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SCVNGR, Inc. v. Punchh, Inc.

Superior Court of Massachusetts, Suffolk, Business Litigation Session

July 22, 2016

SCVNGR, Inc. [1]
v.
Punchh, Inc No. 134361

         Filed July 23, 2016

          MEMORANDUM OF DECISION AND ORDER ON DEFENDANT PUNCHH, INC.'S MOTION TO DISMISS

          Mitchell H. Kaplan, Justice

         The plaintiff, SCVNGR, Inc., doing business as LevelUp, brings this action against the defendant, Punchh, Inc., one of its competitors. LevelUp complains that Punchh has engaged in a " campaign of [making] knowingly false statements to LevelUp restaurant clients and potential clients, " to the effect that LevelUp does not respect the confidentiality of its restaurant clients' customer data.

         LevelUp's complaint contains the following five claims: defamation (Count I), commercial disparagement (Count II), intentional interference with prospective business relations (Count III), violation of G.L.c. 93A (Count IV), and violation of Cal. Bus. & Prof. Code § 17200 et seq. (Count V). LevelUp seeks monetary damages and injunctive relief to prevent Punchh from continuing to make false and/or defamatory statements concerning LevelUp's products and services. Punchh filed a motion to dismiss for lack of personal jurisdiction pursuant to Mass.R.Civ.P. 12(b)(2). On May 5, 2016, the court held a hearing on the motion. At hearing, the court ordered Punchh to respond to an interrogatory posed by LevelUp requesting information identifying each occasion in which Punchh made statements to a LevelUp client or potential client similar to those alleged in the complaint. Following Punchh's response to the interrogatory, the parties submitted supplemental memoranda in support of their respective positions on the motion to dismiss. In consideration of the parties' memoranda of law, supporting materials, and oral arguments, for the reasons that follow, Punchh's motion to dismiss is ALLOWED .

         BACKGROUND

         The following facts, assumed to be true for the purposes of this motion, are taken from the complaint and the supplemental materials submitted by the parties.

         LevelUp is a technology company based in Boston, Massachusetts that offers mobile device applications (apps) and related services that enable consumers to earn and redeem rewards in connection with retail purchases and to initiate a payment for a purchase by scanning a quick-response (QR) code that is displayed on a mobile phone at a merchant's point of sale. LevelUp designs and develops such mobile apps for restaurant businesses and has clients ranging from single-location restaurants to national franchise restaurant chains. LevelUp's restaurant clients use custom mobile apps to engage with their customers through tailored promotions, incentives, messaging, customer loyalty programs, and other features. LevelUp's apps and customer resource management services also allow its restaurant clients to gather and analyze information about their customers.

         Punchh, a direct competitor of LevelUp with respect to certain services, is engaged in the business of providing mobile apps for restaurant businesses throughout the United States. Punchh is a Delaware corporation with a principal place of business in Mountain View, California. Punchh provides mobile apps for several restaurant chains that operate in Massachusetts, including: Moe's Southwest Grill (eight locations in Massachusetts), Noodles & Co. (six locations in Massachusetts), Earl of Sandwich (one location in Boston), and Vino Volo (one location in Boston). According to LevelUp, Punchh and a number of its restaurant clients market their Punchh-built mobile apps to consumers in Massachusetts for use at Massachusetts retail business locations. LevelUp also asserts in its complaint that Punchh regularly does and solicits business within Massachusetts and derives substantial revenue from and in connection with the use of Punchh-built mobile apps by its clients in Massachusetts and by Massachusetts residents.[2]

         In this action, LevelUp contends that Punchh embarked on a campaign of making knowingly false statements to LevelUp restaurant clients and potential clients in which it asserted that LevelUp does not respect the confidentiality of its restaurant clients' valuable customer data. LevelUp asserts that Punchh continued to make such statements notwithstanding representations made to LevelUp in December 2015 that Punchh would stop this conduct. LevelUp claims that this was an unfair and deceptive attempt by Punchh to compete with LevelUp's technology and customer resource management platform.

         More specifically, LevelUp alleges that on October 2, 2015, Jitendra Gupta, Punchh's founder, sent an e-mail to a representative of Veggie Grill, a restaurant chain that had recently signed an agreement with LevelUp, that contained a number of false and disparaging statements. For example, Gupta asserted that LevelUp clients " don't own their own customer data" and that LevelUp owns all user data by default, even though LevelUp's professional service agreement expressly provides that, " User Data as collected by Client via the LevelUp platform shall be the property of Client, and Client's rights in such User Data shall be unlimited." Gupta's e-mail went on to state that, " We [Punchh] have spoken to a number of businesses are [sic] they are not aware and shocked that they were sharing user data with LevelUp network and potentially with their competitors." Further, in January and/or February 2016, a Punchh representative made the following false statements to at least one LevelUp restaurant client and to several potential clients: (1) LevelUp does not grant ownership of its clients' data to its clients; (2) LevelUp shares confidential client data with a client's competitor restaurants; and (3) several of LevelUp's clients have sued LevelUp in an effort to gain access to their confidential data. LevelUp believes that these false statements have caused damage to LevelUp's business.

         On February 19, 2016, LevelUp filed this action in the Superior Court. Punchh filed a motion to dismiss for lack of personal jurisdiction pursuant to Mass.R.Civ.P. 12(b)(2) or, in the alternative, to dismiss this action under the doctrine of forum non conveniens. Punchh argues that this court lacks personal jurisdiction over Punchh because LevelUp's allegations are entirely unconnected to Massachusetts and because Punchh does not have sufficient minimum contacts with Massachusetts.

         Punchh's motion is supported by the March 10, 2016 declaration of Jitendra Gupta, the founder of Punchh. According to Gupta, Punchh is a California-based company that has eighty employees, none of whom are based in Massachusetts. Punchh is incorporated in Delaware and has a principal place of business in Mountain View and no other offices in the United States. Punchh is not a citizen of Massachusetts, is not registered to do business in Massachusetts, and does not own any property in Massachusetts. All of Punchh's records that are relevant to this dispute are in California. No Punchh employee has travelled to Massachusetts for business. Gupta believes that Veggie Grill has restaurants in California, Washington, and Oregon. The person Gupta e-mailed at Veggie Grill worked at Veggie Grill's California headquarters. In addition, none of Protein Bar, Freebirds World Burrito, Moe's Southwest Grill, Noodles & Co., and Vino Volo are headquartered in Massachusetts, and Punchh's employees did not communicate with any Massachusetts representatives of those restaurants.

         LevelUp filed an opposition to Punchh's motion to dismiss. It argues, among other things, that this court has specific jurisdiction over Punchh resulting from Punchh's intentional efforts to cause harm to LevelUp in Massachusetts. LevelUp's opposition is supported by the affidavit of Andrew Boch, chief operations officer of LevelUp. Boch believes that Punchh markets its apps and services extensively within Massachusetts and to restaurant clients with operating locations in Massachusetts. He also contends that Punchh distributes its mobile apps to Massachusetts consumers, who like all other Punchh customers can download Punchh's app through the Apple App Store.[3]

         On May 5, 2016, the court held a hearing on the motion. At the hearing, the court ordered Punchh to respond to an interrogatory requesting information concerning other businesses to which Punchh had provided information similar to that alleged in the complaint. In response, Punchh identified eighteen companies, including: 16 Handles, 85 Degrees Celsius Bakery Café, Arizona Pizza Management, Chopt, Bridg, Cowboy Chicken, Freebirds World Burrito, Lyfe Kitchen, Noodles & Co., Olo, Parabox, Protein Bar, Roy Rogers, Sweetgreen, Taco Johns, TooJay's, Veggie Grill, and Vino Volo. Punchh's response also identified the specific ...


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