Opinion
Case No. 2:02CV905DAK
May 7, 2003
MEMORANDUM DECISION AND ORDER
This matter is before the court on Defendant McCarthy Building Companies' Motion to Dismiss for Lack of Personal Jurisdiction, a hearing on the motion was held on May 7, 2003. At the hearing, Defendant was represented by Dwayne A. Vance and Ryan Earl, and Plaintiff was represented by David R. Nielson. The court took the matter under advisement. The court has considered carefully the memoranda and other materials submitted by the parties, as well as the law and facts relating to the motion. Now being fully advised, the court renders the following Memorandum Decision and Order.
BACKGROUND
McCarthy is a Missouri corporation that acted as a general contractor on a commercial construction project in Reno, Nevada, commonly known as Corporate Point ("the Project"). McCarthy subcontracted with a Utah corporation, Eagle Precast, for the precast and granite work on the Project.
In late August of 2000, Eagle Precast faxed a proposal from Salt Lake City to McCarthy for the work on the Project. On September 7, 2000, McCarthy sent Eagle Precast a letter awarding the subcontract for the Project to Eagle Precast and instructing Eagle Precast to proceed with work. Representatives of Eagle Precast traveled to McCarthy's offices in California and the job site in Reno, Nevada regarding the company's involvement in the Project. No representative of McCarthy ever traveled to Utah to meet with Eagle Precast. However, McCarthy and Eagle Precast corresponded regularly regarding work on the Project, including several letters and at least thirty telephone calls.
McCarthy is registered to do business in Utah and has a valid license to act as a general contractor in Utah, but it has never actually engaged in any construction projects in Utah. Because it is registered to do business in Utah, McCarthy is required to have and has an agent for service of process in Utah, which agent was sewed with process to commence this litigation. McCarthy is also registered with Utah's Lien Recovery fund. However, McCarthy has no offices, bank accounts, or employees in Utah. McCarthy does not send salespeople or agents to Utah to solicit business. But, McCarthy has a website that is accessible in Utah and the website provides a link allowing email messages to be sent directly to McCarthy.
On September 13, 2002, the owner of the property involved in the Project, MeCarran Properties LLC, commenced bankruptcy proceedings in the United States Bankruptcy Court, District of Nevada. McCarthy has not received payment from McCarran for the work performed by Eagle Precast and has not paid Eagle Precast for the work it performed before stop work instructions were given. McCarran has identified Eagle Precast as a creditor in the Nevada bankruptcy proceedings. A number of actions are currently pending in Nevada involving McCarthy, McCarran, and other subcontractors. Most of these cases have been consolidated into one case pending in Nevada state court. Because Eagle Precast has not received payment from McCarthy, it commenced the present lawsuit.
DISCUSSION Motion to Dismiss
McCarthy argues that Plaintiffs Complaint should be dismissed because this court lacks both general and specific personal jurisdiction over it. Plaintiff argues that this court has both general and specific personal jurisdiction over McCarthy. In the event that the court finds it has not provided sufficient evidence, Eagle Precast filed a Rule 56(f) Affidavit requesting time to do discovery.
When a court's jurisdiction is contested, the plaintiff "bears the burden of establishing personal jurisdiction over the defendant." OMI Holdings, Inc. v. Royal Ins. Co. of Canada, 149 F.3d 1086, 1091 (1Oth Cir. 1998); Electronic Realty Assoc. v. Vaughan, 897 F. Supp. 521, 521 (D. Kansas 1995) (citing McNutt v. General Motors, 298 U.S. 178, 189 (1936)). However, in the preliminary stages of litigation, the plaintiffs burden is only to establish a prima facie case that jurisdiction exists. Electronic Really, 897 F. Supp. at 521. "Where . . . there has been no evidentiary hearing, and the motion to dismiss for lack of jurisdiction is decided on the basis of affidavits and other written material, the plaintiff need only make a prima facie showing that jurisdiction exists." Id.; see also Soma Medical Int'l v, Standard Chartered Bank, 196 F.3d 1292, 1295 (10th Cir. 1995). All factual disputes are resolved in favor of the plaintiff when determining the sufficiency of this showing. Wenz v. Memory Crystal, 55 F.3d 1503, 1505 (10th Cir. 1995).
"To obtain personal jurisdiction over a nonresident defendant in a diversity action, a plaintiff must show that jurisdiction is legitimate under the laws of the forum state and that the exercise of jurisdiction does not offend the due process clause of the Fourteenth Amendment." Soma Medical, 196 F.3d at 1295 (internal quotations omitted). There are two types of jurisdiction a court may exercise over a nonresident defendant — general or specific.
I. General Jurisdiction
"General personal jurisdiction permits a court to exercise power over a defendant without regard to the subject of the claim asserted." Arguello v. Industrial Woodworking Mach. Co., 838 P.2d 1120, 1122 (Utah 1992). Under Utah law, "for [general jurisdiction] to exist, the defendant must be conducting substantial and continuous local activity." Id. The Utah Court of Appeals has stated twelve factors that are relevant to the issue of general personal jurisdiction:
Whether the corporation defendant is: 1. engaged in business in the state; 2. licensed to do business in the state; 3. owning, leasing, or controlling property (real or personal) or assets in this state; 4. maintaining employees, offices, agents, or bank accounts in this state; 5. present in that shareholders reside in this state; 6. maintaining phone or fax listings in this state; 7. advertising or soliciting business in this state; 8. traveling to this state by way of salespersons, etc.; 9. paying taxes in this state; 10. visiting potential customers in this state; 11. recruiting employees in this state; 12. generating a substantial percentage of its national sales through revenue generated from instate customers.Soma Medical International v. Standard Chartered Bank, 196 F.3d 1292, 1295-96 (10th Cir. 1999) (quoting Buddensick v. Stateline Hotel, Inc., 972 P.2d 928, 930-31 (Utah Ct.App. 1998). The Utah Supreme Court has explained that courts should weigh several factors, "none of which is the sine qua non to establish a business presence in the State." Hill v. Zale Corp., 482 P.2d 332, 334 (Utah 1971). "[B]ut from a consideration of the total picture as to the existence or absence of them the answer to that critical question is to be found." Id.
Defendant argues that the only general contacts it has with the State of Utah are that it is registered to do business in Utah, it holds a valid Utah license authorizing it to act as a general contractor in the State of Utah, and it has registered to become a participant in Utah's Lien Recovery Fund. Defendant contends that these contacts are a part of being licensed in Utah, only one factor in the Buddensick list. In addition, Defendant claims that although these facts show that it has the ability to conduct business in Utah if it chooses to do so, these facts alone do not establish that McCarthy has actually conducted business in Utah on a continuous and systemic basis.
Although McCarthy has continued to renew its business and contractor license for many years, it has never actually engaged in construction work in Utah. McCarthy does not have any bank accounts, offices, employees, or shareholders in Utah, nor does it send salespeople or agents to Utah to solicit or conduct business. McCarthy also has a website containing general information about the company which is accessible throughout the world. The website states that Utah is one of the states McCarthy can do business. Websites are evaluated by looking at their level of interactivity and the commercial nature of the exchange of information that occurs. See Soma Medical, 196 F.3d at 1296. McCarthy's website is predominantly passive in providing information and the fact that a person may initiate contact with McCarthy through an email link is more properly characterized as a source of information than the conduct or solicitation of business. Moreover, Plaintiff has not alleged that a single person in Utah has ever contacted McCarthy by means of the website.
The majority of the twelve Buddensick factors weigh in favor of a finding that McCarthy does not have substantial and continuous contacts with Utah in order to establish general jurisdiction. In Hydro Engineering Inc. v. Landa, Inc., 231 F. Supp. 1130, 1133 (D. Utah 2002), this court found no general jurisdiction over a company who sent a sales representative to Utah a few days a year, maintained a website that identified an authorized dealer and distributor of its product in West Jordan, had previously operated a store in Utah, and had an insignificant amount of ongoing sales to various Utah customers. Similarly, McCarthy's limited contacts with Utah do not reach the level of "substantial and continuous" activity necessary to support general personal jurisdiction. Therefore, the court concludes that McCarthy is not subject to general jurisdiction in Utah.
II. Specific Jurisdiction
Next, this court must analyze whether McCarthy is subject to specific jurisdiction in this court. The Utah Supreme Court has stated that "specific jurisdiction gives a court power over a defendant only with respect to claims arising out of particular activities of the defendant in the forum state. For such jurisdiction to exist, the defendant must have certain minimum local contacts." Arguello, 838 P.2d at 1122. Until recently, the Utah Supreme Court employed a three-party inquiry into personal jurisdiction. See, e.g., Phone Directories Co. v. Henderson, 8 P.3d 256 (Utah 2000). The court has now clarified that "[t]he proper test to be applied in determining whether personal jurisdiction exists over a nonresident defendant involves two considerations. First the court must assess whether Utah law confers personal jurisdiction over the nonresident defendant. . . . Second, assuming Utah law confers personal jurisdiction over the nonresident defendant, the court must assess whether an assertion of jurisdiction comports with the due process requirements of the Fourteenth Amendment." State ex rel. W.A., 63 P.2d 607, 612 (Utah 2002). "This test is merely a refinement of [the Utah Supreme Court's] previous tests governing the assertion of personal jurisdiction. It recognizes that the legislature may provide for the extension of personal jurisdiction in statutes other than the long-arm statute." Id. The court explained that "[u]nder this new test, however, any legislative enactment of personal jurisdiction, in or out of the long-arm statute, cannot justify on its own the assertion of jurisdiction. The true safeguard on the extension of personal jurisdiction is the constitutional due process analysis, with its focus on minimum contacts and on traditional notions of fair play and substantial justice." Id. In this case, the parties rely only on the long-arm statute as a statutory basis for jurisdiction. Utah's long-arm statute provides, in pertinent part, as follows:
Any person . . . who in person or through an agent does any of the following enumerated acts, submits himself . . . to the jurisdiction of the courts of this state as to any claim arising out of or related to:
(1) the transaction of any business within this state;
* * * *
(3) the causing of any injury within this state whether tortious or by breach of warranty . . .
Utah Code Ann. § 78-27-24. The statute broadly defines "transaction of business" to mean "activities of a non-resident . . . in this state which affects persons or business within the State of Utah." Id. § 78-27-23(2). The long-arm statute states that it is intended to be interpreted broadly "so as to assert jurisdiction over nonresident defendants to the fullest extent permitted by the due process clause of the Fourteenth Amendment to the United States Constitution." Id. § 78-27-22; see also Starways, Inc. v. Curry, 980 P.2d 204, 206 (Utah 1999).
Consistent with the long-arm statute's command to apply it as broadly as permitted by due process, the Utah Supreme Court "frequently make[s] a due process analysis first because any set of circumstances that satisfies due process will also satisfy the long-arm statute." SII MegaDiamond, Inc. v. American Superabrasives Corp., 969 P.2d 430, 433 (Utah 1998). The new test announced by the Utah Supreme Court does not appear to conflict with analyzing due process standards first given the courts discussion of due process standards being the true safeguard. Therefore, this court will first determine whether the exercise of personal jurisdiction over McCarthy meets federal due process standards.
Under due process standards, a "court may exercise personal jurisdiction over a nonresident defendant only so long as there exist `minimum contacts' between the defendant and the forum state." World-Wide Volkswagen Corp. v, Woodson, 444 U.S. 286, 291, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980) (citations omitted). The `minimum contacts' necessary for specific personal jurisdiction are established "if the defendant has `purposefully directed' his activities at residents of the forum and the litigation results from alleged injuries that `arise out of or relate to' those activities." OMI Holdings, Inc. v. Royal Ins. Co. of Canada, 149 F.3d 1086, 1091 (10th Cir. 1998) (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985)); Hydro Eng'g, 231 F. Supp. at 1135. If the defendant's activities create sufficient minimum contacts, the court then considers whether the exercise of personal jurisdiction over the defendant offends `traditional notions of fair play and substantial justice.' Id. (quoting Asahi Metal Indus. Co. v. Superior Court of California, 480 U.S. 102, 113, 107 So. Ct. 1026, 94 L.Ed.2d 92 (1987)).
Under the first prong of the due process analysis, the court should "examine the quantity and quality of [defendant's] contacts with Utah, including prior negotiations and contemplated future consequences, along with the terms of the contract and the parties' actual course of dealing, to determine whether the exercise of personal jurisdiction over [defendant] comports with due process." Id.; Arguello v. Industrial Woodworking Mach. Co., 838 P.2d 1120, 1122 (Utah 1992).
McCarthy's ability to transact business in Utah is not relevant to its contractual relationship with Eagle Precast which is the basis for this lawsuit. McCarthy is not required to register to do business in Utah in order to contract with Eagle Precast to provide goods and services at a job site in Reno, Nevada. For purposes of specific jurisdiction, this court looks only to the contacts between McCarthy and the State of Utah with respect to Eagle Precast's claims for breach of contract. Therefore, contacts relating to McCarthy's general ability to do business in this State are not relevant to the due process analysis. See Soma Medical, 196 F.3d at 1298 ("Because Soma's claims in this case are completely unrelated to these latter activities [i.e., the defendant's website and filing of UCC financing statements and lawsuits in Utah], we ignore these latter activities in determining whether the exercise of specific personal jurisdiction over [the defendant] in this case satisfies the constitutional due process standard.")
McCarthy's contacts relevant to the specific dispute before the court is limited to interstate communications such as telephone conversations and correspondence regarding Eagle Precast's involvement with the work being done in Reno. "`It is well established that phone calls and Letters are not necessarily sufficient themselves to establish minimum contacts.'" Soma Medical, 196 E.3d at 1299 (quoting Far West Capital, Inc. v. Towne, 46 F.3d 1071, 1077 (10th Cir. 1995)). In Soma Medical, the court did not find that a signature card mailed to Plaintiff in Utah, two letters sent to Plaintiff soliciting signature verification, fourteen other written communications, and a few wire transfer of funds to Utah was enough to establish minimum contacts. Id.
Plaintiff argues that McCarthy voluntarily decided to contract with a Utah company and received the benefit of Utah based labor and equipment without paying for it or performing pursuant to the agreement. However, as in Soma Medical, the fact that Eagle Precast was based in Utah was of no consequence to McCarthy. Id. ("The fact that Soma happened to be a resident of Utah was of no consequence to [defendant]"). "`[T]here is no indication that Utah had anything but a fortuitous role in the parties past dealing or would have any role in their continuing relationship.'" Id. (quoting Far West, 46 F.3d at 1080). In this case, McCarthy selected Eagle Precast because of previous work it had done in the Reno, Nevada area and the future dealings between the parties would have involved installation of the prefabricated materials in Reno, Nevada at the Project site.
Plaintiff further argues that because it performed all of its work under the contract in Utah, the court should find jurisdiction over McCarthy. However, Eagle Precast's determination to do all of the prefabrication work in Utah was a unilateral decision. "Unilateral activity of those claiming a relationship with a nonresident defendant is not sufficient and `it is essential in each case that there be some act by which the defendant purposely [sic] avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of the laws.'" Far West, 46 F.3d at 1075. In Far West, the court determined that the location of an escrow account in Utah that the nonresident defendant could claim funds from was no indication of purposeful availment by the nonresident defendant because the plaintiff had unilaterally determined to place the escrow account in Utah. Id. Similarly, in this case, the fact that Eagle Precast performed its prefabrication work in Utah provides no indication that McCarthy purposefully availed itself of the benefits of this State.
The court concludes that McCarthy's contracting with a Utah company to provide goods and services for a job site in Nevada and engaging in interstate communication with Eagle Precast in connection with the contract is not enough to find that McCarthy purposefully availed itself of the benefits and privileges of the State of Utah. Therefore, there are not sufficient contacts for this court to exercise specific personal jurisdiction in accordance with due process standards.
In light of the due process analysis, it is unnecessary to consider the statutory basis for jurisdiction under Utah's long-arm statute. Furthermore, Plaintiffs request for additional discovery is denied. The parties agree on the facts relevant to the jurisdiction issue and Plaintiff has provided no basis for determining that there are potential facts that would result in a different finding. Accordingly, McCarthy's Motion to Dismiss for Lack of Personal Jurisdiction is granted.
CONCLUSION
Defendant's Motion to Dismiss is GRANTED and this case is dismissed for lack of personal jurisdiction over Defendant. Defendant's pending Motion for Leave to File Third Party Complaint is, therefore, MOOT.