Citgo Petroleum Corp. v. MTI Connect, LLC
| Decision Date | 18 August 2020 |
| Docket Number | Appeal No. 2018AP1555 |
| Citation | 2020 WI App 57,394 Wis.2d 126,949 N.W.2d 577 |
| Parties | CITGO PETROLEUM CORPORATION, Plaintiff-Respondent, v. MTI CONNECT, LLC d/b/a Black Canyon, Defendant, mGage, LLC, Defendant-Appellant. |
| Court | Wisconsin Court of Appeals |
On behalf of the defendant-appellant, the cause was submitted on the briefs of Thomas M. Burnett and Malinda J. Eskra of Reinhart Boerner Van Deuren s.c. in Milwaukee.
On behalf of the plaintiff-respondent, the cause was submitted on the brief of Scott C. Solberg and Gregory Schweizer of Elmer Stahl LLP in Chicago, Illinois and Trevor J. Will and Gregory N. Heinen of Foley & Lardner LLP in Milwaukee.
Before Brash, P.J., Dugan and Gundrum, JJ.
¶1 mGage, LLC, appeals the trial court's nonfinal order denying its motion to dismiss CITGO Petroleum Corporation's complaint on the grounds of lack of personal jurisdiction.1 The sole issue on appeal is whether mGage is subject to specific personal jurisdiction in Wisconsin.
¶2 mGage argues that the trial court erred in finding personal jurisdiction under Wisconsin's long-arm statute, WIS. STAT. § 801.05, and erred in finding that mGage's due process rights were not violated because specific jurisdiction exists in this case. For the reasons stated below, we agree with mGage that exercising personal jurisdiction over mGage would violate its due process rights.2 We, therefore, reverse and remand with directions that mGage's motion be granted.
The parties
¶3 MTI Connect, LLC, doing business as Black Canyon, is a Wisconsin limited liability company with its principal place of business in Milwaukee. MTI is a mobile messaging company that carries out marketing campaigns for its clients, which include text messaging components.3
¶4 CITGO is a Delaware corporation with its principal place of business in Texas. In 2014, CITGO retained MTI to administer a promotional texting program.
¶5 mGage, a limited liability company organized under Delaware law with its principal place of business in Atlanta, Georgia, is a mobile messaging company that assists clients in communicating via text messaging with the client's customers through cellular telephones, electronic tablets, and other mobile devices. mGage permits its clients to use mGage's proprietary messaging platform, which allows those clients to create, manage, send, and receive text messages to and from their customers.
¶6 mGage's clients reach its platform through its website portal that permits access to the platform using login credentials provided by mGage. An mGage client accesses the platform and enters instructions as to how it wants to conduct a text messaging campaign. mGage has contractual relationships with telecommunications carriers who ultimately deliver the text messages through the mGage gateway to recipients’ individual mobile devices. The portal used by mGage's clients is hosted on servers in Los Angeles, California. The software and hardware comprising mGage's platform are also located in California.
¶7 Although both mGage and MTI are mobile messaging companies, MTI does not have any contracts with carriers under which MTI could route its clients’ text messages to the carriers. In this case, MTI contracted with mGage to route MTI's clients’ text messages to the carriers and the carriers would then deliver the messages to the recipients.
CITGO's contract with MTI
¶8 Beginning in 2015, CITGO sponsored a number of text-to-win sweepstakes at various concert venues, amusement parks, and other smaller events, as well as contests advertised at gas stations. One purpose of the contests was to obtain entrants’ mobile phone numbers for future text-based promotions.
¶9 Pursuant to the CITGO/MTI contract, MTI was the administrator of CITGO's text messaging programs. Each sweepstakes program was supposed to employ a double opt-in protocol whereby the contestants were required to "Reply ‘Y’ " to a confirmatory text that, among other things, solicited each individual's consent to receive future text messages from CITGO as required by federal law.4
The Florida lawsuit
¶10 In August, October, and November 2016, using mGage's text-messaging service, MTI sent text messages on CITGO's behalf to tens of thousands of people whose mobile phone numbers MTI obtained during the sweepstakes contests. An individual who received those text messages filed a federal class action lawsuit in November 2016 against CITGO in a Florida federal district court, alleging claims under the Telephone Consumer Protection Act of 1991 (TCPA), 47 U.S.C. § 227.5 From discovery documents that CITGO obtained in the Florida federal class action, CITGO learned that the plaintiff and tens of thousands of other sweepstakes entrants did not receive the confirmatory "Reply ‘Y’ " opt-in text, contrary to the double opt-in protocol that CITGO had authorized and approved and that MTI had promised to use.
CITGO's lawsuit against mGage
¶11 After settling the Florida federal class action for eight million dollars plus three hundred thousand dollars in costs, CITGO commenced this action in Wisconsin against MTI and mGage seeking to recover the amounts that it paid to settle the Florida federal class action. As to mGage, CITGO alleges that it breached its duty as a subagent, was negligent, and made negligent and strict liability misrepresentations.
MTI's contract with mGage
¶12 MTI and mGage entered into a contract on January 1, 2016, which gave MTI the right to access and use mGage's platform that allowed MTI to create, manage, send, and receive text messages to and from those individuals who received MTI's text messages. Pursuant to the contract, CITGO or MTI created the text messages for CITGO's text messaging program using mGage's platform located in California. Then pursuant to the contract mGage routed MTI's text messages to the carriers and the carriers then delivered the text messages to the individuals that MTI identified. We discuss the MTI agreement in further detail below.
Procedural history
¶13 CITGO filed this suit on October 23, 2017, against MTI and mGage. On February 22, 2018, mGage filed a motion to dismiss for lack of personal jurisdiction. CITGO filed a response to the motion and mGage filed a reply. The trial court held a motion hearing on June 12, 2018 and, thereafter, on August 1, 2018, issued a written decision denying mGage's motion. The trial court found that CITGO had established personal jurisdiction under the Wisconsin long-arm statute, WIS. STAT. § 801.05(5), and that the exercise of personal jurisdiction in this case satisfies due process concerns because mGage purposefully established "minimum contacts" in Wisconsin.
¶14 This appeal followed.
¶15 CITGO argues that the trial court properly found that specific personal jurisdiction over mGage existed under Wisconsin's long-arm statute and that exercising personal jurisdiction over mGage was proper under constitutional principles of due process. mGage argues that both of these findings were in error. We conclude that CITGO failed to show that mGage has sufficient minimum contacts with Wisconsin to satisfy the Fourteenth Amendment's due process clause and, therefore, the trial court erred in denying mGage's motion to dismiss.
¶16 Both parties agree that whether a party is subject to personal jurisdiction in Wisconsin is a question of law, which this court reviews de novo. See Rasmussen v. Gen. Motors Corp ., 2011 WI 52, ¶14, 335 Wis. 2d 1, 803 N.W.2d 623. A court decides this issue using a two-step inquiry. See id. , ¶16 ; Kopke v. A. Hartrodt S.R.L. , 2001 WI 99, ¶8, 245 Wis. 2d 396, 629 N.W.2d 662. First, the court determines whether the defendant is subject to personal jurisdiction under Wisconsin's long-arm statute, WIS. STAT. § 801.05. See Kopke , 245 Wis. 2d 396, ¶8, 629 N.W.2d 662. Second, if the court determines that the statute is satisfied, it then determines "whether the exercise of jurisdiction comports with due process requirements." See id . CITGO "has a ‘minimal burden’ of showing that the statutory and constitutional requirements are met." See Rasmussen , 335 Wis. 2d 1, ¶17, 803 N.W.2d 623 (citation omitted). "The limits of due process are ... established by the rules set forth in the decisions of the United States Supreme Court." Salfinger v. Fairfax Media Ltd. , 2016 WI App 17, ¶14, 367 Wis. 2d 311, 876 N.W.2d 160 (citing Kopke , 245 Wis. 2d 396, ¶22, 629 N.W.2d 662 ; ellipses in Kopke ).
¶17 There are two types of personal jurisdiction—general and specific—that can satisfy the requirements of due process. See Segregated Account of Ambac Assurance Corp. v. Countrywide Home Loans, Inc. , 2017 WI 71, ¶¶10-11, 376 Wis. 2d 528, 898 N.W.2d 70. CITGO does not argue that mGage is subject to general personal jurisdiction.6 Rather, the issue here is whether mGage is subject to specific jurisdiction. Specific jurisdiction exists where the action before the court arises from or relates to the defendant's contacts with the forum state. Tamburo v. Dworkin , 601 F.3d 693, 702 (7th Cir. 2010). Specific personal jurisdiction only exists where the defendant's contacts with the forum state "directly relate to the challenged conduct or transaction." Id.
¶18 "The Due Process Clause of the Fourteenth Amendment limits the power of a state court to render a valid personal judgment against a nonresident defendant." World-Wide Volkswagen Corp. v. Woodson , 444 U.S. 286, 291, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980). "[A] state court may exercise personal jurisdiction over a nonresident defendant only so long as there exist ‘minimum contacts’ between the defendant and the forum State." Id. (citation omitted). "[T]he defendant's contacts with the forum State must be such that maintenance of the suit ‘does not offend traditional notions of fair play and substantial justice.’ " Id. at 292, 100 S.Ct. 559 ()....
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