Toys R Us Inc v. Step Two

Opinions of the United
2003 Decisions States Court of Appeals
for the Third Circuit
1-28-2003
Toys R Us Inc v. Step Two
Precedential or Non-Precedential: Precedential
Docket 01-3390
Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2003
Recommended Citation
"Toys R Us Inc v. Step Two" (2003). 2003 Decisions. Paper 815.
http://digitalcommons.law.villanova.edu/thirdcircuit_2003/815
This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
University School of Law Digital Repository. It has been accepted for inclusion in 2003 Decisions by an authorized administrator of Villanova
University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.
PRECEDENTIAL
Filed January 27, 2003
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 01-3390
TOYS "R" US, INC.;
GEOFFREY, INC.,
Appellants
v.
STEP TWO, S.A.;
IMAGINARIUM NET, S.L.
ON APPEAL FROM THE
UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF NEW JERSEY
District Court Judge: Honorable Katharine S. Hayden
(D.C. No. 01-00632)
Argued: September 12, 2002
Before: ALITO and FUENTES, Circuit Judges,
and OBERDORFER,* District Judge.
(Opinion Filed: January 27, 2003)
_________________________________________________________________
* The Honorable Louis F. Oberdorfer, Senior District Judge for the
District of Columbia, sitting by designation.
PAUL FIELDS (Argued)
ROBERT S. WEISBEN
HEATHER C. WILDE
Darby & Darby
805 Third Avenue
New York, NY 10022
Counsel for Appellants
SUSAN H. FARINA
MARK G. MATUSCHAK (Argued)
ELIZABETH M. REILLY
Hale & Dorr
60 State Street
Boston, MA 02109
Counsel for Appellees
OPINION OF THE COURT
OBERDORFER, District Judge:
Toys "R" Us, Inc. and Geoffrey, Inc. ("Toys") brought this
action against Step Two, S.A. and Imaginarium Net, S.L.
("Step Two"), alleging that Step Two used its Internet web
sites to engage in trademark infringement, unfair
competition, misuse of the trademark notice symbol, and
unlawful "cybersquatting," in violation of the Lanham Act,
15 U.S.C. S 1501 et seq., and New Jersey state law. The
District Court denied Toys’ request for jurisdictional
discovery and, simultaneously, granted Step Two’s motion
to dismiss for lack of personal jurisdiction. We hold that the
District Court should not have denied Toys’ request for
jurisdictional discovery. We therefore reverse and remand
for limited jurisdictional discovery, relating to Step Two’s
business activities in the United States, and for
reconsideration of personal jurisdiction with the benefit of
the product of that discovery, with a view to its renewing
administration of the case, in the event the District Court
finds that it does have jurisdiction.
I.
Toys, a Delaware corporation with its headquarters in
New Jersey, owns retail stores worldwide where it sells toys,
2
games, and numerous other products. In August 1999,
Toys acquired Imaginarium Toy Centers, Inc., which owned
and operated a network of "Imaginarium" stores for the sale
of educational toys and games. As part of this acquisition,
Toys acquired several Imaginarium trademarks, and
subsequently filed applications for the registration of
additional Imaginarium marks. Prior to Toys’ acquisition,
the owners of the Imaginarium mark had been marketing a
line of educational toys and games since 1985 and had first
registered the Imaginarium mark with the United States
Patent and Trademark Office in 1989. Toys currently owns
thirty-seven freestanding Imaginarium stores in the U.S., of
which seven are located in New Jersey. In addition, there
are Imaginarium shops within 175 of the Toys "R" Us stores
in the U.S., including five New Jersey stores.
Step Two is a Spanish corporation that owns or has
franchised toy stores operating under the name
"Imaginarium" in Spain and nine other countries. It first
registered the Imaginarium mark in Spain in 1991, and
opened its first Imaginarium store in the Spanish city of
Zaragoza in November 1992. Step Two began expanding its
chain of Imaginarium stores by means of a franchise
system in 1994. It has registered the Imaginarium mark in
several other countries where its stores are located. There
are now 165 Step Two Imaginarium stores. The stores have
the same unique facade and logo as those owned by Toys,
and sell the same types of merchandise as Toys sells in its
Imaginarium stores. However, Step Two does not operate
any stores, maintain any offices or bank accounts, or have
any employees anywhere in the United States. Nor does it
pay taxes to the U.S. or to any U.S. state. (JA 135-36.) Step
Two maintains that it has not directed any advertising or
marketing efforts towards the United States. The record
does, however, indicate some contacts between Step Two
and the United States: for example, a portion of the
merchandise sold at Step Two’s Imaginarium stores is
purchased from vendors in the United States. Additionally,
Felix Tena, President of Step Two, attends the New York
Toy Fair once each year. (JA 314.)
In the mid-1990s, both parties turned to the Internet to
boost their sales. In 1995, Imaginarium Toy Centers, Inc.
3
(which Toys later acquired) registered the domain name
and launched a web site featuring
merchandise sold at Imaginarium stores. In 1996, Step Two
registered the domain name , and began
advertising merchandise that was available at its
Imaginarium stores.1 In April 1999, Imaginarium Toy
Centers registered the domain name ,
and launched another web site where it offered
Imaginarium merchandise for sale. In June 1999, Step Two
registered two additional "Imaginarium" domain names,
and . In
May 2000, Step Two registered three more domain names:
, , and
.2 Step Two’s web sites are
maintained by Imaginarium Net, S.L., a subsidiary of Step
Two, S.A. formed in 2000.
At the time this lawsuit was filed, four of the
aforementioned sites operated by Step Two were interactive,
allowing users to purchase merchandise online.3 When
buying merchandise via Step Two’s web sites, purchasers
are asked to input their name and email address, as well as
a credit card number, delivery address, and phone number.
At no point during the online purchase process are users
asked to input their billing or mailing address. The web
sites provide a contact phone number within Spain that
_________________________________________________________________
1. Step Two maintains that goods have been available for purchase via
its web site only since November 2000. Before that time, merchandise
was advertised, but not sold, online.
2. Step Two originally contracted with the European company
Intercomputer Soft, S.A. (now owned by PsiNet Europe) to register the
domain names and ,
and with the European company Interdomain to register
, , and
. These domain names were ultimately registered
with Network Solutions, Inc. ("NSI"), a U.S. company. Step Two pays
PsiNet Europe to maintain these domain names, and does not send any
payments to NSI. (JA 314.)
3. The web sites at and
were not used to sell merchandise. Discovery may be necessary to
determine whether Step Two has changed its web sites during the course
of this litigation.
4
lacks the country code that a user overseas would need to
dial. Moreover, the prices are in Spanish pesetas and
Euros, and goods ordered from those sites can be shipped
only within Spain. Step Two’s Imaginarium web sites are
entirely in Spanish.
Visitors to the four sales-oriented Step Two web sites may
elect to receive an electronic newsletter, or sign up for
membership in "Club Imaginarium," a promotional club
with games and information for children. Each registrant
for Club Imaginarium is required to provide a name and an
email address. At the time this suit was filed, there was a
section for "voluntary information," including the
registrant’s home address, on the Club Imaginarium
registration page. This optional portion of the page required
users to choose from a pull-down list of Spanish provinces,
and did not accommodate mailing addresses in the United
States.4 After joining Club Imaginarium via the web site,
registrants receive an automatic email response.
Mr. Tena submitted an affidavit stating that Step Two
had not made any sales via its web sites to U.S. residents.
(JA 136.) Toys, however, adduced evidence of two sales to
residents of New Jersey conducted via Step Two’s
Imaginarium web sites. These purchases were initiated by
Toys. Lydia Leon, a legal assistant in the Legal Department
of Geoffrey, Inc., made the first purchase. Ms. Leon, a
resident of New Jersey, purchased a toy via
on January 23, 2001. (JA
167-69.) The second purchase was made in February 2001
by Luis M. Lopez, an employee of Darby & Darby P.C.,
attorneys for Toys. Mr. Lopez is also a resident of New
Jersey, and accessed to make his
purchase. (JA 207-14.)
For both of these sales, the items were shipped to
Angeles Benavides Davila, a Toys employee in Madrid,
_________________________________________________________________
4. An earlier version of the Club Imaginarium registration form was
included in the record as Exhibit N of the Affidavit of Luis M. Lopez. (JA
272.) This page asked users to input the "Province," and did not have a
pull-down menu. There was no field for "Country." According to Step
Two, this alternate version was available only at
.
5
Spain; Ms. Benavides Davila then forwarded the items to
the offices of Geoffrey, Inc. in New Jersey. Both purchases
were made with credit cards issued by U.S. banks.
Additionally, both purchasers received in New Jersey an
email confirming their purchases, and a subsequent email
with a login and password to access Club Imaginarium.
One of the two purchasers also separately registered for
Club Imaginarium, exchanged emails with a Step Two
employee about his purchase, and received a copy of an
email newsletter from Step Two. Aside from these two sales,
there is no evidence in the record of a sale to anyone in the
United States. After learning of these two sales, Mr. Tena
submitted a second affidavit stating that his company does
not know where its purchasers reside, as that information
is not apparent from a purchaser’s email address, and Step
Two keeps records only of shipping addresses. (JA 310-11.)
On February 7, 2001, Toys filed the instant complaint
against Step Two in federal district court. Step Two moved
to dismiss for lack of personal jurisdiction on April 10,
2001. Toys opposed the motion, and requested discovery on
the issue of jurisdiction. After hearing oral argument on
July 30, 2001, the District Court denied the discovery
request and granted the motion to dismiss. Toys appealed
these decisions on August 28, 2001.
II.
In the following discussion, we first consider the standard
for personal jurisdiction based upon a defendant’s
operation of a commercially interactive web site, as
articulated by courts within this circuit and other Courts of
Appeals. In light of that standard and the arguments
presented in the proceeding below, we then assess the
propriety of the District Court’s denial of jurisdictional
discovery.
A. Personal Jurisdiction Based on the Operation of a
Web Site
The advent of the Internet has required courts to fashion
guidelines for when personal jurisdiction can be based on
a defendant’s operation of a web site. Courts have sought
to articulate a standard that both embodies traditional
6
rules and accounts for new factual scenarios created by the
Internet. Under traditional jurisdictional analysis, the
exercise of specific personal jurisdiction requires that the
"plaintiff ’s cause of action is related to or arises out of the
defendant’s contacts with the forum." Pinker v. Roche
Holdings Ltd., 292 F.3d 361, 368 (3d Cir. 2002). Beyond
this basic nexus, for a finding of specific personal
jurisdiction, the Due Process Clause of the Fifth
Amendment requires (1) that the "defendant ha[ve]
constitutionally sufficient ‘minimum contacts’ with the
forum," id. (quoting Burger King Corp. v. Rudzewicz, 471
U.S. 462, 474 (1985)), and (2) that "subjecting the
defendant to the court’s jurisdiction comports with
‘traditional notions of fair play and substantial justice,’ " id.(quoting Int’l Shoe Co. v. Washington, 326 U.S. 301, 316
(1945)). The first requirement, "minimum contacts," has
been defined as " ‘some act by which the defendant
purposefully avails itself of the privilege of conducting
activities within the forum State, thus invoking the benefits
and protections of its laws.’ " Asahi Metal Indus. Co., Ltd. v.
Superior Court of California, 480 U.S. 102, 109 (1987)
(quoting Burger King Corp., 471 U.S. at 475). Second,
jurisdiction exists only if its exercise "comports with
traditional notions of fair play and substantial justice," i.e.,
the defendant "should reasonably anticipate being haled
into court" in that forum. World-Wide Volkswagen Corp. v.
Woodson, 444 U.S. 286, 297 (1980).
The precise question raised by this case is whether the
operation of a commercially interactive web site accessible
in the forum state is sufficient to support specific personal
jurisdiction, or whether there must be additional evidence
that the defendant has "purposefully availed" itself of the
privilege of engaging in activity in that state. Prior decisions
indicate that such evidence is necessary, and that it should
reflect intentional interaction with the forum state. If a
defendant web site operator intentionally targets the site to
the forum state, and/or knowingly conducts business with
forum state residents via the site, then the "purposeful
availment" requirement is satisfied. Below, we first review
cases from this and other circuits that articulate this
requirement. Next, we consider the role of related non-
Internet contacts in demonstrating purposeful availment.
7
We then assess whether the "purposeful availment"
requirement has been satisfied in the present case.
1. The "Purposeful Availment" Requirement in
Internet Cases
a. Third Circuit Cases
The opinion in Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952
F. Supp. 1119 (W.D. Pa. 1997) has become a seminal
authority regarding personal jurisdiction based upon the
operation of an Internet web site. The court in Zippo
stressed that the propriety of exercising jurisdiction
depends on where on a sliding scale of commercial
interactivity the web site falls. In cases where the defendant
is clearly doing business through its web site in the forum
state, and where the claim relates to or arises out of use of
the web site, the Zippo court held that personal jurisdiction
exists. Id. at 1124. In reaching this conclusion, the Zippo
court relied on CompuServe, Inc. v. Patterson , 89 F.3d 1257(6th Cir. 1996), which found the exercise of personal
jurisdiction to be proper where the commercial web site’s
interactivity reflected specifically intended interaction with
residents of the forum state. Zippo, 952 F. Supp. at 1124
(citing CompuServe, 89 F.3d at 1264-66).
Analyzing the case before it, the Zippo court similarly
underscored the intentional nature of the defendant’s
conduct vis-a-vis the forum state. In Zippo, the defendant
had purposefully availed itself of doing business in
Pennsylvania when it "repeatedly and consciously chose to
process Pennsylvania residents’ applications and to assign
them passwords," knowing that the contacts would result
in business relationships with Pennsylvania customers. Id.
at 1126. The court summarized the pivotal importance of
intentionality as follows:
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.’ . . .
If [the defendant] had not wanted to be amenable to
jurisdiction in Pennsylvania, . . . it could have chosen
not to sell its services to Pennsylvania residents.
Id. at 1126-27 (citing World-Wide Volkswagen, 444 U.S. at
297).
8
Since Zippo, several district court decisions from this
Circuit have made explicit the requirement that the
defendant intentionally interact with the forum state via the
web site in order to show purposeful availment and, in
turn, justify the exercise of specific personal jurisdiction.
See, e.g., S. Morantz, Inc. v. Hang & Shine Ultrasonics, Inc.,
79 F. Supp. 2d 537, 540 (E.D. Pa. 1999) (observing that "a
web site targeted at a particular jurisdiction is likely to give
rise to personal jurisdiction."). As another district court in
this Circuit put it, "[c]ourts have repeatedly recognized that
there must be ‘something more’ . . . to demonstrate that the
defendant directed its activity towards the forum state."
Desktop Technologies, Inc. v. Colorworks Reprod. & Design,
1999 WL 98572, at *5 (E.D. Pa. Feb. 25, 1999) (citation
omitted) (emphasis added).
b. Case Law from Other Circuits
Several Courts of Appeals decisions have adopted
"purposeful availment" requirements that are consistent
with the principles articulated in the Zippo line of cases.
The Fourth Circuit, in ALS Scan v. Digital Service
Consultants, Inc., 293 F.3d 707 (4th Cir. 2002), expressly
incorporated an "intentionality" requirement when
fashioning a test for personal jurisdiction in the context of
the Internet:
a State may, consistent with due process, exercise
judicial power over a person outside of the State when
that person (1) directs electronic activity into the State,
(2) with the manifested intent of engaging in business or
other interactions within the State, and (3) that activity
creates, in a person within the State, a potential cause
of action cognizable in the State’s courts.
Id. at 714 (emphasis added).
In Cybersell, Inc. v. Cybersell, Inc., 130 F.3d 414 (9th Cir.
1997), the Ninth Circuit considered an infringement action
brought against a Florida web site operator whose allegedly
infringing site was accessible in Arizona, the state where
the plaintiff had its principal place of business. In declining
to exercise specific personal jurisdiction, the Cybersell court
found there must be " ‘something more’[beyond the mere
posting of a passive web site] to indicate that the defendant
9
purposefully (albeit electronically) directed his activity in a
substantial way to the forum state." Id. at 418. Decisions
from other circuits have articulated similar standards. See,
e.g., Neogen Corp. v. Neo Gen Screening, Inc., 282 F.3d 883,
890 (6th Cir. 2002) (holding that the purposeful availment
requirement is satisfied "if the web site is interactive to a
degree that reveals specifically intended interaction with
residents of the state") (citation omitted) (emphasis added).
2. Non-Internet Contacts
In deciding whether to exercise jurisdiction over a cause
of action arising from a defendant’s operation of a web site,
a court may consider the defendant’s related non-Internet
activities as part of the "purposeful availment" calculus.
One case that relies on non-Internet contacts for the
exercise of jurisdiction -- a case Toys repeatedly cites -- is
Euromarket Designs, Inc. v. Crate and Barrel Ltd ., 96 F.
Supp. 2d 824 (N.D. Ill. 2000). In Euromarket, the court
exercised jurisdiction over an Irish manufacturer based on
its commercially interactive web site, even though the
products purchased through the web site could not be
shipped to Illinois. The court identified a number of non-
Internet contacts between the defendant and Illinois,
including the fact that the defendant’s vendors included
Illinois suppliers, its attendance at trade shows in Illinois,
and its advertisement in publications that circulate in the
United States (albeit originating outside). Id. at 838. The
Euromarket court also relied on the fact that the defendant
billed Illinois customers, collected revenues from Illinois
customers, and recorded sales from goods ordered from
Illinois, id., and that the web site was designed to
accommodate addresses in the United States. Id. at 836.
Thus far, Toys has not shown that Step Two maintained
the type of contacts that supported jurisdiction in
Euromarket -- i.e., that the defendant intentionally and
knowingly transacted business with residents of the forum
state, and had significant other contacts with the forum
besides those generated by its web site. This limited record
does not provide an occasion for us to spell out the exact
mix of Internet and non-Internet contacts required to
support an exercise of personal jurisdiction. That
determination should be made on a case-by-case basis by
10
assessing the "nature and quality" of the contacts. Zippo,
952 F. Supp. at 1127 (quoting Int’l Shoe, 320 U.S. at 320).
However, non-internet contacts such as serial business
trips to the forum state, telephone and fax communications
directed to the forum state, purchase contracts with forum
state residents, contracts that apply the law of the forum
state, and advertisements in local newspapers, may form
part of the "something more" needed to establish personal
jurisdiction. See Barrett v. Catacombs Press, 44 F. Supp. 2d
717, 726 (E.D. Pa. 1999), and cases there collected. It is
noteworthy that the Supreme Court in Burger King Corp.,
when expounding on the "minimum contacts" requirement,
referred generally to a defendant’s "activities" in the forum
state -- a term that includes the aforementioned non-
Internet contacts. Burger King Corp., 471 U.S. at 475.
3. Personal Jurisdiction over Step Two
As Zippo and the Courts of Appeals decisions indicate,
the mere operation of a commercially interactive web site
should not subject the operator to jurisdiction anywhere in
the world. Rather, there must be evidence that the
defendant "purposefully availed" itself of conducting activity
in the forum state, by directly targeting its web site to the
state, knowingly interacting with residents of the forum
state via its web site, or through sufficient other related
contacts.
Based on the facts established in this case thus far, Toys
has failed to satisfy the purposeful availment requirement.
Step Two’s web sites, while commercial and interactive, do
not appear to have been designed or intended to reach
customers in New Jersey. Step Two’s web sites are entirely
in Spanish; prices for its merchandise are in pesetas or
Euros, and merchandise can be shipped only to addresses
within Spain. Most important, none of the portions of Step
Two’s web sites are designed to accommodate addresses
within the United States. While it is possible to join Club
Imaginarium and receive newsletters with only an email
address, Step Two asks registrants to indicate their
residence using fields that are not designed for addresses in
the United States.
Moreover, the record may not now support a finding that
11
Step Two knowingly conducted business with residents of
New Jersey. The only documented sales to persons in the
United States are the two contacts orchestrated by Toys,
and it appears that Step Two scarcely recognized that sales
with U.S. residents had been consummated.5
At best, Toys has presented only inconclusive
circumstantial evidence to suggest that Step Two targeted
its web site to New Jersey residents, or that it purposefully
availed itself of any effort to conduct activity in New Jersey.
Many of the grounds for jurisdiction that Toys advanced
below have been deemed insufficient by the courts. First,
the two documented sales appear to be the kind of
"fortuitous," "random," and "attenuated" contacts that the
Supreme Court has held insufficient to warrant the exercise
of jurisdiction. See Burger King Corp., 471 U.S. at 475(citations omitted). As for the electronic newsletters and
other email correspondence, "telephone communication or
mail sent by a defendant [do] not trigger personal
jurisdiction if they ‘do not show purposeful availment.’ "
Barrett, 44 F. Supp. 2d at 729 (quoting Mellon Bank (East)
PSFS, N.A. v. DiVeronica Bros., Inc., 983 F.2d 551, 556 (3d
Cir. 1993)). The court in Barrett found that the exchange of
three emails between the plaintiff and defendant regarding
the contents of the defendant’s web site, without more, did
not "amount to the level of purposeful targeting required
under the minimum contacts analysis." Id. at 729; see also
_________________________________________________________________
5. Toys argues that Step Two was aware that it was conducting business
with New Jersey residents. In particular, Toys points to the email
correspondence between Mr. Luis M. Lopez and a representative of Step
Two regarding Mr. Lopez’s overpayment. Mr. Lopez requested that the
difference be mailed to his home address in "South Orange, NJ 07079,"
but did not spell out "New Jersey" or specify that he resided in the
United States. (JA 254, 256.) The Step Two representative, apparently
uncertain about the address, sent a reply stating"I have received your
address and as far as I can see, it is pretty far from here (we are in
Zaragoza). I would appreciate your giving me more information on the
address so that I can be sure that it will arrive." (JA 256.) Mr. Lopez’s
response to this message -- if he sent one -- is not included in the
record. Although Step Two ultimately learned that Mr. Lopez is a United
States resident, a trier of fact could reasonably find from the
correspondence that the company did not contemplate that sales would
occur with U.S.-based purchasers.
12
Machulsky v. Hall, 210 F. Supp. 2d 531, 542 (D.N.J. 2002)
(minimal email correspondence, "by itself or even in
conjunction with a single purchase, does not constitute
sufficient minimum contacts."). Non-Internet contacts, such
as Mr. Tena’s visits to New York and the relationships with
U.S. vendors, have not been explored sufficiently to
determine whether they are related to Toys’ cause of action,
or whether they reflect "purposeful availment."
Absent further evidence showing purposeful availment,
Toys cannot establish specific jurisdiction over Step Two.6
However, any information regarding Step Two’s intent vis-a-
vis its Internet business and regarding other related
contacts is known by Step Two, and can be learned by Toys
only through discovery. The District Court’s denial of
jurisdictional discovery is thus a critical issue, insofar as it
may have prevented Toys from obtaining the information
needed to establish personal jurisdiction. We next turn to
whether the District Court properly denied Toys’ request for
jurisdictional discovery.
B. Jurisdictional Discovery
The pivotal issue on appeal is whether the District Court
erred in denying Toys’ request for jurisdictional discovery.
A district court’s decision to deny jurisdictional discovery is
reviewed for abuse of discretion. See Brumfield v. Sanders,
_________________________________________________________________
6. As an alternative to the "minimum contacts" analysis for specific
jurisdiction, Toys argues that jurisdiction over Step Two may be based
on the "effects" test. Following the lead of the Supreme Court in Calder
v. Jones, 465 U.S. 783, 788-89 (1984), the Third Circuit has held that
personal jurisdiction may, under certain circumstances, be based on the
effects in the forum state of a defendant’s tortious actions elsewhere.
Remick v. Manfredy, 238 F.3d 248, 258 (3d Cir. 2001). One of the Third
Circuit’s requirements is that the "defendant expressly aimed his
tortious conduct at the forum . . . ." Id. (internal quotations omitted).
Even assuming that Step Two’s registration of the Imaginarium
domain names and its operation of web sites under that name bring
about an injury to Toys in New Jersey (its corporate headquarters), Toys
has failed to establish that Step Two engaged in intentionally tortious
conduct expressly aimed at New Jersey. In the present case, this
intentionality requirement is the key missing component for jurisdiction
under either the "minimum contacts" analysis or the "effects" test.
13
232 F.3d 376, 380 (3d Cir. 2000); Pacitti v. Macy’s, 193
F.3d 766, 776 (3d Cir. 1999).
Toys requested jurisdictional discovery for the purpose of
establishing either specific personal jurisdiction, or
jurisdiction under the federal long-arm statute, Fed. R. Civ.
P. 4(k)(2).7 The District Court denied Toys’ request,
explaining that "the clear focus of the Court is directed, as
it should be, to the web site[,] [a]nd to the activity of the
defendants related to that web site, which is making sales
here, . . ." The court added that "the apparent
contradictions, if such there will be in the Tena affidavit,
[and] what else Mr. Tena might have been doing here, just
have no relationship to where the eye is directed and
should stay and that is, the web site activities of this
defendant." (JA 13-14.)
We are persuaded that the District Court erred when it
denied Toys’ request for jurisdictional discovery. The court’s
unwavering focus on the web site precluded consideration
of other Internet and non-Internet contacts -- indicated in
various parts of the record -- which, if explored, might
provide the "something more" needed to bring Step Two
within our jurisdiction. Cybersell, Inc., 130 F.3d at 418;
Desktop Technologies, Inc., 1999 WL 98572, at *3. Although
the plaintiff bears the burden of demonstrating facts that
support personal jurisdiction, Pinker, 292 F.3d at 368,
courts are to assist the plaintiff by allowing jurisdictional
discovery unless the plaintiff ’s claim is "clearly frivolous."
Massachusetts School of Law at Andover, Inc. v. American
Bar Ass’n, 107 F.3d 1026, 1042 (3d Cir. 1997). If a plaintiff
presents factual allegations that suggest "with reasonable
particularity" the possible existence of the requisite
"contacts between [the party] and the forum state," Mellon
Bank (East) PSFS, Nat’l Ass’n v. Farino, 960 F.2d 1217,
1223 (3d Cir. 1992), the plaintiff ’s right to conduct
jurisdictional discovery should be sustained.
_________________________________________________________________
7. The federal long-arm statute sanctions personal jurisdiction over
foreign defendants for claims arising under federal law when the
defendant has sufficient contacts with the nation as a whole to justify
the imposition of U.S. law, but without sufficient contacts to satisfy the
due process concerns of the long-arm statute of any particular state.
14
Where the plaintiff has made this required threshold
showing, courts within this Circuit have sustained the right
to conduct discovery before the district court dismisses for
lack of personal jurisdiction. See, e.g., In re Automotive
Refinishing Paint Antitrust Litigation, 2002 WL 31261330, at
*9 (E.D. Pa. July 31, 2002) (denying motion to dismiss and
permitting jurisdictional discovery where plaintiff made a
"threshold prima facie showing of personal jurisdiction over
Defendants"); W. Africa Trading & Shipping Co., et al. v.
London Int’l Group, et al., 968 F. Supp. 996, 1001 (D.N.J.
1997) (denying defendant’s motion to dismiss where the
plaintiffs’ "request for jurisdictional discovery is critical to
the determination of whether [the court can] exercise
personal jurisdiction over the defendant."); Centralized
Health Systems, Inc. v. Cambridge Medical Instruments, Inc.,
1989 WL 136277, at *1 (E.D. Pa. Nov. 8, 1989) (holding
motion to dismiss in abeyance to permit party to take
discovery on jurisdiction where distribution arrangement
might satisfy minimum contacts). Here, instead of adopting
a deferential approach to Toys’ request for discovery, the
District Court appears to have focused entirely on the web
site, thereby preventing further inquiry into non-Internet
contacts.
The record before the District Court contained sufficient
non-frivolous allegations (and admissions) to support the
request for jurisdictional discovery. First, Toys’ complaint
alleges that Step Two has "completely copied the
IMAGINARIUM concept" from Toys. Compl. at P 24. For
example, Toys alleges that "the mix of toys sold by Step
Two is identical to the mix of toys sold by Toys under the
IMAGINARIUM mark," and that "Step Two continues to
copy Toys’ marketing developments and Intellectual
property." Id. at PP 24, 25. Underlying Toys’ complaint is its
concern that Step Two is "attempt[ing] to expand [its]
business throughout the world including the United States
by operating international web sites that offer goods similar
to the goods offered in Toy’s [sic] IMAGINARIUM stores." Id.at P 29. Step Two’s intent, according to Toys, is to
"capitalize for [its] own pecuniary gain on the goodwill and
excellent reputation of Toys . . . ." Id. at P 50.
It is well established that in deciding a motion to dismiss
for lack of jurisdiction, a court is required to accept the
15
plaintiff ’s allegations as true, and is to construe disputed
facts in favor of the plaintiff. Pinker, 292 F.3d at 368. Given
the allegations as to Step Two’s mimicry of Toys’ ventures
on the Internet and its copy-cat marketing efforts, it would
be reasonable to allow more detailed discovery into Step
Two’s business plans for purchases, sales, and marketing.
Limited discovery relating to these matters would shed light
on the extent, if any, Step Two’s business activity--
including, but not limited to, its web site -- were aimed
towards the United States. This information, known only to
Step Two, would speak to an essential element of the
personal jurisdiction calculus.
Other aspects of the record should have also alerted the
District Court to the possible existence of the"something
else" needed to exercise personal jurisdiction. For example,
Step Two concedes that a portion of the merchandise sold
through its Imaginarium stores and web sites are
purchased from U.S. vendors, and that Mr. Tena attends
the New York Toy Fair each year. Further discovery into the
vendor relationships and Mr. Tena’s activities here, if any,
may shed light on Step Two’s intentions with respect to the
U.S. market, or the extent of its business contacts in the
United States. Discovery might also reveal whether these
non-Internet contacts directly facilitate Step Two’s alleged
exploitation of Toys’ marketing techniques by providing it
with a supply of items identical to Toys’ inventory to sell on
its web sites.
The two documented sales to residents of New Jersey--
and the subsequent emails sent from Step Two to the two
purchasers -- also speak "with reasonable particularity" to
the possible existence of contacts needed to support
jurisdiction. Mellon Bank (East) PSFS, 960 F.2d at 1223.
Although affiliates of Toys orchestrated the two sales, Mr.
Tena’s conflicting affidavits raise the possibility that
additional sales to U.S. residents may have been conducted
via the web sites. The need for additional discovery
regarding sales is further underscored by the parties’
uncertainty as to whether the residence of purchasers can
16
be determined from their credit card number or through
some other electronic means.8
Counsel for Toys mentioned some of these contacts when
it explained to the District Court why it should be allowed
jurisdictional discovery:
Mr. Tena states in his affidavit that he has substantial
regular and systematic contacts with the United States,
[and] he attends trade shows. He purchases from
vendors in the United States. I think at the very least,
Your Honor, we should be able to inquire into what
these substantial and continuing contacts are. Because
apparently he buys a lot of the toys that he resells from
U.S. vendors, because the ones that we have got were
in English that we would be permitted to take
discovery on that aspect. To determine whether or not
. . . he has made more sales within the State of New
Jersey and in the United States as a whole, as far as
accepting orders from United States residents. And/or
whether there’s a basis for general jurisdiction under
Rule 4(k)(2), because of his regular and systematic
contacts with the United States. Apparently a lot of his
toys are obtained through United States vendors.
(JA 389.)
Toys’ request for jurisdictional discovery was specific,
non-frivolous, and a logical follow-up based on the
information known to Toys. The District Court erred by
denying this reasonable request. Toys should be allowed
jurisdictional discovery, on the limited issue of Step Two’s
business activities in the United States, including business
_________________________________________________________________
8. In its brief on appeal, Step Two contends that Toys should not be
allowed discovery because there is simply no basis for believing that
there are any other contacts to find and, moreover, seeking discovery
about other web site-generated contacts would be futile as Step Two
does not keep track of billing addresses or the physical location of its
email correspondents. At oral argument, however, counsel for Toys
suggested there are means by which an individual’s residence can be
determined from a credit card number. Toys also suggests, in its brief on
appeal, that the residence of on-line purchasers may be determined from
the phone number that purchasers are required to input. These
possibilities can be explored through discovery.
17
plans, marketing strategies, sales, and other commercial
interactions. Although Step Two does not appear to have
widespread contacts with the United States, this limited
discovery will also help determine whether jurisdiction
exists under the federal long-arm statute. Accordingly, on
remand, the District Court should consider whether any
newly discovered facts will support jurisdiction under
traditional jurisdictional analysis, or under Rule 4(k)(2).
CONCLUSION
For all of the reasons set forth above, we reverse the
District Court’s denial of Toys’ request for jurisdictional
discovery, vacate the District Court’s dismissal of Toys’
complaint, and remand the case for limited jurisdictional
discovery guided by the foregoing analysis, and for
reconsideration of jurisdiction with the benefit of the
product of that discovery.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
18