Kesters Merch. Display Int'l v. Surfacequest, Inc.
| Decision Date | 11 May 2022 |
| Docket Number | 21-2300-EFM-GEB |
| Parties | KESTERS MERCHANDISING DISPLAY INTERNATIONAL, INC., Plaintiff, v. SURFACEQUEST, INC., SURFACEQUEST CHICAGO, and ENGINEERED GROUP, LLC, d/b/a SQ ORLANDO, Defendants. |
| Court | U.S. District Court — District of Kansas |
ERIC F. MELGREN CHIEF U.S. DISTRICT JUDGE.
Plaintiff Kesters Merchandising Display International, Inc. (“KMDI”) brings this suit against Defendants Surface Quest, Inc. (“SQ”), Surface Quest Chicago (“SQ Chicago”), and Engineered Group, LLC d/b/a SQ Orlando (“SQ Orlando”) alleging violation of the Lanham Act, unfair competition, and unjust enrichment. KMDI alleges that Defendants falsely represented that they were the inventor and purveyor of KMDI's “Microlite” product to deceive consumers and divert profits away from KMDI. This matter comes before the Court on Defendant SQ's Motion to Dismiss, or in the Alternative, to Sever and Transfer Venue (Doc 15).[1] SQ asks the Court to dismiss the claims against it for lack of personal jurisdiction and improper venue, or in the alternative, seeks to transfer this case to the District of Minnesota under 28 U.S.C. § 1406(a) and/or 28 U.S.C § 1631. For the reasons stated below, the Court denies SQ's motion.
KMDI is a Kansas corporation with its principal place of business in Kansas City, Kansas. KMDI sells a material known as “Microlite.” Microlite is a composite material that can be customized to create architectural elements such as soffits, fascias, displays, curves, and rings. Microlite is unique because it is light-weight, easy to install, and able to be formed to any shape, size, or finish. It is a fully encapsulated material, meaning that KMDI only manufactures the structural aspect of the architectural feature, not the exterior film or veneer visible to the consumer.
SQ is a Minnesota corporation with its principal place of business in Minneapolis, Minnesota. SQ manufactures and sells films and laminates that cover walls and other surfaces to make them more visually appealing for a more affordable price than wood or stone. When combined with a structural material, this film can be used to create architectural features that safely hang from ceilings and walls where a material like wood or stone could not be as readily hung.
SQ began working as an outside sales representative for KMDI in 2013, and sent its employee to KMDI's facilities in Kansas to meet with it regarding the business relationship. From 2013 to 2014, SQ acted as KMDI's representative, using Microlite samples SQ obtained from Kansas to market Microlite material to customers across the country. More specifically, SQ used its architectural films to demonstrate how the films could be applied to the Microlite to achieve the desired aesthetic result. KDMI paid SQ a commission for each sale made from KMDI's checking account located in Kansas. In March of 2014, KMDI wished to enter a more formal, exclusive partnership with SQ. When KMDI communicated those wishes, SQ stopped communicating with it. KMDI continued to order SQ's film, however, which was delivered to KMDI's facilities in Kansas until 2017.
SQ has since begun selling its lightweight architectural product-known as the “RevBeam” product. RevBeam contains an interior structural material that is different from Microlite. In 2020, KMDI learned that SQ improperly promoted its RevBeam product by misrepresenting to customers and the public that KDMI's Microlite was actually SQ's product. For example, KMDI alleges that:
KMDI alleges that it suffered substantial, irreparable harm, as well as lost millions of dollars in business revenue, when SQ stole its business and interfered with KMDI's customer relationships. Specifically, SQ entered into a contract with Hy-Vee, a retail grocer based in Kansas and Missouri, to install RevBeam at its stores. KMDI submitted a proposal for the 2020 Hy-Vee remodel project but did not receive the business.
The Complaint alleges that the Court has personal jurisdiction because “the transaction giving rise to the claims herein originated at KMDI's principal place of business in Wyandotte County, Kansas, and because the harm suffered by KMDI is most felt in Kansas, where its business bank accounts are located.” SQ has never sold or attempted to sell its RevBeam product in Kansas. Although SQ maintains a website on which the pictures at issue were published, the website does not allow a customer to purchase its products directly. At most, persons can submit a generic form or email to schedule a project consultation or product presentation.
KMDI asserts three claims against SQ based on SQ's alleged misconduct. The first claim is a false misrepresentation claim under the Lanham Act, 15 U.S.C. § 1125. The second claim is a state law unfair competition claim, and the third claim is a state law unjust enrichment claim. SQ has now moved to dismiss the Complaint.
A plaintiff opposing a motion to dismiss based on lack of personal jurisdiction bears the burden of showing that jurisdiction over the defendant is appropriate.[3] In a pretrial motion to dismiss, when the matter is decided on the basis of affidavits and written materials, the plaintiff is only required to make a prima facie showing that personal jurisdiction is proper to avoid dismissal.[4]Once the plaintiff makes a prima facie showing, the defendant “must present a compelling case demonstrating ‘that the presence of some other considerations would render jurisdiction unreasonable.' ”[5]
The court views the allegations in the complaint as true if they are uncontroverted by the defendant's affidavits.[6] “If the parties present conflicting affidavits, all factual disputes must be resolved in the plaintiff's favor, and the plaintiff's prima facie showing is sufficient notwithstanding the contrary presentation by the moving party.”[7] “However, only the well pled facts of [the] plaintiff's complaint, as distinguished from mere conclusory allegations, must be accepted as true.”[8] “The plaintiff has the duty to support jurisdictional allegations in a complaint by competent proof of the supporting facts if the jurisdictional allegations are challenged by an appropriate pleading.”[9]
Under Rule 12(b)(3), a defendant may request dismissal for improper venue. Venue is proper in Kansas under 28 U.S.C. § 1391(b) only when (1) all defendants are residents of Kansas, (2) a substantial part of the events giving rise to the action occurred in Kansas, or (3) there is no other venue in which the action could have been brought.
When a defendant challenges venue, the plaintiff bears the burden of showing that venue is proper.[10] In a motion to dismiss for improper venue, the plaintiff is only required to make a prima facie showing that venue is proper to avoid dismissal; this is the same standard as a motion to dismiss for lack of personal jurisdiction.[11]
Transfer of venue is governed by 28 U.S.C. § 1404 or § 1406. Which section governs depends on whether the plaintiff's choice of venue is proper. If the original venue is proper, § 1404 is the governing section; if venue is improper, § 1406 governs.[12]
The relevant portion of § 1404 states: “For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought ”[13] Unless the balance of interests “is strongly in favor of the movant, the plaintiff's choice of forum should rarely be disturbed.”[14]
The relevant portion of § 1406 states: “The district court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought.”[15] The phrase “if it is in the interest of justice” grants the Court discretion in deciding to dismiss or transfer an action.
SQ moves the Court to dismiss the Complaint against it for lack of personal jurisdiction under Rule 12(b)(2) and for improper venue under Rule 12(b)(3). In the alternative, SQ asks the Court to sever the claims against it under Rule 21 and transfer venue to the District of Minnesota under 28 U.S.C. § 1406(a) and/or 28 U.S.C. § 1631.
The Court's assertion of personal jurisdiction over SQ is determined by the law of the forum state.[16] To establish personal jurisdiction over SQ, KMDI must make two showings: (1) that jurisdiction is legitimate under the state's long-arm statute, and (2) that jurisdiction does not offend the Due Process Clause of the Fourteenth Amendment.[17]
KMDI spends much of its response arguing that personal jurisdiction is proper under the Kansas long-arm statute. This argument, however, is irrelevant. The Kansas Supreme Court has interpreted Kansas' long-arm statute to extend jurisdiction to the fullest extent allowed by the Due Process Clause of the Fourteenth Amendment.[18]...
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