Universal Turbine v. Brij Bhargava CV-98-553-JD 01/21/99 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Universal Turbine Energy Systems, Inc.

v. Civil Nos. 98-553-JD, 98-555-JD

Brii Bhargava

O R D E R

Following the demise of a business relationship between

plaintiff. Universal Turbine Energy Systems, Inc. ("UTES"), and

defendant, Brij Bhargava, UTES brought two companion actions in

New Hampshire state court against Bhargava. In one, UTES sought

a permanent injunction to prevent Bhargava from disclosing

information related to a product that was the subject of the

parties' joint venture, and in the other, UTES brought claims

against Bhargava for breach of contract, negligent

misrepresentation, and breach of fiduciary duty. Bhargava

removed both cases to federal court and now moves to dismiss for

lack of personal jurisdiction (document no. 2 in each case). As

the factual background of each case is the same for purposes of

personal jurisdiction analysis, the motions are considered

together. Background

The plaintiff, UTES, is a corporation that was organized in

October of 1993 by a group of individuals interested in

developing a high speed gas turbine electrical generator. The

defendant, Bhargava, was involved in the organization of UTES, is

a shareholder of the corporation, and was a director and officer

of the corporation from its inception until he resigned in

September of 1996. Bhargava has been a resident of California at

all times relevant to this case. He has never visited New

Hampshire.

Individuals interested in the development of a gas turbine

generator began to investigate the commercial opportunity for the

project. In May of 1993, one member of the group met with

Bhargava in Arizona. Bhargava's interest in developing a high

speed generator to meet the needs of a potential customer changed

the focus of the corporation's development plans from a

mechanical to a high speed generator.

UTES was incorporated in New Hampshire on October 22, 1993.

One week later, an organizational meeting of the board of

directors was held in Scottsdale, Arizona, since the board

members lived in Maine, Arizona, California, and Florida. The

corporate documents reviewed and signed by Bhargava in Arizona

indicated that UTES was a New Hampshire corporation. A New

Hampshire law firm handles UTES's corporate legal work.

2 Tamara Jones, the daughter of one of the UTES founders, was

elected to serve as registered agent of the corporation in New

Hampshire. Because Ms. Jones worked for Kenmart Sales at 11

Columbia Drive, Amherst, New Hampshire, a mailbox and telephone

and fax numbers for UTES were established at that address. A

bank account was opened for UTES in New Hampshire. Bhargava and

the other officers and directors were issued UTES stationery with

its New Hampshire address.

UTES accepted a proposal by Bhargava and another board

member, Suresh Gupta, operating as Ashman Consulting Services, to

work on the development of a high speed turbine. In January of

1994, Bhargava incorporated his business as Ashman Technologies.

Thereafter, Bhargava did business with UTES through Ashman

Technologies, sending invoices to UTES that listed the New

Hampshire address.1 Ashman Technologies was paid from UTES's New

Hampshire bank account.

Initially, the officers and directors focused on finding

funding sources for development of the generator. One

possibility that was considered, but did not work out, was a

development corporation to be located in Berlin, New Hampshire,

with the cooperation of a local bank. In the spring of 1994,

1Bhargava says in his affidavit that although the invoices show UTES's New Hampshire mailing address, he was directed to send the invoices to one of the UTES principals at his home in Maine.

3 UTES opened facilities in Florida, and since then, Florida has

been its principal place of business.

With the assistance of Bhargava, UTES found a financial

partner, Elliott Turbomachinery, a Delaware corporation with its

principal place of business in Jeannette, Pennsylvania, to fund

the development of the generator. In December of 1994, UTES

entered a development agreement establishing a joint venture with

Elliott. The officers of UTES, including Bhargava, signed the

agreement at Elliott's office in Pennsylvania. The agreement

provides that it will be construed under the laws of the state of

Pennsylvania.

Bhargava resigned as an officer and director of UTES on

September 3, 1996. On September 16, 1996, UTES and Elliott

signed an agreement to establish a new corporation with its

principal office in Stuart, Florida.

In a writ of summons from Hillsborough County (North)

Superior Court dated September 9, 1998, returnable the first

Tuesday of October, 1998, UTES brought claims against Bhargava

for breach of contract, negligent misrepresentation, and breach

of fiduciary duty all arising from their business relationship.

On September 11, 1998, UTES filed a petition for a permanent

injunction, based on provisions of the development agreement with

Elliott Turbomachinery Co., to prevent Bhargava from "releasing

to third parties any of the information relating to the high

4 speed gas turbine generator developed by UTES and from in any way

competing with the UTES TA and its derivatives." Bhargava

removed both cases to this court pursuant to

(a) alleging subject matter jurisdiction based on diversity

of citizenship pursuant to

. Bhargava now

moves to dismiss both cases for lack of personal jurisdiction.

Discussion

When a defendant moves to dismiss for lack of personal

jurisdiction, the plaintiff bears the burden of showing that

jurisdiction exists. Sawtelle v. Farrell,

(1st Cir. 1995). Absent pertinent factual or credibility issues,

a hearing is not reguired, and the jurisdictional guestion may be

resolved based on a prima facie showing. Foster-Miller, Inc. v.

Babcock & Wilson Canada,

(1st Cir. 1995);

accord Nowak v. Tak How Investments, Ltd.,

(1st

Cir. 1996). In the prima facie process, the court acts as "data

collector," accepting "the plaintiff's (properly documented)

evidentiary proffers as true." Foster-Miller,

.

The court's personal jurisdiction over foreign defendants in

diversity jurisdiction cases depends upon the reach of the forum

state's long-arm statute and due process restraints imposed by

the Constitution. Nowak,

. New Hampshire's long-

arm statute applicable to individuals, N.H. Rev. Stat. Ann.

5 510:4, I (1997), has been construed to be "coextensive with the

outer limits of due process," focusing the court's attention on

"the issue of whether the exercise of personal jurisdiction

comports with federal constitutional standards." Sawtelle,

.

UTES argues that the court has specific personal

jurisdiction over Bhargava based on his business dealings with

UTES, a New Hampshire corporation, which are the subject of

UTES's claims against Bhargava. Three factors guide the

constitutional analysis of specific personal jurisdiction:

First, the claim underlying the litigation must directly arise out of, or relate to, the defendant's forum-state activities. Second, the defendant's forum-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.

Nowak,

(guoting Pritzker v. Yari,

(1st Cir. 1994)).

A. Relatedness

The relatedness reguirement "focus[es] the court's attention

on the nexus between a plaintiff's claim and the defendant's

contacts with the forum." Sawtelle,

. To satisfy

relatedness in the context of a tort claim, such as

6 misrepresentation, UTES must show that Bhargava's contacts with

New Hampshire foreseeably or proximately lead to UTES's cause of

action, or at a minimum, UTES must show a "meaningful link"

between Bhargava's contacts and the harm UTES claims. Nowak,

. For its contract claims, UTES must show that

Bhargava's "forum-based activities [were] instrumental in the

formation of the contract." Massachusetts School of Law v.

American Bar,

(1st Cir. 1998) (guotation

omitted).

The pertinent contacts UTES asserts in support of personal

jurisdiction are that Bhargava was a shareholder, officer, and

director of UTES, a closely-held New Hampshire corporation, that

he received stock and a participation allowance from UTES, that

he acted as a third-party contractor, and that he was bound by

fiduciary duties under New Hampshire law. In addition, UTES

argues that Bhargava's refusal to sign agreements for

noncompetition and nondisclosure "have the potential to

economically damage the plaintiff which is a New Hampshire

corporation." 98-553, Pi. Obj. at 11.

The representations and discussions between UTES and

Bhargava and Bhargava's activities as a "third party contractor"

with UTES, which are the bases for UTES's breach of contract and

misrepresentation claims in 98-555-JD, all occurred outside of

New Hampshire. Bhargava's alleged breaches of fiduciary duties

7 also occurred outside of New Hampshire. The agreement between

UTES and Elliott Turbomachinery, which is the subject of UTES's

claim for injunctive relief in 98-553-JD, was signed in

Pennsylvania, performed in Florida, and by its terms, is subject

to Pennsylvania law. To the extent the effects of Bhargava's

alleged breaches of contract, misrepresentation, and breaches of

fiduciary duties are relevant to determining personal

jurisdiction in this case, the effects would be most likely felt

in Florida, UTES's principal place of business, not New

Hampshire. See, e.g., VDI Technologies v. Price,

(D.N.H. 1991) .

In short, the only connection UTES asserts between Bhargava

and New Hampshire is based on his positions in the corporate

structure of UTES. As UTES acknowledges, Bhargava's positions in

UTES's corporate structure are not enough to show that UTES's

claims arise from Bhargava's contacts with New Hampshire. See

Shaffer v. Heitner,

(1977); American Freedom

Train Foundation v. Spurnev,

(1st Cir. 1984) .

UTES's arguments that its claims relate to Bhargava's duties and

benefits from the corporation, incorporated in New Hampshire,

merely avoid discussion of where the activities giving rise to

UTES's claims actually occurred. The relatedness reguirement is

not satisfied "merely because a plaintiff's cause of action arose

out of the general relationship between the parties." Sawtelle,

.

Accordingly, UTES has not provided a sufficient prima facie

case to establish the relatedness requirement of personal

jurisdiction for either 98-553-JD or 98-555-JD.

B. Purposeful Availment

Since UTES has not carried its burden of persuasion through

the first of the three factors in the personal jurisdiction

analysis, an extended review of the remaining factors is

unnecessary. See Massachusetts School of Law,

(stopping analysis after plaintiff failed to establish

relatedness factor). "The purposeful availment requirement

ensures that jurisdiction is not premised on 'random, isolated,

or fortuitous' contacts with the forum state," but rather

guarantees that the exercise of jurisdiction is 'fair, just, or

reasonable.'" Nowak,

(quoting Sawtelle,

) (further quotations omitted). The two essential

elements of purposeful availment are voluntariness and

foreseeability.

Put in terms of the cases at issue, UTES

must show that Bhargava's pertinent contacts with New Hampshire

were voluntary, not merely by chance, and that based on those

contacts, he could have reasonably foreseen being haled into a

New Hampshire court because of his corporate positions and

relationships with UTES or his participation in UTES's contract

9 with Elliott Turbomachinery in Pennsylvania. See Sawtelle, 70

F .3d at 1391-94.

Although Bhargava voluntarily accepted positions in a New

Hampshire corporation, the place of incorporation of UTES appears

to be entirely fortuitous. New Hampshire seems to have been

chosen based on the residence of the daughter of one of the

founders who served as corporate agent. None of the founders or

the officers, directors, or shareholders were New Hampshire

residents.

As Bhargava did not do business or conduct any of the

activities leading to UTES's claims against him in New Hampshire,

it was not foreseeable that claims would be brought against him

in New Hampshire courts. To the extent UTES's claims of breach

of fiduciary duty arise under New Hampshire law, that may affect

a choice of law guestion for those claims but does not establish

that Bhargava purposefully availed himself of privileges in New

Hampshire. See Shaffer,

. Accordingly, even if

UTES had satisfied the reguirements of relatedness, the record

does not support a determination that Bhargava purposely availed

himself of the privilege of conducting business in New Hampshire.

C. The Gestalt Factors

The following considerations, the "gestalt factors," are

pertinent to assessing the reasonableness of personal

10 jurisdiction:

(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.

Nowak,

(guotation omitted). At the gestalt stage

of the analysis, a particularly weak showing on the first two

factors increases the burden on a plaintiff to show that

jurisdiction would, nevertheless, be reasonable. See Sawtelle,

.

UTES offers no compelling argument that personal

jurisdiction over Bhargava in New Hampshire would be reasonable

despite the lack of relatedness of the claims to the forum and

the lack of Bhargava's purposeful availment of benefits in New

Hampshire. Instead, the circumstances in these two cases

demonstrate that it would be unreasonable to reguire Bhargava, a

resident of California, to defend the claims in New Hampshire,

and it would be reasonable to expect UTES, which was formed in

Arizona and does business in Florida, to bring its claims in a

more appropriate forum. New Hampshire has little interest in

claims brought by a New Hampshire corporation whose principal

place of business is in Florida particularly when all of the

relevant activities occurred outside of New Hampshire. Neither

the administration of justice nor policy considerations encourage

11 personal jurisdiction in New Hampshire.

Based upon the record and arguments presented in both 98-

553-JD and 98-555-JD, UTES has failed to show that personal

jurisdiction over Bhargava exists in New Hampshire.

Conclusion

For the foregoing reasons, defendant's motions to dismiss

(98-553-JD document no. 2 and 98-555-JD document no. 2) are

granted. Accordingly, the clerk of court is directed to enter

judgment in favor of the defendant in each case, and close both

cases.

SO ORDERED.

Joseph A. DiClerico, Jr, District Judge

January 21, 1999

cc: Paul C. Semple, Esguire Steven A. Solomon, Esguire

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