Court: District Court, E.D. Oklahoma; January 5, 2015; Federal District Court
The Court has reviewed the Motion to Dismiss filed by Defendants IM Solutions, LLC and LeadingResponse, along with the Plaintiffs' Response and the Defendants' Reply. The Court grants the Defendants' motion.
The Complaint, filed on June 3, 2014, involves Plaintiffs Anthony Allen and James E. Blount, IV, both lawyers with their respective firms in Oklahoma and Tennessee. They claim ownership of common law trademarks related to their names and domain names, asserting these marks are distinctive and have acquired secondary meaning. The Complaint is a putative class action for all legal service providers in the U.S. who use the Internet for advertising.
Defendant IM Solutions, LLC is a Nevada company based in Texas, while LeadingResponse is identified as a trading name for RME Group Holding Company, a Delaware corporation. Plaintiffs accuse IMS and RME, along with other defendants, of unfair competition under the Lanham Act, deceptive trade practices under Oklahoma law, tortious interference with economic advantage, and civil conspiracy.
The alleged unfair competition involves "pop-up" advertisements on Plaintiffs’ websites soliciting clients for non-Plaintiff lawyers who purchase leads from Defendants. These advertisements result from adware or malware that generates pop-ups inviting user contact information without disclosing their disconnection from the viewed website. The collected information is then routed to Reed Elsevier, which connects consumers to Lead-Buying Lawyers. Plaintiffs claim IMS profits from these leads while compensating Reed Elsevier per lead.
Plaintiffs claim that Defendants' pop-up ads mislead consumers about the source of legal services, falsely attributing the services of Defendants’ Lead-Buying Lawyers to Plaintiffs and diverting potential clients away from them. Defendants assert, through declarations, that RME is a non-operational holding company with no ties to Oklahoma, and that IMS generates leads for law firms without using pop-up ads or malware. IMS claims that over 90% of its leads come from its own websites, with minimal revenue generated from two Oklahoma law firms, which do not constitute a significant connection to the state. IMS has no physical presence, employees, or targeted advertising in Oklahoma, and its representatives rarely travel there. Plaintiffs challenge the credibility of IMS’s declarations, particularly questioning O’Sullivan's firsthand knowledge; however, they do not provide counter-evidence. Plaintiffs argue that their complaint sufficiently demonstrates that Defendants have systematic contacts with Oklahoma to establish general jurisdiction and that their activities directed at Oklahoma confer specific jurisdiction. The analysis emphasizes that the purpose of jurisdictional challenges is to protect defendants from litigating in unfamiliar forums, highlighting that plaintiffs bear the burden of proving personal jurisdiction, which can be established through initial pleadings and affidavits.
To establish personal jurisdiction over defendants, a plaintiff must demonstrate compliance with forum state laws and adherence to due process principles. In Oklahoma, the long-arm statute allows jurisdiction to the constitutional limit, necessitating "minimum contacts" with the forum state to avoid offending "traditional notions of fair play and substantial justice." Personal jurisdiction can be categorized as general or specific. General jurisdiction applies when a defendant has continuous and systematic contacts with the forum, regardless of the claims' relation to those contacts. Specific jurisdiction requires that the defendant purposefully directs activities at forum residents, and the plaintiffs' injuries arise from those activities. Recent Supreme Court rulings, particularly Daimler and Goodyear, emphasize that general jurisdiction is limited to situations where a corporation's affiliations are so pervasive that it is deemed "essentially at home" in the forum state, typically identified by its place of incorporation or principal business location. The decisions clarify that while these locations are paradigmatic for general jurisdiction, they do not restrict jurisdiction solely to these bases.
A formulation allowing general jurisdiction over a corporation in any state where it conducts a "substantial, continuous, and systematic course of business" is overly expansive. The inquiry focuses on whether the corporation's affiliations with the state are sufficiently continuous and systematic to render it "essentially at home" there, as established in Daimler and Goodyear. Tenth Circuit precedents align with this view, emphasizing that contacts must approximate physical presence in the state. Merely engaging in commerce with state residents does not suffice to establish this presence.
In this case, the court found no general jurisdiction over the defendants. RME, a Delaware corporation with its principal place of business in Florida, is considered "at home" in those states, not in Oklahoma. Plaintiffs failed to allege facts indicating RME's continuous and systematic contacts with Oklahoma, particularly as RME has no employees or operations there. Similarly, IMS, a Nevada limited liability company with its principal place of business in Texas, is "at home" in those states and Delaware and Florida (due to RME's membership). IMS lacks a physical presence in Oklahoma, having no office, employees, property, or bank accounts in the state.
The fact that IMS operates websites accessible in Oklahoma does not establish general jurisdiction. Arguments claiming that IMS's sales of leads to Oklahoma lawyers are "continuous and systematic" fail, as maintaining relationships with two law firms does not confer general jurisdiction. Previous cases support the notion that ongoing contracts or business relationships alone do not establish sufficient contacts for general jurisdiction.
Daimler contends that a business is not considered "at home" in a state solely based on significant business activities there. In a ruling involving Daimler, a German company, the Court determined that it lacked general jurisdiction in California despite the substantial sales of its subsidiary, MBUSA, in the state. The Court deemed it "exorbitant" to allow jurisdiction based on such contacts, warning that it could lead to broad jurisdiction in all states where sales are significant.
For jurisdiction over IMS or RME, the court can only assert "specific" jurisdiction, which requires a connection between the forum state and the underlying controversy. Specific jurisdiction is limited to issues directly related to the defendant's activities in the forum. To align with due process, defendants must demonstrate "minimum contacts" with Oklahoma, ensuring that defending a lawsuit there does not violate fair play and substantial justice principles.
The "minimum contacts" standard necessitates that an out-of-state defendant must have purposefully directed activities at the forum's residents, and the plaintiff's injuries must arise from those activities. Even if these conditions are satisfied, the court must still assess whether exercising jurisdiction aligns with traditional fairness standards. The claims in this case stem from alleged internet-based activities by the defendants. The Tenth Circuit has previously held that basing personal jurisdiction solely on a website's accessibility in a state is inadequate, as the internet is universally accessible and could undermine the principles of territorial jurisdiction.
An internet user is subject to personal jurisdiction in a forum state only if they intentionally direct their activities at that state, rather than simply making those activities accessible there. This principle is supported by case law, which indicates that the forum state must be the focal point of the alleged tort. The court determined it lacks specific jurisdiction over the defendants due to a lack of "purposeful direction" in their conduct toward the forum state. Evaluating purposeful direction requires an examination of the quantity and quality of forum contacts, using the "effects test" established in Calder v. Jones. This test necessitates proof that the defendant (1) committed an intentional action, (2) aimed at the forum state, and (3) knew the injury would be felt in that state.
In this case, RME, identified as a holding company, had no employees or business operations, negating any basis for specific jurisdiction. The complaint fails to identify any intentional act by RME directed at Oklahoma. Similarly, IMS, as claimed in various declarations, is not involved in the creation of the disputed pop-up ads. Even if IMS was involved, the complaint does not demonstrate that its actions were expressly aimed at Oklahoma with the knowledge that the injury would be felt there. While IMS allegedly creates leads for lawyers across the U.S. through pop-up ads generated by unauthorized browser plug-ins, the necessary legal connection to the forum state for specific jurisdiction is not established.
Plaintiffs assert that pop-up advertisements have disrupted their websites and that this issue affects numerous legal service providers across the United States. Their claims indicate that the conduct in question is not specifically aimed at Oklahoma or the plaintiffs within that state, but instead targets a nationwide audience of consumers. According to the legal standard for specific jurisdiction, the conduct allegedly lacks the necessary focus on Oklahoma, as it does not demonstrate an intent to harm the plaintiffs or to direct activities towards that state. The plaintiffs attempt to differentiate their case from prior rulings, particularly the Shrader case, where defendants also did not direct their actions toward Oklahoma. The court emphasizes that a plaintiff's residence in a state and resultant harm does not automatically grant personal jurisdiction if the defendant's actions are not purposefully directed there. Furthermore, allegations of conspiracy among defendants are deemed insufficient to establish jurisdiction, as the claims are generalized and lack specificity about how each defendant coordinated actions to target the plaintiffs or their websites. The overall assertion is that the defendants' conduct, while potentially intentional, is broadly directed at consumers throughout the country rather than specifically at Oklahoma or the plaintiffs.
Dudnikov emphasizes that only "well-pled" facts—plausible, non-conclusory, and non-speculative—are considered in jurisdictional analyses. For personal jurisdiction based on conspiracy, plaintiffs must provide sufficient factual allegations beyond mere assertions of conspiracy, demonstrating a prima facie case. Additionally, each defendant must have minimum contacts with the forum state to establish specific jurisdiction. Plaintiffs failed to demonstrate that the defendants had adequate minimum contacts with Oklahoma, which is essential for jurisdiction. An allegation of conspiracy does not address the lack of these contacts. Jurisdiction must comply with the laws of the forum state and due process standards, which are evaluated through five factors: the burden on the defendant, the forum state's interest, the plaintiffs' interest, the efficiency of resolving disputes, and the shared interests of states. However, as the court determined that defendants lacked minimum contacts with Oklahoma, it did not need to assess these factors. Lastly, the plaintiffs requested jurisdictional discovery in response to the defendants' motion, arguing that without it, they would be prejudiced if the court relied solely on the defendants’ declaration concerning their Oklahoma contacts.
The court evaluated O’Sullivan’s Declaration, Supplemental Declaration, and DallAcqua Declaration primarily concerning the organizational structure and business locations of RME and IMS, their parent-subsidiary relationship, and their absence of employees or physical assets in Oklahoma. The plaintiffs did not challenge the factual assertions in O’Sullivan’s declarations. However, the court rejected O’Sullivan’s declarations regarding IMS’s involvement in generating the contested pop-ups, favoring the plaintiffs' allegations. Despite this, the court determined that the plaintiffs' claims did not justify personal jurisdiction, stating that proposed jurisdictional discovery would not significantly alter the analysis. Consequently, the court granted the Defendants’ Motion to Dismiss for Lack of Personal Jurisdiction, dismissing the claims of the plaintiffs against IM Solutions, LLC, and RME Group Holding Company, LeadingResponse.
O’Sullivan confirmed IMS is a Nevada limited liability company with its principal place of business in Plano, Texas, which the court found insignificant for jurisdictional purposes. The court treated RME as a Delaware corporation with its principal place of business in Florida based on the Fictitious Name Certificate provided. The plaintiffs’ cited cases did not persuade the court to strike the declarations, as O’Sullivan's position as Executive Vice President implies he possesses personal knowledge relevant to the organization’s operations, contrasting with the cited cases where affidavits were deemed inadmissible due to hearsay or lack of personal knowledge.
Plaintiffs submit the Declaration of Scott A. Kamber, accompanied by five screen captures from various websites, to demonstrate O'Sullivan's limited knowledge of RME. However, the DallAcqua Declaration addresses any deficiencies noted. The court finds that none of the exhibits challenge the statements in O’Sullivan's declarations regarding jurisdiction. The court emphasizes that the term "continuous and systematic" from *International Shoe* pertains to specific jurisdiction related to in-forum activities that caused the claims. The Tenth Circuit has not definitively ruled on how to determine the citizenship of a limited liability company (LLC) for diversity jurisdiction, although it is established that an LLC’s citizenship mirrors that of its members, a stance supported by various circuit courts. It is agreed that Shell, a Delaware LLC with its principal place of business in Texas, is a citizen of both states. The complaint does not distinguish between the actions of RME and IMS, yet specific jurisdiction must be established for each defendant. Jurisdiction cannot extend from one defendant to another through indirect connections, as illustrated in cases involving corporate structures. RME's relationship with IMS does not grant jurisdiction over RME if IMS is subject to jurisdiction, reiterating that a parent company’s oversight of a subsidiary does not negate corporate separateness for jurisdictional purposes.
RME, a holding company without employees, does not exert sufficient control over IMS to warrant jurisdiction in any forum where IMS operates. Plaintiffs' claims do not arise from any forum-related activities, which is essential for establishing specific jurisdiction. There is no evidence or allegation of a conspiracy between RME and IMS; they are described as "operationally indistinguishable," and plaintiffs fail to identify any specific actions taken by one independent of the other. RME, as a non-operating holding company and sole member of IMS, lacks the capacity to conspire with IMS. Additionally, plaintiffs treat Reed Elsevier and Internet Brands as a joint venture, implying that any alleged conspiracy would be between IMS and Reed Elsevier. The court finds that the burden on the defendants, likely based in Texas, to defend a lawsuit in Oklahoma weighs slightly in favor of the defendants. While advances in technology may reduce logistical burdens, they do not significantly influence the jurisdiction decision. NIAC's operational presence in California further supports the argument against exercising jurisdiction in Oklahoma. Overall, the court deems it unnecessary to delve deeper into the jurisdictional factors presented.
