MPHJ’s Losing Streak Continues

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The State of Vermont has continued its winning ways against MPHJ.

A recent Vermont court decision continues the shut-out being tossed by the state of Vermont against MPHJ. You can read the full decision here.

Just to recap the proceedings before getting to the latest decision:

  • On May 13, 2013 the State of Vermont sued MPHJ in Vermont state court alleging violations of Vermont’s consumer protection law.
  • MPHJ removed the case to federal court and requested dismissal of the case due to a lack of personal jurisdiction.
  • Vermont filed a motion to remand on July 8, 2013 and District Judge William Sessions heard arguments on February 25, 2014.
  • Judge Sessions found that the federal court lacked jurisdiction and thus granted the state’s motion to remand on April 15, 2014.
  • MPHJ appealed to the Second Federal Circuit*, which affirmed the remand. State of Vermont v. MPHJ Technology Investments, LLC, Nos. 2014-1481, 2014-137, 2014 WL 3938955 (2d Fed. Cir. Aug. 11, 2014)

With the case in state court, Vermont Superior Court Judge Helen Toor heard the parties’ positions on the propriety of personal jurisdiction over MPHJ (note that Judge Sessions declined to decide this issue as he believed it was premature), i.e., whether MPHJ had minimum contacts with the state and whether it would be fair to exercise jurisdiction over MPHJ in the event that minimum contacts exists.

MPHJ and the state’s position differed mainly in the characterization of the letters that MPHJ sent.  MPHJ indicated that it was just a patentee defending its rights.  MPHJ relied on long-standing precedent that allows patentees to send demand letters to allegedly infringing parties (generally) without fear of being hailed into the infringer’s jurisdiction.  In contrast, the State (and ultimately, the Court) focused on the alleged illegality of the letters themselves.  In other words, since the State has alleged the letters violate Vermont’s consumer protection statute, the letters are sufficient, in and of themselves, to establish minimum contacts with the state where the letters were received.  The court analogized to cases involving text messages and mailings in violation of consumer protection laws, libel suits where the libeler was in a different jurisdiction than the libelee, and phone calls made in violation of the Telephone Consumer Protection Act.

The importance of the court’s insight should not be understated. My brief review of the cases cited by the court allow for much fewer contacts with the forum state than one would normally expect under standard personal jurisdiction factual scenarios.  We are basically in a hybrid civil-criminal scenario, where illegal activity, once committed in a state comes under the jurisdiction of that state.  We wouldn’t bat an eye at a state prosecutor charging an out-of-state person for a crime committed in the prosecutor’s state, and in much the same way, we shouldn’t be surprised if a business sends an illegal letter to a state resident and the state decides to prosecute.

The court then assessed whether or not, in spite of the minimum contacts, it would be fair to MPHJ to defend itself in Vermont.  Weighing heavily against MPHJ is the fact that it was the state, itself, as the plaintiff, and that MPHJ’s letters threatened suit of the alleged infringers (which would necessarily take place in Vermont) and ultimately the court found that it would be fair to subject MPHJ to the suit in Vermont courts.

Next up for the court will likely be discovery issues…this could take a while.

*ed. Thanks to Walter Judge of Downs Rachlin Martin PLLC for pointing out that it was the Federal Circuit that reviewed the remand decision of Judge Sessions, not the Second Circuit as set forth in Judge Toor’s opinion.

MPHJ’s Motion to Dismiss for Lack of Personal Jurisdiction

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MPHJ filed a motion to dismiss yesterday (filing is below).  Nothing surprising here – MPHJ asks the court to review issues of personal jurisdiction first before ruling on remand issue then claims that no personal jurisdiction exists under general or specific jurisdictional principles.

A few interesting aspects after my quick read of the paper:

  1. MPHJ attempts to minimize its contacts within the state, claiming that the state’s basis is THREE letters sent to entities in Vermont.
  2. MPHJ focuses almost exclusively on Federal Circuit precedent which isn’t controlling on this issue and suggests that Second Circuit law is in lock-step with the Federal Circuit’s opinions.

In regards to the letters, if true, MPHJ can win on this argument.  However, my understanding is that MPHJ (or its subsidiaries) has sent hundreds of letters and has made phone contact with individuals in VT.  In fact, it would seem odd for the state of VT to take such a strong position against MPHJ if it was a mere three letters that were sent to businesses in the state.  Thus, I would imagine that the state will be able to show that MPHJ has made a substantial number of contacts within VT.

As to the specific jurisdiction caselaw, I’m not sure this is as clear as MPHJ makes it out to be. One of the cases cited by MPHJ in support of their position is Fiedler v. First City Nat. Bank of Houston, 807 F. 2d 315 (2nd Cir. 1986) where the court did not find personal jurisdiction over defendants due to minimal contacts within the state of NY.  Interestingly, the court looked at other cases Parke-Bernet Galleries, Inc. v. Franklyn, 26 N.Y.2d 13, 308 N.Y.S.2d 337, 256 N.E.2d 506 (1970) (jurisdiction proper over a California resident who participated in a New York art auction via a telephone link with an agent of the auctioneer who then relayed defendant’s bids) and CT Chemical (USA), Inc. v. Horizons International, Inc., 106 F.R.D. 518 (S.D.N.Y.1985) (defendant established a telephonic course of dealing with the plaintiff-seller and travelled to New York to have lunch with the seller in order to discuss and negotiate the contract) where the court did find PJ.  The Court cited with approval the reasoning of Judge Sweet who stated with regards to these cases “the defendants had established a pattern of commercial dealings with each plaintiff centered in New York and used the telephonic link to this state as a means of projecting themselves into local commerce.”  Depending on what evidence the state can produce, it may be able to show that MPHJ was projecting itself into local commerce and thus satisfy personal jurisdiction in the 2nd circuit.

Other interesting aspects of note – MPHJ has yet to answer the complaint and MPHJ responded to the State’s Motion for Remand today (more on that later).

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