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Inter123 Corporation v. Ghaith

United States District Court, D. Arizona

April 4, 2014

Inter123 Corporation, Plaintiff,
Chadi Ghaith, Defendant.


DAVID G. CAMPBELL, District Judge.

Plaintiff Inter123 Corporation filed this action on March 7, 2014, along with a motion for a temporary restraining order ("TRO") and a preliminary injunction. Docs. 1, 4. The Court entered a TRO on March 14, 2014 (Doc. 15), and Plaintiff now seeks a preliminary injunction. Defendant has moved to vacate the TRO. Doc. 20.

A preliminary injunction hearing was held on March 27, 2014, at which the Court extended the TRO for 14 days and ordered the parties to file additional briefing on a number of issues. Doc. 22. The parties submitted their memoranda (Docs. 23, 24) and Plaintiff filed a motion for alternative service (Doc. 25). An additional hearing was held on April 3, 2014.

After careful consideration, the Court concludes that Defendant, who is located in the country of Lebanon, does not have sufficient contacts with Arizona, related to this case, to support the exercise of personal jurisdiction over him. The Court accordingly will deny Plaintiff's motion for a preliminary injunction and grant Defendant's request to vacate the TRO. The Court recognizes that this decision may permit Defendant to avoid accountability for an alleged (and apparently clear) breach of a contract to sell the domain name to Plaintiff, but the Court is bound to apply legal principles neutrally, and its best application of those principles leads to the conclusion that it does not have personal jurisdiction over Defendant.

I. Legal Standard.

To obtain a preliminary injunction, Plaintiff must establish that it is likely to succeed on the merits, that it is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in its favor, and that an injunction is in the public interest. Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20 (2008). The Ninth Circuit analyzes these four elements using a "sliding scale" approach, in which "the elements of the preliminary injunction test are balanced, so that a stronger showing of one element may offset a weaker showing of another." Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1131 (9th Cir. 2011). An injunction may be granted when serious questions going to the merits are raised and the balance of hardships tips sharply in the plaintiff's favor. Id. at 1135.

II. Analysis.

Plaintiff has not shown a likelihood of success on the merits or the existence of serious questions because Defendant is not subject to personal jurisdiction in this Court. Plaintiff bears the burden of establishing personal jurisdiction. See Ziegler v. Indian River Cnty., 64 F.3d 470, 473 (9th Cir. 1995). As there is no applicable federal statute governing personal jurisdiction, Arizona's long-arm statute applies. See Terracom v. Valley Nat'l Bank, 49 F.3d 555, 559 (9th Cir. 1995). Arizona Rule of Civil Procedure 4.2(a) "provides for personal jurisdiction co-extensive with the limits of federal due process." Doe v. Am. Nat'l Red Cross, 112 F.3d 1048, 1050 (9th Cir. 1997). Federal due process requires that a defendant have "minimum contacts" with the forum state such that the exercise of personal jurisdiction does not offend "traditional notions of fair play and substantial justice." See Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945).

There are two kinds of personal jurisdiction - general and specific. Plaintiff does not contend that Defendant is subject to general jurisdiction in Arizona, which would require a continuous and systematic presence in the state. The Ninth Circuit has established a three-part inquiry for specific jurisdiction: (1) has the defendant purposefully directed his activities at the forum or a resident thereof or performed some act by which he purposefully availed himself of the privilege of conducting activities in the forum, (2) do the claims arise out of or relate to the defendant's forum-related activities, and (3) is the exercise of jurisdiction reasonable? See Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 802 (9th Cir. 2004) (citation omitted). In a contract case, the purposeful availment standard "requires that the defendant engage in some form of affirmative conduct allowing or promoting the transaction of business within the forum state." Gray & Co. v. Firstenberg Mach. Co., 913 F.2d 758, 760 (9th Cir. 1990) (internal citation omitted).

Plaintiff asserts that Defendant has purposefully availed himself of the privilege of conducting business in Arizona by: (1) registering the domain name with GoDaddy, an Arizona-based company, and maintaining it there for four years; (2) consenting in his contract with GoDaddy to be subject to suit Arizona for any dispute between GoDaddy and Defendant; (3) negotiating for the sale of the domain name with Plaintiff, which has its principal place of business in Arizona, and with Plaintiff's President, Jeffrey Peterson, who resides in Arizona; (4) entering into a contract with Plaintiff which called for Plaintiff to transfer funds from Arizona for purchase of the domain name; (5) transferring the domain name from GoDaddy to an Australian company after this lawsuit commenced; and (6) communicating with Mr. Peterson (who was in Arizona) via Facebook after this lawsuit commenced. Doc. 24.

The Court divides these contacts into three categories: (a) Defendant's business dealings with GoDaddy related to the domain name, (b) Defendant's negotiation and execution of the sale contract with Plaintiff, and (c) Defendant's post-litigation actions. The Court will address each category.

A. Dealings with GoDaddy.

Defendant's business dealings with GoDaddy suggest that he personally availed himself of the privilege of doing business in Arizona. He registered his domain name with an Arizona company, kept it here for four years, and consented to suit in Arizona for any disputes he had with GoDaddy. Although these contacts satisfy the first element of the specific jurisdiction test, they do not satisfy the second. The Court cannot conclude that the present lawsuit arises out of Defendant's contacts with GoDaddy.

The Ninth Circuit applies a "but for" analysis to the second element of the specific jurisdiction test. A dispute arises out of forum-related contacts if the claims would not have arisen "but for" those contacts. ...

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