Opinion
NO. 03-10456-GAO
November 17, 2003
MEMORANDUM AND ORDER
ScanSoft, Inc. ("ScanSoft") filed suit against J. Larry Smart ("Smart") in the Massachusetts Superior Court seeking a declaratory judgment concerning the rights and obligations of the parties with respect to certain stock options granted to Smart, a former director of ScanSoft. ScanSoft alleges that the stock options granted to Smart have either expired or were cancelled, and that Smart is not entitled to any additional compensation from ScanSoft. A few days after ScanSoft filed its complaint in Massachusetts state court, Smart filed suit against ScanSoft in a California state court alleging breach of contract and tort claims arising out of the same dispute over stock options. Smart then removed the Massachusetts declaratory judgment action to this Court. Smart now moves to dismiss the declaratory judgment action for lack of personal jurisdiction or improper venue, or, in the alternative, to transfer the action to the Northern District of California based on improper venue or forum non conveniens. For the reasons discussed below, Smart's motion is denied.
A. Personal Jurisdiction
This Court has personal jurisdiction over a defendant in a diversity case if the defendant is within the reach of the Massachusetts long-arm statute, and if the exercise of personal jurisdiction comports with the due process requirements of the Fourteenth Amendment. Ticketmaster-New York, Inc. v. Alioto, 26 F.3d 201, 204 (1st Cir. 1994). The Massachusetts long-arm statute provides, in pertinent part, that its courts may exercise jurisdiction over a defendant if the plaintiffs cause of action arises from the defendant "transacting any business in this commonwealth." Mass. Gen. Laws ch. 223A, § 3(a). The "transacting any business" requirement is broadly construed and "applies to any purposeful acts by an individual, whether personal, private, or commercial." Nile v. Nile, 734 N.E.2d 1153, 1158 (Mass. 2000) (quoting Ross v. Ross, 358 N.E.2d 437, 439 (Mass. 1976)).
ScanSoft is a Delaware corporation with a principal place of business in Peabody, Massachusetts. Smart became a member of the board of directors of ScanSoft following the merger of ScanSoft and Visioneer, Inc. ("Visioneer") on February 23, 1999. In connection with this merger, Smart traveled to Massachusetts once to conduct due diligence, and he was given a nonstatutory stock option to purchase 100,000 shares of ScanSoft common stock, which would continue to vest as long as Smart was a director or consultant of ScanSoft. During his tenure on the ScanSoft board of directors, Smart received nonstatutory stock options on 30,000 additional shares of ScanSoft common stock, and he attended approximately fourteen board meetings. Smart attended at least one of these board meetings in person at ScanSoft's headquarters in Massachusetts. He participated in most, if not all, of the rest of the meetings via telephone conference from California with ScanSoft's senior management in Massachusetts.
There is no forum-selection clause in the written agreement granting Smart the option on the 100,000 shares.
The number of meetings Smart attended personally is disputed. For purposes of this motion, I will assume in his favor that he attended only one.
Smart's tenure on ScanSoft's board of directors ended June 21, 2001, after he had decided he would not seek reelection to the board. ScanSoft claims that Smart's option to purchase 100,000 shares of ScanSoft common stock expired 90 days after his tenure as director ended. Smart disagrees, alleging that in return for his not seeking reelection, ScanSoft agreed to retain him as a consultant precisely so that his option would not expire, and agreed to grant him nonqualified stock options on an additional 20,000 shares of stock. Smart alleges that he thereafter performed consulting services for ScanSoft in California and Taiwan, but not in Massachusetts.
Based on these facts, I conclude that Smart transacted business within Massachusetts for the purposes of the Massachusetts long-arm statute, and that ScanSoft's declaratory judgment action arises out of Smart's transaction of business in Massachusetts. For over two years, Smart was an active participant on the board of directors of a company with a principal place of business in Massachusetts. Smart received stock options, which would continue to vest as long as he remained a director or consultant of the company. ScanSoft's action concerns the viability of those options and the existence of an alleged consulting agreement between ScanSoft and Smart.
Smart's contacts with Massachusetts are also sufficient to satisfy due process requirements such that the exercise of personal jurisdiction over him does not offend "traditional notions of fair play and substantial justice." Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). This action arises out of Smart's forum contacts as a participant in the corporate organization and governance of a company which rewarded his contributions with stock options. Smart has "purposefully avail[ed] [himself] of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws."Hanson v. Denckla, 357 U.S. 235, 253 (1958). As such, he could reasonably anticipate being haled into court in the Commonwealth. See World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980).
Finally, exercising personal jurisdiction over Smart in this instance would not be fundamentally unfair. While litigating this matter in federal court in Massachusetts may be more convenient for ScanSoft than it is for Smart, a resident of California, the burden on Smart is not so onerous as to make it unreasonable for him to defend this action here. It is almost always inconvenient and costly for an individual party to litigate in a forum located an appreciable distance from his residence. See Nowak v. Tak How Invs., Ltd, 94 F.3d 708.718 (1st Cir. 1996). But Smart has not demonstrated that the exercise of personal jurisdiction here would be "onerous in a special, unusual, or other constitutionally significant way." Id. (citation and quotations omitted). Additionally, Massachusetts has an interest in exercising jurisdiction over a suit involving a company with its principal place of business in the Commonwealth. Micro Networks Corp. v. HIG Hightec. Inc., 195 F. Supp.2d 255, 263 (D. Mass. 2001). For all the foregoing reasons, the Court finds that the exercise of personal jurisdiction over Smart in this instance would be proper.
B. Venue
Venue is also proper in this district. The general venue statute provides, in pertinent part:
(a) A civil action wherein jurisdiction is founded only on diversity of citizenship may, except as otherwise provided by law, be brought only in (1) a judicial district where any defendant resides, if all defendants reside in the same State, (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated28 U.S.C. § 1391 (a). This action could have been brought in the Northern District of California, since Smart is the only defendant and he resides in California. Even so, the statute contemplates that venue may be proper in more than one district. The focus is not on which judicial district's activities are more substantial or which judicial district would be the better venue. Uffner v. La Reunion Francaise, S.A., 244 F.3d 38, 42 (1st Cir. 2001); see also, David D. Siegel, Commentary on 1988 and 1990 Revisions of Section 1391 , 28 U.S.C. § 1391 (1993). Smart is correct that substantial activities giving rise to ScanSoft's claims occurred in California. However, substantial activities took place in Massachusetts as well. In particular, the negotiations concerning the alleged consulting agreement and Smart's decision to not seek re-election to the board of directors occurred between ScanSoft's Chief Executive Officer, Paul Ricci ("Ricci"), in Massachusetts and Smart in England and California. A significant part of this dispute is whether Ricci, on behalf of ScanSoft, and Smart entered into a consulting agreement which would have allowed for the continued vesting of Smart's option on 100,000 shares of stock and granted Smart an option on an additional 20,000 shares.
There is a third alternative under the statute which comes into play only in the event that the first two provisions fail to provide an appropriate forum. Uffner v. La Reunion Francaise, S.A., 244 F.3d 38, 42 n. 4 (1st Cir. 2001)
C. Forum Non Conveniens
The doctrine of forum non conveniens is used to avoid "serious unfairness" and the plaintiffs choice of forum should rarely be disturbed. Nowak, 94 F.3d at 719. The defendant must demonstrate both the availability of an adequate alternative forum and that considerations of convenience and judicial efficiency strongly favor litigating the claim in the alternative forum. Mercier v. Sheraton Int'l. Inc., 935 F.2d 419, 423-24 (1st Cir. 1991). Furthermore, where, as here, there are only two parties to a dispute, the plaintiff should not be deprived of his choice of forum "except upon a clear showing of facts which either (1) establish such oppressiveness and vexation to a defendant as to be out of all proportion to plaintiffs convenience, which may be shown to be slight or nonexistent, or (2) make trial in the chosen forum inappropriate because of considerations affecting the court's own administrative or legal problems." Nowak. 94 F.3d at 720 (quoting Koster v. (American) Lumbermens Mut. Gas. Co., 330 U.S. 518, 524 (1947)).
While the Northern District of California is an adequate alternative forum for this action, the relevant material factors do not strongly favor litigating this action in that district. The burden of obtaining witnesses and relevant documents is likely to be about equal, and while it may be more inconvenient for Smart to litigate in Massachusetts, this is not the type of "oppressiveness and vexation" disproportionate to ScanSoft's convenience of litigating in this district.
D. Conclusion
Smart's contacts with Massachusetts are sufficient to permit this Court to exercise personal jurisdiction over him, and venue in this district is proper. Smart has not demonstrated that considerations of convenience and judicial efficiency strongly favor litigating this case in an alternative forum in California. Accordingly, Smart's motion to dismiss or transfer is DENIED.
It is SO ORDERED.