Visalus, Inc. v. Smith
| Decision Date | 17 May 2013 |
| Docket Number | Case No. 13-10631 |
| Parties | VISALUS, INC., Plaintiff, v. KODY SMITH, Defendants. |
| Court | U.S. District Court — Eastern District of Michigan |
HON. TERRENCE G. BERG
HON. R. STEVEN WHALEN
This matter is before the Court on Defendant Kody Smith's February 20, 2013 motion to dismiss for lack of personal jurisdiction or for improper venue, and his alternative motion to transfer the matter to the United States District Court for the District of Colorado. The parties have fully briefed the motion, and oral argument was heard on April 10, 2013.
The Court finds that Defendant has submitted to the jurisdiction of this Court and has agreed it is a proper venue for this dispute, for those reasons, and the reasons more fully set forth below, it is ORDERED that Defendant's motion to dismiss and his alternative motion to transfer (Dkt. 10) are DENIED.1
Plaintiff ViSalus, Inc., is a Troy, Michigan, based LLC incorporated in the state of Delaware. Compl. ¶ 2, Dkt. 1. The company markets weight-management products, nutritional supplements, and energy drinks. Compl. ¶ 7. It appears the company's primary method of sales is a "multi-level marketing" or "network marketing" practice where sales are made by myriad independent contractors who sell to their friends and acquaintances and, importantly, recruit others to serve as ViSalus distributors as well. Compl. ¶¶ 7, 9. Each independent-contractor distributor is compensated both for his own sales as well as for the sales of those he has recruited, continuing like a pyramid. This recruited sales-force is referred to as the participant's "downline," and can provide multiple levels of compensation. Compl. ¶¶ 9, 21.
Defendant Kody Smith is a resident of Colorado and was a very successful distributor of ViSalus products, with a substantial "downline" of more than 700 distributors. Compl. ¶ 16. It is undisputed that Defendant has never been to Michigan. Smith Decl. ¶ 4. Plaintiff alleges that sometime around January 2013, Mr. Smith stopped selling ViSalus products and became a distributor of Ocean Avenue products. Compl. ¶¶ 26-29. Plaintiff alleges that Ocean Avenue is in direct competition with ViSalus. Compl. ¶ 26.
Plaintiff's claims against Defendant are for breach of contract and tortious interference with business relationships, premised on the allegation that Defendant solicited ViSalus distributors to join him in selling Ocean Avenue products, inviolation of two agreements between the parties. Compl. ¶¶ 26-32. Defendant's successful solicitation of Plaintiff's distributors has allegedly caused Plaintiff damages in excess of $75,000, primarily through lost sales. Compl. ¶ 4.
Plaintiff identifies the two agreements at issue as the "Distributor Agreement" and the "IP Agreement," both of which contain clauses prohibiting the distributor, for one year, from soliciting or recruiting ViSalus employees or distributors to participate in any other "network marketing program." Compl. ¶¶ 18-25, Ex. A and Ex. B. It appears both of these agreements were in the form of point-and-click agreements, where Defendant allegedly agreed to be bound by their contents by clicking an "I have read and agree to the Terms and Conditions" button while registering online to be a ViSalus distributor. Compl. ¶¶ 18-25; Pl.'s Resp. Opp'n 5, Dkt. 15; Le Gall Decl. ¶ 4, Dkt. 15-1. While Defendant initially argued that Plaintiff's allegations regarding the acceptance of the agreement were deficient (Def.'s Mot. Dismiss 5-6, Dkt. 10), he does not offer an affirmative denial of or rebuttal to Plaintiff's explanation of the acceptance of the agreement (Dkts. 15, 15-1, 15-2).
The two agreements also contain a forum-selection clause designating Michigan courts—both state and federal—as the exclusive forum for dispute resolution, and a choice-of-law clause designating Michigan law as the law to be applied. Compl. Ex. A at 10, Ex. B ¶ 19.
On February 14, 2013, Plaintiff brought this suit against Defendant. Defendant now moves to dismiss the case on two grounds, (1) lack of personal jurisdictionunder Federal Rule of Civil Procedure 12(b)(2) and (2) improper venue under Federal Rule of Civil Procedure 12(b)(3). If his motion to dismiss fails, he alternatively moves for transfer to the United States District Court for the District of Colorado under 28 U.S.C. § 1404(a).
Federal Rule of Civil Procedure 12(b)(2) authorizes the filing of motions to dismiss for lack of personal jurisdiction. When "[p]resented with a properly supported 12(b)(2) motion and opposition, the court has three procedural alternatives: it may decide the motion upon the affidavits alone; it may permit discovery in aid of deciding the motion; or it may conduct an evidentiary hearing to resolve any apparent factual questions." Theunissen v. Matthews, 935 F.2d 1454, 1458 (6th Cir. 1991) (citing Serras v. First Tennessee Bank Nat. Ass'n, 875 F.2d 1212, 1214 (6th Cir. 1989)). "The court has discretion to select which method it will follow, and will only be reversed for abuse of that discretion." Id.
When a defendant challenges personal jurisdiction under Rule 12(b)(2), the plaintiff bears the burden of establishing the existence of personal jurisdiction. See Int'l Tech. Consultants, Inc. v. Euroglas S.A., 107 F.3d 386, 391 (6th Cir. 1997). In the face of a properly supported motion for dismissal, the "plaintiff may not stand on his pleadings but must, by affidavit or otherwise, set forth specific facts showing that the court has jurisdiction." E & M Props. v. Razorgator, Inc., No. 08-CV-10377, 2008 WL 1837261, at *2 (E.D. Mich. Apr. 23, 2008) (quoting Theunissen, 935 F.2d at1458). Because the Court has not conducted an evidentiary hearing, it will construe the facts in the light most favorable to Plaintiff and may not consider conflicting facts offered by Defendant. See Neogen Corp. v. Neo Gen Screening, Inc., 282 F.3d 883, 887 (6th Cir. 2002). Further, in the absence of an evidentiary hearing, "the plaintiff must make only a prima facie showing that personal jurisdiction exists in order to defeat dismissal." Theunissen, 935 F.2d at 1458.
In a diversity case such as this, the Court looks to the law of the forum state to determine whether personal jurisdiction exists. See Calphalon Corp. v. Rowlette, 228 F.3d 718, 721 (6th Cir. 2000).
Lastly, Defendant may waive objection to personal jurisdiction, and courts will generally enforce waivers made by agreement. See Preferred Capital, Inc. v. Associates in Urology, 453 F.3d 718, 721 (6th Cir. 2006); see also Carnival Cruise Lines v. Shute, 499 U.S. 585, 590-95 (1991); M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 8-20 (1972).
In a diversity action, venue must be proper under 28 U.S.C. § 1391(a), which creates proper venue in:
(1) a judicial district where any defendant resides, if all defendants reside in the same State, (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated, or (3) a judicial district in which any defendant is subject to personal jurisdiction at the time the action is commenced, if there is no district in which the action may otherwise be brought.
28 U.S.C. § 1391(a). "This includes any forum with a substantial connection to the plaintiff's claim." First of Mich. Corp. v. Bramlet, 141 F.3d 260, 263 (6th Cir. 1998).
For venue to be improper, it must be that no substantial part of the events giving rise to this claim occurred in the Eastern District of Michigan. See 28 U.S.C. § 1391(a)(2). Further, § 1391(a)(2) See Amphion Inc. v. Buckeye Elec. Co., 285 F. Supp. 2d. 943, 946 (E.D. Mich. 2003) (quoting Greenblatt v. Gluck, 265 F. Supp. 2d 346, 352 (S.D.N.Y. 2003)).
Lastly, as with personal jurisdiction, Defendant may waive objection to venue, and courts will generally enforce waivers made by agreement. See Carnival Cruise Lines v. Shute, 499 U.S. 585, 590-95 (1991); M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 8-20 (1972); Neirbo Co. v. Bethlehem Shipbuilding Corp., 308 U.S. 165, 168 (1939).
Section 1404(a) provides that "[f]or the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought." 28 U.S.C. § 1404(a). "To obtain a transfer of venue, the moving party has the burden of showing 'that the balance of convenience . . . strongly favor[s] [the transfer].'" Crestmark Fin. Corp. v. OMO Sci., Energy, and Tech., Inc., 10-CV-11795, 2010 WL 3702371, at *2 (E.D.Mich. Sept. 16, 2010) (quoting Comshare, Inc. v. Execucom Systems Corp., 593 F. Supp. 981, 985 (E.D. Mich. 1984)). The district court deciding a § 1404(a) motion to transfer has broad discretion to grant or deny the motion. See Phelps v. McClellan, 30 F.3d 658, 663 (6th Cir. 1994). The movant must first show that the action could have been brought in the proposed transferee district. See Amphion, 285 F. Supp. 2d 943, 946 (E.D. Mich. 2003). The Court must then evaluate whether a transfer would "promote the interests of justice" and "serve the parties' and witnesses' convenience." Id. Specific factors that courts have considered in making the "interest of justice" and "convenience" determinations include:
"(1) the convenience of witnesses; (2) the location of relevant documents and relevant relative ease of access to sources of proof; (3) the convenience of the parties; (4) the locus of the...
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