United States District Court, N.D. Illinois, Eastern Division
August 30, 2005.
IMAGES OF THE WORLD, INC., Plaintiff,
CONTINENTAL AMERICAN INDUSTRIES, INC. and CONWEST RESOURCES, INC., d/b/a FALCON STUDIOS, JOCKS STUDIOS, MUSTANG STUDIOS and THE FALCON INTERNATIONAL COLLECTION, Defendants.
The opinion of the court was delivered by: DAVID COAR, District Judge
MEMORANDUM OPINION AND ORDER
Plaintiff Images of the World, Inc. ("Plaintiff" or "Images"),
is an Illinois corporation with its principal place of business
in Chicago, Illinois. (Pl. Compl. ¶ 1). Defendants Continental
American Industries, Inc. ("Continental") and ConWest Resources,
Inc. ("ConWest" or "Defendant") (collectively "Defendants"),
d/b/a Falcon Studios, Jocks Studios, Mustang Studios, and the
Falcon International Collection, are both California corporations
with their principal place of business in California. (Pl. Comp.
¶ 2). Defendants move to dismiss for lack of personal
jurisdiction. Alternatively, should this Court find personal
jurisdiction, Defendants move to dismiss for improper venue, or
to transfer this action to the Northern District of California
for forum non conveniens. For the reasons set forth below,
Defendants' motion to dismiss for lack of personal jurisdiction, or alternatively,
transfer this action, pursuant to 28 U.S.C. § 1404(a), to the
Northern District of California, is DENIED in its entirety.
Plaintiff is a producer, manufacturer, and retailer of adult
films. (See, Steven Toushin ("Toushin") Declaration, ¶ 4). In
1987, Toushin, the president and sole shareholder of Images,
purchased the copyrights to the films "Dangerous," "Getting It,"
"A Few Good Men," and "Games" (hereinafter referred to as "the
four films") (Toushin Declaration, ¶ 5). In 1989, Toushin
assigned all his individual rights to the four films to Images.
(Id. at ¶ 6).
For over fifteen years, Defendants have been in the business of
producing adult entertainment that is distributed through outside
distributors, mail order and the Internet. (Def. Ex. 1; Terry
Mahaffey ("Mahaffey") Declaration, ¶ 5).*fn1 In addition,
Defendants also distribute videos produced or manufactured by
other production companies. (Id. at ¶ 6). Defendants, through
mail order and via the Internet, have openly offered the four
films for sale. (Id. at ¶ 26).
In 1991, Images discovered that Continental was selling the
four films. (Pl. Compl., ¶ 6). Images contacted Continental
regarding the unauthorized sales, and Continental conceded that
the copyrights to the four films were owned by Images. (Toushin
Declaration, ¶ 10). Continental agreed to cease and desist its
infringing activity, surrender to Images the masters of the four
films, destroy all the copies of the copyrighted works, and pay
Images $4000 (the approximate income earned by Continental by
selling the four films). Id. Images refrained from filing suit
against Continental as a result of Continental's agreement to
cease and desist the infringing activity. (Pl. Compl., ¶ 29). In 2001, Plaintiff discovered that Defendants' website was
offering the four films for sale. (Pl. Compl., ¶ 9). Since the
matter had been addressed in 1991, Plaintiff was under the
impression that Defendants had discontinued the duplication and
sale of the four films. (Toushin Declaration, ¶ 14). Plaintiff
purchased the four films through the website to determine whether
they were the same films to which Images owns the copyright. (Pl.
Compl., ¶ 10). Upon arrival, Plaintiff learned that they were the
four films, and furthermore, that Defendants had attached a
notice to the copies claiming copyrights in each of the films.
(Pl. Compl., ¶ 11).
Plaintiff contends that it is the owner of the copyrights for
each of the four films in question. (Pl. Compl. ¶ 5). Plaintiff's
suit contains three counts. Count I alleges copyright
infringement, in violation of 17 U.S.C. § 101, et seq. Count II
is a claim against Defendants for false designation of origin and
unfair competition (15 U.S.C. § 1125(a)). Count III is a claim of
common law fraud against Continental.
Defendants move to dismiss for lack of personal jurisdiction.
Defendants contend that they lack the continuous and systematic
contacts with Illinois that would confer general jurisdiction.
Moreover, Defendants maintain that this Court does not have
specific jurisdiction over Defendants. Should this Court assert
personal jurisdiction, Defendants move to dismiss for improper
venue, or alternatively, transfer this action to the Northern
District of California for forum non conveniens. The Court will
address each ground for dismissal in turn. I. Motion To Dismiss For Lack of Personal Jurisdiction
Defendants contend that Images' Complaint must be dismissed
pursuant to Fed.R.Civ.P. 12(b)(2) for lack of personal
jurisdiction. To survive a motion to dismiss for lack of personal
jurisdiction, Plaintiff has the burden of making a prima facie
case for personal jurisdiction. RAR, Inc. v. Turner Diesel,
Ltd., 107 F.3d 1272, 1276 (7th Cir. 1997) (internal
citations omitted). When reviewing a motion to dismiss, all
jurisdictional allegations are taken to be true. Euromarket
Designs, Inc. v. Crate & Barrel Ltd., 96 F. Supp. 2d 824, 833
(N.D. Ill. May 21, 2001) (citing Turnock v. Cope,
816 F.2d 332, 333 (7th Cir. 1987)). If there are any conflicts between
the parties' affidavits, they will be resolved in favor of the
A. General Jurisdiction
General jurisdiction is appropriate when the defendant has
engaged in continuous and systematic activities in the forum
state. RAR, 107 F.3d at 1277. Neither party alleges that
Defendants' activities in Illinois are continuous and systematic.
Images concedes that if personal jurisdiction exists in this
case, it must be specific.
B. Specific Jurisdiction
Specific jurisdiction is proper when the cause of action arises
out of or is related to the defendant's contacts with the forum.
RAR, 107 F.3d at 1277. In order to make a prima facie case for
specific jurisdiction, a plaintiff must show that: (1) the
defendant is amenable to service of process; and (2) bringing the
defendant into court is consistent with due process. LFG, L.L.C.
v. Zapata Corp., 78 F. Supp.2d 731, 734. The Court will discuss
each of the two factors necessary for specific jurisdiction in
turn. 1. Amenability to Service
Fed.R.Civ.P. 4(k) provides:
service is sufficient to establish personal
jurisdiction over the defendant either, first, when
such service is provided for by a United States
statute, or second, when the defendant could be
subjected to the jurisdiction of a court in the forum
state through that state's long arm statute
See Euromarket Designs, Inc. v. Crate & Barrel Ltd.,
96 F.Supp.2d 824, 834 (N.D. Ill. 2000). "The Illinois long-arm
statute provides that a defendant is subject to the jurisdiction
of its courts as to any of several specified causes of action."
Id.; see also 735 ILCS 5/2-209 (a). The statute also
allows Illinois courts to exercise personal jurisdiction to the
fullest constitutional limit. 735 ILCS 5/2-209(c). Therefore, the
requirements of the Illinois long-arm statute may be satisfied by
inquiring as to whether subjecting the Defendants to the personal
jurisdiction of Illinois comports with federal due process
2. Due Process
In order for Illinois to assert personal jurisdiction over a
foreign defendant, the defendant must have sufficient contacts
with Illinois that would provide a fair warning that those
contacts may subject the defendant to jurisdiction in Illinois.
Burger King v. Rudzewicz, 471 U.S. 462, 472-73 (1985). The
types of contacts that constitute fair warning are those that are
purposefully directed to the forum state to establish minimum
contacts with that state. Id. at 473. Moreover, "[i]f a
defendant has purposefully established minimum contacts with the
forum State, the nature of the contacts are considered to
determine whether assertion of jurisdiction would comport with
fair play and substantial justice." International Star Registry
of Illinois v. Bowman-Haight Ventures, Inc., No. 98 C 6823, 1999 U.S. Dist. LEXIS 7009, at
*10 (N.D. Ill. May 4, 1999) (internal quotations and citations
a. Minimum Contacts Established From Internet Activities
The minimum contacts requirement can be satisfied even if the
defendant did not physically enter the forum state. See Burger
King, 471 U.S. at 476. Business transactions conducted via mail
and wire across state lines circumvents the need for physical
presence. Id. "[T]he likelihood that personal jurisdiction can
be constitutionally exercised is directly proportionate to the
nature and quality of commercial activity that an entity conducts
over the Internet." Zippo Manufacturing Co. v. Zippo Dot Com,
Inc., 952 F. Supp. 1119, 1124 (W.D. Pa. 1997). The sliding scale
analysis for Internet jurisdiction first set forth in Zippo has
been used to determine what level of website interaction subjects
a defendant to personal jurisdiction. The Zippo court
identified three categories of website activity: (1) where the
defendant actively conducts business with residents of a foreign
jurisdiction over the Internet; (2) where the defendant operates
an interactive website used for exchanging information between
the defendant and potential customers; and (3) where the
defendant maintains a passive website which provides no further
communication between the defendant and website visitors.
Zippo, 952 F. Supp. at 1123-1124.
Under the Zippo analysis, personal jurisdiction may be
exercised over defendants who fall under the first category by
actively conducting business over the Internet. "[W]here a
defendant actively conducts business over the Internet and
generates revenue through direct commercial transactions with
Illinois residents, it is subject to suit in Illinois." Ty, Inc.
v. Baby Me, Inc., No. 00 C 6016, 2001 U.S. Dist. LEXIS 5761 at *12
(N.D. Ill. April 20, 2001) (internal citations omitted).
In the case at hand, Defendants fall under the first category.
Defendants operate a website with a high level of interactivity,
which enables customers to browse through an online catalog and
place orders over the Internet. Defendants do not target or
tailor their business to any particular geographical area.
Additionally, the website allows all users, including residents
of Illinois, to purchase films. International Star, 1999 U.S.
Dist. LEXIS 7009 at *5. Defendants profited from Internet users
in Illinois who purchased "Dangerous," "Getting It," "A Few Good
Men," or "Games" through Defendants' website. That benefit
confirms that Defendants purposefully directed its business
activities to the State of Illinois. Id. at *17.
Defendants assert that they have not advertised in Illinois,
nor have they specifically targeted customers in Illinois. Thus,
Defendants argue, any business conducted with Illinois residents
has resulted from contacts initiated by Illinois residents who
visited Defendants' website. However, Defendants made a repeated
and conscious choice to process orders placed by Illinois
residents. Defendants knew that processing the orders would lead
to sending films to Illinois; an action entirely within the
Defendants' control. "When a defendant makes a conscious choice
to conduct business with the residents of a forum state, `it has
clear notice that it is subject to suit there.'" Zippo,
952 F. Supp. at 1126 (quoting World Wide Volkswagen Corp. v. Woodson,
444 U.S. 286, 297 (1980)). If the Defendants did not want to be
subject to personal jurisdiction in Illinois, they could have
chosen not to sell films to Illinois residents. Zippo,
952 F. Supp. at 1126-1127. Defendants argue that the few sales of the four films into
Illinois are not enough to establish sufficient minimum contacts.
Over the past three years, the four films generated $7,587.31 in
sales nationwide. Sales of the four films to Illinois residents
contributed $341.98 to the nationwide sales. Defendants'
contention that only a small amount of business was conducted
does not alter the conclusion that personal jurisdiction is
proper. Even a single contact can be sufficient. Defendants may
have had relatively few contacts with Illinois, but "it is the
quality of contacts, not their number[,] that determine whether
they amount to purposeful availment for jurisdiction purposes."
International Star, 1999 U.S. Dist. LEXIS 7009 at *20. Contacts
can create a substantial connection with a forum state even if
they yield little revenue. Zippo, 952 F. Supp. at 1127 (citing
CompuServe Inc. v. Patterson, 89 F.3d 1257, 1265 (6th Cir.
Defendants' business practice of processing film orders over
the Internet demonstrates its intention to conduct business with
consumers throughout the United States, including Illinois. See
Ty, 2001 U.S. Dist. LEXIS 5761 at *14. Defendants' website is
one where business is actively conducted over the Internet, and
Defendants sold films to Illinois residents. The exercise of
specific personal jurisdiction over Defendants is proper.
b. Copyright Infringement Claim Arises Out of Internet
The "arising out of" requirement for personal jurisdiction
assures that defendants are haled into court as a result of their
own purposeful activity in the forum state. Euromarket, 96 F.
Supp.2d at 839 (citing Burger King, 471 U.S. at 475). This
requirement prevents a finding of personal jurisdiction over a
foreign defendant due to the "unilateral activity of another
party or third person." Id. The Illinois long-arm statute authorizes the exercise of
personal jurisdiction for torts that are committed in Illinois.
International Star, 1999 U.S. Dist. LEXIS 7009 at *18;
735 ILCS 5/2-209 (a)(2). "In determining whether specific
jurisdiction exists when a plaintiff's intellectual property
rights have been harmed, the Seventh Circuit has given
consideration to where the injury is felt." Id. An infringing
article sold in the State of Illinois constitutes the commission
of a tort in Illinois sufficient to confer jurisdiction under the
Illinois long-arm statute. Id. at *18-19.
Images' injury and claim of copyright infringement arose from
Defendants' contacts with Illinois. Defendants' business with
Illinois residents entails the sale of the films that Images
claims infringe its copyrights. When the films are shipped to
Illinois and viewed by Illinois residents, the alleged
infringement and unfair competition occurs in Illinois.
Therefore, the cause of action arises out of Defendants'
activities in the forum state.
Defendants' website and business activity within the State of
Illinois make it reasonably foreseeable that the Defendants could
be brought before an Illinois court. Consequently, the Court has
specific jurisdiction over Defendants.
II. Motion To Dismiss For Improper Venue
Defendants argue that this case should be dismissed for
improper venue because this Court does not have personal
jurisdiction over Defendants. Venue is appropriate 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.
See 28 U.S.C. § 1391(b). Subsection (c) provides that a
corporation resides in any district in which it is subject to
personal jurisdiction at the time the action is commenced.
28 U.S.C. § 1391(c). Venue is appropriate in the Northern District
of Illinois when the exercise of personal jurisdiction is proper.
Aero Products Int'l v. Intex Corp., No. 02 C 2590, 2002 U.S.
Dist. LEXIS 17948 at *25-26 (N.D. Ill. Sept. 19, 2002). In light
of this Court's decision regarding the appropriateness of the
exercise personal jurisdiction, this Court finds that venue in
this district is proper pursuant to 28 U.S.C. § 1391.
III. Motion To Transfer For Forum Non Conveniens
Alternatively, Defendants have moved for this Case to be
transferred to the Northern District of California. Pursuant to
28 U.S.C. § 1404(a), a court may transfer a civil action "for the
convenience of parties and witnesses, in the interest of
justice." The movant has the burden of showing that the
transferee court is clearly more convenient than the transferor
court. Coffey v. Van Dorn Iron Works, 796 F.2d 217, 219-220
(7th Cir. 1986). Transfer is appropriate when: (1) venue is
proper in both the transferor and transferee court; (2) transfer
is for the convenience of the parties and witnesses; and (3)
transfer is in the interest of justice. Law Bulletin Publishing
Co. v. LRP Publications, Inc., 992 F. Supp. 1014, 1017 (N.D.
Ill. 1998). District courts have broad discretion to determine
whether transfer is appropriate. Aero, 2002 U.S. Dist. LEXIS
17948 at *26 (citing Heller Financial, Inc. v. Midwhey Powder
Co., 883 F.2d 1286, 1293 (7th Cir. 1989)). This Court has already determined that venue is proper in
the Northern District of Illinois. The issues remaining in
dispute are whether the convenience of parties and witnesses and
the interest of justice weigh in favor of transfer.
A. Convenience of the Parties and Witnesses
When evaluating the convenience of the parties and witnesses,
the court should consider: (1) the plaintiff's choice of forum;
(2) the situs of material events; (3) the relative ease of access
to sources of proof; (4) the convenience of the witnesses; and
(5) the convenience to the parties litigating in the respective
forums." Amoco Oil Co. v. Mobil Oil Corp., 90 F. Supp. 2d 958,
960 (N.D. Ill. 2000) (internal citations omitted). The Court will
address each of these five factors in turn.
1. Plaintiff's choice of forum
Plaintiff's choice of forum, particularly when it is
Plaintiff's home forum, enjoys substantial deference. Id.
(citing Vandeveld v. Christoph, 877 F. Supp. 1160, 1167 (N.D.
Ill. 1995)). Plaintiff's choice of forum is entitled to less
deference when it is not the site of events material to the case.
Law Bulletin, 992 F. Supp. at 1017 (citing Heller Fin., Inc.
v. Midwhey Powder Co., 883 F.2d 1286, 1293 (7th Cir. 1989)).
Illinois is both Images' home forum and chosen forum. Images'
claims of copyright infringement, and false designation of origin
and unfair competition arose from Defendants' contacts with
Illinois. This factor weighs in favor of retention.
2. Situs of material events
Images' injuries resulting from copyright infringement, and
false designation of origin and unfair competition, arose in
Illinois. Transaction conducted between Images and Continental and ConWest transpired via telephone, mail or the Internet.
Though Illinois is the site where the injury occurred, the
Northern District of California is the location where the
allegedly illegal duplicating of the four films is taking place.
The Court finds that this factor weighs neither in favor of
transfer nor retention.
3. Relative ease of access to source of proof
Images alleges that all of the documents relating to this cause
of action are located in Illinois. Moreover, the masters of the
copyrighted works are also in Illinois. These masters are heavy
and bulky and, therefore, difficult to transport. Defendants
argue that the issue of damages in copyright infringement cases
is highly dependent on the financial records in the Defendants'
possession. These business records are located in the Northern
District of California. The Court is satisfied that both parties
have the same relative access to evidence. See Law Bulletin,
992 F. Supp. at 1018 (internal citations omitted). This factor
weighs neither in favor of transfer nor retention.
4. Convenience of the witnesses
"The convenience of the witnesses is often viewed as the most
important factor in the transfer balance." Law Bulletin,
992 F. Supp. at 1018 (quoting Rose v. Franchetti, 713 F. Supp. 1203,
1214 (N.D. Ill. 1989)).
Defendants have identified four potential witnesses. The first
witness, Terry Mahaffey, is the Principal of ConWest. Generally,
employee-witnesses' convenience is assigned little weight. Law
Bulletin, 992 F. Supp. at 1019 (internal citations omitted). The
three other potential witnesses, Steven Scarborough, Stan Loeb,
and John Rutherford, are all non-party witnesses. From the
descriptions provided to the Court, these three witnesses may be
able to offer information regarding the Defendants' authority to distribute the
four films. Since these witnesses reside in the Northern District
of California, that forum would be more convenient for these
Images has identified one potential witness, David Van Abel,
who is a non-party witness. Images intends to call Mr. Van Abel
as a witness in the event that Defendants make allegations that
Images engaged in unauthorized duplication and sale of
Defendants' copyrighted works. Defendants have not yet made a
formal allegation against Images. Since this is a speculative
allegation, and thus a speculative witness, there is no guarantee
that Mr. Van Abel will be called to testify. This witness does
not factor into considerations of convenience.
Based on the information concerning witnesses presently before
this Court, the Northen District of California appears to be more
convenient to non-party witnesses than the Northern District of
Illinois. Consequently, this factor weighs in favor of
transferring the case to the Northern District of California.
5. Convenience of the parties
When considering the convenience of the parties, "the court
should consider their respective residences and their ability to
bear the expenses of litigating in a particular forum." Law
Bulletin, 992 F. Supp. at 1019 (citing Habitat Wallpaper &
Blinds, Inc. v. K.T. Scott Ltd. Partnership, 807 F. Supp. 470,
474 (N.D. Ill. 1992)).
Images, a small business with five employees, earns an annual
income of less than $300,000. The burden of litigating this
matter in the Northern District of California would subject
Images to substantial financial hardship. Defendants are one of
the largest sellers of gay adult films, with annual revenues of
around $5,000,000. They currently employ about thirty-six employees. Since Defendant is in a stronger financial position
than Images, it would be less burdened than Images if the case
was transferred. This factor weighs in favor of retention.
B. Interest of Justice
"The `interest of justice' analysis relates . . . to the
efficient functioning of the courts, not to the merits of the
underlying dispute." Coffey, 796 F.2d at 221. This analysis
considers: (1) the speed at which the case will proceed through
trial; (2) the court's familiarity with the applicable law; and
(3) the relation of the respective forums with the issues in the
case and the desirability of resolving controversies in their
locale. Amoco, 90 F. Supp. 2d at 961.
1. Speed at which the case will proceed at trial
The two court management statistics that are the most relevant
to effectively evaluating the speed at which the case will
proceed at trial are (1) the median months from filing to
disposition and (2) the median months from filing to trial.
Amoco, 90 F. Supp. 2d at 962 (citing Vandeveld,
877 F. Supp. at 1169).
The median months from filing to disposition was 5.5 months in
the Northern District of Illinois, compared to 10.6 months in the
Northern District of California. (Pl. Resp., Exs. B and
C).*fn2 The median months from filing to trial was 26 months
in the Northern District of Illinois, compared to 30.3 months in
the Northern District of California. Id. These statistics show
that the parties would receive a quicker resolution in the
Northern District of Illinois than they would in the Northern
District of California. This factor weighs in the favor of
retention. 2. Court's familiarity with the applicable law
This case involves three claims, one of which is governed by
state law. Two of Images' claims against Defendants involve
federal law. Both the Northern District of Illinois and the
Northern District of California are equally capable of
adjudicating these issues. The fraud claim will be governed by
state common law. An Illinois court would be more familiar with
substantive Illinois law. This factor weighs in favor of
3. Relation of the respective forums with the issues in the
case and the desirability of resolving controversies in their
Images contends that since its injury occurred in Illinois,
this forum has a stronger interest in redressing a business with
its principal place of business in Illinois than the Northern
District of California. (Pl. Resp., p. 15). Further, as noted
previously by this Court, Plaintiff's cause of action arises from
Defendant's contacts with Illinois. This factor weighs in favor
Based on the comparison between the convenience of the parties
and the witnesses, and the interests of justice, the factors
weigh in favor of retention. Defendants have not overcome the
deference to the Plaintiff's choice of forum. Though Defendants'
witnesses will be inconvenienced if it becomes necessary that
they travel to Illinois, Defendants have not shown that the
overall inconvenience would be less if the case was transferred
to the Northern District of California. Lastly, the parties will
likely proceed to trial more quickly in the Northern District of
Illinois, and an Illinois court has a stronger relation to the
claims at issue. CONCLUSION
For the foregoing reasons, Defendants' motion to dismiss for
lack of personal jurisdiction, or alternatively transfer this
action, pursuant to 28 U.S.C. § 1404(a), to the Northern District
of California, is DENIED in its entirety.
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