Opinion
No. C6-00-962.
Filed February 6, 2001.
Appeal from the District Court, Hennepin County, File No. 9915915.
Thomas P. Malone, Bradley A. Kletscher, and Cheryl A. Jorgensen, (for respondent)
William L. Davidson, Thomas D. Jensen, and Sarah E. Morris, (for appellant)
Considered and decided by Amundson, Presiding Judge, Schumacher, Judge, and Halbrooks, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2000).
UNPUBLISHED OPINION
On appeal from the denial of his motion to dismiss for lack of personal jurisdiction, appellant, a Canadian, alleges that neither general nor specific personal jurisdiction exist over him because both the primary and secondary factors weighed in the jurisdictional analysis do not favor asserting jurisdiction. Further, he contends he should be shielded from suit because he was acting as an employee of his corporation while he was in Minnesota. We affirm.
FACTS
J.J. Marchand, a citizen and resident of Ontario, Canada, is the president and sole owner of Marchand Promotional Group, LLC (Marchand Group), a Florida limited liability corporation with its principal place of business in Ontario. Marchand Group is a promotional business which counts Stanley Tools (Stanley) among its clients.
Mark Swanson owns and operates M.G. Incentives (M.G.), a Minnesota corporation that puts together business incentives, advertising specialties, recognition items, and gifts for individual and corporate clients. One of M.G.'s clients is TCF Bank (TCF).
In late March 1999, Swanson attended a Las Vegas trade show looking for promotional ideas for M.G.'s clients when he met Marchand at the Marchand Group booth. The two discussed ordering tool kits though Marchand and Marchand Group. The two parties remained in contact after the trade show. Shortly after returning from Las Vegas, Marchand called Swanson at M.G.'s Minnesota office and expressed interest in a deal.
On April 6, 1999, Marchand sent an email to Swanson offering several different promotional products from various manufacturers (including Stanley and Smith Wesson), proposing that M.G. put together a catalog of different promotional ideas for TCF to review, offering to make a presentation in May, and requesting a response. Over the next few weeks, Marchand and Swanson exchanged several emails regarding a potential deal involving Stanley and TCF.
On April 8, 1999, Marchand Group sent Smith Wesson catalogs to M.G. with a packing slip enclosed that contained the phrase, "Sales Rep: SALES FOR MINNESOTA."
On April 22, 1999, Marchand sent several faxes proposing specific product options for TCF, indicating that samples were being sent directly from the supply companies. He proposed that the parties set up a program with TCF whereby M.G. would be paid by Marchand Group. The parties dispute whether this arrangement was intended to make Swanson a Marchand Group agent.
Ultimately, TCF decided to order the tool kits. After the parties exchanged several communications clarifying the details, M.G. submitted a purchase order to Marchand Group in June 1999, and wire transferred $93,000 to Marchand and Marchand Group.
After a TCF executive expressed concern over the timeliness and accuracy of the Stanley tool order, Marchand assured Swanson that the order would be on time, and offered to meet with TCF while he was participating in a trade show in Minnesota on September 10. That offer was declined, but Marchand and Swanson met while Marchand was in Minnesota. Swanson told Marchand that, if he could not deliver the tools, he should return the $93,000 deposit.
Swanson was unsatisfied with Marchand's assurances and contacted Stanley directly to confirm that, if necessary, Stanley would overnight the order as Marchand had allegedly represented. Stanley refused, indicating that the cost would be prohibitive. Upon hearing this, TCF cancelled the order and M.G. used another company to fill the order. Swanson requested the return of the $93,000 deposit. Marchand allegedly refused to return the money and indicated that Swanson could not recover it because Marchand Group was structured as a limited liability company.
M.G. commenced this action alleging breach of contract, conversion, fraud, negligent misrepresentation, violation of the consumer fraud act, violation of the deceptive trade practices act, and piercing the corporate veil. Marchand filed a motion to dismiss for lack of personal jurisdiction, which was denied. This appeal followed.
DECISION I.
Marchand argues that the district court erred when it concluded it had personal jurisdiction over him. The existence of jurisdiction is a question of law, which this court reviews de novo. KSTP-FM, LLC v. Specialized Communications, Inc., 602 N.W.2d 919, 922-23 (Minn.App. 1999) (citing Stanek v. A.P.I., Inc . , 474 N.W.2d 829, 832 (Minn.App. 1991), review denied (Minn. Oct. 31, 1991)). The plaintiff's evidence establishing the necessary minimum contacts is to be viewed as true for the purposes of analyzing personal jurisdiction. V.H. v. Estate of Birnbaum, 529 N.W.2d 462, 466 (Minn.App. 1995). In doubtful cases, the court should resolve this question in favor of retaining jurisdiction. Hardrives, Inc. v. City of LaCrosse, 307 Minn. 290, 296, 240 N.W.2d 814, 818 (1976).
Pursuant to Minnesota's long-arm statute, this court may exercise personal jurisdiction over a nonresident defendant if there are sufficient minimum contacts to satisfy constitutional due process requirements. Domtar, Inc. v. Niagara Fire Ins. Co., 533 N.W.2d 25, 29 (Minn. 1995); Jenson v. R.L.K. Co . , 534 N.W.2d 719, 722 (Minn.App. 1995), review denied (Minn. Sept. 20, 1995). Due process requires that minimum contacts exist between a nonresident defendant and the state in order to satisfy "traditional notions of fair play and substantial justice." Domtar, 533 N.W.2d at 29 (quoting International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158 (1945)).
The fairness of exercising personal jurisdiction over a nonresident defendant is determined by applying a five-factor test. Courts must examine (1) the quantity of contacts with the forum state; (2) the quality and nature of contacts; (3) the connection between the cause of action and the contacts; (4) the state's interest in providing a forum; and (5) the convenience to the parties. KSTP-FM, 602 N.W.2d at 923; Marquette Nat'l Bank v. Norris, 270 N.W.2d 290, 295 (Minn. 1978). These five factors are employed to determine whether nonresidents have "purposefully availed" themselves of the protection and benefits of Minnesota law, Dent-Air, Inc. v. Beech Mountain Air Serv., Inc., 332 N.W.2d 904, 907 (Minn. 1983), whether the defendant's contacts with Minnesota justify his being sued here, Real Properties, Inc., v. Mission Ins. Co., 427 N.W.2d 665, 668 (Minn. 1998), and whether those contacts were established in order to conduct business in this state. Id. Of the five factors, the first three are of primary concern, while the last two merit less consideration. TRWL Fin. Establishment v. Select Int'l, Inc., 527 N.W.2d 573, 576 (citing Dent-Air, 332 N.W.2d at 907).
Two types of personal jurisdiction exist, general and specific . KSTP-FM, 602 N.W.2d at 923 (citing Domtar, 533 N.W.2d at 30). Specific personal jurisdiction may exist even when the nonresident's contacts are minimal, if the cause of action arises out of, or is related to, those contacts. Id.; see also Valspar Corp. v. Lukken Color Corp., 495 N.W.2d 408, 411 (Minn. 1992). Even a single, isolated transaction between a nonresident and a forum state may be sufficient to justify specific personal jurisdiction. Marquette Nat'l Bank, 270 N.W.2d at 295.
Quantity of contacts
The first factor we consider is the quantity of the contacts with Minnesota. Specific jurisdiction exists when the cause of action arises out of or is related to the defendant's contacts with the forum, and can arise from a single contact with the forum if the cause of action arose out of that contact. Marshall v. Inn on Madeline Island, 610 N.W.2d 670, 674 (Minn.App. 2000).
Here, even if this court takes the narrowest view of Marchand's contacts with Minnesota, the cause of action is inescapably a product of those contacts with Minnesota. However, Marchand's contacts with Minnesota are not as limited as Marchand characterizes them.
Marchand urges several views that minimize his contacts with Minnesota. Although Marchand and Swanson met face-to-face in September, Marchand argues that it is inappropriate to treat contacts subsequent to the contract as a basis for exerting personal jurisdiction because those contacts occurred "solely as part of an effort to settle a dispute." But here, meeting with Swanson was not intended to settle a dispute. Rather it was intended to allay TCF's concerns about Marchand Group's ability to perform under the terms of their agreement. At the time of the meeting, no dispute had yet arisen.
Marchand next argues that most of the parties' correspondence should not be considered because it does not involve the specific Stanley Tool Kit order at issue. Marchand made calls and sent emails and faxes suggesting different products for TCF. Among these suggestions were some regarding Stanley tool products. But Marchand provides no authority for the proposition that, in evaluating the extent of contacts, a court can only consider communications wholly focused on the specific transaction from which the dispute arises. Marchand aggressively pursued Swanson's business and offered to sell Swanson or TCF several different products. The fact that they signed a contract for only one of the products does not mean the other offers were without effect.
M.G. points to Marchand's emails to Hanson to support a finding of specific personal jurisdiction. But is it not a nonresident's contacts with the forum state, and not with the forum state's residents, that determines whether minimal contacts exist? KSTP-FM, 602 N.W.2d at 923-24. An email message is directed to a specific person, or rather to a specific email address, and that address is independent of the intended recipient's geographical location. Email stands virtually alone in communications traffic, unfettered by any specific geographical site. People often review their email from locations other than where they principally conduct business. To conclude that email contacts alone might establish personal jurisdiction would potentially subject the sender to jurisdiction in any state in which the recipient reviews a message. We leave it to the supreme court to determine whether email correspondence alone may establish jurisdiction.
In this case, Marchand had many non-email contacts with M.G. and TCF regarding this transaction, including faxes, phone calls, mailings, and an in-person visit. Marchand was clearly soliciting business from M.G. and/or TCF. Therefore, we need not consider the emails in establishing personal jurisdiction, and we do not do so.
Although Marchand`s contacts with Minnesota were not numerous, they were substantial. Marchand was able to fully negotiate a contract and even meet with Swanson in order to quiet his trepidation about contractual performance. The quantity and quality of contacts supports a finding of personal jurisdiction.
Nature and quality of contacts
"When a nonresident has had few contacts with Minnesota, the nature and quality of those contacts become dispositive." Marquette Nat'l Bank, 270 N.W.2d at 295. In assessing this factor, the general question is "whether the nonresidents `purposefully availed' themselves of the benefits and protections of Minnesota law," or whether "the defendant was brought into contact incidentally through the unilateral activity of the plaintiff." Dent-Air, 332 N.W.2d at 907.
In analyzing the nature and quality of contacts, a determination of the aggressor-party can be determinative especially when the contact is simply a single sale . See KSTP-FM, 602 N.W.2d at 924 ("A crucial factor in determining whether a single sale suffices to justify personal jurisdiction is whether the nonresident in some way solicited the sale or actively engaged in negotiating its terms."). If a nonresident is the "aggressor" in terms of establishing contacts with a Minnesota resident, this court is much more likely to conclude that personal jurisdiction exists. Id.
In the usual scenario, the seller is the aggressor. Dent-Air, 332 N.W.2d at 907. Here, the evidence supports a finding that Marchand Group was the aggressor and Marchand suggests that M.G. should be characterized as the aggressor because Swanson initially met Marchand at Marchand's trade show booth. But this fact is not determinative. Marchand repeatedly sent Swanson catalogs and different proposals for sales. His behavior was typical of a seller. Regardless of how the parties initially met, the deal was driven by Marchand's desire to make it happen.
Nexus between the cause of action and the contacts
The cause of action in this case obviously arose directly out of many of Marchand's activities. Specifically, Marchand allegedly made fraudulent claims and promises to M.G. in his conversations and correspondence. This factor clearly supports a finding of personal jurisdiction.
Secondary factors
Generally, Minnesota has a strong interest in providing a forum for its citizens to address tortious conduct, Marshall, 610 N.W.2d at 676, and especially fraudulent conduct. Kopperud v. Agers, 312 N.W.2d 443, 445 (Minn. 1981). Although that interest by itself cannot establish minimum contacts, Dent-Air, 332 N.W.2d at 908, it supports our determination that specific jurisdiction exists.
Finally, we consider the convenience of the parties. In analyzing this factor, this court balances the interests of the plaintiff against the inconvenience to the nonresident defendant. Shuck v. Champs Food Sys., Ltd . , 424 N.W.2d 567, 571 (Minn.App. 1988). Although Marchand characterizes this factor as neutral because most of the contacts between the parties occurred when Marchand was in Canada and Swanson was in Minnesota, in reality Marchand will already be in Minnesota to litigate this case as the president of Marchand Group. The addition of Marchand individually will not require substantial, if any, additional witnesses to travel or increase the inconvenience to the parties.
Because we find that specific personal jurisdiction exists here, we need not address the question of general personal jurisdiction.
II.
Marchand next urges this court to apply the fiduciary shield doctrine to shield him from jurisdiction in this case. The fiduciary shield doctrine provides that "a nonresident corporate agent is not individually subject to a court's jurisdiction simply on the basis of jurisdiction of the corporation itself." State ex rel. Miller v. Internal Energy, Etc., 324 N.W.2d 707, 711 (Iowa 1982). This doctrine has never been adopted in Minnesota. See Oakridge Holdings, Inc. v. Brukman, 528 N.W.2d 274, 278 (Minn.App. 1995) ("Minnesota has thus far neither expressly adopted nor expressly rejected the doctrine."). The Minnesota Supreme Court has given no indication that it is inclined to do so. Additionally, the United States Supreme Court has declined to adopt the fiduciary shield doctrine. See Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 781 n. 13, 104 S.Ct. 1473, 1482 n. 13 (1984). ("[W]e today reject the suggestion that employees who act in their official capacity are somehow shielded from suit in their individual capacity.").
Although Iowa has at least partially adopted the fiduciary shield doctrine, see Whalen v. Connelly, 545 N.W.2d 284, 295 (Iowa 1996) (noting that non-resident corporate agents are not subject to personal jurisdiction if only contacts with the state are by virtue of acts on behalf of the corporation), many jurisdictions have expressly rejected this doctrine in whole or in part. See, e.g., Mobil Oil Corp. v. Advanced Envtl. Recycling Techs., Inc., 833 F. Supp. 437, 442 (D.Del. 1993) (criticizing rule); Kreutter v. McFadden Oil Corp., 522 N.E.2d 40, 44, 46-47 (N.Y. 1988) (New York declining to adopt fiduciary shield doctrine). The rule has been especially criticized in cases where a corporation is "mere shell" for the employee, See Plummer Co. Realtors v. Crisafi, 533 A.2d 1242, 1246-48 (Del. Super. 1987); Holfield v. Power Chem. Co., Inc., 382 F. Supp. 388, 393-94 (D.Md. 1974) (holding that the fiduciary shield is not available if corporate veil might be pierced), or when the acts are tortious or, especially, fraudulent. See Miller, 324 N.W.2d at 714 ("[A]llegations of fraud are sufficient in themselves under the less stringent test to disregard [the corporate defendant's] corporate existence and attribute its minimum contacts with Iowa to [the agents] on an individual basis."); Merkel Assoc., Inc. v. Bellofram Corp., 437 F. Supp. 612, 619 (W.D.N.Y. 1977) (exception for tortious acts); Graber v. Prelin Industries, Inc., 368 F. Supp. 1358, 1365-66 (D.S.D. 1974) (exception for fraud).
The rationales for these exceptions to the fiduciary shield doctrine are the same. An agent is presumed to be acting for himself if he commits fraud or if the corporation is a mere shell. Here, M.G. has alleged facts sufficient to pierce the corporate veil and any distinction between Marchand the individual, Marchand the agent, and the Marchand Group is, at a minimum, a blurry one. Furthermore, M.G. has alleged fraud against Marchand.
We need not decide if the fiduciary shield doctrine should apply in Minnesota because Marchand's activities would fall outside of the protections of the doctrine regardless.