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Purple Innovations, LLC v. Honest Reviews, LLC

United States District Court, D. Utah

July 25, 2017

PURPLE INNOVATIONS, LLC, a Delaware limited liability company, Plaintiff,
v.
HONEST REVIEWS, LLC, a Florida Corporation, RYAN MONAHAN, an individual, and GHOSTBED, INC., a Delaware corporation, Defendants.

          MEMORANDUM DECISION AND ORDER

          Dee Benson United States District Judge

         Before the court are two Motions to Dismiss, one filed by Defendants Honest Reviews, LLC (“HMR”) and Ryan Monahan (“Monahan”) (collectively “HMR Defendants”) (Dkt. No. 64), and the other filed by Defendant GhostBed, Inc. (“GhostBed”). (Dkt. No. 67.) The court held a hearing on the Motions on July 7, 2017. Plaintiff was represented by James E. Magleby, Christine T. Greenwood, and Adam Alba. The HMR Defendants were represented by Marc J. Randazza, D. Gill Sperlein, and W. Andrew McCullough. GhostBed was represented by Eleanor M. Yost and Kathryn Smith. At the hearing, the court heard argument with respect to the above motions.[1] At the conclusion of the hearing, the court took the motions under advisement. Now being fully informed, the court issues the following Memorandum Decision and Order.

         BACKGROUND FACTS

         Plaintiff is a manufacturer and online distributor of mattresses and related products. (Compl.[2] at ¶¶ 14-27.) Plaintiff is a Delaware limited liability company with its principal place of business in Utah County, Utah. (Id. at ¶ 6.) Plaintiff manufactures its products in Utah but does not maintain any brick and mortar stores for the sale of its products. (Id. at ¶ 24.) Instead, Plaintiff sells its bedding products solely through an e-commerce platform. (Id.)

         Plaintiff alleges that, beginning in January 2017, the HMR Defendants began a smear campaign against Plaintiff on their purportedly independent mattress review website, honestmattressreviews.com. (Id. at ¶ 39.) Plaintiff alleges that the HMR Defendants made numerous false and misleading statements regarding Plaintiff's products, including posts attacking the safety of Plaintiff's products without factual support. (Id. at ¶¶ 39-117.) In its Complaint, Plaintiff identifies several specific posts that link Plaintiff's products to cancer-causing agents, provide unsubstantiated false information about the make-up of Plaintiff's products, and post inflammatory images with respect to Plaintiff's products. (Id. at ¶¶ 67, 68, 77, 90, 92.)

         Plaintiff identifies other posts in which the HMR Defendants state that they made “repeated inquiries to [Plaintiff] for information” including a post that states that the HMR Defendants attempted to contact Plaintiff for “159 days”, and posts specifically identifying two separate phone calls to Plaintiff in Utah. (Id. at ¶¶ 54, 60, 82, 94, 97.) The website also includes several images of Plaintiff's products, some of which have an unidentified source, some which appear to be taken from Plaintiff's website, and others which are labeled as being drawn from a Utah news source, KUTV 2 News. (Id. at ¶¶ 76, 77, 90, 102, 105, 109.)

         Plaintiff further alleges that the HMR Defendants, while claiming to provide independent consumer reviews, are actually closely associated with Plaintiff's competitor, GhostBed. (Id. at ¶ 118.) In support of its allegations, Plaintiff provides facts showing that Monahan was an author on the GhostBed's website on several occasions (id. at ¶¶123-129), that Monahan's Twitter and LinkedIn profiles identified him as the Chief Brand Officer of GhostBed until approximately October 2016 (id.), that Monahan identified himself as Chief Brand Officer of GhostBed when he spoke at a Content and Commerce Summit in September 2016 (id.at ¶130), that Monahan used the email address “ryan@GhostBed.com” and was responsible for handling GhostBed inquiries to that email (id. at ¶¶132-133), that the HMR Defendants, as well as Social Media Sharks-another company owned by Monahan-are jointly represented in other litigation by the same law firm representing GhostBed in this litigation (id. at ¶134), and that GhostBed has admitted to continuing to maintain a connection with Monahan through Social Media Sharks and another entity, Achieve Agency. (Id. at ¶¶ 135-136.) The honestmattressreviews.com website makes several affirmative representations of independence from all mattress manufacturers, including that the website does not receive “affiliate commissions” or seek “affiliate relationships” with mattress companies, that the website is not interested in “influencing a purchase decision to promote a company”, and that the website is “free from corporate or conglomerates.” (Id. at ¶¶ 148-155.)

         Plaintiff further alleges that GhostBed representatives have independently posted false or misleading statements about Plaintiff's products. Plaintiff alleges that the daughter of GhostBed's CEO, an employee of GhostBed, posted a review under a false name, stating that Plaintiff's mattress had a “whitish powder” all over it and expressing concern that the powder would cause cancer. (Id. at ¶ 137.)

         Plaintiff provided the court with additional facts supporting its allegations of a close association between GhostBed and the HMR Defendants and GhostBed's independent defamatory comments in its Opposition to the Motions to Dismiss, including various emails between Monahan and GhostBed representatives and various posts or comments made by GhostBed employees. (Dkt. No. 94.) The court does not rely on the additional facts presented in Plaintiff's Opposition in determining the issue of jurisdiction here, but rather relies on Plaintiff's Complaint with its attachments and the Declarations submitted by the parties. (Dkt. Nos. 30, 31, 137.)

         In support of their motions, Defendants reference two Declarations previously submitted to the court[3], the Declaration of Ryan Monahan (Dkt. No. 30) and the Declaration of Marc Werner (Dkt. No. 31). In his Declaration, Monahan states that he is the sole member and president of HMR, which operates honestmattressreviews.com, and the founder, co-owner, and CEO of Social Media Sharks, a Florida marketing company. Monahan maintains a current business relationship with GhostBed through Achieve Agency and Social Media Sharks, but those services do not involve HMR. (Id. at ¶ 6.) Monahan has identified himself as Chief Brand Officer of GhostBed on LinkedIn, Twitter, and a conference in September 2016, but was later asked by GhostBed to stop using the title. (Id. at ¶¶ 7-8.) Monahan has never had an office or phone extension with GhostBed. (Id. at ¶ 9.) Monahan further states that HMR has a single source of income-Google Adsense-and that HMR has never received any consideration from GhostBed, nor has any company, person, or product had any influence over reviews on HMR. (Id. at ¶¶ 11-13.)

         In the Declaration of Marc Werner, CEO of GhostBed, Mr. Werner disavows any relationship with the HMR Defendants, stating that “GhostBed does not have any affiliation whatsoever with co-defendants Honest Reviews LLC or Mr. Monahan.” (Dkt. No. 31 at ¶ 6.) GhostBed does not own, operate, direct, control or contribute to honestmattressreviews.com. (Id. at ¶¶ 4-5.) GhostBed “did not, and does not, remunerate Mr. Monahan or Honest Reviews LLC in any way for anything they do in connection with the honestmattressreviews.com website.” (Id. at ¶ 7.) “Mr. Monahan is not, and has never been, an employee, director, or officer of GhostBed.” (Id. at ¶ 11.) When Monahan identified himself on Twitter and LinkedIn as “Chief Brand Officer” of GhostBed, he did so “mistakenly.” (Id. at ¶ 14.) Monahan is “not a member of GhostBed's marketing department or any other GhostBed department” and does not have an office, phone extension, or email address with GhostBed. (Id. at ¶¶ 15-19.) Monahan has “no monetary interest in the success of GhostBed” and “receives no compensation either directly or indirectly from GhostBed for the content he publishes on honestmattressreviews.com.” (Id. at ¶ 20.) However, Werner acknowledges a connection with Monahan through Achieve Agency and Social Media Sharks. (Id. at ¶ 12.)

         In a supplemental memorandum, Plaintiff submitted a Declaration of GhostBed's former Director of Marketing, Calisha Anderson, which disputes Werner's Declaration and provides additional information indicating a close relationship between Monahan and Ghostbed. (Dkt. No. 137.) Anderson was employed as Director of Marketing of GhostBed from October 2016 until June 7, 2017. (Dkt. No. 137-1 at ¶ 4.) She had “very little actual authority for GhostBed's marketing” and Monahan “was the real ‘Director of Marketing.'” (Id. at ¶¶ 5, 8.) Monahan “controlled every aspect of the GhostBed website from before the time [Anderson] was hired until the day that [she] left GhostBed.” (Id. at ¶ 11.) Monahan “was on the agenda” for every weekly staff meeting Anderson attended. (Id. at ¶¶ 14, 15.) Monahan attended GhostBed staff meetings telephonically and “led the discussion” regarding marketing. (Id. at ¶ 16.) Monahan “frequently used the email address ryan@ghostbed.com to communicate with others, including in the system used to send out email blasts.” (Id. at ¶ 43.) Monahan “was the Chief Brand Officer of GhostBed, and he held himself out as such in his communications with others….” (Id. at ¶ 41.) During Anderson's employment, Monahan spoke on the telephone regularly with Werner, visited GhostBed's offices from time to time, and went to Werner's house for dinner. (Id. at ¶¶ 17, 21.)

         Shortly after being hired, Anderson was informed by CEO Werner's daughter, Ashley Werner, “that Ryan was the real ‘Director of Marketing'” and that “Monahan's marketing decisions trumped [Anderson's] marketing decisions.” (Id. at ¶ 8.) Monahan “could and did and several occasions veto [Anderson's] decisions.” (Id.) Based on Anderson's observations and experience, she “suspect[s] that [Monahan] is being paid under the table by GhostBed.” (Id. at ¶ 22.)

         Anderson's Declaration also provided support for the proposition that GhostBed independently made statements substantially similar to those alleged in the Complaint. She stated that CEO Werner “would tell [Anderson] and other GhostBed employees about a powder on [Plaintiffs] mattress”, “saying that a competitor was using talcum powder and talking about lawsuits against Johnson & Johnson because talcum powder caused cancer.” (Id. at ¶ 24.) Anderson further stated that she believed that Werner “wanted consumers to know about this.” (Id.)

         GhostBed is a Delaware corporation with its principal place of business in Plantation, Florida. (Compl. at ¶ 9.) Similarly, HMR is a Florida limited liability company with its principal place of business in Plantation, Florida. (Id. at ¶ 7.) Monahan is an individual domiciled in Florida. (Id. at ¶ 8.) Monahan is the sole member and president of HMR, which operates honestmattressreviews.com. (Dkt. No. 30 at ¶ 2.) None of the defendants appears to have a residence or place of business in the state of Utah. (Id.at ¶¶ 4-5; Compl. at ¶ 9.)

         DISCUSSION

         When, as in this case, a court considers a motion to dismiss “on the basis of the complaint and affidavits, ” a plaintiff must “only make a prima facie showing of personal jurisdiction.” Dudnikov v. Chalk & Vermilion Fine Arts, Inc., 514 F.3d 1063, 1070 (10th Cir. 2008). The plaintiff may make this prima facie showing by demonstrating by affidavit or other written materials, facts that if true would support jurisdiction over the defendant. OMI Holdings, Inc. v. Royal Ins. Co., 149 F.3d 1086, 1091 (10th Cir. 1998). “[A]ny factual disputes in the parties' affidavits must be resolved in plaintiffs' favor.” Dudnikov, 514 F.3d at 1070. In order to defeat the plaintiff's prima facie showing of personal jurisdiction, the moving defendant must present a compelling case demonstrating “that the presence of some other considerations would render jurisdiction unreasonable.” OMI Holdings, 149 F.3d at 1091 (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 477 (1985)).

         To obtain personal jurisdiction over a nonresident defendant in a diversity action, a plaintiff must show (1) that jurisdiction is legitimate under the laws of the forum state, and (2) that the exercise of jurisdiction does not offend the due process clause of the Fourteenth Amendment. Soma Medical Int'l v. Standard Chartered Bank, 196 F.3d 1292, 1295 (10th Cir. 1999).

         I. Jurisdiction Under State Law

         Utah law expressly states that the Utah state long arm statute must be interpreted broadly “so as to assert jurisdiction over nonresident defendants to the fullest extent permitted by the due process clause of the Fourteenth Amendment to the United States Constitution.” Utah Code § 78B-3-201; see also Starways, Inc. v. Curry, 980 F.2d 204, 206 (Utah 1999) (“We have held that the Utah long-arm statute ‘must be extended to the fullest extent allowed by due process of law.”) (quoting Synergetics v. Marathon Ranching Co., 701 F.2d 1106, 1110 (Utah 1985)). Because the Utah long-arm statute confers the maximum jurisdiction permissible consistent with the Due Process Clause, the court proceeds to determine whether the exercise of personal jurisdiction over Defendants meets federal due process standards.

         II. Due Process Analysis

         “The Due Process Clause protects an individual's liberty interest in not being subject to the binding judgments of a forum with which he has established no meaningful ‘contacts, ties, or relations.'” Burger King, 471 U.S. at 471-72 (quoting International Shoe Co. v. Washington, 326 U.S. 310, 319 (1945)). Accordingly, a “court may exercise personal jurisdiction over a nonresident defendant only so long as there exist ‘minimum contacts' between the defendant and the forum state.” World Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 291 (1980) (quoting International Shoe, 326 U.S. at 316). The minimum contacts standard can be met in two ways. First, a court may assert specific personal jurisdiction over a nonresident defendant where “the defendant has ‘purposefully directed' his activities at residents of the forum, and the litigation results from alleged injuries that arise out of or are related to those activities.” Burger King, 471 U.S. at 472. Where no nexus exists between the forum-related activity and the injury sustained, the court may nevertheless exercise general jurisdiction over the defendant when the defendant's contacts are “so pervasive that personal jurisdiction is conferred by the ‘continuous and systematic' nature of the defendant's in-state activities.” OMI Holdings, 149 F.3d at 1090-91. The court does not find that any of the Defendants have continuous and systematic contacts with the State of Utah such that they would be subjected to general personal jurisdiction in Utah. As such, the court proceeds with the specific personal jurisdiction analysis as to each defendant.

         A. ...


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