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Decon Laboratories, Inc. v. Decon Laboratories Limited

August 18, 2009

DECON LABORATORIES, INC.
v.
DECON LABORATORIES LIMITED



The opinion of the court was delivered by: Bartle, C.J.

MEMORANDUM

Now before the court is the motion of defendant Decon Laboratories Limited ("Decon UK") to dismiss for lack of personal jurisdiction pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure.

Plaintiff Decon Laboratories, Inc. ("Decon USA"), a Pennsylvania corporation, initiated this antitrust action against defendant Decon UK, an English company. Decon USA is a Pennsylvania corporation that manufactures, sells, and distributes over 70 products, including cleaning agents and various disinfectants, for use in industries such as biotechnology and healthcare. Decon UK is an English company that manufactures, sells, and distributes approximately seven cleaning agents for use in scientific and medical laboratories. According to the affidavit of Decon UK's president, Robert Taylor, both Decon UK and Decon USA were owned and controlled by Robert Taylor and his two brothers from 1982 to 1987. In 1987, Decon UK came under the ownership and control of Robert Taylor while Decon USA came to be owned by his brother, Peter Taylor.

On April 1, 1987, Decon UK and Decon USA entered into a written non-compete agreement ("Agreement") that designated geographical regions in which each company was prohibited from doing business. Decon UK agreed that it would not do business in North and South America, and in turn Decon USA would refrain from doing business outside of these two continents. Wishing to expand its business beyond these territorial boundaries, Decon USA now seeks to terminate the Agreement. Decon USA alleges that the Agreement is illegal, unenforceable, and void under 15 U.S.C. § 1.*fn1 Decon USA seeks relief in the form of declaratory judgment against Decon UK as well as damages.

Section 12 of the Clayton Act provides, in relevant part, "Any suit, action, or proceeding under the antitrust laws against a corporation may be brought ... in any district wherein it may be found or transacts business; and all process in such cases may be served ... wherever [the defendant] may be found."

15 U.S.C. § 22. Our Court of Appeals has held that "personal jurisdiction under Section 12 of the Clayton Act is as broad as the limits of due process under the Fifth Amendment." In re Auto. Refinishing Paint Antitrust Litig., 358 F.3d 288, 299 (3d Cir. 2004).

Under the Due Process Clause, a defendant is subject to a forum's jurisdiction if it has "minimum contacts" with that forum "such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'" International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)). The Supreme Court has explained, "Whether due process is satisfied must depend ... on the quality and nature of the activity in relation to the fair and orderly administration of the laws which it was the purpose of the due process clause to insure." International Shoe, 326 U.S. at 319. Particularly where "contractual obligations" are concerned, as in the instant case, this fairness inquiry demands that "parties who 'reach out beyond one state and create continuing relationships and obligations with citizens of another state' are subject to regulation and sanctions in the other State." Burger King v. Rudzewicz, 471 U.S. 462, 473 (1985) (quoting Travelers Health Ass'n v. Virginia, 339 U.S. 643, 647 (1950)).

Thus, in ruling on a Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction, a court must determine whether or not the defendant has continuing relationships and obligations in the proposed forum. With regard to making such determinations, "[t]he Court long ago rejected the notion that personal jurisdiction might turn on 'mechanical' tests." Burger King, 471 U.S. at 478 (citing International Shoe, 326 U.S. at 319 (1945)). The "central concern of the inquiry into personal jurisdiction," the Supreme Court has written, is "the relationship among the defendant, the forum, and the litigation." Shaffer v. Heitner, 433 U.S. 186, 204 (1977).

Our Court of Appeals "has held broadly that 'a federal court's personal jurisdiction may be assessed on the basis of the defendant's national contacts when the plaintiff's claim rests on a federal statute authorizing nationwide service of process.'" In re Auto. Refinishing, 358 F.3d at 298 (citing Pinker v. Roche Holdings, Ltd., 292 F.3d 361, 369 (3d Cir. 2002)). Because § 12 of the Clayton Act provides for nationwide service of process, we will assess this court's personal jurisdiction over Decon UK by examining its national contacts.

When considering a motion to dismiss under Rule 12(b)(2) for lack of personal jurisdiction, the court "must accept all of the plaintiff's allegations as true and construe disputed facts in favor of the plaintiff." Carteret Savings Bank, FA v. Shushan, 954 F.2d 141, 142 n.1 (3d Cir. 1992). However, the plaintiff's allegations must be grounded in "specific facts." Marten v. Godwin, 499 F.3d 290, 298 (3d Cir. 2007).

Personal jurisdiction may be exercised where a defendant has "continuous and systematic" contacts with the proposed forum. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 415 (1984). This is referred to as general jurisdiction. Id. at n.9. Alternatively, a court is said to have specific jurisdiction over a defendant where the plaintiff's claim "arise[s] out of or relate[s] to" the defendant's activity in the forum. Burger King, 471 U.S. at 472. In this case, the forum is the United States. Our Court of Appeals has specifically declined to address "the question of what level of relationship is necessary under the 'arise out of or relate to' requirement." Miller Yacht Sales, Inc. v. Smith, 384 F.3d 93, 99-100 (3d Cir. 2004). Rather, it has acknowledged "the difficulty of formulating bright-line rules in the personal jurisdiction analysis." Id. at 100. In so doing, the court has "indicat[ed] the fact-sensitive nature of that analysis." Id.

Decon USA first submits that Decon UK maintains continuous and systematic contacts with the United States because it has held a trademark registered with the U.S. Patent & Trademark Office since 1990. Although Robert Taylor states in his affidavit that the trademark was only used in connection with a product that has not been marketed in the United States since 1993 and that only four units of the product were ever sold in the United States, Decon USA points to documents filed by Decon UK with the U.S. Patent & Trademark Office which state that the trademark has been in use since the establishment of the trademark in 1990. The existence of the Decon UK trademark registered in the United States is certainly indicative of its continual presence in this country.

Decon UK has an additional contact with the United States which is more specifically connected with the claim at issue. This contact is its 1987 Agreement with Decon USA. The Agreement limits the business activity of Decon USA to North and South America, of which the United States is, of course, a part.

When addressing a claim for relief grounded in a contractual dispute, courts must adopt "a highly realistic approach that recognizes that a contract is ordinarily but an intermediate step serving to tie up prior business negotiations with future consequences which themselves are the real object of the business transaction." Burger King, 471 U.S. at 479 (internal citations omitted). In this case, the "prior business negotiations" included the division of territories between Decon UK and Decon USA. ...


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