Opinion
Case No. 3:03CV7263
September 23, 2003
ORDER
Plaintiff SRECO — Flexible, Inc. ("SRECO") brings this action for trademark infringement, unfair and deceptive trade practices, and misappropriation of trade secrets. Plaintiff alleges that the defendants, Ramiro Fernandez, José Martin, Juan Martin, and Ishmael Martin, used secret information about plaintiff's products improperly to sell copies of those products to plaintiff's former customers. This court has subject matter jurisdiction pursuant to 28 U.S.C. § 1331 and 1367. Pending is defendants' Fed.R.Civ.P. 12(b)(2) motion to dismiss or transfer for lack of personal jurisdiction. For the following reasons, defendants' motion shall be granted and this case shall be transferred to an appropriate venue.
BACKGROUND
Plaintiff SRECO designs, manufactures, and sells industrial sewer supplies throughout the United States. Sometime prior to filing the present action, plaintiff employed three of the defendants, José Martin, Juan Martin, and Ramiro Fernandez, at its manufacturing facility in Marina Del Ray, California. Defendants now operate a business known as Plumber's Depot, which sells sewer equipment manufactured by a competitor of plaintiff. Plaintiff's complaint alleges that defendants stole trade secrets and product designs and breached their duties of loyalty to plaintiff during their employment. Plaintiff claims that defendants are now using improperly acquired proprietary information to supply products identical to those sold by plaintiff
Defendants' motion to dismiss alleges that defendants, residents of California, do not have sufficient contacts with Ohio to support exercise of personal jurisdiction over them by this court. Defendants assert that Plumber's Depot has one customer in California, Stanley Steemer, that maintains its corporate headquarters in Ohio, but, otherwise, none of the defendants has any business or personal contacts in Ohio.
Defendants acknowledge having contacted the Stanley Steemer headquarters in Ohio by telephone two or three times after a Stanley Steemer vendor approached them in California. No defendant has visited Ohio or solicited business from Ohioans. While Plumber's Depot has advertised its services in a national trade publication, which is made available to prospective customers throughout the country, including Ohio, defendants argue that this, even in view of the other putative contacts, is not enough to maintain personal jurisdiction over them.
Plaintiff claims that, in addition to their advertisement in a national trade magazine, defendants "actively solicited" customers in Ohio (Doc. 13, at ¶ 2), delivered products to Stanley Steemer in Ohio, and attended national trade shows to market their services. Plaintiff supports these assertions with an affidavit from its California — based chief executive officer, and argues that the aforementioned activities are sufficient to support exercise of personal jurisdiction over defendants.
STANDARD OF REVIEW
"The procedural scheme which guides the district court in disposing of Rule 12(b)(2) motions is well — settled." Theunissen v. Matthews, 935 F.2d 1454, 1458 (6th Cir. 1991). Plaintiff bears the burden of establishing personal jurisdiction over defendants. Id.; CompuServe, Inc. v. Patterson, 89 F.3d 1257, 1262 (6th Cir. 1996). Moreover, Plaintiff may not stand on its pleadings to meet its burden; Plaintiff must "set forth specific facts showing that the court has jurisdiction." Theunissen, 935 F.2d at 1458. However, because this court has elected to decide this motion based on affidavits alone, Plaintiff's pleadings and affidavits will be considered in a light most favorable to Plaintiff. Id. A court in this situation "does not weigh the controverting assertions of the party seeking dismissal." Id. at 1459.
DISCUSSION
To meet its burden, plaintiff must establish a prima facie case showing that defendants are subject to personal jurisdiction. "To determine whether personal jurisdiction exists over a defendant, federal courts apply the law of the forum state, subject to the limits of the Due Process Clause of the Fourteenth Amendment." CompuServe, 89 F.3d at 1262.
A. Ohio's Long — Arm Statute
The Ohio long — arm statute, O.R.C. § 2307.382(A), states that personal jurisdiction arises from:
(1) Transacting any business in this state; (2) Contracting to supply services or goods in this state; (3) Causing tortious injury . . . in this state; (4) Causing tortious injury in this state by an act . . . outside this state if he regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered in this state . . .; (5) Causing injury in this state to any person by breach of warranty . . .; (6) Causing tortious injury in this state to any person by an act outside this state committed with the purpose of injuring persons . . .; (7) Causing tortious injury to any person by a criminal act . . .; (8) Having an interest in, using, or possessing real property in this state; (9) Contracting to insure any person, property, or risk located within this state. . . .
Ohio's long — arm statute does not extend personal jurisdiction to the limits of due process. Goldstein v. Christiansen, 70 Ohio St.3d 232, 238 n. 1 (1994); see also Glasstech, Inc. v. TGL Tempering Systems, Inc., 50 F. Supp.2d 722, 725 (N.D. Ohio 1999). Plaintiff, therefore, must show that: 1) the defendant is amenable to suit under Ohio's long — arm statute and 2) due process requirements of the Constitution are met. CompuServe, 89 F.3d at 1262; Douglas v. Modern Aero, Inc., 954 F. Supp. 1206, 1210 (N.D. Ohio 1997); Highway Auto Sales, Inc. v. Auto — Konig of Scottsdale, Inc., 943 F. Supp. 825, 828 (N.D. Ohio 1996). Because plaintiff does not assert any particular subsection of the statute as its basis for asserting specific jurisdiction over defendants, the court will discuss the most relevant potential bases for jurisdiction in this case: namely, subsections (1), (2), and (4).
1. Subsection (1) of the Ohio Long — Arm Statute
The Ohio Supreme Court interprets subsection (1), the "transacting business" clause of the statute, as meaning "to carry on business" and "to have dealings," and as being "broader than the word `contract.'" Goldstein, 70 Ohio St.3d at 236. Plaintiff alleges broadly that defendants "regularly transacted and attempted to transact business in . . . Ohio" (Doc. 1, at ¶ 11), and that "one or more Defendants actively solicited [an] Ohio — based customer soon after leaving SRECO's employment" (Doc. 13, at ¶ 2), but does not allege specific facts showing this to be the case in either its pleadings or the affidavit of SRECO chief executive officer Patrick Crane. Plaintiff, in fact, recites no specific factual basis showing that any defendants had dealings or even spoke with any customers in Ohio.
The fact that defendants spoke with Stanley Steemer's Ohio headquarters after being contacted by a Stanley Steemer vendor in California does not by itself prove that defendants are carrying on business in Ohio. Plaintiff does not provide any specifics as to defendants' contacts with Stanley Steemer's Ohio headquarters or any of its Ohio offices. Defendants — not plaintiff — reference the two or three contacts with Ohio. The record does not indicate the content or outcome of those contacts; the record only reveals sales to a Stanley Steemer entity in California.
Defendants' acknowledgment of two or three contacts with the Ohio headquarters of Stanley Steemer leads plaintiff to speculate that defendants dealt extensively with the Stanley Steemer headquarters in Ohio. Speculation does not provide a basis for personal jurisdiction. The affidavit of SRECO chief executive officer Patrick Crane offers general statements that defendants "actively sought to commence [sales to Stanley Steemer] soon after they . . . left their employment at SRECO" and "have regularly called on SRECO's suppliers and customers" (Doc. 13, attach. 1, at ¶¶ 2, 8). The affidavit fails to allege, however, that any specific contacts between defendants and Stanley Steemer or other Ohio customers provide a basis for plaintiff's claims against defendants.
Contact on only two or three occasions with one Ohio customer, without some proof that these conversations contributed to the negotiating of a contract or otherwise give rise to plaintiff's substantive claims against defendants, does not amount to "carrying on business" or "having dealings" in Ohio for the purposes of subsection (1) of the long — arm statute. See, e.g., Kobill Airways Ltd. v. Nat'l Flight Services, Inc., 92 F. Supp.2d 689, 692 (N.D. Ohio 2000) (finding no personal jurisdiction under subsection (1) where the defendant spoke with plaintiff's representatives in Ohio but did not "do some act or consummate some transaction within [Ohio]"); Nationwide Mutual Ins. Co. v. Baker, et al, 105 Ohio App.3d 336, 340 (1995) (explaining that "the mere solicitation of business by a foreign corporation is insufficient to establish that the corporation has transacted business within this state" to establish personal jurisdiction over a corporation under subsection (1) and that "a `one — shot' deal between two private individuals does not constitute transacting business . . . the ties of a nonresident defendant to the state must be substantial" to find jurisdiction over an individual under subsection (1)).
In addition, plaintiff's extensive allegations regarding defendants' advertisement in a national trade publication does not provide a basis for establishing that defendants have carried on business or made deals in Ohio. Nor does it provide a basis for personal jurisdiction over defendants on its own. See, e.g., Krustowsky v. Simonson, 109 Ohio App.3d 367, 371 (1996) ("We cannot say a person subjects himself to Ohio's jurisdiction simply by advertising in a magazine with national circulation."); see also Coleman v. Chen, 712 F. Supp. 117, 120-21 (S.D. Ohio 1988) (finding that advertising that does not amount to "substantial advertising" within Ohio is not enough to provide a basis for personal jurisdiction under the Ohio long — arm statute).
Even if plaintiff were to establish defendants' actions regarding advertising its services with more specificity, plaintiff still has not met its burden of showing a nexus between defendants' advertising efforts and plaintiff's claims against defendants. There is, for example, no indication that defendants' advertisement in the national trade publication cited by plaintiff led to its business relationship with the Ohio headquarters of Stanley Steemer, or any other Ohio customer. An advertisement that has not been answered by Ohio customers is the jurisdictional equivalent of one hand clapping. Therefore, plaintiff has failed to establish personal jurisdiction over defendants under subsection (1) of the long — arm statute.
2. Subsection (2) of the Ohio Long — Arm Statute
Similarly, there is no evidence set forth in plaintiff's pleadings and affidavit to establish that defendants have entered into a contract with any Ohio customers, as is required by subsection (2). As this court has stated, "if the phrase `transacting business' is `broader than the word contract,' `transacting business' must logically subsume the narrower act of contracting." Highway Auto Sales, 943 F. Supp. at 829. Plaintiff alleges, and defendants admit, that defendants have done business with Stanley Steemer, but plaintiff has not stated that this business relationship arises from contacts or a contract between defendants and the Ohio headquarters of Stanley Steemer — just as it has not shown that this relationship amounts to "carrying on business" for the purposes of subsection (1) of the long — arm statute.
3. Subsection (4) of the Ohio Long — Arm Statute
Subsection (4) of the Ohio long — arm statute provides personal jurisdiction over a defendant who causes an injury within the state from outside of Ohio. Plaintiff's complaint specifically alleges that it has suffered harm in Ohio that was caused by defendants' alleged illegal activities conducted from their homes in California. However, plaintiff does not specify that the harms it alleges are a result of defendants regularly doing or soliciting business in Ohio, engaging in any persistent course of conduct in Ohio, or deriving substantial revenue from goods used or consumed or services rendered in Ohio.
The mere statement that defendants have sought to sell their products to Stanley Steemer (a national corporation) does not establish that defendants solicited business in Ohio. Plaintiff provides no other facts asserting that defendants have otherwise engaged in any consistent conduct in Ohio. Moreover, the fact that defendants marketed their products in a trade magazine with a national circulation does not amount to seeking out business persistently or other contacts with Ohio or gaining any substantial benefit from services or goods provided inside Ohio.
Judge Nugent of the Northern District of Ohio has held that "the act of advertising in [a] trade journal reasonably can be construed as an attempt to solicit business within Ohio" for the purposes of finding personal jurisdiction under subsection (4) of the Ohio long — arm statute. Quality Solutions, Inc. v. Zupanc, et al, 993 F. Supp. 621, 623 (N.D. Ohio 1997). However, that case is distinguishable from the case at bar because the
Quality Solutions plaintiff's claim for trademark infringement arose out of the defendant's advertisement in that trade journal. Here, plaintiff does not claim that any Ohio customer answered defendants' advertisement or that defendants' advertisement caused plaintiff to file this lawsuit. Therefore, plaintiff has failed to establish that jurisdiction exists under subsection (4) of the long — arm statute. B. Constitutional Due Process Because plaintiff has failed to establish facts sufficient to find personal jurisdiction over defendants under Ohio's long — arm statute, it is unnecessary for the court to engage in an analysis of the constitutionality of asserting jurisdiction over these defendants.C. General Jurisdiction
Moreover, because plaintiff has not met its burden with regard to the less rigorous standard for doing business in Ohio under the long — arm statute, it is not necessary for this court to analyze whether Defendants are subject to the general jurisdiction of this court. Clearly, defendants' contacts with Ohio are not "continuous and systematic," as is required to provide a basis for general jurisdiction over them. Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408, 414 (1984).
CONCLUSION
Even though personal jurisdiction over defendants is not proper in this court, plaintiff should not lose its right to pursue its claims in an appropriate jurisdiction. Therefore, in the interest of justice, this case shall be transferred to the appropriate federal district court in California, which has personal jurisdiction over all defendants. 28 U.S.C. § 1631 (2000).
It is, therefore,
ORDERED THAT
1) Defendants' Rule 12(b)(2) motion to dismiss or transfer for lack of jurisdiction over the person be, and hereby is, granted as to all defendants.
2) This case be, and hereby is, transferred to the United States District Court for the Central District of California for further proceedings.
So ordered.