The opinion of the court was delivered by: URBINA
Denying Defendants' Motions to Dismiss the Complaint for Lack of Personal Jurisdiction and Improper Venue; Denying in Part and Granting in part the Defendants' Motion to Dismiss the Complaint
The plaintiff filed this action under §§ 4, 16 of the Clayton Act, 15 U.S.C. §§ 15, 26, seeking treble damages and injunctive relief for injuries resulting from the defendants' alleged anti-competitive conduct in the Internet Yellow Pages market. Specifically, the plaintiff alleges the defendants illegally combined and conspired to restrain trade and to monopolize the Internet Yellow Pages market by controlling Internet access points through which competing Internet Yellow Pages providers offer their services. The plaintiff in this action is GTE New Media Services Inc. ("GTE").
The defendants in this action are the five regional Bell operating companies ("RBOCs"): Ameritech, Bell Atlantic, BellSouth, SBC, and US West and their respective subsidiaries.
This matter comes before the court on the following motions: Defendants BellSouth, SBC, and US West move to dismiss the complaint for lack of personal jurisdiction pursuant to Fed. R. Civ. P. 12(b)(2). Defendants BellSouth and SBC additionally move to dismiss the complaint for improper venue pursuant to Fed. R. Civ. P. 12(b)(3).
All defendants, except Bell Atlantic, jointly seek, to dismiss the complaint pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim because the plaintiff has failed to allege properly federal antitrust violations under §§ 1, 2 of the Sherman Act, 15 U.S.C. §§ 1, 2, and District of Columbia unfair competition and tortious interference with an existing contracts and prospective business relationships claims.
As explained more fully below, upon consideration of the parties' submissions and the relevant law, the court (1) denies Defendants Bell South, SBC, and US West's motions to dismiss for lack of personal jurisdiction and/or improper venue, and (2) denies in part and grants in part the defendants' joint motion to dismiss for failure to state a claim upon which relief can be granted.
A. The Internet Yellow Pages
In today's rapidly developing age of computer technology, personal computers enable users to create an unlimited number of interactive applications. These applications range from simple programs allowing users to view information or images to more complex programs designed to send or receive information. Users of personal computers cannot access the majority of applications without assistance, however, because substantial investments in time and money make such an option impractical. The Internet provides a powerful alternative and solution to this problem through the creation of a world-wide network of computers that facilitates the exchange of applications. By virtue of interconnecting computers, users are able to access all applications on the network without having to purchase separately each application.
To develop this new technology many efforts were made to organize efficiently these applications on the Internet. First, a uniform protocol called the World Wide Web (the "Web") assigned each application an address by which a user could easily identify it. On the Web, these interactive applications are commonly referred to as "websites."
Second, because users cannot know all of the millions of different types of websites and their specific addresses, search engines were created for the purpose of locating desired websites. For the most part, users engage the search engine by entering relevant terms that describe the desired websites. The search engine subsequently retrieves and displays a list of websites containing the relevant terms. From the list the user can directly connect or "hyperlink" to a listed website.
The last segment of this emerging technology consists of graphical interfaces ("web browsers"), which allow users to perform numerous operations on the Internet without typing computer commands. Web browsers, similar to other operating systems such as Windows 95(R), permit users to perform tasks by selecting a visually displayed option rather than directly typing out commands to perform the desired tasks.
As with other developing technologies companies have developed ways to profit off the Internet. For most users they become part of the network of computers by paying a monthly fee to an Internet service provider such as America Online(R). Other companies have profited off the Internet by targeting different areas. Netscape
for instance sells popular versions of web browsers to users directly or through licensing agreements to network providers. Most commonly, companies profit from the Internet by providing specialized interactive services on their websites. One type of specialized service on a website is a search engine service. Normally, such specialized services do not directly generate revenue from the Internet user but rather by selling advertising space on the websites to other businesses.
The controversy in the case before this court involves the activities of companies who provide national Yellow Pages services through their websites on the Internet ("Internet Yellow Pages"). Because Internet Yellow Pages services are accessed electronically through the Internet and not through large printed volumes, an Internet user in any part of the United States can conveniently access information about a business regardless of where the business is located. Internet Yellow Pages services allow users to "hyperlink" directly from a published business listing or advertisement on the Internet Yellow Pages to the business's direct website. At the website, the user may obtain additional information or even purchase goods or services directly over the Internet. This type of transaction is commonly referred to as "electronic commerce." Although more expansive than printed Yellow Pages, providers of Internet Yellow Pages similarly earn revenue by selling advertisement space to businesses. Therefore, profitability for Internet Yellow Pages services largely depends on how many Internet users are accessing these website services.
To access an Internet Yellow Pages service on the Internet users are offered a variety of mechanisms. A common mechanism is through predetermined options on web browsers. Web browsers such as Netscape provide a visually displayed toolbar having options that provide a list of links to connect to popular and commonly visited websites such as Internet Yellow Pages websites. Specifically, by accessing the "Yellow Pages" option through Netscape's toolbar, a user is linked or connected to Internet Yellow Pages services designated by Netscape. Another common mechanism is through links on well known and popular websites such as search engine websites. For example, popular search engine websites such as Four11 and Who Where similarly have a "Yellow Pages" option to link directly or connect to a group of pre-selected Internet Yellow Pages services. Finally, assuming a user knows the Internet Yellow Pages' specific address, a user may access the website by inputting the website's specific address into a web browser such as Netscape. For example, a user can access GTE's SuperPages website by inputting its unique address "http://superpages.gte.net" into Netscape to access the website.
On or about July 1997, GTE alleges the five RBOCs entered into a conspiracy to capture, control, and dominate the Internet Yellow Pages market. Specifically, GTE alleges the five RBOCs held a number meetings in Colorado, Michigan, Georgia, and California to devise the conspiracy. (Compl. P 47.) As a result of these alleged meetings, the five RBOCs agreed to provide jointly a coded Internet Yellow Pages map of the United States (the "MAP"), which allows users to access particular states and businesses within its borders through the designated Internet Yellow Pages service. (Id. P 53); see Figure 1 below. Each of the five RBOCs allegedly is the exclusive Internet Yellow Pages provider for a particular region and has agreed not to compete with any of the other RBOCs in their designated region. (Id. PP 54, 61.) The regions allocated to each of the RBOCs correspond to the same region where they provide telecommunication services.
[SEE Figure 1.(Recreated) Coded MAP IN ORIGINAL]
To dominate the Internet Yellow Pages market, GTE alleges the defendant RBOCs planned to obtain exclusive links for their MAP at well known Internet access points. (Id. P 54.) To obtain these exclusive links, GTE alleges the defendants formed agreements with Netscape to control how users accessed the Internet Yellow Pages through Netscape's toolbar. (Id. PP 58, 62.) Specifically, when users selected the "Yellow Pages" option on Netscape's toolbar, Netscape would direct the users exclusively to the defendants' MAP. (Id.) GTE alleges the defendants also engaged with Yahoo! to control how users accessed the Internet Yellow Pages through a website Yahoo! maintained for Netscape called "Netscape's Guide by Yahoo!." (Id. PP 54, 62.) As stated previously, this website offers users a pre-selected arrangement of hyperlinks to popular websites such as Internet Yellow Pages websites. GTE alleges Yahoo! similarly directed users exclusively to the defendants' MAP whenever users selected the "Yellow Pages" option on Netscape's Guide toolbar. The five RBOCs have also allegedly reached similar agreements with other co-conspirators not named in the complaint who operate and maintain well known and popular search engine websites such as Four11 and Who Where. (Id. PP 68-69.)
Before the alleged conspiracy, GTE contracted with Netscape to direct users to GTE's Internet Yellow Pages service "SuperPages" whenever a user selected the "Yellow Pages' option on Netscape's toolbar.
As a result of the alleged conspiracy, GTE asserts that on July 18, 1997, Netscape terminated its links to GTE's SuperPages, including hyperlinks on Netscape's Guide by Yahoo!. (Id. PP 59, 62.) Prior to the alleged conspiracy, GTE alleges Netscape provided users with a selection of competing Internet Yellow Pages providers when accessing the "Yellow Pages" option through its toolbar. (Id. PP 42, 45.) Consequently, GTE filed the above-captioned complaint alleging five counts. In Count I, GTE alleges the defendants combined, conspired, contracted and agreed with each other to restrain trade in the national and regional Internet Yellow Pages markets in violation of § 1 of the Sherman Act, 15 U.S.C. § 1. In Count II, GTE alleges the defendants combined, conspired, contracted and agreed with specific intent to monopolize the Internet Yellow Pages markets in violation of § 2 of the Sherman Act, 15 U.S.C. § 2. In Count III, GTE alleges the defendants entered into contracts in restraint of trade and conspired to monopolize the relevant Internet Yellow Pages markets in violation of D.C. Code 1981 §§ 28-4502, 28-4503. (See Compl. P 4.) In Counts IV and V, GTE alleges the defendants' anti-competitive acts with Netscape and Yahoo! violate District of Columbia common law by tortiously interfering with its existing contract with Netscape and prospective business relationships from advertisers who would continue to purchase Internet advertising space on GTE's SuperPages service.
Three non-resident RBOC defendants (BellSouth, SBC, and US West) move to dismiss the complaint for lack of personal jurisdiction because they have no contacts with this jurisdiction in connection with the disputed matter. In such a challenge, the plaintiff bears the burden of establishing personal jurisdiction over the defendants. See Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 904 (2d Cir. 1981); see also Dooley v. United Technologies Corp., 786 F. Supp. 65, 70 (D.D.C. 1992) ("The plaintiff has the burden of establishing that jurisdiction exists."). Prior to an evidentiary hearing or discovery, the plaintiff may defeat a motion to dismiss the complaint for lack of personal jurisdiction by making mere factual allegations to establish a prima facie showing of jurisdiction. See Ball v. Metallurgie Hoboken-Overpelt, S.A., 902 F.2d 194, 197 (2d Cir.), cert. denied, 498 U.S. 854, 112 L. Ed. 2d 116, 111 S. Ct. 150 (1990). In that regard, the plaintiff is entitled to his complaint and any doubts resolved in the light most favorable to him. See Landoil Resources Corp. v. Alexander & Alexander Servs., Inc., 918 F.2d 1039, 1043 (2d Cir. 1991). The plaintiff, however, cannot rest on bare allegations or conclusory statements and must allege specific facts connecting each defendant with the forum. Schwartz v. CDI Japan, Ltd., 938 F. Supp. 1, 4 (D.D.C. 1996). In antitrust cases involving multiple defendants, the plaintiff has the burden of establishing personal jurisdiction over each defendant. See Delong Equipment Co. v. Washington Mills Abrasive Co., 840 F.2d 843, 855 (11th Cir. 1988); see also Schwartz, 938 F. Supp. at 4 (citing First Chicago Int'l v. United Exchange Co., 267 U.S. App. D.C. 27, 836 F.2d 1375, 1378 (D.C. Cir. 1988)).
1. The Court Has Personal Jurisdiction Over the Non-Resident Defendants Pursuant to D.C. Long-Arm Statute Section 13-423(a)(4)
The adequacy of a court's exercise of personal jurisdiction over the three non-resident defendants begins with determining whether jurisdiction is proper under the forum's long-arm statute. The court, therefore, must determine if exercising jurisdiction over these non-resident defendants is proper under the District of Columbia long-arm statute and is consistent with the demands of due process. United States v. Ferrara, 311 U.S. App. D.C. 421, 54 F.3d 825, 828 (D.C. Cir. 1995). For the reasons stated herein, the court concludes that it has personal jurisdiction over Defendants BellSouth, SBC, and US West under § 13-423(a)(4) of the District of Columbia long-arm statute because the acts of the non-resident defendants caused tortious injury in the District of Columbia by an act outside this jurisdiction.
The District of Columbia long-arm statute states in relevant part as follows:
(a) A District of Columbia court may exercise personal jurisdiction over a person, who acts directly or by an agent, as to a claim for relief arising from the person's . . . (4) causing tortious injury in the District of Columbia by an act or omission outside the District of Columbia if he [i] regularly does or solicits business, [ii] engages in any other persistent course of conduct, or [iii] derives substantial revenue from goods used or consumed or services rendered, in the District of Columbia.
D.C. Code § 13-423(a)(4) (emphasis added).
To establish personal jurisdiction under this provision, a plaintiff must allege sufficient facts to make out a prima facie showing that (1) the plaintiff suffered a tortious injury in the District of Columbia, (2) the injury was caused by the defendant's act or omission outside of the District of Columbia, and (3) the defendants had one of the three enumerated contacts with the District of Columbia. See Blumenthal v. Drudge, 992 F. Supp. 44, 53 (D.D.C. 1998). This last inquiry focuses on whether a defendant (i) regularly does or solicits business, (ii) engages in any other persistent course of conduct, or (iii) derives substantial revenue from goods used or consumed or services rendered in this district. Id.; see also D.C. Code § 13-423(a)(4). The plaintiff must satisfy all three requirements and also establish that minimum contacts consistent with notions of due process exist before the court can exercise personal jurisdiction over the non-resident defendants. See § 13-423(a)(4).
a. Plaintiff Has Sufficiently Alleged a Tortious Injury in the District of Columbia
GTE claims that District of Columbia users who seek Internet Yellow Pages service through Netscape's toolbar are directed away from its SuperPages service and directed to the defendants' MAP. (Compl. P 62.) GTE claims it has consequently suffered tortious injury because of the defendants' alleged exclusionary acts restrict GTE's ability to generate advertising revenue. ( Id. P 74.) In this respect, GTE's profitability substantially depends on the advertising rates it charges to Internet advertisers, and GTE's advertising rates, in large measure, are determined by the number of users GTE attracts to advertisers' websites. Moreover, it makes no difference that the injury GTE claims to have suffered derived from alleged antitrust violations because an antitrust injury creates a liability in tort. See Albert Levine Assoc. v. Bertoni & Cotti, S.p.A., 314 F. Supp. 169, 171 (S.D.N.Y. 1970). Thus, because GTE's advertising revenue depends, in large part, on the number of users in the District of Columbia accessing its ...