Nicholas Services, LLC v. Glassdoor, Inc.

Background

Glassdoor operates a website where third parties can post reviews of their employers. Nicholas Services, LLC, doing business as Nicholas Air, and Corr Flight S., Inc. are described in the opinion as closely related companies in the private-jet transportation industry. Nicholas Air is the brand, while Corr Flight employs the people performing duties for that brand. The complaint also named unknown individuals who allegedly posted content about Nicholas Air on Glassdoor.

After discovering the reviews, Nicholas Air alleged that the reviews were defamatory and violated an employment contract that prohibited disclosure of information related to the companies. Nicholas Air created a Glassdoor employer account so it could see, respond to, or complain about the reviews, and it agreed to Glassdoor’s terms of use. Nicholas Air contacted Glassdoor several times and sent a demand letter, but alleged that Glassdoor did not respond after saying the complaint had been escalated.

The plaintiffs sued for defamation, tortious interference with business relations, tortious interference with contracts, and, as to the Doe defendants, breach of contract. Glassdoor moved to dismiss for lack of personal jurisdiction, failure to state a claim, and protection under § 230 of the Communications Decency Act. In the alternative, Glassdoor moved to transfer the action to the Northern District of California under the forum-selection clause in the terms of use.

Personal Jurisdiction

The court denied Glassdoor’s motion to dismiss for lack of personal jurisdiction. The court considered whether exercising specific personal jurisdiction—authority over a defendant based on its contacts related to the lawsuit—was consistent with the Fourteenth Amendment.

The court held that Glassdoor had sufficient contacts with Mississippi. It emphasized that Glassdoor created a review page for a Mississippi company, allowed users to post reviews there, required the Mississippi company to create an employer account before responding or complaining, accepted the terms of use, received the complaint, and allegedly continued displaying the reviews to potential Mississippi employees. The court found that the claims arose from or related to those contacts. It also found that Glassdoor had not shown that exercising jurisdiction would be unfair or unreasonable.

Transfer

The court granted Glassdoor’s alternative motion to transfer in part. It found that the forum-selection clause appeared valid and applied to Nicholas Air, which entered into the terms of use. The court rejected the plaintiffs’ argument that the clause was procedurally unfair.

The court held that the clause did not bind Corr Flight because Corr Flight never agreed to the terms of use. The court also rejected Glassdoor’s arguments that Corr Flight should be bound under agency or direct-benefit principles. According to the court, Corr Flight received no benefit from the contract Nicholas Air entered, and the complaint’s allegations did not establish that Nicholas Air acted as Corr Flight’s agent.

Because only one plaintiff was bound by the forum-selection clause, the court considered whether to separate Nicholas Air’s claims and transfer them. Applying Fifth Circuit guidance, the court concluded that severance and transfer were appropriate. It found no evidence that Corr Flight would be harmed and determined that the public-interest considerations did not outweigh the forum-selection clause.

The court therefore severed all claims by Nicholas Services, LLC and transferred them to the Northern District of California as a separate case. Corr Flight’s claims remained in the Mississippi case.

Failure to State a Claim

The court denied the motion to dismiss the defamation claim against Glassdoor. Under Mississippi law, defamation requires a false and defamatory statement, an unprivileged publication to a third party, at least negligence by the publisher, and either actionability without special harm or special harm caused by the publication. The court found that the plaintiffs attached the allegedly defamatory reviews and alleged facts supporting each element.

The court granted the motion to dismiss the claims against Glassdoor for tortious interference with business relations and tortious interference with contracts. It found that the complaint did not plausibly allege that Glassdoor acted intentionally and willfully, calculated its conduct to cause damage, or acted with an unlawful purpose to cause damage. The court specifically found no facts suggesting that Glassdoor intended to cause anyone to breach a contract with the plaintiffs.

Section 230

Section 230 generally protects an interactive computer service from being treated as the publisher or speaker of information supplied by another content provider. The court recognized that Glassdoor qualifies as an interactive computer service and that Fifth Circuit precedent gives the protection broad scope.

The court nevertheless denied Glassdoor’s § 230 motion to the extent stated in the opinion. It reasoned that Glassdoor required users reviewing Nicholas Air to identify themselves as a current or former employee, even though Nicholas Air allegedly had no employees. Glassdoor then displayed the reviews under a page stating, “What are Nicholas Air employees talking about?” The court concluded that, if the forced employee-status representation was defamatory, Glassdoor could be treated as having contributed to that content and would not be protected by § 230 for that aspect of the claim.

Disposition

The court ruled that Glassdoor’s motion to dismiss or transfer was granted in part and denied in part. Specifically, the motion to dismiss for lack of personal jurisdiction was denied; the alternative motion to transfer was granted in part; the motion to dismiss for failure to state a claim was denied as to defamation and granted as to the claims against Glassdoor for tortious interference with business relations and tortious interference with contract; and the motion under § 230 was denied to the extent set forth in the opinion. Judge Michael P. Mills ordered Nicholas Services’ claims transferred and Corr Flight’s claims to remain in the Mississippi case.