Applied Research Investments, LLC v. Lin

Background

Applied Research Investments, LLC alleged that Mark Lin, who had worked for Applied Research until his resignation in January 2022, accessed Applied Research’s computer systems and transferred confidential information to cloud storage. The alleged information included client lists and data, portfolio models, contracts, transaction records, presentations, and other business materials. Applied Research alleged that Lin and Alpha Lab Asset Management Inc., a company founded by Lin, used the information to solicit Applied Research’s clients and obtained more than 90% of Applied Research’s managed assets.

The defendants moved to dismiss the amended complaint under Federal Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction. The court considered the complaint, declarations, and other materials. At this stage, factual disputes were resolved in Applied Research’s favor, and the court stated that it was not making findings about the truth of the allegations.

Personal jurisdiction over Lin

Personal jurisdiction is a court’s authority to adjudicate claims against a particular defendant. Applied Research relied on New York’s long-arm statute, particularly the provision allowing jurisdiction over a person who transacts business in New York when the claims arise from that business.

The court held that Applied Research made the required initial showing of personal jurisdiction over Lin. The court relied on allegations that Lin regularly accessed Applied Research’s records through New York-based systems, downloaded confidential documents from New York servers before and after his employment ended, communicated with Applied Research employees in New York, visited New York at least thirteen times for Applied Research’s benefit, and participated in transactions involving New York-based accounts. The court stated that Lin’s physical absence from New York when he accessed the servers did not prevent a finding that he purposefully engaged with New York.

The court also held that the claims were sufficiently connected to Lin’s New York-related conduct because the alleged downloading of confidential information was the conduct on which Applied Research based its claims. It further held that exercising jurisdiction over Lin was consistent with due process because his conduct and contacts with New York were sufficient for him reasonably to anticipate being sued there.

Personal jurisdiction over Alpha

Applied Research did not assert an independent basis for personal jurisdiction over Alpha. Instead, it argued that Alpha was Lin’s alter ego, meaning that the company and Lin should be treated as one entity for jurisdictional purposes.

The court held that Applied Research had not provided enough factual allegations to support alter ego jurisdiction over Alpha. The court explained that Applied Research relied mainly on legal conclusions and statements made on information and belief, without specific supporting facts concerning issues such as corporate formalities, capitalization, commingling of funds, shared offices or personnel, ownership, or use of the company to commit the alleged wrong. The court therefore granted the defendants’ motion to dismiss the claims against Alpha for lack of personal jurisdiction.

Leave to amend and disposition

Applied Research asked for permission to amend if any portion of the defendants’ motion was granted. The court granted leave to replead because it was possible that Applied Research could allege facts establishing alter ego jurisdiction over Alpha. Any amended pleading had to be filed within 21 days of the Opinion & Order.

The defendants’ motion to dismiss was GRANTED IN PART and DENIED IN PART. Alpha was dismissed as a defendant, while all claims against Lin survived. The defendants’ motion for oral argument was DENIED.