361 F. Supp. 3d 869
D. Me.
2019

Contact that is "random, fortuitous, and attenuated" does not satisfy the first factor. Viasystems, Inc. v. EBM-Papst St. Georgen GmbH & Co., KG , 646 F.3d 589, 594 (8th Cir. 2011). For example, scattered communication via emails and phone calls to individuals within the forum state does not justify a court's exercise of personal jurisdiction over the defendant. Id. Similarly, a defendant's communication with an out-of-state third party, who in turn has contacts with the forum state, is a contact with the forum state that is too tenuous to satisfy the first factor. See Nash Finch Co. v. Preston , 867 F.Supp. 866, 868-69 (D. Minn. 1994). In Nash Finch , the district court did not have personal jurisdiction over an out-of-state lawyer who provided an opinion letter to his Minnesota client. See id. That the letter approved a deal with a Minnesota corporation or that the Minnesota corporation relied on the letter was unavailing. See id. (explaining that a contrary rule would lead to the "absurd" result of making a law firm potentially "susceptible to the jurisdiction of every state in the union").

The second factor in the Eighth Circuit's minimum contacts analysis considers the quantity of a defendant's contacts. But a low volume of contacts will not defeat an otherwise meaningful interaction with the forum state, nor will a high volume of contacts bolster an otherwise deficient connection to the forum state. For example, a single, direct sale may be sufficient to confer personal jurisdiction. See Pope , 588 F.Supp.2d at 1020. In contrast, even 100 phone calls will not establish jurisdiction if a defendant has no offices, employees, inventory, real estate, or bank accounts in the forum state. See Burlington , 97 F.3d at 1103 ; see also Porter v. Berall , 293 F.3d 1073, 1076-77 (8th Cir. 2002) (finding that when defendant did not solicit business from the forum state, subsequent phone calls and mailings did not establish personal jurisdiction).

In support of its motion to dismiss, B & R argues that none of Plaintiffs' proffered contacts is sufficient to confer specific personal jurisdiction over B & R, nor are they when considered together. Of the five minimum-contacts factors, the first factor-the quality and nature of the contacts-most strongly disfavors the Court's exercise of personal jurisdiction over B & R. Although Plaintiffs allege that B & R encouraged Defendants to distribute the Prince Recordings, Plaintiffs concede that B & R did not directly sell the music. Merely encouraging another party to place an item in the stream of commerce does not establish personal jurisdiction over B & R. SeeAsahi , 480 U.S. at 112, 107 S.Ct. 1026. Plaintiffs' other allegations concerning phone calls, emails, and the opinion letter also fall short. B & R is not a Minnesota law firm and its clients in this matter were not Minnesota residents. Plaintiffs make no allegations that B & R

was compensated by the Prince Estate, travelled to Minnesota, or solicited business in Minnesota. Absent other contacts, B & R's emails, phone calls, and opinion letter are not so purposefully directed to Minnesota to justify this Court's exercise of personal jurisdiction over B & R. See Burlington , 97 F.3d at 1103 ; Nash Finch Co. , 867 F.Supp. at 868-69.

The second factor, the quantity of contacts, strongly favors neither Plaintiffs nor B & R. Although Plaintiffs allege numerous phone and email conversations between B & R and the Prince Estate, even a high volume of such contacts does not establish personal jurisdiction where personal jurisdiction otherwise would be lacking. See Burlington , 97 F.3d at 1103 ; Porter , 293 F.3d at 1076. Plaintiffs' allegations that there were "at least four purchasers" of the Prince Recordings in Minnesota also is of limited significance, as B & R did not directly sell to any of these customers.

The third factor favors Plaintiffs. B & R's alleged conduct relates to the causes of action asserted in the third amended complaint: tortious interference with contract, indirect copyright infringement, and declaratory judgment. The tortious interference with contract claim arises from B & R's alleged notice of and response to the Confidentiality Agreement. The indirect copyright infringement claim and requested declaratory relief relate to B & R's alleged encouragement of the distribution of the Prince Recordings.

Likewise, the final two factors favor Plaintiffs. Because the Prince Estate is located in Minnesota, the state is both an interested and convenient forum. However, a state's interest in the litigation and convenience as a forum are of limited significance for the purpose of this analysis. See Burlington , 97 F.3d at 1102.

In summary, because the nature and quality of the asserted contacts weigh strongly against the Court's exercise of personal jurisdiction over B & R, Plaintiffs have not made a prima facie showing that B & R has sufficient minimum contacts with Minnesota.

B. Calder Test

Plaintiffs allege that B & R committed intentional torts directed at Minnesota which, in combination with the contacts described above, justify the Court's exercise of personal jurisdiction over B & R.

A defendant's tortious conduct can be a basis for personal jurisdiction. Calder v. Jones , 465 U.S. 783, 790, 104 S.Ct. 1482, 79 L.Ed.2d 804 (1984). To establish personal jurisdiction under an intentional tort theory, a plaintiff must make a prima facie showing that "the defendant's acts (1) were intentional, (2) were 'uniquely' or expressly aimed at the forum state, and (3) caused harm, the brunt of which was suffered-and which the defendant knew was likely to be suffered-there." Zumbro, Inc. v. Cal. Nat. Prods. , 861 F.Supp. 773, 782-83 (D. Minn. 1994). The Eighth Circuit considers the Calder test in combination with the standard five-factor analysis. See Johnson , 614 F.3d at 797 ("We therefore construe the Calder effects test narrowly, and hold that, absent additional contacts, mere effects in the forum state are insufficient to confer personal jurisdiction.").

The Eighth Circuit has acknowledged the limited reach of Calder , accepting that businesses often promote their products and solicit customers at the expense of competitors. Although such actions "may have an effect on a competitor, absent additional contacts, this effect alone will not be sufficient to bestow personal jurisdiction." See Hicklin Eng'g, Inc. v. Aidco, Inc. , 959 F.2d 738, 739 (8th Cir. 1992) (holding that allegedly defamatory statements about a business in Iowa, sent to out-of-state customers, did not invoke Calder even though competitive effects were felt in Iowa). Instead, personal jurisdiction under Calder is appropriate when a defendant purposefully targets the forum state, such as by directly selling an infringing product to retailers or customers in that state. See, e.g., Dakota Indus., Inc. v. Dakota Sportswear, Inc. , 946 F.2d 1384, 1391 (8th Cir. 1991) (affirming exercise of personal jurisdiction over out-of-state company because company was aware of competing trademark yet still used its infringing trademark when selling to retailers and customers in the forum state).

B & R argues that its conduct was not expressly aimed at Minnesota. Plaintiffs allege that B & R committed intentional torts by allowing its opinion letter to be circulated after B & R was aware of the Confidentiality Agreement, thereby encouraging the unlawful distribution of the Prince Recordings. And Plaintiffs maintain that B & R knew its actions would primarily affect the Prince Estate, a Minnesota entity. Here, as in Hicklin , B & R is an out-of-state entity that distributed a letter to out-of-state recipients. Although competitive effects were felt in Minnesota, this alone is not enough to invoke the Court's personal jurisdiction. See 959 F.2d at 739. Plaintiffs' reliance on Dakota is unavailing. Unlike directly selling a product with an infringing trademark, B & R passively allowed the continued circulation of its opinion letter to third parties who, in turn, decided to distribute and promote the Prince Recordings. Mere effects in Minnesota do not confer personal jurisdiction over B & R. See Johnson , 614 F.3d at 797.

In sum, the contacts and conduct that Plaintiffs allege are insufficient to establish that B & R has purposefully availed itself of Minnesota's laws. An out-of-state law firm provided advice to out-of-state clients. The advice happened to concern a Minnesota entity and several sales happened to be to Minnesota residents. But to subject B & R to this Court's personal jurisdiction under these circumstances would discourage the dissemination of legal advice and expand the reach of personal jurisdiction well beyond its current limits. Accordingly, the Court dismisses without prejudice the claims in the third amended complaint against B & R.5

II. Motion to Dismiss Tortious Interference Counterclaim

Boxill, Deliverance, RMA, Wilson, and Staley (collectively, "Defendants") assert a counterclaim for tortious interference with contracts and prospective economic advantage.6 Defendants allege that Plaintiffs misrepresented legal documents to Defendants' business partners, which interfered with Defendants' efforts to sell the Prince Recordings. Plaintiffs move to dismiss Defendants' counterclaim for failure to state a claim for either tortious interference with contracts or tortious interference with prospective economic advantage. Fed. R. Civ. P. 12(b)(6).

To survive a Rule 12(b)(6) motion to dismiss, a claim must allege sufficient facts such that, when accepted as true, a facially plausible claim for relief is stated. Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

When determining whether the claim is sufficient, a district court accepts as true all of the factual allegations in the claim and draws all reasonable inferences in the nonmoving party's favor. Blankenship v. USA Truck, Inc. , 601 F.3d 852, 853 (8th Cir. 2010) ; see also Reis v. Walker , 491 F.3d 868, 870 (8th Cir. 2007) (applying Rule 12(b)(6) standards to motion to dismiss counterclaim). The factual allegations need not be detailed, but they must be sufficient to "raise a right to relief above the speculative level" and "state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Mere "labels and conclusions" or a "formulaic recitation of the elements of a cause of action" are insufficient; and legal conclusions couched as factual allegations may be disregarded. See id. at 555, 127 S.Ct. 1955. A district court may consider documents that are necessarily embraced by the claim when considering a Rule 12(b)(6) motion to dismiss. See Kushner v. Beverly Enters. , 317 F.3d 820, 831 (8th Cir. 2003).

A. Tortious Interference with Contracts

Defendants allege that Plaintiffs misrepresented the scope of both the Confidentiality Agreement and an April 19, 2017 temporary restraining order (TRO) to Defendants' business partners. After misrepresenting these legal documents, Defendants contend, Plaintiffs improperly threatened to pursue legal action against any of Defendants' business partners that continued distributing the Prince Recordings.

To state a claim for tortious interference with a contract, a party must allege (1) the existence of a contract, (2) the accused's knowledge of the contract, (3) intentional procurement of its breach, (4) the absence of justification, and (5) damages. Kallok v. Medtronic, Inc. , 573 N.W.2d 356, 362 (Minn. 1998). Alleged negotiations or agreements in principal are not sufficient. See Bouten v. Richard Miller Homes, Inc. , 321 N.W.2d 895, 900 (Minn. 1982) (concluding that, because the contract at issue was void, it did not satisfy the first element of the tortious interference claim).

Plaintiffs argue that Defendants have not alleged the existence of an actual contract. Defendants identify various business partners with whom they had negotiated for the Prince Recordings to be promoted and advertised. But negotiations and preliminary agreements do not satisfy the first element of a tortious interference with contracts claim. See id. Defendants fail to identify any agreement with its business partners that is an actual contract. Without additional allegations, Defendants have not stated a cognizable claim.

Accordingly, the Court grants Plaintiffs' motion to dismiss Defendants' counterclaim for tortious interference with contracts, and dismisses that counterclaim without prejudice.7

B. Tortious Interference with Prospective Economic Advantage

Plaintiffs also argue that Defendants have not stated a claim for tortious interference with prospective economic advantage. Defendants allege in their counterclaim that, but for Plaintiffs' misrepresentation of the Confidentiality Agreement and TRO, Defendants "would have realized additional advantage and benefit from both current business relationships and future business relationships."

To recover under Minnesota law for tortious interference with prospective economic advantage, Defendants must prove (1) the existence of a reasonable expectation of economic advantage; (2) Plaintiffs' knowledge of that expectation; (3) Plaintiffs' intentional interference with Defendants' expectation, such that the interference was either independently tortious or in violation of a state or federal statute or regulation; (4) a reasonable probability that Defendants would have realized the economic advantage or benefit in the absence of Plaintiffs' wrongful act; and (5) damages. Gieseke ex rel. Diversified Water Diversion, Inc. v. IDCA, Inc. , 844 N.W.2d 210, 219 (Minn. 2014). Defendants must specifically identify the third party that is the source of the expected future economic relationship because "a projection of future business or unidentified customers, without more, is insufficient as a matter of law." Id. at 221-22.

Plaintiffs' argument is twofold. First, Plaintiffs argue that Defendants have not stated a claim on which relief can be granted because they have not identified a specific business partner or customer with whom Defendants could expect any future economic advantage. But Plaintiffs rely on Gieseke , which provides only the elements required to prove tortious interference with prospective economic advantage, not the elements required to plead that claim. See id. It is not clear from the Gieseke decision that identifying a specific business partner or customer is necessary to survive a motion to dismiss. However, even assuming without deciding that identification of a specific business partner or customer is a pleading requirement, Defendants satisfy this requirement. In their counterclaim, Defendants allege that one of the Prince Recordings, "Deliverance," was the top-selling pre-order on iTunes before Apple removed the song from its platform and the second best-selling album pre-order on Amazon. These allegations clearly identify Apple and Amazon as specific business partners with whom Defendants expected to have an ongoing relationship. Accordingly, Plaintiffs' first argument fails.

Second, Plaintiffs argue that Defendants have not alleged an independently tortious act. Plaintiffs maintain that any interference with Defendants' business partners was justified because Plaintiffs are entitled to enforce their intellectual property rights. Plaintiffs rely on Select Comfort Corp. v. Sleep Better Store, LLC , 838 F.Supp.2d 889, 894 (D. Minn. 2012), which held that a party's cease-and-desist letter, sent in good faith, did not constitute tortious interference. But Select Comfort is inapposite here because Defendants allege that Plaintiffs acted in bad faith. Defendants specifically allege that Plaintiffs intentionally misrepresented the Confidentiality Agreement and TRO. And by doing so, Plaintiffs knowingly made unfounded threats to take legal action against entities that distributed certain Prince Recordings. Accepting Defendants' allegations as true, as the Court must for the purpose of this motion to dismiss, Defendants have alleged an independently tortious act. The third element of a tortious interference with prospective economic advantage claim is met.

Plaintiffs do not challenge the sufficiency of the pleadings with respect to the other elements of Defendants' tortious interference with prospective economic advantage counterclaim, nor does the Court determine that Defendants' allegations are lacking. Accordingly, the Court denies Plaintiffs' motion to dismiss Defendants' tortious interference with prospective economic advantage counterclaim.

ORDER

Based on the foregoing analysis and all the files, records and proceedings herein, IT IS HEREBY ORDERED :

1. Plaintiffs' motion to supplement the record, (Dkt. 360), is GRANTED .

2. Defendant Brown & Rosen, LLC's motion to dismiss the third amended complaint for lack of personal jurisdiction, (Dkt. 330), is GRANTED .

3. Plaintiffs' third amended complaint, (Dkt. 262), is DISMISSED WITHOUT PREJUDICE with respect to Defendant Brown & Rosen, LLC.

4. Plaintiffs' motion to dismiss Defendants' counterclaim, (Dkt. 306), is GRANTED as to the tortious interference with contracts counterclaim and DENIED as to the tortious interference with prospective economic advantage counterclaim. Defendants' counterclaim for tortious interference with contracts is DISMISSED WITHOUT PREJUDICE .

5. Plaintiffs' earlier motion to dismiss Defendants' counterclaim, (Dkt. 188), is DENIED AS MOOT .

Notes

The Court grants Plaintiffs' motion to supplement the record with a newly produced document for the limited purpose of this motion to dismiss. (Dkt. 360.) A careful review of the supplemental document does not change the Court's determination that B & R's contacts with Minnesota are insufficient to establish personal jurisdiction.

Defendants combine the tortious interference with contracts claim and tortious interference with prospective economic advantage claim in a single count. Because tortious interference with contracts and tortious interference with prospective economic advantage have distinct elements, the Court analyzes each claim separately.

Plaintiffs argue that dismissal of the counterclaim should be with prejudice because Defendants have had two previous attempts to state a claim for relief properly. A district court, in its discretion, may dismiss a pleading for failure to state a claim with or without prejudice. See Orr v. Clements , 688 F.3d 463, 465 (8th Cir. 2012). Dismissal with prejudice may be warranted if amending the pleading would be futile. See Pet Quarters, Inc. v. Depository Tr. & Clearing Corp. , 559 F.3d 772, 782 (8th Cir. 2009). Here, although Defendants have asserted this counterclaim on two prior occasions, this is the first instance that Defendants' counterclaim is the subject of a judicial ruling. And there is no indication in the record that it would be impossible for Defendants to adequately plead a tortious interference with contracts claim. For these reasons, the dismissal is without prejudice.
Read the detailed case summary