GERALD CHAMALES CORP. v. OKI DATA AMERICAS, INC. Civil Action No. 07-1947 (JEI).
557 F.Supp.2d 494 (2008)
GERALD CHAMALES CORPORATION, Plaintiff, v. OKI DATA AMERICAS, INC. and Barry L. McElreath, Defendants, v. Gerald Chamales Corporation and Gerald Chamales, Counterclaim-Defendants.
United States District Court, D. New Jersey.
June 6, 2008.
Pietragallo, Gordon, Alfano, Bosick & Raspanti, LLP, by Kevin E. Raphael, Esq., Christopher A. Iacono, Esq., William L. Carr, Esq., Philadelphia, PA, for Plaintiff/Counterclaim-Defendant, Gerald Chamales Corporation and Counterclaim-Defendant, Gerald Chamales.
Obermayer Rebmann Maxwell & Hippel LLP, by Stephen D. Schrier, Esq., Matthew A. Green, Esq., Cherry Hill, NJ, for Defendants/Counterclaimants, Oki Data Americas, Inc. and Barry L. McElreath.
IRENAS, Senior District Judge:
Presently before this Court is Counterclaim-Defendant Gerald Chamales's motion to dismiss for lack of personal jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2). For the reasons set forth below, the motion will be denied.
In September 2006 Plaintiff/Counterclaim-Defendant, Gerald Chamales Corporation ("GCC"), filed a complaint alleging fraud and negligent misrepresentation against Defendants/Counterclaimants Oki Data Americas, Incorporated ("Oki Data") and Oki Data's Vice President Barry L. McElreath in the United States District Court for the Central District of California (the "California Court").
Also on April 13, 2007, upon Oki Data's motion, the California Court transferred venue to this Court pursuant to 28 U.S.C. § 1404(a). On October 5, 2007, Oki Data filed an amended answer, adding counterclaims for fraud and negligent misrepresentation against GCC and its Chairman, Gerald Chamales.
This action arises from a two-part business deal in which MKG Imaging Solutions, Inc. ("Imaging Solutions"), a wholly-owned subsidiary of Oki Data, acquired MKG Cartridge Systems, Inc. ("Cartridge Systems"), a corporation which was eighty-five percent owned by Chamales.
Oki Data is a New Jersey corporation with its principal place of business in Mount Laurel, New Jersey.
Chamales traveled to Oki Data's office in Mount Laurel, New Jersey to meet with McElreath and representatives from Cartridge Systems on August 19, 2004, to discuss the potential sale of Cartridge Systems' assets to Oki Data or a subsidiary. (Cntclaim ¶ 9; Chamales Aff't ¶ 3). After
As a result of these negotiations, Imaging Solutions agreed to purchase the assets of Cartridge Systems pursuant to an Asset Purchase Agreement ("Purchase Agreement"), dated April 29, 2005. (Oki Data Cert., Ex. E). While the President of Cartridge Systems, Michael Grist, signed the Purchase Agreement on behalf of Cartridge Systems, Chamales also signed the Purchase Agreement and agreed to be bound by certain provisions of the Purchase Agreement in his individual capacity. (Id.).
On the same day Imaging Solutions and GCC executed the Supply Agreement which provided that Imaging Solutions was to be the exclusive supplier of certain products to GCC for three years. (Oki Data Cert., Ex. F). Chamales signed the Supply Agreement as President of GCC. ad.).
The Purchase Agreement and the Supply Agreement both stipulated that they were to be governed by the laws of the state of New Jersey.
Based on Imaging Solutions' alleged default in performing the terms of the Supply Agreement, GCC brought a two-count complaint alleging fraud and negligent misrepresentation against Oki Data and McElreath. Oki Data counterclaimed against GCC and Chamales for fraudulent misrepresentation and negligent misrepresentation, alleging that GCC and Chamales made material misrepresentations to Oki Data to induce its purchase of Cartridge Systems.
Oki Data bears the burden of proving that this Court has personal jurisdiction over Chamales.
Due process requires that Chamales have certain "minimum contacts" with the forum state such that the court's exercise of jurisdiction over him comports with "traditional notions of fair play and substantial justice." Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945). "[M]inimum contacts must have a basis in `some act by which [Chamales] purposefully avails [him]self of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws.'" Asahi Metal Indust. Co. v. Superior Court, 480 U.S. 102, 109, 107 S.Ct. 1026, 94 L.Ed.2d 92 (1987) (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985)).
Minimum contacts may be met if Oki Data can adequately show the existence of either general or claim-specific jurisdiction. See Remick v. Manfredy, 238 F.3d 248, 255 (3d Cir.2001).
Id. at 255 (citations omitted). "A `relationship among [Chamales], the forum, and the litigation' is the essential foundation" of specific jurisdiction. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984) (quoting Shaffer v. Heitner, 433 U.S. 186, 204, 97 S.Ct. 2569, 53 L.Ed.2d 683 (1977)). Finally, "[m]inimum contacts must have a basis in `some act by which [Chamales] purposefully avails [him]self of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws.'" Asahi Metal Indust. Co., 480 U.S. at 109, 107 S.Ct. 1026 (quoting Burger King Corp., 471 U.S. at 475, 105 S.Ct. 2174).
If there are sufficient minimum contacts, a court may exercise jurisdiction only after it determines that doing so would comport with "`traditional notions of fair play and substantial justice.'" Int'l Shoe Co., 326 U.S. at 316, 66 S.Ct. 154 (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 85 L.Ed. 278).
Under the traditional minimum contacts analysis, "[s]pecific jurisdiction over [Chamales will] exist[ ] when [he] has `purposefully directed his activities at residents of the forum and the litigation results from alleged injuries that arise out of or relate to those activities.'" Miller Yacht Sales, Inc., 384 F.3d at 96 (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985)).
Here, Chamales traveled to New Jersey to discuss the sale of Cartridge Solutions and engaged in subsequent correspondence on numerous occasions with McElreath in New Jersey to negotiate the terms of the parties' agreements via telephone and electronic mail. Chamales made the alleged misrepresentations to Oki Data and McElreath during the course of these negotiations, and thus, the litigation here "arise[s] out of or relate[s] to" Chamales's activities in the forum state. Helicopteros, 466 U.S. at 414, 104 S.Ct. 1868; see also Carteret Sav. Bank, FA, 954 F.2d at 146 (3d Cir.1992) ("Personal jurisdiction may be exercised over a non-resident who, while present in the forum state, makes a deliberate misrepresentation during the course of negotiations or other direct oral communications.").
Chamales makes two arguments against finding jurisdiction based on these negotiations. First, Chamales argues that, because the negotiations during his New Jersey trip only concerned the sale of Cartridge Solutions and not the Supply Agreement, such negotiations are unrelated to Oki Data's counterclaims, which Chamales argues derive from the negotiations concerning the Supply Agreement only.
However, the facts set forth in the pleadings and affidavits submitted in support of these motions belie this argument. Both the Supply Agreement and the Purchase Agreement were inextricably related and arose from the same set of negotiations. Indeed, the execution of the Supply Agreement was an express condition precedent to the consummation of the Purchase Agreement. See Oki Data Cert., Ex. E, ¶ 10.12.
Second, Chamales states that he did not know he was corresponding with anyone in New Jersey during the course of such negotiations. (Chamales Aff't at ¶ 5). However, given that Chamales had already traveled to Oki Data's office to meet with McElreath there, it is difficult to conceive that Chamales did not realize that there
Moreover, there were contractual provisions that should have put Chamales on notice such that he could reasonably anticipate being haled into court in New Jersey. Under the notice provisions of both the Supply Agreement and the Purchase Agreement, Oki Data's Mount Laurel address in New Jersey is listed as the recipient of required notices or other communications under these agreements. Likewise, the Supply Agreement and the Purchase Agreement both contained a choice of law provision providing that the laws of New Jersey were to govern the agreements. See Panella v. O'Brien, 2006 WL 2466858, at *3-4, 2006 U.S. Dist. LEXIS 59880, at *10-11 (D.N.J.2006) (holding that a choice of law provision contained in an agreement provided defendants with notice of being haled into a court within the forum state).
Oki Data has established that Chamales purposefully availed himself of New Jersey and set forth the requisite relationship among Chamales, New Jersey, and Oki Data's claims of fraud and misrepresentation.
The conclusion that Oki Data has established sufficient contacts between Chamales and New Jersey to subject him to this Court's jurisdiction, is proper even though many of those contacts were made by Chamales in his role as an officer of GCC. In Educational Testing Service v. Katzman, this Court held that actions taken by an individual within New Jersey in his "corporate capacity" may be imputed to a defendant corporate officer individually. 631 F.Supp. 550, 556 (D.N.J.1986). The Court noted that "[i]t would be anomalous, and would defeat the purposes of the law creating substantive liability, to permit a corporate officer to shield himself from jurisdiction by means of the corporate entity, when he could not interpose the same shield as a defense against substantive liability." Id. (quoting Donner v. Tams-Witmark Music Library, Inc., 480 F.Supp. 1229, 1234 (E.D.Pa.1979)); see also Acteon, Inc. v. Vista Dental Products, 2006 WL 1207999, at *4, 2006 U.S. Dist. LEXIS 27584, at *12-14 (D.N.J. May 3, 2006).
Chamales, as sole owner of GCC and an eighty-five percent owner of Cartridge Systems, was directly involved with the negotiations concerning the Supply Agreement and the Purchase Agreement, and
Finally, this Court must consider whether the exercise of personal jurisdiction "comport[s] with fair play and substantial justice." Miller Yacht Sales, Inc., 384 F.3d at 97 (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985)). Fair play and substantial justice requires a fairness inquiry that includes other considerations, beyond purposeful availment and the relationship of the parties, that would render jurisdiction unreasonable. Id. These considerations include "the burden on [Chamales], the forum State's interest in adjudicating the dispute, [Oki Data's] interest in obtaining the most efficient resolution of controversies, and the shared interest of the several States in furthering fundamental substantive social policies." Id. (quoting Burger King Corp., 471 U.S. at 476, 105 S.Ct. 2174 (1985)).
Chamales has not put forth any additional circumstances that would render jurisdiction in New Jersey particularly burdensome. As to New Jersey's interest in adjudicating the dispute, this Court has recognized that "the state of New Jersey ha[s] an interest in protecting New Jersey residents against potential fraud or misrepresentations in business transactions." See Panella, 2006 WL 2466858 at *5, 2006 U.S. Dist. LEXIS at *15.
Because the counterclaims against GCC and Chamales involve the identical set of facts, it would be in the interest of judicial economy to avoid dismissal of Chamales, thereby avoiding two simultaneous lawsuits on identical claims. Further, the California Court already transferred venue of this action to New Jersey on the basis of 18 U.S.C. § 1404(a)("... for the convenience of the parties and witnesses, ...."). It would be somewhat incongruous to now dismiss the action as to Chamales where all of the parties' claims derive from the identical set of facts. The exercise of personal jurisdiction over Chamales in New Jersey therefore comports with fair play and substantial justice.
For the foregoing reasons, the motion to dismiss for lack of personal jurisdiction by Counterclaim-Defendant Chamales will be denied. The Court will issue an appropriate order.
ORDER DENYING THE MOTION TO DISMISS OF COUNTERCLAIM-DEFENDANT GERALD CHAMALES (Docket No. 47)
This matter' having appeared before the Court on Counterclaim-Defendant Gerald Chamales's Motion to Dismiss for Lack of Personal Jurisdiction pursuant to Fed. R.Civ.P. 12(b)(2), the Court having considered the submissions of the parties, and for the reasons set forth in an Opinion issued by this Court on even date herewith, and for good cause appearing;
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