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Supreme Court of the Federated States of Micronesia |
FEDERATED STATES OF MICRONESIA
SUPREME COURT TRIAL DIVISION
Cite as National Fisheries Corp. v. New Quick Co., [1999] FMSC 28; 9 FSM Intrm. 120 (Ponape. 1999)
[1999] FMSC 28; [9 FSM Intrm. 120]
NATIONAL FISHERIES CORPORATION,
Plaintiff,
vs.
NEW QUICK CO., LTD., NORTHSTAR
INTERNATIONAL HOLDINGS, LTD. and
L. DOUGLAS BROWN,
Defendants.
CIVIL ACTION NO. 1998-042
ORDER AND MEMORANDUM
Martin Yinug
Associate Justice
Decided: May 3, 1999
APPEARANCES:
For the Plaintiff:
Fredrick L. Ramp, Esq.
P.O. Box 1480
Kolonia, Pohnpei FM 96941
Allen R. Wolff, Esq.
Carlsmith Ball
Pacific Tower, Suite 200
1001 Bishop St.
Honolulu, Hawaii 96813
For the Defendant:
Stephen V. Finnen, Esq.
Salomon Saimon, Esq.
Law Offices of Saimon & Associates
P.O. Box 1450
Kolonia, Pohnpei FM 96941
* * * *
HEADNOTES
Civil Procedure - Service
In addition to the personal service provided in 4 F.S.M.C. 204(2), service may be accomplished for the purpose of the long arm statute
by any of the means provided for in Rule 4 of the FSM Rules of Civil Procedure. National Fisheries Corp. v. New Quick Co., [1999] FMSC 28; 9 FSM Intrm. 120, 124 (Pon. 1999).
Civil Procedure - Service
Service of the summons and complaint may be made on a foreign corporation not an inhabitant
of or found within the state by registered or certified mail, return receipt requested. If service was by mail, the person serving process shall show in the proof of service the date and place of mailing. National Fisheries Corp. v. New Quick Co., [1999] FMSC 28; 9 FSM Intrm. 120, 124 (Pon. 1999).
Civil Procedure - Dismissal; Civil Procedure - Service
Because failure to make proof of service does not affect the validity of the service, a motion to dismiss for a defect in a return
of service will be denied. National Fisheries Corp. v. New Quick Co., [1999] FMSC 28; 9 FSM Intrm. 120, 125 (Pon. 1999).
Civil Procedure - Venue; Jurisdiction
Venue does not refer to jurisdiction at all. Jurisdiction of the court means the inherent power to decide a case, whereas venue designates
the particular county or city in which a court with jurisdiction may hear and determine the case. On the other hand, forum means
a place of jurisdiction. National Fisheries Corp. v. New Quick Co., [1999] FMSC 28; 9 FSM Intrm. 120, 125 (Pon. 1999).
Civil Procedure - Dismissal; Contracts - Forum Selection Clause
A motion to dismiss because the forum selection clause in the agreement selects a different court to hear the dispute is properly
seen as a motion to dismiss for improper forum. National Fisheries Corp. v. New Quick Co., [1999] FMSC 28; 9 FSM Intrm. 120, 125 (Pon. 1999).
Contracts - Forum Selection Clause
Parties may by contract designate a forum in which any litigation is to take place. Forum selection clauses are presumed valid, and
enforcement will be ordered absent a strong showing that it should be set aside, and unless it clearly would be unreasonable and
unjust, or that the clause is invalid for such reasons as fraud or overreaching. National Fisheries Corp. v. New Quick Co., [1999] FMSC 28; 9 FSM Intrm. 120, 125 (Pon. 1999).
Contracts - Forum Selection Clause
A forum selection clause may be subject to judicial scrutiny for fundamental fairness. In determining fundamental fairness, courts
should consider such factors as: 1) whether the forum was selected by one party as a bad faith tactic to discourage pursuit of legitimate
claims by the other; 2) whether consent to the forum selection clause was obtained by fraud or overreaching; or 3) whether the contesting
party had no notice of the forum provision. National Fisheries Corp. v. New Quick Co., [1999] FMSC 28; 9 FSM Intrm. 120, 126 (Pon. 1999).
Contracts - Forum Selection Clause
A forum selection clause is not unfair and rendered unenforceable because the court selected is a neutral forum with no relation to
the parties or their dispute. National Fisheries Corp. v. New Quick Co., [1999] FMSC 28; 9 FSM Intrm. 120, 126 & n.1 (Pon. 1999).
Contracts - Forum Selection Clause
A forum selection clause unaffected by fraud, undue influence, or overweening bargaining power should be given full effect. National Fisheries Corp. v. New Quick Co., [1999] FMSC 28; 9 FSM Intrm. 120, 126 (Pon. 1999).
Contracts - Forum Selection Clause
When parties engaged in an international business transaction unambiguously select a forum in a third country, they are to be credited
with knowledge of the jurisdictional requirements of the chosen court. National Fisheries Corp. v. New Quick Co., [1999] FMSC 28; 9 FSM Intrm. 120, 126 (Pon. 1999).
Contracts - Forum Selection Clause; Contracts - Interpretation
Once a forum selection clause is determined to be binding, its scope and effect should be determined under a contract law analysis.
National Fisheries Corp. v. New Quick Co., [1999] FMSC 28; 9 FSM Intrm. 120, 127 (Pon. 1999).
Contracts - Forum Selection Clause; Contracts - Interpretation
When the forum selection clause language uses "exclusive jurisdiction" in conjunction with the mandatory language, "hereby irrevocably
consent," it establishes an intent to have any dispute resolved only by the other forum and it leaves no room for dispute over the
clause's meaning in this respect. National Fisheries Corp. v. New Quick Co., [1999] FMSC 28; 9 FSM Intrm. 120, 127 (Pon. 1999).
Civil Procedure - Dismissal; Jurisdiction - Personal
For purposes of the motion to dismiss, the plaintiff has the burden of showing a prima facie case of personal jurisdiction, and the
allegations in the complaint are taken as true except where controverted by affidavit, in which case any conflicts are construed
in the non-moving party's favor. National Fisheries Corp. v. New Quick Co., [1999] FMSC 28; 9 FSM Intrm. 120, 127 (Pon. 1999).
Constitutional Law - Due Process; Jurisdiction - Personal
To obtain personal jurisdiction over a non-resident defendant in a diversity action, a plaintiff must show that jurisdiction is consistent
with the "long arm" statute, 4 F.S.M.C. §§ 203-04, and that the exercise of jurisdiction does not deny the defendant due
process of law as guaranteed by article IV, section 3 of the FSM Constitution. National Fisheries Corp. v.Quick Co.[1999] FMSC 28; , 9 FSM Intrm. 120, 128 (Pon. 1999).
Constitutional Law - Due Process; Jurisdiction - Personal
Because Article IV, section 3 is based on the Due Process Clause of the United States Constitution, FSM courts can look to interpretations
of the United States Due Process Clause to determine the extent to which the FSM long-arm statute may be used consistently with due
process to exert jurisdiction over a non-forum defendant. National Fisheries Corp. v. New Quick Co., [1999] FMSC 28; 9 FSM Intrm. 120, 128-29 (Pon. 1999).
Constitutional Law - Due Process; Jurisdiction - Personal
Under the doctrine of minimum contacts a defendant must have certain minimum contacts with a forum such that maintenance of the suit
does not offend traditional notions of fair play and substantial justice. The FSM Supreme Court applies a minimum contacts analysis
to determine the extent to which the FSM long-arm statute may be used consistently with due process to exert jurisdiction over a
non-forum defendant. National Fisheries Corp. v. New Quick Co., [1999] FMSC 28; 9 FSM Intrm. 120, 129 (Pon. 1999).
Jurisdiction - Personal
Except as provided for in 4 F.S.M.C. 204, the Supreme Court may exercise personal jurisdiction in civil cases only over persons residing
or found in the Federated States of Micronesia or who have been duly summoned and voluntarily appear. National Fisheries Corp. v. New Quick Co., [1999] FMSC 28; 9 FSM Intrm. 120, 129 (Pon. 1999).
Jurisdiction - Personal
The FSM Supreme Court can exercise personal jurisdiction in civil cases over an individual or agent of a corporation as to any cause
of action arising from the commission of a tortious act within the Federated States of Micronesia. National Fisheries Corp. v. New Quick Co., [1999] FMSC 28; 9 FSM Intrm. 120, 129 (Pon. 1999).
Constitutional Law - Due Process; Jurisdiction - Personal
The mere allegation that an out-of-state defendant has tortiously interfered with contractual rights or has committed other business
torts that have allegedly injured a forum resident does not necessarily establish that the defendant possesses the constitutionally
required minimum contacts. In order to resolve the jurisdictional question, a court must undertake a particularized inquiry as to
the extent to which the defendant thus purposefully availed itself of the benefits of the forum's laws. National Fisheries Corp. v. New Quick Co., [1999] FMSC 28; 9 FSM Intrm. 120, 129 (Pon. 1999).
Constitutional Law - Due Process; Jurisdiction - Personal
Generalized legal conclusions in an affidavit have no bearing on the particularized inquiry, which a court must undertake in order
to determine whether defendants have minimum contacts with the forum in order to make a prima facie case that the court has personal
jurisdiction over the defendants. National Fisheries Corp. v. New Quick Co., [1999] FMSC 28; 9 FSM Intrm. 120, 130 (Pon. 1999).
Constitutional Law - Due Process; Jurisdiction - Personal
Two - possibly four - letters and unspecified phone calls sent into the FSM are insufficient in themselves to establish the minimum
contacts necessary to establish personal jurisdiction. National Fisheries Corp. v. New Quick Co., [1999] FMSC 28; 9 FSM Intrm. 120, 130 (Pon. 1999).
Constitutional Law - Due Process; Jurisdiction - Personal
Personal jurisdiction is not established when the alleged tortious conduct resulted only in economic consequences in the FSM because
mere economic injury suffered in the forum is not sufficient to establish the requisite minimum contacts so as to sustain long-arm
jurisdiction. National Fisheries Corp. v. New Quick Co., [1999] FMSC 28; 9 FSM Intrm. 120, 130 (Pon. 1999).
Constitutional Law - Due Process; Jurisdiction - Personal
When the tortious conduct is not shown to have occurred in FSM, and the alleged harm flowing from the conduct cannot be said to have
been "targeted" to the FSM, it does not persuade the court that the defendants have caused an "effect" in this forum sufficient to
justify jurisdiction over them under the FSM long-arm statute. National Fisheries Corp. v. New Quick Co., [1999] FMSC 28; 9 FSM Intrm. 120, 131 (Pon. 1999).
Constitutional Law - Due Process; Jurisdiction - Personal; Torts - Interference with a Contractual Relationship
When the defendants are not parties to the contract they tortiously interfered with and have no meaningful presence in the FSM, although
the economic harm was allegedly targeted to an FSM plaintiff, it is insufficient to establish personal jurisdiction over the defendants.
National Fisheries Corp. v. New Quick Co., [1999] FMSC 28; 9 FSM Intrm. 120, 132 (Pon. 1999).
* * * *
COURT'S OPINION
MARTIN YINUG, Associate Justice:
By order dated March 2, 1999, Chief Justice Andon Amaraich recused himself, and reassigned this case to me.
As to the Motion to Dismiss for Insufficient Service and Return of Process and for Improper Venue of defendant New Quick Co., Ltd. ("New Quick"), the service/return of process portion of the motion is denied, whereas the venue (the parties actually mean forum) portion of the motion is granted.
The Motion to Dismiss for Lack of In Personam Jurisdiction of defendants Northstar International Holdings, Ltd. ("Northstar") and L. Douglas Brown ("Brown") is also granted. The reasoning is set out below.
As a housekeeping matter, the court previously had granted the pro hac vice motions of Dean Robb, Allen Wolff, and Kevin Fowler, subject to submission of certificates showing Robb's and Wolff's good standing before the Hawaii bar, and Fowler's good standing before the Michigan and Oregon bars. By affidavit, Fowler cites his discovery that he failed to complete his registration form for the Michigan bar as reason for not submitting the Michigan certificate, although he has submitted an Oregon certificate. The court accepts the evidence of good standing that has been submitted, and Robb, Wolff, and Fowler stand admitted for this cause. The pending, unopposed motions for extensions of time are also granted.
I. New Quick's Motion to Dismiss for Insufficient Service and Return of Process and for Improper Venue
On October 26, 1998, defendant New Quick, a Japan corporation, brought a Motion to Dismiss for Insufficient Service and Return of Process and For Improper Venue. On November 5, 1998, New Quick filed a Supplemental Memorandum to its Motion to Dismiss. After an unopposed extension of time, on November 19, 1998, and again on November 27, 1998, plaintiff National Fisheries Corp. ("NFC") filed an Opposition to new Quick's Motion Dismiss, the November 27 document being a print copy of the fax version filed on November 19. On November 30, 1998, New Quick filed a Rely Memorandum to NFC's Opposition.
A. Insufficient Service
New Quick has brought a three part motion. First, New Quick moves to dismiss the summons and complaint for insufficient service. The FSM long arm statute, 4 F.S.M.C. 204, provides at subsection (2) that "[s]ervice of process may be made upon any person subject to the jurisdiction of the Supreme Court under this Section by personally serving the summons upon the defendant outside the Federated States of Micronesia." 4 F.S.M.C. 204(2) (emphasis added). At the same time, however, subsection (4) of § 2ovides that "[n]othing cong contained in this Section limits or affects the right to serve any process in any other manner now oeafter provided by law." The court reads subsection (4) to mean that in addition to the pere personal service provided in subsection (2), service may be accomplished for the purpose of the long arm statute by any of the means provided for in Rule 4 of the FSM Rules of Civil Procedure.
New Quick apparently contends that only personal service is good service on it under the FSM long-arm statute. The court concludes differently, since Rule 4(d)(8) and (e) of the FSM Rules of Civil Procedure provides that service of the summons and complaint may be made on a foreign corporation not an inhabitant of or found within the state by registered or certified mail, return receipt requested, which was the method used in this case. The defendant's motion for insufficient service is therefore denied.
B. Return of Service
With respect to the return of service portion of the motion, the Proof of Timely Service on New Quick Co., Ltd., filed by New Quick on August 14, 1998, is problematic. The only evidence that service was accomplished is a return receipt which counsel avows "is proof of [sic] that New Quick Co., Ltd. was served in a timely manner." Rule 4(g) expressly provides that "[i]f service was by mail, the person serving process shall show in the proof of service the date and place of mailing," and the
proof of service is defective in this regard. However, Rule 4(g) provides that "[f]ailure to make proof of service does not affect the validity of the service."
The telling point here is that defendant New Quick nowhere contends in its motion that it was not actually served with the summons and complaint. It also moved to dismiss the complaint. These facts, along with the return mail receipt over the signature of counsel, lead the court to conclude that service was effected in accordance with Rule 4(d)(8) and (e). The crux of the matter here is a formal defect in the return of service. Since Rule 4(g) expressly provides that such a defect does not affect validity of service, the motion to dismiss for insufficient return of service is denied.
C. Venue (by which the parties mean forum)
New Quick has brought a motion to dismiss for improper venue. Both the motion and NFC's response fail to make a distinction between venue, which has to do with the physical locale within a jurisdiction where a case may be heard, and forum, which goes directly to jurisdiction. Indeed, NFC goes so far as to assert that the forum selection clause at issue is invalid because the word "venue" does not appear in the clause. One need look no further than the entry under "venue" in Black's Law Dictionary to find that "[v]enue does not refer to jurisdiction at all. 'Jurisdiction' of the court means the inherent power to decide a case, whereas 'venue' designates the particular county or city in which a court with jurisdiction may hear and determine the case." Black's Law Dictionary 1396 (5th ed. 1979) (citation omitted). On the other hand, "forum" as defined by Black's means "a place of jurisdiction." Id. at 589. The parties are not contending that one place within the jurisdiction of this or any other court is superior to another for purposes of hearing this case. Rather, the issue is whether, in light of the forum selection clause contained in the lease agreement, this court or the United States District Court in California should hear this dispute. Consequently, New Quick's motion to dismiss, styled one for dismissal for improper venue, is properly seen as a motion to dismiss for improper forum. The court considers it in that light.
The lease that is the subject of this litigation, and to which New Quick and NFC are parties, is dated June 30, 1995, and contains a forum selection clause which provides as follows:
19. LAW
19.1 This Lease and the relationship of the parties hereto shall be governed and interpreted in accordance with the laws of the United States of America and the parties hereto hereby irrevocably consent to the exclusive jurisdiction of the United States District Court for the State of California.
New Quick contends that NFC has agreed to the California venue, i.e. forum, for any dispute arising out of the lease. NFC emphasizes that the word "venue" does not appear in paragraph 19, and, as noted, contends that "[a]s a forum selection clause, paragraph 19 is therefore invalid, unless some other, independent basis for jurisdiction [in the California court] can be identified." National Fisheries Corporation's Mem. in Opp'n to Def. New Quick Co., Ltd.'s Motion to Dismiss For Improper Venue at 10 (Nov. 19, 1998). NFC cites the proposition that the parties by agreement cannot create subject matter jurisdiction where there is none.
The clause unambiguously names a forum, the United States District Court for the State of California. Parties may by contract designate a forum in which any litigation is to take place. Forum selection clauses are presumed valid, and enforcement will be ordered "absent a strong showing that it should be set aside," and unless it clearly "would be unreasonable and unjust, or that the clause is invalid for such reasons as fraud or overreaching." Bremen v. Zapata Off-Shore Co., [1972] USSC 129; 407 U.S. 1, 15,
[1972] USSC 129; 92 S. Ct. 1907, 1916, 32 L. Ed. 2d 513, 523 (1972). In Bremen, like the instant case, the forum selection clause did not use the word "venue," but specified in its entirety that as between the disputing American and German corporations, "'[a]ny dispute arising must be treated before the London Court of Justice.'" Id. at 2, 92 S. Ct. at 1909, 32 L. Ed. 2d at 516. The Bremen court noted that "[t]here are compelling reasons why a freely negotiated private international agreement, unaffected by fraud, undue influence, or overweening bargaining power, such as that involved here, should be given full effect." Id. at 12-13, 92 S. Ct. at 1914-15, 32 L. Ed. 2d at 522 (footnote deleted). Not the least of these concerns is that the "elimination of all such uncertainties [i.e., regarding where a potential dispute might be litigated] by agreeing in advance on a forum acceptable to both parties is an indispensable element in international trade, commerce, and contracting." Id. at 13-14, 92 S. Ct. at 1915, 32 L. Ed. 2d at 522-23.
It follows that a forum selection clause may be subject to judicial scrutiny for "fundamental fairness." Carnival Cruise Lines, Inc. v. Shute, [1991] USSC 56; 499 U.S. 585, 595[1991] USSC 56; , 111 S. Ct. 1522, 1528, 113 L. Ed. 2d 622, 633 (1991). In determining "fundamental fairness," courts should consider such factors as: (1) whether the forum was selected by one party as a bad faith tactic to discourage pursuit of legitimate claims by the other; (2) whether consent to the forum selection clause was obtained by fraud or overreaching; or (3) whether the contesting party had no notice of the forum provision. Id. at 594-595, 111 S. Ct. at 1528, 113 L. Ed. 2d 632-33.
NFC argues that enforcement of the forum selection clause would be unfair because the dispute has no connection to California and thus a California court may not hear it.[1] However, this fact alone does not render the clause unenforceable. Looking to Carnival Cruise Lines, it does not appear that the California forum was selected by one party as a bad faith tactic to discourage pursuit of legitimate claims by the other; that NFC's consent to the forum selection clause was obtained by fraud or overreaching; or that NFC had no notice of the forum provision. NFC has presented no evidence that New Quick misrepresented the force and effect of the forum selection clause, or otherwise acted in bad faith. NFC and New Quick appear to have agreed to the forum selection clause as part of an arm's length transaction. NFC does not argue that it was unaware of the forum selection clause, nor that the clause was the result of fraud and overreaching. Indeed, the forum selection clause is conspicuously labeled "LAW." This suggests NFC's awareness of the provisions, and that the provision played some part in the negotiations between the parties. Similarly, the conspicuousness of the provision suggests it was not occasioned by fraud or overreaching.
On the facts now before the court, the forum selection clause meets the Carnival Cruise Lines criteria, and such an agreement, "unaffected by fraud, undue influence, or overweening bargaining power, such as that involved here, should be given full effect." Bremen, 407 U.S. at 12-13, 92 S. Ct. at 1914-15, 32 L. Ed. 2d at 522 (footnote deleted).
NFC now opines that the California court may not hear the instant dispute. When parties engaged in an international business transaction unambiguously select a forum in a third country, they are to be credited with knowledge of the jurisdictional requirements of the chosen court. Having so pointedly selected a forum as the parties did pursuant to paragraph 19 of the lease agreement, it is too late in the day for NFC to urge that this court should relieve it from the effects of its arms-length agreement because the forum that it chose may not hear the dispute. Were that to prove the case, it
would not be because the agreement is fundamentally unfair, but because the parties reached an agreement, unaffected by fraud or overreaching, which designated the California forum. The court will leave the parties as it found them. Accordingly, the court finds that the forum selection clause is binding as between NFC and New Quick.
Once a forum selection clause is determined to be binding, its scope and effect should be determined under a contract law analysis. The language of the clause establishes an intent to have any dispute resolved only by the United States District Court for the State of California. The use of the language "exclusive jurisdiction" in conjunction with the mandatory language, "hereby irrevocably consent," leaves no room for dispute over the meaning of the clause in this respect. See Hunt Wesson Foods Inc. v. Supreme Oil Co., [1987] USCA9 829; 817 F.2d 75, 77-78 (9th Cir. 1987).
Accordingly, New Quick's motion to dismiss, styled one to dismiss for improper venue but which this court considers as a motion to dismiss for improper forum, is granted. The complaint as to defendant New Quick is dismissed with prejudice.
II. Motion to Dismiss for Lack of In Personam Jurisdiction
On August 24, 1998, Brown and Northstar filed their Motion to Dismiss for Lack of In Personam Jurisdiction. After requesting an unopposed extension of time, on October 17, 1998, NFC filed an Opposition to Motion to Dismiss. On October 28, 1998, Brown and Northstar filed a Reply Memorandum.
For purposes of the motion to dismiss, the plaintiff has the burden of showing a prima facie case of personal jurisdiction, and the allegations in the complaint are taken as true except where controverted by affidavit, in which case any conflicts are construed in the non-moving party's favor. Turnock v. Cope, [1987] USCA7 304; 816 F.2d 332, 333 (7th Cir. 1987). The court gleans the following from the parties' submissions.
A. Facts Taken as True for Purposes of Determining Jurisdiction
In June of 1995, plaintiff NFC and defendant New Quick entered into a three year lease of a Boeing 727 jet for use in NFC's fishing operations. This lease was performed without objection until December of 1997. Then on December 7, 1997, New Quick sent NFC a Notice of Default and Election to Terminate Aircraft Lease Agreement. Upon receipt of this notice, NFC "immediately cured any and all default in performing its obligations under the Lease, which cure was accepted by New Quick." Complaint para. 14. The election to terminate was made pursuant to paragraph 9.1(a) of the lease which states as follows:
9.1 The occurrence of any of the following shall constitute an event of default and material breach of this Lease by Lessee . . .: (a) Lessee's fa tureake make a payment of Basic Rent or other payment due hereunder within one month of the due date provided herein. No noticehe Lewill be required.
The termination goes to NFC's allegations at paragraragraph 1aph 12 of the complaint that New Quick, Brown, and Northstar "wrongfully conspired and agreed to terminate NFC's Lease of the Boeing 727 jet, whereupon New Quick would lease the jet to Defendant Northstar." Northstar is a Delaware corporation with its principal place of business in Los Angeles, California.
On December 8, 1997, NFC wrote to New Quick asking New Quick to reconsider its position regarding termination of the lease. Thereafter, NFC sent $68,000 to New Quick by wire transfer. In
a letter dated December 10, 1997, New Quick acknowledged receiving the money, rejected the money as a cure for the default, and placed the funds in trust.
NFC worked to cure the default with Brown, who was New Quick's attorney. Brown was never physically present in Micronesia. The moving and opposing papers attach letters written by Brown where he negotiates with NFC on behalf of New Quick to resolve the lease dispute. The letters are dated December 10 (a letter different from the one relating to the $68,000 wire transfer, which was from New Quick in Japan), 11, 17, 19, and 24, 1997. None of these five letters are to addresses in the FSM. The parties eventually reached an agreement allowing NFC to operate the aircraft through and including March 31, 1998, at which time it was repossessed by New Quick. NFC alleges that at the time the plane was repossessed, NFC was in compliance with the lease.
In early March, 1998, NFC discovered that Brown's company, Northstar, was going to lease the aircraft from New Quick. On March 12, 1998, Brown wrote to a Washington, D.C., attorney who also represented NFC, admitting that he was functioning in a dual capacity, both as attorney for New Quick, and as president and CEO of Northstar.
On June 1, 1998, Brown wrote to NFC in the FSM on behalf of New Quick and demanded payment of over 1 million dollars in maintenance costs to return the aircraft to the operating level required by the lease agreement. The next day, June 2, 1998, Brown sent a brief letter as a follow up to the June 1, 1998, letter, and based on the materials presented to the court, it appears that these two letters are the only ones sent by Mr. Brown into the FSM during relevant times.[2]
On June 23, 1998, the complaint in this action followed. NFC alleges that New Quick breached the lease agreement, and that Brown and Northstar conspired with New Quick to interfere with and induce the breach of the lease agreement. The complaint also asks the court to declare that NFC does not owe New Quick for certain maintenance costs.
B. Law
NFC has brought this diversity action against non-resident defendants Brown and Northstar pursuant to article XI, section 6(b) of the FSM Constitution. To obtain personal jurisdiction over a non-resident defendant in a diversity action, a plaintiff must show that jurisdiction is consistent with the "long arm" statute enacted by the Congress of the Federated States of Micronesia, codified at 4 F.S.M.C. §§ 203-04, and that the exercise of jurisdiction does not deny the defendant due process of law as guaranteed by article IV, section 3 of the FSM Constitution, which provides that "[a] perso not be deprived of life, liberty, or property without due due process of law." Article IV, section 3 is based on the Due Process Clause of the United States Constitution, and this court can look to interpretations of the United States Constitution in this regard. Ludwig v. FSM, 2 FSM Intrm. 27, 35 (App. 1985).
Courts in the FSM have yet to consider the jurisdictional limits of the FSM long-arm statute, and the court considers United States precedent to determine the extent to which the FSM long-arm statute may be used consistently with due process to exert jurisdiction over a non-forum defendant.
The United States Supreme Court, in the seminal case International Shoe Co. v. Washington, [1945] USSC 158; 326 U.S. 310, 66 S. Ct. 154, 90 L. Ed. 95 (1945), defined the doctrine of minimum contacts: a defendant must have "certain minimum contacts" with a forum "such that maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'" 326 U.S. at 316, 66 S. Ct. at 158, 90 L. Ed. at 102 (citations omitted). The court applies a minimum contacts analysis in this case, and concludes that Brown and Northstar's contacts with this forum are insufficient to hold them to answer here.
The FSM long-arm statute, 4 F.S.M.C. 203, provides that "[t]he Supreme Court may exercise personal jurisdiction in civil cases only over persons residing or found in the Federated States of Micronesia or who have been duly summoned and voluntarily appear, except as provided in Section 204 of this Chapter." To establish personal jurisdiction over Brown and Northstar in this case, NFC relies on 4 F.S.M.C. 204(1)(e), which provides in pertinent part that an individual or agent of a corporation "submits himself or its personal representative to the personal jurisdiction of the Supreme Court of the Federated States of Micronesia as to any cause of action arising from . . . [t]he ssion tf a tortuoustuous act within the Federated States of Micronesia."[3] It is only by showing specific, forum related acts upich tleged tortious cous conductnduct rests that NFC can carry its burden of showing on a prima facie basis the necessary minimum contacts with this forum such that the defendants can be hailed into court here:
[T]he mere allegation that an out-of-state defendant has tortiously interfered with contractual rights or has committed other business torts that have allegedly injured a forum resident does not necessarily establish that the defendant possesses the constitutionally required minimum contacts. Instead, in order to resolve the jurisdictional question, a court must undertake a particularized inquiry as to the extent to which the defendant thus purposefully availed itself of the benefits of the forum's laws.
Far West Capital, Inc. v. Towne, [1995] USCA10 127; 46 F.3d 1071, 1079 (10th Cir. 1995). The court in Far West Capital, which involved allegations that included breach of contract and intentional interference with contractual relationships, observed that "we examine the contacts created by the out-of-state defendant in committing the alleged tort." Id. at 1079-80. Similarly, this court examines Brown's and Northstar's contacts with this forum.
C. Discussion
The court first digresses to address an issue raised in Northstar's and Brown's reply memorandum relating to paragraphs 11 and 14-20 of the affidavit of Peter Sitan, which is attached to NFC's response to the motion to dismiss. Brown and Northstar, citing Ittu v. Charley, [1987] FMKSC 4; 3 FSM Intrm. 188, 193 (Kos. S. Ct. Tr. 1987); Heirs of Mongkeya v. Heirs of Mackwelung, [1987] FMKSC 3; 3 FSM Intrm. 92, 100 (Kos. S. Ct. Tr. 1987); and Federated Shipping Co. v. Ponape Transfer & Storage, 4 FSM Intrm. 3, 15 (Pon. 1989), assert that these portions of the affidavit should be stricken, because they are speculative and conclusory. These paragraphs generally allege that Brown and Northstar "inflicted harm on NFC" (para. 14); that Brown and Northstar's conduct was "calculated to cause harm to NFC" (para. 18); and, in a sweeping statement, that "Brown's and Northstar's conduct was not general negligence that only
happened to have a collateral effect within the FSM, but was specifically targeted so harm would be caused to NFC in the FSM" (para. 19).
The point for present purposes is that these statements incorporate legal conclusions. In this respect they bring nothing to the analysis - they have no bearing on the "particularized inquiry," Far West Capital, 46 F.3d at 1079, which this court must undertake in order to determine whether Brown and Northstar have minimum contacts with this forum. NFC may not rely on such generalized legal conclusions, but must point to specific, forum connected facts in order to make its prima facie case that this court has jurisdiction over Brown and Northstar.
The complaint alleges that Brown was acting as attorney for New Quick, which repossessed the Boeing 727 jet, and demanded payment for maintenance and repairs. The moving and opposing papers further reveal that Brown, acting as New Quick's attorney, wrote seven letters, of which two were sent into the FSM. As discussed supra at footnote 2, he may have authored two additional letters sent by New Quick into the FSM. Brown also made unspecified telephone calls regarding the lease dispute. Brown and Northstar were not parties to the contract between NFC and New Quick, and are not alleged to have played a role in negotiating the terms of the lease. Northstar has no contacts with the FSM, while Brown's sole contact with the FSM are two - possibly four - letters, and unspecified phone calls. Notably, both letters which actually bear his signature were sent after the contract was allegedly breached. Brown's communications do not amount to purposeful availment of the benefits of the forum's laws. Far West Capital, 46 F.3d at 1077 (ten to twenty scattered contacts to negotiate a contract held insufficient to establish personal jurisdiction, the court noting that "[i]t is well-established that phone calls and letters are not necessarily sufficient in themselves to establish minimum contacts"). Neither Brown nor North had sufficient minimum contacts with the FSM so that they may be hailed into court here.
NFC urges that Brown and Northstar's intentional, tortious conduct resulted in harm in the FSM, and the Brown and Northstar should be called to account in the FSM on this basis. However, the tortious conduct resulted in economic consequences in the FSM. Mere economic injury suffered in the forum is not sufficient to establish the requisite minimum contacts so as to sustain long-arm jurisdiction. In Real Colors, Inc. v. Patel, 974 F. Supp. 645 (N.D. Ill. 1997), plaintiff, as in the case at bar, alleged breach of contract, tortious interference with contract, and conspiracy where the alleged tortious conduct did not occur in the forum state. The Real Colors court, citing Turnock v. Cope, [1987] USCA7 304; 816 F.2d 332, 335 (7th Cir. 1987), noted that "[w]here an injury is merely economic, rather than physical or emotions, the plaintiff needs to show more than that the 'harm [was] felt' in Illinois." Real Colors, 974 F. Supp. at 649. In turn, Turnock held that "[a]n economic injury, by itself, is too remote from the defendant's misconduct to support the conclusion that a tortious act was committed in Illinois." 816 F.2d at 335. See also GCI 1985-1 Ltd. v. Murray Properties Partnership, 770 F. Supp. 585, 590 (D. Colo. 1991) (holding that "the injury in the forum state must be direct, not consequential or remote, and loss of profits in the state of plaintiff's domicile is insufficient to sustain long-arm jurisdiction over a nonresident defendant"). The alleged economic harm to NFC is plainly insufficient to establish the necessary minimum contacts over Brown and Northstar such that they may be held to answer in this court.
Given the significance of the issue presented, some discussion of the cases cited by NFC in support of its contention that personal jurisdiction lies over Brown and Northstar is therefore appropriate.
NFC relies on Calder v. Jones, [1984] USSC 53; 465 U.S. 783, 104 S. Ct. 1482, 79 L. Ed. 2d 804 (1984), for the proposition that Brown and Northstar are subject to the jurisdiction of this court because they caused an "effect" in the FSM. However, Calder involved a defamation action against Florida residents
who were the writer of an allegedly libelous story, and the president and editor of the publication in which the story appeared. The Florida residents were then sued in California, in which the publication had its largest circulation of approximately 600,000. The court observed:
[t]he allegedly libelous story concerned the California activities of a California resident. It impugned the professionalism of an entertainer whose television career was centered in California. The article was drawn from California sources, and the brunt of the harm, in terms both of respondent's emotional distress and the injury to her professional reputation, was suffered in California. In sum, California is the focal point both of the story and of the harm suffered.
465 U.S. at 788-89, 104 S. Ct. at 1486, 79 L. Ed. 2d at 812. In finding that the California court had jurisdiction over the Florida residents, the court expressly noted "petitioners are not charged with mere untargeted negligence. Rather, their intentional, and allegedly tortious, actions were expressly aimed at California." 465 U.S. at 789, 104 S. Ct. at 1487, 79 L. Ed. 2d at 812.
The alleged libel in Calder involved multiple connections with the forum, including a readily identifiable link between the instrument of harm, and the harm suffered. Unlike the generalized economic harm which is alleged to have resulted in the FSM in this case, the harm in Calder, damage to reputation, could be squarely placed in California: it occurred at the point at which any given reader in California read, and presumably understood, the allegedly libelous matter contained in the article about a California entertainer involved in activities in California. The facts of this case are of a different stripe, and do not lend themselves to such a harm assessment. NFC has not shown that the tortious conduct occurred in FSM, and the alleged harm flowing from the conduct cannot be said to have been "targeted" in the sense that it was in Calder, where a specific article was published for the express purpose of circulation among a California readership. Accordingly, Calder does not persuade the court that Brown and Northstar have caused an "effect" in this forum sufficient to justify jurisdiction over them under the FSM long-arm statute.
Plaintiff also cites Coblentz GMC/Freightliner, Inc. v. General Motors, 724 F. Supp. 1364 (M.D. Ala. 1989), aff'd without opinion, 932 F.2d 977 (11th Cir. 1991); Burger King Corp. v. Rudzewicz, [1985] USSC 126; 471 U.S. 462, 105 S. Ct. 2174, 85 L. Ed. 2d 528 (1985) (Stevens & White, JJ., dissenting); and Burt v. Board of Regents of University of Nebraska, [1985] USCA10 63; 757 F.2d 242 (10th Cir. 1985) (Seth, J., dissenting) for the proposition that long-arm jurisdiction is appropriate in the forum where the effects of intentional tortious conduct are felt. Burt, like Calder, supra, was a defamation action where the defendant, a Nebraska medical school department chairman, sent an allegedly libelous letter from Nebraska to specific hospitals in Colorado regarding the plaintiff doctor, who had attended the Nebraska medical school. In this regard, the libelous material was even more targeted than the article in Calder was, and the court of appeals reversed the trial court's finding that there was no personal jurisdiction over the defendant. Yet, the dissenting judge on appeal noted that on the facts of Burt "we have but half a Calder." 757 F.2d at 245. He pointed out that in Burt, unlike Calder, the focal point of the story was Nebraska, which was not the forum state as California was in Calder. Id. In terms of the directed nature of the allegedly tortious conduct at issue here however, the facts of the case at bar do not present half a Burt, let alone half a Calder. Burt is not a basis for personal jurisdiction in this case.
In Burger King, the United States Supreme Court held that a Florida court had jurisdiction over a Michigan franchisee in a suit involving a dispute over a franchise agreement. The court found that "the franchise dispute grew directly out of 'a contract which had a substantial connection with that State.'" 471 U.S. at 479, 105 S. Ct. at 2186, 85 L. Ed. 2d at 545 (citation omitted) (emphasis supplied by the Burger King court). Further, defendant "had entered into a carefully structured 20-year relationship that envisioned continuing and wide-reaching contacts with Burger King in Florida," and
this contract involved "exacting regulation" of defendant's business from Burger King's Miami, Florida, headquarters. 471 U.S. at 480, 105 S. Ct. at 2186, 85 L. Ed. 2d at 545. Unlike the close and long-term connection between the Florida plaintiff and the defendant's Michigan activities in Burger King, at issue here is defendants' interference in a contractual relationship involving a plane that was to be used for fish transport to markets thousands of miles away from the defendant's home state. That having been said, the focus of Burger King is on the parties to the contract, and does not provide enlightenment for the purposes here, where the defendants are third parties alleged to have interfered with a contractual relationship.
NFC makes its best case for a finding that this court has jurisdiction over Brown and Northstar when it cites to Coblentz, supra. In that case, a General Motors truck dealer brought an action against General Motors Corporation ("GM") and two companies of the Swedish firm Volvo ("Volvo") in Alabama in the United States, alleging that the termination of its GM dealership constituted intentional interference with business relations. Plaintiff maintained that Volvo had entered into a joint venture agreement with GM for the manufacture of heavy trucks, and that as a part of this agreement GM had promised to terminate its existing heavy truck franchises. Volvo moved for dismissal for lack of personal jurisdiction. The court found that it had personal jurisdiction, finding that the Volvo "knew of the existence of the various GMC heavy truck dealers across the nation and 'targeted' this group as potential recipients of the effects of any joint venture." 724 F. Supp. at 1370. NFC contends that Brown and Northstar "targeted" NFC when they allegedly negotiated a lease agreement with New Quick for the plane which was the subject of the lease with NFC. However, the court notes one important difference in the facts of Coblentz that militates against a finding of personal jurisdiction here. In Coblentz, the other party to the agreement resulting in the alleged contractual interference was General Motors, a company with pervasive presence throughout the United States. At the risk of interlarding minimum contacts notions with "effects" considerations, it is nevertheless apt to observe that through GM, the offending agreement was indissolubly anchored on one end by a defendant with undisputed, and indisputable, ties to the forum - it is not stretching the point to call GM an American institution. This connection forged a link to the forum that is altogether missing from the facts of this case, involving as it does a Japan corporation, an American corporation, and a resident of California, none of whom can be said to have any meaningful presence in the FSM. In Coblentz, as here, the alleged "targeting" was a concerted effort, and the resultant harm in that case could not have happened but for the tortious conduct of both GM and Volvo. GM was exceedingly close to the target, and it follows that Volvo, standing at a distance, should be held to answer in the forum where the arrow hit its mark.
After giving careful consideration to Coblentz, this court concludes that the economic harm that Brown and Northstar allegedly "targeted" at NFC is, without more, insufficient to establish personal jurisdiction over Brown and Northstar.
Based on the foregoing, the motion to dismiss for lack of personal jurisdiction of Brown and Northstar is granted.
The clerk is directed to enter judgment consistent with this order and memorandum and pursuant to Rule 58 of the FSM Rules of Civil Procedure.
[1] It is not uncommon for sophisticated business entities to designate a neutral forum having no relation to the parties or their dispute.
See Contraves Inc. v. McDonnell Douglas Corp., 889 F. Supp. 470, 474 (M.D. Fla. 1995) (contract between Pennsylvania and Missouri corporations, calling for performance in Florida, Missouri and
Taiwan, designated New York as forum for any dispute).
[2] Peter Sitan, who is president of NFC, states at paragraph 8 of his affidavit that Brown, on behalf of New Quick, sent "numerous letters"
to NFC, and that some "appeared to have been written by Defendant Brown and sent directly from New Quick."
Along with the two letters from Brown to NFC, dated June 1 and 2, 1998, NFC also submits to the court two additional letters sent directly from New Quick to NFC signed by New Quick's president. Assuming that these letters were authored by Brown for the signature of New Quick's president, that puts the total of letters submitted to the court which were written by Brown and sent into the FSM at four. As discussed infra at section II.C., this does not change the analysis.
[3] The statute uses the word "tortuous," which Webster's Third New International Dictionary defines as a synonym for "tortious." The court employs the latter, more common usage.
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