Failla v. FixtureOne Corp.

336 P.3d 1112, 181 Wash. 2d 642

Opinions

¶1 This case asks whether Washington’s long-arm statute, RCW 4.28.185, confers personal jurisdiction over an officer of a foreign corporation that employs a Washington resident. On the facts before us, we conclude it does for wage claims arising from that employment relationship and reverse the Court of Appeals.

Yu, J.

Facts and Procedural History

|2 In 2009, Kristine Failla, a Washington resident and experienced salesperson, was looking for a job she could perform from her Gig Harbor home. She e-mailed Kenneth A. Schütz, looking for such a position. Schütz is the founder and chief executive officer (CEO) of FixtureOne Corporation, which sells fixtures, casework, and displays for use in retail stores. Clerk’s Papers (CP) at 62. Both FixtureOne and Schütz are based in Pennsylvania, and at the time of Failla’s e-mail, FixtureOne had no physical presence or customers in Washington.

|3 Failla’s inquiry caught the interest of Schütz, who replied to Failla that she “may be a fit” for FixtureOne because the company did “not have a sales representative in [this] area of the country.” CP at 93. The parties continued negotiating, and Schütz eventually invited Failla to interview with FixtureOne in Pennsylvania, knowing she lived and planned to work in Washington. Schütz admits the nature of FixtureOne’s business allows sales representatives to work anywhere with Internet and telephone access. CP at 63.

¶4 FixtureOne hired Failla as an account executive in November 2009 and agreed to pay her an annual salary of $75,000, plus an additional three percent commission on sales. Failla’s job responsibilities included, among other duties, “leading the company” in “[planning, execution and management of profitable growth and expansion of the company’s revenue base and market share.” CP at 30. The job also involved the “[d]esign, implementation and management of business development, client acquisition, and sales strategies.” Id. Failla reported directly to Schütz, and the two communicated extensively by e-mail.

¶5 In December 2010, Failla requested a promotion and a raise. Schütz agreed and promoted her to FixtureOne’s vice president of sales, increasing her salary to $135,000. Although there were outstanding commissions owed, Failla accepted the promotion and salary increase based on the assurances that the commissions would be paid. CP at 36. Schütz provided a draft employment agreement for Failla to sign in connection with the promotion. Among other things, the agreement contained a provision that it would be interpreted in accordance with Pennsylvania law. Failla proposed revisions to the agreement, but for reasons unknown neither Failla nor Schütz ever signed it.

¶6 Failla continued working for FixtureOne from her Washington home until May 2011. She received regular paychecks, and the only issue in this case is the sales commissions owed to her that were not paid. On May 26, 2011, Schütz e-mailed Failla to tell her that FixtureOne was “clos[ing] its doors” and ending her employment the following day. CP at 44. He assured Failla that FixtureOne would “pay your commissions and expenses asap in the next several weeks.” Id. For two months following her termination, Schütz returned Failla’s requests for payment with various explanations as to why the commissions remained unpaid. At one point he told Failla that he signed her commission check and blamed another employee for not mailing it. At other times he faulted the company’s comp troller for failing to calculate the commission amount. Schütz eventually advised Failla that she would not receive a commission check and for the first time disputed whether such commissions were even owed. CP at 50.

f7 Failla filed suit against FixtureOne and Schütz for the willful withholding of wages, including an allegation that Schütz was individually liable under Washington’s wage laws, RCW 49.52.050 and .070. Failla served Schütz in Pennsylvania but was unable to serve FixtureOne. Consequently, the suit proceeded against Schütz alone.

¶8 Failla and Schütz cross moved for summary judgment.¹ Schütz argued that the trial court lacked personal jurisdiction because he did not have the requisite minimum contacts with the state, and even if Washington could exercise jurisdiction over him, there were genuine issues of material fact preventing the entry of summary judgment. The trial court concluded it had personal jurisdiction and denied Schutz’s summary judgment motion. Instead, the court granted summary judgment to Failla, awarding double damages pursuant to RCW 49.52.070, which provides for such damages when an employer willfully withholds wages due an employee.

¶9 The Court of Appeals reversed, holding that Washington’s long-arm statute did not reach Schütz because the employment relationship between Failla and FixtureOne was inadequate to confer jurisdiction over Schütz. Failla v. FixtureOne Corp., 177 Wn. App. 813, 312 P.3d 1005 (2013). We granted review. Failla v. FixtureOne Corp, 180 Wn.2d 1007, 321 P.3d 1207 (2014).

¶10 Both parties agree FixtureOne, not Schütz, was the employer entity that hired Failla and that Failla performed work for FixtureOne in Washington. The disputed issue is whether Schütz, as the president and CEO of FixtureOne, is subject to Washington’s jurisdiction and, if so, whether the trial court erred in finding he is liable under Washington’s wage statute for nonpayment of wages under RCW 49.52-.050 and .070. We hold that Schütz is subject to Washington’s jurisdiction based on his level of contacts and transactions in Washington, regardless of whether he ever personally set foot in the state, and that the record supports the trial court’s finding of liability.

Analysis

I. Standard of Review

¶11 We review the grant of summary judgment de novo and engage in the same inquiry as the trial court, determining whether any genuine issue of material fact exists and whether the moving party is entitled to judgment as a matter of law. Lewis v. Bours, 119 Wn.2d 667, 669, 835 P.2d 221 (1992). “In so doing, ‘[t]he court must consider the facts in the light most favorable to the nonmoving party, and the motion should be granted only if, from all the evidence, reasonable persons could reach but one conclusion.’ ” Id. (alteration in original) (quoting Marincovich v. Tarabochia, 114 Wn.2d 271, 274, 787 P.2d 562 (1990)).

¶12 Similarly, a trial court’s assertion of personal jurisdiction is a question of law that we review de novo, where, as here, the jurisdictionally relevant facts are undisputed. Id.

II. Personal Jurisdiction

¶13 Washington courts are authorized to assert personal jurisdiction over nonresident defendants to the extent permitted by the federal due process clause. Shute v. Carnival Cruise Lines, 113 Wn.2d 763, 766-67, 783 P.2d 78 (1989); U.S. Const, amend. XTV, § 1. States can exercise jurisdiction without violating due process if the nonresident defendant has certain minimum contacts with the state such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice. Daimler AG v. Bauman, _U.S._, 134 S. Ct. 746, 754, 187 L. Ed. 2d 624 (2014) (citing the Court’s canonical opinion International Shoe Co. v. Washington, 326 U.S. 310, 66 S. Ct. 154, 90 L. Ed. 95 (1945)). The central concern of the federal constitutional inquiry is the relationship between the defendant, the forum, and the litigation. Shaffer v. Heitner, 433 U.S. 186, 204, 97 S. Ct. 2569, 53 L. Ed. 2d 683 (1977).

¶14 Our long-arm statute, designed to be coextensive with federal due process, subjects nonresident defendants to personal jurisdiction of Washington courts for any cause of action that arises from the transaction of any business within the state, among other conduct. RCW 4.28.185(l)(a). Three factors must coincide for the long-arm statute to apply:

“(1) The nonresident defendant or foreign corporation must purposefully do some act or consummate some transaction in the forum state; (2) the cause of action must arise from, or be connected with, such act or transaction; and (3) the assumption of jurisdiction by the forum state must not offend traditional notions of fair play and substantial justice, consideration being given to the quality, nature, and extent of the activity in the forum state, the relative convenience of the parties, the benefits and protection of laws of the forum state afforded the respective parties, and the basic equities of the situation.”

Shute, 113 Wn.2d at 767 (quoting Deutsch v. W. Coast Mach. Co., 80 Wn.2d 707, 711, 497 P.2d 1311 (1972)). This inquiry encompasses both the statutory and due process concerns of exercising personal jurisdiction. FutureSelect Portfolio Mgmt., Inc. v Tremont Grp. Holdings, Inc., 180 Wn.2d 954, 964, 331 P.3d 29 (2014).

¶15 Schütz argues he is not subject to Washington’s jurisdiction because he has never been to Washington and because he acted only as an employee and officer of the corporation that employed Failla. He asserts that jurisdiction and liability, if any, rests exclusively with the employing corporation.

¶16 We agree that a corporation’s actions cannot be simply imputed to a corporate officer or employee for purposes of determining whether there are minimum contacts necessary to establish jurisdiction. But it is just as true that an officer or employee is not automatically shielded from personal jurisdiction just because his contacts occurred in the context of his employment. Calder v. Jones, 465 U.S. 783, 790, 104 S. Ct. 1482, 79 L. Ed. 2d 804 (1984). Instead, “[e]ach defendant’s contacts with the forum State must be assessed individually.” Id.; see also Davis v. Metro Prods. Inc., 885 F.2d 515, 522 (9th Cir. 1989) (affirming states’ authority to assert personal jurisdiction over corporate officers based on contacts performed in that capacity). We determine personal jurisdiction on a case-by-case basis.

¶17 Schütz is the founder and CEO of FixtureOne. He was the individual who responded to Failla’s job inquiry, interviewed her, and hired her because of the potential benefits to FixtureOne of having a sales representative in Washington. During the two-year course of her employment, Schütz set her salary, issued her payroll checks, promoted her, gave her a raise, and calculated her commissions. He appeared to be the primary contact for Failla, and in fact, there is no evidence in the record that Failla had contact with anyone other than Schütz. Failla was Fixture-One’s employee located in the State of Washington who, while working in this state, generated over $700,000 in revenue for the company in 2010. CP at 40.

¶18 The Court of Appeals held that Washington could not exert jurisdiction over Schütz because

FixtureOne did not register to do business in Washington and never had operations, officers, or customers in this state. Nothing about Schutz’s employment of Failla anticipated that her activities in Washington would consist of more than residing here, working from home, and collecting a paycheck. Nothing in the record shows any attempt to do business with a Washington company, let alone any transactions with Washington companies.

Failla, 177 Wn. App. at 823-24. The Court of Appeals’ analysis relies on a finding that a person or company must target potential consumers in Washington, a subset of all this state’s residents, to have transacted business here and to come within reach of the long-arm statute. But we have interpreted RCW 4.28.185(l)(a) more broadly.

¶19 For example, in Toulouse v. Swanson, 73 Wn.2d 331, 334, 438 P.2d 578 (1968), we held that it was “beyond dispute” that an Idaho resident transacted business in this state under the long-arm statute when he employed a Washington lawyer. We found it particularly relevant that the parties’ contract “ ‘called for services over an extended period of time,’ ” giving the nonresident defendant an ongoing connection to this state. Id. at 331 (quoting trial court order). Likewise, in Thornton v. Interstate Securities Co., 35 Wn. App. 19, 23-25, 666 P.2d 370 (1983), the Court of Appeals determined that Washington could assert personal jurisdiction over a Kansas successor corporation on the basis that it consummated a transaction when it employed a Washington resident. “It has availed itself, however, of the knowledge and services of [the Washington employee] to collect accounts receivable here. It has thus carried on activity which touched the matter in issue — use of [the employee’s] services under the employment contract.” Id. at 25.

¶20 Similarly, in Cofinco of Seattle, Ltd. v. Weiss, 25 Wn. App. 195, 196, 605 P.2d 794 (1980), the Court of Appeals exercised jurisdiction over a nonresident defendant who agreed to work for a Washington corporation selling shoes on the East Coast. Jurisdiction was proper despite the fact that the defendant, who lived and worked in New York, had never been to Washington, never owned real property situated in Washington, and “never engaged in any activities, business or otherwise, in the state.” Id. The court correctly held that Washington courts had the jurisdictional power to adjudicate the employment dispute and that by entering into the employment contract, the employee pur posefully availed himself of the privilege of conducting activities within the state of Washington. Id. at 197.

¶21 Logically, if a nonresident employee defendant in New York is afforded the protection of Washington’s laws governing the employer-employee relationship, at the very least a Washington resident should also be afforded the statutory protection of Washington’s wage laws. A Pennsylvania employer that employs a Washington resident, and through that employee, conducts business from Washington for over two years forms a sufficient connection to the state such that it should reasonably anticipate defending a wage dispute here.²

f 22 Thus, we hold that employing a Washington resident to perform work in Washington constitutes the “transaction of any business within this state” under RCW 4.28.185(l)(a) and satisfies the first Shute prong. Jurisdiction is proper in Washington for wage claims arising from that employment, and employees may seek redress in this state’s courts absent an enforceable contract selecting an alternative forum and assuming fair play and substantial justice are not offended.

¶23 This analysis is a practical application of the principles delineated in Toulouse, Thornton, and Cofinco and conforms the long-arm statute to the “phenomena of [the] modern economy.” Griffiths & Sprague Stevedoring Co. v. Bayly, Martin & Fay, Inc., 71 Wn.2d 679, 684, 430 P.2d 600 (1967) (interpreting RCW 4.28.185 consistently with contemporary business practices). We recognize many employers no longer do business in physical buildings or rely on hands-on or face-to-face presence for there to be actual presence in a geographical location.

¶24 In this case, as outlined above, Schütz is not just any corporate officer, and we do not hold today that any corporate officer of a nonresident corporation may be subject to the state’s jurisdiction. Rather, Schütz was the officer directly responsible for the hiring, firing, promotion, and payment of Failla’s wages. Schutz’s contacts with the state of Washington were sufficient to confer jurisdiction over him for wage disputes arising from those contacts.

¶25 Likewise, it does not offend fair play or substantial justice to require Schütz to defend Failla’s wage claim here. It is not unreasonable to require a company that knowingly employs a Washington resident to abide by this state’s wage laws, nor is it unreasonable to require the individual responsible for payroll to answer for failing to comply with those laws. Schütz knew from the outset that he was hiring an employee in Washington and, as Failla’s primary contact at FixtureOne, was ultimately responsible for paying her. Employers have fair notice of our laws governing the employer-employee relationship, including RCW 49.52.050 and .070, which impose individual liability. We cannot say under the facts of this case that exercising jurisdiction violates due process. This satisfies the third Shute prong,³ and the trial court was correct to exercise personal jurisdiction over Schütz.

III. Summary Judgment

¶26 The trial court entered judgment in favor of Failla under RCW 49.52.050 and .070. Together these statutes create a cause of action against

[a]ny employer or officer, vice principal or agent of any employer . . . who . . .

[w]ilfully and with intent to deprive the employee of any part of his or her wages, [pays] any employee a lower wage than the wage such employer is obligated to pay such employee by any statute, ordinance, or contract.

RCW 49.52.050(2) (emphasis added). The critical, but not stringent, prerequisite to liability is that the employer’s (or officer’s) failure to pay wages was “willful.” Schilling v. Radio Holdings, Inc., 136 Wn.2d 152, 159-60, 961 P.2d 371 (1998). The employee need show only that the refusal to pay was a volitional act, not the product of mere carelessness and not the result of a bona fide dispute. Id. at 160. Usually willfulness is a question of fact, but as with all fact questions, summary judgment is proper as a matter of law if the evidence supports a single reasonable conclusion. Id.

¶27 We affirm the trial court’s judgment. The evidence that Schütz offered the trial court — e-mails in which he faults other employees under his direction for not calculating and paying the commissions to Failla — does not create a genuine issue of fact regarding willfulness such that it requires a trial on the issue. RCW 49.52.050 and .070 express the legislature’s “strong policy in favor of ensuring the payment of the full amount of wages earned.” Morgan v. Kingen, 166 Wn.2d 526, 538, 210 P.3d 995 (2009). Corporations act only through individuals, and by extending personal liability to individual officers for wages owed by the corporation, the legislature recognized that “officers control the choices over how the corporation’s money is used.” Id. at 537. Thus, officers, vice principals, and agents act willfully if those individuals exercise control over the employer’s funds and still fail to pay their employees. Ellerman v. Centerpoint Prepress, Inc., 143 Wn.2d 514, 522-23, 22 P.3d 795 (2001) (rejecting liability based on mere agency). We affirmed summary judgment for the employees in Morgan based on the employing CEO’s ultimate control of the business’s finances, which included the authority to hire employees and set compensation. 166 Wn.2d at 531.

¶28 Schutz’s evidence creates a factual dispute only if we accept as reasonable his suggestion that he lacked power over FixtureOne’s assets. The e-mails on which Schütz relies to negate willfulness, all of which he sent after he terminated Failla, conflict with Schutz’s obvious control of the company during Failla’s employment. He interviewed her. He hired her. He unilaterally promoted her and directed the company’s comptroller to increase her salary. Schütz even admitted his fiscal authority in an e-mail to Failla. CP at 50 (“I know [the comptroller] cut a payroll check for you and I signed it.”). The trial court found it possible to draw only one conclusion from this evidence— that Schütz controlled FixtureOne’s finances, had the ability to pay Failla, and failed to do so willfully. We agree.

¶29 Nor do we find persuasive Schutz’s argument that a bona fide dispute exists regarding the amount of commissions owed to Failla. See Schilling, 136 Wn.2d at 160 (recognizing a bona fide dispute over wages negates will fulness under RCW 49.52.050 and .070). Schütz offered the trial court no evidence refuting Failla’s accounting and instead relies on bare allegations in his summary judgment response. Unsupported allegations do not create a question of fact. Young v. Key Pharm., Inc., 112 Wn.2d 216, 225, 770 P.2d 182 (1989).

Conclusion

¶30 For the above stated reasons, we reverse the Court of Appeals and reinstate the judgment of the trial court. Failla is entitled to her costs and attorney fees on appeal. RCW 49.52.070; Brandt v. Impero, 1 Wn. App. 678, 683, 463 P.2d 197 (1969).

Madsen, C.J., and C. Johnson, Fairhukst, Stephens, Wiggins, González, and Gordon McCloud, JJ, concur.

Footnotes

1

Schütz styled his motion as one to dismiss, but because he relied on materials outside the complaint, the superior court properly treated the motion as one for summary judgment. CR 12(b), 56.

2

A relevant inquiry in this case is whether Schütz could “ ‘reasonably anticipate being haled into court’ ” in Washington. Calder, 465 U.S. at 790 (quoting WorldWide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S. Ct. 559, 62 L. Ed. 2d 490 (1980)). This standard “ensures that a defendant will not be haled into a jurisdiction solely as a result of‘random,’ ‘fortuitous,’ or ‘attenuated’ contacts, or ‘the unilateral activity of another party or a third person.’ ” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475, 105 S. Ct. 2174, 85 L. Ed. 2d 528 (1985) (citations omitted) (quoting Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 774, 104 S. Ct. 1473, 79 L. Ed. 2d 790 (1984); World-Wide Volkswagen, 444 U.S. at 299; Helicopteros Nacionales de Colom., SA v. Hall, 466 U.S. 408, 417, 104 S. Ct. 1868, 80 L. Ed. 2d 404 (1984)).

The dissent agrees the “contact” in question here is Schutz’s correspondence with and decision to hire Failla. But it fails to evaluate the extent of contact and subsequent contacts under the proper precedent. Instead, the dissent concludes Washington lacks minimum contacts because Failla “did not solicit any business in Washington, and there is no record that [FixtureOne] made any sales or did any advertising in Washington.” Dissent at 658-59. The dissent does not explain why Schütz would have been better able to foresee Failla’s lawsuit for unpaid wages if FixtureOne had solicited more business in Washington.

Moreover, the dissent relies principally on Walden v. Fiore,_U.S._, 134 S. Ct. 1115, 188 L. Ed. 2d 12 (2014), a case easily distinguishable. Walden involved a federal agent who stopped a couple at an airport in Georgia, seized from them $97,000 in cash, and allegedly filed a false and misleading affidavit in support of forfeiture. Id. at 1120-21. The couple, who had residences in California and Nevada, sued in Nevada. Id. at 1121. The United States Supreme Court unanimously held the Nevada court lacked personal jurisdiction over the agent, who “never traveled to, conducted activities within, contacted anyone in, or sent anything or anyone to Nevada.” Id. at 1124 (emphasis added). The plaintiffs’ residence in Nevada was, from the point of view of the defendant, random and fortuitous.

Schutz’s connection to Washington was not random and fortuitous. It was the product of deliberate negotiation with Failla over the terms of her employment and salary and apparently stemmed in part from his decision that FixtureOne needed a sales representative in this part of the country. For this reason, Walden is inapposite.

3

The second Shute prong is not at issue. Neither party contests that Failla’s claim arises from Schutz’s contacts with Washington (the nonpayment of wages due under the employment relationship).