Icee Distributors, Inc. v. J&J Snack Foods Corp.

• Decision Date: 21 March 2003
• Docket Number: No. 02-30039.,02-30039.
• Citation: 325 F.3d 586
• Parties: ICEE DISTRIBUTORS, INC., Plaintiff-Appellee, v. J&J SNACK FOODS CORP., Wal-Mart Stores, Inc., and Icee of America, Inc., Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

325 F.3d 586

ICEE DISTRIBUTORS, INC., Plaintiff-Appellee, v. J&J SNACK FOODS CORP., Wal-Mart Stores, Inc., and Icee of America, Inc., Defendants-Appellants.

No. 02-30039.

United States Court of Appeals, Fifth Circuit.

March 21, 2003.

COPYRIGHT MATERIAL OMITTED

Daniel V. Thompson (argued), Thompson & Howison, Roy W. Hardin, William

Scott Hastings, Locke, Liddell & Sapp, Dallas, TX, Cary A. Hilburn, Hilburn & Hilburn, Shreveport, LA, for Plaintiff-Appellee.

Michael Lowenberg (argued), Jeffrey M. Goldfarb, Heather Lynn Peckham, Akin, Gump, Strauss, Hauer & Feld, Dallas, TX, for Defendants-Appellants.

Appeals from the United States District Court for the Western District of Louisiana.

Before JOLLY, HIGGINBOTHAM and MAGILL, Circuit Judges.^*

PATRICK E. HIGGINBOTHAM, Circuit Judge:

These appeals concern a disagreement between two ICEE distributors as to whether one, J&J Snack Foods, can distribute frozen ICEE squeeze-up tubes of various flavors in the same territory that the other, ICEE Distributors, distributes ICEEs in a cup. After a jury trial, the district court entered a permanent injunction barring J&J and Wal-Mart Stores, which sold J&J's squeeze-up tubes within the territory, from continuing to distribute the tubes. We affirm.

I

In the 1960s, the John E. Mitchell Company ("Mitchell Company") developed the ICEE, a semi-frozen beverage consisting of carbonated water and syrup mixed together that stands up when poured into a cup. Through its subsidiary, ICEEQUIP, the Mitchell Company owned the trademark rights to the ICEE name on products such as the cups for holding the frozen carbonated beverage, the machines for making the beverage, and the beverage itself. ICEEQUIP entered into several trademark licensing agreements with ICEE distributors in different parts of the country. The plaintiff-appellee, ICEE Distributors, Inc. ("Distributors"), by virtue of its purchase of several regional distributorships that had each entered into these licensing agreements, is a party to these identically-worded agreements for its various distribution territories, which include most of Louisiana and Arkansas, and parts of Texas, Missouri, Alabama, and Georgia.

In the 1980s, the Mitchell Company went out of business. In response, the regional licensees, including Distributors and The ICEE Company, a subsidiary of J&J, formed ICEE of America ("IOA"). Upon execution of an assignment agreement, IOA acquired the ownership rights and interests in the trademarks previously held by ICEEQUIP. Both Distributors and The ICEE Company own stock in IOA, with The ICEE Company being the largest shareholder and Distributors the second largest.

In 1999, J&J began manufacturing frozen squeeze-up tubes under the name "ICEE" on a nationwide basis. Appellant Wal-Mart sold these tubes in its Sam's Club stores. Although J&J requested permission from Distributors to sell the tubes in its territory, Distributors refused. J&J sold the tubes in Distributors' territory nonetheless. Distributors filed this suit in May 1999 against J&J and Wal-Mart for trademark infringement and dilution.

After the case was filed, J&J attempted unsuccessfully to register with the U.S. Patent and Trademark Office a trademark for the use of the ICEE name on the tubes. The PTO rejected the application on the basis that the proposed trademark would likely be confused with IOA's trademarks on the ICEE beverage, cups, and beverage machine. J&J then assigned the trademark application to IOA, which successfully registered the trademark. IOA's president, Dan Fachner, who was also the president of J&J's subsidiary The ICEE Company, then granted J&J a license to use the trademark in areas including Distributors' territory.¹

After execution of the licensing agreement between IOA and J&J, Distributors added IOA as a defendant, alleging that IOA, as the assignee of the trademarks previously held by ICEEQUIP, was bound to the licensing agreements with Distributors, and had breached those contracts by entering into the squeeze tube agreement with J&J. The district court granted summary judgment in the defendants' favor on the trademark infringement claim, but held a trial on the trademark dilution and breach of contract claims, bifurcating the liability and damages stages. After the liability stage of the trial, the jury found J&J and Wal-Mart liable for willful trademark dilution and IOA liable for breach of contract.

Based on the jury verdict, the trial court subsequently entered a permanent injunction against J&J and Wal-Mart forbidding the sale of squeeze tubes within Distributors' territory. Defendants appeal the injunction pursuant to 28 U.S.C. § 1292.²

II

A

IOA first objects that the verdict against it for breach of contract cannot serve as a basis for the permanent injunction because the district court improperly asserted jurisdiction over IOA. Accepting the magistrate judge's recommendation, the district court denied IOA's motion to dismiss for lack of personal jurisdiction. In its motion, IOA, a Texas corporation with its principal place of business in California, claimed that it was not subject to personal jurisdiction in Louisiana because it had never engaged in business in the state, had never owned or occupied any property in the state, had never employed any person who worked or lived in the state, had never earned, generated, or received any income in or from the state, and had never entered into or acquired an interest in any contract or license to be performed in the state.

In response, Distributors argued, inter alia, that the Mitchell Company's assignment of trademark rights to IOA resulted in IOA becoming a party to the license agreements between Distributors and ICEEQUIP, which were to be performed in part in Louisiana.

The magistrate judge concluded that although the jurisdictional issue was "admittedly close," Distributors put forth a prima facie case for jurisdiction because of the license agreements between Distributors and IOA. It explained, "[i]t is entirely reasonable for the person who grants another party an exclusive territory to expect to be haled into court in that territory should it breach its promise." However, it stated that "to prevail at trial on the jurisdictional issue," Distributors "will have to produce substantially more evidence (and legal authority) than it has shown on this motion."

On appeal, Distributors reurges that IOA is subject to specific jurisdiction because ICEEQUIP's assignment of its trademark rights to IOA meant that IOA became a party to the exclusive licensing agreements ICEEQUIP had executed with its regional distributors. This lawsuit arises from IOA's breach of these agreements, which occurred when IOA granted a license to J&J to sell push-up tubes in Distributors's territory, including Louisiana. Thus, Distributors argues that IOA should have reasonably anticipated being haled into court in Louisiana for intruding upon Distributors' exclusive territory there.

B

"Whether in personam jurisdiction can be exercised over a defendant is a question of law subject to de novo review by this court."³ In determining whether to exercise jurisdiction over a nonresident defendant, we must look to the restrictions of the state long-arm statute and the Due Process Clause.⁴ In Louisiana, this becomes a unitary inquiry, because the state long-arm statute extends jurisdiction over nonresidents to the extent allowed by federal due process.⁵ Extension of jurisdiction over IOA satisfies due process if IOA had sufficient minimum contacts with the forum state so that extension of jurisdiction over it comports with "traditional notions of fair play and substantial justice."⁶

A court may exercise specific, as opposed to general, jurisdiction over a nonresident defendant if "the lawsuit arises from or relates to the defendant's contact with the forum state."⁷ A defendant's singular act can be a sufficient basis for jurisdiction "if that act gives rise to the claim being asserted," so long as the defendant "reasonably anticipate[s] being haled into court" in the forum state.⁸

Because Distributors prevailed in the district court, we must review the complaint and any factual disputes in favor of the exercise of personal jurisdiction, and "all reasonable inferences from the facts thus established are drawn in favor of the prevailing plaintiff. However, the facts thus arrived at must be sufficient to affirmatively show personal jurisdiction."⁹

Contracting with a resident of the forum state does not alone support the exercise of jurisdiction over the defendant.¹⁰ "Instead we look to the factors of prior negotiations, contemplated future consequences, terms of the contract, and the parties' actual course of dealing to determine whether [IOA] purposefully established minimum contacts with the forum."¹¹

The textbook case of Burger King Corp. v. Rudzewicz¹² dealt with a contractual relationship similar to that between IOA and Distributors. The plaintiff, Burger King, sued a franchisee, Rudzewicz, for breach of the franchise agreement's payment provision and for trademark infringement; the allegations stemmed from Rudzewicz's failure to pay required monthly amounts to Burger King and his continued use of the Burger King trademarks at his restaurant after termination of the franchise.¹³ Burger King filed suit in Florida, the location of its headquarters, even though Rudzewicz's franchise was in Michigan.¹⁴ Rudzewicz argued that he was not subject to personal jurisdiction in Florida because his restaurant was located in Michigan and he had never even visited Florida.¹⁵

The Court found otherwise, concluding that "this franchise dispute grew directly out of `a contract which had a substantial connection with that State.'"<sup>16</sup> Rudzewicz had "eschew[ed] the option of operating an independent local enterprise," and instead deliberately "`reached out beyond' Michigan and negotiated with a Florida corporation for the purchase of a long-term...