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Comfort Heat Systems, LLC v. Royall Mfg., Inc.: US District Court : CIVIL PROCEDURE - insufficent basis for personal jurisdiction; suit dismissed

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Comfort Heat Systems, LLC, d/b/a
Aqua-Therm, LLC, a Minnesota
limited liability company,
Plaintiff, MEMORANDUM OPINION
AND ORDER
v. Civil No. 08-5246 ADM/JSM
Royall Manufacturing, Inc., a Wisconsin
corporation; Jeffrey Anderson, an
individual; Andersons Outdoor Wood
Furnace Center, LLC, a Wisconsin limited
liability company; and American
Stoveworks, Inc., a Wisconsin corporation,
Defendants.
______________________________________________________________________________
Matthew J. Schaap, Esq., Severson, Sheldon, Dougherty & Molenda, PA, Apple Valley, MN,
appeared on behalf of Plaintiff.
Mychal A. Bruggeman, Esq., Mackall, Crounse & Moore, PLC, Minneapolis, MN, appeared on
behalf of Jeffrey Anderson; Andersons Outdoor Wood Furnace Center, LLC; and American
Stoveworks, Inc.
Andrea Kiehl, Esq., Flynn, Gaskins & Bennet, LLP, Minneapolis, MN, appeared on behalf of
Royal Manufacturing, Inc.
______________________________________________________________________________
I. INTRODUCTION
On December 22, 2008, the undersigned United States District Judge heard oral argument
on Defendants American Stoveworks, Inc. (American Stoveworks); Jeffrey Anderson
(Anderson); and Andersons Outdoor Wood Furnace Center, LLC (Andersons Outdoor)
(collectively the Anderson Defendants) Amended Motion to Dismiss [Docket No. 28]. In its
Amended Complaint [Docket No. 15], Plaintiff Comfort Heat Systems, LLC, d/b/a
Aqua-Therm, LLC, (Aqua-Therm) asserts two claims against the Anderson Defendants: (1)
1 In considering a motion to dismiss, the pleadings are construed in the light most
favorable to the nonmoving party, and the facts alleged in the complaint must be taken as true.
Hamm v. Groose, 15 F.3d 110, 112 (8th Cir. 1994).
2 Royall has not taken a position on the Anderson Defendants Motion to Dismiss.
2
violation of the Minnesota Deceptive Trade Practices Act, Minn. Stat. 325D.43-.48; and (2)
violation of the Minnesota False Statement in Advertising Act, Minn. Stat. 325F.67. For the
reasons set forth below, the Anderson Defendants Motion is granted.
II. BACKGROUND1
Aqua-Therm is a Minnesota company that designs and sells wood-burning heating
appliances throughout the United States. Am. Compl. 1, 10, 11. One of Aqua-Therms
product lines is the Eco-One boiler, which Aqua-Therm began developing in 2007. Id. 17.
The dispute in this case, as reflected by the majority of the claims asserted in the Amended
Complaint, centers on the relationship and dealings between Aqua-Therm and Defendant Royall
Manufacturing, Inc. (Royall), a Wisconsin company that manufactures wood-burning heating
appliances. The specifics of the relationship are of limited relevance to the Anderson
Defendants Motion to Dismiss,2 but by way of background, Aqua-Therm and Royall formed a
relationship in January 2008, in which Royall agreed to manufacture a prototype of Aqua-
Therms Eco-One boiler. Id. 15, 25. Royall delivered two such prototypes to Aqua-Therm on
June 25, 2008. Id. 32, 34. According to Aqua-Therm, testing on the prototype revealed that a
number of design changes were necessary to address certain safety concerns, but Royall refused
to make the design changes. Id. 35-36, 40.
After Aqua-Therm received the two Eco-One prototypes from Royall, Aqua-Therm
learned that Royall had produced, without Aqua-Therms authorization, an additional twenty3
two prototypes and had sold those prototypes to one or more of the Anderson Defendants. Id.
39, 51. The Anderson Defendants are Wisconsin residents. Id. 3-5. The Anderson
Defendants then listed on eBay under the name American Stove Works Clean Burn Model
these Eco-One prototypes. Id. 54-55, 59-60. In addition, Aqua-Therm alleges that the
Anderson Defendants have made false or misleading statements on the Internet about the safety
and efficiency of the Eco-One prototypes being offered by the Anderson Defendants under the
name American Stove Works Clean Burn Model and about the units qualification for EPA
certification. Id. 60-69.
Aqua-Therm filed a complaint in state court on September 12, 2008, against the
Defendants, and, on September 22, 2008, Defendants removed the action to this Court on the
basis of diversity of citizenship. Notice of Removal [Docket No. 1], Attach. 1. On September
30, 2008, the Court denied Aqua-Therms Motion for Temporary Restraining Order [Docket No.
3]. Aqua-Therm filed its Amended Complaint on October 2, 2008, and the Anderson Defendants
now move to dismiss the claims against them on the basis of lack of personal jurisdiction, failure
to state a claim, and failure to satisfy the pleading with particularity requirement of Rule 9(b) of
the Federal Rules of Civil Procedure.
III. DISCUSSION
A. Personal Jurisdiction Standard
Rule 12 of the Federal Rules of Civil Procedure provides that a party may move to
dismiss a complaint for lack of personal jurisdiction. Fed. R. Civ. P. 12(b)(1). To survive a
motion to dismiss for lack of personal jurisdiction, the plaintiff need only make a prima facie
showing of personal jurisdiction over the defendant. Digi-Tel Holdings, Inc. v. Proteq
4
Telecomms., 89 F.3d 519, 522 (8th Cir. 1996). Determining whether personal jurisdiction exists
is a two-prong inquiry: first, the requirements of the Minnesota long-arm statute must be
satisfied, and second, the exercise of personal jurisdiction must comport with the due process.
Stanton v. St. Jude Med., Inc., 340 F.3d 690, 693 (8th Cir. 2003). Because Minnesotas longarm
statute is coextensive with the limits of due process, the only question is whether the
exercise of personal jurisdiction comports with due process. Minnesota Mining & Mfg. Co. v.
Nippon Carbide Indus., Inc., 63 F.3d 694, 697 (8th Cir. 1995).
The exercise of personal jurisdiction comports with due process when a defendant
maintains sufficient minimum contacts with the forum state such that summoning the defendant
would not offend traditional notions of fair play and substantial justice. Pecoraro v. Sky Ranch
for Boys, Inc., 340 F.3d 558, 561 (8th Cir. 2003). The central question is whether a defendant
has purposefully availed itself of the privilege of conducting activities in the forum state and
should, therefore, reasonably anticipate being haled into court there. Id. at 562. With these
principles in mind, courts consider the following factors: (1) the nature and quality of the
defendants contacts with the forum state; (2) the quantity of contacts; (3) the relationship
between the cause of action and the contacts; (4) the forum states interest in providing a forum
for its residents; and (5) the convenience of the parties. Id. The first three factors are of
primary importance, while the last two are secondary factors. Minnesota Mining, 63 F.3d at
697. The third factor distinguishes between specific and general jurisdiction. Digi-Tel, 89 F.3d
at 523 n.4. Aqua-Therm argues that personal jurisdiction over the Anderson Defendants exists
on the basis of general jurisdiction; specific jurisdiction is not at issue.
5
B. General Jurisdiction
General jurisdiction exists where the contacts between the defendant and the forum state
are continuous and systematic even if there is no relationship between the contacts and the
cause of action. Johnson v. Woodcock, 444 F.3d 953, 956 (8th Cir. 2006). Aqua-Therm
alleges that the Anderson Defendants have had such continuous and systematic contacts with
Minnesota. The contacts relied upon are: (1) the Anderson Defendants had repeated[]
communicat[ions] with Aqua-Therm by email and by telephone regarding a dispute (which is
not the basis of any claims in this lawsuit) over the Anderson Defendants status as a Royall
dealer and alleged infringement by the Anderson Defendants of Royalls trademark; (2) the
Anderson Defendants offered to sell through eBay the American Stove Works Clean Burn Model
(alleged to be the Eco-One prototypes) to Minnesota residents; and (3) one of the Anderson
Defendants, American Stoveworks, is a closely-held corporation with one of its shareholders
being a Minnesota resident. Pl.s Mem. in Oppn to Mot. to Dismiss [Docket No. 35] at 5.
These alleged contacts are insufficient to confer general personal jurisdiction over the Anderson
Defendants.
Phone and mail contacts alone have been held to be insufficient to justify the exercise of
personal jurisdiction under the due process clause. See Johnson, 444 F.3d at 956 (quotation
omitted); see also Bell Paper Box, Inc. v. Trans W. Polymers, Inc., 53 F.3d 920, 923 (8th Cir.
1995) (The use of interstate facilities, such as telephones or mail, is a secondary or ancillary
factor and cannot alone provide the minimum contacts required by due process.) (quotations
omitted). Additionally, mere purchases, even if occurring at regular intervals, are not enough to
warrant a States assertion of in personam jurisdiction over a nonresident corporation in a cause
3 Although the number of sales to Minnesota residents through the Anderson Defendants
eBay auctions is not known, the available information is sufficient to conclude that general
personal jurisdiction is lacking. The eBay sales, as well as the record as a whole, fails to show
any purposeful availment by the Anderson Defendants. Auction sales on eBay are random and
attenuated, and the choice of [the] highest bidder is . . . beyond the control of the seller; as such,
6
of action not related to those purchase transactions. Helicopteros Nacionales de Columbia, S.A.
v. Hall, 466 U.S. 408, 414 (1984). And even when there is the presence of both phone
communications and the sale and shipment of goods into the forum, personal jurisdiction can still
be lacking. See N. Am. Fin. Corp. v. Amgrar Gesellschaft Fur Farmlagen, 702 F. Supp. 1435,
1439 (D. Minn. 1989) (noting that courts have found the extensive use of telephone, mail and
banking, as well as shipping goods into [the] state to be insufficient to confer personal
jurisdiction) (citing Mountaire Feeds, Inc. v. Agro Impex S.A., 677 F.2d 651, 652 (8th Cir.
1982)). Granted, the relevant contacts must be viewed in the totality of the circumstances rather
than on an individual basis. See Northrup King Co. v. Compania Productora Semillas
Algodoneras Selectas, S.A., 51 F.3d 1383, 1388 (8th Cir. 1995). Nevertheless, the contacts
alleged by Aqua-Therm fail, even when considered in the aggregate, and are insufficient to
confer general personal jurisdiction.
The contacts that the Anderson Defendants have had with Minnesota do not rise to the
level of being continuous and systematic. Rather the Anderson Defendants contacts with
Minnesota are more properly viewed random, fortuitous, or attenuated. See Burger King
Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985). The record before the Court shows that the
extent of the contacts consists of only three telephone conversations and three email exchanges
in April and May 2008 and an unknown portion of the Anderson Defendants 2,500 sales
through eBay in the past year.3 See Pl.s Mem. in Oppn to Mot. to Dismiss at 8-10. In addition,
an overwhelming majority of courts have held that an eBay seller does not purposefully avail
himself of the privilege of doing business in a forum state absent some additional conduct
directed at the forum state. Boschetto v. Hansing, No. C-06-1390, 2006 WL 1980383, at *4
(alteration in the original) (quotations omitted); see also Metcalf v. Lawson, 802 A.2d 1221,
1226 (N.H. 2002) (holding that purposeful availment on the part of an eBay seller had not been
shown because the seller has no control over who would ultimately be the winning bidder, nor
could [the seller] exclude bidders from particular jurisdictions).
4 As previously explained, see supra note 3, the fact that the Anderson Defendants sold
products to Minnesota residents through eBay auctions is insufficient to show that the Anderson
Defendants purposefully availed themselves of the privilege of conducting business in
Minnesota in light of the nature of an eBay auction. Jurisdictional discovery to determine the
number of eBay sales to Minnesota is therefore unnecessary.
7
the Anderson Defendants have no offices, employees, or bank accounts in Minnesota; they have
not directed any advertisements specifically at Minnesota residents; they have not targeted
Minnesota as a market; and any purchases of their products by Minnesota residents have been
initiated by Minnesota residents. Anderson Decl. [Docket No. 42] 5-9. Viewed in the
totality, the record fails to show that the Anderson Defendants purposely availed themselves of
the privilege of conducting activities in Minnesota which would have lead to a reasonable
expectation of being sued in a Minnesota court.
C. Jurisdictional Discovery
Aqua-Therm argues in the alternative that it should be permitted to conduct limited
discovery on the issue of personal jurisdiction. In support of this request, Aqua-Therm asserts
that (1) in light of the Anderson Defendants internet sales, discovery will likely reveal that the
Anderson Defendants continuously and systematically solicited and sold products to Minnesota
residents;4 (2) because one of the products sold by the Anderson Defendants on the Internet is
made by a company with headquarters in Minnesota, the Anderson Defendants must have had
continuous and systematic contacts with that company; and (3) because one of the Anderson
5 Under 28 U.S.C. 1631, a district court that has determined that jurisdiction is lacking
is empowered to transfer an action to cure the lack of jurisdiction. Aqua-Therm, however, has
made no such request. Cf. Johnson, 444 F.3d at 954 n.2 (affirming dismissal when a plaintiff did
not request transfer).
8
Defendants, American Stoveworks, is a closely-held corporation with one of its shareholders
being a Minnesota resident, the Anderson Defendants must have had contact with Minnesota
through its contact with the shareholder, i.e., telephone calls, e-mails, business meetings,
corporate meetings, etc. Pl.s Mem. in Oppn to Mot. to Dismiss at 14-15. The Court finds
these unsupported, conclusory allegations insufficient to meet Aqua-Therms burden. When a
plaintiff offers only speculation or conclusory assertions about contacts with a forum state, a
court is within its discretion in denying jurisdictional discovery. Dever v. Hentzen Coatings,
Inc., 380 F.3d 1070, 1074 n.1 (8th Cir. 2004) (quotation omitted).
In short, the record fails to demonstrate that Minnesota has general jurisdiction over the
Anderson Defendants, and, therefore, Aqua-Therms claims against the Anderson Defendants are
dismissed for lack of personal jurisdiction.5 Because the Anderson Defendants motion to
dismiss is granted on this basis, the issues of whether Aqua-Therms claims against the
Anderson Defendants should be dismissed for failure to state a claim and for failure to satisfy the
pleading with particularity requirement of Rule 9(b) are moot.
9
IV. CONCLUSION
Based upon the foregoing, and all the files, records, and proceedings herein, IT IS
HEREBY ORDERED that:
1. The Anderson Defendants Amended Motion to Dismiss [Docket No. 28] is
GRANTED; and
2. Counts VII and VIII of Aqua-Therms Amended Complaint [Docket No. 15] are
DISMISSED.
BY THE COURT:
s/Ann D. Montgomery
ANN D. MONTGOMERY
U.S. DISTRICT JUDGE
Dated: February 6, 2009.
 

 
 
 

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