Hi-Tex, Inc. v. Tsg, Inc.

• Decision Date: 19 January 2000
• Docket Number: No. Civ. 99-CV-74333-DT.,Civ. 99-CV-74333-DT.
• Citation: 87 F.Supp.2d 738
• Parties: HI-TEX, INC., Plaintiff, v. TSG, INC., Defendant.
• Court: U.S. District Court — Eastern District of Michigan

87 F.Supp.2d 738

HI-TEX, INC., Plaintiff, v. TSG, INC., Defendant.

No. Civ. 99-CV-74333-DT.

United States District Court, E.D. Michigan, Southern Division.

January 19, 2000.

COPYRIGHT MATERIAL OMITTED

Mark A. Cantor, Southfield, MI, for plaintiff.

James Medford, Greensboro, North Carolina, R. Terrance Rader, Bloomfield Hills, MI, for defendant.

OPINION

DUGGAN, District Judge.

Plaintiff, Hi-Tex, Inc., has filed a patent infringement claim under 35 U.S.C. § 271, against defendant, TSG, Inc., alleging that defendant has violated plaintiff's patents for "Treated Polyester Fabric," patent number 5,565,265 ("the '265 patent"), and "Stain Resistant, Water Repellant, Interpenetrating Polymer Network Coating-Treated Textile Fabric," patent number 5,747,392 ("the '392 patent"). The matter is currently before the Court on defendant's motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b) for lack of personal jurisdiction and improper venue, or in the alternative, to transfer venue to the Western District of North Carolina pursuant to 28 U.S.C. § 1404(a).¹ Oral argument regarding defendant's motion was held on January 13, 2000, and, for the reasons stated below, defendant's motion to dismiss for lack of personal jurisdiction shall be granted.

Background

Defendant TSG is a Pennsylvania corporation engaged in the business of textile finishing. Defendant's business is divided into four divisions: Synfin Industries, which finishes textiles at one plant in Pennsylvania; Synthetics Finishing, which finishes textiles at three plants in North Carolina; Combeau Industries, which finishes fabric at one plant in North Carolina; and Long View Machinery, which manufactures machinery in North Carolina for defendant's three other divisions. (Def.'s Mot. to Dismiss at 2). With the exception of its Combeau division, defendant sells a service, the finishing of textiles, not a product. (Id. at 3).

Defendant does not own the textiles it finishes, nor does it direct the type of finish to be applied to a particular textile. (Id.). Instead, defendant's customers ship textiles to defendant with directions regarding the type of finish to apply. (Id.). Once defendant has completed the textile finishing process, it ships the textile to the end-user per its customer's directions. (Id.).

Plaintiff alleges that defendant, through its business of finishing textiles, is infringing two of its patents directed to liquid and stain resistant fabrics. According to plaintiff, defendant "has contacted other fabric manufacturers and has offered to finish their fabrics to make them liquid and stain resistant." (Am.Compl. at ¶ 13). On August 12, 1999, plaintiff informed defendant by letter that it believed that some of defendant's finishes were covered by the '265 and '392 patents, and requested evidence that defendant's finishes were outside the scope of their patents. (Id. at ¶ 14). After defendant failed to respond to plaintiff's inquiry, plaintiff filed suit in this Court.

Discussion

Defendant has filed a motion to dismiss for lack of personal jurisdiction asserting that this Court has neither general personal jurisdiction nor limited personal jurisdiction over defendant. The parties do not dispute that defendant does no fabric finishing within Michigan, is not incorporated under the laws of Michigan, has no place of business in Michigan, has no registered agent for service of process in Michigan, owns no real property in Michigan, does not incur or pay taxes in Michigan, does not have a license to do business in Michigan, and does not maintain a bank account in Michigan. (Rosenstein Aff. at ¶¶ 9-22). Furthermore, none of defendant's sales agents have visited Michigan in over four years,² none of defendant's sales agents have directly solicited orders from customers in Michigan for over four years, and none of defendant's sales agents have shipped samples of its finishes to customers in Michigan in over four years. (Id. at ¶¶ 23-25).

Nonetheless, plaintiff contends that defendant is subject to both general and limited personal jurisdiction in Michigan because it has had regular sales to Michigan customers and it advertises nationally through trade magazines, trade shows, and an Internet site. (Pl.'s Resp. at 12-14). Plaintiff bears the burden of establishing that jurisdiction exists. Theunissen v. Matthews, 935 F.2d 1454, 1458 (6th Cir.1991). Furthermore, in the face of a properly supported motion for dismissal, plaintiff may not stand on its pleadings but must, by affidavit or otherwise set forth specific facts showing that this Court has jurisdiction. Id.

Because the Court is relying solely upon the parties' affidavits in determining whether personal jurisdiction exists, "plaintiff must make only a prima facie showing that personal jurisdiction exists in order to defeat dismissal." Id. Under such circumstances, the Court's treatment of defendant's motion to dismiss mirrors, in some respects, that of a motion for summary judgment under Federal Rule of Civil Procedure 56. Id. at 1459. For example, the pleadings and affidavits are construed in a light most favorable to plaintiff. Id. Furthermore, the Court is obligated to examine each of plaintiff's factual allegations made in support of exercising personal jurisdiction over defendant and must determine whether such allegations, if true, would be sufficient to establish personal jurisdiction. Id.

To determine whether personal jurisdiction exists in a patent infringement case, this Court applies the law of the Federal Circuit, not the regional circuit. Akro Corp. v. Luker, 45 F.3d 1541, 1543 (Fed.Cir.1995). Personal jurisdiction over a non-consenting defendant outside the forum involves a two-step inquiry. Red Wing Shoe Co. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355, 1358 (Fed.Cir.1998). First, the Court must determine whether the defendant would be subject to personal jurisdiction under the laws of the forum state in which it sits.³ Id. Second, if the defendant is subject to personal jurisdiction in the forum state, the Court must determine whether its exercise of personal jurisdiction over the defendant comports with due process. Id.

The Due Process Clause permits a court to exercise both general and limited personal jurisdiction over a non-resident defendant. In analyzing the due process limits of personal jurisdiction, however, a distinction is made between general and limited personal jurisdiction. General personal jurisdiction exists when a defendant has "continuous and systematic" contacts with the forum state justifying the Court's exercise of judicial power with respect to any and all claims against the defendant. Id. at 1359.

By contrast, limited personal jurisdiction subjects a defendant to suit in the forum state only when the claims "arise out of or relate to" the defendant's contact with the forum state. Id. Under the concept of limited personal jurisdiction, "even a single contact with a forum state may suffice for personal jurisdiction if it is directly and substantially related to the plaintiff's claim." Id. (citing McGee v. International Life Ins. Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957)).

I. General Personal Jurisdiction

Plaintiff contends that defendant is subject to general personal jurisdiction in Michigan because it has "carried on a substantial, continuous and systematic part of its business in Michigan." (Pl.'s Resp. at 12). According to plaintiff, defendant's "business generated in Michigan is regular and continuous as is indicated by consistent sales in each year." (Id.). Plaintiff also relies on the fact that defendant "has engaged in a national advertising campaign intended to solicit nationally and has successfully done so." (Id. at 13). For example, defendant has advertised in trade magazines circulated in Michigan, participated in trade shows, and advertised on the Internet. (Id.).

Defendant admits that it has finished textiles for Michigan-based customers. Defendant, however, contends that such contacts are an insufficient basis for this Court to exert general personal jurisdiction over it in Michigan. This Court agrees. Substantially less than one percent of defendant's business in the years 1995 through 1998 was attributable to Michigan-based customers.⁴ (Rosenstein Aff. at 28). Such levels do not rise to "systematic or continuous" justifying this Court's exercise of general personal jurisdiction over defendant. See Stairmaster Sports/Medical Prod., Inc. v. Pacific Fitness Corp., 78 F.3d 602, 1996 WL 39681 (Fed.Cir.1996) (affirming lower court's finding that general personal jurisdiction was lacking when defendant only shipped three percent of its product to forum state).

Plaintiff has provided no evidence that defendant "systematically" or "continuously" does business within Michigan. Defendant does not solicit business in Michigan or ship any of its product to Michigan. At most, plaintiff has provided evidence that defendant, when solicited to do so by a customer, provides finishing services at its facilities outside the State of Michigan per the customer's directions by applying the finish to the customer's product and then shipping the customer's finished product in accordance with the customer's directions. The fact that plaintiff believes "it is a common practice of business entities that require routine services, for example, fabric finishing for a furniture manufacturer, to do repeat business from the same organization," does not automatically lead to the conclusion that defendant conducts "systematic and continuous" business within Michigan. (Pl.'s Resp. at 13).

Defendant argues that its situation is analogous to the defendant's situation in Neighbors v. Penske Leasing, Inc., 45 F.Supp.2d 593 (E.D.Mich.1999), in which this Court held that a defendant steel treating facility that treated steel for Michigan-based customers was not subject to general personal jurisdiction in Michigan. This Court agrees. Similar to ...