Opinion
Case No. 03-1202-WEB
September 16, 2003
MEMORANDUM and ORDER
Plaintiff brought this action claiming the defendants have engaged in various tortious acts, including an infringement of Coleman's trademark, trade dress, and design patent rights. The matter is now before the court on the defendants' motion to dismiss the complaint or in the alternative to transfer the action to the Eastern District of Virginia. The court finds that oral argument would not assist in deciding the issues presented.
I. Background.
Plaintiff Coleman Company, Inc., is a Delaware corporation with its principal place of business in Wichita, Kansas. Doc.1, ¶ 2. The complaint alleges that for sixty years Coleman has produced distinctive-looking lanterns having a trade dress that serves to identify the products of the Coleman Company. ¶¶ 9-11. Since 1990, Coleman has sold key chains that incorporate a working miniature Coleman lantern as part of the key ring. ¶¶ 13-15. Plaintiff alleges that these lantern key chains have come to be recognized by the public as coming from Coleman and identifying Coleman products. ¶ 16. Plaintiff further claims it has a registered trademark in the embodiment of its lantern design for "non-metal key chains and fobs," ¶ 14. Additionally, plaintiff claims to be the owner of a design patent [U.S. Patent No. Des. 300, 470] ("the `470 patent") that protects the ornamental design of a particular hand-held spotlight. ¶ 18. Plaintiff alleges that the defendant Dollar Tree Stores, Inc., which operates thousands of discount stores in the United States offering products for $1.00, has offered for sale Dollar Tree lantern key chains that are substantially similar to Coleman's and which are likely to confuse and deceive the public into believing that Dollar Tree's products originate from Coleman or are affiliated with Coleman. ¶¶ 21, 25, 27. Plaintiff also claims the sale of such items will dilute Coleman's trademark rights. ¶ 29. The complaint sets forth various federal and state law claims.
The claims include: Count 1 — federal trademark infringement ( 15 U.S.C. § 1114); Count 2 — false designation of origin ( 15 U.S.C. § 1125(a)); Count 3 — dilution ( 15 U.S.C. § 1125(c)); Count 4 — trade dress infringement ( 15 U.S.C. § 1125(a)); Count 5 — violation of Kansas Consumer Protection Act; Count 6 — common law trademark infringement; Count 7-1 common law unfair competition; Count 7 [sic] — common law misappropriation; and Count 8 — design patent infringement ( 35 U.S.C. § 271).
According to the complaint, defendants Dollar Tree Stores, Inc. ("DTS") and Dollar Tree Distribution, Inc. ("DTD") are Virginia corporations with their principal place of business at the same address in Chesapeake, Virginia. ¶¶ 2-3. DTS is registered to do business in Kansas; DTD is not. ¶¶ 3-4. As of December 31, 2002, DTS operated 2,263 stores in 40 states. ¶ 21. DTD is a wholly-owned subsidiary of DTS. For a fee, DTD provides merchandise, procurement, warehousing, and distribution services to DTS. ¶ 22. Plaintiff alleges that the court has jurisdiction over the subject matter and parties and that venue is proper in this district under 28 U.S.C. § 1391 and 1400(b). ¶¶ 5-6.
II. Summary of Motion to Dismiss or Transfer.
Defendants first argue that the court lacks personal jurisdiction over defendant Dollar Tree Distribution, Inc. ("DTD") because the Kansas "long-arm" statute does not apply to any of DTD's actions and because DTD has not had minimum contacts with the state sufficient to warrant the exercise of jurisdiction over DTD in Kansas. Secondly, defendants argue the claims should be dismissed for improper venue. Next, defendants argue that the claims against DTD under Kansas law must be dismissed because DTD has not transacted any business within the state. Defendants further argue that plaintiff has failed to state a claim for misappropriation under Kansas law or for violation of the Kansas Consumer Protection Act. Finally, defendants argue that if the action is not dismissed it should be transferred to the Eastern District of Virginia pursuant to 28 U.S.C. § 1404(a) because the interests of justice favor litigation of the claims in that forum.
III. Discussion.
A. Personal Jurisdiction.
A plaintiff opposing a motion to dismiss for lack of personal jurisdiction bears the burden of establishing that the exercise of personal jurisdiction over the defendant is proper. Kuenzle v. HTM Sport-Und Freizeitgerate AG, 102 F.3d 453, 456 (10th Cir. 1996). Where, as here, the motion is submitted prior to trial on the basis of affidavits and other written materials, the plaintiff need only make a prima facie showing to avoid dismissal. Id. The plaintiff may make such a showing by demonstrating, via affidavit or other written materials, facts that if true would support jurisdiction over the defendant. OMI Holdings, Inc. v. Royal Ins., 149 F.3d 1086, 1091 (10th Cir. 1998). Although the plaintiff will be required to prove the factual basis for jurisdiction by a preponderance of the evidence at trial, on a pretrial motion to dismiss all factual disputes are resolved in favor of the plaintiff. Kuenzle, 102 F.3d at 456. If the plaintiff makes the required prima facie showing, a defendant must present a compelling case demonstrating that the presence of some other considerations would render jurisdiction unreasonable. OMI Holdings, 149 F.3d at 1091 ( quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 477 (1985)).
Of course, "plaintiff has the duty to support jurisdictional allegations in a complaint by competent proof of the supporting facts if the jurisdictional allegations are challenged by an appropriate pleading." Pytlik v. Prof'l Res., 887 F.2d 1371, 1376 (10th Cir. 1989). A plaintiff's conclusory allegations that defendant has minimum contacts is insufficient to establish personal jurisdiction, but the Court resolves all factual disputes in favor of plaintiff. Id.
The Court applies a two-part test in determining whether personal jurisdiction over a nonresident defendant is proper. First, the defendant's conduct must fall within a provision of the Kansas long-arm statute, K.S.A. § 60-308. Second, the defendant must have sufficient minimum contacts with Kansas to satisfy the constitutional guarantee of due process. See Equifax Serv., Inc. v. Hitz, 905 F.2d 1355, 1357 (10th Cir. 1990); see also World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 291 (1980).
Among other things, the Kansas long-arm statute provides that any person who transacts any business within the state or who commits a tortious act within the state thereby submits to the jurisdiction of the courts of Kansas as to any cause of action arising from such actions. K.S.A. § 60-308(b)(1) (2). Plaintiff's primary argument concerning jurisdiction is that DTD committed tortious acts — including the tort of trademark infringement — in Kansas by virtue of its distribution of the allegedly infringing key chains. Pl. Resp. at 4. In reply, DTD argues that an analysis of the long-arm statute is unnecessary because plaintiff has failed to show that the exercise of jurisdiction comports with due process. Def. Rep. at 4. Because the Kansas long-arm statute is construed liberally to allow jurisdiction to the full extent permitted by due process, courts generally proceed directly to the constitutional analysis. Federated Rural Elec. Ins. Corp. v. Kootenai Elec. Co-op., 17 F.3d 1302, 1305 (10th Cir. 1994). See also Volt Delta Res. Inc. v. Devine, 241 Kan. 775, 777, 740 P.2d 1089, 1092 (1987). Under the due process analysis, the "constitutional touchstone" is "whether the defendant purposely established `minimum contacts' in the forum state." Burger King, 471 U.S. at 474 ( quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). There must be some act by which the nonresident party purposefully avails itself of the privilege of conducting activities in the forum state. Hanson v. Denckla, 357 U.S. 235, 253 (1958). The purposeful availment requirement ensures that a defendant will not be sued in a foreign jurisdiction solely as a result of the unilateral activity of another party. Burger King, 471 U.S. at 475. Consistent with due process, specific jurisdiction may be conferred over a nonresident defendant where the court's exercise of jurisdiction directly arises from a defendant's forum-related activities. To determine whether specific jurisdiction is appropriate, the court must first decide whether the defendant has such minimum contacts within the forum state "that he should reasonably anticipate being haled into court there." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1979). Second, the court must then consider whether the exercise of personal jurisdiction offends "traditional notions of fair play and substantial justice." Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102, 113 (1987).
Under the materials submitted, it is undisputed that DTD is a wholly-owned subsidiary of DTS. DTD is a single-purpose entity and operates solely for the benefit of DTS by procuring, warehousing, and distributing goods for DTS. DTD takes orders from DTS and makes arrangements to procure ordered products. In this instance, DTD imported the allegedly infringing products from China and distributed the products to DTD's various distribution centers (none of which are located in Kansas). DTD then negotiated and contracted with a third-party carrier (Swift Transportation Services) to transport the product to specific DTS stores, including DTS stores in Kansas. According to DTD, the products are sold to DTS "F.O.B." from the various DTD distribution centers, meaning title to the goods passes to DTS at the distribution centers and the product is no longer in the ownership or control of DTD. Some of the allegedly infringing products were acquired and transported in the foregoing manner to DTS stores in Kansas, and were then sold to consumers at such stores (as well as in DTS stores outside of Kansas). DTS operates fewer than 20 stores in Kansas. It operates over 2300 stores nationwide.
The court concludes that undisputed facts show DTD has purposefully directed its activities at Kansas by acquiring and arranging for transportation of the challenged products to DTS stores in this state. DTD did so at the direction and under the control of DTS, with knowledge that the products so shipped would be sold to consumers in Kansas. DTD placed the products in the stream of commerce intending and expecting them to be shipped to Kansas and ultimately sold to Kansas consumers as part of an ongoing economic arrangement with DTS. DTD thus purposefully directed its activities at the State of Kansas, and the claims in the instant case arise out of or are related to those activities. While it is true that a third party carrier actually transported the goods into the state, the carrier did so only at the behest of DTD and DTS and by virtue of their actions and direction, with DTD more or less acting as an arm of DTS in making the arrangements. Cf. Volt Delta Resources, Inc. v. Devine, 241 Kan. 775, 778, 740 P.2d 1089 (1987) ("Business" is transacted within the state when an individual is within or enters this state in person or by agent and, through dealing with another within the state, effectuates or attempts to effectuate a purpose to improve his economic conditions and satisfy his desires). The transportation of the goods to Kansas was obviously not the result of a fortuitous or unilateral act of a third party; it was a consequence anticipated and brought about by the purposeful actions of the defendants, including DTD. Cf. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 295 (1980). Having knowingly helped to place these products into the stream of commerce in Kansas with the expectation that they would be purchased by consumers in the state, DTD may be fairly held accountable here to the extent the sale of the products in this forum is tortious and causes injury here. See Woodson, 444 U.S. at 297; Keeton v. Hustler Magazine, Inc., 465 U.S. 770 (1984) (publisher who distributes magazine to a distant State may held accountable in that forum for damages resulting there from defamatory story); Packerware Corp. v. B R Plastics, Inc., 15 F. Supp.2d 1074, 1081 (D. Kan. 1998) ("The fact that some of the `passing off' occurred in South Dakota, along with the fact that [plaintiff's] principal place of business is in South Dakota, demonstrates that [defendant's] actions were uniquely aimed at the forum state and that the `brunt' of the injury would be felt there."); Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558, 1566-67 (Fed. Cir. 1994) (establishing distribution channel to sell products in forum state supports finding of jurisdiction); Fidelity and Cas. Co. of New York v. Philadelphia, 766 F.2d 440, 446 (10th Cir. 1985) ("If a defendant's product comes into the forum state as a result of a deliberate, although perhaps indirect, effort of the defendant to serve the forum state's market, then that defendant is subject to jurisdiction there. Placing one's product into the `stream of commerce' with the expectation of distribution into particular areas is the classic example of such an indirect effort."). Under the circumstances, DTD could "reasonably anticipate being haled into court" in Kansas on claims arising from the sale of products that DTD arranged to ship to the Kansas stores of its parent company. Regardless of the fact that DTD has not physically entered the state, it has availed itself of the privilege of conducting business in Kansas. Cf. Burger King Corp., 471 U.S. at 476.
The court notes defendants' argument that plaintiff has not supported its claim of jurisdiction with affidavits showing that the alleged harm occurred in Kansas, but the uncontested facts give rise to an inference of injury in Kansas, and this inference must be construed in plaintiff's favor on a motion to dismiss.
The court further concludes that the assertion of personal jurisdiction over DTD comports with traditional notions of fair play and substantial justice. It is true that DTD has no physical presence in Kansas and that litigating the claims in this district will constitute somewhat of a burden on DTD. But at the same time, a State generally has a compelling interest in providing its residents with a convenient forum for redressing injuries inflicted by out-of-state actors. Burger King, 471 U.S. at 473. That interest is significant here given that the claims involve not only allegations of injury to the plaintiff, a Kansas resident, but also allegations that members of the public have been and will be deceived as a result of the defendants' actions. Moreover, "because modern transportation and communications have made it much less burdensome for a party sued to defend himself in a State where he engages in economic activity, it usually will not be unfair to subject him to the burdens of litigating in another forum for disputes relating to such activity." Id. at 474 ( quoting McGee v. Int'l. Life Ins. Co., 355 U.S. 220, 223 (1957)). After considering all of the factors cited by the defendants, the court concludes that DTD has not pointed to factors that render the exercise of jurisdiction by Kansas over DTD unreasonable with regard to the claims asserted. Accordingly, the motion to dismiss for lack of personal jurisdiction will be denied.
B. Venue.
Defendants argue, for various reasons, that venue is improper in this district as to all claims. All of these various arguments are based in part on defendants' premise that DTS and DTD cannot be considered to reside in the State of Kansas. Under the applicable venue statutes, however, "a defendant that is a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced." See 28 U.S.C. § 1391(c). For the reasons previously stated, the court concludes that the defendants were subject to personal jurisdiction at the time the action was commenced. Accordingly, they are both deemed to reside in Kansas, and venue is proper in this district.
C. Kansas Common Law and Statutory Claims.
Defendants next argue that plaintiff has failed to state a claim for relief on any claims under Kansas common or statutory law. Their first contention is that all of plaintiff's state law claims fail because there is no specific allegation that any of the defendants' actions occurred in Kansas. The court rejects this argument, largely for the reasons previously stated. Plaintiff has alleged that jurisdiction is appropriate and that the defendants have distributed and offered the infringing products for sale in Dollar Tree Stores. Plaintiff has supported the complaint with affidavits showing that the products in question were sold at DTS stores in Kansas. Defendants have conceded in their own affidavits that DTD and DTS arranged to ship the challenged products to Kansas, where they are offered for sale by DTS. Moreover, as the court noted previously, the facts in the complaint support an inference that the defendants' actions caused injury to the plaintiff in Kansas. Taken together, these facts are sufficient to show the transaction of business or the commission of a tort within the state of Kansas.
Defendants also contend that plaintiff's cause of action entitled "Common Law Misappropriation" fails to state a claim for relief under Kansas law. Plaintiff concedes there is no Kansas case specifically recognizing such a claim, but points out that Kansas courts have recognized analogous claims and argues they would likely recognize this particular tort. The court concludes that plaintiff's allegations of injury to its good will, reputation and business property, as set forth in the "misappropriation" claim, would likely be viewed by the Kansas courts as items of damage available (if appropriately proven) for the tort of unfair competition, which is also alleged in plaintiff's complaint. See e.g. Restatement of the Law (Third) Unfair Competition § 36 (recoverable damages for unfair competition include harm to the market reputation of the plaintiff's goods, services, business, or trademark); Parsons Mobile Products, Inc. v. Remmert, 216 Kan. 256, 261, 531 P.2d 428 (1975) ("Where one manufactures a product similar to his former employer's product and sells such goods without distinguishing marks, using similar sales methods and advertisements in order to appropriate his good will, a charge of unfair competition has been sustained."). Kansas would be unlikely to recognize a separate and independent tort of misappropriation of good will, because there are strong public policy reasons for limiting such misappropriation theories, including the need to foster competition and protect public access to information. See Restatement of the Law (Third) Unfair Competition § 38, Comment b ("The common law of unfair competition has generally recognized rights against the appropriation of intangible trade values only when the recognition of such rights is supported by other interests that justify protection, and then only when the scope of the resulting rights can be clearly defined. * * * In the absence of such additional interests, the common law has resisted the recognition of general rights against the appropriation of information and other intangible trade values."). With the foregoing distinction, the court concludes that this "misappropriation" count, when considered with the allegations incorporated by reference therein, does state a claim for the common law tort of unfair competition. See Conley v. Gibson, 355 U.S. 41, 45-46 (1957) (court may not dismiss for failure to state a claim unless it appears beyond doubt that plaintiff can prove no set of facts in support of his claim which would entitle him to relief). Accordingly, the court will deny defendants' motion to dismiss this claim. Defendants next argue that plaintiff's fifth cause of action for "Deceptive Acts and Practices" should be dismissed because Coleman is a corporation and has no standing to assert a claim under the Kansas Consumer Protection Act. Coleman essentially concedes the point in its response brief, Pl. Resp. at 10, n. 3, and the court will therefore grant the motion to dismiss this claim for failure to state a claim upon which relief can be granted.
D. Request to Transfer Pursuant to § 1404(a).
Finally, defendants argue that the action should be transferred to the Eastern District of Virginia pursuant to § 1404(a). Among other things, defendants argue that Kansas has minimal connections to the accused product; that the overwhelming source of proof in the action — including witnesses — will be located in Virginia or in China; that a nearly identical action is now pending in the Eastern District of Virginia, a district famous for its expeditious handling of lawsuits; and that a transfer will result in a speedier resolution of the action and will not impose a burden on the plaintiff.
Section 1404(a) provides that "[f]or the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought." The party moving to transfer a case pursuant to § 1404(a) bears the burden of establishing that the existing forum is inconvenient. Scheidt v. Klein, 956 F.2d 963, 965 (10th Cir. 1992). Unless the balance is strongly in favor of the movant the plaintiff's choice of forum should rarely be disturbed. Id.
Aside from a general allegation that "many" "senior employees" would be inconvenienced by a trial in this district, defendants have made no concrete showing concerning particular witnesses or the degree of inconvenience likely to be suffered. The court sees no unusual obstacles in this case that weigh significantly in favor of a transfer. As plaintiff points out, most if not all of plaintiff's witnesses are located in Kansas, and a transfer to Virginia would do little more than shift any inconvenience from the defendants to the plaintiff. See Scheidt, 956 F.2d at 966 ("Merely shifting the inconvenience from one side to the other . . . obviously is not a permissible justification for a change of venue."). And contrary to defendants' argument that Kansas has a minimal connection to the action, Kansas in fact has a strong interest in providing a convenient forum for its citizens who claim to be injured by the sale of infringing products in this state. It is true that a similar suit is now pending in Virginia, but that is so only because defendant filed such an action after the instant suit was brought in Kansas. And finally, the court notes — and shares — defendants' desire for a prompt resolution of the case. To that end, the court will certainly entertain any proposals the parties have for expediting the litigation. The desire for a prompt resolution, however, does not justify a transfer of the action under § 1404(a). In sum, defendants have not shown the presence of factors sufficient to outweigh the presumption in favor of the plaintiff's choice of forum. After considering all of the circumstances, the court concludes the motion to transfer should be denied.
IV. Conclusion.
Defendants' Motion to Dismiss (Doc. 6) is GRANTED IN PART and DENIED IN PART. The motion is granted with respect to plaintiff's Fifth Claim for Relief asserting "Deceptive Acts and Practices;"such claim is hereby dismissed. The motion to dismiss is denied in all other respects. Defendants' alternative request for a transfer of the action to the Eastern District of Virginia is denied.
IT IS SO ORDERED.