Interadd of NH v. Foreign Motors CV-94-560-SD 02/02/95 UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF NEW HAMPSHIRE
Interadd of New Hampshire, Inc.
v. Civil No. 94-560-SD
Foreign Motors, Inc.; MBPA Corp.; Herbert G. Chambers
O R D E R
In this diversity action, plaintiff Interadd of New
Hampshire, Inc., seeks to recover monies it is allegedly owed
under a Consulting and Non-Competition Agreement entered into
between Interadd and defendants Foreign Motors, Inc., and MBPA
Corporation, and guaranteed by defendant Herbert G. Chambers.
Presently before the court are (1) defendants' motion to
dismiss this action for lack of personal jurisdiction or, in the
alternative, to dismiss or stay the action because of an
agreement to arbitrate, and (2) plaintiff's motion to file an
amended complaint. Objections to each motion have been filed.
Background
Prior to 1986, Lutz N. Wallem and his wife, Waltraud A. Wallem, were the owners of Foreign Motors, Inc., an automobile
dealership in Boston, Massachusetts, authorized to sell Mercedes-
Benz, BMW, Porsche, and Audi automobiles.
In December 1985 Foreign Motors entered into an Asset
Purchase Agreement with Bahig Bishay. Pursuant to said
agreement. Foreign Motors agreed to sell Bishay certain assets,
including its four foreign car franchises. Said agreement was
contingent upon the franchisors' approval of the sale.
Declaration of Herbert G. Chambers 5 3.1 In March 1986,
Mercedes-Benz refused to approve the transfer of Foreign Motors'
Mercedes-Benz franchise to Bishay. Id. As a result. Foreign
Motors and Bishay entered into an Extension Agreement which gave
Bishay an additional two years to obtain Mercedes-Benz's
approval. Id.
Defendant Herbert G. Chambers states.
In September 1986, I was contacted on behalf of Foreign Motors and was informed that Foreign Motors was in serious financial difficulty and was threatened with loss of its inventory or "floor plan" financing, without any replacement financing in place. Bishay's dispute with Mercedes remained unresolved at this time. I agreed to enter
Chambers' "declaration" is an unsworn statement signed under penalty of perjury. Under 28 U.S.C. § 1746, such a statement "may be used, in lieu of a sworn statement or affidavit" to support defendants' motion. Goldman, Antonetti, Ferraiuoli, Axtmaver & Hertell v. Medfit Int'l, Inc., 982 F.2d 686, 689 (1st Cir. 1993).
2 into a series of agreements with Foreign Motors and the Wallems intended to address Foreign Motors' financial problems. I formed MBPA, a Massachusetts corporation, in connection with these transactions.
Id. 5 4.
On October 15, 1986, the following agreements were entered
into with respect to Foreign Motors:
(1) a financing agreement under which MBPA agreed to loan
$1,030,000 to Foreign Motors and to guarantee Foreign Motors'
floor plan in exchange for li^ percent of the dealership's stock;
(2) an Option to Purchase Stock Agreement (Defendants'
Exhibit A) between the Wallems, Foreign Motors, and MBPA, under
which MBPA or its designee received an option to purchase the
remaining percent of Foreign Motors' stock; and
(3) an Indemnity Agreement between the Wallems, Foreign
Motors, and MBPA (Defendants' Exhibit B) addressing, inter alia,
the parties' responsibility for any expenses and liability
associated with litigation involving Bishay.
MBPA subseguently exercised its option to purchase the
remaining Foreign Motors stock owned by the Wallems, and named
Chambers as its approved designee to receive transfer of the
stock. See Memorandum Re: Tentative, Closing and Final Book
Value at 1 (Defendants' Exhibit D). The sale of stock took place
on November 6, 1987. Chambers Declaration 1 8.
3 In connection with this sale. Interadd, a New Hampshire
corporation formed by the Wallems, entered into a Consulting and
Non-Competition Agreement with Foreign Motors and MBPA
(Defendants' Exhibit E) (the Consulting Agreement). Under said
agreement. Interadd was to be paid $108,000 "each year for ten
years payable monthly in arrears . . . ." Consulting Agreement
at 1. In return. Lutz Wallem and Interadd agreed, inter alia, to
provide consulting services to Foreign Motors and MBPA and not to
compete with said companies over the ten-year period covered by
the agreement. Id. at 1-2. Payment of the amounts due to
Interadd under the Consulting Agreement was guaranteed by
Chambers. See Guaranty of Non-Competition and Confidentiality
Payments (Defendants' Exhibit F).
In December 1986 Bishay filed suit against the Wallems,
Foreign Motors, MBPA, and Chambers in Massachusetts Superior
Court. Chambers Declaration 1 7. Pursuant to the terms of the
Indemnity Agreement, the Wallems are obligated to indemnify MBPA
for a portion of the expenses incurred by MBPA as a result of
this litigation. See Indemnity Agreement at 2- 2 (a) . The
Indemnity Agreement also grants MBPA and Foreign Motors the
following right of offset:
MBPA and/or the Company [Foreign Motors] shall have the right to offset any unpaid sum due under this Indemnity from the Indemnitors or either of them against the Five Thousand
4 ($5,000.00) Dollars per week and the incentive bonus of 50% of the net operating profits otherwise due to the Indemnitors or either of them under the Wallem Employment Agreement and Wallem Consulting and Non competition Agreement of even date herewith, upon notice of offset to the Indemnitors.
Id. at 4 .
Relying on this right of offset, the defendants subseguently
offset amounts that were purportedly due to them under the
Indemnity Agreement against the amounts due to Interadd under the
Consulting Agreement. The Wallems disputed both the right of the
defendants to make such an offset and the amount defendants
claimed to be due under the Indemnity Agreement. Wallem
Affidavit I 13.
In an agreement dated March 12, 1993, the parties resolved
their differences as to the offset issue and as to other related
issues for all payments due under the various contracts between
them prior to February 18, 1993. Said agreement provides, inter
alia, that.
The parties to this Agreement hereby agree that prior to any future offsets (after February 18, 1993) by MBPA or Foreign Motors, MBPA or Foreign Motors shall notify Interadd, in writing, of its intention to offset and shall furnish Interadd with detailed backup data of the amount to be offset. Interadd shall respond within ten (10) days of receipt of said written notice and data as to any offsets that are in dispute. Upon any dispute of the propriety and/or amount of offset the parties hereby agree to submit the
5 dispute to a single arbitrator with said procedure being set forth in paragraph (15) fifteen of the Memorandum re: Tentative, Closing and Final Book Value of November 6, 1987. The terms and conditions of paragraph (15) fifteen of Memorandum re: Tentative, Closing and Final Book Value of November 6, 1987, are hereby incorporated herein by reference.2
Agreement of March 12, 1993, 5 7 (Defendants' Exhibit G) .
By letter dated June 22, 1994, defendants notified Interadd
and the Wallems of their intent "to offset amounts due under the
Indemnity Agreement against amounts otherwise due under the
November 6, 1987 Consulting and Non-Competition Agreement."
Letter from Bruce H. Spatz to Interadd, Lutz N. Wallem, and
Waltraud A. Wallem (Defendants' Exhibit H ) . The Wallems have
challenged the amount due to defendants under the Indemnity
2Paragraph 15 of the November 6, 1987, Memorandum states.
Single Arbitrator Procedure. Whenever any provision in this agreement reguires arbitration before a single arbitrator, the Arbitrator shall be Wayne Shenk, currently General Manager of Foreign Motors, Inc., 1095 Commonwealth Avenue, Boston, Massachusetts. The sole remedy of the party shall be a single arbitrator proceeding, without appeal. Such arbitrator is to be totally independent, unconnected with any party hereto. (Such proceeding is herein referred to as "arbitration by a single arbitrator"). Each party shall pay their own attorneys' fees and both parties shall share egually the cost of the single arbitrator proceeding.
Memorandum of November 6, 1987, 5 15 (Defendants' Exhibit D).
6 Agreement and maintain that the Agreement of March 12, 1993, does
not allow that amount to be offset against amounts due to
Interadd under the Consulting Agreement. In addition, by letter
dated September 30, 1994, the Wallems reguested that the dispute
between the parties over the amount of indemnification be
submitted to arbitration pursuant to paragraph seven of the
March 12, 1993, Agreement and paragraph fifteen of the
November 6, 1987, memorandum. Letter from Earl L. Kalil,Jr., to
Spatz (attached to Plaintiff's Objection as Exhibit 2(B)).
The instant action was initiated by Interadd in Rockingham
County (New Hampshire) Superior Court on October 4, 1994.
Defendants, citing a diversity of citizenship, removed the action
to this court on November 1, 1994.
Discussion
A. Personal Jurisdiction
” [I]n personam jurisdiction relates to the power of a court
over a defendant. It is of two varieties, general and specific."
Pritzker v. Yari, Nos. 93-2374, 94-1128, 94-1129, ___ F.3d ___ ,
, 1994 U.S. App. LEXIS 35101, at *10 (1st Cir. Dec. 13, 1994).
Plaintiff asserts that this court has both general and specific
personal jurisdiction over each of the named defendants.
7 1. Burden of Proof
"[W]hen a court's personal jurisdiction over a defendant is
contested, plaintiff bears the burden of demonstrating that such
jurisdiction exists." Kopf v. Chloride Power Elecs., Inc., No.
94-391-SD, ___ F. Supp. ___, ___ , 1995 U.S. Dist. LEXIS 384, at
*22 (D.N.H. Jan. 12, 1994) (citing Boit v. Gar-Tec Prods., Inc.,
967 F .2d 671, 675 (1st Cir. 1992)).
A district court can elect to dispose of a motion to dismiss
for lack of personal jurisdiction without holding an evidentiary
hearing, provided that when it does so, it uses a "prima facie"
standard to govern its review. United Elec. Workers v. 163
Pleasant Street Corp. [Pleasant Street III, 987 F.2d 39, 43 (1st
Cir. 1993). Under this standard, plaintiff must make a prima
facie showing of personal jurisdiction that is "based upon
evidence of specific facts set forth in the record." Id. at 44
(citing Boit, supra, 967 F.2d at 675). Otherwise stated, "[t]his
means that plaintiff '"must go beyond the pleadings and make
affirmative proof."'" Id. (guoting Boit, supra, 967 F.2d at 675
(guoting Chlebda v. H.E. Fortna & Bro., Inc., 609 F.2d 1022, 1024
(1st Cir. 1979) )) .
In determining whether a plaintiff has made a prima facie
jurisdictional showing, the court "draw[s] the facts from the
pleadings and the parties' supplementary filings, including affidavits, taking facts affirmatively alleged by plaintiff as
true and construing disputed facts in the light most hospitable
to plaintiff." Ticketmaster-New York, Inc. v. Alioto, 26 F.3d
201, 203 (1st Cir. 1994). The court is not, however, reguired to
"credit conclusory allegations or draw farfetched inferences."
Id.
2. General Personal Jurisdiction
"General personal jurisdiction, as its name implies, is
broad in its ambit: it is the power of a forum-based court,
whether state or federal, over a defendant 'which may be asserted
in connection with suits not directly founded on [that
defendant's] forum-based conduct . . . .'" Pritzker, supra,
F .3d at ___ , 1994 U.S. App. LEXIS 35101, at *10 (guoting
Donatelli v. National Hockey League, 893 F.2d 459, 462-63 (1st
Cir. 1990)). "'[G]eneral jurisdiction exists when the litigation
is not directly founded on the defendant's forum-based contacts,
but the defendant has nevertheless engaged in continuous and
systematic activity, unrelated to the suit, in the forum state.'"
Id. at *11 (quoting United Elec. Workers v. 163 Pleasant Street
Corp. [Pleasant Street II, 960 F.2d 1080, 1088 (1st Cir. 1992));
see also Glater v. Eli Lilly & Co., 744 F.2d 213, 216-17 (1st
Cir. 1984).
9 The contacts unrelated to this suit cited by plaintiff
consist of advertising in the Boston Globe, which is distributed
in New Hampshire, and the selling of automobiles to and providing
automobile service for New Hampshire residents. Lutz Affidavit
55 8-9; Affidavit of Richard F. Collins 55 2-4; Affidavit of Joan
E. Skewes 55 1-3.
Having reviewed the nature of defendants' contacts with New
Hampshire, the court finds that said contacts are not the type of
"continuous and systematic" contacts that would allow the court
to assert general jurisdiction over the defendants. See, e.g.,
Glater, supra, 744 F.2d at 217 (advertising and solicitation of
product orders by defendants in New Hampshire not sufficient to
support exercise of general jurisdiction over defendants).
3. Specific Personal Jurisdiction
"The proper exercise of specific in personam jurisdiction
hinges on satisfaction of two reguirements: first, that the forum
in which the federal district court sits has a long-arm statute
that purports to grant jurisdiction over the defendant; and
second, that the exercise of jurisdiction pursuant to that
statute comports with the strictures of the Constitution."
Pritzker, supra, ___ F.3d at ___ , 1994 U.S. App. LEXIS 35101, at
*12. See also Ticketmaster, supra, 26 F.3d at 204; Pleasant
10 Street II, supra, 987 F.2d at 43.
4. The Long-Arm Statutes
a. The Corporate Defendants
Foreign Motors and MBPA are both Massachusetts corporations.
They are not authorized to transact business in New Hampshire,
nor do they maintain a registered agent here. Chambers
Declaration 5 11.
The long-arm statute governing the jurisdiction of New
Hampshire courts over unregistered foreign corporations is New
Hampshire Revised Statutes Annotated (RSA) 293-A:15.10.3 McClary
v. Erie Engine & Mfg. Co., 856 F. Supp. 52, 55 (D.N.H. 1994) .
When the New Hampshire Legislature enacted RSA 293-A:15.10, it
3RSA 293-A:15.10 provides, in relevant part,
(b) A foreign corporation may be served by registered or certified mail, return receipt reguested, addressed to the secretary of the foreign corporation at its principal office shown in its application for a certificate of authority or in its most recent annual report if the foreign corporation: (1) has no registered agent or its registered agent cannot with reasonable diligence be served;
(d) This section does not prescribe the only means, or necessarily the reguired means, of serving a foreign corporation.
RSA 293-A:15.10(b) and (d) (Supp. 1993).
11 eliminated all of the restrictive long-arm language that had
appeared in the statute's predecessors. In so doing, this court
has held that the legislature "intended RSA 293-A:15.10 to
authorize jurisdiction over foreign corporations to the full
extent allowed by federal law." Id.
"Because RSA 293-A:15.10 reaches to the federal limit, the
traditional two-part personal jurisdiction inguiry collapses into
the single guestion of whether the constitutional reguirements of
due process have been met." Id. Accordingly, this court's
exercise of jurisdiction over Foreign Motors and MBPA is
authorized by RSA 293-A:15.10 if it comports with the
reguirements of due process.
b. Herbert G. Chambers
The long-arm statute applicable to defendant Chambers is RSA
510:4, which provides,
I. JURISDICTION. Any person who is not an inhabitant of this state and who, in person or through an agent, transacts any business within this state, commits a tortious act within this state, or has the ownership, use, or possession of any real or personal property situated in this state submits himself, or his personal representative, to the jurisdiction of the courts of this state as to any cause of action arising from or growing out of the acts enumerated above.
RSA 510:4, I (1983). The New Hampshire "legislature intended RSA
12 510:4, I, 'to be construed in the broadest legal sense to
encompass personal, private and commercial transactions.'"
Phelps v. Kingston, 130 N.H. 166, 170, 536 A.2d 740, 742 (1987)
(quoting Leeper v. Leeper, 114 N.H. 294, 297, 319 A.2d 626, 628
(1974)). Accordingly, the statute is applied "to provide
jurisdiction over foreign defendants to the full extent that the
statutory language and due process will allow." Id., 130 N.H. at
171, 536 A.2d at 742.
Because RSA 510:4 reaches to the constitutional limit, the
court confines its analysis here to the question of whether its
exercise of personal jurisdiction over the defendant Chambers
comports with the requirements of due process. See, e.g.,
McClary, supra, 85 6 F. Supp. at 55; Ganis Corp. of California v.
Jackson, 822 F.2d 194, 196 (1st Cir. 1987).
3. The Reguirements of Due Process
A court's exercise of personal jurisdiction over a non
resident defendant meets the requirements of due process if the
court finds that the defendant has "certain minimum contacts"
with the forum state "such that the maintenance of the suit does
not offend 'traditional notions of fair play and substantial
justice.'" International Shoe Co. v. Washington, 326 U.S. 310,
316 (1945) (quoting Milliken v. Mever, 311 U.S. 457, 463 (1940)).
13 In determining whether its exercise of jurisdiction falls
"within constitutional bounds," the court employs the following
tripartite analysis:
First, the claim underlying the litigation must directly arise out of, or relate to, the defendant's forum-state activities. Second, the defendant's in-state contacts must represent a purposeful availment of the privilege of conducting activities in the forum state, thereby invoking the benefits and protections of that state's laws and making the defendant's involuntary presence before the state's court foreseeable. Third, the exercise of jurisdiction must, in light of the Gestalt factors, be reasonable.
Pritzker, supra, ___ F.3d at , 1994 U.S. App. LEXIS 35101, at
*14-15 (guoting Pleasant Street I, supra, 960 F.2d at 1089).
a. Relatedness
The reguirement that an action arise out of or relate to a
defendant's forum-state contacts serves two functions.
First, relatedness is the divining rod that separates specific jurisdiction cases from general jurisdiction cases. Second, it ensures that the element of causation remains in the forefront of the due process investigation. Even if the facts are such that a court may not dismiss a given case for lack of relatedness per se, the relatedness reguirement, in serving its second function, authorizes the court to take into account the strength (or weakness) of the plaintiff's relatedness showing in passing upon the fundamental fairness of allowing the suit to proceed.
14 Ticketmaster, supra, 26 F.3d at 207.
The court's examination of defendants' contacts with the
forum begins with the Consulting Agreement between Foreign
Motors, MBPA, and Interadd,4 and the guarantee of payments due to
Interadd under that agreement by Chambers.
However, a defendant's contract with an out-of-state party,
standing alone, does not automatically establish sufficient
minimum contacts in the other party's home forum for the purposes
of due process analysis. Burger King Corp. v. Rudzewicz, 471
U.S. 462, 478 (1985); Ganis Corp., supra, 822 F.2d at 197.
Instead, the court, applying a "contracts-plus" analysis, must
also examine "all of the communications and transactions between
the parties, before, during and after the consummation of the
contract, to determine the degree and type of contacts the
defendant has with the forum, apart from the contract alone."
Ganis Corp., supra, 822 F.2d at 197-98. This approach
"recognizes that a 'contract' is 'ordinarily but an intermediate
4Lutz Wallem states that "[t]he purpose of the formation of Interadd . . . was the transaction and performance of the various contracts and agreements among the parties to this litigation." Affidavit of Lutz Wallem 5 2. Wallem further states that Interadd was formed "at the reguest and direction of" defendant Chambers. Id. 55 1-2; Second Affidavit of Lutz N. Wallem 5 2. Chambers contends that he "never made any such reguest . . . ." Second Declaration of Herbert G. Chambers 5 3. The court finds this dispute over the formation of Interadd to be immaterial to the guestions before it at this time.
15 step serving to tie up prior business negotiations with future
conseguences which themselves are the real object of the business
transaction.'" Burger King, supra, 471 U.S. at 479 (guoting
Hoopeston Canning Co. v. Cullen, 318 U.S. 313, 316-17 (1943)).
"It is these factors--prior negotiations and contemplated future
conseguences, 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 within the forum." Id.
With respect to the negotiations between the parties prior
to consummation of the Consulting Agreement, Lutz Wallem asserts
that in September of 198 6, "Mr. Chambers traveled to Lebanon, New
Hampshire to negotiate the contracts and agreements with me in
person. At that time Mr. Chambers traveled to Lebanon, New
Hampshire by means of his helicopter to negotiate the terms of
the Option To Purchase Stock and the Indemnity Agreement, both
dated October 15, 1986." Wallem Affidavit 5 5. The Option to
Purchase Stock Agreement negotiated between the parties provided
that, at the closing of the sale of stock from the Wallems to
MBPA or its designee, the parties "shall execute the Consulting
and Non-Competition Agreement." Option to Purchase Stock
Agreement at 8. Said agreement further provides that Lutz
Wallem, the consultant, shall be paid an initial consulting fee
16 of $500,000 at the closing and shall be paid the monthly payment
under the Consulting and Non-Competition Agreement for 120 months
after the execution of such agreement. Id. at 8-9. The
Consulting Agreement is also referenced in the Indemnity
Agreement. See Indemnity Agreement at 4.
Chambers states that he "did not travel to New Hampshire in
connection with the negotiation or execution of the November 6,
1987 closing documents and agreements." Chambers Declaration
I 9. Plaintiff does not dispute Chambers' claim that he did not
travel to New Hampshire to negotiate the terms of the Consulting
Agreement and Guaranty, but asserts that during the negotiation
of the November 6, 1987, contracts defendants "had numerous and
varied forms of communication with [Wallem] and Interadd in New
Hampshire" including "various correspondence and numerous
telephone contacts made by Mr. Chambers and his and the co
defendants ' representatives with [Wallem] and Interadd in New
Hampshire . . . ." Wallem Affidavit 55 4-5.
The closing at which the Wallems' remaining stock in Foreign
Motors was sold to Chambers and at which the Consulting Agreement
was signed took place at the offices of Chambers' counsel, Milton
Sorokin, in Hartford, Connecticut. Second Declaration of Bruce
H. Spatz 5 8.
Under the terms of the Consulting Agreement, Interadd and
17 Lutz Wallem were to provide consulting services to Foreign Motors
and MBPA for a ten-year term. With respect to performance of the
Consulting Agreement, Wallem states in his affidavit, "I have
been contacted in New Hampshire as the representative of Interadd
for consultation and advice relating to sales, service and
business administration. I provided this performance on behalf
of Interadd from the State of New Hampshire." Wallem Affidavit 5
6. Wallem further states.
The performance of Interadd's services would regularly occur with my being contacted in New Hampshire to discuss matters having to do with financial records, warranties and other managerial matters concerning the operation of Foreign Motors, Inc. after Foreign Motors, Inc. was bought out and taken over by Mr. Chambers and his companies. Interadd of New Hampshire, Inc.'s status as a consultant after Mr. Chambers took over is that Interadd is on standby, in New Hampshire, for telephonic communication of matters on which they might need continuing consultation on matters having to do with the ongoing operations. In performing such work as a consultant I have traveled to Massachusetts on behalf of Interadd on occasion. However, it has nearly always been the case that Interadd and myself are contacted in New Hampshire and perform the reguested consultation over the telephone from New Hampshire also based on records located at the offices of Interadd in New Hampshire.
Second Affidavit of Lutz N. Wallem 5 6 (attached to Plaintiff's
18 Response as Exhibit 1) .5
"The location of where payments are to be sent has been
recognized as a material contact in jurisdictional analysis."
Ganis Corp., supra, 822 F.2d at 198 (citing Burger King, supra,
471 U.S. at 480-81. Plaintiff asserts that fees due under the
Consulting Agreement were to be paid to Interaddin New
Hampshire. Wallem Affidavit 5 7. Defendants concede that "[o]n
limited occasions, checks may have been mailed to Wallem" in New
Hampshire, but maintain that "[a]lmost all checks for payments
made by Foreign Motors under the Consulting Agreement were picked
up in Massachusetts." Declaration of Bruce H. Spatz 5 6.
Further, all notices under the agreement are to be sent to
Interadd in New Hampshire, with a copy to C. Michael Malon, Esq.,
of Davis, Malon & D'Agostine in Boston, Massachusetts.
Consulting Agreement at 6-7.
On the basis of all the evidence before it,the court finds
that there is a substantial connection between defendants'
contacts in the forum and the instant cause of action.
5The court notes that Chambers states in his declaration that "[a]11 consulting services rendered under [the Consulting and Non-Competition Agreement] have taken place in Boston." Chambers Declaration 5 9. However, in determining whether plaintiff has made a prima facie showing of jurisdiction, the court is required to "constru[e] disputed facts in the light most hospitable to plaintiff." Ticketmaster, supra, 26 F.3d at 203.
19 b. Purposeful Availment
The second prong of the tripartite analysis requires the
court to determine whether defendants' in-state contacts,
described infra at pp. 15-20, represent a purposeful availment of
the privilege of conducting activities in New Hampshire.
Pritzker, supra, ___ F.3d at ___ , 1994 U.S. App. LEXIS 35101, at
*15-16. This 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" . . . .'"
Donatelli, supra, 893 F.2d at 464-65 (quoting Burger King, supra,
471 U.S. at 475) .
The court finds that defendants, by entering into a contract
with a New Hampshire resident that would be performed, at least
in part, in New Hampshire over a ten-year period, purposely
availed themselves of the privilege of conducting business in New
Hampshire. See McGee v. International Life Ins. Co., 355 U.S.
220, 223 (1957) ("It is sufficient for purposes of due process
that the suit was based on a contract which had substantial
connection with that State.").
c. The Gestalt Factors
The Gestalt factors identified by the First Circuit include:
20 (1) the defendant's burden of appearing, (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 effective resolution of the controversy, and (5) the common interests of all sovereigns in promoting substantive social policies.
Pritzker, supra,____ F.3d at ___ , 1994 U.S. App. LEXIS 35101, at
*26 (guoting Pleasant Street I, supra, 960 F.2d at 1088) . The
court notes that said factors "'are not ends in themselves, but
they are, collectively, a means of assisting courts in achieving
substantial justice. In very close cases, they may tip the
constitutional balance.'" Id. at *27 (guoting Ticketmaster,
supra, 26 F.3d at 209) .
(1) Defendants' Burden of Appearing
The First Circuit, recognizing that "the concept of burden
is inherently relative," has held that "insofar as staging a
defense in a foreign jurisdiction is almost always inconvenient
and/or costly, . . . this factor is only meaningful where a party
can demonstrate some kind of special or unusual burden."
Pritzker, supra,____ F.3d at ___ , 1994 U.S. App. LEXIS 35101, at
*27 .
Defendants Foreign Motors and MBPA are Massachusetts
corporations with their principal places of business located in
21 Somerville, Massachusetts, and Hartford, Connecticut,
respectively. Defendant is a Connecticut resident, but clearly
conducts a great deal of his business in the Boston area. The
court finds that the burden that would be placed on the
defendants by requiring them to appear before this court in
Concord, New Hampshire, is minimal.
(2) The Forum State's Interest
The action arises from a contract between a New Hampshire
resident and several nonresident defendants. New Hampshire
clearly has an interest in exercising jurisdiction over
nonresident defendants who are alleged to have breached such a
contract. See, e.g., Haverhill v. City Bank and Trust Co., 119
N.H. 409, 411-12, 402 A.2d 185, 187 (1979) (exercising
jurisdiction over a nonresident defendant whose contract with a
resident was to be partially performed in New Hampshire).
(3) The Plaintiff's Convenience
Interadd is currently located in Stratham, New Hampshire.
Stratham is located in the southern part of the state and, as a
practical matter, is not much further from the federal court in
Boston than it is from this court. Therefore, "[w]hile [the
court] must accord plaintiff's choice of forum a degree of
22 deference in respect to the issue of its own convenience, see
Piper Aircraft Co. v. Revno, 454 U.S. 235, 241 (1981), the
plaintiff's actual convenience seems to be at best a makeweight
in this situation." Ticketmaster, supra, 26 F.3d at 211.
(4) The Administration of Justice
The judicial system has a clear interest in obtaining the
most effective resolution of any controversy. Ticketmaster,
supra, 26 F.3d at 209. The court finds that its determination of
what constitutes the most effective resolution of this
controversy reguires it to consider the interrelationship between
the Consulting Agreement and the numerous other agreements
between the various parties.
The controversy at issue is whether defendants owe money to
Interadd under the Consulting Agreement. Taken at face value,
this dispute appears to be a relatively simple one to resolve.
However, there is an ongoing dispute between the parties as to
whether defendants are entitled to offset amounts due under the
Indemnity Agreement against amounts due under the Consulting
Agreement. The parties are also in dispute over the amount due
under the Indemnity Agreement and are both seeking to have that
dispute submitted to arbitration in accordance with their
Agreement of March 12, 1993, and the arbitration provision set
23 forth in their Memorandum of November 6, 1987.6
The court finds that these three disputes are all
interrelated and that the most effective resolution of the
controversy at issue is one that also resolves the other two
disputes described herein. See, e.g., Pritzker, supra, ___ F.3d
, 1994 U.S. App. LEXIS 35101, at *29 ("the judicial system's
interest in obtaining the most efficacious resolution of the
controversy . . . counsels against furcation of the dispute among
several different jurisdictions"). The court does not find,
however, that this factor counsels against exercising
jurisdiction over the defendants at this time.
(5) Pertinent Policy Arguments
The parties have not identified any specific substantive
social policies that counsel for or against exercising
jurisdiction over defendants in this matter. The court notes
that all sovereigns share a general interest in reguiring parties
to resolve all of their related disputes in a single forum and at
a single time rather than engaging in protracted litigation in
several different forums that will necessarily interfere with one
another.
defendants have notified the court that on January 18, 1995, they filed a complaint in Massachusetts Superior Court seeking to compel arbitration of said dispute in Massachusetts.
24 Although the court views this policy as important to the
court's ultimate determination as to how to proceed with this
action, the policy does not counsel against exercising
d. Summarizing the Specific Personal Jurisdiction
Analysis
In order for a court to exercise specific personal
jurisdiction over an out-of-state defendant, there must exist a
logical nexus between "the defendant, the forum, and the
litigation." Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 780
(1984). As set forth herein, the court finds that plaintiff's
claims relate to defendants' contacts with the forum and that the
nature of defendants' contacts with the forum made it reasonably
foreseeable that defendants would be haled into court here. The
court further finds, in light of the Gestalt factors discussed
herein, that its exercise of jurisdiction over the defendants
does not offend traditional notions of fair play and substantial
justice. The court therefore finds that it has specific personal
jurisdiction over the defendants.
B. Stay Pending Arbitration
Defendants move, in the alternative, "to dismiss or stay
25 this action on the grounds that the parties have agreed to
arbitrate the dispute raised by the complaint." Defendants'
Motion at 1.
The complaint filed by plaintiff asserts that defendants
have failed to pay amounts due to Interadd under the Consulting
Agreement. The arbitrability of this dispute "turns on the
interpretation of contractual terms, a guestion of law which [the
court] can determine in the first instance." Commercial Union
Ins. Co. v. Gilbane Bldq. Co., 992 F.2d 386, 388 (1st Cir. 1993).
In making this determination, the court is cognizant of "the
strong federal policy favoring arbitration agreements, a policy
which reguires [courts] to resolve 'any doubts' concerning
arbitrability in favor of arbitration." Id.; see also Vimar
Seguros Y Reaseguros, S.A. v. M/V Sky Reefer, 29 F.3d 727, 730
(1st Cir.) ("Where there is an agreement to arbitrate, the
[Federal Arbitration Act, 9 U.S.C. § 1, et seg.1 reflects a
strong, well-established, and widely recognized federal policy in
favor of arbitration."), cert, granted, 115 S. C t . 571 (1994).
Defendants contend that the parties agreed to arbitrate
disputes such as the one raised in the complaint in their
Agreement of March 12, 1993. Said agreement provides, in
relevant part, that "[u]pon any dispute of the propriety and/or
amount of offset the parties hereby agree to submit the dispute
26 to a single arbitrator" in accordance with the procedure set
forth in paragraph 15 of the parties' Memorandum of November 6,
1987, which is incorporated into their Agreement of March 12,
1993, by reference. Agreement of March 12, 1993, at 3 (relevant
provision guoted in full at page 5-6 of this order).
As a preliminary matter, the court finds that the guestion
of whether defendants owe any amount to Interadd under the
Consulting Agreement is separate and distinct from the guestion
of whether defendants may offset said amount against amounts the
Wallems allegedly owe the defendants under the Indemnity
Agreement. Therefore, although any dispute over "the propriety
and/or amount of offset" is clearly subject to arbitration under
the terms of the March 12, 1993, Agreement, the court finds that
the dispute raised in the complaint over amounts due under the
Consulting Agreement is not.
Second, defendants filed their motion to dismiss for lack of
personal jurisdiction as a pre-answer motion. Accordingly, the
disputes they raise regarding offset and amounts due to them
under the Indemnity Agreement are not yet before this court as
affirmative defenses or counterclaims. Defendants' motion to
stay this action pending arbitration of said disputes is
27 therefore premature.7
C. Plaintiff's Motion for Leave to File Amended Complaint
Plaintiff requests leave to file an amended complaint that
is "in the form of a Federal Court Complaint and stating
additional or different claims." Plaintiff's Reply 5 2.
Rule 15 (a) permits a party to amend its pleading "once as a
matter of course at any time before a responsive pleading is
served . . . ." Rule 15(a), Fed. R. Civ. P. No responsive
pleading has been filed by the defendants, who opted instead to
file a pre-answer motion to dismiss. Therefore, Rule 15(a)
permits plaintiff to file an amended complaint. As requested in
its motion, plaintiff shall have twenty days from the date of
this order in which to file its amended complaint.
7The court does not reach the question of whether the arbitration provision set forth in the Agreement of March 12, 1993, is, as defendants contend, governed by Massachusetts law.
28 Conclusion
For the reasons set forth herein, defendants' motion to
dismiss (document 4) is denied and plaintiff's motion for leave
to file an amended complaint (document 6) is granted.
SO ORDERED.
Shane Devine, Senior Judge United States District Court
February 2, 1995
cc: Ralph R. Woodman, Jr., Esg. Ronald L. Snow, Esg.