Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Ultimate Outdoor Movies, LLC v. Funflicks, LLC

United States District Court, D. Maryland

May 8, 2019

ULTIMATE OUTDOOR MOVIES, LLC, et al., Plaintiffs,
v.
FUNFLICKS, LLC, et al., Defendants.

          MEMORANDUM OPINION

          Stephanie A. Gallagher United States Magistrate Judge.

         Plaintiffs Ultimate Outdoor Movies, LLC and Laura Landers (“Plaintiffs”) filed suit against Defendants Charles Hunter, Matthew Dias, and FunFlicks Audiovisuals (collectively “the California Defendants”); Todd Severn and FunFlicks, LLC (collectively, “the Severn Defendants”); and James Gaither and NATJAY, LLC (collectively, “the Gaither Defendants”). ECF 1. Plaintiffs allege fraud; aiding and abetting; breach of contract; violations of the Maryland Uniform Trade Secrets Act, Md. Code Ann., Com. Law § 11-1201 et seq., and the Federal Trade Secrets Act, 18 U.S.C. § 1836; defamation; intentional interference with contract; violations of the Federal Wiretap Act, 18 U.S.C. § 2511, and the Texas Wiretap Act, Tex. Civ. Prac. & Rem. Code Ann. §123.001 et seq.; violations of the Federal Lanham Act, 15 U.S.C. §§ 1125(a)(1)(A)-(B); unfair competition; intentional interference with economic relations; and civil conspiracy. ECF 21. Presently pending are the Severn Defendants' Motion to Dismiss for Failure to State a Claim, ECF 29, the Gaither Defendants' Corrected Motion to Dismiss for Failure to State a Claim, ECF 31, and the California Defendants' Motion to Dismiss for Lack of Personal Jurisdiction and Failure to State a Claim, ECF 26. Plaintiffs opposed each motion, ECF 32, 44, 46, and the California Defendants and the Severn Defendants each filed a Reply, ECF 45, 61. The Gaither Defendants did not file a Reply. This Court also granted Plaintiffs' Motion for Leave to File a Supplemental Response in Opposition to the California Defendants' Motion to Dismiss, and will consider Plaintiffs' Supplemental Opposition, ECF 40. ECF 99.

         This Court held a hearing on Defendants' Motions on January 23, 2019, ECF 86, and granted Plaintiffs limited jurisdictional discovery as to the California Defendants, ECF 99. The Court also granted Plaintiffs an opportunity to supplement their opposition to the California Defendants' Motion to Dismiss, and granted the California Defendants an opportunity to file a response. ECF 99. After conducting the limited jurisdictional discovery, Plaintiffs supplemented their opposition, ECF 102, and the California Defendants filed a response, ECF 104. On April 10, 2019, the Severn Defendants filed a Third Party Complaint and a Motion for Preliminary Injunction against Darrell Landers (“Darrell Landers”) and his company, LND Technologies, LLC (“LND”). ECF 105, 106.

         For the reasons stated below, I shall grant in part and deny in part the Severn Defendants' Motion to Dismiss, ECF 29, grant in part and deny in part the Gaither Defendants' Corrected Motion to Dismiss, ECF 31, and grant in part and deny in part the California Defendants' Motion to Dismiss, ECF 26.

         I. Factual Background[1]

         Plaintiff Ultimate Outdoor Movies, LLC (“UOM”) is a Texas-based outdoor inflatable movie screen rental company. ECF 21 ¶ 2. UOM was incorporated in Texas in 2010. Id. ¶ 56. Plaintiff Laura Landers (“Laura Landers”), a Texas resident, is the sole owner of UOM. Id. ¶¶ 1, 56 n.2. Laura Landers's husband, Darrell Landers, is CEO and Vice President of UOM. Id. ¶ 56 n.2.

         Defendant Todd Severn (“Severn”) is the original owner and creator of the outdoor inflatable movie screen rental brand known as FunFlicks. ECF 21 ¶ 48. Severn operated the business as FunFlicks, LLC (“FF-Severn”) from 2002 until January 1, 2013. Id. During this time, FF-Severn granted non-exclusive licenses to individuals and small business owners, including Darrell Landers in April, 2008, for the purpose of operating a business under the FunFlicks name. Id. ¶¶ 49, 55. When UOM was formed in 2010, Darrell Landers transferred his FunFlicks licenses to UOM. Id. ¶ 56. As of December 31, 2012, UOM operated FunFlicks businesses in Dallas, Fort Worth, Houston, San Antonio, Oklahoma City, Tulsa, Memphis, Nashville, Huntsville, and Little Rock. Id. ¶57. In December, 2012, Darrell Landers incorporated a separate entity, FunFlicks, Inc., in Texas (“FF-Landers”). Id. ¶ 58. FF-Landers eventually changed from FunFlicks, Inc. to FunFlicks, LLC. Id. ¶ 13. In January, 2013, FF-Landers bought the rights to the FunFlicks brand, including additional FunFlicks territories, from the Severn Defendants through an asset purchase agreement (“2013 APA”), executing a promissory note and granting FF-Severn a security interest in FF-Landers's business assets. Id. ¶¶ 15, 58-61. After that transaction, FF-Landers allowed UOM to begin operating additional FunFlicks territories in Maryland, Delaware, and D.C. Id. ¶ 61.

         In or about the fall of 2017, FF-Landers did not make payment to FF-Severn under the promissory note, [2] and the parties began negotiating a restructuring of the 2013 APA. Id. ¶¶ 96- 125. In or about December, 2017, unbeknownst to FF-Landers, FF-Severn sought a replacement buyer, and approached California Defendants Charles Hunter (“Hunter”) and Matthew Dias (“Dias”) about purchasing the FunFlicks brand through their California-based FunFlicks company, Defendant FunFlicks Audiovisual (“FF-AV”). Id. ¶¶ 115-125. Individual Defendants Dias and Hunter are residents of California. ECF 26-5 ¶ 7, 26-6 ¶ 8. Corporate Defendant FF-AV, a company that provides outdoor movie entertainment, was incorporated in California and maintains its principal place of business in Bakersfield, California. ECF 26-5 ¶¶ 3-4, 26-6 ¶¶ 4-5. Dias is the Vice President and Chief Financial Officer of FF-AV, ECF 26-5 ¶ 2, and Hunter is the Chief Executive Officer of FF-AV, ECF 26-6 ¶ 3. FF-AV does not have an office or any employees in Maryland, does not own property in Maryland, does not have a resident agent for service of process in Maryland, does not have a mailing address or telephone number in Maryland, and does not maintain a bank account in Maryland. ECF 26-5 ¶¶ 5-6, 26-6 ¶¶ 6-7. Dias and Hunter have never lived in Maryland, have never owned, rented or leased any real or personal property in Maryland, have never worked or attended school in Maryland, have never paid taxes in Maryland or maintained any type of bank or securities account in the state, and have never traveled to Maryland to participate in any judicial proceedings or arbitrations. ECF 26-5 ¶¶ 8-15, 26-6 ¶¶ 9-16.

         On or about December 21, 2017, the California Defendants and FF-Severn executed an asset purchase agreement (“2017 APA”), selling the assets covered under the 2013 APA to the California Defendants. ECF 21 ¶116. The 2017 APA is governed by Maryland law. Id. ¶¶ 118, 119, Exh. 4. Plaintiffs allege that the 2013 APA did not cover the after-acquired property of FF-Landers and, when FF-Landers learned of the 2017 APA, FF-Landers and FF-Severn began a second round of negotiations to resolve their remaining disputes over the 2013 APA. Id. ¶¶ 129, 130, 139. During those negotiations, FF-Severn had control of the www.FunFlicks.com URL, held in escrow on a separate DNS server, pursuant to the 2013 APA. Id. ¶ 137 (1) n.4. Plaintiffs allege, however, that FF-Landers, not FF-Severn, had control over the “web/email servers containing the FunFlicks email addresses and data.” Id.

         While negotiations were ongoing between FF-Landers and FF-Severn, the California Defendants contacted Laura Landers to discuss UOM's continuation of its license under the FunFlicks brand. Id. ¶ 140. Plaintiffs allege that Defendant Hunter promised Laura Landers, over the phone, that he would not “screw” her over. Id. ¶ 155. Based on this promise, Plaintiffs allege that UOM refrained from switching its brand from FunFlicks to UOM, and continued to operate under the FunFlicks name without objection from the California Defendants. Id. ¶ 157. On March 3, 2018, Darrell Landers and FF-Severn executed a Release and Settlement Agreement (“the Release”), settling their dispute over the 2013 APA. Id. ¶¶ 245-255, Exh. 13.

         James Gaither worked as an independent contractor for UOM for 6 years. Id. ¶ 172. Plaintiffs allege that Gaither was contracted with UOM through December 31, 2018. Id. ¶ 175. However, in January, 2018, Gaither formed NATJAY, LLC in Maryland, to operate a movie business. Id. ¶ 180. On or about February 5, 2018, Gaither executed a licensing agreement with the California Defendants to operate as a FunFlicks licensee. Id. ¶ 182. On February 18, 2018, Gaither and Darrell Landers spoke on the phone about UOM's plans for the 2018 season. Id. ¶ 198. On February 20, 2018, UOM switched its brand to “Ultimate Outdoor Movies, ” and sent a notice to all of its customers about the switch from FunFlicks to UOM, including its new email contacts, using the URL www.ultimateoutdoormovies.com.[3] Id. ¶ 206.

         On or about February 27, 2018, Plaintiffs allege that Gaither, on behalf of all of the Defendants, sent an email to all FunFlicks customers from UOM's Mid-Atlantic Client List, warning clients that a “Texas business has been marketing outdoor movies using the FunFlicks® name without authorization.” Id. ¶ 212. The email also stated, “[y]our events and deposits are at risk! This out of state company formed in August and is attempting to undermine FunFlicks business across America. Most importantly, they MAY NOT have infrastructure in Maryland or other states to handle these events, and they are not registered to conduct business in Maryland.” Id. The email was signed by the “FunFlicks Team.” Id.

         On or about March 1, 2018, FF-Severn disconnected the FunFlicks URL link to FF-Landers's server, and redirected the domain to the California Defendants. Id. ¶¶ 259, 260. Plaintiffs allege that the California Defendants “recreate[d] related directional protocols on its own separate e-mail/web server” for emails sent to “@funflicks.com.” Id. ¶¶ 260-262. On or about April 27, 2018, a former UOM client, “Megan, ” received an email from Gaither in response to Megan's inquiry, which was sent to “events@funflicks.com” and addressed to “Kenneth, ” a UOM employee. Id. ¶ 274. After receiving Gaither's response, Megan booked her event with Gaither and NATJAY, LLC, and not with UOM. Id. ¶¶ 275, 276, Exh. 16. On or about June 14, 2018, Darrell Landers sent an email to “darrell@funflicks.com, ” posing as a client seeking FunFlicks services for events in Alabama, Arizona, California, Colorado, Connecticut, Florida, Illinois, Indiana, Louisiana, North Carolina, and Texas. Id. ¶¶ 269, 270, Exh. 14. Darrell Landers never received the email he sent to his former email address, but, as the fictitious client, Darrell Landers received a response from Severn. Id. ¶ 271.

         On or about May 22, 2018, Hunter incorporated “Ultimate Outdoor Movies, LLC” in California. Id. ¶¶ 279-282, Exh. 18. Plaintiffs filed suit in this Court on July 27, 2018. ECF 1. On April 10, 2019, the Severn Defendants filed a Third Party Complaint and Motion for Preliminary Injunction against Darrell Landers and his company, LND, alleging breach of contract and seeking specific performance as well as injunctive relief. ECF 105, 106.

         II. Personal Jurisdiction over California Defendants

         A. 12(b)(2) Motion to Dismiss Standard

         The California Defendants' Motion to Dismiss under Fed.R.Civ.P. 12(b)(2) challenges this Court's personal jurisdiction over them. Under Rule 12(b)(2), the burden is “on the plaintiff ultimately to prove the existence of a ground for jurisdiction by a preponderance of the evidence.” Combs v. Bakker, 886 F.2d 673, 676 (4th Cir. 1989); see Universal Leather, LLC v. Koro AR, S.A., 773 F.3d 553, 558 (4th Cir. 2014); Carefirst of Md., Inc. v. Carefirst Pregnancy Ctrs., Inc., 334 F.3d 390, 396 (4th Cir. 2003) (citing Mylan Labs., Inc. v. Akzo, N.V., 2 F.3d 56, 59-60 (4th Cir. 1993)). When “a district court decides a pretrial personal jurisdiction motion without conducting an evidentiary hearing, the plaintiff need only make a prima facie showing of personal jurisdiction.” Carefirst of Md., 334 F.3d at 396 (citing Combs, 886 F.2d at 676). To determine whether the 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. The court need not “look solely to the plaintiff's proof in drawing” all reasonable inferences in plaintiff's favor, and may also look at the defendant's proffered proof and assertions regarding defendant's lack of contacts with the forum state. Mylan Labs., Inc., 2 F.3d at 62. “When the existing record is inadequate to support personal jurisdiction over a defendant, the plaintiff is entitled to jurisdictional discovery if it can demonstrate that such discovery would yield ‘additional facts' that would ‘assist the court in making the jurisdictional determination.'” FrenchPorte IP, LLC v. Martin Door Mfg., Inc., Civil Action No. TDC-14-0295, 2014 WL 4094265, at *5 (D. Md. Aug. 14, 2014) (first quoting Commissariat A L'Energie Atomique v. Chi Mei Optoelectronics Corp., 395 F.3d 1315, 1323 (Fed. Cir. 2005); and then citing Toys “R” Us, Inc. v. Step Two, S.A., 318 F.3d 446, 456 (Fed. Cir. 2003) (“[C]ourts are to assist the plaintiff by allowing jurisdictional discovery unless the plaintiff's claim is clearly frivolous.'”)).

         To exercise personal jurisdiction over a non-resident defendant, a court must determine that (1) the exercise of jurisdiction is authorized under the state's long-arm statute, pursuant to Federal Rule of Civil Procedure 4(k)(1)(A); and (2) the exercise of jurisdiction conforms to the Fourteenth Amendment's due process requirements. Carefirst of Md., 334 F.3d at 396. When interpreting the reach of Maryland's long-arm statute, a federal district court is bound by the interpretations of the Maryland Court of Appeals. See Carbone v. Deutsche Bank Nat'l Tr. Co., Civil Action No. RDB-15-1963, 2016 WL 4158354, at *5 (D. Md. Aug. 5, 2016); Snyder v. Hampton Indus., Inc., 521 F.Supp. 130, 135-36 (D. Md. 1981), aff'd, 758 F.2d 649 (4th Cir. 1985); see also Mylan Labs., 2 F.3d at 61 (citing Erie R.R. v. Tompkins, 304 U.S. 64, 178 (1938)). Moreover, courts must address both prongs of the personal jurisdiction analysis, despite Maryland courts consistently holding that “the state's long-arm statute is coextensive with the limits of personal jurisdiction set out by the due process clause of the Constitution.” Bond v. Messerman, 391 Md. 706, 721, 895 A.2d 990, 999 (2006); see CSR, Ltd. v. Taylor, 411 Md. 457, 472, 984 A.2d 492, 501 (2009) (noting that the personal jurisdiction analysis “entails dual considerations”); Carefirst of Md., 334 F.3d at 396.

         Under the first prong, the plaintiff must identify a provision in the Maryland long-arm statute that authorizes jurisdiction. Ottenheimer Publishers, Inc. v. Playmore, Inc., 158 F.Supp.2d 649, 652 (D. Md. 2001). Under the second prong, “due process requires only that . . . a defendant . . . have certain minimum contacts . . . such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.'” Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (quoting Milleken v. Meyer, 311 U.S. 457, 463 (1940)). This “minimum contacts” analysis depends on the number and relationship of a defendant's contacts to the forum state, and whether the present cause of action stems from the defendant's alleged acts or omissions in the forum state. Id. at 316-19.

         Finally, a court may exercise two types of personal jurisdiction, “general” or “specific.” Bristol-Myers Squibb Co. v. Superior Court of California, San Francisco Cty., 137 S.Ct. 1773, 1780 (2017). “General” jurisdiction is a fairly limited concept, since it only arises where “the continuous corporate operations within a state [are] so substantial and of such a nature as to justify suit against [defendant] on causes of action arising from dealings entirely distinct from those activities.” Int'l Shoe, 326 U.S. at 318. “For an individual, the paradigm forum for the exercise of general jurisdiction is the individual's domicile; for a corporation, it is an equivalent place, one in which the corporation is fairly regarded as at home.” Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 924 (2011). In the context of a corporation, the paradigm bases for general jurisdiction are “the place of incorporation and principal place of business.” Daimler AG v. Bauman, 571 U.S. 117, 137 (2014). The Daimler court clarified that while those paradigms are not necessarily the only bases for general jurisdiction, it would be “unacceptably grasping” to approve the exercise of general jurisdiction wherever a corporation, “engages in a substantial, continuous, and systematic course of business.” Id. at 137-38 (declining to find general jurisdiction lies in every state in which a corporate defendant has “sizable” sales).

         “Specific” jurisdiction arises when there is an “affiliation between the forum and the underlying controversy.” Goodyear, 564 U.S. at 919; Carefirst of Md., 334 F.3d at 397. To assess specific jurisdiction, the Fourth Circuit considers: “(1) the extent to which the defendant purposefully availed itself of the privilege of conducting activities in the State; (2) whether the plaintiffs' claims arise out of those activities directed at the State; and (3) whether the exercise of personal jurisdiction would be constitutionally reasonable.” Consulting Eng'rs Corp. v. Geometric Ltd., 561 F.3d 273, 278 (4th Cir. 2009) (quoting ALS Scan, Inc. v. Digital Serv. Consultants, Inc., 293 F.3d 707, 712 (4th Cir. 2002)).

         B. Analysis

         The California Defendants argue that this Court does not have general or specific personal jurisdiction over them. ECF 104. Although Plaintiffs appear to concede that there is no basis for general jurisdiction, they maintain that this Court has specific personal jurisdiction over the California Defendants. ECF 102. As bases for personal jurisdiction, Plaintiffs have cited the conspiracy theory of jurisdiction, and four provisions in Maryland's long-arm statute: Maryland Courts and Judicial Proceedings Article (“MJCP”) § 6-103(b)(1) (transacting business), § 6-103(b)(2) (conferring personal jurisdiction over a party who “[c]ontracts to supply goods, food, services, or manufactured products in the State”), § 6-103(b)(3) (causing tortious injury), and § 6-103(b)(4) (causing tortious injury by act or omission outside the state if deriving substantial revenue from “goods, food, services, or manufactured products used or consumed” in Maryland). ECF 32 at 5-6, ECF 40 at 1. For the reasons described below, Plaintiffs have presented a prima facie case that the California Defendants' actions in Maryland gave rise to Plaintiffs' causes of action.

         1. Maryland's Long-Arm Statute

         Under Maryland's long-arm statute, the lynchpin of a plaintiff's assertion of specific jurisdiction is that the claims arise out of acts performed in Maryland. See MJCP § 6-103(a). The statute provides jurisdiction over someone who performs such acts directly or through an agent. See MJCP § 6-103(b). Only one provision of the long-arm statute needs to be satisfied for this Court to exercise jurisdiction. CSS Antenna, Inc. v. Amphenol-Tuchel Electronics, GmbH, 764 F.Supp.2d 745, 748-49 (D. Md. 2011) (citing Bahn v. Chicago Motor Club Ins. Co., 634 A.2d 63, 67 (Md. Ct. Spec. App. 1993)). As noted below, Plaintiffs have made a prima facie showing as to §§ 6-103(b)(1) and 6-103(b)(4).

         Under Section 6-103(b)(1), the Court may exercise personal jurisdiction over a party who “[t]ransacts any business or performs any character of work or service in the State.” To constitute transacting business under this subsection, a defendant's actions must “‘culminate in purposeful activity within the State.'” Bahn, 634 A.2d at 67 (quoting Sleph v. Radtke, 545 A.2d 111, 115, cert. denied, 550 A.2d 381 (Md. 1988)). “Although a defendant need not have been physically present in Maryland, the plaintiff must show ‘some purposeful act in Maryland in relation to one or more of the elements of [the] cause of action.'” Aphena Pharma Solutions-Maryland LLC v. BioZone Labs., Inc., 912 F.Supp.2d 309, 315 (D. Md. 2012) (quoting Talegen Corp. v. Signet Leasing & Fin Corp., 657 A.2d 406, 409 n.3 (Md. Ct. Spec. App. 1995)) (footnotes omitted). Maryland courts construe the phrase “transacting business” narrowly, “requiring, for example, significant negotiations or intentional advertising and selling in the forum state.” Id. at 315.

         Under Section 6-103(b)(4), the Court may exercise personal jurisdiction over a party who causes tortious injury by act or omission outside the state if the party “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.”

         Plaintiffs argue that the California Defendants transacted business in Maryland and derived substantial revenue from business in Maryland by “delegating [their] contractual duties owed to NATJAY” to the Severn Defendants, placing the Severn Defendants “in charge of the ‘catch all' device used for intercepting the Former FunFlicks Email addresses, ” and having an “ongoing and active relationship in the State of Maryland with FF Gaither.” ECF 102 at 2. Plaintiffs rely on the documents produced during jurisdictional discovery and the California Defendants' Answers to Interrogatories to support their claims. Specifically, Plaintiffs highlight the terms of the California Defendants' licensing agreement with NATJAY, and the California Defendants' independent contractor agreement with FF-Severn. ECF 102 at 3-10; ECF 102-1 at FFAV000060-63, FFAV000091-102.

         The Trademark License Agreement between the California Defendants and the Maryland LLC NATJAY imposes several contractual duties on NATJAY, including an initial nonrefundable payment of $230, 000.00, a minimum monthly royalty payment of either 6% of NATJAY's monthly gross sales or $287.50, whichever is greater, a three-year non-competition agreement, a record-keeping requirement of gross sales for a period of seven years, and the provision of such records for inspection at NATJAY's place of business upon notice by the California Defendants. ECF 102-1 at FFAV000091-102. The existence of a license agreement between a non-resident defendant licensor and a Maryland licensee does not automatically confer personal jurisdiction over the defendant, but additional facts that indicate purposeful activity in the state may suffice to subject the defendant to personal jurisdiction. ECF 98 at 9-10 (citing FrenchPorte IP, LLC v. Martin Door Mfg., Inc., Civil Action No. TDC-14-0295, 2014 WL 4094265, at *12 (D. Md. Aug. 14, 2014); Choice Hotels Int'l, Inc. v. Madison Three, Inc., 23 F.Supp.2d 617, 621 (D. Md. 1998)).

         Plaintiffs have provided additional facts that indicate purposeful activity in Maryland related to Plaintiffs' claims of unfair competition and intentional interference with economic relations. The heart of Plaintiffs' case is the allegation that the Defendants used a “catch-all” account to “intercept” emails sent to their former FunFlicks accounts, and then used those emails to usurp business intended for Plaintiffs by referring the customers to NATJAY. In their Answer to Plaintiffs' Interrogatory Number 1, the California Defendants state that “Defendants Matthew Dias, Chad Hunter, and Todd Severn had access to the catch-all account.” ECF 102-3 at 4. They also state that, because more than one person had access to the account, “the identity of the forwarder of any specific email is unclear, unless the sender signed the email, which typically did not occur given the informal nature of the communications.” Id. at 4-5. They do, however, list thirteen emails that were forwarded from the catch-all account to Gaither between March 1, 2018 and February 27, 2019. Id. at 5-6. On eight of the thirteen emails, Severn was listed as an additional recipient. Id. These facts, viewed in the light most favorable to Plaintiffs, establish a prima facie case that California Defendants Dias and Hunter played some role in directing emails intended for Plaintiffs to Gaither and his Maryland FunFlicks licensee, NATJAY, actions which Plaintiffs contend constitute unfair competition and intentional interference with economic relations.

         In addition, the California Defendants' Independent Contractor Agreement (“IC Agreement”) with FF-Severn, and the California Defendants' Interrogatory Answers, reflect a close connection, suggestive of an agency relationship. See ECF 102-1 at FFAV000060-63; ECF 102-3 at 3-16. The IC Agreement provides that Severn's Maryland FunFlicks licensee, or FF-Severn, is paid $50, 000 per year from January 1, 2019, plus 10% commissions of gross sales generated from FF-AV's contracting parties. ECF 102-1 at FFAV000060-63. The IC Agreement also describes the services provided by FF-Severn as “management services, ” and defines FF-Severn as an independent contractor. Id. In their original and supplemental Answers to Plaintiffs' Interrogatories, the California Defendants explain that Severn “has done work related to search engine optimization, website design, maintenance of the catch-all account inbox, new licensee support, licensee business development, and licensee support, ” and that “Severn provided ‘first line of defense' support to all existing licensees, which included fielding questions regarding changes to the website and general operational support.” ECF 102-3 at 13; ECF 102-4 at 4. In 2018, Severn also provided training for two new licensees in Kentucky and Colorado. ECF 102-4 at 4.

         The California Defendants maintain that Severn's independent contractor work is insufficient to create jurisdiction because he “is merely an independent contractor for FunFlicks Audiovisuals, who happens to reside in Maryland and does remote work for FunFlicks Audiovisuals by providing licensee support, and performing work on the website and search engine optimization.” ECF 104 at 12. The label of “independent contractor” does not automatically exclude the possibility of an agency relationship to confer jurisdiction over a nonresident defendant, nor, on the other hand, do an agent's in-state activities automatically confer jurisdiction over a non-resident defendant. See Snyder v. Hampton Indus., Inc., 521 F.Supp. 130, 142 (D. Md. 1981) (“The use of the label ‘independent contractor does not aid in determining whether the plaintiffs' relationship with [defendant] is such that their in-state acts can be attributed to [defendant] for jurisdictional purposes. … The distinguishing factor concerns the principal's right to control the agent's physical conduct.”); Zavian v. Foudy, 747 A.2d 674, 699 (Md. Ct. Spec. App. 2000) (“We are not saying that an agent's in-state activities for a nonresident principal may never be attributed to its principal. We are concluding simply that under the present circumstances, appellant's Maryland activities as agent for the nonresident appellees does not subject them to Maryland's long arm statute.”). The California Defendants rely on Beyond Systems, Inc. v. Kennedy Western Univ., where the court declined to exercise personal jurisdiction over an online education company defendant because “the cause of action-sending unsolicited bulk e-mail- does not arise from Defendants' contacts.” Civil Action No. DKC 2005-2446, 2006 WL 1554847, at *6 (D. Md. May 31, 2006). The court noted “the lack of a showing of an agency relationship between Defendants and the senders of the e-mails in question.” Id. at *8.

         Here, in contrast, the Plaintiffs allege that personal jurisdiction over the California Defendants arises from their “interception of emails directed at Maryland Resident[s], ” and the California Defendants acknowledge both receipt and use of emails that were sent to, among other addresses, Laura Landers's email address, “Laura@FunFlicks.com.” ECF 21 ¶ 42; see ECF 102-3 at 4-6 (“the California Defendants identify the following emails which were deposited into [FF-AV's] catch-all email account after being addressed to either MB@funflicks.com, Events@Funflicks.com, Laura@Funflicks.com, Darrell@Funflicks.com, Kenneth@Funflicks.com, or Chandra@Funflicks.com, and which were subsequently forwarded from the catch-all account to Gaither”). The emails identified by the California Defendants were neither unsolicited nor bulk emails, but instead appear to be specific inquiries for movie rental services. See 102-3 at 5-6. While the exact extent of the California Defendants' involvement in this email redirection, and the revenue derived from it, is still unclear, they do concede that the list of emails representing “11 unique Maryland contacts [] were sent to Gaither by either the California Defendants or Severn from the catch-all account.” Id. at 6. As a result, Plaintiffs have adequately alleged that the California Defendants “derive substantial benefits from NATJAYS [sic] FunFlicks Business” through “royalty payments received from NATJAY” and the California Defendants “providing website/email services, to NATJAY for a fee.” ECF 102 at 3; see ECF 21 ¶ 275 (“By the Defendants intercepting, the UOM FunFlicks E-mail, Mr. Gaither was able to book an event with Megan when she was trying to book an event with Kenneth at UOM.”).

         Taking the allegations and available evidence in the light most favorable to the Plaintiffs, the Court is satisfied that Plaintiffs have made a prima facie showing that the California Defendants have transacted business in Maryland and derived substantial revenue therefrom through their purposeful activity in the state, including their licensee agreement with NATJAY, their relationship with Severn and FF-Severn, and their participation in redirecting emails that were sent to Plaintiffs' former accounts, subjecting them to personal jurisdiction at this stage under Sections 6-103(b)(1) and (b)(4).

         2. Conspiracy Theory of Jurisdiction[4]

         Plaintiffs also assert that the California Defendants are subject to personal jurisdiction under the conspiracy theory of jurisdiction. Under this theory, “an out-of-state party involved in a conspiracy who would lack sufficient, personal, ‘minimum contacts' with the forum state if only the party's individual conduct were considered nevertheless may be subject to suit in the forum jurisdiction based upon a co-conspirator's contacts with the forum state.” Mackey, 892 A.2d at 484. To establish personal jurisdiction under this theory, a plaintiff must show:

(1) two or more individuals conspire to do something
(2) that they could reasonably expect to lead to consequences in a particular forum, if
(3) one co-conspirator commits overt acts in furtherance of the conspiracy, and
(4) those acts are of a type which, if committed by a non-resident, would subject the nonresident to personal jurisdiction under the long-arm statute of the forum state Id. at 486. This theory of jurisdiction also comports with the requirements of constitutional due process. Gold v. Gold, Civil No. JKB-17-483, 2017 WL 2061480, at *2 (D. Md. May 15, 2017)

(citing Mackey, 892 A.2d at 487). If all four of the elements above are present, “a party may fairly be said to have purposefully established minimum contacts in a forum such that exercise of jurisdiction over [the party] would not be ‘random, fortuitous, or attenuated,' thus satisfying constitutional demands.” Id. (quoting Mackey, 892 A.2d at 491).

         As will be discussed fully below, Plaintiffs have alleged a civil conspiracy, in that the California Defendants, the Severn Defendants, and the Gaither Defendants agreed to divert “customers, monies, business revenues, and business opportunities away from Plaintiffs.” ECF 21 ¶¶ 514-522. They have also alleged overt acts by the Defendants, namely their redirection of the emails allegedly intended for Plaintiffs. Id. ¶ 137. To satisfy the second element of the conspiracy theory of jurisdiction, “the required showing is that a reasonable person in the defendant's position would have anticipated a co-conspirator committing an act in furtherance of the conspiracy within the forum jurisdiction.” Gold, 2017 WL 2061480, at *3 (citing Mackey, 892 A.2d at 486). This “hypothetical ‘reasonable person' must form the pertinent expectation at the time the agreement with the co-conspirator was formed.” Id. (quoting Mackey, 892 A.2d at 489). This requirement ensures that the “out-of-forum co-conspirator has ‘purposely availed' herself of the privilege of conducting activities in the forum and therefore has fair warning that she could be subject to suit there.” Id. (citing Mackey, 892 A.2d at 495). Plaintiffs have satisfied this element by alleging that the California Defendants conspired with FunFlicks licensees in Maryland, and they should reasonably have known at the time of the alleged agreement that a portion of the conspiracy was likely to occur in Maryland, as the Severn Defendants and Gaither Defendants resided in and operated their businesses in Maryland.

         Accordingly, Plaintiffs have met their burden of presenting a prima facie showing to establish personal jurisdiction under the conspiracy theory of jurisdiction.

         3. Federal Due Process

         Once a basis has been established for personal jurisdiction under Maryland's long-arm statute, the Court must then decide whether exercise of personal jurisdiction comports with the requirements of the Due Process Clause of the Fourteenth Amendment. The relevant question here is whether an out of state defendant has “certain minimum contacts” with the forum state, “such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.'” Int'l Shoe, 326 U.S. at 316 (quoting Milliken v. Meyer, 311 U.S. 457 (1940)). The Supreme Court has held that “even a single act” between an in-state resident and a non-resident defendant may suffice to establish personal jurisdiction, as long as it creates a “substantial connection” with the forum. Burger King v. Rudzewicz, 471 U.S. 462, 475 n.18 (1985) (quoting McGee v. Int'l Life Ins. Co., 355 U.S. 220, 223 (1957)).

         The Court is satisfied that the Plaintiffs have established a prima facie case that the California Defendants have the requisite minimum contacts with Maryland to comport with federal due process. The allegations of the license agreement with NATJAY, the IC agreement with FF-Severn, and the California Defendants' participation in the redirection of emails all serve to support a substantial connection between the California Defendants and Maryland. See, e.g. A Love of Food I, LLC v. Maoz Vegetarian USA, Inc., 795 F.Supp.2d 365, 371-72 (D. Md. 2011) (finding minimum contacts consistent with due process based on a franchise contract that “produced an elaborate, ongoing relationship between Maryland-based [plaintiff] and New York-based [defendant], despite the fact that the franchise restaurant itself was slated to operate in Washington, D.C.”); Choice Hotels Int'l, Inc., 23 F.Supp.2d at 621 (franchise agreement “imposes continuing significant contractual duties upon the franchisee, e.g., reporting and payment obligations”). Moreover, as alleged, the California Defendants' contacts were not “random, fortuitous, or attenuated, ” but were the result of negotiated and purposeful actions with their Maryland licensees. See Burger King, 471 U.S. at 476 (quoting Keeton v. Hustler Magazine, Inc., 465 U.S. 770. 774 (1984); World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 299 (1980) (internal quotation marks omitted)). Accordingly, under the prima facie standard, the exercise of personal jurisdiction over the California Defendants under Sections 6-103(b)(1) and (b)(4) comports with federal due process.

         The Court is mindful that, with the benefit of full discovery, the Plaintiffs may be unable to show, by a preponderance of the evidence, that the California Defendants' actions suffice to establish personal jurisdiction over them in Maryland. See New Wellington Financial Corp. v. Flagship Resort Development Corp., 416 F.3d 290, 294 n.5 (4th Cir. 2005) (“[a] threshold prima facie finding that personal jurisdiction is proper does not finally settle the issue; plaintiff must eventually prove the existence of personal jurisdiction by a preponderance of the evidence, either at trial or at a pretrial evidentiary hearing”) (emphasis in original) (internal quotation marks and citation omitted). Accordingly, this decision does not preclude the California Defendants from renewing their 12(b)(2) motion after the close of discovery, if appropriate.

         III. Motions to Dismiss

         A. 12(b)(6) Motion ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.