Sharp Corp. v. Hisense USA Corp.

• Decision Date: 13 November 2017
• Docket Number: Civil Action No. 17–1648 (JEB)
• Citation: 292 F.Supp.3d 157
• Parties: SHARP CORPORATION and Sharp Electronics Corporation, Plaintiffs, v. HISENSE USA CORPORATION and Hisense International (Hong Kong) America Investment Co. Ltd., Defendants.
• Court: U.S. District Court — District of Columbia

292 F.Supp.3d 157

SHARP CORPORATION and Sharp Electronics Corporation, Plaintiffs,

v.HISENSE USA CORPORATION and Hisense International (Hong Kong) America Investment Co. Ltd., Defendants.

Civil Action No. 17–1648 (JEB)

United States District Court, District of Columbia.

Signed November 13, 2017

Kevin William Weigand, Nicholas Martin DePalma, Randall K. Miller, Venable LLP, Tysons Corner, VA, for Plaintiffs.

Francis A. Vasquez, Jr., White & Case LLP, Washington, DC, David G. Hille, Pro Hac Vice, Gregory M. Starner, Pro Hac Vice, White & Case LLP, New York, NY, for Defendants.

MEMORANDUM OPINION

JAMES E. BOASBERG, United States District Judge

Should a federal court stand idly by when a foreign arbitral commission issues an order restricting the speech of a private party? Actually, yes. Here, two Asian television manufacturers, Sharp and Hisense, entered into a 2015 licensing agreement under which Hisense would make and market televisions bearing Sharp's name. In 2017, alleging that Hisense had violated various regulatory standards and failed to maintain the quality of its television sets, Sharp terminated the agreement. A week later, under a provision of the licensing agreement providing that all disputes would be arbitrated by the Singapore International Arbitration Center, Hisense filed an arbitration action there. Among other relief, Hisense sought an emergency order requiring that Sharp abide by the agreement while the full arbitration was pending and enjoining it from making disruptive or disparaging statements about Hisense or the licensing dispute. In May 2017, an emergency arbitrator in Singapore issued an interim award granting that injunctive request.

Sharp thereafter filed suit here and now seeks a preliminary injunction declaring that the interim award is not enforceable in the United States because it contradicts U.S. public policy. Specifically, Sharp argues that the emergency award—which it deems a "gag order"—would prevent it from communicating with both consumers and the Federal Communications Commission, and is thus against the policies enshrined in the First Amendment of the U.S. Constitution. Hisense opposes the Motion for a Preliminary Injunction and has moved to dismiss the case, asserting that this Court lacks both subject-matter and personal jurisdiction, and that the award does not violate our public policy.

Although subject-matter jurisdiction exists here, personal jurisdiction does not; in any event, the interim award does not contradict any fundamental public policy that would allow Sharp to prevail. The Court will therefore dismiss the Complaint in its entirety.

I. Background

Given the Court's ruling here, it must consider the facts as set forth in the Complaint. The relationship between Sharp and Hisense started on amicable terms. In July 2015, Sharp, a Japanese electronics company, entered into a limited trademark-licensing agreement (TLA) with Hisense, a Chinese manufacturer. See ECF 1 (Complaint), ¶ 24. The TLA allows Hisense to "manufacture, assemble, promote, market, distribute, [and] sell" Sharp-branded televisions. See ECF No. 28–2 (Licensing Agreement), ¶ 2.1. It also provides that "[a]ny disputes arising out of or in connection with this Agreement, including any question regarding its validity or termination, shall be referred to and finally resolved in Singapore by Singapore International Arbitration Centre in accordance with the Arbitration Rules of [the Centre,] ... which rules are deemed to be incorporated by reference." TLA, ¶ 28.1.

According to Sharp, "immediately" after entering into the TLA, Hisense began to fall short of its contractual obligations. See Mot. for PI at 2. It allegedly "fail[ed] to comply with regulations and maintain the required standards and quality of its television sets." Id. Based on these violations, Sharp terminated the TLA on April 17, 2017. Id. at 3. On April 24, Hisense filed for arbitration in Singapore with the SIAC, seeking emergency relief to reinstate the TLA. Id. On May 9, an arbitrator appointed to consider the emergency motion issued a 33–page "emergency" interim award. See ECF No. 8–3 (Emergency Award). The interim award prohibited Sharp from terminating the TLA, required it to continue to perform under the agreement while the arbitration was pending, and imposed an order stating:

[Sharp] shall refrain from, directly or indirectly through its affiliates, disparaging [Hisense] and/or disrupting its business, including by making public statements or press releases about this arbitration and/or the dispute between [Hisense] and [Sharp], or approaching [Hisense's] business associates and/or other third parties (including, but not limited to, [Hisense's] customers, suppliers, content and service providers, and/or regulatory authorities, except as required by law), in respect of any matters that are to be addressed in arbitration under the [License Agreement].

Emergency Award, ¶ 135 (iii). It is this portion of the award, which Sharp characterizes as a "one-sided Gag Order," Mot. for PI at 3, that Plaintiffs now contest.

On August 15, 2017, Plaintiffs Sharp Corporation and Sharp Electronics Corporation filed a Complaint in this Court, alleging that the emergency order "is contrary to the public policy of the United States embodied in the First Amendment of the Constitution, including (1) the public policy that prohibits a prior restraint on speech absent extraordinary circumstances, and (2) the public policy that favors the right to petition the Government." Compl., ¶ 5. Sharp requested declaratory and injunctive relief pursuant to the Declaratory Judgment Act, 28 U.S.C. §§ 2201 – 02, seeking an "order declaring that the Gag Order against Sharp is not recognizable or enforceable in the United States" and "enjoin[ing] Hisense from taking any action to enforce the Gag Order in the United States." Id., ¶¶ 2,5. The same day they submitted their Complaint, Plaintiffs also filed a Motion for Preliminary Injunction, asking the Court to enjoin the enforcement of the "gag order" and declare that it is "contrary to the public policy of the United States and is thus unenforceable." Mot. for PI at 2.

In response, Defendants Hisense USA Corporation and Hisense International filed an Opposition to Plaintiffs' Motion for Preliminary Injunction, see ECF No. 22, as well as a Motion to Dismiss, or, alternatively, stay the action. See ECF No. 21. On October 27, this Court heard oral argument on the Motions and now issues this expedited Opinion.

II. Legal Standard

Because the Court grants Hisense's Motion to Dismiss, it need not address the standards governing a preliminary injunction and will instead consider this case under Rules 12(b)(6), 12(b)(1), and 12(b)(2).

In evaluating Defendants' Motion to Dismiss for failure to state a claim pursuant to Rule 12(b)(6), the Court must "treat the complaint's factual allegations as true ... and must grant plaintiff 'the benefit of all inferences that can be derived from the facts alleged.' " Sparrow v. United Air Lines, Inc., 216 F.3d 1111, 1113 (D.C. Cir. 2000) (quoting Schuler v. United States, 617 F.2d 605, 608 (D.C. Cir. 1979) ) (internal citation omitted). The Court need not accept as true, however, "a legal conclusion couched as a factual allegation," nor an inference unsupported by the facts set forth in the Complaint. Trudeau v. Fed. Trade Comm'n, 456 F.3d 178, 193 (D.C. Cir. 2006) (quoting Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986) (internal quotation marks omitted)).

To survive a motion to dismiss under Rule 12(b)(1), conversely, Plaintiffs bear the burden of proving that the Court has subject-matter jurisdiction to hear their claims. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992) ; U.S. Ecology, Inc. v. U.S. Dep't of Interior, 231 F.3d 20, 24 (D.C. Cir. 2000). A court has an "affirmative obligation to ensure that it is acting within the scope of its jurisdictional authority." Grand Lodge of Fraternal Order of Police v. Ashcroft, 185 F.Supp.2d 9, 13 (D.D.C. 2001). For this reason, " 'the [p]laintiff's factual allegations in the complaint ... will bear closer scrutiny in resolving a 12(b)(1) motion' than in resolving a 12(b)(6) motion for failure to state a claim." Id. at 13–14 (quoting 5A Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 1350 (2d ed. 1987) (alteration in original)). Additionally, unlike with a motion to dismiss under Rule 12(b)(6), the Court "may consider materials outside the pleadings in deciding whether to grant a motion to dismiss for lack of jurisdiction." Jerome Stevens Pharm., Inc. v. Food & Drug Admin., 402 F.3d 1249, 1253 (D.C. Cir. 2005).

Finally, under Rule 12(b)(2) a defendant may move to dismiss a suit if the court lacks personal jurisdiction over him. Personal jurisdiction determines the court's "authority over the parties ..., so that the court's decision will bind them." Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 577, 119 S.Ct. 1563, 143 L.Ed.2d 760 (1999). The plaintiff bears the burden of establishing that such jurisdiction exists. See FC Inv. Grp. LC v. IFX Markets, Ltd., 529 F.3d 1087, 1091 (D.C. Cir. 2008). In deciding whether the plaintiff has shown a factual basis for personal jurisdiction over a defendant, the court resolves factual discrepancies in favor of the plaintiff. See Crane v. N.Y. Zoological Soc'y, 894 F.2d 454, 456 (D.C. Cir. 1990). When personal jurisdiction is challenged, "the district judge has considerable procedural leeway in choosing a methodology for deciding the motion." 5B Charles A. Wright & Arthur R. Miller et al. , Federal Practice and Procedure § 1351 (3d ed. 2004). The Court may rest on the allegations in the pleadings, collect affidavits and other evidence, or even hold a hearing. Id.

III. Analysis

As it must address jurisdictional concerns first, the Court begins with Defendants' assertion that the Court does not have subject-matter jurisdiction...