Court: District Court, S.D. California; August 1, 2016; Federal District Court
The Court, presided over by Hon. Cynthia Bashant, addresses a motion filed by Defendant Isagenix International, LLC, seeking dismissal of Plaintiff Lindora, LLC's claims due to lack of personal jurisdiction and improper venue. Alternatively, Isagenix requests to sever claims and transfer them to Arizona. Lindora opposes this motion. The Court has determined the motion is suitable for decision based on submitted papers without oral argument and ultimately denies Isagenix’s motion.
Lindora, a Delaware LLC based in Costa Mesa, California, has utilized the "Lean for Life" marks since at least 1989, registering them with the USPTO in 1994 and 2007. The marks are essential to Lindora's reputation and consumer recognition of its weight management products and services. Isagenix, an Arizona LLC based in Gilbert and founded in 2002, operates as a multi-billion dollar network marketing company that sells similar products. Despite lacking a physical presence in California, Isagenix has a significant market there, with more Associates and product sales than in any other state. The company conducts training and promotional events in California, including a notable conference that attracted around 12,000 attendees in San Diego in 2015. Isagenix Associates, including Defendant Ella Novokolsky, utilize a personalized back office webpage to market and distribute Isagenix products.
Isagenix operates a back office webpage allowing consumers to order products directly. Lindora alleges that Isagenix has used the Lindora Marks and similar marks without authorization in various ways, including promotional materials on its website, events, training, and materials provided to Isagenix Associates. Lindora also claims that Novokolsky infringed on the Lindora Marks on her own back office webpage and in related marketing. Furthermore, it is alleged that Isagenix willfully continued to use the Lindora Marks after receiving a cease-and-desist letter from Lindora on October 30, 2015. Lindora's claims against Isagenix and Novokolsky include trademark infringement under the Lanham Act, false designation of origin, unfair competition under both federal and California law, and contributory trademark infringement against Isagenix. Lindora contends that the infringement has caused customer confusion, loss of profits, damage to goodwill, and reduced value of the Lindora Marks. In response, Isagenix seeks to dismiss the case for lack of personal jurisdiction and improper venue or to transfer claims to Arizona. The legal standards for personal jurisdiction are outlined, indicating that jurisdiction must comply with the forum state's long-arm statute and federal due process, requiring the defendant to have sufficient minimum contacts with the state.
Personal jurisdiction safeguards an individual's right to avoid being subjected to judgments from a forum lacking meaningful connections. The necessary quality and nature of contacts for establishing personal jurisdiction hinge on whether the plaintiff claims general or specific jurisdiction. Under Federal Rule of Civil Procedure 12(b)(2), a defendant can move to dismiss a complaint due to lack of personal jurisdiction, placing the burden on the plaintiff to prove jurisdiction is valid. If the court does not hold an evidentiary hearing, the plaintiff only needs to make a prima facie showing of jurisdictional facts. The court may consider evidence beyond the pleadings, such as affidavits, while uncontroverted allegations in the complaint are accepted as true. However, allegations contradicted by affidavits are not assumed true, although the court interprets all reasonable inferences in favor of the plaintiff. In this case, Lindora claims Isagenix is subject to both general and specific jurisdiction; the court determines that general jurisdiction is improper, but specific jurisdiction aligns with federal due process requirements.
General jurisdiction allows courts to hear any claims against a defendant, irrespective of the claims' connection to the forum state's activities. For general jurisdiction to be established, a defendant's affiliations with the forum must be "continuous and systematic" to the extent that the defendant is considered "essentially at home" there, as defined in Daimler and Goodyear cases. For corporations, general jurisdiction typically applies at their place of incorporation and principal place of business, with only "exceptional cases" permitting jurisdiction elsewhere.
In this context, Lindora acknowledges that California does not meet the traditional bases for general jurisdiction regarding Isagenix, an Arizona corporation. However, Lindora argues general jurisdiction exists based on multiple contacts, including Isagenix's registration to do business in California, significant sales and associate numbers in the state, direct sales and shipping to California residents, hosting events in the state, maintaining an interactive website for California consumers, and specific compliance information regarding California consumer protection laws.
Lindora believes these factors demonstrate sufficient continuous and systematic contacts with California. However, the relevant test for general jurisdiction requires a determination of whether the corporation's contacts are so extensive that it is "essentially at home" in the forum, rather than simply being continuous and systematic in a general sense. This assessment must consider the corporation's overall activities on a national and global scale.
The inquiry into general jurisdiction involves evaluating a corporation's global activities to determine where it can be considered "at home." This assessment follows the precedent set by the Supreme Court in Daimler, which mandates a holistic view of a defendant's contacts with the forum state compared to its overall business presence. General jurisdiction may be established if a corporation's activities in the forum state significantly exceed those in other locations. However, if the corporation's activities in the forum are minimal relative to its global operations, general jurisdiction is inappropriate, as illustrated by cases like Brown v. Lockheed Martin Corp. and Martinez, which found insufficient grounds for general jurisdiction.
In the current case, Lindora has not provided the necessary comparative analysis of Isagenix's business activities across different states and regions. Although Isagenix has significant operations in California, including product sales and distributor presence, Lindora fails to compare these activities to those in other key markets such as New York, New Jersey, and Ontario, Canada. Additionally, while Isagenix's training workshops and promotional events are noted, Lindora does not demonstrate that these activities signify a stronger connection to California than to other states. Consequently, without a comprehensive evaluation of Isagenix's business activities as a whole, Lindora cannot establish that Isagenix is essentially at home in California. Thus, the Court concludes that this case does not qualify for general jurisdiction beyond the corporation's principal place of business or incorporation.
Lindora asserts that specific jurisdiction is appropriate, focusing on the relationship between the defendant, the forum state, and the litigation. For specific jurisdiction to be established, the defendant's actions must create a substantial connection with the forum. The Ninth Circuit utilizes a three-prong test: (1) the defendant must purposefully direct activities or transact with the forum; (2) the claim must arise from these forum-related activities; and (3) exercising jurisdiction must be reasonable and align with fair play and substantial justice. Lindora carries the burden to satisfy the first two prongs, after which the burden shifts to Isagenix to prove that jurisdiction would be unreasonable.
The first prong encompasses both purposeful availment and purposeful direction. In infringement cases, the Ninth Circuit often employs a purposeful direction analysis using an "effects" test, which evaluates the impact of the defendant's actions on the forum, regardless of where the actions occurred. This test, based on the Supreme Court’s decision in Calder v. Jones, requires the defendant to have: (1) committed an intentional act; (2) aimed at the forum state; and (3) caused harm that the defendant knew would likely be felt in the forum. The Court will examine each of these elements in detail.
Lindora must demonstrate that Isagenix engaged in an intentional act under the Calder test, which defines an intentional act as an external manifestation of intent to perform a physical act, excluding the outcomes of that act. Lindora claims that Isagenix distributed infringing marketing materials to California Associates, conducted training workshops and promotional events in California using Lindora Marks, and operated a website featuring the infringing marks. These allegations meet the Calder definition of intentional acts, supported by case law where similar actions were deemed sufficient.
The second prong of the inquiry involves whether Isagenix expressly aimed its conduct at California. The Ninth Circuit requires that express aiming involves more than just foreseeable effects in the forum state. Relevant factors include the defendant's website interactivity, commercial ambitions, and targeting of a known forum resident. The Court found that Isagenix has expressly aimed its conduct at California, as it sells more products and has more Associates there than anywhere else, conducts training and promotional events in the state, and promotes California residents as success stories on its website. Additionally, Isagenix's website includes information directed at California consumers regarding compliance with local consumer protection laws. Overall, these actions indicate a deliberate effort to exploit the California market, satisfying the express aiming requirement.
Lindora claims that Isagenix violated trademark rights by continuing to use the Lindora Marks after receiving a cease-and-desist letter on October 30, 2015, which confirmed Lindora’s ownership of these marks and its control over trademark rights from California. This acknowledgment creates a basis for asserting "individualized targeting" of Lindora, fulfilling the express aiming requirement for personal jurisdiction. Isagenix argues against this by stating that its marketing efforts originated in Arizona, but this does not negate the relevance of the effects of its actions in California. The purposeful direction analysis focuses on whether actions taken outside the forum have impacts within it, allowing personal jurisdiction even without physical presence in the state. Furthermore, Isagenix contends that its interactions with California-based Associates do not constitute contact with the state. However, these Associates, acting as distributors and customers, are integral to Isagenix's marketing strategy in California and thus establish a legitimate basis for exercising specific jurisdiction over Isagenix in California.
Defendants were found to have expressly aimed their conduct at California by selling goods to third-party retailers with the intention of establishing a national market, including in California. In the case of Guava Family, Inc. v. Guava Kids, LLC, evidence of California sales and advertising targeted at California supported a similar finding. Lindora met the second prong of the Calder test for purposeful direction, which requires defendants' actions to foreseeably cause harm in the forum state. The foreseeability of harm is assessed not by its magnitude but by its likelihood. In trademark infringement cases, it is generally foreseeable that economic harm to a trademark owner will be felt in the owner's home state. Lindora claims that Isagenix infringed its trademarks in California, leading to economic loss, damage to goodwill, and market position harm, which is foreseeable given Lindora's substantial presence in the state with over 40 clinics. The court concluded that Lindora sufficiently alleged that Isagenix's actions intentionally targeted California and resulted in foreseeable harm.
Additionally, for the second prong of the specific jurisdiction test, it was established that Lindora's claims arose from Isagenix's forum-related activities. The "but for" causation analysis was applied, confirming that the claims would not have arisen without the defendant's conduct directed at California. In trademark infringement cases, if the defendant’s actions harm the plaintiff in the forum state, this requirement is satisfied.
Lindora claims that Isagenix has infringed its trademarks by distributing infringing marketing materials to California Associates, using these materials at training workshops and promotional events in California, and allowing the Lindora Marks to appear on webpages from which California consumers purchase Isagenix products. Evidence supporting these claims includes the allegedly infringing materials and webpages. Lindora asserts that Isagenix's actions have harmed its goodwill, reputation, and market position in California. The evidence establishes a connection between Isagenix's California activities and Lindora's trademark infringement claim, indicating that Lindora's claim arises from these activities.
Isagenix contends that its activities in California do not relate to Lindora's infringement claim, supported by a declaration from its CEO, Kevin Adams, stating that the infringing marks were not used at specific California events or authorized for online use. However, this declaration does not fully contradict Lindora's allegations regarding the use of its Marks at Isagenix's conferences and in marketing to new California Associates. Lindora has adequately demonstrated that its claim is linked to Isagenix's California-related actions.
Isagenix's arguments primarily challenge the merits of Lindora’s claims, which is not relevant to the jurisdictional analysis. The Ninth Circuit's three-prong jurisdictional framework precludes consideration of the merits when assessing jurisdiction. Lindora maintains that Isagenix infringed its Marks in connection with its California activities, and the court is required to resolve any factual disputes in favor of Lindora.
Reasonable inferences from the complaint favor the plaintiff in matters of personal jurisdiction, assuming credibility of the claims. The plaintiff's documents are viewed in the best light, resolving doubts in their favor. A challenge to jurisdiction based on the merits of the claim does not prevent the plaintiff from establishing a prima facie case that the claim is related to the defendant's contacts in California. The plaintiff has demonstrated that the defendant, Isagenix, purposefully directed activities at California, substantiating the first two prongs of the specific jurisdiction test.
Once these prongs are met, the burden shifts to the defendant to prove that exercising jurisdiction would be unreasonable. The court evaluates seven factors regarding reasonableness, including the defendant’s purposeful interjection into the forum, the burden of defending in that forum, conflicts with the defendant's home state, the forum state's interest in the case, efficiency of judicial resolution, convenience for the plaintiff, and alternative forums. No single factor is decisive; all must be balanced.
In assessing purposeful interjection, Isagenix has significant ties to California, having more associates, higher sales, and hosting events in the state. The degree of interjection is considerable, particularly as Isagenix was aware of the potential harm from alleged infringements in California. This factor thus favors the reasonableness of jurisdiction.
Regarding the burden on Isagenix, any inconvenience from defending in California is deemed minimal given its status as a large international company with substantial business operations in the state.
California and Arizona are neighboring states, and Isagenix has not claimed that traveling from Arizona to California for litigation constitutes a deprivation of due process. While there is some inconvenience for Isagenix in litigating in California, modern transportation and telecommunications have significantly reduced this burden. Jurisdiction in California does not conflict with Arizona's sovereignty, as Isagenix has not raised this issue, and the case involves federal and California law, meaning it would be in federal court regardless of the state. Arizona's interest in regulating its corporations is acknowledged, but this concern is diminished since Isagenix actively conducts business in California.
California has a strong interest in addressing trademark infringement, particularly when it affects California residents, which supports the reasonableness of litigating in California. The efficient resolution factor considers the location of evidence and witnesses; although Isagenix argues for Arizona as the more efficient forum due to its witnesses, Lindora counters that key individuals reside in California. While this factor may slightly favor Isagenix, the overall impact is minimal due to the modern context of communication.
Finally, in the Ninth Circuit, the convenience of the plaintiff is not the primary consideration in assessing reasonableness, and thus their inconvenience holds little weight in the court's analysis.
Lindora faces a slight burden in litigating in Arizona, similar to Isagenix's burden in California, leading the Court to deem this factor neutral. Isagenix claims Arizona is a viable alternative forum; however, it has not demonstrated that California is an unreasonable forum, which is a prerequisite for considering alternative venues. Consequently, this factor does not influence the Court's analysis.
The Court finds that Isagenix purposefully directed its activities toward California, relating to Lindora’s claims, and Isagenix failed to show that exercising jurisdiction in California would be unreasonable. Therefore, specific jurisdiction exists in California regarding Lindora’s infringement claim. Additionally, under the doctrine of pendent personal jurisdiction, Isagenix is subject to personal jurisdiction for all related claims arising from the same nucleus of operative facts. As a result, Isagenix's motion to dismiss for lack of personal jurisdiction is denied.
In addressing venue, Isagenix also moves to dismiss under Rule 12(b)(3), arguing improper venue in the Southern District of California. The Court must assess if the case fits within the categories of the general venue statute, 28 U.S.C. § 1391. The plaintiff bears the burden to prove proper venue. For corporations, § 1391(d) determines residency in states with multiple judicial districts, stating that a corporation is deemed to reside in any district where it could be subject to personal jurisdiction. If no such district exists, the corporation is considered to reside in the district with the most significant contacts.
California's judicial districts require a district-specific jurisdictional analysis, treating the Southern District of California as separate. Lindora has established a prima facie case for specific jurisdiction over Isagenix based on several key points. First, Isagenix conducts training workshops, promotional tours, and annual conferences in the district, training thousands of Associates on marketing and sales, which Isagenix does not dispute but claims are not exclusive to the district. The Court finds that these activities are intentionally aimed at this district and foreseeably cause harm.
Second, a significant Associate of Isagenix, described as a “Millionaire in Action,” is based in the district, providing further evidence of Isagenix's purposeful activities there, despite Isagenix's claim that this Associate is inactive and has only earned tens of thousands of dollars in the district. The Court concludes that this level of earnings is sufficient for jurisdictional relevance, particularly as it relates to alleged use of infringing marketing materials.
Third, Lindora's infringement claims directly arise from Isagenix's business activities in the district, including the distribution of infringing materials and their use in training workshops. Isagenix's arguments against jurisdiction based on the presence of its Associates are found unpersuasive. Lastly, regarding the reasonableness of personal jurisdiction, Isagenix has failed to demonstrate that jurisdiction in this district is unreasonable, as the factors considered do not favor Isagenix. Thus, the Court affirms that Lindora has sufficiently shown grounds for specific jurisdiction over Isagenix in the Southern District of California.
Isagenix is subject to specific jurisdiction in this district due to its sufficient contacts, thereby establishing it as a resident under 28 U.S.C. § 1891(d). Consequently, venue is appropriate under 28 U.S.C. § 1391(b)(1) since both defendants reside in California, making this district a judicial district where any defendant resides. Additionally, venue is proper under 28 U.S.C. § 1391(b)(2) because a substantial part of the events giving rise to the claims occurred within this district. In trademark cases under the Lanham Act, a substantial part may occur wherever consumer confusion is likely regarding the accused goods. Lindora operates a weight loss clinic and maintains an interactive website in this district, alleging that Isagenix employs infringing materials in its promotional activities here, indicating competition for customers and a likelihood of confusion.
Isagenix's argument that the infringing materials originated in Arizona and that its contacts with Associates in this district are irrelevant is rejected. The court finds that infringing materials were indeed used in commercial activities in this district, rendering Isagenix’s associates pertinent to the case. Therefore, a substantial part of the events giving rise to the claims occurred in this district, affirming the appropriateness of venue under both §§ 1391(b)(1) and (b)(2). As a result, Isagenix’s motion to dismiss for improper venue is denied. Furthermore, Isagenix's motion to sever claims and transfer them to the District of Arizona is also considered.
Isagenix contends that the claims against it and Novokolsky should not be joined because they do not stem from the same transaction or occurrence, arguing this could violate fairness principles. The Court disagrees, citing Federal Rule of Civil Procedure 20(a), which allows for the joinder of multiple defendants if (1) the plaintiff's claims arise from the same transaction or series of transactions, and (2) there are common legal or factual questions. The liberal interpretation of this rule aims to enhance trial efficiency and prevent multiple lawsuits. However, courts must also consider whether joinder aligns with fundamental fairness and could cause prejudice. Isagenix has the burden to prove that severance is necessary.
In addressing the "same transaction" requirement, Isagenix argues that the claims against it relate to its website and marketing efforts, while Novokolsky's claims involve her use of infringing marks on her Isagenix-hosted page, suggesting independent actions. The Ninth Circuit's interpretation of "same transaction" requires factual commonality, emphasizing the need for related activities and similar factual backgrounds. The Court concludes that sufficient transactional relatedness exists, as Lindora's claims indicate that both defendants participated in trademark infringement through collaborative marketing efforts and shared infringing materials, distinguishing this case from others where defendants acted independently.
Novokolsky's use of allegedly infringing materials to market Isagenix products resulted in mutual benefits for both parties, establishing a shared marketing nexus. Consequently, the Court determines that Lindora’s claims arise from the same transaction or series of occurrences, satisfying Rule 20’s requirements for permissive joinder. The Court also evaluates whether joinder aligns with fundamental fairness, analyzing factors such as judicial economy, witness and evidence differences, and potential prejudice.
Firstly, joinder promotes judicial economy due to substantial overlap in factual and legal issues, including trademark validity, use in commerce, willfulness of infringement, customer confusion likelihood, and Isagenix's role in promoting Lindora Marks. Conducting separate trials would lead to significant duplication of effort, favoring joinder over severance.
Isagenix posits that severance could enhance efficiency, suggesting that a favorable outcome against Isagenix could affect the claims against Novokolsky. However, the Court finds that the potential for issue preclusion does not outweigh the efficiency benefits of joinder, as predicting the applicability of preclusion depends on various factors that cannot be determined at this stage. Thus, the analysis supports joinder as the more efficient option.
Novokolsky has a strong case for using issue preclusion defensively against Lindora based on a previous trial, but Lindora's ability to assert it offensively against Novokolsky in a subsequent trial is less certain. Collateral estoppel requires identity or privity between litigating parties, and if it is unavailable, previously decided issues must be relitigated, leading to inefficiencies that contradict the purpose of severance. Thus, Isagenix’s reliance on potential issue preclusion does not demonstrate that severance would enhance judicial economy compared to joinder.
Key witnesses, including Isagenix’s CEO and other officials, are relevant to both cases, suggesting significant overlap. Conducting separate trials would necessitate these witnesses to testify multiple times, increasing inconvenience, inefficiency, and costs. Relevant documentary evidence, such as marketing materials and policies, would also need to be presented in both trials, adding further burden. Consequently, the court finds that the overlap in witnesses and evidence favors joinder over severance.
Isagenix contends that joining claims would prejudice them by potentially confusing the jury regarding Novokolsky's alleged infringement. However, this argument is flawed, as the interrelationship of the claims is central to Lindora’s allegations, regardless of trial separation. The risk of prejudice is inherent to Isagenix's collaborative business model with its Associates, and severance would not mitigate this risk. Protective measures, including specific jury instructions and bifurcation of issues, can effectively reduce potential confusion for the jury.
Measures are proposed to help the jury distinguish between allegations and evidence relevant to each claim, ensuring proper consideration of evidence across multiple claims and reducing the risk of liability misattribution among defendants. The Court finds these measures would mitigate unfair prejudice, and Isagenix fails to demonstrate otherwise. Isagenix's argument that claims against Novokolsky are peripheral is rejected; Novokolsky is deemed integral to the claims against Isagenix, particularly as an associate allegedly provided infringing materials. Even if she were peripheral, the Court emphasizes that joinder promotes judicial economy and any potential prejudice could be addressed through jury instructions. Lindora meets the Rule 20 joinder criteria, and Isagenix has not proven that separate trials are necessary, leading the Court to deny Isagenix's motion to sever claims.
Regarding personal jurisdiction, the Court acknowledges Isagenix's argument against general jurisdiction, agreeing that Lindora has not established a prima facie case as Isagenix is neither incorporated in California nor has its principal place of business there. However, the Court finds specific jurisdiction appropriate, as Lindora demonstrates that Isagenix purposefully engaged in activities directed at California that gave rise to the claims. Isagenix has not convincingly argued that exercising jurisdiction would be unreasonable. Consequently, the Court denies Isagenix’s motion to dismiss for lack of personal jurisdiction.
Venue is deemed proper in this district under 28 U.S.C. § 1391(b)(1) and (b)(2) because both Isagenix and Novokolsky reside here, and a significant portion of the events related to Lindora’s claim occurred in this district. Consequently, Isagenix's motion to dismiss for improper venue is denied. The Court also denies Isagenix's motion to sever claims, affirming that joinder is appropriate under Rule 20(a), as Isagenix did not demonstrate that joinder would violate principles of fundamental fairness. The claims against Isagenix and Novokolsky will proceed in a single action.
Lindora initially filed suit against Isagenix International Products Export, Inc. on December 8, 2015, and subsequently filed a First Amended Complaint against Isagenix and Novokolsky after a motion to dismiss. Isagenix attempted to strike a Notice regarding Exhibit J, which contained allegedly infringing marketing materials, as untimely and prejudicial, but the Court denied this motion, noting that the materials were already included in other exhibits, thus Isagenix was aware of the allegations. The Court accepted Isagenix's response to Exhibit J, which was provided in a footnote of its Motion to Strike.
The Court examined all relevant materials submitted by both parties, including affidavits and exhibits, and found that even if Isagenix's contacts with the Southern District of California did not establish specific jurisdiction, venue remains appropriate since Isagenix is a resident of California. The Court refutes Isagenix's reliance on a different severance standard, favoring the standard in Jacques and related cases, which better reflects the burden on Isagenix to show the necessity of separate trials. Although Isagenix's concerns regarding potential jury confusion and the peripheral nature of claims against Novokolsky were acknowledged, they did not warrant severance. As Isagenix's motion to sever is denied, the Court does not address the potential transfer of the claims to the District of Arizona.
