Opinion
CIVIL ACTION NO. 03-0788, SECTION "C".
June 3, 2003.
Order and Reasons
Stephanie L. Cory, a second year law student at the Louisiana State University Paul M. Hebert Law Center, assisted in the research and preparation of this decision.
This matter comes before the Court on motion to dismiss for lack of personal jurisdiction filed by defendant Miller Desk, Inc. ("Miller"). Having considered the record, the memoranda of counsel, and the law, the motion is DENIED.
I. BACKGROUND
This action was removed from the Louisiana courts to this Court by Miller, a corporation organized and existing under the laws of the State of North Carolina. Miller is a manufacturer of office furniture with its principal place of business in High Point, North Carolina. This dispute arises out the actions of Heather Vaughn ("Vaughn"), a former accounting employee of Miller who worked on the collection of Miller's aged accounts receivable. The parties agree that Vaughn, with the authorization of her supervisor, occasionally forwarded difficult aged accounts receivable to outside agencies for collection prior to August 2002. One such agency was plaintiff Newton Associates, LLC ("Newton"), a commercial credit services, collections, and outsourcing firm. Newton is a corporation organized under the laws of the State of Louisiana with it principal place of business in Louisiana and offices located throughout the United States.
In August 2002, with the authorization of Miller, Vaughn placed two old accounts with Newton through its Denver, Colorado branch. In doing so, she became acquainted with two employees of Newton's Colorado office, Marcus Anthony and David Herbert ("Herbert"). Herbert and Vaughn began communicating regularly through telephone and e-mail. In the Fall of 2002, at the alleged request of Herbert, Vaughn forwarded to Newton all of Miller's accounts receivable. Vaughn did so despite the fact that she lacked such authority over Miller's accounts and her actions were done without the knowledge or consent of Miller.
Following Vaughn's transfer of Miller's accounts, Newton's Louisiana employees performed all of the collection work on the accounts out of Newton's Louisiana office. In addition, Newton performed all of the accounting work, including reporting, invoicing, and billing to Miller out of its Louisiana office. Finally, pursuant to Newton's efforts in Louisiana, Vaughn allegedly kept in frequent contact with Newton's Louisiana employees.
In support of these facts, Newton presents an affidavit of one of its Louisiana employees, Wanda Godfrey ("Godrey"). Godrey states that she had frequent telephone conversations and e-mail exchanges with Vaughn. During these alleged frequent contacts, Vaughn provided Godfrey with detailed information on the transferred accounts. Vaughn also allegedly communicated with Godfrey in order to confirm payments made on the accounts that had been received by Miller as a result of Newton's efforts. Finally, Vaughn was allegedly in contact with Godfrey concerning Miller's late payments on invoices that were sent from Newton's Louisiana office to Miller. Godfrey attached to her affidavit a copy of an e-mail sent to her by Vaughn which served as an example of Vaughn's above contacts with the forum. Vaughn, however, in her affidavit, states that she "did not contact or conduct business with anyone in Newton's Louisiana office" and "sought services solely from Newton's Colorado office."
In addition to Godfrey's affidavit, Newton presents the affidavits of four more employees in the Louisiana office who were allegedly in contact with Vaughn. These employees performed the collection efforts on Miller's accounts and allege that their contact with Vaughn included telephone contact as well as written contact via fax. Furthermore, all four employees allege that Miller provided them with information and invoices on the accounts in order to assist in the collection efforts.
As a result of Newton's Louisiana efforts, funds were collected and Miller is allegedly indebted to Newton for an amount in excess of $157,764.08. Miller has refused to pay. Following removal of the action from state court, Miller timely filed a motion to dismiss for lack of personal jurisdiction pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure.
II. LAW ANALYSIS
When a defendant files a motion to dismiss for lack of personal jurisdiction, the party who attempts to invoke the jurisdiction of the court bears the burden of establishing a prima facie case of personal jurisdiction over the defendant. D.J. Investments, Inc. v. Metzeler Motorcycle Tire Agent Gregg, Inc., 754 F.2d 542, 545 (5th Cir. 1985). The court in its determination of jurisdiction may receive affidavits, oral testimony, "or any combination of the recognized methods of discovery." Stuart v. Spademan, 772 F.2d 1185, 1192 (5th Cir. 1985). As regards an issue of fact, "uncontroverted allegations in the plaintiff's complaint must be taken as true, and conflicts between the facts contained in the parties' affidavits must be resolved in the plaintiff's favor." D.J. Investments, 754 F.2d at 546.
In determining whether personal jurisdiction is proper, a district court sitting in diversity applies the law of the forum state in which it sits. Fed.R.Civ.P. 4(e). The Louisiana Long-Arm Statute provides that this Court may exercise personal jurisdiction over any nonresident as long as the basis for such jurisdiction is consistent with the Constitution of the United States. La. Rev. Stat. Ann. § 13:3201 (2003). Consequently, the limits of the Louisiana Long-arm Statute are coextensive with the limits of constitutional due process. Petroleum Helicopters, Inc. v. Avco Corp., 513 So.2d 1188, 1192 (La. 1987).
Two requirements must be met in order to satisfy constitutional due process. Burger King v. Rudzewicz, 471 U.S. 462, 476, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985). First, the nonresident corporation must have purposefully established "minimum contacts" with the forum state such that "it enjoys the benefits and protection of the laws of that state." International Shoe Co. v. Washington, 326 U.S 310, 319, 66 S.Ct. 154, 90 L.Ed. 95 (1945). In making this determination, there must be "some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State." Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958). Second, the exercise of jurisdiction over the nonresident must not "offend traditional notions of fair play and substantial justice." International Shoe, 326 U.S. at 320. Some of the factors that may be considered under this second "reasonableness" requirement include "the burden on the defendant" of litigating in the forum as well as the "plaintiff's interest in obtaining convenient and effective relief." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292, to S.Ct. 559, 62 L.Ed.2d 490 (1980).
Minimum Contacts
In order to establish minimum contacts, the court may assert either "general" or "specific" personal jurisdiction. Wilson v. Belin, 20 F.3d 644, 647 (5th Cir. 1994). In its opposition, Newton agrees that general jurisdiction over Miller does not exist. Rather, Newton alleges that this Court has specific jurisdiction over Miller. Specific jurisdiction is invoked when the cause of action "arises out of" the defendant's contacts with the forum, Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984), such that the defendant should reasonably anticipate being haled into court there. World-Wide, 444 U.S. at 297.
As stated by the Fifth Circuit, a cause of action "is a state of facts which would entitle a person to sustain an action and to seek a judicial remedy on his behalf." Woodfork v. Marine Cooks Stewards Union, 642 F.2d 966, 971 (5th Cir. 1981). The cause of action in this case is Miller's failure to pay fees allegedly due and owing to Newton. This cause of action arises from Vaughn's transferring of Miller's accounts to Newton for collection and Newton's Louisiana employees' efforts to service those Miller accounts and be compensated for those efforts.
The Fifth Circuit, in establishing minimum contacts, has found significant the determination that a nonresident defendant is "no mere passive customer." Mississippi Interstate Exp., Inc. v. Transpo, Inc., 681 F.2d 1003, 1009 (5th Cir. 1982), (quoting Southwest Offset, Inc. v. Hudco Publ'g Co., Inc., 622 F.2d 149, 152 (5th Cir. 1980)). In Mississippi Interstate, the court relied on the fact that (1) the defendant in the case exercised a significant amount of control in the performance of the oral agreement, (2) the relationship between the parties as a result of the agreement was "sustained," i.e., not "single" or "fortuitous," and (3) the plaintiff performed its obligation under the agreement at its "sole" place of business in the forum which was known to the defendant "at the outset" of the relationship. Id.
The facts of Mississippi Interstate are similar to those in the present action. Mississippi Interstate involved a Mississippi trucking firm, Mississippi Interstate, which entered into an oral agreement with a California freight broker, Transpo, whereby Mississippi Interstate agreed to supply trucks to Transpo. Id. at 1005. As a result and in furtherance of the agreement, Transpo frequently contacted Mississippi Interstate via telephone at its headquarters and sole business office in Mississippi. Id. All of Mississippi Interstate's trucks were maintained and housed at the headquarters in Mississippi. Id. Mississippi Interstate also telephoned its drivers from its office in Mississippi in order to instruct them in accordance with the directives of Transpo. Id. Finally, all invoices that were received by Transpo directed it to make payment to Mississippi Interstate's headquarters in Mississippi. Id. None of the invoices, however, were paid. Id.
Just as Transpo was considered to be no mere passive customer based on the above facts, Miller is no mere passive customer. Id. at 1009. While Transpo provided directives for the shipping of goods via telephone to Mississippi Interstate's Mississippi office, Miller, according to Newton's affidavits, provided detailed account information via telephone and e-mail to Newton's Louisiana office. Id. at 1005. In effect, both Transpo and Miller exercised a significant amount of control in the performance of their respective agreements as without the provided information neither Mississippi Interstate nor Newton would have been able to perform.
In addition, similar to the parties in Mississippi Interstate, contact between Miller and Newton's employees in Louisiana was prolonged, occurring over a significant period of months. The relationship between Miller and Newton was therefore not summarized by a "single or "fortuitous" event, but rather was the result of "sustained" communications. Id. at 1009.
Finally, although Newton has branch offices throughout the United States and therefore does not have its "sole" place of business in Louisiana, Newton did perform its obligations according to the alleged oral agreement at its principal place of business in Louisiana. Although Vaughn states in her affidavit that at the time she transferred the accounts she was unaware that Newton's principal place of business was in Louisiana, Newton presents an affidavit that states otherwise. The branch manager of Newton's Denver, Colorado branch explains that he was in contact with Vaughn in the early part of the relationship and that Vaughn was aware that the Denver office was only a branch. Specifically he alleges that Vaughn was aware that all of the collecting, billing, and accounting would be done by Newton's Louisiana office. It is also important to note that prior to the transfer of the accounts at issue, Vaughn had previously transferred two accounts for collection with Newton. As stated earlier, disputed facts contained in the parties' affidavits shall be resolved in the plaintiff's favor. D.J. Investments, 754 F.2d at 546. Therefore not only did Newton perform its obligations under the agreement in Louisiana, but Miller was aware that it would do so from the "outset" of the relationship.
The Court, in its analysis of personal jurisdiction, does not address the merits of any defense that Miller might have concerning the apparent authority of Vaughn. It suffices to say that at least for the purposes of the prima facie showing of personal jurisdiction, Vaughn's actions, whether or not internally authorized, are sufficient to constitute action by Miller.
While Miller correctly points out that merely conducting business with a corporation who happens to reside in Louisiana is not sufficient to establish minimum contacts, Alba v. Pyramid Island, Ltd., 474 So.2d 486, 487 (La.App. 4th Cir. 1985), the above analysis indicates that Miller was not a mere passive customer. Instead, Miller conducted "purposeful and affirmative action," whose effect caused "business activity, foreseeable [by Miller], in the forum state. Mississippi Interstate Exp., Inc. v. Transpo, Inc., 681 F.2d 1003, 1007 (5th Cir. 1982), (quoting Marathon Metallic Building Co. v. Mountain Empire Constr. Co., 653 F.2d 921, 923 (5th Cir. 1981)). The Fifth Circuit has ruled that this is sufficient to satisfy the minimum contacts inquiry and is applicable to cases like the present where the nonresident defendant is the buyer as opposed to the seller. Id. at 1007.
Not all nonresident defendants who enter into an agreement with a resident of the forum and who subsequently breach the agreement are found to have purposefully availed themselves of the forum. See Hydrokinetics, Inc. v. Alaska Mechanical, Inc., 700 F.2d 1026. However, in Hydrokinetics the court distinguishes its case from that of Mississippi Interstate and from the present set of facts. Id. at 1031. In Hydrokinetics, the defendant did not initiate repeated contacts with the forum state, as Vaughn allegedly did here. Id. In addition, the defendant's business in Hydrokinetics was purely local in character where as here Miller dealt with Newton's Colorado and Louisiana branches. Id. Furthermore, this transfer to Newton in Colorado is not the only outsourcing that Miller is involved with, as Miller often forwards difficult aged accounts receivable to other outside agencies for collection.
Accordingly, this Court finds that Miller had sufficient minimum contacts with the forum so as to satisfy the minimum contacts inquiry. Miller had prolonged contacts with Newton's Louisiana employees concerning the performance of the parties' alleged agreement. Furthermore, Miller is considered to have purposefully availed itself of the privilege of conducting business in the forum as it was aware that Newton would be performing all of the collection and accounting work at its principal place of business in Louisiana. Thus it was reasonably foreseeable for Miller to anticipate being haled into court in Louisiana.
Reasonableness
Upon a showing of minimum contacts, the court must determine whether exercising jurisdiction over the nonresident defendant would offend "traditional notions of fair play and substantial justice." International Shoe, 326 U.S. at 320. In considering the burden that would be placed on Miller, it is important to take into consideration that all of Miller's witnesses are in North Carolina. Therefore, forcing Miller to litigate the present suit in Louisiana would impose a significant burden on the corporation. If Newton were forced to travel to North Carolina, however, then the same burden would be placed upon its witnesses, who are located both in Louisiana and in Colorado. Upon weighing the interest of Louisiana in providing a forum for its residents, the fact that Miller purposefully availed itself of the benefits of conducting business in Louisiana, and the fact that the brunt of the harm resulting from the alleged breach is felt in Louisiana, it is reasonable for this Court to exercise personal jurisdiction over Miller in the present action.
Consequently, the two-prong test for establishing personal jurisdiction over a non-resident defendant has been satisfied. Newton has therefore met its burden of proving a prima facie case of personal jurisdiction.
Accordingly,
IT IS ORDERED that Defendant Miller's motion to dismiss for lack of personal jurisdiction is hereby DENIED.