Cabot Lodge Securities, LLC v. Stoltmann Law Offices, P.C.

Background

Stoltmann Law Offices represented 47 claimants in two arbitrations against Cabot Lodge Securities. Cabot alleged that Stoltmann obtained Cabot’s trade secrets from former Cabot employee Ann Louise Werts. According to Cabot, Stoltmann contacted Werts, threatened to sue her unless she provided contact information for clients who bought GWG L Bonds, and received the names of bond purchasers and Cabot client files.

Cabot alleged seven claims: violations of the federal Defend Trade Secrets Act, the Colorado Uniform Trade Secrets Act, and the Delaware Uniform Trade Secrets Act; tortious interference with contract; tortious interference with business relations; misappropriation; and conversion. Stoltmann moved to dismiss for lack of personal jurisdiction, lack of venue, and failure to state a claim.

Personal Jurisdiction Analysis

Cabot did not argue that Stoltmann was subject to general jurisdiction in New York. Instead, it relied on two provisions of New York’s long-arm statute: New York Civil Practice Law and Rules § 302(a)(1), concerning the transaction of business in New York, and § 302(a)(3), concerning an out-of-state tort that causes injury in New York.

Under § 302(a)(1), the court concluded that Stoltmann had not transacted business in New York in a way connected to Cabot’s claims. An out-of-state law firm does not transact business in New York merely by handling matters related to New York. The press release mentioning Aegis Capital, another New York-based brokerage, was directed at potential clients who could live anywhere and was not alleged to have targeted New York clients. The court also found no sufficient connection between the press release and Cabot’s claims, because Cabot’s theory was that Stoltmann obtained the information through Werts, not through the press release.

Under § 302(a)(3), the court applied the general rule that the relevant injury location is where the first effects of the alleged tort occurred, rather than where the plaintiff later experienced economic consequences. Cabot argued that it was injured in New York because its headquarters and confidential information were there. The court rejected that argument. It reasoned that the claimants were outside New York, Werts worked in Colorado, the alleged access to the information occurred through Werts, and the arbitrations were in Colorado. Cabot’s expenses and other effects in New York were consequences of events occurring elsewhere, not a direct New York injury sufficient for jurisdiction.

Disposition

Judge Arun Subramanian granted Stoltmann’s motion to dismiss for lack of personal jurisdiction. All claims against Stoltmann were dismissed without prejudice to being reinstated in a forum that can exercise personal jurisdiction over Stoltmann. The court directed the Clerk of Court to close the case. Because the dismissal was based on personal jurisdiction, the opinion did not decide whether Cabot’s claims were substantively valid, whether venue was proper, or whether the complaint stated a claim.