Rillito River Solar LLC v. Wencon Development Incorporated

Filing 50

ORDER - 1. Quick Mount's motion for leave to amend its answer (Doc. 45 ) is GRANTED. Quick Mount shall file its amended answer within 14 days of the date of this order. 2. Quick Mount's motion to dismiss or, in the alternative, to transfer venue (Doc. 40 ) is GRANTED. The Clerk is directed to transfer this action to the Northern District of California, Oakland Division. (See document for further details). Signed by Judge Douglas L Rayes on 11/20/17. (LAD)

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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Rillito River Solar LLC dba EcoFasten Solar, an Arizona limited liability company, 10 Plaintiff, 11 12 13 14 No. CV-16-03245-PHX-DLR ORDER v. Wencon Development Incorporated dba Quick Mount PV, a California corporation, Defendant. 15 16 17 Before the Court are Defendant Wencon Development Incorporated d/b/a Quick 18 Mount PV’s (“Quick Mount”) motion for leave to amend its answer and motion to 19 dismiss or, in the alternative, to transfer venue. (Docs. 40, 45.) The motions are fully 20 briefed and neither party requested oral argument. For reasons stated below, the motions 21 are granted and this case is transferred to the Northern District of California. 22 I. Background 23 Plaintiff Rillito River Solar LLC d/b/a EcoFasten Solar (“EcoFasten”) and Quick 24 Mount manufacture and market roof mounts for solar panels. At issue is technology used 25 to secure solar panels to roofs in a manner that avoids damage. EcoFasten, which claims 26 to be the inventor of this technology, filed a complaint against Quick Mount in 27 September 2016, alleging that Quick Mount infringes on its patents. (Doc. 1.) In its 28 complaint, EcoFasten alleged that venue is proper in this district because a substantial 1 part of the events or omissions giving rise to its claims occurred here. (¶ 8.) 2 In November 2016, Quick Mount filed an answer to EcoFasten’s complaint and 3 counterclaimed for declaratory judgments that EcoFasten’s patents are invalid. (Doc. 4 12.) In response to EcoFasten’s venue allegation, Quick Mount responded that it “lacks 5 information and belief sufficient to answer these allegations and on that basis neither 6 admits nor denies them.” (Id. at 2 ¶ 8.) With respect to its counterclaims, Quick Mount 7 alleged that venue is proper in this district. (Id. at 8 ¶ 3.) 8 EcoFasten later filed an amended complaint alleging additional claims related to 9 the patents at issue. (Doc. 16.) Like its predecessor, EcoFasten’s amended complaint 10 alleges venue is proper in this district. (¶ 8.) In December 2016, Quick Mount filed an 11 answer to the amended complaint. 12 allegation, Quick Mount responded that it “lacks information and belief sufficient to 13 answer these allegations and on that basis denies them.” (Id. at 2 ¶ 8.) Though Quick 14 Mount denied EcoFasten’s venue allegation, it did not at that time move under Federal 15 Rule of Civil Procedure 12(b)(3) to dismiss for improper venue, or to transfer this case to 16 the proper venue. (Doc. 21.) In response to EcoFasten’s venue 17 The parties thereafter proceeded to litigate. In February 2017, the Court issued a 18 scheduling order setting certain case management deadlines. Of note, the Court set a 19 March 1, 2017 deadline for amending pleadings, deadlines running from March 17, 2017 20 to July 14, 2017 for claims construction disclosure, discovery, and briefing, and a 21 Markman hearing for August 11, 2017. (Doc. 29 ¶¶ 2-12.) 22 During this time, on May 22, 2017, the United States Supreme Court issued its 23 decision in TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S. Ct. 1514 24 (2017), which made clear that a corporation “resides” only in its state of incorporation for 25 purposes of 28 U.S.C. § 1400(b), the patent venue statute. 26 Court affirmed its 1957 decision in Fourco Glass Co. v. Transmirra Products Corp., 353 27 U.S. 222, 226 (1957), and reversed the Federal Circuit’s 1990 decision in VE Holding 28 Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (1990), by clarifying that the patent -2- In doing so, the Supreme 1 venue statute, not the general venue statute, 28 U.S.C. § 1391(c), defines where a 2 domestic corporation “resides” for purposes of patent infringement litigation. In Fourco, 3 the Supreme Court held that § 1400(b) was the sole and exclusive provision controlling 4 venue in patent infringement actions, and that it was not to be supplemented by the 5 general venue provisions of § 1391(c). 353 U.S. at 229. In 1988, however, Congress 6 amended § 1391(c) to provide that “[f]or purposes of venue under this chapter,” a 7 defendant corporation shall be deemed “to reside in any judicial district in which it is 8 subject to personal jurisdiction at the time the action is commenced.” Two years later, 9 the Federal Circuit in VE Holding held that the newly added phrase “[f]or purposes of 10 venue under this chapter” was “exact and classic language of incorporation” 11 and therefore § 1391(c), as amended, established the definition for all other venue 12 statutes, including § 1400(b): “On its face, § 1391(c) clearly applies to § 1400(b), and 13 thus redefines the meaning of the term ‘resides’ in that section.” 917 F.2d at 1578- 14 80. VE Holding remained good law for nearly 30 years until it was abrogated by TC 15 Heartland in late May of this year. 16 On July 28, 2017—approximately two months after the Supreme Court issued its 17 TC Heartland decision, and two weeks after the completion of claims construction 18 briefing—Quick Mount filed the present motion under Rule 12(b)(3) to dismiss for 19 improper venue or, alternatively, to transfer this case to the Northern District of 20 California, Quick Mount’s state of incorporation. (Doc. 40.) Relatedly, on August 5, 21 2017, Quick Mount moved for leave to amend its answer to deny that venue is proper, 22 rather than deny based on insufficient knowledge or belief. (Doc. 45.) EcoFasten 23 opposes both requests. (Doc. 42, 49.) 24 On August 9, 2017, after receiving full briefing on Quick Mount’s motion to 25 dismiss (but before full briefing on its motion for leave to amend), the Court held a 26 telephonic status conference to discuss the impending Markman hearing. The Court 27 advised the parties, based on its preliminary review of the briefs, that it likely would 28 grant Quick Mount’s motion and transfer this matter to the Norther District of California. -3- 1 (Doc. 48.) Though understanding that the Court’s assessment was preliminary, the 2 parties agreed that August 11, 2017 Markman hearing should be vacated pending 3 resolution of the venue issue. 4 II. Motion for Leave to Amend 5 Quick Mount has moved for leave to amend its answer to affirmatively deny that 6 this district is a proper venue. (Doc. 45.) Because Quick Mount’s motion comes five 7 months after the Scheduling Order’s deadline for amended pleadings, it must first satisfy 8 Rule 16(b)’s good cause standard. Fed. R. Civ. P. 16(b)(4) (providing that deadlines 9 established in a scheduling order “may be modified only for good cause and with the 10 judge’s consent.”). “Good cause” exists when deadlines “cannot reasonably be met 11 despite the diligence of the party seeking the extension.” Fed. R. Civ. P. 16 Advisory 12 Comm.’s Notes (1983 Am.). 13 considers the diligence of the party seeking the amendment.” Johnson v. Mammoth 14 Recreations, Inc., 975 F.2d 604, 609 (9th Cir. 1992). If good cause supports deviation 15 from the scheduling order, the Court then assesses the propriety of the motion for leave to 16 amend by considering factors such as bad faith, undue delay, prejudice to the opposing 17 party, futility of amendment, and whether the pleading previously has been amended. 18 See Allen v. City of Beverly Hills, 911 F.2d 367, 373 (9th Cir. 1990). Thus, “Rule 16(b)’s ‘good cause’ standard primarily 19 A. Good Cause Supports Deviation from the Scheduling Order 20 Good cause supports deviation from the scheduling order because Quick Mount’s 21 improper venue defense was not available to it until after the Supreme Court issued its 22 decision in TC Heartland in late May of this year. In Re Micron Tech., Inc., --- F.3d ---, 23 2017 WL 5474215, at *3-6 (Fed. Cir. Nov. 15, 2017) (“The venue objection was not 24 available until the Supreme Court decided TC Heartland because, before then, it would 25 have been improper, given controlling precedent, for the district court to dismiss or to 26 transfer for lack of venue.”); see also OptoLum, Inc. v. Cree, Inc., No. CV-16-03828- 27 PHX-DLR, 2017 WL 3130642, at *3-5 (D. Ariz. July 24, 2017) (same). Accordingly, 28 Quick Mount could not have met the March 1, 2017 deadline for amending pleadings -4- 1 even with due diligence. 2 B. The Proposed Amendment is Proper and Advances the Interests of Justice 3 EcoFasten argues that Quick Mount’s proposed amendment is futile and would be 4 prejudicial because Quick Mount has waived its improper venue defense by: (1) failing 5 to preserve it in a pre-answer motion or in its initial answer, (2) filing a counterclaim, and 6 (3) otherwise litigating this matter in the two months between the Supreme Court’s TC 7 Heartland decision and the filing of its motion to dismiss. The Court disagrees. 8 1. Quick Mount Adequately Preserved the Improper Venue Defense 9 “Rule 12(g) operates in conjunction with Rule 12(h) to require that all defenses 10 permitted to be raised by motion, which are then available, must be included in the same 11 motion[.]” Bromfield v. McBurney, No. C07-5226RBL-KLS, 2009 WL 674517, at *5 12 (W.D. Wash. Mar. 12, 2009). Specifically, Rule 12(g) provides that “a party that makes a 13 motion under this rule must not make another motion under this rule raising a defense or 14 objection that was available to the party but omitted from its earlier motion.” Fed. R. 15 Civ. P. 12(g)(2). Rule 12(h) further provides that a party waives any defense listed 16 in Rule 12(b)(2)-(5) by “omitting it from a motion in the circumstances described in Rule 17 12(g)(2)” or by failing to “include it in a responsive pleading or in an amendment 18 allowed by Rule 15(a)(1) as a matter of course.” Fed. R. Civ. P. 12(h)(1)(A)-(B). In 19 other words, a defendant “who does not initially raise certain [available] defenses—lack 20 of personal jurisdiction, improper venue, improper process, and improper service of 21 process—cannot invoke those defenses later on.” Paleteria La Michoacana v. Producto 22 Lacteos, 905 F. Supp. 2d 189, 192 (D.D.C. 2012). Although Rule 15(a)(2) provides for 23 liberal amendment of pleadings, the language of Rule 12(h) establishes that this 24 amendment procedure is not available to raise the defense of improper venue under Rule 25 12(b)(3) (or the other defenses listed above) if the defense was available to the party at 26 the time it filed the initial pleading. See id.; Bromfield, 2009 WL 674517, at *5. 27 As an initial matter, the Court is not convinced that Quick Mount failed to 28 preserve its improper venue defense in its answer. In response to the venue allegation in -5- 1 EcoFasten’s original complaint, Quick Mount responded that it “lacks information and 2 belief sufficient to answer these allegations and on that basis neither admits nor denies 3 them.” (Doc. 12 at 2 ¶ 8.) Quick Mount’s initial response functionally was an admission 4 that venue is proper. Fed. R. Civ. P. 8(b)(6). But EcoFasten’s original complaint and 5 Quick Mount’s original answer are not the operative pleadings in this case. EcoFasten 6 later amended its complaint, and Quick Mount was entitled to answer that amended 7 complaint as a matter of course. In its answer to EcoFasten’s amended complaint, Quick 8 Mount denied based on lack of knowledge or information that venue in this district is 9 proper. (Doc. 16 at 2 ¶ 8.) Quick Mount’s operative answer to EcoFasten’s venue 10 allegation therefore has the effect of a denial. Fed. R. Civ. P. 8(b)(5). Regardless, 11 however, the Court has granted Quick Mount’s motion for leave to amend its answer to 12 clearly deny that venue in this district is proper, thereby mooting this portion of 13 EcoFasten’s argument. 14 Assuming, however, that Quick Mount’s operative answer does not adequately 15 preserve its venue objection, the Court finds that Quick Mount has not waived the 16 defense within the meaning of Rule 12(h) because the defense was not available to Quick 17 Mount at the time it filed its answers to the original and amended complaints. See In Re 18 Micron Tech., 2017 WL 5474215, at *3-6; OptoLum, 2017 WL 3130642, at *3-5. 19 The Court also is not convinced that Quick Mount was required to raise the 20 improper venue defense in a pre-answer motion. Strictly speaking, Rule 12(b) states that 21 a motion to dismiss for improper venue “must be made before pleading if a responsive 22 pleading is allowed.” 23 courts are split on allowing post-answer motions to dismiss, and no bright-line rule 24 against allowing such a motion exists in the Ninth Circuit.” Yocum v. Rockwell Med. 25 Techs., Inc., No. 12-CV-568-MMA(MDD), 2012 WL 2502701, at *2 (S.D. Cal. June 27, 26 2012). “Indeed, district courts in this Circuit have heard post-answer motions to dismiss 27 despite . . . the mandatory language in Rule 12(b).” Id. (citing Vineyard v. Soto, No. 10- 28 CV-1481-SI, 2011 WL 5358659 (D. Or. Nov. 7, 2011); Moreno-Garcia v. Yakima Police “[D]espite this seemingly unambiguous mandatory language, -6- 1 Dep’t, No. CV-09-3123-EFS, 2010 WL 4386481 (E.D. Wash. Oct. 27, 2010)). The 2 Court agrees, particularly under these circumstances, that “[i]mproper venue may be 3 challenged in a post-answer motion to dismiss as long as the objection was preserved in 4 the answer.” Jaliwa v. Concerned Citizens of S. Cent. L.A., No. 06cv2617 BTM(LSP), 5 2007 WL 2021818, at *2 (S.D. Cal. July 10, 2007). 6 2. Quick Mount’s Counterclaim is not a Waiver of the Venue Defense 7 Quick Mount’s assertion of a counterclaim against EcoFasten does not amount to a 8 waiver of its improper venue defense. Generally, “mere assertion of a counterclaim will 9 not waive a defense of improper venue that was explicitly asserted in an answer filed 10 contemporaneously with the counterclaim.” Hillis v. Heineman, 626 F.3d 1014, 1018 11 (9th Cir. 2010). Though Quick Mount did not explicitly assert an improper venue 12 defense in its answer filed contemporaneously with the counterclaim, it denied that venue 13 is proper. Moreover, “[t]he trend in more recent cases is to hold that no Rule 12(b) 14 defense is waived by the assertion of a counterclaim, whether permissive or compulsory.” 15 5C Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1397 (3d 16 ed. 2004) (citied favorably by the Ninth Circuit in Hillis, 626 F.3d at 1018). 17 Further, there is some authority suggesting that the law of the Federal Circuit, and 18 not of the regional circuit, governs waiver of defenses unique to patent law. See Rates 19 Tech Inc. v. Nortel Networks Corp., 399 F.3d 1302, 1307-08 (Fed. Cir. 2005) (applying 20 Federal Circuit law to determine whether objections to personal jurisdiction were waived 21 by assertion of counterclaims). 22 “determination of venue in light of § 1400(b) is necessarily unique to patent law because 23 the statute itself is unique to patent law.” Navico, Inc. v. Garmin Int’l, Inc., No. 2:16- 24 CV-190, 2017 WL 2957882, at *1 (E.D. Tex. July 11, 2017). If the assertion of a 25 counterclaim does not waive a personal jurisdiction defense so long as Rule 12(h)(1) has 26 been satisfied, the Court sees no reason why the same would not hold true for an 27 improper venue defense. 28 At least one district court has concluded that 3. Post-TC Heartland Litigation Does Not Preclude Amendment -7- 1 Finally, the procedural posture of this case is closer to OptoLum than to other 2 cases finding waiver. In those cases that found waiver of an improper venue defense 3 post-TC Heartland, the defendant sought to raise the venue defense late in the litigation. 4 For example, the defendant in Cobalt Boats, LLC v. Sea Ray Boats, Inc., No. 2:15cv21, 5 2017 WL 2556679, at *2 (E.D. Va. June 7, 2017), challenged venue only a few weeks 6 before trial. That court explicitly denied “any postponement of the trial to conduct 7 further proceedings regarding venue[.]” Id. at *4. Similarly, the defendants in Elbit Sys. 8 Land & C4I Ltd. v. Hughes Network Sys., LLC, 2:15-CV-00037-RWS-RSP, 2017 WL 9 2651618, at *19 (E.D. Tex. June 20, 2017), raised the venue defense “less than two 10 months from trial.” See also Navico, 2017 WL 2957882, at *2 (finding waiver after claim 11 construction and only two months before trial). 12 Although the Court acknowledges that a certain degree of prejudice will result 13 from transferring this matter to the Northern District of California, given that the parties 14 already have briefed the claims construction issues, this case is not so far along to justify 15 continued litigation in the wrong venue. Moreover, the Court mitigated further and more 16 substantial prejudice by vacating the Markman hearing pending resolution of the venue 17 dispute. 18 Quick Mount has not previously amended its answer to EcoFasten’s amended 19 complaint, and the Court does not find that the proposed amendment is brought in bad 20 faith or to unduly delay these proceedings. Rather, the proposed amendment is brought 21 in reaction to TC Heartland, which “affected a sea change in the law of venue for patent 22 cases.” OptoLum, 2017 WL 3130642, at *2 (quotation and citation omitted). For these 23 reasons, Quick Mount’s motion for leave to amend its answer is granted. 24 III. Motion to Dismiss or, in the Alternative, to Transfer Venue 25 Preliminarily, EcoFasten argues that Quick Mount’s motion to dismiss should be 26 stricken because Quick Mount failed to meet and confer with EcoFasten before filing it. 27 On September 27, 2016, the Court issued a standard order discouraging motions to 28 dismiss pursuant to Rule 12(b). Specifically, and in relevant part, the Court ordered: -8- [T]he parties must meet and confer prior to the filing of a motion to dismiss to determine whether it can be avoided. Consequently, motions to dismiss must be accompanied by a notice of certification of conferral indicating that the parties have conferred to determine whether an amendment could cure a deficient pleading, and have been unable to agree that the pleading is curable by a permissible amendment. . . . Motions to dismiss that do not contain the required certification are subject to be stricken on the Court’s motion. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 (Doc. 7.) EcoFasten correctly notes that Quick Mount’s motion to dismiss does not include the required certificate of conferral. The Court’s order, however, is intended to discourage the filing of motions to dismiss based on defects that are readily curably by a permissible amendment. The order therefore is aimed primarily at motions brought under Rule12(b)(6). Indeed, the most recent version of the Court’s standard order, which is publicly available on the Court’s website at, now specifies that the meet and confer obligations apply only to motions to dismiss pursuant to Rule 12(b)(6). Although the order issued in this case is an older, less precise version, the Court nonetheless finds that the spirit of the order has not been violated here. Moreover, Quick Mount’s failure to strictly comply with the order is harmless because no party argues that the venue defect identified by Quick Mount is curable by a permissible amendment. Accordingly, the Court will not strike Quick Mount’s motion. On the merits, there is no dispute that this case currently is being prosecuted in an improper venue. Quick Mount is incorporated in California, not Arizona. Thus, under 28 U.S.C. 1400(b) and TC Heartland, this district is not the proper venue for this case.1 “Given the lack of venue, the Court has discretion to dismiss this case or, in the interest of justice, transfer it to a district where it could have been brought.” Medbox Inc. v. 24 25 1 26 27 28 Section 1400(b) provides that a patent infringement suit may be brought in the judicial district where the defendant resides (meaning, where the defendant is incorporated), “or where the defendant has committed acts of infringement and has a regular and established place of business.” Neither party argues that venue is proper under this latter provision. The Court therefore does not address it. -9- 1 Kaplan, No. CV-13-00949-PHX-GMS, 2013 WL 6094577, at *4 (D. Ariz. Nov. 20, 2 2013) (citing 28 U.S.C. § 1406(a)). There is no dispute that this action could have been 3 brought in California. 4 discretion to transfer the case to the District Court for the Northern District of California. Rather than dismiss the action, the Court will exercise its 5 IT IS ORDERED as follows: 6 1. Quick Mount’s motion for leave to amend its answer (Doc. 45) is GRANTED. 7 Quick Mount shall file its amended answer within 14 days of the date of this order. 8 2. Quick Mount’s motion to dismiss or, in the alternative, to transfer venue (Doc. 9 40) is GRANTED. The Clerk is directed to transfer this action to the Northern District 10 11 of California, Oakland Division. Dated this 20th day of November, 2017. 12 13 14 15 16 Douglas L. Rayes United States District Judge 17 18 19 20 21 22 23 24 25 26 27 28 - 10 -

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