TEMPUR-PEDIC INTERNATIONAL, INC. v. GO SATELLITE INC. (N.D.Tex. 12-8-2010)

mmerce."); accord Ruston Gas Turbines, 9 F.3d at 419-20; Ham, 4 F.3d at 416 n. 11 ("Absent rejection by a majority on the Supreme Court, we have continued to apply the stream of commerce analysis found in our pre- Asahi cases."). See also Luv n' Care, 438 F.3d at 470-71 (extending personal jurisdiction where defendant's invoices indicated forum state as the destination, and concluding that businesses cannot claim ignorance of contents of their own orders). This test stands in contrast with cases from other circuits that defendants cite, which require "something more" to demonstrate that the defendant specifically intended to direct its activities toward the forum state. See Toys "R" Us, 318 F.3d at 452-53. Notably, Toys "R" Us does not cite a Fifth Circuit case in its survey of precedent, perhaps because specific intent to target the forum state does not appear to be a requirement for purposeful availment in the Fifth Circuit. Because the Fifth Circuit seems to follow a different standard than the circuits on which defendants rely, compare Luv n' Care, 438 F.3d at 470-71 (holding that Supreme Court precedent does not bar "mere foreseeability" from being constitutionally sufficient when defendant's product enters the forum state while in the stream of commerce) with Shamsuddin, 346 F.Supp.2d at 814

In adopting this test, the Fifth Circuit has declined to follow the four Members of the Court in Asahi Metal Industries Co. v. Superior Court of California, 480 U.S. 102, 112 (1987), who suggested that some additional action from defendant, beyond foreseeability, would be necessary to convert the mere act of placing a product in the stream of commerce into an act purposefully directed toward the forum state. See Luv n' Care, 438 F.3d at 470; see also Asahi, 480 U.S. at 117 (Brennan, J., concurring) (expressing the opinion of four other members of the Asahi Court, who felt that no act other than placing the product in the stream of commerce was necessary). Luv n' Care also appears to distinguish itself from cases such as World Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 295 (1980) — which held that foreseeability alone does not provide a sufficient basis for personal jurisdiction — by limiting its holding to situations where there is foreseeability and entry into the forum state's stream of commerce. Luv n' Care, 438 F.3d at 470. The instant case involves such circumstances.

(interpreting World Wide Volkswagen, 444 U.S. at 297, to require "deliberate, rather than merely foreseeable, contacts"), the cases outside this circuit applying Zippo have less persuasive weight than they would otherwise. Cf. Shamsuddin, 346 F.Supp.2d at 809-10 (noting significant variation in ways that courts have applied the Zippo test).

The court therefore concludes that plaintiffs have made a sufficient prima facie showing of minimum contacts to ensure that Go Satellite is not being haled into this jurisdiction "solely as a result of `random,' `fortuitous,' or `attenuated' contacts." Burger King, 471 U.S. at 475. Unlike the defendants in cases such as World-Wide Volkswagen, where defendants' products had passed completely to consumers' control, Go Satellite is not a victim of unilateral third-party conduct. Go Satellite cannot open itself for business to every state in the United States and then feign surprise when it receives an order from a resident of one of the states. Go Satellite deliberately held itself out as willing to sell to residents in all 50 states, accepted customers from Texas, and shipped products to Texas. See AdvanceMe, Inc. v. Rapidpay LLC, 450 F.Supp.2d 669, 673-74 (E.D. Tex. 2006) (finding personal jurisdiction on basis of two sales to Texas, ongoing potential for sales to Texas, and drop-down menu of states that allowed potential customer to identify Texas as its state). Go Satellite would have been aware that filling any orders made by persons with Texas addresses would mean shipping the products to Texas in the stream of commerce. Construing the evidence in plaintiffs' favor, Go Satellite's sales agent was not only aware that a Texas resident was seeking to purchase a mattress and to arrange delivery into Texas, but the agent even admitted to prior sales in Texas as a selling point and encouraged one Texas resident to tell his acquaintances about Go Satellite's products. Furthermore, the websites were designed in a way that permitted Texas residents to engage in ongoing interactions with Go Satellite: the residents could ask questions via live chat, place orders, and continue communicating with the staff to follow up on shipping and payment. See Am. Eyewear, 106 F.Supp.2d at 898 and 901-02 (concluding that New York-based website had sufficient contacts to support specific jurisdiction where fewer than 0.5% of sales came from Texas, but website was intended to reach every person with Internet access, including Texans, and provided order forms and ways to communicate with customer service). In short, Go Satellite established a website targeting United States residents and offering shipping to United States addresses. Unlike sellers in online auctions, who may have limited control over those with whom they transact business, cf. McGuire v. Lavoie, 2003 WL 23174753, at *3 (N.D. Tex. Aug. 19, 2003) (Ramirez, J.) (reviewing decisions that have found that there is no personal jurisdiction over Internet auction sellers, and noting that such sellers have no control over who would ultimately be the highest bidder), had Go Satellite wanted to exclude certain jurisdictions, it was able to refuse to deal with certain customers or to turn down any orders after checking customer addresses. As Zippo itself notes, "If [the defendant] had not wanted to be amenable to jurisdiction in [the forum state], the solution would have been simple — it could have chosen not to sell its services to [forum-state] residents." Zippo, 952 F. Supp. at 1126-27; cf. QR Spex, 507 F.Supp.2d at 660 (holding that website that permitted pre-orders did not rise to level of an offer to sell under traditional contract law principles, and was insufficient for minimum contacts finding).

The court therefore concludes that plaintiffs have made a prima facie showing of minimum contacts to support a finding of specific in personam jurisdiction over Go Satellite.

B

The court next determines whether exercising personal jurisdiction over Go Satellite would satisfy traditional notions of fair play and substantial justice.

Addressing some of the Burger King factors, Go Satellite maintains that it is a small company (four employees), it would be required to travel from Canada to Texas for trial, and it would be obligated to submit itself to a foreign nation's judicial system. It contends that the burden would be extremely high because it has no contacts with Texas. Go Satellite also posits that Texas' interest in this lawsuit is minimal because no plaintiff resides here, the majority of plaintiffs' claims are brought under federal rather than Texas law, Go Satellite's alleged acts did not take place in Texas, and plaintiffs have failed to identify any sales made to Texas residents. Finally, Go Satellite asserts that plaintiffs can obtain effective relief by suing it in Canada, where they have a presence through a Canadian subsidiary.

Go Satellite must present a "compelling case" that jurisdiction is unreasonable and incompatible with "fair play and substantial justice." Burger King, 471 U.S. at 477-78. "It is rare to say the assertion [of jurisdiction] is unfair after minimum contacts have been shown." See Wien Air Alaska, 195 F.3d 208, 215 (5th Cir. 1999) (alterations in original) (citing Akro Corp. v. Luker, 45 F.3d 1541, 1547 (Fed. Cir. 1995)). Go Satellite has not made the required compelling case.

Plaintiffs have made a prima facie showing that Go Satellite has intentionally made sales to Texas residents. Other than its small size and the fact that it is a Canadian corporation, Go Satellite has not shown any reasons — certainly not compelling ones — to conclude that it will be unduly burdensome to defend itself in a forum where the evidence shows it has intentionally made sales. Texas has an interest in protecting its consumers from consumer confusion or deception, and plaintiffs are suing based on harm to their goodwill and false advertising affecting the Texas market. And even if Canada is an available forum to plaintiffs, this is of itself, or in combination with the other Burger King factors, insufficient to establish a compelling case that exercising in personam jurisdiction is unreasonable and incompatible with fair play and substantial justice.

C

Having found that minimum contacts exist to support specific jurisdiction and that the exercise of in personam jurisdiction would not offend traditional notions of fair play and substantial justice, the court holds that it can exercise in personam jurisdiction over Go Satellite, and it denies defendants' motion to dismiss in this respect.

IV

The court next addresses whether it can exercise in personam jurisdiction over Hutt.

A

Defendants argue that the fiduciary-shield doctrine prevents the court from exercising personal jurisdiction over Hutt based on Go Satellite's contacts. Plaintiffs posit that the fiduciary shield doctrine is inapposite because Hutt's actions in supporting the infringement were intentional. They maintain that the court can exercise specific jurisdiction because Hutt was Go Satellite's CEO during the relevant periods and he was personally aware of Tempur-Pedic's position barring most of its authorized retailers

from selling its products via the Internet.

B

Generally, "an individual's transaction of business within the state solely as a corporate officer does not create personal jurisdiction over that individual though the state has in personam jurisdiction over the corporation." Stuart v. Spademan, 772 F.2d 1185, 1197 (5th Cir. 1985). But this rule does not apply to a corporate officer who injures a third person by his tortious activity, even if such acts are performed within the scope of his employment. Id.; accord Carrot Bunch Co. v. Computer Friends, Inc., 218 F.Supp.2d 820, 826 (N.D. Tex. Aug. 14, 2002) (Buchmeyer, J.) (noting that personal jurisdiction is proper when defendant intentionally directs tortious activities toward forum state); Ponder Research Grp., LLP v. Aquatic Navigation, Inc., 2009 WL 2868456, at *7 (N.D. Tex. Sept. 4, 2009) (Means, J.) ("The fiduciary-shield doctrine is not absolute however. The doctrine does not apply to intentional torts or fraudulent acts committed by a corporate officer or agent."); Global 360, Inc. v. Spittin' Image Software, Inc., 2005 WL 625493, at *7 (N.D. Tex. Mar. 17, 2005) (Lindsay, J.) (finding specific jurisdiction where officer's trademark infringement actions, such as registering and maintaining website that sold infringing products to Texas consumers, were intentional). "The thrust of the general rule is that the officer to be held personally liable must have some direct, personal participation in the tort, as where the defendant was the guiding spirit behind the wrongful conduct or the central figure in the challenged corporate activity." Mozingo v. Correct Mfg. Corp., 752 F.2d 168, 174 (5th Cir. 1985) (internal quotation marks and ellipsis omitted) (quoting Escude Cruz v. Ortho Pharm. Corp., 619 F.2d 902, 907 (1st Cir. 1980)).

Plaintiffs allege in their complaint that Hutt, as Go Satellite's founder, CEO, and owner, supervises and controls the day-to-day operations of Go Satellite. They also assert that Hutt had knowledge of, directed, controlled, supervised, acted in concert with, and/or took action that contributed to Go Satellite's purportedly unlawful activities. For factual support, they aver that in February 2010 Hutt met with an employee of Tempur-Canada to inquire about the requirements for becoming an authorized Tempur-Pedic retailer. The Tempur-Canada employee allegedly informed Hutt that Tempur-Canada prohibits most of its authorized dealers from selling Tempur-Pedic products via the Internet. Within one month of Hutt's being informed of this policy, Go Satellite had set up the Cloud 9 websites to sell Tempur-Pedic mattresses online, even though plaintiffs never approved Hutt as an authorized retailer. Plaintiffs communicated their trademark infringement accusations directly to Hutt, personally informing him of their position around March 3, 2010. Plaintiffs also persuaded defendants' Internet service provider to disable the Cloud 9 websites, but defendants resumed running the websites via another service provider.

Given the proximity in time between Hutt's discovery of Tempur-Canada's Internet sale policy and his company's establishment of another website, and given the communications that plaintiffs sent to Hutt personally, plaintiffs have made a prima facie showing that Hutt willfully infringed plaintiffs' trademark. As the officer in control of a company with only four employees, Hutt was the "central figure" behind Go Satellite's infringement. Hutt avers that he was not personally aware of any specific sales by Go Satellite to anyone in Texas, but he does not deny that, by establishing a "cloud9mattress.us" website, advertising "no sales tax all 50 states," and offering to deliver anywhere in the 48 contiguous states, Go Satellite was targeting the United States market and open for accepting orders from any state, including Texas.

The court concludes that the CEO of a small company, even if unaware of the particulars of any individual sale to Texas, plays the role of a "central figure" in bringing about Texas sales when he intentionally approves a website whose entire purpose is to solicit sales from all 50 states in the United States and permits the website to continue even after receiving communication directed to him personally urging him to take action to prevent trademark infringement. Given the prima facie evidence of intentional infringement and Hutt's level of knowledge and control, the fiduciary-shield doctrine does not apply, and the court can exercise personal jurisdiction over Hutt.

V

Having determined that it can exercise in personam jurisdiction over both defendants, the court now considers whether it should dismiss this case under the doctrine of forum non conveniens.

A

"A defendant invoking forum non conveniens ordinarily bears a heavy burden in opposing plaintiff's chosen forum." Sinochem Int'l Co. v. Malaysia Int'l Shipping Corp., 549 U.S. 422, 430 (2007). In addressing a forum non conveniens challenge where the proposed alternate forum is in another country, the court applies a two-part analysis. See Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 722 (1996) (noting that forum non conveniens doctrine has been superseded by 28 U.S.C. § 1404(a) for transfers of venue within the federal court system, but that common law forum non conveniens doctrine still applies in cases where the alternative forum is abroad). First, the court considers whether an available and adequate alternative forum exists that could have jurisdiction over the dispute. Alpine View, 205 F.3d at 221. Second, the court weighs private and public interest factors to determine the favored forum. Id. at 221-22. The court will assume arguendo that an available and adequate alternative forum exists in Canada and will therefore weigh the private and public interest factors.

"When the plaintiff's choice is not its home forum . . . the presumption in the plaintiff's favor `applies with less force[.]'" Sinochem, 549 U.S. at 430 (quoting Piper Aircraft Co. v. Reyno, 454 U.S. 235, 255 (1981)). But where a United States plaintiff seeks to bring suit against a foreign defendant in a United States court, several courts have held that "the `home forum' for the plaintiff is any federal district in the United States, not the particular district where the plaintiff lives." Reid-Walen v. Hansen, 933 F.2d 1390, 1394 (8th Cir. 1991) (concluding that, where the alternate forum is foreign, the relevantdistinction is whether the plaintiff is a United States citizen, not whether the plaintiff resides in the particular district where the case was brought); Adelson v. Hananel, 510 F.3d 43, 53 (1st Cir. 2007); Guidi v. Inter-Continental Hotels Corp., 224 F.3d 142, 146 n. 4 (2d Cir. 2000); Snaza v. Howard Johnson Franchise Sys., 2008 WL 5383155, at *11 (N.D. Tex. Dec. 24, 2008) (O'Connor, J.).

B

The presumption in favor of the plaintiff's chosen forum "may be overcome only when the private and public interest factors clearly point towards trial in the alternative forum." Schexnider v. McDermott Int'l, Inc., 817 F.2d 1159, 1163 (5th Cir. 1987). The private interest factors are:

[T]he relative ease of access to sources of proof; availability of compulsory process for attendance of unwilling, and the costs of obtaining attendance of willing, witness; possibility of view of the premises, if view would be appropriate to the action; and all other practical problems that make trial of a case easy, expeditious, and inexpensive.

Dickson Marine Inc. v. Panalpina, Inc., 179 F.3d 331, 342 (5th Cir. 1999) (alterations in original) (quoting Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508 (1947)). The public interest factors are:

The administrative difficulties flowing from court congestion; the "local interest in having localized controversies decided at home"; the interest in having the trial of a diversity case in a forum that is at home with the law that must govern the action; the avoidance of unnecessary problems in conflict of laws, or in the application of foreign law; and the unfairness of burdening citizens in an unrelated forum with jury duty.

Piper Aircraft Co. v. Reyno, 454 U.S. 235, 241 n. 6 (1981) (quoting Gilbert, 330 U.S. at 509).

C

The court turns initially to the private interest factors.

1

The first factor — the relative ease of access to sources of proof — favors plaintiffs. Defendants argue that their web hosting companies, company records, and employees are located in Canada. Inconveniences in travel for the parties or location of documents do not necessarily add up, however, to difficulty of access to sources of proof. Defendants have access to their own records and web hosting data, whether this case is litigated in Texas or in British Columbia, and the court can compel parties to the suit to produce discovery. Instead, the court should consider in the context of this factor whether there are third-party witnesses in the United States or Canada from whom discovery may become difficult to obtain if the case is litigated in a foreign court. Although defendants note the locations of Go Satellite's offices and web hosting companies, they do not identify the third-party witnesses or potential evidence that could become more difficult to access if the litigation is conducted in this court. Plaintiffs, by contrast, explain that there may be a third party in Vermont who helped store and ship defendants' infringing products, and third party retailers in the United States who supplied unapproved products to defendants. Defendants have not explained why traveling to Texas would of itself create a burden under this factor.

Defendants cite reasoning under the first factor that appears to be germane to the second factor, but the court will discuss these arguments here because defendants rely on them under the first factor.

Because Go Satellite is a foreign corporation, the home forum for plaintiffs is any federal district in the United States. See supra note 6.

2

The second factor — availability of compulsory process for attendance of unwilling, and the costs of obtaining attendance of willing, witnesses — does not particularly favor either side. Defendants allege that some of their potential witnesses reside in Canada: their own officers, shareholders, and employees and some of their web host's employees. But defendants do not specify whether any of these foreign witnesses is unwilling to participate in the litigation so as to require compulsory process. Go Satellite's employees and officers should be categorized as willing witnesses because Go Satellite can compel them to testify, without the need

for compulsory process. By contrast, as with the first private interest factor, plaintiffs have pointed to potential third-party witnesses located in the United States who may be difficult to subpoena for litigation conducted in Canadian courts, while defendants have not identified any third party in Canada, other than the web host, whose testimony it seeks.

Defendants point to Rule 45(c)(3)(B)(iii) as problematic because it provides that the court can quash or modify a subpoena that requires a witness to travel more than 100 miles. But defendants have not explained whether quashing subpoenas under this Rule would apply to any particular witness. If, for example, a witness were a party or a party's officer, the witness would be subject to the court's subpoena power. See Rule 45(c)(3)(A)(ii) (limiting scope of quashal to witness "who is neither a party nor a party's officer").

Furthermore, defendants do not offer a sufficient explanation of the costs they would incur in securing the attendance of willing witnesses and why such costs would be so disproportionate, when compared to plaintiffs' costs in bringing its witnesses to Canada, as to clearly favor Canada as the appropriate forum. Given that the relevant market and affected stream of commerce are in the United States, and that any witnesses who may testify as to the validity of the trademark itself would be located in this country, it is not apparent that the costs to plaintiffs of securing their witnesses' participation in Canada would be any less burdensome than what defendants will incur if the litigation continues in this court.

3

Because neither party finds the third factor applicable, the court now considers the fourth: "all other practical problems that make trial of a case easy, expeditious, and inexpensive." Dickson Marine, 179 F.3d at 342.

The only other consideration that defendants raise under the private interest factors is the relative burdens of travel. Because plaintiffs must travel regardless whether the case is litigated in Canada or in Texas, defendants argue that plaintiffs will be less inconvenienced by being required to litigate in Canada than will defendants, one of whom is a small company, by being required to defend in Texas. Defendants also note that all the identified potential third-party witnesses other than plaintiffs' private investigator live outside Texas. The court agrees that this factor favors defendants.

D

The court now turns to the public interest factors. The court need not discuss these factors at length because only these two — the local interest in deciding localized controversies and the application of foreign law — have been sufficiently addressed in the briefing.

The United States has an interest in protecting its federally recognized trademarks and protecting United States consumers from infringing products. The complained-of injury to plaintiffs' trade reputation occurred entirely in the United States, the infringing acts concern Go Satellite's sales to United States (including Texas) residents, and Go Satellite sold and transported infringing goods into United States commerce. The Lanham Act unquestionably extends to such injuries and actions. See 15 U.S.C. § 1127 (defining "[t]he word `commerce' [to] mean[] all commerce which may lawfully be regulated by Congress" throughout the Lanham Act and defining "use in commerce" to include placement on a mark on goods "sold or transported" in commerce); see Vanity Fair Mills v. T. Eaton Co., 234 F.2d 633, 641 (2d Cir. 1956) (noting that, "[w]hile Congress has no power to regulate commerce in the Dominion of Canada, it does have power to regulate commerce `with foreign Nations, and among the several States,'" and using this constitutional grant of power in U.S. Const. art. I, § 8, cl. 3 to justify Lanham Act applicability in all commerce that has a substantial effect on commerce between the United States and foreign countries); see, e.g., Miller Brewing Co. v. Carling O'Keefe Breweries, 452 F. Supp. 429, 442-43 (W.D.N.Y. 1978) (applying Lanham Act to Canadian company that advertised on U.S. television stations, despite fact that infringing product was only sold in Canadian stores, where U.S. plaintiff and U.S. trademark were involved). And it would be most efficient for a United States court to preside over this case, which requires application of

United States law.

It is possible that a Canadian court would apply United States trademark law where the affected market is entirely in the United States. R. Scott Joliffe A. Kelly Gill, Fox on Canadian Law of Trademarks and Unfair Competition § 17.6 (4th ed. 2002) (quoting M. Baer et al., Private International Law in Common Law Canada 528 (1997), for the prediction that Canadian courts will "almost certainly" apply the law of the forum where the market and alleged damage to goodwill exists).

E

Weighing the private and public interest factors together, the court finds that defendants have failed to meet their heavy burden of establishing that this case should be dismissed under the doctrine of forum non conveniens. They have failed to demonstrate that the private and public interest factors clearly point towards trial in the alternative forum.

* * *

For the foregoing reasons, the court denies defendants' July 20, 2010 motion to dismiss for lack of personal jurisdiction or under the doctrine of forum non conveniens.

Because the court has denied the motion, it also denies plaintiffs' alternative motion for jurisdictional discovery as moot.

SO ORDERED.