Opinion
Civil Action No. 00-5191 (JBS).
Filed: February 9, 2001
Terry M. Henry, Esquire, Cherry Hill, New Jersey Counsel for Plaintiff.
Norman E. Lehrer, Esquire, Cherry Hill, New Jersey Counsel for Defendants.
Wayne D. Porter, Jr., Esquire, Cleveland, Ohio Pro Hac Vice Counsel for Defendants.
OPINION
This matter is before the Court on defendants' motion to dismiss plaintiff's Complaint for lack of personal jurisdiction pursuant to Rule 12(b)(2), Fed.R.Civ.P. Defendants Cleveland Track Material, Inc. ("Cleveland Track") and Blanchard Steel, Inc. ("Blanchard") move that plaintiff's Complaint should be dismissed as to both defendants because this Court lacks specific and/or general personal jurisdiction over both companies.
I. Background
A. Procedural History
Plaintiff CMI-Promex, Inc. ("CMI") filed a complaint in this Court on October 20, 2000, and applied for an Order to Show Cause why a Preliminary Injunction should not issue against defendants for their alleged violations of plaintiff's patent and trademark involving its Ridex miter rail system, as well as for misappropriation of trade secrets. On October 25, 2000, this Court ordered defendants to show cause and on November 13, 2000 a Consent Order was entered continuing the motion for a preliminary injunction and setting a briefing schedule. On November 21, 2000, defendants filed the instant motion to dismiss for lack of personal jurisdiction. On January 3, 2001, this Court held a hearing on the personal jurisdiction issue and Wayne D. Porter, Jr., Esquire, was admitted pro hac vice for defendants. Also at the hearing, plaintiff was granted leave to file an Amended Complaint to assert additional allegedly infringing transactions. Decision was reserved on the personal jurisdiction issue pending receipt of the Amended Complaint. On January 5, 2001, after argument was heard on jurisdiction in this Court, defendants filed a Complaint against plaintiff CMI in the Northern District of Ohio, seeking a declaratory judgment that CMI's Ridex system patent is invalid and that Cleveland Track and Blanchard had committed no infringements or violations associated with that patent. (Defs.' Mot. to Transfer, Ex. 7.) On January 10, 2001, defendants filed a motion to transfer this action to the Northern District of Ohio. Plaintiff's Amended Complaint was filed with the Clerk of this Court on January 30, 2001. Only defendants' motion to dismiss the Amended Complaint for lack of personal jurisdiction is resolved in this Opinion.
In its Opposition Brief to defendants' motion to transfer, plaintiff argues that the Amended Complaint supports the exercise of personal jurisdiction over defendants "because a substantial part of the events or omissions giving rise to the claims of CMI-Promex, i.e . the offered sale of 'knock-off' CMI-Promex miter rail systems manufactured by defendants, occurred within this jurisdictional district" (Pl.'s Opp. to Motion to Transfer at 6) and that by sharing plaintiff's confidential information and producing products covered by its patent, defendant Blanchard subjected itself to jurisdiction in this state. ( Id . at 8). This argument, as it relates to personal jurisdiction only, will be more fully addressed in the discussion section below.
B. Facts
The plaintiff, CMI, a New Jersey corporation located in Pedricktown, New Jersey, designs, engineers and machines rails for specialty needs in the railroad industry, including for movable bridges and switches. (Am. Compl., ¶¶ 1-2.) Among its products are the specialty railroad or track systems sold under the Ridex trademark (U.S. Trademark Registration 2,168,990), which is used in the railroad industry in connection with a rider rail or miter rail system comprised of an allegedly improved track joint for movable railroad bridges. (Am. Compl., ¶¶ 10-11.) CMI alleges that it invented an improved design that combines a rider rail (a rail that spans the rail joint) with other components to form its innovated miter rail system. CMI applied for a patent of its Ridex miter rail system in March, 1998 (U.S. Pat. 6,000,624, issued December 14, 1998). (Am. Compl., ¶¶ 18-21.) Defendants Cleveland Track and Blanchard compete with plaintiff in the miter rail system market.
Plaintiff has sued the two out of state defendant corporations, Cleveland Track and Blanchard, alleging that these defendants have improperly obtained and used plaintiff's property, confidential corporation and trade secrets related to the Ridex miter rail system (Am. Compl., ¶ 35), thereafter manufacturing, marketing, and selling imitations or "knock-offs" of the Ridex rail system. (Am. Compl., ¶¶ 37-39.) Plaintiff alleges Cleveland Track and Blanchard have marketed and continue to market these devices which infringe plaintiff's patent (Id., ¶¶ 119-125) and misappropriate plaintiff's trade secrets (Id., ¶¶ 102-104).
In the Amended Complaint, plaintiff specifically alleges that in March and September, 1998, Cleveland Track made four false and misleading offers to sell "knock off" Ridex miter rail systems in New Jersey which were derived from plaintiff's confidential proprietary information, thus subjecting them to the specific jurisdiction of this Court. (Am. Compl. ¶¶ 56-70.) The Amended Complaint plead the specifics of Cleveland Track's four failed bid offers for projects in New Jersey, including, the two March 31, 1998 offers to sell miter rail systems to New Jersey Transit for their Coastline Bridge (Am. Compl., ¶¶ 56-58) and their Boonton Line Bridge (Am. Compl., ¶¶ 59-61), and the two September 25, 1998 offers to make and sell miter rail systems to Conrail for their Bridgeport, New Jersey bridge (Am. Compl., ¶¶ 62-66) and their Kearny, New Jersey bridge (Am. Compl., ¶¶ 67-70).
In the Amended Complaint, plaintiff names only Cleveland Track, and not Blanchard, as being the entity responsible for the alleged wrongful conduct in this judicial district.
Because plaintiff had not yet obtained a patent for the Ridex miter rail system at the time the allegedly infringing offers were made in New Jersey, plaintiff does not argue that these offers violated any property right in the patent. Instead, plaintiff argues that had a protectable trademark and trade secret interests in the Ridex miter rail system as of March, 1998, when they applied for the patent.
Defendant Cleveland Track is an Ohio corporation headquartered in Cleveland, Ohio. (Id., ¶ 3.) Defendant Blanchard is a Tennessee corporation headquartered in Memphis, Tennessee, and is a wholly owned subsidiary of Cleveland Track. (Id., ¶¶ 4-5.) Neither Cleveland Track nor Blanchard is registered to do business in New Jersey (Mangan Decl., ¶ 5), owns or leases any real estate in New Jersey (id., ¶ 6), has any bank accounts in New Jersey (id., ¶ 7), has any telephone listing in New Jersey (id., ¶ 8), or has any salesperson located in or regularly contacting customers in New Jersey. (Id., ¶ 9).
Cleveland Track and Blanchard share several corporate officers, but maintain separate corporate forms (id., ¶ 5), and have done so, according to defendants, since Blanchard was incorporated in 1994. Cleveland Track and Blanchard both manufacture miter rail systems and other custom engineered track-work products in response to solicitations for bids received for various railroads around the country. Blanchard receives all of its work through Cleveland Track, Cleveland Track sells Blanchard's products, and all of the miter rail systems manufactured by Blanchard are sold by or through Cleveland Track. (Id., ¶ 7; Pl.'s Br., Ex. B at T 77-15 to 78-1.)
Plaintiff has made no allegation that any of the corporate officers common to both Cleveland Track and Blanchard were involved with the allegedly infringing offers to sell "knock off" Ridex miter rail systems in New Jersey.
During the years relevant to this suit, 1998, 1999, and 2000, defendant Cleveland Track sold a total of $1.8 million worth of rail products through Atlantic Track and Turnout ("Atlantic Track"), an independent broker in New Jersey, with $1.4 million of those products directly delivered to New Jersey. (See Tr. Personal Jurisdiction Hr'g, Jan. 3, 2001 at T 10-20 to 11-16.) Cleveland Track's total sales for those years amount to approximately $40 million. (See id. at T 3-20 to 3-21.) Blanchard Steel made one direct sale of a product unrelated to the miter rail system to a customer in New Jersey in July, 2000. (Pl.'s Br., Ex. A, Am. Mangan Decl., ¶ 4.) Blanchard's total annual sales for the period of 1998-2000 were approximately $3,500,000.00. (See id. at T 4-1 to 6.)
Cleveland Track's sales to Atlantic Track amounted to 1.5% of the company's overall sales for the years 1998-2000.
Blanchard's one direct sale to a New Jersey customer represents slightly more than 1.0% of Blanchard's total sales during 1998-2000. (Pl.'s Br., Ex A, ¶ 4.)
C. The January 3, 2001 Hearing
This Court's personal jurisdiction over the defendants was the subject of a hearing, held January 3, 2001. The parties presented argument on whether and why defendants should or should not be subject to the personal jurisdiction of this Court. Defendants first argued that personal jurisdiction, both specific and general, was completely lacking over Blanchard, because it is a Tennessee corporation with no sales, office, or real estate in New Jersey, and because Blanchard's sales are directed at the southern and western portions of the United States. Although defense counsel admitted that there was a single transaction in the year 2000 where Blanchard filled an order for expansion joints for a New Jersey company, they asserted that the sale was wholly unrelated to the Ridex system at issue in this case. Defense counsel further emphasized that Blanchard and Cleveland Track have been separate entities, which have maintained separate corporate forms, since 1994 when Blanchard was incorporated.
According to the Cleveland Track website, www.clevelandtrack.com , Blanchard was opened in Memphis, Tennessee to "manufacture frogs and switch plates and enhance service to western railroads." (Pl.'s Br., Ex. N at 2.)
Plaintiff conceded that Blanchard's contacts with New Jersey are minimal at best (see Tr., Jan 3, 2001, at T 19-13 to 19-14), but argued that the Court should pierce the corporate veil and subject Blanchard to the same jurisdiction as Cleveland Track because Blanchard is wholly owned by Cleveland Track, the companies share several key managers and directors, the same products are sold through both companies, and corporate formalities are not observed. Defendants denied any blurring of the corporate entities. Defendants further argued that Cleveland Track should not be subject to personal jurisdiction in New Jersey because they do not actively solicit business in the state. Instead, they argued, Cleveland Track only filled orders in New Jersey that were placed by Atlantic Track and three other customers seeking specialty rail products. (See id. at T 13-9 to 13-20.) The Court reserved decision on the personal jurisdiction issue pending receipt of plaintiff's Amended Complaint.
II. Discussion
A. Personal Jurisdiction
A district court must apply the rules of the state in which it sits to determine whether it may assert personal jurisdiction over a non-resident defendant. Fed.R.Civ.P. 4(e). The New Jersey Long Arm jurisdiction statute permits the assertion of in personam jurisdiction as far as is constitutionally permissible under the Fourteenth Amendment. See N.J. Ct. R. 4:4-4; Database America v. Bell South Adver. Publ'g Corp., 825 F. Supp. 1195, 1207 (D.N.J. 1993). Therefore, this Court has jurisdiction over a nonresident defendant if (a) the exercise of personal jurisdiction over the party comports with New Jersey Law, and (b) due process is not violated. See VP Intellectual Prop., LLC v. IMTEC Corp., 53 U.S.P.Q.2d 1269, 1271 (D.N.J. 1999); Fed.R.Civ.P. 4(e). The Court of Appeals for the Federal Circuit has held that in cases where patent infringement claims are joined with and related to non-patent infringement claims, as is the case here, Federal Circuit law, rather than regional circuit law, applies. 3D Systems, Inc. v. Aarotech Lab., Inc., 160 F.3d 1373, 48 U.S.P.Q.2d 1773, 1775-76 (Fed. Cir. 1998). Defendants now move to dismiss plaintiff's complaint under Rule 12(b)(2), Fed.R.Civ.P., for lack of personal jurisdiction over both Cleveland Track and Blanchard.
1. General Personal Jurisdiction
Once a jurisdictional burden is raised by defendants, the plaintiff bears the burden of proving, by a preponderance of the evidence, that the facts as stated are sufficient to support a connection between defendants and the forum state. See Provident Nat'l Bank v. California Fed. Sav. Loan Ass'n, 819 F.2d 434, 437 (3d Cir. 1987); Dayhoff, Inc. v. H.J. Heinz Co., 86 F.3d 1287, 1302 (3d Cir.), cert. denied, 519 U.S. 1028, 117 S.Ct. 583 (1996). In order for a district court to assert general personal jurisdiction over a defendant, the plaintiff must show that the defendant's contacts with the forum have been "continuous and systematic" and that defendant, therefore, should expect to be haled into the forum court on any cause of action. See VP Intellectual Prop., 53 U.S.P.Q.2d at 1271. A plaintiff must demonstrate that the defendants have significantly more than bare minimum contacts with the forum state and due process is satisfied only when plaintiff satisfied the rigorous burden of showing that the contacts are continuous and substantial. See Provident Nat'l, 819 F.2d at 437; Osteotech v. Gensci Regeneration Sci., Inc., 6 F. Supp.2d 349, 353 (D.N.J. 1998) (citing Giangola v. Walt Disney World Co., 753 F. Supp. 148, 154 (D.N.J. 1990); Exton v Our Farm, Inc., 943 F. Supp. 432, 437 (D.N.J. 1996)).
Here, the Court will first address the issue of whether the sales of Cleveland Track in New Jersey were consistent and substantial enough to subject it to general personal jurisdiction in the state and will next address the same issue with respect to Blanchard.
a) Cleveland Track
Plaintiff argues that defendants' sales from 1998 through 2000 to New Jersey customers, to non-New Jersey companies which were shipped to New Jersey customers, and their advertising and website access in New Jersey are contacts that are continuous and systematic and thus subject defendants to personal jurisdiction in this state. Cleveland Track contends that their sales in New Jersey represent a de minimis percentage of the company's overall sales and argues that because the company is not registered to do business in New Jersey, has no bank accounts, property, offices or salespeople in New Jersey, and does not regularly solicit business in New Jersey, it should not be required to defend against any cause of action in this forum. Defendants further argue that their offers to sell the allegedly infringing miter rail system to New Jersey Transit and Conrail should not weigh in favor of finding general jurisdiction because the offers were unsuccessful, although Cleveland Track does not dispute that it was aware that if the bids had been successful, the result would have been the permanent installation of the allegedly infringing product in the state. During the years 1998, 1999 and 2000, Cleveland Track sold approximately $1.8 million worth of rail products to Atlantic Track, an independent broker of rail related products. (Pl.'s Br. at 11-12 and Ex. K; Personal Jurisdiction Hr'g, T 11-3 to 11-16.) Of the one hundred and thirty-one invoices detailing Cleveland Track's sales to Atlantic Track, 86 show that Cleveland Track shipped rail products directly to consumers in New Jersey. (Pl.'s Ex. J.) Those direct shipments to New Jersey customers represented approximately $1.4 million of Cleveland Track's total $1.8 million of business with Atlantic Track from 1998 to 2000. (Pl.'s Br. at 12.)
The Federal Circuit, in Akro Corp. v. Luker , specified the three-prong test to determine if a court may exercise specific jurisdiction over an out-of-state defendant in a patent infringement case: (1) whether the defendant purposefully directed its activities at the residents of the forum; (2) whether the claims arise out of or relate to those activities; and (3) whether assertion of personal jurisdiction is reasonable and fair. Akro , 45 F.3d 1541, 1545-46, 33 U.S.P.Q.2d 1505, 1508-09 (Fed. Cir. 1995). Cleveland Track bid on four projects to make or sell miter rail systems (allegedly protected by the '624 patent) to New Jersey Transit and Conrail. Plaintiff alleges that such offers were themselves infringements directed at residents of New Jersey. ( See Am. Compl., ¶¶ 56-70.) In 3D Systems , the Federal Circuit determined that a defendant's distribution of promotional letters, price quotations, and responses to e-mail requests for information to California consumers was enough to satisfy the first prong of the Akro specific jurisdiction test. 3D Systems , 160 F.3d at 1378. Cleveland Track does not dispute that it unsuccessfully bid on miter rail projects in the State of New Jersey. (Mangan Decl., ¶ 13.) Cleveland Track does dispute the claim that such miter rail systems infringed on any rights of plaintiff and submits that the drawings submitted by customers "did not disclose any information that was not already widely distributed to the public and well-known to those of ordinary knowledge and skill in the trackwork products industry." (Mangan Decl., ¶ 15.) Accepting all of plaintiff's allegations as true, this Court finds that Cleveland Track's bids submitted to New Jersey Transit for miter rail projects on the North Jersey Coastline and Boonton Lines were actions clearly and purposely directed at New Jersey and satisfy the first prong of the Akro test.
The second prong of the Akro test is also met. This case, similar to the 3D Systems case, involves offers to sell a product that is alleged to be infringing of plaintiff's trade secrets and confidential trademark information. In 3D Systems , the court determined that defendants' promotional letters and price quotations could be considered "offers to sell" that could subject them to the jurisdiction of the court. 160 F.3d at 1379. The court reasoned that defendants should be prevented from "generating interest in a potential infringing product to the commercial detriment of the rightful patentee." Id . ; see also VP Intellectual Prop , 53 U.S.P.Q.2d at 1273 (finding that in order to exercise specific personal jurisdiction over a defendant based on offers to sell, the specific products and pricing information must be purposefully circulated to residents of the forum state). Defendants made no substantial showing that it would be unfair to subject Cleveland Track to general personal jurisdiction in New Jersey. Further, plaintiff points to New Jersey's interest in providing its residents with a convenient forum for redressing injuries inflicted by out of state corporations. (Pl.'s Opp. to Motion to Dismiss at 11); see Beverly Hills Fan , 21 F.3d at 1568. The third prong of the Akro test, therefore, is also met. Although the facts and law clearly support a finding that Cleveland Track is subject to the specific personal jurisdiction of this Court, the scope of plaintiff's claims subject to that specific jurisdiction need not be determined because we have found general personal jurisdiction over Cleveland Track, which allows them to be hailed into this Court on any claim.
In addition to its sales to Atlantic Track, Cleveland Track also independently sold products to four other companies in New Jersey during the years 1998, 1999, and 2000. (Pl.'s Br. at 12; Pl.'s Ex. B at T 64-1 to 65-25; Pl.'s Ex. C at T 31-1 to 35-25.) Cleveland Track made a total of 232 product sales, totaling $2,816,338.07, during the applicable time period to New Jersey and non-New Jersey companies that were shipped directly to the New Jersey Customers. (Pl.'s Ex. K.) In 1998, there were 69 deliveries to New Jersey customers, representing $409,497.80 in sales. (Pl.'s Ex. K at Bates Nos. 225 to 226.) In 1999, there were 66 deliveries to New Jersey customers, representing $977,536.79 in sales. (Pl.'s Ex. K at Bates Nos. 227 to 228.) In 2000, there were 97 deliveries to New Jersey customers, representing $1,429,303.48 in sales. (Pl.'s Ex. K at Bates Nos. 229-231.)
Plaintiff alleges in its opposition brief that both "Cleveland Track and Blanchard Steel independently sold products to at least four other companies in New Jersey," and refers to the depositions of Mangan and William Willoughby and Cleveland Track's delivery spreadsheets. Although the testimony and data support plaintiff's claims of independent sales to New Jersey by Cleveland Track, there is no evidence that Blanchard sold directly to a New Jersey customer during 1998-2000, except for the single sale of an unrelated product in July, 2000, to which Blanchard admits.
In addition to these sales, Cleveland Track also submitted two bids to New Jersey Transit and two bids to Conrail for miter rail system projects at New Jersey sites. (Pl.'s Exs. C-E.) Although ultimately unsuccessful, Cleveland Track was aware that the bids, if awarded, would have resulted in Cleveland Track's sale of allegedly infringing miter rail systems to be installed as a permanent fixture in New Jersey, as the bids were specifically designed for the New Jersey locations. (Pl.'s Exs. C-E.) Defendants insist that they did not reach out to the New Jersey consumers and instead submitted the bids only in response to requests by the potential buyers in New Jersey. (Defs.' Reply Br. at 7).
Defendants cite several cases that focus on the defendant corporation's percentage of sales in the forum state when determining whether or not that corporation should be susceptible to the general personal jurisdiction of the court. See Nichols v. G.D. Searle Co., 991 F.2d 1195 (4th Cir. 1993) (holding that 2% of total sales, amounting to $9 million to $13 million in annual sales in the forum, was not enough for general jurisdiction); Zeneca Ltd. v. Pharmachemie B.V., 42 U.S.P.Q.2d 1212 (D.Md. 1996) (holding that 5% of total sales, amounting to $50,000 in annual sales in the forum, was not enough for general jurisdiction);L.H. Carbide Corp. v. Piece Maker Co., 32 U.S.P.Q. 1248 (N.D.Ind. 1994) (holding that annual sales in the forum over a five year period ranging from 0.5% to 8.0% of the company's total sales was not enough to subject company to general jurisdiction in the forum). The Court notes that none of these cases have binding precedential value on this Court, and that the determination of personal jurisdiction based solely on total sale percentages and annual sale amounts in the forum, without consideration of the nature of such sales, is somewhat artificial. This Court will therefore use the general jurisdiction reasoning articulated by the Third Circuit in Provident Nat'l Bank v. California Fed. Sav. Loan Ass'n, 819 F.2d 434 (3d Cir. 1987), in support of its conclusion that Cleveland Track is subject to the general jurisdiction of this Court.
In Provident Nat'l Bank, the Third Circuit considered "how much contact a modern lending institution must have within the forum state to confer in personam jurisdiction." 819 F.2d 434 at 435. Provident National sought to sue California Federal, a lending institution, in Pennsylvania, and California Federal raised a jurisdictional defense. California Federal was not registered to do business in Pennsylvania, and had no office, employees, agents, mailing address, telephone, or advertisements in the state. Id. at 436. Three Pennsylvania financial institutions financed $10.2 million of loans for California Federal and one, Mellon Bank, received daily wire transfers from California Federal. Id. During the years relevant to the suit, between 700 to 1,000 of California Federal's depositors resided in Pennsylvania (0.066% of its total one million depositors), contributed $10 million (0.071% of its total $14 million in deposits), and had $10 million in loans (0.083% of its total $12 billion in outstanding loans). Id.
Despite these minuscule percentages of loans, deposits, and customers in the forum state, the Third Circuit affirmed the District Court's finding that California Federal carried on a continuous and systematic part of its general business in Pennsylvania and therefore was properly subject to general jurisdiction in the state. Id. at 438. The court agreed with the district court that "the size of the percentage of California Federal's total business represented by its Pennsylvania contacts is generally irrelevant" and further wrote that "we do not believe . . . the absolute amount of dollars and customers is more persuasive proof of substantial 'continuous and systematic' activity by California Federal in Pennsylvania." Id. at 437-38. The court instead focused on the nature of California Federal's contacts with Pennsylvania, such as deposits and loans, that "w[ere] central to the conduct of its business" id. at 438, and therefore should have created a "greater expectation of being hailed into court in Pennsylvania." Id. (distinguishing Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408, 104 S.Ct. 1868 (1984), which held that defendant's purchase of 80% of its helicopters for over $4 million in Texas was not sufficient to confer jurisdiction because the activities were "important but not central to the defendant's business.")
Based on the Third Circuit's reasoning, this Court finds ample support for finding general jurisdiction over Cleveland Track in this case. Cleveland Track's contacts with New Jersey (i.e rail product sales and offers to install miter rail systems) are the "bread and butter of its daily business," in much the same way that California Federal's loans and deposits were central to its operations. Provident Nat'l Bank, 819 F.2d at 438. By considering the percentages and dollar amounts of Cleveland Track's contacts in New Jersey in conjunction with the nature of those contacts, it is clear that they should have anticipated being hailed into court on any matter. Over the relevant period, Cleveland Track shipped rail products sold through Atlantic Track to New Jersey customers eighty-six times and shipped products sold through other companies to New Jersey companies 232 times. These sales, in addition to the bid submissions made to New Jersey Transit and Conrail on miter rail systems intended to be permanently affixed to the landscape in New Jersey, establish that Cleveland Track's substantial and continuous contacts with New Jersey are continuous and systematic enough to subject them to the general jurisdiction of this court. Accordingly, defendants' Rule 12(b)(2) motion to dismiss plaintiff's complaint with respect to defendant Cleveland Track will be denied.
The Court notes that plaintiff also references Cleveland Track's national advertising campaign and website as reasons to subject the company to the general jurisdiction of this state. It is well established that such contacts, by themselves, are not enough to subject a company to the general jurisdiction of any given state. See Osteotech, Inc . , 6 F. Supp.2d at 354 (citing Weber v Jolly Hotels , 977 F. Supp. 327, 222 (D.N.J. 1997) and Gehling v. St. George's School of Medicine , 773 F.2d 539, 542 (3d Cir. 1985)).
b) Blanchard
The Court will now consider whether plaintiff has established that there is general jurisdiction over Blanchard. Plaintiff baldly argues in its opposition brief that Blanchard was involved with Cleveland Track's sales and shipments to New Jersey customers. (Pl.'s Br. at 11-12.) No evidence supplied by plaintiff shows that Blanchard or any common employee of Blanchard and Cleveland Track was involved in Cleveland Track's manufacture or sale of the rail products shipped to New Jersey customers. (See Pl.'s Exs. C-E and I-K, detailing Cleveland Track's sales and shipments to New Jersey.) Other than the one direct sale of an unrelated product by Blanchard to a New Jersey customer in July, 2000, plaintiff has not shown that Blanchard had any contact, much less systematic and continuous contact with the state. Indeed, at the January 3, 2000 hearing, plaintiff's counsel conceded that Blanchard's "contacts here [in New Jersey] are minimal at best" (Hr'g T 19-13 to 19-14) and that their arguments with respect to subjecting Blanchard to the jurisdiction of this Court "depend in large part on piercing the corporate veil." (Hr'g T 24-5 to 24-8). Therefore, plaintiff has failed to show the substantial and continuous contacts with New Jersey required to directly exercise general jurisdiction over Blanchard.
The Court also considered whether Blanchard's activities in New Jersey satisfy the Akro test for specific jurisdiction and found that they do not. A review of the Amended Complaint reveals that Blanchard's activities do not satisfy the first prong of the Akro test because plaintiff did not allege that Blanchard participated in the allegedly infringing bid submissions to New Jersey Transit and Conrail (Am. Compl., ¶¶ 56-70) or that Blanchard otherwise purposely directed its activities at residents of New Jersey. The one sale in July, 2000, to which Blanchard admits, was unrelated to the miter rail system at issue in this case and is not sufficient to confer specific personal jurisdiction in this case.
Plaintiff next argues that Blanchard and Cleveland Track do not maintain separate corporate forms and are so closely related in their conduct that this Court should pierce the corporate veil and subject Blanchard to personal jurisdiction based on Cleveland Track's contacts with New Jersey. This argument fails for several reasons.
The Federal Circuit has affirmed that "the corporate form is not to be lightly cast aside." 3D Systems, 160 F.3d at 1380; Manville Sales Corp. v. Paramount Sys., Inc., 917 F.2d 544 (Fed. Cir. 1990) (holding that a court, when deciding whether to pierce the corporate veil, must "start from the general rule that the corporate entity should be recognized and upheld, unless specific, unusual circumstances call for an exception" or unless there is at least "specific intent to escape liability for a specific tort. . . .") (quoting Zubik v. Zubik, 384 F.2d 267, 271-73 (3d Cir. 1967)). Plaintiffs have presented no legal authority to justify piercing the corporate veil in this case. Additionally, the factual support offered for piercing the corporate veil, such as the cooperative sales efforts and common employees of the companies, does not rise to the level required for this court to disregard the two as separate corporate entities. Furthermore, plaintiff's assertions that Cleveland Track and Blanchard do not maintain separate corporate identities are unsupported; in fact, the two companies have been separate since 1994, when Blanchard was incorporated in Tennessee to gain access to a competitor rail-maker's market. Under the test articulated in 3D Systems, there is no basis to ignore the corporate form or to impute Cleveland's actions to Blanchard.
This Court acknowledges there can be situations where a subsidiary may be held responsible for the activities of its parent. In fact, there are several scenarios which would justify a district court to pierce the corporate veil in a patent infringement case. First, if a plaintiff demonstrated some fraud or intent by the parent to escape liability as a motive underlying the establishment of an "alter-ego" corporation, then it would be proper to disregard the corporate form and impute the conduct of the parent to the subsidiary "alter-ego" or vice versa. See 3D Systems, 160 F.3d at 1380-81; CVI/Beta Ventures, Inc. v. Tura LP, 905 F. Supp. 1171, 1200-01 (E.D.N.Y. 1995) (citing to New York law, which allows the corporate form to be disregarded only where plaintiff demonstrates evidence of fraud or complete dominance by one entity of another). Next, if plaintiff had alleged and demonstrated that the common employees and directors of Cleveland Track and Blanchard were "wearing two hats" and making statements on behalf of Blanchard regarding the patent or infringement in dispute, then this Court might have reached a different decision on this point. See Dainippon Screen Mfg. Co., Ltd. v. CFMT, Inc., 142 F.3d 1266, 1270 (Fed. Cir. 1998) (finding that district court erred in its conclusion that personal jurisdiction was not proper where employees of both the parent and subsidiary corporations wore two hats and made statements that would reasonably only be attributed to the other).
Plaintiff, however, did not make these arguments and offered no evidence that would lead the court to conclude that any fraud or double dealing occurred in this case. Defendant's motion to dismiss Blanchard pursuant to Rule 12(b)(2) for lack of personal jurisdiction will therefore be granted.
III. Conclusion
For the foregoing reasons, defendants' motion to dismiss plaintiff's complaint for lack of personal jurisdiction pursuant to Rule 12(b)(2), Fed.R.Civ.P., will be denied with respect to Cleveland Track and granted with respect to Blanchard. The accompanying order is entered.
ORDER
This matter having come before the Court upon defendants' motions to dismiss plaintiff's Complaint pursuant to Rule 12(b)(2), Fed.R.Civ.P., for lack of personal jurisdiction ( Docket Item 15-1); and this Court having considered the parties' submissions; and for the reasons expressed in an Opinion of today's date;
IT IS this ________ day of February, 2001 hereby
ORDERED that the motion of defendant Cleveland Track to dismiss for lack of personal jurisdiction be, and hereby is, DENIED; and
IT IS FURTHER ORDERED that the motion of defendant Blanchard Steel to dismiss for lack of personal jurisdiction be, and hereby is, GRANTED.