Emeryallen, LLC v. MaxLite Inc.

EmeryAllen, LLC, Plaintiff, v. MaxLite Inc., Defendant.

Case No. 2:20-cv-4332-RMG

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF SOUTH CAROLINA CHARLESTON DIVISION

May 25, 2021

ORDER AND OPINION

Before the Court is Defendant's motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(2), 12(b)(3), and 12(b)(6) (Dkt. No. 20). For the reasons set forth below, the Court grants in part the motion and dismisses this action for improper venue.

Background

Plaintiff EmeryAllen, LLC alleges that it is organized and exists under the laws of South Carolina and has a principal place of business in Mount Pleasant, South Carolina. (Dkt. No. 17 ¶ 2). Plaintiff alleges Defendant MaxLite Inc. is organized and exists under the laws of the State of New York and has a principal place of business in West Caldwell, New Jersey. (Id.¶ 3).¹ Sometime in 2016, Defendant allegedly requested a meeting with Plaintiff to determine if Plaintiff could supply its "JA8-compliant miniature lamp" to Defendant under a private label supply arrangement. (Id. ¶ 30). The miniature lamp is a commercial embodiment of the inventions claimed under Plaintiff's Asserted Patents. (Id. ¶ 21). The parties entered into a Non-Disclosure Agreement ("NDA"). (Id. ¶ 31). Though the Amended Complaint is not clear on this point, it appearsundisputed from the parties' respective briefing that these discussions did not result in Plaintiff selling Defendant any product and were generally conducted, over the course of five months, via email. See (Dkt. No. 20-1 at 5-7); (Dkt. No. 20-4). Plaintiff alleges that "Defendant [then] developed its Accused Product based on confidential information provided by [Plaintiff] under the NDA, including information regarding the size and shape of the EmeryAllen product." (Dkt. No. 17 ¶ 33).

Plaintiff brings five causes of action: (1) Patent Infringement; (2) Breach of Contract; (3) Breach of Contract Accompanied by a Fraudulent Act; (4) Violation of South Carolina Unfair Trade Practices Act; and (5) Unjust Enrichment.

Defendant moves to dismiss the Amended Complaint for improper venue, lack of personal jurisdiction, and failure to state a claim pursuant to Federal Rules of Civil Procedure 12(b)(2), 12(b)(3) and 12(b)(6). (Dkt. No. 20). If the Court finds venue improper in South Carolina, Defendant requests that the action be dismissed or transferred to the District of New Jersey. Plaintiff opposes. (Dkt. No. 23). Defendant filed a reply. (Dkt. No. 26).

Defendant's motion is fully briefed and ripe for disposition.

Legal Standard

Under Rule 12(b)(3) of the Federal Rules of Civil Procedure, parties are permitted to file motions to dismiss for improper venue. Fed. R. Civ. P. 12(b)(3); Pee Dee Health Care, P.A. v. Sanford, 509 F.3d 204, 209 (4th Cir. 2007). To grant a motion under Rule 12(b)(3), the court must find that venue is improper. See Fed. R. Civ. P. 12(b)(3). "'When a defendant objects to venue under Rule 12(b)(3), the plaintiff bears the burden of establishing that venue is proper.'" Ameristone Tile, LLC v. Ceramic Consulting Corp., Inc., 966 F.Supp.2d 604, 616 (D.S.C. 2013) (brackets omitted) (quoting Butler v. Ford Motor Co., 724 F.Supp.2d 575, 586 (D.S.C. 2010)).However, the plaintiff is required "to make only a prima facie showing of proper venue in order to survive a motion to dismiss." Aggarao v. MOL Ship Mgmt. Co., Ltd., 675 F.3d 355, 366 (4th Cir. 2012) (citing Mitrano v. Hawes, 377 F.3d 402, 405 (4th Cir. 2004)). "In assessing whether there has been a prima facie venue showing, [the court] view[s] the facts in the light most favorable to the plaintiff." Id. (citing Global Seafood Inc. v. Bantry Bay Mussels Ltd., 659 F.3d 221, 224 (2d Cir. 2011)). Moreover, "[o]n a motion to dismiss under Rule 12(b)(3), the court is permitted to consider evidence outside the pleadings." Id. at 365-66 (citing Sucampo Pharm., Inc. v. Astellas Pharma, Inc., 471 F.3d 544, 550 (4th Cir. 2006)).

A case filed in an improper venue must be dismissed, or, if it is in the interest of justice, transferred to a district in which it could have been brought. 28 U.S.C. § 1406(a). Under the general venue statute, a civil action may be brought, and venue is proper, in:

(1) a judicial district in which any defendant resides, if all defendants are residents of the State in which the district is located;

(2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated; or

(3) if there is no district in which an action may otherwise be brought as provided in this section, any judicial district in which any defendant is subject to the court's personal jurisdiction with respect to such action

28 U.S.C. § 1391(b).

Rule 12(b)(6) of the Federal Rules of Civil Procedure permits the dismissal of an action if the complaint fails "to state a claim upon which relief can be granted." A motion to dismiss tests the legal sufficiency of the complaint and "does not resolve contests surrounding the facts, the merits of the claim, or the applicability of defenses. Our inquiry then is limited to whether the allegations constitute a short and plain statement of the claim showing that the pleader is entitledto relief." Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992) (internal quotation marks and citation omitted). On a Rule 12(b)(6) motion, the Court is obligated to "assume the truth of all facts alleged in the complaint and the existence of any fact that can be proved, consistent with the complaint's allegations." E. Shore Mkts., Inc. v. J.D. Assocs. Ltd. P'ship, 213 F.3d 175, 180 (4th Cir. 2000). Although the Court must accept the facts in a light most favorable to the plaintiff, the Court "need not accept as true unwarranted inferences, unreasonable conclusions, or arguments." Id. Generally, to survive a motion to dismiss the complaint must provide enough facts to "'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)); see also Fed. R. Civ. P. 8(a)(2). Although the requirement of plausibility does not impose a probability requirement at this stage, the complaint must show more than a "sheer possibility that a defendant has acted unlawfully." Iqbal, 556 U.S. at 678. A complaint has "facial plausibility" where the pleading "allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged."

Discussion

a) Propriety of Venue — Plaintiff's Patent Claim

The proper venue for this action is "the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business." 28 U.S.C. § 1400(b). It is undisputed that Defendant does not reside in South Carolina. Viewing all facts in a light most favorable to Plaintiff, Defendant appears to have sold allegedly infringing products in South Carolina. See (Dkt. No. 23-5) (receipt of an order for the Accused Product shipped from LED Lowcountry, LLC, Bluffton, SC to Plaintiff); (Dkt. No. 23-8) (shipping invoice of Defendant to LED Lowcountry, LLC, Bluffton, SC). South Carolina, therefore, is a proper venue for this action if and only if Defendant has "a regular and establishedplace of business" in South Carolina. For purposes of patent litigation venue, a corporation has a "regular and established place of business" where it "does its business ... through a permanent and continuous presence." In re Cordis Corp., 769 F.2d 733, 737 (Fed. Cir. 1985).

Plaintiff argues Defendant has a "regular and established place of business" in South Carolina because (1) Defendant has two employees located in South Carolina, one of whose sales territory includes South Carolina, (2) South Carolina is a sales territory for Defendant, (3) Defendant admits that roughly "2% of its revenues" come from sales originating in South Carolina, (4) Defendant, as a wholesaler distributor, sells products to "various businesses, distributors and merchants" in South Carolina, and (5) Defendant signed an NDA that is governed by South Carolina law. (Dkt. No. 23 at 3-6). Defendant responds with sworn statements that (1) it neither leases nor owns business premises of any type in South Carolina, (2) that it does not maintain a South Carolina telephone number or bank account, and (3) that while one employee works remotely for the company from his home in South Carolina, he does not make sales, maintain inventory, or interact with customers in South Carolina. (Dkt. No. 20-1 at 11-12).

Plaintiff fails to meet its burden to show venue for its patent claim is proper in South Carolina. The "identity of [Defendant's] South Carolina customers, and the volume of its sales to South Carolina customers, are not relevant to the § 1400(b) venue analysis." Hand Held Products, Inc. v. Code Corp., 265 F. Supp. 3d 640, 645 (D.S.C. 2017); see Flexible Techs., Inc. v. Sharkninja Operating LLC, No. 8:17-cv-00117-DCC, 2018 U.S. Dist. Lexis 35520, at *10 (D.S.C. Feb. 14, 2018) ("The mere fact that a domestic company 'does business' in a particular state is not enough to satisfy the 'regular and established place of business' requirement under the venue statute."), report and recommendation adopted, 2018 U.S. Dist. Lexis 35040, (D.S.C. Mar. 5, 2018) (transferring case); Mastantuono v. Jacobsen Mfg. Co., 184 F. Supp. 178, 180 (S.D.N.Y. 1960);American Cyanamid Co. v. Nopco Chemical Co., 388 F.2d 818 (4th Cir. 1968). The presence of third parties distributing Defendant's products also is irrelevant. Code Corp., 265 F.3d at 645. The most relevant allegation to support proper venue is that Defendant has one employee who resides in South Carolina. In Cordis, the defendant had two sales representatives resident in Minnesota, who continuously maintained inventory in Minnesota, and utilized a Minnesota secretarial service to provide them with office...