United Merchants & Mfrs., Inc. v. David & Dash, Inc.

• Decision Date: 03 October 1977
• Docket Number: Civ. A. No. W-75-456.
• Citation: 439 F. Supp. 1078
• Parties: UNITED MERCHANTS AND MANUFACTURERS, INC., and Pattern Rights, Inc. v. DAVID & DASH, INC., et al.
• Court: U.S. District Court — District of Maryland

439 F. Supp. 1078

UNITED MERCHANTS AND MANUFACTURERS, INC., and Pattern Rights, Inc. v. DAVID & DASH, INC., et al.

Civ. A. No. W-75-456.

United States District Court, D. Maryland.

October 3, 1977.

COPYRIGHT MATERIAL OMITTED

Francis D. Murnaghan, Jr., Elizabeth H. Trimble and Venable, Baetjer & Howard, Baltimore, Md., for plaintiffs.

David L. Cohen and Arent, Fox, Kintner, Plotkin & Kahn, Washington, D. C., for defendant David & Dash, Inc.

WATKINS, Senior District Judge.

In this suit for infringement of a federal copyright and for unfair competition, Defendant David & Dash, Inc. (hereinafter D&D) has moved to dismiss the complaint or quash service of process for lack of in personam jurisdiction and for improper venue. Additionally, D&D has moved for dismissal of Count II (unfair competition) on the ground that plaintiffs' pursuit of that claim is barred by their failure to comply with state statutes regarding the qualification of foreign corporations to conduct intrastate business in Maryland.

Litigation of these matters has brought the Court and the parties, by a protracted route, to the point where plaintiffs have now concluded that further discovery relating to personal jurisdiction, although perhaps indicated by incompleteness in certain areas of the record, would be unduly expensive and time consuming. A hearing on these issues was held in December 1975, after which discovery continued, and numerous scholarly memoranda of law were filed with the Court. The Court agrees with the parties that no further hearing is necessary. Accordingly, pursuant to Local Rule 6, the issues will be decided on the basis of the present record.

I Personal Jurisdiction

The existence of personal jurisdiction in this case depends upon the applicability of Maryland's long arm statute, Md.Ann.Code, Courts & Judicial Proceedings Article § 6-103, which in pertinent part provides:

§ 6-103. Cause of action arising from conduct in state or tortious injury outside state.

(a) Condition.—If jurisdiction over a person is based solely upon this section, he may be sued only on a cause of action arising from any act enumerated in this section.

(b) In general.—A court may exercise personal jurisdiction over a person, who directly or by an agent:

(1) Transacts any business or performs any character of work or service in the state;

(2) Contracts to supply goods, food, services, or manufactured products in the state;

(3) Causes tortious injury in the state by an act or omission in the state;

(4) Causes tortious injury in the state or outside of the state by an act or omission outside the state if he regularly does or solicits business, engages in any other persistent course of conduct in the state or derives substantial revenue from goods, food, services, or manufactured products used or consumed in the state . . ..

Applicability of the long arm statute depends upon a two-step analysis. Haynes v. James H. Carr, Inc., 427 F.2d 700, 703 (4 Cir.), cert. denied, 400 U.S. 942, 91 S.Ct. 238, 27 L.Ed.2d 245 (1970). First, it is necessary to determine whether the facts fit within the statutory language. In this regard, authoritative interpretations of the statute by the Court of Appeals of Maryland are controlling. See Shealy v. Challenger Mfg. Co., 304 F.2d 102, 104 (4 Cir. 1962). Second, the Court must determine whether the exercise of personal jurisdiction would be consonant with due process. As Judge Thomsen noted in Piracci v. New York City Employees' Retirement System, 321 F.Supp. 1067, 1070 (D.Md.1971), the two questions often tend to merge, inasmuch as the Maryland legislature intended "to expand the boundaries of permissible in personam jurisdiction to the limits permitted by the Federal Constitution." Geelhoed v. Jensen, 277 Md. 220, 224, 352 A.2d 818, 821 (1976); Krashes v. White, 275 Md. 549, 558-59, 341 A.2d 798 (1975); Lamprecht v. Piper Aircraft Corp., 262 Md. 126, 130, 277 A.2d 272 (1971), and Harris v. Arlen Properties, Inc., 256 Md. 185, 195-96, 260 A.2d 22 (1969). Regarding issues of due process, however, federal law is controlling. Piracci, supra.

The burden of alleging and proving the existence of a factual basis for the exercise of in personam jurisdiction, once it has been placed in controversy, rests with plaintiffs. See McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 80 L.Ed. 1135 (1936). In the instant case, the Court deems the following facts sufficiently proven for purposes of this motion.

Plaintiff United Merchants and Manufacturers, Inc. (hereinafter UM&M), through its various divisions, is a converter of textiles; that is, it dyes and finishes raw fabrics, imprints them with color and design, and sells the finished textiles to manufacturers of draperies, upholsterers, and apparel manufacturers. The original designs used in converting the textiles are copyrighted in the name of Pattern Rights, Inc., a wholly-owned subsidiary of UM&M.

In 1969, UM&M introduced a fabric pattern called "Magnolia" through its Riverdale Division. This apparently attractive design features large white flowers on a colored background with the centers of the flowers being of a contrasting color. The design was registered with the Register of Copyrights, and all "Magnolia" fabric bears a copyright notice on its selvedge edge.

"Magnolia" received favorable comment in the trade and was selected for use as drapery and bedspread fabric in at least three prominent new hotels, including the Sheraton-Fontainebleau Hotel in Ocean City, Maryland. In 1972, representatives of Defendant Savoir Faire, Inc., design consultants for the Sheraton-Fontainebleau, visited the Riverdale showroom and were provided with samples, or "strikeoffs," of "Magnolia" fabric. Each strikeoff bore notice of copyright and a statement that the strikeoffs were accepted on the express understanding and agreement that the pattern would not be copied. Savoir Faire subsequently placed an order with Riverdale for approximately $30,000 worth of drapery fabric and bedspreads, mostly in the "Magnolia" design, to be used in the hotel. In early 1973, however, a problem arose when UM§M's credit department refused to bill Savoir Faire directly and insisted that financial guarantees be provided. Shortly thereafter, Savoir Faire cancelled its order with Riverdale.

For purposes of this motion, it appears that Savoir Faire then took the "Magnolia" strikeoffs to D&D and placed an order for "Magnolia" fabric in the same amounts originally ordered from Riverdale. It was agreed that D&D would furnish the drapery material to Savoir Faire's drapery fabricator in Hyattsville, Maryland, and that the finished bedspreads would be sent directly to the hotel. According to the purchase orders and invoices, all goods were to be shipped prior to complete payment, f. o. b. destination; title was to remain in D&D until full payment was received. Supplemental orders for fabric and bedspreads were placed over the next several months, and the ordered merchandise was in fact shipped into Maryland. Plaintiffs allege that the D&D fabric, originally called "Magnolia" but later renamed "Amapola,"¹ was an infringing copy of their copyrighted design. In all, nearly 12,000 yards of "Amapola" were sold to Savoir Faire. Affidavit of Jay Dash.

Throughout the course of dealing between Savoir Faire and D&D, no D&D representative, agent, or officer entered the State of Maryland in connection with this transaction, although there was some mutual contact by mail and telephone. D&D, a Florida corporation based in Miami, does not maintain a company representative in Maryland but clearly does transact business with Maryland firms.² Over the past several years, D&D has maintained a merchandising relationship with Rian Taggert Associates, an independent firm located in Bethesda, Maryland. See Affidavit of Jay Dash. Rian Taggert displays the goods of D&D and other manufacturers in its show-rooms, takes orders, and forwards the orders to D&D for acceptance. For this service, Rian Taggert receives a commission. It appears, however, that Rian Taggert was not involved in the marketing of "Amapola." The record also shows that D&D and Savoir Faire had transacted business in the past and suggests that those prior dealings were more substantial than the transaction alleged in the instant case.³

Plaintiffs contend that all of the quoted subsections of § 6-103 apply to these facts. It is sufficient, however, if any one subsection applies. Lawson v. Baltimore Paint & Chemical Corp., 298 F.Supp. 373, 377 (D.Md.1969); see, e. g., Holfield v. Power Chemical Co., 382 F.Supp. 388, 392 (D.Md.1974).

It is plain that subsections (b)(2) and (b)(3) have no application, because the literal terms of the statute are not met by these facts. Subsection (b)(2) expressly applies only to actions arising out of a contract. See McLaughlin v. Copeland, 435 F.Supp. 513 (D.Md.1977). This case, although related to a contract, is in every particular a tort action and therefore outside the scope of (b)(2). Holfield, supra, on which plaintiffs rely, is not contrary. There the court found jurisdiction pursuant to (b)(2) where plaintiff alleged misrepresentation; Holfield was, however, an action for rescission of a contract, and the claim arose from the contractual relationship between the parties. Subsection (b)(3) also has no application to the instant case; there is no proof that the defendant committed an act or omission in the state which has caused tortious injury. Whatever such acts may have been committed took place in Florida, and those do not fall within the ambit of (b)(3).

The possible applicability of (b)(1) is a much closer question. In this regard, D&D has pursued two arguments. D&D contends, first, that (b)(1) applies only to actions in contract; and, second, that it has not engaged in any transaction of business in Maryland related to the claim.

Until recently, the only authoritative decisions on the first of...