Tuesday, November 14, 2017

Mass. SJC remands internet jurisdiction, defamation case


The Massachusetts Supreme Judicial Court (SJC) last week remanded an internet jurisdiction case because the lower court jumped to constitutional due process arguments without first applying the state long-arm jurisdiction statute.  The case, replete with fun Internet trade names, highlights the limits of Massachusetts long-arm jurisdiction relative to the global growth in jurisdictional reach in online commerce.

SCVNGR, Inc., doing business as "LevelUp," is a Delaware-incorporated, Boston-headquartered tech company that works with customers through an app to promote participating restaurants with deals and a special payment system.  Punchh is a Delaware-incorporated, California-headquartered company with a similar business model.  Punchh works with customers in Massachusetts and with restaurants with Massachusetts locations, but Punchh denies any physical tie to Massachusetts.

At one time, LevelUp and Punchh entered into an agreement to work together.  But according to LevelUp, Punchh then bad-mouthed LevelUp to LevelUp clients.  LevelUp terminated their agreement, but the allegations state, the bad-mouthing didn't stop.  LevelUp sued in Massachusetts superior court on theories including defamation, trade defamation, tortious interference, and statutory unfair competition.  Punchh disputed personal jurisdiction.

The trial court dismissed for want of personal jurisdiction on federal constitutional due process grounds.  The trial court declined to apply the state long-arm statute because, the court explained, the parties had only argued due process.  LevelUp appealed, and the SJC transferred the case from the appeals court sua sponte.  Notwithstanding the trial court's dispositive conclusion on due process, the SJC opined, it was reversible error not to analyze the state long-arm law first.  That is to say, it was reversible error not to have observed the doctrine of constitutional avoidance.

The Massachusetts long-arm statute is not the typical sort that U.S. law students read about in civil procedure, defining state personal jurisdiction as maximally co-extensive with the limits of constitutional due process.  Rather, Massachusetts constrains long-arm jurisdiction to eight scenarios:

  • (a) transacting any business in this commonwealth;
  • (b) contracting to supply services or things in this commonwealth;
  • (c) causing tortious injury by an act or omission in this commonwealth;
  • (d) causing tortious injury in this commonwealth by an act or omission outside this commonwealth if he regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in this commonwealth;
  • (e) having an interest in, using or possessing real property in this commonwealth;
  • (f) contracting to insure any person, property or risk located within this commonwealth at the time of contracting;
  • (g) maintaining a domicile in this commonwealth while a party to a personal or marital relationship out of which arises a claim for divorce, alimony, property settlement, parentage of a child, child support or child custody; or the commission of any act giving rise to such a claim; or
  • (h) having been subject to the exercise of personal jurisdiction of a court of the commonwealth which has resulted in an order of alimony, custody, child support or property settlement, [in certain modification or enforcement proceedings].

Certainly the statute affords plenty of room to argue still over the bounds of due process.  But the terms of a statute may be subject to limiting construction.

The SJC declined to hint at the appropriate outcome under the statute, bemoaning an incomplete record.  However, the Court observed that the first four provisions of the statute, paragraphs (a) to (d), might be in play.  In a footnote, the Court recalled Calder v. Jones, 465 U.S. 783 (1984) (Justia), in which the U.S. Supreme Court allowed California jurisdiction over a non-resident defamation defendant because the defendant was alleged to have calculated its libel to cause injury in California.  As the SJC moreover observed, the U.S. Supreme Court later limited Calder in Walden v. Fiore, 134 S. Ct. 1115 (2014) (Justia), finding "minimum contacts" wanting when a non-resident's "allegedly unlawful seizure of money elsewhere caused harm to plaintiffs living in Nevada."

The Calder-Walden dichotomy, played out in a defamation context such as SCVNGR v. Punchh, serves as reminder that the United States has rather a dearth of case law in the area of long-arm Internet jurisdiction.  After the earth-rattling assertion of jurisdiction by the High Court of Australia in Dow Jones v. Gutnick in 2002, observers such as me should be forgiven for expecting that we would have moved the ball forward a good bit more in 15 years.  Internet jurisdiction remains a turbulent battlefield in lower domestic courts both here and around the world.

The case is SCVNGR, Inc. v. Punchh, Inc., No. SJC-12297 (Mass. Nov. 8, 2017).

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