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United Tactical Systems LLC v. Real Action Paintball, Inc.

United States District Court, N.D. California

May 11, 2015

UNITED TACTICAL SYSTEMS LLC, Plaintiff,
v.
REAL ACTION PAINTBALL, INC., et al., Defendants. REAL ACTION PAINTBALL, INC., Plaintiff,
v.
ADVANCED TACTICAL ORDNANCE SYSTEMS, LLC, et al., Defendants.

[REDACTED VERSION][*] ORDER DENYING MOTIONS TO DISMISS FOR LACK OF PERSONAL JURISDICTION AND VENUE ORDER CONSOLIDATING RELATED ACTIONS AND DENYING MOTIONS TO DISMISS AND MOTIONS TO STRIKE AS MOOT

MARIA-ELENA JAMES, Magistrate Judge.

INTRODUCTION

Real Action Paintball, Inc. ("Real Action") and United Tactical Ordnance Systems LLC ("UTS") are competitors in the irritant projectile market. They have sued and counter-sued one another as well as related parties in the above-captioned actions over disputes involving the "PepperBall" trademark, unfair competition claims, and other issues. Pending before the Court are Motions to Dismiss for Lack of Personal Jurisdiction or Lack of Venue by Perfect Circle Projectiles LLC, Gary Gibson, Michael Blumenthal, and David Piell (the "Moving Parties"). ATO Dkt. Nos. 13 & 39; UTS Dkt. No. 96.[1] Real Action has also recently filed a Motion to Amend its Complaint. ATO Dkt. No. 153. Having considered the parties' positions, relevant legal authority, and the record in this case, the Court DENIES the Motions for the reasons set forth below.

Additionally, in the process of reviewing the parties' motions, pleadings, and related materials, the Court has determined that the above captioned actions involve common questions of law and fact. Separate consideration of the claims in these cases wastes time and effort by the Court and the parties. Consequently, the Court consolidates these actions pursuant to Federal Rule of Civil Procedure 42(a)(2) ("If actions before the court involve a common question of law or fact, the court may:... consolidate the actions"). Although the case first filed in this District was Real Action Paintball, Inc. v. Advanced Tactical Ordnance Systems, LLC et al., Case No. 14-2435-MEJ (N.D. Cal.) (the "ATO Case"), the Court will consolidate the actions under United Tactical Systems, LLC v. Real Action Paintball, Inc. et al., Case No. 14-4050-MEJ (N.D. Cal.) (the "UTS Case"). The UTS Case effectively represents the earliest filed action as UTS advances the interests of Advanced Tactical Ordinance Systems, LLC ("ATO"), which filed the first action pertaining to the issues arising in these cases: Advanced Tactical Ordinance Systems, LLC v. Real Action Paintball, Inc., et al ., Case No. 12-00296-JVB-RBC (N.D. Ind.) (the "Indiana Action"). The above captioned cases are thus CONSOLIDATED for pretrial proceedings before this Court.

The consolidated case will continue to be referred to as United Tactical Systems, LLC v. Real Action Paintball, Inc., Case No. 14-4050-MEJ (N.D. Cal.). All documents shall be filed in Case No. 14-4050. Additionally, in light of this consolidation, the Court DENIES Real Action's Motion to Amend its Complaint, and DENIES WITHOUT PREJUDICE the remaining pending Motions to Dismiss and Motions to Strike.[2] That said, the Court will grant all parties leave to amend their pleadings should they choose to do so. UTS will have until May 27, 2015 to file any amended complaint, and Real Action will have until June 17, 2015 to file any amended counterclaims. Any motions pursuant to Rule 12 shall be filed by July 9, 2015. Additionally, the Court welcomes the parties to agree to a more expedited schedule and will consider such a stipulation if they are able to agree to an alternative timetable.

The Court now turns to the substance of the Motions to Dismiss for Lack of Personal Jurisdiction and Venue.

BACKGROUND

UTS and Real Action sell irritant filled projectiles. Real Action's Compl. ("RAP Compl.") ¶ 13, ATO Dkt. No. 1; UTS Compl. ¶ 2, UTS Dkt. No. 1. Typically used by law enforcement or military, these projectiles are non-lethal capsules that contain a pepper substance and can be shot like paintballs. RAP Compl. ¶ 12. UTS's predecessor in interest, ATO, an Indiana corporation, previously brought suit against Real Action, [3] a California Company, in the Indiana Action, alleging that Real Action infringed on its "PepperBall" trademark by making statements implying that Real Action sold PepperBall projectiles, among other things. RAP Compl. ¶¶ 18-19; UTS Compl. ¶ 36. ATO obtained a temporary restraining order and later a preliminary injunction to stop Real Action's use of the PepperBall mark and related acts by Real Action. RAP Compl. ¶ 24; UTS Compl. ¶ 36.

ATO also sued Conrad Sun, Sun LLC, and Apon in the Indiana Action. RAP Compl. ¶¶ 68-69. Apon manufactured irritant projectiles, while Conrad Sun and his company Sun LLC had previously helped broker a deal for the sale of irritant filled projectiles from Apon to Real Action. UTS Compl. ¶ 11, RAP Compl. ¶ 16. ATO settled with these defendants in the Indiana Action, based on terms discussed more thoroughly within this Order. RAP Compl. ¶ 29. Specifically, Real Action alleges that Sun, Sun LLC, and Apon settled the Indiana Action "on abusive terms, " which made it so that Real Action was unable to acquire the irritant projectiles contracted for from Sun LLC and Apon, and consequently harmed Real Action's position in the market place. Id. ¶ 72. Meanwhile, Real Action challenged the Northern District of Indiana's jurisdiction, arguing that Indiana did not have personal jurisdiction over it. The Court of Appeals for the Seventh Circuit agreed, and the suit was dismissed. See Advanced Tactical Ordnance Sys., LLC v. Real Action Paintball, Inc., 751 F.3d 796 (7th Cir. 2014).

Real Action then filed suit in this Court (the ATO Case). It asserts 17 claims against ATO, including claims for wrongful injunction, declaratory relief, unfair competition, and restraint of trade. Real Action also sues attorneys Michael Blumenthal and David Piell, who represented ATO in the Indiana Action. RAP Compl. ¶ 18; Piell Decl. ¶ 5, ATO Dkt. No. 42, UTS Dkt. No. 98. Blumenthal and Piell are both residents of Illinois and have offices in Illinois. Blumenthal Decl. ¶ 3, ATO Dkt. No. 41, UTS Dkt. No. 99; Piell Decl. ¶ 3. Real Action alleges claims against these attorneys for malicious prosecution, abuse of process, and conspiracy, among other things.

Additionally, Real Action sues Gary Gibson and Perfect Circle Projectiles LLC. Perfect Circle is an Illinois limited liability company with its principal place of business in Lake Forest, Illinois. RAP Compl. ¶ 3; ATO Dkt. No. 13 (Gibson and Perfect Circle's Motion, "PC & Gibson Mot.") at 2, 5, ATO Dkt. No. 13; Gibson Decl. ¶ 3, ATO Dkt. No. 15. It owns 50% of ATO and once supplied irritant projectiles to Pepperball Technologies, Inc., a California company that ATO purportedly acquired in 2012. Gibson Decl. ¶ 10; Gibson Dep. at 63:13-16, ATO Dkt. No. 159-16. In turn, Gibson owns Perfect Circle. Gibson Dep. at 63:5-9. Gibson likewise is a resident of Illinois who lives in Riverwoods, Illinois. RAP Compl. ¶ 4; Gibson Decl. ¶ 2. Gibson is not personally a shareholder in ATO. Gibson Decl. ¶ 10. Real Action brings numerous claims against Perfect Circle, including claims for monopoly and restraint of trade under the Sherman Act, combination in restraint of trade under California's Cartwright Act, unfair competition under California Business and Professions Code §§ 17200 and 17500, and conspiracy. Real Action asserts claims against Gary Gibson for intentional interference with contractual relations, intentional or negligent interference with prospective economic advantage, and conspiracy, among other claims.

After Real Action originally filed suit in this Court, UTS was formed and purchased ATO and the PepperBall mark. UTS Compl. ¶ 2. UTS then filed a lawsuit against Real Action in this Court (the UTS Case) and moved for an ex parte temporary restraining order. UTS Dkt. No. 27. The Court denied that motion but construed it as a motion for a preliminary injunction. UTS Dkt. No. 34. The Court ultimately granted in part and denied in part UTS's motion for a preliminary injunction, which, among other things, enjoined Real Action from using the PepperBall name to refer to its irritant projectiles. UTS Dkt. No. 85 at 41. Real Action subsequently counter-sued UTS for various claims (many of which are similar to those asserted against ATO) as well as Blumenthal and Piell for misappropriation of trade secrets related to information published with the filing of UTS's motion for a temporary restraining order. UTS Dkt. No. 51. Real Action served both attorneys in California while they attended UTS's preliminary injunction hearing. UTS Dkt. No. 73 (Blumenthal served in San Francisco, California) & UTS Dkt. No. 74 (Piell served in San Francisco, California).

The Moving Parties filed their motions challenging the Court's personal jurisdiction over them several months ago. ATO Dkt. No. 13, PC & Gibson Mot.; ATO Dkt. No. 39 (Blumenthal and Piell's Motion, "ATO B&P Mot."); UTS Dkt. No. 96 (Blumenthal and Piell's Motion, "UTS B&P Mot."). During that time, the Court has permitted Real Action the opportunity to conduct targeted discovery on the jurisdictional issue. ATO Dkt. No. 80. The Court also invited the parties' input on whether to consolidate these actions. ATO Dkt. No. 126; UTS Dkt. No. 87. The Court consolidated the personal jurisdiction motions on January 7, 2015 and set a schedule for Real Action's Opposition and the Moving Parties' Reply. ATO Dkt. No. 130; UTS Dkt. No. 117; see also Modified Order, ATO Dkt. No. 138; UTS Dkt. No. 127. At a subsequent case management hearing, the parties agreed to keep the actions separated pending the Court's order on the personal jurisdiction motions. See ATO Dkt. Nos. 135-36; 137; UTS Dkt. Nos. 125-27. Following numerous discovery disputes, Real Action has now filed its Opposition (ATO Dkt. No. 159; UTS Dkt. No. 131), and the Moving Parties have filed their Reply[4] (ATO Dkt. No. 163). The Moving Parties contend that the Court does not have personal jurisdiction over them; alternatively, they argue that venue is not proper in this District and that the claims against them should be dismissed or transferred. The Court has considered each of these challenges below, starting first with the matter of personal jurisdiction, and following with the Moving Parties' venue challenge.

LEGAL STANDARD - PERSONAL JURISDICTION

The plaintiff bears the burden of proving that the court may exercise personal jurisdiction over a defendant when the defendant moves to dismiss under Federal Rule of Civil Procedure 12(b)(2). Pebble Beach Co. v. Caddy, 453 F.3d 1151, 1154 (9th Cir. 2006). "[U]ncontroverted allegations in the complaint must be taken as true, " and conflicts between facts contained within the declarations or affidavits submitted by the parties are resolved in the plaintiff's favor. Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004); see, e.g., Mattel, Inc. v. Greiner & Hausser GmbH, 354 F.3d 857, 861-62 (9th Cir. 2003).

Courts properly exercise personal jurisdiction over a defendant "if it is permitted by a long-arm statute and if the exercise of jurisdiction does not violate federal due process." Pebble Beach Co., 453 F.3d at 1154. Where there is no applicable federal statute governing personal jurisdiction, courts apply the law of the state in which the court sits. Fed.R.Civ.P. 4(k)(1)(A); Panavision Int'l, L.P. v. Toeppen, 141 F.3d 1316, 1320 (9th Cir. 1998). In California, a court "may exercise jurisdiction on any basis not inconsistent with the Constitution of this state or of the United States." Cal. Civ. Proc. Code § 410.10; Daimler AG v. Bauman, ___ U.S. ___, 134 S.Ct. 746, 753 (2014) ("California's long-arm statute allows the exercise of personal jurisdiction to the full extent permissible under the U.S. Constitution."). As such, "the jurisdictional analyses under state law and federal due process are the same." Schwarzenegger, 374 F.3d at 801.

The Fourteenth Amendment Due Process Clause requires that an out-of-state defendant have "minimum contacts" with the forum state such that the exercise of jurisdiction "does not offend traditional notions of fair play and substantial justice." Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (quotation omitted). "In judging minimum contacts, a court properly focuses on the relationship among the defendant, the forum, and the litigation.'" Calder v. Jones, 465 U.S. 783, 788 (1984) (quoting Shaffer v. Heitner, 433 U.S. 186, 204 (1977)). Courts distinguish between general and specific jurisdiction. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 (1984).

DISCUSSION - PERSONAL JURISDICTION

A. Jurisdiction over Michael Blumenthal and David Piell

Real Action served Blumenthal and Piell with process in the UTS Case while they were physically present in California. See UTS Dkt. Nos. 73-74 (proofs of service). Real Action contends that this establishes personal jurisdiction over them in California.

Personal jurisdiction protections are rooted in due process concerns. See Burnham v. Superior Court of Cal., 495 U.S. 604, 609 (1990) (Scalia, J., plurality op.). But in considering due process concerns, the United States Supreme Court in Burnham held that "the Due Process Clause does not prohibit the California courts from exercising jurisdiction over petitioner based on the fact of in-state service of process." Id. at 628. The defendant in Burnham was a New Jersey resident personally served with a divorce petition while visiting his children in California. Id. at 608. Although no part of the divorce proceedings arose out of the defendant's California contacts, the Court nevertheless held that California's courts could exercise general personal jurisdiction over the defendant. Id. The Court reaffirmed the long-standing rule that "personal service upon a physically present defendant suffice[s] to confer jurisdiction, without regard to whether the defendant was only briefly in the State or whether the cause of action was related to his activities there." Id. at 612. This kind of jurisdiction is referred to as "tag jurisdiction." Martinez v. Aero Caribbean, 764 F.3d 1062, 1067 (9th Cir. 2014); see also Bourassa v. Desrochers, 938 F.2d 1056, 1058 (9th Cir. 1991) (referring to "[j]urisdiction obtained through service of a person temporarily in a forum and engaged in activity unrelated to the litigation" as "transient jurisdiction."). Since Burnham, the Ninth Circuit has recognized that "[i]n-state personal service... serves as a basis for personal jurisdiction." Water Wheel Camp Recreational Area, Inc. v. LaRance, 642 F.3d 802, 819 (9th Cir. 2011); see Cripps v. Life Ins. Co. of N. Am., 980 F.2d 1261, 1267 (9th Cir. 1992) ("Personal jurisdiction over a defendant may be acquired in one of two ways: by personal service of that defendant or by means of a defendant's minimum contacts' with the jurisdiction.").

While jurisdiction based on in-state service of process is well-established, the matter here involves a number of unique variables. The first of those variables is the reason for Blumenthal and Piell's presence in California. Blumenthal was present in California while representing his client, UTS, at the hearing on its preliminary injunction motion. Opp'n at 10; Reply at 4. While Piell has not appeared as a named attorney in either the UTS or ATO Case, he was at any rate previously an attorney for ATO in the Indiana Action and attended the preliminary injunction hearing in the UTS case. Opp'n at 10, 13; Reply at 4; see UTS Dkt. Nos. 72-74. Blumenthal and Piell maintain that their presence in California would not have been necessary but for Real Action initiating the current litigation and contend that "[w]here a plaintiff uses fraud or deceit to serve a plaintiff in a given forum, the in-forum service is ineffective to establish jurisdiction over the defendant." Reply at 4 (quoting Voice Sys. Mktg. Co., L.P. v. Appropriate Tech. Corp., 153 F.R.D. 117, 119 (E.D. Mich. 1994)). They contend "Real Action essentially used the November hearing to surprise [them] with summonses in the UTS action." Id.

Although Blumenthal and Piell may have been surprised by the summonses, these attorneys were aware that Real Action filed counterclaims against them in the UTS Case prior to the hearing on the preliminary injunction. UTS Counterclaim, UTS Dkt. No. 51; Hr'g Tr. at 80:15-16, UTS Dkt. No. 84. Additionally, their argument that Real Action fraudulently induced them to attend the hearing is unsupported. The November hearing was in consideration of UTS's preliminary injunction motion, and there is no evidence that Real Action used "fraud" or "deceit" to draw these attorneys to California. This case is thus distinguishable from Voice Systems Marketing, where-according to Blumenthal and Piell-"plaintiff induced defendant to attend a business meeting in the forum, but the meeting was merely a pretext to serve the defendant." Reply at 4 (citing Voice Sys. Mktg., 153 F.R.D. at 119). UTS's preliminary injunction hearing was not a pretext for Real Action to serve Blumenthal and Piell; Real Action only took advantage of the situation presented. As in Burnham, the fact that these attorneys did not purposefully avail themselves of California's laws and protections does not necessarily mean they are protected from litigation here if tag or transient jurisdiction is established. See Burnham, 495 U.S. at 619 (reaffirming transient jurisdiction as "[a]mong the most firmly established principles of personal jurisdiction in American tradition");[5] Martinez, 764 F.3d at 1067.

The second variable is that Real Action only served these attorneys in California in the UTS Case, not the ATO Case. In the ATO Case, Real Action served Piell in Buffalo Grove, Illinois, and Blumenthal agreed to service through his attorney, John Kirke. ATO Dkt. Nos. 21, 30. Two issues arise from this situation: first, whether the attorneys are subject to transient jurisdiction while representing their client in the forum state; and second, whether the fact that the attorneys were served in one case makes them subject to jurisdiction in the related case.

In Lamb v. Schmitt, the Supreme Court considered the situation where counsel for a party in a pending action was served with process in an action related to the principal action. 285 U.S. 222 (1932). The Court first noted "[t]he general rule [is] that witnesses, suitors, and their attorneys, while in attendance in connection with the conduct of one suit, are immune from service of process in another[.]" Id. at 225; see also Stewart v. Ramsay, 242 U.S. 128, 129 (1916) ("[S]uitors, ... coming from another jurisdiction, are exempt from service of civil process during the period required for their attendance in court and for a reasonable period of time in coming and going."). This "privilege, " however, "is the privilege of the court, rather than of the defendant. It is founded in the necessities of the judicial administration, which would be often embarrassed, and sometimes interrupted, if the suitor might be vexed with process while attending upon the court for the protection of his rights, or the witness while attending to testify." Lamb, 285 U.S. at 225 (citation omitted).

The Court then considered the question of "[w]hether, despite any effect of the immunity in encouraging voluntary attendance at the trial, it should be withheld from one who, while in attendance, is served with process commanding his continued presence and aid to facilitate the pending litigation, and to carry it to its final conclusion?" Id. at 226. The test applied by the Court was "whether the immunity itself, if allowed, would so obstruct judicial administration in the very cause for the protection of which it is invoked as to justify withholding it." Id. at 228. The Court concluded that where the two proceedings are related, the intrusion of service of process in the second suit does not obstruct the principal proceeding and immunity is not necessary for the convenience of the courts. Id .; see also 4 Charles Alan Wright and Arthur R. Miller, Federal Practice and Procedure § 1080 at 511 ("There is generally no immunity from service of process when the suit in which immunity is sought is part of, or a continuation of, the suit for which the person claiming immunity is in the jurisdiction.").

Since the Supreme Court's decision in Lamb, "the extension of the privilege has been limited by the majority of courts to cases in which the party or witness was participating in an unrelated litigation at the time that he was served with process in the forum state." N. Light Tech., Inc. v. N. Lights Club, 236 F.3d 57, 62 (1st Cir. 2001) (collecting cases; emphasis in original), cert. denied, 533 U.S. 911 (2001). As the First Circuit Court of Appeals explained:

The rationale for the differing-lawsuit prerequisite to process immunity in this context is relatively straightforward: while a court can, in cases before it, choose to protect the jurisdictional status of a party or witness who is reluctant to come to the forum state by issuing protective orders or subpoenas, it cannot wield such power in other cases. The process-immunity exception therefore fills the gap only where it needs to be filled that is, in cases where a district court wishes to shield an individual from service of process to encourage his or her travel to the forum state, but would be unable to do so absent the power to grant immunity.

Id. at 63.

In Northern Lights, the First Circuit found the defendant was not entitled to process immunity when he entered the forum to attend a personal jurisdiction and preliminary injunction hearing. Id. The court refused to adopt "a broad, per se rule precluding the exercise of personal jurisdiction whenever the served individual is in the jurisdiction to attend litigation-related proceedings that pertain to him or her." Id. The court instead considered the circumstances and found particularly important the fact the defendant never asked the district court for such immunity, either prior to or following the hearing which had prompted the defendant's presence in the forum. Id. at 63. In addition, the court noted the defendant had entered the forum voluntarily to attend the hearing as a spectator and to make himself available as a witness in the same case in which he was served with process, not an unrelated litigation. Id. The First Circuit noted that these sorts of voluntary circumstances "are not those that would ordinarily favor a finding of immunity even in a case where it had been timely requested." Id .; see also St. Jude Med. S.C., Inc. v. Janssen-Counotte, 2014 WL 7237411, at *11 (W.D. Tex. Dec. 17, 2014) (finding no immunity where a litigant voluntarily choose to go to Texas to attend a hearing in the same litigation for which she was served, and noting that the Court did not order her to appear and that she could have earlier requested immunity or waived service).

The Ninth Circuit has not yet considered whether an attorney is subject to personal jurisdiction in a state where the attorney has been served while attending a hearing in which they are representing clients. But see Moylan v. AMF Overseas Corp., S.A., 354 F.2d 825, 829 (9th Cir. 1965) (finding defendant exempt from service where he went to Guam for the sole purpose of testifying in the action on behalf of his employer). Other courts, however, have held that there is no immunity if the service is made in a case related to the one in which the attorney is making an appearance. See United States v. Shibley, 112 F.Supp. 734, 751 (S.D. Cal. 1953) ("[A]ssuming that the defendant was, at the time, of the service of the subpoena, acting as counsel for Bennette, and was on the military premises for that purpose, he was not immune from service, because the inquiry was so closely related to the Bennette court-martial conviction as to bring the principles declared in the case just cited into full play."); LaCroix v. Am. Horse Show Ass'n, 853 F.Supp. 992, 994 (N.D. Ohio 1994) (jurisdiction established over attorney defendant where "service was made in the case in which the attorney was making an appearance."); Ferguson v. Ford Motor Co., 92 F.Supp. 868, 870-71 (S.D.N.Y. 1950) (attorney attending the taking of a deposition was not immune from service of process in the same action); see also Lifelast, Inc. v. Coldwater Grp., Inc., 2005 WL 2454191, at *4 (W.D. Wash. Oct. 4, 2005) ("Because he was served in the same case as the one in which he was giving a deposition, service immunity does not apply[.]"); U.S. Nat'l Bank of Or. v. Great Republic Life Ins. Co., 54 F.R.D. 498, 499 (D. Or. 1971) (no immunity where corporation's president served after testifying at hearing in Oregon; "[i]mmunity in this case would serve the purpose of forum shopping, but that is not a sufficient basis for defeating the service of process[.]").

In this case, there are several considerations that lead the Court to conclude that immunity is not warranted. First, these Defendants have not requested such immunity-in this motion or otherwise. Nowhere in their briefing or in all their appearances before this Court have they indicated that they seek immunity. Nor did they request immunity prior to attending the hearing on their client's Motion. Second-and somewhat compounded by the first consideration-is the fact that these Defendants are attorneys with knowledge of the potential jurisdictional issues that arise when entering another jurisdiction. While they suggest that they should be in some way protected by their status as attorneys representing a client in this matter, they fail to acknowledge the longstanding precedent of Lamb, which establishes that attorneys are not always protected in such situations. Third, both of these Defendants voluntarily entered the forum, despite having California counsel and without asking the Court for some advanced immunity from process. Finally, Federal Rule of Civil Procedure 4(d) permits a defendant to waive jurisdiction, with no impact on later objecting to personal jurisdiction or to venue. See ...


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