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DH Services, LLC v. Positive Impact, Inc.

United States District Court, S.D. New York

February 5, 2014

DH SERVICES, LLC, Plaintiff,
v.
POSITIVE IMPACT, INC., Defendant.

OPINION AND ORDER

RONNIE ABRAMS, District Judge.

This case arises from a trademark dispute between Plaintiff, a software company that provides a dating application used on mobile phones, and Defendant, a non-profit organization that provides mental health counseling and other services to those affected by HIV. Before the Court is Defendant's motion to dismiss for lack of personal jurisdiction and to dismiss four of the counts in the amended complaint for failure to state a claim. For the following reasons, the Court concludes that it lacks personal jurisdiction over Defendant, and thus need not consider Defendant's motion under Fed.R.Civ.P. 12(b)(6). Because transferring the case is in the interest of justice, however, the Court transfers the case to the United States District Court for the Northern District of Georgia.

BACKGROUND

Plaintiff DH Services, LLC is software provider with its principal place of business in New York, New York.[1] (Am. Compl. ¶¶ 6, 8.) Since May 2011, Plaintiff has used the marks "MISTER" and "MR." in connection with online dating and networking services it provides for its customers. (Id. ¶ 10.) Plaintiff owns trademark registrations in those marks. (Id. ¶ 13.) Additionally, between the filing of its original and amended complaints in this action, Plaintiff acquired the rights to marks used in connection with the "MR. party, " an annual event hosted in California that draws attendees from across the country. (See id. ¶ 8; Decl. of Erin Vivion, June 27, 2013 ("Vivion Decl."), Ex. I.) Plaintiff's predecessor-in-interest began using the "MR." mark in connection with the party in 2008. (Am. Compl. ¶¶ 10, 32.)

Defendant is a non-profit organization based in Atlanta, Georgia, that offers education and information about HIV and provides counseling and other services to those affected by HIV. (Id. ¶ 18.) One of Defendant's programs is titled "M.I.S.T.E.R., " an acronym that represents the phrase "Men's Information Services: Testing, Empowerment, Resources." (Id.) Defendant has used that acronym since 2010. (Id. at ¶¶ 24, 33; Declaration of Paul Plate, July 11, 2013 ("Plate Decl."), ¶ 3.) According to the amended complaint, Defendant "offers its M.I.S.T.E.R. services exclusively at its location in Atlanta, Georgia and promotes its services primarily to individuals in the greater Atlanta area, including in interstate commerce." (Id. ¶ 20.) Defendant asserts that it has no offices, employees, addresses or telephone numbers in New York; that it does not own, lease, or control any real or personal property in New York; and that it does not have a bank account or pay taxes in New York. (Def.'s Mem. of Law 8.) Nowhere does Plaintiff dispute these facts.

On April 30, 2012, Plaintiff's counsel received a letter from Defendant's counsel stating that Defendant had received "queries from some of its consumers evincing actual confusion" concerning the "MISTER, " "MR." and "M.I.S.T.E.R." marks. (See Declaration of Mike Rodenbaugh, June 27, 2013 ("Rodenbaugh Decl.") Ex. A. at 3-4.) The letter asked Plaintiff to confirm that it would cease using the marks, and threatened to take "such actions as [Defendant] deem[ed] necessary to protect its proprietary rights" in the event Plaintiff continued to use the marks. (Rodenbaugh Decl. Ex. A at 4.) In a follow-up phone call, Defendant's counsel threatened legal action. (Id. ¶ 4.)

Plaintiff filed its complaint in this action on August 10, 2012. (Dkt. No. 1.). The original complaint sought a declaratory judgment that Plaintiff's "MISTER" and "MR." marks (the marks it had used since May 2011) did not infringe Defendant's mark (used since 2010). It also asserted claims for unfair competition and unlawful deceptive acts, under common law and New York law, based on Defendant's "cease and desist" letter and the parties' subsequent phone call. (Id.).

After limited jurisdictional discovery, Plaintiff filed an amended complaint. In addition to asserting the claims from the original complaint, the amended complaint added a trademark infringement and Lanham Act unfair competition claim. In support of these claims, Plaintiff asserted that it had become the "senior user" of the "MISTER" and "MR." marks, based on the common law rights it had acquired in the mark associated with the "MR." party (allegedly used since 2008). (See Am. Compl. ¶¶ 32-47.)

Defendant filed the instant motion several weeks after submission of the amended complaint.

DISCUSSION

The Court first considers Defendant's motion to dismiss for lack of jurisdiction. Because the Court concludes that it does not have personal jurisdiction over Defendant, it declines to consider the motion to dismiss for failure to state a claim.

The showing a plaintiff must make to overcome a defendant's motion to dismiss for lack of jurisdiction "varies depending on the procedural posture of the litigation." Dorchester Fin. Secs., Inc. v. Banco BRJ, S.A. , 722 F.3d 81, 84 (2d Cir. 2013). Where, as here, the Court permits limited discovery but does not hold an evidentiary hearing, the plaintiff must make a " prima facie showing" of personal jurisdiction from the pleadings and affidavits. Id. at 85. Conclusory allegations will not suffice to meet this burden; plaintiff must make a "specific averment" of facts that are "sufficiently supported." S. New England Tel. Co. v. Global NAPS Inc. , 624 F.3d 123, 138 (2d Cir. 2010). The plaintiff "must establish the court's jurisdiction with respect to each claim asserted." Sunward Elecs., Inc. v. McDonald , 362 F.3d 17, 22 (2d Cir. 2004).

In assessing the sufficiency of the submissions, the Court "construe[s] the pleadings and affidavits in the light most favorable to plaintiffs, resolving all doubts in their favor, " Dorchester , 722 F.3d at 85, even if defendant has made a "controverting presentation" that causes the Court to question the authenticity or veracity of plaintiff's evidence, id. at 87.

1. Governing Law

To determine whether it has personal jurisdiction over Defendant, the Court must engage in a two-step inquiry. First, because "this is a federal question case where [the] defendant resides outside the forum state and the relevant federal statute does not specifically provide for national service of process, " the Court applies "the forum state's personal jurisdiction rules." Marvel Characters, Inc. v. Kirby , 726 F.3d 119, 128 (2d Cir. 2013) (alterations omitted); see Sunward Elecs., Inc. v. McDonald , 362 F.3d 17, 22 (2d Cir. 2004). The Court thus looks to New York law. Second, the Court considers "whether an exercise of jurisdiction under th[is] law[] is consistent with federal due process requirements." Grand River Enters. Six Nations, Ltd. v. Pryor , 425 F.3d 158, 165 (2d Cir. 2005). Because the Court concludes that jurisdiction is lacking under New York law, its analysis focuses only on the first step.

At the onset, the Court must draw a distinction between "general or all-purpose jurisdiction, and specific or conduct-linked jurisdiction." Daimler AG v. Bauman , 134 S.Ct. 746, 751 (2014). A court has general jurisdiction over a defendant when the defendant's "continuous corporate operations within a state are so substantial and of such a nature as to justify suit against it on causes of action arising from dealings entirely distinct from those activities." Id . (alteration omitted). Specific jurisdiction, on the other hand, rests on the premise that "the commission of some single or occasional acts of the corporate agent in a state may sometimes be enough to subject the corporation to jurisdiction in that State's tribunals with respect to suits relating to that-in-state activity." Id.

Nowhere does Plaintiff's amended complaint assert that the Court has general jurisdiction over Defendant. Instead, Plaintiff asks the Court to exercise specific jurisdiction over Defendant. (Am. Compl. ¶ 4.) It relies on New York's long-arm jurisdiction statute, which provides:

As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any non-domiciliary [who]... 1. transacts any business within the state or contracts anywhere to supply goods or services in the state; or 2. commits a tortious act within the state[;]... or 3. commits a tortious act without the state causing injury to person or property within the state... if he... expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce....

N.Y.C.P.L.R. § 302(a). Because Plaintiff asserts that subsections 302(a)(1), (a)(2), and (a)(3) all provide a basis for exercising jurisdiction over Defendant, the Court examines each provision in turn.

2. Whether Defendant Transacted Business in New York Under § 302(a)(1)

In order to demonstrate that an individual "transacted business" within the meaning of § 302(a)(1), "there must have been some purposeful activities within the State that would justify bringing the nondomiciliary defendant before the New York courts." SPCA of Upstate New York, Inc. v. Am. Working Collie Ass'n , 18 N.Y.3d 400, 404 (2012). Purposeful activities "are those with which a defendant, through volitional acts, avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." Fischbarg v. Doucet , 9 N.Y.3d 375, 380 (2007). Not every "transaction, " however, will give rise to jurisdiction under § 301(a)(1). The plaintiff must also establish "some articulable nexus between the business transacted and the cause of action sued upon." SPCA , 18 N.Y.3d at 404.

The New York Court of Appeals has described § 302(a)(1) as a "single act statute, " meaning that "proof of one transaction in New York is sufficient to invoke jurisdiction... so long as the defendant's activities here were purposeful and there is a substantial relationship between the transaction and the claim asserted." Kreutter v. McFadden Oil Corp. , 71 N.Y.2d 460, 467 (1988). At the same time, "no single event or contact connecting defendant to the forum state need be demonstrated; rather, the totality of all defendant's contacts with the forum state must indicate that the exercise of jurisdiction would be proper." Grand River , 425 F.3d at 166. Thus, a defendant's "ongoing course of conduct or relationship in the state may" establish jurisdiction under this provision, even when it has not performed an "individual act" sufficient to confer jurisdiction." Licci ex rel. Licci v. Lebanese Canadian Bank, SAL , 673 F.3d 50, 62 (2d Cir. 2012). Ultimately, "it is the quality of the defendant['s] New York contacts that is the primary consideration" when determining whether jurisdiction is appropriate under § 302(a)(1). Id.

Accordingly, the Court first examines whether Defendant has committed a single act sufficient to confer jurisdiction, then considers whether the "totality of all defendant's contacts" establish an "ongoing course of conduct or relationship in the state" such that the Court may exercise jurisdiction over it.

a. Purchases from New York-based Vendors

Plaintiff first argues that Defendant has transacted business in New York because it has ongoing relationships with suppliers in New York. (See Pl.'s Mem. of Law in Opposition at 9.) In support of this assertion, Plaintiff has submitted various invoices showing Defendant's purchases of what appear to be medical and office supplies from vendors based in New York. (See Vivion Decl. Ex. F.)

The Court is skeptical that by purchasing gauze pads and other supplies from companies based in New York, Plaintiff "avail[ed] itself of the privilege of conducting activities within [New York], thus invoking the benefits and protections of its laws." Fischbarg , 9 N.Y.3d at 380. As Judge Lynch has noted, "the language of § 302(a)(1) itself casts doubt on the possibility of in personam jurisdiction based solely on the purchase by an out-of-state defendant of goods from a New York seller." Stengel v. Black, No. 03 Civ. 495(GEL), 2003 WL 1961638, at *2 n.1 (S.D.N.Y. Apr. 25, 2003). Because the statute expressly provides jurisdiction "over a defendant who contracts anywhere to supply goods or services in the state, '" Judge Lynch explained, "the statute would appear to rule out the possibility that "transacting business within the state' was intended to encompass those who contract to purchase goods from a New York supplier." Id.

Consistent with this reasoning, the Second Circuit in Beekman Paper Co. v. National Paper Products , 909 F.2d 67, 69 (2d Cir. 1990), found it "inconceivable" that New York's long-arm statute, "however liberally construed, " could support jurisdiction over a Texas company whose only contact with New York was the purchase of paper from a New York company, even though the lawsuit centered on the Texas company's alleged failure to pay for the paper. The New York Court of Appeals, in M. Katz & Son Billiard Products v. Correale & Sons , 20 N.Y.2d 903, 904 (1967), similarly dismissed for lack of jurisdiction an action brought by a New York company against a New Jersey company, where the alleged basis for jurisdiction was the New Jersey company's purchase of billiards equipment. Although the two companies had been doing business for thirty years, the Court found that the purchases "did not constitute purposeful acts sufficient to sustain jurisdiction" under the analogue to § 302(a)(1).

Even if the Court were to conclude that Plaintiff's purchases in this case constituted "transactions" within the meaning of the statute, there is no "articulable nexus" between the purchases and the "cause of action sued upon, " namely, the alleged trademark infringement. SPCA , 18 N.Y.3d at 404. All of the invoices are made out to "Positive Impact"; none mentions or displays the allegedly infringing "M.I.S.T.E.R." mark. (See Vinion Decl. Ex. F.) The Court is similarly unable to discern any connection between the purchases and Plaintiff's claims for common law ...


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