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Scottsdale Capital Advisors Corp. v. The Deal, LLC

United States Court of Appeals, First Circuit

April 3, 2018

SCOTTSDALE CAPITAL ADVISORS CORP.; JOHN HURRY, Plaintiffs, Appellants,
v.
THE DEAL, LLC; WILLIAM MEAGHER, Defendants, Appellees.

          APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE [Hon. Joseph Laplante, Chief U.S. District Judge]

          Dilan Esper, with whom Douglas E. Mirell, Jordan D. Susman, Harder Mirell & Abrams, LLP, Christopher D. Hawkins, and Devine, Millimet & Branch, P.A., were on brief, for appellants.

          Elizabeth A. McNamara, with whom John M. Browning and Davis Wright Tremaine LLP were on brief, for appellees.

          Before Lynch, Circuit Judge, Souter, Associate Justice, [*] and Kayatta, Circuit Judge.

          KAYATTA, CIRCUIT JUDGE.

         Defendant The Deal, LLC posted to a subscriber-only website and attached to email newsletters three articles written by defendant William Meagher that allegedly defamed plaintiffs Scottsdale Capital Advisors Corporation and John Hurry. Plaintiffs eventually filed suit in New Hampshire. None of the four parties has anything to do with New Hampshire except that one of The Deal's institutional subscribers, Dartmouth College, is located there. After discovery indicated that plaintiffs would have no reasonable basis upon which to establish that anyone in New Hampshire ever saw any of the three articles as a result of the Dartmouth subscription, the district court dismissed the complaint for lack of personal jurisdiction. For the following reasons, we affirm.

         I. Background

         The Deal is a Delaware limited liability company with its principal place of business in New York. It reports primarily on financial matters relevant to small cap and microcap securities markets. It has approximately 700 subscribers. While this number may seem small in absolute terms, virtually all of these subscribers are large institutions, many of which apparently pay substantial amounts for a subscription. Individuals affiliated with the subscribing institution gain the ability to access The Deal's web portal, on which The Deal posts its articles. These individuals can also sign up to receive email newsletters from The Deal containing PDF copies of The Deal's articles.

         In late 2013 and early 2014 The Deal posted on its subscriber-only web portal three articles written by Meagher concerning plaintiffs. The Deal also sent each article as a PDF attachment by email to newsletter subscribers. The articles stated -- falsely, allege plaintiffs -- that plaintiffs were under investigation by law enforcement and securities regulators.

         Plaintiff Scottsdale is an Arizona corporation with its principal place of business in Arizona. Plaintiff Hurry is an executive officer of Scottsdale and a citizen of Nevada. Neither plaintiff had any particular connection to New Hampshire before they decided to file this suit in New Hampshire state court, from which defendants removed it to federal court. The parties devote some effort to debating plaintiffs' motives for choosing to file this case in New Hampshire, but we find no need to get to issues of motive in order to decide this appeal.

         Defendants moved to dismiss the claims under Federal Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction. Plaintiffs requested that should the district court be inclined to grant the motion, it first allow for jurisdictional discovery. In May 2017, the district court did as plaintiffs asked, issuing an order permitting jurisdictional discovery. The order limited the forms of discovery to interrogatories and requests for production. Plaintiffs never suggested that they needed any other forms of discovery.

         The jurisdictional discovery revealed that for at least five years (including the years at issue here) The Deal successfully recruited and retained Dartmouth's business by sending targeted communications to school officials explaining why Dartmouth should pay the substantial costs of becoming a subscriber. The Deal also telephoned Dartmouth directly in the course of actively soliciting Dartmouth's renewal of its subscription. The Dartmouth subscription granted to Dartmouth's 7, 000 students and faculty members the ability to sign up for access to the web portal on which one could read The Deal's articles. Dartmouth bore the cost of the subscription and did not charge its users for access. The Deal affirmatively contacted thirty to forty individuals on campus to elicit interest in The Deal. Thirty members of the Dartmouth community signed up for access to the web portal, and two members also signed up to receive the emailed newsletter during the relevant period. The Deal had no other New Hampshire subscribers or contacts. Meagher has never set foot in the state, nor did he have any other relevant contact to which plaintiffs point.

         The additional information produced in jurisdictional discovery trained on whether anyone actually looked at any of the three articles at issue here. Analytic tools, the accuracy of which the parties do not dispute, [1] revealed that no one at Dartmouth (or elsewhere in New Hampshire) accessed the allegedly defamatory articles available on The Deal's web portal. The parties also learned that the second and third articles sent in PDF format were never opened, but because The Deal was not set up to collect the necessary data when the first article was sent in 2013, discovery did not reveal whether either recipient opened the PDF file containing the first article.

         Discovery also showed that twenty-one individuals in New Hampshire viewed one of the articles on a free, unrestricted website operated by The Deal's parent corporation. Plaintiffs did not sue the parent company, and they make no effort to ground jurisdiction on those viewings of the parent's website, so neither shall we. See United States v. Zannino, 895 F.2d 1, 17 (1st ...


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