Covista Commc'ns, Inc. v. Oorah, Inc.

• Decision Date: 14 November 2012
• Docket Number: No. E2012-00720-COA-R3-CV,E2012-00720-COA-R3-CV
• Parties: COVISTA COMMUNICATIONS, INC. v. OORAH, INC. d/b/a CUCUMBER COMMUNICATIONS, INC.
• Court: Tennessee Court of Appeals

COVISTA COMMUNICATIONS, INC. v. OORAH, INC. d/b/a CUCUMBER COMMUNICATIONS, INC.

No. E2012-00720-COA-R3-CV

COURT OF APPEALS OF TENNESSEE AT KNOXVILLE

October 2, 2012 Session

FILED NOVEMBER 14, 2012

Appeal from the Chancery Court for Hamilton County

No. 11-0635

W. Frank Brown, III, Chancellor

This appeal involves in personam jurisdiction over an out-of-state defendant. The chancery court granted the defendant's motion to dismiss for lack of personal jurisdiction pursuant to Rule 12.02(2) of the Tennessee Rules of Civil Procedure. The court found that the defendant had not purposely availed itself of the privilege of doing business in Tennessee and did not have sufficient contacts with Tennessee to be subjected to jurisdiction in this state. The plaintiff, a corporation that claims its principal place of business is in Tennessee, appeals. We find that the circumstances do not support the exercise of personal jurisdiction over the defendant foreign corporation by a Tennessee court. Accordingly, we affirm.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court

Affirmed; Case Remanded

JOHN W. MCCLARTY, J., delivered the opinion of the court, in which HERSCHEL P. FRANKS, P.J., and D. MICHAEL SWINEY, J., joined.

William H. Horton, Chattanooga, Tennessee, for the appellant, Covista Communications, Inc.

Sam D. Elliott, Chattanooga, Tennessee, and Steven G. Storch and Matthew D. Kane, New York, New York, for the appellee, Oorah, Inc. d/b/a Cucumber Communications, Inc.

OPINION

I. BACKGROUND

Capsule Communications, Inc. ("Capsule") and the defendant, Oorah, Inc., d/b/a Cucumber Communications, Inc. ("Oorah"), negotiated and executed an agreement datedNovember 1, 2001 ("the Reseller Agreement"), in which Capsule, a Delaware corporation with its principal place of business in Pennsylvania, agreed to deliver telecommunications services for customers provided by Oorah. Oorah, a corporation organized under the laws of New Jersey with its principal place of business in that state, is a non-profit organization that serves the New York tri-state Jewish community and fund-raises in part by marketing telecommunications services to members of the orthodox Jewish community in the New York area.

According to Oorah, the Reseller Agreement relates that Oorah was to receive monthly commissions from Capsule based upon the usage charges paid by the Oorah-provided customers purchasing Capsule's telecommunications services.¹ Further, Oorah observed that the Reseller Agreement provides "the rights and obligations of the parties hereunder and thereunder shall be construed in accordance with and be governed by the laws of the Commonwealth of Pennsylvania" and "any legal action or proceeding . . . may be brought in the state courts or the courts of the United States of America located in Philadelphia, Pennsylvania . . . ." The original agreement refers to the jurisdiction of such courts as "non-exclusive."

In February 2002, the plaintiff, Covista Communications, Inc. ("Covista"), acquired Capsule. Per the Reseller Agreement, the Oorah contract was assigned to Covista.² Subsequently, Covista began providing the telecommunications services to the customers obtained by Oorah.

According to Covista, around the time it acquired Capsule, it relocated its principal place of business from New Jersey to Chattanooga, Tennessee. Two years later, on June 2004, Oorah and Covista executed another contract, an Independent Authorized Master Agent Agreement ("the Agent Agreement").³ Although this second agreement was executedwhen Covista's principal office purportedly was located in Tennessee, it identifies Covista as "a corporation incorporated under the laws of the State of Delaware, having a principal office at 3331 Street Road, Bensalem, PA 19020." The Agent Agreement specifically provides that Pennsylvania law shall apply to its interpretation and contains a forum selection clause conferring exclusive jurisdiction with the courts of Pennsylvania ("the Courts of Philadelphia or Norristown, PA, for a State claim, and Philadelphia, PA, for a Federal claim.").

In approximately May 2009, Oorah discovered that Covista had ceased paying the monthly commissions. Covista filed this action for breach of contract on August 17, 2011, alleging that Oorah failed to meet certain revenue commitments to Covista and was obligated to pay "shortfalls." Covista also sought a declaratory judgment regarding the amount of any set off that may be owed to Oorah. Covista asserted that Oorah's business transactions in Tennessee made it subject to the jurisdiction of a Tennessee court. Covista contended that although the Agent Agreement contained a mandatory forum selection clause selecting certain Pennsylvania courts, it applied only with respect to legal actions "arising directly or indirectly from this Agreement." Covista asserted the claims in this case arose under the Reseller Agreement rather than the Agent Agreement, as the forum selection clause of the Reseller Agreement was not mandatory and the jurisdiction of the courts was "non-exclusive." Thus, according to Covista, the forum selection clause did not apply. Two days later, on August 19, 2011, Oorah commenced its own action in the Supreme Court of New York.

Shortly after this case was initiated, Oorah filed a motion to dismiss for lack of personal jurisdiction, accompanied by the affidavit of Jeffrey Stern, the Chief Executive Officer of Oorah.⁴ Oorah took the position that it was not subject to the jurisdiction of the Tennessee courts because it did not have sufficient contacts within this state. Covista filed a response, along with the affidavit of Sandra Forquer, Controller and Vice President ofFinance.⁵

A hearing was held on December 13, 2011. The trial court, in a December 30, 2011, decision, dismissed Covista's complaint. The court noted as follows:

First, in both contracts, the contracting parties agreed to make the courts of Pennsylvania the forum for litigation between the parties. Forum selection clauses are generally enforced in Tennessee. . . . Plaintiff has not put forward any arguments why the forum selection clause is invalid and this court, after reviewing the factors and fairness of enforcing the forum selection clause, finds no reason not to enforce the clause. Thus, the case must be dismissed on the basis of the forum selection clause in the parties' agreements.

Second, the court finds that it does not have personal jurisdiction over Oorah in Tennessee. The work that is done in Tennessee is being done by Covista, pursuant to contract. There is no doubt that the court would have personal jurisdiction over Covista. However, the court does not believe Plaintiff has shown how Oorah has purposefully availed itself of the privilege of acting in Tennessee for this court to sufficiently have personal jurisdiction over Oorah.

Plaintiff has attempted to shift the focus away from analyzing Oorah's contacts with Tennessee and instead focuses on Plaintiff's own contacts with Tennessee. This court certainly does not have general jurisdiction over Oorah, and to the extent it is alleged this court has specific jurisdiction because Defendant communicated with Plaintiff by phone and email, this court rejects that argument. The court does not believe any communications by Oorah about contractual issues would be sufficient to assert personal jurisdiction over Oorah. The nature and extent of these communications were not detailed by Ms. Forquer[;] rather they were merely generalized, nonspecific allegations. The mere act of communicating via phone and/or email with a resident of a forum is not enough to subject a foreign defendant to jurisdiction within the forum. See Kerry Steel, Inc. v. Paragon Industries, Inc., 106 F.3d 147, 151 (6th Cir. 1997). These are the types of generalized contacts that do not bythemselves create a claim of jurisdiction. See LAK, Inc. v. Deer Creek Enters., 885 F.2d 1293, 1300-1301 (6th Cir. 1989) (stating "[t]he telephone calls and letters on which the plaintiff's claim of jurisdiction primarily depends strike us as precisely the sort of 'random,' 'fortuitous' and 'attenuated' contacts that the Burger King Court rejected as a basis for haling non-resident defendants into foreign jurisdictions"). The other actions Ms. Forquer specified are acts of Covista in carrying out its contractual obligations to Oorah.

The existence of a contract between a foreign defendant and resident plaintiff alone does not itself confer jurisdiction to the plaintiff's home forum. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 478 (1985). If Covista could change its location and thereby make a contracting party with it subject to the jurisdiction of the new state, because it communicated with Covista about contractual matters, then this entire area of law would be turned upside down. In effect, this scenario happened here because Covista acquired Capsule and assumed the contract with Oorah. Sometime later, Covista changed its principal place of business from New Jersey to Tennessee. Covista changed. Oorah did not change its location or business. It would not be "fair and substantially just" to make Oorah litigate this case in Tennessee.

* * *

In its motion to alter or amend, Covista argued that it has never had any connection to Pennsylvania, and that the language in the Agent Agreement as to its principal office location was erroneous. The trial court declined to revise its ruling. Covista filed a timely appeal.

II. ISSUES

We restate the issues raised by Covista as follows:

1. Whether the trial court erred in concluding that Oorah lacked sufficient contacts with Tennessee through its ongoing business relationship with a corporation located in Tennessee to establish personal jurisdiction.

2. Whether the forum selection clauses in the parties' contracts precluded filing of suit in Tennessee where Covista's claims did not involve the contract containing the mandatory forum selection clause, neither party had a

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