Opinion Corp. v. Roca Labs, Inc.
Filing
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OPINION AND ORDER re: 18 SECOND MOTION to Dismiss for Lack of Jurisdiction . filed by Roca Labs, Inc., Roca Labs Nutraceuticals USA, Inc.. For the foregoing reasons herein, Defendants' motion to dismiss for lack of personal j urisdiction is DENIED. The Clerk of Court is respectfully directed to close the motion at Docket No. 18 and to transfer this matter to the United States District Court for the Middle District of Florida, pursuant to 28 U.S.C. § 1406(a). (Signed by Judge Lorna G. Schofield on 1/30/2015) (kgo)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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OPINION CORP.,
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Plaintiff,
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-against:
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ROCA LABS, INC., et al.,
Defendants. :
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01/30/2015
14 Civ. 6396 (LGS)
OPINION AND ORDER
LORNA G. SCHOFIELD, District Judge:
This declaratory judgment action is a defensive action by Plaintiff Opinion Corp., which
owns and operates a consumer review website called “PissedConsumer.com.” Plaintiff seeks a
declaration that it is not liable to Defendants Roca Labs, Inc. (“Roca Labs”) and Roca Labs
Nutraceuticals USA, Inc. (“RLN”) for posting negative consumer reviews about Defendants’
product, the “Gastric Bypass Alternative.” Defendants move to dismiss for lack of personal
jurisdiction. For the following reasons, Defendants’ motion is denied, and the case is transferred
to the United States District Court for the Middle District of Florida.
BACKGROUND
The facts and quotations below are taken from Plaintiff’s Amended Complaint
(“Complaint”) and assumed to be true for purposes of this motion.
Plaintiff Opinion Corp. is a New York corporation with its principal place of business in
New York, New York.1 Plaintiff owns and operates “PissedConsumer.com” (the “Web Site”), a
consumer review site that “permits third party users . . . to post comments and criticisms of
1
Defendants contend that Plaintiff’s principal place of business is actually in Brooklyn,
New York. See Dkt. 39. It is unnecessary to resolve this factual dispute, however, in
adjudicating Defendants’ Motion to Dismiss.
businesses and individuals.” Plaintiff “does not, as a rule, edit, confirm or vet the content of
users’ posts for accuracy.”
Both Defendants are Florida corporations with their principal place of business in
Sarasota, Florida. RLN describes itself on its website as the inventor of the “Gastric Bypass
Alternative,” a nutraceutical product purported to be the “strongest non-surgical weight loss
[nutraceutical product] in the world.” “RLN sells [this product] to buyers nationwide, including,
upon information and belief, in the State of New York, through its website.”
When purchasing RLN’s product, consumers are presented with -- and presumed to agree
to -- terms and conditions on RLN’s website. These terms include that customers “will not
speak, publish, cause to be published, print, tweet, review, blog, or write negatively about RLN,
or our products or employees in any way.”
The Complaint alleges that “numerous dissatisfied customers have posted complaints” -including “[o]n information and belief, citizens of the State of New York” -- on Plaintiff’s web
site. The Complaint estimates that approximately 71,000 individuals have read negative reviews
posted about Defendants on the Web Site. The Complaint further avers, “Upon information and
belief, citizens of the State of New York have sought consumer reviews of the product in order to
make informed decisions as to purchasing or using the product.”
In a letter dated August 4, 2014, (the “First Demand Letter”), counsel purporting to
represent Roca Labs wrote to Plaintiff and demanded that Plaintiff remove complaints about
Defendants from the Web Site. The First Demand Letter “explicitly threatened litigation against
plaintiff, was purposely directed at plaintiff in New York and towards New York and had the
intent and effect of chilling the First Amendment rights of plaintiff, a New York corporation, as
well as those citizens of the State of New York.” The Complaint further alleges that the First
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Demand Letter “placed plaintiff, a New York corporation, in reasonable apprehension of an
immediate and imminent frivolous lawsuit by Roca Labs in Florida, which is an inconvenient
forum for plaintiff.”
In a letter dated August 7, 2014, (the “Second Demand Letter”) Roca Labs wrote to
Plaintiff that “Roca has suffered damages in excess of $40 million” and accused Plaintiff of
infringing trademarks and copyrights claimed by Defendants. In the Second Demand Letter,
Defendants “demanded that, in order to avoid litigation, [Plaintiff] remove all postings about
Roca Labs from [the Web Site], identify anonymous complainants and pay $100,000 to Roca
Labs ‘to cover past expenses and future monitoring.’”
On August 12, 2014, Plaintiff filed this action, and subsequently filed the Amended
Complaint on September 30, 2014. The Complaint alleges that the Court has personal
jurisdiction over Defendants “because they are doing business in the State of New York or
otherwise have engaged in acts and conduct purposefully directed toward plaintiff, a New York
company whose principal place of business is in the State of New York.” The Complaint further
asserts that personal jurisdiction exists “because [Defendants] have purposefully availed
themselves of the privilege of doing business in New York by entering into multiple contracts
with New York residents, selling a significant number of products in New York, and further by
virtue of their efforts to enforce contracts against New York residents.”
On August 15, 2014 -- shortly after this action was filed -- Defendants filed an action
against Plaintiff in Florida, based in part on the facts described above.
STANDARD
Defendants ask the Court to dismiss this action for lack of personal jurisdiction over
them. “On a Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction, the plaintiff bears
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the burden of showing that the court has [personal] jurisdiction over the defendant.”
Metropolitan Life Ins. Co. v. Robertson–Ceco Corp., 84 F.3d 560, 566 (2d Cir. 1996) (citing
Robinson v. Overseas Military Sales Corp., 21 F.3d 502, 507 (2d Cir. 1994)). “Prior to
discovery, a plaintiff may defeat a motion to dismiss based on legally sufficient allegations of
jurisdiction.” Id. at 566 (citation omitted). Where “a court relies on pleadings and affidavits,
rather than conducting a ‘full-blown evidentiary hearing,’ the plaintiff need only make a prima
facie showing that the court possesses personal jurisdiction over the defendant.” DiStefano v.
Carozzi N. Am., Inc., 286 F.3d 81, 84 (2d Cir. 2001) (citation omitted); accord Bank Brussels
Lambert v. Fiddler Gonzalez & Rodriguez, 171 F.3d 779, 784 (2d Cir. 1999). “Such a showing
entails making ‘legally sufficient allegations of jurisdiction,’ including ‘an averment of facts that,
if credited[,] would suffice to establish jurisdiction over the defendant.’” Penguin Grp. (USA)
Inc. v. Am. Buddha, 609 F.3d 30, 35 (2d Cir. 2010) (alteration in original) (citation omitted).
The Court engages in a two-step inquiry to determine whether it has personal jurisdiction
over a defendant. First, the Court determines whether there is personal jurisdiction over the
defendant under the laws of the forum state. Best Van Lines, Inc. v. Walker, 490 F.3d 239, 242
(2d Cir. 2007). If so, the Court determines whether asserting jurisdiction would be consistent
with the requirements of due process under the Fourteenth Amendment. Id. (citing Int’l Shoe
Co. v. Washington, 326 U.S. 310, 315, 66 S.Ct. 154, 90 L.Ed. 95 (1945)).
“Personal jurisdiction over a defendant in a diversity action in the United States District
Court for the Southern District of New York is determined by reference to the relevant
jurisdictional statutes of the State of New York.” Beacon Enters., Inc. v. Menzies, 715 F.2d 757,
762 (2d Cir. 1983) (citations omitted).
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DISCUSSION
The Complaint’s allegations relevant to personal jurisdiction reduce to the following:
Defendants are foreign corporations that advertise their product on the Internet and conduct
business nationwide, including by selling and shipping goods to unspecified customers in New
York. Defendants sent two cease-and-desist letters into New York in connection with the instant
dispute. The claims seek a declaratory judgment that Plaintiff committed no wrong, and do not
allege any wrongdoing by Defendants in New York or elsewhere. These facts do not give rise to
personal jurisdiction in New York. However, as described in greater detail below, dismissal is
unwarranted where, as it is here, transfer of the case would promote the interest of justice.
Section 302 of the New York Civil Practice Law and Rules governs the exercise of
personal jurisdiction in New York over non-domiciliaries such as Defendants. See Whitaker v.
Am. Telecasting, Inc., 261 F.3d 196, 209 (2d Cir. 2001). Section 302(a) provides “[a]s to a cause
of action arising from any of the acts enumerated in this section, a court [in New York] may
exercise personal jurisdiction over any non-domiciliary,” who:
1. transacts any business within the state or contracts anywhere to
supply goods or services in the state; or
2. commits a tortious act within the state, except as to a cause of
action for defamation of character arising from the act; or
3. commits a tortious act without the state causing injury to
person or property within the state, except as to a cause of
action for defamation of character arising from the act, if he
(i)
regularly does or solicits business, or engages in any
other persistent course of conduct, or derives substantial
revenue from goods used or consumed or services
rendered, in the state, or
(ii)
expects or should reasonably expect the act to have
consequences in the state and derives substantial
revenue from interstate or international commerce; or
4. owns, uses or possesses any real property situated within the
state.
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N.Y. C.P.L.R. § 302(a). As the Complaint does not allege that Defendants committed a tortious
act or that they own, use or possess real property in New York, subsections (2), (3) and (4) are
irrelevant here. Only subsection (1) could conceivably apply in this matter.
Section 302(a) by its terms requires that the cause of action arise out of the enumerated
act that provides a nexus to New York, in this case the transaction of business in New York. See
Agency Rent a Car Sys., Inc. v. Grand Rent A Car Corp., 98 F.3d 25, 29 (2d Cir. 1996) (“[A]
court may exercise personal jurisdiction over any foreign defendant who ‘transacts any business
within the state,’” so long as “the claim . . . ‘arise[s] from’ the transaction of business within the
state.” (citations omitted)). “A claim ‘arises out of’ a defendant’s transaction of business in New
York ‘when there exists ‘a substantial nexus’ between the business transacted and the cause of
action sued upon.’” Id. at 31 (citations omitted).
For section 302 purposes, Defendants here are similarly situated to the defendant in
Menzies, where “[t]he present controversy arose as a result of Menzies’ ‘cease and desist’ letter,
not her New York commercial activity.” Menzies, 715 F.2d at 765 (“Menzies’ shipment of
goods into New York are irrelevant to [plaintiff]’s declaratory judgment action and [plaintiff]’s
cause of action would exist regardless of whether Menzies’ products were sent to New York.”).
Just as the Second Circuit found no “articulable nexus” for section 302 purposes in Menzies,
there is no articulable nexus here. Id. Section 302 therefore does not confer personal jurisdiction
over Defendants in this matter.
Even if a non-domiciliary defendant ships goods into New York, these shipments do not
give rise to personal jurisdiction under section 302 unless the plaintiff shows that these
shipments are in some way injurious to it. See Menzies, 715 F.2d at 765. Furthermore, New
York courts have consistently refused to sustain section 302 jurisdiction solely on the basis of a
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defendant’s communication from another locale with a party in New York. See McGowan v.
Smith, 52 N.Y.2d 268, 271-72 (1981) (collecting cases).
Plaintiff’s arguments to the contrary are unavailing. In opposition to the instant motion,
Plaintiff expends much effort to show that Defendants have transacted business and contracted to
supply goods in New York. It is undisputed that Defendants have sold products to New York
consumers. However, the Complaint fails to allege a “substantial nexus” -- or indeed any
relationship -- between Defendants’ sales in New York and this action.
Without a “substantial nexus,” section 302 does not permit the exercise of personal
jurisdiction over Defendants in this case.
Even assuming arguendo that the requirements of section 302 were satisfied, the exercise
of jurisdiction would be barred by the Due Process Clause of the Fourteenth Amendment. To
show that the exercise of jurisdiction would not violate due process, a plaintiff must establish,
inter alia, that the “defendant ‘purposefully availed’ [himself] of the privilege of doing business
in [the forum state] and that [the defendant] could foresee being ‘haled into court’ there.”
Kernan v. Kurz-Hastings Inc., 175 F.3d 236, 242-43 (2d Cir. 1999) (citing Chew v. Dietrich, 143
F.3d 24, 28 (2d Cir. 1998); see also World–Wide Volkswagen Corp. v. Woodson, 444 U.S. 286,
297 (1980). In J. McIntyre Machinery, Ltd. v. Nicastro, 131 S. Ct. 2780 (2011), a plurality of the
Supreme Court concluded that the placement of goods into the stream of commerce -- the socalled “stream of commerce theory” -- does not establish purposeful availment. Instead, the
plurality determined that a defendant must also be “engaged in conduct purposefully directed at
[the state].” Id. at 2790. Plaintiff here has alleged merely that Defendant has placed goods into
the stream of commerce; Plaintiff has not alleged that Defendant “engaged in conduct
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purposefully directed” at New York. Thus, the exercise of personal jurisdiction here, even if
there were a “substantial nexus,” would violate due process.
Accordingly, Plaintiff has failed to make a prima facie showing that the exercise of
personal jurisdiction is permissible here. Neither the New York long-arm statute nor the Due
Process Clause of the Fourteenth Amendment permits the exercise of personal jurisdiction over
Defendants in this matter.
CONCLUSION
Although no personal jurisdiction exists over Defendants in this matter, dismissal is not
necessary. “Rather, a court may transfer an action commenced in a district in which personal
jurisdiction over the defendant is lacking to another district in which the action could have been
brought, if the transfer would promote the interest of justice.” Holey Soles Holdings, Ltd. v.
Foam Creations, Inc., No. 05 CIV. 6939, 2006 WL 1147963, at *9 (S.D.N.Y. May 1, 2006)
(citing Corke v. Sameiet M.S. Song of Norway, 572 F.2d 77, 80 (2d Cir. 1978). “A court may
transfer a case pursuant to 28 U.S.C. § 1406(a) sua sponte even if the defendant moves only to
dismiss.” Id. (citing Concession Consultants, Inc. v. Mirisch, 355 F.2d 369, 372 n.3 (2d Cir.
1966)).
Transfer to the Middle District of Florida is appropriate here. Defendants in this matter
have filed an action against Plaintiff there; Plaintiff therefore has already retained Florida
counsel to represent it in that matter. Furthermore, “such a transfer would benefit the plaintiff,
which will avoid the chore of refiling this action.” Id.
For the foregoing reasons, Defendants’ motion to dismiss for lack of personal jurisdiction
is DENIED. The Clerk of Court is respectfully directed to close the motion at Docket No. 18
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and to transfer this matter to the United States District Court for the Middle District of Florida,
pursuant to 28 U.S.C. § 1406(a).
SO ORDERED.
Dated: January 30, 2015
New York, New York
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