SCVNGR, Inc. v. Punchh, Inc.: The SJC Instructs Trial Courts and Litigants on Analyzing Challenges to Personal Jurisdiction

by Evan Fray-Witzer

Case Focus

In SCVNGR, Inc. v. Punchh, Inc., 478 Mass. 324 (2017), the Supreme Judicial Court reversed a Superior Court Business Litigation Session decision that had dismissed the plaintiff’s complaint for lack of personal jurisdiction.  Notably, the SJC’s opinion prohibits the trial courts, when deciding a challenge to personal jurisdiction, from engaging in the frequently employed practice of skipping the analysis under the long-arm statute and jumping directly to the analysis under the Due Process Clause of the U.S. Constitution.  In reaching this conclusion, the SJC “clarif[ied]” that “the long-arm statute’s reach is not coextensive with what due process allows.” Id. at 330 n.9.

Background

SCVNGR, Inc., a Massachusetts-based company doing business as LevelUp, sued Punchh, Inc., a California-based competitor, for defamation.   Punchh moved to dismiss for lack of personal jurisdiction. Id. at 325. After allowing some limited jurisdictional discovery, Judge Kaplan of the Business Litigation Section allowed Punchh’s motion to dismiss, finding that Punchh lacked the minimum contacts with Massachusetts necessary for an exercise of personal jurisdiction to comport with the Due Process requirements of the U. S. Constitution. Id.  Although Judge Kaplan recognized that “typically a Superior Court judge presented with a Rule 12(b)(2) argument begins with an analysis of whether the requirements of the long-arm statute have been met,” he nevertheless proceeded directly to the federal Due Process considerations, noting that this was where “both parties ha[d] focused their arguments.”  Id.

LevelUp appealed the dismissal to the Appeals Court.  The SJC, of its own accord, took direct appellate review.  Id.

Analysis

“Prior to exercising personal jurisdiction over a nonresident defendant, a judge must determine that doing so comports with both the forum’s long-arm statute and the requirements of the United States Constitution.”  Id. at 325 (citing World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 290 (1980)).  Massachusetts’s long-arm statute, G.L. c. 223A, § 3, provides eight enumerated categories of actions which can give rise to personal jurisdiction over a foreign defendant.  Two of those categories address claims arising out of domestic relationships (marriage, divorce, child custody, and the like); one from the ownership of real estate within Massachusetts; and one from offering insurance within the Commonwealth.  The remaining four categories address claims that arise out of a defendant’s: (a) transacting business within Massachusetts; (b) contracting for goods or services within Massachusetts; (c) committing a tort within Massachusetts; and (d) committing a tort outside of Massachusetts that causes injury within Massachusetts if the Defendant also does or solicits business within Massachusetts or derives substantial revenues from goods or services provided in Massachusetts.

Unlike a number of other states, Massachusetts’s long-arm statute does not explicitly extend personal jurisdiction to the limits of the U. S. Constitution.  Nevertheless, two seminal SJC cases had seemed to interpret the statute to have the same broad scope.  In “Automatic” Sprinkler Corp. v. Seneca Foods Corp., 361 Mass. 441, 443 (1972), the SJC held: “We see the function of the long arm statute as an assertion of jurisdiction over the person to the limits allowed by the Constitution of the United States.”  Likewise, in Good Hope Indus., Inc. v. Ryder Scott Co., 378 Mass. 1, 5-6 (1979), the SJC held: “Since we have stated that our long arm statute, G. L. c. 223A, functions as ‘an assertion of jurisdiction over the person to the limits allowed by the Constitution of the United States,’ …the two questions tend to converge” (quoting “Automatic” Sprinkler). Good Hope also, however, contained the seeds of SCVNGR’s “clarif[ication],” stating that the long-arm statute “asserts jurisdiction over the person to the constitutional limit only when some basis for jurisdiction enumerated in the statute has been established.”  Good Hope, 378 Mass. at 1 (emphasis added).

Prior to SCVNGR, state and federal cases applying Massachusetts law frequently cited “Automatic” Sprinkler and/or Good Hope in support of the proposition that Massachusetts’s long-arm statute extended to the outer reaches of the Due Process Clause and that, as a result, the two-step inquiry could be addressed in a single inquiry.  See, e.g., OpenRisk, LLC v. Roston, 90 Mass. App. Ct. 1107 (2016) (Rule 1:28) (“The Massachusetts long-arm statute, G. L. c. 223A, § 3, however, allows for an assertion of jurisdiction over the person to the limits allowed by the Constitution of the United States. …It is appropriate, therefore, for the court to sidestep the statutory inquiry and proceed directly to the constitutional analysis”) (citations omitted); FTI, LLC v. Duffy, 2017 Mass. Super. LEXIS 93, at *8 (Suffolk Super. Ct. 2017); Let’s Adopt! Glob., Inc. v. Macey, 32 Mass. L. Rep. 573 (Worcester Super. Ct. 2015); Daynard v. Ness, Motley, Loadholt, Richardson & Poole, P.A., 290 F.3d 42, 52 (1st Cir. 2002).

In light of this precedent, the SCVNGR parties’ decision to focus exclusively on the question of whether the Court could exercise jurisdiction consistent with Due Process made perfect sense.  In baseball terms (this is, after all, summer in New England): since the runner cannot advance to third without touching both first and second bases, if the runner missed second, the question of whether he touched first is moot.  Indeed, in at least two cases pre-dating SCVNGR the First Circuit noted that even if Massachusetts’ long-arm statute might not extend to the limits of Due Process, examining the long-arm statute was not necessary if the claims clearly failed to meet the requirements of Due Process.  See A Corp. v. All Am. Plumbing, Inc., 812 F.3d 54, 58-59 (1st Cir. 2016); Copia Communs., LLC v. AMResorts, L.P., 812 F.3d 1, 3-4 (1st Cir. 2016).

In SCVNGR, though, the SJC was having none of it. It first clarified that “Automatic” Sprinkler’s sweeping language was more limited than might first appear:

To the extent that “Automatic” Sprinkler …identifies “the function of the long arm statute as an assertion of jurisdiction over the person to the limits allowed by the Constitution of the United States,” we take this opportunity to clarify that, in accordance with Good Hope. . . the long-arm statute’s reach is not coextensive with what due process allows.

SCVNGR, 478 Mass. at 330 n.9.

The SJC then stated that the order in which a lower court examines the two prongs of personal jurisdiction does indeed matter:

Our jurisprudence since Good Hope also makes clear that courts should consider the long-arm statute first, before approaching the constitutional question. …In this regard, it is canonical that courts should, where possible, avoid unnecessary constitutional decisions. … Determining first whether the long-arm statute’s requirements are satisfied is consonant with the “duty to avoid unnecessary decisions of serious constitutional issues. … [W]e cannot let the actions of private litigants force us to decide unnecessarily a serious question of constitutional law.”

Id. at 330 (citations omitted).

As a result, the SJC remanded the case to the Superior Court for a determination, first, as to whether the long-arm statute’s requirements were met and only then for a determination as to whether an exercise of jurisdiction comports with the requirements of Due Process.  In doing so, the SJC noted that the subsequent re-examination of the constitutional due process question would likely take place “on a presumably fuller record,” apparently assuming that the trial court would allow the parties some additional jurisdictional discovery before ruling on the remanded motion (id. at 330).

Another recent SJC opinion drives home the point that neither the parties nor the court can leapfrog over the long-arm statute and proceed directly to the constitutional question.  In Exxon Mobil Corp. v. Attorney General, 479 Mass. 312, 317 n.3 (2018), citing SCVNGR, the SJC noted that although the parties’ argument on the jurisdictional issues focused exclusively on the due process question, the Court would first analyze them under the long-arm statute, which it proceeded to do.

Takeaways

Two practical takeaways are clear:

1. Notwithstanding any suggestion to the contrary in prior precedent, “the long-arm statute’s reach is not coextensive with what due process allows.”
2. Neither practitioners nor the Court should address whether an assertion of personal jurisdiction comports with the requirements of the Due Process Clause without first addressing whether the plaintiff’s claims assert a cause of action that brings the case within the parameters of the Massachusetts long-arm statute.  In short, although the plaintiff may still get tagged-out for failing to touch second base, we will not know until a call is made at first.

Evan Fray-Witzer is a founding partner of Ciampa Fray-Witzer. He maintains an active employment litigation, counseling, and defense practice; a sophisticated litigation and counseling practice, representing businesses in a wide range of commercial disputes; and a thriving appellate practice in both the state and Federal Courts.