Vermont Business Magazine Vermont’s consumer-protection case against MPHJ Technology Investments, LLC will move forward, according to a decision released late last week denying MPHJ’s motion to dismiss for lack of personal jurisdiction. In denying the motion, the court recognized the state’s “strong interest in protecting its citizens from consumer fraud... In balancing the burdens on both sides here, the interest of the State in protecting its citizens weighs heavily in favor of jurisdiction,” the court concluded.
“MPHJ has done everything in its power to stop the state from proceeding against it on the merits, but has not succeeded. We are pleased to be able to go forward with this litigation,” said Attorney General William H Sorrell.
Walter Judge, the Director of the Litigation Group at Downs Rachlin Martin PLLC in Burlington, said in a statement to Vermont Business Magazine: "Judge Helen Toor, sitting in Washington Superior Court in Montpelier, issued a detailed decision finding that Vermont has specific jurisdiction over an out-of-state company (MPHJ Technology Investments, LLC) based on MPHJ’s activities in sending numerous cease-and-desist letters to Vermont businesses alleging patent infringement and threatening suit. The Vermont Attorney General William Sorrell, on behalf of the State of Vermont, is suing MPHJ, alleging that MPHJ is essentially a “patent troll” and that the letters were sent in bad faith, such that MPHJ violated Vt.’s consumer protection law. The Attorney General concedes that there is no “general” jurisdiction in Vermont over MPHJ, which is not based in Vermont and does not do business here.
"The issue is whether directing letters into a state, by itself, is enough to furnish specific jurisdiction in that state over the letter-sender. Judge Toor recognized that, in many, if not most, cases, it might not. In this case, however, it was that very activity – the sending of (allegedly) bad faith cease-and-desist letters – that forms the basis for the State’s claim against the defendant. Judge Toor analogized the situation to one in which a debt collector sends a dunning letter to a resident of a state in violation of the Fair Debt Collection Practices Act. In such cases, the sending of the letter establishes jurisdiction in the receiving state over the debt collector for allegedly violating the Act. Judge Toor cited a case in which a California court found specific jurisdiction over an out-of-state defendant who had sent text messages to California residents in violation of California consumer protection law. In that case the defendant had knowingly sent unsolicited messages to California cell phone numbers. The California court concluded that it had jurisdiction over the defendant. Judge Toor also noted that other courts have concluded that mailings that allegedly violated state consumer protection laws created jurisdiction in the state into which those mailings were sent. Finally, Judge Toor noted that, since, in its letters to Vermont companies, MPHJ had threatened to sue those companies in Vermont, MPHJ could not realistically claim that having to defend itself in a Vermont court against the State’s consumer protection claims constitutes an unfair hardship. Accordingly, Judge Toor found that Vermont has jurisdiction over MPHJ in this case."
Attorney General Sorrell filed this lawsuit against MPHJ in state court in May 2013. The Attorney General alleged that MPHJ, which claims to have a patent on the process of scanning documents and attaching them to email via a network, sent unfair and deceptive demand letters to businesses and non-profits throughout Vermont. MPHJ initially removed the case to federal court. The federal court, finding no federal jurisdiction, sent the case back to state court in April 2014. The Federal Circuit Court of Appeals dismissed MPHJ’s appeal of that ruling last month.
Source: Vermont Attorney General September 2, 2014