Icon Health & Fitness v. Relax A Cizor Products

Filing 20

MEMORANDUM DECISION denying 4 Motion to Dismiss (see order for specifics). Signed by Magistrate Judge Samuel Alba on 5/4/12. (alp)

IN THE UNITED STATES DISTRICT COURT FOR TI-W.~Iort¥~~liiJ'~fI
CENTRAL DIVISION

1011 MAY -4 P 3: 31
DISTRICT OF UTAH

ICON HEALTH & FITNESS, INC.,

Case N<B'i::]2-CV-00017~A

DEPUTY CLER

Plaintiff,

v.

MEMORANDUM ORDER AND DECISION
RELAX-A-CIZOR PRODUCTS, INC.,

D/B/A THE STICKIRPI OF ATLANTA

Magistrate Judge Samuel Alba

Defendant.

Before the court is Defendant's Motion to Dismiss (Doc. 4). Having carefully reviewed
the pleadings and having heard oral argument in this matter, the court orders that Defendant's
Motion be DENIED pending limited jurisdictional discovery.
ANALYSIS
A. SUBJECT MATIER JURISDICTION
Defendant Relax-a-cizor Products, Inc. ("RPI") argues that the court lacks subject matter
jurisdiction because there is no sufficient controversy for the Declaratory Judgment Act ("DJA")
to apply. I Defs Memorandum in Support of Mot. To Dismiss 2 (Doc. 5).
There are "two separate hurdles for parties seeking a declaratory judgment to overcome,"
a Constitutional one and a discretionary one. Sure/oot LC v. Sure Foot, 531 F.3d 1236, 1240
(lOth Cir. 2008). First, the DJA requires an "actual controversy," analogous to the Constitution's

RPI also argues that the controversy has not been sufficiently pleaded under Bell Atlantic Corp.
v. Twombly, 550 U.S. 544 (2007) and Ashcroft v. Iqbal, 556 U.S. 662 (2009). But as RPI only
seeks dismissal under Fed. R. Civ. Pro. 12(b)(l) (subject matter jurisdiction), 12(b)(2) (personal
jurisdiction), and 12(b)(3) (venue), and not 12(b)(6) (failure to state a claim), see Def.'s Motion
to Dismiss 2 (Doc. 4), the court considers RPI's pleading-standard argument subsumed in its
subject-matter-jurisdiction argument.
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"case or controversy" requirement. Id. In determining whether a controversy exists under the
DJA, the Supreme Court has explained that "the question in each case is whether the facts
alleged, under all the circumstances, show that there is a substantial controversy, between parties
having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a
declaratory judgment." MedImmune, Inc. v. Genenlech, Inc., 549 U.S. 118, 127 (2007). Second,
if it determines that a substantial controversy exists under MedImmune, the court '''may' -- not
'must' -- make a declaration on the merits of that controversy; accordingly, [the Tenth Circuit
has] held that district courts are entitled to consider a number of case-specific factors in deciding
whether or not to exercise their statutory declaratory judgment authority." Surefool, 531 F.3d at
1240.
The pleadings establish that this case came about after RPI sent a cease-and-desist letter
to Gold's Gym regarding a product manufactured and sold by ICON Health & Fitness, Inc.
("ICON") under license from Gold's Gym. Pl.'s Opposition to Def.'s Motion to Dismiss 6-8
(Doc. 13). The letter claims that RPI holds a trademark for "The Stick," instructs Gold's Gym to
"cease and desist usage of the mark MASSAGE STICK in connection with massage devices
within the United States," and clearly contemplates legal action should they fail to do so. See
RPI's Cease-and-Desist Letter (Doc. 13-1). Though the parties do not agree on whether RPI
knew, or should have known, that its letter to Gold's Gym implicated ICON's legal interests,
compare Declaration of Pat E. Belcher 4 (Doc. 5-1)(claiming that RPI had no knowledge of

ICON prior to the present lawsuit) with PI.'s Exhibit 1 (Doc. 14-1) (photographs of packaging)
(showing ICON's name on the packaging of the Accused Product), the court does not find this
factual issue dispositive on the question of subject matter jurisdiction. Similarly, the court is not

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swayed by RPI's assertion that it could sue Gold's Gym individually, without a trademark
infringement suit against ICON. Doc. 18 at 3.
A controversy under the DJA is not premised on "a judicial wager on the chances the
parties will (imminently or otherwise) sue one another; rather, it has always focused on the
underlying facts, assessing whether they suggest an extant controversy between the parties."
Sure/oot, 531 F.3d at 1242. In this case, RPI's letter, combined with ICON's allegations that

ICON actually manufactures the Accused Product, that ICON uses the word 'stick' in its
advertising of the Accused Product, and that ICON's use of the word 'stick' does not infringe
RPI's Trademark, Pl.'s Complaint 4 (Doc. 2), are sufficient to suggest an extant controversy
between the parties. Accordingly, the court finds that the facts alleged show a substantial
controversy to satisfy the requirements of the DJA, and that the controversy was sufficiently
pleaded.
Having so determined, the court moves on to the discretionary portion of the analysis.
Here, the Tenth Circuit has pointed out five non-exclusive factors to consider: "(1) whether a
declaratory action would settle the controversy; (2) whether it would serve a useful purpose in
clarifying the legal relations at issue; (3) whether the declaratory remedy is being used merely
for the purpose of 'procedural fencing' or to provide an arena for a race to res judicata; (4)
whether use of a declaratory action would increase friction between our federal and state courts
and improperly encroach upon state jurisdiction; and (5) whether there is an alternative remedy
which is better or more effective." Marlin Oil Corp. v. Lurie, 417 Fed. Appx. 740, 745 (lOth
Cir. 2011) (unpublished) (quoting State Farm Fire & Cas. Co. v. Mhoon, 31 F.3d 979. 983 (10th
Cir. 1994».

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Here, declaratory judgment would settle the trademark controversy identified above and
clarify the legal relations at issue. As far as "procedural fencing," in cases where this factor is
dispositive, there is typically some sort of bad faith involved. See D. Peter Harvey and Seth L
Appel, The Declaratory Judgment Response to a Cease and Desist Letter: "First-to-File" or
"Procedural Fencing"?, 96 THE TRADEMARK

REPORTER

639, 657 (2006) ("Procedural Fencing ...

often involves bad faith."); see e.g., Buzas Baseball, Inc. v. Board ofRegents, 1999 U.S. App.
LEXIS 21630,5 (lOth Cir. 1999) (unpublished) (pointing out that declaratory judgment plaintiff
filed action while ostensibly continuing settlement negotiations); Plymouth Press v. Klutz, Inc.,
1997 U.S. Dist. LEXIS 12185, *5-6 (E.D. Mich. 1997)("The critical issue appears to be whether
the plaintiff in the earlier-filed declaratory action misled the defendant into believing that their
dispute could be resolved amicably so that the plaintiff could win the race to the courthouse.").
In this case, there is no indication of bad faith or a race to the courthouse. The court therefore
finds that the third factor does not counsel against issuance of a declaratory judgment. Nor
would this case "improperly encroach on state jurisdiction," as the underlying law is federal
trademark law. Finally, the court is not aware of an alternate remedy in this case which would be
"better or more effective." Therefore, the court exercises its discretion to accept the case for
declaratory judgment.

B. PERSONAL JURISDICTION
RPI also claims that the court does not have personal jurisdiction, because RPI lacks the
necessary minimum contacts with Utah. Doc. 5 at 2.
To meet its initial burden of establishing personal jurisdiction, "the plaintiff must only
make a prima facie showing." Melea, Ltd. v. Jawer Sa, 511 F.3d 1060, 1065 (lOth Cir. 2007).
"The plaintiff may meet this burden by demonstrating, via affidavit or other written materials,

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facts that if true would support jurisdiction over the defendant." Id. (internal quotation marks
and citation omitted). Factual disputes are resolved in favor of the plaintiff. See TH Agric.
&Nutrition, LLC v. Ace European Group Ltd., 488 F.3d 1282, 1286 (lOth Cir. 2007).
"In determining whether a federal court has personal jurisdiction over a defendant, the
court must determine (1) whether the applicable statute potentially confers jurisdiction by
authorizing service of process on the defendant and (2) whether the exercise ofjurisdiction
comports with due process." Trujillo v. Williams, 465 F.3d 1210, 1217 (lOth Cir. 2006). As the
applicable federal statutes in this case do not confer jurisdiction, the court must look to the
state's long-arm statute. See id; Fed. R. Civ. Pro. 4(k)(l)(A). Where the long-arm statute confers
the maximum jurisdiction allowable under constitutional due process, see Utah Code Ann. §
78B-3-201 (2012); accord Sys. Designs, Inc. v. New Custom ward Co., 248 F. Supp.2d 1093,
1097 (D. Utah 2003), the whole analysis is compressed into the second prong, see id.; Melea,
511 F.3d at 1065. Thus, the court next addresses whether the exercise ofjurisdiction over RPI
comports with due process.
In examining due process, the court will "conduct a two-step analysis." Melea, 511 F.3d
at 1065.
At the first step, [the court] examiners] whether the non-resident defendant has
'minimum contacts' with the forum state such that he should reasonably anticipate
being haled into court there. If the defendant has sufficient contacts, [the court]
then proceed[s] to the second step. At this step, [the court] ask[s] whether the
court's exercise ofjurisdiction over the defendant offends 'traditional notions of
fair play and substantial justice,' that is, whether the exercise ofjurisdiction is

'reasonable' under the circumstances."

Id. at 1065-66 (internal quotations marks and citations omitted).

These "minimum contacts" "may give rise to personal jurisdiction over a non-resident

defendant either generally, for any lawsuit, or specifically, solely for lawsuits arising out of

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particular forum-related activities." Shrader v. Bigginger, 633 F.3d 1235, 1239 (10th Cir. 2011).
General jurisdiction requires the defendant to have made "continuous and systematic" contacts
with the forum state. !d. Specific jurisdiction requires that an out-of-state defendant has
"purposefully direct[ed]" its activities at the forum state and that the litigation in question arose
out ofthose activities. !d.
General jurisdiction, compared to specific jurisdiction, requires a greater threshold of
contacts between the defendant and the forum state. See 16-108 Moore's Federal Practice ­
Civil§ 108.40 (2011) ("The distinction between general and specific jurisdiction is significant
because, as the Supreme Court made clear ... the threshold of contacts for satisfying the
minimum contacts requirement ... is higher in general than in specific jurisdiction cases.")
(citing Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408,414-15 (1984».
RPI's admissions and ICON's allegations, taken as true, establish that: (I) the lawsuit
was triggered by a cease-and-desist letter which RPI mailed to Gold's Gym in Texas, concerning
a product manufactured and marketed by ICON, Doc. 136-8, (2) RPI distributes its product in
Utah both through an interactive website and through approximately fifteen separate businesses
in the state, Doc. 13 at 19, and (3) RPI generated around 1.4% of its revenue from 2000 to 2011
from Utah customers, Doc. 5 at 10.
The Tenth Circuit has found that a notice of copyright infringement, roughly analogous to
the cease-and-desist letter in this case, can be conduct triggering specific jurisdiction analysis,
even when the notice was sent to a third-party distributor in another state and not to the
declaratory judgment plaintiff. Dudnikov v. Chalk & Vermillion Fine Arts, Inc., 514 F.3d 1063,
1075 (10th Cir. 2008). In that case, the court found that the defendant sent a notice to California
with the "express aim" of affecting the plaintiffs' business in Colorado, and therefore the

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defendant fell under the specific jurisdiction analysis of Calder v. Jones, 465 U.S. 783 (1984).
Dudnikov, 514 F.3d at 1071-1080.
However, based on the limited factual material before it, and ICON's understandably
limited ability to allege RPl's intentions, the court is uncomfortable finding that the cease-and­
desist letter in this case triggers specific jurisdiction analysis. Similarly, the court cannot
determine, at this time, that 1.4% of RPl's revenue or RPl's unspecified relationships with Utah
distributors adequately demonstrates the 'continuous and systematic' conduct necessary for
general jurisdiction to attach.
ICON has requested limited jurisdictional discovery, Doc. 13 at 23', and the court has
broad discretion to allow it in this situation. See Budde v. Ling-Temco-Vought, Inc., 511 F.2d
1033, 1035 (10th Cir. 1975). The court therefore gives ICON leave for limited jurisdictional
discovery on the following issues: the number of products that RPI sells in Utah and the amount
of revenue it makes from those sales; the duration and nature of RPl's business relationships
with Utah distributors; and, to the extent possible, the knowledge and intentions of RPI' s agents
in deciding to send the cease-and-desist letter to Gold's Gym in Texas. The court grants ICON
leave to propound up to five interrogatories on RPI and to conduct up to two depositions, each no
longer than three hours. Thereafter, the parties may resubmit memoranda prior to the court's
decision on personal jurisdiction.
C. VENUE

RPI also contests venue. Doc. 5 at 2. A determination of proper venue cannot precede
the personal jurisdiction analysis. See 28 U.S.C. 1391 (b)(1), (c)(2) (explaining that venue is
proper in any judicial district where a defendant resides, and that business entities are deemed to

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reside in any district where they are subject to personal jurisdiction). The court therefore
reserves the question of venue until it makes a decision regarding personal jurisdiction.
CONCLUSION

Based on the above analysis, it is hereby ordered that Defendant RPI's Motion to Dismiss
(Doc. 4) be DENIED pending limited jurisdictional discovery. ICON may propound up to five
interrogatories on RPI and conduct up to two depositions, each no longer than three hours.
ICON must issue any interrogatories within ten days of this order. Depositions must be
completed within forty-five days of this order.

. . V't

DATED this

L

day of~, 2012.

BY THE COURT:

~
SAMUEL ALBA
United States Magistrate Judge

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