Beyond Systems, Inc. v. Realtime Gaming Holding Co., LLC

• Decision Date: 22 June 2005
• Docket Number: No. 119,119
• Citation: 388 Md. 1,878 A.2d 567
• Parties: BEYOND SYSTEMS, INC. v. REALTIME GAMING HOLDING COMPANY, LLC, ET AL.
• Court: Maryland Court of Appeals

878 A.2d 567

388 Md. 1

BEYOND SYSTEMS, INC. v. REALTIME GAMING HOLDING COMPANY, LLC, ET AL.

No. 119, September Term, 2004.

Court of Appeals of Maryland.

June 22, 2005.

Reconsideration Denied August 8, 2005.

Stephen H. Ring (Stephen H. Ring, P.C., Gaithersburg, on brief), for Appellant.

Sanford M. Saunders, Jr. (Kenneth P. Kaplan, Greenberg Traurig, LLP, Washington, DC), on brief for Appellees.

Argued Before BELL, C.J., RAKER, WILNER, CATHELL, HARRELL, BATTAGLIA and GREENE, JJ.

BATTAGLIA, Judge.

This case arises out of a civil suit premised upon Section 14-3002 of the Commercial Law Article of the Maryland Code, which prohibits conspiring to disseminate unauthorized, false, or misleading information via electronic mail ("e-mail"). Because we determine that Petitioner, Beyond Systems, Inc. ("BSI"), did not establish a prima facie case that Respondents, KDMS International, LLC ("KDMS") and Realtime Gaming Holding Company, LLC ("Realtime Gaming"), possess the requisite minimum contacts amounting to purposefully availing themselves of the benefits of conducting business in Maryland, we agree with the Circuit Court's ruling that the court lacked personal jurisdiction over Respondents. Moreover, we conclude that the Circuit Court did not abuse its discretion by denying Petitioner discovery on the personal jurisdiction issue and striking the amended complaint.

Background

KDMS, a business that develops interactive¹ proprietary software² used in the online gaming industry, is a limited liability company ("LLC") formed under the laws of the State of Delaware, with its principal place of business in Atlanta, Georgia. Realtime Gaming, the holding company for KDMS, is a limited liability company formed under the laws of the State of Georgia with its principal place of business in Atlanta, Georgia. The two businesses share the same President and Chief Executive Officer, Michael Staw.

As part of Realtime Gaming's sales and marketing strategy for the KDMS software, Realtime Gaming entered into an exclusive licensing agreement with Montana Overseas, a Panamanian corporation, by which Montana Overseas would be responsible for issuing licenses for the use of KDMS's software. Through the licensing process with Montana Overseas, windowscasino.com, which is owned by ADLM Ltd. based in St. Helier, Jersey, United Kingdom, obtained the right to use the KDMS software in its online casino. Windowscasino.com is an interactive online casino that promotes only the games designed by KDMS.

In March of 2003, Travis Thom, a resident of Albuquerque, New Mexico, found an advertisement on the Internet for "www.windowscasino.com." The advertisement explained how individuals could become "affiliates" of windowscasino.com for a small investment and make money by referring players to windowscasino.com's website. During the first two weeks of March, Thom contacted windowscasino.com by telephone and spoke to a sales associate for windowscasino.com about becoming an "affiliate." The employee described the relationship with windowscasino.com and informed Thom that he would have to purchase a "Casino-To-Go Private Label Package" for $999.00 plus applicable taxes.

Around March 14, 2003, Thom visited the www.windowscasino.com website and completed an "affiliate" application to make the purchase, which was confirmed the next day by a windowscasino.com employee through e-mail. Upon receipt of the "Casino-To-Go Private Label Package," Thom created a name for his affiliate webpage, www.goldenrhinocasino.com, which he registered in his own name with Yahoo! Domains,³ a service that registers names of websites. Windowscasino.com then designed Thom's webpage, with his input regarding the aesthetics, but not the content or function. Thom's webpage directed players to the windowscasino.com website where gamblers downloaded the software designed by KDMS, which was retrieved from an IP address (Internet Protocol address) registered to KDMS. In return for directing individuals to windowscasino.com, Thom would be compensated with 45% of referred players' losses and up to a $40.00 "bounty" per player who deposited funds to gamble at windowscasino.com.

On April 14, 2003, Thom contracted with a bulk e-mail solicitation service, Omega One Media, Inc., to send 2.5 million unsolicited e-mail advertisements.⁴ He paid windowscasino.com an additional fee to write and design the e-mails. On April 26, 2003, sixteen e-mail addresses used by employees of BSI each received fifteen such unsolicited commercial e-mails over a twenty-four hour period, for a total of 240 e-mails, advertising the Golden Rhino Casino.

On December 31, 2003, BSI filed a complaint against Realtime Gaming, KDMS, and an unknown co-defendant in the Circuit Court for Montgomery County and alleged violations of Maryland Code (2002, 2004 Cum.Supp.), Section 14-3002 of the Commercial Law Article.⁵ On April 16, 2004, Realtime Gaming and KDMS filed a motion to dismiss the complaint for lack of personal jurisdiction, or in the alternative a motion for summary judgment. In support of their motion, Realtime Gaming and KDMS attached an affidavit from their mutual President and CEO, Michael Staw ("Staw") who asserted that Realtime Gaming functions solely as a holding company for KDMS and does not engage in any other business activities, and that KDMS has conducted no business in Maryland. BSI filed a memorandum in opposition to Realtime Gaming and KDMS's motion and attached a supporting affidavit from BSI's owner, Paul Wagner ("Wagner"), in which he asserts various conclusory statements concerning the existence of an agency relationship between Realtime Gaming, KDMS, and windowscasino.com.⁶ On May 21, 2004, Realtime Gaming and KDMS filed a reply memorandum, attempting to refute BSI's allegations.

On May 26, 2004, the Circuit Court held a hearing and, at the hearing's close, stated its intention to dismiss the complaint for lack of personal jurisdiction. On June 2, 2004, the court issued a written order that dismissed BSI's complaint for lack of personal jurisdiction over Realtime Gaming and KDMS and did not specify that BSI would have leave to amend the complaint.⁷ On June 11, 2004, BSI filed a motion for reconsideration with an amended complaint attached. In the amended complaint, BSI made specific allegations regarding the connection between Realtime Gaming, KDMS, windowscasino.com, and Thom through a server and IP address registered to KDMS. It also alleged a significant relationship among Realtime Gaming, KDMS, and a network of sub-licensees, one of which assisted in the transmission of the e-mails at issue. Moreover, it named Travis Thom as an additional defendant who caused the e-mails in question to be sent.

Realtime Gaming and KDMS, in turn, filed a motion opposing BSI's motion for reconsideration and seeking to have the amended complaint stricken. In so doing, Realtime Gaming and KDMS asserted that BSI offered no new facts that would establish personal jurisdiction over them. On September 21, 2004, the Circuit Court denied BSI's motion for reconsideration and granted the motion to strike the amended complaint.

On October 20, 2004, BSI filed its notice of appeal.⁸ Prior to any proceedings in the Court of Special Appeals, BSI, on November 22, 2004, filed a petition for writ of certiorari containing the following questions:

1. Did the trial court err in dismissing Petitioner's claims against Respondents under the Maryland anti-spam statute, § 14-3001 et seq. of the Commercial Law Article of the Annotated Code of Maryland, for initiating, conspiring to initiate, or assisting in the transmission of 240 e-mails advertising Respondents' business, for lack of personal jurisdiction?

2. Did the trial court err in denying Petitioner's request to take discovery as to the nature and extent of Respondents' contacts with Maryland for purposes of personal jurisdiction under the facts described above?

3. Did the trial court err in striking the amended complaint containing detailed allegations of fact, including facts relevant to the issue of personal jurisdiction?

On December 17, 2004, we granted the petition and issued the writ. Beyond Systems, Inc. v. Realtime Gaming Holding Company, LLC, 384 Md. 448, 863 A.2d 997 (2004).⁹ Because we concur with the trial court's determination that BSI has failed to make a prima facie showing of personal jurisdiction by a preponderance of the evidence, we hold that the Circuit Court properly determined that the action could not proceed to trial. Moreover, we determine that the Circuit Court did not abuse its discretion in denying BSI's request for discovery.

Standard of Review

The trial court dismissed BSI's complaint for lack of personal jurisdiction over Realtime Gaming and KDMS under Maryland Rule 2-322(a) and (c), which state in pertinent part:

(a) Mandatory. The following defenses shall be made by motion to dismiss filed before the answer, if an answer is required: (1) lack of jurisdiction over the person, (2) improper venue, (3) insufficiency of process, and (4) insufficiency of service of process. If not so made and the answer is filed, these defenses are waived.

* * *

(c) Disposition. If, on a motion to dismiss for failure of the pleading to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 2-501, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 2-501.

Md. Rule 2-322(a) and (c).

As Judge Paul V. Niemeyer notes in his Maryland Rules Commentary, Third Edition, all of the defenses listed in Maryland Rule 2-322(a) are collateral to the merits and raise questions of law. Judge Paul V. Niemeyer and Linda Shuett, MARYLAND RULES COMMENTARY, THIRD EDITION 205 (2003). If facts are necessary in deciding the motion, the court may consider...