Merola Sales Company Incorporated v. Tabarka Studio Incorporated

Filing 93

AMENDED ORDER - Third-Party Defendants 41 Motion to Dismiss is granted. See document for complete details. Signed by Judge Steven P Logan on 2/1/19. (MSA)

WO
1
2
3
4
5
6

IN THE UNITED STATES DISTRICT COURT

7

FOR THE DISTRICT OF ARIZONA

8

Merola Sales Company, Inc.,

9
10
11
12

Plaintiff,
vs.
Tabarka Studio, Inc.,
Defendant.

13
14
15
16
17
18
19
20
21
22
23
24
25

)
)
)
)
)
)
)
)
)
)
)
)

No. CV-18-00248-PHX-SPL
AMENDED ORDER1

Plaintiff Merola Sales Company, Inc. (“Merola”) filed suit against Tabarka Studio,
Inc. (“Tabarka”) seeking a declaratory judgment against any copyright infringement
claims, and other relief. (Doc. 1) Tabarka filed counterclaims against Home Depot U.S.A.
Incorporated (“HD Stores”) and Home Depot Product Authority LLC (“HD Web”, and
together with HD Stores, the “Home Depot Defendants”)2 for copyright infringement and
injunctive relief. (Doc. 29) Before the Court is the Home Depot Defendants’ motion to
dismiss (the “Motion”) seeking dismissal of Tabarka’s infringement counterclaims against
them. (Doc. 41) The Court’s ruling is as follows.
///
///

26
27
28

1
2

This Order amends page 7, line 23 of the January 31, 2019 Order.
HD Stores owns and operates the stores of The Home Depot Inc. throughout the
United States. HD Web buys products and operates the website for The Home Depot Inc.
(Doc. 41 at 3)

1

I.

Background

2

Meir Zenati (“Zenati”) is a designer that creates hand-painted tiles, pottery,

3

furniture, and other housewares. (Doc. 29 at 14) Zenati has created many collections of

4

hand-painted tiles, which he manufactures and sells to several of the largest tile distributors

5

throughout the United States. (Doc. 29 at 15) At issue in this case are four of Zenati’s

6

designs, Paris Metro 1 (“PM 1”) created in 2008, Casablanca 2 (“C2”) created in 2007,

7

Paris Metro 11 (“PM 11”) created in 2008, and Touareg 6 created in 2011. In 2017,

8

Tabarka began the process of obtaining registered copyrights for PM 1, PM 11, C2, and

9

Touareg 6 with the U.S. Copyright Office. (Doc. 29 at 16) On August 15, 2017, PM 1, PM

10

11 and Touareg 6 were issued copyright registrations for the artwork on the tiles. (Doc. 29

11

at 16) However, the registration application for C2 was denied on March 22, 2018. 3 (Doc.

12

29 at 17)

13

In 2015, prior to the filing of the copyright registration applications, Tabarka

14

became aware that several of its designs, including PM 1, PM 11, and C2, were being

15

copied and sold in nearly-identical tiles throughout the United Kingdom. (Doc. 29 at 17)

16

In 2017, Tabarka became aware that Merola, along with the Home Depot Defendants, was

17

selling unlicensed tiles that were identical copies of Tabarka’s tiles. (Doc. 29 at 22, 25)

18

Tabarka sent a letter to the Home Depot Defendants on May 1, 2017, stating that the Home

19

Depot Defendants were violating Tabarka’s copyright interests through sale of the tiles.

20

(Doc. 41 at 2) Merola, the supplier of the tiles to the Home Depot Defendants, responded

21

to the first letter seeking proof of ownership of valid copyrights. (Doc. 41 at 2–3) On

22

August 23, 2017, Tabarka sent a second letter to the Home Depot Defendants alleging

23

copyright infringement. (Doc. 41 at 3)

24

On January 23, 2018, Merola initiated this lawsuit seeking a declaratory judgment

25

that it did not infringe on Tabarka’s copyright interests. (Doc. 1 at 12–13) On May 1, 2018,

26

Tabarka filed its answer and asserted counterclaims against Merola and the Home Depot

27
28

3

The application for C2 was denied, but Tabarka filed a request for reconsideration
with the U.S. Copyright Office. (Doc. 29 at 17)
2

1

Defendants for copyright infringement and injunctive relief. (Doc. 29 at 12–34) The Home

2

Depot Defendants filed the Motion on June 7, 2018, seeking dismissal of Tabarka’s

3

counterclaims for lack of personal jurisdiction and improper venue, among other reasons.

4

(Doc. 41)

5

II.

Dismissal for Lack of Personal Jurisdiction Pursuant to Rule 12(b)(2)

6

A. Legal Standard for General Jurisdiction

7

It is well settled that only a limited set of affiliations with a forum will render a

8

defendant amenable to general jurisdiction there, and the paradigm forum for the exercise

9

of general jurisdiction over a corporation is one in which the corporation is fairly regarded

10

as at home, such as the place of incorporation and principal place of business. Best Odds

11

Corp. v. iBus Media Ltd., 655 F. App’x 582–83 (9th Cir. 2016). Only in an exceptional

12

case will general jurisdiction be available anywhere else. Id. It is undisputed that HD

13

Stores is a Delaware corporation with its principal place of business in Georgia, and HD

14

Web is a limited liability company organized under the laws of Georgia with its principal

15

place of business in Georgia. (Doc. 41 at 5; Doc. 29 at 13) Accordingly, the Court finds

16

that the Home Depot Defendants are not subject to the general jurisdiction of the Court.

17

B. Legal Standard for Specific Jurisdiction

18

Under Rule 4.2(a) of the Arizona Rules of Civil Procedure, an Arizona court may

19

exercise personal jurisdiction over parties, whether found within or outside the state, to the

20

maximum extent permitted by the Arizona Constitution and the Constitution of the United

21

States. Cybersell, Inc. v. Cybersell, Inc., 130 F.3d 414, 416 (9th Cir. 1997) (stating that

22

under Rule 4.2(a), Arizona will exert personal jurisdiction over a nonresident litigant to the

23

maximum extent allowed by the federal constitution). Due process requires that to exercise

24

jurisdiction over a non-resident defendant, the defendant have certain minimum contacts

25

with a forum such that the maintenance of the suit does not offend traditional notions of

26

fair play and substantial justice. Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945).

27

Courts employ a three-part test to determine if a defendant has sufficient minimum contacts

28

to be subject to specific personal jurisdiction: (1) the non-resident defendant must
3

1

purposefully direct his activities or consummate some transaction with the forum or

2

resident thereof; or perform some act by which he purposefully avails himself of the

3

privilege of conducting activities in the forum, thereby invoking the benefits and

4

protections of its laws; (2) the claim must be one which arises out of or relates to the

5

defendant’s forum-related activities; and (3) the exercise of jurisdiction must comport with

6

fair play and substantial justice, i.e. it must be reasonable.4 Schwarzenegger v. Fred Martin

7

Motor Co., 374 F.3d 797, 802 (9th Cir. 2004).

8

“The plaintiff bears the burden of satisfying the first two prongs of the test.”

9

Schwarzenegger, 374 F.3d at 802. If the plaintiff meets that burden, “the burden then shifts

10

to the defendant to ‘present a compelling case’ that the exercise of jurisdiction would not

11

be reasonable.” Axiom Foods, Inc. v. Acerchem Int’l, Inc., 874 F.3d 1064, 1068–69 (9th

12

Cir. 2017). Although the burden is on a plaintiff to show that a court has jurisdiction over

13

a defendant, in the absence of an evidentiary hearing, a plaintiff need only make a “prima

14

facie showing of jurisdictional facts to withstand the motion to dismiss.” Pebble Beach Co.

15

v. Caddy, 453 F.3d 1151, 1154 (9th Cir. 2006).

16

C. Analysis
i.

17

Purposeful Direction

18

A plaintiff satisfies the first prong by demonstrating that a defendant either

19

purposefully availed itself of the privilege of conducting activities in the forum or

20

purposefully directed its activities at the forum. Washington Shoe Co. v. A-Z Sporting

21

Goods Inc., 704 F.3d 668, 672 (9th Cir. 2012). In tort cases, courts typically inquire

22

whether a defendant purposefully directs its activities at the forum state, applying an effects

23

test that focuses on the forum in which the defendant’s actions were felt, whether or not

24
25
26
27
28

4

In determining reasonableness, seven factors are considered: (1) the extent of a
defendant’s purposeful interjection; (2) the burden on the defendant in defending in the
forum; (3) the extent of conflict with the sovereignty of the defendant’s state; (4) the forum
state’s interest in adjudicating the dispute; (5) the most efficient judicial resolution of the
controversy; (6) the importance of the forum to the plaintiff’s interest in convenient and
effective relief; and (7) the existence of an alternative forum. Rio Properties, Inc. v. Rio
Int’l Interlink, 284 F.3d 1007, 1021 (9th Cir. 2002). No single factor is dispositive, and a
court must balance all seven. Id.
4

1

the actions themselves occurred within the forum. Yahoo! Inc. v. La Ligue Contre Le

2

Racisme, 433 F.3d 1199, 1206 (9th Cir. 2006). The “effects” test requires that the

3

defendant allegedly must have (1) committed an intentional act, (2) expressly aimed at the

4

forum state, (3) causing harm that the defendant knows is likely to be suffered in the forum

5

state. Calder v. Jones, 465 U.S. 783 (1984); Mavrix Photo, Inc. v. Brand Techs., Inc., 647

6

F.3d 1218, 1228 (9th Cir. 2011).

7

a. Intentional act

8

In this case, the intentional act element is easily satisfied. Courts have held that

9

operating an active website qualifies as an intentional act. Rio Properties, Inc. v. Rio Int’l

10

Interlink, 284 F.3d 1007, 1021 (9th Cir. 2002) (stating that operating even a passive website

11

in conjunction with “something more”—conduct directly targeting the forum—is sufficient

12

to confer personal jurisdiction). In the Complaint, Tabarka alleges that HD Web hosted a

13

website that provided a forum to actively allow commercial transactions to take place,

14

including sale of the tiles at issue. (Doc. 29 at 13, 25–26) Furthermore, HD Stores denies

15

that it stocked the tiles in its stores, but admits that its stores were available as vehicles to

16

ship and retrieve tiles ordered from HD Web. (Doc. 41 at 8) The Court finds that the

17

website operated by HD Web was not a passive website and that the transaction of

18

commerce constitutes the “something more” necessary to confer jurisdiction. Further, the

19

availability and use of HD Stores’ locations for products ordered from HD Web constitutes

20

an intentional act predicated on the sale of the tiles in Arizona. Therefore, the Court finds

21

that Tabarka has pleaded sufficient facts to demonstrate that the Home Depot Defendants

22

engaged in intentional acts in Arizona.

23

b. Expressly Aimed

24

The second prong of the test, express aiming, focuses on whether a defendant’s

25

allegedly tortious action was expressly aimed at the forum. Picot v. Weston, 780 F.3d 1206,

26

1214 (9th Cir. 2015). Courts have held that individualized targeting satisfies the express

27

aiming requirement. Individualized targeting is established when a defendant willfully

28

infringes on a plaintiff’s copyright and has knowledge of both the existence of the
5

1

copyright and the forum of the copyright holder. Axiom Foods, 874 F.3d at 1069. In this

2

analysis, the Court must look to the Defendants’ own contacts with the forum, not to the

3

Defendants’ knowledge of the Plaintiff’s connections to the forum. Axiom, 874 F.3d at

4

1070; Picot, 780 F.3d 1206, 1214 (9th Cir. 2015) (stating that personal jurisdiction analysis

5

must focus on the defendant’s contacts with the forum state, not the defendant’s contacts

6

with a resident of the forum).

7

It is clear from the pleadings that the Home Depot Defendants were unaware of

8

Tabarka or any of its copyright interests until it received the first letter alleging copyright

9

infringement in May 2017. The Home Depot Defendants argue that upon receiving the

10

letter, Merola reached out to Tabarka to request proof of ownership of valid copyrights for

11

the tiles at issue. (Doc. 41 at 2–3) In the Complaint (Doc. 1), Merola’s description of the

12

letter demonstrates that the letter identified Tabarka and alleged infringement of Tabarka’s

13

intellectual property rights. (Doc. 1 at 6) Neither party has provided the Court with exhibits

14

reflecting the contents of the letters sent from Tabarka to the Home Depot Defendants.

15

Accordingly, the Court can only speculate as to when the Home Depot Defendants became

16

aware that Arizona was the forum state of Tabarka. However, it is undisputed that the

17

Home Depot Defendants have contacts with Arizona in the form of approximately 50 stores

18

located in Arizona and website sales made to customers in Arizona. (Doc. 29 at 13) It is

19

also undisputed that the Home Depot Defendants sold the tiles at issue in Arizona before

20

receipt of Tabarka’s first letter. (Doc. 29 at 25) Accordingly, the Court finds that Tabarka

21

has pleaded facts sufficient to demonstrate that the Home Depot Defendants’ sale of the

22

tiles is sufficient to demonstrate that their intentional acts were expressly aimed at Arizona.

23

c. Causing Harm

24

Tabarka must also make a prima facie showing that the Home Depot Defendants

25

knew that they were causing harm likely to be suffered in Arizona. This element is satisfied

26

when a defendant’s intentional act has foreseeable effects in the forum and can be

27

established if the bulk of the harm occurs outside of the forum. Wake Up & Ball LLC v.

28

Sony Music Entm’t Inc., 119 F. Supp. 3d 944, 951 (D. Ariz. 2015). The Complaint alleges
6

1

that the Home Depot Defendants were engaging in copyright infringement. It is well

2

settled that the economic loss caused by the intentional infringement of a plaintiff’s

3

copyright is foreseeable. Mavrix, 647 F.3d at 1231 (9th Cir. 2011). Accordingly, the Court

4

finds that the economic harm described by Tabarka would have foreseeably caused harm

5

to an Arizona entity. (Doc. 29 at 25)
ii.

6

Forum Related Activities

7

The second requirement for specific jurisdiction is that Tabarka’s claims arise out

8

of the Home Depot Defendants’ Arizona-related activities. This requirement is satisfied if

9

Tabarka would not have been injured “but for” the Home Depot Defendants’ conduct in

10

Arizona. It is undisputed that the Home Depot Defendants and Merola sold Tabarka’s

11

products outside of Arizona. (Doc. 66 at 3) Tabarka does not allege facts sufficient to

12

demonstrate that its injury is limited to the tiles sold in Arizona, as Tabarka admits that its

13

tiles are sold internationally and the Home Depot Defendants admit that the tiles were

14

offered nationwide. (Doc. 29 at 15) The Court must find that “but for” the Home Depot

15

Defendants’ actions selling the tiles in Arizona, Tabarka still would have potentially

16

suffered an injury. Accordingly, the Court cannot find that Tabarka’s claims arise out of

17

the Home Depot Defendants’ forum related activities in Arizona.

18

Because the Court finds that Tabarka has not met its burden of demonstrating that

19

Tabarka’s claims arise out of forum related activities, the Court need not address the issue

20

of reasonableness. The Court finds that Tabarka’s counterclaims against HD Stores and

21

HD Web are not properly within the specific jurisdiction of the Court. Accordingly, the

22

Home Depot Defendants’ Motion to Dismiss must be granted for lack of personal

23

jurisdiction.

24

///

25

///

26

///

27

///

28

///
7

1

Accordingly,

2

IT IS ORDERED that Third-Party Defendants’ Motion to Dismiss (Doc. 41) is

3
4

granted.
Dated this 1st day of February, 2019.

5
6
Honorable Steven P. Logan
United States District Judge

7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
8