Facts

Netgain Technology, LLC is a cloud hosting and information technology service company that provides services to several organizations in the healthcare and accounting industries. Gerald Lee is a citizen of South Carolina who was required to provide his personal medical information to CareSouth Carolina, Inc., a community health center and one of Netgain's clients. On December 3, 2020, cyber criminals infiltrated network servers belonging to Netgain and CareSouth where sensitive personal and medical information was being kept. Netgain paid a significant amount of money in exchange for a promise from the criminals that they would delete the copies of the data that were in their possession and would not publish or share the data. Lee brought a putative class action on behalf of all persons residing in the U.S. whose personal medical information was compromised by the data breach. Lee also brought a putative nationwide class action on behalf of all patients of CareSouth against Netgain, alleging negligence, invasion of privacy, breach of third-party beneficiary contract, breach of implied contract, breach of confidence, breach of implied covenant of good faith and fair dealing, violation of South Carolina law, and declaratory relief.

PLAINTIFF'S CONTENTIONS: Plaintiff argued that Netgain failed to secure CareSouth patients' personal medical information by taking insufficient or no action. Plaintiff also alleged that CareSouth began filing sample data security incident letters with the California Attorney General that mirrored the language of the notice sent to plaintiff and thus, sent notice to California residents of its failings. Moreover, plaintiff contended that the court has personal jurisdiction over defendants because Netgain conducted much of its business in and had sufficient minimum contacts with California. Plaintiff argued that he made a prima facie showing of purposeful availment for jurisdiction because Netgain advertises in the San Diego market, has a physical California office, employs personnel working in California, and has California employees providing IT services for California residents. Moreover, plaintiff contended that Netgain purposefully availed themselves of the benefits of California by operating an office in San Diego. Finally, Plaintiff argued that it made a prima facie case for relatedness because Netgain staffs its California office with IT personnel providing services for multiple customers, including California healthcare workers that were impacted by the breach and that the breach occurred nationwide because of the negligence and data security failures of these California IT professionals.

DEFENDANTS' CONTENTIONS: Defendants argued that plaintiff did not shown purposeful direction because Netgain only had one satellite office in California that it staffed with only a few employees, none of which provided services to CareSouth and Netgain did not store any data at its California office.

Result

Plaintiff did not make a prima facie showing of purposeful direction or purposeful availment. Accordingly, Netgain's motion to dismiss for lack of personal jurisdiction was granted, and the complaint was dismissed with prejudice.