     09-1739-cv
     Penguin Grp. (USA) Inc. v. Am. Buddha

 1                        UNITED STATES COURT OF APPEALS

 2                            FOR THE SECOND CIRCUIT

 3                               August Term, 2010

 4   (Argued: January 7, 2010                Question Certified: June 15, 2010
 5
 6                Certified Question Answered: March 24, 2011

 7                            Decided: May 12, 2011)

 8                             Docket No. 09-1739-cv

 9                   -------------------------------------

10                           PENGUIN GROUP (USA) INC.,

11                              Plaintiff-Appellant,

12                                       - v -

13                                AMERICAN BUDDHA,

14                              Defendant-Appellee.

15                   -------------------------------------

16   Before:     SACK, KATZMANN, and CHIN,* Circuit Judges.

17               Appeal by the plaintiff from an order of the United

18   States District Court for the Southern District of New York

19   (Gerard E. Lynch, Judge) dismissing this action for lack of

20   personal jurisdiction over the defendant.         In answer to a

21   question we certified to the New York Court of Appeals, see

22   Penguin Grp. (USA) Inc. v. Am. Buddha, 609 F.3d 30, 42 (2d Cir.

23   2010), that court has concluded that "[i]n copyright infringement

24   cases involving the uploading of a copyrighted printed literary


           *
            The Honorable Denny Chin, who was at the time of argument
     a United States District Judge for the Southern District of New
     York sitting by designation, is now a member of this Court.
 1   work onto the Internet, . . . the situs of injury for purposes of

 2   determining long-arm jurisdiction under [the relevant section of

 3   New York's long-arm-jurisdiction statute is] . . . the location

 4   of the copyright holder," Penguin Grp. (USA) Inc. v. Am. Buddha,

 5   16 N.Y.3d 295, 301-02, --- N.E.2d ---, ---, --- N.Y.S.2d ---, ---

 6   (2011).   In light of this response by the Court of Appeals, the

 7   judgment of the district court is now:

 8                 Vacated and Remanded.

 9                                RICHARD DANNAY, Cowan, Liebowitz &
10                                Latman, P.C. (Thomas Kjellberg, of
11                                counsel), New York, N.Y., for Plaintiff-
12                                Appellant.

13                                CHARLES CARREON, Online Media Law, PLLC,
14                                Tucson, Ariz., for Defendant-Appellee.

15   PER CURIAM:

16                 This appeal, which returns to us after the New York

17   Court of Appeals responded to a question we certified to that

18   Court, concerns the limits of New York's "long-arm" jurisdiction

19   over out-of-state defendants in copyright infringement actions.

20   We assume the readers' familiarity with the facts and procedural

21   history as set forth in our previous opinion in this case.        See

22   Penguin Grp. (USA) Inc. v. Am. Buddha, 609 F.3d 30, 32-34 (2d

23   Cir. 2010) ("Am. Buddha II").         We rehearse them here only insofar

24   as we think necessary to explain our final resolution of this

25   appeal.

26                 The defendant American Buddha is an Oregon not-for-

27   profit corporation with its principal place of business in

28   Arizona that maintains a website known as the Ralph Nader

                                            2
 1   Library.2    The website "provides access to classical literature

 2   and other works . . . , including [four] works published in print

 3   format by Plaintiff-Appellant Penguin Group (USA) Inc.

 4   [("Penguin")]."3    Am. Buddha II, 609 F.3d at 33 (internal

 5   quotation marks omitted).    Having learned of the existence of

 6   American Buddha's website and its contents, Penguin filed suit

 7   against American Buddha in the United States District Court for

 8   the Southern District of New York, alleging that American

 9   Buddha's posting of the four Penguin books on the Internet

10   violated Penguin's copyrights in works that it had published.4

11   American Buddha moved to dismiss the complaint pursuant to Rule

12   12(b)(2) of the Federal Rules of Civil Procedure, "contending

13   that it has done nothing that would make it amenable to suit in

14   New York."    Penguin Grp. (USA) Inc. v. Am. Buddha, No. 09-cv-528,

15   2009 WL 1069158, at *1, 2009 U.S. Dist. LEXIS 34032, at *1

16   (S.D.N.Y. Apr. 21, 2009) ("Am. Buddha I").    The district court



          2
            The Ralph Nader Library is not affiliated with well known
     consumer advocate Ralph Nader. See Penguin Grp. (USA) Inc. v.
     Am. Buddha, 609 F.3d 30, 33 (2d Cir. 2010).
          3
            Penguin alleges that American Buddha has posted the
     following four books in their entirety on www.naderlibrary.com,
     thereby infringing Penguin's copyrights in the printed works:
     Upton Sinclair, Oil!; Sinclair Lewis, It Can't Happen Here;
     Apuleius, The Golden Ass (E.J. Kenney trans.); and Lucretius, On
     the Nature of the Universe (R.E. Latham trans.). Penguin Grp.
     (USA) Inc. v. Am. Buddha, No. 09-cv-528, 2009 WL 1069158, at *1,
     2009 U.S. Dist. LEXIS 34032, at *2 (S.D.N.Y. Apr. 21, 2009).
          4
            Subject matter jurisdiction was premised on the federal
     courts' "original and exclusive" jurisdiction over actions
     alleging copyright infringement pursuant to 17 U.S.C. § 501.
     Compl. ¶ 4; see 28 U.S.C. § 1338(a).

                                       3
 1   agreed, ruling, as we later characterized it, that the "situs of

 2   the injury" was "where the book[s in which Penguin holds the

 3   copyrights were] electronically copied -- presumably in Arizona

 4   or Oregon, where American Buddha and its computer servers were

 5   located -- and not New York, where Penguin was headquartered."

 6   Am. Buddha II, 609 F.3d at 32; see also Am. Buddha I, 2009 WL

 7   1069158, at *4, 2009 U.S. Dist. LEXIS 34032, at *13.   This appeal

 8   followed.

 9               Concluding that resolution of the issues raised on

10   appeal "require[d] analysis of state law and policy

11   considerations that this Court is ill-suited to make," Am. Buddha

12   II, 609 F.3d at 32, we certified a question to the New York Court

13   of Appeals, which that Court has now answered.

14               The district court's dismissal of Penguin's complaint

15   rested on its interpretation of New York's long-arm statute, N.Y.

16   C.P.L.R. 302(a)(3)(ii).    It provides, in pertinent part:

17               [A] court may exercise personal jurisdiction
18               over any non-domiciliary . . . who . . .
19               commits a tortious act without the state
20               causing injury to person or property within
21               the state, . . . if he . . . expects or
22               should reasonably expect the act to have
23               consequences in the state and derives
24               substantial revenue from interstate or
25               international commerce . . . .
26   N.Y. C.P.L.R. 302(a)(3)(ii).   To establish jurisdiction under

27   this provision, a plaintiff must demonstrate that:

28               (1) the defendant's tortious act was
29               committed outside New York, (2) the cause of
30               action arose from that act, (3) the tortious
31               act caused an injury to a person or property
32               in New York, (4) the defendant expected or

                                       4
 1                should reasonably have expected that his or
 2                her action would have consequences in New
 3                York, and (5) the defendant derives
 4                substantial revenue from interstate or
 5                international commerce.
 6   Am. Buddha II, 609 F.3d at 35 (citing LaMarca v. Pak-Mor Mfg.

 7   Co., 95 N.Y.2d 210, 214, 735 N.E.2d 883, 886, 713 N.Y.S.2d 304,

 8   307 (2000)).

 9                In this case, the applicability vel non of the long-arm

10   statute turns on the third requirement: the situs of Penguin's

11   injury.   For the district court to find that the long-arm statute

12   conferred jurisdiction on courts in New York, Penguin was

13   required to show that it suffered injury "within the state."

14   After examining two competing lines of New York cases, the

15   district court reasoned that "[b]ecause Penguin pleaded

16   infringement only by American Buddha, and not by any individual

17   who downloaded material from American Buddha's site, . . .

18   business was lost through the copying of the copyrighted works by

19   American Buddha and not through their placement on the Internet."

20   Id. at 37 (characterizing the district court's analysis in Am.

21   Buddha I).     The district court therefore concluded that Penguin's

22   business was lost -- and its injury suffered -- "where the books

23   were uploaded -- Oregon or Arizona     -- not where they were

24   downloaded and used, which could have been anywhere that the

25   Internet is available, including New York."    Id. (same).

26                On appeal to this Court, we decided that resolution of

27   the appeal "require[d] a determination of how the New York State

28   Legislature intended to weigh the breadth of protection to New

                                        5
 1   Yorkers whose copyrights have allegedly been infringed against

 2   the burden on non-resident alleged infringers whose connection to

 3   New York may be remote and who may reasonably have failed to

 4   foresee that their actions would have consequences in New York."

 5   Id. at 32; see also id. at 37-41 (reviewing the legislative

 6   history of the relevant long-arm provisions and New York cases

 7   interpreting them).

 8             We therefore certified the following question to the

 9   New York Court of Appeals:5   "In copyright infringement cases, is

10   the situs of injury for purposes of determining long-arm

11   jurisdiction under N.Y. C.P.L.R. § 302(a)(3)(ii) the location of

12   the infringing action or the residence or location of the

13   principal place of business of the copyright holder?"      Id. at 32.

14             On March 24, 2011, the Court of Appeals answered a

15   "narrow[ed] and reformulate[d]" version of our question.     Penguin

16   Grp. (USA) Inc. v. Am. Buddha, 16 N.Y.3d 295, 301, --- N.E.2d ---

17   , ---, --- N.Y.S.2d ---, --- (2011) ("Am. Buddha III").     The

18   Court rephrased our question as follows:   "In copyright

19   infringement cases involving the uploading of a copyrighted

20   printed literary work onto the Internet, is the situs of injury

21   for purposes of determining long-arm jurisdiction under N.Y.

22   C.P.L.R. § 302(a)(3)(ii) the location of the infringing action or

23   the residence or location of the principal place of business of

          5
            The district court does not have statutory authority to
     ask the New York Court of Appeals for its views on unsettled and
     important issues of New York law. We do. See N.Y. Comp. Codes
     R. & Regs. tit. 22, § 500.27(a).

                                      6
 1   the copyright holder?"   Id. at 301-02, --- N.E.2d at ---, ---

 2   N.Y.S.2d at --- (emphasis added).6    The Court concluded that "a

 3   New York copyright owner alleging infringement sustains an in-

 4   state injury pursuant to CPLR 302(a)(3)(ii) when its printed

 5   literary work is uploaded without permission onto the Internet

 6   for public access."   Id. at 304, --- N.E.2d at ---, --- N.Y.S.2d

 7   at ---.

 8             The New York Court of Appeals observed that "the

 9   Internet itself plays an important role in the jurisdictional

10   analysis in the specific context of this case."    Id. at 304, ---

11   N.E.2d at ---, --- N.Y.S.2d at ---.    "[T]he alleged injury in

12   this case involves online infringement that is dispersed

13   throughout the country and perhaps the world."    Id. at 305, ---

14   N.E.2d at ---, --- N.Y.S.2d at ---.    The Court therefore

15   concluded that "it is illogical to extend" the traditional tort

16   approach that "equate[s] a plaintiff's injury with the place

17   where its business is lost or threatened" to the context of

18   "online copyright infringement cases where the place of uploading

19   is inconsequential and it is difficult, if not impossible, to

20   correlate lost sales to a particular geographic area."    Id. at

21   305, --- N.E.2d at ---, --- N.Y.S.2d at ---.



          6
            The Court of Appeals emphasized that it was not "necessary
     [for it] to address whether a New York copyright holder sustains
     an in-state injury pursuant to CPLR 302(a)(3)(ii) in a copyright
     infringement case that does not allege digital piracy and,
     therefore, express[ed] no opinion on that question." Am. Buddha
     III, 16 N.Y.3d at 307 n.5, --- N.E.2d at --- n.5, --- N.Y.S.2d at
     --- n.5.

                                      7
 1              The Court also identified the right of a copyright

 2   holder "'to exclude others from using his property'" as a

 3   "critical factor that tips the balance in favor of identifying

 4   New York as the situs of injury."    Id. at 305, --- N.E.2d at ---,

 5   --- N.Y.S.2d at --- (quoting eBay Inc. v. MercExchange, L.L.C.,

 6   547 U.S. 388, 392 (2006)).   In light of this right and the

 7   "undisputed" fact that "American Buddha's Web sites are

 8   accessible by any New Yorker with an Internet connection," the

 9   Court viewed the "absence of any evidence of the actual

10   downloading of Penguin's four works by users in New York" as "not

11   fatal to a finding that the alleged injury occurred in New York."

12   Id. at 306, --- N.E.2d at ---, --- N.Y.S.2d at ---.

13              The Court of Appeals rejected American Buddha's

14   assertion that its decision would "open a Pandora's box allowing

15   any nondomiciliary accused of digital copyright infringement to

16   be haled into a New York court when the plaintiff is a New York

17   copyright owner of a printed literary work."   Id. at 307, ---

18   N.E.2d at ---, --- N.Y.S.2d at ---.   The Court was satisfied that

19   the long-arm statute's "built-in safeguards against such

20   exposure," together with the requirements of the United States

21   Constitution's Due Process Clause, would guard against such

22   abuse.   Id. at 307, --- N.E.2d at ---, --- N.Y.S.2d at ---.

23              When this appeal was last before us, we indicated that

24   "were we eventually to agree with Penguin, contrary to the

25   district court's decision, that the situs of injury was indeed

26   New York, the proper course would be to remand to the district

                                      8
 1   court to consider the remaining four factors for personal

 2   jurisdiction under the long-arm statute."   Am. Buddha II, 609

 3   F.3d at 41.   The Court of Appeals' decision now compels us to

 4   "agree with Penguin" and to conclude, for the purposes of the

 5   personal jurisdiction analysis pursuant to New York's long-arm

 6   statute, that the situs of Penguin's alleged injury was New York.

 7               As we observed in American Buddha II, the district

 8   court's opinion and order dismissing Penguin's complaint

 9   addressed only the situs-of-injury issue.   See id.; Am. Buddha I,

10   2009 WL 1069158, at *4, 2009 U.S. Dist. LEXIS 34032, at *13 ("As

11   this issue is dispositive, it is not necessary to explore whether

12   plaintiff has met its burden on the other elements necessary to

13   establish jurisdiction under Rule 302(a)(3)(ii), or whether the

14   exercise of jurisdiction would comport with due process.").      We

15   therefore vacate the judgment of the district court and remand

16   this case to that court for its consideration in the first

17   instance of whether Penguin has established the four remaining

18   jurisdictional requisites, and the extent to which the assertion

19   of personal jurisdiction over American Buddha would be consistent

20   with the requirements of Due Process.

21               For the foregoing reasons, the judgment dismissing the

22   plaintiff's complaint is vacated and the case is remanded to the

23   district court for further proceedings consistent with this

24   opinion and with the Court of Appeals' response to our certified

25   question.



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