Title: SCVNGR, Inc. v. Punchh, Inc.

State: massachusetts

Issuer: Massachusetts Supreme Court

Document:

NOTICE:  All slip opinions and orders are subject to formal 
revision and are superseded by the advance sheets and bound 
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error or other formal error, please notify the Reporter of 
Decisions, Supreme Judicial Court, John Adams Courthouse, 1 
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SJC-12297 
 
SCVNGR, INC.1  vs.  PUNCHH, INC. 
 
 
 
Suffolk.     September 6, 2017. - November 8, 2017. 
 
Present:  Gants, C.J., Lenk, Gaziano, Budd, Cypher, 
& Kafker, JJ. 
 
 
Practice, Civil, Motion to dismiss.  Jurisdiction, Personal, 
Nonresident, Long-arm statute.  Due Process of Law, 
Jurisdiction over nonresident. 
 
 
 
 
Civil action commenced in the Superior Court Department on 
February 19, 2016. 
 
 
A motion to dismiss was heard by Mitchell H. Kaplan, J. 
 
 
The Supreme Judicial Court on its own initiative 
transferred the case from the Appeals Court. 
 
 
 
Brian C. Carroll for the plaintiff. 
 
Jeffrey J. Pyle for the defendant. 
 
 
 
LENK, J.  Plaintiff SCVNGR, Inc., doing business as LevelUp 
(LevelUp), is a Massachusetts-based company that develops 
                     
 
1 Doing business as LevelUp. 
2 
 
 
software applications for restaurants.  Punchh, Inc. (Punchh),is 
a California-based company that develops competing applications.  
LevelUp filed a complaint in the Superior Court against Punchh 
alleging that, in 2015 and 2016, Punchh repeatedly made 
knowingly false statements about LevelUp to LevelUp's clients 
and potential clients, causing it harm.  Punchh appeared 
specially, moving under Mass. R. Civ. P. 12 (b) (2), 365 Mass. 
754 (1974), to dismiss the complaint on the grounds that it had 
insufficient contacts with Massachusetts to permit the exercise 
of personal jurisdiction.  Focusing upon whether it would 
comport with due process to hale Punchh into a Massachusetts 
court, the parties disputed the proper application of two United 
States Supreme Court cases that partially define the 
constitutional parameters guiding the exercise of personal 
jurisdiction over a nonresident defendant.2 
 
Concluding that the constitutional analysis resolved the 
jurisdictional question in Punchh's favor, a Superior Court 
                     
 
2 See Calder v. Jones, 465 U.S. 783 (1984) (Jones), and 
Walden v. Fiore, 134 S. Ct. 1115 (2014).  The United States 
Supreme Court in Jones concluded that a California court 
properly could exercise jurisdiction over nonresident defendants 
accused of defaming an in-State plaintiff because "their 
intentional, and allegedly tortious, actions were expressly 
aimed at California."  Jones, supra at 789.  Distinguishing its 
decision in Jones, the Court determined that a Nevada court 
could not exercise jurisdiction over a nonresident whose 
allegedly unlawful seizure of money elsewhere caused harm to 
plaintiffs living in Nevada.  Walden, supra at 1123-1124. 
3 
 
 
judge allowed Punchh's motion to dismiss.  The judge noted that, 
because of the parties' focus on due process, he had not 
determined whether the Massachusetts long-arm statute would 
permit the exercise of personal jurisdiction over Punchh.  
LevelUp appealed, and we transferred the case to this court on 
our own motion. 
 
Prior to exercising personal jurisdiction over a 
nonresident defendant, a judge must determine that doing so 
comports with both the forum's long-arm statute and the 
requirements of the United States Constitution.  World-Wide 
Volkswagen Corp. v. Woodson, 444 U.S. 286, 290 (1980).  Because 
the long-arm statute imposes specific constraints on the 
exercise of personal jurisdiction that are not coextensive with 
the parameters of due process, and in order to avoid unnecessary 
consideration of constitutional questions, a determination under 
the long-arm statute is to precede consideration of the 
constitutional question.  See, e.g., Morrill v. Tong, 390 
Mass. 120, 133 (1983).  See also Beeler v. Downey, 387 
Mass. 609, 613 n.4 (1982) (recognizing "duty to avoid 
unnecessary decisions of serious constitutional issues").  
Because the requisite statutory analysis did not occur, we 
remand the matter to the Superior Court for further proceedings. 
4 
 
 
 
1.  Background.3  a.  Factual history.  LevelUp is a 
Delaware corporation headquartered in Massachusetts, and designs 
and markets applications (apps) that run on customers' cellular 
telephones.  LevelUp's apps enable customers to earn and redeem 
rewards at restaurants, and to make purchases, by scanning a 
code on their cellular telephones at the point of sale.  These 
apps are designed to help restaurants both engage with their 
customers and gather information about customer behavior.  As of 
2016, all but four of LevelUp's ninety employees were based in 
Massachusetts. 
 
Punchh is a Delaware corporation with its principal place 
of business in California; it also provides apps to restaurants.  
Punchh's clients include businesses that, while headquartered 
outside Massachusetts, own restaurants in the Commonwealth.  
LevelUp asserts that Punchh regularly markets its apps within 
Massachusetts and to businesses operating restaurants here, and 
                     
3 The facts are taken from the Superior Court judge's order 
and the documents that were before him, including the unverified 
complaint filed by SCVNGR, Inc., doing business as LevelUp 
(LevelUp); affidavits signed by LevelUp's chief operating 
officer and the founder of Punchh, Inc. (Punchh); and Punchh's 
response to one interrogatory.  When a defendant moves to 
dismiss for lack of personal jurisdiction, the plaintiff bears 
the burden of adducing facts on which jurisdiction may be found.  
Droukas v. Divers Training Academy, Inc., 375 Mass. 149, 151 
(1978).  In considering a motion to dismiss for lack of personal 
jurisdiction, "[w]e accept as true the essential uncontroverted 
facts that were before the judge."  Miller v. Miller, 448 Mass. 
320, 321 (2007). 
5 
 
 
derives substantial revenue from the use of its apps in 
Massachusetts.4  Punchh has not directly contradicted LevelUp's 
claims concerning such contacts with Massachusetts.  Punchh 
maintains, however, that it is not registered to do business in 
Massachusetts and does not have an office, employees, or 
property in the Commonwealth, and that no Punchh employee has 
ever traveled to Massachusetts for business. 
 
In 2014, the two companies entered into an agreement 
whereby LevelUp allowed Punchh to incorporate LevelUp's payment 
technology into Punchh-developed apps for use by Punchh clients.  
LevelUp claims that, in September, 2014, Punchh made knowingly 
false statements to LevelUp clients; in response, LevelUp 
terminated the companies' agreement.  LevelUp informed Punchh 
that it had no plans to take legal action at that time. 
 
According to LevelUp, in October, 2015, Punchh resumed 
making defamatory statements about LevelUp to LevelUp clients.  
LevelUp confronted Punchh about the alleged misrepresentations, 
and demanded that Punchh cease making them.  LevelUp also 
requested a list of the entities to which Punchh made the 
allegedly false statements about LevelUp.  Punchh responded that 
                     
 
4 These claims are supported by a declaration signed by 
LevelUp's chief operating officer, stating only his belief in 
their truth.  As will be discussed, discovery on the extent of 
Punchh's business conducted in Massachusetts, and of revenue 
derived from such services rendered, was not ordered.  See part 
1.b, infra. 
6 
 
 
the statements were made to three LevelUp clients, all of which 
are headquartered outside Massachusetts.  Punchh subsequently 
said that it had made the statements to one other entity, which 
was not a client of LevelUp, and whose identity Punchh did not 
disclose.  Punchh stated that it would cease making the 
statements that LevelUp alleged to be false, and LevelUp 
responded that it would take no further action. 
 
LevelUp asserts, however, that in early 2016, Punchh 
resumed making knowingly false statements about LevelUp to at 
least one LevelUp client, and to several potential clients.  
According to LevelUp, Punchh's misrepresentations contributed to 
or caused the termination of at least one client relationship, 
and resulted in damage to LevelUp's business. 
 
b.  Prior proceedings.  In February, 2016, LevelUp filed an 
unverified complaint in the Superior Court seeking damages and 
an injunction enjoining Punchh from continuing to make allegedly 
false statements about LevelUp to LevelUp's clients and 
prospective clients.  The complaint asserted five claims:  
defamation, commercial disparagement, intentional interference 
with prospective business relations, and violations of G. L. 
c. 93A, §§ 2 and 11, and Cal. Bus. & Prof. Code §§ 17200 et seq. 
 
Following service of the complaint, and before Punchh's 
special appearance for the purpose of moving to dismiss for lack 
of personal jurisdiction, LevelUp sought discovery in the form 
7 
 
 
of seven interrogatories and three requests for production of 
documents.  The first four interrogatories, and the documents 
requested, solicited information regarding the entities to which 
Punchh made the allegedly defamatory statements, as well as 
Punchh's basis for claiming that those statements were true.  
The last three interrogatories probed the scope of Punchh's 
business conducted in Massachusetts, and of revenue derived from 
those services rendered.  Specifically, LevelUp asked Punchh to 
identify the entities with locations in Massachusetts that 
either use Punchh apps or whose business Punchh has solicited, 
and disclose the number of Massachusetts residents that utilize 
Punchh apps. 
 
In April, 2016, without answering LevelUp's complaint or 
responding to the discovery requests, Punchh moved to dismiss 
for lack of personal jurisdiction.  LevelUp, having not received 
the information it requested from Punchh, sought to stay the 
motion to dismiss pending discovery.  Punchh, in turn, moved to 
stay discovery. 
 
The matter was resolved when the judge conducted a 
nonevidentiary hearing in May, 2016, and ordered Punchh to 
respond to the first of LevelUp's seven interrogatories, which 
requested a list of the entities to whom Punchh allegedly 
8 
 
 
misrepresented information about LevelUp.5  Punchh's response 
revealed that the statements were made to eighteen companies, 
all headquartered outside Massachusetts. 
 
Following supplemental briefing, the judge allowed Punchh's 
motion to dismiss, concluding that the limits of due process 
would not permit the exercise of personal jurisdiction over 
Punchh.  While recognizing that "typically a Superior Court 
[judge] presented with a Rule 12 (b) (2) argument begins with an 
analysis of whether the requirements of the long-arm statute 
have been met," the judge did not address the long-arm statute 
because "in this case both parties have focused their arguments 
on Federal due process considerations." 
 
LevelUp appealed to the Appeals Court, and we transferred 
the case to this court on our own motion. 
 
2.  Discussion.  Personal jurisdiction over an out-of-State 
defendant is proper only where both the forum State's long-arm 
statute and the requirements of due process allow it.  World-
Wide Volkswagen Corp., 444 U.S. at 290.  Massachusetts's long-
arm statute, G. L. c. 223A, § 3, provides that "[a] court may 
exercise personal jurisdiction over a person . . . as to a cause 
                     
 
5 We infer that the exclusive focus on due process 
considerations brought about this limitation on the discovery 
that Punchh was compelled to provide.  The first interrogatory 
sought information especially pertinent to the constitutional 
inquiry, whereas the last three seem to pertain more to the 
statutory analysis. 
9 
 
 
of action in law or equity arising from the person's" one or 
more specific acts or omissions, as enumerated in the statute.  
In contrast to the long-arm statutes of some States, the 
Massachusetts statute does not purport to extend jurisdiction as 
far as due process would allow.  Compare Cal. Civ. Proc. Code 
§ 410.10 (West 2004) ("A court of this [S]tate may exercise 
jurisdiction on any basis not inconsistent with the Constitution 
of this [S]tate or of the United States").  "Where the words of 
a statute are clear on their face, we deem them conclusive as to 
legislative intent."  Care & Protection of Jamison, 467 Mass. 
269, 276 (2014). 
 
The Massachusetts long-arm statute enumerates eight 
specific grounds on which a nonresident defendant may be 
subjected to personal jurisdiction by a court of the 
Commonwealth.  See G. L. c. 223A, § 3.  Only four of them appear 
to have any potential bearing on the matter at hand.6  The long-
arm statute first provides that a Massachusetts court may 
                     
 
6 The remaining provisions of G. L. c. 223A, § 3, authorize 
the exercise of personal jurisdiction over a cause of action 
arising from a nonresident defendant's interest in real property 
in Massachusetts; contract to insure a person, property, or risk 
located in the Commonwealth; domicil located in Massachusetts, 
if the defendant is a party to a relationship giving rise to 
certain domestic relations disputes; or "having been subject to 
the exercise of personal jurisdiction of a court of the 
[C]ommonwealth which has resulted in" one of several types of 
domestic relations orders.  See G. L. c. 223A, § 3 (e), (f), 
(g), (h). 
10 
 
 
exercise personal jurisdiction over a cause of action arising 
from a nonresident person's business transactions within the 
Commonwealth.7  G. L. c. 223A, § 3 (a).  Second, a nonresident 
must submit to personal jurisdiction with respect to a cause of 
action arising out of its "contracting to supply services or 
things in this [C]ommonwealth."  G. L. c. 223A, § 3 (b).  Third, 
Massachusetts courts have jurisdiction over torts committed 
within the Commonwealth.  G. L. c. 223A, § 3 (c).  Fourth, the 
Massachusetts long-arm statute will reach a defendant who has 
caused injury within the Commonwealth through a tort occurring 
elsewhere, so long as that defendant "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 [C]ommonwealth."  G. L. c. 223A, 
§ 3 (d).8 
 
We have long held that the long-arm statute "asserts 
jurisdiction over the person to the constitutional limit only 
when some basis for jurisdiction enumerated in the statute has 
                     
7 General Laws c. 223A, § 1, defines "person" to include a 
corporation such as Punchh. 
 
 
8 Although the judge expressly did not reach the question 
whether the long-arm statute was satisfied, he noted that on the 
facts then before him, G. L. c. 223A, § 3 (c), appeared to be 
the only provision that could be relevant.  Were the facts to 
expand upon remand and further discovery, however, this could 
well alter the assessment of which subsections of the long-arm 
statute are applicable.  See note 10, infra. 
11 
 
 
been established."  Good Hope Indus., Inc. v. Ryder Scott Co., 
378 Mass. 1, 6 (1979) (Good Hope).  Accordingly, a judge would 
"be required to decline to exercise jurisdiction if the 
plaintiff was unable to satisfy at least one of the statutory 
prerequisites" of G. L. c. 223A, § 3.  Good Hope, supra.  See 
Intech, Inc. v. Triple "C" Marine Salvage, Inc., 444 Mass. 122, 
125 (2005) (basis for jurisdiction listed in statute must be 
established).  "The inquiry into jurisdiction is thus twofold 
. . . ."  Hahn v. Vermont Law Sch., 698 F.2d 48, 50 (1st Cir. 
1983).  The requirements of G. L. c. 223A, § 3, may not be 
circumvented by restricting the jurisdictional inquiry to due 
process considerations.9 
 
Our jurisprudence since Good Hope also makes clear that 
courts should consider the long-arm statute first, before 
approaching the constitutional question.  See Roberts v. 
Legendary Marine Sales, 447 Mass. 860, 865 (2006), quoting 
Morrill, 390 Mass. at 133 ("Having concluded that the long-arm 
statute does not provide a basis for conferring personal 
jurisdiction over the defendant, 'we need not inquire into the 
                     
 
9 To the extent that "Automatic" Sprinkler Corp. of Am. v. 
Seneca Foods Corp., 361 Mass. 441, 443 (1972), identifies "the 
function of the long arm statute as an assertion of jurisdiction 
over the person to the limits allowed by the Constitution of the 
United States," we take this opportunity to clarify that, in 
accordance with Good Hope Indus., Inc. v. Ryder Scott Co., 378 
Mass. 1, 6 (1979), the long-arm statute's reach is not 
coextensive with what due process allows. 
12 
 
 
constitutional constraints on the exercise of jurisdiction under 
the statute'"); Morris v. Morris, 403 Mass. 1001, 1001 (1988) 
("We need consider only the first [jurisdictional] inquiry").  
In this regard, it is canonical that courts should, where 
possible, avoid unnecessary constitutional decisions.  
Commonwealth v. Guzman, 469 Mass. 492, 500 (2014).  Determining 
first whether the long-arm statute's requirements are satisfied 
is consonant with the "duty to avoid unnecessary decisions of 
serious constitutional issues. . . .  [W]e cannot let the 
actions of private litigants force us to decide unnecessarily a 
serious question of constitutional law."  Beeler, 387 Mass. at 
613 n.4. 
 
"Whether jurisdiction will be found is a determination 
sensitive to the particular facts of each case," Morrill, 390 
Mass. at 129, and the record before us lacks sufficient 
information for us to reach a determination under G. L. c. 223A, 
§ 3.  To the extent that, here, the jurisdictional questions 
were decided out of order, discovery may have been prematurely 
limited to facts relevant to the constitutional inquiry.  On 
remand, consideration should be given to appropriate discovery 
aimed at determining whether the long-arm statute permits the 
exercise of personal jurisdiction.10  Should the judge, as a 
                     
 
10 By way of example, such discovery might target the scope 
 
13 
 
 
result of the statutory analysis, conclude that the requirements 
of G. L. c. 223A, § 3, are satisfied, the constitutional 
determination then would be made on a presumably fuller record. 
 
3.  Conclusion.  The matter is remanded to the Superior 
Court for further proceedings consistent with this opinion. 
 
 
 
 
 
 
 
So ordered. 
                                                                  
of Punchh's alleged business conducted in Massachusetts, and of 
revenue derived from such services, facts that would be integral 
to the assertion of personal jurisdiction under G. L. c. 223A, 
§ 3 (d).