TED STEWART, District Judge.
This matter is before the Court on a Motion to Dismiss for Lack of Personal Jurisdiction filed by Defendant Langoost Enterprises, LLC (DBA Applied Nutriceuticals).
Plaintiff Alphagen Biotech ("Alphagen") is a Utah limited liability company, with its principal place of business in Salt Lake City, Utah. Defendant Langoost Enterprises, LLC (DBA Applied Nutriceuticals) ("Applied") is a Delaware corporation with its principal place of business in North Carolina.
Plaintiff Alphagen markets and sells dietary supplements, specifically a product called SeroVax. Plaintiff alleges that SeroVax has been shown to increase human growth hormone ("HGH") levels in men and women. Defendant Applied sells a competing product called HGH Up. Plaintiff alleges that Defendant has made false claims in its marketing of HGH Up.
Plaintiff brings claims against Defendant for false advertising in violation of the Lanham Act, unfair competition in violation of the Lanham Act, and unfair competition in violation of Utah's Truth in Advertising Act. Plaintiff also seeks declaratory and injunctive relief.
The following facts are relevant to Defendant's Motion to Dismiss and are found in the Declaration and Amended Declaration of Pete Vas Dias.
Defendant has never had any offices in the state of Utah, has no business operations in Utah, and is not registered to do business in Utah. Defendant does not own, lease, or control any property in Utah. Defendant has never owned or otherwise controlled any asset in Utah, and has never maintained any bank accounts in Utah. Defendant has never maintained any telephone or fax listings in Utah. Defendant has never paid any taxes in Utah. In addition, none of Defendant's officers, directors, members, managers, employees, or agents have traveled to Utah for business on behalf of Defendant in the past five years. Defendant has not entered into a contract with a person in or a company headquartered in Utah. Finally, Defendant has not been sued in Utah in the last 10 years, with the exception of this action.
Independent distributors—including e-tailers, retailers, and wholesalers—sell Defendant's products, including HGH Up. These distributors are entirely independent and operate separately from Defendant. Defendant does not control when, where, or how these distributors sell their products or which customers these distributors target. None of the distributors is an exclusive distributor to Utah. However, certain distributors, including GNC and Vitamin Shoppe, operate stores in Utah. At least one of these Utah stores sells HGH Up.
In response to this action, Defendant has attempted to gather information concerning sales made by these distributors to customers in Utah. Defendant's two largest distributors—Vitamin Shoppe and Europa—have provided sales numbers. In 2012, Vitamin Shoppe sold 11,893 units of HGH Up. Only 38 units were sold to Utah customers. Europa purchased 5,893 from Defendant, and sold 96 units to customers in Utah. The sales to Utah customers made up 0.3% of Vitamin Shoppe's total HGH Up sales and 1.6% of Europa's total HGH Up sales.
In addition to sales through independent distributors, Defendant offers its products for sale on its website. Defendant's internet sales make up only 2.7% of its total sales. Utah residents can purchase products from Defendant's website and can have those products shipped to Utah. In the twelve months leading up to March 2013, Defendant sold $479.41 worth of product to customers in Utah, making up 0.02% of Defendant's total sales for that time period. In that same time period, Defendant sold four units of HGH Up to customers believed to be located in Utah. This makes up just 1.0% of Defendant's total internet sales of HGH Up for that time period.
Plaintiff carries the burden of establishing personal jurisdiction over Defendant.
"When the evidence presented on the motion to dismiss consists of affidavits and other written materials, the plaintiff need only make a prima facie showing."
To satisfy the constitutional requirement of due process there must be "minimum contacts" between the defendant and the forum state.
When the "defendant has `purposely directed' his activities at residents of the forum," courts in that state may exercise specific jurisdiction in cases that "arise out of or relate to those activities."
If the Court finds that Defendant had adequate minimum contacts with the forum state, the Court must also determine that personal jurisdiction is reasonable in light of the circumstances surrounding the case or, in other words, that exercising jurisdiction would not offend traditional notions of "fair play and substantial justice."
Defendant argues that it has insufficient contacts with Utah to allow the Court to exercise personal jurisdiction. As stated, jurisdiction can be established by either general jurisdiction or specific jurisdiction. Both will be discussed below.
For general jurisdiction to exist, "`the defendant must be conducting substantial and continuous local activity in the forum state.'"
Plaintiff argues that additional discovery is required to determine whether general jurisdiction exists. To that end, Plaintiff has filed its Motion for Additional Time for Limited Discovery Regarding Jurisdictional Issues. Based on this, Plaintiff does not argue for general jurisdiction and the Court need not determine whether there is general jurisdiction over Defendant. However, based on the evidence presented, there is insufficient evidence from which the Court could find general jurisdiction. Therefore, the Court will consider whether specific jurisdiction exists.
Plaintiff argues that the exercise of specific jurisdiction is appropriate for two reasons. First, Plaintiff relies on Defendant's website and the sales made through that website to Utah customers. Second, Plaintiff points to sales made by Defendant's independent distributors.
"Establishing jurisdiction through the Internet, or more specifically through a website, has been analyzed by some courts under a framework of three general categories lying along a sliding scale."
Plaintiff argues that Defendant operates an interactive website from which Utah residents can purchase their products. This, Plaintiff argues, is sufficient to establish personal jurisdiction. In support of this argument, Plaintiff relies heavily on a case from this District: Del Sol, L.C. v. Caribongo, LLC.
Here, as in Del Sol, Defendant operates an interactive website from which Utah residents can purchase Defendant's product. However, in Del Sol, there was "a nexus between the products for sale on [the defendant's] website and Plaintiff's claims of copyright and trade dress infringement. Moreover, by infringing on a Utah company's mark, the brunt of any confusion will be felt in Utah."
Within this district and elsewhere, "courts have looked to find `something more' that creates actual acts directed at the forum state other than the mere existence of an interactive website."
In this case, there is not "something more" that would allow the Court to exercise jurisdiction over Defendant based on its website. There is no evidence that Defendant uses its website to somehow target Utah residents and the Amended Declaration of Pete Vas Dias specifically states that the website does not target Utah residents. For example, there are no special deals or offers made specifically to Utah residents. Further, Defendant has sold a de minimus amount of product to Utah residents over the past year. This bolsters the conclusion that Defendant has not done anything to specifically direct its activities to Utah. Therefore, the Court cannot find that Defendant has purposefully directed its activities at residents of Utah based on the operation of its website.
Plaintiff also argues that Defendant's sales through independent distributors are sufficient to establish personal jurisdiction. Plaintiff does so by advancing a stream of commerce argument.
In World-Wide Volkswagen Corp. v. Woodson, the Supreme Court held that "[t]he forum State does not exceed its powers under the Due Process Clause if it asserts personal jurisdiction over a corporation that delivers its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum State."
In Asahi Metal Industry Co., Ltd v. Superior Court of California,
In an opinion for four Justices, Justice O'Connor stated that "[t]he placement of a product into the stream of commerce, without more, is not an act of the defendant purposefully directed toward the forum State."
Justice Brennan, also writing for four Justices, authored a competing concurring opinion. Justice Brennan stated that "the placement of a product into the stream of commerce is consistent with the Due Process Clause."
In J. McIntyre Machinery, Ltd. v. Nicastro,
Based upon these facts, the New Jersey Supreme Court held that a New Jersey court could "exercise jurisdiction over a foreign manufacturer of a product so long as the manufacturer `knows or reasonably should know that its products are distributed through a nationwide distribution system that might lead to those products being sold in any of the fifty states.'"
The Supreme Court rejected this conclusion. The Court stated that "[t]he principal inquiry in cases of this sort is whether the defendant's activities manifest an intention to submit to the power of a sovereign. In other words, the defendant must purposefully avai[l] itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws."
The Court stated that "[t]he question is whether a defendant has followed a course of conduct directed at the society or economy existing within the jurisdiction of a given sovereign, so that the sovereign has the power to subject the defendant to judgment concerning that conduct."
With these principles in mind, the Court considered the facts of the case before it:
The Court found that, while these facts may reveal an intent on behalf of J. McIntyre to serve the U.S. market, "they do not show that J. McIntyre purposefully availed itself of the New Jersey market."
The facts of this case are similar. Defendant has entered into distribution agreements with independent distributors, including wholesalers, e-tailers and retailers. Certain of these distributors have made sales to consumers in Utah. However, Defendant states that these distributors are entirely separate from Defendant and that it does not control where, when, or how these distributors sell their products, or which customers they target. Plaintiff has provided nothing to suggest that this statement is untrue. While the distributors have made limited sales to Utah residents, there is nothing to suggest that Defendant has purposefully availed itself of the Utah market. Further, as with its internet sales, the sales made by independent distributors to Utah customers have been minimal.
The cases cited by Plaintiff are distinguishable in that they all involve situations where the defendants knew the products would be sold in specific markets. There is no such evidence here. Therefore, the Court finds that the facts before it are insufficient to establish jurisdiction and Defendant's Motion to Dismiss must be granted.
Even if the Court were to find that the Defendant had adequate minimum contacts with the forum state, the Court must also consider whether personal jurisdiction is reasonable in light of the circumstances surrounding the case, or, in other words, that exercising jurisdiction would not offend traditional notions of "fair play and substantial justice."
"Courts consider the following factors to decide whether exercise of jurisdiction is reasonable: (1) the burden on the defendant; (2) the forum state's interest in resolving the dispute; (3) the plaintiff's interest in receiving convenient and effective relief; (4) the interstate judicial system's interest in obtaining the most efficient resolution of controversies; and (5) the shared interest of the several states in furthering fundamental substantive policies."
In this case, the Court finds that exercising jurisdiction over Defendant would offend traditional notions of fair play and substantial justice. First, Defendant has presented evidence that it would be burdened if forced to litigate in Utah. Defendant is a North Carolina corporation and the majority of its witnesses and evidence are located there. Therefore, the Court finds that this factor weighs in Defendant's favor. Second, the Court finds that the State of Utah has little interest in resolving this dispute. While Utah certainly has an interest in providing a forum for its citizens, given the limited contacts that Defendant has had with the State and its citizens, this interest is severely limited. Third, Plaintiff has an interest in receiving convenient and effective relief in Utah. Therefore, this factor weighs in favor of Plaintiff. Finally, for substantially the same reasons set forth above, the Court finds that the judicial system's interest in obtaining the most efficient resolution of controversies does not favor jurisdiction. Therefore, even if Defendant had sufficient minimum contacts, the Court finds that exercising jurisdiction over Defendant would offend traditional notions of fair play and substantial justice.
Plaintiff requests additional time to conduct additional discovery concerning personal jurisdiction in the event the Court is inclined to grant Defendant's Motion.
A trial court has discretion to refuse to grant discovery on the limited basis of personal jurisdiction.
For substantially the same reasons set forth above, the Court will deny Plaintiff's Motion for Additional Time for Limited Discovery Regarding Personal Jurisdiction. Plaintiff has failed to make a prima facie case of personal jurisdiction and there is nothing to indicate that additional discovery would alter this conclusion. Further, the discovery sought is overly broad, unduly burdensome, irrelevant to the issues before the Court, and/or has already been provided by Defendant. Therefore, the Court will deny Plaintiff's request for jurisdictional discovery.
It is therefore
ORDERED that Defendant's Motion to Dismiss (Docket No. 16) is GRANTED. It is further
ORDERED that Plaintiff's Motion for Additional Time for Limited Discovery Regarding Personal Jurisdiction (Docket No. 20) is DENIED.
The Clerk of the Court is directed to close this case forthwith.
