Titan Atlas Manufacturing, Inc. v. Sisk
Filing
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MEMORANDUM OPINION. Signed by Magistrate Judge Pamela Meade Sargent on 7/15/11. (Bordwine, Robin)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF VIRGINIA
ABINGDON DIVISION
TITAN ATLAS MANUFACTURING,
INC., and STRATA MINE SERVICES,
LLC,
Plaintiffs
v.
FRANK A. SISK and PRECISION
MINE REPAIR, INC.,
Defendants
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MEMORANDUM OPINION
Case No. 1:11cv00012
This case currently is before the court on the defendants’ Motion For
Jurisdictional Discovery And For An Extension Of Time To File A Reply In
Support Of Their Motion To Dismiss. (Docket Item No. 34) (“Motion”). In the
Motion, the defendants request that the court allow limited jurisdictional discovery
to include: (1) certain interrogatories and document requests to both plaintiffs and
(2) depositions of the plaintiffs’ four fact declarants 1 and Federal Rules of Civil
Procedure Rule 30(b)(6) witnesses for the plaintiffs.
The defendants further
request that the court allow them one week from the completion of such limited
jurisdictional discovery in which to file their reply to the plaintiffs’ Opposition To
Defendants’ Motion To Dismiss, Stay, or Transfer. (Docket Item No. 32). In the
alternative, the defendants ask that, if the court denies the Motion, that it be
granted a two-week extension to file such reply. By Order entered July 11, 2011,
(Docket Item No. 43), this court granted the defendants until July 19, 2011, to file
their reply to the plaintiffs’ Opposition To Defendants’ Motion To Dismiss, Stay,
1
The declarants are Jeffrey Hamrick, David Nardo, Richard Werth and Jeremy
Blackburn.
1
Or Transfer. That being the case, that portion of the defendants’ Motion seeking
an extension of time to file such reply now is moot. The plaintiffs have partially
opposed the defendants’ Motion. (Docket Item No. 38). The Motion is before the
undersigned magistrate judge by referral pursuant to 28 U.S.C. § 636(b)(1)(A). A
hearing was held on the Motion on July 7, 2011, before the undersigned. At that
hearing, the defendants also moved for an evidentiary hearing to determine the
existence of both personal jurisdiction and subject matter jurisdiction. Based on
the written arguments and oral representations of counsel, and for the reasoning set
out below, I will deny the Motion. I also will deny the defendants’ motion for an
evidentiary hearing.
Discovery under the Federal Rules of Civil Procedure is broad in scope and
freely permitted. See Carefirst of Md., Inc. v. Carefirst Pregnancy Ctrs., Inc., 334
F.3d 390, 402 (4th Cir. 2003) (citing Mylan Labs., Inc. v. Akzo, N.V., 2 F.3d 56, 64
(4th Cir. 1993)). At the same time, however, district courts “have broad discretion
in [their] resolution of discovery problems that arise in cases pending before
[them].” Carefirst, 334 F.3d at 402 (quoting In re Multi-Piece Rim Prods. Liab.
Litig., 653 F.2d 671, 679 (D.C. Cir. 1981)). It is clear that limited jurisdictional
discovery may be warranted to explore jurisdictional facts in some cases. See
Mylan Labs., 2 F.3d at 64 (citing McLaughlin v. McPhail, 707 F.2d 800, 806-07
(4th Cir. 1983)). While Federal Circuit law governs substantive issues in patentrelated cases, a district court is guided by regional circuit law in determining
whether to allow jurisdictional discovery, as discovery issues are not unique to
patent law. See Patent Rights Prot. Grp., LLC v. Video Gaming Techs., Inc., 603
F.3d 1364, 1371 (Fed. Cir. 2010). In Carefirst, the Fourth Circuit held that when a
plaintiff offers only speculation or conclusory assertions about contacts with a
forum state, a court is within its discretion in denying jurisdictional discovery
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when “against the defendant’s affidavits” the plaintiff “offered nothing beyond his
bare allegations that the defendants had had significant contacts with the [forum]
state.…” 334 F.3d at 403 (quoting McLaughlin, 707 F.2d at 806). Similarly, in
ALS Scan, Inc. v. Digital Serv. Consultants, Inc., 293 F.3d 707, 716 n.3 (4th Cir.
2002), the Fourth Circuit upheld the district court’s refusal to allow the plaintiff to
engage in jurisdictional discovery where the plaintiff’s request was based on
“conclusory allegations.” Likewise, in Rich v. KIS Cal., Inc., 121 F.R.D. 254, 259
(M.D.N.C. 1988), the district court denied the plaintiff’s request for jurisdictional
discovery where the plaintiff’s claim of personal jurisdiction appeared to be both
attenuated and based on bare allegations in the face of specific denials made by the
defendants, noting that such exercise amounted to nothing more than a “fishing
expedition.” This sentiment was echoed in Base Metal Trading, Ltd. v. OJSC
“Novokuznetsky Aluminum Factory,” 283 F.3d 208, 216 n.3 (4th Cir. 2002), in
which the Fourth Circuit held that where the plaintiff simply wants to conduct a
fishing expedition in the hopes of discovering some basis of jurisdiction, there was
no reason to overturn the district court’s exercise of discretion in denying
jurisdictional discovery.
The defendants conceded at the hearing on this matter that this Motion
presents in an odd posture, as it is the defendants who are seeking jurisdictional
discovery, not the plaintiffs. It is well-settled that it is the plaintiffs who bear the
burden of establishing both personal jurisdiction and subject matter jurisdiction,
and it is, typically, the plaintiff who seeks such jurisdictional discovery in an
attempt to avoid dismissal of its case. However, here, it is the defendants who seek
jurisdictional discovery in order to prepare a better reply to the plaintiffs’
opposition to the defendants’ motion to dismiss. In applying the jurisdictional
discovery analysis in the current circumstances, I find that the defendants have not
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alleged a sufficient need for such information because they either have or should
have access to the information upon which they seek discovery, they have not
made a showing that information garnered through such discovery would change
the jurisdictional analysis, and they have not submitted affidavits calling into
question the veracity of the information contained in the affidavits submitted by
the plaintiffs. That being the case, I find that the purpose of allowing jurisdictional
discovery would not be furthered under such circumstances, and I find that even
limited jurisdictional discovery is not warranted.
A. Personal Jurisdiction
Federal Circuit law governs the substantive issue of whether a court may
exercise personal jurisdiction over a particular defendant in patent-related cases.
See Deprenyl Animal Health, Inc. v. Univ. of Toronto Innovations Found., 297
F.3d 1343, 1348 (Fed. Cir. 2002) (citing Hildebrand v. Steck Mfg. Co., Inc., 279
F.3d 1351, 1354 (Fed. Cir. 2002)).
A determination of whether personal
jurisdiction exists over an out-of-state defendant involves a two-step inquiry. First
is whether the forum state’s long-arm statute permits service of process. 2 Second
is whether the assertion of personal jurisdiction violates due process.
See
Autogenomics, Inc. v. Oxford Gene Tech. Ltd., 566 F.3d 1012, 1017 (Fed. Cir.
2009). There are two types of personal jurisdiction: general personal jurisdiction
and specific personal jurisdiction. General personal jurisdiction exists where the
defendant has “continuous and systematic” contacts with the forum state.
Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414-16 (1984).
2
Virginia’s long-arm statute provides that “[a] court may exercise personal jurisdiction
over a person, who acts directly or by an agent, as to a cause of action arising from the person’s
... [t]ransacting any business in this Commonwealth. ...” VA. CODE ANN. § 8.01-328.1 (2007
Repl. Vol. & 2011 Supp.).
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When such is the case, the cause of action need not have any relationship with the
defendant’s contacts. See Silent Drive, Inc. v. Strong Indus,. Inc., 326 F.3d 1194,
1200 (Fed. Cir. 2003).
Specific personal jurisdiction can exist even if the
defendant’s contacts with the forum are “isolated and sporadic.” Silent Drive, 326
F.3d at 1200 (citations omitted). Whether specific personal jurisdiction exists
requires a three-part inquiry:
(1) whether the defendant purposely directs its
activities at residents of the forum; (2) whether the claim arises out of or relates to
those activities; and (3) whether the assertion of personal jurisdiction is reasonable
and fair. See Autogenomics, 566 F.3d at 1018. Additionally, it is well-settled that
in evaluating specific personal jurisdiction in a declaratory action against a
patentee, as here, the court should look only at the defendant’s efforts to enforce
the patent-in-suit and may not consider a defendant’s efforts to market or sell
commercial embodiments of the patent-in-suit. See Autogenomics, 566 F.3d at
1020 (citing Avocent Huntsville Corp. v. Aten Int’l Co., Ltd., 552 F.3d 1324, 1336
(Fed. Cir. 2008)).
With regard to personal jurisdiction, the defendants seek jurisdictional
discovery related to the following factual issues raised by the plaintiffs that they
claim require investigation to facilitate the preparation of an appropriate reply: (1)
information relating to Strata’s sales of the accused systems both within and
outside of Virginia; (2) information relating to the plaintiffs’ allegation that the
defendants exercise a measure of control over Strata as PMR’s distributor; (3)
information relating to whether Strata’s principal operating office was in Virginia
at the time that the Distribution Agreement was negotiated, such that the agreement
can be viewed as tied to Virginia; and (4) information relating to the plaintiffs’
claims that Sisk controls PMR. With regard to subject matter jurisdiction, the
defendants request discovery related to the following issues: (1) Titan’s alleged
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indemnity obligation to Strata; and (2) conversations that allegedly occurred
between Strata personnel and Sisk.
First, the defendants seek discovery to explore Strata’s contacts with
Virginia.3 However, the plaintiffs are correct that it is the actions of the defendants
that are to be scrutinized in determining whether this court has jurisdiction over
them. Information regarding the defendants’ own actions, of course, is within the
defendants’ knowledge and, therefore, would not require jurisdictional discovery.
Moreover, as the plaintiffs argue, even if Strata’s contacts were relevant to the
jurisdictional issue, the defendants have not sufficiently explained why they would
not have knowledge of the specific contacts alleged by the plaintiffs in their
opposition to defendants’ motion to dismiss at pages 9 through 14 since all of the
alleged contacts relate to actions taken by the defendants themselves. Specifically,
the plaintiffs allege the following contacts with Virginia by the defendants: (1)
entering into a Distributorship Agreement with Strata to supply 3D panels to
various states including Virginia; (2) receiving orders from Virginia; (3) shipping
products into Virginia; (4) directly conducting pull tests 4 in Virginia as required by
3
At the July 7, 2011, hearing on the Motion, the plaintiffs represented to the court that
they were not seeking to impute any of Strata’s actions to the defendants.
4
In his affidavit, Jeffrey Hamrick, Vice President of Strata Mine Services, LLC since
August 2006, testified that the 2007 Distributorship Agreement obligated PMR to conduct onsite “pull tests” that establish the depth to which rebar anchors must be placed in a given area of
a mine in order to ensure that a mine seal will be strongly anchored. (Attachment No. 3 to
Docket Item No. 32, (“Hamrick Affidavit”), at 3-4.) He testified that a PMR employee attended
or conducted a pull test in Deep Mine #26 in Virginia on or about January 31, 2009. (Hamrick
Affidavit at 4.) He further testified that a PMR employee attended or conducted a pull test in the
Buchanan Mine #1 in Virginia on or about February 4, 2009. (Hamrick Affidavit at 4.)
Additionally, Hamrick testified that on or about April 24, 2009, one or more PMR employees
conducted at least one pull test for at least one of the mine seals installed in a Kentucky mine
owned by a mine operator headquartered in Virginia. (Hamrick Affidavit at 4.) Additionally,
David Nardo, a former employee of PMR testified in his affidavit that he and another PMR
employee personally attended or conducted pull tests on seals in Virginia in 2008 for Jewell
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the Distributorship Agreement; (5) directly contracting with mining companies
headquartered in Virginia; and (6) directly contracting with another distributor,
GMS, to install 3D panels in Virginia. Because there simply is no reason that the
defendants would not have access to such information, I find that jurisdictional
discovery on these issues is not warranted.
Next, the defendants seek discovery of “information relating to Strata’s sales
of the accused systems both within and outside of Virginia, because one factor in
determining general jurisdiction is the proportion of sales within the jurisdiction
versus outside of it.” The plaintiffs argue again, however, that the proper focus is
on the defendants’ contacts with the forum, not Strata’s. They argue that “a broad
distributorship network in a forum state that generates a substantial amount of
revenue for the defendant may warrant general jurisdiction.” Taltwell, LLC v.
Zonet USA Corp., 2007 U.S. Dist LEXIS 93465, at *19-20 (E.D. Va. 2007) (citing
LSI Indus. v. Hubbell Lighting, Inc., 232 F.3d 1369, 1375 (Fed. Cir. 2000)
(emphasis added)). In this vein, the plaintiffs have submitted the affidavit of
Richard Werth, head of the Seals Division and Assistant Vice President of Strata.
(Attachment No. 5 to Docket Item No. 32, (“Werth Affidavit”)). Werth testified
that, from its office in Sword’s Creek, Virginia, Strata ordered an estimated total of
several million dollars of materials from defendant PMR between 2007 and the
summer of 2009. (Werth Affidavit at 1.) He further testified that PMR shipped
seal materials costing approximately $500,000 to the Jewell Smokeless Mine, the
Buchanan Mine and the Deep Mine #26, all of which were located in Virginia, in
numerous shipments from February 2008 through May 2009, for installation
Smokeless Coal Corporation and in 2009 for Deep Mine #26 located in Virginia. (Attachment 4
to Docket Item No. 32, (“Nardo Affidavit”), at 3.) He further testified that he conducted pull
tests in Kentucky for Black Mountain, which is headquartered in Virginia. (Nardo Affidavit at
3.)
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therein. (Werth Affidavit at 1-2.) Lastly, Werth testified that since August 2007,
Strata ordered, and PMR shipped, seals and overcast materials exceeding a value
of $1,000,000 specifically for installation in out-of-state mines owned by mine
operators headquartered in Virginia, including James River Coal Company and
Massey Energy Corporation.
(Werth Affidavit at 2.)
The defendants have
provided no affidavits disputing this evidence, and I find that it is the defendants
who are in the best position of knowing whether those amounts constitute a
substantial amount of revenue for them.
Therefore, I find that jurisdictional
discovery is not warranted on this issue.
Third, the defendants seek discovery to explore what the plaintiffs meant by
the term “control” in their opposition with regard to PMR’s relationship with
Strata. While the plaintiffs, in their opposition to the motion to dismiss, stated that
“PMR actually had at least some control over those distributors under
distributorship agreements such as the 2007 Distributorship Agreement,” the
plaintiffs state that they have not argued that personal jurisdiction may be found
based on Sisk’s and PMR’s “control” over Strata. Instead, the plaintiffs reiterate
their argument that personal jurisdiction may be found based on Sisk’s and PMR’s
actions of intentionally seeking out and knowingly engaging in sales with Virginia
residents and Sisk’s and PMR’s deriving of substantial revenue from sales in
Virginia. Therefore, I find that jurisdictional discovery is not warranted on this
issue as the plaintiffs are not seeking to base the court’s exercise of personal
jurisdiction over the defendants on any alleged “control” that PMR had over Strata
through the Distributorship Agreement.
Fourth, the defendants are seeking discovery to explore whether Strata’s
primary operating office was located in Virginia when the Distributorship
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Agreement was negotiated. As noted above, the plaintiffs have submitted the
affidavit of Jeffrey Hamrick, the Vice President of Strata since August 2006. In
his affidavit, Hamrick testified that “[w]hen the Distributorship Agreement was
negotiated in 2007, although Strata’s headquarters were located in Georgia,
Strata’s primary operating office and sole warehouse was in Sword’s Creek,
Virginia.... During the negotiations in 2007, Frank Sisk and other PMR employees
were aware that Strata’s primary operating office and warehouse were located in
Sword’s Creek.” (Hamrick Affidavit at 2.) Hamrick testified that Strata relocated
its primary operating office from Virginia to Ohio in the summer of 2009, but
continues to operate the Sword’s Creek office and warehouse as a regional support
center. (Hamrick Affidavit at 2.) The defendants have offered no affidavits to
contradict Hamrick’s testimony. In fact, they stated that they simply do not know
whether this was true and would like to conduct discovery to determine whether
this was, in fact, the case. To the contrary, however, Sisk and PMR know what
was or was not within their knowledge when this agreement was entered.
Therefore, I find that jurisdictional discovery is not warranted under these
circumstances.
Lastly, the defendants seek jurisdictional discovery to explore whether the
patentee, Sisk, as the owner and president of PMR, controls the licensee, PMR.
The plaintiffs do not dispute the relevance of this information to the court’s
jurisdiction over Sisk. Specifically, the defendants seek to depose David Nardo, a
former PMR employee, to determine the relationship between Sisk and PMR. The
plaintiffs attached Nardo’s affidavit to their opposition to the motion to dismiss. In
his affidavit, Nardo testified to the control that Sisk exerted over PMR.
He
testified that Sisk had a dedicated office within PMR’s office area and that he was
in the office frequently. (Nardo Affidavit at 3.) He testified that Sisk was “the
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boss.” (Nardo Affidavit at 3.) Nardo testified that key personnel reported to Sisk,
including Harry Riddle, the general manager, Jeff Kearns, who was responsible for
purchasing and outgoing shipments, and Jamie Lutz, who worked in sales. (Nardo
Affidavit at 3.) He testified that Kearns or Riddle spoke with Sisk on a daily basis.
(Nardo Affidavit at 3.) Nardo testified that Sisk “kept his thumb on how many
panels were ordered and where they had to go.” (Nardo Affidavit at 3.) He
testified that Sisk would sometimes visit the production shop where the panel
machine operated and that he would be busy there. (Nardo Affidavit at 3.) Nardo
testified that Sisk kept a “pretty close rein” on the overcast work. (Nardo Affidavit
at 3.) He further testified that, upon information and belief, Sisk had or has check
signing authority for PMR’s bank account. (Nardo Affidavit at 3.) Nardo testified
that during his employment at PMR from May 2007 through September 2008, Sisk
had hiring and firing power. (Nardo Affidavit at 3-4.) He also testified that it was
Sisk who applied to the Mine Safety and Health Administration, (“MSHA”), for
approval of PMR’s 120-PSI blast seal design in MSHA District No. 5 (i.e.
Virginia) and other MSHA districts.
(Nardo Affidavit at 4.)
Finally, Nardo
testified that correspondence from MSHA regarding the approvals was addressed
to Frank Sisk. (Nardo Affidavit at 4.)
Yet again, the defendants have not challenged the veracity of the
information contained in Nardo’s affidavit, and it is undoubtedly the defendants
who are in the best position to explain the relationship between Sisk and PMR.
Furthermore, as the plaintiffs state, they have provided other information showing
Sisk’s control over PMR so that deposing Nardo is unnecessary. This information
includes the following: (1) Sisk is the owner of PMR; (2) Sisk is the president,
secretary and registered agent of PMR; (3) Sisk negotiated the relationship with
Strata; (4) Sisk sent letters regarding the patent on PMR letterhead to Strata and its
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customers; and (5) Sisk served as the primary correspondent for communications
between PMR and MSHA regarding PMR’s seals.
The defendants have not
challenged any of these factual allegations. For all of these reasons, I find that
jurisdictional discovery on this issue is not warranted.
B. Subject Matter Jurisdiction
It is well-settled that a district court may exercise subject matter jurisdiction
over a declaratory judgment action only if the action presents a “case of actual
controversy.” Genentech, Inc. v. Eli Lilly & Co., 998 F.2d 931, 936 (Fed. Cir.
1993) (citing Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 239-40 (1937)). The
case must be “of sufficient immediacy and reality” to warrant declaratory relief.
Genentech, 998 F.2d at 936 (quoting Md. Cas. Co. v. Pac. Coal & Oil Co., 312
U.S. 270, 273 (1941)). The court’s determination as to whether there is an actual
controversy in patent actions involves a two-part inquiry: (1) whether the
declaratory plaintiff has acted in such a way that the patentee asserts infringes the
patent, or is preparing to act in such a way; and (2) whether the patentee has
created in the declaratory plaintiff a reasonable apprehension of suit for
infringement. See Genentech, 998 F.2d at 936 (citing Arrowhead Indus. Water,
Inc. v. Ecolochem, Inc., 846 F.2d 731, 735-36 (Fed. Cir. 1988)). When a patentee
has explicitly charged that a current activity of the declaratory plaintiff is an
infringement, “certainty has rendered apprehension irrelevant, and one need say no
more.” Genentech, 998 F.2d at 937 (quoting Arrowhead, 846 F.2d at 736).
With regard to the court’s subject matter jurisdiction, the defendants argue
that jurisdictional discovery is necessary to: (1) explore Titan’s indemnity
obligation to Strata; and (2) to explore the “numerous unsubstantiated factual
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allegations regarding conversations that allegedly took place between Strata
personnel and [] Sisk.” The plaintiffs do not dispute the relevance of Titan’s
indemnity obligation to Strata to the court’s subject matter jurisdiction, and the
plaintiffs have agreed to produce a redacted copy of the agreement from which this
indemnification obligation arises. 5 The plaintiffs state that this agreement is signed
by Titan and Strata prior to the institution of this action, and they submit that this
agreement is sufficient to establish subject matter jurisdiction. Therefore, I find
that jurisdictional discovery on this issue is unnecessary.
Likewise, I agree with the plaintiffs that discovery related to the “numerous
unsubstantiated … conversations that allegedly took place between Strata
personnel and … Sisk” is unnecessary. As the plaintiffs emphasize, they refer to
only one conversation between Sisk and Strata that is relevant both to subject
matter jurisdiction and to personal jurisdiction over Sisk.
That conversation
occurred in January 2011 when Sisk telephoned Hamrick and told him “You’re
done … I’m pulling the plug.” The plaintiffs allege that Sisk also asserted that
Titan’s supply of panels to Strata and/or Strata’s use of those panels would
constitute infringement of the ‘231 Patent. Moreover, the plaintiffs assert that
during this telephone conversation, Sisk referred to Titan’s panels as being
“illegal.” In his affidavit, Hamrick testified that he “understood [Sisk] to mean that
if Strata continued to purchase panels from Titan . . . Strata’s use of those panels to
build stoppings and overcasts would infringe the ‘231 Patent.” (Hamrick Affidavit
at 5.) At the hearing on the Motion, defense counsel represented to the court that
Sisk did nothing other than inform Hamrick of Sisk’s patent rights. In any event,
because Sisk was a party to this conversation, he is in the best position of knowing
5
At the hearing on the Motion, the plaintiffs stated that they intended to produce this
agreement to the defendants by July 12, 2011.
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what occurred during this conversation, and I see no need for jurisdictional
discovery on this issue.
Again, the defendants have submitted no affidavits
relating to this issue. Thus, I find that jurisdictional discovery on this issue is not
warranted.
CONCLUSION
Based on the above-stated reasons, I will deny the Motion insofar as it seeks
jurisdictional discovery. I also will deny the defendants’ motion for an evidentiary
hearing.
ENTERED: This 15th day of July, 2011.
Pamela Meade Sargent
/s/
UNITED STATES MAGISTRATE JUDGE
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