Lyle Richards Intern., Ltd. v. Ashworth, Inc.

• Decision Date: 07 October 1997
• Docket Number: No. 97-1387,97-1387
• Citation: 132 F.3d 111
• Parties: LYLE RICHARDS INTERNATIONAL, LTD., Plaintiff, Appellant, v. ASHWORTH, INC., Defendant, Appellee. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 111

132 F.3d 111

LYLE RICHARDS INTERNATIONAL, LTD., Plaintiff, Appellant, v. ASHWORTH, INC., Defendant, Appellee.

No. 97-1387.

United States Court of Appeals, First Circuit.

Heard Oct. 7, 1997.

Decided Dec. 22, 1997.

Michael J. Traft, Boston, MA, with whom Carney & Bassil was on brief for appellant.

Toni G. Wolfman, Boston, MA, with whom Foley, Hoag & Eliot LLP was on brief for appellee.

Before STAHL, Circuit Judge, GODBOLD ^* and CYR, Senior Circuit Judges.

CYR, Senior Circuit Judge.

Plaintiff Lyle Richards International, Ltd., a Massachusetts corporation, appeals from a district court judgment dismissing its contract action against Ashworth, Inc., a Delaware corporation with its principal place of business in California. We affirm.

I BACKGROUND

In March 1994, Ashworth hired a former Lyle employee, Andrew Tarlow, to direct its new golf shoewear operations in California. Shortly thereafter, without direct or indirect solicitation from Ashworth, Lyle made overtures, through Tarlow, to serve as Ashworth's purchasing agent. Over the next two months, Lyle and Ashworth discussed the matter by phone and at meetings in California and China. At no time did Ashworth advertise for or solicit a purchasing agent in Massachusetts.

Not later than July 1994, Ashworth, through Tarlow, proposed entering into a formal written agreement with Lyle. In due course, the Agreement, drafted and signed by Lyle in Massachusetts, was mailed to California, where Ashworth executed it on August 5. The Agreement designated Lyle as Ashworth's purchasing agent for footwear manufactured in China and Taiwan, but required Ashworth to undertake no specific contractual responsibilities in Massachusetts.

Thereafter, Ashworth periodically forwarded purchase orders to Lyle in Massachusetts, which Lyle transmitted to the appropriate Chinese or Taiwanese factory. Ashworth communicated with Lyle in Massachusetts two or three times a week regarding ongoing contract performance, and from time to time placed orders with shoe-component suppliers which were instructed to bill Lyle directly. In addition, during the term of the Agreement an Ashworth representative attended three trade shows in Massachusetts, accompanied on two occasions by a Lyle employee.

The Agreement prescribed a one-year term. Absent written notice of termination from either party at least ninety days prior to its anniversary date, the Agreement renewed itself automatically. In August 1995, Ashworth provided written notice of termination to Lyle, dated April 19, 1995.

Thereafter, Lyle filed suit against Ashworth in a Massachusetts superior court, alleging breach of contract and unfair trade practices under Mass. Gen. Laws ch. 93A, §§ 2, 11, claiming that the termination notice had been back-dated to April 1995 to conceal its untimeliness under the Agreement. Following its removal, see 28 U.S.C. §§ 1332(a) & 1441(a), and a nonevidentiary hearing, the action was dismissed for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2).

II DISCUSSION ¹

A. The Breach of Contract Claim

In a diversity case, personal jurisdiction over a nonresident defendant is constrained both by the long-arm statute of the forum state and the Due Process Clause of the Fourteenth Amendment. See Ticketmaster-New York, Inc. v. Alioto, 26 F.3d 201, 204 (1st Cir.1994). Massachusetts law permits Commonwealth courts to assert jurisdiction "over a person, who acts directly or by an agent, as to a cause of action in law or equity arising from the person's ... transacting any business in this commonwealth ...." Mass. Gen. Laws ch. 223A, § 3(a) (emphasis added).

The "transacting business" test under section 3(a) is designed to identify deliberate, as distinguished from fortuitous, contacts with the forum by the nonresident party, see, e.g., Good Hope Indus., Inc. v. Ryder Scott Co., 378 Mass. 1, 389 N.E.2d 76, 82 (1979), with a view to determining whether " 'the possible need to invoke the benefits and protections of the forum's laws was reasonably foreseeable....' " Id. (quoting Product Promotions, Inc. v. Cousteau, 495 F.2d 483, 496 (5th Cir.1974)). Often, the "transacting business" test is importantly informed by ascertaining whether the nonresident party initiated or solicited the business transaction in Massachusetts. For instance, the Massachusetts Supreme Judicial Court ("SJC") has held that a California corporation transacted business in Massachusetts by systematically advertising its California hotel in Massachusetts. See Tatro v. Manor Care, Inc., 416 Mass. 763, 625 N.E.2d 549, 551-52 (1994); see also Hahn v. Vermont Law Sch., 698 F.2d 48, 51 (1st Cir.1983) (nonresident law school transacted business by sending application for admission and notice of acceptance to plaintiff in Massachusetts); New Hampshire Ins. Guar. Ass'n v. Markem Corp., 424 Mass. 344, 676 N.E.2d 809, 812-13 (1997) (nonresident insured did not transact business by mailing premium payments to Massachusetts, since Massachusetts-based insurer solicited insurance business in New Hampshire).

An Ashworth affidavit--attesting that Lyle had proposed, in March 1994, to serve as Ashworth's purchasing agent--went unopposed by Lyle. Instead, Lyle relied upon the inapposite fact that it was Ashworth which suggested, during the summer of 1994, that the precise terms of the business relationship previously proposed by Lyle be reduced to writing.

Although any effect a nonresident defendant's activity may have had upon commerce in Massachusetts is also to be considered in determining whether it transacted business in the Commonwealth, see Droukas v. Divers Training Academy, Inc., 375 Mass. 149, 376 N.E.2d 548, 551 n. 5 (1978), the purely incidental contacts involved here were insufficient to support an assertion of personal jurisdiction over Ashworth. See, e.g., Whittaker Corp. v. United Aircraft Corp., 482 F.2d 1079, 1085 (1st Cir.1973) (finding defendant's contacts with Massachusetts insufficient, and thus no personal jurisdiction, where there was "no requirement in any of the agreements that performance take place in Massachusetts") (emphasis added); New Hampshire Ins. Guar. Ass'n v. Markem Corp., 424 Mass. 344, 676 N.E.2d 809, 812 (1997) ("That [plaintiff] then decided to conduct some administration ... in Massachusetts ... cannot be the basis for personal jurisdiction against [defendant] where [defendant] reasonably assumed it would be doing business with [plaintiff] in New Hampshire and did in fact conduct most of its business ... there.") (emphasis added). See also Nichols Assocs., Inc. v. Starr, 4 Mass.App.Ct. 93, 341 N.E.2d 909, 912 (1976) (no significant involvement in commerce of Massachusetts, and thus no personal jurisdiction, where nonresident defendant's "contact [was] limited to the ... acceptance of services which the plaintiff simply chose to perform in Massachusetts.") (emphasis added).

For one thing, most performance required from Lyle under the Agreement was to be rendered outside Massachusetts. The Agreement did not even require that the internal administrative functions actually conducted by Lyle in Massachusetts be performed there, such as arranging for merchandise shipments from the Chinese-Taiwanese suppliers to Ashworth in California, receiving price quotes or product samples from the Asian factories, or reporting to Ashworth on market conditions and the availability of merchandise.

Nor does the Agreement indicate that Lyle either needed or intended to perform its "quality control" responsibilities in Massachusetts. Rather, most of its core contractual responsibilities relating to the inspection of merchandise would have had to have been performed in China or Taiwan, rather than Massachusetts. Thus, its performance of various attendant chores in Massachusetts was incidental to the formation of the Agreement. See Nichols Assocs., Inc., 341 N.E.2d at 912. ²

Finally, Lyle notes, Ashworth attended three trade shows in Massachusetts, accompanied by a Lyle employee on at least two occasions, and Lyle performed two contract functions in Massachusetts: designing golf shoes and purchasing various golf-shoe components and the materials with which to package them for shipment to Asia. Nevertheless, as these initiatives were undertaken unilaterally by the respective parties, even though neither was responsible for their performance under the Agreement, this attempt to assert personal jurisdiction over Ashworth is unavailing since chapter 223A requires that the cause of action have "aris[en] from [Ashworth's ] ... transacting any business in [Massachusetts]...." Mass. Gen. Laws ch. 223A, § 3(a) (emphasis added). We explain briefly.

The "arising from" clause in chapter 223A is to be generously construed in favor of asserting personal jurisdiction, by applying the following "but...