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Reynolds v. InVivo Therapeutics Holdings Corp.

United States District Court, D. New Hampshire

November 30, 2016

Francis M. Reynolds
InVivo Therapeutics Holdings Corp., et al. Opinion No. 2016 DNH 214

          Christopher H.M. Carter, Esq.

          Gary R. Greenberg, Esq.

          Cliff Anderson, Esq.


          Joseph N. Laplante United States District Judge.

         This defamation action turns on whether this court has specific personal jurisdiction over several Massachusetts citizens and a Nevada corporation that has its principal place of business in Massachusetts. Plaintiff Francis Reynolds, a New Hampshire businessman, brings claims of defamation, conspiracy, and tortious interference with prospective contractual relations against his former corporation, InVivo Therapeutics Corp., and several of its officers. This court has subject-matter jurisdiction under 28 U.S.C. § 1332(a) (diversity).

         Moving to dismiss this action, the defendants challenge this court's personal jurisdiction over them. See Fed.R.Civ.P. 12(b)(2). They also move to dismiss for failure to state a claim for relief. See Fed.R.Civ.P. 12(b)(6). After holding oral argument, the court grants the defendants' motion. The plaintiff has failed to establish that defendants have the minimum contacts with New Hampshire required for this court to exercise personal jurisdiction over them in this action consistent with the Fourteenth Amendment's Due Process Clause. Specifically, the plaintiff has not demonstrated relatedness between his claims and the defendants' forum-based activities or that the defendants engaged in purposeful contact with the forum such that they could expect to be haled into court to answer for their actions here.

         I. Applicable legal standard

         “Personal jurisdiction implicates the power of a court over a defendant . . . . [B]oth its source and its outer limits are defined exclusively by the Constitution, ” namely, the due process clause of the Fourteenth Amendment. Foster-Miller, Inc. v. Babcock & Wilcox Can., 46 F.3d 138, 143-44 (1st Cir. 1995) (citing Ins. Corp. of Ir., Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702 (1982)); U.S. Const. Am. XIV. “To establish personal jurisdiction in a diversity case, a plaintiff must satisfy both the forum state's long-arm statute and the Due Process Clause of the Fourteenth Amendment.” C.W. Downer & Co. v. Bioriginal Food & Sci. Corp., 771 F.3d 59, 65 (1st Cir. 2014). Where, as here, the applicable long-arm statute is coextensive with federal due process limitations, the court proceeds directly to the due process inquiry. See Phillips Exeter Acad. v. Howard Phillips Fund, 196 F.3d 284, 287 (1st Cir. 1999).

         Due process requires that a defendant have sufficient “minimum contacts” with the forum “such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.” Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (internal quotations omitted). Consistent with those requirements, a court may exercise either general or specific jurisdiction over the defendants. Reynolds invokes only this court's specific jurisdiction over the defendants.[1]Specific jurisdiction “is confined to adjudication of issues deriving from, or connected with, the very controversy that establishes jurisdiction.” Goodyear, 131 S.Ct. at 2851 (internal quotations omitted). “[T]he constitutional test for determining specific jurisdiction . . . has three distinct components, namely, relatedness, purposeful availment (sometimes called ‘minimum contacts'), and reasonableness.” Adelson v. Hananel, 652 F.3d 75, 80-81 (1st Cir. 2011) (internal quotations and citations omitted).

         The plaintiff bears the burden of demonstrating that these three components are satisfied by “proffer[ing] evidence which, if credited, is sufficient to support findings of all facts essential to personal jurisdiction.”[2] A Corp. v. All Am. Plumbing, Inc., 812 F.3d 54, 58 (1st Cir. 2016) (quoting Phillips v. Prairie Eye Ctr., 530 F.3d 22, 26 (1st Cir. 2008)). “To satisfy the prima facie standard in a specific jurisdiction case, a plaintiff may not rest on mere allegations but, rather, must submit competent evidence showing sufficient dispute-related contacts between the defendant and the forum.” Carreras v. PMG Collins, LLC, 660 F.3d 549, 552 (1st Cir. 2011). The court “view[s] this evidence, together with any evidence proffered by the defendant[s], in the light most favorable to the plaintiff and draw[s] all reasonable inferences therefrom in the plaintiff's favor, ” albeit without “credit[ing] bald allegations or unsupported conclusions.” Id. The following factual summary takes this approach.

         II. Background

         Reynolds founded InVivo, a medical device company, in November 2005. He served as the company's CEO, CFO, CSO, President, and Chairman of the Board of Directors from that time until August 22, 2013.[3] Though InVivo established its headquarters in Cambridge, Massachusetts, in 2012, Reynolds largely worked out of his home in Salem, New Hampshire, between October 2012 and his departure from the company in August 2013. That August, Reynolds resigned from his position as Chairman, CEO, and CFO of InVivo.[4]

         One week after resigning from InVivo, Reynolds formed a new company, PixarBio, which focused on developing non-opioid pain relief products. PixarBio operated out of Reynolds' Salem home until it moved to Medford, Massachusetts, in early 2014.[5] In March 2016, it obtained additional office facilities in Salem.[6]

         Following Reynolds' resignation from InVivo, Reynolds alleges, the defendants made several allegedly defamatory statements about his work at that company. First, the company issued two press releases. In one, dated August 22, 2013, InVivo announced that Reynolds had resigned from the company due to his medical condition.[7] The next press release, issued August 27, 2013, announced “an update on the clinical timeline for its biopolymer scaffolding to treat acute [spinal cord injuries]. The Company now expects that, based on the judgment of new management, it will enroll the first patient during the first quarter of 2014.”[8] Following the press releases, Reynolds alleges that defendant Luque made certain statements to investors. Specifically, in September 2013, defendant Luque allegedly told an InVivo investor that Reynolds “had been forced to resign because the NeuroScaffold clinical studies were ‘bogus' and their result had been ‘fudged' by [Reynolds], ” and that “Plaintiff misrepresented the timeline for InVivo to obtain regulatory approval for the NeuroScaffold.”[9] Reynolds further alleges that Luque made similar statements during an August 2014 telephone conference with a second InVivo investor, to the effect that Reynolds had “misled people” about clinical trial results and “deliberately manipulated the release of test results to distort the beneficial effects of the NeuroScaffold.”[10] These allegations, Reynolds contends, were then circulated in the biotechnology community via, among other media, “a crowd-sourced service for financial markets” called “Seeking Alpha.”[11]

         On July 22, 2016, Reynolds filed this action in Hillsborough County Superior Court, asserting claims for defamation, conspiracy, and tortious interference with prospective contractual relations against all defendants, and a claim based in the doctrine of respondeat superior against InVivo. Defendants subsequently removed the case to this court in light of the parties' diversity of citizenship. See 28 U.S.C. § 1332(c).

         III. Analysis

         As discussed supra, “the constitutional test for determining specific jurisdiction . . . has three distinct components, namely, relatedness, purposeful availment (sometimes called ‘minimum contacts'), and reasonableness.” Adelson, 652 F.3d at 80-81 (internal quotations and citations omitted). The court addresses these components in that order, see United States v. Swiss Am. Bank, Ltd., 274 F.3d 610, 621 (1st Cir. 2001) (quoting Phillips Exeter Acad., 196 F.3d at 288), and concludes that the plaintiff has not established this court's personal jurisdiction over the defendants.[12]

         A. Relatedness

         “To satisfy the relatedness prong, the plaintiff must show a nexus between [his] claims and the defendants' forum-based activities. Although this is a ‘relaxed standard, ' it nevertheless requires [the court] to hone in ‘on the relationship between the defendant and the forum.'” A Corp., 812 F.3d 54, 59 (1st Cir. 2016). “[A] defendant need not be physically present in the forum state” for such a nexus to exist, N. Laminate Sales, Inc. v. Davis, 403 F.3d 14, 25 (1st Cir. 2005) (citing Calder, 465 U.S. at 789), and when he is not, the court “looks for some other indication that the defendant reached into the forum, such as mail or telephone contacts, ” Swiss Am. Bank, 274 F.3d at 622.

         In arguing that a nexus exists between the defendants' activities and the forum, the plaintiff invokes only his allegations that he was injured in New Hampshire by the effects of the defendants' conduct.[13] It is, however, the defendants, and not the plaintiff or any third parties, who must create the contacts with the forum state. Walden v. Fiore, 134 S.Ct. 1115, 1122 (2014) (minimum contacts analysis “looks to defendant's contacts with forum State itself, not the defendant's contacts with persons who reside there”). That the plaintiff felt the effects of the defendants' activities in the forum does not, alone, qualify as related contacts. Swiss Am. Bank, 274 F.3d at 622-23.

         In fact, the First Circuit Court of Appeals has specifically cautioned against conflating the relatedness requirement with the effects test for purposeful availment, discussed infra Part III.B, which is what the plaintiff invites the court to do here. Swiss Am. Bank, 274 F.3d at 622-25. The court must, accordingly, decline that invitation. None of the other cases relied upon by the plaintiffs convince it to do otherwise. In each of those cases, the defendant acted within the forum; the plaintiff's injuries did not constitute the sole relationship between the forum and the defendants. See R & R Auction Co., LLC v. Johnson, 2016 DNH 40, 20-21 (Barbadoro, J.) (plaintiff met relatedness requirement because defendant made allegedly false statements to “someone he knew to be a New Hampshire-based reporter”); New Eng. Coll. v. Drew Univ., 2009 DNH 158, 14 (Laplante, J.) (defendant university's agent acted within New Hampshire to interfere with plaintiff's business relations); Sindi v. El-Moslimany, No. 13-cv-10798-IT, 2014 WL 6893537, at *8 (D. Mass. Dec. 5, 2014), 2014 WL 6893537, at *8 (finding relatedness where defendant “came to Needham, Massachusetts and . . . allegedly followed [the plaintiff] around” and defendant's conduct “affected [plaintiff's] relationship with Massachusetts organizations”).

         B. Purposeful availment

         Even had the plaintiff satisfied the relatedness requirement, the court would still be unable to exercise specific personal jurisdiction over the defendants because the plaintiff has not shown purposeful availment. The Supreme Court has adopted, and the First Circuit Court of Appeals has employed, “an effects test for determining purposeful availment in the context of defamation cases.” Noonan v. Winston Co.,135 F.3d 85, 90 (1st Cir. 1998) (citing Calder v. Jones,465 U.S. 783, 789 (1984)). This test, unlike that for relatedness, focuses on the location at which the effects of the alleged defamation are directed ...

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