Advanced Duplication Services, LLC, a Delaware limited liability company, et al., Respondents, vs. Darryl Payne, a/k/a and d/b/a Classic World Productions, Appellant.

Advanced Duplication Services, LLC, a Delaware limited liability company, et al., Respondents, vs. Darryl Payne, a/k/a and d/b/a Classic World Productions, Appellant. A05-1132, Court of Appeals Unpublished, March 21, 2006.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2004).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A05-1132

 

Advanced Duplication Services, LLC,

a Delaware limited liability company, et al.,

Respondents,

 

vs.

 

Darryl Payne, a/k/a and d/b/a

Classic World Productions,

Appellant.

 

Filed ­­­March 21, 2006

Affirmed

Dietzen, Judge

 

Hennepin County District Court

File No. DJ-04-11661

 

Scott A. Lifson, George E. Warner, Jr., Bernick and Lifson, P.A., 5500 Wayzata Boulevard, The Colonnade, Suite 1200, Minneapolis, MN 55416 (for respondents)

 

Charles K. Maier, Julie L. Boehmke, Gray, Plant, Mooty, Mooty & Bennett, P.A., 500 IDS Center, 80 South Eighth Street, Minneapolis, MN 55402-3796 (for appellant)

 

            Considered and decided by Dietzen, Presiding Judge; Wright, Judge; and Worke, Judge.

U N P U B L I S H E D   O P I N I O N

 

DIETZEN, Judge

 

            Appellant challenges the district court's denial of his motion to dismiss for lack of personal jurisdiction, arguing that he lacked sufficient minimum contacts with Minnesota to justify the exercise of personal jurisdiction.  Because we conclude that appellant had sufficient minimum contacts to establish personal jurisdiction in this state, we affirm.

FACTS

Appellant Darryl Payne is the founder and president of Classic World Productions, Inc. (CWP), a music-distribution corporation with its principal place of business in Aurora, Illinois.  Respondent Advanced Duplication Services (ADS) is a manufacturer of compact discs (CDs) with its principal place of business in Plymouth, Minnesota. 

In August 2003, appellant traveled to Canada to meet with Kai Voigt, president of Provac Disc Media Corporation (Provac), respondent's wholly owned subsidiary, to discuss a potential arrangement whereby Provac would duplicate CDs for appellant to be sold to a third party for distribution.  Prior to respondent's acquisition of Provac in July 2003, Provac had occasionally performed "encrypting and authoring" services for appellant.  At the meeting, Voigt informed appellant that Provac did not have the capabilities to duplicate CDs, but that duplication services could be provided by respondent at its Minnesota facility.  During the meeting, Voigt repeatedly advised appellant that he was negotiating on behalf of respondent.  The record does not indicate that the parties entered into a written contract at this time. 

Subsequently, appellant began sending packing lists and "art disks" relating to its orders directly to respondent in Minnesota.  Appellant also submitted new and revised purchase orders to respondent.  The parties had telephone, mail, e-mail and facsimile communications regarding appellant's orders and account.  The written communications prominently displayed Provac's affiliation with respondent and respondent's Minnesota address and telephone number; and respondent's employees made it clear in their contacts with appellant that they were located in Minnesota and acting on behalf of respondent. 

Respondent manufactured and shipped the specialized orders from its facility in Minnesota to appellant.  Appellant failed to make payments after receiving shipments and invoices, and respondent eventually requested that appellant complete its credit application.  Appellant completed and returned the credit application, and sent a $3,000 check written directly to respondent. 

Despite repeated collection attempts by respondent's credit department, appellant's failure to make payments continued.  In June 2004, respondent filed a lawsuit against appellant on theories of breach of contract, unjust enrichment, and account stated.  The complaint alleged that appellant failed to pay respondent for specially duplicated CDs that respondent manufactured and shipped to CWP.  Appellant moved to dismiss respondent's complaint for lack of personal jurisdiction pursuant to Minn. R. Civ. P. 12.02(b), arguing that he did not have sufficient contacts with Minnesota to warrant personal jurisdiction.  The district court denied the motion to dismiss.  This appeal follows. 

D E C I S I O N

Appellant argues that he did not have sufficient minimum contacts with Minnesota to justify the exercise of personal jurisdiction.  An order denying a pretrial motion for dismissal for lack of personal jurisdiction is appealable as a matter of right.  In re State & Regents Bldg. Asbestos Cases, 435 N.W.2d 521, 522 (Minn. 1989).  The existence of personal jurisdiction is a question of law, which we review de novo.  Nw. Airlines, Inc. v. Friday, 617 N.W.2d 590, 592 (Minn. App. 2000).  "When a defendant challenges jurisdiction, the burden is on the plaintiff to prove the minimum contacts necessary to satisfy due process.  At the pretrial stage, however, the plaintiff need only make a prima facie showing of sufficient Minnesota-related activities through the complaint and supporting evidence, which will be taken as true."  Hardrives, Inc. v. City of LaCrosse, Wis., 307 Minn. 290, 293, 240 N.W.2d 814, 816 (Minn. 1976) (citation omitted).  Thus, on review of a denial of defendant's motion to dismiss for lack of personal jurisdiction, we accept the allegations contained in plaintiff's complaint and supporting affidavits as true.  Id.  A plaintiff may satisfy its burden and make a prima facie showing of personal jurisdiction even if the district court believes a more developed record might reveal that a basis for such jurisdiction is lacking.  Dever v. Hentzen Coatings, Inc., 380 F.3d 1070, 1076 (8th Cir. 2004).  In close cases, "doubts should be resolved in favor of retention of jurisdiction."  Valspar Corp. v. Lukken Color Corp., 495 N.W.2d 408, 411-12 (Minn. 1992). 

Minnesota courts may exercise personal jurisdiction over a nonresident defendant if the plaintiff meets the requirements of Minnesota's long-arm statute, Minn. Stat. § 543.19 (2004), as well as the requirements of due process.  Domtar, Inc. v. Niagara Fire Ins. Co., 533 N.W.2d 25, 29 (Minn. 1995).  The Minnesota long-arm statute is coextensive with the constitutional limits of due process.  Valspar, 495 N.W.2d at 410.  A plaintiff satisfies due process by showing that the nonresident defendant established "minimum contacts" with the forum state that comport with "traditional notions of fair play and substantial justice."  Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S. Ct. 154, 158 (1945). 

The minimum contacts requirement may be satisfied in two different ways: general personal jurisdiction or specific personal jurisdiction.  Domtar, 533 N.W.2d at 30.  Respondent argues that the principles of specific personal jurisdiction apply.  "Specific personal jurisdiction exists when the defendant's contacts with the forum state are limited, yet connected with the plaintiff's claim such that the claim arises out of or relates to the defendant's contacts with the forum."  Id.  "When a claim arises out of a contract that has a ‘substantial connection' with the forum state, specific jurisdiction exists."  Id. at 31 (citation omitted). 

Minnesota courts utilize a five-factor test to ascertain when sufficient contacts give rise to specific personal jurisdiction over a nonresident defendant.  Hardrives, 307 Minn. at 294, 240 N.W.2d at 817.  The five factors are: (1) the quantity of contacts with Minnesota; (2) the nature and quality of the defendant's contacts with Minnesota; (3) the connection between the cause of action and the defendant's contacts; (4) Minnesota's interest in providing a forum; and (5) the convenience of the parties.  Dent-Air, Inc. v. Beech Mountain Air Serv., Inc., 332 N.W.2d 904, 907 (Minn. 1983).  "The first three factors determine whether minimum contacts exist and the last two factors determine whether the exercise of jurisdiction is reasonable according to traditional notions of fair play and substantial justice."  Juelich v. Yamazaki Optonics Corp., 682 N.W.2d 565, 570 (Minn. 2004).  The first three factors carry the most weight in the court's overall personal-jurisdiction determination.  Dent-Air, 332 N.W.2d at 907. 

Quantity of Contacts

Generally, to sustain jurisdiction, the quantity of contacts must have been "numerous and fairly frequent or regular in occurrence."  NFD, Inc. v. Stratford Leasing Co., 433 N.W.2d 905, 908 (Minn. App. 1988).  Here, the quantity of appellant's contacts was somewhat limited, but occurred throughout the performance of the contract.  The contacts included sending items relating to manufacturing to respondent; multiple communications via telephone, e-mail, facsimile, and mail regarding orders and accounts payable; placing and revising purchase orders; completing a new credit application; and sending payments. 

Appellant contends that these contacts cannot be attributed to him because they were made in his capacity as president of CWP, and he is not personally responsible for the acts of the corporation.  Respondent argues that CWP was involuntarily dissolved during the time period in question, and therefore, appellant, as the "alter ego" of CWP, was acting in an individual capacity.  But the question before us is whether Minnesota should exercise personal jurisdiction over appellant, and not whether appellant will be personally liable for claims asserted in the lawsuit.  Personal jurisdiction may be exercised over corporate officers based on the nature and quality of their individual contacts and course of dealings with the forum state.  See, e.g., Trident Enter. Int'l, Inc. v. Kemp & George, Inc., 502 N.W.2d 411, 416 (Minn. App. 1993) (affirming district court's denial of corporate officer's motion to dismiss the complaint against him for lack of personal jurisdiction because officer had sufficient minimum contacts to support personal jurisdiction); see also Minn. Mining & Mfg. Co. v. Rauh Rubber, Inc., 943 F. Supp. 1117, 1124 (D. Minn. 1996) (corporate officer established sufficient deliberate contacts with Minnesota in order to conduct business in the state to justify being sued there). 

Appellant also argues that the contacts are not attributable to him because they were made by other employees at CWP.  But activities carried out on behalf of a nonresident party may be attributed to the party for purposes of personal jurisdiction when the party is a "primary participan[t] in the enterprise and has acted purposefully in directing those activities[.]"  Burger King Corp. v. Rudzewicz, 471 U.S. 462, 480, 105 S. Ct. 2174, 2186 n.22 (1985) (citation omitted).  Appellant's position as president and CEO of CWP created an agency relationship whereby appellant necessarily controlled and directed the administrative and clerical acts of employees.  Cf.  Curry v. McIntosh, 389 N.W.2d 224, 228 (Minn. App. 1986), review denied (Minn. Aug. 20, 1986) (failure to show a party's ability to control the actions of another precludes finding of agency relationship). 

Because appellant had more than isolated or minimal contacts with Minnesota, the quantity of contacts weighs in favor of the exercise of personal jurisdiction.  Here, the quantity of contacts is not extensive, so the nature and quality of the contacts becomes dispositive.  Marquette Nat'l Bank of Mpls. v. Norris, 270 N.W.2d 290, 295 (Minn. 1978).

Nature or Quality of Contacts

In reviewing the nature and quality of the contacts, we attempt to ascertain whether appellant purposefully availed himself of the privilege of conducting activities in this state, including the benefits and protections of Minnesota law.  Dent-Air, 332 N.W.2d at 907.  "When a defendant deliberately engages in significant activities in a state or creates continuing obligations between itself and residents of the state, the defendant purposefully avails itself of the protections of the law, as required to support the exercise of personal jurisdiction under the Due Process Clause."  Marshall v. Inn on Madeline Island, 610 N.W.2d 670, 675-76 (Minn. App. 2000).  Jurisdiction is proper when "the contacts proximately result from actions by the defendant himself that create a substantial connection with the forum State."  Burger King, 471 U.S. at 475, 105 S. Ct. at 2183-84 (emphasis in original) (quotation omitted).  The fact that a nonresident defendant was never physically present in the state in the course of their transaction, which was accomplished entirely by telephone, mail, and facsimile, is of no significant consequence.  Marquette, 270 N.W.2d at 295.

Taking respondent's complaint and supporting affidavits as true, the evidence supports the conclusion that appellant was aware from the outset that any duplication or manufacturing services would be performed by respondent in Minnesota, and appellant deliberately engaged in activities in this state by subsequently placing duplication and manufacturing orders.  And appellant applied for and received a line of credit with respondent.  Unlike the cases cited by appellant, appellant could reasonably expect to be "haled into court" in Minnesota because he was fully aware that the bulk of the transactions, i.e., the receipt and processing of orders, and manufacturing and shipment of specialized goods, occurred in Minnesota.  Cf. Walker Mgmt. v. FHC Enters, 446 N.W.2d 913, 915 (Minn. App. 1989) (defendant could not reasonably have expected to be haled into Minnesota court by sellers of services when all services were to be performed outside of Minnesota), review denied (Minn. Dec. 15, 1989).  Thus, the nature and quality of appellant's contacts with Minnesota support the exercise of personal jurisdiction over him in this state. 

Connection between Contacts and Cause of Action

Specific personal jurisdiction requires that there be a connection between the cause of action and the defendant's contacts with the forum state.  Marshall, 610 N.W.2d at 676."When a claim arises out of a contract that has a substantial connection with the forum state, specific jurisdiction exists."  Domtar Inc. v. Niagara Fire Ins. Co., 533 N.W.2d 25, 31 (Minn. 1995) (quotation omitted).  But "[m]erely entering into a contract with a forum resident does not provide the requisite contacts between a [nonresident] defendant and a forum state."  S.B. Schmidt Paper Co. v. A to Z Paper Co., 452 N.W.2d 485, 488 (Minn. App. 1990). 

Appellant argues that there is no connection between the causes of action, i.e., breach of contract, unjust enrichment, and account stated, on the one hand, and the contacts, because the "contract" underlying the lawsuit was executed in Canada and involved entities not affiliated with Minnesota.  But taking respondent's evidence as true, the negotiations in Canada resulted in an offer by respondent, communicated through Provac's president, to provide appellant's duplication and manufacturing needs at its facility in Minnesota.  And acceptance of the offer occurred when appellant began placing duplication and manufacturing orders.  Thus, the formation of the contract has significant connection to Minnesota.  Further, a substantial part of the performance of the contract, i.e., receipt, manufacturing, and shipment of appellant's orders, occurred in Minnesota.  Cf. id., 452 N.W.2d at 489 (finding no substantial connection when no part of the performance of the contract occurred in Minnesota).  And respondent's performance triggered appellant's payment obligations, the non-performance of which resulted in this litigation.   Therefore, a connection exists between appellant's contacts and the causes of action, which supports the exercise of specific personal jurisdiction. 

Interest of Forum State

Although this factor alone cannot establish jurisdiction, Minnesota does have an interest in providing a forum for its residents who allegedly have been wronged.  NFD, 433 N.W.2d at 909.  This is particularly true when, as here, the nature and quality of appellant's contacts with Minnesota, the source of the cause of action, and the connection of the cause of action with the contacts support the exercise of personal jurisdiction. 

Convenience of the Parties

"[W]henever minimum contacts are present jurisdiction should be exercised unless the court finds that Minnesota jurisdiction is improper on forum non conveniens grounds."  Dent-Air, 332 N.W.2d at 909.  There is a strong presumption in favor of the plaintiff's choice of forum.  Bergquist v. Medtronic, Inc., 379 N.W.2d 508, 511 (Minn. 1986).  "And because modern transportation and communications have made it much less burdensome for a party sued to defend himself in a State where he engages in economic activity, it usually will not be unfair to subject him to the burdens of litigating in another forum for disputes relating to such activity."  Burger King, 471 U.S. at 474, 105 S. Ct. at 2183 (quotation omitted). 

Appellant argues that Minnesota is an inconvenient forum because witnesses with knowledge are located outside of the state, and litigation in Minnesota would unduly burden these witnesses.  But respondent, its employees who dealt directly with appellant regarding account and credit management, and the majority of relevant documents are located in Minnesota.  And any inconvenience to appellant is not sufficiently extensive to prevent the exercise of personal jurisdiction, particularly given the fact that the record reflects appellant's ability to travel for business opportunities.  Thus, this factor does not weigh against a finding of personal jurisdiction.  

            Affirmed.