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Northstar Alarm Services, LLC v. Alder Home Protection

United States District Court, D. Utah

June 24, 2019

NORTHSTAR ALARM SERVICES, LLC, Plaintiff,
v.
ALDER HOME PROTECTION, d/b/a ALDER HOLDINGS, LLC, Defendant.

          MEMORANDUM DECISION AND ORDER DENYING MX SECURITY'S MOTION TO DISMISS

          David Nuffer, United States District Judge

         Counterclaim Defendant MX Security LLC (“MX”) filed a motion (“Motion”)[1] to dismiss the amended counterclaim (“Counterclaim”)[2] of Defendant Alder Home Protection (“Alder”) for lack of standing, lack of personal jurisdiction, improper venue, and failure to state a claim upon which relief can be granted. For the reasons set forth below, the Motion is DENIED.

         TABLE OF CONTENTS

         Background ...................................................................................................................................... 2

         Discussion ........................................................................................................................................ 4

         Alder has made a prima facie showing of personal jurisdiction over MX. . ........................ 4

         Alder has standing to bring a claim under the Lanham Act ................................................. 8

         Utah is not an improper venue for this action. . .................................................................... 9

         Alder has adequately stated claims for relief against MX. . ............................................... 10

         Alder has stated plausible claims for tortious interference. . .................................. 10

         Alder has stated a plausible claim for defamation. . ............................................... 10

         Alder has stated a plausible claim for unfair competition. . ................................... 11

         Alder has stated a plausible claim for civil conspira c y. . ........................................ 11

         Order .............................................................................................................................................. 11

         BACKGROUND

         When ruling on a motion to dismiss for lack of standing, [3] for lack of personal jurisdiction, [4] for improper venue, [5] or for failure to state a claim upon which relief can be granted, [6] courts generally must accept as true all material allegations of the complaint and construe them in the plaintiff's f av o r. This is especially true when, as here, an evidentiary hearing was not held.[7] Based on the pleadings, declarations, and other written materials on file, the relevant facts for purposes of this Motion are as follows.

         Alder is a Utah residential security and home automation company with thousands of customers throughout the United States.[8] Its headquarters are in Utah.[9] Plaintiff NorthStar Alarm Services LLC (“NorthStar”)-also a Utah-formed and -based entity-is a direct competitor of Alder.[10] MX, a corporation formed and headquartered in South Carolina, [11] is an agent of NorthStar and subject to NorthStar's control from Utah.[12] MX holds itself out to the public as being NorthStar.[13] Although MX does not sell NorthStar's products to customers in Utah, its sales representatives occasionally travel to Utah to receive information, training, and recognition from NorthStar regarding the sale of NorthStar's products and services.[14] MX's contracts with NorthStar are expressly governed by Utah law, [15] and disputes between the two must be litigated in Utah.[16]

         As the counterclaim alleges, NorthStar and MX have knowingly engaged in an intentional and targeted campaign to damage Alder's reputation, goodwill, and business relationships by, among other things, disseminating materially false, disparaging, and damaging information about Alder in connection with the commercial advertisement and promotion of NorthStar's products and services.[17] For example, NorthStar and MX have affirmatively and dishonestly solicited the cancellation and breach of Alders' customers' contracts;[18] intentionally lied and caused confusion about their relationship to and association with Alder and Alder's products and services;[19] falsely stated that Alder had gone out of business or was going out of business;[20] wrongfully accused Alder of being an unlawful “scam company”;[21] placed deceptive telephone calls to Alder in Utah;[22] and made other misrepresentations regarding the nature, availability, safety, efficacy, quality, and status of Alder's products and services.[23] These false and misleading representations have caused, and continue to cause, Alder to lose many customers and suffer damages.[24] Although MX's actions and representations concerning Alder occurred outside of Utah, their aim was to harm Alder in Utah.[25] And, in fact, almost all of the resulting damages to Alder have been suffered in Utah.[26]

         Alder is suing NorthStar and MX for (1) tortious interference with contractual relations, (2) tortious interference with economic relations, (3) unfair competition under the Lanham Act, [27](4) defamation, (5) unfair competition under Utah law, and (6) civil conspiracy.

         DISCUSSION

         Alder has made a prima facie showing of personal jurisdiction over MX.

         MX denies that there is personal jurisdiction over it in Utah with respect to Alder's claims.[28] It is Alder's burden, as the claimant against MX, to establish personal jurisdiction over MX.[29] To do so at this stage, Alder only needs to make a prima facie showing of personal jurisdiction.[30] Alder “may make this prima facie showing by demonstrating, via affidavit or other written materials, facts that if true would support jurisdiction over” MX.[31] That is, Alder must demonstrate that jurisdiction is authorized under Utah's long-arm statute and that the exercise of jurisdiction will not offend the due process clause of the Fourteenth Amendment.[32] However, given that Utah's long-arm statute authorizes “jurisdiction over nonresident defendants to the fullest extent permitted by the due process clause of the Fourteenth Amendment, ”[33] there is no need to “conduct a statutory analysis apart from the due process analysis.”[34]

         “[T]o exercise [personal] jurisdiction in harmony with due process, defendants must have ‘minimum contacts' with the forum state, such that having to defend a lawsuit there would not ‘offend traditional notions of fair play and substantial justice.'”[35] There are two types of personal jurisdiction: general and specific. Because Alder does not contend that general jurisdiction exists over MX in Utah, the adjudication of Alder's claims against MX in this forum is contingent on the existence of specific jurisdiction.

         “Specific jurisdiction . . . depends on an affiliation between the forum and the underlying controversy, principally, activity or an occurrence that takes place in the forum State and is therefore subject to the State's regulation.”[36] “The inquiry whether a forum State may assert specific jurisdiction over a nonresident defendant focuses on the relationship among the defendant, the forum, and the litigation.”[37] “In the specific-jurisdiction context, the minimum-contacts standard requires that a court assert such jurisdiction if the defendant has purposefully directed his activities at residents of the forum, and the litigation results from alleged injuries that arise out of or relate to those activities.”[38] “Where a defendant's intentionally tortious actions are aimed at the forum state and most of the harm is felt in the forum state, minimum contacts are established.”[39]

         Alder has adequately pleaded that MX purposefully directed its activities at Utah. Specifically, MX: (1) holds itself out to the public as being NorthStar-an entity formed and headquartered in Utah;[40] (2) is an agent of NorthStar and subject to NorthStar's control from Utah;[41] (3) sends its sales representatives to Utah to receive instruction, training, and recognition regarding the sale of NorthStar's products and services (specifically to customers of competitors);[42] (4) regularly sends customer account information to NorthStar in Utah;[43] (4) has expressly agreed that its relationship and dealings with NorthStar are governed by Utah law;[44](5) intentionally engages in tortious activities outside of Utah aimed at damaging Alder in Utah;[45] (6) knowingly makes deceptive telephone calls to Alder in Utah in furtherance of such activities;[46] and (7) receives compensation from Utah for its actions.[47] The harm resulting from MX's actions has been felt almost exclusively in Utah.[48] Because this litigation is the result of Alder's injuries arising out of or related to MX's actions, MX has sufficient minimum contacts with Utah for jurisdictional purposes.

         Having found sufficient contacts between MX and Utah, it is necessary to “determine whether exercising personal jurisdiction would offend traditional notions of fair play and substantial justice.”[49] “This inquiry requires a determination of whether the district court's exercise of personal jurisdiction over defendant is reasonable in light of the circumstances surrounding the case.”[50] This requires consideration of:

(1) the burden on the defendant, (2) the forum state's interest in resolving the dispute, (3) the plaintiff's interest in receiving convenient and effective relief, (4) the interstate judicial system's interest in obtaining the most efficient resolution of controversies, and (5) the shared interest of the several states in furthering fundamental social policies.[51]

         “[A]n especially strong showing of reasonableness may serve to fortify a borderline showing of minimum contacts.”[52]

         The burden on MX to appear in Utah is minimal, given that it sends its representatives to NorthStar's headquarters in Utah for instruction, training, and recognition, and has expressly agreed to resolve disputes involving NorthStar in Utah.[53] Utah has a strong interest in providing a forum in which its residents can seek redress for the intentional injuries caused by out-of-state actors.[54] “Finally, it is more efficient and just for judgment creditors such as [Alder] to seek collection where their judgment was obtained and not chase the defendant to another state.”[55]

         Accordingly, specific personal jurisdiction over MX may properly be exercised in Utah.

         Alder has standing to bring a claim under the Lanham Act.

         MX seeks the dismissal of Alder's claim under the Lanham Act for lack of standing. “For purposes of ruling on a motion to dismiss for want of standing, . . . courts must accept as true all material allegations of the complaint, and must construe the complaint in favor of the complaining party.”[56] To have standing, a “plaintiff must have suffered or be imminently threatened with a concrete and particularized ‘injury in fact' that is fairly traceable to the challenged action of the defendant and likely to be redressed by a favorable judicial decision.”[57]

         MX contends that Alder lacks standing because it has not alleged that MX's conduct or statements injured Alder's commercial interests or business reputation.[58] This contention is incorrect, as Alder has adequately alleged that MX's conduct and statements injured Alder's commercial interests and reputation.[59] Alder, therefore, has standing to bring a claim against MX under the Lanham Act.

         Utah is not an improper venue for this action.

         MX argues that venue in this judicial district is improper under 28 U.S.C. § 1391(b) because MX “does not reside in Utah” and “all of the alleged illegal activity took place outside of Utah.”[60] Section 1391(b) reads:

A civil action may be brought in-
(1) a judicial district in which any defendant resides, if all defendants are residents of the State in which the district is located;
(2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated; or
(3) if there is no district in which an action may otherwise be brought as provided in this section, any judicial district in which any defendant is subject to the court's personal ...

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