Summary
denying transfer because movant provided only testimony that witnesses outside of the forum were necessary to the case, but did not provide evidence as to how or why they were relevant
Summary of this case from Holmes v. Warrior Gulf Navigation CompanyOpinion
Civil Action No. 3:04-CV-0511-K.
June 29, 2004
MEMORANDUM OPINION AND ORDER
Before the Court is Defendant the Hide Group, Inc., John W. Jordan and Larry Barefoot's Motion to Dismiss or Alternatively, Motion to Transfer Venue, filed April 7, 2004, and Plaintiff's Motion for Preliminary Injunction, filed March 11, 2004. After carefully considering the motions, responses, replies, record evidence and the applicable law, the Court rules on the motions as follows:
I. Factual and Procedural Background
According to Plaintiffs' Complaint, Plaintiff Nations Ag II, LLC ("Nations Ag II") is engaged in registering, formulating and marketing generic versions of pesticide products that were originally developed and registered by other companies whose patents for those products have now expired. Nations Ag II's generic registrations include both "technical" registrations for pesticide active ingredients in their "technical grade" form, and "end-use" registrations for pesticides that are formulated by mixing the "technical" pesticide ingredients with other ingredients and are then sold to end-users. Nations Ag II is a Tennessee limited liability company with its principal place of business in Knoxville, Tennessee. Plaintiff Farmsaver.com LLC ("Farmsaver") is in the business of marketing and obtaining the needed registrations for generic end-use pesticides, including end-use pesticides federally registered by Nations Ag II. Farmsaver markets pesticides to end-users such as farmers, ranchers and nursery growers. Farmsaver is a Washington limited liability company with its principal place of business in Seattle.
Plaintiffs further allege that Nations Ag II has developed confidential formulas and has obtained environmental registrations for agricultural chemical products containing mepiquat chloride, a chemical used in cotton farming. These mepiquat chloride products are marketed by Farmsaver and are manufactured by Bold Corporation ("Bold") at a facility located in Georgia. Plaintiffs state that the formulas for Nations Ag II's mepiquat chloride products are held strictly confidential by Nations Ag II, Farmsaver and Bold.
In April 2000, Farmsaver and Defendant The Hide Company, LLC ("Hide Co.") entered into a Sales Representation Agreement wherein Hide Co. agreed to make sales calls on cotton farmers to introduce them to Farmsaver and its new mepiquat chloride product, and to promote the sale of the product to growers. Farmsaver and Hide Co. subsequently entered into a second Sales Representation Agreement for the promotion and sale of mepiquat chloride products in February 2001, for the term of February through October 31, 2001. On September 28, 2001, Farmsaver notified Hide Co. That the second Sales Representation Agreement would be cancelled effective October 31, 2001.
In their Complaint filed March 11, 2004, Plaintiffs allege that Defendants have breached various provisions of the two Sales Representation Agreements. Plaintiffs further allege that Defendants John Jordan ("Jordan") and Larry Barefoot ("Barefoot") toured the Bold facility that manufactures Plaintiffs' mepiquat chloride products, and during that visit improperly obtained a copy of Plaintiffs' confidential "batch sheet" for those products, which contains the formula for the product. According to Plaintiffs, Hide Co. then hired various third parties to assist in using the batch sheet to develop and obtain regulatory approval for a competing mepiquat chloride product. Based upon this alleged conduct, Plaintiffs contend that Defendants have misappropriated their trade secrets. Therefore, Plaintiffs seek a preliminary injunction to prevent Defendants from using or disclosing confidential information belonging to Plaintiffs. Additionally, Plaintiffs bring claims for breach of contract, unfair competition, breach of fiduciary duty, unjust enrichment and conversion. Before determining whether Plaintiffs are entitled to injunctive relief, the Court will address the threshold questions of personal jurisdiction and venue.
II. Hide Group, Jordan and Barefoot's Motion to Dismiss or Transfer Venue
Hide Co. has answered Plaintiffs' Complaint, but Defendants The Hide Group, Inc. ("Hide Group"), Jordan and Barefoot have moved to dismiss Plaintiffs' claims against them, arguing that they are not subject to personal jurisdiction in Texas. Alternatively, Hide Group, Jordan and Barefoot have moved to transfer this case to a Mississippi court under 28 U.S.C. § 1404 or 1406.
A. Personal Jurisdiction
A determination of personal jurisdiction over a nonresident defendant consists of two elements. First the Court must determine whether the nonresident is subject to jurisdiction under the law of the state in which it sits, and secondly it must determine whether the exercise of jurisdiction over the defendant comports with the due process requirements of the United States Constitution. Panda Brandywine Corp. v. Potomac Electric Power Co., 253 F.3d 865, 867 (5th Cir. 2001); Stuart v. Spademan, 772 F.2d 1185, 1189 (5th Cir. 1985). Here, Plaintiffs contend that the exercise of personal jurisdiction over Defendants is appropriate in this case pursuant to the Texas long-arm statute. See Tex. Civ. Prac. Rem. Code § 17.042. The Texas long-arm statute has been interpreted to extend as far as the limits of constitutional due process permit. Panda Brandywine, 253 F.3d at 867; Stuart, 772 F.2d at 1189; Schlobohm v. Schapiro, 784 S.W.2d 355, 357 (Tex. 1990). Therefore, the Court is only required to consider whether an exercise of personal jurisdiction over Defendants satisfies constitutional due process. Panda Brandywine, 253 F.3d at 867; Stuart, 772 F.2d at 1189.
The exercise of personal jurisdiction over a nonresident defendant is consistent with due process when that defendant has purposefully availed himself of the benefits and protections of the forum state by establishing "minimum contacts" with Texas such that the defendant could "reasonably anticipate" being haled into court in the forum state, and the exercise of jurisdiction does not offend "traditional notions of fair play and substantial justice." Wien Air Alaska, Inc. v. Brandt, 195 F.3d 208, 211 (5th Cir. 1999); Holt Oil Gas Corp. v. Harvey, 801 F.2d 773, 777 (5th Cir. 1986), cert. denied, 481 U.S. 1015 (1987). The Plaintiffs have the initial burden of establishing a prima facie case of personal jurisdiction over Defendants. Wien Air, 195 F.3d at 211; Wilson v. Belin, 20 F.3d 644, 648 (5th Cir.), cert. denied, 513 U.S. 930 (1994). Where facts are in dispute, Plaintiffs are entitled to have the conflicts resolved in their favor. Wien Air, 195 F.3d at 211; Bullion v. Gillespie, 895 F.2d 213, 216-17 (5th Cir. 1990). However, the Court is not required to credit conclusory allegations, even though they may be uncontroverted. Panda Brandywine, 253 F.3d at 868-69.
The necessary "minimum contacts" can be established either through contacts sufficient to support specific jurisdiction, or contacts that adequately support general jurisdiction. Alpine View Co. Ltd. v. Atlas Copco AB, 205 F.3d 208, 215 (5th Cir. 2000); Wilson, 20 F.3d at 647. Specific jurisdiction arises when the defendant has purposefully directed activities toward the forum state, from which the litigation arises or to which it relates. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985); Alpine View, 205 F.3d at 215. General jurisdiction will attach where the Defendant's contacts with the forum state are not related to the Plaintiff's cause of action, but are continuous and systematic. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 415-16 (1984); Alpine View, 205 F.3d at 215.
If Plaintiffs establish that Defendants have sufficient minimum contacts with Texas, the burden shifts to Defendants to establish that an assertion of jurisdiction would be unfair. Wien Air, 195 F.3d at 215. To show that an exercise of jurisdiction is unreasonable once minimum contacts are established, Defendants must make a "compelling case" against it. Id., citing Burger King, 471 U.S. 462. The factors relevant to this inquiry are the burden on the defendant having to litigate in the forum; the forum state's interests in the lawsuit; the plaintiff's interests in convenient and effective relief; the judicial system's interest in efficient resolution of controversies; and the state's shared interest in furthering fundamental social policies. Id., citing Ruston Gas Turbines, Inc. v. Donaldson Co., Inc., 9 F.3d 415, 421 (5th Cir. 1993).
In the motion to dismiss, Hide Group asserts that it is a Mississippi corporation with its principal place of business in Mississippi. Jordan and Barefoot state that they are residents of Mississippi. It is undisputed that Hide Group, Jordan and Barefoot have no offices or employees in Texas, and own no real property here. They also do not maintain a registered agent for service of process in Texas. The undisputed facts further show that Hide Group does not have a telephone listing, bank account or pay taxes in Texas. Therefore, based on these and other undisputed facts, all three of these Defendants maintain that they do not have the requisite contacts with Texas to subject themselves to personal jurisdiction here.
Conversely, Plaintiffs maintain that the following contacts of Hide Group, Jordan and Barefoot with Texas satisfy the "minimum contacts" element of personal jurisdiction: 1) that Jordan, Barefoot and their representatives made numerous sales calls on farmers and other potential customers in Texas on behalf of "Hide Group" in performing the 2000 and 2001 Sales Representation Agreements; 2) Barefoot attended and Hide Group was an exhibitor at the 2004 Beltwide Cotton Conference held in San Antonio, while Hide Co.'s applications for EPA registration of its mepiquat chloride products were pending; and 3) an e-mail sent by Jordan to residents of Texas on behalf of both Hide Co. and Hide Group that introduced Mep 42, a new mepiquat chloride product for use in cotton growing. The Court will examine each of these contacts to determine whether they provide a basis for personal jurisdiction over Defendants.
Plaintiffs contend that Defendants are subject to personal jurisdiction because Jordan and Barefoot conducted sales calls in Texas on behalf of Hide Group during the term of the 2000 and 2001 Sales Representation Agreements. In support of their position, Plaintiffs rely primarily on the call logs that were completed in relation to those calls, which show numerous meetings with persons located in Texas. The majority of these logs are entitled "The Hide Group — Call Report" or other similar designation. Hide Group, Jordan and Barefoot first respond that these sales calls do not properly establish "minimum contacts" with Texas because Hide Group was not incorporated in Mississippi until early 2004. Plaintiffs' evidence, when taken in the light most favorable to them, shows that Hide Group (versus Hide Co.) was conducting sales calls in Texas in connection with the 2000 and 2001 Sales Representation Agreements. Therefore, as to Hide Group, the call reports are sufficient to state a prima facie case of personal jurisdiction.
Secondly, Jordan and Barefoot state that they were acting as representatives of Hide Co. at that time rather than in their individual capacities. Therefore, Jordan and Barefoot take the position that they are protected by the fiduciary shield doctrine, which holds that personal jurisdiction over an individual cannot be based on personal jurisdiction over a corporation. Stuart, 772 F.2d at 1197. Here, Plaintiffs are only required to establish a prima facie case of personal jurisdiction over defendants; proof by a preponderance of the evidence is not required. See Thompson v. Chrysler Motors Corp., 755 F.2d 1162, 1165 (5th Cir. 1985) (on a motion to dismiss only prima facie case of personal jurisdiction must be established). Moreover, as stated above, the Court must resolve all factual conflicts in Plaintiffs' favor, and thus the Court must find that it was Hide Group, rather than Hide Co., that conducted the sales calls at issue. Wien Air, 195 F.3d at 211; Bullion, 895 F.2d at 216-17. As the undisputed evidence shows, Hide Group was not actually incorporated until 2004. Thus, Jordan and Barefoot (who do not deny that they participated in the sales calls in Texas) have no corporate or fiduciary shield to protect them from jurisdiction based upon these sales activities conducted on behalf of Hide Group three or four years earlier, and the fiduciary shield doctrine does not apply. Therefore, the Court finds that through the Hide Group call reports Plaintiffs have also established that Jordan and Barefoot have had sufficient "minimum contacts" with Texas to have subjected themselves to personal jurisdiction here.
The record further shows that earlier this year, Barefoot attended the 2004 Beltwide Cotton Conference in San Antonio, and that Hide Group was an exhibitor at the conference. Finally, on March 10, 2004 Jordan sent an e-mail to Texas residents on behalf of both Hide Co. and Hide Group that advertised their Mep 42 product, which is at issue in this case. This evidence further supports a finding of minimum contacts that would justify the Court's exercise of personal jurisdiction in Texas.
Because Plaintiffs have established a prima facie case of personal jurisdiction over Hide Group, Jordan and Barefoot, the burden now shifts to these Defendants to show that the Court's exercise of jurisdiction over them would be unfair. Hide Group, Jordan and Barefoot merely state in passing that it would be "fundamentally unfair" of the Court to impose jurisdiction on them, and that it would be burdensome for them to litigate this dispute in Texas for work and family reasons. As the Fifth Circuit stated in Wien Air, rarely will the assertion of jurisdiction be unfair after minimum contacts have been shown. 195 F.3d at 215, citing Akro Corp. v. Luker, 45 F.3d 1541, 1547 (Fed. Cir.), cert. denied, 515 U.S. 1122 (1995). The Court finds that the evidence set forth by Hide Group, Jordan and Barefoot does not sufficiently establish that requiring them to defend against Plaintiffs' claims in this forum will offend traditional notions of fair play and substantial justice. For all of the above reasons, Hide Group, Jordan and Barefoot's motion to dismiss is denied.
B. Transfer of Venue
Hide Group, Jordan and Barefoot have also moved the Court to transfer this case to the United States District Court for the Northern District of Mississippi under either 28 U.S.C. § 1406(a) or 1404(a). First, these Defendants argue that the Court should transfer this case due to improper venue because they are not subject to personal jurisdiction in Texas. Because the Court has determined that it does have personal jurisdiction over Hide Group, Jordan and Barefoot, it declines to transfer this case pursuant to section 1406(a).
As an alternative ground for transfer, Hide Group, Jordan and Barefoot argue that many of the witnesses, business records, personal records and other documents relevant to the case are located outside of Texas, and therefore the Court should exercise its discretion to transfer this case to the Northern District of Mississippi under 28 U.S.C. § 1404(a). Under section 1404(a), a district court may transfer any civil action to any district or division where it might have been brought for 1) the convenience of the parties and witnesses, and 2) in the interest of justice. 28 U.S.C. § 1404(a). In determining whether a transfer of venue is warranted, the Court considers the following factors: 1) the availability and convenience of the parties and witnesses; 2) the availability of process to compel the presence of unwilling witnesses; 3) the location of counsel; 4) the relative ease of access to sources of proof; 5) the cost of obtaining attendance of witnesses and other trial expenses; 6) the location of the alleged wrong; 7) the possibility of delay and prejudice if transfer is granted; 8) the plaintiff's choice of the forum; 9) calendar congestion; and 10) the interests of justice in general. Intl. Truck and Engine Corp. v. Quintana, 259 F. Supp.2d 553, 558 (N.D. Tex. 2003). The plaintiff's choice of forum is entitled to great deference and generally should not be disturbed unless the balance of factors strongly favors the moving party. Intl. Truck, 259 F. Supp.2d at 558, citing Houston Trial Reports, Inc. v. LRP Publ'ns, Inc., 85 F. Supp.2d 663, 665 (S.D. Tex. 1999).
Here, Hide Group, Jordan and Barefoot have not adequately established that the above factors support a transfer pursuant to section 1404(a). Although they have provided testimony that documents and witnesses that they contend are relevant to the case are located in various places throughout the United States, they do not explain how these witnesses and documents are relevant to any issue in the case. Intl. Truck, 259 F. Supp.2d at 558. Hide Group, Jordan and Barefoot also emphasize that the ability to compel the attendance of unwilling witnesses is a very important factor in determining venue, however, they do not identify any unwilling witnesses that they will need to subpoena for trial. Finally, these Defendants argue that the convenience of one key witness can outweigh the convenience of less important witnesses, but they fail to identify who the key witnesses and non-key witnesses are. The Court finds that Hide Group, Jordan and Barefoot have not sufficiently shown that a balancing of the above factors weighs strongly in their favor. Defendants' motion to transfer venue is denied.
III. Plaintiffs' Motion for Preliminary Injunction
Plaintiffs have also moved for a preliminary injunction, asking the Court to enjoin Defendants from using or disclosing their confidential information and trade secrets, specifically their formula for mepiquat chloride.
A. Applicable Standard for a Preliminary Injunction
To obtain a preliminary injunction, Plaintiffs must establish that: (1) they have a substantial likelihood of success on the merits; (2) that there is a substantial threat that they will suffer irreparable injury if the injunction is denied; (3) that the threatened injury outweighs any damage that the injunction might cause Defendants; and (4) that the injunction will not disserve the public interest. Sugar Busters LLC v. Brennan, 177 F.3d 258, 265 (5th Cir. 1999); Hoover v. Morales, 164 F.3d 221, 224 (5th Cir. 1998).
B. Likelihood of Success on the Merits
To show that they are likely to succeed on the merits of their claims for misappropriation of trade secrets, Plaintiffs must first establish that the information they seek to protect actually qualifies as a trade secret. Metallurgical Industries, Inc. v. Fourtek, Inc., 790 F.2d 1195, 1199 (5th Cir. 1986). Under Texas law, a trade secret is "`any formula, pattern, device or compilation of information which is used in one's business and presents an opportunity to obtain an advantage over competitors who do not know or use it.'" In re Bass, 113 S.W.2d 735, 739 (Tex. 2003), quoting Computer Assoc. Intl. v. Altai, 918 S.W.2d 453, 455 (Tex. 1996). To determine whether a trade secret exists, Texas courts apply a six-factor test:
1) the extent to which the information is known outside of [the plaintiff's] business; 2) the extent to which it is known by employees and others involved in [the plaintiff's] business; 3) the extent of the measures taken by him to guard the secrecy of the information; 4) the value of the information to him and to his competitors; 5) the amount of effort or money expended by him in developing the information; 6) the ease or difficulty with which the information could be properly acquired or duplicated by others.In re Bass, 113 S.W.3d at 739; Chapa v. Garcia, 848 S.W.2d 667, 670 (Tex. 1992); John Paul Mitchell Systems v. Randalls Food Markets, Inc., 17 S.W.3d 721, 738 (Tex.App.-Austin 2000, pet. denied). These factors must be weighed in the context of the surrounding circumstances, and a party seeking trade secret protection need not satisfy all six factors. In re Bass, 113 S.W.3d at 740. Further, information that is generally known and readily available is not protectable, but the fact that information is discoverable by lawful means does not deprive its owner of protection from one acquiring it by unfair means.
Based upon the above factors and the evidence presented in support of Plaintiffs' motion for preliminary injunction, the Court cannot find, at this stage of the proceedings, that Plaintiffs' formula for mepiquat chloride is a trade secret. First, Plaintiffs' mepiquat chloride formula is based on an expired patent that can now be copied in a generic formulation by anyone who wants to do so. Defendants have also set forth evidence that the formula for mepiquat chloride can also be ascertained from reading product labels, and that the formulation is well known in the agricultural industry. Furthermore, the record shows that a "batch sheet" reflects the formulation of a particular batch of mepiquat chloride, but that formulation can vary depending on the purity of the technical mepiquat chloride ingredient. Because Plaintiffs have not set forth sufficient evidence supporting their claim that the mepiquat chloride batch sheet allegedly obtained by Defendants is a trade secret, the Court finds that they have failed to show a substantial likelihood of success on the merits of their misappropriation of trade secrets claim. Accordingly, Plaintiffs' motion for preliminary injunction is denied.
IV. Conclusion
For the foregoing reasons, Defendant the Hide Group, Jordan and Barefoot's Motion to Dismiss or Alternatively, Motion to Transfer Venue, is denied. Plaintiffs' Motion for Preliminary Injunction is also denied. SO ORDERED.