MC KESSON CORP., d/b/a MC KESSON SPECIALTY DISTRIBUTION SERVICES v. HACKENSACK MEDICAL IMAGING d/b/a LIFESCAN DIAGNOSTIC IMAGING

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-2265-06T12265-06T1

MC KESSON CORP., d/b/a

MC KESSON SPECIALTY

DISTRIBUTION SERVICES,

Plaintiff-Respondent,

v.

HACKENSACK MEDICAL IMAGING

d/b/a LIFESCAN DIAGNOSTIC

IMAGING,

Defendant-Appellant.

_____________________________________________________________

 

Submitted October 17, 2007 - Decided

Before Judges R. B. Coleman and Lyons.

On appeal from the Superior Court of New Jersey, Law Division, Bergen County, DJ-264-803-06.

Joseph A. Massood, attorney for appellant (Richard V. Amici, on the brief).

Dilworth Paxson LLP, attorneys for respondent (John L. Laskey, on the brief).

PER CURIAM

Defendant Hackensack Medical Imaging d/b/a Lifescan Diagnostic Imaging (Hackensack MRI) appeals from a November 17, 2006 order denying its motion to stay execution of a Texas judgment in favor of plaintiff McKesson Corp. d/b/a McKesson Specialty Distribution Services (McKesson). We have carefully considered the arguments of the parties and the applicable law and conclude that Texas lacked in personam jurisdiction over Hackensack MRI. Accordingly, we reverse.

On or about March 31, 2006, plaintiff McKesson filed an original petition in the District Court for Dallas County, Texas, 193rd Judicial District, alleging that Hackensack MRI failed to make payments for medical supplies that plaintiff delivered to Hackensack MRI. Hackensack MRI did not file an answer or file any motions with the court in Texas. Instead, Hackensack MRI's attorney sent a letter to the Texas court asking that the court dismiss the case for lack of personal jurisdiction. On or about August 31, 2006, the Texas court entered a default judgment in favor of McKesson and against Hackensack MRI because Hackensack MRI had failed to answer or otherwise appear. The judgment reflected the amount McKesson alleged Hackensack MRI owed as well as pre-judgment interest, post-judgment interest and attorneys' fees.

On October 10, 2006, pursuant to the Uniform Enforcement of Foreign Judgments Act (UEFJA), N.J.S.A. 2A:49A-27 to -28, McKesson filed a copy of the Texas judgment, along with an Affidavit In Support of Registration for Foreign Judgment, in the Superior Court of New Jersey, Law Division, Bergen County. After Hackensack MRI received notice that the Texas judgment had been recorded in New Jersey, it filed a motion to stay execution. McKesson submitted an opposition to Hackensack MRI's motion.

On November 17, 2006, after hearing oral argument, the court delivered an oral decision denying Hackensack MRI's motion and entered an order memorializing the same. On December 20, 2006, Hackensack MRI filed its notice of appeal.

The following factual background is pertinent to our decision. Hackensack MRI provides radiology and imaging services at its facility in Hackensack, New Jersey. Hackensack MRI received a catalogue and promotional materials advertising plaintiff's products. Hackensack MRI submitted a credit application to plaintiff's Texas location, which was approved. It thereafter placed several orders for plaintiff's products which were delivered to Hackensack MRI's facility in New Jersey. Although it received the goods, Hackensack MRI failed to pay invoiced amounts totaling $24,406.18. Additionally, Hackensack MRI remitted two checks to plaintiff which were returned due to insufficient funds. Plaintiff demanded payment of the debt in full but Hackensack MRI still did not remit payment. As a result, plaintiff filed a complaint in Texas where it obtained a default judgment against Hackensack MRI.

In connection with its effort to enforce the Texas judgment in New Jersey, plaintiff McKesson brings the following facts to the attention of the court: (1) all decisions concerning whether to extend credit to Hackensack MRI were made in Texas; (2) McKesson's representatives that spoke with Hackensack MRI's representatives were in Texas; (3) all decisions regarding its relationship with Hackensack MRI were decided in Texas; (4) McKesson processed Hackensack MRI's orders in Texas; (5) all other business functions, including inventory control, invoicing, accounts receivable, collections, and customer service were performed by McKesson in Texas; and (6) Hackensack MRI remitted payments to McKesson in Texas.

By contrast, defendant Hackensack MRI asserts that it "never transacted business in the State of Texas," and notes the following: (1) it does not maintain corporate offices in Texas; (2) none of its employees traveled to Texas to conduct business with plaintiff; and (3) Hackensack MRI never advertised or circulated printed materials in Texas for the purpose of soliciting business.

Hackensack MRI asserts the following issues on appeal:

POINT I: THERE WAS NO ADJUDICATION BY THE TEXAS COURT OF THE ISSUE OF LACK OF PERSONAL JURISDICTION AND, THUS, THE NEW JERSEY COURT MUST INQUIRE INTO THAT ISSUE AND NOT NECESSARILY ACCORD FULL FAITH AND CREDIT TO THE TEXAS JUDGMENT.

POINT II: HACKENSACK DID NOT HAVE THE REQUIRED "MINIMUM CONTACTS" WITH THE STATE OF TEXAS AND WAS DENIED DUE PROCESS, THUS, RENDERING THE TEXAS COURT JUDGMENT INVALID.

At the outset, we reject plaintiff's contention that no stay of enforcement may be granted without the posting of security for satisfaction of the judgment. We recognize that N.J.S.A. 2A:49A-29(b) provides:

If the judgment debtor shows the Superior Court any ground upon which enforcement of a judgment of the Superior Court would be stayed, the Superior Court shall stay enforcement of the foreign judgment for an appropriate period, upon requiring the same security for satisfaction of the judgment which is required in this State.

Further, we have recently held that a party moving to stay an execution of a judgment is not entitled to the stay if "it failed to post the security required by N.J.S.A. 2A:49A-29." Maine v. Sekap, 392 N.J. Super. 227, 244 (App. Div. 2007). "[I]n order to stay execution of a foreign judgment pursuant to the UEFJA, a judgment debtor must strictly comply with the statute's provisions and post 'security for satisfaction of the judgment' before a stay is issued." Id. at 241. However, we have also recognized that an "assertion of a 'due process defense' to [a] domesticated judgment may be properly raised without the posting of any security." Id. at 244. In this case, Hackensack MRI challenges the exercise of jurisdiction by the court in Texas. Hence, even though there is no evidence in the record that Hackensack MRI has posted security for the satisfaction of the judgment, the posting of a bond is not required under these circumstances.

"If a defendant does not appear when an action is brought against him and he thereby suffers a default judgment, he may in an action in another state question the validity of the judgment by asserting that the court in the first case did not have jurisdiction over him." Hupp v. Accessory Distribs., Inc., supra, 193 N.J. Super. 701, 708-09 (App. Div. 1984). However, "if a defendant challenges the jurisdiction of the court over him and the court rejects his challenge and finds it has jurisdiction, the issue may not be raised in a second state in an action to enforce the judgment rendered in the first state." Id. at 709; see also Sontag Reporting Serv., Ltd. v. Ciccarellil, 374 N.J. Super. 533, 538 (App. Div. 2005) ("Trial courts of sister states may inquire into defenses of lack of jurisdiction in the foreign court . . . provided that those issues have not been litigated in the forum court.").

In the present case, Hackensack MRI's attorney sent a letter to the Texas court stating that the court lacked personal jurisdiction over his client; however, Hackensack MRI did not file a formal motion. The court's order granting McKesson a default judgment did not address the merits of the letter. The order stated that "process was duly and legally performed, and that every notice was duly given to [Hackensack MRI]." Thus, it appears that the jurisdictional issue was not adjudicated and rejected. Jurisdiction simply appears to have been presumed. As a result, Hackensack MRI may contest the Texas court's jurisdiction in this proceeding.

In Hupp, supra, 193 N.J. at 708, we stated that:

A judgment properly entered in accordance with local procedure is entitled to full faith and credit in any other state provided that the judgment is not entered in violation of due process of law. Thus a judgment to be valid must be founded upon adequate jurisdiction over the parties and the subject matter.

Likewise, in Arnold, White & Durkee, P.C. v. Gotcha Covered, Inc., 314 N.J. Super. 190, 201 (App. Div. 1998), we acknowledged that "[i]n the context of an application to domesticate a foreign money judgment, a court of this State is obliged to recognize a foreign money judgment, unless the defendant demonstrates that the foreign jurisdiction lacked personal jurisdiction of defendant . . . ." See also Sontag, supra, 374 N.J. Super. at 538 ("In accordance with the constitutional mandate, New Jersey courts will enforce the judgments of sister states unless there has been a denial of due process."). [This] occur[s] when the rendering state [] lacked personal jurisdiction over the judgment debtor . . . ." (internal quotations omitted).

As articulated by the United States Supreme Court, "due process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it 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. 2d 95, 102 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S. Ct. 339, 343, 85 L. Ed. 278, 283 (1940)). Individuals must have fair warning that their activities may "subject them to the jurisdiction of a foreign sovereign." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472, 105 S. Ct. 2174, 2182, 85 L. Ed. 2d 528, 540 (1985). As it has been further expressed by the United States Supreme Court:

Where a forum seeks to assert specific jurisdiction over an out-of-state defendant who has not consented to suit there, this "fair warning" requirement is satisfied if the defendant has "purposefully directed" his activities at residents of the forum, Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 774 (1984), and the litigation results from alleged injuries that "arise out of or relate to" those activities, Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 (1984).

[Ibid. (footnotes omitted).]

A court may exercise personal jurisdiction over a nonresident if two conditions are met: "(1) the long-arm statute creates personal jurisdiction over the defendant and (2) the exercise of personal jurisdiction is consistent with due process guarantees of the Unites States Constitution." Revel v. Lidov, 317 F.3d 467, 469 (5th Cir. 2002).

Plaintiff argues that defendant is subject to personal jurisdiction pursuant to Texas' long-arm statute, Tex. Civ. Prac. & Rem. 17.042, because that statute provides in pertinent part:

In addition to other acts that may constitute doing business, a nonresident does business in this state if the nonresident:

 
(1) contracts by mail or otherwise with a Texas resident and either party is to perform the contract in whole or in part in this state[.]

Plainly, the Texas long-arm statute purports to reach to the constitutional limits. Nevertheless, the court must engage in the requisite due process analysis to determine whether the minimum contacts have indeed been established "such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'" Ibid.; see also Aviles v. Kunkle, 978 F.2d 201, 204 (5th Cir. 1992).

"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 v. Everglades Marina, Inc., 115 N.J. 317, 323 (1989). Defendant's conduct must be "such that [it] should reasonably anticipate being haled into court" in the jurisdiction in question. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S. Ct. 559, 567, 62 L. Ed. 2d 490, 501. "[T]he existence of minimum contacts turns on the presence or absence of intentional acts of the defendant to avail itself of some benefit of a forum state. An intentional act calculated to create an actionable event in a forum state will give that state jurisdiction over the actor." Waste Management, Inc. v. Admiral Insur. Co., 138 N.J. 106, 126 (1994).

In Bayway Refining Co. v. State Utilities, Inc., 333 N.J. Super. 420 (App. Div. 2000), we were presented with facts similar to those in this appeal. We were called upon to decide whether the New York defendant had sufficient minimum contacts with New Jersey to justify our courts' exercise of jurisdiction. There, State Utilities, a New York corporation providing heating oil to Long Island residents, purchased its fuel from a Long Island wholesale terminal. Id. at 425. Bayway, a corporation organized under the laws of Delaware and authorized to conduct business in New Jersey, took over the operations of State Utilities' Long Island supplier and solicited State Utilities to continue the business relationship. Id. at 426. The relationship between the parties commenced when State Utilities' president responded to the solicitation by sending a credit application to Bayway in Linden as Bayway requested. Ibid. Over a four-year period, State Utilities entered various contracts with Bayway for the purchase of fuel oil. Id. at 427. It mailed payment checks to Bayway's bank in New Jersey then later arranged for electronic fund transfers from its New York bank to Bayway's bank. Ibid. Bayway sued in New Jersey after State Utilities allegedly failed to pay for deliveries. Id. at 428.

We recognized that "the combined effect of several contacts with [a] state, no one of which is sufficient, might under some circumstances establish 'minimum contacts.'" Id. at 433. We observed, however, that "[State Utilities'] role in the transaction sued upon was no more than that of a passive buyer. [State Utilities] did nothing to avail itself of the benefits of protection of New Jersey law, nor did it have reason to contemplate that . . . it was causing significant effects in New Jersey." Ibid. We further stated that State Utilities had no intent to do business in New Jersey; the contract did not require a special undertaking in New Jersey; Bayway did not produce its product according to specific requirements imposed by State Utilities; and State Utilities' contacts in New Jersey were made almost exclusively through Bayway's marketing and solicitation in New York. Id. at 436. Consequently, Bayway's lost revenue was "not an effect that support[ed] specific jurisdiction." Id. at 437.

We held that "purchasing a mass-produced commodity from a New Jersey producer . . . accompanied by mailing or transferring credit documents and payments at the seller's request to New Jersey, does not rise to the level of 'minimum contacts' required to satisfy due process and therefore does not subject [State] to New Jersey jurisdiction." Ibid. That holding applies with equal force to the facts of this case, for as we noted, "[i]f the law were otherwise, every commercial purchase would subject the buyer to jurisdiction in the home state of the seller on every dispute related to the transaction." Id. at 431.

In Bayway, we distinguished Avdel Corp. v. Mecure, 58 N.J. 264 (1971), a case in which a New York corporation contacted a New Jersey corporation to procure specially designed rivets. Id. at 435. In that case, the Court found jurisdiction because the New York defendant "ordered rivets in New Jersey knowing that the order would have significant effects in New Jersey, defendant traveled to New Jersey to discuss the contract, and defendant traveled again to New Jersey to return unused material." Id. at 436. Thus, the Court found substantial business effects in New Jersey, justifying jurisdiction. Ibid.

In the present case, Hackensack MRI's minimal contacts with Texas are extremely similar to State Utilities' contacts with New Jersey in Bayway. Hackensack MRI's role is not different than that of a passive buyer. Plaintiff solicited Hackensack MRI through materials sent to New Jersey. As did State Utilities in Bayway, Hackensack MRI sent a credit report and payments to plaintiff in Texas. Plaintiff did not manufacture its products according to detailed specifications required by Hackensack MRI. Like State Utilities, Hackensack MRI did not show any intent to benefit from Texas law and did not intend to affect persons or events in Texas. Id. at 436. Plaintiff's lost revenue alone does not create adequate jurisdiction in Texas over Hackensack MRI. Thus, Hackensack MRI's contacts with Texas "do not rise to the level of the constitutionally mandated 'minimum contacts.'" Id. at 438.

Based on the foregoing, the trial court's order denying the stay of enforcement is reversed. Stated another way, the judgment entered in Texas and recorded in New Jersey under UEFJA shall be stayed due to the lack of valid personal jurisdiction of the Texas court over Hackensack MRI.

Reversed and remanded for entry of an appropriate order.

(continued)

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A-2265-06T1

February 14, 2008