Kraft Foods Grp. Brands LLC v. TC Heartland, LLC

• Decision Date: 13 August 2015
• Docket Number: Civil Action No. 14-28-LPS
• Parties: KRAFT FOODS GROUP BRANDS LLC, Plaintiff, v. TC HEARTLAND, LLC d/b/a HEARTLAND FOOD PRODUCTS GROUP and HEARTLAND PACKAGING CORPORATION, Defendants.
• Court: U.S. District Court — District of Delaware

KRAFT FOODS GROUP BRANDS LLC, Plaintiff, v. TC HEARTLAND, LLC d/b/a HEARTLAND FOOD PRODUCTS GROUPand HEARTLAND PACKAGING CORPORATION, Defendants.

Civil Action No. 14-28-LPS

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE

August 13, 2015

REPORT AND RECOMMENDATION

Presently pending before the Court in this patent infringement suit is Defendants TC Heartland, LLC ("TC Heartland") and Heartland Packaging Corporation's ("HPC") (collectively, "Defendants") Motion to Dismiss Claims for Lack of Personal Jurisdiction and for Transfer of Venue to the Southern District of Indiana (the "Motion"). (D.I. 7) Defendants seek dismissal of Plaintiff Kraft Foods Group Brands LLC's ("Plaintiff") Complaint according to Federal Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction. (Id.; D.I. 8 at 4-10) Defendants further ask the Court to transfer venue of this action to the Southern District of Indiana, pursuant to 28 U.S.C. §§ 1404 and 1406. (D.I. 7) For the reasons set forth below, the Court recommends that Defendants' Motion be DENIED.

I. BACKGROUND

A. Factual Background

Plaintiff is a corporation organized and existing under the laws of the State of Delaware, and maintains its principal place of business in Northfield, Illinois. (D.I. 1 at ¶ 1) Plaintiffalleges that it does business in Delaware "through manufacturing facilities and products sold." (Id.)

Defendant TC Heartland is a limited liability company organized and existing under the laws of the State of Indiana; it maintains its headquarters in Carmel, Indiana. (D.I. 9 at ¶ 3) TC Heartland develops, tests and manufactures the accused "liquid water enhancer products" (the "accused products") at facilities in both Carmel and Indianapolis, Indiana. (Id.) TC Heartland alleges, and Plaintiff does not contest, that it "is not registered to do business in Delaware and has no office, property, employees, agents, distributors, bank accounts, or other local presence in Delaware." (D.I. 8 at 3; see D.I. 9 at ¶¶ 4-18) TC Heartland also claims that it has not entered into any supply contracts in Delaware and that it does not call on any accounts in Delaware to solicit sales. (D.I. 9 at ¶¶ 13, 17) TC Heartland admits, however, that it does ship orders of the accused products directly to Delaware under contracts with "two national accounts" that are headquartered outside of Delaware. (Id. at ¶ 19) In 2013, these shipments by TC Heartland amounted to approximately 2% of TC Heartland's total sales of the accused products. (Id. at ¶ 20 (stating that, in 2013, "more than 98% of TC Heartland's liquid water enhancer sales were shipped to destinations outside of Delaware."))¹

Defendant HPC is incorporated in the State of Indiana, and Plaintiff alleges that HPC's principal place of business is in Carmel, Indiana. (D.I. 1 at ¶ 3) Defendants contend that HPCceased doing business years ago and has never sold the accused products.² (D.I. 8 at 3 n.1; see also D.I. 9 at ¶ 2)

B. Procedural History

Plaintiff commenced this action on January 14, 2014, alleging infringement of the three patents-in-suit. (D.I. 1 at 3-4) Defendants' Motion was filed on June 23, 2014, (D.I. 7), and it was referred to the Court for resolution by Chief Judge Leonard P. Stark on July 15, 2014, (D.I. 13). The Motion was not fully briefed, however, until October 14, 2014. (D.I. 26)

At both parties' request, (D.I. 27, 29), the Court held oral argument on the Motion on December 22, 2014. Following oral argument, the parties filed supplemental letter briefs regarding the legislative history of 28 U.S.C. § 1391 ("Section 1391")—a statute that was addressed in the parties' briefs and at oral argument. The Court received those supplemental letter briefs on January 7, 2015. (D.I. 34, 35)

II. DISCUSSION

A. Personal Jurisdiction

1. Legal Standard

Rule 12(b)(2) requires the Court to dismiss any case in which it lacks personal jurisdiction. Fed. R. Civ. P. 12(b)(2). As an initial matter, if a jurisdictional defense is raised by way of a Rule 12(b)(2) motion, then the plaintiff bears the burden of showing the basis for jurisdiction. Eastman Chem. Co. v. AlphaPet Inc., Civ. Action No. 09-971-LPS-CJB, 2011 WL 6004079, at *3 (D. Del. Nov. 4, 2011). To satisfy its burden at this stage of the litigation, in acase where the district court has not held an evidentiary hearing, the plaintiff need only establish a prima facie case of personal jurisdiction. Metcalfe v. Renaissance Marine Inc., 566 F.3d 324, 330 (3d Cir. 2009); Power Integrations, Inc. v. BCD Semiconductor Corp., 547 F. Supp. 2d 365, 369 (D. Del. 2008); see also Celgard, LLC v. SK Innovation Co., — F. 3d —, No. 20144807, 2015 WL 4068810, at *4 (Fed. Cir. July 6, 2015) (holding that the prima facie standard applies where "jurisdictional discovery [has been] conducted and the district court did not conduct a jurisdictional hearing," if the parties have not agreed that there are no facts in dispute). All factual inferences to be drawn from the pleadings, affidavits and exhibits must be drawn in the plaintiff's favor at this stage. Eastman Chem. Co., 2011 WL 6004079, at *3; Power Integrations, Inc., 547 F. Supp. 2d at 369.

The Supreme Court of the United States has recognized two classifications of personal jurisdiction: "general jurisdiction" and "specific jurisdiction." Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846, 2853-54 (2011) (internal quotation marks and citations omitted). The Supreme Court distinguished between these concepts in International Shoe Co. v. Washington, 326 U.S. 310 (1945), which remains the "'canonical opinion'" in the area of personal jurisdiction. Daimler AG v. Bauman, 134 S. Ct. 746, 754 (2014) (citation omitted). "Specific jurisdiction" encompasses causes of action that "'aris[e] out of or relate[] to the defendant's contacts with the forum.'" Goodyear, 131 S. Ct. at 2853 (quoting Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 n.8 (1984)). "General jurisdiction" encompasses complaints arising from dealings that are distinct from the defendant's activities in the state. Goodyear, 131 S. Ct. at 2853-54 (citing International Shoe, 326 U.S. at 318); see also Daimler, 134 S. Ct. at 754. A court may exercise general jurisdiction over a foreign corporationonly when the corporation's "affiliations with the State [in which suit is brought] are so 'continuous and systematic' as to render [it] essentially at home in the forum State." Daimler, 134 S. Ct. at 754 (quoting Goodyear, 131 S. Ct. at 2851).

"To establish personal jurisdiction, the plaintiff must adduce facts sufficient to satisfy two requirements—one statutory and one constitutional." Eastman Chem. Co., 2011 WL 6004079, at *3. The Court must first consider whether the defendant's actions fall within the scope of Delaware's long-arm statute, 10 Del. C. § 3104(c). Id.; Power Integrations, Inc., 547 F. Supp. 2d at 369. Second, the Court must determine whether the exercise of jurisdiction comports with the defendant's right to due process. Eastman Chem. Co., 2011 WL 6004079, at *3 (citing Int'l Shoe Co., 326 U.S. at 316); Power Integrations, Inc., 547 F. Supp. 2d at 369. Due process is satisfied if the Court finds that "'minimum contacts'" exist between the non-resident defendant and the forum state, "'such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.'" Power Integrations, Inc., 547 F. Supp. 2d at 369 (quoting Int'l Shoe Co., 326 U.S. at 316).

2. Claims Relating to the Accused Products That Are Shipped Directly to Delaware

Defendants first appear to assert that the Court lacks specific jurisdiction under the Due Process Clause³ regarding alleged infringement by the approximately 2% of accused products that Defendants ship directly to Delaware for sale in Delaware. (D.I. 26 at 7-8)⁴ In consideringwhether the due process requirement for specific personal jurisdiction is met, the Court assesses: "(1) whether the defendant purposefully directed its activities at residents of the forum state, (2) whether the claim arises out of or relates to the defendant's activities with the forum state, and (3) whether assertion of personal jurisdiction is reasonable and fair." Celgard, 2015 WL 4068810 at *3.⁵ Plaintiff bears the burden of establishing the first two factors above, and if it does so, the burden shifts to Defendants to show that personal jurisdiction is unreasonable or unfair. Id. "The first two factors correspond with the 'minimum contacts' prong of International Shoe, and the third factor corresponds with the 'fair play and substantial justice' prong." Id. (internal quotation marks and citation omitted).

In this case, Plaintiff asserts jurisdiction based on a stream-of-commerce theory. (D.I. 20 at 1) The Supreme Court set forth in World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980), that a "forum State does not exceed its powers under the Due Process Clause if it asserts personal jurisdiction over a corporation that delivers its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum State." When the Supreme Court next addressed the issue, however, its opinions were split as to whether a court may assert jurisdiction over a defendant who was merely "aware that the final product isbeing marketed in the forum State[,]" Asahi Metal Indus. Co., Ltd. v. Superior Court of Cal., 480 U.S. 102, 117 (1987) (Brennan, J., concurring in part), or whether such an assertion requires "an action of the defendant purposefully directed toward the forum State[,]" id. at 113 (O'Connor, J.) (emphasis omitted). See AFTG-TG, LLC v. Nuvoton Tech. Corp., 689 F.3d 1358, 1362 (Fed. Cir. 2012) (per curiam) (noting that "[b]ecause neither Justice Brennan's nor Justice O'Connor's [stream-of-commerce] test garnered a majority of the votes in Asahi, neither test prevailed as the applicable precedent"). The Supreme Court addressed the issue again in J. ...