FORECAST SALES v. AXXIOM MANUFACTURING, INC.
Filing
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ORDER denying 18 Motion to Transfer Case and also denying 23 Motion for Leave to File Surreply. Defendant has not made a convincing showing that a transfer to the Southern District of Texas would be clearly more convenient overall or that a transfer would more fully comport with the interests of justice. This case shall proceed in this District. Signed by Judge Sarah Evans Barker on 7/27/2011. (PGS)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
FORECAST SALES, a division of MCCOY )
)
INVESTMENTS, INC.,
)
Plaintiff,
)
)
vs.
)
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AXXIOM MANUFACTURING, INC.,
)
Defendant.
1:10-cv-01379-SEB-DML
ORDER DENYING DEFENDANT’S MOTION TO DISMISS OR TRANSFER
This cause is before the court on Defendant Axxiom Manufacturing’s (“Axxiom”)
motion to dismiss or transfer venue [Docket No. 18] filed December 19, 2010. Axxiom
argues that the more appropriate venue for this qui tam claim is the Southern District of
Texas and that it should therefore be transferred to that venue. Plaintiff Forecast Sales
(“Forecast”) responds that Axxiom has failed to meet its burden of establishing a need for
transfer, claiming that transferring this action would only shift the inconvenience from
Axxiom to Forecast and its third party witnesses. For the reasons detailed in this entry,
we DENY Defendant’s Motion to Dismiss or Transfer Venue.
Factual Background
Forecast, a division of McCoy Investments, Inc., is a company based in
Indianapolis, Indiana, that produces aftermarket parts, including replacement parts for
Schmidt Manufacturing abrasive blasting equipment. Schmidt Manufacturing is a
prominent brand name in the sandblasting industry. Forecast’s line of products is
registered under the “PIRATE BRAND” trademark.
Axxiom produces Schmidt Manufacturing and Axxiom Manufacturing brand
abrasive blasting industry products (“Schmidt/Axxiom MFG”). It is incorporated in
North Carolina but maintains its principal place of business in Fresno, Texas. The
company’s president, John K. Pirotte, is responsible for the overall management of
Axxiom, including its product manufacturing and marketing decisions, its advertising
decisions, and its business development activities. Axxiom employs various distributor
companies throughout the country to market and sell its products. Mr. Pirotte owns
residences in both Texas and North Carolina, and was served process in connection with
the instant suit at his home in North Carolina.
Forecast’s affiliate, IDS Blast Finishing (“IDS”), served as a Schmidt
Manufacturing stocking distributor from approximately June 1997 until November 30,
2006. C.J. Theriac worked as an employee for IDS for more than four years until he
resigned his position on October 16, 2008, and ended his employment on November 14,
2008. On December 3, 2008, Midwest Surface Prep, LLC (“Midwest”) was formed as an
Indiana limited liability company with Mr. Theriac as its registered agent. Midwest is the
current distributor of Schmidt/Axxiom MFG products, which competes against IDS and
Forecast’s PIRATE BRAND products.
On November 17, 2009 Axxiom filed a lawsuit against Forecast in the United
States District Court for the Southern District of Texas, Houston Division, Case No. 4:092
cv-03735, alleging copyright infringement, unfair competition, and unfair business
practices. The gravamen of Axxiom’s allegations is that Forecast copied protected
information from a written manual concerning Axxiom’s products and used that
information in its own manual. On October 29, 2010, Forecast filed the instant qui tam
false marking lawsuit against Axxiom on its own behalf of itself and the United States,
alleging that Axxiom was falsely marking its products with expired patent numbers, in
violation of 28 U.S.C. § 292.
Legal Analysis
I.
Standard of Review
The purpose of 28 U.S.C. § 1404(a) is “to prevent the waste of time, energy and
money and to protect litigants, witnesses and the public against unnecessary
inconvenience and expense.” Whitney v. Big Dog Holdings, Inc., No. 1:07-cv-1026, 2007
WL 3334503 at *2 (S.D. Ind. Nov. 7, 2007) (quoting Van Dusen v. Barrack, 376 U.S.
612, 616 (1964)). That section provides that, “for the convenience of parties and
witnesses, in the interest justice, a district court may transfer any civil action to any other
district or division where it might have been brought.” 28 U.S.C. § 1404(a). “Transfer is
appropriate under § 1404(a) where the moving party establishes that (1) venue is proper
in the transferor district, (2) venue and jurisdiction are proper in the transferee district,
and (3) the transfer will serve the convenience of the parties, the convenience of the
witnesses, and the interest of justice.” Whitney, 2007 WL 3334503 at *2 (internal
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citations omitted). The weight accorded each factor is committed to the sound discretion
of the court. Coffey v. Van Dorn Iron Works, 796 F.2d 217, 219 (7th Cir. 1986).
II.
Discussion
The parties agree that venue is proper for adjudication of this action in either
Indiana or Texas, so the only issue before the Court is whether a transfer of venue would
be more convenient and in the interest of justice pursuant to § 1404(a).1 Axxiom (as the
movant) has the burden of establishing that the Southern District of Texas “is not just
more convenient, but ‘clearly more convenient’ than the Southern District of Indiana.”
Whitney, 2007 WL 3334503 at *3 (quoting Coffey, 796 F.2d at 220) (emphasis added).
As mentioned above, “when making this determination, we consider the convenience of
the parties, the convenience of the witnesses, and the interest of justice in light of all the
circumstances of the case.” Id.
A.
Convenience of the Parties
An important factor in determining the convenience of the parties is the plaintiff’s
choice of forum and, as a general rule, “it is a longstanding principle that the plaintiff’s
choice of forum is entitled to ‘[a] large measure of deference.’” Id. at *4 (quoting
Chicago, R.I. & P.R. Co. v. Igoe, 220 F.2d 299, 304 (7th Cir. 1955)). The parties,
1
Axxiom proffers an alternative argument for dismissal, pursuant to Fed. R. Civ. Pro Rule
12(b)(3). However, the primary thrust of Axxiom’s argument is that the proper venue for this
action is Texas, not that the action should be dismissed. What’s more, in making the argument
for transfer, Axxiom concedes that venue is proper in the Southern District of Indiana.
Therefore, the Court shall focus on Axxiom’s primary argument, to wit, the motion to transfer,
and hereby denies the motion to dismiss.
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however, dispute the level of deference that should be accorded Forecast’s choice of this
forum in the case at bar. Axxiom cites Simonian v. Monster Cable Products, Inc., No.
10-C-1269, 2010 WL 4822899 (N.D. Ill. Nov. 22, 2010), arguing that the plaintiff’s
choice of forum is not entitled to substantial deference in a false patent marking claim
under 35 U.S.C. §292. Id. at *1. Axxiom contends that false patent marking claims are
qui tam actions where the federal government is the real party in interest, and therefore
the plaintiff’s choice of venue is entitled to less weight. Forecast rejoins, citing Whitney,
2007 WL 4822899 to the effect that its choice of venue is in fact entitled to great
deference because Forecast is located within this district and the alleged falsely marked
products were purchased here. Id. at *5 (finding that the events giving rise to the action,
such as the discovery, sale, and purchase of the items, occurred in the forum and gave the
action a substantial and direct connection to the forum despite the fact that neither the
plaintiff nor the defendant were located in the forum).
The false patent marking statute provides that “[a]ny person may sue for the
penalty in which event one-half shall go to the person suing and the other to the use of the
United States.” 35 U.S.C. § 292(b). In Simonian v. Oreck Corp., the court concluded that
§ 292(b) “constitutes a real qui tam statute because it sufficiently defines an offense
against the public, provides a penalty for that offense, allows an uninjured, private party
to pursue civil action for such an offense, and gives a portion of the award to that party.”
No. 10-C-1224, 2010 WL 3385465 at *2 (N.D. Ill. Aug. 23, 2010); see also Zojo
Solutions, Inc. v. Leviton Manu. Co., Inc., No. 10-C-881, 2010 WL 4257546 at *1 (N.D.
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Ill. Oct. 20, 2010) (according a plaintiff’s choice of forum “little weight” because its
“action for false marking [was] a qui tam action in which the real party in interest is the
United States.”).
Although our research has not revealed any Seventh Circuit precedent holding the
same, we find the reasoning in these cases persuasive. Accordingly, we hold that because
35 U.S.C. § 292(b) is a qui tam statute, Forecast’s choice of venue is to be afforded slight
deference rather than substantial deference. See, e.g., id. (“little weight” given to
plaintiff/relator’s choice of venue); Monster, 2010 WL 4822899 at *1 (relator “not
entitled to substantial deference”); Simonian v. Maybelline, LLC., No. 10-C-1615, 2010
WL 4257546 at *6 (N.D. Ill. Mar. 1, 2011) (qui tam plaintiff’s choice of venue is
afforded only “slight deference”).
Axxiom argues that virtually all the evidence necessary to prove or disprove the
elements of a false marking claim is located in Texas. This includes all of the relevant
documents and people with information concerning Axxiom’s business decisions, and all
of the important decisions, including those regarding patent marking. In response,
Forecast has not addressed Axxiom employees or Axxiom’s business location in Texas,
but instead focuses on Mr. Pirotte, Axxiom’s president, noting that he is the key witness
responsible for all of Axxiom’s decisions and that he is a North Carolina resident. Thus,
says Forecast, not all of Axxiom’s decisions regarding patents were in fact made in
Texas. Mr. Pirotte counters Forecast’s claim stating that he owns residences in both
locations and spends at least 80% of his time in Texas (Doc. 21 Ech. B “Pirotte
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Declaration”) but he concedes that he did accept service of this lawsuit in North Carolina
(Doc. 10).2
Forecast claims this demonstrates that the key witness in this litigation travels
frequently which would lessen the burden of participating in litigation in Indiana. To
bolster its argument that the Southern District of Indiana is not an inconvenient venue,
Forecast asserts that Axxiom is already required to come to Indianapolis for purposes of
discovery for the Texas action. Further, Forecast claims that the evidence of its actions
and relevant conduct regarding the alleged illegal conduct in the Texas action will come
from its employees and documents in Indianapolis. It asserts that “by definition Forecast
actions occurred in Indianapolis” and that “if Axxiom attempts to show that Forecast had
access to Axxiom copyrighted works, it will have to investigate that in Indianapolis.”
Resp. at 7. While it may be true, as Forecast contends, that Axxiom will be required to
travel to Indianapolis for discovery in the Texas action and thus will not be
inconvenienced, Forecast’s argument cuts both ways. Applying the same logic, it also is
true that the relevant conduct and decisions regarding patent marking by Axxiom in the
instant case occurred at its principal place of business in Texas. Thus, Forecast will no
doubt be required to investigate in Texas where Axxiom’s actions occurred. Because
2
Plaintiff argues that facts asserted in the Reply concerning Pirotte’s residences and
Axxiom’s sales figures are new facts and thus Plaintiff has filed a Motion for Leave to File a
Surreply in Opposition of Defendant’s Motion to Dismiss or Transfer. Defendant responds that
these facts are simply reactive and do not constitute new facts. We find that the arguments made
in the Motion to Dismiss or Transfer, Response, and Reply are sufficient and therefore DENY
Plaintiff’s Motion for Leave to File a Surreply.
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Forecast’s “claim stems from [defendant’s] decision-making, it is defendant’s evidence
that will constitute the bulk of proof.” Zojo, 2010 WL 4257546 at *2. Forecast also
claims the falsely marked products were sold in Indianapolis, but “the relevant conduct
leading to this lawsuit is not the final sale but rather the business decisions made at
[Axxiom’s] corporate offices to package, market, distribute, and even sell [blasting]
products with expired patents.” Maybelline, 2011 WL 814988 at *7.
“[W]hile it is true that the site of the allegedly infringing activity is entitled to
some consideration in our analysis, it is not the only factor. Otherwise, the defendant
would ‘almost always be allowed to transfer the case to its home forum.’” Whitney, 2007
WL 3334503 at *4 (quoting Aero Co. v. Bacou-Dalloz USA Safety, Inc., 2004 WL
1629566 at *2 (S.D. Ind. July 21, 2004)). It is not unfair to expect Axxiom, who sells its
products nationally, to respond to litigation where it sells those products. Id. At *5.
“Where the balance of convenience is a close call, merely shifting inconvenience from
one party to another is not a sufficient basis for transfer.” Research Automation, Inc., v.
Schrader-Bridgeport Int’l, Inc., 626 F.3d 973, 978 (7th Cir. 2010). Taking all of the
above factors into consideration, we find that the convenience of the parties does not
favor transfer.
B.
Convenience of the Witnesses
The convenience of the witnesses is another important aspect of a venue analysis.
Non-party witnesses do not possess the same motivations to appear at trial as party
witnesses, and thus non-party witnesses factor more heavily in the analysis because they
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may or may not be amenable to service in one venue over another. Whitney, 2007 WL
3334503 at *6. “[I]t can ordinarily be assumed that the parties will be sufficiently
motivated to have their own employees or other allies appear for trial wherever it might
take place.” Id. (internal citations omitted). Both parties agree that the president of
Axxiom, Mr. Pirotte, will be a key witness in this litigation. The parties disagree,
however, on where precisely Mr. Pirotte resides: Forecast maintains it is in North
Carolina; Axxiom while acknowledging that Pirotte owns residences in both locations,
maintains that he spends the majority of his time in Texas. However, given his
importance to the trial of this case, we can assume he will appear for trial wherever it
occurs.
Axxiom asserts all of its “business decisions . . . are conducted in Texas by
personnel located in Texas” but names only Mr. Pirotte as a potential witness. Motion at
3. In contrast, Forecast asserts various of its employees possess knowledge relevant to
the alleged false patent markings. Doc. 20 Ech. 3 “McCoy Declaration.” We regard
these facts as tending to balance each other out. Forecast, does go further by arguing that
it has non-party witnesses located in Indiana that it intends to call, mentioning
specifically, Mr. Theriac and employees of Midwest Surface Preparation, a distributor for
Axxiom products at competition with Forecast. Forecast maintains that they would be
unable to subpoena these non-party witnesses, who reside in this district, if venue is
transferred to Texas.
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The subpoena power of the court to compel non-party employees to testify is one
consideration in determining the convenience of the witnesses. See, e.g., Monster, 2010
WL 4822899 at *2 (finding that the defendant’s inability to compel witnesses to testify
required transfer to a venue where service was possible). Forecast has specifically
identified the non-party witnesses it intends to call (specifically competitors working as
distributors for Axxiom). Axxiom has mentioned only Mr. Pirotte and other generally
referenced “personnel located in Texas” as potential witnesses. A defendant must go
“beyond vague generalizations” and “clearly specify the key witnesses to be called and
make at least a generalized statement of what their testimony would have included” to
support its contentions. Heller Fin, Inc. v. Midwhey Powder Co., Inc., 883 F.2d 1286,
1293-94 (7th Cir. 1989) (denying transfer of venue upon finding that the defendant
“supplied nothing . . . containing facts tending to establish who (specifically) it planned to
call or the materiality of that testimony”) (emphasis in original). For these reasons, we
conclude that the convenience of witnesses factor does not support a transfer of this cause
to the Southern District of Texas.
C.
Interests of Justice
“The ‘interest of justice’ is a separate component of a § 1404(a) transfer analysis,
and may be determinative in a particular case, even if the convenience of the parties and
witnesses might call for a different result.” Coffey, 796 F.2d at 220 (internal citations
omitted). The “interests of justice include such concerns as ensuring speedy trials, trying
related litigation together, and having a judge who is familiar with the applicable law try
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the case.” Heller, 883 F.2d at 1293 (citing Coffey, 796 F.2d at 221). The principal
concern of this analysis, then, is the “efficient functioning of the courts.” Coffey, 796
F.2d at 221.
Forecast referenced a comparison of the Judicial Caseload Statistics of the
Southern District of Indiana and the Southern District of Texas, which reveals minor
differences in the relative median times to trial and to disposition. These variations
between the districts are insignificant, and thus do not favor one district over the other.
Speedy trial considerations do not warrant transfer, therefore, especially since transferring
this case would likely cause additional delay.
Axxiom also summarily asserts that this action should have been brought as a
counterclaim in the Texas action, but entirely fails to develop this contention. Forecast
maintains in contrast that the cases are not related, without developing its view either.
The Court’s review of both complaints reveals some similarities between the two but,
upon close inspection, we find no link to demonstrate that these cases should be tried
together.
The Texas case and the Indiana case do not arise from the same transaction or
occurrence; they involve different property, and do not pertain to a patent or copyright
issue common to both cases. The Texas action is based on copyright infringement of a
written manual, while the case at bar asserts an alleged false marking of patent numbers
on products. In addition, the cases are brought under different federal statutes. Thus, we
find Axxiom’s assertion unconvincing that Forecast’s claim should have been brought as
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a counterclaim. The two cases simply are not related.
Finally, we can think of no reason to conclude that a judge in the Southern District
of Texas is more capable or better qualified than the undersigned in terms of overseeing
this litigation. There are no facts presented which set the Southern District of Texas apart
from the district in which the case now pends. “[B]ecause the false marking claim
derives from federal law, both districts have comparable knowledge and experience for
handling the case.” Maybelline, 2011 WL 814988 at *9; see also Zojo Solutions, Inc.,
2010 WL 4257546 at *3 (“False marking involves issues of federal law, and [the N.D.
Ill.] [is] no better able to apply the false marking statute than a federal district in New
York.”); Monster, 2010 WL 4822899 at *2 (“[J]udges in this judicial district are equally
familiar with the law surrounding patents.”). Thus, modesty aside, we view the Southern
District of Indiana to be as well qualified as the Southern District of Texas to adjudicate
this case. The interest of justice does not favor transfer.
III.
Conclusion
A party requesting a transfer to another venue must satisfy a heavy burden to
justify the move. While it may be more inconvenient for Axxiom to litigate this case in
Indiana, it has not made a convincing showing that a transfer to the Southern District of
Texas would be clearly more convenient overall or that a transfer would more fully
comport with the interests of justice. Therefore, for the reasons detailed in this entry, we
DENY Defendant’s Motion to Transfer or Dismiss.
IT IS SO ORDERED.
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07/27/2011
Date: _________________________
_______________________________
SARAH EVANS BARKER, JUDGE
United States District Court
Southern District of Indiana
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Copies to:
Michael C. Bartol
BOSE MCKINNEY & EVANS, LLP
mbartol@boselaw.com
Edward Ronald Goldman
RENDIGS FRY KIELY & DENNIS LLP
egoldman@rendigs.com
Joel T. Nagle
BOSE MCKINNEY & EVANS, LLP
jnagle@boselaw.com
Craig Eldon Pinkus
BOSE MCKINNEY & EVANS, LLP
cpinkus@boselaw.com
Jonathan P. Saxton
RENDIGS FRY KIELY & DENNIS LLP
jps@rendigs.com
William Shawn Staples
Stanley Frank & Rose, LLP
wsstaples@stanleylaw.com
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