The opinion of the court was delivered by: William M. Skretny Chief Judge United States District Court
In this action, commenced on May 28, 2010, Plaintiff Armstrong Pump, Inc. ("Armstrong") is suing Defendant Hartman, the owner of three patents to which Armstrong has a license, for breach of contract and anticipatory breach of contract related to its intended sale of the three patents to Defendant Optimum Energy. Optimum Energy is sued for tortious interference with contract. Now before the Court are: (1) Hartman's motion to dismiss this action for lack of personal jurisdiction, improper venue, and failure to state a claim for relief; (2) Optimum Energy's motion to dismiss for lack of personal jurisdiction and failure to state a claim; and (3) Armstrong's motion for a temporary restraining order and preliminary injunction. For the reasons that follow, Defendants' motions are denied to the extent they seek dismissal based on lack of jurisdiction and improper venue, Plaintiff's motion for a temporary restraining order is granted, and the motions to dismiss for failure to state a claim and motion for a preliminary injunction will be addressed in a further decision.
The following facts are taken from Armstrong's Complaint, the attached License Agreement, and affidavits and exhibits submitted by the parties.
Thomas Hartman, d/b/a The Hartman Company, is a professional engineer with a principal place of business in Georgetown, Texas. He is licensed in several states, but not in the state of New York. In the late 1990s, Hartman began to apply for and obtained the three patents at issue here, which relate to methods, systems, and devices that improve the efficiency in chilled water cooling systems used in commercial and industrial buildings. The patents disclose methods for sequencing the chillers, pumps, fans, and other components in a loop HVAC system in order to optimize system operating efficiency (the "Hartman Loop Technology" or "Loop Patents").
Armstrong Pump, Inc. is a New York corporation founded in 1934 with a principal place of business in North Tonawanda, New York. A significant part of its business involves the development and manufacture of HVAC chilled water and boiler water systems, pumps, and other components ("chilled water products"). Armstrong is a subsidiary of S.A. Armstrong Ltd. ("SAA"), which is located in Toronto, Ontario. (Docket No. 15-2, Ex. A; Docket No. 25-2, Ross Aff., ¶ 1.) SAA's CEO, Charles Armstrong, its Director of Marketing, Brent Ross,*fn1 and its Manager of Strategic Projects, Peter Thomsen, are located in Toronto, Ontario.
Hartman and Brent Ross first met in Minneapolis, Minnesota, in or about 2000, at the annual meeting of the American Society of Heating, Refrigeration and Air-conditioning Engineers ("ASHRAE"). At that time, Hartman had been issued the first of the three patents at the heart of this suit. The remaining two patents were issued in 2001.
In June 2003, Ross contacted Hartman by email to inquire about meeting with him at an ASHRAE meeting in Kansas City. Thereafter, Hartman corresponded with both Ross and Thomsen about their interest in using his inventions in Armstrong's products. All three met at an ASHRAE meeting in Anaheim, California in 2004, after which Hartman sent them a proposed licensing agreement for the Loop Patents. All of Hartman's calls, faxes, and emails relative to negotiations were directed to Toronto, and, other than the ASHRAE meetings discussed, all in-person negotiations occurred in Toronto.
The License Agreement executed on February 4, 2005, is between Hartman and SAA's New York manufacturing subsidiary, Armstrong. The Agreement's term is until the expiration of the last of the patents to expire-on or about May 8, 2020.*fn2 (Agreement Recital A and § 4.) In exchange for agreed upon fees, the Agreement provides to Armstrong a license: to make, have made, use, sell, and otherwise distribute factory packaged chilled water systems, pumping and/or other mechanical products that incorporate the Licensed Technologies at the factory implementation level, and to use and otherwise practice the Licensed Technologies in Licensed Products. (Id. § 2.1.) Hartman agrees to be diligent in referring potential applications for new chilled water equipment he learns of to Armstrong (id. § 3.3(e)), promote Armstrong's marketing of the Licensed Technologies during the life of the Agreement, including joint marketing efforts (id. § 12.8), provide email support to Armstrong and its clients (id. § 3.4 and Ex. A), and provide consulting services to Armstrong in connection with product development and support, including travel as necessary (id. § 12.7).
At about the same time Armstrong was negotiating with Hartman, Defendant Optimum Energy, a Washington company with its principal place of business in Seattle, Washington, also was negotiating with Hartman. It sought rights to the Hartman Loop Technology for its business, which involved the provision of energy saving services, monitoring services, and redesign services in connection with pre-existing systems. As a result, the License Agreement contains the following carveout:
[Hartman] shall not be precluded from licensing the Licensed Technologies or the Licensed Patents to Optimum Energy Corporation or others for the purpose of incorporating the Technologies into products excluding those that include the manufacture or assembly of pumps, chillers, towers, chilled water plant controls or pumping or chiller systems that could compete with [Armstrong's] intended product offering. (Id. § 3.2(b)).
Since the License Agreement was executed, Optimum appears to have expanded its business model and now manufactures and installs control systems on chilled water systems in direct competition with Armstrong. Hartman now intends to sell to Optimum all patents identified in the License Agreement. Armstrong is seeking to halt that sale. According to Armstrong, the impending sale is contrary to explicit provisions in the License Agreement, including, inter alia, a provision precluding Hartman from granting a license for "factory implementation" of the Licensed Technologies to any third party (id. § 3.3(a)), a provision granting Armstrong a right of first refusal on improvements to the Licensed Technologies during the term of the License Agreement (id. § 8), and Hartman's provision of consulting services regarding the Licensed Technologies during the term of the Agreement (id. § 12.7).
Prior to considering Armstrong's request for injunctive relief, the Court must determine whether Armstrong has sufficiently demonstrated personal jurisdiction over the nonresident defendants, and whether dismissal for improper venue is warranted.
A. The Motions to Dismiss for Lack of Personal Jurisdiction
In deciding a motion to dismiss for lack of personal jurisdiction, a district court has discretion to proceed on written submissions or conduct an evidentiary hearing. Daniel v. Am. Bd. of Emergency Med., 988 F. Supp. 127, 201 (W.D.N.Y. 1997) (citation omitted). In responding to a Rule 12(b)(2) motion, the plaintiff bears the burden of establishing that the Court has jurisdiction over the defendants. Wik v. City of Rochester, 07-CV-6541, 2008 U.S. Dist. LEXIS 92032, at *36, (W.D.N.Y. Nov. 13, 2008). Where, as here, the Court relies solely upon pleadings and affidavits, the plaintiff need only made a prima facie showing of facts establishing jurisdiction. Xerox Corp. v. Arizona Digital Prods., Inc., 08-CV-6480, 2009 U.S. Dist. LEXIS 84-15, at *24 (Sept. 14, 2005). "Those documents are construed in the light most favorable to plaintiff and all doubts are resolved in its favor. CutCo Indus. v. Naughton, 806 F.2d 361, 365 (2d Cir. 1986).
However, a different standard applies to Armstrong's request for a preliminary injunction. Where such preliminary relief is sought, a prima facie showing does not suffice and a plaintiff's response to a jurisdictional challenge must "adequately establish that there is at least a reasonable probability of ultimate success upon the question of jurisdiction when the action is tried on the merits." Visual Scis., Inc. v. Integrated Commc'ns, Inc., 660 F.2d 56, 59 (2d Cir. 1981) (citation and internal quotation marks omitted); see also, Applewhite v. Sheahan, 08-CV-6045, 2009 U.S. Dist. LEXIS 114872, at *2 (W.D.N.Y. Feb. 19, 2010).
In a diversity action such as this, district courts look to the forum state's jurisdictional statutes to determine whether jurisdiction exists over nonresident defendants. DiStefano v. Carozzi N. Am., Inc., 286 F.3d 81, 84 (2d Cir. 2001). Here, Armstrong alleges that Hartman has "transacted business" in this District by negotiating a license agreement with a New York corporation, granting rights to the New York corporation, and executing an agreement with a New York choice of law provision. (Complaint ¶ 5.) Thus, it appears Armstrong is relying on N.Y. C.P.L.R. § 302(a)(1),*fn3 which provides, in pertinent part:
[A] court may exercise personal jurisdiction over any non-domiciliary, or his executory or administrator, who in person or through an agent:
1. transacts any business within the state or contracts anywhere to provide goods or services in the state; . . . . (McKinney's 2010). Two requirements must be met to establish jurisdiction under this provision: (1) the defendant must have transacted business within the state, and (2) there must be a "substantial nexus" between the transaction and the claims asserted. Sole Resort, S.A. de C.V. v. Allure Resorts Mgmt. LLC, 450 F.3d 100, 103 (2d Cir. 2005). A nondomiciliary "transacts business" by purposefully availing himself of the privilege of conducting activities within New York, thereby invoking the benefits and protection of its law. Cutco Indus., 806 F.2d at 365 (citations omitted). The "transacts business" determination is based on the totality of the circumstances including:
(i) whether the defendant has an on-going contractual relationship with a New York corporation; (ii) whether the contract was negotiated or executed in New York and whether, after executing a contract with a New York business, the defendant has visited New York for the purpose of meeting with parties to the contract regarding the relationship; (iii) what the choice-of-law clause is in any such contract; and (iv) whether the contract requires [defendants] to send notices and payments into the forum state or subjects them to supervision by the corporation in the forum state.
Sunward Elecs., Inc. v. McDonald, 362 F.3d 17, 22-23 (2d Cir. N.Y. 2004) (quoting Agency Rent A Car Sys., Inc. v. Grand Rent A Car Corp., 98 F.3d 25, 29 (2d Cir. 1996) (internal citations omitted) [alteration added]). No one ...