PTT, LLC v. GIMMIE GAMES et al
Filing
471
OPINION. Signed by Judge John Michael Vazquez on 8/9/2019. (sms)
Not for Publication
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
HIGH 5 GAMES, LLC,
Plain tuf
Civil Action No. 13-7161
V.
OPINION
DANIEL MARKS, et aL,
Defendants.
John Michael Vazguez, U.S.D.J.
This highly contentious litigation involves competitors who develop features for casino
games. Neither side has been entirely consistent in their positions with the exception that each
side consistently opposes the other. Presently before the Court are two partial motions to dismiss
the Third Amended Complaint filed by (1) Daniel Marks, Joseph Masci, Brian Kavanagh, Marks
Studios, LLC (“Marks Studios”), and Aristocrat Technologies, Inc. (individually “ATI” and
collectively the “SAC Defendants”), D.E. 344; and (2) Aristocrat Technologies Australia PTY
Limited (“ATA”), Aristocrat Leisure Limited (“ALL”), Product Madness, Inc. (“PM”), and Grant
Boiling (collectively the “New Defendants”), D.E. 345. Plaintiff High 5 Games, LLC (“H5G” or
“Plaintiff’) opposed both motions, D.E. 370, 371, to which Defendants replied D.E. 378, 379)
The New Defendants’ brief in support of their motion, D.E. 345-1, will be referred to as “New
Br.”; the SAC Defendants’ brief in support of their motion, D.E. 344-1, will be referred to as “SAC
Br.”; Plaintiffs brief in opposition to the New Br., D.E. 370, will be referred to as “New Opp.”;
Plaintiffs brief in opposition to the SAC Br., D.E. 371, will be referred to as “SAC Opp.”; the
New Defendants’ reply brief, D.E. 379, will be referred to as “New Reply”; and the SAC
Defendants’ reply brief, D.E. 378, will be referred to as “SAC Reply.” Plaintiffs supplemental
brief, D.E. 460, will be referred to as “PIf. Supp. Br”; Defendants’ supplemental brief, D.E. 459,
The Court heard oral argument on the motions on June 27, 2019, D.E. 456, after which the parties
filed supplemental briefs and opposition, D.E. 459,460, 462, 463. For the reasons that follow and
as discussed on the record at oral argument, Defendants’ motions are GRANTED in part and
DENIED in part.
1.
BACKGROUND2
1. Factual Background
Plaintiff’s business involves the gaming market, including slot machines.
“Super
Symbols” and “Super Stacks,” two of H5G’s gaming methodologies and inventions for slots, are
at issue in this litigation. The Super Stacks method provides “a unique method of taking simple
stacks and generating an experience-changing function for a player through substituting fixed
symbols on the reel with the desired stacked symbol.” TAC
¶ 25.
Plaintiff alleges that it created
the Super Stacks method in approximately the summer of 2009. The Super Stacks method was
included in Plaintiffs March 28, 2012 patent application and the resulting US Patent No.
9,022,852 (“852”) patent,3 which was issued to Plaintiff on May 5,2015. Id.
¶J 23-28.
Plaintiff
will be referred to as “Defs. Supp. Br.”; Plaintiffs supplemental response, D.E. 463, will be
referred to as “PIf. Supp. Resp.”; and Defendants’ supplemental response, D.E. 462, will be
referred to as “Defs. Supp. Resp.”
2
The factual background is taken from Plaintiffs Third Amended Complaint (the “TAC”) and its
exhibits. D.E. 318. When reviewing a Rule 12(b)(6) motion to dismiss, “courts generally consider
only the allegations in the complaint, exhibits attached to the complaint, matters of public record,
and documents that form the basis of a claim.” Goldenberg v. Indel, Inc., 741 F. Supp. 2d 618,
624 (D.N.J. 2010) (quotingLum v. Bank ofAm., 361 F.3d 217,222 n.3 (3d Cir. 2004)). In addition,
when considering a motion to dismiss for lack of personal jurisdiction, a court must “accept all of
the plaintiffs allegations as true and construe disputed facts in favor of the plaintiff.” Carteret
Say. Bankv. Shushan, 954 F.2d 141, 142 n.1 (3d Cir. 1992).
After the supplemental briefing on the pending motions, Defendants notified the Court that
following an inter partes review, the Patent Trial and Appeal Board recently found that each claim
of ‘852 patent was unpatentable. D.E. 466. Plaintiff has indicated that it intends to appeal the
decision to the Federal Circuit.
2
alleges that prior to the ‘852 patent’s issuance date, it did not disclose its proprietary methodology
as to Super Stacks and considered it a trade secret. Id.
¶ 28.
The Super Symbols invention “pertains to the concept of oversize symbols occupying
multiple positions across multiple rows and/or colunms.” Id.
¶
30.
Plaintiff alleges that it
conceived of this idea in “the latter part of 2009” and filed a provisional patent application that
included the Super Symbols invention on August 16,2011. Approximately one year later, Plaintiff
filed its patent application, and U.S. Patent No. 8,734,223 (‘223) patent was issued to Plaintiff on
May 27, 2014. Id.
¶J 30-3 1.
Plaintiff also considered the Super Symbols invention to be a frade
secret prior to the issuance of the ‘223 patent and kept its invention a secret before then. Id.
¶ 32.
Plaintiff alleges that three of its former employees, Defendants Daniel Marks, Joseph
Masci, and Brian Kavanaugh, as well as Mark’s company, Defendant Marks Studios (d/b/a
Gimmie Games), misapproptiated confidential information. Marks Studios used this information
to help a competitor, Defendant ATI, develop two new game features, “Mega Symbols” and “Mega
Stacks.” Id.
¶ 54.
Marks began working as H5G’s legal counsel in September 1998, and during his
employment, devised and developed casino game software. Id. ¶37. Plaintiff alleges that in 1998,
Marks executed an Employee Proprietary Information Agreement in favor of H5G (the
“Proprietary Information Agreement”), which assigned Marks’ intellectual property rights to 115G.
Id.
¶ 65.
Marks resigned from H5G, effective February 4, 2010. On that date, Marks and H50
entered into a Separation, Severance and Transition Services Agreement (the “Marks
Agreement”).
Pursuant to the Marks Agreement, Marks agreed to return (and not use) all
confidential information, and to honor a “Restricted Period.” Id.
¶
38. The Restricted Period
included non-solicitation and non-compete provisions. Id. Plaintiff alleges that the Super Stacks
3
and Super Symbols inventions constitute confidential information under the Marks Agreement.
Id.
In October 20111 Marks and H5G executed the “Marks Amendment” to the Marks Agreement,
which extended the non-solicitation period. Id.
¶ 40.
Plaintiff alleges that after Marks left, he created and became the managing partner of Marks
Studios, and began to compete against H50. Id.
¶1
48-49. In December 2012, Marks hired
Kavanagh, and in July 2013, Masci joined Marks Studios. Kavanagh and Masci had previously
worked at H5G. Id. ¶flj 41, 43, 51. Each had post-employment agreements with Plaintiff Id.
¶J
41, 43. Bolling also worked with Plaintiff, leaving in 2010 and agreeing to a post-employment
contract; he currently works for ATI. Id.
¶J
45. In addition, Marks allegedly entered into an
agreement with ATI as early as October 2012. Id.
¶ 50.
In the spring of 2012, ATI had executed
a non-disclosure agreement with H5G, through which “H50 shared confidential information with
[ATI] for the sole purpose of entering a business relationship.” Id.
¶ 50.
As noted, the gist of Plaintiff’s case centers on its allegations that Defendants
misappropriated information that Plaintiff used to fashion the Super Stacks and Super Symbols to
create the Max Stacks and Mega Symbols features. Id.
¶11 55-56.
Plaintiff created many games
with the Super Symbols feature and then sold some of the games to Bally Technologies. Id.
¶ 35.
Plaintiff and Bally planned to publicly introduce the games in September 2013 at an industry trade
show, G2E, in Las Vegas. Id.
¶
36. Plaintiff alleges, upon information and belief, that Marks
Studios’ games (with the Max Stacks and Mega Symbols features) were also first publicly
introduced at an ATI booth during G2E (although Plaintiff does not allege in what year). Id.
¶ 53.
Plaintiff identifies specific games from Marks Studios’ that have incorporated the Max Stacks and
Mega Symbols features. Id.
¶J 57, 60.
4
Plaintiff also alleges that as early as June 2013, one or more of the Defendants wrongfiully
filed multiple patent applications in violation of the Proprietary Information Agreement. Id.
¶ 74.
At least one of the applications has resulted in an issued patent. Id.
2. Procedural History
Plaintiff filed its initial Complaint on November 26, 2013, alleging trademark
infringement, unfair competition, and breach of contract claims against Marks, Masci, Kavanaugh,
and (Jimmie Games. D.E. 1. On July31, 2014, H5G filed its First Amended Complaint (“FAC”),
which added ATI as a Defendant and asserted a patent infringement claim against ATI as to the
‘223 patent. D.E. 32. Defendants moved to dismiss the FAC pursuant to Rule 121b)(6), which
was granted in part and denied in part. D.E. 67. Plaintiff was granted leave to file a Second
Amended Complaint, which it filed on January 30, 2017. The SAC added new trade secret and
unfair competition claims, in addition to patent infringement claims related to a second patent, the
‘852 patent. D.E. 186. On February 27, 2017, Defendants sought to dismiss certain counts from
the SAC for failure to state a claim. D.E. 195.
While Defendants’ motion to dismiss the SAC was pending, H5G filed a motion for a
temporary restraining order and a preliminary injunction (the “TRO”) on August 9, 2017, alleging
that Marks was improperly filing new patent applications and was prosecuting pending patent
applications for which H5G was the dghtM owner. D.E. 209. The SAC Defendants opposed
H5G’s motion (D.E. 220-25), to which H5G replied (D.E. 227-28).
This Court heard oral
argument on H5G’s TRO on September 7, 2017, and entered an Order denying the motion the
same day. D.E. 229, 230. During oral argument on the TRO, H5G informed the Court that it was
contemplating filing a motion to amend the SAC to address certain issue raised in the TRO. As a
5
result, the Court administratively terminated Defendants’ pending motion to dismiss the SAC so
that Plaintiff could first seek leave to amend. TRO Argument at T68:l-69:24 (Sept. 7,2017).
Plaintiff filed its motion for leave to file a Third Amended Complaint (“TAC”) on
November 10, 2017 (D.E. 242), which the SAC Defendants opposed (D.E. 245). Among other
things, the SAC Defendants noted briefly that the proposed TAC failed to allege that New Jersey
was a proper forum for the patent infringement claims in light of the Supreme Court’s recent
decision in TC Heartland LLC v. Kraft Foods Grp. Brands LLC, 137 S. Ct. 1514, 1517 (2017).
D.E. 245 at 3, 38. Plaintiff conceded in its reply brief that despite the age of the case, the parties
still had much to accomplish in the litigation. D.E. 249 at 3 (explaining that “discovery is still
open, no trial date is scheduled, substantive depositions have not yet been conducted, and expert
reports were not yet exchanged”). In granting Plaintiff leave to file, Judge Falk determined that
“[t]hough the case has been pending for a number of years, it is effectively at square one.”4 D.E.
3 16 at 7.
H5G filed its TAC on May 9, 2018. DiE. 318. The TAC includes new claims that were
allegedly learned from discovery produced in 2017 and asserts claims against four new Defendants
who are related to AT!. D.E. 242. The New Defendants are (1) PM, a subsidiary’ of ATI that owns
or operates Internet-based “social casinos” that allegedly use infringing games; (2) BoIling, a
former H5G employee and current employee of ATI; (3) ATA, an Australian entity and “affiliate
company” of AT! that is the listed assignee of intellectual property at issue; and (4) ALL, an
Plaintiff later echoed this same sentiment. On April 16, 2018, H5G sought leave to amend its
infringement contentions arguing, in part, that leave should be granted because the case was in the
early stages of the proceedings. D.E. 304 at 28. And on October 9, 2018, H5G filed a motion that
sought leave to file supplemental infringement contentions against the SAC Defendants. Again,
H5G maintained that the motion should be granted because “this case is in its early stages.” D.E.
387 at 9.
‘
6
Australian entity that is listed as the parent company of ATI and ATA. TAC
¶J’J 10,
12-14. As for
the new claims, H50 asserts indirect infringement claims (1) as to PM relating to the ‘223 patent
and (2) against all the entity Defendants relating to the ‘852 patent. H5G also asserts the following
claims that are solely related to the wrongful patent applications: (1) a breach of contract claim
against ATI claims; (2) a claim for declaratory judgment, (3) conversion, (4) unfair competition,
(5) breach of contract, (6) unjust enrichment, and (7) constructive trust. See generally TAC.
The current motions followed.
ANALYSIS
II.
As a threshold matter, the Court made certain findings on the record during oral argument,
which it summarizes here. H5G’s conversion claim (Count Two) is dismissed; H5G agreed in its
opposition to dismiss the claim. For the reasons discussed on the record, the New Defendants’
motion as it pertains to the dismissal of H5G’s indirect infringement claims as to PM (Counts
Seven and Eight) is denied. The New Defendants’ motion is also denied to the extent that it seeks
to dismiss the New Jersey trade secrets claim (Count Three) as to Boiling on statute of limitations
grounds.
The New Defendants and the SAC Defendants raised a number of arguments seeking to
dismiss Plaintiffs trade secrets claims (Counts Three, Twelve, and Thirteen). At oral argument,
however, Defendants conceded that many of their arguments were better addressed through a
motion for summary judgment rather than a motion to dismiss on plausibility grounds. To the
extent that Defendants contest that they conceded this fact, the Court expressly finds that such
arguments are better suited for resolution by way of summary judgment and the motion to dismiss
is denied as to the trade secrets claims. In addition, Plaintiff admitted that its use of the word
“other” in the TAC (TAC
¶ 95) was not intended to expand the scope of its previously defined
7
trade secrets as to the Super Stacks and Super Symbols features. As a result, the Court denies
Defendants’ motion on this issue but expressly finds that Plaintiffs trade secret claims are so
limited. In other words, Plaintiffs trade secrets claims may proceed but they are limited to the
Super Stacks and Super Symbols trade secrets.
The New Defendants and the SAC Defendants also seek to dismiss Plaintiffs “patent
ownership claims” (Counts One, Fourteen, and Fifteen). As discussed at oral argument, these
claims are dismissed to the extent that they rely on alleged wrongful patent applications because
they are not ripe for adjudication at this time. See HIF Bio, Inc. v. Yung Shin Phanns. Indus. Co.,
Ltd., 600 F.3d 1347, 1354 (Fed. Cir. 201) (statingthat there is no private right of action to challenge
inventorship ofpending patent application).
The Court now addresses the remaining motions.
1. Lack of Personal Jurisdiction
ATA, ALL, and PM seek to dismiss the claims, other than those related to patent
infringement, for lack of personal jurisdiction. New Br. at 7. Plaintiff maintains that there is
personal jurisdiction over the three entities pursuant to alter ego/piercing the corporate veil and
agency theories. H5G adds that PM also purposefully availed itself of doing business in New
Jersey forum such that this Court has personal jurisdiction over PM. The Court finds that it lacks
personal jurisdiction over ATA and ALL but grants jurisdictional discovery as to PM.
ATA, ALL and PM are affiliated with ATI; ATA and ALL are both an “affiliate company”
of ATI, and PM is a subsidiary of ATI. TAC
¶{ 12-14.
None of the three entities, however, have
a physical presence in New Jersey. ATA is an Australian proprietary company with a registered
business address in Australia. Id.
¶
12. ALL is an Australian public company with a registered
8
business address in Australia. Id.
business in California. Id.
¶
14. PM is a Delaware corporation with a principal place of
¶ 13.
Federal Rule of Civil Procedure 1 2(b)(2) permits a court to dismiss for lack of personal
jurisdiction. The plaintiff “bears the burden of demonstrating the facts that establish personal
jurisdiction.” Pinker v. Roche Holdings Ltd., 292 F.3d 361, 368 (3d Cir. 2002). Initially, a court
“take[s] the allegations of the complaint as true.” DavhoffInc.
i’.
Hf Heinz C’o., 86 F.3d 1287,
1302 (3d Cir. 1996). However, once a defendant raises ajurisdictional defense, “a plaintiff bears
the burden of proving by affidavits or other competent evidence that jurisdiction is proper.” Id.
Yet, in reviewing the evidence, a court must “accept all of the plaintiffs allegations as true and
construe disputed facts in favor of the plaintiff” Carteret Say. Bank v. Shushan, 954 F.2d 141,
142 n. I (3d Cir. 1992). Therefore, in determining whether personal jurisdiction exists, the Court
looks beyond the pleadings to all relevant evidence and construes all disputed facts in favor of
Plaintiff
“[A] federal district court may assert personal jurisdiction over a nonresident of the state
in which the court sits to the extent authorized by the law of that state,” so long as the jurisdiction
comports with the Due Process Clause of the Fourteenth Amendment. Marten v. Gothvin, 499
F.3d 290, 296 (3d Cir. 2007) (internal quotation marks omitted). The inquiry thus involves a twostep process, first looking to the state requirements and then to the constitutional requirements.
IMO Indies., Inc. v. Kiekan AG, 155 F.3d 254, 259 (3d Cir. 1998). New Jersey’s long-arm
jurisdiction law provides that courts may “exercise jurisdiction over a non-resident defendant to
the uttermost limits permitted by the United States Constitution.” Nicastro
i’.
McIntyre Macli.
Am., Ltd., 201 N.J. 48, 72 (2010) (internal quotation marks omitted), rev’d on other grounds sub
nom., ./ McIntyre Mach., Ltd.
i
Nicastro, 564 U.S. 873 (2011). Accordingly, the two steps are
9
collapsed into one and “we ask whether, under the Due Process Clause, the defendant has certain
minimum contacts with [New Jersey] such that the maintenance of the suit does not offend
traditional notions of fair play and substantial justice.” O’Connor v. Sandy Lane Hotel Cc., 496
F.3d 312, 316 (3d Cir. 2007) (internal quotation marks omitted). In other words, to establish
personal jurisdiction, the Due Process Clause requires minimum contacts between the defendant
and the forum and that jurisdiction over the defendant comports with “fair play and substantial
justice.” Burger King Corp. v. Rudzewicz, 471 U.s. 462, 476 (1985) (quoting Int’l Shoe Co. v.
Washington, 326 U.S. 310, 320 (1945)).
Personal jurisdiction may be established by means of general or specific jurisdiction over
a defendant.5 Goodyear Dunlop Tires Operations, S.A. v. Bronn, 564 U.S. 915, 919 (2011).
Plaintiff does not argue that this Court has general jurisdiction6 over ATA, ALL or PM. As a
result, the Court addresses the parties’ arguments as to specific jurisdiction.
Specific jurisdiction requires that a party “purposeffihly 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 Corp., 471 U.S. at 472 (internal citations and quotation marks omitted).
The minimum contacts analysis depends upon “the relationship among the defendant, the forum,
and the litigation.” Shaffer v. Heitner, 433 U.S. 186, 204 (1977). However, actual “[p]hysical
There are other means of establishing personal jurisdiction, such as by consent, waiver, or in
state service. These are methods are not at issue here.
6
General jurisdiction, also called all-purpose jurisdiction, may be asserted over an out-of-state
corporation if its “affiliations with the State are so ‘continuous and systematic’ as to render [it]
essentially at home in the forum State.” Goodyear Dunlop Tires Operations, S.A., 564 U.S. at
919. For an entity, its “place of incorporation and principal place of business are paradigm bases
for general jurisdiction[.]” DaimlerAG v. Bauman, 571 U.S. 117, 137 (2014) (internal quotation
marks omitted). ATA, ALL, and PM are not incorporated in New Jersey nor do they have their
principal places of business in the state.
10
presence within the forum is not required to establish personal jurisdiction over a nonresident
defendant.” IMOIndus., Inc., 155 F.3d at 259. The Third Circuit has laid out a three-part test to
determine whether specific jurisdiction exists as to a particular defendant. O’Connor, 496 F.3d at
317. First, the defendant must have “purposefUlly directed [its] activities at the forum.” Id.
(internal quotation marks omitted).7 Second, the litigation must “arise out of or relate to at least
one of those activities.” Id. (internal quotation marks omitted). Third, if the first two requirements
are met, the exercise of jurisdiction must “otherwise comport with fair play and substantial
justice.” Id. (internal quotation marks omitted).
a. Alter Ego/Piercing the Corporate Veil
Generally, a parent corporation is not liable for the acts of its subsidiaries. Portfolio Fin.
Servicing Co. exreL Jacom Comput. Sen’s., Inc. v. Sharemax.com, Inc., 334 F. Supp. 2d 620, 626
(D.N.J. 2004) (“Liability will not be imposed on the parent corporation merely because of its
ownership of the subsidiary.”). In limited circumstances, however, “abuse of the corporate form
will allow courts to employ the ‘tool of equity’ known as veil-piercing.” Id. The corporate veil
may be pierced only if (1) the subsidiary was an alter ego or the parent “so dominated the
subsidiary that it had no separate existence but was merely a conduit for the parent” and (2) “the
parent has abused the privilege of incorporation by using the subsidiary to perpetrate a fraud or
injustice, or otherwise to circumvent the law.” Craig v. Lake Asbestos of Quebec, Ltd., 843 F.2d
This factor has also been characterized as “purposefUl availment.” Burger King, 471 U.S. at 475.
The factor focuses on contact that the defendant itself created with the forum State. Id. The
“purposefUlly directed” or “purposefUl availment” requirement is designed to prevent a person
from being haled into a jurisdiction “solely as the result of random, fortuitous, or attenuated
contacts” or due to the “unilateral activity of another party or third person.” Id. (internal quotation
marks omitted) (citing Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 774 (1984)); World-Wide
Volkswagen Corp. v. Woodson, 444 U.S. 286, 299 (1980); Helicopteros Nacionales de Colom.,
S.A. v. Hall, 466 U.S. 408, 417 (1984)).
11
145, 149 (3d Cir. 1988). Courts consider the following factors to determine whether an entity is
an alter ego: “gross undercapitalization, failure to observe corporate fonnalities, nonpayment of
dividends, insolvency of debtor corporation, siphoning of funds from the debtor corporation by
the dominant stockholder, nonfunctioning of officers and directors, absence of corporate records,
and whether the corporation is merely a facade for the operations of the dominant stockholder.”
Pearson v. Component Tee/i. Corp., 247 F.3d 471. 485 (3d Cir. 2001).
At the motion to dismiss stage, a plaintiff “must plead specific facts with respect to how
the affiliated entities and individuals allegedly controlled or dominated [the defendant].” Linus
Holding Corp.
i’.
Mark Line Indus., LLC’, 376 F. Supp. 3d 417, 427 (D.N.J. 2019) (refusing to
pierce the veil because even assuming alleged transfers constituted a disregard of corporate
formalities, the plaintiff otherwise failed to demonstrate the presence any of the other factors
relevant to a veil-piercing analysis). Plaintiff fails to plead sufficient such facts here.
H5G alleges that ALL “prepares and files consolidated financial statements” for ATI, ATA
and PM (TAC ¶ 15); ALL referred to ATI, ATA and PM as “controlled entities” in its 2016 annual
report (ii); that there is a shared website for all four entities
common executives, directors, and officers (id.
¶
(it!.
¶
16); and that the entities have
17). “[C]ommon ownership and common
management alone’ are insufficient for veil-piercing purposes.” Linus Holding Corp., 376 F.
Supp. 3d at 427 (quoting RjVC Sys. v. MTG Holdings, LLC, No. 15-5239, 2017 WL 1135222, at
5 (D.N.J. Mar. 27, 2017)).
Outside of these limited allegations, Plaintiff pleads no facts
demonstrating undercapitalization, insolvency, or an absence of corporate formalities.
Importantly, Plaintiff points to no authority that recognizes a piercing of the corporate veil based
on its alleged facts. Plaintiff’s allegations fall far short of what is necessary to allege that any of
12
the entities are alter egos of ATI, or that ATI dominated ATA, ALL or PM such that there was in
essence no separate existence amongst the entities.
H5G also fails to satis1, the second prong of the veil piercing analysis. A plaintiff “need
not prove common law fraud” and must only “meet the less rigid standard of ‘fraud, injustice, or
the like.” The Mall at IV Grp. Props.. LLC v. Roberts, No. 02-4692, 2005 WL 3338369, at *3
(D.N.J. Dec. 8, 2005) (quoting Kuibyshevnefteorgsythez v. Model, No. 93-4919, 1995 WL 66371,
at *15 (D.N.J. Feb. 6, 1995)). Here, Plaintiff maintains that if this Court does not pierce the veil,
Plaintiff would be forced to litigate its claims in multiple forums, which would create inefficiencies
and waste judicial resources. New
Opp. at 6.
Judicial efficiency, however, is not a consideration
in determining whether the corporate veil should be pierced.
Plaintiff makes no plausible
allegations that the corporate structure of the relevant entities reflects fraud or an effort to
circumvent the law. As a result, the Court does not have personal jurisdiction over the entities
under the piercing the corporate veil/alter ego theories.
b. Agency Relationship
Plaintiff also argues that this Court has personal jurisdiction over ATA, ALL, and PM by
virtue of agency relationships with ATI. New Opp. at 8. “Agency relationships.
.
.
may be relevant
to the existence of specific jurisdiction.” DaimlerAG v. Bauman, 571 U.S. 117, 135 n.13 (2014).
To determine if a subsidiary is acting as an agent of the parent, courts consider the following:
(1) whether the subsidiary is doing business in the forum that would
otherwise be performed by the parent; (2) whether there is common
ownership of the parent and subsidiary; (3) whether there is financial
dependency; and (4) whether the parent interferes with the
subsidiary’s personnel, disregards the corporate formalities, andlor
controls the subsidiary’s marketing and operational policies.
Cardenas v. Spinnaker Resorts, Inc., No. 16-2466, 2017 WL 3315285, at *5 (D.N.J. Aug. 3,2017)
(internal citations omitted). As discussed, Plaintiff fails to plead sufficient facts demonstrating
13
financial dependency or that ATI disregards corporate formalities (or interferes) with ATA, ALL
or PM’s operations. Critically, Plaintiff has pointed to no authority supporting the finding of
personal jurisdiction on an agency theory in light of the factual allegations here. The Court has
real concerns that if it were to adopt Plaintiffs theory, it would always result in the finding of
specific personal jurisdiction between a parent and subsidiary, or between affiliates, on an agency
theory. Cf Daimler AG, 571 U.S. at 759-60 (warning that focusing on whether an agent performs
services that a corporation would otherwise perform absent the agent “stacks the deck, for it will
always yield a pro-jurisdiction answer”). Therefore, the Court also lacks personal jurisdiction over
these entities by virtue of an agency relationship.
c. Purposeful Availment
Plaintiff contends that this Court has personal jurisdiction over PM because PM makes its
online gaming platforms available to New Jersey users.
Thus, according to Plaintiff. PM
purposefully availed itself of doing business in New Jersey. New Opp. at 19. A defendant’s online
contacts with users in a specific state may create sufficient minimum contacts with the forum such
that “the maintenance of the suit does not offend traditional notions of fair play and substantial
justice.” Ackourey v. Sonetlas Custom Tailors, 573 F. App’x 208, 212 (3d Cir. 2014) (quoting
mt ‘1 Shoe Co., 326 U.S. at 316).
When analyzing internet commerce cases for personal jurisdiction
purposes, “the likelihood that personal jurisdiction can be constitutionally exercised is directly
proportionate to the nature and quality of commercial activity that an entity conducts over the
Internet.” Id. (quoting Zippo Mfg. Co. v. Zippo Dot Coin, Inc., 952 F. Supp. 1119, 1124 (W.D. Pa.
1997)). In this instance, PM markets its online gambling websites on international platforms
including Facebook and encourages users in New Jersey to operate its games. TAC
¶fflJ
13, 135.
While not detailed, these factual allegations are enough to permit Plaintiff to conduct jurisdictional
14
discovery as to PM. See Toys “1?” Us, Inc. v. Step Two, S.A., 318 F.3d 446, 456 (3d Cir. 2003)
(“If a plaintiff presents factual allegations that suggest ‘with reasonable particularity’ the possible
existence of the requisite ‘contacts between the party and the forum state’, the plaintiff’s right to
conduct jurisdictional discovery should be sustained.” (quoting Mellon Bank (East) PSFS, Nat’!
Ass’n v. Farino, 960 F.2d 1217, 1223 (3d Cir. 1992D).
Thus, the Court denies the New
Defendants’ motion as to PM without prejudice pending the result ofjurisdictional discovery.
d. The Patent Long-Arm Statute
Relatedly, the New Defendants argue that 35 U.S.C.
§ 293 does not convey specific
personal jurisdiction over the non-patent claims8 asserted against ATA, in light of the fact that
ATA is the assignee of the wrongful patent applications and patents. New Br. at 13-14.
§ 293
provides as follows:
Every patentee not residing in the United States may file in the
Patent and Trademark Office a written designation stating the name
and address of a person residing within the United States on whom
may be served process or notice of proceedings affecting the patent
or rights thereunder. If the person designated cannot be found at the
address given in the last designation, or if no person has been
designated, the United States District Court for the Eastern District
The court shall have the same
of Virginia shall have jurisdiction.
jurisdiction to take any action respecting the patent or rights
thereunder that it would have if the patentee were personally within
the jurisdiction of the court.
.
35 U.S.C.
.
.
§ 293. Plaintiff conectly asserts that § 293 is not mandatory, meaning that the Eastern
District of Virginia is not the only jurisdiction where personal jurisdiction exists over a foreign
patent owner. See Asia Vita! Components Co., Ltd. v. Asetek Danmark A/S, No. 14-1293, 2016
8
The New Defendants’ § 293 argument is somewhat unclear in light of their overall brief The
New Defendants make the § 293 argument, which clearly concerns patent ownership and rights,
under their overarching argument as to personal jurisdiction vis-ã-vis Plaintiff’s counts other than
those addressing patent infringement. New Br. at 7, 13-14.
15
WL 9175601, at *2 (E.D. Va. Dec. 13, 2016). However,
§ 293 only conveys personal jurisdiction
over a foreign entity with respect to “proceedings affecting the patent or rights thereunder.” See
Purdue Research Found. v. Sanofi-Synthelabo, S.A., 332 F. Supp. 2d 63, 70 (D.D,C. 2004) (“The
bare fact that defendant is a nonresident patent owner does not authorize the Court to assert
personal jurisdiction over defendant under Section 293 for all matters.”). Accordingly,
§ 293 is
inapplicable to the New Defendants’ arguments conceming personal jurisdiction as to Plaintiffs
non-patent infringement claims.
In sum, this Court lacks specific personal jurisdiction over ALL and ATA. The New
Defendants’ motion to dismiss is granted on these grounds and the non-patent infringement claims
asserted against ALL and ATA are dismissed. H5G, however, alleges sufficient facts to warrant
limited jurisdictional discovery as to PM’s contacts with New Jersey.
2. Improper Venue for Patent Infringement Claims
Marks Studios, ATI, and PM seek to dismiss, or in the alternative transfer, the patent
infringement claims pursuant to Rule 12(b)(3) and 28 U.S.C.
§ 1406(a). Rule 12(b)(3) permits a
district court to dismiss a matter that is filed in the wrong venue. Further, 28 U.S.C.
§ 1406(a)
provides that a district court may dismiss a matter that is filed in the wrong venue, or “if it be in
the interest ofjustice, transfer such case to any district.
28 U.S.C.
.
.
in which it could have been brought.”
§ 1406(a).
a. TCHeanland
Venue for patent infringement claims is governed by the patent venue statute, 28 U.S.C.
§
1400(b). “Whether venue is proper under § 1400(b) is an issue unique to patent law” and therefore,
is governed by Federal Circuit law. Federal Circuit law provides that a plaintiff bears to the burden
of establishing that venue is proper. In re ZTE (USA) Inc., 890 F.3d 1008, 1012 (Fed. Cir. 2018).
16
Whether a party waived or forfeited its right to assert an improper venue defense is also governed
by Federal Circuit law. In re Oath Holdings Inc., 908 F.3d 1301, 1305 (Fed. Cir. 201 8).
The patent venue statute provides that venue is only proper “in the judicial district where
the defendant resides, or where the defendant has committed acts of infringement and has a regular
and established place of business.” 28 U.S.C.
§ 1400(b). The Supreme Court recently overruled
Federal Circuit precedent and determined that “a domestic corporation ‘resides’ only in its State
of incorporation for purposes of the patent venue statute.” TCHeartlandLLC v. Kraft Foods Grp.
Brands LLC, 137 S. Ct. 1514, 1517 (2017). Marks Studios. ATI and PM are not incorporated in,
nor do they have a “regular and established place of business” in New Jersey. Accordingly,
pursuant to
§ 1400(b), New Jersey is an improper venue for the patent claims asserted against these
Defendants. Plaintiff does not contest this point. Instead, Plaintiff argues that Marks Studio and
ATI9 have waived their rights to contest venue,10
b. Waiver of Venue Defense
Plaintiff contends that ATI and Marks Studios cannot now argue that New Jersey is an
improper venue because they waited too long to raise the defense. SAC
Opp. at 9.
The defense
of improper venue is waived if a party fails to assert it at the first available opportunity, generally
in an initial Rule 12(b) motion. hire Micron Tech., Inc., 875 F.3d 1091, 1096 (Fed. Cir. 2017)
(citing Fed. R. Civ. P. 12(h)(1)(A)). There is an exception, however. “when there has been an
Plaintiff does not argue that PM forfeited or waived its venue defense. PIf. Supp. Resp. at 6. PM
was not named as a Defendant in this matter until the TAC 50 PM timely raised the defense in the
current motion.
‘°
H5G originally argued that this Court could retain jurisdiction over the infringement claims
under the doctrine of pendent venue. New Opp. at 12. Plaintiff, however, withdrew its pendent
venue argument in light ofMetuchen Pharms. LLC v. Empower Pharms. LLC, No. 18-11406, 2018
WL 5669151, at *4 (D.N.J. Nov. 1,2018). Plf. Supp. Br. at 1 n.1. The Court, therefore, will not
address this argument.
17
intervening change in the law recognizing an issue that was not previously available.” Akeso
Health Scis., LLC v. Designs for Health, Inc., No. 16-7749, 2018 WL 2558420, at *2 (C.D. Cal.
Jan. 28, 2018). TCHeartland constituted a change in the controlling law. In re Micron Tech.,
Inc., 875 F.3d at 1099. As a result, “Rule 12(h)’s waiver provision [is] inapplicable to a defendant
asserting a venue objection based on TC Heartland that [was] not
[] made in a Rule
12(b) motion
filed prior to the TC Heartland decision.” Princeton Dig. Image corp. z Ubisoft Entm ‘t SA, No.
13-335, 2018 WL 3105062, at *4 (D. Del. June 25, 2018).
This is Marks Studios and ATI’s third motion to dismiss. TC Heartland, however, was
decided on May 22, 2017, after these Defendants filed their two prior motions to dismiss.
Accordingly, a TC Heartland venue argument was not previously available to Marks Studios and
AT!. Thus, Marks Studios and ATI did not waive their venue defense pursuant to Rule 12(h).
Princeton Dig. Image Corp., 2018 WL 3105062, at *4
c. Forfeiture of Venue Defense
A court, however, may use its inherent powers to conclude that a party forfeited its right to
assert an improper venue defense on timeliness grounds even though the defense was not
technically waived per Rule 12(h). In re Micron Tech., Inc., 875 F.3d at 1100-01 (stating that
“district courts have the authority to find forfeiture of a venue objection” as a result of their
“inherent powers
.
.
.
to manage their own affairs so as to achieve the orderly and expeditious
disposition of cases”). To determine whether a venue defense is forfeited, a court may consider
(1) how long after TCHeanland the party waited before raising the defense; (2) how near trial is,
“which may implicate the efficiency or other interest of the judicial system and of other
participants in the case”; and (3) whether a defendant employed a “tactical wait-and-see” approach
in raising the defense such that “the course of proceedings might well have been altered by such a
18
declaration” that venue was improper. Id. at 1102. As explained below, while this is somewhat
of a close call, the Court concludes that neither Defendant forfeited their right to assert an improper
venue defense.
H5G maintains that Marks Studios and ATI forfeited their right to assert a venue defense
because they did not raise the defense until months after TC Heartland was decided while they
continued to litigate this matter. The SAC Defendants, which includes Marks Studios and ATI,
waited more than six months after TC Heartland before first mentioning TC Heartland in their
opposition to Plaintiffs motion to amend (D.E. 245 at 34) and did not formally raise their venue
defense until this motion, which was filed on June 19, 2018
—
more than a year after TC Heartland
was handed down. In the interim, the SAC Defendants participated in numerous conferences with
the Special Master, continued to engage in discovery, filed a motion for injunctive relief and to
disqualify counsel, and filed Mark7nan briefs. During this time frame, however, nothing precluded
Defendants from also filing a motion to transfer the patent infringement claims in light of TC
Heartland.
Plaintiff correctly argues that courts have determined that a defendant forfeited its venue
defense because it failed to assert the defense within a far shorter time period after the TC
Heartland decision. See, e.g., Chamberlain Grp.
i’.
Techironic Indus., 315 F. Supp. 3d 977, 1008
(N.D. 111. 2018) (finding forfeiture where defendant waited a month after TC Heartland before
filing motion to transfer); Princeton Dig. Image Corp., 2018 WL 3105062, at *8 (finding foffeiwre
where defendant waited eight months to assert venue objection “while actively seeking and
obtaining key rulings from this [c]ourt”). Some courts have even concluded that a six-month delay
“is, at best, the outer edge of what might be a reasonable period of time” for a motion to transfer.
Nat’l Prods., Inc. v. Arkon Res., Inc., No. 15-1984, 2018 WL 1457254, at *5 (W.D. Wash. Mar.
19
23, 2018). Timeliness, however, is not dispositive. See In re Micron Tech., Inc., 875 F.3d at 1101
(“As to timeliness, whereas the waiver rule of Rule I 2(g)(2) and (h)( I )(A) requires a focus on the
time the TC Heartland venue objection was ‘available’ for the district court to adopt (i.e., on or
after May 22, 2017), the non-Rule authority’s general concern with timeliness is not necessarily
so limited[,]” such that a court may consider additional factors).
Moreover, as to the timeliness factor, the record reflects that the SAC Defendants’ actions
are not as egregious as they might otherwise appear solely in reference to the aforementioned dates.
Plaintiff filed its SAC on January 30, 2017. D.E. 186. The SAC Defendants filed their motion to
dismiss on February 27, 2017.
D.E. 195.
TC Heartland was decided on May 22, 2017.
Admittedly, the SAC Defendants did not take any immediate action in response to the decision.
However, in early August 2018, Plaintiff moved for injunctive relief In the briefing and during
oral argument as to the TRO, it became apparent that Plaintiff was seeking relief from entities who
were not parties to the action. Moreover, at oral argument, Plaintiff indicated that it intended to
seek leave to file the TAC to incorporate arguments made in its application for injunctive relief
In response, the Court administratively terminated the pending motion to dismiss the SAC until
the TAC issue was resolved. Again, the SAC Defendants did not indicate that they wished to
nevertheless file a motion in light of TC Heartland at this time. However, even if the SAC
Defendants had, the Court would have ordered that any such motion be held until the TAC issue
was resolved. The reason being is that Plaintiff’s initial and amended pleadings were factually
complex and had evolved both factually and as to the number of defendants and claims. The Court
did not want to make decisions on the pending motion to dismiss when such rulings could have
been mooted or no longer necessary in light of the TAC. Then PlaintWwaited over two months
before filing its motion for leave to file the TAC. D.E. 243. In opposing the motion, the SAC
20
Defendants did note the TCHeartland issue. D.E. 245. Yet, Judge Falk granted Plaintiff’s motion
because, among other reasons, the case was still essentially at square one. D.E. 316. In fact, in
both April and October of 2018, Plaintiff also argued that matter was effectively at square one in
conjunction with two of its motions.
While timeliness is relevant to the Court’s analysis, it appears that the key factor in a
forfeiture analysis is the proximity to trial and the potential waste ofjudicial resources. Here, there
has not been a Markman hearing and a thai date has not been set. The majority of the cases relied
on by Plaintiff reflect these considerations. For example, in Chamberlain Group, the motion to
transfer was filed two months before thai was scheduled to begin. Chamberlain Grp., 315 F. Supp.
3d at 1008. In Princeton Digital, the court held a Marbnan hearing, entered multiple opinions as
to claim construction, and set a trial date before the defendant asserted its improper venue defense.
Princeton Dig. Image Corp., 2018 WL 3105062, at
*
1-3. In Akeso Health Sciences, LLC v.
Designs for Health, Inc., the parties participated in claim construction proceedings and were
“gearing up for trial” between the TC Heartland decision and the defendants’ motion to dismiss
on venue grounds. No. 16-7749, 2018 WL 2558420, at *3 (C.D. Cal. Jan. 25, 2018)).
Although the parties have been actively litigating this matter, opening claim construction
briefs were only recently filed in April. D.E. 427, 428. As noted, a Mathnan hearing has not yet
been scheduled, and trial is not contemplated in the near future. As a result, this matter is in a
materially different procedural posture than the majority of cases in which a court has determined
that a party forfeited its right to assert a venue defense. See In re Oath Holdings Inc., 908 F.3d at
1306 (rejecting judicial economy argument where “the case has not progressed past written
discovery and claim construction briefing” because “the record simply does not indicate the type
of significant judicial investment that might, in some circumstances, support a determination of
21
forfeiture”). In addition, while the Court has expended substantial resources on this matter, the
Court’s efforts will not be wasted because the SAC Defendants’ venue defense only applies to the
patent infringements claims for certain Defendants. Finally, the delay is not solely attributable to
the parties. As the parties are well aware, the District of New Jersey is facing ajudicial emergency
due to the number ofjudicial vacancies in the district, which is causing delays in the resolution of
civil cases. See Jeannie O’Sullivan, Top NJ Federal Judge Bemoans Court’s Workload Upon Exit,
Law3óO,
May
17,
2019,
https://www.1aw360.com!articles/ 1160836/top-nj-federal-judge-
bemoans-court-s-workload-upon-exit.
The Court cannot fault any party for this unfortunate
reality.
Moreover, it does not appear that Defendants are attempting to employ a “wait-and-see”
tactical approach. In Keranos, LLC v. Silicon Storage Technology, Inc., for example, the court
concluded that the defendants’ delay was strategic. There, the defendants filed their motion to
transfer more than nine-months after TCHeartland in a case that had been pending for almost five
years. Critically, the defendants “waited until [the] court considered and ultimately granted [the
plaintiffs] motion to amend [infringement contentions]” before filing a motion to transfer. No.
13-17, 2018 WL7283284, at *2(E.D.Tex. Mar. 1,2018); see also In re Fedex Corp.,No. 18-117,
ECF No. 26 (Fed. Cir. Jan. 23, 2018) (refusing to grant mandamus where district court determined
that the defendants “may have purposely delayed filing their motion hoping for a different [PTAB]
decision that could lead to a more advantageous litigation position”). Moreover, the Keranos court
concluded that the defendants’ delay was “amplified” by the length of time that case had been
pending. Id.
H5G relies on Keranos, arguing that this Court should find that Marks Studio and ATI
forfeited their venue defense. Plf. Supp. Br. at 3-4.
22
But Keranos is distinguishable. Here,
approximately six months after TC Heartland, Marks Studios and ATI raised the venue issue in
opposition to Plaintiffs motion to amend the complaint (albeit in passing). D.E. 245 at 3, 38.
Ultimately, the venue issue was not critical to Judge Falk’s decision granting leave to amend.
Further, in deciding the motion to amend, Judge Falk explained that “[t]hough the case has been
pending for a number of years, it is effectively at square one.”11 D.E. 316 at 7. In fact, Plaintiff
advocated the same view (that the case was effectively at square one) in two motions filed in 2018.
Moreover, outside of the motion to amend the complaint, there have been no substantive decisions
that could have impacted Plaintiffs patent infringement claims.
Consequently, the Court
concludes that the delay here does not appear to be gamesmanship.
Finally, Plaintiff has not identified any undue prejudice that it would suffer if the patent
infringement claims were transferred. See Boston Sci. Corp. v. Cook Grp. Inc., 269 F. Supp. 3d
229, 243 (D. Del. 2017) (stating that “prototypical examples” of a finding of forfeiture include
“where a defendant raises venue for the first time on the eve of trial, or many month (or years)
after TC Heartland was handed down, or where dismissal or transfer would unduly prejudice a
plaintiff’). Plaintiff argues that if the infringement claims are transferred it would be forced to
relitigate claims in new forums. Plf. Supp. Br. at 9. There is no indication that the work already
performed by the parties would be for naught following a transfer. This is especially true because
the Court has not yet conducted a Markman hearing.
Plaintiff also contends that it would be prejudiced by a transfer due to the risk of
inconsistent rulings and unnecessary expenditures incurred by litigating in multiple forums.
Plaintiff relies on the fact that since the motions to dismiss were filed, the parties have actively
moved the case forward through the claim construction process and discovery. Plf. Supp. Br. at
4. This conduct, however, occurred after Marks Studios and ATI noted their improper venue
defense. As a result, these recent case developments are irrelevant to the forfeiture analysis.
23
Though Plaintiff raises legitimate concerns, the Federal Circuit has explained that a court’s nonRule 12 based authority “must be exercised with caution to avoid impairment of, among other
things, the congressionally granted venue rights.” In re Oath Holdings Inc., 908 F.3d at 1305
(internal citation omitted). The Court must also keep in mind that because Plaintiff is not arguing
that PM waived or forfeited its venue defense, the patent infringement claims against PM cannot
be heard in this Court and that this Court lacks personal jurisdiction over the non-patent
infringement claims asserted against ATT and ALA. Consequently, Plaintiff will be forced to
litigate in multiple forums regardless of the patent venue ruling. Thus, the Court concludes that
while Plaintiff may be prejudiced by a transfer, it does not amount to undue prejudice that
necessitates a finding that Marks Studios and ATI forfeited their venue defense. See Nat’! Prods.,
Inc., 2018 WL 1457254, at *5 (rejecting judicial inefficiencies argument as basis for finding
forfeiture where infringement claims were already set to be decided by different judges in the same
district).
In sum, the District of New Jersey is an improper venue for the patent infringement claims
asserted against PM’2, ATI, and Marks Studios pursuant to
§ 1400(b), and these Defendants did
not waive or forfeit their right to assert an improper venue defense. In reaching this conclusion,
the Court is not condoning Marks Studios and ATI’s strategic decision to not seek to transfer this
matter in light of TC Heartland at an earlier point in this litigation. These Defendants conceivably
could have filed a motion at a significantly earlier date and were not required to wait until they
sought to dismiss the TAC.
12
Plaintiff also argues that venue is proper as to PM because it is the alter ego or agent of ATI.
New Opp. at 9. This argument is unavailing in light of the Court’s ruling as to Plaintiffs alter ego
and agent arguments as they pertained to personal jurisdiction.
24
d. Transfer of Patent Infringement Claims
If a matter is filed in the wrong venue, Section 1406(a) permits a court to dismiss or transfer
the matter to any district in which that matter could have been brought in the interest of justice.
28 U.S.C.
§
1406(a). Moreover, when venue is proper for one defendant but not others, a district
court may sever and transfer the claims as to any defendant where venue is improper and retain
the remainder of the claims.’3 Cottman Transmission Sys., Inc. v. Martino, 36 F.3d 291, 296 (3d
Cir. 1994). The decision of whether to sever and transfer or dismiss is within a district court’s
discretion. Id. Moreover, “[d]ismissal is considered to be a harsh remedy and transfer of venue
to another district court in which the action could originally have been brought, is the preferred
remedy.” Konica Minolta, Inc. v. ICR Co., No. 15-1446, 2015 WE 9308252, at *5 (D.N.J. Dec.
22, 2015). In this instance, Defendants argue that the patent infringement claims should be
transferred rather than dismissed. The Court agrees and finds that it would be in the interest of
justice to sever and transfer the patent infringement claims. See, e.g., Infinity Comput. Prods,, Inc.
v. OKI Data Ams., Inc., No. 12-6797, 2018 WE 1035793, at *10 (E.D. Pa. Feb. 23, 2018)
(transferring claims asserted against defendants to four separate forums in which venue was proper
pursuant to
§
1400(a)). Accordingly, the Court will transfer the patent infringement claims as to
(1) PM to the District of Delaware; (2) Marks Studios to the Northern District of Georgia; and (3)
ATI to the District of Nevada.
3. Breach of Contract Claim as to ATI
The SAC Defendants also argue that New Jersey is an improper venue for the breach of
contract claim asserted against ATI and argue that this claim must be dismissed or transferred to
13
The Court recognizes that Cottman cautions against severing claims if the partial transfer would
require the same issues to be litigated in two places. However, the Court does not see a way to
avoid the multiple forums issue in light of TC Heartland.
25
the District of Nevada. SAC Br. at 7. Third Circuit law governs the non-patent infringement
claims. See In re ZTE (USA) Inc., 890 F. 3d at 1012. Pursuant to Third Circuit law, a defendant
bears the burden of establishing that venue is improper. Bochnan
1’.
First Am. Mktg. Corp., 459
F. App’x 157, 160 (3d Cir. 2012). When deciding a motion to dismiss for improper venue, a court
accepts the allegations in the complaint as true and draws all reasonable inferences and resolves
factual conflicts in a plaintiffs favor. Id. at 158 n.l.
The TAC indicates that in the spring of 2012, ATI executed a non-disclosure agreement
with H5G, through which “HSG shared confidential information with [ATII for the sole purpose
of entering a business relationship.” Id.
¶
50. Plaintiff alleges that ATI breached the non
disclosure agreement (“NDA”). The SAC Defendants maintain that the breach of contract claim
asserted against ATI must be transferred to the District of Nevada because the NDA contains a
jurisdiction and venue selection clause. SAC Br. at 29. The NDA provides that
“[amy disputes
arising from this Agreement shall be litigated in the State ofNevada, and the Parties hereby consent
to the personal jurisdiction and venue of Nevada courts.” Decl. of Bradley D. Roush. Ex. F at
¶
11.
Although ATI states in Defendants’ supplemental brief that the breach of contract claim
should be dismissed for failure to state a claim (Defs. Supp. Br. at 15), the SAC Defendants’
opening brief states that ATI sought to transfer Plaintiffs breach of contract claim pursuant to
Federal Rule of Civil Procedure 12(b)(3), which addresses improper venue, and 28 U.S.C.
1406(a), which also addresses improper venue. Further, 28 U.S.C.
§
§
1404(a), which addresses
change of venue (from an otherwise proper venue) is not addressed in any of Defendants’ briefs.
Thus, the Court will decide the issue as it was initially framed by the SAC Defendants
motion to dismiss for improper venue pursuant to Rule 12(b)(3) and
26
§
—
as a
1406(a). SAC Br. at 19, 29.
To that end, “a forum-selection clause does not render venue in a court ‘wrong’ or ‘improper’
within the meaning of § 1406(a) or Rule 12(b)(3).”4 AtL Marine Const. Co. v. US. Dist. Court
for W Dist. of Texas, 571 U.S. 49, 59(2013). Accordingly, New Jersey is not an improper venue
because of the forum selection clause. The New Defendants’ motion to dismiss, therefore, is
denied on these grounds.
4. Contract-Based Tort Claims
Finally, Defendants argue that H5G’s contract-based tort claims (Counts Nine through
Eleven) should be dismissed on plausibility grounds. Federal Rule of Civil Procedure 12(b)(6)
pennits a court to dismiss a complaint that fails “to state a claim upon which relief can be
granted[.]” For a complaint to survive dismissal under Rule 12(b)(6), it must contain sufficient
factual matter to state a claim that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (quoting Bell Ati. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially
plausible “when the plaintiff pleads factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Id. Further, a plaintiff must
“allege sufficient facts to raise a reasonable expectation that discovery will uncover proof of her
claims.” Connelly v. Lane Const. Corp., 809 F.3d 780, 789 (3d Cir. 2016). In evaluating the
sufficiency of a complaint, district courts must separate the factual and legal elements. Fowler v.
UPMCShadyside, 578 F.3d 203,210-211 (3d Cir. 2009). Restatements of the elements of a claim
are legal conclusions, and therefore, are not entitled to a presumption of truth. Burtch v. Milberg
Factors, Inc., 662 F.3d 212, 224 (3d Cir. 2011). The Court, however, “must accept all of the
complaint’s well-pleaded facts as true.” Fowler, 578 F.3d at 210. Even if plausibly pled, however,
14
Because venue is not improper under Rule l2(b)(3) and
Plaintiffs argument as to the entire controversy doctrine.
27
§
1406, the Court need not address
a complaint will not withstand a motion to dismiss if the facts alleged do not state “a legally
cognizable cause of action.” Turner v. J.P. Morgan Chase & Co., No. 14-7148, 2015 WL
12826480, at *2 (D.N.J. Jan. 23, 2015).
a. Breach of the Implied Covenant of Good Faith and Fair Dealing (Count Nine)
“Every party to a contract.
.
.
is bound by a duty of good faith and fair dealing in both the
performance and enforcement of the contract.” Brunswick Hills Racquet Club, Inc. v. Route 18
Shopping Ctr. Assocs., 182 N.J. 210, 224 (2005). “Although the implied covenant of good faith
and fair dealing cannot override an express term in a contract, a party’s performance under a
contract may breach that implied covenant even though that performance does not violate a
pertinent express term.” Wilson v. Arnerada Hess Corp., 168 N.J. 236, 244 (2001). “As a general
rule, subterfrges and evasions in the performance of a contract violate the covenant.
..
even
though the actor believes his conduct to be justified.” Brunswick Hills Racquet Club, Inc., 182
N.J. at 225 (brackets and citations omitted) (finding violation where landlord evaded tenant’s
attempt to schedule closing on an option landlord knew tenant intended to exercise). “However,
bad motive or intention is essential, and an allegation of bad faith or unfair dealing should not be
permitted to be advanced in the abstract and absent improper motive.” Elliott & Frantz, Inc. v.
ingersoll-Rand Co., 457 F.3d 312, 329 (3d Cir. 2006) (citations omitted).
The TAC alleges that prior to the conclusion of the restricted period, as required by the
Marks Agreement, Marks entered into an agreement with ATI for the purpose of developing games
and game technology, and “served as an intermediary for an agreement between ATI and a
[competitor].” TAC ¶ 165. Plaintiff further alleges that “Marks acted with ill motives and without
any legitimate purpose.” Id. These factual allegations are sufficient to survive a motion to dismiss.
28
Defendants argue that the implied covenant claim must be dismissed because it appears
duplicative of the breach of contract claim. D.E. 196 at 24. “[A] breach of the covenant of good
faith and fair dealing claim must not arise out of the same conduct underlying an alleged breach
of contract action.” CRA, Inc. v. Ozitus Int’l, Inc., No. 16-5632,2017 WL 2779749, at *64 (D.NJ.
June 27, 2017). In certain circumstances, however, a plaintiff is permitted to plead alternative
claims. Id. Here, the Marks Agreement prohibited Marks from, among other things, participating
in any business that was also involved with computer casino games. TAC ¶ 38. Thus, it is possible
that by serving as an intermediary, Marks did not technically breach of the agreement but did
violate the implied covenant of good faith and fair dealing.
Accordingly, this claim is an
appropriate alternate claim at the motion to dismiss stage.
b. Tortious Interference Claims (Counts Ten and Eleven)
To prevail on a claim for tortious interference with a prospective economic advantage in
New Jersey, a plaintiff must plead “[1] that it had a reasonable expectation of economic
advantage, [2] which was lost as a direct result of [the defendants’] malicious interference, and [3]
that it suffered losses thereby.” Avaya Inc., RP i Telecom Labs, Inc., 838 F.3d 354, 382 (3d Cir.
2016) (quoting Ideal Daity Farms, Inc. v. Farmland Daity Farms, Inc., 282 N.J. Super. 140, 19899 (App. Div. 1995)). To state a claim for tortious inference with a contract under New Jersey
law, a party must demonstrate (1) actual interference with a contract; “(2) that the interference was
inflicted intentionally by a defendant who is not a party to the contract; (3) that the interference
was without justification; and (4) that the interference caused damage.” 214 Corp. v. Casino
Reinvestment Dev, Auth., 280 N.J. Super. 624, 628 (Law Div. 1994) (citing Nonvood Easthill
Assoc. v. N.E. Watch, 222 N.J. Super. 378 (App. Div. 1988)).
29.
H5G pleads that before the restricted period was over, ATI wrongflully interfered with the
Marks Agreement “by soliciting, discussing, negotiating, encouraging, and/or entering into an
agreement with Marks” about his participation with ATI. TAC ¶ 175, 182. Plaintiff further alleges
that Marks sewed as an intermediary for an agreement between ATI and a competitor. Id.
Plaintiff alleges that it has been damaged by this interference. Id.
¶J 177,
¶
182.
184. These allegations
are sufficient to state claims for tortious interference of a contract as to Marks and a prospective
economic advantage as to ATI.
Accordingly, Defendants’ motions to dismiss, to the extent they seek to dismiss the
contract-based claims on plausibility grounds, are denied.
III.
CONCLUSION
For the reasons set forth above, Defendants’ motions to dismiss (D.E. 344, 345) are granted
in part and denied in part. An appropriate Order accompanies this Opinion.
Dated: August 9,2019
C\flQ’c\pp\A-
,/
John Michael Vazquez,i.J.
30
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