J. Lloyd International, Inc v. Super Wings International, Ltd

Filing 28

ORDER denying 9 Motion to Dismiss or to Quash Service and denying as moot 16 Motion for Alternative Service of Summons and Complaint on Defendant (see text of Order). Signed by Chief Judge Linda R Reade on 2/8/2016. (skm)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF IOWA
CEDAR RAPIDS DIVISION
J. LLOYD INTERNATIONAL, INC.,
Plaintiff,

No. 15-CV-74-LRR

vs.

ORDER

SUPER WINGS INTERNATIONAL,
LTD.,
Defendant.
____________________
I.

TABLE OF CONTENTS
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

II.

PROCEDURAL HISTORY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

III.

FACTUAL BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
A.
B.

IV.

Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Overview of the Dispute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

MOTION TO DISMISS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
A.
B.
C.
D.

Subject Matter Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Personal Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Failure to State a Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.
Res judicata . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.
Judicial estoppel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Venue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

V.

MOTION FOR ALTERNATIVE SERVICE . . . . . . . . . . . . . . . . . . . . . . 16

VI.

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
I. INTRODUCTION
The matters before the court are Defendant Super Wings International, Ltd.’s

(“SWI”) “Motion to Dismiss or to Quash Service” (“SWI Motion”) (docket no. 9) and
Plaintiff J. Lloyd International, Inc.’s (“JLI”) “Motion for Alternative Service of Summons

and Complaint on Defendant” (“JLI Motion”) (docket no. 16) (collectively, “Motions”).
On February 2, 2016, the court held a telephonic hearing and heard argument on the
Motions. See February 2, 2016 Minute Entry (docket no. 26). The matter is fully
submitted and ready for decision.
II. PROCEDURAL HISTORY
On August 13, 2015, JLI filed a Complaint (docket no. 2). The Complaint contains
two counts. Count I alleges that SWI breached a contract by refusing to release tooling and
molds to JLI. Count II alleges that SWI’s actions constitute conversion of the tooling and
molds. On September 4, 2015, SWI filed the SWI Motion. On September 28, 2015, JLI
filed a Resistance to the SWI Motion (“JLI Resistance”) (docket no. 15). On October 1,
JLI filed the JLI Motion. On October 8, 2015, SWI filed a Reply to the SWI Motion
(“SWI Reply”) (docket no. 17). On October 19, 2015, SWI filed a Resistance to the JLI
Motion (“SWI Resistance”) (docket no. 18). On October 26, 2015, JLI filed a Reply to the
JLI Motion (“JLI Reply”) (docket no. 19).
III. FACTUAL BACKGROUND1
Viewed in the light most favorable to Plaintiffs, the facts are as follows:
A. Parties
JLI is an Iowa corporation with its principal place of business in Cedar Rapids, Iowa.
SWI is a corporation organized under the laws of Hong Kong, China.
B. Overview of the Dispute
JLI and SWI entered into an Agreement (docket no. 2-2) dated December 30, 2008.
The Agreement provides that certain molds and tooling in the possession of SWI are the
property of JLI. The Agreement provides that SWI will “release the molds and tooling to
1

The court draws its factual background from the Complaint and “materials that are
‘necessarily embraced by the pleadings.’” Porous Media Corp. v. Pall Corp., 186 F.3d
1077, 1079 (8th Cir. 1999) (quoting Piper Jaffray Cos. v. Nat’l Union Fire Ins. Co., 967
F. Supp. 1148, 1152 (D. Minn. 1997)).
2

a party authorized by [JLI] to receive same” and that SWI releases all interest in the molds
and tooling “in consideration of” promissory notes signed by Tim Yip, an owner of SWI,
and Jody Keener, the founder of JLI. Complaint ¶¶ 9-10. After entering into the
Agreement, the parties became involved in various litigation, summarized as follows:
In August 2009, a dispute developed between the parties and SWI filed an action
against Keener in this court to recover payment of Keener’s debt. See Super Wings Int’l,
Ltd. v. Keener, 09-CV-115-JSS (N.D. Iowa 2009) [hereinafter First Action].

JLI

intervened in that action. See First Action, ECF No. 20. Chief Magistrate Judge Jon S.
Scoles granted judgment in favor of SWI and dismissed JLI’s petition of intervention,
stating that there was no evidence that “JLI provided [SWI] with a list of specific molds and
tooling to be released” and that he could not, therefore, “find that [SWI] has refused to
release the molds and tooling, as required by the Agreement.” First Action, ECF No. 69,
at 22. Judge Scoles noted that JLI “may still pick up the molds and tooling by providing
[SWI] with notice of the specific molds and tooling to be released, and the party authorized
to receive the same.” Complaint ¶ 15 (quoting First Action, ECF No. 69, at 24).
In 2010, JLI filed an action against SWI, alleging that SWI manufactured defective
molds and tooling and that SWI falsified documents regarding the inspection of
manufactured toys. See J. Lloyd Int’l, Inc. v. Super Wings Int’l, Ltd., 10-CV-83-LRR
(N.D. Iowa 2010) [hereinafter Second Action]. The court dismissed the Second Action due
to JLI’s failure to adequately plead subject matter jurisdiction. See Second Action, ECF
No. 13. In 2011, Keener sued his company, JLI, and obtained a default judgment against
JLI in the Iowa District Court for Linn County, No. LACV071352. On July 30, 2013, SWI
filed an involuntary Chapter 7 bankruptcy petition against Keener in the United States
Bankruptcy Court for the Northern District of Iowa. See Complaint ¶ 21. On March 31,
2014, JLI “executed a [g]eneral [a]ssignment of ‘all right, title and interest of Assignor, in,
to all tooling located in China currently in the custody of [SWI]’ in favor of Keener, in

3

exchange for a partial satisfaction of judgment.” Id. ¶ 22. On July 28, 2014, JLI filed a
Chapter 11 petition for relief in the United States Bankruptcy Court for the Northern
District of Iowa. SWI filed a motion to dismiss in that action, challenging JLI’s assignment
of the molds and tooling to Keener as a violation of the automatic stay in place during
bankruptcy proceedings. Chief Bankruptcy Judge Thad Collins found that Keener “had
failed to demonstrate that the [a]ssignment was not ‘improperly or collusively made’” and
that, therefore, his cause of action fell outside the limits of federal bankruptcy jurisdiction.
In re Keener, 14-4469, 2015 WL 5118691, at *5 (Bankr. N.D. Iowa 2015). However,
Judge Collins did not make any ruling on the validity of the assignment itself.
In the Complaint, JLI alleges that SWI has demanded several rent payments for
storage of the molds and tooling.

JLI also alleges that SWI “made several

demands . . . that had to be met for [JLI] to be able to have its designee retrieve the tooling
and molds and each time [JLI] agreed to [SWI’s] demand,” but SWI would then prevent JLI
from retrieving the materials. Complaint ¶ 20. JLI alleges that it has made efforts to
retrieve the molds and tooling, and attached to the Complaint various e-mails between the
parties to demonstrate such efforts. See Exhibits 2-9 (docket nos. 3-10).
IV. MOTION TO DISMISS
SWI argues that the court should grant the SWI Motion for the following reasons:
(1) lack of subject matter jurisdiction; (2) lack of personal jurisdiction; (3) failure to state
a claim upon which relief can be granted; and (4) improper venue.2 SWI Motion at 1. JLI
argues that dismissal is not warranted on any of those grounds. See JLI Resistance at 1.
The court will address each argument in turn.

2

SWI also argued that the court should grant the SWI Motion based on insufficient
service of process. However, on January 29, 2016, JLI filed an Affirmation of Service
(docket no. 25) and the parties confirmed at the hearing that dismissal on the grounds of
insufficient service is no longer warranted. Accordingly, the court shall not address this
issue.
4

A. Subject Matter Jurisdiction
Federal Rule of Civil Procedure 12(b)(1) provides that a party may file a motion
asserting the defense of “lack of subject-matter jurisdiction.” Fed. R. Civ. P. 12(b)(1).
A Rule 12(b)(1) motion can either attack the complaint’s assertion of jurisdiction on its face
or it can attack the factual basis underlying the court’s jurisdiction. See Branson Label,
Inc. v. City of Branson, Mo., 793 F.3d 910, 914 (8th Cir. 2015); Titus v. Sullivan, 4 F.3d
590, 593 (8th Cir. 1993).

In a facial challenge, the factual allegations concerning

jurisdiction are presumed to be true, and the motion will fail unless the plaintiff fails to
allege some element necessary to invoke the court’s jurisdiction. Branson Label, 793 F.3d
at 914. “Accordingly, ‘the court restricts itself to the face of the pleadings and the nonmoving party receives the same protections as it would defending against a motion brought
under Rule 12(b)(6).’” Id. (quoting Osborn v. United States, 918 F.2d 724, 729 n.6 (8th
Cir. 1990)).
Under a factual attack, “the trial court may proceed as it never could under
12(b)(6).” Osborn, 918 F.2d at 730 (quoting Mortensen v. First Fed. Sav. & Loan Ass’n,
549 F.2d 884, 891 (3d Cir. 1977)). Where a party attacks the very facts underpinning the
court’s jurisdiction, “no presumptive truthfulness attaches to the plaintiff’s allegations” and
the court may undertake an independent evaluation of those disputed facts. Id. (quoting
Mortensen, 549 F.2d at 891). “Because at issue in a factual 12(b)(1) motion is the trial
court’s jurisdiction—its very power to hear the case—there is substantial authority that the
trial court is free to weigh the evidence and satisfy itself as to the existence of its power to
hear the case.” Id. (quoting Mortensen, 549 F.2d at 891). Therefore, “the court may
receive competent evidence such as affidavits, deposition testimony, and the like in order
to determine the factual dispute.” Titus, 4 F.3d at 593.
SWI argues that the court should grant the SWI Motion because “JLI has failed to
allege diversity of citizenship.” Brief in Support of the SWI Motion (docket no. 9-4) at 9.

5

Therefore, this is a facial attack on the Complaint and the court will “restrict itself to the
face of the pleadings” and accept all of the factual allegations in the complaint as true. See
Branson Label, 793 F.3d at 914 (quoting Osborn, 918 F.2d at 729 n.6); Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009) (“[F]or the purposes of a motion to dismiss [the court] must take
all of the factual allegations in the complaint as true.”).
The Complaint alleges that the court has subject matter jurisdiction based on
diversity of citizenship. Complaint ¶ 2. Diversity jurisdiction exists where “the matter in
controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is
between—(1) citizens of different States; (2) citizens of a State and citizens or subjects of
a foreign state.” 28 U.S.C. § 1332(a) (formatting omitted). Furthermore, “a corporation
shall be deemed to be a citizen of every State and foreign state by which is has been
incorporated and of the State or foreign state where it has its principal place of business.”
28 U.S.C. § 1332(c). The court notes that in the Second Action, the reason for dismissing
based on lack of subject matter jurisdiction was JLI’s failure to allege the amount in
controversy. See Second Action, ECF No. 13, at 2-3.
Here, the issue is whether JLI sufficiently stated SWI’s citizenship for purposes of
establishing subject matter jurisdiction.

“In order to adequately establish diversity

jurisdiction, a complaint must set forth with specificity a corporate party’s state of
incorporation and its principal place of business. Where the plaintiff fails to state the place
of incorporation or the principal place of business of a corporate party, the pleadings are
inadequate to establish diversity.” Sanders v. Clemco Indus., 823 F.2d 214, 216 (8th Cir.
1987) (quoting Joiner v. Diamond M Drilling Co., 677 F.2d 1035, 1039 (5th Cir. 1982)).
The Complaint alleges that JLI “is a corporation organized under the laws of the State of
Iowa with its principal place of business located in Cedar Rapids, Linn County, Iowa” and
SWI “is a corporation organized under the laws of Hong Kong, China.” Complaint ¶¶ 4-5.
The Complaint then states that SWI “is based in Hong Kong.” Id. ¶ 6. A corporation’s

6

“‘principal place of business’ refers to the place where the corporation’s high level officers
direct, control, and coordinate the corporation’s activities,” or, the corporation’s “nerve
center.” Hertz Corp. v. Friend, 559 U.S. 77, 80-81 (2010). Based on the allegations in
the Complaint, the court finds that JLI adequately alleged subject matter jurisdiction. The
Complaint states where SWI is organized and where it is “based.” See Complaint ¶ 6.
Although the Complaint does not use the term “principal place of business,” the court finds
that the Complaint sufficiently alleges citizenship of the parties for the purpose of
determining diversity jurisdiction.3 Accordingly, the court shall deny the SWI Motion to
the extent it argues that the Complaint fails to allege diversity of citizenship.
B. Personal Jurisdiction
SWI argues that “JLI fails to state sufficient facts in its Complaint to support . . . a
‘reasonable inference’ that [SWI] can be subjected to [personal] jurisdiction in Iowa.” Brief
in Support of SWI Motion at 10. SWI argues that “JLI fails to make sufficient factual
allegations regarding [SWI’s] alleged minimum contacts to support [the] [c]ourt’s exercise
of specific and/or general personal jurisdiction.” Id. at 12.
“To defeat a motion to dismiss for lack of personal jurisdiction, the nonmoving party
need only make a prima facie showing of jurisdiction.” Epps v. Stewart Info. Servs. Corp.,
327 F.3d 642, 647 (8th Cir. 2003). “The party seeking to establish the court’s in personam
jurisdiction carries the burden of proof, and the burden does not shift to the party
challenging jurisdiction.” See id. (citing Gould v. P.T. Krakatau Steel, 957 F.2d 573, 575
(8th Cir. 1992)). The court examines the facts and resolves all factual conflicts in the light
most favorable to the nonmoving party. See id. at 646-47. However, although “the
plaintiff[] bear[s] the ultimate burden of proof, jurisdiction need not be proved by a
preponderance of the evidence until trial or until the court holds an evidentiary hearing.”

3

The court notes that SWI does not argue that Hong Kong is not, in fact, SWI’s
principal place of business, only that the Complaint does not adequately plead that fact.
7

Id. at 647.
There are two requirements for determining whether personal jurisdiction exists: (1)
“whether the forum state’s long-arm statute confers jurisdiction over the non-resident
defendant” and (2) “whether the exercise of personal jurisdiction over the non-resident
defendant comports with due process.” Austad Co. v. Pennie & Edmonds, 823 F.2d 223,
225 (8th Cir. 1987). Iowa’s long-arm statute extends jurisdiction over nonresidents “to the
widest due process parameters allowed by the United States Constitution.” Wells Diary Inc.
v. Food Movers Int’l, 607 F.3d 515, 518 (8th Cir. 2010) (quoting Hammond v. Fla. Asset
Fin. Corp., 695 N.W.2d 1, 5 (Iowa 2005)); see also Iowa R. Civ. P. 1.306. Therefore the
court’s “inquiry is limited to whether the exercise of personal jurisdiction comports with
due process.” Id. at 518.
“Due process requires that there be minimum contacts between the nonresident
defendant and the forum state such that the assertion of personal jurisdiction is consistent
with traditional notions of fair play and substantial justice.” Id. (citing World-Wide
Volkswagen Corp v. Woodson, 444 U.S. 286, 291-92 (1980); Int’l Shoe Co. v. Washington,
326 U.S. 310, 316 (1945)). “Sufficient contacts exist when the defendant’s conduct and
connection with the forum state are such that [it] should reasonably anticipate being haled
into court here.” Id. (quoting Bell Paper Box, Inc. v. U.S. Kids, Inc., 22 F.3d 816, 818
(8th Cir. 1994)) (alteration in original). An “act by which the defendant purposefully avails
itself of the privilege of conducting activities” in the forum state will support a finding of
reasonable anticipation. Id. The Eighth Circuit follows a five-part test to measure a
nonresident defendant’s contacts with the forum state:
(1) the nature and quality of the contacts with the forum state;
(2) the quantity of those contacts; (3) the relation of the cause
of action to the contacts; (4) the interest of the forum state in
providing a forum for its residents; and (5) the convenience of
the parties.
Id. (quoting Bell Paper Box, Inc., 22 F.3d at 819).
8

The Complaint states that “a substantial part of the events or omissions giving rise
to this claim occurred in this judicial district, and [that] . . . [SWI] is subject to the [c]ourt’s
personal jurisdiction.” Complaint ¶ 3. The Complaint alleges that JLI and SWI entered
into an agreement on December 30, 2008 regarding the possession and ownership of molds
and tooling for toys. See id. ¶¶ 9-10. The parties have been engaged in various litigation
in the Northern District of Iowa since that time. See id. ¶¶ 11-23. The Agreement entered
into by JLI and SWI contains an Iowa choice-of-law provision. Brief in Support of SWI
Motion at 12. The Agreement also states that it “shall be deemed to have been entered into
and performable in part in Cedar Rapids, Linn County, Iowa.” Id.
Although a choice-of-law “provision standing alone would be insufficient to confer
jurisdiction,” a court may consider such a provision in the context of analyzing whether a
defendant “purposefully availed himself of the benefits and protections of [the forum
state’s] laws.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 481 (1985). Here, the
language in the Agreement supports a finding of personal jurisdiction. See Agreement at
3 (“This Agreement shall be governed by and construed in accordance with the laws of the
State of Iowa and shall be deemed to have been entered into and performable in part in
Cedar Rapids, Linn County, Iowa.). The parties appear to have anticipated that the
contract would be performed in part in Iowa. Furthermore, viewed as a whole, the
Complaint alleges sufficient facts regarding SWI’s communications with Keener and JLI in
Iowa such that it would be reasonable for SWI to anticipate being “haled into court” in this
state. And, in fact, the parties have litigated in this forum in the past. Therefore, the court
finds that JLI has made a prima facie showing of personal jurisdiction. Accordingly, the
court shall deny the SWI Motion with respect to the argument that the court lacks personal
jurisdiction.
C. Failure to State a Claim
Federal Rule of Civil Procedure 12(b)(6) provides for dismissal on the basis of

9

“failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). To
survive a Rule 12(b)(6) motion to dismiss, “a complaint must contain sufficient factual
matter . . . to ‘state a claim to relief that is plausible on its face.’” Iqbal, 556 U.S. at 678
(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)); accord B & B Hardware,
Inc. v. Hargis Indus., Inc., 569 F.3d 383, 387 (8th Cir. 2009). A claim satisfies the
plausibility standard “when the plaintiff pleads factual content that allows the court to draw
the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556
U.S. at 678 (citing Bell Atl., 550 U.S. at 556). “The plausibility standard is not akin to a
‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has
acted unlawfully.” Id. (quoting Bell Atl., 550 U.S. at 556).
Although a plaintiff need not provide “detailed” facts in support of his or her
allegations, the “short and plain statement” requirement of Federal Rule of Civil Procedure
8(a)(2) “demands more than an unadorned, the-defendant-unlawfully-harmed-me
accusation.” Id. (quoting Bell Atl., 550 U.S. at 555) (internal quotation marks omitted);
see also Erickson v. Pardus, 551 U.S. 89, 93 (2007) (“Specific facts are not necessary
[under Rule 8(a)(2)].”). “A pleading that offers ‘labels and conclusions’ or ‘a formulaic
recitation of the elements of a cause of action will not do.’” Iqbal, 556 U.S. at 678
(quoting Bell Atl., 550 U.S. at 555). “Where the allegations show on the face of the
complaint [that] there is some insuperable bar to relief, dismissal under Rule 12(b)(6) is
appropriate.” Benton v. Merrill Lynch & Co., 524 F.3d 866, 870 (8th Cir. 2008) (citing
Parnes v. Gateway 2000, Inc., 122 F.3d 539, 546 (8th Cir. 1997)).
SWI argues that the court should grant the SWI Motion under Rule 12(b)(6) because
res judicata and judicial estoppel bar JLI’s claims. See Brief in Support of SWI Motion at
19-28.
1.

Res judicata

SWI argues that res judicata bars JLI’s claim because it “could have sought

10

possession of the tooling and molds in the First and Second Actions but failed to assert its
then existing claims.” Id. at 22. JLI argues that its claim could not have been adjudicated
in the prior actions because a proper request to turn over the molds and tooling had not yet
been made. See JLI Resistance at 16-18.
Res judicata, or claim preclusion, “may be raised in a motion to dismiss when ‘the
identity of the two actions can be determined from the face of the petition itself.’” C.H.
Robinson Worldwide, Inc. v. Lobrano, 695 F.3d 758, 763 (8th Cir. 2012) (quoting
Potamitis v. Pittsburgh Plate Glass Co., 82 F.3d 472, 473 (8th Cir. 1936)). “[T]he phrase
‘face of the complaint . . . include[s] public records and materials embraced by the
complaint.’” Id. at 764 (quoting Noble Sys. Corp. v. Alorica Cent., LLC, 543 F.3d 978
(8th Cir. 2008)). “The law of the forum that rendered the first judgment controls the res
judicata analysis.” Id. (quoting Laase v. Cty. of Isanti, 638 F.3d 853, 856 (8th Cir. 2011)).
In the Eighth Circuit, whether res judicata bars a claim “in a diversity action is a question
of substantive law controlled by state common law.” Hillary v. Trans World Airlines, Inc.,
123 F.3d 1041, 1043 (8th Cir. 1997) (quoting Austin v. Super Valu Stores, Inc., 31 F.3d
615, 617 (8th Cir. 1994)). “This rule applies when the original judgment is that of another
federal court sitting in diversity.” Id. (quoting Follette v. Wal-Mart Stores, Inc., 41 F.3d
1234, 1237 (8th Cir. 1994)). Therefore, the court will apply Iowa law to the instant action
to determine if res judicata bars JLI’s claims.
Under Iowa law, res judicata “applies only when a party has had a ‘full and fair
opportunity’ to litigate in the first trial.’” George v. D.W. Zinser Co., 762 N.W.2d 865,
868 (Iowa 2009) (quoting Spiker v. Spiker, 708 N.W.2d 347, 353 (Iowa 2006)). “A party
asserting res judicata must establish the following: (1) ‘the parties in the first and second
action were the same’; (2) ‘the claim in the second suit could have been fully and fairly
adjudicated in the prior case’; and (3) ‘there was a final judgment on the merits in the first
action.’” Id. (quoting Spiker, 708 N.W.2d at 353) (formatting omitted). Res judicata bars
further litigation “not only to matters actually determined in an earlier action but to all
11

relevant matters that could have been determined.” Pavone v. Kirke, 807 N.W.2d 828, 835
(Iowa 2011) (quoting Penn v. Iowa State Bd. of Regents, 577 N.W.2d 393, 398 (Iowa
1998)). “An adjudication in a prior action between the same parties on the same claim is
final as to all issues that could have been presented to the court for determination. Simply
put, a party is not entitled to a ‘second bite’ simply by alleging a new theory of recovery
for the same wrong.” Id. at 836 (quoting Bennett v. MC #619, Inc., 586 N.W.2d 512, 51617 (Iowa 1998)).
Here, based on the facts of the Complaint and the attached materials, it does not
appear that JLI has had a “full and fair opportunity to litigate” its claim. George, 762
N.W.2d at 868 (quoting Spiker, 708 N.W.2d at 353) (quotation marks omitted). SWI
argues that JLI failed to assert its “then existing” claims in the First Action and Second
Action. However, in the First Action, Judge Scoles found that there was no evidence to
indicate JLI had made the requisite demand for SWI to return the molds and tooling. See
First Action at 22. The issue in the Second Action was the manufacture of toys and
allegedly falsified documents. Although JLI could have made the demand for SWI to return
the molds and tooling prior to either of those actions, nothing in the record indicates that
it did so. Rather, JLI states that it made demand for return of the tools and molding in
2012, after the Second Action had been dismissed. See Complaint ¶¶ 17-20; JLI Resistance
at 17-18. Therefore, JLI’s claim in this action did not arise until after the First Action and
Second Action were complete and could not have been “fully and fairly adjudicated in the
prior case.” George, 762 N.W.2d at 868 (quoting Spiker, 708 N.W.2d at 353) (quotation
marks omitted). The mere fact that JLI could have made the demand prior to the Second
Action does not warrant dismissal. JLI is not attempting to get an impermissible second
bite at the apple, and the court does not view res judicata to require parties to preemptively
take every action required for every possible cause of action in one proceeding.
Accordingly, the court shall deny the SWI Motion with respect to the argument that res
judicata bars JLI’s claim.
12

2.

Judicial estoppel

SWI argues that judicial estoppel bars JLI’s claims because the allegations in the
“Complaint are wholly inconsistent with representations made to Chief Bankruptcy Judge
Thad J. Collins in the bankruptcy proceedings.” Brief in Support of SWI Motion at 25.
JLI argues that the matters at issue for purposes of judicial estoppel are outside the scope
of a 12(b)(6) motion and that the court should not consider them at this time.
Eighth Circuit “precedent calls for the application of state law elements of judicial
estoppel in diversity cases.” Spencer v. Annett Holdings, Inc., 757 F.3d 790, 797 (8th Cir.
2014). “Under Iowa law, judicial estoppel ‘prohibits a party who has successfully and
unequivocally asserted a position in one proceeding from asserting an inconsistent position
in a subsequent proceeding.’” Id. (quoting Winnebago Indus., Inc. v. Haverly, 727
N.W.2d 567, 573 (Iowa 2006)); Tyson Foods, Inc. v. Hedlund, 740 N.W.2d 192, 196
(Iowa 2007) (“[J]udicial estoppel is a ‘commonsense doctrine’ that ‘prohibits a party who
has successfully and unequivocally asserted a position in one proceeding from asserting an
inconsistent position in a subsequent proceeding.’”(quoting Vennerberg Farms, Inc. v. IGF
Ins. Co., 405 N.W.2d 810, 814 (Iowa 1987))). Although
“the circumstances under which judicial estoppel may
appropriately be invoked are probably not reducible to any
general formulation of principle,” New Hampshire v. Maine,
532 U.S. 742, 750 (2001) (quotation marks and formatting
omitted), “the fundamental feature of the doctrine is the
successful assertion of the inconsistent position in a prior
action. Absent judicial acceptance of the inconsistent position,
application of the rule is unwarranted because no risk of
inconsistent, misleading results exists.” Vennerberg Farms,
405 N.W.2d at 814.
Tyson Foods, Inc., 740 N.W.2d at 196.
On July 30, 2013, SWI filed a bankruptcy action against Keener, pursuant to 11
U.S.C. § 303. On March 31, 2014, JLI executed a general assignment to Keener of “all

13

right, title and interest . . . to all tooling located in China currently in the custody of” SWI.
Complaint ¶ 22. On July 28, 2014, Keener filed a petition for relief under Chapter 11 of
the United States Bankruptcy Code. On September 29, 2014, SWI filed a motion in the
United States Bankruptcy Court for the Northern District of Iowa challenging JLI’s March
31, 2014 assignment as a violation of the automatic stay in the July 30, 2013 bankruptcy
action. The bankruptcy court dismissed the action without deciding whether the assignment
itself was valid, stating that Keener “brought the property into the bankruptcy solely to
protect it with the automatic stay,” which violated 28 U.S.C. § 1359.
SWI argues that the court should find that it is estopped from deciding this action due
to Keener’s representations to the bankruptcy court regarding the assignment of the molds
and tooling. SWI argues that JLI’s statement that the “assignment from [JLI] to Keener did
not assign the intellectual property rights associated with the tooling and molds, including
trademarks for toys to be made with those tooling and molds” is in direct conflict “with the
clear language of the Assignment as set forth in the Complaint.” Brief in Support of SWI
Motion at 26 (quoting Complaint ¶ 26). However, the court finds that judicial estoppel, as
defined under Iowa law, does not apply in the instant action. The bankruptcy action was
not dismissed because the bankruptcy court relied in any way on the legal validity or scope
of the assignment of the molds and tooling. Rather, the bankruptcy court found that Keener
failed to demonstrate that the assignment was valid for purposes of bankruptcy jurisdiction.
Therefore, there has not been judicial acceptance of the inconsistent position, such that a
decision in the instant action would risk resulting in an inconsistent, misleading position.
See Tyson Foods, Inc., 740 N.W.2d at 196. Accordingly, the court shall deny the SWI
Motion to the extent it argues the court should find judicial estoppel prevents it from
hearing the instant action.
D. Venue
SWI argues that the court should grant the SWI Motion because “JLI fails to allege

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sufficient facts to support venue in” the Northern District of Iowa. Brief in Support of SWI
Motion at 28-29. JLI argues that venue is proper “because this [c]ourt has personal
jurisdiction over [SWI] . . . [and] because a substantial part of the events or omissions
giving rise to this claim occurred in” the Northern District of Iowa. JLI Resistance at 2021. Additionally, JLI argues that the allegations in the Complaint “are largely based on
[SWI’s] actions contrary to a court order in [the Northern District of Iowa], which supports
a finding of venue . . . .” Id. at 21.
Venue is proper pursuant to 28 U.S.C. § 1391 in “a judicial district in which a
substantial part of the events or omissions giving rise to the claim occurred, or a substantial
part of property that is the subject of the action is situated,” or, “if there is no district in
which an action may otherwise be brought, any judicial district in which any defendant is
subject to the court’s personal jurisdiction with respect to such action.” 28 U.S.C. 1391.
“One of the central purposes of statutory venue is to ensure that a defendant is not ‘haled
into a remote district having no real relationship to the dispute.’” Woodke v. Dahm, 70
F.3d 983, 985 (8th Cir. 1995) (quoting Cottman Transmission Sys., Inc. v. Martino, 36
F.3d 291, 294 (3d Cir. 1994)). The Eighth Circuit has found that a court order from a
different case that is related to a party’s action can be an event that gives rise to venue. See
Setco Enters. Corp. v. Robbins, 19 F.3d 1278, 1281 (8th Cir. 1994) (finding that a
bankruptcy court order gave rise to a plaintiff’s district court action for purposes of
establishing venue). Although the Eighth Circuit has not explicitly ruled on the issue, it
appears that once a defendant challenges venue in a pre-answer motion, the burden of proof
is on the plaintiff to sustain venue. See Cohen v. Newsweek, Inc., 312 F.2d 76, 78 (8th
Cir. 1963) (stating that a district court did not err in holding that a plaintiff-appellant had
the burden of establishing venue, but deciding the case on other grounds); see also Beckley
v. Auto Profit Masters, L.L.C., 266 F. Supp. 2d 1001, 1003 (S.D. Iowa 2003) (“Once a
defendant raises the issue of proper venue by motion, the burden of proof is placed upon

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the plaintiff to sustain venue.”). But see Cooper v. Dep’t of Army, No. 4:13CV3086, 2013
WL 6631618, at *4 (D. Neb. Dec. 17, 2013) (unpublished decision) (finding that, despite
other district courts’ interpretation of Eighth Circuit precedent, “the defendant bears the
burden of establishing facts showing improper venue”).
SWI argues that venue is improper in this court because the tooling and molds are
stored in Hong Kong or China, not Iowa; the tooling and molds are to be released in China,
not Iowa; efforts to retrieve the tooling and molds occurred in China; and manufacturing
of the tooling and molds took place in China. See Brief in Support of SWI Motion at 28.
However, the court finds that venue is appropriate in this district. Although the materials
are stored abroad and are to be released abroad, there is still a “substantial connection” to
this forum. See Pecoraro v. Sky Ranch for Boys, Inc., 340 F.3d 558, 563 (8th Cir. 2003)
(stating that courts “do not ask which district among two or more potential forums in the
‘best’ venue, rather, [courts] ask whether the district the plaintiff chose had a substantial
connection to the claim, whether or not other forums had greater contacts (citing Setco
Enters. v. Robbins, 19 F.3d 1278, 1281 (8th Cir. 1994))). Here, the Agreement states that
the contract was executed and partially performed in Iowa. Furthermore, the parties have
been engaged in related litigation in this venue. Therefore, the court finds that venue is
appropriate in this district. Accordingly, the court shall deny the SWI Motion to the extent
it seeks dismissal based on improper venue.
V. MOTION FOR ALTERNATE SERVICE
JLI requests that the court authorize JLI to serve SWI’s local counsel. See JLI
Motion at 2. However, because the court need not address the issue of service of process
and the parties now agree that service was sufficient, the court shall deny the JLI Motion
as moot.
VI. CONCLUSION
In light of the foregoing, the SWI Motion (docket no. 9) is DENIED and the JLI

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Motion (docket no. 16) is DENIED AS MOOT.
IT IS SO ORDERED.
DATED this 8th day of February, 2016.

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