Marycle v. First Choice

890 A.2d 818

166 Md. App. 481

MARYCLE, LLC, et al. v. FIRST CHOICE INTERNET, INC., et al.

No. 2321, September Term, 2004.

Court of Special Appeals of Maryland.

January 26, 2006.

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Michael S. Rothman of Rockville, for appellant.

Andrew M. Dansicker (Schulman, Treem, Kaminkow, Gilden & Ravenell, PA on the brief) Baltimore, for appellee.

Argued before SALMON, ADKINS and BARBERA, JJ.

ADKINS, J.

This case requires us to consider how established law governing personal jurisdiction and the Commerce Clause applies in cyberspace. Asserting claims for both monetary and injunctive relief, appellants MaryCLE, LLC (MaryCLE) and NEIT Solutions, LLC (NEIT) filed suit against appellees First Choice Internet, Inc. and Joseph Frevola, the president of First Choice, in the Circuit Court for Montgomery County. Appellants maintained that appellees, whom we designate as "First Choice,"¹ violated the Maryland Commercial Electronic Mail Act ("MCEMA"), Md Code (1975, 2005 Repl.Vol.), § 14-3001 et seq. of the Commercial Law Article (CL), by sending them 83 unsolicited false and misleading commercial emails.

First Choice responded by filing a "Motion to Dismiss, or Alternatively, Motion for Summary Judgment," alleging that (1) MCEMA violates the "dormant Commerce Clause" of the United States Constitution, (2) the circuit court lacked personal jurisdiction over First Choice and Frevola, (3) Frevola could not be sued individually, and (4) First Choice had not violated MCEMA. After a hearing, the circuit court granted the motion to dismiss and issued a written opinion in which it ruled that (1) MCEMA violates the "dormant Commerce Clause" of the U.S. Constitution as applied in this case, (2) Maryland lacks personal jurisdiction over First Choice and Frevola, and (3) no cause of action was stated against Frevola individually. In doing so, the circuit court considered affidavits submitted by the parties. Accordingly, we treat the motion as one for summary, judgment as required by Md. Rule 2-322(c).

As discussed in detail below, we shall reverse because we conclude that personal jurisdiction over First Choice is proper and that MCEMA as applied in this case does not offend the Commerce Clause. We also determine that there were material disputed facts concerning the individual liability of Frevola that rendered the grant of summary judgment in his favor erroneous. See Md. Rule 2-501.

FACTS AND LEGAL PROCEEDINGS

The Parties

MaryCLE, LLC (pronounced "miracle"), an acronym for "Maryland Consumer Legal Equity," describes itself as a "consumer protection firm" that "protects consumers wronged by online ... marketers[.]"² MaryCLE was founded by Eric Menhart, who at the time of the proceedings below, was a third-year law student at the George Washington University Law School. MaryCLE maintains a website on which it states its mission to "protect[] consumers via promotion of responsible marketing practices, mediation, and litigation." First Choice, on the other hand, describes MaryCLE as a company that

set up Internet email accounts to receive emails from Internet marketing companies... and, when it received a substantial number of email solicitations, [] contact[ed] the targeted marketing company and demand[ed] a substantial payment as "settlement" of its statutory damages claims under MCEMA in return for MaryCLE's promise not to file a lawsuit[.]

Although MaryCLE is registered in Maryland and has a Maryland mailing address, which is Mr. Menhart's home address in Adelphi, Maryland, the complaint and MaryCLE's own website and letterhead list its principal place of business as Washington, D.C. One of the email addresses "registered to and used by MaryCLE" is emj@maryland-state-resident.com.³

NEIT Solutions, LLC is an interactive computer service provider ("ISP") that provides internet services, including the hosting of web space and use of email addresses, to MaryCLE. NEIT is a registered Maryland limited liability company that is located in Frederick, Maryland, although its computer servers are located in Colorado.

First Choice is an Internet marketing company based in New York that describes its purpose as "promot[ing] products for various third-party customers through `opt-in' email mailings and promotions[.]" Joseph Frevola, who lives in New York, is the President of First Choice.

Background

Before the events in this case began, First Choice entered into a partnership agreement with a company called Wow Offers, LLC.⁴ Wow Offers supplied First Choice with email addresses of people who had allegedly "opted-in" to Wow Offers' services. First Choice asserts that ejm@maryland-state-resident.com was registered on a website called www.idealclick.com, which in turn provided that email address to Wow Offers. First Choice engaged the services of Master Mailings, LLC,⁵ to send promotional emails, including those at issue in this case, to the email addresses obtained through Wow Offers. First Choice alleges that Master Mailings is located in Virginia.⁶

MaryCLE denies signing up for any "opt-in" services through www.idealclick.com or in any other way giving the email address ejm@maryland-state-resident.com to Wow Offers or First Choice. Nevertheless, on September 18, 2003, First Choice sent an email to MaryCLE at that address. The "From" line of the email indicated that the sender was "Exceptional Deals," with an email address of promotions@firstchoiceinternet.com. The "Subject" line of the email was "Interest Rates are at a 36 Year low-Act Now."

Although the email contained an "unsubscribe" link as well as a postal mailing address to which requests to be removed from the email list could be sent, MaryCLE did not avail itself of the "unsubscribe" option. Instead, it attempted to "Reply" to the email and requested to be removed from the mailing list. The reply was returned to MaryCLE as "undeliverable." MaryCLE did not send any written communications to the postal address contained in the email. Instead, for reasons not explained in the record, MaryCLE attempted to find a street mailing address for "Exceptional Deals" through the United States Postal Service. The Postal Service indicated that it had no address for "Exceptional Deals."

MaryCLE then utilized the free "WHOIS" feature on www.networksolutions.com, a website on which any member of the public can find contact information for the registrants of domain names.⁷ After entering the domain "firstchoiceinternet.com," MaryCLE obtained Mr. Frevola's name, as well as an email and mailing address for First Choice. MaryCLE attempted to contact First Choice using this email address, but this email was also returned as "undeliverable." MaryCLE did not attempt to contact First Choice by postal mail at this point.

By September 30, 2003, MaryCLE had received an additional 23 emails from First Choice. MaryCLE maintains that it replied to each email with a request to be removed from the mailing list, but each time the reply was returned as "undeliverable."

MaryCLE next visited the First Choice website, www.firstchoiceinternet.com. On this site, MaryCLE found a working email address and phone number. MaryCLE sent an email to the email address, joe@firstchoiceinternet.com,⁸ and left a voice mail at the phone number to inform First Choice that it did not wish to receive further emails. This email was not returned as undeliverable, which led MaryCLE to conclude that an email had finally been received by First Choice. MaryCLE's phone message was not returned.

Despite these efforts, MaryCLE continued to receive 59 additional emails throughout the month of October, at a rate of approximately two per day. MaryCLE maintains that all 83 of the emails it received were opened in either Maryland or Washington, D.C. Examples of subject lines from these emails include "Urgent: Claim Now or Forfeit" and "Confirmation # 87717." MaryCLE asserts that it replied to every email, and each time its reply bounced back as "undeliverable." At no time, however, did MaryCLE click on the "unsubscribe" link located within the emails or send any written requests via postal mail to be removed from the mailing list. MaryCLE explains that it did not do so because "`unsubscribe' links are notoriously unreliable, and have been recognized by many to be a method via which marketers collect `live' e-mail addresses to be resold to other marketers."

On October 28, 2003, MaryCLE sent a second email to joe@firstchoiceinternet.com, and for the first time followed up with a letter sent via postal mail to Frevola. The letter was entitled "Notification of Violation of Maryland Law."⁹ On October 29, 2003, the emails to MaryCLE ceased. On November 10, 2003, Mr. Frevola sent MaryCLE a letter in which he stated that MaryCLE's email address had been removed from First Choice's mailing list and that First Choice had ceased all of its mailings indefinitely.

Court Proceedings

On December 31, 2003, MaryCLE and NEIT filed suit against First Choice and Frevola in the Circuit Court for Montgomery County. They alleged two counts for statutory damages under the Maryland Commercial Electronic Mail Act, and one count for injunctive relief. Before filing an answer, First Choice and Frevola filed a "Motion to Dismiss or, Alternatively, Motion for Summary Judgment," and MaryCLE filed a response. See Md. Rule 2-322(a). A hearing was held on October 13, 2004, and on December 9, 2004, the circuit court entered an order granting the motion to dismiss.

Relying on the Maryland long arm statute, the circuit court determined that First Choice had not caused tortious injury in Maryland. Nor had it "regularly conduct[ed] business, engage[d] in persistent conduct or derive[d] revenues from Maryland." See Md.Code (1974, 2002 Repl.Vol. 2005 Cum.Supp.), § 6-103(b)(3)-(4) of the Courts and Judicial Proceedings Article (CJP).¹⁰ The circuit court also declared that the exercise of personal jurisdiction over First Choice...