In The News

In The News

New York Law Journal

By Beth Bar
Published on June 29, 2007

A New York-based moving company cannot bring a lawsuit in Manhattan federal court against an Iowa resident who operates a Web site the company says defamed it, a 2nd U.S. Circuit Court of Appeals has ruled.

Finding that Best Van Lines failed to demonstrate personal jurisdiction under New York's "long-arm" statute, the circuit, in what it said was the first appellate decision to consider the issue, upheld a Southern District judge's dismissal of the complaint against the operator of MovingScam.com.

"We conclude that while New York appellate courts have not decided this precise issue, under well-settled principles of New York law, the district court did not have such jurisdiction," 2nd Circuit Judge Robert D. Sack wrote for the court in Best Van Lines v. Walker, 04-3924-cv.

Sack said Best Van Lines failed to allege facts sufficient to show that Walker had transacted business in New York for purposes of CPLR §302(a)(1) or that its suit arose from such transactions for purposes of long-arm jurisdiction.

2nd Circuit Judges Amalya L. Kearse and Joseph M. McLaughlin joined the opinion.

Defendant Timothy Walker, a resident of Waverly, Iowa, operates the Web site out of his home. He says he created it after a moving company cheated him when he moved from Virginia to Nevada.

Sack said the site "provides consumer-related comments, most of them derogatory, about household movers in the United States."

In August 2003, Walker posted comments at two different locations on the site asserting that Best Van Lines was operating without legal authorization and without the insurance required by law.

A month later, Best Van Lines filed a diversity action in the Southern District of New York, alleging that the statements were false, defamatory, and made with an intent to harm the company. The company sought to have Walker enjoined from publishing further defamatory statements about Best Van Lines and to pay compensatory and punitive damages totaling $1.5 million.

Walker moved to transfer the action to the U.S. District Court for the Southern District of Iowa. Best Van Lines opposed the motion, but it also interpreted it as a motion to dismiss for lack of personal jurisdiction.

On May 4, 2004, Southern District Judge Gerard E. Lynch granted Walker's motion to dismiss on the ground that CPLR §302(a), New York's "long-arm" statute, did not give the court personal jurisdiction over Walker. Best Van Lines v. Walker, 03 Civ. 6585.

Federal courts hearing diversity suits apply state substantive law. The company appealed.

At the circuit, Sack explained that CPLR §§302(a)(2) and (3) permit jurisdiction over tortious acts committed by non-New Yorkers in New York and those committed outside New York that injure state domiciliaries, but exempt defamation claims.

"One might think that New York State Legislature meant for no provision of the long-arm statute to grant jurisdiction over an-out-of-state defendant with respect to a cause of action for defamation," Sack said. "But the New York courts have not gone that far."

Even though §302(a)(3), which concerns out-of-state acts that injure New York, explicitly excludes defamation cases, he said a state court can claim jurisdiction over a non-domiciliary under §302(a)(1) if the defendant transacts any business within the state or contracts anywhere to supply goods or services to the state.

 

He said that while no New York appellate court has yet explicitly analyzed a case of Web site defamation under the "transacting business" provision of §302, several federal district courts in New York have.

"These courts have concluded that the posting of defamatory material on a Web site accessible in New York does not, without more, constitute 'transact[ing] business' in New York for purposes of New York's long-arm statute," he said.

The judge said New York case law establishes that making defamatory statements outside of New York about New York citizens does not, without more, provide a basis for jurisdiction, even when those statements are published in media accessible to New York readers. He cited Realuyo v. Villa Abrille, 01 Civ. 10158 (S.D.N.Y. July 8, 2003) and Starmedia Network v. Star Media, 00 Civ. 4647 for that conclusion.

Sack then analyzed whether Walker's "Internet postings or other activities [were] the kind of activity 'by which [he] purposely avail[ed him]self of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws,' and over which the New York Legislature intended New York courts have jurisdiction."

He said anyone -- whether in New York state or throughout the world -- could view and download the allegedly defamatory articles. He also said the nature of Walker's comments does not suggest that they were purposefully directed to New Yorkers rather than to a nationwide audience.

"Material on the Web site discusses interstate moving companies located in many states for the putative benefit of potential persons in many states who will undergo household moves," he said. "Walker's comments, therefore, do not establish that, for purposes of section 302(1), he 'purposefully availed himself of the privilege of conducting activities within New York, thus invoking the benefits and protections of its laws.'"

Walker, who represented himself, could not be reached for comment. The circuit asked Hogan & Hartson to file a friend of the court brief on Walker's behalf. New York partners Slade R. Metcalf and Katherine M. Bolger worked on the matter pro bono.

Thomas Freedman, Terrence A. Oved, Darren Oved and Eric S. Crusius of Oved & Oved represented Best Van Lines.

"We ... are saddened that the court chose to interpret the relevant statute in such a manner so as to provide added protections for the rights of out-of-state alleged defamers at the expense of New York residents," Darren Oved said.

He added that he was "disappointed" that the 2nd Circuit did not, at a minimum, permit discovery on the issue of personal jurisdiction prior to rendering its decision.

His client may ask for an en banc review of the case, Oved said.

 

 

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