Calypso v . DanaSoft CV-94-578-M 04/25/95 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Calypso Software Systems, Inc., Plaintiff, v. Civil N o . 94-578-M DanaSoft, Inc. and Michael D. Pierce, Defendants.

O R D E R

Plaintiff, Calypso Software Systems, Inc. ("Calypso"),

brings this petition for declaratory judgment, injunctive relief,

and damages against DanaSoft, Inc. and its president, Michael D.

Pierce (collectively, "DanaSoft"). Although Calypso originally

filed this suit in the Hillsborough County (New Hampshire)

Superior Court, DanaSoft removed it pursuant to

et seq. Jurisdiction is based upon diversity of citizenship and

an amount in controversy alleged to be in excess of $50,000.00.

(a). Pending before the court is DanaSoft's

motion to dismiss for lack of personal jurisdiction.

Fed.R.Civ.P. 12(b)(2). Factual Background.

Calypso is a New Hampshire corporation with a principal place of business in Manchester, New Hampshire. Calypso develops and sells computer software. DanaSoft is a Delaware corporation with a principal place of business in the Commonwealth of Virginia. Michael Pierce, president of DanaSoft, is a Virginia resident. DanaSoft is not registered to do business in New Hampshire and maintains no offices or agents in this state.

Calypso's petition alleges that it developed a software product known as "Maestrovision," which is intended to assist companies with systems management across a computer network. As part of its development of Maestrovision, Calypso also claims to have developed "NLM," software designed to support Maestrovision's use on Novell's Netware operating systems. Calypso asserts that although it had discussions with DanaSoft regarding the possibility of jointly developing NLM, it actually created NLM independently, without the benefit of any assistance, information, or source code from DanaSoft. Calypso also alleges that, by letter dated October 3 , 1994, DanaSoft threatened to file suit and issue a press release announcing the suit, unless Calypso agreed to pay Danasoft royalties for the NLM software.

2 Calypso claims DanaSoft has submitted itself to the

jurisdiction of the courts of this state by having transacted

business in New Hampshire, consisting of directing telephone

calls, electronic mail, and written correspondences to Calypso's

office in Manchester. Calypso also alleges that DanaSoft

contacted Cabletron, Inc., a corporation located in New Hampshire

and the only reseller of Calypso products, and informed Cabletron

that: (i) Calypso engages in "under-handed business practices";

(ii) DanaSoft plans to sue Calypso for monies owed to it in

connection with the development of NLM; and (iii) NLM is based

upon source code developed by DanaSoft and i s , in fact, a

DanaSoft product.

Calypso further claims that its business relationship with

Cabletron has been damaged by DanaSoft's alleged conduct and that

additional damage will occur if DanaSoft is not enjoined from

issuing its threatened press release. Finally, Calypso asserts

that Cabletron markets certain DanaSoft products and that

DanaSoft has entered into an agreement with Cabletron to "develop

a wholly independent product to be used, and which is currently

being used, with Cabletron's Spectrum product." Affidavit of

Janet Drigian (Calypso Director of Operations) at para. 2 9 .

3 DanaSoft says that its only written communication to New

Hampshire was the October 3 , 1994, letter from Pierce to Calypso,

stating DanaSoft's "intention to prevent the shipment of any

software relating to the management of Novell File Servers" and

to "begin issuing press releases announcing its pending actions

against Calypso Software." DanaSoft denies ever having contacted

Cabletron. It concedes, however, that Pierce did receive two

calls from a Cabletron employee, after Calypso initiated this

proceeding, inquiring into the nature of the dispute between

DanaSoft and Calypso. DanaSoft contends that the court lacks

personal jurisdiction, because neither it nor Pierce has had

sufficient contacts with the State of New Hampshire to justify

the exercise of long-arm personal jurisdiction over them. For

the reasons set forth below, the court agrees that it lacks

personal jurisdiction over the defendants.

Standard of Review.

It is well established that in a diversity case the court's

personal jurisdiction over a nonresident defendant is governed,

at least in part, by the forum state's long-arm statute.

Goldman, Antonetti, Ferraiuoli, Axtmayer & Hertell, Partnership

v . Medfit Int'l, Inc.,

(1st Cir. 1993). And,

4 when personal jurisdiction is contested, the plaintiff bears the

burden of establishing that jurisdiction. Kowalski v . Doherty,

Wallace, Pillsbury & Murphy,

, 8 (1st Cir. 1986). The

court will construe allegations of jurisdictional facts in the

plaintiff's favor, Buckley v . Bourdon,

5 , 98 (D.N.H.

1988), and, if the court proceeds based upon the written

submissions of the parties, without an evidentiary hearing, the

plaintiff need only make a prima facie showing that jurisdiction

exists. Kowalski,

; Boit v . Gar-Tec Products, Inc.,

7 1 , 674-75 (1st Cir. 1992). Nevertheless, plaintiff's

demonstration of personal jurisdiction must be based upon

specific facts set forth in the record in order to defeat

defendant's motion to dismiss. And, "in reviewing the record

before i t , a court `may consider pleadings, affidavits, and other

evidentiary materials without converting the motion to dismiss to

a motion for summary judgment.'" VDI Technologies v . Price,

5 , 87 (D.N.H. 1991) (quoting Lex Computer & Management

Corp. v . Eslinger & Pelton, P.C.,

(D.N.H.

1987) (citation omitted).

Before a court may exercise personal jurisdiction over a

non-resident defendant, the plaintiff must make two showings:

5 (i) the forum state's long-arm statute confers jurisdiction over

the defendant, and (ii) the constitutional due process standard

is met (by establishing that the defendant has sufficient

"minimum contacts" with the forum state). Kowalski,

. As this court has previously noted, RSA 510:4, the New

Hampshire long-arm statute "provides jurisdiction over foreign

defendants to the full extent that the statutory language and due

process will allow. Therefore, the proper inquiry . . . focuses

on whether jurisdiction comports with federal constitutional

guarantees." Estate of Mullen by Mullen v . Glick, N o . 94-377-L,

(D.N.H. November 3 , 1994) (quoting

Phelps v . Kingston,

(1987)). Likewise, New

Hampshire's corporate long-arm statute authorizes jurisdiction

over foreign corporations to the full extent permitted by federal

law. McClary v . Erie Engine & Mfg. Co.,

2 , 54

(D.N.H. 1994). Stated another way, New Hampshire's individual

and corporate long-arm statutes are coextensive with the outer

limits of due process protection under the federal constitution.

Accordingly, the court's "proper inquiry . . . focuses on whether

jurisdiction comports with federal constitutional guarantees."

Mullen, supra, at * 6 ; see also McClary, supra, at 5 2 .

6 Discussion.

A. The State Long-Arm Statute - Jurisdiction Over Pierce.

With regard to jurisdiction over non-resident individuals,

New Hampshire law provides, in pertinent part:

I . Jurisdiction. Any person who is not an inhabitant of this state and who, in person or through an agent, transacts any business within this state, commits a tortious act within this state, or has the ownership, use or possession of any real or personal property situated in this state subjects himself, or his personal representative, to the jurisdiction of the courts of this state as to any cause of action arising from or growing out of the acts enumerated above.

N.H. RSA 510:4, I . The pleadings suggest (and Calypso does not claim otherwise) that neither Pierce nor DanaSoft has the ownership, use, or possession of any real or personal property in this state. Nor has Calypso alleged that Pierce or DanaSoft committed a tort in New Hampshire.1 Accordingly, in examining

1 Even construing Calypso's allegations broadly and considering whether the October 3 , 1994, letter constitutes a sufficient basis upon which the court might exercise personal jurisdiction, the facts as they appear on the record are insufficient to warrant a finding of jurisdiction. See, e.g., Talus Corporation v . Browne,

3 , 27-28 (D.Me. 1991) ("Case law does not support the applicability of a state's long- arm statute regarding tortious conduct where Defendant merely has sent a notice-of-infringement letter to Plaintiff in the forum state . . . . " ) . There is no evidence that Danasoft contacted (either orally or in writing) any of Calypso's customers or made any disparaging or potentially defamatory statements. C f . Lex Computer & Management Corp. v . Eslinger & Pelton, P.C., 676 7 whether N.H. RSA 510:4 confers personal jurisdiction over Pierce,

the court's focus is necessarily limited to the question of

whether Pierce's conduct, as alleged by Calypso, constitutes the

"transaction of business" in New Hampshire and, if s o , whether

Calypso's cause of action arises from or relates to that

business.

In that regard, Calypso has failed to sustain its burden of

demonstrating that Pierce "transacts business" in New Hampshire.

The October 3 , 1994, letter and the telephone conversations and

facsimile transmissions between Pierce and Calypso do not

constitute the transaction of business under the statute and are,

without more, insufficient to confer personal jurisdiction over

DanaSoft. See e.g., Fielder v . First City Nat. Bank,

(2d Cir. 1986) (discussing cases in which courts have

held that telephone contacts not involving visits or

consultations in the jurisdiction are insufficient to confer

personal jurisdiction); U.S. Theatre Corp. v . Gunwyn/Lansburg

Ltd. Partnership,

9 4 , 595 (S.D.N.Y. 1993)

("Transacting business under the New York long-arm statute has

F.Supp. 399, 402-03 (D.N.H. 1987) (defendants sent allegedly defamatory letters to out-of-state customers of plaintiff, with an adverse impact upon plaintiff in New Hampshire).

8 been interpreted to require a certain quality, rather than a

specific quantity, of contacts with the forum. Telephone and

mail contacts only provide a basis for jurisdiction when the

defendant projected himself into New York in such a manner that

he purposefully availed himself of the benefits and protections

of its laws.") (citations omitted).

Calypso concedes that its communications with Pierce and

DanaSoft related to "unsuccessful attempts to jointly develop a

satisfactory NLM." Plaintiff's Memorandum in Opposition to

Defendants' Motion to Dismiss, at 4-5. According to Calypso, it

never entered into any contractual relationship with Pierce or

DanaSoft and, ultimately, it developed the NLM without any input

or assistance from Pierce or DanaSoft. Without more, Pierce's

conduct in this regard is insufficient to confer personal

jurisdiction. C f . Burger King Corp. v . Rudzewicz,

6 2 ,

479 (1985) ("we have emphasized the need for a `highly realistic'

approach that recognizes that a `contract' is `ordinarily but an

intermediate step serving to tie up prior business negotiations

with future consequences which themselves are the real object of

the business transaction.' It is these factors -- prior

9 negotiations and contemplated future consequences, along with the

terms of the contract and the parties' actual course of dealing

-- that must be evaluated in determining whether the defendant

purposefully established minimum contacts with the forum.").

Here, the parties apparently never even reached the "intermediate

step" of entering into a contract.

Moreover, Calypso's claim that Cabletron distributes

DanaSoft's products is likewise insufficient to confer personal

jurisdiction over Pierce (or DanaSoft). Calypso has not alleged

nor has it referenced any facts from which it could be found that

Pierce or DanaSoft "delivers its products into the stream of

commerce with the expectation that they will be purchased by

consumers" in New Hampshire. World-Wide Volkswagen Corp. v .

Woodson,

(1980); see Hugel v . McNell,

(1st Cir. 1989) (noting that under the "stream of commerce"

theory, courts must focus on the acts of the non-resident

defendant to see if the defendant has a "substantial connection"

with the forum state to support an assertion of personal

jurisdiction) cert. denied,

(1990); see, e.g.,

Kibby v . Anthony Industries, Inc.,

7 2 , 274-75 (1983)

("Although the statute provides a broad basis for the exercise of

10 in personam jurisdiction over persons transacting business within

the state, it requires that a cause of action against a non-

resident party transacting business here arise from or grow out

of the transaction of that business."). Nor has Calypso shown

how this litigation relates to or arises from Pierce's (or

DanaSoft's) relationship, if any, with Cabletron.

Simply stated, Calypso has failed to assert facts from which

the court might reasonably infer that Pierce "transacts business"

within the State of New Hampshire or that Calypso's claims

"aris[e] from or grow[] out of" Pierce's alleged business

transactions in this state. And, even if the court were

persuaded that Calypso had met its burden of demonstrating the

applicability of New Hampshire's broadly construed long-arm

statute, Pierce's contacts with New Hampshire are, as discussed

more fully below, insufficient to satisfy the requirements of due

process. Boit,

("To defeat a motion to dismiss .

. . the plaintiff must make the showing [of facts essential to

personal jurisdiction] as to every fact required to satisfy `both

the forum's long-arm statute and the due process clause of the

Constitution' . . . . The `plaintiff must go beyond the

pleadings and make affirmative proof.'") (citations omitted).

11 B. The State Long-Arm Statute - Jurisdiction Over Danasoft.

Chapter 510:4 of the New Hampshire Revised Statutes

Annotated does not govern the exercise of jurisdiction of non-

resident corporate defendants. McClary v . Erie Engine & Mfg.

Co.,

. Instead, the court must look to New

Hampshire's recently amended business corporations act, N.H. RSA

293-A:15.10. As this court (Devine, J.) noted in McClary, supra,

by amending the long-arm provisions of the business corporations

act, the New Hampshire legislature "intended RSA 293-A:15.10 to

authorize jurisdiction over foreign corporations to the full

extent allowed by federal law." Id., at 5 5 . Accordingly,

because the corporate long-arm statute, like the individual long-

arm statute, is coextensive with the outer limits of federal due

process, "the traditional two-part personal jurisdiction inquiry

collapses into the single question of whether the constitutional

requirements of due process have been met." Id., at 5 5 . As

discussed below, the court finds that Danasoft does not have

sufficient "minimum contacts" with the State of New Hampshire to

warrant a finding that this court has jurisdiction over i t .

C. Due Process Analysis.

12 The court must engage in a two-step analysis to determine

whether exercise of personal jurisdiction over DanaSoft would

comport with the requirements of due process: first, does

DanaSoft have "minimum contacts" with New Hampshire and, second,

would the assertion of personal jurisdiction over DanaSoft offend

traditional notions of fair play and substantial justice. Lex

Computer,

(citing International Shoe C o . v .

Washington,

1 0 , 316 (1945)). "The constitutional

touchstone of the determination whether an exercise of personal

jurisdiction comports with due process remains whether the

defendant purposefully established `minimum contacts' in the

forum State." Ashai Metal Industry C o . v . Superior Court of

California,

0 2 , 108-09 (1987) (internal quotations

omitted). A party establishes "minimum contacts" with the forum

state when he or she "purposefully directs" activities to

residents of the forum state and the subject litigation relates

to injuries which "arise out of or relate to" those activities.

Burger King Corp. v . Rudzewicz, 471 U.S. at 472-76. Moreover, to

the extent that a party has "minimum contacts" with the forum

state, they must be the product of that party's conduct; minimum

contacts cannot be established through the conduct of an

independent third party. World-Wide Volkswagen,

.

13 And finally, minimum contacts with the forum state are not

established through random, isolated or fortuitous acts of the

non-resident party. Keeton v . Hustler Magazine, Inc.,

(1984).

Here, the totality circumstances fail to establish: (i) that

the underlying litigation relates to or arises from DanaSoft's

New Hampshire activities; or (ii) that DanaSoft purposefully

availed itself of the privilege of conducting activities in New

Hampshire; o r , ultimately (iii) that the exercise of personal

jurisdiction over DanaSoft would be fair and reasonable. United

Electrical Workers v . 163 Pleasant Street Corp.,

,

1089 (1st Cir. 1992). Having reviewed the alleged conduct of

DanaSoft on the record before i t , the court concludes that it did

not purposefully avail itself of the privileges of conducting

business in New Hampshire and finds that DanaSoft's contacts with

New Hampshire are "random, isolated and fortuitous." Keeton,

. As the Seventh Circuit has noted, "personal

jurisdiction over nonresidents of a state is a quid for a quo

that consists of the state's extending protection or other

services to the nonresident. . .." Cote v . Wadel,

8 1 ,

984 (7th Cir. 1986). Here, Calypso has failed to allege such a

14 quid pro quo which would support this court's exercise of

personal jurisdiction.

That Cabletron (a company located in New Hampshire)

contacted DanaSoft and inquired into the status of pending litigation with Calypso is precisely the type of isolated and

fortuitous contact with the forum state referenced in

And, perhaps even more critically, DanaSoft's

communication with Cabletron about its dispute with Calypso

occurred after Calypso had already initiated this proceeding.

The court cannot base an exercise of personal jurisdiction upon a

non-resident party's conduct occurring after the alleged cause of

action arose. See, e.g., Steel v . United States,

(9th Cir. 1987) ("courts must examine the defendant's

contacts with the forum at the time of the events underlying the

dispute when determining whether they have jurisdiction.")

(emphasis added); Farmers Ins. Exch. v . Portage La Prairie Mut.

Ins. Co.,

1 1 , 913 (9th Cir. 1990) (in determining

whether the defendant has "minimum contacts" with the forum

state, "[o]nly contacts occurring prior to the event causing the

litigation may be considered.") (emphasis added); Federated Rural

Elec. Ins. Corp. v . Kootenai Elec. Coop,

, 1147

15 (D.Kan. 1993) ("The contacts [with the forum state] accumulated

after the cause of action arose . . . To provide a basis for

specific jurisdiction, the cause of action must arise from the

contacts in question."); aff'd,

(10th Cir. 1994);

Johnson v . Summa Corp.,

2 2 , 124-25 (E.D.Pa. 1985)

("In determining whether the cause of action `arose from' a

defendant's activities in the forum state, a court cannot

consider those contacts taking place after the date on which the

alleged cause of action arose.").

Conclusion.

Having examined Pierce's and DanaSoft's contacts with the

State of New Hampshire as alleged on the record, the court

concludes that they are insufficient to satisfy the due process

requirements of "minimum contacts;" defendants' contacts with the

State of New Hampshire, as alleged by Calypso, are too isolated,

fortuitous, and unrelated to this litigation to warrant the

conclusion that defendants should reasonably have anticipated

being haled into court here. World-Wide Volkswagen,

. Stated simply, the exercise of personal jurisdiction over

defendants would run afoul of traditional notions of fair play

and substantial justice. International Shoe C o . v . Washington,

16

1 0 , 316 (1945). Accordingly, the court holds that it

lacks personal jurisdiction over the defendants. Defendants'

motion to dismiss (document n o . 3 ) is granted.

SO ORDERED.

Steven J. McAuliffe United States District Judge

April 2 5 , 1995 cc: Arnold Rosenblatt, Esq. Russell F. Hilliard, Esq.

17