Titan Atlas Mfg. Inc. v. Sisk
| Decision Date | 22 August 2011 |
| Docket Number | Case No. 1:11cv00012 |
| Court | U.S. District Court — Western District of Virginia |
| Parties | TITAN ATLAS MANUFACTURING, INC., and STRATA MINE SERVICES, LLC, Plaintiffs v. FRANK A. SISK and PRECISION MINE REPAIR, INC., Defendants |
This case is before this court on the defendants' Motion to Dismiss, Stay Or Transfer, (Docket Item No. 26) ("Motion"). The Motion is before the undersigned magistrate judge by referral pursuant to 28 U.S.C. § 636(b)(1)(B). A hearing was held on the Motion on July 26, 2011, and the case is now ripe for disposition. As directed by the order of referral, the undersigned now submits the following report and recommended disposition.
I. Facts & Procedural History
Plaintiff Titan Atlas Manufacturing, Inc., ("Titan"), uses technology licensed from Entwicklungs- und Verwertungs-Gesellschaft M.B.H., ("EVG"), to manufacture a prefabricated construction panel known as the "3D Panel." Plaintiff Strata Mine Services, LLC, ("Strata"), uses Titan's 3D Panels to construct mine ventilation overcasts. Frank A. Sisk, ("Sisk"), is the owner of U.S. Letters Patent No. 5,879,231, ("the '231 Patent"). Very basically, the '231 Patent relates to a mine ventilation structure used to block a passageway or to prevent mixture ofventilation air at the intersection of two passageways. (Ex. A to Ex. 2 to Docket Item No. 27). Sisk founded defendant Precision Mine Repair, Inc., ("PMR"), in 1995, and it is the exclusive licensee of the '231 Patent. PMR entered into a Distributorship Agreement, ("Agreement"), with Strata Mine Services, Inc., Strata's predecessor,1 on August 26, 2007. Two amendments to the Agreement were, thereafter, executed. The Agreement and all amendments were executed in Illinois and, possibly, Ohio. Under the terms of the Agreement, PMR retained certain "Company Responsibilities," including (1) performing all pull testing to ensure that the products comply with all governmental requirements; and (2) performing intermittent inspections of Strata's construction and installation of the products to verify that all construction and installation conforms to all applicable specifications and governmental requirements. The Agreement gave Strata the nonexclusive right to "purchase, distribute, sell and construct" PMR's products and structures which were covered by the '231 Patent. The Agreement also granted Strata certain exclusive rights, including "exclusive Distributorship Rights" to mine sites where Strata had contracted or installed mine ventilation structures. Sisk personally negotiated the Agreement with Strata.
On December 31, 2010, Sisk learned that Strata had several non-PMR 3D panels in its warehouses and that several non-PMR 3D panels were found at the Enlow Fork Mine in Pennsylvania, a customer of Strata's where PMR products previously had been installed. On January 3, 2011,2 Sisk sent a letter on behalf of PMR advising Strata that its purchase of such substitute goods breached theAgreement and that, pursuant to the Agreement, Strata had 30 days to cure its breach. (Ex. B to Ex. 1 to Docket Item No. 27) ("January 3, 2011, Letter"). Sisk testified by affidavit that at the time he sent this letter, neither he nor anyone at PMR knew the identity of the competing manufacturer who had provided the non-PMR 3D panels to Strata. (Ex. 1 to Docket Item No. 27, ("Second Sisk Declaration"), at 2.) On January 17, 2011, Jeffrey Hamrick, Strata's Vice President, e-mailed PMR a letter, directed to Sisk, responding to the January 3, 2011, Letter, in which Strata stated that the panels, manufactured by Titan were ordered solely for limited use, admitting that at least 16 panels were shipped to the McElroy Mine, located in West Virginia and stating its willingness to resolve its differences with PMR. (Ex. C to Ex. 1 to Docket Item No. 27) ("January 17, 2011, Letter.") Thereafter, on January 25, 2011, Sisk initiated a telephone call to Hamrick, during which Sisk stated "You're done ... I'm pulling the plug." (Att. 3 to Docket Item No. 32, ("Hamrick Declaration"), at 5). Sisk further informed Hamrick that Strata could not build overcasts, undercasts or stoppings without his patent. (Hamrick Declaration at 5). During this telephone conversation, Sisk also referred to Strata's use of Titan's 3D Panels as "illegal." (Hamrick Declaration at 5). Sisk states that he merely reminded Hamrick that in order for Strata to practice the patented mine ventilation system, Strata had to use materials purchased from PMR, including the 3D Panels. (Docket Item No. 54, ("Fourth Sisk Declaration"), at 8). Sisk states that he noted his belief that a mine ventilation system constructed with 3D Panels supplied by other manufacturers would likely be "illegal." (Fourth Sisk Declaration at 8). Sisk states that he used the term "illegal" to mean that they would not have MSHA approval and had not been appropriately tested. (Fourth Sisk Declaration at 8). Sisk states that he did not accuse Strata of infringing the '231 Patent, but told Hamrick that mine ventilation structures using 3D Panels ofthe type sold by PMR were protected by the '231 Patent. (Fourth Sisk Declaration at 8-9). He states that he does not recall using the words "pulling the plug," but if he did, he believes he was referring to the termination of the Agreement. (Fourth Sisk Declaration at 9).
On February 1, 2011, Titan entered into a Sole Source Purchase Agreement with Strata, in which Titan agreed to indemnify Strata from all "losses, liabilities, suits, costs, expenses, demands, actions, penalties . or other claims . arising or resulting from any Strata Claims and Losses experienced by the Strata Indemnified Parties that are made by [PMR] or ... Sisk ... to the effect that any of the Strata Indemnified Parties, by using Products for constructing overcasts, undercasts and/or stoppings in underground mines, is infringing any claim contained in the 231 Patent. ." (Att. 1 to Docket Item No. 73, ("Indemnification Agreement"), at 9).
Thereafter, Jeff Kearns, PMR's Project Administrator, sent a letter to the attention of Hamrick, dated February 14, 2011, notifying Strata that, as a result of Strata's breach, it was terminating its Agreement with Strata, except as to certain ongoing projects. (Ex. D. to Ex. 1 to Docket Item No. 27) ("February 14, 2011, Letter.") On February 16, 2011, Hamrick e-mailed a letter, dated January 16, 2011, to some of Strata's customers, notifying them that Titan would be providing Strata with substitute goods made on the identical machine as the PMR mine ventilation structure products. (Ex. E to Ex. 1 to Docket Item No. 27) ("January 16, 2011, Letter.") PMR alleges that it became aware of this e-mail and accompanying letter no earlier than February 17, 2011, the date that Titan filed its Original Complaint in the instant action. The recipients of the January 16, 2011, Letter includedcompanies having offices in or operating mines in Illinois, Alabama, Kentucky, Ohio, Pennsylvania, Utah, Virginia and West Virginia. (Second Sisk Declaration at 2.)
At the time the parties negotiated and entered into the Agreement, Strata had its "principal operating office" in Swords Creek, Virginia. From this facility, Strata distributed products, including PMR's products, to mines and/or mine operators in Virginia. Invoices dated November 2, 5, 9, 14 and 30, 2007; December 3 and 7, 2007; January 10, 22 and 25, 2008; March 20, 2008; May 16 and 30, 2008; and June 2, 2008, were sent from Strata's Virginia facility. Strata moved its principal operating office from Virginia to Georgia sometime during 2008, but retained the Virginia facility as a regional support center.
In addition to Strata, PMR used another Virginia distributor, GMS, to which PMR shipped products in Virginia. From 2007 through 2011, the time period covering the execution of the Agreement through the filing of both the Original and Amended Complaints, PMR's total revenue arguably attributable to Virginia was approximately $2.2 million. This included shipments of Gunite and other materials to Strata's Virginia facility, shipments of products to Virginia mines on behalf of Strata, shipments of products to Virginia mines on behalf of GMS and invoicing for pull tests in Virginia mines and materials related thereto.
In an article in the October/November 2007 issue of Coal People Magazine, Harry Riddle, former General Manager of PMR, stated that "[t]he vast majority of [PMR's] work is in Ohio, Illinois, Indiana, Kentucky, West Virginia, Virginia, Alabama and Pennsylvania." (Ex. D. to Ex. 2 to Docket Item No. 32, ("Coal People Article"), at 5).
Titan filed its Original Complaint against defendant Sisk on February 17, 2011, seeking a declaratory judgment that (1) Titan is a co-owner or licensee of the '231 Patent; (2) Titan has not infringed any valid claims of the '231 Patent; and (3) each and every claim of the '231 Patent is invalid and unenforceable. Titan further sought an injunction preventing Sisk from enforcing or threatening to enforce the '231 Patent against Titan or its mining customers. On March 14, 2011, Sisk received a copy of the Original Complaint from Titan. Thereafter, on April 4, 2011,3 Sisk and PMR filed an action in the Southern District of Illinois, ("Illinois Action"), Civil Action No. 3:11cv00264, which included the following claims: (1) breach of contract against Strata; (2) tortious interference with a contractual relationship or business expectancy by Titan; (3) patent infringement by Strata; (4) inducement of patent infringement by Titan; and (5) inducement of patent infringement by Strata and Titan. All of these claims arose out of Strata's alleged breach of the Agreement with PMR.
On April 5, 2011, Titan filed its First Amended Complaint, (Docket Item No. 11) ("Amended Complaint"), in which it added Strata as a plaintiff and PMR as a defendant. The Amended Complaint seeks the following relief: a declaratory judgment that (1) Titan is...
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