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QTECH SERVICES, LLC v. VERITION FUND MANAGEMENT

November 30, 2010

QTECH SERVICES, LLC
PLAINTIFF,
v.
VERITION FUND MANAGEMENT,LLC ET AL, DEFENDANTS,



The opinion of the court was delivered by: Dennis M. Cavanaugh, U.S.D.J.:

NOT FOR PUBLICATION

OPINION

Hon. Dennis M. Cavanaugh

This matter comes before this Court upon motion by Verition Fund, et al. ("Defendants") to dismiss the complaint by Qtech Services ("Plaintiff") pursuant to Fed. R. Civ. P. 12(b)(2) for lack of personal jurisdiction. Pursuant to Fed. R. Civ. P. 78, no oral argument was heard. After carefully considering the submissions of all parties, it is the decision of this Court that Defendants' motion is denied without prejudice pending jurisdictional discovery.

I. BACKGROUND

Plaintiff is a limited liability company with its principal place of business in West Bound Brook, New Jersey. Plaintiff is engaged in developing trading strategies on the Chicago Mercantile Exchange, particularly an advanced trading technique known as "high frequency trading" which, Plaintiff avers, is based on its copyrighted software and trade secret strategies. Plaintiff began trading on the Chicago Mercantile Exchange using its trading software in 2007.

Plaintiff had two employees, Defendant Chen, and Defendant Zheng*fn1 , who began work for Plaintiff in 2004 and 2008 respectively. Both Chen and Zheng signed confidentiality agreements when they accepted Plaintiff's offer of employment. Both Chen and Zheng resigned from their positions with Plaintiff within one month of each other in 2009. Plaintiff alleges that Zheng copied documents and computer data which he removed from Plaintiff's place of business at or around the time of his resignation, including large quantities of printed source code integral to Plaintiff's software.

Not long after, Plaintiff received a phone call to confirm the past employment of Zheng and Chen; Plaintiff subsequently discovered that both Zheng and Chen were employed by Defendant, Verition Management, a hedge fund with its principal place of business in Connecticut. Plaintiff avers that within four months of their employment at Verition, Zheng and Chen began a high frequency trading group trading on the Chicago Mercantile Exchange.

Plaintiff wrote to Defendant requesting help in investigating the alleged misappropriation of Plaintiff's proprietary information. Defendant responded that they had questioned Zheng extensively, and were certain that he had not brought confidential or misappropriated information to Verition.

Verition is a Delaware limited liability company with its principal place of business in Connecticut. Defendant avers that they do not maintain an office or other business locale in New Jersey, that they are not licensed in New Jersey, do not employ any personnel in New Jersey, conduct no advertising or marketing in New Jersey, and have no clients in New Jersey. They challenge this Court's ability to exercise personal jurisdiction over Defendant in this action.

II. LEGAL STANDARD

A. Personal Jurisdiction; 12(b)(2)

Pursuant to Fed.R.Civ.P. 4(e), a district court may exercise jurisdiction over a non-resident defendant to the extent permitted by the law of the state where the district court sits. See Fed.R.Civ.P. 4(e). "A federal court sitting in New Jersey has jurisdiction over parties to the extent provided under New Jersey state law." Miller Yacht Sales, Inc. v. Smith, 384 F.3d 93, 96 (3d Cir.2004). "New Jersey's long-arm statute provides for jurisdiction coextensive with the due process requirements of the United States Constitution." Id. (citing N.J. Ct. R. 4:4-4(c)). Pursuant to Fed.R.Civ.P. 12(b)(2), a plaintiff must demonstrate by a preponderance of the evidence facts sufficient to support the assertion of personal jurisdiction over a defendant. Ameripay, LLC v. Ameripay Payroll, Ltd., 334 F.Supp.2d 629, 632 (D.N.J.2004) (citing Carteret Savings Bank, FA v. Shushan, 954 F.2d 141, 146 (3d Cir.1992)). "A court must accept as true the allegations in the complaint and resolve disputed issues of fact in favor of the plaintiff[,]" for purposes of jurisdiction, plaintiff cannot rely on pleadings alone, but instead must provide actual proofs. Id. (citing Time Share Vacation Club v. Atlantic Resorts, Ltd., 735 F.2d 61, 66 n. 9 (3d 1984)). "Once the plaintiff has shown minimum contacts, the burden shifts to the defendant, who must show that the assertion of jurisdiction would be unreasonable." Id. (citing Mellon Bank (East) PFSF, Nat'l Assoc. v. Farino, 960 F.2d 1217, 1221 (3d Cir.1992)).

"Once challenged, a plaintiff bears the burden of establishing personal jurisdiction." Pro Sports Inc. v. West, 639 F.Supp.2d 475, 478 (D.N.J.2009) ( citing General Elec. Co. v. Deutz AG, 270 F.3d 144, 150 (3d Cir.2001) (finding the plaintiff must demonstrate "[a] nexus between defendant, the forum, and the litigation.")).. "However, when the court does not hold an evidentiary hearing on the motion to dismiss, the plaintiff need only establish a prima facie case of personal jurisdiction and the plaintiff is entitled to have its allegations taken as true and all factual disputes drawn in its favor." Miller Yacht Sales, Inc. v. Smith, 384 F.3d 93, 97 (3d Cir.2004); See also Carteret Say. Bank, FA v. Shushan, 954 F.2d 141, 142 n. 1 (3d Cir.1992)."If the contents of the plaintiff's complaint conflict with the defendant's ...


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