Opinion
Case No. 1:18-cv-62
2019-08-21
AUTOMOBILI LAMBORGHINI S.P.A., et al., Plaintiffs, v. LAMBORGHINI LATINO AMERICA USA, et al., Defendants.
Daniel Yonan, Monica Riva Talley, Sterne, Kessler, Goldstein & Fox PLLC, Washington, DC, for Plaintiffs. Warren Arthur Zitlau, Cahn & Samuels LLP, Washington, DC, for Defendant Jorge Antonio Fernandez Garcia. Anthony Crudup, Bala Cynwyd, PA, pro se.
Daniel Yonan, Monica Riva Talley, Sterne, Kessler, Goldstein & Fox PLLC, Washington, DC, for Plaintiffs.
Warren Arthur Zitlau, Cahn & Samuels LLP, Washington, DC, for Defendant Jorge Antonio Fernandez Garcia.
Anthony Crudup, Bala Cynwyd, PA, pro se.
ORDER
T. S. Ellis, III, United States District Judge
This action arises from the alleged marketing and sale of counterfeit Lamborghini-marked merchandise into the United States by defendants on the website www.lamborghinigrupo.com. Based on this alleged conduct by defendants, plaintiffs, the owner of the Lamborghini trademark and two corporate subsidiaries, have asserted claims of trademark infringement, trademark counterfeiting, trademark dilution, cybersquatting, and false designation of origin under the Lanham Act against defendants. See 15 U.S.C. §§ 1114, 1116, 1117, 1125(a). At issue in this case is defendant Jorge Antonio Fernandez Garcia's ("Garcia") motion to dismiss for lack of personal jurisdiction and for failure to state a claim. The focus of the parties' dispute is whether Garcia is subject to personal jurisdiction based on his contacts with the United States as a whole pursuant to Rule 4(k)(2), Fed. R. Civ. P.
This matter previously came before the Court on April 5, 2019 for a hearing on Garcia's motion to dismiss. During briefing and argument, both sides relied on evidence and materials outside of the pleadings to challenge and defend the existence of personal jurisdiction over Garcia. Accordingly, by Order dated April 5, 2019, (i) an evidentiary hearing was scheduled to resolve the factual disputes material to the existence of personal jurisdiction, (ii) the parties were directed to file supplemental briefing to explain how the evidence to be introduced at the evidentiary hearing would prove or disprove that personal jurisdiction over Garcia is established, and (iii) this case was stayed until the resolution of the motion to dismiss.
See Combs v. Bakker , 886 F.2d 673, 676 (4th Cir. 1989) (explaining that when "the existence of jurisdiction turns on disputed factual questions the court may resolve the challenge on the basis of a separate evidentiary hearing").
On August 1, 2019, the evidentiary hearing was held on the motion to dismiss. Plaintiffs and Garcia, by counsel, were present for the hearing. Plaintiffs introduced the testimony of co-defendant Anthony Crudup ("Crudup") along with various documentary evidence. Garcia did not call any witnesses and elected to introduce only documentary evidence and testimony adduced by cross-examining Crudup. At the conclusion of the evidentiary hearing, the matter was taken under advisement, and the parties were given an additional opportunity to submit supplemental briefing in light of the evidence introduced at the hearing. Accordingly, this matter has now been fully briefed and argued and is therefore ripe for disposition.
I.
When, as here, personal jurisdiction is to be resolved on the basis of an evidentiary hearing, the plaintiff must "prove grounds for jurisdiction by a preponderance of the evidence." Carefirst of Maryland, Inc. v. Carefirst Pregnancy Centers, Inc. , 334 F.3d 390, 396 (4th Cir. 2003). Plaintiffs argue that personal jurisdiction over Garcia is established pursuant to Rule 4(k)(2), which "provides for personal jurisdiction through nationwide service of process over any defendant provided (i) exercise of jurisdiction is consistent with the Constitution and the laws of the United States, (ii) the claim arises under federal law, and (iii) the defendant is not subject to the jurisdiction of the courts of general jurisdiction of any state." Graduate Mgmt. Admission Council v. Raju , 241 F. Supp. 2d 589, 596-97 (E.D. Va. 2003) (citing Rule 4(k)(2) ; Base Metal Trading, Ltd. v. OJSC "Novokuznetsky Aluminum Factory" , 283 F.3d 208, 215 (4th Cir. 2002) ).
In contrast, when "the court addresses the question [of personal jurisdiction] on the basis only of motion papers, supporting legal memoranda and the relevant allegations of a complaint, the burden on the plaintiff is simply to make a prima facie showing of a sufficient jurisdictional basis in order to survive the jurisdictional challenge." Combs , 886 F.2d at 676.
A.
The first element of the Rule 4(k)(2) analysis "requires the same minimum contacts due process analysis as is conducted under Rule 4(k)(l)(A), with the significant difference that the relevant forum is the United States as a whole, not an individual State." Graduate Mgmt. , 241 F. Supp. 2d at 597. It is well-settled that exercising jurisdiction over a defendant is consistent with due process as long as the defendant has sufficient "minimum contacts with [the forum] such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice." Int'l Shoe Co. v. Washington , 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945) (internal quotes omitted). The Fourth Circuit has held that "a single act by a defendant can be sufficient to satisfy the necessary ‘quality and nature’ of such minimal contacts, although ‘casual’ or ‘isolated’ contacts are insufficient to trigger such an obligation." CFA Inst. v. Inst. of Chartered Fin. Analysts of India , 551 F.3d 285, 293 (4th Cir. 2009) (quoting Int'l Shoe , 326 U.S. at 317–19, 66 S.Ct. 154 ). In particular, the defendant's contacts with the forum are sufficient to permit the exercise of specific personal jurisdiction over the defendant if the defendant "purposefully availed itself of the privilege of conducting activities in [the forum]" and the plaintiff's "claims arose out of the activities that [the defendant] directed at [the forum]." Sneha Media & Entm't, LLC v. Associated Broad. Co. P Ltd. , 911 F.3d 192, 198 (4th Cir. 2018). Of particular relevance here, the Fourth Circuit has held that a defendant's Internet activity can serve as a basis for exercising specific personal jurisdiction if the defendant "(1) directs electronic activity into the [forum], (2) with the manifested intent of engaging in business or other interactions within the [forum], and (3) that activity creates, in a person within the [forum], a potential cause of action cognizable in the [forum]'s courts." ALS Scan, Inc. v. Digital Serv. Consultants, Inc. , 293 F.3d 707, 714 (4th Cir. 2002).
Plaintiffs do not contend that Garcia has sufficient contacts with the United States to support the exercise of general jurisdiction, which is appropriately invoked with respect to an individual defendant when that individual defendant is domiciled in the forum. See Bristol-Myers Squibb Co. v. Superior Court of California, San Francisco Cty. , ––– U.S. ––––, 137 S. Ct. 1773, 1780, 198 L. Ed. 2d 395 (2017).
Here, exercising jurisdiction over Garcia is consistent with the limits of due process because plaintiffs' claims arise from the activities that Garcia purposefully directed at the United States as a whole. In particular, the evidence presented at the evidentiary hearing proves by a preponderance of the evidence that Garcia, in concert with Crudup, took steps to market and sell infringing and counterfeit Lamborghini-marked products into the United States through an online store at the website www.lamborghinigrupo.com. In this regard, the testimony and documentary evidence established the following facts by a preponderance of the evidence.
In 2011, co-defendant Anthony Crudup was introduced to Garcia by a mutual acquaintance. Garcia represented to Crudup that he possessed licensing agreements that gave Garcia worldwide rights to license, manufacture, and sell Lamborghini-marked merchandise for a period of 99 years. Initially, Garcia and Crudup entered into a partnership agreement in 2011 for the purpose of manufacturing and selling automobiles bearing the Lamborghini trademark in the United States. Despite taking steps to pursue this venture, Garcia and Crudup's plan to manufacture and sell a Lamborghini-marked vehicle in the United States did not come to fruition. Garcia and Crudup thus attempted to find other ways to profit from using the Lamborghini brand.
According to plaintiffs, the licensing agreements possessed by Garcia were fraudulent and contained the forged signature of Robert Braner, then-president of the North American distribution and marketing subsidiary of plaintiffs.
In early 2015, Garcia and Crudup decided to manufacture and sell so-called "lifestyle" merchandise, such as cigars and t-shirts, bearing the Lamborghini trademark in the United States through a website, www.lamborghinigrupo.com. Unlike their prior attempt to make and sell cars, the merchandising venture was not covered by any formal partnership agreement between Garcia and Crudup. Garcia made decisions with Crudup regarding the design of the www.lamborghinigrupo.com website, the type of merchandise that should be listed for sale on the website, and the appearance of the merchandise. Indeed, because Garcia was the one who held the alleged licensing rights, Garcia had to approve all business decisions relating to the marketing and sale of Lamborghini-marked merchandise on the www.lamborghinigrupo.com website. The two men also agreed on a plan for allocating profits made from selling Lamborghini merchandise in the United States, with 12% of the profits to go to Garcia. Through the www.lamborghinigrupo.com website, Garcia and Crudup made two confirmed sales of Lamborghini-marked cigars into the United States in Virginia and Florida.
These facts demonstrate that Garcia has sufficient contacts with the United States as a whole such that the exercise of personal jurisdiction would comport with the limits of due process under the ALS Scan test. First, the above facts show that Garcia "direct[ed] electronic activity into the [United States]," in satisfaction of the first ALS Scan element. See ALS Scan , 293 F.3d at 714. It is undisputed that the www.lamborghinigrupo.com website specifically targeted the United States market; indeed, the only confirmed sales made by Garcia and Crudup through the website were to purchasers in the United States. And importantly, the evidence persuasively demonstrates that Garcia personally marketed and sold products into the United States through the website. Specifically, as explained above, the facts show that Garcia worked in concert with Crudup (i) to design the www.lamborghinigrupo.com website, (ii) to list products bearing the Lamborghini brand for sale on the website, and (iii) to design the appearance of such products. In fact, as Crudup testified, Garcia had the final say with respect to all decisions concerning the marketing and sale of products on the website, as he was the holder of the purported licensing rights. The above facts also show that Garcia was to receive 12% of the profits from selling Lamborghini-merchandise into the United States through the website. This evidence makes clear that Garcia personally directed electronic activity into the United States through his participation in marketing and selling Lamborghini-marked products through the www.lamborghinigrupo.com website, undertaken in concert with Crudup.
It is important to observe that several courts have found that one or two sales of allegedly infringing products from a defendant's website into a forum are sufficient to demonstrate purposeful availment of that forum. See, e.g., Furminator, Inc. v. Wahba , No. 410CV01941AGF, 2011 WL 3847390, at *4 (E.D. Mo. Aug. 29, 2011) ; Bose Corp. v. Neher , No. CIV.A. 09-11479-PBS, 2010 WL 3814886, at *5 (D. Mass. July 30, 2010) ; Graduate Mgmt. Admission Council v. Raju , 241 F. Supp. 2d 589, 598 & n.17 (E.D. Va. 2003) ; see also CFA Inst. , 551 F.3d at 293 (explaining that "a single act by a defendant can be sufficient to satisfy the necessary quality and nature of such minimal contacts") (internal quotation marks omitted).
These facts also reflect that Garcia's "manifested intent" in directing electronic activity into the United States via the website was to "engag[e] in business" within the United States, as is required by the second ALS Scan element. See id. Specifically, it is clear that Garcia's intent in taking steps in concert with Crudup to design allegedly counterfeit Lamborghini-marked products, design the website, and list those products on the website was to sell the products into the United States via the website, which Garcia and Crudup were in fact able to do. And as already noted, Garcia and Crudup had agreed on a plan to allocate the profits from selling merchandise into the United States through the website, which further reflects that Garcia's intent in engaging in the above electronic activity was to engage in business in the United States.
Third, the last element of the ALS Scan test is met here because Garcia's electronic activity in connection with the www.lamborghinigrupo.com website "creates, in a person within [the United States], a potential cause of action cognizable in [the United States'] courts," namely the Lanham Act actions brought by plaintiffs in the instant case. See id. In sum, the evidence demonstrates that Garcia purposefully contacted the United States by directing his electronic activity—i.e. taking steps in concert with Crudup to design counterfeit Lamborghini-marked products, design the www.lamborghinigrupo.com website, and listing those products for sale on the website—into the United States with the intent of engaging in business in the United States. Under the ALS Scan test established by the Fourth Circuit, this electronic activity is sufficient to support the exercise of specific personal jurisdiction over Garcia. See id.
Seeking to avoid this conclusion, Garcia makes three arguments aimed at demonstrating that the exercise of personal jurisdiction under Rule 4(k)(2) is improper here. None of these arguments is persuasive. First, at the hearing and in his briefing, Garcia argued emphatically that Crudup's testimony was entitled to little credibility because plaintiffs previously offered to dismiss Crudup from the instant lawsuit if he agreed to testify against Garcia. But importantly, it is undisputed that Crudup did not accept this offer and that there is no settlement agreement currently in place that is contingent on Crudup giving testimony favorable to plaintiffs at the August 1 evidentiary hearing. Furthermore, Crudup's testimony concerning Garcia's participation in the marketing and sale of infringing products on the www.lamborghinigrupo.com website was supported by the documentary evidence introduced by plaintiffs, and defendant offered no evidence to contradict Crudup's account in any meaningful way. Indeed, in this respect, it important to note that Garcia elected not to testify to his lack of involvement in the website at the hearing and thereby subject himself to cross-examination, in contrast to Crudup. Accordingly, Garcia has failed to show that Crudup's testimony concerning Garcia's role in operating the website is not credible.
Second, Garcia argues that his participation in the operation of the website was too limited to connect him to the marketing and sale of products into the United States taking place on the website. In support, Garcia cites Hard Candy, LLC v. Hard Candy Fitness, LLC , 106 F. Supp. 3d 1231 (S.D. Fla. 2015), in which the district court ruled that two parent companies' approval rights over a subsidiary company were insufficient to support the exercise of personal jurisdiction under the Florida long-arm statute over the parent companies by imputing the subsidiary's forum contacts under agency principles. That case is inapposite because here it is unnecessary to impute Crudup's contacts to Garcia under agency principles. As the above evidence demonstrates, Garcia personally and substantially participated in marketing and selling products into the United States through the website; thus, it is clear that Garcia himself targeted the United States through his electronic activity, as is required under the first element of the ALS Scan test. Accordingly, given that the exercise of agency-based personal jurisdiction is not at issue in this case, the district court's decision in Hard Candy, LLC is not instructive here.
Third, Garcia makes much of the fact that the two products sold by Garcia and Crudup through the website were purchased by private investigators hired by plaintiffs, but this in no way impacts the minimum contacts analysis. See Cartier v. Seah LLC , 598 F. Supp. 2d 422, 425 (S.D.N.Y. 2009) ("[T]he fact that the purchaser [of the infringing product] happened to be an investigator in plaintiffs' employ does not go to the question whether [the defendant] purposefully availed itself of the privilege of doing business in [the forum]."). The case cited by defendant, Simone v. VSL Pharm., Inc. , No. CV TDC-15-1356, 2017 WL 658711 (D. Md. Feb. 16, 2017), does not hold to the contrary. There, the district court held that a single sale of the defendants' allegedly infringing product through a third party's website did not constitute personal availment of the forum because the website had "no identified connection" to the defendants, in addition to the fact that the purchase was made by plaintiff's attorneys to "manufactur[e] jurisdiction." Id. at *5. This case is thus distinguishable from the instant case where, as discussed above, there is ample evidence that Garcia is connected to the www.lamborghinigrupo.com website through which plaintiffs' investigators purchased allegedly infringing Lamborghini-marked products. Accordingly, Simone is neither binding nor persuasive here, and the fact that plaintiffs' investigators made the purchases at issue is given little weight in the instant minimum contacts analysis.
In sum, Garcia has cited no persuasive ground on which to evade the conclusion that the evidence introduced at the evidentiary hearing proved by a preponderance of the evidence that Garcia, in concert with Crudup, personally and substantially took steps to market and sell infringing and counterfeit Lamborghini-marked products into the United States through an online store at the website www.lamborghinigrupo.com. Nor has Garcia demonstrated that such electronic activity is insufficient to support the exercise of specific personal jurisdiction over Garcia under the ALS Scan test established by the Fourth Circuit. Accordingly, plaintiffs have met their burden to show that exercising personal jurisdiction over Garcia in the United States is consistent with due process, as is required by the first element of the Rule 4(k)(2) analysis. See Graduate Mgmt. , 241 F. Supp. 2d at 597.
B.
The second element of the Rule 4(k)(2) analysis is that the plaintiff's claims must arise under federal law. As the parties correctly acknowledge, this element is met here. Plaintiffs' claims against defendants, including Garcia, consist of trademark infringement, trademark counterfeiting, trademark dilution, cybersquatting, and false designation of origin. Each of these causes of action arise under a federal statute, namely the Lanham Act. See 15 U.S.C. §§ 1114, 1116, 1117, 1125(a). Therefore, the second Rule 4(k)(2) element is satisfied.
C.
The third and final element of the Rule 4(k)(2) analysis is that the defendant is not subject to personal jurisdiction in any state. As the Seventh Circuit has explained:
A defendant who wants to preclude use of Rule 4(k)(2) has only to name some other state in which the suit could proceed.... If, however, the defendant contends that he cannot be sued in the forum state and refuses to identify any other where suit is possible, then the federal court is entitled to use Rule 4(k)(2).
ISI Int'l, Inc. v. Borden Ladner Gervais LLP , 256 F.3d 548, 552 (7th Cir. 2001). Here, Garcia contends that he is not subject to personal jurisdiction in Virginia, and Garcia does not identify any other state where he could be sued. Therefore, it is appropriate to conclude, by a preponderance of the evidence, that Garcia is not subject to personal jurisdiction in any state, which satisfies the final Rule 4(k)(2) element.
Although the Fourth Circuit has not specifically addressed the issue, the Seventh Circuit's approach to the application of the final Rule 4(k)(2) element in ISI Int'l has been widely and sensibly adopted by many other federal courts and is thus appropriately applied in this case. See, e.g., Touchcom, Inc. v. Bereskin & Parr , 574 F.3d 1403, 1415 (Fed. Cir. 2009) ; Holland Am. Line Inc. v. Wartsila N. Am., Inc. , 485 F.3d 450, 461 (9th Cir. 2007) ; Mwani v. bin Laden , 417 F.3d 1, 11 (D.C. Cir. 2005) ; Adams v. Unione Mediterranea Di Sicurta , 364 F.3d 646, 651 (5th Cir. 2004).
D.
In sum, plaintiffs have shown by a preponderance of the evidence that "(i) exercise of jurisdiction is consistent with the Constitution and the laws of the United States, (ii) the claim arises under federal law, and (iii) the defendant is not subject to the jurisdiction of the courts of general jurisdiction of any state" and thus that personal jurisdiction may be exercised over Garcia under Rule 4(k)(2). See Graduate Mgmt. , 241 F. Supp. 2d at 596–97 (citing Rule 4(k)(2) ). Accordingly, plaintiffs have satisfied their burden to prove the grounds for personal jurisdiction over Garcia in this matter.
II.
Garcia also seeks to dismiss the Complaint for failure to state a claim under Rule 12(b)(6), Fed. R. Civ. P. In essence, Garcia argues that the Complaint does not allege facts showing with particularity that he personally participated in the alleged marketing and sale of infringing Lamborghini-marked products on www.lamborghinigrupo.com. This argument fails because the facts alleged in the Complaint adequately allege that Garcia personally participated in the marketing and sale of infringing products on the website. In particular, the Complaint alleges that "Defendants Garcia, Crudup, and Braner are interrelated and working in active concert under the guise of [co-defendant] Lamborghini Latino America USA and/or 215 Racing, Inc. to knowingly and willfully manufacture, import, distribute, offer for sale, and sell products that are either counterfeit or infringe on Plaintiffs' trademarks." Compl. ¶ 22; see also id. ¶ 23 ("The Defendants have offered to sell and, on information and belief, have sold and continue to sell Infringing and Counterfeit Products within the United States ... via Defendants' Online Stores"). These allegations are sufficient at the motion to dismiss stage to show that Garcia personally participated along with the other defendants in the alleged marketing and sale of infringing Lamborghini-marked products on www.lamborghinigrupo.com. Accordingly, Garcia is not entitled to dismissal of the Complaint under Rule 12(b)(6).
III.
For the reasons stated above,
It is hereby ORDERED that defendant Jorge Antonio Fernandez Garcia's ("Garcia") motion to dismiss for lack of personal jurisdiction and for failure to state a claim (Dkt. 81) is DENIED.
It is further ORDERED that the stay previously entered in this matter is LIFTED and that Garcia must file an answer or other appropriate pleading in response to the Complaint by the deadline set forth in Rule 12(a)(4XA), Fed. R. Civ. P.