Opinion
CIVIL NO. SA:13-CV-867-OG
01-28-2014
DEAF INTERPRETER SERVICES, INC., Plaintiff, v. WEBBCO ENTERPRISES, L.L.C., et al., Defendants.
ORDER
On this day came to be considered Defendants' motions to dismiss for improper venue, failure to state a claim, and failure to properly plead and Defendants' motion for a more definite statement (docket no. 7). For the following reasons, the Court DENIES Defendants' motions.
I. Background
On September 20, 2013, Plaintiff Deaf Interpreter Services, Inc. filed its complaint against Defendants Webbco Enterprises, L.L.C., d/b/a Visual Communication Services ("VCS") and Erma L. Webb. According to its complaint, Plaintiff provides sign language communications services to facilitate communication exchanges between hearing impaired and non-hearing impaired individuals. (See Docket No. 1). Plaintiff has allegedly developed a strong reputation for quality and community service within the San Antonio area. Plaintiff asserts that, beginning around August 2011, VCS sought to capitalize on the name and reputation of Plaintiff by expanding its communication services into the San Antonio area using the term "Deaf Interpreter Services" and using branding similar to Plaintiff's. Plaintiff alleges that Defendant Webb founded, owns, and exclusively controls VCS. Plaintiff alleges that Webb and/or VCS opened an office in San Antonio and created the website of www.sanantoniodeafinterpreterservices.com. Plaintiff alleges that the website placed the words "Deaf Interpreter Services" on every page and used the same background colors as those used on Plaintiff's website. Plaintiff asserts that Webb and/or VCS knowingly use Plaintiff's name and pass off their services as those of Plaintiff's.
Plaintiff's complaint asserts causes of action against Webb and VCS for false designation of origin and unfair competition under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and common law unfair competition. Plaintiff also asserts that VCS's corporate veil should be pierced and Webb held responsible for the acts of VCS. On November 4, 2013, Defendants jointly filed a fourteen-page document containing a motion to dismiss for improper venue or, in the alternate, a motion to transfer venue; a motion to dismiss for failure to state a claim upon which relief may be granted; a motion to dismiss for failure to properly plead pursuant to Federal Rule of Civil Procedure 9(b); a motion for a more definite statement; a Federal Rule of Civil Procedure 7.1 disclosure statement; and an original answer. (Docket No. 7). Plaintiff responded to Defendant's motions in four separate documents. (Docket Nos. 12-15). Defendants have not replied. The Court addresses Defendants' motions in turn.
II. Motion to Dismiss for Improper Venue
Defendants challenge venue in the Western District of Texas because both Defendants are allegedly Texas residents that reside in the Southern District of Texas. Defendants also assert that Defendants' allegedly wrongful acts were all committed in the Southern District of Texas because the allegedly deceptive website was created by a Houston-based company.
Federal Rule of Civil Procedure 12(b)(3) allows a defendant to move to dismiss an action brought in an improper venue. If the Court finds venue is improper, it "shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought." 28 U.S.C. § 1406. Venue is proper in "a judicial district in which any defendant resides, if all defendants are residents of the State in which the district is located." 28 U.S.C. § 1391(b)(1).
Here, Defendants admits that they are both residents of Texas; however, contrary to VCS's assertion, for venue purposes, it is a resident of the Western District of Texas. 28 U.S.C. § 1391(c)(2) provides:
an entity with the capacity to sue and be sued in its common name under applicable law, whether or not incorporated, shall be deemed to reside, if a defendant, in any judicial district in which such defendant is subject to the court's personal jurisdiction with respect to the civil action in question . . . .In states with multiple districts—like Texas—a corporation is "deemed to reside in any district in that State within which its contacts would be sufficient to subject it to personal jurisdiction if that district were a separate State." 28 U.S.C. § 1391(d). Thus, 28 U.S.C. § 1391 largely collapses the venue analysis into a personal jurisdiction analysis.
Though VSC is a limited liability company, rather than a corporation, the Court will apply 28 U.S.C. § 1391(d). See Graham v. Dyncorp Intern., Inc., 3:13-CV-00065, 2013 WL 5305788, at *2 n.2 (S.D. Tex. Sept. 19, 2013) (examining the history of § 1391(d) and concluding that § 1391(d)'s failure to explicitly include unincorporated associations within its scope was an oversight).
The Supreme Court allows a district court to exert personal jurisdiction over a defendant "if the defendant has 'certain minimum contacts with [the State] such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.'" Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S.Ct. 2846, 2853 (2011) (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). The Supreme Court has also determined that, "[t]here are two types of 'minimum contacts': those that give rise to specific personal jurisdiction and those that give rise to general personal jurisdiction." Lewis v. Fresne, 252 F.3d 352, 358 (5th Cir. 2001); see Goodyear, 131 S.Ct. at 2853-54. "General personal jurisdiction is 'all-purpose' and grants a court the power 'to hear any and all claims against' a party regardless of where the events at issue took place." Graham v. Dyncorp Intern., Inc., 3:13-CV-00065, 2013 WL 5305788, at *3 (S.D. Tex. Sept. 19, 2013) (citing Goodyear, 131 S.Ct. at 2851). "Specific jurisdiction, on the other hand, depends on an affiliation between the forum and the underlying controversy, principally, activity or an occurrence that takes place in the forum State and is therefore subject to the State's regulation." Goodyear, 131 S. Ct. at 2851 (internal quotations omitted). General jurisdiction requires a substantially higher degree of contacts than specific jurisdiction. See Daimler AG v. Bauman, No. 11-965, 2014 WL 113486, at *11 (U.S. Jan. 14, 2014) (reiterating the high standard for establishing general jurisdiction, and finding general jurisdiction had not been established where, among other things, the forum was not the defendant company's place of incorporation or principal place of business); Graham, 2013 WL 5305788, at *3 (comparing Goodyear, 131 S.Ct. at 2851 (ruling on general jurisdiction), with J. McIntyre Mach., Ltd. v. Nicastro, 131 S.Ct. 2780, 2787-88 (2011) (ruling on specific jurisdiction)).
Here, at a minimum, Plaintiff has established the Court's specific personal jurisdiction over VCS. Therefore, the Court will not consider general jurisdiction. To establish specific jurisdiction, a court must find affirmatively on the following: "(1) whether the defendant has minimum contacts with the forum state, i.e., whether it purposely directed its activities toward the forum state or purposefully availed itself of the privileges of conducting activities there; (2) whether the plaintiff's cause of action arises out of or results from the defendant's forum-related contacts; and (3) whether the exercise of personal jurisdiction is fair and reasonable." McFadin v. Gerber, 587 F.3d 753, 759 (5th Cir. 2009); see Breathwit Marine Contractors, Ltd. v. Deloach Marine Services, LLC, 3:13-CV-00169, 2014 WL 199026, at *3 (S.D. Tex. Jan. 16, 2014). Here, Plaintiff asserts that VCS opened an office in San Antonio, offered its services to customers in San Antonio, and advertised its business in San Antonio. VCS does not dispute these assertions. Therefore, the Court finds that VCS directed its activities towards the Western District. Next, Plaintiff's causes of action arise out of VCS's forum-related contacts. VCS's alleged infringing activities were all undertaken for the alleged purpose of obtaining clients in the Western District of Texas. Regardless of whether VCS's website was created or hosted in the Southern District of Texas or the Western District of Texas, the website was allegedly targeted at businesses and individuals residing in the Western District. Moreover, VCS allegedly maintained an office in San Antonio and marketed through third-parties operating in the Western District. Thus, Plaintiff's cause of action arises out of or results from VCS's forum-related contacts. Finally, the Court's exercise of personal jurisdiction is fair and reasonable. It is entirely foreseeable that VCS would face a lawsuit in a forum where it opened an office, offered its services, and directed its solicitations. Therefore, the Court finds that, for venue purposes, VCS is a resident of the Western District of Texas, and, accordingly, venue is proper. 28 U.S.C. § 1391(b)(1).
Finally, the Court rejects Defendants' motion, in the alternative to dismissal, to transfer the case to the Southern District of Texas. To obtain a transfer of venue through 28 U.S.C. § 1404(a), the moving party must show good cause by clearly demonstrating that a transfer is "for the convenience of parties and witnesses, [and] in the interest of justice." In re Volkswagen of Am., Inc., 545 F.3d 304, 315 (5th Cir. 2008). To determine whether a transfer is for the convenience of the parties and witnesses and in the interest of justice, a court examines certain private and public interest factors. Id.
The private interest factors are: (1) the relative ease of access to sources of proof; (2) the availability of compulsory process to secure the attendance of witnesses; (3) the cost of attendance for willing witnesses; and (4) all other practical problems that make trial of a case easy, expeditious and inexpensive. The public interest factors are: (1) the administrative difficulties flowing from court congestion; (2) the local interest in having localized interests decided at home; (3) the familiarity of the forum with the law that will govern the case; and (4) the
avoidance of unnecessary problems of conflict of laws [or in] the application of foreign law."Id. (citations omitted). If the moving party is unable to show that the transferee venue is clearly more convenient, than the plaintiff's choice of forum will be respected. Id.
Here, the private interest factors are neutral as to whether the Western District of Texas or the Southern District of Texas is a more convenient forum. Potential witnesses—among which are Defendants' website developer and third-party marketing companies—likely reside in both forums. Likewise, sources of proof likely are located in both forums. Moreover, the public interest factors weigh against transfer. Chief among these factors is the local interest in having localized interests decided at home. Here, Plaintiff alleges marketing violations aimed at consumers in the Western District. Because Defendants have not clearly demonstrated that transfer is for the convenience of the parties and witnesses and in the interest of justice, the Court denies Defendants' motion to transfer. 28 U.S.C. § 1404(a); Volkswagen, 545 F.3d at 315; see Dupre v. Spanier Marine Corp., 810 F. Supp. 823, 826 (S.D. Tex. 1993) (refusing to transfer venue where the primary result of transfer would be to inconvenience plaintiff rather than defendant).
III. Motion to Dismiss for Failure to State a Claim
Next, Defendants asserts that Plaintiff has failed to "allege a single fact that would support Defendant Webb's individual liability." (Docket No. 7, at 3). Defendants point to a section in Plaintiff's complaint titled "piercing the corporate veil," where Plaintiff asserts that the corporate form of VSC should be disregarded and Webb held liable because:
a. The form was used to perpetuate a fraud on the public; b. VCS was organized and operated as a mere tool or business conduit of Webb; c. VCS was used to evade an existing legal obligation not to (1) infringe[] upon other[']s marks and (2) unfairly compete; d. VCS was used to circumvent a statute, i.e., 15 U.S.C. § 1125(a); e. VCS was used to protect against discovery of a wrong, i.e., trademark
infringement or unfair competition; and f. VCS was inadequately capitalized with an effort to create an injustice when sued for trademark infringement and/or unfair competition.(Docket No. 1 ¶ 65). Defendants assert that these statements are conclusory.
"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim for relief must contain (1) "a short and plain statement of the grounds for the court's jurisdiction"; (2) "a short and plain statement of the claim showing that the pleader is entitled to the relief; and (3) "a demand for the relief sought." FED. R. CIV. P. 8(a). In considering a motion to dismiss under Rule 12(b)(6), all factual allegations from the complaint should be taken as true, and the facts are to be construed favorably to the plaintiff. Fernandez-Montez v. Allied Pilots Assoc., 987 F.2d 278, 284 (5th Cir. 1993). To survive a 12(b)(6) motion, a complaint must contain "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555 (2007).
Here, Defendants correctly note that, standing alone, Plaintiff's assertions for piercing VCS's corporate form and holding Webb liable are conclusory; however, Defendants ignore the entire preceding allegations in the complaint, which Plaintiff specifically incorporates by reference into the section titled "piercing the corporate veil." (Docket No. 1 ¶ 63). These allegations include that Webb is the president of VSC (id. ¶ 33); that Webb directed the expansion of VCS into San Antonio (id. ¶ 39); that Webb is the current owner of, and exclusively controls the actions of, VCS (id. ¶ 40); and that Webb is personally responsible for the decision to use the web address www.sanantoniodeafinterpreterservices.com and inserting the words "Deaf Interpreter Services" repeatedly throughout the website (id.) Accordingly, Plaintiff has stated claims against Webb under a veil piercing theory.
IV. Motion to Dismiss for Failure to Properly Plead Pursuant to Rule 9
Defendants assert that Plaintiff pleaded fraud, but did not plead with particularity as required by Federal Rule of Civil Procedure 9(b).
Federal Rule of Civil Procedure 9(b) requires that, "[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." Rule 9(b) thus imposes a particularity requirement in pleading fraud and pleading mistake, and not in pleading other causes of action. Leatherman v. Tarrant County Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 168 (1993).
Here, Plaintiff has not asserted a cause of action for fraud. Instead, the issue of fraud arises only as one basis for disregarding VCS's corporate form. (Docket No. 1 ¶ 65 (asserting that VCS's corporate form "was used as a sham to perpetuate a fraud on the public"). Rule 8(a)'s more lenient pleading standard thus applies to the non-fraud bases for piercing the corporate veil. See Spring St. Partners-IV, L.P. v. Lam, 730 F.3d 427, 443-44 (5th Cir. 2013) (discussing the standard for piercing the corporate veil in Texas); Wright v. Weaver, 4:07-CV-369, 2009 WL 1457174, at *2 (E.D. Tex. May 22, 2009) (applying the Rule 8(a) pleading standard to a plaintiff's allegations regarding his veil piercing theory). To the extent that Rule 9(b) applies to Plaintiff's fraud-based veil piercing theory, Plaintiff has met its burden of pleading with peculiarity. To meet the Rule 9(b) standard, "[a]t a minimum . . . a plaintiff [must] set forth the who, what, when, where, and how of the alleged fraud." United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 903 (5th Cir. 1997). Here, Plaintiff has alleged that Webb committed fraud; it described Webb's relationship to VCS; it pinpointed Webb's alleged wrongful actions and misrepresentations, undertaken individually and through VCS; it identified the timeframe the alleged fraud was committed; it identified the location of the fraud as centered on San Antonio; and it described how Webb used VCS as a vehicle for her personal actions. Therefore, to the extent Plaintiff has alleged fraud as a basis for piercing VCS's corporate veil, Plaintiff has stated its allegations with sufficient peculiarity.
V. Motion for a More Definite Statement
Finally, Defendants seek a more definite statement regarding Plaintiff's cause of action for unfair competition under the common law of the State of Texas. Defendants request that Plaintiff direct Defendants to the source of the cause of action and a list of elements. Defendants also seek more definite allegations regarding Plaintiff's veil piercing theory.
Federal Rule of Civil Procedure 12(e) allows a party to "move for a more definite statement of a pleading to which a responsive pleading is allowed but which is so vague or ambiguous that the party cannot reasonably prepare a response." Here, Defendants' motion for a more definitive statement is moot since Defendants have already filed an answer. (Docket No. 7). Furthermore, Plaintiff need only state a short and plain statement of its claim for unfair competition under Texas common law, which it has done. See FED. R. CIV. P. 8(a) (listing the general federal pleading standard); Taylor Pub. Co. v. Jostens, Inc., 216 F.3d 465, 486 (5th Cir. 2000) ("Unfair competition under Texas law is the umbrella for all statutory and nonstatutory causes of action arising out of business conduct which is contrary to honest practice in industrial or commercial matters."). Finally, the Court has already considered and rejected Defendants' challenges to the sufficiently of Plaintiff's pleading of its theory for piercing VCS's corporate veil. Therefore, Defendants' motion for a more definite statement is denied.
VI. Conclusion
For the foregoing reasons, the Court finds no merit to Defendants' motions to dismiss for improper venue, failure to state a claim, and failure to properly plead and Defendants' motion for a more definite statement (docket no. 7). Accordingly, the Court DENIES Defendants' motions.
It is so ORDERED.
SIGNED this 28 day of January, 2014.
/s/_________
ORLANDO L. GARCIA
UNITED STATES DISTRICT JUDGE