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COA: Indiana lacks jurisdiction in trade secrets case

April 4, 2018

An Alabama-based medical billing company is not subject to Indiana jurisdiction in a trade secrets case because the Indiana plaintiff failed to prove the misappropriation of its trade secrets had a substantial connection to the Hoosier state.

In 2013, Carmel-based medical billing company Zotec Partners, LLC acquired a competitor and brought G. Darrell Hulsey into Zotec as an executive. Hulsey resigned from Zotec in February 2014 and took a job as CEO of Professional Billing, Inc. in September 2016.

PBI is based in Alabama and has offices across the south and in Ohio but is not registered to do business in Indiana. Zotec, however, filed a complaint against PBI and Hulsey in December 2016, alleging violations of Indiana’s Uniform Trade Secrets Act. PBI moved to dismiss the Indiana complaint for lack of personal jurisdiction, and Zotec responded with a motion in opposition or, alternatively, a motion for additional time for discovery.

 The Marion Superior Court denied the motion to dismiss, finding “the allegations surrounding Hulsey’s conduct and PBI’s involvement subject PBI to jurisdiction in the Court by way of specific personal jurisdiction.” But the Indiana Court of Appeals reversed that decision Wednesday, with Judge John Baker writing Zotec failed to allege that Hulsey was a PBI employee or agent when he misappropriated his former employer’s trade secrets, or that PBI solicited Zotec’s Indiana customers or used confidential information in Indiana.

“Without question, then, PBI has proved the trial court’s lack of personal jurisdiction,” Baker wrote. “The record shows that PBI has had no contact with Indiana whatsoever, let alone sufficient minimum contacts or a substantial connection with Indiana.”

Baker went on to write that PBI and Hulsey are separate legal entities, so Indiana’s jurisdiction over Hulsey does not extend to PBI. Further, the harm allegedly suffered by Zotec through Hulsey’s misappropriation “does not connect PBI to Indiana in a meaningful way,” he said.

Finally, the appellate court denied Zotec’s request for additional time to conduct jurisdictional discovery, finding Zotec failed to adequately explain why it did not seek discovery from PBI at the same time it sought discovery from Hulsey. The case was remanded with instructions to dismiss Zotec’s claims.

The case is Professional Billings, Inc. v. Zotec Partners, LLC, and Medical Management Professionals, LLC, 49A02-1709-PL-2219.

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