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Puravai, LLC v. Blue Can

United States District Court, D. Utah, Central Division

October 17, 2018

PURAVAI, LLC, a Utah limited liability company; SAGAN LIFE LLC dba SAGAN INDUSTRIES, a Utah limited liability company; COLDSTREAM OUTDOOR L.P., a California limited partnership; RBM TAHOE LLC, a California limited liability company; and BE READY, INC., a California corporation, Plaintiffs,
v.
BLUE CAN dba BLUE CAN WATER, a Nevada corporation, Defendant.

          MEMORANDUM DECISION AND ORDER

          Dee Benson, United States District Judge

         This matter is before the Court on Defendant's Motion to Dismiss for Lack of Personal Jurisdiction, filed on July 23, 2018. (Dkt. No. 26.) On August 20, 2018, Plaintiffs filed a timely memorandum in opposition to Defendant's motion. (Dkt. No. 29.) On September 18, 2018, Defendant submitted a reply to Plaintiffs' opposition. (Dkt. No. 34.) Pursuant to civil rule 7-1(f) of the United States District Court for the District of Utah Rules of Practice, the Court elects to determine the motion on the basis of the written memoranda and finds that oral argument would not be helpful or necessary. DUCivR 7-1(f).

         BACKGROUND

         In reviewing a case's factual background, the Court is mindful that “the allegations in the [plaintiff's] complaint must be taken as true to the extent they are uncontroverted by the defendants' affidavits.” Behagen v. Amateur Basketball Ass'n, 744 F.2d 731, 733 (10th Cir. 1984). If there is conflicting evidence, the Court is to “resolve all factual disputes in favor of the plaintiff in determining whether plaintiff has made a prima facie showing that establishes jurisdiction.” Far West Capital v. Towne, 46 F.3d 1071, 1075 (10th Cir. 1995). With these standards in mind, the Court considers the facts and allegations of this case.

         Defendant Blue Can Water (“Blue Can”) is a Nevada corporation with its principal place of business in Los Angeles County, California. (Dkt. No. 26 at 3.) It conducts business primarily in California, is not registered to conduct business in Utah, and has no corporate operations in Utah. It has no offices, property, employees, or records in Utah, and has no Utah agent for service of process. (Id. at 14.) Plaintiffs Puravai, LLC (“Puravai”) and Sagan Life LLC dba Sagan Industries (“Sagan”) are based in Utah, while Plaintiffs Be Ready, Inc. (“Be Ready”), Coldstream Outdoor L.P. (“Coldstream”), and RBM Tahoe LLC (“RBM”) are based in California. (Id. at 4-5). Puravai manufactures and sells prepackaged storage water designed for use in emergency and disaster relief circumstances. (Dkt. No. 9, FAC ¶11.) Blue Can also manufactures and sells prepackaged emergency storage water, and maintains that its high-tech filtration process allows the water to be safely consumed for up to 50 years. (Id. ¶19.)

         In May 2015, Plaintiff Be Ready entered into an agreement with Blue Can to be the master distributor of Blue Can's products. (Id. ¶20.) In or around August 2016, Dennis Clements, a principal of Plaintiff Sagan, noticed that several cans of Blue Can that had been purchased from Be Ready in April 2016 appeared defective. (Dkt. No. 29 at 5.) Plaintiffs allege that Sagan's CEO Rick Muir then sent a case of those cans to BCS Labs in Florida to be tested for bacteria content, and that on August 22, 2016 BCS determined that each of the samples had a significant quantity of heterotrophic bacteria (the “8-2016 Test Results”). (FAC ¶26.)

         In October 2016, Blue Can terminated its distributor agreement with Be Ready after learning from another distributor that Be Ready was working with another party to develop a competing emergency water company. (Id. ¶21; Dkt. No. 26 at 6.) In January 2017, Plaintiffs then formed a competing emergency water company, Puravai, LLC. (FAC ¶27).

         In mid-2017, Puravai initiated a marketing campaign emphasizing the bacteria-free nature of its water product and, according to Defendant, specifically disparaged Blue Can on social media pages and sent misleading emails to Blue Can's customers in California in an effort to draw business away from Blue Can. (Id. ¶28; Dkt. No. 26 at 7.) As part of Puravai's campaign, an informational video (the “Informational Video”) was placed on its website that included a picture that Mr. Muir received from BCS of a petri dish labeled “Blue Can B” with bacteria on it. (FAC ¶29.) Puravai also posted this same video on YouTube and embedded the video as a link on a reseller's website. (Dkt. No. 26 at 7.) Blue Can alleges that this is misleading to consumers because “only certain types of bacteria are the least bit harmful to consumers” and because the BCS test did not meet scientific protocol such as a chain of custody. (Id. at 7.)

         On or around May 18, 2017, Blue Can sent a cease and desist letter to Puravai accusing Puravai of defamation and demanding that Puravai remove the video from its website and all other online locations where it was embedded. (FAC ¶30.) Puravai agreed to edit and remove the “Blue Can B” label from the video from Puravai's website (Id. ¶31), but denied publishing false or disparaging statements. (Dkt. No. 29 at 8.) Defendant alleges that the original video with Blue Can's name depicted on the petri dish is still viewable on YouTube and many other websites, including Plaintiff Coldstream's website. (Dkt. No. 26 at 8.) In June 2017, Puravai through its manager Marcello Surjopolos sent emails to several of Plaintiff's potential and current customers and resellers to persuade them to stop carrying Blue Can. (Id. at 9.)

         Two of Puravai's potential customers (one from Utah and one from California) sent their own samples of Blue Can water to BCS for bacteria testing. (FAC ¶33.) The results for both tests allegedly showed varying levels of heterotrophic bacteria in the samples. (Id. ¶33.) Soon thereafter, Puravai entered into an agreement with J.J. Johnson dba Reality Survival in Wyoming to produce another video (the “Johnson Video”) comparing Blue Can Water to Puravai Water, and referencing the 8-2016 Test Results. (Id. ¶37.) This video still appears on Puravai's website. (Id.)

         On February 10, 2018, Blue Can sent a second cease and desist letter to Plaintiffs, and accused Plaintiffs of defamation by continuing to reference the August 2016 test results in the Informational Video and by posting the Johnson Video. (Dkt. No. 29 at 9.) Blue Can also accused Plaintiffs of conspiring together to defame Blue Can in an effort to unfairly compete, as well as of interference with contractual relations and prospective economic advantage. (Id. at 10.) As with the May 2017 Letter, Blue Can specifically noted in the February 2018 Letter that it would be filing its claims against Plaintiffs in California. (Dkt. No. 26 at 3.) After receiving this letter, Sagan purchased one case of Blue Can on Amazon.com and shipped it to Ultimate Labs in California for testing. (Dkt. No. 29 at 10-11.) This report also showed high levels of heterotrophic bacteria. (Id.) Puravai asserts that evidence pertaining to each of these test results are stored at its Utah headquarters. (Id. at 11.)

         On March 22, 2018, Plaintiffs filed this suit for a declaratory judgment that Plaintiffs have not engaged in unfair competition, and affirmatively claiming that Blue Can falsely advertised its products in violation of the Lanham Act and the Utah Truth in Advertising Act. (Id.) In the motion now before the Court, Defendant moves for dismissal for lack of personal jurisdiction, arguing that Blue Can is not at home in Utah, and that there is no meaningful connection between Blue Can's alleged Utah-related activities and the purported false advertising claim.

         Plaintiffs' opposition to the motion alleges that Blue Can's contacts and activities in Utah collectively make the Court's exercise of personal jurisdiction over Defendant proper. (Id. at 2.) In particular, Plaintiffs allege that Blue Can both maintains and holds itself out to the public on its website as maintaining three authorized dealers located in Utah through which Blue Can sells its products in Utah. (Id. at 2, 15.) They also assert that Blue Can holds contracts with both the Utah-based Intermountain Healthcare (IHC) and the University of Utah, has advertised its products and solicited sales at emergency preparedness fairs in Utah (id.), and that Blue Can water has been advertised at least once in the Deseret News, a Utah publication. (Id. at 4.) Plaintiffs argue that Blue Can's misleading claims and false advertising cause Puravai to lose sales and customers, thus harming it as a competitor. (Id. at 17.)

         In its reply to Plaintiffs' opposition, Defendant provides evidence that two of the Utah locations (Honeywell #1 and #2) that resell Blue Can water 1) obtained their products directly from its prior distributor, Be Ready, 2) had no contact with Blue Can, and 3) were only put on Blue Can's website per Be Ready's request. (Dkt. No. 34 at 1-2; Suppl. Skylar Decl., ¶2.) Blue Can's third Utah reseller (Kimball Ready) has an online presence only, with no brick and mortar store in Utah, and has not purchased any Blue Can product in over 18 months. (Dkt. No. 34 at 2; Suppl. Skylar Decl., ¶3.) Blue Can also asserts that it never instructed or directed Plaintiff Be Ready to go to or perform any specific act in Utah. (Dkt. No. 34 at 7.) It also never attended an emergency preparedness fair in Utah; rather, it was Be Ready, by and through its principal Alden Cabacungan, who attended these fairs at his own behest to showcase numerous other products in addition to Blue Can products. (Id. at 1, 7.) Further, it was Be Ready that placed an advertisement for Blue Can products in the Deseret News, without instruction or direction from Blue Can. (Id. at 7.) While Blue Can does not dispute that it held contracts with ...


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