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River City Media, LLC v. Kromtech Alliance Corp.

United States District Court, E.D. Washington

August 28, 2017

RIVER CITY MEDIA, LLC, a Wyoming limited liability company, MARK FERRIS, an individual, MATT FERRIS, an individual, and AMBER PAUL, an individual, Plaintiffs,
v.
KROMTECH ALLIANCE CORPORATION, a German corporation, CHRIS VICKERY, an individual, CXO MEDIA, INC., a Massachusetts corporation, INTERNATIONAL DATA GROUP, INC., a Massachusetts corporation, and STEVE RAGAN, an individual, and DOES 1-50, Defendants.

          ORDER ADDRESSING DEFENDANTS' MOTIONS TO DISMISS

          Stanley A. Bastian, United States District Judge.

         Before the Court are Defendant International Data Group's Motion to Dismiss for Lack of Personal Jurisdiction or Alternatively, Motion to Dismiss for Failure to State a Claim, ECF No. 12; Defendants CXO Media, Inc. and Steve Ragan's Motion to Dismiss for Lack of Personal Jurisdiction or Alternatively, Motion to Dismiss for Failure to State a Claim, ECF No. 14; and Defendant Kromtech Alliance Corporation's Motion to Dismiss Plaintiffs' Claims, ECF No. 41. A hearing on the motions was held on August 16, 2017, in Yakima, Washington. Plaintiffs were represented by Leeor Neta and Jason E. Bernstein. The IDG Defendants were represented by Charles L. Babcock, William J. Stowe, and Keven Curtis. Defendant Kromtech Alliance Corporation was represented by Matthew Brown, Amy Smith, and Christopher Durbin. Defendant Chris Vickery was represented by Aaron Rocke, who participated telephonically.

         Plaintiffs River City Media, Mark Ferris, Matt Ferris and Amber Paul are suing Defendants under the Computer Fraud and Abuse Act, 18 U.S.C. § 1030 et seq.; the Stored Communications Act, 18 U.S.C. § 2701 et seq.; the Electronic Communications Privacy Act, 18 U.S.C. § 2510, et seq.; and the Defend Trade Secrets Act, 18 U.S.C. § 1832 et seq.; and also are bringing state law claims for invasion of privacy; intentional interference with contractual relations/business expectancy; intentional infliction of emotional distress; conversion; and defamation. Plaintiff is seeking injunctive relief as well as general and special damages and attorneys' fees. All of the Defendants listed in the Complaint, with the exception of Defendant Chris Vickery, are moving to dismiss the action, asserting the Court does not have personal jurisdiction over them.

         Defendants' Motions to Dismiss for Lack of Personal Jurisdiction

         Defendants argue the Court does not have personal jurisdiction over them. They bring their motions under Fed.R.Civ.P. 12(b)(2).

         1. Motion Standard - Fed.R.Civ.P. 12(b)(2)

         Fed. R. Civ. P. 12(b)(2) governs the dismissal of an action based on lack of personal jurisdiction. When a defendant moves to dismiss a complaint for lack of personal jurisdiction, the plaintiff bears the burden of demonstrating that jurisdiction is appropriate. Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 799 (9th Cir. 2004). In ruling on a 12(b)(2) motion, the Court may, in its discretion, order discovery, hold an evidentiary hearing, or rely only on the written submissions. Data Disc, Inc. v. Sys. Tech. Assoc., Inc., 557 F.2d. 1280, 1285 (9th Cir. 1977). If the motion is based on written materials rather than an evidentiary hearing, the plaintiff need only make a prima facie showing of jurisdictional facts. Id. A prima facie showing means the plaintiff has produced admissible evidence which, if believed, is sufficient to establish the existence of personal jurisdiction. Ballard v. Savage, 65 F.3d 1495, 1498 (9th Cir. 1995). The plaintiff cannot “simply rest on the bare allegations of its complaint, ” but uncontroverted allegations in the complaint must be taken as true. Schwarzenegger, 374 F.3d at 800. While the court does not assume the truth of allegations in a pleading that are contradicted by affidavit, it resolves factual disputes in the plaintiff's favor. CollegeSource, Inc. v. AcademyOne, Inc., 653 F.3d 1066, 1073 (9th Cir. 2011) (citations omitted). This means that if both parties provide evidence supporting different versions of a fact, the court must resolve competing inferences in the plaintiff's favor. Harris Rutsky & Co. Ins. Servs., Inc. v. Bell & Clements Ltd., 328 F.3d 1122, 1129 (9th Cir. 2003).

         2. Personal Jurisdiction

         Where there is no applicable federal statute governing personal jurisdiction, the law of the state in which the district court sits applies. Id. Washington's long-arm statute (RCW § 4.28.185) extends personal jurisdiction to the broadest reach that the Due Process Clause of the federal Constitution permits. Shute v. Carnival Cruise Lines, 113 Wash.2d 763, 771 (1989). Because Washington's long-arm jurisdictional statute is coextensive with federal due process requirements, the jurisdictional analysis under state law and federal due process are the same. Mavrix Photo, Inc. v. Brand Techs. Inc., 647 F.3d 1218, 1223 (9th Cir. 2011).

         The Due Process Clause protects a defendant's liberty interest in not being subject to the binding judgments of a forum with which it has established no meaningful contacts, ties, or relations. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 471-72 (1985). Thus, for a court to exercise personal jurisdiction over a nonresident defendant, that defendant must have at least “minimum contacts” with the relevant forum such that the exercise of jurisdiction “does not offend traditional notions of fair play and substantial justice.” Id. (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). In conducting the minimum contacts inquiry, the court must focus on the relationship among the defendant, the forum, and the litigation. Walden v. Fiore, ___ U.S. ___, 134 S.Ct. 1115, 1122 (2014). For a court to exercise jurisdiction consistent with due process, the defendant's suit-related conduct must create a substantial connection with the forum State. Id. This means “the relationship must arise out of contacts that the defendant himself creates with the forum State.” Id. (emphasis in original). Thus, the focus should be on the defendant's contacts with the forum State itself, not the defendant's contact with persons who reside there. Id.

         Although personal jurisdiction can be established two ways-through general jurisdiction or specific jurisdiction-Plaintiffs are only relying on specific jurisdiction. Specific jurisdiction is based on the relationship between the defendant's forum contacts and the plaintiff's claim. It is established if the plaintiff can show that (1) the non-resident defendant purposefully directed his activities or consummated some transaction with the forum or resident thereof; or performed some act by which it purposefully availed itself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of the forum's laws[1]; (2) the claim arises out of or relates to the defendant's forum-related activities; and (3) the exercise of jurisdiction comports with fair play and substantial justice, i.e., it must be reasonable.[2] Picot v. Weston, 780 F.3d 1206, 1211 (9th Cir. 2015). “If any of the three requirements is not satisfied, jurisdiction in the forum would deprive the defendant of due process of law.” Pebble Beach Co. v. Caddy, 453 F.3d 1151, 1155 (9th Cir. 2006) (quotation omitted).

         In analyzing whether the non-resident defendant purposefully directed its activities with the forum (the first element), courts apply a three-part “effects” test.[3] Id. at 1156. Under this test, a defendant purposefully directed its activities at the forum if it: “(1) committed an intentional act, (2) expressly aimed at the forum state, (3) causing harm that it knows is likely to be suffered in the forum state.” Id. Under this analysis, there is no requirement that the defendant have any physical contacts with the forum. Schwarzenegger, 374 F.3d at 802.

         “[M]ere injury to a forum resident is not a sufficient connection to the forum. Regardless of where a plaintiff lives or works, an injury is jurisdictionally relevant only insofar as it shows that the defendant has formed a contact with the forum State. The proper question is not where the plaintiff experienced a particular injury or effect but whether the defendant's conduct connects him to the forum in a meaningful way.” Warden, 134 S.Ct. at 1125.

         In evaluating whether the assertion of personal jurisdiction would comport with fair play and substantial justice, that is, would be reasonable (the third element), the following factors may be considered by the court: (1) the extent of the defendants' purposeful injection into the forum state's affairs; (2) the burden on the defendant of defending in the forum; (3) the extent of the conflict with the sovereignty of the defendant's state; (4) the forum state's interest in adjudicating the dispute; (5) the most efficient judicial resolution of the controversy; (6) the importance of the forum to the plaintiff's interest in convenient and effective relief; and (7) the existence of an alternative forum. CollegeSource, 653 F.3d at 1079.

         “A State generally has a ‘manifest interest' in providing its residents with a convenient forum for redressing injuries inflicted by out-of-state actors.” Burger King Corp., 417 U.S. at 473. “[T]he likelihood that personal jurisdiction can be constitutionally exercised is directly proportionate to the nature and quality of commercial activity that an entity conducts over the Internet.” Cybersell, Inc. v. Cybersell, Inc., 130 F.3d 414, 419 (9th Cir. 1997).

         “When a plaintiff relies on specific jurisdiction, he must establish that jurisdiction is proper for “each claim asserted against a defendant.” Picot, 780 F.3d at 1212. “If personal jurisdiction exists over one claim, but not others, the district court may exercise pendent personal jurisdiction over any remaining claims that arise out of the same “common nucleus of operative facts” as the claim for which jurisdiction exists.” Id.

         3. Background Facts

         Plaintiff River City Media (RCM) is a Wyoming corporation that engages in internet-based marketing. Operated by Plaintiffs Mark Ferris, Matt Ferris, Amber Paul and others, its principal place of business is Liberty Lake, Washington. Plaintiffs maintain that Defendants systematically infiltrated their data network, illegally gained access to their databases without authorization, and then copied, modified, and damaged its confidential, sensitive, and propriety information.

         Specifically, Plaintiffs allege that a suspicious IP address logged into their systems on January 27, 2017. On January 28, 2017, a then-unknown threat agent connected to one of River City's servers. This threat agent spent several days inside the server, learning as much as it could about RiverCity's network before ultimately using that information to compromise additional River City computer systems. This particular server was used to monitor River City's network for possible irregularities and intruders. By purposefully attacking and compromising this server, the threat agent effectively hamstrung River City's ability to detect and stop their cyberattack.

         The threat agent accessed and destroyed data on River City's server that stored records of River City's network topology. Without this “map” of its network, River City lost the ability to manage its own systems, causing severe service ...


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