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Sioux Pharm, Inc. v. Summit Nutritionals International, Inc.

Supreme Court of Iowa

January 30, 2015

SIOUX PHARM, INC. and SIOUX BIOCHEMICAL, INC., Appellees,
v.
SUMMIT NUTRITIONALS INTERNATIONAL, INC., Appellant

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Appeal from the Iowa District Court for Sioux County, Duane E. Hoffmeyer, Judge. Defendant appeals order denying motion to dismiss for lack of personal jurisdiction.

Daniel J. Fischer, Brian J. Koenig, and J. Daniel Weidner of Koley Jessen, P.C., L.L.O., Omaha, Nebraska, for appellant.

Anthony L. Osborn and Jeana L. Goosmann of Goosmann Law Firm, PLC, Sioux City, for appellees.

WATERMAN, Justice. All justices concur except Hecht, J., who takes no part.

OPINION

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WATERMAN, Justice.

This appeal provides our first opportunity to address when statements on a website support personal jurisdiction and the impact of recent United States Supreme Court precedent on the showing required for general jurisdiction. Specifically, we must decide whether a nonresident corporation's inaccurate statement on its passive website--that it had a manufacturing facility in Sioux Center, Iowa--subjected it to personal jurisdiction in Iowa in a lawsuit by an Iowa plaintiff alleging unfair competition. The district court denied the nonresident defendant's motion to dismiss, ruling that general jurisdiction was established simply because its website held this defendant out as having an Iowa manufacturing facility. The Sioux Center facility actually is owned and operated by a separate Iowa defendant that supplies the product to the nonresident defendant. We allowed the nonresident defendant's interlocutory appeal of the jurisdictional ruling.

For the reasons explained below, we hold the district court erred by exercising general jurisdiction over Summit based solely on the inaccurate statement on its passive website. Recent precedent requires proof the nonresident defendant is " essentially at home in the forum State" to establish general jurisdiction. See Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. __, __, 131 S.Ct. 2846, 2851, 180 L.Ed.2d 796, 803 (2011). That proof is lacking here. Nevertheless, we hold the totality of the nonresident's contacts with Iowa, including its website statement, Iowa supply contract, and its sale of the product to the plaintiff in Iowa were sufficient to subject it to specific jurisdiction here on claims related to those contacts. We therefore affirm the order denying its motion to dismiss on this alternative ground.

I. Background Facts and Proceedings.

Plaintiff Sioux Pharm, Inc.[1] is an Iowa corporation that manufactures chondroitin sulfate, a supplement for joint health usually mixed with glucosamine to help lessen the effects of osteoarthritis. Eagle Laboratories, Inc. (Eagle Labs) is an Iowa corporation and a competitor of Sioux Pharm. Eagle Labs sells and ships chondroitin sulfate monthly to Summit Nutritionals International, Inc. (Summit), a New Jersey corporation with its principal place of business in Branchburg, New Jersey. Summit packages and resells the chondroitin sulfate.

At the time this lawsuit was filed, Summit's website erroneously claimed that Summit had a manufacturing facility in Sioux Center, Iowa. The website read, " Manufacturing Facility, Summit Nutritionals International, Inc.," and for contact information listed a Sioux Center, Iowa, physical address and an email address. In fact, the Sioux Center facility at that physical address has always been owned and operated by Eagle Labs. Summit admits it

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listed the facility on its website to inform its customers as to the Iowa source of Summit's chondroitin sulfate, which is derived from bovine organs.

Summit actually has no Iowa office, agent, or employees. It has never been registered to do business in Iowa, and neither owns nor leases any real or personal property in Iowa. Summit has no Iowa bank accounts and has never been a party in litigation in Iowa before this case. Summit has never specifically directed advertising at Iowa markets or sold its product to anyone in Iowa except for a sample purchased by Sioux Pharm to test for purposes of this lawsuit. Summit purchases its chondroitin sulfate from Eagle Labs under an annual contract to supply Summit's requirements through monthly shipments. Summit's president traveled to Iowa once to inspect Eagle Labs' facility, but he flew in and out of an airport in South Dakota and only spent a few hours in Iowa. No other employee of Summit has ever visited Iowa on its behalf.

Sioux Pharm filed suit against Eagle Labs and its principals, Dana Summers, Robert Den Hoed, and John Ymker on March 8, 2012. The initial pleading alleged claims for the misappropriation of trade secrets, which are the subject of a separate, pending interlocutory appeal. See Sioux Pharm, Inc. v. Eagle Labs, Inc., No. 13-1756 (Iowa filed September 27, 2013). Sioux Pharm's second amended petition, the operative pleading here, was filed April 23, 2013. That pleading added claims of unfair competition, intentional interference with contractual relationships, and civil conspiracy and named Summit and Federal Laboratories Corporation (Federal Labs), a New York corporation, as additional defendants. Sioux Pharm specifically alleged Summit, Federal Labs, and Eagle Labs conspired to distribute adulterated and diluted chondroitin sulfate while misrepresenting its purity, in violation of § 1125(a) of the Lanham Act, 15 U.S.C. § § 1051-1141n (2012). On June 7, the district court, pursuant to Iowa Rule of Civil Procedure 1.914, granted Summit's motion to bifurcate the trade-secret claims from the unfair-competition claims.

Both Summit and Federal Labs moved to dismiss for lack of personal jurisdiction. Both nonresident defendants filed affidavits attesting to their lack of contacts with Iowa. Sioux Pharm filed resistances and argued as to Summit that its website statement along with its contract with Eagle Labs and site visit there were sufficient to subject it to general jurisdiction or, alternatively, specific jurisdiction. The district court granted Federal Labs' motion, determining that Sioux Pharm " failed to present a prima facie case" sufficient to justify personal jurisdiction on a conspiracy theory and that Federal Labs lacks contacts with Iowa sufficient for general jurisdiction. However, the district court denied Summit's motion, stating:

Although Summit presents this Court with many facts to establish that it has no systematic or continuous ties to the State of Iowa, this Court does not find those facts to be persuasive. Although Summit may not have an office or real property in Iowa, it holds itself out as having both. Summit's website clearly states that it has a manufacturing facility in Sioux Center, Iowa. . . . Regardless of Summit's intent when posting that information, and regardless of what ties Summit has to the manufacturing facility, by asserting that it has continuous and systematic ties with Iowa, Summit has availed itself [of] Iowa Courts.

The district court did not reach the specific jurisdiction theory. The district court also granted motions for partial summary judgment, dismissing the civil conspiracy claims against all defendants, including

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Summit, by finding " [t]here has been no evidence presented to show a meeting of the minds" or an overt act required to establish liability for civil conspiracy.

We granted Summit's application for interlocutory appeal and retained the appeal to determine if that defendant is subject to personal jurisdiction in Iowa.

II. Standard of Review.

" We review a district court's decision on a motion to dismiss for lack of personal jurisdiction for correction of errors at law." Shams v. Hassan, 829 N.W.2d 848, 853 (Iowa 2013); see also Iowa R. App. P. 6.907. We are not bound by the court's conclusions of law or application of legal principles. Shams, 829 N.W.2d at 853. The district court's factual findings are binding on appeal if supported by substantial evidence. Id.

" '" [W]e accept as true the allegations of the petition and the contents of uncontroverted affidavits." '" Id. (quoting Addison Ins. Co. v. Knight, Hoppe, Kurnik & Knight, L.L.C., 734 N.W.2d 473, 476 (Iowa 2007)). " After the plaintiff makes a prima facie case showing that personal jurisdiction is appropriate, the burden shifts to the defendant to rebut that showing." Id.

We may affirm the district court on an alternative ground that is supported by the record and urged by the prevailing party in district court and on appeal. Hawkeye Foodserv. Distrib., Inc. v. ...


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