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KULTUR INTL. FILMS LTD. v. COVENT GARDEN PIONEER

August 23, 1994

KULTUR INTERNATIONAL FILMS LTD., etc., Plaintiff,
v.
COVENT GARDEN PIONEER, FSP., LTD., etc., Defendant.



The opinion of the court was delivered by: ALFRED M. WOLIN

 WOLIN, District Judge

 On September 24, 1993, plaintiff Kultur International Films, Ltd. ("Kultur"), a New Jersey corporation, with its principal place of business also in New Jersey, brought this action against defendant Covent Garden Pioneer FSP, Ltd. ("CGP"), a British corporation with its sole office located in London, England. Kultur originally filed its complaint in New Jersey Superior Court. CGP subsequently removed the action to this Court on October 29, 1993, pursuant to 28 U.S.C. §§ 1441 and 1446, and in conformity with the requirements for diversity jurisdiction set forth in 28 U.S.C. § 1332. Kultur pursues various contract and tort claims against CGP in connection with an alleged agreement between the parties whereby Kultur was to become the exclusive North American home video distributor for assorted classical music and opera programs owned by CGP.

 DISCUSSION

 A. Personal Jurisdiction

 1. Standard of Review

 Rule 4(f) of the Federal Rules of Civil Procedure allows the Court to exercise personal jurisdiction over a nonresident defendant to the extent allowed by the long-arm statute of the state where the court sits. *fn1" New Jersey's long-arm statute, N.J. Ct. R. 4:4-4, permits the exercise of personal jurisdiction over a nonresident defendant to the outer boundaries allowed under the Due Process Clause of the Fourteenth Amendment of the Constitution. DeJames v. Magnificence Carriers, Inc., 654 F.2d 280, 284 (3d Cir.), cert. denied, 454 U.S. 1085, 102 S. Ct. 642, 70 L. Ed. 2d 620 (1981); Doumani v. Casino Control Comm'n, 614 F. Supp. 1465, 1471 (D.N.J. 1985).

 The purpose of restricting personal jurisdiction to the limits of due process is to protect the individual interests of nonresident defendants. United States v. Morton, 467 U.S. 822, 828, 104 S. Ct. 2769, 2773, 81 L. Ed. 2d 680 (1984); World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 291, 100 S. Ct. 559, 564, 62 L. Ed. 2d 490 (1980). A court may exercise personal jurisdiction over a nonresident defendant only where "minimum contacts" exist such that jurisdiction "does not offend 'traditional notions of fair play and substantial justice.'" International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S. Ct. 154, 158, 90 L. Ed. 95 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S. Ct. 339, 343, 85 L. Ed. 278 (1940)). A defendant establishes minimum contacts with a forum state by committing some act by which he purposefully avails himself of the privilege of conducting activities within the forum state, thus invoking the benefits and protection of its laws. Hanson v. Denckla, 357 U.S. 235, 253, 78 S. Ct. 1228, 1240, 2 L. Ed. 2d 1283 (1958).

 These contacts must be of the nature such that the individual nonresident defendant "should reasonably anticipate being haled into court there." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474, 105 S. Ct. 2174, 2184, 85 L. Ed. 2d 528 (1985) (citing World-Wide Volkswagen, 444 U.S. at 295, 100 S. Ct. at 566). What constitutes minimum contacts varies with the "quality and nature of the defendant's activity," Hanson, 357 U.S. at 253, 78 S. Ct. at 1240, but the unilateral activity of a plaintiff claiming a relationship with a nonresident defendant does not suffice to create the requisite forum contacts. Id. ; Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 416, 104 S. Ct. 1868, 1873, 80 L. Ed. 2d 404 (1984); Kulko v. Superior Court of California, 436 U.S. 84, 93-94, 98 S. Ct. 1690, 1698, 56 L. Ed. 2d 132 (1978).

 Defendants can be subject to specific or general personal jurisdiction in a forum state. If a plaintiff's cause of action against a defendant does not arise out of the defendant's contacts with the forum state, the plaintiff must establish that defendant has sustained "continuous and substantial contacts" with the forum state such as to create general jurisdiction over the defendant. Helicopteros, 466 U.S. at 416, 104 S. Ct. at 1873. Sporadic contacts between the nonresident defendant and the forum state may suffice if the plaintiff's cause of action arises out of, or relates to the defendant's contacts with the forum state. Id. at 414, 104 S. Ct. at 1872.

 To establish specific jurisdiction, there is sufficient due process contact for personal jurisdiction if the defendant purposefully has directed his activities at residents of the forum. Henry Heide, Inc. v. WRH Prods. Co., 766 F.2d 105, 108 (3d Cir. 1985). Here the focus is on whether the defendant conducted activities in the forum such that the defendant might "reasonably anticipate being haled into court there." World-Wide Volkswagen, 444 U.S. at 297, 100 S. Ct. at 567.

 Invoking constitutional principles of due process, CGP asserts that it is not subject to the jurisdiction of this Court. Once a defendant properly disputes the existence of personal jurisdiction, the plaintiff bears the burden of establishing, by a preponderance of the evidence, sufficient facts demonstrating the court's jurisdiction. Carteret Sav. Bank, FA v. Shushan, 954 F.2d 141, 146 (3d Cir.), cert. denied, 121 L. Ed. 2d 29, U.S. , 113 S. Ct. 61 (1992). To this end, the plaintiff must present a prima facie case for the exercise of personal jurisdiction by "establishing with reasonable particularity sufficient contacts between the defendant and the forum state." Mellon Bank (East) PSFS Nat'l Ass'n v. Farino, 960 F.2d 1217, 1223 (3d Cir. 1992) (citing Provident Nat'l Bank v. California Fed. Sav. & Loan Ass'n, 819 F.2d 434, 437 (3d Cir. 1987)).

 "At no point may a plaintiff rely on the bare pleadings alone in order to withstand a defendant's Rule 12(b)(2) motion to dismiss for lack of in personam jurisdiction. Once the motion is made, plaintiff must respond with actual proofs, not mere allegations." Time Share Vacation Club v. Atlantic Resorts, Ltd., 735 F.2d 61, 67 n.9 (3d Cir. 1984). See also Carteret Sav. Bank, 954 F.2d at 146; Farino, 960 F.2d at 1223.

 If the plaintiff establishes a prima facie case supporting personal jurisdiction, the defendant then "bear[s] the burden of showing the unreasonableness of an otherwise constitutional assertion of jurisdiction . . . ." Farino, 960 F.2d at 1223. Given the parties' respective burdens, the Court has reviewed the permitted submissions and, having resolved all disputes in favor of Kultur, makes the following findings of fact.

 2. Facts

 Kultur, a New Jersey corporation, is well known in the entertainment industry and is one of the largest distributors of classical music and opera videotapes in the United States. (Certification of Dennis Hedlund Affidavit P 1) CGP is a British corporation which, at a minimum, appears to own the rights to produce, sell and distribute video programs of various ballets and operas. CGP does none of the following in the State of New Jersey: (1) pay taxes, (2) maintain an office, mailing address, telephone number or bank accounts, (3) solicit or operate any business via agents, representatives or employees, (4) own real or personal property. (Affidavit of Robert Albert ("Albert Affidavit") PP 2-10)

 The genesis of this litigation dates back to December 1992, when Dennis Hedlund, president of Kultur, met with Revel Guest of Transatlantic Films in New York. (Hedlund Certification P 2) During the course of this business meeting Guest, who also is the Executive Producer at CGP, suggested that Hedlund call Christopher Higham, CGP's Sales and Marketing Director, to discuss a potential distribution project in North America for the videotapes of various ballet and opera productions from the Royal Opera House. (Id. at P 3)

 Hedlund subsequently contacted Higham in early 1993 and the parties set about negotiating an agreement for the North American distribution of various CGP videos by Kultur. The negotiations were somewhat fruitful, but led only to the exchange of various proposed Heads of Agreement (dated March 25, March 31 and April 15, 1993), and a proposed License Agreement, drafted by Kultur and dated June 16, 1993. (Hedlund Certification, Exhibits F, K; CGP's Brief in Support of Motion to Dismiss, Exhibits 2-4) Neither of the parties executed any of these proposed agreements. Whether or not there existed some type of oral agreement between the parties is hotly disputed and rests at the heart of this litigation.

 On the pending jurisdictional motion, however, the Court will refrain from inquiring into the merits of Kultur's claims. See Associated Business Telephone Sys. v. Danihels, 829 F. Supp. 707, 711 (D.N.J. 1993) (assuming existence of disputed contract on jurisdictional motion). Rather, the Court turns to those facts relevant to determining whether this Court may properly exercise personal jurisdiction over CGP by virtue of CGP's contacts with New Jersey.

 
1. a February 5, 1993, fax from Higham indicating CGP's desire to do business with Kultur;
 
2. a February 11, 1993, fax from Higham which confirms ongoing negotiations and Hedlund's planned visit to England in March 1993;
 
3. a February 15, 1993, fax from Higham regarding Hedlund's visit;
 
4. a February 18, 1993, fax from Higham regarding Kultur's viewing of four video cassettes;
 
5. on February 22, 1993, CGP delivered to Kultur four video cassettes for Kultur to preview;
 
6. a February 24, 1993, fax from Higham concerning a screening scheduled for Hedlund's March visit to England; and
 
6. an April 15, 1993, fax from Nicola Cobbold, CGP Business Affairs manager, covering a proposed Heads of Agreement of the same date.

 (Hedlund Certification P 7, Exhibits A-F)

 In addition, Hedlund attests to numerous other telephone calls made by CGP to Kultur during the course of the negotiations, dates of which he cannot specifically recall. (Id. at P 8)

 On May 27, 1993, Higham phoned Hedlund to advise him that CGP's board of directors had approved the licensing and appointment of Kultur as its exclusive North American distributer. (Id. at P 6h) One day later, Higham called to request additional financial information from Kultur. (Id. at 10) On June 5, 1993, Hedlund and Higham met in New York to discuss marketing plans and strategy. (Id. at 12) On June 17, 1993, Hedlund sent to CGP the proposed License Agreement. (Id. at P 15) As noted, neither party ever executed a written contract.

 Subsequently, CGP endured a management upheaval, after which it executed an exclusive licensing and distribution agreement for North America with Public Media, Inc. ("PMI"). (Reply Declaration of Robert Alpert ("Alpert Reply Declaration") PP 3, 5) Under the terms of the agreement, PMI and its subsidiary Home Vision/Video Opera House produce, sell and distribute CGP programs via master cassettes from the CGP library. (Id. at PP 8-9)

 On June 23, 1993, Cobbold sent a fax to Kultur, denying the existence of any agreement with Kultur and implying that CGP's May 28, 1993, request for additional information had ultimately led to the selection of another distributor. (Hedlund Certification, Exhibit L) In subsequent communications from Cobbold on June 25 and July 16, 1993, CGP continued to deny the existence of a contract and indicated that CGP would not consider itself bound by any representations made to Kultur by Higham, who was no longer employed by the company as of July 6, 1993. (Id., Exhibits M-N)

 In its complaint, Kultur alleges that CGP breached the alleged contract and its duties of good faith and fair dealing and of good faith bargaining, and made intentional or negligent misrepresentations to Kultur concerning the alleged agreement. At a minimum, Kultur seeks restitution for the 130,000 full-color catalogs it prepared in reliance on Higham's representation that CGP had ratified the licensing and distribution agreement with Kultur. (Complaint; Hedlund Certification P 13)

 3. Minimum Contacts

 a. General Personal Jurisdiction

 To succeed on a claim of general jurisdiction, Kultur must establish that CGP has had continuous and systematic contacts with New Jersey so that to subject it to the Court's general jurisdiction will not violate the Fourteenth Amendment guarantee of due process. In fact, Kultur asserts that CGP's contact with New Jersey has been "continuous and systematic." (Kultur's Brief in Opposition at 22-24) To support this argument, Kultur points to CGP's licensing and distribution agreement with PMI. This arrangement enables CGP to sell its video programs by mail order and through retail stores located in New Jersey, which constitutes one of the largest markets in North America for CGP's product. (Hedlund Certification P 22)

 Kultur attempts to establish general jurisdiction under the stream-of-commerce theory: CGP, via its distributor, is doing business in New Jersey on a continuous and systematic basis, for the purpose of reaping a pecuniary profit and with the expectation that its product will be purchased by New Jersey consumers. As shown by Kultur, a New Jersey consumer may walk into a nearby video retail store and purchase a copy of a video program owned by CGP and distributed by PMI, or may order similar CGP products over the telephone by calling Home Vision/Video Opera House. (Certification of Jason J. Laubenstein P 2; Certification of Barbara Desjadon-Sell PP 2-4)

 The jurisdictional stream-of-commerce theory initially developed exclusively to redress physical injury in products liability tort actions. See DeJames, 654 F.2d at 283. See also World-Wide Volkswagen, 444 U.S. at 297-298, 100 S. Ct. at 567 (due process requires that the manufacturer deliver products into stream of ...


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