Opinion
Civil Action No: 02-1859, Section: "R"(2)
August 12, 2002
ORDER AND REASONS
Before the Court is defendants' Motion to Dismiss Pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure for lack of personal jurisdiction. For the following reasons, defendants' motion is denied.
I. Background
Plaintiffs, Planet Beach Franchising Corporation and Planet Beach Tanning Salons, Inc., are Louisiana corporations in the business of franchising tanning salons. Defendant TanToday.com operates a website on which users share information and news related to the tanning salon industry and salon operations. Bruce Schoenfelder, also a defendant in this matter, is TanToday.com's sole managing officer. Schoenfelder resides in Pennsylvania. TanToday.com is a Pennsylvania corporation that is operated and managed by Schoenfelder in Pennsylvania. It is undisputed that defendants have no officers, employees or property in Louisiana. It is also undisputed that defendants have never entered into or performed a contract or other transaction with a Louisiana citizen or business.
On or about May 22, 2002, defendants posted an article on their website entitled: "SCOOP: Planet Beach — the DEATH of A Franchising Chain?" (Pl.'s Complaint, Ex. B.) In the article, defendants state that "we are alerting the ENTIRE INDUSTRY of a meltdown, and warning everyone with business dealings with Planet Beach to review your status, your arrangements, and hunker down." Id.. Defendants further assert that Stephen Smith, the President of Planet Beach, had experience with "FOUR **FAILED** tanning salons." Id. The article also alleges that the training provided by Planet Beach to new franchisees, "if any at all, was done by people with LIMITED TO NO background in running a successful tanning operation." Id. The article indicates that defendants based these allegations on a deposition taken under oath that is now in their possession. Id. The article also indicates that defendants "called the corporate offices of Planet Beach, left a message for the director of franchising, telling them of our investigation, and asking for them to call us. They have failed to do so." Id. Alongside the article, defendants posted an image of Planet Beach's registered trademark.
On June 18, 2002, plaintiffs filed a complaint in the Eastern District of Louisiana alleging that defendants' posting constitutes libel, libel per se, tortious interference with business interests, interference with trademark rights and unfair trade practices. Plaintiffs seek actual and punitive damages. Plaintiffs also moved for a preliminary injunction.
Defendants now move to dismiss the complaint for lack of personal jurisdiction. Defendants contend that they have no contacts with Louisiana except that they operate an Internet website that is accessible to computer users in Louisiana. For the following reasons, the Court denies defendants' motion.
II. Discussion
A. Personal Jurisdiction
When, as here, nonresident defendants move to dismiss for lack of personal jurisdiction, the plaintiffs shoulder the burden of establishing jurisdiction over those defendants. See Stuart v. Spademan, 772 F.2d 1185, 1192 (5th Cir. 1985). When a court rules on this issue without a full evidentiary hearing, plaintiffs need only make a prima facie showing of jurisdiction. See Wilson v. Belin, 20 F.3d 644, 648 (5th Cir. 1994) (citing Thompson v. Chrysler Motors Corp., 755 F.2d 1162, 1165 (5th Cir. 1985)). In determining whether plaintiffs have made a prima facie showing of jurisdiction, the Court must accept as true all uncontroverted allegations in plaintiffs' complaint and resolve any factual disputes in their favor. See Latshaw v. Johnson, 167 F.3d 208, 211 (5th Cir. 1999); Wilson, 20 F.3d at 648.
A court has personal jurisdiction over a nonresident defendant if (1) the forum state's long-arm statute confers personal jurisdiction over that defendant; and (2) the forum state's exercise of such jurisdiction complies with the due process clause of the Fourteenth Amendment. See Latshaw, 167 F.3d at 211. Louisiana's long-arm statute extends jurisdiction to the full limits of due process. Thus, the Court must determine whether the exercise of jurisdiction satisfies the due process clause. See LA. REV. STAT. § 13:3201(B); Guidry v. United States Tobacco Co., 188 F.3d 619, 624 (5th Cir. 1999) (citing Petroleum Helicopters, Inc. v. Avco Corp., 513 So.2d 1188, 1192 (La. 1987)).
B. Due Process
The exercise of personal jurisdiction over a nonresident defendant satisfies due process when (1) the defendant has purposefully availed itself of the benefits and protections of the forum state by establishing "minimum contacts" with that state; and (2) exercising personal jurisdiction over the defendant does not offend "traditional notions of fair play and substantial justice." Latshaw, 167 F.3d at 211 (citing International Shoe Co. v. State of Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158 (1945)). The minimum contacts prong of the due process analysis may be satisfied if the contacts give rise to specific personal jurisdiction or give rise to general personal jurisdiction. See Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414, 104 S.Ct. 1868 (1984); Wilson, 20 F.3d at 647.
A court may exercise specific jurisdiction over a nonresident defendant when the claim asserted against the defendant arises out of or relates to his contacts with the forum state. See Helicopteros, 466 U.S. at 414 n. 8, 104 S.Ct. at 1872 n. 8; Wilson, 20 F.3d at 647. To determine whether specific jurisdiction exists, courts examine whether the defendant purposefully availed himself of the privileges of conducting activities in the forum state, and whether the cause of action arises out of or relates to those activities. See Guidry, 188 F.3d at 625; D.J. Investments, Inc. v. Metzeler Motorcycle Tire Agent Gregg, Inc., 754 F.2d 542, 547-48 (5th Cir. 1985). The defendant's connection with the forum state must be such that he "should reasonably anticipate being haled into court" there. Latshaw, 167 F.3d at 211 (citing World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 567 (1980)). A single act by the defendant directed at the forum state can be enough to confer in personam jurisdiction over him, if the cause of action arises out of that act. See Ruston Gas Turbines, Inc. v. Donaldson Co., 9 F.3d 415, 419 (5th Cir. 1993). In order to determine whether defendants have purposefully availed themselves of the privilege of conducting activities within this forum, the Court must consider factors such as the quality, nature and extent of defendants' activities in this forum, and the relationship between the cause of action and the contacts. See D.J. Investments, 754 F.2d at 545 n. 1 (quoting Prejean v. Sonatrach, Inc., 652 F.2d 1260, 1268 (5th Cir. 1981)).
General jurisdiction, on the other hand, will exist when the defendant engaged in "systemic and continuous" activities in the forum state. See Helicopteros, 466 U.S. at 414 n. 9, 104 S.Ct. at 1872 n. 9; Wilson, 20 F.3d at 647. Contacts between a defendant and the forum state must be "extensive" to satisfy the "systematic and continuous" test. Submersible Systems, Inc. v. Perforadora Central, S.A. de C.V., 249 F.3d 413, 419 (5th Cir 2001).
C. Analysis
1. Specific Jurisdiction
The touchstone for the exercise of personal jurisdiction over nonresident defendants in defamation cases is Calder v. Jones, 465 U.S. 783, 104 S.Ct. 1482 (1984). In Calder, a reporter living in Florida published an allegedly defamatory article in the National Enquirer, a publication based in Florida but with national distribution about a popular entertainer living in California. The allegedly libelous story concerned the California activities of a California resident. Importantly, the Supreme Court noted that the article drew from California sources and that the reporter and publishers of the article knew that the brunt of the harm would be felt in California. The Supreme Court found that "an individual injured in California need not go to Florida to seek redress from persons who, though remaining in Florida, knowingly cause the injury in California." Id. at 790. The Fifth Circuit has embraced the Calder "effects" test, finding that "[e]ven an act done outside the state that has consequences or effects within the state will suffice as a basis for jurisdiction in a suit arising from those consequences if the effects are seriously harmful and were intended or highly likely to follow from the nonresident defendant's conduct." Guidry, 188 F.3d at 628; see also Wien Air Alaska, 195 F.3d 208, 212 (5th Cir. 1999). The Fifth Circuit has extended this doctrine beyond the tort of libel. Guidry, 188 F.3d at 629 (extending the Calder analysis to unintentional torts causing death or serious physical injury).The facts of this case are similar to those in Calder. Defendants published a controversial, allegedly defamatory article about a corporation that defendants knew to be based in Louisiana. The primary source of defendants' information is a deposition of Stephen Smith, founder and President of Planet Beach, who defendants know to live in Louisiana. (Def.'s Opp. Mot. to Dismiss, Ex. H at 149.) Plaintiffs drew from Louisiana sources when they discussed Smith's deposition with a former Planet Beach franchisee located in Louisiana. (Def.'s Surreply to Pl.'s Mot. to Dismiss, Ex. B.) That the effects of defendants' publication would be felt in Louisiana was either "intended" or "highly likely to follow." Guidry, 188 F.3d at 628.
Furthermore, defendants reached out to the forum state in several ways. First, they tried to obtain information about Planet Beach through a phone call to Planet Beach's Louisiana headquarters. (Def.'s Opp. Mot. to Dismiss, Ex. A at 2; Ex. H at 149.) Even a single phone call placed to the forum may be enough to sustain personal jurisdiction. Brown v. Flowers Industries, Inc., 688 F.2d 328, 333-34 (5th Cir. 1982). Second, as previously mentioned, plaintiffs called a former Planet Beach franchisee located in Louisiana to discuss the contents of the allegedly defamatory article. (Def.'s Surreply to Pl's Mot. to Dismiss, Ex. B.) Third, defendants posted alongside the allegedly defamatory article an electronic version of plaintiffs' logo that was obtained from plaintiffs' Internet server located in Louisiana. (Def.'s Opp. Not. to Dismiss, Ex. I at 1.) The use of this logo is the subject of plaintiffs' cause of action pertaining to trademark infringement. Based on their actions, defendants must reasonably anticipate being haled into court in Louisiana "to answer for the truth of the statements made in their article." Calder, 465 U.S. at 790, 104 S.Ct. at 1487 (internal quotations omitted). This is enough to satisfy the minimum contacts prong of the due process analysis.
Although defendants solicit sales of banner ad space on their website, the record does not indicate that they have sold such space to anyone located in Louisiana.
The Court recognizes that the newspaper in Calder profited from sales of its publication in the forum state. Here, the record does not indicate that defendants have profited from sales of products or advertising in Louisiana. The Calder test, however, does not turn on the profitability of defendants' activities in the forum. Rather, the Calder court sustained jurisdiction over a reporter and an editor, in addition to the newspaper, and rejected the argument that they were jurisdictionally off-limits because they derived no direct economic benefit from the newspaper's sales in the forum. Id. at 1487-88; see also Wien Air Alaska, 195 F.3d at 212. Therefore, defendants lack of direct economic benefit from Louisiana does not foreclose the exercise of personal jurisdiction.
That defendants' article appeared online, as opposed to in print, does not substantially alter the Court's analysis. There is good reason to maintain the same jurisdictional standard for Internet communications as that which applies to print communications: to hold otherwise would give publishers an incentive to disseminate libelous speech via the medium with the more restrictive standard. Indeed many courts have applied Calder's "effects" test to Internet communications. See Panavision International, L.P. v. Toeppen, 141 F.3d 1316, 1321 (9th Cir. 1998); Verizon Online Services, Inc. v. Ralsky, 203 F. Supp.2d 601, 617 (E.D.Va. 2002); Young v. New Haven Advocate, 184 F. Supp.2d 498, 508 (W.D.Va. 2001); Bochan v. La Fontaine, 68 F. Supp.2d 692, 702 (E.D.Va. 1999); Edias Software International, L.L.C., v. Basis International Ltd., 947 F. Supp. 413, 420 (D. Ariz. 1996); Blakey v. Continental Airlines, Inc., 751 A.2d 538, 555 (N.J. 2000). In Young, for example, a Connecticut newspaper published on its website an allegedly defamatory article about a Virginia prison warden. Young, 184 F. Supp.2d at 501. The defendant conducted research for the article by placing phone calls to Virginia. Id. at 502. Even though the defendant had no other meaningful contacts with Virginia, the Young court held that exercise of jurisdiction did not violate due process because, first, defendant knew plaintiff to be a Virginia resident and, second, knew or should have known that the harm caused by the defamatory statements would be primarily suffered in Virginia. Id. at 508. Here, defendants knew plaintiffs to be Louisiana corporations, and knew or should have known that the brunt of the harm caused by the allegedly defamatory statements would be suffered in Louisiana.
Defendants argue that minimum contacts do not exist because the allegedly defamatory article was published nationwide but not specifically directed to readers in Louisiana. The case law simply does not support this interpretation of the Calder "effects" test. In applying Calder, the Fifth Circuit has consistently focused on whether a defendant intended or could have reasonably foreseen that the harm would be felt in the forum. Guidry, 188 F.3d at 628-30. Indeed in Guidry, the speech at issue was distributed nationwide, and the Fifth Circuit required no special showing of whether the speech was specifically directed to readers in the forum that the speech was available to readers in the forum was sufficient. Id. at 626. The same was true in Young, in which the allegedly defamatory article was not specifically directed to the forum, yet the court found personal jurisdiction to be appropriate because the defendant drew from sources located in the forum and knew that the harm would be felt in the forum. Indeed, in Young the allegedly defamatory speech was directed to the newspaper's readers in Connecticut, yet the court found personal jurisdiction in Virginia because of the article's effect on the Virginia plaintiff in Virginia. Young, 184 F. Supp.2d at 502. In short, whether defamatory speech is specifically directed to readers in the forum is relevant to the Calder analysis, but it is not dispositive. Here, even if it were dispositive, there would still be personal jurisdiction over defendants because the article was directed to current and potential Planet Beach franchisees, many of whom defendants should have known are likely to be located in Planet Beach's home state of Louisiana. Indeed the former Planet Beach franchisee with whom defendants spoke resides in Louisiana.
Like the Fifth Circuit, the Ninth Circuit focuses on whether the defendant knew that the harm would be felt in the forum. Panavision, 141 F.3d at 1321-22. The Third Circuit, by contrast, places greater weight on the manner in which allegedly defamatory speech is directed toward the forum. Remick v. Manfredy, 238 F.3d 248, 258 (3rd Cir. 2001).
Finally, defendants' reliance on Schnapp v. McBride, 64 F. Supp.2d 608, 611 (E.D.La. 1998), is misplaced because the challenged communication in that case did not focus on the plaintiff. Here, defendants' article was focused on and purposefully targeted at plaintiffs. Defendants' reliance on Bellino v. Simon, 1999 WL 1059753 (E.D.La. 1999), is equally misplaced. In Bellino, this Court did not exercise jurisdiction over a nonresident defendant who made allegedly defamatory statements during a single, unsolicited phone call from the forum state. Id. at *5, Also in Bellino, this Court exercised jurisdiction over a nonresident defendant who made allegedly defamatory comments in a series of e-mails to the plaintiff located in the forum state. Id. That the defendant directed the allegedly tortious e-mails to the forum state was relevant to the Court's analysis, but the Court did not find this to be the sine qua non for jurisdiction under Calder. Id.
In summary, the Court finds specific jurisdiction over defendants because they committed an act outside of the forum that allegedly caused a tortious injury within the forum, and The harm suffered was intended or highly likely to follow from defendants' acts. The presence of these key elements, along with the fact that defendants drew from sources in the forum, placed phone calls to the forum, and obtained an electronic copy of plaintiffs' registered trademark from a server located in The forum, are enough to establish defendants' minimum contacts with the forum.
2. General Jurisdiction
Plaintiffs also assert that the nature of defendants' website subjects defendants to general personal jurisdiction in Louisiana. Defendants, on the other hand, assert that they maintain no presence whatsoever in Louisiana and have not solicited or conducted any business here. Whether to exercise general personal jurisdiction over a defendant who operates an Internet website with little or no other contacts with the forum state was addressed by the Fifth Circuit in Mink v. AAAA Development LLC, 190 F.3d 333, 336 (5th Cir. 1999). There the court adopted the analysis laid out in Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119, 1124 (W.D.Pa. 1997), to differentiate among websites by the nature and quality of the commercial activity they engage in over the Internet. Mink, 190 F.3d at 336. The court noted that the Zippo decision classified Internet use along a spectrum. "At the one end of the spectrum, there are situations where a defendant clearly does business over the Internet by entering into contracts with residents of other states which involve the knowing and repeated transmission of computer files over the Internet. . . . In this situation, personal jurisdiction is proper." Id. The opposite end of the spectrum consists of situations "where a defendant merely establishes a passive website that does nothing more than advertise on the Internet." Id. Here, personal jurisdiction is not appropriate. In the middle of the spectrum are situations in which a defendant has a website that allows a user to exchange information with a host computer. "In this middle ground, the exercise of jurisdiction is determined by the level of interactivity and commercial nature of the exchange of information that occurs on the Website." Id.
In Mink, the Fifth Circuit declined to exercise general personal jurisdiction over a "passive" website on which the defendant merely posted information about products and services. The defendant in Mink had no other contacts with the forum state, and the plaintiff's cause of action did not arise from the defendant's Internet activity.
Plaintiffs argue that defendants' website "clearly does business" over the Internet and thus falls under Zippo's first category of websites. Defendants' website is primarily used to facilitate the exchange of information about the tanning salon industry and salon operations. Visitors to the site cans post news stories, participate in discussions and obtain information about the world of tanning salons. Visitors can also send e-mail messages to defendants. Through the use of cookies, defendants exchange information with users' computers in an effort to track users' experiences and enhance the website. Defendants do not buy and sell products and services through the website, though they do solicit sales of banner advertisement space. Defendants website is certainly more than "passive," and the Court finds that the site lies somewhere in the middle of the Zippo spectrum. Under the Zippo test, the Court must then determine whether the "level of interactivity" and the "commercial nature of the exchange of information" subject defendants to general personal jurisdiction in states with which they maintain no other meaningful contacts. The Court finds that plaintiffs have failed to show that the nature and scope of defendants' commercial Internet activity is sufficient to amount to "continuous and systematic" conduct in Louisiana to warrant the assertion of general personal jurisdiction. Besides pointing to defendants' Internet statements about plaintiffs, plaintiffs have made no showing of the extent to which defendants' Internet activities penetrated Louisiana, whether measured by subscriber data, hits on the website, or sales of products and advertisements.
3. The Fiduciary Shield Doctrine
Defendants assert that under the fiduciary shield doctrine, jurisdiction over a nonresident corporation does not necessarily confer jurisdiction over an individual officer of that corporation. Defendants correctly note that the Court must look to the individual and personal contacts, if any, that the corporate officer had with the forum state. "Each defendant's contacts with the forum state must be assessed individually." Calder, 465 U.S. at 790, 104 S.Ct. at 1487. Here, the contacts that defendant TanToday.com had with the forum state are identical to those that defendant Bruce Schoenfelder had with The forum state. The Court's analysis applies equally to both defendants. Therefore the Court possesses personal jurisdiction over both the corporation and Schoenfelder, its sole managing officer.
4. Reasonableness
Finally, once a plaintiff has established minimum contacts, the burden shifts to the defendant to make a "compelling case" that the exercise of jurisdiction is not reasonable. Wien Air Alaska, 195 F.3d at 215; Guidry, 188 F.3d at 630. More specifically, the defendant must establish that the exercise of jurisdiction offends traditional notions of fair play and substantial justice. Guidry, 188 F.3d at 630. Among the factors to be considered are the defendant's burden, the forum state's interests, and the plaintiffs' interest in convenient and effective relief. Id. Here, Louisiana has a strong interest in tortious conduct directed at residents by nonresidents. See Wien Air Alaska, 195 F.3d at 215. In addition, these Louisiana plaintiffs clearly have a strong interest in the convenient administration of justice in a Louisiana forum. Although it is somewhat inconvenient for defendants to litigate this matter in Louisiana, "once minimum contacts are established, the interests of the forum and the plaintiff justify even large burdens on the defendant." Id. Weighing all of these factors, the Court concludes that exercising jurisdiction over defendants does not violate due process.
III. Conclusion
For the foregoing reasons, defendants' motion to dismiss for lack of personal jurisdiction is denied.