Opinion
2:12-cv-00927 JWS
08-24-2012
ALLIANCE LABS, LLC, Plaintiff, v. STRATUS PHARMACEUTICALS, INC., and SONAR PRODUCTS, INC., Defendants.
ORDER AND OPINION
[Re: Motions at Dockets 12, 16]
I. MOTION PRESENTED
At docket 12, defendant Sonar Products, Inc. ("Sonar") moves pursuant to Federal Rule of Civil Procedure 12(b)(2) to dismiss the complaint for lack of personal jurisdiction. At docket 16, defendant Stratus Pharmaceuticals, Inc. ("Stratus") has filed a nearly identical motion. Both defendants move, in the alternative, to dismiss based on improper venue or to transfer the case to an alternative venue for the convenience of the parties and witnesses. Plaintiff Alliance Labs, LLC ("Alliance") opposes both motions at docket 23. Sonar's reply is at docket 29. Stratus replies at docket 30. Oral argument was not requested and would not assist the court.
II. BACKGROUND
Alliance is an Arizona company that markets and distributes enema products, including the Enemeez Mini Enema, the Enemeez Plus Mini Enema, and the Docusol Mini Enema. Stratus is a Florida corporation that markets and distributes competing enema products such as the Vacuant Mini-Enema and the Vacuant Plus Mini-Enema. Sonar is a New Jersey corporation that manufactures Vacuant and Vacuant Plus for Stratus.
Alliance alleges that Stratus's Vacuant products are "knock-offs" of its Enemeez products. Alliance maintains that Stratus has targeted its customers and represented Vacuant products to be less expensive than the Enemeez products, but equally effective. Alliance alleges that Stratus uses packaging that is virtually indistinguishable from the Enemeez packaging and that Stratus copied substantial portions of the Enemeez brochure to promote Vacuant products. Alliance also alleges that Stratus has misrepresented the number and quantities of active ingredients in the Vacuant products.
Alliance has asserted federal claims for false advertising, unfair competition, and trademark infringement under the Lanham Act, and copyright infringement. Alliance has asserted state law claims for unfair competition, trademark infringement, and unjust enrichment.
III. STANDARD OF REVIEW
"Where a defendant moves to dismiss a complaint [pursuant to Federal Rule of Civil Procedure 12(b)(2),] for lack of personal jurisdiction, the plaintiff bears the burden of establishing that a court has personal jurisdiction over a defendant." Where the motion is based only upon written materials, rather than an evidentiary hearing, the plaintiff is required only to make a prima facie showing of personal jurisdiction. Uncontroverted allegations in the complaint are taken as true, and conflicts between parties over statements contained in affidavits are resolved in favor of the plaintiff.
Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004).
Dole Food Co., Inc. v. Watts, 303 F.3d 1104, 1108 (9th Cir. 2002).
Brayton Purcell LLP v. Recordon & Recordon, 575 F.3d 981, 985 (9th Cir. 2009).
"Where, as here, there is no applicable federal statute governing personal jurisdiction, the district court applies the law of the state in which the district court sits." Arizona Rule of Civil Procedure 4.2(a) authorizes the exercise of jurisdiction to the extent permitted by federal due process requirements. Due process requires that the defendant "have certain minimum contacts with [the forum] such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice."
Fred Martin Motor Co., 374 F.3d at 800.
Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (internal quotations omitted).
IV. DISCUSSION
A. General Jurisdiction
General jurisdiction arises where a defendant has "substantial" or "continuous and systematic" contacts with the forum and therefore "can be haled into court in that state in any action, even if the action is unrelated to those contacts." The defendant's contacts must "be of the sort that approximate physical presence." "Factors to be taken into consideration are whether the defendant makes sales, solicits or engages in business in the state, serves the state's markets, designates an agent for service of process, holds a license, or is incorporated there."
Bancroft & Masters, Inc. v. Augusta Nat., Inc., 223 F.3d 1082, 1086 (9th Cir. 2000) (citing Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408, 415 (1984)).
Id.
Id.
1. Sonar
Alliance argues that, because 8% of Sonar's 2011 sales and 1.64% of Sonar's sales for the first quarter of 2012 came from Arizona, Sonar is subject to general jurisdiction in Arizona. Without more specific information, the court is unable to conclude that the percentages of sales for 2011 and the first part of 2012 approximate physical presence in Arizona. Because that is the only factor Alliance has used to support its prima facie case, the court concludes that Sonar is not subject to general jurisdiction in Arizona.
2. Stratus
Alliance argues that because 3.2% of Stratus' 2011 gross sales and 14.25% of Stratus' gross sales for the first quarter of 2012 came from Arizona, Stratus is subject to general jurisdiction in Arizona. As with Sonar, Stratus' sales percentages in 2011 and 2012 do not approximate physical presence in Arizona. Again, because Alliance has not cited any other factor supporting a prima facie case, the court concludes that Stratus is not subject to general jurisdiction in Arizona.
B. Specific Jurisdiction
Specific jurisdiction exists where "(1) the defendant has performed some act or consummated some transaction within the forum or otherwise purposefully availed himself of the privileges of conducting activities in the forum, (2) the claim arises out of or results from the defendant's forum-related activities, and (3) the exercise of jurisdiction is reasonable." "The first prong is satisfied by either purposeful availment or purposeful direction . . . which . . . are . . . two distinct concepts." "Purposeful direction is . . . the proper analytical framework in this case."
Bancroft & Masters, 223 F.3d at 1086.
Brayton Purcell, 606 F.3d at 1128 (internal quotations omitted).
See id.
Purposeful direction is determined using a three-part test. A defendant has purposefully directed activity towards a forum if the defendant has "(1) committed an intentional act, (2) expressly aimed at the forum state, (3) causing harm that the defendant knows is likely to be suffered in the forum state."
Brayton Purcell, 606 F.3d at 1128.
1. Sonar
Sonar maintains that it was only a contract manufacturer and that it did not purposefully direct any action towards Arizona. Sonar states that it "did not develop the labeling, packaging or inserts for the Vacuant products. It merely had the label, packaging, and inserts as supplied to it printed." Sonar therefore maintains that it did not expressly aim any intentional act towards Arizona.
Doc. 29 at 6.
"Express aiming encompasses wrongful conduct individually targeting a known forum resident." Alliance argues in its response that Sonar and Stratus acted in conjunction and "mimicked Alliance's labeling." In its complaint, Alliance alleges that Sonar must have been aware that Stratus was falsely advertising because it manufactured Vacuant and Vacuant Plus. Even if that allegation is true and would subject Sonar to liability, knowledge that Stratus was falsely advertising does not constitute express aiming at an Arizona resident.
Bancroft & Masters, 223 F.3d 1082.
Doc. 23 at 11.
Doc. 1 at 10.
Meanwhile, each of the "allegedly infringing activities" listed in Alliance's complaint refer only to conduct by Stratus. With respect to Alliance's individual claims, the complaint describes conduct by Stratus and then states that Sonar is also liable because it "knows or has reason to know" of Stratus' conduct. In short, Alliance has not supported allegations of any conduct on the part of Sonar that targeted Alliance or any other forum resident. Because Alliance has not demonstrated express aiming, it has not established purposeful direction and Sonar is not subject to specific jurisdiction.
Doc. 1 at 13.
See, e.g., doc. 1 at 14, 16, 17
2. Stratus
By contrast, the allegations in plaintiff's complaint state that Stratus has intentionally copied substantial portions of Alliance's brochures, and "deliberately mimicked [Alliance's] packaging." Those allegations constitute intentional acts expressly aimed at Alliance, an Arizona resident. Alliance has also alleged that it has been injured by that conduct. Because Stratus would have known that its conduct would injure an Arizona resident, Alliance has made a prima facie case of purposeful direction.
Doc. 1 at 9.
Id.
Alliance also alleges that Stratus uses its trademarks in metatags for its website. Id. at 13. All of the pertinent jurisdictional allegations are supported by the declaration at docket 24.
See, e.g., doc. 24 at 4.
Although Stratus argues that Alliance's claims do not arise out of the sale of Vacuant products in Arizona, that argument is both incorrect and immaterial. There is no dispute that Alliance's claims arise, in part, out of the Stratus' alleged copying of Alliance's brochures. The only remaining question, therefore, is whether the exercise of specific jurisdiction over Stratus would be reasonable.
Reasonableness depends on seven factors: "(1) the extent of the defendant's purposeful injection into the forum; (2) the defendant's burdens from litigating in the forum; (3) the extent of conflict with the sovereignty of the defendant's forum; (4) the forum state's interest in adjudicating the dispute; (5) the most efficient judicial resolution of the controversy; (6) the importance of the forum to the plaintiff's interest in convenient and effective relief; and (7) the existence of an alternative forum."
Ziegler v. Indian River Cnty., 64 F.3d 470, 475 (9th Cir. 1995).
Here, Stratus has injected itself into Arizona via sales. Those sales have recently constituted over 14% of its total sales. Although those sales do not constitute continuous and systematic contacts sufficient to support general jurisdiction, they do represent injection such that this factor weighs in favor of reasonableness. Stratus argues that the burden of defending suit in Arizona is great because most of the witnesses and evidence are in Florida. The burden on a non-resident defendant will always be greater than the burden on a defendant who is a resident of the forum-moreover, this factor is examined "in light of the corresponding burden on the plaintiff." Given that it is just as difficult for Alliance to litigate in Florida as it is for Stratus to litigate in Arizona, and given that Alliance's witnesses and evidence are in Arizona, the second factor is a wash. The court agrees with Alliance that the exercise of jurisdiction in this instance would not implicate Florida's sovereignty; the third factor therefore weighs in favor of reasonableness. As with most other states, "Arizona has a strong interest in protecting its residents from torts that cause injury within the state, and in providing a forum for relief." The fourth factor therefore weighs in favor of reasonableness.
Sinatra v. Nat'l Enquirer, Inc., 854 F.2d 1191, 1199 (9th Cir. 1988).
Brainerd v. Governors of the Univ. of Alberta, 873 F.2d 1257, 1260 (9th Cir. 1989).
With respect to the fifth factor, Alliance argues that the only non-party witnesses are found in Arizona. Stratus responds that there are non-party witnesses in Florida as well. The court concludes that this factor is a wash. The sixth factor-which focuses on the plaintiff's interest-is not as significant as the others, but ultimately weighs, however slightly, in favor of reasonableness. Finally, both New Jersey and Florida represent potential alternative forums, but as Alliance points out, "whether another reasonable forum exists becomes an issue only when the forum state is shown to be unreasonable."
Bauman v. DaimlerChrysler Corp., 644 F.3d 909, 929 n.19 (9th Cir. 2011) (quoting Sinatra, 854 F.2d at 1201).
Because the court has concluded that the exercise of jurisdiction in Arizona is reasonable, Stratus is subject to specific jurisdiction.
C. Venue
1. Dismissal
Stratus moves in the alternative to dismiss for improper venue. Stratus' arguments in favor of dismissal all hinge on whether it is subject to personal jurisdiction in Arizona. The court has already concluded that Stratus is subject to personal jurisdiction in Arizona, and therefore dismissal based on improper venue is not appropriate.
See doc. 16 at 12. See also 28 U.S.C. § 1391(c)(2) ("For all venue purposes an entity . . . whether or not incorporated, shall be deemed to reside, if a defendant, in any judicial district in which such defendant is subject to the court's personal jurisdiction . . . .").
2. Transfer
Stratus argues that this case should be transferred to the Southern District of Florida. Section 1406(a) of Title 28 of the United States Code provides that "[t]he district court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought." Because the court has already concluded that Stratus is subject to personal jurisdiction in Arizona, venue is not improper, and dismissal pursuant to § 1406(a) is inappropriate.
Stratus argues that the case should be transferred to the Southern District of Florida pursuant to 28 U.S.C. § 1404(a), which states 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 . . . where it might have been brought." Assuming that the case could have been brought in the Southern District of Florida, whether transfer is appropriate depends on a number of public and private factors. "The defendant must make a strong showing of inconvenience to warrant upsetting the plaintiff's choice of forum."
Id. § 1404(a).
Decker Coal Co. v. Commonwealth Edison Co., 805 F.2d 834, 843 (9th Cir. 1986).
Among the factors that may be considered are: (1) whether one state is more familiar with the governing law than another; (2) the plaintiff's choice of forum; (3) the parties' contacts with the forum; (4) the contacts relating to the plaintiff's claim in the chosen forum; (5) the differences in the cost of litigation in each forum; (6) the availability of compulsory process to compel attendance of non-party witnesses; and (7) the accessibility to sources of proof.
Jones v. GNC Franchising, Inc., 211 F.3d 495, 498-99 (9th Cir. 2000).
The court disagrees with Stratus that "this is not a case where the burden is simply shifted from one party to another." Either party would be inconvenienced by litigation in the other's preferred forum. Here, neither Arizona nor Florida is more familiar with the law governing Alliance's federal claims. However, Alliance has chosen Arizona. Some of its claims are based on allegations that Stratus copied its brochures and labels almost verbatim. Those allegations also constitute the defendant's jurisdictionally significant contacts. The second, third, and fourth factors therefore weigh against transferring the case. Stratus' argument that compulsory process is more readily available in Florida applies equally to Alliance's witnesses who reside in Arizona. Finally, the court has already discussed that witnesses and evidence are located in both states. Consequently, Stratus has not made a strong showing of inconvenience warranting transfer.
Doc. 16 at 16.
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V. CONCLUSION
For the reasons above, Sonar's motion to dismiss for lack of personal jurisdiction at docket 12 is GRANTED. Sonar is DISMISSED from this action. Stratus' motion at docket 16 to dismiss for lack of personal jurisdiction is DENIED. Stratus' alternative motion to dismiss for improper venue or to transfer to an alternative venue for the convenience of the witnesses and the parties is DENIED.
______________________
JOHN W. SEDWICK
UNITED STATES DISTRICT JUDGE