Opinion
File No. 1:98-CV-726
Date January 6, 2000
ORDER
In accordance with the opinion entered this date,
IT IS HEREBY ORDERED that Defendant Sidney Schwartz's motion to dismiss for lack of personal jurisdiction (Docket # 55) is DENIED.
IT IS FURTHER ORDERED that Plaintiff Amway Corporation's motion to dismiss Defendant Schwartz's counterclaim under Rule 12(b)(6) (Docket # 68) is GRANTED.
IT IS FURTHER ORDERED that Defendant Schwartz's counterclaim s DISMISSED.
OPINION
This matter comes before the Court on Defendant Sidney Schwartz's motion to dismiss for lack of personal jurisdiction, and Plaintiff/Counter-Defendant Amway Corporation's motion to dismiss Defendant/Counter-Plaintiff Schwartz's counterclaim under Rule 12(b)(6).
I.
Plaintiff Amway has filed suit against Defendant Sidney Schwartz, alleging in its third amended complaint tortious interference with contract and with actual and prospective business relations.
Defendant Schwartz, who is a resident of the State of Oregon, has filed a motion to dismiss for lack of personal jurisdiction.
As the party seeking the Court's exercise of personal jurisdiction, Plaintiff bears the burden of showing that exists.Market/Media Research, Inc. v. Union Tribune Pub. Co., 951 F.2d 102, 104 (6th Cir. 1991), cert. denied, 506 U.S. 824 (1992). Where, as here, the Court considers the issue without the benefit of an evidentiary hearing, Plaintiff need only make a prima facie showing of personal jurisdiction in order to defeat dismissal.Nationwide Mut. Ins. Co. v. Tryg Intern. Ins. Co., 91 F.3d 790, 792 (6th Cir. 1996). In evaluating the motion to dismiss the Court must consider the pleadings and affidavits in the light most favorable to Plaintiff. Market/Media, 951 F.2d at 104 (citations omitted).
Where, as here, the Court's jurisdiction is based on diversity of citizenship, the Court applies the law of the forum state to determine whether personal jurisdiction exists. Tryg, 91 F.3d at 793. A valid assertion of personal jurisdiction must satisfy both the state long-arm statute, and constitutional due process.Reynolds v. International Amateur Athletic Fed'n, 23 F.3d 1110, 1115 (6th Cir.), cert. denied, 513 U.S. 1962 (1994). "Under Michigan's long-arm statute, the state's Jurisdiction extends to the limits imposed by federal constitutional due process requirements and thus, the two questions become one." Michigan Coalition of Radioactive material Users, Inc. v. Griepentrog, 954 F.2d 1174, 1176 (6th Cir. 1992).
The Due Process Clause requires that the exercise of personal jurisdiction in each case comport with traditional notions of fair play and substantial justice." International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). The assertion of personal Jurisdiction generally satisfies due process if "the defendant purposefully avails itself of the privilege of conducting activities within the forum State," Hanson v. Denckla, 357 U.S. 235, 253 (1958), such that it "should reasonably anticipate being haled into court there." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980).
Jurisdiction may be general, based upon a defendant's "continuous and systematic" conduct within the forum, or limited, where the subject matter of the lawsuit arises out of or is related to the defendant's contacts with the forum. Conti, 977 F.2d at 981. Under Michigan law, a court may exercise limited personal jurisdiction over an individual for actions arising out of "[t]he doing or causing an act to be done, or consequences to occur, in the state resulting in an action for tort." M.C.L.A. § 600.705(2); M.S.A. § 27A.705(2).
Plaintiff does not assert that Schwartz had continuous and systematic contacts with the State such that this Court can assert general jurisdiction over him. There is no allegation in this case that Schwartz has entered the State of Michigan or that he has conducted any business in the State of Michigan. Instead, Plaintiff asserts that the subject matter of the lawsuit arises out of or is related to Schwartz's contacts with the forum. Tryg, 91 F.3d at 793. Plaintiff contends this Court has limited personal jurisdiction over Schwartz based upon the fact that Schwartz's actions caused tortious consequences to occur in Michigan.
In support of its claim that the Court has limited personal jurisdiction over Schwartz, Plaintiff relies on three separate arguments: 1) Schwartz's actions were intended to and did cause consequences in the State of Michigan; 2) Schwartz voluntarily invoked the power of this Court through the filing of his counterclaim; and 3) because Schwartz's co-conspirator, PG, is subject to the jurisdiction of this Court, Schwartz is also subject to the jurisdiction of this Court.
Plaintiff's first contention is that Defendant Schwartz's maintenance of the internet web site entitled "Amway: the Untold Story," was intended to and did cause consequences in Michigan, sufficient to constitute the necessary minimum contacts with the forum state.
Sidney Schwartz resides in Oregon. He has created a Web site where he posts information about Amway that he has collected, and e-mail responses from those who have visited his Web site. Defendant Schwartz's Web site is accessible to people in every state and all over the globe.
The issue of what type of Internet activity is sufficient to establish personal jurisdiction in a particular forum is a relatively new issue. Most courts that have considered the issue have adopted the "sliding scale" approach set forth in Zippo Mfg. Co. v. Zippo Dot Com. Inc., 952 F. Supp. 1119 (W.D.Pa. 1997):
[T]he likelihood that personal jurisdiction can be constitutionally exercised is directly proportionate to the nature and quality of commercial activity that an entity conducts over the Internet. This sliding scale is consistent with well developed personal jurisdiction principles. At one end of the spectrum are situations where a defendant clearly does business over the Internet. If the defendant enters into contracts with residents of a foreign jurisdiction that involve the knowing and repeated transmission of computer files over the Internet, personal jurisdiction is proper.
CompuServe, Inc. v. Patterson, 89 F.3d 1257 (6th Cir. 1996), falls into this first category. In CompuServe the Sixth Circuit held that where Patterson, a Texas resident, entered into a contract to distribute shareware through CompuServe's Internet server located in Ohio, and electronically uploaded thirty-two master software files to CompuServe's server in Ohio via the Internet, Patterson had purposefully directed his business activities toward Ohio and was subject to personal jurisdiction in Ohio. Id. at 1261.
At the opposite end are situations where a defendant has simply posted information on an internet Web site which is accessible to users in foreign jurisdictions. A passive Web site that does little more than make information
available to those who are interested in it is not grounds for the exercise personal jurisdiction. The middle ground is occupied by interactive Web sites where a user can exchange information with the host computer. In these cases, the exercise of jurisdiction is determined by examining the level of interactivity and commercial nature of the exchange of information that occurs on the Web site952 F. Supp. at 1124 (citations omitted). The Zippo test was adopted by the Fifth Circuit in Mink v. AAAA Development LLC, 190 F.3d 333, 336 (5th Cir. 1999), and it has been applied by numerous district courts. See, e.g., Coastal Video Communications, Corp. v. Staywell Corp., 59 F. Supp.2d 562, 571 (E.D.Va. 1999); Patriot Systems, Inc. v. C-Cubed Corp., 21 F. Supp.2d 1316, 1324 (D.Utah 1998).
Defendant Schwartz contends that his Web page is a passive Web site that does little more than make information available to those who are interested in it, and that therefore, under the authority of Zippo and Bensusan Restaurant Corp. v. King, 937 F. Supp. 295 (S.D.N.Y. 1996), aff'd, 126 F.3d 25 (2nd Cir. 1997), is not grounds for the exercise of personal jurisdiction. "[N]o court has ever held that an Internet advertisement alone is sufficient to subject :he advertiser to jurisdiction in the plaintiff's home state."Cybersell, 130 F.3d at 418. If jurisdiction were be based upon a defendant's mere presence on the internet, a defendant would be subjected to jurisdiction on a worldwide basis and the personal jurisdiction requirements as they currently exist would be eviscerated. Edberg v. Neogen Corp., 17 F. Supp.2d 104, 114 (D.Conn. 1998). Accordingly, in each case where personal jurisdiction has been exercised, there has been "something more" to indicate that the defendant purposefully (albeit electronically) directed his activity in a substantial way to the forum state. Cybersell, 130 F.3d at 418.
That "something more" may be satisfied by the "effects doctrine." As noted in Panavision Int'l, L.P. v. Toeppen, 141 F.3d 1316, 1320 (9th Cir. 1998), in tort cases, jurisdiction may attach if the defendant's conduct is aimed at or has an effect in the forum state. Id. at 1321. [C]ourts have found purposeful availment when the claim involves an intentional tort allegedly committed over the Internet, such that the defendant intentionally directed its tortious activities at the forum state." Millennium Enterprises, Inc. v. Millennium Music, LP, 33 F. Supp.2d 907, 916 (D.Or. 1999).
Plaintiff's third amended complaint focuses on Defendants' allegedly intentional tortious activity of placing defamatory statements on the Web site with the intent that it would cause harm to Plaintiff in Michigan.
Allegations that a defendant intentionally directed its tortious Internet activities at the forum state are analyzed under the "effects test" articulated in Calder v. Jones, 465 U.S. 783, 788-90 (1984). In Calder the Supreme Court held that personal jurisdiction was properly asserted over a non-resident defendant whose libelous actions were directed at the plaintiff resident of the forum state. The Calder effects test requires the plaintiff to show the following:
(1) The defendant committed an intentional tort;
(2) The plaintiff felt the brunt of the harm in the forum such that the forum can be said to be the focal point of the harm suffered by the plaintiff as a result of that tort;
(3) The defendant expressly aimed his tortious conduct at the forum such that the forum can be said to be the focal point of the tortious activity.IMO Industries Inc. v. Kiekert AG, 155 F.3d 254, 265-66 (3rd Cir. 1998) (footnote omitted).
In Panavision, the Illinois defendant engaged in a scheme to register Panavision's trademarks as his domain names on the Internet and then to extort money from Panavision by trading on the value of those names. The Ninth Circuit determined that the defendant's actions were aimed at Panavision in California and the brunt of the harm was felt in California. Accordingly, the Ninth Circuit affirmed the district court's exercise of personal jurisdiction over the defendant in California under the effects doctrine. 141 F.3d at 1321-24.
In Blumenthal v. Drudge, 992 F. Supp. 44 (D.D.C. 1998), the District Court for the District of Columbia held that it had personal jurisdiction over Matt Drudge, a California resident, who had posted an allegedly defamatory article about Sidney and Jacqueline Blumenthal, residents of Washington, D.C., on the Internet. Among the factors considered by the court was the fact that the Web site was not truly passive because it allowed readers to directly e-mail Drudge and to request subscriptions to his report. Id. at 56. In addition, the court observed that because Drudge's Web page primarily concerned political gossip and rumor in Washington, D.C., it was targeted at readers in Washington, D.C., by virtue of the subjects covered. Id. at 57.
In TELCO Communications v. An Apple A Day, 977 F. Supp. 404 (E.D.Va. 1997), the court held that defendants were subject to personal jurisdiction Virginia for posting an allegedly defamatory cress release regarding the Virginia plaintiff on a passive Internet site because the defendant should have known that the press release would be received in Virginia and would cause injury there. Id. at 407-08.
Plaintiff Amway has alleged that Defendant Schwartz "has committed and is committing tortious acts with the intent and effect of harming Amway in Michigan." Third Amended Complaint ("TAC") ¶ 7. Plaintiff alleges that Defendant Schwartz has conspired "to damage or destroy Amway's business using the internet." TAC ¶ 9. More specifically, Plaintiff alleges that Defendant Schwartz is the author of a web site which has been "devoted to making malicious attacks against Amway" and "foments hate rhetoric about Amway, its employees, and its distributors." TAC ¶ 12. Plaintiff alleges that Defendant Schwartz has broadcasted "vulgar, false, and defamatory statements about Amway, its officers, its business practices, and its products," all "calculated to paint Amway in a false and negative light." TAC ¶ 13. Plaintiff's complaint clearly meets the first prong of the "effects" test. Plaintiff has alleged that Defendant committed an intentional tort.
The second prong of the test requires Plaintiff to show that it felt the brunt of the harm in the forum such that the forum can be said to be the focal point of the harm suffered by the plaintiff as a result of that tort. Although it has been noted a corporation typically does not suffer harm in a particular geographic location in the same sense that an individual does, Cybersell, 130 F.3d at 420, there is nothing in the case law that would preclude a determination that a corporation suffers the brunt of harm in its principal place of business. Panavision, 141 F.3d at 1322 n. 2. The court held in Panavision that the brunt of the harm suffered by Panavision was in California, the state where it maintained its principal place of business. Id. See, also, Telco, 977 F. Supp. at 408 ("because Telco is located here, the firm absorbed the harm here").
Amway is a Michigan corporation with its principal place of business in Ada, Michigan. The business was founded in Michigan and its headquarters remain in Michigan. Because the complaint alleges interference with business relations through the dissemination of false and defamatory statements about Amway, its officers, its business practices, and its products, Plaintiff has adequately made a prima facie showing that Plaintiff felt the brunt of the harm in Michigan.
In order to make out the third prong of the Calder "effects" test, "the plaintiff must show that the defendant knew that the plaintiff would suffer the brunt of the harm caused by the tortious conduct in the forum, and point to specific activity indicating its tortious conduct at the that the defendant expressly aimed forum." IMO, 155 F.3d at 266.
Defendant Schwartz was an Amway distributor for a period of time so that he could get informational mailing from Amway. Because he had an insider's knowledge of Amway, and because Plaintiff is alleging that he was using his Web page to target not only Amway, but its officers as well, there is no question that Michigan was the focal point of the allegedly tortious activity.
Considering the pleadings in the light most favorable to the Plaintiff, see Market/Media, 951 F.2d at 104, this Court concludes that the allegations in Plaintiff's third amended complaint, together with the excerpts of Defendant Schwartz's deposition, are sufficient to make out a prima facie showing of personal jurisdiction over Defendant Schwartz under the effects doctrine. Plaintiff has made a prima facie showing that Defendant Schwartz has taken intentional actions, aimed at the forum state, and that these actions cause harm, the brunt of which is suffered, and which the defendant knew was likely to be suffered, in the forum state. See Panavision, 141 F.3d at 1321.
Having found personal jurisdiction under the "effects" doctrine, the Court declines to address Plaintiff's other proffered arguments in support of personal jurisdiction.
II.
Defendant Schwartz has filed a counterclaim against Plaintiff Amway, alleging intentional infliction of emotional distress. Defendant Schwartz alleges that "Amway filed this action without legal cause and with the intent to deprive Mr. Schwartz of his First Amendment rights and cause great emotional distress."
In evaluating a motion to dismiss under Rule 12(b)(6) the Court accepts as true all factual allegations in the complaint, and construes ambiguous allegations in the plaintiff's favor. In re Sofamor Danek Group, Inc., 123 F.3d 394, 400 (6th Cir. 1997). "In order for a dismissal to be proper, it must appear beyond doubt that the plaintiff would not be able to recover under any set of facts that could he presented consistent with the allegations of the complaint." Bower v. Federal Express Corp., 96 F.3d 200, 203 (6th Cir. 1996) (citations omitted).
Although the tort of intentional infliction of emotional distress has not been formally recognized by the Michigan Supreme Court,see Roberts v. Auto-Owners Ins. Co., 422 Mich. 594, 374 N.W.2d 905 (1985), the Michigan Court of Appeals has recognized the cause of action. See, e.g., Haverbush v. Powelson, 217 Mich. A-op. 228, 551 N.W.2d 206 (1996). In order to invoke the tort of intentional infliction of emotional distress, a plaintiff must establish:
(1) extreme and outrageous conduct; (2) intent or recklessness; (3) causation; and (4) severe emotional distress.Graham v. Ford, No. 210123, ___ N.W.2d ___, 1999 WL 803419 (Mich.Ct.App. Oct. 1, 1999). "Liability for the intentional infliction of emotional distress has been found only where the conduct complained of has been so outrageous in character, and so extreme degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious and utterly intolerable in a civilized community." Id. (citing Doe v. Mills, 212 Mich. App. 73, 91, 536 N.W.2d 824 (1995)).
Counter-Plaintiff Schwartz has not alleged conduct that is sufficiently extreme or outrageous to support a claim for intentional infliction of emotional distress. Schwartz's claim is based upon Plaintiff's use of the legal process. The use of the legal process is generally privileged. 1 RESTATEMENT (SECOND) OF TORTS, § 46, cmt. g, p. 76. Even the filing of a "groundless" suit "amounts to nothing more than an assertion of legal rights in a permissible way." Early Detection Center, P.C., v. New York Life Ins. Co., 157 Mich. App. 618, 625, 403 N.W.2d 830 (Mich.App. 1986). By resorting to a court of law for the resolution of its dispute with Schwartz, Amway followed what a civilized society would consider the most appropriate form of conduct. Id. See also Delorean v. Cork Gully, 118 B.R. 932, 947 (E.D.Mich. 1990) ("There can be no claim `for tortious infliction of emotional distress where the defendants' alleged misconduct consists of actions taken in legal proceedings."). The allegations in Schwartz's counterclaim cannot be characterized as outrageous and atrocious and cannot form the basis for an intentional infliction of emotional distress claim.
Furthermore, Schwartz has not alleged severe emotional distress, another essential element of the claim. A claim for intentional infliction of emotional distress only arises where emotional distress has in fact resulted, and where it is severe.
Emotional distress passes under various names, such as mental suffering, mental anguish, mental or nervous shock, or the like. It includes all highly unpleasant mental reactions, such as fright, horror, grief, shame, humiliation, embarrassment, anger, chagrin, disappointment, worry, and nausea. It is only where it is extreme that the liability arises. Complete emotional tranquility is seldom attainable in this world, and some degree of transient and trivial emotional distress is a part of the price of living among people. The law intervenes only where the distress inflicted is so severe that no reasonable man could be expected to endure it.Roberts v. Auto-Owners Ins. Co., 422 Mich. 594, 608-09, 374 N.W.2d 905 (Mich. 1985) (quoting RESTATEMENT (SECOND) TORTS, § 46, cmt. j, p. 77). Schwartz does not allege facts in his counterclaim to suggest that he has suffered severe emotional distress.
Although Schwartz appears to be attempting to raise a First Amendment issue in his counterclaim, he cannot make out a First Amendment claim against Amway because Amway is not a governmental entity. The First Amendment prohibits only Congress (and, through the Fourteenth Amendment, a State), not private individuals, from abridging the freedom of speech. Denver Area Educational Telecommunications Consortium, Inc. v. F. C.C., 518 U.S. 727, 737 (1996).
To the extent Schwartz is seeking sanctions for Plaintiff's filing of an allegedly frivolous claim, that request for relief is properly submitted by way of a motion to the Court rather than by a counterclaim.
For all these reasons, Defendant/Counter-Plaintiff Schwartz's counterclaim against Plaintiff Counter-Defendant Amway will be dismissed.
An order consistent with this opinion will be entered.