SII MegaDiamond, Inc. v. American Superabrasives Corp.

• Citation: 969 P.2d 430
• Decision Date: 20 October 1998
• Docket Number: No. 970212,970212
• Parties: 354 Utah Adv. Rep. 26 SII MEGADIAMOND, INC., a Delaware corporation, Plaintiff and Appellant, v. AMERICAN SUPERABRASIVES CORP., a New York corporation; American Superabrasives Corp., a New Jersey corporation; Thomas M. Corcoran, an individual; and Christopher Danielak, an individual, Defendants and Appellees.
• Court: Utah Supreme Court

Page 430

969 P.2d 430

354 Utah Adv. Rep. 26

SII MEGADIAMOND, INC., a Delaware corporation, Plaintiff and Appellant, v. AMERICAN SUPERABRASIVES CORP., a New York corporation;

American Superabrasives Corp., a New Jersey corporation;

Thomas M. Corcoran, an individual; and Christopher

Danielak, an individual, Defendants and Appellees.

No. 970212.

Supreme Court of Utah.

Oct. 20, 1998.

Bruce P. Badger, Salt Lake City, for plaintiff.

Greggory J. Savage, Salt Lake City, and Earl G. Rhodes, Grand Junction, CO, for defendants.

HOWE, Chief Justice:

SII MegaDiamond, Inc., located in Provo, Utah, appeals from the trial court's dismissal of its suit on the basis of lack of personal jurisdiction. The suit sought to recover payment due from a New Jersey distributor that purchased industrial diamond products on 170 invoices ordered via fax and telephone.

FACTS

In February 1995, plaintiff SII MegaDiamond, Inc. ("SII"), a Utah-based manufacturer of industrial diamonds, and defendant American Superabrasives Corp. ("ASC"), then a New York corporation with its offices in New Jersey, signed a three-year nonexclusive distribution agreement covering the United States and six foreign countries. ASC, the distributor, projected that sales would total $2.6 million in 1995 alone. During the following two years, ASC placed orders by telephone and fax and paid by checks made payable to SII in Provo, Utah. SII shipped orders from Provo either to ASC in New Jersey or directly to ASC's customers. However, during the period between October 1995 and July 1996, ASC failed to pay 170 of the invoices, totaling $118,000.

In March 1995, unbeknownst to SII, ASC underwent a corporate dissolution in New York and shortly thereafter reincorporated in New Jersey under the same name and at the same business address ("ASC II"). During the dissolution period, SII continued to receive payments by check from ASC.

On August 9, 1996, SII filed this action against ASC in the fourth district court, joining as defendants corporate officers Thomas Corcoran and Christopher Danielak and seeking to recover payment on the delinquent invoices. Defendants removed the case to the United States District Court for the District of Utah and filed their answer to the complaint from which SII first learned of the dissolution and reincorporation. The answer did not object to jurisdiction in the federal court but stated, "Defendants allege as a separate affirmative defense that should this matter be remanded to state court, such court lacks personal jurisdiction over defendants." The United States District Court concluded that the removal was untimely and remanded the case to the fourth district court. SII then amended its complaint, designating ASC predissolution as ASC I and post-reformation as ASC II. ¹

ASC moved for dismissal of the amended complaint, arguing that the court had no jurisdiction over it under Utah Code Ann. § 78-27-24, Utah's long-arm statute, and also under the right to due process guaranteed under Amendment XIV, Section 1 of the United States Constitution. Section 78-27-24 provides in relevant part:

Any person ..., whether or not a citizen or resident of this state, who in person or through an agent does any of the following enumerated acts, submits himself, and if an individual, his personal representative, to the jurisdiction of the courts of this state as to any claim arising from:

(1) The transaction of any business within this state....

The district court heard oral arguments, concluded that ASC lacked sufficient minimum contacts with Utah to support jurisdiction, and granted its motion to dismiss, relying on

uncontested documentary evidence. The court founded its decision primarily on Scullin Steel Co. v. National Railway Utilization Corp., 676 F.2d 309 (8th Cir.1982) (decided under Missouri law) and other cases decided prior to the United States Supreme Court's benchmark decision in Burger King Corp. v. Rudzewicz, 471 U.S. 462, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985).

ANALYSIS

The "ultimate ruling on an issue of jurisdiction is one of law as applied to facts as properly determined." Transamerica Title Ins. Co. v. United Resources, Inc., 24 Utah 2d 346, 348, 471 P.2d 165, 167 (1970). Therefore, we grant no deference to the conclusions of the trial court. Ross v. Schackel, 920 P.2d 1159, 1162 (Utah 1996).

ASC contends that it did not transact business in Utah as defined by the long-arm statute and that it lacked sufficient minimum contacts with Utah to support jurisdiction under the Fourteenth Amendment guarantee of due process of law. ² It relies heavily on cases decided before the United States Supreme Court's 1985 decision in Burger King rather than on post-1985 cases from this court or from the United States Supreme Court. We note that Burger King enunciated the current standard for determining whether "sufficient minimum contacts" exist to satisfy due process. Therefore, we base our decision on post-Burger King law from this court and the United States Supreme Court.

I. SPECIFIC PERSONAL JURISDICTION UNDER THE UTAH LONG-ARM STATUTE AND FOURTEENTH AMENDMENT DUE PROCESS

The legislature has expressly stated an intent "to assert jurisdiction over nonresident defendants to the fullest extent permitted by the due process clause of the Fourteenth Amendment to the United States Constitution." Utah Code Ann. § 78-27-22. This court has explicitly upheld that policy. See Synergetics v. Marathon Ranching Co., 701 P.2d 1106, 1110 (Utah 1985) (citing Brown v. Carnes Corp., 611 P.2d 378, 380 (Utah 1980)). Therefore, we frequently make a due process analysis first because any set of circumstances that satisfies due process will also satisfy the long-arm statute. See Arguello v. Industrial Woodworking Mach. Co., 838 P.2d 1120, 1122 (Utah 1992); Parry v. Ernst Home Ctr. Corp., 779 P.2d 659, 661 (Utah 1989); Bradford v. Nagle, 763 P.2d 791, 793 (Utah 1988). In this case, however, we are asked to determine whether business conducted exclusively through remote means can qualify as "transaction of any business within this state." Recent developments in technology and in Utah law make this a vital question. ³ Consequently, we will first examine jurisdiction under section 78-27-24(1).

A. Jurisdiction Under the Long-Arm Statute

ASC denies that it has transacted any business within Utah. However, in Synergetics, we noted that section 78-27-23(2) defines " 'transaction of business within the state' " as " '[t]he activities of a nonresident person, his agents, or representatives in this state which affect persons or businesses within the State of Utah.' " 701 P.2d at 1110. The parties in that case contracted to exchange an ocean-going sailboat for a parcel of real property in Canada. Although the property was not within the state, we held that the negotiation, drafting, and signing of a single modified contract in Utah constituted the transaction of business sufficient to support jurisdiction. In the instant case, the parties did not formally execute a written contract while physically within the state. However, the Supreme Court held in Burger King that jurisdiction "may not be avoided merely because Although the distribution agreement was not a contract per se, since neither party was bound to perform, each order that ASC sent and SII received in Utah was an offer to form a contract. "The offer of a promise for an act takes place ... in the sending of an order for goods to a merchant or manufacturer." 17 C.J.S. Contracts § 36(1) (1963). SII's shipment of goods in response to an order constituted acceptance of ASC's offer. "Under the Uniform Commercial Code an order or offer to buy goods for prompt or current shipment may be accepted either by shipping the goods or promptly promising to do so...." 67 Am.Jur.2d Sales § 145 (1985) (footnotes omitted); see also 17 C.J.S. Contracts § 41(d) (1963) ("An acceptance of an offer may be by act.... In such a case, performance is the only thing needful to complete the agreement and to create a binding promise...."). "In cases involving a contract which possesses possible elements in two or more jurisdictions ... the place where the last act is done which is necessary to complete the contract and give it validity is generally regarded as the place in which the contract is made." 16 Am.Jur.2d Conflict of Laws § 97 (1998) (footnotes omitted). Therefore, "[a]n informal contract consisting of an offer in one state and an acceptance in another is usually regarded as having been made in the latter state." Id. § 98 (footnote omitted).

the defendant did not physically enter the forum State" if other contacts are sufficient. 471 U.S. at 476, 105 S.Ct. 2174 (emphasis in original).

Here, both the receipt of the offer and the "last act" needed to form the contract occurred in Utah. Furthermore, payment to SII constituted ASC's performance of its contractual promise, and default constituted breach of the contract. Consequently, the orders and shipments constituted hundreds of individual contracts, all formed and performed, or with performance due, in Utah, and all bound together into a course of business by the distribution agreement. As we held in Synergetics, the formation of a contract within a state involving a state resident qualifies as transaction of business for purposes of the long-arm statute.

Additionally, other connections are stronger in the instant case than in Synergetics. SII is located in Provo, Utah. The parties signed a three-year distribution agreement that ASC considered significant enough to set out on its letterhead. ASC subsequently produced a sales forecast of $2.6 million for 1995 alone and represented that it would hire a full-time marketer to promote the SII products. Thereafter, almost weekly orders and shipments followed. These transactions pertained to the distribution agreement and therefore constituted part of a course of business, not isolated events. In short, pursuant to a three-year...