MARK D. CLARKE, Magistrate Judge.
Plaintiffs Orbital Publishing Group, Inc. ("Orbital") and Liberty Publishers Service, Inc. ("Liberty") allege Defendants Bridget Wells ("Wells") and Periodical Watchguard, LLC ("Periodical Watchguard") tortiously interfered with their magazine subscription business by disseminating false and harmful information about their business practices to magazine publishers, banks, and governmental agencies across the country. Currently before the court is Defendants' Motion to Dismiss (#9) and their related Request for Judicial Notice (#12). For the reasons set forth below, both should be GRANTED.
The following allegations come from Plaintiffs' Complaint (#1). For the limited purpose of ruling on Defendants' motion to dismiss, the Court assumes these allegations are true and draws all reasonable inferences in Plaintiffs' favor.
Plaintiffs are former independent magazine subscription agents who marketed and sold magazine subscriptions to consumers through direct mail. Compl. ¶¶ 1, 12. Orbital was incorporated in New York and started doing business in 2010. Compl. ¶ 2. It had places of business in Reno, Nevada and Medford, Oregon. Compl. ¶ 2. Orbital ceased operations in 2012 because it could not maintain banking relationships in Oregon. Compl. ¶ 2. Liberty, a New York corporation, took over business once Orbital ceased operations. Compl. ¶ 3. It had a place of business in Medford, Oregon. Compl. ¶ 3. Liberty stopped doing business in 2014 because it could not maintain banking relationships in Oregon. Compl. ¶ 3.
Wells is an individual who resides in Mint Hill, North Carolina. Compl. ¶ 4. Wells founded Periodical Watchguard in 2006. Compl. ¶ 5. Periodical Watchguard is a North Carolina limited liability company that was purportedly established to help publishers identify fraudulent sales and educate consumers on scams. Compl. ¶¶ 5-6.
In 2010, Wells and Periodical Watchguard initiated a campaign to disparage Plaintiffs and divert their business to entities in which Wells had an interest. Compl. ¶¶ 18-19. They falsely informed publishers, banks, state attorney generals, and other government agencies that Plaintiffs were defrauding consumers. Compl. ¶¶ 10, 18. Periodical Watchguard's website identified Orbital as a "rogue seller" engaged in a direct mail scam. Compl. ¶ 21. Wells encouraged publishers to take steps to ensure their magazines were not sold through Plaintiffs. Compl. ¶ 22. She noted that Plaintiffs' solicitations generally come from White City, Oregon, where two clearing firms used by Plaintiffs are located. Compl. ¶ 21. In January 2015, Wells conducted a seminar in New York City, entitled "Fraud/Bogus Renewal/Unauthorized Sellers: Lunch with an Expert," where she repeatedly referred to Plaintiffs as frauds. Compl. ¶¶ 25-27. Wells advised attendees to contact the U.S. Postal Service to put an end to Plaintiffs' purported mail fraud. Compl. ¶ 29. She also encouraged them to notify their Attorney Generals if they received a solicitation from Plaintiffs and to avoid doing business with companies associated with Plaintiffs. Compl. ¶¶ 30-31.
At Wells' urging, Attorney Generals across the country received baseless complaints about Plaintiffs. Compl. ¶ 39. Wells personally contacted multiple Attorney Generals about Plaintiffs' business practices. Compl. ¶ 40. The Attorney Generals opened investigations into Plaintiffs and companies with whom they do business. Compl. ¶ 43. These investigations adversely affected Plaintiffs' business relationships. Compl. ¶ 45.
Wells contacted Plaintiffs' banks and incorrectly informed them that Plaintiffs were laundering money and defrauding customers. Compl. ¶ 47. She encouraged others to contact Plaintiffs' banks with claims of fraud as well. Compl. ¶ 48. As a result of Wells' conduct and incitement, the banks terminated Plaintiffs' accounts. Compl. ¶ 51.
The parties submitted the following evidence to assist the Court in its jurisdictional analysis.
Plaintiffs submit evidence that Defendants reached into Oregon in the following ways. First, Wells testified telephonically in a Jackson County Circuit Court case involving Customer Access Services, Inc. Lennon Decl. Ex. D. Plaintiffs identify Customer Access Services as one of their vendors but provide no evidentiary support for this association. Second, Defendants sent cease and desist letters to Oregon. Lennon Decl. Ex. F; Wells Decl. ¶ 5. Specifically, on September 18, 2014, Wells sent a letter to Orbital's P.O. Box in White City, Oregon. Writing on behalf of a publisher, Wells demanded that Orbital "immediately cease and desist from all solicitations using [the publisher's] brands[.]" Lennon Decl., Ex F., at 4. Third, Plaintiffs allege that Defendants corresponded with Plaintiffs' Oregon-based banks. Plaintiffs do not offer any evidence of these contacts. Nor do they identify what specific banks are at issue. In response, Wells declares that "to the best of [her] knowledge, [she has] never contacted an Oregon bank about Plaintiffs." Wells Decl. ¶ 5.
Finally, Wells corresponded with the Oregon Department of Justice (the "DOJ"). Beginning in 2013, Wells forwarded the DOJ's Chief Financial Fraud Investigator, Geoffery Darling, copies of cease and desist letters; a copy of a presentation she gave in New York about Plaintiffs; and e-mail chains between Defendants, clearinghouses, and publishers discussing possible fraudulent activity. Lennon Decl. Ex. E, at 1-34, 43-60. She also introduced Darling to a retired U.S. Postal Inspector who worked with Defendants on an investigation of Plaintiffs in Nevada, and representatives of publishers and fulfillment houses with concerns about Plaintiffs' practices. Lennon Decl. Ex. E, at 35-39, 42. She updated Darling on cases involving or affecting Plaintiffs. Lennon Decl. Ex. E, at 40. Wells also spoke with DOJ representatives over the phone about its investigation of Plaintiffs. Wells Decl. ¶ 6. In 2015, Wells agreed to testify as an expert witness in the DOJ's civil racketeering case against Plaintiffs. Wells Decl. ¶ 6. However, the case never went to trial. Wells Decl. ¶ 6. Instead, Plaintiffs settled with the DOJ: agreeing to pay over $3 million, create a restitution fund, and be "permanently prohibited" from "engaging in the magazine or newspaper subscription business." Supp. Kalmanson Decl. Ex. 1, at 12-19.
Federal courts may exercise personal jurisdiction over a non-resident defendant where the state's long-arm statute confers jurisdiction over the defendant and the exercise of jurisdiction does not violate due process.
As a threshold matter, Defendants ask (#12) the court take judicial notice of complaints filed against Plaintiffs by the states of Oregon, New York, Texas, Wisconsin, and Minnesota. Plaintiffs do not oppose Defendants' request. Under Federal Rule of Evidence 201(b)(2), this court "may judicially notice a fact that is not subject to reasonable dispute because it ... can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Because the authenticity of the submitted complaints is "beyond reasonable controversy[,]" the court should grant Defendant's request for judicial notice.
Turning to the substance of the present motion, Defendants identify multiple alleged defects in Plaintiffs' suit. They move to dismiss (1) for lack of personal jurisdiction; (2) for improper venue
Due process requires a court to have general or specific jurisdiction over a defendant to avoid "offend[ing] traditional notions of fair play and substantial justice."
In the context of tort cases like this one, courts of the Ninth Circuit employ a three-part "effects" test to determine whether the first prong of the "minimum contacts" test is satisfied.
Here, Plaintiffs contend that Defendants purposefully availed themselves of Oregon's jurisdiction by: (1) testifying telephonically in a Jackson County Circuit Court case; (2) sending cease and desist letters to White City, Oregon; (3) corresponding with Plaintiffs Oregon-based banks; and (4) corresponding with the forum state's DOJ. The Court will apply the "effects" test to each alleged contact in turn.
First, Plaintiffs argue that Defendants purposefully availed themselves of Oregon's jurisdiction when Wells provided expert testimony over the telephone in a Jackson County Circuit Court case involving one of Plaintiffs' vendors, Customer Access Services Inc. Wells has submitted a declaration stating that "the case did not involve these Plaintiffs." Wells Decl. ¶ 5. However, Plaintiffs point out multiple references to their business in the record. For instance, Wells testified that some consumers never received the magazines they purchased through Orbital. Lennon Decl. Ex. D, at 9.
The Court should find Wells' testimony insufficient to sustain jurisdiction for two reasons. First and foremost, Wells' testimony is absolutely privileged under Oregon law.
Next, Plaintiffs contend that Defendants purposefully availed themselves of jurisdiction in Oregon by mailing cease and desist letters into the state. "A cease and desist letter is not in and of itself sufficient to establish personal jurisdiction over the sender of the letter."
The Court notes that cease and desist letters facilitate dispute resolution outside of court. "There are strong policy reasons to encourage [them.]"
Third, Defendants challenge Plaintiffs' allegation that Wells purposefully availed herself of the forum state by contacting Plaintiffs' Oregon financial institutions. Wells has submitted a declaration stating "to the best of [her] knowledge, [she has] never contacted an Oregon bank about Plaintiffs." Wells Decl. ¶ 5. The party asserting jurisdiction bears the burden of establishing challenged jurisdictional facts.
Finally, Plaintiffs claim that Defendants purposely availed themselves of the forum state by corresponding with the Oregon DOJ. These communications satisfy the three prongs of Calder's "effects" test. There is no dispute that Defendants intended to e-mail and call the DOJ. These communications were directed at Oregon. They related to Defendants' business practices in the forum state and were made to the state's DOJ.
Defendants argue the Supreme Court's recent decision in
Having determined that Defendants purposefully availed themselves of the forum state, the Court turns to the second prong of the "minimum contacts" test. In order to secure personal jurisdiction, "the plaintiff's claim must be one which arises out of or relates to the defendant's forum-related activities."
Reading Plaintiffs' Complaint together with their jurisdictional evidence, and taking all uncontroverted allegations as true, it is reasonable to assume that Plaintiffs' business in Oregon would have continued but-for Defendants' allegedly deceptive correspondence with the DOJ. See
Finally, the Court must determine whether it would be reasonable to exert personal jurisdiction over Defendants. In doing so, the Court will presume reasonableness unless Defendants present a "compelling case" to the contrary.
With respect to the first factor, the Comi has already concluded Defendants purposely directed their actions at Oregon. This finding does not, however, necessitate the conclusion that jurisdiction is reasonable. Instead, in
The second factor weighs slightly against jurisdiction. Defendants are residents of North Carolina and would be burdened to travel to Oregon. Though the Court is sympathetic to Defendants, this burden would not be substantial thanks to advances in transportation and telecommunications.
The third and fourth factors weigh in favor of jurisdiction. There is no apparent conflict between North Carolina and Oregon regarding sovereignty. The Complaint does not allege that Plaintiffs conduct any business in Defendants' home state of North Carolina. North Carolina has little apparent interest in the present tort action. Meanwhile, Oregon has a strong interest in providing a forum for businesses that are tortuously injured within its borders.
As for the fifth factor, courts consider the location of possible witnesses and evidence in order to evaluate the efficiency of the forum. Neither side presents pertinent information for this inquiry. Rather than speculate, the Court finds this factor to be neutral.
The sixth factor — convenience to the plaintiff — is not of significant importance.
The seventh and final factor in the reasonableness test is the existence of an alternate forum. This element comes into play, however, "only when the forum state is shown to be unreasonable."
In sum, Plaintiffs contend that Defendants reached into the forum state in four separate ways. Just one of these alleged contacts — Defendants' communications with the DOJ — supports the exercise of personal jurisdiction. Plaintiffs have demonstrated that Defendants intentionally contacted state officials and made comments expressly aimed toward Plaintiffs' activities in Oregon in order to harm their reputation here. Defendants should have reasonably anticipated being hauled into court in Oregon to defend the truthfulness of their statements.
This conclusion hinges on Plaintiffs' showing under the second prong of the "minimum contacts" test. Personal jurisdiction is appropriate only if Plaintiffs' tort claim arises from Defendants' correspondence with the DOJ. As discussed below, Plaintiffs undermine their showing under this important requirement in order to avoid the application of a statutory basis of dismissal.
Defendants move to dismiss Plaintiffs' interference claim under Oregon's Anti-SLAPP statute, Or. Rev. Stat. § 31.150, et seq. "Anti-SLAPP statutes are designed to allow the early dismissal of meritless lawsuits aimed at chilling expression through costly, time-consuming litigation."
The defendant carries the initial burden of showing that the challenged claim falls within one of these categories. Or. Rev. Stat. § 31.150(3). If the defendant does so, the burden shifts to the plaintiff "to establish that there is a probability that the plaintiff will prevail on the claim by presenting substantial evidence to support a prima facie case." Or. Rev. Stat. § 31.150(3).
Defendants make a prima facie case that the present suit arises out of a protected activity: Defendants' communications with the DOJ. Plaintiffs' own argumentation and evidence supports this conclusion. As discussed above, Plaintiffs submit evidence that Wells alerted the DOJ to concerns about Plaintiffs' business practices and corresponded with the DOJ throughout its ensuing investigation. Plaintiffs contend that Defendants' contacts with the DOJ gave rise to their present tort claim and, therefore, are sufficient to establish personal jurisdiction over them. Pis.' Resp., at 19-20. Plaintiffs back-peddle on that assertion, however, in the context of the Anti-SLAPP statute. They maintain that their intentional interference with business relations claim is primarily based on Defendants' statements to members of the publishing industry. Ifthat is true — if Defendants' contacts with the DOJ were not "integral and essential parts" of the alleged business interference on which they base their suit — then this Court does not have personal jurisdiction over Defendants.
Alternatively, if Plaintiffs' tort claim stems from Defendants' contacts with the DOJ, dismissal is appropriate because Plaintiffs fail to meet their burden under Or. Rev. Stat. § 31.150(3). In the face of Defendant's prima facie showing that Plaintiffs' case arises out of a protected statement, Plaintiffs do not offer "substantial evidence" to support the merits of their claim. Or. Rev. Stat. § 31.150(3). Instead, Plaintiffs recount their generalized pleadings. They allege that Defendants are disseminating false information about Plaintiffs in order to put them out of business. This is not a sufficient showing to defeat a motion to strike under Oregon's Anti-SLAPP law.
Plaintiffs represent that the present suit arises from Defendants' contacts with the DOJ in one context, but contradict that assertion in their opposition to a different proffered basis of dismissal. The Court need not sort out this confusion because, regardless of whether the present suit arises from Defendants' correspondence with the DOJ, dismissal is appropriate. Oregon's Anti-SLAPP statute bars the action if it arises from Defendants' statements to the DOJ; and the Court lacks personal jurisdiction if Plaintiffs' claim does not. As such, Defendants' Motion to Dismiss (#9) and Request for Judicial Notice (#12) should be GRANTED.
This Report and Recommendation will be referred to a district judge. Objections, if any, are due no later than fourteen (14) days after the date this recommendation is filed. FED. R. CIV. P. 72. If objections are filed, any response is due within fourteen (14) days after being served with a copy of the objections.