Aerotel, Ltd. v. Sprint Corp.

• Decision Date: 13 April 2000
• Docket Number: No. 99 Civ. 11091(SAS).,99 Civ. 11091(SAS).
• Citation: 100 F.Supp.2d 189
• Parties: AEROTEL, LTD., and Aerotel USA, Inc., Plaintiffs, v. SPRINT CORPORATION, Sprint Communications Company L.P., Sprint Spectrum L.P., and Tandy Corporation, Defendants.
• Court: U.S. District Court — Southern District of New York

100 F.Supp.2d 189

AEROTEL, LTD., and Aerotel USA, Inc., Plaintiffs, v. SPRINT CORPORATION, Sprint Communications Company L.P., Sprint Spectrum L.P., and Tandy Corporation, Defendants.

No. 99 Civ. 11091(SAS).

United States District Court, S.D. New York.

April 13, 2000.

Glenn F. Ostrager, Dennis M. Flaherty, Joshua S. Broitman, Ostrager Chong Flaherty & Onofrio, P.C., New York City, for Plaintiffs.

Raphael V. Lupo, Brian E. Ferguson, John R. Fuisz, McDermott, Will & Emery, Washington, DC, for Defendants.

OPINION AND ORDER

SCHEINDLIN, District Judge.

I. Introduction

Aerotel, Ltd. is a corporation organized under the laws of Israel with its principal place of business in Israel. See Amended Complaint ("Am.Cmpl."), attached as Exhibit G to the Declaration of John Fuisz, defendants' attorney, in Support of Defendant Sprint Corporation's Motion to Dismiss and/or Transfer and for a Protective Order Staying Discovery ("Fuisz Decl."), ¶ 3. Aerotel, Ltd. is the assignee of U.S. Patent No. 4,706,275 (the "'275 Patent") which protects an invention for making prepaid telephone calls. Id. ¶ 9. Aerotel U.S.A., Inc. is a wholly owned subsidiary of Aerotel, Ltd. and is its exclusive U.S. licensing representative. Id. ¶ 4. Sprint Corporation is a corporation organized under the laws of Kansas with its principal place of business in Kansas. Id. ¶ 5. Sprint Communications Company L.P. ("Sprint Communications") and Sprint Spectrum L.P. ("Sprint Spectrum") are limited partnerships wholly owned by Sprint Corporation. Id. ¶¶ 6-7, 14. Tandy Corporation is a Delaware corporation which has a place of business in New York. Id. ¶ 8.

Aerotel, Ltd. and Aerotel, U.S.A., Inc. (collectively "Aerotel") sued defendant Sprint Corporation in the Southern District of New York for its alleged infringement of the '275 Patent by filing a Complaint on November 5, 1999. See Original Complaint ("Cmpl."), attached as Exhibit A to the Fuisz Declaration. Aerotel mailed the Original Complaint to Office of the President, Sprint Corporation, 380 Madison Avenue, New York, New York 10022. According to Sprint Corporation, it does not own or lease any property at that address. See Declaration of Michael Hyde, Assistant Secretary of Sprint Corporation, in Support of Defendant Sprint Corporation's Motion to Dismiss and/or Transfer Plaintiff Aerotel's Complaint for Lack of Personal Jurisdiction ("Hyde Decl."), sworn to on December 8, 1999, ¶ 5. On December 8, 1999, Sprint Corporation filed a declaratory judgment action against Aerotel, Ltd. in the United States District Court for the District of Kansas. See Fuisz Decl. Ex. C. Aerotel, Ltd. was served with the declaratory judgment complaint on December 10, 1999. Plaintiffs then filed and served an Amended Complaint on December 15, 1999 naming Sprint Corporation as well as Sprint Communications, Sprint Spectrum and Tandy Corporation as defendants. See Am. Cmpl. ¶¶ 5-8.

Defendant Sprint Corporation now moves, inter alia, under Federal Rules of Civil Procedure 12(b)(2) and 12(b)(3) for dismissal of the complaint for lack of personal jurisdiction and for improper venue. Sprint Corporation alternatively moves under 28 U.S.C. § 1404(a) to have this action transferred to the District of Kansas where it will be joined with the declaratory judgment action, Sprint Corporation, et al., v. Aerotel, Ltd. 99 Civ. 2547(JWL).¹ Sprint Communications, Sprint Spectrum and Tandy Corporation join in Sprint Corporation's motion to dismiss and also move for a transfer of venue pursuant to 28 U.S.C. § 1404(a). For the following reasons, Sprint Corporation's motion to dismiss is denied and its motion to transfer venue is denied. The remaining motions to dismiss and transfer venue are denied.

II. Discussion

A. Personal Jurisdiction — Sprint Corporation

The burden of proof to establish personal jurisdiction is on Aerotel, see Kernan v. Kurz-Hastings, Inc., 175 F.3d 236, 240 (2d Cir.1999) (citation omitted), and the required standard of proof is by a preponderance of the evidence. See First Nationwide Bank v. Gelt Funding Corp., 27 F.3d 763, 771 (2d Cir.1994). Although in patent cases the court applies the uniform body of Federal Circuit law, see Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558, 1564-65 (Fed.Cir. 1994), the court will apply the relevant state long-arm statute when determining whether it has personal jurisdiction over a defendant. See Graphic Controls Corp. v. Utah Med. Prods., Inc., 149 F.3d 1382, 1386 n. 2 (Fed.Cir.1998). Accordingly, New York law will determine whether this Court has jurisdiction over Sprint Corporation. As explained by the Federal Circuit:

Determining whether jurisdiction exists over an out-of-state defendant involves two inquiries: whether a forum state's long-arm statute permits the assertion of jurisdiction and whether assertion of personal jurisdiction violates federal due process. With regard to the federal constitutional due process analysis of the defendant's contacts with the forum state in patent cases, we do not defer to the interpretations of other federal and state courts. However, in interpreting the meaning of state long-arm statutes, we elect to defer to the interpretations of the relevant state and federal courts, including their determinations regarding whether or not such statutes are intended to reach to the limit of federal due process.

Graphic Controls, 149 F.3d at 1385 (citations and footnote omitted).

"Under New York law there are two ways in which a court may exercise personal jurisdiction over a non-domiciliary corporation: (1) If the corporation `does business' in New York, jurisdiction may be exercised pursuant to N.Y. CPLR § 301.(2) Even if the corporation does not `do business' in New York, jurisdiction may be exercised if the corporation falls under New York's long-arm statute (N.Y. CPLR § 302)." King v. Best Western Country Inn, 138 F.R.D. 39, 41 (S.D.N.Y. 1991). Under the "doing business test", a foreign corporation is amenable to suit in New York if it is "`engaged in such a continuous and systematic course of "doing business" here as to warrant a finding of its "presence" in this jurisdiction.'" Frummer v. Hilton Hotels Int'l, Inc., 19 N.Y.2d 533, 536, 281 N.Y.S.2d 41, 227 N.E.2d 851 (1967) (quoting Simonson v. International Bank, 14 N.Y.2d 281, 285, 251 N.Y.S.2d 433, 200 N.E.2d 427 (1964)). Alternatively, although a corporation may not be doing business so as to subject it to general jurisdiction, it may be subject to specific jurisdiction. Section 302(a)(1) provides for jurisdiction where the defendant "transacts any business within the state or contracts anywhere to supply goods or services in the state" and the cause of action arises from such acts. N.Y. CPLR § 302(a)(1) (McKinney 1990).

For a court to assert jurisdiction over a defendant under section 302(a)(1), the plaintiff must meet the following two prong test: (1) the defendant's business activities in New York must be activities by which the defendant projects itself into New York in such a way as to purposefully avail itself of the benefits and protections of New York laws and (2) the plaintiff's cause of action must arise out of that business activity within the state.

Graphic Controls, 149 F.3d at 1386.

Sprint Corporation is a holding company that does not transact telecommunications services, including pre-paid calling services, in New York. See Hyde Decl. ¶¶ 3-4. Moreover, it does not have any employees authorized to act on its behalf in New York. Id. ¶ 5. Sprint Corporation is not licensed to do business in New York and has never purposefully availed itself of the privilege of doing business in New York. Id. ¶¶ 4-5.

In its Amended Complaint, Aerotel has alleged that "Sprint Communications and Sprint Spectrum are wholly owned by Sprint Corporation, and Sprint Corporation exercises control over Sprint Communications and Sprint Spectrum and their operations, including the alleged infringing activities of Sprint Communications and Sprint Spectrum."² Am. Cmpl. ¶ 14 (emphasis added). Aerotel advances its argument that Sprint Corporation is present in New York by reason of its management and control of Sprint Communications and Sprint Spectrum in a number of ways. First, Aerotel points to the common management Sprint Corporation shares with its subsidiaries. Aerotel cites the 1998 Form 10-K filed by Sprint Spectrum which discloses that at least four of its sixteen officers and board members are shared in common with Sprint Corporation.³ Compare Sprint Corporation's 1999 Form 10-K, attached as Exhibit 1 to the Declaration of Joshua S. Broitman, plaintiffs' attorney, in Opposition to Sprint Corporation's Motion to Dismiss the Complaint or Transfer, sworn to January 13, 2000 ("Broitman Decl."), at 17/83 with id. at 16/307. Aerotel also cites the 1999 Form 10-K of Sprint Corporation in further support of a finding of common management. See id., Ex. 1 at 16/307. Presumably, the two officers of Sprint Corporation holding the title "President — Long Distance Division" and "President — Sprint PCS" also overlap with the businesses of Sprint Communications and Sprint Spectrum. Aerotel also cites portions of the deposition testimony of Michael Hyde submitted in an unrelated case, Berrios v. Sprint Corp. and Sprint Communications Co. L.P., 1997 WL 777945, 1997 U.S. Dist. LEXIS 19259 (E.D.N.Y.1997).⁴ During that deposition Mr. Hyde stated that ten to twelve of the senior executives of Sprint Corporation hold comparable positions at Sprint Communications. He also stated that Sprint Communications has no other senior executive management other than those ten to twelve people. As Mr. Hyde is the Assistant Secretary of Sprint Corporation, these statements are admissions of Sprint Corporation and may be considered pursuant to Federal Rule of Evidence 801(d)(2). Aerotel's evidence thus shows considerable overlap in the management of Sprint Corporation and Sprint Communications and, to a lesser...