Xpansion Holdings, LLC v. The Retail Coach, LLC

Filing 34

MEMORANDUM OPINION re 33 Order on Motion to Dismiss/Lack of Jurisdiction, Stay, and Transfer. Signed by District Judge Sharion Aycock on 3/3/2017. (adm)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF MISSISSIPPI
ABERDEEN DIVISION
XPANSION HOLDINGS, LLC
V.

PLAINTIFF
CIVIL ACTION NO. 1:16CV125-SA-DAS

THE RETAIL COACH, LLC

DEFENDANT
MEMORANDUM OPINION

This matter arises from infringement claims under the Lanham Act. Plaintiff Xpansion
has filed a Motion to Dismiss for Lack of Personal Jurisdiction, or to Transfer or, alternatively,
Stay [23]. Defendants responded, noting the parallel case styled, The Retail Coach, LLC v.
Xpansion Holdings, LLC and r360, LLC, Civil Action No. 1:16-CV-00032-SA-DAS, wherein
Jurisdictional Discovery had occurred. Further, Defendant requested consolidation of the two
actions.
Facts and Procedural History
In the parallel case, Retail Coach alleges that r360, LLC’s marks are infringing on their
own marks, and therefore filed a Complaint in the Northern District of Mississippi. Initially, the
Complaint was filed against Retail360, LLC and r360, LLC. Retail Coach later realized that
Retail360, LLC was the mere preformation name for r360, LLC. Therefore, they amended their
complaint to replace Retail360, LLC with Xpansion Holdings, the intended related entity. Retail
Coach alleges that Xpansion Holdings is equally responsible for the use of the infringing mark
because it is essentially the same entity as r360, or an alter ego.
However, before Retail Coach added Xpansion to the complaint, Xpansion brought this
suit against Retail Coach in the Northern District of Alabama for trademark infringement and
trademark cancellation, or, in the alternative, a declaration of non-infringement. Upon motion by
Retail Coach, this suit was transferred to the Northern District of Mississippi based on the “first

filed rule.” Xpansion motioned to dismiss or transfer for lack of personal jurisdiction in both
cases, asserting that Mississippi lacks personal jurisdiction. Therefore, as it stands, there are two
parallel cases in the Northern District of Mississippi, with similar pending jurisdictional Motions.
The first one, originally filed in Mississippi, is styled as The Retail Coach, LLC v. Xpansion
Holdings, LLC and r360, LLC, Civil Action No. 1:16-CV-00032-SA-DAS. The second case,
transferred from Alabama is styled as Xpansion Holdings, LLC v. The Retail Coach, Civil Action
No. 1:16-CV-00125-SA-DAS.
Xpansion Holdings, doing business as Decision Data Resources, provides web-based
Geospatial Information Systems (“GIS”) software solutions to economic and workforce
development and chamber organizations. Though Xpansion has no day to day operations, it
solicits customers by using mass emails to encourage participation in webinars. Xpansion’s
CEO, Charles Branch, is the sole member, manager and owner of Xpansion. Branch, along with
Amanda Beshears and Branch’s son are the sole members of r360. Unlike Xpansion, who merely
runs the website providing access to the software for both r360 and Xpansion customers, r360
uses one database within that software to do marketing analysis, consulting services, and
proactive retail recruitment for public sector clients, who are primarily cities or municipalities.
The two entities share an office space and equipment, and Xpansion has given r360 a
substantial “loan” for which payments have never been made. The Retail Coach alleges that this
is not a loan, but rather a commingling of funds. Additionally, Xpansion paid for and
administered all of r360’s start up procedures, including creating the name Retail360, LLC.
Xpansion has also provided an unwritten license agreement to r360 to use the r360 mark, and
Xpansion does not charge for r360’s use of the software or the mark. Finally, the two entities use
the same accountant, though they maintain separate banking accounts.

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Xpansion alleges that even if there is personal jurisdiction over r360 in Mississippi, as a
separate entity, Xpansion has no physical presence in Mississippi, maintains no office or bank
accounts in Mississippi, has no property located in Mississippi, and does not directly solicit
business in Mississippi. However, since 2003, Xpansion has maintained a renewable contract
with the Mississippi Development Authority (“MDA”) wherein the MDA pays for access to
Xpansion’s web-based services. Nevertheless, Xpansion insists that there is no personal
jurisdiction because the website is maintained in Birmingham Alabama, and it is situated on a
computer located in Andover, Massachusetts. Furthermore, Xpansion alleges that it has not used
the r360 mark to market or solicit its services in Mississippi or to Mississippi residents.
Branch, the CEO of both companies, has sent mass emails soliciting business on behalf of
r360. The emails contain a copy of the allegedly infringing r360 logo embedded in the signature
line of the email, as well as Xpansion’s logo. After sending these emails, Branch was able to
develop a relationship between r360 and Blackwater Resources in order to explore providing
consulting services for the building of a shopping center in Clinton, Mississippi. In further
communications with Blackwater Resources, r360, via Branch, used Xpansion’s logo in their
signature, as well as their own. However, Branch alleges that r360 and Xpansion are entirely
separate entities. He argues that he was acting on behalf of r360 only, and not Xpansion.
In response to the pleadings regarding the Motion to Dismiss, Retail Coach filed a
Motion for Jurisdictional Discovery in the Mississippi action, which was granted by the Court.
Retail Coach also requested consolidation of the two cases.
Standard
“The party who seeks to invoke the jurisdiction of the federal court bears the burden of
establishing the district court’s jurisdiction over the nonresident.” D.J. Investments, Inc. v.

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Metzeler Motorcycle Tire Agent Gregg, Inc., 754 F.2d 542, 545–46 (5th Cir. 1985). “The
plaintiff need not, however, establish jurisdiction by a preponderance of the evidence; a prima
facie showing suffices.” Luv N’ Care, Ltd. v. Insta–Mix, Inc., 438 F.3d 465, 469 (5th Cir. 2006)
(quoting Wyatt v. Kaplan, 686 F.2d 276, 280 (5th Cir. 1982)). When determining whether a
prima facie case for jurisdiction exists, “[t]he district court is not obligated to consult only the
assertions in the plaintiff’s complaint . . . [r]ather, the district court may consider the contents of
the record at the time of the motion . . . .” Paz v. Brush Engineered Materials, Inc., 445 F.3d 809,
812 (5th Cir. 2006). In this regard, all “uncontroverted allegations in the plaintiff’s complaint
must be taken as true, and conflicts between the facts contained in the parties’ affidavits must be
resolved in the plaintiff’s favor.” Gatte v. Dohm, 574 F. App’x 327, 330 (5th Cir. 2014) (quoting
D.J. Investments, 754 F.2d at 546).
Analysis
“Absent a controlling federal statute regarding service of process, [the district court
must] first determine whether the long arm statute of the forum state permits exercise of
jurisdiction. [The district court] then determine[s] whether such exercise comports with due
process.” Ham v. La Cienega Music Co., 4 F.3d 413, 415 (5th Cir. 1993) (citing FED. R. CIV. P.
4(e); Aviles v. Kunkle, 978 F.2d 201 (5th Cir. 1992)). The Lanham Act does not authorize
nationwide service of process. See, e.g., Frosty Bites, Inc. v. Dippin’ Dots, Inc., 2002 WL
1359704, at *2 n. 4 (N.D. Tex. June 20, 2002) (Kaplan, J.).
“A federal court, even in a federal question case, can use a state long-arm statute only to
reach those parties whom a court of the state could also reach under it.” Burstein v. State Bar of
Cal., 693 F.2d 511, 514 (5th Cir. 1982). The Mississippi long-arm statute allows a court to
exercise personal jurisdiction over an out of state defendant who: (1) makes a contract with a

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resident of this state to be performed in whole or in part by any party in this state; (2) commits a
tort in whole or in part in this state against a resident or nonresident of this state; or (3) does any
business or performs any character of work or service in this state. MISS. CODE ANN. § 13–3–57
(2000).
Mississippi’s Long Arm Statute
In the Mississippi action,1 Retail Coach asserted that Mississippi’s long-arm statute
reaches Xpansion via the second and third prongs, generally regarded as the tort prong and the
“doing business prong.” “As it stands now, the long-arm statute, by its plain terms, applies to any
person or corporation performing any character of work in this state.” ITL Int’l, Inc. v.
Constenla, S.A., 669 F.3d 493, 498 (5th Cir. 2012) (quoting Estate of Jones v. Phillips, 992 So.2d
1131, 1139 (Miss. 2008) (emphasis added). That broad scope encompasses Xpansion’s activities
here. Furthermore, the Mississippi Supreme Court has explained that a nonresident may be
“doing business” in Mississippi if “he did various acts here for the purpose of realizing a
pecuniary benefit or otherwise accomplishing an object.” McDaniel v. Ritter, 556 So. 2d 303,
309 (Miss. 1989) (citing Restatement (Second) of Conflict of Laws § 35, Comment a (1971)).
Retail Coach has alleged that Xpansion placed the infringing logos on the emails in an effort to
increase knowledge about r360’s services, which would allow Xpansion to realize a pecuniary
benefit—interest in its related company. Retail Coach also alleges that r360 used its mark for
purposes of soliciting business on behalf of Xpansion from Clinton, Mississippi, targeting
Blackwater Resources to provide consulting services for a shopping center.

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There are two parallel cases in the Northern District of Mississippi with similar pending jurisdictional Motions. See
The Retail Coach, LLC v. Xpansion Holdings, LLC and r360, LLC, Civil Action No. 1:16-CV-00032-SA-DAS;
Xpansion Holdings, LLC v. The Retail Coach, Civil Action No. 1:16-CV-00125-SA-DAS. Pursuant to this Order,
the cases will henceforth be consolidated.

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Additionally, “under the tort prong of the Mississippi long-arm statute, personal
jurisdiction is proper if any element of the tort (or any part of any element) takes place in
Mississippi.” Allred v. Moore & Peterson, 117 F.3d 278, 282 (5th Cir. 1997), cert. denied, 522
U.S. 1048, 118 S. Ct. 691, 139 L. Ed. 2d 637 (1998). The Mississippi Supreme Court has stated
that “[t]he tort is not complete until the injury occurs, and if the injury occurs in this State, then,
under the . . . statute, the tort is committed, at least in part, in this State, and personam
jurisdiction of the nonresident tortfeasor is conferred upon the Mississippi court.” Smith v.
Temco, 252 So.2d 212, 216 (Miss. 1971). Accordingly, Retail Coach argues that there is personal
jurisdiction under the tort prong of the long-arm statute as the injuries allegedly suffered by
Retail Coach occurred in Mississippi.
Under the facts of the case sub judice, Xpansion transmitted e-mails to a recipient or
recipients in Mississippi, MDA employees. Embedded in the emails were allegedly infringing
graphics and signatures. Such signatures were allegedly placed there by Xpansion in order to
increase awareness for products distributed by its CEO’s other company, r360. Furthermore,
Xpansion placed the logo on its website, which was used by customers within Mississippi. The
test for infringement is “whether there is a probability that the average person will be so
confused by the use of the device complained of as to believe that the products offered by the
infringer were produced by the trademark owner,—that there is likelihood that prospective
purchasers will be misled to appellant’s damage. Squirrel Brand Co. v. Barnard Nut Co., 224
F.2d 840, 844 (5th Cir. 1955) (citations omitted). Even if Xpansion did not consummate
continuous transactions in Mississippi on behalf of r360, its repeated use of an infringing logo
while doing business in Mississippi on behalf of itself may be in violation of the Lanham Act,

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and therefore tortious. The Court is satisfied that the “doing business prong” and the tort prong
of the long arm statute reach Xpansion under the prima facie standard.
Due Process
The Due Process Clause of the Fourteenth Amendment permits the exercise of personal
jurisdiction over a nonresident defendant when (1) that defendant has purposefully availed
himself of the benefits and protections of the forum state by establishing “minimum contacts”
with the forum state; and (2) the exercise of jurisdiction over that defendant does not offend
“traditional notions of fair play and substantial justice.” Latshaw v. Johnston, 167 F.3d 208, 211
(5th Cir. 1999) (footnotes omitted) (citing World–Wide Volkswagen Corp. v. Woodson, 444 U.S.
286, 297, 100 S. Ct. 559, 62 L. Ed. 2d 490 (1980); International Shoe Co. v. State of
Washington, 326 U.S. 310, 316, 66 S. Ct. 154, 90 L. Ed. 95 (1945)). To comport with due
process, the defendant’s conduct in connection with the forum state must be such that he ‘should
reasonably anticipate being haled into court’ in the forum state.” Id.2
Regarding the first prong, “whether the minimum contacts are sufficient to justify
subjection of the non-resident to suit in the forum is determined not on a mechanical and
quantitative test, but rather under the particular facts upon the quality and nature of the activity
with relation to the forum state.” Mississippi Interstate Express Inc. v. Transpo, Inc., 681 F.2d
1003, 1006 (5th Cir. 1982) (emphasis added), see also D.J. Investments, Inc., 754 F.2d at 547. “If
a nonresident corporate or individual defendant has ‘purposefully availed itself of the privilege

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For purposes of the due process inquiry, there are two types of jurisdiction: general and specific. Stroman Realty,
Inc. v. Wercinski, 513 F.3d 476, 484 (5th Cir. 2008). Specific jurisdiction exists where the plaintiff’s claim against
the non-resident defendant arises out of or relates to activities that the defendant purposefully directed at the forum
state. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472, 105 S. Ct. 2174, 85 L. Ed. 2d 528 (1985). General
jurisdiction exists where the defendant has maintained “continuous and systematic” contacts with the forum state.
Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 415–16, 104 S. Ct. 1868, 80 L. Ed. 2d 404
(1984). In the case at bar, Plaintiff’s claims arise out of Defendant’s use of the logo while conducting activities
within the state. Therefore, the Court examines claims under the specific jurisdiction theory.

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of conducting activities within the forum state,’ then it is considered not ‘unfair’ that the
nonresident’s important rights be adjudged in that forum.” Hanson v. Denckla, 357 U.S. 235,
253, 78 S. Ct. 1228, 2 L. Ed. 2d 1283 (1958) (additional citations omitted)).
Here, there is clear evidence that MDA has used the website repeatedly for the past
several years, and the website and its accompanying email addresses have been used to facilitate
a renewing contract with Xpansion. Furthermore, Xpansion’s website was knowingly and
repeatedly used to transfer files to Mississippi residents. See Mink v. AAAA Dev. LLC, 190 F.3d
333, 335 (5th Cir. 1999) (citing Zippo Manufacturing Co. v. Zippo Dot Com, Inc., 952 F. Supp.
1119, 1124 (W.D. Pa. 1997)3 (finding that where a website facilitates contractual relationships
and the knowing and repeated transmission of computer files over the Internet, personal
jurisdiction is proper). Not only did Xpansion maintain a contract with MDA for several years,
r360’s CEO sent emails and negotiated new business opportunities in Mississippi using both the
allegedly infringing logo and Xpansion’s logo as a means to allow people to know that r360 had
substantial experience and a general access to Xpansion software. Xpansion was aware that
Retail Coach was competing for the same contracts. Xpansion could have easily left their logo
off of the emails in order to avoid doing business in Mississippi. Therefore, the Court finds that
the unilateral moves by Xpansion regarding its MDA contract, combined with the marketing to
other Mississippi residents, as well as its intentional moves in competing with Retail Coach are
sufficient to show purposeful availment, even without determining whether Xpansion is the alterego of r360.
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The Fifth Circuit adopted Zippo’s sliding scale in Mink. Mink, 190 F.3d at 336. Although Mink was a general
jurisdiction case, see id. (“Because we conclude that Mink has not established any contacts directly related to the
cause of action required for specific jurisdiction, we turn to the question of whether general jurisdiction has been
established.”), and Zippo was a specific jurisdiction case, see Zippo, 952 F. Supp. at 1127 (“the cause of action
arises out of [defendant’s] forum-related conduct in this case”), the Mink panel found “the reasoning of Zippo [to be]
persuasive and adopt [ed] it in this Circuit,” Mink, 190 F.3d at 336. It therefore appears that Mink’s sliding scale
should be applied in the present specific jurisdiction context.

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Turning to the second prong, traditional notions of fair play and substantial justice, the
Court notes that Xpansion’s burden, though not ideal, would not outweigh this State’s interest in
administering federally mandated copyright laws or the Retail Coach’s interest in convenient and
effective relief. Finally, transferring the suits back to Alabama would not satisfy the interests of
efficiency in this complicated matter, nor the states’ shared interest in furtherance of fundamental
social policies. Therefore Retail Coach has established a prima facie case for specific personal
jurisdiction as to its Lanham Act claims.
Conclusion
Plaintiff Xpansion’s Motion to Dismiss, Transfer, or Stay is DENIED. In addition, the
Court orders this case to be consolidated with The Retail Coach, LLC v. Xpansion Holdings, LLC
and r360, LLC, Civil Action No. 1:16-CV-00032-SA-DAS, pursuant to Rule 42(a) of the Federal
Rules of Civil Procedure.
IT IS SO ORDERED, this 3rd day of March, 2017.
/s/ Sharion Aycock
UNITED STATES DISTRICT JUDGE

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