IN THE UNITED STATES DISTRICT COURT WESTERN DISTRICT OF TEXAS AUSTIN DIVISION FUNDSXPRESS FINANCIAL NETWORK, INC., Plaintiff, v. DIGITAL INSIGHT CORPORATION, JOHN DORMAN, VINCENT BRENNAN, RONALD GOFFMAN, ERIC EDWARDS and STEPHEN CRAIN, Defendants. PLAINTIFF'S OPPOSITION TO ERIC EDWARDS'S MOTION TO DISMISS TO THE HONORABLE SAM SPARKS: Plaintiff FundsXpress Financial Network, Inc. ("FundsXpress") opposes Edwards's Motion to Dismiss on the following grounds: I. INTRODUCTION AND FACTS. A. Introduction. This case is about the electronic theft of FundsXpress's trade secrets. Defendant Edwards is a regional sales manager and vice president for Defendant Digital Insight, FundsXpress's direct competitor. Edwards - working secretly with a FundsXpress employee who had access to FundsXpress's computer systems - participated in the theft of FundsXpress's trade secrets, copyrighted material, and confidential information, and then used that information to help Digital Insight and to harm FundsXpress. Edwards knew that FundsXpress was located in Texas and that the stolen information he obtained originated in Texas. He now claims, however, that he is not subject to personal jurisdiction in Texas because neither he nor the disloyal FundsXpress employee who helped traveled to Texas to commit the theft. Edwards is not insulated from jurisdiction in Texas because he was able to accomplish his thievery using computers and the Internet, however. Because he committed a tort knowing and intending its impact to be felt in Texas, and because his wrongful actions were directed towards Texas, he must answer in a Texas court for his deeds. B. Facts. FundsXpress is a Texas corporation with its offices located in Travis County, Texas. Exhibit 1.[1] FundsXpress provides Internet banking services to independent and community banks, credit unions and other smaller financial institutions. Plaintiff's Second Amended Complaint PP 17-18. Defendant Digital Insight, a Delaware corporation with its corporate headquarters in Calabasas, California, offers similar services to the same market. Id. P 2, 14. Both companies have regional salesmen living in other states. In October 2001, a FundsXpress salesman, Gifford Dunn, became a Digital Insight sales representative while still employed by FundsXpress. Exhibit 2, p. 6.[2] Dunn was in regular contact with Edwards throughout this period. Id., pp. 6, 25-26. Edwards was living in Wisconsin at the time, and Dunn was living in Kansas. Digital Insight began paying Dunn as its employee on October 31, 2001. Id., p. 6. With Edwards' knowledge, however, Dunn continued to draw a paycheck from FundsXpress throughout November, 2001. Id., p. 26-27. During that November, Dunn retained access to FundsXpress's computer systems in Texas and the proprietary documents contained on that system. Id., p. 7-10, 26-27. Using his continued access to the FundsXpress Texas computers, Dunn sent himself, and then forwarded to Edwards, documents containing FundsXpress's most sensitive trade secrets. Id., p. 7-10; Exhibit 1 PP 4-5. For example, on November 12, 2001, Dunn e-mailed Edwards a copy of the highly confidential FundsXpress Pricing Suite for all of FundsXpress products and services. Dunn wrote Edwards: "Eric, Pricing suite attached - you don't know where you got this." See Exhibit 3.[3] Edwards responded within the hour, confirming that he knew this was illegal, by saying "got what? As long as I don't send it ot [sic] Nymo we should be OK! Ha ha." Id. On November 14, Edwards e-mailed Dunn with questions about the stolen FundsXpress information he had received two days before: "Giff, Looking at the FX pricing and have a couple of questions. Are they leading with Princeton for BP and that is what the pricing is? If so then do you add the amount to the right of that to the prices to then arrive at Metavante pricing? On Cash Mgmt is there a per user or per company fee? That's it for now. Thanks." Exhibit 4. Dunn promptly replied, providing detailed answers to Digital Insight's questions about FundsXpress pricing. Id. Edwards had a follow-up question, and Dunn again obliged. Id. In addition, on November 30, 2001, his last day of work at FundsXpress and just before his access to the FundsXpress computer system was cut off, Dunn again sent an e-mail message from the FundsXpress Texas computer system to his home computer with a copy of the proprietary Dynamic Website Tutorial and Documentation for its new Dynamic Website portal product. Exhibit 2, p. 9-10. This enabled Dunn to maintain access to the document and to provide it to Digital Insight, which he did via e-mail to Edwards on December 3, 2001. Dunn bragged: "Eric, Here is pretty good intel on FX PDW product. Pass on as you see fit- as usual you don't know where you got this. gd" Exhibit 5. Edwards promptly thanked Dunn for delivering "the goods." Id. Edwards admits he forwarded the stolen information to California to Digital Insight management. Exhibit 6. Dunn testified he stole the information for Edwards. Exhibit 2, pp. 8-15, 25-27. In sum: with Edwards' knowledge and encouragement, Dunn stole documents located on a computer system in Texas and forwarded them to Edwards, who forwarded them to Digital Insight's offices in California, which used them to compete with, and harm, FundsXpress. Edwards claims he is not subject to personal jurisdiction in Texas, because he and Dunn were outside of Texas when the thefts occurred. But if Edwards had solicited Dunn to go to Texas to steal paper documents from FundsXpress, this Court's jurisdiction would be clear. Effecting the same theft using computers and e-mail, does not make a court in Texas powerless to assert jurisdiction. II. STANDARDS FOR PERSONAL JURISDICTION In considering personal jurisdiction, this Court must take all uncontroverted allegations in plaintiff's pleadings as true, and resolve conflicts between facts asserted by the parties in the plaintiff's favor. D.J. Investments, Inc. v. Metzeler Motorcycle Tire Agent Gregg, Inc., 754 F.2d 542, 546 (5th Cir. 1985). Jurisdictional analysis is equitable and highly fact specific. Guardian Royal Exchange Assur., Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 231 (Tex. 1991). Texas state law determines whether this Court has personal jurisdiction. Panda Brandywine Corp. v. Potomac Elec. Power Co., 253 F.3d 865, 867 (5th Cir. 2001). The Court has jurisdiction if the Texas long-arm statute authorizes jurisdiction and such exercise is consistent with due process. Cartlidge v. Hernandez, 9 S.W.3d 341, 346 (Tex. App. -- Houston [14th Dist.] 1999, no pet.); Tex. Civ. Prac. & Rem. Code S 17.042. Functionally, these two limitations are the same. Panda, 253 F.3d at 867. This Court, therefore, need only decide whether subjecting Edwards to suit in Texas is consistent with Fourteenth Amendment due process. See Electrosource, Inc. v. Horizon Battery Technologies, Ltd., 176 F.3d 867, 871 (5th Cir. 1999); Schlobohm v. Schapiro, 784 S.W.2d 355, 357 (Tex. 1990). Federal due process requires (1) that the nonresident have purposefully established "minimum contacts" with the forum state; and (2) that the exercise of jurisdiction over the nonresident comport with "traditional notions of fair play and substantial justice." International Shoe Co. v. State of Washington, 326 U.S. 310, 316, 66 S. Ct. 154, 158 (1945). A nonresident establishes minimum contacts in Texas by purposefully availing himself of privileges and benefits of conducting business within Texas. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S. Ct. 559, 567 (1980). A non-resident defendant is subject to specific jurisdiction in Texas if the plaintiff's claims against it arise out of the its actions that are directed toward Texas. Burger King v. Rudzewicz, 471 U.S. 462, 486, 105 S. Ct. 2174, 2189 (1985). If Edwards did business in Texas or intentionally directed acts toward Texas, he must have foreseen being haled into a Texas court. Burger King, 471 U.S. at 472, 105 S. Ct. at 2182. III. THIS COURT HAS SPECIFIC PERSONAL JURISDICTION OVER EDWARDS BECAUSE HE WAS "DOING BUSINESS" IN TEXAS. The Texas long-arm statute authorizes jurisdiction over a nonresident defendant "doing business" in Texas. Tex. Civ. Prac. & Rem. Act S 17.042. A person "does business" in Texas if he commits a tort in whole or in part in this state. Tex. Civ. Prac. & Rem. Act S 17.042(2). A tort causing harm or injury in Texas satisfies the Texas long-arm statute that a defendant be "doing business in Texas" in order to be subject to Texas courts, even if the wrongful act or acts took place in other states. Hearne v. DowBadische Chem. Co., 224 F. Supp. 90, 96 (S.D. Tex. 1963). In a copyright infringement case where personal jurisdiction was judged under Illinois law, the court discussed jurisdiction based upon a tortfeasor's acts outside Illinois causing harm in Illinois. Janmark, Inc. v. Reidy, 132 F.3d 1200 (7th Cir. 1997). Janmark, an Illinois corporation, claimed copyright to a "mini shopping cart." Reidy disputed Janmark's claims, claiming the cart design as its own, and allegedly threatened a Janmark customer in New Jersey with suit for contributory infringement. Id. at 1202. Reidy's threat was made by phone from California. After the call, the New Jersey customer stopped buying Janmark carts, and Janmark sued in Illinois for declaratory judgment that it had not infringed any copyright and for damages based on tortious acts in Illinois. Id. The Seventh Circuit held that personal jurisdiction existed in Illinois because "the state in which the injury occurs may require the wrongdoer to answer for its deeds even if events were put in train outside its borders." Id. Edwards' position is exactly the same. While in Kansas, Dunn e-mailed Edwards FundsXpress's copyrighted pricing suites and other trade secrets and confidential information. Edwards swears he received that information in Wisconsin. He sent the information to Digital Insight's executive management team in California. Exhibit 6. But the information was stolen from Texas and Edwards knew it. Their theft injured FundsXpress. Edwards used the information to persuade FundsXpress customers and potential customers not to contract with FundsXpress for banking services. The injury -- and the tort -- occurred in Texas. Edwards cites Panda for the proposition that he cannot be subject to the specific jurisdiction of this Court merely because "a plaintiff resides in and was injured in Texas." Defendant's Motion. p. 6. Panda does not say that. Panda says that a nonresident defendant should not be subject to general jurisdiction in Texas "simply because the plaintiff's complaint alleged injury in Texas to Texas residents regardless of the defendant's contacts" and that the alleged injuries were "potential." Panda,, 253 F.3d at 870. In Panda, the court found no contact with Texas other than the plaintiffs' allegation "on information and belief" that the nonresident defendant knew the plaintiffs were Texas residents and that its actions would cause harm. FundsXpress is not asserting facts on information and belief. Edwards does not deny that he knew FundsXpress was located in Texas, that he knew the stolen documents were coming from Texas, or that he knew the documents were being stolen (his language - "Got what? ... ha ha"; thanking Dunn for "the goods" - makes clear what he knew). Exhibits 3, 5. There is no dispute that Edwards asked for information that he could use to take customers away from FundsXpress. Most importantly, FundsXpress has alleged in detail that its injuries are not "potential" but actual. See Second Amended Complaint PP 58-61. Panda does not apply. Calder v. Jones, 465 U.S. 783, 104 S. Ct. 1482 (1984), however, does. In Calder, journalists in Florida wrote a story about Shirley Jones, the entertainer. They wrote the story while in Florida and a Florida corporation, with its principal place of business in Florida, published it. The paper, however, was distributed all over the United States. Ms. Jones sued for libel in California where she lived. The Supreme Court found jurisdiction was proper in California because "the brunt of the harm . . . was suffered in California." Id. at 789. The writers were not "charged with mere untargeted negligence"; their actions were "intentional and allegedly tortious . . . expressly aimed at California." Id. Because they knew where the harm would occur, they must "reasonably anticipate being haled into court" in California. Id. at 790. Under Calder, a person "injured in California need not go to Florida to seek redress from persons who, though remaining in Florida, knowingly cause the injury in California." Id. Edwards knowingly committed a tort in Texas by arranging for the theft of trade secrets, copyrighted materials, and confidential information located in Texas and belonging to a Texas corporation and then using those trade secrets and confidential information to damage the Texas corporation's ability to compete in the marketplace, to keep its customers, and to attract new customers. That Edwards was not in Texas when he had these e-mail conversations with Dunn or transmitted the information to Digital Insight does not matter. He knew where the harm from his actions would occur, and he must reasonably expect to be haled into a Texas court to answer for those acts. Id. at 790. IV. TEXAS HAS SPECIFIC PERSONAL JURISDICTION OVER EDWARDS BECAUSE HIS ACTIONS WERE DIRECTED AT TEXAS. Specific jurisdiction arises when a person's actions are "aimed at" the forum state. Calder v. Jones, 465 U.S. at 789-790, 104 S. Ct. at 1487. Calder held that the directed actions of a defendant will be enough to establish specific jurisdiction, even in instances where a defendant's contacts with the forum state are not systematic and continuous enough to establish general jurisdiction. Id. at 787. The Texas Supreme Court established guidelines for when a defendant's actions meet the Calder standard of directed action for specific jurisdiction: "first, the defendant's activities must have been "purposefully directed" to the forum, and second, the litigation must result from alleged injuries that "arise out of or relate to those activities." National Indus. Sand Ass'n v. Gibson, 897 S.W.2d 769, 774 (Tex. 1995) (quoting Burger King v. Rudzewicz, 471 U.S. at 472, 105 S. Ct. at 2182. Both purposeful direction and injuries arising out of or relating to the alleged activities are present here. Edwards solicited trade secrets from Dunn, a FundsXpress sales representative, who was being paid by Digital Insight while still on the FundsXpress payroll. Edwards knew that stealing FundsXpress's confidential information, trade secrets and copyrighted materials would damage FundsXpress's ability to compete in the marketplace. Edwards' actions are analogous to the defendants' tortious behavior in Calder v. Jones, where the Court ruled that the defendants' actions would have results they "knew would have a potentially devastating impact upon [the plaintiff]." Calder, 464 U.S. at 789. Edwards's intention to help Digital Insight and hurt FundsXpress is shown by his e-mail to Digital Insight's personnel forwarding Dunn's material: I will forward their [FundsXpress's] latest pricing info to all of you next week for IB, BP, CM (probably not the Cash Tech pricing), Portal, and UMonitor aggregation. Hopethis helps. Thanks. Eric Exhibit 6. Edwards intended his actions to hurt FundsXpress. He purposefully directed his actions towards a Texas company. That satisfies the first element of National's, purposeful direction of actions. The second element, that the claims must arise out of or be related to the directed actions, is even more unambiguous. FundsXpress's allegations against Edwards arise exclusively from his knowledge of and participation in the theft of FundsXpress's information. Edwards' actions were directed towards Texas. The Texas Supreme Court in Schlobohm established a three-part test for specific jurisdiction. Schlobohm, 784 S.W.2d at 355. (1) The nonresident defendant or foreign corporation must purposefully do some act or consummate some transaction in the forum state; (2) The cause of action must arise from, or be connected with the act; and (3) The assumption of jurisdiction by the forum state must not offend traditional notions of fair play and substantial justice, consideration being given to the quality, nature, and extent of the activity in the forurn state, the relative convenience of the parties, the benefits and protection of the laws of the forum state afforded the respective parties, and the basic equities of the situation. Schlobohm, 784 S.W.2d at 358. The Court's test does not require, for the first prong, that the defendant literally commit an act in Texas. Rather, the Court refers to the first prong as a test for "purposeful availment," to determine whether the defendant should "have reasonably anticipated the call to a Texas court[.]" Id. at 359. Under Schlobohm, Edwards clearly falls under Texas jurisdiction where he knew or should have known he would be held accountable. A single directed action can satisfy a minimum contacts analysis. In Wien Air Alaska, Inc. v. Brandt, 195 F.3d 208 (5th Cir. 1999), the Fifth Circuit found personal jurisdiction over a German national in a fraud and breach of contract case. The district court had ruled in Wien that the defendant's contacts with Texas related to "an ongoing relationship between the parties established in Germany and do not establish that [the defendant] purposefully availed himself of the benefits and protections of Texas law." The Fifth Circuit reversed, relying on Calder, to find that "[e]ven if the parties formed their relationship in Germany ... a single act by [the defendant] directed toward Texas that gives rise to a cause of action by [plaintiffs] can support a finding of minimum contacts." Wien, 195 F.3d at 211 (citing Calder, 465 U.S. at 783, 104 S. Ct. at 1483). The defendant's alleged acts in Wien were misrepresentations that the plaintiffs construed as "tortious actions outside of Texas directed towards [plaintiffs in Texas that] had foreseeable effects in the forum and were directed at the forum." Id. at 212. Edwards's solicitations of misappropriation of FundsXpress trade secrets to damage FundsXpress and from which damages resulted fit the Wien analysis for directed action. Under Wien, Edwards's directed actions establish sufficient contacts with Texas to support the exercise of specific personal jurisdiction in a case arising from those actions. V. CONCLUSION Given the unambiguous nature of Edwards's tortious actions directed toward a Texas corporation intending to profit at the expense of and cause harm to that Texas corporation in Texas, Edwards clearly knew or should have known that he would be haled into court in Texas. This Court, therefore, has specific personal jurisdiction over Edwards. His motion should be denied. [1] Exhibit 1 is the Affidavit of John Burns, CEO of FundsXpress. [2] Exhibit 2 is a true and correct copy of the transcript of Mr. Dunn's testimony at a temporary injunction hearing in a lawsuit filed by FundsXpress against Gifford Dunn, FundsXpress Financial Network, lnc. v. Gifford A. Dunn, Cause No. 01CV-8333, in Johnson County, Kansas. [3] Exhibits 3-6 are true and correct copies of e-mails originally presented as exhibits in the temporary injunction hearing in FundsXpress Financial Network, Inc. v. Gifford A. Dunn, Cause No. 01CV-8333. Respectfully submitted, R. James George, Jr. State Bar No. 07810000 David H. Donaldson, Jr. State Bar No. 05969700 Peter D. Kennedy State Bar No. 11296650 Nanneska N. Hazel State Bar No. 12813500 114 W. 7th Street, Suite 1100 Austin, Texas 78701 (512) 495-1400 (512) 499-0094 (Fax) ATTORNEYS FOR PLAINTIFF FUNDSXPRESS FINANCIAL NETWORK, INC. OF COUNSEL: GEORGE & DONALDSON, L.L.P. 114 West 7th Street, Suite 1100 Austin, Texas 78701 (512) 495-1400 FAX: (512) 499-0094 CERTIFICATE OF SERVICE I hereby certify that on July 15, 2002 a true and correct copy of the foregoing was served on counsel of record as shown below: Barry K. Bishop Clark, Thomas & Winters, P.C. 300 W. 6th Street, Suite 1500 Austin, Texas 78701 (via Hand Delivery) Aaron C. Gundzik Cotton & Gundzik, L.L.P. 725 S. Figueroa St., 34th Floor Los Angeles, CA 90017 (via Certified Mail, Return Receipt Requested Peter D. Kennedy