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Inc. v. Sky Thunder, LLC

United States District Court, D. Kansas

June 16, 2017

JAKE'S FIREWORKS, INC., Plaintiff,
v.
SKY THUNDER, LLC, Defendants.

          AMENDED MEMORANDUM AND ORDER

          JULIE A. ROBINSON UNITED STATES DISTRICT JUDGE.

         This matter is before the Court on Defendant Michael Kimberling's Motion to Dismiss (Doc. 37) for lack of personal jurisdiction and for failure to state a claim. The motion is fully briefed and the Court is prepared to rule. For the reasons explained in detail below, the Court denies Defendant's motion to dismiss.

         I. Background

         Plaintiff Jake's Fireworks, Inc.'s Amended Complaint seeks relief on the basis of four claims: (1) counterfeiting under 15 U.S.C. § 1114, (2) trademark infringement under 15 U.S.C. § 1114, (3) unfair competition under 15 U.S.C. § 1125, and (4) unfair competition under Kansas law. The following relevant facts are alleged in the Amended Complaint in support of these claims. Plaintiff is a leading distributor of wholesale and retail fireworks in the United States. It owns the registered trademark EXCALIBUR7, which it has used in connection with fireworks, specifically consumer fireworks artillery shells, since at least June 19, 1998. Plaintiff's artillery shells are packaged in a rectangular box having side cutouts that permit viewing of the packaged shells. Defendant Sky Thunder is owned by Defendant Kimberling, who started the company in 2011. Defendants, without authorization from Jake's Fireworks, have used and continue to use the infringing and counterfeit X-CALIBUR mark in connection with the advertisement and sale of fireworks, namely, consumer artillery shells packaged in a rectangular box having side-cutouts that permit viewing of the packaged shells. Defendants advertise that Defendant Sky Thunder designed the X-CALIBUR-branded consumer artillery shells. Defendant purchases fireworks from a distributor located within the State of Kansas.

         Kimberling personally participated in, was directly responsible for and authorized and approved the selection, purchase, import, promotion, distribution and/or sale of Defendants' X-CALIBUR®-branded fireworks, carrying out all such activities in Defendant Kimberling's own personal interest. Defendants were aware of Plaintiff and its consumer artillery shells advertised and sold under the EXCALIBUR® mark at the time Defendants adopted and began selling identical products under the infringing and counterfeit X-CALIBUR mark.

         Kimberling has submitted an affidavit in support of his motion to dismiss on the basis of personal jurisdiction. He resides in Indiana, and Sky Thunder's principal place of business is in Indiana. Kimberling attests that neither he nor Sky Thunder solicits business from, sends agents or representatives to, holds themselves out as doing business in, advertises or markets in, maintains bank accounts in, or maintains property or employees in the State of Kansas. They are not licensed to do business in Kansas. Kimberling has never transacted business with nor purchased fireworks from any distributor in Kansas.

         II. Standards

         A. Personal Jurisdiction

         Plaintiff has the burden of establishing personal jurisdiction over Defendant.[1] In the absence of an evidentiary hearing, as in this case, the plaintiff must make only a prima facie showing of jurisdiction to defeat a motion to dismiss.[2] “The plaintiff may make this prima facie showing by demonstrating, via affidavit or other written materials, facts that if true would support jurisdiction over the defendant.”[3] Allegations in a complaint are accepted as true if they are plausible, non-conclusory, and non-speculative, to the extent that they are not controverted by submitted affidavits.[4] At the same time, the Court does not have to accept as true conclusory allegations, nor incompetent evidence. When a defendant has produced evidence to support a challenge to personal jurisdiction, a plaintiff has a duty to come forward with competent proof in support of the jurisdictional allegations of the complaint.[5] The court resolves all factual disputes in favor of the plaintiff.[6] Conflicting affidavits are also resolved in the plaintiff's favor, and “the plaintiff's prima facie showing is sufficient notwithstanding the contrary presentation by the moving party.”[7] “In order to defeat a plaintiff's prima facie showing of jurisdiction, a defendant must present a compelling case demonstrating ‘that the presence of some other considerations would render jurisdiction unreasonable.'”[8]

         B. Failure to State a Claim

         To survive a motion to dismiss for failure to state a claim, a complaint must present factual allegations, assumed to be true, that “raise a right to relief above the speculative level, ” and must contain “enough facts to state a claim to relief that is plausible on its face.”[9] To state a claim for relief, “the complaint must give the court reason to believe that this plaintiff has a reasonable likelihood of mustering factual support for these claims.”[10] The plausibility standard does not require a showing of probability that a defendant has acted unlawfully, but requires more than “a sheer possibility.”[11] “[M]ere ‘labels and conclusions, ' and ‘a formulaic recitation of the elements of a cause of action' will not suffice; a plaintiff must offer specific factual allegations to support each claim.”[12] Finally, the Court must accept the nonmoving party's factual allegations as true and may not dismiss on the ground that it appears unlikely the allegations can be proven.[13]

         The Supreme Court has explained the analysis as a two-step process. For the purposes of a motion to dismiss, the court “must take all the factual allegations in the complaint as true, [but] we ‘are not bound to accept as true a legal conclusion couched as a factual allegation.'”[14] Thus, the court must first determine if the allegations are factual and entitled to an assumption of truth, or merely legal conclusions that are not entitled to an assumption of truth.[15] Second, the court must determine whether the factual allegations, when assumed true, “plausibly give rise to an entitlement to relief.”[16] “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”[17]

         III. Discussion

         A. Personal Jurisdiction

         Federal courts follow state law “in determining the bounds of their jurisdiction over persons.”[18] To establish personal jurisdiction over a defendant, a plaintiff must show that jurisdiction is proper under the laws of the forum state and that the exercise of jurisdiction would not offend due process.[19] The Kansas long-arm statute is construed liberally so as to allow jurisdiction to the full extent permitted by due process, therefore the Court proceeds directly to the constitutional analysis.[20] Personal jurisdiction requirements must be met as to each defendant.[21]

         The due process analysis is comprised of two steps. First, the court must consider whether the defendant has such minimum contacts with the forum state “that he should reasonably anticipate being haled into court there.”[22] If the requisite minimum contacts are found, the Court will proceed to the second step in the due process analysis-ensuring that the exercise of jurisdiction “does not offend ‘traditional notions of fair play and substantial justice.'”[23]

         1. Minimum Contacts

         “Minimum contacts” can be established in one of two ways, either generally or specifically for lawsuits based on the forum-related activities:

General jurisdiction is based on an out-of-state defendant's “continuous and systematic” contacts with the forum state, and does not require that the claim be related to those contacts. Specific jurisdiction, on the other hand, is premised on something of a quid pro quo: in exchange for “benefitting” from some purposive conduct directed at the forum state, a party is deemed to consent to the exercise of jurisdiction for claims related to those contacts.[24]

         Plaintiff alleges that Kimberling had minimum contacts with Kansas based on specific jurisdiction. Specific jurisdiction exists over a nonresident defendant “if the defendant has ‘purposefully directed' his activities at residents of the forum, and the litigation results from alleged injuries that ‘arise out of or relate to' those activities.”[25]

         The specific jurisdiction inquiry “focuses on the relationship among the defendant, the forum, and the litigation.”[26] To establish minimum contacts, the “defendant's suit-related conduct must create a substantial connection with the forum State.”[27] Specific jurisdiction exists over a nonresident defendant “if the defendant has ‘purposefully directed' his activities at residents of the forum, and the litigation results from alleged injuries that ‘arise out of or relate to' those activities.”[28] One aspect of this requirement is that the Court must look to “the defendant's contacts with the forum State itself, not the defendant's contacts with persons who reside there.”[29]

         Here, Plaintiff alleges specific, or “case-linked” jurisdiction, [30] based on its allegation in the Complaint that Sky Thunder purchased fireworks from a distributor in Kansas. Plaintiff maintains that Kimberling personally participated, directed, and authorized the business' conduct, therefore Sky Thunder's act of purchasing fireworks from a distributorship in Kansas can be imputed to him. Defendant argues that this is not a well pled fact entitled to an assumption of truth in the face of Kimberling's affidavit, where he attests that he does “not transact business with or purchase fireworks from any distributor within the State of Kansas or the District of Kansas.”[31]

         The Court agrees that Plaintiff lacks competent proof that Kimberling personally transacted business in the State of Kansas. On a motion to dismiss for lack of personal jurisdiction, the Court does not accept allegations in the Complaint as true if they are controverted by affidavit. Here, Kimberling's affidavit controverts Plaintiff's assertion that he personally transacted business in Kansas. Kimberling states that he has never transacted business with or purchased fireworks from any distributor in Kansas.

         But Plaintiff alleges that Sky Thunder purchases fireworks from a distributor in Kansas, a contact that may be imputed to Kimberling as the sole member of the LLC. The Court agrees that if Kimberling was a primary participant in the alleged wrongdoing that forms the basis of this Court's jurisdiction, his actions on behalf of Sky Thunder may be sufficient to satisfy the minimum contacts requirement.[32] Plaintiff alleges in the Complaint that Kimberling, as the founder and owner of Sky Thunder, was directly responsible for, and authorized and approved the selection, purchase, import, promotion, distribution, and/or sale of the allegedly infringing fireworks. The Court accepts this allegation as true given that it is not directly contradicted by Kimberling's affidavit. In fact, Kimberling's affidavit supports Plaintiff's allegation of control by attesting that he is “the sole and managing member of Sky Thunder.”[33]

         Moreover, if Kimberling completely controlled Sky Thunder's contacts with Kansas, the business's contacts may be imputed to him.[34] Defendant has produced no evidence to controvert Plaintiff's allegation that Sky Thunder purchases fireworks from a Kansas distributor. Plaintiff alleges in the Complaint that Defendants market and sell infringing and counterfeit fireworks, and further allege that they purchase fireworks from a distributor in Kansas. These allegations are sufficient on this minimal record to demonstrate that Defendants purposefully directed their activities to the State of Kansas by purchasing fireworks here. Plaintiff does not allege that the fireworks purchased from the Kansas distributor are the same fireworks that contain allegedly infringing marks, although a reasonable inference could arguably be drawn that such products are purchased in Kansas. But because Plaintiff's claims are tied to Sky Thunder's production, advertising, and sale ...


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