Ramparts, Inc. v. Weldon
Filing
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ORDER granting Defendant's 8 Motion to Dismiss. Signed by Judge Gloria M. Navarro on 9/28/11. (Copies have been distributed pursuant to the NEF - ECS)
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UNITED STATES DISTRICT COURT
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DISTRICT OF NEVADA
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RAMPARTS, INC.,
Plaintiff,
vs.
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THOMAS D. WELDON,
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Defendant.
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Case No.: 2:10-cv-01665-GMN-RJJ
ORDER
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INTRODUCTION
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Before the Court is Defendant Thomas D. Weldon‟s Motion to Dismiss for Lack of
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Personal Jurisdiction or in the alternative to Transfer Venue (ECF No. 8). Plaintiff Ramparts,
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Inc. filed a Response (ECF No. 14) and Defendant filed a Reply (ECF No. 19).
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FACTS
This suit arises out of an allegedly fraudulent registration of a trademark and subsequent
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negotiations of a concurrent use agreement. Plaintiff Thomas D. Weldon is an individual who
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lived in Fernandina Beach, Florida.(First Amended Complaint ¶3, ECF No. 13.) Weldon filed
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an intent-to-use U.S. trademark application of LIQUIDITY for use in connection with red wine
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in International Class 33 on April 29, 2006. (Id. at ¶6.) Luxor is a resort hotel and casino located
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in Las Vegas, Nevada which is owned by Defendant Ramparts. (Id. at ¶2.) On May 16, 2006,
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Luxor filed an intent-to-use U.S. trademark application for LIQUIDITY for bar services in
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International Class 41. (Id. at ¶7.) On December 5, 2006, Luxor filed a request for an extension
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of time to oppose Weldon‟s registration of the LIQUIDITY mark. (Id. at ¶8.)
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Beginning in January 2007 and continuing until June 2007, Luxor and Weldon engaged
in negotiations of a concurrent use agreement of the LIQUIDITY mark for their respective
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services. (Id. at ¶9.) Luxor decided not to file an opposition to Weldon‟s application to register
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the mark in reliance on the representations made by Weldon during the course of negotiations.
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(Id.) Although Plaintiff alleges that an oral agreement in principal was obtained, the final
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agreement was never reduced to writing and signed. (Id. at ¶12.) On June 18, 2007,
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disappointed that the agreement would not be signed, Luxor informed Weldon that it had relied
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on the agreement by continuing to expend money to use the mark and in foregoing its opposition
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to Weldon‟s registration of the mark. (Id. at ¶13.) On December 26, 2007, Luxor opened the
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LIQUIDITY bar/lounge venue in the center of the casino floor at the Luxor. (Id. at ¶ 15.)
On April 29, 2008, the United States Patent and Trademark Office issued U.S.
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registration number 3,420,502 for the LIQUIDITY mark for red wine to Weldon. (Id. at 16.) On
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July 23, 2009, Luxor again filed federal trademark applications for the LIQUIDITY mark this
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time in International Classes 41 and 43. (Id. at ¶18.) Luxor then filed a petition to cancel
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Weldon‟s registration for the LIQUIDITY mark on September 20, 2009. (Id. at ¶19.) Weldon
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answered the petition to cancel on November 9, 2009 and subsequently sent a letter to Luxor to
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“cease and desist from using” the mark on February 25, 2010. (Id. at ¶¶20–21.)
Plaintiff filed the instant suit on September 27, 2010 alleging two causes of action:
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(1) false or fraudulent registration under 15 U.S.C. § 1120; and (2) promissory estoppel.
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Plaintiff then filed an amended complaint (“FAC”) adding causes of action for fraud and breach
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of contract.
DISCUSSION
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A.
Personal Jurisdiction
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A defendant may move to dismiss for lack of personal jurisdiction. Fed. R. Civ. P.
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12(b)(2). Personal jurisdiction over a nonresident defendant is established when a two-part test
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is satisfied. First, there must be personal jurisdiction under the laws of the state where it is
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asserted. Chan v. Society Expeditions, Inc., 39 F.3d 1398, 1404 (9th Cir. 1994). Second, the
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exercise of jurisdiction must satisfy due process. U.S. Const. amend XIV, 1; Chan, 39 F.3d at
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1404–05.
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For a non-resident defendant, the assertion of jurisdiction is constitutionally proper under
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the Due Process Clause of the Fourteenth Amendment only where there are continuous and
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systematic contacts with the forum state (general jurisdiction), Bauman v. DaimlerChrysler
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Corp., 579 F.3d 1088, 1094 (9th Cir. 2009), or when there are sufficient minimal contacts with
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the forum state such that the assertion of personal jurisdiction does not offend traditional notions
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of fair play and substantial justice (specific jurisdiction), Int’l Shoe Co. v. State of Wash., Office
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of Unemployment Compensation & Placement, 326 U.S. 310, 316 (1945) (quoting Milliken v.
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Meyer, 311 U.S. 457, 463 (1940)).
Plaintiff does not contend that Defendant‟s contacts meet the requirements of general
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personal jurisdiction. Therefore the Court will apply the test for specific jurisdiction and
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determine whether Defendant had sufficient minimum contacts with the District of Nevada.
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1.
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The Ninth Circuit employ‟s a three-part test to determine whether the exercise of specific
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jurisdiction satisfies the requirements of due process: (1) the defendant must purposefully direct
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his activities or consummate some transaction with the forum or resident thereof; or perform
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some act by which he purposefully avails himself of the privileges of conducting activities in the
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forum, thereby invoking the benefits and protections of its laws; (2) the plaintiff‟s claim must
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arise out of that activity; and (3) the exercise of jurisdiction must be reasonable. Dole Food Co.,
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Inc. v. Watts, 303 F.3d 1104, 111 (9th Cir. 2002).
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Specific Jurisdiction
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Purposeful Availment or Direction
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Under the first prong of the Ninth Circuit test the defendant must have either
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(1) “purposefully availed” himself of the privilege of conducting activities in the forum, or
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(2) “purposefully directed” his activities toward the forum. Schwarzenegger v. Fred Martin
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Motor Company, 374 F.3d 797, 802 (9th Cir. 2004). A purposeful availment analysis is most
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often used in suits sounding in contract while a purposeful direction analysis is most often used
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in suits sounding in tort. Id.The Plaintiff in this case alleges causes of action sounding in both
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contract and tort.
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i.
Purposeful Availment
“To have purposefully availed itself of the privilege of doing business in the forum, a
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defendant must have „performed some type of affirmative conduct which allows or promotes the
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transaction of business within the forum state.‟” Boschetto v. Hansing, 539 F.3d 1011, 1016 (9th
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Cir. 2008) (quoting Sher v. Johnson, 911 F.2d 1357, 1362 (9th Cir. 1990)). Plaintiff argues that
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Defendant purposefully availed himself of the privilege of doing business in Nevada because he
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engaged in contract negotiations with Plaintiff from January 2007 until June 2007. Plaintiff
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alleges that the Luxor and Weldon engaged in extensive negotiations of a concurrent use
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agreement for the LIQUIDITY mark for their respective goods and services.” (FAC at ¶9.)
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“[P]rior negotiations and contemplated future consequences, along with the terms of the contract
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and the parties‟ „additional course of dealing‟ are factors that may establish purposeful
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availment.” Hoag v. Sweetwater Int’l, 857 F. Supp. 1420, 1425–1426 (D.Nev. 1994) (quoting
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Burger KingCorp. v. Rudzewicz, 471 U.S. 462, 478, 105 S.Ct. 2174 (1985)). Plaintiff alleges
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that as a result of the negotiations a concurrent use agreement was formed, whereby Luxor could
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use the trademark in Nevada in connection with Luxor‟s Liquidity Bar & Lounge at the Luxor
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Hotel & Casino and Weldon would use the trademark for wine only. (FAC at ¶¶10, 15.)
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Plaintiff argues that this relationship “envisioned continuing and wide-reaching contacts” with
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Weldon in Nevada. See Burger King, 471 U.S. at 480 (A contract that envisioned continuing and
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wide-reaching contacts with the forum established that out of state defendant purposefully
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availed himself of the jurisdiction in the forum).
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Defendant argues that he has not purposefully availed himself of the privilege of doing
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business in Nevada. Defendant argues that the contact that forms the basis of personal
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jurisdiction over him cannot be the alleged oral contract because this is no more than a legal
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conclusion. Plaintiff alleges that “Luxor and Weldon reached an oral agreement in principle by
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which Weldon would use the LIQUIDITY mark for red wine and Luxor would use the
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LIQUIDITY mark for bar and lounge services.” (FAC at ¶10.) Defendant argues that even if an
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oral agreement was in fact entered between the parties, which he denies, it would be barred as a
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matter of law under the statute of frauds. The statute of frauds “precludes enforcement” of an
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oral agreement that cannot be performed within one year. See Edwards Industries, Inc.
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v.DTE/BTE, Inc., 112 Nev. 1025, 1032, 923 P.2d 569,573 (1996). Plaintiff‟s allegations that it
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would use the trademark in connection with its bar and lounge leads to the inevitable conclusion
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that the contract would be in effect for more than one year. Plaintiff‟s description of the oral
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agreement also leads to the conclusion that the agreement was to last for more than a year. (See
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Response 9:5–8, ECF No. 14 “the concurrent use agreement envisioned Weldon having
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continuing and extensive contacts with Nevada [because] [p]arties to a concurrent use agreement
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should monitor compliance with the agreement on an ongoing basis.”.)
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The Court agrees with Defendant that the alleged oral agreement/contract between the
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two parties cannot establish the basis for personal jurisdiction because the allegation is no more
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than a legal conclusion. "The tenet that a court must accept as true all allegations is inapplicable
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to legal conclusions." Ashcroft v. Iqbal, 129 S.Ct. 1937, (2009); see also Bell Atl. Corp. v.
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Twombly, 550 U.S. 544, 555 (2006)(Although for purposes of a motion to dismiss we must take
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all factual allegations in the complaint as true, we “are not bound to accept as true a legal
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conclusion couched in a factual allegation”).
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ii.
Purposeful Direction
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The Court will now consider whether the Defendant “purposefully directed” his activities
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toward the forum. Purposeful direction is determined under the “effects” test of Calder v. Jones,
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465 U.S. 783, 789–90 (1983). “Under Calder the „effects‟ test requires that the defendant
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allegedly have (1) committed an intentional act, (2) expressly aimed at the forum state,
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(3) causing harm that the defendant knows is likely to be suffered in the forum state.”
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Schwarzenegger, 374 F.3d at 803. Cases following Calder have explained that the “effects” test
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is not satisfied merely by a foreign act with foreseeable effects in the forum; there must be
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“something more”–namely, “express aiming” at the forum state. Bancroft & Masters, Inc. v.
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Augusta Nat’l Inc., 223 F.3d 1082, 1087 (9th Cir. 2000) (citing Calder, 465 U.S. at 789).
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Plaintiff argues that Defendant‟s false statements to Luxor, that he was in agreement with
Luxor‟s use of the LIQUIDITY mark in Nevada, was an intentional act expressly aimed at the
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forum that harmed Plaintiff in the forum. Plaintiff alleges that if not for Defendant‟s alleged
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consent, Luxor would not have continued to expend money and proceed to develop the use of
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the LIQUIDITY mark and would not have withdrawn its opposition to Weldon‟s registration of
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the mark.
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Defendant argues however, that his conduct was not expressly aimed at the forum.
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Defendant claims that his counsel, John C. Gaydos, was contacted by Plaintiff‟s attorney
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sometime in January 2007 to discuss Luxor‟s opposition to Weldon‟s trademark application.
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(Gaydos Decl. Ex. C ¶8, ECF No. 19.) Plaintiff‟s counsel then e-mailed an agreement to
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Defendant for him to sign granting Plaintiff certain rights to the mark to avoid future litigation.
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(Id. at ¶11.) Following this e-mail the parties entered in to settlement discussions that lasted
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until June 2007. (Id. at ¶¶ 13–17.) Defendant argues that the contract negotiations that took
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place were actually nothing more than settlement negotiations to avoid litigation.
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Although it is an issue of first impression in Nevada, other jurisdictions have held that
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settlement negotiations and accompanying correspondence do not suffice to create sufficient
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contact for the exercise of personal jurisdiction. In re Shipowners Litigation, 361 N.W.2d 112
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(Minn.App. 1985) (citing Washington Sci. Indus., Inc. v. Polan Indus., Inc., 302 F.Supp. 1354,
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1358 (D.Minn. 1969). The court in In re Shipowners found that to allow personal jurisdiction to
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attach when the defendants came to the forum state at the request of the plaintiff to discuss a
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possible settlement of their contract difference would amount to a form of civil entrapment. Id.
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at 115. Other jurisdictions have also held that an out of state defendant's contacts with the
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forum state for purposes of settlement negotiations does not amount to “purposeful availment”
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for purposes of finding personal jurisdiction over the defendant. See Red Wing Shoe Co. v.
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Hockerson–Halberstadt, Inc., 148 F.3d 1355, 1360–1361 (Fed.Cir.1998) (Offer for a license
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within a cease and desist letter likened to offer of settlement, and alone, does not confer personal
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jurisdiction); Digi–Tel Holdings, Inc. v. Proteq Telecommunications, Ltd., 89 F.3d 519, 524–525
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(8th Cir.1996) (“courts have hesitated to use unsuccessful settlement discussions as „contacts‟
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for jurisdictional purposes”); Smith Architectural Metals, LLC v. Am. Railing Sys., Inc., 698
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S.E.2d 752, 756 (Ct.App. N.C. 2010)(“[I]f every offer to compromise and promote peace is used
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as a contact to establish personal jurisdiction in this State over the party who presents it, „many
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settlements would be prevented, and unnecessary litigation would be produced and prolonged.‟”
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(citing Hammond Packing Co. v. Dickey, 183 F.977, 978 (8th Cir. 1911)).
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Likewise, this Court is hesitant to confer jurisdiction based on conduct which Defendant
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characterizes as a settlement negotiation not a business negotiation. Plaintiff claims that it was
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during the course of this negotiation that Defendant made false statements that induced Plaintiff
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to continue to spend money to promote a mark that it did not yet have rights to use. Defendant
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establishes, and Plaintiff does not deny, that it was Plaintiff who first contacted Defendant to
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discuss the concurrent use agreement. While an on-going business relationship was discussed
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and probably contemplated, it is apparent that at some point these negotiations broke down. (See
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e-mail, Ex. G, ECF No. 19.) The court finds that the negotiation itself, including any
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communications and false statements that may have or may not have occurred, is not enough to
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satisfy the expressly aimed prong of specific personal jurisdiction.
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Courts have long recognized, public policy strongly encourages settlement outside of
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litigation. See Ahern v. Cent. Pac. Freight Lines, 846 F.2d 47, 48 (9th Cir. 1988). A person
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who takes the proper steps to register a trademark should not fear being hauled into a foreign
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court merely because he entertains an offer to enter into a concurrent use agreement. Moreover,
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the trademark owner should not be threatened with some adverse action if he refuses to accept
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the business offer; he should not be punished for attempting to prevent future infringement
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litigation. Allowing such contact to qualify as "purposeful direction" would motivate a potential
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infringer to feign interest in an agreement merely to establish the minimum contacts necessary to
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bring the suit in their own forum or to threaten litigation in a foreign court if a bonafide offer is
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rejected by the trademark owner. These risks would clearly discourage pre-trial negotiations
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since the trademark owner would be best served by waiting until after the suit is filed and the
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jurisdiction is established prior to contemplating any coexistence agreements. Accordingly, the
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Court finds that Defendant‟s contacts with the forum were not “expressly aimed” at the forum.
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Therefore, this Court does not have personal jurisdiction over Defendant and this case should be
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dismissed.1
CONCLUSION
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IT IS HEREBY ORDERED that Defendant Thomas D. Weldon‟s Motion to Dismiss
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for Lack of Personal Jurisdiction (ECF No. 8) is GRANTED.
DATED this 28th day of September, 2011.
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________________________________
Gloria M. Navarro
United States District Judge
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The Court denies Plaintiff‟s request for jurisdictional discovery.
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