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).
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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.
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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.
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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.
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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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