CABA LTD. LIABILITY v. MUSTANG SOFTWARE

Decision Date25 May 1999
Docket NumberNo. 18842.,18842.
Citation984 P.2d 803,127 N.M. 556
PartiesCABA LIMITED LIABILITY COMPANY, Plaintiff-Appellant, v. MUSTANG SOFTWARE, INC., Defendant-Appellee.
CourtCourt of Appeals of New Mexico

Jeffrey A. Dahl, Clayton E. Crowley, Lamb, Metzgar, Lines, & Dahl, P.A., Albuquerque, for Appellant.

Richard D. Yeomans, Guebert & Yeomans, P.C., Albuquerque, for Appellee.

OPINION

APODACA, Judge.

{1} CABA Limited Liability Company (Plaintiff) appeals from the trial court's order dismissing its complaint against Mustang Software (Defendant) for lack of personal jurisdiction. This appeal raises a question concerning the in personam jurisdiction of our state courts over an out-of-state company that arranged, essentially by telephone, fax and mail correspondence, to retain software program services from a New Mexico corporation. We hold that, because Defendant did not transact business in New Mexico within the meaning of our long-arm statute, the trial court properly dismissed the complaint for lack of personal jurisdiction.

I. FACTUAL AND PROCEDURAL BACKGROUND

{2} The facts are undisputed. Plaintiff is a New Mexico corporation with its principal place of business in Albuquerque. Defendant is a California corporation with its principal place of business in Bakersfield, California. Plaintiff and Defendant are both engaged in the business of software development. Defendant does not maintain offices in New Mexico, nor has it ever been licensed to do business in New Mexico. Richard Heming, who participated in the contract negotiations in question, has never been in New Mexico. Mr.Heming is the Vice President and Chief Operations Officer of Defendant and is also a member of its board of directors. He has never owned or leased property, applied for a loan, or maintained an office, telephone listing or bank account in New Mexico.

{3} Defendant is a publicly-traded corporation, doing business both nationally and internationally. It sells its products through large software outlets, including a local New Mexico store and through value-added resellers in New Mexico.

{4} Two New Mexico software engineers, Simon Clement and Derek Backus, incorporated Plaintiff for the purpose of entering into a contract with Defendant. Before Plaintiff's dealings with Defendant, Simon Clement was the principal of a company named ProDesign, Inc. (ProDesign), with offices in Albuquerque. Clement and another member of ProDesign, Derek Backus, traveled from Albuquerque to Bakersfield to attend a conference on one of Defendant's products—Wildcat 5.0 Platform (the Wildcat). During the conference, Clement and Backus met Brett Martin, the Vice President of Sales and Marketing for Defendant. Martin indicated that he was interested in having Clement and Backus develop applications for the Wildcat. Specifically, he was interested in having Clement and Backus reconfigure ProDesign's "shopping mall" software to operate with the Wildcat. A "shopping mall" apparently is software that allows customers to buy products on-line.

{5} Martin later approached Clement and Backus about converting their Zephyr shopping mall to the Wildcat under an original equipment manufacturer (OEM) agreement. The three reached a consensus that they would enter into an agreement to have Clement and Backus convert their Zephyr shopping mall to the Wildcat under an OEM agreement, on the condition that Clement and Backus would be paid an advance on royalties in the amount of $30,000, and $30,000 on completion of the project.

{6} After returning to Albuquerque, Clement and Backus prepared corporate documents to incorporate Plaintiff and registered the new company with the appropriate state agency in anticipation of entering into the contract with Defendant. At this point, Heming took over the contract negotiations for Defendant. Heming telephoned Clement in Albuquerque to discuss the terms and conditions of an agreement to convert the Zephyr shopping mall to operate on the Wildcat. Heming indicated that he wanted to make some changes to the deal proposed by Martin in Bakersfield. After several days of negotiations by telephone, including the exchange of proposed agreements by fax, Clement and Heming arrived at the conditions contained in a document entitled "Letter of Intent." Heming mailed the Letter of Intent to Clement in New Mexico. The letter provided as follows:

This document outlines the basic contract points for licensing technology generally described as a Shopping Mall WC5 client, based on the Zephyr product. The product will be licensed for distribution as an OEM product tentatively called wcMall. The basics of the agreement include the following points:
Mustang Software, Inc. will distribute the product as an OEM version, with responsibility for all costs of production, marketing and support.
• Payment will be structured at $130 per end-user copy.
• ProDesign will provide code maintenance and updates on a timely basis for a period of 18 months.
• Advance on royalties of $30,000 paid at Letter of Intent with additional advance on royalties and 18 month royalty guarantee based on delivery: ....
• An additional advance on royalties of $10,000 will be paid on January 1, 1997 if HTML functionality is added to the product by that time.
Please sign and return this original along with the name and address of the entity that will enter into the contract.

Clement endorsed the two copies and returned one copy by mail to Heming in California. After receiving the endorsed agreement, Heming issued a check for payment of $30,000 to Plaintiff. The payment was received and deposited by Plaintiff in its New Mexico bank account.

{7} Later, Heming received a letter from an attorney for DataSafe Publications, Inc., indicating that Clement's software product was a "knock off" of DataSafe's software. DataSafe, located in New Mexico, is a licensed reseller for Defendant and sells its products both locally and nationally. The letter informed Heming of pending litigation between Clement and DataSafe and threatened legal action against Defendant for knowingly participating in copyright infringement. As a result of this letter, Heming wrote to Clement, explaining that Defendant was unable to proceed with an advance on royalties and that he was canceling the check previously issued. Clement was later informed that Heming placed a stop-payment on the check and that the bank refused to honor it. Plaintiff acknowledges that all contacts with Heming concerning the agreement, as set forth in the Letter of Intent, were completed by telephone, fax and mail between Plaintiff in New Mexico and Heming in California.

{8} Plaintiff later filed a complaint in New Mexico against Defendant for breach of contract and for damages, alleging that Defendant failed to comply with the provisions of the Letter of Intent even after Plaintiff exhibited to Defendant that its software technology was substantially different from that of DataSafe's "Omni-Mall" product. Defendant moved to dismiss the complaint for lack of personal jurisdiction. Both parties filed affidavits in support of their positions on the issue of personal jurisdiction. Following a hearing, the trial court entered an order dismissing the complaint for lack of personal jurisdiction.

II. DISCUSSION
A. Standard of Review
[1,2] {9} In reviewing an appeal from an order granting or denying a motion to dismiss for lack of personal jurisdiction, the determination of whether personal jurisdiction exists is a question of law, which an appellate court reviews de novo when the relevant facts are undisputed. If the [trial] court's ruling on the motion to dismiss is based upon pleadings and affidavits, the standard of review largely mirrors the standard involving appeals from the grant or denial of motions for summary judgment. In the instant case the underlying material facts are not disputed.

Harrell v. Hayes, 1998-NMCA-122, ¶ 11, 125 N.M. 814, 965 P.2d 933 (citations omitted). We thus review de novo the trial court's application of the law to the undisputed facts of this case.

B. Application of New Mexico's Long-Arm Statute

{10} We examine the facts of this case in light of New Mexico's long-arm statute and constitutional due process principles to determine if our courts have personal jurisdiction over Defendant. New Mexico's long-arm statute, NMSA 1978, § 38-1-16(A) (1971) provides in relevant part:

Any person, whether or not a citizen or resident of this state, who in person or through an agent does any of the acts enumerated in this subsection thereby submits himself or his personal representative to the jurisdiction of the courts of this state as to any cause of action arising from:
(1) the transaction of any business within this state ....

"We have repeatedly equated the `transaction of business'—insofar as the acquisition of long-arm jurisdiction under our statute is concerned—with the due process standard of `minimum contacts' ...." Telephonic, Inc. v. Rosenblum, 88 N.M. 532, 534, 543 P.2d 825, 827 (1975).

{11} New Mexico case law has consolidated the statutory and constitutional requirements of our long-arm statute into a three-part test, which must be met before our state courts may exercise personal jurisdiction over a nonresident defendant.

In order to ascertain whether personal jurisdiction exists over an out-of-state defendant, our Supreme Court has approved a three-part test, inquiring whether (1) the acts of the defendant are specifically set forth in this state's long-arm statute, (2) the plaintiff's cause of action arises out of and concerns such alleged acts, and (3) the defendant's acts establish minimum contacts to satisfy constitutional due process concerns.

Doe v. Roman Catholic Diocese of Boise, Inc., 121 N.M. 738, 742, 918 P.2d 17, 21 (Ct.App.1996).

1. Transaction of Business Within New Mexico

{12} The first step in our analysis is to determine whether Defendant transacted business within New Mexico. The determination of whether a...

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