Noble Sec., Inc. v. Miz Engineering, Ltd.

• Decision Date: 14 April 2009
• Docket Number: Civil Action No. 2:05cv722.
• Citation: 611 F.Supp.2d 513
• Court: U.S. District Court — Eastern District of Virginia
• Parties: NOBLE SEC., INC., Noble Locks Enterprises, Inc., and Tzong-Hsiung Huang, Counterclaim Plaintiffs, v. MIZ ENGINEERING, LTD., Counterclaim Defendant. Noble Security, Inc., Third Party Plaintiff, v. Jane Ratto, Penelope Kane, Germain de Martinis, J.R. Marketing, LLC d/b/a Royal Locks, Inc., and Chien-Chi Lu a/k/a Francisco Lu, Third Party Defendants.

611 F.Supp.2d 513

NOBLE SEC., INC., Noble Locks Enterprises, Inc., and Tzong-Hsiung Huang, Counterclaim Plaintiffs, v. MIZ ENGINEERING, LTD., Counterclaim Defendant.

Noble Security, Inc., Third Party Plaintiff, v. Jane Ratto, Penelope Kane, Germain de Martinis, J.R. Marketing, LLC d/b/a Royal Locks, Inc., and Chien-Chi Lu a/k/a Francisco Lu, Third Party Defendants.

Civil Action No. 2:05cv722.

United States District Court, E.D. Virginia, Norfolk Division.

April 14, 2009.

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Daniel L. Grubb, for Counter Defendants, MIZ Engineering, Ltd. and Chien-Chih Lu.

Max Moskowitz, for Counter Claimant, Noble Locks Enterprises, Inc. and Noble Security, Inc.

Cameron S. Reuber, for Counter Claimant, Noble Locks Enterprises, Inc., Noble Security, Inc. and Tzong-Hsiung Huang.

Stephen A. Horvath, for Third Party Defendants, Jane Ratto, Penelope Kane, Germain DeMartinis and J.R. Marketing, LLC.

OPINION AND ORDER

MARK S. DAVIS, District Judge.

This matter is before the Court on motions to dismiss for lack of personal jurisdiction filed by third party defendants Jane Ratto ("Ratto"), Penelope Kane ("Kane"), Germain De Martinis ("De Martinis"), and J.R. Marketing, LLC d/b/a Royal Locks, Inc. ("JRM" or "Royal Locks"). Oral argument has taken place, and the motions are now ripe for decision.

The Court notes at the outset that, during oral argument, counsel for the third party plaintiff, Noble Security, Inc. ("Noble"), agreed to the dismissal of De Martinis from this suit. Accordingly, the claims against De Martinis are DISMISSED. Therefore, only Ratto, Kane, and JRM are collectively referred to as "Third Party Defendants."¹

I. Factual and Procedural History

According to the factual allegations, Noble purchases fully-assembled computer locks from Guan Gao Co., d/b/a Polox Co., Ltd. ("Polox"), who assembles the lock components after it purchases them from manufacturer Ming-Yi Technology Co. ("Ming-Yi"). Ming-Yi produces the lock components pursuant to a United States patent, specifically U.S. Patent No. 5,626,203 ("the '203 patent"). (Noble Supp. Brief, Docket No. 166 at 2.)

One of Ming-Yi's principals is Tzong-Hsiung Huang. Huang is allegedly the inventor of the '203 patent and a former business partner of Chien-Chih Lu (a/k/a Francisco Lu), who owns MIZ Engineering, LTD ("MIZ"), a Taiwanese company.² Huang assigned the '203 patent to the Ming-Yi partnership in the early 1990s. However, MIZ claims to own the '203 patent via several assignments. Noble denies that MIZ is a valid assignee of the patent and asserts that MIZ's rights to the patent were obtained fraudulently.

Ratto, Kane, and DeMartinis allegedly worked for Noble and its related entities and essentially ran Noble's operations. Noble alleges that Ratto, Kane, and De-Martinis stopped working for Noble and formed their own company, JRM, to compete with Noble. These third party defendants allegedly began purchasing the computer locks at issue from MIZ, but also allegedly secretly conspired with MIZ and executed a plan to harm Noble and steal its computer lock business. The conspirators allegedly used MIZ's counsel, who had offices in Virginia and Washington, D.C., not only to file suit against Noble in Virginia, but also to write to and telephone certain Noble customers, making various misrepresentations that Noble's product infringed on the MIZ patent. The customers were purportedly told that they should purchase locks from JRM to avoid legal trouble involving the disputed patent. The Third Party Defendants allegedly also provided information to MIZ and/or its counsel, including Noble's customer information, in furtherance of the conspiracy. Noble claims that the conspirators successfully harmed its business, that a corresponding sales reduction occurred, and that some of Noble's customers began purchasing locks from JRM.

MIZ, a Taiwanese corporation, filed its Complaint in this Court on December 8, 2005, seeking to enforce its alleged patent rights against Noble, a California corporation, and related entities.³ Noble, among others, then filed a Counterclaim against MIZ. Noble, the sole third party plaintiff, subsequently sought leave of court to assert claims against third parties Ratto, Kane, De Martinis, JRM, and Chien-Chih Lu (a/k/a Francisco Lu). Leave was granted by the Court on September 29, 2006, and Noble's Third Party Complaint was filed. The Third Party Complaint contains a number of civil causes of action against Ratto, Kane, De Martinis, and JRM. There are two federal causes of action: 1) Racketeer Influenced and Corrupt Organizations Act ("RICO") conspiracy in violation of 18 U.S.C. § 1962 et seq., and 2) unfair competition in violation of 15 U.S.C. § 1125(a) (Lanham Act), and five Virginia causes of action: 1) tortious interference with business relations, 2) tortious interference with prospective business relations, 3) defamation and trade libel, 4) common law misappropriation and unfair competition, and 5) Virginia business conspiracy in violation of Va.Code § 18.2-499.

Counterclaim defendant MIZ, and third party defendant Lu have filed Answers. However, third party defendants Ratto, Kane, De Martinis, and JRM filed Answers concurrently with several motions to dismiss on October 30, 2006. Plaintiff MIZ eventually dismissed all of its claims with prejudice. In a September 28, 2007 Opinion and Order, Judge Kelley disposed of all of the motions to dismiss, with the exception of these motions to dismiss for lack of personal jurisdiction filed by Ratto, Kane, De Martinis and JRM. (Order, Sept. 28, 2007, Docket No. 146 at 17.) The Court permitted the parties to conduct limited discovery concerning personal jurisdiction, and because that discovery was ongoing, the Court advised the parties that it would address the motions to dismiss for lack of personal jurisdiction at a later time. Subsequently, with the hope of facilitating settlement, Judge Kelley apparently stopped further proceedings pending the outcome of a related case being litigated by many of the same parties in California. See Avganim v. Ratto, Case No. CV054204 (Cal.App. Dep't Super. Ct.). A jury has now rendered a verdict in the California litigation. However, no settlement has taken place in this case, and the parties wish to go forward with this litigation.

Third Party Defendants assert that they should not be subject to the personal jurisdiction of this Court because they do not have sufficient contacts with Virginia to make long-arm jurisdiction appropriate. For purposes of these jurisdictional motions alone, the Court finds that the following pertinent facts have been established, and the parties do not specifically disagree with them:

• Ratto and Kane are California residents, and JRM is a California limited liability company.

• Ratto and Kane own no property in Virginia.

• JRM has no officers, directors, or employees, in Virginia, has paid no Virginia taxes, and has never sought a Virginia business license.

• Ratto and Kane have visited Virginia only one time in their lives, which they allege was in connection with this litigation.

• During their visit to Virginia, Ratto and Kane met with MIZ's counsel, the law firm of Dunlap, Grubb & Weaver ("the Dunlap law firm"), in Virginia, and discussed "agreements and things."

• Although Ratto and Kane have both submitted affidavits stating that they do not personally transact business in Virginia, one of the Noble entities that Ratto and Kane previously either worked for or owned (their status is disputed) shows significant sales to Virginia.

• JRM itself has had only three small sales in Virginia, which, in a related case, Judge Kelley found insufficient to subject JRM to the general personal jurisdiction of this Court. Hartford Casualty Ins. Co. v. JR Marketing, LLC, 511 F.Supp.2d 644 (E.D.Va. 2007).

• JRM and MIZ entered into a licensing agreement with Virginia choice of law and choice of forum provisions. As part of the licensing agreement, JRM agreed to give MIZ certain information concerning some Noble entities and owners.

In addition to the facts presented above, Noble has made numerous allegations which are disputed by the Third Party Defendants. The parties agreed amongst themselves to submit briefs, with exhibits attached as evidence, including affidavits, deposition testimony, invoices, emails, and agreements, for the Court's consideration. Due to the stipulations by the parties as to how the Court should consider this information, as addressed below, the Court has reviewed all of this material and considered it as if an evidentiary hearing had occurred. (Hr'g Tr. 13-16, April 1, 2009, Docket No. 180). A credibility determination was not necessary.

The evidentiary standard applied by a court is typically dictated by whether an evidentiary hearing is held on such a personal jurisdiction challenge. The parties have stipulated that the Court should consider the record as if an evidentiary hearing had taken place and apply the preponderance of the evidence standard. Having done so, as further explained below, the Court finds, for purposes of these jurisdictional motions only, that Noble has not provided evidence supporting the following allegations:

• MIZ and the Third Party Defendants conspired to harm Noble and steal Noble's business through unfair competition.

• Thomas Dunlap ("Dunlap"), a partner with the Dunlap law firm who filed the Complaint in this case, contacted various Noble customers, outlining the lawsuit, requesting that customers discontinue purchasing locks from Noble and instead purchase locks from Third Party Defendants.

• Dunlap acted as a MIZ sales representative for at least one potential customer and sought to convince such customer to discontinue purchasing locks from Noble and instead purchase the MIZ locks from JRM.

The above disputed allegations were...