District Court Rejects “Agency” Theory for Personal Jurisdiction

The World in U.S. Courts: Winter 2016 - Personal Jurisdiction | October.06.2016

AMA Multimedia LLC v. Sagan Limited, U.S. District Court for the District of Arizona, October 6, 2016

Plaintiff AMA Multimedia, a producer of pornographic material, sued several entities associated with the website Porn.com, including Netmedia Services, Inc. and GLP 5, Inc., alleging copyright infringement.  Defendants GLP and Netmedia—a Michigan corporation and Canadian company, respectively, moved to dismiss for lack of personal jurisdiction.

 

AMA argued that Netmedia was subject to personal jurisdiction under Federal Rule of Civil Procedure 4(k)(2), the “catch-all” provision that authorizes federal jurisdiction in certain cases where a non-US defendant cannot otherwise be sued in a US forum.  Among other requirements, the Court stated that application of the rule required a showing that Netmedia had “sufficient minimum contacts with the United States so that maintenance of the suit here does not offend traditional notions of fair play and substantial justice.”  AMA argued the requirement was satisfied because Porn.com's contacts with the US were substantial and could be imputed to Netmedia inasmuch as the Canadian corporation was an “alter ego” or agent of Porn.com.

 

The Court rejected AMA’s agency argument as a legally inadequate basis for jurisdiction.  It rejected the alter-ego argument on grounds that AMA had provided no evidence that Netmedia and Porn.com comingled funds, entered into contracts on behalf of one another, assumed liability for one another's debts, failed to keep separate corporate records, or were inadequately capitalized—all factors addressed in the alter-ego analysis. Though AMA did identify some common officers and directors between the two entities, such overlap, the Court ruled, was not sufficient in and of itself.  As a result, Porn.com's contacts with the United States were not imputed to Netmedia for purposes of personal jurisdiction.

 

With respect to the Michigan corporation GLP, AMA argued that an exercise of specific personal jurisdiction was appropriate because GLP had purposefully availed itself of the privilege of conducting activities in Arizona, citing GLP’s direction of employees to an annual industry tradeshow in Arizona to solicit business from Arizona-based companies, and its entry into a contract with an Arizona-based business to display advertisements on a pornographic website.  Even taking these allegations as true, however, the Court determined that AMA had not shown that its claims against GLP arose out of these contacts, which is required for the exercise of specific personal jurisdiction.

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