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Pumponator Inc., A South Carolina Corporation v. Water Sports

April 5, 2012

PUMPONATOR INC., A SOUTH CAROLINA CORPORATION, PLAINTIFF,
v.
WATER SPORTS, LLC, AN ILLINOIS LIMITED LIABILITY COMPANY, KETZ & ASSOCIATES INC., A MINNESOTA CORPORATION, AND BRAD KETZ, AN INDIVIDUAL, DEFENDANTS.



The opinion of the court was delivered by: Marvin E. Aspen, District Judge:

MEMORANDUM OPINION AND ORDER

Plaintiff Pumponator Inc., a South Carolina Corporation and manufacturer of the water-balloon filling device called the "Pumponator," brings five claims against Defendants Water Sports, LLC ("Water Sports"), an Illinois limited liability company, Ketz & Associates Inc. ("KAI"), a Minnesota corporation, and Bradley Ketz, an individual. Specifically, Pumponator Inc. alleges that KAI and Mr. Ketz are liable for breach of contract, breach of fiduciary duties, and breach of the duty of loyalty. Pumponator Inc. also alleges that the conduct of all three defendants, improperly selling Water Sport's competing water-balloon filling device, constitutes trade dress infringement and unfair competition, actionable under Section 43(a) of the Lanham Act and under common law. Presently before us is KAI and Mr. Ketz' (collectively "Ketz Defendants") motion to dismiss pursuant to Federal Rule of Civil Procedure Rule 12(b)(2) for lack of personal jurisdiction. The motion comes after limited jurisdictional discovery. For the reasons set forth below, we deny the Ketz Defendants' motion.

BACKGROUND

A. Pumponator Inc.'s Business Relationship with the Ketz Defendants

Pumponator Inc. "designed, developed, and now sells" a water-balloon filling device called the "Pumponator." (Compl. ¶¶ 1--2.) Donna Ramere, Pumponator Inc.'s sole owner and registered agent, developed the concept of a water-balloon pumping device in her garage while working with her granddaughter to find a way to avoid bursting water balloons while filling them with a faucet or hose. (Id. ¶¶ 1, 12.) Her solution, the Pumponator-a modified garden sprayer-has won awards for its utility of pumping water into a balloon and has patent applications pending for its utility and exterior shape. (Id. ¶¶ 13--14, 16--17.) Pumponator Inc. sells the Pumponator throughout the United States. Sales are made online and in retail stores; the latter is orchestrated through "a network of commissioned, independent sales representatives" that market and sell the Pumponator. (Id. at ¶ 2; Bradley Ketz Aff. ¶ 4.)

KAI is in the business of representing toy and gift manufacturers as a sales agent. (Id. ¶¶ 1--2.) Bradley Ketz is the sole owner and director of KAI, which has its sole showroom and place of business located in Minneapolis, Minnesota. (Id.) Neither Mr. Ketz, nor KAI, "have ever owned real estate, paid income or property taxes, held bank accounts, voted, or maintained a personal office or telephone number in the state of Illinois." (Id. ¶ 3.) Starting in January 2010, KAI became a Pumponator Inc. commissioned sales agent, at which time KAI and Pumponator Inc. signed and executed a Sales Representation Agreement and a Confidentiality Agreement providing that KAI would "not use or disclose" confidential information. (Compl. ¶ 51; Ketz Aff. ¶ 5; Ketz Aff. Exs. 1--2.)

From January 2010 to February 2011, KAI sold the Pumponator to retail stores within its standard multi-state territory: Iowa, Minnesota, Nebraska, North Dakota, South Dakota, and Wisconsin. (Id. ¶ 5.) During this period, KAI booked over $100,000 in sales for Pumponator Inc. and earned a 15 percent commission. (Id. ¶¶ 5, 10 (equaling approximately $80,000 in 2010 and $24,000 in the first two months of 2011).) Meanwhile, Pumponator Inc. had at least two other sales representatives based in Chicago-Total Toy, Inc. and Rocket Rep, LLC-that were responsible for sales within the state of Illinois. (Id. ¶ 8.)

B. Termination of Pumponator Inc.'s Relationship with the Ketz Defendants

On February 18, 2011, Ms. Ramere sent an email to Lori Ketz, wife of Mr. Ketz and a KAI staff member, providing "30 day notice that I am terminating the sales agreement that we have."*fn1 (Compl. Ex. C.) Ms. Ramere cited concern with Mr. Ketz. (Id. (stating that he is "unexcited about the Pumponator . . . [and] I can't have that kind of thinking on my team.").) Within a week, KAI began soliciting and signed a contract with Water Sports, manufacturer of the ItzaPump. The ItzaPump is a water-balloon filling station with a similar design to, and a competitor of, the Pumponator. (W.S. Answer ¶ 22; Compl. ¶ 34.) On March 12, 2011, KAI also sold ItzaPumps at a Minnesota sales show, despite its promise to sell the Pumponator at that show. (Id. at Exs. 22, 26.) Pumponator Inc. claims in this suit that the ItzaPump product infringes the Pumponator's trade dress and is likely "to deceive, confuse[,] and mislead purchasers" in violation of the Lanham Act, 15 U.S.C. § 1051 et seq. (2006), and Illinois trade dress law. (Compl. ¶ 34.)

STANDARD OF REVIEW

In a motion to dismiss under Federal Rule of Civil Procedure 12(b)(2), when there is not an evidentiary hearing,*fn2 plaintiff bears the burden of showing a prima facie case of personal jurisdiction. Purdue Research Found. v. Sanofi-Synthelabo, S.A., 338 F.3d 773, 782 (7th Cir. 2003); see also RAR, Inc. v. Turner Diesel, Ltd., 107 F.3d 1272, 1276 (7th Cir. 1997); GCIU--Emp'r Ret. Fund v. Goldfarb Corp., 565 F.3d 1018, 1023 (7th Cir. 2009). For purposes of a motion to dismiss based on personal jurisdiction, we treat the complaint's allegations as true unless defendants' affidavits controvert the allegations. Logan Prods., Inc. v. Optibase, Inc., 103 F.3d 49, 52 (7th Cir. 1996); Adams v. Raintree Vacation Exch., LLC, No. 10 C 3264, 2011 WL 1626561, at *3 (N.D. Ill. Apr. 28, 2011). Where the defendant submits an affidavit contesting personal jurisdiction, as the Ketz Defendants have, "the plaintiff must go beyond the pleadings and submit affirmative evidence supporting the exercise of jurisdiction." Purdue, 338 F.3d at 783. We resolve all factual disputes in the record in the plaintiff's favor, but we may accept as true those facts presented in the defendant's affidavit that remain uncontested. Id. at 782 ("[T]he plaintiff is entitled to the resolution in its favor of all disputes concerning relevant facts presented in the record.").

ANALYSIS

A. Federal Due Process and Personal Jurisdiction

Personal jurisdiction "is an essential element of the jurisdiction of a . . . federal court" without which "the court is powerless to proceed to an adjudication." Emp'rs Reins. Corp. v. Bryant, 299 U.S. 374, 382, 57 S. Ct. 273, 277 (1937). Unless a statute provides nationwide service, a federal court has jurisdiction over the defendant only if the state where the federal district court sits would provide for service of the defendant in a court of general jurisdiction. Fed. R. Civ. P. 4(k). In order for a plaintiff to show the existence of jurisdiction over an out-of-state defendant, the Illinois long-arm statute must authorize service of process on that defendant. Omni Capital Int'l Ltd. v. Rudolf Wolff & ...


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