Delphix Corp. v. Embarcadero Technologies ( 2018 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS SEP 11 2018
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
DELPHIX CORP., No. 16-16572
Plaintiff-Appellant, D.C. No. 5:16-cv-00606-BLF
v.
MEMORANDUM*
EMBARCADERO TECHNOLOGIES,
INC.,
Defendant-Appellee.
DELPHIX CORP., No. 16-16697
Plaintiff-Appellee, D.C. No. 5:16-cv-00606-BLF
v.
EMBARCADERO TECHNOLOGIES,
INC.,
Defendant-Appellant.
Appeal from the United States District Court
for the Northern District of California
Beth Labson Freeman, District Judge, Presiding
Argued and Submitted December 6, 2017
San Francisco, California
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
Before: RAWLINSON and OWENS, Circuit Judges, and RICE,** Chief District
Judge.
Delphix appeals the district court’s order dismissing the case for lack of
personal jurisdiction. Embarcadero cross-appeals the district court’s order finding
the court had subject matter jurisdiction. We have jurisdiction pursuant to 28
U.S.C. § 1291. We review the district court’s factual findings for clear error and
the issue of jurisdiction de novo. Reebok Int’l, Ltd. v. McLaughlin, 49 F.3d 1387,
1390 (9th Cir. 1995). We affirm in part and reverse in part.
“Where, as here, the defendant’s motion is based on written materials rather
than an evidentiary hearing, the plaintiff need only make a prima facie showing of
jurisdictional facts to withstand the motion to dismiss.” Ranza v. Nike, Inc., 793
F.3d 1059, 1068 (9th Cir. 2015) (citation and internal quotation marks omitted).
While “a plaintiff may not simply rest on the bare allegations of the complaint,”
“uncontroverted allegations must be taken as true, and conflicts between parties
over statements contained in affidavits must be resolved in the plaintiff’s
favor.” Id. (citation, internal quotation marks, and brackets omitted).
When a defendant moves to dismiss for lack of personal jurisdiction, the
plaintiff bears the burden of demonstrating that the court has jurisdiction. Harris
Rutsky & Co. Ins. Servs., Inc. v. Bell & Clements Ltd., 328 F.3d 1122, 1128–29
**
The Honorable Thomas O. Rice, Chief United States District Judge
for the Eastern District of Washington, sitting by designation.
2
(9th Cir. 2003). However, the plaintiff must make “only a prima facie showing of
jurisdictional facts to withstand the motion to dismiss.” Doe v. Unocal Corp., 248
F.3d 915, 922 (9th Cir. 2001). For purposes of deciding whether a prima facie
showing has been made, “the court resolves all disputed facts in favor of the
plaintiff.” Pebble Beach Co. v. Caddy, 453 F.3d 1151, 1154 (9th Cir. 2006); In re
W. States Wholesale Nat. Gas Antitrust Litig., 715 F.3d 716, 741 (9th Cir. 2013),
aff'd sub nom. Oneok, Inc. v. Learjet, Inc., 135 S. Ct. 1591, 191 L. Ed. 2d 511
(2015).
A. Subject Matter Jurisdiction
The district court properly found the court had subject matter jurisdiction.
Per the Declaratory Judgment Act, 28 U.S.C. § 2201, the court may “declare the
rights and other legal relations of any interested party.” “[T]he question in each
case is whether the facts alleged, under all the circumstances, show that there is a
substantial controversy, between parties having adverse legal interests, of sufficient
immediacy and reality to warrant the issuance of a declaratory judgment.” Md.
Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273 (1941).
The district court correctly found that “the record of communication
between the parties both before and after this suit was filed and the ongoing TTAB
[Trademark Trial and Appeal Board] proceedings paint a clear picture of a
‘substantial controversy’ that is ‘definite and concrete’ enough to be addressed by
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the Court.” Although Embarcadero highlights it never threatened litigation,
Embarcadero (1) asserted the elements of trademark infringement in its opposition
to Delphix’s registration for its word mark and petition to cancel Delphix’s logo
mark, (2) represented it saw no way forward with Delphix’s use of DELPHIX as
its company name or for its products and services during settlement talks, and (3)
refused to sign a covenant not to sue Delphix for its use of the DELPHIX mark
after Delphix brought this action. Without a declaratory judgment, Delphix would
be forced to either play it safe and change its company and product name, thereby
foregoing the goodwill and incurring transition costs, or push forward and risk
having to destroy infringing product, pay additional damages, and disgorge profits
to Embarcadero. These circumstances are ripe for a declaratory judgment.
B. Personal Jurisdiction
The district court erred in finding there was no personal jurisdiction. There
are two categories of in personam jurisdiction. In 1984, the Supreme Court
explicitly recognized the distinction between what has come to be called “general
jurisdiction” and “specific jurisdiction.” 4 Wright, et al., Fed. Prac. & Proc. Civ. §
1067.5 (4th ed. 2018) (citing Helicopteros Nacionales de Colombia, S.A. v. Hall,
466 U.S. 408 (1984)); accord BNSF Ry. Co. v. Tyrrell, 137 S. Ct. 1549, 1558
(2017) (“[W]e have distinguished between specific or case-linked jurisdiction and
general or all-purpose jurisdiction.”).
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A general jurisdiction inquiry is very different from a specific jurisdiction
inquiry. “Unlike the specific jurisdiction analysis, which focuses on the cause of
action, the defendant and the forum, a general jurisdiction inquiry is dispute blind,
the sole focus being on whether there are continuous and systematic contacts
between the defendant and the forum.” 4 Fed. Prac. & Proc. Civ. § 1067.5
(quoting Dickson Marine Inc. v. Panalpina, Inc., 179 F.3d 331, 339 (5th Cir.
1999)); see also Daimler AG v. Bauman, 571 U.S. 117, 127 (2014).
“[A] court may assert general jurisdiction over foreign (sister-state or
foreign-country) corporations to hear any and all claims against them when their
affiliations with the State are so ‘continuous and systematic’ as to render them
essentially at home in the forum State.” Daimler, 571 U.S. at 127 (quoting
Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011)).
The “paradigm” forums in which a corporate defendant is “at home” are the
corporation’s place of incorporation and its principal place of business. Id. at 137.
The exercise of general jurisdiction is not limited to these forums; in an
“exceptional case,” a corporate defendant’s operations in another forum “may be
so substantial and of such a nature as to render the corporation at home in that
State.” Id. at 138-39 & n.19.
“[C]ourts must examine the defendant’s contacts with the forum at the time
of the events underlying the dispute when determining whether they have
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jurisdiction.” Steel v. United States, 813 F.2d 1545, 1549 (9th Cir. 1987). “[O]ne
cannot defeat personal jurisdiction by a move away from the state in which the
underlying events took place.” Id. Accordingly, a general jurisdiction inquiry
should consider all of a defendant’s contacts with the forum state prior to the filing
of the lawsuit, rather than just those contacts that are related to the particular cause
of action the plaintiff asserts. 4 Fed. Prac. & Proc. Civ. § 1067.5. In determining
“how far back from either the accrual or filing of the claim they will look; most
courts use a ‘reasonable time’ standard yielding timeframes of roughly three to
seven years.” Id. (citing e.g., Helicopteros, 466 U.S. at 409–11 (seven year look)).
Here, Embarcadero is a Delaware corporation that maintained its
headquarters in California up until at least October 2015. At that time,
Embarcadero was purchased by Idera, Inc., a Texas-based company. Embarcadero
claims that its headquarters are now in Austin, Texas. Understandably, it took
months to transfer Embarcadero’s headquarters and change its corporate records to
reflect its new location. Plaintiff filed suit on February 4, 2016. In July 2016,
Plaintiff gathered and proffered to the district court extensive evidence showing
Embarcadero continued to represent that its headquarters were located in
California.
For at least two decades Embarcadero’s headquarters were located in
California and it engaged in “continuous and systematic” activities within
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California, including directing or performing all the alleged conduct which
generates the subject matter jurisdiction for this suit. That conduct started in April
2012 and continued through May 2016. The purchase of Embarcadero by Idera,
Inc. in October 2015 did not instantaneously dissolve the general jurisdictional
nexus Embarcadero had established by its continuous and systematic operations in
California.
Moreover, were these facts viewed through the lens of specific personal
jurisdiction, the result would be the same. Critically, the instant action is about
Delphix’s right to use the DELPHIX mark as its business name and on its product
(in light of Embarcadero’s rights to the DELPHI mark). This issue is beyond the
jurisdiction of the TTAB proceeding in Virginia, which only involved the disputed
right to register the mark. As such, when Embarcadero challenged Delphix’s right
to use the DELPHIX mark during settlement talks in California, this conduct was
not directed at Virginia, but rather was directed at Delphix in California, where
both companies were operating at that time.
When every aspect of the case – from the parties to the underlying disputed
rights – is completely centered in California, we cannot say the exercise of specific
jurisdiction in California would be unfair or unreasonable. See Bancroft &
Masters, Inc. v. Augusta Nat’l, Inc., 223 F.3d 1082, 1086 (9th Cir. 2000),
overruled in part on other grounds by Yahoo! Inc. v. La Ligue Contre Le Racisme
7
Et L’Antisemitisme, 433 F.3d 1199, 1207 (9th Cir. 2006) (en banc). Costs are to be
taxed against the Defendant-Appellee and Cross-Appellant Embarcadero
Technologies, Inc..
AFFIRMED IN PART; REVERSED IN PART.
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FILED
SEP 11 2018
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
Delphix Corporation v. Embarcadero Technologies, Case No. 16-16572
Rawlinson, Circuit Judge, concurring in part and dissenting in part:
I agree with the majority that the district court had subject matter
jurisdiction. However, I do not agree that the district court erred in finding that it
lacked general or specific personal jurisdiction.
The majority’s overly expansive imposition of general jurisdiction, in a case
in which the underlying dispute is limited to proceedings before the Trademark
Trial and Appeal Board (TTAB) in Virginia, does not satisfy “the demanding
nature of the standard for general personal jurisdiction over a corporation.”
Martinez v. Aero Caribbean, 764 F.3d 1062, 1070 (9th Cir. 2014). “Because the
assertion of judicial authority over a defendant is much broader in the case of
general jurisdiction than specific jurisdiction, a plaintiff invoking general
jurisdiction must meet an exacting standard for the minimum contacts required.”
Ranza v. Nike, Inc., 793 F.3d 1059, 1069 (9th Cir. 2015) (citation and internal
quotation marks omitted). “General jurisdiction requires affiliations so continuous
and systematic as to render the foreign corporation essentially at home in the forum
State, i.e., comparable to a domestic enterprise in that State.” Id. (citation and
alteration omitted). “The paradigmatic locations where general jurisdiction is
1
appropriate over a corporation are its place of incorporation and its principal place
of business.” Id. (citation omitted). “Only in an exceptional case will general
jurisdiction be available anywhere else.” Id. (citation and internal quotation marks
omitted).
Relying on a secondary source, the majority asserts that “a general
jurisdiction inquiry should consider all of a defendant’s contacts with the forum
state prior to the filing of the lawsuit, rather than just those contacts that are related
to the particular cause of action the plaintiff asserts.” Majority Disposition, p. 6.
However, the majority does not follow through in applying this standard for
general jurisdiction because it fails to consider all of Embarcadero’s contacts with
California prior to Delphix’s lawsuit. The record reflects that, prior to the filing of
Delphix’s lawsuit in February, 2016, Embarcadero transferred its principal place of
business and associated operations to Texas. Laurie Crawford (Crawford),
Embarcadero’s Director of Human Resources, explained that, prior to its
acquisition by Idera, Embarcadero relocated its main sales office and former CEO
to Texas, and “[t]he only sales people that Embarcadero had outside of Texas
pre-acquisition were a small number of specialty sales representatives.” Crawford
related that “[b]y January 1, 2016, there were no employees working in the San
Francisco Embarcadero office location,” and the remaining California employees
2
were IT specialists and software developers who were not in management
positions. Crawford stated that, in February, 2016, only thirty-seven of
Embarcadero’s three hundred and twenty-four employees remained in California.
Similarly, Atanas Popov (Popov), Embarcadero’s General Manager, conveyed that
“most all operations and all management were centered in Texas by the end of
2015.” Chris Smith, Embarcadero’s Chief Operating Officer, explained that all of
Embarcadero’s officers and directors resigned on October 9, 2015, and were
replaced with officers and directors in Texas. Thus, Embarcadero amply
demonstrated that its principal place of business was in Texas.
The listing of California addresses for Embarcadero in pre-litigation
licensing agreements, trademark registrations, websites, social media posts, and
other documents does not establish the requisite systematic contact for general
jurisdiction. See Majority Disposition, pp. 6-7. Popov explained that, during the
corporate transition, Embarcadero had “over 700,000 URL’s or webpages” that
were “modified in phases” with update prioritization for web pages generating the
most significant business usage. Popov emphasized that “contact information on
social media channels was not updated urgently as it [was] not used for sales . . .”
Heidi Farris, Embarcadero’s chief marketing officer, conveyed that, because
Embarcadero is an online company, any listings of physical office addresses were
3
immaterial to its customers, and Embarcadero’s license agreements were updated
to reflect the Texas address. It is evident that Embarcadero was not “at home” in
California such as to warrant the imposition of general jurisdiction. See Daimler
AG v. Bauman, 571 U.S. 117, 138-39 (2014) (explaining that “the inquiry . . . is
not whether a foreign corporation’s in-forum contacts can be said to be in some
sense continuous and systematic, it is whether that corporation’s affiliations with
the State are so continuous and systematic as to render it essentially at home in the
forum State”) (citation, alteration, footnote reference, and internal quotation marks
omitted).
The majority’s reliance on Steel v. United States, 813 F.2d 1545 (9th Cir.
1987) to support its conclusion that Embarcadero’s near total relocation to Texas
was immaterial is misplaced. See Majority Disposition, pp. 5-6. In Steel, we
recognized that the defendant’s move from one state to another was not controlling
for purposes of specific jurisdiction. See Steel, 813 F.2d at 1549. We articulated
that:
When a court is exercising specific jurisdiction over a defendant,
arising out of or related to the defendant’s contacts with the forum, the
fair warning that due process requires arises not at the time of the suit,
but when the events that gave rise to the suit occurred. . . .
Id. (citation and internal quotation marks omitted) (emphasis added). Applying
4
this standard, we held that the defendant was subject to specific jurisdiction, not
general jurisdiction, despite his move from California to Virginia, because the
defendant’s “contacts with California during the marriage, separation, and divorce
proceedings determine whether the district court has personal jurisdiction over him
in the declaratory judgment action.” Id. at 1549-50. It was within the context of
imposing specific jurisdiction that we observed that “one cannot defeat personal
jurisdiction by a move away from the state in which the underlying events took
place.” Id. at 1549 (giving the example of continuing jurisdiction for acts
committed while doing business in the state) (citation omitted) (emphasis added).
In contrast to the example of acts committed while doing business in the state, the
“underlying events” involved in the present appeal occurred solely as the result of
proceedings before the TTAB in Virginia, not in California, and Embarcadero had
relocated its headquarters and operations to Texas prior to the ensuing litigation. 1
Simply stated, this is not the “exceptional case” where general jurisdiction exists
outside the “place of incorporation [or the] principal place of business.” Ranza,
793 F.3d at 1069.
1
The majority maintains that Embarcadero “direct[ed] or perform[ed] all
the alleged conduct” in California. Majority Disposition, p. 7. However, the
majority fails to mention that “the alleged conduct” was singularly linked to the
TTAB proceedings in Virginia, and not in California.
5
The majority’s application of specific jurisdiction suffers from similar
factual and legal deficiencies. See Majority Disposition, pp. 7-8. The majority’s
assertion that the facts supporting a finding of general jurisdiction also support
imposition of specific jurisdiction, see id. at 7, “elide[s] the essential difference
between case-specific and all-purpose (general) jurisdiction.” Daimler, 571 U.S. at
132 (citation omitted). “There are three requirements for a court to exercise
specific jurisdiction over a nonresident defendant: (1) the defendant must either
purposefully direct his activities toward the forum or purposefully avail himself of
the privileges of conducting activities in the forum; (2) the claim must be one
which arises out of or relates to the defendant’s forum-related activities; and (3) the
exercise of jurisdiction must comport with fair play and substantial justice, i.e. it
must be reasonable.” Axiom Foods, Inc. v. Acerchem Int’l, Inc., 874 F.3d 1064,
1068 (9th Cir. 2017) (citation, alteration and internal quotation marks omitted).
It is important to keep in mind the plaintiff’s burden to “satisfy [ ] the first
two prongs of the test.” Id. (citation omitted). In other words, the plaintiff must
establish that the defendant in this case “purposefully direct[ed] [its] activities
toward the forum or purposefully avail[ed] [itself] of the privileges of conducting
activities in the forum.” Id. (citation and internal quotation marks omitted).
Delphix Corporation, as the plaintiff, failed to meet its burden of proof
6
because the record in this case points much more strongly toward a lack of specific
personal jurisdiction than toward the existence of specific personal jurisdiction.
The majority seeks to impose specific personal jurisdiction on the basis that
Embarcadero “directed conduct” toward Delphix in California “during settlement
talks.” Majority Disposition, p. 7 (emphasis added). However, purposeful
direction requires the intentional commission of an act by the defendant that is
“expressly aimed at the forum state.” Morrill v. Scott Fin. Corp., 873 F.3d 1136,
1142 (9th Cir. 2017); see also Panavision Intern., L.P. v. Toeppen, 141 F.3d 1316,
1321 (9th Cir. 1998) (applying purposeful direction test in trademark case because
“it is akin to a tort case”) (citations omitted). Indeed, Delphix acknowledges that
the purposeful direction test applies. Under the purposeful direction test, Delphix
is unable to demonstrate that Embarcadero’s enforcement action before the TTAB
in Virginia was intentionally directed at California. Indeed, the majority’s approach
belies the fact that the only action relating to the trademark dispute initiated by
Embarcero was the trademark challenge before the TTAB. Embarcadero has never
filed a lawsuit in California or elsewhere regarding Delphix’s use of the trademark.
Importantly, there is absolutely no indication in the record that the
settlement discussions relied upon by the majority as a basis for specific
jurisdiction were divorced from the TTAB proceedings. It also does not appear
7
that such discussions would have occurred in the absence of Embarcadero’s
enforcement action before the TTAB. Embarcadero’s enforcement action does not
otherwise involve California.
Notably, in Morrill, we affirmed the finding of a lack of personal
jurisdiction despite these actions by the defendant: making phone calls into the
forum state, sending snail mail and email to the forum state, filing civil actions in
the forum state, and appearing pro hac vice in the forum state. See 873 F.3d at
1142-43.
To the extent the majority seeks to impose specific jurisdiction based on
activities unrelated to Delphix’s trademark claims that the majority deemed
relevant for general jurisdiction, the Supreme Court has held otherwise. See
Majority Disposition, p. 7 (stating that facts relating to general jurisdiction “when
viewed through the lens of specific personal jurisdiction” would produce the same
result); but see also Bristol-Myers Squibb Co. v. Superior Ct. of Cal., 137 S. Ct.
1773, 1781 (2017) (articulating that “[i]n order for a court to exercise specific
jurisdiction over a claim, there must be an affiliation between the forum and the
underlying controversy, principally, an activity or an occurrence that takes place in
the forum State. When there is no such connection, specific jurisdiction is lacking
regardless of the extent of a defendant’s unconnected activities in the State”)
8
(citation, alteration, and internal quotation marks omitted).
The majority asserts that the “instant action is about Plaintiff’s right to use
the DELPHIX mark as its business name and on its product (in light of
Embarcadero’s rights to the DELPHI mark).” Majority Disposition, p. 7.
According to the majority, “[t]his issue is beyond the jurisdiction of the TTAB
proceedings in Virginia, which only involved the disputed right to register the
mark.” Id. (emphasis in the original). But it is unclear how the TTAB’s limited
jurisdiction over certain claims demonstrates that Embarcadero purposefully
directed its activities toward California. See Morrill, 873 F.3d at 1142 (explaining
that purposeful direction requires “[a]n intentional act” rather than the results of
that act, “even the most direct, immediate, and intended”) (citation omitted).
The majority maintains that specific jurisdiction exists because “when
Embarcadero challenged Delphix’s right to use the DELPHIX mark during
settlement talks in California, this conduct was not directed at Virginia, but rather
was directed at Delphix in California, where both companies were operating at the
time.” Majority Disposition, p. 7 (emphasis in the original). This is precisely the
approach that the Supreme Court has rejected as untenable for exercising specific
jurisdiction. The Supreme Court has emphasized that “[a] forum State’s exercise
of jurisdiction over an out-of-state intentional tortfeasor must be based on
9
intentional conduct by the defendant that creates the necessary contacts with the
forum.” Walden v. Fiore, 571 U.S. 277, 286 (2014). Our analysis “looks to the
defendant’s contacts with the forum state itself, not the defendant’s contacts with
persons who reside there.” Id. at 285 (citation omitted). “[T]he plaintiff cannot be
the only link between the defendant and the forum. Rather, it is the defendant’s
conduct that must form the necessary connection with the forum State that is the
basis for its jurisdiction over him.” Id. at 285 (citations omitted). Indeed, “the
mere fact that [the defendant’s] conduct affected plaintiffs with connections to the
forum State does not suffice to authorize jurisdiction.” Id. at 291. The majority’s
reliance on the fact that “settlement talks in California” were “not directed at
Virginia, but rather to Delphix’s right to use the mark in California and abroad”
contravenes these limits on specific jurisdiction. Majority Disposition at 7. Under
the majority’s approach, any time a licensor seeks to enforce its rights before the
TTAB or other agencies pursuant to a licensing agreement, it would automatically
be subject to the jurisdiction of the forum state in which the licensee is located,
particularly if the licensor engaged in settlement discussions regarding the use of
the license. However, neither the mere existence of a licensing agreement nor
settlement discussions regarding that agreement supports such an expansive
application of personal jurisdiction unmoored from actions directed at the forum
10
state by the defendant. See id. I am not prepared to extend our precedent that far.
I respectfully dissent.
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