Greenway Nutrients, Inc. v. Blackburn et al

Filing 129

ORDER adopting Report and Recommendations re 124 that the Motion to Dismiss for Lack of Jurisdiction 109 be GRANTED in part and DENIED in part. The Motion to Dismiss is GRANTED with respect to the breach of contract claims and all claims against Supreme Growers, LLC. The motion is DENIED in all other respects by Chief Judge Marcia S. Krieger on 3/31/15.(pglov)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Chief Judge Marcia S. Krieger
Civil Action No. 13-cv-01088-MSK-KMT
GREENWAY NUTRIENTS, INC.,
Plaintiff,
v.

STEVE BLACKBURN,
DAVID SELAKOVIC,
FULFILLMENT SOLUTIONS SERVICES, LLC,
SUPREME GROWERS, LLC,
Defendants.
OPINION AND ORDER ADOPTING
RECOMMENDATION AND GRANTING IN PART
AND DENYING IN PART MOTION TO DISMISS
THIS MATTER comes before the Court on the Recommendation (#124) of the
Magistrate Judge that the Defendants’ Motion to Dismiss (#109) be granted in part and denied in
part. Defendants Steve Blackburn, David Selakovic, and Fulfillment Solutions Services, LLC,
filed timely Objections (#126) to the Recommendation.
I. Background
The underlying facts of this case have been repeated in several orders. In sum,
Greenway, a Colorado corporation, is a supplier of plant nutrients and organic pesticides. It
owns the trademark “Greenway Nutrients,” which it includes on its line of products. As alleged
in the Amended Complaint (#107), at some unknown point in time, Greenway discovered
overseas suppliers for two new products: “No Powdery Mildew” is a product that eliminates
powdery mildew on agricultural products, and “No Spider Mites” is a product that eliminates

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spider mites. Greenway began importing the products and selling them under the “Greenway
Nutrients” trademark.
Later, Greenway, through its principles, met Defendant Steve Blackburn, and “his
company,” Defendant Fulfillment Solutions Services (FSS). Greenway and Mr. Blackburn
entered into a business relationship whereby FSS was to assist Greenway in expanding its
operations and market share. Greenway understood FSS to be a product fulfillment center in
Florida that could bottle and ship products throughout the United States. Mr. Blackburn
subsequently introduced Greenway to Mr. Selakovic, who was Mr. Blackburn’s business partner.
In furtherance of their business relationship, Greenway and FSS through Mr. Blackburn
executed a Fulfillment Agreement. The agreement provided that FSS would provide fulfillment
services to Greenway for its new products. Mr. Selakovic purchased some of the product with
his credit card, presumably to begin fulfillment services. Greenway also executed Nondisclosure
Agreements1 with Mr. Blackburn and Mr. Selakovic so that it could share its confidential
information with them during the course of business.
Later, Mr. Blackburn and Mr. Selakovic allegedly fabricated a dispute with Greenway
allegedly for the purpose of reneging on the contract and to keep the inventory of product they
had acquired. In an attempt to resolve the fictional dispute, Mr. Blackburn represented to
Greenway that Mr. Selakovic was interested in investing in Greenway. Mr. Blackburn went to
Greenway’s office, representing that he needed to conduct due diligence for the invest plan.

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The Defendants allege that the Nondisclosure Agreement purportedly entered into by Mr.
Selakovic and attached to the Amended Complaint is a forged. The Court does not have
occasion to address that issue today, as the Nondisclosure Agreement is not relevant to its ruling.
However, the Court warns that the affirmative submission of false evidence is, at a minimum,
akin to fraud on the Court, for which for which severe sanctions may be imposed. See Garcia v.
Berkshire Life Ins. Co. of America, 569 F.3d 1174, 1182 (10th Cir. 2009).
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During that time, Mr. Blackburn had access to all of Greenway’s proprietary and confidential
information.
Greenway alleges that Mr. Blackburn and Mr. Selakovic used the confidential
information that they obtained to reverse engineered Greenway’s No Spider Mites product and
that they began selling the reproduced, counterfeit product with the Greenway trademark.
Further, Mr. Blackburn and Mr. Selakovic allegedly began selling Greenway’s stock of No
Spider Mites and No Powdery Mildew, which bore the Greenway trademark, without
authorization. These sales took place through FSS and Defendant Supreme Growers, LCC, a
Colorado limited liability company. Greenway alleges that the Defendants used Greenway’s
internal customer notes to sell the infringing products to Greenway’s own customers.
Greenway asserts claims for breach of contract against Mr. Blackburn, FSS, and Mr.
Selakovic; unjust enrichment against Mr. Blackburn, FSS, and Mr. Selakovic; and violations of
the Lanham Act (trademark infringement under 15 U.S.C. § 1114, and false designation of origin
under 15 U.S.C. § 1125) against all Defendants. Greenway asserts federal subject matter
jurisdiction of this Court pursuant to 28 U.S.C. § 1331, and requests that the Court exercise
supplemental jurisdiction over the attendant state law claims.
The Defendants move to dismiss all claims for lack of personal jurisdiction and failure to
state a claim for which relief can be granted pursuant to Fed. R. Civ. P. 12(b)(2) and (6). The
matter was referred to the Magistrate Judge for a report and recommendation.
The Recommendation issued by the Magistrate Judge recommends that the Motion to
Dismiss be granted with respect to the breach of contract claims and all claims against Supreme
Growers, LLC. No party objects to that part of the Recommendation. The Court therefore
reviews that part of the Recommendation only for clear error. See Fed. R. Civ. P. 72, Advisory

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Committee Note. Having reviewed the Recommendation and seeing no clear error, the Court
adopts the Recommendation that the Motion to Dismiss be granted, in part, with respect to the
breach of contract claims and all claims against Supreme Growers, LLC. Accordingly, the
breach of contract claims against Mr. Blackburn and Mr. Selakovic, and all claims against
Supreme Growers, LLC, are dismissed.
The Magistrate Judge also recommends that the Motion to Dismiss be denied with
respect to the claims under the Lanham Act (trademark infringement and false designation of
origin) and for unjust enrichment. The Magistrate Judge found that Greenway made a prima
facie showing of personal jurisdiction over these Defendants and that the First Amended
Complaint sufficiently pled the claims. On the issue of personal jurisdiction, the Magistrate
Judge determined that Mr. Blackburn, FSS, and Mr. Selakovic waived their right to contest
specific personal jurisdiction pursuant to forum selection clauses found in the contracts entered
into by the parties.
The Defendants filed timely Objections to the Recommendation. The Defendants object
only to the Magistrate Judge’s finding that the Court has personal jurisdiction over them with
regard to the Lanham Act claims.
II. Standard of Review
When a Magistrate Judge issues a Recommendation on a dispositive motion, the parties
may file specific, written objections within fourteen days after being served with a copy of the
Recommendation. 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b). This Court shall make a de
novo determination of those portions of the Recommendation to which timely and specific
objection is made. U.S. v. One Parcel of Real Prop. Known as 2121 E. 30th St., 73 F.3d 1057,
1060 (10th Cir. 1996).

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Federal Rule of Civil Procedure 12(b)(2) provides that a defendant may move to dismiss
a claim for lack of personal jurisdiction over the person. The Plaintiff bears the burden of
establishing personal jurisdiction over the Defendants. See OMI Holdings, Inc. v. Royal Ins. Co.,
149 F.3d 1086, 1091 (10th Cir. 1998). In the preliminary stages of litigation, the Plaintiff’s
burden is light. Where, as here, there has been no evidentiary hearing, and the motion to dismiss
for lack of personal jurisdiction is decided on the basis of the Complaint and affidavits, the
Plaintiff need only make a prima facie showing that jurisdiction exists. See Wenz v. Memery
Crystal, 55 F.3d 1503, 1505 (10th Cir. 1995).2
For purposes of reviewing a motion to dismiss, the Court accepts all well-pled facts
alleged in the Complaint as true — that is, factual allegations that are plausible, non-conclusory,
and non-speculative. See Bell Atl. Corp v. Twombly, 550 U.S. 544 (2007). If jurisdictional
allegations in the Complaint are challenged by an appropriate pleading, the Plaintiff has the duty
to support its allegations by competent proof. See Pytlik v. Prof’l Res., Ltd., 887 F.3d 1371,
1376 (10th Cir. 1989). If the parties present conflicting affidavits, all factual disputes must be
resolved in the Plaintiff’s favor. See Wenz, 55 F.3d at 1505.
III. Analysis
As the Court understands it, the Defendants argue that any forum selection clauses
contained in the contracts attached to the complaint apply only to the breach of contract claims
and do not establish a consent to personal jurisdiction for purposes of the federal Lanham Act
claims. The Defendants argue that because this is a federal question case, Greenway must
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Of course, even if the Plaintiff meets its burden of establishing personal jurisdiction on the
pleadings and by affidavit, it may be reviewed again at subsequent stages in the proceedings as
evidence accumulates. See FDIC v. Oaklawn Apartments, 959 F.2d 170, 174 (10th Cir. 1992).
Ultimately, at trial, the Plaintiff must establish that personal jurisdiction exists by a
preponderance of the evidence. See Dennis Garberg & Assoc., Inc. v. Pack-Tech Int’l Corp.,
115 F.3d 767, 773 (10th Cir. 1997).
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establish an independent basis for personal jurisdiction over them with regard to the Lanham Act
claims. They argue that Greenway has not alleged sufficient facts to show that the Defendants
had minimum contacts with Colorado that gave rise to the Lanham Act claims.
1. Consent to Personal Jurisdiction
A party may consent to jurisdiction by assenting to a forum selection clause contained in
a contract. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 n.14 (1985). By consenting
to jurisdiction, a party waives any due process challenges that it could have otherwise brought.
See Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 590 (1991). Forum selection clauses are
“prima facie valid and should be enforced unless enforcement is shown by the resisting party to
be unreasonable under the circumstances.” See The Breman v. Zapata Off-Shore Co., 407 U.S.
1, 10 (1972); Riley v. Kingsley Underwriting Agencies, Ltd., 969 F.2d 953, 957 (10th Cir. 1992).
To overcome the presumption that a forum selection clause provision is valid, a party must make
“a showing of inconveniences so serious as to foreclose a remedy, perhaps coupled with a
showing of bad faith, overreaching, or lack of notice.” See Riley, 969 F.2d at 958.
Here, only the Fulfillment Agreement, entered into by Greenway and FSS through Mr.
Blackburn, contains a forum selection clause. 3 The clause provides:
This Agreement shall be deemed to have been negotiated and
executed in the State of Colorado, who shall have exclusive
jurisdiction over this matter with venue in Denver, CO. The laws
of the State of Colorado shall govern this Agreement and all
matters arising out of or otherwise relating to this Agreement. The
parties hereby submit to the personal jurisdiction of the state and
federal courts of the State of Colorado.
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The Non-Disclosure Agreements, purportedly entered into by Mr. Blackburn and Mr.
Selakovic, contain only a provision that provides that the agreements will be governed by the law
of the State of Colorado. This is a choice of law provision, not a forum selection clause. The
provision does not provide for the location of dispute resolution, nor does it purport to bind the
parties to the jurisdiction of a particular court. Thus, the execution of these contracts alone do
not confer personal jurisdiction over Mr. Blackburn or Mr. Selakovic.
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The Defendants do not dispute the validity of this clause or argue that enforcement would
be unreasonable or unjust. The Defendants argue only that the clause does not operate as
consent to personal jurisdiction with regard to the Lanham Act claims asserted here.
Although the Tenth Circuit has not addressed the issue of whether a forum selection
clause applies to non-contract claims, the Supreme Court has applied a forum selection clause in
a case involving tort claims. See Carnival Cruise Lines, 499 U.S. at 588. Other Circuit Courts
have held that where tort claims “ultimately depend on the existence of a contractual
relationship” between the parties, such claims are covered by a contractually-based forum
selection clause, despite the “pleading of alternative non-contractual theories of liability.” See
Coastal Steel Corp. v. Tilghman Wheelabrator Ltd., 709 F.2d 190, 203 (3d Cir. 1983), overruled
on other grounds, Lauro Lines v. Chasser, 490 U.S. 495 (1989)); Lambert v. Kysar, 983 F.2d
1110, 1121-22 (1st Cir. 1993) (holding that “contract-related tort claims involving the same
operative facts as a parallel claim for breach of contract should be heard in the forum selected by
the contracting parties.”).
Here, the Court is persuaded that the Lanham Act claims depend on the existence of the
contractual relationship between Greenway and the Defendants and involve the same operative
facts as a parallel breach of contract claim. Greenway alleges that the Defendants sold the stock
of Greenway product without authorization and in violation of Greenway’s trademark rights.
Prior to that, however, the parties entered into the Fulfillment Agreement, which provided that
the Defendants would carry out fulfillment and distribution services for Greenway. This
obligation required the Defendants to purchase product and bottling materials and to fulfill
customer orders on behalf of Greenway. Thus, in order to determine whether the Defendants
acted in violation of Greenway’s rights, or rather, in accordance with the contract, will
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necessarily rely on an interpretation of the Fulfillment Agreement. Because the Lanham Act
claims are related to the Fulfillment Agreement, which expressly provides consent to jurisdiction
in Colorado, the Court finds that the FSS and Mr. Blackburn have waived their right to contest
personal jurisdiction in Colorado on due process grounds.
2. Due Process Analysis
The Court proceeds with the traditional due process analysis to determine whether it may
exercise personal jurisdiction over Mr. Selakovic.
Before a federal court can assert personal jurisdiction over a non-resident defendant in a
federal question case, the Court must determine (1) whether any applicable statute potentially
confers jurisdiction by authorizing service of process on the defendant, and (2) whether the
exercise of jurisdiction comports with due process. Trujillo v. Williams, 465 F.3d 1210, 1217
(10th Cir. 2006). Because the Lanham Act does not, by itself, provide for nationwide service of
process, Fed. R. Civ. P. 4(k)(1)(A) refers the Court to the Colorado long-arm statute. Colorado’s
long-arm statute confers maximum jurisdiction permissible consistent with the Due Process
Clause. Archangel Diamond Corp. v. Lukoil, 123 P.3d 1187, 1193 (Colo. 2005); Dudnikov v.
Chalk & Vermilion Fine Arts, Inc., 514 F.3d 1063, 1070 (10th Cir. 2008). Thus, the statutory
inquiry effectively collapses into the second, constitutional inquiry. The Court therefore
proceeds directly to the constitutional issue.
The due process analysis is a two-step inquiry. First, the Court examines whether the
non-resident defendant has “minimum contacts” with the forum state. Melea, Ltd. v. Jawer SA,
511 F.3d 1060, 1065 (10th Cir. 2007). Second, the Court considers whether the exercise of
jurisdiction over the defendant offends “traditional notions of fair play and substantial justice,”
— in other words, whether the exercise of jurisdiction is reasonable under the circumstances. Id.

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To have sufficient minimum contacts for “specific” personal jurisdiction, 4 the out-ofstate defendant must have (1) purposefully directed activities at forum residents, and (2) the
litigation must result from alleged injuries that arise out of those forum-related activities. See
Dudnikov, 514 F.3d at 1071 (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472). The
touchstone of this analysis is whether the defendant’s conduct and connection with the forum
State are such that he should reasonably anticipate being haled into court there. World-Wide
Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980). The aim of the “purposeful direction”
doctrine has been said to ensure that the defendant is not bound to appear to account for merely
“random, fortuitous, or attenuated contacts” with the forum state. Dudnikov, 514 F.3d at 1071
(quoting Burger King, 471 U.S. at 475 ). The question of whether a non-resident defendant has
sufficient minimum contacts with the forum state to establish personal jurisdiction must be
decided on the particular facts of each case. See Benton v. Cameco Corp., 375 F.3d 1070, 1076
(10th Cir. 2004).
In Calder v. Jones, 465 U.S 783 (1984), the Supreme Court set forth what is now known
as the “Calder effects test.” The Court held that, where a defendant intentionally engages in
tortious actions outside the forum state, and her actions are expressly directed at causing a
harmful effect within the forum state, a sufficient nexus exists between the defendant and the
state so as to satisfy due process and constitute “purposeful direction” under the “minimum
contacts” analysis. Id. The Tenth Circuit has refined the Calder test to three elements,
explaining that a defendant has “purposefully directed” its activities at Colorado or its residents
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The minimum contacts standard is also satisfied based on a defendant’s “continuous and
systematic” general business contacts with the forum state. Helicopteros Nacionales v. Hall, 466
U.S. 408, 415 (1984). Such contacts would establish that the Court has general personal
jurisdiction over the defendant. Here, however, the Amended Complaint does not allege that any
of the Defendants were engaged in systematic and continuous activity in Colorado. Thus, the
Court concludes that it does not have general personal jurisdiction over the Defendants.
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when the defendant has (1) taken intentional tortious action, (2) that was expressly aimed at
Colorado, (3) with the knowledge that the brunt of the injury from the action would be felt in
Colorado. Dudnikov, 514 F.3d at 1071. Further, the Tenth Circuit takes a “restrictive” approach
when analyzing whether a defendant expressly aimed his activities at the forum, explaining that
the “express aiming” requirement looks at the “focal point” of the defendant’s intentional action,
and holding that the forum state itself must be the focal point of the tort. Id. at 1075.
Indeed, the mere fact that an out-of-state defendant has committed a tort that causes
economic injury to a forum resident does not necessarily establish that the defendant engaged in
the constitutionally required minimum contacts with the forum state. See Far W. Capital, Inc. v.
Towne, 46 F.3d 1071, 1077-80 (10th Cir. 1995). Rather, the plaintiff must show that there was
“something more” than the mere foreseeability of economic injury. Id.
For purposes of personal jurisdiction analysis, trademark infringement and false
designation of origin are considered tortious acts. See, e.g, Impact Productions, Inc. v. Impact
Productions, LLC, 341 F.Supp.2d 1186, 1190 (D.Colo. 2004). Mr. Selakovic argues that under
the Calder effects test, Greenway has not alleged that he “expressly aimed” any tortious activity
at Colorado.
The Court disagrees. Trademark infringement turns on whether customers are likely to
be confused, mistaken, or deceived by the use of a trademarked product. 15 U.S.C. §§ 1114(1).
Thus, the effects of an infringement will be felt wherever the infringing products are marketed or
sold because that is where the confusion, mistake, or deceit will occur. Here, Greenway alleges
that the Defendants sold counterfeit and unauthorized product through a Colorado distributor,
Supreme Growers, LLC. It is therefore reasonable to infer that the effects of the Defendants’
allegedly infringing acts would be felt in Colorado. Further, Greenway alleges that Mr.

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Selakovic used his credit card to purchase raw product for the benefit of Greenway, a forum
resident, and in furtherance of their business relationship. Mr. Selakovic therefore took
affirmative acts to establish a business connection in Colorado. The Court finds that the
Amended Complaint sufficiently alleges that Mr. Selakovic expressly aimed his conduct at
Colorado.
Accordingly, the Court agrees with the Magistrate Judge that at this early stage of
litigation, Greenway has met its burden of making a prima facie showing of personal jurisdiction
over Defendants Blackburn, FSS, and Selakovic.
IV. Conclusion
For the forgoing reasons, the Recommendation (#124) of the Magistrate Judge that the
Defendant’s Motion to Dismiss (#109) be granted in part and denied in part is ADOPTED. The
Motion to Dismiss is GRANTED with respect to the breach of contract claims and all claims
against Supreme Growers, LLC. The motion is DENIED in all other respects.
Dated this 31st day of March, 2015.
BY THE COURT:

Marcia S. Krieger
Chief United States District Judge

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