Sonoco Products Co. v. Inteplast Corp., Civ. A. No. 4-93-2442-22.

• Decision Date: 27 June 1994
• Docket Number: Civ. A. No. 4-93-2442-22.
• Parties: SONOCO PRODUCTS COMPANY, Plaintiff, v. INTEPLAST CORP., Advance Polybag, Incorporated, Superbag Corp., and Omega Plastics Corporation, Defendants.
• Court: U.S. District Court — District of South Carolina

867 F. Supp. 352

SONOCO PRODUCTS COMPANY, Plaintiff, v. INTEPLAST CORP., Advance Polybag, Incorporated, Superbag Corp., and Omega Plastics Corporation, Defendants.

Civ. A. No. 4-93-2442-22.

United States District Court, D. South Carolina, Florence Division.

June 27, 1994.

Elizabeth Anne Carpentier, William Clarence Boyd, Harold Simmons Tate, Jr., Columbia, SC, John H. Thomas, Charles B. Park, III, Blas P. Arroyo, Charlotte, NC, for plaintiff.

John B. Hardaway, Greenville, SC, for Inteplast.

Jon René Josey, Florence, SC, Janet L. Carter, Myrtle Beach, SC, for Advance Polybag.

Gerald Michael Finkel, Edward A. Frazier, Columbia, SC, for Superbag.

Howell V. Bellamy, Jr., Myrtle Beach, SC, John Daniel, Robert Schaffer, NY City, Janet L. Carter, Myrtle Beach, SC, for Omega.

ORDER

CURRIE, District Judge.

Before the court is the motion of Defendant Inteplast Corporation to dismiss this action for lack of personal jurisdiction, insufficiency of service of process, and improper venue. For reasons discussed more fully below, the motion is denied.

I. FACTS

Plaintiff Sonoco Products Company ("Sonoco"), a South Carolina corporation with its principal place of business in Hartsville, South Carolina, instituted this action for patent infringement against the four defendants.¹ Sonoco alleges that Defendants infringed a patent relating to a highly successful plastic grocery bag and bag dispensing system known as "Quickmate." Defendant Inteplast Corporation ("Inteplast"), a Delaware corporation with its principal place of business in Livingston, New Jersey, is a holding company which does not manufacture bag products. Inteplast, however, is the sole owner of Integrated Bagging Systems Corporation ("Integrated Bagging"), which manufactures plastic bags. Integrated Bagging is a Delaware corporation with its principal place of business in Lolita, Texas.

Mr. Tony Tseng, the Marketing Director for both Inteplast and Integrated Bagging,² was deposed for the purpose of determining Inteplast's contacts with this forum. Mr. Tseng coordinates all marketing and shipments of plastic grocery bag products manufactured by Integrated Bagging. Integrated Bagging has no marketing or sales force of its own. Mr. Tseng stated that all accounting records for Integrated Bagging are maintained at Inteplast's headquarters in Livingston, New Jersey.

According to Mr. Tseng, Inteplast has appointed distributors located in Atlanta, New York, Houston, Chicago, and Los Angeles to distribute its plastic grocery bag products. The retail customer (i.e., a supermarket) generally places its order with a distributor who then relays the order to Inteplast's headquarters. Inteplast then schedules the shipment of the goods from Integrated Bagging's Texas facility. Based upon the terms of the order, Integrated Bagging either ships the products to the distributor or directly to the customer's warehouse. The distributors are not assigned a specific territory. Instead, they are allowed to solicit sales of the allegedly infringing products from supermarket chains across the country. Mr. Tseng admitted that he knows that many of the supermarket chains who were sold the allegedly infringing products have stores located in several states and that the grocery bags would be distributed for use at the various stores.

Inteplast records reveal that its plastic bag products have been shipped to eight customers located in North Carolina. One of these customers is Ingles Markets, Inc. ("Ingles"): Ingles is headquartered in Asheville, North Carolina and operates retail supermarkets in five states, including South Carolina. Sonoco is competing with Inteplast to supply plastic grocery bags to Ingles. Inteplast's plastic grocery bags were found in an Ingles grocery store in Spartanburg, South Carolina. Additional plastic bags marketed by or on behalf of Inteplast were discovered in a Piggly Wiggly grocery store located in Charleston, South Carolina.

Additionally, Inteplast has sold plastic bag products and shipped these products to its affiliate, Nan Ya Plastics Corporation, in Lake City, South Carolina. Inteplast shares its headquarters in New Jersey with Nan Ya Plastics. Inteplast's shipments to Nan Ya Plastics are part of a company program which allows employees residing in South Carolina to purchase plastic trash can liners from the company.

II. DISCUSSION

A court can exercise personal jurisdiction over a defendant if (1) the defendant's conduct satisfies the requirements of the forum's long-arm statute and (2) the defendant's conduct satisfies the minimum contacts requirements of the Due Process Clause so that the exercise of jurisdiction would not offend traditional notions of fair play and substantial justice. The court finds that both requirements are met.

Under South Carolina law, the first requirement collapses into the second. The South Carolina long-arm statute, S.C.Code Ann. §§ 36-2-801 — 809, has been interpreted to reach to the limits of due process. See e.g., Southern Plastics Co. v. Southern Commerce Bank, ___ S.C. ___, ___, 423 S.E.2d 128, 130 (1992); Atlantic Soft Drink Co. v. South Carolina Nat'l Bank, 287 S.C. 228, 231, 336 S.E.2d 876, 878 (1985); Hardy v. Pioneer Parachute Co., Inc., 531 F.2d 193, 195 (4th Cir.1976). Therefore, the determination of personal jurisdiction in South Carolina compresses into a due process assessment of minimum contacts and fair play.

The applicable law in this patent infringement case was recently set forth in Beverly Hills Fan Company v. Royal Sovereign Corp., 21 F.3d 1558 (Fed.Cir.1994).³ Significantly, in Beverly Hills Fan Company, the Federal Circuit found that personal jurisdiction existed under a "stream of commerce" theory.

Plaintiff Beverly Hills Fan Company, a ceiling fan manufacturer, was a Delaware corporation with its principal place of business in California. One of the defendants in Beverly Hills Fan Company, Ultec, was a competing ceiling fan manufacturer who allegedly infringed Beverly's patent. Ultec was a Chinese corporation which manufactured the allegedly infringing fans in Taiwan. The other defendant, Royal Sovereign Corporation, a New Jersey corporation, imported into and distributed the allegedly infringing fans in the United States. Beverly Hills Fan Company, 21 F.3d at 1559-60. Beverly sued Defendants in the Eastern District of Virginia. Neither of the defendants maintained any place of business in Virginia. Id.

Defendants moved to dismiss the action for lack of personal jurisdiction. In accompanying affidavits, Defendants claimed no significant contacts with Virginia. Ultec's president stated that the company "has no assets or employees located in Virginia; has no agent for service of process in Virginia; does not have a license to do business in Virginia and has not directly shipped the accused fan into Virginia." Id. Royal submitted a similar affidavit by its president which stated that it has no assets or employees located in Virginia; has no agent for service of process in Virginia; does not have a license to do business in Virginia; made a one time sale of unrelated goods to Virginia in 1991 which represented less than three percent of Royal's total sales that year; and has not sold the accused fan to distributors or anyone else in Virginia." Id.

Beverly submitted several affidavits in opposition to the motion to dismiss. A private investigator stated that he purchased one of the fans from a retail outlet, Builder's Square, in Virginia which identified Royal as the source of the fan and that Royal warranted the fan. Beverly Hills Fan Company, 21 F.3d at 1560-61. Beverly's president stated that Beverly, although not a resident of the forum, conducted substantial business in Virginia and that it sold to the same retail accounts where the allegedly infringing fans were being sold. Id. An additional affidavit submitted in support of a motion to reconsider stated that fifty-two accused fans were available for sale in the six Builder's Square retail outlets in Virginia. Id. The Beverly Hills Fan Company opinion discloses no evidence that the fans were delivered directly to Builder's Square by the defendants. The district court granted the motion to dismiss and denied a motion for reconsideration.

In its opinion the Federal Circuit identified the issue on appeal as "whether the Due Process Clause of the Federal Constitution or specific limiting provisions in Virginia's long-arm statute preclude the exercise of jurisdiction in a case in which an alleged foreign infringer's sole contact with the forum resulted from indirect shipments through the stream of commerce." Beverly Hills Fan Company, 21 F.3d at 1564. Prior to resolving the...