Fitch v. Wine Express Inc.

• Citation: 297 So.3d 224
• Decision Date: 27 February 2020
• Docket Number: NO. 2018-SA-01259-SCT,2018-SA-01259-SCT
• Parties: Lynn FITCH, Attorney General of the State of Mississippi, ex rel., The State of Mississippi and Commissioner of Revenue Herb Frierson and Mississippi Department of Revenue v. WINE EXPRESS INC., Bottle Deals Inc. and Gold Medal Wine Club
• Court: United States State Supreme Court of Mississippi

297 So.3d 224

Lynn FITCH, Attorney General of the State of Mississippi, ex rel., The State of Mississippi and Commissioner of Revenue Herb Frierson and Mississippi Department of Revenue

v.WINE EXPRESS INC., Bottle Deals Inc. and Gold Medal Wine Club

NO. 2018-SA-01259-SCT

Supreme Court of Mississippi.

February 27, 2020

ATTORNEYS FOR APPELLANTS: OFFICE OF THE ATTORNEY GENERAL BY: JAMES A. BOBO, Brandon, KRISSY CASEY NOBILE, DAVID J. CALDWELL

ATTORNEY FOR APPELLEES: JOEL W. HOWELL, III, Jackson

EN BANC.

BEAM, JUSTICE, FOR THE COURT:

¶1. The Mississippi Department of Revenue (MDOR) and the Office of the Attorney General of the State of Mississippi filed suit against Wine Express, Inc., Gold Medal Wine Club, and Bottle Deals, Inc., in the Chancery Court of Rankin County, Mississippi. The State sought injunctive relief, disgorgement, monetary relief, attorneys' fees, and punitive damages. Defendants moved for dismissal claiming that Mississippi courts lack personal jurisdiction over Defendants. After a hearing on the matter, the trial court granted Defendants' motion.

¶2. The State appeals. We find that the trial court erred by finding that it lacks personal jurisdiction over the Defendants.

FACTS AND PROCEDURAL HISTORY

¶3. In early 2017, the Alcohol Beverage Control (ABC) Division of the Mississippi Department of Revenue and the Alcohol and Tobacco Enforcement Division of the Mississippi Attorney General's Office investigated the shipment of wine and other alcoholic beverages into the state. Agents used common online search engines to search the websites of various Internet wine retailers. The investigation revealed that most Internet retailers make it "impossible" to place an order for alcoholic beverages once it is disclosed that the shipment would be to a location in Mississippi. This, however, is not so for the Defendants' websites. In December 2017, the State sued the Defendants for injunctive relief to enforce the provisions of the "Local Option Alcoholic Beverage Control Law." See Miss. Code Ann. §§ 67-1-1 to -99 (Rev. 2012).

¶4. Pursuant to this statutory scheme, Mississippi operates under a three-tier system in which the State acts as the wholesaler for alcoholic beverages, meaning Mississippi directly controls the distribution and sale of alcoholic beverages. Miss. Code Ann. § 67-1-41 (Rev. 2012). Each manufacturer ships its alcoholic beverages to a centralized warehouse in Gluckstadt, Mississippi, which is owned by the State. From there, the alcohol is held in bailment by the State until ordered by privately held and permitted retailer package stores. Miss. Code Ann. § 67-1-51 (Supp. 2019) (issuance of permits). Once ordered, alcohol is then shipped by the State to individual package stores for resale to consumers who must purchase the alcohol while on the package store premises. Package store retailers may not ship or deliver alcohol to consumers. Miss. Code Ann. § 67-1-83(1) (Rev. 2012) ("It shall also be unlawful for the holder of any package retailer's permit to sell any alcoholic beverages except by delivery in person to the purchasers at the place of business of the permittee.").

¶5. Mississippi law further provides as follows:

It shall be unlawful for any person to manufacture, distill, brew, sell, possess, import into this state, export from the state, transport, distribute, warehouse, store, solicit, take order for, bottle, rectify, blend, treat, mix or process any alcoholic beverage except as authorized in this chapter. However, nothing contained herein shall prevent importers, wineries and distillers of alcoholic beverages from storing such alcoholic beverages in private bonded warehouses located within the State of Mississippi for the ultimate use and benefit of the Department of Revenue as provided in § 67-1-41.

Miss. Code Ann. § 67-1-9(1) (Supp. 2019).

No alcoholic beverage intended for sale or resale shall be imported, shipped or brought into this state for delivery to any person other than as provided in this chapter, or as otherwise provided by law for native wines.

Miss. Code Ann. § 67-1-41(3) (Rev. 2012).

¶6. Section 67-1-51, as noted above, sets forth the various permits that must be obtained from the State in order to engage in the possession, sale, and distribution of alcoholic beverages to adults. The Defendants do not possess any of the permits required by state law.

¶7. In February 2018, the State filed an amended complaint for injunctive relief, disgorgement, monetary relief, attorneys' fees and punitive damages.¹ The State alleged that through the Defendants' interactive, commercial websites, they sold and directed the shipment of thousands of bottles of alcohol into Mississippi. The State alleged that the damages are the unpaid sales taxes and excise taxes due in relation to the taxable illegal transaction and the unrealized wholesale markup.

¶8. The Defendants separately filed motions to dismiss based on a lack of personal jurisdiction under Mississippi Rule of Civil Procedure 12(b)(2), but the grounds for dismissal in each motion were the same. The Defendants stated that they are incorporated in New York or California with no physical presence or place of business in Mississippi. Further, all the purchases made by the buyers were made online. In each transaction, the Defendants received, processed, finalized, and completed the sales orders in their places of business in New York or California. And the Defendants contend that alcohol purchases by consumers in Mississippi were made F.O.B. (Free on Board), and title to the goods passed to the buyers at the time and place that the goods left the Defendants' respective premises located outside the state of Mississippi.²

¶9. The State opposed the motions, arguing that the Defendants are operators of unlicensed virtual liquor stores in Mississippi. The State argued that the Defendants had intentionally decided to direct activities in Mississippi and to allow orders to be placed through their highly interactive websites.

¶10. Before the trial court ruled on the matter, the parties had conducted jurisdiction-related discovery. According to the State, the discovery revealed that the Defendants had sold and directed the shipment of thousands of bottles of alcoholic beverages into the State, profiting more than $200,000.

¶11. On August 23, 2018, the trial court held a hearing on the State's motion to amend and on the Defendants' motions for dismissal. The trial court entered an order granting the Defendants' motion to dismiss for lack of personal jurisdiction.

¶12. The trial court reasoned as follows:

This case is about the Uniform Commercial Code .... The [c]ourt finds in this particular case that title to all these goods passed outside the state of Mississippi.... [U]nder these transactions, the buyers took full responsibility for the shipment of the alcohol unto themselves from the point of sale in New York and California....

....

Now, yes, [the Defendants] probably did it in contravention of Mississippi state law, and they're probably responsible for it, but the buyer is solely responsible for the shipment of wine under these contracts.

¶13. The State appeals from that ruling. The only question before this Court is whether the trial court's dismissal of the State's case for lack of personal jurisdiction over the Defendants was proper. As will be explained, we find that the trial court erred.

LAW AND ANALYSIS

¶14. "Jurisdictional issues are reviewed pursuant to a de novo standard of review." Joshua Props., LLC v. D1 Sports Holdings, LLC , 130 So. 3d 1089, 1092 (Miss. 2014) (citing McDaniel v. Ritter , 556 So. 2d 303, 308 (Miss. 1989) ). Personal jurisdiction over a nonresident defendant is determined under a two-part inquiry. Id. (citing Estate of Jones v. Phillips ex rel. Phillips , 992 So. 2d 1131, 1137 (Miss. 2008) ). The first inquiry is whether Mississippi's long-arm statute confers personal jurisdiction over the nonresident defendant. McDaniel , 556 So. 2d at 307 (citing Miss. Code Ann. § 13-3-57 (Supp. 1989) ). If so, the second inquiry is whether personal jurisdiction comports with constitutional due process. Id. at 308.

I. Mississippi's Long-Arm Statute

¶15. Mississippi's long-arm statute provides in pertinent part as follows:

Any nonresident person, firm, general or limited partnership, or any foreign or other corporation not qualified under the Constitution and laws of this state as to doing business herein, who shall make a contract with a resident of this state to be performed in whole or in part by any party in this state, or who shall commit a tort in whole or in part in this state against a resident or nonresident of this state, or who shall do any business or perform any character of work or service in this state, shall by such act or acts be deemed to be doing business in Mississippi and shall thereby be subjected to the jurisdiction of the courts of this state.

Miss. Code Ann. § 13-3-57 (Rev. 2019).

¶16. The statute comprises three types of conduct: the contract component, the tort component, and the doing-business component. Only one need be met for purposes of the statute. Sorrells v. R & R Custom Coach Works, Inc. , 636 So. 2d 668, 671 (Miss. 1994). While the State maintains that all three are met in this instance, we limit our discussion to the doing-business component.

¶17. The State contends that the Defendants satisfy this component because each Defendant operated and maintained an interactive commercial website through which Mississippi consumers could purchase alcohol, calculate shipping costs using Mississippi zip codes, and create accounts.

¶18. The Defendants maintain that they do not meet this component because they do not do business in Mississippi as contemplated by the statute. They have no physical presence in the state, no business permits, no agents for service of process, and they do not advertise in Mississippi. The Defendants further contend that the sales transactions did not occur in Mississippi but were sold at...