Antitrust Law Daily Wrap Up, ADVERTISING—D. Kan.: Personal jurisdiction found over Georgia-based seller of appliance self-adhesive films, (Feb 19, 2016)

By Edward L. Puzzo, J.D.

The federal district court in Kansas City, Kansas had personal jurisdiction over the defendants in a false advertising lawsuit brought by a Kansas-based seller of self-adhesive films used for appliances and countertops against a Georgia-based competitor (Ezfauxdecor, LLC v. Appliance Art Incorporated, February 17, 2016, Murguia, C.).

Plaintiff Amber Shank is the sole owner and sole full-time employee of Ezfauxdecor, LLC. Defendants were Alison Smith, doing business as Easy Home Renewals, Appliance Art Incorporated and Instant One Media, Inc. The parties were competitors in the sale and marketing of self-adhesive films imprinted with patterns of stainless steel, marble, and granite, used to cover existing appliances and countertops.

Plaintiffs alleged that defendants introduced their competing products into the marketplace with false and misleading advertising, such as using photos of plaintiff's products shown on a television show in a way that implied they were defendants' products. Plaintiffs also alleged that defendants had made false statements directly to potential customers and to Amazon.com, in a way that damaged plaintiffs’ business reputation and goodwill. Plaintiff brought claims including false advertising, commercial disparagement, and unfair competition. Defendants moved to dismiss based on an alleged lack of personal jurisdiction by the court.

In order to determine whether personal jurisdiction existed, the court stated, it must first determine whether the defendants had minimal contacts with the state, and if so, whether maintenance of the suit offended traditional notions of fair play and substantial justice.

Minimum contacts. Plaintiffs alleged that the defendants posted false advertising and false statements concerning their own and plaintiff's products, intending specific harm to plaintiffs by diverting sales from plaintiffs to themselves. In addition, it is alleged that the sole owner of defendant Appliance Art Incorporated had traveled to Kansas to discuss a possible partnership with plaintiff, later sent a cease-and-desist letter demanding that plaintiff discontinue the use of certain terms she was entitled to use under common-law and registered trademarks, and causing Amazon.com to discontinue sales of plaintiff's products. These actions, the court found, show that defendants acted intentionally, in a manner expressly aimed at Kansas, knowing that the brunt of the injury would be felt in Kansas. Under these circumstances, the minimum contacts requirement for personal jurisdiction was met, the court ruled.

Fair play and substantial justice. Next, to determine whether subjecting defendants to jurisdiction in Kansas would offend traditional notions of fair play and substantial justice, the court first considered the burden on the defendant. Since defendants were in Georgia, this factor weighed in favor of defendants, the court stated.

The court next considered forum state Kansas' interests in resolving the dispute. States have an important interest in providing a forum for their residents seeking redress for injuries caused by out-of-state actors. The court found that Kansas had a strong interest in adjudicating this controversy because the alleged injury was suffered by Kansas residents in the state. Kansas also had a significant interest in resolving a dispute regarding the rights to trademarks used by Kansas residents.

The court considered whether plaintiff Amber Shank could receive convenient and effective relief in another forum, but concluded that she could not. As the sole owner and sole full-time employee of Ezfauxdecor, Shank would have to shut down her business each time she was required to leave Kansas, a burden the court viewed as catastrophic for her business. This factor weighed in favor of plaintiff.

The court also considered whether Kansas or Georgia courts would be best to hear the dispute from the perspective of judicial efficiency regarding witnesses and the like. With plaintiffs in one state, defendants in another, and possible witnesses elsewhere, the court viewed this factor as neutral.

Finally, the court considered whether the exercise of personal jurisdiction by the forum would affect the substantive social policy interests of other states, and found that it would not. This factor weighed in favor of plaintiffs.

Taking all the five factors into account, the court concluded that exercising personal jurisdiction over defendants would not offend traditional notions of fair play and substantial justice. Consequently, the court ruled that it had personal jurisdiction over the defendants and denied defendants' motion to dismiss.

The case is Civil Action No. 2:15-cv-09140-CM-KGG.

Attorneys: Steven J. Braun (Krigel & Krigel, PC) for Ezfauxdecor, LLC. Cheryl L. Burbach (Hovey Williams LLP) for Alison Smith.

Companies: Ezfauxdecor, LLC; Appliance Art Incorporated; Instant One Media, Inc.

Cases: Advertising KansasNews