IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION

FUNDSXPRESS FINANCIAL NETWORK:, INC.,
Plaintiff,

-vs-

DIGITAL INSIGHT CORPORATION, JOHN
DORMAN, VINCENT BRENNAN, RONALD
GOFFMAN, ERIC EDWARDS & STEPHEN
CRAIN,
Defendants.

ORDER

BE IT REMEMBERED on the 29th day of August 2002 the Court reviewed the
file in the above-styled cause, specifically Defendant Eric Edwards'
Motion to Dismiss Complaint pursuant to F.R.C.P. 12(b)(2) [#13],
Plaintiff's opposition thereto [#29] and Defendant's reply [#31];
Defendants John Dorman and Vincent Brennan's Motion to Dismiss
Complaint Pursuant to Rule 12(b)(2) [#32] and Plaintiff's response
[#43]; Defendants' Motion to Dismiss for Failure to State a Claim for
Relief pursuant to Rule 12(b)(6) [#34] and Plaintiffs' opposition
thereto [#45]; Defendants' Motion to Dismiss for Failure to State a
Claim for Relief and Motion to Strike [#12]; and Defendants' Motion
for More Definite Statement [#33] and Plaintiff's response thereto
[#44]. Having considered the motions and responses, the case file as a
whole and the applicable law, the Court enters the following opinion
and orders.

Background

The plaintiff, FundsXpress Financial Network, Inc. ("FundsXpress") is
a Texas corporation with its principal place of business in
Austin. See Third Amended Complaint, at P 1. Defendant Digital Insight
Corporation ("Digital Insight") is a Delaware corporation with its
principal place of business in Calabasa, California. Id. at
P 2. Defendant John Dorman resides in California and is chairman and
chief executive officer of Digital Insight. Id. at P 3. Defendant
Vincent Brennan resides in California and is senior vice president of
sales of Digital Insight. Id. at ~ 4. Defendant Ronald Goffman
resides in Minnesota. Id. at P 5. Defendant Eric Edwards resides in
Wisconsin. Id. at P 6. Defendant Stephen Crain resides in South
Carolina. Id. at P 7.

FundsXpress and Digital Insight are competitors who provide internet
banking services to small financial institutions. Id. at P
14. FundsXpress contends Digital Insight conspired with former
employees of Digital Insight to steal trade secrets, copyrighted
information and other confidential information from FundsXpress for
the purpose of damaging FundsXpress' competitiveness. Id. at P
15. The proprietary information related to the plaintiff's computer
systems, which enable its customers to use FundsXpress' secure systems
instead of their own to provide internet banking services to their
customers; its "Goldmine" database containing information about
customers and potential customers; and its "Pricing Suite," a pricing
spreadsheet for its products and services. Id. at PP 17-25.

During the relevant time period, defendants Dunn, Goffman and Crain
were employees of FundsXpress, and defendants Edwards and Brennan
worked for Digital Insight. Id. at P 16. FundsXpress alleges Dunn,
Goffman and Crain stole trade secrets from FundsXpress and gave them
to Digital Insight via Edwards. Id. at P 16. In August 2000, Dunn
became FundsXpress' national sales director, and in 2001 was named
senior account executive. Id. at P 29. FundsXpress hired Crain in
October 1999 as a sales account executive responsible for sales in
South Carolina, Georgia, Florida and Alabama. Id. at P 31. Crain left
FundsXpress on July 9, 2001 and began working for Digital
Insight. Id. at P 37. FundsXpress hired Goffman in August 2000 as a
sales account executive responsible for sales in Michigan, Wisconsin
and other states. Id. at P 32. Goffman left FundsXpress on May 2, 2001
and began working for Digital Insight. Id. at P 34. Dunn left
FundsXpress on November 30, 2001, and the plaintiff contends he had
been stealing trade secrets and providing them to Edwards for several
months and even began working for Digital Insight on October 31,
2001. Id. at PP 38-47. FundsXpress alleges Digital Insight's
executives, including Dorman, knew the company had received and was
using the plaintiff's trade secrets. Id. at P 48. According to the
plaintiff, Digital Insight profited from the stolen information, since
its sales expanded and FundsXpress' decreased when Digital Insight had
access to the plaintiff's trade secrets, but Digital Insight's sales
dropped after the Court entered its injunction in this case. Id. at P
61. FundsXpress claims it suffered damages between around $87 million
and $150 million.

FundsXpress also alleges Digital Insight has systematically defamed it
to customers and potential customers. Id. at PP 54-60. Specifically,
Digital Insight told its employees to impart false information about
FundsXpress' financial irresponsibility and instability to potential
customers. Id. at PP 55-58. FundsXpress estimates its damages from the
defamation at no less than $50 million.

FundsXpress raises nine causes of action: misappropriation of trade
secrets, in violation of common law; misappropriation of trade
secrets, in violation of California Civil Code S 3426; receipt,
concealment and use of stolen property, in violation of California
Penal Code S 496(c); conversion; violations of the federal Computer
Fraud and Abuse Act,47 U. S. C. S 1030; copyright infringement;
tortious interference; defamation; and false advertising, trade
disparagement and trade libel, in violation of section 43(a) of the
Lanham Act. FundsXpress seeks a permanent injunction, monetary damages
and exemplary damages.

On March 18, 2002, the Court entered an agreed preliminary injunction
in this case. Defendants Edwards, Dorman and Brennan have filed
motions to dismiss for lack of personal jurisdiction. The defendants
also filed motions for a more definite statement, for failure to state
a claim and to strike. Many of these motions were resolved by the
plaintiff's filing of the Third Amended Complaint, as discussed below.

Analysis I. Personal Jurisdiction

Defendants Edwards, Dorman and Brennan move to dismiss for lack of
personal jurisdiction. In a motion to dismiss for lack of personal
jurisdiction, the party asserting jurisdiction - in this case,
FundsXpress - bears the burden of proof. See Kelly v. Syria Shell
Petroleum Dev. B. V., 213 F.3d 841, 854 (5th Cir. 2000). Because the
Court has not conducted an evidentiary hearing regarding personal
jurisdiction, the plaintiff's burden is lessened in that it "must
present sufficient facts as to make out only a prima facie case
supporting jurisdiction." Alpine View Co. Ltd. v. Atlas Copco AB, 205
F.3d 208, 215 (5th Cir. 2000). In deciding whether FundsXpress has
presented a prima facie case of personal jurisdiction, the Court must
accept FundsXpress' uncontroverted allegations as true and resolve any
factual conflicts in its favor. Alpine, 205 F.3d at 215.

A court has personal jurisdiction over an out-of-state defendant if
the forum state's long-arm statute permits service of process and the
assertion of personal jurisdiction does not violate due process. See
Burger King Corp. v. Rudzawicz, 471 U.S. 462, 471-76 (1985). Because
the Texas long-arm statute is coextensive with the limits of due
process,[1] this Court need only determine whether exercising
jurisdiction over the individual defendants in this case comports with
due process. Electrosource, Inc. v. Horizon Battery Tech., Inc. 176
F.3d 867,871 (5th Cir.1999), citing Schlobohm v. Shapiro, 784 S.W.2d
355,357 (Tex.1990). Due process requires the Court to decide (1) the
defendant has minimum contacts with Texas, and (2) requiring the
defendant to litigate in Texas does not offend traditional notions of
fair play and substantial justice. See Mink v. AAAA Dev. LLC, 190 F.3d
333,336 (Sth Cir.1999) (citing International Shoe Co. v. Washington,
326 U.S.310 (1945)).

The minimum contacts prong is satisfied if the defendant has
"continuous and systematic" contacts to Texas sufficient to establish
general jurisdiction or if the defendant has contacts with Texas
sufficient to establish specific jurisdiction. Wilson v. Belin, 20
F.3d 644, 647 (5th Cir.1994). A court has specific jurisdiction over a
defendant if the defendant "purposefully directed" his activities
toward the residents of the forum and the causes of action "arise out
of or relate to" those activities. Burger King, 471 U.S. at 472
(quoting Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 744 (1984);
Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S.408,414
(1984)). Having purposefully directed his activities toward a state, a
defendant "should reasonably anticipate being haled into court there."
WorldWide Volkswagon v. Woodson, 444 U.S. 286, 297 (1980). The
purposeful availment requirement cannot be satisfied by "random,"
"fortuitous," or "attenuated" contacts with the forum state or by the
plaintiff's or a third party's unilateral activities; instead, the
plaintiff must show "actions by the defendant himself that create a
'substantial connection' with the forum state." Burger King, 471
U.S. at 475 (citations omitted).

Once a plaintiff establishes minimum contacts with the state, the
burden shifts to the defendant to demonstrate assertion of personal
jurisdiction over him offends traditional notions of fair play and
substantial justice. Wien Air Alaska, Inc. v. Brandt, 195 F.3d 208, 2
1 5 (5th Cir. 1 999).

The Court weighs the burden on the defendant, the forum state's
interest in the litigation, the plaintiff's interest in convenient and
effective relief; the judicial system's interest in efficiency and the
state's interest in furthering fundamental social policies. Ruston Gas
Turbines, Inc. v. Donaldson Co., Inc., 9 F.3d 415, 421 (5th Cir. 1993).

A. Eric Edwards

Edwards contends this Court does not have personal jurisdiction over
him because he has never lived in Texas or owned real estate here and
his only contact with Texas consists of three one-night trips here
within the past seven years. See Edwards' Motion to Dismiss, Att. A
("Edwards Affidavit"), at 1. None of his visits to Texas were related
to the plaintiff. Id. He resides in Wisconsin and works from home as a
vice president of sales for Digital Insight. Id. Edwards further
contends none of the acts FundsXpress alleges took place in Texas.

FundsXpress contends Edwards received emails from FundsXpress
employees containing trade secrets and proprietary information and
forwarded them to other Digital Insight personnel. Specifically, the
plaintiff alleges in October, November and early December 2001, Dunn,
who lived in Kansas but worked for FundsXpress, emailed Edwards
confidential documents such as the Pricing Suite, and Edwards then
sent them to other Digital Insight employees and executives in
California. See Plaintiff's Response, Ex. 3-6 (emails). FundsXpress is
located in Texas and its main computer system for internal business
operations is in Texas. See Plaintiff's Response, Ex. 1 ("Burns
Declaration"), at PP 2-3. The confidential documents attached to the
emails Dunn sent to Edwards, and Edwards forwarded to other Digital
Insight personnel, were located on FundsXpress' computers in Texas,
and Dunn remotely accessed them from Kansas, emailed them to himself,
and then used his personal email account to send them to
Edwards. Id. at P 4.

The plaintiff alleges Edwards encouraged Dunn to steal trade secrets,
copyrighted information and confidential information from the
plaintiff; passed the information along; and used the information to
harm the plaintiff's ability to compete with Digital Insight. These
unlawful actions, FundsXpress claims, were directed toward a Texas
corporation and were intended to harm a Texas corporation. In other
words, FundsXpress contends Edward's "intentional, and allegedly
tortious, actions were expressly aimed at" a Texas company. Calder
v. Jones, 465 U.S. 783, 789 (1984). This is not a case where the
injury to FundsXpress was merely "potential" or "foreseeable;" rather,
Edwards allegedly "purposefully direct[ed]" his actions to the Texas
corporation with the intent to harm its ability to compete. Burger
King, 471 U.S. at 476; Panda Brandywine Corp. v. Potomac Elec. Power
Co., 253 F.3d 865,869-70 (5th Cir.2001); Wien Air Alaska,
Inc. v. Brandt, 195 F.3d 208, 212 (5'h Cir. 1999) ("Foreseeable injury
alone is not sufficient to confer specific jurisdiction, absent the
direction of specific acts toward the forum."). While the plaintiff
will be required to prove these jurisdictional facts down the road, it
has pleaded sufficient contacts with Texas to survive a motion to
dismiss for lack of personal jurisdiction, and Edwards has not
demonstrated exercising personal jurisdiction over him would offend
traditional notions of fair play and substantial justice.

B. John Dorman

Dorman claims this Court does not have personal jurisdiction over him
because he has never lived in Texas or owned any assets here and has
only visited Texas on short business trips three or four times over
the past five years. See Dorman's Motion to Dismiss, Att. A ("Dorman
Affidavit"), at 1. One trip in March 2001 was to participate in a
mediation with the plaintiff. Id. at 1-2. Dorman resides in
California and is the chairman and chief executive officer for
Digital Insight with his office in Calabasas, California. Id. at 1.

FundsXpress contends Dorman participated in the theft of confidential
information and trade secrets intended to harm the plaintiff, a Texas
corporation and Digital Insight's competitor. Specifically, the
plaintiff contends Dorman authorized his employees to steal the
information and received it from them. For instance, Dorman received
emails from Edwards containing pricing information obtained from
FundsXpress. See Third Amended Complaint, at PP 48-49; Ex. 6. Because
Dorman, as the head of Digital Insight, explicitly or implicitly
authorized Edwards to solicit that information, the plaintiff argues,
he too engaged in specific tortious acts aimed at injuring the
plaintiff's ability to compete. By alleging Dorman authorized and
participated in a scheme to harm a Texas company, the plaintiff has
set forth minimum contacts to Texas to establish specific
jurisdiction. Dorman has not established fair play and substantial
justice require the Court to abstain from exercising jurisdiction
despite these contacts.

FundsXpress also alleges Dorman defamed FundsXpress by publicly
stating in May 2002 FundsXpress laid off most of its sales force and
raised prices, causing its sales to decrease. See Third Amended
Complaint, at 1158. Dorman admits he was interviewed about this
lawsuit in May 2002, but states he did not solicit the interview and
simply answered the reporter's questions. See Dorman Affidavit, at
2. Dorman contends his statements in this interview, defamatory or
not, do not subject him to jurisdiction in Texas, citing Wilson
v. Belin, 20 F.3d 633 (5th Cir. 1994). In that case, a reporter
writing a story on a photographer (not from Texas) who claimed his
enhanced photographs revealed a second gunman in the John F. Kennedy
assassination called two experts on the assassination for their
opinions, who stated the idea was "outrageous" and "garbage."  Belin,
20 F.3d at 646. Even though the article was published in the Dallas
Times Herald, the Fifth Circuit held a Texas court did not have
personal jurisdiction over the two experts, who resided in other
states, simply because the photographer's reputation in Texas was
allegedly ruined. Belin, 20 F.3d at 648. This case differs from Belin
because the only contacts to Texas in that case were the publication
of the article in Texas and the photographer's nebulous reputation in
Texas - the photographer did not reside in Texas and his career was
not centered there, the Fifth Circuit pointed out. Belin, 20 F.3d at
648. Here, Dorman's comments were about a Texas company and, the
plaintiff alleges, were intended to create a false impression about
the company's strength in order to harm its competitive edge. These
facts are more analagous to those in Calder, where the defendants
wrote a story about a California plaintiff "that they knew would have
a potentially devastating impact upon" the California
plaintiff. Calder, 465 U.S. at 789. Accordingly, the Court finds the
plaintiff has pleaded sufficient facts to establish specific
jurisdiction, subject to the plaintiff's ability to prove these facts
at trial.

C. Vincent Brennan

Brennan contests this Court's personal jurisdiction over him because
he has never lived in Texas or owned any assets here and he has only
been to Texas five times in the past twelve years, for only a few
nights each time. See Brennan's Motion to Dismiss, Att. B ("Brennan
Affidavit"), at 1. None of his visits to Texas were related to the
plaintiff. Id. He resides in Georgia and is employed by Digital
Insight as a senior vice president of sales. Id. Brennan further
contends he has never spoken to a FundsXpress employee who was located
in its Texas offices about becoming a Digital Insight employee, and
never spoke to Dunn when he was in Texas. Id. at 2.

The plaintiff states Brennan, Edwards, Goffman, Crain and Dunn worked
together in the early l990s at a third company. See Third Amended
Complaint, at P 16. When Brennan and Edwards went to Digital Insight,
they urged the others to come along. Specifically, FundsXpress
alleges, Brennan and Edwards recruited Dunn to work for Digital
Insight even though they knew he was still working for
FundsXpress. Id. at PP 16; 38-39. They also encouraged Dunn to steal
trade secrets and confidential information from his company and
forward it to Digital Insight before he quit to come work for Digital
Insight. Id. Thus, the plaintiffs contend Brennan participated in the
scheme to obtain confidential and copyrighted information from
FundsXpress and utilize it to harm FundsXpress' business. Even though
Brennan contends he had no conversations with Dunn when either one was
in Texas, Brennan knew Dunn was a high-level employee of a Texas
company and intended to harm that company. Brennan's alleged acts,
purposefully directed toward a Texas company, are sufficient to
establish specific jurisdiction at this stage of the
proceeding. Brennan has not shown subjecting him to jurisdiction in
Texas would offend the traditional notions of fair play and
substantial justice.

II. Plaintiff's Third Amended Complaint

The Court granted FundsXpress leave to file its Third Amended
Complaint on August 23, 2002. The new complaint sets out the
plaintiff's defamation claims with more specificity and clarifies the
plaintiff does not raise a business disparagement claim. Accordingly,
the filing of the Third Amended Complaint renders the issues the
defendants raised in their motion for more definite statement
moot. The Third Amended Complaint also removes the plaintiff's unfair
competition and Economic Espionage Act claims, which were the subject
of the defendants' motion to dismiss for failure to state a claim and
motion to strike. Therefore, those motions are moot as well.

III. Claims under California Law

The plaintiff's Third Amended Complaint includes causes of action
under California law: misappropriation of trade secrets in violation
of California Civil Code S 3426.1 (Count II) and receipt, concealment
and use of stolen property in violation of California Penal Code S
496(c) (Count III). The defendants move to dismiss these claims
pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure,
arguing Texas law is applicable to this case, not California law.

In diversity cases, federal courts apply the choice of law rules of
the forum state. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487,
496 (1941). Texas courts determine which state's law to apply using
the "most significant relationship" test. See RESTATEMENT (SECOND) OF
CONFLICT OF LAWS SS 6;145; Hughes Wood Prod., Inc.v. Wagner, 18 S.W.3d
202, 205 (Tex. 2000). Under this test, courts consider "which state's
law has the most significant relationship to the particular
substantive issue to be resolved." Hughes, 18 S.W.2d at 205 (emphasis
in original). To determine which state has the most significant
relationship to a case, courts weigh the following facts: (1) the
place of injury; (2) the place where the conduct causing the injury
occurred; (3) the parties' domicile, residence, nationality, place of
incorporation and place of business; and (4) where the relationship
between the parties focused. See RESTATEMENT (SECOND) OF CONFLICT OF
LAWS S 145(2).

The defendants contend Texas has the most significant relationship to
the case as a whole, so Texas law should be applied. The plaintiff
argues the Restatement requires courts to determine which state has
the most significant relationship to each particular issue, and while
most issues have a more significant relationship to Texas, Count II
and m are closely tied to California. The Restatement does not prevent
courts from applying one state's law to some issues and another
state's to other issues in the same case. See RESTATEMENT (SECOND) OF
CONFLICT OF LAWS S 145, comment d; Spence v. Glock, Ges.m.b.h., 227
F.3d 308,311 n.6 (5th Cir.2000) ("Texas also requires that a choice of
law determination be done on an issue by issue basis."). Accordingly,
the Court must make a distinct factual determination of which state's
law to apply for each issue in the case.

The defendants do not argue Counts II and III do not have a
significant relationship to California, but merely contend Texas law,
to the exclusion of California law, must apply to all issues in the
case. For the reasons above, their motion is denied on that
basis. However, because discovery has just begun, the Court does not
have enough information on the record to evaluate which state has the
most significant relationship to each issue in the complaint. Thus,
the defendants may raise substantive choice of law arguments at a
later stage in the proceeding.

In accordance with the foregoing:

IT IS ORDERED that Defendant Eric Edwards' Motion to Dismiss Complaint
pursuant to F.R.C.P. 12(b)(2) [#13] is DENIED;

IT IS FURTHER ORDERED that Defendants John Dorman and Vincent
Brennan's Motion to Dismiss Complaint Pursuant to Rule 12(b)(2) [#32]
is DENIED;

IT IS FURTHER ORDERED that Defendants' Motion for More Definite
Statement [#33] is DISMISSED AS MOOT;

IT IS FURTHER ORDERED that Defendants' Motion to Dismiss for Failure
to State a Claim for Relief and Motion to Strike [#12] is DISMISSED AS
MOOT;

IT IS FINALLY ORDERED that Defendants' Motion to Dismiss for Failure
to State a Claim for Relief pursuant to Rule 12(b)(6) [#34] is DENIED.

[1] The Texas long-arm statute extends to people who commit a tort
that causes injury in Texas. TEX. CIV. PRAC. & REM. CODE S 17.042(2).

SIGNED this the 29th day of August 2002.

SAM SPARKS
UNITED STATES DISTRICT JUDGE