No. 04 Civ. 1089 (GEL).
August 12, 2004
Barry G. Magidoff, Deepro R. Mukerjee, Greenberg Traurig LLP, New York, NY for plaintiff Savage Universal Corp.
Greg Grazier, defendant pro se.
OPINION AND ORDER
This case involves allegations by plaintiff Savage Universal Corp. ("Savage Universal") that defendant Greg Grazier and various corporate defendants of which Grazier is principal (the "Grazier Corporations") infringed Savage Universal's trademark and trade name by using them to direct internet users to websites owned by Grazier or the Grazier Corporations, which sold competing products and also disparaged Savage Universal and its products. Defendant Grazier has moved to dismiss this action for insufficiency of service of process and for lack of personal jurisdiction. For the reasons that follow, the motion will be denied.
Plaintiff Savage Universal is a New York corporation which sells various photography supplies, including glassine envelopes. Savage Universal holds a registration for its trademark SAVAGE and accompanying logo design, for use in connection with glassine envelopes, photographic background paper, mat mounts for photos, and other types of photographic paper supplies. The trademark has been in continuous commercial use since 1937. (Declaration of Sylvester Hank ¶¶ 2-4, Ex. A.) Savage Universal sells its branded products primarily to specialty retailers and had sales of over $12 million in 2003, approximately 10% of which were in New York. (Hank Decl. ¶¶ 6-7.) Defendant Grazier is an Oregon resident who owns and operates a number of small businesses, including Panda Productions and Micro-Tech Industries, as well as serving as the sole officer, owner and employee of several Oregon corporations, including Grazier Construction, Inc., and Precision Landscapes and Yard Care, Inc. (Affidavit of Gregory P. Grazier 1-4.) One of the web-based businesses operated by Grazier through Micro-Tech Industries is located at www.theglassinewebshop.com and sells glassine paper sleeves, envelopes, and bags to internet customers. (See, e.g., Hank Decl. Ex. F.) Through the website, customers can email Grazier directly, place orders (including custom printing), and make payment through credit cards, Paypal, or direct cash deposits via wire transfer. (Id.)
In or around July 2003, Grazier began a commercial relationship with Savage Universal, placing several large orders for glassine envelopes on behalf of his company Micro-Tech Industries. (Hank Decl. ¶ 11.) In the course of this relationship, the parties communicated by phone, fax, and e-mail. Although the parties dispute many of the specifics of the conflict, both sides agree that, over the course of the next several weeks, the dealings between Grazier and Savage Universal were marked by arguments, complaints, mistakes and misunderstandings. The undisputed end result was one very dissatisfied customer in the person of defendant Grazier. (Hank Decl. ¶¶ 12-16; Grazier Aff. 3, Exs. C E.)
In January 2004, Savage Universal became aware that, in early August 2003, defendant Grazier or the Grazier Corporations had purchased and registered six internet domain names that incorporated Savage Universal's trademarks or trade names: savagepaper.biz, savagepaper.info, savageuniversalcorp.com, savageuniversalcorp.net, savageuniversalcorporation.com, and savageuniversal.com (collectively, the "Grazier Websites"). (Hank Decl. ¶ 17, Exs. E-1 — E-6.) Savage Universal first learned of these websites when employees in the sales and mail order departments received inquiries about the Grazier Websites from Savage Universal customers who had been directed to one or more of the Grazier Websites in the course of searching on the internet for Savage Universal's legitimate website. (Id. ¶ 18.) At that time, both savageuniversal.com and savagepaper.info pointed to a website operated by Grazier at http://home.onemain.com/~gpg/DiscontinuedItems.htm, which contained strong criticism of Savage Universal's business practices and pricing, and allowed viewers to click through to www.theglassinewebshop.com by selecting the phrase "Just visit our Glassine Home Page and SEE the SAVINGS." (Id. ¶¶ 18-21, Exs. F-G.) The savagepaper.biz domain name pointed directly to www.theglassinewebshop.com, where, as noted above, Grazier offered a substantial variety of glassine products for sale to internet customers via orders placed directly on the website. (Id. ¶ 18.)
On January 28, 2004, Savage Universal's counsel sent a cease-and-desist letter via e-mail and express mail to Grazier, Micro-Tech Industries and Panda Productions. (Id. ¶ 22, Ex. H.) Savage Universal did not receive any direct acknowledgment or response to these communications, but by February 2, 2004, all six of the Grazier Websites pointed to a website located at http://home.onemain.com/~gpg/SavagePaperInfoSite.htm, where viewers were greeted with the words "Hello and Welcome to My Savage Paper Info Site About Scoundrels and Savages Who Sell Glassine Envelopes, Sleeves, Preservers Paper at Unreasonable Prices and Questionable Authenticity." (Id. ¶ 23, Ex. I.) The site goes on to inform viewers that "This Site is The One `They' Don't want you to Know about. . . . There's no need for Cheating and Overpricing, but the fact is, There Is. You'll even find a few links to follow at the bottom of the page, for some better prices." (Id.) The links offered at the bottom of this webpage did not point directly to Grazier's theglassinewebshop page, but rather allowed viewers to link to pre-programmed searches on sites such as Google and Yahoo!, which brought up lists of web-based glassine product suppliers, with theglassinewebshop typically listed at or near the top. (Id.)
On February 10, 2004, Savage Universal commenced this litigation, alleging trademark infringement, trademark dilution, unfair competition, false designation of origin, and cybersquatting under the Lanham Act, 15 U.S.C. §§ 1501 et seq. and New York state law regarding trademarks, unfair competition, deceptive business practices, and defamation and trade libel. (May 13, 2004 Declaration of Barry Magidoff, Ex. A.) On February 24, 2004, Savage Universal made an ex parte application for a Temporary Restraining Order and an Order to Show Cause for a preliminary injunction, which was granted the same day.
Between February 25 and February 28, 2004, a process server hired by plaintiff made numerous attempts, including stake-outs at various times of day, to serve defendants at the address listed by Grazier with the Oregon Secretary of State — 93262 Bear Creek Ranch Road, Junction City, Oregon. (Magidoff Decl. ¶ 4, Ex. B; Declaration of Tim McNamara, Exs. A-E.) Grazier has identified this address as his residence in numerous communications with the Court, including on the record at a hearing on July 27, 2004, although he has provided evidence that the address is not valid for U.S. Mail service. (Grazier Aff., Ex. A.) On February 27, 2004, plaintiff mailed copies, by both first class and express mail, of the Summons and Complaint and all papers associated with the Temporary Restraining Order and Order to Show Cause to both the Bear Creek Ranch Road address and another address that Grazier had provided to the Oregon Secretary of State: P.O. Box 724, Springfield, Oregon. (Magidoff Decl., ¶ 5, Ex. C.) Although the original Order to Show Cause had specified personal service, on March 2, 2004, at the plaintiff's request and upon a showing that personal service was not feasible, the Order was amended nunc pro tunc to allow service by "any legally authorized means."
On March 8, 2004, having received no response from any defendant, the Court granted the preliminary injunction, enjoining defendants and anyone affiliated with them from, inter alia, (i) using plaintiff's trademark or trade name, or any reproduction, copy or colorable imitation thereof, as a domain name or in any other fashion that is intended to or is likely to cause others to believe that the defendants' websites are connected with plaintiff or supply plaintiff's genuine merchandise; (ii) making any transfer of the identified domain names; and (iii) directing defendants to deposit the registrations for any infringing domain names with the Court during the pendency of the lawsuit, and contact the relevant search engine companies to remove any and all references to the infringing websites or domain names. (Magidoff Decl., Ex. D.) Following the entry of the Preliminary Injunction Order, plaintiff served copies of the Order on defendants at the two addresses noted above, by both first class mail and express mail. (Magidoff Decl. ¶ 10.) Plaintiff also sent copies of the Order to Grazier's email address and fax number and left a phone message describing the Order at an answering machine connected to Grazier's last known phone number. (Id.) The express mail packages were all returned to plaintiff marked "refused by addressee," and the fax machine stopped receiving mid-way through the attempted transmission by plaintiff; the first class mail packages were not returned. (Id. ¶¶ 11, 15.)
By March 16, 2004, Grazier clearly had some actual notice of the pendency of this action, as Grazier's website at http://home.onemain.com/~gpg/SavagePaperInfoSite.htm, still accessible by means of "savagepaper.info," had been updated to inform viewers that the Grazier Website domain names were now for sale for a total of $6.6 million, and that, in addition to any revenue from selling the domain names, Grazier was soliciting donations for his "legal defense fund." (Id., Ex. K.) The site also contained the following message: "Because Savage Universal Corp. has decided to destroy me and my small businesses with an excessive unlawful use of legal process, taking advantage of my medical and financial hardships, as well as their filing legal action in a State (New York) far from where we even did any real business, deliberately and maliciously utilizing the disadvantage of distance by misleading the Court when all business with them was actually done here in Oregon, in their desperate attempt to eliminate my competition, I am left no choice but to liquidate these domain names. . . ." (Id.) By March 18, 2004, Grazier had added specific references to the lawsuit's pendency in the "United States District Court Southern District of New York," and to the affidavit of Sylvester Hank, which was submitted by plaintiff in support of its application for the order to show cause, and served on defendants as described above. (July 27, 2004 Declaration of Barry Magidoff, Ex. B.)
On April 7, 2004, the Clerk of this Court certified that none of the defendants in this action had filed an answer or otherwise moved in response to the complaint as provided in the Federal Rules of Civil Procedure, and were therefore in default. (Magidoff Decl. ¶ 31, Ex. R.) On May 18, 2004, plaintiff moved for an order to show cause as to why a default judgment should not be entered against all defendants, which was granted the same day. On May 19, 2004, plaintiff moved for the entry of a contempt order. The papers for both the May 18 Order and the May 19 Motion were served on defendants by first class mail, express mail, and facsimile on May 19, 2004. (7/27 Magidoff Decl., Ex. A.) The May 18 Order directed defendants to respond by June 4, 2004.
On June 3, 2004, the Court received a letter by facsimile from Grazier, noting that he had "recently been informed by the plaintiff's attorney, Mr. Barry Magidoff, that a motion for default judgment and for contempt has been filed with the court." (7/27 Magidoff Decl., Ex. C.) Grazier claimed in this correspondence that he had "never received copies of any such motion and had no knowledge of it until Mr. Magidoff's letter." (Id.) Grazier further noted that his "Oregon attorney" had complained to Magidoff that Grazier was never properly served, and that settlement discussions were ongoing. (Id.)
Grazier is apparently referring here to correspondence between Magidoff and an Oregon lawyer named James Coons, whom Grazier hired to represent him in negotiations with Savage Universal, and who apparently first communicated with plaintiff's counsel by letter dated May 24, 2004, in response to the order to show cause for default judgment.
In response to this correspondence, the Court issued an Order dated June 4, 2004, extending the defendants' time to answer or move in response to the Complaint, and to respond to plaintiff's motion for a contempt order, to June 28, 2004, and setting a hearing on both matters for July 1, 2004. The June 4 Order also directed plaintiff to provide an additional set of all relevant papers to Grazier by U.S. Postal Service Express Mail at the address provided by Grazier in his letter to the Court: P.O. Box 724, Springfield, OR 97477. Plaintiff complied with these instructions on June 10, 2004. (Id., Ex. E.) On June 23, 2004, the Court received a letter by facsimile from James Coons, the Oregon attorney acting on Grazier's behalf, informing the Court that settlement negotiations between the parties were ongoing, and respectfully requesting that the deadline for defendants' response to pending motions be further extended to July 23, 2004, to allow for additional time to reach a consensual resolution. Coons never formally entered an appearance in the case, but the request for additional time was granted and the date for the hearing was re-set to July 27, 2004 at 4:30 p.m.
On July 22, 2004, the Court received another letter from Coons, informing the Court that settlement negotiations had broken down, and that Grazier would like to represent himself at the July 27 Hearing, and requesting permission for Grazier to participate by phone. The Court granted that request, though with some reservations. As noted on the record at the July 27 Hearing, the telephone facilities available in the Courtroom are less than ideal for conducting a hearing, consisting simply of a standard speakerphone on the Judge's bench, amplified by microphones designed for live testimony. Requests for telephonic participation are granted rarely, as an exception to the normal rule of live attendance, and typically only as a courtesy to those litigants truly unable to be present in court, e.g. due to incarceration or serious physical illness or handicap. Nevertheless, this courtesy was extended to Grazier, and the hearing took place on July 27, with plaintiff's counsel physically present in the courtroom and Grazier present by telephone from Oregon. At the Hearing, Grazier again asserted that he had never been properly served with any papers in this action, although he admitted that he could receive mail at the address provided to the Court in his June 3 Letter, and that his attorney Coons had received certain papers from plaintiff's counsel and subsequently provided them to him.
DISCUSSIONI. Corporate Defendants
As discussed above, the two corporate defendants in this action — Grazier Construction, Inc. and Precision Landscapes and Yard Care, Inc. — have defaulted by failing to appear or respond to any of plaintiff's numerous filings. Grazier attempted to make arguments on behalf of these corporate defendants, both in his June 3 letter and at the July 27 Hearing, asserting that as the sole owner, principal, and employee of these corporations, he is entitled to speak for them. Regardless of his relationship with the corporate defendants, Grazier is not an attorney and "it has been the law for the better part of two centuries . . . that a corporation may appear in the federal courts only through licensed counsel." Rowland v. California Men's Colony, Unit II Men's Advisory Council, 506 U.S. 194, 201-202 (1993) (citing Osborn v. President of Bank of United States, 9 Wheat. 738, 829, 6 L.Ed. 204 (1824)).
Grazier repeated these assertions in an August 10, 2004, letter faxed to the Court — specifically that Oregon law allows a corporation's registered agent to appear on its behalf, and that the Court invited Grazier to appear pro se in its June 4 Order. However, Oregon corporate law does not alter the procedural requirements of the federal courts, and the Court's advice in its June 4 Order was specifically in response to a letter that Grazier, as an individual, sent to the Court regarding his inability to respond to plaintiff's filings without an attorney.
Grazier's implicit assertion that the corporate defendants essentially are him, as he is the only person associated with them or empowered to speak for them, is unavailing. The corporate form is a creature of the state, and corporations are not necessarily entitled to the same rights as natural persons. Courts in every circuit have uniformly held that 28 U.S.C. § 1654, which provides that "parties may plead and conduct their own cases personally or by counsel," does not allow corporations, partnerships, associations, or, indeed, any party other than a natural person, to appear in federal court other than through a licensed attorney. See, e.g., Eagle Associates v. Bank of Montreal, 926 F.2d 1305 (2d Cir. 1991); Taylor v. Knapp, 871 F.2d 803, 806 (9th Cir. 1989); Jones v. Niagara Frontier Trans. Auth., 722 F.2d 20, 22 (2d Cir. 1983); see also Turner v. American Bar Assn., 407 F. Supp. 451, 476 (ND Tex. 1975) (citing the "long line of cases" from 1824 to the present holding that a corporation may only be represented by licensed counsel). Accordingly, as Grazier cannot represent the corporate defendants in this action, and as no attorney has appeared to speak on their behalf, the corporate defendants are in default, and a default judgment will be entered against them.
II. Service of Process
As to himself personally, Grazier has moved to dismiss this action under Federal Rule of Civil Procedure 12(b)(5), challenging the adequacy of service of process as effected under Federal Rule of Civil Procedure 4 and the New York and Oregon Rules of Civil Procedure. (D. Mem. 2-3.) The relevant provision of Rule 4 provides that service may be effected on an individual within a judicial district of the United States "pursuant to the law of the state in which the district court is located, or in which service is effected, for the service of a summons upon the defendant in an action brought in the courts of general jurisdiction of the State." Fed.R.Civ.P. 4(e)(1). Because plaintiff attempted to serve Grazier in Oregon, and because plaintiff does not claim that it has satisfied the New York rules for effecting service, the Court will look to the requirements of Oregon law to determine whether service was properly effected.
Oregon Rule of Civil Procedure 7(D)(1) states Oregon's general requirement for service of process: "Summons shall be served, either within or without this state, in any manner reasonably calculated, under all the circumstances, to apprise the defendant of the existence and pendency of the action and to afford a reasonable opportunity to appear and defend." The Oregon Supreme Court has established a two-part test for determining the adequacy of service of process.Baker v. Foy, 310 Or. 221, 228-29 (1990). If the plaintiff demonstrates that it has complied with one of the service methods described in ORCP 7, the service is presumptively adequate. Id. If the defendant comes forward with evidence to rebut the presumption of adequacy, or if the plaintiff does not use one of the methods described in the rule, then the court must determine whether service is nonetheless adequate because it provides "reasonable notice" to the defendant. Id. at 229. In making a determination of whether "reasonable notice" has been provided, a court looks to the totality of the circumstances. Id. at 225.
After attempting without success to service Grazier personally with the Order to Show Cause for Preliminary Injunction, plaintiff was granted permission by the Court to serve Grazier by "any legally authorized means." Plaintiff elected to serve Grazier by mail, pursuant to ORCP 7(D)(2)(d). Service by mail is proper under Oregon law, provided that service be made both by first class mail and by a means designed to provide proof of receipt — either certified or registered mail, return receipt requested, or express mail. ORCP 7(D)(2)(d)(i). As noted above, plaintiff delivered all of the papers it filed in this action to Grazier by both first class mail and express mail, which appears on its face to provide adequate service under Oregon rules. However, all of the express mail packages were returned "unclaimed," and Oregon courts have consistently held that where mail is returned "unclaimed," it cannot constitute adequate service. See, e.g., Edwards v. Edwards, 310 Or. 672, 679 (1990) ("No Oregon case upholds service by mail as adequate unless receipt is acknowledged by defendant"; where certified mail is returned "unclaimed," service was not adequate); Davis Wright Tremaine LLP v. Menken, 45 P.3d 983, 989 (Or.App. 2002) (certified mail returned "refused" cannot constitute adequate service; only mailing methods that provide for "particularized assurance or confirmation of delivery to defendant" are sufficient to satisfy ORCP 7(D) and constitute adequate service). Even evidence of actual notice, standing alone, does not make service adequate if it fails to comply with the requirements of ORCP 7, as the right to receive adequate service is treated by Oregon courts as a substantive right. Id. at 989.
Although Grazier thus may be correct that, at least prior to June 3, 2004, he may not have been adequately served with the pleadings and other papers in this action, he is not entitled to a dismissal. ORCP 7 provides that "upon a showing . . . that service cannot be made by any method otherwise specified . . . the court, at its discretion, may order service by any method or combination of methods which under the circumstances is most reasonably calculated to apprise the defendant of the existence and pendency of the action." ORCP 7(D)(6)(a). Grazier's June 3 letter to the Court specifically identified P.O. Box 724, Springfield, OR 97477 as the address at which he could be reached, and made representations regarding ongoing discussions between Grazier, plaintiff's counsel, and an "Oregon attorney" (James Coons). After examining the totality of the record, including the declarations and affidavits of plaintiff's counsel regarding Grazier's apparent efforts to evade service, the representations made to the Court by both Grazier and plaintiff's counsel regarding James Coons and his receipt of a full set of papers from plaintiff's counsel, and the evidence from Grazier's own websites regarding his actual notice of this action, the Court in its June 4 Order directed plaintiff to provide an additional complete set of all papers in this action to Grazier by Express Mail to the address Grazier provided.
Under all the circumstances, the June 4 Order regarding alternative service was reasonably calculated to provide proper notice to Grazier. Moreover, although the package sent by plaintiff was again refused by Grazier and returned, the record at the July 27 Hearing established that Grazier, through a combination of first class mail and service on his former attorney Coons, does have actual notice of the existence and pendency of this action. This is sufficient to satisfy even the relatively high deference given to adequate service by the Oregon Rules of Civil Procedure, as interpreted by the Oregon courts. Litigants are not entitled to actively avoid service, up to and including defiance of Court orders regarding alternative service methods, and then seek dismissal of otherwise legally sufficient causes of action on grounds of insufficiency of service of process. See, e.g., Stonebrook Hillsboro LLC v. Flavel, 69 P.3d 807, 810 (Or.App. 2003); State Dep't of Human Resources ex rel. Johnson v. Bail, 915 P.2d 439, 443 (Or.App. 1996). Accordingly, defendant's motion to dismiss for insufficiency of service of process is denied.
III. Motion to Dismiss for Lack of Personal Jurisdiction
A. Legal Standard
On a motion to dismiss for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2), the plaintiff bears the burden to establish jurisdiction. In re Magnetic Audiotape Antitrust Litig., 334 F.3d 204, 206 (2d Cir. 2003). Where no jurisdictional discovery has been conducted, allegations of jurisdictional fact must be construed in the light most favorable to the plaintiff, CutCo Indus., Inc. v. Naughton, 806 F.2d 361, 365 (2d Cir. 1986), and the motion must be denied if those allegations suffice as a matter of law. In re Magnetic Audiotape, 334 F.3d at 206; PDK Labs, Inc. v. Friedlander, 103 F.3d 1105, 1108 (2d Cir. 1997) ("A plaintiff facing a Fed.R.Civ.P. 12(b)(2) motion to dismiss made before any discovery need only allege facts constituting a prima facie showing of personal jurisdiction[,]" and courts must "construe the pleadings and affidavits in plaintiff's favor at this early stage."); see also Metro. Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 566 (2d Cir. 1996).
B. Bases for Personal Jurisdiction Under New York Law
A federal court sitting in diversity may exercise jurisdiction over a foreign defendant if (i) the defendant is amenable to process under the law of the forum state, Omni Capital Int'l Ltd. v. Rudolf Wolff Co., 484 U.S. 97, 105 (1987); Metro. Life Ins. Co., 84 F.3d at 567, and (ii) the exercise of personal jurisdiction comports with due process under International Shoe Co. v. Washington, 326 U.S. 310 (1945), and its progeny. See, e.g., Clarendon Nat'l Ins. Co. v. Lan, 152 F. Supp. 2d 506, 515 (S.D.N.Y. 2001).
Plaintiff asserts two bases for personal jurisdiction over Grazier under New York law: Civil Practice Law and Rules ("CPLR") §§ 302(a)(1) and 302(a)(3). CPLR § 302(a)(1) is New York's long-arm statute, which confers specific jurisdiction over "any non-domiciliary [who] transacts any business within the state or contracts anywhere to supply goods or services in the state." "A nondomiciliary `transacts business' under CPLR 302(a)(1) when he purposefully avails [himself] of the privilege of conducting activities within [New York], thus invoking the benefits and protections of its laws." CutCo, 806 F.2d at 365 (alterations in original), quoting McKee Electric Co. v. Rauland-Borg Corp., 20 N.Y.2d 377, 382 (1967). Furthermore, jurisdiction is only proper under this statutory provision where the cause of action "arises out of the subject matter of the business transacted."Citigroup Inc. v. City Holding Co., 97 F. Supp. 2d 549, 564 (S.D.N.Y. 2000); CutCo, 806 F.2d at 365 (same). "A suit will be deemed to have arisen out of a party's activities in New York if there is an articulable nexus, or a substantial relationship, between the claim asserted and the actions that occurred in New York."Henderson v. I.N.S., 157 F.3d 106, 123 (2d Cir. 1998) (internal quotations omitted).
Alternatively, under CPLR § 302(a)(3), a foreign defendant may be subject to personal jurisdiction in New York if he "commits a tortious act without the state causing injury to person or property within the state . . . if he . . . (ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce." The Second Circuit has held that, in order to be subject to jurisdiction under this "tortious injury" provision of the CPLR, the "first effect" of the tortious act must be felt by the plaintiff in New York. DiStefano v. Carozzi North America, Inc., 286 F.3d 81, 84-85 (2d Cir. 2001) (New York plaintiff fired by out-of-state employer satisfies "first effects" test; although tortious act of wrongful discharge took place outside New York, injury of job loss was felt by plaintiff in New York, where plaintiff lived and had performed job duties).
The question of personal jurisdiction over foreign defendants has become increasingly complex in the internet age, as the phenomenal reach of internet communications and web-based businesses has made traditional notions of "presence," "transacting business," or "contracting for delivery" in a forum state difficult to reconcile with a virtual world. Although Second Circuit case law provides little guidance through this territory, Judge Sweet has aptly summarized the state of the law as it has developed around the country:
[T]he courts have identified a spectrum of cases involving a defendant's use of the internet. At one end are cases where the defendant makes information available on what is essentially a `passive' web site. This use of the internet has been analogized to an advertisement in a nationally-available magazine or newspaper, and does not without more justify the exercise of jurisdiction over the defendant. At the other end of the spectrum are cases in which the defendant clearly does business over the internet, such as where it knowingly and repeatedly transmits computer files to customers in other states. Finally, occupying the middle ground are cases in which the defendant maintains an interactive web site which permits the exchange of information between users in another state and the defendant, which depending on the level and nature of the exchange may be a basis for jurisdiction.Citigroup, 97 F. Supp. 2d at 565 (citations omitted); see also Zippo Mfg. Co. v. Zippo Dot Com, 952 F. Supp. 1119, 1124 (W.D. Pa. 1997) (outlining framework for analyzing internet jurisdiction cases). Although this "sliding scale" model provides a useful guide to how courts have approached such claims in the recent past, it does not amount to a separate framework for analyzing internet-based jurisdiction, and traditional statutory and constitutional principles continue to apply. See Hy Cite Corp. v. Badbusinessbureau.com, L.L.C., 297 F. Supp. 2d 1154, 1160-61 (W.D. Wisc. 2004) (rejecting notion that sliding scale framework represents a "specialized test" for internet jurisdiction, but finding that "[t]he website's level of interactivity may be one component of a determination whether a defendant has availed itself purposefully of the benefits or privileges of the forum state"); Winfield Collection, Ltd. v. McCauley, 105 F. Supp. 2d 746, 750 (E.D. Mich. 2000) ("[T]he need for a special Internet-focused test for `minimum contacts' has yet to be established. . . . [T]he ultimate question can still as readily be answered by determining whether the defendant did, or did not, have sufficient `minimum contacts' in the forum state.").
Here, Grazier's voluntary and deliberate actions clearly provide the "minimum contacts" with New York necessary to subject him to personal jurisdiction in a New York court, at least under CPLR § 302(a)(3). First, however, as to CPLR § 302(a)(1), plaintiff has provided no evidence that any customer in New York saw any of the Grazier Websites or ordered products from Grazier, or that Grazier's choice to conduct business with Savage Universal's Arizona sales office, even if he knew that the company was located in New York, has a sufficient nexus to the creation and maintenance of the allegedly infringing websites that give rise to plaintiff's claims. Although the Grazier Websites were clearly in the third group identified by Judge Sweet, above, in that they were patently commercial enterprises, with multiple means of interaction between Grazier and customers, including the consummation of a transaction, and the Grazier Websites could have been viewed by New York residents, without some allegation that such commercial activity actually occurred in New York it is unclear whether plaintiff can meet its burden to establish a prima facie case of "transacting business" under CPLR § 302(a)(1). It stretches the meaning of "transacting business" to subject defendants to personal jurisdiction in any state merely for operating a website, however commercial in nature, that is capable of reaching customers in that state, without some evidence or allegation that commercial activity in that state actually occurred. Cf. Citigroup, 97 F. Supp.2d at 566.
For purposes of jurisdiction, the actual ownership of the domain names, as between Grazier and the Grazier Corporations, is immaterial. Where an individual defendant acts through corporate entities within his control, the acts of those corporations can form the basis for jurisdiction over the individual. Kreutter v. McFadden Oil Corp., 71 N.Y.2d 460, 467 (1988). Grazier himself admits that he is the sole owner, employee, and agent of the Grazier Corporations.
Although Grazier subsequently altered the Grazier Websites so that they did not contain direct links to his own commercial websites, later actions cannot defeat personal jurisdiction.See Indymac Mortgage Holdings, Inc. v. Reyad, 156 F. Supp.2d 222, 232 (D. Conn. 2001); Ball v. Metallurgie Hoboken-Overpelt, S.A., No. 87-CV-191, 1989 WL 87418 (N.D.N.Y. July 31, 1989).
However, where, as here, plaintiff has made sufficient allegations of tortious conduct through the operation of those commercial websites, the analysis changes. Taking plaintiff's allegations and affidavits as true, as the Court must on a motion to dismiss, Savage Universal has met its burden of making a prima facie case that Grazier is subject to personal jurisdiction in New York under CPLR § 302(a)(3). The infringing use of Savage Universal's trademarks and trade name to "cybersquat" and otherwise direct Savage Universal's legitimate commercial traffic to websites operated by Grazier qualifies as a "tortious act" without the state, which has caused harm within the state. Although the mere operation of a website containing or using others' trademarks does not constitute a tort anywhere the site can be viewed, see National Football League v. Miller, 54 U.S.P.Q.2d 1574, 1575 (S.D.N.Y. 2000), Savage Universal has presented sufficient allegations that the alleged infringement caused injury within New York, as the "first effects" of trademark infringement or dilution are typically felt where the trademark owner resides and conducts business, and can include injury in the form of damage to goodwill, lost sales, or lost customers. Citigroup, 97 F. Supp. 2d at 568.
As to the second prong of § 302(a)(3)(ii), Grazier clearly expected or reasonably should have expected that his actions would have consequences in New York, where he knew Savage Universal was located. (Grazier Aff., Ex. C.) Indeed, the entire purpose of his activity at issue in this lawsuit appears to have been to damage Savage Universal's reputation and business. Whether his actions are an effort to publicize truthful anecdotes about unfair business practices, as Grazier claims, or merely a spiteful campaign of trademark infringement and defamation, as plaintiff claims, there can be no serious dispute that his actions were purposeful and intended to have consequences in New York (and, indeed, anywhere that potential customers might reside and view the Grazier Websites). Compare Bensusan Restaurant Corp. v. King, 126 F.3d 25 (2d Cir. 1997) (defendant who operated "Blue Note" club in Missouri and used website to advertise the club and its charge-by-phone service for will-call tickets, is not subject to jurisdiction in New York in suit by owner of "Blue Note" club in Manhattan, where defendant had not directed any activity at New York or at the New York-located plaintiff, and where the defendant's activities were entirely local).
Likewise, plaintiff has made sufficient allegations to satisfy the third prong of § 302(a)(3)(ii), that Grazier derives "substantial revenue from interstate or international commerce." Although Grazier claims that his businesses are purely local and only use the internet as a local advertising medium (Grazier Aff. 2), even a cursory review of his business websites indicates otherwise, and indeed Grazier's own statements about his glassine paper web business belie this claim (Grazier Aff. 3, noting that he has "been successful at establishing [his] Glassine Business in the TOP 10 Ranking with all Top Search Engines . . . in fact my domain names are starting at No. 2, No. 3, No. 6 No. 8, still today with the exception of Yahoo and MSN because of contact by the Plaintiff. . . ."). Grazier's websites offer a large variety of products and list prices for order volumes up to 50,000 units. (Hank Decl., Ex. F.) They indicate that the products advertised there are for sale to any customer viewing the site, they provide a means for calculating shipping costs from anywhere in the country, and further suggest that those customers in Canada, NAFTA, or other international locations contact Grazier directly to inquire about shipping rates. (Id.) The undisputed evidence is simply inconsistent with a claim that Grazier's commercial activities are merely local, or that his websites do little more than provide a local advertising medium for his businesses. Accordingly, plaintiff has met its burden of establishing a prima facie case that, through his voluntary and purposeful activities, Grazier is subject to personal jurisdiction in New York for claims related to his internet use of the plaintiff's trademark and trade name, and the other claims related thereto.
Finally, the exercise of personal jurisdiction over Grazier in this lawsuit is reasonable and consistent with constitutional principles of due process under the factors laid out by the Supreme Court in Burger King v. Rudzewicz, 471 U.S. 462 (1985). First, as described above, Grazier has "purposefully directed" his conduct at New York, such that he should "reasonably anticipate" litigation here. The interactive and commercial nature of the Grazier Websites, particularly when combined with Grazier's apparent campaign directed specifically at Savage Universal, after he was, by his own admission, aware that it was located in New York, clearly amount to "purposeful direction" of conduct. See, e.g., Citigroup Inc., 97 F. Supp.2d at 564;Hsin Ten Enterprise USA, Inc. v. Clark Enterprises, 138 F. Supp. 2d 449, 455 (S.D.N.Y. 2000); Cello Holdings, L.L.C. v. Lawrence-Dahl Cos., 89 F. Supp.2d 464, 471 (S.D.N.Y. 2000); see also Sports Auth. Mich., Inc. v. Justballs, Inc., 97 F. Supp.2d 806, 814 (E.D. Mich. 2000); Christian Science Bd. of Dirs. v. Robinson, 123 F. Supp. 2d 965, 975 (W.D.N.C. 2000); American Eyewear, Inc. v. Peeper's Sunglasses Accessories, Inc., 106 F. Supp.2d 895, 901 (N.D. Tex. 2000); Blumenthal v. Drudge, 992 F. Supp. 44, 56 (D.D.C. 1998); GTE New Media Servs. Inc. v. Ameritech Corp., 21 F. Supp. 2d 27, 38 (D.D.C. 1998); Inset Sys., Inc. v. Instruction Set, Inc., 937 F. Supp. 161, 165 (D. Conn. 1996). See also, e.g., Calder v. Jones, 465 U.S. 783 (1984) (libelous article regarding California plaintiff suffices for "purposeful direction," although written and edited entirely in Florida). Second, Savage Universal's claims plainly arise out of that purposeful conduct, and, third, the exercise of jurisdiction is reasonable and comports with principles of "fair play and substantial justice." Burger King, 471 U.S. at 476-77.
Grazier has purposefully interjected himself into New York through his operation of a nationwide (and apparently international) business through his commercial website — a website that formed an integral part of what the plaintiff has sufficiently alleged was a purposeful and deliberate campaign of trademark infringement and cybersquatting, directed at Savage Universal, a New York corporation. Although litigating in New York will undoubtedly be less convenient for Grazier than litigating in Oregon or in some other forum, Grazier has failed to present any evidence to demonstrate that, in this modern age and for a litigant with obvious familiarity with internet communication, litigation in New York would present so great an inconvenience as to constitute a deprivation of due process. Indeed, the statements that Grazier has offered regarding his rural location, his lack of financial resources, and his various injuries and disabilities (Grazier Aff. 1-2), if credited, would present a similar barrier to litigation even in the federal courts in Oregon, where Grazier would clearly have no claim for lack of personal jurisdiction. The generalized inconvenience of litigating in a foreign forum is typically not sufficient to establish that the exercise of jurisdiction is constitutionally unreasonable. See, e.g., Starmedia Network Inc. v. Star Media Inc., 00 Civ. 4647, 64 U.S.P.Q.2d 1791, 2001 WL 417118, at *2 (S.D.N.Y. 2001).
Although Grazier has asserted that he lives "far out in the countryside," and that it is an 80 mile round-trip to retrieve mail (Grazier Aff. 2), the Court takes judicial notice of the fact that readily available internet mapping services place Grazier's admitted residence approximately 25 miles from his post office box, and approximately 22 miles from the city of Eugene.
Furthermore, litigating this case in New York presents no conflict with the sovereignty of Oregon, because it primarily concerns the Lanham Act, a federal statute. New York has an interest in adjudicating the dispute because Savage Universal has raised supplemental claims under New York law, and Grazier's activities clearly implicate New York's interest in enforcing its laws and providing a forum where its corporations may seek redress. From a judicial efficiency perspective, New York is as efficient as Oregon as a forum to resolve the controversy, because the bulk of the evidence concerns internet website printouts and federal court or agency records, which are accessible anywhere to parties with internet access (a group to which Grazier plainly belongs). Accordingly, the balance of theBurger King factors weighs in favor of the exercise of personal jurisdiction over Grazier in New York, as comporting with standards of fair play and substantial justice. As plaintiff has satisfied, at least for purposes of a motion to dismiss, its burden to show that Grazier is subject to personal jurisdiction both under the laws of New York and under constitutional notions of due process, Grazier's motion to dismiss for lack of jurisdiction is denied.
IV. Additional Observations
Although the Court does not address the substantive merits of this lawsuit, as no consideration of the merits is required on a motion to dismiss under Federal Rule of Civil Procedure 12(b)(2) or 12(b)(5), certain additional comments are in order. Defendant Grazier has sought to portray this lawsuit and the Court's actions concerning it as a kind of witchhunt or personal campaign intended to destroy his businesses and deprive him of his First Amendment rights to freedom of speech. (E.g., Grazier Aff. 2-5; June 3 Letter; August 10 Letter.) Without commenting on the motives of plaintiff in bringing this lawsuit, whatever they might be, the Court merely notes for Grazier's benefit, and in consideration of his pro se status, that nothing in this opinion or in the Court's prior orders in this action prevents Grazier from complaining about Savage Universal, on the internet or elsewhere, or operating a business that competes with them. However, under the laws of the United States, what Grazier is barred from doing is accomplishing those objectives by means of trademark infringement or dilution — including cybersquatting and other illegal uses of others' trademarks or trade dress to direct or misdirect commercial internet traffic. The Court further notes that Grazier's challenged speech was not directed at criticizing our government or elected officials, or voicing unpopular positions on vital issues of the day — actions that have formed the heart of the courts' proud and vital tradition of protecting Americans' First Amendment rights. Rather, Grazier's speech was purely commercial — spreading the word about a negative customer experience with plaintiff and publicizing his beliefs about its unethical business practices, and using this commentary to point out the favorable and preferable aspects of his own competing business. Grazier is of course entitled to those beliefs and statements, within the limits of the applicable trademark, defamation, and trade practices laws, but purely commercial speech has long been accorded a much lower degree of First Amendment protection,see, e.g., Central Hudson Gas Elec. Corp. v. Public Serv. Comm'n of N.Y., 447 U.S. 557, 569 (1980), and cries of constitutional violation have little place in a suit of this type.
Finally, as to Grazier's claims of bias and mistreatment by this Court, raised both at the July 27 Hearing and in Grazier's August 10 Letter, and again in consideration of Grazier's pro se status and possible lack of familiarity with court procedures, the Court merely notes for the record that, as described fully above, this Court has extended Grazier every courtesy available to any litigant, and more. Grazier, whether acting for himself or through his former lawyer, has been granted numerous extensions of deadlines, even where requests were made after those deadlines had expired and where the documentary record cast fair doubt on Grazier's good faith. In addition, Grazier was permitted to participate in a default judgment hearing by telephone, an accommodation that is rarely requested and even more rarely granted in this Court.
For the reasons discussed above, Grazier's motion to dismiss for insufficiency of service of process and lack of personal jurisdiction is denied. As his motion to dismiss has been denied, Grazier is hereby directed to answer the Complaint in this action no later than September 17, 2004.
Grazier is again reminded that the Pro Se Office for this district, located at the Daniel P. Moynihan United States Courthouse, 500 Pearl Street, Room 203, New York, NY 10007, 212-805-0175, may be of assistance to him regarding court procedures and forms.