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CR Associates, L.P. v. Sparefoot, Inc.

United States District Court, D. Massachusetts

February 20, 2018

CR ASSOCIATES L.P., Plaintiff,
v.
SPAREFOOT, INC. Defendant.

          ORDER ON MOTION TO DISMISS AND MOTION TO TRANSFER

          Leo T. Sorokin, United States District Judge

         On March 31, 2017, CR Associates L.P. (“CR”) sued defendants Selfstorage.com, LLC, (“Selfstorage”); Argus Self Storage Sales Network, Inc., (“Argus”);[1] and Sparefoot, Inc (“Sparefoot”), claiming that these entities violated federal and Massachusetts trademark and unfair competition laws by the improper use of CR's trademark name on defendants' websites. Doc. No. 1. Specifically, CR alleges the defendant websites have used CR's mark “Cross Road Storage” (a) to boost defendants' Google search results and (b) on defendants' own websites, to say CR's self-storage facility is “unavailable” while directing viewers to other self-storage facilities under contract with defendants. Id. at ¶¶ 12-23. At issue in the complaint are two websites, Selfstorage.com and Sparefoot.com, both of which are operated by Sparefoot, see id.; Doc. No. 31 at 2; Selfstorage owns the domain name Selfstorage.com, the use of which it licensed to Sparefoot. Doc. No. 31 at 1. Defendant Selfstorage moves to dismiss for lack of personal jurisdiction. Doc. No. 29. Defendant Sparefoot moves to transfer pursuant to a forum selection clause in a contract allegedly executed on February 2, 2017. Doc. No. 32. CR opposes both motions, Doc. Nos. 29, 32, and has filed an emergency motion to amend its complaint, Doc. No. 70.

         I. EMERGENCY MOTION TO AMEND

         The Emergency Motion to Amend (Doc. No. 70) is DENIED for several reasons. First, as to Selfstorage it is futile, the Court lacks personal jurisdiction over Selfstorage, infra at 3-5, and nothing in the proposed Amended Complaint changes the jurisdictional analysis. Second, purportedly, the motion to amend eliminates claims arising from conduct after the execution of the February 2, 2017 contract and thus avoids, according to CR, the forum selection clause. Doc. No. 70 at 4-5. Whatever the merits of such a position, neither the language of the proposed Amended Complaint nor CR's conduct support the conclusion that CR disavows its claims arising from conduct that transpired after February 2, 2017. See Doc. No. 70-3. The Proposed Amended Complaint contains no such disclaimer and does contain general language suggesting the claims are based upon post February 2, 2017 conduct. E.g. id. at ¶¶ 27, 32, 37, 42, 48 (“Defendants' actions have damaged and continue to damage Plaintiff's rights, reputation, and good will.”) (emphasis added); id. at 15 (requesting “appropriate preliminary and permanent injunctive relief.”). Furthermore, CR moved for partial summary judgment on liability from its Mass. Gen. Laws. Chapter 93A claim based upon events between December 25, 2016 and March 25, 2017. Doc. No. 81 at page 5; see also Doc. No. 82 at 4. In CR's statement of facts, Doc. No 82, it stated that its expert “calculations are based on analysis of a three-month period in which it is undisputed that Sparefoot was using the CrossRoad Storage name without authorization on its websites.” Id. at 4 n.1. This period includes dates after the February 2, 2017 contract. Thus, CR, continues to rely on post February 2, 2017 events as the basis for its claims. Accordingly, its Motion to Amend (Doc. No. 70) is DENIED.

         II. SELFSTORAGE'S MOTION TO DISMISS

         The Court applies the prima facie standard for determining personal jurisdiction in this case. Foster-Miller, Inc. v. Babcock & Wilcox Canada, 46 F.3d 138, 143 (1st Cir. 1995). “To make a prima facie showing . . . the plaintiff ordinarily cannot rest upon the pleadings, but is obliged to adduce evidence of specific facts. . . [T]he court [then] . . . must accept the plaintiff's (properly documented) evidentiary proffers as true for the purpose of determining the adequacy of the prima facie jurisdictional showing.” Id. at 145. The facts here are undisputed. Defendant Selfstorage has no activities, operations or customers in Massachusetts. It is organized and based outside of Massachusetts. Doc. No. at ¶¶ 5, 7. There is no general jurisdiction over Selfstorage, and CR does not contend otherwise. See Doc. No 46. CR asserts only specific jurisdiction. See id. Selfstorage's connection to this case is narrow: it owns the domain name “selfstorage.com” and it has entered into an exclusive license arrangement with defendant Sparefoot permitting Sparefoot to operate a site using the domain name. Doc. No. 1 at ¶ 8. A copy of the agreement is before the Court. Doc. No. 46-2. Under that agreement, Sparefoot, Inc, not Selfstorage, “shall . . . design, develop, operate, and manage” the selfstorage.com website. Id. at 5. Sparefoot, not Selfstorage, bears responsibility for server hosting, website development and maintenance, customer service and support, and marketing and promotion. Id. at 5-6. In other words, the content, operation and management of the website belongs entirely to Sparefoot.

         The foregoing facts would ordinarily end the jurisdictional inquiry because they establish both that (1) CR's claims arise out of conduct that is not Selfstorage's and (2) the conduct to which CR points to as purposeful availment by Selfstorage-the content or operation of the website-is not Selfstorage's conduct. See Doc. No. 46 at 6-7. But CR points to several more facts to support the assertion of the jurisdiction. First, CR asserts that Selfstorage, under the agreement, “actively participates in the maintenance and upkeep of the site.” Id. at 3. The agreement says otherwise. Doc. No. 46-2 at 5-6. Selfstorage's only responsibility has to do with hosting the domain name, paying the registration fees for the name, and aiding in recovery if the name becomes unavailable. Id. at 6. All of this is unrelated to Massachusetts, CR's claims, or purposeful availment. See Hilsinger Co. v. FBW Investments, 109 F.Supp.3d 409, 430 (D. Mass. 2015) (explaining that, as a general rule, personal jurisdiction “does not exist over a licensor by virtue of its status if it . . . has no dealings with the licensee beyond the receipt of royalty income”) (quotations omitted). Selfstorage's limited responsibilities do not involve content control or use of the website Selfstorage.com. Second, Selfstorage may sell or assign its ownership interest in the domain name. Id. at 16. But, that right has no relationship to the instant claims or the forum Massachusetts. Finally, CR asserts Selfstorage “has the legal obligation to indemnify Sparefoot for any legal action taken cause [sic] by the use of www.selfstorage.com and [Selfstorage] has the right to control the defense or settle any claims.” Doc. No. 46 at 9 (citing Doc. 46-2 at 11-12). By its terms, this provision only applies to events “arising prior to [January 1, 2015] the Effective Date [of the agreement].” Doc. No. 46-2 at 12. Even assuming this provision implies that Selfstorage controlled the content of Selfstorage.com prior to January 1, 2015, the provision is of no assistance to CR. The only specific factual allegations described in the complaint occurred in February 2017. Doc. No. 1-5. CR amplified these facts by asserting that it first become aware of the problems described in the Complaint in December, 2016. Doc. No. 47 at 2.

         As Plaintiff concedes, “a license agreement that merely entitles the licensor to royalties without reserving a right to control the licensee's actions will not, by itself, be sufficient to support personal jurisdiction.” Doc. No. 46 at 6-7 (quoting Automated Facilities Mgmt. Corp. v. Smartware Grp., Inc., No. 12-CV-327-PB, 2013 WL 5723314, at *4 (D.N.H. Oct. 21, 2013)). Under these circumstances, CR has failed to meet its burden to establish that its claims against Selfstorage arise out of Massachusetts or that Selfstorage purposefully availed itself of the opportunity to do business here.

         For the foregoing reasons, the Motion to Dismiss for Lack of Personal Jurisdiction (Doc. No. 20) is ALLOWED.

         III. SPAREFOOT'S MOTION TO TRANSFER VENUE

         Sparefoot moves to transfer this case to the United States District Court for the Western District of Texas, Austin Division, pursuant to 28 U.S.C. § 1404. Doc. No. 32. In support of its motion, Sparefoot cites a forum selection clause in a contract agreement between Sparefoot and CR that CR allegedly executed on February 2, 2017. Id.

         Becoming a client of Sparefoot involves four steps. Doc. Nos. 50-1 at 3; 56 at 2. First, a potential client requests a sign-up code by calling a phone number and entering, online, the code. Doc. No. 56 at 2. Though nothing specifically before the Court identifies when such a call was made on behalf of CR, it appears it was done as the process requires it. Second, the potential client creates an online account by completing certain company information as well as establishing both a username and email address for login and contact purposes. Id. at 2. Here, Kenneth Alves, Jr., did that on or about January 22, 2017 by creating an account in the name of Cross Road Self Storage using the following email address: westmainselfstorage@gmail.com. Doc. No. 34 a 3. Third, Sparefoot requires new clients to agree to Sparefoot's terms. Doc. No. 56 at 2. Specifically, Sparefoot requires each new client to agree to certain payment rules, audit rules and Sparefoot's “terms of use.” Id. at 2-3. The “terms of use” phrase is a hyperlink that when clicked brings the user to a document entitled “terms of service.” Id.[2] The user must click a box next to an “I agree” statement for each of these agreements. Id. at 3. The fourth step is submission of payment preferences and facility information. Id. at 3. Alves, Jr., completed the four steps, including agreeing to all contract terms on February 2, 2017. Id. at 4.

         After a client completes the four steps of the sign-up process, a “walkthrough” between Sparefoot and the client is scheduled. Doc. No. 35 at 2. The purpose of the walkthrough is “to brief a new client regarding any actions that the client must take to complete the onboarding of its account with Sparefoot and to become an active Sparefoot client.” Id. at 2. Despite a series of late January through late February 2017 phone calls between Alves, Jr., and a representative of Sparefoot, the walk through never occurred. Id. at 2. And thus, CR never became an active client of Sparefoot.

         Two more facts bear mention. The specific “Facility Unavailable” messages CR cites in the Complaint, Doc. No. 1 at ¶ 19, according to the affidavits before the Court occurred after Alves, Jr., signed the terms of use on February 2, 2017. Doc. No. 34 at 3.[3] Sparefoot also alleges that the messages only arose because it was in the middle of transitioning CR from non-client to client status, see id., assertions CR disputes. Second, the combined ToU/ToS provides that “The federal and state courts of Travis ...


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