Seldon v. Magedson

• Decision Date: 09 July 2012
• Docket Number: 11 Civ. 6218 (PAC)(MHD)
• Parties: PHILIP SELDON, Plaintiff, v. EDWARD MAGEDSON a/k/a ED MAGEDSON, RIPOFFREPORT.COM, and XCENTRIC VENTURES L.L.C., Defendants.
• Court: U.S. District Court — Southern District of New York

PHILIP SELDON, Plaintiff,

v.EDWARD MAGEDSON a/k/a ED MAGEDSON, RIPOFFREPORT.COM, and XCENTRIC VENTURES L.L.C., Defendants.

11 Civ. 6218 (PAC)(MHD)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

July 9, 2012

REPORT & RECOMMENDATION

TO THE HONORABLE PAUL A. GROTTY, U.S.D.J.

Plaintiff Philip Seldon, a citizen of New York, filed this diversity action pro se on September 6, 2011, asserting common-law claims for defamation and breach of contract. On November 7, 2011, plaintiff filed an amended complaint as a matter of course in response to defendants' first motion to dismiss, asserting claims substantially similar to those alleged in the original complaint. He alleges that defendants Edward Magedson ("Magedson") and Xcentric Ventures, LLC ("Xcentric") knowingly posted false and defamatory comments on their website, which is titled ripoffreport.com. Seldon further alleges that Magedson failed to perform certain reputation-repair services for which he and Magedson had contracted. He seeks compensatory and punitive damages as well as specific performance of the alleged contract.

Defendants move to dismiss this action for lack of personal jurisdiction. They also assert that plaintiff's defamation claims and part of his contract claim are barred by the Communications Decency Act (the " CDA"), 47 U.S.C. § 230 et seq., and that plaintiff's remaining contract claim is either barred by the Statute of Frauds or cannot be heard for lack of subject-matter jurisdiction. For the reasons set forth below, we recommend that defendants' motion to dismiss be granted based on the lack of personal jurisdiction over defendants. If the district court finds that the exercise of jurisdiction over defendants is proper, we recommend that the court grant defendants' motion to dismiss plaintiff's defamation claims and part of his contract claim as barred by the CDA, but deny their motion with respect to the remaining contract claim.

BACKGROUND

Defendant Xcentric, an Arizona limited liability company, owns a website known as ripoffreport.com.¹ (Am. Compl. ¶ 4). DefendantMagedson, also a citizen of Arizona, is the manager of Xcentric and runs the website's day-to-day operations. (Decl. of Edward Magedson in Supp. of Defs.' Mot. to Dismiss ("Magedson Decl.") ¶ 2; Pl.'s Affirmation in Opp'n to Motion to Dismiss Am. Compl. ("Pl.'s Affirmation") ¶¶ 8). The website functions as a free message board where consumers can post comments regarding companies' business practices. (See Magedson Decl. ¶¶ 4-5).

According to the complaint, Seldon found himself the subject of unflattering posts by several users of the site -- Irina Borisenko and one or more patrons who identified themselves only as "Mike," "Doctor," and "Employee." (Am. Compl. ¶¶ 8, 11, 18, 25, 32, 39, 46). The posts accused plaintiff of various misdeeds ranging from sexual harassment to fraud and tax evasion. (F.g., id. ¶¶ 32, 39).² Seldon alleges that he spoke with Magedson, who agreedto contact the authors of the posts in order to substantiate their claims. (Id. ¶ 8). Magedson allegedly agreed, among other things,to remove the posts if the authors were unable to establish their claims. (Id.; Pl.'s Affirmation ¶ 8).³ According to Seldon, Magedson failed to follow through on his promises, prompting this lawsuit. Based on these allegations, Seldon asserts claims for defamation and for breach of contract.

Defendants move to dismiss the complaint on several grounds. They assert that this court lacks personal jurisdiction over them, that plaintiff's defamation claims and part of his contract claim are barred by the CDA, and that the remaining portion of his breach-of-contract claim is barred by the Statute of Frauds. (SeeMot. to Dismiss Am. Compl. ("Defs.' Mot."} 2-16, Nov. 28, 2011).⁴ Furthermore, if plaintiff's defamation claims are dismissed, defendants argue, this court would lack subject-matter jurisdiction over the contract claim. (Id. at 2-3, 16-17). We first address whether we have jurisdiction over defendants, and answer that question in the negative.

ANALYSIS

I. Personal Jurisdiction

A. The Jurisdictional Arguments

Defendants seek dismissal of both the six defamation claims and the contract claim for lack of personal jurisdiction. In support of their motion, they proffer the declaration of defendant Edward Magedson, who reports, without contradiction, that he is a resident of Arizona, that he is the "manager" of co-defendant "XCENTRIC VENTURES, L.L.C.," that Xcentric is based in Tempe,Arizona, and that it operates a website located at www.ripoffreport.com and www.badbusinessbureau.com. (See Magedson Decl. ¶¶ 1-2). He describes the so-called "Ripoff" site as a passive system under which users post "individual 'reports,'" such as comments about the practices of a business, and "[o]ther consumers or the company that is the subject of the report can then comment on that report by posting a rebuttal." (Id. ¶ 4). He avers that the site "is a free resource available to the public" and also aids law enforcement and other investigations. (Id. ¶ 6).

Magedson goes on to state that Xcentric is an Arizona limited liability company, that its sole place of business is in Arizona, and that it has no assets, offices or employees in New York State, nor any customers there and that it does not run any advertising for New York businesses. (Id. ¶¶ 8-10, 12-13). As for himself, he reports that he owns no real estate in New York. (Id. ¶ 11).

Based on this proffer, defendants argue that plaintiff cannot satisfy the requisites for jurisdiction under either section 301 or section 302(a)(1) of the New York Civil Practice Law and Rules ("CPLR"), since defendants have no continuous presence in New York and the claims in this case do not arise out of any activity undertaken by defendants in this state. (Defs.' Mot. 3-7). Focusingon sections 302(a)(2) and (3), they further note that these provisions are inapplicable to defamation claims. (Id. at 7). Finally, they assert that section 302(a)(4) cannot apply in the absence of ownership by them of real estate in New York. (Id. at 8).

In opposing this aspect of defendants' motion, plaintiff seems to invoke principally section 302(a)(1), asserting that he made one or more oral agreements with Magedson by telephone while he -- a resident of New York -- was present in the state, though defendant was apparently in Arizona at the time. Since these alleged agreements form the basis for plaintiff's current contract claim, he asserts that jurisdiction is available over defendants. (See, e.g., Am. Compl. ¶ 53; Pl.'s Affirmation ¶ 8).⁵ He also may be understood to suggest that Xcentric's website is interactive and that the company offers some commercial services, thus arguablytriggering general jurisdiction under section 301.

B. Standards

Once a defendant challenges a court's exercise of personal jurisdiction, plaintiff bears the burden of establishing that jurisdiction is indeed proper. See, e.g., Kernan v. Kurz-Hastings, Inc., 175 F.3d 236, 240 (2d Cir. 1999) (quoting Metro. Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 566 (2d Cir. 1996)). In evaluating whether jurisdiction is proper on a Rule 12(b)(2) motion, the court is afforded a large degree of discretion as to process. See, e.g., CutCo Indus., Inc. v. Naughton, 806 F.2d 361, 364 (2d Cir. 1986). It may choose to rely on the pleadings and affidavits proffered or to conduct a full evidentiary hearing. See id. Where, as here, no discovery has taken place and no evidentiary hearing has been held, the plaintiff need merely make a prima facie showing that jurisdiction over defendant is proper. Id.; Grand River Enters. Six Nations, Ltd. v. Prvor, 425 F.3d 158, 165 (2d Cir. 2005); PDK Labs, Inc. v. Friedlander, 103 F.3d 1105, 1108 (2d Cir. 1997); Ball v. Metallurgie Hoboken-Overpelt, S.A., 902 F.2d 194, 196-97 (2d Cir. 1990).⁶ In undertaking a jurisdictionalanalysis, the court must construe the pleadings in the light most favorable to the plaintiff, and must resolve all doubts in his favor. DiStefano v. Carozzi N. Am.. Inc., 286 F.3d 81, 84 (2d Cir. 2001).

In diversity cases, the court must look to the law of the forum state to determine whether the exercise of in personam jurisdiction over an out-of-state defendant is proper. See, e.g., D.H. Blair & Co. v. Gottdiener, 462 F.3d 95, 104 (2d Cir. 2006) (citing Agency Rent A Car Svs., Inc. v. Grand Rent A Car Corp., 98 F.3d 25, 29 (2d Cir. 1996)); Bensusan Rest. Corp. v. King, 126 F.3d 25, 27 (2d Cir. 1997). If the exercise of jurisdiction is appropriate under the relevant state statute, the court then must decide whether such exercise comports with the requisites of due process. Best Van Lines, Inc. v. Walker, 490 F.3d 239, 242 (2d Cir. 2007) (citing Int'l Shoe Co. v. Wash., 326 U.S. 310, 315 (1945)).

Because this case is before us on diversity, we look to New York law to determine whether jurisdiction is proper. Under New York law, there are two bases for personal jurisdiction over out-of-state defendants: (1) general jurisdiction pursuant to CPLR301 ("section 301"), and (2) long-arm jurisdiction pursuant to CPLR 302 ("section 302").

1. Section 301 - General Jurisdiction Criteria

Section 301 confers jurisdiction over a foreign corporation "engaged in such a continuous and systematic course of "doing business' [in New York] as to warrant a finding of its "presence'" there. Laufer v. Ostrow, 55 N.Y.2d 305, 309-10, 449 N.Y.S.2d 456, 458 (1982) (quoting McGowan v. Smith, 52 N. Y. 2d 268, 272, 437 N.Y.S.2d 643 (1981)); see also Citigroup Inc. v. City Holding Co., 97 P. Supp.2d 549, 569 (S.D.N.Y. 2000).⁷ A defendant's "presence" is based on the "permanence and continuity" of its commercial contacts with the forum state. Hoffritz for Cutlery, Inc. v. Amaiac, Ltd., 763 F.2d 55, 58 (2d Cir. 1985) (quoting Tauza v. Susquehanna Coal Co., 220 N.Y. 259, 267, 115 N.E. 915, 917 (1917)). A court may exercise jurisdiction over such a defendant under section 301 regardless of where...