Kennett v . Business and Taxpayers CV-94-481-M 03/26/96 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Douglas Kennett, Plaintiff,
v. Civil N o . 94-481-M
Business and Taxpayers Coalition for Affordable Housing; Billy Hardin; Billy Hardin d/b/a Winston Financial Group and d/b/a Southwestern Affordable Housing Company; and Harry Nagler, Defendants.
O R D E R
The plaintiff, Douglas Kennett, brings this action for libel
and contractual interference against the defendants, Business and
Taxpayers Coalition for Affordable Housing ("BTCAH"), Billy
Hardin, and Harry Nagler. All defendants move to dismiss
(documents n o . 22 and 23) Kennett's claims for lack of personal
jurisdiction, Fed. R. Civ. P. 12(b)(2), and improper venue, Fed.
R. Civ. P. 12(b)(3).
Standard of Review
When considering a motion to dismiss for lack of personal
jurisdiction without an evidentiary hearing, the court applies
the prima facie standard of review. Sawtelle v . Farrell, 70 F.3d
1381, 1386 n.1 (1st Cir. 1995). The court "draws the facts from
the pleadings and the parties' supplemental filings, including affidavits, taking facts affirmatively alleged by the plaintiff
as true and viewing disputed facts in the light most favorable to
plaintiff." Id. at 1385 (citing Ticketmaster-New York, Inc. v .
Alioto, 26 F.3d 2 0 1 , 203 (1st Cir. 1994); Kowalski v . Doherty,
Wallace, Pillsbury and Murphy, Attorneys at Law, 787 F.2d 7 , 9
(1st Cir. 1986)). However, conclusory allegations are not
credited, nor will the court draw "far-fetched inferences" in
favor of the plaintiff. Sawtelle, 70 F.3d at 1386 (citing
Ticketmaster, 26 F.3d at 2 0 3 ) . "In reviewing the record before
i t , a court 'may consider pleadings, affidavits, and other
evidentiary materials without converting the motion to dismiss to
a motion for summary judgment.'" Price, 781 F. Supp. at 87
(quoting Lex Computer & Management Corp. v . Eslinger & Pelton,
P.C., 676 F. Supp. 399, 402 (D.N.H. 1987)).
Background
The present dispute stems from a soured business
relationship between Kennett and the defendants. From 1990 to
1993, Kennett raised over $9,000,000 from residential real estate
investors who sought to receive low income housing investment tax
credits and investment income. A group of these investors is
known as American Housing Funds. BTCAH, whose managing partner
and officer was Billy Hardin, is a non-profit California
corporation formed to rehabilitate low-income housing and which
2 owns and manages several apartment complexes in Texas. BTCAH is also a general partner in several limited partnerships with American Housing Funds, in which it managed Texas real estate investments for American Housing Funds. The relationship between Kennett and the defendants took a turn for the worse in 1994 when Kennett, as general partner of American Housing Funds, sued BTCAH in Texas claiming, inter alia, breach of contract, deceptive trade practices, and fraudulent conversion of funds. Kennett demanded the return of $345,000 and to have control of residential investment properties managed by BTCAH placed in the hands of a receiver. BTCAH agreed to pay the requested amount and to turn over to a receiver two Texas properties (Lake Bluff and Burnett Place) within forty-eight hours. Then, BTCAH filed for Chapter 11 bankruptcy protection in California. On March 3 , 1994, the bankruptcy petition operated to automatically stay the Texas litigation. On August 2 4 , 1994, the Federal Bankruptcy Court in Los Angeles dismissed BTCAH from bankruptcy and released the properties. BTCAH now allegedly controls the assets it agreed to turn over to a receiver.
In this suit, Kennett maintains that Billy Hardin, on behalf of BTCAH, and as agent of Harry Nagler at all relevant times, published and disseminated letters which defamed Kennett, injuring his reputation among American Housing Funds investors and the general public. Kennett further alleges that Nagler was
3 complicit in the authorship, publication, and dissemination of Hardin's defamatory letters. Plaintiff also claims that Nagler personally authored and disseminated two defamatory letters. All of the letters in question generally portray Kennett as a dishonest businessman who has lied to and stolen money from his investors.
According to Kennett, Hardin's letter of April 2 9 , 1994, was disseminated to the "general public, including investors throughout the state of New Hampshire." Other letters signed by Billy Hardin (May 1 8 , 1994; June 9, 1994; and June 1 6 , 1994) were sent to "the general public, including individuals and specific investors in American Housing Funds."
Harry Nagler allegedly assisted Hardin in the drafting and dissemination of the April 2 9 , 1994, letter. Plaintiff claims that Nagler also authored and disseminated two letters (April 2 2 , 1994 and May 2 2 , 1994) to the general public and investors outside of New Hampshire.
The defamatory letters, claims Kennett, were directed at him in New Hampshire and caused injury to his business reputation here. Kennett says investors are no longer willing to participate in his real estate, movie and "high-tech" video ventures as a direct result of the false and defamatory information communicated in the letters sent by the defendants. Kennett maintains that the defendants knew the letters would
4 expose him to contempt and ridicule and would have the desired
effect of undermining his business. Kennett claims to have been a New Hampshire domiciliary and resident of this state during all relevant periods.1 Nagler and Hardin are Texas residents. BTCAH is a California corporation registered as doing business in Texas. None of the defendants conducts business in New Hampshire.
Discussion I. New Hampshire Long-Arm Statute
As the plaintiff, Kennett must first establish that the non-
resident defendants are subject to personal jurisdiction under
New Hampshire's long-arm statute, N . H . Rev. Stat. Ann. ("RSA")
§ 510:4(I). See, e.g., Hugel v . McNell, 886 F.2d 1 , 3 (1st Cir.
1989), cert. denied, 494 U.S. 1079 (1990); Kowalski v . Doherty,
Wallace, Pillsbury and Murphy, 787 F.2d 7 , 10 (1st Cir. 1986).
RSA 510:4(I) provides in pertinent part that "[a]ny person who is
not an inhabitant of this state and who, in person or through an
agent . . . commits a tortious act within this state . . .
submits himself . . . to the jurisdiction of the courts of this
1 Answering Hardin and BTCAH's interrogatories, Kennett stated that in 1993 and 1994 he was physically present in New Hampshire "99.9%" of the time. He also stated that he was filming a movie entitled "Iron Man" in North Conway, N.H., from July through October, 1993. (See Answers to Defendant's Interrogatories ¶¶ 1 8 , 1 9 , attached to document n o . 2 3 ) .
5 state as to any cause of action arising from or growing out of
the acts enumerated above." Id. The New Hampshire Supreme Court
has interpreted this statute as authorizing the assertion of
personal jurisdiction over non-resident tortfeasors to the full
extent allowed by the Due Process Clause of the Constitution.
Phelps v . Kingston, 130 N.H. 166, 171 (1987). The Court of
Appeals for the First Circuit recently held that "when a state's
long-arm statute is coextensive with the outer limits of due
process, the court's attention properly turns to the issue of
whether the exercise of personal jurisdiction comports with
federal constitutional standards." Sawtelle v . Farrell, 70 F.3d
1381, 1388 (1st Cir. 1995) (citing Phelps, 130 N.H. at 171)).
Thus, in this case the constitutional inquiry will determine
whether the exercise of personal jurisdiction over defendants is
proper.
II. The Due Process Clause
In determining whether specific personal jurisdiction exists
over a nonresident defendant, "[t]he Fourteenth Amendment's
concern of fundamental fairness is achieved by the central
requirement that certain 'minimum contacts' exist between the
defendant and the forum state." Sawtelle, 70 F.3d at 1388
(citing International Shoe C o . v . State of Washington, 326 U.S.
310, 316 (1945); Ticketmaster, 26 F.3d at 2 0 6 ) . Crucial then to
6 the court's assertion of jurisdiction is the quality and nature
of the defendant's contacts with the forum state in connection
with the causes of action alleged in the complaint. Helicopteros
Nacionales de Colombia, South America v . Hall, 466 U.S. 4 0 8 , 413-
414 (1984) (citing Shaffer v . Heitner, 433 U.S. 186, 204 (1977)).
A three-part test is employed in this circuit to determine
whether contacts are sufficient to support the exercise of
personal jurisdiction:
First, the claim underlying the litigation must directly arise out o f , or relate t o , 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 courts foreseeable. Third, the exercise of jurisdiction must, in light of the Gestalt factors, be reasonable.
Sawtelle, 70 F.3d at 1389 (citations omitted). "Central to each
step of the established analysis, therefore, are the contacts
which are attributable to each defendant in this case." Id. As
to all defendants, the contacts at issue are defamatory letters
which can be categorized in two groups: (1) the in-state letter,
and (2) out-of-state letters. Each communication of a defamatory
statement by the same defamer is a separate publication, and each
7 publication gives rise to a separate cause of action. See
Restatement (Second) of Torts § 577A(1) & comment a (1977).
Accordingly, the court will consider whether each category
of letters attributable to each defendant satisfies each prong of
the tripartite specific jurisdiction inquiry.
A. The Relatedness Factor as to All Defendants and All Letters
To satisfy this first prong of the due process inquiry, "the
action must directly arise out of the specific contacts between
the defendant and the forum state." 70 F.3d at 1389 (citations
omitted). Hardin, in collaboration with Nagler and on behalf of
BTCAH, is alleged to have authored and disseminated a defamatory
letter dated April 2 9 , 1994, throughout New Hampshire, to the
general public, and to investors in American Housing Funds.
Hardin and Nagler authored and disseminated other letters to
investors and the general public outside of New Hampshire.
Plaintiff specifically alleges the following with respect to
all letters: (1) he had previously raised over $9,000,000 from
investors in American Housing Funds (complaint ¶ 1 1 ) ; (2) those
investors were to be included in future business deals, including
real estate, movie and video ventures (complaint ¶ 2 7 ) ; (3) the
defendants mailed defamatory letters to the investors and the
general public (complaint ¶¶ 21-24); and (4) as a result of the
8 defamatory statements in the letters, American Housing Funds
investors are now unwilling to invest in his projects (complaint
¶ 27). Plaintiff also alleges throughout the complaint that all
defamatory statements were directed at him in New Hampshire and
that the defendants knew the letters would injure him in his
vocation, and intended that result.
The in-state letter certainly constitutes a contact with New
Hampshire. See Sawtelle, 70 F.3d 1381, 1389-90 (citing Burger
King Corp. v . Rudzewicz, 471 U.S. 4 6 2 , 476 (1985)). The letters
disseminated outside of this state also constitute contacts with
New Hampshire because the plaintiff has sufficiently alleged, and
evidence in the record supports, that the defendants knew
plaintiff would suffer harm in New Hampshire, where he works and
resides, as a result of the publication directed at this state.
See Price, 781 F. Supp. at 92 (citing Hugel v . McNell, 886 F.2d
1 , 4 (1st Cir. 1991) (citing Calder v . Jones, 465 U.S. 783, 789
(1984))). For example, the record contains a letter signed by
Hardin, dated April 2 9 , 1994, and addressed to a California
resident. (attached to document n o . 2 ) . The letter is on BTCAH
letterhead and Hardin wrote the letter in his position as BTCAH's
Director of Operations. In part, the letter states:
Douglas Kennett has used your funds to make a motion picture written, directed, produced and starring himself as the "Iron Man." Meanwhile, he left Dallas nearly a year ago
9 to his refuge in the White Mountains of New Hampshire . . . . After Kennett fled Dallas for the hills of New Hampshire . . . .
(letter at ¶¶ 4 , 8 ) .
Nagler, in an affidavit, also indicates his knowledge of the plaintiff's presence in New Hampshire. (attached to document n o . 22). As of January 7 , 1994, Nagler knew that plaintiff worked for a company that relocated to New Hampshire. (Affidavit at ¶ 13). On March 4 , 1994, Nagler knew that plaintiff opened a New Hampshire office for American Housing Funds and he was given a New Hampshire phone number to be used for future inquiries. (Affidavit at ¶ 1 4 ) . On January 1 0 , 1994, Nagler received an "American Housing Update" bulletin which informed him that plaintiff had not been in Texas since 1993 and was involved in making a movie in New Hampshire. (Affidavit at ¶ 1 8 ) . In April, 1994, Nagler saw an article in a Connecticut newspaper which stated that plaintiff had moved from Texas to New England to make his first movie. (Affidavit at ¶ 1 5 ) . Therefore, by his own admissions, Nagler knew or should have known that any injury resulting from his out-of-state conduct would be felt foremost by plaintiff in New Hampshire.
Out-of-state tortious conduct directed at New Hampshire, combined with the tortfeasor's knowledge that the "major impact" of that conduct will be felt within this state, is a substantial
10 contact with the forum for purposes of asserting personal
jurisdiction. See Price, 781 F. Supp. at 92 (citing Hugel v .
McNell, 886 F.2d 1 , 4 (1st Cir. 1991) (citing Calder v . Jones,
465 U.S. 783, 789 (1984))); see also First American First, Inc.
v . National Association of Bank Women, 802 F.2d 1511, 1517 (4th
Cir. 1986); Burt v . Board of Regents of University of Nebraska,
757 F.2d 2 4 2 , 244-245 (10th Cir. 1985); Concord Labs, Inc. v .
Ballard Medical Products, 701 F. Supp. 2 7 2 , 276 (D.N.H. 1988);
Lex Computer & Management v . Eslinger & Pelton, P.C., 676 F.
Supp. 399, 404-405 (D.N.H. 1987). The dissemination of
defamatory letters to investors in New Hampshire and elsewhere,
designed to discourage future business relationships with a New
Hampshire resident and businessman, causes injury in New
Hampshire. See generally, Price, 781 F. Supp. at 9 2 ; Lex
Computer, 676 F. Supp. at 4 0 4 , 405; Concord Labs, 701 F. Supp. at
276 (all holding that jurisdiction is proper where defamatory
letters mailed to out-of-state customers of a New Hampshire
business have the effect of harming sales potential).
Defendants' tortious conduct directed at New Hampshire, and
the harm felt by plaintiff there, represent the gravamen of the
complaint. Not only do the causes of action against the
defendants relate to the letters, but the letters constitute the
very foundation of his claims in libel and contractual
interference. Therefore, plaintiff has made a prima facie
11 showing that his claims against all defendants directly arise out
of their contacts with New Hampshire.
B. Purposeful Availment
The second prong of the jurisdictional analysis asks whether
each defendant "purposefully availed" himself of the forum state.
The answer differs somewhat depending on whether or not the letters were distributed in New Hampshire. Thus, in-state and
out-of-state letters are considered separately to determine if
each defendant purposefully availed himself of the benefits and
protections of the State of New Hampshire.
Although, by sending defamatory letters to investors and the
general public, the defendants may not have "conducted business"
in New Hampshire in the common understanding of the phrase, the
true "function of the purposeful availment requirement is to
assure that personal jurisdiction is not premised solely upon a
defendant's 'random, isolated, or fortuitous' contacts with the
forum state." Sawtelle, 70 F.3d at 1391 (citing Keeton v .
Hustler Magazine, Inc., 465 U.S. 7 7 0 , 774 (1980)). The
"cornerstones" of the purposeful availment concept are
voluntariness and foreseeability. Sawtelle, 70 F.3d at 1391
(citing Ticketmaster, 26 F.3d at 2 0 7 ) . With these general
principles in mind, the court will examine the in-state and out-
of-state letters in turn.
12 1. In-State Letter
a. Hardin
In Burger King v . Rudzewicz, the Supreme Court held that
letters mailed into a state can constitute sufficient minimum
contacts so long as the letters were "purposefully directed"
there. 471 U.S. 4 6 2 , 476; see also Froess v . Bulman, 610 F.
Supp. 3 3 2 , 336-337 (D.R.I. 1984), aff'd, 767 F.2d 905 (1st Cir. 1985) (one letter mailed to plaintiff's employer was a sufficient
contact on which to base specific jurisdiction). Crediting as
true the allegation that Hardin's April 29th letter was
intentionally distributed to American Housing Funds investors
throughout New Hampshire, Hardin's contacts cannot be described
as random, isolated, or fortuitous and, therefore, constitute
purposeful availment.
Further, in Keeton v . Hustler, the Supreme Court held that
the regular distribution of magazines in New Hampshire was
"unquestionably" a constitutionally valid basis upon which to
exercise personal jurisdiction over Hustler because the defendant
purposefully directed its conduct at New Hampshire and
"inevitably affected people in the state." 465 U.S. at 774.
Here, plaintiff alleges that Hardin intentionally sent defamatory
letters, knowing harm would result. Thus, based on Burger King
and Keeton, plaintiff's allegations are sufficient to establish
voluntary and purposeful contacts with this state such that it
13 should have been foreseeable to Hardin that he would be haled
into court in this forum to defend his actions. See also Buckley
v . McGraw Hill, Inc., 762 F. Supp. 4 3 0 , 438-439 (D.N.H. 1991)
(defendants "reasonably anticipate being haled into court in a
libel action where injury to the targeted plaintiff can be
expected to occur" in New Hampshire).
b. BTCAH
BTCAH is subject to personal jurisdiction for the torts of
its agents acting in the scope of their duties or under the
control of BTCAH. In Sawtelle, this Circuit held that "[u]nder
elemental principles of agency," the contacts of two attorneys
were attributable to their respective law firms. See 70 F.3d at
1389 n.4 (citing United Electrical Workers v . 163 Pleasant S t .
Corp., 960 F.2d 1080, 1090 (1st. Cir. 1992) (contacts of
corporation's agent can subject the corporation to personal
jurisdiction); Donatelli v . National Hockey League, 893 F.2d 459,
467 (1st Cir. 1990) (contacts of a partner committed in the
furtherance of partnership business are imputed to the
partnership)).
The plaintiff contends that Hardin worked for BTCAH as a
managing partner until May, 1994, and that Hardin authored and
disseminated his letters on behalf of BTCAH. Evidence in the
record supports this. The Hardin letter of April 2 9 , 1994, was
14 written on BTCAH letterhead and was signed "Billy Hardin,
Director of Operations, Business and Taxpayers Coalition for
Affordable Housing." After portraying the plaintiff in an
unfavorable light, Hardin wrote in the letter, inter alia, that
"[t]he Business and Taxpayers Coalition for Affordable Housing
and I have a solution." Hardin then set forth the various ways in
which he and BTCAH could salvage their investments with Kennett.
(See letter attached to document 2 ) . Thus, to the extent that
Hardin acted on behalf of BTCAH in the authorship and
dissemination of the defamatory letters, BTCAH is subject to
personal jurisdiction in New Hampshire.
c. Nagler
The plaintiff does not allege that any letters actually
signed by Nagler were disseminated in New Hampshire. Plaintiff
does allege that at all relevant times, with respect to each
defamatory letter, the defendants were engaged in principal-agent
relationships in the course of which the letters were authored
and disseminated. Plaintiff also alleges that each defendant
controlled and ratified the actions of the other during the
drafting and dissemination of the letters. (complaint ¶ 1 0 ) .
Elsewhere in the complaint, the plaintiff makes more
detailed factual allegations concerning Nagler's involvement in
the Hardin letters. (See complaint ¶ 2 4 ) . Specifically,
15 plaintiff alleges that "Nagler collaborated extensively in the
authorship of the Hardin letters of April 2 9 , 1994, [allegedly
distributed throughout N . H . ] , May 1 8 , 1994, June 9, 1994, and
June 1 6 , 1994, and collaborated with Hardin in distributing the
letters and drafting the materials." Id. Plaintiff's claim of
extensive collaboration in the authorship and distribution of the
April 2 9 , 1994, letter, construed in a light most favorable to
plaintiff, could reasonably be inferred to mean that both
defendants authored and distributed the letter, even though only
Hardin signed i t . Thus, the distribution of the April 2 9 , 1994,
letter throughout New Hampshire constitutes a substantial contact
with New Hampshire on the part of Nagler as well as Hardin.
2. Out-of-State Letters of All Defendants
Next, the court considers whether each defendant's contacts
with New Hampshire, by way of the letters disseminated outside of
this state, represent a purposeful availment or contact. In
Calder v . Jones, 465 U.S. 783 (1984), the Supreme Court
considered whether a libelous article, authored in Florida and
disseminated in the forum state (California), constituted a
purposeful availment. The Court held that jurisdiction over the
nonresident defendants who only wrote and edited the article, but
had no hand in distributing it within California, could be
properly based on the "effects" of their Florida conduct in
16 California. Id. Specifically, the Court held that jurisdiction
was proper because:
(i) their intentional actions were aimed at the forum State, (ii) they knew that the article was likely to have a devastating impact on the plaintiff, and (iii) they knew that the brunt of the injury would be felt by the plaintiff in the forum State where she lived, worked and the article would have the largest circulation. The knowledge that the major impact would be felt in the forum State constitutes a purposeful contact or substantial connection whereby the intentional tortfeasor could reasonably expect to be haled into the forum State's courts to defend his actions.
Hugel v . McNell, 886 F.2d 1 , 4 (1st Cir. 1989) (citing Calder,
465 U.S. at 789-90). In Hugel, the First Circuit applied the
Calder "effects" test to determine if nonresident defendants
could be haled into a New Hampshire court for their part in the
nationwide publication of a libelous story in the Washington
Post. The plaintiff, a New Hampshire resident, claimed that his
New Hampshire personal and business reputations were harmed by
the defendants who released false and defamatory information to
the Washington Post who in turn published an article containing
that information.
In assessing the plaintiff's complaint to determine whether
the "effects" test was satisfied, i.e., whether the defendants
had made a purposeful contact or a had a substantial connection
17 to New Hampshire such that their being haled into a New Hampshire
forum to defend their actions was foreseeable, the Hugel Court,
reasoned as follows:
The complaint sufficiently alleges that the McNells actually directed their actions at a New Hampshire resident. The McNells knew that release of the allegedly false information would have a devastating impact on Hugel, and it can be fairly inferred that they intended the brunt of the injury to be felt in New Hampshire where Hugel had an established reputation as a businessman and public servant. Specifically the allegations in Hugel's complaint assert that the McNells gave the information to the Washington Post reporters with the intent that it be published and thus disseminated nationwide and cause damage to Hugel's reputation in New Hampshire. The intended result of the McNell's contact with the reporters and release of information to them, according to the complaint, was to impugn Hugel's honesty, integrity, and his ability to perform duties as either a public official or businessman . . . . The complaint alleges that the McNells committed an intentional tort, directed their actions toward the forum state, and knew that the brunt of the devastating blow caused by release of the allegedly libelous material would be felt in the State where Hugel resides and has an established reputation as a businessman and public servant. The district court correctly read the complaint as establishing that the McNells could reasonably expect to be haled into a New Hampshire court to answer for their conduct, and thus the assertion of in personam jurisdiction over the McNells satisfies the dictates of Due Process.
Hugel, 886 F.2d at 5 .
18 Kennett alleged that defendants committed intentional torts
which caused "substantial injury in his home state of New
Hampshire, (complaint ¶¶ 1 , 2 6 , 3 4 , 4 1 , 4 8 , 5 3 ) , in that American
Housing Funds' clients and partners were expected to be included
in Kennett's future real estate, movie and video ventures, but
now "are not prepared to assist M r . Kennett" after reading
defamatory letters sent to them by defendants. (complaint ¶¶ 2 0 ,
27). Kennett also alleges that the defendants knew the letters
were directed at a New Hampshire resident and would harm him
there. (See complaint ¶¶ 3 1 , 3 4 , 3 8 , 4 1 , 4 5 , 4 8 , 5 2 ) . It can be
reasonably inferred from these allegations that the defendants
knew that the brunt of the harm would be felt by Kennett in New
Hampshire. In fact, as discussed above, evidence in the record
indicates that at the time the letters were distributed, Nagler
and Hardin both knew that plaintiff lived and worked in New
Hampshire. Thus, as in Calder, the plaintiff alleges that the
defendants: (1) aimed their actions at the forum state; (2) knew
that their actions would have a devastating impact on the
plaintiff; and (3) knew the brunt of the injury would be felt in
the forum state where plaintiff lived and worked.
Defendants cite to two Ninth Circuit decisions in support of
their contention that the dissemination of defamatory material in
the forum state is an essential element of the Calder "effects"
test. See generally Casualty Risk Insurance C o . v . Dillon, 976
19 F.2d 596 (9th Cir. 1992); Core-vent Corp. v . Nobel Industries A B ,
11 F.3d 1482 (9th Cir. 1993). To the extent those cases stand
for that proposition, the court declines to follow them. Rather,
the court agrees with the Ninth Circuit's reasoning in Haisten v .
Grass Valley Medical Reimbursement, 784 F.2d 1392, 1396-1396 (9th
Cir. 1986) ("activity by the defendant need not physically take
place in the forum state so as to constitute sufficient contact
under the due process test. . . . [T]he Supreme Court has
consistently rejected the notion that absence of physical
contacts with a forum state can defeat personal jurisdiction,
'[s]o long as a commercial actor's efforts are 'purposefully
directed' toward residents of another state.'") (citations
omitted).
Additionally, defendants cite to McNell v . Hugel, N o . 93-
462-JD (D.N.H. May 1 6 , 1994), affirmed, N o . 95-1470, 1996 WL
75320 (1st Cir. Feb. 2 6 , 1996), as supportive of the necessity of
dissemination in the forum state. In McNell, however, the lack
of distribution of the libelous newspaper article in New
Hampshire was but one of several factors weighing against
assertion of jurisdiction under the facts of that case. Notably,
the district court determined that the effects of the article
were not aimed at New Hampshire, but were directed at New York
and New Jersey. The plaintiff was not a resident of New
Hampshire and did not claim to have a business reputation injured
20 in the forum state. McNell, therefore, is distinguishable from
the present case.
In Calder also, the widespread distribution of the
defamatory article in California was but one of several factors
which established that the defendants could foresee that the
brunt of the harm would be felt in the forum state. See Calder,
465 U.S. at 789-790. Calder does not require actual publication
in the forum state to be present in order to satisfy the
"effects" test. In fact, in Hugel, where there was some
dissemination in New Hampshire, the First Circuit did not focus
on or recognize that factor in applying the "effects" test. See
Hugel, 886 F.2d at 4-5; see also First American First v . National
Association of Bank Women, 802 F.2d 1511, 1516-1517 (4th Cir.
1986); Burt v . Board of Regents of University of Nebraska, 757
F.2d 2 4 2 , 244-245 (10th Cir. 1985). As the Seventh Circuit
stated in its interpretation of the "effects" test, "the key to
Calder is that the effects of an alleged tort are to be assessed
as part of the analysis of the defendant's relevant contacts with
the forum. Whether these effects, either alone or in combination
with other contacts, are sufficient to support in personam
jurisdiction will turn upon the particular facts of each case."
Wallace v . Herron, 778 F.2d 3 9 1 , 395 (7th Cir. 1985), cert.
denied, 475 U.S. 1122 (1986). As discussed above, the facts of
this case demonstrate that the defendants could reasonably
21 foresee that the brunt of the harm caused by their actions, aimed
at a New Hampshire resident, would be felt by the plaintiff in
New Hampshire where he lived and worked.
In light of the foregoing, the court finds that plaintiff's
complaint sufficiently alleges that the defendants' out-of-state
letters constitute purposeful contacts with New Hampshire. The
defendants could reasonably expect to be haled into this forum to
answer for the out-of-state letters directed at a resident of New
Hampshire.
C. The Gestalt Factors as to All Defendants and All Letters
After finding the relatedness and purposeful availment
prongs satisfied, the court must determine whether exercise of
jurisdiction comports with fundamental fairness. Ticketmaster,
26 F.3d at 209. In gauging fairness, courts consider the
following factors: (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
interest of all sovereigns in promoting substantive social
policies. Sawtelle, 70 F.3d at 1394.
22 1. Defendants' Burden of Appearing
Litigating in a foreign forum is almost always inconvenient
to out-of-state defendants. Thus, this factor is only meaningful
when some special, onerous, or unique burden is demonstrated.
Pritzger v . Yari, 42 F.3d 5 3 , 64 (1st Cir. 1994), cert. denied,
115 S.Ct. 1959 (1995). In Ticketmaster, 26 F.3d at 2 0 1 , the
Court of Appeals for the First Circuit held that "the burden associated with forcing a California resident to appear in a
Massachusetts court is onerous in terms of distance." But, in
Sawtelle, 70 F.3d at 1381, the same court held that forcing
Florida attorneys to litigate in New Hampshire was not an unusual
burden. That finding was based on the fact that the law firm
regularly litigated outside Florida. The rationale of
Ticketmaster is more applicable here because the record does not
indicate that Nagler, Hardin, or BTCAH are regularly involved in
out-of-state litigation, and certainly not to the extent the
defendants in Sawtelle were.
Additionally, Nagler claims that because he is 72 years old
and recovering from quintuple bypass heart surgery, it would be
unfair to force him to defend himself in New Hampshire. The
distance from Texas to New Hampshire for Nagler and Hardin, and
from California or Texas for BTCAH, presents a burden similar to
that identified in Ticketmaster. Moreover, as to Nagler, his age
23 and stamina following heart surgery add to his inconvenience.
Accordingly, this factor weighs in favor of the defendants.
2. New Hampshire's Interest
New Hampshire has a significant interest in redressing
injuries to its residents that actually occur within the state.
See Keeton v . Hustler, 465 U.S. 7 7 0 , 776-777 (1983) (citing Leeper v . Leeper, 114 N.H. 2 9 4 , 298 (1974)). This interest is
implicated in cases where defamatory letters are sent to out-of-
state customers of a New Hampshire business, interfering with
future New Hampshire-related business. Buckley v . McGraw Hill,
701 F. Supp. 2 7 2 , 276 (D.N.H. 1988) (citations omitted). Thus,
this factor cuts in favor of the plaintiff.
3. Plaintiff's Interest
The plaintiff's interest in obtaining convenient and
effective relief is the next consideration. This circuit has
repeatedly held that a plaintiff's choice of forum must be given
some degree of deference. See, e.g., Sawtelle, 70 F.3d at 1395;
Pritzker, 42 F.3d at 6 4 . "Here, unquestionably, it would be more
convenient for the [plaintiff] to litigate [his libel and
contractual interference] claim in [his] home state rather than
elsewhere." Sawtelle, 70 F.3d at 1395. Thus, this factor weighs
in favor of the plaintiff as well.
24 4. Administration of Justice
The judicial system's interest in obtaining the most
effective resolution of the controversy "does not appear to cut
in either direction" in this case. Sawtelle, 70 F.3d at 1395
(citing Ticketmaster, 26 F.3d at 2 1 1 ) . Since witnesses and
evidence will likely come from New Hampshire, Texas and other states, it is not clear that the judicial system's concern for
efficiency would be better served in another forum. As a result,
this factor is neutral.
5. Common Interest of All Sovereigns in Promoting Social Policies
Here, as in Sawtelle, "the most prominent policy implicated
is the ability of a state to provide a convenient forum for its
residents to redress injuries inflicted by out-of-forum actors."
70 F.3d at 1395 (citing Burger King, 471 U.S. at 4 7 3 ) . This
policy is important in a case such as this where an
entrepreneur's business reputation and ability to raise revenue
from investors are harmed by the dissemination of libelous
letters from tortfeasors in another state, the effects of which
are primarily felt here. State residents would face substantial
burdens in this type of case if forced to pursue relief in
foreign jurisdictions. Additionally, public policy discourages
25 libel and contractual interference by extra-territorial
tortfeasors. To deny jurisdiction in this case would encourage
libel aimed at state residents so long as it was disseminated in
other states. This factor, therefore, weighs in favor of the
plaintiff.
D. Tallying the Results
Plaintiff succeeded in demonstrating that his causes of
action related to and arose out of the defendants' contacts with
New Hampshire. Plaintiff also has shown that the defendants'
voluntary contacts were purposefully directed at New Hampshire,
such that being haled into a New Hampshire forum was reasonably
foreseeable. The court now proceeds to add its findings on the
Gestalt factors.
A finding of unreasonableness can trump a minimally
sufficient showing of relatedness or purposefulness. However,
the "Gestalt" factors evoke a sliding scale: the weaker the
showing on relatedness and purposefulness, the less
unreasonableness the defendant need show; likewise, a strong
showing of reasonableness may fortify a borderline showing of
relatedness and purposefulness. Ticketmaster, 26 F.3d at 210.
Here, the plaintiff's showing of relatedness and purposefulness
is fairly solid as to both in-state and out-of-state letters. In
these circumstances, a strong showing of reasonableness is not
26 required under the sliding-scale balancing test. See Ticketmaster, 26 F.3d at 210. That said, the court finds that the interest of the forum, plaintiff's convenience, and pertinent policy concerns combine to tip the scales in favor of finding that the assertion of jurisdiction over Hardin, Nagler and BTCAH is reasonable. Although accepting Nagler's advanced age and diminished health as additional burdens to him, requiring his appearance here is not fundamentally unfair. It does not give rise to a level of unreasonableness sufficient to overcome the plaintiff's showing on the other elements and factors pertinent to the jurisdictional analysis. Therefore, exercise of personal jurisdiction over all defendants on all causes of action comports with due process, and defendants' motions to dismiss for lack of personal jurisdiction are denied.
III. Venue
Since this is a "civil action wherein jurisdiction is
founded only on diversity of citizenship," 28 U.S.C. § 1391(a)
applies and provides Kennett with three venue options. Kennett
has chosen to lay venue under § 1391(a)(2), "in a judicial
district in which a substantial part of the events or omissions
27 giving rise to the claim occurred . . . ." 28 U.S.C.A.
§ 1391(a)(2) (West 1993).
Both the in-state and out-of-state letters are alleged to
have caused substantial injury in New Hampshire. In Price, 781
F. Supp. at 94-95, this court analyzed language under
§ 1391(b)(2) that is identical to that quoted above. To aid in
interpretation, the court examined the official commentary to
1391(a)(2), as well as the enactment's legislative history, and
found that the language was designed to permit venue in any of
numerous potential locations that qualify as a district in which
"a substantial part" of the activities giving rise to the claim
occurred. Id. at 9 4 . The court held as follows:
Plaintiff VDI has satisfied this court that New Hampshire is the place where at least some things happened, i.e., the alleged tortious injuries to a New Hampshire corporation. While there may be another situs of substantial activity in this case, the court finds that plaintiff has met its burden that venue is proper in this district.
Id. at 94-95. Likewise, plaintiff in this case has specifically
alleged tortious injuries to his ability to function as an
entrepreneur in New Hampshire. That alleged injury in New
Hampshire constitutes a substantial event giving rise to the
plaintiff's claims. Considering the letters disseminated in
states other than New Hampshire, it could be argued that the most
substantial events occurred outside this state. However, this
28 argument fails because "[i]f the selected district's contacts are
'substantial,' it should make no difference that another's are
more s o , or the most so." Id. at 94 (citations omitted).
Accordingly, venue is proper in this district. Defendants'
motions to dismiss for improper venue are, therefore, denied.
IV. Conclusion
The defendants' motions to dismiss (documents n o . 22 & 23) for lack of personal jurisdiction and improper venue are denied. The plaintiff has made a prima facie showing that assertion of jurisdiction comports with the New Hampshire Long-Arm Statute and constitutional due process requirements. Additionally, plaintiff has demonstrated that venue in this district is proper.
SO ORDERED.
Steven J. McAuliffe United States District Judge
March 2 6 , 1996
cc: Douglas Kennett G. Martin Jacobs, Esq. R. Stevenson Upton, Esq.