New Jersey Attorney General Cease-and-Desist Letter Sent to Second-Amendment Organization in Texas Supported Personal Jurisdiction There, Holds Fifth Circuit

In Defense Distributed v. Grewal, No. 19-50723 (5th Cir. 19-50723),  the Fifth Circuit reverses dismissal, on personal jurisdiction grounds, of a suit between the Attorney General of New Jersey (Grewal) and two organizations – Defense Distributed and Second Amendment Foundation (“SAF”).

Defense Distributed, located in Austin, Texas, makes computer files available by download for people who want to build guns from 3D-printer parts. “Across the nation, SAF members seek the digital firearms information created by Defense Distributed, circulate their own digital firearms information by utilizing Defense Distributed’s facilities, and republish digital firearms information independently.”

Although the U.S. State Department had entered into a settlement with Defense Distributed that allowed them to continue operating, nine state Attorneys General – including Grewal – jointly filed suit in the U.S. District Court for the Western District of Washington to enjoin the settlement. “Just before the Attorneys General sued in Washington, Defense Distributed and SAF brought the instant action in the Western District of Texas challenging select enforcement actions taken by the state Attorneys General.” The plaintiffs alleged First Amendment violations and tortious interference with the settlement agreement.

The plaintiffs based personal jurisdiction on the following activity by Grewal: “(1) sending a cease-and-desist letter threatening legal action if Defense Distributed published its files; (2) sending letters to third-party internet service providers based in California urging them to terminate their contracts with Defense Distributed; (3) initiating a civil lawsuit against Defense Distributed in New Jersey; and (4) threatening Defense Distributed with criminal sanctions at a live press conference.”

The district court found that these facts failed to state sufficient minimum contacts with Texas to support personal jurisdiction. It relied heavily on Stroman Realty, Inc. v. Wercinski, 513 F.3d 476 (5th Cir. 2008), which held that a cease-and-desist letter – also by a state agency (from Arizona) – sent into Texas does not by itself create minimum contacts. (There was also an argument that Grewal was judicially estopped from denying personal jurisdiction, based on positions taken in the Washington litigation, but that argument was not addressed on appeal.)

The Fifth Circuit reverses. It finds its prior decision Stroman “distinguishable in at least two key respects.” First, while Stroman concerned the effect of Arizona’s regulatory scheme on a Texas-based company, and the cease-and-desist letter was simply incidental, here the plaintiffs alleged direct harm from the chilling effect of the letter itself. Second, “Stroman found that the Arizona public official did not purposefully direct her conduct at Texas because she was simply ‘asserting nationwide authority over any real estate transactions involving Arizona residents or property.’” Here, by contrast, Grewal “does not cabin his request by commanding the plaintiffs to stop publishing materials to New Jersey residents; he instead demands that the plaintiffs cease publication of their materials generally.” Thus, “the intended effects on the plaintiffs and, by extension, the intended effects on Texas residents who would benefit from the plaintiffs’ activities, are much greater than the effects at issue in Stroman.”

Moreover, “Grewal’s communication with Defense Distributed, specifically the cease-and-desist letter delivered into Texas, itself gives rise to distinct tort causes of action. Section 1983’s intentional ‘tort’ of unconstitutional censorship and intentional interference with a contractual relationship are just two possibilities.” Thus, the cause of action was allegedly completed with the letter itself. In a footnote, the court observes, “Censorship, like libel, is damaging not just to the speaker, but to surrounding audiences. And like libel, censorship’s harm occurs not just where it originates, but where it arrives.” (Nevertheless, possibly to stem a flood of similar assertions of personal jurisdiction in future cases, the panel adds in another footnote, “[w]e do not intend to convey that sending a cease-and-desist letter into a forum always subjects the sender to jurisdiction in the forum state.”

In a concurring opinion, Judge Higginson expresses unease with the way in which the majority’s analysis might be construed in inhibit sister states’ enforcement activity, finding “the limiting principles given in Stroman protecting state government officials, as should be assured reciprocally for Attorneys General from our three states, vitally important and binding in this circuit even after our holding today.” The judge would have, instead, “employ[ed] the traditional minimum contacts analysis to find that the aggregate of Grewal’s alleged conduct affirmatively reached out into Texas by attempting to enforce state law even when New Jersey citizens or property were not involved.”