Stover v. O'Connell Associates ( 1996 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
RICHARD D. STOVER,
Plaintiff-Appellant,
v.
No. 94-1309
O'CONNELL ASSOCIATES,
INCORPORATED,
Defendant-Appellee.
Appeal from the United States District Court
for the District of Maryland, at Baltimore.
John R. Hargrove, Senior District Judge.
(CA-93-1936-HAR)
Argued: January 29, 1996
Decided: May 14, 1996
Before HALL, NIEMEYER, and LUTTIG, Circuit JUDGES.
_________________________________________________________________
Affirmed by published opinion. Judge Niemeyer wrote the opinion,
in which Judge Hall and Judge Luttig joined.
_________________________________________________________________
COUNSEL
ARGUED: William Thomas Fitzhugh, BEDDOW, MARLEY, BUR-
GESS & ASSOCIATES, Chesterfield, Virginia, for Appellant.
Andrew Jay Graham, KRAMON & GRAHAM, P.A., Baltimore,
Maryland, for Appellee. ON BRIEF: Kevin F. Arthur, KRAMON &
GRAHAM, P.A., Baltimore, Maryland, for Appellee.
_________________________________________________________________
OPINION
NIEMEYER, Circuit Judge:
In this case, we revisit the statutory and constitutional limits of
Maryland's long-arm statute, Md. Code Ann., Cts. & Jud. Proc.
§ 6-103. Assuming that the statute extends jurisdiction to the limits of
due process, we hold that Maryland courts may, nonetheless, not
exercise personal jurisdiction over a New York private investigation
firm whose only connection with Maryland was its occasional reten-
tion by telephone of Maryland investigation companies to provide it
with information about Maryland subjects, including the plaintiff in
this case. Accordingly, we affirm the judgment of the district court
dismissing the case for lack of personal jurisdiction over the defen-
dant.
I
When Richard D. Stover, a Maryland resident, obtained a copy of
his consumer credit file in September 1992, he discovered that
O'Connell Associates, Inc., a New York private investigation com-
pany, had requested and obtained information about him from Equi-
fax Corporation. While Stover suspects that O'Connell Associates
requested the information because of his work with Ross Perot's pres-
idential campaign, he acknowledges that he has never been informed
of O'Connell's reason for requesting the information and makes no
allegations concerning O'Connell's purpose for requesting the infor-
mation or the persons to whom the information was submitted. He
claims, however, that because consumer reports may be furnished
only for limited purposes, O'Connell violated the federal Fair Credit
Reporting Act, 15 U.S.C. § 1681 et seq., its Maryland analog, Md.
Code Ann., Com. Law II § 14-1201 et seq ., and his common law right
to privacy. He alleges that O'Connell's conduct caused him injury in
Maryland, for which he demands $50,000 in compensatory damages
and $100,000 in punitive damages.
O'Connell filed a motion under Federal Rule of Civil Procedure
12(b)(2) to dismiss the complaint, contending that it was not subject
to personal jurisdiction in Maryland. While representing that it had
never had property or agents in Maryland, O'Connell acknowledged
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that it had occasionally used Maryland investigation firms to obtain
information about Maryland subjects.
In connection with its investigation of Stover, O'Connell states
that, through use of a computer terminal in its New York office, it
obtained Stover's name, address, birthdate, social security number,
and place of employment from Equifax. O'Connell also acknowl-
edges that it telephoned Montgomery Investigative Services, Ltd., a
licensed private investigation firm in Rockville, Maryland, and
retained that firm to conduct a "criminal check" on Stover and deter-
mine whether Stover had "any ties to KKK or any known white
supremist [sic] group." O'Connell maintains that from Montgomery
Investigative Services it received information only from public court
records. It asserts that it provided the information procured from
Equifax and Montgomery Investigative Services to its client in Cali-
fornia.
On O'Connell's motion to dismiss, the district court concluded that
O'Connell's "intermittent historical contacts" with Maryland were not
sufficiently "extensive, continuous and systematic" to sustain general
jurisdiction over O'Connell. The court also concluded that it did not
have specific jurisdiction over O'Connell because Stover's claims did
not arise out of any conduct by O'Connell in Maryland; all of
O'Connell's conduct had occurred in New York. Accordingly, the
district court granted O'Connell's motion to dismiss the complaint for
lack of personal jurisdiction.
From the district court's dismissal order, this appeal was taken.
II
In analyzing a challenge to a court's exercise of personal jurisdic-
tion, we first consider whether the state's long-arm statute authorizes
the exercise of jurisdiction over the defendant, and if we conclude that
it does, we then determine whether the exercise of jurisdiction com-
ports with the Fourteenth Amendment due process requirements. See
Ellicott Mach. Corp. v. John Holland Party, Ltd., 995 F.2d 474, 477
(4th Cir. 1993); First American First, Inc. v. National Ass'n of Bank
Women, 802 F.2d 1511, 1513-14 (4th Cir. 1986).
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Stover contends that O'Connell's conduct in obtaining "a copy of
Stover's consumer credit report" from Equifax and in retaining Mont-
gomery Investigative Services to determine whether Stover had "any
ties to [the] KKK" or similar groups violated federal and state con-
sumer protection laws and his common law right to privacy. Stover
maintains that because O'Connell invaded his privacy in Maryland,
causing tortious injury in the state by acts in the state, the require-
ments of Md. Code Ann., Cts. & Jud. Proc. § 6-103(b)(3) are satis-
fied. Focusing on "O'Connell's other investigations of Maryland
residents," however, Stover rests his principal jurisdictional claim on
§ 6-103(b)(4), which subjects a defendant to jurisdiction for conduct
outside the state if the defendant has engaged in a "persistent course
of conduct" in Maryland. On the federal due process issue, Stover
argues that O'Connell "purposefully directed its tortious activity" at
him, thereby causing him injury within Maryland. He maintains that
tortious activity conducted outside a state that causes injury within the
state "is a sufficient contact to comport with federal due process"
under Calder v. Jones, 465 U.S. 783 (1984).
Section 6-103(b)(3) of Maryland's long-arm statute provides that
a Maryland court may exercise jurisdiction over a person outside the
state who "[c]auses tortious injury in the State by an act or omission
in the State." (Emphasis added). While Stover may be able to estab-
lish that O'Connell caused injury in Maryland, he cannot sustain his
claim that O'Connell's injury-causing acts occurred in the state. The
evidence demonstrates that O'Connell's conduct occurred entirely in
New York State where O'Connell used a computer terminal to obtain
information from Equifax and telephoned a licensed Maryland private
investigation company to retain the firm to conduct a "criminal
check." Although Montgomery Investigative Services did operate in
Maryland, Stover cannot impute any of that firm's activities to
O'Connell on an agency theory because there is no evidence that
O'Connell controlled those activities. See Mylan Lab., Inc. v. Akzo,
N.V., 2 F.3d 56, 61 (4th Cir. 1993). O'Connell simply asked Mont-
gomery Investigative Services to provide certain information. The
Maryland firm selected the means and method of the investigation
and used its own employees to fulfill O'Connell's request.
The statutory provision upon which Stover must rely, therefore, is
§ 6-103(b)(4), which authorizes a Maryland court to exercise personal
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jurisdiction over any person who "[c]auses tortious injury in the State
or outside of the State by an act or omission outside the State if he
regularly . . . engages in any other persistent course of conduct in the
State." Stover argues that even though O'Connell is not present in
Maryland, its admitted prior investigatory efforts in Maryland consti-
tute a "persistent course of conduct in the State."
In defining the reach of Maryland's long-arm statute, Maryland
courts have concluded that the state legislature intended to expand
Maryland's exercise of personal jurisdiction to the limits allowed by
the Due Process Clause of the Fourteenth Amendment. See
Camelback Ski Corp. v. Behning, 513 A.2d 874, 876 (Md. 1986),
vacated and remanded on other grounds, 480 U.S. 901 (1987).*
Because the limits of Maryland's statutory authorization for the exer-
cise of personal jurisdiction are coterminous with the limits of the
Due Process Clause, the statutory inquiry necessarily merges with the
constitutional inquiry, and the two inquiries essentially become one.
See Ellicott Mach. Corp., 995 F.2d at 477; see also Mohamed v.
Michael, 370 A.2d 551, 553 (Md. 1977). Accordingly, we direct our
inquiry to whether O'Connell's activities in Maryland constituted suf-
ficient minimum contacts with Maryland such that maintenance of
suit against O'Connell in Maryland comports with the demands of
due process.
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*Were we to read Maryland's long-arm statute naturally, we might
question the Maryland courts' interpretation, at least with respect to the
constitutional limits of specific jurisdiction. Cf. Beaty v. M.S. Steel Co.,
401 F.2d 157 (4th Cir. 1968), cert. denied, 393 U.S. 1049 (1969). Section
6-103(b)(3) reaches persons whose actions take place in the state and
cause tortious injury in the state; it does not reach persons whose actions
outside the state cause tortious injury in the state. Cf. Calder v. Jones,
465 U.S. 783 (1984) (upholding exercise of personal jurisdiction over
defendants whose out-of-state activities caused injury in forum state).
While § 6-103(b)(4) covers out-of-state conduct that causes injury in the
forum state, its plain language would appear to require greater contacts
than the specific jurisdiction jurisprudence requires. In any event, we
shall assume that Maryland's long-arm statute reaches the limits of due
process.
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III
A state's sovereign authority over persons, property, and activities
extends only to its territorial limits, and its laws have no operation in
other states except as allowed by those states or by comity. See
Pennoyer v. Neff, 95 U.S. 714, 720-22 (1877); Lesnick v. Hollings-
worth & Vose Co., 35 F.3d 939, 941 (4th Cir. 1994), cert. denied, 115
S. Ct. 1103 (1995). And a state's assertion of power beyond its borders
violates the Due Process Clause of the Fourteenth Amendment.
Pennoyer, 95 U.S. at 733.
Because the requirement that a person be physically present in a
state before he may be subjected to that state's exercise of judicial
power was too restrictive to serve the increasing demands of interstate
commerce and the multi-state activities of corporations, the Supreme
Court has established that a person is thought to be"present" in a
state, not only when he is physically there, but also when he conducts
meaningful activity there. In International Shoe Co. v. Washington,
326 U.S. 310 (1945), the Supreme Court explained that a person's
activity in a state, conducted directly or through agents, may serve as
an analog for his physical presence there, as long as the in-state activ-
ity creates "certain minimum contacts [with the forum state] such that
maintenance of the suit [there] does not offend `traditional notions of
fair play and substantial justice.'" Id. at 316 (citation omitted). That
analog for physical presence was further defined in Hanson v.
Denckla, 357 U.S. 235, 253 (1958), as activity by which "the defen-
dant purposefully avails itself of the privilege of conducting activities
within the forum State." To create a basis for the exercise of in
personam jurisdiction, however, the defendant's activities must in any
event create a "substantial connection" between himself and the forum
state. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985)
(quoting McGee v. International Life Ins. Co., 355 U.S. 220, 223
(1957)).
The jurisprudence of surrogate presence in a state, articulated for
pragmatic reasons, was never intended to reorder the concepts of state
sovereignty which form the basis of the Constitution's due process
guarantee. A state's sovereignty remains territorial, and its judicial
power extends over only those persons, property, and activities within
its borders. The linchpin for long-arm jurisdiction, therefore, is the
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quantity and quality of the defendant's activity in the forum state. As
we explained in Lesnick:
While the jurisprudence of personal jurisdiction has focused
on fixing the minimum measurement of a person's contact
with a state necessary to substitute for the person's presence
in the state and thus to justify that state's imposing an in
personam judgment over the person, the immediate concept
of "presence" is no longer part of the language. Neverthe-
less, the establishment of a surrogate for presence has been
the core task in defining the due process boundaries of a
state's legitimate exercise of sovereignty over a person
beyond its borders.
35 F.3d at 941.
In this case, O'Connell, using only its computer terminal in New
York, obtained information about Stover from Equifax. The record
does not disclose where Equifax stored that information or where
Equifax is located. O'Connell also made a telephone call to a private
investigation firm in Maryland to retain it to conduct a "criminal
check." When the Maryland firm completed its search of the public
court records, it supplied the information to O'Connell in New York.
O'Connell passed the information that it obtained from both Equifax
and the Maryland investigation firm to its client in California. Finally,
O'Connell acknowledges that "on occasion over the last several
years" it has engaged Maryland investigation agencies to review pub-
lic documents concerning other individuals.
Ordering a product or service by telephone from a company in a
different state does not subject the customer to that state's jurisdic-
tion. See Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408,
417-18 (1984); Rosenberg Bros. & Co. v. Curtis Brown Co., 260 U.S.
516, 518 (1923). While it is true that the electronic connection trans-
ports the customer's order for the product or service into the forum
state, thereby prompting a response, such conduct does not establish
the customer's "presence" in that jurisdiction. On the contrary, the use
of a telephone to facilitate transactions between remote locations
serves as an alternative to presence. To conclude that such activity
establishes presence in a state would upset generally held expecta-
7
tions, see Craig v. General Finance Corp., 504 F. Supp. 1033, 1038-
39 (D. Md. 1981) (in personam jurisdiction does not exist over person
who placed various telephone calls and mailed letters to forum state),
and redefine the nature of state sovereignty.
Stover's reliance on Calder v. Jones does not persuade us to reach
a different conclusion because in that case the magnitude of the
defendants' activities amounted to an analog for the defendants' pres-
ence in the forum state. In Calder, Shirley Jones filed a libel suit in
California against the National Enquirer, one of its reporters, and one
of its editors. The reporter and the editor challenged the California
court's personal jurisdiction over them because they were Florida res-
idents and had prepared the article primarily in Florida. The Supreme
Court rejected the challenge, noting that the article about Jones was
researched from California sources, the National Enquirer has its larg-
est circulation in California, and both the reporter and the editor knew
that the article would appear in 600,000 copies circulated in Califor-
nia. The Court concluded that California was both the focal point of
the Jones story and of the alleged defamation. The defendants' "inten-
tional, and allegedly tortious, actions were expressly aimed at Califor-
nia," and Jones suffered the "brunt of the harm" there. The defendants
therefore must have "`reasonably anticipate[d] being haled into court
there.'" Id. at 789-90 (citations omitted).
In this case, we cannot conclude that from O'Connell's occasional
telephonic requests for information from Maryland-based investiga-
tion services over a period of years and its furnishing of that informa-
tion to clients in other states, it could reasonably have anticipated
being "haled into court" in Maryland. The magnitude of the Calder
defendants' activities in California distinguishes that case from the
one before us.
Because O'Connell's only contacts with Maryland were its occa-
sional placement of telephonic orders for, and the consequent receipt
of, investigation services from Maryland, we hold that it would con-
travene the Due Process Clause to apply Maryland's long-arm statute
to grant Maryland courts in personam jurisdiction over O'Connell in
8
New York. Accordingly the district court's order dismissing this case
for lack of personal jurisdiction over O'Connell is
AFFIRMED.
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