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Concrete Washout Systems, Inc. v. Terrell Moran, Inc.

United States District Court, E.D. California

February 25, 2015

CONCRETE WASHOUT SYSTEMS, INC., a California corporation, Plaintiff,


WILLIAM B. SHUBB, District Judge.

Plaintiff Concrete Washout Systems sued defendants for breach of contract and patent infringement. Defendants Trucks and Equipment Rentals, LLC and Trucks and Machinery for Industry, LLC (together "Trucks LLCs")[1] move to dismiss for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2).

Factual and Procedural Background

Concrete washout is a waste that comes from washing out cement trucks and other concrete equipment at the end of the day. (Compl. ¶ 8.) The Environmental Protection Agency ("EPA") regulates the substance because its corrosive nature makes it an environmental risk. (Id.) Following the issuance of EPA guidelines, many companies tried to develop best practices for the disposal of concrete waste water. (Id. ¶ 9.)

Plaintiff's CEO Mark Jenkins developed a portable container that is an allegedly novel solution for concrete waste disposal. (Id. ¶ 11.) Jenkins formed Concrete Washout, a California corporation headquartered in Sacramento, to market and license his system. (Id. ¶¶ 1, 12.) In October 2006, plaintiff obtained several patents for the system, which are still in full force and effect. (Id. ¶¶ 2-21.)

Defendant Terrell Moran, Inc., ("TMI") is a Louisiana corporation with a principal place of business in Gonzales, Louisiana. (Id. ¶ 2.) In April 2007, plaintiff and TMI entered into a written Licensing Agreement for the Concrete Washout Systems containers. (Id. ¶ 35.) TMI purchased twenty-one containers in exchange for a monthly sum. (Id. ¶¶ 36-37.) The Licensing Agreement prohibited TMI from selling or transferring ownership of the containers without written consent from plaintiff. (Id. ¶ 39.)

Plaintiff alleges that despite this provision, in 2010, Terrell Moran met with Roydan Bozeman in Louisiana to discuss the acquisition of certain assets owned by TMI. (Id. ¶ 2; Bozeman Decl. ¶ 2.) The sale went forward. (Compl. ¶ 58.) To complete the transaction, Bozeman formed the Trucks LLCs. (Bozeman Decl. ¶ 3.) The Trucks LLCs are Delaware LLCs with their principal places of business in Denham Springs, Louisiana.[2]

Plaintiff alleges that the Trucks LLCs are infringing on his patent by operating their concrete washout business using the patented containers obtained from Moran. (Id. ¶ 42.) Plaintiff brings a breach of contract claim against TMI and patent infringement claims against all defendants, seeking injunctive relief and damages. (Compl. ¶¶ 48-63.) The Trucks LLCs make a special appearance to seek dismissal on the basis that the court does not exercise personal jurisdiction over them.

II. Personal Jurisdiction Over Trucks Defendants

Federal Circuit precedent generally applies to determine whether the court may properly exercise personal jurisdiction over a defendant in patent cases. Adobe Sys. Inc. v. Tejas Research, LLC, Civ. No. 3:14-868 EMC, 2014 WL 4651654, at *2 (N.D. Cal. Sept. 17, 2014); Deprenyl Animal Health, Inc. v. Univ. of Toronto Innovations Found., 297 F.3d 1343, 1348 (Fed. Cir. 2002) ("Federal Circuit law governs the issue of personal jurisdiction in this patent-related case."). Plaintiff bears the burden of demonstrating that the court has jurisdiction over the defendant. See Merial Ltd. v. Cipla Ltd., 681 F.3d 1283, 1294 (Fed. Cir. 2012) (recognizing that the burden of establishing personal jurisdiction ordinarily falls on the plaintiff).

Due process requires that for a nonresident defendant to be subject to the court's jurisdiction, the defendant must "have certain minimum contacts with [the forum state] such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice." Int.'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (internal quotation marks and citation omitted). Plaintiff must normally make a prima facie showing of either general or specific jurisdiction. See Elecs. For Imaging, Inc. v. Coyle, 340 F.3d 1344 (Fed. Cir. 2003).

The Trucks LLCs do no business outside of Louisiana and appear to have no contacts with California. Rather than attempting to establish general or specific jurisdiction, plaintiff appears to argue that the Trucks LLCs can be deemed to have consented to personal jurisdiction in California. (See Pl.'s Opp'n at 6.) "Under general contract principles, a forum selection clause may give rise to waiver of objections to personal jurisdiction." Holland Am. Line, Inc. v. Wartsila N. Am., Inc., 485 F.3d 450, 457 (9th Cir. 2007). The Licensing Agreement between plaintiff and TMI contained a clause selecting California as the forum for litigation arising out of the agreement.[3] (See Compl. Ex. A.) The Trucks LLCs, however, were not parties to this Agreement-nor were they even in existence at the time the Agreement was executed, (Bozeman Decl. ¶ 3). A forum selection clause does not apply to a nonresident defendant, unless the party assented to it. See Holland, 485 F.3d at 458. Plaintiff has not provided evidence that Bozeman assented to the Agreement's terms.

Plaintiff nevertheless argues that Bozeman's awareness of the existence of the Agreement after the fact means the Trucks LLCs can be deemed to have consented to the forum selection clause. (See Pl.'s Opp'n at 6.) The parties dispute that Bozeman was actually aware of the terms of the Agreement when he purchased TMI's assets.[4] This dispute is immaterial. Even if Bozeman was aware of the existence of the Licensing Agreement, that would not support the conclusion that plaintiff consented to jurisdiction in California.

Holland recognized that if a nonparty to a contract containing a forum selection clause is nevertheless related to a signatory in such a way that it can be deemed to have participated in the transaction, then that nonparty would be subject to the forum selection clause. See Holland, 485 F.3d at 456 (holding that companies related to contract signatory who were among the "range of transaction participants" were subject to the agreement's forum selection clause). Holland does not apply to a situation where a non-party to a contract bears no relation to a signatory at the time of the execution of the contract, because such a non-party could not have participated in the transaction. Here, defendants the Trucks LLCs were not involved in the transaction covered by the Licensing Agreement, nor were they related to TMI at the time the Agreement was executed. Absent any participation in the transaction, there must be some independent evidence that the party ...

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