Opinion
Civil Action No. 98-1523 (NHP)
June 28, 1999
Frederick C. Biehl, III, Esq., SORIANO, HENKEL, SALERNO, BIEHL MATTHEWS, P.C., for Plaintiff.
Robert Mahoney, Esq., Douglas E. Edlin, Esq., FRIEDMAN, SIEGELBAUM, LLP, for Defendants.
LETTER OPINION ORIGINAL ON FILE WITH CLERK OF THE COURT
ear Counsel:
This matter comes before the Court on the motion of defendants, James Kearns and Software Solutions, L.L.C., to dismiss the Complaint of plaintiff Galaxy Solutions, L.L.C., for lack of personal jurisdiction. This Court heard oral argument on April 8, 1999. For the reasons stated more particularly herein, defendants James Kearns and Software Solutions, L.L.C.'s Motion to Dismiss is DENIED.
STATEMENT OF FACTS PROCEDURAL HISTORY
Plaintiff Galaxy Solutions, L.L.C. ("Galaxy") is a limited liability company, organized and existing under the laws of the State of Delaware, with its principal place of business in New Jersey. See Complaint, ¶ 1. Galaxy is a software developer and the owner and licensor of certain software applications, including but not limited to, software known as "Galaxy," "Galaxy IV," and "Galaxy V." See id., ¶ 5. The software programs perform various data processing tasks for end users in the "business forms" industry.
Defendant James Kearns ("Kearns") is a resident of California and a former employee of Galaxy. See id., ¶ 2. Kearns is currently the President and sole shareholder of defendant Software Solutions, L.L.C. Defendant Software Solutions, L.L.C., ("Software") is limited liability company, organized and existing under the laws of the State of Delaware, with its principal place of business in California. See id., ¶ 3.
On January 30, 1998, Galaxy filed a Complaint in the Superior Court of the State of New Jersey, Chancery Division, Middlesex County against defendants Kearns, Software and various fictitious persons and entities (collectively referred to as "defendants") alleging: (1) unfair competition; (2) unjust enrichment; (3) misappropriation of trade secrets; (4) conversion; (5) tortious interference with present and prospective economic advantage; (6) violations of 15 U.S.C. § 1125; (7) trade disparagement and (8) breach of fiduciary obligations and self dealing. Galaxy contends, in part, that defendants misappropriated customer lists and made "disparaging" remarks about Galaxy in a newsletter which was distributed to the entire Galaxy base of customers, including New Jersey residents.
On February 26, 1999, defendants Kearns and Software filed the subject Motion to Dismiss Galaxy's Complaint for lack of personal jurisdiction.
DISCUSSION
The Supreme Court has expressly mandated that a plaintiff must establish certain procedural prerequisites before a federal court can exercise personal jurisdiction. See Omni Capital Intern. v. Rudolf Wolff Co., Ltd., 484 U.S. 97, 104 (1987). Once the procedural prerequisites have been met, the next question, then, is whether the district court may exercise in personam jurisdiction over the particular defendant.
A district court may exercise jurisdiction over a nonresident of the state in which that court sits only to "the extent authorized by the laws of that state."Provident Nat'l Bank v. California Fed. Sav. Loan Ass'n, 819 F.2d 434, 436 (3d Cir. 1987). New Jersey's long-arm statute permits courts to exercise jurisdiction to the fullest extent under the Constitution. See Advel Corp. v. McCure, 58 N.J. 264, 268 (1971); N.J. Ct. R. 4:4-4. Accordingly, this Court's analysis must focus on whether an exercise of jurisdiction comports with the requirements of the Due Process Clause of the Fourteenth Amendment.
The constitutional touchstone of this analysis is whether the "defendant purposefully established `minimum contacts' in the forum State." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474 (1985) (quotingInternational Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). The minimum contacts must have a basis in "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." Rudzewicz, 471 U.S. at 475. "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, Keeton v. Hustler Magazine, Inc., 465 U.S. at 774, 104 S.Ct. at 1478; World-Wide Volkswagen Corp. v. Woodson, 444 U.S. at 299, 100 S.Ct. at 568, or of the "unilateral activity of another party or third person," Helicopteros Nacionales de Columbia, S.A. v. Hall, supra, 466 U.S. at 417, 104 S.Ct. at 1873." "Jurisdiction is proper . . . where the contacts proximately result from actions by the defendant himself that create a `substantial connection' with the forum State." Id. (quoting McGee v. International Life Ins. Co., 355 U.S. 220, 223 (1957)). Once minimal contacts are established, the court must ensure that the maintenance of the lawsuit does not offend "traditional notions of fair play and substantial justice." International Shoe, 326 U.S. at 316.
In Helicopteros Nacionales de Colombia v. Hall, the Supreme Court distinguished the exercise of specific jurisdiction from general jurisdiction. 466 U.S. 408, 414-15 (1984). When the litigation is related to or arises out of a defendant's contacts with the forum, the jurisdictional analysis focuses on the "relationship among the defendant, the forum and the litigation." Id. at 414 (citing Shaffer v. Heitner, 433 U.S. 186, 204 (1977)). This requirement is satisfied provided that the contacts resulted from the defendant's purposeful conduct and not the plaintiff's unilateral activities.See World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297-98 (1980). The courts have referred to this principle as "specific jurisdiction." Provident, 819 F.2d at 437.
Alternatively, when the cause of action does not relate to or arise out of the defendant's forum-related contacts, jurisdiction may be properly asserted without offending due process if the defendant has sufficient "continuous and systemic" contacts with the forum. The threshold for exercising this "general jurisdiction" is, consequently, significantly greater than the exercise of specific jurisdiction. Id. at 437 (citingDollar Sav. Bank v. First Sec. Bank of Utah, 746 F.2d 208, 212 (3d Cir. 1984)).
Once a defendant raises the issue of personal jurisdiction, the plaintiff then bears the burden to demonstrate, by a preponderance of the evidence, that the defendant indeed had contacts sufficient to give the district court jurisdiction. See Carteret Sav. Bank, FA v. Shushan, 954 F.2d 141, 146-47 (3d Cir.), cert.denied, 506 U.S. 817 (1992) (citing Time Share Vacation v. Atlantic Resorts, Ltd., 735 F.2d 61, 65 (3d Cir. 1984)). Moreover, the plaintiff is required to sustain its burden through sworn affidavits or other competent evidence; at no point may a plaintiff rely on the pleadings alone in order to withstand an in personam jurisdictional attack. See Stranahan Gear Co., Inc. v. NL Indus., 800 F.2d 53, 58 (3d Cir. 1986); Time Share Vacation Club v. Atlantic Resorts, Ltd., 735 F.2d 61, 67 n. 9 (3d Cir 1984).
In this matter, the factual record reveals that both Kearns and Software's contacts with New Jersey are sufficient to support an exercise of personal jurisdiction.
With respect to specific jurisdiction, plaintiff argues that this Court has specific personal jurisdiction over defendants because defendants have: (1) maintained a long term contractual relationship with Brodie Systems, Inc. ("Brodie"), a New Jersey corporation; (2) received, and continue to receive, payment from Brodie pursuant to said contract; (3) regularly called Brodie in New Jersey; and (4) solicited other New Jersey residents and corporations for business purposes with newsletters which contained various misrepresentations about Galaxy.
Defendants acknowledge having one contractual relationship with Brodie, a New Jersey company. See Deposition Transcript of defendant James P. Kearns, page 12 at lines 15-25. However, the record reveals that Brodie, which is not a "Galaxy user," became Kearns' customer in 1992 or 1993. Since this period of time was prior to Kearns employment with Galaxy, Kearns could not have used trade secrets, customer lists or inaccurate information about Galaxy to obtain Brodie as a client.See id., page 14 at lines 13-15. Moreover, plaintiff has not alleged that the underlying contract between defendants and Brodie is to any degree related to this litigation. Therefore, plaintiff cannot obtain specific jurisdiction over defendants simply because defendants have entered into a contractual relationship with a New Jersey company when the essence of such contractual relationship is entirely unrelated to the claims alleged in this litigation.
Galaxy also contends, however, that defendants have engaged in intrastate telephone and written communications with citizens of New Jersey during which they falsely represented to customers of Galaxy the nature and kind of maintenance and support of computer systems it is capable of providing to them.
The United States Supreme Court has opined, . . . it is an inescapable fact of modern commercial life, that a substantial amount of business is transacted solely by mail and wire communications across state lines, thus obviating the need for physical presence within a State in which business is conducted. So long as a commercial actor's efforts are "purposefully directed" toward residents of another State, we have consistently rejected the notion that an absence of physical contacts can defeat personal jurisdiction there.
Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476 (1985) (citing Keeton v. Hustler Magazine, Inc., 465 U.S. at 774-75).
Accordingly, the mere fact that defendants were never physically present in New Jersey does not preclude a finding that minimum contacts exist.
The "mere transmittal of letters and messages by mail or telephone within a state is not the critical factor [in determining whether there exists personal jurisdiction], it is the nature of the contact." Lebel v. Everglades Marina, Inc., 115 N.J. 317, 325 (1989) (citing Baron Co. v. Bank of N.J., 497 F. Supp. 534 (E.D.Pa. 1980)) (emphasis added); see also Grand Entertainment Group, Ltd. v. Star Media Sales, Inc., 988 F.2d 476, 482 (3d Cir. 1993) (acknowledging that "[m]ail and telephone communications sent by [a] defendant into the forum may count toward the minimum contacts that support jurisdiction."). Courts have been more willing to confer jurisdiction in a factual situation where a defendant knowingly sends a false statement into the forum state. See Lebel v. Everglades Marina, Inc., 115 N.J. 317, 326 (1989) (citing Vishay Intertechnology, inc. v. Delta Int'l Corp., 696 F.2d 1062, 1066 (4th Cir. 1982) (quoting Murphy v. Erwin-Wasey, Inc., 460 F.2d 661, 664 (1st Cir. 1972) (citations omitted))).
In this matter, Kearns concedes, via affidavit, that his company has sent facsimile transmissions of Software's newsletters to prospective clients in New Jersey affirmatively seeking their business. See Affidavit of James P. Kearns, ¶ 7; see Affidavit of Frederick C. Biehl, Exhibits E, F. Although none of the potential clients have hired Software for their business needs, the solicitations contain the allegedly damning content about Galaxy and were widely disbursed throughout New Jersey. See Affidavit of James P. Kearns, ¶ 7. Since it is the actual content of the solicitation letters which were sent to New Jersey residents that form, at least in part, the basis of this lawsuit this Court finds that it is proper to exercise specific personal jurisdiction over defendants. See Lebel v. Everglades Marina, Inc., 115 N.J. 317, 326 (1989) (holding that defendant's alleged telephone calls and use of the mails to solicit a contract satisfied minimum contacts, in part, because plaintiff alleged that defendant's representations contained therein were fraudulent); see also Ketcham v. Charles R. Lister International, Inc., 167 N.J. Super. 5, 9 (N.J.Super.Ct. A.D. 1979), cert. denied, 81 N.J. 339 (1979) (quoting Amercoat Corp. v. Reagernt Chem. Research, Inc., 108 N.J. Super. 331, 340 (N.J.Super.Ct. A.D. 1970) (courts have found "sufficient contacts for personal jurisdiction where virtually any form of economic entry into the state was evident . . . solicitation [of business], in and of itself, may be sufficient `contact' to comport with the requirements of due process.")).
Defendants heavily rely upon the case, Ritz Camera Centers, Inc. v. Wentling Camera Shops, Inc., 982 F. Supp. 350 (D.Md. 1997), for the proposition that telephonic and facsimile transmissions are inadequate to establish jurisdiction over a nonresident defendant. However, the Ritz Camera case is distinguishable on two grounds.
First, the plaintiff in that case did not allege that the contacts,i.e., telephonic and facsimile communications, were fraudulent in nature. Instead, the plaintiff in the Ritz Camera case alleged only interference with contract. Here, however, plaintiff's proofs with regard to its allegations of unfair competition, trade disparagement, misappropriation of trade secrets, conversion, tortious interference with present and prospective economic advantage, violations of 15 U.S.C. § 1125, trade disparagement and breach of fiduciary obligations are all intertwined with the solicitations which were disbursed to the alleged clients of Galaxy in New Jersey.
Second, the Ritz Camera case involves Maryland's long-arm statute. In order to confer jurisdiction pursuant to Maryland's long-arm statute, a plaintiff is required to make a showing that a defendant "regularly does or solicits business, engages in any other persistent course of conduct . . ." Ritz Camera, 982 F. Supp. at 354. Here, however, New Jersey's long-arm statute does not require that a defendant meet such specific requirements. Instead, New Jersey's long-arm statute permits courts to exercise jurisdiction to the fullest extent under the Constitution. The focus is on fairness and whether an exercise of jurisdiction comports with the requirements of the Due Process Clause of the Fourteenth Amendment.
Finally, this Court concludes that traditional notions of fair play and substantial justice would not be offended by having defendants submit to personal jurisdiction in New Jersey. See International Shoe, 326 U.S. at 316. The factors include: "(1) the burden on the defendant; (2) the forum state's interest in adjudicating the dispute; (3) the plaintiff's interest in obtaining convenient and effective relief; (4) the judicial system's interest in obtaining the most efficient resolution of controversies; and (5) the shared interest of the several states in furthering fundamental substantive social policies." Telesis Mergers Acquisitions, Inc. v. Atlis Federal SVCS, Inc., 918 F. Supp. 823 (D.N.J. 1996) (citing Burger King, 471 U.S. at 477). Although defendants may be inconvenienced by having to come to New Jersey to defend their position, this Court finds that the burden upon defendants is slight and that New Jersey has a strong interest in adjudicating the dispute.
CONCLUSION
Based upon the foregoing analysis, this Court concludes that defendants James Kearns and Software Solutions, L.L.C.'s Motion to Dismiss is DENIED.
An appropriate Order accompanies this Letter Opinion.