Enhanceworks, Inc. v. Dropbox, Inc.

03/14/2019
IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
January 10, 2019 Session
ENHANCEWORKS, INC. v. DROPBOX, INC.
Appeal from the Chancery Court for Davidson County
No. 18-241-BC Joseph P. Binkley, Jr., Judge
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No. M2018-01227-COA-R3-CV
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This appeal involves the issue of personal jurisdiction over Appellee, a Delaware
corporation with its principal place of business in San Francisco, California. The trial
court, on Appellee’s Tennessee Rule of Civil Procedure 12.02(2) motion to dismiss for
lack of personal jurisdiction, decided it lacked personal jurisdiction and dismissed the
case. Appellant appeals. Discerning no error, we affirm and remand.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court
Affirmed and Remanded
KENNY ARMSTRONG, J., delivered the opinion of the court, in which FRANK G. CLEMENT,
JR., P.J., M.S. and ANDY D. BENNETT, J., joined.
John R. Jacobson, Timothy L. Warnock, Stuart A. Burkhalter, Nashville, Tennessee, for
the appellant, EnhanceWorks, Inc.
Brian M. Willen, New York, New York, John Mellyn, Washington, D.C., Robb S.
Harvey, Nashville, Tennessee for the appellee, Dropbox, Inc.
OPINION
I. Background
Charlie Corts is a resident of Nashville, Tennessee and has a background in digital
media and software development. From 2012 through 2014, Mr. Corts developed and
eventually launched the application (“app”) “Expo.” Expo is a “mobile app solution that
allows a business or individual to create a custom-branded interface that sits on top of
cloud storage services such as Box, Dropbox, Google Drive, or Microsoft OneDrive and
makes it simple to organize, present, and share content.” Mr. Corts founded
EnhanceWorks, Inc. (“EnhanceWorks,” or “Appellant”), a Delaware corporation with its
principal place of business in Nashville, Tennessee, for the purpose of further developing
and bringing Expo to the marketplace. On March 7, 2014, the first version of Expo
became available for download in the App Store. After Expo’s launch, Mr. Corts began
searching for potential customers, partners, investors, and acquirers for the app; he
presented at conferences, and used his connections to pitch Expo to established
individuals and entities within the software industry.
In early 2015, Paul Francis, who is not a party to this appeal, introduced Mr. Corts
to Robert Mylod, Jr., a member of the Board of Directors of Dropbox, Inc. (“Dropbox,”
or “Appellee”). Mr. Mylod resides in Michigan and has been a member of Dropbox’s
Board of Directors since August 2014. Dropbox is a Delaware corporation with its
principal place of business in San Francisco, California. Mr. Francis, on behalf of
EnhanceWorks, contacted Mr. Mylod to determine whether Mr. Mylod, on behalf of
Dropbox, would be interested in Expo as a potential partner, investor, or purchaser. Mr.
Francis also inquired whether Mr. Mylod would provide Mr. Corts with feedback
regarding Expo. EnhanceWorks alleges that Mr. Francis transmitted, on behalf of
EnhanceWorks, confidential “ideas, documents, and information includ[ing] a slideshow
presentation, . . . a link to an online video, and a link to Expo’s newly launched website”
to Dropbox and its Board of Directors.
On March 18, 2015, Mr. Francis facilitated an email exchange between Messrs.
Mylod and Corts. Mr. Francis informed Mr. Corts that Mr. Mylod had reviewed the
documents and information and had spoken to “one or two people at Dropbox about the
idea.” On March 19, 2015, Mr. Corts replied to Mr. Francis’s email and asked Mr.
Mylod if he would be available for a telephone call in the near future. That same day,
Mr. Mylod replied to Mr. Corts’s email stating that he was available for a telephone call
the next day. On March 20, 2015, Mr. Corts emailed Mr. Mylod stating that he called
Mr. Mylod, left him a voicemail, and requested a call back. Mr. Mylod returned Mr.
Corts’s call later that day. EnhanceWorks alleges that during this telephone call Mr.
Mylod told Mr. Corts that “Expo looked like a ‘cool UI [user interface]’ and a different
way of visualizing files” but informed Mr. Corts that the app “had no practical value for
Dropbox.” Additionally, EnhanceWorks alleges that Mr. Mylod discouraged Mr. Corts
from further engaging in development and promotion of Expo. Specifically, Mr. Corts
alleges that Mr. Mylod stated that the app was a “waste of time” and opined that Mr.
Corts should choose a different career path. On March 30, 2015, Mr. Corts emailed Mr.
Mylod thanking him for the telephone call and his feedback. Mr. Corts continued to
promote Expo after the call.
On October 17, 2017, Dropbox launched “Dropbox Professional,” an enhanced
version of Dropbox, with a $19.99 monthly fee for users. One of Dropbox Professional’s
premium features is “Dropbox Showcase.” EnhanceWorks alleges that Dropbox
Showcase is “an application that is an indistinguishable copy of Expo” (emphasis
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included in original). Furthermore, EnhanceWorks alleges that Dropbox Showcase’s
website and marketing materials are almost identical to Expo’s website and marketing
materials.
On March 7, 2018, EnhanceWorks filed a complaint in Davidson County
Chancery Court, alleging: (1) breach of contract; (2) breach of the duty of good faith and
fair dealing; (3) breach of confidence; (4) intentional misrepresentation; (5) negligent
misrepresentation; (6) implied-in-fact contract; (7) unfair competition; (8) intentional
interference with business relations; and (9) violation of the Tennessee Consumer
Protection Act (“TCPA”). On March 22, 2018, the case was transferred to the Business
Court Pilot Project (“trial court”). On April 27, 2018, Dropbox filed a motion to dismiss
for lack of personal jurisdiction. On June 8, 2018, the trial court heard Dropbox’s motion
to dismiss. By order of June 26, 2018, the trial court granted the motion and dismissed
the case. EnhanceWorks appeals.
II. Issues
EnhanceWorks raises one issue for review, i.e., whether the trial court erred when
it granted Dropbox’s motion to dismiss for lack of personal jurisdiction.
III. Standard of Review
“The plaintiff bears the ultimate burden of demonstrating that the trial court may
properly exercise personal jurisdiction over a defendant.” Gordon v. Greenview Hosp.,
Inc., 300 S.W.3d 635, 643 (Tenn. 2009) (citing Chenault v. Walker, 36 S.W.3d 45, 56
(Tenn. 2001); Davis Kidd Booksellers, Inc. v. Day-Impex, Ltd., 832 S.W.2d 572, 577
(Tenn. Ct. App. 1992)). However, “[t]his burden is ordinarily not a heavy one, because
personal jurisdiction need only be demonstrated by a preponderance of the evidence.” Id.
(citations omitted).
A defendant may challenge personal jurisdiction by filing a Tennessee Rule of
Civil Procedure 12.02(2) motion to dismiss. Id. at 643-44. The defendant may or may
not choose to support its motion with affidavits or other evidentiary materials. Id. at 644
(citing Humphreys v. Selvey, 154 S.W.3d 544, 550 n.5 (Tenn. Ct. App. 2004)). Here,
Dropbox did not file an affidavit or other evidentiary materials; therefore, the trial court
reviewed only EnhanceWorks’s complaint. “Under Tennessee law, the factual
allegations in the plaintiff’s complaint must establish sufficient contacts between the
defendant and this state with reasonable particularity.” First Cmty. Bank, N.A. v. First
Tennessee Bank, N.A., 489 S.W.3d 369, 383 (Tenn. 2015). Therefore, “the trial court’s
responsibility is to determine whether the plaintiff has alleged or presented sufficient
facts to survive the motion to dismiss.” Gordon, 300 S.W.3d at 644 (citing Progeny
Mktg. v. Farmers & Merchs. Bank, No. M2003-02011-COA-R3-CV, 2005 WL 819732,
at *2 (Tenn. Ct. App. Apr. 7, 2005)). The trial court must take as true all of the factual
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allegations in the plaintiff’s complaint and supporting papers, if any, and must resolve all
factual disputes in the plaintiff’s favor. Id. (citing Chenault, 36 S.W.3d at 56; Mfrs.
Consolidation Serv., Inc., v. Rodell, 42 S.W.3d 846, 855 (Tenn. Ct. App. 2000)).
“Dismissal is proper only if all the specific facts alleged by the plaintiff collectively fail
to establish a prima facie case for personal jurisdiction.” Id. (citing Mfrs. Consolidation
Serv., Inc., 42 S.W.3d at 855).
A decision regarding the exercise of personal jurisdiction over a defendant
involves a question of law, which we review “de novo with no presumption of
correctness for the purpose of determining whether the plaintiff has made out a prima
facie basis for the exercise of personal jurisdiction over the defendant.” Id. at 645. The
question before us, then, is whether, taking the plaintiff’s factual allegations as true and
resolving all reasonably disputed facts in the plaintiff’s favor, the plaintiff has shown, by
a preponderance of the evidence, that Tennessee courts may properly exercise jurisdiction
over the defendant. See State v. NV Sumatra Tobacco Trading Co., 403 S.W.3d 726,
739 (Tenn. 2013).
IV. Analysis
Tennessee’s long-arm statute permits the courts of this state to exercise
jurisdiction on “‘[a]ny basis not inconsistent with the constitution of this state or of the
United States.’” Mfrs. Consolidation Serv., Inc., 42 S.W.3d at 855 (quoting Tenn. Code
Ann. §§ 20-2-214(a)(6), 20-2-225(2)). “The due process requirements of the Tennessee
Constitution are co-extensive with those of the United States Constitution,” and our
courts “have generally hewn closely to the United States Supreme Court’s precedents.”
Advanced Sec. Servs. Evaluation & Training, LLC v. OHR Partners Ltd., No. M2017-
00249-COA-R3-CV, 2018 WL 1391626, at *6 (Tenn. Ct. App. Mar. 20, 2018) (quoting
NV Sumatra, 403 S.W.3d 726 at 751). “When a state’s long-arm statute authorizes the
assertion of personal jurisdiction to the limits of federal due process, as does Tennessee’s
long-arm statute, the issue becomes simply whether the trial court’s exercise of personal
jurisdiction over the defendant meets due process requirements.” Mfrs. Consolidation
Serv., Inc., 42 S.W.3d at 855. “[D]ue process obligates the courts to ascertain whether it
is ‘fair and substantially just to both parties to have the case tried in the state where the
plaintiff has chosen to bring the action.’” Gordon, 300 S.W.3d at 646 (quoting Masada
Inv. Corp. v. Allen, 697 S.W.2d 332, 335 (Tenn. 1985)). A state cannot enter a binding
judgment against a defendant that has “‘no contacts, ties or relations’” with the state. NV
Sumatra, 403 S.W.3d at 743 (quoting World-Wide Volkswagen Corp. v. Woodson, 444
U.S. 286, 294 (1980)). However, the United States Supreme Court announced long ago
that “due process requires only that in order to subject a defendant to a judgment in
personam, if he be not present within the territory of the forum, he have certain minimum
contacts with it such that the maintenance of the suit does not offend ‘traditional notions
of fair play and substantial justice.’” International Shoe Co. v. Washington, 326 U.S.
310, 316 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)). The Court’s
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“minimum contacts” language “has been the crux of personal jurisdiction in America
ever since International Shoe was decided.” NV Sumatra, 403 S.W.3d at 741-42.
“Federal and state courts now recognize two varieties of personal jurisdiction—
specific jurisdiction and general jurisdiction.” Gordon, 300 S.W.3d at 647. General
jurisdiction “may be asserted when the plaintiff’s cause of action does not arise out of
and is not related to the nonresident defendant’s activities in the forum state.” Id. As
stated by the Gordon Court,
[t]he threshold for satisfying the requirements for general jurisdiction is
substantially higher than the requirements for establishing specific
jurisdiction. 4 Charles Alan Wright & Arthur R. Miller Federal Practice and
Procedure § 1067.5, at 517. An assertion of general jurisdiction must be
predicated on substantial forum-related activity on the part of the defendant.
The nonresident defendant’s contacts with the forum state must be
sufficiently continuous and systematic to justify asserting jurisdiction over
the defendant based on activities that did not occur in the forum state.
Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. [408,] at 416
[(1984)], 104 S. Ct. 1868; Perkins v. Benguet Consol. Mining Co., 342
U.S.[437,] at 448 [(1952)], 72 S. Ct. 413; Lindsey v. Trinity Commc'ns,
Inc., 275 S.W.3d [411,] at 417 [(2009)]; see also 4 Federal Practice and
Procedure § 1067.5, at 507.
Id. at 647-48 (footnote omitted). “Specific jurisdiction may be asserted when the
plaintiff’s cause of action arises from or is related to the nonresident defendant’s
activities in or contacts with the forum state.” Id. at 647. In order to invoke specific
jurisdiction, the plaintiff must show that the nonresident defendant has purposefully
established significant contact with the forum state and that the plaintiff’s cause of action
arises out of or is related to these activities or contacts. Id. (citing Burger King Corp. v.
Rudzewicz, 471 U.S. 462, 472 (1985)). The Tennessee Supreme Court “reiterate[d] the
law of specific personal jurisdiction, as it applies in Tennessee[,]” in NV Sumatra:
Due process permits a state to enforce its judgments against a
defendant only when the defendant has sufficient minimum contacts with
the state that jurisdiction does not offend traditional notions of fair play and
substantial justice. Minimum contacts are present when the defendant’s
purposeful conduct and connection with the forum state are such that the
defendant avails itself of the benefits and protections of the state’s laws and
should, therefore, reasonably anticipate being haled into that state’s courts.
Assessing minimum contacts involves a two-part test. The first step
is the fact-gathering exercise of identifying the relevant contacts. The
plaintiff is required to establish that minimum contacts exist by a
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preponderance of the evidence. The court should consider the quantity of
the contacts, their nature and quality, and the source and connection of the
cause of action with those contacts. A defendant’s contacts are sufficiently
meaningful when they demonstrate that the defendant has purposefully
targeted Tennessee to the extent that the defendant should reasonably
anticipate being haled into court here.
If the court finds sufficient minimum contacts, then the inquiry
should proceed to the second step. At step two, the defendant bears the
burden of showing that, despite the existence of minimum contacts,
exercising jurisdiction would be unreasonable or unfair.
NV Sumatra, 403 S.W.3d at 759-60. “Both steps call for a careful, not mechanical,
analysis of the facts of each case with particular focus on the defendant, the forum, and
the nature of the litigation.” Davis Kidd Booksellers, Inc., 832 S.W.2d at 575.
EnhanceWorks concedes that Tennessee cannot exercise general personal
jurisdiction over Dropbox. Therefore, our review and analysis concern only specific
personal jurisdiction. In applying the two-part test from NV Sumatra, we first identify
Dropbox’s alleged “relevant contacts” with Tennessee. NV Sumatra, 403 S.W.3d at 759.
In its complaint, EnhanceWorks alleges two points of contact: (1) the initial contact via
Mr. Mylod’s email and telephone call; and (2) Dropbox accessing EnhanceWorks’s
public website a few years later. After identifying the relevant contacts, we consider the
“quantity of the contacts, their nature and quality, and the source and connection of the
cause of action with those contacts.” Id. Dropbox’s and Mr. Mylod’s contacts are
sufficiently meaningful if they demonstrate that Dropbox purposefully targeted
Tennessee such that Dropbox should reasonably anticipate being haled into court here.
Id. We turn to those questions.
A. Emails and Phone Call
The first alleged point of contact between Dropbox and Tennessee concerns an
email and a telephone call. As described, supra, Mr. Francis, at EnhanceWorks’s
request, made the initial email connection between EnhanceWorks and Mr. Mylod.
Thereafter, Mr. Corts emailed Mr. Mylod and requested a telephone call with him. Mr.
Mylod’s reply email was simply: “Hi Charlie, [n]ice to meet you. I’m available in the
late morning tomorrow for a call if you are. How about 11:30 am?” Mr. Corts called Mr.
Mylod at the agreed time, but Mr. Mylod did not answer. Mr. Mylod returned Mr.
Corts’s call the same day. EnhanceWorks alleges that, during the call, Mr. Mylod stated,
inter alia, that Expo had a “cool UI [user interface]” but “no practical value for
Dropbox.” EnhanceWorks further alleges that Mr. Mylod discouraged Mr. Corts from
continuing to develop Expo. After the telephone call, Mr. Corts sent Mr. Mylod a
follow-up email thanking him for his time and advice. There is no allegation that Mr.
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Mylod responded to the follow-up email. Therefore, EnhanceWorks’s complaint alleges
only two possible initial points of contact between Mr. Mylod, on behalf of Dropbox, and
Tennessee: (1) Mr. Mylod’s response to Mr. Corts’s email; and (2) Mr. Mylod’s return
telephone call to Mr. Corts.
In applying the NV Sumatra test, we consider the quantity of the contacts, their
nature and quality, and the source and connection of the cause of action with these
contacts. NV Sumatra, 403 S.W.3d at 759-60. First, the number of the contacts is only
two: Mr. Mylod returned an email, and Mr. Mylod returned a telephone call. The nature,
quality, and source of the email and the telephone call were both responses to Mr. Corts’s
initial contact. Next, we consider the connection between the alleged causes of action
and the email response and the connection between the alleged causes of action and the
return telephone call. As set out above, the entire substance of Mr. Mylod’s response
email was to set a time for a telephone call that Mr. Corts requested; it does not relate to
EnhanceWorks’s alleged causes of action. However, even if we assume that Mr. Mylod’s
email was connected to a cause of action (which we do not) EnhanceWorks would still be
required to demonstrate that Mr. Mylod and Dropbox knew that Mr. Corts and
EnhanceWorks were located in Tennessee in order to show that Dropbox purposefully
directed its email response to Tennessee. Rice v. Karsch, 154 Fed. Appx. 454, 462 (6th
Cir. 2005) (“Finding personal jurisdiction over an individual merely because he sends an
email to a generic email address is incomprehensible to th[e] court.”); Shrader v.
Biddinger, 633 F.3d 1235, 2148 (10th Cir. 2011) (citing Rice, 154 Fed.Appx. at 462)
(“[I]f the plaintiff does not show that the defendant otherwise knew where the recipient
was located, the email itself does not demonstrate purposeful direction of the message to
the forum state, even if that happens to be where the recipient lived.”). EnhanceWorks
failed to allege specific facts from which to conclude or infer that Mr. Mylod knew he
was emailing Mr. Corts in Tennessee. Furthermore, Mr. Corts’s email address was
sufficiently generic that Mr. Mylod would not know he was emailing someone in
Tennessee. Our analysis now shifts to Mr. Mylod’s alleged statements made during the
telephone call.
As discussed, supra, EnhanceWorks alleged nine causes of action in its complaint:
(1) breach of contract; (2) breach of the duty of good faith and fair dealing; (3) breach of
confidence; (4) intentional misrepresentation; (5) negligent misrepresentation; (6)
implied-in-fact contract; (7) unfair competition; (8) intentional interference with business
relations; and (9) violation of the TCPA. On appeal, EnhanceWorks alleges that
Dropbox created a fraudulent scheme and aimed it at Tennessee when Mr.
Mylod/Dropbox discouraged Mr. Corts from further developing Expo and then developed
Dropbox Showcase, an exact replica of Expo. Specifically, EnhanceWorks’s complaint
states:
29. Little did Mr. Corts know, however, that the discouragement of
Dropbox, Mr. Mylod, the Board of Directors of Dropbox, Drew Houston
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and Dennis Woodside was apparently a ruse, as, upon information and
belief, Dropbox, Mr. Mylod, the Board of Directors of Dropbox, Drew
Houston and Dennis Woodside had decided to simply take the idea,
documents, and information and create an identical application for
Dropbox. Further, upon information and belief, because they wanted to
discourage a competitor in the marketplace and knowing full well how
pivotal a communication from Dropbox would be to the development and
expansion of an app like Expo, Mr. Mylod, Dropbox, the Board of
Directors of Dropbox, Drew Houston and Dennis Woodside also
purposefully told Mr. Corts that his product was worthless in an effort to,
among other things, compete with EnhanceWorks unfairly and ultimately
scuttle the development of Expo.
EnhanceWorks argues that the connection between Mr. Mylod’s alleged
comments during the telephone call and its causes of action establish that Dropbox
purposefully targeted Tennessee. In making this argument, EnhanceWorks urges this
Court to apply the Sixth Circuit Court of Appeals’ analysis in Neal v. Janssen, 270 F.3d
328 (6th Cir. 2001). The sole issue presented in Neal was whether the district court
properly exercised personal jurisdiction over the defendant. Id. at 330. The plaintiffs,
residents of Tennessee, owned a dressage horse they wanted to sell. Id. The defendant, a
Belgian resident, agreed to serve as the plaintiffs’ agent in selling the horse and take a
10% commission on the sale. Id. Importantly, while the defendant was working with the
plaintiffs, he “made phone calls and sent facsimiles to [the] plaintiffs in Tennessee on
several occasions . . . to discuss the sale of the horse and to present offers to purchase the
horse made by third parties.” Id. Later, the defendant called one of the plaintiffs’ sons, a
Tennessee resident, and stated that he had a prospective buyer who would pay
$312,000.00 for the horse. Id. The defendant explained that he would waive his
commission if the plaintiffs accepted the offer. Id. The plaintiffs accepted the offer and
soon after received a wire transfer into their Tennessee bank account for $311,964.50.
Id. Later, the plaintiffs learned that the buyer paid the defendant $480,000.00 for the
horse. Id.
The plaintiffs filed an action against the defendant in federal district court in
Tennessee for breach of fiduciary duty and fraud. Id. The defendant filed a motion to
dismiss for lack of personal jurisdiction, which the district court denied. Id. at 330-31.
Subsequently, the matter was tried to a jury without the defendant present. The jury
awarded the plaintiffs $250,000.00 in compensatory damages and $250,000.00 in
punitive damages. Id. at 331. On appeal, the defendant again argued that the district
court could not exercise personal jurisdiction over him. Id. As part of its analysis, the
Sixth Circuit opined that “[t]he acts of making phone calls and sending facsimiles into the
forum, standing alone, may be sufficient to confer jurisdiction on the foreign defendant
where the phone calls and faxes form the bases for the action.” Id. at 332 (internal
citations omitted). Further, the Sixth Circuit explained that “[w]hen the actual content of
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the communications into the forum gives rise to an intentional tort action, that alone may
constitute purposeful availment.” Id. Relying on Neal, EnhanceWorks argues that, like
the defendant in Neal, Dropbox created a fraudulent scheme and aimed it at Tennessee.
The scheme, according to EnhanceWorks, was discouraging Mr. Corts from continuing to
develop Expo because Dropbox had the intention of developing Dropbox Showcase, an
Expo replica.
Dropbox’s and Mr. Mylod’s contact with Tennessee is clearly distinguishable
from the Neal defendant’s contact with Tennessee. Unlike Mr. Mylod, the defendant in
Neal, over several months, continuously called and sent facsimiles to Tennessee in
furtherance of the established business relationship he had with the plaintiffs. Mr.
Mylod’s email and telephone call to a resident of Tennessee were merely responses to
Mr. Corts’s contacts. The conversations were largely one-sided with the substance of the
telephone call being Mr. Mylod’s communication of his thoughts concerning Expo. “A
forum State’s exercise of jurisdiction over an out-of-state intentional tortfeasor must be
based on intentional conduct by the defendant that creates the necessary contacts with the
forum.” Walden v. Fiore, 571 U.S. 277, 286 (2014). Even taking EnhanceWorks’s
allegations as true, Dropbox did not aim its actions at Tennessee. Rather, any action on
Dropbox’s part to intercept and sell Expo was accomplished, if at all, in California not in
Tennessee. In short, Dropbox’s contacts with Tennessee were not sufficiently
meaningful such that it should reasonably anticipate being haled into court here. It is not
enough that EnhanceWorks alleged that the fraudulent behavior was suffered by a
Tennessee resident. “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.” Walden, 571 U.S. at 290.
“For a State to exercise jurisdiction consistent with due process, the defendant’s
suit related conduct must create a substantial connection with the forum.” Id. at 284.
Here, Mr. Mylod’s conduct, and therefore Dropbox’s conduct, did not create a substantial
connection with Tennessee. To the contrary, Mr. Mylod’s two contacts were with Mr.
Corts who happened to live in Tennessee. In determining whether minimum contacts
exist, we analyze “the defendant’s contacts with the forum State itself, not the
defendant’s contacts with persons who reside there.” Id. at 285. Furthermore, Mr.
Mylod did not make the initial connection with Mr. Corts or with EnhanceWorks. Only
after Mr. Francis first communicated with Mr. Corts and Mr. Mylod, and Mr. Corts
communicated with Mr. Mylod did Mr. Mylod return communication. Mr. Mylod was
simply responding to the initial contacts. Mr. Mylod never targeted Tennessee. See NV
Sumatra, 403 S.W.3d at 759-60. Even though Mr. Mylod, on behalf of Dropbox, sent
one email and made one return telephone call to Mr. Corts in Tennessee, for the reasons
discussed above, the quality and nature of these contacts fall short of the requirements of
due process. EnhanceWorks has failed to allege facts sufficient to demonstrate that this
was more than a single isolated call where Mr. Mylod and Dropbox were unaware that
they were dealing with Tennessee. Cf. Sledge v. Indico System Resources, Inc., 68 F.
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Supp. 3d 834, 845 (W.D. Tenn. 2014) (finding that the defendant knowingly made
numerous communications into Tennessee for his own gains, thereby availing himself of
the forum). “Due process requires that a defendant be haled into court in a forum State
based on his own affiliation with the State, not based on the ‘random, fortuitous, or
attenuated’ contacts he makes by interacting with other persons affiliated with the State.”
First Cmty. Bank, N.A., 489 S.W.3d at 393-94 (citing Walden, 571 U.S. at 284-85
(quoting Burger King, 471 U.S. at 475)). Mr. Mylod’s reply email and telephone call to
Mr. Corts are the “random, fortuitous, or attenuated” contacts the Supreme Court warned
against in Burger King. See Burger King, 471 U.S. at 475. We agree with the trial court
that Mr. Mylod’s email and telephone communications with Mr. Corts did not
purposefully target Tennessee such that Dropbox should reasonably anticipate being
haled into court here. NV Sumatra, 403 S.W.3d at 759-60. Therefore, EnhanceWorks
has not established that Mr. Mylod/Dropbox’s reply email and telephone call constitute
sufficient minimum contacts with Tennessee. Id.
B. Website
The second alleged point of contact between Dropbox and Tennessee concerns
Dropbox accessing Expo’s public website. Specifically, EnhanceWorks alleged in its
complaint that
[a]long with creating an application that is nearly identical to Expo,
Dropbox also appears to have used the Expo website and Expo marketing
materials to create Dropbox Showcase’s website and marketing material,
while providing only perfunctory revisions in an apparent effort to avoid
detection of its copying[.]
Essentially, EnhanceWorks argues that Dropbox accessed Expo’s public website and
copied materials from it. Indeed, EnhanceWorks does not specifically allege that
Dropbox actually accessed the website; the complaint states only that “Dropbox . . .
appears to have used the Expo website.” (emphasis added).
Tennessee case law is rather sparse on the question of how personal jurisdiction is
related to the Internet and contacts made through that medium. We find guidance,
however, in the case law of our sister states. In ALS Scan, Inc. v. Digital Service
Consultants, Inc., 293 F.3d 707, 714 (4th Cir. 2002), the Fourth Circuit Court of Appeals
articulated a new test for specific personal jurisdiction in the Internet era, to-wit:
[A] State may, consistent with due process, exercise judicial power over a
person outside of the State when that person (1) directs electronic activity
into the State, (2) with the manifested intent of engaging in business or
other interactions within the State, and (3) that activity creates, in a person
within the State, a potential cause of action cognizable in the State’s courts.
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Under this standard, a person who simply places information on the
Internet does not subject himself to jurisdiction in each State into
which the electronic signal is transmitted and received. Such passive
Internet activity does not generally include directing electronic activity
into the State with the manifested intent of engaging business or other
interactions in the State thus creating in a person within the State a
potential cause of action cognizable in courts located in the State.
Id. (emphasis added).1 “This standard for reconciling contacts through electronic media
with standard due process principles is not dissimilar to that applied by the Supreme
Court in Calder v. Jones, 465 U.S. 783 (1984).” Id. In Calder, the Supreme Court held
that personal jurisdiction was proper in California based on the “effects” of the
defendants’ conduct in Florida because “California [was] the focal point both of the story
and of the harm suffered.” Calder, 465 U.S. at 788-90. “Analogously, under the
standard [adopted by the Fourth Circuit], specific jurisdiction in the Internet context may
be based only on an out-of-state person’s Internet activity directed at [the forum state]
and causing injury that gives rise to a potential claim cognizable in [the forum state].”
ALS Scan, Inc., 293 F.3d at 714.
In 2011, the Tenth Circuit Court of Appeals addressed the complexity of personal
jurisdiction in the Internet age in Shrader v. Biddinger, 633 F.3d 1235 (10th Cir. 2011).
1
In articulating this new test, the ALS Scan, Inc. Court adopted the model developed in Zippo
Manufacturing Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119 (W.D. Pa. 1997). ALS Scan, Inc., 293
F.3d at 713. While the majority of jurisdictions have adopted the Zippo test, including the Sixth Circuit
Court of Appeals, according to our research, Tennessee courts have yet to formally adopt it. In Cadle Co.
v. Schlichtmann, 123 F. App’x 675, 678 (6th Cir. 2005), the Sixth Circuit explained the Zippo test:
The “operation of an Internet website can constitute the purposeful availment of
the privilege of acting in a forum state . . . if the website is interactive to a degree that
reveals specifically intended interaction with residents of the state.” Bird v. Parsons, 289
F.3d 865, 874 (6th Cir. 2002) (internal quotations omitted). In evaluating whether the
defendant’s contact with the forum state constituted purposeful availment, this and other
circuits have used the “Zippo sliding scale” approach, which distinguishes between
interactive websites, where the defendant establishes repeated online contacts with
residents of the forum state, and websites that are passive, where the defendant merely
posts information on the site. See, e.g., Neogen Corp. v. Neo Gen Screening, Inc., 282
F.3d 883, 890 (6th Cir. 2002) (citing Zippo Mfg. Co., 952 F. Supp. at 1124); Revell v.
Lidov, 317 F.3d 467, 472 (5th Cir. 2002)). Interactive websites can subject the defendant
to specific personal jurisdiction, whereas passive websites are less likely to confer such
jurisdiction. Neogen Corp., 282 F.3d at 889-91.
Id. While we conclude that the Zippo test would be concordant with Tennessee case law concerning
personal jurisdiction, it does not apply to the facts of this case. The Zippo test is applicable when the
defendant operates a website that can be accessed from any jurisdiction. In this case, the defendant is
accused of accessing the plaintiff’s website.
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The Tenth Circuit explained that “[t]he basic problem with relating [Internet] activities[,]
[such as hosting a website, posting on the Internet, or sending mass emails,] directly to
the general principles developed pre-[I]nternet is that, in a sense, the [I]nternet operates
‘in’ every state regardless of where the user is physically located, potentially rendering
the territorial limits of personal jurisdiction meaningless.” Shrader, 633 F.3d at 1240.
To avoid subjecting every person who uses the Internet to personal jurisdiction in every
state, the law must adapt and grow alongside technology. “[I]n considering what ‘more’
could create personal jurisdiction for such [Internet] activities, courts look to indications
that a defendant deliberately directed its message at an audience in the forum state and
intended harm to the plaintiff occurring primarily or particularly in the forum state.”
Shrader, 633 F.3d at 1241. Applying the ALS Scan, Inc. test, the Shrader court
concluded that “merely posting information on the [I]nternet does not, in itself, subject
the poster to personal jurisdiction wherever that information may be accessed.” Shrader,
633 F.3d at 1244.
The Fourth Circuit’s test in ALS Scan, Inc. is harmonious with Tennessee
common law concerning specific personal jurisdiction. As articulated by the Tennessee
Supreme Court in NV Sumatra, “[a] defendant’s contacts are sufficiently meaningful
when they demonstrate that the defendant has purposefully targeted Tennessee to the
extent that the defendant should reasonably anticipate being haled into court here.” NV
Sumatra, 403 S.W.3d at 760. Applying NV Sumatra to Internet contacts, we reason that
for a defendant’s Internet contacts to be sufficiently meaningful, they must be more than
“passive Internet activity” such that the defendant directs electronic activity into
Tennessee “with the manifested intent of engaging business or other interactions in the
State thus creating in a person within the State a potential cause of action cognizable in
[Tennessee].” ALS Scan, Inc., 293 F.3d at 714.
Following the reasoning of ALS Scan, Inc. and Shrader, we conclude that merely
accessing a public website from the Internet does not, in itself, subject the individual
accessing the site to personal jurisdiction wherever the website may be located. See
Shrader, 633 F.3d at 1244; ALS Scan, Inc., 293 F.3d at 714; see also Wright v. Writers
Coffee Shop, LLC, No. 1:17-CV-355, 2018 WL 6729642, at *4 (E.D. Tenn. Dec. 21,
2018) (“Without knowing that Plaintiff was a resident of Tennessee, Defendants could
not have purposefully availed themselves of the privilege of causing consequences in
Tennessee by interacting with Plaintiff online.”); Traton News, LLC v. Traton Corp.,
914 F. Supp. 2d 901, 912 (S.D. Ohio 2012), aff’d in part, 528 F. App’x 525 (6th Cir.
2013) (concluding that the defendant’s act of using the plaintiff’s website was insufficient
to confer personal jurisdiction over the defendant, regardless of how many times the
defendant visited the website). Observing a public website on the Internet is “passive
Internet activity,” which “does not generally include directing electronic activity into the
State.” ALS Scan, Inc., 293 F.3d at 714. A person accessing a public website would not
“reasonably anticipate being haled into court” wherever the website might be maintained.
Id.; NV Sumatra, 403 S.W.3d at 760. From our review of the complaint, EnhanceWorks
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does not allege sufficient facts to demonstrate that, by accessing Expo’s website and
copying its materials, Dropbox “deliberately directed its message [or any electronic
activity] at an audience in the forum state . . . .” Shrader, 633 F.3d at 1241.
Nonetheless, EnhanceWorks argues that when “a defendant is alleged to have
accessed a website and wrongfully obtained information from that website . . . the contact
at issue is deemed to have occurred in the company’s physical location.” Therefore,
according to EnhanceWorks, because Dropbox allegedly stole information from Expo’s
website, the contact is deemed to have occurred in Tennessee, EnhanceWorks’s physical
location. EnhanceWorks cites two cases for this proposition, Premedics, Inc. v. Zoll
Medical Corporation, No. 3:06-0716, 2007 WL 3012968 (M.D. Tenn. Oct. 9, 2007) and
Facebook, Inc. v. ConnectU LLC, No. C 07-01389 RS, 2007 WL 2326090 (N.D. Cal.
Aug. 13, 2007). These cases concern motions to dismiss for lack of personal jurisdiction.
In analyzing whether the defendants purposefully availed themselves of the privilege of
conducting activities in the forum states, both federal courts applied the Calder “effects
test.” Calder, 465 U.S. at 788-90. “In cases involving intentional conduct, the
‘purposeful availment’ prong [of specific personal jurisdiction] can be satisfied by
meeting the ‘effects test’ . . . .” Faceboook, Inc., 2007 WL 2326090, at *3 (citing
Calder, 465 U.S. at 788-90). The “effects test” “finds personal jurisdiction ‘where an
individual purposefully directs activities towards the forum state with the intent to cause
harm there.’” Predemics, Inc., 2007 WL 3012968, at *4 (citing Koch v. Local 438, 54
Fed. Appx. 807, 810 (6th Cir. 2002)).
In Premedics, one of the defendants “accessed Premedics’ [I]nternet website, []
navigated onto the AED Manager portion of the website . . ., [and] created an
unauthorized test account for the AED Manager, an account that [was] only distributed to
Premedics’ own web developers.” Premedics, Inc., 2007 WL 3012968, at *1. The
defendants were then able to receive the automated “action item” emails, which
Premedics claimed was a proprietary component of its system. Id. The Premedics court
acknowledged the challenges of determining purposeful availment when the Internet is
involved. Id. at *4. Ultimately, the court concluded that the Calder effects test was
satisfied because the defendants acted intentionally when they “navigated to Premedics’
website, logged into the AED Manager using a falsified test account, and obtained
informational emails indicating how AED Manager operates . . . .” Premedics, Inc.,
2007 WL 3012968, at *5. Further, the Premedics court found that “Premedics’ physical
location and incorporation in the state of Tennessee [were] facts plainly stated on the
home page of the Premedics website . . . .” Id.
Similarly, in Facebook, the allegation was that the defendants gained unauthorized
access to Facebook “by logging into [it] using borrowed or falsified login information,
and then importing profile and email account information from a registered user,
‘grabbing’ email addresses from the friends listed on that user’s profile, and adding those
email addresses to ConnectU’s database.” Faceboook, Inc., 2007 WL 2326090, at *2.
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Facebook also alleged that the defendants sent unsolicited emails to the stolen email
addresses asking users to join ConnectU, a competing social networking site. Id. The
Facebook court acknowledged the difficulty with “apply[ing] traditional geographically-
based precepts of jurisdiction in a world where such borderlines are decreasingly
important in many other contexts.” Id. at *6. The court ultimately determined that “the
technology of the Internet can . . . provide a means whereby specific, targeted conduct
may be ‘expressly aimed’ at a particular individual or entity, despite the fact that the
person engaging in the conduct may not know the geographic location of the individual
or entity.” Id. at*5 (emphasis in original). The Facebook court applied the Calder
effects test and held that the defendants expressly aimed their conduct at Facebook when
it hacked into the website. Id. at *5-6. The court opined that the defendants could be
haled into California court, despite not knowing Facebook’s physical address, because
the defendants expressly aimed their conduct at Facebook’s website. Id. at *7.
Here, EnhanceWorks encouraged Dropbox to access its website and review its
information and marketing materials when it included a link to Expo’s website with the
materials sent to Mr. Mylod and Dropbox. Unlike the defendants in Premedics and
Facebook, there is no allegation in the complaint that Dropbox “hacked” into Expo’s
website and stole proprietary information; the entire allegation concerning the website
was that “Dropbox appear[ed] to have used the Expo website” to create Dropbox
Showcase’s website. Dropbox’s actions did not rise to the level of directing activities or
conduct into Expo’s website and, therefore, Tennessee. Taking EnhanceWorks’s
allegations as true and giving all reasonable inference in its favor, Dropbox, at most,
copied marketing materials from the public website and used those materials outside
Tennessee to create and promote Dropbox Showcase. There are no allegations that
Dropbox purposefully directed its activities towards Tennessee with the intent to cause
harm here. Predemics, Inc., 2007 WL 3012968, at *4 (citing Koch, 54 Fed. Appx. at
810). Finally, there are no allegations in the complaint that Expo’s website indicated that
EnhanceWorks was a Tennessee company, or that Dropbox otherwise knew that the
website was connected to Tennessee.
We reach our conclusion finding no personal jurisdiction whether we apply the
tests in ALS Scan, Inc. and Shrader or the analyses in Premedics and Facebook.
Indeed, our conclusion is in line with a previous decision from this Court relating to
personal jurisdiction and the Internet. In Hibdon v. Grabowski, 195 S.W.3d 48, 71
(Tenn. Ct. App. 2005), we concluded that a trial court properly exercised personal
jurisdiction over the defendants when they “directed many of their Internet messages to
residents of Tennessee.” Id. We also noted that personal jurisdiction was proper because
the alleged causes of action “arose specifically from injuries arising out of or relating to
those Internet messages.” Id. Here, EnhanceWorks did not allege sufficient facts to
demonstrate that Dropbox deliberately directed any electronic activity to Expo’s website
or to the State of Tennessee. To the contrary, the allegation is that Dropbox copied
information from the public website and used it in another state.
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From our review, we conclude that EnhanceWorks failed to meet its burden to
show that Dropbox purposefully created significant contacts with Tennessee. See
Gordon, 300 S.W.3d at 647. Therefore, we agree with the trial court’s finding that
EnhanceWorks did not establish Dropbox’s minimum contacts. Because EnhanceWorks
failed to establish Dropbox’s minimum contacts with Tennessee, we do not reach the
second step of the NV Sumatra test and, as such, do not consider whether exercising
jurisdiction over Dropbox would be unreasonable or unfair. See NV Sumatra, 403
S.W.3d at 760.
Our conclusion does not deprive EnhanceWorks from pursuing relief in the
proper forum; it merely ensures that due process is met, and that the case will be tried in a
state that is “‘fair and substantially just to both parties . . . .’” Gordon, 300 S.W.3d at 646
(quoting Masada Inv. Corp., 697 S.W.2d at 335).
V. Conclusion
For the foregoing reasons, we affirm the trial court’s order granting Dropbox’s
motion to dismiss for lack of personal jurisdiction. The case is remanded for such further
proceedings as are necessary and consistent with this opinion. Costs of the appeal are
assessed against Appellant, EnhanceWorks, Inc., and its surety, for all of which execution
may issue if necessary.
_________________________________
KENNY ARMSTRONG, JUDGE
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