LeDuc Gifts & Specialty Products, LLC v. New Thermo-Serv, Ltd.

Background

LeDuc Gifts & Specialty Products, LLC (LeDuc) is a Minnesota limited liability corporation that designed, manufactured, and sold thermal tumblers until 2018. New Thermo-Serv, Ltd. (NTS) is a Texas limited partnership that also sells thermal tumblers; its principal place of business and general partner are located in Texas.

In 2014, LeDuc-related entity 4Brava, LLC entered a partnership with DSC Products Holding, LLC. After that relationship deteriorated, LeDuc alleged that Daniel Sachs, DSC’s owner, embezzled partnership funds and misappropriated LeDuc’s trade secrets, including by duplicating and making minor improvements to LeDuc’s molds and manufacturing equipment. LeDuc and 4Brava sued Sachs and DSC in 2015 in what the opinion calls the Sachs litigation.

While that litigation was pending, Sachs offered to sell thermal-tumbler molds and equipment to NTS. NTS bought the molds and equipment in fall 2016. Although a draft asset-purchase agreement referred to the ongoing litigation, the final agreement did not. NTS used the equipment to sell thermal tumblers and compete with LeDuc. After learning of the sale, LeDuc and 4Brava sent cease-and-desist letters to NTS, but NTS continued using the equipment and selling tumblers.

LeDuc filed this action on October 4, 2018, asserting claims for misappropriation of trade secrets, unjust enrichment, tortious interference with prospective economic advantage, and tortious interference with contracts.

Personal-jurisdiction standard

NTS moved under Federal Rule of Civil Procedure 12(b)(2), which allows dismissal when the court lacks personal jurisdiction over the defendant. LeDuc had to make an initial evidentiary showing that NTS could reasonably be sued in Minnesota. The court viewed the evidence in the light most favorable to LeDuc and resolved factual conflicts in LeDuc’s favor.

Because Minnesota’s long-arm statute extends as far as due process permits, the court focused on whether exercising jurisdiction would comply with due process. The court applied the five-factor test considering the nature and quality of NTS’s Minnesota contacts, the number of contacts, how closely the claims related to those contacts, Minnesota’s interest in providing a forum, and the parties’ convenience. The first three factors were most important.

Contacts involving the asset-purchase agreement

LeDuc relied on NTS’s negotiations with Sachs, communications with Aroplax and LeDuc, and the shipment of the molds and equipment from a Minnesota storage location. The court held that these contacts were not sufficiently substantial. LeDuc did not allege that the agreement was negotiated in Minnesota or that NTS made payments to Minnesota. The molds and equipment were delivered to Texas, and the agreement did not contemplate sales in Minnesota. The final agreement omitted references to Minnesota, and the isolated communications with Aroplax and LeDuc were insufficient. The storage location also did not establish jurisdiction, particularly because LeDuc had not alleged that NTS chose that location.

The court also rejected LeDuc’s argument that NTS’s awareness of litigation in Minnesota created a sufficient contact. Awareness that other entities were involved in litigation in Minnesota did not show that NTS deliberately invoked the benefits of conducting business there.

Sales to Minnesota customers

LeDuc argued that NTS sold thermal tumblers to Minnesota residents through Amazon, Walmart, Bed Bath & Beyond, and Overstock. The court distinguished a direct sale to a Minnesota customer from sales through third-party retailers. Because LeDuc did not allege any direct sales by NTS to Minnesota customers, NTS’s nationwide sales through intermediaries, which might have included Minnesota sales, did not establish sufficient contacts. Merely placing products into the stream of commerce or knowing they might reach Minnesota was not enough.

Alleged tortious conduct

LeDuc also argued that NTS’s alleged interference with LeDuc’s business and contracts caused harm in Minnesota. The court explained that intentional conduct can support jurisdiction when it is uniquely or expressly aimed at the forum state and causes harm there that the defendant knew was likely to occur. But harm felt in Minnesota, without conduct aimed at Minnesota, was insufficient.

Even assuming without deciding that NTS’s conduct was tortious, the court found no basis to conclude that NTS’s sales were made for the purpose of causing consequences in Minnesota. NTS bought the molds and equipment from a California company and sold the resulting tumblers nationwide. LeDuc’s competitive harm in Minnesota did not establish that NTS targeted Minnesota.

Cumulative contacts and secondary factors

The court considered all of LeDuc’s asserted contacts together and reached the same conclusion. Isolated communications, nationwide sales, and an agreement with only tenuous Minnesota connections did not show that NTS deliberately conducted business in Minnesota. Minnesota’s interest in the dispute and the parties’ convenience could not overcome the absence of sufficient minimum contacts, and neither factor strongly favored jurisdiction.

Disposition

The court held that LeDuc had not made the required initial showing that Minnesota had personal jurisdiction over NTS. The court granted NTS’s motion to dismiss, dismissed LeDuc’s complaint without prejudice, and declined LeDuc’s request to transfer the case because LeDuc had not identified the relevant limitations periods, deadlines, or a proposed transferee district, and the court found no compelling reason to transfer the case.