Opinion
No. C 01-03068 WHA
November 5, 2001
INTRODUCTION
In this trade-libel case, this order concludes that exercising personal jurisdiction over defendant would be unreasonable, and therefore GRANTS defendant's motion to dismiss under FRCP 12(b)(2). Defendant's SLAPP motion is DENIED as moot. The hearing on these motions, presently scheduled for November 8, 2001, is VACATED.
STATEMENT
Defendant Marshall Fallwell is an antiques dealer and appraiser (Fallwell Decl. ¶ 3). In March 2001, he was retained by Mark and Becky Levin, two Bostonians, to appraise antique furniture and certain decorative objects that their interior decorator had obtained for them. The decorator had purchased the antiques from several dealers, including plaintiff Foster-Gwin, a San Francisco company. The parties disagree as to what motivated the Levins to seek an appraisal: legitimate concern that they had bought fakes, or simply "buyer's remorse" (Fallwell Decl. ¶ 17; Opp. 2).
Fallwell has also done other appraisal work for the Levins (Lipscomb Exh A at 23).
Fallwell agreed to appraise the antiques and to provide expert testimony for the Levins if requested to do so. Fallwell examined the antiques in Boston and Rhode Island (Fallwell Decl. ¶ 17). At that time, he did not know who had sold the Levins the pieces. He also began to write a preliminary appraisal opinion before he learned which pieces had been purchased from which dealer. Fallwell claims that learning the names of the dealers had no effect on his appraisal opinions. His final report categorized the antiques by the dealer from which they had been purchased (Fallwell Decl. ¶ 19; Medina Exh. A). The report included a section on pieces purchased from Foster-Gwin, and noted that Foster-Gwin was a San Francisco firm (Medina Exh. A). The report, completed on June 20, 2001, concluded that many of the pieces were fakes (ibid).
After Fallwell completed his report, he gave it to the Levins' counsel, Boston-based Scibelli and Whiteley LLP, and no one else. He understood that the report would be used in legal discussions with Foster-Gwin (Fallwell Decl. ¶ 23-24). Scibelli and Whiteley sent the report to Foster-Gwin's counsel in California as an attachment to a letter dated June 22, 2001. That letter referred to Fallwell's report, sought a full refund for antiques purchased from Foster-Gwin, and raised the possibility of legal action (Scibelli Exh. B).
Fallwell has since provided a copy of the report to his California-based counsel in this action (Fallwell Decl. ¶ 24).
The Levins filed suit against their interior decorator and another antiques dealer (not Foster-Gwin) on August 3, 2001, in federal district court in Boston (Scibelli Decl. ¶ 6). When discussions with Foster-Gwin proved unfruitful, their original complaint was amended on August 24, 2001, to add Foster-Gwin and three other antiques dealers as defendants (id. at ¶ 6-7; Scibelli Exh. A). The Levins' complaint accused the defendants of misrepresentation, breach of contract, negligence, breach of fiduciary duty, unjust enrichment, and unfair and deceptive trade practices (Scibelli Exh. A). The Levins' suit relies in substantial part on Fallwell's report, and their counsel expects to call Fallwell as a witness in that action (id. at ¶ 9-10).
Before the Levins amended their complaint to name Foster-Gwin as a defendant, Foster-Gwin filed the present action against Fallwell. Foster-Gwin's complaint alleged that Fallwell falsely impugned the authenticity of the furniture he appraised (Compl. ¶ 15). The complaint asserted causes of action for trade libel, defamation, interference with existing contractual relations; interference with prospective economic advantage, professional negligence, and violation of California Business and Professions Code Section 17200. Fallwell responded with a motion to dismiss for lack of personal jurisdiction, or failure to state a claim. Fallwell also moved to strike the complaint under California's "SLAPP" statute, California Code of Civil Procedure Section 425.16.
The parties have stipulated to take Fallwell's motion to dismiss for failure to state a claim off-calendar pending resolution of his jurisdictional and SLAPP motions.
Since the filing of Foster-Gwin's complaint, the parties to this action have engaged in discovery on whether personal jurisdiction over Fallwell is proper in this forum. Discovery has established that Fallwell resides in Nashville, Tennessee (Fallwell Decl. ¶ 2). He has never personally visited California, and owns no real or tangible property in the state (Fallwell Decl. ¶ 6, 12). He has not solicited appraisal clients in California, and to the extent of his knowledge has had no appraisal clients who resided in California (id. at ¶ 7). He does not direct any advertising specifically toward California residents, or place advertisements in publications directed primarily toward California residents (id. at ¶ 13). He has not advertised in any other trade publications outside of the Nashville, Tennessee area (Lipscomb Exh. A at 21).
Fallwell has published several articles in the Maine Antiques Digest, which he has described as the "New York Times" of the antiques business (id. at 24). He owns three internet domain names. There is no evidence that he has ever maintained publicly-accessible websites at these domains, however (id. at 16; Medina Decl. ¶ 4, Medina Exh. 2). In connection with work for the Levins, Fallwell has made six or seven phone calls to Dominique Scholl, a California-based art consultant (Lipscomb Exh. A at 22; Fallwell Supp. Decl. ¶ 2). He was named as a source in a Smart Money magazine article in November 2000, which led to his retention by the Levins (Lipscomb Exh. A at 19). Finally, in addition to appraising antiques, Fallwell sells them. Some of his sales are made through eBay, Inc., an online marketplace headquartered in California and incorporated in Delaware. He has listed approximately 250 items for sale "with eBay," making 162 sales (Lipscomb Exh. A at 25). Sellers on eBay (which is incorporated in Delaware and has its headquarters in California) must assent to a "User Agreement." This agreement provides, in pertinent part, as follows (P1. Exh. C):
Foster-Gwin contends that these calls related to appraisal work involved in this suit; Fallwell swears that they did not and that Foster-Gwin is misinterpreting his deposition testimony (Opp. 12). This order does not determine whether there is an ambiguity here (which would have to be interpreted in Foster-Gwin's favor) or not, as it considers the calls, however characterized, insufficient either to confer general jurisdiction over Fallwell or to disturb its conclusion as to the reasonableness of asserting specific jurisdiction over him.
3.1 Online Auctions. Although we are commonly referred to as an online auction web site, it is important to realize that we are not a traditional "auctioneer." Instead, our site acts as a venue to allow anyone to offer, sell, and buy just about anything, at anytime, from anywhere, in a variety of formats, including a fixed price format and an auction-style format commonly referred to as an "online auction." We are not involved in the actual transaction between buyers and sellers. As a result, we have no control over the quality, safety, or legality of the items advertised, the truth or accuracy of the listings, the ability of sellers to sell items or the ability of buyers to buy items. We cannot ensure that a buyer seller will actually complete a transaction.
The agreement also provides that disputes arising out of eBay transactions will be governed by California law, and that users consent to resolve those disputes through binding arbitration in California (ibid).
Fallwell has made between 11 and 13 eBay sales to California residents (Lipscomb Exh. A at 30-31). None of these sales is alleged to have been to Foster-Gwin. The total dollar amount of these sales to California residents was between approximately $600 and $800 (id. at 31-32). Sales made through eBay constitute only a small percentage of his business (id. at 37).
ANALYSIS
The two issues addressed in this order are whether Fallwell's California contacts suffice to allow personal jurisdiction over him in this forum; and whether Foster-Gwin' s complaint should be struck under California's SLAPP statute. As this order concludes that exerting personal jurisdiction over Fallwell would be improper, it does not reach the SLAPP issue.
1. General Principles.
When a defendant moves to dismiss for lack of personal jurisdiction, it is plaintiff's burden to establish that jurisdiction exists. Alexander v. Circus Circus Enterprises, Inc., 939 F.2d 847, 849 (9th Cir. 1991). Declarations, exhibits, interrogatories, oral testimony and other discovery materials are all relevant to this inquiry. Data Disc, Inc. v. Systems Tech Ass'n, Inc., 557 F.2d 1280, 1289 (9th Cir. 1977).
When sitting in diversity, a federal court first looks to its forum state's jurisdictional statute for guidance. Core-Vent Corp. v. Nobel Indus. AR, 11 F.3d 1482, 1484 (9th Cir. 1993). California's long-arm statute, California Civil Code Section 410.10, permits the exercise of jurisdiction to the full extent permitted by due process. The state and federal inquiries are therefore conflated, making the operative test whether the exercise of general or specific jurisdiction over a defendant would comply with due process principles. See International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945).
2. General Jurisdiction.
General jurisdiction refers to the Court's authority to hear any cause of action concerning a defendant, regardless of the cause of action's relationship to the defendant's activities within the forum state. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 415 (1984). General jurisdiction exists if a defendant has "substantial" or "continuous and systematic" contacts with the forum state. Id. at 414. This is a fairly high standard, and requires that the defendant's contacts be of the sort that approximate physical presence. Factors to be considered are whether the defendant makes sales, solicits or engages in business in the state, serves the state's markets, designates an agent for service of process, or is incorporated there. Bancroft Masters, Inc. v. Augusta Nat'l, Inc., 223 F.3d 1082, 1086 (9th Cir. 2000).
As discussed, Fallwell has few contacts with California. He does not live there; has never visited there; does not own property there; does not have any appraisal clients there; etc. The only facts supporting jurisdiction are that Fallwell owns three non-operative websites; that he occasionally publishes articles in a magazine, Maine Antiques Digest, that is probably circulated in California, among other places; that he was cited in a Smart Money article; that he has made several phone calls to a California art consultant; and, most importantly, that he has completed 162 sales through eBay, including 11 to 13 sales to California customers. As evidenced by the parties' briefs, the most compelling evidence relates to the eBay transactions. The other contacts are sporadic and indirect at best, and are plainly insufficient (on their own or in the aggregate) to give rise to general jurisdiction. See, e.g., Brand v. Menlove Dodge, 796 F.2d 1070, 1073 (9th Cir. 1986).
Any discussion of eBay implicates the internet, a medium that has provoked new and challenging jurisdictional issues. See, e.g., Panavision Int'l L.P. v. Toeppen, 141 F.3d 1316 (9th Cir. 1998); Callaway Golf Corp. v. Royal Canadian Golf Ass'n, 125 F. Supp.2d 1194, 1202 (C.D. Cal. 2000). But the question before the Court is not as novel as the parties claim. Foster-Gwin asserts that general jurisdiction exists over a non-resident defendant by virtue of sales that he has made using an in-state medium or sales agent (depending on one's view of what eBay is). The sales include several to residents of the forum state. This raises three familiar issues: (1) what is the jurisdictional effect of contracting with a forum-state company; (2) what is the effect of contracting with a company performing the sort of services eBay offers; and (3) what is the effect of making 11 to 13 sales, totaling less than $1,000, to forum-state residents.
As applied here, general jurisdictional principles do not accord great weight to the fact that eBay's user agreement calls for the application of California law, and that its headquarters are located in California. This suit has nothing to do with Fallwell's eBay transactions, and thus the user agreement's invocation of California law is not particularly relevant. See Gates Learjet Corp. v. Jensen, 743 F.2d 1325, 1331 (9th Cir. 1984) (even taken together with other activities, choice of forum provision applicable to unrelated claims not sufficient grounds for general jurisdiction). If repeated contracting, no matter what for, with a forum-state company was enough to confer general jurisdiction, then every frequent flier could be hauled into court in their airline's home state to answer for any and all causes of action, since they had repeatedly "contracted" for tickets. Furthermore, Fallwell undoubtedly placed little if any weight on the location of eBay's headquarters when he accepted the user agreement. indeed, the very purpose of the eBay service is to remove spatial constraints on shopping and to provide an affordable national marketplace for low-cost goods. The fact that he contracted with eEay, by itself, cannot connote general jurisdiction and cause Fallwell to be hauled into court on a totally unrelated claim. Cf. Helicopteros, 466 U.S. at 416-17 (holding that a defendant's cashing of checks on a Texas bank was not enough to confer general jurisdiction in that state, since the bank's location was unimportant to defendant).
This holds true regardless of how eBay's services are categorized. As the parties recognize, it is difficult to classify eBay as either a passive forum manipulated by Fallwell, or as an active distributor or sales agent. The company's user agreement, excerpted earlier, describes its service as providing sellers and buyers with a "venue." Regardless of how the service operates, however, under the facts of this case it has not been employed in a manner that would make general jurisdiction proper. Use of a forum-state agent does not afford personal jurisdiction as to an unrelated cause of action. Congoleum Corp. v. DLW Aktiengesellschaft, 729 F.2d 1240, 1242 (9th Cir. 1984). Even more apt is a comparison to an advertisement, brochure or like solicitation for a product or service, also insufficient grounds for asserting jurisdiction in every state that advertisement reaches. Shute v. Carnival Cruise Lines, 897 F.2d 377, 381 (9th Cir. 1990), rev'd on other grounds, 498 U.S. 807 (1991).
Fallwell's 11 to 13 sales to California customers provide somewhat stronger grounds for invoking general jurisdiction. Cf. Bancroft Masters, 223 F.3d at 1086. But it is not determinative, and several cases have decided that no general jurisdiction exists over a defendant notwithstanding their solicitation of customers in the forum state. See Brand, 796 F.2d at 1073 (sales made in Utah to California residents do not constitute "substantial" contacts with California); Cubbage v. Merchent, 744 F.2d 665, 667-68 (9th Cir. 1984) (no general jurisdiction over non-resident doctors despite a significant number of patients in forum); Congoleum, 729 F.2d at 1242-43 (agent's solicitation of orders in forum state and promotion of products through mail not enough for general jurisdiction over principal corporation).
In examining business contacts with the forum state, moreover, a court must focus on the "economic reality" of a defendant's actions. Gates, 743 F.2d at 1331. Here, the reality is that Fallwell has conducted less than $1,000 worth of business through eBay with California residents. There is no indication that Fallwell specifically targeted California buyers on eBay; it is a national service. Although each of his sales may have necessitated contacts with the buyer, "[m]aking telephone calls and sending telexes and letters . . . are not activities which support a finding of general jurisdiction." Ibid. Fallwell has employed the services of a company that happens to have its headquarters in California to reach a national audience, including 11-13 customers who also happened to reside in California. These activities, even taken together with Fallwell's other California contacts, fall well short of the "fairly high" threshold for general jurisdiction. Bancroft Masters, 23 F.3d at 1086; Shute, 897 F.2d at 381 (cruise line that advertised in Washington and sold approximately one percent of its cruises to Washington residents not subject to general jurisdiction in Washington). This conclusion is consistent with the Ninth Circuit's acknowledgment that it "regularly ha[s] declined to find general jurisdiction even where the contacts were quite extensive." Amoco Egypt Oil Co. v. Leonis Navigation Co., 1 F.3d 848, 851 n. 3 (9th Cir. 1993).
3. Specific Jurisdiction.
Foster-Gwin contends that even if general jurisdiction does not exist, specific jurisdiction over Fallwell is proper. Specific jurisdiction exists if: (1) the defendant has performed some act or consummated some transaction within the forum or otherwise purposely availed himself of the privileges of conducting activities in the forum; (2) the claim arises out of or results from the defendant's forum-related activities; and (3) the exercise of jurisdiction is reasonable. Bancroft Masters, 223 F.3d at 1086.
a. Purposeful Availment.
Foster-Gwin asserts that the "purposeful availment" prong has been set because Fallwell's foreign acts satisfy the "effects test" set forth in Calder v. Jones, 465 U.S. 783 (1984). To meet the effects test, the defendant must (1) be alleged to have committed an intentional act, which was (2) expressly aimed at the forum state, and (3) caused harm, the brunt of which is suffered and which the defendant knows is likely to be suffered in the forum state. Bancroft Masters, 223 F.3d at 1087. The "expressly aimed" prong of the effects test "hardly defines itself," but in general goes to whether "the defendant is alleged to have engaged in wrongful conduct targeted at a plaintiff whom the defendant knows to be a resident of the forum state." Ibid.
Fallwell's eBay contacts are irrelevant to the necessary specific jurisdiction analysis because Foster-Gwin's claim does not arise from Fallwell's use of the internet service. Foster-Gwin asserts that these sales show Fallwell is its competitor, and therefore had a motive to libel its antiques. This is a very unpersuasive argument, particularly in light of the vast discrepancy between the value of the items Fallwell sold on eBay (ranging from $20 to $300, with most sales at the low end of the range) to the price tags affixed to Foster-Gwin's antiques ($560,00 for 19 pieces) (Compl. ¶ 11).
In this trade libel case, it is a close call whether the "effects test" has been met. Two decisions are close on point; each reached a different conclusion. In Casualty Assurance Risk Ins. Brokerage Co. v. Dillon, 976 F.2d 596 (1992), a Guam insurance corporation sued the Indiana Insurance Commissioner in federal court in Guam for libel arising out of a letter the Commissioner had sent to healthcare providers, all located outside of Guam. The Commissioner moved to dismiss for lack of personal jurisdiction. Dillon rejected plaintiff's contention that its incorporation in Guam, alone, satisfied the effects test. Dillon noted that the letter was never sent to Guam, and that the plaintiff did not conduct any business at all in Guam. The brunt of the injury, therefore, was not considered to fall on Guam soil. Id. at 599-600.
In Core-Vent, by contrast, a California corporation sued Swedish doctors in California for antitrust violations and libel based on articles the doctors had published in medical journals circulated worldwide, including in California. The doctors moved to dismiss for lack of personal jurisdiction. The plaintiffs invoked Calder and the effects test. Core-Vent noted that, in contrast to the facts in Dillon, the forum state was plaintiff's principal place of business, meaning that the majority of any economic effects of the alleged libel would arguably be felt there. On the other hand, Core-Vent also recognized the possibility that the brunt of the harm would be felt most strongly where the statements affected business most, and that the plaintiff had not alleged it did most of its business in the forum state. In addition, it had not been alleged that the defendants knew the journal would be circulated in California. Core-Vent called the matter a "close question" and assumed that the effects test had been met, before going on to find that exercising jurisdiction over the defendants would be unreasonable. Id. at 1487.
This case has more in common with Core-Vent than Dillon. Although Fallwell did not know that Foster-Gwin supplied the antiques when he began his allegedly improper appraisal, he learned its identity and location before he was (lone. Foster-Gwin has not shown that it does most of its business in California, but then again neither did the plaintiff in Core-Vent. Fallwell understood that his report would be used in negotiations with Foster-Gwin, and it was probable that a copy would make its way to California. In addition, he knew that the report would be used in litigation that might adversely affect Foster-Gwin's business. As with Core-Vent, based on the facts before it this order will assume that the effects test has been met. See id. at 1487.
b. "But For."
Under the second prong of the specific jurisdiction test, the plaintiff's claim must arise out of the defendant's forum-related activities. Bancroft Masters, 223 F.3d at 1087. That test is met here. Foster-Gwin's claims arise out of Fallwell's appraisal, which as discussed above, had a sufficient effect in California.
c. Reasonableness.
Finally, an exercise of personal jurisdiction must be reasonable in that it must comport with fair play and substantial justice. The inquiry into reasonableness implicates seven factors: (1) the extent of a defendant's purposeful interjection; (2) the burden on the defendant in defending in the forum; (3) the extent of conflict with the sovereignty of the defendant's state; (4) the forum state's interest in adjudicating the dispute; (5) the most efficient judicial resolution of the controversy; (6) the importance of the forum to the plaintiff's interest in convenient and effective relief and (7) the existence of an alternative forum. Burger King v. Rudzewicz, 471 U.S. 462, 476-77 (1985). All seven factors must be considered, and to avoid jurisdiction, the defendant must make a compelling case as to why operative considerations render its exercise unreasonable. Core-Vent, 11 F.3d at 1488.
(1) Purposeful Interjection.
The smaller the element of purposeful interjection, the less the jurisdiction is to be anticipated and the less reasonable is its exercise. Ibid. As discussed above, Fallwell's purposeful interjection into California was minimal, arguably just enough to satisfy the effects test. His other contacts with the state are also attenuated. This factor weighs in his favor.
(2) Defendant s Burden.
This factor is afforded little weight. Id. at 1489. That said, trying this case in California would impose a substantial burden on Fallwell. He is a Tennessee resident and private citizen. This factor supports dismissal. Terracom v. Valley Nat'l Bank, 49 F.3d 555, 561 (9th Cir. 1995).
(3) Sovereignty Concerns.
The only "sovereignty concern" implicated by asserting jurisdiction over Fallwell is the risk of inconsistent results in this case and the Levins' suit in Boston. Were this suit dismissed, then re-filed in Boston, the parties and facts in both suits might be more capably monitored. This factor weighs slightly, though not much, in Fallwell's favor.
(4) Forum State's interest.
This factor leans toward Foster-Gwin, as "California maintains a strong interest in providing an effective means of redress for its residents tortiously injured." Gordy v. Daily News, L.P., 95 F.3d 829, 831-32 (9th Cir. 1996).
(5) Efficient Resolution.
This consideration goes to where the witnesses and evidence are likely to be located. Core-Vent, 11 F.3d at 1489. This factor helps Fallwell. Foster-Gwin is located in California, the Levins are in Massachusetts, and Fallwell is in Tennessee. Most importantly, the central evidence in this case — the appraised antiques are in Boston and Providence. As discussed below, this points toward Boston as a more reasonable forum for this suit than California.
(6) Convenient and Effective Relief.
Like the second factor, the defendant's burden, this factor is not given great weight. Id. at 1490. What significance it holds weighs in Foster-Gwin's favor, as California is a more convenient forum for vindicating its interests.
(7) Alternative Forum.
Foster-Gwin bears the burden of proving the unavailability of another forum. ibid. This final consideration works in Fallwell's favor. Foster-Gwin is a party in a lawsuit filed by the Levins. Foster-Gwin was on notice that they might be sued no later than June 22, 2001. That suit is ongoing in Boston. The allegedly tortious actions giving rise to this suit took place in Boston and Providence. Fallwell is expected to be called as an expert witness in that suit, meaning that he has no compunctions about making himself available in that forum. The Levins' suit implicates the same issues and facts as this one. Boston is a viable, preferable, alternative forum for this action.
On balance, these factors present a compelling case in favor of dismissal. See Terracom, 49 F.3d at 561-62 (holding that although a factor supported plaintiff, dismissal was still proper); Core-Vent, 11 F.3d at 1490 (same, although two factors supported plaintiff). There is an ongoing suit in Massachusetts, involving many of the same claims, at which Fallwell is likely to appear as a witness. Fallwell performed many of the appraisals leading to his allegedly libelous report in Massachusetts. The furniture is located there, and in nearby Rhode Island. Fallwell's contacts with California are minimal, even given this order's liberal interpretation of the effects test. This order therefore dismisses this action, as the exercise of jurisdiction over Fallwell would be unreasonable.
CONCLUSION
For the reasons stated above, this order DISMISSES this case for lack of personal jurisdiction over the defendant. Defendant's SLAPP motion is DENIED as moot. The hearing scheduled for these motions scheduled for November 8, 2001, is VACATED. The clerk SHALL close the file.
IT IS SO ORDERED.