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finding no general jurisdiction over an online retailer that allowed “anyone with an Internet connection” to view its website and purchase products online
Summary of this case from Brown v. Web.com Grp., Inc.Opinion
05 Civ 6893 (MBM).
May 1, 2006
PAUL M. FAKLER, ESQ. (Attorney for plaintiff) Thelen Reid Priest New York, NY.
JONATHAN ZAVIN, ESQ. (Attorney for defendants) Loeb Loeb New York NY.
OPINION AND ORDER
Plaintiff Holey Soles Holdings Ltd. seeks a declaratory judgment against Crocs, Inc. and its wholly owned subsidiary Foam Creations, Inc. ("Foam") to determine whether Crocs or Foam holds a copyright for the design of certain foam clog shoes, whether Holey Soles has violated such a copyright if it exists, whether Crocs or Foam holds a protectable interest in the trade dress of such shoes, and whether Holey Soles' manufacture and distribution of a particular line of shoes constitutes trade dress infringement or unfair competition. Defendants move to dismiss the complaint under Fed.R.Civ.P. 12(b) (2) for lack of personal jurisdiction or, in the alternative, to transfer the action to the United States District Court for the District of Colorado under 28 U.S.C. § 1404 (2000). For the reasons stated below, this court lacks personal jurisdiction and this case is transferred to the District of Colorado pursuant to 28 U.S.C. § 1406(a).
I.
The following facts are drawn from the complaint and affidavits of all parties, because a motion to dismiss pursuant to Fed.R.Civ.P. 12(b) (2) requires the resolution of factual issues that arise outside of the pleadings. CutCo Indus. Inc. v.Naughton, 806 F.2d 361, 365 (2d Cir. 1986); Pilates, Inc. v. Pilates Inst., Inc., 891 F. Supp. 175, 178 n. 2 (S.D.N.Y. 1995). The facts are construed in the light most favorable to the plaintiff non-movant. CutCo Indus., 806 F.2d at 365.
Holey Soles is a Canadian corporation based in Vancouver that develops, manufactures, and distributes injection molded footwear made from closed cell polymer foam. (Compl. ¶ 5) Crocs, formerly known as Western Brands, Inc., is a Delaware corporation with a principal place of business in Colorado; it distributes Foam's shoes throughout the United States and internationally. (Compl. ¶¶ 2, 7) Foam, formerly known as Finproject, is a Canadian corporation based in Quebec City that manufactures foam clogs. (Compl. ¶¶ 2, 6; Groote Decl. ¶ 8) Foam became a wholly owned subsidiary of Crocs in 2004. (Compl. ¶ 12)
Crocs has two independent contractors providing sales representation in New York (the "Independent Sales Representatives"); one handles Long Island, Manhattan, eastern Pennsylvania, Delaware, Maryland, and the District of Columbia, the other upstate New York and western Pennsylvania. (Fakler Decl. Ex. 2, Seldin Dep. at 19, 26; Rebich Decl. ¶ 3) The Sales Representative Agreement signed by Crocs and the Independent Sales Representatives states that the Independent Sales Representatives are independent contractors and are not employees or agents of Crocs. (Rebich Decl. ¶ 4) The Independent Sales Representatives are not and have never been authorized to bind Crocs to contracts or make commitments on behalf of Crocs; Crocs has retained always the exclusive right to confirm any order solicited by the Independent Sales Representatives. (Rebich Decl. ¶¶ 6, 7) Crocs has never given the Independent Sales Representatives the authority to open new account locations or authorize new retail outlets to sell Crocs' products. (Rebich Decl. ¶ 8) Retailers in New York who sell Crocs products purchase the products from either the Independent Sales Representatives or directly from Crocs' Colorado headquarters. (Rebich Decl. ¶ 27) The Independent Sales Representatives sell other products in addition to Crocs products. (Rebich Decl. ¶ 28)
Crocs products were sold at 171 stores in New York on November 18, 2005. (Fakler Decl. Ex. 8) Between January 1, 2002 and August 31, 2005, Crocs and Foam sold $121,137 worth of products to individuals located in New York, compared to a nationwide sales total of $61,989,553; New York sales constitute.195 percent of Crocs total sales in the United States between 2001 and 2005. (Rebich Decl. ¶ 9) Croc's total sales in New York, from January 1, 2005 to August 31, 2005 were $500,303.47, representing 1 percent of Crocs' worldwide sales. (Rebich Decl. ¶ 29)
In September 2002, Holey Soles began selling a line of shoes manufactured by Foam (the "Finproject Shoes") branded with the Holey Soles trademark. (Compl. ¶ 10) Simultaneously, Crocs sold the Finproject Shoes in the United States and Canada under the Crocs trademark. (Compl. ¶ 11) Numerous other companies distributed the Finproject Shoes in the United States and Canada under various trademarks. (Compl. ¶ 11)
In early 2004, shortly after Foam became a wholly owned subsidiary of Crocs, it ceased to fulfill Holey Soles' requirements and Holey Soles began distributing similar shoes made by another manufacturer. (Compl. ¶ 12; Rebich Decl. ¶ 6) In spring 2004, Foam granted the exclusive right to distribute the Finproject Shoes in the United States to Crocs. (Compl. ¶ 13) On May 17, 2004, Crocs sent a cease and desist letter to Holey Soles, claiming that Crocs owned the copyright and trade dress rights in the design of the Finproject Shoes and that Holey Soles, distribution of similar shoes infringed on such rights and constituted unfair competition. (Compl. ¶ 14) Neither this letter nor Holey Soles' response was sent to or from New York. (Compl. ¶ 15, Ex. B) Following this exchange, Crocs representatives or agents began photographing displays of Holey Soles shoes and informing retailers that it was preparing to sue Holey Soles for copyright and trade dress infringement. (Compl. ¶ 16) Holey Soles does not allege any communications between Crocs or Foam personnel and retailers carrying Holey Soles' products occurred in New York. (Compl. ¶¶ 16, 19)
On January 28, 2005, Foam sued Holey Soles in Canada, alleging that Holey Soles' distribution of its foam clogs in Canada violates Foam's copyright and trade dress rights. (Compl. ¶¶ 3, 17) Foam and Crocs have threatened to sue Holey Soles in the United States for copyright and trade dress violations based on Holey Soles' distribution of its foam clogs in the United States. (Compl. ¶ 3) In response, Holey Soles brought this action in the Southern District of New York seeking a declaratory judgment under 28 U.S.C. §§ 2201- 2202 that Crocs and Foam have no valid copyright or trade dress rights with respect to the Finproject Shoes and that Holey Soles has not infringed any copyright or trade dress interests of Crocs or Foam. (Compl. ¶ 4)
Crocs maintains no documents in New York, does not have an office or employees located in New York, does not own any property or maintain bank accounts or telephone numbers in New York, and has not sent any correspondence to or otherwise interacted with any Holey Soles. (Rebich Decl. ¶¶ 22-25) Crocs and Foam personnel visit New York occasionally to attend the New York Shoe Expo. (Rebich Decl. ¶¶ 24, 31)
II.
Federal question jurisdiction exists pursuant to 28 U.S.C. §§ 1331 and 1338(a) (2000), because this action arises under the Copyright Act, 17 U.S.C. §§ 101 et seq. and the Lanham Trademark Act, 15 U.S.C. §§ 10501 et seq. Relief is sought under the Declaratory Judgement Act, 28 U.S.C. §§ 2101- 2202, which does not, however, provide an independent basis for federal jurisdiction. Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 671-72 (1950); PDK Labs, Inc. v. Friedlander, 103 F.3d 1105, 1110 (2d Cir. 1997).
III.
When defendants move to dismiss for lack of personal jurisdiction under Fed.R.Civ.P. 12(b) (2), "the plaintiff bears the burden of showing that the court has jurisdiction over the defendants" by a preponderance of the evidence. Metro. Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 566 (2d Cir. 1996). Where, as here, the issue of personal jurisdiction is addressed without the benefit of an evidentiary hearing, "the plaintiff need only make a prima facie showing of personal jurisdiction — i.e., `an averment of facts, that if credited . . . would suffice to establish jurisdiction over the defendant.'"Levisohn, Lerner, Berger Langsam v. Med. Taping Sys., Inc., 10 F. Supp. 2d 334, 339 (S.D.N.Y. 1998) (quoting Metro. Life Ins. Co., 84 F.3d at 567). At the motion to dismiss stage, "all allegations are construed in the light most favorable to the plaintiff and doubts are resolved in the plaintiff's favor. . . ." A.I. Trade Fin. Inc. v. Petra Bank, 989 F.2d 76, 79-80 (2d Cir. 1993).
Personal jurisdiction over non-resident defendants is determined by the law of the jurisdiction in which the district court sits. PDK Labs, 103 F.3d at 1108. For this court to have personal jurisdiction over Crocs and Foam, New York law must provide a basis for exercising personal jurisdiction and such jurisdiction cannot offend federal standards of due process.See Bank Brussels Lambert v. Fiddler Gonzalez Rodriguez, 171 F.3d 779, 784 (2d Cir. 1999). Holey Soles alleges this court has jurisdiction over Crocs and Foam under both N.Y.C.P.L.R. § 301 and § 302 (a) (1) (McKinney 2001).
A. N.Y.C.P.L.R. § 301
Under N.Y.C.P.L.R. § 301, a New York court has general personal jurisdiction over a non-domiciliary corporation that is "doing business" in New York. See McGowan v. Smith, 52 N.Y.2d 268, 272, 437 N.Y.S.2d 643, 645 (1981). A foreign defendant is "doing business" in New York if it is engaged in "continuous, permanent, and substantial activity in New York." Landoil Res. Corp. v.Alexander Alexander Servs., Inc., 918 F.2d 1039, 1043 (2d Cir. 1990). Courts "have generally focused on the following indicia of jurisdiction: the existence of an office in New York; the solicitation of business in New York; the presence of bank accounts or other property in New York; and the presence of employees or agents in New York." Id.; Overseas Media, Inc. v. Skvortsov, 407 F. Supp. 2d 563, 568 (S.D.N.Y. 2006). The "doing business" standard is "stringent, because a defendant who is found to be doing business in New York in a permanent and continuous manner may be sued in New York on causes of action wholly unrelated to acts done in New York." Overseas Media, 407 F. Supp. 2d at 567-68 (internal quotation marks omitted).
Defendants do not maintain an office in New York; Crocs is a Delaware corporation with a principal place of business in Colorado and Foam is incorporated in Canada with a principal place of business in Quebec. (Rebich Decl. ¶¶ 1, 4) Neither defendant has bank accounts, owns property, or has any employees in New York. (Rebich Decl ¶¶ 24, 31) Crocs and Foam employees have visited New York, but only occasionally to attend such events as the New York Shoe Expo; this is not enough to confer general jurisdiction. (Rebich Decl ¶¶ 24, 31); See Artrmide SpA v. Grandlite Design and Mfg. Co., Ltd., 672 F. Supp. 698, 704 (S.D.N.Y. 1987) (attending trade show for a few days does not confer general personal jurisdiction). Also, defendants' advertisements in New York are not grounds for general jurisdiction, because advertising within New York does not constitute the required substantial solicitation. See Schultz v. Ocean Classroom Found., Inc., No. 01 Civ. 7487, 2004 WL 488322, at *5 (S.D.N.Y. Marach 15, 2004) ("New York courts have long held that absent a showing of an office or employees or agents in New York, the use of New York media for advertising defendant's foreign business has been held insufficient to confer jurisdiction over the defendant in New York.") (internal quotation marks omitted); Holness v. Maritime Overseas Corp., 251 A.D.2d 220, 676 N.Y.S.2d 540, 543 (1st Dept. 1998) ("New York has no jurisdiction over a foreign defendant company whose only contacts with New York are advertising and marketing activities plus representatives' occasional visits to New York.").
Contrary to Holey Soles' argument, the Crocs website does not provide grounds for this court to exercise general jurisdiction. "`[T]he fact that a foreign corporation has a website accessible to New York is insufficient to confer jurisdiction under C.P.L.R. § 301'" unless that website is purposefully directed towards New York. Freeplay Music, Inc. v. Cox Radio, Inc., No. 04 Civ. 5238, 2005 WL 1500896, *4 (S.D.N.Y. June 23, 2005) (quotingSpencer Trask Ventures, Inc. v. Archos S.A., No. 01 Civ. 1169, 2002 WL 417192, at *6 (S.D.N.Y. Mar. 18, 2002) (finding no general jurisdiction existed due to a foreign defendant making radio broadcasts available in New York via its websites)). The Crocs website is not purposefully directed towards New York; the website allows anyone with an Internet connection around the globe to learn more about Crocs products, to view a listing of the location of every Crocs authorized retailer, and to purchase products online from Crocs' Colorado headquarters. (Seldin Dep. at 94-97) If such a website gave rise to general jurisdiction, then millions of retailers located throughout the globe could be haled into New York courts for any claim brought against them by any party; such a finding would contravene the purposefully narrow reach and long-standing stringent application of C.P.L.R. § 301. Thus, general jurisdiction over the defendants will lie only if the defendants substantially solicit business in New York or have agents doing business in New York.
The solicitation of business in New York will not justify a finding of general jurisdiction unless the foreign defendant's actions constitute "solicitation-plus." To meet the requirements of the "solicitation-plus" doctrine, the foreign defendant's solicitation of business in New York must be "substantial and continuous" and the foreign defendant must engage "in other activities of substance in the state." Landoil Res. Corp., 918 F.2d at 1043 (finding no general jurisdiction when various employees made 13 short business trips to New York over 18 months to solicit business).
In making the initial determination of whether solicitation is "substantial and continuous," courts "frequently look to the percentage of a company's revenue attributable to New York business. . . ." Overseas Media, 407 F. Supp. 2d at 569. During the three and one-half years before this lawsuit was filed, New York sales constituted .195 percent of the defendants' nationwide sales. (Rebich Decl. ¶ 9) During the eight months before the current action was filed, New York sales constituted 1 percent of defendant's worldwide sales. (Rebich Decl. ¶ 29) Such negligible New York sales are not sufficient to satisfy the "substantial and continuous" solicitation requirement of the "solicitation-plus" doctrine. See Schultz, 2004 WL 488322, at *6 (.07 percent of revenues derived from New York not "substantial solicitation"); Hutton v. Priddy's Auction Galleries, Inc., 275 F. Supp. 2d 428, 437 (S.D.N.Y. 2003) (less than 3 percent of the foreign defendant's total revenue for the last three years derived from New York not substantial solicitation); Hennigan v. Taser Int'l, Inc., No. 00 Civ. 2981, 2001 WL 185122, at *2 (S.D.N.Y. Feb. 26, 2001) (3 percent of foreign defendant's total nationwide sales derived from New York not substantial solicitation); Thompson Med. Co. v. Nat'l Ctr. Of Nutrition, Inc., 718 F. Supp. 252, 253 (S.D.N.Y. 1989) (8.5 percent of foreign defendant's nationwide sales derived from New York is substantial solicitation).
Because Holey Soles filed this lawsuit on August 2, 2005, any of defendants' contacts that took place after that date have no bearing on the general jurisdiction inquiry.
Thus, general jurisdiction will extend over Crocs and Foam only if Holey Soles can show that Crocs and Foam have agents who transact business in New York. A court may assert jurisdiction over a foreign corporation, even if that corporation has performed no activities in New York itself, "when it affiliates itself with a New York representative entity and that New York representative renders services on behalf of the foreign corporation that go beyond mere solicitation and are sufficiently important to the foreign entity that the corporation itself would perform equivalent services if no agent were available." Wiwa v. Royal Dutch Petroleum Co., 226 F.3d 88, 95 (2d Cir. 2000);see also Schenker v. Assicurazioni Generali S.P.A., No. 98 Civ. 9186, 2002 WL 1560788, at * 6 (S.D.N.Y. July 15, 2002) (citing Frummer v. Hilton Hotels Int'l, Inc., 19 N.Y.2d 533, 537, 281 N.Y.S.2d 41, 44 (1967)). There is no general jurisdiction when the purported in-state agent's promotion of the defendant's product constitutes "mere solicitation." Ball v.Metallurgie Hoboken-Overpelt, 902 F.2d 194, 199 (2d Cir. 1990) (finding no general jurisdiction, because "[t]he existence of an exclusive sales contract with respect to a limited number of products, sharing of technical and marketing information, and limited solicitation on behalf of both companies do not demonstrate that the relationship . . . is more than that of major distributor to manufacturer."); Laufer v. Ostrow, 55 N.Y.2d 305, 311, 449 N.Y.S.2d 456, 459 (1982) (a "foreign supplier of goods or services for whom an independent agency solicits orders from New York purchasers is not present in New York and may not be sued here, however substantial in amount the resulting order.").
Further, although a formal agency agreement does not have to exist and the defendant does not have to exercise direct control over the purported agent, the "agent must be primarily employed by the defendant and not engaged in similar services for other clients." See Wiwa, 226 F.3d at 95 (citations omitted) (finding an Investor Relations Office, which is permanently and solely dedicated to promoting the defendants' interests, constituted an agent doing business in New York on behalf of the foreign defendant). General jurisdiction will not lie when the foreign defendant merely uses outside sales representatives residing in the forum state to service authorized retail accounts when such representatives are not employed by the defendant and have no authority to bind the defendant to contracts or to open new account locations. See Riviera Trading Corp. v. Oakley, Inc., 944 F. Supp. 1150, 1156 (S.D.N.Y. 1996); Cent. Gulf Lines, Inc. v. Cooper, 664 F. Supp. 127, 130 (S.D.N.Y. 1987) (primary consideration in cases where general jurisdiction is denied is "that the representative did not bind the foreign corporation, but merely solicited orders for their client.");Koterba v. Ariens Co., No. 85 Civ. 9883, 1987 WL 8335, at * 2 (S.D.N.Y. Mar. 19, 1987) (when an independent contractor is distributing foreign defendant's products, it will be an agent of the foreign defendant only if it, "at a minimum, [has] the power not only to solicit orders, but also to confirm or accept them on behalf of the [foreign defendant]."). "[I]t is not enough that an independent contractor is present in New York, systematically soliciting business for the corporation" no matter how substantial the orders. Artemide SpA, 672 F. Supp. at 703.
The Independent Sales Representatives are not agents of the defendants such that this court can exercise general jurisdiction over the defendants. First, the Independent Sales Representatives sell other products in addition to Crocs products. (Seldin Dep. at 11, Rebich Decl. ¶ 28) Second, the defendants assert no control over the Independent Sales Representatives. (Rebich Decl. ¶ 28) Third, the Independent Sales Representatives have never been authorized to bind Crocs to contracts, make commitments on behalf of Crocs, open new accounts, or confirm the orders they solicit. (Rebich Decl. Ex. F, G) Fourth, the Independent Sales Representatives do not repair Crocs products. (Seldin Dep. at 69) All the Independent Sales Representatives do is to systematically solicit business for Crocs and Foam by contacting new retailers and monitoring existing accounts; their responsibilities include introducing retailers to new products and displays, making sales calls, conveying Crocs' required procedures, occasionally monitoring the market for similar products, occasionally assisting Crocs with payment collection, attending trade shows, and finding appropriate new retailers for Crocs' products in their territories. (Seldin Dep. at 39, 52) The Independent Sales Representatives are not agents of the defendants, thus their solicitation of business in New York is not enough to confer general jurisdiction over the defendants.
Further, the defendants are not using the Independent Sales Representatives to "render services on behalf of [it] that go beyond mere solicitation and are sufficiently important to the foreign entity that the corporation itself would perform equivalent services if no agent were available." Wiwa, 226 F.3d at 95 (2d Cir. 2000). Crocs' United States Sales Manager explained that if Crocs could not use the Independent Sales Representatives in New York to prospect and monitor retail accounts, it "perhaps . . . might decide to just close the market down" and would "probably make the decision not to expand that market," because it is "no more than 1 percent of all our sales, so it has not a huge effect." (Seldin Dep. at 88-89) Thus, the work of the Independent Sales contractors is not "sufficiently important" to Crocs that it would use its own employees and resources to perform such tasks.
Holey Soles erroneously argues that Gelfand v. Tanner Motor Tours, Ltd., 385 F.2d 116 (2d Cir. 1967) and Katz Communications, Inc. v. Evening News Ass'n, 705 F.2d 20 (2d Cir. 1983) provide this court with a basis to impute the actions of the Independent Sales Representatives to the defendants for the purposes of exercising general jurisdiction. First, Second Circuit case law subsequent to Gelfand and Katz makes it clear that general personal jurisdiction does not exist in the present case. Second, even under Gelfand and Katz the defendants are not subject to New York general jurisdiction. InGelfand, the Court found an independent contractor to be an agent because it booked and confirmed reservations for a tour, performed other services integral to the defendant's business, and brought in three-sevenths of the foreign defendant's business for that particular tour; such services were "sufficiently important" to the foreign corporation that, if the representative could not perform them, the foreign corporation would undertake the services itself or give up the product. 385 F.2d at 121. As explained above, the Independent Sales Representatives could not confirm orders and were responsible for a minimal proportion of the defendants' business, and the defendants would neither perform the tasks of the Independent Sales Representatives themselves nor cease selling their product if the Independent Sales Representatives could not perform their tasks. In Katz, the Court found that general jurisdiction existed over a television station, because its advertising sales representatives in New York were found to be agents when the foreign defendant's employees regularly traveled to New York to solicit customers and plan a national advertising program that led to revenues of approximately $2 million a year and the sales representatives were a virtual a division of the defendant's business, guaranteed advertisers' orders, billed advertisers, and collected accounts receivable. 705 F.2d at 24-25. Here, the Independent Sales Representatives did not regularly, or even occasionally, meet with Crocs employees to solicit customers or create a multimillion dollar advertising campaign, did not guarantee product orders, and did not bill retailers.
Accordingly, Holey Soles has not made a prima facie case that Crocs or Foam does business in New York through an agent or otherwise with any degree of permanence or continuity such that they should be subject to the general jurisdiction of the New York courts. In addition, Holey Soles has not demonstrated that the defendants should be subject to general jurisdiction under the "solicitation plus" doctrine.
B. N.Y.C.P.L.R. § 302(a) (1)
Holey Soles argues that there is personal jurisdiction over Crocs under New York's long arm statute, N.Y.C.P.L.R. § 302(a) (1). To establish personal jurisdiction pursuant to N.Y.C.P.L.R. § 302(a) (1), Holey Soles must show (1) that the defendants transacted business within New York and (2) that the claim arises from that transaction. See Agency Rent-A-Car Sys., Inc. v. Grand Rent a Car Corp., 98 F.3d 25, 29 (2d Cir. 1996). A non-domiciliary corporation transacts business within a state when it "purposefully avails [itself] of the privilege of conducting activities within [the state], thus invoking the benefits and protections of its laws." CutCo Indus., 806 F.2d at 365 (citation omitted). There is no dispute that Crocs transacts business in New York. (Def. Reply Memo. of Law at 2)
The analysis for Crocs and Foam is the same, because Foam is a "mere department" of Crocs as Crocs' control over Foam is "pervasive enough that the corporate separation is more formal than real." H. Hellar Co. v. Novacor Chem., Ltd., 726 F. Supp. 49, 54 (S.D.N.Y. 1988). There is common ownership between Crocs and Foam, Foam receives 70 percent of its revenues from Crocs, thus making it financially dependent on its parent, and Crocs exercises near total control over Foam. See Volkswagenwerk Aktiengesellschaft v. Beech Aircraft Corp., 751 F.2d 117, 120-22 (2d Cir. 1984); (Rebich Decl. ¶ 4; Reddyhoff Dep. at 29-31, 35).
The posture of this case as a defensive declaratory judgment action does not change this analysis. See Agency Rent a Car, 98 F.3d at 32 (holding any prior expression of doubt as to whether long-arm jurisdiction can be asserted in a defensive declaratory judgment action was dictum and should no longer be followed).
A "strong nexus" must exist between the cause of action and the in-state transaction of business. Beacon Enter., Inc. v.Menzies, 715 F.2d 757, 764 (2d Cir. 1983). To determine whether a declaratory judgment action arises from New York contracts, the court must evaluate the "`totality of the circumstances surrounding the defendants' activities in New York in connection with the matter giving rise to the lawsuit.'" PDK Labs, 103 F.3d at 1105 (quoting Hoffritz for Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 60 (2d Cir. 1985)) (finding a claim arose out of the transaction of business in New York when the defendant initiated calls from New York to the plaintiff with the intent of soliciting investments in its product and the nature of the declaratory judgment action was out of the plaintiff's desire to protect itself from defendant's harassing communications).
As set forth below, Beacon determines the outcome here. InBeacon, the Second Circuit found that sale of a product in New York did not confer jurisdiction over an action seeking a declaratory judgment that the product did not infringe the defendant's trademark and copyright. 715 F.2d at 765-66. The Court held that it did not have personal jurisdiction under C.P.L.R. § 302(a) (1), because the sales in New York bore no nexus to the plaintiff's action for a declaration of non-infringement as "the present controversy arose as a result of [defendant's] `cease and desist' letter, not her New York commercial activity." Id. at 765; see also Graphic Controls Corp. v. Utah Med. Prods., Inc., 149 F.3d 1382, 1387 (Fed. Cir. 1998); Fort Knox Music, Inc. v. Baptiste, 139 F. Supp. 2d 505, 510-511 (S.D.N.Y. 2001).
Holey Soles argues this court has personal jurisdiction over the defendants, because its claim arises out of Crocs' sale of goods in New York and a letter sent by Crocs to its New York retailers stating that Crocs possesses "design and utility patent applications pending throughout the world," has "initiated a lawsuit in Canada against one company," and has the right to prohibit authorized retailers from the "sale of knock-offs" under the Retail Standards Agreement. Rebich Decl. Ex. D at 2) This letter was not sent to Holey Soles or any of Holey Soles' retailers in New York, and Holey Soles does not allege that any communications between Crocs or Foam personnel and retailers carrying Holey Soles products occurred in New York, (Compl. ¶¶ 16, 19; Rebich Decl. ¶¶ 1, 25).
Although the activities Holey Soles cites arguably relate to the business the defendants transact in New York, none of Holey Soles' claims arise from these activities. Crocs' sales of shoes in New York and its reminder to authorized Crocs retailers that their Retail Sales Agreement prohibits them from selling knock-off products do not relate to Crocs' claim that Holey Soles in particular is infringing its trademark and copyright, or to its insistence that Holey Soles "cease and desist", but rather to Crocs' attempt to promote and sell its own products. See Hennigan, 2001 WL 185122, at *3; Stein v. Microelectronic Pkg., No. 98 Civ. 8952, 1999 WL 540443, at *4 (S.D.N.Y. July 26, 1999) (holding out-of-state defendant's New York activities relating to transactions with non-plaintiffs were insufficient to establish jurisdiction over defendant).
The case law is clear that in the Second Circuit an action seeking a declaration of non-infringement for copyright and trademark does not arise out of the sale of goods or other contacts with the defendant's retailers, but out of the sending of a cease-and-desist letter. See Beacon, 715 F.2d at 765. The cease-and-desist letter sent by Crocs to Holey Soles was sent from Colorado to Vancouver and did not assert any rights under New York law or allege that any infringement was taking place in New York. (Rebich Decl. Ex. E) Thus, this court does not have personal jurisdiction over Crocs and Foam under C.P.L.R. § 302(a) (1).
IV.
Although this court lacks personal jurisdiction over defendant, dismissal is not required. Rather, a court may transfer an action commenced in a district in which personal jurisdiction over the defendant is lacking to another district in which the action could have been brought, if the transfer would promote the interest of justice. 28 U.S.C. § 1406(a); Corke v. Sameiet M.S. Song of Norway, 572 F.2d 77, 80 (2d Cir. 1978); Grill v.Walt Disney, Co., 683 F. Supp. 66, 69-70 (S.D.N.Y. 1988); Body Beautiful, Inc. v. Fred Hayman Beverly Hills, Inc., No. 96 Civ. 8541, 1997 WL 527784 (S.D.N.Y. Aug. 25, 1997). Here, transfer to the District of Colorado would serve the interest of justice. Venue is proper in that district, where Crocs, the only United States party and parent corporation of the other defendant, resides and is subject to personal jurisdiction. 28 U.S.C. § 1391(a). Further, such a transfer would benefit the plaintiff, which will avoid the chore of refiling this action. Defendants will not be prejudiced by such a transfer because they have notice of this action, are either a corporation based in Colorado or the wholly owned subsidiary of that corporation, and actually moved in the alternative to transfer this action to Colorado pursuant to 28 U.S.C. § 1404. A court may transfer a case pursuant to 28 U.S.C. § 1406(a) sua sponte even if the defendant moves only to dismiss. See Concession Consultants, Inc. v. Mirisch, 355 F.2d 369, 372 n. 3 (2d Cir. 1966). Here, defendants moved in the alternative to transfer pursuant to 28 U.S.C. § 1404, and thus a transfer is even more appropriate.
* * *
For the reasons stated above, defendants' motion to dismiss for lack of personal jurisdiction is denied, and the Clerk will transfer this case to the United States District Court for the District of Colorado pursuant to 28 U.S.C. § 1406(a).
SO ORDERED: