HLFIP Holding, Inc. v. Rutherford Cnty., 3:19-cv-00714
| Decision Date | 01 October 2021 |
| Docket Number | 3:19-cv-00714 |
| Parties | HLFIP HOLDING, INC. d/b/a SMART COMMUNICATIONS IP HOLDINGS, Plaintiff, v. RUTHERFORD COUNTY, TENNESSEE, et al., Defendants. |
| Court | U.S. District Court — Middle District of Tennessee |
Pending before the Court is Defendants' Motion [to Dismiss] for Lack of Personal Jurisdiction and Subject Matter Jurisdiction. (Doc. No. 56, “Motion”), supported by a memorandum in support thereof (Doc. No. 57). Plaintiff has responded. (Doc. No. 68, “Response”). Defendants have replied. (Doc. No. 78 “Reply”).[1] The Motion is ripe for review. For the reasons discussed herein, the Court will deny in part and grant in part the Motion.
BACKGROUND [2]
On May 14, 2019, the United States Patent and Trademark Office issued the Asserted Patent, entitled “Correctional Postal Mail Contraband Elimination System” to Smart Communications IP (the business name under which Plaintiff does business). (Doc. No. 1 at ¶¶ 11, 12). Plaintiff focuses its products on eliminating the need for physical mail in the United States prison system and reducing the amount of contraband that enters prisons through the mail. (Id. at ¶¶ 13-16). The two relevant products owned by Plaintiff are branded as MailGuard and MailGuard Postal Mail Elimination. (Id. at ¶ 15). This MailGuard technology is used by jails and prisons throughout the United States. (Id. at ¶ 17).
In mid-2017, Plaintiff met with Defendant Rutherford County and Defendant Rutherford County Adult Detention Center (“RCADC”) officials, performed a demonstration of its technology, and informed them that the technology was subject to a patent application (which ultimately was granted). (Id. at ¶ 19). During the demonstration of the technology, Plaintiff included a detailed description of how its MailGuard system worked. (Id.). Defendants indicated an interest in Plaintiff's MailGuard Postal Mail Eliminatory and electronic messaging system, and Defendant RCADC instructed its commissary vendor, Vend Engine, Inc. (which is an Intervenor to the present action), to work with Plaintiff to bring the technology to RCADC prisons by way of an integrated platform. (Id. at ¶ 20). The parties thereafter executed a nondisclosure agreement. (Id. at ¶ 21). After exchanging communications regarding the implementation of the MailGuard technology, Vend Engine and Defendant RCADC stopped communicating with Plaintiff. (Id.).
Then in June 2018, VendEngine confirmed that it was launching, and RCADC would be implementing, a new digital “MailRoom” application. (Id. at ¶ 22). Plaintiff claims that this “MailRoom” technology was developed after VendEngine learned about Plaintiff's similar product (MailGuard) and the value the product could have to RCADC. (Id. at ¶ 23). VendEngine then allegedly copied Plaintiff's MailGuard Postal Mail Elimination System product. (Id.).
Plaintiff believes that this “MailRoom” technology, which is currently in use by Defendant RCADC, infringes on Plaintiff's patent. (Id. at ¶ 25). The “MailRoom” technology provides on site mail scanning, which allows the facility to process and digitize postal mail, and then allows the inmate to view the digitized mail directly on a kiosk. (Id.). The technology also allows for a facility to flag any physical mail that may contain contraband or other inappropriate content. (Id.). As a result, Plaintiff alleges that the VendEngine MailRoom application infringes the Asserted Patent. (Id. at ¶ 26).[3] On June 28, 2019, counsel for Plaintiff wrote to Defendant Fitzhugh (copying Defendants Lowery and Fly) to identify the Asserted Patent and express concerns over the possible infringement of the VendEngine MailRoom application. (Id. at ¶ 29). Defendant Fitzhugh informed Plaintiff that they would not change their conduct in response to the letter. (Id. at ¶ 30).
Plaintiff thereafter brought this lawsuit against Defendants Rutherford County, Tennessee, its County Sheriff Michael Fitzhugh (only in his official capacity), and its Deputy Chief of the Sheriff's Officer Keith D. Lowery (only in his official capacity), as well as the RCADC and its Deputy Chief Christopher Fly (only in his official capacity).[4] The Complaint brings two counts: patent infringement (Count I) and deprivation of federal rights (Count II). Plaintiff requests damages, attorney's fees, treble damages under the Patent Act, a permanent injunction, and other relief.
LEGAL STANDARD[5]
Rule 12(b)(1) “provides for the dismissal of an action for lack of subject matter jurisdiction.” Cartwright v. Garner, 751 F.3d 752, 759 (6th Cir. 2014). “Subject matter jurisdiction is always a threshold determination.” Am. Telecom Co. v. Republic of Lebanon, 501 F.3d 534, 537 (6th Cir. 2007).
There are two types of motions to dismiss for lack of subject-matter jurisdiction: facial and factual attacks. Gentek Bldg. Products, Inc. v. Sherman-Williams Co., 491 F.3d 320, 330 (6th Cir. 2007). A facial attack questions merely the sufficiency of the pleading. When reviewing a facial attack, a district court takes the allegations in the complaint as true. Id. If those allegations establish federally-cognizable claims, jurisdiction exists. Id. A factual attack instead raises a factual controversy concerning whether subject-matter jurisdiction exists. Id.
Where there is a factual attack on the subject-matter jurisdiction of the court under Fed.R.Civ.P. 12(b)(1), no presumptive truthfulness applies to the complaint's allegations; instead, the court must weigh the conflicting evidence to arrive at the factual predicate that subject-matter jurisdiction does or does not exist. Gentek Bldg. Products, Inc., 491 F.3d at 330. “[T]he district court has considerable discretion in devising procedures for resolving questions going to subject matter jurisdiction[.]” Ohio Nat. Life Ins. Co. v. United States, 922 F.2d 320, 327 (6th Cir. 1990).
The Sixth Circuit has noted that:
The factual attack, however, differs greatly for here the trial court may proceed as it never could under 12(b)(6) or Fed. R. Civ. Pro. 56. Because at issue in a factual 12(b)(1) motion is the trial court's jurisdiction-its very power to hear the case- there is substantial authority that the trial court is free to weigh the evidence and satisfy itself as to the existence of its power to hear the case. In short, no presumptive truthfulness attaches to plaintiff's allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims.
RMI Titanium Co. v. Westinghouse Elec. Corp., 78 F.3d 1125, 1134 (6th Cir. 1996) (quoting Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884, 890 (3d Cir. 1977)).
In making its decision, the district court has wide discretion to allow affidavits, documents, and even a limited evidentiary hearing to resolve jurisdictional facts.[6] Gentek Bldg. Products, Inc., 491 F.3d at 330; see also Nichols v. Muskingum Coll., 318 F.3d 674, 677 (6th Cir. 2003) (); Cunningham v. Rapid Response Monitoring Servs., Inc., 251 F.Supp.3d 1187, 1192 (M.D. Tenn. 2017) (discussing Gentek).
Defendants here lodge a factual attack on subject-matter jurisdiction. “An assertion of Eleventh Amendment sovereign immunity, as has been made by the defendants here, constitutes a factual attack.” Dunn v. Spivey, No. 2:09-0007, 2009 WL 1322600, at *3 (M.D. Tenn. May 11, 2009); see also Gaffney v. Kentucky Higher Educ. Student Loan Corp., No. 3:15-CV-01441, 2016 WL 3688934, at *2 (M.D. Tenn. July 12, 2016); Giorgadze v. Tennessee Tech. Ctr., No. 2:06CV264, 2007 WL 2327034, at *2 (E.D. Tenn. Aug. 10, 2007). Defendants bear the burden of proving that they are entitled to immunity under the Eleventh Amendment. Town of Smyrna, Tenn. v. Mun. Gas Auth. of Georgia, 723 F.3d 640, 650 (6th Cir. 2013); Gragg v. Kentucky Cabinet for Workforce Dev., 289 F.3d 958, 963 (6th Cir. 2002).
Defendants argue that they are acting as arms of the state and are therefore entitled to protection under the Eleventh Amendment. (Doc. No. 57). Plaintiff responds that Defendants are not arms of the state and are not entitled to protection under the Eleventh Amendment. (Doc. No. 68).
“The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.” U.S. Const. amend. XI.[8] Under the Eleventh Amendment, states and state agencies or departments have sovereign immunity from suit in federal court.[9] Boler v. Earley, 865 F.3d 391, 409-10 (6th Cir. 2017) (). However, political subdivisions of a state are not entitled to Eleventh Amendment immunity. Ernst, 427 F.3d at 355. The Sixth Circuit has indicated clearly that the issue, as to whether an entity associated somehow with a state is entitled to Eleventh Amendment immunity, is whether the entity is properly considered an “arm of the state” (in which case immunity exists) or a “political subdivision” of the state (in which case immunity does not exist). See id.
Binding precedent states that “[Eleventh Amendment] immunity ‘does not extend to counties and similar municipal corporations.'” (Ernst, 427 F.3d at 358 (6th Cir. 2005) ...
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