U, Incorporated v. Shipmate, Inc. et al
Filing
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MEMORANDUM AND ORDER denying 41 ShipMate's Motion to Dismiss for Lack of Jurisdiction; and denying as moot 53 plaintiff's Motion for Leave to File a Supplemental Brief. Signed by Chief Judge J. Thomas Marten on 12/10/14. (mss)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
U, INCORPORATED,
Plaintiff,
v.
Case No. 14-2287-JTM
SHIPMATE, INC. and COORDINATING
COMMITTEE FOR AUTOMOTIVE REPAIR,
Defendants.
MEMORANDUM AND ORDER
Before the court are defendant ShipMate, Inc.’s (“ShipMate”) Motion to Dismiss
for Lack of Personal Jurisdiction (Dkt. 41) and Plaintiff U, Inc.’s Motion Seeking Leave
to File a Supplemental Brief (Dkt. 53). This case arises out of the parties’ competing
online hazardous materials training courses. Plaintiff originally filed a seven-count
complaint against ShipMate and the Coordinating Committee for Automotive Repair
(“CCAR”) in Kansas state court. Four of the counts are directed at ShipMate. The issue
before the court is whether ShipMate’s conduct directed at the state of Kansas is
sufficient to subject it to personal jurisdiction for these claims.
I. Background
ShipMate is a California corporation providing online training course content
and hosting with its principal place of business in Sisters, Oregon. (Dkt. 43, at 1). Codefendant CCAR is a foreign corporation whose principal place of business was in
Kansas until 2011. CCAR specializes in marketing educational materials to automotive
dealers. (Dkt. 38, at 4). Plaintiff is a Kansas corporation headquartered in Overland
Park, Kansas. (Dkt. 38, at 2). It develops and markets web-based training courses on a
variety of subjects to individuals residing in Kansas and throughout the United States.
(Dkt. 38, at 4).
Beginning in June 2005, ShipMate developed original content for an online
hazardous materials training program called “HazMatU,” which CCAR agreed to host.
(Dkt. 43, at 2). However, CCAR lacked the capacity to host HazMatU and turned to
plaintiff for hosting services. On or about March 16, 2007, plaintiff contracted with
CCAR to host HazMatU on plaintiff’s online learning management system (“LMS”)1
(Dkt. 38, at 5). The parties were thus situated regarding HazMatU: ShipMate provided
the course content, plaintiff hosted and provided interface and administrative services
for the content, and CCAR marketed the content. HazMatU was hosted alongside
plaintiff’s own safety training program called “S/P2”. (Dkt. 38, at 6). The HazMatU
arrangement lasted until October 2013, when plaintiff terminated the agreement, citing
CCAR’s non-performance. (Dkt. 38, at 8).
The contractual relationship between CCAR and plaintiff for hosting HazMatU
lasted from March 2007 to July 2013. The contract provided CCAR with passcode access
to plaintiff’s LMS, including confidential customer information. (Dkt. 39, at 8). The
contract forbade the use of any customer information other than to further plaintiff’s
1 An LMS is an internet software platform that delivers, manages, and administers online
educational courses. An LMS provides tools and interfaces to persons with administrative
access whereby they can view course information, including information about the end-users.
(Dkt. 38, at 5).
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interests. It also provided that, after termination, CCAR must cease using and return or
destroy all confidential information derived from plaintiff’s LMS. (Dkt. 38, at 8).
Beginning on or about July 7, 2013, ShipMate developed a new hazardous
materials course called GHS HazCom2012 (“GHS”), which has been hosted on
ShipMate’s own LMS since late summer 2013.2 (Dkt. 43, at 3). In spring 2014, CCAR
contracted with ShipMate to make a new product called “CCAR HazmatU” to replace
HazMatU (Dkt. 43, at 3-4). CCAR HazmatU is an expanded version of ShipMate’s GHS
content that is hosted on ShipMate’s LMS and marketed by CCAR. (Dkt. 43, at 3). GHS
and CCAR HazmatU are direct competitors of plaintiff’s S/P2 product.
Shortly after the launch of CCAR HazmatU, plaintiff filed this case in Kansas
state court. Defendants removed the case to federal court, and plaintiff amended its
complaint on August 25, 2014. (Dkt. 38) The Amended Complaint alleges the following
five counts against ShipMate: violation of the Computer Fraud and Abuse Act, 18
U.S.C. § 1030, for unauthorized use of plaintiff’s customer list with intent to defraud;
violation of the Kansas Uniform Trade Secrets Act, K.S.A. 60-3320 et seq., for
misappropriating plaintiff’s customer list; false advertising in violation of the Lanham
Act, 15 U.S.C. § 1125, for directly or impliedly stating that CCAR courses have the
characteristics or achieved recognition actually belonging to S/P2; intentional
interference with current and prospective business advantage for interfering with
plaintiff’s current and known prospective customers via information appropriated by
2 ShipMate developed its own LMS sometime in 2006, which now hosts GHS and CCAR
HazmatU. (Dkt. 43, at 3). ShipMate’s LMS is independent of plaintiff’s LMS.
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CCAR; and trademark infringement for defendants’ inclusion of plaintiff’s S/P2 mark
in online marketing to plaintiff’s current and known prospective customers.
ShipMate now moves to dismiss for lack of personal jurisdiction.
II. Analysis
A court must exercise personal jurisdiction over the parties to render a valid
judgment. OMI Holdings, Inc. v. Royal Ins. Co. of Can., 149 F.3d 1086, 1090 (10th Cir.
1998). Plaintiff bears the burden of establishing personal jurisdiction over defendant
when opposing a motion to dismiss for lack thereof. Id. at 1091. The court “must accept
as true” the well-pled facts of the complaint “to the extent they are uncontroverted by
the defendant’s affidavits.” Toytrackerz LLC v. American Plastic Equip., Inc., 615 F. Supp.
2d 1242, 1248-49 (D. Kan. 2009) (citing Ten Mile Indust. Park v. W. Plains Serv. Corp., 810
F.2d 1518, 1524 (10th Cir. 1987)). “To obtain personal jurisdiction over a defendant not a
resident of nor found in the forum state, the federal court must follow the state’s
jurisdictional statute . . . which is subject to the bounds of constitutional due process.”
Leney v. Plum Grove Bank, 670 F.2d 878, 879 (10th Cir. 1982); see also FED. R. CIV. P. 4(e).
“Because the Kansas long-arm statute is construed liberally so as to allow jurisdiction to
the full extent permitted by due process, we proceed directly to the constitutional
issue.” OMI Holdings, Inc., 149 F.3d at 1090 (quoting Federated Rural Electric Ins. Corp. v.
Kootenai Electric Coop., 17 F.3d 1302, 1305 (10th Cir. 1994)).
The Due Process Clause protects a party from being subject to judgment in a
forum “with which he has established no meaningful contacts, ties, or relations.” Burger
King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985) (quotation omitted). “Due process
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requirements are satisfied when in personam jurisdiction is asserted over a nonresident
corporate defendant that has ‘certain minimum contacts with [the forum] such that the
maintenance of the suit does not offend traditional notions of fair play and substantial
justice.’” Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 (1985)
(quoting International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)) (alteration in
Helicopteros). The ‘minimum contacts’ requirement is satisfied when a 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). Two categories of personal jurisdiction arise under the ‘minimum
contacts’ requirement: general jurisdiction and specific jurisdiction. Daimler AG v.
Bauman, 134 S. Ct. 746, 754 (2014).
A. General Jurisdiction
“A court may assert general jurisdiction over foreign (sister-state or foreigncountry) corporations to hear any and all claims against them when their affiliations
with the State are so ‘continuous and systematic’ as to render them essentially at home
in the forum State.” Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846, 2851
(2011) (quoting International Shoe, 326 U.S. at 317). “Mere purchases, even if occurring at
regular intervals” are alone insufficient to warrant general jurisdiction. Daimler AG, 134
S. Ct. at 757 (quotation omitted). Business dealings, contractual relationships, or
correspondence with forum residents do not subject a defendant to general jurisdiction.
Shrader v. Biddinger, 633 F. 1235, 1247 (10th Cir. 2011). “[G]eneral jurisdiction over a
website that has no intrinsic connection with a forum state requires commercial activity
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carried on with forum residents in such a sustained manner that it is tantamount to
physical presence in that state.” Id. at 1246.
ShipMate engaged in ongoing obligations with forum resident CCAR and now
directs its own content into the forum. However, it has neither offices nor a registered
agent in the forum. Nor does it maintain production facilities or brick and mortar retail
locations in the forum. Further, ShipMate’s direct economic activity with Kansas
residents is not continuous – its customers use courses only as-needed. Therefore,
ShipMate’s contacts with Kansas are not so systematic and continuous as to render it at
home there. General jurisdiction is not proper over ShipMate.
B. Specific Jurisdiction
A court may assert specific jurisdiction over a nonresident defendant who has
not consented to suit in the forum “if the defendant has purposefully directed his
activities at residents of the forum and the litigation results from alleged injuries that
‘arise out of or relate to’ those activities.” Burger King, 471 U.S. at 472 (quoting
Helicopteros, 466 U.S. at 414). “The unilateral activity of those who claim some
relationship with a nonresident defendant cannot satisfy the requirement of contact in
the forum State” for specific jurisdiction. Id. at 474 (quoting Hanson v. Denckla, 357 U.S.
235, 253 (1958)). The nonresident must “purposefully avail itself of the privilege of
conducting activities within the forum State, thus invoking the benefits and protections
of its laws.” Id. at 475 (quoting Hanson, 357 U.S. at 253). A defendant purposefully avails
himself of the privileges and protections of the forum’s laws if he “deliberately
engage[s] in significant activities within a State . . . or has created continuing obligations
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between himself and residents of the forum.” Id. at 475-76 (quotations and citations
omitted). “This purposeful availment requirement ensures that a defendant will not be
haled into a jurisdiction solely as a result of random, fortuitous, or attenuated contacts,
or of the unilateral activity of a third party.” Id. at 474-75 (quotations and citations
omitted).
In the context of the internet, maintenance of a web site, without something
more, does not invoke specific jurisdiction. Shrader, 633 F.3d at 1241. A defendant is
subject to specific jurisdiction if it intentionally directs internet activity into the State for
the purpose of engaging in business or other transactions within the State, and that
activity creates a possible cause of action cognizable by the State in a person within the
State. Id. at 1240.
Here, ShipMate has purposefully availed itself of the privilege of conducting
activities in Kansas by its agreement with CCAR from 2005 to 2011, and by directing
CCAR HazmatU into Kansas.
1. ShipMate’s HazMatU Activity in Kansas
In 2005, ShipMate agreed to provide HazMatU web content to CCAR, then a
Kansas resident. The agreement licensed CCAR to use and host the content for
ShipMate’s economic gain. ShipMate continued to provide web content to CCAR under
the agreement and a subsequent contract until at least 2011, when CCAR ceased being a
Kansas resident. ShipMate thus intentionally directed its web content into Kansas,
maintaining a continuing obligation over the course of nearly six years between itself
and a Kansas resident. ShipMate purposefully availed itself of the privilege of
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conducting long-term economic activity in Kansas. ShipMate is therefore subject to
personal jurisdiction in Kansas for any possible cause of action arising out of its
provision of HazMatU content to CCAR from 2005 to 2011.
Plaintiff’s causes of action regarding its customer information, Counts I, II, and
VI, naturally arise out of ShipMate’s provision of HazMatU content to CCAR from 2005
to 2011. CCAR and ShipMate gained access to plaintiff’s customer information through
the HazMatU relationship. ShipMate directed its activity at Kansas at the outset of the
relationship and for six years following. Although the claimed act of appropriating the
information occurred after CCAR left the forum, access to the information was only
possible because of the activity directed at Kansas. Therefore, the causes of action relate
to ShipMate’s intentional direction of HazMatU content into Kansas while CCAR was a
Kansas resident. Specific jurisdiction is proper for these claims.
2. ShipMate’s LMS Activity in Kansas
In 2006, ShipMate created its own LMS, which began hosting ShipMate’s GHS
content in 2013. In 2014, ShipMate adapted GHS in expanded form to create CCAR
HazmatU. ShipMate currently hosts and provides content for GHS and CCAR
HazmatU on its LMS. CCAR HazmatU is purposefully directed at every Toyota, Scion,
and Lexus auto dealer in the United States, some of which are in Kansas. (Dkt. 11-1, at
4). ShipMate provides web content knowing that CCAR will market it throughout the
nation and into Kansas. ShipMate’s own LMS had 256 users in Kansas as of September
15, 2014. (Dkt. 43, at 4). It is unclear whether any of these Kansans are using the GHS or
CCAR HazmatU content. ShipMate asserts that it had “not yet collected revenue from
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any of [those] customers in connection with the competing GHS program that U-Inc.
complains about in this case” as of September 15, 2014. (Dkt. 43, at 4). However, neither
the collection of revenue nor the number of users in the forum is dispositive here
because ShipMate need only purposefully direct its economic activity at Kansas to
produce personal jurisdiction. It is clear that ShipMate is directing its web content,
whether in the form of GHS or CCAR HazmatU, into Kansas via its LMS. ShipMate is
therefore subject to specific personal jurisdiction for claims related to or arising out of
its current LMS activity directed at Kansas.
All of plaintiff’s claims against ShipMate relate to the current products directed
at Kansas. Count I alleges that ShipMate is currently using plaintiff’s customer list to
fraudulently market its new LMS products. Count II alleges misappropriation of
plaintiff’s customer information to unfairly compete against S/P2. Count V alleges that
ShipMate’s CCAR HazmatU content, currently on its LMS, is being falsely advertised as
having characteristics or recognition actually belonging to plaintiff’s S/P2. Count VI
alleges that ShipMate is using confidential customer information to interfere with
plaintiff’s current and prospective customers. Finally, Count VII alleges that ShipMate’s
content, hosted on its LMS, improperly includes plaintiff’s trademark in online
marketing. These four claims are related to ShipMate’s current activity directed at
Kansas: web content for GHS or CCAR HazmatU on ShipMate’s LMS. Therefore,
specific jurisdiction is proper for these claims.
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C. Fair Play and Substantial Justice
Even if the conditions for general or specific jurisdiction are met, maintenance of
the suit must “not offend traditional notions of fair play and substantial justice.” WorldWide Volkswagen Corp., 444 U.S. at 292 (quotation omitted). Thus, litigation in the forum
must be reasonable in light of “the burden on the defendant[,] . . . the forum State’s
interest in adjudicating the dispute[,] the plaintiff’s interest in obtaining convenient and
effective relief,” judicial efficiency, and social policy of the several States. Id. Upon a
showing of minimum contacts, “it is incumbent on defendants to present a compelling
case that the presence of some other considerations would render jurisdiction
unreasonable.” Schrader, 633 F.3d at 1240.
ShipMate argues that the forum is unreasonable because it is not a resident of the
forum, it had to hire counsel in the forum, the forum’s interest is small because only a
small number of its customers are there, and plaintiff can get relief in another forum.
ShipMate also argues that Kansas is not the most efficient forum because no defendants
reside there, but does not suggest a more efficient alternative.
However, ShipMate is no more burdened by litigating in Kansas than it would
be in any other foreign-state forum. Twenty-first century technology makes travel and
communication between Sisters, Oregon and Kansas City little more burdensome than
between Sisters and Reno, NV – a neighboring foreign-state. Plaintiff and the judiciary
in whole have efficiency interests in resolving this dispute as one litigation, rather than
litigating each defendant separately. Here, there is no alternative forum where any two
parties are at home. Kansas is geographically between both defendants, and serves to
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centralize the parties. Kansas has an interest in enforcing its consumer protection laws
when violations thereof arise out of contacts within the state. Further, the state-law
claims here arise out of the Kansas Uniform Trade Secrets Act, which reflects the model
Uniform Trade Secrets Act that has been adopted by most jurisdictions. Thus, resolution
of the dispute under Kansas law comports with the policy of most states on the issues.
ShipMate fails to make a compelling case that the forum is unreasonable. Kansas
is a fair and just forum.
D. Plaintiff’s Motion to File Surreply is Denied
On November 20, 2014, plaintiff filed a motion seeking leave to file a
supplemental response to ShipMate’s motion to dismiss. (Dkt. 53). Local rules do not
provide for the filing of surreplies; they are allowed only in “exceptional circumstances
compelling the filing of such a pleading.” IMC Chems. v. Nitro, 95 F. Supp. 2d 1198, 1214
(D. Kan. 2000). The court finds no such circumstances here. Although plaintiff cites
newly discovered information as its basis for surreply, the request is moot because the
Motion to Dismiss is denied.
IT IS ACCORDINGLY ORDERED this 10th day of December, 2014, that
ShipMate’s Motion to Dismiss (Dkt. 41) is DENIED.
IT IS FURTHER ORDERED that plaintiff’s Motion for Leave to File a
Supplemental Brief (Dkt. 53) is DENIED as moot.
s/ J. Thomas Marten
J. THOMAS MARTEN, JUDGE
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