Opinion
Case No. C02-1876L.
April 26, 2004
ORDER DENYING MOTIONS TO DISMISS
I. INTRODUCTION
This matter comes before the Court on a motion to dismiss (Dkt. #40) filed by defendant Robert Hayes ("Hayes") and a motion to dismiss (Dkt. # 46) filed by defendant Lynne Stewart ("Stewart"). Hayes and Stewart seek to dismiss plaintiff Frances Clairmont's ("Clairmont") claims against them for lack of personal jurisdiction. For the reasons set forth in this Order, the Court denies the motions.
II. DISCUSSION
A. Background.
Clairmont alleges that the defendants failed to pay her over $500,000 in commissions she earned between 2001 and 2003. Several months after Clairmont filed this action, defendant Genuity, Inc., filed for bankruptcy protection in the United States District Court for the Southern District of New York. While Genuity was in bankruptcy proceedings, Clairmont settled her claim against the corporation for far less than she alleges she was owed by her former employer. See Kennar Decl. Ex. B. Clairmont seeks to recover damages from Hayes and Stewart, and other individual defendants, under RCW 49.52.070. That statute provides that "any officer, vice principal or agent of any employer who shall violate any of the [wage] provisions of subdivisions (1) and (2) of RCW 49.52.050 shall be liable in a civil action by the aggrieved employee . . . for twice the amount of the wages unlawfully rebated or withheld by way of exemplary damages, together with costs of suit and a reasonable sum for attorney's fees."
Hayes worked for Genuity in Massachusetts, where he now resides. Hayes was a member of Genuity's compensation committee and was one of the individuals who drafted Genuity's sales incentive plan, (Clairmont Decl. Ex. A). As a member of the compensation committee, Hayes was responsible for "administration of the [sales incentive] Plan, including discretionary authority to interpret the terms of this Plan and make exceptions to those terms." Id. at 23. After Clairmont sought commissions that she contends she was owed, Hayes participated in conference calls and the exchange of electronic mail messages regarding Clairmont's compensation. (Hayes Decl. ¶ 10; see also Clairmont Decl. Exs. B-N). In January of 2003, Hayes sent an email to Clairmont in which he requested additional information regarding her compensation demands. See Clairmont Decl. Ex. P. All of Hayes' communications regarding Clairmont and with Clairmont occurred while he was in Massachusetts.
Stewart also worked for Genuity in Massachusetts, where she now resides. Like Hayes, Stewart was a member of Genuity's compensation committee and was one of the individuals who drafted Genuity's sales incentive plan. (Clairmont Decl. Ex. A). As a member of the compensation committee, Stewart was responsible for "administration of the [sales incentive] Plan, including discretionary authority to interpret the terms of this Plan and make exceptions to those terms." Id. at 23. When Clairmont sought commissions that she contends she was owed, Stewart participated in telephone calls and the exchange of electronic mail messages regarding Clairmont's compensation. (Hayes Decl. ¶ 12; see also Clairmont Decl. Exs. B-N). All of Stewart's communications regarding Clairmont and with Clairmont occurred while she was at Genuity's Massachusetts office.
B. Personal Jurisdiction.
Hayes and Stewart contend that this Court does not possess personal jurisdiction over them and therefore this action should be dismissed pursuant to Fed.R.Civ.P. 12(b)(2).
For a forum state to possess personal jurisdiction over an out-of-state defendant, that defendant must "have certain minimum contacts with the forum state, such that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice.'" International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)).
A district court applies the law of the state in which it is located to determine the defendant's amenability to a lawsuit.Peterson v. Kennedy, 771 F.2d 1244, 1262 n. 12 (9th Cir. 1985). To establish personal jurisdiction, Clairmont must demonstrate that Washington's long-arm statute confers personal jurisdiction and that the exercise of that jurisdiction meets the constitutional requirements of due process. Rio Props., Inc. v. Rio Int'l Interlink, 284 F.3d 1007, 1019 (9th Cir. 2002). Washington's long-arm statute provides for personal jurisdiction over non-residents who conduct business or commit torts within the state. RCW 4.28.185(1)(a)-(b). That statute "authorizes courts to exercise jurisdiction over nonresident defendants to the extent permitted by the due process clause of the United States Constitution." MBM Fisheries, Inc. v. Bollinger Mach. Shop and Shipyard, Inc., 60 Wn. App. 414, 423 (1991).
"Where a defendant has `substantial' or `continuous and systematic' contacts with the forum state, there is a sufficient relationship between the defendant and the state to support `general personal jurisdiction' even if the cause of action is unrelated to the defendant's forum activities." Peterson, 771 F.2d at 1261 (citing Data Disc. Inc. v. Systems Tech. Assocs., Inc., 557 F.2d 1280, 1287 (9th Cir. 1977)). Where such "substantial" or "continuous and systematic" contacts are lacking, a court may exercise "limited" or "specific" personal jurisdiction depending upon "the nature and quality of the defendant's contacts in relation to the cause of action." Data Disc. Inc. v. Systems Tech. Assocs., Inc., 557 F.2d 1280, 1287 (9th Cir. 1977).
1. General Jurisdiction.
The Court does not have general personal jurisdiction over Hayes and Stewart because their contacts with Washington State are not "substantial" or "continuous and systematic." Peterson, 771 F.2d at 1261.
2. Specific Jurisdiction.
The Ninth Circuit utilizes a three-part test for determining whether due process allows for the exercise of specific jurisdiction: "(1) the nonresident defendant must have purposefully availed himself of the privilege of conducting activities in the forum by some affirmative act or conduct; (2) plaintiff's claim must arise out of or result from the defendant's forum-related activities; and (3) exercise of jurisdiction must be reasonable." Roth v. Garcia Marquez, 942 F.2d 617, 620-21 (9th Cir. 1991) (emphasis removed).
a. Purposeful Availment.
The purposeful availment inquiry requires an evaluation of whether the "defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there." Core-Vent Corp. v. Nobel Indus. AB, 11 F.3d 1482, 1485 (1993). This element may be met if "the defendant has taken deliberate action within the forum state or if he has created continuing obligations to forum residents. . . . It is not required that a defendant be physically present within, or have physical contact with, the forum, provided that his efforts are purposefully directed toward forum residents." Ballard v. Savage, 65 F.3d 1495, 1498 (9th Cir. 1995) (internal citations omitted).
Clairmont contends that the purposeful availment inquiry should be considered under the "effects test" of Calder v. Jones, 465 U.S. 783 (1984). See Response at 12. "To meet the effects test, the defendant 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 likely to be suffered in the forum state."Bancroft Masters, Inc. v. Augusta Nat'l Inc., 223 F.3d 1082, 1087 (9th Cir. 2000). Hayes and Stewart contend that application of the effects test is inappropriate here, (Reply at 4).
The two motions, and the response and reply briefs for both motions, raise the same arguments. For the sake of simplicity, citation to a motion, response, or reply refers to the Stewart documents unless otherwise noted.
Ninth Circuit courts apply the effects test to intentional torts and claims that are "akin" to intentional torts, and apply the traditional purposeful availment inquiry to contract claims and claims akin to contract claims. See Ziegler v. Indian River County, 64 F.3d 470, 473 (9th Cir. 1995) ("we apply different purposeful availment tests to contract and tort cases"); see also Panavision Int'l L.P. v. Toeppen, 141 F.3d 1316, 1321 (9th Cir. 1998) (noting that effects test is used in tort actions and finding trademark infringement claim to be "akin" to tort claim); Garcia Marquez, 942 F.2d at 621 ("It is important to distinguish contract from tort actions."). The Washington Supreme Court has held that Washington Minimum Wage Act [WMWA] claims "are more analogous to claims for unjust enrichment [or implied contract] than to tort claims." Seattle Prof'l Eng'g Employees Ass'n v. The Boeing Co., 139 Wn. 2d 824, 838 (2000). If claims brought under the WMWA, which " does not assure payment of contractually agreed wages [but rather] only requires that an employer pay the minimum wage for straight time," are more akin to contract actions than tort claims, then claims brought under RCW 49,52.070, which does enforce payment of contractually agreed wages, must be more akin to contract claims than tort claims. Id. at 835 (emphases added and removed). Because the claims asserted by Clairmont against Hayes and Stewart are akin to contract claims, as opposed to tort claims, the effects test is inapplicable. The Court therefore must determine whether Hayes and Stewart "have purposefully availed [themselves] of the privilege of conducting activities in the forum" under the traditional purposeful availment inquiry. Garcia Marquez, 942 F.2d at 620-21.
As noted above, the purposeful availment element may be met if "the defendant has taken deliberate action within the forum state or if he has created continuing obligations to forum residents."Ballard, 65 F.3d at 1498. A defendant does "not purposefully avail itself of the privilege of conducting business in Washington simply by sending communications to the plaintiffs' Washington residence." Van Steenwyk v. Interamerican Mgmt. Consulting Corp., 834 F.Supp. 336, 342 (E.D. Wash. 1993) (citingPeterson v. Kennedy, 771 F.2d 1244, 1262 (9th Cir. 1985)). Similarly, a defendant's telephone conversations with a plaintiff in the forum state do not, without more, "qualify as purposeful activity invoking the benefits and protection of the forum state." Garcia Marquez, 942 F.2d at 622. If Hayes' and Stewart's communications with Clairmont regarding her compensation were their only contact with Washington citizens, the Court would not find that the purposeful availment requirement is met. However, those communications are not Hayes' and Stewart's only contact with this forum.
Both Hayes and Stewart were members of Genuity's compensation committee. (Hayes Decl. Ex. A; Clairmont Decl. Ex. A). Both drafted Genuity's sales incentive plan. Id. Additionally, as members of the compensation committee, Hayes and Stewart were responsible for "administration of the [sales incentive] Plan, including discretionary authority to interpret the terms of this Plan and make exceptions to those terms." Id. at 23. Hayes' and Stewart's membership in the compensation committee and their authorship, administration, and interpretation of the plan created continuing obligations with Clairmont. Such continuing obligations may satisfy the purposeful availment element.Ballard, 65 F.3d at 1498. Based upon those continuing obligations and Hayes' and Stewart's communications with Clairmont regarding her compensation, the defendants could "reasonably anticipate being haled into court" in this forum.Core-Vent, 11 F.3d at 1485. The purposeful availment element therefore is established.
Hayes and Stewart appear not to have entered any contracts with Clairmont. Contracts are the usual method by which "continuing obligations" to forum residents are created. However, the Court finds that Hayes' and Stewart's alleged creation and administration of the compensation plan, which placed responsibility for resolution of Clairmont's compensation issues with Hayes and Stewart, created continuing obligations with a forum resident for purposes of the purposeful availment element.
b. Forum-Related Activities.
The second element of the specific jurisdiction test requires the plaintiff's claim to arise out of or result from the defendant's forum-related activities. Garcia Marquez, 942 F.2d at 620-21. Clairmont's claims arise out of Hayes' and Stewart's forum-related activities.
c. Reasonableness.
Courts consider seven factors when determining whether the exercise of jurisdiction comports with traditional notions of fair play and substantial justice, and is therefore reasonable: "(1) the extent of a defendant's purposeful interjection; (2) the burden on the defendant in defending in the forum; (3) the extent of conflict with the sovereignty of the defendant's state; (4) the forum state's interest in adjudicating the dispute; (5) the most efficient judicial resolution of the controversy; (6) the importance of the forum to the plaintiff's interest in convenient and effective relief; and (7) the existence of an alternative forum." RIO Props., Inc. v. RIO Int'l Interlink, 284 F.3d 1007, 1021 (9th Cir. 2002). The defendant bears the burden of demonstrating that exercising specific jurisdiction would be unreasonable. Bancroft Masters, 223 F.3d at 1088 (citingBurger King Corp. v. Rudzewicz, 471 U.S. 462, 476-77 (1985)).
i. Purposeful Interjection.
In evaluating the first reasonableness factor, a court should consider "the extent to which the defendant, by its alleged activities, purposefully interjected itself into the forum."Callaway Golf Corp. v. Royal Canadian Golf Ass'n, 125 F.Supp. 2d 1195, 1205 (C.D. Cal. 2000). "The `smaller the element of purposeful interjection, the less is jurisdiction to be anticipated and the less reasonable its exercise.'" Id. (quoting Insurance Co. of N. Am. v. Marina Salina Cruz., 649 F.2d 1266, 1271 (9th Cir. 1981)).
The Court has found that Clairmont established the purposeful availment element. Although Hayes and Stewart purposefully availed themselves of the privilege of conducting activities in this forum, the extent of their purposeful interjection in this forum is not large. The Court therefore finds that this factor weighs moderately against the exercise of specific personal jurisdiction.
ii. Burden on Defendants.
Hayes and Stewart contend that they "face the heavy burden of litigating this case in a state in which [they] have never been." (Motion at 9). Both would "have to travel from Massachusetts to Washington, incurring significant travel costs and taking uncompensated time off from work." Id.
Hayes and Stewart will face obvious burdens if required to litigate this matter in this forum. This factor weighs against a finding of reasonableness.
iii. Massachusetts' Sovereignty.
Litigation in this forum will not conflict with Massachusetts' sovereignty. This factor is neutral.
iv. Washington's Interest.
The purpose of the statute under which Clairmont brings her claims is to protect the wages of Washington employees:
The aim or purpose of the act is to see that the employee shall realize the full amount of the wages which by statute, ordinance, or contract he is entitled to receive from his employer, and which the employer is obligated to pay, and, further, to see that the employee is not deprived of such right, nor the employer permitted to evade his obligation, by a withholding of a part of the wages.Schilling v. Radio Holdings, Inc., 136 Wn. 2d 152, 159 (1998) (quoting State v. Carter, 18 Wn. 2d 590, 621 (1943)). Washington has a strong interest in ensuring that its residents have a forum to recover wages to which they are entitled. This factor weighs heavily in favor of a finding of reasonableness.
v. Efficient Judicial Resolution.
The work that Clairmont contends entitles her to compensation was conducted in this state. Hayes and Stewart have provided no evidence that this matter cannot efficiently be resolved in this forum. This factor weighs slightly in favor the of exercise of specific personal jurisdiction.
vi. Convenience and Alternative Forum.
Due to their related nature, these factors are often evaluated together. Callaway, 125 F. Supp. 2d at 1207.
Hayes and Stewart contend that Clairmont "would not be bared from obtaining relief by the dismissal of the cause[s] of action against [them] . . . and an alternative forum exists." (Motion at 10). However, Hayes and Stewart have made no showing that Massachusetts law attaches personal liability to officers or agents of an employer for withholding an employee's wages. Dismissal of this action therefore likely would deprive Clairmont of her ability to recover damages from Genuity employees who allegedly unlawfully withheld her wages. Additionally, as the "defendant's burden" factor weighs against the exercise of specific personal jurisdiction, consideration of Clairmont's convenience favors a finding of reasonableness.
These factors weigh in favor the of exercise of specific personal jurisdiction.
vii. Conclusions Regarding Reasonableness.
The seven reasonableness factors are mixed. The purposeful interjection and defendant's burden factors weigh against the exercise of specific personal jurisdiction. Consideration of Massachusetts' sovercignty is neutral. The remainder of the factors favor a finding of reasonableness.
On balance, the Court finds that requiring Hayes and Stewart to litigate this dispute in this forum is reasonable and comports with traditional notions of fair play and substantial justice. The Court therefore finds that dismissal of Clairmont's claims pursuant to Fed.R.Civ.P. 12(b)(2) is not warranted.