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Cytosport, Inc., A California Corporation v. Cytogenix Sports Laboratories

December 21, 2010

CYTOSPORT, INC., A CALIFORNIA CORPORATION, PLAINTIFF,
v.
CYTOGENIX SPORTS LABORATORIES, SRL, A BARBADOS CORPORATION, DEFENDANT.



MEMORANDUM AND ORDER RE:

MOTIONS TO DISMISS AND TO AMEND

Plaintiff CytoSport, Inc. ("CytoSport"), brought this action against defendant Cytogenix Sports Laboratories, SRL ("Cytogenix Sports Laboratories"), alleging trademark infringement and other claims. Defendant now moves to dismiss for lack of personal jurisdiction and insufficient service of process. Plaintiff also moves for leave to amend its First Amended Complaint ("FAC").

I. Factual and Procedural Background Plaintiff is a California corporation headquartered in Benecia, California, and is in the business of manufacturing and marketing various dietary supplement products using a family of trademarks that employ the prefix "Cyto," including "CytoSport," "Cyto Gainer," and "CytoMax." (FAC ¶¶ 1, 8, 10-13.) Defendant is a "Barbados society."*fn1 (Id. ¶ 2.) Plaintiff alleges that defendant is marketing and promoting products called "Cytonox," "Cytocell," and "Cytogenix," which directly compete with plaintiff's "Cyto" products. (Id. ¶¶ 18-20, 24-26, 30-32.) Defendant admits that it is the "owner" of trademarks for Cytonox and Cytocell, which it licenses to Iovate Health Sciences International, Inc. ("Iovate International"), a Canadian corporation, but claims that it is only a "repository of trademark rights." (Skinner Decl. in Supp. of Def.'s Mot. to Dismiss ("Skinner Decl.") ¶¶ 5-6 (Docket No. 24).)

Plaintiff brought this action against defendant on March 23, 2010 (Docket No. 2), and filed the FAC on October 27, 2010. (Docket No. 12.) The FAC alleges claims for trademark infringement, unfair competition, and trademark cancellation. (Id.) On November 8, 2010, Iovate International filed a declaratory judgment action against CytoSport in the Western District of New York, seeking a judgment that its use of Cytogenix Sports Laboratories' trademarks does not infringe on CytoSport's rights. (Def.'s Mem. in Supp. of Mot. to Dismiss ("Def.'s Mem.") at 2:19-24 (Docket No. 21).)

The names of all the potentially interested parties require clarification. Currently involved in the suit are CytoSport as plaintiff and Cytogenix Sports Laboratories as defendant. The parties mention Cytogenix Laboratories, SRL ("Cytogenix Laboratories"), as an entity that might actually own some of the trademarks at issue. Cytogenix Laboratories, like Cytogenix Sports Laboratories, is a Barbados corporation, now dissolved, with the same address and the same business model of acting as a "repository of trademark rights." (See Def.'s Reply Mem. in Supp. of Mot. to Dismiss ("Def.'s Reply") at 1:15-2:5 (Docket No. 48).) There are also multiple Iovate-related corporations, including Iovate International, Iovate Health Sciences U.S.A. Inc., and Iovate Health Sciences Inc. (See id. at 2:6-19.)

Soon after plaintiff filed the initial Complaint, it entered into settlement discussions with counsel for defendant. (Pl.'s Mem. in Opp'n to Def.'s Mot. to Dismiss ("Pl.'s Opp'n") at 3:17-18 (Docket No. 42).) Counsel for defendant entered an appearance in the case on October 13, 2010. (Docket No. 9.) During the settlement negotiations, plaintiff proposed a settlement that included defendant and "Iovate Health Sciences" as defendants. (Pl.'s Opp'n at 4:1-2.) In response, defendant's counsel deleted both defendants as parties to the agreement, and added "Iomedix Trademark Ltd." as defendant, listing its place of business as 381 North Service Road West, Oakville, Ontario L6M 0H4. (Id. at 4:2-9.) In a later version, Iomedix was removed by defendant, and "Cytogenix Trademark Ltd." was listed as defendant, with the same address in Ontario. (Id. at 4:10-13.)

When settlement discussions broke down, plaintiff served the Complaint on defendant at the address in Ontario. (Id. at 4:22-24.) Records on file with the Canadian Intellectual Property Office relating to the trademarks at issue specify that the Ontario address was also the address of defendant's designated representative regarding trademark applications or registrations in Canada, Jo-Ann Heikkila. (Id. at 4:25-28; Def.'s Reply at 13:26-14:16.) The FAC was similarly served. (Def.'s Mem. at 9:1-6.) Defendant's actual address is in Barbados. (Def.'s Mem. at 8:10-12.)

Defendant now moves to dismiss the FAC pursuant to Federal Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction and Rule 12(b)(5) for insufficient service of process. Plaintiff moves for leave to amend its FAC to include Iovate Health Sciences International, Inc., and Iovate Health Sciences U.S.A. Inc. as defendants and to add one more cause of action.

II. Discussion

A. Motion to Dismiss

1. Service of Process

Federal courts cannot exercise personal jurisdiction over a defendant without proper service of process. Omni Capital Int'l, Ltd. v. Rudolf Wolff & Co., 484 U.S. 97, 104 (1987). Insufficient service can result in dismissal under Federal Rule of Civil Procedure 12(b)(5). To determine whether service of process was proper, courts look to the requirements of Federal Rule of Civil Procedure 4. See Fed. R. Civ. P. 4. Rule 4(h) governs service over domestic and foreign corporations.

Rule 4(h)(2) provides that a foreign corporation may be served in "a place not within any judicial district of the United States, in any manner prescribed by Rule 4(f) for serving an individual, except personal delivery . . . ." Fed. R. Civ. P. 4(h)(2). Rule 4(f) governs service of an individual in a foreign country and states that service abroad is to be effected "by any internationally agreed means of service that is reasonably calculated to give notice, such as those authorized by the Hague Convention on the Service Abroad of Judicial and Extra-judicial Documents." Fed. R. Civ. P. 4(f)(1).

The Convention on Service Abroad of Judicial and Extra-judicial Documents in Civil and Commercial Matters, Nov. 15, 1965 (Hague Service Convention), (1969) 20 U.S.T. 361, T.I.A.S. No. 6638, referenced in Rule 4(f)(1), is a multi-national treaty that governs service of summons on persons in signatory foreign countries. Volkswagenwerk Aktiengesellschaft v. Schlunk, 486 U.S. 694, 698 (1988). Each member state must establish a "central authority" for receiving and processing requests for service upon defendants residing within the state. Id. at 698-99. Once a central authority receives a request in the proper form, it must serve the documents by a method prescribed by the internal law of the receiving state or by a method designated by the requester and compatible with that law. Id. at 699. A signatory to the Convention may also consent to other methods of service within its boundaries. See 20 U.S.T. 361, T.I.A.S. No. 6638, Arts. 8, 10. Barbados is a signatory to the Convention. See Societe Nationale Industrielle Aerospatiale v. U.S. Dist. Court for the Southern District of Iowa, 482 U.S. 522, 524 n.1 (1987). Even if plaintiff's method of service would have been proper under the Hague Convention, the address to which service was effected was not defendant's proper address.

However, even if service was not accomplished in conformance with Rule 4, "[s]o long as a party receives sufficient notice of the complaint, Rule 4 is to be 'liberally construed' to uphold service." Travelers Cas. & Sur. Co. of Am. v. Brenneke, 551 F.3d 1132, 1135 (9th Cir. 2009) (quoting Chan v. Soc'y Expeditions, Inc., 39 F.3d 1398, 1404 (9th Cir. 1994)). The Ninth Circuit applies a flexible approach to determine whether to permit the defective service to stand. In Borzeka v. Heckler, 739 F.2d 444, 447 (9th Cir. 1984), the Ninth Circuit adopted a rule permitting courts to overlook a non-compliant service of process provided that (1) the party to be served received actual notice, (2) the defendant would not be prejudiced by the defect in service, (3) there was a justifiable excuse for the failure to properly serve, and (4) the plaintiff would be severely prejudiced if the complaint were dismissed. Id.

Defendant does not argue that it did not have actual notice or that it would be prejudiced by maintaining the action (see Def.'s Reply at 15:11-12, n. 12), and the court finds that the first two prongs are therefore met. Defendant, which had been in settlement discussions with plaintiff for several months after the complaint was filed, was certainly on notice of the suit and cannot have been prejudiced by the non-compliant service. Furthermore, defendant did not inform plaintiff that service of the initial Complaint was insufficient, and thus plaintiff proceeded to serve the FAC in the same fashion.

As to whether plaintiff had a justifiable excuse for failure to properly serve, it has sufficiently demonstrated that the confusion surrounding each of the relevant parties and their addresses constituted a justifiable excuse. CytoSport attempted service of the Complaint and the FAC on Cytogenix Sports Laboratories at the address given to it by defendant's counsel multiple times during settlement discussions. (See Pl.'s Opp'n at 4:2-13.) That address was also the address on file with the Canadian Intellectual Property Office for Cytogenix Sports Laboratories. (Id. at 4:25-28.) While Cytogenix Sports Laboratories also had an address in Barbados, the court can understand plaintiff's confusion. In light of the fact that defendant does not contest actual notice, and thus no harm occurred as a result of the improper service, the court finds that plaintiff had a justifiable excuse for the attempted service in Canada.

Finally, plaintiff has shown that it would be prejudiced if the non-compliant service resulted in dismissal of the suit. If the suit were dismissed for non-compliance with the rules of service, plaintiff could properly serve defendant and start the suit over again. While there is no evidence that plaintiff would be barred from refiling the case in the Eastern District of California, the parties seem to agree that the first-to-file rule would then potentially result in transfer of the newly re-filed case to the Western District of New York, where Iovate International's declaratory judgment case would have become the first-filed action upon dismissal of the instant action. (See Pl.'s Opp'n at 20:13-27; Def.'s Reply at 16:1-9.)

The prejudice described is thus essentially that of being denied plaintiff's choice of forum. Dismissal and subsequent re-filing solely to perfect service of process would also unnecessarily burden the resources of the parties and the court. Denying plaintiff its choice of forum may not be especially prejudicial. However, given the complete lack of prejudice to defendant, the fact that actual notice was clearly accomplished, and the confusion, if not purposeful obfuscation on the part of defendant, leading to the technical defect in service, the court finds that plaintiff ...


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