Savvy Rest, Inc. v. Sleeping Organic, LLC

SAVVY REST, INC., Plaintiff, v. SLEEPING ORGANIC, LLC, Defendant.

Civil Action No. 3:18CV00030

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF VIRGINIA CHARLOTTESVILLE DIVISION

March 29, 2019

MEMORANDUM OPINION

By: Hon. Glen E. Conrad Senior United States District Judge

Savvy Rest, Inc. ("Savvy Rest") filed this action against Sleeping Organic, LLC ("Sleeping Organic"), asserting claims of trademark infringement, unfair competition, and false advertising under the Lanham Act, and related claims of trademark infringement and unfair competition under Virginia law. Sleeping Organic has moved to dismiss the case for lack of personal jurisdiction and improper venue or, in the alternative, to transfer the case to the District of South Carolina. The motion has been fully briefed and is ripe for review.¹ For the reasons set forth below, the defendant's motion will be denied.

Background

Savvy Rest is a Virginia corporation based in Charlottesville, Virginia. Compl. ¶ 1, Dkt. No. 1. The company has been selling organic mattresses in Virginia for more than a decade. Id. ¶ 8. Savvy Rest maintains retail locations in Charlottesville and Vienna, Virginia; Rockville, Maryland; and Berkley, California. Id. ¶ 9. Plaintiff also sells and distributes mattresses through independent dealers across the country. Id. ¶ 10. Savvy Rest's mattresses have been certified to meet the requirements of the Global Organic Textile Standard ("GOTS"), which has beenendorsed by the United States Department of Agriculture. Id. ¶¶ 14-15. Consequently, Savvy Rest's mattresses may be labeled or sold as organic in the United States. Id. ¶¶ 12-13.

In 2009, the plaintiff obtained a certificate of registration from the United States Patent and Trademark Office for the "SAVVY REST" mark. Id. ¶¶ 18-19. The mark covers "retail store and on-line retail store services featuring sleep products, namely, mattresses, spring mattresses, box springs, crib mattresses, adjustable beds, mattress pads, mattress foundations and pillows." Id. ¶ 18 (internal quotation marks omitted). Savvy Rest uses the mark "as its trade name/service mark and a trademark/brand for its mattresses." Id. ¶ 23.

Savvy Rest has been competing with defendant Sleeping Organic for more than 10 years. John Smith Dec. ¶ 16, Dkt. No. 10-2. Sleeping Organic is a limited liability company organized in South Carolina, which is owned and operated by Chris Mullins and Brandon Maxey. Id. ¶ 2; Mullins Aff. ¶ 3, Dkt. No. 9-1. Sleeping Organic's principal place of business is in Mount Pleasant, South Carolina, where the defendant operates its only brick-and-mortar retail location. Mullins Aff. ¶¶ 2, 4. Sleeping Organic also maintains an online retail store at www.sleepingorganic.com, through which customers can order mattresses and other bedding products. Compl. ¶ 24; see also Mullins Aff. ¶ 4 (acknowledging that Sleeping Organic sells mattresses "online through orders placed by customers on a website located at the URL www.sleepingorganic.com").

In the instant action, Savvy Rest claims that Sleeping Organic's website falsely advertises that the defendant's bedding products are "chemical free" and "organic." Compl. ¶¶ 27, 28, 30. Savvy Rest likewise alleges, on information and belief, that Sleeping Organic's mattresses are "not GOTS certified" and that the defendant's website nonetheless "display[s] the GOTS certification trademark prominently superimposed over [its] mattress offerings providing the impression that [an] advertised mattress is a GOTS certified mattress." Id. Savvy Rest allegesthat such advertising "is intended to deceive consumers into thinking that the mattress itself is certified organic [pursuant] to the GOTS . . . certification standards and that the entire mattress is completely free from chemicals." Id. ¶ 32. Savvy Rest further alleges that the false or misleading statements regarding the nature, characteristics, qualities, and accreditation of the defendant's mattresses are part of "an effort to divert business and sales away from plaintiff." Id. ¶ 37.

Savvy Rest also claims that Sleeping Organic has used the SAVVY REST mark in online advertising through Google AdWords in an effort to divert sales from the plaintiff. Id. ¶¶ 33-35, 40. In January of 2017, Savvy Rest contacted Sleeping Organic regarding its use of the SAVVY REST mark in online advertising. A representative of Sleeping Organic indicated that "the advertising would be changed" and "that this activity would not happen again." Id. ¶ 42. However, in March of 2018, Sleeping Organic "set into motion new and revised efforts to use Plaintiff's trademark in advertising," including by "using the mark SAVVY REST in one or multiple Google AdWords paid advertisement(s) and . . . in the title of [Sleeping Organic's] sponsored advertisement(s) on Google." Id. ¶ 45.

Savvy Rest filed the instant action against Sleeping Organic on April 13, 2018. Savvy Rest's original complaint contains the following claims: trademark infringement under the Lanham Act (Count I); unfair competition under the Lanham Act (Count II); false advertising in violation of the Lanham Act (Count III); and trademark infringement and unfair competition under Virginia law (Count IV).

On June 7, 2018, Sleeping Organic moved to dismiss the case for lack of personal jurisdiction and improper venue or, in the alternative, to transfer the case to the District of South Carolina. Sleeping Organic submitted an affidavit from Chris Mullins in support of the motion. According to the affidavit, Sleeping Organic does not operate any retail locations in Virginia orown or rent any property in Virginia. Mullins Aff. ¶ 5. Nor does the defendant have any employees in Virginia. Id. The affidavit also indicates that the defendant's advertising through Google AdWords included "no parameters . . . set to intentionally direct advertising to consumers in Virginia over any other consumers," and that the defendant "does no other type of advertising, such as printed ads in periodicals or newspapers, directed specifically at residents of the Commonwealth of Virginia." Id. ¶ 7, 9. The affidavit further alleges, based on "data collected by Google," that "Sleeping Organic did not sell any products to consumers in Virginia through the Google AdWord ad illustrated in [the complaint]." Id. ¶ 10.

Savvy Rest submitted a number of exhibits in response to the pending motion, including a printout from the defendant's website, which describes Sleeping Organic as "a direct-to-consumer online retailer with thousands of happy customers across the United States." Smith Decl. Ex. D; Dkt. No. 10-2. Savvy Rest also submitted exhibits indicating that Sleeping Organic has sold products to customers in Virginia.

On August 2, 2018, the court held a hearing on the defendant's motion via conference call. Following the hearing, the court took the motion under advisement and permitted the plaintiff to engage in limited jurisdictional discovery.

In response to requests for admission propounded by the plaintiff, Sleeping Organic admitted that it accepts orders for mattresses from Virginia residents, that it ships mattresses to Virginia residents after the orders are placed, and that such orders are made using the defendant's online webstore. Resp. to Req. for Admis., Dkt. No. 23-1. Sleeping Organic also admitted that it has sold more than 50 mattresses to Virginia residents through its online web store in the past five years and that its gross sales to Virginia residents have totaled in excess of $100,000. Id. Sleeping Organic objected to, and did not answer, over 20 additional requests for admission.

In response to interrogatories, Sleeping Organic indicated that its gross sales to Virginia residents have totaled more than $219,000.00 since 2012. Resp. to Interrog., Dkt. No. 23-1. A significant portion of the defendant's sales to Virginia customers have occurred in the past two years. Id. Between January 1, 2017 and September 4, 2018, Sleeping Organic sold 39 mattresses to customers in Virginia. Id.

Upon the completion of the limited jurisdictional discovery, the parties filed supplemental briefs on the outstanding issues. The matter is now ripe for review.

Discussion

Sleeping Organic has moved to dismiss the case for lack of personal jurisdiction and improper venue under Rule 12(b)(2) and (3) of the Federal Rules of Civil Procedure. In the alternative, Sleeping Organic has requested that the court transfer the case to the District of South Carolina, pursuant to 28 U.S.C. § 1404(a). The court will address each argument in turn.

I. Personal Jurisdiction

Rule 12(b)(2) of the Federal Rules of Civil Procedure authorizes dismissal for lack of personal jurisdiction. When a defendant moves for dismissal under this rule, "the plaintiff ultimately bears the burden of proving to the district court [] the existence of jurisdiction over the defendant by a preponderance of the evidence." New Wellington Fin. Corp. v. Flagship Resort Dev. Corp., 416 F.3d 290, 294 (4th Cir. 2005) (citing Combs v. Bakker, 886 F.2d 673, 676 (4th Cir. 1989)). "Yet when, as here, the district court decides a pretrial personal jurisdiction dismissal motion without an evidentiary hearing, the plaintiff need prove only a prima facie case of personal jurisdiction." Mylan Labs., Inc. v. Akzo, N.V., 2 F.3d 56, 60 (4th Cir. 1993); see also SEC v. Receiver for Rex Ventures Grp., LLC, 730 F. App'x 133, 137 (4th Cir. 2018) (holding that the prima facie standard applies when no evidentiary hearing is conducted and the parties are only permitted to engage in limited jurisdictional discovery) (citing Walk Haydel &Assocs. v. Coastal Power Prod. Co., 517 F.3d 235, 242 (5th Cir. 2008)). "In deciding whether the plaintiff has proved a prima facie case of personal jurisdiction, the district court must draw all reasonable inferences arising from the proof, and resolve all factual disputes, in the plaintiff's favor." Mylan Labs., Inc., 2 F.3d at 60.

A district court may...