1. Defendant KCSI
The Stock Purchase Agreement involved the purchase of a New Jersey corporation from New Jersey residents. Although the final negotiating sessions were held in Missouri and the Agreement was executed there, plaintiffs allege that preliminary negotiations were conducted through correspondence and telephone conversations to and from New Jersey. Moreover, despite the general provision favoring Missouri law, the Agreement provides that title transfer is deemed to have occurred in New Jersey.
Plaintiffs argue that these contacts alone are sufficient to sustain jurisdiction, and cite Alchemie International, Inc. v. Metal World, Inc., 523 F. Supp. 1039, 1042 (D.N.J. 1981). Alchemie held that defendant's solicitation of a contract with a New Jersey resident, combined with defendant's mail and telephone contacts with plaintiff in New Jersey and a New Jersey choice-of-law provision, were sufficient contacts to sustain jurisdiction. 523 F. Supp. at 1049-51. Although telephone and mail communications alone may not give rise to jurisdiction, such contacts are relevant when they "form an integral part of an ongoing business relationship." Electro-Catheter Corp. v. Surgical Specialties Instrument Co., 587 F. Supp. 1446, 1455 (D.N.J. 1984). The contacts in the instant case go beyond even those in Alchemie.
Defendant KCSI has had a series of contacts with New Jersey in relation to the events preceding the execution of the Stock Purchase Agreement. In its brief in support of this motion, KCSI places undue emphasis on the negotiation and execution of the Stock Purchase Agreement itself, while ignoring the events preceding the Agreement's negotiation and execution. KCSI thus invites the Court to look at only one segment of the chronology and to ignore the raison d'etre of the Agreement. This offer the Court declines to accept. Indeed, the Supreme Court in Burger King adopted a "highly realistic" approach to personal jurisdiction issues in contracts cases. Under this approach, the existence of minimum contacts must be determined by considering "prior negotiations and contemplated future consequences, along with the terms of the contract and the parties' actual course of dealing." 471 U.S. at 479, 105 S. Ct. at 2185.
The full picture shows that the Stock Purchase Agreement arose out of the prior relationship between USI and MPI, a relationship by virtue of which KCSI had several ongoing contacts with the State of New Jersey, at least as averred by plaintiffs.
According to plaintiffs, KCSI was named as the insured for the joint venture's automobile; provided employment benefits for at least one joint venture employee; agreed to provide necessary insurance for the joint venture; and allowed an MPI employee to use KCSI's Federal Express account. Moreover, William G. Skelly, an employee of both KCSI and the joint venture, conducted various aspects of the joint venture's business on KCSI letterhead. It is true that a foreign corporation is not automatically subject to the jurisdiction of the forum state because of a subsidiary's activities within the state. Lucas v. Gulf & Western Industries, 666 F.2d 800, 805-06 (3d Cir. 1981). However, in determining whether jurisdiction is proper, the court may consider other factors, namely "whether the subsidiary corporation played any part in the transactions at issue, whether the subsidiary was merely the alter ego or agent of the parent, and whether the independence of the separate corporate entities was disregarded." Id. at 806. Based on the allegations contained in the Zeich and Sherrill affidavits, and accepting those allegations at face value, the Court concludes that plaintiffs have made out a prima facie case that KCSI and MPI were effectively the same entity for purposes of the joint venture. Since MPI, as a participant in the joint venture, was conducting business in New Jersey, the Court concludes that MPI's contacts with New Jersey are chargeable to KCSI, at least in part.
In addition, plaintiffs allege that Skelly and Landon Rowland, KCSI's president, came to New Jersey on several occasions in 1984 and 1985 to conduct the business of the joint venture. Visits to the forum state for the purpose of negotiating a contract have been recognized as substantial contacts with the forum state. E.g., Western Union Telegraph Co. v. T.S.I., Ltd., 545 F. Supp. 329, 335 (D.N.J. 1982). It is true that these alleged visits were not for the purpose of negotiating the Stock Purchase Agreement. Again, however, they were related to the entire course of dealing between the parties, a relationship that culminated in the Stock Purchase Agreement. To ignore these visits would therefore be tantamount to tunnel vision on the part of the Court.
In light of all of the above contacts with New Jersey, the Court holds that it would not be unconstitutional to assert personal jurisdiction over KCSI.
In arguing against jurisdiction, KCSI focuses on its status as a guarantor of the Stock Purchase Agreement and relies on Bond Leather Co. v. Q.T. Shoe Manufacturing Co., 764 F.2d 928 (1st Cir. 1985), for the proposition that merely serving as the guarantor of a contract with a relationship to the forum state does not amount to minimum contacts. However, there is an exception to this rule where, as here, the guarantor has a financial interest in the business or person whose obligation it guarantees. National Can Corp. v. K Beverage Co., 674 F.2d 1134, 1138 (6th Cir. 1982).
Moreover, even if the Court were to follow Bond Leather, that case would not require a holding for defendants. The First Circuit in Bond Leather based its ruling on the fact that the defendant's sole contact with the forum state in that case was the guarantee; under the "contracts plus" approach, some "supplemental contacts" would be required to sustain jurisdiction. See 764 F.2d at 933-34. As discussed above, such supplemental contacts are present in the case at bar.
KCSI cites the Missouri choice-of-law provision in the Stock Purchase Agreement in support of its argument that KCSI has negligible contacts with New Jersey. There is ample authority holding that a choice-of-law provision favoring the forum state weighs in favor of jurisdiction. E.g., Southwest Offset, Inc. v. Hudco Publishing Co., 622 F.2d 149, 152 (5th Cir. 1980); Alchemie, 523 F. Supp. at 1051 & n. 31. What KCSI argues, however, is that the converse is also true: that a choice-of-law provision in favor of a state other than the forum state weighs against the jurisdiction of a court in the forum state. For this point KCSI cites J.I. Kislak, Inc. v. Trumbull Shopping Park, Inc., 150 N.J. Super. 96, 101-02, 374 A.2d 1246, 1249 (App.Div. 1977). The Court need not determine whether this converse proposition is valid in general because in the case at bar KCSI has numerous other significant contacts with New Jersey, as already discussed. Cf. Kislak, 150 N.J. Super. at 101-02, 374 A.2d at 1249 (where the "overall kernel" of the parties' relationship was outside the forum state). Moreover, KCSI fails to acknowledge that the Stock Purchase Agreement provides an exception to the applicability of Missouri law, to wit: "stock transfer taxes . . . shall be governed by the laws of the State of New Jersey and title transfer shall be deemed to have occurred in New Jersey." Agreement § 12.08. By dint of this exception clause, KCSI has, at least to some extent, "purposefully availed" itself of the benefits of New Jersey law.
2. Defendant Brighton
Much of the above discussion concerning KCSI applies as well to Brighton. For example, plaintiffs cite the partial choice of New Jersey law as a Brighton contact with New Jersey. Furthermore, plaintiffs have alleged not only that KCSI and MPI are interchangeable, but also that Brighton is interchangeable with both KCSI and MPI. In support of this contention, plaintiffs cite a document that KCSI filed with the Securities and Exchange Commission in which KCSI implied that it owned MPI directly, without mention of Brighton's (or L.M. Johnson Co.'s) status as an intermediate owner; and in which KCSI stated that it was Martec, and not Brighton, that bought out plaintiffs' interest in the joint venture.
The Court need not determine whether the above contacts alone are sufficient because plaintiffs have shown a broader Brighton contact with New Jersey sufficient in itself to sustain jurisdiction over Brighton: Brighton had a certificate of authority to conduct business in New Jersey from August 1, 1984 to December 31, 1985 (the day after the Stock Purchase Agreement was executed). Plaintiffs' Opposition Memorandum, Exh. F. In order to procure such a certificate, Brighton designated an agent for service of process within New Jersey. See id. Since the very purpose of designating such an agent was to make it possible for Brighton to be sued for causes of action arising from or related to its New Jersey activities, Brighton cannot claim that it could not reasonably have foreseen being haled into a New Jersey court by virtue of a contract to buy a New Jersey corporation from New Jersey residents. Cf. Burger King, 471 U.S. at 474-76, 105 S. Ct. at 2174-75. That the certificate is no longer valid is immaterial; what is crucial is that on the date Brighton entered into the Stock Purchase Agreement (December 30, 1985), Brighton had a valid certificate of authority to transact business in New Jersey. Thus the Court finds sufficient minimum contacts between Brighton and New Jersey to sustain jurisdiction over Brighton, at least for this cause of action, which arose out of or was related to Brighton's contacts with New Jersey.
(B) Consideration of Other Factors
Having found minimum contacts, the Court now turns to the consideration of the "other factors" listed in Burger King to determine whether the assertion of jurisdiction over KCSI and Brighton would comport with the concepts of fairness and justice inherent in the Due Process Clause. See 471 U.S. at 476-77, 105 S. Ct. at 2184.
With regard to the first factor, defendants allege that it would be burdensome for them to have to defend a lawsuit in New Jersey, on the ground that "the significant documents and non-party witnesses are located in Missouri." However, despite this putative burden, KCSI's officers managed to travel to New Jersey in 1984 and 1985 on several occasions to conduct the business of the joint venture. Moreover, at oral argument, counsel for defendants could cite only one nonparty witness residing in Missouri whom defendants would call at trial -- and that person was the attorney who negotiated the Agreement for defendants. Plaintiffs, on the other hand, plan to call several nonparty residents of New Jersey.
While recognizing a burden on defendants, therefore, the Court does not find it "compelling." Cf. Burger King, 471 U.S. at 477, 105 S. Ct. at 2185.
Consideration of the second factor indicates that New Jersey does have a significant interest in the dispute. At issue is a contract that involved New Jersey citizens on one side and deemed a transfer of title of stock to have taken place in New Jersey. New Jersey has a strong interest in providing a forum to enforce the contractual obligations of parties who contract with New Jersey residents. See Alchemie, 523 F. Supp. at 1052. Moreover, the corporation whose stock was transferred under the contract (USI) was a New Jersey corporation that was engaged in a joint venture for the sale of pharmaceutical products in New Jersey; this reinforces New Jersey's interest in the dispute.
With regard to the only other relevant factor, plaintiffs' interest in obtaining convenient and effective relief, it has already been noted that plaintiffs themselves, as well as some of the possible non-party witnesses, reside in New Jersey. Therefore plaintiffs have a valid interest in preserving their chosen forum, a New Jersey federal court.
Since none of the above supplementary considerations destroy the fairness under the Due Process clause of subjecting KCSI and Brighton to jurisdiction in New Jersey,
their motion to dismiss the complaint for lack of in personam jurisdiction will be denied.
II. The Motions to Transfer
As an alternative to their motions to dismiss, defendants move this Court to transfer the instant action to the Western District of Missouri pursuant to 28 U.S.C. § 1404(a). That section provides:
For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought.