Opinion
Civil No. 00-481-KI.
July 3, 2001.
STEPHEN F. ENGLISH, RENEE E. ROTHAUGE, Bullivant Houser Bailey, PC, Portland, OR., Attorneys for Plaintiff.
RODNEY E. LEWIS, JR., MICHELLE A. BELLIA, DAVIS WRIGHT TREMAINE LLP, Portland, OR., Attorneys for Defendant.
OPINION
Before the court is the motion to dismiss (#11) by defendant Nafta Traders, Inc. ("NAFTA"). Pursuant to Fed.R.Civ.P. 12(b)(2), NAFTA moves to dismiss the Complaint on the basis that this court lacks personal jurisdiction over NAFTA. For the reasons set forth below, I deny the motion.
FACTS
Plaintiff Dr. Martens Airwair USA, LLC ("Dr. Martens"), is a Delaware limited liability corporation in the business of distributing footwear manufactured by its parent company. Its principal place of business is in Portland, Oregon. All North American footwear shipments are supervised and coordinated through Dr. Martens' Portland offices. These include shipments from Dr. Martens' distribution center in Portland and shipments direct from England. NAFTA is a Texas corporation with its principal place of business in Irving, Texas. NAFTA does not maintain an office or a registered agent in Oregon.
Dr. Martens alleges that, beginning on or about June 8, 2000, it entered into a series of agreements with NAFTA to sell NAFTA fashion footwear. Specifically, Dr. Martens alleges that it contracted with NAFTA to sell sandals, "worn and damaged" shoes, and new footwear (uppers) to NAFTA. Dr. Martens alleges that it has delivered approximately 255,000 pairs of shoes to NAFTA under such contracts but has not received payment from NAFTA. Complaint, ¶¶ 3-7.
In the spring of 2000, Dr. Martens and NAFTA began negotiating the terms of a sales agreement. As part of those negotiations, the Vice President of Sales for Dr. Martens, John Kraus, traveled to Texas to meet with NAFTA's president, Marc Schlachter. A series of communications ensued by telephone, e-mail, and facsimile between Kraus in Portland and Schlachter in Texas that culminated in an agreement dated June 8, 2000. Complaint, ¶ 9; Affidavit of John Kraus, Exh. C. The preamble to the agreement states (with emphasis added) that it is
an exclusive agreement [between NAFTA and Dr. Martens] for (i) all of Dr. Martens "Worn And Damaged" Pairs of shoes, (ii) all Pairs of "Corporate and Salesman Samples" of Dr. Martens shoes, and (iii) up to, but not to exceed, 100,000 Pairs of "First-Quality Close-Out" Footwear . . . (such product collectively hereinafter referred to as "Merchandise"), and Nafta agrees to purchase all such Merchandise from Dr. Martens.
Likewise, the agreement states that "Dr. Martens will sell, and Nafta will purchase, all Merchandise offered for sale by Dr. Martens during the term of this agreement" and that "[t]he term of this agreement is from the date executed below until the date that Dr. Martens delivers to Buyer Two-Hundred Thousand (200,000) Pairs of Worn and Damaged Shoes. Thereafter this agreement shall be automatically renewed for terms of one year under the same terms as the then existing agreement." A cover letter attached to the agreement from Schlachter asked Kraus to acknowledge that they also had agreed that NAFTA had an option to purchase up to 200,000 pairs of New First-Quality Footwear of its choice at 32% of Dr. Martens wholesale price for November 2000 delivery under the same terms as the attached agreement. Kraus acknowledged and accepted those terms.
Following negotiation of the June 8, 2000 agreement, Dr. Martens made shipments of shoes to NAFTA in Texas from Dr. Martens' Oregon warehouse. Communications continued between the parties from their respective states.
The parties negotiated a second contract that was signed on August 18, 2000. Complaint, ¶ 23. Among other things, the contract gave NAFTA the right to return product for full credit prior to April 30, 2001 and set forth NAFTA's agreement to purchase certain footwear in November 2000 at 32% of the original wholesale cost. Kraus Aff., Exh. I. Subsequent to the parties entering into this contract, additional shoes were shipped to NAFTA by Dr. Martens, including shipments from Oregon and England. Likewise, the parties continued to communicate with each other from their respective states.
I acknowledge that NAFTA asserts that the only contract between the parties is an agreement entered on or about June 9, 2000.
On April 18, 2001, NAFTA filed an action against Dr. Martens in the District Court of Dallas County, Texas (the "Texas Action"). Declaration of Marc Schlachter, Exh. 1. Among the allegations of the complaint in that case are the following:
On or about June 9, 2000, NAFTA and Dr. Martens entered into a written agreement providing NAFTA the exclusive right to purchase for resale all of Dr. Martens "worn and damaged" pairs of shoes, all of Dr. Martens "Corporate and Salesman Samples" pairs of shoes, and up to 100,000 pairs of Dr. Martens "First-Quality Close-Out" footwear. Dr. Martens also granted NAFTA an option to purchase up to 200,000 pair of new first-quality footwear of NAFTA's choice at 32% of Dr. Martens' wholesale price for November, 2000 delivery under the same terms as the agreement. During the negotiations of the contract, Dr. Martens represented to NAFTA that it would ship to NAFTA between 50,000 and 80,000 pairs of "worn and damaged" pairs per year until the contractual limit of 200,000 pairs was met. However, NAFTA has only received 4,147 pairs of "worn and damaged shoes" since the contract was signed. Additionally, Dr. Martens has sold "worn and damaged" footwear to third parties in violation of the agreement.
Schlachter Decl., Exh. 1, p. 3
Dr. Martens filed this action against NAFTA on April 5, 2001. NAFTA states that it had not been served with the complaint in this action when it filed the Texas Action on April 18, 2001.
DISCUSSION
A plaintiff bears the burden of establishing that the court has personal jurisdiction over a defendant. Sher v. Johnson, 911 F.2d 1357, 1361 (9th Cir. 1990). If no evidentiary hearing is held, a plaintiff can withstand a motion to dismiss by making a prima facie showing of jurisdictional facts which, if true, support jurisdiction over the defendant. Ballard v. Savage, 65 F.3d 1495, 1498 (9th Cir. 1995). Allegations in the complaint must be taken as true and conflicts between the facts must be resolved in the plaintiff's favor for purposes of deciding whether a prima facie case for personal jurisdiction exists.American Tel. Tel. Co. v. Compagnie Bruxelles Lambert, 94 F.3d 586, 588 (9th Cir.), opinion supplemented on another grounds, 95 F.3d 1156 (9th Cir. 1996).
The jurisdictional reach of a federal court over defendants in a diversity action is determined by the law of the forum state. Oregon extends jurisdiction to the outer limits permitted by the state or federal constitutions. ORCP 4L. Thus, I can turn to a federal due process analysis and I do so notwithstanding Dr. Martens' arguments under ORCP 4D and 4E. Gray Co. v. Firstenberg Mach. Co., 913 F.2d 758, 760 (9th Cir. 1990). Federal due process requires that a nonresident defendant have minimum contacts with the forum state such that the exercise of personal jurisdiction does not offend "traditional notions of fair play and substantial justice." International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). The constitutional due process test may be satisfied by a finding of either general or specific jurisdiction. Sher, 911 F.2d at 1361. Dr. Martens does not allege that general jurisdiction exists over NAFTA and the record does not support such a finding. Accordingly, I focus on whether specific jurisdiction exists.
The Ninth Circuit has recognized the application of a three-part test to determine whether specific jurisdiction exists:
(1) The nonresident defendant must do some act or consummate some transaction with the forum or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws. (2) The claim must be one which arises out of or results from the defendant's forum-related activities. (3) Exercise of jurisdiction must be reasonable.Gordy v. Daily News, L.P., 95 F.3d 829, 831-32 (9th Cir. 1996).
In regard to the first element of this test, NAFTA argues that it did not purposely avail itself of the privilege of conducting activities in Oregon. NAFTA emphasizes that it was Kraus, on behalf of Dr. Martens, that made the initial contact with Schlachter that led to the June 8, 2000 agreement. Likewise, NAFTA emphasizes that Schlachter never visited Oregon as part of any negotiations between the parties and it argues that the parties' interstate negotiations and communications are insufficient to satisfy the purposeful availment prong.
The existence of a contract with a resident of the forum state is insufficient by itself to create personal jurisdiction over the nonresident. Burger King Corp. v. Rudezewicz, 471 U.S. 462, 478 (1985). However, the Supreme Court also stated that "with respect to interstate contractual obligations, we have emphasized that parties who `reach out beyond one state and create continuing relationships and obligations with citizens of another state' are subject to regulation and sanctions in the other State for the consequences of their activities." Id. at 473 (quoting Travelers Health Ass'n v. Virginia, 339 U.S. 643, 647 (1950)). With respect to a contract entered into with a forum corporation, prior negotiations and contemplated future consequences, along with the terms of the contract and the parties actual course of dealings, are the factors to be considered. Burger King, 471 U.S. at 479.
Contrary to NAFTA's characterization, the interaction between the parties did not result in an isolated sale transaction or "discrete relationship" but, instead, created the type of continuing relationship and obligations that allow this court to exercise personal jurisdiction over NAFTA. According to NAFTA's own complaint in the Texas Action, it had relied on Dr. Martens' representation that it would ship to NAFTA between 50,000 and 80,000 pairs of "worn and damaged" pairs per year until the contractual limit of 200,000 pairs was met. Thus, NAFTA anticipated a relationship with Dr. Martens that would have involved multiple shipments over more than a two-year time period (especially given the automatic renewal clause in the agreement). Likewise, the terms of the June 8, 2000 contract and NAFTA's allegations in the Texas Action demonstrate NAFTA's understanding that it had an exclusive arrangement with Dr. Martens for any "worn and damaged shoes" (as well as other types of footwear) and that it considered Dr. Martens in breach for selling any of such footwear to third parties. These facts, together with the multiple shipments of shoes already made from Oregon, support a finding that NAFTA had the type of continuing, wide-reaching business relationship with Dr. Martens sufficient to constitute purposeful availment. See Roth v. Garcia Marquez, 942 F.2d 617, 622 (1991) (in finding purposeful availment, the court noted "[t]his is not an instance where the contract was a one-shot deal that was merely negotiated and signed by one party in the forum; on the contrary, most of the future of the contract would have centered on the forum."). These facts also satisfy the second element of the specific jurisdiction test ( i.e., Dr. Martens' claims arise out of NAFTA's forum-related activities).
The third element of the specific jurisdiction test focuses on whether exercise of jurisdiction over the defendant would be reasonable. Seven factors are relevant to the determination of the reasonableness of the exercise of jurisdiction:
1) the extent of the defendant's purposeful interjection into the forum state's affairs; 2) the burden on the defendant; 3) conflicts of law between the forum and defendant's home jurisdiction; 4) the forum's interest in adjudicating the dispute; 5) the most efficient judicial resolution of the dispute; 6) the plaintiff's interest in convenient and effective relief; and 7) the existence of an alternative forum.Roth, 942 F.2d at 623. No factor is dispositive; the court must balance all seven. Gordy v. Dailey News, L.P., 95 F.3d at 836. If the requisite minimum contacts exist and the claim arises out of them, the burden is on the defendant to present a "compelling case" that jurisdiction would be unreasonable. Id. at 835.
I find that NAFTA has not made the requisite compelling case to defeat jurisdiction. At best, NAFTA has demonstrated that this litigation may create burdens for NAFTA if it requires multiple NAFTA managers to be absent simultaneously from Texas. I trust that the parties can avoid such an occurrence during the pretrial stages of the case and the court has video conference capabilities if this case reaches trial.
CONCLUSION
Based on the foregoing, the motion to dismiss (#11) by defendant Nafta Traders, Inc. is DENIED.