Opinion
Case No. 04-6071-HO.
May 14, 2004
ORDER
Plaintiffs EQ solutions, LLC and Gemtek Of Oregon, LLC commenced this action in the Circuit Court of the State of Oregon for the County of Benton alleging breach of contract and tortious interference with business relationships. Defendants William C. Bain and Reata Service and Supply, LLC removed the action to this court based on diversity jurisdiction. Defendants now move to dismiss (#3).
ALLEGATIONS
Plaintiffs are Oregon limited liability corporations and defendant William C. Bain is the president of defendant Reata Service and Supply, LLC, a Texas corporation.
On April 10, 2003, the parties entered into a wholesale distributor contract prepared in Oregon. The contract provides that it shall be governed by the laws of Oregon.
The defendants have substantial dealings with the State of Oregon.
Subsequent to the formation of the contract, the defendants allegedly breached their obligations by:
(a) collaborating with others in making a competing product in violation of the contract;
(b) improperly contacting the plaintiffs' customers and untruthfully telling them that the plaintiffs are bankrupt, that the plaintiffs are defrauding customers and that the plaintiffs' product does not work and is not certified;
(c) improperly and untruthfully informing distributors and wholesalers that the plaintiffs had been dishonest with them;
(d) improperly approaching distributors, sponsors, and customers and attempting to tell them to void their contracts with the plaintiffs and not to purchase any more products from the plaintiffs.
As a result, plaintiffs allegedly have been damaged in the amount of $10,000,000.
Defendants allegedly also have improperly interfered with plaintiffs' business relations and prospective business relations for the same reasons noted in a-d above.
DISCUSSION
Defendants move to dismiss contending that the court lacks personal jurisdiction over them.
There is no applicable federal statute governing personal jurisdiction in this diversity case, thus the law of Oregon applies. Dole Food Co. v. Watts, 303 F.3d 1104, 1108 (9th Cir. 2002). The law of the State of Oregon permits a court to exercise jurisdiction over any party so long as "prosecution of the action against a defendant in this state is not inconsistent with the Constitution of this state or the Constitution of the United States." Or.R.Civ.P. 4 L. Thus, the long-arm statute of the State of Oregon is coextensive with the limits of federal due process. Gray Co. v. Firstenberg Mach. Co., 913 F.2d 758, 760 (9th Cir. 1990). Plaintiff bears the burden of demonstrating personal jurisdiction. McGlinchy v. Shell Chem. Co., 845 F.2d 802, 817 n. 10 (9th Cir. 1988). Plaintiff need only make a prima facie showing of jurisdictional facts. Sher v. Johnson, 911 F.2d 1357, 1361 (9th Cir. 1990). In such cases, the court only inquires into whether plaintiff's pleadings and affidavits make a prima facie showing of personal jurisdiction. Caruth v. Int'l Psychoanalytical Ass'n, 59 F.3d 126, 128 (9th Cir. 1995). Although plaintiff cannot simply rest on the bare allegations of his complaint,Amba Marketing Systems, Inc. v. Jobar Int'l, Inc., 551 F.2d 784, 787 (9th Cir. 1977), uncontroverted allegations in the complaint must be taken as true. See AT T v. Compagnie Bruxelles Lambert, 94 F.3d 586, 588 (9th Cir. 1996).
When the activities of a defendant within the State of Oregon are "continuous and systematic" or "substantial," a court may exercise general personal jurisdiction over that defendant without offending notions of due process. See Lake v. Lake, 817 F.2d 1416, 1420 (9th Cir. 1987). In this case, the moving defendants lack sufficient contacts with the State of Oregon for the court to exercise general jurisdiction over them. Therefore, the court must examine whether it may exercise limited personal jurisdiction over the defendants.
Oregon courts use a three-part test for determining when limited jurisdiction may be exercised over defendants: 1) the nonresident defendants must have purposefully availed themselves of the privilege of conducting activities in the forum by some affirmative act or conduct; 2) plaintiff's claims must arise out of or result from the defendants' forum-related activities; and 3) exercise of jurisdiction must be reasonable. Roth v. Garcia Marquez, 942 F.2d 617, 620-21 (9th Cir. 1991).
A. Purposefully Availed
Purposeful availment analysis examines whether defendants' contacts with the forum are attributable to their own actions or solely to the actions of plaintiff. In order to have purposefully availed themselves of conducting activities in the forum, the defendants must have engaged in some type of affirmative conduct which allows or promotes the transaction of business within the forum state. Roth, 942 F.2d at 621. In the case of a tort claim, exercise of jurisdiction over a defendant whose only contact with the forum state is the purposeful direction of a foreign act having effect in the forum state is proper. Haisten v. Grass Valley Medical Reimbursement Fund, 784 F.2d 1392, 1397 (9th Cir. 1986).
To meet the effects test, the defendants must have (1) committed an intentional act, which was (2) expressly aimed at the forum state, and (3) caused harm, the brunt of which is suffered and which the defendants know is likely to be suffered in the forum state. See Panavision Int'l, L.P. v. Toeppen, 141 F.3d 1316, 1321 (9th Cir. 1998). Express aiming is met when the defendants are alleged to have engaged in wrongful conduct targeted at a plaintiff whom the defendants know to be a resident of the forum state. Bancroft Masters, Inc. v. Augusta National, Inc., 223 F.3d 1082, 1087 (9th Cir. 2000).
The "purposeful availment" requirement ensures that a defendant will not be hauled into a jurisdiction solely as a result of "random," "fortuitous," or "attenuated" contacts or of the "unilateral activity of another party or a third person. See Burger King v. Rudzewicz, 471 U.S. 462, 475 (1985).
Defendant Reata Service and Supply, LLC was formed in order to enter into a marketing agreement with EQ solutions to market and sell EQ products. On August 31, 2001, the companies entered into an agreement granting Reata the rights to market and sell EQ Solutions products in Texas, Oklahoma, Florida, California, Louisiana, New Mexico, Arizona, and Mexico. In April of 2003, the agreement was modified to provide for a one year term and Reata retained exclusive marketing rights for Texas only. Reata ceased doing business on December 31, 2003, and dissolved.
Neither defendant is a resident of Oregon. Defendants maintain that they have not solicited any business in Oregon, have not conducted any business in Oregon, and that all business dealing with EQ solutions occurred outside of Oregon. In short, defendants contend they have had no contact with Oregon and have not availed themselves of the privilege of acting in Oregon or causing important consequences in Oregon.
Plaintiffs assert that the parties engaged in a continuous and extensive pattern of business dealing for over two years, that defendants purchased approximately $245,000 worth of product produced by plaintiffs in Oregon, and that the contract provides that the law of Oregon governs.
Plaintiffs cannot attribute any of the above activities to defendant Bain individually. Defendant Bain's activities with plaintiffs was conducted in a representative capacity as President of Reata. There is a presumption of corporate regularity which requires the party seeking to assert jurisdiction over an individual to come forward with substantial evidence that the corporation was really a dummy for the person sought to be held liable. Ius v. Butcher, 680 F. Supp. 343, 347 (D.Or. 1987). The actions of defendant Bain in his representative capacity are insufficient to establish personal jurisdiction over him. See Chem Lab Products, Inc. v. Stepanek, 554 F.2d 371, 372 (9th Cir. 1977) (actions of defendant who communicated to corporation's attorneys the authorization of the board of directors that attorneys write to plaintiff in California charging it with patent infringement did not supply the requisite contact between defendant and the forum state to justify in personam jurisdiction).
Reata executed the contracts in Texas. Thus, the only Oregon activity plaintiffs can attribute to Reata are phone calls and fax orders for product or other electronic communications to obtain product information. Mere purchases, even if occurring at regular intervals, are not enough to warrant a State's assertion of in personam jurisdiction over a nonresident corporation in a cause of action not related to those purchase transactions.Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 418 (1984). Plaintiffs claims do not relate to any purchases made by Reata. The complaint does not allege that the asserted wrong-doing took place in Oregon.
Plaintiffs fail to make a prima facie showing that defendant Bain purposefully availed himself of the privilege of conducting activities in Oregon by some affirmative act or conduct. The same is true for defendant Reata.
B. Claim Arising from Forum-Related Activities
As noted above, the plaintiffs fail to show that the alleged improprieties arose from activities in Oregon. The only activity Reata purposely directed toward Oregon were electronic communications for product information and orders. Plaintiffs allege breach and tortious interference arising from: collaborating in making a competing product; contacting plaintiffs' non-Oregon customers and untruthfully telling them that plaintiffs are bankrupt, that plaintiffs are defrauding customers and that plaintiffs' product does not work and is not certified; informing distributors that plaintiffs have been dishonest; and telling other contractors of plaintiffs to void their contracts and not purchase any more product. These actions do not arise from the electronic communications to plaintiff to purchase product. Cf. Shamrock Building Materials, Inc. v. Overseas Building Supply, 189 Or. App. 302, 308 (2003) (because Overseas was faxing invoices daily to Oregon for payment, the consequences of Overseas' alleged breach of contract were felt directly by Shamrock in Oregon, the ongoing business relationship between Overseas in Florida and Shamrock in Oregon was such that it should reasonably have anticipated being haled into court here to answer Shamrock's breach of contract claim). C. Reasonableness
However in Shamrock, the breach specifically related to the products ordered (and billed in Oregon) in that they were defective.
If plaintiffs present a prima facie case that the defendants purposefully availed themselves of the privilege of conducting activities in the forum state, and that the claims in the complaint, at least in part, arise out of these forum-related activities, the burden shifts to the defendant to present a "compelling case" that the exercise of personal jurisdiction would be unreasonable. Roth, 942 F.2d at 625. The court weighs seven factors to determine whether the exercise of jurisdiction is reasonable: (1) the extent of the defendant's purposeful interjection into the affairs of the forum state; (2) the burden on the defendant; (3) the extent of conflict with the sovereignty of the defendant's home state; (4) the interest of the forum in adjudicating the dispute; (5) the most efficient judicial resolution of the dispute; (6) the interest of the plaintiff in convenient and effective relief; and (7) the existence of an alternative forum. See Roth, 942 F.2d at 623; Sinatra v. National Enquirer, Inc., 854 F.2d 1191, 1198-99 (9th Cir. 1988).
As noted above, defendant Bain has not purposefully interjected himself individually, but only in a representative capacity to the extent any interjection occurred. In addition, Reata's interjection was minimal in that it only made periodic electronic communications with plaintiffs in Oregon for product orders. Moreover, the claims in the complaint do not arise out of the Oregon contacts.
Defendants have never personally appeared in Oregon, while plaintiffs have actively sought and appeared in Texas and other states to solicit distributors. There would be no conflict with Texas' sovereignty as the contract specifically applies Oregon law. Oregon's interest appears to be no greater than that of Texas in this dispute. It does not appear that efficiency favors Oregon or Texas to any great extent. Obviously Oregon is more convenient to plaintiffs, but a Texas forum is capable of providing relief for the plaintiffs.
Given the slight forum contacts, that the contacts do not give rise to plaintiff's claims, and that the balance of the above seven factors favor defendant, the motion to dismiss is granted.
CONCLUSION
For the reasons stated above, defendants' motion to dismiss (#3) is granted and this action is dismissed.