RI HOSP. TR. NB v. San Gabriel Hydroelectric Partnership, Civ. A. No. 86-0773 L.

• Decision Date: 21 August 1987
• Docket Number: Civ. A. No. 86-0773 L.
• Citation: 667 F. Supp. 66
• Parties: RHODE ISLAND HOSPITAL TRUST NATIONAL BANK, Plaintiff, v. SAN GABRIEL HYDROELECTRIC PARTNERSHIP, RHM Energy Development Corporation and Hydrowest of California, Inc., Defendants.
• Court: U.S. District Court — District of Rhode Island

667 F. Supp. 66

RHODE ISLAND HOSPITAL TRUST NATIONAL BANK, Plaintiff, v. SAN GABRIEL HYDROELECTRIC PARTNERSHIP, RHM Energy Development Corporation and Hydrowest of California, Inc., Defendants.

Civ. A. No. 86-0773 L.

United States District Court, D. Rhode Island, First Division.

August 21, 1987.

COPYRIGHT MATERIAL OMITTED

Mark A. Pogue, Edwards and Angell, Providence, R.I., for plaintiff.

Gerard M. DeCelles, Providence, R.I., for defendants.

OPINION AND ORDER

LAGUEUX, District Judge.

The sole issue presented by the parties for decision concerns the scope of a federal district court's in personam jurisdiction over out-of-state defendants under the due process clause of the United States Constitution. The facts giving rise to this issue are as follows.

Plaintiff, Rhode Island Hospital Trust National Bank (RIHTNB), is a national banking association with its principal place of business in Providence, Rhode Island. Defendant, San Gabriel Hydroelectric Partnership (SGHP), is a limited partnership engaged in the construction and operation of a dam with hydro-electric power generation capability in Los Angeles, California. Defendant, RHM Energy Development Corporation (RHM), is a California corporation with its principal place of business in that state. RHM is a general partner in SGHP. The third defendant named in plaintiff's complaint is Hydrowest of California, Inc. (Hydrowest), a corporation organized under the laws of California and with its principal place of business in that state. Hydrowest is a limited partner in SGHP.

In August of 1984, SGHP approached the Bank of California (BOC) for construction financing of a 4.975 megawatt hydroelectric generating facility located on San Gabriel Dam in Los Angeles County, California. BOC, in turn, contacted RIHTNB in December of 1984, about the possibility of participating in the financing of the project. Later that month, Mr. Phillip Schlernitzauer, a Vice-President at RIHTNB, contacted BOC by telephone and requested that it send financial information for RIHTNB's use in evaluating defendants' loan application. SGHP provided that information, and throughout the following two weeks a number of communications by telephone took place between Schlernitzauer and officials at BOC and RHM concerning the financial information.

On January 10, 1985, RIHTNB's Credit Committee approved the loan application and informed BOC and RHM of this development. Eight days later RIHTNB and BOC entered into a written contract in the form of a commitment letter (First Commitment Letter). This letter was signed on behalf of SGHP by Donald C. Hawkins, President of RHM and by Miles Duffy, President of Hydrowest.

Prior to the execution of the First Commitment Letter, SGHP was waiting for an exemption from licensing from the Federal Energy Regulatory Commission (FERC). It is agreed that because receipt of this waiver did not occur prior to April 30, 1985, as provided in Paragraph 14 of the letter, there was no obligation on the part of BOC or RIHTNB to loan SGHP funds. Accordingly, the First Commitment Letter lapsed.

In January of 1986, RIHTNB claims that it received a telephone call from SGHP through RHM in which it learned that the processing of SGHP's waiver had been completed. In this call, RIHTNB also claims that "SGHP wanted a new loan commitment letter from RIHTNB and BOC." Approximately one week later, a second telephone conversation occurred between RIHTNB and Hawkins in which Hawkins indicated that "he would be eager to recommit to a second loan and to get SGHP's offer memo out." In February of 1986, BOC withdrew from the negotiations to loan funds to SGHP; however, RIHTNB continued these negotiations of its own accord.

On February 19, 1986, Douglas Rastello, a Vice-President of RHM, traveled to Rhode Island and discussed the contemplated financing with staff from RIHTNB. Four days later, plaintiff contends (and it is not disputed) that RHM mailed a cover letter plus a "three-inch thick stack" of SGHP financial and background data to RIHTNB. These materials were to be used in order to decide whether RIHTNB should offer another loan to SGHP. One month later RHM mailed another cover letter and two-inch stack of SGHP material, again for RIHTNB's use in reviewing SGHP's loan request.

On March 18, 1986, RIHTNB executed and mailed to SGHP a second loan commitment letter (Second Commitment Letter). RHM (via Hawkins) executed this letter as General Partner for SGHP on March 31, 1986, and telecopied it back to RIHTNB. Throughout the months of April and May of 1986, further negotiations took place between RIHTNB and RHM. It is agreed that these communications took place in person, by mail and by telephone, and focused on the possibility of modifying the Second Commitment Letter in light of proposed changes to the 1987 federal tax laws. More specifically, on May 12, 1986, Rastello and Peter Nataras, an attorney representing SGHP, flew to Rhode Island from California and met with Schlernitzauer at the offices of RIHTNB. The two executives met for approximately eight hours over two days and eventually came to an understanding concerning a proposal to modify the Second Commitment Letter.

One week later Schlernitzauer flew to Los Angeles, California to look at the project site and to meet with Rastello. At this meeting Schlernitzauer delivered a third commitment letter (Third Commitment Letter) to Rastello dated May, 1986. This letter was not signed by RHM.

On August 22, 1986, SGHP informed RIHTNB that it had obtained alternative financing. Several months later RIHTNB brought suit in this Court alleging breach of the Second Commitment Letter. This included defendants' alleged failure to pay a $30,000 facility fee as specified in that letter and $4,031.50 in legal fees incurred by RIHTNB in connection with the proposed loans. Defendants, then, moved to dismiss plaintiffs cause of action under Fed.R.Civ.P. 12(b)(2) for lack of jurisdiction over the person. The matter was heard on June 18, 1987, and taken under advisement. It is now in order for decision.

Consideration of personal jurisdiction requires a federal court to undertake a twostep method of analysis. First, the court must determine whether the requirements of the long-arm statute of the state in which the court is sitting are satisfied. Secondly, the court must determine whether the mandates of the due process clause to the Constitution of the United States have been met.

The first step is but a short hop. The Supreme Court of Rhode Island has interpreted Rhode Island's long-arm statute as reaching to the full breadth of the Fourteenth Amendment's due process clause. Conn v. ITT Aetna Finance Co., 105 R.I. 397, 402, 252 A.2d 184, 186 (1969). Thus, adjudication of the present matter automatically shifts to examination of the second step laid out above.

The United States Supreme Court has indicated that courts must engage in a three-part analysis in determining whether the mandates of the due process clause have been satisfied. First, a court is required to determine whether the jurisdiction exercised is specific or general. Then, depending upon the type of jurisdiction that is exercised, a court must examine the nature of the defendant's contacts with the forum state. Lastly, if the defendant has "minimum contacts" with the forum state, the court must still inquire whether it is "unreasonable" for it to exercise personal jurisdiction in the particular matter.

Whether a court's jurisdiction is specific or general depends upon the relationship between plaintiff's claims and defendant's contacts with the forum state. Where plaintiff's claims "arise out of" or are "directly related" to defendant's contacts with the forum state, a court exercises specific jurisdiction. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414, n. 8, 104 S.Ct. 1868, 1872, n. 8, 80 L.Ed.2d 404 (1984). Conversely, where plaintiff's claims do not arise out of or are not directly related to defendant's contacts with the forum state, a court exercises general jurisdiction. Id. at 414 n. 9, 104 S.Ct. at 1872 n. 9.

It is undisputed in the present case that plaintiff's claims against RHM "arise out of" or are "directly related" to RHM's contacts with the state of Rhode Island. RIHTNB alleges that RHM breached the Second Commitment Letter. The Second Commitment Letter, in turn, was formulated out of a lengthy series of negotiations which occurred between RHM and RIHTNB, at least in part, in Rhode Island. RHM's contacts with Rhode Island, then, directly produced the contract upon which plaintiff's claim rests. Consequently, the jurisdiction purportedly exercised by this Court is specific in nature.

The second part of the Supreme Court's three-part test was most recently discussed by the Court in the case of Asahi Metal Ind. v. Superior Court, ___ U.S. ___, 107 S.Ct. 1026, 1033, 94 L.Ed.2d 92 (1987). There, the Court once again stressed that in order for a federal court to assert personal jurisdiction consonant with requirements of due process, a defendant's actions must be "purposefully directed toward the forum state." Id. 107 S.Ct. at 1033 (plurality opinion). Two years prior to the Asahi decision, the Court ruled that analysis of purposeful conduct in the contract context must be undertaken by discussion of three considerations:

(1) The parties prior negotiations and contemplated future consequences.

(2) The terms of the contract itself.

(3) The parties actual course of dealing.

Burger King Corp. v. Rudzewicz, 471 U.S. 462, 479, 105 S.Ct. 2174, 2185-86, 85 L.Ed.2d 528 (1985).

The second of these considerations merits little discussion. There is no choice of law provision in the Second Commitment Letter which would suggest that RHM was purposefully directing its conduct towards Rhode Island. Nonetheless, absence of such a provision is not determinative of the character of RHM's conduct.

More important are the first and third...