Court Opinion

ID: 9493486
Source: CourtListenerOpinion
Date Created: 2023-08-05 15:09:37.4468+00
Date Added: 2024-06-11T17:55:52.195061
License: Public Domain

BOYCE F. MARTIN, C. J., delivered the opinion of the court, in which DAUGHTREY, J., joined. HILLMAN, D.J. (pp. 724-29), delivered a separate dissenting opinion.
OPINION
BOYCE F. MARTIN, JR., Chief Judge.
Calphalon Corporation, an Ohio corporation, appeals the district court’s dismissal of a declaratory judgment claim against Jerry Rowlette and Rowlette and Associates because of a lack of personal jurisdiction. For the following reasons, we AFFIRM.
Jerry Rowlette (“J. Rowlette”), a resident of Minnesota, is shareholder, director, and president of Rowlette and Associates (“Rowlette”)(The two defendants are also collectively referred to as “Rowlette.”), a Minnesota-based corporation. Neither party owns any real or personal property in Ohio.
From 1980 to January 31, 1998, Row-lette was the exclusive manufacturer’s representative for Calphalon in the states of Minnesota, Iowa, North Dakota, South Dakota, and Nebraska. Between 1980 and 1996, a “letter agreement” controlled this arrangement. In both 1996 and 1997, Rowlette executed a one-year manufacturer’s representative agreement. Rowlette agreed, in part, to promote the sale of Calphalon’s products, to keep Calphalon informed of market conditions, and to develop sales plans for customers. During the term of the agreements, Rowlette corresponded with Calphalon in Ohio via telephone, fax, and mail, and J. Rowlette made two physical visits to Ohio in 1996: one for a mandatory sales meeting and another to accompany a client on a tour of the Cal-phalon facilities. The one-year agreement stated “this Agreement shall be interpreted under the laws of the State of Ohio.” At the end of 1997, Calphalon notified Row-*721lette that it did not intend to renew the agreement. On May 2, 1998, counsel for Rowlette notified Calphalon by letter of Rowlette’s claims for breach of contract and unpaid commissions.
On May 27, Calphalon filed suit in the United States District Court for the Northern District of Ohio, seeking a declaratory judgment that: Ohio law controls the agreement; Calphalon’s termination of Rowlette was lawful; and Calphalon does not owe additional commissions to Row-lette. Subsequently, Rowlette filed suit in Minnesota state court, claiming Calphalon breached the manufacturer’s representative agreement and seeking payment of earned commissions. Rowlette then filed a special appearance in the Ohio federal case and moved for dismissal of the Ohio action under Federal Rule 12(b)(2), alleging lack of personal jurisdiction.
The district court granted the motion to dismiss, finding that it lacked specific personal jurisdiction over Rowlette. The court gave some thought to the idea that Rowlette was subject to the Ohio long-arm statute, Ohio Rev.Code § 2807.382, but held that even under the long-arm statute Rowlette lacked sufficient minimum contacts with Ohio to meet due process requirements.
Dismissal for lack of personal jurisdiction is reviewed de novo. See Tobin v. Astra Pharmaceutical Prods., 993 F.2d 528, 542 (6th Cir.1993). In the absence of an evidentiary hearing, we must view the pleadings and affidavits in the light most favorable to Calphalon and not consider the controverting assertions of Rowlette. See Dean v. Motel 6 Operating L.P., 134 F.3d 1269, 1272 (6th Cir.1998). Calphalon must make only a prima facie showing of personal jurisdiction. See id.
In dealing with a diversity case, we look to the law of the forum state to determine whether personal jurisdiction exists. See LAK, Inc. v. Deer Creek Enterprises, 885 F.2d 1293, 1298 (6th Cir.1989) (citing Southern Machine Co. v. Mo-hasco Indus., 401 F.2d 374, 376 n. 2 (6th Cir.1968)). The exercise of personal jurisdiction is valid only if it meets both the state long-arm statute and constitutional due process requirements. See Nationwide Mutual Ins. Co. v. Tryg International Ins. Co., 91 F.3d 790, 793 (6th Cir.1993) (citing Reynolds v. International Amateur Athletic Fed’n, 23 F.3d 1110, 1115 (6th Cir.1994)). Although the Ohio Supreme Court has ruled that the Ohio long-arm statute does not extend to the constitutional limits of the Due Process Clause, our central inquiry is whether minimum contacts are satisfied so as not to offend “traditional notions of fair play and substantial justice.” See Cole v. Mileti, 133 F.3d 433, 436 (6th Cir.1998) (citing Goldstein v. Christiansen, 70 Ohio St.3d 232, 638 N.E.2d 541, 545 n. 1 (Ohio 1994) (per curiam)).
The parties here dispute whether the district court had specific personal jurisdiction over Rowlette under the three-part test established in Southern Machine Co. v. Mohasco Industries, Inc., 401 F.2d at 381:
First, the defendant must purposefully avail himself of the privilege of acting in the forum state or causing a consequence in the forum state. Second, the cause of action must arise from the defendant’s activities there. Finally, the acts of the defendant or consequences caused by the defendant must have a substantial enough connection with the forum state to make the exercise of jurisdiction over the defendant reasonable.
The district court found that Rowlette did not purposefully avail itself of the benefits of the laws of Ohio and that the declaratory judgment action did not arise from Rowlette’s activities in Ohio.
The purposeful availment prong of the Southern Machine test is essential to a finding of personal jurisdiction, LAK, 885 F.2d at 1300:
This ‘purposeful availment’ requirement ensures that a defendant will not be *722haled into a jurisdiction solely as a result of “random,” “fortuitous,” or “attenuated” contacts. There is a difference between what World-Wide Volkswagen calls a mere “collateral relation to the forum State,” and the kind of substantial relationship with the forum state that invokes, by design, “the benefits and protections of its laws.” An understanding of this difference is important to the proper application of the “purposeful availment” test.
The Supreme Court has emphasized, with respect to interstate contractual obligations, 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 State for the consequence of their activities.”
(Citing Burger King v. Rudzewicz, 471 U.S. 462, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985); Worldr-Wide Volkswagen v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980); Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958).)
Calphalon asserts that Rowlette purposefully availed itself of the benefits of the laws of Ohio through its association with Calphalon as a manufacturer’s representative. Calphalon presents the following facts to demonstrate purposeful availment: the 1997 agreement that is the subject of this declaratory judgment action; the agreement’s choice of law provision; Rowlette’s duties to monitor market conditions and report to Calphalon; Rowlette’s telephone and fax contacts with Calphalon; J. Rowlette’s visits to Calphalon offices in Ohio; and Rowlette’s letter threatening litigation.
We think the district court correctly recognized that the mere existence of a contract between Rowlette and an Ohio citizen for seventeen months is insufficient to confer personal jurisdiction over Rowlette. See Nationwide, 91 F.3d at 795 (citing Burger King, 471 U.S. at 478, 105 S.Ct. 2174). In Burger King, 471 U.S. at 479, 105 S.Ct. 2174, the Supreme Court stated that “prior negotiations and contemplated future consequences, along with the terms of the contract and parties’ actual course of dealing” must be considered to determine whether “the defendant purposefully established minimum contacts within the forum.” We interpret this statement to mean that the parties’ actions “in the negotiation and performance of the ... agreement” are more important factors to consider than the duration of the contract in determining whether this case “should be subject to suit in Ohio.” See Nationwide, 91 F.3d at 796. Moreover, in LAK, 885 F.2d at 1301, we noted that the quality rather than the quantity of the contacts is the proper subject of review. Similarly, we should focus here on the quality of the parties’ relationship, rather than the duration of the relationship.
In examining the quality of the parties’ relationship, we find that the actual course of dealings between the parties demonstrates that Rowlette’s contacts with Ohio were purely “fortuitous” and “attenuated.” In Kerry Steel Inc. v. Paragon Industries, Inc., 106 F.3d 147, 151 (6th Cir.1997), we held that an out-of-state defendant-buyer did not purposefully avail itself of the benefits and protections of the forum state’s laws because, in part, no facts connected the subject matter or performance of the contract at issue to the forum state. Furthermore, we held that any negative economic effect on the in-state plaintiff-seller did not create a determinative impact on the state economy, as “ ‘the locus of such a monetary injury is immaterial, as long as the obligation did not arise from a privilege the defendant exercised in the forum state.’ ” Id. (quoting LAK, 885 F.2d at 1303). Likewise, in International Technologies Consultants v. Euroglas, 107 F.3d 386, 395 (6th Cir.1997), we found it “purely fortuitous” that the foreign defendant-seller had any contact with Michigan. The defendant was not attempting to “exploit any market for its products” in the state of *723Michigan, but rather had contact with the state only because the plaintiff chose to reside there. See id. These contacts differ from the defendant’s efforts in Lanier v. American Board of Endodontics, 843 F.2d 901 (6th Cir.1988), which we held to demonstrate purposeful availment. In Lanier, 843 F.2d at 911, the foreign medical certification board sought to associate with the in-state plaintiff to further its business and create “continuous and substantial” consequences in the state.
In this case, the agreement and previous association between Calphalon and Row-lette centered on Rowlette representing Calphalon in the states of Minnesota, Iowa, South Dakota, North Dakota, and Nebraska. Rowlette’s performance of the agreement was not focused on exploiting any market for cookware in the state of Ohio. Moreover, Rowlette’s phone, mail, and fax contact with Calphalon in Ohio and J. Rowlette’s physical visits there occurred solely because Calphalon chose to be headquartered in Ohio, not because Rowlette sought to further its business and create “continuous and substantial” consequences there. See id. Arguably, Rowlette would have served as Calphalon’s representative in the designated states, regardless of Cal-phalon’s base of operation. Thus, Row-lette’s contacts were precisely the type of “random,” “fortuitous,” and “attenuated” contacts that the purposeful availment requirement is meant to prevent from causing jurisdiction.
The district court also did not err in determining that the choice of law provision in the 1997 agreement is not decisive. The Court in Burger King, 471 U.S. at 482, 105 S.Ct. 2174, stated that a choice of law provision, though alone insufficient to establish jurisdiction, can “reinforce [a] deliberate affiliation with the forum State and the reasonable foreseeability of possible litigation there.” Moreover, we found in CompuServe, 89 F.3d at 1264, that the choice of law provision provided the out-of-state defendant, who purposefully transacted business in Ohio, with notice that he had entered written contracts governed by Ohio law. Here, even though Rowlette was on notice that the contract was to be governed by Ohio law, it did not make a deliberate affiliation with that state nor could it reasonably foresee possible litigation there.
The district court did not address Row-lette’s correspondence by counsel expressing claims against Calphalon. We have recognized that the threat of litigation can be a factor supporting purposeful availment. In American Greetings, 839 F.2d at 1170, the defendant, over a nine-month period, sent numerous letters, made numerous phone calls, and appointed local agents who pursued his claims with the plaintiff. In CompuServe, 89 F.3d at 1266, the defendant sent numerous electronic mail messages and letters threatening suit and posted his version of the parties’ dispute on CompuServe’s Ohio-based computer server. In this case, Rowlette’s counsel sent one letter to Calphalon, in lieu of an impending acquisition of the company, to outline Rowlette’s possible claims for the benefit of the acquiring company. This contact is not as significant as that occurring in American Greetings and CompuServe and does not significantly alter the nature of Rowlette’s contacts with Ohio. Thus, in our view, the district court was correct in holding that Calphalon failed to demonstrate that Rowlette had purposefully availed itself of the benefits and protections of the laws of Ohio.
After finding that Rowlette failed to satisfy the purposeful availment prong under the Southern Machine test, the district court also addressed the second and third prongs of the. test. The “arising from” requirement under the second prong is satisfied when the operative facts of the controversy arise from the defendant’s contacts with the state. See Southern Machine, 401 F.2d at 384. “Only when the operative facts of the controversy are not related to the defendant’s contact with the state can it be said that the cause of action *724does not arise from that contract.” Id. at n. 29.
Though the district court correctly held that the contract dispute at issue did not arise from Rowlette’s activities in Ohio, its reasoning for reaching that conclusion is flawed. Rather than look to where the operative facts of the controversy arose, the lower court focused on which party’s action' caused an alleged breach of the contract. We have recognized that a breach of contract action arises from the defendant’s contact with the state because the contract “is necessarily the very soil from which the action for breach grew.” In-Flight, 466 F.2d at 228. In Kerry Steel, 106 F.3d at 151, we found the “arising from” requirement was not satisfied because defendant’s alleged breach by failure to pay the purchase price occurred out of state.
However, if the actual breach does not arise from “the very soil from which the action for breach grew,” the exercise of jurisdiction may still be deemed reasonable if, according to the third prong of the Southern Machine Co. test, the consequences of the act or breach caused by the defendant have a substantial enough connection with the forum state. In LAK, 885 F.2d at 1303, we noted that “if the contract had borne a more substantial relationship to Michigan [the forum state], it would not have been necessary for [the alleged tortious conduct] actually to have [occurred] in Michigan.”
In this case, the facts at issue did not occur in the forum state nor were the consequences of the breach substantially connected to the forum state. Rowlette’s performance of the terms of the agreement and any earning of commissions occurred in the states of Rowlette’s sales territory, not Ohio. Moreover, because Rowlette’s connection with Ohio was not substantial as required by the third prong of the Southern Machine Co. test, it is necessary for the plaintiff to demonstrate that the facts at issue actually occurred in the forum state. See Southern Machine Co., 401 F.2d at 381. Here, Calphalon cannot show that Rowlette had a substantial connection to the state. Therefore, the cause of action does not arise from Row-lette’s contact with Ohio, nor do the consequences of its acts have a substantial enough connection with Ohio to make the exercise of jurisdiction over the defendant reasonable. See id.
Under the jurisdictional analysis set forth by the Supreme Court in Burger King and by this circuit in Southern Machine Co. and other cases, we find that Rowlette did not purposefully avail itself of the privilege of conducting activities in Ohio and that the quality of its relationship to Calphalon in Ohio can reasonably be viewed as “random,” “fortuitous,” or “attenuated.” See Burger King, 471 U.S. at 480, 105 S.Ct. 2174. Accordingly, we AFFIRM the district court’s grant of Rowlette’s motion to dismiss for lack of personal jurisdiction.