Opinion
CIVIL ACTION NO. 3:03-CV-1798-G
November 24, 2003
MEMORANDUM ORDER
Before the court is the motion of the defendants Universal Communication Systems, Inc. ("Universal") and its wholly-owned subsidiary, Airwater Corp. ("Airwater") (together, "UCSI"), to dismiss, pursuant to FED. R. Civ. P. 12(b)(2), the complaint of the plaintiffs Electric Gas Technology, Inc. ("Electric Gas"), Atmospheric Water Technology, Inc. ("Atmospheric Water"), and Richard Ehrlich ("Ehrlich") (collectively, the "plaintiffs") for lack of personal jurisdiction. For the reasons set forth below, UCSI's motion to dismiss for lack of personal jurisdiction is granted.
The defendant J.J. Reidy, Inc. has not moved to dismiss this case for lack of personal jurisdiction.
I. BACKGROUND
This case arises out of an ongoing patent dispute between the plaintiffs and the defendants, amongst other parties. On March 17, 1981, Ehrlich, a scientific inventor whose principal residence is in Miami, Florida, patented a device that makes water out of the atmosphere. See Plaintiff's [sic] Original Complaint ("Complaint") ¶¶ 3, 6; Plaintiff [sic] Electric Gas Technology, Inc. and Atmospheric Water Technology, Inc. and Richard Ehrlich Response to Motion to Dismiss for Lack of Jurisdiction ("Response") at 2; see also United States Patent No. 4,255,937 (issued Mar. 17, 1981), attached to Complaint as Exhibit A. Ehrlich then sold the patented device, plus a subsequent patent enhancing that device, to Electric Gas and its subsidiary, Atmospheric Water — both Texas corporations with their principal places of business in Texas. Complaint ¶¶ 1, 2, 6, 18; Response at 2. The device is currently sold under the trademarked name "Watermaker." Complaint ¶ 6; Response at 3.
There are at least two other lawsuits related to this case. First, Electric Gas and Atmospheric Water filed a motion to intervene in Electric Gas Technology, et al. v. Worldwide Water, Inc. et al., No. 03-642PA (C.D. Cal. filed Jan. 28, 2003). See Complaint in Intervention for Damages and Injunctive Relief — Patent Infringement; and Fraud, attached to Plaintiff [sic] Electric Gas Technology, Inc. and Atmospheric Water, Inc. Appendix ("Appendix to Response") as Exhibit 4. In addition, Airwater and Universal filed suit against Electric Gas and Atmospheric Water only days after this suit was filed. See Complaint in AirWater Corporation and Universal Communications Systems, Inc. v. Electric Gas Technology, Inc. and Atmospheric Water Technology, Inc., No. 03-22250 (S.D. Fla. filed Aug. 20, 2003), attached to Appendix to Response as Exhibit 2.
The plaintiffs' claim that the defendant J.J. Reidy, Inc., a Massachusetts corporation, infringed their patent by copying the Watermaker technology and then selling the fraudulently obtained patent to Universal and its subsidiary, Airwater. See Response at 2, 3; Complaint ¶ 10. Universal is a Florida corporation with its principal place of business in Florida. See Airwater and Universal's Complaint in AirWater Corporation and Universal Communications Systems, Inc. v. Electric Gas Technology, Inc. and Atmospheric Water Technology, Inc., No. 03-22250, ¶ 2 (S.D. Fla. filed Aug. 20, 2003) ("S.D. Fla. Complaint"), attached to Appendix to Response as Exhibit 2; Complaint ¶ 3. Airwater is a Nevada corporation with its principal place of business in Florida. S.D. Fla. Complaint ¶ I.
The defendants do not contest the plaintiffs' assertion, see Complaint ¶ 3, that J.J. Reidy, Inc. is a Massachusetts corporation. Neither party suggests that J.J. Reidy, Inc.'s principal place of business is other than Massachusetts.
In their complaint, the plaintiffs assert that both Universal and Airwater are "Florida based corporation" [sic]. Complaint ¶ 3. However, Airwater, in its Southern District of Florida complaint, asserts that it is a Nevada corporation with its principal place of business in Florida. S.D. Fla. Complaint ¶ 1.
According to the plaintiffs, J.J. Reidy ("Reidy"), the owner of J.J. Reidy, Inc., studied the Ehrlich patents at Daveco, Inc. ("Daveco"), an authorized manufacturer of the Watermaker, in Garland, Texas in the late 1980s and early 1990s. Response at 2; Complaint ¶ 13. Reidy, according to the plaintiffs, obtained full disclosure of the patented Watermaker device from Daveco "under the pretext of being a purchaser." Response at 2; see also Complaint ¶¶ 13, 15. The plaintiffs also allege that, in a series of meetings in Florida, Reidy gained information concerning the Watermaker from Russell B. Adler and Melvin Adler — both of whom, in 1996, lost a patent dispute with Ehrlich regarding this device. Complaint ¶¶ 9, 14; Response 2, 3; see also Agreed Final Judgment Reverting Patent No. 4,255,937 to Plaintiff and Finding Assignments of U.S. Patent 4,255,937 to Defendant Null and Void, No. 96-07641 (Fla. Broward County Ct. [17th Cir.] Dec. 3, 1996), attached to Complaint as Exhibit D. Plaintiffs allege that after receiving full disclosure from Daveco, Russell and Melvin Adler, and even Ehrlich himself, Reidy filed an application and received a United States patent on April 21, 1992. See Response at 2; Complaint ¶ 15; see also United States Patent No. 5,106,512 (issued Apr. 20, 1992), attached to Complaint as Exhibit F. Reidy, according to the plaintiffs, "thereafter sold his fraudulently obtained patent plagiarized from Ehrlich's patent" to UCSI. Response at 3; Complaint ¶ 10.
On August 12, 2003, the plaintiffs brought the present patent infringement suit in this court, seeking both pecuniary and equitable relief against defendants Universal, Airwater, and J.J. Reidy, Inc. See generally Complaint. Only eight days after the plaintiffs filed this suit, on August 20, 2003, UCSI filed a patent infringement action against Electric Gas and Atmospheric Water in the United States District Court for the Southern District of Florida. See S.D. Florida Complaint at 1; Response at 6. On September 18, 2003, in the present action, UCSI filed a motion, pursuant to FED. R. CIV. P. 12(b)(2), to dismiss the case for lack of personal jurisdiction. See generally Defendants' Motion to Dismiss for Lack of Personal Jurisdiction and Memorandum in Support ("Motion"). The plaintiffs filed a response on October 10, 2003, asserting that each defendant — Universal, Airwater, and J.J. Reidy, Inc. — had subjected itself to the jurisdiction of this court; in the alternative, the plaintiffs argued, the court should transfer this case to the United States District for the Central District of California for consolidation with a pending, affiliated case. See Response at 1, 8, 14-16. See also Electic Gas and Airwater's Complaint in Intervention in Electric Gas Technology, et al. v. Worldwide Water, Inc. et al., No. 03-642PA (C.D. Cal. filed Jan. 28, 2003), attached to Appendix to Response as Exhibit 4. UCSI filed a reply on October 24, 2003, reasserting its argument that UCSI "simply ha[s] not engaged [in] substantive business . . . conduct in the State of Texas." Reply Memorandum of Defendants Universal Communication Systems, Inc., and Airwater Corp., in Support of Their Motion to Dismiss for Lack of Personal Jurisdiction ("Reply") at 2.
II. ANALYSIS A. The Factual Standard: A Prima Facie Case
When a nonresident defendant moves to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of establishing the district court's jurisdiction over the nonresident. Wilson v. Belin, 20 F.3d 644, 648 (5th Cir.), cert. denied, 513 U.S. 930 (1994); Gardemal v. Westin Hotel Company, 186 F.3d 588, 592 (5th Cir. 1999). If the district court chooses to decide the matter without an evidentiary hearing, the plaintiff may meet its burden by presenting a prima facie case for personal jurisdiction. Wilson, 20 F.3d at 648; Gardemal, 186 F.3d at 592.The court will take the allegations of the complaint as true, except where they are controverted by opposing affidavits, and all conflicts in the facts are resolved in favor of the plaintiff. Wilson, 20 F.3d at 648; Gardemal, 186 F.3d at 592. In making its determination, the court may consider affidavits, interrogatories, depositions, oral testimony, or any combination of recognized discovery methods. Allred v. Moore Peterson, 117 F.3d 278, 281(5th Cir. 1997), cert. denied, 522 U.S. 1048 (1998); Thompson v. Chrysler Motors Corporation, 755 F.2d 1162, 1165 (5th Cir. 1985).
B. The Legal Standard
A federal district court may exercise personal jurisdiction over a nonresident defendant if: (1) the long-arm statute of the forum state permits the exercise of personal jurisdiction over the defendant; and (2) the exercise of such jurisdiction by the forum state is consistent with due process under the United States Constitution. Revell v. Lidov, 317 F.3d 467, 469 (5th Cir. 2002); see also J.R. Stripling v. Jordan Production Company, LLC, 234 F.3d 863, 869 (5th Cir. 2000). A defendant is amenable to the personal jurisdiction of a federal court sitting in a federal question case to the same extent that it would be amenable to the jurisdiction of a state court in the same forum. Burstein v. State Bar of California, 693 F.2d 511, 514 (5th Cir. 1982) (holding that, under FED. R. Civ. P. 4(e), "a federal court, even in a federal question case, can use a state long-arm statute only to reach those parties whom a court of the state could also reach under it."). Applying state law, this court must first determine whether Texas, the forum state, could assert long-arm jurisdiction. Pedelahore v. Astropark, Inc., 745 F.2d 346, 347 (5th Cir. 1984). Because the Texas long-arm statute confers jurisdiction to the limits of the federal constitution, Access Telecom, Inc. v. MCI Telecommunications Corporation, 197 F.3d 694, 716 (5th Cir. 1999), cert. denied, 531 U.S. 917 (2000); Hall v. Helicopteros Nacionales de Colombia, S.A., 638 S.W.2d 870, 872 (Tex. 1982), rev'd on other grounds, 466 U.S. 408 (1984), the court need only concern itself with the federal due process inquiry. Latshaw v. Johnston, 167 F.3d 208, 211 (5th Cir. 1999); Ruston Gas Turbines, Inc. v. Donaldson Company, Inc., 9 F.3d 415, 418 (5th Cir. 1993); see also TEX. CIV. PRAC. REM. CODE ANN. § 17.041, et seq. (Vernon 1997) (Texas long-arm statute).
C. Due Process Requirements
Due process requires the satisfaction of two elements to exercise personal jurisdiction over a nonresident defendant: (1) the nonresident must have some minimum contact with the forum that results from an affirmative act on his part such that the nonresident defendant could anticipate being haled into the courts of the forum state; and (2) it must be fair or reasonable to require the nonresident to defend the suit in the forum state. Burger King Corporation v. Rudzewicz, 471 U.S. 462, 474-77 (1985). The Due Process Clause ensures that persons have a "fair warning that a particular activity may subject [them] to the jurisdiction of a foreign sovereign." Id. at 472 (quoting Shaffer v. Heitner, 433 U.S. 186, 218 (1977) (Stevens, J., concurring)).1. Minimum Contacts
To establish minimum contacts, a nonresident defendant must do some act by which he "purposefully avails [him]self of the privilege of conducting activities within the forum State, thus invoicing the benefits and protections of its laws." Hanson v. Denckla, 357 U.S. 235, 253 (1958) ((citing International Shoe Company v. Washington, 326 U.S. 310, 319 (1945)); see also Electrosource, Inc. v. Horizon Battery Technologies, Ltd., 176 F.3d 867, 871 (5th Cir. 1999). The unilateral activity of one asserting a relationship with the nonresident defendant does not satisfy this requirement. WorldWorld-Wide Volkswagen Corporation v. Woodson, 444 U.S. 286, 298 (1980) (quoting Hanson, 357 U.S. at 253). In determining whether the exercise of jurisdiction is appropriate, the Supreme Court has considered whether a defendant's contacts with the forum state make it reasonable to require the defendant to defend the particular suit in that forum. Shaffer, 433 U.S. at 203; Quill Corporation v. North Dakota, 504 U.S. 298, 307 (1992).
Minimum contacts can be sufficient to establish two types of in personam jurisdiction over a nonresident defendant: specific jurisdiction and general jurisdiction. Specific jurisdiction exists if the cause of action is related to, or arises out of, the nonresident defendant's contacts with the forum state and those contacts meet the due process standard. Stripling, 234 F.3d at 871 (quotations and citations omitted). "Specific jurisdiction over a nonresident corporation is appropriate when that corporation has purposefully directed its activities at the forum state and the 'litigation results from alleged injuries that "arise out of or relate to" those activities.'" Alpine View Company Limited v. Atlas Copco AB, 205 F.3d 208, 215 (5th Cir. 2000) (quoting Burger King, 471 U.S. at 472; Helicopteros, 466 U.S. at 414). General jurisdiction, on the other hand, may be found when the claim is unrelated to the nonresident's contacts with the forum, but where those contacts are "continuous and systematic." Helicopteros Nacionales de Columbia, SA. v. Hall, 466 U.S. 408, 415-16 (1984); Alpine View, 205 F.3d at 215.
Under either a specific or general jurisdiction analysis, "the constitutional touchstone remains whether the defendant purposefully established 'minimum contacts' in the forum [s]tate." Burger King, 471 U.S. at 474 ((quoting International Shoe, 326 U.S. at 316). The "purposeful availment" requirement of the minimum contacts inquiry "ensures that a defendant will not be haled into a jurisdiction solely as a result of 'random,' 'fortuitous,' or 'attenuated' contacts . . . or of the 'unilateral activity of another party or a third person.'" Id. at 475 (citations omitted). A plaintiff must establish a substantial connection between the nonresident defendant and the forum state. Jones v. Petty-Ray Geophysical, Geosource, Inc., 954 F.2d 1061, 1068 n. 9 (5th Cir.), cert. denied, 506 U.S. 867 (1992). "[W]hether the minimum contacts are sufficient to justify subjection of the non-resident to suit in the forum is determined not on a mechanical and quantitative test, but rather under the particular facts upon the quality and nature of the activity with relation to the forum state." Mississippi Interstate Express, Inc. v. Transpo, Inc., 681 F.2d 1003, 1006 (5th Cir. 1982) (emphasis added); see also Coats v. Penrod Drilling Corporation, 5 F.3d 877, 884 (5th Cir. 1993), cert. denied, 510 U.S. 1195 (1994).
a. Specific Jurisdiction
In the case sub judice, the plaintiffs argue that UCSI has sufficient minimum contacts with Texas for this court to exercise personal jurisdiction over UCSI. Response at 12, 13. According to the plaintiffs' "information and belief," "the defendant companies and their president and chief operating officer, Michael Zwebner, has [sic] made material contacts in Texas." Id. at 13. Specifically, the plaintiffs allege that in personam jurisdiction is proper because Zwebner, in July of 1998, "came to Dallas" to perform "due diligence for a proposed acquisition of Aristar Technologies, Inc." ("Aristar") — a company that is, for all that appears in the record, unrelated to this litigation. Id.; see also Affidavit of S. Mort Zimmerman ("Zimmerman Affidavit") at 2, attached to Appendix to Response as Exhibit 6. One business trip to Texas by a senior corporate officer, according to the plaintiffs, is enough to demonstrate that UCSI sought "to purposefully avail itself of the privilege of conducting activities in within [sic] Texas" and to "invok[e] the benefits and protections if [sic] its laws." Response at 13.
UCSI, for its part, argues that it lacks sufficient minimum contacts with Texas to be subject to personal jurisdiction in this court. See Motion ¶ 1; Reply at 1; see also Affidavit of Michael J. Zwebner in Support of Defendants' Motion to Dismiss ("Zwebner Affidavit") at 2, attached to Motion as Exhibit 1. According to UCSI, all of the alleged wrongdoing by UCSI contained in the complaint took place in Massachusetts or Florida, not Texas. Motion ¶ 12. In his Affidavit, Zwebner attested that neither Universal nor Airwater has meaningful contact with the State of Texas because: (1) all UCSI officers and employees reside in Florida or states other than Texas; (2) UCSI does not own or lease any property in Texas; (3) UCSI does not have offices, employees, agents, or bank accounts in Texas; (4) UCSI does not maintain telephone or facsimile listings in Texas; (5) UCSI does not send salespersons into Texas; (6) UCSI does not pay taxes in Texas; (7) UCSI does not recruit employees in Texas; and (8) UCSI does not generate a substantial percentage of its national sales from Texas revenue. Zwebner Affidavit at 2; see also Motion ¶ 4.
The allegations in the plaintiffs' complaint and response reflect that UCSI made only a single contact with Texas: Zwebner, in 1998, performed due diligence on Aristar Technologies, Inc., a company in Garland, Texas. See Response at 13; Zimmerman Affidavit at 2. While "[a] single contact with the forum state may be sufficient to support personal jurisdiction," the cause of action must "arise[ ] out of that specific act." System Pipe Supply, Inc. v. M/V Viktor Kurnatovskiy, 242 F.3d 322, 324 (5th Cir. 2001) (emphasis in original) ("As a practical matter, however, a single act will rarely suffice to meet the minimum contacts standard."). In this case, the plaintiffs make no attempt to link Zwebner or Aristar's contacts with Texas and the instant litigation. This is a link that specific jurisdiction requires. See Shaffer, 433 U.S. at 204; Guidry v. United States Tobacco Company, Inc., 188 F.3d 619, 625 (5th Cir. 1999).
Instead, the plaintiffs' seek an "evidentiary hearing" to establish jurisdictional facts because "the extent of [Universal and Airwater] to [sic] purposefully availing themselves to the jurisdiction of Texas . . . is only known by [them]." Response at 13.
Therefore, even when all of the facts asserted by the plaintiffs are taken as true, there is no evidence that UCSI has purposefully availed itself of the privilege of conducting business within Texas. See Burger King, 471 U.S. at 475. Unproffered "information" and unsubstantiated "belief" that UCSI has made "material contacts in Texas," see Response at 13, is clearly insufficient to warrant this court's exercise of in personam jurisdiction over UCSI. The plaintiffs have failed to proffer any affidavits, interrogatories, depositions, oral testimony, or other combinations of recognized discovery methods upon which this court may rely to resolve the issue of personal jurisdiction in their favor. See Allred, 117 F.3d at 281.
Given these facts concerning the quality and nature of UCSI's activity (or lack thereof) in Texas, the plaintiffs have not demonstrated that UCSI purposefully directed its activities toward Texas, that it purposefully availed itself of the benefits and protections of Texas law, or that it could reasonably foresee being haled into court in Texas.
b. General Jurisdiction
Because the plaintiffs are asserting that the claims in this case arise out of UCSI's contacts with Texas, and because the plaintiffs have not alleged that UCSI had continuous and systematic contacts with Texas outside of these claims, the court will not address the question of general jurisdiction. See Helicopteros, 466 U.S. at 415-16. See also Response at 11 ("[T]he Court need not address the question of general jurisdiction.").
2. Fair Play and Substantial Justice
The due process inquiry limits the court's power to exercise personal jurisdiction over a nonresident if the exercise of jurisdiction under the circumstances would offend "traditional notions of fair play and substantial justice." International Shoe, 326 U.S. at 316 (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)). Because the plaintiffs have not shown that UCSI purposefully established the necessary minimum contacts in Texas, the court need not consider whether assertion of jurisdiction over the defendants would comport with the principles of fair play and substantial justice. See Burger King, 471 U.S. at 476; Wilson, 20 F.3d at 650 n. 7.
III. CONCLUSION
In deciding whether a nonresident corporation should be required to defend itself in a suit in Texas arising out of contacts claimed between the nonresident and Texas, "'each case must be decided on its own facts.'" Hydrokinetics, Inc. v. Alaska Mechanical, Inc., 700 F.2d 1026, 1028 (5th Cir. 1983) (citation omitted), cert. denied, 466 U.S. 962 (1984). Based on the facts currently before the court, an exercise of jurisdiction over Universal Communications Systems, Inc. and Airwater Corporation would be inconsistent with the requirements of due process. Accordingly, Universal and Airwater's motion to dismiss for lack of personal jurisdiction is GRANTED, and the plaintiffs' claims against Universal and Airwater are DISMISSED without prejudice to their being litigated in an appropriate forum which has personal jurisdiction over them.
In light of this ruling, UCSI's FED. R. CIV. P. 12(b)(6) motion to dismiss for failure to state a claim, as well as the plaintiffs' alternative request that the court transfer venue, are DENIED as moot.