George & Company LLC v. Spin Master Corp et al

Filing 70

ORDER granting 63 Defendants' Motion to Dismiss Plaintiff's Third Amended Complaint. Plaintiff George & Company LLC may file a Fourth Amended Complaint against Cardinal Industries, Inc. following this Order on or before January 9, 2019. If George & Co. does not timely file a Fourth Amended Complaint, the Court will dismiss this case without further notice. Signed by Judge Sheri Polster Chappell on 12/27/2018. (LMF)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
FORT MYERS DIVISION
GEORGE & COMPANY LLC,
Plaintiff,
v.

Case No: 2:18-cv-154-FtM-38MRM

SPIN MASTER CORP, SPIN
MASTER U.S. HOLDINGS, INC.,
SPIN MASTER LTD, SPIN MASTER,
INC., CARDINAL INDUSTRIES, INC.
and JOEL BERGER,
Defendants.
/
OPINION AND ORDER1
Before the Court is Defendants Spin Master Corp., Spin Master U.S. Holdings,
Inc., Spin Master Ltd., Spin Master Inc., Cardinal Industries, Inc., and Joel Berger's Motion
to Dismiss Plaintiff’s Third Amended Complaint (Doc. 63) and George & Company LLC’s
Response in opposition (Doc. 67).
Background
Plaintiff George & Co. is the owner of trademarks relating to a dice game called
LCR or Left Center Right. (Doc. 55 at 11-13). George & Co. entered into a license
agreement with Cardinal Industries, Inc. that gave Cardinal the right to manufacture and

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sell an electronic version of LCR until December 31, 2011. (Doc. 32-1). Under the
Agreement, Cardinal would do nothing in derogation or dilution of certain designs and
marks relating to LCR during the Agreement’s term “or any time thereafter.” (Doc. 55 at
15). The Agreement also had confidentiality and choice-of-venue clauses. The choiceof-venue clause read:
The validity, construction and performance of this Agreement shall be
governed by, and interpreted in accordance with, the laws of the State of
Florida. In any dispute relating to this Agreement, the parties hereto admit
venue and submit themselves to the exclusive jurisdiction of the tribunals of
the United States District Court for Middle District of Florida, expressly
waiving any venue to which they may be entitled by their present or future
domiciles.
(Doc. 55 at 16).
Besides selling the electronic LCR, Cardinal distributed a conventional, nonelectronic version of LCR to Walmart, Toys R Us, and Kohl’s. (Doc. 41-1 at 6). Cardinal
distributed the conventional version under purchase orders that Cardinal sent to George
& Co., and not under the Agreement. (Doc. 64-2 at 3). Cardinal became an important
distributer of LCR, and George & Co. relied on Cardinal’s President, Joel Berger, to
represent its interests to national retailers. (Doc. 41-1 at 7-9).
Trouble started when Cardinal was acquired by Spin Master2, which sells a game
identical to LCR called, “PassPlay: The Game of LeftCenterRight.” (Doc. 55 at 16-26).
Sometime after the acquisition, PassPlay started replacing LCR on retail shelves, and
retailers fulfilled orders for LCR with PassPlay. (Doc. 41-1 at 15-34). Spin Master and

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George & Co. sues Spin Master Corp., Spin Master U.S. Holdings, Inc., Spin Master
Ltd., and Spin Master, Inc. In this Opinion and Order, the Court collectively refers to these
defendants as “Spin Master” or the “Spin Master Defendants.”

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third-party websites and retailers have used “LCR,” “Left Center Right,” and variations
thereof to identify PassPlay. (Doc. 55 at 27-37).
George & Co. sued Defendants, along with Spin Master Acquisition, Inc. and
Bonnie Berger Canner, and the Court dismissed the First Amended Complaint in part for
lack of personal jurisdiction over all Defendants but Cardinal. (Doc. 46). George & Co.
filed a Third Amended Complaint to drag Spin Master and Berger back into the case.
(Doc. 55).

Defendants again move to dismiss, arguing this Court lacks personal

jurisdiction and challenging Count IV under Rule 12(b)(6). (Doc. 63).
Discussion
Courts consider two questions when asked to exercise jurisdiction over out-of-state
defendants: “(1) whether personal jurisdiction exists under the forum state’s long-arm
statute; and (2) whether exercising jurisdiction over the nonresident defendant would
violate the Due Process Clause of the Fourth Amendment.” Rowe v. Gary, Williams,
Parteni and Gary, P.L.L.C., 723 F. App’x 871, 874 (11th Cir. 2018) (quoting United Techs.
Corp. v. Mazer, 556 F.3d 1260, 1274 (11th Cir. 2009)). George & Co. bears the initial
burden of alleging facts sufficient to establish a prima facie case of jurisdiction. Wolf v.
Celebrity Cruises, Inc., 683 F. App’x 786, 790 (11th Cir. 2017). The burden then shifts to
Defendants to rebut George & Co.’s allegations. Id. If the rebuttal affidavits succeed, the
burden “shifts back to [George & Co.] to produce evidence supporting jurisdiction unless
those affidavits contain only conclusory assertions that the defendant is not subject to
jurisdiction.” Id. (quoting Meier ex rel. Meier v. Sun Int’l Hotels, Ltd., 288 F.3d 1264, 126869 (11th Cir. 2002)). If the parties’ evidence conflicts, “the court must construe all
reasonable inferences in favor of the plaintiff.” Id.

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George & Co. presents three arguments to trigger Florida’s long-arm statute, Fla.
Stat. § 48.193(1)(a): (1) Cardinal consented, on behalf of itself and Spin Master, to the
jurisdiction of this Court in all disputes relating to the Agreement; (2) Cardinal breached
the Agreement by failing to return or destroy inventory and production implements; and
(3) Cardinal, Spin Master, and Berger committed tortious acts in Florida. (Doc. 67).
Before addressing these arguments, Florida law requires the Court to first consider
“whether the allegations of the complaint state a cause of action.” Dollar Rent a Car, Inc.
v. Westover Car Rental, LLC, No. 2:16-CV-363-FTM-29C, 2017 WL 5495126, at *3 (M.D.
Fla. Nov. 16, 2017) (quoting PVC Windoors, Inc. v. Babbitbay Beach Const., N.V., 598
F.3d 802, 808 (11th Cir. 2010)).
A. Pleading Sufficiency of the Complaint
The Court considered the sufficiency of George & Co.’s nine counts in a previous
order.

(Doc. 46).

Counts I-III and V-IX survived scrutiny, and Defendants do not

challenge them here. But the Court dismissed Count IV (breach of the covenant of good
faith and fair dealing) as duplicative of the breach-of-contract claim in Count I. (Doc. 46).
George & Co. has tried to resuscitate Count IV by adding paragraphs 136 and 137 to the
Third Amended Complaint. (Doc. 55 at 50-51). Defendants argue that Count IV remains
duplicative of Count I despite the new allegations, and the Court agrees. Even with
paragraphs 136 and 137, Count IV is based on the same conduct underlying Count I:
Cardinal shared confidential information with Spin Master and replaced LCR with
PassPlay on store shelves.

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George & Co. sufficiently pled Counts I-III and V-IX of the Third Amended
Complaint for the reasons stated in the Court’s previous order, but Count IV is duplicative
of Count I and will be dismissed.
B. The Reach of Florida’s Long-Arm Statute
George & Co. proceeds under the same three subsections of Florida’s long-arm
statute that the Court addressed before, but the parties have submitted new evidence
and arguments for the Court to consider.
1. Consent
George & Co. renews its argument that Cardinal consented to jurisdiction in Florida
when it executed the License Agreement. Fla. Stat. § 48.193(1)(a)(9) grants parties the
right to confer personal jurisdiction by agreement, but the agreement must:
(1) include a choice of law provision designating Florida Law as the
governing law, (2) include a provision whereby the non-resident agrees to
submit to the jurisdiction of the courts of Florida, (3) involve consideration
of not less than $250,000, (4) not violate the United States Constitution, and
(5) either bear a substantial or reasonable relation to Florida or have at least
one of the parties be a resident of Florida or incorporated under its laws.
Dollar Rent a Car, 2017 WL 5495126 at *5. George & Co.’s first attempt to invoke
subsection (1)(a)(9) failed because it did not meet the $250,000 threshold, which “may
be satisfied by consideration on the face of the contract and from transactions arising
from the contract.” Corp. Creations Enters. LLC v. Brian R. Fons Attorney at Law P.C.,
225 So. 3d 296, 302 (Dist. Ct. App. Fla. 2017).
In the Third Amended Complaint, George & Co. pleads that it and Cardinal
“anticipated that the sales of the product covered by the agreement would exceed
$250,000.00 in the aggregate.” (Doc. 55 at 13-14). Defendants correctly argue that
George & Co. cannot rely on anticipated consideration when pleading jurisdiction under

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Fla. Stat. § 48.193(1)(a)(9). (Doc. 63 at 5-6). In response, George & Co. submitted
evidence that sales under the Agreement did, in fact, exceed $250,000. (Doc. 67-1 at 3).
But this evidence does not cure George & Co.’s deficient pleading. Federal pleading
standards and the shifting burden give defendants notice of a plaintiff’s jurisdictional
argument and an opportunity to rebut. The Court will not undermine this process by
allowing George & Co. to ambush Defendants with a new theory of jurisdiction in its
Response.
Because the Third Amended Complaint establishes no prima facie case for
consent jurisdiction, George & Co. cannot rely on Fla. Stat. § 48.193(1)(a)(9). But the
evidence suggests facts that, if properly pled, might satisfy Florida’s consent jurisdiction
requirements. The Court will therefore give George & Co. another opportunity to amend
its complaint to address this pleading deficiency.
2. Breach of Contract in Florida
George & Co. has used the same tactic to support jurisdiction over Defendants
based on Cardinal’s breach of the Agreement. Under Fla. Stat. § 48.193(1)(a)(7), Florida
courts can exercise jurisdiction over parties who “breach a contract in this state by failing
to perform acts required by the contract to be performed in this state.” The Court rejected
George & Co.’s previous attempt to proceed under this subsection because the provisions
Cardinal allegedly breached required no acts to be performed in Florida.
In its Response, George & Co., for the first time, accuses Cardinal of breaching
the Agreement by failing to return inventory and production implements after the
Agreement expired. (Doc. 67 at 6). But again, George & Co.’s new argument does not
cure its failure to plead a prima facie case for jurisdiction under Fla. Stat. §

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48.193(1)(a)(7). George & Co.’s argument also fails because this new breach has no
relation to the breach alleged in the complaint, and personal jurisdiction only attaches if
the “breach formed the bases for the cause of action for which relief is sought.” Olson v.
Robbie, 141 So. 3d 636, 640 (Dist. Ct. App. Fla. 2014).
George & Co. has not shown that this Court can extend jurisdiction to Defendants
under Fla. Stat. § 48.193(1)(a)(7).
3. Tortious Acts Committed within Florida
George & Co. finally renews its partially successful argument that Defendants are
subject to Fla Stat. § 48.193(1)(a)(2) and (1)(a)(6) because they committed tortious acts
and caused injury in Florida. For Florida’s long-arm statute, a tortious act occurs in Florida
when it causes injury there. Louis Vuitton Malletier, S.A. v. Mosseri, 736 F.3d 1339, 1353
(11th Cir. 2013). As the Court held, George & Co. has presented enough evidence to
extend the long-arm statute to Spin Master Inc., Spin Master Ltd., Cardinal, and Berger.
The new evidence presented by Defendants does not alter the Court’s analysis because
it remains clear that the effects of the torts were felt in Florida.
George & Co. hopes to rope in Spin Master Corp. and Spin Master U.S. Holdings
by pleading that Cardinal became their agent when Spin Master acquired Cardinal and
“utilized and continue to utilize Cardinal as their agent and alter ego to advertise, promote,
and sell Spin Master products.” (Doc. 55 at 17). A foreign parent corporation is normally
“not subject to the jurisdiction of a forum state merely because a subsidiary is doing
business there.” Meier, 288 F.3d at 1272. But agency-based jurisdiction exists “where
the parent entity exercises operational control over a subsidiary.” Hard Candy, LLC v.
Hard Candy Fitness, LLC, 106 F. Supp. 3d 1231, 1240-41 (S.D. Fla. 2015). Defendants

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rebutted George & Co.’s agency allegations with evidence of Cardinal’s independence
from its parent company, Spin Master Ltd., and the other Spin Master Defendants. (Doc.
64-2 at 4-7). George & Co. responded with evidence of control exercised by Spin Master
Ltd. and Spin Master Inc., but not with evidence relating to Spin Master Corp. and Spin
Master U.S. Holdings. (Doc. 67 at 2-4). So the Florida long-arm statute does not extend
to these latter two Spin Master Defendants.
C. Due Process
Having found Florida’s long-arm statute to apply to some Defendants, the Court
must again decide whether due process permits jurisdiction in this forum. Courts in the
Eleventh Circuit apply a three-part test in specific-jurisdiction cases:
(1) whether the plaintiff’s claims arise out of or relate to at least one of the
defendant’s contacts with the forum; (2) whether the nonresident defendant
purposefully availed himself of the privilege of conducting activities within
the forum state, thus invoking the benefit of the forum state’s laws; and (3)
whether the exercise of personal jurisdiction comports with traditional
notions of fair play and substantial justice.
Rowe, 723 F. App’x at 875 (internal quotation marks omitted). The plaintiff must prove
the first two prongs. Id. In this part of the analysis, courts focus on a defendant’s “contacts
with the forum State itself, not the defendant’s contacts with persons who reside there.”
Aviation One of Fla., Inc. v. Airborne Ins. Consultants (PTY), Ltd., 722 F. App’x 870, 880
(11th Cir. 2018) (citing Walden v. Fiore, 571 U.S. 277 (2014)). The contacts cannot be
merely “random, fortuitous, or attenuated.” Id. And “the plaintiff cannot be the only link
between the defendant and the forum.” Id. Minimum contacts are not established by the
mere fact that a defendant signed a contract with a forum resident, or by “mere injury to
a forum resident.” Id.

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An alternative test is available in intentional-tort cases. Id. at 879. The Calder
effects test “requires a showing that the defendant (1) committed an intentional tort (2)
that was directly aimed at the forum, (3) causing an injury within the forum that the
defendant should have reasonably anticipated.” Id. at 879-80 (quoting Oldfield v. Pueblo
De Bahia Lora, S.A., 558 F.3d 1210, 1220 n.28 (11th Cir. 2009)). It is not enough to show
that a defendant intentionally caused damage to a company based in Florida. “The proper
question is not where the plaintiff experienced a particular injury or effect but whether the
defendant’s conduct connects him to the forum in a meaningful way.” Walden, 571 U.S.
at 290.
George & Co. urges the Court to adopt a third test based on stream-of-commerce.
George & Co. proposes “that selling an infringing product through national retailers, when
done with the intention of developing a national market for the product, is sufficient to
support jurisdiction over the supplier in the forums where the national retailer sells the
product.” (Doc. 67 at 13). While the plurality opinion in J. McIntyre Mach., Ltd. v. Nicastro,
564 U.S. 873 (2011) recognized there may be exceptions to the general purposefulavailment test in intentional-tort cases, neither the Supreme Court nor the Eleventh Circuit
has used the stream-of-commerce test as such an alternative. In fact, the Nicastro
plurality found that the stream-of-commerce test cannot displace the general rule in a
products-liability case. Id. at 877-78. The Court here likewise declines to adopt the
proposed stream-of-commerce standard as an alternative. Instead, placing goods into
commerce with the expectation of nationwide distribution is a fact the Court will consider
when applying the existing tests.
1. Cardinal

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Cardinal is a New York corporation with a principal place of business in New York.
(Doc. 63-1 at 14). It has no property or employees in Florida and does not conduct
business within the state or direct its advertising to consumers in Florida. (Doc. 63-1 at
14). But some of Cardinal’s products, including PassPlay, are sold in Florida stores.
(Doc. 63-1 at 14).
The Court once found that Cardinal used George & Co.’s uniform product code
(“UPC”) and the LCR mark to trick Walmart into replacing LCR with PassPlay on its retail
shelves in Florida. (Doc. 46). But the Defendants have presented evidence in support of
their Motion that sheds new light on the switch. (Doc. 64-2). It started when Spin Master
offered to sell PassPlay to Walmart. (Doc. 64-2 at 10). Walmart’s Buyer for Games,
Leslie Treat, recognized PassPlay as equivalent to the LCR game she was buying from
Cardinal, so she contacted Berger. (Doc. 64-2 at 10). Thus prompted, Berger contacted
Spin Master and learned that distributing PassPlay would be more profitable. (Doc. 64-2
at 11). Berger and Treat agreed that Cardinal would sell Walmart PassPlay instead of
LCR when Cardinal’s LCR inventory ran out, which occurred in December 2017. (Doc.
64-2 at 11). At Walmart’s request and with help from Spin Master, Cardinal added
PassPlay to Walmart’s database system as a product equivalent to LCR. (Doc. 64-2 at
12-13). Cardinal’s sales of PassPlay to Walmart start with purchase orders sent by
Walmart in Arkansas to Cardinal in New York. Walmart or its agents pick up the products
in New York or California before distributing them to stores. (Doc. 64-2 at 2). George &
Co. has rebutted none of these facts.3

George & Co. submitted an affidavit from Treat in which she testifies, “At no time was I
made aware that there was a change in the ownership of the ‘LCR’ or ‘Left Center Right’
3

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In short, Cardinal did not manipulate Walmart into selling PassPlay in Florida.
Rather, Berger negotiated with Walmart employees in Arkansas to sell PassPlay, and the
sales occurred in New York and California. Defendant’s new evidence severs the link
George & Co. had built between Cardinal and Florida with the independent actions of a
third party. It is Walmart, not Cardinal, that chose to sell PassPlay in its Florida stores.
And Walmart’s sales of PassPlay to consumers in Florida cannot form the relationship
between Cardinal, Florida, and this case necessary for personal jurisdiction because “the
relationship must arise out of contacts that the defendant himself creates with the forum
State.” See Walden, 571 U.S. at 284 (internal quotations omitted).
George & Co. also points to the Agreement as a basis for jurisdiction over Cardinal.
Cardinal’s consent to this jurisdiction in the Agreement’s forum-selection clause likely
satisfies due-process requirements. See Burger King Corp. v. Rudzewicz, 471 U.S. 462,
473 n.14 (1985). But George & Co. did not plead a prima facie case for jurisdiction under
the Florida long-arm statute’s contract or consent prongs, as explained above. Because
“[f]ederal courts ordinarily follow state law in determining the bounds of their jurisdiction
over persons,” this Court will not exercise jurisdiction on grounds explicitly excluded from
Florida’s long-arm statute.
George & Co. has not shown that this Court can exercise jurisdiction over Cardinal,
but, as stated above, the Court will allow George & Co. another amended complaint to
address the pleading deficiency that sunk its consent-jurisdiction argument.
2. Spin Master Inc. and Spin Master Ltd.

game or the game itself or of the company with which I was dealing.” (Doc. 58-15). But
Treat’s testimony is not inconsistent with Defendants’ evidence.

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The Court held before that George & Co. failed to establish personal jurisdiction
over Spin Master Inc. and Spin Master Ltd. (Doc. 46 at 19-22). In its Third Amended
Complaint and its Response to Defendants’ Motion, George & Co. attacks this issue with
three arguments: (1) Spin Master sells and ships PassPlay directly to Florida buyers; (2)
Spin Master can be haled into this Court through its agent, Cardinal; and (3) the Court
should apply the stream-of-commerce test to assert jurisdiction over Spin Master. (Doc.
55; Doc. 67). Having already declined to adopt the stream-of-commerce test, the Court
will address the two remaining arguments.
In response to George & Co.’s first argument, Defendants rebutted George & Co.’s
allegations of sales in Florida with testimony that “Spin Master Ltd. has not shipped any
product into Florida and has no sales in Florida” and that Spin Master Inc. sells PassPlay
to national retailers outside Florida, who distribute and sell the game throughout the
country, including in Florida. (Doc. 64-1 at 4-5). With the burden thus shifted back,
George & Co. produced spreadsheets from a warehousing company called DSV
Solutions Inc. (Doc. 67-1). The spreadsheets show that DSV warehoused products
described as “LCR in Tin” before the goods were shipped to buyers, including buyers in
Florida. (Doc. 67-1 at 7-68, 83-110). The spreadsheets do not mention Spin Master, yet
George & Co. President Peter Smilanich nevertheless interpreted them as proof that Spin
Master sold PassPlay to stores in Florida and shipped PassPlay into the state. (Doc. 671 at 2-3). But Spin Master’s Christopher Harrs clarified Spin Master’s relationship with
DSV. DSV receives and stores imported shipments of PassPlay. When Spin Master Inc.
receives a purchase order, it sends an invoice to DSV, DSV labels the product to be
shipped, and the buyer (or its carrier) takes possession of the shipment at DSV’s

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warehouses in California. The buyer is then responsible for shipping the product to its
destination. (Doc. 68-1 at 7-5). Given this testimony, the Court finds that the DSV
spreadsheets do not prove that Spin Master ships PassPlay to Florida, despite
Smilanich’s speculative and self-serving interpretation.
George & Co.’s argument that the Court can exercise jurisdiction over Spin Master
through its agent, Cardinal, fails because George & Co. has not established this Court’s
jurisdiction over Cardinal. Even if George & Co. shows consent jurisdiction over Cardinal
in a fourth amended complaint, the agency theory will not ensnare Spin Master because
Cardinal consented years before allegedly becoming Spin Master’s agent and thus could
not have consented at Spin Master’s direction.
After three attempts and ample opportunity to conduct discovery, George & Co.
has not shown it can produce evidence that supports this Court’s jurisdiction over Spin
Master. Nor has George & Co. requested transfer to an appropriate venue. The Court
will thus dismiss the claims against the Spin Master Defendants.
3. Joel Berger
The Court has found that it lacks jurisdiction over Berger. (Doc. 46 at 24). Since
then, George & Co. has not pled or proven any additional contacts between Berger and
Florida. George & Co. focused instead on bolstering allegations of Berger’s fiduciary
relationship with George & Co. and his active involvement in Cardinal’s operations. (See,
e.g., Doc. 55 at 3-5). These allegations do not alter the Court’s earlier analysis, and the
claims against Berger will be dismissed.
Accordingly, it is now
ORDERED:

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1. Defendants’ Motion to Dismiss Plaintiff’s Third Amended Complaint (Doc. 63)
is GRANTED.
2. Plaintiff George & Company LLC may file a Fourth Amended Complaint against
Cardinal Industries, Inc. following this Order on or before January 9, 2019. If
George & Co. does not timely file a Fourth Amended Complaint, the Court will
dismiss this case without further notice.
DONE and ORDERED in Fort Myers, Florida this 27th day of December, 2018.

Copies: All Parties of Record

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