PowerHour v. Brain Swell Media

Filing 31

MEMORANDUM DECISION denying 17 Motion to Dismiss for Lack of Jurisdiction. Signed by Judge David Sam on 10/4/11. (jmr)

THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH
CENTRAL DIVISION
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)
POWERHOUR, L.L.C., a Utah
Limited Liability Company,
)
Case No. 2:11CV356
Plaintiff,

)
MEMORANDUM DECISION

vs.

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BRAIN SWELL MEDIA, L.L.C, a
South Carolina Limited
Liability Company,
Defendant.

)
)
)

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PowerHour (“Plaintiff”), a Utah limited liability corporation, filed this diversity suit on April
18, 2011 alleging breach of contract against Brain Swell Media (“Defendant”), a South Carolina
limited liability company. Brain Swell Media filed a motion to dismiss for lack of personal
jurisdiction and memorandum in support on June 2, 2011 (Doc. # 17). Plaintiff filed its response in
opposition and memorandum on July 7, 2011. Defendant filed its reply on July 26, 2011. The court
has considered the parties’ briefs and is prepared to issue the following memorandum decision.
RELEVANT FACTS
Defendant does not maintain any offices, bank accounts, telephone numbers, or employees
in Utah and has never been incorporated or paid taxes in Utah. Declaration of Ryan Dohrn
(hereinafter “Dohrn Decl.”) ¶¶ 4-13. No employee, agent, or representative of Defendant has ever
visited Utah to discuss, work on, or conduct business relating to the facts alleged in the complaint.
Id ¶¶ 13, 16-19.

The terms of the contract at issue in this litigation were negotiated between PowerHour and
BSM by means of telephone calls and email exchanges between PowerHour and BSM, as well as
exchanges of copies of the document. Declaration of Ernest Oriente (“Oriente Decl.”) ¶¶ 23, 24.
During the relationship, BSM knew that PowerHour was located in Utah. Id ¶ 24. BSM has sent
hundreds of weekly emails to PowerHour in Utah. Id ¶¶ 15,19. For most of the period,
communications were daily or nearly daily, and for significant periods multiple emails were
exchanged each day. Id ¶ 19. BSM participated in or initiated weekly telephone conferences with
PowerHour and its affiliates. Id ¶¶ 11-14.
BSM operates several websites that solicit subscriptions to BSM newsletters and updates
and solicit participation in webinar presentations. Bogart Decl. ¶¶ 1-7, 12, 15. BSM’s websites
offer website search engine optimizations services throughout the country. Bogart Decl. ¶¶ 11.
STANDARD OF REVIEW
The plaintiff in a civil case bears the burden of establishing that the court has personal
jurisdiction over the defendant. See OMI Holdings, Inc. v. Royal Ins. Co. of Canada, 149 F.3d
1086, 1091 (10th Cir.1998). When a defendant files a motion to dismiss for lack of personal
jurisdiction under Fed.R.Civ.P. 12(b)(2), the plaintiff must make only a prima facie case of
personal jurisdiction in order to defeat the motion. See OMI Holdings, 149 F.3d at 1091; accord
Patriot Sys., Inc. v. C-Cubed Corp., 21 F.Supp.2d 1318, 1320 (D.Utah 1998). This may be done
through well-pleaded facts in the complaint or in supporting affidavits. See OMI Holdings, 149
F.3d at 1091. “The allegations in the complaint must be taken as true to the extent they are
uncontroverted by the defendant's affidavits. If the parties present conflicting affidavits, all
factual disputes are resolved in the plaintiff's favor, and the plaintiff's prima facie showing is
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sufficient notwithstanding the contrary presentation by the moving party.” Rambo v. American
Southern Ins. Co., 839 F.2d 1415, 1417 (10th Cir.1988); accord Far West Capital, Inc. v. Towne,
46 F.3d 1071, 1075 (10th Cir.1995).
PERSONAL JURISDICTION
The basis for jurisdiction in this case is the diversity of the parties' citizenship. This court
must therefore apply the law of the forum state, Utah, to determine whether personal jurisdiction
exists. See Harnischfeger Eng'rs, Inc. v. Uniflo Conveyor, Inc., 883 F.Supp. 608, 612 (D.Utah
1995). Utah courts may apply either “general” or “specific” personal jurisdiction. As explained
by the Utah Supreme Court:
General personal jurisdiction permits a court to exercise power over a defendant without
regard to the subject of the claim asserted. For such jurisdiction to exist, the defendant
must be conducting substantial and continuous local activity in the forum state. In
contrast, specific personal jurisdiction gives a court power over a defendant only with
respect to claims arising out of the particular activities of the defendant in the forum state.
For such jurisdiction to exist, the defendant must have certain minimum local contacts.
Arguello v. Industrial Woodworking Mach. Co., 838 P.2d 1120, 1122 (Utah 1992) (citations
omitted), quoted in Harnischfeger, 883 F.Supp. at 611; accord Helicopteros Nacionales de
Colombia, S.A. v. Hall, 466 U.S. 408, 414, 414 n. 9, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984).
PowerHour contends that this court has both general and specific personal jurisdiction over
Defendant Brain Swell Media and these contentions are addressed in order below.
General Jurisdiction
Defendant does not conduct substantial and continuous local activity such that this court
would have general jurisdiction over it. General personal jurisdiction allows a court to hear
matters involving a non-resident defendant regardless of the subject matter of the claim asserted.
See Soma Medical Int'l v. Standard Chartered Bank, 196 F.3d 1292, 1295 (10th Cir.1999) citing
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Arguello, 838 P.2d at 1122. For a court to exercise general personal jurisdiction, “the defendant
must be conducting substantial and continuous activity in the forum state.” Soma, 196 F.3d at
1295, quoting Arguello, 838 P.2d at 1122. As the Tenth Circuit Court of Appeals has noted, the
relevant factors to consider whether general jurisdiction exists are whether the corporate
defendant is:
1. engaged in business in this state;
2. licensed to do business in this state;
3. owning, leasing, or controlling property (real or personal) or assets in this state;
4. maintaining employees, offices, agents, or bank accounts in this state;
5. present in that shareholders reside in this state;
6. maintaining phone or fax listings within this state;
7. advertising or soliciting business in this state;
8. traveling to this state by way of salespersons, etc.;
9. paying taxes in this state;
10. visiting potential customers in this state;
11. recruiting employees in the state;
12. generating a substantial percentage of its national sales through revenue generated
from in-state customers.
Soma, 196 F.3d at 1295-96, quoting Buddensick v. Stateline Hotel Inc., 972 P.2d 928, 930-31
(Utah Ct.App.1998), cert. denied, 982 P.2d 88 (Utah 1999), cert. denied, 528 U.S. 928, 120 S.Ct.
324, 145 L.Ed.2d 253 (1999). Defendant Brain Swell Media has offered affidavit evidence that
none of these factors apply to it. Plaintiff, however, argues that Defendant is indeed engaged in
business in this state and advertising or soliciting business in this state through its websites. In
Patriot Systems, Inc. v. C-Cubed Corp., 21 F.Supp.2d 1318, 1323-24 (D.Utah 1998), this court
adopted the analysis of several other courts, which “reveals three general categories along a
‘sliding scale’ for evaluating jurisdiction.” Id at 1324. The categories are as follows:
First, personal jurisdiction is established when “a defendant clearly does business over the
Internet,” such as entering into contracts which require the “knowing and repeated
transmission of computer files over the Internet.” Second, exercising personal jurisdiction
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is not appropriate when the Internet use involves “[a] passive Web site that does little
more than make information available to those who are interested in it.” Under these
circumstances, “a defendant has simply posted information on an Internet Web site which
is accessible to users in foreign jurisdictions.” Third, a middle category encompasses
“interactive Web sites where a user can exchange information with the host computer.”
Whether the exercise of jurisdiction is appropriate depends upon “the level of
interactivity and commercial nature of the exchange of information that occurs on the
Web site.”
Id. (quoting Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F.Supp. 1119, 1123-24 (W.D.Pa.1997))
(other quotations omitted); see also Soma, 196 F.3d at 1296 quoting Cybersell, Inc. v. Cybersell,
Inc., 130 F.3d 414, 419 (9th Cir.1997) (noting that “the common thread [in cases involving
jurisdiction via an Internet website], well stated by the district court in Zippo, is that ‘the
likelihood that personal jurisdiction can be constitutionally exercised is directly proportionate to
the nature and quality of commercial activity that an entity conducts over the Internet.’ ”)
(quoting Zippo, 952 F.Supp. at 1124); SF Hotel Co. v. Energy Invs., Inc., 985 F.Supp. 1032,
1034 (D.Kan.1997).
BSM’s websites seem to be best categorized passive. They do little more than make BSM
information available to those who are interested. Although the websites solicit participation in
webinars and newsletters, a party in unable to enter into contractual obligations through the
website or exchange information with the host computer. Thus, this court cannot establish
general jurisdiction over Defendant.
Specific Jurisdiction
“[T]he evaluation of specific jurisdiction in Utah mandates a three-part inquiry: ‘(1) the
defendant's acts or contacts must implicate Utah under the Utah long-arm statute; (2) a ‘nexus'
must exist between the plaintiff's claims and the defendant's acts or contacts; and (3) application

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of the Utah long-arm statute must satisfy the requirements of federal due process.’ ” Soma 196
F.3d at 1297 quoting National Petroleum Mkt'g, Inc. v. Phoenix Fuel Co., 902 F.Supp. 1459,
1465 (D.Utah 1995)(citation omitted).
The applicable portion of Utah’s long-arm statute states:
Any person ... who in person or through an agent does any of the following enumerated
acts, submits himself ... to the jurisdiction of the courts of this state as to any claim
arising out of or related to: (1) the transaction of any business within this state; (2)
contracting to supply services or goods in this state; (3) the causing of any injury within
this state whether tortious or by breach of warranty;
Utah Code Ann. § 78-27-24. The long-arm statute defines the transaction of business as
“activities of a non-resident person, his agents, or representatives in this state which affect
persons or businesses within the state of Utah.” Utah Code Ann. § 78-27-23. The legislature has
expressly stated its intent “to assert jurisdiction over nonresident defendants to the fullest extent
permitted by the due process clause of the Fourteenth Amendment to the United States
Constitution.” Utah Code Ann. § 78-27-22. The Utah Supreme Court “frequently make[s] a due
process analysis first because any set of circumstances that satisfies due process will also satisfy
the long-arm statute.” SII MegaDiamond, Inc. v. American Superabrasives Corp., 969 P.2d 430
(Utah 1998)(citation omitted).
To satisfy due process, a court may exercise specific jurisdiction where 1) the defendant
has purposefully directed its activities toward the forum state or otherwise established contacts
with the forum state, 2) a nexus exists between the plaintiff’s claim and the defendant’s Utah
contacts, and 3) the exercise of personal jurisdiction is reasonable. Burger King Corp. v.

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Rudzewicz, 471 U.S. 462, 477-478 (1985). A lack of physical presence cannot defeat personal
jurisdiction. Id at 477.
BSM has purposefully directed its activities toward Utah and established contacts with
the forum state. BSM knowingly and deliberately entered into a contract with PowerHour.
Oriente Decl. at ¶¶6, 25, 26. Drafts of the contract were exchanged, directed to PowerHour in
Utah, and the terms negotiated through correspondence and telephone calls to PowerHour in
Utah. Id ¶25. The parties entered into an ongoing business relation that lasted for over two years.
Id ¶¶6, 11-24. BSM knew that it was dealing with PowerHour and where PowerHour was
located. Id ¶¶ 11-27. Thus, BSM established the minimum contacts required by the due process
clause of the Fourteenth Amendment.
“The nexus requirement is found ‘only where a non-resident defendant has engaged in
some conduct within the state and the plaintiff's claims against the defendant specifically arise
from that conduct.’” First Mortgage Corp. v. State Street Bank and Trust Co., 173 F. Supp.2d
1167, 1175 (D. Utah 2001) quoting Harnischfeger, 883 F.Supp. at 617-18.
In Patriot Systems, Inc. v. C-Cubed Corp., there was insufficient nexus between Utah
computer software company's claims of tortious business injuries and Virginia competitor's
contacts with Utah as to provide personal jurisdiction over competitor, even though it was
“transacting business” within Utah pursuant to its long-arm statute, since claims did not originate
or “spring from” licensing and royalty agreements between competitor and Utah company; the
court found that the claims actually arose from competitor's unilateral decisions and conduct once
it obtained the platform. 21 F.Supp.2d 1318, 1323-24 (D.Utah 1998). This is similar to the case

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at hand because this suit did not spring from the Defendant’s contacts with Plaintiff, but rather
from its unilateral acts in the fulfillment of their contractual agreement. However, the court finds
that the contacts in the instant case have a nexus with the suit because all of the contacts regarded
the fulfillment of the contract at issue rather than a totally distinct action as in Patriot.
Similarly, in First Mortgage, the court found that a nexus did not exist because the claims
did not arise from any conduct the defendant performed in Utah. 173 F. Supp.2d at 1175. This is
also distinguishable from the case at hand because there were no internet-technology issues in the
First Mortgage case nor were minimum contacts established. In this case, although the alleged
breach of contract did not occur in Utah, its effects were felt in Utah in direct relation to the
contract which was formed through the internet and telephone with Utah residents.
Furthermore, the general jurisdiction analysis from Zippo may be analogized and useful
in this context. “[P]ersonal jurisdiction is established when ‘a defendant clearly does business
over the Internet,’ such as entering into contracts which require the “knowing and repeated
transmission of computer files over the Internet.” Patriot Systems, Inc. v. C-Cubed Corp., 21
F.Supp.2d at1324 (quoting Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F.Supp. 1119, 1123-24
(W.D.Pa.1997)). This is a perfect description of what took place in the instant case. BSM clearly
did business with PowerHour over the internet by entering into a contract via email and
telephone. This contract required knowing and repeated transmission of computer files in order
to build websites and engage in search engine optimization. Although PowerHour does not have
sufficient internet contacts to establish general jurisdiction in the state of Utah, these same types
of contacts with one individual are enough to establish specific jurisdiction as to that internet

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deal. Thus, the court finds the current claim sufficiently springs from BSM’s contacts with Utah
so as to establish specific personal jurisdiction over the defendant BSM.
Furthermore, the exercise of personal jurisdiction in Utah is reasonable and fair to BSM.
It signed a contract to provide services in Utah and maintained a business relationship under that
contract for over two years. BSM does not face any special burden in defending in Utah. It has
already hired counsel here. By its own self-descriptions, it conducts a worldwide business and
offers services throughout the United States. There is no reason to think that South Carolina has
any special interest in litigating this matter there, nor are the majority of the records and
witnesses present in South Carolina. Finally, Utah has an interest in resolving this case here, as
established by the language of the Utah Long-Arm Statute. The denial of jurisdiction on these
grounds is only appropriate where litigation in the forum is so gravely difficult that it puts the
defendant at a severe disadvantage and the court does not find that circumstance to be present
based on the evidence presented. Sher v. Johnson, 911 F.2d 1357, 1365 (9th Cir. 1990).

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CONCLUSION
The motion to dismiss for lack of personal jurisdiction is denied. Exercise of specific
jurisdiction is appropriate in this context. The contacts are substantial and related to the suit
sufficient to establish personal jurisdiction over defendant BSM.
SO ORDERED.

DATED this 4th day of October, 2011.

BY THE COURT:

David Sam
Senior Judge
United States District Court

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