Civil Action No. SA-04-CA-0361-XR.
September 22, 2004
On this date the Court considered Defendant's Motion to Dismiss for lack of personal jurisdiction. Defendant claims that it does not have sufficient contacts with the state of Texas to enable Plaintiff to file suit against it in Texas. After consideration of Defendant's motion, as well as Plaintiff's Complaint, Plaintiff's Response in opposition of Defendant's motion, and the affidavits accompanying the filings of both parties, the Court is of the opinion that the motion should be GRANTED and this case should be DISMISSED (docket no. 3).
I. Factual and Procedural Background
Plaintiff is a Texas corporation that designs, converts and manufactures customized limousines. Plaintiff has been an interior designer of limousines for more than 30 years and sells its customized limousines to consumers worldwide. Plaintiff markets its products through various media, including its website, www.lcwlimo.com. This website includes various photographs of Plaintiff's customization process, including photographs of its factory, products, employees, building methods and equipment.
Defendant is a California corporation that similarly designs, converts and manufactures customized limousines. Defendant does not maintain a place of business in Texas, has no employees, servants, or agents within the State, and has no customers in the State. Defendant does, however, maintain various websites that are accessible in Texas, includingwww.limelitelimo.com, www.hummerstretch.com, www.stretchedhummer.com, www.longlimo.com, www.hummerbuilder.com, and www.buildalimo.com. Plaintiff alleges that Defendant has misappropriated photographs and language from Plaintiff's website and placed them on both Defendant's website and Defendant's advertising brochures.
There is some dispute as to Defendant's pro per name, which is of no concern at this moment.
Each of these websites apparently re-route the user to Defendant's principal website, www.limelitelimo.com.
On approximately December 11, 2003, Plaintiff notified Defendant of its position and requested Defendant cease its activities. Plaintiff subsequently filed this action on April 29, 2004. Plaintiff seeks declaratory relief, injunctive relief, and damages under various causes of action, including copyright infringement under 17 U.S.C. §§ 101 et seq., unfair competition under 15 U.S.C. § 1125(A), violations of the Texas Deceptive Trade Practices Act, TEX. BUS. COM. CODE § 17.46, and common law unfair competition. Defendant has filed the instant motion to dismiss prior to the filing of its answer. FED. R. CIV. P. 12(b)(3). Defendant asserts that this Court does not have in personum ("personal") jurisdiction over it and that this suit should be dismissed.
II. Personal Jurisdiction Standard
A federal court may exercise personal jurisdiction only to the extent that it is permitted by the state long arm statute if exercising jurisdiction does not violate due process guaranteed by the Fourteenth Amendment of the United States Constitution. See Allred v. Moore Peterson, 117 F.3d 278, 281 (5th Cir. 1997). When a nonresident defendant presents a motion to dismiss for lack of personal jurisdiction, the burden is on the plaintiff to establish that jurisdiction exists. Wilson v. Belin, 20 F.3d 644, 648 (5th Cir. 1994). Where a motion to dismiss for lack of personal jurisdiction does not raise any issues of fact, a court need not resort to discovery or an evidentiary hearing. Wyatt v. Kaplan, 686 F.2d 276, 284 (5th Cir. 1982). When the Court rules on the motion without an evidentiary hearing, the plaintiff may establish personal jurisdiction by presenting a prima facie case that personal jurisdiction is proper, id., instead of by a preponderance of the evidence. WNS, Inc. v. Farrow, 884 F.2d 200, 203 (5th Cir. 1992). Allegations in the plaintiff's complaint are taken as true except to the extent that they are contradicted by affidavits presented by the defendant. Wyatt, 686 F.2d at 282-83 n. 13. Any genuine, material conflicts between the facts established by the parties' affidavits and other evidence are resolved in favor of the plaintiff. Jones v. Petty-Ray Geophysical Geosource, Inc., 954 F.2d 1061, 1067 (5th Cir. 1992). The Court will not, however, accept conclusory allegations of fact as true. Panda Brandywine Corp. v. Potomac Elec. Power Co., 253 F.3d 865, 868 (5th Cir. 2001).
In order to exercise jurisdiction over Defendant in Texas, the Court "can use a state long-arm statute only to reach those parties whom a court of the state could also reach." Burstein v. State Bar of California, 693 F.2d 511, 514 (5th Cir. 1982). Under the Texas long arm statute, a nonresident may be subject to personal jurisdiction if the nonresident commits "acts constituting doing business" in Texas. See TEX. CIV. PRAC. REM. CODE §§ 17.041-.045. This requirement is interpreted broadly as spanning to the limits of due process under the United States Constitution. Gundle Lining Const. v. Adams County Asphalt, 85 F.3d 201, 204 (5th Cir. 1996) (citing Schlobohm v. Schapiro, 784 S.W.2d 355, 357 (Tex. 1990)).
Exercise of personal jurisdiction over a nonresident defendant satisfies due process when two requirements are met. First, the nonresident defendant must have purposefully availed itself of the benefits and protections of the forum state by establishing "minimum contacts" with that state. Marathon Oil Co. v. A.G. Ruhrgas, 182 F.3d 291, 294 (5th Cir. 2001). The minimum contacts prong is divided into two separate analyses: contacts that give rise to specific jurisdiction and those that give rise to general jurisdiction. Id. at 294-95. Exercise of specific jurisdiction is appropriate when the nonresident's contacts with the forum state arise from or are directly related to the cause of action. Id. at 295. Exercise of general jurisdiction is appropriate where the nonresident's contacts with the forum state are not related to the plaintiff's cause of action, but are continuous and systematic. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 415-16 (1984). Second, exercising jurisdiction over the nonresident defendant must not offend traditional notions of fair play and substantial justice. Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102 (1987). Plaintiff has nominally limited its argument to specific jurisdiction, but makes arguments that fall within the ambit of general jurisdiction.
Defendant argues that Plaintiff has not established a prima facie case that personal jurisdiction is proper. Plaintiff seeks to establish personal jurisdiction in Texas based on at least three contacts with the State. First, Plaintiff argues that Defendant's websites are sufficient to establish jurisdiction because the cause of action arises in part from the use of photographs on Defendant's website. Second, Plaintiff argues that jurisdiction is proper because Defendant has advertised in at least two nationally distributed publications. Third, Plaintiff argues that jurisdiction is proper because Defendant sent a brochure to the Limousine Industry Council in San Antonio, Texas which included the allegedly infringing material. None of these contacts are sufficient, by themselves or in conjunction, to establish Plaintiff's prima facie case of personal jurisdiction in this Court.
A. Defendant's Websites
Plaintiff argues that Defendant's websites are sufficient to establish jurisdiction. Defendant's websites contain information about Defendant's business, including pictures of the manufacturing process, and also contains contact information, including Defendant's address, toll-free number and e-mail address. There is no other discernable way to contact Defendant through the websites. There is no avenue for a customer to place an order through the website. According to Phil Restivo, Defendant's President, Defendant does not have any customers in Texas and has never had any orders from customers in Texas. Restivo asserts that the purpose of Defendant's websites is advertisement and that the websites do not have the capability of processing funds or orders, but merely provides contact information for potential customers. Plaintiff essentially argues that the display of a toll-free number and e-mail address for the specific purpose of attracting customers is sufficient for the Court to find that Defendant has subjected itself to jurisdiction in any state in which the websites are accessible.
Despite Plaintiffs contentions, a prominently displayed toll-free number or e-mail address on a website in conjunction with advertising is not sufficient to establish personal jurisdiction. See Quick Technologies, Inc. v. Sage Group PLC, 313 F.3d 338, 345 (5th Cir. 2003). The Fifth Circuit has established a standard for assessing personal jurisdiction in Internet cases. In Mink v. AAAA Development LLC, the Fifth Circuit adopted the "sliding scale" test set forth in Zippo Mfg. Co. v. Zippo Dot Com, Inc. Mink, 190 F.3d 333, 336 (5th Cir. 1999) (citing Zippo, 952 F. Supp. 1119 (W.D. Pa. 1997)). Texas district courts have interpreted Mink's adoption of Zippo to apply in both general jurisdiction and specific jurisdiction cases. Zippo requires a court to look to the "nature and quality of commercial activity that an entity conducts over the Internet." Zippo, 952 F. Supp. at 1124. The level of activity conducted may be classified into three categories. On one outer limit is the first category, which consists of situations where a defendant does business over the Internet by entering into contracts with residents of other states by knowingly and repeatedly transmitting computer files over the Internet. Id. Jurisdiction is proper in these situations. On the other outer limit is the third category, which consists of situations where a defendant has merely posted information on an Internet website which is accessible to out of state users. Id. Jurisdiction is not proper in these situations. In between these limits is the second category. This category consists of situations where a defendant has a website that allows a user to exchange information with a host computer. Id. Jurisdiction is determined in these types of cases by looking at "the level of interactivity and commercial nature of the exchange of information that occurs on the Web site. Id. The more interactive and commercial the website is, the more likely it is that a court will find that the minimum contacts requirement is met. See, e.g., Carrot Bunch Co., Inc. v. Computer Friends, Inc., 218 F. Supp.2d 820, 825 (N.D. Tex. 2002).
Whether the Court looks at Defendant's websites as falling within Zippo's second or third category, it is clear that the websites themselves are not sufficient to establish jurisdiction. The websites may be best categorized as "passive advertisements," similar to any other advertisement circulated nationally that gives the reader the opportunity to order by calling a phone number or writing a letter to a given address. See Singletary v. B.R.X., Inc., 828 F.2d 1135, 1136-37 (5th Cir. 1987) (concluding that advertisements by themselves are generally insufficient to establish personal jurisdiction). The only way to contact Defendant if one were to access the websites would be to call the toll-free number or write an e-mail to the provided address. There is no way to order any of Defendant's product through the websites, nor is there apparently any way to order any of Defendant's products without affirmatively contacting one of Defendant's agents.
Plaintiff bases its argument on two cases in which the district court held jurisdiction to be proper where the defendant's website included a toll-free sales number. See American Eyewear, Inc. v. Peeper's Sunglasses and Accessories, Inc., 106 F. Supp.2d 895 (N.D. Tex. 2000); Inset Systems, Inc. v. Instruction Set, Inc., 937 F. Supp. 161 (D. Conn. 1996). In neither of these cases, however, did the court rest on the simple inclusion of a toll-free number on the defendant's website.
In American Eyewear, the plaintiff based personal jurisdiction over the nonresident defendant on the defendant's website. The defendant's website allowed anyone with Internet access to access the site and make purchases. American Eyerwear, 106 F. Supp.2d at 898. Customers completed order forms online that specified the products they ordered, their shipping address, and their credit card number. Id. The court found jurisdiction based on the fact that "sales to Texas residents occurred almost daily and typically involved multiple transactions each day," even though these transactions constituted fewer than 1/2% of the defendant's total sales. Id. While the court noted that the defendant's website prominently displayed a toll-free sales number, it did not base its holding on this fact alone. It was this toll-free number, in conjunction with the defendant's admitted emphasis on attempting to sell to every person that had Internet access that allowed the court to find jurisdiction. Id. at 901-03. Defendant's website does not allow the same scope of interaction as the American Eyewear defendant's website. Users cannot complete order forms on Defendant's website. They cannot communicate with defendant through the website. The only way potential customers can communicate with Defendant is by making contact, either through the telephone or through email.
The court noted that the defendant's President "concede[d] that [the defendant] attempts to reach every person, including all Texans, who have Internet access and to provide them with the opportunity to purchase [the defendant's] products from anywhere, at any time." American Eyewear, Inc. v. Peeper's Sunglasses Accessories, Inc., 106 F. Supp.2d 895, 901 (N.D. Tex. 2000). In contrast, Defendant's President denies having any customers in Texas at any time.
Inset Systems speaks more directly to Plaintiff's argument. There, the defendant used the plaintiff's trademark both in its website name and in its toll-free number. Inset Systems, 937 F. Supp. at 163. The court found that jurisdiction was proper based on its finding that the defendant had "directed its advertising activities via the Internet and its toll-free number toward not only the state of Connecticut, but to all states." Id. at 165. The court essentially rested its decision on the fact that Internet advertising is available continuously to all Internet users, and therefore the defendant had purposefully directed its advertising activities at customers in every state in which Internet users had access to the website. Id. While noting that there is some dispute as to the continued validity of this decision, the Court is not prepared to follow its reasoning in this case. Personal jurisdiction should not be based on the mere fact that Defendant advertises over a website accessible throughout the world, or the fact that Defendant places a toll-free number or e-mail address on its site inviting inquiries from prospective customers.
See Hy Cite Corp. v. Badbusinessbureau.com, L.L.C., 297 F. Supp.2d 1154, 1159 (W.D. Wisc. 2004) (calling Inset Systems into doubt and noting that its reasoning would likely allow anyone with a website to be sued anywhere in the world); Milne v. Catuogno Court Reporting Servs., Inc., 239 F. Supp.2d 195, 201 (D. Conn. 2002) (noting the dispute over the continued validity of Inset Systems).
This case falls far below other cases within the federal district courts of Texas that have attempted to adequately define the line regarding the exercise of jurisdiction. As noted above, this case has no resemblance to the website at issue in American Eyewear. Similarly, this case does not have the same level of interaction as the defendant's website in the case of People Solutions Inc. v. People Solutions Inc., No. CIV.A.399-CV-2339-L, 2000 WL 1030619 (N.D. Tex. July 25, 2000), in which the court refused to find personal jurisdiction. In that case, customers could test the defendant's products, download product brochures and information, and order products online. Id. at *1. The court found no personal jurisdiction, however, because it found no evidence that the defendant had actually ever sold any products to, or contracted with, anyone in Texas. Id. at *4. The court noted that "[p]ersonal jurisdiction should not be premised on the mere possibility, with nothing more, that Defendant may be able to do business with Texans over its web site; rather, Plaintiff must show that Defendant has `purposefully availed itself' of the benefits of the forum state and its laws." Id. In this case, Plaintiff similarly bases its claim on the "mere possibility, with nothing more, that Defendant may be able to do business with Texans over its web site." See also Mink, 190 F.3d at 337 (holding that a website that provided users with a printable mail-in order form and that contained a toll-free telephone number, mailing address, and e-mail address for the defendant, but which could not be used by customers to place orders did not subject the defendant to personal jurisdiction). Therefore, the Court refuses to find that it has personal jurisdiction over Defendant based solely on Defendant's website.
B. Defendant's Advertisements
Plaintiff also attempts to base its claim of personal jurisdiction on the fact that Defendant has advertised in at least two publications distributed nationally. "Advertising in nationally-circulated trade publications may be sufficient to constitute a `purposeful availment' of the facilities of a state in which the publication circulates." Loumer v. Smith, 698 F.2d 759, 763 (5th Cir. 1983). However, the mere fact that a defendant has placed advertisements in nationally circulated publications is insufficient, in itself, to subject a nonresident defendant to personal jurisdiction. Id. Advertisements have generally been thought insufficient to establish personal jurisdiction. Singletary, 828 F.2d at 1136-37 (concluding that advertisements did not establish personal jurisdiction where there was no evidence that the "claim arose out of or was related to" the advertisement). Advertisements in national journals will also not establish personal jurisdiction. See Wenche Siemar v. Learjet Acquisition Corp., 966 F.2d 179 (5th Cir. 1992). Accordingly, the mere fact that Defendant has advertised in two publications with national circulation, by itself, will not subject Defendant to jurisdiction.
Plaintiff does not give the names of these publications. As Defendant has not contradicted this claim, however, and as the Court must take all uncontroverted, non-conclusory allegations of Plaintiff as true at this stage, the Court accepts Plaintiff's statement as true.
C. Defendant's Brochure
Plaintiff also argues that Defendant is subject to jurisdiction in this Court based on the fact that it mailed a promotional brochure to the office of the Limousine Industry Council in San Antonio. The Fifth Circuit has consistently been hesitant to establish personal jurisdiction based on a single contact with the forum state. In Growden v. Ed Bowlin Associates, Inc., 733 F.2d 1149, 1151 (5th Cir. 1984), the Court refused to find personal jurisdiction where the defendant had made one isolated sale within the forum state. The Court noted that the defendant had not sought out the plaintiff, who lived in the forum state. Id. The defendant had never sent representatives, inspectors, or repair or service personnel to the forum state. Id. In fact, the only contact the defendant had with the forum state in regard to the sale of an airplane to the plaintiff was the plaintiff's placement of an order over the phone. Similarly, in Singletary, the Fifth Circuit held that personal jurisdiction could not be had based on a single sale within the forum state where that sale had nothing to do with the claim at issue. Singletary, 828 F.2d at 1136. The Court also refused to find sufficient contacts with the forum state based on direct advertisements by the defendant within the forum state where that advertisement did not give rise to the claim. Id. at 1137.
The plaintiff also argued that personal jurisdiction was proper under the theory of general jurisdiction based on the defendant's contacts with the state, including placement of advertisements in two national publications. Growden v. Ed Bowlin Associates, Inc., 733 F.2d 1149, 1151 (5th Cir. 1984). The Court rejected this argument.
While the Court is mindful of the fact that "[e]ven a single contact can support specific jurisdiction," American Eyewear, 106 F. Supp.2d at 900 (citing Bearry v. Beech Aircraft Corp., 818 F.2d 370, 374 (5th Cir. 1987)), and that a portion of Plaintiff's cause of action arises from the alleged infringing material contained within the brochure, it is not appropriate to exercise personal jurisdiction based on this single mailing. Plaintiff asserts that it is "logical and possible [that] the infringing brochures were also sent to other residents listed in the July 2003 Limousine Digest Magazine, Page 120, including two Texas organizations." The Court cannot accept this conclusory allegation of fact as true. See Panda Brandywine Corp., 253 F.3d at 868. Plaintiff is unable to allege more than a single contact with the State of Texas. This contact falls far below what is required to establish personal jurisdiction on its own. The mere fact that Defendant has sent a brochure to a industry group in the State of Texas is not enough, without more, to find that it purposefully availed itself of the benefits and protections of the State. Therefore, the Court cannot exercise personal jurisdiction over Defendant based on the mailing of the brochure to the Limousine Industry Council in Texas.
D. Combination Of Defendant's Contacts
Plaintiff's chief argument is that the combination of Defendant's contacts with the State of Texas authorizes the Court to exercise personal jurisdiction over Defendant. Plaintiff analogizes this case to the case of International Truck Engine Corp. v. Quintana, 259 F. Supp.2d 553 (N.D. Tex. 2003). In Quintana, the court found personal jurisdiction based on a combination of contacts with the State of Texas, including: (1) attending trade shows in Texas; (2) sending unsolicited promotional materials to Texas; (3) selling products in Texas; (4) calling and soliciting business in Texas; and (5) advertising on an internet website accessible in Texas. Id. Plaintiff argues that the combination of Defendant's contacts are similar enough to the contacts in Quintana to allow the Court to exercise personal jurisdiction. The flaw in this argument, however, is that there is one critical difference between this case and Quintana: the fact that Defendant has never had any customers in Texas. A defendant is much more likely to have purposefully availed itself of the benefits and protections of the forum state when it has entered into obligations within the state. Had Defendant sold products within Texas, in combination with its other contacts, it would be much more likely that the Court could exercise personal jurisdiction over it. While this factor is not determinative, it would be a factor that carried great weight when examining Defendant's contacts with the State of Texas. As it is, Defendant's contacts with the State are insufficient to find that the Court may exercise personal jurisdiction over it.
E. Effects Test
As a final argument, Plaintiff argues that the Court may exercise jurisdiction over Defendant based on the "effects" test of Calder v. Jones, 465 U.S. 783, 789-90 (1984). Under the effects test, minimum contacts exist where a nonresident defendant expressly aims intentionally tortious activity into the forum state. Guidry v. United States Tobacco Co., Inc., 188 F.3d 619, 628 (5th Cir. 1999) ("Even an act done outside the state that has consequences or effects within the state will suffice as a basis of 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."). The effects test applies to intentional business torts, including copyright infringement. Isbell v. DM Records, Inc., No. CIV.A.3:02-CV-1408-G, 2004 WL 1243153, at *10 (N.D. Tex. June 4, 2004). The Court may therefore exercise jurisdiction based on defendant's intentional conduct that is purposefully directed at the State of Texas.
In Isbell, the court based its finding of personal jurisdiction on the fact that the defendant "could have reasonably foreseen that its licensee would sell . . . [certain products] in Texas, and that [the plaintiff] would feel the effects [in Texas]." The court in Isbell also based its holding on certain other district court decisions in which the courts held the sale or the attempted sale of infringing material in the forum state was sufficient for jurisdiction. The Court feels that Defendant's actions in this case, were they to amount to intentional tortious activity, do not rise to the level necessary to exercise jurisdiction under the effects test. Defendant has not purposefully directed action at the State of Texas other than sending a brochure to a trade group, which has its office in Texas. Plaintiff's reasoning would stretch the effects test beyond its existing limits and encompass essentially all advertisements that contain allegedly infringing material, thereby subjecting virtually all companies that advertise in nationally circulated publication to personal jurisdiction in the State. In light of the fact that advertisements themselves are generally thought not to constitute a valid basis for personal jurisdiction, the Court is not prepared to expand Calder's effects test to exercise jurisdiction over Defendant based on one brochure which has led to neither the sale of a single product, nor the enrollment of a single customer, in Texas.
See, e.g, Johnson v. Tuff N Rumble Management, Inc., No. 99-1374, 1999 WL 1201891, at * (E.D. La. Dec. 15, 1999) (finding specific personal jurisdiction under the effects test where the defendant knew the plaintiff would "feel the brunt of the injury" in Louisiana and the defendant "could reasonably foresee that its affiliate would use the licensing agreement to sell the [allegedly infringing] song in Louisiana"); Editorial Musical Latino Americana, S.A. v. Mar International Records, Inc., 829 F. Supp. 62, 64 (S.D.N.Y. 1993) ("Offering one copy of an infringing work for sale in New York, even if there is no actual sale, constitutes commission of a tortious act within the state sufficient to imbue this Court with personal jurisdiction over the infringers."); Lipton v. The Nature Company, 781 F. Supp. 1032, 1035-36 (S.D.N.Y. 1992) (finding jurisdiction, in part, because a license agreement to sell products allegedly violating a copyright was arguably a tortious act entered into out of state which could reasonably have been foreseen to have consequences within the forum state).
Defendant has moved for dismissal of this copyright infringement case based on a lack of personal jurisdiction. Plaintiff has attempted to show its prima facie case of personal jurisdiction based on a combination of three separate contacts with the State of Texas by Defendant: (1) Defendant's website, which includes a prominently displayed toll-free number and e-mail address; (2) Defendant's advertisements in two nationally circulated publications; and (3) Defendant's brochure which was mailed to a trade group in Texas. These contacts are not sufficient in themselves, or in combination, to find that Defendant has purposefully availed itself of the benefits and protections of the State of Texas and therefore has sufficient minimum contacts with the State for the Court to exercise personal jurisdiction. Plaintiff has been unable to make a prima facie case as to either general or specific jurisdiction. Accordingly, the Court GRANTS Defendant's motion (docket no. 3) and DISMISSES this case.