Opinion
CV. No. 00-1135-HA
January 4, 2001
Attorneys for Plaintiff :
Michael J. Sandmire, Lori Irish Bauman, Heather J. Van Meter, Ater Wynne, Portland, Oregon
Attorney for Defendants.
Joel A. Mullin, Stoel Rives, Portland, Oregon
OPINION AND ORDER
Plaintiff filed this action on July 17, 2000, in the Multnomah County Circuit Court, and filed an amended complaint on July 24, 2000. Plaintiff seeks damages for breach of contract, quantum merit relief, and attorney fees from defendant Microportal, and recovery for fraud and misrepresentation and "disregard of corporate form" from defendants Worldspy Corporation, iCENTENNIAL and Centennial International, LLC. Defendants removed the action to federal court on August 15, 2000. Presently before the court is a motion by defendants Worldspy Corporation, iCENTENNIAL and Centennial International, LLC, (hereinafter the "moving defendants") seeking an order that dismisses the case as to these defendants for lack of personal jurisdiction. For the reasons provided below, these defendants' motion to dismiss is denied in part and granted in part.
BACKGROUND
Plaintiff and defendant Microportal.com, Inc., entered into an Enhanced Services Agreement on August 13, 1999. Pursuant to the agreement, plaintiff was obligated to provide technical and sales support for Microportal's internet service, and Microportal in turn was obligated to make monthly payments for this support. The moving defendants are not formal parties to this agreement or any of the subsequent amendments to it. Plaintiff alleges in two claims of its amended complaint, however, that these defendants committed tortious acts with knowledge that those acts would have an impact upon plaintiff. Accordingly, plaintiff contends, these defendants are subject to the personal jurisdiction of this court.
After entering into the agreement with plaintiff, defendant Microportal fell behind in payments it owed to plaintiff. Plaintiff alleges that it continued to provide services to Microportal solely because of representations made by officers of the moving defendants that all of the defendants shared accounts, possessed the resources to satisfy Microportal's obligations to plaintiff, and would pay plaintiff. Plaintiff's former president, Danton Mendell, states in an affidavit that Microportal's senior executives advised him that they also held positions with Worldspy and iCentennial. Another representative, Andrea Olenik, told him that she worked for Microportal, Worldspy and iCentennial, and that one executive, Henry Schachar, "called the shots" for all three companies. Mendell Aff. at 3. Mendell asserts that when he sought assurances of payment from September, 1999 through May, 2000, Olenik and Schachar replied that funds from Worldspy or other related entities would be used to pay plaintiff. Id. Defendants deny making these representations.
The business cards for Schachar and for George Coulter, who assisted in negotiations on behalf of Microportal with plaintiff, bear the business names of iCentennial, Worldspy, Microportal, and others. Ex. A to Mendell Aff. The former Chief Executive Officer for plaintiff, Patrick Charley, states in an affidavit that his initial dealings with Microportal involved Schachar and Alan Clingman. Charley Aff. at 2. Jeff Frank later became the Microportal CEO, but allegedly repeatedly told Charley that Schachar made the decisions as to "where the money came from and who got paid." Id. Schachar told Charley that Schachar often had to "move money around" to pay plaintiff, and repeatedly indicated that he was involved with Microportal, Worldspy, iCentennial and Centennial as an executive or board member. Id. In e-mail exchanges regarding overdue payments that followed the contract termination between plaintiff and Microportal, Frank assured Charley that plaintiff's concerns were "on the top of my list, and of Henry's [Schachar]." Ex. B to Charley Aff.
In light of these assertions and circumstances, plaintiff alleges that it was induced to deal with and extend credit to Microportal, because the moving defendants shared staff and funds with Microportal and indicated a willingness to be responsible for Microportal's debt to plaintiff. In early 2000, plaintiff prepared an addendum to its agreement with Microportal, and also extended a $325,000 credit limit to Microportal. Plaintiff claims it did so based upon assurances that Microportal would meet its obligations through the accounts of the moving defendants and other commingled entities.
In late April, 2000, plaintiff was compelled to issue a 30-day notice of termination of services to Microportal due to non-payment. In subsequent attempted telephone calls to Microportal, representatives for plaintiff were connected to voice mail systems for Centennial and Worldspy, and Microportal was no longer identified. In May, 2000, plaintiff's officers were told that Microportal could not pay its obligations because Microportal was owed money by Worldspy, its primary customer and corporate affiliate. In late May, 2000, Olenik, titled as the Senior Vice President of Finance for Worldspy, faxed a promissory note to plaintiff in the amount of $533,403.19. The note was accompanied by a Worldspy cover sheet, bore the return telephone number to iCentennial, and was signed by Alan Clingman, previously represented to plaintiff as an officer for Microportal. Plaintiff proceeded with this lawsuit in July, 2000, asserting that Microportal breached its contract and alleging that the moving defendants made false misrepresentations to plaintiff.
Specifically, in the Fourth Claim to its lawsuit, plaintiff sues the moving defendants for fraud and misrepresentation, alleging that these defendants knowingly made false representations that their funds were commingled with Microportal and would be available to pay Microportal's obligations to plaintiff. In the Fifth Claim for "Disregard of Corporate Form," plaintiff initially alleged that Worldspy and Centennial carried out commingled business activities and engaged in improper conduct while exercising control over Microportal. The moving defendants seek dismissal of these claims, arguing that this court lacks personal jurisdiction over them. Plaintiff responds by asserting that personal jurisdiction as to each of the moving defendants exists on the Fourth Claim, and that personal jurisdiction as to iCentennial exists on the Fifth Claim.
STANDARDS FOR A MOTION TO DISMISS
On a Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction, plaintiff bears the burden of establishing jurisdiction. American Telephone Telegraph Co. v. Compagnie Bruxelles Lambert, 94 F.3d 586, 588 (9th Cir. 1996); Farmers Ins. Ex. v. Portage la Prairie Mut. Ins. Co., 907 F.2d 911, 912 (9th Cir. 1990). "Where a district court acts on a defendant's motion to dismiss under Rule 12(b)(2) without holding an evidentiary hearing, the plaintiff need make only a prima facie showing of jurisdictional facts to withstand the motion to dismiss." Ballard v. Savage, 65 F.3d 1495, 1498 (9th Cir. 1995). Accordingly, the plaintiff needs to demonstrate facts that, if true, would support jurisdiction over the defendant. Id. If there are factual disputes arising in jurisdictional allegations, the disputes are resolved in the plaintiff's favor. Lake v. Lake, 817 F.2d 1416, 1420 (9th Cir. 1987).
Personal jurisdiction over a non-resident defendant is tested by a two-part analysis: the exercise of jurisdiction must (1) satisfy the requirements of the long-arm statute of the state in which the district court sits; and (2) comport with principles of federal due process. Fireman's Fund Ins. Co. v. National Bank of Cooperatives, 103 F.3d 888, 893 (9th Cir. 1996); Chan v. Society Expeditions, Inc., 39 F.3d 1398, 1404-05 (9th Cir. 1994), cert. denied, 514 U.S. 1004 (1995); Terracom v. Valley Nat. Bank, 49 F.3d 555, 559 (9th Cir. 1995); Ziegler v. Indian River Courts, 64 F.3d 470, 473 (9th Cir. 1995).
The relevant state statute applies even when the cause of action is purely federal. Fed.R.Civ.P. 4(k). Under Or. R. Civ. P. 4L, Oregon courts assert jurisdiction to the extent permitted by federal due process, even if none of the specific rules concerning jurisdiction is satisfied. This court, therefore, may proceed directly to a determination of whether the assertion of jurisdiction here comports with the requirements of federal due process. Gray Co. v. Firstenberg Mach. Co., 913 F.2d 758, 760 (9th Cir. 1990) (citing Or. R. Civ. P. 4L); Oregon ex rel. Hydraulic Servocontrols Corporation. v. Dale, 294 Or. 381, 384 (1982)).
Oregon's long-arm statute identifies instances where the court may exercise personal jurisdiction over a defendant. Under Rule 4L, the statute states "[n]otwithstanding a failure to satisfy the requirement of sections B through K of this rule, [personal jurisdiction exists] in any action where prosecution of the action against a defendant in this state is not inconsistent with the Constitution of this state or the Constitution of the United States."
The due process clause of the United States Constitution protects persons from being subject to the binding judgments of a forum with which they have established no meaningful contacts, ties, or relations. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 471-72 (1985) (citing International Shoe Co. v. State of Washington, 326 U.S. 310, 319 (1945)). Jurisdiction is proper only where the defendant's conduct and connection with the forum state are such that the defendant should reasonably anticipate being brought into court in the forum state. World-Wide Volkswagen Corporation. v. Woodson, 444 U.S. 286, 297 (1980). The minimum contacts may be demonstrated through facts supporting either "general personal jurisdiction" or "specific personal jurisdiction." Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 (1984); Sher v. Johnson, 911 F.2d 1357, 1361 (9th Cir. 1990). General jurisdiction refers to the authority of a court to hear any cause of action involving a defendant, regardless of whether the cause of action arose from the defendant's activities within the forum state. Helicopteros, 466 U.S. at 415. In order for a court to assert general jurisdiction, the defendant must have "continuous and systematic" contacts with the forum state. Id. at 416.
Where the defendant's contacts with the forum are not continuous and systematic, the forum may exercise only specific personal jurisdiction. Specific personal jurisdiction refers to a situation in which the cause of action arises directly from a defendant's contacts with the forum state, and in the Ninth Circuit is determined by the following three-part test:
(1) The nonresident defendant must purposefully direct activities or consummate some transaction with the forum or resident thereof; or perform some act by which defendant purposefully avails itself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws;
(2) the claim must be one which arises out of or relates to the defendant's forum-related activities; and
(3) the exercise of jurisdiction must comport with fair play and substantial justice, and must be reasonable.
See Ballard, 65 F.3d at 1498; Core-Vent Corp. v. Nobel Industries AB, 11 F.3d 1482, 1485 (9th Cir. 1993); Roth v. Garcia Marquez, 942 F.2d 617, 620 (9th Cir. 1991). Pursuant to the following analysis, this court concludes that there is specific personal jurisdiction over the moving defendants. While this conclusion, for practical purposes, renders the question of general personal jurisdiction moot, the court notes that there is no evidence that the moving defendants enjoyed continuous and systematic contacts with the forum. Accordingly, this court would find that an application of general personal jurisdiction is inapplicable.
Worldspy acknowledges that it may have conducted some internet sales in Oregon between October, 1999 and May, 2000, and Olenik submits a Second Declaration indicating that Worldspy's sales to Oregon constituted just over one-half of one percent of its business during the period in question. There are no grounds for determining that such sales constituted "continuous and systematic" contacts in Oregon, however. See Millennium Enterprises, Inc. v. Millennium Music, LP., 33 F. Supp.2d 907, 921 (D.Or. 1999) (no personal jurisdiction over a defendant offering to make sales over an Internet Web site, in part because defendants did not take action creating "a substantial connection" with Oregon, did not deliberately engage in "significant activities" within Oregon, and did not create "ongoing obligations" with residents of Oregon in a manner related to plaintiff's claims, although the court suggested that the result might be different if transactions with Oregon residents had been consummated).
ANALYSIS
1. FOURTH CLAIM FOR FRAUD AND MISREPRESENTATION1. Purposeful Availment
"This purposeful availment requirement ensures that a defendant will not be haled into a jurisdiction solely as a result of random, fortuitous, or attenuated contacts, or of the unilateral activity of another party or third person." Burger King, 471 U.S. at 475 (citations and internal quotation marks omitted) (merely contracting with a resident of a forum state is insufficient to confer specific jurisdiction over a nonresident).
The moving defendants argue that none of them shared any business relationship with plaintiff and never entered into any contractual relationship. Plaintiff's allegations, which are accompanied by supporting affidavits, are that representatives for the moving defendants indicated they would satisfy Microportal's obligations. Defendants deny this, and have also submitted supporting affidavits. While the parties' affidavits present markedly different accounts of the parties' relationship, and appear to frame issues of material fact that will have to be resolved, plaintiff has made an adequate prima facie showing of jurisdictional facts, which are assumed to be true, to withstand the motion to dismiss.
The parties dispute whether plaintiff's Fourth Claim for Relief is properly characterized as a claim to enforce a guarantee, or a tort claim for fraudulent inducement. An out-of-state guarantor of a debt is not subject to personal jurisdiction unless the guarantor's conduct played an integral part in causing important economic consequences in this state. See State ex rel. Sweere v. Crookham, 289 Or. 3, 9-10, 609 P.2d 361, 364 (1980). Defendants contend that, despite plaintiff's assertions of tortious misrepresentation, its Fourth Claim against the moving defendants is founded upon allegations of a breach of a guarantee. Accordingly, the moving defendants argue, the standards for finding personal jurisdiction in guarantor cases apply.
Plaintiff relies upon the Ninth Circuit's ruling in Data Disc, Inc. v. Systems Tech Assoc., 557 F.2d 1280 (9th Cir. 1977). In that decision, the plaintiff alleged that the defendant's employee made material misrepresentations upon which the plaintiff relied, and supported the allegations with an affidavit. The defendant denied making these misrepresentations. The Ninth Circuit concluded that jurisdiction over the defendant was justified in part because of the facts asserted in plaintiff's misrepresentation claim. Id. at 1288.
This court concludes that under either side's theories, this court has personal jurisdiction over the moving defendants for the Fourth Claim. From a pleading standpoint, plaintiff's allegations indicate that the moving defendants' conduct played an integral part in causing important economic consequences in Oregon. Moreover, Data Disc provides sufficient guidance to steer this court away from having to preliminarily resolve factual disputes such as those presented here. See Data Disc, 557 F.2d at 1285. While this court has the discretion to compel the taking of discovery to attempt to resolve factual disputes in jurisdictional challenges, the jurisdictional facts here are intertwined with the merits. In accordance with the Ninth Circuit's specific reasoning on this point, this court elects to allow plaintiff to establish jurisdiction with a prima facie showing so as to avoid potentially prejudicing plaintiff's case on the merits. See id. at 1285, n. 1; 1285-86, n. 2. Having limited plaintiff's proof to written materials, this court may find personal jurisdiction upon a demonstration of facts that support such a finding. Id. at 1285. Plaintiff has made such a showing. As alleged by plaintiff, its officers were repeatedly told by executives for Microportal and the moving defendants that the funds to pay plaintiff came from, and would continue to come from, accounts of the moving defendants. Plaintiff was told that one executive "called the shots" for all of these entities, and this executive referred to "moving money around" to pay plaintiff. The business cards of several executives indicate affiliations with Microportal and the moving defendants, and support plaintiff's allegations. These factual assertions support finding personal jurisdiction over the moving defendants because, if true, they indicate that these defendants worked closely with Microportal to obtain and preserve a contractual relationship with plaintiff.
If Microportal shared, or commingled, assets and accounts with the moving defendants in the manner plaintiff was led to believe, then the moving defendants shared in the benefits Microportal sought to realize in contracting with plaintiff. Consequently, the moving defendants must be said to have purposefully availed themselves of the privilege of conducting activities (with Microportal) in Oregon.
2. Arising Out Of
Claims arise out of a defendant's forum-related activities if plaintiff would not have a cause of action "but for" defendant's contacts with the forum. Ziegler, 64 F.3d at 474. The "but for" test should not be narrowly applied; the requirement ensures that there is a nexus between the cause of action and the defendant's contact with the forum. Shute v. Carnival Cruise Lines, 897 F.2d 377, 385 (9th Cir. 1990), rev'd on other grounds, 499 U.S. 585 (1991). Under the circumstances presented, plaintiff's Fourth Claim arises out of the moving defendants' alleged activities in inducing plaintiff to continue dealing with Microportal, and involve — through Microportal's dealings with plaintiff — contacts with Oregon. Accordingly, the Ninth Circuit's test for "arising out of" the minimum contacts is deemed to be satisfied.
3. Reasonableness of Exercising Jurisdiction
In determining whether exercise of jurisdiction is reasonable, the court must weigh the following seven factors:
(1) the extent of the defendant's purposeful interjection into the forum;
(2) the defendant's burdens created by litigating in the forum;
(3) the extent of conflict with the sovereignty of the defendant's state;
(4) the forum state's interest in adjudicating the dispute;
(5) the most efficient judicial resolution of the controversy;
(6) the importance of the forum to the plaintiff's interest in convenient and effective relief; and
(7) the existence of an alternative forum.
Ziegler, 64 F.3d at 475 (citing Terracom, 49 F.3d at 561). No single factor is dispositive. Terracom at 561 (citing Core-Vent, 11 F.3d at 1488). However, "[o]nce purposeful availment has been established, the forum's exercise of jurisdiction is presumptively reasonable. To rebut that presumption, a defendant must present a compelling case that the exercise of jurisdiction would, in fact, be unreasonable." Ziegler, 64 F.3d at 476 (quoting Roth, 942 F.2d at 625) (internal quotation marks omitted; emphasis in original)).
The court concludes that "purposeful availment" has been established in this case, and the moving defendants present no argument that exercising jurisdiction would be unreasonable.
Accordingly, exercise of personal jurisdiction over these defendants is deemed to be reasonable.
2. FIFTH CLAIM FOR DISREGARDING CORPORATE FORM
In its Fifth Claim for "Disregard of Corporate Form," plaintiff alleged initially that Worldspy and Centennial carried out commingled business activities and engaged in improper conduct while exercising control over Microportal. In response to the moving defendants' motion for dismissal of this claim, plaintiff contends that the court should exercise personal jurisdiction as to iCentennial only. Accordingly, defendants' motion is granted as conceded by plaintiff as to Worldspy and to all other defendants except for iCentennial.
Plaintiff argues that there is personal jurisdiction as to iCentennial because it is Microportal's sole shareholder, and because plaintiff makes a prima facie showing that iCentennial controlled Microportal, engaged in improper conduct, and caused plaintiff to be unable to obtain an adequate remedy from Microportal. The parties agree that this constitutes the applicable test for asserting jurisdiction over a non-resident shareholder. See Amfac Foods v. Int'l Systems, 294 Or. 94, 654 P.2d 1092 (1982); Rice v. Oriental Fireworks Co., 75 Or. App. 627, 632-33, 707 P.2d 1250, 1255 (1985). The court in Rice held that in seeking to establish personal jurisdiction over a shareholder a plaintiff need only make a prima facie showing of the facts necessary to impose personal liability, and "[t]here are three criteria for imposing liability on a shareholder: (1) The shareholder must have controlled the corporation; (2) the shareholder must have engaged in improper conduct in his exercise of control over the corporation; and (3) the shareholder's improper conduct must have caused plaintiff's inability to obtain an adequate remedy from the corporation." 75 Or. App. at 632-33, 707 P.2d at 1255.
Plaintiff's prima facie showing here suggests that as the sole shareholder of Microportal, iCentennial held and exercised control over Microportal, and did so in a manner that caused plaintiff to enter into transactions with Microportal. Allegedly, iCentennial staff made improper representations to plaintiff that related to plaintiff's contractual relations with Microportal and interfered with Microportal's ability to perform its obligations toward the plaintiff. See Amfac, 294 Or. at 110, 654 P.2d at 1102 (misrepresentations which may not be sufficient to constitute fraud can support a recovery against a shareholder on a misrepresentation theory; shareholders can be liable for corporate debts because of misrepresentations by the shareholder to the creditor). This court concludes that plaintiff has made a prima facie showing of personal jurisdiction over iCentennial, but also emphasizes that such a conclusion in no way resolves the liability issues on the merits. See Rice, 75 Or. App. at 632, 707 P.2d at 1255.
CONCLUSION
Because plaintiff presents facts and allegations that, if true, establish that the moving defendants purposefully directed activities toward plaintiff, an Oregon corporation, and performed acts by which they purposefully availed themselves of the privilege of conducting activities in Oregon, defendants' motion to dismiss this action for lack of personal jurisdiction as to the defendants named in the Amended Complaint's Fourth Claim is denied. The motion to dismiss the defendants named to the Fifth Claim is granted except as to iCentennial. This court concludes that plaintiff presents a prima facie case for personal jurisdiction as to that defendant. Defendants' motion to dismiss (doc. # 10-1) is granted in part and denied in part in accordance with this Order and Opinion.
IT IS SO ORDERED.