Efco Corp. v. Aluma Systems, Usa, Inc.

• Decision Date: 30 October 1997
• Docket Number: No. CIV. 4-97-90069.,CIV. 4-97-90069.
• Citation: 983 F.Supp. 816
• Parties: EFCO CORP. f/k/a Economy Forms corporation, an Iowa corporation and Economy Forms, Ltd., Plaintiffs, v. ALUMA SYSTEMS, USA, INC., Aluma Systems Corp., A Subsidiary of Tridel Enterprises, Inc., et al., Defendants.
• Court: U.S. District Court — Southern District of Iowa

983 F.Supp. 816

EFCO CORP. f/k/a Economy Forms corporation, an Iowa corporation and Economy Forms, Ltd., Plaintiffs, v. ALUMA SYSTEMS, USA, INC., Aluma Systems Corp., A Subsidiary of Tridel Enterprises, Inc., et al., Defendants.

No. CIV. 4-97-90069.

United States District Court, S.D. Iowa, Central Division.

October 30, 1997.

David L. Charles, David K. Basler, Des Moines, IA, for Plaintiffs.

W. Don Brittin, Jr., Des Moines, IA, Harvey J. Kirsh, Toronto, Canada, for Defendants.

MEMORANDUM OPINION AND ORDER ON DEFENDANTS' MOTION TO DISMISS OR TO STAY

PRATT, District Judge.

MEMORANDUM AND ORDER

Canadian defendants moved to dismiss for lack of personal jurisdiction in Iowa. In the alternative, defendants requested this court to stay proceedings in light of related proceedings in Canada. The court denies the motion to dismiss and grants defendants' requested stay.

I. Background:

Plaintiff, EFCO Corp.,¹ is an Iowa corporation with its principal place of business in Iowa. Plaintiff, Economy Forms Ltd., is a limited company incorporated in Iowa and registered to do business in all the provinces of Canada. Economy Forms Ltd. is located in Georgetown, Ontario. Economy Forms Ltd. and Economy Forms Corp. are both subsidiary companies of William Holding Co., a limited company incorporated in Iowa. Plaintiffs will be referred to collectively as EFCO in this opinion.

The three defendants, Aluma Systems USA Inc. (Aluma USA), Aluma Systems Canada Inc. (Aluma Canada), and Aluma Systems Inc.(Aluma Systems)² will be referred to collectively as Aluma. Aluma USA is a California corporation with its principal place of business in California. Aluma Canada is a Canadian corporation and a wholly owned subsidiary of Aluma Systems and has its principal place of business in Canada. Aluma Systems is a Canadian corporation with its principal place of business in Toronto. Aluma Systems is a wholly owned subsidiary of Tridel Enterprises Inc. Tridel Enterprises is a Canadian corporation with its principal place of business in Canada.

EFCO claims, and Aluma does not contest, that EFCO and Aluma are two of the three "significant competitors in the world" for customized-construction-forms business. The forms are used in the construction industry to support and form concrete structures of all types — from tunnels to high-rise buildings. EFCO has offices dispersed over the Americas, as well as Europe and Southeast Asia. EFCO states that it has been in the business for approximately 60 years while Aluma began in 1971. According to EFCO, Aluma did not directly compete with EFCO in the customized forming business until approximately 1992. EFCO states that it developed a significant database of proprietary information that is compiled in the form of a manual and is only distributed to its engineering support personnel. The information is distributed in either hard-copy or software form.

The dispute between these parties arose when EFCO allegedly discovered that Aluma had obtained the EFCO database and used it to submit a bid for the construction of Ravens Stadium in Baltimore, Maryland. Aluma did not get the job. EFCO contends that its former employees gave the database to Aluma's Canadian branch after the former EFCO Canadian branch employees left to work for Aluma Canada. EFCO claims the Canadian branch of Aluma, Aluma Canada, helped prepare the bid on Ravens Stadium.

EFCO brought this action seeking relief under four counts: (1) violation of the Iowa Uniform Trade Secrets Act; (2) inducement of breach of fiduciary obligation; (3) conversion; and (4) unjust enrichment. Prior to filing this action, EFCO filed a separate action in Canada. The Canadian action will be discussed later in this opinion.

Aluma filed its Motion to Dismiss or to Stay on June 9, 1997. Dismissal was requested for lack of personal jurisdiction. Aluma stated:

None of the defendants are incorporated or authorized to do business in Iowa. None of the defendants has done business or ever submitted a bid to do business in Iowa. None of the defendants have had any contact with the state of Iowa, nor have they availed themselves of the benefits of the forum. Defendants have no reason to expect to be haled before an Iowa court.

EFCO responded, alleging several jurisdictional facts. EFCO alleged, on the basis of very limited and preliminary discovery, that it knew of two construction projects in Iowa that used Aluma products in 1996 and 1997. (Pl.'s Sup. Br. at 4.) Further discovery revealed that Aluma had paid Iowa tax in 1992 and 1995 commensurate with Iowa sales or leases worth $44,000. (Pl.'s Sup. Br. at 4.) Aluma replied that, at least since 1990, it has not sold any product directly to a customer in Iowa. (Def.'s Sup. to Reply Br. at 4.) Aluma contends that it sold only to its independent, non-Iowa dealers which then resold or leased to Iowa customers. These dealers then remitted Iowa sales tax to Aluma USA which then paid the tax to the State of Iowa.

Aluma contends that only Aluma USA ever did business in the U.S. EFCO insists that Aluma defendants work in conjunction on any project or sale in the U.S. or elsewhere and that there is no clear territorial line between the activities of Aluma USA and Aluma Canada. For example and as previously stated, EFCO claims there is evidence Aluma Canada prepared the bid for Ravens Stadium in Baltimore.

EFCO also alleges that it is "well-aware of Aluma's `competitive' practices" which include "(1) management obtaining copies of EFCO's publication "Form Marks," which clearly indicate that EFCO's home office is Des Moines, Iowa and that EFCO has a mailing address of Des Moines, Iowa; (2) management reading industry publications, such as "Engineering News Record," which periodically includes articles about EFCO and its Iowa base; and (3) management advising its sales personnel with information about EFCO, including EFCO's standing as a primary competitor and EFCO's primary place of business being in Iowa." EFCO states "this is an industry in which there are few players, such that all of the players know their competitors very well."

II. Discussion:

A. Personal Jurisdiction:

Aluma moves pursuant to Federal Rule of Civil Procedure 12(b)(2) to dismiss EFCO's complaint for lack of personal jurisdiction. EFCO bears the ultimate burden of proving personal jurisdiction over the Aluma defendants. Watlow Elec. Mfg. v. Patch Rubber Co., 838 F.2d 999, 1000 (8th Cir. 1988). Jurisdiction, however, need not be proved by a preponderance of the evidence until trial or until an evidentiary hearing is held. Dakota Indus., Inc. v. Dakota Sportswear, Inc., 946 F.2d 1384, 1387 (8th Cir. 1991). "To defeat a motion to dismiss for lack of personal jurisdiction, the nonmoving party need only make a prima facie showing of jurisdiction." Id. (emphasis added).

This court has not held a full-blown evidentiary hearing and instead relies on the pleadings and affidavits from the parties. In weighing this material, the court views the facts in the light most favorable to the nonmoving party (EFCO) and resolves all factual conflicts or disputes in favor of that party. Id.

The court ordinarily analyzes personal jurisdiction on two levels, first examining the propriety of jurisdiction under the state's long-arm statute. Austad Co. v. Pennie & Edmonds, 823 F.2d 223, 225 (8th Cir.1987). If the activities of the non-resident defendant pass the first level analysis, then the court considers whether the exercise of personal jurisdiction complies with the requirements of constitutional due process. Dakota Indus., 946 F.2d at 1388. However, because personal jurisdiction in Iowa is coterminous with the constitutional reach of due process, the two level inquiry collapses into one. Hicklin Eng'g Inc., v. Aidco, Inc., 959 F.2d 738, 739 (8th Cir.1992)(per curiam).

Due process mandates that jurisdiction be exercised only if defendant has sufficient "minimum contacts" with the forum state, such that summoning the defendant to the forum state would not offend "`traditional notions of fair play and substantial justice.'" International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 343, 85 L.Ed. 278 (1940)). To maintain personal jurisdiction, defendant's contacts with the forum state must be more than "random," "fortuitous," or "attenuated." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475, 105 S.Ct. 2174, 2183, 85 L.Ed.2d 528 (1985).

Sufficient contacts exist when "the defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 567, 62 L.Ed.2d 490 (1980). Jurisdiction is proper, therefore, where the contacts proximately result from actions by the defendant that create a "substantial connection" with the forum State. Id. The Supreme Court, in applying these constitutional principles, long ago rejected strained "conceptualistic theories" and "mechanical tests" in favor of more realistic measures of the defendant's expectations. Burger King, 471 U.S. at 478-79, 105 S.Ct. at 2185; Cf., Austad Co. v. Pennie & Edmonds, 823 F.2d 223, 226 (8th Cir.1987). Even seemingly isolated acts are to be viewed in the context of the "circumstances of their commission." Id. at 476 n. 18, 105 S.Ct. at 2184 n. 18.

In conjunction with these basic principles of due process, the Eighth Circuit applies a five-factor test in analyzing the constitutional requirements needed for personal jurisdiction: (1) the nature and quality of the contacts with the forum state; (2) the quantity of contacts with the forum; (3) the relation of the cause of action to these contacts; (4) the interest of the forum state in providing a forum for its residents: and (5) the convenience of the parties. Wessels, Arnold & Henderson v. National Medical Waste, Inc., 65 F.3d 1427, 1432 (...