SCVNGR, Inc. v. Punchh, Inc.: The SJC Instructs Trial Courts and Litigants on Analyzing Challenges to Personal JurisdictionPosted: August 15, 2018
by Evan Fray-Witzer
In SCVNGR, Inc. v. Punchh, Inc., 478 Mass. 324 (2017), the Supreme Judicial Court reversed a Superior Court Business Litigation Session decision that had dismissed the plaintiff’s complaint for lack of personal jurisdiction. Notably, the SJC’s opinion prohibits the trial courts, when deciding a challenge to personal jurisdiction, from engaging in the frequently employed practice of skipping the analysis under the long-arm statute and jumping directly to the analysis under the Due Process Clause of the U.S. Constitution. In reaching this conclusion, the SJC “clarif[ied]” that “the long-arm statute’s reach is not coextensive with what due process allows.” Id. at 330 n.9.
SCVNGR, Inc., a Massachusetts-based company doing business as LevelUp, sued Punchh, Inc., a California-based competitor, for defamation. Punchh moved to dismiss for lack of personal jurisdiction. Id. at 325. After allowing some limited jurisdictional discovery, Judge Kaplan of the Business Litigation Section allowed Punchh’s motion to dismiss, finding that Punchh lacked the minimum contacts with Massachusetts necessary for an exercise of personal jurisdiction to comport with the Due Process requirements of the U. S. Constitution. Id. Although Judge Kaplan recognized that “typically a Superior Court judge presented with a Rule 12(b)(2) argument begins with an analysis of whether the requirements of the long-arm statute have been met,” he nevertheless proceeded directly to the federal Due Process considerations, noting that this was where “both parties ha[d] focused their arguments.” Id.
LevelUp appealed the dismissal to the Appeals Court. The SJC, of its own accord, took direct appellate review. Id.
“Prior to exercising personal jurisdiction over a nonresident defendant, a judge must determine that doing so comports with both the forum’s long-arm statute and the requirements of the United States Constitution.” Id. at 325 (citing World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 290 (1980)). Massachusetts’s long-arm statute, G.L. c. 223A, § 3, provides eight enumerated categories of actions which can give rise to personal jurisdiction over a foreign defendant. Two of those categories address claims arising out of domestic relationships (marriage, divorce, child custody, and the like); one from the ownership of real estate within Massachusetts; and one from offering insurance within the Commonwealth. The remaining four categories address claims that arise out of a defendant’s: (a) transacting business within Massachusetts; (b) contracting for goods or services within Massachusetts; (c) committing a tort within Massachusetts; and (d) committing a tort outside of Massachusetts that causes injury within Massachusetts if the Defendant also does or solicits business within Massachusetts or derives substantial revenues from goods or services provided in Massachusetts.
Unlike a number of other states, Massachusetts’s long-arm statute does not explicitly extend personal jurisdiction to the limits of the U. S. Constitution. Nevertheless, two seminal SJC cases had seemed to interpret the statute to have the same broad scope. In “Automatic” Sprinkler Corp. v. Seneca Foods Corp., 361 Mass. 441, 443 (1972), the SJC held: “We see the function of the long arm statute as an assertion of jurisdiction over the person to the limits allowed by the Constitution of the United States.” Likewise, in Good Hope Indus., Inc. v. Ryder Scott Co., 378 Mass. 1, 5-6 (1979), the SJC held: “Since we have stated that our long arm statute, G. L. c. 223A, functions as ‘an assertion of jurisdiction over the person to the limits allowed by the Constitution of the United States,’ …the two questions tend to converge” (quoting “Automatic” Sprinkler). Good Hope also, however, contained the seeds of SCVNGR’s “clarif[ication],” stating that the long-arm statute “asserts jurisdiction over the person to the constitutional limit only when some basis for jurisdiction enumerated in the statute has been established.” Good Hope, 378 Mass. at 1 (emphasis added).
Prior to SCVNGR, state and federal cases applying Massachusetts law frequently cited “Automatic” Sprinkler and/or Good Hope in support of the proposition that Massachusetts’s long-arm statute extended to the outer reaches of the Due Process Clause and that, as a result, the two-step inquiry could be addressed in a single inquiry. See, e.g., OpenRisk, LLC v. Roston, 90 Mass. App. Ct. 1107 (2016) (Rule 1:28) (“The Massachusetts long-arm statute, G. L. c. 223A, § 3, however, allows for an assertion of jurisdiction over the person to the limits allowed by the Constitution of the United States. …It is appropriate, therefore, for the court to sidestep the statutory inquiry and proceed directly to the constitutional analysis”) (citations omitted); FTI, LLC v. Duffy, 2017 Mass. Super. LEXIS 93, at *8 (Suffolk Super. Ct. 2017); Let’s Adopt! Glob., Inc. v. Macey, 32 Mass. L. Rep. 573 (Worcester Super. Ct. 2015); Daynard v. Ness, Motley, Loadholt, Richardson & Poole, P.A., 290 F.3d 42, 52 (1st Cir. 2002).
In light of this precedent, the SCVNGR parties’ decision to focus exclusively on the question of whether the Court could exercise jurisdiction consistent with Due Process made perfect sense. In baseball terms (this is, after all, summer in New England): since the runner cannot advance to third without touching both first and second bases, if the runner missed second, the question of whether he touched first is moot. Indeed, in at least two cases pre-dating SCVNGR the First Circuit noted that even if Massachusetts’ long-arm statute might not extend to the limits of Due Process, examining the long-arm statute was not necessary if the claims clearly failed to meet the requirements of Due Process. See A Corp. v. All Am. Plumbing, Inc., 812 F.3d 54, 58-59 (1st Cir. 2016); Copia Communs., LLC v. AMResorts, L.P., 812 F.3d 1, 3-4 (1st Cir. 2016).
In SCVNGR, though, the SJC was having none of it. It first clarified that “Automatic” Sprinkler’s sweeping language was more limited than might first appear:
To the extent that “Automatic” Sprinkler …identifies “the function of the long arm statute as an assertion of jurisdiction over the person to the limits allowed by the Constitution of the United States,” we take this opportunity to clarify that, in accordance with Good Hope. . . the long-arm statute’s reach is not coextensive with what due process allows.
SCVNGR, 478 Mass. at 330 n.9.
The SJC then stated that the order in which a lower court examines the two prongs of personal jurisdiction does indeed matter:
Our jurisprudence since Good Hope also makes clear that courts should consider the long-arm statute first, before approaching the constitutional question. …In this regard, it is canonical that courts should, where possible, avoid unnecessary constitutional decisions. … Determining first whether the long-arm statute’s requirements are satisfied is consonant with the “duty to avoid unnecessary decisions of serious constitutional issues. … [W]e cannot let the actions of private litigants force us to decide unnecessarily a serious question of constitutional law.”
Id. at 330 (citations omitted).
As a result, the SJC remanded the case to the Superior Court for a determination, first, as to whether the long-arm statute’s requirements were met and only then for a determination as to whether an exercise of jurisdiction comports with the requirements of Due Process. In doing so, the SJC noted that the subsequent re-examination of the constitutional due process question would likely take place “on a presumably fuller record,” apparently assuming that the trial court would allow the parties some additional jurisdictional discovery before ruling on the remanded motion (id. at 330).
Another recent SJC opinion drives home the point that neither the parties nor the court can leapfrog over the long-arm statute and proceed directly to the constitutional question. In Exxon Mobil Corp. v. Attorney General, 479 Mass. 312, 317 n.3 (2018), citing SCVNGR, the SJC noted that although the parties’ argument on the jurisdictional issues focused exclusively on the due process question, the Court would first analyze them under the long-arm statute, which it proceeded to do.
Two practical takeaways are clear:
- Notwithstanding any suggestion to the contrary in prior precedent, “the long-arm statute’s reach is not coextensive with what due process allows.”
- Neither practitioners nor the Court should address whether an assertion of personal jurisdiction comports with the requirements of the Due Process Clause without first addressing whether the plaintiff’s claims assert a cause of action that brings the case within the parameters of the Massachusetts long-arm statute. In short, although the plaintiff may still get tagged-out for failing to touch second base, we will not know until a call is made at first.
Evan Fray-Witzer is a founding partner of Ciampa Fray-Witzer. He maintains an active employment litigation, counseling, and defense practice; a sophisticated litigation and counseling practice, representing businesses in a wide range of commercial disputes; and a thriving appellate practice in both the state and Federal Courts.
Voice of the Judiciary
*The following judges have served in the BLS since its inception: Allan van Gestel; Margot Botsford; Ralph Gants; Nonnie Burnes; Susan Garsh; Margaret Hinkle; Judith Fabricant; Stephen Neel; Christine Roach; Janet Sanders; Peter Lauriat; Thomas Billings; and Mitchell Kaplan
The Business Litigation Session of the Superior Court received its charter in 1999, and although Judge Allen van Gestel did not preside over the first BLS hearing until 2000, those of us currently charged with the care and maintenance of the BLS believe it to be celebrating its fifteenth birthday. On November 18, 2014, the New England Law Foundation and Boston Bar Association were kind enough to give the BLS a birthday party at the Boston College Club. The celebration included a panel discussion moderated by Paul Dacier, executive vice president and general counsel of EMC Corporation and past president of the BBA. The panelists including six sitting or retired judges, all of whom served at one point as the administrative judge of the BLS and whose service on the BLS collectively spanned the fifteen years that it has been in existence: Judges Allen van Gestel, Margaret Hinkle, Judith Fabricant, Janet Sanders, and now Chief Justice of the Supreme Judicial Court, Ralph Gants. Judge van Gestel was warmly recognized as the “father” of the BLS. Chief Justice Rouse was applauded for her steadfast support for the BLS during her entire tenure as Chief of the Superior Court. The room was full of well-wishers, and, I think it fair to say, a good time was had by all.
A fifteenth birthday is also a good occasion to reflect on how well the BLS has met the needs for which it was created. I am able to consider this question from two different courtroom vantage points: the well and the bench. I was appointed to the Superior Court in 2009; prior to that I represented clients in many BLS cases during the first nine years of its life. For the past two years I have presided in BLS-1, sharing the session with Judge Tom Billings. I should point out that these observations are my reflections and not those of any other BLS judges or an institutional report.
In the late 1990’s, I was among the lawyers advocating for the creation of a dedicated session for business cases. The Delaware Chancery Court had, of course, long since become the court of record for interpreting business law and defining the relationships between corporations and their boards and shareholders. Other states were then beginning to establish specialized courts or sessions for business cases. At that time, whether it was fact or self-interested perception, some attorneys who handled business cases believed that those cases did not receive the attention that they required in the very busy time standards sessions. There was also a concern that attorneys with options to file their cases in other states, federal court or private arbitrations were going to other forums, with the result that Massachusetts appellate courts did not have the opportunity to write on many of the developing issues in business law. Other attorneys with different practices rightfully argued that many other kinds of cases, such as medical malpractice, products liability and employment disputes, presented equally complex issues. Whatever the merits of those differing positions, the BLS was established in 1999 and heard its first motions in 2000, and a second BLS session was added in January 2002.
Is the BLS achieving its mission? Given my present assignment as a BLS judge, it is apparent that I am no longer an unbiased observer, but I believe that it is. We can start with an objective measure: as of July 1, 2014, the BLS had disposed of 3,698 cases since inception. A review of the currently pending cases is illustrative of the types of cases the BLS handles, which are very much broader than what I might think of as classic “business” disputes. As could be expected, there are a number of cases involving corporate governance, both securities class actions as well as disputes between stakeholders in closely held companies and partnerships; there are also several professional malpractice claims including legal, accounting and engineering services; there are a substantial number of consumer class actions involving products and services; there are a number of trade secret cases, often presented in the context of covenants not to compete, and other intellectual property cases arising in the context of breach of contract claims; there are a number of insurance coverage disputes, and, of course, a broad variety of commercial contract disputes. As always, there are cases arising out of some government action or program. At present, the licensing of medical marijuana dispensaries has generated many BLS cases, and the Attorney General’s proposed settlement with Partners is receiving much media attention.
Regardless of the subject matter of any particular case, I think that the BLS is at its best when it assists the parties in managing the complex case with multiple moving parts and often multiple parties. Blessed with a smaller case load than the time standards sessions, every case begins with a Rule 16 conference scheduled as soon as issues are joined. All BLS judges encourage the parties to consider participating in what we used to call the Pilot Project, but now refer to as the Discovery Project, in which the parties expressly agree on the scope and methods of discovery. However, we work with the attorneys in every case to tailor a pretrial schedule and discovery plan to the needs of the case. We will want to know if there will be contentious issues because of the volume of electronically stored data. Does it make sense to sequence discovery? Does it make sense to tee-up resolution of a particular claim or defense that might dispose of the case, or perhaps facilitate settlement, before discovery proceeds on other issues? Because we have the time to work closely with counsel and to understand the issues presented by a case, we are able to resolve many discovery disputes expeditiously and sometimes without the need for formal motion practice.
I attended a conference of business law judges from across the country last year. There was a panel addressing issues arising out of electronic discovery. (I think every conference has a panel like that now.) The lawyers on the panel both emphasized that in their experience the biggest factor in the expeditious resolution of a data driven litigation is the trial judge’s willingness to be involved in discussions concerning the scope and timing of electronic discovery from the outset of the case. Beginning well before my service on the BLS, the BLS judges have been ahead of the curve on this aspect of case management. At the fifteenth anniversary event, several of the judges on the panel described mammoth cases over which they presided some years ago in which they conducted multiple hearings and worked with counsel to adopt discovery plans in which the process was broken down to manageable bites (or bytes).
We do not have as many jury trials in the BLS as are tried in the time standards sessions. From my perspective as a BLS judge that has benefits and detriments. I like jury trials; however, having unscheduled time many mornings helps in preparing adequately for afternoon motions and delivering written opinions in a timely manner. All of the BLS judges try to provide written, and hopefully reasoned, opinions explaining our rulings. We send them all to the Social Law Library so that attorneys appearing in the BLS can have a sense of where a particular judge stands on certain kinds of issues and cases.
When the cases do try, they will typically take three to four weeks. In a time standards session it is difficult to devote a month to a single case, but the BLS does that regularly; and, as was true when I was trying BLS cases, when a case is scheduled for trial in the BLS, even for a lengthy trial, it is a hard date. You can use it to reserve hotel rooms for your out-of-state witnesses. And, we will give you a timely trial, regardless of its anticipated length.
Another benefit of having unscheduled time is the ability to fill it with matters needing immediate attention. A great many of the cases accepted in the BLS include requests for preliminary injunctive relief. Indeed, for a lot of those cases the definitive ruling will be the grant or denial of a preliminary injunction. I am coming to believe that in many of those cases at least a brief evidentiary hearing promptly scheduled can help me better understand the case and be more confident in my decision. I am increasingly offering the parties the opportunity to present or cross-examine key witnesses, particularly experts, at preliminary hearings.
In the years that I have been a judge, I have learned to be judicious in telling jokes or war stories from the bench because the lawyers always laugh, in the first instance, and look interested, in the second, regardless of whether the joke is funny or the story boring. Nonetheless, I conclude with a couple stories from my years of practice in the BLS. My hope is that I, and the other current custodians of the BLS sessions, are doing the job as well as the judges who presided in the early years of the BLS: the giants on whose shoulders we stand.
When I was in practice, I remember on a number of occasions explaining to clients with general counsel offices in other states that we should file our case in the BLS, even though we had diversity jurisdiction and could file in federal court. There were only two BLS sessions, the judges were both really smart and hardworking, it didn’t matter who we drew, and if we had to try the case they would give us a prompt trial date. I no longer have clients (which I must admit is a nice part of my job), so I don’t have that conversation any more, but I hope there are lawyers who practice in the BLS still having it with their clients.
Sometimes, the BLS works too efficiently. At our fifteen year celebration, the panelists were seated in front of a large window that looked out on the roof-tops of International Place. As I listened to Judge van Gestel speak, I was reminded of a jury waived case I tried before him a decade or so ago involving that building. I represented one of the two partners in the partnership that owned the building. They had a dispute about their respective rights under the partnership agreement and that led to a trial that took a week. A few days after it ended, I left for a short vacation. It never occurred to me that Judge van Gestel would render a decision in less than a week, but he did, many pages, and my side didn’t do well. While the young lawyers who had helped me try the case were debating whether to call me on vacation with the unhappy news, my client’s general counsel, who had already heard about the decision from the gloating, victorious partner, called me. He was not happy about the decision, but more than unhappy that he hadn’t first heard about it from me.
I try hard to work quickly and never keep matters under advisement for lengthy periods, but I can’t say that I am as efficient as Judge van Gestel was—maybe sometimes that is a good thing. In any event, I trust that the bar and the business community believe that the BLS session is continuing to meet the important needs for which it was formed fifteen years ago.
Mitchell Kaplan is a justice of the Superior Court and currently sits on the Business Litigation Session of the court. He was previously a partner at Choate, Hall, & Stewart and served as a law clerk to Hon. Joseph L. Tauro, USDC.