United States District Court, M.D. North Carolina
PRECISION FABRICS GROUP, INC. Plaintiff,
TIETEX INTERNATIONAL, LTD., Defendant. PRECISION FABRICS GROUP, INC. Plaintiff,
TIETEX INTERNATIONAL, LTD., Defendant.
MEMORANDUM OPINION AND ORDER
D. Schroeder United States District Judge
the court are the motions by Defendant, Tietex International,
Ltd. (“Tietex”), to amend its answers to contest
venue and to transfer these related actions to the District
of South Carolina pursuant to Federal Rule of Civil Procedure
12(b)(3). (Doc. 211.) Tietex contends that its failure to
initially raise a venue defense should be excused in light of
the Supreme Court's recent decision in TC Heartland,
LLC v. Kraft Foods Group Brands, LLC, 137 S.Ct. 1514
(2017), which Tietex contends constitutes an intervening
change of law. The court recently permitted discovery on the
motion, and it has been fully briefed. For the reasons set
forth below, the court will grant Tietex's motion to
amend its answers and, finding that venue is improper in this
district, exercise its discretion to transfer these actions
to the District of South Carolina, pursuant to 28 U.S.C.
Precision Fabrics Group, Inc. (“PFG”) filed these
actions on August 6, 2013, and August 5, 2014, alleging that
certain Tietex products incorporating flame-retardant fabrics
infringe on PFG's U.S. Patent Nos. 8, 501, 639
(‘639 Patent) and 8, 796, 162 (‘162 Patent),
respectively. (Doc. 1 at 2; Doc. 29 at 2-3.) In its answers
and subsequent filings, Tietex did not contest venue in this
district. (Doc. 6 at 2, 5; Doc. 28 at 2; Doc. 32 at 2.)
ensuing four years, the court has conducted a
Markman hearing, construed the claims (Doc. 57),
entertained a motion for reconsideration (Doc. 127), resolved
summary judgment motions (Doc. 152), and entertained a motion
for reconsideration of the summary judgment ruling (Doc.
172). The case was set for trial during the July 2017 term of
22, 2017, the Supreme Court decided TC Heartland,
holding that under 28 U.S.C. § 1400(b), “a
domestic corporation ‘resides' only in its State of
incorporation for purposes of the patent venue
statute.” 137 S.Ct. at 1517. In reaching this
conclusion, the Court rejected VE Holding Corp. v.
Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir.
1990), where the Federal Circuit held that congressional
amendment to 28 U.S.C. § 1391(c) applied to §
1400(b) such that a defendant corporation was deemed to
“reside” in any district where it was subject to
personal jurisdiction. Id. at 1584.
next day, on May 23, 2017, Tietex moved to continue the trial
and gave notice that “[i]n light of this change in the
law yesterday and because Tietex is not a corporation of the
state of North Carolina, Tietex is now considering the impact
on venue in this Court and any necessary motion related to
venue will be filed promptly after Tietex considers the full
effects of TC Heartland.” (Doc. 175 at 6.)
Tietex contended that “[s]etting a trial date in
September, October, or November 2017 will allow the Court
ample time for consideration of any such a motion.”
(Id. at 6-7) PFG opposed the motion to continue
trial (Doc. 177), but on May 26 the court continued the trial
to October 4, 2017 (Doc. 178). Tietex filed the present
motions to amend its answers and transfer venue on August 7,
2017. (Doc. 211.)
September 15, 2017, the court held a hearing to consider the
motions and, acting within its discretion, granted PFG's
request to conduct limited discovery into whether venue was
proper in the Middle District of North Carolina. See
InVue Sec. Prods. v. Mobile Techs., Inc., No.
3:17-cv-00270-MOC-DSC, 2017 U.S. Dist. LEXIS 125693, at *2
(W.D. N.C. Aug. 9, 2017) (citing Mylan Labs, Inc. v.
Akzo, N.V., 2 F.3d 56, 64 (4th Cir. 2003)). To
accommodate this development, the court delayed trial to
October 30, 2017. Once the parties filed updated briefing as
a result of the venue discovery, the court, on October 16,
issued an order directing the parties to stand down from
trial preparation pending resolution of the motions.
evidence, viewed in the light most favorable to PFG as the
non-moving party, establishes the following:
is a South Carolina corporation with its principal place of
business in Spartanburg, South Carolina. (Doc. 6 at 2.) It
manufactures and sells a broad range of fabrics nationwide,
including some using a flame-retardant at issue in this case.
(Id.; Doc. 32 at 5.) The company has been registered
to do business in North Carolina since 2001 (Doc. 275-11
(proof of business registration)) and, for purposes of these
motions, acknowledges it has conducted sales of the allegedly
infringing product in this district (Doc. 273, Tr. at
16:18-20, 53:20-23; see Doc. 277 (listing sales
attributable to Doug Owens)). Since at least August of 2013,
Tietex has not owned, rented, or leased any real property in
this district. (Doc. 274-1, Wallace Dep. at 42:12-23,
103:6-25; Doc. 274-2, Owens Dep. 124:8-24.) However, from
1991 until December of 2014, it did employ a regional sales
manager, Doug Owens, who worked from his personal residence
located in the district. (Doc. 275-7, Owens Dep. at 11:12-19;
Doc. 268 at 14; Doc. 268-3 at 3.)
was responsible for a large sales territory that encompassed
most of the Southeast and the Midwest, including this
district. (Doc. 263-3 at 3; Doc. 274-2, Owens Dep. 21:6-16;
Doc. 274-1, Wallace Dep. at 43:18-25.) Tietex provided
Owens with a business card that listed his cell phone number
(containing a local “336” area code) as well as
his home address. (Doc. 275-3; Doc. 275-4, Wallace Dep. at
70:12-73:20.) While the customers located within the
district did not constitute a large portion of his overall
sales, Owens occasionally visited some customers within the
district to promote Tietex's products. (Doc. 274-2, Owens
Dep. at 53:22-54:18; Doc. 274 at 10.) Owens accounted for
millions of dollars in sales in 2013 and 2014, several
hundred thousand dollars of which originated from customers
in this district. (Doc. 275 at 18; Doc. 275-8; Doc. 277.)
generally placed orders directly with Tietex's customer
service department located at its headquarters in
Spartanburg, South Carolina, and all such orders were
received, fulfilled, and shipped from that location. (Doc.
274 at 10; Doc. 274-1, Wallace Dep. at 102:15-103:5; Doc.
274-2, Owens Dep. at 51:19-52:16.) Owens occasionally placed
orders for new customers (Doc. 274-2, Owens Dep. at
51:25-52:16), but he lacked the authority to bind the company
(Doc. 274-1, Wallace Dep. at 102:11-14). To facilitate his
work, he kept “[s]mall sample swatches” of fabric
as well as marketing materials in his home (Doc. 274-2, Owens
Dep. at 41:16-18), but there is no evidence that he
maintained any inventory there (see Doc. 274 at 11;
Doc. 274-1, Wallace Dep. at 101:19-21; Doc. 274-2, Owens Dep.
at 41:2-43:16; 81:18-25). Tietex also provided him with a
company car, which was registered in the company's name
to his home address. (Doc. 275-6; Doc. 275-7, Owens Dep. at
27:13-28:25.) He was reimbursed for the taxes and expenses
associated with his use of the car (Doc. 275-7, Owens Dep. at
27:13-28:25, 30:4-25), as well as his cell phone (Doc. 275-4,
Wallace Dep. at 19:2-17).
did not pay any part of Owens's residential expenses or
exercise any control over his home. (Doc. 274-1, Wallace Dep.
at 101:5-21.) No customers ever visited his residence, nor
did Tietex ever hold meetings there. (Id.; Doc.
274-2, Owens Dep. at 122:21-23.) Similarly, Tietex did not
publicly advertise Owens's home as its place of business.
(See Doc. 274 at 14-15; Doc. 274-1, Wallace Dep. at
101:1-4, 101:22-102:10; Doc. 274-2, Owens Dep. at 122:5-7.)
acknowledging the “late state of this case, ”
Tietex argues that its motions are timely in light of
“an emerging trend for courts to recognize that TC
Heartland was a complete change in the venue law”
after 27 years of Federal Circuit precedent to the contrary.
(Doc. 212 at 2-3.) On the merits, Tietex argues that TC
Heartland and applicable precedent make clear that venue
is improper in this district.
argues that Tietex's motion should be denied because
Tietex waived its right to object to venue and TC
Heartland is not an intervening change in law that would
excuse Tietex's failure to timely raise this defense.
(Doc. 260 at 3.) In the alternative, PFG contends that the
intervening law exception should not apply because a transfer
at this late stage of the litigation would unduly prejudice
it. (Doc. 275 at 2-3; Doc. 260 at 4.) PFG asserts that Tietex
waived any right to challenge venue by its continued
participation in the litigation and delay in bringing the
present motions. (Doc. 275 at 11-12.) On the merits, PFG
argues that venue is proper in this district. (Doc. 275 at
14; Doc. 260 at 4.)
Tietex's Motions to Amend Answers
Rule of Civil Procedure 15(a)(2) provides that “a party
may amend its pleading only with the opposing party's
written consent or the court's leave.” Leave to
amend should be freely given “when justice so
requires.” Fed.R.Civ.P. 15(a)(2). It may be denied
where it “would be prejudicial to the opposing party,
there has been bad faith on the part of the moving party, or
the amendment would have been futile.” U.S. ex rel.
Nathan v. Takeda Pharm. N. Am., Inc., 707 F.3d 451, 461
(4th Cir. 2013) (quoting Laber v. Harvey, 438 F.3d
404, 426 (4th Cir. 2006) (en banc)).
alone is an insufficient reason to deny leave to
amend.” Edwards v. City of Goldsboro, 178 F.3d
231, 242 (4th Cir. 1999) (citing Johnson v. Oroweat Foods
Co., 785 F.2d 503, 509 (4th Cir. 1986)). Delay must be
accompanied by undue prejudice, bad faith, or futility.
Id.; Foman v. Davis, 371 U.S. 178, 182
(1962). Prejudice may be undue where the proposed amendment
would “belatedly . . . change the character of the
litigation, ” such as raising an entirely new legal
claim or requiring additional discovery. Equal Rights
Ctr. v. Niles Bolton Assocs., 602 F.3d 597, 604 (4th
Cir. 2010) (citing Deasy v. Hill, 833 F.2d 38, 42
(4th Cir. 1987)); Laber, 438 F.3d at 427.
does not contend Tietex is acting in bad faith. The question
is whether granting Tietex leave to amend its answers would
be futile or unduly prejudicial to PFG. For the reasons
set forth below, the court finds that it would not. Before
reaching the questions of futility and the merits, however,
the court must address the question of waiver.
Venue under § 1400(b)
is a waivable personal privilege of defendants.”
Hand Held Prod., Inc. v. Code Corp., No.
2:17-167-RMG, 2017 WL 3085859, at *1 (D.S.C. July 18, 2017)
(citing Leroy v. Great W. United Corp., 443 U.S.
173, 180 (1979)). “In most instances, the purpose of
statutorily specified venue is to protect the
defendant against the risk that a plaintiff will
select an unfair or inconvenient place of trial.”
Leroy, 443 U.S. at 183-184; Hoover Grp., Inc. v.
Custom Metalcraft, Inc., 84 F.3d 1408, 1410 (Fed. Cir.
1996) (“Venue requirements exist for the benefit of
in patent infringement actions is governed exclusively by 28
U.S.C. § 1400(b). TC Heartland, 137 S.Ct. at
1520. Under § 1400(b), “[a]ny civil action for
patent infringement may be brought in the judicial district
where the defendant resides, or where the defendant has
committed acts of infringement and has a regular and
established place of business.” 28 U.S.C. §
1400(b). While seemingly straightforward, the statute's
application has been the subject of conflicting
1957, the Supreme Court held that § 1400(b) was the
exclusive venue statute for patent cases and that a domestic
corporation could “reside” only in its state of
incorporation. Fourco Glass Co. v. Transmirra Products
Corp., 353 U.S. 222, 228 (1957). In 1990, however, the
Federal Circuit, which exercises appellate jurisdiction over
all patent cases, held that congressional amendment to the
general venue statute, 28 U.S.C. § 1391(c), applied in
patent cases. VE Holding, 917 F.2d at 1584. Under
this more liberal approach, venue in patent cases became
proper in any district where a defendant is subject to
personal jurisdiction. Id. The Federal Circuit's
precedent prevailed, surviving certiorari petitions to the
Supreme Court, until the Supreme Court's May 22, 2017
decision in TC Heartland. See VE Holding Corp.
v. Johnson Gas Appliance Co., 499 U.S. 922 (1991)
(denying certiorari petition); Century Wrecker Corp. v.
Vulcan Equip. Co., 923 F.2d 870 (Fed. Cir. 1990)
(table), cert. denied, 499 U.S. 962
TC Heartland reaffirmed the Supreme Court's
Fourco holding that “‘reside[nce]'
in § 1400(b) . . . refers only to the State of
incorporation, ” it rejected VE Holding's
conclusion that the congressional amendment to § 1391(c)
overrode § 1400(b). TC Heartland, 137 S.Ct. at
1520. In so doing, the Court abrogated the Federal