Flame-Spray Indus. Inc. v. GTV Auto. GmbH, CV 15–6664
| Decision Date | 14 August 2017 |
| Docket Number | CV 15–6664 |
| Parties | FLAME–SPRAY INDUSTRIES INC., Plaintiff, v. GTV AUTOMOTIVE GMBH, GTV Gmbh & Co. KG, GTV–mbH, and GTV Verschleißschutz GmbH, Defendants. |
| Court | U.S. District Court — Eastern District of New York |
ULMER & BERNE LLP, By: Robert E. Chudakoff, Esq. and Nicholas B. Wille, Esq., 1660 West Second Street, Suite 1100, Cleveland, Ohio 44113 and RIVKIN RADLER LLP, By: Stephen J. Smirti, Jr., Esq., and Michael C. Cannata, Esq., 926 RXR Plaza, Uniondale, New York 11556, Attorneys for Plaintiff.
SMITH, GAMBRELL & RUSSELL, LLP, By: John G. McCarthy, Esq. and Jason S. Bell, Esq., 1301 Avenue of the Americas, 21st Floor, New York, New York 10019, Attorneys for Defendants.
Plaintiff Flame–Spray Industries Inc. ("Flame–Spray" or "plaintiff") commenced this diversity action alleging, inter alia, breach of contract and misappropriation of trade secrets as well as violations of the Lanham Act by defendants GTV Automotive GmbH ("GTV Automotive"), GTV GmbH & Co. KG ("GTV & Co."), GTV–mbH ("GTV–mbH"), and GTV Verschleißschutz GmbH ("GTV Verschleißschutz") (collectively "defendants"). Currently before the Court is defendants' motion to dismiss the amended complaint pursuant to Rule 12(b)(2), (6), and (7) of the Federal Rules of Civil Procedure. Motion, Docket Entry ("DE") [21] For the reasons set forth below, the motion is denied.
The facts are taken from the amended complaint and are assumed to be true for purposes of this motion. Plaintiff is a New York corporation with its principal place of business in New York. All the defendants are partnerships or limited liability companies organized under the laws of Germany, with principal places of business in Germany, and whose partners or members are citizens of Germany. Plaintiff alleges that the Defendants "have common principals, officers and managers." Amended Complaint ("Am. Compl.") ¶ 7, DE [15].
Flame–Spray and its predecessors developed advanced thermal spray technologies for the application of metallic and composite coatings onto a surface. The technology is referred to as Plasma Transferred Wire Arc ("PTWA") technology and it is used to coat automotive and heavy equipment engines. In the 1990s, Ford Motor Company ("Ford") acquired all the patents concerning PTWA technology in existence at the time of the acquisition, and then licensed the technology to Flame–Spray as its sole licensee. As the sole licensee of the Ford PTWA patents, Flame–Spray "is the only source, absent Flame–Spray authorization, for potential PTWA customers to obtain torch systems and components utilizing the full range of Ford and Flame–Spray PTWA technology and proprietary Confidential Information and know-how belonging to Flame–Spray." Am. Compl. ¶ 15. Some of Flame–Spray's improvements to the technology have been patented, while others have been "maintained confidentially as trade secrets." Id. ¶ 16.
Flame–Spray entered into a "business relationship with GTV to manufacture and supply PTWA technology to Flame–Spray approved customers in Europe and elsewhere." Am. Compl. ¶ 17. Before this relationship was established, GTV had "no experience with PTWA technology, no experience with rotating torches, and no experience with coating of engine blocks or engine bores." Id. ¶ 18. Flame–Spray and the GTV entities entered into a series of four Mutual Non–Disclosure Agreements ("NDA"), beginning in 2003, that governed their relationship.1 The NDAs, which govern the treatment of the exchange of confidential information between the parties, are essentially identical, except as discussed below.
The 2003 NDA purports to be between Flame–Spray and GTV–mbH and was signed by Klaus Nassenstein on behalf of GTV–mbH. The NDA contains a choice of law provision stating that the agreement "shall be construed under the laws of the State of New York."
The 2006 NDA purports to be between Flame–Spray and GTV GmbH & Co. KG, and is again signed by Nassenstein. It also contains the identical choice of New York law provision. The parties concurrently entered into an agreement that "outlined additional formal terms of the parties' working relationship." Am. Compl. ¶ 34. This agreement, referred to by plaintiff as the "Production Agreement," is signed by both parties and contains details concerning the supplying of technology by Flame–Spray to GTV. It states that improvements and/or developments made by Flame–Spray are owned by it, and "improvements/developments relating to PTWA or similar technology that is developed by GTV will be owned by GTV." Production Agreement, p. 2. GTV's improvements/developments are, however, subject to "a royalty free license" to be provided to Flame–Spray.
The 2009 NDA states in its initial paragraph that it is an agreement between Flame–Spray and simply "GTV" having a place of business at Gewerbegebit, Luckenbach, Germany, but a stamp next to the signature says "GTV Verschleißschutz GmbH." This NDA also contains the choice of law provision regarding application of New York law.
The 2011 NDA also states in its initial paragraph that it is an agreement between Flame–Spray and, as in the 2009 NDA, "GTV" having a place of business at Gewerbegebit, Luckenbach, Germany. In the 2011 NDA, however, the stamp next to the signature says "GTV Automotive GmbH." In addition to the choice of law language regarding the agreement's construction under New York law, the 2011 NDA also contains a forum selection clause stating that
For years, the parties engaged in business pursuant to the NDAs and the Production Agreement. GTV would identify a potential client and Flame–Spray would provide written authorization for GTV to sell PTWA equipment to that customer. GTV then manufactured and supplied the equipment, and paid Flame–Spray a commission.
At some point, GTV began working separately with Ford's Germany affiliate ("Ford Germany") to patent modifications and improvements to the PTWA technology. In 2010, Ford Germany and GTV filed a joint international patent application for a modified PTWA torch. GTV began selling its PTWA equipment to customers without obtaining Flame–Spray approval. In March 2013, GTV declared its intention to stop selling PTWA equipment.
Flame–Spray alleges that GTV did not stop selling PTWA equipment, but rather continues to manufacture and sell its modified version, which GTV calls Rotating Single Wire ("RSW") technology. Plaintiff alleges that the RSW torch "is based upon the fundamental original PTWA design that is part of the original Ford patent package of which Flame–Spray is the sole licensee and to which GTV had access only from Flame–Spray, subject to the Production Agreement and NDAs." Am. Compl. ¶ 59. The RSW technology relies upon and utilizes confidential information and know-how, constituting trade secrets, that was provided by Flame–Spray to GTV under the agreements between the parties.
After commencing this action, plaintiff amended its complaint. The Amended Complaint asserts nine causes of action: (I) breach of contract; (II) unjust enrichment; (III) promissory estoppel; (IV) misappropriation of trade secrets; (V) unfair competition; (VI) tortious interference with business relationships; (VII) false designation under Lanham Act; (VIII) false advertising under the Lanham Act; and (IX) accounting. Defendants have moved to dismiss the amended complaint for lack of personal jurisdiction over the corporate entities, forum non conveniens, and failure to join a necessary party. They further move to dismiss the claims for breach of contract, misappropriation of trade secrets, unfair competition, and tortious interference with business relationships for failure to state a claim.
When opposing a motion to dismiss for lack of personal jurisdiction under Rule 12(b)(2), plaintiff bears the burden of showing that the court has jurisdiction over the defendant. Metro. Life Ins. Co. v. Robertson–Ceco Corp., 84 F.3d 560, 566 (2d Cir. 1996). Before discovery has been conducted, Dorchester Fin. Sec., Inc. v. Banco BRJ, S.A. , 722 F.3d 81, 84–85 (2d Cir. 2013) (quoting Ball v. Metallurgie Hoboken–Overpelt, S.A., 902 F.2d 194, 197 (2d Cir. 1990) ); see also Thomas v. Ashcroft, 470 F.3d 491, 495 (2d Cir. 2006) ().
Defendants indicate that GTV Verschleißschutz is the successor in interest to both GRV & Co. and GTV–mbH, but argue that GTV Automotive is a separate and distinct company.2 See Declaration of Klaus Nassenstein, ¶ 6. While conceding that GTV Automotive is subject to the forum selection clause in the 2011 NDA, defendants argue that GTV Verschleißschutz is not a signatory to that agreement and thus cannot be bound by it, and that there are insufficient contacts permitting long-arm jurisdiction over it. Plaintiff counters that all the GTV defendants acted as a single entity throughout the relationship with Flame–Spray and that long-arm jurisdiction is appropriate. The Court analyzes the bases for personal jurisdiction separately.
For a forum selection clause to apply, the party seeking enforcement must demonstrate that: "(1) the clause was reasonably communicated to the...
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