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Court Lacks Long-Arm Jurisdiction Over App Developer in Defamation Lawsuit

Judge Kaplan recently ruled that the Superior Court does not have jurisdiction over an out-of-state defendant under the Massachusetts long-arm statute, G.L. c. 223A, § 3. The case involves two competing businesses that design and market apps for restaurants: SCVGR d/b/a LevelUp and Punchh.

In February 2016, LevelUp sued Punchh, alleging that Punchh had made defamatory statements about LevelUp to its customers. In July 2016, Judge Kaplan dismissed the lawsuit. Without concluding whether the court could exercise jurisdiction under the long-arm statute, Judge Kaplan ruled that Punchh had insufficient contacts with Massachusetts to meet the due-process requirements of the Fourteenth Amendment to the U.S. Constitution. In other words, Judge Kaplan bypassed resolution of the statutory issue and dismissed the case on constitutional grounds.

In November 2017, the Supreme Judicial Court (SJC) remanded the matter to the Superior Court. As we noted in a prior post, the SJC ruled that courts must decide whether the Massachusetts long-arm statute is satisfied before approaching the due-process inquiry under the United States Constitution. According to the SJC, to do otherwise would violate the “canonical” rule that courts should avoid unnecessary constitutional decisions, if possible.

Back in the Superior Court, Judge Kaplan allowed LevelUp to pursue further jurisdictional discovery from Punchh and the parties filed supplemental briefing. At the conclusion of this second go-round, Judge Kaplan held that, “in addition to failing the substantial contacts test under Federal due process standards, the court also does not have jurisdiction under the Massachusetts Long-Arm statute.”

Analyzing the long-arm statute, Judge Kaplan made three main points.

  • First, Judge Kaplan ruled that neither Punchh nor its agents were “transacting business” in Massachusetts within the meaning of Section 3(a) of G.L. c. 223A. He rejected the notion that a non-resident is transacting business in Massachusetts simply because the non-resident’s customer has contact with the forum. “LevelUp makes no argument that Punchh’s customers were acting as Punchh’s agent in deciding to open restaurants in Massachusetts and then having those restaurants employ Punchh’s app,” Judge Kaplan also noted.
  • Second, Judge Kaplan ruled that Section 3(c) of the statute was not met. Section 3(c) allows jurisdiction “over a person, who acts directly or by agent, as to a cause of action in law or equity arising from the person’s . . . (c) causing tortious injury by an act or omission in this commonwealth . . . .” LevelUp argued Punchh’s disparaging statements made to third parties outside of Massachusetts supported jurisdiction. Rejecting the argument, Judge Kaplan wrote: “LevelUp’s argument appears to depart from the plain language of § 3(c), which bases jurisdiction on where the tortious act was undertaken, not where its effect was felt, even when the defendant knew that the plaintiff was located in Massachusetts.”
  • Third, Judge Kaplan found that the court did not have jurisdiction under Section 3(d). That section allows jurisdiction over a defendant who causes tortious injury in Massachusetts “by an act or omission outside” of Massachusetts if the defendant “regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in this commonwealth.” Judge Kaplan agreed that “the complaint adequately allege[d] that LevelUp experienced ‘tortious injury in the commonwealth’ as a result of ‘an act . . . outside the commonwealth.’” Nonetheless, he found that LevelUp failed to adduce evidence sufficient to satisfy Section 3(d), a provision that provides a means of establishing general (not specific) jurisdiction over a defendant. “The fact that, during the period relevant to the jurisdictional inquiry, Punchh received $12,000 from customers that were not based or incorporated in the Commonwealth, but could be traced to those customers’ operations in Massachusetts, is insufficient to establish general jurisdiction,” he wrote.

SCVNGR, Inc. v. Punchh, Inc. (September 14, 2018)

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