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Darryl T. Garvin v. Scott W. Klein


August 20, 2012


On appeal from Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-773-11.

Per curiam.


Argued May 7, 2012

Before Judges Parrillo, Grall and Alvarez.

Plaintiff Darryl T. Garvin is a resident of New Jersey who purchased shares of publicly traded stock in Idearc, Inc. (Idearc) that became worthless when Idearc later filed for bankruptcy and reorganized. Garvin commenced this litigation to recover damages from Idearc's chief executive officer, defendant Scott W. Klein. Garvin claimed to have purchased the stock in reliance on material misrepresentations and omissions Klein made in two press releases Idearc issued in September and October 2008 that Garvin read on the internet and during a "webcast/teleconference," which had been announced in the October press release, that he viewed online.

Although Idearc does business in New Jersey, Klein is a resident of Texas who has never lived, owned property, voted or had an office in this State while employed by Idearc. Alleging that his contacts with this State were insufficient to permit our courts to exercise personal jurisdiction, Klein moved to dismiss Garvin's amended complaint. The trial court granted Klein's motion and denied Garvin's motion for reconsideration.

Garvin now appeals from those orders. Because Garvin has not established a "relationship among [Klein], the forum, and the litigation" that is sufficient to permit exercise of personal jurisdiction, we affirm. Shaffer v. Heitner, 433 U.S. 186, 204, 97 S. Ct. 2569, 2580, 53 L. Ed. 2d 683, 698 (1977);

Lebel v. Everglades Marina, Inc., 115 N.J. 317, 323, 326 (1989).

Garvin's amended complaint and certification submitted in support of his motion for reconsideration include these allegations. In 2008, Garvin was considering investing in stocks that had been hit hard by the harsh downtrend in the stock market but would recover. He wanted to avoid investments in companies that had an "identifiable near term risk [of bankruptcy]."

Garvin did not buy stock in Idearc until he read a September 2, 2008 press release, and he purchased additional shares after reading an October 30, 2008 press release and listening to Klein speak that day on a "website/teleconference" announced in the press release. At argument on the motion to dismiss, Garvin, who is an attorney and appeared pro se, explained that such a press release "gets picked up by all these financial sites and [is published] throughout the website." A reader "get[s] this information almost instantaneously through numerous sources at that point," the same as if Klein had issued a press release "and all the magazines in the country picked it up." Garvin read the press releases on a website and learned about the "webcast/teleconference" from one of them. Garvin did not assert that he received any information from Klein or Idearc via e-mail or any other communication addressed to him or that the websites he visited were in any way targeted to investors or potential investors residing in New Jersey.

According to Garvin, based on what he read and heard in the press releases and "website/teleconference," he believed that Idearc "provided a unique opportunity at that time given its reported financial condition, taken together with [Klein's] representations." Klein had "assured shareholders and prospective Idearc shareholders that while Idearc was producing a positive cash flow, there was no reason why Idearc would have to file for bankruptcy." In addition, Klein "represented that he had a plan for generating more revenues and decreasing Idearc's costs, and that he intended to use Idearc's resources to pursue his plan to transform Idearc." Klein advised shareholders that his plan "was progressing as planned" but never advised shareholders that the plan included "filing for reorganization in bankruptcy" until the petition was filed.

Garvin asserted that the bankruptcy filing became necessary because of the long-term debt that Idearc carried before Klein became its CEO. In his view, however, statements Klein made after the bankruptcy filing showed that the reorganization was part of Klein's plan for reforming Idearc from the outset.

A judgment rendered by a court lacking personal jurisdiction violates the Due Process Clause of the Fourteenth Amendment. Pennoyer v. Neff, 95 U.S. 714, 733, 24 L. Ed. 565, 572 (1877); Blakey v. Cont'l Airlines, Inc., 164 N.J. 38, 64-65 (2000). The Due Process Clause "limit[s] every foray into the realm of long-arm jurisdiction over non-residents," Blakey, supra, 164 N.J. at 66, and its demands must be satisfied in this case involving a defendant who is a Texas resident.

"[A] state court's assertion of personal jurisdiction does not violate the Due Process Clause if the defendant has 'certain minimum contacts with it such that the maintenance of the suit does not offend "traditional notions of fair play and substantial justice."'" Blakey, supra, 164 N.J. at 65 (quoting 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))). Where, as here, the defendant is an individual sued for actions taken as an officer of a corporation, the defendant's contacts, not the corporation's, control. Keeton v. Hustler Magazine, 465 U.S. 770, 781 n.13, 104 S. Ct. 1473, 1482, 79 L. Ed. 2d 790, 802 (1984).

In this case, Garvin does not claim that Klein has sufficient continuous and systematic contacts with New Jersey to subject him to jurisdiction on any claim. Helicopteros Nacionales de Columbia, S.A. v. Hall, 466 U.S. 408, 416, 104 S. Ct. 1868, 1873, 80 L. Ed. 2d 404, 412 (1984); Lebel, supra, 115 N.J. at 323. He argues that his cause of action against Klein "relates directly to" Klein's alleged misrepresentations that harmed Garvin in New Jersey and that this gives our courts jurisdiction specific to his cause of action. Lebel, supra, 115 N.J. at 322.

"In the context of specific jurisdiction, the minimum contacts inquiry must focus on 'the relationship among the defendant, the forum, and the litigation.'" Lebel, supra, 115 N.J. at 323 (quoting Shaffer, supra, 433 U.S. at 204, 97 S. Ct. at 2579, 53 L. Ed. 2d at 698). "An intentional act calculated to create an actionable event in a forum state will give that state jurisdiction over the actor." Waste Mgmt., Inc. v. Admiral Ins. Co., 138 N.J. 106, 126 (1994), cert. denied, sub nom., WMX Techs., Inc. v. Canadian Gen. Ins. Co., 513 U.S. 1183, 115 S. Ct. 1175, 130 L. Ed. 2d 1128 (1995). Stated differently, the "'minimum contacts' requirement is satisfied so long as the contacts resulted from the defendant's purposeful conduct and not the unilateral activities of the plaintiff." Lebel, supra, 115 N.J. at 323. "This 'purposeful availment' requirement ensures that a defendant will not be haled into a jurisdiction solely as a result of 'random,' 'fortuitous,' or 'attenuated' contacts." Id. at 323-24 (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475, 105 S. Ct. 2174, 2183, 85 L. Ed. 2d 528, 542 (1985) (quoting Keeton, supra, 465 U.S. at 774, 104 S. Ct. at 1478, 79 L. Ed. 2d at 797; World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 299, 100 S. Ct. 559, 568, 62 L. Ed. 2d 490, 502 (1980))).

Decisions of the New Jersey and United States Supreme Courts provide guidance on what must be shown to establish jurisdiction based on an intentional act outside the State calculated to create an actionable event in the State.

In Blakey, the Court considered whether our courts had personal jurisdiction over pilots employed by Continental who "posted derogatory and insulting remarks about" the plaintiff on an "on-line computer bulletin board called the Crew Members Forum," which the plaintiff alleged were defamatory and harassing. 164 N.J. at 48. The plaintiff, who was also a pilot for Continental, had a civil action alleging a violation of New Jersey law prohibiting gender discrimination pending in Federal District Court for the District of New Jersey when the postings were made. Id. at 47-48.

The Court held that pilots "who published defamatory electronic messages, with knowledge that the messages would be published in New Jersey and could influence a claimant's efforts to seek a remedy under New Jersey's Law Against Discrimination, may properly be subject to the State's jurisdiction." Id. at 46. Reasoning that the "quality" and "nature of the contact" was more important than the means of communication, id. at 68, the Court concluded that "if defendants' statements [were] capable of a defamatory meaning and were published with knowledge or purpose of causing harm to plaintiff in the pursuit of her civil rights within New Jersey, those intentional contacts within the forum would satisfy the minimum contacts requirement of International Shoe," id. at 69.

In Blakey, the Court relied on Calder v. Jones, a case in which the United States Supreme Court held that Florida authors of a defamatory tabloid article were subject to the personal jurisdiction of a California court because "their intentional conduct in Florida [was] calculated to cause injury to [the person defamed] in California." Calder v. Jones, 465 U.S. 783, 791, 104 S. Ct. 1482, 1488, 79 L. Ed. 2d 804, 813 (1984). See Blakey, supra, 164 N.J. at 67-68. The plaintiff was an actress who lived in and had a career centered in California and would suffer any harm attributable to the allegedly defamatory statements in that state. In addition, the writers' sources were in California. On those facts, the court concluded that California was the focal point of defamation and that California could exercise personal jurisdiction over the writers because the dispute and "their intentional conduct in Florida [was] calculated to cause injury to [the plaintiff] in California." Calder, supra, 465 U.S. at 791, 104 S. Ct. at 1488, 79 L. Ed. 2d at 813.

Our Supreme Court has applied the same principles in considering alleged misrepresentations made in a commercial context. In Lebel, the Court considered whether New Jersey courts had personal jurisdiction over a Florida seller with no other contacts with New Jersey who allegedly made fraudulent representations in connection with the sale of a boat to a resident in New Jersey. 115 N.J. at 320-21. The Court concluded that the seller's alleged phone calls to New Jersey and use of the postal service to solicit the contract were sufficient to satisfy the minimum contacts requirement necessary for specific jurisdiction because the buyer's allegations "support[ed] a finding that, at least for the purposes of this sale, the defendant purposely directed his activities" at the buyer in New Jersey. Lebel, supra, 115 N.J. at 327.

The Court in Lebel noted that the defendant knew the buyer was a New Jersey resident and that the boat would be shipped to the buyer here. Ibid. Thus, the plaintiff-buyer's residence in New Jersey, "'because of defendant's relationship with the plaintiff,'" was deemed to "'enhance defendant's contacts with the forum.'" Ibid. (quoting Keeton, supra, 465 U.S. at 780, 104 S. Ct. at 1481, 79 L. Ed. 2d at 801). In short, the seller's conduct was "'purposefully directed' toward" a resident of this State, id. at 328 (quoting Burger King, supra, 471 U.S. at 476, 105 S. Ct. at 2184, 85 L. Ed. 2d at 543), and there was "no doubt that [the seller] was well aware that this sale would have direct consequences in New Jersey such that it should have been aware of the possibility of litigation arising in that forum," ibid.

This court has considered personal jurisdiction in a case involving internet communication of alleged fraudulent misrepresentations about the financial state of a corporation offering stock disseminated in this State and relied upon by the New Jersey Department of Treasury. McCormac v. Qwest Comm'ns Int'l, Inc., 387 N.J. Super. 487, 499 (App. Div. 2006). Noting that Qwest had established an investor relations division to communicate with and respond to questions from institutional investors, and that New Jersey was among Qwest's thirty-five largest institutional investors and received communications through that division, we concluded that this State was the focal point of a harm New Jersey suffered as a consequence of the alleged intentional tort the individual defendants aimed at this State. Id. at 502-05.

With those precedents in view, we turn to consider whether Garvin has met his burden of establishing a prima facie basis for exercise of personal jurisdiction. Lebel, supra, 115 N.J. at 327--29. Because the trial court dismissed the action on Klein's motion prior to discovery, we assume that Garvin can establish all of his allegations and assertions. NCP Litig. Trust v. KPMG LLP, 187 N.J. 353, 365-66 (2006). Our review of the trial court's ruling on a motion to dismiss for lack of jurisdiction at the inception of the case is de novo. Mastondrea v. Occidental Hotels Mgmt. S.A., 391 N.J. Super. 261, 268 (App. Div. 2007).

Garvin's allegation is that he acted in reliance on Klein's statements posted on websites and delivered in a "website/teleconference" that he viewed online. There is nothing that indicates that these communications were directed at Garvin or any other resident of this State or that Klein was aware that his statements would, or intended his statements to, cause a harm to Garvin or anyone else in this State. Garvin does not allege that Klein knew the identity or location of any person accessing the websites that posted Idearc's press releases or joining the "website/ teleconference" during which he spoke.

Garvin's contention is that personal jurisdiction can be based on the inference that Klein must have known that anyone anywhere, including someone in New Jersey, could rely on the statements he made. Calder, Blakey, Lebel and Qwest provide no support for that broad application of a principle of personal jurisdiction based on an intentional act calculated to create an actionable event in a forum state. Those cases all involved statements designed to injure or specifically directed to particular persons or entities in the forum who would be injured. In contrast, Klein's statements had no relationship to this State or any individual in it. Unlike the commercial communications in Lebel and Qwest, there is no allegation that Klein had any relationship with Garvin or any other person hearing or reading this information. Thus, there is no relationship here to enhance the otherwise insufficient action of releasing press statements and invitations to participate in a press conference posted by operators of websites. Accordingly, the trial court properly dismissed this case, with prejudice, for lack of personal jurisdiction.

Garvin presents additional procedural arguments. Specifically, he contends that the court erred in considering the motion to dismiss because it was not timely filed and improperly precluded him from filing this action elsewhere by dismissing the action with prejudice. Having considered these arguments in light of the record, we conclude that they lack sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E). With respect to Garvin's concerns about claim preclusion in another forum, it suffices to recite the general rule - "a judgment for the defendant is not on the merits if it is based on the court's lack of jurisdiction or of competence over the subject matter of the controversy." Restatement (Second) of Conflict of Laws, § 110 cmt. a.



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