DIRTT Environmental Solutions, Inc. v. Falkbuilt Ltd.

Nos. 21-4078 & 21-4153. 4/11/2023. D.Utah. Judge Baldock. Forum non Conveniens—Available Alternative Forum—Conflict with Federal Sentencing Policy.

April 11, 2023

DIRTT Environmental Solutions, Inc., a Colorado corporation, and DIRTT Environmental Solutions Ltd., its Canadian parent (collectively, DIRTT), design and construct prefabricated interior spaces and use proprietary software in the design process. Smed was a DIRTT founder, and he served as its CEO until DIRTT fired him several years later. Smed then established Falkbuilt Ltd. (and Falkbuilt, Inc., its US-based subsidiary), which, like DIRTT, produces prefabricated interior spaces. DIRTT sued Falkbuilt Ltd. and Smed for breach of contract in Canadian court, claiming that Smed recruited DIRTT’s employees and affiliates to join his new business and to bring DIRTT’s proprietary information with them. DIRTT later learned that Lance Henderson, a former DIRTT employee, apparently misappropriated its data. DIRTT then brought the instant lawsuit in Utah district court against Falkbuilt Ltd., Lance, and his wife Kristy Henderson (a former employee of a DIRTT affiliate who incorporated Falk Mountain States, LLC (FMS) to serve as Falkbuilt’s Utah affiliate), and FMS. DIRTT’s original complaint alleged theft of trade secret claims under federal and state law, and breach of contract against Lance. Falkbuilt Ltd. filed a counterclaim, which DIRTT moved to dismiss on forum non conveniens grounds. DIRTT subsequently amended its complaint to, among other things, add DIRTT Ltd. as a new plaintiff and Falkbuilt, Inc. and Smed as defendants; change DIRTT, Inc.’s principal place of business from Canada to the United States; and refine its allegations to be more focused on harm suffered in the United States. Falkbuilt and Smed moved to dismiss DIRTT’s first amended complaint, based on forum non conveniens. The Hendersons and FMS refused to join this motion or consent to Canadian jurisdiction, which was the alternative forum proposed in the motion to dismiss. The district court later granted DIRTT’s motion to dismiss Falkbuilt’s counterclaim for forum non conveniens, and it subsequently granted Falkbuilt and Smed’s motion to dismiss DIRTT’s first amended complaint. DIRTT appealed the latter ruling, which is the subject of appeal no. 21-4078. DIRTT also moved for relief from judgment under Fed. R. Civ. P. 60(b), which the district court denied and that is the subject of appeal no. 21-4153. The Tenth Circuit consolidated these appeals, and because its resolution of the forum non conveniens issue disposes of both appeals, it focused its analysis on DIRTT’s first appeal.
On appeal, DIRTT argued that the district court abused its discretion by concluding Canada was an available forum when three of the six defendants in the suit—Lance and Kristy Henderson, and Falk Mountain States—were not subject to Canadian jurisdiction and had not consented to proceeding with an action there. Forum non conveniens requires courts to decide whether the suit could be more conveniently resolved in a foreign jurisdiction other than plaintiff’s chosen forum. The threshold inquiry is whether there is an alternative forum for the suit that is available and adequate. Based on caselaw from various circuits, all parties (and by extension the entire case) must be subject to the jurisdiction of an alternative forum for it to be considered available under forum non conveniens. Accordingly, the Tenth Circuit determined, as a matter of first impression, that a district court clearly abuses its discretion when it dismisses an action as to several defendants under a theory of forum non conveniens while simultaneously allowing that action to proceed against other defendants. Here, all defendants are subject to the district court’s jurisdiction, but the Utah-based defendants are not subject to Canadian jurisdiction and neither consented to that jurisdiction nor joined the Canadian defendants’ motion to dismiss for forum non conveniens. Therefore, Canada is not an available alternative forum, and the district court abused its discretion by deciding otherwise.
The judgment in appeal no. 21-4078 was reversed and the case was remanded with instructions for the district court to exercise jurisdiction over the entirety of appellants’ action. Appeal no. 21-4153 was dismissed as moot.