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Cornelius v. Deluca

April 26, 2010


The opinion of the court was delivered by: Honorable B. Lynn Winmill Chief U. S. District Judge



The Court has before it Defendants' Motions to Dismiss based on insufficient service of process, lack of personal jurisdiction, expiration of the statute of limitations, Rule 12(b)(6), and immunity. The Court heard oral argument on the motion on March 16, 2010, and now issues the following decision.


Derek W. Cornelius and SI03, Inc. (collectively "SI03") filed suit in Missouri state court on October 20, 2008, alleging (1) violations of the Lanham Act, 15 U.S.C. § 1125(a), (2) tortious interference with a business expectancy or prospective business relationship, (3) injurious falsehood, (4) defamation, (5) libel, and (6) civil conspiracy. SI03 named more than fifteen defendants in the suit. SI03 asserts that the defendants were responsible for postings on the website which criticized Cornelius, SI03, and SI03's products. The statements at issue in this case were all posted on the Forum Message Board, on which any user can post comments.

In December, 2008, defendants Ryan DeLuca, Bryna Matthews DeLuca, and (collectively "") removed the case to the United States District Court for the Eastern District of Missouri. SI03 filed a Second Amended Complaint on August 19, 2009, and several defendants moved to dismiss. Rather than dismiss the suit for lack of personal jurisdiction, the district court transferred the case to this Court pursuant to 28 U.S.C. § 1406(a).

After the transfer, Defendants (Docket No. 128), SNS Nutrition ("SNS") (Docket No. 137), Scientifically Advanced Nutrition ("SAN") (Docket No. 165), ISS Research, LLC ("ISS") (Docket No. 168), and Molecular Nutrition, LLC ("Molecular") (Docket No. 169) filed Motions to Dismiss. SI03 voluntarily dismissed Count Six, alleging civil conspiracy, as to all defendants on November 12, 2009. The Defendants challenge the remaining counts.


I. Motion to Dismiss for Insufficient Service of Process

SNS and Molecular assert that they have not been served with a summons and complaint since the transfer of this case to the District of Idaho.

A. Applicable Legal Standards

When a complaint is filed in a district court that is not the proper venue for the claims, the case may be transferred to another district court in which the complaint could have been filed originally, if it suits the interests of justice. 28 U.S.C. § 1406(a). Transfer "to remove a procedural obstacle such as lack of personal jurisdiction is favored over dismissing an action because transfer facilitates the adjudication of a dispute on its merits." Wilson v. St. Mary's Hosp., 822 F. Supp. 1450, 1451 (D. Minn. 1993). Even if a court does not have personal jurisdiction over the defendants, it can transfer the action to a district which may. Id. (citing Goldlawr, Inc. v. Heiman, 369 U.S. 463, 465-66 (1962)). Transfer of a case "does not confer personal jurisdiction upon the court receiving the case." Id.

Service of process is a prerequisite to the exercise of personal jurisdiction. Omni Capital Int'l v. Rudolf Wolff & Co., 484 U.S. 97, 104 (1987), superseded by rule, Fed. R. Civ. P. 4(k)(2). "[S]ervice of summons is the procedure by which a court having venue and jurisdiction of the subject matter of the suit asserts jurisdiction over the person of the party served." Miss. Publ'g Corp. v. Murphree, 326 U.S. 438, 444-45 (1946). Actual notice, without substantial compliance with Federal Rule of Civil Procedure 4, is insufficient to subject defendants to personal jurisdiction. Jackson v. Hayakawa, 682 F.2d 1344, 1347 (9th Cir. 1982).

B. SNS's and Molecular's Motions to Dismiss

Defendants assert that SI03's claims against them should be dismissed due to SI03's failure to serve a complaint and summons issued by this Court. SI03 counters that re-service is not required, as Defendants clearly had notice of the action. See Bentz v. Recile, 778 F.2d 1026, 1028 n.5 (5th Cir. 1985).

Service is required following a transfer pursuant to § 1406(a) when a decision on the merits has not been reached. See Wilson, 822 F. Supp. at 1452 (requiring re-service after transfer where case was "at its inception and its merits have not been adjudicated"); Michelson v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 709 F. Supp. 1279, 1289 (S.D.N.Y. 1989) (noting that re-service in Bentz "would only tidy a case and require another appeal"); see also McCurdy v. Am. Bd. of Plastic Surgery, 157 F.3d 191, 195-96 (3d Cir. 1998).

The 1993 amendments to Rule 4 discourage "hyper-technical" compliance with the requirements of service, but only as to how service can be effectuated, not as to the requirement that a party be served. Fed. R. Civ. P. 4 notes to 1993 Amend; see also McCurdy, 157 F.3d at 195-96. SI03 also asserts that Defendants waived their objection to the lack of service by appearing at and participating in a scheduling conference. See Datskow v. Teledyne, Inc., Cont'l Prods. Div., 899 F.2d 1298, 1303 (2d Cir. 1990). SNS's Motion to Dismiss asserting the problem with service was filed prior to the scheduling conference, and the issue of service was discussed at the conference. Defendants have not waived their objection.

The Court will follow the "better practice" of requiring re-service following transfer. Bentz, 778 F.2d at 1028 n.5. Without service of process, the Court cannot obtain personal jurisdiction over Defendants. SI03's complaint was filed in the District of Idaho on January 22, 2010.*fn1 Thus, SI03 has until May 24, 2010 to serve a complaint and summons issued by this Court on Defendants. Fed. R. Civ. P. 4(m) (providing 120 days for service). As there is adequate time remaining for SI03 to effectuate service, the Court will proceed with Defendants' remaining claims as though service was complete.

II. Motion to Dismiss for Lack of Personal Jurisdiction

Defendants SNS, ISS, and Molecular all contest the Court's exercise of personal jurisdiction over them.

A. Applicable Legal Standards

In a motion to dismiss under Federal Rule of Civil Procedure 12(b)(2), SI03 bears the burden of proving that jurisdiction is appropriate.*fn2 Boschetto v. Hansing, 539 F.3d 1011, 1015 (9th Cir. 2008), cert. denied, 129 S.Ct. 1318 (2009). Where, as here, the motion is based on written materials rather than an evidentiary hearing, SI03 need only establish a prima facie showing of jurisdictional facts to withstand the motion to dismiss. Ballard v. Savage, 65 F.3d 1495, 1498 (9th Cir. 1995). The Court must take SI03's uncontroverted allegations in the complaint as true. Dole Food Co. v. Watts, 303 F.3d 1104, 1108 (9th Cir. 2002).

Where there is no applicable federal statute governing personal jurisdiction, the law of the state in which the district court sits applies. Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004). Because Idaho's long-arm statute, codified in Idaho Code § 5-514, allows a broader application of personal jurisdiction than the Due Process Clause, the Court need look only to the Due Process Clause to determine personal jurisdiction.*fn3

The exercise of personal jurisdiction over a defendant comports with federal due process only if the defendant "has certain minimum contacts with the relevant forum such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice." Yahoo! Inc. v. La Ligue Contre Le Racisme Et L'Antisemitisme, 433 F.3d 1199, 1205 (9th Cir. 2006) (en banc) (internal quotation marks omitted). Sufficient minimum contacts gives rise to general jurisdiction or specific jurisdiction. Doe v. Unocal Corp., 248 F.3d 915, 923 (9th Cir. 2001). General jurisdiction applies if the defendants' activities in the forum "are substantial, continuous and systematic," while specific jurisdiction applies if the defendants' "less substantial contacts with the forum give rise to the cause of action before the court." Id.

B. SNS's, ISS's, and Molecular's Motions to Dismiss

General jurisdiction exists when a defendant's contacts with the forum state approximate physical presence. Schwarzenegger, 374 F.3d at 801. Although Defendants have sold their products to citizens of Idaho, and have shipped their products to a warehouse in Idaho, this is insufficient to meet the high standard for general jurisdiction. See Brand v. Menlove Dodge, 796 F.2d 1070, 1073 (9th Cir. 1986).

The Ninth Circuit analyzes specific jurisdiction using a three-prong test:

(1) The non-resident defendant must purposefully direct his activities or consummate some transaction with the forum or resident thereof; or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws;

(2) the claim must be one which arises out of or relates to the defendant's forum-related activities; and

(3) the exercise of jurisdiction must comport with fair play and substantial justice, i.e. it must be reasonable.

Yahoo!, 433 F.3d at 1205-06. SI03 bears the burden of satisfying the first two prongs of the test. See Menken v. Emm, 503 F.3d 1050, 1057 (9th Cir. 2007). If SI03 succeeds in satisfying both of the first two prongs, the burden then shifts to the Defendants to "'present a compelling case' that the exercise of jurisdiction would not be reasonable." See id. (quoting Schwarzenegger, 374 F.3d at 802).

i. Purposeful Direction

The first prong involves purposeful direction or purposeful availment. Purposeful direction generally applies to tort cases. The effects test is applied by focusing on the forum where the defendants' actions were felt, whether or not the actions themselves occurred within that forum. Yahoo!, 433 F.3d at 1206. Purposeful availment generally applies to cases sounding in contract. Brayton Purcell LLP v. Recordon & Recordon, 575 F.3d 981, 985 (9th Cir. 2009). The Court is not required to consider one test to the exclusion of the other. Yahoo!, 433 F.3d at 1206; see Schwarzenegger, 374 F.3d at 803.

The effects test, derived from Calder v. Jones, 465 U.S. 783 (1984), requires that the defendant have "(1) committed an intentional act, (2) expressly aimed at the forum state, (3) causing harm that the defendant knows is likely to be suffered in the forum state." Dole Food, 303 F.3d at 1111. An intentional act refers to "an intent to perform an actual, physical act in the real world, rather than an intent to accomplish a result or consequence of that act." Schwarzenegger, 374 F.3d at 806.

The Court must consider all of the Defendants' contacts with the forum state, regardless of whether they involve wrongful activity. Yahoo!, 433 F.3d at 1207. Here, Defendants sold their products to an Idaho company and shipped those products to a warehouse in Idaho for redistribution. These are intentional acts. Posting a message on the online Forum is also an intentional act.

The next question is "whether the [defendants'] conduct was expressly aimed at the forum." Brayton Purcell, 575 F.3d at 986. Selling products to, a company with its principal place of business in Idaho, is activity expressly aimed at the forum state. Shipping those products to's warehouse in Idaho for distribution to's customers, some of whom are located in Idaho, is also activity expressly aimed at the forum state. See, e.g., CompuServe, Inc. v. Patterson, 89 F.3d 1257, 1264-65 (6th Cir. 1996) (finding express aiming from defendant's sales and advertising of his software through an Ohio-based company), overruled on other grounds by Cole v. Mileti, 133 F.3d 433, 436 (6th Cir. 1998).

The statements posted on the Forum Message Board, however, are less clear-cut. Ninth Circuit case law has addressed whether the owner and operator of a website may be hailed into court in another jurisdiction, but not whether someone who uses a website owned and operated by a third party subjects themselves to the jurisdiction where the website is hosted and operated. However, the Fifth Circuit addressed this very issue in Revell v. Lidov, 317 F.3d 467 (5th Cir. 2002). Lidov, an Assistant Professor at Harvard Medical School, posted an article on a website maintained by Columbia University School of Journalism. Id. at 469. In the article, Lidov accused the government of failing to prevent, and then covering up their knowledge of, the bombing of Pan Am Flight 103 over Lockerbie, Scotland. Id. Lidov singled out Revell for criticism. Id. At the time the article was posted online, Revell was a resident of Texas. Id.

The act of posting an article online did not create jurisdiction over Lidov in Texas. Lidov's article contained no references to Texas, it did not discuss Revell's activities in Texas, and it was "not directed at Texas readers as distinguished from readers in other states." Id. at 473. While any harm from the article would hit hardest in Texas where Revell resided, a more direct targeting was required. Id. at 476.

Similarly, the Ninth Circuit has consistently held that passive website activity must be accompanied by "something more" in order to confer jurisdiction in a particular forum. See Pebble Beach Co. v. Caddy, 453 F.3d 1151, 1157-58 (9th Cir. 2006); Panavision Int'l, L.P. v. Toeppen, 141 F.3d 1316, 1322 (9th Cir. 1998), modified by, Yahoo! Inc., 433 F.3d 1199; Cybersell, Inc. v. Cybersell, Inc., 130 F.3d 414, 418-19 (9th Cir. 1997). That "something more" may be use of the website as a scheme to extort money from the plaintiff in order to release the domain name, or purchasing print and radio advertising in the forum state. Panavision, 141 F.3d at 1322; see also Rio Properties, Inc. v. Rio Int'l Interlink, 284 F.3d 1007, 1020-21 (9th Cir. 2002).

As in Revell, the purportedly defamatory statements in this case failed to mention Idaho. The statements were not based on activities in Idaho, and they were not directed at Idaho readers as distinguished from readers in other states. However, there is "something more" that expressly aims the statements at Idaho -- each of the defendants and SI03 sell and ship their products to the Idaho-based owner of the website on which the statements were posted. The website is the main retail outlet for, and SI03 and the other defendants are competitors for business through In this sense, Defendants expressly aimed the online statements at Idaho.

The final question is whether the Defendants caused harm that they knew was likely to be suffered in the forum state. "[T]his element does not require that the 'brunt' of the harm be suffered in the forum." Brayton Purcell, 575 F.3d at 988. "This element is satisfied when defendant's intentional act has 'foreseeable effects' in the forum." Id. In this case the brunt of the harm likely occurred in Missouri, where SI03 has its principle place of business and Cornelius resides. See Allcare Dental Mgmt., LLC v. Zrinyi, No. CV-08-407-S-BLW, at *2 (D. Idaho Feb. 4, 2009). Harm was foreseeable in Idaho as well, though. SI03, like Defendants, sells its products to for retail sale, and ships products to the warehouse ...

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