Fenn v. Mleads Enterprises, Inc.

• Decision Date: 10 February 2006
• Docket Number: No. 20041072.,20041072.
• Citation: 2006 UT 8,137 P.3d 706
• Parties: Brittney FENN, on behalf of herself and all others similarly situated, Plaintiff and Respondent, v. MLEADS ENTERPRISES, INC.; and John Does one through ten whose true names are unknown, Defendants and Petitioner.
• Court: Utah Supreme Court

Page 706

137 P.3d 706

2006 UT 8

Brittney FENN, on behalf of herself and all others similarly situated, Plaintiff and Respondent, v.MLEADS ENTERPRISES, INC.; and John Does one through ten whose true names are unknown, Defendants and Petitioner.

No. 20041072.

Supreme Court of Utah.

February 10, 2006.

COPYRIGHT MATERIAL OMITTED

Denver C. Snuffer, Jr., Sandy, Jesse L. Riddle, Draper, for plaintiff.

Jill L. Dunyon, Salt Lake City, Derek A. Newman, Roger M. Townsend, Venkat Balasubramani, Seattle, WA, for defendants.

WILKINS, Associate Chief Justice:

¶ 1 In this case, we are asked to consider whether due process permits a Utah court to exert personal jurisdiction over a defendant who sends an email without knowledge of the residence of the recipient or the location at which the recipient will retrieve the message.The court of appeals concluded that Utah may exert jurisdiction under the given circumstances in this case.We disagree and reverse.

FACTUAL AND PROCEDURAL BACKGROUND

A.FACTUAL BACKGROUND

¶2 When determining whether the trial court correctly granted a motion to dismiss, we"`accept the factual allegations in the complaint as true and consider them, and all reasonable inferences to be drawn from them, in the light most favorable to the nonmoving party.'"¹Mleads is an eight-employee closely-held corporation located in Arizona.It contracts with third-party marketing companies who advertise Mleads's services to customers through email solicitations.Recipients of those emails may complete an application requesting more information from Mleads regarding particular loans.Mleads subsequently provides the applicant with an appropriate institution for further financial assistance with home loans and mortgages.Mleads maintains an office solely in Arizona and conducts most of its business in Arizona, although business activity within Utah produces approximately 1% of its revenue.Mleads is not licensed to conduct business in Utah nor does it employ any Utah-based employees or agents.Mleads does not recruit employees or agents in Utah and does not advertise in any Utah newspapers, magazines, or other forms of Utah-based media.Its advertisement to Utahns has been strictly through unsolicited email over the Internet.Mleads has no bank accounts in Utah and is not subject to taxation in Utah.

¶3Brittney Fenn, a Utah resident, received an unsolicited email advertisement from Mleads that she opened while living in Utah.On January 3, 2004, Fenn filed a two-page complaint, alleging that Mleads had violated the Unsolicited Commercial and Sexually Explicit Email Act (the Act), which required the characters "ADV" in the subject line of unsolicited commercial email.²The Utah Act permitted recipients of non-complying emails to recover the lesser of $10 per email or $25,000 per day and reasonable attorney fees and costs.³Fenn's complaint presented only facts regarding this particular email sent to Fenn and failed to discuss the details of Mleads's general business contacts with Utah.

¶4 One month after Fenn filed her complaint, the Utah Legislature passed a bill to repeal the Act because the federal government had passed "Controlling the Assault of Non-solicited Pornography and Marketing"(CAN-SPAM), which preempted the Utah Act.⁴

B.PROCEDURAL BACKGROUND

¶5The district court dismissed the case for lack of specific personal jurisdiction, finding "that there [were] insufficient minimum contacts between Defendant and this forum to warrant exercise of personal jurisdiction over Defendant."The district court further explained that the "complaint's sole allegation with respect to jurisdiction is that `Defendant sent, or caused to be sent, to plaintiff an unsolicited commercial e-mail,' which, according to Plaintiff establishes this Court's jurisdiction under Utah Code Ann. § 13-36-101(Supp.2002)."The court observed that although Fenn argued for personal jurisdiction over Mleads, Fenn failed to claim and provide evidence that the court could exercise general personal jurisdiction over Mleads.Rather, Fenn alleged that "the Act itself, as well as Utah's long-arm statute, provide a basis for specific personal jurisdiction over Defendant."

¶6The court of appeals also correctly understood Fenn's arguments to be based on specific jurisdiction, noting that "[t]he plaintiff bears the burden of establishing personal jurisdiction over the defendant.Fenn does not allege that Utah could exercise general personal jurisdiction over Mleads.Thus, we consider only whether Fenn established that the court could exercise specific personal jurisdiction."⁵Applying the specific jurisdiction analysis, the court of appeals held that sending one email to a resident of Utah satisfies both the Utah long-arm statute and the minimum contacts required by due process.Accordingly, the court of appeals vacated the dismissal and remanded to the district court.

ANALYSIS

¶7 The question before this court is whether the court of appeals erred in reversing the district court's dismissal for lack of personal jurisdiction.An appeal from a pretrial jurisdictional decision made only on documentary evidence presents legal questions which we review for correctness.⁶

¶ 8 Once a defendant raises lack of personal jurisdiction as a defense, the plaintiff must establish personal jurisdiction with adequate evidence.⁷To meet this burden, the plaintiff must demonstrate either specific or general jurisdiction.⁸Here, where Plaintiff Fenn relies on specific jurisdiction, personal jurisdiction is only proper if we determine that (1) the Utah long-arm statute extends to defendant's acts or contacts, (2)plaintiff's claim arises out of those acts or contacts, and (3) the exercise of jurisdiction satisfies the defendant's right to due process under the United States Constitution.⁹

¶ 9 Both parties agree that the Utah long-arm statute¹⁰ extends to Mleads's actions in this case and that the Plaintiff's claim arises out of those acts or contacts.Hence, we granted certiorari only to review the due process analysis of the court of appeals in regards to the email sent to Fenn.Mleads contends that due process prohibits the exercise of personal jurisdiction for two reasons: (1) Mleads lacks minimum contacts with Utah and (2) an exercise of jurisdiction based on one email would be unfair and unreasonable.We agree and reverse.

I.THE ASSERTION OF JURISDICTION VIOLATES THE DUE PROCESS REQUIRED BY THE CONSTITUTION

¶ 10 The Due Process Clause of the Fourteenth Amendment declares that no state shall "deprive any person of life, liberty, or property, without due process of law."¹¹In determining whether a state's exercise of jurisdiction over a non-resident defendant comports with due process, so as not to deprive the party of life, liberty, or property, the United States Supreme Court has determined that

due process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend the "traditional notions of fair play and substantial justice."¹²

Thus, a Utah state court may assert specific personal jurisdiction over a foreign defendant only if (1)the defendant has minimum contacts with Utah and (2) the assertion of jurisdiction would not offend the traditional notions of fair play and substantial justice.¹³

A. Mleads Lacks Sufficient Minimum Contacts Arising Out of This Claim

¶11We first review whether Mleads's act of sending this one email to Fenn established minimum contacts between Mleads and Utah.Mleads argues that it did not, and we agree.The activity that gave rise to this claim, namely the sending of an unsolicited email advertisement, created an insubstantial contact with Utah under the federal due process analysis.

¶12 AUtah court may not exert jurisdiction unless the defendant's contacts create a "`substantial connection' with the forum state."<sup>14</sup>The fact that the contact with Utah occurred via the Internet does not change the analysis."Traditionally, when an entity intentionally reaches beyond its boundaries to conduct business with foreign residences, the exercise of specific jurisdiction is proper,"<sup>15</sup> and "[d]ifferent results should not be reached simply because business is conducted over the Internet."<sup>16</sup>Nevertheless, "[t]he `minimum contacts' standard is not susceptible of mechanical application, and instead, involves an ad hoc analysis of the facts,"¹⁷ particularly when dealing with the Internet because emails and websites present unique and complicated problems for jurisdictional analysis.The main complication is that a defendant, like Mleads, is generally unaware of the geographic location to which it sends an email because that information is not necessarily provided with the email address.With this in mind, courts have applied a variety of tests in Internet jurisdiction cases.Thus, a defendant may establish a substantial connection with Utah in a number of ways.

¶13 First, a defendant may purposefully avail itself of the benefits of conducting business in Utah.¹⁸Generally, a party purposefully avails itself of the benefits of conducting business in a state by deliberately engaging in significant activities within the state¹⁹ or by creating "`continuing obligations' between himself and residents of the forum."²⁰Courts often determine purposeful availment by considering whether the defendant"deliberately" created "some relationship with the forum state that would serve to make that state's potential exercise of jurisdiction foreseeable."²¹Nevertheless, the question of purposeful availment is irrelevant when the nature and quality of the contact creates an insubstantial connection with the forum.²²Furthermore, even if a defendant has purposefully availed itself of the benefits of conducting business in a forum so that the exercise of jurisdiction is foreseeable, a...