Taken from www.westlaw.com
388
Court of Appeals of
BEYOND SYSTEMS, INC.
v.
REALTIME GAMING HOLDING COMPANY, LLC, et al.
No. 119, Sept. Term, 2004.
June 22, 2005.
Reconsideration Denied Aug. 8, 2005.
Background: Business that received, via electronic mail (e-mail), numerous
unsolicited "spam" messages advertising online gambling brought
action against out-of-state company that developed software, alleging violation
of Maryland Commercial Electronic Mail Act (MCEMA). The Circuit Court,
Montgomery County, Joseph A. Dugan, Jr., J., dismissed complaint for lack of personal jurisdiction.
Plaintiff filed notice of appeal and petition for writ of certiorari.
Holdings: Following issuance of writ of certiorari, the Court of Appeals, Battaglia, J., held that:
(1)
plaintiff failed to establish prima facie case that defendant company was subject to personal jurisdiction in Maryland;
(2)
trial court acted within its discretion in denying discovery on personal
jurisdiction issue; and
(3)
trial court acted within its discretion in striking amended complaint.
Affirmed.
Raker, J., dissented and filed opinion, in which Bell, C.J., and Harrell, J., joined.
[1]
KeyCite this headnote
30
Appeal and Error
30XVI
Review
30XVI(A)
Scope, Standards, and Extent, in General
30k862
Extent of Review Dependent on Nature of Decision Appealed from
30k863
k. In General. Most Cited Cases
If the trial court grants a motion to dismiss for failure to state a claim upon
which relief may be granted after considering evidence outside the four corners
of the complaint, appellate court views the motion as having converted into one
of summary judgment for review purposes. Md.Rule 2-322.
[2]
KeyCite this headnote
106
Courts
106I
Nature, Extent, and Exercise of Jurisdiction in General
106k10
Jurisdiction of the Person
106k12
Domicile or Residence of Party
106k12(2)
Actions by or Against Nonresidents; "Long-Arm" Jurisdiction in
General
106k12(2.1)
k. In General. Most Cited Cases
Purview of the long arm statute is coextensive with the limits of personal
jurisdiction set by the due process clause of the Federal Constitution. U.S.C.A. Const.Amend. 14; West's Ann.Md.Code, Courts and Judicial Proceedings, § 6-103.
[3]
KeyCite this headnote
372
Telecommunications
372VIII
Computer Communications
372k1339
Civil Liabilities; Illegal or Improper Purposes
372k1343
k. Unsolicited E-Mail. Most Cited Cases
Maryland Commercial Electronic Mail Act (MCEMA) section prohibiting conspiring
to disseminate unauthorized, false, or misleading information via electronic
mail (e-mail) was enacted to curb the dissemination of false or misleading
information through unsolicited, commercial e-mail, as a deceptive business
practice. West's Ann.Md.Code, Commercial Law, § 14-3002.
[4]
KeyCite this headnote
106
Courts
106I
Nature, Extent, and Exercise of Jurisdiction in General
106k10
Jurisdiction of the Person
106k12
Domicile or Residence of Party
106k12(2)
Actions by or Against Nonresidents; "Long-Arm" Jurisdiction in
General
106k12(2.15)
k. Transacting or Doing Business. Most Cited Cases
For purposes of establishing personal jurisdiction, conducting business in
[5]
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92
Constitutional Law
92XXVII
Due Process
92XXVII(E)
Civil Actions and Proceedings
92k3961
Jurisdiction and Venue
92k3964
k. Non-Residents in General. Most Cited Cases
(Formerly
92k305(5))
Court's exercise of personal jurisdiction over a nonresident defendant
satisfies due process requirements if the defendant has "minimum
contacts" with the forum, so that to require the defendant to defend its
interests in the forum state "does not offend traditional notions of fair
play and substantial justice." U.S.C.A. Const.Amend. 14.
[6]
KeyCite this headnote
106
Courts
106I
Nature, Extent, and Exercise of Jurisdiction in General
106k10
Jurisdiction of the Person
106k12
Domicile or Residence of Party
106k12(2)
Actions by or Against Nonresidents; "Long-Arm" Jurisdiction in
General
106k12(2.5)
k. Contacts with Forum State. Most Cited Cases
If nonresident defendant's contacts with the State are not the basis for the
suit, then personal jurisdiction over the defendant must arise from the
defendant's general, more persistent contacts with the State; to establish
general jurisdiction, the defendant's activities in the State must have been
continuous and systematic.
[7] KeyCite this headnote
101
Corporations
101XVI
Foreign Corporations
101k663
Actions by or Against
101k665
Jurisdiction
101k665(1)
k. Facts and Circumstances Conferring Jurisdiction. Most Cited Cases
Out-of-state company that developed interactive proprietary software for use in
online gaming industry was not subject to personal jurisdiction in Maryland in
action alleging that company violated Maryland Commercial Electronic Mail Act
(MCEMA) through its alleged role in plaintiff's receipt of unsolicited
"spam" electronic mail (e-mail) messages advertising online gambling;
company's website was not highly interactive as to support general
jurisdiction, and only evidence of company's relationship to website advertised
in e-mail was link to IP address (Internet Protocol address) where customers
could download company's gaming software. U.S.C.A. Const.Amend. 14; West's Ann.Md.Code, Courts and Judicial Proceedings, § 6-103; West's Ann.Md.Code, Commercial Law, § 14-3002.
[8]
KeyCite this headnote
106
Courts
106I
Nature, Extent, and Exercise of Jurisdiction in General
106k10
Jurisdiction of the Person
106k12
Domicile or Residence of Party
106k12(2)
Actions by or Against Nonresidents; "Long-Arm" Jurisdiction in
General
106k12(2.10)
k. Defendant's Activities in Forum State; Cause of Action Arising
Therefrom. Most Cited Cases
In determining whether specific personal jurisdiction exists, courts consider
(1) the extent to which the defendant has purposefully availed itself of the
privilege of conducting activities in the State; (2) whether the plaintiffs'
claims arise out of those activities directed at the State; and (3) whether the
exercise of personal jurisdiction would be constitutionally reasonable.
[9]
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308
Principal and Agent
308I
The Relation
308I(A)
Creation and Existence
308k1
k. Nature of the Relation in General. Most Cited Cases
Although agency relationship is not necessarily
contractual in nature, it is always consensual; ultimate question is one of
intent, of both the principal and the agent.
[10]
KeyCite this headnote
308
Principal and Agent
308I
The Relation
308I(A)
Creation and Existence
308k18
Evidence of Agency
308k18.1
k. In General. Most Cited Cases
Factors for determining existence of agency relationship are evaluated within
the totality of the circumstances.
[11]
KeyCite this headnote
30
Appeal and Error
30XVI
Review
30XVI(H)
Discretion of Lower Court
30k961
k. Depositions, Affidavits, or Discovery. Most Cited Cases
Appellate court reviews the denial of discovery under the abuse of discretion
standard and will only conclude that the trial court abused its discretion
where no reasonable person would take the view adopted by the trial court, or
when the court acts without reference to any guiding principles and the ruling
under consideration is clearly against the logic and effect of facts and
inferences before the court, or when the ruling is violative of fact and logic.
[12] KeyCite this headnote
307A
Pretrial Procedure
307AII
Depositions and Discovery
307AII(A)
Discovery in General
307Ak36
Particular Subjects of Disclosure
307Ak36.1
k. In General. Most Cited Cases
Trial court acted within its discretion in denying plaintiff's request for
discovery on personal jurisdiction issue in action against out-of-state company
that developed interactive proprietary software for use in online gaming
industry, alleging that company violated Maryland Commercial Electronic Mail
Act (MCEMA) through its alleged role in plaintiff's receipt of unsolicited
"spam" electronic mail (e-mail) messages advertising online gambling;
plaintiff was unable to produce any evidence of a connection between company
and website advertised in e-mail, beyond a link leading to an IP address
(Internet Protocol address) at which individuals could download company's
software.
[13] KeyCite this headnote
302
Pleading
302XVI
Motions
302k351
Striking Out Pleading or Defense
302k356
k. Amended or Supplemental Pleading. Most Cited Cases
Following determination that trial court did not have
personal jurisdiction over out-of-state defendants, trial court acted within
its discretion in striking amended complaint, where plaintiff failed to
introduce any new facts to cure its inability to produce prima facie evidence
of personal jurisdiction over defendants.
**569 *4 Stephen H. Ring (Stephen H. Ring, P.C.,
Gaithersburg, on brief), for Appellant.
Sanford M.
Saunders, Jr. (Kenneth P.
Kaplan, Greenberg Traurig, LLP,
Argued Before BELL, C.J., RAKER, WILNER, CATHELL, HARRELL, BATTAGLIA and GREENE, JJ.
BATTAGLIA, Judge.
This case arises out of a civil suit premised upon Section 14-3002 of the Commercial Law
Article of the Maryland
Code, which prohibits conspiring to disseminate unauthorized, false, *5 or
misleading information via electronic mail ("e-mail"). Because we
determine that Petitioner, Beyond Systems, Inc. ("BSI"), did not
establish a prima facie case that Respondents, KDMS International, LLC
("KDMS") and Realtime Gaming Holding Company, LLC ("Realtime
Gaming"), possess the requisite minimum contacts amounting to purposefully
availing themselves of the benefits of conducting business in Maryland, we
agree with the Circuit Court's ruling that the court lacked personal
jurisdiction over Respondents. Moreover, we conclude that the Circuit Court did
not abuse its discretion by denying Petitioner discovery on the personal jurisdiction issue and striking the amended complaint.
Background
KDMS, a business that develops interactive **570 [ FN1] proprietary
software [FN2] used in the
online gaming industry, is a limited liability company ("LLC") formed
under the laws of the State of Delaware, with its principal place of business
in Atlanta, Georgia. Realtime Gaming, the holding company for KDMS, is a
limited liability company formed under the laws of the State of
FN1. Interactive is
defined as "a two-way electronic communication system ... that involves a
user's orders ... or responses." Merriam-Webster Dictionary,
"interactive" (10th ed.2002).
FN2. Proprietary
software is "[s]oftware that cannot be used, redistributed, or modified
without permission. Proprietary software is usually sold for profit, consists
only of machine-readable code, and carries a limited license that restricts
copying, modification, and redistribution. A user may usually make a backup
copy for personal use; but if the software is sold or given away, any backup
copies must be passed
on to the new user
or destroyed." BLACK'S LAW DICTIONARY, "proprietary software"
(8th ed.2004).
As part of Realtime Gaming's sales and marketing strategy for the KDMS
software, Realtime Gaming entered into an exclusive licensing agreement with
Montana Overseas, a Panamanian corporation, by which Montana Overseas would be
responsible for issuing licenses for the use of KDMS's software. *6 Through
the licensing process with Montana Overseas, windowscasino.com, which is owned
by ADLM Ltd. based in St. Helier,
In March of 2003, Travis Thom, a resident of
Around March 14, 2003, Thom visited the www.windowscasino.com website and completed an "affiliate" application to make the
purchase, which was confirmed the next day by a windowscasino.com employee
through e-mail. Upon receipt of the "Casino-To-Go Private Label
Package," Thom created a name for his affiliate webpage,
www.goldenrhinocasino.com, which he registered in his own name with Yahoo!
Domains, [FN3] a service that
registers names of websites. Windowscasino.com then designed Thom's webpage,
with his input regarding the aesthetics, but not the content or function.
Thom's webpage directed players to the windowscasino.com website where gamblers
downloaded the software designed by KDMS, which was retrieved from an IP
address (Internet Protocol address) *7 registered to KDMS. In return for
directing individuals to windowscasino.com, **571 Thom would be compensated
with 45% of referred players' losses and up to a $40.00 "bounty" per
player who deposited funds to gamble at windowscasino.com.
FN3. "Domain
names serve as a primary identifier of an Internet user." Zippo Manufacturing
Co. v. Zippo Dot Com Inc., 952 F.Supp. 1119, 1121 n. 1 (W.D.Pa.1997),
citing Panavision Intern., L.P. v. Toeppen, 938 F.Supp. 616 (C.D.Cal.1996). "Businesses
using the Internet commonly use their business names as part of the domain name
(e.g.IBM.com)."
On April 14, 2003, Thom contracted with a bulk e-mail solicitation service,
Omega One Media, Inc., to send 2.5 million unsolicited e-mail advertisements. [FN4] He paid
windowscasino.com an additional fee to write and design the e-mails. On April
26, 2003, sixteen e-mail addresses used by employees of BSI each received
fifteen such unsolicited commercial e-mails over a twenty-four hour period, for
a total of 240 e-mails, advertising the Golden Rhino Casino.
FN4. Omega One Media,
Inc. is not related to any of the entities named in the present action and is
not named in this lawsuit.
On December 31, 2003, BSI filed a complaint against Realtime Gaming, KDMS, and
an unknown co-defendant in the Circuit Court for Montgomery County and alleged
violations of Maryland Code (2002, 2004 Cum.Supp.), Section 14-3002 of
the Commercial Law Article. [FN5] On April 16,
2004, Realtime *8 Gaming and KDMS filed a motion to dismiss the complaint for
lack of personal jurisdiction, or in the alternative a motion for summary
judgment. In support of their motion, Realtime Gaming and KDMS attached an
affidavit from their mutual President and CEO, Michael Staw ("Staw")
who asserted that Realtime Gaming functions solely as a holding company for
KDMS and does not engage in any other business activities,
and that KDMS has conducted no business in Maryland. BSI filed a memorandum in
opposition to Realtime Gaming and KDMS's motion and attached a supporting
affidavit from BSI's owner, Paul Wagner ("Wagner"), in which he
asserts various conclusory statements concerning the existence of an agency
relationship between Realtime Gaming, KDMS, and windowscasino.com. [FN6] On May **572 21, 2004, Realtime Gaming
and KDMS filed a reply memorandum, attempting to refute BSI's allegations.
FN5. Section 14-3002 of
the Commercial Law Article provides:
(a) Application.--This section does not apply to an interactive
computer service provider or a telecommunication utility to the extent that the
interactive computer service provider or telecommunication utility merely
handles, retransmits, or carries a transmission of commercial electronic mail.
(b) Prohibition.--A person may not initiate
the transmission, conspire with another person to initiate the transmission, or
assist in the transmission of commercial electronic mail that:
(1) Is from a computer in the State or is sent to an electronic mail
address that the sender knows or should have known is held by a resident of the
State; and
(2)(i) Uses a third party's Internet domain name or electronic mail
address
without the permission of
the third party;
(ii) Contains false or misleading information about the origin or the
transmission path of the commercial electronic mail; or
(iii) Contains false or misleading information in the subject line that
has the capacity, tendency, or effect of deceiving the recipient.
(c) Presumption.--A person in presumed to know that the intended
recipient of commercial electronic mail is a resident of the State if the
information is available on request from the registrant of the Internet domain
name contained in the recipient's electronic mail address.
(d) Blocking.--An interactive computer service provider:
(1) May block the receipt or transmission through its interactive
computer service of commercial electronic mail that it reasonably believes is
or will be sent in apparent violation of this section; and
(2) May not be held liable for an action under item (1) if this
subsection that is voluntarily taken in good faith.
Md.Code (2002, 2004 Cum.Supp.), § 14-3002 of the Commercial Law Article.
FN6. In his affidavit,
Wagner asserts that a significant relationship exists among Realtime Gaming and
KDMS and "affiliates" in which "the principal merchants (and
alter egos) ... employ affiliates to spamvertise their products," and the two
companies "pay[ ] affiliates to advertise
KDMS's proprietary software to
potential players." Throughout his affidavit, Wagner characterizes,
without support, windowscasino.com and Realtime Gaming and KDMS as
interchangeable entities.
On May 26, 2004, the Circuit Court held a hearing and, at the hearing's close,
stated its intention to dismiss the complaint for lack of personal
jurisdiction. On June 2, 2004, the court issued a written order that dismissed
BSI's complaint for lack of personal jurisdiction over Realtime Gaming and KDMS
and did not specify that BSI would have leave to amend the complaint. [FN7] On June 11, 2004,
BSI filed a motion *9 for reconsideration with an amended complaint attached.
In the amended complaint, BSI made specific allegations regarding the
connection between Realtime Gaming, KDMS, windowscasino.com, and Thom through a
server and IP address registered to KDMS. It also alleged a significant
relationship among Realtime Gaming, KDMS, and a network of sub-licensees, one
of which assisted in the transmission of the e-mails at issue. Moreover, it
named Travis Thom as an additional defendant who caused the e-mails in question
to be sent.
FN7. Because the oral statement
of dismissal contemplated the written order, which was later issued by the
trial court, it is the date of the issuance of the written order that
constitutes the date of the final
appealable judgment. See Walbert v. Walbert,
310 Md. 657, 661, 531 A.2d 291, 293 (1987). The Circuit
Court failed to dismiss "John Doe" from the suit. Because "John
Doe," although named as a defendant in the complaint, was never served
with process and was never identified as a real person, "John Doe" is
not a party to the action and the Circuit Court's failure to dismiss him from
the suit does not prevent the judgment from being final. See, e.g., Jones v.
Mid-Atlantic Funding Co., 362 Md. 661, 665 n. 2, 766 A.2d 617, 618 n. 2 (2001) (noting that
defendant named in the complaint was not a party to the action because he was
never served); Md. Bd. of Nursing
v. Nechay, 347 Md. 396, 406, 701 A.2d 405, 410 (1997) (stating that the
court lacks jurisdiction over a named defendant if "process" has not
been served); Claibourne v.
Willis, 347 Md. 684, 686-87, 702 A.2d 293, 297 (1997) (same).
Subsequently, BSI filed a motion in Circuit Court to dismiss "John
Doe" from the case. Although we do not know whether the Circuit Court
dismissed "John Doe," because he was never served, is not a party,
and does not represent a real person, we do not address any filings made after
the writ of certiorari was issued.
Realtime Gaming and KDMS, in turn, filed a motion opposing BSI's motion for
reconsideration and seeking to have the amended complaint stricken. In so
doing, Realtime Gaming and KDMS asserted that BSI offered no new facts that would establish personal jurisdiction over them. On September
21, 2004, the Circuit Court denied BSI's motion for reconsideration and granted
the motion to strike the amended complaint.
On October 20, 2004, BSI filed its notice of appeal. [FN8] Prior to any
proceedings in **573 the
Court of Special Appeals, BSI, on *10 November 22, 2004, filed a
petition for writ of certiorari containing the following questions:
FN8. Because BSI filed
its Motion for Reconsideration under Rule 2- 534, which governs motions to
alter or amend judgment, within the ten-day period specified in the Rules, the
judgment dismissing the complaint lost its finality for appeal purposes. See Popham v. State Farm
Mut. Ins. Co., 333 Md. 136, 143, 634 A.2d 28, 31-32 (1994);
Unnamed Att'y v. Attorney Grievance Comm'n, 303 Md. 473, 486, 494 A.2d
940, 946 (1985).
Rule 8-202, governing the proper time for filing notice of appeal,
provides in pertinent part:
In a civil action, when a timely motion is filed pursuant to Rule ...
2- 534, the notice of appeal shall be filed within 30 days after entry of (1) a
notice withdrawing the motion or (2) an order denying a motion pursuant to Rule
2-533 or disposing of a motion pursuant to Rule 2-532 or 2-534.
In the present case, the court denied the motion for reconsideration on
September 21, 2004 and BSI filed its notice of appeal
to the Court of Special Appeals on October 20, 2004, within the 30-day period
set forth in Rule 8-202. Therefore, we have jurisdiction to hear the appeal.
1. Did the trial court err in dismissing Petitioner's claims against
Respondents under the Maryland anti-spam statute, § 14-3001 et seq. of
the Commercial Law Article of the Annotated Code of Maryland, for initiating,
conspiring to initiate, or assisting in the transmission of 240 e-mails
advertising Respondents' business, for lack of personal jurisdiction?
2. Did the trial court err in denying Petitioner's request to take discovery as
to the nature and extent of Respondents' contacts with
3. Did the trial court err in striking the amended complaint containing
detailed allegations of fact, including facts relevant to the issue of personal
jurisdiction?
On December 17, 2004, we granted the petition and issued the writ. Beyond Systems, Inc. v. Realtime Gaming Holding Company, LLC, 384 Md.
448, 863 A.2d 997 (2004). [FN9] Because *11 we
concur with the trial court's determination that BSI has failed to make a prima
facie showing of personal jurisdiction by a preponderance of the evidence, we
hold that the Circuit Court properly determined that the action could not
proceed to trial. Moreover, we determine that the Circuit
Court did not abuse its discretion in denying BSI's request for discovery.
FN9. Prior to argument
in this Court, on April 18, 2005, BSI filed a motion to supplement the record
under Maryland Rule 8-414, which Realtime
Gaming and KDMS opposed as an impermissible motion to introduce evidence that
was not presented below. Maryland Rule 8-414 permits the
Court, upon the motion of a party or sua sponte, to "order that an error
or omission in the record be corrected." Md. Rule 8-414. In its motion,
BSI seeks to introduce additional pages from the Internet, which were not presented to the court below, to further bolster
its allegations concerning the relationship between Realtime Gaming, KDMS, and
windowscasino.com. Because the evidence at issue was not erroneously omitted
from the record transmitted from the Circuit Court, and BSI does not seek to
correct any error contained in the record, its motion to supplement is denied.
Standard of Review
The trial court dismissed BSI's complaint for lack of personal
jurisdiction over Realtime Gaming and KDMS under Maryland Rule
2-322(a) and (c), which state in pertinent part:
(a) Mandatory. The following defenses shall be made by motion to dismiss filed before the answer, if an answer is required: (1) lack
of jurisdiction over the person, (2) improper venue, (3) insufficiency of
process, and (4) insufficiency of service of process. If not so made and the
answer is filed, these defenses are waived.
* * *
(c) Disposition. If, on a motion to dismiss for failure of the pleading
to state a claim upon which relief can be granted, matters outside the pleading
are presented to and not excluded by the court, the motion shall be treated as
one for summary judgment and disposed of as provided in Rule 2-501, and all
parties shall be given reasonable opportunity to present all material made
pertinent to such a motion by Rule 2-501.
Md. Rule 2-322(a)
and (c).
[1] As Judge Paul V.
Niemeyer notes in his Maryland Rules Commentary, Third **574 Edition, all of the
defenses listed in Maryland Rule
2-322(a) are collateral to the merits and raise *12 questions of law. Judge Paul V. Niemeyer and Linda
FN10. This contrasts
with the effect of the trial court's
consideration of matters
outside the pleadings on a motion to dismiss for failure to state a claim upon
which relief may be granted under Maryland Rule 2-322(b). Rule 2-322 provides that if
the trial court grants a motion to dismiss for failure to state a claim upon
which relief may be granted after considering evidence outside the four corners
of the complaint, we view the motion as having converted into one of summary
judgment for review purposes. See Green v. H & R
Block, Inc., 355 Md. 488, 501, 735 A.2d 1039, 1047
(1999).
Discussion
BSI argues that it has made a prima facie showing of minimum contacts
with
BSI further argues that the trial court abused its discretion by denying it
discovery concerning personal jurisdiction. According to BSI, the
jurisdictional issue is inextricably intertwined *13 with the merits of the
case, and therefore, the court should have permitted the action to proceed with
discovery. BSI states that to do otherwise is inequitable.
Finally, BSI asserts that the trial court abused its discretion in striking the
amended complaint because the facts alleged therein and supporting materials
showed that Realtime Gaming and KDMS had sufficient contacts with
Conversely, Realtime Gaming and KDMS argue that BSI has not demonstrated a prima
facie case of specific personal jurisdiction or general personal jurisdiction.
Realtime Gaming and KDMS assert that BSI has not pointed to any evidence showing
an agency or subsidiary relationship between them and windowscasino.com or
Travis Thom, the individual who arranged for the e-mails to
be sent. Moreover, Realtime Gaming and KDMS contend that neither company has
any contacts with the State of Maryland, i.e., are not incorporated in
Maryland, do not conduct business in Maryland, and were not involved in the
transmission of the e-mails at issue, and as such, are not subject to specific
or general personal jurisdiction.
**575 Realtime Gaming
and KDMS also argue that the trial court did not abuse its discretion when it
denied BSI's request for discovery. They assert that BSI provided no basis upon
which to grant discovery beyond conclusory allegations and bald-faced
assertions of jurisdiction. Ultimately, Realtime Gaming and KDMS characterize
BSI's desire for discovery as a fishing expedition.
Finally, in response to BSI's arguments concerning the striking of the amended
complaint, Realtime Gaming and KDMS contend that the trial court did not abuse
its discretion when it denied BSI's request for leave to amend. They argue that
the trial judge properly exercised his discretion because the amended complaint
was based on facts that were already *14 before the court, and
therefore, could not cure the fatal defects in BSI's action.
Conditions for Personal Jurisdiction
[2] Whether a court
may exert personal jurisdiction over a foreign defendant entails dual
considerations. First, we consider whether the exercise of jurisdiction is
authorized under
FN11. Md.Code (1973,
2002 Repl.Vol.), Section 6-103 of the
Courts and Judicial Proceedings Article provides:
(a) Condition.--If jurisdiction over a person is based solely upon this
section, he may be sued only on a cause of action arising from any act
enumerated in this section.
(b) In general.--A court may exercise personal jurisdiction over a
person,
(1) Transacts any business or performs any character of work or service
in the State;
(2) Contracts to supply goods, food, services, or manufactured products
in the State;
(3) Causes tortious injury in the State by an act or omission in the
State;
(4) Causes tortious injury in the State or outside the State by an act
or omission outside the State if he regularly does or solicits business,
engages in any other persistent course of conduct in the State or derives
substantial revenue from goods, food, services, or manufactured products used
or consumed in the State;
(5) Has an interest in, uses, or possesses real property in the State;
or
(6) Contracts to insure or act as a surety for, or on, any person,
property, risk, contract, obligation, or agreement located, executed, or to be
performed within the State at the time the contract is made, unless the parties
otherwise provide in writing.
(c) Applicability to computer information and computer programs.--(1)(i) in this subsection the following terms have the
meanings indicated.
(ii) "Computer information" has the meaning stated in § 22-102 of the
Commercial Law Article.
(iii) "Computer program" has the meaning stated in § 22-102 of the
(2) The provisions of this section apply to computer information and
computer programs in the same manner as they apply to goods and services.
Maryland Code (2002, 2004 Cum.Supp.), Section 22-102(10)
of the Commercial Law Article provides:
"Computer information" means information in electronic form
which is obtained from or through the use of a computer or which is in a form
capable of being processes by a computer. The term includes a copy of the
information and any documentation or packaging associated with the copy.
Maryland Code (2002, 2004 Cum.Supp.), Section 22-102(12)
of the Commercial Law Article provides:
"Computer program" means a set of statements or instructions
to be used directly or indirectly in a computer to bring about a certain
result. The term does not include separately identifiable informational
content.
[3] BSI alleges that
the e-mails at issue in the present case violate the Maryland Commercial
Electronic Mail Act ("MCEMA"), Md.Code (2002, 2004 Cum.Supp.), §§ 14-3001 to 14-3003 of the
Commercial Law Article, which provides for a private cause of action to seek
redress for tortious injury arising from the receipt of misleading or
fraudulent, unsolicited, commercial e-mail. Section 14-3002 provides in
pertinent part:
(b) Prohibition.--A person may not initiate the transmission, conspire with
another person to initiate the transmission, or assist in the transmission of
commercial electronic mail that:
(1) Is from a computer in the State or is sent to an electronic mail address
that the sender knows or should have known is held by a resident of the State;
and
*16 (2)(i) Uses a third part's Internet domain name or electronic mail address
without the permission of the third party;
(ii) Contains false or misleading information about the origin or the
transmission path of the commercial electronic mail; or
(iii) Contains false or misleading information in the subject line that has the
capacity, tendency, or effect of deceiving the recipient.
Md.Code (2002, 2004 Cum Supp.), § 14-3002 if the
Commercial Law Article. This statute was enacted in 2002 by the General
Assembly in an effort to curb the dissemination of false or misleading
information through unsolicited, commercial e-mail, as a deceptive business
practice. Economic Matters Committee, Fl. Rpt., HB 915, at 2.
At the time of the statute's enactment, twenty-one other states had already
enacted some form of statutory scheme to address the proliferation of
"spam." [FN12] See **577 Spam Laws: Summary, Bill
File, HB 915. Thus, BSI asserts that the e-mails and
their content *17 provide
the basis for the trial court to assert personal jurisdiction
through the long arm statute.
FN12. As the Washington
Supreme Court noted in State v. Heckel, 143
Wash.2d 824, 24 P.3d 404, 406 n. 1 (2001):
The term 'spam' refers broadly to unsolicited bulk e-mail (or 'junk
e-mail'), which 'can be either commercial (such as an advertisement) or
noncommercial (such as a joke or chain letter).' Sabra Anne
Kelin, State Regulation of Unsolicited Commercial E-Mail, 16 Berkeley Tech. L.J.
435, 436 & n. 10 (2001). Use of the term
"spam" as Internet jargon for this seemingly ubiquitous junk e-mail
arose out of a skit by the British comedy troupe Monty Python, in which a
waitress can offer a patron no single menu item that does not include spam:
'Well, there's spam, egg, sausage and spam. That's not got much spam in it.' 2
Graham Chapman et al., The Complete Monty Python's
Flying Circus: All the Words 27 (Pantheon Books 1989). Hormel Foods
Corporation, which debuted its SPAMŪ luncheon meat in
1937, has dropped any defensiveness about this use of the term and now
celebrates its product with a website (www.spam.com). See Hormel Objects to
Cyber Promotions' Use of 'SPAM' Mark, 4 No. 1 Andrews Intell. Prop. Litig. Rep. 19 (1997); Laurie J. Flynn,
Gracious Concession on Internet 'Spam,' N.Y. Times, Aug. 17, 1998, at D3.
Because the term has been widely adopted by Internet users, legislators, and
legal commentators,
we use the term
herein, along with its useful derivatives 'spammer' and 'spamming.'
The Maryland long arm statute, Md.Code (1973, 2002 Repl. Supp.), Section 6-103 of the
Courts and Judicial Proceedings Article, was first
enacted in 1964 in response to the Supreme Court's decision in Int'l Shoe Co. v.
Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). [FN13] This statute,
codified as Maryland Code (1957, 1964 Cum.Supp.), Article 75 Section 96,
provided:
FN13. Prior to Int'l
Shoe, the Supreme Court's opinion in Pennoyer v. Neff, 95
U.S. 714, 24 L.Ed. 565 (1877), provided that due process required service of
process on an individual defendant while present within the state for a valid
personal judgment. A corporation only existed within the
borders of the state of its incorporation, see Bank of Augusta v.
Earle, 38 U.S. 519, 10 L.Ed. 274 (1839), and states had
no jurisdiction over foreign corporations. Bernard Auerbach, The "Long
Arm" Comes to
(a) A court may exercise personal jurisdiction over a person who acts directly
or by an agent, as to a cause of action arising from the person's
(1) transacting any business in this State;
(2) contracting to supply services in this State;
(3) causing tortious injury in this State by an act or omission in this State;
(4) causing tortious injury in this State by an act or omission outside the
State if he regularly does or solicits business, engages in any other
persistent course of conduct in this State or derives substantial revenue from
food or services used or consumed in this State;
(5) having an interest in, using, or possessing real property in this State;
[or]
(6) contracting to insure any person, property, or risk located within this
State at the time of contracting;
(b) When jurisdiction over a person is based solely on this section.
*18 In 1965, the Section was amended to add language to subsection (b) that had
been omitted inadvertently, see 1965 Md. Laws, Chap. 749, so that subsection
(b) read:
(b) When jurisdiction over a person is based solely upon this section, only a
cause of action arising from acts enumerated in this section may be asserted
against him.
Md.Code (1957, 1965 Cum.Supp.), Art 75 § 96(b). In
1968, subsection (a)(6) was amended to state:
(a)(6) contracting to insure or act as a surety for, or on, any person,
property, or risk, contract, obligation, or agreement located, executed or to
be performed within this State at the time of contracting, unless the parties
otherwise provide in writing.
Md.Code (1957, 1968 Repl.Vol.), Art. 75 § 96(a)(6). As part of the recodification effort, in 1973, the
General Assembly revised this Section and renumbered it as Section 6-103 of the
Courts and Judicial Proceedings Article:
(a) Condition. If jurisdiction over a person is based solely upon this section,
he may only be sued on a cause of action arising from any act enumerated in
this section.
(b) In general. A court may exercise personal jurisdiction over a person, who
directly or by an agent:
(1) transacts any business or performs any character of work or services in
this State;
**578 (2) contracts to
supply goods, food, services, or manufactured products in the State;
(3) causing tortious injury in this State by an act or omission in this State;
(4) causes tortious injury in the State or outside of the State by an act or
omission outside the State if he regularly does or solicits business, engages in any other persistent course of conduct in the State or
derives substantial revenue from goods, food, services, or manufactured
products used or consumed in the State;
(5) has an interest in, uses, or possesses real property in the State; or
*19 (6) Contracts to
insure or act as a surety for, or on, any person, property, risk, contract. obligation, or agreement located, executed, or to be
performed within the State at the time the contract is made, unless the parties
otherwise provide in writing.
Md.Code (1973), § 6-103 of the Courts and Judicial Proceedings Article. According to the
commentary published with the statute, the long arm statute was intended to
give
In 2000, the General Assembly amended the long arm statute for the final time
with the Maryland Uniform Computer Information Transactions Act and added
current subsection (c) to expand the courts' jurisdiction over "computer
information" and "computer programs." 2000
(c) Applicability to computer information and computer programs.--(1)(i) In this subsection the following
terms have the meanings indicated.
(ii) "Computer information" has the meaning stated in § 22-102 of the
Commercial Law Article.
(iii) "Computer program" has the meaning stated in § 22-102 of the
Commercial Law Article.
(2) The provisions of this section apply to computer information and computer
programs in the same manner as they apply to goods and services.
Md.Code (1973, 2002 Repl.Vol.), § 6-103(c) of the Courts and Judicial Proceedings Article. "Computer
information" and "computer program" are defined as follows under
the Maryland Code:
(10) "Computer information" means information in electronic form
which is obtained from or through the use of a computer or which is in a form
capable of being processed by a computer. The term includes a copy of the
information *20 and any documentation or packaging associated with the copy.
* * *
(12) "Computer program" means a set of statements or
instructions to be used directly or indirectly in a computer to bring about a
certain result. The term does not include separately identifiable informational
content.
Md.Code (2004 Cum.Supp.), §§ 22-102(10) and
(12) of the Commercial Law Article.
[4] Although e-mails
brought the present case to court, the gravamen of the personal
jurisdiction issue for the purposes of the long arm statute arise out of
advertisements for licensed proprietary software for use on computers, which
require the user to download the program from a remote source. The software at
issue "consists **579 only
of machine-readable code" to execute a certain action on the user's
computer. BLACK'S LAW DICTIONARY, "proprietary software" (8th
ed.2004). Thus, conducting business in
The Internet
In Reno v. American
Civil Liberties Union, 521 U.S. 844, 117 S.Ct. 2329, 138 L.Ed.2d 874 (1997), the Supreme
Court provided its explanation of the Internet as:
an international network of interconnected computers. It is the outgrowth of
what began in 1969 as a military program called "ARPANET," [an
acronym for the network developed by the Advanced Research Project Agency]
which was *21 designed
to enable computers operated by the military, defense contractors,
and universities conducting defense-related research to communicate with one
another by redundant channels even if some portions of the network were damaged
in a war.
While the ARPANET no longer exists, it provided an example for the development
of a number of civilian networks that, eventually linking with each other, now
enable tens of millions of people to communicate with one another and to access
vast amounts of information from around the world.
Id. at 849-50, 117
S.Ct. at 2334, 138 L.Ed.2d at 884.
Because the Internet is a global network of computers, "each computer
connected to the Internet must have a unique address," Rus Shuler, HOW
DOES THE INTERNET WORK? (Whitepaper 2002), [FN14]
known as an Internet Protocol Address, which "can be used to identify the
source of the connection" to the Internet. United States v. Bach, 400 F.3d 622, 625 n. 4 (8th Cir.2005).
FN14. The information
concerning the structure of the Internet that follows is taken from HOW DOES
THE INTERNET WORK? unless otherwise cited.
When connected to the Internet, computers communicate with each other through
the use of a "protocol [ [FN15]] stack,"
which is usually the "TCP/IP protocol stack." For example, when
someone is sending an e-mail, the e-mail message enters through the Application
Protocols Layer, which corresponds to specific programs
such as browsers for using the World Wide Web and e-mail. The message then
enters the Transmission Control Protocol ("TCP"), which directs
certain information to a specific application or program on a computer using a
port. From the TCP layer of the protocol stack, the message then moves into the
Internet Protocol Layer, which directs the message to a specific computer using
an IP address. The final step in the process prior to entering the Internet is
for *22 the Hardware Layer to convert the message from binary data to network
signals.
FN15.
"Protocol" is "a set of conventions governing the treatment and
especially the formatting of data in an electronic communications system."
Merriam-Webster Dictionary, "protocol" (10th ed.2002).
The message is then transmitted via an Internet Service Provider
("ISP") which examines the IP address of the message **580 and routes the information
to the computer with the proper IP address. When the message reaches its
intended recipient, the receiving computer reverses the TCP/IP protocol stack
and the message is decoded.
Constitutional Considerations in Personal Jurisdiction
[5] Because we have
consistently held that the reach of the long arm statute is coextensive with
the limits of personal jurisdiction delineated under the
due process clause of the Federal Constitution, our statutory inquiry merges
with our constitutional examination. See Mohamed v. Michael,
279 Md. at 656, 370 A.2d at 553; Carefirst, 334 F.3d
at 396-97. A court's exercise of personal jurisdiction over a
nonresident defendant satisfies due process requirements if the defendant has
"minimum contacts" with the forum, so that to require the defendant
to defend its interests in the forum state "does not offend traditional
notions of fair play and substantial justice." Int'l Shoe Co. v.
Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed.
95, 102 (1945).
General Personal Jurisdiction
[6] The standard for
determining the existence of personal jurisdiction over a nonresident defendant
depends upon whether the defendant's contacts with the forum state also provide
the basis for the suit. If the defendant's contacts with the State are not the
basis for the suit, then jurisdiction over the defendant must arise from the
defendant's general, more persistent contacts with the State. "To
establish general jurisdiction, the defendant's activities in the State must
have been 'continuous and systematic.' " Carefirst, 334 F.3d
at 397, quoting ALS Scan, Inc. v.
Digital Serv. Consultants, Inc., 293 F.3d 707, 712 (4th Cir.2002), cert. denied, 537 U.S. 1105, 123
S.Ct. 868, 154 L.Ed.2d 773 (2003); see Helicopteros
Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 & n. 9, *23
104 S.Ct. 1868, 1872
& n. 9, 80 L.Ed.2d 404, 411 & n. 9 (1984). BSI has alleged
both general and specific personal jurisdiction over Realtime Gaming and KDMS.
With respect to
The first case explicating a model framework for exploring whether websites on
the Internet can be used as a basis for conferring personal jurisdiction on the
courts is Zippo Manufacturing
Co. v. Zippo Dot Com, Inc., 952 F.Supp. 1119 (W.D.Pa.1997). See Toys "R"
Us, Inc. v. Step Two S.A., 318 F.3d 446, 452 (3d Cir.2003) (stating that Zippo
"has become a seminal authority regarding personal jurisdiction based upon
the operation of an Internet website"); Carefirst, 334 F.3d
at 399 (noting that Zippo "first enunciated that
court's influential 'sliding scale' model" for applying personal
jurisdiction requirements to electronic commerce); Sublett v. Wallin,
136 N.M. 102, 94 P.3d 845, 851 (App.2004) (observing that
the sliding scale of interactivity was first articulated in Zippo ). In Zippo,
an action arising out of a trademark violation alleged by
Zippo Manufacturing Co., which produces lighters, against Zippo Dot Com, Inc.,
an online news service, the court suggested the use of a "sliding
scale" of personal jurisdiction that is "directly proportionate to
the nature and quality of commercial activity **581 that an entity conducts
over the Internet." Zippo, 952 F.Supp. at 1124. The Zippo court described
it as a "spectrum" which:
[a]t one end ... are situations where a defendant
clearly does business over the Internet. If the defendant enters into contracts
with residents of a foreign jurisdiction that involve the knowing and repeated
transmission of computer files over the Internet, personal jurisdiction is
proper. E.g., *24 CompuServe, Inc. v. Patterson, 89 F.3d 1257 (6th Cir.1996). At the opposite
end are situations where a defendant has simply posed information on an
Internet Website which is accessible to users in foreign jurisdictions. A
passive Website that does little more than make information available to those
who are interested in it is not grounds for the exercise of personal
jurisdiction. E.g., Bensusan Restaurant
Corp. v. King, 937 F.Supp. 295
(S.D.N.Y.1996). The middle ground
is occupied by interactive Websites where a user can exchange information with
the host computer. In these cases, the exercise of jurisdiction is determined
by examining the level of interactivity and commercial nature of the exchange
of information that occurs on the Web site. E.g., Maritz, Inc. v.
Cybergold, Inc., 947 F.Supp. 1328
(E.D.Mo.1996).
Zippo, 952 F.Supp. at 1124.
In Maritz, Inc. v. Cybergold, Inc., 947 F.Supp. 1328 (E.D.Mo.1996), the defendant
hosted a website as a promotion for the launch of its Internet service.
Although the service was not operational, visitors to the site were encouraged
to add their address to a mailing list to receive its updates about the
service. Id. at 1330. The plaintiff
brought suit to recover for copyright infringement based upon the website's
availability to consumers in
At the opposite end of the spectrum, the court in Bensusan Restaurant
Corp. v. King, 937 F.Supp. 295 (S.D.N.Y.1996), concluded that
the website at issue in that case did not enable the court to exercise personal
jurisdiction over the defendant. The Internet website in issue contained
general information about the defendant's club, a calendar of events, and
ticket information. Id. at 297. The site was not
interactive, and if a user wanted to go to the club, she would have to call or
visit a *25 ticket outlet and then pick up tickets at the club on the night of
the show.
[7] BSI contends that
it has established a prima facie case for general jurisdiction based upon the Zippo
sliding scale of interactivity of websites. In the proceedings before the trial
court, BSI alleged that Realtime Gaming and KDMS's website is highly
interactive without further factual support illustrating its interactivity or
its use by residents of
FN16. In Zippo, the
plaintiff had conceded that only specific jurisdiction was at issue. Zippo, 952 F.Supp. at 1122.
Irrespective of the sliding scale delineated in Zippo, the
question of general jurisdiction is not difficult to resolve. Though the
maintenance of a website is, conceivably, a continuous presence everywhere, the
existence of a website alone is not sufficient to establish general
jurisdiction in
*26
Specific Personal Jurisdiction
[8] If the
defendant's contacts with the forum state form the basis for the suit, however,
they may establish "specific jurisdiction." Carefirst, 334 F.3d at 397. In determining whether specific
jurisdiction exists, we consider (1) the extent to which the defendant has
purposefully availed itself of the privilege of conducting activities in the
State; (2) whether the plaintiffs' claims arise out of those activities
directed at the State; and (3) whether the exercise of personal jurisdiction
would be constitutionally reasonable. Carefirst, 334 F.3d
at 397; ALS Scan, 293 F.3d
at 711-12; see Helicopteros, 466
U.S. at 414 & n. 8, 104 S.Ct. at 1872 & n. 8, 80 L.Ed.2d at 411 &
n. 8.
BSI asserts that it has established a prima facie case for specific jurisdiction over Realtime Gaming and KDMS because it has
alleged that Realtime Gaming and KDMS own or control windowscasino.com, the
company that assisted Thom in designing the website for the Golden Rhino Casino
and the unsolicited commercial e-mails that BSI received. In support of this
assertion, BSI notes that windowscasino.com has a link that leads to an IP
address that is registered to Realtime Gaming and KDMS and that the e-mails at
issue contained a link which ultimately led to the same IP address.
[9][10] Specifically, BSI
must make a prima facie showing that an agency or contractual relationship
exists between Realtime Gaming and KDMS and windowscasino.com. See Md.Code
(1973, 2002 Repl.Vol.), § 6-103 of the
Courts and Judicial Proceedings Article. An agency
relationship "is a legal concept which depends upon the existence of
required factual elements: the manifestation by the principal that the agent
shall act for him, the agent's acceptance of the undertaking and the
understanding of the parties that the principal is to be in control of the
undertaking." Restatement (Second) of Agency § 1,
cmt. (1958); see Insurance Company of
North America v. Miller, 362 Md. 361, 373, 765 A.2d 587, 593 (2001); Green v. H & R
Block, Inc., 355 Md. 488, 503, 735 A.2d 1039, 1047 (1999). Although such a
relationship is not necessarily *27 contractual in nature, it is always
consensual. Insurance Co. Of N.
Amer., 362 Md. at 373, 765 A.2d at 593, citing Lohmuller Bldg. Co.
v. Gamble, 160 Md. 534, 539, 154 A. 41, 43 (1931). The ultimate question is one of intent, of both the principal and
the agent.
(1) The agent's power to alter the legal relations of the principal;
(2) The agent's duty to act primarily for the benefit of the principal; and
(3) The principal's right to control the agent.
Green, 355 Md. at
503, 735 A.2d at 1048, citing United Capitol Ins.
v. Kapiloff, 155 F.3d 488, 498 (4th Cir.1998); Proctor v. Holden,
75 Md.App. 1, 20, 540 A.2d 133, 142, cert. denied sub nom., 313 Md. 506, 545
A.2d 1343 (1988); Schear v, Motel
Management Corp., 61 Md.App. 670, 687, 487 A.2d 1240, 1248 (1985) (stating the
factors derive from sections 12-14 of the Restatement); Restatement (Second)
of Agency §§ 12-14 (1958). The three
factors are evaluated within the totality of the circumstances. Green, 355 Md. at
506, 735 A.2d at 1049. The presence of
all three factors is not required for a finding of an agency relationship.
The only evidence of any kind of relationship between Realtime Gaming and KDMS
and windowscasino.com is the fact that the windowscasino.com website contains a
link to an IP address registered to KDMS where customers can download the
gaming software. This does not establish or even indicate a relationship,
principal-agent or contractual, between Realtime Gaming and KDMS, on the one hand, and windowscasino.com on the other in which
windowscasino.com is empowered to act on Realtime Gaming and KDMS's behalf or
whether Realtime Gaming and KDMS control windowscasino.com. BSI does not
provide any evidence of mutual corporate officers, board members, owners, or
other such controlling individuals or entities to show anything more than that *28
windowscasino.com has obtained a sub-license from Montana Overseas. A mere link
with no more compelling evidence is insufficient to create the necessary nexus
between Realtime Gaming and KDMS, and windowscasino.com and Thom. [FN17]
FN17. BSI also asserts
that Realtime Gaming and KDMS receive substantial revenue from citizens in
Because BSI has failed to provide any evidence of a relationship among Realtime
Gaming, KDMS, windowscasino.com, and Thom, that is either governed by a
contract or possesses those qualities characteristic of agency relationships,
we fail to see any substantive contact with Maryland or connection with the conduct giving rise to this suit, and as such find that it
would not be constitutionally reasonable to exercise personal jurisdiction over
Realtime Gaming and KDMS on these facts.
The Denial of Discovery
[11][12] BSI claims that
the trial judge abused his discretion in ruling on the motion to dismiss at the
May 26, 2004 hearing and in denying its request for discovery. We review the
denial of discovery under the abuse of discretion standard and will only
conclude that the trial court abused its discretion " 'where no reasonable
person would take the view adopted by the [trial] court [ ]' ... or when the
court acts 'without reference to any guiding principles,' and the ruling under
consideration is 'clearly against the logic and effect of facts and inferences
before the court[ ]' ... or when the ruling is
'violative of fact and logic.' " Wilson v. Crane, 385
Md. 185, 198, 867 A.2d 1077, 1084 (2005), quoting **584 In re Adoption/Guardianship
No. 3598, 347 Md. 295, 312- 13, 701 A.2d 110, 118-19 (1997) (citations
omitted). We do not find that the trial court's decision in the present case is
beyond the decision that a reasonable person would make in light of the fact
that BSI was unable to produce any evidence of a connection between Realtime
Gaming and KDMS, on the one hand, and *29 windowscasino.com and
Thom, on the other, beyond a link leading to an IP address at which individuals
could download the software designed by KDMS.
Striking the Amended Complaint
[13] On June 2, 2004,
the trial court issued an order dismissing BSI's complaint that was silent as
to whether the complaint was dismissed with or without prejudice. BSI argues
that the trial court abused its discretion in striking the amended complaint
that it filed and cites a number of this Court's cases for the proposition that
a dismissal is without prejudice unless otherwise specified in the order of
dismissal. See, e.g., Williams v. Snyder,
221 Md. 262, 157 A.2d 265 (1960); State ex rel. Lennon
v. Strazzella, 331 Md. 270, 627 A.2d 1055 (1993). BSI also notes
that Maryland Rule
2-341(c) provides that "[a]mendments shall be freely
allowed when justice so permits." Despite the preference for freely
permitted amendments, BSI failed to introduce any new facts to cure its
inability to produce prima facie evidence of
Conclusion
Because we find that the trial court properly concluded,
based on the evidence introduced, that BSI failed to establish a prima facie
case for general or specific personal jurisdiction over Realtime Gaming and
KDMS, we affirm the trial court's order dismissing the complaint. Moreover, we
conclude that the trial court did not abuse its discretion in denying BSI
discovery or denying the motion for reconsideration and
striking the amended complaint.
JUDGMENT OF THE
*30 RAKER, Judge, dissenting, in which BELL, Chief Judge, and HARRELL, Judge, join.
I would reverse the judgment of the Circuit Court because the court abused its
discretion in denying petitioner BSI's request for further discovery as to
jurisdictional facts. The Circuit Court granted respondents KDMS and Realtime's
motion to dismiss the complaint on the grounds that respondents were not
subject to the personal jurisdiction of the court and that petitioner was not
entitled to discovery on the issue. The majority holds that the Circuit Court
acted within its discretion to deny discovery "in light of the fact that
BSI was unable to produce any evidence of a connection between Realtime Gaming
and KDMS, on the one hand, and windowscasino.com and Thom, on the other, beyond
a link leading to an IP address at which individuals could download the software
designed by KDMS." Maj. Op. at 28-29, 878 A.2d at 583-84
(emphasis in original). I disagree.
I agree that based on the record before the court, evidence of
The general rule is that a court should not dismiss a claim for lack of
personal jurisdiction without permitting the plaintiff to obtain discovery as
to jurisdictional facts. In Androutsos v.
Fairfax Hospital, 323 Md. 634, 594 A.2d 574 (1991), the *31 Circuit Court had
dismissed a negligence action for lack of personal jurisdiction without
permitting the plaintiffs to obtain discovery as to the defendant's contacts
with
"[O]
'If all of the parties have knowledge of all of the relevant, pertinent and
non-privileged facts, or the knowledge of the existence or whereabouts of such
facts, the parties should be able properly to prepare their claims and
defenses, thereby advancing the sound and expeditious administration of
justice. In order to accomplish the above purposes, the discovery rules are to
be liberally construed. And the trial judges, who are primarily called upon to
administer said rules, are vested with a reasonable, sound discretion in
applying them, which discretion will not be disturbed in the absence of a
showing of its abuse.'
Nowhere is that rationale more applicable than when a fact-specific issue, such
as whether the court can exercise personal jurisdiction over a non-resident
defendant, is presented."
Androutsos, 323 Md. at 638, 594 A.2d at 576
(citations omitted).
Although the plaintiff in a civil action bears responsibility for establishing
the defendant's amenability to suit, including personal jurisdiction, a
complaint is required to contain "only such statements of fact as may be
necessary to show the pleader's entitlement to relief." Md. Rule 2-303(b). Indeed, it is
the defendant who must raise questions of personal jurisdiction at
the pleading stage; under Maryland Rule
2-322(a) any defense to personal jurisdiction is waived if not
raised before filing an answer to the complaint. See *32 Hansford v. District
of Columbia, 329 Md. 112, 120, 617 A.2d 1057, 1060 (1993). Thus, a
plaintiff bears no affirmative duty to plead personal jurisdiction in a
complaint, and it is inappropriate ordinarily to grant a motion to dismiss
based solely on the pleadings and to deny discovery on the issue of amenability
to suit. See, e.g., Edmond v. United
States Postal Serv. Gen. Counsel, 953 F.2d 1398, 1401 (D.C.Cir.1992) (Ginsberg, J.,
concurring); Compagnie des
Bauxites de Guinee v. L'Union Atlantique S.A. d'Assurances, 723 F.2d 357, 362
(3rd Cir.1983); Leasco Data
Processing Equip. Corp. v. Maxwell, 468 F.2d 1326, 1343 (2d Cir.1972); Surpitski v.
Hughes-Keenan Corp., 362 F.2d 254, 255-56 (1st Cir.1966); Hart Holding Co.
Inc. v. Drexel Burnham Lambert, Inc., 593 A.2d 535, 538 (Del.Ch.1991); **586 Peterson v. Spartan
Indus., Inc., 33 N.Y.2d 463, 354 N.Y.S.2d 905, 310 N.E.2d 513, 516 (1974).
In Edmond, then-Circuit Judge Ruth Bader Ginsburg noted the importance of
affording a plaintiff "ample opportunity" to take discovery relevant
to personal jurisdiction before dismissing a claim against a defendant:
"The ruling on personal jurisdiction over Popkin was premature in the
absence of any discovery; in keeping with Naartex [Consulting
Corp. v. Watt, 722 F.2d 779
(D.C.Cir.1983), cert. denied sub nom. Naartex Consulting
Corp. v. Clark, 467 U.S. 1210, 104 S.Ct. 2399, 81 L.Ed.2d 355 (1984) ], that ruling
should have abided a fair opportunity for plaintiffs to pursue discovery keyed
to the issue of personal jurisdiction."
Edmond, 953 F.2d
1398 at 1401.
In Surpitski, the United States Court of Appeals for the First Circuit noted as
follows:
"A plaintiff who is a total stranger to a corporation should not be
required, unless he has been undiligent, to try such an issue on affidavits
without the benefit of full discovery.... The condemnation of plaintiff's
proposed further activities as a 'fishing expedition' was unwarranted. When the
fish is identified, and the question is whether it is in the *33 pond, we know no reason to
deny a plaintiff the customary license."
Surpitski, 362 F.2d
at 255-56.
The Delaware Court of Chancery addressed this issue in Hart Holding Co. and
stated as follows:
"As a plaintiff does have an evidentiary burden, she may not be precluded
from attempting to prove that a defendant is subject to the jurisdiction of the
court, and may not ordinarily be precluded from reasonable discovery in aid of
mounting such proof. Surpitski v.
Hughes-Keenan Corp., 362 F.2d 254, 255 (1st Cir.1966); see 5A Wright
and Miller § 1351 n. 33. Only where the facts alleged in the complaint make any
claim of personal jurisdiction over defendant frivolous, might the trial court,
in the exercise of its discretionary control over the discovery process,
preclude reasonable discovery in aid of establishing personal jurisdiction. Insurance Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456
U.S. 694, 708, 102 S.Ct. 2099, 2107, 72 L.Ed.2d 492 (1982). In Compagnie des
Bauxites de Guinee v. L'Union Atlantique S.A. d'Assurances, 723 F.2d 357 (3d
Cir.1983), the Court of Appeals for the Third Circuit stated
the general rule:
Where the plaintiff's claim is not clearly frivolous, the district court should
ordinarily allow discovery on jurisdiction in order to aid the plaintiff in
discharging that burden.
723 F.2d at 362.
It is relatively rare but not unheard of that a court will require a plaintiff
to attempt to make out its prima facie factual showing of defendant's
amenability to suit without the benefit of discovery. See, e.g., Wyatt v. Kaplan, 686
F.2d 276 (5th Cir.1982); Daval Steel Products
v. M.V. Juraj Dalmatinac, 718 F.Supp. 159 (S.D.N.Y.1989);
Singer v. Bell, 585 F.Supp. 300 (S.D.N.Y.1984);
Grove Valve & Regulator Co., Inc. v. Iranian Oil Services, Ltd., 87
F.R.D. 93 (S.D.N.Y.1980). While in each of
these cases the court considered matters outside of the
pleading, in each instance *34 the court found that plaintiff's assertion of
personal jurisdiction lacked that minimal level of plausibility needed to
permit discovery to go forward. No purpose is here served by detailing the
facts presented in those cases; questions of this kind are inherently highly
particular. **587 But it
is notable that, in Wyatt v. Kaplan, in approving the granting of a motion to
dismiss under Rule 12(b)(2) where the plaintiff had
been denied an opportunity to take depositions, the Fifth Circuit Court of
Appeals strongly endorsed the practice that ordinarily permits discovery on
such a motion:
When a defendant challenges personal jurisdiction, courts generally permit
depositions confined to the issues raised in the motion to dismiss.... In
appropriate cases we will not hesitate to reverse a dismissal for lack of
personal jurisdiction, on the ground that plaintiff was improperly denied
discovery....
Wyatt v. Kaplan, 686
F.2d at 283."
Hart Holding Co.,
593 A.2d at 539-40.
This case is not one which falls into the category of "clearly
frivolous." The elusive nature of Internet presence, together with the
strong incentives for "spammers" to conceal their identities,
portends that often there will be a dearth of jurisdictional facts in future
cases brought under the Commercial Electronic Mail
statute. The General Assembly has created a private cause of action to aid
The e-mails at issue in this case were composed by an entity named windowscasino.com,
and sent into
BSI established three facts casting doubt on respondents' contention that
windowscasino.com is, at most, a sub-licensee of KDMS software and has no
agency relationship with respondents. First, the hyperlink "http://
wincasinoclicks.com/ SmartDownload.asp?affid=13462"
permitted
The relationship between respondents and windowscasino.com is shrouded in the
mists of holding companies, offshore entities, and multi-level licensing
arrangements. According to respondents, KDMS has entered into an exclusive
license with a master licensee (Panama-based Montana Overseas). Montana
Overseas, in turn, sub-licenses the software to many client casinos, among them
windowscasino.com (seemingly a trade name of either Angel de la Maņana, a Costa
Rican corporation, or ADLM, Ltd., located in the Channel Island of Jersey).
Respondents assert that KDMS and Realtime have no direct relationship with
their sub-licensees, and exercise no control over the manner in which the
sub-licensees advertise their services. Under BSI's theory, on the other **588 hand, the licensing and
sub-licensing agreements are shams, Montana Overseas, Angel de la Maņana, and
ADLM are mere dummy corporations, and windowscasino.com is a trade name or
alter ego of KDMS/Realtime.
*36 While the
relationships may be exactly as KDMS and Realtime claim, the three facts
detailed above provide some credence to BSI's theory. A KDMS-owned
server is providing KDMS-developed software directly to end users. This
server's collection of affiliate identification numbers suggests that KDMS and
Realtime may have some role in the administration of windowscasino.com's
affiliate commission system.
These facts alone do not establish an agency relationship between KDMS/Realtime
and windowscasino.com, but they do render BSI's request for discovery something
more than a "fishing expedition." BSI is entitled to more information
regarding the connections among the various entities. Who owns Montana
Overseas, Angel de la Maņana, and ADLM? Do these companies have any assets or
employees? Who is acting as the "house" when a gambler bets at
windowscasino.com? Do the purported licensing agreements between KDMS/Realtime,
Montana Overseas, and Angel de la Maņana or ADLM actually exist, and if so,
what do they contain? Is the software licensed for a flat fee, or do KDMS and
Realtime receive an additional payment for each download? What aspects of
windowscasino.com's business, if any, are run directly by KDMS and Realtime? Do
KDMS and Realtime write advertising copy for windowscasino.com and its
affiliates?
Answers to the above questions might establish that KDMS and Realtime merely
develop software, provide some incidental hosting services, and can in no way
be deemed to have purposefully "sent" Travis Thom's e-mails into
I respectfully dissent.
Chief Judge BELL and Judge HARRELL have authorized me to state that they join in this
dissenting opinion.
Beyond Systems, Inc. v. Realtime Gaming Holding Co., LLC
388
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