Incorp Servs. Inc. v. Incsmart.biz Inc.
| Decision Date | 24 August 2012 |
| Docket Number | Case No. 11-CV-4660-EJD-PSG |
| Parties | INCORP SERVICES INC., a Nevada corporation Plaintiff, v. INCSMART.BIZ INC., a Nevada corporation; DAVID OLIVER, an individual; MICHAEL LASALA, an individual; JO ANN OLIVER, an individual; and DOES 1-10, inclusive, Defendants. |
| Court | U.S. District Court — Northern District of California |
Before the Court are motions filed by Defendant Incsmart, amongst other co-defendants ('Defendant').1 Specifically, Defendant moves the Court to dismiss for lack of personal jurisdiction and improper venue, or, in the alternative to transfer venue. Plaintiff Incorp opposes such motions.
Having heard oral argument and reviewed the parties' materials, the abovementioned motions should be dismissed, with exception of Jo Ann Oliver. For reasons that follow, Jo Ann Oliver is the only co-defendant that remains shielded from the Court's personal jurisdiction.
On September 20, 2011, Plaintiff filed suit against Defendant for claims under the Computer Fraud and Abuse Act and intentional interference of contract relations, amongst other claims based on Californian law.
On October 6, 2011, Plaintiff filed a motion to take early discovery. See, Discovery, Dkt Item No. 7. On November 9, 2011, the Court granted Plaintiff's motion and allowed Plaintiff to serve a subpoena on Cox Communications for the purpose of identifying the customer(s) associated with the two flagged IP addresses. See, Subpoena, Dkt Item No. 12. On January 17, 2012, Cox responded to the Subpoena and identified the Cox customers associated with the IP addresses at issue. See, Rosenfeld Decl. Dkt Item 47 ¶8 & Ex. F.
On February 3, 2012, Plaintiff filed its Amended Complaint, which added Defendants as parties and a claim for false advertising under the Lanham Act. See, Amended Complaint, Dkt Item No. 17. The Amended Complaint alleged claims for: (1) false advertising under the Lanham Act; (2) violation of the Computer Fraud and Abuse Act; (3) fraud; (4) intentional interference with prospective economic advantage; (5) intentional interference with contractual relations; and (6) breach of contract.
Following Defendants failure to respond to the Amended Complaint, the Clerk of the Court entered default against them in March 2012, and Plaintiff filed a motion for default judgment. See, Dkt Items No. 25, 28, 34.
Prior to the hearing on Plaintiff's motion for default judgment, Plaintiff was contacted by counsel for Defendants. See, Rosenfeld Decl. ¶12. The parties negotiated and filed a stipulation to set aside the default against Defendants, which the Court entered as an order on June 6, 2012. See, Stipulated Order, Dkt Item No. 40.
On June 18 2012, Defendant filed the motions that are now currently before the Court.
Plaintiff Incorp provides a variety of company formation and registration services, including registered agent services across the country. Incorp describes itself as a corporation, "based in Henderson, Nevada." See, Amended Complaint, Dkt. No. 17, ¶20. It further describes itself as, "the largest Nevada-based national registered agent firm. . ." Id. Its business involves advertising its services to potential customers, primarily through online advertising, and spending resources in pursuit of such advertising. Id. ¶21. Plaintiff has expended resources to advertise its services on Microsoft, Google, and Yahoo! search engines - all of which are headquartered or have offices in the Northern District of California. Id. See also, Rosenfeld Decl. ¶2-6 & Exs. A-E.2
Defendant Incsmart also provides incorporation services and resident agent services across the country. See, Declaration of David Oliver "Oliver Decl.", ¶ 1. The corporate office for Incsmart is in Las Vegas, Nevada. See, Oliver Decl.,¶ 6. David Oliver is a resident of Las Vegas, Nevada, as well as the other individual Defendants. Id. at ¶ 1. David Oliver and Michael Lasala are officers of IncSmart. In addition, Jo Ann Oliver is David Oliver's elderly mother. Id, at ¶ 3. The Defendants have no meaningful ties, personally, to the State of California. The individual Defendants do not own or lease any real or personal property in California, nor have they ever owed or been required to pay taxes in California. See id, at ¶ 8.
Defendant's Website is located at www.incsmart.biz>, on which they advertise Defendant's services. See, Amended Complaint, Dkt Item No. 17 ¶ 50. Incsmart's website advertises that it provides registered agent services in all fifty states. For example, the website states, "Our Registered Agent service is for any entity in any state," and See, Amendment Complaint, Dkt Item No. 17 ¶70-74. The Incsmart Website is interactive, in so far that it allows a user to purchase registered agent, company formation, and company management services by proceeding through standard ecommerce checkout screens. See, Amended Complaint ¶54; Rosenfeld Decl. ¶9 & Ex. G. Specifically, Plaintiff alleges that Incsmart's advertisements are false in so far that they do not provide—and in some cases cannot lawfully provide—the advertised registered agent services. Id. ¶55-56. In the vast majority of states, Incsmart is not registered to conduct business as either a domestic or foreign corporation, even where such a registration is required to serve as a registered agent or to conduct business in that state. Id. ¶57. In the vast majority of states that require a person to qualify as a commercial registered agent, Incsmart does not have the necessary qualifications and has not obtained the necessary certification. Id. ¶58. In some states, Incsmart improperly purports to accept service of process through a P.O. Box. Id. ¶60.
For California, the Incsmart Website advertises both specific corporate formation and registered agent services. Id. ¶67; Rosenfeld Decl. ¶10 & Ex. H. However, as alleged by Plaintiff, Defendants have not complied with the requirements of Corporation Code section 1505 for Incsmart to serve as a registered agent; nor has Incsmart registered as a Private Service Company with the California Secretary of State. Id. ¶67. Rather, instead of maintaining an office and personnel in California to act as a registered agent for its customers, Defendants have simply rented a mailbox at a UPS store, and used this mailbox for its registered agent services in circumstances where Defendants have not filed a section 1505 registration with the California Secretary of State—and thus cannot serve as a registered agent). Id. ¶67.
With the advent and use of the Internet, new challenges for the law regarding personal jurisdiction have evolved. Thus far, the U.S. Supreme Court has not yet entered the debate.3 Overthe past decade, however, the Ninth Circuit has begun to frame standards for establishing personal jurisdiction with respect to the internet.
Here, the debate is made novel because it not only combines the internet with a federal false advertising claim, but neither the Plaintiff, nor Defendant reside in this forum's jurisdiction.
As a threshold matter, courts have an affirmative duty to examine their own subject matter jurisdiction. In re Tuli, 172 F.3d 707, 712 (9th Cir.1999). Pursuant to 12(b)(1) Fed. R. Civ. P., a Court may dismiss an action for lack of subject matter where the court has neither constitutional, nor statutory basis for a determination. See, Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir.2004). If the Court determines that it lacks subject matter jurisdiction, the Court must dismiss the action pursuant to Fed. R. Civ. P. 12(h)(3).
Plaintiff relies on claims under the Lanham Act and the Computer Fraud and Abuse Act (CFAA) for the purposes of subject matter jurisdiction. With respect to the CFAA claim, however, it is questionable whether Plaintiff has pled "a satisfactory showing of the facts necessary to establish jurisdiction" under the CFAA claim. See, Laub v. U.S. Dep't of the Interior, 342 F.3d 1080, 1093 (9th Cir.2003). Because of reasons stated in the Ninth Circuit's recent Nosal decision, the Court finds that Plaintiff's CFAA claim does require a more satisfactory showing of alleged facts to establish jurisdiction under the CFAA claim. See, United States v. Nosal, 676 F.3d 854, (9th Cir.2012)
In Nosal, the court addressed the CFAA and interpreted the phrase "exceeds authorized access" within the meaning of that statute. The court held that the phrase "does not extend to violations of use restrictions." Nosal, 676 F.3d 863.4 The court reasoned that its interpretation was a more "sensible reading of the text and legislative history of a statute whose general purpose is to punish hacking - [being] the circumvention of technological access barriers." Id.5
Here, and with regard to the CFAA claim, Plaintiff has pled the following: "In clicking on Incorp's online ads without having an actual interest in Incorp's website or services, Defendants exceeded their authorized access to the Search Engines' protected computers, furthered their fraud, and obtained things of value in violation of 18 U.S.C. §1030(a)(4)." See, Amended Complaint, Dkt Item No. 17 ¶80. The Court observes that there are no direct or clear allegations of "hacking" in this passage - being, broadly, "the circumvention of technological access barriers," not violation of "use restrictions." Nosal, 676 F.3d 863. In light of Nosal, the Court queries how a lack of "actual interest in Incorp's website" equates with outside or inside hacking. Id. The Amended Complaint further alleges that the Defendants used the Search Engines on Google and Yahoo to fraudulently click on Plaintiff's ads and to display Defendants' own ads. See, Amended Complaint, Dkt Item No. 17 ¶...
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