Court Opinion

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Date Created: 2015-10-13 21:53:59.79895+00
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Opinions of the United
2003 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

5-21-2003

MoneyGram Payment v. Consorcio Oriental
Precedential or Non-Precedential: Non-Precedential

Docket 01-4386

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Recommended Citation
"MoneyGram Payment v. Consorcio Oriental" (2003). 2003 Decisions. Paper 542.
http://digitalcommons.law.villanova.edu/thirdcircuit_2003/542

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                                                           NOT PRECEDENTIAL

                     UNITED STATES COURT OF APPEALS
                          FOR THE THIRD CIRCUIT

                                    No. 01-4386

                   MONEYGRAM PAYM ENT SYSTEMS, INC.

                                       Appellant

                                          v.

                          CONSORCIO ORIENTAL, S.A.;
                              ROBERTO LOPEZ;
                               FREDDY LOPEZ;
                               JOHN DOES 1-10

                   On Appeal from the United States District Court
                            for the District of New Jersey
                             D.C. Civil No.00-cv-03764
                      District Judge: Hon. Katharine S. Hayden

                           Argued: July 19, 2002
                BEFORE: McKee, Fuentes & Aldisert, Circuit Judges

                               (Filed: May 21, 2003)

Kevin M. Mattessich, Esquire (Argued)
Cozen & O’Connor
One Newark Center
Suite 1900
Newark, NJ 07102
       Attorney for Appellant

Richard A. DePalma, Esquire (Argued)
Anthony P. Callaghan, Esquire
Coudert Brothers
1114 Avenue of the Americas
New York, NY 10036
      Attorneys of Appellees
                              OPINION OF THE COURT

McKee, Circuit Judge

       MoneyGram Payment Services, Inc. appeals the district court’s November 13,

2001 Memorandum Order granting defendants’ motion to dismiss under Fed. R. Civ. P.

12(b). MoneyGram sought money damages for an alleged breach of contract and related

torts. MoneyGram argues that the district court erred in dismissing the suit sua sponte on

grounds that went beyond the scope of the court’s Scheduling Order. We will affirm.1

                                              I.

       Inasmuch as we write only for the parties who are familiar with the background of

this dispute, we need not set forth the underlying facts except insofar as may be helpful to

our discussion.

       MoneyGram argues that the district court erred in basing its dismissal on the forum

selection clause contained in the Agency and Trust Agreement between it and Consorcio

Oriental, S.A., a privately held Dominican Republic corporation. That forum selection

clause provides, in pertinent part, that “any action or proceeding initiated under this

Agreement shall be maintained exclusively in the courts of the State of New York or of

1
 Our review of a district court’s grant of a Rule 12(b) motion to dismiss is plenary. See
Wilson v. Quadramed Corp., 225 F.3d 350, 353 (3d Cir. 2000).

                                              2
the United States of America for the Southern District of New York.” (Agreement at ¶

21).

         In addition, ¶ 22 of the Agreement provides that “[a]ny unresolved dispute,

controversy or claim arising out of or relating to [the Agreement] shall be resolved

exclusively by final and binding arbitration . . . with the place of arbitration to be New

York, New York[]” (emphasis added). An Amendment to ¶ 22 removes all doubt as to

the materiality of the arbitration clause to the bargain struck by the contracting parties.

The Amendment states that arbitration “IS EXPRESSLY BARGAINED FOR BY THE

PARTIES AND IS A MATERIAL INDUCEMENT TO [ENTERING] INTO THE

AGREEMENT.” Additional Terms at ¶ H (emphasis in original).

         Despite this explicit language, MoneyGram filed the instant suit in the United

States District Court for the District of New Jersey, and now urges that we interpret these

broad clauses very narrowly so as to reach a result that would to be in direct contradiction

to the contract MoneyGram is trying to enforce. MoneyGram argues that the nature of

the defendants’ alleged wrongdoing preempts the scope of these provisions, and it insists

that the district court’s conclusion to the contrary was error. It also argues that the district

court “blind sided” 2 it by resting its decision on the forum selection clause sua sponte

without affording MoneyGram an adequate opportunity to demonstrate why the forum

selection clause should not be enforced. We disagree.

   2
       This is our term, not MoneyGram’s.

                                               3
         Initially, we note that the Scheduling Order that MoneyGram claims narrowed the

issues that the district court would consider3 stated:

                IT IS . . . ORDERED that Defendants Roberto Lopez and
                Freddy Lopez . . . shall file and serve their motion contesting
                this Court’s exercise of personal jurisdiction over them and
                Defendant . . . Consorcio . . . shall file and serve its motion
                demanding referral of this matter to arbitration pursuant to the
                terms of the parties’ agreement.

A103-104 (emphasis added). The “parties’ agreement” clearly included the

aforementioned forum selection and arbitration clauses, both of which required

MoneyGram to bring any action or proceeding in New York rather than New Jersey

where it chose to file suit. Accordingly, we can not accept MoneyGram’s claim of

“surprise” that the district court, upon reviewing the very agreement referred to in the

Scheduling Order, concluded that the action belonged in New York, not in New Jersey.

         MoneyGram would have us conclude that filing suit in New Jersey is somehow

consistent with provisions requiring “[a]ny unresolved dispute . . . arising out of” the

Agreement, or “any action or proceeding initiated” under the Agreement, to be brought in

New York City. MoneyGram attempts to escape the operation of the forum selection

clause, in part, by arguing fraud. However, we will not redraft this Agreement, as

MoneyGram’s argument requires, merely because MoneyGram bottoms its claim for

damages on alleged fraud and conversion it claims occurred in New Jersey.

          In Coastal Steel Corp. v. Tilghman Wheelabrator, Ltd., 709 F.2d 190 (3d Cir.

1983), we stated that:

   3
       The Scheduling Order was entered by the Magistrate Judge, not by the District Judge.

                                               4
              a forum selection clause is presumptively valid and will be
              enforced by the forum unless the party objecting to its
              enforcement establishes (1) that it is the result of fraud or
              overreaching; (2) that enforcement would violate strong
              public policy of the forum; or (3) that enforcement would in
              the particular circumstances of the case result in jurisdiction
              so seriously inconvenient as to be unreasonable.

Id. at 202.

       Significantly, MoneyGram does not allege that it was fraudulently induced into

entering this Agreement. Indeed, MoneyGram’s own Complaint establishes the contrary.

MoneyGram alleges: “Between October 1, 1999 and January 6, 2000, computer error

caused duplicate pre-funding to be made into Consorcio’s New Jersey bank account.”

Complt at ¶¶ 12-15, Appellant’s Br. at 8 (emphasis added). According to MoneyGram,

the defendants knew of this error and fraudulently converted the excess payments to their

own use rather than alerting MoneyGram to the error and repaying the duplicate

payments.

       In Scherk v. Alberto-Culver Co., the Supreme Court addressed how claims of

fraud affect the enforceability of a forum-selection clause. 417 U.S. 506, 513 (1974).

There, Alberto-Culver, an American manufacturer, purchased three German enterprises

from Scherk, a German citizen. Id. at 508. The purchase contract contained an

arbitration clause that the Court

described as “a specialized forum-selection clause that posits not only the situs of suit but

also the procedure to be used in resolving the dispute.” Id. at 519. The clause provided

that any controversy or claim arising under the contract would be referred to arbitration

                                              5
before the International Chamber of Commerce in Paris, France. Id. at 508 n.1. One year

after the contract was finalized, Alberto Culver discovered that certain trademark rights

purchased under the contract were encumbered. Id. at 509. That was contrary to

representations made by Scherk during contract negotiations. Id. at 508. Consequently,

Alberto-Culver filed suit in federal district court in Illinois alleging, inter alia, fraud. Id.

at 509. Scherk responded with a motion to dismiss for lack of personal jurisdiction. Id.

        The Court relied upon M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972), in

upholding enforcement of the forum selection clause despite allegations of fraud. Id. at

518. The Court noted that the concern it had expressed in M/S Bremen regarding

enforcing such clauses in suits alleging fraud:

               does not mean that any time a dispute arising out of a
               transaction is based upon an allegation of fraud, as in this
               case, the clause is unenforceable. Rather, it means that an
               arbitration or forum-selection clause in a contract is not
               enforceable if the inclusion of that clause in the contract was
               the product of fraud or coercion.

Id. at 519 n. 14.

       Thus, contrary to MoneyGram’s position here, the mere allegation of fraudulent

conduct does not suspend operation of a forum selection clause. Rather, the proper

inquiry is whether the forum selection clause is the result of “fraud in the inducement of

the [forum-selection] clause itself.” Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388

U.S. 395, 403-04 (1967).

       MoneyGram does not claim that defendants fraudulently caused it to enter into the

forum selection clause, arbitration clause, or the Agreement. Indeed, as mentioned above,

                                                6
MoneyGram argues that fraud occurred after the contractual relationship was formed and

it came about as a result of defendants not properly responding to unintentional

“computer error.” Accordingly, the district court quite properly held MoneyGram to its

own agreement by dismissing the action in favor of a New York forum. See Coastal Steel

Corp., 709 F.2d at 202.

       We are similarly not convinced by MoneyGram’s claim that the court’s “sua

sponte” reliance on the forum selection clause deprived it of an opportunity to establish

that the clause ought not to be enforced for reasons of public policy and severe burden.

As Justice Kennedy noted in his concurring opinion in Stewart Org. Inc. v. Ricoh Corp.,

487 U.S. 22 (1988), “a valid forum selection clause [should be] given controlling weight

in all but the most exceptional case.” Moreover, the party opposing enforcement of a

forum selection clause has a “heavy burden of showing not only that the balance of

convenience is strongly in favor of [a different forum] but also that [resolution in the

selected forum] will be so manifestly and gravely inconvenient to [it] that it will be

effectively deprived of a meaningful day in court.” Zapata Off-Shore Co., 407 U.S. at 19.

We are hard pressed to accept MoneyGram’s claim that bringing a proceeding in New

Jersey, rather than just across a river in New York City is now so inconvenient that it

should be excused from the contractual undertaking in which it agreed to do just that.

       MoneyGram argues that the district court erred in dismissing its claims without

first providing it with an opportunity to make the requisite “strong showing” that the

clause was the result of fraud or overreaching, that enforcement of the clause would

violate public policy in the forum, or that enforcement of the clause in a particular case

                                              7
would be so inconvenient as to be unreasonable. MoneyGram claims that it could have

developed a record in support of its claim that the clause violated public policy by

“exploring State regulation of the money transfer industry, or the State’s interest in

protecting funds entrusted by customers for transfer.” Appellant’s Br. at 22-3. Yet, even

now, MoneyGram offers nothing to support these vague reference. MoneyGram is, after

all, suing to enforce that very Agreement according to its terms, and those terms require

MoneyGram to raise its purported claims of unfairness or public policy in a New York

court, or before a panel of arbitrators in New York.

       MoneyGram cites Zelson v. Thromforde, 412 F.2d 56, 58-59 (3d Cir. 1969), to

support its contention that the district court erred in raising the forum selection clause sua

sponte and impermissibly granting defendants’ 12(b) motion to dismiss in reliance on that

clause. In Zelson, the district court dismissed the action “without the issue [of personal

jurisdiction] having been raised below by defendant-appellees.” Id. In that context, we

stated that “a court may not sua sponte dismiss for want of personal jurisdiction, at least

where a defendant has entered an appearance by filing a motion.” Id. That is not the case

here. Rather, Consorcio and the Lopez brothers filed an Answer raising several

affirmative defenses including the arbitration clause, improper venue, and lack of

personal jurisdiction over the individual defendants. A42.

                                              B.

       MoneyGram also faults the district court for failing to rule on whether it had

personal jurisdiction over the individual defendants. It argues:

                                              8
              [b]y entwining the individual Defendants in its sua sponte use
              of the forum selection clause, the District Court failed to
              address whether or not it had personal jurisdiction over those
              Defendants on the grounds briefed by the parties. The record
              before the Court, however, was sufficient to establish that
              jurisdiction.

Appellant’s Br. at 25. The district court’s only response to the defendants’ challenge to

in personam jurisdiction was the following query: “Why would the Court deal with the

issue of jurisdiction . . . over Robeto Lopez and Freddie Lopez, one has to ask, if the

parties have already agreed that . . . ‘any action . . . under this Agreement shall be

maintained exclusively in the courts of the State of New York.’” Dist. Ct. Op. at 8.

       However, the district court’s reasoning on this issue ignores the fact that the

Agreement containing that forum selection clause is between MoneyGram and

Consorcio. Neither Roberto Lopez nor Freddie Lopez signed the Agreement in their

individual capacities. Rather, they signed as officers of the corporate entity, Consorcio.

MoneyGram’s allegations and jurisdictional arguments sweep broadly enough to reach

Roberto and Freddie as individuals. Yet, ironically, MoneyGram challenges the court’s

dismissal of claims against them by arguing “the Agency and Trust Agreement between

Consorcio and MoneyGram [] . . . is wholly inapplicable to the individual defendants.”

Appellant’s Br. at 33. We agree.4 However, we disagree with MoneyGram’s position

that the court had in personam jurisdiction over those two individuals.

   4
    The district court’s oversight in this regard is clearly understandable since
MoneyGram’s claims of error evidence a convenient lapse in the distinction between
corporate and individual actions and liability.

                                               9
       A federal court has personal jurisdiction over a nonresident defendant to the extent

authorized under the law of the forum state in which the district court sits, within

constitutional limitations of due process. Fed. R. Civ. P. 4(e); see also Sunbelt Corp. v.

Noble, Denton & Assoc., Inc., 5 F.3d 28, 31 (3d Cir. 1993). Therefore, we begin an

inquiry into the district court’s jurisdiction over the individual defendants by looking to

New Jersey’s long-arm statute. New Jersey courts have held that that statute reaches to

the “outermost limits permitted by the United States Constitution.” Avdel Corp. v.

Mecure, 277 A.2d 207, 209 (N.J. 1971); see also N.J. Ct. R. 4:4-4. Thus, the reach of

the New Jersey statute is coextensive with the Due Process Clause of the Fourteenth

Amendment.

       In all cases where the defendant moves for dismissal for lack of personal

jurisdiction “the plaintiff bears the burden of demonstrating contacts with the forum state

sufficient to give the court in personam jurisdiction.” Time Share Vacation Club v.

Atlantic Resorts Ltd., 735 F.2d 61, 63 (3d Cir. 1984). In reviewing a ruling on a motion

to dismiss for lack of in personam jurisdiction, we accept plaintiff’s allegations as true

and construe disputed facts in favor of the plaintiff. Carteret Sav. Bank v. Shushan, 954

F.2d 141, 142 n.1 (3d Cir. 1992), cert. denied, 506 U.S. 817.

       Personal jurisdiction over a nonresident defendant may be asserted in two

contexts. General jurisdiction exists when a defendant has maintained such continuous

and systematic contacts with the forum state that the defendant is generally subject to the

exercise of a court’s jurisdiction there without regard to the relationship between the

court action and the forum. See Helicopteros Nacionales de Colombia, S. A. v. Hall, 466

                                             10
U.S. 408, 414-415 (1984). Specific jurisdiction is far narrower, however. It arises when

“the claim is related to or arises out of the defendant’s contacts with the forum.” Dollar

Sav. Bank v. First Sec. Bank of Utah, 746 F.2d 208, 211 (3d Cir. 1984). Specific

jurisdiction arises within the context of the relationship between the defendant, the cause

of action, and the forum embodied in the “minimum contacts” analysis announced in

International Shoe Co. v. Washington, 326 U.S. 310 (1945).

       Under International Shoe, a federal court can only assert personal jurisdiction over

a nonresident defendant if the “minimum contacts” between the defendant and the forum

“do not offend ‘traditional notions of fair play and substantial justice.’” 326 U.S. at 316.

Those contacts must be sufficient to make it “reasonable, in the context of our federal

system of government, to require the [defendant] to defend the particular suit which is

brought there.” Id. at 317.

       The reasonableness of subjecting a nonresident defendant to the courts of a given

forum depend upon the “quality and nature of the defendant’s activity” in the forum state.

Hanson v. Denckla, 357 U.S. 235, 253 (1958). The plaintiff must establish that the

defendant has “purposefully availed itself of the privilege of conducting activities within

the forum state, thus invoking the benefits and protections of its laws.” Id.

       Ultimately, “the existence of minimum contacts turns on the presence or absence

of intentional acts of the defendant to avail itself of some benefit of a forum state.”

Waste Mgmt., Inc. v. Admiral Ins. Co., 649 A.2d 379, 388-89 (N.J. 1994). Here,

MoneyGram is asking the federal court to exercise in personam jurisdiction over both a

corporate entity and two individuals in their individual capacities. As noted above, both

                                              11
of those individuals are officers of the corporate defendant. MoneyGram alleges:

“Defendants themselves concede that those individual Defendants have traveled to New

Jersey, and Freddy Lopez traveled to the State to establish a bank account in Consorcio’s

name specifically for the purpose of doing business in New Jersey with a business then

located in the State.” Appellant’s Br. at 28. (Emphasis Added). However, the “business”

that MoneyGram seeks to attribute to Freddie was opening Consorcio’s bank account.

MoneyGram concedes this. It states: “Fairly read, the Complaint shows additionally,

inter alia, that the Lopez brothers are officers and owners of Consorcio, and, as such,

direct and control the actions of the corporation and its agents.” Id. at 29. MoneyGram

then goes on to argue that the Lopez brothers used the New Jersey bank account to

systematically conduct business with MoneyGram’s New Jersey office. However, once

again, MoneyGram ignores that the “business” that forms the basis of its claims is the

business of the Dominican corporation. It is not the business of the individual officers

and shareholders who are Dominican citizens with no identified contact with New Jersey

other than in their capacity as corporate agents.

       It is axiomatic that “jurisdiction over . . . [individual] defendants does not exist

simply because they are agents or employees of organizations which presumably are

amenable to jurisdiction in” a particular forum. Nicholas v. Saul Stone & Co., 224 F.3d

179, 184 (3d Cir. 2000) (citing Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 781

(1984)). Rather, “[e]ach defendant’s contacts with the forum state must be assessed

individually.” Id. at 781 n.13.

                                              12
         MoneyGram argues that Roberto and Freddy Lopez used Consorcio’s New Jersey

bank account “to conduct regular and systematic business with MoneyGram,”

Appellant’s Br. at 29. However, M oneyGram’s attempt to ensnare Roberto and Freddie

Lopez in a jurisdictional web by reciting Consorcio’s contacts with New Jersey both

ignores and obfuscates Consorcio’s separate legal identity. Although MoneyGram has

clearly asserted a sufficient basis for in personam jurisdiction over Consorcio, its

Complaint falls woefully short of establishing the nexus necessary to extend that

jurisdiction to either Freddie or Roberto Lopez. See Saul Stone & Co., 224 F.3d at 184.

         Moreover, the deficiencies of MoneyGram’s complaint can not be spackled over

by MoneyGram’s allegations of fraud. In Imo Indus. Inc. v. Kiekert, 155 F.3d 254 (3d

Cir. 1998), we stated that allegations of fraud may support in personam jurisdiction

where:

                      (1) The defendant committed an intentional tort; (2)
               The plaintiff felt the brunt of the harm in the forum such that
               the forum can be said to be the focal point of the harm
               suffered by the plaintiff as a result of that tort; and (3) The
               defendant expressly aimed his tortious conduct at the forum
               such that the forum can be said to be the focal point of the
               tortious activity.

Id. at 265-66. Under the third prong, “the plaintiff must show that the defendant knew

that the plaintiff would suffer the brunt of harm caused by the tortious conduct in the

forum, and point to specific activity indicating that the defendant expressly aimed its

tortious conduct at the forum.” Id.

                                              13
                 MoneyGram claims that the Lopez brothers committed a fraud by

remaining silent about the excess deposited in the New Jersey account, and then

fraudulently conveying that money to other corporate entities. However, the silence

emanated from their residence in the Dominican Republic, and nothing suggests that the

other entities that they owned were located anywhere else; there is certainly nothing to

allow us to conclude that any of them were in New Jersey; and MoneyGram does not

argue to the contrary.

                                                     II.

       Thus, although we agree with MoneyGram that the district court erred in enforcing

the forum selection clause and arbitration clause against Roberto and Freddie Lopez, we

hold that the Complaint here fails to establish in personam jurisdiction over them.

Accordingly, we will affirm the district court’s dismissal of the Complaint under Fed. R.

Civ. P. 12(b).

       TO THE CLERK OF THE COURT:

                 Please file the foregoing Opinion

                                                           /s/ Theodore McKee
                                                               Circuit Judge

                                              14
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