Opinion ID: 202048
Heading Depth: 3
Heading Rank: 2

Heading: Lack of Personal Jurisdiction over HG Limited

Text: 69 Plaintiffs also claim error in the district court's dismissal of HG Limited, the Partnership's successor-in-interest, for lack of personal jurisdiction. 70 Plaintiffs assert two bases for exercising personal jurisdiction over HG Limited. Their first argument is that the court may exercise specific jurisdiction based on HG Limited's assumption of the Partnership's obligations under the Agreement. Plaintiffs argue that specific jurisdiction over HG Limited exists under subsections (a), (c), and (d) of the Massachusetts long-arm statute. Mass. Gen. Laws ch. 223A, § 3. The state long-arm statute states, in relevant part: 71 A court may exercise personal jurisdiction over a person, who acts directly or by an agent, as to a cause of action in law or equity arising from the person's 72
73 . . . . 74 (c) causing tortious injury by an act or omission in this commonwealth; 75 (d) causing tortious injury in this commonwealth by an act or omission outside this commonwealth if he 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 this commonwealth. . . . 76 Id. Plaintiffs' second argument is that there is general jurisdiction over HG Limited by virtue of its relationship with HGI, which itself has sufficient contacts in Massachusetts to be hailed into federal court in this state. 77 The district court found that neither jurisdictional theory had sufficient factual support to carry the day. We review those conclusions of law de novo, see Harlow v. Children's Hosp., 432 F.3d 50, 57 (1st Cir.2005), and affirm. 78 The district court analyzed plaintiffs' jurisdictional claim under the prima facie standard of Boit v. Gar-Tec Products, Inc., 967 F.2d 671 (1st Cir.1992). See id. at 675. Under that standard, plaintiff[s] ultimately bear[] the burden of persuading the court that jurisdiction exists. Mass. Sch. of Law, 142 F.3d at 34. [P]laintiffs may not rely on unsupported allegations in their pleadings, Boit, 967 F.2d at 675, but are obliged to adduce evidence of specific facts, Foster-Miller, Inc. v. Babcock & Wilcox Can., 46 F.3d 138, 145 (1st Cir.1995). We, in turn, take those specific facts affirmatively alleged by the plaintiff[s] as true . . . and construe them in the light most congenial to the plaintiff[s'] jurisdictional claim. Mass. Sch. of Law, 142 F.3d at 34. We also add to the mix facts put forward by the defendants, to the extent that they are uncontradicted. Id. To establish personal jurisdiction, plaintiffs must show that jurisdiction is both statutorily authorized and consistent with the Constitution. See Daynard, 290 F.3d at 52. The Supreme Judicial Court of Massachusetts has interpreted the state's long-arm statute as coextensive with the outer limits of the Constitution, id. (citing Automatic Sprinkler Corp. of Am. v. Seneca Foods Corp., 361 Mass. 441, 280 N.E.2d 423, 424 (1972)); thus, the only inquiry that remains is the constitutional one, see Sawtelle v. Farrell, 70 F.3d 1381, 1388 (1st Cir.1995). Specifically, the question here is whether the Due Process Clause of the Fourteenth Amendment allows Massachusetts to exercise personal jurisdiction over HG Limited. 79 For the answer to this question to be yes, a defendant must have sufficient minimum contacts with the forum state such that maintenance of the suit does not offend `traditional notions of fair play and substantial justice.' Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 85 L.Ed. 278 (1940)). The minimum contacts standard has three requirements: 80 For specific jurisdiction, the plaintiff's claim must be related to the defendant's contacts. For general jurisdiction, in which the cause of action may be unrelated to the defendant's contacts, the defendant must have continuous and systematic contacts with the state. Second, for either type of jurisdiction, the defendant's contacts with the state must be purposeful. And third, the exercise of jurisdiction must be reasonable under the circumstances. 81 Harlow, 432 F.3d at 57; see also Cambridge Literary Props. Ltd. v. W. Goebel Porzellanfabrik G.m.b.H. & Co. Kg., 295 F.3d 59, 63 (1st Cir.2002); Noonan v. Winston Co., 135 F.3d 85, 89 (1st Cir.1998).
82 Plaintiffs argue that specific jurisdiction over HG Limited exists with respect to both their contract and tort claims. 83 For specific jurisdiction, this circuit divides the constitutional analysis into three categories: relatedness, purposeful availment, and reasonableness. Daynard, 290 F.3d at 60. For its contract claim[s], . . . [plaintiffs] may ask the court to draw inferences from the parties' `prior negotiations and contemplated future consequences, along with the terms of the contract and the parties' actual course of dealing.' Jet Wine & Spirits, Inc. v. Bacardi & Co., 298 F.3d 1, 7 (1st Cir.2002) (quoting Daynard, 290 F.3d at 52). For its tort claims, [plaintiffs] must show a sufficient `causal nexus' between [HG Limited's] contacts with [Massachusetts] and [plaintiffs'] causes of action. Id. (quoting Phillips Exeter Acad. v. Howard Phillips Fund, 196 F.3d 284, 289 (1st Cir.1999)). 84
85 Plaintiffs' primary theory of specific jurisdiction is that their breach of contract claim arises from HG Limited's assumption of the Partnership's obligations under the Agreement, which one of the plaintiffs entered into in Massachusetts. Specifically, plaintiffs contend that there is sufficient evidence in the record to support the propositions that the Partnership solicited Platten to become a partner in Massachusetts, that the Agreement was executed in Massachusetts, and that Platten's performance under the Agreement occurred primarily in Massachusetts. 86 HG Limited, in turn, counters that it has its principal place of business in Bermuda; maintains its books, records, and accounts in Bermuda; and pays taxes in Bermuda. Moreover, it maintains that it has never attempted to solicit or service customers in Massachusetts or to derive substantial revenue from services rendered in the state. As a holding company, it exercises only limited control over HGI, a fourth-tier subsidiary, which has an office in, among other places, Massachusetts. 87 We assume for present purposes that HG Limited fully assumed the Partnership's obligations under the Agreement. Nonetheless, we hold, as did the district court, that the record lacks support for plaintiffs' allegations that the Partnership established sufficient minimum contacts in Massachusetts to be subject to suit by plaintiffs in this state. Our inquiry begins and ends with the first prong of the constitutional inquiry, that of relatedness. 88 In support of specific jurisdiction over their contract claims, plaintiffs rely almost solely on the affidavits of Paul Platten. The first of those affidavits, and the only Platten affidavit admitted into the record, makes the following relevant allegations: 89 2. In February, 1989, I was hired by the defendant [HGI] with the Boston Office. . . . 90 7. As a condition of employment with the Hay Group, I was required to become a partner in the Partnership and, in or about 1992, in Massachusetts, I entered into an Agreement . . . with the Partnership. . . . 91 Aside from these allegations, plaintiffs provide no additional details about the place and circumstances of contracting. Flannery and Pfau's affidavits are silent with respect to the place of contracting, and neither of the two has ever claimed that their agreements with the Partnership were signed or executed in Massachusetts. 92 The Supreme Court has held that parties who `reach out beyond one state and create continuing relationships and obligations with citizens of another state' are subject to regulation and sanctions in the other [s]tate for the consequences of their activities. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 473, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985) (quoting Travelers Health Ass'n v. Virginia, 339 U.S. 643, 647, 70 S.Ct. 927, 94 L.Ed. 1154 (1950)). Evidence of a defendant's entry into a contractual relationship with a plaintiff in another state is relevant to whether the defendant reached out to that state. But the mere fact that a plaintiff entered into a contract with a defendant in the forum state is not in and of itself dispositive of the personal jurisdiction question. The [Supreme] Court long ago rejected the notion that personal jurisdiction might turn on `mechanical' tests or on `conceptualistic. . . theories of the place of contracting or of performance.' Burger King, 471 U.S. at 478, 105 S.Ct. 2174 (omission in original) (quoting Int'l Shoe, 326 U.S. at 319, 66 S.Ct. 154; Hoopeston Canning Co. v. Cullen, 318 U.S. 313, 316, 63 S.Ct. 602, 87 L.Ed. 777 (1943)). Instead, [the Court has] emphasized the need for a `highly realistic' approach that recognizes that a `contract' is `ordinarily but an intermediate step serving to tie up prior business negotiations with future consequences which themselves are the real object of the business transaction.' Id. at 479, 105 S.Ct. 2174 (quoting Hoopeston, 318 U.S. at 316-17, 63 S.Ct. 602). 93 As the district court points out, plaintiffs' affidavits are silent as to details regarding where negotiations took place, where the agreement was presented for signatures, where it was signed, where it was to be performed, and who represented the Partnership at the time of the negotiations. Aside from Platten's conclusory allegations that he performed Partnership business in Massachusetts, none of the plaintiffs offer additional information on whether the Partnership or HG Limited directed an out-of-state activity at the forum state, see Phillips Exeter Acad., 196 F.3d at 289, whether the parties' Agreement contemplated ongoing interaction between Platten in Massachusetts and the Partnership or HG Limited in Bermuda, see Daynard, 290 F.3d at 61, or whether the two other plaintiffs' claims are at all related to the Partnership's and HG Limited's contacts in Massachusetts. Plaintiffs fail to make out a prima facie case for specific jurisdiction on the contract theory.
94 Also unsuccessful is plaintiffs' argument that specific jurisdiction over HG Limited exists on account of the Partnership's alleged misrepresentation and breach of fiduciary duty. 95 To satisfy the relatedness prong of the constitutional inquiry in a tort case, 96 [t]he evidence produced to support specific jurisdiction must show that the cause of action either arises directly out of, or is related to, the defendant's forum-based contacts. The relatedness requirement is not an open door; it is closely read, and it requires a showing of a material connection. This court steadfastly reject[s] the exercise of personal jurisdiction whenever the connection between the cause of action and the defendant's forum-state contacts seems attenuated and indirect. Instead, the defendant's in-state conduct must form an `important, or [at least] material, element of proof' in the plaintiff's case. A broad but-for argument is generally insufficient. . . . [D]ue process demands something like a `proximate cause' nexus. 97 Harlow, 432 F.3d at 60-61 (citations omitted) (quoting Pleasant St. I, 960 F.2d at 1089; Cambridge Literary Props., 295 F.3d at 65); see also Phillips Exeter Acad., 196 F.3d at 289. None of plaintiffs' claims is sufficiently related to HG Limited's Massachusetts contacts. 98 Plaintiffs allege that Platten was induced to enter into the Agreement by misrepresentations that were made by an agent of the Partnership in Massachusetts and that [t]he scheme to defraud and mislead Platten was furthered by four letters sent to him in Massachusetts from the Partnership's New York lawyers and Matthews himself. They further allege that [t]wo similar letters were sent by Matthews and the Partnership's New York counsel to Flannery in Massachusetts. 11 These letters all dealt with the non-competition and termination distribution clauses of the Agreement, and the plaintiffs' rights and responsibilities thereunder. 12 99 Again, plaintiffs failed to provide any details in their complaint or affidavits about the circumstances surrounding the parties' entry into the Agreement, including any misrepresentations that were made at that time, who may have made them, and in what capacity. Thus, any alleged misrepresentations made by the Partnership at the time of contracting cannot be the basis of specific jurisdiction over HG Limited. 100 As for the correspondence from the Partnership's lawyers and Matthews to Platten and Flannery, that itself does not suffice to show relatedness. See Far W. Capital, Inc. v. Towne, 46 F.3d 1071, 1077 (10th Cir.1995) (It is well-established that phone calls and letters are not necessarily sufficient in themselves to establish minimum contacts.); see also Nicholas v. Buchanan, 806 F.2d 305, 307-08 (1st Cir. 1986) (per curiam) (collecting cases). We are doubtful that the letters even provide a basis for a viable cause of action. Platten and Flannery did not allege reasonable reliance on the purported misrepresentations; thus, any harm that Platten or Flannery suffered did not arise out of those misrepresentations, but instead out of the Partnership's alleged breach of the promise to pay them their termination distributions. In specific jurisdiction terms, plaintiffs have not shown a material connection between their injuries and HG Limited's contacts in Massachusetts and therefore cannot meet the relatedness requirement of the due process inquiry. 13 See Harlow, 432 F.3d at 61. 101 Nor does HG Limited's alleged breach of fiduciary duty satisfy the constitutional standard for asserting specific jurisdiction. A breach of fiduciary duty occurs [in the state] where the fiduciary acts disloyally. Phillips Exeter Acad., 196 F.3d at 291. Thus, for minimum contacts analysis, even if the effects of the alleged breach were felt in Massachusetts, there is no evidence in the record that the alleged breach itself occurred in this state, see id. (concluding that an in-forum effect of an extra-forum breach . . . [was] inadequate to support a finding of relatedness), as opposed to, say, Bermuda, where HG Limited has its usual place of business, or Pennsylvania, from whence Chris Matthews allegedly controlled the Partnership.
102 Plaintiffs argue that general jurisdiction also exists over HG Limited by virtue of its parent-subsidiary relationship with HGI and of Platten's activities, as a partner, in Massachusetts. 103 General jurisdiction [may] exist[] when the defendant has engaged in `continuous and systematic activity' in the forum, even if the activity is unrelated to the suit. Daynard, 290 F.3d at 51 (quoting Pleasant St. I, 960 F.2d at 1088). The standard for evaluating whether [defendants' alleged] contacts satisfy the constitutional general jurisdiction test `is considerably more stringent' than that applied to specific jurisdiction questions. Noonan, 135 F.3d at 93 (quoting Glater v. Eli Lilly & Co., 744 F.2d 213, 216 (1st Cir.1984)). 104 The bar is set even higher in a case like this one, in which plaintiffs seek to disregard the corporate form. The mere fact that a subsidiary company does business within a state does not confer jurisdiction over its nonresident parent, even if the parent is sole owner of the subsidiary. There is a presumption of corporate separateness that must be overcome by clear evidence. . . . Escude Cruz v. Ortho Pharm. Corp. 619 F.2d 902, 905 (1st Cir.1980) (citation omitted); see also Donatelli v. Nat'l Hockey League, 893 F.2d 459, 465 (1st Cir.1990); My Bread, 233 N.E.2d at 752 (elaborating the contours of the corporate disregard doctrine). 105 Relying primarily on Platten's affidavits, plaintiffs argue that HG Limited engaged in continuous and systematic activities in Massachusetts through the Partnership's active control over HGI's Boston office and through Platten, who routinely engaged in Partnership business in Massachusetts. 106 Again, there is no reason to disregard the corporate form in this case. Ultimately, nothing in the record substantiates the proposition that HG Limited plainly made a choice to avail itself of the forum's benefices. Donatelli, 893 F.2d at 466. No personal jurisdiction, specific or general, exists over the defendant. 107