Universal Turbine v. Brij Bhargava CV-98-553-JD 01/21/99 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Universal Turbine Energy Systems, Inc.
v. Civil Nos. 98-553-JD, 98-555-JD
Brii Bhargava
O R D E R
Following the demise of a business relationship between
plaintiff. Universal Turbine Energy Systems, Inc. ("UTES"), and
defendant, Brij Bhargava, UTES brought two companion actions in
New Hampshire state court against Bhargava. In one, UTES sought
a permanent injunction to prevent Bhargava from disclosing
information related to a product that was the subject of the
parties' joint venture, and in the other, UTES brought claims
against Bhargava for breach of contract, negligent
misrepresentation, and breach of fiduciary duty. Bhargava
removed both cases to federal court and now moves to dismiss for
lack of personal jurisdiction (document no. 2 in each case). As
the factual background of each case is the same for purposes of
personal jurisdiction analysis, the motions are considered
together. Background
The plaintiff, UTES, is a corporation that was organized in
October of 1993 by a group of individuals interested in
developing a high speed gas turbine electrical generator. The
defendant, Bhargava, was involved in the organization of UTES, is
a shareholder of the corporation, and was a director and officer
of the corporation from its inception until he resigned in
September of 1996. Bhargava has been a resident of California at
all times relevant to this case. He has never visited New
Hampshire.
Individuals interested in the development of a gas turbine
generator began to investigate the commercial opportunity for the
project. In May of 1993, one member of the group met with
Bhargava in Arizona. Bhargava's interest in developing a high
speed generator to meet the needs of a potential customer changed
the focus of the corporation's development plans from a
mechanical to a high speed generator.
UTES was incorporated in New Hampshire on October 22, 1993.
One week later, an organizational meeting of the board of
directors was held in Scottsdale, Arizona, since the board
members lived in Maine, Arizona, California, and Florida. The
corporate documents reviewed and signed by Bhargava in Arizona
indicated that UTES was a New Hampshire corporation. A New
Hampshire law firm handles UTES's corporate legal work.
2 Tamara Jones, the daughter of one of the UTES founders, was
elected to serve as registered agent of the corporation in New
Hampshire. Because Ms. Jones worked for Kenmart Sales at 11
Columbia Drive, Amherst, New Hampshire, a mailbox and telephone
and fax numbers for UTES were established at that address. A
bank account was opened for UTES in New Hampshire. Bhargava and
the other officers and directors were issued UTES stationery with
its New Hampshire address.
UTES accepted a proposal by Bhargava and another board
member, Suresh Gupta, operating as Ashman Consulting Services, to
work on the development of a high speed turbine. In January of
1994, Bhargava incorporated his business as Ashman Technologies.
Thereafter, Bhargava did business with UTES through Ashman
Technologies, sending invoices to UTES that listed the New
Hampshire address.1 Ashman Technologies was paid from UTES's New
Hampshire bank account.
Initially, the officers and directors focused on finding
funding sources for development of the generator. One
possibility that was considered, but did not work out, was a
development corporation to be located in Berlin, New Hampshire,
with the cooperation of a local bank. In the spring of 1994,
1Bhargava says in his affidavit that although the invoices show UTES's New Hampshire mailing address, he was directed to send the invoices to one of the UTES principals at his home in Maine.
3 UTES opened facilities in Florida, and since then, Florida has
been its principal place of business.
With the assistance of Bhargava, UTES found a financial
partner, Elliott Turbomachinery, a Delaware corporation with its
principal place of business in Jeannette, Pennsylvania, to fund
the development of the generator. In December of 1994, UTES
entered a development agreement establishing a joint venture with
Elliott. The officers of UTES, including Bhargava, signed the
agreement at Elliott's office in Pennsylvania. The agreement
provides that it will be construed under the laws of the state of
Pennsylvania.
Bhargava resigned as an officer and director of UTES on
September 3, 1996. On September 16, 1996, UTES and Elliott
signed an agreement to establish a new corporation with its
principal office in Stuart, Florida.
In a writ of summons from Hillsborough County (North)
Superior Court dated September 9, 1998, returnable the first
Tuesday of October, 1998, UTES brought claims against Bhargava
for breach of contract, negligent misrepresentation, and breach
of fiduciary duty all arising from their business relationship.
On September 11, 1998, UTES filed a petition for a permanent
injunction, based on provisions of the development agreement with
Elliott Turbomachinery Co., to prevent Bhargava from "releasing
to third parties any of the information relating to the high
4 speed gas turbine generator developed by UTES and from in any way
competing with the UTES TA and its derivatives." Bhargava
removed both cases to this court pursuant to 28 U.S.C.A. §
1441(a) alleging subject matter jurisdiction based on diversity
of citizenship pursuant to 28 U.S.C.A. § 1332. Bhargava now
moves to dismiss both cases for lack of personal jurisdiction.
Discussion
When a defendant moves to dismiss for lack of personal
jurisdiction, the plaintiff bears the burden of showing that
jurisdiction exists. Sawtelle v. Farrell, 70 F.3d 1381, 1387
(1st Cir. 1995). Absent pertinent factual or credibility issues,
a hearing is not reguired, and the jurisdictional guestion may be
resolved based on a prima facie showing. Foster-Miller, Inc. v.
Babcock & Wilson Canada, 46 F.3d 138, 145-47 (1st Cir. 1995);
accord Nowak v. Tak How Investments, Ltd., 94 F.3d 708, 712 (1st
Cir. 1996). In the prima facie process, the court acts as "data
collector," accepting "the plaintiff's (properly documented)
evidentiary proffers as true." Foster-Miller, 46 F.3d at 145.
The court's personal jurisdiction over foreign defendants in
diversity jurisdiction cases depends upon the reach of the forum
state's long-arm statute and due process restraints imposed by
the Constitution. Nowak, 94 F.3d at 712. New Hampshire's long-
arm statute applicable to individuals, N.H. Rev. Stat. Ann.
5 510:4, I (1997), has been construed to be "coextensive with the
outer limits of due process," focusing the court's attention on
"the issue of whether the exercise of personal jurisdiction
comports with federal constitutional standards." Sawtelle, 70
F.3d at 1388 .
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Universal Turbine v. Brij Bhargava CV-98-553-JD 01/21/99 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Universal Turbine Energy Systems, Inc.
v. Civil Nos. 98-553-JD, 98-555-JD
Brii Bhargava
O R D E R
Following the demise of a business relationship between
plaintiff. Universal Turbine Energy Systems, Inc. ("UTES"), and
defendant, Brij Bhargava, UTES brought two companion actions in
New Hampshire state court against Bhargava. In one, UTES sought
a permanent injunction to prevent Bhargava from disclosing
information related to a product that was the subject of the
parties' joint venture, and in the other, UTES brought claims
against Bhargava for breach of contract, negligent
misrepresentation, and breach of fiduciary duty. Bhargava
removed both cases to federal court and now moves to dismiss for
lack of personal jurisdiction (document no. 2 in each case). As
the factual background of each case is the same for purposes of
personal jurisdiction analysis, the motions are considered
together. Background
The plaintiff, UTES, is a corporation that was organized in
October of 1993 by a group of individuals interested in
developing a high speed gas turbine electrical generator. The
defendant, Bhargava, was involved in the organization of UTES, is
a shareholder of the corporation, and was a director and officer
of the corporation from its inception until he resigned in
September of 1996. Bhargava has been a resident of California at
all times relevant to this case. He has never visited New
Hampshire.
Individuals interested in the development of a gas turbine
generator began to investigate the commercial opportunity for the
project. In May of 1993, one member of the group met with
Bhargava in Arizona. Bhargava's interest in developing a high
speed generator to meet the needs of a potential customer changed
the focus of the corporation's development plans from a
mechanical to a high speed generator.
UTES was incorporated in New Hampshire on October 22, 1993.
One week later, an organizational meeting of the board of
directors was held in Scottsdale, Arizona, since the board
members lived in Maine, Arizona, California, and Florida. The
corporate documents reviewed and signed by Bhargava in Arizona
indicated that UTES was a New Hampshire corporation. A New
Hampshire law firm handles UTES's corporate legal work.
2 Tamara Jones, the daughter of one of the UTES founders, was
elected to serve as registered agent of the corporation in New
Hampshire. Because Ms. Jones worked for Kenmart Sales at 11
Columbia Drive, Amherst, New Hampshire, a mailbox and telephone
and fax numbers for UTES were established at that address. A
bank account was opened for UTES in New Hampshire. Bhargava and
the other officers and directors were issued UTES stationery with
its New Hampshire address.
UTES accepted a proposal by Bhargava and another board
member, Suresh Gupta, operating as Ashman Consulting Services, to
work on the development of a high speed turbine. In January of
1994, Bhargava incorporated his business as Ashman Technologies.
Thereafter, Bhargava did business with UTES through Ashman
Technologies, sending invoices to UTES that listed the New
Hampshire address.1 Ashman Technologies was paid from UTES's New
Hampshire bank account.
Initially, the officers and directors focused on finding
funding sources for development of the generator. One
possibility that was considered, but did not work out, was a
development corporation to be located in Berlin, New Hampshire,
with the cooperation of a local bank. In the spring of 1994,
1Bhargava says in his affidavit that although the invoices show UTES's New Hampshire mailing address, he was directed to send the invoices to one of the UTES principals at his home in Maine.
3 UTES opened facilities in Florida, and since then, Florida has
been its principal place of business.
With the assistance of Bhargava, UTES found a financial
partner, Elliott Turbomachinery, a Delaware corporation with its
principal place of business in Jeannette, Pennsylvania, to fund
the development of the generator. In December of 1994, UTES
entered a development agreement establishing a joint venture with
Elliott. The officers of UTES, including Bhargava, signed the
agreement at Elliott's office in Pennsylvania. The agreement
provides that it will be construed under the laws of the state of
Pennsylvania.
Bhargava resigned as an officer and director of UTES on
September 3, 1996. On September 16, 1996, UTES and Elliott
signed an agreement to establish a new corporation with its
principal office in Stuart, Florida.
In a writ of summons from Hillsborough County (North)
Superior Court dated September 9, 1998, returnable the first
Tuesday of October, 1998, UTES brought claims against Bhargava
for breach of contract, negligent misrepresentation, and breach
of fiduciary duty all arising from their business relationship.
On September 11, 1998, UTES filed a petition for a permanent
injunction, based on provisions of the development agreement with
Elliott Turbomachinery Co., to prevent Bhargava from "releasing
to third parties any of the information relating to the high
4 speed gas turbine generator developed by UTES and from in any way
competing with the UTES TA and its derivatives." Bhargava
removed both cases to this court pursuant to 28 U.S.C.A. §
1441(a) alleging subject matter jurisdiction based on diversity
of citizenship pursuant to 28 U.S.C.A. § 1332. Bhargava now
moves to dismiss both cases for lack of personal jurisdiction.
Discussion
When a defendant moves to dismiss for lack of personal
jurisdiction, the plaintiff bears the burden of showing that
jurisdiction exists. Sawtelle v. Farrell, 70 F.3d 1381, 1387
(1st Cir. 1995). Absent pertinent factual or credibility issues,
a hearing is not reguired, and the jurisdictional guestion may be
resolved based on a prima facie showing. Foster-Miller, Inc. v.
Babcock & Wilson Canada, 46 F.3d 138, 145-47 (1st Cir. 1995);
accord Nowak v. Tak How Investments, Ltd., 94 F.3d 708, 712 (1st
Cir. 1996). In the prima facie process, the court acts as "data
collector," accepting "the plaintiff's (properly documented)
evidentiary proffers as true." Foster-Miller, 46 F.3d at 145.
The court's personal jurisdiction over foreign defendants in
diversity jurisdiction cases depends upon the reach of the forum
state's long-arm statute and due process restraints imposed by
the Constitution. Nowak, 94 F.3d at 712. New Hampshire's long-
arm statute applicable to individuals, N.H. Rev. Stat. Ann.
5 510:4, I (1997), has been construed to be "coextensive with the
outer limits of due process," focusing the court's attention on
"the issue of whether the exercise of personal jurisdiction
comports with federal constitutional standards." Sawtelle, 70
F.3d at 1388 .
UTES argues that the court has specific personal
jurisdiction over Bhargava based on his business dealings with
UTES, a New Hampshire corporation, which are the subject of
UTES's claims against Bhargava. Three factors guide the
constitutional analysis of specific personal jurisdiction:
First, the claim underlying the litigation must directly arise out of, or relate to, the defendant's forum-state activities. Second, the defendant's forum-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.
Nowak, 94 F.3d at 712-13 (guoting Pritzker v. Yari, 42 F.3d 53,
60-61 (1st Cir. 1994)).
A. Relatedness
The relatedness reguirement "focus[es] the court's attention
on the nexus between a plaintiff's claim and the defendant's
contacts with the forum." Sawtelle, 70 F.3d at 1389. To satisfy
relatedness in the context of a tort claim, such as
6 misrepresentation, UTES must show that Bhargava's contacts with
New Hampshire foreseeably or proximately lead to UTES's cause of
action, or at a minimum, UTES must show a "meaningful link"
between Bhargava's contacts and the harm UTES claims. Nowak, 94
F.3d at 716. For its contract claims, UTES must show that
Bhargava's "forum-based activities [were] instrumental in the
formation of the contract." Massachusetts School of Law v.
American Bar, 142 F.3d 26, 35 (1st Cir. 1998) (guotation
omitted).
The pertinent contacts UTES asserts in support of personal
jurisdiction are that Bhargava was a shareholder, officer, and
director of UTES, a closely-held New Hampshire corporation, that
he received stock and a participation allowance from UTES, that
he acted as a third-party contractor, and that he was bound by
fiduciary duties under New Hampshire law. In addition, UTES
argues that Bhargava's refusal to sign agreements for
noncompetition and nondisclosure "have the potential to
economically damage the plaintiff which is a New Hampshire
corporation." 98-553, Pi. Obj. at 11.
The representations and discussions between UTES and
Bhargava and Bhargava's activities as a "third party contractor"
with UTES, which are the bases for UTES's breach of contract and
misrepresentation claims in 98-555-JD, all occurred outside of
New Hampshire. Bhargava's alleged breaches of fiduciary duties
7 also occurred outside of New Hampshire. The agreement between
UTES and Elliott Turbomachinery, which is the subject of UTES's
claim for injunctive relief in 98-553-JD, was signed in
Pennsylvania, performed in Florida, and by its terms, is subject
to Pennsylvania law. To the extent the effects of Bhargava's
alleged breaches of contract, misrepresentation, and breaches of
fiduciary duties are relevant to determining personal
jurisdiction in this case, the effects would be most likely felt
in Florida, UTES's principal place of business, not New
Hampshire. See, e.g., VDI Technologies v. Price, 781 F. Supp.
85, 90 (D.N.H. 1991) .
In short, the only connection UTES asserts between Bhargava
and New Hampshire is based on his positions in the corporate
structure of UTES. As UTES acknowledges, Bhargava's positions in
UTES's corporate structure are not enough to show that UTES's
claims arise from Bhargava's contacts with New Hampshire. See
Shaffer v. Heitner, 433 U.S. 186, 213-16 (1977); American Freedom
Train Foundation v. Spurnev, 747 F.2d 1069, 1074 (1st Cir. 1984) .
UTES's arguments that its claims relate to Bhargava's duties and
benefits from the corporation, incorporated in New Hampshire,
merely avoid discussion of where the activities giving rise to
UTES's claims actually occurred. The relatedness reguirement is
not satisfied "merely because a plaintiff's cause of action arose
out of the general relationship between the parties." Sawtelle, 70 F.3d at 1389.
Accordingly, UTES has not provided a sufficient prima facie
case to establish the relatedness requirement of personal
jurisdiction for either 98-553-JD or 98-555-JD.
B. Purposeful Availment
Since UTES has not carried its burden of persuasion through
the first of the three factors in the personal jurisdiction
analysis, an extended review of the remaining factors is
unnecessary. See Massachusetts School of Law, 142 F.3d at 36-7
(stopping analysis after plaintiff failed to establish
relatedness factor). "The purposeful availment requirement
ensures that jurisdiction is not premised on 'random, isolated,
or fortuitous' contacts with the forum state," but rather
guarantees that the exercise of jurisdiction is 'fair, just, or
reasonable.'" Nowak, 94 F.3d at 716 (quoting Sawtelle, 70 F.3d
at 1391) (further quotations omitted). The two essential
elements of purposeful availment are voluntariness and
foreseeability. Id. Put in terms of the cases at issue, UTES
must show that Bhargava's pertinent contacts with New Hampshire
were voluntary, not merely by chance, and that based on those
contacts, he could have reasonably foreseen being haled into a
New Hampshire court because of his corporate positions and
relationships with UTES or his participation in UTES's contract
9 with Elliott Turbomachinery in Pennsylvania. See Sawtelle, 70
F .3d at 1391-94.
Although Bhargava voluntarily accepted positions in a New
Hampshire corporation, the place of incorporation of UTES appears
to be entirely fortuitous. New Hampshire seems to have been
chosen based on the residence of the daughter of one of the
founders who served as corporate agent. None of the founders or
the officers, directors, or shareholders were New Hampshire
residents.
As Bhargava did not do business or conduct any of the
activities leading to UTES's claims against him in New Hampshire,
it was not foreseeable that claims would be brought against him
in New Hampshire courts. To the extent UTES's claims of breach
of fiduciary duty arise under New Hampshire law, that may affect
a choice of law guestion for those claims but does not establish
that Bhargava purposefully availed himself of privileges in New
Hampshire. See Shaffer, 433 U.S. at 216. Accordingly, even if
UTES had satisfied the reguirements of relatedness, the record
does not support a determination that Bhargava purposely availed
himself of the privilege of conducting business in New Hampshire.
C. The Gestalt Factors
The following considerations, the "gestalt factors," are
pertinent to assessing the reasonableness of personal
10 jurisdiction:
(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.
Nowak, 94 F.3d at 717 (guotation omitted). At the gestalt stage
of the analysis, a particularly weak showing on the first two
factors increases the burden on a plaintiff to show that
jurisdiction would, nevertheless, be reasonable. See Sawtelle,
70 F.3d at 1394 .
UTES offers no compelling argument that personal
jurisdiction over Bhargava in New Hampshire would be reasonable
despite the lack of relatedness of the claims to the forum and
the lack of Bhargava's purposeful availment of benefits in New
Hampshire. Instead, the circumstances in these two cases
demonstrate that it would be unreasonable to reguire Bhargava, a
resident of California, to defend the claims in New Hampshire,
and it would be reasonable to expect UTES, which was formed in
Arizona and does business in Florida, to bring its claims in a
more appropriate forum. New Hampshire has little interest in
claims brought by a New Hampshire corporation whose principal
place of business is in Florida particularly when all of the
relevant activities occurred outside of New Hampshire. Neither
the administration of justice nor policy considerations encourage
11 personal jurisdiction in New Hampshire.
Based upon the record and arguments presented in both 98-
553-JD and 98-555-JD, UTES has failed to show that personal
jurisdiction over Bhargava exists in New Hampshire.
Conclusion
For the foregoing reasons, defendant's motions to dismiss
(98-553-JD document no. 2 and 98-555-JD document no. 2) are
granted. Accordingly, the clerk of court is directed to enter
judgment in favor of the defendant in each case, and close both
cases.
SO ORDERED.
Joseph A. DiClerico, Jr, District Judge
January 21, 1999
cc: Paul C. Semple, Esguire Steven A. Solomon, Esguire