JACOB "ROCKY" STEFANSKY v. WILLIAM L. LAGAMBA, et al.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-6265-03T1

JACOB "ROCKY" STEFANSKY,

Plaintiff-Appellant,

v.

WILLIAM L. LAGAMBA, JUGAL K.

TANEJA, DYNAMIC HEALTH PRODUCTS,

INC. AND DRUGMAX, INC.,

Defendants-Respondents.

_____________________________________

 

Argued April 19, 2005 - Decided

Before Judges Stern and Wecker.

On appeal from the Superior Court of New

Jersey, Law Division, Ocean County,

L-378-03.

Daniel Louis Grossman argued the cause for

appellant.

Andrew J. Kelly argued the cause for

respondents (Kelly & Brennan, attorneys;

Mr. Kelly, on the brief).

PER CURIAM

This appeal presents the question whether any or all of the named defendants had the minimum contacts with New Jersey required to satisfy due process and support plaintiff's assertion of personal jurisdiction. Plaintiff, Jacob "Rocky" Stefansky, appeals an order dismissing his complaint for lack of personal jurisdiction over individual defendants William L. LaGamba, Chief Operating officer and a Director of Drugmax, Inc., and Jugal K. Taneja, Chairman of Dynamic Health Products, Inc. ("Dynamic"); and corporate defendants Dynamic Health Products, Inc. and Drugmax, Inc.

The motion judge initially denied defendants' motion to dismiss for lack of personal jurisdiction and allowed the parties the opportunity for discovery with respect to jurisdictional facts. After reciting the jurisdictional facts adduced through discovery, the judge subsequently granted defendants' renewed motion with little more than a conclusory explanation: "[I]t fails to meet the minimum contacts requirements as found by our Appellate Division in [Jacobs v. Walt Disney World, Co., 309 N.J. Super. 443 (App. Div. 1998)]. The failure to explain the reasons for the decision is a disservice to the parties and to the appellate court. See CNA Ins. Cos. v. Cave, 332 N.J. Super. 185 (App. Div. 2000) (citing R. 1:7-4, 2:5-1). Nonetheless, we now affirm.

A lower court's decision to dismiss a suit for want of personal jurisdiction is an issue of law and therefore subject to de novo review on appeal. See, e.g., Vetrotex Certainteed Corp. v. Consol. Fiber Glass Prods. Co., 75 F.3d 147, 150 (3d Cir. 1995). New Jersey's exercise of jurisdiction over non-residents is permitted to the greatest extent allowable under the Due Process Clause of the Fourteenth Amendment to the United States Constitution. See, e.g., Avdel Corp. v. Mecure, 58 N.J. 264, 268 (1971); R. 4:4-4(b)(1). The party opposing a motion to dismiss for lack of personal jurisdiction bears the burden of proving sufficient contacts to justify the court's exercise of jurisdiction over the moving party. BP Chems. Ltd. v. Formosa Chem. & Fibre Corp., 229 F.3d 254, 259 (3d Cir. 2000).

A New Jersey court's exercise of jurisdiction over a party does not offend that party's right to due process when the party has had certain minimum contacts with the forum and the exercise of jurisdiction "does not offend 'traditional notions of fair play and substantial justice.'" Lebel v. Everglades Marina, Inc., 115 N.J. 317, 322 (1989) (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S. Ct. 154, 158, 90 L. Ed. 95, 102 (1945)). A court is said to exercise specific jurisdiction when the cause of action alleged arises out of the defendant's contacts in the forum. Id. at 322. Where the defendant's contacts do not relate to the cause of action, the "minimum contacts" required to support jurisdiction must have been "continuous and systematic." Id. at 323 (quoting Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 416, 104 S. Ct. 1868, 1873, 80 L. Ed. 2d 404, 412 (1984)). There is no evidence here of the necessary continuous and systematic contacts with New Jersey to support general jurisdiction over any of the defendants. We therefore look to the specific facts underlying plaintiff's cause of action.

The New Jersey Supreme Court has clearly set forth the parameters of personal jurisdiction in Waste Mgmt., Inc. v. Admiral Ins. Co., 138 N.J. 106, 119-25 (1994), cert. denied, sub nom., WMX Techs. v. Canadian Gen. Ins. Co., 513 U.S. 1183, 115 S. Ct. 1175, 130 L. Ed. 2d 1128 (1995). After citing Lebel, supra, the Court traced the history of "minimum contacts" as "the threshold requirements for specific personal jurisdiction" from International Shoe v. Washington, 326 U.S. 310, 66 S. Ct. 154, 90 L. Ed. 95 (1945), to Hanson v. Denckla, 357 U.S. 235, 251, 78 S. Ct. 1228, 1238, 2 L. Ed. 2d 1283, 1296 (1958), and World-Wide Volkswagen v. Woodson, 444 U.S. 286, 100 S. Ct. 559, 62 L. Ed. 2d 490 (1980). The Court then explained:

In World-Wide Volkswagen v. Woodson, 444 U.S. 286, 100 S. Ct. 559, 62 L. Ed. 2d 490 (1980), the Supreme Court clarified the purposes of the "minimum contacts" doctrine: to protect a defendant against litigating in an inconvenient forum and to ensure that States not exceed their jurisdictional limits under our federal system. Id. at 291-92, 100 S. Ct. at 564, 62 L. Ed. 2d at 498. The first interest, that of ensuring against litigating in inconvenient forums, requires that "maintenance of the suit" * * * not offend "traditional notions of fair play and substantial justice.'" Id. at 292, 100 S. Ct. at 564, 62 L. Ed. 2d at 498 (quoting International Shoe, supra, 326 U.S. at 316, 66 S. Ct. at 154, 90 L. Ed. at 102 (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S. Ct. 339, 342, 85 L. Ed. 278, 283 (1940))). That end is achieved through the requirement that "the relationship between the defendant and the forum * * * be such that it is 'reasonable * * * to require the corporation to defend the particular suit which is brought there.'" Ibid. (quoting International Shoe, supra, 326 U.S. at 317, 66 S. Ct. at 158, 90 L. Ed. at 102 (omission in original)). The second interest, the jurisdictional limitations, "has been relaxed substantially over the years" because of the "fundamental transformation in the American economy." Id. at 292-93, 100 S. Ct. at 565, 62 L. Ed. 2d at 498. Nonetheless, minimum contacts remain the threshold requirement of jurisdiction. Id. at 294, 100 S. Ct. at 565-66, 62 L. Ed. 2d at 499-500.

Critical to the due-process analysis is the question whether the defendant should reasonably anticipate being haled into court in the forum state. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474, 105 S. Ct. 2174, 2183, 85 L. Ed. 2d 528, 542 (1985). The record must demonstrate that the defendant has purposefully availed itself of the privilege of engaging in activities within the forum state, thereby gaining the benefits and protections of its laws. Id. at 475, 105 S. Ct. at 2183, 85 L. Ed. 2d at 542. In that way defendants are protected against being haled into court in a foreign jurisdiction solely on the basis of random, fortuitous, or attenuated contacts or as a result of the unilateral activity of some other party. Ibid.

[Waste Mgmt., supra, 138 N.J. at 120-21.]

Referring to the question addressed in Burger King, "whether a 'contract with an out-of-state party alone can automatically establish sufficient minimum contacts in the other party's forum,'" the Court quoted Burger King's answer: "'clearly . . . it cannot." 138 N.J. at 121. The same answer applies here.

Plaintiff's complaint alleged breach of contract and fraud claims against defendants arising out of his having been hired as a financial consultant to attract investors who would provide capital for Dynamic, and having been promised compensation with shares in that entity. Plaintiff contends that after he performed in accordance with the contract, defendants diverted the investment funds he raised to Drugmax, a related company, and failed to compensate him as agreed.

In support of jurisdiction, plaintiff provided only the following facts: Plaintiff entered into a letter agreement with Dynamic, dated August 12, 1998. The letter is addressed to plaintiff at his Lakewood, New Jersey home. It is signed by LaGamba as Chief Executive Officer ("CEO") of Dynamic, and by plaintiff, and provides that Dynamic "agrees to hire you as a financial consultant to help identify international sources of capital to grow the company by acquisitions." (Emphasis added.) The agreement further provided that funds so raised would be conveyed by wire transfer to a bank in Clearwater, Florida. A second letter agreement, dated January 5, 1999, was signed by plaintiff (identified in this letter as President of K.I.D. International) and LaGamba, again as CEO of Dynamic. That letter extended the prior agreement and provided a new schedule for sending investment funds to Florida by wire transfer. Both letters appear on Dynamic's letterhead, which bore an address in Largo, Florida.

Plaintiff admits that "the contract was made via fax and mailed." He also admits that he "traveled to Florida to make sure the operation was real, as a matter of due diligence." But he contends that "[a]ll the investors [he] solicited and from whom defendants received funds either lived or operate[d] [a] business in New Jersey," that LaGamba and Taneja "knew that [he] was doing all the work in New Jersey," and "that despite the fact that [he] was identifying international sources of finance, [his] initial work would be with people [he] knew in New Jersey and specifically in Lakewood."

Plaintiff cites deposition testimony of the individual defendants in which they contend that another individual raised the funds for Dynamic, and while disputing "the specifics," plaintiff contends that that individual "is a New Jersey resident who worked out of [plaintiff's] premises in Lakewood and Farmingdale" and that plaintiff "introduced" him to defendants. But nothing in the record supports plaintiff's contention that defendants knew or should have known that his efforts on their behalf would involve substantial investments by New Jersey residents and therefore would have significant effects in New Jersey that would make it reasonable for defendants to anticipate being subject to jurisdiction in this state. In other words, plaintiff's performance in New Jersey does not constitute purposeful action by defendants to affect commerce in New Jersey or to avail themselves of the protection of New Jersey law.

Finally, plaintiff presents information contained in DrugMax's website, describing its headquarters in Clearwater, Florida, "distribution centers in Pennsylvania, Ohio, Louisiana, and Texas," and "licenses to ship to all 50 states and Puerto Rico." That is not enough, either alone or together with the other minimal facts plaintiff can marshal, to support jurisdiction in New Jersey.

Defendants do not dispute plaintiff's contention that their negotiations "were done on the telephone from [his] office in New Jersey." Defendants admit the letter agreements relied upon by plaintiff (although they dispute any breach on their part), but their answer sets forth lack of personal jurisdiction as their first affirmative defense. Dynamic is a Florida corporation, and Drugmax is a Nevada corporation. Neither corporation owns property or maintains offices in New Jersey. Neither LaGamba nor Taneja resides in or owns property in New Jersey. Moreover, neither party, nor any other representative of the defendant corporations, traveled to New Jersey to negotiate or execute the agreements with plaintiff.

Defendants' actions during the negotiations leading up to the formation of the contract are insufficient to satisfy the "minimum contacts" requirement. Interstate communications during the formation of a contract, by themselves, do not satisfy the "minimum contacts" requirement for subjecting a party to specific jurisdiction. See Pfundstein v. Omnicom Group, Inc., 285 N.J. Super. 245, 248, 251 (App. Div. 1995). In Pfundstein, the plaintiff sued his former employer in a New Jersey court based upon a severance agreement. Id. at 248. The former employer, a New York corporation, had mailed the agreement to the plaintiff at his New Jersey residence, and the agreement became binding after the plaintiff signed it and returned it to the former employer in New York. Ibid. We found that the agreement was "connected to New Jersey only by the interstate phone and mail communications which led up to it" and concluded that "[t]hose communications are insufficient to warrant the exercise of specific jurisdiction." Id. at 251.

In the instant matter, during the formation of the contract at issue, defendants did little more to avail themselves of the protections of New Jersey law than the former employer in Pfundstein. See id. at 248. The extent of defendants' contact with New Jersey during contract formation was that they mailed and faxed documents to New Jersey that were signed by plaintiff and returned to defendants in Florida. Even if plaintiff negotiated the agreement while at his New Jersey residence, such conduct does not warrant an exercise of personal jurisdiction over defendant. See Sunbelt Corp. v. Noble, Denton & Assocs. Inc., 5 F.3d 28, 32 (3d Cir. 1993) (holding that a party does not establish "minimum contacts" with a forum merely by contracting with a resident of the forum or by participating in communications in furtherance of the formation of such a contract). Accordingly, defendant's actions during the formation of the contract did not subject them to personal jurisdiction in New Jersey. See also Baron & Co., Inc. v. Bank of New Jersey, 497 F. Supp. 534 (E.D. Pa. 1980) (transferred to the District of New Jersey, 504 F. Supp. 1199 (D.N.J. 1981)), where the plaintiff argued that the defendant was subject to personal jurisdiction in Pennsylvania because the plaintiff's performance under the contract took place in Pennsylvania. Id. at 537. Rejecting this argument, the district court stated:

The fact that the plaintiff's conduct was in pursuance of its agreement with defendant does not impute that conduct to the defendant for jurisdictional purposes. . . . The voluntary choice by Baron & Company to conduct its business and perform its contract with defendants [sic] in Pennsylvania cannot serve to subject the defendant to the jurisdiction of this court unless the defendant has done something to manifest its affiliation with this forum.

[Ibid. (citation omitted)].

Plaintiff's reliance upon Lebel, supra, 115 N.J. 317, is misplaced. The plaintiff in Lebel alleged that he was defrauded in the attempted purchase of a boat from a Florida marina. See id. at 320-21. The Lebel Court noted that "the mere transmittal of messages by mail or telephone within the state is not the critical factor, it is the nature of the contact." Id. at 325 (citing Baron & Co., supra, 497 F. Supp. 534). Applying this rule, the Court stressed "that in this case it is alleged that the defendant's representations via mail and telephone to New Jersey were fraudulent." Id. at 326. In addition, the Court observed that the defendant was alleged to have called the plaintiff at least twenty times over a two-year time span to solicit the sale. Id. at 320. In addition, it was clearly foreseeable "that the boat would be shipped to New Jersey." Id. at 327. Significantly, the Supreme Court acknowledged in Lebel that it was pushing "[t]he 'outermost limit' of personal jurisdiction." Id. at 329.

Defendant's actions are distinguishable from those of the Lebel defendant. Unlike Lebel, where the defendant pressured the plaintiff for more than two years to enter into a contract, id. at 320, the record in the instant matter is unclear on the issue of which party even initiated the contract negotiations. In addition, Lebel involved the sale of a product that the defendant had reason to know was likely to be transported to New Jersey, whereas no such product is involved here. See Lebel, supra, 115 N.J. at 327. The Court itself, in Lebel, described that decision as having reached the "outermost limit" of personal jurisdiction. We cannot go further. See id. at 329.

 
Affirmed.

Drugmax acquired a subsidiary of Dynamic, Beacon Distributors.

In LaGamba's deposition, given over the telephone from Florida, he did not recall who placed the first calls, but said that he first "met" plaintiff "sometime in '96" and that it had to do with sales of "product" between plaintiff and Drugmax, and claimed that plaintiff still owed money for some early purchases.

(continued)

(continued)

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A-6265-03T1

December 1, 2005