Plantbikes, LLC v. Bike Nation, Inc. et al

Filing 17

ORDER ON DEFENDANTS' RULE 12(b) MOTION TO DISMISS staying 7 Motion to Dismiss. Court ORDERS Plaintiff to conduct jurisdictional discovery by 9/16/13. The Court ORDERS Plaintiff to file a supplemental response to Defendants' Motion to Dismiss by 9/30/13. The Court ORDERS Defendants First Pacific Holdings and Media Nation to file a supplemental reply by 10/14/13.(Signed by Judge Nelva Gonzales Ramos) Parties notified.(mserpa, )

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
CORPUS CHRISTI DIVISION
PLANTBIKES, LLC; dba RUGGED
CYCLES,
Plaintiff,
VS.
BIKE NATION, INC., et al,
Defendants.

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§ CIVIL ACTION NO. 2:13-CV-108
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ORDER ON DEFENDANTS’ RULE 12(b) MOTION TO DISMISS
Pending before the Court is Defendants First Pacific Holdings, Inc. (“First Pacific
Holdings”) and Media Nation Print LLC’s (“Media Nation”) Rule 12(b) Motion to
Dismiss Plaintiff’s Petition (D.E. 7). After careful consideration and for the reasons
articulated below, the Court STAYS its decision on Defendants’ Motion to Dismiss and
GRANTS Plaintiff’s request to conduct jurisdictional discovery.
I.

FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff manufactures bicycles in Corpus Christi, Texas. (D.E. 1, Exhibit B).

Plaintiff’s bicycles are not traditional bikes as they use a driveshaft instead of a chain,
and solid tires to prevent flats. (D.E. 1, Exhibit B). Defendant Bike Nation, Inc. (“Bike
Nation”) provides bike sharing programs in major cities. (D.E. 1, Exhibit B). Bike
sharing programs involve placing bicycles at stations throughout the participating city so
that they are available for paying customers. (D.E. 1, Exhibit B). In 2010, Plaintiff and
Defendant Bike Nation began negotiations for Plaintiff to become the exclusive supplier
of bicycles to Bike Nation. (D.E. 1, Exhibit B). Plaintiff and Bike Nation entered into a
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nondisclosure agreement to protect Plaintiff’s confidential information. (D.E. 1, Exhibit
B). On February 2, 2012, Plaintiff and Bike Nation executed a written contract where
Bike Nation agreed to order a minimum of 1,500 bicycles from Plaintiff in the first year
at a cost of $1,875 per bicycle and additional bicycles in subsequent years. (D.E. 1,
Exhibit B). According to Plaintiff, the business relationship broke down when Bike
Nation failed to order the agreed number of bicycles, violated the nondisclosure
agreement, and used Plaintiff’s protected information in manufacturing bicycles. (D.E. 1,
Exhibit B).
Plaintiff filed suit in the 117th Judicial District Court of Nueces County, Texas on
March 5, 2013 against Defendants Bike Nation, First Pacific Holdings, and Media Nation
for breach of contract, misappropriation of trade secrets, violations of the Texas Theft
Liability Act, fraud, tortious interference, and conspiracy. (D.E. 7, p. 1). Defendants
removed the action to the United States District Court for the Southern District of Texas,
Corpus Christi Division, based on diversity of citizenship pursuant to 28 U.S.C. §§ 1332
and 1441(a). (D.E. 7, p. 2). Plaintiff is organized under the laws of Texas. (D.E. 1,
Exhibit B). Defendant Bike Nation is a Delaware Corporation with headquarters and
address for service of process in Tustin, California.

(D.E. 1, p. 4). Defendant First

Pacific Holdings is a California corporation with its headquarters and address for service
of process in Tustin, California. (D.E. 1, p 4). Defendant Media Nation is a California
company and shares the same physical address as the other two defendants. (D.E. 1, p. 4).

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Defendants First Pacific Holdings and Media Nation moved to dismiss this action
pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure, arguing that the Court
lacks personal jurisdiction over these nonresident Defendants. (D.E. 7). Defendant Bike
Nation did not join in the motion to dismiss.
Plaintiff argues that Defendants waived their objection to the Court’s exercise of
jurisdiction over them when they agreed to an extension of a temporary restraining order
entered by the 117th Judicial District Court of Nueces County, Texas without any
reservations. Plaintiff alternatively argues that it should be allowed to conduct discovery
of jurisdictional facts because Defendants have the same principals, use the same agents
for service of process, and have the same address. Plaintiff alleges that Defendants First
Pacific Holdings and Media Nation purposefully availed themselves to Texas, acting in
concert with Defendant Bike Nation to commit a tort in Texas, or alternatively, these
companies are alter egos of Bike Nation. 1 (D.E. 1, Exhibit B).
II.

APPLICABLE LAW
Federal Rule of Civil Procedure 12(b)(2) allows for dismissal of an action where

the Court lacks personal jurisdiction over a defendant. The plaintiff bears the burden of
proving that a nonresident defendant is subject to the Court's jurisdiction. Jones v. Petty–
Ray Geophysical, Geosource, Inc., 954 F.2d 1061, 1067 (5th Cir. 1992). A federal court
sitting in diversity may exercise personal jurisdiction over a non-resident defendant (1) as
permitted under the state's long-arm statute; and (2) to the extent permitted by the Due
Process Clause of the Fourteenth Amendment. Pervasive Software, Inc. v. Lexware
1

Plaintiff also alleges that First Pacific Holdings is solely owned by Bradley Barlow and Navin Narang and that
First Pacific Holdings owns both Bike Nation and Media Nation. Plaintiff further alleges that Mr. Barlow and Mr.
Narang own and control Bike Nation and Media Nation. (D.E. 1, Exhibit B).

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GMBH & Co. KG, 688 F.3d 214, 220 (5th Cir. 2012). “Because the Texas long-arm
statute extends to the limits of federal due process, the two-step inquiry collapses into one
federal due process analysis.” Mullins v. TestAmerica Inc., 564 F.3d 386, 398 (5th Cir.
2009) (quoting Johnston v. Multidata Sys. Int'l Corp., 523 F.3d 602, 609 (5th Cir. 2008)).
To satisfy the requirements of due process, the plaintiff must demonstrate: “(1) that the
non-resident purposely availed himself of the benefits and protections of the forum state
by establishing ‘minimum contacts' with the state; and (2) that the exercise of jurisdiction
does not offend ‘traditional notions of fair play and substantial justice.” Id. (quoting
Wilson v. Belin, 20 F.3d 644, 647 (5th Cir. 1994)).
“Jurisdiction may be general or specific.” Stroman Realty, Inc. v. Wercinski, 513
F.3d 476, 484 (5th Cir. 2008). Specific jurisdiction exists when the plaintiff's claim
against the nonresident defendant arises out of or relates to activities that the defendant
purposefully directed at the forum state. Alpine View Co. v. Atlas Copco AB, 205 F.3d
208, 215 (5th Cir. 2000) (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472,
105 S.Ct. 2174, 85 L.Ed.2d 528 (1985)). In contrast, general jurisdiction requires the
defendant to have 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).
III.

APPLICATION OF THE LAW TO THE FACTS
A.

Defendants did not waive their objection to the Court’s exercise of
jurisdiction.

Whether Defendants’ actions before removal waived their objection to personal
jurisdiction is resolved under Texas law because state rules and procedures control until
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removal. The federal court, upon removal, simply “takes the case up where the state
court left it.” Granny Goose Foods, Inc. v. Teamsters, 415 U.S. 423, 436, 94 S.Ct. 1113,
39 L.Ed.2d 435 (1974); see also Mobil Oil Co. de Venezuela v. Jimenez, 948 F.2d 1282
(4th Cir. 1991) (unpublished) (holding that state law applied to determination of whether
party waived objection to personal jurisdiction by actions taken before removal). “Upon
removal, a defendant may assert any defense that would have been available to him in
state court and which has not been lost through the operation of [the Federal Rules].”
Nationwide Eng'g & Control Sys., Inc. v. Thomas, 837 F.2d 345, 347-48 (8th Cir. 1988).
Before removing to federal court, a defendant may lose his right to challenge personal
jurisdiction if he has taken any action in the state court that under state law would waive
that right. See id.
Texas law distinguishes between a special and a general appearance by a
nonresident defendant. A special appearance may be filed “prior to motion to transfer
venue or any other plea, pleading or motion.” Tex. R. Civ. P. 120a(1).

“Every

appearance, prior to judgment, not in compliance with this rule is a general appearance.”
Id. By filing a general appearance in Texas state court, a nonresident defendant submits
to the exercise of personal jurisdiction by the Texas court. Morris v. Morris, 894 S.W.2d
859, 862 (Tex.App.-Fort Worth 1995, no writ). Texas Rule of Civil Procedure 120a(1)
states that the “use of discovery processes” is not a general appearance and “shall not
constitute a waiver of [the] special appearance.”
Texas courts have held that appearing at a hearing on an application for a
temporary restraining order, filing a motion for continuance, and filing discovery motions
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are not general appearances that waive personal jurisdiction objections. See, e.g.,
Silbaugh v. Ramirez, 126 S.W.3d 88, 93-94 (Tex.App.-Houston [1st Dist.] 2002, no pet.)
(holding that a motion to stay discovery and a motion to quash deposition were a “use of
the discovery process” that did not waive the right to make a special appearance, even if
the discovery was unrelated to the special appearance); Turner v. Turner, No. 14-9800510-CV, 1999 WL 33659, at *3 (Tex.App.-Houston [14th Dist.] Jan. 25, 1999, no pet.)
(holding that an appearance at a temporary restraining order hearing was not a general
appearance that waived the personal-jurisdiction objection because the purpose of the
hearing was merely to preserve the status quo and not to litigate the merits). Based on the
information currently before the Court, Defendants First Pacific Holdings and Media
Nation do not appear to have made a general appearance in Texas state court and
therefore, did not waive their objection to personal jurisdiction before removal.
B.

Jurisdictional discovery is appropriate to determine whether the
Defendants are subject to the jurisdiction of this Court.

Plaintiff alleges that Defendants First Pacific Holdings and Media Nation have the
same principals, use the same agents for service of process, and have the same address.
(D.E. 13). Plaintiff contends that acts of the common principal were conducted in the
state of Texas and support the conclusion that this Court’s exercise of personal
jurisdiction is appropriate. (D.E. 13). Plaintiff further argues that it will be able to
supplement its jurisdictional allegations by deposing the corporate representatives of First
Pacific Holdings and Media Nation.

(D.E. 13).

In light of the minimum contacts

analysis and the apparent connection of the Defendants to each other, the Court finds that
Plaintiff is entitled to take jurisdictional discovery to determine whether this Court has
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personal jurisdiction over Defendants First Pacific Holdings and Media Nation. See
Trintec Industries, Inc. v. Pedre Promotional Products., Inc., 395 F.3d 1275, 1283
(Fed.Cir. 2005) (holding that jurisdictional discovery is appropriate where existing record
is inadequate to support personal jurisdiction and party demonstrates that it can
supplement its jurisdictional allegations through discovery); Patterson v. Dietze, Inc., 764
F.2d 1145, 1148 (5th Cir. 1985) (“jurisdictional discovery is within the trial court's
discretion and will not be disturbed ordinarily unless there are unusual circumstances
showing a clear abuse”).
Accordingly, the Court STAYS its decision on Defendants’ Motion to Dismiss for
lack of personal jurisdiction (D.E. 7) and ORDERS Plaintiff to conduct jurisdictional
discovery by September 16, 2013. The Court ORDERS Plaintiff to file a supplemental
response to Defendants’ Motion to Dismiss by September 30, 2013. The Court ORDERS
Defendants First Pacific Holdings and Media Nation to file a supplemental reply by
October 14, 2013.
ORDERED this 15th day of July, 2013.
___________________________________
NELVA GONZALES RAMOS
UNITED STATES DISTRICT JUDGE

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