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Plaintiff’s Foreign Operations Result in “Lessened” Deference to Choice of Home Forum in Trade Secret Misappropriation Case

Agreeing that a Texas plaintiff’s choice of litigation forum in Texas deserved “somewhat lessened” deference because of its business operations in China, the U.S. Court of Appeals for the Fifth Circuit affirmed a dismissal without prejudice of the Texas company’s claims for trade secret misappropriation against a Chinese manufacturer based on forum non conveniens grounds.  Innovation First Int’l, Inc. v. Zuru, Inc., Case No. 12-10511 (5th Cir., Feb. 19, 2013) (per curium) (Stewart, J.; Davis, J.; Clement, J.)

The Texas plaintiff filed suit in Texas state court after learning of its competitor’s competing product at a trade show in Texas.  Plaintiff alleged that British-Virgin-Islands-formed Zuru misappropriated trade secrets in China by contracting with plaintiff’s former Chinese employee who had designed plaintiff’s product during his previous employment as part of plaintiff’s Chinese operations.  Zuru conducted its primary operations in China, where it contracted with plaintiff’s former employee.  The case was removed to federal court in the Texas district where plaintiff was headquartered.  Despite acknowledging proper personal jurisdiction over Zuru, the district court dismissed the case after neither party contested the availability of another adequate legal forum in China, and the court analyzed each of the Gilbertprivate and public interest factors.  Given the facts pertinent to venue, the district court found that all but one of the private interest factors favored dismissal, with the last (inconvenience associated with language translation) being neutral.  The court cited the existence of foreign witnesses, its lack of subpoena power and cost of travel as all favoring the Chinese forum.  The court also concluded that the public interest factors supported transfer because the case threatened to impose the “burden of jury duty on the people of a community that has ‘no relation to the litigation.’”

Noting that the district court had performed the appropriate analysis in evaluating the motion for dismissal, the Fifth Circuit found no abuse of discretion.  The Court disputed plaintiff’s first point of contention that “district court failed to afford its choice of forum proper deference.”  The Court explained that “the plaintiff’s choice of forum is entitled to great weight in the balancing of factors, and unless the balance strongly favors the defendants, the plaintiff’s choice of forum should not be overturned,” but, “[w]hen the plaintiff’s choice is not its home forum, however, [this weight] in the plaintiff’s favor ‘applies with less force.’”  Citing precedent, the Court further explained that a balance in the private interest factors favoring transfer negated the need for a court to consider the public interest factors, even in circumstances where the public factors may favor transfer.  For example, while the Court found plaintiff’s argument that “the district court should have weighed Texas’s interest in protecting its companies from trade secret misappropriation more heavily” persuasive, it nevertheless declined to use that public interest factor to supplant the district court’s discretion. 

© 2020 McDermott Will & Emery


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