Ready 4 A Change, LLC v. Sourcis, Inc.

Background

Ready 4 A Change, LLC (R4AC) is a limited liability company organized under Minnesota law and based in Minnesota. R4AC provides medical-tourism services, including promoting and coordinating weight-loss and plastic-surgery procedures performed in Mexico.

Sourcis, Inc., doing business as Sourcis, provided website-development and search-engine-optimization services to R4AC. Sourcis is incorporated under California law and has its principal place of business in Folsom, California. It had no office, employee, or property in Minnesota, and it had not worked in Minnesota or targeted advertising there. Shahram Elli, Sourcis’s chief executive officer, is a California citizen and had never been to Minnesota.

R4AC alleged that Sourcis and Elli breached their contract and misappropriated R4AC’s confidential information and intellectual property to compete with R4AC in the medical-tourism industry. R4AC asserted state-law claims and sought more than $500,000 in damages. The case was in federal court based on diversity jurisdiction.

Personal-Jurisdiction Analysis

The defendants sought dismissal or transfer on several alternative grounds, including lack of personal jurisdiction, statutes of limitation, insufficient pleading, federal preemption, and improper venue. They alternatively requested transfer to the Eastern District of California.

The court focused on personal jurisdiction, which concerns whether a court has legal authority over a defendant. In a diversity case, that authority must comply with Minnesota’s jurisdictional statute and the federal Constitution. Because Minnesota’s statute reaches the constitutional limit, the key question was whether Sourcis and Elli had sufficient “minimum contacts” with Minnesota to make it fair to require them to defend the case there.

The court concluded that they did not. The evidence showed that R4AC was referred to Sourcis by another Sourcis customer in California, with no evidence that Sourcis solicited the relationship by reaching into Minnesota. Sourcis performed its work in California, Mexico, and Illinois, and there was no evidence that it performed work for R4AC in Minnesota. The court also explained that sending invoices to Minnesota and receiving payment from a Minnesota bank, standing alone, did not establish the required contacts.

The court considered Minnesota’s interest in providing a forum and the convenience of the parties but found those factors insufficient. The dispute had minimal connections to Minnesota because the medical-tourism activities and the recorded meetings occurred outside Minnesota, and R4AC identified no particular convenience-related reason for keeping the case there.

Transfer and Disposition

Because the court lacked personal jurisdiction over Sourcis and Elli, it considered whether transfer was more appropriate than dismissal. The defendants initially referred to both the Northern and Eastern Districts of California in their filings, but clarified at the hearing that they sought transfer to the Eastern District. The court found that transfer would better support a speedy and inexpensive resolution and ordered the case transferred to the United States District Court for the Eastern District of California.

The court’s order states that the defendants’ motion to dismiss or transfer venue was granted in part and denied in part. The request to transfer venue was granted, and the request for dismissal was denied without prejudice as moot. The opinion did not decide the merits of R4AC’s contract, information-misappropriation, or intellectual-property allegations.