46 F.3d 138 (1st Cir. 1995), 94-1498, Foster-Miller, Inc. v. Babcock & Wilcox Canada

Docket Nº:94-1498.
Citation:46 F.3d 138
Party Name:FOSTER-MILLER, INC., Plaintiff, Appellant, v. BABCOCK & WILCOX CANADA, Defendant, Appellee.
Case Date:February 09, 1995
Court:United States Courts of Appeals, Court of Appeals for the First Circuit
 
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46 F.3d 138 (1st Cir. 1995)

FOSTER-MILLER, INC., Plaintiff, Appellant,

v.

BABCOCK & WILCOX CANADA, Defendant, Appellee.

No. 94-1498.

United States Court of Appeals, First Circuit

February 9, 1995

Heard Sept. 7, 1994.

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James J. Foster, with whom Michael A. Diener and Wolf, Greenfield & Sacks, P.C., Boston, MA, were on brief, for appellant.

Peter L. Resnik, with whom Cherie L. Krigsman and McDermott, Will & Emery, Boston, MA, were on brief, for appellee.

Before SELYA, Circuit Judge, ALDRICH, Senior Circuit Judge, and BOUDIN, Circuit Judge.

SELYA, Circuit Judge.

In Boit v. Gar-Tec Prods., Inc., 967 F.2d 671 (1st Cir.1992), we urged district courts to take a flexible approach in handling motions to dismiss for lack of in personam jurisdiction, and, concomitantly, to tailor procedures for use in those purlieus. Turning from the general to the particular, we recommended that district courts employ varying levels of scrutiny in connection with such motions, adapting the level of scrutiny to the exigencies of the individual case. See id. at 674-78. Among other possibilities, we suggested using a special intermediate standard when "factual issues are common to both the jurisdictional question and the claim on the merits...." Id. at 677.

The case before us today--an appeal by Foster-Miller, Inc. (FMI) from an order dismissing its commercial tort action against Babcock & Wilcox Canada (BWC)--illustrates vividly that Boit 's flexible approach demands circumspection in its application. In this case, the district court applied Boit 's intermediate standard too rashly when, eager to test whether a legally sufficient showing of jurisdiction had been made, it neither gave the parties adequate notice that it intended to use this special standard nor ensured that FMI had a fair opportunity to gather and present the evidence necessary for such a showing. While we are not without sympathy for the district judge--he inherited this case midstream, and Boit, in retrospect, should have emphasized the need to forewarn litigants of a trial court's intention to go

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beyond the prima facie standard typically associated with motions to dismiss under Fed.R.Civ.P. 12(b)(2)--we cannot permit the dismissal order to stand.

I. THE FACTS

We sketch the operative facts, drawing liberally from the lower court's opinion. See Foster-Miller, Inc. v. Babcock & Wilcox Can., 848 F.Supp. 271 (D.Mass.1994).

The parties to this appeal are quondam competitors: FMI is a Massachusetts corporation engaged in furnishing sludge and particle removal services for nuclear steam generators; BWC is a Canadian firm that, among other things, services such generators. At its core, the litigation concerns a virtual meltdown of the parties' relationship, which in turn detonated a lawsuit. The tale follows.

As early as 1988, FMI and BWC entertained the prospect of a joint venture to furnish sludge removal services to Ontario Hydro, a Canadian utility. Although the joint venture idea stalled and the principals went their separate ways, Canada remained an alluring target. But the road to prosperity had a large pothole. FMI's then-extant technology, known by the acronym "CECIL," featured flexible lances that directed powerful bursts of water at pockets of sludge found within the hard-to-reach crannies of nuclear steam boilers. While this system had distinct competitive advantages over BWC's rival rigid lance system, neither system performed satisfactorily in the cleansing of Canadian boilers (known in the trade as Candu boilers).

Determined to detour around the "can't do Candu" pothole and penetrate the Canadian market, BWC set out to design a lance of unprecedented flexibility. In 1989, while BWC's development efforts were underway, Ontario Hydro (acting on behalf of a consortium of Canadian utilities) retained FMI to study the feasibility of adapting FMI's flexible lance technology for use in Candu boilers. As part of this endeavor, FMI contracted with a well-known supplier, U.S. Composites (CompCo), to create a new type of hose.

In March 1990, Robert A.S. Lee, an FMI employee who had been instrumental in perfecting CECIL, attended an industry conference in Tennessee. Daniel St. Louis, a BWC engineer involved in that company's push to fashion a flexible lance, attended the same session. During a previous encounter, the men had casually discussed high pressure hoses. On this occasion, their conversation became more detailed and focused on the possibility of reinforcing high pressure hoses with certain fibers. The discussion proved prophetic: a few weeks thereafter, CompCo delivered the special hose that FMI had asked it to design. The hose was thought in certain quarters to represent a technological breakthrough. One of its more revolutionary features was a double-layered Kevlar sheath that supplied desired reinforcement.

On May 11, 1990, an Ontario Hydro representative, James Malaugh, traveled to FMI's plant in Waltham, Massachusetts, to assess FMI's progress. Seeking expertise and insight, Malaugh invited St. Louis to join him. Nonplussed, FMI allowed St. Louis to attend only after BWC signed a confidentiality agreement. The agreement, duly executed by a ranking official of BWC and transmitted via facsimile machine from Canada, acknowledged that FMI "anticipate[d] disclosing ... certain information of a novel, proprietary, or confidential nature," and memorialized BWC's promise "not to use [the] information for any purpose unless specifically authorized in writing by FMI." The agreement also stipulated that FMI would be entitled to relief for any breach.

William Leary, the FMI engineer in charge of the Ontario Hydro project, hosted the Waltham session. The participants debated various aspects of flexible lance technology, including the preferred characteristics of the hose and possible methods of reinforcement. At one point Leary, responding to a direct question by St. Louis, identified CompCo as FMI's supplier. Not long after the Waltham meeting, St. Louis contacted CompCo and inquired about the possibility of that company fabricating a similar hose for BWC. St. Louis' suggestion that FMI would not object proved overly sanguine;

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after consulting with FMI, CompCo rebuffed BWC's overtures. 1

Undaunted, BWC forged ahead in its research effort. It eventually succeeded in manufacturing its own flexible lance, suitable for Candu boilers. Thereafter, Ontario Hydro awarded BWC a lucrative contract.

II. THE LITIGATION

On November 12, 1993, FMI, claiming to have gotten hosed, commenced suit against BWC in the United States District Court for the District of Massachusetts. Invoking diversity jurisdiction, 28 U.S.C. Sec. 1332 (1988), FMI charged breach of the confidentiality agreement, misappropriation of trade secrets, and unfair competition. BWC moved to dismiss for lack of in personam jurisdiction or, in the alternative, on the basis of forum non conveniens.

Judge Keeton drew the case. Concerns about the parties' trade secrets slowed discovery to a crawl. At a conference held on December 16, 1993, Judge Keeton scheduled a hearing on the motion for January 4, 1994, restricted discovery for the time being to matters "bear[ing] upon the jurisdictional issue," and advised counsel that, absent an agreement dissolving the discovery deadlock, he would use the traditional prima facie standard, not the special intermediate standard, in evaluating the motion to dismiss.

At that point, fate intervened. In a routine shuffling of cases ancillary to the appointment of several new judicial officers, this case was plucked from Judge Keeton and reassigned to Judge Stearns. The January 4 hearing never materialized. Instead, Judge Stearns heard the motion to dismiss on February 1 and 2, 1994. Though the discovery dispute had not been resolved, Judge Stearns, to FMI's obvious chagrin, undertook not only to probe the existence of the basic facts on which jurisdiction might be premised but also to adjudicate certain ultimate facts (e.g., whether the participants actually disclosed any confidential information at the Waltham meeting). 2 And he applied the special intermediate level of scrutiny rather than the more easily satisfied prima facie standard.

The district court granted the motion to dismiss. After stressing the importance of the Waltham meeting to the jurisdictional issue--BWC, after all, had no other significant contacts with the forum--Judge Stearns articulated two bases for refusing to exercise jurisdiction. First, he found it unlikely either that proprietary information had been disclosed at the meeting or that such information came into BWC's possession as a result of the meeting; therefore, FMI's cause of action did not arise from BWC's participation in the meeting as required by the Massachusetts long-arm statute. See Foster-Miller, 848 F.Supp. at 276-77. Second, and alternatively, the judge concluded that, even if FMI's claims did arise from BWC's participation in the Waltham meeting, it would be unreasonable for a Massachusetts-based court to exercise jurisdiction over BWC, in part because the court might not be able to grant effective injunctive relief. See id. at 277.

FMI moved for reconsideration, specifically withdrawing its prayer for an injunction. Judge Stearns denied the motion without comment. This appeal ensued.

III. SPECIFIC PERSONAL JURISDICTION

Prior to reexamining the Boit framework, we rehearse certain general principles of law relating to specific in personam jurisdiction.

Personal jurisdiction implicates the power of a court over a defendant. In a federal court, both its source and its outer limits are...

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