BidPrime, LLC v. SmartProcure, Inc. et al

Filing 62

ORDER DENYING 38 Motion to Dismiss. Signed by Judge Robert Pitman. (td)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION
BIDPRIME, LLC,
Plaintiff,
v.
SMARTPROCURE, INC., d/b/a SmartProcure,
and JEFFREY RUBENSTEIN,
Defendants.

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1:18-CV-478-RP

ORDER
Before the Court is Defendant Jeffrey Rubenstein’s (“Rubenstein”) Motion to Dismiss. (Dkt.
38). Plaintiff BidPrime, LLC (“BidPrime”) sued Rubenstein and Defendant SmartProcure, Inc.
(“SmartProcure”), a rival company, alleging that SmartProcure hacked BidPrime’s website and
scraped information. (Am. Compl., Dkt. 34, at 16). Rubenstein is SmartProcure’s founder and CEO;
BidPrime sued Rubenstein individually for his alleged role in the hacking. (See Resp. Mot. Dismiss,
Dkt. 44, at 10). Rubenstein, a Florida resident, seeks to dismiss BidPrime’s claims against him for
lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2). (Mot. Dismiss, Dkt. 38,
at 2). Having considered the motion, the parties’ responsive briefing, the evidence, and the relevant
law, the Court will deny the motion.
I. LEGAL STANDARDS
The Federal Rules of Civil Procedure allow a defendant to assert lack of personal jurisdiction
as a defense to suit. Fed. R. Civ. P. 12(b)(2). “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).
When, as here, the court considers a motion to dismiss for lack of personal jurisdiction without

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holding an evidentiary hearing, the plaintiff need only present a prima facie case that personal
jurisdiction is proper. Walk Haydel & Assocs., Inc. v. Coastal Power Prod. Co., 517 F.3d 235, 241 (5th
Cir. 2008). Even if the court receives discovery materials, unless there is a full and fair hearing, a
district court should not act as a factfinder and must construe all disputed facts in the plaintiff’s
favor and consider them along with the undisputed facts and uncontroverted allegations. Id.; Latshaw
v. Johnston, 167 F.3d 208, 211 (5th Cir. 1999). Nevertheless, a court need not credit conclusory
allegations, even if uncontroverted. Panda Brandywine Corp. v. Potomac Elec. Power Co., 253 F.3d 865,
869 (5th Cir.2001) (per curiam).
II. DISCUSSION
A. Due Process
Because Rubenstein is not a Texas resident, (see Am. Compl., Dkt. 34, at 2), BidPrime has
the burden to establish a prima facie case for this Court’s personal jurisdiction over him. Lewis v.
Fresne, 252 F.3d 352, 358 (5th Cir. 2001). A federal district court may exercise personal jurisdiction
over a nonresident defendant if “(1) the forum state’s long-arm statute confers personal jurisdiction
over that defendant; and (2) the exercise of personal jurisdiction comports with the Due Process
Clause of the Fourteenth Amendment.” McFadin v. Gerber, 587 F.3d 753, 759 (5th Cir. 2009), cert.
denied, 562 U.S. 827 (2010). Because Texas’s long-arm statute extends as far as constitutional due
process allows, the two-step inquiry “collapses into one federal due process analysis.” Sangha v.
Navig8 ShipManagement Private Ltd., 882 F.3d 96, 101 (5th Cir. 2018)
Exercising personal jurisdiction over a nonresident defendant is compatible with due process
when “(1) the defendant has purposefully availed himself of the benefits and protections of the
forum state by establishing minimum contacts with the forum state, and (2) exercise of jurisdiction
over that defendant does not offend traditional notions of fair play and substantial justice.” Walk
Haydel, 517 F.3d at 243 (cleaned up). There are two types of minimum contacts: those that give rise

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to specific personal jurisdiction and those that give rise to general personal jurisdiction. Lewis, 252
F.3d at 358. BidPrime argues only that Rubenstein is subject to this Court’s specific jurisdiction.
(Resp. Mot. Dismiss, Dkt. 44, at 7).
In this circuit, specific personal jurisdiction is a claim-specific inquiry; a plaintiff bringing
multiple claims that arise out of different forum contacts must establish specific jurisdiction for each
claim. McFadin, 587 F.3d at 759. Specific jurisdiction applies when a nonresident defendant “has
purposefully directed its activities at the forum state and the litigation results from alleged injuries
that arise out of or relate to those activities.” Walk Haydel, 517 F.3d at 243. The touchstone of
specific-jurisdiction analysis is “whether the defendant’s conduct shows that it reasonably anticipates
being haled into court.” McFadin, 587 F.3d at 759 (cleaned up). Even a single contact can support
specific jurisdiction if it creates a “substantial connection” with the forum. Burger King Corp. v.
Rudzewicz, 471 U.S. 462, 475 n.18 (1985).
Specific jurisdiction “focuses on the relationship among the defendant, the forum, and the
litigation.” Sangha, 882 F.3d at 103. Due process requires that specific jurisdiction be based on more
than the “random, fortuitous, or attenuated” contacts a defendant makes by interacting with people
affiliated with the forum state. Walden v. Fiore, 571 U.S. 277, 285 (2014). The plaintiff thus “cannot
be the only link between the defendant and the forum. Rather, it is the defendant’s conduct that
must form the necessary connection with the forum State that is the basis for its jurisdiction over
him.” Id. at 285.
BidPrime asserts nine claims against Rubenstein; eight of them are intentional torts, and the
ninth is a claim for breach of contract. (Am. Compl., Dkt. 34, at 30–44). 1 Rubenstein argues that
BidPrime has failed to establish a prima facie case that he has minimum contacts with Texas for each
claim. (Mot. Dismiss, Dkt. 38, at 10). Rubenstein argues that his alleged conduct took place in
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The same due process analysis applies when intentional torts are involved. Walden, 571 U.S. at 286.

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Florida—“from IP addresses at his office or at his home”—rather than Texas. (Id.). The only alleged
conduct between Rubenstein and Texas, he argues, is his “contact with BidPrime,” which is
insufficient to establish specific jurisdiction because the plaintiff cannot be the only link between the
defendant and the forum. (Id. at 10–11). As for allegations that Rubenstein obtained unauthorized
access to BidPrime’s servers, Rubenstein offers a number of arguments—(1) BidPrime does not
allege that Rubenstein accessed servers located in Texas, (id. at 15–16); (2) even if it had, the location
of the servers is insufficient to establish minimum contacts, (id. at 16); and (3) Rubenstein did not
know where BidPrime’s servers were located in any event and therefore would not have
purposefully targeted Texas by his alleged conduct, (id. at 17). BidPrime admits that Rubenstein
scraped data from its server in Oregon. (Schwartzbeck Decl., Dkt. 44-1, ¶ 9).
Server location notwithstanding, Rubenstein knew that BidPrime was a Texas company.
BidPrime alleges that Rubenstein operates one of BidPrime’s “largest competitors,” that he
contacted BidPrime to propose working together, and that he proposed to buy unlimited access to
BidPrime’s website. (Am. Compl., Dkt. 34, at 12–13). Rubenstein has not disputed that he knew
BidPrime was a Texas company. (See Rubenstein Decl., Dkt. 38, at 27–30). Rubenstein allegedly tried
to register for free trial access to BidPrime’s website (“BidPrime.com”) using a fake name after his
account was shut down. (Am. Compl., Dkt. 34, at 16). He allegedly used his computer to access
BidPrime.com without authorization through another user’s account. (Id. at 20). He allegedly hired a
software developer to write a data-scraping program and directed that developer to scrape thousands
of bid requests from BidPrime.com. (Id. at 17–20). He allegedly attempted to create two more
accounts using fake names to access BidPrime.com, once successfully. (Id. at 22–23).
These allegations suffice to establish a prima facie case for specific jurisdiction in Texas.
“Specific jurisdiction applies when a nonresident defendant has purposefully directed its activities at
the forum state and the litigation results from alleged injuries that arise out of or relate to those

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activities.” Walk Haydel, 517 F.3d at 243. Both of those conditions are met here. All of Rubenstein’s
alleged conduct constitutes purposeful action directed at a company that he knew to be located in
Texas, and he does not dispute that the injuries alleged in this case arise out of this conduct. These
allegations are not “random, fortuitous, or attenuated” contacts with Texas; they are repeated
intentional actions to harvest data from a Texas company. A defendant who repeatedly and
purposefully obtains unauthorized access to servers he knows belong to a Texas company can
reasonably anticipate being haled into court in Texas.
That Rubenstein scraped data from a BidPrime server sited in Oregon is irrelevant. Courts
have repeatedly rejected the argument that a server’s physical location is relevant to specific
jurisdiction. See Future World Elecs., LLC v. Results HQ, LLC, No. CV 17-17982, 2018 WL 2416682,
at *3 (E.D. La. May 29, 2018) (“[A] plaintiff may not ‘rely on the fortuitous location’ of a server to
establish personal jurisdiction over a defendant who accessed that server.”) (quoting Chang v. Virgin
Mobile USA, LLC, No. 07-1767, 2009 WL 111570, at *3 (N.D. Tex. Jan. 16, 2009)); Motio, Inc. v. BSP
Software LLC, No. 3:16-CV-00331-O, 2016 WL 9559916, at *6 (N.D. Tex. May 27, 2016) (“[T]he
crucial inquiry is whether Defendants purposefully directed their alleged tortious actions at Texas
residents or ‘communicated’ with Texas, regardless of the server’s actual location. . . . Defendants
knew that Motio was located in Texas, that in their capacities as BSP principals they would have
known that their actions were purposefully directed toward a Texas corporation.”); BGDG Enter.,
LLC v. Barley & Swine, No. A-13-CA-719-SS, 2014 WL 12479650, at *4 (W.D. Tex. Jan. 23, 2014)
(noting that “courts have rejected the physical location of servers as a basis for personal
jurisdiction”). The question is whether Rubenstein’s conduct “connects him to the forum in a
meaningful way.” Walden, 571 U.S. at 290. Rubenstein did not direct his conduct at a server in
Oregon; he had no idea where BidPrime’s servers were located. (Rubenstein Decl., Dkt. 38, at 28
¶ 9). Construing disputed facts in BidPrime’s favor, Rubenstein hacked a Texas company to steal its

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trade secrets in order to siphon business away from that company. (See Am. Compl., Dkt. 34). Just as
the fortuitous location of an unknown server cannot create specific jurisdiction in the server’s forum
state, Chang, 2009 WL 111570, at *3, neither should it deny specific jurisdiction over a defendant
who purposefully directed his allegedly tortious conduct at a forum resident and knew or should
have known that its effects would be felt in the forum state. See Christie v. Nat’l Inst. for Newman
Studies, 258 F. Supp. 3d 494, 506 (D.N.J. 2017) (rejecting, in a Computer Fraud and Abuse case, the
defendant’s argument that their conduct targeted California because the plaintiff’s emails were stored
on servers there, and concluding that “because Defendants deliberately targeted a New Jersey
resident—who Defendants knew was in New Jersey when they targeted him—with tortious
conduct, Defendants should have reasonably anticipated being haled to court in New Jersey.”).
Because BidPrime has established minimum contacts between Rubenstein and Texas, the
burden of proof shifts to Rubenstein to show that the assertion of jurisdiction is unfair and
unreasonable. Sangha, 882 F.3d at 102. In determining whether the exercise of jurisdiction is fair and
reasonable, the court must balance: “(1) the burden on the nonresident defendant of having to
defend itself in the forum, (2) the interests of the forum state in the case, (3) the plaintiff’s interest in
obtaining convenient and effective relief, (4) the interstate judicial system’s interest in the most
efficient resolution of controversies, and (5) the shared interests of the states in furthering
fundamental social policies.” Id. (citing Burger King, 471 U.S. at 477). The defendant must make a
“compelling case . . . . It is rare to say the assertion is unfair after minimum contacts have been
shown.” Wien Air Alaska, Inc. v. Brandt, 195 F.3d 208, 215 (5th Cir. 1999) (cleaned up). Even when
litigation in the forum would “place a burden on the defendant,” the interests of the forum and the
plaintiff “justify even large burdens on the defendant” once minimum contacts are established. Id.
Rubenstein argues that defending a suit in Texas would be burdensome and inconvenient
because he lives 1,300 miles away from Austin in Boca Raton, Florida, and all of his records related

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to this action are in Florida. (Mot. Dismiss, Dkt. 38, at 19–20). This interest is insufficient to show
that jurisdiction is unfair and unreasonable. See Wien Air Alaska, 195 F.3d at 216 (“At most [the
defendant] demonstrates an inconvenience which would be equally felt by forcing the plaintiff to
litigate in Germany.”). “Texas has an interest in protecting its residents’ property rights and
providing a convenient forum for its residents to resolve their disputes.” McFadin, 587 F.3d at 763.
BidPrime has an interest in securing relief quickly, efficiently, and conveniently. See id. BidPrime’s
evidence and witnesses are in Texas. (Resp. Mot. Dismiss, Dkt. 44, at 17). The Court finds “no
overwhelming burden to the defendant that outweighs the legitimate interests of the plaintiff and the
forum state.” Wien Air Alaska, 195 F.3d at 216. 2
B. Fiduciary Shield
Rubenstein also argues that the fiduciary shield doctrine insulates him from individual
liability because BidPrime’s complaint only alleges that he acted in his official capacity. (Mot.
Dismiss, Dkt. 38, at 11–12). BidPrime responds that the fiduciary shield doctrine does not apply
when the officer is sued in his personal capacity or when a corporate officer commits an intentional
tort while acting on behalf of the corporation. (Resp. Mot. Dismiss, Dkt. 44, at 10–11). Rubenstein
agrees that the doctrine does not shield him from being subject to specific personal jurisdiction for
intentional tort claims. (Reply Mot. Dismiss, Dkt. 46, at 3 n.2). Having agreed that the fiduciary
shield doctrine applies to BidPrime’s intentional tort claims, the parties dispute only whether the
doctrine applies to BidPrime’s sole remaining claim for breach of contract. (Id. at 3–4).
The Court need not resolve that dispute. Assuming arguendo that the doctrine does apply to
BidPrime’s breach of contract claim, it only “prohibits a court from exercising personal jurisdiction”
over Rubenstein. Fairchild v. Barot, 946 F. Supp. 2d 573, 581 (N.D. Tex. 2013) (citing Stuart v.
2 Rubenstein also argues that it would be unfair to require him to defend this action in Texas because he lacks minimum
contacts with Texas. (Mot. Dismiss, Dkt. 38, at 19). This argument misunderstands the burden-shifting analysis. Courts
only look at whether jurisdiction would be fair to a defendant if it has already found minimum contacts, Sangha, 882 F.3d
at 102, as this Court has here.

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Spademan, 772 F.2d 1185, 1197 (5th Cir. 1985)). Because the Court possesses personal jurisdiction
over Rubenstein for BidPrime’s intentional tort claims, it can exercise pendent personal jurisdiction
over another claim that arises out of the same nucleus of operative facts, even though it lacks an
independent basis for personal jurisdiction over that claim. Rolls-Royce Corp. v. Heros, Inc., 576 F.
Supp. 2d 765, 783 (N.D. Tex. 2008). BidPrime alleges that Rubenstein breached BidPrime.com’s
terms of service by registering for accounts under fake identities and customer accounts. (Am.
Compl., Dkt. 34, at 41–43). This claim arises out of the same nucleus of operative facts as
BidPrime’s intentional tort claims against Rubenstein, which likewise arise out of his alleged
attempts to access BidPrime.com without authorization and obtain data. The Court can therefore
exercise pendent personal jurisdiction over Rubenstein for the breach of contract claim even if the
fiduciary shield doctrine would otherwise deprive the Court of an independent basis for personal
jurisdiction over that claim.
III. CONCLUSION
For the reasons given above, IT IS ORDERED that Defendant Jeffrey Rubenstein’s
(“Rubenstein”) Motion to Dismiss, (Dkt. 38), is DENIED.
SIGNED on October 22, 2018.

_____________________________________
ROBERT PITMAN
UNITED STATES DISTRICT JUDGE

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