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FILED – Nov. 15, 2002
9:39am
IN THE UNITED STATES COURT FOR THE DISTRICT
OF UTAH CENTRAL DIVISION
_______________________________________
WORLD WIDE ASSOCIATION
) OPINION AND
OF SPECIALTY PROGRAMS,
) ORDER
a Utah Corporation,
)
) Case No. 2:02
Plaintiff,
) CV 0010 PGC
)
)
Vs.
)
)
)
PURE, INC., PURE FOUNDATION, INC., )
SUE SCHEFF AND DOES 1 THROUGH 10 )
)
Defendants.___________________________)
This matter is before the court on the motion of defendants Pure, Inc., and Sue Scheff (referred to collectively
as “PURE”) to quash service of summons for lack of personal jurisdiction. Plaintiff World Wide Association of Specialty Schools (“WWASP”)
has responded alleging sufficient contacts for personal jurisdiction. On September 26, 2002, the court heard oral argument on this matter.
Mr. James Seaman represented PURE, and Mr. Spence Sibers represented WWASP. After argument, the court ordered supplemental briefing
which was completed by October 25, 2002. Having heard arguments and reviewed the brief, the court DENIES the motion to quash service.
Entered on Docket
11/15/02 by:
Deputy Clerk
Statement of Facts
The facts surrounding this issue appear to be largely uncontested. WWASP is a Utah corporation comprised
of an association of residential treatment programs for troubled and at-risk teens. The various programs that WWASP refers to are located
inside and outside of the United States. WWASP provides marketing support and referral services for its associated programs and deals
directly with parents, governmental agencies, other residential treatment facilities, and industry professionals. WWASP’s headquarters
are in St. George, Utah. WWASP does not manage any of the programs, but maintains an extensive network of relationships and contracts
with them. WWASP refers teens to programs based in Southern Utah.
In 2000, Sue Scheff placed her daughter in a residential treatment facility recommended by WWASP, the Carolina
Springs Academy (“CSA”) in North Carolina. In November 2000, Ms. Scheff sent notice to CSA that she wished to withdraw from the program
within 60 days. In this letter she stated that she believed in CSA and credited it with helping her daughter. A copy of this letter
was sent to Jennifer, “billing for WWASP,” and St. George, Utah is listed in the heading of the letter. After her daughter left CSA,
Ms. Scheff sent communications to CSA expressing her satisfaction of the program. In November 2000, Sue Scheff sent an extensive email
to a list of individuals regarding her ideas of how to deal with teens. She referred favorably to Teen Help (an organization to which
WWASP referred clients) in the email, and sent a copy if the email to Ken Kay expressing her “dedication” to the program.
At some later point, however, Ms. Scheff’s opinion of WWASP changed. This change of opinion coincided with
her establishment of her own referral service for troubled teens, PURE, Inc., based in Florida. Like WWASP, PURE refers teens to programs
based in southern Utah.
Dr. Lon Woodbury operated an internet “chatroom” dedicated to these residential treatment facilities. The chat
room was based in Idaho, but parents from all over the United States used the chat room as an informal, influential source of information
concerning various teen programs.
According to an affidavit filed by Mr. Ken Kay of WWASP, in December 2001 a series of messages were posted
in the chat room, disparaging the services of WWASP. In an attempt to identify who was making the statements, Dr. Woodbury obtained
a computer “fingerprint” and determined that six ostensibly different “posters” were. In fact, all operating from the same computer
in Florida. On December 27, 2001, Dr. Woodbury revealed his findings to the participants in the chat room. The six ostensible posters
were “Mark D.W.”, “Lara”, “Deb C.”, “Tracy Brittany Reese”, Sue Scheff, and “Hilda.” Mr. Woodbury concluded the posters were fairly
well informed about the internal workings of WWASP. Jeff Berryman also had a relationship with Sue Scheff and posted comments in the
chat room. Sue Scheff responded to Mr. Woodbury’s “outing” of the posters by indicating these individuals were working in her office.
The postings began on December 3, 2001, with a message from “Lara” from Florida stating:
I have a good source of (insider leak) at Teen Help in their office in Utah, that states all the “Sales Reps” are very disgruntled.
Something political with WWASP/Teen Help Administration. I understand even one of their best sales people is very dissati[s]fied with
the way the operation is going (financially) and has threatened to leave. Pay is going down parents…..hmmmmm wonder why? This leak
also stated, “the seminars are very satanic, but hey the parents love them and it keeps the business growing……”
The same day “Deb C.” from Florida supporting the statements of “Lara.”
Jeff Berryman also entered into the discussion further questions regarding WWASP’s financial stability.
“Hilda” from Florida, also weighed in with comments indicating WWASP used “less than ethical” tactics. “Deb C.” weighed one more time
on that day with further negative comments.
On December 5, 2001, “Lara” responded to “Deb C.’s” message, and “Deb C.” responded again expressing negative
comments about a WWASP posting. “Lara” again responded in the chat room on December 6, 2001. On December 7, 2001, “Tracy Brittany Reese,”
purportedly from Springfield, Illinois, opined in the chat room regarding her negative experiences with WWASP.
On December 8, 2001, Jeff Berryman, a parent that supported Sue Scheff and PURE, indicated he believed WWASP
was an “abusive” program. “Lara” responded that same day criticizing a chat room participant that supported WWASP. Jeff Berryman weighed
in later that day comparing the WWASP tactics with the Symbionese Liberation Army tactics of the 1970’s.
On December 9, 2001, Jeff Berryman again criticized WWASP and alleged they maintained physical control over
the youth in their programs. “Tracy Brittany Reese” responded again, criticizing a chat room participant that supported WWASP and again
alleging abuse by WWASP.
On December 12, 2001, a thread of discussion in the chat room started regarding a positive experience a parent
had at Cross Creek, a WWASP facility in Utah, by someone outside of the PURE posters. “Lara,” “Deb C.,” and “Tracy Brittany Reese” all
quickly responded with negative statements about WWASP programs and schools.
On December 16, 2001, “Deb C.” weighed in on a discussion of a WWASP facility calling it a “children’s prison,”
and discussed a grandmother who fought to get her child out of a facility and “won.”
On December 17, 2001, “Mark D.W.” from New York posted a message alleging abuse of a child at a WWASP facility.
He responded later in the day indicating his daughter was at a non-WWASP program in Utah and wrote that the director of that program
confirmed a boy that had been abused at a WWASP facility was brought to his daughters’ facility in Utah. “Lara” responded the same day
expressing “they don’t care if a child dies at the hands of WWASP,” among other comments. “Mark D.W.” responded again that he did not
report the child abuse, but the “Dr. did in Utah….” “Lara,” “Tracy Brittany Reese,” Jeff Berryman, and Sue Scheff all weighed in with
anti-WWASP comments.
On December 18, 2001, the thread of ant-WWASP sentiment continued as “Tracy Brittany Reese,” “Lara,” and “Mark
D.W.” all weighed in with their comments against WWASP. “Lara” sent two messages, “Mark D.W.” another message, and “Hilda” sent two
messages all expressing negative information about WWASP. On December 19, 2001, the thread continued as “Lara” weighed in again and
Dr. Woodbury reported that the allegedly abused boy that “Mark D.W.” had reported two weeks earlier did not in fact exist.
On December 20, 2001, “Mark D.W.” again mentioned the allegedly abused boy at his daughter’s facility in Utah.
He denied Mr. Woodbury’s report and posted two more comments in the chat room, as did “Lara.”
On December 21, 2001, a parent requested information about a treatment facility named Tranquility Bay, and
discussed speaking to individuals at an “office in Utah.” Jeff Berryman immediately responded offering to get her additional information.
Mr. Berryman sent this parent a lengthy private email making various negative statements about WWASP and about Dr. Woodbury for his
defense of WWASP.
On December 27, 2001, Mr. Woodbury identified the participants in Ms. Scheff’s scheme and banned them from
posting on the site. Sue Scheff responded to Mr. Woodbury’s “outing” of her group by entering the chat room under a new name “Suzanne
Lisa.” On December 27, 2001 she responded and reasserted her complaints about WWASP.
On December 29, 2001, a parent in the chat room sought information about WWASP and was informed by Lon Woodbury
that it was an association of specialty schools with headquarters in St. George, Utah. The same question was asked by a different poster
on December 30, 2001, with the same response from Lon Woodbury. Jeff Berryman responded on the same day by referring individuals in
the chat room to the PURE websites.
In January 2002, WWASP filed suit in this court alleging intentional interference with prospective economic
advantage, defamation, civil conspiracy, unfair business practices, and sought injunctive relief and damages. PURE responded in February
2002, filing a motion to quash based on a lack of personal jurisdiction.
Standard of Review
To obtain personal jurisdiction over a nonresident defendant in a diversity action, a plaintiff must show
that jurisdiction is legitimate under the laws of the forum state and that the exercise of jurisdiction does not offend the due process
clause of the Fourteenth Amendment.(1) Here the forum state is Utah, and thus Utah law governs the exercise of personal jurisdiction
over PURE subject to the constitutional constraints of the Fourteenth Amendment. The plaintiff, WWASP, bears the burden of establishing
personal jurisdiction over the defendant.(2) In response to a Rule 12(b)(2) motion to dismiss, Worldwide need only make a prima facie showing of personal
jurisdiction to defeat the motion.(3)
The Ken Kay Affidavit
Sue Scheff and PURE first contend that Ken Kay’s affidavit was not based on personal knowledge. But, Ken
Kay’s affidavit was based on reading the series of emails that anyone who visited Lon Woodbury’s chat room could read. He certainly
had personal knowledge of the contents of these emails, as he himself had read them. On this issue, the court will accept the affidavit
only for the limited purpose of recounting what was said in the emails. Mr. Kay also had personal knowledge of the influence of this
website in his industry, based on his experience in the industry. Finally, he also had personal knowledge of the business events that
affected WWASP, as he is the President of WWASP and, in that capacity, talked to his staff and prospective customers who had seen the
statements. The affidavit is therefore admissible.
Specific Jurisdiction
The evaluation of specific jurisdiction in Utah requires a three-part inquiry: 1) the defendant’s acts
or contracts must implicate Utah under the Utah long-arm statute; 2) a ‘nexus’ must exist between the plaintiff’s claims and the defendant’s
acts or contracts; and 3) application of the Utah long-arm statute must satisfy the requirements of federal due process.(4) Utah’s long-arm statute provides in pertinent part as follows:
Any person… who in person or through an agent does any of the following enumerated acts,
submits himself to the jurisdiction of the courts of this state as to any claim arising out of or related to:
1) the transaction of any business within this state;
2) contracting to supply services or goods in this state;
3) the causing of any injury within this state whether tortuous or by any breach of warranty;(5)
The legislature has declared that the 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.”(6) The Utah Supreme Court frequently makes a due process analysis first, because any set of circumstances that satisfies
due process will also satisfy the long-arm statute.(7) Accordingly, the court will proceed to determine whether the exercise of personal jurisdiction
over WWASP meets federal due process standards.
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.”(8) The “minimum contacts” necessary for specific personal jurisdiction are established if the defendant has “purposefully
directed” his activities at residents of the forum and the litigation results from the alleged injuries that “arise out of or relate
to” those activities.(9)
If the defendant’s activities create sufficient minimum contacts the court then considers “whether the exercise of personal jurisdiction
over the defendant offends traditional notions of fair play and substantial justice.”(10)
__________________
(1)Far West Capitol, Inc. v. Towne, 46 F3d 1071, 1074(10th Cir. 1995).
(2)OMI Holdings, Inc. v. Royal Ins. Co. of Canada, 149 F.3d 1086, 1091 (10th Cir. 1998), quoting Rambo v. American Southern Ins. Co.,
839 F2d. 1415, 1417 (10th Cir. 1988).
(3)OMI Holdings, Inc., 149 F.3d at 1091.
(4)Soma Medical Intern v. Standard Chartered Bank, 196 F.3d 1292 (10th Cir. 1999) quoting National Petroleum Marketing, Inc. v. Phoenix
Fuel Co., Inc., 902 F. Supp. 1459, 1465 (D. Utah 1995).
(5)Utah Code Ann. 78-27-23.
(6)Utah Code Ann. 78-27-22
(7)See SII MegaDiamond, Inc. v. American Superabrasives Corp., 969 P.2d 430, 433 (Utah 1998); See also Far West Capital, Inc., 46 F.3d
at 1075; See also Soma Medical, 196 F.3d at 1298.
(8)See Soma Medical, 196 F.3d at 1298, quoting Burger King Corp v. Rudzewicz, 471 U.S. 462, 471-72(1985).
(9)OMI Holdings, Inc. 149 F.3d at 1091, quoting Burger King Corp., 471 U.S. at 472.
(10)Id.
Minimum Contacts
In judging minimum contacts, a court properly focuses on the relationship among the defendant, the forum,
and the litigation.(11) In Burt v. Board of Regents of the University of Nebraska,(12) a physician at the University of Nebraska sent a single letter to Colorado allegedly defaming a Dr. Burt. Relying on
the Supreme Court’s decision in Calder v. Jones,(13) the Tenth Circuit held that the intentional nature of the defendants’ conduct and its calculated injurious effect in
the forum state provided sufficient minimum contacts for personal jurisdiction. The Circuit quoted the following Calder language in
support of its ruling:
[P]etioners are not charged with mere untargeted negligence. Rather, their intentional, and
allegedly tortuous, actions were expressly aimed at California. Petitioner South wrote and petitioner Calder edited an article That
they knew would have a potentially devastating impact upon respondent. And they knew that the brunt of that injury would be felt by
respondent in the State in which she lives and works….(14)
Here, Lon Woodbury’s chat room provided a forum for parents of troubled teens to share their
thoughts and ideas with each other. Parents and families shared comments in the chat room regarding specific youth programs. In the
threads of emails submitted to the court, parents often expressed very emotional pleas for help for their troubled children. The site
was exclusively dedicated to discussions of the issues affecting troubled teens and was a very influential website in this industry.
PURE sent over 30 negative emails about WWASP into Lon Woodbury’s chat room. Sue Scheff’s six posters to Lon
Woodbury’s chat room specifically referred to St. George, Utah, and to “sales reps” working at WWASP’s headquarters, which was located
in Utah. The emails also implied that WWASP was in financial difficulties, difficulties that would presumably have arisen at its headquarters
in Utah. The emails refer to at least two different teen programs in Utah. The emails discuss the fact that WWASP is a Utah based company,
and specifically mention “Ken,” the director of WWASP in St. George, Utah.
In light of these facts, the court finds a clear allegation that PURE and its agents targeted their allegedly
defamatory statements into Utah knowing that the brunt of those statements would be felt by WWASP in Utah. The comments were in an internet
chat room and specifically and repeatedly mentioned WWASP’s Utah headquarters in their messages. Further compounding the adverse effect
in Utah, the emails refer to two different teen programs located in Utah.
The Utah connection was well known to PURE. Sue Scheff herself had her daughter in a WWASP program and sent
correspondence to WWASP in St. George, Utah. For her to claim she did not address her “letter” or email to a Utah resident parses things
too finely. Though no letter with postage was sent to Utah, every communication Sue Scheff and her agents sent within Lon Woodbury’s
chat room directly affected WWASP based in St. George, Utah.
WWASP correctly analogizes this case to Berrett v. Life Insurance Company of the Southwest.(15) There, this court found jurisdiction proper due to the defendant purposefully directing his actions into Utah by making
defamatory phone calls into the state.(16) Sue Scheff and her company likewise made defamatory statements that were purposefully directed at Utah, via the twenty-first
century functional equivalent of telephone calls: posting in an internet chat room.
PURE further argues the posting in a chat room are not “commercial distribution” sufficient to meet the standards
of Keeton v. Hustler Magazine, Inc.(17) Keeton, however, does not set some standard that all defamation claims must meet, but simply considered whether jurisdiction
was proper in that matter (it was). Moreover, in this case PURE’s postings had a tightly targeted aim at the WWASP customer base. Indeed,
if anything, the PURE comments are more harmful than those found sufficient to sustain jurisdiction in Keeton because the comments were
directly specifically at WWASP rather than published in a magazine of general distribution.
Finally, PURE tries to make much of the fact that this is an “internet” case and that PURE maintains a purely
“passive website.” This misses the point of the lawsuit. The defamatory comments that form the basis of WWASP’s complaint have little
to do with PURE’s passive website; rather, they were made in an internet chat room. Moreover, this is not a case involving alleged “links”
to defamatory websites.(18) Instead, it involves defamatory statements allegedly made by the plaintiff. Finally,
it is relevant to emphasize that this case involves a very specific, information-oriented chat room, not a website available to a large
group of individuals about general subjects. Indeed, this chat room was dedicated to creating an independent forum for discussing the
reputation of various schools and businesses that worked with troubled teens so that (among other things) potential customers could
make an informed judgment about which program to use. In such a unique context, allegations of defamatory impact must be given special
attention.
Finally, PURE argues that the name “World Wide” in WWASP’s name implies that the company has presence larger
than the State of Utah and that this somehow bars WWASP from claiming harm in Utah. At this preliminary stage of the proceedings, it
appears that WWASP is a Utah Corporation, with a principal place of business in Utah, with its employees in St. George, Utah. Whether
or not it also does some business elsewhere is irrelevant for jurisdictional purposes.
________________
(11)Burt v. Board of Regents of the University of Nebraska, 757 F.2d 242, 244 (10th Cir. 1985); Keeton V. Hustler Magazine, Inc., 104
S. Ct. 1473, 1486 (1984) and Calder v. Jones, 104 S. Ct. 1473, 1486 (1984)
(12)757 F.2d at 244-245.
(13)See 104 S.Ct 1482.
(14)Burt, 757 F.2d at 245.
(15)623 F. Supp. 946 (D.Utah 1985)
(16)Id.
(17)See 104 S.Ct. 1473(1984)
(18)See Barrett v. Catacombs Press, 44 F.Supp. 2d. 717 (E.D. Pa. 1999).
Fairness
Having found sufficient minimum contacts, the court must also consider whether application of the Utah
long-arm statute satisfies the requirements of federal due process.(19)
WWASP asserts the gravamen of a defamation action is injury to reputation.(20) Taking WWASP’s allegations as true, as the court must on a motion to dismiss,
no due process notions of fairness are violated by requiring one who intentionally defames another to answer for the truth of her statements
in the state where the defamation causes harm to the victim and, indeed, was known to have caused harm to the victim.(21) To the extent that WWASP’s finances and reputation have been damaged, the damage has
occurred in Utah. WWASP alleges that its business reputation and goodwill with staff, parents, programs and government agencies have
all suffered from the defamatory statements. The unique nature of this industry, involving parents placing the care of their children
in the hands of a third party, no doubt makes industry reputation vitally important. Personal jurisdiction is therefore proper under
the Due Process clause and, thus, under Utah’s long arm statute.
Because the court finds personal jurisdiction over this matter based on the internet postings described above,
the court need not reach WWASP’s contentions that there are other grounds for finding jurisdiction.
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(19)Soma Medical Intern., 196 F.3d. 1292, quoting National Petroleum Marketing, 902 F. Supp. At 1465.
(20)Russell v. Thomson Newspapers, Inc., 842 P. 2d. 896,905(Utah 1992)
(21)Burt, 757 F.2d. at 245.
Nexus
The court finds personal jurisdiction proper under the due process clause, however, the nexus remaining
element under the long-arm statute merits brief comment. As set forth above, the systematic postings in the chat room were intended
to harm WWASP in Utah. The postings caused harm in Utah, and all of WWASP’s claims arise directly from these postings. Under Utah law
the nexus requirement for personal jurisdiction has been satisfied.(22)
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(22)Frontier Federal Sav. & Loan Ass’n v. National Hotel Corp., 675 F. Supp. 1293, 1298 (D. Utah 1987).
CONCLUSION
PURE, Inc. motion to dismiss the affidavit of Ken Kay is DENIED. PURE, Inc.’s motion to quash service
of summons for lack of personal jurisdiction is DENIED.
SO ORDERED.
Dated this 14th day of November 2002.
BY THE COURT:
Judge Paul G. Cassell
United States District Court Judge
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