Northern Laminate Sales, Inc. v. Davis, 04-1522.

• Citation: 403 F.3d 14
• Decision Date: 01 April 2005
• Docket Number: No. 04-1522.,04-1522.
• Parties: NORTHERN LAMINATE SALES, INC., Plaintiff, Appellee, v. Lawrence E. DAVIS, Defendant, Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

403 F.3d 14

NORTHERN LAMINATE SALES, INC., Plaintiff, Appellee, v. Lawrence E. DAVIS, Defendant, Appellant.

No. 04-1522.

United States Court of Appeals, First Circuit.

Heard December 6, 2004.

Decided April 1, 2005.

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Paul B. Kleinman, with whom Bouchard & Kleinman, P.A., was on brief for appellant.

Catherine R. Connors, with whom Lawrence M. Edelman and Pierce Atwood, LLP, were on brief for appellee.

Before TORRUELLA, Circuit Judge, COFFIN, Senior Circuit Judge, and STAHL, Senior Circuit Judge.

STAHL, Senior Circuit Judge.

Plaintiff-Appellee Northern Laminate Sales, Inc. ("NLS"), a New Hampshire corporation, sued Defendant-Appellant Lawrence E. Davis ("Davis"), a New York resident, personally in New Hampshire for tortiously inducing NLS to extend credit to the company of which Davis was an officer. A jury returned a verdict in NLS' favor, awarding NLS $219,946.46 in damages. Davis appeals, claiming that the district court did not have jurisdiction over his person and that the jury incorrectly calculated the amount of damages. Finding no error, we affirm.

I. BACKGROUND

A. The Parties

This case involves three corporations, the first of which, Appellee NLS, is both incorporated and has its principal place of business in New Hampshire. Miles Russell is the president and owner of NLS, which is in the business of distributing laminate components for printed circuit boards. The second corporation, American Board Companies ("ABC"), was a manufacturer and fabricator of printed circuit boards. ABC was incorporated in New York, and maintained a manufacturing facility in Vestal, New York. ABC was an affiliate (by common ownership) of the third corporation involved, The Matco Electronics Group ("Matco"), a Delaware corporation. Matco was an "administrative and materials procurement corporation," the subsidiaries of which included contract manufacturers, designers, and assemblers of printed circuit boards. At all relevant times, Appellant Davis, an individual who resides in Vestal, New York, served as secretary, treasurer, Chief Financial Officer, and Director of Matco and all of the Matco affiliates (including ABC).

B. The Relevant Contacts

On or about January 13, 2000, NLS and Matco entered into an agreement pursuant to which NLS furnished laminate components to ABC. The components were shipped F.O.B. NLS' New Hampshire facility, with invoices providing that New Hampshire law governed. Under the terms of the agreement, NLS would transport the components to the ABC manufacturing facility in New York, where NLS would keep, maintain, and periodically replenish the stock of components. ABC, on an as-needed basis, would draw its raw materials from that stock and issue corresponding purchase orders. NLS would then, in turn, prepare and issue invoices to ABC. The payment terms of the agreement required that ABC issue weekly checks to NLS in New Hampshire satisfying all invoiced charges that were fifty-three or more days old.

1. September 14 Meeting in New York

Concerned over increasingly delinquent payments by ABC to NLS, NLS president Miles Russell faxed a letter on September 1, 2000 to James F. Matthews, the president and sole shareholder of Matco, ABC, and the Matco affiliates, requesting a meeting to discuss ABC's financial condition. Russell concluded the letter by stating "[w]ithout such a meeting, I must inform you that I will need to significantly alter the terms with which our two organizations currently conduct business." Russell copied Davis on the letter.

In response, Davis invited Russell to meet with him at Matco's New York offices on September 14, 2000.¹ Russell drove from New Hampshire to New York to meet with Davis as arranged. At the time of the meeting, the balance owed by ABC to NLS was $495,685.65. During the meeting, Russell claims that Davis made six relevant representations: (1) Matco was committed to the support of ABC; (2) Matco would be willing to guarantee ABC's payment of debt obligations owed to NLS; (3) the ABC payment delinquencies were not cash flow related, but rather were occasioned by logistical problems, including centralization of administrative functions, understaffing in the department charged with addressing accounts payable, and the relatively small size of the vendor (NLS); (4) Matco and its affiliates (on a consolidated basis) were profitable; (5) Matco and its affiliates (on a consolidated basis) were rapidly growing; and (6) Davis, as treasurer of Matco, would furnish NLS with consolidated financial statements for Matco and its affiliates within a period of a few weeks following the meeting.

At the end of the meeting, Davis gave Russell a check in the amount of $158,240.05, which reduced the outstanding balance owed to NLS from $495,685.65 to $337,445.60, and as a result of what had transpired, Russell agreed that NLS would continue to provide ABC the laminate components pursuant to their agreement.

At trial, Russell claimed that Davis failed to disclose during their meeting that Matco and its affiliates (including ABC): (1) had liabilities that vastly exceeded their assets; (2) had suffered millions of dollars in losses during the preceding three years; (3) were in rapid financial decline; (4) had negative working capital; (5) had almost no available cash; and (6) had, for the preceding four months, stood in default of a fifty million dollar line of credit that was secured by all of the companies' assets, including their inventory, cash, receivables and equipment; and that a Fourth Forbearance Agreement was due to expire on the day following the September 14 meeting.²

Unaware of this impending financial doom, after the September 14 meeting, NLS continued to extend credit to ABC.

2. September 22 Letter from Davis to Russell

On September 22, 2000, as a follow-up to the September 14, 2000 meeting, Davis sent a letter from New York to NLS in New Hampshire, reiterating "[his] commitment to meet [NLS's] payment terms" and "assur[ing][NLS] that Matco ... stands behind this commitment and all confirmed obligations of ABC to NLS." Davis then concluded the letter "if there is ever a[n] issue with payment, simply send me an e-mail...."

On October 13, 2000, Matco's lender, National Bank of Canada, notified Davis via telephone (followed up by an October 17 faxed letter) that a subsequent Forbearance Agreement would not be renewed and that no further forbearance would take place. Davis never notified NLS of the lender's intentions, and ABC continued to draw raw material from NLS's stock. Then, an ABC check in the amount of $35,835.47, payable to the order of NLS and dated October 11, 2000, was returned to NLS unpaid with a "return to maker" stamp dated October 23, 2000.

3. The E-mails

On October 31, 2000, Russell took Davis up on his invitation in the September 22 letter to send him an e-mail "if there is ever a[n] issue with payment...." In the e-mail, sent by Russell in New Hampshire to Davis in New York, Russell stated that: "[c]urrently, we have not seen a check in three weeks and the last check we did receive has been returned to NLS with a `return to maker' marking (our agreement calls for a weekly check paying all invoices 53 days old or older). Currently $215,717.57 is due through next Monday, including the amount of the check that has been returned." Russell went on to note that Davis' accounts payable staff had indicated to him that "Matco has encountered a problem with [its line of credit facility] and that this problem should be cleared up by the end of the week." Russell then asked that Davis update Russell on the "situation" and told Davis that he had "not yet received the financial statements that [Davis] agreed to forward following [the September 14] meeting."

On November 1, 2000, Davis responded to Russell in New Hampshire by an e-mail sent from New York. In that e-mail, Davis stated that "[a]bout two weeks ago, our Bank Group disallowed a substantial receivable, which backed us into an overadvance. They then began returning checks and to date have only allowed us to fund payroll. We are working very hard to correct this situation." He then stated "I assure you this situation was totally unexpected and we are doing everything possible to protect our suppliers."

Russell testified that as a result of this e-mail, he sent a memorandum by facsimile to Davis informing him that the consignment stock was not to be used and that it was to be returned to NLS as soon as possible.³ The balance due to NLS upon termination of the consignment relationship was $669,946.46.

Subsequent to the termination of the consignment relationship, NLS did not receive any further payments from ABC or Matco on the past due amount, nor any explanation for the lack of payment from Davis. NLS attempted on numerous occasions to telephone Davis with no success. On November 10, 2000, NLS sent an e-mail from New Hampshire to Davis in New York, stating "[y]ou've ignored numerous telephone calls. I would appreciate an update on Matco's situation positive or negative."

In response, Davis e-mailed that he had not intentionally ignored Russell's calls, and that he had "been working diligently on solutions." He said that "[w]e have a consulting team now involved and our focus has been on our options, including equity, refinancing, etc. We will be presenting our cash plan to our current bank group next week. Hopefully they will free up advances to our vendors. Again, we are trying to do all posible [sic] to protect our supplier/partners exposure."

C. The Proceedings

After receiving Davis' last e-mail, Russell testified that Davis' language, for the first time, suggested that Matco and ABC were in serious financial trouble. In response, NLS filed suit against Matco and ABC in Rockingham County New Hampshire Superior Court, and Matco removed the case to the District Court of New Hampshire. See Northern Laminate Sales, Inc. v. Matco Elecs....