Diamond Healthcare of Ohio v. Humility of Mary Health Partners

• Decision Date: 05 June 2000
• Docket Number: No. 00-1006,00-1006
• Citation: 229 F.3d 448
• Parties: (4th Cir. 2000) DIAMOND HEALTHCARE OF OHIO, INCORPORATED, a Virginia corporation, Plaintiff-Appellant, v. HUMILITY OF MARY HEALTH PARTNERS, formerly known as Saint Elizabeth Health Center, d/b/a Saint Elizabeth Health Center, an Ohio nonprofit corporation; HM HEALTH SERVICES, INCORPORATED, an Ohio corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 448

229 F.3d 448 (4th Cir. 2000)

DIAMOND HEALTHCARE OF OHIO, INCORPORATED, a Virginia corporation, Plaintiff-Appellant, v. HUMILITY OF MARY HEALTH PARTNERS, formerly known as Saint Elizabeth Health Center, d/b/a Saint Elizabeth Health Center, an Ohio nonprofit corporation; HM HEALTH SERVICES, INCORPORATED, an Ohio corporation, Defendants-Appellees.

No. 00-1006.

UNITED STATES COURT OF APPEALS, FOR THE FOURTH CIRCUIT.

June 5, 2000, Argued.

October 5, 2000, Decided.

Judith Bowles Henry, CREWS & HANCOCK, P.L.C., Richmond, Virginia, for Appellant. Quintin F. Lindsmith, BRICKER & ECKLER, L.L.P., Columbus, Ohio, for Appellees. ON BRIEF: Martin A. Donlan, Jr., CREWS & HANCOCK, P.L.C., Richmond, Virginia, for Appellant. Susan C. Armstrong, MAYS & VALENTINE, L.L.P., Richmond, Virginia, for Appellees.

Before NIEMEYER and LUTTIG, Circuit Judges, and Robert R. BEEZER, Senior Circuit Judge of the United States Court of Appeals for the Ninth Circuit, sitting by designation.

Affirmed by published opinion. Judge NIEMEYER, wrote the opinion, in which Senior Judge BEEEZER joined. Judge LUTTIG wrote a dissenting opinion.

OPINION

NIEMEYER, Circuit Judge:

The question presented on appeal in this breach-of-contract action is whether Humility of Mary Health Partners ("HMH Partners"), an Ohio corporation with its principal place of business in Youngstown, Ohio, is subject to the personal jurisdiction of a federal court sitting in Virginia. Diamond Healthcare of Ohio, Inc. ("Diamond Healthcare"), a Virginia corporation which entered into a contract with HMH Partners, contends that by reason of this contract, HMH Partners subjected itself to personal jurisdiction in Virginia. The district court disagreed and granted HMH Partners' motion, filed under Federal Rule of Civil Procedure 12(b)(2), to dismiss for lack of personal jurisdiction. We affirm.

I

Diamond Healthcare, which has its principal place of business in Richmond, Virginia, entered into a contract with HMH Partners, dated December 24, 1997. Under the contract, Diamond Healthcare agreed to provide services to HMH Partners in Boardman, Ohio, for the operation of "Project NuStart," a partial-hospitalization program for the elderly. In July 1999, HMH Partners terminated the contract, and Diamond Healthcare filed this action in the district court in Virginia for breach of contract, relying on diversity of citizenship for subject matter jurisdiction. Diamond Healthcare alleged that HMH Partners failed to make its required monthly payments, failed to give 60 days' notice of its termination of the contract, failed to give "notice of a specific alleged breach," and failed to allow Diamond Healthcare an opportunity to cure. It demanded $ 1,364,000 in damages.

HMH Partners filed a motion to dismiss the complaint based on lack of personal jurisdiction. It contended that HMH Partners' contacts with Virginia were constitutionally insufficient to subject it to personal jurisdiction in a Virginia court. The parties submitted numerous affidavits, which were not materially in conflict. Based on these affidavits, the district court granted HMH Partners' motion to dismiss, concluding that HMH Partners' contractual relationship with Diamond Healthcare did not create constitutionally sufficient contacts with Virginia to subject it to suit there. It noted that under the contract, Diamond Healthcare agreed to hire staff and run an Ohio partial-hospitalization program serving Ohio patients using Ohio personnel. Even though Diamond Healthcare was a Virginia corporation located in Richmond and would perform its contract under the general supervision of its corporate leadership in Richmond, the court concluded that the contract called for Diamond Healthcare to perform "predominantly in Ohio." The court acknowledged that there were many phone calls, letters, and fax communications between Ohio and Virginia, but concluded that "the vast number of phone calls between Ohio and Richmond appear to have taken place between employees of the Virginia company not between the companies themselves." Dismissing as constitutionally insufficient the few contractual contacts that HMH Partners did have with Virginia, the court concluded:

While the parties here did enter into extended negotiations, the Contract does not require Diamond [Healthcare] to per form its services from Virginia. At most, the Contract . . . appears merely to document the unremarkable notion that a corporation's home office may instruct that corporation's operatives in the field, but this alone does not invest the Court with personal jurisdiction over [HMH Partners]. Nor is it at all clear from its course of dealing with Diamond [Healthcare] that [HMH Partners] could reasonably expect to be haled into court in Virginia, given that the utmost extent of [HMH Partners'] post-negotiation contacts with [Diamond Healthcare's] corporate office appears to be the occasional payment mailed to Richmond. The defendant here did not seek out the forum corporation, it did not anticipate that the forum corporation would provide its services predominantly from the forum, it did not agree to a contract governed by forum law, and its course of performance under the Contract demonstrates that it could not expect to be haled into Court in Virginia.

From the district court's opinion dismissing its action, Diamond Healthcare noticed this appeal.

II

Under Federal Rule of Civil Procedure 4(k)(1)(A), a federal court may exercise personal jurisdiction over a defendant in the manner provided by state law. See ESAB Group, Inc. v. Centricut, Inc., 126 F.3d 617, 622 (4th Cir. 1997). And a Virginia court may exercise personal jurisdiction "over a person . . . as to a cause of action arising from the person's . . . transacting any business" in Virginia. Va. Code Ann. 8.01-328.1(A). This statute has been construed to extend personal jurisdiction to the full extent permitted by the Due Process Clause. See English & Smith v. Metzger, 901 F.2d 36, 38 (4th Cir. 1990); Danville Plywood Corp. v. Plain & Fancy Kitchens, Inc., 218 Va. 533, 238 S.E.2d 800, 802 (Va. 1977). Accordingly, we recognize that, in determining the reach of the state's long-arm statute, the statutory and constitutional inquiries coalesce into the question of whether HMH Partners had sufficient minimum contacts with Virginia to satisfy due process requirements. See Stover v. O'Connell Assocs., Inc., 84 F.3d 132, 135-36 (4th Cir. 1996). At bottom, however, the question is a matter of Rule 4 interpretation and not of constitutional magnitude because Congress has authority constitutionally to permit service in federal court beyond any state's boundaries.^* See Fed. R. Civ. P. 4(k)(1); ESAB Group, 126 F.3d at 622.

Applying the constitutional limitations on state service of process incorporated in Rule 4(k)(1)(A), we understand that when a defendant's contacts with the forum state are continuous and systematic, irrespective of whether the transaction in question had sufficient contacts with the state, a court may exercise general personal jurisdiction over the defendant. See ESAB Group, 126 F.3d at 623-24. In the absence of continuous and systematic contacts, a court may still exercise specific personal jurisdiction when the contacts relate to the cause of action and create a substantial connection with the forum state. See id. at 625.

In this case, HMH Partners filed affidavits, which have remained uncontroverted, averring that it has not conducted any business in Virginia; that it owns no property in Virginia; that it has not solicited any business in Virginia; that its employees have not visited Virginia on its behalf to conduct its business; and that it has no Virginia patients. Because HMH Partners' contacts with Virginia have accordingly not been continuous and systematic, the district court could not exercise general personal jurisdiction over HMH Partners. See ESAB Group, 126 F.3d at 623-24. The only potential basis for personal jurisdiction therefore is the contractual relationship between Diamond Healthcare and HMH Partners. The resulting inquiry probes whether, in connection with this contract, HMH Partners had a substantial connection with Virginia such that it "engaged in some activity purposefully directed toward [Virginia]." Id. at 625 (quotation marks and citations omitted). And HMH Partners' actions must have been directed at Virginia "in more than a random, fortuitous, or attenuated way." Id. It is on these criteria that we base our analysis.

III

The contract between Diamond Healthcare and HMH Partners was initiated by Diamond Healthcare, which approached HMH Partners in Ohio to solicit HMH Partners' purchase of Diamond Healthcare's capacity for managing a partial-hospitalization program. During negotiations, representatives of the parties met in Ohio on several occasions, but never in Virginia. They did, however, exchange telephone calls, letters, and faxes between their offices in Ohio and Virginia. Following negotiations, HMH Partners signed the agreement in Ohio and sent it to Richmond, where Diamond Healthcare signed it. Formed in these circumstances, the contract represents the product of HMH Partners' favorable response to Diamond Healthcare's unsolicited invitation for performance of a project in Ohio, which the parties agreed would be regulated under Ohio law, even though some aspects of the contract could be performed in Virginia. See Chung v. NANA Dev. Corp., 783 F.2d 1124, 1128 (4th Cir. 1986) (Alaska defendant lacked minimum contacts with Virginia, even though the contract's "essential terms were negotiated by telephone between Alaska and Virginia," when "those communications were initiated by" the Virginia plaintiff).

Not only did Diamond Healthcare initiate the contractual relationship in Ohio, but the resulting agreement contemplated the bulk of the contract's performance at Project NuStart in Boardman, Ohio. Under the contract, Diamond Healthcare was...