U.S.S. Yachts, Inc. v. Ocean Yachts, Inc., s. 88-2240

• Decision Date: 02 November 1989
• Docket Number: 89-1728,Nos. 88-2240,s. 88-2240
• Citation: 894 F.2d 9
• Parties: U.S.S. YACHTS, INC., Plaintiff, Appellant, v. OCEAN YACHTS, INC., Defendant, Appellee. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 9

894 F.2d 9

U.S.S. YACHTS, INC., Plaintiff, Appellant, v. OCEAN YACHTS, INC., Defendant, Appellee.

Nos. 88-2240, 89-1728.

United States Court of Appeals First Circuit.

Heard Nov. 2, 1989.

Decided Jan. 18, 1990.

David Efron, Rio Piedras, P.R., with whom Rolando A. Silva and Bernardo Vazquez, Rio Piedras, P.R., were on brief, for plaintiff, appellant.

Freddie Perez-Gonzales with whom Woods Rosenbaum Luckeroth & Perez-Gonzalez, San Juan, P.R. was on brief, for defendant, appellee.

Before CAMPBELL, Chief Judge, COFFIN, Senior Circuit Judge, and FUSTE, ^* District Judge.

LEVIN H. CAMPBELL, Chief Judge.

The district court dismissed the present action for lack of personal jurisdiction over defendant Ocean Yachts, Inc. We affirm.

The relevant facts derived from the pleadings and affidavits are as follows. On July 6, 1984, Robert C. Buckley, president of plaintiff U.S.S. Yachts, Inc., a corporation of Florida and the Cayman Islands, British West Indies, sent a letter from his Grand Cayman office to the New Jersey office of defendant Ocean Yachts, Inc. (Ocean). ¹ In the letter, Buckley requested designation as an Ocean dealer in the British West Indies and Puerto Rico. He informed Ocean, however, that it should write to him only at his Grand Cayman address. Accompanying the letter was a stock order for three Ocean Yachts and a security deposit of $20,000.

During the next three months, Buckley and Ralph Leek, an Ocean officer, negotiated by telephone between New Jersey, Florida, and the British West Indies. In the course of these negotiations, the parties agreed that U.S.S. Yachts would be authorized as an Ocean dealer in the British West Indies. On October 30, 1984, Leek sent to Buckley's Grand Cayman address a letter formally authorizing U.S.S. Yachts as an Ocean dealer.

On November 1, 1984, Buckley bought his first yacht from Ocean for shipment to Grand Cayman. Although U.S.S. Yachts alleges that it later sold the boat in Puerto Rico, the district court found that this allegation was not adequately supported by the pleadings and affidavits. The court instead accepted as true Ocean's allegation that Buckley sold the yacht in Miami, Florida to a resident of Puerto Rico. We decline to disturb the district court's finding on this matter.

On November 9, 1984, Leek sent to Buckley's temporary Puerto Rico address a letter extending U.S.S. Yachts's exclusive Ocean dealership to the Virgin Islands and Puerto Rico. The letter further stated that Ocean reserved the right to replace U.S.S. Yachts as an Ocean dealer if U.S.S. Yachts failed to purchase a minimum of four Ocean boats per year.

On January 10, 1985, Buckley bought his second yacht from Ocean for shipment to Grand Cayman. He subsequently sold the yacht in Miami to a resident of South Carolina. Soon thereafter, in a letter sent to Buckley at another temporary Puerto Rico address, Ocean granted U.S.S. Yachts a five percent commission credit.

On June 13, 1985, Leek sent Buckley a letter to a third temporary address in Puerto Rico, informing him that because he had sold and docked Ocean boats in the United States in violation of their agreement (U.S.S. Yachts contests Ocean's version of the terms of the agreement) U.S.S. Yachts was being terminated as an authorized dealer of Ocean Yachts. The $20,000 deposit was returned.

U.S.S. Yachts then brought this diversity action against Ocean in the District Court for the District of Puerto Rico, alleging that Ocean had unjustly terminated the dealership agreement, thereby violating the Dealers' Act of Puerto Rico, 10 L.P.R.A. Secs. 278-278d. After finding that U.S.S. Yachts had failed to establish the requisite "minimum contacts" between Ocean and Puerto Rico, the district court granted Ocean's motion to dismiss for lack of personal jurisdiction. U.S.S. Yachts brought a motion for reconsideration, which the district court denied.

When challenged, the plaintiff has the burden of proving the court's jurisdiction over the defendant. See Gray v. O'Brien, 777 F.2d 864, 866 (1st Cir.1985) (per curiam). To meet its burden, the plaintiff must establish sufficient facts to support a prima facie case authorizing personal jurisdiction over the defendant under both the forum's long-arm statute and the due process clause of the Constitution. See American Express International, Inc. v. Mendez-Capellan, 889 F.2d 1175, 1179 (1st Cir.1989).

The long-arm statute applicable here is Rule 4.7 of the Puerto Rico Rules of Civil Procedure, which provides in pertinent part that:

(a) Whenever the person to be served is not domiciled in Puerto Rico, the General Court of Justice shall take jurisdiction over said person if the action or claim arises because said person:

(1) Transacted business in Puerto Rico personally or through an agent; or

(2) Participated in tortious acts within Puerto Rico personally or through his agent....

P.R.Laws Ann. app. III, Rule 4.7(a)(1), (2) (1979) (emphasis added). U.S.S. Yachts argues that Ocean "[p]articipated in tortious acts within Puerto Rico" when it cancelled the dealership agreement in June of 1985. According to U.S.S. Yachts, the allegedly unjust cancellation constituted a tortious act under the Dealers' Act of Puerto Rico. See 10 L.P.R.A. Sec. 278b ("If no just cause exists for the termination of the dealer's contract ..., the principal shall have executed a tortious act against the dealer ..."). We need not decide, however, whether U.S.S. Yachts has established a prima facie case authorizing personal jurisdiction over Ocean under Puerto Rico's long-arm statute. Even if Ocean allegedly participated in a tortious act within Puerto Rico for purposes of Puerto Rico's long-arm statute, the assertion of personal jurisdiction over Ocean by the district court would offend due process. Cf. Eveland v. Director of C.I.A., 843 F.2d 46, 50 (1st Cir.1988) ("Without discussing whether the requirements of the long-arm statute have been met, we find that defendants lack the constitutionally required 'minimum contacts' with Massachusetts to support an assertion of jurisdiction over them by the district court.").

The due process clause of the Constitution requires that before a defendant can be brought into a forum's court, two conditions must be met. First, the defendant must have purposely established "minimum contacts" with the forum such that he can reasonably anticipate being haled into that forum's court. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474, 105 S.Ct. 2174, 2183, 85 L.Ed.2d 528 (1984) (quoting International Shoe Co. v. Washington, 326 U.S. 310, 320, 66 S.Ct. 154, 160, 90 L.Ed. 95 (1945)); Keds v. Renee International Trading Corp., 888 F.2d 215, 219 (1st Cir.1989). Second, if such contacts exist, the exercise of personal jurisdiction over the defendant must comport with "fair play and substantial justice." Burger King Corp., 471 U.S. at 476, 105 S.Ct. at 2184 (1984) (quoting International Shoe Co., 326 U.S. at 320, 66 S.Ct. at 160); Keds, 888 F.2d at 219-20.

Here, Ocean's only contacts with the forum were three letters sent by Ocean from its New Jersey office to U.S.S. Yachts in Puerto Rico: (1) the letter extending the dealership to Puerto Rico; (2) the letter granting the commission credit; and (3) the letter cancelling the dealership. Of the three, the letter designating U.S.S. Yachts as the exclusive Ocean Yachts dealer in Puerto Rico evidences Ocean's most significant contact with Puerto Rico. In that letter, Ocean granted U.S.S. Yachts permission to expand its dealership territory from the British West Indies to take in both Puerto Rico and the Virgin Islands. We must consider whether this...