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ETEAM, Inc. v. CLD Solutions

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


October 7, 2008

ETEAM, INC., PLAINTIFF-APPELLANT,
v.
CLD SOLUTIONS, DEFENDANT-RESPONDENT.

On appeal from the Superior Court of New Jersey, Law Division-Special Civil Part, Bergen County, Docket No. DC-11090-07.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted: September 10, 2008

Before Judges Cuff and Baxter.

Plaintiff ETEAM, Inc. (ETEAM) appeals from an order dismissing its complaint against defendant CLD Solutions (CLD) for lack of personal jurisdiction. We reverse.

We derive the facts from the certifications filed in support of and in opposition to defendant's motion to dismiss. The facts are undisputed; it is the application of the law to the facts that controls the disposition of this appeal.

ETEAM is a New Jersey corporation with its principal place of business at 1001 Durham Avenue, Suite 201, South Plainfield. ETEAM is in the information technology (IT) field and provides software development and consulting services to numerous corporations throughout the United States. Through its New Jersey office, ETEAM employs consultants who are proficient in software development. The employees of ETEAM are subcontracted by ETEAM to its clients requiring IT services. At all times, the ETEAM consultants/subcontractors remain employees of ETEAM, and ETEAM is responsible for their payroll and benefits.

On or about August 15, 2006, ETEAM and CLD entered a Subcontractor Agreement. Prior to this date, CLD contacted ETEAM in its New Jersey office. CLD is located in Dallas, Texas. It sought to retain an ETEAM employee in a consultant capacity to provide certain IT services. Rodney Cole, a principal of CLD, initiated this contact by a telephone call to an ETEAM representative in New Jersey.

Ben Thakur, ETEAM's Vice President of Operations, executed the Subcontractor Agreement in ETEAM's New Jersey office. The consultant, Pankaj Sital, supplied to CLD was an ETEAM employee. Sital performed certain services for CLD and submitted timesheets for the hours worked. Based upon the timesheets, ETEAM billed CLD for these services. ETEAM paid Sital his weekly wages and any additional employee benefits because he remained an employee of this New Jersey company.

CLD failed to remit payment to ETEAM for services performed by Sital, valued at $4,785, thereby breaching the Subcontractor Agreement. CLD asserts that it was dissatisfied with the services provided by the ETEAM consultant. We cannot discern from this record where the ETEAM consultant resided or even where he performed the services.

The motion judge found that the minimum contacts required by due process to exercise personal jurisdiction over CLD could only be established in accordance with the principles governing specific jurisdiction rather than general jurisdiction. The motion judge found that the only contact in New Jersey was a telephone call to plaintiff's New Jersey office. Based on that finding, the motion judge proceeded to hold that CLD "did not purposefully avail themselves of being in court in New Jersey. They engaged in no extensive contact, and did not reasonably expect being [haled] into court in New Jersey."

New Jersey's equivalent of a long-arm statute, Rule 4:4-4(b)(1), permits service of process on a non-resident defendant "consistent with due process of law." Accordingly, New Jersey courts have allowed out-of-state service to the outermost limits permitted by the United States Constitution. Avdel Corp. v. Mecure, 58 N.J. 264, 268 (1971).

Due process requires that a defendant who is not physically present have "certain minimum contacts with [the forum] such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'" Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95, 102 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 343, 85 L.Ed. 278, 283 (1940)). "Minimum contacts" is understood to require that a defendant has "purposefully avail[ed] itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1240, 2 L.Ed. 2d 1283, 1298 (1958). The purpose of the minimum contacts doctrine is to protect a defendant against litigating in an inconvenient forum and to ensure that states do not exceed their jurisdictional limits. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 291-92, 100 S.Ct. 559, 564, 62 L.Ed. 2d 490, 498 (1980). The doctrine has been relaxed substantially over the years because of the fundamental transformation in the American economy, commonly involving interstate business transactions without physical presence. Id. at 292-93, 100 S.Ct. at 565, 62 L.Ed. 2d at 498.

More than fifty years ago, the United State Supreme Court recognized that the minimum contacts basis, as an alternative to the requirement of physical presence for the assertion of in personam jurisdiction, was justified by the "increasing nationalization of commerce," in which many business transactions were conducted across state lines. The corresponding improvements in modern transportation and communication made it less burdensome for a party sued to defend himself in a state where he engages in economic activity. McGee v. Int'l Life Ins. Co., 355 U.S. 220, 222-23, 78 S.Ct. 199, 201, 2 L.Ed. 2d 223, 226 (1957). In World-Wide Volkswagen, supra, the Court observed that these "historical developments . . . have only accelerated in the generation since [McGee] was decided." 444 U.S. at 293, 100 S.Ct. at 565, 62 L.Ed. 2d at 498-99.

In the minimum-contacts analysis, courts distinguish between specific and general jurisdiction. Wilson v. Paradise Vill. Beach Resort & Spa, 395 N.J. Super. 520, 527 (App. Div. 2007). "Although the minimum-contacts test centers on the defendant's relationship with the forum state, the sufficiency of the contacts for jurisdictional purposes depends on 'the relationship among the defendant, the forum, and the litigation . . . .'" Charles Gendler & Co., Inc. v. Telecom Equip. Corp., 102 N.J. 460, 471 (1986) (quoting Shaffer v. Heitner, 433 U.S. 186, 204, 97 S.Ct. 2569, 2580, 53 L.Ed. 2d 683, 698 (1977)). When the cause of action is unrelated to the defendant's contacts with the forum state, the court's jurisdiction is general, and continuous and substantial contacts are required. Id. at 471-72.

However, when the cause of action arises directly out of the defendant's contact with the forum state, the court's jurisdiction is specific, and an isolated act by the defendant may be sufficient to support jurisdiction over that defendant. Id. at 471. Jurisdiction is more likely to be found when the cause of action arises directly out of the defendant's contacts with the forum state. Ibid. Because plaintiff's cause of action arises directly out of the provision of technical services by a New Jersey company at the request of the out-of-state defendant, this is a case of specific jurisdiction.

The due process analysis requires consideration of whether the defendant should reasonably anticipate being haled into court in the forum state. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474, 105 S.Ct. 2174, 2183, 85 L.Ed. 2d 528, 542 (1985). It must be shown that the defendant has purposefully availed itself of the privilege of engaging in activities within the forum state, thus gaining the benefits and protections of its laws. Id. at 475, 105 S.Ct. at 2183, 85 L.Ed. 2d at 542. The purposeful availment requirement protects defendants against being haled into court in a foreign jurisdiction solely on the basis of random, fortuitous, or attenuated contacts, or as a result of the unilateral activity of some other party. Ibid.

If a plaintiff succeeds in establishing sufficient minimum contacts, the court must also determine whether entertaining jurisdiction would be consistent with considerations of fair play and substantial justice. Id. at 476, 105 S.Ct. at 2184, 85 L.Ed. 2d at 543; Lebel v. Everglades Marina, Inc., 115 N.J. 317, 322 (1989).

In Lebel, supra, the Court instructed that the minimum contacts inquiry in the context of specific jurisdiction focuses on "'the relationship among the defendant, the forum, and the litigation.'" 115 N.J. at 323 (quoting Shaffer v. Heitner, 433 U.S. 186, 204, 97 S.Ct. 2569, 2579, 53 L.Ed. 2d 683, 698 (1977). Unilateral actions by the plaintiff are insufficient. On the other hand, minimum contacts in this context are satisfied as long as the defendant engaged in purposeful conduct in this state. Id. at 323.

In Lebel, the plaintiff was a New Jersey resident who purchased a luxury boat from a Florida boat builder. Id. at 320. Over the course of two years, the plaintiff received at least twenty phone calls in New Jersey from the Florida boat builder. Ibid. Ultimately, the plaintiff agreed to purchase a boat, signed the agreement of sale in New Jersey and accepted delivery in Florida. Ibid.

Although the contacts in this State were limited, the Court held those contacts did not defeat the jurisdiction of the court. Rather, the sufficiency or lack thereof more properly informed the analysis of whether the exercise of jurisdiction offended "traditional notions of fair play and substantial justice." Id. at 327. In that regard, the Court held the defendant was aware that the sale would have direct consequences in this state so that the resolution of any dispute in this state that arose from the sale of the boat would not be unfair. Id. at 328-29.

The mere transmittal of messages by mail or telephone within the state is not the critical factor. Id. at 325 (citing Baron & Co. v. Bank of N.J., 497 F.Supp. 534 (E.D. Pa 1980). Here, ETEAM and CLD did more than exchange telephone calls. As in Lebel, those messages and telephone calls were made to explore the formation of a business relationship, a business relationship formed, and a service was provided by a business located in New Jersey by a person who is an employee of the New Jersey firm. The nature of this contact, albeit limited, is commercially consequential such that notions of fair play and substantial justice are not offended by allowing a suit to proceed in the courts of this State against a Texas company for unpaid services. See Accura Zeisel Mach. Corp. v. Timco, Inc., 305 N.J. Super. 559, 570 (App. Div. 1997) (telephone calls and negotiations leading to purchase and shipment of machinery to New Jersey signify purposeful conduct relating to transaction of business in this State). Under these circumstances, defendant cannot reasonably assert that it had no expectation of being sued in New Jersey if it failed to pay invoices for services provided for it by this New Jersey company.

The motion judge advanced forum non conveniens as an alternate basis for dismissal. Defendant, however, confined its argument solely to the absence of personal jurisdiction. Moreover, the record is too sparse to allow a considered assessment of that theory.

We also decline to seize on the mediation clause in paragraph 15 of the contract executed by the parties. Plaintiff obviously chose to by-pass that remedy. It remains to be seen whether defendant may also choose to do so. See Lucier v. Williams, 366 N.J. Super. 485, 500 (App. Div. 2004) (while a party cannot enforce an arbitration clause after that party commences litigation or uses the litigation process improperly, an arbitration clause otherwise remains viable until a final judgment is entered). Both parties may waive an alternate dispute resolution provision in their agreement. See Wein v. Morris, 194 N.J. 364, 376 (2008) (parties mutually waived arbitration where they filed complaint and answer without reference to arbitration and engaged in five years of court-monitored discovery).

Reversed.

20081007

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