Trade Wings v . Technetics, Inc. CV-02-169-B 10/10/02

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Trade Wings, LLC

v. Civil N o . 02-169-B Opinion N o .

Technetics, Inc. d/b/a SMTEK San Diego

MEMORANDUM AND ORDER

Trade Wings, LLC (“Trade Wings”), filed this civil action in

New Hampshire Federal District Court, claiming that Technetics,

Inc., d/b/a/ SMTEK (“SMTEK”), breached contractual duties to

Trade Wings. In addition, Trade Wings claims that SMTEK breached

both an express warranty and the implied warranty of

merchantability; breached the covenant of good faith and fair

dealing; and violated the New Hampshire Consumer Protection Act,

N.H. Rev. Stat. Ann. ch. 358-A (1995 & Supp. 2001). SMTEK has

moved to dismiss the action for lack of personal jurisdiction

pursuant to Fed. R. Civ. P. 12(b)(2). For the reasons noted

below, I deny the motion to dismiss. I. BACKGROUND1

Trade Wings is a New Hampshire company, with its

headquarters in Portsmouth, New Hampshire. Trade Wings is in the

business of locating, purchasing, and reselling electronic

components. SMTEK is a corporation wholly owned by SMTEK

International, a Delaware corporation, which has its headquarters

in California and offices all over the world, including one in

Massachusetts. SMTEK manufactures customized electronic

hardware.

In March of 2001, Trade Wings contacted SMTEK concerning a

possible commercial relationship in which Trade Wings would buy

and resell SMTEK’s excess inventory and, in turn, also become

SMTEK’s “premier supplier” of electronic components. In April of

2001, Trade Wings’ Vice-President of Sales, Edward Latham,

traveled to California where he met with SMTEK’s then president,

Michael Perry, and other SMTEK representatives. After this

meeting, Trade Wings and SMTEK began to negotiate the terms and

conditions of a contract.

1 The background facts are drawn from the parties’ evidentiary submissions and are considered in the light most favorable to the plaintiffs. See Foster-Miller, Inc. v . Babcock & Wilcox Canada,

3 8 , 145 (1st Cir. 1995).

-2- Negotiations between Trade Wings and SMTEK took place during

a series of telephone calls, facsimiles, and e-mails that were

sent between New Hampshire and California. Drafts of the contract

were sent between New Hampshire and California. In the body of

an e-mail, to which a draft of the contract was attached, SMTEK’s

Perry wrote “I am looking forward to developing a long-term

mutually beneficial relationship.”

Trade Wings executed a Letter of Agreement (“LOA”) at its

headquarters in New Hampshire and faxed it to SMTEK in

California. SMTEK, in turn, executed the LOA and returned it to

New Hampshire. The LOA contemplated a year-long relationship in

which Trade Wings was to “purchase and take delivery” of excess

electronic components owned by SMTEK. Instead of obtaining

payment for the goods immediately, SMTEK took a trade credit

against future purchases of components from Trade Wings. The LOA

stated that Trade Wings would become one of SMTEK’s premier

suppliers and SMTEK would use its “best efforts” to purchase

materials from Trade Wings.

On May 1 4 , 2001, Trade Wings issued its first purchase order

to SMTEK in the amount of $873,044.60. This purchase order

contained a clause stating that the order is “[b]ased upon all

-3- materials being unused, in original tubes and/or packaging.” The

clause further stated that “[p]rogrammable devices shall never

have been programmed.” After receiving the order, SMTEK shipped

the electronic components to Trade Wings’ Portsmouth, New

Hampshire location. Trade Wings notified SMTEK immediately after

discovering that a substantial portion of the electronic

components were pre-programmed in violation of the purchase

order. SMTEK ran independent tests on the components and agreed

that the parts were in fact pre-programmed. At that time, SMTEK

and Trade Wings had multiple communications concerning the pre-

programmed components.

Trade Wings continued to contact representatives of SMTEK,

requesting information on their material needs in order to

provide them with price quotations. SMTEK, over a span of four

months, placed fourteen purchase orders with Trade Wings in New

Hampshire, totaling over $650,000.

On June 2 1 , 2002, SMTEK filed a complaint against Trade

Wings in the Superior Court of California for non-payment of

goods. Less than a week later, SMTEK was served by mail with the

complaint for this action.

-4- SMTEK maintains that its only contacts with New Hampshire

stem from its relations with Trade Wings and that these contacts

are not sufficient for this court to maintain jurisdiction.

II. STANDARD OF REVIEW

When personal jurisdiction is contested, the plaintiff bears

the burden of showing that such jurisdiction exists. See Mass.

Sch. of Law at Andover, Inc. v . Am. Bar Ass’n.,

6 , 34

(1st Cir. 1998); Ticketmaster-N.Y., Inc. v . Alioto,

0 1 ,

207 n.9 (1st Cir. 1994). Where, as is the case here, I have not

held an evidentiary hearing, a plaintiff need only make a prima

facie showing that the court has personal jurisdiction over the

defendants. See Sawtelle v . Farrell,

, 1386 n.1 (1st

Cir. 1995) (citing United Elec., Radio, & Mach. Workers v . 163

Pleasant Street Corp.,

9 , 43 (1st Cir. 1993)

[hereinafter Pleasant Street. I I ] ) .

In meeting the prima facie standard, Trade Wings must submit

“evidence that, if credited, is enough to support findings of all

facts essential to personal jurisdiction.” Boit v . Gar-Tec

Prods. Inc.,

7 1 , 675 (1st Cir. 1992); see Pleasant

Street. I I , 987 F.2d at 4 4 . Trade Wings must not rest on the

-5- pleadings. See id. Supporting evidence must be based on

evidence of specific facts set forth in the record. See id. I

take the specific facts alleged by the plaintiff, both disputed

and undisputed, as true and construe them in a light most

favorable to the plaintiff’s claim. See Mass. Sch. of Law,

4 ; Ticketmaster, 26 F.3d at 203. I will also consider

facts put forward by SMTEK to the extent that they are

uncontradicted. See Mass. Sch. of Law,

4 . While

the prima facie standard is a liberal one, the law requires that

I not “credit conclusory allegations or draw farfetched

inferences.” Mass. Sch. of Law,

4 ; (quoting

Ticketmaster, 26 F.3d at 2 0 3 ) .

III. ANALYSIS

For this court to have personal jurisdiction over SMTEK, I

must find the contacts between SMTEK and New Hampshire sufficient

to satisfy both the New Hampshire long-arm statute and the due

process clause of the Fourteenth Amendment. See Sawtelle,

. The long-arm statute that applies here permits the

exercise of jurisdiction over unregistered foreign corporations

to the full extent permitted under the federal due process

-6- standard. See

-A:15 (1999); Sawtelle,

. As such, the traditional two-part analysis for

personal jurisdiction merges into a single analysis of whether

the requirements of the due process clause have been met. See

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

2 ,

55 (D.N.H. 1994).

The purpose of the due process analysis is to ensure

“fundamental fairness” by requiring defendants to have certain

minimum contacts with the forum state. See Int’l Shoe C o . v .

State of Wash.,

1 0 , 316 (1945); Sawtelle,

; Ticketmaster, 26 F.3d at 206. Under the Due Process

Clause, this court will not assert jurisdiction over SMTEK unless

its “[c]onduct and connection with [New Hampshire] are such that

[it] should reasonably anticipate being haled into court there.”

World-Wide Volkswagen Corp. v . Woodson,

(1980).

This determination is fact-sensitive and necessarily involves

“[a]n individualized assessment and factual analysis of the

precise mix of contacts that characterize each case.” Pritzker

v . Yari,

3 , 60 (1st Cir. 1994).

A court may assert personal jurisdiction over a defendant

under a theory of either general or specific jurisdiction. Here,

-7- Trade Wings argues only that the court has specific jurisdiction.

A court has specific jurisdiction over a defendant if there is “a

demonstrable nexus between a plaintiff’s claims and a defendant’s

forum-based activities, such as when the litigation itself is

founded directly on those activities.” Mass. Sch. of Law,

4 . The First Circuit utilizes a three-part test to

determine whether the defendant’s contacts are sufficient to give

rise to specific jurisdiction. This test considers: (1)

relatedness; (2) purposeful availment; and (3) reasonableness.

Sawtelle,

.

1. Relatedness

The first consideration is whether Trade Wings’ claim

underlying this litigation “[d]irectly arises out o f , or relates

to,” SMTEK’s New Hampshire activities. Id.; Ticketmaster, 26

F.3d at 206. In contract cases, relatedness is established if

the defendant’s contacts with the forum “were instrumental either

in the formation of the contract or in its breach.” Phillips

Exeter Academy v . Howard Phillips Fund, Inc.,

8 4 , 289

(1st Cir. 1999); see Mass. Sch. of Law,

(formation

of contract). SMTEK claims that it was a passive party to the

formation of the contract and, therefore, its participation in

-8- contract negotiations cannot satisfy the relatedness requirement.

This is not the case. SMTEK negotiated with Trade Wings through

phone calls, faxes, and e-mails directed to New Hampshire.

SMTEK’s Perry sent numerous drafts of the LOA to Trade Wings’ New

Hampshire office. Perry then executed the LOA and faxed it to

New Hampshire. These contacts were instrumental in the formation

of the LOA.

In addition to SMTEK’s contacts concerning the formation of

the LOA, its alleged breach of contract arose from its contacts

with New Hampshire. First, SMTEK sent the allegedly non-

conforming goods to Trade Wings in New Hampshire. Second, SMTEK

directed a series of telephone calls and e-mails to Trade Wings

in Portsmouth, New Hampshire, after the alleged breach. Because

the contract that represents SMTEK’s contacts with New Hampshire

is the very cause and object of the litigation here, the

relatedness requirement is fulfilled. Pritzker,

1 .

2. Purposeful Availment

I next determine whether SMTEK’s contacts with New Hampshire

“represent a purposeful availment of the privilege of conducting

activities in New Hampshire, thereby invoking the benefits and

protections of [its] laws and making SMTEK’s involuntary presence

-9- before [the New Hampshire-based] court foreseeable.”

The

function of this second prong of the specific jurisdiction test

is to ensure that SMTEK’s contacts are not “random, isolated, or

fortuitous contacts with the forum state.” Sawtelle,

(internal quotation omitted). Instead, to satisfy the

purposeful availment requirement, SMTEK must have “engaged in any

purposeful activity related to the forum that would make the

exercise of jurisdiction fair, just or reasonable.”

(citing

Rush v . Savchuk,

2 0 , 329 (1980). The two factors I

must consider are voluntariness and foreseeability. See

Sawtelle,

; Ticketmaster, 26 F.3d at 207.

Voluntariness, at a minimum, requires that SMTEK’s contacts

with the forum must not be the result of “unilateral activity of

another party or a third person.” Ticketmaster, 26 F.3d at 207-

08 (quoting Burger King Corp. v . Rudzewicz,

6 2 , 475

(1985)). SMTEK argues that it did not purposefully avail itself

of the privilege of conducting business in New Hampshire because

its contacts with the forum were “isolated” and “instigated

solely by activities of [Trade Wings]. . . .” However, Trade

Wings asserts, and SMTEK does not dispute, that SMTEK directed

numerous communications to Trade Wings’ offices in New Hampshire

-10- both during the negotiation process and after the parties

executed the LOA.

SMTEK also voluntarily shipped electronic components to New

Hampshire. Once Trade Wings discovered that the electronic

components had been pre-programmed, SMTEK again sent various

communications to Trade Wings in New Hampshire. SMTEK also sent

over fourteen purchase orders to Trade Wings’ Portsmouth

location. These purchase orders spanned a four-month period and

totaled over $650,000. SMTEK therefore cannot claim that the

contacts it had with New Hampshire were a product of involuntary

coercion merely because Trade Wings initiated negotiations with

SMTEK.

When evaluating the issue of purposeful availment, I also

must determine whether it was foreseeable to SMTEK that it might

be haled into a New Hampshire court. World-Wide Volkswagen,

; Sawtelle,

; Ticketmaster, 26 F.3d at

207. In the LOA, SMTEK agreed to at least a year-long commitment

with Trade Wings. In addition, SMTEK’s Perry wrote in an e-mail

to Trade Wings in New Hampshire that he was “[l]ooking forward to

developing a long-term mutually beneficial relationship.” SMTEK

clearly did not intend for its contacts with New Hampshire to be

-11- limited to an isolated shipment of goods. Instead, SMTEK foresaw

a long-term relationship which did in fact span several months.

SMTEK’s numerous contacts with Trade Wings in New Hampshire thus

easily satisfy the purposeful availment component of the personal

jurisdiction test.

3. Reasonableness

The third prong of the specific jurisdiction test is whether

it is reasonable to exercise jurisdiction over SMTEK in light of

the gestalt factors. Sawtelle, F.3d at 1389, 1394; accord

Foster-Miller,

; Ticketmaster, 26 F.3d at 209. The

First Circuit has identified five gestalt factors: (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. See id.

a. Burden of Appearing

SMTEK’s headquarters are located in California. It would be

more convenient for SMTEK to litigate in California as opposed to

New Hampshire, a foreign jurisdiction. However, the ordinary

-12- inconvenience that SMTEK may confront in litigating in a foreign

jurisdiction is not sufficient to tip this factor in favor of a

finding of unreasonableness. A defendant must “demonstrate a

special or unusual burden” before this factor weighs against

jurisdiction. Pritzker,

4 ; accord Sawtelle,

. SMTEK argues that its’ burden is special because

potential key witnesses will be leaving SMTEK’s employment within

the next month. SMTEK states that because of these departures,

it will not be able to compel the attendance of their former

employees in New Hampshire on SMTEK’s behalf. Based on my

assessment of the other gestalt factors, however, this factor

alone, although it may weigh in favor of SMTEK, is insufficient

to deny Trade Wings the opportunity to litigate its claims in

this district. See Ticketmaster, 26 F.3d at 210.

b. Forum State’s Adjudicatory Interest

The First Circuit has emphasized that “[t]he purpose of

[this] factor is not to compare the forum’s interests to that of

some other jurisdiction, but to determine the extent to which the

forum has an interest.” Sawtelle,

(citing

Foster-Miller,

) (alteration and emphasis in

original). New Hampshire has a strong interest in adjudicating a

-13- breach of contract where the injured party is a local business.

In addition, Trade Wings’ claims are not based solely on breach

of contract and warranties. Trade Wings claims that SMTEK

violated the New Hampshire Consumer Protection Act. N.H. Rev.

Stat. Ann. ch. 358-A (1995 & Supp. 2001). New Hampshire enacted

its Consumer Protection Act to protect consumers within the state

from unfair or deceptive practices and such practices are

implicated in this suit.

c. Plaintiff’s Interest in Obtaining Convenient Relief

The third gestalt factor requires that I accord Trade Wings’

choice of forum a degree of deference. See, e.g., Sawtelle,

; Foster-Miller,

; Pritzker,

. Here, Trade Wings has selected New Hampshire as its forum.

In addition, it would be more convenient for Trade Wings to

litigate its contract and consumer protection claims in New

Hampshire, the location of its headquarters and offices, rather

than in a foreign jurisdiction.

d. Administration of Justice

I must determine the overall judicial system’s interest in

obtaining effective relief over this controversy. See

Sawtelle,

; Ticketmaster, 26 F.3d at 211. Courts

-14- often find that this factor does not weigh in either direction.

Id. That is the case here and SMTEK does not contend otherwise.

e. Pertinent Policy Arguments

The last of the gestalt factors requires a consideration of

all sovereigns in promoting substantive social policies. See id.

Trade Wings’ claimed injury implicates the public policy favoring

the prevention of unfair or deceptive acts in business

transactions. New Hampshire has the strongest interest in this

public policy because its citizen is the alleged victim of

SMTEK’s unfair and deceptive practices.

On balance, the gestalt factors support a determination that

this court may reasonably assert jurisdiction over SMTEK.

IV. CONCLUSION

For the forgoing reasons, I deny SMTEK’s motion to dismiss

(Doc. N o . 6 ) .

SO ORDERED.

Paul Barbadoro Chief Judge October 1 0 , 2002

cc: W . Scott O’Connell, Esq. Paul McEachern, Esq.

-15-