Global Verge v. Rodgers
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Global Verge v. Rodgers
Case: Global Verge v. Rodgers (2011)
Subject Category: Breach of Contract
Agency Involved: Private Civil Suit
Court: U.S. District Court, Nevada
Case Synopsis: Global Verge hired Rodgers as a consultant and sued him and PHP after he stopped working at Global and joined PHP as their new CEO, alleging that he violated his confidentiality agreement at PHP. Global sued in Nevada, its state of incorporation, and Rodgers and PHP moved to dismiss for lack of jurisdiction.
Legal Issue: Does signing up 4 independent distributors over the internet meet the standards for establishing personal jurisdiction over a company and its CEO who otherwise have no contacts with the forum state?
Court Ruling: No, signing up 4 independent contractor does not demonstrate that PHP or Rodgers purposely availed themselves of the laws and regulations of Nevada, and because they did not otherwise have any contacts with the state, Global Verge lacked personal jurisdiction within Nevada, and the suit was dismissed. Global Verge claimed that Rodgers violated the terms of a non-disclosure agreement with Global Verge when he began working for PHP. After hiring Rodgers as CEO, PHP began operating using a similar format and selling the same types of products and services that Global Verge sold. Global Verge sued in Nevada over the violation of the non-disclosure agreement. Verge claimed that by marketing to Nevada residents, Rodgers and PHP should be held to have availed themselves of the laws of the state, and jurisdiction should exist. The Court disagreed, stating because a person could not purchase products directly from the PHP website for delivery into Nevada, and that only 4 independent distributors from the state were signed up through the site, the nature of PHP's activities did not approximate a physical presence in the state and could not support personal jurisdiction over them.
Practical Importance to Business of MLM/Direct Sales/Direct Selling/Network Marketing/Party Plan/Multilevel Marketing: Purposefully availment is one prong of the standard for establishing jurisdiction in a lawsuit. Jurisdiction establishes that the court can exercise control over the defendant. If a company's contacts with a state are only through an internet presence, the contact must approximate a physical presence for jurisdiction to be established.
Global Verge v. Rodgers , Case No.: 2:10-cv-01360-RLH-RJJ (2011) : No, signing up 4 independent contractor does not demonstrate that PHP or Rodgers purposely availed themselves of the laws and regulations of Nevada, and because they did not otherwise have any contacts with the state, Global Verge lacked personal jurisdiction within Nevada, and the suit was dismissed. Global Verge claimed that Rodgers violated the terms of a non-disclosure agreement with Global Verge when he began working for PHP. After hiring Rodgers as CEO, PHP began operating using a similar format and selling the same types of products and services that Global Verge sold. Global Verge sued in Nevada over the violation of the non-disclosure agreement. Verge claimed that by marketing to Nevada residents, Rodgers and PHP should be held to have availed themselves of the laws of the state, and jurisdiction should exist. The Court disagreed, stating because a person could not purchase products directly from the PHP website for delivery into Nevada, and that only 4 independent distributors from the state were signed up through the site, the nature of PHP's activities did not approximate a physical presence in the state and could not support personal jurisdiction over them.
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UNITED STATES DISTRICT COURT
DISTRICT OF NEVADA
* * *
GLOBAL VERGE, INC., a Nevada corporation, ) Case No.: 2:10-cv-01360-RLH-RJJ
vs. ) ) O R D E R
DERRICK L. RODGERS, an individual; )
PEOPLE HELPING PEOPLE, INC., )
(Motion to Dismiss–#7; Motion for Temporary Restraining Order and Preliminary Injunction–#8)
Before the Court is Defendants Derrick L. Rodgers and People Helping People,
Inc.’s Motion to Dismiss (#7), filed August 23, 2010. The Court has also considered Plaintiff
Global Verge, Inc.’s (“Global”) Opposition (#15), filed September 17, 2010, and Defendants’
Reply (#18), filed September 23, 2010.
Also before the Court is Global’s Motion for Temporary Restraining Order and
Preliminary Injunction (#8), filed August 27, 2010. The Court has also considered Defendants’
Opposition (#17), filed September 20, 2010, and Global’s Reply (#19), filed September 30, 2010.
This case involves the alleged breach of a non-disclosure agreement entered into
between Rodgers and Global. The following facts are either alleged by Global or are
uncontradicted, unless otherwise noted. Global is an internet based business incorporated in
Nevada with its principal place of business in Missouri. Rodgers is a North Carolina citizen.
Global sells products at “wholesale” to people–independent business operators of some kind or
e-associates–who can then sell these products at retail. Global hired Rodgers as a consultant and
had him sign a Non-Disclosure / Non-Circumvent Agreement (the “NDA”) on or about July 30,
2009. Rodgers negotiated this agreement in North Carolina, only dealt with people in Missouri,
and only faxed documents to Missouri. Rodgers never dealt with anyone in Nevada or sent
documents to Nevada. After Rodgers signed the agreement, Global provided Rodgers with certain
confidential and proprietary information in his capacity as a consultant. Rodgers and Global
terminated their relationship on or about November 16, 2009, not quite four months after Rodgers
began consulting Global.
After Rodgers ceased working with Global, Defendant People Helping People
(“PHP”) hired him as its new CEO. PHP is a Delaware corporation with its principal place of
business in North Carolina. Global believes that Rodgers disclosed Global’s confidential
information to PHP because PHP now uses the same or similar business model as Global and sells
the same products to independent sales people or e-associates. PHP operates at least two websites
(www.phpico.com and www.teamgg.com) that give information about the PHP, allow people to
sign up to receive newsletters, and apply to become these independent type sales operators that
both companies apparently use. Global claims that PHP has been able to replicate its business
model because Rodgers disclosed confidential information to PHP after he began employment
Global filed this suit with the Eighth Judicial District Court for the State of Nevada
on June 8, 2010, alleging (1) breach of contract, (2) breach of the duty of good faith and fair
dealing, (3) misappropriation, (4) conversion, (5) tortious interference with contractual relations,
(6) tortious interference with prospective economic advantage, (7) civil conspiracy/concert of
action, (8) unfair competition/unjust enrichment, and (9) injunctive relief. Defendants removed
the case to this Court on August 11.
For the reasons set forth below, the Court grants Defendants’ motion and dismisses this case.
I. Personal Jurisdiction
A. Legal Standard
Rule 12(b)(2) of the Federal Rules of Civil Procedure provides that a court may
dismiss a complaint for “lack of jurisdiction over the person.” “Where a defendant moves to
dismiss a complaint for lack of personal jurisdiction, the plaintiff bears the burden of
demonstrating that jurisdiction is appropriate.” Schwarzenegger v. Fred Martin Motor Co., 374
F.3d 797, 800 (9th Cir. 2004). A court evaluating such a motion may consider evidence presented
in affidavits to assist it in its determination and may order discovery on the jurisdictional issues.
Data Disc, Inc. v. Systems Technology Assoc., Inc., 557 F.2d 1280, 1285 (9th Cir. 1977). Where a court proceeds on the basis of affidavits and without discovery and an evidentiary hearing, “the
plaintiff need only make a prima facie showing of jurisdiction to avoid the defendant's motion to
dismiss,” that is, demonstrate facts that, if true, would support jurisdiction over the Defendant.
Harris Rutsky & Co. Ins. Services, Inc. v. Bell & Clements Ltd., 328 F.3d 1122, 1129 (9th Cir.
2003). “Although the plaintiff cannot ‘simply rest on the bare allegations of its complaint,’ Amba
Marketing Systems, Inc. v. Jobar International, Inc., 551 F.2d 784, 787 (9th Cir. 1977),
uncontroverted allegations in the complaint must be taken as true, AT & T v. Compagnie Bruxelles
Lambert, 94 F.3d 586, 588 (9th Cir. 1996). Conflicts between parties over statements contained in
affidavits must be resolved in the plaintiff's favor. ” Schwarzenegger, 374 F.3d at 800.
When there is no governing federal statute, a district court must apply the personal
jurisdiction law of the state in which it sits. Dole Food Co., Inc. v. Watts, 303 F.3d 1104, 1110
(9th Cir. 2002). Since Nevada’s long-arm statute is coextensive with the United States
Constitution and its due process requirements, Welburn v. Eighth Judicial Dist. Court, 806 P.2d
1045, 1046 (Nev. 1991), the personal jurisdiction question is simply analyzed under federal due
process standards. Further, there are two types of personal jurisdiction: general and specific.
Trump v. District Court, 857 P.2d 740, 748 (Nev. 1993). The Court will address both types of
jurisdiction as plaintiff argues that both apply. In this analysis, the Court determines that it does
not have general or specific jurisdiction over either of the defendants.
1. General Jurisdiction
The exercise of general jurisdiction is appropriate when a defendant’s activities in
the forum are so “substantial” or “continuous and systematic,” Helicopteros Nacionales de
Columbia, S.A. v. Hall, 466 U.S. 408, 416 (1984), that it “approximates physical presence” in the
forum state, Bancroft & Masters, Inc. v. Augusta Nat. Inc., 223 F.3d 1082, 1086 (9th Cir. 2000).
Some of the factors that a court may consider in making this determination are “whether the
defendant makes sales, solicits or engages in business in the state, serves the state’s markets,
designates an agent for service of process, holds a license, or is incorporated there.” Id. Rare or
insubstantial contact or business with the forum, therefore, is insufficient for general jurisdiction.
i. Derrick Rodgers
General jurisdiction is inappropriate against Rodgers. Here, Rodgers has never
entered Nevada and there is no allegation that he has directly done business in or with Nevada.
The only factual allegations are that Rodgers entered into a contract with a Nevada corporation,
that he misappropriated data from the Nevada corporation, and that as CEO of a different
corporation he solicited four, and maybe more, Nevada citizens to become e-associates orindependent business operators for PHP. Global asserts various torts related to these alleged acts,
but they do not create substantial or continuous and systematic contact with Nevada. Therefore,
they are insufficient for general jurisdiction.
Applied here, Rodgers never purposefully availed himself of the benefits and
privileges of Nevada law and did not engage in substantial, continuous, or systematic contact with
Nevada. Beyond never physically entering Nevada, Rodgers never communicated with anyone
physically present in Nevada in negotiating his contract with Global. In negotiating the contract,
Rodgers communicated with and faxed documents back and forth with people in Missouri, not
Nevada. Further, the contract itself states that it is to be governed by Massachusetts rather than
Nevada law. (Dkt. #7, Mot. Ex. A at § 11(a).) Therefore, at no point did Rodgers avail himself of
Nevada, much less in a continuous or systematic way. Finally, the contract was executed in North
Carolina and no work was done or required to be done in Nevada. To determine that merely
entering a contract with a foreign entity in one’s home states submits that person to jurisdiction in
the state where that entity may be incorporated is nonsensical and does not take into account the
practicalities of commerce. See Doe v. Unocal Corp., 248 F.3d 915, 924 (9th Cir. 2001). For
example, opening a bank account in Nevada cannot create general personal jurisdiction in
Delaware just because the bank happens to be incorporated there, that is simply not substantial or
continuous and systematic contact with the forum. See Helicopteros, 466 U.S. at 416.
Global also argues that since Rodgers worked for Global for four months “he was
able to market to and engage in business with Nevada residents.” This is also insufficient to create
general jurisdiction. While Rodgers’ employment as an e-associate (though not as a consultant) is
disputed, it is immaterial. Global does not allege that Rodgers did business with Nevada as an e
1 PHP presents evidence that two of these four are actually residents of other states and that a third never
actually joined or enrolled with PHP. However, the fourth was a Nevada member of PHP at the time Global
commenced this lawsuit even though he has since disassociated from PHP.
associate, only that he could have. With modern technology any person can engage in business
with people in nearly any forum at any time. The mere opportunity to engage in conduct that may
create general jurisdiction is not the same as actually engaging in that conduct. Therefore this
allegation does not create general jurisdiction either.
Finally, the assertion of general personal jurisdiction must be reasonable. Amoco
Egypt Oil Co. v. Leonis Navigation Co., Inc., 1 F.3d 848, 852–53 (9th Cir. 1993). Courts will
generally consider seven various factors that the Court need not lay out here. See id. The burden
of showing that jurisdiction is unreasonable is on the defendant. Gator.com Corp. v. L.L. Bean,
Inc., 341 F.3d 1072, 1081 (9th Cir. 2003). Here, jurisdiction over Rodgers is unreasonable. To
extend general jurisdiction against a person whose only contact with a forum is employment by a
company incorporated in the forum and an employment related contract with that same company
goes beyond reason. Because employers are frequently incorporated far from where people work,
this would extend general jurisdiction beyond its rational bounds and could force employees to
litigate in areas of the country with which they have no real, substantive relationship and give an
overwhelming advantage to employers. For the foregoing reasons, the Court does not have general
jurisdiction over Rodgers.
ii. People Helping People, Inc.
The Ninth Circuit has adopted a sliding scale approach based on Zippo Mfg. Co. v.
Zippo Dot Com, Inc., 952 F.Supp. 1119 (W.D. Pa. 1997), in analyzing general jurisdiction as
regards internet based parties. Gator.com, 341 F.3d at 1079. This sliding scale test requires that
the defendant clearly engages in business over the internet and that the defendant’s business
contacts with the forum be substantial or continuous and systematic. Id. The Ninth Circuit
recognizes that digital storefronts are functionally equivalent to physical stores, at least for
jurisdictional purposes, and therefore does not require physical presence in the state. Id.
Nonetheless, the “nature of the commercial activity” must be substantial enough to “‘approximate
physical presence.’” Id. (quoting Bancroft & Masters, 223 F.3d at 1086).
Applying this sliding scale test, the Court does not have general jurisdiction over
PHP. While PHP clearly has an internet presence, it is far less clear whether it clearly does
business over the internet. This is not L.L. Bean, Amazon.com, Newegg.com, or another internet
retailer that clearly does business over the internet. See Gator.com, 341 F.3d at 1080. Nor is it a
financial entity engaging in non-retail commerce on the internet. See Gorman v. Ameritrade
Holding Corp., 293 F.3d 506, 512–13 (D.C. Cir. 2002). Instead, PHP provides informational
websites where people can sign-up or apply to become some sort of independent salesperson who
purchases products from PHP and then sells them on their own. Apparently, no one can buy
anything directly from PHP’s websites, all they can do is submit personal information to PHP in
the application process and learn about the company. While these are interactive websites, without
something more, they are insufficient to confer general jurisdiction over PHP. See Revell v. Lidov
317 F.3d 467, 470–71 (5th Cir. 2002) (holding that the court did not have general jurisdiction over
a defendant whose website allowed users to subscribe to a journalism review, purchase
advertising, and submit electronic admissions applications because the cited contacts with the
forum were not substantial). Here, where Global can only show the website and one actual PHP
connected Nevada resident, the contacts are simply not substantial and are, therefore, insufficient
to confer general jurisdiction over the company.
2. Specific Jurisdiction
The Ninth Circuit analyzes specific jurisdiction using a three-prong test to determine whether a forum has specific jurisdiction over a particular defendant. Schwarzenegger, 374 F.3d at 802. The three prongs are:
(1) The non-resident defendant must purposefully direct his activities orconsummate some transaction with the forum or resident thereof; or performsome act by which he purposefully avails himself of the privilege of conductingactivities in the forum, thereby invoking the benefits and protections of itslaws;
(2) the claim must be one which arises out of or relates to the defendant’s
forum-related activities; and
(3) the exercise of jurisdiction must comport with fair play and substantialjustice, i.e. it must be reasonable.
Id. For specific jurisdiction over a defendant, a plaintiff must establish the first two prongs, and if
he does, the burden shifts to the defendant to show that the third prong is not met.
Schwarzenegger, 374 F.3d at 802. Here, the Defendants did not direct their actions at or avail
themselves of Nevada, the claims are not sufficiently related to forum activity, and, importantly,
the exercise of jurisdiction would not “comport with fair play and substantial justice” and would
not be reasonable. Id.
i. Derrick Rodgers
Global asserts both contract and tort claims against Rodgers. Therefore, in
addressing the first prong of the test, the Court must address whether Rodgers either purposefully
availed himself of Nevada or purposefully directed his activities at Nevada. This is because the
purposeful availment analysis applies to contract claims and purposeful direction applies to tort
claims. See Schwarzenegger, 374 F.3d at 802. Purposeful availment may be shown by conduct
“such as executing or performing a contract” in the forum. Id. A showing of purposeful direction,
on the other hand, consists of evidence that the “defendant’s actions outside the forum state [were]
directed at the forum.” Id.
a. Purposeful Availment
As the Court explained above, Rodgers has not purposefully availed himself of
Nevada. Global argues that Nevada has jurisdiction over Rodgers because of the contract Rodgers
executed with it and because Rodgers worked for it. The Court disagrees; neither confers
jurisdiction. As shown above, Rodgers did not execute the contract in Nevada, negotiate the
contract in Nevada, or perform the contract in Nevada. He never worked in Nevada and his work
did not even involve Nevada. Further, the contract states that it is to be governed by
Massachusetts law and so Rodgers does not even avail himself of Nevada law in the interpretation
of the contract. Finally, Global argues that PHP’s business in Nevada confers jurisdiction over
Rodgers. This is inaccurate. PHP’s conduct is insufficient to create jurisdiction over Rodgers
because the two are different entities. Therefore, Rodgers has not purposefully availed himself of
Nevada and the first prong of the test fails with regard to the contract claims.
b. Purposeful Direction
Rodgers has not purposefully directed his activities at Nevada. Purposeful
direction is analyzed under the three-part Calder effects test. Schwarzenegger, 374 F.3d at 804
(citing Calder v. Jones, 465 U.S. 783 (1984)). Calder “requires that the defendant allegedly have
(1) committed an intentional act, (2) expressly aimed at the forum state, (3) causing harm that the
defendant knows is likely to be suffered in the forum state.” Id. (quoting Dole Food, 303 F.3d at
1111). Global argues that since it is incorporated in Nevada, the affect of any tort against it is felt
in Nevada and that Rodgers (and PHP) should reasonably know this. However, Global does not
support its argument that mere incorporation makes the effect of any tort felt in (or aimed at) the
company’s state of incorporation with any legal citations.
The express aiming requirement is not met merely because the plaintiff is
incorporated in the forum state, more is required. See Bancroft & Masters, 223 F.3d at 1087; see
also Schwarzenegger, 374 F.3d at 807 (determining that the fact that defendant may have known
that plaintiff lived in the forum was insufficient to show express aiming at the forum). The Ninth
Circuit has determined “that in appropriate circumstances a corporation can suffer economic harm
both where the bad acts occurred and where the corporation has its principal place of business.”
Dole Food, 303 F.3d at 1113. Other cases from other circuits also refer to a corporation’s
principle place of business, not its state of incorporation, in determining where harm occurred.
See, e.g., Dakota Indus., Inc. v. Dakota Sportswear, Inc., 946 F.2d 1384, 1388–89 (8th Cir. 1991)
(The plaintiff corporation “has its principal place of business in the forum state and thus suffered
the economic injury there.”). While these cases are generally discussing this issue in reference to
choice of law analysis, the reasoning holds here as well.
Personal jurisdiction by way of express aiming does not logically extend from a
corporation’s principle place of business, where it actually is, to its state of incorporation, where
its foundational papers are. Corporations generally incorporate in a particular state either because
they are located in the state or for internal governance and legal matters. However, by
incorporating in a particular forum a corporation may be sued there regardless of whether they do
anything else there. Corporations do this because they believe that certain states internal
governance laws can afford great protection and be very valuable to the corporation. However, it
does not follow that by this strategy the corporation gains the right to sue anybody else in that
same forum regardless of where the bad acts took place. Here, where there is no evidence that the
bad acts actually took place in Nevada, were in any way aimed or directed at Nevada, or that the
Defendants knew the effect of which would occur in Nevada, the Calder test and the purposeful
direction prong are not met.
c. Remaining Prongs
Since the Court has determined that Rodgers neither purposefully availed himself
nor purposefully directed his actions at the forum, the Court need not address the other two
prongs. Nonetheless, the Court will address them succinctly. First, the Court has already
determined that Rodgers did not engage in activities sufficiently related to this forum for them to
count in the Court’s analysis and therefore the claims cannot relate to forum related activity.
Finally, any exercise of jurisdiction based on the facts alleged by Global would be unreasonable
and violate the Court’s sense of fair play and substantial justice. The connection to the forum is
simply too tenuous for the Court to assert jurisdiction. Therefore, even if the first two prongs were
met, the Court would not have specific jurisdiction over Rodgers. Because Global does not satisfy
the requirements for either general or specific personal jurisdiction, the Court grants the motion to
dismiss as regards Rodgers.
ii. People Helping People, Inc.
While Global asserts both contract and tort claims against Rodgers, Global does not
allege the contractual claims against PHP. The Court, therefore, need only address purposeful
direction in analyzing the first prong of the three-prong specific jurisdiction test detailed above.
a. Purposeful Direction
Under the Calder effects test used above, PHP’s conduct does not meet the
purposeful direction requirement. Global makes the same arguments against PHP as it did against
Rodgers and therefore the same analysis applies. Again, Global does not support its argument that
mere incorporation makes the effect of PHP’s actions felt in or aimed at Nevada. Therefore the
Calder test and the purposeful direction prong fail.
b. Forum Related Activities
Global does allege some PHP forum related activities. Principally, Global alleges
that PHP has hired away at least four of Global’s Nevada e-associates. However, PHP sufficiently
rebuts these unsupported allegations as to three of the e-associates. While the Court is not certain
that “hire” or even “employ” would be the correct terms to use in the type of arrangements both of
these companies use, the Court determines that it is immaterial. Even if this minor forum related
activity is related to the conduct of which Global complains of, the other two prongs are not met
and therefor the Court will not address this prong further.
c. Fair Play and Substantial Justice
As above, applied to Rodgers, PHP’s connections to the forum are too tenuous to
support specific personal jurisdiction even if all of Global’s factual allegations are true. Any bad
conduct appears to have occurred in North Carolina, where Rodgers and PHP are both located, and
any such conduct was aimed at and felt in Missouri, where Global has its principal place of
business. The connections to Nevada (Global’s incorporation, one known e-associate, and
theoretical e-associate poaching) are too tenuous to support specific jurisdiction. Because the
Court does not have either general or specific jurisdiction over PHP, the Court must grant the
motion to dismiss PHP.
3. Jurisdictional Discovery
The Court denies Global’s request for jurisdictional discovery. Jurisdictional
discovery “may be appropriately granted where pertinent facts bearing on the question of
jurisdiction are controverted or where a more satisfactory showing of the facts is necessary.”
Boschetto v. Hansing, 539 F.3d 1011, 1020 (9th Cir. 2008). The party seeking discovery bears the
burden of showing that the denial of discovery results in actual and substantial prejudice to it. Id.
Here, Global cannot demonstrate actual or substantial prejudice because it still has viable forums
available to it that would not be prejudicial (namely, Missouri, its principal place of business) and
that would be required to apply the same law as this Court would apply. Further, only one
possible witness is in Nevada, the others all appear to be in Missouri or North Carolina. Since
Global cannot demonstrate actual and substantial prejudice, the Court denies its request for
II. Temporary Restraining Order and Preliminary Injunction
The Court cannot issue a temporary restraining order or a preliminary injunction
against parties over which it does not have personal jurisdiction. Since the Court previously
established that it does not have jurisdiction over the defendants to this case and therefore must
dismiss this case in its entirety, the Motion for Temporary Restraining Order and Preliminary
Injunction is denied as moot.
Accordingly, and for good cause appearing,
IT IS HEREBY ORDERED that Defendants’ Motion to Dismiss (#7) is
IT IS FURTHER ORDERED that Global’s Motion for Temporary Restraining
Order and Preliminary Injunction (#8) is DENIED as moot.
The Clerk of the Court is directed to close this case.
Dated: January 7, 2011.
Chief United States District Judge
ROGER L. HUNT