Dmarcian, Inc. v. DMARC Advisor BV

1:21-cv-00067Ncwd11 de ago. de 2021

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THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
ASHEVILLE DIVISION
CIVIL CASE NO. 1:21-cv-00067-MR
DMARCIAN, INC., )
)
Plaintiff, )
)
vs. ) O R D E R
)
DMARCIAN EUROPE BV, )
)
Defendant. )
________________________________ )
THIS MATTER is before the Court on the Defendant’s Motion to Stay
Pending Appeal or, in the Alternative, to Modify or Clarify [Doc. 59], and the
Plaintiff’s Motion to Strike. [Doc. 71].
I. BACKGROUND
On March 12, 2021, dmarcian, Inc. (the “Plaintiff”) filed this action
against dmarcian Europe BV (the “Defendant”). [Doc. 1]. On March 25,
2021, the Plaintiff filed a Motion for Temporary Restraining Order and
Preliminary Injunction. [Doc. 6]. On March 31, 2021, the Court entered an
Order denying the Plaintiff’s Motion for Temporary Restraining Order and
ordered the parties to appear on April 23, 2021 for a hearing on the Plaintiff’s
Motion for Preliminary Injunction. [Doc. 12].
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On April 19, 2021, the Defendant filed a Motion to Dismiss, arguing
that the Court lacked personal jurisdiction over the Defendant. [Doc. 22].
On April 23, 2021, the Court held a hearing on the Plaintiff’s Motion for
Preliminary Injunction. While the Court heard argument on the Defendant’s
Motion to Dismiss, neither party presented testimony from witnesses.
On May 26, 2021, the Court denied the Defendant’s Motion to Dismiss
and entered a preliminary injunction against it on the Plaintiff’s claims for
copyright infringement under the Copyright Act; trademark infringement
under the Lanham Act; misappropriation of trade secrets under the DTSA;
tortious interference with contract; and tortious interference with prospective
advantage, enjoining the Defendant from:
(1) providing services to any customers located
outside of Europe, Africa, or Russia, except for the
six customers detailed in the Defendant’s Brief on
Proposed Voluntary Commitments [Doc. 32 at 4 n.3];
(2) providing access to any of its websites to IP
addresses from countries outside of Europe, Africa,
or Russia. The Defendant shall inform website
visitors from outside of those areas that it does not
create new accounts in that region and shall direct
those customers to contact dmarcian, Inc. for
services through the Plaintiff’s website
https://dmarcian.com;
(3) making changes to the copyrighted software
except as specifically and expressly allowed or
directed by this Order;
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(4) using the Plaintiff’s trademark in any manner
unless such use is accompanied by a statement
which reads: “This trademark is the trademark of
dmarcian, Inc. This website is produced and
generated and posted by dmarcian Europe BV,
which is a different entity from dmarcian, Inc. This
trademark is being used at this location without the
permission of dmarcian, Inc. and only pursuant to the
terms of a court order allowing its temporary use
during litigation between dmarcian, Inc. and
dmarcian Europe BV.” That statement must be at
least the size of the trademark itself, as presented, or
12-point type when displayed on a 24” computer
screen, whichever is larger. Such statement must
appear immediately adjacent to the location where
the trademark appears, and must be shown at each
location where the trademark appears, whether that
be on the Defendant’s website, in printed material, an
electronic display, or otherwise;
(5) displaying any website with the “dmarcian” name
unless that website includes a statement that “The
dmarcian software was originally developed by
dmarcian, Inc. This is not the website of dmarcian,
Inc. The website of dmarcian, Inc. can be found at
https://dmarcian.com.” That statement must be
displayed as a banner at the top of each page of the
website on which the dmarcian name appears and
must be of a size that is at least 12-point type when
displayed on a 24” computer screen, and the
reference to the website of the Plaintiff must be a link
to that website;
(6) redirecting, encouraging, or allowing any
customer to change its service provider or payment
recipient from dmarcian, Inc. to dmarcian Europe,
BV; or
(7) making any public statement about dmarcian, Inc.
except as expressly allowed or directed herein.
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[Doc. 39 at 75-77].
On June 25, 2021, the Defendant filed a Notice of Appeal to the Fourth
Circuit Court of Appeals. [Doc. 52].
On July 6, 2021, the Defendant filed the present Motion to Stay
Pending Appeal or, in the Alternative, to Modify or Clarify. [Doc. 59]. On
July 20, 2021, the Plaintiff responded. [Doc. 72]. On July 27, 2021, the
Defendant replied. [Doc. 73].
On July 20, 2021, the Plaintiff filed a Motion to Strike the evidence that
the Defendant submitted with its Motion to Stay Pending Appeal or, in the
Alternative, to Modify or Clarify, arguing that such evidence was not before
the Court when it entered the preliminary injunction. [Doc. 70]. On August
3, 2021, the Defendant filed a response. [Doc. 77]. On August 6, 2021, the
Plaintiff replied. [Doc. 79].
II. STANDARD OF REVIEW
The standard for consideration of a motion to stay pending appeal is
substantially similar to the standard governing a request for preliminary
injunction. Nken v. Holder, 556 U.S. 418, 434 (2009). The Court considers
“(1) whether the stay applicant has made a strong showing that he is likely
to succeed on the merits; (2) whether the applicant will be irreparably injured
absent a stay; (3) whether issuance of the stay will substantially injure the
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other parties interested in the proceeding; and (4) where the public interest
lies.” Hilton v. Braunskill, 481 U.S. 770, 776 (1987). The first two factors are
the most critical to the inquiry. Nken, 556 U.S. at 434.
III. DISCUSSION
A. Jurisdiction
The Court begins by addressing the procedural posture of the
Defendant’s Motion seeking to stay the preliminary injunction. Generally,
“the timely filing of a notice of appeal confers jurisdiction in the court of
appeals and divests the district court of its control over those aspects of the
case involved in the appeal.” Dixon v. Edwards, 290 F.3d 699, 709 (4th Cir.
2002) (citing Griggs v. Provident Consumer Disc. Co., 459 U.S. 56, 58
(1982)) (internal quotation marks omitted). “The rule is a judge-made
doctrine designed to avoid the confusion and waste of time that might flow
from putting the same issues before two courts at the same time.” Grand
Jury Proceedings Under Seal v. United States, 947 F.2d 1188, 1190 (4th Cir.
1991) (citing In re Thorp, 655 F.2d 997, 998 (9th Cir. 1981)). One general
exception to this rule is that a district court has the authority to stay or modify
an injunction, even when an appeal is pending. See Fed. R. Civ. P. 62(d);
United States v. Swift & Co., 286 U.S. 106 (1932). Another “exception to the
rule is that a district court does not lose jurisdiction to proceed as to matters
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in aid of the appeal.” Grand Jury Proceedings, 947 F.2d at 1190 (citing
Thorp, 655 F.2d at 998). For example, the Fourth Circuit has held that a
district court properly aided an appeal and avoided the unnecessary
expenditure of appellate resources by modifying a preliminary injunction
during the pendency of appeal. Dixon v. Edwards, 290 F.3d 699, 720 n. 14
(4th Cir. 2002); see also Lytle v. Griffith, 240 F.3d 404, 408 (4th Cir. 2001)
(finding that a district court “aided in [the] appeal by relieving [the Fourth
Circuit] from considering the substance of an issue begotten merely from
imprecise wording in the injunction.”).
Because the Defendant has already filed an appeal, the Court has
jurisdiction only to modify or stay the injunction or to proceed as to “matters
in aid of the appeal.” Grand Jury Proceedings, 947 F.2d at 1190 (citing
Thorp, 655 F.2d at 998). In this case, resolution of the Defendant’s Motion
will aid the appeal and prevent the waste of appellate resources by clarifying
the preliminary injunction.1 Accordingly, the Court will consider the
Defendant’s Motion to Stay Pending Appeal or, in the Alternative, to Modify
or Clarify.
1 Moreover, resolution of the Defendant’s Motion will allow the Defendant to file a motion
for a stay with the Fourth Circuit Court of Appeals under Federal Rule of Appellate
Procedure 8(a)(1), which states that a party must ordinarily request a stay of judgment or
order in the district court before asking an appellate court to entertain a motion for a stay.
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B. Motion to Strike
Before considering the Defendant’s Motion, however, the Court must
address the Plaintiff’s Motion to Strike. [Doc. 71]. The Plaintiff argues that
the Defendant has provided previously available supplemental evidence that
should be stricken as an improper attempt to “backfill” the appellate record.
[Id. at 8].
After an appeal has been filed, a district court reviewing a motion to
stay a preliminary injunction generally is “not permitted to examine new
evidence” that was available to the party at the briefing stage. Graveline v.
Johnson, No. 18-12354, 2018 WL 4184577, at *3 (E.D. Mich. Aug. 30, 2018)
(citation omitted); see also Maxwell Techs., Inc. v. Nesscap, Inc., No. 06-
2311, 2007 WL 9723323, at *3 (S.D. Cal. June 1, 2007) (explaining that
evidence attached to a motion for a stay would not be considered “because
the evidence presented in Defendants’ declarations was available at the time
the preliminary injunction was pending”). This general rule has several
justifications. First, allowing a party to reargue its position by providing
supplemental evidence would allow a party to essentially re-litigate that
which has already been ruled upon and thus would create the prospect of
endless litigation. Bhatnagar v. Surrendra Overseas Ltd., 52 F.3d 1220,
1231 (3d Cir. 1995). Second, jurisdiction generally passes to the appellate
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court after an appeal has been taken, and arguments that were not advanced
or properly preserved in the district court are typically considered to have
been waived on appeal. Rosenzweig v. Azurix Corp., 332 F.3d 854, 863–64
(5th Cir. 2003). Third, requiring parties to present the entire available factual
record when moving for or opposing a preliminary injunction promotes
diligence and preserves judicial resources that would otherwise be expended
combing through multiple rounds of briefing.
For those reasons, the Court will not consider any supplemental
evidence that the Defendant “simply overlooked or forgot the first time
around.” Newspaper, Newsprint, Mag. & Film Delivery Drivers, Helpers, &
Handlers, Int'l Bhd. of Teamsters, Loc. Union No. 211 v. PG Publ'g Co., No.
2:19-CV-1472-NR, 2019 WL 9101872, at *3 (W.D. Pa. Dec. 27, 2019). The
Court will consider the Defendant’s evidence, however, to the extent that it
was not available to the parties for presentation to the Court at the time of
the preliminary injunction hearing. The Court will also consider the
Defendant’s evidence to the extent that it supports its request to modify or
clarify the preliminary injunction. Accordingly, the Plaintiff’s Motion to Strike
[Doc. 71] will be granted in part and denied in part.2
2 Moreover, while the Plaintiff filed its motion under Federal Rule of Civil Procedure 12(f),
“affidavits and exhibits are not pleadings that may be stricken under Rule 12(f).” Browder
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C. Motion for Stay
The Defendant first argues that it has made a strong showing that it is
likely to succeed on the merits because the Court applied the wrong standard
when analyzing personal jurisdiction. [Doc. 60 at 15-17]. The Defendant
specifically contends that the Court erred by viewing the jurisdictional
pleadings and affidavits in the light most favorable to the Plaintiff, despite
having provided the Plaintiff an opportunity to present testimony at the
preliminary injunction hearing. [Id.].
“The plaintiff's burden in establishing jurisdiction varies according to
the posture of a case and the evidence that has been presented to the court.”
Grayson v. Anderson, 816 F.3d 262, 268 (4th Cir. 2016). Where “the court
addresses the personal jurisdiction question by reviewing only the parties’
motion papers, affidavits attached to the motion, supporting legal
memoranda, and the allegations in the complaint, a plaintiff need only make
a prima facie showing of personal jurisdiction to survive the jurisdictional
challenge.” Grayson v. Anderson, 816 F.3d 262, 268 (4th Cir. 2016)
(emphasis omitted). On the other hand, “when the parties develop the record
before trial and the court conducts a hearing at which the parties are afforded
v. State Farm Fire & Cas. Co., No. 1:20-cv-00026-MOC-WCM, 2021 WL 2964253, at * 4
(W.D.N.C. Jul. 14, 2021) (Cogburn, J.).
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a fair opportunity to present both the relevant jurisdictional evidence and their
legal arguments . . . the plaintiff must carry the burden to establish personal
jurisdiction by a preponderance of the evidence[.]” Sneha Media & Ent., LLC
v. Associated Broad. Co. P Ltd., 911 F.3d 192, 197 (4th Cir. 2018) (citing
Grayson, 816 F.3d at 268)). Parties are afforded a “fair opportunity to
develop the record regarding personal jurisdiction” when the district “court
does not preclude the parties from pursuing jurisdictional discovery, and
holds a hearing at which the parties may present relevant evidence and legal
arguments based on a developed record[.]” Id. (internal citation omitted;
emphasis added).
Unlike the parties in Sneha and Grayson, the Plaintiff did not have a
“fair opportunity” to undertake jurisdictional discovery, make a full evidentiary
showing or present its arguments regarding the Defendant’s Motion to
Dismiss at the April 23 hearing. The Defendant filed its Motion to Dismiss
(and 262 pages of attached exhibits) less than four days before the hearing.
[Doc. 22]. There was little opportunity for the Plaintiff to review the extensive
record submitted by the Defendant prior to the hearing. That is particularly
true because the parties had already submitted nearly 600 additional pages
of briefing and evidence in the prior month. [Docs. 1; 6-11; 15-17; 19; 20].
While the Court allowed the parties to present argument on the personal
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jurisdiction issues, the Plaintiff’s response to the Defendant’s Motion to
Dismiss was not due until ten days after the hearing. It would have been
unreasonable to expect the Plaintiff to appear at the hearing with complete
arguments and comprehensive evidence in response to the Defendant’s
Motion to Dismiss.
Moreover, the Plaintiff did not have an opportunity to conduct
jurisdictional discovery. While the Defendant relies on Sneha to claim that
the Plaintiff had a fair opportunity to present its personal jurisdiction
arguments and evidence, the parties in Sneha had two months to engage in
jurisdictional discovery prior to the relevant hearing. 911 F.3d at 197.
Likewise, in Grayson, upon which the Defendant also relies, the parties had
the opportunity to submit deposition transcripts and answers to
interrogatories. 816 F.3d at 269. As the Fourth Circuit has explained, the
parties “must be allowed . . . to employ all forms of discovery” before the
preponderance of evidence standard can be applied. Sec. & Exch. Comm'n
v. Receiver for Rex Ventures Grp., LLC, 730 F. App'x 133, 136 (4th Cir. 2018)
(citation and quotations omitted). In this case, however, the parties never
conducted jurisdictional discovery. [Doc. 58 at 4].
For these reasons, the circumstances present in this case are different
from those in Sneha and Grayson. Unlike the parties in those cases, the
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Plaintiff simply did not have “a fair opportunity to present both the relevant
jurisdictional evidence and [its] legal arguments[.]” Sneha, 911 F.3d at 197.3
It is for this reason that the Court in its preliminary injunction explained that
the Plaintiff would still have to “eventually prove the existence of personal
jurisdiction by a preponderance of the evidence.” [Doc. 39 at 4 (citing Public
Impact, LLC v. Boston Consulting Group, Inc., 117 F.Supp.3d 732, 737
(M.D.N.C. Aug. 3, 2015) (citing New Wellington Fin. Corp. v. Flagship Resort
Dev. Corp., 416 F.3d 290, 294 n. 5 (4th Cir. 2005))]. Accordingly, the Court
did not err by viewing the pleadings and evidence in the light most favorable
to the Plaintiff.
Even if the Court had applied the preponderance of the evidence
standard to the evidence before the Court, the conclusion regarding the
existence of personal jurisdiction over the Defendant would be the same.
Because the parties submitted a voluminous and largely undisputed factual
record on the Defendant’s Motion to Dismiss and the Plaintiff’s Motions for
3 To hold otherwise would force a plaintiff to establish personal jurisdiction by a
preponderance of the evidence whenever there is a token opportunity to present
arguments and evidence at a hearing. If that were the case, shrewd defense attorneys
would be incentivized to file motions to dismiss as close to preliminary injunction hearings
as possible, knowing that the plaintiff would have to hastily prepare arguments and
evidence to meet the preponderance of the evidence standard if given the opportunity to
present testimony and evidence. In addition to being unfair to plaintiffs, such a result
would wreak havoc on district courts. The Court takes a dim view of such gamesmanship.
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Temporary Restraining Order and Preliminary Injunction, [Doc. 6-9; Doc. 11;
Doc. 15-17; Doc. 20; Doc. 22-26; Doc. 29-33; Doc. 35], the Court was able
to evaluate the jurisdictional issues without needing to view the evidence in
the light most favorable to one party or resolve any material factual disputes.4
The Plaintiff submitted sufficient evidence to establish the Court’s personal
jurisdiction over the Defendant by a preponderance of the evidence, and
therefore, the Defendant has failed to make a strong showing that it is likely
to succeed on the merits on that issue. Hilton v. Braunskill, 481 U.S. 770,
776 (1987).
The Defendant further argues that the Court erred by applying U.S. law
to the Plaintiff’s trademark claims. [Doc. 60 at 12]. The Defendant’s
argument was fully addressed in the Court’s order denying the Defendant’s
motion to dismiss and granting the Plaintiff’s motion for preliminary
injunction. The Defendant simply rehashes its arguments presented in
opposition to the motion for preliminary injunction and in support of its motion
to dismiss. As such, repetition and further explication of those arguments
would not aid the appeal.5
4 Notably, the Defendant fails to identify any factual dispute that was resolved against it,
or any fact that was not considered by the Court that would have altered the analysis.
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In short, the Defendant has failed to show a likelihood of success on
the merits. Accordingly, the first factor weighs against staying the preliminary
injunction pending appeal.
The second factor also weighs against staying the preliminary
injunction because the Defendant fails to show that it will be irreparably
injured absent a stay. While the Defendant claims that “it will go out of
business if it is prohibiting from honoring its contractual obligations to its
customers[,]” [Doc. 60 at 25], the preliminary injunction does not bar the
Defendant from serving its customers within its territory of Europe, Africa,
and Russia. [Doc. 39 at 75]. That is exactly what the Defendant offered as
a proposed restraint in response to the Court’s efforts to preserve the status
quo and protect the parties’ businesses. [Doc. 32 at 4]. The Defendant fails
to explain how abiding by its own proposed restraint will cause it to go out of
business. Accordingly, the Defendant fails to show that the preliminary
5 While the Defendant also argues that the preliminary injunction should be stayed as a
matter of international comity, [Doc. 60 at 12], that does not establish that the Defendant
is likely to succeed on the merits. Moreover, the preliminary injunction specifically
considered any potential conflicts with the Dutch courts and preserved the status quo
pending the resolution of the Dutch proceedings. S. All. for Clean Energy v. Duke Energy
Carolinas, LLC, No. 1:08-CV-00318, 2008 WL 5110894, at *8 (W.D.N.C. Dec. 2, 2008).
Because there are no conflicts between the preliminary injunction and any order from the
Dutch courts, the international comity issues are relatively weak here. It is noted that the
Defendant specifically thwarted any effort to put that preliminary injunction order before
the Dutch court.
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injunction’s restraints on its business activities constitute an irreparable
harm.
To the extent that the Defendant argues that it is unfairly restrained by
the prohibition in the preliminary injunction on “redirecting, encouraging, or
allowing any customer to change its service provider or payment recipient[,]”
[Doc. 61 at 17 (quoting Doc. 39 at 77)], because the Defendant is uncertain
as to how to apply that provision of the complex relationship between the
Plaintiff and the Defendant, the Court will modify that portion of the
preliminary injunction to ensure that the parties can delineate their respective
responsibility for each client. The amended preliminary injunction will
prohibit the Defendant from redirecting, encouraging, or allowing any
customer to change its payment recipient from the Plaintiff to the Defendant.
To the extent that the current service provider for any customer is different
from the payment recipient for that customer, the party providing services will
be forbidden from unilaterally terminating or otherwise altering those
services without express permission from the Court. An amended
preliminary injunction to that effect will be filed contemporaneously herewith.
The Defendant also argues that complying with the Plaintiff’s
interpretation of the preliminary injunction would constitute an irreparable
harm on the Defendant’s First Amendment rights by forcing it to post
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statements about the Plaintiff’s intellectual property and prohibiting the
Defendant from making public statements about the Plaintiff. [Doc. 60 at
26].6 Because the Defendant is a foreign corporation whose business
territory calls for it to do business exclusively outside of the United States
and “has never had an office, agent, or property in the United States[,]” [Doc.
60 at 8 (citing Doc. 26-9 at ¶¶ 31-32)], the Defendant has no First
Amendment rights. Agency for Int'l Dev. v. All. for Open Soc'y Int'l, Inc., 140
S. Ct. 2082, 2086 (2020); see also Boumediene v. Bush, 553 U.S. 723, 770–
771 (2008). Accordingly, the speech restrictions in the preliminary injunction
impose no harm on the Defendant. The speech restrictions in the preliminary
injunction also will not cause an irreparable harm in the future because the
preliminary injunction also prohibits the Defendant from acquiring any new
customers in the United States. [Doc. 39 at 75].
While the final two factors are of lesser importance, Nken, 556 U.S. at
434, they also counsel against the imposition of a stay pending the
Defendant’s appeal. A stay would harm the Plaintiff by allowing the
Defendant to continue using the Plaintiff’s intellectual property and interfering
with the Plaintiff’s contractual relationships. Indeed, the Plaintiff claims that
6 It is unclear why the Defendant seems to argue that the Plaintiff’s interpretation of the
preliminary injunction carries any controlling weight.
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the Defendant is continuing to do those things despite the preliminary
injunction. [Doc. 43]. Moreover, as found in the preliminary injunction, the
public interest in preventing consumer confusion and protecting intellectual
property are sufficiently important to weigh against a stay.
For these reasons, the Court concludes that the Defendant has not
shown that it is likely to succeed on the merits; that it will be irreparably
injured absent a stay; that the issuance of the stay will not substantially injure
other interested parties; or that a stay would be in the public interest. Hilton,
481 U.S. at 776. Accordingly, the Defendant’s Motion to Stay Pending
Appeal or, in the Alternative, to Modify or Clarify [Doc. 59] will be denied.
O R D E R
IT IS, THEREFORE, ORDERED that the Plaintiff’s Motion to Strike
[Doc. 70] is GRANTED IN PART and DENIED IN PART. Specifically, the
Motion is DENIED as to evidence of events occurring after April 23, 2021,
but is otherwise GRANTED.
IT IS FURTHER ORDERED that the Defendant’s Motion to Stay
Pending Appeal or, in the Alternative, to Modify or Clarify [Doc. 59] is
GRANTED IN PART and DENIED IN PART. The Motion is GRANTED with
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regard to Paragraph 6 of the decretal section in the preliminary injunction,
which will be amended to read as follows:
(6) redirecting, encouraging, or allowing any
customer to change its payment recipient from the
Plaintiff to the Defendant. To the extent that the
current service provider for any customer is different
from the payment recipient for that customer, the
party providing services to that customer is prohibited
from unilaterally terminating or otherwise altering
those services without the express permission from
the Court.
The Defendant’s Motion to Stay Pending Appeal or, in the Alternative, to
Modify or Clarify is otherwise DENIED.
An Amended Preliminary Injunction will be entered
contemporaneously herewith.
IT IS SO ORDERED.
Signed: August 11, 2021
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