# COURT OF APPPALS AILED 

### Of',' fSlt? f; I 2013 

### NOV i M 11: 15 IN THE COURT OF APPEALS OF THE STATE OF WASHIN DIVISION II Py KRISTINE FAILLA, Respondent,

V. FIXTUREONE CORPORATION; and KENNETH A. SCHUTZ, No. 43405 -9 -II
PUBLISHED OPINION ASHINi O I DEMTY

BJoRGEN, J. — Kenneth A. Schutz, president and chiefexecutive officer of FixtureOne Corporation, appeals the denial ofhis motion to dismiss Kristine Failla' s claims against him for 

### unpaid wages and other reliefand the granting ofFailla's summaryjudgment motion onthe same claims. Schutz argues that Washington State lacks personal jurisdiction over him because he does not have the requisite minimum contacts with the state; and, even ifWashington did have 

### personaljurisdiction,that summaryjudgment was . inappropriate because genuine issues of material fact are present. Concluding that Washington lacks personaljurisdiction,we reverse the superior court' s denial of Schutz' s dismissal motion. Because Washington lacksjurisdiction,we 

### also reverse the superior court' s summaryjudgment in Failla's favor and the accompanying judgment and awards ofprejudgment interest, attorney fees and costs. FACTS I. REMOTE EMPLOYMENT WITH PENNSYLVANIA CORPORATION FixtureOne is a Pennsylvania corporation headquartered in Philadelphia, specializing in the design and production ofcustom store fixtures and furnishings for the retail industry. Schutz was the president and chief executive officer ofFixtureOne Corporation and had been an officer
and director of the company between 2004 and 2011No. 43405 -9 -II In October 2009 Failla e-mailed Schutz seeking a sales position with FixtureOne that she could perform from her home near Seattle. Failla traveled to Pennsylvania for an interview with 

### Schutz. Following the interview, Schutz offered Failla an account executive position with the 

### company. The position required Faillato conduct herworkviatelephone, e-mail, and occasional airplane travel. Schutz told Faillathat having a sales representative in herpart ofthe country could be useful because he would like to do business with Starbucks. However, Failla did not 

### pursue Starbucks or any other Washington company as a customer. Failla' s compensation included $75,000 in annual salary and an additional three percent sales commission on new
accounts. At the end of2010, Failla' s first full year of employment with FixtureOne, she e-mailed 

### Schutz asking for an accounting ofher sales commissions and payment ofthose commissions. Schutz instructed " Ed"' 

### to identify and report Failla's2010 sales commissions and to issue her.a check. Clerk' s Papers (CP) at 36.

Schutz promoted Failla to vice president for sales in 2011. He raised her base salary to 135, 000 and continued her three percent sales commission, with the exception of one account. 

### Additionally, Schutz informed Faillathat she would need to sign the company' s employment 

### agreement, which, among otherterms, provided that it "shall be interpreted in accordance with the laws ofthe Commonwealth of Pennsylvania." CP at 78. Failla responded that she would 

### sign and mail the agreement that day. Three days later, Failla sent aversion ofthe agreement

1 The e -mail address associated with this person is " Ed Friedman." Clerk' s Papers at 36. 

### Otherwise, the record does not identify him. In the " Facts" section of Failla's brief,she refers to this person as " staff." See Br. ofResp' t at 3. 2No. 43405 -9 -II

back to Schultz with proposed revisions. Neither Schutz nor Failla took further action on the
agreement. 

### In early April, Failla sent Schutz another request forthe accounting and payment ofher 2010 commissions. Schutz replied, " If Ed does not calculate soon, I will do so." CP at 38.. 

### Shortlythereafter, Schutz calculated Failla's 2010 commissions as $21,025.06. He e-mailedthat calculation to Ed with instructions that Ed send a checkforthat amountto Failla by overnight 

### mail. Not having received payment in early May, Failla again asked Schutz about the situation. Schutz responded that he had instructed Ed to make the payment and that he would find out what happened. 

### In late May Schutz e-mailed Failla, informing herthat FixtureOne could not execute its orders properly and needed to close. Schutz told Faillathatthe company needed to end her
employment as of the next day, but he promised, "We will pay your commissions and expenses asap in the next several weeks as we complete operations." CP at 44. 

### In early June Failla again e-mailed Schutz, asking for her last payroll salary check, her expenses, her 2010 sales commissions, and for documentationfor her 2011 commissions. Schultz responded, " I know that Ed cut a payroll check for you and I signed itI assume it would have been sent overnight and will check on it. I will check the status ofyour expenses
and calculate the 2011 commissions." CP at 46.

In late July Schutz e- mailed Failla stating, " 

### Legally we do not owe you any commissions

as the amount owed was negated when Juicy cancelled $50, 000 ofJFK ... would like to payyou

a severance in an amount equal to what the commission would have been assuming we are in aNo. 43405 - 9 -II financial position to do so, however right now we are not in a financial position to do so." CP at 50. 

### Through counsel, Failla sent a letterto Schutz demanding immediate payment. The letter informed Schutz that Washington subjected employers to liability for double damages and attorney.fees. II. PROCEDURE . 

### Failla filed a complaint in Washington State seekingjudgment for double her unpaid wages and for breach ofher employment contract. Although Failla originally named both FixtureOne and Schutz, she was unable to obtain service on FixtureOne; therefore, she 

### proceeded solely against Schutz and served him in Pennsylvania. Failla moved for summaryjudgment against Schutz, seeking wages, exemplary damages, attorney fees, and costs under RCW 49. 52. 050 and .070. Schutz moved to dismiss for lack of personal jurisdiction under CR 12(b)( 2). The parties agreed that the trial court would consider both motions concurrently. 

### Thetrial court denied Schutz' s motion to dismiss and granted summaryjudgment for Failla.2 The order included $59, 608. 12 as the principal amount, $3, 129.42 for prejudgment interest, $

### 8, 150.00 in attorney fees, and $568.40 in costs. Schutz appeals.



### 2 The record before this court consists of only Clerk's Papers; the record does not contain the Verbatim Report of Proceedings. rdNo. 43405 -9 -II ANALYSIS Schutz argues that the Washington court lacked personal jurisdiction over him under the 

### long - arm statute, RCW 4.28. 185, because he lacks minimum contacts with the forum state. Schutz additionally argues that even ifWashington has personaljurisdiction, summaryjudgment was inappropriate because questions ofmaterial fact remained. Failla responds that Washington hasjurisdiction because Schutz knew that Failla lived and would perform her duties in 

### Washington. Failla also responds that Schutz failed to raise any issue ofmaterial fact before the trial court. We hold that the superior court lacked personaljurisdiction over Schutz and, forthat reason, we reverse the superior court' s denial of Schutz' s dismissal motion and its grant of 

### summaryjudgment in favor ofFailla. I. STANDARD OF REVIEW 

### When reviewing a summaryjudgment order, we engage in the same inquiry asthe trial court. We determine ifthere are any genuine issues ofmaterial fact and, ifnot,whetherthe 

### moving party is entitled tojudgment as a matter oflaw. Lewis v. Bours, 119 Wn.2d 667, 669, 835 P.2d 221 ( 1992). In this review, "` [ t]he court must consider the facts in the light most 

### favorable to the nonmoving party, and the motion should be granted only if,from all the
evidence, reasonable persons could reach but one conclusion. "' Lewis, 119 Wn.2d at 669 quoting Marincovich v. Tarabochia, 114 Wn.2d 271, 274, 787 P.2d 562 ( 1990)) ( alteration in original). 

### More specifically, where the " underlying facts are undisputed, the trial court' s
assertion of personal jurisdiction is a question of law reviewable de novo." MBMFisheries, Inc.

v. Bollinger Mach. Shop & Shipyard, Inc., 60 Wn.App. 414, 418, 804 P.2d 627 ( 1991). Failla 

### has the burden ofestablishingjurisdiction,but she need only make a prima facie showing.
5No. 43405 -9 -II

CTVC ofHawaii Co., Ltd. v. Shinawatra, 82 Wn.App. 699, 708, 919 P. 2d 1243 ( 1996), modified 

### by 932 P.2d 664 ( 1997). H. JURISDICTION 

### Washington' s long -

arm statute, RCW 4.28. 185, authorizes Washington courts to exercise jurisdiction over a nonresident defendant to the extent permitted bythe due process clause ofthe United States Constitution. MBM Fisheries, Inc.,60 Wn.App. at 423. 

### Specifically, RCW 4.28. 185 provides in pertinent part: 

### 1) Any person, whether or not a citizen or resident ofthis state, who in person or through an agent does any ofthe acts in this section enumerated,thereby submits said person, and, if an individual, his or her personal representative, to the jurisdiction ofthe courts ofthis state as to any cause ofaction arising from the doing of any ofsaid acts: a) The transaction ofany business within this state; b) The commission ofa tortious act within this state;, 

### 3) Only causes ofaction arising from acts enumerated herein may be asserted against a defendant in an action in whichjurisdiction over him or her is based upon this section. To subject a nonresident defendant to the personal jurisdiction ofthis state under RCW 

### 4.28. 185, the following requirements must be met:

1) The nonresident defendant or foreign corporation must purposefully do some act or consummate some transaction in the forum state; ( 2) the cause of action must arise from, or be connected with, such act or transaction; and (3) the 

### assumption ofjurisdiction bythe forum state must not offend traditional notions 

### offair play and substantialjustice, consideration being given to the quality, nature, and extent ofthe activity in the forum state, the relative convenience ofthe parties, the benefits and protection ofthe laws ofthe forum state afforded the respective parties, and the basic equities ofthe situation. Shute v. Carnival Cruise Lines, 113 Wn.2d 763, 767, 783 P.2d 78 ( 1989) ( quoting Deutsch v. W. Coast Mach. Co., 80 Wn.2d 707, 711, 497 P. 2d 1311 ( 1972)).

0No. 43405 - 9 -II 

### We will not findjurisdiction under the long - arm statute unless a nexus exists between the
plaintiffs cause of action and the defendant' s activities in the state. 14 KARL B. TEGLAND, WASHINGTON PRACTICE: CIVIL PROCEDURE § 4. 13, at 89 (2d ed. 2009). We determine the 

### propriety oflong -

armjurisdiction "on a case - by - case basis, based upon the specific parties and the specific facts." 14 WASHINGTON PRACTICE at 90. A. No Transaction of Business within Washington . 

### To meetthe first step in the Shute test, set out above, the evidence must showthat Schutz 

### purposefully did some act or consummated some transaction in this state. Shute, 113 Wn.2d at 767. Personal jurisdiction " exists where the contacts create a substantial connection with the forum state." SeaHAVN, Ltd. v: Glitnir Bank, 154 Wn.App. 550, 564, 226 P. 3d 141 ( 2010). We 

### determine the sufficiency ofthe contacts " by the quality and nature ofthe defendant' s activities,

not the number of acts or mechanical standards." Shinawatra, 82 Wn. App. at 710.

The execution of a contract with a state resident alone does not fulfill the "` purposeful
act "' 

### requirement. MBMFisheries, 60 Wn.App. at 423 ( quoting Burger King v. Rudzewicz, 471 U.S. 462, 478 -

79, 105 S. Ct. 2174, 85 L. Ed. 2d 528 ( 1985)). To determine whether Schutz 

### purposefully established minimum contacts with Washington by hiring Failla,we must examine the entire transaction, including negotiations, " contemplated future consequences, the terms of the contract, and the parties' actual course ofdealing." MBMFisheries, 60 Wn.App. at 423. 

### Failla argues that Schutz consummated atransaction in Washington by employing her knowing that she lived in Washington, citing Toulouse v. Swanson, 73 Wn.2d 331, 438 P.2d 578 1968), Thornton v. Interstate Sec. Co., 35 Wn.App. 19, 21, 666 P.2d 370 ( 1983), and Cofinco of

7No. 43405 -9 -II

Seattle, Ltd. v. Weiss, 25 Wn.App. 195, 605 P.2d 794 ( 1980). These cases, however, do not support this proposition. In Toulouse, 73 Wn.2d at 331, an Idaho resident employed a Washington lawyer to represent him in Washington in extended litigation involving his mother' s estate. Toulouse was 

### in the state ofWashington on many occasions from 1956 to 1959 and was afrequent visitor, as a client, to his attorney' s law office. Toulouse, 73 Wn.2d at 331. The court upheld Washington 

### jurisdiction over Toulouse in a suit by his attorney for compensation, holding that Toulouse consummated atransaction in Washington by employing the plaintiffas his lawyer,thatthe present action arose from thattransaction, and that sustaining Washingtonjurisdiction would not 

### be " an affront to the `traditional notions offair play and substantialjustice' necessary for due
process of law." Toulouse, 73 Wn.2d at 334 (citations omitted). In Thornton, a foreign corporation hired Thornton to expand into Washington and other northwest states. Thornton worked in Washington, with Washington companies, and was chosen for employment Necause of his numerous contacts in the industry, his position as vice - president and then president of the Washington State Consumer Finance Association, his dealings since 1956 with Washington State' s Division of Banking, Department of 

### General Administration, his knowledge of state laws regulating small loan companies, and his experience in the field since 1946. Thornton, 35 Wn.App. at 21. When Thornton' s employment was terminated, he sued the foreign corporation in the Washington courts. We held that Thornton' s role and the company' s 

### reasons for hiring him raised sufficient contacts with Washington to sustain personaljurisdiction. Thornton, 35 Wn.App. at 25.No. 43405 - 9 -II 

### In Cofinco, 25 Wn. App. at 196, a Washington corporation with its principal place of business in Seattle, hired Weiss, a New York resident, to sell shoes for Cofinco on the east coast. Although Weiss never came to Washington, Cofinco provided him with goods, funds, and

advancements as part of selling shoes for Cofmco. 

### Cofinco, 25 Wn.App. at 196. We held that 

### underthese circumstances the long - arm statute gave Washington courtsjurisdiction overWeiss in a contract dispute with Confinco. By entering into the employment contract,we held Weiss purposefully [availed himself] ofthe privilege ofconducting activities" within the state of Washington. Cofinco, 25 Wn. App. at 197 ( alteration in original) ( citation omitted). None ofthese cases stand for the rule that Schutz is subject to Washingtonjurisdiction 

### merely because he hired Failla knowing that she lived inWashington. Instead, each decision rests its holding on contactsthat are not present in the relationship between Failla and Schutz or FixtureOne. Failla reached out to.Schutz in Pennsylvania and flew to Pennsylvania to interview. 

### FixtureOne paid Failla by checks initiated, issued, and mailed from Pennsylvania. FixtureOne did not registerto do business in Washington and never had operations, officers, or customers in 

### this state. Nothing about Schutz's employment ofFailla anticipated that her activities in Washington would consist ofmore than residing here, working from home, and collecting a 

### paycheck. Nothing in the record shows any attemptto do business with aWashington company, let alone anytransactions with Washington companies. 

### Federal case law strongly indicatesthatthis level ofcontact is insufficientto sustain jurisdiction over Schutz. In Peterson v. Kennedy, 771 F.2d 1244, 1262 (9th Cir. 1985), the court 

### held that use ofmails ortelephones ordinarily does not qualify as purposeful activity invoking 9No. 43405 - 9 -II 

### the benefits and protections ofthe forum state. Pennebacker v. Wayfarer Ketch Corp., 777 F.Supp. 1217, 1221 ( E.D. Pa. 1991), held that the plaintiff' s decisions to live in Pennsylvania and receive some paychecks there were unilateral decisions on his part and did not support Pennsylvaniajurisdiction overthe New York employer. Similarly, Romann v. Geissenberger Mfg. Corp., 865 F.Supp. 255, 261 -63 ( E. D. Pa. 1994), held that a salesman' s unilateral decision 

### to workpartly in his home state ofPennsylvania did not establishjurisdiction over his New Jersey employer where the salesman had an office in NewJersey and his employer neither required nor encouraged him to live or work in Pennsylvania. 

### The business relationship between Schutz and Failla shares its essential characteristics with those relationships found inadequate to sustainjurisdiction in these federal cases. In 

### contrast, the relationship between Schutz and Failla lacks the sort ofadditional contacts on which Toulouse, Thornton, and Cofinco relied to upholdjurisdiction. Thus, the case law leans heavily against the conclusion that the superior court hadjurisdiction over Schutz. Failla argues that her presence in Washington was more than simple residence, because 

### Schutz had told herthat having a sales representative here could be useful in obtaining business with Starbucks. However, the record merely shows that after Schutz hired Failla, he forwarded

an e -mail to her with the subject line " Starbucks," mentioning that another company had certified FixtureOne' s fixtures under a food equipment standard. CP at 95. 

### The meaning ofthis e -mail is obscure. Otherthan this bare subject line, the record does not show any attempt to do business 

### with Starbucks or any otherWashington company. Failla' s employment began in November 2009 and ended in May 2011. 

### During thattime, there is no evidence ofcontact with Starbucks. 

### During thattime,there are no e -mails discussing attempts to make contacts, no meetings
10No. 43405 -9 -II



### concerning Starbucks, and no mention ofphone calls concerning Starbucks. Not only did FixtureOne fail to gain Starbucks or any other Washington company as a customer, there is no evidence that Failla or anyone at FixtureOne ever solicited Starbucks or any other Washington company' s business. Without any action, preparations, or planning, a single mention of Starbucks in the subject line ofan e -mail is without significance in determining whether Washington courts have jurisdiction over Schutz. For these reasons, we conclude that Schutz did not transact business in Washington for 

### the purpose ofthe long -

arm statute. In reaching this holding, we do not ignore the potential effect ofthe recent,revolutionary advances in communications, such as e -mail, video 

### conferencing, social media and the Internet, onthe analysis ofjurisdiction. IfSchutz and FixtureOne had opened a physical.branch office here, the case forjurisdiction over them would 

### be much stronger. The availability ofe -mail,the Internet and the rest invites consideration 

### whether Failla's situation was effectively no different from a bricks and mortar branch office; whether it was qualitatively different from that ofan employee working at home usingjust mail
and the telephone. The case law rejects "` mechanical "' and "` conceptualistic "' approaches to long -

armjurisdiction in favor of a "` highly realistic "' approach that considers actual course of 

### dealing. See Burger King Corp., 471 U.S. 462 at478 - 79 (quoting Int'l Shoe v. Washington, 326 

### U.S. 310, 319, 66 S. Ct. 154, 90 L. Ed. 95 ( 1945) and Hoopeston Canning Co. v. Cullen, 318 U.S. 313, 316, 63 S. Ct. 602, 87 L. Ed. 777 ( 1943)). The factual record in this appeal does not allow proper consideration ofthe effect ofthe new electronic world on the " highly realistic" 

### approach to long -

armjurisdiction required bythe case law. That question awaits another day.

11No. 43405 -9 -II

B. No Commission ofTortious Act within Washington

Failla also argues that Schutz committed a tortious act that established personal jurisdiction in Washington under RCW 4.28. 185( 1)( b). Specifically, Failla argues that Schutz 

### committed atort byfailing to pay herwages andthat he injured her in Washington because that is where she resided and should have been paid. Schutz correctly responds that because his 

### alleged failure to pay did not occur in Washington,that action cannot subject him to its jurisdiction.

Under RCW 4.28. 185( 1)( b), atortious act occurs in Washington when the injury occurs
within our state. Grange Ins. Assn v. State, 110 Wn.2d 752, 757, 757 P. 2d 933 ( 1988). An injury " occurs" in Washington for purposes ofthe 

### long - arm statute, " ifthe last event necessary to make the defendant liable for the alleged tort occurred in Washington." MBMFisheries, 60 

### Wn.App. at425. A nonphysical loss suffered in Washington is not sufficient in itselfto confer jurisdiction. Hogan v. Johnson, 39 Wn. App. 96, 100, 692 P.2d 198 ( 1984). No jurisdiction 

### exists when alleged fraud had an effect in Washington only because plaintiffhad chosen to reside there. DiBernardo-Wallace v. Gullo, 34 Wn.App. 362, 366, 661 P.2d 991 ( 1983). The SeaHAVN decision is also instructive in resolving this issue. SeaHAVN alleged that 

### Glitnir Banktortiously misrepresented that it had no conflicts ofinterest and that itwould not disclose SeaHAVN' s confidential information to benefit a competitor. SeaHAVN, 154 Wn.App.

at 569. SeaHAVN argued that Washington hadjurisdiction because SeaHAVN was a 

### Washington based company and Glitnir had financially harmed SeaHAVN in Washington. See SeaHAVN, 154 Wn. App. at 569. Division One of this court concluded, however, that "[ b] ecause

12No. 43405 - 9 -II
the alleged misrepresentations did not occur in Washington, ... Glitnir was not subject to jurisdiction under RCW 4.28. 185( 1)( b)." SeaHAVN, 154 Wn.App. at 570. 

### Here, Schutz allegedly committed atort by failing to pay Failla's wages. His failure to 

### pay occurred in Pennsylvania. Failla experienced nonphysical injury in Washington only because she chose to live in Washington. Because the failure to pay is the " last event necessary" to make Schutz liable and his alleged failure did not occur in Washington, he is not subject to 

### Washingtonjurisdiction. See MBMFisheries, 60 Wn.App. at 425. Failla does not show that Schutz either transacted business or committed a tort in 

### Washington. Consequently, Failla does not meetthe first prong ofthe three - part Shute test, and Washington courts lack personal jurisdiction over Schutz. See Shute, 113 Wn.2d at 767. With that conclusion, we need not consider the second or third parts ofthe Shute test. We reverse the superior court' s decision that.it had personaljurisdiction over Schutz and its denial of Schutz' s dismissal motion. Because the superior court lackedjurisdiction,we reverse 

### its grant ofsummaryjudgment in favor ofFailla and the accompanyingjudgment award and award ofprejudgment interest, attorney fees, and costs.

BJORGEN, We ncur:
NT, P.J

k SET U YAR, J . r

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