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Inc. v. Metropolitan Transportation Authority

United States District Court, D. Maryland

November 7, 2016



          J. Frederick Motz United States District Judge.

         Plaintiff Mike's Train House ("Train House") brings this lawsuit against defendant Metropolitan Transportation Authority ("MTA") seeking (1) a declaratory judgment that it did not infringe or violate MTA'$ alleged trademarks or trade dress, and (2) trademark cancellation under the Lanham Act. (ECF No. 13). Now pending is MTA's motion to dismiss the amended complaint for lack of personal jurisdiction.[1] (ECF No. 16). The motion is fully briefed, and no oral argument is necessary. See Local Rule 105.6. For the reasons stated below, this court cannot exercise personal jurisdiction over MTA.


         Plaintiff Train House is a corporation located in Columbia, Maryland, that sells model trains. (ECF No. 13, ¶ 2). Train House has sold subway cars replicating "real life subway cars found in New York" for over a decade. Id. at ¶ 12. Defendant MTA is a "New York public benefit corporation" whose "statutory purpose is to maintain the New York public transportation system." Id. at ¶¶ 2, 6. The parties' dispute arises out of MTA's decision to send cease-and-desist letters to Train House regarding Train House's alleged infringement of certain trademarks and copyrighted materials owned by MTA.

         In 2006, MTA sent Train House a cease-and-desist letter alleging trademark and trade dress violations, but MTA never pursued any claims in 2006 after Train House denied infringement. Id. at ¶ 17. In May 2016, however, MTA once again sent cease-and-desist letters to Train House. Instead of acquiescing with MTA's cease-and-desist request, Train House brought this action in the U.S. District Court for the District of Maryland seeking: (1) a declaratory judgment that its "model subway products" did not infringe MTA's alleged trademarks and trade dress; (2) a declaratory judgment that its "model signs for use on model subway sets" did not infringe MTA's alleged copyrights; and (3) trademark cancellation of MTA's federal trademark registration of "NEW YORK CITY TRANSIT for model trains" under the Lanham Act. (ECF No. 13, ¶¶ 20-34). In response, MTA filed a motion to dismiss for lack of personal jurisdiction. (ECF No. 16). The relevant facts for the pending motion to dismiss are as follows.


         MTA is a "New York public benefit corporation with its principal place of business at 2 Broadway, New York, New York 10004." (ECF No. 13, 12). MTA does not have any operations or real estate interests in Maryland; it has no, employees who work in Maryland and no bank accounts in Maryland. (ECF No. 16, p. 3-4). MTA operates a website at where it solicits consumers, including those in Maryland, to purchase model trains, (ECF No. 13, ¶ 2), but the amount of sales stemming from Maryland totals only $4, 016 (1.31% of total sales). (ECF No. 16, p. 12). And of these sales, only $192 is from sales of the licensed products at issue here (less than 0.01% of total sales). Id. MTA also obtains royalty payments from its licensees, including Lionel, LLC ("Lionel") and Daron Worldwide Trading LLC ("DWT").

         Lionel and DWT (licensees)

         MTA exclusively licenses the trademarks, trade dresses, copyrights and designs it contends Train House is infringing to Lionel for use on model train equipment. (ECF No. 13, ¶ 8). Additionally, MTA non-exclusively licenses the trademarks, trade dresses, copyrights and designs that it contends Train House is infringing to DWT. Id., Neither Lionel nor DWT are headquartered in Maryland, nor do they have their principal place of business in Maryland. (ECF No. 16, p. 8). Lionel and DWT maintain a network of dealers who promote, advertise, distribute and sell model subway and toy subway products on a regular basis to customers nationwide, including in Maryland. Lionel and DWT distribute catalogues to customers and retailers in Maryland. Lionel advertises it is a licensee of MTA on its website, catalogues, and in materials accompanying products it sells. Id.

         Licensing Agreements with Lionel and DWT

         MTA's license agreements with Lionel and DWT contain various terms and provisions including, inter alia: (1) a term specifying the royalty amount to be paid to MTA; (2) clauses requiring licensees to obtain MTA's approval prior to manufacture of a licensed product; (3) a requirement that licensees submit annual reports; and (4) indemnification and insurance clauses requiring the licensee to defend and indemnify MTA from claims arising out of the licensing agreement. (ECF 16, Ex. 2). The agreements do not, however, require either MTA or its licensees to litigate in the event of infringement. Id. at 120(A-B). Rather, in the event of infringement, the licensee is required to merely notify MTA, and then MTA and the licensee will "cooperate with each other and discuss and implement such strategy as they may agree upon[.]" Id. And in the event of legal action, MTA will "do so at its own expense." Id. MTA also exerts a "quality control" function over its licensees, but this function does not extend to controlling its licensees' marketing or sales decisions. Id.

         Other Enforcement Activities

         There is no evidence of MTA engaging in any other enforcement-related activities in Maryland. For example, there are no allegations of MTA filing any infringement suits or engaging in any extra-judicial actions in Maryland regarding the copyrights, trademarks, and trade dress at issue here.


         When a defendant files a motion to dismiss under Fed.R.Civ.P. 12(b)(2) for lack of personal jurisdiction, "the jurisdictional question is to be resolved by the judge, with the burden on the plaintiff ultimately to prove grounds for jurisdiction by a preponderance of the evidence." Carefirst of Md., Inc. v. Carefirst Pregnancy Ctrs., Inc., 334 F.3d 390, 396 (4th Cir. 2003) (citation omitted). "[A] court has broad discretion to determine the procedure that it will follow in resolving a Rule 12(b)(2) motion." Grayson v. Anderson, 816 F.3d 262, 268 (4th Cir. 2016). For example, "[i]f the existence of jurisdiction turns on disputed factual questions the court may resolve the challenge on the basis of a separate evidentiary hearing, or may defer ruling pending receipt at trial of evidence relevant to the jurisdictional question." Combs v. Bakker, 886 F.2d 673, 676 (4th Cir. 1989). Alternatively, the court can decide the issue without a hearing because "[discovery and an evidentiary hearing are not required to resolve a motion under Rule 12(b)(2)." Sigala v. ABR of VA, Inc., 145 F.Supp.3d 486, 489 (D. Md. 2015) (citing 5B Wright & Miller, Federal Practice & Procedure § 1351, at 274-313 (3d ed. 2004, 2012 Supp.)). In considering a personal jurisdiction challenge in the absence of an evidentiary hearing, the court "must construe all relevant pleading allegations in the light most favorable to the plaintiff, assume credibility, and draw the most favorable inferences for the existence of jurisdiction." Mylan Labs,, Inc. v. Akzo, N.V., 2 F.3d 56, 62 (4th Cir. 1993) (internal quotation marks, citation, and emphasis omitted).


         I. Personal Jurisdiction

         For a district court to exercise personal jurisdiction over a nonresident defendant like MTA, two conditions must be satisfied: (1) the state's applicable long-arm statute must confer jurisdiction, and (2) the assertion of jurisdiction must comport with constitutional due process under the Fourteenth Amendment. Christian Sci. Bd. of Dirs. of the First Church of Christ v. Nolan, 259 F.3d 209, 215 (4th Cir. 2001). Maryland courts have consistently held that Maryland's long-arm statute "is coextensive with the limits of personal jurisdiction set by the due process clause of the Federal Constitution, " and so the statutory inquiry necessarily "merges with [the] constitutional examination." Perdue Foods LLC v. BRFS.A., 814 F.3d 185, 188 (4th Cir. 2016) (quoting Beyond Sys., Inc. v. Realtime Gaming Holding Co., LLC, 878 A.2d 567 (Md. 2005)). This does not, however, suggest analysis under the long-arm statute is irrelevant. See Mackey v. Compass Mktg., Inc., 391 Md. 117, 141 n.6 (2006) (noting that although the "long-arm statute is coextensive with the limits of personal jurisdiction set by the due process clause, " it is not "permissible to dispense with analysis under the long-arm statute"). "Indeed, there may be cases where personal jurisdiction is proper under constitutional due process but not under Maryland's long-arm statute." Sigala, 145 F.Supp.3d at 490. As this court has stated previously regarding the intersection between the long-arm statue and the constitutional inquiry:

[I]t does not follow from the principle that the General Assembly intended to "expand the exercise of personal jurisdiction to the limits of the due process clause" that the language of the long arm statute should be ignored; rather, a more correct understanding of the first principle is that to the extent that a defendant's activities are covered by the statutory language, the reach of the statute extends to the outermost boundaries of the due process clause.

Joseph M. Coleman & Associates, Ltd. v. Colonial Metals, 887 F.Supp. 116, 118 (D. Md. 1995). Accordingly, I will examine these two requirements in turn.

         A. Maryland's Long-Arm Statute

         "A plaintiff must specifically identify the Maryland statutory provision that authorizes jurisdiction, either in the complaint or in opposition to a Rule 12(b)(2) motion." Sigala, 145 F.Supp.3d at 490. Train House asserts this court "has personal jurisdiction over MTA under . .. Md. Code. Ann. Cts. & Jud. Proc. Sections 6-103(b)(1) and 6-103(b)(2)." (ECF No. 13, t 8). Maryland's long-arm statute provides, in relevant part:

(a) If jurisdiction over a person is based solely upon this section, he may be sued only on a cause of action arising from any act enumerated in this section.
(b) A court may exercise personal jurisdiction over a person, who directly or by an agent:
(1) Transacts any business or performs any character of work or service in the State;
(2) Contracts to supply goods, food, services, or manufactured ...

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