Affiliate web sales subjects defendant to personal jurisdiction and venue in retailers’ state.

MuscleDriver USA, LLC, Plaintiff,
vs.
Robert Chandler Smith and Web Ninjas, LLC, Defendants.

C/A No. 0:11-1777-MBS-PJG

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF SOUTH CAROLINA, ROCK HILL DIVISION

2012 U.S. Dist. LEXIS 69446

May 17, 2012, Decided

Opinion by Chief United States District Judge Margaret B. Seymour:

On July 22, 2011, Plaintiff MuscleDriver USA, LLC, filed an action against Defendants Robert Chandler Smith (“Smith”) and Web Ninjas, LLC (“Web Ninjas”). On September 19, 2011, default was entered against Web Ninjas. Because Smith is represented pro se, this action was referred to United States Magistrate Judge Paige J. Gossett for pretrial handling pursuant to 28 U.S.C. § 636(b) and Local Rule 73.02(B)(2), D.S.C.

On October 11, 2011, Smith filed a motion to dismiss for lack of personal jurisdiction and for improper venue, or, in the alternative, to transfer the action to the Western District of Texas. On April 17, 2012, the Magistrate Judge issued a Report and Recommendation recommending that Smith’s motion be denied. … The court adopts the Report and Recommendation and incorporates it herein by reference.

According to that April 17 report by Magistrate Judge Paige J. Gossett, this case is about:

The Plaintiff, MuscleDriver USA, LLC (“MuscleDriver”) filed this action against Defendant Robert Chandler Smith (“Smith”), who is self-represented, and Defendant Web Ninjas, LLC (“Web Ninjas”), alleging false designation of origin and unfair competition in violation of the Lanham Act, § 43(a), 15 U.S.C. § 1125(a), as well as state law claims for unfair trade practices under S.C. Code Ann. §§ 39-5-10, et seq., common law unfair competition, and injunction.

and

This case arises out of an internet business relationship gone bad. At some point prior to 2009, Smith, who attests that he has never been to South Carolina, created and began operating a website at the domain www.buyweightliftingshoes.com. (Smith Decl. ¶¶ 3, 20, ECF No. 14-2 at 1, 2.) Smith states that on the website, “I drafted and posted reviews of various weightlifting shoes. The site also contained ‘affiliate’ links to the sellers of the reviewed shoes through the sellers’ affiliate programs.” (Id. at ¶ 21, ECF No. 14-2 at 2.) Under affiliate programs, a party seeking to become an affiliate generally signs up with a retailer online, is given a tracking code, and collects a commission from the retailer on “click-through” sales that flow from the affiliate site. (Id. at ¶ 22, ECF No. 14-2 at 2.) In November 2009, Smith contacted MuscleDriver by e-mail, and the parties exchanged information about the MuscleDriver affiliate program. (ECF No. 18-1 at 8, 9.) Thereafter, Smith states that “I entered into an affiliate agreement with plaintiff . . . by signing up online then by agreeing to [MuscleDriver]’s Affiliate Terms and Conditions by clicking a check-box at the bottom of the page.” (Smith Decl. ¶ 23, ECF No. 14-2 at 3.) Although MuscleDriver’s location and address is identified on its website that Smith visited to establish the affiliate agreement, Smith states that he “only learned that [MuscleDriver] was in South Carolina after receiving his first commission check,” which was mailed from the MuscleDriver headquarters. (Id. at ¶ 25, ECF No. 14-2 at 3.) He had periodic communications with MuscleDriver and received monthly commission checks. (Id. at ¶ 11, ECF No. 14-2 at 2.) In 2010, Smith initiated a second, separate wholesale agreement with MuscleDriver in which he received commissions for advertising and selling MuscleDriver products from a different website, www.musclesandcurves.com. In March 2011, a dispute arose between the parties over a product review posted on http://www.buyweightliftingshoes.com, and MuscleDriver terminated its relationship with Smith. (Id. at ¶¶ 28-30, ECF No. 14-2 at 3.) In response to the termination and communications about the dispute, Smith removed some content from http://www.buyweightliftingshoes.com, but continued to post other content related to MuscleDriver and its products on the site, as well as the disputed review. (Id. at ¶ 32, ECF No. 14-2 at 4.) He also then formed Web Ninjas, LLC on March 16, 2011. (Id. at ¶ 33, ECF No. 14-2 at 4.) Five months later, on August 15, 2011, Smith took http://www.buyweightliftingshoes.com offline. (Id. at ¶ 34, ECF No. 14-2 at 4.) During the eighteen-month relationship between the parties, Smith’s websites generated more than $100,000 in sales of MuscleDriver’s products, all for products that shipped from MuscleDriver’s facility in South Carolina. Some of the sales through Smith’s websites were to customers in South Carolina. (Hess Decl. ¶¶ 5, 7-8, ECF No. 18-1 at 4; Invoices, ECF No. 18-1 at 15-26.) MuscleDriver majority owner and president Brad Hess further attests that all of its witnesses and documents related to this case are in South Carolina. (Hess Decl. ¶¶ 14-16, ECF No. 18-1 at 5-6.)

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