Scheel et al v. Harris et al

Filing 40

MEMORANDUM OPINION. Signed by Judge Norman K. Moon on 6/28/11. (hnw)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF VIRGINIA
CHARLOTTESVILLE DIVISION

STEPHANIE SCHEEL, ET AL.,

CASE NO. 3:11-cv-00018
Plaintiffs,

v.

MEMORANDUM OPINION

STEVE W. HARRIS, ET AL.,
Defendants.

JUDGE NORMAN K. MOON

This matter is before the Court upon Defendant Harris’s Motion to Dismiss or Transfer
(docket no. 2), Defendant Harris’s Rule 12(b)(6) Motion to Dismiss (docket no. 5), Defendant
Brooks’s Motion to Dismiss or Transfer (docket no. 7), and Defendant Brooks’s Rule 12(b)(6)
Motion to Dismiss (docket no. 9). The motions were fully briefed and a hearing was held on
June 22, 2011. Upon consideration of the parties’ arguments, I will grant Harris’s Motion to
Dismiss or Transfer (docket no. 2) and Brooks’s Motion to Dismiss or Transfer (docket no. 7).
Harris’s Rule 12(b)(6) Motion to Dismiss (docket no. 5) and Brooks’s Rule 12(b)(6) Motion to
Dismiss (docket no. 9) will be denied as moot.
I. BACKGROUND
Plaintiffs Stephanie Scheel and MRW Holdings, Inc. (“MRW”) (collectively,
“Plaintiffs”) brought this action for defamation and common law conspiracy against Steve W.
Harris and Gregg Brooks (collectively, “Defendants”) in the Circuit Court for the County of
Albemarle, Virginia, seeking damages, attorney’s fees, and costs. Defendants removed the
action to this Court on the basis of diversity of citizenship. Scheel is a resident of Virginia, and
Harris and Brooks are residents of Kentucky. MRW is a North Carolina corporation of which

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Margaret Ward is the president and sole shareholder. (Compl. ¶9.) MRW, Harris, and Brooks
were members of Worldwide Benefit Services, L.L.C., a North Carolina limited liability
company. (Id. ¶ 10.) The American Institute of Professional Association Group Insurance
Administrators (“AIPAGIA”) “is a professional association of group administrators dedicated to
promoting and policing the business interests of group insurance administrators.” (Id. ¶ 11.)
MRW and Harris are members of AIPAGIA, and Scheel “is the voting representative of MRW
within AIPAGIA.” (Id. ¶ 12.)
On or about March 29, 2010, Harris allegedly sent an “Ethics Complaint” to Woody
Long, who was the Chair of the Ethics Committee of AIPAGIA. (Id. ¶ 13.) As alleged, the
Ethics Complaint consisted of “a package containing statements made by Harris and Brooks, and
letters and emails concerning both MRW and Scheel.” (Id.) Harris and Brooks allegedly
worked together to prepare the Ethics Complaint. (Id. ¶ 18.) Harris and Brooks allegedly knew
that the Ethics Complaint “would be simultaneously transmitted and re-published to the other
members of AIPAGIA’s National Council” and to Scheel and Ms. Ward. (Id. ¶¶ 14, 16.) The
Ethics Complaint “was transmitted and re-published in several states to the members of
AIPAGIA’s National Council” and to Scheel and Ms. Ward. (Id. ¶ 15, 17.) Plaintiffs allege that
the Ethics Complaint contained false statements about Scheel and MRW that were defamatory
and impugned their business reputations. (Id. ¶¶ 19-21.)
Plaintiffs also allege that Harris and Brooks sent several defamatory emails. Harris
allegedly made a defamatory statement “about Plaintiff” in a November 23, 2009 email sent to
Brooks and Long. (Id. ¶ 22.) Harris allegedly made a defamatory statement about Plaintiffs in a
January 8, 2010 email sent to Brooks and Scheel.

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(Id. ¶ 23.)

Brooks allegedly made a

defamatory statement in a November 23, 2009 email sent to Harris, in a January 12, 2010 email
sent to Harris, and in a March 22, 2010 email sent to Harris. (Id. ¶ 41.)
Counts I and II are defamation claims against Harris and Brooks, respectively. Count III
is a claim against both Harris and Brooks for statutory conspiracy under the Virginia Civil
Conspiracy Act, Va. Code Ann. § 18.2-499, et seq., and for common law conspiracy. It alleges
that Harris and Brooks intentionally acted in concert to willfully and maliciously injure the
business reputations of Scheel and MRW. Subsequent to filing this suit, Plaintiffs filed a nearly
identical action in the United States District Court for the Eastern District of Kentucky. See
Scheel v. Harris, No. 3:11-cv-17 (E.D. Ky.). In the instant motions, Defendants object to
personal jurisdiction over them in Virginia, service of process upon them in Kentucky, and venue
in Virginia.1
II. APPLICABLE LAW
A. Federal Rule of Civil Procedure 12(b)(2)
To exercise personal jurisdiction over a nonresident defendant, the plaintiff bears the
burden of making a prima facie showing that jurisdiction is authorized by the language of the
state’s long arm statute and that the exercise of personal jurisdiction would be consistent with
due process under the U.S. Constitution. See Mitrano v. Hawes, 377 F.3d 402, 406 (4th Cir.
2004); English & Smith v. Metzger, 901 F.2d 36, 38 (4th Cir. 1990). “Virginia’s long arm statute
extends personal jurisdiction to the limits allowed by due process.” Mitrano, 377 F.3d at 406. In
pertinent part, Virginia’s long arm statute provides as follows:
A. A court may exercise personal jurisdiction over a person, who
acts directly or by an agent, as to a cause of action arising from the
person’s:
...
1

The service of process objection is subsumed under the question of personal jurisdiction.

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3. Causing tortious injury by an act or omission in this
Commonwealth;
...
B. Using a computer or computer network located in the
Commonwealth shall constitute an act in the Commonwealth. For
purposes of this subsection, “use” and “computer network” shall
have the same meanings as those contained in § 18.2-152.2.
Va. Code Ann. § 8.01-328.1.
The Due Process Clause requires that the defendant “have certain minimum contacts with
[the forum] such that the maintenance of the suit does not offend ‘traditional notions of fair play
and substantial justice.’” Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). There are two
forms of personal jurisdiction: general and specific. Helicopteros Nacionales de Colombia, S.
A. v. Hall, 466 U.S. 408, 414-15 (1984). Where a defendant’s contacts with the forum state
provide the basis for the suit, those contacts may establish specific personal jurisdiction.
Mitrano, 377 F.3d at 407. “The relevant question is not where the contacts predominate, but
only whether enough minimum contacts exist that the district court’s assumption of specific
jurisdiction satisfie[s] due process.” English & Smith, 901 F.2d at 39. But a defendant’s
contacts “must be directed at the forum state in more than a random, fortuitous, or attenuated
way.” ESAB Group, Inc. v. Centricut, Inc., 126 F.3d 617, 625 (4th Cir. 1997) (citing Burger
King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985)). “[W]hen the defendant has intentionally
directed his tortious conduct toward the forum state, knowing that that conduct would cause
harm to a forum resident,” a court may exercise specific personal jurisdiction over a nonresident
defendant acting outside of the forum. Carefirst of Md., Inc. v. Carefirst Pregnancy Ctrs., Inc.,
334 F.3d 390, 398 (4th Cir. 2003) (citing Calder v. Jones, 465 U.S. 783, 789-90 (1984)). The
United States Court of Appeals for the Fourth Circuit has synthesized the due process

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requirements for asserting specific personal jurisdiction in a three part test in which the court
considers “(1) the extent to which the defendant purposefully availed itself of the privilege of
conducting activities in the State; (2) whether the plaintiffs’ claims arise out of those activities
directed at the State; and (3) whether the exercise of personal jurisdiction would be
constitutionally reasonable.” Consulting Eng’rs Corp. v. Geometric Ltd., 561 F.3d 273, 278 (4th
Cir. 2009).
In support of Defendants’ motions to dismiss for lack of personal jurisdiction and
improper venue, Defendants attached as exhibits to their motions affidavits as well as court
documents and the docket sheet from the Eastern District of Kentucky proceeding. To support
Plaintiffs’ opposition to the motions to dismiss for lack of personal jurisdiction and improper
venue, Plaintiffs attached an affidavit and copies of several emails. The court may consider
materials submitted outside the pleadings without converting the motion to one for summary
judgment as long as the materials are not submitted to support a motion to dismiss pursuant to
Rule 12(b)(6) or a motion for judgment on the pleadings pursuant to Rule 12(c). Fed. R. Civ.
P. 12(d). Furthermore, “a court may consider official public records, documents central to
plaintiff’s claim, and documents sufficiently referred to in the complaint so long as the
authenticity of these documents is not disputed.” Witthohn v. Fed. Ins. Co., 164 Fed. App’x 395,
396 (4th Cir. 2006) (unpublished); see also Gasner v. County of Dinwiddie, 162 F.R.D. 280, 282
(E.D. Va. 1995) (permitting district court to take judicial notice of public documents, such as
court records, even when the documents were neither referenced by nor integral to plaintiff’s
complaint).

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B. Federal Rule of Civil Procedure 12(b)(3)
Venue lies in “a judicial district in which a substantial part of the events or omissions
giving rise to the claim occurred.” 28 U.S.C. § 1391(a)(2). When venue is challenged, the
plaintiff has the burden to prove that venue is proper in the chosen forum for each defendant.
See United Coal Co. v. Land Use Corp., 575 F. Supp. 1148, 1158 (W.D. Va. 1983). “The district
court of a district in which is filed a case laying venue in the wrong division or district shall
dismiss, or if it be in the interest of justice, transfer such case to any district or division in which
it could have been brought.” 28 U.S.C. § 1406(a). Even where venue is proper, “a district court
may transfer any civil action to any other district or division where it might have been brought”
if such transfer is for the convenience of the parties and witnesses and in the interest of justice.
28 U.S.C. § 1404(a).
C. Federal Rule of Civil Procedure 12(b)(6)
A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the legal
sufficiency of a complaint to determine whether the plaintiff has properly stated a claim; “it does
not resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.”
Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992). In considering a Rule
12(b)(6) motion, a court must accept all factual allegations in the complaint as true and must
draw all reasonable inferences in favor of the plaintiff. Erickson v. Pardus, 551 U.S. 89, 94
(2007). Legal conclusions in the guise of factual allegations, however, are not entitled to a
presumption of truth. Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950-51 (2009). Although a complaint
“does not need detailed factual allegations, a plaintiff’s obligation to provide the grounds of his
entitle[ment] to relief requires more than labels and conclusions, and a formulaic recitation of a
cause of action’s elements will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)

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(citations and quotations omitted). “Factual allegations must be enough to raise a right to relief
above the speculative level,” id., with all the allegations in the complaint taken as true and all
reasonable inferences drawn in the plaintiff’s favor, Chao v. Rivendell Woods, Inc., 415 F.3d
342, 346 (4th Cir. 2005). In sum, Rule 12(b)(6) does “not require heightened fact pleading of
specifics, but only enough facts to state a claim to relief that is plausible on its face.” Twombly,
550 U.S. at 570. Consequently, “only a complaint that states a plausible claim for relief survives
a motion to dismiss.” Iqbal, 129 S. Ct. at 1950.
III. DISCUSSION
To exercise personal jurisdiction over Harris and Brooks, Virginia’s long arm statute
must reach them, and the constitutional minimum contacts requirement must be satisfied. To
establish personal jurisdiction, Plaintiffs rest on the transmission of some of the allegedly
defamatory emails through AOL servers located within Virginia to Scheel’s AOL email address.
According

to

Scheel’s

affidavit,

Scheel

maintains

the

AOL

email

address

of

“[e-mail],” and it was through this email address that she received “some” of the
allegedly defamatory emails. (Scheel Aff. ¶ 2, May 11, 2011.) Scheel states that it is “[m]y
understanding, based on my billing statements and other information, [] that the AOL servers
through which my AOL email account ran are located in Virginia.” (Scheel Aff. ¶ 3.) Plaintiffs
argue that the passage of the emails sent by Defendants to Scheel’s AOL email address through
AOL servers located in Virginia constituted use of “a computer or computer network located in
the Commonwealth” for the purposes of § 8.01-328.1(B). The term “use” under § 8.01-328.1(B)
has the same meaning as under the Virginia Computer Crimes Act, Va. Code Ann. § 18.2-152.1
et seq. That statute provides that a person uses a computer or computer network “when he
attempts to cause or causes a computer or computer network to perform or to stop performing

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computer operations.” Va. Code Ann. § 18.2-152.2. A “computer network” means “two or
more computers connected by a network.” Id. The transmission of an email from one computer
to another computer through AOL servers located in Virginia is considered “use” of a computer
or computer network. See Jaynes v. Commonwealth, 276 Va. 443, 451-53, 666 S.E.2d 303, 30708 (2008). Pursuant to § 8.01-328.1(B), if Defendants used a computer or computer network in
Virginia, then that use constituted an act in Virginia. Plaintiffs maintain that the act of emailing
the allegedly defamatory statements to Scheel caused tortious injury for the purposes of § 8.01328.1(A)(3).
Even if I assume, for the sake of argument, that the emails were routed through servers
located in Virginia, and the transmission of the emails is considered use of a computer network,
Plaintiffs still cannot show that this act caused tortious injury.

Under either Virginia or

Kentucky law, defamation requires publication of a defamatory statement to a third party. Food
Lion, Inc. v. Melton, 250 Va. 144, 150, 458 S.E.2d 580, 584 (1995) (citing Montgomery Ward &
Co. v. Nance, 165 Va. 363, 378, 182 S.E. 264, 269 (1935) and Snyder v. Fatherly, 158 Va. 335,
350, 163 S.E. 358, 364 (1932)); Stringer v. Wal-Mart Stores, Inc., 151 S.W.3d 781, 793-94 (Ky.
2004). A third party is someone other than the party defamed. Stringer, 151 S.W.3d at 794.
Without satisfaction of the publication element, the tort is not actionable. Thus, the statements
contained in the emails sent by Defendants to Scheel are not actionable as defamation without
communication of the statements to a third party. The delivery route taken by the emails
directed to the email recipients other than Scheel is the route that supposedly caused tortious
injury. If there were third-party recipients of the emails, they were not located in Virginia, and
there is no claim that the emails directed to third-party recipients involved use of a computer or
computer network in Virginia. Identical copies of the allegedly defamatory statements were sent

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by Defendants to multiple parties via email; the fact that the copy sent to Scheel—the defamed
party—was processed through AOL servers located in Virginia and received at a Virginia-based
email account is not material to the tortious act.
In Bochan v. La Fontaine, the court was tasked with deciding whether defendants
residing in Texas who posted purportedly defamatory statements via the Virginia-based AOL
service to an online bulletin board committed an act in Virginia causing tortious injury sufficient
to enable the court to exercise personal jurisdiction in Virginia. 68 F. Supp. 2d 692, 698-99
(E.D. Va. 1999). After reviewing pertinent case law, the court summarized that the focus of the
jurisdictional inquiry should be placed “on the location of the Internet service provider or the
server on which the bulletin board is stored and the role played by this service or hardware in
facilitating the alleged tort.” Id. at 699 (emphasis added). The court concluded that the plaintiff
had made a prima facie showing of personal jurisdiction under § 8.01-328.1(A)(3) because
publication of the allegedly defamatory statements occurred in Virginia, and publication is a
required element of defamation, and use of an AOL server located in Virginia was integral to
that publication. Id. Applying the guidance set forth in Bochan to the present matter, the AOL
servers played no role in facilitating the publication of the allegedly defamatory statements
because they only aided the defamed party in receiving the statements. The AOL servers were
not integral to the tort otherwise.
Nor is the ALS Scan, Inc. v. Digital Service Consultants, Inc. model for determining
personal jurisdiction based on Internet activity satisfied. 293 F.3d 707 (4th Cir. 2002). In ALS
Scan, it was found that a state may, consistent with due process, exercise judicial power over a
person outside of the state “when that person (1) directs electronic activity into the State, (2) with
the manifested intent of engaging in business or other interactions within the State, and (3) that

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activity creates, in a person within the State, a potential cause of action cognizable in the State’s
courts.” Id. at 714. The electronic activity directed into Virginia is the emails sent to Scheel, but
that activity did not create a potential cause of action in Scheel. If a cause of action for
defamation and statutory and common law conspiracy exists, it was the emails containing
statements about Scheel and MRW that were sent to third parties that created it. For these
reasons, no basis exists under the long arm statute to exercise personal jurisdiction over
Defendants in Virginia, and the requirement of constitutional due process is not met. The action
must be dismissed.
The chosen venue is also improper. The only question is whether a substantial part of the
events giving rise to the claims occurred in Virginia. As with personal jurisdiction, the only
connection with Virginia claimed by Plaintiffs is the use of the Virginia-based AOL servers to
deliver the supposedly defamatory statements to Scheel. Having found that the particular emails
sent to Scheel did not give rise to the claims, Plaintiffs cannot meet their burden to show venue is
proper. See United Coal, 575 F. Supp. at 1158. Plaintiffs have not directed me to any other
events giving rise to the claims that occurred in Virginia. Both Harris and Brooks are citizens
and residents of Kentucky. Long, to whom the Ethics Complaint was transmitted, was located in
Kentucky. The other members of AIPAGIA’s National Council, to whom the Ethics Complaint
allegedly was republished, were located in states other than Virginia.

The action will be

dismissed for improper venue as well.
IV. CONCLUSION
For the reasons stated herein, I will grant Harris’s Motion to Dismiss or Transfer (docket
no. 2) and Brooks’s Motion to Dismiss or Transfer (docket no. 7). I will deny as moot Harris’s

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Rule 12(b)(6) Motion to Dismiss (docket no. 5) and Brooks’s Rule 12(b)(6) Motion to Dismiss
(docket no. 9). An appropriate order will follow.
The Clerk of the Court is hereby directed to send a certified copy of this Memorandum
Opinion and the accompanying Order to all counsel of record.
28th
Entered this ________ day of June, 2011.

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