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ARP Wave, LLC v. Salpeter

United States District Court, D. Minnesota

January 31, 2019

ARP WAVE, LLC, a Minnesota Limited Liability Company; and ARP MANUFACTURING, LLC, a Minnesota Limited Liability Company, Plaintiffs,
v.
GARRETT M. SALPETER; NEUROLOGICAL FITNESS AND RECOVERY FACILITIES, LLC, a Texas Limited Liability Company; ARPWAVE AUSTIN, LLC, a Texas Limited Liability Company; NEUROLOGICAL FITNESS EQUIPMENT AND EDUCATION, LLC, a Texas Limited Liability Company; and JOHN DOES I-X, Defendants.

          JEFFREY D. SHEWCHUK, SHEWCHUK IP SERVICES, LLC; BORIS PARKER AND NICHOLAS M. WENNER, PARKER & WENNER, P.A., FOR PLAINTIFFS.

          KEVIN TERRAZAS AND JOHN MATTHEW MURRELL, CLEVELAND TERRAZAS PLLC; JOHN M. WEYRAUCH AND PETER R. FORREST, DICKE, BILLIG & CZAJA, PLLC, FOR DEFENDANTS.

          ORDER

          Patrick J. Schiltz United States District Judge

         Plaintiffs ARP Wave, LLC and ARP Manufacturing, LLC (collectively “ARPwave”)[1] bring this patent-infringement action against defendants Garrett Salpeter; ARPwave Austin, LLC; Neurological Fitness and Recovery Facilities, LLC; and Neurological Fitness Equipment and Education, LLC. In addition to their claims for patent infringement, plaintiffs bring claims for misappropriation of trade secrets and confidential information, breach of contract, conversion, interference with contractual and business relationships, and unjust enrichment.

         All defendants have moved to dismiss the patent-infringement claims-and all defendants save Salpeter have moved to dismiss other claims-for lack of proper venue. For the reasons that follow, the Court grants defendants' motion in part and dismisses the patent-infringement claims without prejudice.

         I. BACKGROUND

         ARPwave manufactures and distributes devices that electronically stimulate muscles. ECF No. 1 at ¶¶ 1-2. ARPwave's devices-and its treatment system-are designed to help athletes and others to relax and strengthen muscles, recover from injury, and better absorb force. See Id. at ¶¶ 22, 26.

         Salpeter first started using ARPwave's devices in 2006, while playing college hockey. See Id. at ¶¶ 34-35. Salpeter “had a life-changing experience using the ARPwave system” and “was amazed at the ability of the ARPwave System to bring people back faster from all kinds of injuries and to reverse chronic pain.” Id. at ¶ 36.

         In December 2008, ARPwave and Salpeter entered into a “clinic master lease and license agreement” (“the 2008 agreement”). ECF No. 1 at ¶ 38; ECF No. 1-1. Under the agreement, Salpeter leased various devices from ARPwave and received a license to provide ARPwave's treatment system to the public. ECF No. 1 at ¶¶ 37-38, 42; ECF No. 1-1. Salpeter received training regarding ARPwave's proprietary devices and treatment system in Minneapolis. ECF No. 1 at ¶¶ 43-44. In January 2009, Salpeter registered ARPwave Austin in Texas and marketed the licensed treatment system to the public through ARPwave Austin. Id. at ¶¶ 39, 45-46. ARPwave alleges that “Salpeter exercises full dominion, ownership and operational control over [ARPwave Austin].” Id. at ¶ 7.

         In May 2010, ARPwave Austin and Salpeter executed a new agreement with ARPwave (“the 2010 agreement”). ECF No. 1 at ¶ 50; ECF No. 1-2. This agreement granted Salpeter and ARPwave Austin a five-year lease on a newly developed ARPwave device called the “RX 100, ” as well as a license to use the associated protocols. See id.

         Both the 2008 and 2010 agreements contained identical forum-selection clauses, providing (in relevant part) as follows: “Venue for the enforcement of this Agreement shall be limited to the Hennepin County, Minnesota, Federal or State District Court to the exclusion of all other courts . . . . ” ECF No. 1-1 at p. 5, ¶ 21 and at p. 9, § 7, ¶ 2 (2008 agreement) (emphasis added); ECF No. 1-2 at p. 5, ¶ 21 and at p. 8, § 6, ¶ 2 (2010 agreement) (emphasis added).

         In March 2012, Salpeter entered yet another agreement with ARPwave (“the 2012 agreement”). ECF No. 1 at ¶ 55; ECF No. 1-3. This agreement granted Salpeter a five-year lease on a new ARPwave device called the “POV Sport, ” as well as a license to use the associated protocols. ECF No. 1 at ¶¶ 55-56; ECF No. 1-3. The 2012 agreement also contained a forum-selection clause that was worded somewhat differently from the forum-selection clauses in the 2008 and 2010 agreements. The forum-selection clause in the 2012 agreement provided (in relevant part) as follows:

EACH PARTY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF HENNEPIN, STATE OF MINNESOTA AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS RELATING TO THIS AGREEMENT OR ANY RELATED AGREEMENTS MUST BE LITIGATED IN SUCH COURTS. EACH PARTY ACCEPTS FOR ITSELF, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS.

ECF No. 1-3 at p. 5, ¶ 7.9 (emphasis added).

         In this action, ARPwave alleges that Salpeter failed to make the payments required by the agreements and, following expiration of the agreements, refused to return the devices leased to him under the agreements. ECF No. 1 at ¶¶ 49, 54, 58. ARPwave also alleges that Salpeter and the other defendants are still using ARPwave's proprietary devices and treatment system to provide services to members of the public, albeit under another brand name. See ECF No. 1 at ¶¶ 61-63. Specifically, ARPwave alleges that Salpeter registered a new LLC in Texas in April 2016 (Neurological Fitness and Recovery Facilities) and that this company is being used to promote the “Neufit” treatment system. Id. at ¶ 61. According to ARPwave, the Neufit treatment system “is a converted copy of ARPwave proprietary and patented Systems and technology previously leased and licensed to [Salpeter].” Id.

         In May 2017, Salpeter registered another new LLC in Texas (Neurological Fitness Equipment and Education). Id. at ¶ 62. Both of these new companies (collectively “the Neurological Fitness LLCs”) have the same address. Id. at ¶¶ 4-5, 61-62. ARPwave alleges that Salpeter “is the current Chief Operating Officer” (as well as a “director and member”) of both of the Neurological Fitness LLCs, and that he “exercises full dominion, ownership and operational control over [them].” Id. at ¶¶ 4-5, 7.

         ARPwave also alleges that defendants are using a device that they refer to as the “Neubie” “to perform . . . methods of electrotherapeutic stimulation, diagnosis, treatment and adjustment” that are “virtually identical” to the treatment system licensed from ARPwave. ECF No. 1 at ¶ 63. ARPwave also alleges that the “Neubie” infringes on three ARPwave utility patents, specifically U.S. Patent No. 8, 768, 474 (issued in 2014) (see ECF No. 1 at ¶¶ 31, 80; ECF No. 1-7), U.S. Patent No. 9, 302, 102 (issued in 2016) (see ECF No. 1 at ¶¶ 32, 81; ECF No. 1-8), and U.S. Patent No. 9, 526, 892 (also issued in 2016) (see ECF No. 1 at ¶¶ 33, 82; ECF No. 1-9).

         All of the defendants now move to dismiss ARPwave's patent-infringement claims for lack of venue. See ECF No. 9; ECF No. 11. All of the defendants (with the exception of Salpeter) also move to dismiss ARPwave's other claims for lack of proper venue. ECF No. 11 at 9-10; ECF No. 19 at 5.

         II. ANALYSIS

         ARPwave does not seem to dispute that, in the absence of the forum-selection clauses, venue over this case would not lie in this District. ARPwave contends, however, that because of the forum-selection clauses, ARPwave may sue defendants in this District. Defendants disagree. Defendants argue that an entity cannot be bound by a forum-selection clause in an agreement to which the entity is not a party, and point out that ARPwave Austin signed only one of the agreements and that neither of the Neurological Fitness LLCs signed any of the agreements. Defendants also argue that, even if all of them are bound by all of the forum-selection clauses, venue over some of the claims would still not lie in this District, as those claims are not within the scope of the clauses.

         The Court will first address the question of which defendants are bound by the forum-selection clauses, and then the question of which claims fall within the scope of those clauses.

         A. Which Defendants Are Bound By the Forum-Selection Clauses?

         Defendants contend that an entity cannot be bound by a forum-selection clause unless the entity is a party to the agreement containing the clause. Because only Salpeter signed all three of the agreements, defendants argue, only Salpeter is bound by all three forum-selection clauses. ECF No. 11 at 9-10; ECF No. 19 at 5. ARPwave Austin signed only the 2010 agreement and thus contends that it is bound only by the forum- selection clause contained in that agreement. Id. And the Neurological Fitness LLCs did not sign any of agreements-indeed, ...


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