Lloyd Ward v. Stephen Rhode

Case: 12-41201 Document: 00512229307 Page: 1 Date Filed: 05/03/2013
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
May 3, 2013
No. 12-41201 Lyle W. Cayce
Clerk
LLOYD WARD; LLOYD WARD & ASSOCIATES, P.C.,
Plaintiffs - Appellants
v.
STEPHEN JEFFREY RHODE, doing business as Myvesta.org, Incorporated,
doing business as Myvesto.org, Incorporated, doing business as Myvestr.org,
doing business as Myvesta.org.uk, doing business as Getoutofdebt.org,
Incorporated, doing business as Getoutofdebt.org; PAMELA S. RHODE, doing
business as Myvesta.org, Incorporated, doing business as Myvesto.org,
Incorporated, doing business as Myvestr.org, doing business as
Myvesta.org.uk, doing business as Getoutofdebt.org, Incorporated, doing
business as Getoutofdebt.org; MYVESTA FOUNDATION,
Defendants - Appellees
Appeal from the United States District Court
for the Eastern District of Texas
USDC No. 6:11-CV-531
Before JONES and CLEMENT, Circuit Judges, and KAZEN*, District Judge.
PER CURIAM:**
*
District Judge of the Southern District of Texas, sitting by designation.
**
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
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The district court, adopting the magistrate judge’s report, dismissed this
diversity case for lack of personal jurisdiction. We AFFIRM.
FACTS AND PROCEEDINGS
Plaintiffs Lloyd Ward and Lloyd Ward & Associates, P.C. (collectively,
“Ward”) asserted federal diversity jurisdiction in their suit against Stephen
Jeffery Rhode and Pamela S. Rhode for state law claims of disparagement,
tortious interference, libel, slander, and negligence in the Eastern District of
Texas. These claims stem from the Rhodes’s website, which the Rhodes
characterize as a blog that assists consumers trying to get out of debt. Ward,
which provides legal representation concerning compliance and creditors’
collection efforts, alleges that the Rhodes posted a “Scam Alert” on their site that
urges potential clients not to use Ward’s services. The Scam Alert allegedly
contains false statements about Ward in order to support this advice.
In response to Ward’s complaint, the Rhodes filed a motion to dismiss for
lack of personal jurisdiction. The district court referred the case to a magistrate
judge, who made findings and issued a written report recommending that the
motion be granted. Her report included notice to the parties that they had
fourteen days to file written objections to the findings and recommendations it
contained. It concluded with the warning that failure to file such objections
would bar a party from de novo review by the district court of those findings and
conclusions and limit to plain error the party’s grounds for challenging on appeal
the unobjected-to proposed factual findings and legal conclusions adopted by the
district court.
Ward did not file written objections. The district court expressly adopted
the findings and conclusions of the magistrate judge and dismissed the case.
Ward now appeals.
STANDARD OF REVIEW
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Because Ward did not file written objections to the magistrate’s report, we
review the district court’s adoption of the report’s findings of facts and
conclusions of law for plain error.1 Douglass v. United Servs. Auto. Ass’n, 79
F.3d 1415, 1428-29 (5th Cir. 1996) (en banc), superceded by statute on other
grounds, 28 U.S.C. § 636(b)(1) (extending the time to file objections from ten to
fourteen days). Under plain error review, this court reverses “only where there
is ‘error that is plain and that affects substantial rights.’” Delgado v. Reef Resort
Ltd., 364 F.3d 642, 646 (5th Cir. 2004) (quoting United States v. Olano, 507 U.S.
725, 732 (1993)). Such “reversal is in the sound discretion of the appellate court
and ‘the court should not exercise that discretion unless the error seriously
affects the fairness, integrity or public reputation of judicial proceedings.’” Id.(quoting Olano, 507 U.S. at 732). Plain error thus must meet four requirements;
it must be “(1) an error; (2) that is clear or plain; (3) that affects the [party]’s
substantial rights; and (4) that seriously affects the fairness, integrity or public
reputation of judicial proceedings.” United States v. Vasquez, 216 F.3d 456, 459
(5th Cir. 2000); see Douglass, 79 F.3d at 1424 (“[O]ur court has applied the plain
error standard of FED. R. CRIM. P. 52(b) in civil cases.”). “Plain” is defined as
“clear” or “obvious” under current law. Crawford v. Falcon Drilling Co., 131 F.3d
1120, 1125 (5th Cir. 1997); see Brown v. Bryan Cnty., 219 F.3d 450, 466 (5th Cir.
2000) (“‘[C]lear’ means ‘the error is clear under current law.’” (quoting Olano,
507 U.S. at 734)). “‘[A]ffects substantial rights’ means that ‘the error must have
been prejudicial.’” Brown, 219 F.3d at 466 (quoting Olano, 507 U.S. at 734).
DISCUSSION
The district court did not plainly err. Ward contends that the Rhodes are
subject to both general and specific jurisdiction in Texas, although they are not
1
Ward did not cite the correct standard of review in its opening brief. The Rhodes
specified the correct standard in their brief, and Ward has not responded with an argument
either that plain error review should not apply or that the district court’s error was plain.
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residents of the state. In support of its claim of general jurisdiction, it points to
evidence that the Rhodes had Texas drivers’ licenses in 2008, various of the
Rhodes’s corporate entities have a mailing address in Houston, and the Rhodes’s
website’s servers are located in San Antonio. These contacts are insufficient to
meet the “continuous and systematic” standard required for a court to exercise
general jurisdiction. Pervasive Software Inc. v. Lexware GmbH & Co. KG, 688
F.3d 214, 230 (5th Cir. 2012) (“In International Shoe, the Supreme Court
explained that ‘continuous activity of some sorts within a state is not enough to
support the demand that the corporation be amenable to suits unrelated to that
activity . . . the continuous corporate operations within a state [must be] so
substantial and of such a nature as to justify suit against it on causes of action
arising from dealings entirely distinct from those activities.’ Lexware had only
sporadic and attenuated contacts with the state of Texas.” (quoting Int’l Shoe Co.
v. State of Wash., Office of Unemployment Comp. & Placement, 326 U.S. 310, 318
(1945) (alterations in original))). It was not clear or obvious error for the district
court to decide that it could not exercise general personal jurisdiction over the
Rhodes.
“Where contacts are less pervasive, the court may still exercise specific
jurisdiction in a suit arising out of or related to the defendant’s contacts with the
forum.” Luv N’ care, Ltd. v. Insta-Mix, Inc., 438 F.3d 465, 469 (5th Cir. 2006)
(quotation marks and citation omitted); see also Seiferth v. Helicopteros
Atuneros, Inc., 472 F.3d 266, 274 (5th Cir. 2006) (“A plaintiff bringing multiple
claims that arise out of different forum contacts of the defendant must establish
specific jurisdiction for each claim.”). This court uses a three-step analysis for
specific jurisdiction:
(1) whether the defendant has minimum contacts with the forum
state, i.e., whether it purposely directed its activities toward the
forum state or purposefully availed itself of the privileges of
conducting activities there; (2) whether the plaintiff’s cause of action
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arises out of or results from the defendant’s forum-related contacts;
and (3) whether the exercise of personal jurisdiction is fair and
reasonable.
McFadin v. Gerber, 587 F.3d 753, 759 (5th Cir. 2009) (quotation marks and
citation omitted).
The court classifies the purposeful direction of a contact arising out of
internet use along a spectrum:
At the one end of the spectrum, there are situations where a
defendant clearly does business over the Internet by entering into
contracts with residents of other states which involve the knowing
and repeated transmission of computer files over the Internet. In
this situation, personal jurisdiction is proper. At the other end of
the spectrum, there are situations where a defendant merely
establishes a passive website that does nothing more than advertise
on the Internet. With passive websites, personal jurisdiction is not
appropriate. In the middle of the spectrum, there are situations
where a defendant has a website that allows a user to exchange
information with a host computer. In this middle ground, the
exercise of jurisdiction is determined by the level of interactivity and
commercial nature of the exchange of information that occurs on the
Website.
Mink v. AAAA Dev. LLC, 190 F.3d 333, 336 (5th Cir. 1999) (quotation marks,
alterations, and citations omitted). The Rhodes’s website is interactive to the
extent that it allows users to post their opinions about the debt-counseling
services that they have used. However, it neither allows users to purchase
products online, nor sells subscriptions to view its content. Therefore, the nature
of the exchange of information is not commercial. While it is plain that, as the
magistrate judge recognized, the Rhodes’s website falls within the “middle
ground” of the spectrum, it is not clear or obvious that the website’s level of
interactivity with Texans and the commercial nature of these exchanges are
sufficient for the district court to exercise jurisdiction.
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Furthermore, a “plaintiff seeking to assert specific personal jurisdiction
over a defendant in a defamation case [must] show (1) the subject matter of and
(2) the sources relied upon for the article were in the forum state.” Clemens v.
McNamee, 615 F.3d 374, 380 (5th Cir. 2010) (quotation marks and citation
omitted). Ward has not presented evidence that the sources relied upon for the
Scam Alert were in Texas. The district court, therefore, did not obviously err in
concluding that it did not have specific personal jurisdiction over the Rhodes.
Finally, we have held that a plain error in failing to find personal
jurisdiction affects the plaintiff’s substantial rights (satisfying the third prong
of the test) but “does not seriously impact the fairness, integrity, or public
reputation of the judicial proceeding.” Delgado, 364 F.3d at 646. Thus, the
fourth prong of the plain error test also is not satisfied.
CONCLUSION
We AFFIRM the district court’s dismissal for lack of personal jurisdiction.
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