Court Opinion

ID: 4260383
Source: CourtListenerOpinion
Date Created: 2018-04-04 05:00:13.198713+00
Date Added: 2024-06-11T14:29:07.373504
License: Public Domain

United States Court of Appeals
                      For the First Circuit

No. 17-1968

          SCOTTSDALE CAPITAL ADVISORS CORP.; JOHN HURRY,

                      Plaintiffs, Appellants,

                                v.

                  THE DEAL, LLC; WILLIAM MEAGHER,

                      Defendants, Appellees.

           APPEAL FROM THE UNITED STATES DISTRICT COURT
                 FOR THE DISTRICT OF NEW HAMPSHIRE

         [Hon. Joseph Laplante, Chief U.S. District Judge]

                              Before

                       Lynch, Circuit Judge,
                    Souter, Associate Justice,*
                    and Kayatta, Circuit Judge.

     Dilan Esper, with whom Douglas E. Mirell, Jordan D. Susman,
Harder Mirell & Abrams, LLP, Christopher D. Hawkins, and Devine,
Millimet & Branch, P.A., were on brief, for appellants.
     Elizabeth A. McNamara, with whom John M. Browning and Davis
Wright Tremaine LLP were on brief, for appellees.

                           April 3, 2018

     * Hon. David H. Souter, Associate Justice (Ret.) of the
Supreme Court of the United States, sitting by designation.
             KAYATTA, Circuit Judge.            Defendant The Deal, LLC posted

to a subscriber-only website and attached to email newsletters

three articles written by defendant William Meagher that allegedly

defamed plaintiffs Scottsdale Capital Advisors Corporation and

John Hurry.       Plaintiffs eventually filed suit in New Hampshire.

None of the four parties has anything to do with New Hampshire

except that one of The Deal's institutional subscribers, Dartmouth

College,     is   located    there.       After     discovery   indicated    that

plaintiffs would have no reasonable basis upon which to establish

that anyone in New Hampshire ever saw any of the three articles as

a   result   of   the    Dartmouth      subscription,     the   district    court

dismissed the complaint for lack of personal jurisdiction.                    For

the following reasons, we affirm.

                                I.    Background

             The Deal is a Delaware limited liability company with

its principal place of business in New York.              It reports primarily

on financial matters relevant to small cap and microcap securities

markets.     It has approximately 700 subscribers.           While this number

may   seem    small     in   absolute    terms,     virtually   all   of    these

subscribers are large institutions, many of which apparently pay

substantial amounts for a subscription.                Individuals affiliated

with the subscribing institution gain the ability to access The

Deal's web portal, on which The Deal posts its articles.                    These

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individuals can also sign up to receive email newsletters from The

Deal containing PDF copies of The Deal's articles.

             In late 2013 and early 2014 The Deal posted on its

subscriber-only       web    portal      three   articles     written   by   Meagher

concerning plaintiffs.          The Deal also sent each article as a PDF

attachment by email to newsletter subscribers. The articles stated

--   falsely,   allege      plaintiffs      --   that   plaintiffs      were   under

investigation by law enforcement and securities regulators.

             Plaintiff Scottsdale is an Arizona corporation with its

principal place of business in Arizona.                     Plaintiff Hurry is an

executive officer of Scottsdale and a citizen of Nevada.                     Neither

plaintiff had any particular connection to New Hampshire before

they decided to file this suit in New Hampshire state court, from

which defendants removed it to federal court.                  The parties devote

some effort to debating plaintiffs' motives for choosing to file

this case in New Hampshire, but we find no need to get to issues

of motive in order to decide this appeal.

             Defendants moved to dismiss the claims under Federal

Rule    of    Civil     Procedure 12(b)(2)            for     lack   of      personal

jurisdiction.     Plaintiffs requested that should the district court

be inclined to grant the motion, it first allow for jurisdictional

discovery.      In May 2017, the district court did as plaintiffs

asked, issuing an order permitting jurisdictional discovery.                     The

order   limited   the       forms   of    discovery     to    interrogatories    and

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requests for production.               Plaintiffs never suggested that they

needed any other forms of discovery.

            The jurisdictional discovery revealed that for at least

five     years     (including     the    years     at    issue    here)     The   Deal

successfully       recruited      and    retained       Dartmouth's     business     by

sending targeted communications to school officials explaining why

Dartmouth        should   pay    the    substantial       costs    of     becoming    a

subscriber.        The Deal also telephoned Dartmouth directly in the

course     of     actively      soliciting       Dartmouth's      renewal    of      its

subscription.        The Dartmouth subscription granted to Dartmouth's

7,000 students and faculty members the ability to sign up for

access to the web portal on which one could read The Deal's

articles.       Dartmouth bore the cost of the subscription and did not

charge its users for access.               The Deal affirmatively contacted

thirty to forty individuals on campus to elicit interest in The

Deal.     Thirty members of the Dartmouth community signed up for

access to the web portal, and two members also signed up to receive

the emailed newsletter during the relevant period.                      The Deal had

no other New Hampshire subscribers or contacts.                   Meagher has never

set foot in the state, nor did he have any other relevant contact

to which plaintiffs point.

            The additional information produced in jurisdictional

discovery trained on whether anyone actually looked at any of the

three articles at issue here.               Analytic tools, the accuracy of

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which the parties do not dispute,1 revealed that no one at Dartmouth

(or elsewhere in New Hampshire) accessed the allegedly defamatory

articles available on The Deal's web portal.       The parties also

learned that the second and third articles sent in PDF format were

never opened, but because The Deal was not set up to collect the

necessary data when the first article was sent in 2013, discovery

did not reveal whether either recipient opened the PDF file

containing the first article.

            Discovery also showed that twenty-one individuals in New

Hampshire viewed one of the articles on a free, unrestricted

website operated by The Deal's parent corporation.   Plaintiffs did

not sue the parent company, and they make no effort to ground

jurisdiction on those viewings of the parent's website, so neither

shall we.    See United States v. Zannino, 895 F.2d 1, 17 (1st Cir.

1990) (restating the "settled appellate rule" that issues not

properly raised are waived).

     1 At oral argument, plaintiffs' counsel stated in passing
that: "I am not entirely sure of how the process of determining
whether someone opened an email attachment works." To the extent
that one could read this as an argument questioning the facts found
in jurisdictional discovery, such an argument comes too late. Of
course, a plaintiff need not blindly accept all of a defendant's
claims concerning what the evidence shows. But the proper time
and place for plaintiffs to argue about what factual conclusions
should be drawn from information revealed in discovery was in the
district court prior to its ruling, or, at the very least, in their
opening brief to this court. See Remington v. United States, 872
F.3d 72, 77–78 (1st Cir. 2017).

                                - 5 -
              Based upon the information revealed through discovery

and   post-discovery     supplemental    briefing,       the   district   court

granted defendants' motion to dismiss.           First, it concluded that

because plaintiffs had not proffered evidence that the articles in

suit were ever read by anyone via the Dartmouth subscription,

plaintiffs' claim could not be said to "arise out of, or relate

to"   defendants'     New   Hampshire   contacts.        Scottsdale    Capital

Advisors Corp. v. The Deal, LLC, 2017 WL 3981243, at *5 (D.N.H.

Sept. 8, 2017).       Second, it determined that because the evidence

of circulation in the forum was "negligible," defendants could not

be said to have purposefully availed themselves of the privilege

of doing business in New Hampshire.             Id. at *6.        Finally, the

district court found that under the so-called "gestalt" factors,

the exercise of jurisdiction over defendants in New Hampshire would

not be reasonable.      Id. at *7–8.    This appeal followed.

                               II.   Analysis

              Because neither party requested an evidentiary hearing

and the district court did not conduct one, the district court

used the prima facie method to assess the jurisdictional question.

See Foster-Miller, Inc. v. Babcock & Wilcox Can., 46 F.3d 138,

145–48 (1st Cir. 1995).           Under this method, a plaintiff must

"proffer[] evidence which, if credited, is sufficient to support

findings of all facts essential to personal jurisdiction" and may

not   "rely    on   unsupported   allegations."      A    Corp.   v.   All   Am.

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Plumbing, Inc., 812 F.3d 54, 58 (1st Cir. 2016).                   We review de

novo the district court's conclusion that plaintiffs failed to

meet this burden.     See Foster-Miller, Inc., 46 F.3d at 147.

             Plaintiffs understandably make no claim that either

defendant is subject to general personal jurisdiction.                  See, e.g.,

Daimler AG v. Bauman, 134 S. Ct. 746, 754–56 (2014).                Rather, they

assert specific personal jurisdiction, i.e., jurisdiction over

these defendants for the purpose of this specific lawsuit.                  Id. at

754 (citing Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)

and   distinguishing       between      specific     and     general     personal

jurisdiction).      As we recently explained in A Corp., plaintiffs

seeking   to    establish       that    a   court   has      specific    personal

jurisdiction over a defendant must show that:                  (1) their claim

directly arises out of or relates to the defendant's forum-state

activities; (2) the defendant's contacts with the forum state

represent a purposeful availment of the privilege of conducting

activities     in   that   state,       thus   invoking      the   benefits   and

protections of that state's laws and rendering the defendant's

involuntary    presence    in    that    state's    courts    foreseeable;    and

(3) the exercise of jurisdiction is ultimately reasonable. 812
F.3d at 59.     Failure to make any one of these showings dooms any

effort to establish specific personal jurisdiction.                 See id.

                                       - 7 -
                                         A.

           We   begin     (and    ultimately       end)   by   analyzing    whether

plaintiffs have proffered evidence that would support a finding

that their claims arise out of or relate to defendants' forum-

state activities.       See id.    Here, plaintiffs' claims all sound in

tort, so to assess relatedness we "look to whether the plaintiff

has established cause in fact (i.e., the injury would not have

occurred 'but for' the defendant's forum-state activity) and legal

cause (i.e., the defendant's in-state conduct gave birth to the

cause of action)."        Mass. School of Law at Andover, Inc. v. Am.

Bar Ass'n, 142 F.3d 26, 35 (1st Cir. 1998) (internal quotation

marks omitted) (quoting United Elec., Radio & Mach. Workers of Am.

v. 163 Pleasant St. Corp., 960 F.2d 1080, 1089 (1st Cir. 1992)).

           Each    tort    as    alleged      in   this   case     relies   on   the

allegation that defendants published defamatory material, so for

the purpose of defining plaintiffs' injury, we can simply describe

the cause of action as one for defamation.                       In defining the

elements   of     defamation,      New   Hampshire        courts    look    to   the

Restatement (Second) of Torts.             See Duchesnaye v. Munro Enter.,

Inc., 480 A.2d 123, 127–28 (N.H. 1984). The elements of defamation

as enumerated in the Restatement are:

           (a)   a   false   and   defamatory   statement
           concerning another; (b) an unprivileged
           publication to a third party; (c) fault
           amounting to at least negligence on the part
           of the publisher; and (d) either actionability

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          of the statement irrespective of special harm
          or the existence of special harm caused by the
          publication.

Restatement   (Second)   of   Torts   § 558.      The   second   element,

publication, does not mean merely uttering or writing.           Rather,

"publication" as used in this context means to communicate the

defamatory material to a third party (that is, a party who is not

the subject of the defamatory material) where that third party

understands the defamatory significance of the material.         See id.

§ 558 cmt. c ("Since publication requires that the defamatory

matter be communicated to a third person, it is necessary . . .

that the defamatory matter be brought to the attention of a third

person [and] that [this third person] understand its defamatory

significance.").    Logically, then, when the only third party

exposed to a defamatory writing does not read that writing, a

defendant is not liable for defamation.        See Walden v. Fiore, 134
S. Ct. 1115, 1124 (2014) (noting, in the context of an inquiry

into specific personal jurisdiction, that "[h]owever scandalous a

newspaper article might be, it can lead to a loss of reputation

only if communicated to (and read and understood by) third persons"

(emphasis added) (citing Restatement (Second) of Torts § 577 cmt.

b)); Griffin v. Pinkerton's, Inc., 173 F.3d 661, 665 (8th Cir.

1999) (holding the publication requirement unmet because no third

party had read the allegedly defamatory material).

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          The record reflects that this is what happened (or, to

be more precise, did not happen) here, at least as far as the web

portal and the second and third emails. The Deal made the articles

available through the subscriber portal and by email, but no one

looked.   Notionally, a tree fell in New York but no one heard it

in New Hampshire.

          That leaves only the first article emailed to the two

newsletter subscribers.   The record is silent as to whether either

of those subscribers opened the attached article.            This silence

leaves a hole in plaintiffs' prima facie case for maintaining

jurisdiction.   Plaintiffs do not claim that they were refused any

further discovery that might have helped them fill this hole. They

also do not suggest that the litigation is likely to produce any

evidence that either subscriber opened the attachment emailed over

four years ago.     Nor do plaintiffs advance any principle of law

that might generate a presumption that the email attachments were

opened.    Individuals    often    receive   many   emails    every   day,

attachments to which may well go unopened.          And while in other

cases circumstantial evidence -- such as a higher number of email

recipients -- might be sufficient to create a presumption of

publication, no such circumstantial evidence is present here.         The

number of recipients in this case -- two -- is too small to generate

on its own a reasonable assumption that at least one recipient

must have opened the attachment.

                                  - 10 -
           All of this means that even on a prima facie basis,

plaintiffs have not established either "cause in fact (i.e., the

injury would not have occurred 'but for' the defendant's forum-

state activity) [or] legal cause (i.e., the defendant's in-state

conduct gave birth to the cause of action)."              Mass. School of Law

at Andover, 142 F.3d at 35 (quoting United Elec. Radio & Mach

Workers, 960 F.2d   at    1089).         Put   another   way,   plaintiffs'

reputation would not differ had Dartmouth never subscribed to The

Deal.   There is thus no nexus between the claims and defendants'

forum-based      activities,     as     the     relatedness     prong   of   the

jurisdictional analysis requires.             A. Corp., 812 F.3d at 59.

           Plaintiffs' only rejoinder to this conclusion is to

point to the Supreme Court's opinion in Keeton v. Hustler Magazine,

Inc., 465 U.S. 770 (1984).         As plaintiffs correctly observe, the

Court in Keeton found personal jurisdiction over a defamation claim

by a non-New Hampshire plaintiff against a non-New Hampshire

defendant based on the circulation of the allegedly defamatory

article in the state, without mentioning whether anyone within the

state actually read the article.               Therefore, argue plaintiffs,

proof of circulation within the state is enough to establish

relatedness.

           In Keeton, though, the "circulation" consisted of copies

of a paper magazine delivered to over 10,000 paying customers.

Id. at 772.    One can reasonably presume that some of those 10,000-

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plus persons read the article.       Plaintiffs sheepishly suggest that

it is "well known" that the articles in a magazine like that at

issue in Keeton ("Hustler") are less likely to be read because

people buy the magazine for the photographs. We venture no opinion

concerning this speculation beyond saying that it seems quite

certain that at least some of the 10,000-plus purchasers read the

articles that were central to Keeton.           We therefore decline to

infer from Keeton any suggestion that proving defamation does not

require evidence that a third party apprehended the defamatory

communication, or that relatedness does not require at least some

actionable defamation within the state.

                                     B.

           In finding that plaintiffs failed to establish specific

personal   jurisdiction     over     defendants,   the     district   court

helpfully analyzed all three requirements for establishing such

jurisdiction,   thereby    finding    three   reasons    for   declining   to

assert jurisdiction.      Because we find compelling reasons to agree

with the district court's cogent conclusion as to the lack of

relatedness, and because we have reservations about its view that

the   intentional   and   ongoing    recruitment   of    Dartmouth    as   an

institutional subscriber did not constitute purposeful availment,

we restrict our analysis to the issue of relatedness.            We express

no impressions concerning the district court's analysis of the

gestalt factors.

                                   - 12 -
                          III.   Conclusion

            In this case, plaintiffs' only injury was reputational

harm allegedly suffered as a result of the publication of certain

articles.    However, nothing in the record indicates that this

injury arose in any way from defendants' only contacts with

plaintiffs' chosen forum.     The offending articles appear to have

never been read by anyone using the Dartmouth subscription, and to

the extent that there is any doubt concerning that conclusion,

plaintiffs have given us no reason to find within that doubt a

prima facie basis for ruling in their favor.    The judgment of the

district court is affirmed.

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