Brady et al v. Grendene USA, Inc.

Filing 31

ORDER: The Court concludes that limited jurisdictional discovery is appropriate in this case. The Motion to Dismiss or, in the Alternative, to Transfer (Doc. 13 ) filed by Defendants remains pending. Plaintiffs' request to conduct limited juris dictional discovery is GRANTED. The parties are referred to the Magistrate Judge for the purposes of limited jurisdictional discovery, which shall be completed within 60 days of the date of this order. Plaintiffs shall file a supplemental response to the Motion to Dismiss within 75 days of the date of this order. Defendants shall file any supplemental reply within 90 days of the date of this order. Signed by Judge William Q. Hayes on 7/17/2012. (mdc)

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12 JUL 17 PM It! 0 I

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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JAMES W. BRADY and PATRICIA M.
BRADY,

CASE NO. 12cv0604 WQH (KSC)
ORDER

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Plaintiffs,
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vs.
GRENDENE USA, INC. and
GRENDENE S.A.,

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Defendants.
HAYES, Judge:

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The matter before the court is the Motion to Dismiss or, in the Alternative, to Transfer
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filed by Defendants Grendene S.A. and Grendene USA, Inc. (ECF No. 13).

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PROCEDURAL BACKGROUND
On March 9,2012, Plaintiffs James W. Brady and Patricia M. Brady initiated this action

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by filing the Complaint. On March 16, 2012, Plaintiffs filed a First Amended Complaint
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asserting claims for (1) trademark infringement under 15 U.S.C. § 1114, (2) false designation
of origin under 15 U.S.C. § 1125(a), (3) unfair competition under Cal. Bus. & Prof. Code §

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17200, (4) unfair competition under the common law of the state of California, and (5)
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cancellation of Grendene S.A.'s U.S. Trademark Registration No. 1,908,543 for the mark
"IPANEMA" in connection with footwear. (ECF No.4). Plaintiffs allege that Defendants
Grendene USA and Grendene S.A.' s use the name "Ipanema" on their sandals sold in
California which creates a likelihood of confusion with Plaintiffs' products in California and
elsewhere.
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On May 2, 2012, Defendants filed a Motion to Dismiss or, in the Alternative, to

2 Transfer on grounds that the court lacks personal jurisdiction over Defendant Grendene S.A.
3 (ECF No. 13). On May 21,2012, Plaintiffs filed an opposition. (ECF No. 17). On June 4,
4 2012, Defendants filed a reply. (ECF No. 26). On June 7,2012, Plaintiffs filed a sur-reply.
5 (ECF No. 27-1). On June 18,2012, Defendants filed a response. (ECF No. 30).

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UNDISPUTED FACTS
Plaintiffs' company, Made in Brazil, Inc., is the owner ofU.S. Trademark Registration

8 Nos. 1,778,404 and 2,842,768 for the marks "IPANEMA" and "THE GIRL FROM
9 IPANEMA" for use in connection with swimwear. (ECF No. 1, ~~ 7, 12). Grendene S.A. is
10 the owner of U.S. Trademark Registration No. 1,908,543 for the mark "IPANEMA" in
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connection with footwear. (Decl. Marcius Dal B6, ~ 7; ECF No. 13-2 at 4).

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Defendants submit the declaration ofMarcius Dal B6, marketing manager ofGrendene

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S.A., who states that "Grendene S.A. is a Brazilian corporation. Grendene USA is a wholly

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owned subsidiary of Grendene S.A. and has its principal place of business in Orlando,

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Florida." ld. ~ 3. Dal B6 states that "Grendene USA purchases the accused products from

16 Grendene S.A. FOB BraziL .. Grendene USA takes legal possession of the accused products
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in Brazil and pays for transportation ofthe products to its Florida headquarters." ld. ~ 10. Dal

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B6 states that Grendene S.A. "has never directly manufactured, sold, offered to sell, marketed,

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or shipped the accused products in or to California or anywhere else in the United States." ld.

20 ~ 12. Dal B6 states that Grendene S.A. does not maintain any stock ofgoods within California,
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agents for service of process in California, tangible property in California, or office in

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California. ld.

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Defendants submit the declaration ofAngelo Daros, Vice President ofGrendene USA,

24 who states that "three out of four of Grendene USA's officers are also officers or directors of
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Grendene S .A. I am the only officer ofGrendene USA charged with controlling the day to day

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operations and internal affairs of Grendene USA and I am not an officer or director of

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Grendene S.A." (Decl. Angelo Daros, ~ 3; ECF No. 26-1 at 2). Daros states that "Grendene

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USA is solely in control ofthe potential customers it contacts .... [Grendene USA] acquires and
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1 carries its own insurance .... makes its own hiring decisions.... detennines what business
2 systems and software to use ... [and] does not discuss its day-to-day operations with Grendene
3 S.A." Id.

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7, 8. Daros states that "Grendene USA provides monthly financial reports to

4 Grendene S.A. and Grendene USA management travels to Brazil for meetings with Grendene
5 S.A. 3-4 times each year to discuss the company's activities .... Grendene USA will discuss
6 important hiring decisions, such as manager hires, and other general policy decisions with
7 Grendene S.A. directors for their input." Id.
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Defendants submit a "Commercial Agency Agreement" which defines the relationship

9 between Grendene S.A. and Grendene USA, Inc. (Commercial Agency Agreement; ECF No.
10 26-1 at 6-12). According to the tenns ofthe Commercial Agency Agreement, Grendene USA
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"shall perfonn its activities ... in the UNITED STATES OF AMERICA ... [Grendene USA]

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shall not have exclusivity .... [Grendene S.A.] may conduct business transactions in the same

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area.... [Grendene S.A.] reserves the right, at any time, to reduce the territory assigned to

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[Grendene USA].... [Grendene USA] is entitled to carry out activities for another

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company... provided that such activities are not aimed at selling products that compete, directly

16 or indirectly, with [Grendene S.A.]'s products .... [Grendene S.A.] will detennine sales quotas
17 to be met by [Grendene USA]." Id at 7,9, 10.
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Dal B6 states that "Grendene [S.A.] sold approximately 13 million dollars in footwear

19 to companies based in the United States in 2011, which accounts for about 1% of Grendene
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[S.A.]'s total revenue. Only about 30% ofthose sales were made to Grendene USA." (Supp.

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Decl. Dal B6, ~5; ECF No. 26-1 at 14).

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Plaintiffs submit the declaration of Plaintiff James Brady who states that "Vix

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Swimwear is headquartered in San Diego, California and has been a California Corporation

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since 1998 .... Vix Swimwear is a United States company with corporate headquarters in San

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Diego, California. Vix Swimwear lists its Brazil office as one ofseveral international offices."

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(Decl. James W. Brady, ~~ 3, 8; ECF No. 27-2 at 2,3).

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Dal B6 states that "Grendene [S.A.] sells the VIX IPANEMA footwear to Vix

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Swimwear in Brazil. Grendene S.A. does not sell the VIX IPANEMA footwear to the
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California subsidiary of Vix Swimwear. Rather, Vix ships the product to its subsidiary."

2 (Supp. Decl. Dal B6, ,5; ECF No. 26-1 at 14'4). Dal B6 states that "Grendene S.A. has not
3 sold VIX IPANEMA footwear to Vix Swimwear, Inc. in California or anywhere else in the
4 United States." (Second Supp. Decl. Dal B6, ,2; ECF No. 30-1 at 2).
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CONTENTIONS OF THE PARTIES

Plaintiffs contend that the contacts ofGrendene USA within the forum may be imputed

7 to Grendene S.A. through an agency relationship. Plaintiffs contend that Grendene S.A. has
8 the right to control Grendene USA and that Grendene USA is sufficiently important to the
9 business ofGrendene S.A. to establish an agency relationship. Plaintiffs assert that Grendene
10 S.A. would either have to forego sales of sandals in the United States, one of the largest
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consumer markets in the world, or perform the same functions itself, ifGrendene USA did not

12 exist. Plaintiffs contend that Defendant Grendene USA is subject to both general and specific
13 jurisdiction, a contention which is uncontested by Defendants. Plaintiffs seek limited
14 discovery with respect to the issue of personal jurisdiction over Grendene S.A.
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Defendants contend that the Court lacks personal jurisdiction over Defendant Grendene

16 S.A. on the grounds that Grendene S.A. does not possess the requisite right to control
17 Grendene USA and that Grendene USA is not sufficiently important to the business of
18 Grendene S.A. to support an agency relationship. Grendene S.A. contends that the relationship
19 between itself and Grendene USA is an appropriate parent-subsidiary relationship. Grendene
20 S.A. contends that its contacts with California are insufficient to establish either general or
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specific jurisdiction. Defendants contend that the entire action must be dismissed because

22 Grendene S.A. is a necessary and indispensable party within the meaning ofFed. R. Civ. P. 19.
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APPLICABLE LAW

On a motion to dismiss a complaint for lack ofpersonal jurisdiction, the plaintiff bears

25 the burden ofestablishing personal jurisdiction. Farmers Ins. Exchange v. Portage La Prarie
26 Mut. Ins. Co., 907 F.2d 911, 912 (9th Cir. 1990). Where the motion to dismiss is based on

27 written materials rather than an evidentiary hearing, the plaintiff need only make a prima/ade
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showing ofjurisdictional facts to satisfy this burden. Dole Food Co. v. Watts, 303 F.3d 1104,
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1 1108 (9th Cir. 2002). While the plaintiff cannot "simply rest on the bare allegations of its
2 complaint," Amba Marketing Systems, Inc. v. Jobar Int'l, Inc., 551 F.2d 784, 787 (9th Cir.
3 1977), uncontroverted allegations in the complaint must be taken as true. AT&Tv. Campagnie
4 Bruxelles Lambert, 94 F.3d 586,588 (9th Cir. 1996).
A court may exercise general jurisdiction over a foreign defendant when the foreign

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6 defendant's "affiliations with the State are so 'continuous and systematic' as to render [it]
7 essentially at home in the forum state." Goodyear Dunlop Tires Operations, S.A. v. Brown,
8 131 S. Ct. 2846, 2851 (2011) (citing International Shoe Co. v. State ofWashington, Office of
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Unemployment Compensation and Placement, 326 U.S. 310 (1945)). The assertion ofgeneral

10 jurisdiction requires more than "mere purchases, even if occurring at regular intervals."
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Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 418 (1988).

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A court exercises specific personal jurisdiction over a defendant where the claim

13 arises out of, or has a substantial connection to, the defendant's contact with the forum.
14 See Glencore Grain Rotterdam B. V. v. Shivnath Rai Harnarain Co., 284 F.3d 1114, 1123
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(9th Cir. 2002). The Ninth Circuit analyzes specific jurisdiction according to a three-prong

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test:

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(1) The non-resident defendant must purposefully direct his activities or
consummate some transaction with tiie forum or resident thereof; or perform

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some act by which he purposefully avails himself of the privilege of

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conducting activities in tile forum, thereby invoking the benefits and
protections of its laws;

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(2) the claim must be one which arises out of or relates to the defendant's
torum-related activities; and

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(3) the exercise ofjurisdiction must comport with fair play and substantial
justice, i.e. it must be reasonable.
Menken v. Emm, 503 F.3d 1050, 1057 (9th Cir. 2007).

"The existence of a relationship between a parent company and its subsidiaries is not

25 sufficient to establish personal jurisdiction over the parent on the basis of the subsidiaries'
26 minimum contacts with the forum." Doe v. Unocal, 248 F.3d 915,925 (9th Cir. 2001) (citing
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Transure, Inc. v. Marsh and McLennon, Inc., 766 F.2d 1297, 1299 (9th Cir. 1985)). "[A]

28 parent corporation may be directly involved in the activities of its subsidiaries without
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1 incurring liability so long as that involvement is 'consistent with the parent's investor status. ",
2 Unocal, 248 F.3d at 926 (quoting United States v. Bestfoods, 524 U.S. 51 (1998)).
3 "Appropriate parental involvement includes: 'monitoring of the subsidiary'S performance,
4 supervision ofthe subsidiary'S finance and capital budget decisions, and articulation ofgeneral
5 policies and procedures.'" Id.
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"'If the parent and subsidiary are not really separate entities, or one acts as an agent of

7 the other, local subsidiary's contacts with the forum may be imputed to the foreign parent
8 corporation.'" Unocal, 248 F.3d at 926 (quoting El-Fadl v. Central Bank ofJordan, 75 F.3d
9 668,676 (D.C. Cir. 1996)).

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The agency test is satisfied by a showing that the subsidiary functions as the
parent corporation's representative in that it performs servIces that are
sufficiently important to the foreign corporatIon that if it did not have a
representative to perform them, tlie corporation's own officials would
undertake to perform substantially similar services.

13 Bauman v. DaimlerChrysler Corp., 644 F.3d 909 (9th Cir. 2011) (quoting Unocal, 248 F.3d
14 at 926) (emphasis omitted). In order to satisfy the agency test, the parent must "have the right
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of control with respect to the agent" and the agent must perform services of such importance

16 to the parent that "the parent would undertake to perform the services itself if it had no
17 representative at all to perform them." Bauman, 644 F.3d at 921-22 (emphasis in original).
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A district court has discretion to permit or deny jurisdictional discovery. Boschetto v.

19 Hansing, 539 F.3d 1011, 1020 (9th Cir. 2008). "Discovery may be appropriately granted

20 where pertinent facts bearing on the question ofjurisdiction are controverted or where a more
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satisfactory showing of the facts is necessary." Id. Denial of a request of jurisdictional

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discovery is appropriate where "a plaintiffs claim of personal jurisdiction appears to be both

23 attenuated and based on bare allegations in the face of specific denials made by the
24 defendants." Pebble Beach Co. v. Caddy, 453 F.3d 1151 (9th Cir. 2006). "In order to obtain
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discovery on jurisdictional facts, the plaintiff must make at least a 'colorable' showing that the

26 Court can exercise personal jurisdiction over the defendant." Mitan v. Feeney, 497 F. Supp.
27 2d 1113, 1119 (C.D. Cal. 2007) (citing Central States, S.E. & S. w: Areas Pension Fund v.
28 Reimer Express World Corp., 230 F.3d 934,946 (7th Cir. 2000)), "This 'colorable showing'
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1 should be understood as something less than a prima facie showing, and could be equated as
2 requiring the plaintiff to come forward with 'some evidence' tending to establish personal
3 jurisdiction over the defendant." Milan, 497 F. Supp. 2d at 1119.

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RULING OF THE COURT
The Court concludes that Plaintiffs have made a "colorable" showing of jurisdiction

6 necessary to obtain jurisdictional discovery. Milan, 497 F. Supp. 2d at 1119. A more detailed
7 showing ofthe facts would aid the Court in determining whether, on the issues of control and
8 importance, the exercise of jurisdiction over Grendene S.A. comports with the due process
9 clause of the Fifth Amendment. The Court concludes that limited jurisdictional discovery is
10 appropriate in this case.
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IT IS HEREBY ORDERED that the Motion to Dismiss or, in the Alternative, to

12 Transfer (ECF No. 13) filed by Defendants remains pending. Plaintiffs' request to conduct
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limited jurisdictional discovery is GRANTED.

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The parties are referred to the Magistrate Judge for the purposes oflimited jurisdictional

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discovery, which shall be completed within sixty (60) days ofthe date ofthis order. Plaintiffs

16 shall file a supplemental response to the Motion to Dismiss within seventy-five (75) days of
17 the date of this order. Defendants shall file any supplemental reply within ninety (90) days
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of the date of this order.

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20 DATED:

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