International Paper v. Paperboard US CV-99-184-JD 02/08/00 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
International Paper Box Machine Co., Inc.
v. Civil No. 99-184-JD Opinion No. 2000 DNH 031 Paperboard U.S. Industries, Inc., et a l .
O R D E R
International Paper Box Machine Company brought suit, based
on diversity jurisdiction, in which it alleged claims that arose
from a failed business relationship with the defendants. The
defendants are two related corporations. Paperboard U.S.
Industries, Inc. and Paperboard Industries Corporation, and an
individual, Germain Villemarie, who worked for the corporate
defendants. All three defendants move to dismiss the claims
against them for lack of personal jurisdiction, or alternatively
to transfer venue to the Eastern District of Kentucky.
Background1
The plaintiff. International Paper Box Machine Company
("IPBMC") is a New Hampshire corporation with its principal place
1The facts are taken from the complaint and the parties' submissions and are used only as background for the order. of business in Nashua, New Hampshire. IPBMC is in the business
of manufacturing and installing machines for the packaging
industry. IPBMC has a division in Ohio called Multifold
International. All of the work and the employees at Multifold
are controlled or supervised by IPBMC's management in New
Hampshire.
International Paperboard U.S. Industries, Inc. is a Canadian
corporation with its principal place of business in Kentucky, and
Paperboard Industries Corporation, also a Canadian corporation,
has its principal place of business in Montreal, Canada. The
corporate defendants are referred to jointly as "Paperboard."
Germain Villemarie is a resident of Quebec in Canada and, during
the time pertinent to this case, was either an employee of or an
independent consultant to Paperboard. Somerville Packaging,
which is not a defendant in the case, is a division of Paperboard
with a plant in Hebron, Kentucky.
Somerville had previously done business with IPBMC through
IPBMC's office in Nashua, New Hampshire. In September of 1997, a
sales representative from IPBMC's Multifold International
division in Ohio negotiated and entered an agreement with
Somerville Packaging in Toronto, Canada, to provide Somerville
with a system called a "stacker." IPBMC's president, Hugh A.
McAdam, authorized the sales representative at Multifold to
2 conduct the negotiations. Although the stacker system was
originally purchased to be used in Canada, Somerville decided to
use it in its plant in Kentucky. After making the agreement.
Paperboard notified IPBMC that it would use Germain Villemarie as
its project manager for the agreement and that Villemarie would
serve as the contact person for Paperboard.
The Somerville stacker system was developed by using new
design as well as modifications of previous designs and by
integrating certain component parts from subcontractors. The
design work was done in New Hampshire and at Multifold in Ohio
and was supervised by Jeffrey Lindberg of IPBMC in New Hampshire.
Beginning in the winter of 1998, Villemarie met with Multifold
personnel about changes he wanted made in the design and
specifications of the stacker system. In July of 1998,
Villemarie called IPBMC's vice president, William Richardson, in
New Hampshire, to express deep concern about delays in production
of the stacker system. Thereafter, Richardson and IPBMC chief
engineer, Lindberg, who were in New Hampshire, talked extensively
with Villemarie by telephone about the changes and about the
schedule for the stacker system. Villemarie called them back in
New Hampshire to agree to their proposal to extend the schedule.
Other IPBMC engineering personnel in New Hampshire also
communicated with Villemarie about the project, sending manuals
3 and other information about the system to Villemarie.
Multifold sent notice to Villemarie in September of 1998 to
make payments by wire transfer to Bankers Trust Company in New
York or to send payments to IPBMC in Newark, New Jersey. In
December of 1998, IPBMC shipped the stacker system from New
Hampshire to Somerville in Kentucky. McAdam, along with
Richardson and Lindberg, traveled to Somerville during the
installation and testing of the stacker system. Other IPBMC
personnel also went to the Somerville plant in Kentucky to
perform services related to installation of the stacker system
and training Somerville employees in its use.
In January of 1999, Villemarie sent a memorandum by fax on
the status of the project and problems with the stacker system to
Larry Macko, the sales representative at Multifold who was
responsible for the deal with Somerville, which began, "Larry,
Excuses are now not acceptable any more." A copy was also sent
to McAdam in New Hampshire. In response, McAdam went to Kentucky
to try to resolve the remaining issues.
Under the terms of the agreement, the stacker system was
quoted at a price of $841,595 with an optional item called a 575
Volt Operation quoted at a price of $1,200. Paperboard was to
pay 25% as a down payment with the order, 55% prior to shipment,
10% net 30 days after shipment, and 10% net after acceptance of
4 the system. After the system was delivered in December of 1998,
Richardson along with other IPBMC employees in New Hampshire
repeatedly communicated with the defendants about payments due on
the system. Paperboard refused to pay the amount outstanding,
which along with another outstanding invoice totaled $458,517 due
on the order.
On February 25, 1999, Paperboard's counsel sent a letter to
McAdam giving notice to resolve all problems to Paperboard's
satisfaction by March 1, 1999. In April, Paperboard's counsel
sent notice to McAdam of Paperboard's damages due to problems
with the stacker system and of their intent to deduct the cost of
repairs from the amount due and to seek recovery of other
damages.
IPBMC brought suit in April of 1999 alleging claims against
the defendants for nonpayment of goods sold and delivered, unjust
enrichment, tortious interference, breach of the good faith duty,
and violation of the New Hampshire Consumer Protection Act.
Discussion
Paperboard and Villemarie move to dismiss the claims against
them pursuant to Federal Rule of Civil Procedure 12(b) (2),
contending that the court lacks personal jurisdiction over them.
Alternatively, the defendants argue that New Hampshire would be
5 an inconvenient forum and ask that the case be transferred,
pursuant to 28 U.S.C.A. § 1404(a), to the Eastern District of
Kentucky. IPBMC objects to both dismissal and transfer.
A. Personal Jurisdiction
In response to a motion to dismiss for lack of personal
jurisdiction pursuant to Rule 12(b) (2), the plaintiff bears the
burden of establishing personal jurisdiction. See Massachusetts
School of Law v. American Bar Assoc., 142 F.3d 26, 34 (1st Cir.
1998). When, as here, there has not been an evidentiary hearing,
the court proceeds on a prima facie standard, taking the
plaintiff's affirmative allegations as true and construing them
in the plaintiff's favor. See id. A plaintiff cannot rely
exclusively on allegations in the pleadings, however, but must
provide evidence of specific relevant facts. See Foster-Miller.
Inc. v. Babcock & Wilcox Canada, 46 F.3d 138, 145 (1st Cir.
1995). The court also accepts the defendants' factual
allegations to the extent they are uncontradicted. See
Massachusetts School of Law, 142 F.3d at 34. In considering a
prima facie showing, the "court acts not as a factfinder, but as
a data collector." Foster-Miller, Inc., 46 F.3d at 145.
When personal jurisdiction is challenged by a non-resident
defendant, "a federal court exercising diversity jurisdiction 'is
6 the functional equivalent of a state court sitting in the forum
state.'" Sawtelle v. Farrell, 70 F.3d 1381, 1387 (1st Cir. 1995)
(quoting Ticketmaster-New York, Inc. v. Alioto, 26 F.3d 201, 204
(1st Cir. 1994)). The court must therefore satisfy both the
forum state's long-arm statute and the due process requirements
of the Fourteenth Amendment. See id. Because New Hampshire's
long-arm statute applicable to foreign corporations has been
interpreted to be coextensive with the constitutional due process
requirements, the scope of personal jurisdiction depends on a due
process analysis. See id. at 1388.
IPBMC contends that the defendants are subject to specific
personal jurisdiction in New Hampshire. Specific jurisdiction
depends on a three-part analysis that examines the defendants'
contacts with the forum state in light of the claims at issue in
the case. See Phillips Exeter Academy v. Howard Phillips Fund.
196 F.3d 284, 288 (1st Cir. 1999) . The specific jurisdiction
analysis requires the following inquiries: (1) whether the claim
in the case "directly relates to or arises out of the defendant's
contacts with the forum[,] . . . [(2)] whether those contacts
constitute purposeful availment of the benefits and protections
afforded by the forum's laws," and (3) whether the exercise of
jurisdiction is reasonable and fundamentally fair in light of the
"Gestalt factors." Id. A defendant may not avoid personal
7 jurisdiction merely because the defendant has never been
physically present in the forum state, since communications to
the forum state by telephone calls, letters, and other means may
constitute sufficient contacts to confer jurisdiction. See
Burger King Corp. v. Rudzewicz, 471 U.S. 4 62, 476 (1975); accord
Sawtelle, 70 F.3d at 1389-90.
1. Relatedness.
The first question in the personal jurisdiction analysis is
whether the claims in the case are related to or arose out of the
defendant's contacts with the forum state. New Hampshire. See
Phillips Exeter Academy, 196 F.3d at 288. Each of the
plaintiff's causes of action must by analyzed separately to
determine the relatedness of the defendants' contacts with the
forum state in light of the elements of the particular cause of
action. See id. at 289.
In this case, IPBMC alleges causes of action for nonpayment
of the amount owed under the agreement, unjust enrichment,
tortious interference with contractual and advantageous
relations, breach of the implied duty of good faith and fair
dealing under the agreement, and violation of the New Hampshire
Consumer Protection Act. The claims for nonpayment and breach of
the implied duty of good faith are, in essence, breach of contract claims based on the agreement for the stacker system.2
In the context of a contract action, the court must determine
whether "the defendant's contacts with the forum were
instrumental either in the formation of the contract or in its
breach." Phillips Exeter Academy, 196 F.3d at 289. A mere
contractual relationship between an in-state party and an out-of-
state party, however, is insufficient to support personal
jurisdiction. See id. at 290. In addition, while communications
or transmittal of information into the forum state are contacts,
they are meaningful contacts, in the jurisdictional analysis,
only if they are sufficiently related to the plaintiff's cause of
action. See Sawtelle, 70 F.3d at 1389-90.
The initial contract negotiation and formation in this case
occurred between the Multifold sales representative in Ohio and
employees of Somerville (a division of Paperboard) in Canada.
Although Somerville likely understood that it was doing business
with a division of a New Hampshire company, the contract
formation process occurred in Ohio and Canada, not New Hampshire.
2There are three related doctrines of the implied good faith obligation that pertain to contract formation, termination of at- will contracts, and limits on discretion in contract performance. See Centronics Corp. v. Genicom Corp., 132 N.H. 133, 139 (1989) . IPBMC has not specified whether it is alleging breach of the good faith obligation in contract formation or in performance.
9 While the project was in progress, the parties (with Villemarie
acting on behalf of the corporate defendants) apparently
renegotiated the production schedule through telephone
conversations to and from New Hampshire. Neither the nonpayment
claim nor breach of the implied good faith duty claim appears to
arise from the renegotiation of the project's schedule. The
design and specification changes in the project, which might have
led to some of IPBMC's claims, were made by Villemarie at
meetings with IPBMC's sales representatives in Ohio and Canada,
not New Hampshire. To the extent information was sent between
the parties that related to the design and specifications of the
project, IPBMC has shown that its employees sent information from
New Hampshire to the defendants in Kentucky, not vice versa. Cf.
Sawtelle, 70 F.3d at 1389-90 (transmission of information into
New Hampshire constitutes a contact).
After the stacker system was installed in Kentucky, the
corporate defendants responded to IPBMC's demands for payment
through counsel who wrote to IPBMC's president, McAdam, in New
Hampshire, refusing to pay and asserting claims for damages. The
breach occurred, however, where the defendants decided not to pay
the amounts due, which is likely to have been either Kentucky or
Canada, but was not New Hampshire. See Phillips Exeter Academy,
196 F.3d at 289. Alternatively, since the payments were to be
10 made in either New York or New Jersey, to the extent that the
location where the payments were due is material, that factor
does not implicate contacts with New Hampshire. See id. at 2 91.
For similar reasons, the defendants' contacts with New
Hampshire are not related to IPBMC's claim for unjust enrichment.
A claim for unjust enrichment, under New Hampshire law, arises
where no express contractual relationship exists between the
parties and the defendant has received a benefit that it would be
unconscionable to retain without restitution.3 See Pella Windows
and Doors, Inc. v. Faraci, 133 N.H. 585, 586 (1990) . The stacker
system is installed in Kentucky. The demands for payment were
sent from New Hampshire or Ohio to Kentucky or Canada. Although
Paperboard's counsel sent two letters to IPBMC in New Hampshire,
the unjust enrichment claim did not arise from the letters, but
instead arose from the fact that the defendants did not pay the
amount IPBMC believes remains due for the system and they have
kept and used the system.
With respect to IPBMC's tortious interference with
contractual and advantageous relations, personal jurisdiction
depends upon the "causal nexus between the defendant's contacts
3The parties have not addressed a choice of law question in this case, and the court refers to New Hampshire law only as guidance in the context of the personal jurisdiction analysis.
11 and the plaintiff's cause of action." Phillips Exeter Academy,
196 F.3d at 289. A cause of action for tortious interference
requires the plaintiff to show that it had a contractual or
economic relationship with a third party, that the defendant knew
of the relationship, that the defendant intentionally and
improperly interfered with the relationship, and caused damages.
See Jav Edwards, Inc. v. Baker, 130 N.H. 41, 46 (1987); accord
Barrows v. Boles, 141 N.H. 382, 392 (1997). The complaint
alleges that by engaging in all of the conduct related to the
parties' agreement and its demise, the defendants "intentionally
and wrongfully interfered with Plaintiff's advantageous business
relations." IPBMC's theory of liability is not entirely clear.
The defendants' few contacts with New Hampshire, telephone calls
about the project's design and schedule changes, and Paperboard's
notices through counsel of dissatisfaction about the system and
its repair, do not appear to be causally tied to the interference
with advantageous relations claim.
IPBMC's Consumer Protection Act, N.H. Rev. Stat. Ann. §
358-A, claims alleges that the defendants' conduct, described in
the complaint as a whole, constitutes unfair and deceptive acts
or practices within the meaning of the statute. The defendants'
conduct occurred primarily in Kentucky and Canada, but not in New
Hampshire. IPBMC has not shown that the contacts are
12 sufficiently related to the cause of action to serve as a basis
for personal jurisdiction.
Having found that IPBMC has not carried its burden of
showing that the defendants' contacts with New Hampshire are
related to its claims against them, the remaining inquiries in
the personal jurisdiction analysis require little consideration.
2. Purposeful availment.
Contacts with a forum that are merely random or fortuitous
do not satisfy due process. See Burger King, 471 U.S. at 474-75.
Instead, personal jurisdiction must be based on a defendant's
"purposeful activity related to the forum that would make the
exercise of jurisdiction fair, just or reasonable." Sawtelle, 70
F.3d at 1391 (internal quotation omitted). The two focal points
of purposeful availment are voluntariness and foreseeability.
See Nowak v. Tak How Invs., Ltd., 94 F.3d 708, 716 (1st Cir.
1996).
a. Voluntariness.
Voluntary actions are not based on the unilateral actions of
another party or a third person, but are the defendant's own
activities directed at the forum. See id. To be voluntary, the
defendant must reach out to the plaintiff's state to create a
13 relationship, not merely accept a relationship tendered from the
state. See Phillips Exeter Academy, 196 F.3d at 292. In this
case, IPBMC has shown that the defendants knew that Multifold, an
Ohio company, was a division of IPBMC, a New Hampshire company.
The circumstances do not show that the defendants reached out to
New Hampshire to create a relationship with IPBMC, but instead
reached to IPBMC's division in Ohio to do business. The
defendants' later communications with IPBMC in New Hampshire
appear to have been the result of IPBMC's own processes and
procedures rather than the defendants' choice.
b . Foreseeability.
The foreseeability factor relates to whether the defendant's
contacts with the forum state are "such that he should reasonably
anticipate being haled into court there." Nowak. 94 F.3d at 716.
When a defendant has deliberately engaged in significant
activities in the forum state and has purposefully directed its
commercial activities to the state, it is reasonably foreseeable
that the defendant may be subject to suit in that state. See
Burger King, 471 U.S. at 474-76.
In this case, the defendants' worked initially with
Multifold in Ohio, not IPBMC in New Hampshire. The defendants
then continued to communicate with Multifold even after the
14 relationship included IPBMC. IPBMC has not shown that the
defendants benefitted from their contacts with IPBMC in New
Hampshire, since those contacts were largely acrimonious, being
addressed to delays in the project schedule and issues about the
performance of the stacker system. From the record. Paperboard's
contacts with IPBMC in New Hampshire did not have positive
results from Paperboard's point of view, and do not show the kind
of commercial benefits that would subject them to suit in New
Hampshire. See, e.g., Phillips Exeter Academy, 196 F.3d at 292;
Sawtelle, 70 F.3d at 1394.
3. The Gestalt factors.
The final test of whether the exercise of personal
jurisdiction comports with the requirements of due process
depends upon the reasonableness and fairness of subjecting the
defendant to suit in the forum state. See Nowak, 96 F.3d at 717.
When the plaintiff has made a prima facie showing on the first
two steps of the analysis, fairness is assessed on a sliding
scale so that a weak showing on the first two prongs of the
personal jurisdiction analysis puts a lighter burden on the
defendant to show that jurisdiction here would be unreasonable or
unfair. See id. The factors used to assess whether jurisdiction
comports with fair play and substantial justice under the
15 circumstances of a particular case are:
(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.
Id. (quoting United Elec. Workers v. 163 Pleasant St. Corp., 960
F .2d 1080, 1088 (1st Cir. 1992)).
In this case, the Gestalt factors do not fortify IPBMC's
weak case as to relatedness and purposeful availment. Since the
defendants are residents of Kentucky and Canada, jurisdiction in
New Hampshire would impose a burden on them to appear. While New
Hampshire may have some interest in adjudicating the dispute,
because IPBMC is a New Hampshire corporation, the agreement was
negotiated, entered into, and substantially performed elsewhere.
Witnesses and evidence are in several locations, including New
Hampshire. The stacker system is installed in Kentucky, and the
greater part of the information about its performance, problems,
and repairs is located there. While it is no doubt more
convenient for IPBMC to litigate in New Hampshire, that factor
alone cannot serve as a basis to reasonably and fairly exert
jurisdiction over defendants who have so few contacts with New
As IPBMC has not shown that the exercise of personal
16 jurisdiction over the defendants in this case would comport with
the requirements of due process, the defendants' motion to
dismiss must be granted. There is no need, therefore, to
consider the defendants' alternative motion to transfer the case
to the Eastern District of Kentucky. The dismissal of the case
is without prejudice to IPBMC's right to refile the case in any
district where the defendants may be subject to personal
jurisdiction. See Phillips Exeter Academy, 196 F.3d at 292 n.4.
Conclusion
For the foregoing reasons, the defendants' motion to dismiss
(document no. 10) is granted. The clerk of court shall enter
judgment accordingly, and close the case.
SO ORDERED.
Joseph A. DiClerico, Jr. District Judge
February 8, 2000
cc: William C. Saturley, Esquire Joseph H. Walsh, Esquire Andrew W. Serell, Esquire Mark A. Robinson, Esqurie