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Thousand Oaks Barrel Co., LLC v. Deep South Barrels LLC

United States District Court, E.D. Virginia, Alexandria Division

March 20, 2017

THOUSAND OAKS BARREL CO., LLC, Plaintiff,
v.
DEEP SOUTH BARRELS LLC, et al, Defendants.

          MEMORANDUM OPINION

          T. S. Ellis, III United Stales District Judge

         The matter came before the Court on defendants' joint motion to dismiss plaintiffs amended complaint for (i) lack of personal jurisdiction under Rule 12(b)(2), Fed. R. Civ. P., (ii) failure to state a claim under Rule 12(b)(6), Fed. R. Civ. P., and (iii) misjoinder under Rule 20, Fed.R.Civ.P. (Doc. 41). The matter was fully briefed, argued on January 13, 2017, and taken under advisement. Accordingly, defendants' motion is now ripe for disposition.

         I.

         The facts pertinent to defendants' motion to dismiss are derived from the amended complaint, exhibits attached to the amended complaint, and the affidavits defendants submitted to challenge the existence of personal jurisdiction.[1]

         Plaintiff Thousand Oaks is a Virginia limited liability company with its principal place of business in Manassas, Virginia. Defendant Deep South Barrels LLC is a Texas limited liability company located in Pearland, Texas. Defendant Jonathan Emmons is a former owner of Deep South Barrels and was Deep South Barrels' former Managing Partner and Vice President ("VP") of Business Solutions. Defendant Elissa Emmons is a former owner of Deep South Barrels and was Deep South Barrels' former Managing Partner and VP of Business Operations. Defendant Randall Bentley is the current owner of Deep South Barrels. Bentley, together with Jonathan and Elissa Emmons, founded Deep South Barrels in June 2010. Defendant Wood Harbour is a sole proprietorship organized under Texas law and located in Texas. Defendant Mark Carboni is the founder and owner of Wood Harbour.

         Bryan Weisberg founded plaintiffs predecessor-in-interest in 1999, and in 2003 plaintiff began manufacturing and selling miniaturized bourbon barrels that allow individuals to age and flavor their own liquor. Plaintiff has also created a "barrel mug" product, which is essentially a wooden beer mug that looks like a small barrel. In 2003, plaintiff created an e-commerce website to advertise and sell its products. Plaintiff also began setting up vendor booths in outdoor festivals to sell its products, and plaintiff became a wholesale supplier of its barrels to retail outlets. In 2008, plaintiff purchased a laser engraving machine so that plaintiff could create personalized barrels for customers by burning graphics or customers' names on the end of the barrel. Plaintiff created a catalog of images customers could choose to engrave on the barrels they purchased from plaintiff. Plaintiff alleges that its barrel products have been a significant commercial success, as plaintiff has sold hundreds of thousands of barrels through its website and various retail outlets.

         Plaintiff has submitted for copyright registration (i) the graphic designs for the barrels, (ii) the website pages, (iii) the product catalogs, and (iv) various product labels. Plaintiff also alleges that it has acquired common law trademark rights in the marks for four of its products: (1) the "Bootleg Kit" mark, which identifies a product launched in 2006 that allows customers to flavor their spirits in a miniature barrel, (2) the "Cigar Infusion Barrel" mark, which plaintiff began using in 2007 to identify a product line of oak barrels designed to store and flavor cigars, (3) the "Wedding Barrel" mark, which plaintiff began using in 2011 to identify a miniature oak barrel designed to hold wedding cards and other wedding gifts, and (4) the "Top Shelf Taste at a Bottom Barrel Price" mark, which plaintiff began using in 2006 as a tagline for its Bootleg Kit product. Plaintiff has also submitted the Bootleg Kit, Cigar Infusion Barrel, and Wedding Barrel marks for registration with the United States Patent and Trademark Office ("PTO"), and the trademark applications are currently pending with the PTO.

         Plaintiff alleges that Deep South Barrels copied plaintiffs engraving designs, trademarks, and product lines and thereby unlawfully traded off plaintiff s goodwill and reputation. In particular, plaintiff alleges that Deep South Barrels has used the phrases "Bootleg Box, " "Bootleg Kit, " "Cigar Infusion Barrel, " "Wedding Barrel, " and "Top Shelf Liquor at Bottom Shelf Prices" to identify Deep South Barrels products that are similar to plaintiffs products. Plaintiff alleges that Deep South Barrels has sold infringing Deep South Barrels products throughout the United States, including Virginia, through Deep South Barrels' interactive e-commerce website, and that Virginia residents have purchased Deep South Barrels' products from its website. Finally, plaintiff alleges that Bentley, a former employee of plaintiff, had access to plaintiffs confidential business information database, and that Bentley misappropriated that information for the purpose of establishing and operating Deep South Barrels.

         With respect to plaintiffs claims against defendants Wood Harbour and Mark Carboni, plaintiff also alleges that Carboni and Wood Harbour have infringed on plaintiffs copyrights and trademarks. Plaintiff further alleges that Wood Harbour and plaintiff reached an oral agreement in 2008 to allow Wood Harbour to sell plaintiffs products at Wood Harbour's retail stores and festival sites in Texas, but as part of that oral agreement Wood Harbour could not sell any products from plaintiffs competitors. Plaintiff alleges that Wood Harbour breached that agreement in 2011 by selling Deep South Barrels' products.

         Plaintiffs initial complaint in this case, filed in August 2016, consisted of 294 pages, 1134 numbered paragraphs, and hundreds of pages of exhibits. Because that complaint was inappropriately prolix, it was dismissed sua sponte without prejudice for failure to comply with Rule 8, Fed. R. Civ. P.[2] See Thousand Oaks Barrel Co., LLC v. Deep South Barrels LLC, No. 1:16-cv-1035 (E.D. Va. Aug. 30, 2016) (Order). Plaintiff was given leave to file an amended complaint, which it did. Plaintiffs amended complaint is 107 pages, which is still too long, but plaintiff was not required to file another complaint.

         Plaintiff brings eight claims against defendants Deep South Barrels, Jonathon Emmons, Elissa Emmons, and Bentley in its amended complaint: (1) federal copyright infringement under 17 U.S.C. § 501 against Deep South Barrels, (2) contributory and vicarious copyright infringement under 17 U.S.C. § 501 against Jonathan Emmons, Elissa Emmons, and Bentley, (3) federal trademark infringement under 15 U.S.C. § 1125(a)(1)(A) against Deep South Barrels, (4) contributory and vicarious trademark infringement under 15 U.S.C. § 1125(a)(1)(A) against Jonathan Emmons, Elissa Emmons, and Bentley, (5) common law trademark infringement under Virginia law against Deep South Barrels, (6) unfair competition under Virginia law against Deep South Barrels, (7) a violation of the Virginia Uniform Trade Secrets Act ("VUTSA") against Deep South Barrels, and (8) common law misappropriation under Virginia law against Deep South Barrels. Plaintiff seeks damages and injunctive relief against Deep South Barrels, Jonathan Emmons, Elissa Emmons, and Bentley.

         Plaintiff brings seven claims against defendants Wood Harbour and Mark Carboni, which are numbered from 9-15 in accordance with plaintiffs amended complaint: (9) federal copyright infringement under 17 U.S.C. § 501 against Wood Harbour, (10) contributory and vicarious copyright infringement under 17 U.S.C. § 501 against Carboni, (11) federal trademark infringement under 15 U.S.C. § 1125(a) against Wood Harbour, (12) contributory and vicarious trademark infringement under 15 U.S.C. § 1125(a) against Carboni, (13) common law trademark infringement under Virginia law against Wood Harbour, (14) unfair competition under Virginia law against Wood Harbour, and (15) breach of contract against Wood Harbour. Plaintiff also seeks damages and injunctive relief against Wood Harbour and Carboni.

         Defendants have filed a joint motion to dismiss all of plaintiff s claims for lack of personal jurisdiction under Rule 12(b)(2), Fed.R.Civ.P. Additionally, defendants also move to dismiss Wood Harbour and Carboni for misjoinder under Rule 20, Fed. R. Civ. P., and move to dismiss most of plaintiff s claims against all defendants for failure to state plausible claims for relief under Rule 12(b)(6), Fed. R. Civ. P.

         II.

         Because defendants' motion to dismiss for lack of personal jurisdiction, if granted, eliminates the need to address any other issues, the first question is whether personal jurisdiction exists over any defendants. Under Rule 12(b)(2), Fed. R. Civ. P., "a defendant must affirmatively raise a personal jurisdiction challenge, but the plaintiff bears the burden of demonstrating personal jurisdiction at every stage following such a challenge." Grayson v. Anderson, 816 F.3d 262, 267 (4th Cir. 2016). Specifically, plaintiff must ultimately prove the existence of personal jurisdiction by a preponderance of the evidence, but when "a district court decides a pretrial personal jurisdiction motion without conducting an evidentiary hearing, the plaintiff need only make a prima facie showing of personal jurisdiction." Carefirst of Md, Inc. v. Carefirst Pregnancy Ctrs., Inc., 334 F.3d 390, 396 (4th Cir. 2003).

         Courts can exercise personal jurisdiction over a defendant only if "(1) such jurisdiction is authorized by the long-arm statute of the state in which the district court sits; and (2) application of the relevant long-arm statute is consistent with the Due Process Clause." Id. Put differently, the long-arm statute must reach defendant's conduct, and that reach must not exceed the statute's constitutional grasp. Rannoch, Inc. v. Rannoch Corp., 52 F.Supp. 2d. 681, 684 (E.D. Va. 1999).

         Virginia's long-arm statute provides for the exercise of personal jurisdiction where a defendant "transact[s] any business" in Virginia. Va. Code § 8.01-328.1(A). When personal jurisdiction "is based solely upon [the long-arm statute], only a cause of action arising from acts enumerated in [this statute] may be asserted" against the defendant. Id. § 8.01-328.1(C). The Fourth Circuit has explained that Virginia's long-arm statute "extends the jurisdiction of its courts as far as federal due process permits." ePlus Tech., Inc. v. Aboud, 313 F.3d 166, 176 (4th Cir. 2002). Accordingly, the "statutory inquiry necessarily merges with the constitutional inquiry, and the two inquiries essentially become one." Id. (internal quotation marks omitted); see also Consulting Eng'rs Corp. v. Geometric Ltd., 561 F.3d 273, 276-77 (4th Cir. 2009).

         The Due Process Clause requires a nonresident defendant to have "certain minimum contacts with [the forum state] such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice." Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (internal quotation marks omitted). Plaintiff can satisfy the "minimum contacts" requirement by showing that specific jurisdiction exists over defendants, which requires plaintiff to show that the "defendant's qualifying contacts with the forum state also constitute the basis for the suit." Universal Leather, 773 F.3d at 559. Whether a nonresident defendant's contacts with the forum state sufficiently qualify for specific jurisdiction depends on the "extent to which the defendant purposefully availed itself of the privilege of conducting activities in the forum state, " whether plaintiffs claims arise out of defendant's forum activities, and "whether the exercise of personal jurisdiction is constitutionally reasonable." Id. (internal quotation marks omitted).

         Defendants contend that they lack the requisite contacts with Virginia to permit specific jurisdiction. In particular, defendants argue (i) that Deep South Barrels' sales of its products into Virginia via its e-commerce website are insufficient to establish specific jurisdiction, (ii) that personal jurisdiction is improper over defendants Bentley, Jonathan Emmons, and Elissa Emmons based solely on their status as corporate officers of Deep South Barrels, and (iii) that Wood Harbour and Carboni do not have sufficient contacts with Virginia.[3]

         A.

         The first issue is whether personal jurisdiction exists over Deep South Barrels based on its e-commerce sales in Virginia. Deep South Barrels is a non-resident LLC headquartered in Texas. Plaintiff alleges in its amended complaint that Deep South Barrels

(i) sells barrels throughout the United States, including Virginia,
(ii) has an interactive e-commerce website which allows customers to select products, order them, and have them shipped to the customer, and
(iii) maintains an ongoing relationship with customers by requiring them to register with the website.

         In addition to those allegations, Deep South Barrels' affidavit establishes that Deep South Barrels has no offices in Virginia, owns no property in the state, does not employ anyone in Virginia, and has never attended or marketed its products at any festivals in Virginia. As a result, Deep South Barrels' sole contacts with Virginia are its sales to Virginia customers via Deep South Barrels' website: Deep South Barrels has had 251 customers in Virginia since the company's founding in 2010, and since 2013 its Virginia customers account for 1.21% of its total number of customers. Deep South Barrels has also made 99 shipments to Virginia, which is 1.17% of the company's total number of shipments.

         Defendants argue that these e-commerce contacts are insufficient to confer specific jurisdiction over Deep South Barrels, given the small percentage of Internet sales to Virginia residents and the lack of any ads or marketing targeted at Virginia. Defendants further argue that these facts suggest that Deep South Barrels' contacts with Virginia resulted from happenstance. Defendants' arguments are unpersuasive.

         In ALS Scan, Inc. v. Digital Service Consultants, Inc.,293 F.3d 707, 713 (4th Cir. 2002), the Fourth Circuit established a test for determining whether specific jurisdiction exists over a nonresident defendant based on the defendant's Internet contacts with the forum. There, the Fourth Circuit adopted the "sliding scale" model established in Zippo Manufacturing Co. v. Zippo Dot Com, Inc.,[4] which looks to the nature and quality of defendant's Internet activity to determine whether personal jurisdiction exists. At one end of the scale or continuum "are situations where a defendant clearly does business over the Internet. If the defendant enters into contracts with residents of a foreign jurisdiction that involve the knowing and repeated transmission of computer files over the Internet, personal jurisdiction is proper." Id. (quoting Zippo, 952 F.Supp. at 1124). At the other end of the scale or continuum are passive websites that simply put information on the Internet that forum users can access, and thus are typically not a basis for exercising personal jurisdiction. Id. The Fourth Circuit has adopted and adapted that sliding scale approach, and as a result a state can exercise personal jurisdiction over a nonresident defendant when ...


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