Electronic Transaction Network v. Katz

• Decision Date: 14 December 1989
• Docket Number: Civ. A. 1:89-CV-1095-JOF.
• Citation: 734 F. Supp. 492
• Parties: ELECTRONIC TRANSACTION NETWORK, a Georgia corporation, Plaintiff, v. Jeffrey KATZ, d/b/a Electrical Sales Network, Defendant.
• Court: U.S. District Court — Northern District of Georgia

734 F. Supp. 492

ELECTRONIC TRANSACTION NETWORK, a Georgia corporation, Plaintiff, v. Jeffrey KATZ, d/b/a Electrical Sales Network, Defendant.

Civ. A. 1:89-CV-1095-JOF.

United States District Court, N.D. Georgia.

December 14, 1989.

COPYRIGHT MATERIAL OMITTED

James Timothy White, Edward H. Nicholson, Jr., Hurt, Richardson, Garner, Todd & Cadenhead, Atlanta, Ga., for plaintiff.

Frank Andrews Lightmas, Jr., Atlanta, Ga., Josiah Greenberg, Stecher, Jaglom & Prutzman, New York City, for defendant.

ORDER

FORRESTER, District Judge.

This matter is before the court on defendant's motion to dismiss for lack of subject matter jurisdiction, lack of personal jurisdiction, and insufficiency of service of process, Fed.R.Civ.P. 12(b)(1), (2), and (5), or, alternatively, to transfer venue to the Southern District of New York, under 28 U.S.C. § 1404(a). For the reasons discussed below, the motion is DENIED.

I. STATEMENT OF THE CASE.

A. Complaint

Plaintiff seeks a declaratory judgment under 28 U.S.C. § 2201 of the rights and liabilities under an "Independent Sales Organization" (ISO) agreement between the parties. Plaintiff, a Georgia corporation, is in the business of electronically clearing VISA and Mastercard credit card transactions for retail merchants. Complaint, ¶ 5. Retail merchants purchase plaintiff's telephonic terminals which are used to verify and confirm the credit card transaction. Plaintiff relies on independent sales organizations for its sales efforts to these retail merchants. Plaintiff and defendant entered an agreement in February of 1988 in which defendant would perform services of an independent sales organization primarily in the states of New York and New Jersey. Complaint, ¶ 7. Defendant was compensated by commissions and a percentage of the business done by each merchant. Complaint, ¶ 9. In April 1989, the plaintiff became aware of numerous alleged violations of the contract terms by the defendant. Complaint, ¶ 11.

The plaintiff informed defendant in April 1989 that the contract was terminated. Complaint, ¶ 12. Prior to termination of the contract, a dispute had arisen between plaintiff and defendant about non-payment by defendant of sums owed to plaintiff for equipment. Plaintiff withheld compensation for two months, in March and April, for a total of over $27,000. The defendant acknowledged a debt of over $11,000. Complaint, ¶ 13. The complaint states that the defendant has given notice of his intention to sue plaintiff for improperly terminating the contract, and for sums representing monthly residual payments in perpetuity based on sales commissions. Complaint, ¶ 14. The plaintiff asks this court to determine and adjudicate the rights and liabilities of the parties under the contract, and that the court find that the defendant has breached the contract and plaintiff properly terminated it, that plaintiff owes defendant no further compensation and that plaintiff properly withheld the March and April compensation as a set-off of defendant's debt. The complaint alleges that the defendant is a resident of the state of New York and is subject to the jurisdiction of this court pursuant to the Georgia long arm statute. Complaint, ¶ 3. The complaint has been amended as of right, to allege that the defendant is a citizen of the state of New York. First Amended Complaint. The complaint also alleges that the matter in controversy exceeds $50,000. Complaint, ¶ 4.

B. Affidavits

In support of defendant's motion and plaintiff's response, the parties have submitted affidavits detailing certain facts as to service and jurisdiction.

1. Service

Defendant states that on May 31, 1989 he returned to his office to vacate it, and found an envelope which apparently had been slipped under the door dated May 24, 1989, containing the summons and complaint in this action with an acknowledgement form. He did not return the acknowledgement form because before the time had run out to return the form, he was personally served on June 13, 1989. The summons stated that he had twenty days to answer or respond to the complaint.

2. Jurisdiction

In considering a motion to dismiss for lack of personal jurisdiction, allegations in the complaint which are not controverted by the defendant's evidence must be accepted as true. Delong Equipment Co. v. Washington Mills Abrasive Co., 840 F.2d 843 (11th Cir.1988). Conflicts in the facts are resolved in the plaintiff's favor for determining if a prima facie case of personal jurisdiction exists. Id.; Morris v. SSE, Inc., 843 F.2d 489 (11th Cir.1988). Therefore, plaintiff's version of the facts as presented by affidavit will be set forth below.

The defendant contacted plaintiff by telephone in January or February of 1988. The discussions leading up to the execution of the contract took place only by phone. No meetings were held in Georgia or New York. The president of plaintiff prepared the two-page agreement and mailed it to defendant. He signed it and mailed it back to Georgia, and it was executed by the plaintiff in Georgia. Clause ten of the contract provides that its provision shall be construed under the law of Georgia.

The defendant made two trips to plaintiff's office, in June 1988 and August 1988. Plaintiff's president's affidavit states that these trips were related to the performance of the contract or for the amendment of its terms. He states that defendant's compensation was renegotiated and this modification was agreed to and enacted during those meetings.¹

All the defendant's sales efforts apparently took place in New York City. He has no office in Georgia, no customers in Georgia, and no property in Georgia. He apparently has no other connection to Georgia than the present contract with plaintiff.

II. DISCUSSION

Defendant contends that plaintiff failed to adequately allege subject matter jurisdiction based on diversity, because the face of the complaint shows that the amount in controversy is less than $50,000.² Defendant also contends that because plaintiff appears to have attempted to serve defendant by the mail provisions under Fed.R. Civ.P. 4(c)(2)(C)(ii), any further service must be made under Rule 4(c)(2)(A) or (B) and that these provisions do not provide for extraterritorial service, and service under Rule 4(e) using the Georgia long-arm statute is not available. He further contends that his contacts with the state of Georgia are insufficient to establish constitutional minimum contacts in order to assert personal jurisdiction over him under the Georgia long arm statute. As his final point, he contends that venue should be transferred because of the convenience to the parties and witnesses.

A. Subject Matter Jurisdiction

Plaintiff bases jurisdiction in this court on diversity of citizenship of the parties. 28 U.S.C. § 1332(a). That statute provides that the district courts have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $50,000 and is between citizens of different states.³ The defendant challenges the allegations in the complaint of the amount of controversy, arguing that the face of the complaint shows that the amount is less than $50,000.

In a declaratory judgment action, the amount in controversy is measured by the value of the object of litigation. Hunt v. Washington State Apple Advertising Commission, 432 U.S. 333, 347, 97 S.Ct. 2434, 2443, 53 L.Ed.2d 383 (1977). The action should not be dismissed unless this court can say to a legal certainty that the amount in controversy is less than the jurisdictional limit. Id. at 348, 97 S.Ct. at 2444; Adolph Coors Co. v. Movement Against Racism, 777 F.2d 1538 (11th Cir. 1985). To determine the value of the object of litigation, the court must look to the pecuniary effect an adverse decision will have on either party to the suit. City of Moore v. Atchison, T. & S.F. Ry., 699 F.2d 507 (10th Cir.1983). The plaintiff is asking in the complaint that the court declare it was within its rights in terminating the contract, and owes no further compensation to the defendant. If this court rules that such termination was improper, or if the plaintiff owes more compensation to the defendant, it is clear that the amount owed by plaintiff would be greater than $50,000, especially considering the $27,000 already stated as in dispute in the complaint. Therefore, the plaintiff's allegation of jurisdiction is proper, and defendant's motion to dismiss under Rule 12(b)(1) is DENIED.

B. Service of Complaint

Defendant contends that because plaintiff first attempted to serve him by mail, he was forever thereafter precluded from using the service provisions of state law under Rule 4(e). Under Rule 4(c)(2)(C)(ii), service by mail is authorized. If the acknowledgement form contained with the summons and complaint is not returned by the sender within twenty days after the date of mailing, service is to be made pursuant to personal service under Rule 4(c)(2)(A) (service by any non-party over eighteen years of age) or 4(c)(2)(B) (service by a United States Marshal or a person appointed by the court in certain situations).

However, this dispute is irrelevant in this case because the personal service requirements are triggered only if no acknowledgement is received by the sender within twenty days of the date of mailing. In the present case, personal service was effected before the twenty days to respond had expired, so the personal service rules never came into play.⁴ Furthermore, the Eleventh Circuit has held in a nearly identical situation that Rule 4(e) is permissive — it does not require a non-resident to be served only under Rule 4(e), nor that personal service under 4(c) must comply with the state long arm statute. McDougald v. Jenson, 786 F.2d 1465 (11th Cir.1986). Therefore, defendant's motion to dismiss for insufficiency of service of process is DENIED.

C. Personal Jurisdiction

The plaintiff has the burden of proof to establish jurisdiction in this court....