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finding personal jurisdiction because the eBay seller ended the auction prematurely and entered into a traditional sales relationship through a series of transactions with a known buyer
Summary of this case from Great Notions, Inc. v. DanyeurOpinion
Civil Action No. 3:03-CV-0161-BH
August 18, 2003
MEMORANDUM OPINION AND ORDER
Before the Court are Defendant's Combined Motion to Dismiss for Lack of Personal Jurisdiction and Brief in Support Thereof'("M. to Dismiss"), filed February 3, 2003, and Plaintiff's Response to Defendant's Motion to Dismiss for Lack of Personal Jurisdiction and Brief in Support 77zereof("Resp."), filed February 21, 2003. Having reviewed the evidence and the applicable authorities, the Court is of the opinion that Defendant's Combined Motion to Dismiss for Lack of Personal Jurisdiction and Brief in Support Thereof should be DENIED.
I. BACKGROUND
Plaintiff Ed T. McGuire ("Plaintiff") is a citizen of the City of Coppell, Dallas County, Texas. (Notice of Removal at 1.) Defendant Robert L. Lavoie ("Defendant") is a citizen of the state of Wisconsin and does not operate a business authorized to conduct business in Texas. (Def.'s Aff. at 1-2.)This dispute arises from Plaintiffs purchase of 20 tractors from Defendant, during the period from January, 2002, through July, 2002. (Pl.'s Original Pet. at 4-5.) In some cases, Defendant placed tractors for auction on the internet auction site, eBay; the tractors were available for purchase by any individual who had Internet access and could logon to eBay. Defendant ended the auctions early at Plaintiff's request to allow Plaintiff to purchase the tractors. (Pl.'s Aff. at 1-2; Def.'s Aff. at 3.) In other instances, Defendant emailed pictures of his tractor inventory, and Plaintiff then purchased the tractors. Id. The parties communicated via telephone conversations, electronic mail, facsimile transmissions, and regular mail. (Pl.'s Aff. at 2-5.) Plaintiff alleges that Defendant purported to sell tractors not in his possession and failed to deliver several tractors after payment was made, and that restoration of several of the tractors was not completed as agreed. (Pl.'s Original Pet. at 5.) Defendant allegedly offered to repudiate the sales and refund Plaintiff's money, but Plaintiff never received the money. Id. at 5-6. Plaintiff claims Defendant still owes him $90,196.00, and he asserts causes of action for breach of contract, breach of warranty, violations of the Texas Deceptive Trade Practices Act, and fraud herein. Id.
II. ANALYSIS
Defendant moves to dismiss this action pursuant to FED. R. CIV. P. 12(b)(2) for lack of personal jurisdiction. (M. to Dismiss at 1.) A federal district court sitting in a diversity action may exercise personal jurisdiction over a nonresident defendant if the long-arm statute of the forum state confers personal jurisdiction over that defendant, and exercise of such jurisdiction by the forum state is not inconsistent with due process under the United States Constitution. Latshaw v. Johnston, 167 F.3d 208, 211 (5th Cir. 1999). Because the Texas long-arm statute has been determined to extend to the limits of due process, the Court's analysis is limited to determining whether subjecting Defendant to suit in Texas is consistent with due process. Id."The Due Process Clause of the Fourteenth Amendment permits the exercise of personal jurisdiction over a nonresident defendant when (1) that defendant has purposefully availed itself of the benefits and protections of the forum state by establishing `minimum contacts' with the forum state; and (2) the exercise of jurisdiction over that defendant does not offend `traditional notions of fair play and substantial justice.'" Id. (citing International Shoe Co. v. State of Washington, 326 U.S. 310, 316 (1945)). "Minimum contacts" are those contacts sufficient to assert specific jurisdiction, or those sufficient to assert general jurisdiction. Alpine View Co. Ltd. v. Atlas Copco AB, 205 F.3d 208, 215 (5th Cir. 2000). "To comport with due process, the defendant's conduct in connection with the forum state must be such that he `should reasonably anticipate being haled into court' in the forum state." Latshaw, 167 F.3d at 211 (citing World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980)). If the court determines that minimum contacts exist to support the exercise of personal jurisdiction, the court then determines whether it would be fair to require the nonresident defendant to defend the suit in the forum state. WNS, Inc. v. Farrow, 884 F.2d 200, 204 (5th Cir. 1989) (citing Bean Dredging Corp. v. Dredge Tech. Corp., 744 F.2d 1081, 1085 (5th Cir. 1984)). The court "must consider the burden on the defendant, the interest of the forum state, and the plaintiff's interest in obtaining relief." Id. Also to be considered are "the interstate judicial system's interest in obtaining the most efficient resolution of controversies; and the shared interest of the several States in furthering fundamental substantive social policies." Id.
The party seeking to invoke the court's jurisdiction has the burden of establishing sufficient contacts by the nonresident defendant. WNS, Inc., 884 F.2d at 203. When the court conducts a pre-trial evidentiary hearing, the plaintiff must prove jurisdiction by a preponderance of the evidence. Travelers Indem. Co. v. Calvert Fire Ins. Co., 798 F.2d 826, 831 (5th Cir. 1986). However, where a jurisdictional issue is ruled on motion without a full evidentiary hearing, the plaintiff must make only a prima facie showing of jurisdiction. Id. The allegations of the complaint are to be taken as true, except where controverted by the defendant's affidavits. Id. Conflicts in the affidavits are resolved in the plaintiff's favor. Id. Because no pre-trial evidentiary hearing was conducted, the Court must therefore determine whether Plaintiff met his burden to make a prima facie showing that Defendant engaged in "minimum contacts" with the state of Texas, sufficient to support the exercise of personal jurisdiction.
Defendant in this case requested an evidentiary hearing in order to require Plaintiff to prove jurisdiction by a preponderance of the evidence. (M. to Dismiss at 8.) However, it is clear from Plaintiff's Original Petition and the affidavits submitted in this case that there is no dispute as to the material facts establishing jurisdiction. Accordingly, an evidentiary hearing is not necessary. See Moran v. Kingdom of Saudi Arabia, 27 F.3d 169, 173 (5th Cir. 1994) (noting that though a court "may" consider oral evidence as well as the pleadings, an evidentiary hearing is not required).
A. The Zippo Test for Internet Activity
Defendant asserts that asserting personal jurisdiction is not proper in this case because the placement of an item for sale on eBay is similar to operating a passive website under the analysis in Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119, 1124 (W.D. Pa. 1997). (M. to Dismiss at 5.) The Fifth Circuit has adopted the test first set out in Zippo for determining whether a party's Internet activity is a basis for exerting personal jurisdiction. Mink v. AAAA Development LLC, 190 F.3d 333, 336 (5th Cir. 1999). In applying that test, courts look to the "nature and quality of commercial activity that an entity conducts over the Internet. Mink, 190 F.3d at 336 (quoting Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119, 1124 (W.D. Pa. 1997)). Internet use is divided into three categories. Id. Where the defendant clearly does business over the Internet by contracting with residents of other states and knowingly and repeatedly transmitting computer files over the Internet, the exercise of personal jurisdiction is proper. Id. Where the defendant maintains a web site that allows users to exchange information with a host computer, "the exercise of jurisdiction is determined by the level of interactivity and commercial nature of the exchange of information." Id. If the defendant merely advertises on the Internet by establishing a passive website, the exercise of personal jurisdiction is inappropriate. Id.
Although the court in Mink applied the Zippo rationale to determine whether grounds existed to exert general jurisdiction, it is also applicable in the specific jurisdiction context. American Eye-wear, Inc. v. Peeper's Sunglasses and Accessories, Inc., 106 F. Supp.2d 895, 901 n. 1 (N.D. Tex. 2000).
Because the majority of cases applying the Zippo test involve a defendant's conduct over its own website, its application to an internet auction site is questionable. The internet auction site eBay states that it provides a seller with the ability to "market your product to millions of daily visitors" around the world. See How Does eBay Work? at www.ebay.com/education/sellingtips/index.html. Sellers posts items for sale on eBay for a specified time, and buyers place bids on those items they are interested in purchasing. Id. After a winner is established, the buyer and seller make arrangements for payment and shipping. Id. In addition, Defendant notes that specific terms required by the seller can also be set forth on the webpage where the auction is taking place. (Def.'s Aff. at 2.) Thus, selling items via eBay is not equivalent to the third Zippo category, a passive website, because the seller is doing more than just advertising. He is actively seeking a buyer for a particular good, with payment terms to be arranged at the conclusion of the auction.
On the other hand, Plaintiff claims that the act of entering into multiple contracts with a Texas resident is more akin to knowing and repeated transmission of computer files over the Internet. (Resp. at 8.) Because a seller on eBay may only sell one item to an unknown bidder, however, such activity cannot be considered similar to the first Zippo category, "knowingly and repeatedly transmitting computer files over the Internet" to citizens of other states. Thus, placing an item for sale on an internet auction site is most similar to the second Zippo category, where a defendant maintains a web site that allows users to exchange information with a host computer. Accordingly, "the exercise of jurisdiction is determined by the level of interactivity and commercial nature of the exchange of information." Mink, 190 F.3d at 336 (quoting Zippo, 952 F. Supp. at 1124).
Courts which have considered whether commercial transactions over an internet auction site are sufficient to confer specific jurisdiction over the seller have noted that the seller had no control over who would ultimately be the highest bidder, and determined that the seller did not purposefully avail himself of the privilege of doing business in the forum state. See Winfield Collection, Ltd. v. McCauley, 105 F. Supp.2d 746, 749 (E.D. Mich. 2000); Metcalf v. Lawson, 802 A.2d 1221, 1226 (N.H. 2002). The instant case is, however, distinguishable. Here, Defendant did have control over the identity of the buyer of his tractors. Rather than allow the auction to progress, Defendant chose to stop the sale in response to Plaintiffs request and to sell the tractors to Plaintiff. (Pl.'s Aff. at 1; Def.'s Aff. at 3.) It further appears that Defendant could have imposed specific terms of sale, such as excluding potential buyers from particular jurisdictions, but did not do so. See Def.'s Aff. at 2. Additionally, this was not an isolated purchase by an anonymous bidder on an internet auction site. Rather, the parties entered into a series of transactions, and Defendant knew the identity of the buyer and that the buyer was a Texas resident. Based on these distinguishing facts, the second Zippo category analysis also appears to be inapplicable.
The Zippo test does not address a case involving a series of transactions which occurred via both the internet and conventional means such as here. Accordingly, the Court determines whether it has personal jurisdiction over the Defendant utilizing the traditional jurisdictional analysis.
B. Specific jurisdiction
Plaintiff claims that this Court has specific personal jurisdiction over Defendant based on Defendant's contacts with Plaintiff in Texas while conducting the sales in question. (Resp. at 4.) A court has specific personal jurisdiction over an out-of-state defendant "if the defendant has `purposefully directed' his activities at residents of the forum, and the litigation results from alleged injuries that `arise out of or relate to' those activities. Burger King v. Rudzewicz, 471 U.S. 462, 472 (1985) (citations omitted). "Isolated" or "sporadic" contacts may support a finding of specific jurisdiction if a "substantial connection" with the forum state is created, but the contacts must be more than random, fortuitous, or attenuated. Id. at 472-73. Jurisdiction may properly be asserted over a defendant who directs his tortious conduct toward the forum state, knowing that his actions will cause harm to a resident of the forum. Calder v. Jones, 465 U.S. 783, 789-90 (1984). The unilateral activity of entering into a contract with an out-of-state party, without more, is not sufficient to establish minimum contacts. Burger King. 471 U.S. at 474-75 (noting that there must "be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws."). Rather, in a breach of contract case, to determine whether a party purposefully availed itself of a forum, a court must evaluate "prior negotiations and contemplated future consequences, along with the terms of the contract and the parties' actual course of dealing. . . ." Id. at 479. Additionally, a non-resident defendant must have fair warning that a particular activity may subject him to the jurisdiction of another state. Electrosource, Inc. v. Horizon Battery Technologies, Ltd., 176 F.3d 867, 871 (5th Cir. 1999).
1. Minimum Contacts
Defendant alleges he lacks sufficient contacts with the state of Texas to be subjected to personal jurisdiction here. (M. to Dismiss at 3-6.) Plaintiff points to Defendant's emails and telephone calls to Texas as evidence of his purposefully directing activities towards a Texas citizen. (Resp. at 4.) It is undisputed that Defendant placed a tractor on an internet auction site for sale to every individual, including every Texan, who had Internet access and could logon to eBay. Defendant was contacted by Plaintiff, a Texas resident, who sought to purchase that tractor and others. Over the course of several months, Plaintiff and Defendant entered into a series of transactions wherein Plaintiff purchased 20 tractors from Defendant. (Pl.'s Original Pet. at 4.) The parties negotiated the sales and had further business dealings via eBay, email, telephone, facsimile, and regular mail. (Pl.'s Aff. at 1-3; Def.'s Aff. at 3.)
The instant litigation arises out of Defendant's conduct in the sale of tractors to Plaintiff, a Texas resident, which allegedly resulted in injury to Plaintiff. See Burger King v. Rudzewicz, 471 U.S. 462, 472 (1985) (stating that in order for a court to find specific jurisdiction, the lawsuit must result from injuries that `arise out of or relate to' the defendant's activities directed toward the forum state). In addition to his claims of breach of contract, and breach of warranty, Plaintiff claims he relied to his detriment on Defendant's material misrepresentations and false statements made in communications directed to Plaintiff in Texas. (Pl.'s Original Pet. at 8; Pl.'s Aff. at 2-3.) "When the actual content of communications with a forum gives rise to intentional tort causes of action, this alone constitutes purposeful availment." Wein Air Alaska, Inc. v. Brandt, 195 F.3d 208, 213 (5th Cir. 1999). Defendant's communications with Plaintiff in Texas did more than just solicit business or negotiate a series of contracts. Allegedly, they were the means by which Defendant defrauded Plaintiff. Defendant, by entering into a series of sales agreements with a Texas resident and by misrepresenting material facts and making false statements in communications to that resident, should reasonably have anticipated causing injury to a Texas resident and being haled into court in Texas.
Based on the foregoing, the Court finds that Plaintiff has made a prima facie showing that Defendant's contacts with Texas are sufficient to subject it to the Court's jurisdiction.
2. Fairness
Defendant asserts that the exercise of jurisdiction over him would violate fair play. He claims that he faces a tremendous burden in defending this lawsuit in Texas and that his absence would be a burden on his community. (Def.'s Aff. at 4-5.)
In considering the fairness factor, courts consider: (1) the burden upon the nonresident defendant; (2) the interests of the forum state; (3) the plaintiff's interest in securing relief; (4) the interest of the interstate judicial system in obtaining efficient resolution of controversies; and (5) the shared interest of the states in furthering fundamental substantive social policies. Electrosource, Inc. v. Horizon Battery Technologies, Ltd., 176 F.3d 867, 874 (5th Cir. 1999) (quoting Wilson v. Belin, 20 F.3d 644, 647, n. 3 (5th Cir. 1994)).
The burden on Defendant may be considerable. Defendant states that he is the sole owner of a newly established auto repair business having two locations and twenty employees. (Def.'s Aff. at 4.) Additionally, he states that his business operates a life safety service, and that he is the only person at the business with the requisite license to operate the life support service. Id. Defendant does not allege that the forum state's interest is minimal, and the Court finds that the state of Texas has a strong interest in adjudicating disputes with its citizens involving alleged breaches of contract, fraud, and violations of the Texas Deceptive Trade Practices Act. See Thompson v. Handa-Lopez, Inc., 998 F. Supp. 738, 745 (W.D. Tex., 1998). While Plaintiff's interest in securing relief would still be protected if he were required to file in Wisconsin, consideration must be given to Plaintiff's choice to seek relief in Texas. Id. (citing Kulko v. Superior Court of Calif., 436 U.S. 84, 92 (1978)). Additionally, Defendant purposefully negotiated and entered into a series of sales agreements with a Texas resident. Considering all the relevant factors, the Court finds that Plaintiff has made a prima facie showing of facts supporting the assertion of personal jurisdiction over Defendant, such that maintaining the suit against him in Texas "does not offend traditional notions of fair play and substantial justice." Int'l Shoe, 326 U.S. at 316.
III. CONCLUSION
Because the Court finds it has specific personal jurisdiction over Defendant, it is therefore ORDERED that Defendant's Combined Motion to Dismiss for Lack of Personal Jurisdiction and Brief in Support Thereof be DENIED. SO ORDERED.