Dudnikov v. Chalk & Vermilion Fine Arts, Inc., 06-1458.

Citation514 F.3d 1063
Decision Date28 January 2008
Docket NumberNo. 06-1458.,06-1458.
PartiesKaren DUDNIKOV, and Michael Meadors, Plaintiffs-Appellants, v. CHALK & VERMILION FINE ARTS, INC., a Delaware corporation, and SevenArts, Ltd., a British corporation, Defendants-Appellees.
CourtUnited States Courts of Appeals. United States Court of Appeals (10th Circuit)

Gregory A. Beck, Public Citizen Litigation Group, Washington, D.C., for Plaintiffs-Appellants.

Scott C. Sandberg, Snell & Wilmer, LLP, Denver, CO, for Defendants-Appellees.

Before McCONNELL, EBEL, and GORSUCH, Circuit Judges.

GORSUCH, Circuit Judge.

Plaintiffs are eBay "power sellers." Through the Internet auction site, they sell a variety of fabrics from their home in Colorado. This case concerns two of plaintiffs' prints, both of which play on famous images by the artist Erté, Symphony in Black and Ebony on. White. While Erté's images depict elegant women walking aquiline dogs, plaintiffs' prints portray Betty Boop next to her aptly named canine companion, Pudgy.

Defendants, owners of the rights to the Erté images, saw plaintiffs' eBay auction page (which disclosed plaintiffs' Colorado location), and came to the conclusion that plaintiffs' prints infringed their copyrights. Defendants promptly contacted eBay in California and successfully suspended plaintiffs' auction, an action that allegedly had adverse consequences for plaintiffs' business and future dealings with the auction site. By e-mail, defendants also threatened plaintiffs with suit in federal court. Before defendants could carry out that threat, however, plaintiffs initiated this action in federal district court in Colorado seeking a declaratory judgment that, their prints do not infringe defendants' copyrights. Defendants responded with a motion to dismiss, arguing that the court lacked personal jurisdiction over them. The district court concurred and dismissed plaintiffs' complaint. For reasons we explore below, we reverse.

I

Taken in the light most favorable to plaintiffs, as they must be at this stage in the litigation, the facts of this case establish that Karen Dudnikov and Michael Meadors, a husband-and-wife team, operate a small and unincorporated Internet-based business from their home in Colorado. Together, they sell fabric and handmade crafts such as aprons, blankets, and placemats under the name "Tabber's Temptations." The majority of their income is derived from selling these products on eBay, whose operations are based in California. Tabber's Temptations is described by eBay as a "power seller," and has received over 6,000 "feedback messages" in the past year from its eBay customers, and over 13,000 positive feedback messages since 1998. Ms. Dudnikov's and Mr. Meadors's eBay auction pages clearly list the location of their merchandise as Hartsel, Colorado, and link to their personal website which contains more information about their business, including its location in Colorado.

In October 2005, Ms. Dudnikov and Mr. Meadors launched an auction on eBay offering fabric for sale with the imprint of the cartoon character Betty Boop wearing various gowns. One of these gowns, Ms. Dudnikov and Mr. Meadors concede for purposes of defendants' motion to dismiss, is easily recognizable as a design of the artist known as Erté, a 20th century Russian-born French artist and fashion designer. In Erté's original works, Symphony In Black and Ebony On White, a tall, slender woman is pictured wearing a floor length form-fitting dress that trails her feet, and holding the leash of a thin, regal dog. The fabric offered for sale by Ms. Dudnikov and Mr. Meadors replaced the rather elegant woman in Erté's images with the rather less elegant Betty Boop, and substituted Erté's svelte canine with Betty Boop's pet, Pudgy.

SevenArts, a British corporation, owns the copyright in these Erté works. Chalk & Vermilion, a Delaware corporation with its principal place of business in Connecticut, is SevenArts' American agent. Chalk & Vermilion is also a member of eBay's "Verified Rights Owner" ("VeRO") program.1 Under this program, eBay will automatically terminate an ongoing auction when it receives a notice of claimed infringement ("NOCI") from a VeRO member stating, under penalty of perjury, that it has a good-faith belief that an item up for auction infringes its copyright. The complaint, if unresolved, can also result in the suspension of the seller's account. Under the VeRO program, a targeted seller may file a "counter notice" with eBay contesting the validity of the copyright claim. Upon receipt of such a filing, eBay notifies the initial complainant that it will reinstate the contested auction in 10 days unless it is notified that there is pending legal action seeking to adjudicate the parties' rights. If the complaining party does initiate legal proceedings within 10 days, eBay will continue to suppress the contested auction pending the outcome of litigation.

Invoking the VeRO program on behalf of SevenArts, Chalk & Vermilion filed a NOCI with eBay contesting plaintiffs' sale of the Betty Boop fabric. In turn, eBay cancelled the auction and notified Ms. Dudnikov and Mr. Meadors of the NOCI. Ms. Dudnikov then contacted Chalk' & Vermilion and SevenArts by e-mail to ask that the NOCI be withdrawn. Ms. Dudnikov indicated that she would voluntarily refrain from relisting the disputed fabric, but said that she was worried about having a black mark on her eBay record as a result of having a NOCI filed against her. "I make my living on eBay. I have a 99.9% satisfaction rating. . . . Your action puts my business in danger of going under. Nothing to you perhaps but everything to me." Applt's App. at 39. When SevenArts declined to withdraw the NOCI, plaintiffs submitted a counter notice to eBay contesting the validity of SevenArts' copyright claim. In response, SevenArts notified Ms. Dudnikov by e-mail that, in order to prevent the auction from being reinstated under eBay procedures, it intended to "file an action in the federal court[s]" within 10 days. Id. at 44.

Six days after receiving this notice, and before defendants followed through on their threat to sue, Ms. Dudnikov and Mr. Meadors filed a pro se complaint in the United States District Court for the District of Colorado. Their suit sought a declaratory judgment clarifying that their sale of the contested Betty Boop fabric did not infringe defendants' copyrights, and an injunction preventing defendants from interfering with future sales of the fabric.

SevenArts and Chalk & Vermilion responded by entering a special appearance and moving to dismiss for lack of personal jurisdiction.2 In a very thorough opinion, the magistrate judge assigned the case for a recommended disposition, see 28 U.S.C. § 636(b)(1)(A), reasoned that, while the court lacked general jurisdiction over defendants, specific jurisdiction did exist. Defendants objected to the magistrate judge's recommendation and the district court sustained their objection, held that neither specific nor general jurisdiction existed, and thus granted defendants' motion to dismiss. Ms. Dudnikov and Mr. Meadors now appeal the dismissal of their action, though they contest only the district court's disposition of the specific jurisdiction question.

II

In conducting our review, we are mindful that plaintiffs bear the burden of establishing personal jurisdiction. Intercon, Inc. v. Bell Atl. Internet Solutions, Inc., 205 F.3d 1244, 1247 (10th Cir.2000). The extent of their burden, and the scope of our appellate review, however, depend in part on the nature of the district court's response to defendants' motion seeking dismissal for lack of personal jurisdiction. A district court has discretion to resolve such a motion in a variety of ways—including by reference to the complaint and affidavits, a pre-trial evidentiary hearing; or sometimes at trial itself.3

When, as here, personal jurisdiction is found wanting on the basis of the complaint and affidavits, our review of the district court's dismissal is de novo, taking as true all well-pled (that is, plausible, non-conclusory, and non-speculative, see Bell Atl. Corp. v. Twombly, ___ U.S. ___, 127 S.Ct. 1955, 1964-65, 167 L.Ed.2d 929 (2007)) facts alleged in plaintiffs' complaint. Similarly, any factual disputes in the parties' affidavits must be resolved in plaintiffs' favor. FDIC v. Oaklawn Apartments, 959 F.2d 170, 174 (10th Cir.1992). We have further held that, at this stage, plaintiffs need only make a prima facie showing of personal jurisdiction. Wenz v. Memery Crystal, 55 F.3d 1503, 1505 (10th Cir.1995).4

Turning to the test for personal jurisdiction to which these rules of review apply, our analysis begins with two questions. First, we ask whether any applicable statute authorizes the service of process on defendants. Second, we examine whether the exercise of such statutory jurisdiction comports with constitutional due process demands. Trujillo v. Williams, 465 F.3d 1210, 1217 (10th Cir.2006).

On the first of these scores, neither the federal Copyright Act, 17 U.S.C. § 101 et seq., nor the Declaratory Judgment Act, 28 U.S.C. § 2201 et seq, provides for nationwide service of process, so Fed.R.Civ.P. 4(k)(1)(A) commands the district court (and us) to apply the law of the state in which the district court sits. Colorado's long-arm statute, in turn, confers the maximum jurisdiction permissible consistent with the Due Process Clause. Archangel Diamond Corp. v. Lukoil, 123 P.3d 1187, 1193 (Colo.2005). Thus, in our case, the first, statutory, inquiry effectively collapses into the second, constitutional, analysis.

The Supreme Court has held that, to exercise jurisdiction in harmony with due process, defendants must have "minimum contacts" with the forum state, such that having to defend a lawsuit there would not "offend traditional notions of fair play and substantial justice." Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945) (internal quotation marks omitted). Because a state's...

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