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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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Rillito River Solar LLC dba EcoFasten
Solar, an Arizona limited liability company,

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Plaintiff,

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No. CV-16-03245-PHX-DLR
ORDER

v.
Wencon Development Incorporated dba
Quick Mount PV, a California corporation,
Defendant.

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Before the Court are Defendant Wencon Development Incorporated d/b/a Quick

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Mount PV’s (“Quick Mount”) motion for leave to amend its answer and motion to

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dismiss or, in the alternative, to transfer venue. (Docs. 40, 45.) The motions are fully

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briefed and neither party requested oral argument. For reasons stated below, the motions

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are granted and this case is transferred to the Northern District of California.

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I. Background

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Plaintiff Rillito River Solar LLC d/b/a EcoFasten Solar (“EcoFasten”) and Quick

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Mount manufacture and market roof mounts for solar panels. At issue is technology used

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to secure solar panels to roofs in a manner that avoids damage. EcoFasten, which claims

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to be the inventor of this technology, filed a complaint against Quick Mount in

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September 2016, alleging that Quick Mount infringes on its patents. (Doc. 1.) In its

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complaint, EcoFasten alleged that venue is proper in this district because a substantial

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part of the events or omissions giving rise to its claims occurred here. (¶ 8.)

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In November 2016, Quick Mount filed an answer to EcoFasten’s complaint and

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counterclaimed for declaratory judgments that EcoFasten’s patents are invalid. (Doc.

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12.) In response to EcoFasten’s venue allegation, Quick Mount responded that it “lacks

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information and belief sufficient to answer these allegations and on that basis neither

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admits nor denies them.” (Id. at 2 ¶ 8.) With respect to its counterclaims, Quick Mount

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alleged that venue is proper in this district. (Id. at 8 ¶ 3.)

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EcoFasten later filed an amended complaint alleging additional claims related to

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the patents at issue. (Doc. 16.) Like its predecessor, EcoFasten’s amended complaint

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alleges venue is proper in this district. (¶ 8.) In December 2016, Quick Mount filed an

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answer to the amended complaint.

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allegation, Quick Mount responded that it “lacks information and belief sufficient to

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answer these allegations and on that basis denies them.” (Id. at 2 ¶ 8.) Though Quick

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Mount denied EcoFasten’s venue allegation, it did not at that time move under Federal

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Rule of Civil Procedure 12(b)(3) to dismiss for improper venue, or to transfer this case to

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the proper venue.

(Doc. 21.)

In response to EcoFasten’s venue

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The parties thereafter proceeded to litigate. In February 2017, the Court issued a

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scheduling order setting certain case management deadlines. Of note, the Court set a

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March 1, 2017 deadline for amending pleadings, deadlines running from March 17, 2017

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to July 14, 2017 for claims construction disclosure, discovery, and briefing, and a

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Markman hearing for August 11, 2017. (Doc. 29 ¶¶ 2-12.)

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During this time, on May 22, 2017, the United States Supreme Court issued its

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decision in TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S. Ct. 1514

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(2017), which made clear that a corporation “resides” only in its state of incorporation for

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purposes of 28 U.S.C. § 1400(b), the patent venue statute.

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Court affirmed its 1957 decision in Fourco Glass Co. v. Transmirra Products Corp., 353

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U.S. 222, 226 (1957), and reversed the Federal Circuit’s 1990 decision in VE Holding

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Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (1990), by clarifying that the patent

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In doing so, the Supreme

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venue statute, not the general venue statute, 28 U.S.C. § 1391(c), defines where a

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domestic corporation “resides” for purposes of patent infringement litigation. In Fourco,

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the Supreme Court held that § 1400(b) was the sole and exclusive provision controlling

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venue in patent infringement actions, and that it was not to be supplemented by the

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general venue provisions of § 1391(c). 353 U.S. at 229. In 1988, however, Congress

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amended § 1391(c) to provide that “[f]or purposes of venue under this chapter,” a

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defendant corporation shall be deemed “to reside in any judicial district in which it is

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subject to personal jurisdiction at the time the action is commenced.” Two years later,

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the Federal Circuit in VE Holding held that the newly added phrase “[f]or purposes of

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venue under this chapter” was “exact and classic language of incorporation”

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and therefore § 1391(c), as amended, established the definition for all other venue

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statutes, including § 1400(b): “On its face, § 1391(c) clearly applies to § 1400(b), and

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thus redefines the meaning of the term ‘resides’ in that section.” 917 F.2d at 1578-

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80. VE Holding remained good law for nearly 30 years until it was abrogated by TC

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Heartland in late May of this year.

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On July 28, 2017—approximately two months after the Supreme Court issued its

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TC Heartland decision, and two weeks after the completion of claims construction

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briefing—Quick Mount filed the present motion under Rule 12(b)(3) to dismiss for

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improper venue or, alternatively, to transfer this case to the Northern District of

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California, Quick Mount’s state of incorporation. (Doc. 40.) Relatedly, on August 5,

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2017, Quick Mount moved for leave to amend its answer to deny that venue is proper,

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rather than deny based on insufficient knowledge or belief. (Doc. 45.) EcoFasten

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opposes both requests. (Doc. 42, 49.)

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On August 9, 2017, after receiving full briefing on Quick Mount’s motion to

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dismiss (but before full briefing on its motion for leave to amend), the Court held a

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telephonic status conference to discuss the impending Markman hearing. The Court

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advised the parties, based on its preliminary review of the briefs, that it likely would

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grant Quick Mount’s motion and transfer this matter to the Norther District of California.

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(Doc. 48.) Though understanding that the Court’s assessment was preliminary, the

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parties agreed that August 11, 2017 Markman hearing should be vacated pending

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resolution of the venue issue.

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II. Motion for Leave to Amend

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Quick Mount has moved for leave to amend its answer to affirmatively deny that

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this district is a proper venue. (Doc. 45.) Because Quick Mount’s motion comes five

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months after the Scheduling Order’s deadline for amended pleadings, it must first satisfy

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Rule 16(b)’s good cause standard. Fed. R. Civ. P. 16(b)(4) (providing that deadlines

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established in a scheduling order “may be modified only for good cause and with the

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judge’s consent.”). “Good cause” exists when deadlines “cannot reasonably be met

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despite the diligence of the party seeking the extension.” Fed. R. Civ. P. 16 Advisory

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Comm.’s Notes (1983 Am.).

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considers the diligence of the party seeking the amendment.” Johnson v. Mammoth

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Recreations, Inc., 975 F.2d 604, 609 (9th Cir. 1992). If good cause supports deviation

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from the scheduling order, the Court then assesses the propriety of the motion for leave to

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amend by considering factors such as bad faith, undue delay, prejudice to the opposing

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party, futility of amendment, and whether the pleading previously has been amended.

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See Allen v. City of Beverly Hills, 911 F.2d 367, 373 (9th Cir. 1990).

Thus, “Rule 16(b)’s ‘good cause’ standard primarily

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A. Good Cause Supports Deviation from the Scheduling Order

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Good cause supports deviation from the scheduling order because Quick Mount’s

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improper venue defense was not available to it until after the Supreme Court issued its

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decision in TC Heartland in late May of this year. In Re Micron Tech., Inc., --- F.3d ---,

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2017 WL 5474215, at *3-6 (Fed. Cir. Nov. 15, 2017) (“The venue objection was not

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available until the Supreme Court decided TC Heartland because, before then, it would

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have been improper, given controlling precedent, for the district court to dismiss or to

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transfer for lack of venue.”); see also OptoLum, Inc. v. Cree, Inc., No. CV-16-03828-

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PHX-DLR, 2017 WL 3130642, at *3-5 (D. Ariz. July 24, 2017) (same). Accordingly,

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Quick Mount could not have met the March 1, 2017 deadline for amending pleadings

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even with due diligence.

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B. The Proposed Amendment is Proper and Advances the Interests of Justice

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EcoFasten argues that Quick Mount’s proposed amendment is futile and would be

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prejudicial because Quick Mount has waived its improper venue defense by: (1) failing

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to preserve it in a pre-answer motion or in its initial answer, (2) filing a counterclaim, and

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(3) otherwise litigating this matter in the two months between the Supreme Court’s TC

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Heartland decision and the filing of its motion to dismiss. The Court disagrees.

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1. Quick Mount Adequately Preserved the Improper Venue Defense

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“Rule 12(g) operates in conjunction with Rule 12(h) to require that all defenses

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permitted to be raised by motion, which are then available, must be included in the same

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motion[.]” Bromfield v. McBurney, No. C07-5226RBL-KLS, 2009 WL 674517, at *5

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(W.D. Wash. Mar. 12, 2009). Specifically, Rule 12(g) provides that “a party that makes a

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motion under this rule must not make another motion under this rule raising a defense or

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objection that was available to the party but omitted from its earlier motion.” Fed. R.

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Civ. P. 12(g)(2). Rule 12(h) further provides that a party waives any defense listed

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in Rule 12(b)(2)-(5) by “omitting it from a motion in the circumstances described in Rule

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12(g)(2)” or by failing to “include it in a responsive pleading or in an amendment

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allowed by Rule 15(a)(1) as a matter of course.” Fed. R. Civ. P. 12(h)(1)(A)-(B). In

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other words, a defendant “who does not initially raise certain [available] defenses—lack

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of personal jurisdiction, improper venue, improper process, and improper service of

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process—cannot invoke those defenses later on.” Paleteria La Michoacana v. Producto

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Lacteos, 905 F. Supp. 2d 189, 192 (D.D.C. 2012). Although Rule 15(a)(2) provides for

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liberal amendment of pleadings, the language of Rule 12(h) establishes that this

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amendment procedure is not available to raise the defense of improper venue under Rule

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12(b)(3) (or the other defenses listed above) if the defense was available to the party at

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the time it filed the initial pleading. See id.; Bromfield, 2009 WL 674517, at *5.

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As an initial matter, the Court is not convinced that Quick Mount failed to

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preserve its improper venue defense in its answer. In response to the venue allegation in

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EcoFasten’s original complaint, Quick Mount responded that it “lacks information and

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belief sufficient to answer these allegations and on that basis neither admits nor denies

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them.” (Doc. 12 at 2 ¶ 8.) Quick Mount’s initial response functionally was an admission

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that venue is proper. Fed. R. Civ. P. 8(b)(6). But EcoFasten’s original complaint and

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Quick Mount’s original answer are not the operative pleadings in this case. EcoFasten

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later amended its complaint, and Quick Mount was entitled to answer that amended

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complaint as a matter of course. In its answer to EcoFasten’s amended complaint, Quick

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Mount denied based on lack of knowledge or information that venue in this district is

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proper. (Doc. 16 at 2 ¶ 8.) Quick Mount’s operative answer to EcoFasten’s venue

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allegation therefore has the effect of a denial. Fed. R. Civ. P. 8(b)(5). Regardless,

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however, the Court has granted Quick Mount’s motion for leave to amend its answer to

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clearly deny that venue in this district is proper, thereby mooting this portion of

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EcoFasten’s argument.

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Assuming, however, that Quick Mount’s operative answer does not adequately

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preserve its venue objection, the Court finds that Quick Mount has not waived the

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defense within the meaning of Rule 12(h) because the defense was not available to Quick

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Mount at the time it filed its answers to the original and amended complaints. See In Re

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Micron Tech., 2017 WL 5474215, at *3-6; OptoLum, 2017 WL 3130642, at *3-5.

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The Court also is not convinced that Quick Mount was required to raise the

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improper venue defense in a pre-answer motion. Strictly speaking, Rule 12(b) states that

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a motion to dismiss for improper venue “must be made before pleading if a responsive

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pleading is allowed.”

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courts are split on allowing post-answer motions to dismiss, and no bright-line rule

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against allowing such a motion exists in the Ninth Circuit.” Yocum v. Rockwell Med.

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Techs., Inc., No. 12-CV-568-MMA(MDD), 2012 WL 2502701, at *2 (S.D. Cal. June 27,

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2012). “Indeed, district courts in this Circuit have heard post-answer motions to dismiss

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despite . . . the mandatory language in Rule 12(b).” Id. (citing Vineyard v. Soto, No. 10-

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CV-1481-SI, 2011 WL 5358659 (D. Or. Nov. 7, 2011); Moreno-Garcia v. Yakima Police

“[D]espite this seemingly unambiguous mandatory language,

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Dep’t, No. CV-09-3123-EFS, 2010 WL 4386481 (E.D. Wash. Oct. 27, 2010)). The

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Court agrees, particularly under these circumstances, that “[i]mproper venue may be

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challenged in a post-answer motion to dismiss as long as the objection was preserved in

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the answer.” Jaliwa v. Concerned Citizens of S. Cent. L.A., No. 06cv2617 BTM(LSP),

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2007 WL 2021818, at *2 (S.D. Cal. July 10, 2007).

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2. Quick Mount’s Counterclaim is not a Waiver of the Venue Defense

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Quick Mount’s assertion of a counterclaim against EcoFasten does not amount to a

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waiver of its improper venue defense. Generally, “mere assertion of a counterclaim will

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not waive a defense of improper venue that was explicitly asserted in an answer filed

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contemporaneously with the counterclaim.” Hillis v. Heineman, 626 F.3d 1014, 1018

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(9th Cir. 2010). Though Quick Mount did not explicitly assert an improper venue

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defense in its answer filed contemporaneously with the counterclaim, it denied that venue

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is proper. Moreover, “[t]he trend in more recent cases is to hold that no Rule 12(b)

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defense is waived by the assertion of a counterclaim, whether permissive or compulsory.”

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5C Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1397 (3d

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ed. 2004) (citied favorably by the Ninth Circuit in Hillis, 626 F.3d at 1018).

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Further, there is some authority suggesting that the law of the Federal Circuit, and

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not of the regional circuit, governs waiver of defenses unique to patent law. See Rates

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Tech Inc. v. Nortel Networks Corp., 399 F.3d 1302, 1307-08 (Fed. Cir. 2005) (applying

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Federal Circuit law to determine whether objections to personal jurisdiction were waived

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by assertion of counterclaims).

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“determination of venue in light of § 1400(b) is necessarily unique to patent law because

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the statute itself is unique to patent law.” Navico, Inc. v. Garmin Int’l, Inc., No. 2:16-

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CV-190, 2017 WL 2957882, at *1 (E.D. Tex. July 11, 2017). If the assertion of a

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counterclaim does not waive a personal jurisdiction defense so long as Rule 12(h)(1) has

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been satisfied, the Court sees no reason why the same would not hold true for an

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improper venue defense.

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At least one district court has concluded that

3. Post-TC Heartland Litigation Does Not Preclude Amendment

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Finally, the procedural posture of this case is closer to OptoLum than to other

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cases finding waiver. In those cases that found waiver of an improper venue defense

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post-TC Heartland, the defendant sought to raise the venue defense late in the litigation.

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For example, the defendant in Cobalt Boats, LLC v. Sea Ray Boats, Inc., No. 2:15cv21,

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2017 WL 2556679, at *2 (E.D. Va. June 7, 2017), challenged venue only a few weeks

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before trial. That court explicitly denied “any postponement of the trial to conduct

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further proceedings regarding venue[.]” Id. at *4. Similarly, the defendants in Elbit Sys.

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Land & C4I Ltd. v. Hughes Network Sys., LLC, 2:15-CV-00037-RWS-RSP, 2017 WL

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2651618, at *19 (E.D. Tex. June 20, 2017), raised the venue defense “less than two

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months from trial.” See also Navico, 2017 WL 2957882, at *2 (finding waiver after claim

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construction and only two months before trial).

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Although the Court acknowledges that a certain degree of prejudice will result

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from transferring this matter to the Northern District of California, given that the parties

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already have briefed the claims construction issues, this case is not so far along to justify

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continued litigation in the wrong venue. Moreover, the Court mitigated further and more

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substantial prejudice by vacating the Markman hearing pending resolution of the venue

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dispute.

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Quick Mount has not previously amended its answer to EcoFasten’s amended

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complaint, and the Court does not find that the proposed amendment is brought in bad

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faith or to unduly delay these proceedings. Rather, the proposed amendment is brought

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in reaction to TC Heartland, which “affected a sea change in the law of venue for patent

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cases.” OptoLum, 2017 WL 3130642, at *2 (quotation and citation omitted). For these

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reasons, Quick Mount’s motion for leave to amend its answer is granted.

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III. Motion to Dismiss or, in the Alternative, to Transfer Venue

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Preliminarily, EcoFasten argues that Quick Mount’s motion to dismiss should be

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stricken because Quick Mount failed to meet and confer with EcoFasten before filing it.

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On September 27, 2016, the Court issued a standard order discouraging motions to

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dismiss pursuant to Rule 12(b). Specifically, and in relevant part, the Court ordered:

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[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.

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(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 http://www.azd.uscourts.gov/judges/judges-orders, 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.

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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.

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Kaplan, No. CV-13-00949-PHX-GMS, 2013 WL 6094577, at *4 (D. Ariz. Nov. 20,

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2013) (citing 28 U.S.C. § 1406(a)). There is no dispute that this action could have been

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brought in California.

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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

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IT IS ORDERED as follows:

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1. Quick Mount’s motion for leave to amend its answer (Doc. 45) is GRANTED.

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Quick Mount shall file its amended answer within 14 days of the date of this order.

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2. Quick Mount’s motion to dismiss or, in the alternative, to transfer venue (Doc.

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40) is GRANTED. The Clerk is directed to transfer this action to the Northern District

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of California, Oakland Division.
Dated this 20th day of November, 2017.

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Douglas L. Rayes
United States District Judge

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