Hiller Investments Inc. v. Insultech Group

• Decision Date: 03 November 2006
• Docket Number: 1051024.
• Citation: 957 So.2d 1111
• Parties: HILLER INVESTMENTS INCORPORATED v. INSULTECH GROUP, INC.
• Court: Alabama Supreme Court

957 So.2d 1111

HILLER INVESTMENTS INCORPORATED v. INSULTECH GROUP, INC.

1051024.

Supreme Court of Alabama.

November 3, 2006.

C. Frederick Robinson, Mobile, for appellant.

William E. Shreve, Jr., and Allen E. Graham of Lyons, Pipes & Cook, P.C., Mobile, for appellee.

NABERS, Chief Justice.

Hiller Investments Incorporated ("Hiller") appeals the trial court's order dismissing Hiller's breach-of-contract action against Insultech Group, Inc., for lack of in personam jurisdiction. For the reasons stated below, we reverse that judgment for Insultech.

I. Facts and Procedural History

Insultech, a Florida corporation headquartered in Plant City, Florida, contracted in February 2004 with Titan Cruise Lines to renovate a ship named the Ocean Jewel ("the project"). Before it entered into that contract, Insultech had sent Hiller Systems, Inc. ("Hiller Systems"), a wholly owned subsidiary of Hiller, an e-mail message requesting a quote for an arrangement under which Hiller Systems would subcontract to install deck covering on the ship ("the subcontract arrangement"). Both Hiller Systems and Hiller are Alabama corporations that are based in Mobile.

Insultech awarded the deck-covering work to Hiller Systems. Hiller Systems installed the deck covering during 2004 while the ship was in port in locations outside Alabama. During the first half of 2004, representatives of Insultech and Hiller Systems exchanged 14 written communications (by e-mail, facsimile, or correspondence) concerning the subcontract arrangement and the scope of the work. The representatives of Hiller Systems who received or sent these 14 communications were in Alabama when the communications were transmitted. None of the Insultech representatives who received or transmitted those 14 communications was in Alabama when the communications were sent. The subcontract arrangement was not documented by a written contract simultaneously signed by the parties, but by purchase-order and invoice forms (collectively "the purchase order"). The purchase order did not contain a choice-of-law provision or a venue-selection clause for resolution of disputes arising under the subcontract arrangement.

St. Petersburg, Florida, was the home port for the Ocean Jewel. Hiller Systems performed all of the work under the subcontract arrangement outside Alabama.¹ During the latter part of 2004, a dispute arose between Insultech and Hiller Systems concerning the total amount Insultech owed for the deck-covering work. Nineteen written communications (14 of which were e-mails) were transmitted between representatives of Hiller Systems and Insultech from October 1 through December 15, 2004; most of these 19 communications concerned the dispute. The representatives of Hiller Systems who received or sent these 19 communications were in Alabama when the communications were transmitted. Each Insultech representative who received or transmitted these communications was outside Alabama when they were sent.

After negotiations to settle the dispute stalled, Daniel Romanchuk, the chief operating officer of Hiller, intervened in December 2004 to attempt to break that impasse. Romanchuk participated in five telephone conversations with Bob Doyle (Insultech's Florida-based representative for the project) between December 15, 2004, and late January 2005 concerning a possible settlement. Romanchuk was based in Mobile at the time of these telephone conversations. According to Hiller, Romanchuk and Doyle agreed in late January 2005 that the total value of Hiller Systems' work under the subcontract arrangement was approximately $590,000. At that time, Doyle advised Romanchuk that Insultech could not make a lump-sum payment of the then outstanding balance of approximately $221,000 owed for Hiller Systems' work, and inquired whether Hiller would agree to an installment arrangement to retire that debt. Following additional exchanges between Romanchuk and Doyle by telephone and e-mail, Romanchuk sent Insultech a promissory note (and an accompanying letter) dated February 8, 2005, indicating that at four designated times during 2005 Insultech would pay Hiller equal installments of $56,054.25, which included interest of 5.25% per annum ("the note"). The note also provided that, by executing that instrument, Insultech was

"acknowledg[ing] that it was doing business in Alabama, ... subjecting itself to the jurisdiction of the Courts of Alabama, . . . agree[ing] that resolution of any matter arising out of this Promissory Note shall be litigated in the Circuit Court in the County of Mobile, Alabama and agree[ing] that this will be the proper jurisdiction and venue for said issues to be resolved."

Hiller contends that the purpose of the note was to memorialize the financial terms of the settlement of the dispute. According to Insultech, Romanchuk's transmittal of the note to Doyle in early February 2005 was a counteroffer; Insultech never executed the note. Hiller asserts that its failure to secure Insultech's signature on the note was an administrative oversight. Doyle was not in Alabama at any time during the settlement negotiations and communications with Romanchuk.

During 2005 Insultech wired to Hiller's account in Alabama the first three of the four installment payments of $56,054.25 contemplated in the note. That note stated that the final installment was payable on December 1, 2005. Insultech did not make the December 1 payment, and on December 21, 2005, Hiller sued Insultech in the Mobile Circuit Court to recover $56,054.25 (plus prejudgment interest, attorney fees, and costs), alleging breach of contract arising from Insultech's breach of the purported settlement agreement.

On February 6, 2006, Insultech appeared in the action to contest personal jurisdiction. Insultech filed a motion to dismiss pursuant to Rule 12(b)(2), Ala. R. Civ. P., supported by an affidavit; the affidavit reflected the following facts:

1. Hiller Systems performed all the work under the subcontract arrangement outside Alabama.

2. No representative of Insultech traveled to Alabama or met with representatives of Hiller or Hiller Systems in Alabama to discuss or negotiate the subcontract, the progress of the deck-covering work, or the settlement of the dispute.

3. All communications relating to the subcontract arrangement or the dispute that were generated by, or directed to, Insultech's representatives were initiated or received by those representatives at locations outside Alabama.

4. The purchase order did not contain a provision selecting Alabama as the venue for the resolution of disputes arising under the subcontract arrangement.

5. Insultech did not sign the note, which named Alabama as the venue for any litigation "arising out of" the note, or otherwise consent to the jurisdiction of the courts of Alabama.

6. Insultech was not qualified to do business in Alabama. Except for a short-term project in 2000, Insultech had not performed services in Alabama before its dealings with Hiller and Hiller Systems.

7. Insultech did not own or lease property, have employees, advertise, pay taxes, maintain bank accounts, have any ongoing relationships with Alabama-based firms, or otherwise conduct business in Alabama.

Hiller opposed Insultech's motion to dismiss and submitted multiple affidavits detailing the dealings between the parties from December 2003 through December 2005. After considering the briefs and argument of counsel, the trial court granted Insultech's Rule 12(b)(2) motion on March 15, 2006, and dismissed Hiller's action for lack of personal jurisdiction.² Hiller appealed.

II. Standard of Review

A de novo standard applies when an appellate court reviews a trial court's judgment on a motion to dismiss for lack of personal jurisdiction. Elliott v. Van Kleef, 830 So.2d 726, 729 (Ala.2002). Moreover, the plaintiff carries the burden of proving the trial court's personal jurisdiction over the defendant. Ex parte Covington Pike Dodge, Inc., 904 So.2d 226, 229 (Ala.2004).

III. Analysis

Rule 4.2(b), Ala. R. Civ. P., Alabama's "long-arm" provision, governs whether an Alabama court may exercise personal jurisdiction over an out-of-state defendant. In pertinent part, that rule states:

"(b) Basis for Out-of-State Service. An appropriate basis exists for service of process outside of this state upon a person or entity in any action in this state when the person or entity has such contacts with this state that the prosecution of the action against the person or entity in this state is not inconsistent with the constitution of this state or the Constitution of the United States...."

This rule extends the personal jurisdiction of Alabama courts to the limit of due process under the United States and Alabama Constitutions. When applying Rule 4.2(b), this Court has interpreted the due process guaranteed under the Alabama Constitution as coextensive with that guaranteed under the United States Constitution. See Elliott, 830 So.2d at 730.

The analytical framework applicable here was thoroughly described in Elliott:

"The Due Process Clause of the Fourteenth Amendment permits a forum state to subject a nonresident defendant to its courts only when that defendant has sufficient `minimum contacts' with the forum state. International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945). The critical question with regard to the nonresident defendant's contacts is whether the contacts are such that the nonresident defendant `"should reasonably anticipate being haled into court"' in the forum state. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 473, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985), quoting World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 295, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980). The sufficiency of a party's contacts are assessed as follows:

"`Two types of contacts can form a basis for personal jurisdiction: general contacts and specific contacts. General contacts, which give rise to general...