Opinion
Civil No. JFM-08-2061.
December 31, 2008
MEMORANDUM
Plaintiff Sandler System, Inc. ("Sandler") has brought suit against Terry Slattery ("Slattery"), the Slattery Sales Group ("Slattery Sales"), Roxanne Emmerich, The Emmerich Group, Inc., and Banner Press, LLC, alleging copyright infringement (Count II), trademark infringement (Count III), unfair competition, reverse passing off, and false advertising (Count IV), all arising from the defendants' alleged use, reproduction, and dissemination of Plaintiff's copyrighted sales strategy program, known as the "Sandler Selling System," and trademarks associated with the program. As to Defendants Slattery and Slattery Sales Group, Plaintiff also claims breach of contract resulting from Slattery's alleged violation of a Consent Decree (Count I). Plaintiff brings an aiding and abetting count against Defendants Emmerich and The Emmerich Group (Count V).
Defendants Emmerich and The Emmerich Group (collectively "the Emmerich defendants") move to dismiss for lack of personal jurisdiction and improper venue. Alternatively, the Emmerich defendants request transfer to the District of Minnesota.
Defendants Slattery and Slattery Sales move for dismissal of Counts I and II for lack of personal jurisdiction and improper venue, or, in the alternative, for transfer of these counts to the District of Minnesota.
All defendants move for dismissal of Counts III and IV for failure to state a claim upon which relief may be granted.
For the reasons stated below, this court finds that it cannot exercise personal jurisdiction over the Emmerich defendants. Given this court's lack of personal jurisdiction over the Emmerich defendants, Plaintiff has requested that the action be transferred as to all defendants to the District of Minnesota, so that Plaintiff can proceed with the entire case in one venue. Therefore, I will grant Defendants' motions to transfer, and the claims against all defendants are transferred to the District of Minnesota pursuant to 28 U.S.C. § 1406(a).
Because I transfer all counts to the District of Minnesota, I need not consider Defendants' motions to dismiss for failure to state a claim.
I.
Plaintiff Sandler Systems was incorporated in Maryland in 1983 by the late David H. Sandler, who created a sales strategy and educational program known as the Sandler Selling System. Sandler Systems operates and franchises the Sandler Selling System.Defendant Terry Slattery is a resident of Minnesota and the owner and President of Slattery Sales Group. Slattery Sales Group, a Minnesota corporation with its principal place of business in Minnesota, provides sales training to executives and organizations.
Slattery was a Sandler franchisee from 1987 through 1998. In 1997, Slattery filed suit against Sandler Systems in the District of Minnesota, based on a dispute over ownership and use of the Mark "Wimp Junction." The action was transferred to the District of Maryland on November 2, 1998.
In May 1999, the lawsuit was resolved in a Consent Decree, under which the parties agreed to share ownership of the Mark. (Compl., Ex. A ¶ 3.) Under the section "Binding Nature," the decree reads: "all references to Slattery shall apply equally to Slattery's heirs and personal representatives and to all officers, directors, shareholders, successors and assigns of any entity of which Slattery owns 50% or more of the voting interests and uses the Prospect's Buying System." ( Id. ¶ 15.)
Defendant Roxanne Emmerich is a resident of Minnesota and the owner and President of The Emmerich Group. The Emmerich Group, a Minnesota corporation with its principal place of business in Minnesota, assists financial institutions with, in part, sales training. (Emmerich Aff. ¶ 2.) The company has nine employees, all residents of Minnesota. ( Id. ¶ 4.)
The Emmerich defendants were not parties to the Consent Decree. It is undisputed that Emmerich has never lived in Maryland. It is further undisputed that the Emmerich defendants do not have offices, real property, assets, bank accounts, or agents in Maryland. They have never obtained any form of Maryland licensure, advertised in Maryland media, or registered to conduct business in Maryland. (Emmerich Aff. ¶¶ 8, 10.) Emmerich has one client in Maryland, but Plaintiff does not allege any connection between the Maryland client and the instant case. ( Id. ¶ 9.) Emmerich operates a website from which the allegedly infringing book can be purchased. (Compl. ¶ 11.)
The instant action arises from Defendants' co-authorship and publication of a book entitled Profit-Rich Sales, which allegedly wrongfully uses the Mark "Wimp Junction" (the subject of the Consent Decree) and the "entire Sandler Selling System as it is recognized and described in the Training Materials." (Compl. ¶¶ 35, 36.) Plaintiff claims that two other products published by Defendants, Essential Questions (CD and Workbook) and Marketing and Sales Management Boot Camp, "also infringe Sandler's Intellectual Property." ( Id. ¶ 40.) Plaintiff further alleges that "Defendant Slattery is conducting sales training workshops using Sandler Intellectual Property." ( Id. ¶ 39.)
II.
Plaintiff Sandler Systems bears the burden of showing that this court has personal jurisdiction over each defendant. Combs v. Bakker, 886 F.2d 673, 676 (4th Cir. 1989). Because I am ruling on the basis of the motions papers alone, Plaintiff need make only a prima facie showing of personal jurisdiction. Id.; Carefirst of Maryland, Inc. v. Carefirst Pregnancy Ctrs., Inc., 334 F.3d 390, 396 (4th Cir. 2003). In deciding whether a plaintiff has met this burden, "the court must construe all relevant pleading allegations in the light most favorable to the plaintiff, assume credibility, and draw the most favorable inferences for the existence of jurisdiction." Combs, 886 F.2d at 676.
There are two approaches to personal jurisdiction: general jurisdiction and specific jurisdiction based on contacts which provide the basis for the suit. Carefirst, 334 F.3d at 397; ALS Scan, Inc. v. Digital Serv. Consultants, Inc., 293 F.3d 707, 711-12 (4th Cir. 2002).
General jurisdiction arises "from the defendant's general, more persistent, but unrelated contacts with the State." ALS Scan, 293 F.3d at 712. The defendant's activities in Maryland "must have been `continuous and systematic.'" Id.
Sandler argues that the Emmerich defendants are subject to general jurisdiction because they are subject to the Consent Decree entered into in the District of Maryland. (Pl.'s Response to Emmerich Defs. 3.) I disagree. Even if the Emmerich defendants were parties to the consent decree, which, as discussed below, they were not, this does not amount to "continuous and systematic" contact with Maryland. Emmerich has one business client in Maryland unrelated to the instant action; this too does not approach what is needed for an exercise of general jurisdiction. See Robbins v. Yutopian Enters., Inc., 202 F. Supp. 2d 426 (D. Md. 2002) (finding no general jurisdiction where defendant conducted forty-six transactions with Maryland residents in less than one year).
Specific jurisdiction may be established by a defendant's contacts with the State that also form the basis for the suit. See ALS Scan, 293 F.3d at 712. Two conditions must be satisfied: "(1) the exercise of jurisdiction must be authorized under the state's long-arm statute; and (2) the exercise of jurisdiction must comport with the due process requirements of the Fourteenth Amendment." Carefirst, 334 F.3d at 396. The "reach of the [Maryland long-arm] statute is as far as due process permits," Mackey v. Compass Mktg., Inc., 892 A.2d 479, 493 n. 5 (Md. 2006), such that the statutory analysis and constitutional inquiry merge into one. Beyond Systems, Inc. v. Realtime Gaming Holding Co., 878 A.2d 567, 580 (Md. 2005); see also Carefirst, 334 F.3d at 396-97 ("Thus, our statutory inquiry merges with our constitutional inquiry."). The Maryland Court of Appeals has clarified that courts may not "simply dispense with analysis under the longarm statute," but must "interpret the long-arm statute to the limits permitted by the Due Process Clause when [it can be done] consistently with the canons of statutory construction." Mackey, 892 A.2d at 493 n. 6.
Maryland's long-arm statute provides in pertinent part:
(b) A court may exercise personal jurisdiction over a person, who directly or by an agent:
(1) Transacts any business or performs any character of work or service in the State;
(2) Contracts to supply goods, food, services, or manufactured products in the State;
(3) Causes tortious injury in the State by an act or omission in the State;
(4) Causes tortious injury in the State or outside of the State by an act or omission outside the State if he regularly does or solicits business, engages in any other persistent course of conduct in the State or derives substantial revenue from goods, food, services, or manufactured products used or consumed in the State.
Md. Code Ann., Cts. Jud. Proc. § 6-103.
Plaintiff alleges specific jurisdiction over the Emmerich defendants under subsections (1) and (4). (Compl. ¶ 11.) Plaintiff relies on two Maryland contacts related to the instant case: 1) the 1999 Consent Decree, and 2) Emmerich's operation of a website selling the allegedly infringing work. I discuss each in turn.
The Emmerich defendants were not parties to the Consent Decree. However, Plaintiff alleges that the Consent Decree "extends to and incorporates Emmerich by reference" through the following language found under the section entitled "Binding Nature": "[A]ll references to Slattery shall apply equally to Slattery's heirs and personal representatives and to all officers, directors, shareholders, successors and assigns of any entity of which Slattery owns 50% or more of the voting interests and uses the Prospect's Buying System." (Compl., Ex. A ¶ 15.) According to Plaintiff, the Emmerich defendants are "assigns" of an entity owned by Slattery due to Emmerich's co-authorship of the allegedly infringing book.
An assign is defined as "[o]ne to whom property rights or powers are transferred by another." Black's Law Dictionary (8th ed. 2004) (definition of "assignee"); see also Restatement (Second) of Contracts § 317(1) (1981) ("An assignment of a right is a manifestation of the assignor's intention to transfer it by virtue of which the assignor's right to performance by the obligor is extinguished in whole or in part and the assignee acquires a right to such performance."). Even construing all allegations in the light most favorable to Plaintiff, Plaintiff does not allege that Sandler transferred any property rights or powers of any entity owned by him to the Emmerich defendants. Therefore, the Consent Decree does not support specific jurisdiction over the Emmerich defendants.
Plaintiff next argues that the mere fact that Emmerich's website sells the allegedly infringing work constitutes transacting business in Maryland and engaging in a persistent course of conduct in Maryland. This argument is unpersuasive.
The Fourth Circuit has adopted the Zippo "sliding scale" model for Internet-based specific jurisdiction. See Carefirst, 334 F.3d at 399. This model distinguishes between three kinds of websites: (1) passive websites, which merely make information available online, (2) interactive websites, on which a defendant "`enters into contracts with residents of a foreign jurisdiction that involve the knowing and repeated transmission of computer files over the Internet,'" and (3) semi-interactive websites, where users can exchange information with the website but "through which there have not yet occurred a high volume of transactions between the defendant and residents of the foreign jurisdiction." Id. ( quoting Zippo Manufacturing Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119, 1124 (W.D. Pa. 1997)). For semi-interactive websites, "`the exercise of jurisdiction is determined by examining the level of interactivity and commercial nature of the exchange of information that occurs.'" Id. ( quoting Zippo, 952 F. Supp. at 1124). In adopting the Zippo model, the Fourth Circuit concluded 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 activity creates, in a person within the State, a potential cause of action cognizable in the State's courts.ALS Scan, 293 F.3d at 714. Under the Zippo standard, "a person who simply places information on the Internet does not subject himself to jurisdiction in each State into which the electronic signal is transmitted and received." Id.
Plaintiff asserts that jurisdiction exists simply because Emmerich "clearly does business over the Internet." (Pl.'s Response to Emmerich Def.'s Mot. to Dismiss 6.) This contention is insufficient to establish personal jurisdiction. Plaintiff does not allege that the Emmerich defendants intentionally targeted Maryland residents on the website or directed electronic activity into Maryland with the manifest intent of engaging in business within Maryland. See Carefirst, 334 F.3d at 399-401; ALS Scan, 293 F.3d at 714-15; Elec. Broking Servs., Ltd. v. EBusiness Solutions Servs., 285 F. Supp. 2d 686, 691 (D. Md. 2003). Nor does Plaintiff allege that anyone in Maryland has even placed an order on Emmerich's website. See id. As the Fourth Circuit stated,
If we were to conclude as a general principle that a person's act of placing information on the Internet subjects that person to personal jurisdiction in each State in which the information is accessed, then the defense of personal jurisdiction, in the sense that a State has geographically limited judicial power, would no longer exist. The person placing information on the Internet would be subject to personal jurisdiction in every State.ALS Scan, 293 F.3d at 712. Finding personal jurisdiction based on the ability of Internet users anywhere in the world, including Maryland, to view Emmerich's website and potentially place an order for the allegedly infringing work, particularly in the absence of any showing that any person in Maryland has ever done so, does not comport with "traditional notions of fair play and substantial justice." Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). In sum, sufficient contacts do not exist to provide personal jurisdiction in Maryland over the Emmerich defendants.
For these reasons, this action as to all Defendants will be transferred to the United States District Court for District of Minnesota. A separate order to that effect is being entered herewith.