SCVNGR, Inc. v. Punchh, Inc.

• Decision Date: 08 November 2017
• Docket Number: SJC–12297
• Citation: 478 Mass. 324,85 N.E.3d 50
• Parties: SCVNGR, INC. v. PUNCHH, INC.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

478 Mass. 324

85 N.E.3d 50

SCVNGR, INC.¹

v.PUNCHH, INC.

SJC–12297

Supreme Judicial Court of Massachusetts, Suffolk..

Argued September 6, 2017

Decided November 8, 2017

Brian C. Carroll for the plaintiff.

Jeffrey J. Pyle for the defendant.

Present: Gants, C.J., Lenk, Gaziano, Budd, Cypher, & Kafker, JJ.

LENK, J.

Plaintiff SCVNGR, Inc., doing business as LevelUp (LevelUp), is a Massachusetts-based company that develops software applications for restaurants. Punchh, Inc. (Punchh), is a California-based company that develops competing applications. LevelUp filed a complaint in the Superior Court against Punchh alleging that, in 2015 and 2016, Punchh repeatedly made knowingly false statements about LevelUp to LevelUp's clients and potential clients, causing it harm. Punchh appeared specially, moving under Mass. R. Civ. P. 12 (b) (2), 365 Mass. 754 (1974), to dismiss the complaint on the grounds that it had insufficient contacts with Massachusetts to permit the exercise of personal jurisdiction. Focusing upon whether it would comport with due process to hale Punchh into a Massachusetts court, the parties disputed the proper application of two United States Supreme Court cases that partially define the constitutional parameters guiding the exercise of personal jurisdiction over a nonresident defendant.²

Concluding that the constitutional analysis resolved the jurisdictional question in Punchh's favor, a Superior Court judge allowed Punchh's motion to dismiss. The judge noted that, because of the parties' focus on due process, he had not determined whether the Massachusetts long-arm statute would permit the exercise of personal jurisdiction over Punchh. LevelUp appealed, and we transferred the case to this court on our own motion.

Prior to exercising personal jurisdiction over a nonresident defendant, a judge must determine that doing so comports with both the forum's long-arm statute and the requirements of the United States Constitution. World–Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 290, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980). Because the long-arm statute imposes specific constraints on the exercise of personal jurisdiction that are not coextensive with the parameters of due process, and in order to avoid unnecessary consideration of constitutional questions, a determination under the long-arm statute is to precede consideration of the constitutional question. See, e.g., Morrill v. Tong, 390 Mass. 120, 133, 453 N.E.2d 1221 (1983). See also Beeler v. Downey, 387 Mass. 609, 613 n.4, 442 N.E.2d 19 (1982) (recognizing "duty to avoid unnecessary decisions of serious constitutional issues"). Because the requisite statutory analysis did not occur, we remand the matter to the Superior Court for further proceedings.

1. Background.³ a. Factual history. LevelUp is a Delaware corporation headquartered in Massachusetts, and designs and markets applications (apps) that run on customers' cellular telephones. LevelUp's apps enable customers to earn and redeem rewards at restaurants, and to make purchases, by scanning a code on their cellular telephones at the point of sale. These apps are designed to help restaurants both engage with their customers and gather information about customer behavior. As of 2016, all but four of LevelUp's ninety employees were based in Massachusetts.

Punchh is a Delaware corporation with its principal place of business in California; it also provides apps to restaurants. Punchh's clients include businesses that, while headquartered outside Massachusetts, own restaurants in the Commonwealth. LevelUp asserts that Punchh regularly markets its apps within Massachusetts and to businesses operating restaurants here, and derives substantial revenue from the use of its apps in Massachusetts.⁴ Punchh has not directly contradicted LevelUp's claims concerning such contacts with Massachusetts. Punchh maintains, however, that it is not registered to do business in Massachusetts and does not have an office, employees, or property in the Commonwealth, and that no Punchh employee has ever traveled to Massachusetts for business.

In 2014, the two companies entered into an agreement whereby LevelUp allowed Punchh to incorporate LevelUp's payment technology into Punchh-developed apps for use by Punchh clients. LevelUp claims that, in September, 2014, Punchh made knowingly false statements to LevelUp clients; in response, LevelUp terminated the companies' agreement. LevelUp informed Punchh that it had no plans to take legal action at that time.

According to LevelUp, in October, 2015, Punchh resumed making defamatory statements about LevelUp to LevelUp clients. LevelUp confronted Punchh about the alleged misrepresentations, and demanded that Punchh cease making them. LevelUp also requested a list of the entities to which Punchh made the allegedly false statements about LevelUp. Punchh responded that the statements were made to three LevelUp clients, all of which are headquartered outside Massachusetts. Punchh subsequently said that it had made the statements to one other entity, which was not a client of LevelUp, and whose identity Punchh did not disclose. Punchh stated that it would cease making the statements that LevelUp alleged to be false, and LevelUp responded that it would take no further action.

LevelUp asserts, however, that in early 2016, Punchh resumed making knowingly false statements about LevelUp to at least one LevelUp client, and to several potential clients. According to LevelUp, Punchh's misrepresentations contributed to or caused the termination of at least one client relationship, and resulted in damage to LevelUp's business.

b. Prior proceedings. In February, 2016, LevelUp filed an unverified complaint in the Superior Court seeking damages and an injunction enjoining Punchh from continuing to make allegedly false statements about LevelUp to LevelUp's clients and prospective clients. The complaint asserted five claims: defamation, commercial disparagement, intentional interference with prospective business relations, and violations of G. L. c. 93A, §§ 2 and 11, and Cal. Bus. & Prof. Code §§ 17200 et seq.

Following service of the complaint, and before Punchh's special appearance for the purpose of moving to dismiss for lack of personal jurisdiction, LevelUp sought discovery in the form of seven interrogatories and three requests for production of documents. The first four interrogatories, and the documents requested, solicited information regarding the entities to which Punchh made the allegedly defamatory statements, as well as Punchh's basis for claiming that those statements were true. The last three interrogatories probed the scope of Punchh's business conducted in Massachusetts, and of revenue derived from those services rendered. Specifically, LevelUp asked Punchh to identify the entities with locations in Massachusetts that either use Punchh apps or whose business Punchh has solicited, and disclose the number of Massachusetts residents that utilize Punchh apps.

In April, 2016, without answering LevelUp's complaint or responding to the discovery requests, Punchh moved to dismiss for lack of personal jurisdiction. LevelUp, having not received the information it requested from Punchh, sought to stay the motion to dismiss pending discovery. Punchh, in turn, moved to stay discovery.

The matter was resolved when the judge conducted a nonevidentiary hearing in May, 2016, and ordered Punchh to respond to the first of LevelUp's seven interrogatories, which requested a list of the entities to whom Punchh allegedly misrepresented information about LevelUp.⁵ Punchh's response revealed that the statements were made to eighteen companies, all headquartered outside Massachusetts.

Following supplemental briefing, the judge allowed Punchh's motion to dismiss, concluding that the limits of due process would not permit the exercise of personal jurisdiction over Punchh. While recognizing that "typically a Superior Court [judge] presented with a Rule 12 (b) (2) argument begins with an analysis of whether the requirements of the long-arm statute have been met," the judge did not address the long-arm statute because "in this case both parties have focused their arguments on Federal due process considerations."

LevelUp appealed to the Appeals Court, and we transferred the case to this court on our own motion.

2. Discussion. Personal jurisdiction over an out-of-State defendant is proper only where both the forum State's long-arm statute and the requirements of due process allow it. World–Wide Volkswagen Corp., 444 U.S. at 290, 100 S.Ct. 559. Massachusetts's long-arm statute, G. L. c. 223A, § 3, provides that "[a] court may exercise personal jurisdiction over a person ... as to a cause of action in law or equity arising from the person's" one or more specific acts or omissions, as enumerated in the statute. In contrast to the long-arm statutes of some States, the Massachusetts statute does not purport to extend jurisdiction as far as due process would allow. Compare Cal. Civ. Proc. Code § 410.10 (West 2004) ("A court of this [S]tate may exercise jurisdiction on any basis not inconsistent with the Constitution of this [S]tate or of the United States"). "Where the words of a statute are clear on their face, we deem them conclusive as to legislative intent." Care & Protection of Jamison, 467 Mass. 269, 276, 4 N.E.3d 889 (2014).

The Massachusetts long-arm statute enumerates eight specific grounds on which a nonresident defendant may be subjected to personal jurisdiction by a court of the Commonwealth. See G. L. c. 223A, § 3. Only four of them appear to have any potential bearing on the matter at hand.⁶ The long-arm statute first provides that a Massachusetts court may exercise personal jurisdiction over a cause of action arising from a nonresident person's business transactions within the Commonwealth.⁷ G. L. c. 223A, § 3 (a ). Second, a nonresident must submit to personal jurisdiction with respect to a cause of action arising out of its...