Good Hope Industries, Inc. v. Ryder Scott Co.

• Decision Date: 04 May 1979
• Citation: 389 N.E.2d 76,378 Mass. 1
• Parties: GOOD HOPE INDUSTRIES, INC., et al. 1 v. RYDER SCOTT COMPANY.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 76

389 N.E.2d 76

378 Mass. 1

GOOD HOPE INDUSTRIES, INC., et al. ¹ v. RYDER SCOTT COMPANY.

Supreme Judicial Court of Massachusetts, Hampden.

Argued Jan. 4, 1979.

Decided May 4, 1979.

Donald R. Ware, Boston (Christian M. Hoffman, Boston, with him), for plaintiffs.

George W. McLaughlin, Jr., and William Shields, III, Boston, for defendant.

Before QUIRICO, BRAUCHER, KAPLAN, WILKINS and LIACOS, JJ.

LIACOS, Justice.

The plaintiffs filed a civil complaint in the Superior Court for Hampden County against the defendant, a Texas corporation. The defendant filed a motion to dismiss for lack of personal jurisdiction, pursuant to Mass.R.Civ.P. 12(b)(2), 365 Mass. 754 (1974). Thereafter, the parties engaged in discovery limited to the jurisdictional issue, and filed affidavits, depositions, and exhibits prior to argument on the motion. After a hearing, the judge allowed the motion and judgment was entered dismissing the action. The plaintiffs appealed, arguing that subsections (A ), (B ), (C ), and (D ) of G.L. c. 223A, § 3, ² each confers long arm jurisdiction over the defendant. This court allowed the plaintiffs' application for direct appellate review. Because we think the defendant is susceptible to personal jurisdiction under G.L. c. 223A, § 3(A ), we reverse. ³

[2,3] Generally speaking, "inquiries into whether the exercise of personal jurisdiction is permissible in a particular case are sensitive to the facts of each case." Great W. United Corp. v. Kidwell, 577 F.2d 1256, 1266 (5th Cir. 1978). See Droukas v. Divers Training Academy, Inc., --- Mass. ---, ---, ^A 376 N.E.2d 548 (1978); Kulko v. Superior Court, 436 U.S. 84, 92, 98 S.Ct. 1690, 56 L.Ed.2d 132 (1978). Facing a motion to dismiss under Mass.R.Civ.P. 12(b) (2), the plaintiffs bear the burden of establishing sufficient facts on which to predicate jurisdiction over the defendant. DROUKAS, SUPRA, --- MASS. AT ---, 376 N.E.2D 548.^B Compare Walsh v. National Seating Co., 411 F.Supp. 564, 567 (D.Mass.1976).

The facts set forth by the parties in the pleadings, supporting affidavits, depositions, and exhibits are essentially as follows. The plaintiff Good Hope Industries, Inc. (Industries), is a Massachusetts corporation with its main office in Springfield. John R. Stanley owns all the stock of Industries. The additional plaintiffs, Good Hope Refineries, Inc. (Refineries), Good Hope Chemicals, Inc., Southern Pipeline Corporation and Southern Gas Transmission Company are wholly owned subsidiaries of Industries, and, while they are Texas corporations, their principal offices are in Springfield, Massachusetts. Stanley, the chief executive officer of all five corporations, is the controlling force behind them, with Industries functioning as the primary vehicle for control. The principal bank account of each plaintiff is located in Massachusetts. The defendant Ryder Scott Company (Ryder) is a Texas corporation which represents itself as providing "total reservoir engineering and geological services to the petroleum and natural gas industries on a worldwide basis." Specifically, Ryder holds itself out as being able to produce studies and appraisals of natural gas reserves, which appraisals are said to be "accepted by major financial institutions and investors" for loan eligibility evaluation and other purposes.

Early in 1974, Refineries engaged the services of Ryder to appraise the extent and value of natural gas in certain leasehold interests which it owned in Texas. The genesis of the contract was as follows. Stanley, representing Refineries, was in New Orleans discussing potential financing with a Louisiana bank officer. He requested the names of firms specializing in valuation of oil and gas properties and whose reports the bank would accept as the basis for making loans, and was introduced by the bank officer over the telephone to Ryder's president, Raymond V. Cruce. During that initial conversation, Cruce was informed that Stanley's main office was in Springfield. Shortly thereafter, Stanley met with Cruce at the Ryder offices in Houston. Cruce made representations as to the extent of Ryder's services to companies throughout the United States and the world, and as to Ryder's credibility with major lending institutions. At this meeting Stanley and Cruce orally agreed that Refineries would supply Ryder the necessary raw data, which Ryder would analyze for the purpose of preparing periodic appraisal reports indicating the extent and value of the natural gas. The information was to be used both to assist Refineries ⁴ in formulating a development plan and in obtaining the financing required to implement the plan. ⁵

Ryder specifically agreed to send the appraisal reports to Refineries in Springfield, Massachusetts. It sent at least nine such reports to Springfield over a period of about one year. ⁶ The substance of the appraisal reports was discussed in meetings between Stanley and Ryder personnel in Houston, and in frequent telephone communications. According to its records, Ryder initiated at least fifty-two telephone calls to Good Hope personnel in Springfield from October, 1974, through September, 1975. Ryder also sent monthly invoices for its services to Refineries in Springfield. A total of seventeen such invoices were received in Springfield, from April, 1974, through August, 1975. The bills were paid from a Refineries checking account in a Massachusetts bank. ⁷

The initial appraisal reports sent by Ryder to Refineries indicated that Refineries' natural gas reserves were substantial. ⁸ Acting in reliance thereon, the plaintiffs, operating from Springfield, obtained loans and commitments for additional funds from financial institutions and began building the ammonia processing plant in Texas. ⁹ Subsequently, Ryder sent Refineries revised appraisals reflecting a significantly decreased valuation of Refineries' natural gas holdings. ¹⁰ In light of the revised valuation, major banking commitments to the plaintiffs were withdrawn. The plaintiffs terminated construction of the plant, lost their investment, and became liable to contractors and vendors for breaches of contracts entered into in connection with the plant construction. Some of these contractors and vendors are located in Massachusetts. ¹¹

[4-6] Generally, a claim of personal jurisdiction over a nonresident defendant presents a two-fold inquiry: (1) is the assertion of jurisdiction authorized by statute, and (2) if authorized, is the exercise of jurisdiction under State law consistent with basic due process requirements mandated by the United States Constitution? Jurisdiction is permissible only when both questions draw affirmative responses. Since we have stated that our long arm statute, G.L. c. 223A, functions as "an assertion of jurisdiction over the person to the limits allowed by the Constitution of the United States," "Automatic" Sprinkler Corp. of America v. Seneca Foods Corp., 361 Mass. 441, 443, 280 N.E.2d 423, 424 (1972), the two questions tend to converge. General Laws c. 223A, § 3, cannot authorize jurisdiction which is constitutionally unacceptable, even though the fact pattern asserted in support of jurisdiction apparently satisfies the statute's literal requirements. Likewise, G.L. c. 223A, § 3, asserts jurisdiction over the person to the constitutional limit only when some basis for jurisdiction enumerated in the statute has been established. Although presented with jurisdictional facts sufficient to survive due process scrutiny, a judge would be required to decline to exercise jurisdiction if the plaintiff was unable to satisfy at least one of the statutory prerequisites. Having examined the facts before us, we are satisfied that c. 223A, § 3(A ), within its literal and constitutional boundaries, confers jurisdiction in this case.

General Laws c. 223A, § 3(A ), gives rise to jurisdiction if the defendant either directly or through an agent transacted any business in the Commonwealth, and if the alleged cause of action arose from such transaction of business. The factual constellation here including the defendant's sending periodic appraisal reports to Refineries in Massachusetts over the course of one year, its frequent initiation of telephone communications with Refineries in Massachusetts, its mailing monthly invoices to Refineries in Massachusetts over a period of seventeen months and regularly accepting payment by checks drawn from Refineries' Massachusetts bank account points to the conclusion that the defendant "transact(ed) . . . business" in Massachusetts, within the literal meaning of those words. Further, the cause of action alleged obviously has arisen, at least in part, by virtue of that transaction of business in Massachusetts. The literal requirements of G.L. c. 223A, § 3(A ), are satisfied. Our discussion now focuses on reasons why the assertion of jurisdiction in these circumstances also comports with the statute's implicit constitutional constraints.

A recent statement of the relevant constitutional considerations, as gleaned from the leading United States Supreme Court cases on the subject, is as follows: "The governing principle is the fairness of subjecting a defendant to suit in a distant forum. Only if the nonresident defendant has such 'minimum contacts' with the state 'that the maintenance of the suit does not offend " traditional notions of fair play and justice," ' International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), or if the defendant has performed some act 'by which (it) purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws,' Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958); McGee v. International Life Insurance Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957), may the forum, consistently with due process, extend its long arm to embrace it." Great W. United Corp. v. Kidwell, 577...