228 F.3d 718 (6th Cir. 2000), 98-4319, Calphalon Corp. v Rowlette

Docket Nº98-4319
Citation228 F.3d 718
Party NameCalphalon Corporation, Plaintiff-Appellant, v. Jerry Rowlette; Rowlette & Associates,Defendants-Appellees.
Case DateSeptember 08, 2000
CourtUnited States Courts of Appeals, Court of Appeals for the Sixth Circuit

Page 718

228 F.3d 718 (6th Cir. 2000)

Calphalon Corporation, Plaintiff-Appellant,

v.

Jerry Rowlette; Rowlette & Associates,Defendants-Appellees.

No. 98-4319

United States Court of Appeals, Sixth Circuit

September 8, 2000

Submitted: November 2, 1999

Appeal from the United States District Court for the Northern District of Ohio at Toledo. No. 98-07305--David A. Katz, District Judge.

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[Copyrighted Material Omitted]

Page 720

Jenifer A. Belt, David W. Wicklund, Michael M. Briley, SHUMAKER, LOOP & KENDRICK, Toledo, Ohio, for Appellant.

Richard R. Malone, MALONE & AULT, Toledo, Ohio, Marcy S. Wallace, COX, GOUDY, MCNULTY & WALLACE, Minneapolis, Minnesota, for Appellees.

Before: MARTIN, Chief Judge; DAUGHTREY, Circuit Judge; HILLMAN, District Judge[*].

MARTIN, C. J., delivered the opinion of the court, in which DAUGHTREY, J., joined. HILLMAN, D. J. (pp. 724-29), delivered a separate dissenting opinion.

OPINION

BOYCE F. MARTIN, JR., Chief Judge.

Calphalon Corporation, an Ohio corporation, appeals the district court's dismissal of a declaratory judgment claim against Jerry Rowlette and Rowlette and Associates because of a lack of personal jurisdiction. For the following reasons, we AFFIRM.

Jerry Rowlette ("J. Rowlette"), a resident of Minnesota, is shareholder, director, and president of Rowlette and Associates ("Rowlette")(The two defendants are also collectively referred to as "Rowlette."), a Minnesota-based corporation. Neither party owns any real or personal property in Ohio.

From 1980 to January 31, 1998, Rowlette was the exclusive manufacturer's representative for Calphalon - a Minnesota corporation with its principal place of business in Ohio - in the states of Minnesota, Iowa, North Dakota, South Dakota, and Nebraska. Between 1980 and 1996, a "letter agreement" controlled this arrangement. In both 1996 and 1997, Rowlette executed a one-year manufacturer's representative agreement. Rowlette agreed, in part, to promote the sale of Calphalon's products, to keep Calphalon informed of market conditions, and to develop sales plans for customers. During the term of the agreements, Rowlette corresponded with Calphalon in Ohio via telephone, fax, and mail, and J. Rowlette made two physical visits to Ohio in 1996: one for a mandatory sales meeting and another to accompany a client on a tour of the Calphalon facilities. The one-year agreement stated "this Agreement shall be interpreted under the laws of the State of Ohio." At the end of 1997, Calphalon notified Rowlette

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that it did not intend to renew the agreement. On May 2, 1998, counsel for Rowlette notified Calphalon by letter of Rowlette's claims for breach of contract and unpaid commissions.

On May 27, Calphalon filed suit in the United States District Court for the Northern District of Ohio, seeking a declaratory judgment that: Ohio law controls the agreement; Calphalon's termination of Rowlette was lawful; and Calphalon does not owe additional commissions to Rowlette. Subsequently, Rowlette filed suit in Minnesota state court, claiming Calphalon breached the manufacturer's representative agreement and seeking payment of earned commissions. Rowlette then filed a special appearance in the Ohio federal case and moved for dismissal of the Ohio action under Federal Rule 12(b)(2), alleging lack of personal jurisdiction.

The district court granted the motion to dismiss, finding that it lacked specific personal jurisdiction over Rowlette. The court gave some thought to the idea that Rowlette was subject to the Ohio long-arm statute, Ohio Rev. Code § 2307.382, but held that even under the long-arm statute Rowlette lacked sufficient minimum contacts with Ohio to meet due process requirements.

Dismissal for lack of personal jurisdiction is reviewed de novo. See Tobin v. Astra Pharmaceutical Prods., 993 F.2d 528, 542 (6th Cir. 1993). In the absence of an evidentiary hearing, we must view the pleadings and affidavits in the light most favorable to Calphalon and not consider the controverting assertions of Rowlette. See Dean v. Motel 6 Operating L.P., 134 F.3d 1269, 1272 (6th Cir. 1998). Calphalon must make only a prima facie showing of personal jurisdiction. See id.

In dealing with a diversity case, we look to the law of the forum state to determine whether personal jurisdiction exists. See LAK, Inc. v. Deer Creek Enterprises, 885 F.2d 1293, 1298 (6th Cir. 1989) (citing Southern Machine Co. v. Mohasco Indus., 401 F.2d 374, 376 n.2 (6th Cir. 1968)). The exercise of personal jurisdiction is valid only if it meets both the state long-arm statute and constitutional due process requirements. See Nationwide Mutual Ins. Co. v. Tryg Int'l Ins. Co., 91 F.3d 790, 793 (6th Cir. 1993) (citing Reynolds v. International Amateur Athletic Fed'n, 23 F.3d 1110, 1115 (6th Cir 1994)). Although the Ohio Supreme Court has ruled that the Ohio long-arm statute does not extend to the constitutional limits of the Due Process Clause, our central inquiry is whether minimum contacts are satisfied so as not to offend "traditional notions of fair play and substantial justice." See Cole v. Mileti, 133 F.3d 433, 436 (6th Cir. 1998) (citing Goldstein v. Christiansen, 638 N.E.2d 541, 545 n.1 (Ohio 1994) (per curiam)).

The parties here dispute whether the district court had specific personal jurisdiction over Rowlette under the three- part test established in Southern Machine Co. v. Mohasco Industries, Inc., 401 F.2d at 381:

First, the defendant must purposefully avail himself of the privilege of acting in the forum state or causing a consequence in the forum state. Second, the cause of action must arise from the defendant's activities there. Finally, the acts of the defendant or consequences caused by the defendant must have a substantial enough connection with the forum state to make the exercise of jurisdiction over the defendant reasonable.

The district court found that Rowlette did not purposefully avail itself of the benefits of the laws of Ohio and that the declaratory judgment action did not arise from Rowlette's activities in Ohio.

The purposeful availment prong of the Southern Machine test is essential to a finding of personal jurisdiction, LAK, 885 F.2d at 1300:

This 'purposeful availment' requirement ensures that a defendant will not be

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haled into a jurisdiction solely as a result of "random," "fortuitous," or "attenuated" contacts. There is a difference between what World-Wide Volkswagen calls a mere "collateral relation to the forum State," and the kind of substantial relationship with the forum state that invokes, by design, "the benefits and protections of its laws." An understanding of this difference is important to the proper application of the "purposeful availment" test.

The Supreme Court has emphasized, with respect to interstate contractual obligations, that "parties who 'reach out beyond one state and create continuing relationships and obligations with citizens of another state' are subject to regulation and sanctions in the other State for the consequence of their activities."

(Citing Burger King v. Rudzewicz, 471 U.S. 462 (1985); World-Wide Volkswagen v. Woodson, 444 U.S. 286 (1980); Hanson v. Denckla, 357 U.S. 235 (1958).)

Calphalon asserts that Rowlette purposefully availed itself of the benefits of the laws of Ohio through its association with Calphalon as a manufacturer's representative. Calphalon presents the following facts to demonstrate purposeful availment: the 1997 agreement that is the subject of this declaratory judgment action; the agreement's choice of law provision; Rowlette's duties to monitor market conditions and report to Calphalon; Rowlette's telephone and fax contacts with Calphalon; J. Rowlette's visits to Calphalon offices in Ohio; and Rowlette's letter threatening litigation.

We think the district court correctly recognized that the mere existence of a contract between Rowlette and an Ohio citizen for seventeen months is insufficient to confer personal jurisdiction over Rowlette. See Nationwide, 91 F.3d at 795 (citing Burger King, 471 U.S. at 478). In Burger King, 471 U.S. at 479, the Supreme Court stated that "prior negotiations and contemplated future consequences, along with the terms of the contract and parties' actual course of dealing" must be considered to determine whether "the defendant purposefully established minimum contacts within the forum." We interpret this statement to mean that the parties' actions "in the negotiation and performance of the . . . agreement" are more important factors to consider than the duration of the contract in determining whether this case "should be subject to suit in Ohio." See Nationwide, 91 F.3d at 796. Moreover, in LAK, 885 F.2d at 1301, we noted that the quality rather than the quantity of the contacts is the proper subject of review. Similarly, we should focus here on the quality of the parties' relationship, rather than the duration of the relationship.

In examining the quality of the parties' relationship, we find that the actual course of dealings between the parties demonstrates that Rowlette's contacts with Ohio were purely "fortuitous" and "attenuated." In Kerry Steel Inc. v. Paragon Industries, Inc., 106 F.3d 147, 151 (6th Cir. 1997), we held that an out-of-state defendant-buyer did not purposefully avail itself of the benefits and protections of the forum state's laws because, in part, no facts connected the subject matter or performance of the contract at issue to the forum state. Furthermore, we held that any negative economic effect on the in-state plaintiff-seller did not create a determinative impact on the state economy, as "'the locus of such a monetary injury is immaterial, as long as the obligation did not arise from a privilege the defendant exercised in the forum state.'" Id. (quoting LAK, 885 F.2d at 1303). Likewise, in International Technologies Consultants v. Euroglas, 107 F.3d 386, 395...

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