Mesalic v. Fiberfloat Corp.

Decision Date07 March 1990
Docket NumberNos. 89-5362,89-5660 and 89-5661,s. 89-5362
Citation897 F.2d 696
Parties, 58 USLW 2545 James D. MESALIC, Appellant, v. FIBERFLOAT CORP. d/b/a Harley Boat Company, Howard D. Harley, individually, jointly and severally, Appellee.
CourtU.S. Court of Appeals — Third Circuit

Herbert J. Stern (argued), and Richard K. Coplon, Hellring Lindeman Goldstein Siegal Stern & Greenberg, Newark, N.J., for appellant.

Gabriel H. Halpern (argued), Fox and Fox, Newark, N.J., for appellee.

Before HIGGINBOTHAM, Chief Judge, * and SCIRICA, Circuit Judge, and HUTTON, District Judge. **

OPINION OF THE COURT

A. LEON HIGGINBOTHAM, Jr., Chief Judge.

Appellant, James D. Mesalic (Mesalic), appeals from a final order of the United States District Court for the District of New Jersey dismissing this diversity complaint for lack of in personam jurisdiction over the appellees, Howard Harley (Harley) and Fiberfloat Corp., d/b/a Harley Boat Company (Fiberfloat). 708 F.Supp. 641. 1 We will reverse the district court's order.

I.

Mesalic is a New Jersey citizen. The president of Fiberfloat, Howard Harley, is a citizen of the State of Florida. Fiberfloat, a Florida corporation with its principal place of business in Bartow, Florida, advertises its products for sale in Boating, a magazine aimed at a national audience. Boating is not directed specifically to New Jersey residents. However, at oral argument, appellees conceded that the magazine was distributed in New Jersey. Because Fiberfloat has no showrooms or distribution network in New Jersey, Mesalic went to its manufacturing facility in Bartow, Florida to purchase a boat. Harley quoted a price for Mesalic and the next day, he signed a contract to purchase a 42-foot custom built, luxury power boat. The purchase was conditioned upon Mesalic's satisfaction with a sea trial of the same model boat. The sales agreement was silent as to which state's law would govern interpretation of the contract. However, the warranty gives Fiberfloat the right to require the customer to deliver the vessel to Fiberfloat's facility in Florida for repairs. 2 The total cost of the boat was approximately $235,000 including $1,650 for delivery.

After conducting a trial run, Mesalic made a down payment and Fiberfloat began construction of his boat. While the boat was under construction, Mesalic made several trips to Florida to inspect the construction and to make progress payments. At other times, however, the parties communicated by mail and by telephone. Fiberfloat wrote to Mesalic at his home in Flanders, New Jersey on January 27, March 2, April 1, and May 18, 1988. At all times Fiberfloat knew that the boat was to be used in New Jersey as Mesalic lived and had made docking arrangements there.

On or about March 5, 1988, Mesalic made final payment on the vessel in Florida and then tested the vessel for several days. Mesalic's affidavit indicates that the boat had hull leaks and problems relating to the steering mechanism, the fuel lines, the propellers, and the electrical system. Mesalic did not seek to reject or seek to revoke acceptance of the vessel at that time but instead instructed Fiberfloat to correct certain deficiencies and to add $2,000 worth of custom accessories. Mesalic also requested that a Fiberfloat mechanic transport the vessel to New Jersey and it was, in fact, delivered at the end of April, 1988. 3

After the boat's arrival in New Jersey, the engines would not start. A Fiberfloat employee unsuccessfully attempted to get the boat started. Another Fiberfloat mechanic also worked on the boat in New Jersey from May 7 through May 27, 1988. After the engine was finally started, other defects were discovered, including leaks and delamination. During a sea trial of the vessel, the steering mechanism failed and water penetrated the hull. Mesalic requested that the mechanic transport the vessel back to Fiberfloat's Florida facility.

While the vessel was en route to Florida, Mesalic informed Fiberfloat that he no longer wanted the boat. Mesalic brought suit for damages on October 18, 1988 in the District of New Jersey alleging, inter alia, breach of contract and seeking recision. Mesalic contends that the vessel contained major latent defects. Fiberfloat filed an answer and motion to dismiss alleging lack of in personam jurisdiction. On March 29, 1989 the district court granted Fiberfloat's motion and dismissed the case pursuant to Fed.R.Civ.P. 12(b)(2).

Subsequent to the district court's dismissal, Mesalic filed a notice of appeal and motions pursuant to Fed.R.Civ.P. 15 and 59, seeking to amend the complaint or to alter and amend the judgment. Mesalic moved in the alternative under Rule 60, for relief from final judgment. Fiberfloat filed a timely response and cross-motion for imposition of Rule 11 sanctions. The district court denied all motions.

II.

The issue on appeal is whether the district court properly determined that Fiberfloat lacked the requisite minimum contacts with New Jersey to subject it to suit there. Because the district court dismissed the complaint for lack of personal jurisdiction, the court had no occasion to rule on the substantive validity of the plaintiff's claim. The personal jurisdiction question is the principal issue before us now. 4 We have plenary review of this issue of law.

III.
A.

Rule 4(e) of the Federal Rules of Civil Procedure authorizes a district court to assert personal jurisdiction over a non-resident to the extent permissible under the law of the state where the district court sits. New Jersey's long-arm rule, applicable in the instant case, states in relevant part:

Service of summons, writs and complaints shall be made as follows:

... Upon a domestic or foreign corporation, by serving ... any person authorized by appointment or by law to receive service of process on behalf of the corporation ... consistent with due process of law....

N.J. Civil Practice Rule 4:4-4(c). New Jersey's long-arm rule has been interpreted as extending jurisdiction over non-residents "to the uttermost limits permitted by the United States Constitution." Charles Gendler Co. v. Telecom Equity Corp., 102 N.J. 460, 469, 508 A.2d 1127, 1131 (1986) (quoting Avdel Corp. v. Mecure, 58 N.J. 264, 268, 277 A.2d 207, 209 (1971)). Accordingly, this court can exercise jurisdiction over Fiberfloat only if Mesalic can demonstrate that Fiberfloat's contacts with New Jersey are sufficient to satisfy the Due Process Clause of the United States Constitution. 5

In cases where the defendant has properly raised a jurisdictional defense, "the plaintiff bears the burden of demonstrating [that] contacts with the forum state [are] sufficient to give the court in personam jurisdiction." Time Share Vacation Club v. Atlantic Resorts, Ltd., 735 F.2d 61, 63 (3d Cir.1984) (quoting Compagnie des Beauxites de Guinee v. l'Union Atlantique S. A. d'Assurances, 723 F.2d 357, 362 (3d Cir.1983)). A plaintiff can meet this burden by establishing general or specific jurisdiction over the defendant. As this court has explained:

[G]eneral jurisdiction, 'exists when the claim does not arise out of or is unrelated to the defendant's contacts with the forum.... '[S]pecific jurisdiction,' is invoked when the claim is related to or arises out of the defendant's contacts with the forum.

Dollar Savings Bank v. First Security Bank of Utah, 746 F.2d 208, 211 (3d Cir.1984) (citations omitted). Fiberfloat correctly notes that specific jurisdiction is at issue in the present case.

B.

The minimum contacts framework, as first set out in International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), provides the standard for determining specific jurisdiction. Recently, the Supreme Court described the standard as the "constitutional touchstone" for the due process analysis of personal jurisdiction. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474, 105 S.Ct. 2174, 2183, 85 L.Ed.2d 528 (1985).

In Burger King, the Supreme Court held that a Florida district court's exercise of jurisdiction over a Michigan resident was constitutional where the Michigan resident had signed a long-term franchise contract which involved substantial connection to a Florida corporation. Id. at 479, 105 S.Ct. at 2185. The Court reasoned that the minimum contacts at issue must have a basis in "some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum state." Id. at 475, 105 S.Ct. at 2183 (quoting Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1239, 2 L.Ed.2d 1283 (1958)). Although the Court held that a single contract with a forum state resident may subject an out-of-state party to the jurisdiction of that state's courts in a dispute arising from that contract, the Court cautioned that a contract alone cannot "automatically establish sufficient minimum contacts in the other party's home forum...." Burger King, 471 U.S. at 478, 105 S.Ct. at 2185. Additionally, courts must evaluate "prior negotiations and contemplated future consequences, along with the terms of the contract and the parties' actual course of dealing ... in determining whether the defendant purposefully established minimum contacts within the forum." Id. at 479, 105 S.Ct. at 2185.

This court considered the issue of minimum contacts, using the rationale in Burger King in an action where a New Jersey telephone company sued a California hotel seeking to recover amounts due for use of business phones or, alternatively, possession of the phone system. 6 The court held that the district court properly asserted specific jurisdiction over the California hotel. The court reasoned that where the contract between the two parties involved monitoring the phone system from the New Jersey company's home offices and "created continuing obligations" between the parties for the duration of the ten year contract, there was a sufficiently close nexus between the contract...

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