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Foreign Candy Co., Inc. v. Tropical Paradise, Inc.

United States District Court, N.D. Iowa

June 24, 2013

THE FOREIGN CANDY COMPANY, INC., Plaintiff,
v.
TROPICAL PARADISE, INC., d/b/a COOL TROPICS, Defendant

For Foreign Candy Company, Inc, Plaintiff: Alicia M Passerin, Jonathan C Parks, PRO HAC VICE, Pietragallo, Gordon, Alfano, Bosick & Raspanti, LLP, Pittsburg, PA; Michael W Ellwanger, Rawlings Ellwanger Jacobs Mohrhauser & Nelson, L.L.P., Sioux City, IA.

For Tropical Paradise Inc, doing business as Cool Tropics, Defendant: Edward D Kutchin, Kerry R Northup, LEAD ATTORNEYS, PRO HAC VICE, Berluti, McLaughlin & Kutchin, LLP, Boston, MA; John D Mayne, Bikakis, Mayne, Arneson, Hindman & Hisey, Sioux City, IA.

Page 1018

MEMORANDUM OPINION AND ORDER REGARDING DEFENDANT'S MOTION TO DISMISS

MARK W. BENNETT, UNITED STATES DISTRICT JUDGE.

TABLE OF CONTENTS

I. INTRODUCTION

A. Factual Background

1. The parties

2. Jurisdictional facts

B. Procedural Background

1. Foreign Candy's Complaint

2. Tropical Paradise's Motion To Dismiss

II. LEGAL ANALYSIS

A. Personal Jurisdiction

1. Arguments of the parties

2. Applicable standards

a. Rule 12(b)(2) standards

b. Due process requirements

c. Internet contacts

3. Analysis

a. Nature and quality of contacts

b. The quantity of contacts

c. The relationship of the contacts with the

cause of action

d. Interest and convenience of the forum

e. " Effects" in this forum

f. " Fair play and substantial justice" in the

totality of the circumstances

4. Jurisdictional discovery

a. Arguments of the parties

b. Analysis

5. Summary

B. Venue

1. Arguments of the parties

2. Analysis

III. CONCLUSION

Page 1019

In this action by a candy importer against a fruit juice seller, involving federal and state law claims of trademark, trade dress, and copyright infringement and unfair competition, the fruit juice seller's motion to dismiss for lack of personal jurisdiction and improper venue exemplifies the collision between modern conceptions of a " global marketplace" and long-standing constitutional conceptions of due process. The United States Supreme Court recognized, a decade and a half ago, that " [t]he Internet is 'a unique and wholly new medium of worldwide human communication,'" [1] yet commentators and courts have suggested that the analysis of personal jurisdiction based on Internet activity " 'should not be different at its most basic level from any other personal jurisdiction case.'" [2] Here, the fruit juice seller, a New York corporation based in Massachusetts with no business presence in Iowa, asserts that it simply has insufficient contacts with this Iowa forum for the exercise of personal jurisdiction to comport with due process. The candy importer, on the other hand, asserts that the fruit juice seller has sufficient contacts for the exercise of personal jurisdiction to meet due process requirements based on a link on the fruit juice seller's otherwise passive website to the website of a distributor from whom the

Page 1020

fruit juice seller's products can be purchased online and based on a single purchase of the fruit juice seller's products from the distributor's website for shipment to an Iowa customer (the plaintiff's president, chief executive officer (CEO), and owner).

I. INTRODUCTION

A. Factual Background

Because this case is before me on a motion to dismiss, and no jurisdictional discovery has been authorized or conducted, the factual background is necessarily drawn--at least in the first instance--from the factual allegations in the plaintiff's Complaint (docket no. 1). On a Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction, however, I may also consider affidavits and exhibits presented with the motion and in opposition to it. See Dairy Farmers of Am., Inc. v. Bassett & Walker Int'l, Inc., 702 F.3d 472, 474-75 (8th Cir. 2012). Where appropriate or necessary, I have amplified the facts alleged in the Complaint with facts from such additional sources. For present purposes, the focus is on facts relevant to personal jurisdiction and venue, rather than all facts giving rise to the parties' dispute.

1. The parties

The Foreign Candy Company (Foreign Candy), the plaintiff in this action, alleges that it is an Iowa corporation with its principal place of business in Hull, Iowa, and that it is engaged in the business of importing, distributing, and selling candy products. Foreign Candy alleges that it is the exclusive owner of a number of registered trademarks, including the following: " RIPS," Registration No. 2,848,847 (the '847 Mark); " LET 'ER RIP," Registration No. 2,738,693 (the '693 Mark); and " RIP ROLLS," Registration No. 2,763,991 (the '991 Mark). Foreign Candy describes these marks collectively as " the RIP Marks." See Complaint, Exhibits A-C. Foreign Candy also alleges that it is the owner of the trade dress (Foreign Candy Trade Dress) embodied in the packaging, label, and the like, used in connection with its RIPS Products. See Complaint, Exhibit E. Further, Foreign Candy alleges that it has applied for and been issued copyright certificates of registration for various embodiments of its packaging (Foreign Candy's Packaging) used in connection with the RIPS Products, consisting of certificates of registration bearing Registration Nos. TX 7- 446-536, TX 7-452-638, TX 7-451-463, and TX 7-452-521, with effective dates of September 7, 2011, September 8, 2011, September 9, 2011, and September 15, 2011, respectively.

Tropical Paradise, Inc., doing business as Cool Tropics (Tropical Paradise), the defendant in this action, alleges in its Motion To Dismiss (docket no. 5) that it is a New York corporation headquartered in Bedford, Massachusetts. Foreign Candy alleges, and Tropical Paradise has not yet disputed, that Tropical Paradise sells, offers for sale, distributes, and advertises fruit juice packs available in a variety of fruit flavors under a Cool Tropics brand name (the Cool Tropics Products). Foreign Candy alleges that Tropical Paradise has adopted, used, and continues to use the term " RIPS" and the phrase " LET IT RIP!," Complaint, Exhibit D, in connection with the sale, offering for sale, distribution, and advertising of the Cool Tropics Products.

The gravamen of Foreign Candy's trademark infringement claims is its allegation that, from about 2009 to the present, Tropical Paradise has offered and continues to offer for sale, through its dealers and distributors, the Cool Tropics Products that contain marks identical to or confusingly similar to Foreign Candy's RIP Marks, but that those products are

Page 1021

not and were not distributed by Foreign Candy, the owner of the RIP Marks. Foreign Candy also alleges that Tropical Paradise has adopted, used, and continues to use, in intrastate and interstate commerce, a packaging and trade dress for its Cool Tropics Products (the Cool Tropics Trade Dress) that creates an overall impression that is similar to, identical to, or confusingly similar to Foreign Candy's Trade Dress, including but not limited to, the font, coloring, and placement of " RIPS" and " LET IT RIP!" on the packaging. Finally, for present purposes, Foreign Candy alleges that Tropical Paradise has knowingly and willfully directly copied Foreign Candy's Packaging for the specific purpose of infringing Foreign Candy's copyrights in furtherance of its business objectives, specifically, selling its Cool Tropics Products.

2. Jurisdictional facts

Foreign Candy alleges in its Complaint that Tropical Paradise operates and conducts business in the Northern District of Iowa and has and is conducting business and has committed acts of infringement of Foreign Candy's RIP Marks in this judicial district. Tropical Paradise disputes these allegations and avers, instead, that it is not registered to do business in Iowa; has no registered agent for service of process in Iowa; has no offices in Iowa; does not rent or own real estate in Iowa; and has no customers or employees in the state. Indeed, Tropical Paradise avers that it has not sold even a single item in the State of Iowa in at least the last ten years. Tropical Paradise also contends that none of the allegedly infringing or wrongful conduct at issue in Foreign Candy's Complaint occurred in Iowa, and Foreign Candy has not even alleged that it did.

In its Response (docket no. 13) to Tropical Paradise's Motion To Dismiss, Foreign Candy avers that, on Tropical Paradise's website (www.cool-tropics.com), Tropical Paradise advertises the Cool Tropics Products as " NOW AVAILABLE FOR PURCHASE!" with a direct link to an online retailer's website (www.coffeecow.com), operated by CofeeCow.com. Foreign Candy alleges that CoffeeCow.com has been and continues to be a distributor of the Cool Tropics Products, and that customers may direct that the Cool Tropics Products purchased on CoffeeCow.com's website be shipped to Iowa by selecting " Iowa" from a drop-down menu listing U.S. states. Indeed, Foreign Candy's president, CEO, and owner, Peter W. De Yager, avers that, on or about November 12, 2012, before Foreign Candy's Complaint was filed on January 10, 2013, he clicked the link on the Tropical Paradise website to the online retailer, proceeded through the required steps, and purchased and had shipped to his home in Hull, Iowa, and later received, various Cool Tropics RIPS Products. See Response, Exhibit C. In its reply, Tropical Paradise asserts that its website is not interactive, but simply provides a link to an unaffiliated third party's website to purchase Cool Tropics Products.

B. Procedural Background

1. Foreign Candy's Complaint

Beginning in about 2009, the parties engaged in unsuccessful attempts to resolve their disputes, involving various exchanges of correspondence between their respective attorneys. On January 10, 2013, Foreign Candy filed its Complaint (docket no. 1) initiating this action for trademark infringement, trade dress infringement, false designation of origin, false representation and description, and other unfair competitive conduct by Tropical Paradise, in violation of the Lanham Act, 15 U.S.C. § 1051 et seq.; Sections 32 and 43(a) of the Lanham Act, 15 U.S.C. § § 1114 and 1125(a), respectively; the Iowa Trademark Act, Chapter 548 (Iowa Code) and Iowa unfair competition at common law; copyright infringement

Page 1022

in violation of the Copyright Act, 17 U.S.C. § 101 et seq. ; and common law trademark and other rights. Somewhat more specifically, in Count I of its Complaint, Foreign Candy alleges a federal trademark infringement claim pursuant to 15 U.S.C. § 1114; in Count II, Foreign Candy alleges a false designation of origin claim pursuant to 15 U.S.C. § 1125(a); in Count III, Foreign Candy alleges an infringement of trade dress claim pursuant to 15 U.S.C. § 1125; in Count IV, Foreign Candy alleges a trademark violation and unfair competition claim under Iowa law; in Count V, Foreign Candy alleges a common-law trademark infringement claim; and in Count VI, Foreign Candy alleges a copyright infringement claim pursuant to 17 U.S.C. § 501.

2. Tropical Paradise's Motion To Dismiss

On April 11, 2013, Tropical Paradise filed a pre-answer Motion To Dismiss (docket no. 5), seeking dismissal of Foreign Candy's Complaint for lack of personal jurisdiction and improper venue, pursuant to Rules 12(b)(2) and 12(b)(3) of the Federal Rules of Civil Procedure, respectively, accompanied by an affidavit of Fadi S. Massabni, the CEO of Tropical Paradise. On May 13, 2013, Foreign Candy filed its Response To Motion To Dismiss Complaint (docket no. 13), accompanied by three exhibits, consisting of " screen shots" from www.cool-tropics.com, www.coffeecow.com, and an affidavit by Mr. De Yager, accompanied by its own exhibit, consisting of a packing slip for Cool Tropics Products that Mr. De Yager ordered online from www.coffeecow.com and had shipped to his address in Iowa. Foreign Candy's brief in support of its Response included a request that, if I determine that Foreign Candy has not made a prima facie showing of personal jurisdiction over Tropical Paradise, I grant Foreign Candy the opportunity to conduct jurisdictional discovery, because the facts known to date give rise to additional unknown facts that are solely under the control of Tropical Paradise and are otherwise difficult, if not impossible, to determine without formal discovery. On May 30, 2013, Tropical Paradise filed its Reply Brief In Support Of Motion To Dismiss (docket no. 19), reiterating that there is no basis for the exercise of personal jurisdiction over it and asserting that jurisdictional discovery is not appropriate in this case.

No party requested oral arguments on Tropical Paradise's Motion To Dismiss in the manner required by applicable local rules, and I do not find that oral arguments are necessary, in light of the sufficiency of the parties' briefing and other written submissions. Therefore, I will deem the Motion To Dismiss fully submitted on the parties' written submissions.

II. LEGAL ANALYSIS

A. Personal Jurisdiction

Tropical Paradise seeks dismissal of Foreign Candy's Complaint, first, on the ground that this court lacks personal jurisdiction over Tropical Paradise. Foreign Candy disputes that contention.

1. Arguments of the parties

Tropical Paradise asserts that it lacks sufficient " minimum contacts" with Iowa to support " general" jurisdiction, and Foreign Candy does not argue otherwise. Tropical Paradise also asserts that it lacks sufficient " minimum contacts," from which any of Foreign Candy's claims arise, for the exercise of " specific" jurisdiction to be proper, a contention that Foreign Candy does dispute. More specifically, Tropical Paradise argues that it has not engaged in any business transaction in Iowa for at least ten years. It also argues that, while it maintains a general information website,

Page 1023

that website is not specifically directed toward residents of Iowa, but is a " passive" website that does not establish sufficient " minimum contacts" to create personal jurisdiction over Tropical Paradise in this state. Indeed, Tropical Paradise argues that these facts make clear that it in no way " purposefully availed" itself of the benefits of doing business in Iowa, such that it could expect to be haled into court here, that forcing it to litigate in Iowa would offend traditional notions of fair play and substantial justice, and that the exercise of personal jurisdiction would, consequently, violate due process.

In contrast, Foreign Candy contends that consideration of the pertinent factors demonstrates that exercising specific personal jurisdiction over Tropical Paradise would comport with due process. Foreign Candy argues that the nature and quality of Tropical Paradise's contacts with Iowa through its website are sufficient, because that website has a link to a distributor's website, where the Cool Tropics Products can be purchased, raising it above a merely " passive" website into an " active" website. Foreign Candy asserts that other courts have found that sales through a website that included the forum as a potential shipping destination, like Tropical Paradise's distributor's website does, were sufficient for the defendant to reasonably anticipate being haled into the forum. Indeed, Foreign Candy contends that its CEO made an online purchase and had Cool Tropics Products shipped to Iowa. Foreign Candy also argues that courts within this Circuit have recognized that a single purchase by a plaintiff's counsel in the forum was sufficient contact with the forum for personal jurisdiction purposes, although Foreign Candy does not cite any decisions so holding by any such courts. Foreign Candy argues, next, that there is a strong relationship between its causes of action and Tropical Paradise's contacts, because the contacts through the website involve the sale of infringing products, so that those sales directly cause the alleged harm to Foreign Candy, a forum resident. Foreign Candy also argues that the interest of the forum state and the convenience of the parties also weigh in favor of personal jurisdiction here over Tropical Paradise, because Iowa has a significant interest in giving an Iowa resident a convenient forum to adjudicate injuries by out-of-state actors, and Tropical Paradise has not asserted what alternative forum might be more appropriate.

In addition, Foreign Candy argues that the " effects" test warrants the exercise of personal jurisdiction over Tropical Paradise in this case, because Tropical Paradise has continued infringing activity even after notice from Foreign Candy, from as early as 2009, that Tropical Paradise's activities were causing effects in Iowa by injuring an Iowa resident. Indeed, Foreign Candy asserts that, because Tropical Paradise had such notice, it knew that its continuing infringing activity would have a potentially devastating impact on Foreign Candy in Iowa.

In reply, Tropical Paradise reiterates that its website is merely " passive," so that it cannot be the basis for the exercise of personal jurisdiction in Iowa. Tropical Paradise contends that its website is not even a " middle ground" website, because it does not allow for the direct purchase of its products. Rather, Tropical Paradise contends, any purchase was from another independent online retailer, although that retailer could be reached by a link from Tropical Paradise's website. Tropical Paradise argues that its website does not provide for any other interaction or exchange of information between customers and Tropical Paradise's website, but only allows visitors to provide contact information to the company so that the company may contact them via telephone or e-mail.

Page 1024

Tropical Paradise attempts to distinguish cases on which Foreign Candy relies, while arguing that, contrary to Foreign Candy's contentions, courts have consistently found that a website like Tropical Paradise's is not enough for personal jurisdiction. Tropical Paradise also argues that Foreign Candy's reliance on the " effects" test is unavailing, because the Eighth Circuit Court of Appeals construes that test narrowly, as only an additional factor in the personal jurisdiction analysis, not as the basis for personal jurisdiction when traditional contacts are absent.

2. Applicable standards

It does not appear that the Federal Circuit Court of Appeals has ever held that personal jurisdiction in a copyright or trademark case is a matter governed by Federal Circuit law rather than the law of the regional circuit. Therefore, I will apply Eighth Circuit standards to the personal jurisdiction issue presented here.

a. Rule 12(b)(2) standards

As the Eighth Circuit Court of Appeals recently explained, " Personal jurisdiction over a defendant represents the power of a court to enter 'a valid judgment imposing a personal obligation or duty in favor of the plaintiff.'" Viasystems, Inc. v. EBM-Papst St. Georgen GmbH & Co., KG, 646 F.3d 589, 592-93 (8th Cir. 2011) (quoting Kulko v. Superior Court of Cal., 436 U.S. 84, 91, 98 S.Ct. 1690, 56 L.Ed.2d 132 (1978)). Rule 12(b)(2) of the Federal Rules of Civil Procedure authorizes a pre-answer motion to dismiss for " lack of personal jurisdiction." Fed.R.Civ.P. 12(b)(2).

As the Eighth Circuit Court of Appeals recently explained,

" To allege personal jurisdiction, 'a plaintiff must state sufficient facts in the complaint to support a reasonable inference that the defendant[ ] can be subjected to jurisdiction within the state.'" Wells Dairy, Inc. v. Food Movers Int'l, Inc., 607 F.3d 515, 518 (8th Cir.) (quoting Dever v. Hentzen Coatings, Inc., 380 F.3d 1070, 1072 (8th Cir. 2004)), cert. denied, __ U.S. __ 131 S.Ct. 472, 178 L.Ed.2d 289 (2010). " If the defendant controverts or denies jurisdiction, the plaintiff bears the burden of proving facts supporting personal jurisdiction." Id. Its " showing must be tested, not by the pleadings alone, ...

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