Opinion
Case No. 4:07CV1216SNL.
October 29, 2007
ORDER
In accordance with the memorandum filed herein this date,
IT IS HEREBY ORDERED that defendants' motion to dismiss (#11) be and is GRANTED. IT IS FINALLY ORDERED that this cause of action be and is DISMISSED WITH PREJUDICE with no further action to be taken.
MEMORANDUM
Plaintiff filed its complaint for injunctive relief alleging breaches of primarily its termination agreement with the defendants. With the verified complaint, plaintiff filed a motion for preliminary injunction (#2), filed July 3, 2007. In response to this motion, the defendants filed a motion to dismiss for lack of subject matter jurisdiction; lack of personal jurisdiction; and for improper venue (#11), filed August 6, 2007. On or about August 9, 2007 this Court ordered both motions be argued before the Court on August 23, 2007. See, Court Order #12. On August 23, 2007 this Court heard argument by the parties' counsel regarding the issues raised by the pending motions. The matter is now ripe for disposition.
The Court will address the significance, if any, of the original Franchise Agreement, later in this memorandum.
The Court must first address the jurisdictional and/or venue question. If the Court finds that jurisdiction and venue lie properly with this Court, then it will address the issue of injunctive relief.
Defendants challenge this Court's exercise of subject matter jurisdiction; as well as personal jurisdiction over them. They assert that although there is diversity of citizenship between the plaintiff and the defendants; the plaintiff has failed to assert (with any specificity) that the jurisdictional amount; i.e., the value of the injunction requested, exceeds $75,000.00. They further assert that as non-residents of Missouri, they have not engaged in any of the required activities within Missouri to satisfy Missouri's long-arm statute, § 506.500 R.S.Mo. They further contend that even if the Court were to find that their activities satisfy Missouri's long-arm statute, the assertion of personal jurisdiction violates due process because the defendants have not had sufficient minimum contacts with Missouri. As for venue, since the defendants do not reside in Missouri, none of the events allegedly giving rise to this lawsuit occurred in Missouri, and the Court lacks personal jurisdiction over them, then venue is improper in the Eastern District of Missouri.
Plaintiff contends that the defendants' activities; i.e. breaches, do satisfy Missouri's long-arm statute. It argues that the defendants have transacted business in Missouri by visiting to negotiate the franchise agreement and to attend franchise-related meetings and have committed tortious acts with consequences in Missouri by failing to return all proprietary information and competing with plaintiff's attempts to establish a new franchise in the defendants' territory. It further contends that exercising long-arm personal jurisdiction over the defendants will not offend due process because the defendants have had sufficient minimum contacts with Missouri via visitation to Missouri, telephone and e-mail communications to Missouri, and submission of franchise fees and other payments to plaintiff in Missouri. Plaintiff also asserts that due process concerns are eliminated because the defendants' extraterritorial acts produced foreseeable consequences in Missouri; i.e, the loss of business revenue for the plaintiff due to inability to procure a new franchisee in same territory as the defendants' competing business. Finally, the plaintiff argues that the choice of law provision (Missouri) in both the original Franchise Agreement and the Termination Agreement; as well as a choice of forum provision (Missouri) in the original Franchise Agreement favors a Missouri court adjudicating this dispute.
The facts as determined by this Court applicable to the issue of jurisdiction are as follows: Plaintiff is a Missouri corporation doing business franchising its operation and promotion of interior and exterior window cleaning and home and office cleaning services ("the Fish Window Cleaning System"). Defendant Golden Deep South Enterprises is a limited liability company organized under the laws of the State of Florida, with its principal place of business in Cairo, Georgia. Defendant Charles Golden is a resident of the State of Florida. The defendants do not own real or personal property in Missouri, have never done business in Missouri, are not registered to do business in Missouri, and do not have a registered agent for service in Missouri.
In March 2004, after negotiations between the parties via telephone and/or e-mail communications to and from their respective domiciles, the parties entered into a Franchise Agreement. The Franchise Agreement was drafted and signed by plaintiff in Missouri, then sent for signature and execution by defendant Golden. Once signed by the defendant in Georgia, it was returned to plaintiff in Missouri. The obligations and the duties of the defendant under the Franchise Agreement were primarily fulfilled outside of Missouri; i.e, the cleaning services provided by the defendant and customers solicited for these services were located in Florida and/or Georgia.
For purposes of this memorandum, defendant Charles Golden and defendant Golden Deep South Enterprises are treated one in the same.
Defendant Golden traveled to Missouri in January 2004 for a "discovery day" to learn about plaintiff's operation prior to negotiating a franchise agreement. After entering into said agreement, defendant Golden traveled to Missouri for several days to attend a training session in April 2004. Defendant Golden traveled to Missouri for the 2005 and 2006 annual meetings of Fish Window Cleaning. During the relevant time the Franchise Agreement was in force, many e-mails were sent out by plaintiff to all franchisees, including the defendants.
Defendant Charles Golden has filed a supplemental affidavit attesting that, contrary to the affidavit of Benjamin Mudd, Golden did not travel to Missouri to attend a power washing training session in 2006, nor did he travel to Missouri to attend plaintiff's 2004 Annual Meeting.
In March 2007 defendants contacted plaintiff wishing to terminate their franchise relationship. Plaintiff drafted the Termination Agreement in Missouri and sent same to defendants to sign and execute in Georgia. Upon signing the Termination Agreement (on April 27, 2007), defendants sent it to plaintiff by facsimile. All negotiations and discussions concerning the Termination Agreement were conducted either by telephone or by e-mail while defendants remained in Georgia. Following the execution of the Termination Agreement, there was no longer any contact between the parties until this lawsuit.
The Termination Agreement supercedes the Franchise Agreement in all respects except for any obligations expressly set forth in the Termination Agreement:
"1. Termination of the Franchise Agreement: Except for the obligations set forth in this Agreement, the Franchise Agreement and all rights and obligations thereunder are hereby terminated, as of the Effective Date, with no further force and effect."
The obligations re-affirmed in the Termination Agreement, included but not limited to, refraining from operating a competing business for a period of one-year; to return to plaintiff all confidential and proprietary information, such as customer lists; and to pay past-due franchise fees. Although the Franchise Agreement contained both a "choice-of-law" and "choice-of-forum" provisions (Missouri), the Termination Agreement only has a "choice-of-law" provision (Missouri) in it.
When the Court inquired as to this difference, counsel for the plaintiff did not have an explanation as to why the Termination Agreement did not have a "choice-of-forum" provision naming Missouri.
Plaintiff filed their complaint, in Missouri, against the defendants on July 3, 2007. Essentially, plaintiff alleges that defendants have violated obligations pursuant to the Termination Agreement. Although plaintiff refers to obligations under the Franchise Agreement and breaches thereunder, plaintiff concedes that the Franchise Agreement has been terminated and plaintiff no longer has "direct control over Defendants as franchisees.". Plaintiff's Complaint, pg. 9, ¶ 38.
According to the testimony at the hearing, and the submitted affidavits, defendants' "competing business" has, as of August 17, 2007, ceased all operations and all customer contacts within the former franchise territory. Furthermore, as of June 22, 2007, plaintiff has a new Fish Window Cleaning franchise operating in the defendants' former franchise territory. Finally, as to the substantive issues raised in the complaint, said issues are being currently arbitrated between the parties.
When personal jurisdiction is challenged, the plaintiff bears the burden to show that jurisdiction exists. Dever v. Hentzen Coatings, 380 F.3d. 1070, 1072-73 (8th Cir. 2004); Epps v. Stewart Information Services Corp., 327 F.3d. 642, 647 (8th Cir. 2003); Burlington Industries v. Maples Industries, 97 F.3d. 1100, 1102 (8th Cir. 1996); Gould v. P.T. Krakatau Steel, 957 F.2d. 573, 575 (8th Cir. 1992); Enterprise Rent-A-Car Co. v. Stowell, 137 F.Supp.2d. 1151, 1154 (E.D.Mo. 2001). To successfully survive a motion to dismiss challenging personal jurisdiction, a plaintiff must make a prima facie showing of personal jurisdiction over the challenging defendant. Dever, at 1072-73;Epps, at 647; Clune, et. al. v. Alimak AB, et. al., 233 F.3d. 538, 541 (8th Cir. 2000); Falkirk Mining Co. v. Japan Steel Works, 906 F.2d. 369, 373 (8th Cir. 1990); Enterprise Rent-A-Car, supra., citing Digi-Tel Holdings, Inc. v. Proteq Telecommunications, Ltd., 89 F.3d. 519, 522 (8th Cir. 1996); see also, Conway v. Royalite Plastics, 12 S.W.3d. 314, 318 (Mo. 2000); Products Plus v. Clean Green, 112 S.W.3d. 120, 122 (Mo.App. 2003); Johnson Heater Corp. v. Deppe, 86 S.W.3d. 114, 119 (Mo.App. 2002). A plaintiff's prima facie showing must be tested "not by pleadings alone, but by affidavits and exhibits presented with the motions and in opposition thereto." Dever, at 1072 (citations omitted); see, Stevens v. Redwing, 146 F.3d. 538, 543 (8th Cir. 1998) (when considering whether personal jurisdiction exists under Missouri long-arm statute, court may inquire by affidavits or otherwise into the facts as they exist). Although a court must view evidence in a light most favorable to the plaintiff and resolve factual conflicts in the plaintiff's favor; the party seeking to establish the court's personal jurisdiction carries the burden of proof, and the burden does not shift to the party challenging jurisdiction. Epps, at 647.
In a diversity action, a federal court may exercise personal jurisdiction over a non-resident defendant only to the extent permitted by the forum state's long-arm statute and the Due Process Clause. Romak USA v. Rich, 384 F.3d. 979, 984 (8th Cir. 2004) citing Dever, at 1073. Therefore, Missouri law, as well as federal law applying Missouri law, is relevant to the issue of personal jurisdiction in this case.
There are two prerequisites to a finding of personal jurisdiction over a non-resident defendant: firstly, the forum state's long-arm statute must be satisfied; and secondly, the exercise of jurisdiction does not violate the due process clause of the Fourteenth Amendment. Stanton v. St. Jude Medical, 340 F.3d. 690, 693 (8th Cir. 2003); St. Jude Medical, Inc. v. Lifecare International, 250 F.3d. 587, 591 (8th Cir. 2001);Clune, at 541; Stevens v. Redwing, at 543; Burlington Industries, at 1102. Since Missouri courts have found that its long-arm statute extends jurisdiction over non-resident defendants to the extent permissible under the Due Process Clause of the Fourteenth Amendment, this Court need only determine whether plaintiff's assertion of personal jurisdiction has satisfied due process. See, Romak USA, at 984; Porter v. Berall, 293 F.3d. 1073, 1075 (8th Cir. 2002); Clune, at 541 citing State v. Wiesman, 627 S.W.2d. 874, 876 (Mo. 1982) and State v. Pinnell, 454 S.W.2d. 889, 892 (Mo. 1970); Enterprise Rent-A-Car, at 1155 (citations omitted); see, Oriental Trading Co. v. Firetti, 236 F.3d. 938, 943 (8th Cir. 2001) (when a state construes its long-arm statute to grant jurisdiction to the fullest extent permitted under the Constitution, the two-step inquiry collapses into a single question of whether the exercise of personal jurisdiction comports with due process).
Due process requires that a plaintiff show that a non-resident defendant have "minimum contacts" with the forum state and that the maintenance of the lawsuit does not offend "traditional notions of fair play and substantial justice". World-Wide Volkswagon v. Woodson, 444 U.S. 286, 291-92 (1980); International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945); see, Asahi Metal Industry Co. Ltd. v. Superior Court of California, Solano County, 480 U.S. 102, 109-12 (1987); Stanton v. St. Jude Medical, 340 F.3d. at 693; Epps, at 647-48; Clune, at 541-42 citing International Shoe; Burlington Industries, at 1102 citing World-Wide Volkswagen v. Woodson, 444 U.S. 286, 291-92 (1980));Guiness Import Co. v. Mark VII Distributors, et. al., 153 F.3d. 607, 614 (8th Cir. 1998); Enterprise Rent-A-Car, at 1155 citing International Shoe. Minimum contacts with the forum state must be sufficient so that a non-resident defendant should reasonably anticipate being haled into court there. World-Wide Volkswagon, 444 U.S. at 297; Stanton, at 694; Epps, at 648. Minimum contacts can cover a plethora of activities; however, "[t]he baseline for minimum contacts is `some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.'" Clune, at 542 quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985); see, Romak USA, at 984; Dever, at 1073; Stanton, at 693; Epps, at 648-49; Guiness Imports, at 614.
The "`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 a third person'".Stanton, at 693-94 quoting Burger King, 471 U.S. at 475 (citations omitted); see also, Epps, at 648; Guiness Imports, at 614. "`Jurisdiction is proper, however, where the contacts proximately result from actions by the defendant himself that create a `substantial connection' with the forum state.'"Stanton, at 694 quoting Burger King, 471 U.S. at 475. That is, in a case such as this involving specific jurisdiction, "jurisdiction is viable only if the injury giving rise to the lawsuit occurred within or had some connection to the forum state. In other words, the cause of action must `arise out of' or `relate to' a defendant's activities within a state." Romak USA, at 984 (internal citations omitted).
Based upon the due process standard espoused by World-Wide Volkswagon and International Shoe, supra., and their progeny, the Eighth Circuit Court of Appeals has established a five-factor test to determine the sufficiency of the non-resident defendant's contacts with the forum state. These five factors are: 1) the nature and quality of contacts with the forum state; 2) the quantity of contacts; 3) the relation of the cause of action to the contacts; 4) the interest of the forum state in providing a forum for its residents; and 5) convenience of the parties. Romak USA, at 984; Dever, at 1073-74; Stanton, at 694; Epps, at 648;Guiness Imports, at 614; Burlington Industries, at 1102; see also, Products Plus, at 124. The first three factors are of "primary importance", while the last two factors are of "secondary importance" and as such are not determinative of personal jurisdiction. Romak USA, at 984;Dever, at 1074; Stanton, at 694; Guiness Imports, at 614.
As stated before, normally since Missouri courts have already well-established that Missouri's long-arm statute authorizes the exercise of personal jurisdiction over nonresidents to the extent permissible under the Due Process Clause, this Court would go directly to the due process analysis. However, defendants adamantly argue that they have not engaged in any acts which would fall within the purview of Missouri's long-arm statute in the first place. Two activities enumerated in Missouri's long-arm statute are at issue here: transacting business within the state and the commission of a tortious act within the state. § 506.500.1 R.S.Mo.
For purposes of § 506.500.1 R.S.Mo., the phrase "transaction of any business" is construed broadly. Anheuser-Busch, Inc. v. All Sports Arena Amusement, Inc., 244 F.Supp.2d. 1015, 1018 (E.D.Mo. 2002); Products Plus, at 124; Johnson Heater Corp., at 119-20;Capital Indemnity Corp. v. Citizens National Bank of Fort Scott, N.A., 8 S.W.3d. 893, 904 (Mo.App. 2000). A single transaction may suffice to confer jurisdiction, if that transaction gives rise to the lawsuit. Anheuser-Busch, at 1018; Products Plus, at 124;Johnson Heater Corp., at 119-20; Capital Indemnity Corp., at 904. Use of the mail or telephone communications, without more, does not constitute the transaction of business for purposes of long-arm jurisdiction. Anheuser-Busch, at 1018; Johnson Heater Corp., at 120; Capital Indemnity, at 904; see also, Primus Corp. v. Centreformat Ltd., 221 Fed.Appx. 492, 493-94 (8th Cir. 2007).
The parties cite to Primus Corp., supra. as significant to the resolution of this matter. The Court has reviewed this case, and although an unpublished opinion, it is very helpful in providing guidance to this Court in addressing the personal jurisdiction issue before the Court.
In order to bolster its position regarding defendants' transaction of business in Missouri, plaintiff argues that the defendants' "continuous and substantial contractual relationship" with Fish Window Cleaning Services constitutes the transaction of business in Missouri.
An individual's contract with an out-of-state party alone cannot establish personal jurisdiction. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 478 (1985); see also, Bell Paper Box, Inc. v. Trans Western Polymers, Inc., 53 F.3d. 920, 922 (8th Cir. 1995). "Merely entering into a contract with a forum resident does not provide the requisite contacts between a nonresident defendant and the forum state." Iowa Elec. Light Power Co. v. Atlas Corp., 603 F.2d. 1301, 1303 (8th Cir. 1979); Bell Paper Box, at 922 quoting Iowa Elec. Light Power, supra.; Anne Carlsen Center for Children v. Government of the United States, Virgin Islands, 356 F.Supp.2d. 1023, 1029-30 (D.N.D. 2005) quoting Iowa Elec. Light Power, supra.; Lindgren v. GDT, L.L.C., 312 F.Supp.2d. 1125, 1131 (S.D.Iowa 2004) quoting Iowa Elec. Light Power, supra. The Supreme Court in Burger King, supra. 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.'" Burger King, 471 U.S. at 478-79 (internal citations omitted); see also, Anne Carlsen Center for Children, at 1030. To facilitate this "highly realistic" approach, the Supreme Court stated "[i]t is these factors prior negotiations and contemplated future consequences, along with the terms of the contract and the parties' actual course of dealing that must be evaluated in determining whether the defendant purposefully established minimum contacts with the forum." Burger King, 471 U.S. at 479; see also, Anne Carlsen Center for Children, at 1030.
In the present case, the parties negotiated for a franchise in Georgia, with the contract being executed in Georgia. The work contemplated by the contract was to be performed in Florida/Georgia and franchise payments were generated in Florida/Georgia in connection with this work (although admittedly sent to plaintiff in Missouri). The plaintiff's claims arise from acts occurring outside of Missouri in connection with the "contractual relationship" between plaintiff and defendants. Thus, the defendants' contracts cannot be the basis for establishing jurisdiction under Missouri's long-arm statute provision regarding the "transaction of business" in the forum state.
The Court is mindful that a choice-of-law provision referencing Missouri law is contained in the subject contracts. However, "[a]lthough relevant to the jurisdictional question, a contractual choice of law clause is insufficient to confer jurisdiction without other `deliberate affiliation' with the forum." Bell Paper Box, at 923 citing Burger King, 471 U.S. at 482; see also, Northwest Airlines v. Astraea Aviation Services, 111 F.3d. 1386, 1390 (8th Cir. 1997). Absent evidence of other "deliberate affiliation" with Missouri, as discussed above, the Court does not find that the inclusion of a choice-of-law provision referencing Missouri law confers personal jurisdiction under either Missouri's long-arm statute or due process analysis.
This leaves only some telephone calls and e-mails which were not only directed to Missouri but also to Georgia. Moreover, the bulk of these communications involved the defendants' business responsibilities and duties in the franchise territory outside of Missouri. The Court determines that neither defendant was transacting business in Missouri as envisioned by Missouri's long-arm statute.
Plaintiff also fails to carry its prima facie burden in establishing that either defendant committed a tortious act in Missouri. Plaintiff contends that, although defendants have not committed the alleged torts while physically present in Missouri, the "effects" of their alleged tortious conduct have been felt in Missouri. More specifically, plaintiff contends that defendants' actions have resulted in the lost of a customer base and loss revenue from the alleged misappropriation of trade secrets.
In order to establish jurisdiction under Missouri's long-arm statute for the commission of a tortious act within the state of Missouri, a plaintiff must make a prima facie showing that a tort was committed. State ex.rel. William Ranni v. Hartenbach, 742 S.W.2d. 134, 137 (Mo. 1987). Missouri courts have broadly interpreted the "within the state of Missouri" provision to apply to extraterritorial acts that have consequences in the forum.Ranni, at 137; Hollinger, at 116-17; see also, Naegler v. Nissan Motor Corp., 835 F.Supp. 1152, 1155 (W.D.Mo. 1993). "Where a non-resident defendant is engaged in providing a service, as opposed to providing a product through the stream of commerce, the contact requirements for long-arm jurisdiction are more stringent." Hollinger, at 117 citing State ex. rel. Barnes v. Gerhard, 834 S.W.2d. 902, 903 (Mo.App. 1992).
As stated before, plaintiff argues that the economic consequences of the defendants' alleged acts amounts to an extraterritorial act producing actionable consequences within Missouri. Such an argument has been rejected under Missouri law. "The mere fact that a Missouri resident may feel the economic or financial loss as a result of out-of-state activities is not, by itself, enough to meet the requirements of Missouri's long-arm statute." Naegler, at 1155 citing Ranni Associates, at 138 ("Because someone in Missouri conceivably could suffer a financial loss as a result of Ranni's out-of-state activities does not make Ranni amenable to the courts of this state"). Thus, plaintiff has failed to make out a prima facie showing of the commission of a tortious act within Missouri as required under Missouri's long-arm statute.
Assuming arguendo that the defendants' activities constituted the transaction of business in Missouri or the commission of a tort within Missouri, their contacts overall are insufficient under the Due Process Clause. As stated previously, due process requires that the nonresident defendant have certain minimum contacts with the forum state so that maintaining the lawsuit in the forum state does not offend traditional notions of fair play and substantial justice. Porter, at 1075 citing Int'l Shoe Co., 326 U.S. at 316; Johnson Heater Co., at 120. In judging whether the minimum contacts requirement (for due process purposes) has been met, "a court properly focuses on the relationship among the defendant, the forum, and the litigation." Tiger Manufacturing Corp. v. Loadstar Material Handling Equipment, Ltd., 341 F.Supp.2d. 1107, 1111 (W.D.Mo. 2004) (citations omitted).
Defendant Golden resides in Georgia. Defendant Golden Deep South Enterprises is organized under the laws of Florida and its principal place of business is in Georgia. Neither defendant owns any personal or real property in Missouri. Defendant Golden Deep South Enterprises does not have a registered agent for service in Missouri. Defendant Golden made 3-4 short-term trips to Missouri in connection with his franchise business in Florida/Georgia.
The negotiations for both the Franchise and Termination Agreements were done while defendant Golden remained in Georgia. Although both agreements were drafted by the plaintiff in Missouri, they were finalized and executed in Georgia. All of the defendants' franchise business activities occurred in Florida and Georgia. All though franchise fees were sent to Missouri, they were generated via work done outside of Missouri. Telephone, e-mail and/or facsimile communications occurred between the parties, each in his/its respective state of residence.
Reviewing all available facts and circumstances, this Court cannot conclude that the defendants' contacts with Missouri were such that they purposely availed themselves of the rights and privileges of Missouri, whereby they should reasonably have anticipated being haled into court in Missouri. As noted earlier, merely entering into a contract with a forum resident does not provide the requisite contacts between the nonresident defendant and the forum state; nor does a few telephone, e-mail and/or facsimile communications between the parties, without more, establish the requisite contacts to satisfy due process. Plaintiff's burden is to show that the defendants have purposely directed their activities at Missouri residents and that the claims of this lawsuit either arises out of or relate to these activities. Lakin v. Prudential Securities, 348 F.3d. 704, 707 (8th Cir. 2003) citing Burger King, 471 U.S. at 472; State ex. rel Newport v. Wiesman, 627 S.W.2d. 874, 876 (Mo. 1982). The claims in this lawsuit all arise from or relate to the defendants' actions in Florida and/or Georgia; i.e. alleged breaches committed in Florida and/or Georgia of contracts finalized and executed in Georgia. See, Hollinger, at 117 citing Garrity v. A.I. Processors, 850 S.W.2d. 413, 418 (Mo.App. 1993) (where a contract was not made in Missouri and the wrong that damaged plaintiff did not occur in Missouri, the alleged tort of "conspiracy to cause breach of contract" could not have been committed in Missouri; thus, personal jurisdiction not established under Missouri's long-arm statute). There simply is no evidence that defendants', at any time, purposely directed their activities to Missouri residents. To exercise personal jurisdiction over the defendants would clearly violate due process.
Plaintiff argues that the defendants' did have "minimum contacts" so as to satisfy due process. It argues that even if the defendants' actions are contained to Florida/Georgia, the "effects" are felt in Missouri.
The United States Supreme Court has held that, in some circumstances, a forum state's exercise of jurisdiction over a nonresident defendant can be properly based on tortious acts committed by the nonresident defendant outside the forum state but which conduct has actionable effects or consequences inside the forum state. Calder v. Jones, 465 U.S. 783 (1984). In Calder, a California resident (actress Shirley Jones) sued two Florida residents, in California, for allegedly libelous statements in an article they wrote and published in a national tabloid (National Enquirer). The nonresident defendants contended that California lacked personal jurisdiction over them because they had limited physical non-business related contact with California and the article had been written and edited for publication in Florida. The Supreme Court found that the nonresident defendants' tortious conduct subjected them to jurisdiction in California. It held
"[P]etitioners are not charged with mere untargeted negligence. Rather, their intentional, and allegedly tortious, actions were expressly aimed at California. Petitioner South wrote and petitioner Calder edited an article that they knew would have a potentially devastating impact upon respondent. And they knew that the brunt of that injury would be felt by respondent in the state in which she lives and works and in which the National Enquirer has its largest circulation. Under the circumstances, petitioners must "reasonably anticipate being haled into court there" to answer for the truth of the statements made in their article. An individual injured in California need not go to Florida to seek redress from persons who, though remaining in Florida, knowingly cause the injury in California."Calder, 465 U.S. at 789-90 (internal citation omitted); see, Dakota Industries, Inc. v. Dakota Sportswear, Inc., 946 F.2d. 1384, 1390-91 (8th Cir. 1991); Anheuser-Busch, at 959; see also, Dakcoll, Inc. v. Grand Central Graphics, 352 F.Supp.2d. 990, 997 (D.N.D. 2005). The Supreme Court thus approved an "effects test" that allows the assertion of personal jurisdiction over nonresident defendants whose acts "are performed for the very purpose of having their consequences felt in the forum state."Dakota Industries, at 1391 quoting Brainerd v. Governors of Univ. of Alberta, 873 F.2d. 1257, 1260 (9th Cir. 1989).
The Eighth Circuit, as well as Missouri courts, has recognized the "effects test" as articulated in Calder. See, Oriental Trading Co., supra.; Finley v. River North Records, 148 F.3d. 913, 915-17 (8th Cir. 1998); Hicklin Engineering v. Aidco, Inc., 959 F.2d. 738, 739 (8th Cir. 1992); Dakota Industries, supra.; State ex. rel Ranni Associates, at 139. However, the Eighth Circuit has used the "effects test" merely as an additional factor to consider when evaluating a defendant's relevant contacts with the forum state, and have declined to grant personal jurisdiction solely on the basis of forum state effects from an allegedly intentional extraterritorial tort. See, Hicklin Engineering, at 739; Dakota Industries, at 1390-91; Dakcoll, at 997-98; Lindgren v. GDT, 312 F.Supp.2d. 1125, 1132 (S.D.Iowa 2004).
Under Calder, and as applied by state and federal courts within the Eighth Circuit, personal jurisdiction over a nonresident defendant can only apply where the forum state is the "focal point" of the defendant's alleged tortious conduct; i.e. where the out-of-state conduct is specifically targeted at the forum state and the "brunt" of the harm is felt in the forum state. See, Oriental Trading Co., supra. (nonresident defendants established business relationship with forum plaintiff in order to induce plaintiff to pay nonexistent owing anti-dumping duties and purposely directed fraudulent communications to forum state in furtherance of scheme); Finley, supra. (nonresident defendant committed fraud by inducing forum plaintiff to promote concert in forum state by fraudulent telephone calls into forum state and sending fraudulent promotional materials regarding concert artists into forum state; court found that fraudulent conduct was intended to induce commercial activity within the forum state);General Electric Capital Corp. v. Grossman, 991 F.2d. 1376, 1387-88 (8th Cir. 1993) (nonresident accounting firms defendants not subject to personal jurisdiction in Minnesota because "focal point" of the alleged wrongdoing and harm was in Canada, where auditing and accounting activities took place, and where contract negotiations relying on said activities took place — even though "effects of harm" ultimately occurred in Minnesota, nonresident defendants could not reasonably anticipate being haled into Minnesota court); Hicklin, supra. (no personal jurisdiction over nonresident defendant that sent correspondence containing defamatory statements to forum plaintiff's customers outside of forum — although promotion and solicitation of customers outside of forum may have financial effect on forum plaintiff, this effect alone is not sufficient to bestow personal jurisdiction);Capitol Indemnity Corp., supra. (nonresident defendant "must have set in motion some course of action which was deliberately designed to move into Missouri and injure the plaintiff").
Plaintiff cannot meet the "focal point" test established byCalder and courts in Missouri because there is nothing on the record which indicates that the alleged conduct by the defendants was aimed specifically at Missouri or that they acted with the knowledge that the "brunt" of the injury would be felt in Missouri. All acts giving rise to the plaintiff's claims occurred outside of Missouri without any direct implications in Missouri. There are no assertions that defendants communicated any confidential information or trade secrets into Missouri or that they used such information against plaintiff for the procurement of customers in Missouri. Assuming plaintiff's allegations to be true, the "focal point" of the defendants' actions was Florida or Georgia, not Missouri. The only "effect" that plaintiff offers is the loss of revenue in connection with the loss of a franchise in the defendants' former territory. The competent evidence before the Court shows, however, that plaintiff has been able to reestablish a franchise in the defendants' former franchise territory. Even so, although plaintiff as a Missouri corporation may feel the effect of the loss of business by its out-of-state franchise due to the defendants' allegedly tortious conduct, such financial loss alone cannot support long-arm jurisdiction under a due process analysis. See, General Electric Capital Corp., at 1387-88; Hicklin, at 739; Keystone Publishers Serv. v. Ross, 747 F.2d. 1233, 1234 (8th Cir. 1984) (holding that interference with contractual relations occurring outside of Iowa and causing injury in Iowa is not sufficient to assert personal jurisdiction in Iowa); State ex. rel. Ranni Associates, at 138. Since defendants did not focus on or target their alleged tortious conduct towards Missouri, the Court finds that the Calder "effects test" does not apply in order to establish personal jurisdiction over the defendants.
The Court has thus determined that the first three (3) factors of the "five-factor test" (nature and quality of contacts, the quantity of contacts, and the relation of the cause of action to the contacts) are lacking with respect to satisfying due process. The fourth factor, interest of the forum state, weighs only slightly in favor of the plaintiff. It is true that the plaintiff is a Missouri business, and Missouri has a vested interest in protecting the business relationships of its corporations and providing a forum for its residents in adjudicating their business disputes. However, the evidence before the Court shows that the focus of the business relationship was outside of Missouri and the financial impact on the plaintiff, although considered significant by the plaintiff in terms of the revenue generated by the defendants' franchise, is actually less significant when considered in light of the other franchises outside of Missouri brokered by the plaintiff.
Finally, the fifth factor to be considered is the convenience of the parties. The Eighth Circuit has recognized that a plaintiff is normally entitled to choose the forum in which to litigate its case. Dakcoll, at 1000 citing Northrup King Co. v. Compania Productions Semillas Algodoneras, 51 F.3d. 1383, 1389 (8th Cir. 1995). It appears that convenience/inconvenience weighs equally to the parties as to whether this dispute is litigated in Missouri. Although, the agreements stipulate that Missouri law should govern, the Court is confident that any federal court, including a federal court in either Florida or Georgia, could and would properly apply Missouri law. The Court finds that this factor really fails to favor either of the parties.
Based upon the Eight Circuit's five-factor test and the Calder "effects test", the Court concludes that due process precludes this Court from exercising personal jurisdiction over the defendants. Traditional notions of "fair play and substantial justice" would be compromised if this Court were to confer personal jurisdiction over these defendants. Plaintiff has failed to carry its burden demonstrating "minimum contacts" sufficient to satisfy both application of Missouri's long-arm statute and due process standards for the exercise of personal jurisdiction in this case.
Given the Court's findings on the issue of the lack of personal jurisdiction in this case, the Court finds no reason to address the other issues raised in the instant motion pertaining to lack of subject matter jurisdiction; i.e., failure to specify and/or support the requisite jurisdictional amount; and improper venue.
In light of the Court's findings regarding the lack of personal jurisdiction in this case, the defendants' motion to dismiss will be granted.