Loyalty Conversion Sys. Corp. v. Am. Airlines, Inc.

• Citation: 66 F.Supp.3d 795
• Decision Date: 02 September 2014
• Docket Number: Case Nos. 2:13–CV–655 LEAD CASE,2:13–CV–661
• Court: U.S. District Court — Eastern District of Texas
• Parties: Loyalty Conversion Systems Corporation, Plaintiff, v. American Airlines, Inc., et al., Defendants. Loyalty Conversion Systems Corporation, Plaintiff, v. Hawaiian Airlines, Inc., et al., Defendant.

66 F.Supp.3d 795

Loyalty Conversion Systems Corporation, Plaintiff

v.American Airlines, Inc., et al., Defendants.

Loyalty Conversion Systems Corporation, Plaintiff

v.Hawaiian Airlines, Inc., et al., Defendant.

Case Nos. 2:13–CV–655 LEAD CASE

2:13–CV–661

United States District Court, E.D. Texas, Marshall Division.

Signed September 02, 2014

Adam G. Price, Andrew Gerald Dinovo, Jay D. Ellwanger, Stefanie Tina Scott, William Morrison Parrish, Dinovo Price Ellwanger & Hardy LLP, Austin, TX, for Plaintiff.

Stephen E. Baskin, Ann Marie Duffy, Cody I. Gillians, Dara M. Kurlancheek, Saqib J. Siddiqui, Mayer Brown, LLP, Washington, DC, Jennifer Parker Ainsworth, Wilson Robertson & Cornelius PC, Tyler, TX, Ivan Wang, John Bruce Campbell, Jr., McKool Smith, PC, Austin, TX, Mike McKool, Jr., Phillip M. Aurentz, McKool Smith PC, Dallas, TX, for Defendant.

MEMORANDUM OPINION AND ORDER

WILLIAM C. BRYSON, UNITED STATES CIRCUIT JUDGE

Before the Court is Defendant Hawaiian Airlines, Inc.'s Motion to Dismiss for Lack of Personal Jurisdiction. Case No. 2:13–cv–661, Dkt. No. 12. After considering full briefing and hearing argument on the motion, the Court DENIES the motion.

I. BACKGROUND

This action against Hawaiian Airlines, Inc., (“Hawaiian”) is one of nine separate actions brought against various United States airline companies by plaintiff Loyalty Conversion Systems Corporation (“Loyalty”). Loyalty owns two U.S. patents, U.S. Patent Nos. 8,313,023 (“the '023 patent”) and 8,511,550 (“the '550 patent”), which relate to methods and computer program products for converting loyalty award credits that a customer earned from one vendor into loyalty award credits of a second vendor that the customer can use to make purchases from the second vendor. Loyalty alleges that Hawaiian, like the other eight defendant airlines, infringes those patents through the operation of its frequent flyer mileage program.

Hawaiian is a Delaware corporation with its principal place of business and corporate headquarters in Hawaii. It is in the business of providing scheduled air transportation of passengers and cargo among the Hawaiian islands, between the Hawaiian islands and certain cities in the continental United States, and between the Hawaiian islands and certain cities in the South Pacific, Australia, and Asia. In the continental United States, Hawaiian serves the cities of Los Angeles, Oakland, Sacramento, San Diego, San Francisco, and San Jose, California; Las Vegas, Nevada; Phoenix, Arizona; Portland, Oregon; Seattle, Washington; and New York City, New York. It does not serve any city in Texas with scheduled air passenger service, nor does it have any offices, facilities, or support operations in Texas. Hawaiian represents, without contradiction from Loyalty, that although its customers can book flights between Los Angeles and other U.S. cities, including Dallas, Texas, under a code-sharing agreement with Virgin America, Inc., the codeshare flights are all on aircraft operated and controlled by Virgin America, Inc. Based on its assertions that it has no presence or business operations in Texas and has not committed any act of alleged infringement in Texas, Hawaiian contends that this Court lacks personal jurisdiction over it and that the action against it must be dismissed.

II. DISCUSSION

A. Governing Legal Principles

The general principles that apply to the question whether a federal court has in personam jurisdiction over a non-resident defendant are well-settled. If the federal statute under which an action is brought contains an applicable service-of-process provision, the court looks to whether that provision can be satisfied by service of process on the defendant. See Omni Capital Int'l, Ltd. v. Rudolf Wolff & Co., 484 U.S. 97, 105–06, 108 S.Ct. 404, 98 L.Ed.2d 415 (1987). When the federal statute has no such applicable service of process provision, as is the case for the Patent Act,¹ the federal court may reach those entities that are subject to the jurisdiction of the state in which the district court sits.See Fed.R.Civ.P. 4(e). In that setting, federal courts “follow state law in determining the bounds of their jurisdiction over persons.” Daimler AG v. Bauman, ––– U.S. ––––, 134 S.Ct. 746, 753, 187 L.Ed.2d 624 (2014).

A district court may exercise personal jurisdiction over a defendant if the defendant “is subject to the jurisdiction of a court of general jurisdiction in the state where the district court is located.” Fed.R.Civ.P. 4(k)(1)(A). In order to satisfy that requirement, the district court's jurisdiction over an out-of-state defendant must be consistent with both the forum state's long-arm statute and the requirements of due process. See Walden v. Fiore, ––– U.S. ––––, 134 S.Ct. 1115, 1121, 188 L.Ed.2d 12 (2014) ; Radio Sys., Inc. v. Accession, Inc., 638 F.3d 785, 788–89 (Fed.Cir.2011) ; Avocent Huntsville Corp. v. Aten Int'l Co., 552 F.3d 1324, 1329 (Fed.Cir.2008) ; Red Wing Shoe Co. v. Hockerson–Halberstadt, Inc., 148 F.3d 1355, 1358 (Fed.Cir.1998).²

Texas's long-arm statute is coterminous with the extent of personal jurisdiction permitted by due process principles, see Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 413 & n. 7, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984) ; Great W. United Corp. v. Kidwell, 577 F.2d 1256, 1266 (5th Cir.1978) ; Product Promotions, Inc. v. Co usteau, 495 F.2d 483, 492 (5th Cir.1974) ; Schlobohm v. Schapiro, 784 S.W.2d 355, 357 (Tex.1990) ; U–Anchor Advertising, Inc. v. Burt, 553 S.W.2d 760, 762 (Tex.1977). Where, as here, the forum state's long-arm statute “is coextensive with the limits of due process, the two inquiries collapse into a single inquiry: whether jurisdiction comports with due process.” Inamed Corp. v. Kuzmak, 249 F.3d 1356, 1360 (Fed.Cir.2001).

Due process requires that to subject a defendant to the judicial power of a forum state, the defendant must have sufficient “minimum contacts” with the forum “such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.’ ” Int'l 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). As a general matter, the sovereign's exercise of judicial power requires “some act by which the defendant “purposefully avails itself of the privilege of conducting activities within the forum state, thus invoking the benefit and protections of its laws.” J. McIntyre Mach., Ltd. v. Nicastro, ––– U.S. ––––, 131 S.Ct. 2780, 2787, 180 L.Ed.2d 765 (2011) (plurality opinion), quoting Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958). In that manner, due process principles “give[ ] a degree of predictability to the legal system that allows potential defendants to structure their primary conduct with some minimum assurance as to where that conduct will and will not render them liable to suit.” World–Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980).

There are several ways that a defendant can submit to the adjudicative authority of a forum state (and thus of federal courts sitting within that state). Besides consent or presence within the state at the time the suit is filed and process is served, citizenship or domicile “indicates general submission to a State's powers.” McIntyre, 131 S.Ct. at 2787. For a corporation, the state of “citizenship or domicile” means the state of incorporation or the corporation's principal place of business, or some equivalent. Id. In such instances, the defendant is said to be subject to “general jurisdiction” in the forum. Because general jurisdiction exposes the defendant to suit on any claim, regardless of the place of its origin, the minimum contacts required to establish general jurisdiction must satisfy “an exacting standard” that “ ‘approximate[s] physical presence’ in the forum state.” Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 801 (9th Cir.2004) (minimum contacts standard for general jurisdiction is high “because a finding of general jurisdiction permits a defendant to be haled into court in the forum state to answer for any of its activities anywhere in the world.”).

A more limited form of submission to a state's authority, referred to as “specific jurisdiction,” applies only in cases of disputes that “arise out of or are connected with the activities within the state.” Int'l Shoe, 326 U.S. at 319, 66 S.Ct. 154. “[W]here the defendant deliberately has engaged in significant activities within a State, or has created continuing obligations between himself and residents of the forum, he manifestly has availed himself of the privilege of conducting business there, and because his activities are shielded by the benefits and protections of the forum's laws it is presumptively not unreasonable to require him to submit to the burdens of litigation in that forum as well.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475–76, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985) (citations and internal quotation marks omitted). That is, when a defendant “purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws,” Hanson, 357 U.S. at 253, 78 S.Ct. 1228, “it submits to the judicial power of an otherwise foreign sovereign to the extent that power is exercised in connection with the defendant's activities touching on the State,” McIntyre, 131 S.Ct. at 2788. For that reason, “submission through contact with and activity directed at a sovereign may justify specific jurisdiction ‘in a suit arising out of or related to the defendant's contacts with the forum.’ ” Id., quoting Helicopteros, 466 U.S. at 414 n. 8, 104 S.Ct. 1868.

To satisfy the due process standard for specific jurisdiction, the defendant must have “fair warning that a particular activity may subject [it] to the jurisdiction of a foreign sovereign.” Burger King, 471 U.S. at 472, 105...