Allen v. Shutterfly, Inc.

Background

Shawna Allen brought a proposed consumer-fraud class action against Shutterfly, Inc., Lifetouch, Inc., and Lifetouch National School Studios, Inc. Her claims arose from school portraits sold under a “Family Approval” model. Under that model, students received portraits or related products at home, and parents or guardians were directed to pay for them or return them. Allen alleged that the products were unconditional gifts and that the model improperly pressured parents to buy them.

Allen asserted five California-law claims: solicitation of payment for unordered goods, violation of California Civil Code § 1584.5, violation of the Consumers Legal Remedies Act, violation of the Unfair Competition Law, and unjust enrichment. Allen lived in Kansas, her children attended school there, and the portraits at issue were taken, delivered, and paid for in Kansas.

The corporate defendants’ structure had changed. Lifetouch, Inc. had been converted into a limited liability company and merged into Shutterfly, LLC. Lifetouch National School Studios, Inc. had become Shutterfly Lifetouch, LLC, which remained organized under Minnesota law and had its principal place of business in Minnesota.

Personal Jurisdiction

Personal jurisdiction is a court’s authority to exercise power over a defendant. Lifetouch moved to dismiss under Federal Rule of Civil Procedure 12(b)(2), arguing that the court lacked personal jurisdiction over the Lifetouch entities.

The court found no basis for general jurisdiction. General jurisdiction ordinarily exists when a company is essentially at home in the state, typically where it is incorporated or has its principal place of business. The Lifetouch entities were Minnesota companies with their principal places of business in Minnesota, and Allen alleged no facts showing that Lifetouch was essentially at home in California.

The court also found no specific jurisdiction. Specific jurisdiction depends on a connection between the defendant’s forum-related conduct and the plaintiff’s claims. The court explained that Allen’s own claims—not the claims of potential class members—had to arise from or relate to Lifetouch’s California contacts. Allen’s claims arose from events occurring entirely in Kansas. Allegations that people in California or elsewhere received portraits under the Family Approval model did not connect Allen’s claims to California.

The court further held that Allen could not establish jurisdiction by grouping the defendants together. She had to show a jurisdictional basis for each defendant based on that defendant’s own contacts with California. Her allegations that the defendants were agents, affiliates, parents, subsidiaries, or otherwise related to one another were conclusory and unsupported by specific facts showing that Shutterfly controlled Lifetouch. The court also stated that consolidated corporate reporting did not by itself establish an agency relationship, and that a parent-subsidiary relationship alone did not allow one company’s California contacts to be attributed to another.

The parties agreed that a forum-selection clause in Lifetouch’s terms of service did not apply to Allen’s claims. The court therefore concluded that the clause did not provide personal jurisdiction.

Jurisdictional Discovery and Leave to Amend

Allen asked the court to delay the jurisdiction decision until after she amended the complaint and conducted limited jurisdictional discovery. The court denied that request without prejudice because Allen offered only a “hunch” that discovery might uncover useful facts and did not identify what discovery she wanted or what it might reveal. The order permitted Allen to submit a properly supported discovery request and plan after meeting and conferring with the defendants.

The court nevertheless granted leave to amend because this was Allen’s first opportunity to amend. The court noted that Allen had not explained how an amendment could cure the jurisdictional deficiencies and that the alleged transactions occurred in Kansas. The amended complaint was due within 30 days of the order.

Disposition

The court GRANTED Lifetouch’s motion to dismiss for lack of personal jurisdiction WITH LEAVE TO AMEND. The court DENIED WITHOUT PREJUDICE Allen’s request for jurisdictional discovery. The court did not decide the merits of Allen’s California consumer claims. The order also noted that, because the court had concurrently granted Shutterfly’s motion to compel arbitration, Allen could anticipate a similar outcome if the court later found personal jurisdiction over Lifetouch.