Scrum All., Inc. v. Scrum, Inc.

SCRUM ALLIANCE, INC., Plaintiff, v. SCRUM, INC., JEFF SUTHERLAND, and JJ SUTHERLAND, Defendants.

Civil Action No. 4:20-CV-227

United States District Court EASTERN DISTRICT OF TEXAS SHERMAN DIVISION

May 7, 2021

Judge Mazzant

MEMORANDUM OPINION & ORDER

Pending before the Court is Defendant Scrum, Inc.'s Motion to Provide Clarification (Dkt. #174). Having considered the relevant pleadings, the Court clarifies its previous orders below.

BACKGROUND

A more thorough factual background can be found in the Court's July 16, 2020 Memorandum Opinion and Order. See Scrum All., Inc. v. Scrum, Inc., No. 4:20-CV-00227, 2020 WL 4016110, at *1-2 (E.D. Tex. July 16, 2020). Briefly, this case arises out of Scrum Alliance, Inc.'s ("SAI") allegations that Scrum, Inc. used SAI's trademarks without authorization to create a competing line of certification courses that teaches the Scrum framework. Scrum, Inc. denies these allegations.

The immediate motion concerns two orders issued by the Court: Dkt. #153 and Dkt. #154. In Dkt. #153, the Court found that the breach-of-contract claim SAI alleges against the Sutherlands is subject to a forum-selection clause, proceeded to sever that claim from the immediate action, and transfer the breach-of-contract claim to the United States District Court for the District of Colorado in accordance with the applicable forum-selection clause. Scrum All., Inc. v. Scrum, Inc., No. 4:20-CV-227, 2021 WL 798310, at *3-5 (E.D. Tex. Feb. 26, 2021). In Dkt. #154, the Court held that Scrum, Inc.'s argument that the Scheduling Order should be amended since a dispositive motion had been pending was without merit, and then proceeded to make minor adjustments to the Scheduling Order moving forward (Dkt. #154 at pp. 1-2). Scrum, Inc. seeks clarification as to the meaning and effect of these two orders (Dkt. #174 at pp. 1-3).

On March 12, 2021, Scrum, Inc. filed its Motion to Provide Clarification (Dkt. #174), currently before the Court. On March 19, 2021, SAI filed its response (Dkt. #181). On March 26, 2021, Scrum, Inc. filed its reply (Dkt. #189). And on March 31, 2021, SAI filed its sur-reply (Dkt. #207).

ANALYSIS

In the Motion, Scrum, Inc. requests that the Court clarify the orders found at Dkt. #153 and Dkt. #154. Because the Court has since permitted Scrum, Inc. to file an answer to SAI's operative complaint (see Dkts. #219-20), the Court only addresses Dkt. #153.

Scrum, Inc. seeks further information as to the status of two arguments it has previously advanced: (1) whether venue is proper in the Eastern District of Texas under Federal Rule of Civil Procedure 12(b)(3), and (2) whether the case should be transferred elsewhere under 28 U.S.C. § 1404(a). This second position has two strands, one regarding a forum-selection clause and the other concerning the standard § 1404(a) analysis. The Court addresses each matter in turn.

I. Rule 12(b)(3)

a. Legal Standard

The federal statute generally governing venue provides that "[a] civil action may be brought in (1) a judicial district in which any defendant resides, if all defendants are residents of the State in which the district is located [or] (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." 28 U.S.C. § 1391(b)(1), (2). Only "if there is no district in which an action may otherwise be brought as provided in" § 1391 may a plaintiff pursue claims in a judicial district "in which any defendant is subject to the court's personal jurisdiction with respect to such action." Id. § 1391(b)(3).

A party may move to dismiss an action based on improper venue. FED. R. CIV. P. 12(b)(3). "Once challenged, the burden of sustaining venue lies with the plaintiff." Gutierrez v. Drill Cuttings Disposal Co., L.L.C., 319 F. Supp. 3d 856, 861 (W.D. Tex. 2018); see Umphress v. Hall, 479 F. Supp. 3d 344, 348 (N.D. Tex. 2020). "On a Rule 12(b)(3) motion to dismiss for improper venue, the [C]ourt must accept as true all allegations in the complaint and resolve all conflicts in favor of the plaintiff." Braspetro Oil Servs. Co. v. Modec (USA), Inc., 240 F. App'x 612, 615 (5th Cir. 2007) (per curiam). "In determining whether venue is proper, 'the Court may look beyond the complaint to evidence submitted by the parties.'" Jerger v. D&M Leasing Dall., No. 4:20-CV-00309, 2020 WL 4335733, at *2 (E.D. Tex. July 28, 2020) (quoting Ambraco, Inc. v. Bossclip B.V., 570 F.3d 233, 238 (5th Cir. 2009)).

"The district court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought." 28 U.S.C. § 1406(a). Before dismissing a case for lack of proper venue, a district court should consider whether the "interest of justice" standard warrants transfer. See Maley v. Design Benefits Plan, Inc., 125 F. Supp. 2d 836, 838-39 (E.D. Tex. 2000).

If a mistake is made because of uncertainty as to proper venue, Congress, in enacting § 1406(a), recognized that the "interest of justice" may require a complaint to be transferred rather than dismissed as to protect plaintiffs from "time consuming and justice defeating technicalities." Goldlawr, Inc. v. Heiman, 369 U.S. 463, 467 (1962) (quoting Internatio-Rotterdam, Inc. v. Thomsen, 218 F.2d 514, 517 (4th Cir. 1955)). The decision to dismiss or transfer lies within the sound discretion of the district court. Dubin v. United States, 380 F.2d 813, 815 (5th Cir. 1967), superseded by statute on other grounds as stated in Franco v. Mabe Trucking Co., 991 F.3d 616 (5th Cir. 2021).

b. Analysis

Scrum, Inc. offers two arguments explaining why this district is an improper venue for this action: (1) SAI has offered only conclusory allegations as to acts giving rise to the immediate claims, and (2) the substantial part of the events giving rise to SAI's claims did not occur in the Eastern District of Texas (see Dkt. #107 at pp. 19-21). Neither argument is persuasive.

First, without a doubt, SAI has alleged sufficient information that supports the viability of the claims brought. See Charles v. SBC Disability Income Plan, No. 6:05-CV-006-C, 2005 WL 8159403, at *2 (N.D. Tex. Sept. 19, 2005) (explaining that "once a defendant challenges venue, conclusory allegations, speculation, and unsubstantiated assertions cannot be used to establish proper venue"). In its Second Amended Complaint, SAI details specific, concrete instances in which Scrum, Inc., using the marks at issue in this litigation, offered certification courses in the Eastern District of Texas, both physically and virtually (Dkt. #87 at pp. 7-8, 10-11). Contrary to Scrum, Inc.'s assertion, these allegations are more than adequate to demonstrate that the Eastern District of Texas is a proper venue for the immediate action.

Scrum, Inc.'s other venue argument is misguided as well. "Courts uniformly agree the proper venue for a trademark infringement case lies where the infringing activity, or the 'passing off' occurred." Hopdoddy Burger Bar Inc. v. Blacketer, No. 1-15-CV-233 RP, 2015 WL 4624644, at *2 (W.D. Tex. July 31, 2015); accord Thirsty Mule Winery, L.L.C. v. Wild Wild W., L.L.C., No. 6:19-CV-00041-ADA, 2019 WL 10302269, at *2 (W.D. Tex. May 13, 2019). And "[i]n trademark and unfair competition cases, 'the wrong takes place . . . where the deceived customer buys the defendant's product in the belief that he is buying the plaintiff's.'" Bacchanal Hosp., LLC v. Cured, LLC, No. 16-CV-207 (RCL), 2017 WL 1314194, at *4 (W.D. Tex. Feb. 24, 2017) (quoting Vanity Fair Mills, Inc. v. T. Eaton Co., 234 F.2d 633, 639 (2d Cir. 1956)); see Tex. Marine & Brokerage, Inc. v. Euton, 120 F. Supp. 2d 611, 612-13 (E.D. Tex. 2000) ("[T]he venue question in Lanham Act cases . . . is 'where were consumers confused by the defendant's acts?'" (quoting Woodke v. Dahm, 873 F. Supp. 179, 198 (N.D. Iowa), aff'd, 70 F.3d 983 (8th Cir. 1995))). The allegations in SAI's operative complaint are more than sufficient to demonstrate that Scrum, Inc. allegedly "passed off" services within the Eastern District of Texas while utilizing the marks at issue in this litigation (see Dkt. #87 at pp. 7-8, 10-11).

Yet Scrum, Inc. insists that even if these allegations can support SAI's venue argument, the allegations are still not enough to satisfy § 1391(b)(2)'s requirement because the allegations do not show that "a substantial part of the events giving rise to this complaint occurred in this District" (Dkt. #107 at p. 19). The gist of the argument appears to be that, because Scrum, Inc. allegedly offered and taught a limited number of courses using the marks in question within the Eastern District of Texas as compared to other places where it offered and taught the same courses, a substantial part of the events or omissions giving rise to the claims SAI pleads did not occur within the Eastern District of Texas.

This position is ill-conceived. For venue purposes, "substantiality" is determined "by assessing the overall nature of the plaintiff's claims and the nature of the specific events or omissions in the forum, and not by simply adding up the number of contacts"—in other words, substantiality is more qualitative in nature than quantitative. Daniel v. Am. Bd. of Emergency Med., 428 F.3d 408, 432-33 (2d Cir. 2005). The venue in which a plaintiff files suit "does not have to be the place where the most relevant events took place," so long as a "substantial" part of the events or omissions giving rise to the claims transpired there. McClintock v. Sch. Bd. E. Feliciana Parish, 299 F. App'x 363, 365 (5th Cir. 2008); see Zurich Am. Ins. Co. v. Tejas Concrete & Materials Inc., 982 F. Supp. 2d 714, 722 (W.D. Tex. 2013) ("Courts have recognized that 'venue may be properly laid in more than one district,' and the 'substantial part of the events or omissions test does not...