Opinion
Civil Action No. 3:02-CV-0528-G
July 3, 2002
MEMORANDUM ORDER
Before the court is the motion of the defendants Hoosier Freelance, Inc. ("Hoosier") and Chris Dammann ("Dammann") (collectively, "the defendants") to dismiss this case for lack of personal jurisdiction. For the reasons stated below, the motion is denied.
I. BACKGROUND
On January 10, 2002, the plaintiff Stanley Computer Group, LLC ("SCG") filed this action in the County Court at Law No. 4 of Dallas County, Texas. Plaintiff's Verified Original Petition ("Complaint"), attached to Defendants' Joint Notice of Removal ("Notice of Removal") at tab A2. On March 14, 2002, the defendants removed the case to this court on the basis of diversity of citizenship. Notice of Removal at 1-2. SCG is a Texas limited liability company with its principal place of business in Dallas County, Texas. Complaint at 1. Hoosier is an Indiana corporation with its principal place of business in Centerpoint, Indiana. Id. at 2. Dammann, the owner of Hoosier, is an individual residing in Indiana. Id. at 2-3.
According to the complaint, on January 24, 2001, Hoosier entered into a contract with SCG for the performance by Hoosier of computer services on behalf of SCG's clients. Id. at 3; see also Contractor Agreement ("Agreement"), attached to Complaint as Exhibit A. Dammann signed the contract for Hoosier. Agreement at 6. The Agreement contains a choice of law and forum clause that provides, "[t]his agreement is governed by the laws of the State of Texas and venue is Dallas County." Id. at 5.
SCG alleges that, pursuant to the terms of the Agreement, it disclosed trade secrets and other confidential information to the defendants, which allowed them to perform computer services for SCG's clients. Complaint at 3. SCG further claims that, under Dammann's direction, Hoosier failed to provide adequate and proper services to an SCG client. Id. In particular, SCG asserts that the defendants represented that they were qualified to perform the work required, but were unable to render professional services, causing harm to an SCG client. Id. SCG also claims that the defendants contacted an SCG client directly and demanded payment from the client rather than from SGC and that the defendants disclosed to the client SCG's confidential information relating to costs, services, and pricing information. Id. at 3-4. Allegedly, due to the defendants' acts, SCG's client terminated the contract and cancelled SGG's contracts for services in Indianapolis, Atlanta, and Fort Lauderdale. Id. at 4. SCG contends that it would have made a substantial profit from that client. Id. SCG filed the instant action, alleging misappropriation of trade secrets and unfair competition, breach of contract, tortious interference, defamation, and fraud. Id. at 4-8.
On March 29, 2002, the defendants filed this motion to dismiss SCG's claims against it for lack of personal jurisdiction, under FED. R. Civ. P. 12(b)(2), "for the reasons set forth in their Special Appearance and Motion to Dismiss which was filed in the State Court and is a part of the record in this cause." Defendants' Brief in Support of Motion to Dismiss Pursuant to Rule 12(b)(2) ("Motion") at 1; see also Verified Special Appearance Objecting to Jurisdiction and Motion to Dismiss ("Special Appearance"), attached to Notice of Removal at tab A3. SGC responded to the motion on April 9, 2002, see Plaintiff's Brief Opposing Defendant's Motion to Dismiss Pursuant to Rule 12(B)(2) ("Response") at 1, and the defendants filed a reply on May 1, 2002. Defendant's Reply to Plaintiff's Brief in Opposition to Defendant's Motion to Dismiss ("Reply") at 1.
II. ANALYSIS A. Factual Standard: Prima Facie Case
When a nonresident defendant moves to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of establishing the district court's jurisdiction over the nonresident. Wilson v. Belin, 20 F.3d 644, 648 (5th Cir.), cert. denied, 513 U.S. 930 (1994); Stuart v. Spademan, 772 F.2d 1185, 1192 (5th Cir. 1985). If the district court chooses to decide the matter without an evidentiary hearing, the plaintiff may meet its burden by presenting a prima facie case for personal jurisdiction. Wilson, 20 F.3d at 648; Thompson v. Chrysler Motors Corporation, 755 F.2d 1162, 1165 (5th Cir. 1985). The court will take the allegations of the complaint as true, except where they are controverted by opposing affidavits, and all conflicts in the facts are resolved in favor of the plaintiff. Wilson, 20 F.3d at 648. In making its determination, the court may consider affidavits, interrogatories, depositions, oral testimony, or any combination of recognized discovery methods. Thompson, 755 F.2d at 1165; Spademan, 772 F.2d at 1192.
B. Legal Standard
A court determines the existence of personal jurisdiction over a nonresident defendant by examining the "(1) assertion of jurisdiction by the law of the forum;" and "(2) conformity of the law with the Constitution." Pedelahore v. Astropark, Inc., 745 F.2d 346, 347 (5th Cir. 1984). A defendant is amenable to the personal jurisdiction of a federal court sitting in diversity to the same extent that it would be amenable to the jurisdiction of a state court in the same forum. Id. Applying state law, this court must first determine whether Texas, the forum state, could assert long-arm jurisdiction. Id. Because the Texas long-arm statute confers jurisdiction to the limits of the federal constitution, Hall v. Helicopteros Nacionales de Colombia, SA., 638 S.W.2d 870, 872 (Tex. 1982), rev'd on other grounds, 466 U.S. 408 (1984), the court need only concern itself with the federal due process inquiry. Bullion v. Gillespie, 895 F.2d 213, 215-16 (5th Cir. 1990).
C. Due Process Requirements
Due process requires the satisfaction of two elements to exercise personal jurisdiction over a nonresident: (1) the nonresident must have some minimum contact with the forum which results from an affirmative act on its part; and (2) it must be fair and reasonable to require the nonresident to defend the suit in the forum state. Spademan, 772 F.2d at 1189. The due process clause ensures that persons have "fair warning that a particular activity may subject [them] to the jurisdiction of a foreign sovereign." Burger King Corporation v. Rudzewicz, 471 U.S. 462, 472 (1985).
I. Minimum Contacts
To establish minimum contacts, a nonresident defendant must do some act or acts by which it "purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protection of its laws." Hanson v. Denckla, 357 U.S. 235, 253 (1958). In determining whether the exercise of jurisdiction is appropriate, the Supreme Court has focused less on presence in the forum state as a means to establish jurisdiction and looked increasingly to whether a defendant's contacts with the forum make it reasonable to require the defendant to defend the particular suit in that forum. Shaffer v. Heitner, 433 U.S. 186, 203 (1977).
Two types of in personam jurisdiction may be exercised over a nonresident defendant: specific and general. Specific jurisdiction exists if the cause of action is related to, or arises out of, the defendant's contacts with the forum, and those contacts meet the due process standard. Holt Oil Gas Corporation v. Harvey, 801 F.2d 773, 777 (5th Cir. 1986), cert. denied, 481 U.S. 1015 (1987); Wilson, 20 F.3d at 647; Spademan, 772 F.2d at 1190. General jurisdiction, on the other hand, may be found when a claim is unrelated to the nonresident's contacts with the forum but where those contacts are "continuous and systematic." Helicopteros, 466 U.S. at 415; Wilson, 20 F.3d at 647.
Under either a specific or general jurisdiction analysis, however, "the constitutional touchstone remains whether the defendant purposefully established minimum contacts' in the forum [s]tate." Burger King, 471 U.S. at 474 (citing International Shoe Company v. Washington, 326 U.S 310, 316 (1945)). The "purposeful availment" requirement of the minimum contacts inquiry "ensures that a defendant will not be haled into a jurisdiction solely as a result of `random,' `fortuitous,' or `attenuated' contacts . . . or of the "unilateral activity of another party or a third person.'" Id. at 475 (citations omitted). A plaintiff must establish a substantial connection between the nonresident defendant and the forum state. Jones v. Petty-Ray Geophysical, Geosource, Inc., 954 F.2d 1061, 1068 n. 9 (5th Cir.), cert. denied, 506 U.S. 867 (1992); Bearry v. Beech Aircraft Corporation, 818 F.2d 370, 374 (5th Cir. 1987) (citing Burger King, 471 U.S. at 475 n. 18); McGee v. International Life Insurance Company, 355 U.S. 220, 223 (1957).
A court must consider all factors when making the purposeful availment inquiry—"no single factor, particularly the number of contacts, is determinative." Spademan, 772 F.2d at 1192. "[W]hether the minimum contacts are sufficient to justify subjection of the non-resident to suit in the forum is determined not on a mechanical and quantitative test, but rather under the particular facts upon the quality and nature of the activity with relation to the forum state." Mississippi Interstate Express, Inc. v. Transpo, Inc., 681 F.2d 1003, 1006 (5th Cir. 1982); see also D.J. Investments, Inc. v. Metzeler Motoreycle Tire Agent Gregg, Inc., 754 F.2d 542, 547 (5th Cir. 1985).
SCG maintains that the defendants have significant contacts with Texas. Response at 6. Specifically, SCG asserts that the defendants' contacts with Texas arise because (1) the defendants entered into a valid and binding contract that gives this court jurisdiction over them, and (2) the defendants engaged in continuous and systematic contacts with Texas by communicating with SCG via email and by performing computer services for SCG's Texas based client, Logical Link, Inc. Id. at 6-8; see also Agreement at 5. The defendants argue they do not have sufficient minimum contacts with Texas to justify this court's exercise of personal jurisdiction over them. Motion at 1. In particular, the defendants contend that the case involves a dispute over services performed in Indiana and that SCG never executed the contract. Id. at 2; Special Appearance at 5. The defendants also argue that an Indiana state court previously heard this dispute and awarded judgment to Dammann for $1,900 plus court costs upon the theory of quantum meruit. Motion at
In that case, Dammann filed a small claim action against SCG in the Clay Superior Court of Indiana for damages in the amount of $2,314 for services he performed on behalf of SCG. Special Appearance at 6. Allegedly, the Indiana court denied SCG's motion to transfer the case to Texas and found the contract between the parties was not in force because Dammann was never given a signed copy. Id. at 7. Aside from attaching a copy of the Indiana court's judgment in its Reply, see Judgment, entered on February 14, 2002 by J. Blame Akers, Clay Superior Court Judge, attached to Reply at 6, the defendants have failed to provide this court with any other documents verifying these contentions. While the court will assume that the Indiana court was correct in its rulings, it nevertheless accepts SCG's assertion that the instant case is not identical to Hoosier's Indiana lawsuit. Response at 7. According to SCG, "Hoosier testified under oath that he was not suing under the contract but for pre-contract work on an emergency basis and that the later work was under the contract." Id. SCG is unable to provide this court with a copy of that transcript "due to the absence of the Court reporter." Id. at 9. At this time, however, the court accepts SCG claims as true and resolves this conflict in its favor. See Wilson, 20 F.3d at 648 (the plaintiff may meet its burden of establishing personal jurisdiction over the nonresident defendant by presenting a prima facie case for personal jurisdiction and "conflicts between the facts contained in the parties' affidavits must be resolved in the plaintiff's favor for purposes of determining whether a prima facie case for personal jurisdiction exists.") (internal citations and quotation omitted).
2; Special Appearance at 6-7.
The law is clear that merely contracting with a resident of the forum state does not subject a nonresident defendant to the jurisdiction of the forum state. See Holt Oil, 801 F.2d at 778; Spademan, 772 F.2d at 1193. Nor does engaging in communications with a resident of the forum state during the course of carrying out a contract subject a nonresident to the jurisdiction of the state. See Patterson v. Dietze, Inc., 764 F.2d 1145, 1146-47 (5th Cir. 1985); Hydrokinetics, Inc. v. Alaska Mechanical, Inc., 700 F.2d 1026, 1031 (5th Cir. 1983), cert. denied, 466 U.S. 962 (1984). Moreover, the combination of executing a contract in the forum state and engaging in communications with a resident of the state during the course of performance of the contract is insufficient to establish the requisite minimum contacts necessary to support the exercise of jurisdiction over the nonresident defendant. Spademan, 772 F.2d at 1193. The defendants, therefore, have not purposefully availed themselves of the privileges and protections of Texas law merely by contracting with SCG or by communicating with SCG in Texas, despite the fact that SCG is domiciled in Texas.
The law is also clear, however, that a forum-selection clause in a written contract is prima facie valid and enforceable. Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 589-95 (1991); Mitsui Co. (USA), Inc. v. Mira M/V, 111 F.3d 33, 35 (5th Cir. 1997); Gundle Lining Construction Corporation v. Adams County Asphalt, Inc., 85 F.3d 201, 205-06 (5th Cir. 1996); Kevlin Services, Inc. v. Lexington State Bank, 46 F.3d 13, 15 (5th Cir. 1995). To overcome the presumption of validity, the party challenging the forum-selection clause has the "heavy burden" of demonstrating that enforcement of the clause would be unreasonable under the circumstances. See Mitsui, 111 F.3d at 35. In general, a court will find it unreasonable to enforce a forum-selection clause that is the product of fraud or overreaching, violates public policy, or effectively deprives a party of his day in court. See id.
In this case, the "Governing Law" section of the Agreement provides: "This agreement is governed by the laws of the State of Texas and venue is Dallas County." Agreement at 5. Dammann executed this contract on behalf of Hoosier. Id. at 6. The language of this section is unambiguous and was sufficient to make the defendants aware that they were subject to being haled into a Texas court. See American Airlines, Inc. v. Rogerson ATS, 952 F. Supp. 377, 381 (N.D. Tex. 1996).
In the motion to dismiss, the defendants argue that the court should not enforce the Agreement because the "defendants did not receive a signed copy of the contract until the Indiana court held a hearing on the collection suit filed by defendants." Motion at 2; see also Reply at 2 ("Stanley [SCG] never sent an acknowledgment of the execution of the contract to Dammann and despite a demand by Dammann for a signed copy of the contract (if indeed it had ever been signed) [SCG] never forwarded it to Dammann."). The defendants also assert that, "[a]fter Stanley [SCG] refused to pay for the services rendered by Dammann, Dammann notified [SCG] that the contract had been repudiated by [SCG]." Reply at 2. As is the case with all of their pleadings, the defendants fail to provide any citation to the record for this claim. The court did locate an email from Dammann to SCG, in which Dammann states, "If I don't hear from you by the above-mentioned date, and receive my copy of the signed contract, I will have to assume that you do not intend to honor your end of the agreement and will be forced to focus my collection efforts toward Logical Link, Inc." March 2, 2001 email from Chris Dammann, attached to Complaint as Exhibit J. On the basis of the present record, there is insufficient evidence for the court to find that SCG repudiated the Agreement. What is clear from the record, however, is that both parties executed the Agreement. See Agreement at 6.
See Local Rule 7.2(e) ("If a party's motion or response is accompanied by an appendix, the party's brief must include citations to each page of the appendix that supports each assertion that the party makes concerning any documentary or non-documentary evidence on which the party relies to support or oppose the motion.").
The court sees no reason not to enforce the unambiguous choice of forum and law clause included in the Agreement. There is no suggestion that enforcing the forum-selection clause would be unreasonable under the circumstances of this case, nor is there any evidence of fraud or overreaching on the part of SCG. See International Business Machines Corporation v. Martson, 37 F. Supp.2d 613, 617 (S.D.N.Y. 1999). And, while it may be inconvenient for the defendants to defend this suit in Texas, they have not shown that such inconvenience was unforeseeable at the time the contract was executed or that requiring them to defend against SCG's claims in Texas would be so inconvenient as to deprive them of their day in court. See Design Strategy Corporation v. Nghiem, 14 F. Supp.2d 298, 300-02 (S.D.N.Y. 1998). Finally, there is nothing to suggest that the forum-selection clause is fundamentally unfair or that SCG insisted on the clause in bad faith. See id. at 302 (holding that the forum-selection clause was included for the legitimate purpose of dispelling confusion about where suits arising from the contract must be brought and defended).
Accordingly, this court may exercise personal jurisdiction over the defendants. See Gundle, 85 F.3d at 205-206 (holding that the presence of an enforceable forum-selection clause in a contract, in combination with other contacts with the forum state, can provide a basis for exercising personal jurisdiction over a nonresident defendant); see also Kevlin, 46 F.3d at 15; Martson, 37 F. Supp.2d at 617; Design Strategy, 14 F. Supp.2d at 302; Rogerson ATS, 952 F. Supp. at 381.
In the reply, the defendants also argue this court lacks jurisdiction because the Fifth Circuit has held that "minimal computer-based activity which reaches into Texas does not afford a basis for jurisdiction under the Texas Long-Arm Statute." Reply at 2-3 (citing Mink v. AAAA Development LLC, 190 F.3d 333 (5th Cir. 1999)). In Mink, a case of first impression, the Fifth Circuit held that the defendant, a Vermont corporation, did not subject itself to the jurisdiction of the U.S. District for the Southern District of Texas by maintaining an Internet website accessible to Texas consumers. Id. at 336-37. The court finds Mink is readily distinguishable because, unlike the instant action, the parties in that dispute did not enter into a contract with a forum-selection clause.
2. Fair Play and Substantial Justice
Having concluded that the minimum contacts prong of the due process analysis is satisfied, the court must consider whether assertion of jurisdiction over the defendants comports with the principles of fair play and substantial justice. Burger King, 471 U.S. at 476. When minimum contacts have been established, often the interests of the plaintiff and the forum state justify burdens on the defendant. Kervin v. Red River Ski Area, Inc., 711 F. Supp. 1383, 1394 (E.D. Tex. 1989) (citing Asahi Metal Industiy Co., Ltd. v. Superior Court of California, 480 U.S. 102, 114 (1987)). A defendant may defeat personal jurisdiction, however, by presenting a compelling case that the presence of some other considerations would render jurisdiction unreasonable. Burger King, 471 U.S. at 477. Thus, the defendants bear the burden of showing that conducting litigation in this court would be so gravely difficult and inconvenient that they would be at a severe disadvantage in comparison to SCG. Burger King, 471 U.S. at 478 (citations omitted).
The State of Texas has an interest in providing its residents with a convenient forum for redressing injuries allegedly inflicted by out of state actors. See id. at 473 (citations omitted). Texas also has an interest in enforcing contracts which are to be interpreted under Texas law. SCG has the right to choose a convenient, readily accessible forum. It is entitled to maintain this action in the locale where its alleged injury was sustained rather than in a distant forum. The defendants have pointed to no burden that outweighs the interests of Texas and SCG in litigating this matter in Texas. Furthermore, as the defendants consented to jurisdiction in Texas by signing the Agreement containing the forum-selection clause, they will not now be heard to claim that such jurisdiction violates due process. See Rogerson ATS, 952 F. Supp. at 381, n. 5.
Thus, the court may assert jurisdiction over the defendants without violating the principles of fair play and substantial justice.
III. CONCLUSION
For the reasons stated above, the motion to dismiss for lack of personal jurisdiction is DENIED.
The court rejects the defendants' request, in their reply, to transfer this action to the United States District Court for the Southern District of Indiana. Reply at 4. This is not a proper subject for reply, where the plaintiff has no opportunity to respond and the request is therefore not fully briefed by the parties.