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Catapult Communications Corp. v. Foster

May 27, 2009

CATAPULT COMMUNICATIONS CORP., PLAINTIFF,
v.
LEWIS N. FOSTER , DEFENDANT.
LEWIS N. FOSTER , COUNTER-PLAINTIFF,
v.
CATAPULT COMMUNICATION CORP., COUNTER-DEFENDANT, AND DR. RICHARD A. KARP, THIRD PARTY DEFENDANT.



The opinion of the court was delivered by: Wayne R. Andersen United States District Court

Wayne R. Andersen District Judge

MEMORANDUM, OPINION AND ORDER

This case is before the Court on the motion of Third-Party Defendant Dr. Richard Karp to dismiss the claims asserted by Defendant/Counter-Plaintiff Lewis Foster against Dr. Karp. Dr. Karp has filed his motion pursuant to Fed.R.Civ.P. 12(b)(1) and (2) asserting that this Court lacks subject matter jurisdiction over the asserted claims and also lacks personal jurisdiction over Dr. Karp. For the following reasons, the motion to dismiss is denied.

BACKGROUND

This action was originally filed by Catapult Communications Corp. ("Catapult") against Foster, asserting claims for trade secret misappropriation, breach of contract, and violation of the Federal Computer Fraud Act, 18 U.S.C. § 1030. These original claims are based upon the alleged actions of Defendant Foster (a former Catapult salesman), who allegedly misappropriated some of Catapult's confidential information when he left Catapult in April of 2003 to go work for a competitor, a company called IpNetfusion. While at IpNetfusion (now called Nethawk), Foster allegedly disclosed Catapult's confidential information to others at IpNetfusion/Nethawk and used that information to compete against Catapult.

Foster claims that last summer, he learned that Dr. Karp, Catapult's CEO and largest shareholder, contacted at least one of Foster's clients, Motorola, and allegedly falsely stated that Foster accessed Motorola's computer network without authorization while on Motorola's premises. Foster then amended the pleadings to add a counterclaim against Catapult and third-party claims against Dr. Karp, Catapult's Chairman and CEO.

Foster's claims against Catapult and Dr. Karp consist of two separate state law claims: tortious interference with contract against Dr. Karp and tortious interference with business advantage against both Dr. Karp and Catapult. The claims against Dr. Karp are not counterclaims, but are third-party claims. Dr. Karp was joined in this litigation by Foster's motion under Fed. R. Civ. P. 20. The only jurisdictional basis asserted by Foster for these claims is the supplemental jurisdiction statute, 28 U.S.C. § 1367.

Dr. Karp has filed this motion to dismiss, arguing that: 1) the Court lacks subject matter jurisdiction because the amount in controversy requirement is insufficient to invoke diversity subject matter jurisdiction; and 2) the Court has no personal jurisdiction over him. We will address each of these arguments in turn.

DISCUSSION

I. Subject Matter Jurisdiction

The standard applicable to a motion to dismiss under Fed.R.Civ.P. 12(b)(1) is similar to that for a Rule 12(b)(6) motion. The Court must accept all well-pleaded factual allegations as true and draw all reasonable inferences in favor of the plaintiff. United Phosphorus, Ltd. v. Angus Chem. Co., 322 F.3d 942, 946 (7th Cir. 2003). The party asserting jurisdiction bears the burden of proof on a Rule 12(b)(1) motion. Sprint Spectrum L.P. v. City of Carmel, Indiana, 361 F.3d 998, 1001 (7th Cir. 2004).

Dr. Karp first asserts that this Court lacks subject matter jurisdiction over the Third Party Complaint because the amount in controversy is insufficient to invoke diversity jurisdiction. However, we find that we do have jurisdiction because the Complaint in the underlying action against Foster is based, in part, on federal question jurisdiction since a claim is brought under the Federal Computer Fraud Act. Therefore, under 28 U.S.C. § 1367(a), we have supplemental jurisdiction over all claims that are so related to claims in the original action that they form part of the same case or controversy. See Houskins v. Sheahan, 549 F.3d 480, 495 (7th Cir. 2008). As such, the amount in controversy requirement of diversity jurisdiction is immaterial.

In this case, we find that we do have subject matter jurisdiction over the Third Party Complaint because its allegations arise from facts common to those at issue in the underlying matter. The underlying lawsuit involves claims that Foster and Nethawk allegedly engaged in unfair and unlawful competition with Catapult. The acts described in the Third Party Complaint involve claims that Dr. Karp (Catapult's CEO and largest shareholder) allegedly contacted one of Foster's clients (Motorola) and tortiously interfered with Foster's contract and business advantage. These claims are related to the underlying litigation because the acts contained in the Third Party Complaint allegedly occurred during a bidding process between Catapult and Nethawk for the Motorola business. Therefore, we find that the facts relevant to the Third Party Complaint stem from facts at issue in the underlying litigation and are so interrelated as to form part of the same case or controversy.

In sum, because the First Amended Complaint in the underlying litigation is based upon federal question jurisdiction and because it and the Third Party Complaint stem from a common nucleus of operative fact, this Court has supplemental jurisdiction ...


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