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Dudnikov v. Chalk & Vermilion Fine Arts - 514 F.3d 1063 (10th Cir. 2008)

Rule:

The United States Supreme Court has held that, to exercise jurisdiction in harmony with due process, defendants must have minimum contacts with the forum state, such that having to defend a lawsuit there would not offend traditional notions of fair play and substantial justice. Because a state's sovereignty is territorial in nature, a defendant's contacts with the forum state must be sufficient such that, notwithstanding its lack of physical presence in the state, the state's exercise of sovereignty over it can be described as fair and just. A venerated principle to be sure, it is also one that has long eluded a definitive legal test and proven fertile ground for debate by law students, lawyers, and judges alike. The United States Supreme Court has instructed that the minimum contacts standard requires, first, that the out-of-state defendant must have purposefully directed its activities at residents of the forum state, and second, that the plaintiff's injuries must arise out of defendant's forum-related activities. Additionally, exercising personal jurisdiction over defendants must always be consonant with traditional notions of fair play and substantial justice. While those elements afford some shape to the due process inquiry, each is not without its own interpretative difficulties.

Facts:

Karen Dudnikov and Michael Meadors, the plaintiffs, were eBay sellers of variety of fabrics from their home in Colorado. Two of plaintiffs' prints play on famous images by the artist Erte, Symphony in Black and Ebony on White. Defendants Chalk & Vermilion Fine Arts Inc and Sevenarts, Ltd., a Delaware corporation and a British corporation respectively, were owners of the rights to the Erte images, saw plaintiffs' eBay auction page, and came to the conclusion that plaintiffs' prints infringed their copyrights. Defendants promptly contacted eBay in California and successfully suspended plaintiffs' auction. Plaintiffs initiated an action in federal district court in Colorado seeking a declaratory judgment that their prints did not infringe defendants' copyrights. Defendants responded with a motion to dismiss, arguing that the court lacked personal jurisdiction over them. The district court concurred and dismissed plaintiffs' complaint. Plaintiffs appealed the decision of the district court.

Issue:

Was the action filed by the plaintiffs properly dismissed based on the lack of personal jurisdiction of the Colorado court?

Answer:

No.

Conclusion:

The Court held that the plaintiff-sellers met the minimum contacts and purposeful availment requirements where the defendant-owners sent a notice of claimed infringement (NOCI) to eBay expressly intending to suspend the plaintiff-sellers' auction in Colorado. The action of plaintiff-sellers therefore arose from an effort to reverse the intended consequences of the owners' NOCI, which they incurred in Colorado. Furthermore, the district court had to assume that the owners knew that the sellers business was located in Colorado. Finally, the Court held that traditional notions of fair play or substantial justice would not have precluded suit in the district of Colorado. While admittedly a burden, defendants have not indicated that their defense of this case would be hindered by the territorial limits on the Colorado district court's power to subpoena relevant witnesses, or indeed hampered in any other significant way. California had virtually nothing to do with this litigation: eBay was not a party to this suit. The Court reversed the judgment of the district court and remanded the case for further proceedings.

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