Opinion
Civil No. 03-4646 (JRT/FLN)
February 4, 2004
George R. Serdar, Cheryl A. Stanton, MESSERLI KRAMER P.A., Minneapolis, MN, for plaintiff
William L. Killion, Brian L. McMahon, GRAY, PLANT, MOOTY, MOOTY BENNETT P.A., Minneapolis, MN, for defendant
MEMORANDUM OPINION AND ORDER DENYING DEFENDANT'S MOTION TO DISMISS
Plaintiff Marine Innovations Warranty Corporation ("Marine Innovations") and defendant American Marine Holdings, Inc. ("AMH") entered into an agreement under which plaintiff would provide warranty services for boats manufactured by defendant. Plaintiff now alleges that defendant has failed to make certain payments required under the agreement. Defendant disputes that the payments were required. This matter is now before the Court on defendant's motion to dismiss for lack of personal jurisdiction or, in the alternative, for failure to state a claim upon which relief can be granted.
BACKGROUND
Marine Innovations is a Minnesota corporation that administers warranty programs for boat manufacturers in the United States. AMH is a Delaware corporation with its principal place of business in Sarasota, Florida that sells premium boats.
In April 1999, AMH invited Marine Innovations and two other companies to submit proposals to provide extended warranty products to AMH. Between April and the end of May, Marine Innovations and AMH exchanged, via telephone and fax, information and draft proposals of agreements. In early June, the president of Marine Innovations traveled to AMH offices in Florida to continue negotiation of the agreement. Following this meeting, further drafts of pricing arrangements and other terms of the agreement were exchanged, again via telephone and fax. According to Marine Innovations, all of the terms were settled and a final agreement was reached by mid-June. Under the alleged agreement, Marine Innovations was to administer warranties on boats owned by AMH customers in exchange for certain payments by AMH. Warranty claims were only to be submitted to Marine Innovations after a boat had been owned for one year. The parties never signed a formal contract. Marine Innovations contends that the terms agreed to can be found in the series of faxes exchanged by the parties as part of negotiations.
On August 16, 1999, AMH sent Marine Innovations a letter attaching a list of boats eligible for warranty coverage. Marine Innovations asserts that this list indicated that "specific customers had obtained boats with warranties and that [Marine Innovations was] now to begin administering warranties under the agreement." Upon receiving the first list of eligible boats, Marine Innovations contends that it began providing warranty coverage to AMH customers based on the terms agreed to in mid-June, 1999. At some point later, an AMH executive visited Marine Innovations in Minnesota to meet with the customer service personnel who would be servicing the account.
Marine Innovations alleges that although AMH initially made some payments, they have failed to make all of the payments required under the agreement. It appears that the core of the dispute involves what, if any, payment AMH was required to make for the first year of warranty coverage on any given boat during which Marine Innovations was not responsible for claims. Marine Innovations asserts claims of breach of contract and promissory estoppel and requests damages in excess of $2,000,000. AMH denies that it was required to make further payments and moves, initially, for dismissal based on lack of personal jurisdiction. Alternatively, AMH moves for dismissal of both claims for failure to state a claim upon which relief can be granted. Specifically, AMH asks that Count 1, for breach of contract, be dismissed under the statute of frauds and that Count 2, for promissory estoppel, be dismissed as not yet ripe for adjudication.
Defendant included in its motion a request that the Court dismiss "plaintiffs claim for attorney's fees." Plaintiff, in its response, stated that it would "withdraw its allegations concerning entitlement to attorneys' fees, without prejudice." The Court notes that consideration of any claim to attorneys' fees is premature and the issue is therefore moot at this point.
ANALYSIS
As an initial matter, the Court must determine whether it has jurisdiction to consider Marine Innovations claims. If it does not, the matter must be dismissed. Cmwford v. F. Hoffman-LaRoche Ltd., 267 F.3d 760, 764 (8th Cir. 2001). If the Court finds that jurisdiction exists, it will then consider whether dismissal of the individual claims is appropriate.
I. PERSONAL JURISDICTION
AMH objects that its contacts with Minnesota are not substantial enough to support jurisdiction in this court. Marine Innovations asserts that in the course of its business dealings with Marine Innovations, AMH had numerous contacts with Minnesota and that those contacts along with its actions in seeking out and entering into an ongoing relationship with a Minnesota company constitute sufficient connection with Minnesota to support personal jurisdiction.
A federal district court has personal jurisdiction over a foreign defendant to the same extent as a state court in the same forum. Digi-Tel Holdings, Inc. v. Proteq Telecommunications, Ltd., 89 F.3d 519, 522 (8th Cir. 1996). Thus, jurisdiction is proper in this Court if it would also be proper in a Minnesota state court. The Minnesota long-arm statute extends jurisdiction to the outer limits permitted by the due process clause of the U.S. Constitution. Minn. Stat. § 543.19 (1994); Valspar Corp. v. Lukken Color Corp., 495 N.W.2d 408, 411 (Minn. 1992); Jarvis Sons v. Freeport Shipbuilding, 966 F.2d 1248, 1249 (8th Cir. 1992). The due process clause requires that a defendant have "minimum contacts with [the forum state] such that maintenance of the suit does not offend `traditional notions of fair play and substantial justice.'" Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (citation omitted).
Jurisdiction may be either specific or general. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414, nn. 8, 9 (1984) (comparing specific and general jurisdiction). Specific jurisdiction may be found when the cause of action arises out of or is related to the defendant's contacts with the forum state. Id. at 414, n. 8. The minimum-contacts inquiry for specific jurisdiction focuses on the "relationship among the defendant, the forum, and the litigation," Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 775 (1984) (citation omitted), and requires' substantial connection" that "come[s] about by an action of the defendant purposefully directed toward the forum state." Asahi MetalInd. Co. v. Super. Ct. of Cal, 480 U.S. 102, 112 (1987).
General jurisdiction permits the court to exercise jurisdiction over a defendant who has continuous and systematic contacts with the forum state, regardless of where the cause of action arose. See Sondergard v. Miles, Inc., 985 F.2d 1389, 1392 (8th Cir. 1993).
Minnesota courts and the Eighth Circuit look to five factors in determining whether the exercise of personal jurisdiction is appropriate: 1) the nature and quality of the contacts with the forum state; 2) the quantity of the contacts with the forum state; 3) the relation of the cause of action to the contacts; 4) the interest of the forum state in providing a forum for its resident; and 5) the convenience of the parties. Real Properties, Inc. v. Mission Ins. Co., 427 N.W.2d 665, 668 (Minn. 1988); Land-O-Nod Co. v. Bassett Furniture Indus., Inc., 708 F.2d 1338, 1340 (8th Cir. 1983). The first three factors are most important, while the last two are considered "secondary factors." Digi-Tel Holdings, 89 F.3d at 523. No one factor is determinative, and the Court's decision is based on the totality of the circumstances. Northrup King Co. v. Compania Productora Semillas Algondoneras Selectas, S.A., 51 F.3d 1383, 1388 (8th Cir. 1995). Doubts as to whether a court has personal jurisdiction over an individual or entity should be resolved in favor of retaining jurisdiction. Valspar Corp. v. Lukken Color Corp., 495 N.W.2d 408, 412 (Minn. 1992); Medtronic, Inc. v. Camp, 2002 WL 539073, *2 (D. Minn. 2002).
To survive a motion to dismiss, a plaintiff need only establish a prima facie case of personal jurisdiction. Hardrives, Inc. v. City of LaCrosse, Wisconsin, 240 N.W.2d 814, 816 (Minn. 1976); Stevens v. Redwing, 146 F.3d 538, 543 (8th Cir. 1998). For purposes of the prima facie showing, the Court takes the allegations contained in the complaint as true, and all factual conflicts must be resolved in favor of the nonmoving party. Digi-Tel Holdings, 89 F.3d at 522.
After analyzing the facts presented in the pleadings under the five factor framework, the Court concludes that Marine Innovations has established a prima facie case of personal jurisdiction over AMH. Where specific jurisdiction is alleged, the type and quality, rather than quantity, of contacts is determinative. Marshall v. Inn on Madeline Island, 610 N.W.2d 670, 674 (Minn.Ct.App. 2000). In fact, specific jurisdiction may arise from even a single contact with the forum. Marquette Nat'l Bank of Minneapolis v. Norris, 270 N.W.2d 290, 295 (Minn. 1978) (citing McGee v. Int'l Life Ins. Co., 355 U.S. 220, 223 (1957)), Marshall v. Inn on Madeline Island, 610 N.W.2d 670, 674 (Minn.Ct.App. 2000). This action arises directly from AMH's alleged breach of the oral agreement reached between AMH and Marine Innovations. The agreement at issue was initiated by AMH, who sought out Marine Innovations in Minnesota due to an AMH employee's previous dealings with Marine Innovations. It was negotiated between Florida and Minnesota, primarily through seemingly numerous telephone, fax, and mail communications between AMH and Marine Innovations. Marine Innovations personnel primarily performed the agreement in Minnesota, where two dedicated telephone numbers were installed to handle AMH claims. AMH visited Marine Innovations' Minnesota office and met with the customer service personnel dealing with the AMH account. The relationship between the parties, and thus AMH's contact with Minnesota, has been ongoing for over four years.
The Court notes that in addition to AMH's relationship with Marine Innovations, it has sold eight boats to dealerships in Minnesota during the past three years. This dispute does not, however, specifically relate to those boats.
AMH attempts to distinguish between Marine Innovations' ongoing relationship with individual boat owners and its relationship with AMH. The Court is not persuaded by this argument. Marine Innovations would not have any relationship, let alone an ongoing relationship, with any of the individual boat owners if not for AMH.
Additionally, Minnesota has an obvious interest in providing a forum for its citizens, Marshall, 610 N.W.2d at 676, and it does not appear to the Court that requiring AMH to defend in Minnesota would be any more inconvenient than requiring Marine Innovations to prosecute its claims elsewhere (presumably Florida).
Although telephone or fax contacts alone are not a sufficient basis for jurisdiction, see Northrup King at 1388, in this case AMH established a long-term service relationship performed largely in Minnesota, see Bell Paper Box, Inc. v. Trans Western Polymers, Inc., 53 F.3d 920 (8th Cir. 1995), and, in support of that relationship, visited Minnesota on one occasion. See Papachristou v. Turbines, Inc., 902 F.2d 685, 686-87 (8th Cir. 1990) (en bane). Such conduct demonstrates that AMH's contacts with the state are more than "random," "fortuitous," or "attenuated," Burger King v. Rudzewicz, 471 U.S. 462, 475 (1985), and was such that AMH could reasonably anticipate being haled into court in Minnesota. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980).
In short, based upon the totality of the circumstances, and resolving all factual disputes in Marine Innovations' favor, the Court is satisfied that Marine Innovations has made out a prima facie case that personal jurisdiction is proper in Minnesota. Therefore, the Court denies defendant's motion to dismiss on this basis.
II. Motion to Dismiss
Having determined that jurisdiction is proper in this Court, the Court now turns to AMH's motion to dismiss Marine Innovations' claims for failure to state a claim upon which relief can be granted. The Court will address each claim in turn.
A. Standard of Review
In a motion to dismiss, the Court construes the complaint in the light most favorable to the plaintiff and presumes all facts alleged h the complaint to be true. Hishon v. King Spalding, 467 U.S. 69, 73 (1984); Schmedding v. Tnemec Co. Inc., 187 F.3d 862, 864 (8th Cir. 1999). The Court may dismiss a claim only where the plaintiff cannot prove any set of facts in support of his claim that would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Casazza v. Kiser, 313 F.3d 414, 418 (8th Cir. 2002).
B. Breach of Contract/Statute of Frauds
Marine Innovations alleges in the complaint that
Defendant contracted with Marine Innovations to pay Marine Innovations for warranty administration and coverage. Marine Innovations, in exchange for the payment, agreed to administer the Z-Care and Pro-Care warranties after the first year following the sale and delivery of each boat.
AMH asserts that this alleged oral contract cannot be performed within one year and therefore is barred by the Statute of Frauds.
Minnesota Statute § 513.01 provides, in relevant part, that:
[n]o action shall be maintained, in either of the following cases, upon any agreement, unless such agreement, or some note or memorandum thereof, expressing the consideration, is in writing, and subscribed by the party charged therewith:
(1) Every agreement that by its terms is not to be performed within one year from the making thereof.
The warranty program that Marine Innovations was to administer did not permit boat owners to make claims to Marine Innovations during the first year of ownership. Therefore, AMH argues, the contract could not have been performed within one year. Marine Innovations argues that when and if a customer makes a claim is irrelevant to the statute of frauds one-year calculation because Marine Innovations was expected to begin servicing the warranty program upon notification of eligible boats-regardless of when any claims on those boats could be or were filed. The Court finds Marine Innovations' argument persuasive.
Apparently the dealers and AMH handled any problems arising during the first year of ownership.
Marine Innovations also argues that the agreement was sufficiently recorded to satisfy the statute of frauds. The Court disagrees. Even if the series of faxes and letters between the parties were found to contain all of the necessary terms, they cannot establish a contract under the statute of frauds because they do not contain the requisite signatures.
In the context of employment contracts, Minnesota courts have said that although an oral contract for a fixed term of employment cannot be enforced under the statute of frauds, an oral contract for permanent or indefinite employment can be because it is theoretically capable of performance within one year. Braaten v. Midwest Farm Shows, 360 N.W.2d 455, 457 (Minn.Ct.App. 1985) (citing Eklund v. Vincent Brass and Aluminum Co., 351 N.W.2d 371, 375-76 (Minn.Ct.App. 1984)); see also Vess Beverages, Inc. v. Paddington Corp., 886 F.2d 208, 212 (8th Cir. 1989) ("[t]he longstanding interpretation of the one year provision in this statute of frauds is that an oral contract for a definite period of time exceeding one year falls within the statute and is unenforceable"); Argonaut Ins. Companies v. Medical Liability Mut. Ins. Co., 760 F. Supp. 1078, 1083 (S.D.N.Y. 1991) (agreement between insurance companies to share defense costs not barred by statute of frauds); Matter of Greensboro Lumber Co., 148 B.R. 973, 977 (M.D. Ga. 1992) (employer's agreement to provide health insurance to employee not barred by statute of frauds); Boothby v. Texon, Inc., 608 N.E.2d 1028 (Mass. 1993); Kestenbaum v. Pennzoil Co., 766 P.2d 280 (N.M. 1988); Joseph v. Sears Roebuck Co., 77 S.E.2d 583, 586-87 (S.C. 1953) (oral warranty on pressure cooker not barred by statute of frauds); but see Zimmerman v. H.E. Butt Grocery Co., 932 F.2d 469 (5th Cir. 1991).
In Eklund the court noted that a fixed term contract for more than one year could not be terminated within one year without breaching the contract. 351 N.W.2d at 375-76. A lifetime or open-ended contract, however, could be properly terminated through the election or death of either party and thus performed at any time, including within one year. Id. The same is true in this situation. The agreement between the parties appears to be for an indefinite period of time. Thus, theoretically, either party could have properly terminated the agreement within one year of its making. The Court finds that the agreement, as it is presented in the pleadings, is not barred by the statute of frauds. Dismissal of the breach of contract claim is therefore inappropriate at this very early stage in the litigation.
C. Promissory Estoppel
Marine Innovations asserts, in the alternative to the breach of contract claim, a claim of promissory estoppel. AMH contends that Marine Innovations cannot make out the elements of a promissory estoppel claim because they cannot demonstrate detrimental reliance.
In order to make out a claim for promissory estoppel, a plaintiff must establish (1)that defendant made a `clear and definite' promise, (2) that defendant intended plaintiff to rely on that promise, (3) that plaintiff relied on the promise to its detriment. Ruud v. Great Plains Supply, Inc., 526 N.W.2d 369, 372 (Minn. 1995). The complaint asserts that AMH promised to pay Marine Innovations for its services, that Marine Innovations was intended to and did rely on that promise, and that they have been harmed by AMH's alleged failure to make the promised payments. AMH asserts that the complaint only claims prospective damages that may accrue to Marine Innovations if boat owners make claims that they are obligated to honor. The Court disagrees with AMH's position.
If, as Marine Innovations has clearly alleged in the complaint, AMH has failed to make payments required under the agreement, then AMH has been presently harmed. This is because, as a matter of common sense, the payments Marine Innovations receives for administering the warranty program cannot be destined exclusively for a fund from which Marine Innovations may pay eventual customer claims. The payments must also compensate Marine Innovations for assuming the risk of having to pay out on any future claims and for managing the infrastructure necessary to handle any claims filed. To view the payments as going solely towards paying claims would be to assume that Marine Innovations provides their services for free.
The Court therefore finds that, construing the complaint in the light most favorable to plaintiff, Marine Innovations can establish each of the elements of promissory estoppel, including that it is presently harmed by AMH's failure to compensate Marine Innovations for the management services provided.
ORDER
Based on the foregoing, all the records, files, and proceedings herein, IT IS HEREBY ORDERED that:
1. Defendant's motion to dismiss [Docket No. 12] is DENIED.
2. Defendant's motion to dismiss plaintiffs claim for attorneys' fees [Docket No. 12] is DENIED as moot, as plaintiff has withdrawn its claim for attorneys' fees at this time.