Yoder & Frey Auctioneers, Inc., et al vs. John Doe

Filing 123

Memorandum Opinion and Order re choice of law. Judge David A. Katz on 8/26/13. (G,C)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF OHIO
WESTERN DIVISION

YODER & FREY AUCTIONEERS, INC.,
Plaintiff,

Case No. 3:10 CV 1590

-vsMEMORANDUM OPINION
AND ORDER

EQUIPMENTFACTS, LLC,
Defendant.
KATZ, J.

Both sides in this case have filed memoranda regarding choice of law. The Court enters
this memorandum opinion to preliminarily establish choice of law based on what the Court
expects the evidence to show. The actual evidence entered may change these analyses and the
Court will reconsider this ruling as necessary.
Four claims and one counterclaim remain for trial:
Plaintiffs’ Claims
The plaintiffs originally brought three claims in a complaint filed in the Northern District
of Ohio. They subsequently amended the complaint to include a fourth claim.
1.

Computer Fraud and Abuse Act (18 U.S.C. § 1030)
This is a federal statute; federal law applies.

2.

Fraud
Because the plaintiffs brought their claims in this Northern District of Ohio Court, the

Court applies Ohio’s choice of law analysis. Muncie Power Prods., Inc. v. United Techs. Auto.
Inc., 328 F.3d 870, 873 (6th Cir. 2003). Ohio has adopted the Restatement on the Conflict of
Laws, Morgan v. Biro Mfg. Co., Inc., 474 N.E.2d 286, 288 (Ohio 1984). Section 148, item 2
specifically addresses fraud:

(2)

When the plaintiff’s action in reliance took place in whole or in part in a state
other than that where the false representations were made, the forum will
consider such of the following contacts, among others, as may be present in the
particular case in determining the state which, with respect to the particular
issue, has the most significant relationship to the occurrence and the parties:
(a)
the place, or places, where the plaintiff acted in reliance upon the
defendant’s representations,
(b)
the place where the plaintiff received the representations,
(c)
the place where the defendant made the representations,
(d)
the domicil, residence, nationality, place of incorporation and place of
business of the parties,
(e)
the place where a tangible thing which is the subject of the transaction
between the parties was situated at the time, and
(f)
the place where the plaintiff is to render performance under a contract
which he has been induced to enter by the false representations of the
defendant.

Restatement (Second) of Conflict of Laws § 148 (1971).
Regarding 2(a): The defendant allegedly placed the false bids from his business location in
New Jersey, but the plaintiffs say they received those at their auction site in Florida. The plaintiffs
say that their auction was a live auction in Florida and an employee with a computer sat close to
the auctioneer as he sells. When an online bid was received, that employee communicated the bid
to the live auctioneer who accepted it as part of the live sale. The reliance on the bid, therefore,
happened on the sale site in Florida. This is in contrast to most online auctions where the bid is
received by the computer; here, the computer may have transmitted the bid, but it was relied upon
by the live auctioneer in Florida.
Regarding 2(b): the point of receipt of the information was also in Florida.
Regarding 2(c): the defendant made the representations by placing the false bids from his
computer in New Jersey.
Regarding 2(d): plaintiff Yoder & Frey is an Ohio corporation and plaintiff
RealTimeBid.com, LLC is a limited liability company that appears to only have one member and
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that sole member appears to be a resident of Michigan. Defendant EquipmentFacts, LLC is a
limited liability company that appears to have only one member and that sole member appears to
be a resident of New Jersey.
Regarding 2(e): the heavy equipment on which the bids were placed may have been
entirely in Florida or may have been mostly in Florida, but with some scattered around the
country. The plaintiffs have not said where these 18 items are, but they did say that, in their
auction, most items are on site but some are (possibly because of size and logistics) not brought to
Florida.
Regarding 2(f): assuming that the plaintiff would have performed by delivering possession
of the equipment to the winning bidder, performance would likely have occurred in Florida.
However, since most of plaintiffs’ employees return to Ohio after the Florida sale, they may have
transmitted keys or title to the items from Ohio. Assuming the item sat in Florida (there is no
indication the plaintiffs moved the items after the sale), the plaintiffs’ performance could be said
to occur in Florida and possibly also have an Ohio component.
As the Court presently expects the evidence to demonstrate, Florida law applies to the
fraud claim on the facts thus far presented. The restatement puts the heaviest weight on where the
representation was received, where the plaintiff relied on the representation, and where the
plaintiff would have performed. The notes also say: “If any two of the above-mentioned contacts,
apart from the defendant’s domicil, state of incorporation or place of business, are located wholly
in a single state, this will usually be the state of the applicable law with respect to most issues.” Id.
at § 148, Notes. That applies here; defendant sent the statements to Florida, plaintiffs received

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them in Florida, relied on them in Florida, and very likely would have performed on the contract
in Florida. Florida law applies to this claim.
3.

Trespass to Chattels
Conflict of Laws Restatement Section 147 deals with injuries to tangible things:
In an action for an injury to land or other tangible thing, the local law of the state
where the injury occurred determines the rights and liabilities of the parties unless,
with respect to the particular issue, some other state has a more significant relationship
under the principles stated in § 6 to the occurrence, the thing and the parties, in which
event the local law of the other state will be applied.

Restatement (Second) of Conflict of Laws § 147 (1971)
The plaintiffs allege that the defendant trespassed on their chattel when its employees used
credentials to make unauthorized access to their computer bidding system. They allege that the
defendant used the an administrator account and the credentials of a regular auction buyer, both of
which it had access to, having formerly been a technology vendor utilized by the plaintiff Yoder &
Frey. Even though the auction was occurring in Florida, and one of plaintiff’s employees was in
Florida with a computer accepting the bids from the online system, the actual bidding system
appears to have been housed in a server in Connecticut. It is the Connecticut system that the
defendants allegedly entered, and the Restatement puts a strong presumption on the locus of the
injury to the property.
In the amended complaint, the plaintiff is not explicit about how the injury occurred for
this claim. If, as a direct result of the trespass, the computer system itself was otherwise
unavailable (such as when someone hacks a computer and takes it down), then the injury clearly
happened in Connecticut. (And, if the auction happened entirely in the computer (such as it does
with online auction companies), this would arguably be the case.) However, since the computer is

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more of a conduit to the live auction, the evidence may show that the only injury occurred in
Florida, even though the property trespassed upon was in Connecticut.
However, generally, the injury for a trespass action needs to be based on the trespass, not
on another tort (fraud) committed after the trespass. E.g., Intel Corp. v. Hamidi, 1353, 71 P.3d
296, 304 (Cal. 2003) (“The cited line of decisions does not persuade us that the mere sending of
electronic communications that assertedly cause injury only because of their contents constitutes
an actionable trespass to a computer system through which the messages are transmitted. Rather,
the decisions finding electronic contact to be a trespass to computer systems have generally
involved some actual or threatened interference with the computers' functioning.”). So, the injury
focus should be exclusively on whether the computer system itself was injured by the intrusion,
and that leaves the choice of law where that injury (if any) happened.
In sum, the key to this determination is where the injury to property occurred. And,
because showing an injury to the Florida (or Ohio) operations based on the intrusion on the
Connecticut server would probably extend trespass to chattels too far, it will be a question of
whether the plaintiffs can show an injury to the computer system (the property) arising from the
defendant’s entry on it; the evidence will either demonstrate no injury or will lead to the
application of Connecticut law.

4.

Breach of Contract

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Plaintiffs assert that its bidders enter into a contract to purchase goods when they place a
bid—online or in person—and that defendant breached that contract after placing bids and not
performing on those. Section 191 of the Restatement addresses questions of contract:
The validity of a contract for the sale of an interest in a chattel and the rights created
thereby are determined, in the absence of an effective choice of law by the parties, by
the local law of the state where under the terms of the contract the seller is to deliver
the chattel unless, with respect to the particular issue, some other state has a more
significant relationship under the principles stated in § 6 to the transaction and the
parties, in which event the local law of the other state will be applied.
Restatement (Second) of Conflict of Laws § 191 (1971).
The plaintiffs make no mention of a choice of law provision in a written contract (such as
by clicking on an agreement before being allowed to bid). Should evidence of the contract
containing a choice of law provision come out at trial, it will likely control this question.
Barring a choice of law contract provision (and, as discussed in the fraud section) the
Court turns to the location of the chattel first. Most of this auction’s items are in Florida, but some
are not moved to Florida and may be in a variety of states. Therefore, it is likely that the seller was
to physically deliver the goods in Florida after the auction. However, the evidence may show a
delivery from another state. Furthermore, the evidence may show that certain after-sale
transactions where handled in Ohio (although, “greater weight will usually be given to the location
of the chattel . . . at the time of conveyance” than the associated paperwork. Restatement §
244(2).).
If the property was not in Florida or if it was in Florida, but the transaction’s paperwork
would have been completed in Ohio and sent to the buyer, Florida’s law should still apply because
it has a more significant relationship under the § 6 principles. Florida hosted the auction and
licensed the auctioneers. While in Florida, the auctioneers were bound by Florida law in how they
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conducted the sale. Therefore, Florida has a greater interest in the execution of the contracts that
result from those auction sales and the Court will apply Florida law.
Defendant’s counterclaim
1.

Defamation
Defendant says that Florida law should apply to the defamation counterclaim and plaintiffs

do not disagree.
The Court applies New Jersey’s law on the choice of law because the counterclaim was
first filed as an original action in New Jersey by the defendant against the plaintiffs. Polydyne, Inc.
v. Kirk, 238 F.3d 423 (6th Cir. 2000) (unpublished table case). New Jersey has also adopted the
Restatement on Conflict of Laws, however. P.V. ex rel. T.V. v. Camp Jaycee, 962 A.2d 453, 460
(N.J. 2008). Section 149:
In an action for defamation, the local law of the state where the publication occurs
determines the rights and liabilities of the parties, except as stated in § 150, unless,
with respect to the particular issue, some other state has a more significant relationship
under the principles stated in § 6 to the occurrence and the parties, in which event the
local law of the other state will be applied.
Restatement (Second) of Conflict of Laws § 149 (1971).
The defendant alleges that the plaintiff made comments at the auction the following year to
the attendees of the next auction. That auction took place in Florida and this leads to a
presumption that Florida law applies. Next, the Court must also examine whether another state has
a more significant relationship to the claim using the principles in § 145(2):
(a)
(b)
(c)
(d)

the place where the injury occurred,
the place where the conduct causing the injury occurred,
the domicil, residence, nationality, place of incorporation and place of business
of the parties, and
the place where the relationship, if any, between the parties is centered.

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Restatement (Second) of Conflict of Laws § 145 (1971).
These continue to point to Florida, however. The alleged injury is to the defendant’s
business reputation. While the defendant may feel that injury in New Jersey because it is located
there, the injury occurred in Florida when the defendant’s potential customers heard the
defamatory statements there. Additionally, the conduct (making the comments) occurred in
Florida. Yoder & Frey and two of the individual counterclaim defendants are domiciled in Ohio,
RealTimeBid.com, LLC and Justin Clark are domiciled in Michigan, and John Sokoloski, Sr. is
domiciled in Texas. The defendant is domiciled in New Jersey. Since domicile is a consideration,
but typically does not carry more weight than the locus of the defamation, it does not change the
analysis. The location of the parties’ previous relationship is unclear; the evidence may show it
was centered in Ohio, New Jersey, Florida, or that it was exclusively online with each party in its
own location.
Because the place where the injury occurred and the place where the conduct occurred are
both in Florida, and because the domicile of the parties and the location of their relationship
provide no clear argument for using another state’s law, Florida law applies to this claim.
IT IS SO ORDERED.
s/ David A. Katz
DAVID A. KATZ
U. S. DISTRICT JUDGE

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