United States District Court, D. New Jersey
October 18, 2005.
GMAC REAL ESTATE, LLC, Plaintiff,
GATE CITY REAL ESTATE CO., Defendant.
The opinion of the court was delivered by: ANNE THOMPSON, Senior District Judge
MEMORANDUM AND ORDER
This matter comes before the Court on Defendant's motion to
dismiss pursuant to Fed.R.Civ.P. 12(b)(1) and (2) for lack of
subject matter and personal jurisdiction, or in the alternative
to dismiss or transfer pursuant to Fed.R.Civ.P. 12(b)(3) and
28 U.S.C. § 1406(a) for improper venue, or in the alternative to
transfer venue to the District of Idaho pursuant to
28 U.S.C. § 1404(a). The Court has decided this motion based on the
submissions of both parties and without oral argument pursuant to
Fed.R.Civ.P. 78. For the reasons stated below, Defendant's
motion to dismiss will be granted.
Plaintiff GMAC Real Estate is an LLC whose one member, GMAC
Home Services, is a Delaware corporation with offices located in
New Jersey. Defendant Gate City Real Estate Company is an Idaho
corporation with its principal place of business in Idaho. On
March 10, 2000, Gate City entered into a "Real Estate Service
Contract" with GMAC to operate a GMAC franchise in Idaho. The contract specified that it should be
construed in accordance with the laws of the state in which Gate
City is licensed to use the marks. Thus, Idaho law governed the
In an amendment to the Service Contract, also executed on March
10, 2000, the term of the contract was extended until May 1,
2005, and GMAC agreed to finance $17,681.95 to Gate City for its
transition to using GMAC's trademarks, and to forgive this
indebtedness over the term of the Service Contract as long as
Gate City did not default under the contract. On May 1, 2005,
Gate City executed a Conversion Costs Note which set forth the
amount due in the event of such a default. This Note, unlike the
March 10 Service Contract and amendment, contained a forum
selection clause which specified that "[a]ll litigation with
respect to this Note or with respect to actions taken pursuant to
this Note shall be conducted in the courts located in the State
of New Jersey."
In November 2002, Gate City sent GMAC a letter which expressed
Gate City's intent to terminate the Service Contract. In December
of 2002, Gate City ceased using the GMAC marks and ceased paying
fees or reporting income to GMAC. In April 2005, GMAC instituted
the instant lawsuit alleging breach of the Service Contract and
the Conversion Costs Note, unjust enrichment, and breach of
covenant of good faith and fair dealing. GMAC demands a book
accounting and judgment in excess of $151,875.36.
A plaintiff has the burden to establish personal jurisdiction
once it is challenged by a defendant. Mellon Bank (East) PSFS,
Nat'l Ass'n v. Farino, 960 F.2d 1217, 1223 (3d Cir. 1992). If
the court is to rely on pleadings and affidavits, the plaintiff
must present a prima facie case that jurisdiction exists. See, e.g., Neiman v. Rudolf Wolff & Co.,
619 F.2d 1189, 1190 (7th Cir. 1980), cert. denied, 449 U.S. 920
(1980); La Rose v. Sponco Mfg., Inc., 712 F. Supp. 455, 458
(D.N.J. 1989). Plaintiff must respond with actual proofs, not
mere allegations. Patterson by Patterson v. F.B.I.,
893 F.2d 595, 604 (3d Cir. 1990). A court should make its decision viewing
the facts in the light most favorable to the plaintiff as the
non-moving party. Dayhoff Inc. v. H.J. Heinz Co., 86 F.3d 1287,
1302 (3d Cir. 1996).
Generally, a district court looks to the law of the state in
which it sits to determine whether it may assert personal
jurisdiction over a nonresident defendant. See Fed.R.Civ.P.
4(e); see also Dent v. Cunningham, 786 F.2d 173, 175 (3d
Cir. 1986). New Jersey's long arm statute, Civil Practice Rule
4:4-4, allows a court to exercise jurisdiction over a defendant
to the fullest extent permitted by the United States
Constitution. See Charles Gendler Co., Inc. v. Telecom
Equipment Corp., 102 N.J. 460, 469 (1986).
Under the Fourteenth Amendment, it must be shown that a
defendant has had "minimum contacts" with the forum state, so
that it would be "`reasonable . . . to require the [defendant] to
defend the particular suit which is brought there.'" World-Wide
Volkswagen Corp. v. Woodson, 444 U.S. 286, 291-92 (1980)
(quoting International Shoe Co. v. State of Washington Office of
Unemployment, 326 U.S. 310, 317 (1945)). "[I]t is essential in
each case that there be some act by which the defendant
purposefully avails itself of the privilege of conducting
business within the forum state, thus invoking the benefits and
protections of its laws." Mellon Bank, 960 F.2d at 1221 (citing
Hanson v. Denckla, 357 U.S. 235, 253 (1958)). Once it is
determined that a defendant has minimum contacts with the forum
state, "these contacts may be considered in light of other
factors to determine whether the assertion of personal
jurisdiction would comport with fair play and substantial justice." Burger King Corp. v.
Rudzewicz, 471 U.S. 462, 476 (1985).
Personal jurisdiction may be either general or specific. A
defendant is subject to general jurisdiction when it has
continuous and systematic contacts with the forum state.
Helicopteros Nacionales de Colombia, S.A. v. Hall,
466 U.S. 408, 414-16 (1984). Specific jurisdiction is established when a
non-resident defendant has "purposefully directed" his activities
at a resident of the forum and the injury arises from or is
related to those activities. General Elec. Co. v. Deutz AG,
270 F.3d 144, 150 (3d Cir. 2001) (citing Burger King Corp.,
471 U.S. at 472). In order to be subject to personal jurisdiction, a
defendant's conduct in connection with the forum state must be
such that he may "reasonably anticipate being haled into court
there." World-Wide Volkswagen, 444 U.S. at 297.
In the present case, Plaintiff contends that there is specific
jurisdiction over Defendant because of the forum selection clause
in the Conversion Costs Note and because of Defendant's ongoing
business relationship with Plaintiff. As to the first argument,
it is true that New Jersey public policy is not hostile to forum
selection clauses. See, e.g., Park Inn Intern., L.L.C. v. Mody
Enterprises, Inc., 105 F. Supp. 2d 370, 373 (D.N.J. 2000). A
court will enforce a forum selection clause unless it is proven
that "enforcement would be unreasonable and unjust, or that the
clause was invalid for such reasons as fraud or overreaching."
M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15 (1972).
However, even assuming the enforceability of the forum
selection clause in the Note, the Court must also determine
whether the Note's forum selection clause controls disputes over
the Service Contract.*fn1 The Service Contract does not have a
forum selection clause, but rather has a choice of law provision
designating Idaho law. The Note, while referred to in the Service
Contract, was signed separately two months later. The value of
the Note is less than an eighth of what Defendant claims in
damages. In essence, by claiming that the forum selection clause
in the Note controls disputes regarding the Service Contract,
Plaintiff is attempting to have the tail wag the dog. The Service
Contract, not the Note, is what the parties' business
relationship stemmed from. While the forum selection clause in
the Note does confer personal jurisdiction over Defendant with
regard to breach of the Note, it does not confer personal
jurisdiction with regard to the underlying Service Contract.
See, e.g., Vetrotex Certainteed Corp. v. Consolidated Fiber
Glass Products Co., 75 F.3d 147, 152 n. 6 (3d Cir. 1996) (noting
that choice of law provisions in sales invoices "pertain only to
the individual sales contracts for each shipment . . . and we do
not find them relevant to our jurisdictional analysis of the
underlying Supply Agreements.")
Plaintiff also contends that Defendant's ongoing business
relationship with Plaintiff confers specific jurisdiction.
Specifically, Plaintiff argues that there is specific
jurisdiction over Defendant because by entering into a franchise
agreement with a corporation located in New Jersey, signing a
Note that specified venue in New Jersey, and later sending a
notice of termination to that New Jersey corporation, Defendant
should have anticipated being haled into court in New Jersey.
However, the fact that a non-resident has entered into a contract
with a resident of the forum state is not, by itself, sufficient
to justify personal jurisdiction over the nonresident. Mellon Bank, 960 F.2d at 1223. The plaintiff must
additionally show that defendant "purposefully availed" itself of
the forum's benefits. Rodi v. Southern New England School of
Law, 255 F. Supp. 2d 346, 349 (D.N.J. 2003).
To determine whether the defendant opposing jurisdiction
"purposely availed" itself of the forum, courts ask whether the
defendant initiated the relationship with the forum plaintiff.
See Vetrotex Certainteed Corp., 75 F.3d at 152 ("[T]his is
not a case where the defendant solicited the contract or
initiated the business relationship leading up to the
contract."); see also Rodi, 255 F. Supp. 2d at 350; Maglio &
Kendro, Inc. v. Superior Enerquip Corp., 233 N.J. Super. 388
(1989). In the present case, Plaintiff solicited the contract
with Defendant in Idaho and all of the dealings between the
parties took place in Idaho.
In addition, specific jurisdiction is not conferred simply
because Defendant sent Plaintiff correspondence at Plaintiff's
New Jersey address. While mail and telephone communications sent
by a defendant into the forum may count toward the minimum
contacts that support jurisdiction, courts often point to
additional factors, such as visits to New Jersey, when finding
jurisdiction. Carteret Sav. Bank, F.A. v. Shushan,
954 F.2d 141, 150 (3d Cir. 1992); Mesalic v. Fiberfloat Corp.,
897 F.2d 696, 700-01 (3d Cir. 1990); Electro-Catheter Corp. v. Surgical
Specialties Instrument Co., Inc., 587 F. Supp. 1446, 1455
(D.N.J. 1984). There are no such additional factors here, and the
correspondence alone will not satisfy minimum contacts. Gehling
v. St. George's School of Medicine, Ltd., 773 F.2d 539, 544 (3d
Because the Court holds that Defendant does not have sufficient
minimum contacts with New Jersey, it need not address whether the
exercise of personal jurisdiction in this case would be consonant
with "traditional notions of fair play and substantial justice."
Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102, 113 (1987) (requiring both
minimum contacts and fairness in order to assert personal
jurisdiction). Further, because the Court is granting Defendant's
Rule 12(b)(1) and 12(b)(2) motion, it need not address the
arguments to dismiss for improper venue pursuant to
Fed.R.Civ.P. 12(b)(3). However, the Court notes that venue appears to be
improperly laid in New Jersey, as Defendant does not reside in
New Jersey, a substantial part of the events or omissions giving
rise to the claim did not occur in New Jersey, and because the
action may otherwise have been brought in the District of Idaho.
28 U.S.C. § 1391(a); see also Cottman Transmission Systems,
Inc. v. Martino, 36 F.3d 291, 295 (3d Cir. 1994); Base Metal
Trading SA v. Russian Aluminum, 253 F. Supp. 2d 681, 697
(S.D.N.Y. 2003); ZPC 2000, Inc. v. SCA Group, Inc.,
86 F. Supp. 2d 274, 278 (S.D.N.Y. 2000).
For the foregoing reasons, and for good cause shown,
IT is on this 12th day of October 2005,
ORDERED that Defendant's Motion to Dismiss is GRANTED, and it
ORDERED that this case is CLOSED.
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