Opinion
No. FST CV 08 5008828 S
January 8, 2010
MEMORANDUM OF DECISION ON DEFENDANT'S MOTION TO DISMISS DATED JANUARY 16, 2009 (#103.00)
Neither party has provided any Appellate Court or Supreme Court decision that has discussed the interpretation of Gen. Stat. § 33-929(f)(1) that is at issue in this case; what elements must be shown to establish longarm jurisdiction of an out-of-state defendant under Gen. Stat. § 33-929(f)(1); "Out of any contract made in this state or to be performed in this state." This appears to be an issue of first impression.
The plaintiff, a corporation with its offices and principal place of business at 280 Railroad Avenue, Greenwich, Connecticut, is in the business of manufacturing, distributing and selling various nutritional and pharmaceutical products. The plaintiff commenced this litigation by a complaint dated August 28, 2008 in two counts; breach of contract and breach of quasi-contract, seeking the sum of $29,418.28. The plaintiff claims $29,418.28 was due by reason of a July 31, 2007 agreement for the defendant to purchase from the plaintiff certain nutritional and pharmaceutical products. These products were delivered by the plaintiff to the defendant on or about February 29, 2008. The total billed for those products was $52,485.28 of which $29,418.28 remains unpaid. The plaintiff further alleges that the defendant, Hogil Pharmaceutical Corporation, is a corporation with an office and place of business at 237 Mammarock Avenue, White Plains, New York.
The complaint was returnable on September 30, 2008. The complaint was not served on the defendant in Connecticut. Service was made by substitute service. The defendant filed an appearance by counsel of record on December 18, 2008 and filed this instant Motion to Dismiss within 30 days seeking to dismiss the complaint alleging lack of jurisdiction over the person, stating that the defendant is a foreign corporation. Although the Motion to Dismiss and the defendant's supporting memorandum did not cite the statute, the issues raised invoked the provisions of the Connecticut longarm statute; Gen. Stat. § 33-929. The parties each filed a memorandum in support of their respective positions. Each filed an affidavit of facts signed by their respective corporate representatives. The Motion to Dismiss was assigned for the law arguable short calendar on October 13, 2009. Both parties appeared. No evidence, testimony or documents were offered. Oral argument was taken and the matter was submitted to the court on the complaint, the Motion to Dismiss, the memoranda, and the two supporting affidavits.
A motion to dismiss . . . properly attacks the jurisdiction of the court, essentially asserting that the plaintiff cannot as a matter of law and fact state a cause of action that should be heard by the court . . . A motion to dismiss tests whether, on the face of the record, the court is without jurisdiction. "The grounds which may be asserted in this motion are: (1) lack of jurisdiction over the subject matter; (2) lack of jurisdiction over the person; (3) improper venue; (4) insufficiency of process; and(S) insufficiency of service of process." Zizka v. Water Pollution Control Authority, 195 Conn. 682, 687 (1985); P.B. § 10-31. "In ruling on a motion to dismiss, the trial court must take the facts to be those alleged in the complaint, including those facts necessarily implied from the allegations, and construing them in a manner most favorable to the pleader." Fort Trumbull Conservancy, LLC v. New London, 265 Conn. 423, 432-33 (2003). The parties are entitled to offer evidence in a hearing on a motion to dismiss. Standard Tallow Corporation v. Jowdy, 190 Conn. 48, 54 (1983). In this case the defendant is alleging lack of jurisdiction over the person. P.B. § 10-31(a)(2). "This court has recognized that the burden of proof is on the plaintiff to prove jurisdiction over the person when constructive service is used." Id., 54. "Jurisdiction over the person, jurisdiction over the subject-matter, and jurisdiction to render the particular judgment are three separate elements of the jurisdiction of a court." Bridgeport v. Debek, 210 Conn. 175, 179 (1989).
Neither party briefed the procedural effect of a September 8, 2009 Supreme Court decision which confirmed its July 21, 2009 opinion. Those two cases discussed the three situations that may occur when a court is confronted with a motion to dismiss for lack of subject matter jurisdiction: "Lack of subject matter jurisdiction may be found in any one of three instances: (1) the complaint alone; (2) the complaint supplemented by undisputed facts evidenced in the record; or (3) the complaint supplemented by undisputed facts plus the court's resolution disputed facts . . ." Columbia Air Services, Inc. v. Department of Transportation, 293 Conn. 342, 347 (2009); Conboy v. State, 292 Conn. 642, 650-52 (2009). Neither party argued or briefed as to whether those three separate factual scenarios are relevant in a motion to dismiss addressing in personam jurisdiction. The court notes that the briefs and the two supporting affidavits do not agree on all the facts. The court gave the parties the opportunity to offer testimony. Schaghticoke Tribal Nation v. Harrison, 264 Conn. 829, 833 (2003). Both parties declined the court's invitation to hold an evidentiary hearing. Thus, the court is free to resolve any factual disputes based on the affidavits submitted.
"When a defendant files a motion to dismiss challenging the court's jurisdiction, a two part inquiry is required. The trial court must first decide whether the applicable state longarm statute authorizes the assertion of jurisdiction over the defendant. If the statutory requirements are met, its second obligation is then to decide whether the exercise of jurisdiction over the defendant would violate constitutional principles of due process." Knipple v. Viking Communications, Ltd., 236 Conn. 602, 606 (1996). "If a challenge to the court's personal jurisdiction is raised by a defendant, either by a foreign corporation or by a nonresident individual, the plaintiff must bear the burden of proving the court's jurisdiction." Id. 607.
The parties agree that the Connecticut longarm statute in question is Gen. Stat. § 33-929, which is entitled "Service of process on foreign corporation." The parties agree that the defendant, Hogil Pharmaceutical Corporation, is not a Connecticut corporation and that Hogil Pharmaceutical Corporation is not authorized to do business in Connecticut. The plaintiff is claiming that only one section of Gen. Stat. § 33-929 is at issue in this case.
Every foreign corporation shall be subject to suit in this state, by a resident of this state or by a person having a usual place of business in this state, whether or not such foreign corporation is transacting or has transacted business in this state and whether or not it is engaged exclusively in interstate or foreign commerce, on any cause of action arising as follows: (1) Out of any contract made in this state or to be performed in this state.
Gen. Stat. § 33-929(f)(1).
The plaintiff is not relying on Gen. Stat. § 33-929(f)(3), which states: "out of the production, manufacture or distribution of goods by such corporation with the reasonable expectation that such goods are to be used or consumed in this state and are so used or consumed, regardless of how or where the goods were produced, manufactured, marketed or sold or whether or not through the medium of independent contractors or dealers . . ." The plaintiff is not relying on Gen. Stat. § 33-929(e), which states: "Every foreign corporation which transacts business in this state in violation of section 33-920 shall be subject to suit in this state upon any cause of action arising out of such business."
After reviewing the August 28, 2008 complaint and the two affidavits filed by each of parties in support of their position on the Motion to Strike, the court finds the following facts:
The plaintiff, SDA Laboratories, Inc., has its principal place of business at 280 Railroad Avenue, Greenwich, Connecticut. The defendant, Hogil Pharmaceutical Corporation is not a Connecticut corporation, is not authorized to do business in Connecticut and has its office and principal place of business at Suite 205, 237 Mammaronick Avenue, White Plains, New York. The defendant has never had a place of business in Connecticut. On or about July 31, 2007 the defendant entered into an agreement with the plaintiff for the purchase by the defendant of 1,440 cases of Sine Off Severe Cold product at $15.60 per case and 1,600 cases of Sine Off PE Reg. 24 product at $15.12 per case. The invoice in the file appears to be inconsistent with this order and contains a number of ink modifications. That invoice though is consistent with the total billing of $52,485.28. The agreement was not entered into in Connecticut. The agreement took place electronically or by telephone from the two corporation's respective places of business; the plaintiff in Connecticut and the defendant in New York. The defendant issued a purchase order number 0000260 to the plaintiff to confirm this agreement, which was either sent by the defendant to the plaintiff in Connecticut by mail or electronically from the defendant's New York office. The purchase order was not hand delivered by the defendant to the plaintiff's Connecticut place of business. The plaintiff arranged for the shipment of the product from a New Jersey factory to a Pennsylvania warehouse selected by the defendant pursuant to the purchase order. There is no evidence that the plaintiff owned or controlled the New Jersey factory from which the product was shipped. At no time during this transaction did any representative of the defendant go to Connecticut or go to the plaintiff's place of business at 280 Railroad Avenue, Greenwich, Connecticut.
The defendant is also in the retail and wholesale sales business. A defendant's product known as "Sine-Off" is sold in one or more retail stores in Connecticut. It is not clear from the affidavits as to whether a subsidiary of the defendant placed those items in Connecticut retail stores. It is not clear from the affidavits as to whether the defendant sold that product to another business and that other business then placed those products in the Connecticut retail stores. The defendant has no retail stores in Connecticut. There is no evidence that the sold product that is the subject of this lawsuit was ever located in Connecticut. The total billed by the plaintiff to the defendant was $52,485.28. The bill was sent to the defendant at its White Plains, New York office. The defendant paid on account from New York and/or the account was adjusted and/or credited leaving a balance unpaid of $29,418.28. There is no evidence when these payments, adjustments and/or credits were made.
The court finds that the plaintiff performed the contract in Connecticut by accepting the defendant's order at the plaintiff's Greenwich, Connecticut office, that the plaintiff arranged for the order to be transmitted to the defendant from the plaintiff's Connecticut office to defendant's offices in White Plains, New York, that the plaintiff arranged for the order to be processed at the New Jersey factory from the plaintiff's Connecticut office, and that the plaintiff arranged for the New Jersey factory to transmit the goods to the defendant at a Pennsylvania warehouse from the plaintiff's Connecticut office. The plaintiff made all of these arrangements from its Greenwich, Connecticut office. The plaintiff claims according to the plain language of Gen. Stat. § 33-929(f)(1) that these activities satisfy the requirements for the service of process on a foreign corporation.
The plaintiff argues that it is the plaintiff's performance that needs to be examined for the establishment of longarm jurisdiction under Gen. Stat. § 33-929(f)(1). The defendant objects arguing that it is the defendant's performance that needs to be examined and that after such examination the plaintiff has failed to sustain its burden of proof to prove longarm jurisdiction under Gen. Stat. § 33-929(f)(1). The defendant notes that the defendant has had no contact with Connecticut. The defendant argues that the plaintiff came to the defendant's office in White Plains, New York for the purpose of soliciting the defendant's business and the defendant never went to the plaintiff's Connecticut offices. The defendant points out that the fulfillment of this contract took place between a warehouse located in Pennsylvania and a factory in New Jersey and the product had no presence in Connecticut.
Although no appellate court ruled on the exact issue presented in this case, the Supreme Court has discussed the former version of Gen. Stat. § 33-929(f)(1), Gen. Stat. § 33-411(c), which states:
Every foreign corporation shall be subject to suit in this state, by a resident of this state or by a person having a usual place of business in this state, whether or not such foreign corporation is transacting or has transacted business in this state and whether or not it is engaged exclusively in interstate or foreign commerce, on any cause of action arising as follows: (1) Out of any contract made in this state or to be performed in this state.
The language of the current Gen. Stat. § 33-929(f)(1), is the same as its predecessor quoted above. Gen. Stat. § 33-411(c)(1) was replaced in 1994 by P.A. 94-186 § 214. It was later recodified in 1994 as Gen. Stat. § 33-929(e)(i) and in 1997 recodified by P.A. 97-246 to Gen. Stat. § 33-929(f)(1). Lifecare v. Lipton Corporate Child Care Centers, Inc., Superior Court, judicial district of Ansonia-Milford at Milford, Docket Number AAN CV 07-5004429 (January 11, 2008, Levin, J.), see fn.5. "Unlike § 33-411(b), this subsection confers jurisdiction over designated causes of action without regard to whether a foreign corporation transacts business in Connecticut and without regard to a causal connection between the plaintiff's cause of action and the defendant's presence in this state. We read this language as requiring inquiry not only into the various elements of the plaintiff's cause of action, spelled out in the various subparts of subsection (c), but also to the totality of contacts which the defendant may have with the forum." Lombard Brothers, Inc. v. General Asset Management; Co., 190 Conn. 245, 253-54 (1983). Lombard Brothers, Inc. does not resolve the issue raised in this motion to dismiss.
The operative phrase in Gen. Stat. § 33-929(f)(1) "out of any contract made in this state or to be performed in this state" is not addressed to either the plaintiff's performance or the defendant's performance. No appellate court has addressed this exact issue. "The language of § 33-929(f)(1) does not expressly require contemplated performance in this state by the party over whom jurisdiction is sought: . . . There is no indication . . . that the Connecticut legislature intended that the language `to be performed in this state' should be given a limited construction to require performance in this state by the party over whom jurisdiction is sought." Elstein Elstein, PC v. Trafficcast, Inc., Superior Court, judicial district of Fairfield at Bridgeport, Docket Number CV 05-4011761 (May 24, 2006, Gilardi, J) [ 41 Conn. L. Rptr. 388]. The first case so holding is Bowman v. Grolsche Bierbroowerij, B.V., 474 F.Sup. 725, 731 (D.Conn. 1979). Most trial court decisions support the above conclusion. Lifecare v. Lipton Corporate Child Care Center, Inc., supra; BCH America v. Delco International Co., Ltd, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket Number EST CV 06-4008327 S (January 26, 2007, Nadeau, J.) see fn.8. "No Connecticut appellate court has decided whether a plaintiff's substantial performance of a contract in the forum state confers longarm jurisdiction over a foreign corporate defendant. Judges of the Superior Court have held that General Statutes § 33-929 (formerly § 33-411) does not expressly require contemplated performance in this state by parties over whom jurisdiction is sought . . . There is no indication that the Connecticut legislature intended that the language `to be performed in this state' should be given a limited construction to require performance in this state by the party over whom jurisdiction is sought." Westbrook Technologies Inc. v. City Blue Printing Co., Superior Court, judicial district of New Haven, Docket Number CV 98-0420110 (April 26, 1999, Silbert, J.). The court therefore finds that performance may be measured solely by the plaintiff's performance.
That conclusion does not resolve the issue presented. Directed by the language of Lombard Brothers, Inc. further inquiry should be made. The issue is: When the plaintiff is relying on the longarm jurisdiction of Gen. Stat. § 33-929(f)(1) based on the plaintiff's own performance, what findings must be made? This court answers as follows: "Whenever a plaintiff has sought to rely on its own performance of the contract in Connecticut to satisfy the longarm statute, Gen. Stat. § 33-929(f)(1), jurisdiction may be found only if (1) the contract expressly contemplated or required performance in Connecticut: or (2) the plaintiff had actually performed its obligations in Connecticut and such performance was the most substantial part of the obligations to be performed under the contract."
This rule finds support in Connecticut federal court decisions.
A contract that is "to be performed in this state," for the purposes of the longarm statute need not explicitly require performance in Connecticut, neither must the performance be that of the party over whom jurisdiction is sought. Teleco Oilfield Svcs., Inc. v. Skandia Insurance Co., 656 F.Sup. 753, 757 (D.Conn. 1987). If, however, jurisdiction is based solely on the plaintiff's performance there must be a showing either that (1) the contract expressly contemplated performance in Connecticut or (2) the plaintiff performed a substantial part of its obligations in Connecticut. General Star Indemnity Co. v. Anheuser-Busch Co., 1998 WL 774234, *4 (D.Conn. 1998).
Gulf Underwriters Insurance Company v. The Hurd Insurance Agency Inc. and Thomas W. Hurd, United States District Court, Docket No. 3:03 cv 1277 (SRU) (D.Conn. May 11, 2004).
Two Connecticut trial court decisions both cited the above proposition but in both cases found that there was substantial performance in Connecticut. Lifecare Inc. v. Lipton Corporate Child Care Centers, Inc., supra: Santo Buckley Energy v. Blue Sky Holdings, Inc., Superior Court, judicial district of Fairfield at Bridgeport, Docket Number CV 09-5021606 S (May 27, 2009, Bellis, J.).
This court has been able to locate, one case that discussed the above rule and found no substantial performance by the plaintiff in Connecticut. Preferred Display, Inc. v. Vincent Longo, Inc., United States District Court, District of Connecticut at Bridgeport, Civil Action #09 cv 365 (JCH) (August 3, 2009, Hall, J.). The plaintiff, PDI, brought a lawsuit in the Federal District Court in Bridgeport, Connecticut for unpaid invoices against the defendant, VLI, arising from the sale of a number of cosmetic display cases. VLI moved to dismiss the action for lack of personal jurisdiction. PDI is a New Jersey corporation with its principal place of business in Clifton, New Jersey. It manufactures custom cosmetic display cases for use in retail stores. PDI did have offices in Connecticut and in New Jersey and manufactures its products in both states. The defendant, VLI, is a New York corporation with its principal place of business in New York City. It sells brand cosmetics through its own website and retail partners including internet retailers. The internet retailers are not connected with VLI and the internet retailers sell products in Danbury, Greenwich and Farmington, Connecticut. VLI cosmetics are also sold in one store in Westport, Connecticut, the cosmetic retailer Beautiful Faces, and VLI did organize a public event during which consumers had VLI's cosmetics supplied in the Westport store by makeup artists. PDI further alleges that three display cases that were ordered by VLI were shipped from PDI's New Jersey facilities to retailers in Connecticut. The retailers were not owned or operated by VLI. PDI alleged that VLI has not paid for 22 separate invoices for cosmetic display cases and PDI owed $441,855.19. Gen. Stat. § 33-929(f)(i) was the longarm jurisdiction statute at issue.
The trial judge found that there were two alternative tests in Gen. Stat. § 33-929(f)(1); (1) out of any contract made in Connecticut, or (2) out of a contract to be performed in Connecticut. The PDI trial judge further found: "If, however, jurisdiction is based solely on the plaintiff's performance of the contract, the plaintiff must show either: (1) the contract expressly contemplated or required performance in Connecticut; or (2) the plaintiff actually performed its obligations in Connecticut and such performance was the most substantial part of the obligations to be performed under the contract. See Aurand v. Contemporary Mktg, Inc., 2005 U.S. Dist. LEXIS 38428 (D.Conn. Dec. 20, 2005)." The federal trial judge noted that the complaint did not allege that the contract was made in Connecticut and PDI offered no evidence which would support such a finding.
The court then turned to the second test; "to be performed in Connecticut," the performance prong. The court found that the performance prong "need not explicitly require performance in Connecticut, nor must the performance be that of the party over whom jurisdiction is sought." Teleco Oil Fields Svcs., Inc. v. Skandia Insurance Co., 656 F.Sup. 753, 757 (D.Conn. 1987). In analyzing these two tests discussed in Aurand, the PDI trial judge found that PDI did not meet either of the two tests; expressly contemplated or required in Connecticut or such performance was the most substantial part of plaintiff's obligation. The court determined there was no personal jurisdiction under Gen. Stat. § 33-939(f)(1). The PDI court found that the most important part of the contract's performance was the assembly and the shipping of the display cases and both events did not occur in Connecticut.
This court has already found that the longarm statute permits jurisdiction to be established solely by the plaintiff's performance in Connecticut. As to the first test: the court cannot find that the contract expressly contemplated or required performance in Connecticut.
The court now must consider the second test which has two sub-parts. As to the first subpart, the court finds that the plaintiff actually performed certain of its obligations in Connecticut. Although the product was never located in Connecticut, the plaintiff's processing of the sales order, arranging for the shipping from a factory in New Jersey to a Pennsylvania warehouse, billing the defendant and processing the defendant's payments on account all were accomplished in the plaintiff's Connecticut office.
The court now turns to the second sub-part. Although the plaintiff did the actual work in preparing the invoices and arranging in its Connecticut office for the shipping of the product, the actual fulfillment of the contract and the shipping of the product took place outside Connecticut. The second sub-part requires that: "such performance was the most substantial part of the obligations to be performed under the contract." The court recognized that the statute only requires "performance" and only through judicial gloss is "most substantially" added to the plaintiff's performance obligations. The court finds that the plaintiff did perform certain of its obligations in Connecticut concerning processing the order, billing and receiving payments and/or credits. The court finds that the most substantial part of its obligation was the actual organizing, packing and shipping of the $50,000 worth of product. All of that product was shipped between a warehouse located in Pennsylvania and a factory in New Jersey and was organized and packed in the New Jersey factory. The court finds that the most substantial part of the obligations to be performed by the plaintiff did not take place in Connecticut. The plaintiff has failed to sustain its burden of proof under the second sub-part.
The plaintiff has the burden of proof to show compliance with longarm statute, Gen. Stat. § 33-939(f)(1). The court finds that the plaintiff has failed to sustain its burden of proof as to compliance with the longarm statute. The court need not decide if the exercise of jurisdiction over the defendant would violate constitutional principles of due process nor does the court have to discuss the concepts of specific jurisdiction or general jurisdiction.
The defendant's Motion to Dismiss dated January 16, 2009 (#103.00) is hereby granted.