American Companies That Outsource Confront New Legal Risk

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U.S. District Court for the District of Connecticut

U.S. District Court for the District of Connecticut

The United States 2nd Circuit Court of Appeals recently upheld a lower court ruling that three defendants in India could not be sued in a Connecticut court based on the fact that they provided services for clients based in the state.

The three Indian citizens were accused by Glenwood LLC, a Connecticut-based medical billing company, of allegedly using proprietary information to start competing firms and of stealing customers after they worked for Glenwood LLC via an outsourcing contract.

From the Connecticut Law Tribune

“In its sparsely worded decision, the 2nd Circuit did not expressly adopt the reasoning of federal district court Judge Warren W. Eginton. Eginton pointed to the plaintiff’s argument that U.S. companies should be encouraged to outsource to foreign countries because of the mutual economic benefits.

“However a company that outsources its work to foreign countries avails itself of the privileges of a foreign country; at the same time it loses some of the protection of the laws afforded by the United States. It would be inequitable for the workers that enable the outsourcing company to reap profits to bear the brunt of the economic onus of litigation arising from the outsourced work.”

The 2nd Circuit also affirmed the district court’s ruling dismissing related claims against two California defendants, on the basis that India had jurisdiction and that the claims relating to theft of information and solicitation of clients did not exist under Indian law. The court affirmed the district court’s ruling that the plaintiffs had failed to plead the slander, defamation and conversion claims with the required specificity.”

Read the original story.

Case info:
GLENWOOD SYS., LLC v. MED-PRO IDEAL SOLUTIONS, INCORPORATED
GLENWOOD SYSTEMS, LLC, Plaintiff-Appellant-Cross-Appellee,
v.
MED-PRO IDEAL SOLUTIONS, INCORPORATED, VENKATARAGHAVANTAIYA ARAVAMUDHAN, Defendants-Appellees-Cross-Appellants,
MED-PRO HEALTH CARE SERVICES PRIVATE LIMITED, G. JAI BALAJI, N.S. RAJIV KUMAR, K. SIVAKUMAR, Defendants-Appellees.
Nos. 10-2101-cv (L), 10-2592-cv (XAP)
United States Court of Appeals, Second Circuit.
September 23, 2011.

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