Opinion
No. CV05 401 17 61 S
May 24, 2006
MEMORANDUM OF DECISION
This action was commenced by the plaintiffs, Elstein and Elstein, P.C., a Connecticut corporation, Bruce Elstein (Elstein), and Henry Elstein, on September 1, 2005, by service of process on the defendants, TrafficCast, Inc. (TrafficCast), a Wisconsin corporation, its president, chief executive officer and part owner Bin Ran, and its chief operating officer and part owner Connie Jing Li. The plaintiffs have filed a six-count complaint in which they allege the following causes of action: count one, breach of contract; count two, misrepresentation; count three, breach of a fiduciary duty; count four, unjust enrichment; count five, quantum meruit; and count six, a violation of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110b et seq. The plaintiffs allege that these causes of action arise out of an agreement that they entered into with the defendants from 2000 through 2002 to provide legal and business services for which they were not compensated.
The plaintiffs allege in their complaint that TrafficCast is a Deleware corporation with an office and principal address in Wisconsin, whereas the defendants' memorandum in support of the motion to dismiss provides that TrafficCast is incorporated pursuant to the laws of Wisconsin.
On October 27, 2005, the defendants filed a motion to dismiss the action pursuant to Practice Book § 10-31(a)(2), on the grounds that the court lacks personal jurisdiction over them and for insufficiency of service of process. The defendants submitted a memorandum of law in support of the motion with an accompanying affidavit of Bin Ran. On November 9, the defendants supplemented their motion to dismiss with an affidavit of Connie Jing Li. On November 30, 2005, the plaintiffs filed a memorandum in opposition and the affidavits of Elstein and Robert Pritchard arguing that the defendants have sufficient contacts with the state of Connecticut to hale them into court in this state, and/or that an evidentiary hearing is required to determine any disputed issues of fact.
"A motion to dismiss . . . properly attacks the jurisdiction of the court, essentially asserting that the plaintiff cannot as a matter of law and fact state a cause of action that should be heard by the court. A motion to dismiss tests, inter alia, whether, on the face of the record, the court is without jurisdiction." (Internal quotation marks omitted.) Filippi v. Sullivan, 273 Conn. 1, 8, 866 A.2d 599 (2005). "If a challenge to the court's personal jurisdiction is raised by a defendant, either by a foreign corporation or by a nonresident individual, the plaintiff must bear the burden of proving the court's jurisdiction." Knipple v. Viking Communications, Ltd., 236 Conn. 602, 607, 674 A.2d 426 (1996). "When a defendant files a motion to dismiss challenging the court's jurisdiction, a two part inquiry is required. The trial court must first decide whether the applicable state long-arm statute authorizes the assertion of jurisdiction over the [defendant]. If the statutory requirements [are] met, its second obligation [is] then to decide whether the exercise of jurisdiction over the [defendant] would violate constitutional principles of due process." (Internal quotation marks omitted.) Id., 606. "Where the facts necessary to determine jurisdiction are disputed, `due process requires that a trial-like hearing be held, [at the request of either party] in which an opportunity is provided to present evidence and to cross-examine adverse witnesses.' Standard Tallow Corp. v. Jowdy, [ 190 Conn. 48, 56, 459 A.2d 503 (1983)]." Knipple v. Viking Communications, Ltd., supra, 608 n. 10.
A. The Corporate Longarm Statute Inquiry As To TrafficCast
In its memorandum in support, TrafficCast first argues that the court lacks personal jurisdiction over it because the plaintiffs' cause of action does not arise out of any conduct provided for in General Statutes §§ 33-929(f)(1), a contract made or performed in Connecticut, and 33-929(f)(4), tortious conduct in Connecticut. TrafficCast asserts that as to the plaintiffs' breach of contract claims, the meeting between the parties that allegedly formed the contract was held in Massachusetts, and, as a result, the work required to be performed bore no connection to the state of Connecticut but could be performed anywhere. Thus, TrafficCast maintains that the requirements for personal jurisdiction pursuant to § 33-929(f)(1) were not satisfied. TrafficCast also argues that the court lacks personal jurisdiction over it because the plaintiff's tort claims of misrepresentation, breach of fiduciary duty, and a violation of CUTPA did not occur in Connecticut as required by § 33-929(f)(4). TrafficCast additionally argues that, since it has not transacted business in Connecticut, it was not required under General Statutes § 33-929(e) to obtain a certificate of authority to transact business in this state. In response, the plaintiffs counter that personal jurisdiction is proper under both § 33-929(f)(1) and § 33-929(e), and specifically, under the former, because TrafficCast hired the plaintiffs, whose office is in Connecticut, with the knowledge that the work would be performed in Connecticut.
General Statutes § 33-929(f) provides in relevant part: "Every foreign corporation shall be subject to suit in this state, by a resident of this state or by a person having a usual place of business in this state, whether or not such foreign corporation is transacting or has transacted business in this state and whether or not it is engaged exclusively in interstate or foreign commerce, on any cause of action arising as follows: (1) Out of any contract made in this state or to be performed in this state . . . or (4) out of tortious conduct in this state, whether arising out of repeated activity or single acts, and whether arising out of misfeasance or nonfeasance."
In Bowman v. Grolsche Bierbrouwerij B.V, 474 F.Sup. 725, 731 (D.Conn. 1979), the court addressed an issue of first impression as to "whether the language of [§ 33-929 (f)(1)] covering contracts `to be performed in this state . . .' is satisfied where the contract requires performance in this state by [the] plaintiff only." In applying the general principles of statutory construction to determine this issue, the court explained that "[t]he language of [§ 33-929(f)(1) does not expressly require contemplated performance in this state by the party over whom jurisdiction is sought." Id. After an inquiry into the legislative intent behind the statute, the court determined that "there is no indication . . . that the Connecticut legislature intended that the language `to be performed in this state' should be given a limited construction to require performance in this state by the party over whom jurisdiction is sought . . . Furthermore, because [§ 33-929] apparently was enacted to extend the scope of Connecticut's service of process, . . . it should be construed liberally in favor of that objective." (Citation omitted.) Id., 731-32. Accordingly, the court held that "where the contract in question clearly contemplate[s] and require[s] performance in this state by [the] plaintiff [§ 33-929(f)(1)] subjects [the] defendant . . . to suit in this state." Id., 732. See also Integrated Corporate Relations, Inc., v. Tag-It Pacific, Inc., Superior Court, judicial district of Fairfield, Docket No. CV 01 0382762 (January 10, 2002, Rush, J.) ("While the contract was not made in the State of Connecticut, the fact that the performance by the plaintiff was in the State of Connecticut comes within the statute, and accordingly, Connecticut may exercise jurisdiction under General Statutes § 33-929(f)(1) because the contract was performed in this state.").
In the present case, the contract between the plaintiffs and TrafficCast, although entered into in Massachusetts, was to be performed by the plaintiffs, whose office is located in Bridgeport, Connecticut. TraffiCast submitted an affidavit of Ran, in which he attests that "[a]s President and a director of TrafficCast, I agreed that . . . Mr. Elstein would review some business contracts, complete some corporate paperwork, and assist in business negotiations." Ran further attests that the plaintiffs "provided limited services for TrafficCast" but "was never their corporate counsel." In the affidavit provided by the plaintiffs, Pritchard, who was the executive vice president at TrafficCast during 2000 and 2002, affirms that he contacted the plaintiffs by telephone in 2000 about representing TrafficCast with its business and legal affairs and, that subsequently, at the conclusion of their meeting in Massachusetts, they entered into an agreement with Pritchard in which they were retained to act as counsel for TrafficCast. He further testifies in his affidavit that the plaintiff prepared and reviewed many nondisclosure agreements between TrafficCast and third parties, that they were involved in the strategic planning for business deals and were contacted by email and fax, that they had numerous telephone conversations concerning the business of TrafficCast with him, that Pritchard met with the plaintiffs at their Bridgeport office for the sole purpose of discussing TrafficCast's business and at all times they were provided with notice about the various agreements signed by TrafficCast. Although TrafficCast argues that the legal work allegedly performed by the plaintiffs did not concern Connecticut law and could have been performed anywhere, it is unreasonable to assume that the plaintiffs would conduct the majority of their legal work other than at their office in Connecticut. Therefore, the court has personal jurisdiction over TrafficCast under § 33-929(f)(1) of the Connecticut long-arm statute.
B. The Due Process Inquiry As To TrafficCast
Once it is established that the court has jurisdiction over TrafficCast pursuant to the longarm statute, it must next determine whether exercising such jurisdiction would violate federal constitutional principles of due process. Knipple v. Viking Communications, Ltd., supra, 236 Conn. 606. "The United States Supreme Court has held that the test to be applied in considering the reach of personal jurisdiction is whether (1) the nonresident party has created a substantial connection to the forum state or otherwise invoking the benefits and protections of the laws of the state, and (2) the exercise of jurisdiction based on those minimum contacts would not offend traditional notions of fair play and substantial justice." Panganiban v. Panganiban, 54 Conn.App. 634, 639, 736 A.2d 190, cert. denied, 251 Conn. 920, 742 A.2d 359 (1999). "The twin touchstones of due process analysis under the minimum contacts doctrine are foreseeability and fairness. [T]he foreseeability that is critical to due process analysis . . . is that the defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there." (Internal quotation marks omitted.) United States Trust Co. v. Bohart, 197 Conn. 34, 41, 495 A.2d 1034 (1985). "A state court will have specific jurisdiction over a nonresident defendant whenever the defendant has purposefully directed [its] activities at residents of the forum . . . and the litigation [has] result[ed] from alleged injuries that arise out of or relate to those activities . . . Alternatively, [e]ven when the cause of action does not arise out of or relate to the foreign corporation's [or individual's] activities in the forum State, due process is not offended by a State's subjecting the corporation [or individual] to its in personal jurisdiction if the defendant has had continuous and systematic general business contacts with the state." (Internal quotation marks omitted.) Knipple v. Viking Communications, Ltd., supra, 236 Conn. 606 n. 6.
TrafficCast argues that it has had extremely few contacts with Connecticut. According to its memorandum in support and Ran's affidavit, however, TrafficCast sent Elstein a check for $618.20 for work he performed for TrafficCast on September 6, 2000, and a check for $1000 on July 5, 2001, for a continuing legal education seminar that he attended on securities law. Moreover, TrafficCast was allegedly engaged in a business relationship with i3 Mobile, a Connecticut based client, and as testified to by Pritchard, Elstein assisted in the preparation of the agreement, negotiations and strategic decisions concerning that relationship. As to this part of the due process inquiry, TrafficCast has had the requisite minimum contacts with Connecticut.
The second part of the due process analysis is to determine "whether it is reasonable [for the court to exercise personal jurisdiction] under the circumstances of the particular case. Courts are to consider five factors in evaluating reasonableness. Those factors include: (1) the burden that the exercise of jurisdiction will impose on the defendant; (2) the interests of the forum state in adjudicating the case; (3) the plaintiff's interest in obtaining convenient and effective relief; (4) the interstate judicial system's interest in obtaining the most efficient resolution of the controversy; and (5) the shared interest of the states in furthering substantive social policies. Where a plaintiff makes the threshold showing of the minimum contacts required for the first [part of the due process] test, a defendant must present a compelling case that the presence of some other considerations would render jurisdiction unreasonable. The import of the `reasonableness' inquiry varies inversely with the strength of the `minimum contacts' showing — a strong (or weak) showing by the plaintiff on `minimum contacts' reduces (or increases) the weight given to `reasonableness.'" Milne v. Catuogno Court Reporting Services, Inc., 239 F.Sup.2d 195, 205 (D.Conn. 2002).
TrafficCast relies heavily on the first and fourth factors, and argues that since it does not work in Connecticut, it has no presence in Connecticut, and, in addition, all of its corporate records are located in Wisconsin. TrafficCast further avers that the plaintiffs will be presenting only one Connecticut witness, while all other witnesses will be from different states. Even if this court were to agree that the first and fourth factors favor TrafficCast, the remaining three factors weigh in favor of the plaintiffs.
The plaintiffs dispute that all of the records are located in Wisconsin.
In Updike, Kelly Spellacy, P.C. v. Beckett, Superior Court, complex litigation docket at New Britain, Docket No. X03 CV 04 0097890 (March 6, 2002, Aurigemma, J.) ( 31 Conn. L. Rptr. 500), rev'd on other grounds, 269 Conn. 613, 850 A.2d 145 (2004), the court determined that it did not offend due process to exercise personal jurisdiction over an out-of-state defendant who hired a Connecticut attorney. The court examined the five factors to determine whether it could reasonably exercise jurisdiction. With respect to the second factor, the court explained that "Connecticut has a great interest in adjudicating a claim for fees by a Connecticut law firm for services rendered in Connecticut . . . [T]o hold to the contrary would be to hold that a [Connecticut] attorney retained by a non-domiciliary to perform legal services in this state cannot enforce in the courts of this state the obligation of his client to pay for the services contracted for and rendered." (Citation omitted; internal quotation marks omitted.) Updike, Kelly Spellacy, P.C. v. Beckett, supra, 31 Conn. L. Rptr. 503. As to the third factor, the court explained that the Connecticut law firm had "an obvious interest in obtaining convenient and effective relief through the courts in the state where it is located, where it performs its legal services and where its attorneys are admitted to practice law." Id. With respect to the fifth factor, the court explained that "all states share a social policy interest that companies, including law firms, who are located and perform services within their borders, are able to seek payment for the services in their courts." Id. Based on the explanation of these factors in Updike, Kelley Spellacy, P.C. v. Beckett, and the similarity of the facts of that case with the present case, it is not unreasonable to require TrafficCast to defend the action in Connecticut. Exercising personal jurisdiction over TrafficCast would not violate its due process rights.
Although the case involved an individual defendant rather than a corporate defendant, the analysis is equally relevant.
C. The Longarm Statute Inquiry As To Ran and Li
In their memorandum in support of the motion to dismiss, Ran and Li argue that the court lacks personal jurisdiction over them as nonresident corporate officers of TrafficCast. Ran admits to coming to Connecticut on two occasions, but contends that neither occasion concerned legal business to be performed by the plaintiffs. Li asserts that she was present in Connecticut once when she drove through the state. With respect to the allegations based on a breach of contract, Ran and Li argue that the complaint only sets forth a contractual duty allegedly owed by TrafficCast, and not by them individually, and that even if the complaint does contain allegations of a breach of contract against them individually, the court lacks personal jurisdiction for the same reasons as those argued herein by TrafficCast in subsection A. With respect to the allegations in the complaint based on the defendants' tortious conduct, Ran and Li argue that those claims should be dismissed because they fail to specifically address what the alleged misrepresentations were, where they allegedly occurred, and how these misrepresentations relate to each of them, as opposed to TrafficCast.
In response, the plaintiffs counter that Ran and Li have sufficiently transacted business in Connecticut to confer jurisdiction over them pursuant to § 52-59b(a)(1). The plaintiffs rely on the following alleged acts: hiring a lawyer it knew was located in Connecticut, contacting the plaintiffs in Connecticut for advice concerning another company run by Li, participating in numerous and consistent telephone contacts with Connecticut, sending emails and faxes to Connecticut, negotiating and consummating a number of agreements using the services of a Connecticut individual, entering into an agreement with i3 Mobile, a Connecticut company, identifying a Connecticut lawyer as the person to be provided with notice as to certain agreements it entered into, circulating business plans and promotional material to people identifying Connecticut counsel, hiring a business consultant in Connecticut, and conducting meetings in Connecticut. The plaintiffs also contend that jurisdiction is appropriate under § 52-59b(a)(3) because the defendants derived substantial revenue in Connecticut from the i3 Mobile agreement.
Section 52-59b(a) provides in relevant part: "As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any nonresident individual . . . who in person or through an agent: (1) Transacts any business within the state . . . (3) commits a tortious act outside the state causing injury to person or property within the state . . . if such person or agent (A) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state . . ." "The statute does not define what the phrase transact any business means, but [the Supreme Court has] . . . construed it to embrace a single purposeful business transaction." (Internal quotation marks omitted.) Rosenblit v. Danaher, 206 Conn. 125, 138, 537 A.2d 145 (1988). The analysis as to whether the defendant's conduct constitutes the "transaction of business" within the state is not a rigid one, but instead, requires the court to "balance considerations of public policy, common sense and the chronology and geography of the relevant factors." Zartolas v. Nisenfeld, 184 Conn. 471, 477, 440 A.2d 179 (1981).
As noted previously, the present case is similar to Updike, Kelly Spellacy, P.C. v. Beckett, supra, 31 Conn. L. Rptr. 500. In that case, the out-of-state defendants hired an attorney from a Connecticut law firm for legal representation. The Connecticut attorney subsequently hired the plaintiffs, another Connecticut law firm, for assistance in the case. As part of its representation, the plaintiffs communicated with one of the defendants via telephone, mail and facsimile. The parties exchanged relevant information for purposes of litigation, including tax return information, responses to interrogatories, and other legal advice, as well as a copy of the check that was sent to the plaintiffs for legal services. Moreover, nearly all of the legal services that the plaintiffs provided were performed at its Connecticut office. Thus, the court held that "[c]ertainly, the retention of two Connecticut law firms to pursue a claim in a Connecticut court constitutes the transaction of business within the state under Connecticut's longarm statute." (Internal quotation marks omitted.) Id., 501. The court also analogized the case to decisions from other jurisdictions that involved attorneys performing legal work in their forum states for nonresident defendants. In those decisions, the court stated that the exercise of personal jurisdiction was proper because the attorneys were retained to perform legal work, communications were exchanged with the nonresident defendants, and legal work was done with the defendant's knowledge of that performance.
See Mayer v. Goldhaber, 63 Misc.2d 605, 313 N.Y.S.2d 87 (1969), aff'd, 34 App.Div.2d 774 (1970); Kazlow Kazlow v. A. Goodman Co. 92 Misc.2d 1084, 402 N.Y.S.2d 98 (1977); English Smith v. Metzger, 901 F.2d 36 (4th Cir. 1990).
In the present case in his affidavit, Elstein attests that "I prepared, reviewed and negotiated numerous contracts and many proposed business deals" and that "[f]or each contract, negotiation, agreement and strategic planning session, I was contacted, emailed and faxed material to my office in Bridgeport, Connecticut" consisting of "numerous, often times daily, telephone communication concerning the business of TrafficCast." Elstein also testifies therein that "[o]n September 1, 2000, defendant Li contacted me to review an issue concerning a potential violation of a non-disclosure agreement" and that he attached an email to his affidavit that was sent by Li as supporting evidence of this contact. In her affidavit, Li even acknowledges that Elstein "performed some minor legal work for another company in which I am a shareholder, called TransSmart Technologies, Inc." and that "Elstein invoiced TransSmart and was paid approximately $90.00 for that work."
In support of the plaintiffs' position that Li and Ran transacted business in Connecticut, they have provided Pritchard's affidavit in which he attests that the "[d]efendant Ran traveled to Connecticut on June 19, 2001, for strategic planning for TrafficCast. During that trip, Ran and I met with Bruce Elstein, Milan Turk and Rolf Heitmann . . . to discuss the business of TrafficCast and to engage in strategic planning." Although in Ran's affidavit, he affirms that the meeting was not law related, it is difficult to conceive that TrafficCast business was not discussed since that meeting was held at the plaintiffs' law office in Connecticut. Because the evidence shows that both Ran and Li have transacted business in Connecticut within the meaning of § 52-59b(a)(1), a Connecticut court has personal jurisdiction over them both under the Connecticut longarm statute.
D. The Due Process Inquiry As To Ran and Li
Again, once this court has determined that jurisdiction is proper under § 52-59b(a)(1), it must next decide whether it would violate due process to exercise personal jurisdiction over Ran and Li. The reasoning to determine whether Ran and Li have had sufficient minimum contacts with Connecticut is the same as that which the court applies for the "transaction of business" in Connecticut under § 52-59b(a)(1). Thus, the first part of the due process inquiry has been satisfied.
The proper due process inquiry is set forth in Section B of this opinion.
Whether it is reasonable for the court to exercise such jurisdiction depends upon the circumstances of the particular case as explained herein in subsection B. Ran and Li argue that it would be unreasonable to require them to defend this action in Connecticut. Their arguments are similar to those set forth by TrafficCast, with some minor differences. For example, they argue about the lack of Connecticut witnesses, that they have no real presence in this state, that the corporate records are located in Wisconsin, that as officers of TrafficCast, its business will be jeopardized if they are required to travel to Connecticut to defend it and that the litigation will affect their family. For the same reasons as discussed in subsection B as to why asserting personal jurisdiction over TrafficCast is reasonable, so is it over them. Accordingly, a Connecticut court may exercise personal jurisdiction over Ran and Li without offending due process.
The defendants' motion to dismiss is denied.
Having determined that the court may exercise personal jurisdiction pursuant to §§ 33-929(f) and 52-59b(a), the court need not consider the defendants' argument that the plaintiffs' claims should be dismissed for insufficiency of service of process.