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RIVIERA TRADING CORP. v. OAKLEY

October 8, 1996

RIVIERA TRADING CORPORATION, Plaintiff, against OAKLEY, INC., Defendant.


The opinion of the court was delivered by: SWEET

 Sweet, D.J.,

 Defendant Oakley, Inc. ("Oakley") has moved, pursuant to Rules 4 and 12(b)(2), Fed. R. Civ. P., and 28 U.S.C. § 1404, to dismiss or, in the alternative, to transfer the declaratory judgment action brought against it by Plaintiff Riviera Trading Corporation ("Riviera") on the grounds that service of the summons and complaint was defective, this Court lacks personal jurisdiction over Oakley, and New York is an inconvenient forum for this litigation. For the reasons set forth below, the motion will be granted in part and denied in part.

 Parties

 Oakley is a manufacturer and seller of high quality sunglass products. Oakley is a Washington corporation with its principal offices in Irvine, California.

 Riviera is a New York-based seller/distributor of sunglass products that are sold in department stores.

 Background

 Oakley and Riviera were previously involved in litigation in the Southern District of California, Oakley, Inc. v. Mervyns, Inc. and Riviera Trading Corporation, No. 91-982 H(CM) ("the prior California action"), in which Oakley asserted that Riviera had sold sunglass models that infringed upon various Oakley patents. That case was settled by way of a Settlement Agreement and Stipulation, whereby Riviera acknowledged the validity of the patents in suit, agreed to cease and desist from the further sale of the products, and paid damages to Oakley.

 Following settlement of the prior California action, Oakley sent cease and desist letters to Riviera and several of its customers on numerous occasions, again asserting patent infringement relating to two sunglass models being sold under the Riviera label.

 Oakley's first cease and desist letter to Riviera regarding the instant dispute was dated August 23, 1995. Following subsequent settlement negotiations, Oakley, by letter dated February 20, 1996, sent counsel for Riviera a proposed settlement agreement. By letter dated April 30, 1996, counsel for Riviera responded with objections. By letter dated May 8, 1996, counsel for Oakley indicated the points on which Oakley was and was not willing to incorporate changes to the settlement agreement, and sent a revised settlement agreement.

 Oakley also sent cease and desist letters to the following of Riviera's customers: Robinsons-May, located in California and headquartered in Missouri; JC Penney, Inc., located in California; Belk, located in Georgia and headquartered in North Carolina; and Sterns, located and headquartered in New York.

 Having failed to reach a settlement of Oakley's new claims, Riviera filed this action ("the New York action") in the Southern District of New York on June 3, 1996. The New York action is a declaratory relief action alleging non-infringement of Oakley's patents, non-infringement of trade dress rights, false advertising, tortious interference with business relations, commercial disparagement and prima facie tort.

 The summons and complaint in the New York action were handed to a receptionist at the Oakley corporate offices in California on June 5, 1996 by a process server. A second copy was mailed to the Oakley headquarters by the process server. On July 29, 1996, counsel for Riviera mailed a third copy of the summons and complaint to Mike D. Parnell, Chief Executive Officer of Oakley, at Oakley headquarters.

 Oakley has no property, offices, warehouses, employees, bank accounts or telephone listings within the State of New York. Oakley products are sold to consumers in New York State through retail outlets that purchase Oakley products from Oakley's California headquarters. Sales to retailers are governed by Oakley's "Retail Standards Agreement" that specifically provides that it is to be performed in Irvine, California. In 1995, sales of Oakley products to New York State amounted to $ 2.5 million, which constituted 1.9% of Oakley's domestic sales and 1.4% of Oakley's total sales. All Oakley advertising is disseminated from the Oakley headquarters. Oakley sales are solicited primarily by way of telephone contact, by in-house territorial manager employees.

 Oakley uses outside sales representatives to service the authorized retail accounts that reside in the State of New York. They are independent contractors, not employed by Oakley. Oakley has no control over the manner in which they conduct their services for Oakley and the representatives have no authority to bind Oakley in contract or to open new account locations.

 No discovery has been conducted to date in the New York action. On June 25, 1996, Oakley filed the instant motion to dismiss or, in the alternative, to transfer this action on the grounds that: (1) service of the summons and complaint was defective; (2) this Court lacks personal jurisdiction over Oakley; and (3) New York is an inconvenient forum for this litigation. Oakley's motion was considered fully submitted on July 17, 1996.

 Discussion

 I. Service of the Summons and Complaint was Proper

 Oakley asserts that service of the summons and complaint was defective pursuant to Rule 4 of the Federal Rules of Civil Procedure. Service of a summons and complaint can be completed upon a corporation as set forth in Rule 4(h)(1), Fed. R. Civ. P. Rule 4(h)(1) permits service in the manner provided by the State of New York or upon an "officer, a managing or general agent, or any other agent authorized by appointment or by law to receive service of process . . . ."

 Rule 4(h)(1) further provides that service upon a corporation may be made "in the manner proscribed for individuals by subdivision (e)(1) . . . ." Rule 4(e)(1), in turn, provides that service may be made "pursuant to the law of the state in which the district court is located, or in which service is effected . . . ."

 Thus, the question whether service was proper depends on whether service was completed in accordance with the laws of the State of California, as asserted by Riviera. The California Code of Civil Procedure ("CCP") section 416.10 provides that, to effectuate ...


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