EIQNETWORKS INC. v. BHI ADVANCED INTERNET SOLUTIONS INC.

• Decision Date: 29 July 2010
• Docket Number: Civil Action No. 2009-11350-RBC.
• Citation: 726 F.Supp.2d 26
• Parties: EIQNETWORKS, INC., Plaintiff, v. BHI ADVANCED INTERNET SOLUTIONS, INC., Defendant.
• Court: U.S. District Court — District of Massachusetts

726 F.Supp.2d 26

EIQNETWORKS, INC., Plaintiff,

v.BHI ADVANCED INTERNET SOLUTIONS, INC., Defendant.

Civil Action No. 2009-11350-RBC.

United States District Court,D. Massachusetts.

July 29, 2010.

Ryan C. Siden, Siden & Associates, PC, Boston, MA, for Plaintiff.

Mitchell J. Matorin, Matorin Law Office LLC, Needham, MA, for Defendant.

MEMORANDUM AND ORDER ON DEFENDANT'S MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION OR, IN THE ALTERNATIVE, TO TRANSFER (# 19)

COLLINGS, United States Magistrate Judge.

I. Introduction

On August 12, 2009, plaintiff eIQnetworks, Inc. (“EIQ”) filed a four-count complaint (# 1) against defendant BHI Advanced Internet Solutions, Inc., (“BHI”). Specifically, the plaintiff alleges a breach of contract/default in payment claim in Count I, a breach of contract/anticipatory repudiation claim in Count II, a breach of the covenant of good faith and fair dealing claim in Count III, and an unjust enrichment/quantum meruit claim in Count IV. On October 13, 2009, BHI filed an answer (# 7) to the complaint together with a nine-count counterclaim alleging claims for breach of contract (Count I); breach of the covenant of good faith and fair dealing (Count II); unjust enrichment (Count III); intentional or negligent misrepresentation (Count IV); fraud (Count V); promissory estoppel (Count VI); violation of Mass. Gen. L. c. 93A (Count VII); breach of express warranty, Mass. Gen. L. c. 106, § 2-313 (Count VIII); and breach of the implied warranty of fitness for a particular purpose, Mass. Gen. L. c. 106 § 2-315. EIQ duly filed an answer to the counterclaim on November 2, 2009.(# 9)

On March 1, 2010, BHI filed a motion to dismiss for lack of personal jurisdiction or, in the alternative, to transfer (# 19) along with a memorandum (# 20) in support and a declaration (# 21) with exhibits. EIQ filed an opposition (# 23) to the dispositive motion and a declaration (# 24) with exhibits on March 19, 2010. Ten days later BHI filed a reply brief (# 27) and, with leave having been granted, the plaintiff filed a sur-reply (# 29) on April 29, 2010. With the record complete, the motion to dismiss is poised for resolution.

II. The Facts

EIQ is a Massachusetts corporation engaged in the business of security and compliance management software. (# 1 ¶¶ 1-2) BHI is a Minnesota corporation “that provides secure, high-performance Internet hosting and security services” including “a package of services” called “SecureConnect®” which “is a comprehensive, turn-key solution to help companies comply with Payment Card Industry (“PCI”) Data Security Standards (“DSS”).” (Declaration of David Perrill # 21 ¶ 21 ¹ )

On or about June 21, 2005, Julie Wisnewski (“Wisnewski”) of EIQ contacted David Price (“Price”) of BHI after Price participated in a webinar about EIQ's software. (Declaration of Michael Sullivan # 24 ¶ 4) About a week later on June 30, 2005, Wisnewski called Price to follow up on BHI's potential interest in EIQ's software, at which time Price indicated that he did not then have time to evaluate EIQ's product. (# 24 ¶ 5) In another follow-up telephone call initiated by Wisnewski on August 5, 2005, Price advised that BHI was not currently evaluating any software and suggested Wisnewski call him back in September. (# 24 ¶ 6) On October 19, 2005, Wisnewski called Price again and was told that BHI was not then interested in EIQ's software. (# 24 ¶ 7)

On February 16, 2006, David Glenn (“Glenn”) of EIQ called Price to follow up on Wisnewski's previous contacts, but was advised that BHI would not be looking at the software until early the next year. (# 24 ¶ 8) The following day, February 17, 2006, Helena Antilla (“Antilla”) of EIQ sent an e-mail to Price about other of EIQ's software offerings. (# 24 ¶ 9) Antilla again communicated with Price on March 6, 2006 in an attempt to discuss EIQ's software with him. (# 24 ¶ 10)

On August 8, 2007, the Vice President of Field Operations at EIQ sent an unsolicited e-mail to David Price at BHI promoting EIQ's software and requesting that BHI contact him to explore the creation of “a mutually beneficial partnership.” (# 21 ¶ 6 and Exh. 1) BHI did not respond to the e-mail. (# 21 ¶ 6) BHI received another e-mail from EIQ on October 9, 2007, to which it did not reply. (# 21 ¶ 7)

EIQ's Regional Sales Manager, Paul Mayo (“Mayo”), sent an e-mail to BHI's sales department on January 15, 2008, requesting “to schedule an introductory call with the most appropriate people about partnering with your company.” (# 21 ¶ 8 and Exh. 4)

In early May of 2008 Phil DeMeo (“DeMeo”), a Senior Account Manager at EIQ, had a telephone conversation with Eric Humphries (“Humphries”) at BHI about EIQ's products. (# 24 ¶ 11) DeMeo followed up this telephone call with an e-mail to Humphries on May 13, 2008. (# 24 ¶ 12) On June 3, 2008, DeMeo sent Humphries an e-mail with a quote attached. (# 24 ¶ 13)

Two weeks later on June 17, 2008, Mayo from EIQ had a telephone conversation with Perrill of BHI to discuss a potential sale of EIQ's software. (# 24 ¶ 14) In response to BHI's questions about EIQ's warranty, on June 18, 2008, Mayo e-mailed Perrill and Humphries certain information. (# 24 ¶ 15) EIQ representatives John Linkous (“Linkous”) and Mayo held a one-hour conference call with BHI's Perrill and Humphries on June 25, 2008, to discuss EIQ's software products and PCI DSS compliance. (# 24 ¶ 16)

On June 30, 2008, BHI's Perrill e-mailed EIQ's Mayo asking that EIQ's 90-day warranty which Perrill had apparently requested during the June 25th conference call be changed to a 90-day money back guarantee. (# 24 ¶ 17) That same day Mayo responded to Perrill, stating that EIQ would not give a money back guarantee. (# 24 ¶ 18) In turn on June 30th Perrill sent DeMeo by fax a signed copy of the price quote to purchase EIQ's software with the provision that “[t]his agreement is signed per the terms set in e-mails dated 6/30/2008 from Paul Mayo.” (# 21 ¶ 10; # 24 ¶ ¶ 19, 21 and Exh. E)

On July 1, 2008, the “Orders” department at EIQ sent Perrill an e-mail notifying him that BHI's order for the software had been placed. (# 24 ¶ 22) Upon receiving an e-mail invoice attachment from EIQ on July 7, 2008, Perrill e-mailed Mayo to have the invoice redone to reflect “the updated pay schedule.” (# 21 ¶ 11; # 24¶ 23 and Exh. G) On July 20, 2008, Perrill signed a credit card processing authorization on behalf of BHI authorizing EIQ to charge $7,000 to BHI's credit card; Perrill e-mailed the authorization back to EIQ. (# 21 ¶ 12; # 24 ¶ 25)

Mayo of EIQ e-mailed Perrill at BHI on July 30, 2008 to remind him that it was the last date on which the order for EIQ software could be cancelled. (# 24 ¶ 28) On even date, Perrill responded to Mayo by e-mail, stating that he thought “all was well” and “we're excited to do business.” (# 24 ¶ 29) Mayo replied that same day, thanking Perrill for his confirmation (# 25 ¶ 27) to which Perrill responded by return e-mail on July 31, 2008. (# 24 ¶ 26) ²

Between October 14, 2008 and January 5, 2009, BHI contacted EIQ eight times seeking technical support to which EIQ responded. (# 21 ¶ 13; # 24 ¶ ¶ 31-42 ³ ) EIQ's Mayo contacted BHI's Perrill in January, 2009 when BHI's credit card was rejected for payment, and Perrill responded by e-mail that EIQ should forward an invoice and BHI would pay by check. (# 24 ¶ ¶ 43-46) On February 5, 2009, BHI contacted EIQ via its technical support line for help. (# 24 ¶ 47)

When Mayo e-mailed Perrill on May 5, 2009 regarding a late payment, Perrill e-mailed back on May 11, 2009 to set up a conference call. (# 24 ¶ ¶ 49, 50) During the May 13, 2009 telephone call between Mayo and Perrill, Perrill stated that EIQ's product did not work and that BHI had moved on and no longer used it. (# 24 ¶ 51) Perrill responded to an EIQ e-mail requesting information on May 20, 2009. (# 24 ¶ ¶ 52-3)

BHI is a Minnesota corporation with a principal place of business in Minnesota. (# 1 ¶ 3; # 7 ¶ 3) BHI is not registered to do business nor does it have a registered agent in the Commonwealth. (# 21 ¶ 16) BHI has no offices, telephones or bank accounts in Massachusetts. (# 21 ¶ 16) The BHI website is a passive site that provides information about BHI's products and services, but does not sell them; it is available to internet users worldwide and does not target any particular state such as Massachusetts. ⁴ (# 21 ¶ 18) BHI does not solicit customers in the Commonwealth and it does not advertise specifically in Massachusetts although, as noted, its website is available worldwide. (# 21 ¶ 20) In his declaration, Perrill states that “[a]t no time did BHI employees travel to Massachusetts in connection with the negotiation or purchase of the eIQ software or in connection with BHI's efforts to get eIQ to provide the functionality that it had promised to BHI.” (# 21 ¶ 15)

BHI does have four customers in Massachusetts: “[t]hree are local franchisees of YUM! Brands (parent of KFC/A & W Root Beer and Taco Bell), and the fourth is Emmanuel College.” (# 21 ¶ 20) BHI provides services remotely to these clients over the Internet from Minnesota, basically scanning their computers for security vulnerabilities, security maintenance services, etc. (# 21 ¶ 20) In total BHI receives less than two hundred dollars monthly from these four clients as recurring revenue for services provided. (# 21 ¶ 20)

III. The Legal Standard

EIQ bears the burden of proving that BHI is subject to the jurisdiction of Massachusetts courts. Adams v. Adams, 601 F.3d 1, 4 (1 Cir., 2010); Astro-Med, Inc. v. Nihon Kohden America, Inc., 591 F.3d 1, 8 (1 Cir., 2009); Massachusetts School of Law at Andover, Inc. v. American Bar Association, 142 F.3d 26, 34 (1 Cir., 1998). To meet this burden it must be shown that the defendant is subject to jurisdiction under the Massachusetts long-arm statute, Mass. Gen. L. c. 223A, and under the strictures of constitutional due process. ⁵ Harlow v. Children's Hospital, 432...