# FILED
December 7, 1998 Cecil Crowson, Jr. Appellate C ourt Clerk IN THE COURT OF APPEALS OF TENNESSEE,

AT JACKSON

_______________________________________________________ ) CHASE CAVETT SERVICES, INC. , ) Shelby County Chancery Court ) No. 107615-2 Plaintiff/Appella

nt. ) ) VS. ) C.A. No. 02A01-9803-CH-00055 ) BRANDON APPAREL GROUP, INC. , ) ) Defendant/Appellee. ) )

______________________________________________________________________________ From the Chancer

y Court of She

lby County

at Memphis. Honorable Floyd Peete, Jr., Chancellor

Donald E. Bourland , Kenneth P. Jones , BOURLAND, HEFLI

N, ALVAREZ & MINOR, PL C, Memphis, Tennessee Attorneys f

or Plaintiff/Appe

llant. Leo Bearman, Jr. , BAKER, DONELSON, BEARMAN & CALDWEL L, P.C., Memphis, Tennessee Attorney for Defendant/Appellee.

OPINION FIL

ED: REVERSED AND REMAN DED FARMER, J. CRAWFORD, P.

J., W.S. : (Concurs) HIGHERS, J. : (Concurs)1 Brandon’s principal place of business was previously located in Wisconsin. Brandon

apparently did not move its headquarters to Illinois, however, until after it entered into the agreement out o

f which Chase’s c

laim arises.
2 On the face of th

e contract, it ap

pears to be an ag

reement betwee

n Brandon and an

entity known as Walnut Gro

ve, Inc. (Wal

nut Grove). Fro

m our review of the

record, we are

unable to determine why

the contract wa

s signed by

Walnut Grove rathe

r than River Heig

hts. This information appe

ars to be irrelev

ant for purposes o

f this appeal, how

ever, as neither

party disputes the existenc

e of an agree

ment between Br

andon and River He

ights. Plaintiff Chase Cavett Services, Inc. (Chase) appeals an order of the chancery court granting a motion todismiss for lack of personal jurisdiction filed by Defendant Brandon Apparel Group, Inc. (Brandon). Because we find that the chancery court may exercise personal

jurisdiction over Brandon, we reverse the ruling of the chancellor.

Chase is a Tennessee cor

poration with

its principal place of business in Tennessee. Chase operates as a “factor,” meaning that it purchases invoices from other businesses at a discount and subsequently attempts to collect the amounts due under those invoices. Brandon, a Delaware corporationwith its principal pl ace of business

in Illinois, 1 manufactures and distributes sportswear throughoutthe United States using “mass merchandisers.” As part of its man ufacturi ng process, Brandon ships raw fabric to subcontractors to be sewn according to Brandon’s specifications.

In November of 1994 , Brandon entere d into a contract w

ith River Heights , Inc. (Ri ver Heights), a subcontractor located in Tennessee. 2 Under the contract, River Heights agreed to provide sewing services at its plant in Tennessee using raw fabric pr ovided by Brandon and then ship the finished product back to Br andon. After Rive

r Heightsperformed these services, Chase purchased from River Heights cer

tain invoices rep

resenting amounts due to River Heights under its contract withBrandon. Brandon w as then notified of

this purchase

and began making p

ayments to Chase

at its office in Tennessee.

On June 5, 1996, Chase filed an action against Brandon in a Tennessee state

court, alleging that Brandon has f ailed to make payments with respect to five of the outstanding invoices. On September 30, 1996, Brandon filed a motion to dismiss Chase’s claim fo rlack of personal jurisdiction. The chancellor entered an order on February 10, 1998 granting Brandon’s motion to dismiss and Chase appealed.3 In support of its motion to dismiss, Brandon filed with the trial court the affidavit of

Bradley A. Keywell. R

ule 12.03 of the Te

nnessee Rules of Ci

vil Procedure re

quires as follows: If, on a motion [to dismiss], matters outside the pleadings are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as

provided in Rule 56,

and all parties sh

all be given rea

sonable opportunity to present all material made pertinent to such a motion by Rule 56. This general rule is inapplicable, however, when the motion is one involving jurisdictional issues. See Nicholstone Book Bindery, Inc. v. Chel

sea House Publishers , 621 S.W.2d 560, 561 n.1 (Tenn. 1981) (finding that the trial court committed harmless error in treating the defendant’s motion to dismiss for la

ck of personal jur

isdiction as one fo

r summary jud

gment). Thus, although we recognize that the trial court in the instant case had before it matters that were outside the pleadings, we nevertheless conclude that the trial judge acted properly in treating Brandon’s motion

as a motion to dismiss r

ather than a motio

n for summary

judgment. The sole issue on ap peal is whether the chancellor erred in granting Brandon’s motion to dismiss Chase’s claim for lack of personal jurisdiction. 3 When considering a motion to dismiss, the trial court will give a l iberal construc tion to the plaintiff’s complaint and will assume that the averments

contained in the complaint are true. See Lewis v. Allen , 698 S.W.2d 58, 59 (Tenn. 1985); Holloway v. Putnam County , 534 S.W.2d 292, 296 (Te nn. 1976). The tria

l court is not requir

ed to make findings of fact b

ut must only determin

e whether the pla

intiff’s complain

t has alleged fac

ts sufficient to survive the motion to dismiss. See S & S Screw Mach. Co. v. Cosa Corp. , 647 F. Supp. 600, 605 (M.D. Tenn. 1986). Because the issue presented on appeal is a question of law, our review of the chancellor’ s ruling is de novo with no presumption of correctness. See Lucius v. City of Memphis , 925 S.W.2d 522, 524 (Tenn. 1996); T.R.A.P. 13(d).

The power of a court to assert personal jurisdiction over a defendant is limited by the Due Process Clause of the Fourteenth Amendment to the United States Constitution. See Pennoyer
v. Neff , 95 U.S. 714, 733-34 (1877), overruled in part on other grounds by Shaffer v. Heitner , 433 U.S. 186, 20 6 (1977). Itis well established that due process is not offended by the exercise of personal jurisdiction over a defendant who is served wi th process while physically present in the forum state, see, e.g., Burnham v. Superior Court , 495 U.S. 604, 619 (1990), a defendant who is domiciled in the forum

state, see, e.g., Milliken v. Meyer , 311 U.S. 457, 462 (1940), or a defendant who consents to being sued in the forum state. See, e.g., Shaffer, 433 U.S. at 197. Absent one of these bases of jurisdiction, ho

wever, it is also c

onstitutionally per

missible to exerci

se what is known
as long arm jurisdiction if there are “minimum contacts” between the defendant and the forum state. See International Shoe Co. v. Washington , 326 U.S. 310, 316 (1945).In International Shoe Co. v. Washington , 326 U.S. 310 (1945), the Supreme Court

set forth the standard

for determining whether a court may exercise long arm jurisdiction over a nonresident defendant, stating that this type of jurisdiction is appropriate whe n the defendant has “minimum contacts with [the forum state] such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.’” Id. at 316 (quoting Milliken , 311 U.S. at 463). Although the Court did not def ine the phrase “m

inimum contacts,” i

t did indicate that, in so

me cases, a single contact

with the forum state could support a finding of jurisdiction. See id. at 318. It also suggested, however, that “irregular ” or “casual” c

ontacts with

the forum state are insufficient to serve as the basis of jurisdiction. See id. at 320. The Court stated that the focus of the “minimum contacts” inquiry should be the “quality and nature of the activity in relation to the fair and orderl

y administration of the laws which i t was the purpose o

f the due proces s clause to insure.” Id. at 319. In determining that a

Delaware shoe

manufacturer w

as amenable

to suit in the state of Washington, the Court offered the following rationale:

[T]o the extent that a c orporation exer

cises th e privilege of conducting activit

ie s within a state, it enjoys the benefits and protection of the laws of that state. The exercise of that privilege may give rise to obligations;

and, so far as those obligations aris e out of or are connected

with the activities within the state, a procedure which requires the corporation to respond to a suit brought to enforce them can, in most instances, hardly be said to be undue.

Id.

The proper application of the “minimum contacts” test has been further explained in
a number of Supreme Court cases following International Shoe
. In McGee v. International Life Ins. Co. , 355 U.S. 220 (1957), the Court upheld the exercise of long arm jurisdiction by

a California court over a Texas cor

poration whose onl

y contact with the s

tateo f California was that it sold a single insurance policy to a California resident. See id. at 223. In concluding that the “minimum contacts” standard had been satisfied, the Court stated: “It is sufficient for pu

rposes of due pro

cess that the suit was based on a contract which had substantial connection with

[the forum state].” Id. In Hanson v. Denckla , 357 U.S. 235 (1958), the Court focused on the “quality and nature” of the contacts, holding that the trial court lacked personal jurisdiction because the non-resident defendantdidnot “purposefully avail[ ] itself

of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.” Id. at 253.

In addition to asking whether the non-resident

defendant has “

minimum contacts” withthe forum state, a

court must also

consider those contacts in light of other factors and determine if the assertion of personal jurisdictioncomports with “traditional notions of fair play and substantial justice.” International Shoe , 326 U.S. at 316. Such factors include (1) the burden on the def endant, (2) the forum state’s interest in adjudicating the dispute, (3) the plaintiff’s interest in obtaining
conve nient

and effective relief, (4) the judicial system’s interest in obtaining the most efficien t resolution of

controversies, and (5) the shared interest of the several States in furthering fundamental substantive social policies. See World-Wide Volkswagen Corp. v. Woodson , 444 U.S. 286 , 29 2 (1980). In Asahi Metal Indus. Co., Lt d. v. Superior Court

, 480 U.S. 102 (1987), the Court considered

these five factors and held that, even if the “minimum contacts” inquiry w as s atisfied, the assertion of personal jurisdiction by the California court over the Japanese

defendant would be unreasonable. See id. at 114.

In Tennessee, jurisdiction over a non-resident defendant is conferred by a long arm statute which prov

ides in pertinent p

art as follows: (a) Persons who are n

onresidents of Te

nnesse e and residents of Tennessee who are outside the state and cannot be personally served withprocess within the state are subject to the jurisdiction of t h e courts of this state

as to any action or

claim for relief

arising from: (1) The transaction of any business within the state;

. . . . (5) Entering into a contract for services to be rendered or for materials to be furnished in this state; (6) Any basis not

inconsi stent with the const itution of this state or of the Uni

ted States;

Tenn. Code Ann. § 20-2-2 14(a) (1994). Te nnessee’s long a

rm statute was intended to reach

to the full extent of due process and thus should be given a liberal construct ion. S ee, e.g., Masada Inv. Corp. v. Allen , 697 S.W.2d 332, 334 (Tenn. 1985).

In the instantcase, Chase contends that the chancery court had personal jurisdictionover

Brandon under subsections (a)(1), (a)(5), and (a)(6) of T ennessee’s long

arm statute. Ther

e is also some discussio

n in the parties briefs regarding a newly enacted statute providing in pertinent part as follows:

(a) A court may exercise personal jurisdiction over a person, who acts directly or indirectly, as to a claim for relief arising from the pe

rson’s:

. . . (2) Contracting to supply services or things in this state;

Tenn. Code Ann. § 20-2-223 (Supp. 1997)(effective July 1, 1997). We find no evidence suggesting that the legislature intended

for this new statute to be applied retroactively. Thus, our holding in the instant case is in no way influenced by and does not rely upon this provision.

Under su bsec tion (a)(1) of Tennessee’s long arm statute, a Tennessee court may exercise personal jurisdiction over a non-resident defendant and entertain

a claim arising from “[t]he transaction of any business within the state.” Tenn. Code Ann. § 20-2-214(a)(1) (19 9 4). Chase argues that Brandon transacted business in Tennessee within the meaning of subsection (a)(1). Specifically, Chase alleges that Brandon (1) negotiated a contract with River Heights, a Tennessee corporation, (2) entered into a contract with River Heights, a Tennessee corporation, and (3) made paymentsto Chase at its main office in Tennessee. Brandon, however, argues that subsection (a)(1) is inapplicable, noting that the party with whom it transacted business was River Heights rather than Ch ase. We see n o relevance in this distinction. Brandon entered into an agreement obligating a Tennessee corporation to perform sewing services at its factory in Tennessee . According ly, we conclude that Brandon, as a party to this agreement, transacted business in Tennessee withinthe meaning of subsection (a)(1).

Chase also contends that

the chancery c

ourt could have asserted personal

jurisdiction
over Brandon pursuant t

o subse ction (a)(5) of Tennessee’s long arm statute which subjects nonresident defendants to the jurisdiction of the Tennessee courts with re spe ct to claims arising from “[e]ntering into a contract for services to be rendered or fo

r materials to

be furnished in this state.” Tenn. Code Ann. § 20-2-214(a)(5) (1994). Chase again notes that Brandon entered into a contract whereby River Heights

was obligated to provide sewing services at its plant in Tennessee and arguesthat

its claim arises out of Brandon’s alleged breach of that contract. We again reject Brandon’s argument that this subsection is inapplicable sim ply because the s

ervices in this ca

se were rendered by River Heights rather than Chase. Our inqu iry focuses on Brandon’s contacts with the state of Tennessee. Brandon ent ered into a contract for sewing services to be rendered in the state of Tennessee. Chase’s claim arises directly from this s ame agreement. We therefore conclude that Brandon entered a contract for services to be rendered in Tenn essee within the meaning of subsection (a)(5).

Subsection (a)(6) of Tennessee’s long arm statute provides that the assertion of long
arm jurisdiction by a Tennessee court is permissible when there is “[a]ny basis [for jurisdiction] not inconsistentwith the constitution of this state or of t

he United States.” Te nn. Code Ann. § 20-2- 214(a)(6) (1994). In determining whether the chancery court could have exercised jurisdiction over Brandon pursuant to this pro vision, we must apply

the “minimu

m contacts” test of International Shoe
.

In Nicholstone Book Bindery, Inc. v. Chelsea House Publishers , 621 S.W.2d 560 (Tenn. 1981), our suprem e court applied th

e “minimum contact

s” test to facts

very similar to

those of the case at bar. Nicholstone involved a contract whereby Nicholstone, a Tennessee corporation, agreed to perform printing and binding servic es at its office in

Tennessee and then ship the finished product to Chelsea, a New York publisher. See id. at 561. In an action bro u ght by Nicholstone against Chelsea for non-payment under the contract, the issue became whether the Tennessee court hadpersonal jurisdiction over Chelsea under Tennessee’s long arm statute. See id. The Nicholstone court adopted the three part analysis of Southern Mach. Co. v. Mohasco Indus., Inc. , 401 F.2d 374 (6th Cir. 1968), which a

ttempted to

synthesize the rule of International Shoe and its progeny. See id. at 562. The court s

tated the test as f

ollows:
First, the defendant mus

t purposefully ava

il himself of the privileges of acting in the forum state or causing a co n sequence in the forum state. Second, the cause of action mus t arise f rom the defendant’s activities there. Finally, the acts of the defendant or consequences caused by the defendant must have a substantial enough connection withthe forum state to m ake the exercis

e of juris diction over the defendant reasonable.Id. (quoting Mohasco , 401 F.2d at 381). Applying these fact ors, t he court found that Chelsea’s

contacts with the state of Tennessee were sufficient to sub jectChelsea to the jurisdiction of the Tennessee courts. See id. at 566.

In Masada Inv. Corp. v. Allen , 697 S.W.2d 332 (Tenn. 1985), our supreme cour t considered whether

Allen, a Texas attorney, had sufficient contacts with the state of Tennesse

e to confer jurisdiction under subsection (a)(6) of Tennes see’s long arm statute. Id. at 333. Allen’s contacts with Tennessee consisted of the following: (1) He prepared a sale s contract and a w

arranty deedin connection with

a pending purchase of real property located in Tennessee; (2) He sent the aforementioned

sales contract

and warranty deed to Tennessee for execution; and (3) He participated in the closing on the pr

operty, which took

pla ce at his o ffice in Texas. See id. In determining whether Allen had “minimum c

ontacts”with the state of Tennessee, the court adopted the five factor analysisof Shelby Mut. Ins. Co. v. M oore , 645 S.W.2d 2 42 (Tenn. App. 1981). The court thus considered

(1) the quantity

of the contacts, (2) their nature and quality, (3) the source and connection of the cause of ac

tion with those conta

cts, (4) the interest of the forum state, and (5) convenience. See Masada , 697 S.W.2d at 334. A pplying these cons

iderations, the c

ourt found that Al len’s contacts with the state of Tennessee were sufficient to s at isfy the “minimum contacts” test of International Shoe
. See id. at 335.

The analysis d

eveloped in Masada was slightly altered by Shoney’s, Inc. v. Chic Can Enters., Ltd. , 922 S.W. 2d 530 (Tenn. App. 1995). In Shoney’s , the court noted that the reach of Tennessee’s long arm statute had be en exten ded with the addition of subsection (a)(6). See id. at 536. The court concluded that, given this expansion, the Mohasco test is now too restrictive. See id. The court then announced that the proper application of the “minimum contacts” test involved consideration of three primary factors, namely (1) the quantity of the contacts, (2) the nature and qual ity of the contacts, and (3) the source of the contacts and their connection with the cause o f action. See id. The court also listed as lesser factors the interest of the forum state and convenience. See id.

Brandon’s contacts with the state of Tennessee that r

elate to Chase’s claim for relief include the following: (1) Brandon entered into an agreement with River Heights, a Tennesseecorporation, for sewing servic es to be rendere

d in Tennessee; (2) Brandon shipped raw materials to River Heights at its

plant in Tennessee; and (3) Brandon mailed payments to Chase at its office in Tennessee. These

contacts are strikingly similar to the contacts between the state of Tennessee and the non-resident

defendant in Nicholstone . Like the Nicholstone court, we find that the defendant in the instant case has purposefully availed itself to the privilege of

acting and causing consequences in Tennessee. The fact that River Heights alle

gedly initiated the

transaction betw

een River Heights andBrandon in no way ne gates t he purp osefulness of Brandon’s actions. See Nicholstone , 621 S.W.2d at 563 (citing Mohasco , 401 F.2d at 382). We further find that Chase’s clai m for rel ief arises directly out of its contacts with Tennessee.

We next consider whether the contacts between Brandon and the state of Tennessee
are substantial enough to make the exercise of jurisdiction reasonabl e. A brochure prepared by Brandon indicates that

Brandon has a manu

facturing faci

lity in Tennessee, that 1.25% of Brandon’s sales are generated

in Tennessee, and that Brandon is licensed to sell apparel bearing the logos of the University of T

ennessee, the Un

iversity of Memphis , and Vanderbilt University. By virtue of the representation

s contained in

this brochure, Brandon has held itself out as a corporation that does busi n ess in Tennessee. A c ompany that does bu

siness in the state o

f Tennessee shou

ld certainly anticipate being haled into a T

ennessee court

when it fails

to pay for services rendered in Tennessee. See id. at 564. We therefor e find that, under these circumstances, the assertion of personal jurisdiction over Brandon by a Tennessee court is reasonable.

Consideration of the factors discussed in Masada and Shoney’s also leads us to the conclusion that the chancer y court could have

exercised pers

onal jurisdic

tion over Brandon. Brandon’s contacts with the state of Tennessee were limited to its business dealings with River Heights and at least one other subcontractor, the sale of its produc

ts to “mass merchandisers” doing b usiness i n Tennessee, an d its voluntary paym

ents to Chase. The “

nature and qualit

y” of these contacts, however, appear to be fairly substantial as services valued at thousands of dollars were performed

by the Tennessee subcontractors. Brandon’s contacts with Tennessee are directly related to Chase’s cause of

action. Additiona

lly, we note

that the state of Tennesse e has a strong inte

rest in providing a forum for its residents, although Brandon may experience some inconvenienc e if required to defendan action in Tennessee. After considering all of these factors, we conclude that4 There are two types of personal jurisdiction, genera l and specific. See Shoney’s , 922 S.W.2d at 537. General jurisdiction refers to actions that are not related to the defendant’s contacts with the f

orum state while sp

ecific jurisdict

ion refers to ac

tions that arise out

of or relate to these contacts. See id. The Suprem e Court case s followin g International Shoe have applied the “minimum contacts” test in a more conservative manner when the issue was one of general jurisdiction. Unlik

e the cases involv

ing questions of sp

ecific jurisdict

ion, these cases h

old that a court cannot exercise general jurisdiction over a non-resident defendant unless the defenda nt’s contacts with the forum state are “continuous and systematic.” See Helicopteros , 466 U.S. at 415-16 (cit ing Perkins v. Benguet Consol. Mining Co. , 342 U.S. 437, 438, 445 (1952)). the “minimum contac

ts” test has been satisfied. Thus, we hold that Brandon is subject to the long arm jurisdiction of

the Tennessee c

ourts.

Brandon contends that the rationale of Nicholstone must be read in light of the more conservative approach taken by the Supreme Cour

t in Helicopteros Nacionales de Colombia, S.A. v. Hall , 466 U.S. 408 (1984). In Helicopteros , the Court considered whether a Texas court co

uld assert long arm jurisdiction over a non-resident corporation that (1) sent its chief executive officer to Texas to negotiate a contract, (2) accepted checks drawn on a Texa s bank, (3) purchased helicopters and equipment fro m a Texas manufa

cturer, (4) sen

t its pilots to be train

ed in Texas,and (5) sent members of its

management and ma

intenance perso

nnel to visit the plai

ntiff’s plant in Te

xas. See id. at 411. The Court found that these contacts were not “continuous and systematic” and thus concluded

that the Texas court lacked personal jurisdiction over the non-resident defendant. See id. at 416.

Brando n argu es that, because its contacts with the

state of Tennesse

e are even less substantial than the contacts of the defendant in Helicopteros , it is not subject to the jurisdiction of the Tennessee courts. We find that the rationale of Helicopteros is inapplicable to the case at bar. In Helicopteros , the plaintiff’s c ause of action ar

ose out of a helico

pte r accident tha t occurred in Peru. See id. at 409. The parties stipulated that the plaintiff’s claim was unrelated to the defendant’s contacts with the forum

state. See id. at 415. The question, then, was whether the Texas court coul

d assert general

jurisdiction 4 over the non-resident defendant. In the instant case, however, Chase’s
cause of action arises directly from the c ontract between Brandon and River Heights. Thus, the question here is one of specific jurisdiction. The “minimum contacts” test wi th res pect to the exercise of specific jurisdiction does n ot require the de

fendant’s conta

cts with the forum s

tateto be “continuous and systematic.” See J. I. Case Corp. v . Williams , 832 S.W.2d 530, 532 (Tenn. 1992)(noting that, even when there is no general jurisdiction bec ause the defendant did not maintain continuous and syst

ematic contacts

with the state

of Tennessee, the defendant may still be subject to the specific jurisdiction of the Tennessee courts with respect to claims arising out of or relating to the defendant’s co

ntacts with Tenne

ssee). Thus, the r

ationale of Helicopteros cannot be applied in the instant case and does not affect the soundness of our supreme court’s holding in Nicholstone
.
Conclusion

Basedon the foregoing, we find that Brandon is sub ject to the jurisdiction of the Tennessee courts under subsections (a)(1), (a)(5), and (a)(6) of Tennessee’ s long arm statute. Thus, the chancellor erred in g ranting Brandon’s motion to dismiss Chase’s claim for lack of personal jurisdiction. We therefore reverse the ruling of the chancery court and remand for further proceedings consistent with this opinion. Costs on app eal ar e charged to Brandon, for which execution may issue if necessary.

____________________________________ FARMER, J.

______________________________ CRAWFORD, P.J., W.S. ( Concurs)

______________________________ HIGHERS, J. (Concu

rs)