Federal Circuit Vacates Order Transferring Case To District Where Foreign Defendants Had Consented To Personal Jurisdiction
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  • Federal Circuit Vacates Order Transferring Case To District Where Foreign Defendants Had Consented To Personal Jurisdiction

    On January 9, 2023, the United States Court of Appeals for the Federal Circuit (CAFC) granted writs of mandamus to the United States District Court for the Eastern District of Texas in Nos. 2:21-cv-00045-JRG and 2:21-cv-00046-JRG, Chief Judge J. Rodney Gilstrap, vacated district court orders transferring two patent cases to the United States District Court for the Central District of California and instructing the court to recall the cases.  In re Stingray IP Solutions, LLC, __F.3d _(Fed. Cir. January 9, 2023).  In its order, the CAFC held that defendants could not avoid application of Federal Rule of Civil Procedure 4(k)(2) by merely consenting to jurisdiction in a district other than the one chosen by plaintiff.

    In 2017, patent-owner petitioner filed complaints in the Eastern District of Texas against related defendants, organized and headquartered in China and Hong Kong, respectively (collectively, “defendants”).  Defendants moved to dismiss for lack of personal jurisdiction, or, in the alternative, to transfer to the Central District of California under 28 U.S.C. § 1406, a district they represented as having both proper jurisdiction and venue.

    The district court determined that the exercise of personal jurisdiction over defendants would be unreasonable and, under Federal Rule of Civil Procedure 4(k)(2), personal jurisdiction over defendants would not be proper in the Eastern District of Texas because defendants are “amenable to suit” in the Central District of California.  On this basis, the district court transferred the case and denied defendants’ alternative § 1404(a) transfer motion as moot.  Patent owner appealed on the narrow issue of whether defendants’ unilateral, post-suit consent to personal jurisdiction in another state (California) defeated the application of Rule 4(k)(2).

    While acknowledging that mandamus relief is not ordinarily available for rulings on § 1406 motions, the CAFC noted that district courts have been deeply split over whether a defendant can defeat personal jurisdiction under Rule 4(k)(2) by unilaterally consenting to suit in a different district.  Accordingly, the CAFC concluded that mandamus review was appropriate.

    The CAFC’s opinion begins by noting that Rule 4(k)(2) was introduced to close a loophole, by which a nonresident defendant who did not have “minimum contacts” with any individual state sufficient to support an exercise of jurisdiction but did have sufficient contacts with the United States as a whole, could escape jurisdiction in all fifty states.  The rule essentially provides that, in such instances, personal jurisdiction is proper in any district.

    The CAFC then recounted two of its former decisions establishing that (1) it is defendant’s burden to designate a suitable forum in which plaintiff could have brought suit to avoid application of Rule 4(k)(2), and (2) at least in the context of default judgments, defendant’s burden “entails identifying a forum where plaintiff could have brought suit—a forum where jurisdiction would have been proper at the time of filing, regardless of consent.”

    The CAFC then expressly extended its decision governing default judgment cases to non-default judgment cases and held a “unilateral statement of consent” insufficient to preclude application of Rule 4(k)(2) in such cases.

    In reaching its decision, the CAFC noted that the Supreme Court adopted a similar approach in Hoffman v. Blaski, 363 U.S. 335 (1960).  There, the Court interpreted 28 U.S.C. § 1404(a) (permitting transfer of a case to a forum “where it might have been brought”) as only allowing transfer to federal forums where the plaintiff “had a right to sue” when “the suit commenced,” regardless of the later “wish or waiver of the defendant.”  The CAFC further noted that the Court declined to adopt a contrary rule in Hoffman because it would lead to “gross discrimination”—permitting transfer “to any district desired by the defendants and in which they were willing to waive their statutory defenses as to venue and jurisdiction,” while prohibiting plaintiff from originally bringing or later “transferring the action to the same district, without the consent and waiver of venue and personal jurisdiction defenses by the defendants.”

    The CAFC concluded that the Court’s reasoning in Hoffman was also applicable to Rule 4(k)(2), and that nothing in the plain language of Rule 4(k)(2) or its legislative history could be interpreted as permitting a defendant to achieve transfer to a preferred district simply by unilateral, post-suit consent.

    The CAFC proceeded to vacate the district court’s transfer order and instructed the district court to determine whether defendants could show that the patent owner could have brought suit in the Central District of California, independent of defendants’ post-suit consent.