Corp. Bertec v. Sparta Software Corp.
| Decision Date | 04 May 2020 |
| Docket Number | Case No. 2:19-CV-04623 |
| Parties | CORPORATION BERTEC, Plaintiff, v. SPARTA SOFTWARE CORPORATION, AND PLAYGROUND GLOBAL LLC Defendants. |
| Court | U.S. District Court — Southern District of Ohio |
ORDER
This matter comes before the Court on Defendant, Playground Global LLC's Motion to Dismiss Plaintiff's Verified Complaint for Injunctive and Other Relief. (ECF No. 27). Defendant's Motion requests that this Court dismiss Plaintiff's complaint for lack of personal jurisdiction or, in the alternative, for failure to state a claim upon which relief can be granted. Id. For the reason stated below, this Court DENIES Defendant's motion.
Bertec Corporation ("Bertec") is an Ohio company that manufactures and sells force plates, a product that analyzes a person's gait, balance, and performance in certain exercises when a person jumps on the force plate. (ECF No. 2 at 4-5). Sparta Software Corporation ("Sparta") is a corporation that provides health and performance software and services to athletes and military personnel. (ECF No. 27 at 2). Playground Global LLC ("Playground") is a Palo Alto venture capital fund that invests in and provides engineering and other services to early stage startup companies, like Sparta. (ECF No. 44 at 2). Playground invested approximately $5 million in Sparta in December 2017 and acquired 20% of Sparta's shares. Id. at 4.
Beginning in December 2017, Playground conducted due diligence into Sparta's business operations and learned that Sparta had no capabilities to manufacture its own force plates. Sparta and Playground agreed that Playground would design a prototype of a force plate for Sparta and Sparta would decide whether to use that prototype. (ECF No. 44 at 5). Between June and September 2018, Playground built and tested a force plate prototype. Id. at 6. In July of 2018, Playground tested its prototype and did some benchmark comparisons of its prototype compared with Bertec's force plates. Id. at 6. According to Playground it used a publicly available program called Tera Term as well as Bertec's free and publicly available software to read the raw data generated by both the prototype and Bertec's force plates. Id. Playground conducted further testing in September 2018 and then handed off the design files to Sparta. Id. Sparta also identified several manufacturers that Sparta could pay to build the force plate prototype and continued to provide input into Sparta's manufacturing of its own force plate. Id. at 6-7.
Bertec has sold Sparta force plates since 2010. (ECF No. 2 at 5). In August 2018, around the same time that Playground was developing and testing its force plate prototype, Bertec and Sparta negotiated and entered into an Exclusive Supply and Software License Agreement ("Agreement") wherein Sparta agreed to purchase all the force plates it would need exclusively from Bertec for five years and Bertec agreed to give Sparta access to its source code so that Sparta could standardize its data to ensure it was medically and scientifically valid. (ECF No. 2 at 7-8). In June 2019, Sparta informed Bertec that it was planning to create and sell its own force plates, and that it had been developing these force plates since December 2017. (ECF No. 2 at 9).
Bertec brought suit against Sparta and Playground on October 18, 2019 alleging that Sparta breached the Agreement at Playground's direction by sharing its source code with Sparta to create its own force plates. (ECF No. 2 at 9-10). Playground alleges that it did not know about theagreement between Bertec and Sparta until this lawsuit was filed in October 2019 and that it has never seen the source code that Bertec produced to Sparta. (ECF No. 44 at 7). Playground has filed a motion to dismiss on the basis that this court lacks personal jurisdiction over its claims and Bertec has failed to state a claim upon which relief may be granted. (ECF No. 27).
A federal court sitting in a diversity matter may exercise jurisdiction over a defendant if jurisdiction is "both (1) authorized by the law of the state in which it sits, and (2) in accordance with the Due Process Clause of the Fourteenth Amendment." Neogen Corp. v. Neo Gen Screening, Inc., 282 F.3d 883, 888 (6th Cir. 2002). The party seeking to establish the existence of personal jurisdiction bears the burden to establish such jurisdiction. Beydoun v. Wataniya Rest. Holding, Q.S.C., 768 F.3d 499, 504 (6th Cir. 2014). When a district court rules on a motion to dismiss without conducting an evidentiary hearing, the court must consider the pleadings and affidavits in the light most favorable to the nonmoving party. Id. To defeat such a motion, Plaintiff need only make a prima facie showing of jurisdiction. Id. When jurisdiction is challenged in a motion to dismiss, however, "the plaintiff may not stand on his pleading but must, by affidavit or otherwise, set forth specific facts showing that the court has jurisdiction." Carrier Corp. v. Outokumpu Oyj, 673 F.3d 430, 449 (6th Cir. 2012) (quoting Theunissen v. Matthews, 935 F.2d 1454, 1458 (6th Cir. 1991)). In determining whether plaintiff has met its burden, the district court considers the pleadings and affidavits "in a light most favorable to the plaintiff[ ]" and does not weigh "the controverting assertions of the party seeking dismissal." MAG IAS Holdings, Inc. v. Schmuckle, 854 F.3d 894, 899 (6th Cir. 2017) (quoting Theunissen, 935 F.2d at 1459).
A Court may dismiss a cause of action under Federal Rule of Civil Procedure 12(b)(6) for "failure to state a claim upon which relief can be granted." Such a motion "is a test of the plaintiff's cause of action as stated in the complaint, not a challenge to the plaintiff's factual allegations." Golden v. City of Columbus, 404 F.3d 950, 958-59 (6th Cir. 2005). The Court must construe the complaint in the light most favorable to the non-moving party and must accept plaintiff's allegations as true. Stratton v. Portfolio Recovery Assocs., LLC, 770 F.3d 443, 446 (6th Cir. 2014), as amended (Dec. 11, 2014); Total Benefits Planning Agency, Inc. v. Anthem Blue Cross & Blue Shield, 552 F.3d 430, 434 (6th Cir. 2008). If more than one inference may be drawn from an allegation, the Court must resolve the conflict in favor of the plaintiff. Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir. 1993). The Court cannot dismiss a complaint for failure to state a claim "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Id.
Although liberal, Rule 12(b)(6) requires more than bare assertions of legal conclusions. Allard v. Weitzman, 991 F.2d 1236, 1240 (6th Cir. 1993) (citation omitted). Generally, a complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). A complaint's factual allegations "must be enough to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007). It must contain "enough facts to state a claim to relief that is plausible on its face." Id. at 570, 127 S. Ct. 1955. A claim is plausible when it contains "factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).
Playground requests that this Court grant its motion to dismiss arguing this Court has no personal jurisdiction over it since it is an out of state company and has no ties to Ohio. (ECF No. 27 at 5-6). For a federal court to have personal jurisdiction over an out of state person or company, the court must satisfy both the state's long arm statute and the due process clause of the Fourteenth Amendment. Power Investments, LLC v. SL EC, LLC, 927 F.3d 914, 917 (6th Cir. 2019). Personal jurisdiction may be specific or general. Id. A state exercises general personal jurisdiction over a defendant when the defendant's connections to the state are so extensive that it is essentially "at home" in the state and may be brought to court there on any matter, even when not related to the defendant's connections to the state. See Daimler AG v. Bauman, 571 U.S. 117, 127 (2014) (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011)). A state exercises specific jurisdiction over a defendant where the defendant's connections to the state form the basis of the suit. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985)
A state's exercise of specific personal jurisdiction pursuant to a long arm statute must satisfy the requirements of due process—meaning the out of state defendant must have sufficient minimum contacts with the state so that the court's exercise of its power over the defendant does not "offend traditional notions of fair play and substantial justice." Intl. Shoe Co. v. State of Wash., Off. of Unempl. Compen. and Placement, 326 U.S. 310, 316 (1945) (internal quotation marks omitted).
A nonresident is required to have "purposefully avail[ed]" him or herself of the privilege of acting in the forum. The proper focus is on the "affiliation between the forum and the underlying controversy" and "not the foreign defendant's relationship with an in forum plaintiff." Power Investments, 927 F.3d at 917-18 (6th Cir. 2019) ().
Bertec argues that Playground is subject to specific personal jurisdiction pursuant to Ohio's long arm statute Oh. Rev. C. 2307.382 sections (A)(4), (A)(6), and (A)(7). Ohio's long arm statute provides for specific personal jurisdiction over an out of state defendant in relevant part as...
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