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Streamline Business Services, LLC v. Vidible, Inc.

United States District Court, E.D. Pennsylvania

August 26, 2014

STREAMLINE BUSINESS SERVICES, LLC,
v.
VIDIBLE, INC., et al.

MEMORANDUM RE MOTIONS TO DISMISS

MICHAEL M. BAYLSON, District Judge.

Plaintiff, Streamline Business Group, brings claims against a former business partner, Vidible, Inc., two of Vidible's principals (collectively, the "Vidible Defendants"), and two venture capital firms that invested in Vidible, alleging breach of contract, unjust enrichment, and tortious interference. All Defendants have moved to dismiss for lack of personal jurisdiction. The Vidible Defendants have also moved to dismiss for failure to state a claim and improper venue. Since personal jurisdiction is a threshold issue, this Memorandum will first address that question.

I. FACTUAL BACKGROUND & PROCEDURAL HISTORY

Vidible, Inc. is a Delaware corporation with its principal place of business in Washington, which created an exchange market place for distributors and publishers to buy and sell videos for online advertising. Streamline Business Group (Plaintiff) is a Pennsylvania company that entered into an oral contract with Vidible in 2012 to procure customers for Vidible. Michael Hyman (Hyman), a Washington resident, and Timothy Mahlman (Mahlman), a California resident (together the "Individual Defendants"), are principals of Vidible who engaged in all of the communications Plaintiff alleges. Greycroft Partners LP (Greycroft) is a Delaware venture capital firm with its principal place of business in New York. Defendant IDG Ventures USA (IDG) is a Delaware venture capital firm with its principal place of business in California (collectively the "Investors").

A. Plaintiff's Allegations

Plaintiff alleges the following facts. In 2012, Plaintiff and Vidible entered into an oral agreement[1] to share the fees from the customers Plaintiff recruited for Vidible's business for a five-year term. Amend. Compl. at ¶ 16. In 2012 Plaintiff successfully recruited customers DHI, based in New York, and Matomy, based in Israel. Amend. Compl. at ¶ 20. Vidible paid Plaintiff its share of the customer's fees to its bank in Pennsylvania. Amend. Compl. at ¶ 28. In late 2013 Greycroft and IDG made a capital investment in Vidible. Amend. Compl. at ¶ 32.

On January 3, 2014 a principal of Plaintiff, James Battista, met with Mahlman on behalf of Vidible in California. Amend. Compl. at ¶¶ 32-33. At this meeting Mahlman asked Battista if Plaintiff would reduce its share of fees from the Matomy client account because Vidible was spending significant sums providing customer support. Amend. Compl. at ¶ 33.

The First Amended Complaint alleges that Greycroft and IDG were both engaged in management of Vidible by sitting on Vidible's board, and through this influence "exerted pressure on Vidible" to renegotiate its agreement with Plaintiff. Amend. Compl. at ¶¶ 34-37. Vidible sought to limit the contract to two years in duration, reduce the fee percentage, and cap total monthly fees per customer. Amend. Compl. at ¶ 38. Plaintiff rejected this offer, and demanded payments for its share of the customer fees that were overdue. Amend. Compl. at ¶¶ 38-39. Then Vidible went directly to the customers Matomy and DHI to negotiate a new agreement that excluded Plaintiff. Amend. Compl. at ¶ 40.

Plaintiff alleges Mahlman and Hyman falsely accused Plaintiff of illegal or improper activities to interfere with its relationship with DHI, Matomy, and others. Amend. Compl. at ¶ 41. Plaintiff alleges the Individual Defendants flew to New York and Israel to interfere with these business relationships. Amend. Compl. at ¶¶ 42-23. Plaintiff further alleges Hyman and Mahlman urged Plaintiff's consultant, Paranone, to breach its contract with Plaintiff and instead work directly for Vidible. Amend. Compl. at ¶¶ 42-44. Finally, Plaintiff alleges Vidible failed to pay its share of customer fees in the amount of $5, 000, 000. Amend. Compl. at ¶ 56.

In its First Amended Complaint, Plaintiff brings claims against Vidible for breach of contract and unjust enrichment. (ECF 12). Plaintiff also claims tortious interference against Greycroft, IDG, Vidible, and two of Vidible's principals, defendants Mahlman and Hyman.

B. Submitted Affidavits and Appended Documents

Investors submitted affidavits disavowing any significant contacts with Pennsylvania. (ECF 15-2). Plaintiff responded with an affidavit of James Battista, and attached copies of various webpages showing that Investors had invested in companies that operated in Pennsylvania. (ECF 16-3). Plaintiff also produced evidence that IDG is "one facet of the corporate behemoth, International Data Group, whose major publications include GamePro, Macworld, and PCWorld, which have a global circulation undoubtedly inclusive of Pennsylvania consumers." (ECF 16-3 at ¶ 7). Finally, Plaintiff submitted webpages from International Data Group and Greycroft that state both companies have a "global" reach. (ECF 16-3).

Vidible Defendants submitted an affidavit by Vidible principal Michael Hyman, attesting to their lack of contacts with Pennsylvania. (ECF 19). Hyman attested that Vidible does not sell any goods or services to consumers in Pennsylvania, has never solicited business in Pennsylvania, and that it was Plaintiff who reached out to Vidible. (ECF 19 at ¶¶ 12-14). Hyman further attested that the initial meeting between Plaintiff and Vidible took place in New York, and all subsequent in-person meetings took place outside of Pennsylvania. (ECF 19 at ¶¶ 15 & 22). Hyman did admit that "[s]ometimes the parties spoke over the phone or on Skype." (ECF 19 at ¶ 22).

In response, Plaintiff submitted a second declaration of James Battista attesting to Plaintiff's communications with Vidible. (ECF 20). Battista attested that each week he received approximately five emails Mahlman and another five emails from Hyman regarding contract negotiations and the business relationship between Vidible and SBG. (ECF 20 at ¶¶ 4-5). Battista also received approximately one weekly Skype communication and five weekly telephone communications regarding the business relationship from Malhman and another one and five, respectively, from Hyman each week while in Pennsylvania. (ECF 20 at ¶¶ 8-9). Battista attested that Plaintiff received at least ten payments from Vidible in a bank account opened and maintained in Pennsylvania. (ECF 20 at ¶¶ 10-11). Finally, Battista attested that Plaintiff operates in Pennsylvania where it performed the majority of the negotiation, consultation and advice for the services Vidible contracted. (ECF 20 at ¶¶ 15-16).

In a third declaration appended to Plaintiff's surreply, Battista attested that the negotiations over the Vidible contract occurred via Skype and email sent to him while he was in Pennsylvania. (ECF 23 at ¶ 8). Plaintiff submitted copies of 119 email communications, one of which mentioned the use of Skype to discuss the contract. (ECF 23 at ¶¶ 5-7). Battista also attached an email "dated March 28, 2013 from Mr. Mahlman wherein he confirms our call to finalize our partnership terms via telephone while I was in Pennsylvania." (ECF 23 at ¶ 10).

C. Subsequent Procedural History

Greycroft and IDG (Investors) filed a motion to dismiss based on lack of personal jurisdiction, and failure to state a claim for tortious interference. (ECF No. 15). Vidible, Mahlman, and Hyman (Vidible Defendants) also filed a motion to dismiss based on lack of personal jurisdiction, improper venue, and failure to state claims for breach of contract, unjust enrichment, and tortious interference. (ECF No. 19). These motions are presently before this Court.

II. THE PARTIES' ARGUMENTS

Plaintiff contends that this Court has general jurisdiction over Investors because Greycroft and IDG solicit business in Pennsylvania through their Internet websites and have invested in Pennsylvania-based companies. Investors respond that their passive websites do not give rise to general jurisdiction, and that Plaintiff has not produced any evidence showing they exert direction or control of the affiliated entities' contacts with Pennsylvania. Plaintiff does not assert this Court has general personal jurisdiction over the Vidible Defendants.

Plaintiff asserts specific personal jurisdiction over Investors because they presumably reviewed all of Vidible's financials before investing in the company, and must have reviewed invoices showing Plaintiff is located in Pennsylvania. Consequently, Investors had knowledge their conduct would result in harm in Pennsylvania. Investors respond that there is no evidence showing that they had knowledge Vidible operated in Pennsylvania.

Plaintiff claims Vidible, Mahlman, and Hyman are subject to specific personal jurisdiction in this Court because they intentionally entered into an ongoing business venture with Plaintiff, and were aware that Plaintiff would conduct all of its business for Vidible in this district. Vidible Defendants respond that merely entering into a contract with a Pennsylvania resident does not subject them to personal jurisdiction here.

Finally, the Vidible Defendants moved to dismiss for improper venue because none of the defendants reside in this District, none of the events giving rise to the claims occurred here, and venue does properly lie in the Southern District of New York where the events giving rise to the claim did occur. Plaintiff responds that a substantial part of the conduct giving rise to its claims did occur in Pennsylvania because that is where the contracts were formed, where the contracts were to be performed, and where the brunt of the harm was felt. Plaintiff disputes that venue is proper in the Southern District of New York, because only one of the defendants resides there. Further, the parties, relevant witnesses, and documents "are equally scattered, " so Plaintiff's choice of forum should not be disturbed.

The Vidible Defendants reply that New York is appropriate because the draft contract's choice of law provision selects New York law.[2] Plaintiff has requested leave to file a surreply brief which will be GRANTED and discussed below.

III. STANDARD

"To survive a motion to dismiss for lack of personal jurisdiction, a plaintiff bears the burden of establishing the court's jurisdiction over the moving defendants." Miller Yacht Sales, Inc. v. Smith , 384 F.3d 93 (3d Cir. 2004) (citing Pinker v. Roche Holdings, Ltd. , 292 F.3d 361, 368 (3d Cir. 2002)). "Although the plaintiff bears the burden of demonstrating the facts that establish personal jurisdiction, see Mellon Bank (East) PSFS Nat'l Ass'n v. Farino , 960 F.2d 1217, 1223 (3d Cir. 1992), in reviewing a motion to dismiss under Rule 12(b)(2), we must accept all of the plaintiff's allegations as true and construe disputed facts in favor of the plaintiff.'" Pinker v. Roche Holdings Ltd. , 292 F.3d 361, 368 (3d Cir. 2002) (quoting Carteret Sav. Bank, FA v. Shushan , 954 F.2d 141, 142 n.1 (3d Cir. 1992)).

Once a jurisdictional defense is raised, the plaintiff bears the burden of proving, through affidavits, or competent evidence, sufficient contacts with the forum state to establish personal jurisdiction. Dayhoff Inc. v. H.J. Heinz Co. , 86 F.3d 1287, 1302 (3d Cir. 1996), cert. denied, 519 U.S. 1028 (1996). The plaintiff must establish those contacts with reasonable particularity; he may not rely on general averments in the bare pleadings. Farino , 960 F.2d at 1223. "Where the plaintiff has made this required threshold showing, courts within this Circuit have sustained the right to conduct discovery before the district court dismisses for lack of personal jurisdiction." Toys "R" Us, Inc. v. Step Two, S.A. , 318 F.3d 446, 456 (3d Cir. 2003).

"However, when the court does not hold an evidentiary hearing on the motion to dismiss, the plaintiff need only establish a prima facie case of personal jurisdiction and the plaintiff is entitled to have its allegations taken as true and all factual disputes drawn in its favor." Miller Yacht Sales, Inc. v. Smith , 384 F.3d 93, 97 (3d Cir. 2004); see also O'Conner, 496 F.3d at 316 ("Nonetheless, since the District Court did not hold an evidentiary hearing..., the plaintiffs need only establish a prima facie case of personal jurisdiction and the plaintiffs are ...


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