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Componentone, L.L.C. v. Componentart

August 16, 2007

COMPONENTONE, L.L.C., PLAINTIFF,
v.
COMPONENTART, INC., COMPONENTART HOLDINGS, INC., STEVE G. ROLUFS, MILJAN BRATICEVIC, JANE DOE, DUSAN BRATICEVIC, JOHN DOE AND CYBERAKT, INC., DEFENDANTS.



MEMORANDUM OPINION AND ORDER OF COURT

By Memorandum Opinion and Order of Court dated March 12, 2007 (Document No. 102), the Court granted the Motion to Dismiss John Doe (Vernon Rolufs), Jane Doe (Milena Braticevic), and ComponentArt Holdings, Inc. under Fed. R. Civ. P. 12(b)(2) for lack of personal jurisdiction. Thereafter, the Plaintiff filed a Motion for Clarification and/or Partial Relief, which the Court granted in part. See Order of Court dated March 30, 2007 (Document No. 107). The Court permitted Plaintiff forty-five (45) days in which to conduct jurisdictional discovery of Vernon Rolufs and ComponentArt Holdings, Inc. and stayed or otherwise held under reconsideration its Order of March 12, 2007, until said jurisdictional discovery was completed and the parties supplemented the record.*fn1

The parties have now completed the jurisdictional discovery and have supplemented the record by the filing of the following: PLAINTIFF'S SUPPLEMENTAL BRIEF IN OPPOSITION TO DEFENDANTS' MOTION TO DISMISS (Sealed Doc. 127); DEFENDANTS' RESPONSE TO PLAINTIFF'S SUPPLEMENTAL BRIEF IN OPPOSITION TO DEFENDANTS' MOTION TO DISMISS (Document No. 134); and the PLAINTIFFS' REPLY TO DEFENDANTS' OPPOSITION TO PLAINTIFF'S SUPPLEMENTAL BRIEF IN OPPOSITION TO DEFENDANTS' MOTION TO DISMISS (Document No. 137).

After reconsideration and an analysis of the applicable case law, the affidavits and documentation submitted, as well as the extensive memoranda filed in support of the respective positions of the parties, the Court finds and rules that its Order of March 12, 2007, should be reinstated and that Defendants John Doe (Vernon Rolufs) and ComponentArt Holdings, Inc. are dismissed as defendants in this matter.

Standard of Review*fn2

Generally a motion for reconsideration will only be granted if: (1) there has been an intervening change in controlling law; (2) new evidence, which was not previously available, has become available; or (3) necessary to correct a clear error of law or to prevent manifest injustice. Hirsch Corp. v. Zlotnicki, 779 F.2d 906, 909 (3d Cir. 1985), cert. denied, 47 U.S. 1171 (1986).

For the purpose of a 12(b)(2) motion, the Court must accept the plaintiff's allegations as true and construe disputed facts in favor of the plaintiff. Carteret Savings Bank v. Shushan, 954 F.2d 141, 146 (3d Cir.), cert. denied, 506 U.S. 817 (1992). However, when challenged, the burden of establishing personal jurisdiction rests upon the plaintiff. Grand Entertainment Group v. Star Media Sales, 988 F.2d 476, 482 (3d Cir. 1993). "Plaintiff must sustain its burden of proof in establishing jurisdictional facts through sworn affidavits or other competent evidence." Time Share Vacation Club v. Atlantic Resorts, Ltd., 735 F.2d 61, 67 n.9 (3rd Cir. 1984).*fn3 The plaintiff must offer evidence that establishes with reasonable particularity the existence of sufficient contacts between the defendant and the forum state to support jurisdiction. See Carteret, 954 F.2d at 146; Provident Nat. Bank v. California Fed. Sav. & Loan Assoc., 819 F.2d 434 (3d Cir. 1987).

When the district court does not " ' hold an evidentiary hearing . . ., the plaintiff need only establish a prima facie case of personal jurisdiction and the plaintiff is entitled to have its allegations taken as true and all factual disputes drawn in its favor'." O'Connor v. Sandy Lane Hotel Co., Ltd., No. 05-3288, -- F.3d ---, 2007 WL 2135274 at *2 (3d Cir. July 26, 2007) (quoting Miller Yacht Sales, Inc. v. Smith, 384 F.3d 93, 97 (3d Cir. 2004)).

Discussion

The Court described the facts alleged in Plaintiff's amended complaint in its March 12, 2007, Memorandum Opinion and need not repeat them here.

A. ComponentArt Holdings, Inc.

1. Alter Ego Theory

As it did in its original motion, Plaintiff continues to argue that ComponentArt Holdings is the "alter ego" of co-defendant ComponentArt Inc., a party which has not challenged in personam jurisdiction. In its Order of March 12, 2007, the Court found that while Plaintiff had cited numerous factors that suggested a high degree of intimacy between ComponentArt Holdings and ComponentArt Inc., "it offer[ed] no evidence from which an inference can be drawn that the two corporations do not respect normal corporate formalities, or do not deal with each other as separate legal entities, or that ComponentArt Holdings controls the day-to-day operations of ComponentArt Inc. . . . ." Memorandum Opinion, at 10.

"A subsidiary will be considered the alter-ego of its parent only if the parent exercises control over the activities of the subsidiary." Clemens v. Gerber Scientific, Inc., Civ. A. No. 87-5949, 1989 WL 3480 (E.D. Pa. Jan. 13, 1989). To prevail under its alter ego theory, Plaintiff must demonstrate that "[t]he degree of control exercised by the parent [is] greater than normally associated with common ownership and directorship." In re Latex Gloves Products Liability Litig., No. MDL 1148 (Aug. 22, 2001) 2001 WL 964105 *3 (E.D. Pa. 2001). "Plaintiff must prove that the parent controls the day-to-day operations of the subsidiary such that the subsidiary can be said to be a mere department of the parent." Latex Gloves, 2001 WL 964105, *3 (citing Arch v. American Tobacco Co., Inc., 984 F. Supp. 830, 837 (E.D. Pa. 1997)).

Plaintiff does not contend that ComponentArt Holdings controls the day-to-day activities of ComponentArt Inc.; rather, it relies on the following allegations:

(i) the alleged undercapitalization of ComponentArt Holdings and the failure to explain the valuation of Cyberakt when it was sold to ComponentArt Holdings;

(ii) the alleged lack of a market rationale for appointing Vernon Rolufs to act as President of ComponentArt Holdings;

(iii) the absence of "customary" corporate documents with regard to the employment of Steve Rolufs as CEO of ComponentArt Holdings and other activities of ComponentArt Holdings;

(iv) the aligned interests of ComponentArt Holdings and ComponentArt Inc. in legal disputes and the sharing of the companies' intellectual property; and

(v) the absence of evidence of internal operations within ComponentArt Holdings.

In response, where appropriate, ComponentArt Holdings has refuted each of these allegations either by deposition testimony and/or documentary evidence.

With all these arguments in mind, the Court once again turns to the relationship between ComponentArt Holdings and ComponentArt Inc. Even taking all of Plaintiff's allegations to be true and resolving all factual disputes in favor of Plaintiff, the Court again finds that Plaintiff has failed to show that ComponentArt Holdings is the alter ego of ComponentArt, Inc.

This Court previously found that there is a "high degree of intimacy and communality between the two entities" and nothing in the supplemented record convinces the Court otherwise. Moreover, neither the new evidence nor new arguments of Plaintiff persuade this Court that the two corporations do not respect normal corporate formalities, or do not deal with each other as separate legal entities, or that ComponentArt Holdings controls the day-today operations of ComponentArt Inc. such that ComponentArt Inc. can "be said to be a mere department of the parent." In Latex Gloves, 2001 WL 964105 *3.

The Court finds and rules that Plaintiff continues to rely upon conclusory allegations, conjecture, and speculation to support its claim that ComponentArt Holdings has emasculated ComponentArt Inc.'s corporate identity. Such allegations, conjecture, and speculation are insufficient to establish jurisdiction. The Court declines to find that personal jurisdiction is proper over ComponentArt Holdings based on Plaintiff's allegations that ComponentArt Holdings is the alter ego of ComponentArt Inc.

2. Ownership of the Domain Name COMPONENTART.COM and the Filing of A Patent Application in the United States

Plaintiff also argues that personal jurisdiction in this Court is proper over ComponentArt Holdings because ComponentArt Holdings is the "owner"*fn4 of the domain name and "in sharing officers and directors, it is imputed with perfect knowledge of the purposes for which the infringing domain name is used." Pl's Supp. Br. at 6.
It is undisputed that ComponentArt Holdings is the owner/ registrant of the domain name . See Pl's Exhibit 18, ComponentArt Holdings' Responses to Requests for Admissions. However, it is also undisputed that ComponentArt Inc. owns and controls the actual website from which internet users can access information about the products and services offered by ComponentArt Inc. The uncontroverted evidence confirms that ComponentArt Holdings does not use the website to market, manufacture, sell, offer for sale, import or export any products; does not engage in any solicitation through the website; and does not host, maintain, contribute content to, or otherwise participate in the operation of the website located at www.componentart.com.

Furthermore, an actual review of the website reveals that ComponentArt Holdings is not identified in any way. In fact, the website includes only the address and phone number for ComponentArt Inc., not ComponentArt Holdings, and directs that general inquiries should be made to "ComponentArt Inc., 511 King Street West, Suite 400, Toronto, Ontario M5V 1K4 Canada."

The Court finds and rules that the fact that ComponentArt Holdings is the owner / registrant of the domain name , without any involvement or control in the actual operation of the website, is simply not enough to confer personal jurisdiction over ComponentArt Holdings. Furthermore, the Court finds and rules Plaintiff has failed to produce any credible evidence that any officer of ComponentArt Holdings directs or controls the operations of ComponentArt Inc. in such a way that ComponentArt Holdings should be "imputed with perfect knowledge of the purposes for which the infringing domain name is used."

Plaintiff also argues that personal jurisdiction should be conferred upon ComponentArt Holdings because (i) it is the patent holder for certain technologies developed by ComponentArt Inc. that are "comingled into products bearing the infringing mark" and (ii) ComponentArt Holdings has ...


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