ShopStyle, Inc. v. rewardStyle, Inc., 05-19-00736-CV

SHOPSTYLE, INC. AND POPSUGAR, INC., Appellants v. REWARDSTYLE, INC., Appellee

No. 05-19-00736-CV

Court of Appeals Fifth District of Texas at Dallas

July 21, 2020

On Appeal from the 95th District Court Dallas County, Texas

Trial Court Cause No. DC-18-08570

MEMORANDUM OPINION

Before Justices Myers, Whitehill, and Reichek

Opinion by Justice Myers

This is an interlocutory appeal from the denial of special appearances filed by appellants ShopStyle, Inc. (ShopStyle) and PopSugar, Inc. (PopSugar). ShopStyle brings two issues, arguing (1) the claims of appellee rewardStyle, Inc. (rewardStyle)¹ did not arise out of or relate to any affirmative acts by ShopStyle directed at Texas; and (2) ShopStyle did not purposefully avail itself of the privilege of conducting activities in Texas. PopSugar also brings two issues: (1) There was no purposeful availment and rewardStyle's claims did not arise out of or relate to PopSugar'spurported contacts with Texas; and (2) PopSugar did not consent to personal jurisdiction in Texas. We reverse and remand.

BACKGROUND AND PROCEDURAL HISTORY

Appellee rewardStyle, founded in 2011 by Amber Venz Box and her husband Baxter Box, is a company incorporated under the laws of the state of Delaware, with its principal place of business in Dallas, Texas. rewardStyle has an internet website called LIKEtoKNOW.it² that enables digital lifestyle "influencers" to monetize their social media content by allowing consumers to shop for items featured in online posts.

Appellant PopSugar, Inc. is a lifestyle brand and technology company founded in 2006 by Bryan Sugar, primarily known for its lifestyle website popsugar.com.³ PopSugar is incorporated in Delaware and its principal place of business is in San Francisco, California. It does not maintain an office or any other place of business in Texas, although it employs one project manager who lives in Texas.⁴

In 2007, PopSugar launched appellant ShopStyle, Inc. as a digital shopping platform. ShopStyle operates a website, shopstyle.com,⁵ where people can browseproducts and connect to the websites of various affiliated retailers. On or about February 21, 2017, PopSugar sold ShopStyle to Ebates Inc., a subsidiary of Rakuten Inc. At the time of this acquisition, ShopStyle and PopSugar entered, according to ShopStyle, into "an exclusive content commerce agreement with PopSugar to develop creative and engaging content to generate sales for our retail partners."

ShopStyle is incorporated in Delaware and headquartered in California. ShopStyle has no subsidiaries in Texas and no office locations or real property here. It does not ship or sell merchandise to any physical locations in Texas, nor does it own or operate servers here. It has run no advertising campaigns in Texas, and it has never specifically targeted Texas for marketing.

PopSugar and ShopStyle operate websites that compete with rewardStyle. Each of these three companies, through their respective websites, provides a platform that enables consumers to purchase items featured in social media posts from links to the websites of affiliated retailers, with the affiliated retailer paying a commission to the referring company for such purchases.

According to rewardStyle's verified petition, LIKEtoKNOW.it works by connecting fashion and lifestyle influencers with retail partners. Influencers can use the LIKEtoKNOW.it app or website to upload a picture and "tag" particular products in a picture that are "shoppable." A viewer of the influencer's post can click through a link to the websites of rewardStyle's affiliated retailers to view and purchase those products. The LIKEtoKNOW.it app or website generates a trackable referral linkfor each of the tagged items. LIKEtoKNOW.it's affiliated retailers pay LIKEtoKNOW.it a commission for every referred and completed sale, a percentage of which is earned by the influencer who referred the sale.

rewardStyle's petition alleges that in or around April of 2018, it was notified by some of its influencers that PopSugar and ShopStyle were using LIKEtoKNOW.it content without the consent of either rewardStyle or its influencers. rewardStyle further alleges that PopSugar misappropriated this data from the LIKEtoKNOW.it website through a process known as data "scraping," which involves creating an account with LIKEtoKNOW.it, logging in to the website, and using a customized software program to copy, in bulk, content on the website that is accessible to LIKEtoKNOW.it users. In addition to infringing the proprietary rights of influencers and LIKEtoKNOW.it, rewardStyle alleges these actions violated LIKEtoKNOW.it's terms of use, which prohibited the copying or scraping of data.

rewardStyle claims that, after misappropriating this content from the LIKEtoKNOW.it website, it "appears" "PopSugar or ShopStyle" superimposed a new icon in the field that would normally contain the LIKEtoKNOW.it icon and replaced the original rewardStyle/LIKEtoKNOW.it link with a ShopStyle link. The result, according to rewardStyle, was that a consumer viewing the misappropriated content would have the same ability to click a link and purchase shoppable products as if he or she was viewing the content on the liketoknowit.com web page. However, instead of the commission for any referrals being paid to the influencers andrewardStyle, the commission would be paid to "PopSugar and ShopStyle."

Furthermore, according to rewardStyle, PopSugar created "unauthorized profile URL webpages" (i.e., "vanity pages") on PopSugar's website for each rewardStyle influencer from whom it misappropriated content, with collections of content from each of these influencers. These vanity pages, created without the knowledge or consent of the influencers or rewardStyle, were (according again to rewardStyle's petition) used by PopSugar in an attempt to drive traffic to its website, popsugar.com, and increase revenue opportunities for PopSugar and ShopStyle at the expense of the influencers and rewardStyle.

rewardStyle also alleges that PopSugar's founder, Brian Sugar, stated in a tweet that it held a "hackathon" to copy and repurpose rewardStyle content without authorization. The tweet, as originally sent out on April 17, 2018, reads as follows:

Image materials not available for display.

In April 2018, the same month rewardStyle alleges it was notified by some of its influencers of misuse of their content, ShopStyle terminated PopSugar's access to its services. ShopStyle released a statement claiming "PopSugar acted alone, and we do not condone their actions in any way." ShopStyle also explained that "[w]henPopSugar used influencers' content without their consent, PopSugar not only violated the trust of our influencer community, but also violated terms of its agreements with Ebates and ShopStyle."

On June 29, 2018, rewardStyle filed a verified petition under Texas Rule of Civil Procedure 202 against PopSugar and ShopStyle, seeking to take the depositions of their corporate representatives in order to investigate rewardStyle's legal claims and "perpetuate testimony for an anticipated suit." rewardStyle further requested that PopSugar and ShopStyle:

[B]e ordered, at their respective depositions to produce for inspection and copying copies of all data and programs utilized in copying, altering, and utilizing content originating from LIKEtoKNOW.it, copies of all content copied during the 'hackathon' or as a result of those efforts as referenced in Brian Sugar's April 17, 2018 tweet, and all correspondence regarding the copying, altering, or utilizing of content originating from LIKEtoKNOW.it.

The petition alleged that ShopStyle and PopSugar were within the jurisdiction of the court because they both operated "fully interactive" websites for transacting business with Texas consumers; improperly accessed and "scraped" content from Dallas-based rewardStyle; and took actions to misappropriate, monetize, and display content from influencers located in Texas. It also claimed the court has jurisdiction over PopSugar for the independent reason that PopSugar, by and through its agents, agreed to (and breached) rewardStyle's "End User License Agreement and Terms of Service Agreement," which included the following choice of law and forum selection provision:

The laws of the state of Texas, without application of conflict of law provisions, will apply to any disputes arising out of or relating to this Agreement or the Services. All claims arising out of or relating to this Agreement or the Services will be litigated exclusively in the federal or state courts of Dallas County, Texas. The Agreement is fully performable in Dallas County, Texas. The parties consent to personal jurisdiction in Dallas County, Texas and hereby waive any challenge to venue and personal jurisdiction they may have to a lawsuit filed in a state or federal court in Dallas County, Texas.

ShopStyle and PopSugar both filed special appearances objecting to the exercise of personal jurisdiction over them as well as conditional responses to the rule 202 petition. An associate judge signed separate orders granting ShopStyle's special appearance and denying and dismissing rewardStyle's petition as to PopSugar.

rewardStyle requested a de novo rehearing, which was held on April 26, 2019. On May 31, 2019, the trial court signed an order denying ShopStyle's and PopSugar's special appearances and granting rewardStyle's rule 202 petition, ordering depositions and the production of documents. On that same day, the trial court signed findings of fact and conclusions of law.

The trial court adopted rewardStyle's proposed findings of fact and conclusions of law, concluding PopSugar and ShopStyle have minimum contacts with the State of Texas because they both maintain "interactive websites" to solicit and fulfill commercial transactions involving both Texas consumers and retailers. The court found that PopSugar and ShopStyle directly and voluntarily engage with Texas retailers and make their services...