Summary
holding that because the individual defendants offered personal guarantees of their employer's checks, they were subjecting themselves to personal liability as guarantors, which made it reasonable that they should anticipate being haled into the forum state
Summary of this case from NELLIGAN v. ZAIO CORPOpinion
Civil Action No. 05-54 (JCL).
July 15, 2005
MEMORANDUM AND ORDER
Plaintiff Norben Import Corporation ("Norben") brings this action against Defendants Metropolitan Plant Flower Corporation ("Metropolitan"), Edward Clamage and Maxwell Clamage (collectively, the "Clamages") for Metropolitan's breach of a consignment agreement, failure of the Clamages to honor personally guaranteed checks issued on behalf of Metropolitan, Metropolitan's failure to make payment on a promissory note, and Metropolitan's failure to furnish valid checks in exchange for Norben's products.
Presently before the Court are Defendants Maxwell and Edward Clamage's motions to dismiss the complaint on the following grounds: lack of personal jurisdiction and improper venue under Federal Rules of Civil Procedure 12(b)(2) and (3); failure to state a claim under Federal Rule of Civil Procedure 12(b)(6); failure to plead with particularity under Federal Rule of Civil Procedure 9(b); and for technical deficiencies in the complaint under Federal Rules of Civil Procedure 8, 10, and 12(e).
BACKGROUND
The following facts are taken from Plaintiff's complaint and the parties' affidavits addressing personal jurisdiction and venue.
Norben, a New York corporation with its principal place of business in Hackensack, New Jersey, sells Christmas decorations, silk florals, and related goods in the wholesale, manufacturing, and display markets. (Compl. ¶ 5; Bruce H. Adler Aff. ¶¶ 2, 26.).
Metropolitan, an Illinois corporation with its principal place of business in Cicero, Illinois, was formerly in the business of assembling and selling synthetic flower arrangements to retail department stores. (Affidavit of Maxwell Clamage ¶ 4.). Metropolitan is a family-owned business whose stock is wholly owned by the Clamage family: Edward Clamage (Maxwell Clamage's son), Maxwell Clamage, and Laura Gordon (Maxwell Clamage's daughter). (Adler Aff. ¶ 4.). Maxwell and Edward Clamage are Illinois residents who do not own or rent property, earn wages, pay taxes or have telephone numbers in the state of New Jersey. (Maxwell Clamage Aff. ¶¶ 2-3; Edward Clamage Aff. ¶¶ 2-3.). Since 1991, Maxwell Clamage has served as Metropolitan's President and Vice President of Operations. (Maxwell Clamage Aff. ¶ 4.). Edward Clamage has been an officer of Metropolitan since 1991. (Edward Clamage Aff. ¶ 4.).
In or about 1994, Norben began to supply Metropolitan with floral goods and related products. (Adler Aff. ¶ 6.). Metropolitan purchased Norben's products to fabricate floral arrangements for large retail department stores. (Id. ¶ 7.). Initially, the parties' business arrangement called for Metropolitan to pay for the goods before picking them up from Norben's New Jersey warehouse. (Id. ¶¶ 8-9.). Norben did not deliver the goods; Metropolitan utilized hired trucking companies to pick up the goods in New Jersey. (Id. ¶¶ 9-11.). Norben does not maintain any offices or facilities in Illinois. (Id. ¶ 13.). Over the course of eight years, Metropolitan placed orders for goods by telephone, mail, and facsimile to Norben's New Jersey place of business. (Id. ¶ 18.). Metropolitan also mailed payments to, and picked up the purchased goods in, New Jersey. (Id.).
In approximately 1995, Norben extended a line of credit to Metropolitan. (Id. ¶ 15.). By early 1998, Metropolitan had exhausted its line of credit and was indebted to Norben for approximately $400,000.00. (Id. ¶¶ 19-20.). Because Norben had declined to extend Metropolitan further credit, the parties negotiated an arrangement whereby Metropolitan could continue to purchase from Norben, but would be liable to pay off its debt over a term of years. (Id. ¶¶ 23-24.). In his capacity as an officer of Metropolitan, Edward Clamage signed a promissory note to this effect in June 1998. (Id. ¶ 25; Compl., Exh. D.). The note contained a jurisdictional and choice of law clause providing that "the State of New Jersey shall have jurisdiction regarding this promissory Note [and] that the Note shall be governed by the laws of the State of New Jersey." (Compl., Exh. D.).
Norben then agreed to continue supplying Metropolitan on a "cash on delivery basis," which required Metropolitan to tender a check either before, or on the day of, the truckers' pickup in New Jersey. (Adler Aff. ¶¶ 30-31.). Eventually, this arrangement also failed due to stopped payments or the failure of Metropolitan's financial institution to honor the company's checks. (Id. ¶ 33.).
In their continuing effort to maintain Metropolitan's relationship with Norben, Edward and Maxwell Clamage in 1999 and 2000 personally guaranteed that, if they were dishonored for any reason, certain Metropolitan checks would be paid individually by them. (Id. ¶ 36.). Norben claims that such guarantees were made on numerous occasions. (Id. ¶ 37.). While Norben has produced copies of unpaid checks corresponding to several of the Clamages' personal guarantees, Norben acknowledges that the record does not contain copies of all of the guaranteed checks. (Id. ¶ 41.). Norben attributes this to Metropolitan's practice of replacing one dishonored check with another. (Id.). Norben further contends that the Clamages made repeated oral guarantees that were subsequently reduced to writing. (Id. ¶¶ 37, 44.). Maxwell and Edward Clamage deny orally guaranteeing any payments of Metropolitan debts or other obligations to Norben. (Maxwell Clamage Aff. ¶ 10; Edward Clamage Aff. ¶ 10.).
As replacement checks continued to be dishonored by Metropolitan's financial institution, on at least one occasion Maxwell Clamage authorized Norben to debit his personal credit card to satisfy his corporation's outstanding debts. (Adler Aff. ¶ 46.).
In October 2001, Metropolitan and Norben entered into a consignment agreement. (Compl. ¶ 12.). The agreement called for Metropolitan to remit payment to Norben for any goods resold by Metropolitan. (Compl., Exh. A.). It also provided that New York law would apply to construction and enforcement of the agreement. (Id.). Plaintiff alleges that the individual defendants misappropriated for their personal use all the proceeds of goods sold and did not make payment to Plaintiff. (Compl. ¶¶ 20-22.).
I. Defendants' Motions to Dismiss for Lack of Personal Jurisdiction
A. Standard of Review
Once a jurisdictional defense has been raised by a defendant, the burden falls upon the plaintiff to demonstrate sufficiently that the defendant had sufficient contacts with the forum state to support jurisdiction. Carteret Sav. Bank v. Shushan, 954 F.2d 141, 146 (3d Cir. 1992). The plaintiff meets this burden by "establishing with reasonable particularity sufficient contacts between the defendant and the forum state." Mellon Bank (East) PSFS, Nat'l Ass'n v. Farino, 960 F.2d 1217, 1223 (3d Cir. 1992) (quoting Provident Nat'l Bank v. California Fed. Sav. Loan Ass'n, 819 F.2d 434 (3d Cir. 1987)). The Third Circuit instructs that when a challenge to personal jurisdiction is raised, "the plaintiff must sustain its burden of proof in establishing jurisdictional facts through sworn affidavits or other competent evidence," and "at no point may a plaintiff rely on the bare pleadings alone." Time Share Vacation Club v. Atlantic Resorts, Ltd., 735 F.2d 61, 67 n. 9 (3d Cir. 1984); see also Stranahan Gear Co., Inc. v. NL Indus., Inc., 800 F.2d 53, 58 (3d Cir. 1986). The Court must accept the plaintiff's allegations as true and construe all disputed facts in favor of the plaintiff.Pinker v. Roche Holdings, Ltd., 292 F.3d 361, 371 (3d Cir. 2002).
B. Analysis
The question presented here is whether this Court may exercise personal jurisdiction over Maxwell and Edward Clamage individually. Plaintiff argues that jurisdiction is proper because the Clamages personally guaranteed certain Metropolitan debts owed to Norben. Plaintiff further argues that the Clamages consented to jurisdiction in New Jersey. The Clamages contend that they are not subject to personal jurisdiction because their only contacts with this forum were in their capacities as Metropolitan officers. Resolution of this issue requires the Court to examine the familiar principles of personal jurisdiction as they apply to a corporate officer's conduct.
The Clamages argue essentially that any contacts they had with this forum as officers of Metropolitan cannot count toward the contacts necessary for personal jurisdiction over them as individuals. Therefore, the Court will conduct its minimum contacts analysis mindful of the longstanding legal distinction between individual and corporate conduct.
1. Constitutional Requirements: Minimum Contacts
Federal Rule of Civil Procedure 4(e) permits district courts to exercise jurisdiction over non-resident defendants only as authorized by the laws of the state where the court resides. Fed.R.Civ.P. 4(e); Sunbelt Corp. v. Noble, Denton Assocs., Inc., 5 F.3d 28, 31 (3d Cir. 1993); Provident Nat'l Bank v. California Fed. Sav. Loan Ass'n, 819 F.2d 434, 436 (3d Cir. 1987). New Jersey permits the exercise of jurisdiction to the fullest extent allowed under the Fourteenth Amendment of the United States Constitution. N.J. Ct. R. 4:4-4(b)(1) (permitting the exercise of jurisdiction "consistent with due process of law"); Charles Gendler Co., Inc. v. Telecom Equip. Corp., 102 N.J. 460, 469 (1986); Avdel Corp. v. Mecure, 58 N.J. 264, 268 (1971); see also Mesalic v. Fiberfloat Corp., 897 F.2d 696, 698 (3d Cir. 1990). Accordingly, this Court's analysis must focus on whether the exercise of jurisdiction comports with the requirements of the Due Process Clause of the Fourteenth Amendment.
Fed.R.Civ.P. 4(e)(1) provides:
Unless otherwise provided by federal law, service upon an individual from whom a waiver has not been obtained and filed, other than an infant or an incompetent person, may be effected in any judicial district of the United States . . . pursuant to the law of the state in which the district court is located, or in which service is effected, for the service of a summons upon the defendant in an action brought in the courts of general jurisdiction of the State.
The constitutional requirement of due process "shields persons from the judgments of a forum with which they have established no substantial ties or relationship." General Elec. Co. v. Deutz Ag, 270 F.3d 144, 150 (3d Cir. 2001). Personal jurisdiction is thus appropriate only when the defendant has "purposefully established 'minimum contacts' in the forum State." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474 (1985) (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)); World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980) (personal jurisdiction rests on conduct and connection with forum state such that defendant "should reasonably anticipate being haled into court there"). "Minimum contacts" describes actions by which the defendant "purposefully avails itself of the privilege of conducting activities within the forum State," and thereby invokes "the benefits and protections of its laws." Asahi Metal Indus. Co., Ltd. v. Superior Court of California, 480 U.S. 102, 109 (1987) (quoting Burger King, 471 U.S. at 475); Remick v. Manfredy, 238 F.3d 248, 255 (3d Cir. 2001). Once it has been determined that a defendant has purposefully established minimum contacts, courts may next determine whether the exercise of personal jurisdiction over the defendant offends "traditional notions of fair play and substantial justice." Burger King, 471 U.S. at 476-77. The sufficiency of the defendant's minimum contacts with the forum state will therefore vary with the "quality and the nature of the defendant's activity." Hanson v. Denckla, 357 U.S. 235, 253 (1958).
2. Personal Jurisdiction: Specific and General
A defendant's contacts with the forum state may give rise to either specific or general jurisdiction. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414-15 (1984);Remick, 238 F.3d at 255. "Specific personal jurisdiction exists when the defendant has 'purposefully directed his activities at residents of the forum and the litigation results from alleged injuries that arise out of or related to those activities.'" BP Chems. Ltd. v. Formosa Chem. Fibre Corp., 229 F.3d 254, 259 (3d Cir. 2000) (quoting Burger King, 471 U.S. at 472). Alternatively, general jurisdiction exists when a defendant engages in "continuous and systematic" contacts with the forum state, whether or not the contacts are related to the injury giving rise to the cause of action. Remick, 238 F.3d at 255. The greater reach of general jurisdiction requires "significantly more than mere minimum contacts," and the plaintiff seeking to exert general jurisdiction must show that the defendant's contacts with the forum are "continuous and substantial."Provident Nat'l Bank, 819 F.2d at 437 (citations omitted). The threshold for the exercise of general jurisdiction, then, is significantly higher than for the exercise of specific jurisdiction. Amberson Holdings LLC, Inc. v. Westside Story Newspaper, 110 F. Supp. 2d 332, 334 (D.N.J. 2000) (citingProvident Nat'l Bank, 819 F.2d at 437).
Although Plaintiff mentions terminology indicative of general jurisdiction ("continuous," "systematic," "significant"), its argument does not expressly distinguish between specific and general jurisdiction as applied to the Clamages. Because Plaintiff's principal theory of individual liability is based on the Clamages' personal guarantees of certain specified checks, the Court limits its discussion to specific jurisdiction.
3. Personal Jurisdiction and Conduct in Corporate Capacity
As a general rule, an individual whose contacts with the forum state are in his corporate capacity does not thereby become subject to jurisdiction in his individual capacity. Nicholas v. Saul Stone Co., LLC, No. 97-860, 1998 WL 34111036, at *10 (D.N.J. June 30, 1998), aff'd, 224 F.3d 179 (3d Cir. 2000);see also United Prod. Corp. v. Admiral Tool Mfg. Co., 122 F.Supp.2d 560, 562 (E.D. Pa. 2000). This principle, referred to by some courts in this Circuit as the "fiduciary shield doctrine," is intended to prevent a corporate officer's official contacts with the forum state from serving as a basis for personal jurisdiction over the officer individually. In addition, personal jurisdiction does not exist over a corporate officer simply because the corporate entity itself may be amenable to personal jurisdiction in the forum state. Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 781 (1984).
Rather, each defendant's contacts with the forum state must be evaluated individually. Id. n. 13. "[A]ctions taken within the forum state by a corporate official in his official capacity may be considered for purposes of establishing jurisdiction over him in his individual capacity." Educ. Testing Serv. v. Katzman, 631 F.Supp. 550, 559 (D.N.J. 1986). However, actions taken in the forum by the corporate entity should not be imputed to an individual defendant for purposes of personal jurisdiction unless the plaintiff establishes that the individual defendant himself took the specific action. Id.
In Donner v. Tams-Witmark Music Library, 480 F.Supp. 1229, 1234 (E.D. Pa. 1979), then-District Judge Becker concluded that courts can consider acts by individuals in their corporate capacity in assessing the constitutionality of jurisdiction over corporate officers sued in their individual capacities. If a corporate officer has personally engaged in activity for which individual liability may attach, then the corporate shield may not be used to defend against personal jurisdiction. Id. TheDonner case dealt with tortious conduct by corporate officers, but the same principle is applicable here. It is clear that a corporate officer's independent meaningful contacts with the forum state may support a finding of in personam jurisdiction.See, e.g., PSC Prof'l Serv. Group, Inc. v. American Digital Sys., Inc., 555 F.Supp. 788, 794 (E.D. Pa. 1983).
This Court finds that under the circumstances of this case, it is appropriate to consider the Clamages' personal acts as well as their specific acts done in this forum on Metropolitan's behalf. The Clamages are not two of numerous officers directing a large business enterprise. They are two of three family member-stockholders and share primary managerial responsibility at Metropolitan. Maxwell Clamage and his son Edward appear singlehandedly to have forged and maintained the business relationship with Norben. Consideration of the Clamages' corporate contacts, as well as their individual contacts, is therefore appropriate. See, e.g., Rittenhouse Lee v. Dollars Sense, Inc., 1987 WL 9665, No. 83-5996, at *5 (E.D. Pa. Apr. 15, 1987) (although defendant had no contacts with forum in his personal capacity, court considered corporate acts because defendant was a "key player in the corporate structure," "the driving force behind the venture," and "handled all aspects of [the] deal with plaintiff in [the forum state].")
4. Application
Plaintiff makes three arguments for this Court's exercise of personal jurisdiction over the Clamages: 1) Metropolitan entered into New Jersey to conduct its business; 2) Metropolitan signed a promissory note in which it consented to jurisdiction in New Jersey; 3) the Clamages personally guaranteed certain Metropolitan debts and these guarantees contained express consents to jurisdiction in New Jersey.
a. Metropolitan's Business Activities in New Jersey
Plaintiff argues that Metropolitan had extensive business dealings with its Hackensack, New Jersey facility. Metropolitan picked up, or caused to be picked up, the subject goods in New Jersey. Plaintiff submits numerous bills of lading indicating that Metropolitan received the goods in New Jersey.
There is nothing to suggest that Metropolitan carried out its regular business dealings with Norben in anything other than as a corporate entity. The bills of lading themselves are generic shipping documents simply indicating that goods were shipped, and billed, to Metropolitan. They are printed on Norben letterhead and evidence no personal involvement of the Clamages in the transactions.
b. Metropolitan's Consent to Jurisdiction in Promissory Note
Plaintiff next contends that Metropolitan consented to jurisdiction in New Jersey by virtue of the promissory note. The "Consent to Jurisdiction and Choice of Law Clause" in the note contains the following language: "The undersigned consents that the State of New Jersey shall have jurisdiction regarding this promissory note. . . ." However, the signature line lists "Metropolitan Plant Flower, Inc." Although the affixed corporate officer's signature is illegible, presumably one of the Clamages signed the document on behalf of Metropolitan. Again, the Court finds no evidence that Maxwell or Edward Clamage signed the note in a personal capacity. See Clamage Aff. ¶ 6. While the corporate entity may have consented to jurisdiction in this forum on the promissory note, the Court does not find that the Clamages individually so consented as well.
c. Personal Guarantees of Metropolitan Debts
Plaintiff's most persuasive argument for personal jurisdiction over the Clamages is that in their individual capacities Maxwell and Edward Clamage personally guaranteed certain Metropolitan debts that remain unpaid to the present day. Plaintiff contends that in these guarantees the Clamages expressly consented to adjudication in this forum. Maxwell Clamage responds that 1) he signed one letter guaranteeing payment of two specifically-identified checks; 2) the complaint fails to assert that those two checks were dishonored; and 3) by failing to show that the unpaid debts arise out of the two specifically-guaranteed checks, Plaintiff does not establish that this Court has specific jurisdiction over Maxwell Clamage. Edward Clamage responds similarly that the complaint fails to assert that the checks referenced in his guarantees were dishonored or not "made good on." (Edward Clamage Br., at 8.). Maxwell Clamage also raises the defense (not presently before the Court, as discussed infra), that one of his guaranty letters references a binding arbitration provision, which renders Plaintiff "without standing" to seek adjudication of the guaranty in this Court. (Maxwell Clamage Br., at 8.).
i. Personal Guarantees of Maxwell Clamage
Plaintiff appends two letters from Maxwell Clamage to Norben's Bruce Adler in which Maxwell Clamage personally guarantees payment of two specific checks. The October 11, 1999 letter states: "I will personally guarantee that the above referenced post dated checks [# 20309 and 20267] will be honored by our bank on the date noted, within the laws of the state of New Jersey." (Exhibits to Adler Aff.). A January 7, 2000 letter states: "I will personally guarantee that the above referenced post dated checks [# 20835, -836, -837, -838, -839, and -840] will be honored by our bank." (Id.). There is evidence in the record that payment was not made on checks 20309 and 20267.
ii. Personal Guarantees of Edward Clamage
Plaintiff also attaches four letters from Edward Clamage dated August 24, 1999, August 25, 1999, August 4, 2000, and December 12, 2000 in which he personally guarantees checks 20008, 20058, 22433, and 23219. The record contains copies of these checks indicating that payment was not made.
There is also evidence that Edward Clamage consented to personal jurisdiction in New Jersey. In letters dated June 11, 1999, July 12, 1999, and August 5, 1999, Edward Clamage personally guaranteed payment of certain checks "with jurisdiction for the guarantee in the state of New Jersey." The record shows that Plaintiff did not receive payment on three of the checks referenced in those letters — checks 19443, 19935, and 19936.
There is no such consent language in Maxwell Clamage's letters. The October 11, 1999 letter references "the laws of the state of New Jersey," but this choice-of-law provision does not amount to consent to personal jurisdiction in New Jersey. Nevertheless, contrary to Maxwell Clamage's reading of the record, there is clear evidence that guaranteed checks 20309 and 20267 were not honored by Metropolitan's bank and therefore Norben has never received payment of those checks. The question thus becomes whether the Clamages' guarantees of payment of these checks is sufficient to confer specific jurisdiction over them in this forum.
Maxwell Clamage refers to the guaranteed checks as Nos. 27050 and 27051, and then proceeds to argue that Norben makes no showing that these particular checks were dishonored or "not otherwise ma[d]e good on." The Court has examined Maxwell Clamage's June 24, 2002 letter in which he references checks 27050 and 27051. The Court agrees with Maxwell Clamage that there is nothing in Plaintiff's submissions to indicate that these checks were dishonored. However, as noted above, the Court has correlated unpaid checks 20309 and 20267 with Maxwell Clamage's October 11, 1999 letter guaranteeing them.
With respect to the Clamages' legal argument that the pleadings do not establish personal jurisdiction because they do not correlate the specifically-guaranteed checks with the amounts sued upon, the Court finds this unpersuasive. The Second Count of Plaintiff's complaint alleges that the individual defendants guaranteed checks and that these remain unpaid. See Compl. ¶¶ 39-43. The specific guarantees are documented in Plaintiff's affidavit and these correspond to dishonored checks found in the accompanying exhibits. Once a defendant asserts a challenge to personal jurisdiction, the plaintiff discharges its obligation of establishing jurisdiction over the defendant by affidavit or other competent evidence to establish the court's jurisdiction; it may not rely on the pleadings alone. Time Share Vacation Club, 735 F.2d at 67 n. 9; McMullen v. European Adoption Consultants, Inc., 129 F.Supp.2d 805, 810 (W.D. Pa. 2001). Here, Plaintiff's affidavit and exhibits further detail the allegations in the pleadings, and are properly considered on a challenge to personal jurisdiction.
Maxwell Clamage's guarantee of the Metropolitan debts in question unquestionably constitutes conduct taken in his individual capacity, and therefore the Court first considers whether those activities constitute sufficient minimum contacts with New Jersey to justify an assertion of jurisdiction.
"There are no general rules governing whether or not guarantors of contractual obligations fall within the constitutional power of the courts of a particular forum." Mellon Bank, 960 F.2d at 1225. Nevertheless, the Third Circuit has noted that personal guarantees of corporate debt, without much more, may be sufficient to subject the shareholders of a closely held corporation to personal jurisdiction. Id. (citing Nat'l Can Corp. v. K Beverage Co., 674 F.2d 1134 (6th Cir. 1982)).
In Mellon, the Third Circuit looked to the guarantors' pre- and post-contract contacts with the forum to find that individual limited partners purposefully availed themselves of the forum.Id. The Mellon court found it significant that the non-resident guarantors "stood to benefit directly from success of the limited partnerships." Id. Without finding such a factor controlling, the court also noted that "[s]ome courts, when faced with suits against guarantors in a distant forum, have found significance in the guarantor's financial stake in the enterprise that was the beneficiary of the guaranty." Id. n. 4 (citingBond Leather Co. v. Q.T. Shoe Mfg. Co., 764 F.2d 928 (1st Cir. 1985)). In other words, while "[m]erely serving as the guarantor of a contract with a relationship to the forum state does not amount to minimum contacts," an exception to this rule applies when "the guarantor has a financial interest in the business or person whose obligation it guarantees." Koff v. Brighton Pharm., Inc., 709 F.Supp. 520, 526 (D.N.J. 1988) (citing Nat'l Can Corp., 674 F.2d at 1138).
Here, family-owned Metropolitan had received its floral supplies from Norben for many years. During this time, Metropolitan called in its orders to Norben's New Jersey facility, mailed its payments to New Jersey, and sent its hired trucking companies to pick up the goods in New Jersey. The Court is of course cognizant of the fact that these business transactions appeared to be between two corporate entities. However, these activities of Metropolitan provide crucial context to the Clamages' subsequent individual dealings with Norben, in particular their personal availment of this forum in a manner that benefitted them as officers and owners of the family's business.
By 1998, Metropolitan was experiencing financial difficulty and took purposeful steps to maintain a business relationship with Norben. The promissory note, executed by Edward Clamage in his official capacity, is one such example. Edward Clamage contacted Norben to negotiate this arrangement that allowed Metropolitan to continue operating its business. The note made clear that Metropolitan's obligations thereunder would be adjudicated according to New Jersey law in a New Jersey forum. Therefore, the long-standing business relationship with Norben, the established process of ordering and procuring its floral supplies, as well as the terms of its ongoing debt obligations should have made Metropolitan and the Clamage family well aware that they were deliberately reaching out beyond Illinois and creating continuing obligations and relationships with a corporate entity principally operating out of New Jersey.
Faced with a serious financial situation, Metropolitan persuaded Norben to continue supplying it, but even this new financial arrangement failed because Metropolitan did not honor its checks. It was at this point that Edward and Maxwell Clamage had to offer their personal guarantees of Metropolitan checks. Therefore, as principal officers and owners of this family-owned business, Maxwell and Edward Clamage's agreement to personal liability as guarantors makes it reasonable that they should anticipate being haled into this forum to answer for the unpaid debts. Metropolitan created continuing obligations in this forum and the Clamages made themselves answerable for certain of those obligations. Furthermore, the Clamages had a significant financial stake in Metropolitan's success as the beneficiary of their guarantees.See Mellon, 960 F.2d at 1225 n. 4.
The Clamages emphasize that their contacts in New Jersey are non-existent. They note that they are residents of Illinois; have never resided or conducted business in New Jersey; and have never owned property, earned wages, paid taxes or had a telephone number in New Jersey. However, it is clear that a defendant's lack of physical contacts with the forum state is not dispositive of a personal jurisdiction analysis. "When a defendant has received the benefits and protections of the forum's laws by engaging in business activities with a forum resident, the courts have 'consistently rejected the notion that an absence of physical contacts can defeat personal jurisdiction there.'" Id. at 1225 (quoting Burger King Corp v. Rudzewicz, 471 U.S. 462, 476 (1985)). Physical presence is certainly a factor in the analysis, but it is not "a jurisdictional litmus test." Id.
It remains for the Court to determine if the exercise of jurisdiction over the Clamages is reasonable such that it comports with "fair play and substantial justice." Burger King, 471 U.S. at 476-77. Once a court finds that personal jurisdiction is proper, the burden on a defendant to show an absence of fairness or substantial justice is heavy. The defendant must present a "compelling case" that the exercise of jurisdiction would be unreasonable. Grand Entm't Group, Ltd. v. Star Media Sales, Inc., 988 F.2d 476, 483 (3d Cir. 1993). The Court must consider the following factors: the burden on the defendant; the interests of the forum state; the plaintiff's interest in obtaining relief; the judicial system's interest in judicial efficiency; and the shared interests of the several states in furthering fundamental substantive social policies.Id. (citing Asahi, 480 U.S. at 113).
Subjecting non-resident defendants to jurisdiction necessarily involves some degree of hardship. However, "[w]hen minimum contacts have been established, often the interests of the plaintiff and the forum in the exercise of jurisdiction will justify . . . the . . . burdens placed on the . . . defendant."Id. Here, the burden of defending this lawsuit in New Jersey is not great. New Jersey certainly has a significant interest in having its businesses compensated for the goods they provide here in the state. Plaintiff also has a real interest in attaining relief from a party or parties that repeatedly did business in this state without fulfilling their payment obligations. Finally, given that Plaintiff's evidence supports personal jurisdiction over Metropolitan in New Jersey, the interests of judicial efficiency seem best served by litigating the claims against the Clamages in New Jersey as well.
The Court notes that Metropolitan is apparently no longer in operation. The bankruptcies of two of Metropolitan's largest customers "ruined Metropolitan as a continuing business entity and forced it to assign its remaining assets to its creditors in the year 2002." (Maxwell Clamage Br., at 5.).
Finally, in support of his argument that a binding arbitration provision bars adjudication of the personal guaranty in this Court, Maxwell Clamage references his June 24, 2002 letter in which he states:
[T]he parties agree to arbitrate all disagreements between them arising hereunder or elsewhere for whatever reason by binding arbitration. The parties agree that the arbitration hearings shall be held in White Plains, NY and further agree that the decision of the arbitrator shall be binding upon them and consent to the entry of such decision as a judgment in the Supreme Court of the State of New York, County of Westchester.
The Court finds this argument unavailing on several grounds. First, an arbitration defense challenges the court's subject matter jurisdiction over the case and is properly raised in a Rule 12(b)(1) motion. The Clamages have moved for dismissal pursuant to Rules 12(b)(2), 12(b)(3), 12(b)(6), and 12(e). Therefore, to the extent that the Clamages seek dismissal for lack of subject matter jurisdiction based on an agreement to arbitrate, this matter is not presently before the Court.
Second, as a simple question of contract law, absent some indication that Norben did in fact consent to binding arbitration, at this juncture the Court cannot find that Norben is precluded from bringing its claims in court. See CTF Hotel Holdings, Inc. v. Marriott Int'l, Inc., 381 F.3d 131, 137 (3d Cir. 2004) ("Arbitration is strictly a matter of contract. If a party has not agreed to arbitrate, the courts have no authority to mandate that [it] do so. Principles of contract law govern the inquiry."). Maxwell Clamage relies on a letter he composed in which it is recited that the parties have agreed to arbitrate any and all disagreements. Without competent evidence that Norben so agreed and consented to binding arbitration, the Court cannot find that any such agreement existed.
II. Dismissal for Improper Venue
Maxwell Clamage next argues that venue is not proper in this District because "a substantial part of the events or omissions giving rise to the claim" did not occur here. He reiterates his argument that his contacts with Norben in New Jersey were in his corporate capacity and therefore may not form the basis for venue here. He further argues that Metropolitan's alleged conversion of Norben's property would have taken place in Illinois at its place of business. Therefore, venue properly lies in the Northern District of Illinois.
Under 28 U.S.C. § 1391(a):
A civil action wherein jurisdiction is founded only on diversity of citizenship may, except as otherwise provided by law, be brought only in (1) a judicial district where any defendant resides, if all defendants reside in the same state, (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated, or (3) a judicial district in which any defendant is subject to personal jurisdiction at the time the action is commenced, if there is no district in which the action may otherwise be brought.
Since both individual defendants reside in Illinois, subsections (1) and (3) do not support venue in this district. Venue is proper in the District of New Jersey if a substantial part of the events giving rise to the claim occurred here.
To determine whether a substantial part of the events giving rise to the claims occurred in a given district, the Third Circuit instructs that "[t]he test . . . is not the defendant's 'contacts' with a particular district, but rather the location of those 'events or omissions giving rise to the claim.'" Cottman Transmission Sys., Inc. v. Martino, 36 F.3d 291, 294 (3d Cir. 1994). The nature of the asserted claims determines whether a particular event or omission is substantial. Id. at 295.
Although the complaint here is not a model of clarity, the action is comprised essentially of several claims for breach of contract against Metropolitan and the Clamages. With respect to venue in breach of contract claims, some courts lay venue where the contract was executed and payments were received. See, e.g., Nowicki v. United Timber Co., No. 99-257, 1999 WL 619648, at *1 n. 1 (E.D. Pa. Aug. 12, 1999) (venue proper in district where contract negotiated and executed). However, other courts place emphasis on where the contract was to be performed. See, e.g., Lackawanna Chapter of the Railway Locomotive Historical Soc'y, Inc. v. St. Louis County, Missouri, No. 02-0994, 2004 WL 503447, at *3 (M.D. Pa. Mar. 12, 2004).
Under either of these approaches, venue in this district is appropriate. As to where the contracts at issue were to be performed, the Court focuses on the nature of the parties' business relationship. Norben supplied the raw materials which Metropolitan fabricated into floral arrangements for sale to third-party retail stores. Therefore, the scope of the parties' dealings was narrow: Norben supplied goods and Metropolitan was to pay for these goods. Metropolitan placed orders at the New Jersey facility, mailed payments to the New Jersey facility, and Norben released the goods to Metropolitan's hired freight service in New Jersey. The "cash on delivery" arrangement the parties used in recent years conveys the essence of their contractual obligations: Metropolitan paid Norben in New Jersey before the goods could be taken out of New Jersey. Therefore, performance of the contract substantially took place in New Jersey. The Clamages' personal guarantees of certain Metropolitan debts were simply an inducement for Norben to maintain the parties' business relationship in the face of Metropolitan's increasingly precarious financial situation.
The Clamages' argument that any alleged conversion of Norben's property would have taken place in Illinois (presumably at the time and place of dishonor) is not persuasive. The contractual arrangement simply called for payment and pickup in New Jersey. That Metropolitan may have tendered invalid checks in New Jersey in exchange for Norben's products, thus giving rise to a possible conversion claim, does not affect the determination that the essential performance of the contract was to be in New Jersey.
III. Dismissal Under Fed.R.Civ.P. 8, 9, 10, and 12(b)(6)
Finally, the Court turns to the Clamages' argument that the pleadings are "materially deficient" and should be dismissed under Fed.R.Civ.P. 8, 9, 10, and 12(b)(6). Briefly, the Clamages contend that the first count fails to reasonably apprise them of the precise claims against them. They read the first count as asserting, among others, claims of fraud, conversion, breach of fiduciary obligations, and negligence. The unclear drafting of the first count, it is argued, renders them incapable of answering the complaint or determining the appropriate motion to dismiss they should file. Therefore, the Clamages argue, count one is deficient because: (1) it is not a "short and plain statement of the claim" as required by Rule 8(a); (2) it does not lay out the various claims in separate counts as required by Rule 10(b); and (3) it is so vague that they cannot reasonably frame a responsive pleading.
Defendant also raises technical objections based on the fact that Plaintiff has not double-spaced his complaint in accordance with Local Rule 7.2(d) or properly styled the caption to meet the requirements of the local rules. First, L.R. 7.2(d) requires briefs to be double-spaced. L.R. 10.1 governs the forms of pleadings and specifies what must appear in the caption. However, as the Comments to L.R. 10.1 clearly provide, [p]apers that do not meet the requirements of L. Civ. R. 10.1 must be accepted for filing despite nonconformance with technical requirements. The Court, of course, may impose sanctions and/or require satisfaction of such requirements before proceeding with a case." The Local Rules do not provide for dismissal in these circumstances, and the Clamages do not move for dismissal based on non-compliance with the local rules.
Second, to the extent that the Plaintiff has asserted a fraud claim, the Clamages argue that it has not been plead with particularity as required by Rule 9.
Third, the Clamages contend that counts two and four are legally insufficient and must be dismissed under Rule 12(b)(6). Specifically, to the extent that Plaintiff predicates the Clamages' personal liability on a "personal guaranty" theory, the claim fails because the New Jersey Statute of Frauds requires that a guaranty to assume the debt of another be in writing. The Clamages also argue that Plaintiff's purported claim for breach of the promissory note between Metropolitan and Norben must be dismissed as against Maxwell Clamage in his individual capacity.
The Court has reviewed the pleadings and agrees with the Clamages that the first count is deficient as drafted. Although seemingly all related to the consignment agreement, various theories of liability are contained in this count. Therefore, the Court will dismiss count one unless within thirty days Plaintiff amends count one of the complaint. Such amendment shall separately state the various causes of action with clarity, complying with the Federal Rules of Civil Procedure.
The Court declines to dismiss the second count for failure to comply with the Statute of Frauds. Under New Jersey law, "[a] promise to be liable for the obligation of another person, in order to be enforceable, shall be in a writing signed by the person assuming the liability or by that person's agent." N.J.S.A. 25:1-15. As discussed at length above, there are several signed letters from the Clamages in which they promise to act as guarantors of certain Metropolitan checks.
Finally, the Court observes that the third count (dealing with failure to make payment on the promissory note) does not seek relief against Maxwell and Edward Clamage. The complaint alleges that "Metropolitan executed a promissory note" and that "Metropolitan has failed to make payment pursuant to the terms of the Note." See Compl. ¶¶ 46-47. Although Edward Clamage appears to have signed the note on behalf of Metropolitan, there are no allegations that the Clamages are individually liable for nonpayment.
Accordingly, IT IS on this 15th day of July 2005
ORDERED that Defendants Maxwell Clamage's and Edward Clamage's motions to dismiss the complaint for lack of personal jurisdiction are denied; it is further
ORDERED that Defendants Maxwell Clamage's and Edward Clamage's motions to dismiss the complaint for improper venue are denied; it is further
ORDERED that count one of the complaint will be dismissed unless Plaintiff Norben Import Corporation amends count one within 30 days to comply with the Federal Rules of Civil Procedure; and it is further
ORDERED that Defendants Maxwell Clamage's and Edward Clamage's motions to dismiss count three against them in their individual capacities are denied as moot.