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LLC v. Smith

United States District Court, E.D. Pennsylvania

July 17, 2019

SHIFT4 PAYMENTS, LLC, Plaintiff,
v.
ERIC SMITH; ALLIANCE CONSULTANT GROUP, INC., d/b/a ALLIANCE BUNDLES; JOHN DOES 1-10; ABC COMPANIES 1-10, Defendants

          OPINION DEFENDANT SMITH'S MOTION TO DISMISS, ECF NO. 6 - DENIED DEFENDANTS SMITH AND ALLIANCE'S MOTION TO DISMISS, ECF NO. 14 - GRANTED

          JOSEPH F. LEESON, JR. UNITED STATES DISTRICT JUDGE

         I. INTRODUCTION

         Plaintiff Shift4 Payments, LLC (“Shift4”) brings this action pursuant to 15 U.S.C. § 1051 et seq. (“Lanham Act”) and the statutory and common laws of the Commonwealth of Pennsylvania. Shift4 alleges that Defendant Alliance Consultant Group (“Alliance”), through its Chief Executive Officer Defendant Eric Smith, posted false and duplicative advertisements on the same websites as Shift4, harassed sales representatives with disruptive “robo-calls, ” and published defamatory and disparaging false statements about Shift4 and its business practices.

         Smith has moved to dismiss the Complaint, as it relates to him, for lack of personal jurisdiction. Also, Smith and Alliance have jointly moved to compel arbitration on all claims. For the reasons set forth below, Smith's motion to dismiss for lack of personal jurisdiction is denied, but Defendants' motion to compel arbitration is granted.

         II. BACKGROUND

         The Complaint alleges the following facts. Shift4, which was formerly known as Harbortouch Payments, is a limited liability company organized and existing under the laws of the State of Delaware and has a principal place of business in Allentown, Pennsylvania. See Compl. ¶ 5, ECF No. 1. Alliance, which at all times was and still is operated by Smith, is a business entity organized and existing under the laws of the State of Florida and has a principal place of business in Kissimmee, Florida. See Id. at ¶ 6.

         Shift4 and Alliance entered into a contract in October 2015 for Alliance to become an independent sales office (“ISO”) of Shift4. See Compl. ¶¶ 29, 61, 76. Smith signed this ISO Agreement on behalf of Alliance. See Agreement 11, Defs.' Mot. Dismiss, Ex. A, ECF No. 14. The ISO Agreement was due for renewal in October 2017, but a lack of active merchant accounts caused it to be automatically terminated effective October 17, 2017. See Compl. ¶ 60.

         During and after the contract term, Smith unlawfully duplicated Shift4 advertisements on various websites. Specifically, in or about April 2016, David Iava, the owner of a Shift4 ISO, noticed that within hours of posting an advertisement to certain websites, a seemingly duplicate advertisement would appear above his original advertisement. See id. at ¶ 33. While the text of the duplicate advertisement was nearly identical, the phone number in the duplicate advertisement was slightly different than his company's. See id. at ¶ 34. Iava called the phone number in the duplicate advertisement and spoke to Smith, who admitted that he was responsible for the duplicate advertisements. See id. at ¶ 35. Over the course of that initial phone call and two subsequent phone calls, Smith made defamatory comments about Shift4's chief executive officer. See id. at ¶ 36. Shortly after Iava's last communication with Smith, his company began receiving harassing robo-calls that caused the phone to ring approximately every 30 seconds, with nothing but static on the other end of the line. See id. at ¶ 39. Smith's duplicative advertisements also continued. In or about April 2017, Iava obtained a copyright registration for one of his Shift4 advertisements prior to posting it. See id. at 45. Nevertheless, that advertisement was also duplicated by Smith to redirect users to Alliance. See id.

         Defendants engaged in similar conduct in relation to another Shift4 ISO, Harbortouch Screen. See id. at ¶¶ 49-60. In or about November 2018, Iava discovered a website with the domain name “Harbortouch.sucks, ” which would redirect to “Harbortouch.pk.” See id. at ¶ 75. Public domain name registration information revealed that Harbortouch.sucks was created in or about November 2017, shortly after Shift4's termination of its ISO agreement with Alliance. See id. at ¶ 76. The Harbortouch.pk website posted a number of false and defamatory statements relating to Shift4, their agents, their ISOs, and their business practices. See id. at ¶¶ 78-83.

         Beginning in or about October 2018, Smith, for the benefit of Alliance, began using “ghost” robo-calls that caused ISO's to believe they were receiving calls from Shift4, but with only static on the other end of the line. See id. at ¶ 71. This caused ISO's to contact Shift4 to complain about the disruptive calls, thus interfering with Shift4's own operations. See id. at ¶ 72.

         The Complaint asserts thirteen counts: (1) a claim pursuant to the Lanham Act for federal trademark and service mark infringement; (2) a claim pursuant to § 43(a) of the Lanham Act for unfair competition; (3) a claim pursuant to § 43(a) of the Lanham Act for false advertising; (4) a claim pursuant to 15 U.S.C. § 1125(d) (“Anticybersquatting Consumer Protection Act”); (5) a claim pursuant to Pennsylvania common law for trademark infringement; (6) a claim pursuant to Pennsylvania common law for product disparagement/trade libel; (7) a claim pursuant to Pennsylvania common law for defamation; (8) a claim pursuant to Pennsylvania common law for tortious interference with contract; (9) a claim pursuant to Pennsylvania common law for tortious interference with prospective business relationships; (10) a claim pursuant to 73 P.S. § 201-9.2 for unfair competition; (11) a claim pursuant to Pennsylvania common law for injurious falsehood; (12) a claim pursuant to Pennsylvania common law for unjust enrichment; and (13) a claim for injunctive relief.

         III. STANDARDS OF REVIEW

         A. Personal Jurisdiction - Rule 12(b)(2)

         When reviewing a motion to dismiss for lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2), this Court must accept the plaintiff's allegations as true and resolve disputed facts in favor of the plaintiff. Pinker v. Rocher Holdings Ltd., 292 F.3d 361, 368 (3d Cir. 2002). However, once a defendant has raised a jurisdictional defense, the plaintiff must “prove by affidavits or other competent evidence that jurisdiction is proper.” See Metcalfe v. Renaissance Marine, Inc., 566 F.3d 324, 330 (3d Cir. 2009). If an evidentiary hearing is not held, a plaintiff “need only establish a prima facie case of personal jurisdiction.” Id. A plaintiff meets this burden by “establishing with reasonable particularity sufficient contacts between the defendant and the forum state.” Provident Nat. Bank v. California Fed. Sav. & Loan Assoc., 819 F.2d 434 (3d. Cir 1987).

         B. Motion to Compel Arbitration

          In deciding a motion to compel arbitration, a district may either employ the motion to dismiss standard under Federal Rule of Civil Procedure 12(b)(6) or the motion for summary judgment standard under Federal Rule of Civil Procedure 56. MacDonald v. Unisys Corp., 951 F.Supp.2d 729, 732 (E.D. Pa. 2013). When it is apparent from the face of a complaint and documents relied upon in the complaint that certain of a party's claims are subject to an enforceable arbitration clause, a motion to compel arbitration should be considered under Rule 12(b)(6). Id. (quoting Guidotti v. Legal Helpers Debt Resolution L.L.C., 716 F.3d 764, 776 (3d Cir. 2013)). If a court decides to hold discovery on the topic of arbitrability then, “after limited discovery, the court may entertain a renewed motion to compel arbitration, this time judging the motion under a summary judgement standard.” See Guidotti, 716 F.3d at 776.[1]

         C. Motion to Dismiss - Rule 12(b)(6)

         In rendering a decision on a motion to dismiss under Rule 12(b)(6), this Court must “accept all factual allegations as true [and] construe the complaint in the light most favorable to the plaintiff.” Phillips v. Cnty. of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008) (quoting Pinker, 292 F.3d at 374 n.7) (internal quotation marks omitted). Only if “the ‘[f]actual allegations . . . raise a right to relief above the speculative level'” has the plaintiff stated a plausible claim. Id. at 234 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 540, 555 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). However, “the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions.” Id. (explaining that determining “whether a complaint states a plausible claim for relief . . . [is] a context-specific task that requires the reviewing court to draw on its judicial experience and common sense”). The defendant bears the burden of demonstrating that a plaintiff has failed to state a claim upon which relief can be granted. See Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005) (citing Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1409 (3d Cir. 1991)).

         IV. ANALYSIS

         Before determining whether arbitration should be compelled, the Court first considers whether it has personal jurisdiction over Smith. See Control Screening LLC v. Tech. Application & Prod. Co., 687 F.3d 163, 171 (3d Cir. 2012) (affirming the district court's finding of personal jurisdiction then turning to the district court's decision to compel arbitration and affirming). Courts may evaluate personal jurisdiction under two tests: (1) the traditional minimum contacts test, [2] and (2) the Calder[3]effects test. Both tests are discussed herein.[4]

         A. Shift4 has alleged sufficient minimum contacts by Smith to subject him to personal jurisdiction in this Court.

         The Third Circuit Court of Appeals applies a three-step test in determining whether specific jurisdiction exists. See O'Connor, 496 F.3d at 317. The test is as follows: (1) the defendant must have “‘purposefully directed [its] activities' at the forum., ” id. (quoting Burger King Corp., 471 U.S. at 472); (2) “the litigation must ‘arise out of or relate to' at least one if those activities, ” id. (quoting Helicopteros Nacionales de Colombia S.A., 466 U.S. at 414); and (3) “if the prior two requirements are met, a court may consider whether the exercise of jurisdiction otherwise ‘comport[s] with ‘fair play and substantial justice, '” id. (quoting Burger King, 471 U.S. at 476).

         1. Smith “purposefully directed” his ...


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