Lfg, LLC v. Zapata Corp.

• Decision Date: 19 January 1999
• Docket Number: No. 98 C 5096.,98 C 5096.
• Citation: 78 F.Supp.2d 731
• Parties: LFG, LLC, d/b/a Zap Futures, Plaintiff, v. ZAPATA CORPORATION and Zap Corp., Defendants.
• Court: U.S. District Court — Northern District of Illinois

78 F.Supp.2d 731

LFG, LLC, d/b/a Zap Futures, Plaintiff, v. ZAPATA CORPORATION and Zap Corp., Defendants.

No. 98 C 5096.

United States District Court, N.D. Illinois, Eastern Division.

January 19, 1999.

William John Nissen, Andrew L. Goldstein, Erick C. Howard, Sidley & Austin, Chicago, IL, for Plaintiff.

James R. Ferguson, Sonnenschein, Nath & Rosenthal, Chicago, IL, Donald W. O'Brein, Jr., Woods, Oviatt, Gilman, Sturman & Clarke, Rochester, NY, for Defendants.

MEMORANDUM OPINION

GRADY, District Judge.

Before the court is the defendants' motion to dismiss the complaint pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure. For the reasons stated in this opinion, the motion is denied.

BACKGROUND

Viewed in the plaintiff's favor, the relevant facts are as follows. Plaintiff LFG, LLC, doing business as Zap Futures, is an Illinois limited liability company with its principal place of business in Chicago. It is an electronic brokerage firm involved in the trading of commodity futures and options over the internet.¹ Zap Futures provides on-line trading, on-line stock and commodity futures and options research, quotes, and financial news. It uses the trademark "ZAP" in connection with its goods and services and has maintained a web site with the internet domain address "zapfutures.com" since 1996.²

Defendant Zapata Corporation ("Zapata") is a Delaware corporation with its principal place of business in Houston, Texas. In early 1998, Zapata developed a plan to create an internet "portal" through which users could access the internet. Accordingly, Zapata formed defendant Zap Corp. in April 1998 as a wholly-owned subsidiary to conduct Zapata's internet business.³ Zap Corp. is a Nevada corporation with its principal place of business in Rochester, New York. Its computer server is in New York as well.

In June 1998, defendants launched their web site (the "Zap site"), which uses the domain address "zap.com." Internet users in the United States and most of the world can access the Zap site. At the time this action was brought, the site was structured as a "portal," offering a list of connections to other web sites by way of "hyperlinks."⁴ Some of the linked sites merely provided information; others were interactive — for example, allowing users to purchase music or make travel reservations. The Zap site connected users to the linked sites at no charge; in addition, it offered users the opportunity to sign up for Zapata's mailing list and the ability to make the Zap site a user's "starting page" at no charge.⁵

In early summer 1998, Zap Corp. entered into non-binding letters of intent to acquire the web sites hyperlinked to the Zap site. Thereafter, and until some point after this suit was commenced, the Zap site described that list of hyperlinks as "OUR SITES." In mid-October 1998, however, Zap Corp. announced that it would not be proceeding with the acquisitions contemplated by the letters of intent and withdrew the letters. The Zap site as it currently appears provides links to only two sites, "Word" and "Charged," the only other web sites Zap Corp. owns.⁶

Three of the web sites formerly listed on the Zap site under the heading "OUR SITES" were "Starting Point," "Daily Stocks," and "Stocksheet." "Starting Point" provides access to information about stocks, commodities, and related investments, among other things. "Daily Stocks" and "Stocksheet" offer stock and commodity quotes, charts, news, and research. At least three of plaintiff Zap Futures' competitors advertised their services on one of these three web sites.

Zap Futures brought this action in August 1998, alleging that defendants had violated Sections 43(a) and 43(c) of the Lanham Act, 15 U.S.C. § 1125(a), (c), in connection with their Zap site activities. Plaintiff also alleges common law unfair competition and violations of the Illinois Deceptive Trade Practices Act, the Illinois Consumer Fraud and Deceptive Business Practices Act, and the Illinois Anti-Dilution Act. The gist of Zap Futures' claim involves defendants' use of the name "Zap" and the domain name "zap.com" in connection with stocks and commodities trading. Plaintiff alleges that defendants' activities will likely cause trade and public confusion and dilution of the quality of Zap Futures' "ZAP" mark. Zap Futures seeks to enjoin defendants' alleged trademark infringement, trademark dilution, and unfair competition, and also seeks damages. Defendants have moved to dismiss this suit for lack of personal jurisdiction pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure.

DISCUSSION

The standards by which the court must evaluate a 12(b)(2) motion to dismiss are straightforward. The plaintiff bears the burden of providing sufficient evidence to establish a prima facie case for personal jurisdiction. RAR, Inc. v. Turner Diesel, Ltd., 107 F.3d 1272, 1276 (7th Cir.1997); Michael J. Neuman & Assocs. v. Florabelle Flowers, Inc., 15 F.3d 721, 724 (7th Cir.1994); Arena Football League, Inc. v. Roemer, 947 F.Supp. 337, 339 (N.D.Ill. 1996). The jurisdictional allegations in the complaint are taken as true unless controverted by the defendant's affidavits. Any conflicts among affidavits must be resolved in the plaintiff's favor. Turnock v. Cope, 816 F.2d 332, 333 (7th Cir.1987); Cherry Communications, Inc. v. Coastal Tel. Co., 906 F.Supp. 452, 454 (N.D.Ill.1995); Czarobski v. St. Kieran's Church, 851 F.Supp. 1219, 1220 (N.D.Ill.1994).

In federal question cases, a prima facie case for personal jurisdiction has two elements. First, the plaintiff must demonstrate that bringing the defendant into court comports with Fifth Amendment Due Process. Second, the plaintiff must show that the defendant is amenable to service of process. See United States v. De Ortiz, 910 F.2d 376, 381-82 (7th Cir. 1990). As we discuss below, Zap Futures has met both requirements.

A. Due Process

A court's assertion of personal jurisdiction must comport with "`traditional notions of fair play and substantial justice'" to satisfy the Due Process Clause. International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 85 L.Ed. 278 (1940)). The touchstone of the due process analysis is whether the defendant purposefully established "minimum contacts" with the political unit encompassing the forum. Asahi Metal Indus. Co. v. Superior Court of Cal., 480 U.S. 102, 108-09, 107 S.Ct. 1026, 94 L.Ed.2d 92 (1987). Even defendants not physically present in the jurisdiction have sufficient "minimum contacts" if they do some act by which they purposefully avail themselves of the privilege of conducting activities in the forum state, Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958), and if they "should reasonably anticipate being haled into court there." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980). Due process also requires that the action arise from or relate to the defendant's contacts with the forum state. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985); Heritage House Restaurants, Inc. v. Continental Funding Group, Inc., 906 F.2d 276, 281 (7th Cir. 1990). Finally, the court should consider whether it is reasonable to require the nonresident defendant to litigate in the forum state, considering factors such as the relative interests of the litigants, the forum's interest in litigating the dispute, and "`the interstate judicial system's interest in obtaining the most efficient resolution of controversies.'" Burger King, 471 U.S. at 477, 105 S.Ct. 2174.

Our threshold inquiry into "minimum contacts" is not complicated. Indeed, most challenges to personal jurisdiction in federal question cases revolve around the defendant's amenability to service because the due process requirement is easily satisfied. See Vlasak v. Rapid Collection Sys., Inc., 962 F.Supp. 1096, 1099 (N.D.Ill.1997) (Grady, J.); Merrill Lynch Business Financial Services, Inc. v. Marais, No. 94 C 3316, 1995 WL 608573, at *4 (N.D.Ill. Oct.12, 1995). In federal question cases, the defendant must only have sufficient contacts "with the United States as a whole rather than any particular state or other geographic area." De Ortiz, 910 F.2d at 382; see also United Rope Distribs., Inc. v. Seatriumph Marine Corp., 930 F.2d 532, 534 (7th Cir.1991) ("When a national court applies national law, the due process clause requires only that the defendant possess sufficient contacts with the United States."). A defendant "has sufficient contacts with the United States to support the fairness of the exercise of jurisdiction over him by a United States court" if he resides or conducts business on American soil. See Fitzsimmons v. Barton, 589 F.2d 330, 333 (7th Cir.1979). Here, defendants were incorporated and do business in the continental United States. Thus, their contacts with the United States satisfy due process.

B. Amenability to Service

Minimum contacts with the United States are necessary, but not sufficient, to authorize a district court's assertion of personal jurisdiction. A defendant must also be amenable to service of process. See Omni Capital Intern., Ltd. v. Rudolf Wolff & Co., Ltd., 484 U.S. 97, 104, 108 S.Ct. 404, 98 L.Ed.2d 415 (1987) (holding that personal jurisdiction requires both "a constitutionally sufficient relationship between the defendant and the forum" and "a basis for the defendant's amenability to service of summons"). Rule 4(k) of the Federal Rules of Civil Procedure provides that service of a summons is effective to establish jurisdiction over the person of a defendant (1) who could be subjected to the jurisdiction of a court in the state in which the district court is located, or (2) when authorized by a statute of the United States.

This case involves the Lanham Act, which does not authorize nationwide service of process. Therefore, ...