Shippitsa Limited v. Slack et al
Filing
76
MEMORANDUM OPINION AND ORDER denying without prejudice 9 Motion for Temporary Restraining Order and Preliminary Injunction filed by Shippitsa Limited; granting 25 MOTION to Dismiss for Lack of Jurisdiction filed by Defendant MoreNiche Limited; gr anting 29 MOTION to Dismiss for Lack of Jurisdiction filed by Andrew Jon Slack; and denying 32 MOTION for Sanctions filed by MoreNiche Limited, Andrew Jon Slack.(Ordered by Senior Judge Sidney A Fitzwater on 1/22/2019) (Senior Judge Sidney A Fitzwater)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
SHIPPITSA LIMITED,
Plaintiff,
VS.
ANDREW JON SLACK, et al.,
Defendants.
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§ Civil Action No. 3:18-CV-1036-D
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MEMORANDUM OPINION
AND ORDER
In this action by plaintiff Shippitsa Limited (“Shippitsa”) for trademark infringement
and related claims, defendants MoreNiche Limited (“MoreNiche”) and Andrew Jon Slack
(“Slack”) move to dismiss for lack of personal jurisdiction, improper venue, and failure to
state a claim on which relief can be granted.1 They also move for sanctions under Fed. R.
Civ. P. 11. The principal question presented is whether MoreNiche and Slack, by operating
a “redirect” webpage that is accessible to Texas residents, have established sufficient
contacts with this forum to support the exercise of specific personal jurisdiction over them.
Concluding that they have not, the court grants the motions to dismiss and enters final
judgment under Rule 54(b) dismissing Shippitsa’s actions against MoreNiche and Slack for
lack of personal jurisdiction. The court denies the motion for sanctions filed by MoreNiche
and Slack because it concludes that Shippitsa’s legal contentions in support of personal
1
A third defendant, Wolfson Berg Limited (“Wolfson Berg”), also moves to dismiss,
but the court is not deciding that motion today. Instead, it is authorizing Shippitsa to obtain
limited jurisdictional discovery from Wolfson Berg.
jurisdiction are not objectively unreasonable.
I
According to Shippitsa’s complaint, it manufactures a dietary supplement called
Phen375, which it sells through its website at the domain name phen375.com. Shippitsa is
organized under the laws of the United Kingdom (“UK”), is registered in Scotland, and
maintains its headquarters in Scotland. It owns the U.S. registered trademark for the standard
characters “PHEN375.” Compl. ¶ 10.
Shippitsa advertises Phen375 online via an “affiliate marketing network system.” Id.
¶ 16. An affiliate marketing network is comprised of three types of entities: advertisers, who
sell products or services; affiliates, who operate websites that attract visitors with their
content (such as product reviews); and an affiliate marketing network company, which acts
as an intermediary between the advertisers and the affiliates. Affiliates, through the websites
they operate, provide information about the advertisers’ products. They also provide
“affiliate links” that take users to the advertisers’ own websites. P. Resp. App. 047.2 When
a user clicks on an affiliate link and then buys a product from the advertiser, the affiliate
receives a commission on the sale. The affiliate marketing network company tracks visitors
and coordinates commission payments among companies within the network.
In 2011 Shippitsa contracted with MoreNiche (the “Contract”) to join MoreNiche’s
2
Shippitsa has filed separate opposition responses to the motions to dismiss and for
sanctions, but each opposition is accompanied by an identical appendix. The court’s citations
to “P. Resp. App.” are to any and all of these identical appendices.
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affiliate marketing network as an advertiser.3 MoreNiche is organized under the laws of, and
is headquartered in, the UK. Slack, a citizen and resident of the UK, is MoreNiche’s founder
and director. Shippitsa advertised its Phen375 product through MoreNiche’s network until
March 2018, when the Contract between the two companies expired. The Contract provided
that “[f]ollowing termination of this agreement MoreNiche has the right to re-direct visitors
promoting your campaigns to whatever destination it sees fit.” P. Resp. App. 038.
According to Shippitsa, after the Contract expired, certain affiliate websites continued to
display information about Phen375.4 Instead of linking to Shippitsa’s phen375.com website,
however, they instead linked visitors to a webpage—mixi.mn—operated by MoreNiche and
Slack.5 The mixi.mn webpage consists only of the following lines of text: “Phen375 is no
longer available via this link, we will be redirecting you to an alternative in 5 seconds. If you
do not want us to do that click here.” Compl. ¶ 25.
3
More precisely, MoreNiche contracted with a company called RDK Holdings S.A.,
which was later acquired by Sunpyramidhealth S.A. Shippitsa, in turn, is a franchisee of
Sunpyramidhealth S.A. Because the parties seem to assume that the Contract is fully
applicable to Shippitsa, the court—as a shorthand—will refer to the Contract as if it were
between Shippitsa and MoreNiche.
4
The particular websites identified in the complaint are nhscenter.com and
myphen375fatburnerreviews.com, operated by now-dismissed Doe Defendants 1 and 2.
According to the declaration of Shippitsa’s lead counsel, “[a]fter filing the Complaint, [he]
personally verified over 100 websites which included content using the PHEN375 mark[.]”
P. Resp. App. 007.
5
The domain registration record for mixi.mn lists MoreNiche as the “Registrant
Organization” and Slack as the “Registrant Name.” Compl. ¶¶ 27-28; accord P. Resp. App.
004. The complaint alleges that MoreNiche and Slack operate mixi.mn. MoreNiche and
Slack have not denied this allegation.
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If a visitor waits five seconds, mixi.mn automatically “redirect[s]” the visitor, id. ¶
26—that is, mixi.mn causes the visitor’s web browser to connect automatically to another
website, see P. Resp. App. 003. At the time Shippitsa filed the instant lawsuit, mixi.mn was
sending users to either of two websites operated by defendant Wolfson Berg Limited
(“Wolfson Berg”): phenq.com and ph375.com.6 Wolfson Berg is a company organized under
the laws of Cyprus and is headquartered there.7 Through Wolfson Berg’s websites, it sells
dietary supplements called PhenQ and Ph.375.8 Shippitsa alleges that Wolfson Berg uses “a
color scheme, package, trade dress, and promotional and advertising materials” in connection
with PhenQ and Ph.375 that are confusingly similar to those that Shippitsa uses for Phen375.
Compl. ¶ 22.
Shippitsa now sues Slack, MoreNiche, and Wolfson Berg,9 asserting federal-law
claims for trademark infringement, false designation of origin, trademark dilution,
cybersquatting, and violations of the Racketeer Influenced and Corrupt Organizations Act.
6
Shippitsa’s evidence suggests that, as of May 2018, mixi.mn has stopped redirecting
visitors to Wolfson Berg’s websites, and instead sends them to google.com.
7
The complaint alleges that Slack is the founder and an executive of Wolfson Berg,
but Slack has denied this allegation via declaration. Shippitsa has offered no evidence to the
contrary. There being no conflict in the evidence on this point, the court concludes for
purposes of today’s ruling that Slack is not a founder or executive of Wolfson Berg. See
Bullion v. Gillespie, 895 F.2d 213, 216-17 (5th Cir. 1990).
8
Wolfson Berg admits that it owns the websites phenq.com and ph375.com.
Shippitsa’s evidence indicates that the Ph.375 website is no longer accessible.
9
As indicated above, see supra note 4, Shippitsa also sued two John Doe defendants.
Shippitsa has since dismissed its actions against both defendants without prejudice under
Rule 41(a)(1)(A)(i).
-4-
Shippitsa also asserts Texas-law claims for tortious interference with a prospective
contractual relationship, trademark dilution, and unfair competition.
Wolfson Berg,
MoreNiche, and Slack have each filed a motion to dismiss. Each motion seeks dismissal on
the grounds of lack of personal jurisdiction, improper venue, and failure to state a claim on
which relief can be granted. MoreNiche and Slack have also filed a joint motion for Rule 11
sanctions against Shippitsa. The court addresses in this memorandum opinion and order the
motions to dismiss and for sanctions filed by MoreNiche and Slack. As noted, the motion
to dismiss of Wolfson Berg remains pending while jurisdictional discovery is conducted. See
supra note 1.
II
The court need only consider MoreNiche and Slack’s motions to dismiss under Rule
12(b)(2) for lack of personal jurisdiction. Shippitsa maintains that the operation by Slack and
MoreNiche of the mixi.mn website enables this court to assert personal jurisdiction over
them.
A
“When a nonresident defendant presents a motion to dismiss for lack of personal
jurisdiction, the plaintiff bears the burden of establishing the district court’s jurisdiction over
the nonresident.” Stuart v. Spademan, 772 F.2d 1185, 1192 (5th Cir. 1985) (citing Thompson
v. Chrysler Motors Corp., 755 F.2d 1162, 1165 (5th Cir. 1985); D.J. Invs., Inc. v. Metzeler
Motorcycle Tire Agent Gregg, Inc., 754 F.2d 542, 545 (5th Cir. 1985)). The determination
whether a federal district court has in personam jurisdiction over a nonresident defendant is
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bipartite. The court first decides whether the long-arm statute of the state in which it sits
confers personal jurisdiction over the defendant. If it does, the court then resolves whether
the exercise of jurisdiction is consistent with due process under the United States
Constitution. See Mink v. AAAA Dev. LLC, 190 F.3d 333, 335 (5th Cir. 1999). Because the
Texas long-arm statute extends to the limits of due process, the court need only consider
whether exercising jurisdiction over the defendant would be consistent with the Due Process
Clause of the Fourteenth Amendment. See id.; Alpine View Co. v. Atlas Copco AB, 205 F.3d
208, 214 (5th Cir. 2000).
The Due Process Clause of the Fourteenth Amendment permits
the exercise of personal jurisdiction over a nonresident
defendant when (1) that defendant has purposefully availed
itself of the benefits and protections of the forum state by
establishing “minimum contacts” with the forum state; and (2)
the exercise of jurisdiction over that defendant does not offend
“traditional notions of fair play and substantial justice.” To
comport with due process, the defendant’s conduct in
connection with the forum state must be such that it “should
reasonably anticipate being haled into court” in the forum state.
Latshaw v. Johnston, 167 F.3d 208, 211 (5th Cir. 1999) (footnotes omitted) (first quoting
Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945); then quoting World-Wide
Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980)). To determine whether exercising
jurisdiction would satisfy traditional notions of fair play and substantial justice, the court
examines (1) the defendant’s burden, (2) the forum state’s interests, (3) the plaintiff’s
interests in convenient and effective relief, (4) the judicial system’s interest in efficient
resolution of controversies, and (5) the states’ shared interest in fundamental social policies.
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Ruston Gas Turbines, Inc. v. Donaldson Co., 9 F.3d 415, 421 (5th Cir. 1993).
A defendant’s contacts with the forum may support either specific or general
jurisdiction over the defendant. Mink, 190 F.3d at 336. “For the court properly to assert
specific personal jurisdiction, the defendant must have ‘purposefully directed’ his activities
at residents of the forum, and the litigation must result from alleged injuries that ‘arise out
of or relate to’ the defendant’s activities directed at the forum.” Archer & White, Inc. v.
Tishler, 2003 WL 22456806, at *2 (N.D. Tex. Oct. 23, 2003) (Fitzwater, J.) (quoting Burger
King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985)). “General jurisdiction exists when a
defendant’s contacts with the forum state are unrelated to the cause of action but are
‘continuous and systematic.’” Id. (quoting Mink, 190 F.3d at 336). “[A] court may assert
jurisdiction over a foreign corporation ‘to hear any and all claims against [it]’ only when the
corporation’s affiliations with the State in which suit is brought are so constant and pervasive
‘as to render [it] essentially at home in the forum State.’” Daimler AG v. Bauman, 571 U.S.
117, 122 (2014) (first brackets added) (quoting Goodyear Dunlop Tires Operations, S.A. v.
Brown, 564 U.S. 915, 919 (2011)). Shippitsa argues that this court has specific personal
jurisdiction over MoreNiche and Slack.
“The district court usually resolves the jurisdictional issue without conducting a
hearing.” Ham v. La Cienega Music Co., 4 F.3d 413, 415 (5th Cir. 1993) (footnote omitted).
When a court rules on a motion to dismiss for lack of personal
jurisdiction without holding an evidentiary hearing, it must
accept as true the uncontroverted allegations in the complaint
and resolve in favor of the plaintiff any factual conflicts posed
by the affidavits. Therefore, in a no-hearing situation, a plaintiff
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satisfies his burden by presenting a prima facie case for personal
jurisdiction.
Latshaw, 167 F.3d at 211 (footnotes omitted). “This liberal standard, however, does not
require the court to credit conclusory allegations, even if they remain uncontradicted.”
Panda Brandywine Corp. v. Potomac Elec. Power Co., 2000 WL 35615925, at *2 (N.D. Tex.
Sept. 15, 2000) (Fitzwater, J.) (citing Felch v. Transportes Lar-Mex SA DE CV, 92 F.3d 320,
326 n.16 (5th Cir. 1996)), aff’d, 253 F.3d 865, 869 (5th Cir. 2001) (per curiam) (affirming,
inter alia, this conclusion). Nor is the court limited to considering the facts pleaded in the
complaint. See Walk Haydel & Assocs., Inc. v. Coastal Power Prod. Co., 517 F.3d 235, 241
(5th Cir. 2008). Rather, “the district court may receive any combination of the recognized
methods of discovery, including affidavits, interrogatories, and depositions to assist it in the
jurisdictional analysis.” Tendeka, Inc. v. Glover, 2014 WL 978308, at *3 (S.D. Tex. Mar.
12, 2014) (Rosenthal, J.) (internal quotations omitted).
B
When specific jurisdiction is based on online interactions via an Internet website, the
Fifth Circuit follows the sliding scale adopted in Zippo Manufacturing Co. v. Zippo Dot
Com, Inc., 952 F. Supp. 1119, 1124 (W.D. Pa. 1997). See Am. Eyewear, Inc. v. Peeper’s
Sunglasses & Accessories, Inc., 106 F.Supp.2d 895, 900-01 & n.10 (N.D. Tex. 2000)
(Fitzwater, J.) (citing Mink, 190 F.3d at 336) (interpreting Zippo). Zippo requires the court
to assess the level of interactivity of the defendant’s website. It prescribes different outcomes
to the personal jurisdiction question depending on which of following three categories the
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website falls into: (1) where a website is nothing more than a passive advertisement, the court
must decline to exercise personal jurisdiction; (2) where a website facilitates contractual
relationships and the knowing and repeated transmission of computer files over the Internet,
personal jurisdiction is proper; and (3) where a website falls somewhere in between, “the
exercise of jurisdiction is determined by the level of interactivity and commercial nature of
the exchange of information that occurs on the [w]ebsite.” Mink, 190 F.3d at 336 (quoting
Zippo, 952 F. Supp. at 1124).
C
The court holds that, under the Zippo test, Shippitsa has failed to present a prima facie
case that the mixi.mn website subjects Slack and MoreNiche to specific personal jurisdiction.
The parties offer starkly different characterizations of where mixi.mn falls on the
Zippo interactivity scale. MoreNiche and Slack maintain that mixi.mn “was not even a
website, let alone an ‘interactive website,’” thus placing it on the passive end of the Zippo
spectrum. Slack Mot. Dism. Br. 7; MoreNiche Mot. Dism. Br. 6. Shippitsa counters that the
mixi.mn webpage sits at the opposite terminus of the Zippo scale. It contends that, by
sending instructions to visitors’ web browsers and thereby causing the browsers to connect
to another web address, mixi.mn is sufficiently interactive to give rise to personal
jurisdiction.10
10
Shippitsa offers opposition evidence showing, at a technical level, how mixi.mn
interacts with users’ web browsers. But because Shippitsa did not allege these details in its
complaint, MoreNiche and Slack challenge whether the court can consider them. MoreNiche
and Slack cite cases stating that a plaintiff cannot “amend” its complaint in opposition to a
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The mixi.mn webpage contains no advertising and offers no opportunity for visitors
to do business with MoreNiche and Slack or otherwise to interact with the host computer.
The webpage therefore falls on the passive end of the Zippo scale, assuming it is not simply
a category 1 passive website that could not support the exercise of personal jurisdiction.
Courts in this circuit have asserted personal jurisdiction on the basis of websites that, inter
alia, allow visitors to purchase products directly, see, e.g., Am. Eyewear, 106 F.Supp.2d at
901, or provide a subscription-based online service, see, e.g., Sefton v. Jew, 201 F.Supp.2d
730, 740 (W.D. Tex. 2001). A website may fall in the middle of the Zippo scale, but will not
necessarily give rise to personal jurisdiction, if it allows users to communicate with one
another or with the website’s owner. See, e.g., Revell v. Lidov, 317 F.3d 467, 472 (5th Cir.
2002); Mothers Against Drunk Driving v. DAMMADD, Inc., 2003 WL 292162, at *5 (N.D.
Tex. Feb. 7, 2003) (Fish, C.J.). The mixi.mn page does none of this. It is arguably less
interactive than even the “passive” website that the Fifth Circuit addressed in Mink, which
motion to dismiss. See Roebuck v. Dothan Sec., Inc., 515 Fed. Appx. 275, 280 (5th Cir.
2013) (per curiam); Berry v. Indianapolis Life Ins. Co., 600 F.Supp.2d 805, 817 (N.D. Tex.
2009) (Boyle, J.); Skidmore Energy, Inc. v. KPMG LLP, 2004 WL 3019097, at *5 (N.D. Tex.
Dec. 28, 2004) (Boyle, J.). Defendants’ position might have force in the context of a Rule
12(b)(6) motion to dismiss for failure to state a claim. All of the cases that MoreNiche and
Slack cite involved Rule 12(b)(6) motions, and it is generally true that “[w]hen deciding a
Rule 12(b)(6) motion to dismiss, the district court is limited to the allegations set forth in the
complaint.” Roebuck, 515 Fed. Appx. at 280. But the court is not similarly confined when
deciding a Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction. To the contrary,
once the defendant has offered evidence to dispute the personal-jurisdiction allegations in the
plaintiff’s complaint, it is incumbent upon the plaintiff to present its own evidence in support
of personal jurisdiction. See Bullion, 895 F.2d at 217. Otherwise, the defendant’s evidence
will be credited as uncontroverted. See id.
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provided product details, contact information, and mail-in order forms to visitors. See Mink,
190 F.3d at 336-37. All mixi.mn does is provide a small amount of information to
users—information that users can, by default, view for only five seconds before being
redirected to another website, allegedly operated by Wolfson Berg or some other entity, but
not by MoreNiche or Slack. The average visitor’s interaction with mixi.mn is fleeting, at
best. It involves no viewing of advertising or exchanging of information on the mixi.mn
webpage itself that is commercial in nature.
Nor does the fact that the mixi.mn webpage sends digital instructions to a visitor’s
computer render the webpage owner subject to personal jurisdiction. The Zippo test focuses
on the level of interactivity and commercial nature of the exchange of information that occurs
on the website. The court has already explained that the level of interactivity in this case is
minimal: an encounter of no more than five seconds. And the mixi.mn webpage does not
exchange with the visitor any information that is commercial in nature. It unilaterally
provides commercial information (it would be a stretch to call it advertising) by simply
advising the visitor that Phen375 is no longer available via the link that the visitor reached,
that the visitor will be redirected to an alternative in 5 seconds, and that if the visitor does not
want to be redirected, the visitor click on a particular location on the mixi.mn webpage.
Cases that have found personal jurisdiction under Zippo have involved much greater levels
of interactivity and of the exchange of information of a commercial nature. See, e.g.,
Monistere v. Losauro, 2013 WL 6383886, at *7 (E.D. La. Dec. 4, 2013) (acknowledging that
website “is highly interactive because it allows users to purchase allegedly infringing
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products over the internet.”); Tempur-Pedic Int’l, Inc. v. Go Satellite Inc., 758 F.Supp.2d
366, 373 (N.D. Tex. 2010) (Fitzwater, C.J.) (classifying website as interactive because it
allowed users to order products and to communicate with defendant’s sales agents); Am.
Eyewear, 106 F.Supp.2d at 901 (“Users of this web site interact with the site and
[defendant’s] employees by using the Internet to submit product order forms that contain
credit card and shipping information.”).
Shippitsa’s contention that it has established personal jurisdiction under the Zippo test
finds no support in core personal jurisdiction concepts. The Zippo court did not create its
sliding scale from whole cloth—the test is based on “well developed personal jurisdiction
principles.” See Zippo, 952 F. Supp. at 1124. “Even in the strange realm of Internet-related
contacts, the standard for personal jurisdiction remains that a non-resident defendant must
have purposefully availed itself of the benefits and protections of the forum’s laws such that
it should reasonably anticipate being haled into the forum’s courts.” Applied Food Sciences,
Inc. v. New Star 21, Inc., 2009 WL 9120113, at *4 (W.D. Tex. Jan. 23, 2009) (citing Burger
King, 471 U.S. at 474); see also Tempur-Pedic, 758 F.Supp.2d at 375-76 (analyzing, in
conjunction with Zippo test, whether defendant could reasonably foresee being haled into
court on basis of online sales to Texas residents). When a defendant’s only contact with a
forum is a brief and automatic interaction between the defendant’s webpage and a visitor to
that page, involving no exchange of information that is commercial in nature, it follows that
the plaintiff has failed to establish the level of purposeful availment or foreseeability that is
required to satisfy due process.
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Shippitsa contends that sending instructions to a computer in a forum can give rise to
personal jurisdiction in that forum. It appears to be undisputed, however, that all websites
that a visitor can access by computer send instructions to the visitor’s computer.11 Something
more must be involved. And whether that something more is sufficient to establish personal
jurisdiction is determined under the Zippo sliding scale, not merely on the basis that the
defendant’s computer sends instructions to the plaintiff’s computer in the forum in which suit
is brought. To the extent that Shippitsa’s argument relies on the fact that mixi.mn
involuntarily redirects the user, Shippitsa does not explain why voluntariness matters in the
context of the Zippo sliding scale of interactivity; if anything, a website that automatically
redirects visitors without awaiting their input is less interactive than one that, say, features
a link on which a user must click to be redirected.
Even if mixi.mn were the kind of website that could support the assertion of personal
jurisdiction, Shippitsa must offer evidence or non-conclusory allegations that Texas residents
have actually interacted with the website. Courts in this circuit have held that the mere
possibility that forum residents have visited a website—even an extremely interactive
one—does not alone constitute minimum contacts between the website’s owner and the
forum. See, e.g., Monistere, 2013 WL 6383886, at *7 (“[T]he Court agrees . . . that personal
jurisdiction may not be established by the mere possibility that Louisiana residents may
11
Shippitsa’s own evidence includes examples of this. See P. Resp. App. 062 (“The
response from mixi.mn also included a response HTML payload that caused my browser to
display [a] message[.]”); P. Resp. App. 063 (“My browser received a response back from
phenq.com which included an HTML payload that displayed the phenq.com home page.”).
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purchase products on Defendants’ website[.]”); Interactive Life Forms, LLC v. Weng, 2013
WL 12116148, at *5 (W.D. Tex. Apr. 8, 2013) (“Defendants appear to have not accepted
customers from Texas, and not shipped products to Texas.”); Applied Food Sciences, 2009
WL 9120113, at *4 (“[W]here those corporations are not alleged to have conducted
electronic commerce with anyone in Texas, not alleged to have directed any of their
advertising or Internet activities specifically towards Texas, and not alleged to have sold any
infringing products to individuals in Texas, the maintenance of personal jurisdiction over
Defendants would be unreasonable.”); Monkey Boy Graphix, Inc. v. Anton Sport, Inc., 2008
WL 11349966, at *7 (N.D. Tex. Aug. 20, 2008) (Ramirez, J.) (“There is no evidence of any
sales of the allegedly infringing images to Texas residents, nor is there any evidence that the
Corporate Defendants have been interacting with anyone in Texas through [their] website.”),
rec. adopted, 2008 WL 11349845, at *1 (N.D. Tex. Sept. 17, 2008) (O’Connor, J.); People
Sols., Inc. v. People Sols., Inc., 2000 WL 1030619, at *4 (N.D. Tex. July 25, 2000) (Lindsay,
J.) (“Although Defendant appears to have the potential to interact with, sell products to, and
contract with Texas residents on its web site, the evidence does not support a finding that this
level of activity has taken place.”); Origin Instruments Corp. v. Adaptive Comput. Sys., Inc.,
1999 WL 76794, at *4 (N.D. Tex. Feb. 3, 1999) (Lindsay, J.) (“[T]here is no evidence in the
record to establish that Defendant has been interacting with anyone in Texas through its web
site.”); see also Tempur-Pedic, 758 F.Supp.2d at 374-75 (asserting personal jurisdiction over
website owner because evidence suggested at least two online sales had been made to Texas
residents); Am. Eyewear, 106 F.Supp.2d at 902 (“In today’s case, [plaintiff] has shown that
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[defendant] does more than merely maintain a web site; it regularly transacts business with
Texas residents over its ‘peepers.com’ web site.”).
Zippo emphasizes the importance of a website operator’s “conscious choice to conduct
business with the residents of a forum state”—which in that case is demonstrated by the
defendant’s “repeatedly and consciously [choosing] to process [forum] residents’
applications and to assign them passwords.” Zippo, 952 F. Supp. at 1126. A person or
company that wishes to avoid being haled into court in a particular jurisdiction can simply
choose not to interact with forum residents online. Id. at 1126-27. It follows that where a
defendant has not interacted at all with residents of a forum, consciously or otherwise,
personal jurisdiction is improper. Because the plaintiff bears the burden of establishing a
prima facie case for personal jurisdiction, the plaintiff must allege or show that the defendant
has in fact interacted with forum residents.12
Shippitsa does offer evidence that at least two people have visited mixi.mn from
within Texas: Shippitsa’s counsel, and a private investigator whom Shippitsa hired. But a
plaintiff cannot unilaterally manufacture jurisdiction by instructing its own agents, with
litigation in mind, to visit a defendant’s allegedly infringing website. See 721 Bourbon, Inc.
12
The court does not foreclose the possibility that a defendant who specifically targets
a forum with its website might be subject to personal jurisdiction there, even if no forum
resident ever sees the website. See, e.g., Applied Food Sciences, 2009 WL 9120113, at *4
(declining to exercise personal jurisdiction because, inter alia, plaintiffs did not “allege[] any
Texas-specific direction of the [defendants’] websites.”). But in the instant case, MoreNiche
and Slack deny that the mixi.mn page specifically targets Texas residents, and Shippitsa
offers no evidence to the contrary.
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v. House of Auth, LLC, 140 F.Supp.3d 586, 595-97 (E.D. La. 2015); Monistere, 2013 WL
6383886, at *7; Weng, 2013 WL 12116148, at *5; QR Spex, Inc. v. Motorola, Inc., 507
F.Supp.2d 650, 661 (E.D. Tex. 2007); James Avery Craftsman, Inc. v. Lugosch, 486
F.Supp.2d 595, 599 (W.D. Tex. 2007); see also Tempur-Pedic, 758 F.Supp.2d at 374-75
(disregarding, arguendo, online sale to plaintiff’s investigator in personal jurisdiction
analysis). But see Action Tapes, Inc. v. Ebert, 2006 WL 305769, at *5 (N.D. Tex. Feb. 9,
2006) (Fish, C.J.) (“Rather than creating an alias and purchasing the designs as it did via
eBay, [plaintiff] has produced no evidence that it engaged in a similar transaction with
[defendant’s website].”). Were it so, “plaintiffs would be granted the power to manufacture
personal jurisdiction in a forum that presents hardship and inconvenience to defendants.”
Lugosch, 486 F.Supp.2d at 599 (internal quotation marks omitted). Such artificial contacts
are therefore insufficient to support personal jurisdiction.13
D
Shippitsa does not argue that there is any other basis, besides the mixi.mn webpage,
for exercising personal jurisdiction over Slack and MoreNiche. Because Shippitsa has
clearly failed to make a prima facie showing that mixi.mn is sufficiently interactive to
support personal jurisdiction, the court declines to permit Shippitsa to conduct jurisdictional
discovery. See, e.g., Valtech Sols., Inc. v. Davenport, 2016 WL 2958927, at *2 (N.D. Tex.
13
Because Slack and MoreNiche do not have sufficient minimum contacts with Texas
to support personal jurisdiction, the court need not decide whether exercising jurisdiction
over them would comport with fair play and substantial justice. See Panda Brandywine, 253
F.3d at 870.
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May 23, 2016) (Fitzwater, J.) (“When the lack of personal jurisdiction is clear, discovery
would serve no purpose and should not be permitted.” (quoting Kelly v. Syria Shell
Petroleum Dev. B.V., 213 F.3d 841, 855 (5th Cir. 2000))).
Nor is Shippitsa entitled to amend its complaint for purposes of establishing that the
court can exercise personal jurisdiction. Shippitsa requests leave to amend in footnotes on
the last pages of each of its response briefs. But assuming arguendo that these requests
should be treated as motions,14 Shippitsa has failed to explain what, if anything, amending
the complaint would accomplish; it has already had an opportunity to present evidence in
support of personal jurisdiction and has failed to make the required prima facie showing. See
Seitz v. Envirotech Sys. Worldwide Inc., 513 F.Supp.2d 855, 866 (S.D. Tex. June 19, 2007)
(Rosenthal, J.) (“[Plaintiff’s] evidence, with the allegations in the amended complaint, was
insufficient to show personal jurisdiction as to [defendants]. On the present record,
amendment would be both late and futile.”); see also, e.g., Bustos v. Lennon, 538 Fed. Appx.
565, 569 (5th Cir. 2013) (per curiam) (affirming denial, on futility grounds, of motion to
amend complaint to correct jurisdictional defects); Blue Spike, LLC v. Tex. Instruments, Inc.,
2014 WL 11848753, at *3 (E.D. Tex. Mar. 5, 2014) (“It is not Plaintiff’s underlying
14
“[A] bare request in an opposition to a motion to dismiss—without any indication
of the particular grounds on which the amendment is sought, cf. [Rule] 7(b)—does not
constitute a motion within the contemplation of Rule 15(a).” United States ex rel. Willard
v. Humana Health Plan of Tex. Inc., 336 F.3d 375, 387 (5th Cir. 2003) (first alteration in
original) (quoting Confederate Mem’l Ass’n, Inc. v. Hines, 995 F.2d 295, 299 (D.C. Cir.
1993)); In re Alamosa Holdings, Inc., 382 F.Supp.2d 832, 867 n.9 (N.D. Tex. 2005)
(Cummings, J.).
- 17 -
allegations that fall short. Instead, Plaintiff’s theory of jurisdiction is flawed.”).
The court therefore denies Shippitsa’s request for jurisdictional discovery against
MoreNiche and Slack, denies Shippitsa’s request for leave to amend its complaint, and
dismisses Shippitsa’s actions against MoreNiche and Slack without prejudice for lack of
personal jurisdiction by Rule 54(b) final judgment filed today.
III
The court next considers MoreNiche and Slack’s motion for Rule 11 sanctions.
MoreNiche and Slack maintain that Shippitsa had no good-faith factual or legal basis for its
personal jurisdiction and venue allegations, or for bringing the present lawsuit despite the
contractual provision permitting MoreNiche “to re-direct visitors promoting [Shippitsa’s]
campaigns to whatever destination it sees fit.” P. Resp. App. 038.
A
Rule 11(b) provides that, by presenting to the court a pleading, motion, or other paper,
an attorney is certifying that to the best of the attorney’s knowledge, information, and belief,
formed after an inquiry reasonable under the circumstances,
(1) it is not being presented for any improper purpose, such as
to harass, cause unnecessary delay, or needlessly increase the
cost of litigation;
(2) the claims, defenses, and other legal contentions are
warranted by existing law or by a nonfrivolous argument for
extending, modifying, or reversing of existing law or for
establishing new law;
(3) the factual contentions have evidentiary support or, if
specifically so identified, will likely have evidentiary support
- 18 -
after a reasonable opportunity for further investigation or
discovery; and
(4) the denials of factual contentions are warranted on the
evidence or, if specifically so identified, are reasonably based on
belief or a lack of information.
Rule 11(b).
“[T]he central purpose of Rule 11 is to deter baseless filings in district court and thus
. . . streamline the administration and procedure of the federal courts.” Cooter & Gell v.
Hartmarx Corp., 496 U.S. 384, 393 (1990). An attorney has a duty to conduct a “reasonable
inquiry into the facts and law of a case at the time [at] which [he] affixes [his] signature on
any papers to the court.” Mercury Air Grp., Inc. v. Mansour, 237 F.3d 542, 548 (5th Cir.
2001). This court applies a “snapshot” rule: sanctions under Rule 11 cannot be imposed
“merely for the eventual failure of a claim; rather, sanctions are to be applied only where, at
the time of the filing, the position advocated is unwarranted.” Matta v. May, 118 F.3d 410,
415 (5th Cir. 1997) (emphasis added). When Rule 11 has been violated, the court must
“carefully choose sanctions that foster the appropriate purpose of the rule, depending upon
the parties, the violation, and the nature of the case.” Thomas v. Capital Sec. Servs., Inc., 836
F.2d 866, 877 (5th Cir. 1988) (en banc).
B
The court holds that Shippitsa did not violate Rule 11. MoreNiche and Slack do not
specify the subsection of Rule 11 on which their motion relies, but their argument appears
- 19 -
to be based either on Rule 11(b)(2) or on Rule 11(b)(3), or possibly on both.15
1
Under Rule 11(b)(2), “[t]he essential issue is whether the signatories of [the filing]
fulfilled their duty of reasonable inquiry into the relevant law.” CJC Holdings, Inc. v. Wright
& Lato, Inc., 989 F.2d 791, 793 (5th Cir. 1993). In determining whether an attorney has
made a reasonable inquiry into the law, the court may consider: “the time available to the
attorney to prepare the document; the plausibility of the legal view contained in the
document; the pro se status of the litigant; and the complexity of the legal and factual issues
raised.” Thomas, 836 F.2d at 875-76.
Sanctions are appropriate under Rule 11(b)(2) when a party advocates a legal
contention that is objectively unreasonable. See Snow Ingredients, Inc. v. SnoWizard, Inc.,
833 F.3d 512, 528 (5th Cir. 2016) (“An attorney’s conduct is judged under each standard
with an objective, not a subjective, standard of reasonableness.”). “[A] trial court should not
impose Rule 11 sanctions for advocacy of a plausible legal theory, particularly where . . . the
law is arguably unclear.” Id. (ellipsis in original) (quoting CJC Holdings, 989 F.2d at 794).
“[T]he law concerning the permissible scope of personal jurisdiction based on Internet use
is still developing.” 1 James R. Pratt, III & Bruce J. McKee, Litigating Tort Cases § 3:24
15
The allegations that MoreNiche and Slack are challenging—that the court has
personal jurisdiction over MoreNiche and Slack, that venue is proper here, and that
Shippitsa’s claims are not barred by contract—appear to be mixed questions of fact and law.
They are not purely factual contentions, nor are they abstract statements of law. The court
will therefore analyze the motion for sanctions under both the Rule 11(b)(2) and Rule
11(b)(3) paradigms.
- 20 -
(2018). It is in the context of this developing area of law that Shippitsa conceived its theory
of personal jurisdiction and venue. This theory is not objectively unreasonable. The court
is not aware of any Fifth Circuit case that expressly and directly forecloses Shippitsa’s
argument that a webpage that interacts with a visitor’s computer is “interactive” in the sense
contemplated by Zippo. And while the weight of authority in this circuit holds that a plaintiff
must allege or show actual, non-manufactured interactions with the defendant’s website by
Texas residents, the Fifth Circuit itself apparently has not yet held the same. Cf. Snow
Ingredients, Inc. v. SnoWizard, Inc., 2014 WL 1329804, at *9 (E.D. La. Mar. 28, 2014)
(denying motion for sanctions because, inter alia, Fifth Circuit had never clearly foreclosed
plaintiff’s argument), aff’d, 833 F.3d 512 (5th Cir. 2016). Although the court ultimately
holds that it lacks personal jurisdiction over MoreNiche and Slack, “Rule 11 does not require
that the legal theory espoused in a filing prevail.” CJC Holdings, 989 F.2d at 793.
“If abused, Rule 11 may chill attorneys’ enthusiasm and stifle the creativity of
litigants in pursuing novel factual or legal theories. As a result, all will suffer.” Thomas, 836
F.2d at 885; accord Rule 11 advisory committee’s note (1983 amendment). Mindful of this
admonition, the court concludes that Shippitsa’s theory—while ultimately unpersuasive—is
not objectively unreasonable.
Nor is Shippitsa’s interpretation of the Contract objectively unreasonable. Relying
on English law,16 Shippitsa contends that because it would defy “business common sense”
16
The Contract states that it is governed by the laws of England. A federal court
applies the conflict-of-laws rules of the forum in which it sits. Roberts v. Energy Dev. Corp.,
- 21 -
to read the Contract to permit MoreNiche to infringe Shippitsa’s trademarks, the court should
reject such a reading. P. Resp. MoreNiche 11 (quoting Rainy Sky S.A. v. Kookmin Bank
[2011] UKSC 50, [16]).17 MoreNiche and Slack cite a later case from the Supreme Court of
the United Kingdom clarifying that, where a contract’s language is unambiguous, courts
should not use “commercial common sense” to justify ignoring the words’ plain meaning.
See Arnold v. Britton [2015] UKSC 36, [17]-[20]. But Arnold also emphasizes that
“commercial common sense is a very important factor to take into account when interpreting
a contract,” and acknowledges that, in a “very unusual case,” a court might be justified in
departing even from clear language. See id. at [17], [20]. It is therefore at least reasonable
104 F.3d 782, 786 (5th Cir. 1997). Under Texas law, a choice-of-law clause is enforceable
unless the chosen law has no connection to the parties or the contract, or unless application
of the chosen law would offend a fundamental public policy of the forum state. DeSantis v.
Wackenhut Corp., 793 S.W.2d 670, 677 (Tex. 1990). Here, where Shippitsa, MoreNiche,
and Slack are all based in the UK, and where no one has argued that applying English law
would violate Texas public policy, the court will assume arguendo that English law applies.
17
Shippitsa’s counsel did not actually research English law before filing the complaint;
he instead relied on general principles of contract interpretation. It was only later that he
unearthed the English case on which Shippitsa now relies. But the court can take this case
into account despite the snapshot rule. It is well-established that “sanctions can be imposed
only if [counsel’s] position can ‘fairly be said to be unreasonable from the point of view of
both existing law and its possible extension, modification, or reversal.’” FDIC v. Calhoun,
34 F.3d 1291, 1296 (5th Cir. 1994) (quoting Smith Int’l, Inc. v. Tex. Commerce Bank, 844
F.2d 1193, 1200 (5th Cir. 1988)). The court can consider cases that support counsel’s legal
position even if counsel had not actually discovered those cases at the time he signed the
complaint. This is because, regardless whether counsel was aware of these cases when
signing the paper in question, they are evidence that counsel’s position was objectively
reasonable. Moreover, if the court refused to consider these authorities, it would run the risk
of essentially applying a subjective, rather than objective, standard of
reasonableness—contrary to Fifth Circuit precedent. See id.
- 22 -
for Shippitsa to rest its argument on the idea of commercial common sense. Although the
court takes no position on whether Shippitsa’s interpretation of the Contract is correct under
English law, Shippitsa has advanced an objectively reasonable argument that its claim is not
barred by contract. Sanctions are therefore unwarranted.
Nor will the court sanction Shippitsa for failing to mention in its complaint the
“whatever destination it sees fit” provision of the Contract. P. Resp. App. 038. “Rule 11
addresses what a party or its attorney knows at the time of filing, not what it chooses to
include in those filings.” Quantlab Techs. Ltd. (BVI) v. Godlevsky, 719 F.Supp.2d 766, 781
(S.D. Tex. 2010). Rule 11(b) does not expressly permit the court to sanction a plaintiff for
failing to disclose all relevant facts in its complaint. The court will not go beyond the bounds
of Rule 11 by penalizing Shippitsa on this basis.
2
When assessing whether sanctions should be imposed under Rule 11(b)(3), the court
focuses on the reasonableness of counsel’s pre-filing inquiry into the facts. See, e.g., SEC
v. Faulkner, 2018 WL 3708426, at *3-4 (N.D. Tex. Aug. 3, 2018) (Fitzwater, J.); Port of S.
La. v. Tri-Parish Indus., Inc., 927 F.Supp.2d 332, 347-48 (E.D. La. 2013); Jenkins v.
Methodist Hosps. of Dall. Inc., 2004 WL 2871006, at *1-2 (N.D. Tex. Dec. 14, 2004) (Lynn,
J.). The factors to be considered are:
(1) the time available to the signer for investigation; (2) the
extent of the attorney’s reliance upon his client for the factual
support for the document; (3) the feasibility of pre-filing
investigation; (4) whether the signing attorney accepted the case
from another member of the bar or forwarding attorney; (5) the
- 23 -
complexity of the factual and legal issues; and (6) the extent to
which development of the factual circumstances underlying the
claim requires discovery.
Childs v. State Farm Mut. Auto. Ins. Co., 29 F.3d 1018, 1026 (5th Cir. 1994) (citing Thomas,
836 F.2d at 875).
The complaint’s signatory, William D. Cramer, Esquire (“Cramer”), began his prefiling inquiry with a list of potentially-infringing websites provided by Shippitsa itself.
Working from this list, Cramer independently documented dozens of websites allegedly
displaying the Phen375 trademark that linked users, via the mixi.mn redirect webpage, to
either of the two websites operated by Wolfson Berg. He used specialized tools to observe
the series of HTTP messages sent between his computer and the websites to which he
connected, including mixi.mn. And he was able to determine that the mixi.mn webpage was
registered to MoreNiche and Slack. On the basis of this inquiry and his understanding of the
law, Cramer concluded that this court has personal jurisdiction over MoreNiche and Slack.
Moreover, before filing the complaint, Cramer personally read the Contract and interpreted
it in light of his understanding of the general principles of contract law.
The court holds that Cramer did not fail to conduct a reasonable inquiry into the
relevant facts. Turning to the first Childs factor, the court observes that Cramer’s pre-filing
investigation was subject to some time constraints, because Shippitsa was allegedly losing
sales due to the infringing websites. Under the circumstances, his investigation was
sufficiently thorough. Second, Cramer performed his pre-filing inquiry independently of
Shippitsa, although he used information provided by Shippitsa as a starting point. Third, an
- 24 -
investigation was not only feasible, but was actually conducted. Fourth, counsel did not rely
on the work of another attorney, but instead properly performed his own inquiry into the
facts. Fifth, Cramer’s erroneous conclusion is understandable in light of the complicated
subject matter of this case: the intersection between technology and personal jurisdiction.
Sixth, it was not unreasonable to think that discovery would shed additional light on the
extent to which Texas residents may have visited mixi.mn. Sanctions on the basis of Rule
11(b)(3) are therefore unwarranted.
C
Shippitsa asks the court to award it the costs it has incurred in responding to the Rule
11 motion, contending that the motion for sanctions is itself frivolous. The court declines
this request.
Rule 11(c)(2) provides that, “[i]f warranted, the court may award to the prevailing
party the reasonable expenses, including attorney’s fees, incurred” for litigating a Rule 11
motion.
An award of reasonable expenses under Rule 11(c)(2) is not a
sanction for violating Rule 11(b). A court is therefore not
required, in considering a request for reasonable expenses
pursuant to Rule 11(c)(2), to apply the substantive requirements
of Rule 11(c)(4)-(6). Instead, the court applies the requirements
of Rule 11(c)(2) itself, which provides that the award of
expenses to the prevailing party must be “warranted” and
“reasonable.”
SEC v. Faulkner, 2018 WL 5924042, at *4 (N.D. Tex. Nov. 13, 2018) (Fitzwater, J.)
(citations and some internal quotation marks omitted) (quoting Vanliner Ins. Co. v.
- 25 -
DerMargosian, 2014 WL 1632181, at *1 (N.D. Tex. Apr. 24, 2014) (Fitzwater, C.J.)).
The arguments supporting the motion for sanctions are essentially identical to
arguments that MoreNiche and Slack have already presented in their respective motions to
dismiss. This court has awarded expenses to a prevailing nonmovant where the motion for
sanctions, which parroted the movant’s argument for dismissal, was “frivolous” and “devoid
of any good-faith arguments.” See Vanliner, 2014 WL 1632181, at *2. But unlike in
Vanliner, the arguments in the instant motion for sanctions are not frivolous—they persuaded
the court to dismiss Shippitsa’s claims against MoreNiche and Slack. The court therefore
will not award expenses to Shippitsa on the proffered rationale that the Rule 11 motion is
itself frivolous.18
*
*
*
For the foregoing reasons, the court grants MoreNiche’s motion to dismiss, grants
Slack’s motion to dismiss, denies MoreNiche and Slack’s motion for Rule 11 sanctions, and
dismisses without prejudice Shippitsa’s actions against MoreNiche and Slack by Rule 54(b)
final judgment filed today. Because Wolfson Berg’s motion to dismiss has not yet been
18
The court is not suggesting that a Rule 11 motion must be frivolous, or otherwise
violate Rule 11, to warrant an award of expenses. “There should be something negative . .
. in the losing party’s conduct, but it does not have to be so serious that sanctions are
appropriate.” Adhikari v. Daoud & Partners, 2017 WL 5904782, at *8 (S.D. Tex. Nov. 30,
2017); see also Vanliner, 2014 WL 1632181, at *2 (“[A]lthough the [defendants’] amended
motion need not have been frivolous to warrant a fee award under Rule 11(c)(2), the fact that
it was frivolous informs the court’s finding that a fee award is warranted.”).
- 26 -
resolved, the stay of discovery19 remains in place—except to the extent expressly provided
by the court’s order today permitting limited jurisdictional discovery against Wolfson Berg.20
SO ORDERED.
January 22, 2019.
_________________________________
SIDNEY A. FITZWATER
SENIOR JUDGE
19
On October 30, 2018 the court ordered a stay of discovery pending a decision on
defendants’ motions to dismiss.
20
On April 27, 2018 Shippitsa filed a motion for temporary restraining order (“TRO”)
and preliminary injunction. In orders filed the same day, the court carried the TRO motion
pending consideration of the motion for preliminary injunction and scheduled Shippitsa’s
preliminary injunction for consideration on the papers. Because the motion seeks relief
against Slack and MoreNiche, not Wolfson Berg, and the court is today dismissing
Shippitsa’s actions against Slack and MoreNiche, the court denies the motions for a TRO and
preliminary injunction without prejudice as moot.
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