Russ Herman v. Cataphora, Incorporated, et , 730 F.3d 460 ( 2013 )

Case: 12-30966 Document: 00512376190 Page: 1 Date Filed: 09/17/2013
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
September 17, 2013
No. 12-30966 Lyle W. Cayce
Clerk
RUSS M. HERMAN; ARNOLD LEVIN,
Plaintiffs - Appellants
v.
CATAPHORA, INCORPORATED; ROGER CHADDERDON,
Defendants - Appellees
Appeal from the United States District Court
for the Eastern District of Louisiana
Before SMITH, GARZA, and SOUTHWICK, Circuit Judges.
LESLIE H. SOUTHWICK, Circuit Judge:
Russ M. Herman and Arnold Levin appeal the district court’s final order
granting the Defendants’ motion to dismiss for lack of personal jurisdiction and
purporting to transfer the action to the Northern District of California. Herman
and Levin claim Roger Chadderdon made defamatory statements that were
aimed at, and caused harm in, Louisiana, thereby grounding personal
jurisdiction in that state. We agree with the district court that personal
jurisdiction did not exist in Louisiana but find error in the dismissal. We
VACATE the dismissal and REMAND for the case to be transferred to
California.
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No. 12-30966
FACTS AND PROCEDURAL HISTORY
Herman and Levin are members of the Plaintiffs’ Steering Committee for
the Chinese Drywall multidistrict litigation (“MDL”) in the Eastern District of
Louisiana. Herman, the Steering Committee’s court-appointed Liaison Counsel,
resides and works in Louisiana. Levin, the Steering Committee’s Lead Counsel,
resides in Pennsylvania but works extensively in Louisiana. Roger Chadderdon
is technology counsel for Cataphora, a Delaware corporation with its principal
place of business in California. The company provides litigation support
services. The relevant facts underlying this matter are largely undisputed.
After a period of negotiation, Cataphora and the Steering Committee
entered into a contract in October 2009 for Cataphora to provide litigation
services in the MDL. Soon thereafter, the Steering Committee terminated the
contract and claimed Cataphora had surreptitiously included a provision calling
for the company to receive a “success fee.”
Cataphora filed a breach of contract suit against the Steering Committee
in the Northern District of California. In September 2011, Cataphora obtained
a judgment against the Steering Committee. In January 2012, the court
awarded additional litigation costs and interest. The Steering Committee has
appealed both rulings to the Ninth Circuit.
Shortly after judgment was entered in the contract suit, Chadderdon was
interviewed by Christopher Danzig for the website Above the Law. Both Danzig
and Cataphora were in California when the interview took place. On September
26, 2011, Danzig posted an article about the contract dispute on Above the Law.
It quoted several comments Chadderdon made to Danzig, including this about
the defendants in the contract dispute:
These guys are the worst of hypocrites you can possibly find. They
claim to be trying to help the little guy, but what they’re doing is
trying to put more money in their own pockets. Everybody knows
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that, but this is a case that illustrates it beyond what I have ever
seen.
The article described the nature and status of the Chinese Drywall MDL,
as well as the contract negotiations between Cataphora and the Steering
Committee. After Danzig explained the collapse of the parties’ contractual
relationship, Chadderdon was quoted: “We got screwed. Their strategy from day
one was to drag this out as long as possible to make it go away.” Danzig also
stated that Chadderdon said the Steering Committee told Cataphora to “[s]ue
us if you dare.” When describing the Steering Committee’s defense theory that
Cataphora had surreptitiously included the success fee in the contract without
alerting the Steering Committee, Chadderdon is quoted as saying “[t]he jury saw
through it almost immediately. They were bored to tears with this.” Finally,
before ending the article with a full list of defendants in the contract dispute
(including Herman and Levin, though with Levin’s name misspelled), Danzig
quotes Chadderdon saying “[w]e kicked their ass.”
In February 2012, Herman and Levin filed this action against Cataphora
and Chadderdon (“Defendants”) in the Eastern District of Louisiana, claiming
defamation and interference with prospective advantage. In June 2012, prior to
discovery, the Defendants filed a motion to dismiss for lack of personal
jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2), and for
improper venue pursuant to Rule 12(b)(3). In the alternative, the motion
requested that the action be transferred to the Northern District of California.
Accepting the Defendants’ arguments with regard to its lack of personal
jurisdiction, the district court on September 19, 2012, granted the Defendants’
motion to dismiss. In the next sentence of the order, the court transferred the
case to the Northern District of California. Herman and Levin appealed that
order to the Fifth Circuit. They also filed a motion in the California court, which
was granted, to transfer the case back to the Eastern District of Louisiana.
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DISCUSSION
1. Appellate jurisdiction
First, we must determine whether we have jurisdiction. If the Louisiana
district court’s order transferring the case to the Northern District of California
was effective, then jurisdiction was in the California court at least until the
retransfer to Louisiana; whether the appeal, which predated the retransfer, is
precisely in order would be a question. On the other hand, if the court’s
dismissal of the action was effective, then the dismissal is an appealable final
order and we have jurisdiction. See Picco v. Global Marine Drilling Co., 900 F.2d
846, 849 n.4 (5th Cir. 1990).
In its final order, the district court provided a detailed explanation of its
reasons for concluding it lacked personal jurisdiction over the Defendants. At
the end of this analysis, the court stated “it is appropriate to decide whether this
matter should be dismissed or transferred.” It then analyzed this question based
on 28 U.S.C. § 1406(a), under which a district court “in which is filed a case
laying venue in the wrong division or district” must transfer a case “if it be in the
interest of justice.” Concluding that standard was met, the court decided
transfer was appropriate. But rather than order the case transferred pursuant
to the alternative request in the Defendants’ motion, the court granted the
Defendants’ motion to dismiss, and then “further ordered that this matter is
transferred to the [United States] District Court for the Northern District of
California.”
The district court recognized it was faced with a choice whether to dismiss
or transfer. See 28 U.S.C. § 1406(a) (“The district court . . . shall dismiss, or if
it be in the interest of justice, transfer . . . .”) (emphasis added). In its order,
though, the court did both. We conclude that only one of the orders can be
effective. A court’s dismissal of an action results in an appealable final order,
making a transfer invalid because the court no longer has authority over the
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matter.1 Because here the court clearly agreed with the analysis on the personal
jurisdiction issue in the Defendants’ motion to dismiss, and because its first
order was to grant that motion, we conclude the court validly dismissed the
action. This resulted in an appealable final order, making the transfer invalid.
We have jurisdiction to hear the appeal pursuant to 28 U.S.C. § 1291.
2. Personal jurisdiction in Louisiana
A district court’s dismissal of a suit for lack of personal jurisdiction where
the facts are not disputed is a question of law, which is reviewed de novo.
Bullion v. Gillespie, 895 F.2d 213, 216 (5th Cir. 1990). The party invoking the
court’s jurisdiction bears the burden of establishing that a defendant has the
requisite minimum contacts with the forum state to justify the court’s
jurisdiction. Guidry v. U.S. Tobacco Co., Inc., 188 F.3d 619, 625 (5th Cir. 1999).
Where, as here, the court rules on a motion to dismiss for lack of personal
jurisdiction without holding an evidentiary hearing, that burden requires only
that the nonmovant make a prima facie showing. Id.“The limits of the Louisiana long-arm statute are coextensive with
constitutional due process limits. Therefore, the inquiry is whether jurisdiction
comports with federal constitutional guarantees.” Jackson v. Tanfoglio
Giuseppe, S.R.L., 615 F.3d 579, 584 (5th Cir. 2010) (citations omitted). For a
federal court to exercise personal jurisdiction over nonresident defendants, it
must first determine the defendants have “purposefully established ‘minimum
contacts’ with the forum state and, if so, that entertainment of the suit against
1
This appears to be a question of first impression in this court. At least three of our
sister circuits have considered similar issues, and two have determined, as we do here, that
the dismissal must be given effect as a final order and the transfer declared invalid. Tootle v.
Sec’y of Navy, 446 F.3d 167, 172-73 (D.C. Cir. 2006); HollyAnne Corp. v. TFT, Inc., 199 F.3d
1304, 1307 (Fed. Cir. 1999); but see Subsalve USA Corp. v. Watson Mfg., Inc., 462 F.3d 41, 44-
45 (1st Cir. 2006).
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the nonresident[s] would not offend ‘traditional notions of fair play and
substantial justice.’” E.g., Bullion, 895 F.2d at 216 (citations omitted). Such
minimum contacts may support either “general” or “specific” personal
jurisdiction. Id. General jurisdiction is appropriate only where a defendant
maintains “continuous and systematic” contacts with the forum state. Id.Herman and Levin do not contend the Defendants have such contacts.
Therefore, only specific jurisdiction is at issue. Specific jurisdiction “may
arise incident to the commission of a single act directed at the forum,” and is
appropriate only where the defendant “purposefully availed [himself] of the
privilege of conducting activities in-state, thereby invoking the benefits and
protections of the forum state’s laws.” Id. (citations omitted). Even in such a
case, the litigation must “result[] from alleged injuries that arise out of or relate
to those activities.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985)
(quotation marks and citation omitted); see also Clemens v. McNamee, 615 F.3d
374, 378-79 (5th Cir. 2010) (“Specific jurisdiction also requires a sufficient nexus
between the non-resident’s contacts with the forum and the cause of action.”).
The activities from which Herman’s and Levin’s cause of action arise are
the statements ostensibly made by Chadderdon to Danzig, which were then
published on the Above the Law website. “Therefore, the issue narrows to
whether these [allegedly] defamatory remarks constituted purposeful availment
such that [Chadderdon] could have reasonably anticipated being haled into a
[Louisiana] court as a result of his statements.” Clemens, 615 F.3d at 379.
In the context of defamation actions, personal-jurisdiction law is explained
in the Supreme Court’s decision in Calder v. Jones, 465 U.S. 783 (1984). Actress
Shirley Jones sued the National Enquirer newspaper in California, claiming she
had been libeled by an article in that publication. Id. at 784. The newspaper
was a Florida corporation with its principal place of business in Florida;
California was its largest market. Id. at 785. Jones was a resident of California
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whose professional life was also based in that state. Id. The Court noted that
the article’s writer made several telephone calls to California sources to obtain
the information contained in the article. Id. at 785-86. The Court concluded
that jurisdiction was proper in California because the story, “drawn from
California sources,” centered around “the California activities of a California
resident” whose career was based in California; therefore, “the brunt of the
harm, in terms both of respondent’s emotional distress and the injury to her
professional reputation, was suffered in California.” Id. at 788-89. Because
California was the “focal point” of both the article itself and the harm suffered,
even though the actual conduct of writing and researching the article took place
in Florida, jurisdiction rested with the California court. Id. at 789.
In applying the Calder analysis, we have emphasized the importance of
the “focal point” language. Clemens, 615 F.3d at 379. A plaintiff’s suffering
damage in the forum state is part of the calculus, but for minimum contacts to
be present the allegedly defamatory statements must be adequately directed at
the forum state. Id. (citing Revell v. Lidov, 317 F.3d 467, 473 (5th Cir. 2002)).
Even if the majority of the claimed harm is felt in the forum state, this court has
declined to find personal jurisdiction when the statements focus on activities and
events outside the forum state. Id. at 379-80 (citing Fielding v. Hubert Burda
Media, Inc., 415 F.3d 419, 424-26 (5th Cir. 2005)). In Clemens, which concerned
public statements made about a professional baseball player by his former
athletic trainer, we concluded jurisdiction was not appropriate in Texas because
the plaintiff failed to make a “prima facie showing that [the defendant] made
statements in which Texas was the focal point: the statements did not concern
activity in Texas; nor were they made in Texas or directed to Texas residents
any more than residents of any state.” Clemens, 615 F.3d at 380.
Unlike in Clemens, here it is not immediately clear who the targets of the
statements were and where the conduct Chadderdon described took place.
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Herman and Levin contend that, in the context of the article, Chadderdon’s
reference to “these guys” must refer to the members of the Steering Committee.
Supporting that argument, Herman and Levin were among the defendants in
the contract lawsuit and were members of the Steering Committee. Further,
Herman and Levin argue that Chadderdon knew the Steering Committee’s
business was mostly in Louisiana, which shows he intended the harm of his
statements to be felt there. The evidence somewhat in support for that
argument is that Chadderdon and others at Cataphora were aware that the
Chinese Drywall MDL was based in Louisiana.
Even so, the fact that Chadderdon knew Herman and Levin engaged in
some activity in Louisiana is not sufficient to prove the allegedly defamatory
statements themselves were made in reference to that activity. Although Danzig
described the nature of the Chinese Drywall MDL for context in the article, the
focal point of Chadderdon’s own quoted statements are on the contract dispute.
He never mentioned Louisiana explicitly or implicitly. He did not refer to
specific actions taken in Louisiana. Instead, he discussed his perceptions of the
Steering Committee members’ behavior surrounding the contract dispute, which
was litigated in California. He was in California when he made the statements
to a writer who also was in California.
Of course, Cataphora did contract to provide litigation services for the
MDL in Louisiana. But the connection between that contract and Chadderdon’s
allegedly defamatory statements is too attenuated to support bringing him into
Louisiana court for defamation. Finally, like the statements in Clemens and
unlike the article in Calder, there is no evidence that Chadderdon’s statements
or Danzig’s article were directed at Louisiana residents, or that Above the Law
has a disproportionately high Louisiana readership.
Perhaps Herman and Levin did make a prima facie showing that the harm
imposed by Chadderdon’s allegedly defamatory statements will be felt largely in
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Louisiana. This is not enough. Without a showing that the statements’ focal
point was Louisiana, which Herman and Levin have failed to make, the district
court lacked personal jurisdiction over the Defendants. See Clemens, 615 F.3d
at 379-80.
3. Whether dismissal or transfer is the appropriate disposition
Where a court finds it lacks personal jurisdiction, it may dismiss the action
pursuant to Federal Rule of Civil Procedure 12(b)(2). In the alternative, a
federal court is authorized under 28 U.S.C. § 1406(a) to transfer the action to
“any district or division in which it could have been brought” if the court finds
that it is “in the interest of justice” to transfer the action. See Dubin v. United
States, 380 F.2d 813, 816 (5th Cir. 1967). Section 1406(a) allows a transfer
where the first forum chosen is improper due to the existence of some obstacle
to adjudication on the merits. Id. The statute specifically refers to “laying venue
in the wrong division or district,” but a transfer can be made due to the absence
of personal jurisdiction in a district where venue is otherwise proper. See Bentz
v. Recile, 778 F.2d 1026, 1028 (5th Cir. 1985). We explained that a division or
district may be “wrong” under Section 1406(a) when the original court lacks
personal jurisdiction. Id. Therefore, upon finding that it lacked personal
jurisdiction, the district court correctly cited Section 1406(a) for the authority to
transfer the case if that was appropriate in the interest of justice. Id. at 1027.
The district court’s order stated it would be in the interest of justice to
transfer this case to the Northern District of California because witnesses,
evidence, the underlying events, and both defendants are based there. Another
reason a transfer here is in the interest of justice is to avoid any potential
statute of limitations issues in California.
The district court’s dismissal is VACATED. This matter is REMANDED
to the district court with instructions to transfer it to the United States District
Court for the Northern District of California.
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