Jeffrey S. Rotblut & Ubo Propriety Trading, LLC v. Terrapinn, Inc.

• Decision Date: 30 September 2016
• Docket Number: C.A. N15C-12-024 AML
• Parties: JEFFREY S. ROTBLUT and UBO PROPRIETY TRADING, LLC, Plaintiffs, v. TERRAPINN, INC., TERRAPINN HOLDINGS, LTD., and LEWIS C. WILKINS, Defendants.
• Court: Superior Court of Delaware

JEFFREY S. ROTBLUT and UBO PROPRIETY TRADING, LLC, Plaintiffs,
v.
TERRAPINN, INC., TERRAPINN HOLDINGS, LTD.,
and LEWIS C. WILKINS, Defendants.

C.A. N15C-12-024 AML

SUPERIOR COURT OF THE STATE OF DELAWARE

Submitted: June 3, 2016
September 30, 2016

TRIAL BY JURY OF TWELVE DEMANDED

MEMORANDUM OPINION

James S. Green, Sr., Esquire and Jared T. Green, Esquire, SEITZ, VAN OGTROP & GREEN, P.A., Wilmington, Delaware; Attorneys for Jeffrey S. Rotblut and UBO Propriety Trading, LLC.

Kevin J. Connors, Esquire, MARSHALL DENNEHEY WARNER COLEMAN & GOGGIN, Wilmington, Delaware; Attorney for Terrapinn, Inc., Terrapinn Holdings, Ltd., and Lewis C. Wilkins.

LeGROW, J.

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This suit arises out of an allegedly defamatory article posted on a website. The plaintiffs have sued the author of the article, the author's employer, and the website's "host." The author and the website's host have moved to dismiss the complaint for lack of personal jurisdiction. The plaintiffs assert this Court may exercise jurisdiction over the movants under Delaware's long-arm statute. I disagree and, for the reasons below, grant the motions to dismiss.

The pending motions require this Court to probe questions of personal jurisdiction at perhaps their most theoretical. Courts across the country increasingly are confronted with cases challenging online conduct and must determine issues of personal jurisdiction over actors engaged in such conduct. These cases highlight the reality that the Internet, which increasingly forms an important part of our day-to-day interactions, exists outside of the state boundaries that define considerations of jurisdiction. The question posed in this case is this: where an allegedly defamatory article caused injury to a Delaware corporation, but the article was posted solely on a website with no connection to Delaware, while the author was outside Delaware, and without any other nexus between either the author, the website's host, and Delaware, can jurisdiction be maintained against the author of the article and the host of the website? Under settled law in this jurisdiction, the answer is no.

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The plaintiffs argue, persuasively, that this conclusion leads to an unfair and inefficient result, because it will require the plaintiffs to pursue multiple causes of actions in different jurisdictions, with the possibility of inconsistent results and the certainty of increased costs. Although that argument has pragmatic appeal, it cannot overcome the constitutional rigors of the question of jurisdiction.

BACKGROUND

Plaintiff Jeffrey S. Rotblut is the Chief Executive Officer of Plaintiff UBO Propriety Trading, LLC ("UBO"), an alternative asset manager, research firm, and system developer for institutions and high-net worth individuals (collectively "Plaintiffs").¹ Mr. Rotblut is a New York citizen, while UBO is a Delaware limited liability company. Defendant Terrapinn, Inc. ("Terrapinn") is a Delaware corporation. Defendant Terrapinn Holdings, Ltd. ("Holdings") is incorporated under the laws of the United Kingdom and has a principal place of business in London, England. Defendant Lewis C. Wilkins ("Wilkins") was in Illinois at all times relevant to the allegations in the complaint and presently is a citizen of the District of Columbia.²

In August 2013, Terrapinn's New York office invited Mr. Rotblut to participate in a trade conference on automated trading in New York City.³

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Terrapinn, a business media company, promotes and conducts trades exhibitions, conferences, training solutions, and electronic and print publications world-wide.⁴ At that time, Mr. Rotblut had an "excellent reputation and recognized expertise at developing risk[-]averse trading systems and quant strategies."⁵ On December 3 and 4, 2013, Mr. Rotblut participated as a panelist in "The Trading Show New York 2013," hosted by Terrapinn (the "Trading Show").

On December 17, 2013, Terrapinn posted on its "Total Trading" blog an article titled: "Panel: 'Making the trading life cycle more efficient-risk controls, procedures, and compliance' at the Trading Show NYC 2013."⁶ Wilkins authored the article, which contained the following sentence:

Because Jef Rotblut's trading firm once lost $40 million in about 20 minutes, he highlighted the essential roles of mitigating risk through the software development and testing process.

That sentence, however, referenced statements made by a different panelist, not Mr. Rotblut.⁷ Because the sentence states that Plaintiffs incurred $40 million in trading losses in 20 minutes, Plaintiffs' ability to raise capital and ongoing discussions with potential investors came to a halt following the Trading Show.⁸

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Mr. Rotblut did not learn of the article until July 2015, when he was told he and UBO should "clean up their web presence."⁹ Not understanding the meaning of the suggestion, Mr. Rotblut conducted a "Google" search, through which he discovered the article.¹⁰

On December 2, 2015, Plaintiffs filed a defamation claim against Terrapinn, Holdings, and Wilkins based on the December 17, 2013 article. On April 1 and 8, 2016, Wilkins and Holdings, respectively, filed motions to dismiss for lack of personal jurisdiction. The Court held oral argument on June 3, 2016. This is my decision on the motions to dismiss.

THE PARTIES' CONTENTIONS

There is no dispute regarding this Court's jurisdiction over Terrapinn. Plaintiffs contend, however, this Court also has personal jurisdiction over Holdings and Wilkins by virtue of 10 Del. C. § 3104(c)(3) and (4), which provide in relevant part:

As to a cause of action brought by any person arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any nonresident, or a personal representative, who in person or through an agent: . . .

(3) Causes tortious injury in the State by an act or omission in this State;

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(4) Causes tortious injury in the State or outside of the State by an act or omission outside the State if the person regularly does or solicits business, engages in any other persistent course of conduct in the State or derives substantial revenue from services, or things used or consumed in the State . . . .

Plaintiffs argue Section 3104(c)(3) confers jurisdiction over Holdings because Holdings caused tortious injury in Delaware by "publishing defamatory falsehoods on its website about a Delaware company and its CEO to residents of Delaware."¹¹ Plaintiffs contend Holdings "published" the defamatory statement because the article was posted on a website "copyrighted to Holdings" and "hosted in the [United Kingdom]."¹² Plaintiffs further contend Holdings "used the terrapinn.com website to publish the defamatory Wilkins[] article in Delaware and elsewhere."¹³

Plaintiffs also argue Holdings is subject to jurisdiction under Section 3104(c)(4) because Holdings regularly solicits business in Delaware through its website. Plaintiffs maintain that "Holdings purposefully directed its articles, content, advertising, and solicitations to residents of Delaware, including by defaming a Delaware corporation and its CEO."¹⁴

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As to Wilkins, Plaintiffs argue this Court has jurisdiction under Section 3104(c)(3) because "by writing the defamatory article for his Delaware employer, which caused the article to be published, [Wilkins] caused tortious injury in [Delaware]."¹⁵ Plaintiffs further argue general jurisdiction is conferred over Wilkins under Section 3104(c)(4) because: "At the time of authoring the defamatory article about a Delaware entity," Wilkins had been "a blogger with Terrapinn since 2011," and therefore "had been, either in person or through an agent, regularly doing business, engaging in other persistent conduct or deriving substantial revenue from Terrapin[n], the publishing Delaware entity, for over two years."¹⁶

In response, Holdings contends that Plaintiffs fail to meet their burden under subsection (c)(3) because Holdings is "not an operating company"¹⁷ and "was not involved in any way in the publication of the Article dated December 17, 2013."¹⁸ Holdings submitted an affidavit attached to its motion to dismiss, executed by Holdings' Chief Executive Officer (the "Holdings Affidavit").¹⁹ The Holdings Affidavit states that Holdings "did not have any input, control, participation, or specific knowledge regarding the Article."²⁰ In addition, Holdings argues

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subsection (c)(3) does not apply in the "absence of any indication that Holdings posted the alleged writing while in Delaware."²¹ Holdings contends that, under Delaware law, an internet posting made from outside the state and received by a party inside the state fails to provide sufficient minimum contacts for jurisdiction under subsection (c)(3).²²

As to subsection (c)(4), Holdings argues Plaintiffs have offered no evidence supporting the allegation that Holdings regularly solicits business, engages in persistent conduct, or derives substantial revenue from its activities in Delaware. Holdings contends it is a holding company that does not do business in Delaware.

Wilkins similarly responds that Plaintiffs have failed to meet their burden to establish jurisdiction under subsection (c)(3), as they have not alleged that he committed a tangible act or omission in the State of Delaware, such as physically entering the state or writing the alleged defamatory article in the state.²³ Wilkins argues the fact that an individual's conduct may have an effect in Delaware is not enough to establish that the action causing that effect took place in Delaware.

As to subsection (c)(4), Wilkins argues Plaintiffs failed to "establish how Wilkins personally engaged in business or other persistent conduct in Delaware, and in fact, they cannot show as much because [he] does not nor has he ever

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solicited business or engaged in any persistent conduct in Delaware."²⁴ Additionally, Wilkins contends that an individual's relationship with a company that allegedly derives substantial revenue from...