Opinion
Civil Action No. 3:00-C V-2221-X
January 11, 2001
ORDER ON MOTION TO DISMISS OR TRANSFER VENUE
Before the Court are Defendants' Motion to Dismiss for Improper Venue, or in the Alternative, to Transfer Venue to the Southern District of Texas; Plaintiff's Response; and Defendants' Reply. For the reasons stated below, this Court is of the opinion that the motion to dismiss should be DENIED, and that the alternative motion for a transfer of venue to the Southern District of Texas should be GRANTED.
FACTUAL BACKGROUND
Beginning in April, 1999, The U-Zone, Inc. ("U-Zone"), an internet startup company targeted towards college students, retained Plaintiff Richards Group's marketing services for its website. Plaintiff collaborated with U-Zone to design necessary graphics and interfaces for the website, with work totalling over $700,000, which U-Zone ultimately could not pay. In November, 1999, as it faced increasing financial difficulties, U-Zone entered discussions with Defendant Global Netstrategy and its subsidiary, Study Free, resulting in a merger between U-Zone and Study Free. After the merger, the new company set about, with the assistance of Defendant Digital Webs, LLC (a subsidiary of Defendant Global NetStrategy), to redesign its website, incorporating some graphics and interfaces from the original U-Zone website. Plaintiff claims that it holds the copyright to the graphics and interfaces, and thus, this new use constituted an infringement.
ANALYSIS
Defendants, who have filed this 12(b)(3) motion to dismiss, bear the burden of showing that venue in this district is improper. Sanders v. Seal Fleet, Inc., 998 F. Supp. 729 (E.D.Tex 1998). Should Defendants successfully meet this burden, this Court must then decide whether an outright dismissal or a transfer to a proper venue is more appropriate. 28 U.S.C. § 1406 (a)(1993).
Plaintiff presents the following theories as to why venue in this district is proper: 1) Defendants may be `found' within this district; 28 U.S.C. § 1400(a)(2000); 2) Defendants would be subject to personal jurisdiction in this district, if it were its own state; 28 U.S.C. § 1391(c)(1993); 3) a substantial portion of the events and omissions giving rise to this claim arose in this district; 28 U.S.C. § 1391(b)(2)(2000); and, finally 4) the copyright infringement was intentionally targeted at this district and caused the harms which Plaintiff suffered within this district.
Plaintiff, in its response to the Motion to Dismiss, gives a chronology of its working relationship with U-Zone to support its claim that most of the events giving rise to its claim of copyright infringement occurred in the Northern District of Texas. Plaintiff offers, as an example, the following events: 1) the signing of the letter agreement; 2) the design of the graphics and the interface; 3) the transmission of the graphics files; 4) letters warning of copyright infringement; 5) local access to the allegedly infringing website.
Defendants reply, however, that 1) U-Zone is not a party to this lawsuit; 2) U-Zone rightfully owns the allegedly copyrighted materials; and 3) Plaintiff's business dealings with U-Zone ended before Defendants began their relationship with U-Zone. These arguments all underscore the argument that venue might be proper if U-Zone were a party, but since it has no role in this lawsuit, this district is an improper venue.
It is a well established principle that proper venue over a subsidiary does not necessarily entail proper venue over its corporate parent. See Nagele v. Holy Redeemer Visiting Nurse Agency, Inc., 813 F. Supp. 1143 (E.D. Pa. 1993) (holding. in a suit against a subsidiary, that venue in state where parent was based was improper); Stanley Works v. Globemaster, Inc., 400 F. Supp. 1325 (D.Mass. 1975) ("It is, of course, well settled that venue over a local subsidiary will not automatically provide proper venue over a foreign parent."); Willis v. Caterpillar Inc., 199 F.3d 902 (7th Cir. 1999) (holding that new evidence that forklift was manufactured by an Ohio subsidiary did not, in itself, show that venue against parent in its own principal place of business was improper). Only in instances where the corporate parent exercises considerable control over the subsidiary will federal courts impute that subsidiary's venue to the parent. See Reynolds Metals Co. v. Columbia Gas System, Inc., 669 F. Supp. 744 (E.D.Va. 1987) (looking, in the antitrust context, to the degree of control of the parent over the subsidiary to determine if venue is proper).
Here, Plaintiff places almost all of its venue eggs in the U-Zone basket. Unfortunately, most, if not all, ofthe events in the Northern District of Texas pertain only to U-Zone, a nonparty. Plaintiff alleges no facts which tend to show that Defendants exercised substantial, or even nominal control over U-Zone, and this Court is not free to make such an assumption in deciding this motion. The existing Defendants appear only to have interacted with the copyrighted materials tangentially in their dealings with U-Zone; they deny that the own, operate, or profit from the site. Facts that pertain only to U-Zone are immaterial for determining the propriety of venue over Defendants Global NetStrategy and Digital Webs.
The remaining venue arguments rely upon 28 U.S.C. § 1391(c), which provides that:
[i]n a State which has more than one judicial district, and in which a defendant that is a corporation is subject to personal jurisdiction at the time an action is commenced, such corporation shall be 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. . .
Based upon this statutory provision, Plaintiff offers three variations on how Defendants are subject to personal jurisdiction within this district.
Plaintiff first argues that Defendants have sufficient minimal contacts with this district such that an exercise of personal jurisdiction would not violate due process. Plaintiff offers the following evidence of minimal contacts: I) the letters sent by Plaintiff to Defendants regarding potential copyright issues; 2) the accessibility of the U-Zone website from this district; 3) the availability of campus papers which advertise the U-Zone website; and 4) website links to student notes and student organizations from this district. These facts would be dispositive of the personal jurisdiction issue, but for the fact that only the first one has anything to do with Defendants. As previously noted, the U-Zone website is under the sole and exclusive control of U-Zone, and Plaintiffs have not suggested otherwise. The acts and omissions of the non-party U-Zone are irrelevant to the venue analysis. This Court will look instead to Defendants' jurisdiction-specific acts, if any.
Plaintiff claims that minimum contacts are established by the fact that it mailed Defendants, from this district, several letters warning of potential copyright infringement. The mere receipt of these letters is too insubstantial to create the requisite minimum contacts. See Great Western United Corp. v. Kidwell, 577 F.2d 1256, 1268 (5th Cir. 1978) (reversed on other grounds) ("[U]nilateral activity by the Plaintiff cannot produce the minimum contacts necessary to satisfy due process"). This Court does not doubt that personal jurisdiction exists over the U-Zone; in its absence, however, Plaintiff offers no other facts from which this Court could find minimum contacts by the Defendants with this district, such that exercising personal jurisdiction over them would comport with due process. The same failure of proof applies to Plaintiffs claim under 28 U.S.C. § 1400(a). Because federal courts have held that a defendant is `found' wherever he or she may be properly served, the absence of personal jurisdiction over the Defendants dooms this basis for finding venue.
As a final foundation for finding venue in this district, Plaintiff argues, under the effects doctrine, that Defendants are subject to specific jurisdiction for copyright infringement because the infringing act were intentional, directed at this forum `state,' and caused harm, which the Defendants knew to be likely, in this forum `state.' See Nissan Motor Co., Ld. v. Nissan Computer Corp., 89 F. Supp.2d 1154, (C.D.Cal. 2000). Yet again, however, this argument glosses over a crucial fact: U-Zone, the subsidiary, by merger, of Defendant Global NetStrategy and sister company of Defendant Digital Webs, had sole ownership and exclusive control of the allegedly infringing website. Absent more concrete factual claims of guidance and direction by any Defendant, this Court sees no basis for imputing the alleged copyright infringement from the subsidiary to either the parent or the sister corporation, or for finding a knowing, intentional act that would warrant specific jurisdiction. Alleged copyright infringement by a nonparty, however intentional, comes nowhere near the threshold for specific jurisdiction based on an intentional tort. Plaintiff simply cannot anchor personal jurisdiction over a related corporate Defendant without showing that either one had control sufficient to `intend' the alleged infringement.
Defendant also challenges Plaintiff's characterization that its acts were aimed to cause loss, stating that it attempted, repeatedly, to ascertain what, if anything, was infringed upon. Defendant claims that Plaintiff simply stonewalled when asked for a more specific statement of what material was under copyright.
The above discussion plainly reveals that this district is an improper venue for this copyright infringement action. The one party that could render this venue proper has simply been omitted. While it is within this Court's discretion to dismiss the matter on 12(b)(3) grounds, § 1406(a) also permits a transfer to a district where the action could have been brought. In this case, the Southern District of Texas is that venue. All the Defendants reside there, and, even assuming, arguendo, that Plaintiff has stated a claim of copyright infringement, a majority of the relevant actors and witnesses specific to any infringement by these Defendants are located there. Thus, under the discretion granted by § 1406(a), this Court finds that the motion to dismiss should be, and hereby is, DENIED, while the motion to transfer to the Southern District of Texas should be, and hereby is, GRANTED.
IT IS SO ORDERED.