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Wish Atlanta, LLC v. Contextlogic, Inc.

United States District Court, M.D. Georgia, Columbus Division

October 9, 2014

Wish Atlanta, LLC, Plaintiff,
v.
Contextlogic, Inc., Defendant.

ORDER

CLAY D. LAND, Chief District Judge.

Plaintiff Wish Atlanta, LLC ("Wish Atlanta") sued Defendant Contextlogic, Inc. ("Contextlogic") for trademark infringement, trademark dilution, unfair competition, and deceptive trade practices. Presently pending before the Court are Contextlogic's motions to dismiss (1) for lack of personal jurisdiction and (2) for improper venue. In the alternative, Contextlogic moves to transfer this action to the United States District Court for the Northern District of California. For the following reasons, the Court denies all three motions (ECF No. 12).

APPLICABLE STANDARDS

Under Federal Rule of Civil Procedure 12(b)(2), when a plaintiff seeks to have a court exercise personal jurisdiction over a nonresident defendant, that plaintiff "bears the initial burden of alleging in the complaint sufficient facts to make out a prima facie case of jurisdiction.'" Diamond Crystal Brands , Inc. v. Food Movers Int'l, Inc. , 593 F.3d 1249, 1257 (11th Cir. 2010) (quoting United Techs. Corp. v. Mazer , 556 F.3d 1260, 1274 (11th Cir. 2009)). If the defendant presents evidence challenging jurisdiction, "the burden traditionally shifts back to the plaintiff to produce evidence supporting jurisdiction." Meier ex rel. Meier v. Sun Int'l Hotels, Ltd. , 288 F.3d 1264, 1269 (11th Cir. 2002). "Where the plaintiff's complaint and supporting evidence conflict with the defendant's affidavits, the court must construe all reasonable inferences in favor of the plaintiff." Id.

Under Federal Rule of Civil Procedure 12(b)(3), the plaintiff bears the burden of proving that venue is proper. Delong Equip. Co. v. Wash. Mills Abrasive Co. , 840 F.2d 843, 845 (11th Cir. 1988). "The district court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought." 28 U.S.C. § 1406(a).

FACTUAL BACKGROUND

The Court permitted the parties to engage in limited jurisdictional discovery to ascertain the full nature of Contextlogic's contacts with the state of Georgia. The present record reveals the following. The material facts are not disputed.

Contextlogic is a Delaware corporation with its principal place of business in San Francisco, California. Contextlogic's offices, employees, business records, and computer servers are all located in the San Francisco Bay Area. Contextlogic employs no one in Georgia and has never employed a person to travel to Georgia to conduct business on behalf of Contextlogic. Contextlogic does not own real property in Georgia. Contextlogic never registered to conduct business in Georgia nor had an agent for service of process in Georgia.

Contextlogic facilitates the sale of fashion merchandise through an online website and smart phone application. The website and application work the same way: consumers make "wish lists" of products they want to purchase and then purchase those products through Contextlogic. While Contextlogic facilitates the sale, Contextlogic does not directly sell the merchandise. Instead, third-party suppliers sell and ship the merchandise. In exchange for facilitating the sale between the consumer and the third-party supplier, Contextlogic receives a 10-15% fee from each sale. Originally, Contextlogic conducted business on a website with the domain name "www.wishwall.me." At a later date disputed by the parties (November 2011 or 2012), Contextlogic began operating under the domain name "www.wish.com." Compl. ¶ 7, ECF No. 1; Mem. in Supp. of Def.'s Mot. to Dismiss Ex. A, Szulczewski Decl. ¶ 17, ECF No. 12-2. The smart phone application is known as the "WISH app." The website and application are accessible worldwide.

To facilitate its business, Contextlogic contracts with eight suppliers located in Georgia to sell merchandise on Contextlogic's website. Consumers can register to use Contextlogic's website, and 99, 446 registered users reside in the state of Georgia (0.38% of all users worldwide). Of those users, 3, 982 reside in the Middle District of Georgia (0.0153% of all users worldwide). In the past year, Contextlogic facilitated 16, 731 transactions with Georgia consumers over its website and smart phone application. Of those transactions, 3, 765 occurred in the Middle District of Georgia. From the transactions with Georgia consumers, Contextlogic sold $506, 669.58 in products (1.005% of all sales worldwide) and derived $26, 501.02 in revenue. From the transactions with the Middle District of Georgia alone, Contextlogic sold $139, 946.13 in products (0.291% of all sales worldwide) and derived $8, 350.23 in revenue.

Wish Atlanta, a Georgia corporation, conducts an online fashion merchandise store similar to Contextlogic's store. Wish Atlanta owns a federal trademark to the "Wish" mark. Wish Atlanta has used the "Wish" mark in connection with its retail store since 2004 and in its online store since February 2010. Wish Atlanta alleges that Contextlogic operates an online store that sells goods similar to those sold by Wish Atlanta while wrongfully using the "Wish" trademark.

DISCUSSION

I. 12(b)(2) Motion to Dismiss for Lack of Personal Jurisdiction

To determine whether Contextlogic is subject to personal jurisdiction in Georgia, the Court engages in a two-step analysis. Diamond Crystal Brands , 593 F.3d at 1257. First, the Georgia long-arm statute must permit the Court to exercise jurisdiction over Contextlogic. Horizon Aggressive Growth, L.P. v. Rothstein-Kass, P.A. , 421 F.3d 1162, 1166 (11th Cir. 2005). The Georgia long-arm statute is not coextensive with the Due Process Clause of the Fourteenth Amendment to the United States Constitution. Diamond Crystal Brands , 593 F.3d at 1259. Instead, the long-arm statute "imposes independent obligations that a plaintiff must establish for the exercise of personal jurisdiction that are distinct from the demands of procedural due process." Id. If the long-arm statute confers jurisdiction, the second step is for the Court to evaluate whether the exercise of jurisdiction comports with the Due Process Clause of the Fourteenth Amendment. Id. at 1257-58.

A. Georgia's Long-Arm Statute

Wish Atlanta relies on subsection (1) of the Georgia long-arm statute for jurisdiction. Subsection (1) provides for jurisdiction if Contextlogic "[t]ransacts any business" within Georgia. O.C.G.A. § 9-10-91(1). In the alternative, Wish Atlanta contends that subsection (3) provides jurisdiction. Subsection (3) permits the Court to exercise jurisdiction if Contextlogic "[c]ommits a tortious injury in this state caused by an act or omission outside this state if the tortfeasor... derives substantial revenue from goods used or consumed or services rendered in this state." O.C.G.A. § 9-10-91(3). Jurisdiction is proper pursuant to subsection (1), so analysis of subsection (3) is unnecessary.

In determining whether subsection (1) confers jurisdiction, the Court interprets the term "transacts any business" literally. Innovative Clinical & Consulting Servs., LLC v. First Nat'l Bank of Ames , 279 Ga. 672, 675, 620 S.E.2d 352, 355 (2005). The Eleventh Circuit defined "transacts any business" as "the doing of some act or consummation of some transaction." Diamond Crystal Brands , 593 F.3d at 1260. "[U]nless and until the Georgia courts provide further authoritative guidance, courts in this circuit construing the statute literally will have to delineate the precise contours of the [t]ransacts any business within this state' requirement of O.C.G.A. § 9-10-91(1) according to the facts of each case." Id. at 1263 (second alteration in original). Contextlogic "need not physically enter the state" to transact business in Georgia. Id. at 1264. Not only is physical presence unnecessary, but business transactions may be "conducted through... Internet contacts." ATCO Sign & Lighting Co., LLC v. Stamm Mfg., Inc. , 298 Ga.App. 528, 534, 680 S.E.2d 571, 576 (2009). Subsection (1), however, "expressly depends on the actual transaction of business." Diamond Crystal Brands , 593 F.3d at 1260 (emphasis added).

Contextlogic facilitated more than 16, 000 online transactions with Georgia consumers in the past year. But Contextlogic argues that it did not transact business in Georgia because consumers do not purchase products directly from Contextlogic. Instead, Contextlogic's website provides a platform for third-party suppliers to sell products, and Contextlogic receives 10-15% of each sale. Neither the Eleventh Circuit nor any federal court within the circuit has addressed whether a corporation transacts business pursuant to subsection (1) when the corporation maintains a website that facilitates sales through third-party suppliers and the corporation receives compensation from each sale.

Following the Georgia Supreme Court's instruction to interpret the words "transacts any business" literally, the Court finds that Contextlogic transacts business in Georgia each time it derives income from Georgia consumers by providing a service in exchange for compensation. See Innovative Clinical & Consulting , 279 Ga. at 675, 620 S.E.2d at 355 ("[W]e must give the same literal construction to subsection (1) of OCGA § 9-10-91 that we give to the other subsections."). Contextlogic provides a website that allows Georgia consumers to develop a list of products they want to purchase, and it facilitates the purchase of those products from third-party suppliers. In exchange for providing this service, Contextlogic retains a 10-15% transaction fee from each sale. Such online sales to Georgia consumers, from which Contextlogic derived more than $26, 000 in annual revenue, constitute transacting business under subsection (1).

Contextlogic relies heavily on the Court's previous order in Jordan Outdoor Enterprises, Ltd. v. That 70's Store, LLC , 819 F.Supp.2d 1338, 1343-44 (M.D. Ga. 2011), where the Court determined that merely maintaining a website does not constitute transacting business in Georgia under subsection (1). The crucial fact in Jordan Outdoor Enterprises , however, was that "Defendants did not sell any products to Georgia residents through the internet, " and thus "the websites failed to generate any business for Defendants in Georgia." Id. at 1343. By contrast, in the past year Contextlogic facilitated 16, 731 transactions in Georgia, generated $506, 669.58 from those sales, and derived $26, 501.02 in revenue from those sales. It makes no difference that consumers purchase the products from third-party suppliers, ...


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