Phone Directories Co., Inc. v. Henderson

• Decision Date: 15 August 2000
• Docket Number: No. 981728.,981728.
• Citation: 2000 UT 64,8 P.3d 256
• Parties: PHONE DIRECTORIES CO., INC., Plaintiff and Appellant, v. Walter HENDERSON, Defendant and Appellee.
• Court: Utah Supreme Court

8 P.3d 256

2000 UT 64

PHONE DIRECTORIES CO., INC., Plaintiff and Appellant, v. Walter HENDERSON, Defendant and Appellee.

No. 981728.

Supreme Court of Utah.

August 15, 2000.

R. Stephen Marshall, Steve K. Gordon, Salt Lake City, for plaintiff.

Paul C. Drecksel, Mark R. Clements, Salt Lake City, for defendant.

DURHAM, Justice:

¶1 Phone Directories Company, Inc. ("PDC") sued Walter Henderson for breach of contract, breach of the implied covenant of good faith and fair dealing, and interference with economic relations. In response, Henderson filed a motion to dismiss for lack of personal jurisdiction or, alternatively, for failure to state a claim upon which relief could be granted. The trial court, finding that it lacked personal jurisdiction over Henderson, granted Henderson's motion to dismiss. We reverse and remand.

STANDARD OF REVIEW

¶2 At issue in this appeal is the trial court's ruling on Henderson's pretrial motion to dismiss for lack of personal jurisdiction. Trial courts "may determine jurisdiction on affidavits alone, permit discovery, or hold an evidentiary hearing." Anderson v. American Soc'y of Plastic and Reconstructive Surgeons, 807 P.2d 825, 827 (Utah 1990) (approving procedures employed by federal trial courts when making pretrial determinations regarding personal jurisdiction as appropriate guidelines for Utah's trial courts). The record indicates that the trial court made its determination concerning personal jurisdiction based upon affidavits submitted by the parties. Thus, we review the trial court's decision for correctness. See Arguello v. Industrial Woodworking Mach. Co., 838 P.2d 1120, 1121 (Utah 1992)

("Where a pretrial jurisdictional decision has been made on documentary evidence only, an appeal from that decision presents only legal questions that are reviewed for correctness.").

FACTS

¶3 PDC is a Utah corporation with its principal place of business in Utah County, Utah.¹ PDC is in the business of publishing telephone directories. PDC employs sales representatives to contact businesses that may be interested in advertising in PDC's directories.

¶4 Henderson is a resident of Big Bear, California. Since 1972, he has resided in California and has filed tax returns and paid state income tax solely in California.

¶5 In the late summer or early fall of 1996, Henderson telephoned Marc Bingham, CEO of PDC, regarding the possibility of Henderson working as a PDC sales representative. During the conversation, Bingham found Henderson to be an attractive candidate for a PDC sales representative position and invited Henderson to come to PDC's offices in Orem, Utah. Henderson accepted Bingham's invitation and subsequently came to PDC's offices, where he met with Bingham and Linda Brunisholz, PDC's national sales manager, to discuss employment possibilities.

¶6 Several days later, Henderson telephoned Brunisholz at the PDC offices to continue negotiating his possible employment. During that call, Brunisholz told Henderson that PDC would hire him as a sales representative to canvass the Big Bear, California area. Henderson ultimately accepted the position.

¶7 As part of its normal hiring practice, PDC sent Henderson an Employee Representative Sales Agreement ("Agreement"), which Henderson was to sign as a condition of his employment. The Agreement contained a noncompetition clause and a forum selection/consent-to-jurisdiction clause.² After Henderson expressed some concern with the scope of the noncompetition clause, Brunisholz agreed to modify it in the form of an addendum to the Agreement. Prior to signing the Agreement and the addendum, Henderson requested that Brunisholz make further modifications, but Brunisholz refused. Shortly thereafter, Henderson sent the Agreement and addendum, both signed, to Brunisholz in Utah.

¶8 Upon receiving the signed Agreement and addendum, Brunisholz instructed another PDC employee to provide Henderson with confidential information concerning existing and potential clients, which Henderson was to use in making sales. Subsequently, relations between PDC and Henderson broke down, and PDC requested that Henderson return all of the materials provided him. Henderson complied with this request.

¶9 In the late fall or early winter of 1997, PDC sales representatives in the Big Bear area informed Bingham that Henderson was contacting businesses in Big Bear in an attempt to have those businesses agree to advertise in a competing yellow-pages directory. In response, PDC instigated a lawsuit against Henderson in Utah, claiming breach of contract, breach of the implied covenant of good faith and fair dealing, and interference with economic relations. Henderson filed a motion to dismiss for lack of personal jurisdiction, or, in the alternative, for failure to state a claim upon which relief could be granted. PDC opposed the motion, arguing that the trial court had personal jurisdiction over Henderson pursuant to the forum selection/consent-to-jurisdiction clause contained in the fully executed Agreement.³

¶10 The trial court granted Henderson's motion to dismiss for lack of personal jurisdiction.⁴ In reaching this decision, the trial court reasoned that PDC must "make a prima facie showing of specific personal jurisdiction under the Utah long-arm statute[⁵] and due process clause." It then found that Henderson's "only contact with this state was to sign a contract in California with a Utah company that choose [sic] Utah as the forum." Based upon this finding, the trial court concluded that it lacked personal jurisdiction over Henderson because "[t]his type of contact does not arise from any of the enumerated acts listed in the Utah long[-]arm statute."⁶

ANALYSIS

¶11 This case presents a question of first impression, namely, what standard should be used to determine personal jurisdiction where the underlying contract contains a forum selection/consent-to-jurisdiction clause.⁷ Generally,

[p]ersonal jurisdiction can be broken down into two categories. Either a court has general jurisdiction over a defendant or it has specific jurisdiction. General personal jurisdiction permits a court to exercise power over a defendant without regard to the subject of the claim asserted. For such jurisdiction to exist, the defendant must be conducting substantial and continuous local activity in the forum state. In contrast, specific personal jurisdiction gives a court power over a defendant only with respect to claims arising out of the particular activities of the defendant in the forum state. For such jurisdiction to exist, the defendant must have certain minimum local contacts.

Arguello v. Industrial Woodworking Mach. Co., 838 P.2d 1120, 1122 (Utah 1992). Because a forum selection/consent-to-jurisdiction clause does not create contacts with the forum state sufficient to establish general jurisdiction, we consider this court's jurisprudence regarding specific personal jurisdiction.

¶12 Under Utah law, a three-part inquiry is used to determine specific personal jurisdiction:

(1) the defendant's acts or contacts must implicate Utah under the Utah long-arm statute; (2) a "nexus" must exist between the plaintiff's claims and the defendant's acts or contacts; and (3) application of the Utah long-arm statute must satisfy the requirements of federal due process.

Harnischfeger Eng'rs, Inc. v. Uniflo Conveyor, Inc., 883 F. Supp. 608, 612-13 (D.Utah 1995); see also Utah Code Ann. § 78-27-24 (Supp. 1999) ("Any person . . . who . . . does any of the following enumerated acts, submits himself . . . to the jurisdiction of the courts of this state as to any claim arising out of or related to [such acts]."). Acts implicating Utah under Utah's long-arm statute include:

(1) the transaction of any business within this state;

(2) contracting to supply services or goods in this state;

(3) the causing of any injury within this state whether tortious or by breach of warranty;

(4) the ownership, use, or possession of any real estate situated in this state;

(5) contracting to insure any person, property, or risk located within this state at the time of contracting;

(6) with respect to actions of divorce, separate maintenance, or child support, having resided, in the marital relationship, within this state notwithstanding subsequent departure from the state; or the commission in this state of the act giving rise to the claim, so long as that act is not a mere omission, failure to act, or occurrence over which the defendant had no control; or

(7) the commission of sexual intercourse within this state which gives rise to a paternity suit under Title 78, Chapter 45a, to determine paternity for the purpose of establishing responsibility for child support.

Id.

¶ 13 The trial court in this case analyzed whether it had personal jurisdiction over Henderson pursuant to the Harnischfeger three-part inquiry stated above. In particular, the trial court considered whether Henderson's contacts with Utah satisfied subsection (1), (2), or (3) of section 78-27-24. Ultimately, it concluded that Henderson's contacts did not satisfy these subsections and granted Henderson's motion to dismiss for lack of personal jurisdiction. While the trial court raised the question of whether a forum selection/consent-to-jurisdiction clause, by itself, could confer personal jurisdiction over a defendant, it did not answer this question, instead analyzing the personal jurisdiction question under the traditional inquiry.

¶ 14 Although use of the Harnischfeger three-part inquiry to determine personal jurisdiction is generally appropriate, we conclude that a different inquiry should be made in cases involving contractual forum selection/consent-to-jurisdiction clauses.⁸ In particular, we hold that, while a forum selection/consent-to-jurisdiction clause by itself is not sufficient to confer personal jurisdiction over a defendant as a matter of law, such clauses do create a presumption in favor of jurisdiction and will be upheld...