Opinion
Civil Action No: SA-03-CA-0764-XR
December 1, 2003
ORDER
On this date, the Court considered Defendants' Motion to Dismiss for Lack of Personal Jurisdiction and Improper Venue, Plaintiffs Motion to Compel Discovery, and Plaintiffs motion to Consolidate the Preliminary Injunction and Trial on the Merits and for an expedited Scheduling Order. Plaintiff brings suit against Defendants for trademark infringement, unfair competition, dilution and false advertising in violation of the Trademark Act of 1946, 15 U.S.C. § 1051, etseq. and for unfair competition, "palming off, false advertising and dilution under the common laws of the State of Texas. For the reasons stated below, the Court will continue and take under further advisement the Motion to Dismiss, DENIES the Defendants' motion to transfer venue under 28 U.S.C. § 1404 and 1406(a), GRANTS the Plaintiffs motion to Compel
Plaintiffs First Amended Complaint reflects that the following entities are defendants in this case: (1) Universal Express, Inc. ("USXP"), (2) Private Postal Network.com, Inc., (3) Private Postal Network, Inc., (4) Universal Express Logistics, Inc., (5) WorldPost International Delivery, (6) Universal Express Capital Corp., (7) Universal Express Transportation, Inc. individually and/or collectively d/b/a WorldPost, (8) worldpost.com, (9) Private Postal Network ("PPN"), (10) PBCNetwork.com, (11) Privatepostalnetwork.com, (12) PBC Access, (13) PBC Access.com, (14) WorldPostnetwork.com, (15) worldpostflowers.com, and (16) worldpostflowers.net.
Discovery, and ORDERS the parties to propose a scheduling order.
Facts and Procedural Background
Plaintiff provides telecommunications, messaging and computer services. It is a Texas corporation with its principal place of business in San Antonio, Texas. Plaintiff alleges that it registered its WorldPost trademark with the United States Patent and Trademark Office and the registration has a priority date of February 13, 2000. Plaintiff also alleges that Universal Express, Inc. (hereinafter that specific entity will be called USXP) through various subsidiaries or fictitious names began offering various mailbox, packaging, email and internet access services as Worldpost2. Allegedly, one of the defendants later attempted to register Worldpost2. On November 11, 2002, Plaintiff filed an opposition to the attempted registration. Notwithstanding the objection, in a news release dated May 22, 2003, USXP announced that its subsidiary, Private Postal Network, Inc., will be known as WorldPost.(tm)
On September 26, 2003, Defendants filed their Motion to Dismiss for Lack of Personal Jurisdiction and Improper Venue, or in the alternative for a change of venue. Defendants contend that they are not Texas corporations, they are not doing business in the State of Texas, and they do not have the minimum contacts with the State of Texas as to invoke either specific or general jurisdiction. Defendants claim that they have no stores in Texas. Defendants also claim that they are using the Worldpost mark "in connection with the WorldPost Network." "The Network is a free membership service offered by Universal to independently owned postal stores throughout the United States. Universal offers members of the Network the opportunity to utilize a variety of revenue generating programs. However, at the present time, there are no member stores offering any services in Texas under the WORLDPOST mark."
Plaintiff responds to the motion to dismiss for lack of personal jurisdiction by arguing the following: (1) Defendants failed to submit any evidence to controvert the jurisdictional and venue allegations made in the Complaint; (2) Defendants admit to doing "nontraditional" business in Texas; and (3) there is "publicly overwhelming evidence of Universal's substantial and pervasive contacts with this Texas forum."
The Court has conducted its own independent review of the USXP and WorldPost Network web sites. According to USXP's web site, USXP claims: "The WorldPost Network (WPN) is a wholly owned subsidiary of Universal Express, Inc. The WorldPost Network is an association created for the benefit of the private postal industry and this industry s dedicated store owners. . . . The concept of the WorldPost Network was created by Richard Altomare, CEO/Chairman of Universal Express, Inc. Mr. Altomare recognized various needs of store owners and envisioned how this huge industry could benefit by bringing it all together as a group to secure lower shipping rates, various revenue streams for store owners, and expansion of the industry itself." A review of the worldpostnetwork web site reveals the following: "WorldPost, an association of thousands of private postal stores around the country, consists of professionals in the packaging and shipping industry that can assist you with whatever your needs may be. There is a WorldPost member store in almost every town in the USA, so please use the Store Locator to find the one nearest you." The store locator indicates that member stores are located in Austin, Mission, New Braunfels, Corpus Christi and Portland, Texas. Finally, the web site allows an interested person to review a slide show and encourages owners of stores to join for free by completing an on-line membership form.
http://www. usxp.com/companies/wpnetwork.htm
http://www. worldpostnetwork.com/index.htm
Analysis
A. Applicable Legal Standard
When a nonresident defendant presents a motion to dismiss for lack of personal jurisdiction, it is the plaintiffs burden to establish that in personam jurisdiction exists. Wilson v. Belin, 20 F.3d 644, 648 (5th Cir.), cert. denied, 513 U.S. 930 (1994). When the court rules on the motion without an evidentiary hearing, the plaintiff may establish personal jurisdiction by presenting a prima facie case that personal jurisdiction is proper, id., proof by a preponderance of the evidence is not required. WNS, Inc. v. Farrow, 884 F.2d 200, 203 (5th Cir. 1989). In resolving a jurisdictional issue, the court may review pleadings, affidavits, interrogatories, depositions, oral testimony, exhibits, any part of the record, and any combination thereof. Command-Aire Corp. v. Ontario Mech. Sales Serv., Inc., 963 F.2d 90, 95 (5th Cir. 1992). Allegations in plaintiffs complaint are taken as true except to the extent that they are contradicted by defendant's affidavits. Wyatt v. Kaplan, 686 F.2d 276, 282-83 n. 13 (5th Cir. 1982). Any genuine, material conflicts between the facts established by the parties' affidavits and other evidence are resolved in favor of plaintiff for the purposes of determining whether a prima facie case exists. Jones v. Petty-Ray Geophysical Geosource, Inc., 954 F.2d 1061, 1067 (5th Cir.), cert. denied, 506 U.S. 867 (1992).
In a federal question case where the statute in question does not provide for service of process, the court "can use a state long-arm statute only to reach those parties whom a court of the state could also reach under it." Burstein v. State Bar of Cal., 693 F.2d 511, 514 (5th Cir. 1982). It has been held that the reach of the Texas long-arm statute is equivalent to that of the United States Constitution, and thus, the only question before the court is whether or not the exercise of personal jurisdiction over the defendant would offend the due process clause of the Fifth Amendment. See Burstein, 693 F.2d at 514 ("In a federal question case in federal court, the relevant constitutional provision is the due process clause of the fifth amendment. . . .").
The due process clause permits the exercise of personal jurisdiction over a nonresident defendant when (1) that defendant has `minimum contacts' with the forum state; and (2) the exercise of jurisdiction over that defendant does not offend traditional notions of fair play and substantial justice. Id. at 517-18.
"Minimum contacts" may be established sufficient for a court to assert either specific jurisdiction or general jurisdiction. Specific jurisdiction is appropriate where the corporation has purposefully directed its activities at the forum state and the "litigation results from alleged injuries that `arise out of or relate to' those activities." See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985) (in turn quoting Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 (1984)). To exercise specific jurisdiction, the court must examine the relationship among the defendant, the forum, and the litigation to determine whether maintaining the suit offends traditional notions of fair play and substantial justice. See Shaffer v. Heitner, 433 U.S. 186, 204 (1977). Even where specific jurisdiction is lacking, however, the court may nevertheless exercise "general jurisdiction" based on a defendant's contacts with the forum unrelated to the controversy. Helicopteros, 466 U.S. at 414.
To exercise general jurisdiction, the court must determine whether "the contacts are sufficiently systematic and continuous to support a reasonable exercise of jurisdiction." Harvey, 801 F.2d at 777 (citations omitted). "General jurisdiction can be assessed by evaluating contacts of the defendant with the forum over a reasonable number of years, up to the date the suit was filed." Access Telecom, Inc. v. MCI Telecommunications Corp., 197 F.3d 694, 717 (5th Cir. 1999), cert. denied, 531 U.S. 917 (2000); and Metropolitan Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 569-70 (2d. Cir.) ("In general jurisdiction cases, district courts should examine a defendant's contacts with the forum state over a period that is reasonable under the circumstances up to and including the date suit was filed to assess whether they satisfy the `continuous and systematic' standard; the determination of what period is reasonable in the context of each case should be left to the court's discretion."), cert. denied, 519 U.S. 1007 (1996). For general jurisdiction purposes, the court does not view each contact in isolation. Rather, all contacts must "be carefully investigated, compiled, sorted, and analyzed for proof of a pattern of continuing and systematic activity." See Schlobohm v. Schapiro, 784 S.W.2d 355, 359 (Tex. 1990); and Access Telecom, Inc., 197 F.3d at 717 ("In determining whether nonresident defendant's contacts with the forum state are sufficient to establish general personal jurisdiction, contacts must be examined "in toto" rather than examining each contact in isolation from the others."). It should also be noted that the court is not concerned with the quantity of the contacts, but rather with the nature and quality of those contacts. Id.
According to the jurisdictional plea made in the First Amended Complaint, Plaintiff claims that jurisdiction exists pursuant to 28 U.S.C. § 1331 (federal question), 1332 (diversity), 1338 (patent and copyright) and 1367 (supplemental jurisdiction), and 15 U.S.C. § 1116 (injunctive relief regarding trademarks) and 1121 (registered trademarks). Plaintiff also invokes jurisdiction under 15 U.S.C. § 1051, et. seq. (trademarks). Plaintiff claims venue in this Court under 28 U.S.C. § 1391(b). Plaintiff alleges that "a substantial portion of the events giving rise to the causes of action described herein occurred in Bexar County, San Antonio, Texas in the Western District of Texas where Defendants do business, and the acts complained of are occurring in San Antonio, Texas in the Western District of Texas." Plaintiff argues that this court may exercise specific and general jurisdiction.
B. Has Plaintiff Made a Prima Fade Showing of Specific Jurisdiction?
Plaintiff relies on the following contacts by defendants with Texas relating to the instant controversy: (1) USXP encourages stores in Texas to join and reap the benefits of being a member of the WorldPost Network; (2) numerous stores in the Western District of Texas are indicated on USXP's web site as having joined the network; (3) USXP uses the WorldPost name and mark to promote the sale of various goods and services to these stores in Texas; (4) USXP owns and operates a WorldPost delivery hub in Houston, Texas; and (5) USXP launched a nationwide telemarketing campaign to promote its WorldPost international shipping services to member stores located in Texas. Plaintiff further argues that USXP represents itself as the owner of the WorldPost.com domain name and mark, and that such representation defames Plaintiff since it is allegedly the only lawful owner of the mark and domain name. Plaintiff finally argues that by its acts described above, Defendants reasonably should have anticipated being haled into a Texas court.
Defendants argue that "only two subsidiaries of Universal Express, Inc. use the Worldpost name (principally via the internet), Private Postal Network, Inc. d/b/a Worldpost Network and Worldpost International Delivery (a division of Universal Express Logistics, Inc., a wholly owned subsidiary of Universal)." USXP argues that neither of the two subsidiaries are an "alter ego" of Universal Express, Inc. Further, they argue that Universal Express, Inc. is a holding company which conducts no business and has no presence in Texas. With regard to the two subsidiaries (Private Postal Network, Inc. and Universal Express Logistics, Inc.), Defendants argue that they do not have sufficient contacts with the state of Texas to justify personal jurisdiction.
Specific jurisdiction and Private Postal Network, Inc.
According to its web site, Private Postal Network, Inc. a/k/a WorldPost a/k/a "The Private Postal Network", is a wholly owned subsidiary of Universal Express, Inc, a publicly owned company, with Executive Offices in Rockefeller Center in New York City, and administrative offices in Boca Raton, Florida. Private Postal Network, Inc.'s web site encourages individuals to locate a network member store nearest them. Their web site also encourages store owners to join the network and offers an on-line membership service. As indicated in the affidavit of Plaintiff s president, Roy Schwaerzel, once an individual joins the network he or she receives a phone call explaining the services WorldPost network can provide. Some individuals receive an on-site visit in Texas. Individuals also receive other phone calls introducing them to luggage services. Network members may order office supplies from PBCNBizsupplies.com. Mr. Schwaerzel states in his supplemental affidavit that supplies ordered through this service are sent from PBCNbizsupplies, 400 N. Sam Houston Pkwy E, Suite 204, Houston, Texas 77060. He attaches a copy of the shipping envelope which evidences same. Mr. Schwaerzel further states in his affidavit that he ordered flowers through the network and that such flowers were delivered to his San Antonio, Texas office. Attached to his affidavit, Mr. Schwaerzel includes a store locator search he conducted using an area code search, and this search found 10 network members in the greater San Antonio area. Despite the above, in a Declaration, Richard Altomare states: "There has been no business conducted on behalf of the Worldpost Network in Texas. . . ." Apparently, in the alternative he states that "the venture has not generated income from Texas sources to date."
Exhibit 60.
UsxpLuggageExpress.com or 866-744-7224.
This link directs one to PBC Network.com. PBC Network.com directs one to worldpostnetwork. com.
Tab 22 of Plaintiff's exhibits indicates numerous network members throughout Texas.
Inasmuch as Defendants concede that Private Postal Network, Inc. "use the Worldpost name", and this entity actively solicits Texas based customers using the Worldpost name, the Court finds that sufficient contacts exist between Texas, Private Postal Network, Inc. and the instant controversy to support an exercise of specific jurisdiction. ICEE Distributors, Inc. v. J J Snack Foods Corp., 325 F.3d 586, 591 (5th Cir. 2003) ("A court may exercise specific, as opposed to general, jurisdiction over a nonresident defendant if the lawsuit arises from or relates to the defendant's contact with the forum state. A defendant's singular act can be a sufficient basis for jurisdiction if that act gives rise to the claim being asserted, so long as the defendant reasonably anticipates being haled into court in the forum state. . . . To the extent of any actual conflicts in the evidence, we resolve these in favor of the plaintiff, as we do also any choice of reasonable inferences to be drawn from the evidence."). With regard to Defendants' argument that they have not generated any income from Texas sources, it has been alleged by Plaintiff that its president made various purchases through the network, accordingly Private Postal Network, Inc. has generated income. Assuming Defendants' true argument was that it has not generated profits, the Court finds that argument not relevant to this jurisdictional question. An entity can be doing business in a state, albeit unsuccessfully, and still subject itself to personal jurisdiction.
Declaration of Richard Altomare at paragraph 5.
Private Postal Network, Inc. Does not operate a "passive" website. It does more than merely advertise on the internet. It actively solicits and engages in various business transactions. Minkv. AAAA Development L.L.C., 190 F.3d 333 (5th Cir. 1999).
Specific jurisdiction and Worldpost International Delivery, a division of Universal Express Logistics, Inc.
Defendants concede that Worldpost International Delivery uses the Worldpost name. According to USXP's SEC filings, WorldPost International Delivery is a division of Universal Express Logistics, Inc. This division provides international shipping. The Private Postal Network, Inc. web site has a link advertising WorldPost International Delivery. Customers may also track their WorldPost deliveries. The Universal Express, Inc. web site touts the availability of the international shipping service at Private Postal Network, Inc. member stores. The Private Postal Network, Inc. web site states: "$35 billion in International Express Shipping is being spent each year. We currently have exclusive rights for International Delivery Territories in North America through our Shipping partner SkyNet Worldwide Courier. WorldPost currently delivers to over 230 countries worldwide. The Skynet/Worldpost Network delivers over 400,000 packages per month worldwide." It thereafter offers applicants the opportunity to be "a WorldPost Territory owner, [and] you will have the opportunity to provide savings on International shipments of up to 40% for your customers and offer personalized service that larger air express companies do not provide. Providing options, low rates and a quality service is what makes this a once in a lifetime opportunity." Accessing the "Territory Listing" section, at least 26 different Texas cities are listed.
Declaration of Richard Altomare at paragraph 5.
Mr. Altomare states in his Declaration that although attempts were initially made to sell territories, "the concept was abandoned early for lack of interest." As Plaintiff correctly notes, however, Defendant's web site continues to market the concept to this day.
Inasmuch as Defendants concede that Worldpost International Delivery, a division of Universal Express Logistics, Inc. uses the Worldpost name", and this division actively solicits Texas based customers using the Worldpost name, the Court finds that sufficient contacts exist between Texas, Worldpost International Delivery, a division of Universal Express Logistics, Inc. and the instant controversy to support an exercise of specific jurisdiction.
Declaration of Richard Altomare at paragraph 5.
Specific jurisdiction and USXP
USXP states that through the WorldPost Network it "provides an array of services to the private postal industry. These services include International air courier delivery through WorldPost Network International Delivery, Luggage Transportation and Logistics through Luggage Express, and other benefits and programs negotiated with recognized suppliers and services to its members. USXP's principal subsidiaries and divisions include the WorldPost Network, its sub division PBC Network.com, USXP Logistics and it's subdivisions WorldPost Network.com, Luggage Express, and Virtual Bellhop. USXP also has its own leasing division USXP Capital."
In other parts of the USXP web site, USXP Capital is called a subsidiary.
In its most recent 10K filed with the SEC, USXP states: "Universal Express, Inc. has evolved into a conglomerate of supportive companies centered on its private postal network the WorldPost(tm) Network." Rather than clearly delineating that it is a holding company with independent, autonomous subsidiary corporations, it oftentimes designates these other entities as divisions ("USXP is now positioned as a significant player in the international shipping and transportation industries. By building its divisions through classic outsourcing techniques. . . ."). Rather than stating that Private Postal Network, Inc. operates and solicits members for the private postal network, the USXP 10K states: "USXP has enlisted more than 9,000 private postal centers in a network called WorldPost. . . . USXP offers its WorldPost Network members discounted services. . . ." The 10K states that USXP, not Universal Express Logistics, Inc. is the owner of WorldPost trademark.
The 10K is for the period from July 1, 2002 to June 30, 2003.
See also "USXP's business strategy is far more than the sum of today's parts. The company's three highly synergistic divisions position the company to create an entirely new industry paradigm. . . ."
Universal Express Logistics, Inc. is a Delaware corporation authorized to do business in the state of Florida. Its offices in Florida are located at 5295 Town Center Road, Suite 101, Boca Raton, Florida. USXP is located in the same offices. Universal Express Logistics, Inc.'s New York office address is 1230 Avenue of Americas, Suite 771, New York, New York 10020. USXP is located in the same offices.
The Fifth Circuit has addressed jurisdiction being imputed to a parent corporation in Hargrave v. Fibreboard Corp., 710 F.2d 1154 (5th Cir. 1983). The Court stated:
Generally, a foreign parent corporation is not subject to the jurisdiction of a forum state merely because its subsidiary is present or doing business there; the mere existence of a parent-subsidiary relationship is not sufficient to warrant the assertion of jurisdiction over the foreign parent. 2 J. Moore J. Lucas, Moore's Federal Practice ¶ 4.25[6], at 4-272 (2d ed. 1982). It has long been recognized, however, that in some circumstances a close relationship between a parent and its subsidiary may justify a finding that the parent "does business" in a jurisdiction through the local activities of its subsidiaries. See, e.g., Walker, 583 F.2d at 167; Cousteau, 495 F.2d at 492; Turner v. Jack Tar Grand Bahama, Ltd., 353 F.2d 954, 956 (5th Cir. 1965). The rationale for such an exercise of jurisdiction is that the parent corporation exerts such domination and control over its subsidiary "that they do not in reality constitute separate and distinct corporate entities but are one and the same corporation for purposes of jurisdiction."Id. at 1159. If a corporation is the alter ego of another defendant, courts may pierce the corporate veil and attribute jurisdictional contacts accordingly. Dalton v. R W Marine, Inc., 897 F.2d 1359, 1363(5th Cir. 1990). Plaintiff has propounded discovery requests to Defendants regarding their use of the Worldpost mark, the identity of employees and customers in Texas, and the disclosure of business transactions conducted in Texas. Until such discovery and additional briefing as outlined below are received, the Court reserves any ruling on whether specific or general jurisdiction exists with regard to Universal Express, Inc. (USXP).
Hargrave considered the following factors in determining whether a parent's control exceeded the norm: (1) the parent owned 100% of the subsidiary's stock; (2) the two corporations had separate headquarters; (3) they had no common officers and only one common director; (4) they observed corporate formalities; (5) they maintained separate accounting systems; (6) the parent exercised complete authority over general policy; and (7) the subsidiary exercised complete authority over daily operations, including research and development, marketing, and supply.
In concluding that no alter ego relationship existed, the court noted the following: "Several factors point to Midland as the alter ego of its subsidiaries. Midland owns 100% of its subsidiaries and remains responsible for general policy. Its subsidiaries funnel their revenues into centralized bank accounts and file a consolidated federal tax return with Midland. Finally, Midland offers benefit plans to its subsidiaries' employees. Nonetheless, these factors are outweighed, albeit modestly, by the fact that Midland observes corporate formalities, makes its subsidiaries responsible for daily operations including all personnel decisions, and allows each subsidiary to keep its records and accounts in separate books and file its own state tax return."
Plaintiffs Discovery Requests
On October 15, 2003, Plaintiff filed its Motion to Compel Discovery (docket no. 9). On or about October 3, 2003, Plaintiff sent various discovery requests to the Defendants. Defendants argue that since no Rule 26(f) conference has been held and Defendants have not filed an answer (only a motion to dismiss), Plaintiffs discovery requests were sent prematurely.
ORDER
The Court ORDERS the following:
The parties shall confer as required by Rule 26(f) of the Federal Rules of Civil Procedure on or before December 19, 2003.
Pursuant to Local Rule CV-16(c), the parties shall submit a proposed scheduling order on or before January 23, 2004. The Court agrees with Plaintiffs reasoning stated in its Motion to Consolidate the Preliminary Injunction and Trial on the Merits and for an Expedited Scheduling Order. The parties' failure to submit an agreed proposed scheduling order by the above date will result in the Court imposing deadlines that may adversely impact counsel and witness' schedules. Accordingly, the parties are advised that it is in their best interests to reach an understanding.
On or before January 23, 2004, the parties shall submit additional briefing as to whether or not Universal Express, Inc. and Universal Express Logistics, Inc. And Private Postal Network, Inc. are alter egos. The parties shall specifically address the factors listed in Hargrave and Dalton v. R WMarine, Inc. (see footnotes 18 and 19 above).
On or before January 23, 2004, the parties shall submit briefing as to whether or not the following defendants are proper and necessary. It appears that some of these entities are not corporations, but merely web sites or assumed names. The briefing should indicate who owns and operates these defendants. These defendants are: Private Postal Network.com, Inc., Universal Express Capital Corp., Universal Express Transportation, Inc., worldpost.com, Private Postal Network ("PPN"), PBCNetwork.com, Privatepostalnetwork.com, PBC Access, PBC Access.com, WorldPostnetwork.com, worldpostflowers.com, and worldpostflowers.net.
Plaintiffs Motion to Compel Discovery (docket no. 9) is GRANTED. Defendants shall respond to the Plaintiffs discovery requests on or before December 19, 2003.
Should Plaintiff seek depositions regarding the factors listed in Hargrave and Dalton v. R W Marine, Inc., Defendants shall submit to such examination. In an effort to allow for the request for an expedited scheduling order, all parties are granted leave to commence discovery on the merits of the claims and defenses immediately.
The Court will take under advisement whether specific jurisdiction exists as to USXP and whether general jurisdiction exists as to any of the Defendants pending receipt of the further briefing and the results of Plaintiff's discovery.
The Court DENIES Defendants' alternative motion for a change in venue pursuant to 28 U.S.C. § 1404 and 1406(a). The Defendants seek a transfer of venue to the Eastern District of New York. The Plaintiffs choice of forum, however, is typically given great weight and should not be disturbed unless clearly outweighed by other considerations. Time, Inc. v. Manning, 366 F.2d 690 (5th Cir. 1966). The Plaintiff is a resident of the Western District of Texas. Mere inconvenience to the Defendants is not enough. Indeed, many of the Defendants' business operations appear to lie in Florida. Plaintiff does not establish that any of its key witnesses are unable to appear in the Western District of Texas. It has not been established that the costs of litigation or obtaining witnesses will be greatly reduced by any such transfer. The movant has the burden to establish that a transfer is warranted. Id.