Opinion
Case No. C2-02-176
October 25, 2002
OPINION AND ORDER
On January 11, 2002, Fiber Network Solutions, Inc. ("Fiber Network") filed suit in the Court of Common Pleas of Franklin County, Ohio for declaratory and injunctive relief against defendants Pacific Bell Telephone Company and SBC Pacific Bell, a registered dba for Pacific Bell Telephone Company, (hereinafter collectively "Pacific Bell") based upon telecommunications services Pacific Bell provided to Fiber Network and subsequently terminated. On February 26, 2002, Pacific Bell removed the case to this Court pursuant to 28 U.S.C. § 1441 and 1446. On March 12, 2002, Pacific Bell filed a motion to dismiss Fiber Network's case for improper venue, or in the alternative to transfer venue pursuant to Fed.R.Civ.P. 12(b)(2) and 28 U.S.C. § 1404(a). On August 9, 2002, Fiber Network responded to Pacific Bell's motion, asserting that venue is proper in this Court. On August 20, 2002, Pacific Bell filed its reply. For the following reasons, the Court concludes that it lacks personal jurisdiction over Pacific Bell. Pacific Bell's motion to transfer this case to the United States District Court for the Northern District of California will be granted.
I.
The following statement of facts is taken from the motions submitted by the parties in connection with the motion to dismiss. The facts are viewed in the light most favorable to Fiber Network. Fiber Network is an internet company with its principal place of business in Columbus, Ohio and another business location in San Jose, California. Pacific Bell is a California corporation with its principal place of business in San Francisco, California. Pacific Bell is a California public utility authorized to provide telecommunications services in California. Pacific Bell is licensed to do business in Ohio for the limited purpose of selling software and maintenance agreements. It is not authorized to provide telecommunications services in Ohio, nor does it have agents or offices in Ohio.
In 1997, Fiber Network's vice president and chief operations officer, Kyle Bacon, visited Pacific Bell's internet website to learn about Pacific Bell's network access point ("NAP") connections. Mr. Bacon left a message at the Pacific Bell telephone number indicated at the website. One of Pacific Bell's sales managers, Larry Jacobi, then contacted Mr. Bacon by telephone at Mr. Bacon's Columbus, Ohio office to discuss Fiber Network's interest in contracting with Pacific Bell for the use of Pacific Bell's NAP. The record indicates that Mr. Jacobi and Mr. Bacon negotiated the contract terms primarily by telephone, facsimile and electronic mail. The parties do not dispute that Mr. Jacobi visited Fiber Network's Columbus, Ohio location at least once, and perhaps twice, dining the term of the contractual relationship.
Pacific Bell began to provide telecommunications services to Fiber Network at Fiber Network's San Jose, California location in October 1992. Between 1998 and 2001, Fiber Networks claims it experienced billing problems with Pacific Bell. As a result, Fiber Network asserts that it began to pay its bills with checks that contained accord and satisfaction language. On January 8, 2002, Pacific Bell terminated telecommunications services to Fiber Network as a result of allegedly unpaid bills. It is on the basis of these facts that the pending motion to dismiss or, alternatively, to transfer venue will be decided.
II.
In order to subject a defendant to the in personam jurisdiction of this Court, the Court must find that the Ohio long arm statute, R.C. § 2307.382, permits the exercise of jurisdiction and that the Court's assertion of jurisdiction is within the limits dictated by due process. National Can Corp. v. K Beverage Co., 674 F.2d 1134 (6th Cir. 1982); Poyner v. Erma Werke GMBH, 618 F.2d 1186, 1187 (6th Cir. 1980), cert. denied, 449 U.S. 841 (1980). Since plaintiff is asserting the existence of jurisdiction, the burden of proof rests upon plaintiff to establish the existence of any minimum contacts between defendants and the forum State of Ohio. KVOS, Inc. v. Associated Press, 299 U.S. 269, 278 (1936); Welsh v. Gibbs, 631 F.2d 436, 438 (6th Cir. 1980), cert. denied, 450 U.S. 981 (1981). However, because the issue of jurisdiction is being determined solely on the basis of briefs and affidavits, plaintiff is required only to make a prima facie showing of jurisdiction, and the Court must consider the pleadings and affidavits in the light most favorable to plaintiff. Welsh v. Gibbs, 631 F.2d at 438-39. If the Court concludes that the written materials raise issues of disputed facts or credibility, it may conduct an evidentiary hearing, in which case the plaintiff must show by a preponderance of the evidence that jurisdiction exists. Data Disc, Inc. v. Systems Technology Associates, Inc., 557 F.2d 1280, 1285 (9th Cir. 1977). The only matters considered by the Court in the case at bar were the written materials submitted by the parties. Therefore, the Court must consider the pleadings and affidavits in a light most favorable to the plaintiff.
The law of the forum state determines whether personal jurisdiction exists over a defendant. The Ohio long-arm statute is not as expansive as the constitutional limits of due process. See Calphalon Corp. v. Rowlette, 228 F.3d 718, 720 (6th Cir. 2000). Nevertheless, the Court must still examine the facts to determine if the exercise of jurisdiction is consistent with traditional notions of fair play and substantial justice. See id.; see also Bird v. Parsons, 289 F.3d 865, 871 (6th Cir. 2002). Thus, this Court will conduct a traditional due process analysis. The due process clause "does not contemplate that a state may make binding a judgment in personam against an individual or corporate defendant with which the state has no contacts, ties, or relations." Worldwide Volkswagen Corp. v. Woodson, 444 U.S. 286, 194 (1980), citing International Shoe Co. v. Washington, 326 U.S. 310, 319 (1945). The minimum contacts necessary to establish jurisdiction in the forum state must be ". . . such that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice.'" International Shoe, 326 U.S. at 316. The minimum contacts test may be satisfied by doing acts in the state that bring about a substantial connection with a state, or cause a known or expected consequence in the state. McGee v. International Life Ins. Co., 355 U.S. 220, 223 (1957). "The two related functions of the minimum contacts requirement are that it protects a defendant from the burden of litigating in an inconvenient forum and prevents the states from reaching out, through their courts, `beyond the limits imposed on them by their status as coequal sovereigns in a federal system.'" American Greetings Corp. v. Cohn, 839 F.2d 1164, 1169 (6th Cir. 1988).
The Sixth Circuit has developed a three-part test for determining whether the particular circumstances in any case provide sufficient contact between a non-resident defendant and the forum state to support the exercise of personal jurisdiction:
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.Southern Machine Co. v. Mohasco Industries, Inc., 401 F.2d 374, 381 (6th Cir. 1968). If the above criteria are satisfied, jurisdiction is appropriate if the facts of the particular case are such that "maintenance of the suit does not offend `traditional notions of fair play and substantial justice.'" International Shoe, 326 U.S. at 316. While this test established a useful analytical framework, each case must be determined on its particular facts. Velandra v. Regie Nationale des Usines Renault, 336 F.2d 292, 295 (6th Cir. 1964).
The first step of the three part analysis enunciated in Southern Machine requires an inquiry into whether a defendant has acted or caused consequences within the forum state. This step requires that the defendant "purposefully avail itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws." Hanson v. Denckla, 357 U.S. 235, 253 (1958). In most cases, it is a common sense inquiry as to "whether the defendant has transacted business within the forum state in the usual, commercial sense of `doing business.'" American Greetings Corp. v. Cohn, 839 F.2d 1164, 1169 (6th Cir. 1988). This provision is designed to ensure that a plaintiffs unilateral activity will not "drag an unsuspecting and unwilling defendant into a foreign forum." In-Flight Devices Corp. v. Van Dusen Air, Inc., 466 F.2d 220, 226 (6th Cir. 1972). It is a "baseline" requirement that the defendant has become involved with the forum state through actions freely and intentionally done, which have effects in the forum state. Id. at 228.
The second part of the Southern Machine test requires an analysis of whether the plaintiffs cause of action arises out of or is related to the defendant's contacts with the forum state. The third part of the Southern Machine test requires inquiry into whether a defendant's conduct establishes a ". . . substantial enough connection with the forum state to make the exercise of jurisdiction over the defendant reasonable." Southern Machine, 401 F.2d at 381. This analysis requires a determination whether the Court's exercise of jurisdiction would offend "traditional notions of fair play and substantial justice," International Shoe, 326 U.S. at 316, and whether the defendant's conduct relating to the forum was such that he should reasonably anticipate being haled into court here. Worldwide Volkswagen, 444 U.S. at 197. in reaching the decision on fair play and substantial justice, the court must consider such factors as the burden on the defendant, the interest of the forum state, the plaintiffs interest in obtaining relief, and the interest of other states in securing the most efficient resolutions of controversies. American Greeting Corp., 839 F.2d at 1169-70, citing Asahi Metal Industry Co., Ltd. v. Superior Court of California, 480 U.S. 102, 113 (1987). When the first two elements of the Southern Machine test have been met, an inference arises that the third is also present. First National Bank of Louisville v. J. W. Brewer Tire Co., 680 F.2d 1123, 1126 (6th Cir. 1982).
In the case at bar, Fiber Network has not met the burden of demonstrating personal jurisdiction under the three part Southern Machine analysis. First, the Court concludes that Pacific Bell has not purposefully availed itself of the privilege of conducting activities within the forum state. Although Pacific Bell maintained a website through which Mr. Bacon learned more about Pacific Bell's telecommunications services, a passive internet site alone is not grounds for exercise of personal jurisdiction over the company who controls it. See Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119, 1124 (W.D.Pa. 1997). Although Fiber Network has characterized Pacific Bell's website as "interactive," it has not produced any evidence to support this claim. Further, the record is clear that Mr. Bacon initiated contact with Pacific Bell by leaving a telephone message and that Pacific Bell merely responded to that contact.
Fiber Network also asserts that the contractual relationship between the parties gives rise to grounds for exercise of personal jurisdiction. However, "mere existence of a contract . . . is insufficient to confer personal jurisdiction over [defendant]." Calphalon, 228 F.3d at 722. The Sixth Circuit has required an analysis of the quality of the relationship between the parties as a result of that contract in order to determine whether it may exercise personal jurisdiction over the defendant. See id. In the case at bar, the most that can be said is that Mr. Jacobi visited Ohio at least once as a result of the contract between Pacific Bell and Fiber Network. However, one or two visits by a representative of Pacific Bell to Ohio does not rise to the level of purposeful availment. See id. at 723. In fact, Mr. Jacobi's visits to Ohio occurred only because Fiber Network was headquartered there. The contract itself was performed in California where Pacific Bell provided telecommunications services to Fiber Network's San Jose, California location.
Concerning the second part of the Southern Machine analysis, Fiber Network's cause of action does not arise out of nor is it related to Pacific Bell's contacts with Ohio. The cause of action arises out of Pacific Bell's termination of telecommunications services to Fiber Network's San Jose, California location and out of the billing disputes that led to the termination. Therefore, the cause of action arises out of Pacific Bell's contact with Fiber Network's San Jose, California location and not out of contact with Fiber Network's headquarters in Columbus, Ohio, even if the Ohio office was involved in the billing dispute. See Kerry Steel, Inc. v. Paragon Indus., Inc., 106 F.3d 147, 151 (6th Cir. 1997) (explaining that the impact on an in-state bank account is insufficient to establish minimum contacts).
Further, Fiber Network's claim that Pacific Bell's license to do business in Ohio gives rise to personal jurisdiction is unavailing. Pacific Bell's license to do business in Ohio is for the limited purpose of selling software and maintenance agreements. Even so, the mere fact that a defendant is licensed to do business in a state does not establish the requisite minimum contacts with that stato. See Speck v. Mutual Service Life Ins. Co., 65 Ohio App.3d 812, 816 (Cuyahoga Co. 1990). In fact, Pacific Bell was not even authorized to provide telecommunications services in Ohio, the heart of its contractual relationship with Fiber Network. Therefore, Fiber Network's cause of action does not arise out of Pacific Bell's contacts with Ohio.
Regarding the third part of the Southern Machine analysis, Pacific Bell's conduct has not established enough connection with Ohio to make exercise of jurisdiction over Pacific Bell reasonable. As outlined above, Pacific Bell had very limited contact with Fiber Network's Ohio headquarters. Therefore, Pacific Bell's conduct was not such that it could reasonably anticipate being haled into court in Ohio. See Worldwide Volkswagen, 444 U.S. at 197. Pacific Bell contracted to provide services in California and it is not reasonable to expect that a dispute over those services would be litigated in Ohio simply because Fiber Network is headquartered in Ohio. Thus, exercise of jurisdiction by this Court would offend the "traditional notions of fair play and substantial justice." International Shoe, 326 U.S. at 316. Because the three part test outlined in Southern Machine has not been met, this Court lacks jurisdiction over Pacific Bell.
Pursuant to 28 U.S.C. § 1631, the Court may transfer this action to a court in which the action could have been brought at the time it was filed. Pacific Bell has requested that this Court transfer the case to the United States District Court for the Northern District of California and Fiber Network has not suggested otherwise. Because Pacific Bell is a California corporation with a principal place of business in San Francisco, California, Fiber Network could have brought the action in a California court under principles of general jurisdiction arising from Pacific Bell's "systematic and continuous" contact with California. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414-416 (1984); see Zippo, 952 F. Supp. at 1122. Further, San Jose, the city in which Fiber Network's California operation is located, is within the Northern District of California. Therefore, this Court will transfer the action to the United States District Court for the Northern District of California at San Jose. See 28 U.S.C. § 84.
III.
Based on the foregoing, Pacific Bell's motion to transfer venue to the Northern District of California (file doc. #5) is GRANTED. This case is TRANSFERRED to the United States District Court for the Northern District of California at San Jose.