Reynolds Metals Co. v. Fmali, Inc.

• Decision Date: 26 September 1994
• Docket Number: Civ. A. No. 3:94cv413.
• Parties: REYNOLDS METALS COMPANY, Plaintiff, v. FMALI, INC., Defendant.
• Court: U.S. District Court — Eastern District of Virginia

862 F. Supp. 1496

REYNOLDS METALS COMPANY, Plaintiff, v. FMALI, INC., Defendant.

Civ. A. No. 3:94cv413.

United States District Court, E.D. Virginia, Richmond Division.

September 26, 1994.

Charles Manley Allen, Jr., David Ernest Boelzner, Wright, Robinson, McCammon, Osthimer & Tatum, Richmond, VA, for plaintiff.

Robert Steven Holt, William R. Pendergast, Arent, Fox, Kintner, Plotkin & Kahn, Washington, DC, for defendant.

MEMORANDUM OPINION

PAYNE, District Judge.

This case comes before the Court on the motion of FMALI, Inc. ("FMALI") to dismiss this action or, alternatively, to transfer it to California. Reynolds Metals Company ("Reynolds") complains that FMALI has failed to pay for certain packaging as contractually obligated, and it asserts that FMALI is subject to personal jurisdiction in Virginia. FMALI is a family-owned California corporation with its principal place of business in California; and Reynolds is a Delaware corporation with its principal place of business in Virginia.

The parties' contractual obligations stem from two contracts for Reynolds to manufacture and deliver to FMALI packaging for FMALI's Good Earth brand of herbal teas. The first contract, Supply Agreement 6433 ("SA 6433"), was executed on December 21, 1993. The second contract, Supply Agreement 6441 ("SA 6441"), was executed on May 4, 1994, after it was discovered that the packaging called for by SA 6433 was contaminating the teas. On the jurisdiction and venue issues, FMALI claims that, in negotiating SA 6433, it dealt only minimally with Reynolds employees in Richmond, Virginia, and that it was unaware the packaging would be manufactured in Richmond. Finding this argument unpersuasive, the court denies the Defendant's motion to dismiss and, moreover, defers to the Plaintiff's choice of venue.

STATEMENT OF FACTS

The parties' relationship began in 1992 when Reynolds personnel residing in California offered to supply FMALI with packaging for its teas at a price lower than that asked by FMALI's then-current supplier. Before execution of SA 6433, FMALI employees in California communicated with Reynolds employees in California, Texas, Arizona, and Virginia, but no FMALI employee ever travelled to Virginia for these or any subsequent communications with Reynolds. FMALI contends that its communications by telephone and telefax with Virginia were not negotiations, but only exchanges of technical information.

In April of 1993 and by agreement of the parties, Reynolds forwarded from Richmond a small pilot run of packaging. Following FMALI's approval of the pilot run and with its consent, Reynolds shipped from Richmond a limited plant run of two million pieces in November of 1993. A few weeks later, the parties agreed to terms and a contract was drafted. On December 16, a Reynolds representative in Richmond became the first to sign SA 6433, and then, after it was delivered to California, the document was finally executed by a FMALI representative in Santa Cruz on December 21.

The relationship contemplated by the parties' agreement was a significant one. The contract was essentially a two-year requirements contract to begin January 1, 1994, and it estimated the annual volume at 80 million packages — a lot of tea. Prices were set as a function of the volume ordered at one time. The contract evidences some connection with Virginia on its face. The SA 6433 document itself has Reynolds's Richmond address in the heading, but it does not specifically state that the packaging would be manufactured in Richmond. It does, however, call for Virginia law to govern all aspects of the contract. On the other hand, the parties agreed that delivery would be made "F.O.B. Destination California," and in the course of performance, Reynolds asked that all payments be made to a bank in California.

Performance under SA 6433 and negotiations leading to SA 6441 involved more contact with Virginia. In February of 1994, Reynolds produced in Richmond and delivered to California about thirty million packages. Although apparently neither party had suspected a problem, some of FMALI's customers began noticing a bad taste in Good Earth Tea. FMALI's testing revealed that the Reynolds packaging was contaminating the tea, and it refused to pay for most of the packages. Both parties wanted or needed to continue their relationship; so discussions between the two parties from March to May of 1994 led to SA 6441, essentially replacing SA 6433 and calling for a different type of packaging, a lower volume, and a higher price. The Reynolds representatives involved in most of these discussions were in Richmond. The second supply agreement's appearance and manner of execution were very similar to those of the first. In particular, Reynolds's Richmond address was still in the heading; Virginia law was still invoked; and it was again signed first in Richmond, then forwarded to California for a FMALI representative's signature. Under SA 6441, FMALI has accepted at least 30 million packages.

DISCUSSION

A. The Basic Law Of Personal Jurisdiction

In considering a challenge to personal jurisdiction, the plaintiff has the burden of establishing jurisdiction by a preponderance of the evidence. See Combs v. Bakker, 886 F.2d 673, 676 (4th Cir.1989); Verosol B.V. v. Hunter Douglas, Inc., 806 F.Supp. 582, 588 (E.D.Va.1992). The plaintiff is entitled, however, to favorable inferences from the pleadings, affidavits, and documents submitted on the issue. See Combs, 886 F.2d at 676; Verosol, 806 F.Supp. at 588.

Reynolds must prove both that FMALI falls within Virginia's long-arm statute, Va. Code Ann. § 8.01-328.1 (Michie 1992), and that the exercise of personal jurisdiction will not violate the Due Process Clause of the Fourteenth Amendment. Verosol, 806 F.Supp. at 589. Although this is the traditional way of framing the two-prong inquiry, only the second prong requires consideration because the Supreme Court of Virginia has held that the Virginia long-arm statute extends personal jurisdiction to the full extent permitted by due process. See Peanut Corp. of America v. Hollywood Brands, Inc., 696 F.2d 311, 313 (4th Cir.1982); Superfos Investments v. FirstMiss Fertilizer, 774 F.Supp. 393, 397 (E.D.Va.1991).

Reynolds limits the issue still further by asserting only the theory of specific jurisdiction and not pursuing the theory of general jurisdiction. Plaintiff's Response in Opposition to Defendant's Motion to Dismiss, at 27-28 n. 8. Personal jurisdiction exists "specifically" if the instant controversy "arises out of" sufficient contacts with Virginia; it would exist "generally" where a defendant had sufficient "continuous and systematic" contacts to permit the courts of the forum fairly to exercise personal jurisdiction no matter what the controversy. See Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408, 414-15, 104 S.Ct. 1868, 1872, 80 L.Ed.2d 404 (1984). Not surprisingly, then, "a less strict standard applies to specific jurisdiction." Superfos Investments, 774 F.Supp. at 397.

B. Personal Jurisdiction Law Applied "Specifically"

The "essential foundation" of specific jurisdiction is a "relationship among the defendant, the forum, and the litigation." Shaffer v. Heitner, 433 U.S. 186, 204, 97 S.Ct. 2569, 2579-80, 53 L.Ed.2d 683 (1977). In evaluating this relationship here, the court looks to "prior negotiations and contemplated future consequences, along with the terms of the contract and the parties' actual course of dealing." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 479, 105 S.Ct. 2174, 2185, 85 L.Ed.2d 528 (1985). Thus, the court must analyze FMALI's relationship with Virginia in light of the supply agreements giving rise to this litigation.

The Supreme Court confronted a similar task in Burger King, primarily a breach of contract case. There, Burger King, a Florida corporation with its principal offices in Florida, invoked the jurisdiction of Florida courts over Mr. Rudzewicz, a Michigan resident who had partly owned a Burger King franchise in Michigan. Burger King complained that Rudzewicz and his partner had failed to make payments required by the franchise contract and that the two partners were tortiously infringing its trademarks by continuing the franchise after Burger King had terminated it. Id. at 464-69, 105 S.Ct. at 2177-80. Finding that the exercise of jurisdiction was proper, the Supreme Court summarized its reasoning this way:

Because Rudzewicz established a substantial and continuing relationship with Burger King's Miami headquarters, received fair notice from the contract documents and the course of dealing that he might be subject to suit in Florida, and has failed to demonstrate how jurisdiction in that forum would otherwise be fundamentally unfair, we conclude that the District Court's exercise of jurisdiction ... did not offend due process.

Id. at 487, 105 S.Ct. at 2190.

1. Relationship With Reynolds In Richmond

Essentially the same can be said in this case. First, FMALI established a "substantial and continuing" relationship with Reynolds in Richmond. Reynolds was apparently to be the sole FMALI supplier of tea packaging for two years, and FMALI had reason to know Reynolds would be manufacturing the packages in Richmond. FMALI admits it communicated technical and delivery information to Richmond during negotiations. Also, it could easily tell that the contract was forwarded to California from Richmond, and it could see the Richmond address in the heading of the document itself. Finally, the pilot and plant runs in April and November of 1993 came from Richmond. FMALI employees may have believed that Reynolds's decisions were made primarily in California and Texas, see Declaration of Ben Zaricor, ¶ 4 (attached to Defendant's Reply Memorandum), but this does not eliminate the rather substantial Virginia connection, of which FMALI had reason to know, with the supply agreement. Indeed, in Burger King, Rudzewicz argued, and the Eleventh...