Opinion
No. IP02-0576-C-M/S
July 17, 2003.
Daniel L Boots Bingham McHale LLP, Indianapolis, Melanie E Harris Ice Miller, Indianapolis, Alberto A Leon Bauman Dow McIntosh Albuquerque,
ORDER ON DEFENDANT'S MOTION TO DISMISS
This cause is now before the Court on the defendant's, NICOR, Inc., motion to dismiss for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2) ("Rule 12(b)(2)"). NICOR asserts that this Court's exercise of jurisdiction over it neither satisfies the requirements of the Indiana long-arm statute nor comports with due process. Plaintiff, Fanimation Design Manufacturing, Inc. ("Fanimation"), asserts that NICOR's contacts with Indiana are sufficient such that the Court can exercise general jurisdiction over NICOR.
The Court has reviewed the parties' arguments and finds that NICOR's motion to dismiss for lack of personal jurisdiction should be DENIED.
I. FACTUAL PROCEDURAL BACKGROUND
Fanimation filed this action alleging trade dress infringement, trademark infringement and unfair competition under federal and Indiana common law stemming from the sale of ceiling fans and palm leaf-shaped fan blades. Fanimation is an Indiana corporation and designs, manufactures, markets and distributes high-end ceiling fans in the United States. One of its oldest designs incorporates genuine palm leaf into fan blades.
NICOR, a New Mexico corporation with its principle place of business in Albuquerque, New Mexico, is a ceiling fan and electrical products importer and designer. Lawrence Aff. ¶ 2. NICOR has no assets or employees in Indiana. Id. ¶ 4. It does no direct advertising in the state and does not attend trade shows in Indiana.
However, NICOR does engage the services of an independent contractor in Indiana who is responsible for soliciting orders for and promoting the products in NICOR's catalog, including the fan blades that are the subject of this litigation. Lawrence Dep. at 20; Pl.'s Exh. 3, NICOR Lighting Fans, Sales Agent Representative Agreement, Between NICOR and Garre T. Schell, Jan. 17, 1997 ("Sales Agent Agreement"). In addition, since at least the year 2000 NICOR has provided catalogs, brochures and product to at least twenty-three distributors in Indiana and has conducted some business with at least six more businesses. Pl.'s Exh. 2, NICOR Sales from July 2000 thru [sic] Nov. 22, 2002. All products within NICOR's catalog are open to all of its distributors for purchase. Lawrence Dep. at 18.
Specifically, one of the distributors through whom NICOR sells its products is All-Phase/Merrillville ("All-Phase"), in Merrillville, Indiana. Id. at 13. Typically, purchase orders from All-Phase are sent to NICOR's independent Indiana sales agent, who then sends the purchase order to NICOR for processing and fulfillment. Id. at 14. Products so ordered are shipped directly from NICOR to All-Phase. Id. NICOR's revenue from business transacted with All-Phase exceeds $5,872.00. Pl.'s Exh. 2, NICOR Sales from July 2000 thru [sic] Nov. 22, 2002.
In similar fashion, NICOR has transacted business with the following Indiana businesses specifically: City Lights of Muncie, in Muncie, Indiana, since July, 1994, Lawrence Dep. at 21; Eckart Supply, Corydon, Indiana, since May, 1998, id. at 26; Gufstafson Lighting, in Elkhart, Indiana, since December, 1999, id. at 32; and LaSalle Bristol East, in Bristol, Indiana, since February, 2000. Id. at 34.
In the time period between July, 2000, and November, 2002, NICOR sold and shipped to Indiana businesses $942,488.00 worth of its ceiling fan and lighting products. Id. at 60. However, the revenue NICOR derives from sales to Indiana businesses represents less than 1% of NICOR's total annual sales. Lawrence Supp. Aff. ¶ 6.
Apparently, NICOR sold to Eckart Supply the only ceiling fan with the blades at issue in this case, the "Whisper Palm." Id. at 27. Rocklan Lawrence ("Lawrence") is President of NICOR. Lawrence Aff. ¶ 1. Lawrence testified that the Whisper Palm fan sold to Eckart Supply was actually shipped to an Eckart Supply operation in Kentucky. Lawrence Dep. at 28.
NICOR offers a warranty with all of its products. Id. at 55. Under the warranty, consumers may ship the products directly back to NICOR. Id. However, the warranty suggests that consumers make returns or warranty requests through the distributor from which they made their purchase. Id. at 55-56.
NICOR advertises its product line in a national trade publication called Residential Lighting. Id. at 47. NICOR runs ads in the magazine approximately six times per year. Id. at 48. The publication targets lighting showrooms. Id. NICOR intends to target lighting showroom distributors nationwide with its ads in Residential Lighting. Id. at 49. NICOR has also advertised in a trade publication called Home Lighting Accessories. Id. The company advertised its Whisper Palm ceiling fan in that publication in January, 2000. Id.
In addition to trade publication advertising, NICOR promotes its products through a catalog. Id. at 51. NICOR sends its catalogs to independent contractors, distributors and authorized distributors with whom they have ongoing business, including those entities in Indiana. Id. at 51-52. Furthermore, NICOR sends those same entities monthly direct mail brochures. Id. at 52.
II. STANDARD
Because NICOR has challenged personal jurisdiction, Fanimation has the burden of demonstrating that such jurisdiction exists. See RAR, Inc. v. Turner Diesel, Ltd., 107 F.3d 1272, 1276 (7th Cir. 1997).
For purposes of this motion, the Court will assume as true any affidavits or other specific evidence Fanimation offers, and will construe any disputed facts in its favor. Id. at 1275.
Jurisdiction exercised on the basis of a federal statute that does not authorize national service of process requires a federal district court to determine if a court of the state in which it sits could have personal jurisdiction. See Search Force, Inc. v. Dataforce Int'l, Inc. 112 F. Supp.2d 771, 774 (S.D. Ind. 2000). The Indiana Supreme Court explained that a two-step analysis is required to determine whether an Indiana state court may exercise personal jurisdiction over a nonresident defendant. See Anthem Ins. Cos., Inc. v. Tenet Healthcare Corp., 730 N.E.2d 1227, 1232 (Ind. 2000). The Court must first determine whether NICOR's conduct falls within Indiana's long-arm statute. If it does, the Court must then determine if NICOR's contacts with Indiana satisfy federal due process requirements. Id.
The Lanham Act, upon which Fanimation bases its federal claims, does not authorize nationwide service of process. See Search Force, 112 F. Supp.2d at 775 n. 8 (citing 15 U.S.C. § 1121(a); Johnson v. Worldwide Assocs., Inc., 12 F. Supp.2d 901, 906 (E.D.Wis. 1998)). A federal court sitting in diversity performs the same analysis. See Steel Warehouse of Wis., Inc. v. Leach, 154 F.3d 712, 713 (7th Cir. 1998) ("A federal district court exercising diversity jurisdiction has personal jurisdiction over a nonresident only if a court of the state in which it sits would have such jurisdiction.").
Ind. Trial Rule 4.4(A) performs the same function as a long-arm statute. Although technically a trial rule, the Court will refer to it throughout this opinion as the "long-arm statute."
Under the familiar due process analysis enunciated by the Supreme Court in International Shoe Co. v. Washington, a court must determine whether a nonresident 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.'" 326 U.S. 310, 316 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)). See also Wilson v. Humphreys (Cayman) Ltd., 916 F.2d 1239, 1243 (7th Cir. 1990), cert. denied, 499 U.S. 947 (1991). These minimum contacts must be established by a defendant's purposeful acts. As the Supreme Court explained in Hanson v. Denckla:
The unilateral activity of those who claim some relationship with a nonresident defendant cannot satisfy the requirement of contact with the forum State. The application of that rule will vary with the quality and nature of the defendant's activity, but is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protection of its laws.357 U.S. 235, 253 (1958). In short, exercising jurisdiction over a defendant will comply with due process only if the defendant "reasonably should have anticipated `being haled into court' in Indiana" and "purposefully . . . availed itself of the `privilege of conducting activities' in Indiana.'" Wilson, 916 F.2d at 1244 (quoting World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980); Hanson, 357 U.S. at 253). Once minimum contacts have been established, a court must "determine whether the assertion of personal jurisdiction would comport with `fair play and substantial justice.'" Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476 (1985) (quoting Int'l Shoe, 326 U.S. at 320).
The Supreme Court has recognized two separate forms of personal jurisdiction that will satisfy this "minimum contacts" requirement: general and specific. See RAR, 107 F.3d at 1277. "General jurisdiction" allows a court to exercise its jurisdiction over a defendant who has had such "continuous and systematic" contacts with the forum state that the Court's exercise of jurisdiction over the defendant is reasonable and just, even if those contacts bear no relation to the underlying controversy. Id. The standard for establishing general jurisdiction is fairly high. See Wilson, 916 F.2d at 1245.
By contrast, "specific jurisdiction" exists where the defendant has had only "minimum contacts" with the forum state but the cause of action arises from those contacts. See RAR, 107 F.3d at 1277. "[T]he defendant's conduct and connection with the forum state [must be] such that he should reasonably anticipate being haled into court there" to answer for his conduct. World-Wide Volkswagen, 444 U.S. at 297. See also RAR, 107 F.3d at 1277 (stating that the court must consider "whether, by traditional standards, [a defendant's contacts with the forum] would make personal jurisdiction reasonable and fair under the circumstances"). Random, fortuitous or attenuated contacts will not suffice to support a finding of specific personal jurisdiction. See Burger King, 471 U.S. at 475; RAR, 107 F.3d at 1277-78 (discussing what constitutes "purposeful availment" such that litigating in the forum is foreseeable to the defendant). With these standards in mind, the Court will now address the parties' arguments.
III. DISCUSSION
The Court's first inquiry is whether NICOR's conduct falls within the enumerated provisions of Indiana Trial Rule 4.4(A). Fanimation argues that NICOR's conduct falls under any one of the first four sections of the statute. The relevant part of the statute states:
Any . . . organization that is a nonresident of this state, . . . submits to the jurisdiction of the courts of this state as to any action arising from the following acts committed by him or her or his or her agent:
(1) doing any business in this state;
(2) causing personal injury or property damage by an act or omission done within this state;
(3) causing personal injury or property damage in this state by an occurrence, act or omission done outside this state if he regularly does or solicits business or engages in any other persistent course of conduct, or derives substantial revenue or benefit from goods, materials, or services used, consumed, or rendered in this state;
(4) having supplied or contracted to supply services rendered or to be rendered or goods or materials to be furnished or to be furnished in this state. . . .
Ind. T.R. 4.4(A)(1)-(4).
NICOR argues that it cannot do business in Indiana pursuant to Indiana Trial Rule 4.4(A)(1) because its maintains no offices in Indiana, directs no advertising to the state nor makes any direct sales in Indiana; all of the business generated from Indiana businesses is a result of the efforts of its "independent contractor." Def.'s Reply Br., at 4-5. In addition, NICOR avers that it has not caused injury in Indiana by acts arising from its sale of the Whisper Palm fan in the state pursuant to Indiana Trial Rule 4.4(A)(2) because none of the fans have been sold in Indiana. Def.'s Mem. in Support, at 6. Furthermore, NICOR argues that this fact also defeats Fanimation's claim that NICOR caused harm in Indiana via acts outside the state because Fanimation suffered no economic loss in Indiana. Id. at 6-8. Finally, NICOR contends that it neither supplies nor contracts to supply goods in Indiana, therefore, its conduct does not meet the requirements of Indiana Trial Rule 4.4(A)(4). Id. at 8.
At a minimum, the Court finds that NICOR's conduct falls under Indiana Trial Rule 4.4(A)(4). Specifically, the purpose of NICOR's contract with Garre Schell ("Schell") is for the company to have a person promoting its products in the state. Therefore, NICOR has contracted to supply goods in Indiana. Moreover, NICOR has received purchase orders from at least twenty-nine businesses in Indiana and has filled those purchase orders via direct shipment. The fulfillment of a purchase order by shipment of the requested product is considered acceptance of a contract. See Ind. Code § 26-1-2-206 (stating that acceptance of a sales contract may occur upon prompt shipment of conforming goods); see also Lackmond Prods., Inc. v. Constr. Supply, Inc., 691 N.E.2d 494, 496 (Ind.Ct.App. 1998) (discussing the formation of a contract via shipments pursuant to a customer's purchase order). Therefore, NICOR has contracted to supply goods in Indiana and is subject to personal jurisdiction in the state pursuant to Indiana Trial Rule 4.4(A)(4).
Moreover, the Court is convinced that an Indiana court would find that NICOR's shipment of product, catalogs and monthly direct mail brochures, satisfies the "doing any business in [Indiana]" prong of the long-arm statute. Ind. T.R. 4.4(A)(1). The Court recognizes that NICOR has set up its product distribution such that its independent contractors act as middlemen for any given transaction. However, the record establishes that NICOR has shipped product into the state since at least 1993, and continuously, at least to some distributors, through November, 2002, when Fanimation filed its brief in opposition to the instant motion. This is enough "business" to qualify as "doing any business" in the state. Accord Int'l Truck Engine Corp. v. Dawson Int'l Inc., 216 F. Supp.2d 754, 758 (N.D.Ind. 2002) (finding that shipments to Indiana customers of products, including one customer who had purchased products for five years, satisfied the "doing any business" prong of Indiana's long-arm statute). Therefore, NICOR's conduct also satisfies Indiana Trial Rule 4.4(A)(1).
Having found that NICOR's conduct satisfies Indiana's long-arm statute, the Court's inquiry turns to the issue of whether NICOR's contacts with the state comport with the requirements of due process. See Anthem Ins., 730 N.E.2d at 1232; Tom-Wat Inc. v. Fink, 741 N.E.2d 343, 348 (Ind. 2001); Am. Econ. Ins. Co v. Felts, 759 N.E.2d 649 (Ind.Ct.App. 2001). The evidence suggests that NICOR sold to Eckart Supply in Corydon, Indiana, the only Whisper Palm ceiling fan with the blades at issue in this case. Lawrence Dep. at 27. However, the fan actually shipped to an Eckart Supply location in Kentucky. Id. at 28. Apparently, Fanimation concedes that NICOR has not shipped any of the accused fan blades into Indiana because it only argues that NICOR's contacts with Indiana are so continuous and systematic that the Court may exercise general personal jurisdiction over NICOR. Pl.'s Br. in Opp'n, at 10. Specifically, Fanimation argues that NICOR has contracted with at least twenty-nine businesses in Indiana. Id. In addition, NICOR has shipped product to those entities since at least 1993. Id. In addition, NICOR's sales to Indiana outlets have generated revenues in excess of $942,488.00. Id. at 10-11. Moreover, Fanimation asserts that NICOR offers a warranty on its products sold in Indiana and has promoted its products directly to the distributors and independent contractor through which its does business in Indiana. Id. at 11.
The first inquiry in the Court's due process analysis is whether NICOR's contacts with Indiana have been continuous and systematic such that NICOR could reasonably anticipate being haled into an Indiana court for activity unrelated to its business within the state. Burger King Corp., 471 U.S. at 474. The Court must consider whether NICOR has purposefully availed itself of the privilege of conducting activities in Indiana and invoked the protection of its laws. Id. The Court's focus should be the quality and nature of NICOR's contacts with Indiana when making that assessment. Hanson, 357 U.S. at 253. Generally, the standard for general jurisdiction is fairly high. See Wilson, 916 F.2d at 1245.
NICOR challenges whether its contacts with Indiana have been "continuous and systematic" in several ways. Specifically, NICOR asserts that it has no employees in Indiana, owns no property or offices in Indiana, and is not incorporated in Indiana. In addition, to the extent that NICOR derives any revenue from goods that are shipped to Indiana, it is not a substantial amount. Furthermore, NICOR's only nexus to Indiana is indirectly through its independent contractor, and independent distributors. In other words, NICOR argues that its contacts with Indiana are fortuitous.
The Court disagrees with NICOR's assessment that its contacts are fortuitous. The evidence shows that NICOR contracted with Schell for the specific purpose of distributing its product in Indiana. In addition, the contract forbids Schell from distributing competing products without NICOR's permission. Pl.'s Exh. 3, Sales Agent Agreement, Art. IX. While it is clear that the contract does not provide Schell a salary, it is equally clear that NICOR retains control over pricing of its products. Id. Art. VII. Moreover, NICOR accepts purchase orders from and ships its products directly to at least twenty-nine businesses in Indiana and has done business this way for at least ten years. Pl.'s Exh. 2, NICOR Sales from July 2000 thru [sic] Nov. 22, 2002.
NICOR's contacts with Indiana do not end there. The evidence shows that NICOR purposefully sends catalogs for its products to its Indiana based distributors and sends monthly brochures, which advertise various of its products, to its regular customers. Lawrence Dep. at 51-52. NICOR maintains that because this literature does not reach consumers in Indiana, it can neither be doing business in the state nor advertising in the state. But the scope of what constitutes doing business is not so narrow. A company need not be selling directly to consumers to be doing business in the state. In its simplest form, doing business means the exchange of goods or services for either money or another valuable commodity. The facts in this case show that NICOR is doing business in the state and has regularly contacted distributors of its products in the state, at least twenty-nine of them, to promote its products. The Court is hard pressed to call this purposeful availment either random or fortuitous.
Having found that NICOR has minimum contacts with Indiana, the Court must now assess "whether the assertion of personal jurisdiction would comport with `fair play and substantial justice.'" Burger King, 471 U.S. at 476 (quoting Int'l Shoe, 326 U.S. at 320). The Court must balance five factors to ensure that the exercise of jurisdiction is fair:
(1) the burden on the defendant;
(2) the forum state's interest in adjudicating the suit;
(3) the plaintiff's interest in obtaining convenient and effective relief;
(4) the interstate judicial system's interest in obtaining the most efficient resolution of controversies; and
(5) the shared interest of the several States in furthering fundamental substantive social policies.Anthem, 730 N.E.2d at 1240 (citing Burger King, 471 U.S. at 476-77).
NICOR asserts that subjecting it to the instant suit in Indiana is unfair because Fanimation will not receive more convenient or effective relief here than it could in a New Mexico court, but would impose a disproportionate burden on NICOR. Def.'s Mem. in Supp., at 12. In addition, because the primary cause of action in the suit is under federal law, NICOR argues, Indiana's interests are not necessarily furthered any more than those of New Mexico. Id. Further, the majority of the witnesses reside in New Mexico and the documentary evidence related to NICOR's sale of the accused fan is in New Mexico. Id. at 13. Fanimation's burden of litigating, NICOR asserts, is the same regardless of where the case is heard. Id.
The Court finds that in the balance, it would not be unreasonable to subject NICOR to suit in Indiana. With respect to the burden on NICOR, in this intellectual property case the discovery of documents relevant to the case would occur in New Mexico, and possibly other states, regardless of where the suit was brought. But, the burden to travel to New Mexico for such discovery is not on NICOR, it is on Fanimation regardless of the forum of the suit. Therefore, it is difficult to see how the burden on NICOR is unconstitutionally disproportionate. Furthermore, if this cause goes to trial in Indiana, there is no doubt that out-of-state litigation would be more burdensome for NICOR; however, the same would be true for Fanimation if the cause went to trial in New Mexico.
The Court also disagrees with NICOR's assessment of Indiana's interest in this suit. Federal courts have recognized a state's interest in providing a forum for redress of its citizens' complaints, even when those complaints are for federal causes of action. See, e.g., Int'l Truck Engine Corp. v. Dawson Int'l Inc., 216 F. Supp.2d 754, 762 (N.D.Ind. 2002) (discussing a state's interest in adjudicating the patent infringement rights of a party). The fact that Fanimation's intellectual property rights are at issue does not change Indiana's interest in adjudicating the suit. See id. Similarly, the shared interest of the several states in furthering fundamental social policies would not be offended by an Indiana court providing a forum for redress of a resident's injury to intellectual property.
The third factor assesses Fanimation's interest in choosing a convenient and effective forum. Indiana, Fanimation's state of residence, is a convenient forum for Fanimation, and, this Court can provide effective relief.
This Court, as would a New Mexico federal district court, has proficiency with the Lanham Act. And, both courts have familiarity with application of the laws of various states. However, this Court has probably had more occasions to interpret the Indiana laws under which Fanimation has brought its state claims.
In the final analysis, the Court finds that under the circumstances of this case and NICOR's long history of contracting to provide product in Indiana and doing business in Indiana, the exercise of general jurisdiction over NICOR would not "offend traditional notions of fair play and substantial justice." Int'l Shoe, 326 U.S. at 316 (citations and internal quotations omitted).
IV. CONCLUSION
For the foregoing reasons, the Court has found that it may exercise general personal jurisdiction over the defendant NICOR. Therefore, NICOR's motion to dismiss for lack of personal jurisdiction is DENIED.