Hurford Glob., LLC v. ROM Techs., Inc.

HURFORD GLOBAL, LLC, Plaintiff, v. ROM TECHNOLOGIES, INC., PETER ARN,and SANFORD A. GOMBERG, Defendants.

Case No. 20-cv-484-JPG

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF ILLINOIS

November 3, 2020

MEMORANDUM AND ORDER

This matter comes before the Court on the defendants' motion to dismiss this case for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2) or, in the alternative, to transfer this case to the United States District Court for the Central District of California pursuant to 28 U.S.C. § 1404(a) (Doc. 42). Plaintiff Hurford Global, LLC has responded to the motion (Doc. 47)¹, and the defendants have replied to that response (Doc. 50). Hurford Global asks the Court to strike the defendants' reply (Doc. 52), and the defendants have responded to that motion (Doc. 54).

As a preliminary matter, the Court will deny Hurford Global's motion to strike the defendants' reply brief (Doc. 52). Hurford Global argues that the reply fails to state exceptional circumstances justifying a reply as required by Local Rule 7.1(c). The defendants maintain that exceptional circumstances exist and that their reply simply responded to Hurford Global's arguments in its response. The Court has reviewed the defendants' reply brief and finds that is an acceptable reply to Hurford Global's response and raises no new arguments for the first time,which would be ignored by the Court even if they had. See Wright v. United States, 139 F.3d 551, 553 (7th Cir. 1998). Additionally, the Court notes that the reply brief was immaterial to its ultimate decision in this case as set forth below.

I. Background

This case centers on an agreement to exclusively license certain patents to defendant ROM Technologies, Inc. (or its predecessors ROM3 California LLC and ROM3 Rehab LLC (collectively, "ROM")). Defendants Sanford A. Gomberg and Peter Arn were members of the ROM3 LLCs and are shareholders and/or officers of ROM Technologies, Inc. The patents involve a rehabilitative device invention designed to improve the range of motion for people with knee or hip injuries or who have had surgery. Essentially, Hurford Global owns the patents that were exclusively license to ROM in the Exclusive Licensing Agreement ("ELA"). In exchange for the exclusive license, ROM agreed to develop, market, and sell the products developed from the patents and to pay royalties to the patent owner. The details of the circumstances surrounding the agreement will be set forth in more detail below. The parties later modified the ELA with a memorandum of understanding ("MOU") that purported to substantially changed some of the terms.

Hurford Global now accuses ROM of not performing its end of the ELA in good faith and, instead, developing a competing rehabilitation device and giving that device a name deceptively similar to the product it developed using the licensed patents. Hurford Global also accuses ROM of failing to make the payments required by the MOU, and then wrongfully terminating the modified ELA.

Hurford Global has sued ROM, Gomberg, and Arn in an eleven-count First Amended Complaint asserting the following claims:

Count I: Under the Declaratory Judgment Act, 28 U.S.C. § 2202, for a declaration that the ELA is not terminated;

Count II: Breach of contract;

Count III: Fraud;

Count IV: Breach of fiduciary duty;

Count V: Violation of the Illinois Uniform Deceptive Trade Practices Act, 815 ILCS § 510/1 et seq.

Count VI: Violation of the Illinois Consumer Fraud and Deceptive Trade Practices Act ("ICFA"), 815 ILCS § 501/1, et seq., by unfair business practices;

Count VII: Violation of ICFA by deceptive acts;

Count VIII: Violation of § 32 the Lanham Act, 15 U.S.C. § 1114, by trademark infringement;

Count IX: Federal common law trademark infringement;

Count X: Violation of § 43 of the Lanham Act, 15 U.S.C. § 1125, by false designation of origin; and

Count XI Negligent misrepresentation.

The defendants ask the Court to dismiss this case on the grounds that the defendants do not have sufficient contacts with the state of Illinois to support personal jurisdiction. Alternatively, the defendants ask the Court to transfer this case to the Central District of California, which it argues is required by the forum selection clause in the ELA that specifies any litigation will be conducted in Los Angeles, California.

Hurford Global, on the other hand, points to business the defendants transacted in Illinois, torts they committed in Illinois, and communications they directed to Illinois that it claims bring the defendants within the specific personal jurisdiction of this Court. It further argues the forum selection clause is unenforceable because it has no logical connection to the dispute before the Court and, in any case, presents issues beyond the scope of the clause.

The Court first addresses the question of transfer of venue because resolution of that issue will resolve the personal jurisdiction issue as well.

II. Analysis

A. Transfer Venue

The ELA contains a provision regarding the choice of law and the appropriate forum forlitigation:

This Agreement will be construed, interpreted. and applied in accordance with the laws of the State of California, excluding any choice-of-law rules that would direct the application of the laws of another jurisdiction, except that the scope and validity of any patent or patent application under Patent Rights will be determined by the applicable law of the country of such patent or patent application. Any legal action brought by one Party against the other Party relating to this Agreement will be conducted in Los Angeles, California. The prevailing Party in any such legal action under this Agreement will be entitled to recover its reasonable attorneys' fees in addition to its costs and necessary disbursements.

ELA § 27.1 (emphasis added) (Doc. 37-1 at 20).

The defendants argue that the forum selection clause is mandatory and that this dispute falls within its scope. It therefore asks the Court to transfer this case to the United States District Court for the Central District of California pursuant to 28 U.S.C. § 1404(a) so the case may be heard in Los Angeles, as provided in the forum selection clause.

Hurford Global, on the other hand, contends that the forum selection clause is unenforceable. It argues that under California law, the governing law specified in the ELA, a forum selection clause is only enforceable if the chosen forum has a logical connection with the disputes in the case, which Los Angeles does not. It also contends that the dispute in this case is outside the scope of the clause anyway.

1. Law Applicable to the Transfer Analysis

The Court first turns to the threshold question of what law applies to the question of transferring venue. This case is before the Court based on Hurford Global's assertion of federal question jurisdiction under 28 U.S.C. § 1331 and federal diversity jurisdiction under 28 U.S.C. § 1332(a). Pl.'s Compl. ¶ 1. The law is clear that, in such a case, 28 U.S.C. § 1404² controls arequest to transfer venue based on a forum selection clause notwithstanding any state law. Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29-30 (1988); accord Atl. Marine Constr. Co. v. U.S. Dist. Court for W. Dist. of Texas, 571 U.S. 49, 58 (2013). The Court may, of course, consider state law preferences in weighing the interests Congress has directed the Court to consider in making a transfer decision, but it is within the federal procedural framework of § 1404 that this must occur. Id. at 30; IFC Credit Corp. v. Aliano Bros. Gen. Contractors, 437 F.3d 606, 608 (7th Cir. 2006) (district court should "consider the policy behind the state's judgment of validity or invalidity because that policy would bear on whether transferring the case would be 'in the interest of justice,'" but should make an independent decision whether to transfer venue); see, e.g., Wins Equip., LLC v. Rayco Mfg., Inc., 668 F. Supp. 2d 1148, 1152 (W.D. Wis. 2009); Travel Supreme, Inc. v. NVER Enterprises, Inc., No. 3:07CV194PPS, 2007 WL 2962641, at *7 (N.D. Ind. Oct. 5, 2007); Gleich v. Tastefully Simple, Inc., No. 05 C 1415, 2005 WL 3299187, at *5 (N.D. Ill. Dec. 2, 2005).

The cases Hurford Global cites do not convince the Court otherwise. For example, it points to Jackson v. Payday Fin., LLC, 764 F.3d 765 (7th Cir. 2014), a case in which the Court of Appeals for the Seventh Circuit evaluated an arbitration clause—a specie of forum selection clause—and held that state law should be applied to determine the clause's enforceability. Id. at 774-75. That holding was expressly limited, however, to situations where there was no controlling federal statute. Id. at 774. In fact, for this caveat, Jackson cites Wong v. PartyGaming Ltd., 589 F.3d 821, 826 (6th Cir. 2009), which noted that the Supreme Court hasprovided guidance about the law governing enforceability of forum selection clauses in two situations: admiralty cases and transfer under 28 U.S.C. § 1404(a). The Wong court pointed to Stewart for the proposition "that federal law governs the inquiry when a federal court, sitting in diversity, evaluates a forum selection clause in the context of a 28 U.S.C. § 1404(a) motion to transfer venue or in the context of any federal statute." Wong, 589 F.3d at 826 (citing Stewart, 487 U.S. at 29-30)). Thus, state law may be appropriate to determine the enforceability of an arbitration clause like in Jackson, but where the question is transfer under § 1404(a), that federal statute governs, Stewart, 487 U.S. at 29-30, and state law is not relevant other than as a factor to weigh in the balance.³

2. Transfer Rules

Now that it is settled that federal law governs, the Court turns to that law. Motions for transfer of venue for convenience where venue is otherwise proper are governed by the standards set forth in 28 U.S.C. § 1404. See Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 27 (1988); Van Dusen v. Barrack, 376 U.S. 612, 634 (1964). Under § 1404(a...