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Clubcom, Inc. v. Captive Media

May 9, 2008

CLUBCOM, INC., PLAINTIFF,
v.
CAPTIVE MEDIA, INC., D/B/A HEALTH CLUB PANEL NETWORK, DEFENDANT.



The opinion of the court was delivered by: Terrence F. McVerry United States District Court Judge

MEMORANDUM OPINION AND ORDER

Presently before the Court is the MOTION TO DISMISS FOR IMPROPER VENUE OR, IN THE ALTERNATIVE, TO TRANSFER, with brief in support, filed by Defendant Captive Media, Inc., d/b/a Health Club Panel Network (Document Nos. 13 and 9), and the RESPONSE IN OPPOSITION filed by Plaintiff ClubCom, Inc. (Document No. 25). For the reasons that follow, the Motion will be denied.

Procedural Background

On November 14, 2007, Plaintiff, ClubCom, Inc. ("ClubCom"), filed a four-count Complaint against Defendant Captive Media, Inc. d/b/a Health Club Panel Network ("Captive') in which it alleges that Captive breached the long term agreement of the parties which gave Captive the exclusive right to place national advertising on the digital entertainment network developed and operated by ClubCom. Distilled to its essence, ClubCom alleges that Captive was selling a "competing" network and that it had failed to use its "best efforts" to perform under the agreement.

Captive has brought the instant motion in which it contends that venue in the Western District of Pennsylvania is improper because (i) Captive does not reside in the District; (ii) none of the events or omissions giving rise to the claim are alleged to have occurred in the District; and, in the alternative, (iii) the lawsuit should be transferred to the United States District Court for the Central District of California.

Factual Background

ClubCom is a Delaware corporation, with its principal place of business in Pittsburgh, Pennsylvania.*fn1 ClubCom is engaged in the business of developing and operating customized digital entertainment networks, which it broadcasts to health clubs through the United States. The offices of ClubCom are located in Pittsburgh, Pennsylvania, and ClubCom does not conduct business from any other location. ClubCom is licensed to do business in Pennsylvania and files tax returns in Pennsylvania. Every ClubCom employee works out of Pittsburgh. The central operating equipment of ClubCom, including its server, computer network, video production and entertainment studios, as well as its advertising placement and tracking systems are all located in Pittsburgh. The ClubCom Network is broadcast from ClubCom's servers in Pittsburgh and everyone who uses the Network does so through Pittsburgh.

Captive is a California corporation with its principal place of business in Encino, California. Captive provides advertising space to advertisers and advertising agencies in over 2,500 health clubs throughout the nation with which Captive has license agreements.

In March 2003, Michael Lederer, the Vice President of Captive, approached Thomas Lapcevic, the President of ClubCom, about securing non-exclusive rights to sell digital advertisements on the ClubCom Network. During four months of negotiations, Mike Lederer and Eugene "Gene" Lederer, the President of Captive, exchanged over fifty (50) emails and telephone calls with Tom Lapcevic; Rich Wonsettler, the former CFO of ClubCom, and Mike Brak, the former Vice President of Sales of ClubCom. The majority of those electronic communications were between Mike Lederer and Tom Lapcevic. Tom Lapcevic, Rich Wonsettler, and Mike Brak were located at ClubCom's office in Pittsburgh for the majority of those negotiations. On July 18, 2003, the parties entered into a "Media Placement Agreement," under which Captive sold advertising on the ClubCom Network for a two and a half (2-1/2 ) year period.

Captive has placed static advertising in Pittsburgh and has sent Captive media kits to Pittsburgh advertising agencies since at least 2000. Consequently, between 2000 and 2007, Captive entered into "Venue Lease Agreements" with ten (10) different health club facilities located in the Western District of Pennsylvania to install advertising panels ("Media Displays") in those clubs. Most of the Venue Lease Agreements are controlled by Pennsylvania law and all of them have been extended for a period of five to ten years.

From January 2004 to February 2008, Captive employed Jim Rice, a Pittsburgh-based independent contractor, approximately 130 times to install new advertisements and panels and to uninstall old ones at health clubs located within the Western District of Pennsylvania.

In March 2004, before the Media Placement Agreement expired, representatives from ClubCom and Captive began discussing the possibility of Captive obtaining the exclusive right to place national advertisements on ClubCom's network. After lengthy negotiations, the parties entered into a contract, the "ClubCom - Captive Advertising Rights License Agreement" and a Letter Agreement Regarding Captive Facilities, both dated March 7, 2006, which granted Captive exclusive rights to sell advertising on the ClubCom Network for a term of ten and a half (10-1/2 ) years. In exchange, ClubCom would receive 20% of the revenue generated by the advertisements. By its express terms, the Agreement was not to expire until June 30, 2016.

To acquire exclusive advertising rights over the ClubCom Network, Captive had to simultaneously acquire rights held by New Media and Active Media, two companies located in Pittsburgh, Pennsylvania. The negotiations between Captive, ClubCom, New Media, and Active Media involved hundreds of emails and telephone calls between representatives of ClubCom, Captive, New Media, and Active Media. The bulk of Captive's communications were with Paul Bryne in Seattle (President of Precor), Ray Berens in Chicago (General Counsel for Amer Sports) and Tom Lapcevic and Rich Wonsettler in Pittsburgh (ClubCom). In August 2004, October 2004, and May 2006, representatives from Captive traveled to Pittsburgh for face-to-face meetings with representatives from ClubCom, New Media and Active Media. In-person negotiations were also conducted at the Encino, California office of Captive.

ClubCom signed the Advertising Rights Agreement in the Precor office in Washington; Captive signed the Agreement in California.

Following the execution of the exclusive Advertising Rights Agreement in March 2006, Captive and ClubCom communicated on a regular basis about research, solicitation, sales, broadcasting, and payment for the advertisements that were to be broadcast from the ClubCom Network in Pittsburgh. From March 2006 to November 2007, Captive sold twenty-seven (27) advertisements. Each advertisement was sent to Pittsburgh to be placed on the ClubCom Network and each advertisement was then broadcast or sent from the ClubCom Network in Pittsburgh to the health club facilities that used the ClubCom Network. The process of soliciting, securing, and broadcasting the advertisements generated in excess of 500 emails between Captive and ClubCom employees. ClubCom argues that virtually all of these emails were received or sent by ClubCom employees who worked out of Pittsburgh. Additionally, ClubCom provided Captive with an account to access its server in Pittsburgh. Captive would access ClubCom's server in order to utilize the cost calculator and to utilize its playback database to generate status reports on the playback of advertisements. The record reflects that from May 2006 to November 2007, Captive employees logged-in to the Pittsburgh server a total of 439 times, accessing the cost-calculator 173 times and the playback database 266 times.

Standard of Review

In considering a motion to dismiss for improper venue under Federal Rule of Civil. Procedure 12(b)(3), the Court must generally accept as true the allegations in the complaint, unless contradicted by defendant's affidavits. Holiday v. Bally's Park Place, Inc., 2007 WL 2600877, at *1 (E.D. Pa. Sep.10, 2007). "The court may examine facts outside the complaint to determine proper venue, but must draw all reasonable inferences and resolve all factual conflicts in the plaintiff's favor." Fellner v. Philadelphia Toboggan Coasters, Inc., 2005 WL 2660351, at *1 (E.D. Pa. Oct.18, 2005); accord Heft v. AAI Corp., 355 F. Supp.2d 757, 762 (M.D. Pa.2005) ("Whatever the nature of the parties' submissions, the court is bound to view the facts in the light most favorable to the plaintiff.").

The United States Court of Appeals for the Third Circuit has held that the movant (the defendant) bears the burden of demonstrating that venue is not proper. Myers v. American Dental Ass'n, 695 F.2d 716, 724 (3d Cir.1982). The defendant also bears the burden of establishing that a venue transfer is warranted. Furthermore, "in ruling on defendant's [transfer] motion the plaintiff's choice of venue should not be lightly disturbed." Jumara v. State Farm Ins. Co., 55 F.3d 873, 879 (3d Cir.1995).

Questions of venue are governed by either 28 U.S.C. § 1404(a) or 28 U.S.C. § 1406. See Jumara, 55 F.3d at 878. The standards for transfer of an action differ depending on whether venue has been properly laid. Section 1404(a) provides that transfer to another proper venue is appropriate "[f]or the convenience of parties and witnesses, in the interest of justice." Id.

Unlike § 1404(a), section 1406, provides for either transfer or dismissal of an action where the original venue is improper. Specifically, § 1406 states that "[t]he district court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought." Id. The burden of establishing the need for transfer under either § 1404(a) or § 1406 rests with the moving party. See In re United States, 273 F.3d 380, 388 (3d Cir. 2001).

In the matter before the Court, Captive has requested, in the alternative, to transfer the case to the United States District Court for the Central District of California pursuant to § 1404(a).

Discussion

Because the standards for transfer depend upon whether venue has been properly laid, the Court must first determine whether venue is proper in the Western District of Pennsylvania. Next, the Court must determine whether transfer would be appropriate in accordance with the factors enunciated by the applicable standard, § 1404(a) or § 1406.

1. Venue

In a civil action in which jurisdiction is based solely on diversity of citizenship, such as the present case, venue is governed by 28 U.S.C. § 1391(a), which provides that venue may be proper only in:

(1) a judicial district where any defendant resides, if all defendants reside in the same State, (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated, or (3) a judicial district in which any defendant is subject to personal jurisdiction at the time the action is commenced, if there is no district in which the action may otherwise be brought.

28 U.S.C. § 1391(a).

ClubCom contends that venue is proper because Captive (i) has extensive business contacts with the Western District of Pennsylvania and (ii) a substantial amount of Captive's negotiations and performance of the Advertising Rights Agreement occurred in the Western District of Pennsylvania. ClubCom argues that both general and specific jurisdiction exist in this case.

On the other hand, Captive contends that venue is not proper because it is not subject to either general or specific jurisdiction in the Western District of Pennsylvania and that "none, let alone a substantial part, of the events or omissions giving rise to the claims are alleged to have occurred in the district." Memo. at 11.

a. General Jurisdiction

General jurisdiction is implicated when the claim arises from the defendant's non-forum-related activities. Helicopteros Nacionales de Colombia S.A. v. Hall, 466 U.S. 408, 411 n.9 (1984). In such a case, the plaintiff "must show significantly more than mere minimum contacts." Provident Nat'l Bank v. Cal. Fed. Sav. & Loan Ass'n, 819 F.2d 434, 437 (3d Cir. 1987). To assert general jurisdiction, the plaintiff must demonstrate that the defendant's contacts with the forum state were "continuous and substantial." Id.; Gehling v. St. George's Sch. of Med., 773 F.2d 539, 541 (3d Cir. 1985). The threshold for establishing general jurisdiction is very high and requires a showing of "extensive and pervasive" facts demonstrating connections with the forum state. Reliance Steel Prods. Co. v. ...


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