May 17, 2014

American Eutectic Welding Alloys Sales v. Dytron Alloys - 439 F.2d 428 (1971) - US Court of Appeals for the 2nd Circuit

FACTS: The defendant employed two individuals who had participated in an extensive training program sponsored by American Eutectic and then went on to work for the company for 5 and 13 years respectively.  The employment contract they signed stipulated that they had an assigned territory outside New York and if they stopped working for the company they would not work for a competitor in the same territory for two years thereafter.

The defendants left American Eutectic and starting working for Dytron.  The plaintiffs allege that Dytron is using confidential information from their former employees to woo away plaintiff's customers. 

HISTORY: The defendants moved to quash service of summons and to dismiss the action for lack of jurisdiction.  The district court granted the motions to quash service of summons and to dismiss by holding that the execution of the employment contracts in NY was insufficient to bestow jurisdiction and that there was no "substantial contact" with NY to justify invoking a long-arm statute.

ISSUE: Did they "transact any business in the state" within the meaning of section 302(a)1 ?

RATIONALE:

-the level of activity bythe defendants far exceeded the bare execution of employment contracts in NY

- the activity related to training including the 3-month training period, handing over control cards, instructions regarding them, can all be considered "purposeful activity"

*- the specific issue is did the cause of action result from    that activity which the court feels it does not

- the situs of the injury is where the plaintiff's lost business and these places are all "outside" the state of NY

- you cannot argue that by losing business elsewhere their profits in NY were hurt b/c that injury is only a result of the plaintiff being a resident of NY

- "we are concerned with whether there was "injury" within NY not whether the corporate defendant could have "reasonably expected the act to have consequences here" (294)

DISPOSITION: Affirmed