Shippitsa Ltd. v. Slack

          MEMORANDUM OPINION AND ORDER

          SIDNEY A. FITZWATER SENIOR JUDGE.

         In this action for trademark infringement and related claims, defendant Wolfson Berg Limited (“Wolfson Berg”) moves to dismiss the claims asserted against it by plaintiff Shippitsa Limited (“Shippitsa”) for lack of personal jurisdiction, improper venue, and failure to state a claim on which relief can be granted. For the reasons that follow, the court concludes that it can exercise personal jurisdiction over Wolfson Berg, that venue is proper in this district, and that Shippitsa has failed to state a claim as to some, but not all, of its causes of action. Accordingly, the court grants in part and denies in part Wolfson Berg's motion, and grants Shippitsa leave to replead.

         I

         According to Shippitsa's complaint, it manufactures a dietary supplement called Phen375, which it sells through its website at the domain name phen375.com. Shippitsa is organized under the laws of the United Kingdom (“UK”), is registered in Scotland, and maintains its headquarters in Scotland. It owns the U.S. registered trademark for the standard characters “PHEN375.” Compl. ¶ 10.

         Shippitsa advertises Phen375 online via an “affiliate marketing network system.” Id. ¶ 16. An affiliate marketing network is comprised of three types of entities: advertisers, who sell products or services; affiliates, who operate websites that attract visitors with their content (such as product reviews); and an affiliate marketing network company, which acts as an intermediary between the advertisers and the affiliates. Affiliates, through the websites they operate, provide information about the advertisers' products. They also provide “affiliate links” that take users to the advertisers' own websites. P. Resp. App. 047-48. When a user clicks on an affiliate link and then buys a product from the advertiser, the affiliate receives a commission on the sale. The affiliate marketing network company tracks visitors and coordinates commission payments among companies within the network.

         In 2011 Shippitsa contracted with now-dismissed defendant MoreNiche Limited (“MoreNiche”) to join MoreNiche's affiliate marketing network as an advertiser. Shippitsa advertised its Phen375 product through MoreNiche's network until March 2018, when the contract between the two companies expired. According to Shippitsa, after the contract expired, certain affiliate websites continued to display information about Phen375.^[1] Instead of linking to Shippitsa's phen375.com website, however, they instead linked visitors to a webpage-mixi.mn-operated by MoreNiche. The mixi.mn webpage consists only of the following visible lines of text: “Phen375 is no longer available via this link, we will be redirecting you to an alternative in 5 seconds. If you do not want us to do that click here.” Compl. ¶ 25. If a visitor waits five seconds, mixi.mn automatically “redirect[s]” the visitor, id. ¶ 26-that is, mixi.mn causes the visitor's web browser to connect automatically to another website, see P. Resp. App. 003.

         At the time Shippitsa filed the instant lawsuit, mixi.mn was sending users to either of two websites operated by Wolfson Berg: phenq.com and ph375.com.^[2] Wolfson Berg is a company organized under the laws of Cyprus and is headquartered there.^[3] Through Wolfson Berg's websites, it sells dietary pills called PhenQ and Ph.375.^[4] Like Phen375, PhenQ and Ph.375 are marketed as weight loss supplements. Shippitsa identifies a number of similarities between Wolfson Berg's websites and Shippitsa's own phen375.com website: “the home pages on the ph375.com and phenq.com websites both include a picture of a bottle of the product, blue sans serif text on a white background, and clickable ‘Ingredients,' ‘How it Works,' ‘Testimonials,' ‘FAQ,' and ‘ORDER NOW' links[.]” Compl. ¶ 22. Shippitsa alleges that Wolfson Berg uses “a color scheme, package, trade dress, and promotional and advertising materials” in connection with PhenQ and Ph.375 that are confusingly similar to those that Shippitsa uses for Phen375. Id.

         Shippitsa sued Wolfson Berg, MoreNiche, and MoreNiche's founder Andrew Jon Slack (“Slack”), ^[5] asserting federal-law claims for trademark infringement, false designation of origin, trademark dilution, cybersquatting, and violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”). Shippitsa also brings Texas-law claims for tortious interference with a prospective contractual relationship, trademark dilution, and unfair competition. Wolfson Berg, MoreNiche, and Slack each filed a motion to dismiss on the grounds of lack of personal jurisdiction, improper venue, and failure to state a claim on which relief can be granted. MoreNiche and Slack also filed a joint motion for Fed.R.Civ.P. 11 sanctions against Shippitsa. The court granted MoreNiche and Slack's motions to dismiss for lack of personal jurisdiction and denied their motion for Rule 11 sanctions. See Shippitsa Ltd. v. Slack (Shippitsa I), 2019 WL 277613, at *10 (N.D. Tex. Jan. 22, 2019) (Fitzwater, J.). But the court deferred deciding Wolfson Berg's motion to dismiss, and instead ordered limited discovery and supplemental briefing on the question of personal jurisdiction.

         Jurisdictional discovery is now complete, and the parties have submitted their supplemental briefing. Wolfson Berg's motion to dismiss is ripe for decision.

         II

         The court first considers Wolfson Berg's motion to dismiss under Rule 12(b)(2) for lack of personal jurisdiction.

         A

         “When a nonresident defendant presents a motion to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of establishing the district court's jurisdiction over the nonresident.” Stuart v. Spademan, 772 F.2d 1185, 1192 (5th Cir. 1985) (citing Thompson v. Chrysler Motors Corp., 755 F.2d 1162, 1165 (5th Cir. 1985); D.J. Invs., Inc. v. Metzeler Motorcycle Tire Agent Gregg, Inc., 754 F.2d 542, 545 (5th Cir. 1985)). The determination whether a federal district court has in personam jurisdiction over a nonresident defendant is bipartite. The court first decides whether the long-arm statute of the state in which it sits confers personal jurisdiction over the defendant. If it does, the court then resolves whether the exercise of jurisdiction is consistent with due process under the United States Constitution. See Mink v. AAAA Dev. LLC, 190 F.3d 333, 335 (5th Cir. 1999). Because the Texas long-arm statute extends to the limits of due process, the court need only consider whether exercising jurisdiction over the defendant would be consistent with the Due Process Clause of the Fourteenth Amendment. See id.; Alpine View Co. v. Atlas Copco AB, 205 F.3d 208, 214 (5th Cir. 2000).

The Due Process Clause of the Fourteenth Amendment permits the exercise of personal jurisdiction over a nonresident defendant when (1) that defendant has purposefully availed itself of the benefits and protections of the forum state by establishing “minimum contacts” with the forum state; and (2) the exercise of jurisdiction over that defendant does not offend “traditional notions of fair play and substantial justice.” To comport with due process, the defendant's conduct in connection with the forum state must be such that it “should reasonably anticipate being haled into court” in the forum state.

Latshaw v. Johnston, 167 F.3d 208, 211 (5th Cir. 1999) (footnotes omitted) (first quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945); then quoting World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980)). To determine whether exercising jurisdiction would satisfy traditional notions of fair play and substantial justice, the court examines (1) the defendant's burden, (2) the forum state's interests, (3) the plaintiff's interests in convenient and effective relief, (4) the judicial system's interest in efficient resolution of controversies, and (5) the states' shared interest in fundamental social policies. Ruston Gas Turbines, Inc. v. Donaldson Co., 9 F.3d 415, 421 (5th Cir. 1993).

         A defendant's contacts with the forum may support either specific or general jurisdiction over the defendant. Mink, 190 F.3d at 336. “For the court properly to assert specific personal jurisdiction, the defendant must have ‘purposefully directed' his activities at residents of the forum, and the litigation must result from alleged injuries that ‘arise out of or relate to' the defendant's activities directed at the forum.” Archer & White, Inc. v. Tishler, 2003 WL 22456806, at *2 (N.D. Tex. Oct. 23, 2003) (Fitzwater, J.) (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985)). “General jurisdiction exists when a defendant's contacts with the forum state are unrelated to the cause of action but are ‘continuous and systematic.'” Id. (quoting Mink, 190 F.3d at 336). “[A] court may assert jurisdiction over a foreign corporation ‘to hear any and all claims against [it]' only when the corporation's affiliations with the State in which suit is brought are so constant and pervasive ‘as to render [it] essentially at home in the forum State.'” Daimler AG v. Bauman, 571 U.S. 117, 122 (2014) (first brackets added) (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011)). Shippitsa argues that this court has specific personal jurisdiction over Wolfson Berg.

         “The district court usually resolves the jurisdictional issue without conducting a hearing.” Ham v. La Cienega Music Co., 4 F.3d 413, 415 (5th Cir. 1993) (footnote omitted).

When a court rules on a motion to dismiss for lack of personal jurisdiction without holding an evidentiary hearing, it must accept as true the uncontroverted allegations in the complaint and resolve in favor of the plaintiff any factual conflicts posed by the affidavits. Therefore, in a no-hearing situation, a plaintiff satisfies his burden by presenting a prima facie case for personal jurisdiction.

Latshaw, 167 F.3d at 211 (footnotes omitted). “This liberal standard, however, does not require the court to credit conclusory allegations, even if they remain uncontradicted.” Panda Brandywine Corp. v. Potomac Elec. Power Co., 2000 WL 35615925, at *2 (N.D. Tex. Sept. 15, 2000) (Fitzwater, J.) (citing Felch v. Transportes Lar-Mex SA DE CV, 92 F.3d 320, 326 n.16 (5th Cir. 1996)), aff'd, 253 F.3d 865, 869 (5th Cir. 2001) (per curiam) (affirming, inter alia, this conclusion). Nor is the court limited to considering the facts pleaded in the complaint. See Walk Haydel & Assocs., Inc. v. Coastal Power Prod. Co., 517 F.3d 235, 241 (5th Cir. 2008). Rather, “the district court may receive any combination of the recognized methods of discovery, including affidavits, interrogatories, and depositions to assist it in the jurisdictional analysis.” Tendeka, Inc. v. Glover, 2014 WL 978308, at *3 (S.D. Tex. Mar. 12, 2014) (Rosenthal, J.) (internal quotation marks omitted).

         B

         Shippitsa argues that Wolfson Berg has minimum contacts with this forum on two different grounds: that Wolfson Berg has sold its PhenQ and Ph.375 products to Texas residents, and that Wolfson Berg has operated interactive websites through which it sold these products to Texas residents. Because the latter ground is sufficient to support this court's exercise of personal jurisdiction, it will focus its analysis on that ground alone.

         1

         When specific jurisdiction is based on online interactions via an Internet website, the Fifth Circuit is guided by the sliding scale adopted in Zippo Manufacturing Co. v. Zippo Dot Com, Inc., 952 F.Supp. 1119, 1124 (W.D. Pa. 1997). See Am. Eyewear, Inc. v. Peeper's Sunglasses & Accessories, Inc., 106 F.Supp.2d 895, 900-01 & n.10 (N.D. Tex. 2000) (Fitzwater, J.) (citing Mink, 190 F.3d at 336) (interpreting Zippo). Zippo requires the court to assess the level of interactivity of the defendant's website. It prescribes different outcomes to the personal jurisdiction question depending on which of following three categories the website falls into: (1) where a website is nothing more than a passive advertisement, the court must decline to exercise personal jurisdiction; (2) where a website facilitates contractual relationships and the knowing and repeated transmission of computer files over the internet, personal jurisdiction is proper; and (3) where a website falls somewhere in between, “the exercise of jurisdiction is determined by the level of interactivity and commercial nature of the exchange of information that occurs on the [w]ebsite.” Mink, 190 F.3d at 336 (quoting Zippo, 952 F.Supp. at 1124). While interactivity is a significant factor in determining purposeful conduct when personal jurisdiction is based on Internet contacts, “internet-based jurisdictional claims must continue to be evaluated on a case-by-case basis, focusing on the nature and quality of online and offline contacts to demonstrate the requisite purposeful conduct that establishes personal jurisdiction.” Pervasive Software Inc. v. Lexware GmbH & Co. KG, 688 F.3d 214, 227 (5th Cir. 2012).

         2

         Phenq.com and ph375.com fall at least within the middle category of Zippo. Wolfson Berg admits that its websites permitted users to submit orders online, to chat with sales agents, and to track pending orders. This evidence is sufficient to “establish that the [w]ebsite[s] [did] more than passively exist for advertising purposes.” Autoflex Leasing-Dall. I, LLC v. Autoflex LLC, 2017 WL 713667, at *4 (N.D. Tex. Feb. 23, 2017) (Fitzwater, J.).

         Within the middle category of Zippo, Wolfson Berg's websites can support the exercise of personal jurisdiction because they were sufficiently interactive and facilitated the exchange of commercial information. Wolfson Berg's websites invited users to “ORDER NOW, ” and offered free shipping to anywhere in the world. Compl. ¶¶ 20-21. The websites also provided a “Chat” interface that allowed visitors to ask questions about Wolfson Berg's products. And visitors could track and follow up on orders that they had already placed. This court has exercised personal jurisdiction on the basis of websites with very similar features. See, e.g., Tempur-Pedic Int'l, Inc. v. Go Satellite Inc., 758 F.Supp.2d 366, 376 (N.D. Tex. 2010) (Fitzwater, C.J.) (exercising personal jurisdiction where defendant operated website through which “residents could ask questions via live chat, place orders, and continue communicating with the staff to follow up on shipping and payment”); Am. Eyewear, 106 F.Supp.2d at 898, 901-02 (concluding that New York-based website had sufficient contacts to support specific jurisdiction where website provided online order forms and ways to communicate with customer service). Wolfson Berg does not contest this conclusion.

         Of course, merely maintaining interactive websites does not, without more, establish that Wolfson Berg has the requisite minimum contacts with Texas. “Under Zippo personal jurisdiction is based on actual Internet sales to forum residents, not the mere possibility of sales.” Springboards to Educ., Inc. v. Families in Schools, 2017 WL 10434713, at *6 (N.D. Tex. Nov. 15, 2017) (Fitzwater, J.); see also Shippitsa I, 2019 WL 277613, at *5 (collecting cases). The evidence shows that Wolfson Berg, through its websites, sold its allegedly-infringing products to 559 consumers in Texas and 172 consumers in the Northern District of Texas between January 8, 2018 and April 24, 2018. Sales to Texas constituted 10% of Wolfson Berg's U.S. sales of PhenQ; 3% of its worldwide sales of PhenQ; 8.18% of its U.S. sales of Ph.375; and 4.73% of its worldwide sales of Ph.375. These sales are sufficient to create the requisite minimum contacts. See, e.g., Tempur-Pedic, 758 F.Supp.2d at 375 (exercising personal jurisdiction on basis of two admitted online sales to Texas residents); Am. Eyewear, 106 F.Supp.2d at 898, 901-02 (exercising personal jurisdiction over company on basis of online sales to Texas, which constituted 0.5% of defendant's total sales).

         Wolfson Berg could reasonably have anticipated being haled into court in Texas to answer for its online activities. Wolfson Berg deliberately offered its PhenQ and Ph.375 products for sale to consumers all over the world, including consumers in Texas. Its websites phenq.com and ph375.com included “English (US)” as a language option and provided a U.S. telephone number for visitors to call. Compl. ¶ 22. Thus Wolfson Berg clearly targeted the U.S. market, which included Texas. See Tempur-Pedic, 758 F.Supp.2d at 376 (“[Defendant] cannot open itself for business to every state in the United States and then feign surprise when it receives an order from a resident of one of the states.”). Wolfson Berg could have elected not to sell its products to Texas residents; instead, it sold to hundreds of Texas residents over the course of just a few months. See Id. (“[H]ad [defendant] wanted to exclude certain jurisdictions, it was able to refuse to deal with certain customers or to turn down any orders after checking customer addresses.”); Zippo, 952 F.Supp. at 1126-27 (“If [defendant] had not wanted to be amenable to jurisdiction in Pennsylvania, the solution would have been simple-it could have chosen not to sell its services to Pennsylvania residents.”). Wolfson Berg thus purposefully availed itself of the benefits of doing business in Texas, such that it should reasonably have anticipated being haled into court there. Cf. Luv N' Care, Ltd. v. Insta-Mix, Inc., 438 F.3d 465, 470 (5th Cir. 2006) (“[M]ere foreseeability or awareness [is] a constitutionally sufficient basis for personal jurisdiction if the defendant's product made its way into the forum state while still in the stream of commerce.” (second alteration in original) (quoting Ruston, 9 F.3d at 419)). On these facts, the court concludes that Shippitsa has made out a prima facie case that Wolfson Berg has minimum contacts with Texas.

         The court is not persuaded by Wolfson Berg's arguments to the contrary. Wolfson Berg cites four recent Supreme Court cases in support of its contention that this court lacks personal jurisdiction: Bristol-Myers Squibb Co. v. Superior Court, __U.S.__, 137 S.Ct. 1773 (2017); Walden v. Fiore, 571 U.S. 277 (2014); Daimler, 571 U.S. 117; and Goodyear, 564 U.S. 915. But these cases are inapposite. Daimler and Goodyear are both general jurisdiction cases, whereas Shippitsa argues in the present case that the court has specific jurisdiction over Wolfson Berg. See Daimler, 571 U.S. at 121; Goodyear, 564 U.S. at 918. Walden involved a defendant whose only connection to the forum state was his interaction in a different state with the plaintiffs, who were residents of the forum state. See Walden, 571 U.S. at 288-89. Shippitsa's theory of personal jurisdiction, in contrast, is based on Wolfson Berg's contacts with Texas, not on Wolfson Berg's contacts with Shippitsa-indeed, it appears to be undisputed that Shippitsa has no physical presence in Texas. Finally, Bristol-Meyers merely reiterated the requirement that specific jurisdiction be based on an “affiliation between the forum and the underlying controversy, principally, [an] activity or an occurrence that takes place in the forum State.” Bristol-Meyers, 137 S.Ct. at 1781 (alteration in original) (quoting Goodyear, 564 U.S. at 919). For the reasons discussed below, that requirement is satisfied here.

         Wolfson Berg contends that specific jurisdiction is lacking because Shippitsa's claims do not arise from Wolfson Berg's forum-related contacts. The principal case on which Wolfson Berg relies is Withdrawal-Ease.com v. Withdrawalaid.com, 2014 WL 12479407 (W.D. Tex. Dec. 18, 2014). In Withdrawal-Ease the plaintiff sued the defendant for allegedly using the plaintiff's intellectual property on the defendant's website. See Id. at *1. The defendant's only connection to the forum state was a number of online sales to forum residents. See Id. at *3. The court held that it lacked specific personal jurisdiction because the plaintiff's causes of action “have arisen out of or resulted from the content of Defendants' website, not from the Defendants' contacts with Texas.” Id. In contrast, Shippitsa's claims do arise from Wolfson Berg's forum-related contacts. The evidence and Shippitsa's allegations, viewed in the light most favorable to Shippitsa, show that hundreds of Texas residents accessed Wolfson Berg's allegedly-infringing websites, viewed allegedly-infringing content, and were thereby induced to submit orders for Wolfson Berg's allegedly-infringing products-orders that Wolfson Berg purposefully chose to fill. Cf. Cottman Transmission Sys., Inc. v. Martino, 36 F.3d 291, 294 (3d Cir. 1994) (“[A] cause of action for trademark infringement arises where the passing off occurs.” (quoting Tefal, S.A. v. Prods. Int'l Co., 529 F.2d 495, 496 n.1 (3d Cir. 1976))). Wolfson Berg could reasonably have foreseen being haled into a Texas court on this basis. There is thus a “constitutionally adequate nexus, ” Withdrawal-Ease, 2014 WL 12479407, at *4 (quoting ITL Int'l, Inc. v. Constenla, S.A., 669 F.3d 493, 500 (5th Cir. 2012)), between Shippitsa's claims and Wolfson Berg's forum-related contacts.

         Wolfson Berg also argues that the present case is distinguishable from other Zippo cases because Shippitsa-unlike the typical Zippo plaintiff-is not a resident of the forum state. But this is a distinction without a difference. The Supreme Court has never “required a plaintiff to have ‘minimum contacts' with the forum State before permitting that State to assert personal jurisdiction over a nonresident defendant.” Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 779 (1984) (emphasis added). The minimum contacts analysis instead focuses on “the relationship among the defendant, the forum, and the litigation.” Walden, 571 U.S. at 284 (emphasis added) (quoting Keeton, 465 U.S. at 775). So long as there is a constitutionally-sufficient relationship among these three factors, the plaintiff's state of residence is immaterial. See, e.g., Keeton, 465 U.S. at 772, 779-80. The court concludes, for the reasons discussed, that such a relationship exists in this case.

         C

         The court next determines whether exercising personal jurisdiction over Wolfson Berg would comport with traditional notions of fair play and substantial justice.

         Wolfson Berg must present a “compelling case” that jurisdiction is unreasonable and incompatible with “fair play and substantial justice.” Burger King, 471 U.S. at 477-78. “It is rare to say the assertion [of jurisdiction] is unfair after minimum contacts have been shown.” See Wien Air Alaska, Inc. v. Brandt, 195 F.3d 208, 215 (5th Cir. 1999) (alterations in original) (citing Akro Corp. v. Luker, 45 F.3d 1541, 1547 (Fed. Cir. 1995)). Wolfson Berg has not made the required compelling case.

         Wolfson Berg contends that it would suffer a substantial burden if forced to “defend itself in a forum almost 11, 000 kilometers from its home.” Wolfson Berg Supp. Resp. 15. The uncontroverted evidence shows that Wolfson Berg is a Cyprus company whose employees all reside in Cyprus, and that maintains all of its records in Cyprus. Wolfson Berg asserts that it would have to incur significant costs to arrange for witnesses to travel to Texas; that it structures its affairs in accordance with Cyprus law; and that it would have to undertake an additional, expensive legal analysis during discovery to ensure compliance with the European Union's stringent General Data Protection Regulation. Turning to the other Burger King factors, Wolfson Berg argues that Texas has little interest in a case in which no party is a Texas resident; that the plaintiff and the judicial system have no interest in the “efficient” resolution of this controversy in Texas given that no witnesses or evidence are located in Texas; and that adjudicating this dispute in a European forum would not undercut any fundamental social policies. See Burger King, 471 U.S. at 477-78.

         The court is sympathetic to the difficulties Wolfson Berg, a foreign entity, will face defending in this forum. It is unquestionable, however, that Texas has an interest in resolving the present controversy. “Texas has an interest in protecting its consumers from consumer confusion or deception, and plaintiff[] [is] suing based on harm to [its] goodwill and false advertising affecting the Texas market.” Tempur-Pedic, 758 F.Supp.2d at 377. The remaining Burger King factors-including the potential burden on Wolfson Berg-do not add up to a “compelling case, ” Burger King, 471 U.S. at 477, that the exercise of personal jurisdiction would be unfair. It is not constitutionally unreasonable to require a company to defend in a state where the company actively sells its products. See Luv N' Care, 438 F.3d at 474. The court therefore concludes that it can exercise personal jurisdiction over Wolfson Berg in this matter.

         III

         The court next considers Wolfson Berg's motion to dismiss for improper venue. Because Wolfson Berg has challenged venue, Shippitsa has the burden of sustaining it. See Davis v. Billick, 2002 WL 1398560, at *7 (N.D. Tex. June 26, 2002) (Fitzwater, J.). “In the absence of an evidentiary hearing on the matter, courts will allow a plaintiff to carry the burden by establishing facts, taken as true, that establish venue.” Laserdynamics Inc. v. Acer Am. Corp., 209 F.R.D. 388, 390 (S.D. Tex. 2002). The uncontroverted facts contained in the plaintiff's complaint are taken as true, and any factual conflicts demonstrated in the ...