Opinion
CIVIL ACTION NO. 3:02cv-687-H
February 3, 2004
MEMORANDUM OPINION
This matter is before the Court on Defendant's Motion to Dismiss for Lack of Personal Jurisdiction. Plaintiff, Lightyear Communications, Inc. ("Plaintiff"), is a Kentucky corporation with its principal place of business in Louisville, Kentucky. Plaintiff is a provider of telecommunication services and asserts a breach of contract claim with jurisdiction premised upon diversity. Defendant, Xtrasource, Inc. ("Xtrasource"), is a Delaware corporation with its principal place of business in Cleveland, Ohio. Xtrasource does no business in Kentucky and has no connections to the state other than obtaining Plaintiff's services, pursuant to various contracts negotiated by Plaintiff's agent, Globecom Communications ("Globecom"), a Cleveland, Ohio corporation. Everyone agrees that but for an alleged contractual agreement, Xtrasource has insufficient contacts with Kentucky to allow for personal jurisdiction in this Court. Plaintiff alleges that Xtrasource waived personal jurisdiction in its contract. The Court finds no waiver nor minimal contacts justifying jurisdiction.
Xtrasource also moves to dismiss this action for lack of venue, or in the alternative, for partial summary judgment. Plaintiff also moves for partial summary judgment. The Court will not consider these issues because the decision on personal jurisdiction renders these motions moot.
I.
This case involves a contract dispute. Plaintiff provided various telecommunication services to Xtrasource over the course of four years. Plaintiff's customer billing records indicate that Xtrasource owed a total of $127,846.14, not including interest and collection costs, as of August 1, 2002. Plaintiff brings this action for breach of contract, complaint on accounts, and quantum meruit, seeking recovery of the amounts due from Xtrasource. There is no dispute that Plaintiff provided services to Xtrasource, Xtrasource received the services, and Xtrasource has not fully paid for the services.
Globecom was Plaintiff's agent with whom Xtrasource directly negotiated and did business. Paul Tyler, the Vice President of Customer Services for Xtrasource, dealt with Gary Alto at Globecom to obtain telecommunication services that Xtrasource needed. Alto then used Plaintiff as a vendor in fulfilling his obligations to Xtrasource. At least one of the meetings between Xtrasource and Globecom was in-person. However, subsequent interactions were over the telephone and facsimile.
All of the agreements signed by Xtrasource, including the applications for service and the service agreements pertinent to this case, were transmitted by facsimile. Globecom faxed documents for Xtrasource to sign, there was never a reverse side to the documents, and the reverse side was never faxed as a separate document.
Plaintiff produces no signed contracts between it and Xtrasource which include the "terms and conditions" on the reverse side. Plaintiff does not assert Xtrasource orally waived personal jurisdiction. Whether or not Tyler actually knew of the "terms and conditions," Plaintiff argues Xtrasource should have known. It does not contest, however, that the contracts in dispute here have no "terms and conditions" on the reverse.
Plaintiff states that Xtrasource never asked to see the reverse side or inquired into the contents of the "terms and conditions" alleged to be included in the contract but were missing from the reverse sides. Xtrasource puts this lack of inquiry into the context of the negotiations between it and Globecom. Xtrasource incorrectly presumed the missing "terms and conditions" were about time commitments to Plaintiff's services, and since it negotiated this issue with Globecom, it did not inquire further into the reverse side. It believed no other "terms and conditions" were to be incorporated and that the omission of such was not an accident. However, the reasons why Xtrasource did not inquire further are irrelevant to the inquiry of personal jurisdiction.
II.
Plaintiff has the burden of establishing personal jurisdiction over the defendant. See Welsh v. Gibbs, 631 F.2d 436, 438 (6th Cir. 1980). The procedure for determining jurisdiction is clear: if the trial court decides that the motion can be ruled on before trial, the court may determine that motion on the basis of affidavits alone, or it may permit discovery in aid of the motion, or it may conduct an evidentiary hearing on the merits of the motion. See Serras v. First Tenn. Bank Nat'l Ass'n, 875 F.2d 1212 (6th Cir. 1989). The Court is ruling on jurisdiction before trial on the basis of affidavits and discovery submitted.
A plaintiff ordinarily proves personal jurisdiction by a preponderance of the evidence. See Dean v. Motel 6 Operating L.P., 134 F.3d 1269 (6th Cir. 1998). However, that standard does not apply in this case because no evidentiary hearing was held before the personal jurisdiction determination. See id. at 1272. Therefore, the Court must consider the pleadings and affidavits in a light most favorable to Plaintiff, and Plaintiff need only make a prima facie showing of jurisdiction to defeat Xtrasource's motion. See CompuServe, Inc. v. Patterson, 89 F.3d 1257, 1262 (6th Cir. 1996); see also Welsh, 631 F.2d at 439. In addition, the Court does not weigh the controverting assertions of the party seeking dismissal. See CompuServe, 89 F.3d at 1262 (stating that the light standard for plaintiffs is appropriate because any other rule would allow a defendant to defeat personal jurisdiction merely by filing a written affidavit contradicting jurisdictional facts alleged by a plaintiff); see also Millennium Petrochemicals, Inc. v. C.G. Jago, 50 F. Supp.2d 654, 656 (W.D. Ky. 1999) (holding that given the lighter burden, dismissal in this procedural posture is proper only if all the specific facts which plaintiff alleges collectively fail to state a prima facie case for jurisdiction).
If the defendant alleges facts that could defeat the court's personal jurisdiction, it can invoke the court's discretion to order a pretrial evidentiary hearing on those facts. See Serras v. First Tenn. Bank Nat'l Ass'n, 875 F.2d 1212, 1214 (6th Cir. 1989). If written submissions raise disputed issues of fact, the court itself can order an evidentiary hearing or can order discovery to prepare the parties for that hearing. Id.(emphasis added). If at this stage and an evidentiary hearing is held, the burden on the party asserting jurisdiction properly increases, and a plaintiff must again establish jurisdiction by a preponderance of the evidence. See Dean v. Motel 6 Operating L.P., 134 F.3d 1269, 1272 (6th Cir. 1998). However, the Court should not use the prima facie standard if the reason it does not hold an evidentiary hearing is because there is no legitimate dispute of the facts. See International Technologies Consultants, Inc. v. Euroglas S.A., 107 F.3d 386, 391 (6th Cir. 1997) (emphasis added). Here, the Court is not holding an evidentiary hearing, not because there are no factual disputes, but because the record is sufficient in of itself for the Court to render a decision on jurisdiction. Therefore, the prima facie standard applies.
Defendant asked for an evidentiary hearing. The Court believes an evidentiary hearing is unnecessary. The record aptly provides the necessary evidence for the jurisdiction determination. Therefore, the Court applies the prima facie standard, rather than the preponderance of evidence standard. However, even using the lenient prima facie standard, Plaintiff still cannot prove personal jurisdiction exists over Xtrasource.
Preponderance of the evidence standard is used at this stage only when an evidentiary hearing is not held because there are no factual disputes. See International Technologies Consultants, Inc. v. Euroglas S.A., 107 F.3d 386 (6th Cir. 1997) (emphasis added). The Court believes that there are factual disputes, but none are central to the determination of personal jurisdiction.
All of the parties and the Court agree that personal jurisdiction cannot be based on minimal contacts. Instead, Plaintiff argues personal jurisdiction derives from Xtrasource's consent to personal jurisdiction, both expressly by waiver in the service agreements and implicitly pursuant to Xtrasource's negotiations and actions. Personal jurisdiction can be waived pursuant to a contract provision. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 473 n. 14 (1985); see also Rauch v. Day and Night Manufacturing Corp., 576 F.2d 697, 700 (6th Cir. 1978). Here, Xtrasource never approved of a waiver provision.
The Supreme Court notes in Burger King v. Rudzewicz, 471 U.S. 462 (1985), that because the personal jurisdiction requirement is a waivable right, there are a variety of legal arrangements by which a litigant may give implied or express consent to the personal jurisdiction of the court, including contractually.
Plaintiff attempts a prima facie showing of jurisdiction by arguing Xtrasource is subject to the "terms and conditions" of its standard service agreements. These "terms and conditions" include a consent clause for jurisdiction of this Court. No evidence shows that the "terms and conditions" were actually on the back of Xtrasource's contracts. Plaintiff does not contest that the contracts between it and Xtrasource were transmitted via facsimile. Plaintiff does not suggest that it or Globecom ever faxed the "terms and conditions" along with the front side of its faxed standard agreements. Plaintiff argues, in a variety of ways, that Xtrasource should have known of the "terms and conditions." Plaintiff states that face-to-face conversations occurred between Globecom and Xtrasource, and standard contracts were present, including the "terms and conditions" on the reverse.
Regardless of these arguments, the signed agreements between it and Xtrasource did not contain the "terms and conditions," and therefore did not contain jurisdictional consent. Plaintiff produces no evidence to indicate differently. Plaintiff also produces no evidence of Xtrasource orally consenting to the "terms and conditions." Therefore, Plaintiff does not meet its burden of making a prima facie showing because it produces no facts or direct evidence which support an agreement to consent to jurisdiction. See Millennium, 50 F. Supp.2d at 656.
In an unpublished opinion, Judge Simpson of this Court held that personal jurisdiction did not exist with the same Plaintiff despite Plaintiff's assertion of contractual consent. See Lightyear Communications, Inc. v. CNS Communications, Ltd., 2002 WL 1540703 (W.D. Ky. 2003). Plaintiff argued there, as it does here, that the court had to find the defendant consented to personal jurisdiction in Kentucky even though it could not produce the actual contracts between the parties which included the waiver provision. Plaintiff stated that because the court was relying on the parties' affidavits when ruling on the defendants' motion, it must view the facts in the light most favorable to the plaintiff and could not consider facts proffered by the defendants that could conflict with those offered by the plaintiff. The court disagreed because, although factual disputes are resolved in the plaintiff's favor, plaintiff still had the burden of establishing personal jurisdiction. The court held plaintiff could not satisfy this burden through a factual inference of consent.
III.
Plaintiff also insists Xtrasource implicitly waived personal jurisdiction. Plaintiff argues Xtrasource forfeited its personal jurisdiction defense by actively participating in this litigation. Plaintiff asserts that, although Xtrasource literally complied with F.R.C.P. 12(h), it did not comply with the spirit of the rule. Reliable Tire Distributors, Inc. v. Kelly Springfield Tire Co., 323 F. Supp. 153, 156 (E.D. Penn. 1985). There are limits to the extent a defendant can actively litigate without waiving its personal jurisdiction defense. See Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694 (1982) (holding that the requirement of personal jurisdiction can be intentionally waived or a defendant may be estopped from raising the issue); see also Hoffman v. Blaski, 363 U.S. 335 (1960).The Court cannot accept this argument. Xtrasource raised the personal jurisdiction issue at every opportunity, and it has been clear throughout discovery that Xtrasource never agreed to jurisdiction. Xtrasource filed answers, replied to Plaintiff's motions, and submitted a settlement conference statement, evidentiary disclosures, and a litigation plan pursuant to Court orders; but it always maintained a jurisdictional defense throughout. Xtrasource raised the defense to the Court's personal jurisdiction when it made its "first defensive move" by both a motion and a responsive pleading. See Rauch, 576 F.2d at 701.
The Court will enter a motion consistent with this Memorandum Opinion.
ORDER
Defendant has moved to dismiss this case for lack of personal jurisdiction. For the reasons set forth in the accompanying Memorandum Opinion, the Court agrees that it lacks jurisdiction. Being otherwise sufficiently advised,IT IS HEREBY ORDERED that this Court lacks personal jurisdiction over Defendant Hall and, therefore, this case is DISMISSED WITHOUT PREJUDICE. This is a final order.
This _____ day of February, 2004.