United States District Court, M.D. Florida, Jacksonville Division
MORALES HOWARD UNITED SLATES DISTRICT JUDGE
CAUSE is before the Court on several motions.
Plaintiff Advantus, Corp. initiated this action on November
16, 2018, by filing a five count Complaint and Demand for
Jury Trial (Doc. 1) against Defendants Sandpiper of
California, Inc. n/k/a DBJ Enterprises, Inc. (Sandpiper),
PiperGear USA, Inc. (PiperGear), and Innovapro Corporation
(Innovapro). On January 28, 2019, each Defendant filed a
motion seeking dismissal or transfer of this action.
See Innovapro Corporation's Motion to Dismiss
(Doc. 20; Innovapro Motion); Defendant PiperGear USA,
Inc.'s Motion to Dismiss, or in the Alternative, Motion
to Transfer Pursuant to 28 U.S.C. § 1404(a) (Doc. 22;
PiperGear Motion); Defendant Sandpiper of California,
Inc.'s Motion to Dismiss, or in the Alternative, Motion
to Transfer Pursuant to 28 U.S.C. § 1404(a) (Doc. 23;
Sandpiper Motion). Defendants argue that dismissal is
warranted because this Court lacks personal jurisdiction over
them. Alternatively, Defendants request the transfer of this
action to the Southern District of California as a more
convenient forum pursuant to 28 U.S.C. § 1404(a).
Innovapro also moves to dismiss the Complaint for improper
venue and pursuant to Rule 12(b)(6), Federal Rules of Civil
Procedure (Rule(s)), for failure to state a claim. On June
28, 2019, following limited-purpose discovery on the issue of
personal jurisdiction, Advantus filed Plaintiff's Amended
Consolidated Response to Defendants' Motions to Dismiss
(Doc. 87; Response). Thereafter, with leave of Court, each
Defendant filed a reply. See Defendant Sandpiper of
California, Inc.'s Reply to Plaintiff's Opposition to
its Motion to Dismiss, or in the Alternative, Motion to
Transfer Pursuant to 28 U.S.C. § 1404(a) (Doc. 88;
Sandpiper Reply); Innovapro Corporation's Reply in
Support of Motion to Dismiss (Doc. 89; Innovapro Reply);
Defendant PiperGear USA, Inc.'s Reply to Plaintiff's
Opposition to its Motion to Dismiss, or in the Alternative,
Motion to Transfer Pursuant to 28 U.S.C. § 1404(a) (Doc.
91; PiperGear Reply), all filed on July 10, 2019. In
accordance with the Court's instructions, Advantus filed
a consolidated sur-reply on August 23, 2019. See
Plaintiff, Advantus, Corp.'s Sur-Reply (Doc. 101;
Sur-Reply). Accordingly, this matter is now ripe for review.
Standard of Review
ruling on a motion to dismiss pursuant to Rule 12(b)(6), the
Court must accept the factual allegations set forth in the
complaint as true. See Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009); Swierkiewicz v. Sorema N.A., 534
U.S. 506, 508, n 1 (2002); see also Lotierzo v.
Woman's World Med. Ctr., Inc., 278 F.3d 1180, 1182
(11th Cir. 2002). In addition, all reasonable inferences
should be drawn in favor of the plaintiff. See Omar ex.
rel. Cannon v. Lindsey, 334 F.3d 1246, 1247 (11th Cir.
2003) (per curiam). Nonetheless, the plaintiff must still
meet some minimal pleading requirements. Jackson v.
BellSouth Telecomm., 372 F.3d 1250, 1262-63 (11th Cir.
2004) (citations omitted). Indeed, while “[s]pecific
facts are not necessary, ” the complaint should
“‘give the defendant fair notice of what the . .
. claim is and the grounds upon which it rests.'”
Erickson v. Pardus, 551 U.S. 89, 93 (2007) (per
curiam) (quoting Bell Atl. Corp. v. Twombly, 550
U.S. 544, 555 (2007)). Further, the plaintiff must allege
“enough facts to state a claim to relief that is
plausible on its face.” Twombly, 550 U.S. at
570. “A claim has facial plausibility when the
plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Iqbal, 556 U.S.
at 678 (citing Twombly, 550 U.S. at 556). The
“plaintiff's obligation to provide the grounds of
his entitlement to relief requires more than labels and
conclusions, and a formulaic recitation of the elements of a
cause of action will not do.” Twombly, 550
U.S. at 555 (citations omitted); see also BellSouth
Telecomm., 372 F.3d at 1262 (explaining that
“conclusory allegations, unwarranted deductions of
facts or legal conclusions masquerading as facts will not
prevent dismissal”) (citations and quotations omitted).
Indeed, “the tenet that a court must accept as true all
of the allegations contained in a complaint is inapplicable
to legal conclusions, ” which simply “are not
entitled to [an] assumption of truth.” See
Iqbal, 556 U.S. at 679. Thus, in ruling on a motion to
dismiss, the Court must determine whether the complaint
contains “sufficient factual matter, accepted as true,
to ‘state a claim to relief that is plausible on its
face.'” Id. at 678 (quoting
Twombly, 550 U.S. at 570).
in considering a motion to dismiss for lack of personal
jurisdiction under Rule 12(b)(2), the “plaintiff
seeking the exercise of personal jurisdiction over a
nonresident defendant bears the initial burden of alleging in
the complaint sufficient facts to make out a prima
facie case of jurisdiction.” See United Techs.
Corp. v. Mazer, 556 F.3d 1260, 1274 (11th Cir. 2009).
Where a defendant “challenges jurisdiction by
submitting affidavit evidence in support of its position,
‘the burden traditionally shifts back to the plaintiff
to produce evidence supporting jurisdiction.'”
See id. (quoting Meier ex rel. Meier v. Sun
Int'l Hotels, Ltd., 288 F.3d 1264, 1269 (11th Cir.
2002)). In ruling on a motion to dismiss for lack of personal
jurisdiction, a district court has discretion to conduct an
evidentiary hearing. See Delong Equip. Co. v. Wash. Mills
Abrasive Co., 840 F.2d 843, 845 (11th Cir. 1988).
However, where the court does not conduct a hearing,
“the plaintiff must present only a prima facie
showing of . . . personal jurisdiction.” Id.
plaintiff makes a prima facie showing by presenting
evidence sufficient to withstand a motion for directed
verdict on the issue of personal jurisdiction. Morris v.
SSE, Inc., 843 F.2d 489, 492 (11th Cir. 1988). Thus,
“[t]he district court must construe the allegations in
the complaint as true, to the extent they are uncontroverted
by defendant's affidavits[, ]” and “where the
evidence presented by the parties' affidavits . . .
conflicts, the court must construe all reasonable inferences
in favor of the non-movant plaintiff.” Id.
(citing Delong Equip. Co., 840 F.2d at 845); see
also United Techs. Corp., 556 F.3d at 1274 (citing
Polski Linie Oceaniczne v. Seasafe Transp. A/S, 795
F.2d 968, 972 (11th Cir. 1986)) (noting that, if the
defendant rebuts the jurisdictional allegations in the
plaintiff's complaint, “the plaintiff is required
to substantiate [its] jurisdictional allegations [ ] by
affidavits or other competent proof, and not merely reiterate
the factual allegations in the complaint.”). This
construction in favor of the plaintiff is particularly
necessary where, as in the instant case, the jurisdictional
questions are intertwined with the merits of a case. See
Delong Equip. Co., 840 F.2d at 845.
accordance with this legal framework, the Court will
summarize the facts alleged in the Complaint, and then review
the substantial evidence put forth by the parties as to the
question of personal jurisdiction, all the while construing
the alleged facts and evidence in favor of the non-moving
plaintiff, Advantus. Morris, 843 F.2d at
Summary of the Complaint
a Florida corporation principally located in Jacksonville,
Florida, manufactures and distributes products across five
operating divisions. See Complaint ¶ 2. As
relevant to this case, “Advantus manufactures
backpacks, bug out bags, wallets, tactical gear, luggage,
sports bags, tote bags, travel bags, and similar consumer
products” under its Mercury Luggage and Mercury
Tactical Gear brands. Id. ¶ 11. Defendants
Sandpiper, PiperGear, and Innovapro, are California
corporations, principally located in southern California,
that manufacture or distribute similar products and target
the same “customers and resellers” as Advantus.
Id. ¶¶ 3-5, 11. As such, Advantus and
Defendants are direct competitors and compete “for a
common pool of customers, including merchandise buyers at
Armed Forces Exchanges and Armed Forces servicemembers as
end-user retail customers.” Id. ¶ 11. In
the Complaint, Advantus alleges that Defendants are subject
to the jurisdiction of this Court “because they
committed tortious activities within the state of Florida,
caused harm to Advantus within the state of Florida while
engaged in unlawful advertising within the state, and are
engaged in substantial and not isolated business activities
within the state of Florida.” Id ¶ 9.
claims Advantus asserts in this action arise out of
Defendants' alleged false advertising that their products
were manufactured in the United States of America.
Id ¶ 1. According to Advantus, beginning in at
least 2013, Sandpiper and PiperGear began advertising that
their products were “made in the USA.”
Id ¶ 12. In addition, Advantus alleges that
Innovapro took-over the Sandpiper brand in 2018 and continued
to engage in false advertising. Id ¶¶
31-32. In the Complaint, Advantus identifies the following
alleged acts of false advertising:
• Beginning at least as far back as 2013 and continuing
until at least January 2018, Sandpiper represented in the
Frequently Asked Questions section of its website that
“‘[PiperGear] is our sister company based in
Chula Vista, California. [PiperGear] produces U.S. made sewn
goods and product development with manufacturing solutions to
meet U.S. Government contract requirements including GSA and
Berry Amendment.'” Id ¶¶ 12,
13a. (alterations in original).
• “From 2013 through at least 2017, ”
Sandpiper and PiperGear used a symbol in their product
catalog which depicted a United States flag with the word
“USA” and purported to signify that the products
were “‘US Made: U.S. manufactured products.
Eligible for Berry Amendment, NAFTA and/or GSA
requirements.'” Id ¶ 13b.
• At some point, Sandpiper and PiperGear altered the
legend for the flag symbol in its catalog “to read in
small print at the bottom of the page ‘US Made: If this
symbol is in a description, it means we also offer the
ability to make the product in the U.S. (as well as the
option of Berry and NAFTA complaint [sic]),' . . .
.” Id. ¶ 13c. Despite this change
Sandpiper and PiperGear continued to use the flag symbol with
the word USA “next to many foreign made products in a
manner that implied U.S. manufacture and would mislead the
casual reader of the catalogue.” Id ¶
• The “About” section of Sandpiper's
Facebook page included the following statement: “The
growth and success of our U.S. manufacturing is a great
source of pride.'” Id. ¶ 13d.
Significantly, this language remained on the Facebook page
until at least mid-October of 2018, after Innovapro purchased
the Sandpiper brand in August 2018. Id
• Sandpiper and PiperGear “disseminated claims of
the U.S. manufacture of their products directly to consumers
throughout the United States using the internet and
mails.” Id ¶ 13e.
• Online consumers on Amazon.com demonstrated confusion
as to the country of origin of Sandpiper and PiperGear
products. Id. ¶ 13f. According to Advantus,
Sandpiper and PiperGear “knowingly allowed consumers to
labor under the misbelief that many of [Sandpiper's] and
PiperGear's products were manufactured in the USA without
correcting this impression.” Id. Sandpiper,
PiperGear, and Innovapro have “failed to make online
corrective statements to address the known consumer confusion
thereby continuing to perpetuate the perception that many of
their products are made in the USA when this perception is
•. Sandpiper “orally
told merchandise buyers, including buyers at Armed Forces
Exchanges, that its products were made in the United States
to gain a competitive advantage over competitors who
truthfully disclosed the non-United States origin of the
competing products.” Id. ¶ 13g. Advantus
contends that these misrepresentations caused a “direct
loss of sales to Advantus.” Id
• Sandpiper and PiperGear “represented that their
bags, backpacks, and other products were compliant with the
Berry Amendment despite the fact the products contained
substantial foreign components and subcomponents.”
Id ¶ 13h.
maintains that “[Sandpiper], PiperGear, and
Innovapro's claims that their various products were made
in the United States and/or were Berry Amendment
compliant” were false. Id ¶ 14.
in the spring of 2018, the Federal Trade Commission (FTC)
notified Sandpiper and PiperGear that it “had
determined that nearly all of [Sandpiper's] and
PiperGear's products are imported as finished goods or
contain significant imported components despite PiperGear and
[Sandpiper] having made express or implied claims that their
products were manufactured in the United States of
America.” Id. ¶ 15. “As a result,
the FTC served a proposed complaint on Sandpiper and
PiperGear charging them with false advertising, ” and
on September 12, 2018, the FTC filed a proposed consent order
for public comment. Id. ¶¶ 17-18, Exs.
A-B. Advantus, among others, “filed public objections
to the proposed consent order on the basis that it was too
lenient and requested the FTC to take tougher action.”
Id. ¶ 18. At the time the instant Complaint was
filed, the FTC had not announced how it intended to proceed
in light of the objections to the proposed consent order.
also alleges that Innovapro, Sandpiper and PiperGear were
part of a conspiracy to import goods into the United States
and advertise them as “‘Made in the
USA.'” See Complaint ¶ 67. According
to Advantus, Sandpiper promotes PiperGear as its
“sister company” and these companies “share
a common website, sandpiperca.com, as well as use joint
catalogs to sell the products bearing their respective
trademarks.” Id. ¶ 31. Additionally,
Advantus maintains that Innovapro “was the primary
consignee of record for goods that [Sandpiper] imported into
the United States for resale under the [Sandpiper] brand, and
Innovapro imported virtually nothing but [Sandpiper] goods,
including some shipments which contained PiperGear purchase
order numbers.” Id. ¶ 24. Advantus
maintains that Innovapro knew that Sandpiper and PiperGear
had advertised for years that PiperGear produced U.S.-made
and Berry Amendment compliant goods. Id. ¶ 22.
Advantus alleges that Innovapro knew these advertisements
were false because it had imported to the United States
completed goods from China that bore PiperGear purchase order
numbers. Id. ¶ 23. Therefore, Advantus
maintains that “[u]pon information and belief,
Innovapro, was . . . knowingly or negligently helping
[Sandpiper] and PiperGear conceal the foreign origin of the
various products that [Sandpiper] and PiperGear were then
claiming to have manufactured domestically.”
Id. ¶ 25.
according to Advantus, on August 31, 2018, Innovapro
“took over” the Sandpiper brand. Id.
¶ 27. Advantus alleges that this transaction was
fraudulent and in furtherance of the conspiracy. Id.
¶¶ 68, 75. In support, Advantus contends that James
Wu, the “principal owner” of Innovapro also has
had an ownership interest in Sandpiper and the Chinese
manufacturer. Id. ¶¶ 19-20. According to
Advantus, the Defendants, “working in concert, ”
caused Innovapro to file a UCC-1 Financing Statement against
all of Sandpiper's assets “to create the appearance
that Innovapro was an arms-length secured lender” to
Sandpiper. Id. ¶ 26. Then, on August 31, 2018,
“with no apparent exchange of consideration, ”
Innovapro took over the Sandpiper brand and falsely
represented to merchandise buyers that Sandpiper of
California, Inc. had dissolved. Id. ¶ 27.
Advantus alleges that Sandpiper of California, Inc. did not
dissolve, but rather, “one of its principals, David
Jacobs, signed a name change for Sandpiper of California,
Inc. to change its name to DBJ Enterprises, Inc.”
Id. ¶ 28. Although Jacobs signed the name
change form on August 31, 2018, Sandpiper did not file the
document with the California Department of State until
October 5, 2018, “a few weeks after the FTC published
its proposed consent order . . . .” Id. On
September 5, 2018, Innovapro terminated its UCC-1 Financing
Statement which, in conjunction with Innovapro's
take-over representations, “created the appearance that
Innovapro had foreclosed on its secured interest, or
otherwise used its secured interest to obtain ownership of
the secured assets.” Id. ¶ 30. However,
Advantus maintains that this transaction “instead
appears to have been a voluntary asset transfer from
[Sandpiper] to Innovapro without an adversarial arms-length
component to it.” Id.
the asset purchase, “Innovapro continued to operate the
business of [Sandpiper] in the same manner as [Sandpiper]
operated prior to August 31, 2018.” Id. ¶
29. Specifically, “Innovapro continued operating the
Sandpiper brand in the same fashion without change to: the
Sandpiperca.com website, the Sandpiper personnel, the
Sandpiper email addresses, and the Sandpiper phone number
itself.” Id. ¶ 31. According to Advantus,
as of October 23, 2018, “the phone numbers remained the
same, the emails were the same, the website was the same, the
products were the same, the catalog was the same, some of the
personnel were the same, and the factories manufacturing the
products were the same.” Id. Advantus contends
that other than the change of corporate ownership,
“there does not appear to be any other visible
difference” between the operation of the Sandpiper
business before and after the takeover. Id. As such,
Advantus alleges that Innovapro is both directly liable for
its own false advertising and liable as a successor to
Sandpiper. Id. ¶ 32.
Summary of the Evidence
Sandpiper of California, Inc.
stated above, prior to the asset-purchase, Sandpiper was a
corporation, located in California, engaged in the sale and
distribution of various products, including military-style
backpacks and travel bags. See Amended Declaration
of David Jacobs, Corporate Representative, In support of
Defendant DBJ Enterprises, Inc.'s Motion to Dismiss or,
in the Alternative, Transfer and Memorandum of Law (Doc.
34-1; Jacobs Sandpiper Decl.) ¶ 6; see also
Plaintiff's Notice of Filing Deposition Transcripts and
Exhibits (Doc. 47; Notice), Exs. 2-3. Sandpiper did not
manufacture its own products, rather it engaged other
companies to do so, including Defendant PiperGear, as well as
Sun Fai Industrial o/b Sunray Industries Limited (Sun Fai),
and Textiles Costa Bella. See April 11, 2019
Deposition of David Bailey Jacobs (Doc. 55-2; Jacobs Dep.) at
28-29; Jacobs Sandpiper Decl. ¶ 7. Significantly,
Sandpiper and PiperGear shared a common owner, California
resident David Jacobs, and operated out of the same building,
separated by a dividing wall, in California. See
Jacobs Dep. at 10, 15-16, 19-20, 154; Jacobs Sandpiper Decl.
¶ 4. Jacobs also owns Textiles Costa Bella, a factory
located in Mexico. See Jacobs Dep. at 23.
PiperGear USA, Inc.
is a California corporation “in the business of
manufacturing various fabric products, including
backpacks.” See Jacobs PiperGear Decl. ¶
3. PiperGear does not sell any products to end-users under
its own label, rather PiperGear manufactures and labels
products on behalf of other companies, one of which was
Sandpiper. Id. ¶¶ 4, 23. As such,
“[a]fter delivery of these products, PiperGear has no
influence or right regarding where the products are then
taken or delivered to be sold.” Id. ¶ 5.
PiperGear does not conduct any business in Florida.
Id. ¶ 8. Indeed, it does not operate any
distribution centers or manufacturing plants in Florida, and
it has not “sold products to, nor distributed products
in, Florida.” Id. ¶¶ 8, 12.
started PiperGear as a “sewing company” in the
second half of a building he owned after the existing tenant
moved out. See Jacobs Dep. at 19-20. Sandpiper was
located in the other half of the building. See id.
at 10. “At the time PiperGear was incorporated,
[Sandpiper] loaned funds to PiperGear so PiperGear could
begin doing business.” See Second Jacobs
PiperGear Decl. ¶ 2. Notably, approximately 20% of
PiperGear's total manufacturing output was on behalf of
Sandpiper. See Jacobs PiperGear Decl. ¶ 4.
However, PiperGear's “Sales by Customer
Summary” records for the years 2017 and 2018 do not
list Sandpiper as a customer. See Jacobs Dep. at 22,
25, Exs. 47, 48. Jacobs explains that PiperGear sold bags to
Sandpiper “in theory” meaning “[i]t was
done through the inner company, so rather than putting an
invoice together, the - the loan, I believe, was lower
because of the goods that were given to Sandpiper.”
See Jacobs Dep. at 22. Although there is no
promissory note documenting this loan, see Jacobs
Dep. at 119-20, Jacobs maintains that it was “reflected
on the books of both PiperGear and Sandpiper, ”
see Second Jacobs PiperGear Decl. ¶ 2. An
“Intercompany” “Transaction Report”
shows the flow of money back and forth between the companies,
with Sandpiper often paying bills on behalf of PiperGear.
See Declaration of Richard D. Rivera (Doc. 99-1;
Second Rivera Decl.) ¶ 2, Ex. A (Doc. 102). These
records appear to reflect a balance as low as $820, 549.98 at
the beginning of 2013, which grew to approximately $3.6
million as of August 2018. Id. Indeed, according to
Jacobs, at the time of the asset sale PiperGear owed
Sandpiper approximately $3.65 million. See Jacobs
Dep. at 116-17.
addition to sharing the same owner, Sandpiper and PiperGear
also had the same Chief Financial Officer, Morton Hollaender.
See id. at 23. Evidence also suggests that Sandpiper
and PiperGear shared several employees. For example, Reggie
Regala worked in the Sandpiper marketing department.
Id. at 71-72. However, his email signature block
includes both “Sandpiper of California, Est.
1980” and “PiperGear USA, Inc.-Berry
Compliant/GSA/NAFTA, Sewn goods manufacturing and
production.” See Declaration of Richard D.
Rivera (Doc. 45-1; Rivera Decl.), Ex. G (Doc. 60).
Additionally, Jacobs identified Adolfo Coronel as an employee
of Sandpiper in the purchasing department, see
Jacobs Dep. at 100-01, and Ryan Mangahas as a Sandpiper
employee in sales, id. at 101. Yet, Regala, Coronel
and Mangahas all use email addresses with a
“pipergear.com” domain name. See Rivera
Decl., Ex. G at SOC000375, INNOVAPRO.002777. Most notably,
Sandpiper's exchange sales manager, Robert Van Jones,
utilized a business card “[f]or several years”
that identified Sandpiper on the front and PiperGear on the
back. See March 14, 2019 Deposition of Robert Van
Jones (Doc. 47-1; Jones Dep.) at 86-87, Ex. 7; Jacobs Dep. at
70-74. Significantly, the PiperGear side of the card included
the statements “Made in USA, ” “Berry
Compliant, ” “NAFTA, ” “USA, ”
“BAA.” See Jacobs Dep. at 73, Ex. 7. The
PiperGear side of the card also included the Sandpiper logo
in the top left corner. Id. Jacobs testified that,
for a period of more than two years, he believed it was
“typical” for Sandpiper business cards to utilize
a two-sided design with Sandpiper on the front and PiperGear
on the back. See Jacobs Dep. at 73-74. Despite his
use of this business card, Jones testified that he was not
employed by, and did not work on behalf of, PiperGear.
See Jones Dep. at 89.
evidence also suggests that Sandpiper marketed itself in
connection with PiperGear, promoting PiperGear as its
“sister” company. On the Sandpiper website,
Sandpiper described itself and included the following
statements: “Featuring American Made products developed
and manufactured by our sister company, PiperGear
USA. We offer manufacturing options to meet Berry Amendment,
NAFTA, GSA, or Buy American Act requirements. The growth and
success of our U.S. manufacturing plant is a great
source of pride to us.” See Jacobs Dep. at
147-48, Ex. 60 (printout of the Sandpiper website dated March
7, 2018) (emphasis added). The website included a PiperGear
USA logo and the following description of PiperGear with a
link to the PiperGear website: “Piper Gear USA is the
manufacturing sister company of Sandpiper of California. PG
USA provides additional options to customers providing
materials and assembly to cover the full range of
manufacturing requirements. Berry Amendment, Buy American
Act, NAFTA, as well as overseas production.”
Id. The Frequently Asked Questions section of the
website also identified PiperGear as Sandpiper's
“sister company” and included similar
representations regarding U.S. manufacturing. See
Jacobs Dep. at 150-51, Ex. 62. These representations were
also present in Sandpiper's catalogs, see Jacobs
Dep. at 25-26, Ex. 3 at 52, and included on a PowerPoint
slide used during a sales presentation to the military
exchange buyers, see Jacobs Dep. at 95-97, Ex. 46;
April 10, 2019 Deposition of Jeff Payne (Doc. 59-2; Payne
Dep.) at 9-10; April 10, 2019 Deposition of Sean Brown (Doc.
59-1; Brown Dep.) at 82-83.
imports “military backpacks, gear bags, travel bags,
and related goods, ” most of which are manufactured at
a factory in China by Innovapro's affiliate Sun Fai, a
Hong Kong company. See Wu Decl. ¶¶ 3-5.
James Wu is the founder, vice-president, and a director of
Innovapro. See id. ¶ 1. Prior to its
acquisition of Sandpiper, Innovapro consisted solely of Wu
and his wife, who is the president of Innovapro. See
April 4, 2019 Deposition of James Wu (Doc. 55-1; Wu Dep.) at
15-16, 96. Wu started Innovapro in 1999 “mostly to
handle business with Sandpiper, ” and indeed, Innovapro
had no other customers besides Sandpiper. See id. at
15-16. At one time, around 2010, Wu was also a principal of
Sun Fai, although he has “less involvement” with
Sun Fai now. See id. at 14.
to the asset purchase, the goods Innovapro imported entered
the United States through the port of entry in Los Angeles,
California, and were then trucked to the Sandpiper warehouse
in Chula Vista, California. See Jacobs Dep. at
128-29, 158-59; Wu Decl. ¶¶ 6-7. From there,
Sandpiper shipped the goods either to its
retail-customer's distribution center, or directly to the
individual retail stores. See Jacobs Dep. at 129. At
times, Sandpiper obtained goods directly from Sun Fai where
“Sandpiper's customer would purchase goods from
Sandpiper and pick them up directly from the factory in
China.” See Wu Decl. ¶ 12. Innovapro also
served in the “product development process, ”
communicating with Sandpiper, putting together a design, and
then sending the design to Sun Fai “for them to produce
sample, to develop the product.” See Wu Dep.
At 15. According to Wu, all of the goods imported by
Innovapro or produced by Sun Fai bear “MADE IN
CHINA” labels sewn into the fabric of the product.
See Wu Decl. ¶ 27.
majority of Sandpiper's sales were made in bulk to
vendors such as the Army Air Force Exchange System (AAFES),
as well as the Marines Corps Exchange (MCX) and the Navy
Exchange (NEXCOM). See Jacobs Decl. ¶¶ 13,
18; Jacobs Dep. at 154. Significantly, “[a]ll military
exchanges practice central buying. So all buying decisions
are made at [headquarters], and then planners and allocators
and replenishers determine stock levels at each individual
location, and the product is distributed to those locations
appropriately from the distribution centers.”
See Brown Dep. at 25. Thus, sales of Sandpiper
products to military exchanges occurred at two-levels.
See Deposition of Robert Van Jones (Doc. 47-1; Jones
Dep.) at 10-11; see also Declaration of Zach
Mitchell (Doc. 45-3; Mitchell Decl.) ¶¶ 4-6
(generally describing the system-wide and store-level sales
that occur within the Exchange Systems). At the first level,
Sandpiper sold its product to the system-wide exchange buyers
who were located at headquarters in Dallas (for AAFES), and
Virginia Beach (for MCX and NEXCOM). See Brown Dep.
at 24-25; Jones Dep. at 9-10; see also Mitchell
Decl. ¶ 5 (“First, system-wide AAFES buyers at
headquarters will purchase product to stock in the stores,
system-wide.”). These system-wide buyers chose the
products and set the planogram (POG), that is, the
“model that goes into the stores.” See
Jones Dep. at 10.
second-level occurs at the individual stores where Sandpiper
also played an active role. Id. at 10-11; see
also Jacobs Dep. at 38-39, 42-46, Ex. 6: SOC Triangle
for Success, In-Store Plan. Within the AAFES system,
Sandpiper could monitor the amount of product at an
individual store location, and if a store was low, ensure
that additional product was delivered to the store to satisfy
the anticipated need. See Jacobs Dep. at 54-55. In
addition, “with the stores, [a sales representative]
can go in and . . . create promotions, one-time buys on
occasion, and . . . for a promotion, [the representative] can
get them to increase their inventory level. That's
instrumental.” See Jones Dep. at 10-11;
see also Mitchell Decl. ¶ 5 (“[O]nce a
product has been added system-wide, AAFES individual store
managers can request to buy additional products as needed,
sometimes as a result of sales that sales representatives
make to the AAFES local store managers on a store by store
basis at the individual store level.”). According to
Sandpiper's exchange sales manager, Robert Van Jones:
What the stores were used to doing-and I think it's
commonplace with most manufacturers-they would-for a given
promotion, they would say, ‘All right. We're going
to have a 20-percent-off sale on Sandpiper for this
weekend.' What would happen is, we would give a discount
of 10 percent. The store would match it with 10 percent.
See Jones Dep. at 23. Indeed, Jones testified that
“[a] lot of times” store managers would contact
him directly to negotiate Sandpiper's assistance with a
promotion. Id. Sandpiper also worked with individual
stores to add new fixtures to display Sandpiper products.
See Jones Dep. at 20-21; Jacobs Dep. at 39-40, 45-46
(explaining that after receiving approval from the military
buyers for the display, “you have to go into the stores
individually, speak to the manager, the GM, . . . and sell
the idea. The idea was to bring the display in, to give us
extra support as far as being able to show more of our
product inside of the store.”). Although such fixtures
had to be approved at the system-wide level, the fixtures
were then shipped from Sandpiper directly to individual
stores and then assembled, typically by a Sandpiper
contractor who serviced the store. See Jones Dep. at
20-21; Jacobs Dep. at 45-46.
Jacobs believed Sandpiper's involvement at the
store-level was so important to its business that he
developed the “SOC Triangle for Success, In-Store
Plan” in order “to optimize our sales in just
about all the different-all of the stores that we sold to,
whether it was through AAFES, MCX, which is the Marines,
NEXCOM, the Navy, to cover all this data here to promote our
product.” See Jacobs Dep. at 36-37, Ex. 6. The
“Triangle” consisted of AAFES[, ] management in
San Diego[, ] and in-field management working together in a
relationship. Three-legged stool.” See Jones
Dep. at 75. “In-Store” referred to
Sandpiper's physical presence in the stores for
implementation of the plan. See Jacobs Dep. at
38-39. The plan outlined objectives under several headings,
including “Store management communications, ”
“product promotion support, ” “store level
merchandising support, ” and “competitive
disruption at all stores, floor displays, POS, ” among
others. See Notice (Doc. 47), Ex. 6. The
“competitive disruption” heading included a
sub-heading titled “capture the hearts and minds of
AAFES Managers, ” which is followed by several bullet
points, one of which references “product sales
monitoring and order suggestions.” Id.
2014, Sandpiper hired Paragon Brokerage Inc. to act as a
broker between Sandpiper, the supplier, and the military
exchange buyers. See Payne Dep. at 6-7; Brown Dep.
at 16-17, 32-33, Ex. 37; Jacobs Dep. at 91. Paragon is a
military brokerage company founded by Sean Brown in 1994 with
over 80 major clients. See Brown Dep. at 9-10, 22,
50. Paragon operates as an independent contractor and is
“paid commission on sales that [it] generate[s] at
headquarters, military exchange headquarters.” See
id. at 16, 22. Sandpiper and Paragon entered into a
“Supplier Authorization Agreement” in 2014,
whereby Paragon agreed to serve as Sandpiper's
“exclusive worldwide sales representative” with
the AAFES. See id. at 32-33, Ex. 37. This
relationship was later expanded to include MCX and NEXCOM as
well. See Jacobs Dep. at 87-88; Brown Dep. at 33-34.
Pursuant to this agreement, Paragon made presentations at
military headquarters regarding “new items for their
consideration for stock assortments.” See
Brown Dep. at 25. Notably, a Sandpiper sales manager, Dino
Riggott, participated in all of these presentations.
Id. at 23. In addition, Sandpiper “essentially
always” provided Paragon with sales materials
“whenever [it] would go into a headquarters meeting or
presentation with a buyer.” See Payne Dep. at
9-10, Ex. 46. Such materials included a PowerPoint
presentation with a slide that depicted a “Made in
USA” decal and the following statements:
“Featuring American Made products developed and
manufactured by our sister company, PiperGear USA. We offer
manufacturing options to meet Berry Amendment, NAFTA, GSA or
Buy American Act requirements. The growth and success of our
U.S. manufacturing plant is a great source of pride to
us.” See id., Ex. 46.
also provides services to its clients, including Sandpiper,
at the individual store level. See Brown Dep. at
23-24, Ex. 37. Specifically, Paragon operates “a
worldwide sales force of independent contractors” whose
Stocking the shelves, setting new planograms. So as the buyer
changes out the assortments, we go in and make those changes,
make sure the products are priced correctly, the pegs-you
know, the peg that you see at the end-where something is
hanging, make sure that's been adjusted. We do cooking
demos, food demos. We facili[tate] getting the manufacturer
on base. A lot of the manufacturers like to visit bases to
check it out. Our reps do that. As I think I mentioned
earlier, return defective stock and-primarily they're
merchandisers. Probably 90 percent of their efforts are
merchandising, if we include doing demonstrations.
See id. at 23-24. These merchandisers are “a
vast network of retired military people and dependents of
military people.” Id. at 52. According to
Brown, these individuals are independent contractors who are
paid by the hour and “might work for ten companies like
[Paragon].” Id. at 52-53, 104, 107. Because
most planograms contain products for several different
companies, Paragon pays the individual to put out its
client's products on the planogram, “then the next
company pays for them to put their products on, and then the
next company pays them to put their products on.”
Id. at 53-54. Significantly, Paragon never provides
these merchandisers with catalogs or sales literature
“because selling directly to stores is not
permitted.” Id. at 55. According to Brown, the
merchandisers are “not selling, ” rather
“[t]hey're merchandisers . . . . They're just
there to make sure our products are on the shelves.”
Id. at 56.
direct communication between Paragon merchandisers and
Sandpiper was strictly forbidden. Id. at 110,
126-27. According to Brown, Paragon merchandisers were
“under strict instructions” not to take
directives from Sandpiper because ultimately, the time sheets
go to Paragon. Id. at 127. Brown explains that
Paragon “can't have our manufacturers telling [the
merchandisers] what to do or asking them to do a project and
then we get the time sheet for it.” Id.
Indeed, Paragon goes so far as to “hide” the
contact information for the merchandisers from the suppliers
so that suppliers will not be able to issue directives
directly to merchandisers. Id. at 128. Although the
SOC Triangle for Success In-Store Plan was
“consistently pushed by the executives at [Sandpiper],
” Brown thought the Triangle was “ridiculous,
” and had “no relevance to anything”
Paragon did. Id. at 93-94. According to Brown,
Paragon was “not directed to do anything”
regarding the Triangle, never used the Triangle in
presentations, and ignored it Id. at 94.
in addition to the Paragon merchandisers, Sandpiper engaged
its own network of store-level representatives. Indeed,
Jacobs strongly believed in developing good relationships and
goodwill at the store level. See Jones Dep. at 10.
In 2010, Sandpiper hired Jones as a salaried employee to work
“very closely with the individual bases.”
Id. at 8-9; Jacobs Dep. at 41-42, 181. At the time
he was hired, Jones lived in Georgia and held the title of
“Regional Sales Manager.” See Jones Dep.
at 25. Jones traveled from base to base, “selling them
products, selling them displays, working with the managers,
creating trust and relationships and so on.”
Id. at 8-9. Despite the “regional”
title, Jones traveled beyond just the southeast, including
trips to New England and Oklahoma. Id. at 25. In
approximately 2012, his title changed to “Exchange
Stores Sales Manager” and remained the same throughout
the remainder of his employment with Sandpiper. Id.
at 43; Jacobs Dep. at 70 (identifying Jones' title as
“Exchange Sales Manager”). In 2015, for personal
reasons, Jones moved to Navarre, Florida, where he is
currently living. See Jones Dep. at 90-91.
in 2015, because Paragon's “strategy in the field
was not exactly what [Jacobs] wanted, ” Jacobs directed
Jones to “hire on as many people as [he] could in all
stores that would work strictly-merchandisers that would work
strictly for Sandpiper. We could control them; we could make
sure they're in there.” Id. at 16, 26-27;
see also Jacobs Dep. at 52-53. Jones explained that
Sandpiper “wanted that extra layer of support and . . .
[was] coming with new products . . . and new fixtures, new
marketing tools-we wanted to make sure those were in place
and represented as well as possible.” See
Jones Dep. at 16. According to Jones, Jacobs' plan
“was to try to get as many merchandisers in as many
stores as possible.” Id. at 26. As a result,
Sandpiper went from “just a handful of representatives
to about 60 in AAFES, ” “[a]bout eight to
ten” in the Navy, and a few in the Marines.
Id. at 27. Jones was responsible for training and
supervising these Sandpiper merchandisers. See Jones
Dep. at 18. Sandpiper developed checklists for the
merchandisers to complete and required the merchandisers to
submit pictures of the completed planograms to Jones.
Id. at 18-19. At his deposition, Jones explained
that “[t]here's a basic inventory checklist that
has every item in the [planogram] listed, and [the
merchandisers] have to do on-hands and on-orders . . . and
then turn that in.” Id. at 36. At smaller
stores, merchandisers provided this information once a month,
at larger stores, twice a month. Id. at 36.
According to Jones, this information was of “utmost
importance” because it provided him with insight as to
what was occurring at the store-level. Id. As such,
Jones told the merchandisers that they were Sandpiper's
“‘eyes and ears in the store.'”
merchandisers were paid by the hour and submitted their
timesheets to Jones for approval on a monthly basis.
Id. at 31. Jones sent the information to Sandpiper
in California, and Sandpiper then mailed paychecks directly
to the merchandisers at their homes, including to those
merchandisers who lived in Florida. Id.; Jacobs Dep.
at 60-61, 86. Similar to the Paragon merchandisers, Sandpiper
merchandisers were independent contractors who worked for
other companies as well, although Sandpiper typically would
not hire a merchandiser if he or she worked for a competing
line. See Jones Dep. at 12-14; Jacobs Dep. at
168-69. Unlike Paragon, Sandpiper merchandisers were supposed
to try and persuade the store manager to buy more product,
where warranted. See Jones Dep. at 48. Thus, in
addition to ensuring that Sandpiper fixtures were stocked and
clean, with correct signage, Jones trained merchandisers to
“have relationships with the managers; because, the
more you can get out of the managers, the better it is for
the company.” Id. at 18-19. Notably, Sandpiper
expected its merchandisers to have “competent product
knowledge, ” which according to Jacobs,
“probably” included information regarding the
country of origin of the particular products. See
Jacobs Dep. at 56-57. However, merchandisers were not
provided with Sandpiper's product catalog due to the cost
and because “they really didn't need it.”
See Jones Dep. at 61.
is not a major market for Sandpiper brand products.
Id. at 14-15, 34, 93; see also Brown Dep.
at 105, 130-31. In 2016, Florida accounted for only 1.39%
of Sandpiper's total sales. See Wu Decl. ¶
43. In 2018, up to the date of the asset sale, only 2.2% of
Sandpiper's total sales came from Florida. See
id. According to Brown, between March 19, 2014, and
March 20, 2019, Sandpiper sold, in total,
approximately $1.2 million in retail dollars-worth of
products at AAFES and NEXCOM exchange stores in Florida.
See Brown Dep. at 112-13, Ex. 40. In comparison, the
annual military business worldwide of Sandpiper
brand products is approximately $13.5 million. Id.
at 113; see also Wu Decl. ¶ 43. Brown further
testified that Paragon does not have a “significant rep
presence” in Florida because “Florida doesn't
have a lot of bases.” See Brown Dep. at 51,
Ex. 39. For example, over the last five years, Paragon has
paid $62, 256.26 to merchandisers servicing Sandpiper
products, and only $3, 010 of that went to merchandisers
working in Florida. See Brown Dep. at 108, Ex. 38.
This amounts to only 251 hours of service on behalf of
Sandpiper products in Florida by Paragon merchandisers over a
five-year period. Id. at 124. The vast majority of
Sandpiper's internal merchandisers served exchanges and
bases outside the state of Florida. See Jacobs Dep.
at 169-70. Sandpiper records reflect that it employed only
three merchandisers with Florida addresses to work on its
behalf at military exchange stores in Florida. See
Notice (Doc. 47), Ex. 15; Jones Dep. at 34, 37-38; Notice
(Doc. 73), Ex. E (Doc. 78). And, Jones, the salaried exchange
sales manager has lived and worked out of a home office in
Navarre, Florida since December 2015. See Jones Dep.
at 43, 52, 90-91. As part of his job responsibilities, Jones
called on various military bases in Florida, including Eglin,
Pensacola Navy, Hurlburt Field and Tyndall Air Force Base,
see Jones Dep. at 15, 33, nevertheless, the majority
of Jones' work was directed at areas outside Florida,
see Jacobs Dep. at 172.
most of Sandpiper's business involved bulk sales to
retailers, Sandpiper also operated a website which included
an option for individual sales. See Jacobs Sandpiper
Decl. ¶ 14. Individual internet sales overall accounted
for less than 1% of Sandpiper's annual business, and only
a small percentage of those internet sales were made either
from Florida or shipped to Florida. Id. ¶¶
15-16. From January 1, 2018, until August 31, 2018, only six
individual sales through the website were related to Florida,
amounting to no more than 0.007% of Sandpiper's sales
during that time frame. Id. ¶ 16. In 2017,
internet sales to Florida represented 0.01% of
Sandpiper's total sales, and in 2016 represented 0.02% of
total sales. Id.
first became aware that the FTC was investigating his
companies when he received a letter from the FTC on April 5,
2018. See Jacobs Dep. at 104. In the letter, the FTC
informed Jacobs that it had investigated Sandpiper and
PiperGear and intended to pursue a formal enforcement action
against Sandpiper and PiperGear for violating 15 U.S.C.
§ 45 “in connection with the advertising and sale
of certain backpacks and tactical gear as made in America or
the United States, even though they are wholly imported or
contain significant imported content.” See
Jacobs Dep. at 103-04, Ex. 20 at SOC000235. The FTC
“served a proposed complaint on [Sandpiper] and
PiperGear charging them with false advertising in connection
with their claims that [Sandpiper] and PiperGear manufactured
their products in the United States.” See
Complaint, Ex. A: Proposed FTC Complaint. The Proposed FTC
Complaint specifically referenced statements made on the
Sandpiper and PiperGear websites, as well as posts which
Sandpiper made on Instagram. See Proposed FTC
Complaint ¶ 6. The FTC also referenced “certain
wallets imported from Mexico as finished goods, ” in
which Sandpiper and PiperGear “hid truthful
country-of-origin information on the back of tags, and
inserted cards that prominently displayed false U.S.-origin
claims.” Id. ¶ 7. On May 1, 2018, Jacobs,
on behalf of Sandpiper and PiperGear, executed a Consent
Order with the FTC. See Jacobs Dep. at 110-11, Ex.
May of 2018, Sandpiper began a recall of the objectionable
wallets from AAFES locations. See Brown Dep. at 63,
Exs. 20, 41; see also Payne Dep. at 17-18, see
id. at 12, Ex. 20. Significantly, some of those wallets
were sold at military exchange bases in Florida. See
Brown Dep. at 121-22, Ex. 20. Despite the recall, as of
February 19, 2019, some of the improperly labeled wallets
remained in exchange stores. See Declaration of
Teresa Carlson (Doc. 45-5) ¶ 7 (asserting that on the
week of February 19, 2019, she found Sandpiper wallets with
the misleading label at the Lackland Air Force Base Exchange
store and the Fort Lee Exchange store). Significantly, in
December 2016, Advantus had attempted to sell “a wallet
program to AAFES for six SKUs that AAFES was planning to
carry in various exchanges throughout the country, including
the AAFES locations at MacDill and Eglin Air Force
bases.” See Mitchell Decl. ¶ 11. Advantus
“lost that proposal to Sandpiper and [was] informed
that it was because AAFES went with the Sandpiper products
because AAFES wanted to have domestic production for those
stated above, Sandpiper purchased goods from Innovapro, which
imported them from the manufacturer, Sun Fai, in China.
Sandpiper also purchased goods directly from Sun Fai.
According to Wu, “[b]etween January 2015 and mid-2018,
Sandpiper purchased over $25 million in goods from Innovapro
and Sun Fai on credit accounts.” See Wu Decl.
¶ 14. However, “Sandpiper was unable to pay for
all the goods it purchased and by the early spring of 2018,
the combined debt owed by Sandpiper to Innovapro and Sun Fai
exceeded $10 million.” Id. ¶ 15. Wu
asserts that “Sun Fai assigned its portion of the debt
to Innovapro for collection.” Id. ¶ 16.
“After being threatened with collection proceedings,
Sandpiper attempted to negotiate a workout whereby the debt
would be reduced and paid off over time.” Id.
¶ 17; see also Innovapro Reply, Ex. C (Doc. 96)
(email chain between counsel for Sandpiper and
Innovapro's counsel negotiating a plan to address
Sandpiper's debt including a payment plan, granting
Innovapro a security interest, and ultimately proposing an
asset sale). Although these negotiations began around the
same time that Sandpiper learned of the FTC investigation,
Jacobs maintains that the FTC action was not a precipitating
cause of the negotiations leading to the asset sale.
See Jacobs Dep. at 107. Rather, in April of 2018,
Sandpiper attempted to pay Innovapro “a million dollars
in postdated checks, ” two of which “were good,
so bought some time there, ” but then “the
subsequent checks bounced.” Id. at 107-08.
According to Jacobs, “that's what probably
precipitated the negotiations as far as, you know,
[‘]Dave [Jacobs], this isn't working. Let's try
to work something else out.[']” Id. at
108. Soon after, Sandpiper granted bank access to Wu so he
could “monitor and see that we're not going to
bounce anymore checks on you going forward, number one. And
number two is if you're going to continue to give us any
kind of credit, it's okay that you're at [sic]
looking in on our business.” Id. at 109. This
occurred at approximately the same time that Sandpiper and
PiperGear signed the Proposed Consent Order with the FTC.
Id. at 111.
negotiations continued, “Sandpiper agreed to secure the
debt in exchange for a temporary forbearance on collection
proceedings. Innovapro filed a UCC-1 financing statement in
July of 2018 against Sandpiper in California to perfect its
security interest.” See Wu Decl. ¶ 18;
see also Jacobs Dep. at 122-24, Ex. 52: Extension
Agreement; Innovapro Reply, Ex. C at INNOVAPRO.000448-452.
Ultimately, “Innovapro and Sandpiper agreed to terms
for resolution of the debt that took the form of a
forgiveness of debt in return for a transfer of assets from
Sandpiper to Innovapro.” See Wu Decl. ¶
20. Indeed, on July 6, 2018, Innovapro and Sandpiper entered
an “Extension Agreement” which memorialized the
existence of a “preliminary agreement” as
follows: “The first step involves the acknowledgement
of debt by [Sandpiper], the granting of a security interest
by [Sandpiper], the timely delivery of product to
[Sandpiper], and the oversight of the operation of
[Sandpiper's] business by [James Wu] until such time as
the assets of [Sandpiper] are sold to [Innovapro].”
See Jacobs Dep. at 122-23, Ex. 52: Extension
Agreement at 1. Pursuant to the Extension Agreement,
Innovapro agreed to “allow [Sandpiper] to maintain
access to goods to be sold by [Sandpiper], ” in
consideration for Sandpiper “granting a security
interest as set forth in this agreement . . . .”
See Extension Agreement at 1. The Extension
Agreement further provided that “[o]n the completion of
the Asset Sale, all indebtedness secured by this agreement
will expire, and Creditor's security interest in the
Collateral, as set forth in this Agreement, will
terminate.” See Id. at 7.
August 31, 2018, Innovapro and Sandpiper entered into a
written Asset Purchase Agreement. See Wu Decl.
¶ 21, Ex. A: Asset Purchase Agreement (APA). At the time
of the asset sale, Sandpiper was insolvent. See Wu
Dep. at 51-52. Pursuant to the APA, Innovapro acquired
Sandpiper's outstanding inventory, customer contacts,
trademarks, trade names, domain name, website and social
media sites. See Wu Decl. ¶ 23. Innovapro did
not acquire “any aspect of the Piper Gear USA business
or assets, nor did it acquire a line of wallets that was the
subject of a pending [FTC] investigation based on false
origin claims.” Id. ¶ 26. Innovapro also
declined to purchase outstanding loans that both Jacobs and
PiperGear owed to Sandpiper, and did not require Jacobs or
PiperGear to pay this money back. See APA ¶
1.B; Jacobs Dep. at 117; Wu Dep. at 53-54. According to
Jacobs, beginning in 2006 or 2007, and extending possibly
through 2018, he borrowed close to $1.1 million from
Sandpiper. See Jacobs Dep. at 115-16. Jacobs
testified at his deposition that PiperGear owed $3.65 million
to Sandpiper. Id. at 116-17. According to Jacobs,
Sandpiper loaned money to PiperGear at the time it was
incorporated so that PiperGear “could begin doing
business.” See Second Jacobs PiperGear Decl.
¶ 2. Jacobs maintains that the loan was “partially
repaid over time” and “ultimately the remaining
balance on August 31, 2018, was forgiven.” See
id. ¶ 2; Jacobs Dep. at 117. Neither Jacobs nor
PiperGear ever signed a promissory note for these loans.
See Jacobs Dep. at 120. Moreover, as previously
noted, these loans are not reflected in Sandpiper's
accounts receivable ledger, see Jacobs Dep. at
119-20, Ex. 29, and according to Wu, he never saw any
documentation for these loans. See Wu Dep. at 85-86.
Nevertheless, Jacobs maintains that the CFO for PiperGear and
Sandpiper kept track of the loans and they were accounted for
in the records of those companies. See Jacobs Dep.
at 176-77; Second Jacobs PiperGear Decl. ¶ 2.
limited exceptions not relevant here and expressly outlined
in the APA, “Innovapro did not assume any liabilities
of Sandpiper . . . .” See Wu Decl. ¶ 24;
see also APA ¶ 2. As part of the APA, Innovapro
entered into a two-year consulting agreement and a
five-year-non-compete agreement with David Jacobs.
See Wu Decl. ¶ 29; APA ¶¶ 8-9, Sched.
8-9. Although Jacobs has received payment under the
consulting agreement, Wu has not asked him to provide any
services. See Wu Dep. at 59; Jacobs Dep. at 33. In
conjunction with the APA, Sandpiper agreed to amend its
articles of incorporation to change its name to DBJ
Enterprises. See Wu Decl. ¶ 30; APA ¶ 12.
On September 4, 2018, Sandpiper notified the FTC of the asset
sale to Innovapro and the agreement to change its name to DBJ
Enterprises. See Jacobs Dep. at 160, Ex. 55. The
certificate of amendment making this change, signed by Jacobs
and dated August 31, 2018, was filed with the California
Secretary of State on October 5, 2018. See Jacobs
Dep. at 125-26, Ex. 53.
acquiring Sandpiper's assets, Innovapro has continued
Sandpiper's business of supplying Sandpiper-branded
products to the military exchanges. See Wu Decl.
¶ 36. Prior to the take-over, Innovapro entered a
contract with Paragon so that Paragon would seamlessly
continue its services as the sales representative for the
Sandpiper brand. See Wu Dep. at 47-48. Jeff Payne,
Paragon's national account manager, testified that
Paragon's responsibilities on behalf of the Sandpiper
brand have not changed since Innovapro's take-over.
See Payne Dep. at 6-7; Brown Dep. at 95. With
Paragon's assistance, Innovapro “went through all
the steps necessary to be set up as a new- essentially a
brand new vendor in the AAFES system.” See
Payne Dep. at 11, 22-23. After the asset sale, Innovapro met
with AAFES to “announc[e] the new ownership and
introduc[e] Michael Bennett as the new direct representative
at Sandpiper.” Id. at 10-11. However, at the
time of Payne's April 10, 2019 deposition, Paragon had
not “had any new product presentations, ” and
Innovapro had not provided Paragon with “any marketing
materials” or a new product catalog. Id. at
23. According to Payne, the Sandpiper brand product line sold
to AAFES has remained the same, with the exception of the
wallet series that was recalled in May 2018. Id. at
of the take-over, Innovapro terminated all Sandpiper
employees. See Wu Dep. at 31-32. Innovapro then
re-hired “7 or 8” of those employees, including
Jones. See Wu Dep. at 30-32; Jones Dep. at 92.
Jones' first responsibility on behalf of Innovapro was to
terminate all of Sandpiper's internal merchandisers, with
the exception of a “handful” serving the major
stores, none of which are in Florida. See Jones Dep.
at 92-93. The work that was previously performed by
Sandpiper's merchandisers is now handled by Paragon's
field force. Id. at 107. According to Jones,
Innovapro made a business decision to terminate these
internal merchandisers and instead let Paragon's
merchandisers take over because “they're getting a
commission on everything anyway.” Id. at
94-95. According to Jones, two of the Florida merchandisers
had previously left due to personal reasons, and Jones
terminated the “one in Jacksonville that did Mayport
and JAX Navy and Camp Lejeune” on October 1, 2018.
Id. at 94. Jones exercises no managerial authority
over the Paragon merchandisers, as “Paragon handles
that themselves.” Id. at 95. Instead,
Jones' job responsibilities for Innovapro consist
primarily of managing the activities of the few remaining
Sandpiper merchandisers at the larger exchange stores, and
maintaining “[r]elationships with managers and the GMs
at store level, which is kind of the next step up from the
merchandisers . . . .” Id. at 99; see
also Wu Dep. at 34 (“A. Mr. Van Jones's main
job is for service. Not much of sales. Q. The servicing of
the stores and the customers? A. The service, yeah.”).
Although Jones agreed that his job is to maintain
relationships with managers both inside and outside of
Florida, he reiterated-"But, again, Paragon is taking
over all of the representation in Florida. I really am not
going to be involved in that.” See Jones Dep.
at 99-100. Since the take-over, Jones has, on two occasions,
visited the exchange store at the Pensacola Naval Air Station
in Florida, in his capacity as an Innovapro employee.
Id. at 96. While there, he briefly met with the
manager of the exchange store who was requesting additional
fixtures for the store. Id. Other exchanges in
Florida are too small for Jones to call on, such that the
majority of his work is done over the phone and e-mail with
people located outside the state of Florida. Id. at
remains a minor market for Sandpiper-brand products after the
take-over. See Wu Decl. ¶¶ 40-43.
Nevertheless, Innovapro does ship products directly to
Florida. See Wu Dep. at 79, Ex. 27 (identifying
Exhibit 27 as “[o]ne of our printouts for shipping
location when in state of Florida” with item numbers
identifying Innovapro products). According to Wu, the primary
customers for Innovapro's Sandpiper products are the
military exchanges, AAFES and NEXCOM, and Innovapro's
business dealings with these customers occur at their
headquarters in Dallas (AAFES) and Virginia (NEXCOM).
Id. ¶¶ 36-37. Wu maintains that
“Innovapro's military exchange customers arrange to
pick up prepackaged product at Innovapro's warehouse in
California, and then ship the product to their own
distribution centers for further processing.”
Id. ¶ 39. As such, according to Wu,
“Innovapro does not deal directly with the Florida
stores or deliver product directly to the Florida
stores.” Id. ¶ 38. Sandpiper products
sold in military exchange stores located in Florida
“account for fewer than 2% of total Sandpiper sales
nationwide.” Id. ¶ 40. Sandpiper products
are also sold in Florida through “small, independent
retailers, ” and online through the Amazon.com
marketplace, as well as the Sandpiper website. See
Id. ¶ 41. These sales amount to less than 0.5% of
Innovapro's total Sandpiper sales. Id.
to Wu, “[t]here have been only three online sales
delivered to Florida since Innovapro took over the
www.sandpiperca.com website.” Id. ¶ 42.
Since the take-over, Florida sales of Sandpiper products
through all channels make up 2.15% of Innovapro's total
Sandpiper sales. Id. ¶ 43. However,
Florida's share of Sandpiper's total sales, although
small, has gradually been increasing since 2016. Id.
federal district court in Florida may exercise personal
jurisdiction over a nonresident defendant to the same extent
that a Florida court may, so long as the exercise is
consistent with federal due process requirements.”
See Licciardello v. Lovelady, 544 F.3d 1280, 1283
(11th Cir. 2008). “If both Florida law and the United
States Constitution permit, the federal district court may
exercise jurisdiction over the nonresident defendant.”
Id. Thus, to determine whether personal jurisdiction
exists over Defendants, the Court must engage in a two-part
inquiry. See Mut. Serv. Ins. Co. v. Frit Indus.,
Inc., 358 F.3d 1312, 1319 (11th Cir. 2004). First, the
Court must determine “whether the exercise of
jurisdiction is appropriate under [Florida]'s long-arm
statute.” Id. (citing Sculptchair, Inc. v.
Century Arts, Ltd., 94 F.3d 623, 626 (11th Cir. 1996)).
Second, the Court must consider whether exercising personal
jurisdiction over Defendants is consistent with “the
Due Process Clause of the Fourteenth Amendment to the United
States Constitution, which requires that the defendant have
minimum contacts with the forum state and that the exercise
of jurisdiction over the defendant does not offend
‘traditional notions of fair play and substantial
justice.'” Id. (quoting Sculptchair,
Inc., 94 F.3d at 626). “Only if both prongs of the
analysis are satisfied may a federal or state court exercise
personal jurisdiction over a nonresident defendant.”
Robinson v. Giarmarco & Bill, P.C., 74 F.3d 253,
256 (11th Cir. 1996) (internal quotations omitted).