Lenahan Law v. Hibbs

[David A. Szwak]

Lenahan Law Offices, LLC v. Hibbs,
Not Reported in F.Supp.2d, 2004 WL 2966926, W.D.N.Y., Dec 22, 2004


United States District Court,
W.D. New York.
LENAHAN LAW OFFICES, LLC, Plaintiff,
v.
Richard J. HIBBS, a/k/a Richard B. Hibbs, a/k/a Bud Hibbs, and ProComp
Technology Services, Defendants.
No. 04-CV-6376 CJS.
Dec. 22, 2004.

DECISION and ORDER

SIRAGUSA, J.

INTRODUCTION
*1 This diversity action for defamation is before this Court on defendants' motion (# 2) to dismiss for lack of specific personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2). For the reasons stated below, defendants' application is granted and the complaint is dismissed without prejudice.

FACTUAL BACKGROUND
Plaintiff commenced this action by filing a complaint in this Court on August 6, 2004. Richard Hibbs ("Hibbs") is the only defendant to have appeared; no proof of service on defendant ProComp Technology Services has been provided to the Court. Thus, the Court will analyze the complaint only with respect to personal jurisdiction over Hibbs.
The complaint alleges three causes of action against both defendants: (1) defamation; (2) punitive damages due to defamation; and (3) tortious interference with business relations. The complaint states that Hibbs, a resident of Forth Worth, Texas, owned and operated a website at the URL of http://www.budhibbs.com at which he "solicits business across the United States from consumers experiencing financial difficulties. He refers to the services he provides for such individuals as the 'Bankruptcy Alternative Program ." ' Compl. ¶ 5. Plaintiff alleges that Hibbs charges a service for this program and that the website "is readily accessible by New York consumers," and that "Hibbs has contracted with one or more New York consumers to provide these services in New York." Id. Additionally, plaintiff contends that Hibbs' website "contains an interactive portion in which consumers can send questions" to Hibbs, and that he will post the "verbatim questions from consumers, along with his answers, on the website." Compl. ¶ 6.
In support of his motion, Hibbs filed a sworn declaration in which he states that he has no offices, agents or employees in New York, no subsidiaries organized or qualified to do business in New York, and no telephone listings, licenses to do business, or bank accounts in New York. Hibbs Decl. ¶ 2. He also relates that he has never contracted or transacted any business within New York related to his website, has never entered into a contract with a New York-based company, has never paid or incurred taxes in New York, and has never had any representatives, officers, employees, agents, brokers, dealers, or agents for service of process in New York. Further, he states that he has never specifically targeted New York residents for business and has never had a business relationship with plaintiff or, for that matter, ever entered into a single transaction with plaintiff. Id. ¶ 3. Finally, Hibbs provides specific factual statements pertaining to the substance of the complaint, stating that he has "read dozens of e-mails from Texas residents complaining of the collection tactics of the Lenahan Law Office," and has "listened to tape recorded conversations between Texas residents and someone claiming to be from Lenahan Law Offices," and that those statements "often involved threats of arrest for failure to pay a consumer debt, or, statements that a lawsuit was filed." Finally, he asserts that he would need to have those witnesses, who are residents of Texas, testify at any trial on the merits of plaintiff's claims.

STANDARDS OF LAW
*2 In a diversity action, when considering a motion for dismissal under Rule 12(b)(2), the Court must determine whether it has personal jurisdiction over the moving defendants. It is well settled that "the amenability of a foreign corporation to suit in a federal court in a diversity action is determined in accordance with the law of the state where the court sits, with 'federal law' entering the picture only for the purpose of deciding whether a state's assertion of jurisdiction contravenes a constitutional guarantee." Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 171 F.3d 779, 784-85 (2d Cir.1999) (quoting Arrowsmith v. United Press Int'l, 320 F.2d 219, 223 (2d Cir.1963) (en banc )).
Where, as here, jurisdiction is challenged prior to discovery, a plaintiff may defeat a motion to dismiss by "pleading in good faith ... legally sufficient allegations of jurisdiction." Jazini v. Nissan Motor Co., Ltd., 148 F.3d 181, 184 (2d Cir.1998). Thus, plaintiff need only make a prima facie showing of jurisdiction to survive a motion to dismiss. Id. Although the plaintiff bears the burden of establishing that the court has jurisdiction over the defendant, see Robinson v. Overseas Military Sales Corp., 21 F.3d 502, 507 (2d Cir.1994), where, as here, the "court [has chosen] not to conduct a full-blown evidentiary hearing on the motion, the plaintiff need make only a prima facie showing of jurisdiction through its own affidavits and supporting materials." Bank Brussels Lambert, 171 F.3d at 784 (quoting Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 904 (2d Cir.1981)).
To resolve issues of personal jurisdiction, the Court engages in a two-part analysis. First, it must determine whether there is jurisdiction over the defendant under the relevant forum state's laws. Bank Brussels Lambert, 171 F.3d at 784. In this case, New York Civil Procedure Law and Rule § 302(a)(1) ( McKinney's 2004) is the claimed basis for personal jurisdiction. Second, it must determine whether an exercise of jurisdiction under this statute is consistent with federal due process requirements.
As to the first factor, New York Civil Procedure Law and Rule § 302(a)(1) reads:
Personal jurisdiction by acts of non-domiciliaries. (a) Acts which are the basis of jurisdiction. As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any non-domiciliary, or his executor or administrator, who in person or through an agent:
1. transacts any business within the state or contracts anywhere to supply goods or services in the state....
N.Y. C.P.L.R. § 302(a)(1) (McKinney's 2004). Further,
Although physical presence in New York is not a prerequisite for finding personal jurisdiction under the long-arm provisions of CPLR 302 (see Parke-Bernet Galleries v. Fran Klyn, 26 N.Y.2d 13, 308 N.Y.S.2d 337, 256 N.E.2d 506; L.F. Rothschild, Unterberg, Towbin v. Thompson, 78 A.D.2d 795, 433 N.Y.S.2d 6), "it is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws" (Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1240, 2 L.Ed.2d 1283; Ford v. Unity Hospital, 32 N.Y.2d 464, 471, 346 N.Y.S.2d 238, 299 N.E.2d 659; Longines-Wittnauer Watch Co. v. Barnes & Reinecke, 15 N.Y.2d 443, 261 N.Y.S.2d 8, 209 N.E.2d 68, cert. den. 382 U.S. 105, 86 S.Ct. 241, 15 L.Ed.2d 158).
*3 Cato Show Printing Co., Inc. v. Lee, 84 A.D.2d 947, 949, 446 N.Y.S.2d 710 (N.Y.App.Div.1981). Additionally,
Under prior case law, personal jurisdiction did "not extend to nondomiciliaries who merely ship[ped] goods into the State without ever crossing its borders" (McGowan v. Smith, 52 N.Y.2d 268, 271, 437 N.Y.S.2d 643, 419 N.E.2d 321). However, the amended CPLR 302(a)(1): "is a 'single act statute' and proof of one transaction in New York is sufficient to invoke jurisdiction, even though the defendant never enters New York, so long as the defendant's activities here were purposeful and there is a substantial relationship between the transaction and the claim asserted" (Kreutter v. McFadden Oil Corp., 71 N.Y.2d 460, 467, 527 N.Y.S.2d 195, 522 N.E.2d 40 [emphasis added] ).
People v. Concert Connection, 211 A.D.2d 310, 315, 629 N.Y.S.2d 254 (N.Y.App.Div.1995).
With regard to the second factor under the two-part jurisdictional analysis, the Second Circuit has written that,
The second part of the jurisdictional analysis asks "whether the assertion of personal jurisdiction comports with 'traditional notions of fair play and substantial justice'--that is, whether it is reasonable under the circumstances of the particular case." Metro. Life [v. Robinson-Ceco Corp.], 84 F.3d [560] at 568 [2d Cir.1996] (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945)). Courts are to consider five factors in evaluating reasonableness: "(1) the burden that the exercise of jurisdiction will impose on the defendant; (2) the interests of the forum state in adjudicating the case; (3) the plaintiff's interest in obtaining convenient and effective relief; (4) the interstate judicial system's interest in obtaining the most efficient resolution of the controversy; and (5) the shared interest of the states in furthering substantive social policies." Id. at 568. Where a plaintiff makes the threshold showing of the minimum contacts required for the first test, a defendant must present "a compelling case that the presence of some other considerations would render jurisdiction unreasonable." Metro. Life, 84 F.3d at 568. The import of the "reasonableness" inquiry varies inversely with the strength of the "minimum contacts" showing--a strong (or weak) showing by the plaintiff on "minimum contacts" reduces (or increases) the weight given to "reasonableness." Id. at 568-69.
Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 305 F.3d 120, 129 (2d Cir.2002) (some citations omitted; footnote omitted).
Finally, with regard to asserting personal jurisdiction over the owner of an Internet website accessible in New York, the Courts have required that the site be "highly interactive" and, in the cases found by the Court's research, require more than mere presence on the Internet. See, e.g., Citigroup Inc. v. City Holding Co., 97 F.Supp.2d 549, 565 (S.D.N.Y.2000) (describing categories of interactivity and jurisdictional conclusions to draw therefrom); Andrew Greenberg, Inc. v. Sir-Tech Software, Inc., 297 A.D.2d 834, 837, 746 N.Y.S.2d 736 (N.Y.App.Div.2002) (maintenance of passive Web site does not constitute commercial activity sufficient to support personal jurisdiction); c.f. Blissworld, LLC v. Kovack, No. 125431/00, 2001 WL 940210 (N.Y.Sup.Ct. Jul.9, 2001) (web site through which Internet users could order plaintiff's products, and N.Y. sales revenues of $2,970 sufficient to support jurisdiction); Zippo Manuf. Co. v. Zippo Dot Com, Inc., 952 F.Supp. 1119, 1125-26 (W.D.Pa.1997) (concluding that jurisdiction existed where defendant had "done more than create an interactive web site through which it exchanges information with [forum] residents in hopes of using that information for commercial gain later;" it had, as a result of its web site advertisements, contracted with 3,000 individuals in forum state).

ANALYSIS
*4 Plaintiff has not filed any memorandum or other paper in opposition to defendant's motion. Extrapolating from the existing case law, the Court determines that Hibbs has not projected himself into this forum such that the Court has obtained personal jurisdiction over him. First, the Court notes that plaintiff has plead only specific personal jurisdiction, not general jurisdiction. The often cited case of Zippo Mfg. Co., 952 F.Supp. 1119 is instructive:
General jurisdiction permits a court to exercise personal jurisdiction over a non-resident defendant for non-forum related activities when the defendant has engaged in "systematic and continuous" activities in the forum state. Helicopteros Nacionales de Columbia, S.A. v. Hall, 466 U.S. 408, 414-16, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984). In the absence of general jurisdiction, specific jurisdiction permits a court to exercise personal jurisdiction over a non-resident defendant for forum-related activities were the "relationship between the defendant and the forum falls within the 'minimum contacts' framework" of International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945) and its progeny."
Zippo, 952 F.Supp. at 1122 (citing Mellon Bank (East) PSFS, N.A. v. Farino, 960 F.2d 1217, 1221 (3d Cri.1992)). Plaintiff is not alleging that Hibbs regularly does business in New York and is subject to jurisdiction pursuant to N.Y. C.P.L.R. § 301 (McKinney's 2004). Rather, plaintiff alleges specific jurisdiction under New York's Long Arm statute, § 302(a)(1) (McKinney's 2004).
The Zippo decision established a sliding scale of specific personal jurisdiction over Internet users, which has subsequently been followed in a number of jurisdictions. See Lakin v. Prudential Secs., 348 F.3d 704, 710 (8th Cir.2003) (pointing out that the great majority of courts that have examined this issue, have adopted the Pennsylvania court's "sliding scale."); Gator.com Corp. v. L.L. Bean, Inc., 341 F.3d 1072, 1079 (9th Cir.2003), vacated by, rehearing, en banc, granted by 366 F.3d 789 (9th Cir., 2004); Carefirst of Md., Inc. v. Carefirst Pregnancy Ctrs., Inc., 334 F.3d 390, 399 (4th Cir.2003) (pointing out that in a prior decision, the Fourth Circuit "expressly 'adopt[ed] and adapted' the model for Internet-based specific jurisdiction developed in" Zippo ); Toys "R" Us, Inc. v. Step Two, S.A., 318 F.3d 446, 452 (3d Cir., 2003) ("The opinion in Zippo ... has become a seminal authority regarding personal jurisdiction based upon the operation of an Internet web site."); Revell v. Lidov, 317 F.3d 467, 470 (5th Cir.2002) ( "This circuit has drawn upon the approach of Zippo ... in determining whether the operation of an internet site can support the minimum contacts necessary for the exercise of personal jurisdiction."); Soma Med. Int'l v. Standard Chtd. Bank, 196 F.3d 1292, 1296 (10th Cir., 1999) (adopting the "sliding scale" test used in the lower court, which cited to Zippo as a source); Savage Universal Corp. v. Grazier Constr., Inc., No. 04 Civ. 1089(GEL), 2004 U.S. Dist. LEXIS 16088 (S.D.N.Y., Aug. 13, 2004) (adopting the sliding scale formula acknowledging Zippo.); In re Ski Train Fire in Kaprun, Austria on November 11, 2000, No. 01 MDL 1428(SAS), 2003 WL 22909153, *3 (S.D.N.Y. Dec.9, 2003) (adopting sliding scale test acknowledging Zippo ).
*5 In Zippo, a California Internet company, Dot Com, was sued in Pennsylvania by the Pennsylvania manufacturer of Zippo® cigar lighters. Dot Com used the trademarked name Zippo® in connection with its business of providing Internet newsgroup messages to subscribers. The question addressed by Judge McLaughlin in the Western District of Pennsylvania was whether the district court had personal jurisdiction over Zippo Dot Com, which had no physical presence in Pennsylvania. Holding that the court did, Judge McLaughlin heeded the direction of the Supreme Court, that "as technological progress has increased the flow of commerce between the States, the need for jurisdiction has undergone a similar increase," Zippo, 952 F.Supp. at 1123 (quoting Hanson v. Denckla, 357 U.S. 235, 250-51, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958)), and in reviewing the then existing case law, he defined the often quoted sliding scale of jurisdiction over those who use the Internet:
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. E.g. Compuserve, Inc. v. Patterson, 89 F.3d 1257 (6th Cir.1996). 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. E.g. Bensusan Restaurant Corp., v. King, 937 F.Supp. 295 (S.D.N.Y.1996). 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 site. E.g. Maritz, Inc. v. Cybergold, Inc., 947 F.Supp. 1328 (E.D.Mo.1996).
Zippo, 952 F.Supp. at 1124.
One argument Zippo Dot Com made in Zippo was that its presence in Pennsylvania was merely fortuitous, or coincidental within the meaning of World Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980). In World Wide Volkswagen, residents of New York purchased a Volkswagen and subsequently took it to Oklahoma and were injured when driving it in that state. The owners sued Volkswagen and prevailed in the state courts of Oklahoma. However, at the Supreme Court, Volkswagen successfully argued that, since it did not sell its vehicles in Oklahoma and had not made an effort to establish business relationships in Oklahoma, that state's courts did not have personal jurisdiction over Volkswagen. "The Supreme Court characterized the manufacturer's ties with Oklahoma as fortuitous because they resulted entirely out of the fact that the plaintiffs had driven their car into that state." Zippo, 952 F.Supp. at 1126. In Zippo, citing to the Compuserve case, Judge McLaughlin distinguished World Wide Volkswagen from Zippo Dot Com's situation, since Zippo Dot Com had delivered Usenet newsgroup files into Pennsylvania pursuant to contracts with users in that state. In Compuserve, Patterson, the defendant, a Texas resident, had contacted with Compuserve, owner of an Internet server in Ohio, to have Compuserve distribute his shareware files on its server in Ohio. Pursuant to that contract, Patterson "electronically uploaded thirty-two master software files to Compuserve's server in Ohio." Zippo, 952 F.Supp. at 1124. When Compuserve made a program that the defendant claimed violated his _, Compuserve brought a declaratory action in Ohio, and the defendant contested personal jurisdiction. The Sixth Circuit, upholding personal jurisdiction over the Texas defendant in the Ohio court, found
*6 that Patterson chose to transmit his software from Texas to CompuServe's system in Ohio, that myriad others gained access to Patterson's software via that system, and that Patterson advertised and sold his product through that system. Though all this happened with a distinct paucity of tangible, physical evidence, there can be no doubt that Patterson purposefully transacted business in Ohio.
CompuServe, 89 F.3d at 1264-65.
In deciding that he had specific personal jurisdiction over Zippo Dot Com, Judge McLaughlin relied on the fact that
[Zippo] Dot Com repeatedly and consciously chose to process Pennsylvania residents' applications and to assign them passwords. Dot Com knew that the result of these contracts would be the transmission of electronic messages into Pennsylvania. The transmission of these files was entirely within its control.
Zippo, 952 F.Supp. at 1126 (emphasis added). The point is clear: specific jurisdiction over an Internet user depends on a showing that the user projected himself into the jurisdiction. That showing is lacking here.
In the case before the Court, the complaint alleges that Hibbs' website "contains an interactive portion in which consumers can send questions" to Hibbs, and that he will post the "verbatim questions from consumers, along with his answers, on the website." Compl. ¶ 6. A consumer in New York, therefore, must access Hibbs' website in Texas to both post and receive a response to his posting. Hibbs, unlike the defendants in Compuserve and Zippo, is not transmitting files [FN1] into New York. Absent an allegation that Hibbs is projecting himself into New York, this Court cannot exercise specific personal jurisdiction over him.


FN1. The Court notes that none of the cases address the simple fact that clicking on an Internet hyperlink, or entering a specific URL into a web browser causes the web page to be downloaded onto the user's computer for viewing in the user's web browser. See Wells Fargo & Co. v. WhenU.com, Inc., 293 F.Supp.2d 734, 742 (E.D.Mich.2003); British Telecommunications PLC v. Prodigy Communications Corp., 217 F.Supp.2d 399, 407 (S.D.N.Y.2002). The Court distinguishes this situation in that the user has initiated the contact, not the website owner.


Further, the complaint does not address how his causes of action are "arising from" Hibbs' allegedly doing business in New York. See N.Y. C.P.L.R. § 302(a) (McKinney's 2004). As the New York Court of Appeals has held,
Essential to the maintenance of a suit against a nondomiciliary under CPLR 302 (subd [a], par 1) is the existence of some articulable nexus between the business transacted and the cause of action sued upon.... Indeed, it is this basic requirement that differentiates the long-arm authority conferred by CPLR 302 (subd [a], par 1) from the more traditional authority of the New York courts under CPLR 301 to exercise in personam jurisdiction over foreign defendants who are "present" within the State by virtue of their "doing business" here.
McGowan v. Smith, 52 N.Y.2d 268, 272, 437 N.Y.S.2d 643, 419 N.E.2d 321 (1981) (citation omitted). "Although a defendant need not engage in 'systematic and continuous' transactions in New York, there must be a direct and substantial relationship between the in-state activities and the cause of action." Merritt v. Shuttle, Inc., 13 F.Supp.2d 371, 378 (E.D.N.Y.1998). Plaintiff's allegations that Hibbs provided credit advice to New Yorkers for a price, even if it were sufficient to show that Hibbs "transacts business" or "contracts anywhere to supply goods or services in the state," do not support any argument that the claims made in the complaint for defamation and intentional interference with business relations arose from those transactions or contracts to supply goods or services. Rather, the complaint merely alleges that the information was posted on a passive portion of Hibbs' website [FN2] in Texas. Clearly, this is not only insufficient to show specific personal jurisdiction over Hibbs, but also shows that plaintiff has failed to make a prima facie showing of how those alleged false statements arose from Hibbs' transacting business in New York under N.Y. C.P.L.R. § 302(a)(1) ( McKinney's 2004). See Revell v. Lidov, 317 F.3d 467 (5th Cir.2002) (rejecting the argument that defamation of a Texas resident on a website of Columbia University, in New York City, provided jurisdiction over the defamation suit in Texas).


FN2. Plaintiff cites to ht tp:// www.budhibbs.com/budhibbs/agencydetails.asp?ID=185, among others, which the Court found is now disconnected. Information of the type complained about by plaintiffs may be on a new website, http:// www.lenahanlawofficeexposed.com/ ("Lenahan collectors WILL lie about phantom court cases to extort funds from you. Lenahan employees are imposters posing as attorneys, law enforcement and court officials. Do NOT become another Lenahan victim!"), to which visitors to Hibbs' site at www.budhibbs.com are invited. In Hibbs' biography, also online, he invites users to "[a] website [http://www.budhibbs.com/AmWorstCollection.htm] sponsored by Hibbs [that] targets the "Worst Collection Agencies in America" and offers consumers concise information on their rights and the laws that protect them." The Lenhanan Law Office is featured in that link.



CONCLUSION
*7 Accordingly, Hibbs' application (# 2) to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(2) for lack of specific personal jurisdiction is granted. Since plaintiff has not requested jurisdictional discovery, nor moved to amend the complaint, and since no other defendant has appeared, the Clerk is directed to close this case with costs to be taxed to plaintiff by the Clerk pursuant to 28 U.S.C. §§ 1919 and 1920.
IT IS SO ORDERED.
W.D.N.Y.,2004.
Lenahan Law Offices, LLC v. Hibbs
Not Reported in F.Supp.2d, 2004 WL 2966926 (W.D.N.Y.)