Interadd of NH v. Foreign Motors CV-94-560-SD 02/02/95 UNITED STATES DISTRICT COURT FOR THE

DISTRICT OF NEW HAMPSHIRE

Interadd of New Hampshire, Inc.

v. Civil No. 94-560-SD

Foreign Motors, Inc.; MBPA Corp.; Herbert G. Chambers

O R D E R

In this diversity action, plaintiff Interadd of New

Hampshire, Inc., seeks to recover monies it is allegedly owed

under a Consulting and Non-Competition Agreement entered into

between Interadd and defendants Foreign Motors, Inc., and MBPA

Corporation, and guaranteed by defendant Herbert G. Chambers.

Presently before the court are (1) defendants' motion to

dismiss this action for lack of personal jurisdiction or, in the

alternative, to dismiss or stay the action because of an

agreement to arbitrate, and (2) plaintiff's motion to file an

amended complaint. Objections to each motion have been filed.

Background

Prior to 1986, Lutz N. Wallem and his wife, Waltraud A. Wallem, were the owners of Foreign Motors, Inc., an automobile

dealership in Boston, Massachusetts, authorized to sell Mercedes-

Benz, BMW, Porsche, and Audi automobiles.

In December 1985 Foreign Motors entered into an Asset

Purchase Agreement with Bahig Bishay. Pursuant to said

agreement. Foreign Motors agreed to sell Bishay certain assets,

including its four foreign car franchises. Said agreement was

contingent upon the franchisors' approval of the sale.

Declaration of Herbert G. Chambers 5 3.1 In March 1986,

Mercedes-Benz refused to approve the transfer of Foreign Motors'

Mercedes-Benz franchise to Bishay. Id. As a result. Foreign

Motors and Bishay entered into an Extension Agreement which gave

Bishay an additional two years to obtain Mercedes-Benz's

approval. Id.

Defendant Herbert G. Chambers states.

In September 1986, I was contacted on behalf of Foreign Motors and was informed that Foreign Motors was in serious financial difficulty and was threatened with loss of its inventory or "floor plan" financing, without any replacement financing in place. Bishay's dispute with Mercedes remained unresolved at this time. I agreed to enter

Chambers' "declaration" is an unsworn statement signed under penalty of perjury. Under

, such a statement "may be used, in lieu of a sworn statement or affidavit" to support defendants' motion. Goldman, Antonetti, Ferraiuoli, Axtmaver & Hertell v. Medfit Int'l, Inc.,

(1st Cir. 1993).

2 into a series of agreements with Foreign Motors and the Wallems intended to address Foreign Motors' financial problems. I formed MBPA, a Massachusetts corporation, in connection with these transactions.

5 4.

On October 15, 1986, the following agreements were entered

into with respect to Foreign Motors:

(1) a financing agreement under which MBPA agreed to loan

$1,030,000 to Foreign Motors and to guarantee Foreign Motors'

floor plan in exchange for li^ percent of the dealership's stock;

(2) an Option to Purchase Stock Agreement (Defendants'

Exhibit A) between the Wallems, Foreign Motors, and MBPA, under

which MBPA or its designee received an option to purchase the

remaining percent of Foreign Motors' stock; and

(3) an Indemnity Agreement between the Wallems, Foreign

Motors, and MBPA (Defendants' Exhibit B) addressing, inter alia,

the parties' responsibility for any expenses and liability

associated with litigation involving Bishay.

MBPA subseguently exercised its option to purchase the

remaining Foreign Motors stock owned by the Wallems, and named

Chambers as its approved designee to receive transfer of the

stock. See Memorandum Re: Tentative, Closing and Final Book

Value at 1 (Defendants' Exhibit D). The sale of stock took place

on November 6, 1987. Chambers Declaration 1 8.

3 In connection with this sale. Interadd, a New Hampshire

corporation formed by the Wallems, entered into a Consulting and

Non-Competition Agreement with Foreign Motors and MBPA

(Defendants' Exhibit E) (the Consulting Agreement). Under said

agreement. Interadd was to be paid $108,000 "each year for ten

years payable monthly in arrears . . . ." Consulting Agreement

at 1. In return. Lutz Wallem and Interadd agreed, inter alia, to

provide consulting services to Foreign Motors and MBPA and not to

compete with said companies over the ten-year period covered by

the agreement. Id. at 1-2. Payment of the amounts due to

Interadd under the Consulting Agreement was guaranteed by

Chambers. See Guaranty of Non-Competition and Confidentiality

Payments (Defendants' Exhibit F).

In December 1986 Bishay filed suit against the Wallems,

Foreign Motors, MBPA, and Chambers in Massachusetts Superior

Court. Chambers Declaration 1 7. Pursuant to the terms of the

Indemnity Agreement, the Wallems are obligated to indemnify MBPA

for a portion of the expenses incurred by MBPA as a result of

this litigation. See Indemnity Agreement at 2- 2 (a) . The

Indemnity Agreement also grants MBPA and Foreign Motors the

following right of offset:

MBPA and/or the Company [Foreign Motors] shall have the right to offset any unpaid sum due under this Indemnity from the Indemnitors or either of them against the Five Thousand

4 ($5,000.00) Dollars per week and the incentive bonus of 50% of the net operating profits otherwise due to the Indemnitors or either of them under the Wallem Employment Agreement and Wallem Consulting and Non­ competition Agreement of even date herewith, upon notice of offset to the Indemnitors.

Id. at 4 .

Relying on this right of offset, the defendants subseguently

offset amounts that were purportedly due to them under the

Indemnity Agreement against the amounts due to Interadd under the

Consulting Agreement. The Wallems disputed both the right of the

defendants to make such an offset and the amount defendants

claimed to be due under the Indemnity Agreement. Wallem

Affidavit I 13.

In an agreement dated March 12, 1993, the parties resolved

their differences as to the offset issue and as to other related

issues for all payments due under the various contracts between

them prior to February 18, 1993. Said agreement provides, inter

alia, that.

The parties to this Agreement hereby agree that prior to any future offsets (after February 18, 1993) by MBPA or Foreign Motors, MBPA or Foreign Motors shall notify Interadd, in writing, of its intention to offset and shall furnish Interadd with detailed backup data of the amount to be offset. Interadd shall respond within ten (10) days of receipt of said written notice and data as to any offsets that are in dispute. Upon any dispute of the propriety and/or amount of offset the parties hereby agree to submit the

5 dispute to a single arbitrator with said procedure being set forth in paragraph (15) fifteen of the Memorandum re: Tentative, Closing and Final Book Value of November 6, 1987. The terms and conditions of paragraph (15) fifteen of Memorandum re: Tentative, Closing and Final Book Value of November 6, 1987, are hereby incorporated herein by reference.2

Agreement of March 12, 1993, 5 7 (Defendants' Exhibit G) .

By letter dated June 22, 1994, defendants notified Interadd

and the Wallems of their intent "to offset amounts due under the

Indemnity Agreement against amounts otherwise due under the

November 6, 1987 Consulting and Non-Competition Agreement."

Letter from Bruce H. Spatz to Interadd, Lutz N. Wallem, and

Waltraud A. Wallem (Defendants' Exhibit H ) . The Wallems have

challenged the amount due to defendants under the Indemnity

2Paragraph 15 of the November 6, 1987, Memorandum states.

Single Arbitrator Procedure. Whenever any provision in this agreement reguires arbitration before a single arbitrator, the Arbitrator shall be Wayne Shenk, currently General Manager of Foreign Motors, Inc., 1095 Commonwealth Avenue, Boston, Massachusetts. The sole remedy of the party shall be a single arbitrator proceeding, without appeal. Such arbitrator is to be totally independent, unconnected with any party hereto. (Such proceeding is herein referred to as "arbitration by a single arbitrator"). Each party shall pay their own attorneys' fees and both parties shall share egually the cost of the single arbitrator proceeding.

Memorandum of November 6, 1987, 5 15 (Defendants' Exhibit D).

6 Agreement and maintain that the Agreement of March 12, 1993, does

not allow that amount to be offset against amounts due to

Interadd under the Consulting Agreement. In addition, by letter

dated September 30, 1994, the Wallems reguested that the dispute

between the parties over the amount of indemnification be

submitted to arbitration pursuant to paragraph seven of the

March 12, 1993, Agreement and paragraph fifteen of the

November 6, 1987, memorandum. Letter from Earl L. Kalil,Jr., to

Spatz (attached to Plaintiff's Objection as Exhibit 2(B)).

The instant action was initiated by Interadd in Rockingham

County (New Hampshire) Superior Court on October 4, 1994.

Defendants, citing a diversity of citizenship, removed the action

to this court on November 1, 1994.

Discussion

A. Personal Jurisdiction

” [I]n personam jurisdiction relates to the power of a court

over a defendant. It is of two varieties, general and specific."

Pritzker v. Yari, Nos. 93-2374, 94-1128, 94-1129, ___ F.3d ___ ,

,

(1st Cir. Dec. 13, 1994).

Plaintiff asserts that this court has both general and specific

personal jurisdiction over each of the named defendants.

7 1. Burden of Proof

"[W]hen a court's personal jurisdiction over a defendant is

contested, plaintiff bears the burden of demonstrating that such

jurisdiction exists." Kopf v. Chloride Power Elecs., Inc., No.

94-391-SD, ___ F. Supp. ___, ___ ,

(D.N.H. Jan. 12, 1994) (citing Boit v. Gar-Tec Prods., Inc.,

967 F .2d 671, 675 (1st Cir. 1992)).

A district court can elect to dispose of a motion to dismiss

for lack of personal jurisdiction without holding an evidentiary

hearing, provided that when it does so, it uses a "prima facie"

standard to govern its review. United Elec. Workers v. 163

Pleasant Street Corp. [Pleasant Street III,

(1st

Cir. 1993). Under this standard, plaintiff must make a prima

facie showing of personal jurisdiction that is "based upon

evidence of specific facts set forth in the record."

at 44

(citing Boit, supra, 967 F.2d at 675). Otherwise stated, "[t]his

means that plaintiff '"must go beyond the pleadings and make

affirmative proof."'" Id. (guoting Boit, supra, 967 F.2d at 675

(guoting Chlebda v. H.E. Fortna & Bro., Inc.,

(1st Cir. 1979) )) .

In determining whether a plaintiff has made a prima facie

jurisdictional showing, the court "draw[s] the facts from the

pleadings and the parties' supplementary filings, including affidavits, taking facts affirmatively alleged by plaintiff as

true and construing disputed facts in the light most hospitable

to plaintiff." Ticketmaster-New York, Inc. v. Alioto,

(1st Cir. 1994). The court is not, however, reguired to

"credit conclusory allegations or draw farfetched inferences."

Id.

2. General Personal Jurisdiction

"General personal jurisdiction, as its name implies, is

broad in its ambit: it is the power of a forum-based court,

whether state or federal, over a defendant 'which may be asserted

in connection with suits not directly founded on [that

defendant's] forum-based conduct . . . .'"

F .3d at ___ ,

(guoting

Donatelli v. National Hockey League,

(1st

Cir. 1990)). "'[G]eneral jurisdiction exists when the litigation

is not directly founded on the defendant's forum-based contacts,

but the defendant has nevertheless engaged in continuous and

systematic activity, unrelated to the suit, in the forum state.'"

at *11 (quoting United Elec. Workers v. 163 Pleasant Street

Corp. [Pleasant Street II,

, 1088 (1st Cir. 1992));

see also Glater v. Eli Lilly & Co.,

(1st

Cir. 1984).

9 The contacts unrelated to this suit cited by plaintiff

consist of advertising in the Boston Globe, which is distributed

in New Hampshire, and the selling of automobiles to and providing

automobile service for New Hampshire residents. Lutz Affidavit

55 8-9; Affidavit of Richard F. Collins 55 2-4; Affidavit of Joan

E. Skewes 55 1-3.

Having reviewed the nature of defendants' contacts with New

Hampshire, the court finds that said contacts are not the type of

"continuous and systematic" contacts that would allow the court

to assert general jurisdiction over the defendants. See, e.g.,

(advertising and solicitation of

product orders by defendants in New Hampshire not sufficient to

support exercise of general jurisdiction over defendants).

3. Specific Personal Jurisdiction

"The proper exercise of specific in personam jurisdiction

hinges on satisfaction of two reguirements: first, that the forum

in which the federal district court sits has a long-arm statute

that purports to grant jurisdiction over the defendant; and

second, that the exercise of jurisdiction pursuant to that

statute comports with the strictures of the Constitution."

___ F.3d at ___ ,

. See also

; Pleasant

10 Street II, supra,

.

4. The Long-Arm Statutes

a. The Corporate Defendants

Foreign Motors and MBPA are both Massachusetts corporations.

They are not authorized to transact business in New Hampshire,

nor do they maintain a registered agent here. Chambers

Declaration 5 11.

The long-arm statute governing the jurisdiction of New

Hampshire courts over unregistered foreign corporations is New

Hampshire Revised Statutes Annotated (RSA) 293-A:15.10.3 McClary

v. Erie Engine & Mfg. Co.,

(D.N.H. 1994) .

When the New Hampshire Legislature enacted RSA 293-A:15.10, it

3RSA 293-A:15.10 provides, in relevant part,

(b) A foreign corporation may be served by registered or certified mail, return receipt reguested, addressed to the secretary of the foreign corporation at its principal office shown in its application for a certificate of authority or in its most recent annual report if the foreign corporation: (1) has no registered agent or its registered agent cannot with reasonable diligence be served;

(d) This section does not prescribe the only means, or necessarily the reguired means, of serving a foreign corporation.

RSA 293-A:15.10(b) and (d) (Supp. 1993).

11 eliminated all of the restrictive long-arm language that had

appeared in the statute's predecessors. In so doing, this court

has held that the legislature "intended RSA 293-A:15.10 to

authorize jurisdiction over foreign corporations to the full

extent allowed by federal law."

"Because RSA 293-A:15.10 reaches to the federal limit, the

traditional two-part personal jurisdiction inguiry collapses into

the single guestion of whether the constitutional reguirements of

due process have been met."

Accordingly, this court's

exercise of jurisdiction over Foreign Motors and MBPA is

authorized by RSA 293-A:15.10 if it comports with the

reguirements of due process.

b. Herbert G. Chambers

The long-arm statute applicable to defendant Chambers is RSA

510:4, which provides,

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 submits 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.

RSA 510:4, I (1983). The New Hampshire "legislature intended RSA

12 510:4, I, 'to be construed in the broadest legal sense to

encompass personal, private and commercial transactions.'"

Phelps v. Kingston,

,

(1987)

(quoting Leeper v. Leeper,

,

(1974)). Accordingly, the statute is applied "to provide

jurisdiction over foreign defendants to the full extent that the

statutory language and due process will allow."

,

.

Because RSA 510:4 reaches to the constitutional limit, the

court confines its analysis here to the question of whether its

exercise of personal jurisdiction over the defendant Chambers

comports with the requirements of due process. See, e.g.,

85 6 F. Supp. at 55; Ganis Corp. of California v.

Jackson,

(1st Cir. 1987).

3. The Reguirements of Due Process

A court's exercise of personal jurisdiction over a non­

resident defendant meets the requirements of due process if the

court finds that the defendant has "certain minimum contacts"

with the forum state "such that the maintenance of the suit does

not offend 'traditional notions of fair play and substantial

justice.'" International Shoe Co. v. Washington,

(1945) (quoting Milliken v. Mever,

(1940)).

13 In determining whether its exercise of jurisdiction falls

"within constitutional bounds," the court employs the following

tripartite analysis:

First, the claim underlying the litigation must directly arise out of, or relate to, the defendant's forum-state activities. Second, the defendant's in-state contacts must represent a purposeful availment of the privilege of conducting activities in the forum state, thereby invoking the benefits and protections of that state's laws and making the defendant's involuntary presence before the state's court foreseeable. Third, the exercise of jurisdiction must, in light of the Gestalt factors, be reasonable.

___ F.3d at ,

(guoting Pleasant Street I, supra, 960 F.2d at 1089).

a. Relatedness

The reguirement that an action arise out of or relate to a

defendant's forum-state contacts serves two functions.

First, relatedness is the divining rod that separates specific jurisdiction cases from general jurisdiction cases. Second, it ensures that the element of causation remains in the forefront of the due process investigation. Even if the facts are such that a court may not dismiss a given case for lack of relatedness per se, the relatedness reguirement, in serving its second function, authorizes the court to take into account the strength (or weakness) of the plaintiff's relatedness showing in passing upon the fundamental fairness of allowing the suit to proceed.

14 Ticketmaster, supra,

.

The court's examination of defendants' contacts with the

forum begins with the Consulting Agreement between Foreign

Motors, MBPA, and Interadd,4 and the guarantee of payments due to

Interadd under that agreement by Chambers.

However, a defendant's contract with an out-of-state party,

standing alone, does not automatically establish sufficient

minimum contacts in the other party's home forum for the purposes

of due process analysis. Burger King Corp. v. Rudzewicz,

(1985); Ganis Corp., supra,

.

Instead, the court, applying a "contracts-plus" analysis, must

also examine "all of the communications and transactions between

the parties, before, during and after the consummation of the

contract, to determine the degree and type of contacts the

defendant has with the forum, apart from the contract alone."

Ganis Corp., supra,

. This approach

"recognizes that a 'contract' is 'ordinarily but an intermediate

4Lutz Wallem states that "[t]he purpose of the formation of Interadd . . . was the transaction and performance of the various contracts and agreements among the parties to this litigation." Affidavit of Lutz Wallem 5 2. Wallem further states that Interadd was formed "at the reguest and direction of" defendant Chambers.

55 1-2; Second Affidavit of Lutz N. Wallem 5 2. Chambers contends that he "never made any such reguest . . . ." Second Declaration of Herbert G. Chambers 5 3. The court finds this dispute over the formation of Interadd to be immaterial to the guestions before it at this time.

15 step serving to tie up prior business negotiations with future

conseguences which themselves are the real object of the business

transaction.'" Burger King, supra,

(guoting

Hoopeston Canning Co. v. Cullen,

(1943)).

"It is these factors--prior negotiations and contemplated future

conseguences, 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 within the forum."

With respect to the negotiations between the parties prior

to consummation of the Consulting Agreement, Lutz Wallem asserts

that in September of 198 6, "Mr. Chambers traveled to Lebanon, New

Hampshire to negotiate the contracts and agreements with me in

person. At that time Mr. Chambers traveled to Lebanon, New

Hampshire by means of his helicopter to negotiate the terms of

the Option To Purchase Stock and the Indemnity Agreement, both

dated October 15, 1986." Wallem Affidavit 5 5. The Option to

Purchase Stock Agreement negotiated between the parties provided

that, at the closing of the sale of stock from the Wallems to

MBPA or its designee, the parties "shall execute the Consulting

and Non-Competition Agreement." Option to Purchase Stock

Agreement at 8. Said agreement further provides that Lutz

Wallem, the consultant, shall be paid an initial consulting fee

16 of $500,000 at the closing and shall be paid the monthly payment

under the Consulting and Non-Competition Agreement for 120 months

after the execution of such agreement. Id. at 8-9. The

Consulting Agreement is also referenced in the Indemnity

Agreement. See Indemnity Agreement at 4.

Chambers states that he "did not travel to New Hampshire in

connection with the negotiation or execution of the November 6,

1987 closing documents and agreements." Chambers Declaration

I 9. Plaintiff does not dispute Chambers' claim that he did not

travel to New Hampshire to negotiate the terms of the Consulting

Agreement and Guaranty, but asserts that during the negotiation

of the November 6, 1987, contracts defendants "had numerous and

varied forms of communication with [Wallem] and Interadd in New

Hampshire" including "various correspondence and numerous

telephone contacts made by Mr. Chambers and his and the co­

defendants ' representatives with [Wallem] and Interadd in New

Hampshire . . . ." Wallem Affidavit 55 4-5.

The closing at which the Wallems' remaining stock in Foreign

Motors was sold to Chambers and at which the Consulting Agreement

was signed took place at the offices of Chambers' counsel, Milton

Sorokin, in Hartford, Connecticut. Second Declaration of Bruce

H. Spatz 5 8.

Under the terms of the Consulting Agreement, Interadd and

17 Lutz Wallem were to provide consulting services to Foreign Motors

and MBPA for a ten-year term. With respect to performance of the

Consulting Agreement, Wallem states in his affidavit, "I have

been contacted in New Hampshire as the representative of Interadd

for consultation and advice relating to sales, service and

business administration. I provided this performance on behalf

of Interadd from the State of New Hampshire." Wallem Affidavit 5

6. Wallem further states.

The performance of Interadd's services would regularly occur with my being contacted in New Hampshire to discuss matters having to do with financial records, warranties and other managerial matters concerning the operation of Foreign Motors, Inc. after Foreign Motors, Inc. was bought out and taken over by Mr. Chambers and his companies. Interadd of New Hampshire, Inc.'s status as a consultant after Mr. Chambers took over is that Interadd is on standby, in New Hampshire, for telephonic communication of matters on which they might need continuing consultation on matters having to do with the ongoing operations. In performing such work as a consultant I have traveled to Massachusetts on behalf of Interadd on occasion. However, it has nearly always been the case that Interadd and myself are contacted in New Hampshire and perform the reguested consultation over the telephone from New Hampshire also based on records located at the offices of Interadd in New Hampshire.

Second Affidavit of Lutz N. Wallem 5 6 (attached to Plaintiff's

18 Response as Exhibit 1) .5

"The location of where payments are to be sent has been

recognized as a material contact in jurisdictional analysis."

Ganis Corp., supra,

(citing Burger King, supra,

. Plaintiff asserts that fees due under the

Consulting Agreement were to be paid to Interaddin New

Hampshire. Wallem Affidavit 5 7. Defendants concede that "[o]n

limited occasions, checks may have been mailed to Wallem" in New

Hampshire, but maintain that "[a]lmost all checks for payments

made by Foreign Motors under the Consulting Agreement were picked

up in Massachusetts." Declaration of Bruce H. Spatz 5 6.

Further, all notices under the agreement are to be sent to

Interadd in New Hampshire, with a copy to C. Michael Malon, Esq.,

of Davis, Malon & D'Agostine in Boston, Massachusetts.

Consulting Agreement at 6-7.

On the basis of all the evidence before it,the court finds

that there is a substantial connection between defendants'

contacts in the forum and the instant cause of action.

5The court notes that Chambers states in his declaration that "[a]11 consulting services rendered under [the Consulting and Non-Competition Agreement] have taken place in Boston." Chambers Declaration 5 9. However, in determining whether plaintiff has made a prima facie showing of jurisdiction, the court is required to "constru[e] disputed facts in the light most hospitable to plaintiff."

.

19 b. Purposeful Availment

The second prong of the tripartite analysis requires the

court to determine whether defendants' in-state contacts,

described infra at pp. 15-20, represent a purposeful availment of

the privilege of conducting activities in New Hampshire.

___ F.3d at ___ ,

. This requirement ensures "'that a defendant will not be

haled into a jurisdiction solely as a result of "random,"

"fortuitous," or "attenuated" contacts, or of the "unilateral

activity of another party or a third person" . . . .'"

-65 (quoting Burger King, supra,

) .

The court finds that defendants, by entering into a contract

with a New Hampshire resident that would be performed, at least

in part, in New Hampshire over a ten-year period, purposely

availed themselves of the privilege of conducting business in New

Hampshire. See McGee v. International Life Ins. Co.,

(1957) ("It is sufficient for purposes of due process

that the suit was based on a contract which had substantial

connection with that State.").

c. The Gestalt Factors

The Gestalt factors identified by the First Circuit include:

20 (1) the defendant's burden of appearing, (2) the forum state's interest in adjudicating the dispute, (3) the plaintiff's interest in obtaining convenient and effective relief, (4) the judicial system's interest in obtaining the most effective resolution of the controversy, and (5) the common interests of all sovereigns in promoting substantive social policies.

F.3d at ___ ,

(guoting Pleasant Street I, supra, 960 F.2d at 1088) . The

court notes that said factors "'are not ends in themselves, but

they are, collectively, a means of assisting courts in achieving

substantial justice. In very close cases, they may tip the

constitutional balance.'" Id. at *27 (guoting

) .

(1) Defendants' Burden of Appearing

The First Circuit, recognizing that "the concept of burden

is inherently relative," has held that "insofar as staging a

defense in a foreign jurisdiction is almost always inconvenient

and/or costly, . . . this factor is only meaningful where a party

can demonstrate some kind of special or unusual burden."

F.3d at ___ ,

, at

*27 .

Defendants Foreign Motors and MBPA are Massachusetts

corporations with their principal places of business located in

21 Somerville, Massachusetts, and Hartford, Connecticut,

respectively. Defendant is a Connecticut resident, but clearly

conducts a great deal of his business in the Boston area. The

court finds that the burden that would be placed on the

defendants by requiring them to appear before this court in

Concord, New Hampshire, is minimal.

(2) The Forum State's Interest

The action arises from a contract between a New Hampshire

resident and several nonresident defendants. New Hampshire

clearly has an interest in exercising jurisdiction over

nonresident defendants who are alleged to have breached such a

contract. See, e.g., Haverhill v. City Bank and Trust Co.,

,

(1979) (exercising

jurisdiction over a nonresident defendant whose contract with a

resident was to be partially performed in New Hampshire).

(3) The Plaintiff's Convenience

Interadd is currently located in Stratham, New Hampshire.

Stratham is located in the southern part of the state and, as a

practical matter, is not much further from the federal court in

Boston than it is from this court. Therefore, "[w]hile [the

court] must accord plaintiff's choice of forum a degree of

22 deference in respect to the issue of its own convenience, see

Piper Aircraft Co. v. Revno,

(1981), the

plaintiff's actual convenience seems to be at best a makeweight

in this situation."

.

(4) The Administration of Justice

The judicial system has a clear interest in obtaining the

most effective resolution of any controversy.

. The court finds that its determination of

what constitutes the most effective resolution of this

controversy reguires it to consider the interrelationship between

the Consulting Agreement and the numerous other agreements

between the various parties.

The controversy at issue is whether defendants owe money to

Interadd under the Consulting Agreement. Taken at face value,

this dispute appears to be a relatively simple one to resolve.

However, there is an ongoing dispute between the parties as to

whether defendants are entitled to offset amounts due under the

Indemnity Agreement against amounts due under the Consulting

Agreement. The parties are also in dispute over the amount due

under the Indemnity Agreement and are both seeking to have that

dispute submitted to arbitration in accordance with their

Agreement of March 12, 1993, and the arbitration provision set

23 forth in their Memorandum of November 6, 1987.6

The court finds that these three disputes are all

interrelated and that the most effective resolution of the

controversy at issue is one that also resolves the other two

disputes described herein. See, e.g.,

___ F.3d

,

("the judicial system's

interest in obtaining the most efficacious resolution of the

controversy . . . counsels against furcation of the dispute among

several different jurisdictions"). The court does not find,

however, that this factor counsels against exercising

jurisdiction over the defendants at this time.

(5) Pertinent Policy Arguments

The parties have not identified any specific substantive

social policies that counsel for or against exercising

jurisdiction over defendants in this matter. The court notes

that all sovereigns share a general interest in reguiring parties

to resolve all of their related disputes in a single forum and at

a single time rather than engaging in protracted litigation in

several different forums that will necessarily interfere with one

another.

defendants have notified the court that on January 18, 1995, they filed a complaint in Massachusetts Superior Court seeking to compel arbitration of said dispute in Massachusetts.

24 Although the court views this policy as important to the

court's ultimate determination as to how to proceed with this

action, the policy does not counsel against exercising

jurisdiction over the defendants at this time.

d. Summarizing the Specific Personal Jurisdiction

Analysis

In order for a court to exercise specific personal

jurisdiction over an out-of-state defendant, there must exist a

logical nexus between "the defendant, the forum, and the

litigation." Keeton v. Hustler Magazine, Inc.,

(1984). As set forth herein, the court finds that plaintiff's

claims relate to defendants' contacts with the forum and that the

nature of defendants' contacts with the forum made it reasonably

foreseeable that defendants would be haled into court here. The

court further finds, in light of the Gestalt factors discussed

herein, that its exercise of jurisdiction over the defendants

does not offend traditional notions of fair play and substantial

justice. The court therefore finds that it has specific personal

jurisdiction over the defendants.

B. Stay Pending Arbitration

Defendants move, in the alternative, "to dismiss or stay

25 this action on the grounds that the parties have agreed to

arbitrate the dispute raised by the complaint." Defendants'

Motion at 1.

The complaint filed by plaintiff asserts that defendants

have failed to pay amounts due to Interadd under the Consulting

Agreement. The arbitrability of this dispute "turns on the

interpretation of contractual terms, a guestion of law which [the

court] can determine in the first instance." Commercial Union

Ins. Co. v. Gilbane Bldq. Co.,

(1st Cir. 1993).

In making this determination, the court is cognizant of "the

strong federal policy favoring arbitration agreements, a policy

which reguires [courts] to resolve 'any doubts' concerning

arbitrability in favor of arbitration." Id.; see also Vimar

Seguros Y Reaseguros, S.A. v. M/V Sky Reefer,

(1st Cir.) ("Where there is an agreement to arbitrate, the

[Federal Arbitration Act,

, et seg.1 reflects a

strong, well-established, and widely recognized federal policy in

favor of arbitration."), cert, granted, 115 S. C t . 571 (1994).

Defendants contend that the parties agreed to arbitrate

disputes such as the one raised in the complaint in their

Agreement of March 12, 1993. Said agreement provides, in

relevant part, that "[u]pon any dispute of the propriety and/or

amount of offset the parties hereby agree to submit the dispute

26 to a single arbitrator" in accordance with the procedure set

forth in paragraph 15 of the parties' Memorandum of November 6,

1987, which is incorporated into their Agreement of March 12,

1993, by reference. Agreement of March 12, 1993, at 3 (relevant

provision guoted in full at page 5-6 of this order).

As a preliminary matter, the court finds that the guestion

of whether defendants owe any amount to Interadd under the

Consulting Agreement is separate and distinct from the guestion

of whether defendants may offset said amount against amounts the

Wallems allegedly owe the defendants under the Indemnity

Agreement. Therefore, although any dispute over "the propriety

and/or amount of offset" is clearly subject to arbitration under

the terms of the March 12, 1993, Agreement, the court finds that

the dispute raised in the complaint over amounts due under the

Consulting Agreement is not.

Second, defendants filed their motion to dismiss for lack of

personal jurisdiction as a pre-answer motion. Accordingly, the

disputes they raise regarding offset and amounts due to them

under the Indemnity Agreement are not yet before this court as

affirmative defenses or counterclaims. Defendants' motion to

stay this action pending arbitration of said disputes is

27 therefore premature.7

C. Plaintiff's Motion for Leave to File Amended Complaint

Plaintiff requests leave to file an amended complaint that

is "in the form of a Federal Court Complaint and stating

additional or different claims." Plaintiff's Reply 5 2.

Rule 15 (a) permits a party to amend its pleading "once as a

matter of course at any time before a responsive pleading is

served . . . ." Rule 15(a), Fed. R. Civ. P. No responsive

pleading has been filed by the defendants, who opted instead to

file a pre-answer motion to dismiss. Therefore, Rule 15(a)

permits plaintiff to file an amended complaint. As requested in

its motion, plaintiff shall have twenty days from the date of

this order in which to file its amended complaint.

7The court does not reach the question of whether the arbitration provision set forth in the Agreement of March 12, 1993, is, as defendants contend, governed by Massachusetts law.

28 Conclusion

For the reasons set forth herein, defendants' motion to

dismiss (document 4) is denied and plaintiff's motion for leave

to file an amended complaint (document 6) is granted.

SO ORDERED.

Shane Devine, Senior Judge United States District Court

February 2, 1995

cc: Ralph R. Woodman, Jr., Esg. Ronald L. Snow, Esg.

29