Health Grades, Inc. v. Decatur Memorial Hospital

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES CO URT O F APPEALS
June 22, 2006
FO R TH E TENTH CIRCUIT Elisabeth A. Shumaker
Clerk of Court
HEALTH GRADES, IN C.,
Plaintiff-Appellant,
v. No. 05-1445
(D.C. No. 04-CV-1465-LTB-PAC)
(D . Colo.)
DECATU R M EM OR IAL H OSPITAL,
Defendant-Appellee.
OR D ER AND JUDGM ENT *
Before H E N RY, BR ISC OE, and M U RPH Y, Circuit Judges.
This appeal challenges a district court order dismissing for lack of personal
jurisdiction and improper venue H ealth G rades, Inc.’s (HGI’s) complaint against
Decatur M emorial Hospital. HGI argues that the district court either (1) erred
because Decatur consented to jurisdiction and venue or (2) abused its discretion
in denying HGI an opportunity to conduct discovery on the jurisdictional issue.
*
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is
therefore ordered submitted without oral argument. This order and judgment is
not binding precedent, except under the doctrines of law of the case, res judicata,
and collateral estoppel. The court generally disfavors the citation of orders and
judgments; nevertheless, an order and judgment may be cited under the terms and
conditions of 10th Cir. R. 36.3.
Persuaded by the second alternative, we reverse and remand for further
proceedings.
B ACKGROUND
HGI, a Colorado corporation, is a “Web-based health information resource
for the distribution of free healthcare provider ratings and information.” A plt.
App. at 18. Visitors to the HGI website encounter HGI’s user agreement and can
access provider ratings only after clicking an “I agree” icon displayed with the
user agreement. Id. at 15. The agreement governs “access to and use of th[e] Site
and the information, materials and other content available on or through th[e]
Site.” Id. at 18. Acceptance of the agreement confers a “license to access and
view th[e] Site and the Site M aterials, and to copy, download, store and/or print a
single copy of any Site M aterials, solely for . . . non-commercial use and not for
resale or distribution to anyone else.” Id. at 19. Additionally, the agreement
specifies that “[a]ny action to enforce this User Agreement will be brought in the
federal or state courts presiding in Denver, Colorado, U.S.A., and both parties
expressly agree to be subject to the jurisdiction of such courts.” Id. at 24.
Illinois-based Decatur contacted HGI about using its ratings to promote the
hospital. In response, HGI vice-president Nora Sugintas notified Decatur by
email on October 1, 2003, that Decatur was “ranked #1 in the state of Illinois for
orthopedic services.” Id. at 65. Sugintas offered a license to use the rating, as
well as marketing assistance and a quality assessment report, for the price of
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$25,000. She cautioned Decatur that this “information may be utilized only with
a signed and executed HealthGrades agreement.” Id. Decatur declined.
“In late-2003,” D ecatur posted on its website an article written by its
president, revealing that HGI had ranked Decatur number one in orthopedics and
had requested $25,000 for use of the ranking. Id. at 55, 58. The article criticized
H G I for analyzing performance “in secret ways using secret data,” and stated, “w e
don’t know how [HGI] arrived at their [ranking] conclusion, and I don’t think
paying them $25,000 helps our patients or community in any way.” Id. at 58. In
January 2004, HGI demanded that Decatur remove the article from its website.
After Decatur removed the article, HGI sued for copyright infringement and
breach of contract in July 2004.
Five months later, on December 3, 2004, a Decatur-affiliated surgeon,
Dr. Ronald M eng, emailed various individuals, proclaiming that
“Healthgrades.com has announced . . . that our cardiac surgery program here at
[D ecatur] is the only 5 star program in central and southern [I]llinois for coronary
bypass surgery!” Id. at 78-79. Dr. M eng “enclosed . . . the [uniform resource
locator] for the announcement,” w hich, with a mouse click, would take the email
recipient to HGI’s user-agreement page. Id. at 79. On December 10, 2004, HGI
amended its complaint to include Dr. M eng’s email as an instance of copyright
infringement and to add a cause of action for trademark infringement.
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On Decatur’s motion, the district court dismissed HGI’s complaint,
reasoning that it lacked personal jurisdiction because (1) Decatur had not directed
its activities toward Colorado residents; (2) HGI failed to show that Decatur
accepted the user agreement, or that if Decatur employees had accepted the
agreement, that those employees had the authority to bind the corporation; and in
any event (3) exercising jurisdiction over Decatur would offend traditional
notions of fair play and substantial justice. The court acknowledged, but did not
address, HGI’s request to conduct discovery to show Decatur’s acceptance of the
user agreement. The district court also found that HGI’s failure to establish
personal jurisdiction defeated its choice of venue. HGI appeals.
D ISCUSSION
W e review the district court’s jurisdictional and venue assessments de
novo, Bell Helicopter Textron, Inc. v. Heliqwest Int’l, Ltd., 385 F.3d 1291, 1296
(10th Cir. 2004); Pierce v. Shorty Small's of Branson Inc., 137 F.3d 1190, 1191
(10th Cir. 1998), and its refusal to permit jurisdictional discovery for an abuse of
discretion, Sizova v. Nat’l Inst. of Standards & Tech., 282 F.3d 1320, 1326
(10th Cir. 2002). “W hen, as in this case, a district court grants a motion to
dismiss for lack of personal jurisdiction without conducting an evidentiary
hearing, the plaintiff need only make a prima facie showing of personal
jurisdiction to defeat the motion.” Benton v. Cameco Corp., 375 F.3d 1070, 1074
(10th Cir. 2004) (quotation omitted), cert. denied, 544 U.S. 974 (2005). All
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factual disputes must be resolved in the plaintiff’s favor when determining
whether the plaintiff has met its burden. Id.“Consistent with due process, a court may exercise personal jurisdiction
over a nonresident defendant if minimum contacts exist between the defendant
and the forum state such that maintenance of the lawsuit would not offend
traditional notions of fair play and substantial justice.” Doering ex rel. Barrett v.
Copper M ountain, Inc., 259 F.3d 1202, 1210 (10th Cir. 2001) (quotations
omitted). 1 But since the requirement of personal jurisdiction represents an
individual due process right, the “parties to a contract may agree in advance to
submit to the jurisdiction of a given court.” Ins. Corp. of Ireland, Ltd. v.
Compagnie des Bauxites de Guinee, 456 U.S. 694, 704 (1982) (quotation
omitted). HGI does not contest the district court’s ruling that Decatur’s contacts
with Colorado were insufficient to confer jurisdiction. Consequently, our review
is limited to the effect of HGI’s user agreement and its forum-selection
provision. 2
1
In addition to other locations, venue is appropriate in any judicial district in
which the corporate defendant in an infringement action would be subject to
personal jurisdiction. 28 U.S.C. § 1391(b) & (c); id. § 1400(a).
2
W here such “provisions have been obtained through freely negotiated
agreements and are not unreasonable and unjust, their enforcement does not
offend due process.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 n.14
(1985) (quotation and citation omitted). Consequently, the district court erred in
considering whether enforcing HGI’s user agreement would offend traditional
notions of fair play and substantial justice. See Dominium Austin Partners, L.L.C.
(continued...)
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HGI argues that it submitted sufficient evidence showing that Decatur is
bound by the user agreement. 3 Specifically, HGI points to the affidavit of its
database administrator, who testified that from September 2001 through
December 2004, someone with the internet protocol (IP) address 207.0.246.194
visited HGI’s website forty-seven times and consented to the terms of the user
agreement. According to the administrator, this address “clearly belongs to
Decatur” because Decatur’s domain name, www.dmhcares.org, translates into the
internet protocol address 207.0.246.195, which is only one digit different from the
visitor’s address. Aplt. App. at 78. Nevertheless, the district court rejected the
administrator’s opinion as conclusory. W e disagree with the district court.
The administrator was not required to provide a detailed explanation for his
opinion, given that the relationship of the addresses is clear from the numbers
employed. Decatur’s IP address is only one digit different from the address of the
2
(...continued)
v. Emerson, 248 F.3d 720, 726 (8th Cir. 2001); Christian Science Bd. of Directors
v. Robinson, 123 F. Supp. 2d 965, 972 (W .D.N.C. 2000); Provident M ut. Life Ins.
Co. of Philadelphia v. Bickerstaff, 818 F. Supp. 116, 118 (E.D. Pa. 1993).
3
Decatur contends H GI “has conceded that the information in the . . . article
[written by Decatur’s president] was obtained directly from [HGI]— not from the
[HGI] web site and that it was obtained free of any constraints of the click-
through User A greement.” A plee. Br. at 11. But Decatur offers no record
citation for such a concession, and HGI disputes the point. M oreover, HGI’s user
agreement protects information “available on or through” the website. Aplt. App.
at 18 (emphasis added). Decatur does not suggest that the rating its president
revealed was not available on the website. Thus, if Decatur accepted the user
agreement, its use of HGI’s rating would appear to be restricted no matter how it
learned of the rating.
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repeat visitor to HGI’s website. Only the actual network computers are different:
194 and 195. Thus, HGI’s database administrator had a sufficient basis on which
to opine that the 194 address belonged to Decatur. W e decline HGI’s invitation,
however, to proceed further and simply “infer that some of the individuals who
accepted the User Agreement from Decatur’s IP address had authority to bind the
company.” Aplt. Br. at 11.
“An agent can make his principal responsible for his actions if he is acting
pursuant to either actual or apparent authority, regardless of whether the principal
has knowledge of the agent’s conduct.” Willey v. M ayer, 876 P.2d 1260, 1264
(Colo. 1994) (footnote omitted). HGI concedes that “only Decatur and its
employees know who uses the 194 address, and whether those using the 194
address were acting with authority when they agreed to the User Agreement.”
Aplt. Br. at 19. Discovery should be permitted, HGI asserts, to definitively
answ er the jurisdictional issue. W e agree. “W hen a defendant moves to dismiss
for lack of jurisdiction, either party should be allowed discovery on the factual
issues raised by that motion.” Sizova, 282 F.3d at 1326 (quotation omitted).
W hile the district court has broad discretion in determining whether to permit
jurisdictional discovery, a refusal to grant discovery constitutes an abuse of
discretion if either the pertinent jurisdictional facts are controverted or a more
satisfactory showing of the facts is necessary. Id. Here, the district court had
evidence that a D ecatur computer was likely used on numerous occasions to
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accept the H GI agreement and that Decatur’s D r. M eng had accessed HGI’s
website ratings and had invited others to do so. The only jurisdictional
component missing was evidence that these visitors to HGI’s website had
authority to bind Decatur to the user agreement. 4 The district court gave no
explanation for its refusal to allow jurisdictional discovery, and based on the
evidence before it, we can only conclude that the district court abused its
discretion.
The judgment of the district court is REVERSED, and the case is
REM ANDED for further proceedings consistent with this order and judgment.
Entered for the Court
M ary Beck Briscoe
Circuit Judge
4
W e note that HGI limits its request for jurisdictional discovery on the
authority issue to actual authority. Thus, HGI’s purported failure to “show that it
relied on any act or representation of Decatur,” A plee. Br. at 11, is not relevant,
because reliance is a requirement for only apparent authority, see Willey, 876 P.2d
at 1264; Rush Creek Solutions, Inc. v. Ute M ountain Ute Tribe, 107 P.3d 402, 407
(Colo. Ct. App. 2004).
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