Daynard v. Scruggs ( 2002 )

United States Court of Appeals
For the First Circuit
____________________
No. 01-2595
RICHARD A. DAYNARD,
Plaintiff, Appellant,
v.
NESS, MOTLEY, LOADHOLT, RICHARDSON & POOLE, P.A.;
RONALD L. MOTLEY,
Defendants,
SCRUGGS, MILLETTE, BOZEMAN & DENT P.A.;
RICHARD F. SCRUGGS,
Defendants, Appellees.
____________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. William G. Young, U.S. District Judge]
____________________
Before
Lynch, Circuit Judge,
Campbell and Bownes, Senior Circuit Judges.
____________________
Edward J. Barshak with whom Darrel C. Waugh and Sugarman, Rogers,
Barshak & Cohen, P.C. were on brief for appellant.
Stephen M. Prignano with whom Mark A. Pogue and Edwards & Angell,
LLP were on brief for appellees.
____________________
May 10, 2002
____________________
LYNCH, Circuit Judge. The issue on appeal is whether
a federal district court sitting in Massachusetts has specific
personal jurisdiction over a suit brought by Richard A. Daynard,
a Massachusetts law professor, for fees in the tobacco
litigation, against the Mississippi law firm of Scruggs,
Millette, Bozeman & Dent, and Richard Scruggs, a senior partner
("Scruggs defendants"). At the heart of Daynard's claim is the
argument that the court may reach the Scruggs defendants based
in large part on contacts imputed from the South Carolina law
firm of Ness, Motley, Loadholt, Richardson & Poole, and Ronald
Motley ("Motley defendants"), all of whom purportedly acted on
behalf of both firms in engaging Daynard to work on litigation
against the tobacco industry. We conclude, contrary to the
district court, that the Scruggs defendants are subject to
specific personal jurisdiction based on their contacts with
Massachusetts, particularly those contacts properly attributed
to them from the Motley defendants, who are also defendants in
this litigation.
Daynard is a law professor at Northeastern University
specializing in litigation against the tobacco industry. He
sued the Motley and Scruggs defendants, claiming that, pursuant
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to an oral agreement, he is entitled to a portion of the fees
that these firms have received or will receive from their
successful tobacco litigation.
The Motley defendants, based on their Massachusetts
contacts, concede personal jurisdiction, but, central to this
case, the Scruggs defendants do not. Daynard does not challenge
the district court's conclusion that the Scruggs defendants' own
direct contacts with Massachusetts are, by themselves,
insufficient to permit personal jurisdiction. Instead, he
challenges the district court's ruling that personal
jurisdiction does not exist based on the imputation of some of
the Motley defendants' contacts, which were purportedly made on
behalf of both law firms, to the Scruggs defendants. The
district court reasoned that the Motley defendants were not the
Scruggs defendants' agents, and, even if they were, the Scruggs
defendants did not exert "substantial influence" over the Motley
defendants' in-forum activities. The district court reasoned
that it could not, consistent with the Due Process Clause of the
Fourteenth Amendment, attribute the Motley defendants' contacts
to the Scruggs defendants for purposes of personal jurisdiction.
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Daynard appeals this decision arguing that the district
court erred by relying on a general jurisdiction case, Donatelli
v. National Hockey League, 893 F.2d 459 (1st Cir. 1990), to
derive the "substantial influence" requirement. Daynard argues
that he need not show, for specific jurisdiction purposes, that
the Scruggs defendants exerted substantial influence over the
Motley defendants' in-forum activities in order to impute the
Motley defendants' contacts to the Scruggs defendants. Daynard
asserts that the defendants were engaged in a tobacco litigation
joint venture and that, on this basis, attribution is proper.
We conclude that Donatelli's substantial influence test
is not controlling in this case, where Daynard alleges that the
defendants were in a joint venture, or at least held themselves
out to be in a type of agency relationship. We need not
determine whether the defendants were actually engaged in a
joint venture between themselves, however. The facts, as
asserted by Daynard and construed in the light of whether he has
made a prima facie jurisdictional showing, suffice to show a
relationship between the two defendants sufficient to impute
some of the Motley defendants' contacts to the Scruggs
defendants. These same facts show that the Scruggs defendants
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held themselves out to be in some form of an agency relationship
with the Motley defendants and, by accepting and encouraging
Daynard's services, and agreeing to compensate him on the basis
of a share of the fees, ratified the Motley defendants' in-forum
activities giving rise to this lawsuit.
Traditional common law concepts, embodied in the law
of Massachusetts, Mississippi, and South Carolina, confirm the
fundamental fairness of requiring the Scruggs defendants to
answer in Massachusetts. We conclude that the Scruggs
defendants' contacts with Massachusetts, particularly those
contacts of the Motley defendants properly attributed to the
Scruggs defendants, suffice to permit personal jurisdiction over
the Scruggs defendants consistent with the Massachusetts long-
arm statute and the Fourteenth Amendment of the Constitution.
I.
In this case there are many disputed, and as of yet
unresolved, facts. We do not resolve these disputed facts
because we "must accept the plaintiff's (properly documented)
evidentiary proffers as true for the purpose of determining the
adequacy of the prima facie jurisdictional showing." Foster-
Miller, Inc. v. Babcock & Wilcox Canada, 46 F.3d 138, 145 (1st
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Cir. 1995). We use Daynard's version of the facts (although we
provide a brief description of the defendants' competing
version), drawn from his complaint, both sides' subsequent
affidavits, and the products of jurisdictional discovery,
including Daynard's deposition of Scruggs.
A. Daynard's Allegations
Daynard is a resident and citizen of the Commonwealth
of Massachusetts. He is, and has been for over thirty years, a
law professor at Northeastern University School of Law, located
in Massachusetts. For much of that time, he has focused his
professional and academic efforts on defeating the tobacco
industry in court. Daynard is Chair of the Tobacco Product
Liability Project, President of the Tobacco Control Resources
Center, and a frequent advocate for, and consultant to, those
opposing the tobacco industry.
For many years there was a consensus that the potential
for recovery against the tobacco industry was negligible.
Indeed, the tobacco industry, until 1997, boasted that it had
never paid a cent to a tort plaintiff. As of 2002, the
situation is drastically different. Lawyers have sued the
tobacco companies on behalf of many states and recovered
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astronomical sums for those states, with consequently large fees
for themselves. During the past several years, almost every
state has sued the tobacco industry, seeking, among other
things, reimbursement for the medical costs incurred as a result
of smoking-related health harms. The defendant law firms in
this case have been responsible for instituting, litigating, and
settling litigation against the tobacco industry on behalf of forty-six
different states. This settlement was accomplished, in part, in what
is known as the Master Settlement Agreement. See National Association
of Attorneys General, Master Settlement Agreement, at
http://www.naag.org/tobac/cigmsa.rtf (Nov. 23, 1998); Greenless v.
Almond, 277 F.3d 601, 603 (1st Cir. 2002) (describing the tobacco
litigation and settlement). Daynard says this settlement will result
in a distribution of billions of dollars to the two firms.
Daynard says that his efforts were central to many of these
titanic recoveries. He quotes reputable authorities stating that
he is the "recognized leader" in tobacco litigation on behalf of
the public health and the "foremost authority" on, and "driving
force" behind, anti-tobacco legal theory and strategy. In fact,
Daynard quotes one authority stating that without Daynard's
tobacco work, the state-initiated tobacco litigation would not
even exist.
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The parties agree that Charles Patrick, then a partner
at Ness Motley, came to Boston, Massachusetts in the fall of
1993 to meet with Daynard. Daynard says that, at the time
Patrick traveled to Boston to retain his services, Ness Motley
and Scruggs Millette were engaged in a tobacco litigation joint
venture. Indeed, throughout his dealings with Ness Motley and
Scruggs Millette, Daynard understood the two firms to be in a
joint venture that at first encompassed the Mississippi tobacco
litigation and then broadened to include tobacco litigation
nationwide. Daynard insists that Patrick was acting on behalf
of both firms and that Patrick retained him to advance the
objectives of the firms' joint venture.
Shortly after this initial meeting in Boston, Daynard
traveled to Ness Motley's South Carolina offices, where he met
with members of the firm, including Ronald Motley. At these
meetings, Daynard identified and explained legal theories for
recovery on behalf of state governments. After these meetings,
Daynard continued to communicate regularly, by phone and fax,
with members of Ness Motley, providing them advice on similar
matters.
-8-
As a result of Ness Motley's retention of him,
purportedly on behalf of both firms, Daynard also began
"communicat[ing] regularly" with the Mississippi law firm
Scruggs Millette and providing the firm with "advice and
assistance." Beginning in the fall of 1993, members of both
firms came to Boston to meet with and receive advice from
Daynard, in furtherance of his engagement by them.1 According
to his affidavit, Daynard "had many conversations, meetings and
written communications in Boston with members of the defendant
firms, in which [he] provided advice and undertook specific
projects for their use in the tobacco litigation."
Daynard asserts that his legal theories, strategies,
evidence, and arguments "subsequently formed a central
component" of the firms' litigation brought on behalf of several
states against the tobacco industry. In addition, Daynard
introduced Ness Motley firm members to experienced tobacco
litigators and to pleading and discovery files from other
tobacco cases.
1 Scruggs denies that he participated in any such meeting
in Boston for these purposes.
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Initially, Ness Motley compensated Daynard based on
hourly fees for his services rendered. As Daynard's
relationship with the two firms progressed, he had "several
conversations" with "both Mr. Motley and Mr. Scruggs in which
they stated that they would appropriately compensate [Daynard]
. . . and that the final form of compensation would be" in the
form of a share of the fees the firms obtained from handling the
states' tobacco litigation. Ronald Motley advised Daynard that
he would be compensated for his assistance as a member of the
Ness Motley "team." After this communication, Daynard says that
he received no further compensation from Ness Motley. As to
payment by Scruggs Millette, the parties agree that Scruggs
Millette never compensated Daynard.
When the state tobacco litigation commenced, Daynard
continued to work with both firms, educating their attorneys on
the relevant issues, counseling them based on his experience in
other tobacco litigation, providing them with relevant documents
and information, and introducing them to potential witnesses and
contacts. He developed litigation strategies and worked on
pleadings and other documents for the firms. Many of these
services were performed in Boston. See Daynard v. Ness, Motley,
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Loadholt, Richardson & Poole, P.A., 188 F. Supp. 2d 115, 118
(2002) (stating that "Daynard performed his research and
writing, met with Ness Motley partners, and allegedly formed a
compensation contract in Massachusetts"); id. at 119. Daynard
also spoke at conferences of state governmental officials where
he arranged for Ness Motley and Scruggs Millette to participate,
thereby advancing their ongoing litigation and providing them
with legitimacy in the eyes of potential state clients.
Ness Motley recognized and encouraged Daynard's efforts
by assigning him specific projects, by requesting his
information and assistance, by transporting him to selected
meetings and proceedings, and by accepting his work product. At
some point in 1996, when Daynard became concerned that some Ness
Motley attorneys were trying to minimize his role in the
litigation, Mr. Motley assured Daynard that this was not the
case.
In July of 1996, when Daynard reported to Ness Motley
on the time he had expended to complete a research project that
Ness Motley had requested, the firm, consistent with its own and
the Scruggs defendants' past assurances, informed Daynard that
it would compensate him for his work by paying him a share of
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the fees generated if the litigation was successful, an
arrangement to which Daynard agreed. As a result of this
promise, Daynard ceased submitting descriptions of his hourly
work and requests for payment to Ness Motley.
Daynard says that, at a meeting in late August of 1996,
Scruggs Millette and Ness Motley "confirmed" their agreement to
compensate him in the form of a share of the fees. On August 25
through August 27, 1996, Daynard, Motley, and Scruggs were in
Chicago, Illinois, participating in meetings related to the
state tobacco litigation. Scruggs and Motley scheduled a
meeting with Daynard during that period to discuss Daynard's
specific share of any fee award. Although Motley was ultimately
not able to attend the meeting, Daynard met with Scruggs.
Daynard says he asked Scruggs "whether he was speaking for both
himself and Mr. Motley" and Scruggs stated that he was, that
Daynard could rely on this, and that he was acting with at least
"apparent authority" for Motley. Scruggs promised Daynard 5% of
any fees ultimately recovered, in any state tobacco litigation
in which any of the defendants were counsel, as compensation for
Daynard's past and continuing assistance. Daynard says he
accepted the 5% agreement and that he and Scruggs shook hands on
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it. Based on the conduct of the Scruggs and Motley defendants
during the course of the tobacco litigation, Daynard says that
he reasonably believed Scruggs to be acting with apparent
authority for both firms.
Relying on this 5% figure, and "ongoing assurances and
representations," Daynard continued to work for the two firms.
For example, Scruggs requested that Daynard be available during
the trial in the Mississippi litigation and agreed to compensate
Daynard for the cost of paying a substitute teacher to cover his
Northeastern University teaching obligations. Daynard agreed by
committing $15,000 of his own personal funds to buy himself out
of his teaching obligations so that he could be present full-
time during the trial.
Almost a year after the alleged handshake on the 5%
compensation figure, and after the Mississippi state litigation
had reached a tentative settlement, Daynard wrote a letter to
Scruggs confirming the fee arrangement and identifying certain
expenses that Daynard had incurred associated with the
Mississippi litigation. Scruggs never responded. A few months
later, Daynard wrote another letter, this time to both Scruggs
and Motley, referring to the 5% fee arrangement. At this point,
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both firms were expecting to reap significant attorney's fees
from the Mississippi settlement and also from the Florida
settlement. Joseph Rice of Ness Motley and Richard Scruggs both
responded to this second letter and both disavowed the 5% fee
arrangement. Neither firm has paid Daynard any of the legal
fees it has received to date. Daynard alleges that the firms
based their refusal to pay him the 5% on his failure to support
certain national tobacco liability legislation, a requirement he
says the defendants never mentioned in any previous
communication.
B. State Court Proceedings, Federal District Court Proceedings,
and the Defendants' Side of the Story
On December 27, 2000, Daynard sued the Motley
defendants and the Scruggs defendants in the Superior Court for
Suffolk County, Massachusetts, seeking, among other things,
compensation in the form of what Daynard says is his rightful
share of fees generated from settlements with several states,
not including Massachusetts. Daynard claims that Ness Motley
and Scruggs Millette have already received millions and will
receive over two billion dollars of the fees generated from the
settlement, 5% of which he claims is rightfully his. With the
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consent of the Motley defendants, the Scruggs defendants removed
the case to federal district court on January 18, 2001. See 28
U.S.C. § 1441 (1994).
In their answer, the Motley defendants conceded the
Massachusetts court's personal jurisdiction, but told a story on
the merits very different from Daynard's. The Motley defendants
admit that, in 1993, Patrick of Ness Motley met Daynard in
Massachusetts, and that the firm continued to meet with and
communicate with Daynard. Furthermore, they agree that Daynard
provided them with documents related to the tobacco litigation,
identified some potential witnesses, and did some general work
on the state tobacco litigation. The Motley defendants admit
that the firm made specific requests of Daynard and provided him
with transportation to certain meetings and proceedings. They
say that they paid Daynard for this work.
But the Motley defendants downplay Daynard's expertise,
say that his assistance was neither invaluable nor substantial,
and claim that his theories never formed a central component of
their tobacco litigation. Furthermore, they deny that either
they or Scruggs ever met with Daynard in Chicago and agreed upon
the 5% figure. They deny that any agreement as alleged by
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Daynard existed. The Motley defendants' position is that they
have already paid Daynard any money they ever owed him.
On May 30, 2001, the Motley defendants moved for
summary judgment. The district court denied this motion in part
on September 13, 2001, and issued its conclusions in a written
memorandum on December 3, 2001. Daynard v. Ness, Motley,
Loadholt, Richardson & Poole, P.A., 178 F. Supp. 2d 9 (D. Mass.
2001). The district court addressed those issues reserved in
the September 13 hearing and in the December 3 memorandum in a
second memorandum and order, in which it denied the Motley
defendants' motion for summary judgment. Daynard, 188 F. Supp.
2d 115.
The Scruggs defendants pursued a different legal
strategy. On April 20, 2001, they moved to dismiss Daynard's
complaint for lack of personal jurisdiction or for failure to
state a claim, and moved in the alternative for summary
judgement. See Fed. R. Civ. P. 12(b)(2), 12(b)(6), and 56.
Scruggs stated that he never agreed to share any fees with
Daynard and that
[i]t has always been my understanding that Professor
Daynard acted as a volunteer in all of his endeavors
with respect to the litigation, or was otherwise
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compensated by Ness Motley as a consultant on a
limited basis, and that his activities were designed
primarily to promote his own agenda with respect to
tobacco control.
As to personal jurisdiction, Scruggs states that
neither he nor his firm has ever had any offices, real estate,
bank accounts, or other property in Massachusetts. Furthermore,
none of the Scruggs defendants has ever practiced law in
Massachusetts. Daynard does not deny this. In addition, Scruggs
says that he has never traveled to Massachusetts in connection
with any fee sharing arrangement with Daynard or in connection
with any of Daynard's work under the alleged arrangement. He
denies that he or his firm had any role in contacting or
retaining Daynard in Massachusetts. He further states that the
Scruggs defendants did not request, or even have knowledge of,
the Motley defendants' meetings with Daynard. Scruggs also
denies that the Scruggs defendants or the Mississippi joint
venture, to the extent that it existed, ever gave the Motley
defendants any directions with respect to Daynard.
Although Scruggs concedes that "Daynard did at times
consult with me concerning the tobacco litigation in general,"
he says that "these instances were extremely infrequent and were
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not requested or solicited by me" and that the "'assistance' .
. . consisted of nothing more than information already made
available to the general public."
With respect to any relationship between Scruggs
Millette and Ness Motley, Scruggs stated, in a second affidavit,
that Scruggs Millette was part of a written joint venture
agreement in the Mississippi litigation, but that Ness Motley
was not a party to that agreement. He says that "[p]rior to
April of 1999, there was simply no arrangement [between Scruggs
Millette and Ness Motley] with respect to the sharing of
attorney's fees in the nationwide tobacco litigation." Scruggs
also noted that there was no agreement that "either Scruggs
Millette or Ness Motley could exert control over tobacco
litigation in states where those firms were not counsel of
record."
The district court, after one hearing on May 31, 2001,
and after granting Daynard limited jurisdictional discovery on
the issue of the relationship between the defendants from 1992
to 1998, held another hearing on September 13, 2001, in which it
dismissed Daynard's complaint against the Scruggs defendants for
lack of personal jurisdiction. At that September 13 hearing,
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the district court stated what it labeled the "bottom line of
[its] reasoning" for finding that it lacked personal
jurisdiction over the Scruggs defendants:
[W]hile the facts are sufficient to show a joint
venture with respect to the Mississippi litigation, as
the First Circuit has defined the term substantial
influence in the Donatelli versus National Hockey
League case, there is insufficient evidence in this
case that the Mississippi law firm or Mr. Scruggs
exercised a substantial influence over the Ness firm
such as would subject Scruggs or the Mississippi firm
to personal jurisdiction in Massachusetts.
Soon after that, the court entered final judgment in favor of
the Scruggs defendants, thus permitting an immediate appeal to
this court.
The district court supported its September 13
conclusion in a December 21, 2001, memorandum. Daynard v. Ness,
Motley, Loadholt, Richardson & Poole, P.A., 184 F. Supp. 2d 55(D. Mass. 2001). In that memorandum, the district court
addressed two theories on which Daynard might show personal
jurisdiction over the Scruggs defendants. Id. at 60-76. First,
the district court concluded that it did not have personal
jurisdiction over the Scruggs defendants based on their own
direct contacts with Massachusetts. Id. at 68. Second, the
district court concluded that it lacked jurisdiction over the
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Scruggs defendants based on contacts imputed from the Motley
defendants. Id. at 76. The district court reasoned that the
Scruggs defendants "likely were not in a joint venture" with the
Motley defendants,2 that the Motley defendants did not act as the
Scruggs defendants' agent,3 and that the "substantial influence"
requirement articulated in Donatelli, 893 F.2d at 469, 472,
precluded jurisdiction under the Due Process Clause, U.S. Const.
amend. XIV. Daynard, 184 F. Supp. 2d at 74-76. Daynard appeals
the district court's holding that it lacks personal jurisdiction
under an imputed or attributed contacts theory.4
2 This conclusion is in some tension with the district
court's earlier explanation, at the September 13 hearing, that
"the facts are sufficient to show a joint venture with respect
to the Mississippi litigation."
3 Earlier in its opinion, however, the district court
noted that "the South Carolina defendants arguably acted as the
Mississippi defendants' emissary," Daynard, 184 F. Supp. 2d at
66, an observation seemingly inconsistent with its conclusion
that no agency relationship existed.
4 Daynard focuses on the district court's attributed
contacts holding rather than on the district court's conclusion
that the Scruggs defendants' direct contacts are insufficient.
The Scruggs defendants emphasize this, noting that Daynard has
not argued that their direct contacts alone are sufficient to
permit personal jurisdiction. We agree that Daynard does not
advance this argument, but note that many of those facts,
insufficient to establish jurisdiction based on the Scruggs
defendants' direct contacts, are, of course, relevant to the
imputed contacts analysis as well. One cannot make a sensible
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II.
A. Burden of Proof and Standard of Review
To hear a case, a court must have personal jurisdiction
over the parties, "that is, the power to require the parties to
obey its decrees." United States v. Swiss Am. Bank, Ltd., 191
F.3d 30, 35 (1st Cir. 1999). The plaintiff bears the burden of
proving the court's personal jurisdiction over the defendant.
Foster-Miller, 46 F.3d at 145; Boit v. Gar-Tec Prods., Inc., 967
F.2d 671, 674-75 (1st Cir. 1992). The district court, faced
with a motion to dismiss for lack of personal jurisdiction, Fed.
R. Civ. P. 12(b)(2), may choose from among several methods for
determining whether the plaintiff has met this burden. Foster-
Miller, 46 F.3d at 145; Boit, 967 F.2d at 674-75. "The most
conventional of these methods," known as the "prima facie"
method, Foster-Miller, 46 F.3d at 145, "permits the district
court 'to consider only whether the plaintiff has proffered
evidence that, if credited, is enough to support findings of all
inquiry into whether contacts imputed to the Scruggs defendants
support personal jurisdiction without viewing those same
contacts in the context of all of the other alleged facts of the
case.
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facts essential to personal jurisdiction,'" id. (quoting Boit,
967 F.2d at 675).5
The district court applied the prima facie method.
Daynard, 184 F. Supp. 2d at 61. We review the district court's
choice of method de novo. Foster-Miller, 46 F.3d at 147. The
parties do not object to the district court's choice of the
prima facie method. Daynard states in his brief that the
district court employed the prima facie approach and the Scruggs
defendants agree, making no attempt to challenge the
applicability of this approach. Therefore, the Scruggs
defendants have waived any objection to the application of the
prima facie method. Cashmere & Camel Hair Mfrs. Inst. v. Saks
Fifth Ave., No. 00-2341, 2002 U.S. App. LEXIS 5361, at *10 (1st
Cir. Apr. 1, 2002); Ortiz v. Gaston County Dyeing Mach. Co., 277
F.3d 594, 598 (1st Cir. 2002). Under these circumstances, we
accept the prima facie method.6
5 For a discussion of other potential methods of
analysis, see Foster-Miller, 46 F.3d at 145-46 (describing
"prima facie," "preponderance-of-the-evidence," and "likelihood"
standards).
6 When "the assertion of jurisdiction is bound up with the
claim on the merits," but there exists "the possibility of permitting
a dubious case to proceed beyond the pleading stage, and even to trial,
though the court eventually will be found to lack jurisdiction," we
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Accordingly, Daynard has the burden of making a prima
facie showing of personal jurisdiction over the Scruggs
defendants. We "must accept the plaintiff's (properly
documented) evidentiary proffers as true for the purpose of
determining the adequacy of the prima facie jurisdictional
showing." Foster-Miller, 46 F.3d at 145. We take these facts
"as true (whether or not disputed) and construe them in the
light most congenial to the plaintiff's jurisdictional claim."
Mass. Sch. of Law at Andover, Inc. v. Am. Bar Ass'n, 142 F.3d
26, 34 (1st Cir. 1998); see also Sawtelle v. Farrell, 70 F.3d
1381, 1385-86 (1st Cir. 1995). "We then add to the mix facts
put forward by the defendants, to the extent that they are
uncontradicted." Mass. Sch. of Law, 142 F.3d at 34. We review
the district court's application of the prima facie standard de
novo. Foster-Miller, 46 F.3d at 147.
B. Background Law
"In determining whether a non-resident defendant is
subject to its jurisdiction, a federal court exercising
diversity jurisdiction 'is the functional equivalent of a state
have noted that the "likelihood" standard may be appropriate. Foster-
Miller, 46 F.3d at 146; see also Boit, 967 F.2d at 677-78.
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court sitting in the forum state.'" Sawtelle, 70 F.3d at 1387(quoting Ticketmaster-New York, Inc. v. Alioto, 26 F.3d 201, 204
(1st Cir. (1994)). "A district court may exercise authority
over a defendant by virtue of either general or specific
[personal] jurisdiction." Mass. Sch. of Law, 142 F.3d at 34.
General jurisdiction exists when the defendant has engaged in
"continuous and systematic activity" in the forum, even if the
activity is unrelated to the suit. United Elec., Radio & Mach.
Workers v. 163 Pleasant St. Corp., 960 F.2d 1080, 1088 (1st Cir.
1992). This is not such a case and no party suggests that it
is. "In the absence of general jurisdiction, a court's power
depends upon the existence of specific jurisdiction." Mass.
Sch. of Law, 142 F.3d at 34.
To establish personal jurisdiction, Daynard must show
that the Massachusetts long-arm statute grants jurisdiction and,
if it does, that the exercise of jurisdiction under the statute
is consistent with the constitution. Foster-Miller, 46 F.3d at
144.
Daynard's complaint pleads that personal jurisdiction
exists under subsections (a), (c), and (d) of the Massachusetts
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long-arm statute. Mass. Gen. Laws ch. 223A, § 3 (2000).7 The
relevant provision is § 3(a). The question under this
subsection is whether the Scruggs defendants "act[ed] directly
or by an agent, as to a cause of action . . . arising from the
[defendants'] . . . transacting any business in" Massachusetts.
Id. § 3(a). We may sidestep the statutory inquiry and proceed
directly to the constitutional analysis, however, because the
Supreme Judicial Court of Massachusetts has interpreted the
state's long-arm statute "as an assertion of jurisdiction over
the person to the limits allowed by the Constitution of the
7 The statute states, in relevant part:
A Court may exercise personal jurisdiction over a person,
who acts directly or by an agent, as to a cause of action
in law or equity arising from the person's
(a) transacting any business in this commonwealth;
. . .
(c) causing tortious injury by an act or omission in
this commonwealth; [or]
(d) causing tortious injury in this commonwealth by
an act or omission outside this commonwealth if
he regularly does or solicits business, or
engages in any other persistent course of
conduct, or derives substantial revenue . . . ,
in this commonwealth . . . .
Mass. Gen. Laws ch. 223A, § 3(a), (c)-(d).
-25-
United States." "Automatic" Sprinkler Corp. of Am. v. Seneca
Foods Corp., 361 Mass. 441, 280 N.E.2d 423, 424 (1972); accord
Tatro v. Manor Care, Inc., 416 Mass. 763, 625 N.E.2d 549, 553
(1994); see also Sawtelle, 70 F.3d at 1388 ("[W]hen a state's
long-arm statute is coextensive with the outer limits of due
process, the court's attention properly turns to the . . .
constitutional standards.").
"The Due Process Clause protects an individual's
liberty interest in not being subject to the binding judgments
of a forum with which he has established no meaningful
'contacts, ties, or relations.'" Burger King Corp. v.
Rudzewicz, 471 U.S. 462, 471-72 (1985) (quoting Int'l Shoe Co.
v. Washington, 326 U.S. 310, 319 (1945)). "[D]ue process
requires only that in order to subject a defendant to a judgment
in personam, if he be not present within the territory of the
forum, he have certain minimum contacts with it such that
maintenance of the suit does not offend 'traditional notions of
fair play and substantial justice.'" Int'l Shoe, 326 U.S. at
316 (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)); see
also Noonan v. Winston Co., 135 F.3d 85, 90 (1st Cir. 1998). In
a contract case, we evaluate the parties' "prior negotiations
-26-
and contemplated future consequences, along with the terms of
the contract and the parties' actual course of dealing" to
determine whether the defendants purposefully established
minimum contacts. Burger King, 471 U.S. at 479.
The more difficult question in this case is whether any
of the Motley defendants' contacts may be imputed to the Scruggs
defendants for purposes of establishing "minimum contacts." We
conclude that some of these contacts may be imputed. The next
question is whether the sum of any imputed and direct contacts
permits the court to exercise personal jurisdiction over the
Scruggs defendants consistent with the Constitution. We
conclude that these contacts suffice under Supreme Court law,
e.g., Burger King, 471 U.S. at 471-87; Int'l Shoe, 326 U.S. 310,
and the law of this circuit, e.g., Noonan, 135 F.3d at 90;
Foster-Miller, 46 F.3d at 144.
C. Imputed Contacts
Daynard alleges that the relationship between the
Motley defendants and the Scruggs defendants is such that some
of the Motley defendants' contacts with Massachusetts should be
imputed to the Scruggs defendants. As the district court
recognized, whether the defendants were in all respects joint
-27-
venturers is not alone dispositive, Daynard, 184 F. Supp. 2d at
74, although the parties focus much of their energies on
disputing this particular issue. The basic question is whether
the relationship between the Scruggs defendants and the Motley
defendants, however one labels it, is sufficient to attribute
any of the Motley defendants' contacts to the Scruggs defendants
for the purpose of reaching the Scruggs defendants under the
Massachusetts long-arm statute as cabined by the Due Process
Clause of the Fourteenth Amendment. We conclude that the
relationship was sufficient for that purpose. Daynard has put
forth evidence that, if credited and accepted as true, is enough
to support personal jurisdiction over the Scruggs defendants.
Daynard alleges that the Motley defendants and the
Scruggs defendants were part of a formal, written joint venture
between themselves. He also says that he believed the parties
to be joint venturers because they "consistently purported to
be" in such a relationship. Daynard argues that at the time
Charles Patrick of Ness Motley came to Massachusetts to retain
him, Ness Motley and Scruggs Millette were engaged in a form of
tobacco litigation joint venture. Daynard says that Patrick was
acting for both firms when Patrick retained him and that Patrick
-28-
retained him to advance the objectives of the joint venture.
Throughout his dealings with Ness Motley and Scruggs Millette,
he understood the two firms to be in a joint venture that at
first encompassed the Mississippi tobacco litigation and then
broadened to include tobacco litigation nationwide.
1. Applicability of Donatelli's "substantial
influence" test.
First, there is the threshold question of whether the
district court properly applied Donatelli, 893 F.2d 459, as the
governing test. The parties devote the majority of their
attention to this issue, but it is not dispositive of the
personal jurisdiction question. The district court concluded
that even if the Motley defendants acted as the Scruggs
defendants' agents, "there was no substantial influence as
required by Due Process." Daynard, 184 F. Supp. 2d at 76. The
district court derived this "substantial influence" requirement
from Donatelli, 893 F.2d at 469, a general jurisdiction case.
The district court was in error. It read Donatelli as applying
an exclusive test and as applying in the present, very different
context. This over-reads Donatelli.
The question before us is whether Daynard must meet the
-29-
substantial influence test in order to comply with
jurisdictional Due Process requirements. Although Donatelli
aids our inquiry, we conclude that its substantial influence
test is not the exclusive test for attribution of conduct. It
does not control the matter before us here, where the questions
are whether the Scruggs defendants were in an actual or apparent
agency relationship, or at least held themselves out to be in a
joint venture or other agency relationship with the Motley
defendants, and whether the Scruggs defendants ratified the
Motley defendants' conduct.
In Donatelli, this court held that
an unincorporated association which does not itself
conduct significant activities in, or enjoy
affiliating circumstances with, a state cannot be
subject to the general personal jurisdiction of the
state's courts on the basis of a member's contacts
within the state unless the member carries on the in-
forum activities under the association's substantial
influence.
Id. at 472. Donatelli sued the National Hockey League ("NHL")
in Rhode Island, challenging the NHL's draft and its failure to
declare him a free agent. Jurisdiction in Rhode Island over the
NHL was premised on the fact that a member team of the NHL had
contacts with Rhode Island. His suit was unrelated to either
-30-
the NHL's contacts with Rhode Island or its member's contacts
with Rhode Island. Id. at 462. The Donatelli court rejected
the theory that the NHL could be subject to general personal
jurisdiction in Rhode Island simply because one of its members
was subject to general jurisdiction in that state. Id. at 472.
It concluded that, in these circumstances, a showing of
"substantial influence" was necessary in order to attribute
one's contacts to the other consistent with the requirement of
purposeful availment. Id. at 469.
Donatelli's substantial influence test does not control
the entire universe of cases in which one party's contacts might
be attributed to another. By its terms, Donatelli applies "in
the world of unincorporated associations." Id. at 468. Indeed,
as Donatelli itself observed, the substantial influence test
does not control where one seeks to attribute contacts from
partner to partnership or from subsidiary to corporate parent.
Id. at 465-67. In the partnership context, "the activities of
the partner are generally attributed to the partnership and
jurisdiction over the partnership follows from the partner's
contacts, if sufficient, regardless of the absence of
independent contacts between the partnership qua entity and the
-31-
forum." Id. at 466. Donatelli's substantial influence test
does not apply here, where the question is whether an actual or
implied agency relationship, sufficient to attribute contacts,
existed between the parties. We conclude that, similar to some
cases involving actual partnerships, the relationship between
the defendants here invokes certain principles of the law of
agency, partnership, and joint venture and that these principles
permit imputing contacts without the need to show substantial
influence.
In addition, although we do not decide whether
Donatelli's approach to attribution is necessarily limited to
general jurisdiction cases, we note, as stated several times in
the Donatelli opinion, including in the above quoted passage,
that Donatelli "focus[ed] . . . upon . . . general as opposed to
specific jurisdiction." Id. at 463; see also id. at 461 (stating the
issue on appeal as whether "an unincorporated association is subject to
the general personal jurisdiction of every court having jurisdiction
over one of its members") (internal quotation marks omitted). This is
important because, as Donatelli states clearly, the standard for
general jurisdiction is more strict than the standard for
specific jurisdiction. Id. at 463. General jurisdiction
-32-
requires that the defendant's activities in the forum be
"continuous and systematic," United Elec., Radio & Mach.
Workers, 960 F.2d at 1088, whereas specific jurisdiction
requires a lesser showing.
The problem Donatelli addresses is, in some ways, more
likely to occur in general jurisdiction cases. In general
jurisdiction cases, the suit does not arise out of or relate to
the defendant's forum contacts. Helicopteros Nacionales de
Colombia, S.A. v. Hall, 466 U.S. 408, 414 n.9 (1984). Donatelli
addresses the potentially unjust scenario in which an
association, with no direct contacts with a forum, is haled into
a forum based on one of its members' continuous and systematic
activities in the forum, to answer a lawsuit unrelated to either
the member's or the association's in-forum activities. 893 F.2d
at 469. Something more is needed to say that the association
has purposefully availed itself of the benefits of in-forum
activity. Otherwise, the association is subject to a suit in
that forum, unrelated to anything the association has done in
the forum, by merely engaging in a limited relationship with a
member, that through its own activities engages in continuous
and systematic activities in a forum.
-33-
Donatelli resolves this problem by holding that, in
general jurisdiction cases, the association must "exercise[ ]
substantial influence over the member's decision to carry on the
in-forum activities which constitute the relevant 'minimum
contacts.'" Id. This requirement ensures that the association
purposefully availed itself of the benefits of the forum,
because it links the member's in-forum activity with the
association's relationship with that member.
This problem, however, is less likely to arise in
specific jurisdiction cases such as this one. Here a direct
connection is alleged between the in-forum activities of the
agent (the Motley defendants) and the agent's relationship with
the principal (the Scruggs defendants). When the cause of
action relates to both the association's activities giving rise
to the suit and to the member's in-forum activities, the same
risk of unfairness is not necessarily present. In the present
case, Daynard's suit relates to the Scruggs defendants' alleged
promise to pay him a share of the fees and to the Motley
defendants' activities in Massachusetts, claimed to have been
ratified by Scruggs. Donatelli is not controlling in this
context. It addresses a question different from the inquiry
-34-
here, which is whether there was an agency relationship between
the defendants and whether the Scruggs defendants ratified the
Motley defendants' activities in Massachusetts giving rise to
Daynard's suit.
But that does not end the matter. We must still
determine whether the relationship between the defendants
permits imputing a sufficient quantum of the Motley defendants'
connections to the Scruggs defendants.
2. Implied agency and ratification.
For purposes of personal jurisdiction, the actions of
an agent may be attributed to the principal.8 Whether or not an
agent is initially authorized to act on behalf of a principal,
the agent's actions may be attributed to the principal, for
8 See Burger King, 471 U.S. at 480 n.22 (stating that
commercial activities carried out on a party's behalf "may
sometimes be ascribed to the party," but declining to "resolve
the permissible bounds of such attribution"); Grand Entm't
Group, Ltd. v. Star Media Sales, Inc., 988 F.2d 476, 483 (3d
Cir. 1993) (stating that "[a]ctivities of a party's agent may
count toward the minimum contacts necessary to support
jurisdiction"); Sher v. Johnson, 911 F.2d 1357, 1362 (9th Cir.
1990) (stating that the actions of an agent are attributed to
the principal for personal jurisdiction purposes); see also
Donatelli, 893 F.2d at 466 (noting the general rule that
"jurisdiction over a partner confers jurisdiction over the
partnership"); Lewis v. Fresne, 252 F.3d 352, 359 (5th Cir.
2001) (same).
-35-
purposes of personal jurisdiction, if the principal later
ratifies the agent's conduct. Myers v. Bennett Law Offices, 238
F.3d 1068, 1073 (9th Cir. 2001); Wessels, Arnold & Henderson v.
Nat'l Med. Waste, Inc., 65 F.3d 1427, 1433 (8th Cir. 1995)
(attributing contacts where principal "supported, accepted, and
followed through on the efforts initiated" by the agent,
regardless of whether the agent had authority to act on the
principal's behalf). First, we address whether the defendants
were in any sort of agency relationship. Second, we discuss
whether the Scruggs defendants initially authorized, or later
ratified, the Motley defendants' actions.
We disagree with the district court's conclusion that
"the defendants were not in any sort of agency relationship."
Daynard, 184 F. Supp. 2d at 74; see also id. at 76. Traditional
common law concepts support the conclusion that the Scruggs
defendants' relationship with the Motley defendants suffices to
bring the parties within the rule that permits imputation of
contacts for jurisdictional purposes.
Section 16 of the Uniform Partnership Act, which is codified
in the laws of Massachusetts, Mississippi, and South Carolina,
recognizes the common law doctrine of partnership by estoppel --
-36-
or, in this case, joint venture by estoppel. Unif. P'ship Act §
16(1), 6 U.L.A. 125, 501 (1995); Mass. Gen. Laws ch. 108A, § 16
(2000); Miss. Code Ann. § 79-12-31 (2001); S.C. Code Ann. § 33-
41-380 (2001). The Uniform Partnership Act states:
When a person . . . represents himself, or consents to
another representing him to any one, as a partner . . . he
is liable to any such person to whom such representation has
been made, who has, on the faith of such representation,
given credit to the actual or apparent partnership, and if
he has made such representation or consented to its being
made in a public manner he is liable to such person, whether
the representation has or has not been made or communicated
to such person so giving credit by or with the knowledge of
the apparent partner making the representation or consenting
to its being made.
Unif. P'ship Act, supra, § 16(1); see also Standard Oil Co. v.
Henderson, 265 Mass. 322, 163 N.E. 743, 745 (1928) (stating the
common law doctrine of partnership by estoppel).
Partnerships and joint ventures aside, a theory of
agency by estoppel is similarly availing to Daynard. Under the
Restatement (Second) of Agency,
[a] person who is not otherwise liable as a party to
a transaction purported to be done on his account, is
nevertheless subject to liability to persons who have
changed their positions because of their belief that
the transaction was entered into by or for him, if
(a) he intentionally or carelessly caused such
belief, or
(b) knowing of such belief and that others might
-37-
change their positions because of it, he did
not take reasonable steps to notify them of the
facts.
Restatement (Second) of Agency § 8B (1958); accord H.G.
Reuschlein & W.A. Gregory, The Law of Agency and Partnership §
25, at 65-66 (2d ed. 1990) (noting that "[c]onduct which leads
a third party to believe that the agent has authority and thus
creates apparent authority to those persons who act upon it,
frequently causes the principal to be liable to those who have
changed their position in reliance to their detriment"); L.
Lakin & M. Schiff, The Law of Agency 38 (1984) (stating an
"equitable principle of agency by estoppel" similar to that of
the Restatement (Second)).
Even if the defendants' relationship were to fall
slightly outside of the confines of these specific doctrines,
the question before us is whether a sufficient relationship
exists under the Due Process Clause to permit the exercise of
jurisdiction, not whether a partnership, joint venture, or other
particular agency relationship between the two defendants
exists. We think it consistent with the Due Process Clause to
attribute to the Scruggs defendants the Motley defendants'
retention of, and certain interactions with, Daynard where, as
-38-
Daynard alleges, they have led Daynard and the public to believe
they were joint venturers. That is a different issue from
whether, in a dispute between the two firms, a joint venture
agreement could be enforced.
We take the facts alleged and produced by Daynard in
the light most favorable to his jurisdictional assertion. Even
if the parties were not joint venturers, they held themselves
out to Daynard to be part of a joint venture or other agency
relationship and are subject, for personal jurisdiction
purposes, to the doctrine of estoppel. Daynard, throughout his
dealings with the defendants, understood them to be joint
venturers. He says the parties "consistently purported to be
joint venturers" and that he reasonably relied on this
understanding. The question is whether he had a basis for this
belief grounded in the Scruggs defendants' own conduct or
conduct undertaken with their consent.
In support of his understanding, Daynard states that
he believed the firms to be in a joint venture based on their
statements and conduct. Daynard states that Patrick was acting
for both firms when Patrick retained him and that Patrick
retained him to advance the objectives of the joint venture. He
-39-
says that during this first meeting, Patrick described the
tobacco litigation as stemming from a meeting between Scruggs
and the Mississippi attorney general, which then resulted in
Scruggs "br[inging] the Motley firm into their plans."
Daynard supports his claim with documentary evidence
of a joint venture that he unearthed through jurisdictional
discovery. Around October 1994, the Scruggs defendants entered
into a "Joint Venture Agreement" with several firms to pursue
tobacco litigation on behalf of the state of Mississippi. The
Motley defendants claim to have abided by this agreement and
their firm's name was listed on the agreement, although they
never signed the agreement. In a letter from Joseph Rice of
Ness Motley to Richard Scruggs, Rice stated: "As we have
discussed several times, we have not signed the Mississippi
Joint Venture Agreement solely because we don't want to be
governed by Mississippi Tax Law. We are agreeable to all terms
in the agreement and, as you know, we have acted under the
agreement from the beginning." In the agreement, Ness Motley
firm members, including Mr. Motley, were listed as members of
several of the "teams" and "committees" forming the "Litigation
Management Structure" outlined in the agreement. Mr. Motley was
-40-
a co-chairman of the "Public Relations Team," which also
included Steve Bozeman from Scruggs Millette. Indeed, Ness
Motley was counsel of record in the Mississippi case. In
addition, Daynard notes that "the two defendant firms were
parties to a 'Resolution' which recited that they had both 'made
and entered into that certain Joint Venture Agreement'
concerning the Mississippi litigation."
Scruggs says that Ness Motley did not sign the joint
venture agreement, that Ness Motley did not perform under the
agreement's terms, and that the litigation team did not function
as outlined in the agreement. He says Ness Motley did not make
the capital contributions specified in the agreement, that there
was a distinction between being counsel of record and being a
party to the joint venture agreement, and that Ness Motley's
failure to sign the agreement caused "great concern." Scruggs
says that, upon receiving the letter from Rice, stating that
Ness Motley had "acted under the agreement from the beginning,"
he called Rice and told him that "this wasn't good enough" and
that "nobody else" considered Ness Motley to have performed
under the agreement.
Scruggs concedes, however, that the profits from the
-41-
Mississippi litigation, outlined in this agreement, were
eventually divided with Ness Motley, but he says that the
division was under the terms of a 1999 agreement. Scruggs
states that his "understanding with Ness Motley was always that
at the end of the day, we would attempt to negotiate a fee and
expense sharing arrangement, each trusting the goodwill of the
other to reach a successful negotiation, but without any
guarantee that we would." In addition, Scruggs admits that
"[t]here was a general cooperative effort between [Scruggs
Millette and Ness Motley] to advance litigation against the
tobacco industry."
Daynard then says that after Motley hired him, he began
a course of dealing with the defendants in which he provided
both firms with legal advice, including advice to members of the
Scruggs firm physically present in Boston, as well as assistance
provided from Boston by phone and fax. Daynard also cites
several conversations with both Scruggs and Motley in which they
agreed to pay him a share of the fees obtained by both firms,
Scruggs's statement that Scruggs had at least apparent authority
to promise the 5%, and Motley's statement that he would be
compensated as part of the "team."
-42-
Daynard cites a popular book about the tobacco
litigation, which he says describes Ness Motley and Scruggs
Millette as joint venturers beginning in 1993, as evidence that
the firms were engaged in a well publicized joint venture or at
least held themselves out to be so engaged. See M. Orey,
Assuming the Risk: The Mavericks, the Lawyers, and the Whistle-
Blowers Who Beat Big Tobacco 265 (1999) (stating that Scruggs,
Motley, and two others, were the "nucleus" of a tobacco
litigation "team," which "drafted a joint-venture agreement that
spelled out in elaborate detail the duties each of the lawyers
would perform"). He notes, as additional evidence of public
perception, that in the Texas tobacco litigation, other lawyers
sent the firms checks made payable to "Ness Motley/Scruggs." At
least four such checks appear in the record.
Finally, in support of his claim that the defendants
held themselves out to be joint venturers, Daynard presents a
1998 letter to Hawaii's attorney general, from Joseph Rice of
Ness Motley, stating that "Ness, Motley has an arrangement with
Richard Scruggs to work jointly on all of the state cases
against the Tobacco Industry." Noting that "[w]e have no
formal, written agreement," he said "Ness, Motley and Dick
-43-
Scruggs have been doing business together for almost ten years
and have never had any differences. We fully anticipate sitting
down in hindsight and determining what the division of any
recoveries would be between the two law firms."
Scruggs said that he considered Rice's statement that
"Ness, Motley has an arrangement with Richard Scruggs to work
jointly on all of the state cases against the Tobacco Industry"
to be "a bit of an overstatement." On the other hand, Rice's
letter to Hawaii's attorney general said "I am sending a copy of
this letter to Dick so he may respond likewise, if he has any
questions or any additions." Scruggs did not write anything to
contradict Rice's characterization and stated, in his
deposition, that "[t]here was no reason to contradict it."
Scruggs conceded that "[t]here was a general cooperative effort
between [Scruggs Millette and Ness Motley] to advance litigation
against the tobacco industry." Although this letter may not go
to Daynard's understanding of the firms' relationship, and
although it was written by Rice of Ness Motley, not by any of
the Scruggs defendants, Scruggs's silence carries at least some
weight.
-44-
The facts as alleged by Daynard are sufficient to make
the jurisdictional showing that, in Boston, Patrick of Ness
Motley hired Daynard, that Daynard reasonably understood Patrick
to be acting on behalf of a joint venture or other agency
relationship between Ness Motley and Scruggs Millette, and that
Daynard relied on this understanding by providing his services
to both defendants.
Many of these same facts support the conclusion that
the Scruggs defendants subsequently ratified the Motley
defendants' conduct. Even if Patrick, when he hired Daynard,
was acting without actual authority from the Scruggs defendants,
Daynard says Patrick purported to act as an agent for both firms
when Patrick retained Daynard, and that Scruggs effectively
ratified that representation.
"A person may ratify a prior act done by another without
actual or apparent authority. . . . by . . . conduct that is
justifiable only on the assumption that the person so consents."
Restatement (Third) of Agency § 4.01 (Tentative Draft No. 2, 2001).9
9 As described in the Restatement (Second), "Ratification
is the affirmance by a person of a prior act which did not bind
him but which was done or professedly done on his account,
whereby the act, as to some or all persons, is given effect as
if originally authorized by him." Restatement (Second) of
-45-
"The sole requirement for ratification is a manifestation of assent or
other conduct indicative of consent by the principal." Restatement
(Third) of Agency, supra, § 4.01, cmt. b; see also Inn Foods, Inc. v.
Equitable Coop. Bank, 45 F.3d 594, 597 (1st Cir. 1995) (stating that
"[u]nder Massachusetts law, ratification of an agent's acts may be
express or implied"). The Scruggs defendants, on the facts
alleged, engaged in such conduct.
After Ness Motley retained Daynard, and as a result of
this employment, Daynard asserts that he began providing
information directly to the Scruggs defendants. Daynard says
that he "communicated regularly" with the Scruggs defendants,
that they came to Boston to receive his advice, and that he "had
many conversations, meetings and written communications in
Boston with members of the defendant firms, in which [he]
provided advice and undertook specific projects for their use in
the tobacco litigation." Even if the Scruggs defendants did not
come to Boston, we think there is adequate other evidence of
ratification, accepting Daynard's allegations.
Daynard says that he had "several conversations" with
"both Mr. Motley and Mr. Scruggs in which they stated that they
Agency, supra, § 82.
-46-
would appropriately compensate [Daynard] . . . and that the
final form of compensation would be" in the form of a share of
the fees the firms obtained from handling the state tobacco
litigation. Daynard says Ronald Motley advised him that he
would be compensated for his assistance as a member of the Ness
Motley "team." Further evidence of ratification comes from Daynard's
version of the Chicago meeting, where Scruggs said he acted with at
least apparent authority for both firms and reached an agreement.
Daynard says that Scruggs shook hands on a deal to pay him 5% of these
fees. These assurances and reassurances that Daynard would be paid a
portion of the recovered fees were an integral part of the ongoing
relationship existing between Daynard, the Motley defendants, and the
Scruggs defendants.
Finally, Daynard asserts that in reliance on his arrangements
with the Scruggs defendants and at their request, he had to commit out-
of-pocket expenses of $15,000 to retain someone to meet his teaching
obligations. Again, there is no evidence that Scruggs disavowed any
contractual relationship as he accepted Daynard's assistance. To be
sure, Scruggs says Daynard was a volunteer, but reasonable inferences
support Daynard's version.
The Scruggs defendants had many opportunities to disavow a
relationship with Daynard or to clarify the relationship. For example,
-47-
they could have rejected his assistance or accepted it only on certain
conditions. Instead, according to Daynard, they repeatedly encouraged
and accepted his assistance and during several conversations agreed to
pay him in the form of a share of the fees generated. When Daynard
wrote his first letter to Scruggs in July 1997 confirming the
fee arrangement, Scruggs remained silent.10
By knowingly accepting the benefits of the transaction
initiated in Massachusetts, the Scruggs defendants ratified Patrick's
act of hiring and retaining Daynard on behalf of both firms, which
ultimately gave rise to this law suit. See Inn Foods, 45 F.3d at 597
n.7 (noting that "benefits received are certainly strong evidence that
the principal acquiesced in the agent's transaction"); Restatement
(Third) of Agency, supra, § 4.01, cmt. d. In addition, by repeatedly
agreeing to compensate Daynard for ongoing work conducted in
Massachusetts, agreeing to pay Daynard a share of the fees and later
shaking hands on the 5% figure, and accepting his coming from Boston to
Mississippi to assist at trial, Scruggs, acting on behalf of his firm
10 It was not until November 1997, after Daynard had provided
years of services and the firms were expecting to reap significant
financial rewards from at least the Mississippi and Florida litigation,
that Scruggs responded to Daynard's second letter, after he
ignored the first letter, and disavowed the 5% fee arrangement.
Daynard asserts that, even at this point, Scruggs disputed only
the extent of Daynard's compliance with the agreement, not the
existence of the agreement.
-48-
and, according to Daynard, the Ness Motley firm as well, ratified the
arrangement in which the Motley defendants agreed to pay Daynard for
his ongoing services as a member of the team.
D. The Remaining Constitutional Analysis
The easier question in the case is the remaining
constitutional one. Given the Scruggs defendants' direct
contacts with Massachusetts and their contacts imputed from the
Motley defendants, do the Scruggs defendants have "minimum
contacts" with Massachusetts "such that the maintenance of the
suit does not offend 'traditional notions of fair play and
substantial justice.'"? Int'l Shoe, 326 U.S. at 316 (quoting
Milliken, 311 U.S. at 463). The answer is yes.
For specific jurisdiction, this circuit divides the
constitutional analysis into three categories: relatedness,
purposeful availment, and reasonableness:
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 courts
foreseeable. Third, the exercise of jurisdiction
must, in light of the Gestalt factors, be reasonable.
-49-
Foster-Miller, 46 F.3d at 144; see also Noonan, 135 F.3d at 90.
The Supreme Court, speaking on the subject of specific personal
jurisdiction in contract cases, has "emphasized that parties who
'reach out beyond one state and create continuing relationships
and obligations with citizens of another state' are subject to
regulation and sanctions in the other State for the consequences
of their activities." Burger King, 471 U.S. at 473 (quoting
Travelers Health Ass'n v. Virginia, 339 U.S. 643, 647 (1950)).
1. Relatedness.
As to the first requirement, that "the claim underlying
the litigation must directly arise out of, or relate to, the
defendant's forum-state activities," Foster-Miller, 46 F.3d at
144, the district court correctly concluded, based merely on the
Scruggs defendants' direct contacts with the forum, that the
alleged
breach of contract in this case "arose" from a course
of dealing between the parties. The contract was in
the form of a working relationship -- started in
Massachusetts -- that called for interaction between
Massachusetts, South Carolina, and Mississippi.
Drawing all inferences in favor of Daynard, he
arguably meets the relatedness requirement,
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Daynard, 184 F. Supp. 2d at 66. It is clear that Daynard's
breach of contract claim "arise[s] out of, or relate[s] to," the
Scruggs defendants' Massachusetts activities. Foster-Miller, 46
F.3d at 144. Daynard's lawsuit is based on his claim that the
defendants owe him money for his work pursuant to an agreement
initiated by the defendants while physically present in
Massachusetts and performed, in part, in Massachusetts. This
relationship contemplated ongoing interaction between Daynard,
in Massachusetts, and the defendants, in Mississippi and South
Carolina. Daynard's suit arises out of these Massachusetts
activities, which were instrumental to the formation of the
disputed oral contract. See McGee v. Int'l Life Ins. Co., 355
U.S. 220, 223 (1957) (upholding jurisdiction over a suit "based
on a contract which had substantial connection with th[e]
State"); Hahn v. Vt. Law Sch., 698 F.2d 48, 51-52 (1st Cir.
1983).
2. Purposeful availment.
"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
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involuntary presence before the state's courts foreseeable."
Foster-Miller, 46 F.3d at 144. "The cornerstones upon which the
concept of purposeful availment rest[s] are voluntariness and
foreseeability." Sawtelle, 70 F.3d at 1391 (citing
Ticketmaster, 26 F.3d at 207).
The district court's reasoning on purposeful availment
considered only the Scruggs defendants' direct contacts and
found them insufficient. We need not address this conclusion as
Daynard has not challenged it on appeal. We note, however,
that, as the district court recognized, Scruggs did have some
contacts with Massachusetts, however minimal. The Scruggs
defendants, according to Daynard, engaged in telephone and fax
communications with him in Massachusetts.11 In addition, Daynard
says the Scruggs defendants also had conversations with him, in
which they agreed to pay him a share of the fees as compensation
11 "The transmission of facts or information into
Massachusetts via telephone or mail would of course constitute
evidence of a jurisdictional contact directed into the forum
state." Mass Sch. of Law, 142 F.3d at 36; see also Burger King,
471 U.S. at 476 (stating that "it is an inescapable fact of
modern commercial life that a substantial amount of business is
transacted solely by mail and wire communications across state
lines" and that defendants may not defeat jurisdiction merely by
showing that they never physically entered the forum).
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for work performed in Massachusetts. He also says that Scruggs
firm members came to Boston to receive his advice, although
Scruggs denies this.
Combined with Patrick's physical presence in
Massachusetts to negotiate the agreement which ultimately gave
rise to this litigation, and the ongoing relationship between
the Motley defendants and Daynard -- properly attributed to the
Scruggs defendants -- we can properly say that the Scruggs
defendants "engaged in . . . purposeful activity related to the
forum that would make the exercise of jurisdiction fair, just,
or reasonable," Rush v. Savchuk, 444 U.S. 320, 329 (1980). See
Burger King, 471 U.S. at 479 (holding that "prior negotiations
and contemplated future consequences, along with the terms of
the contract and the parties' actual course of dealing" must be
evaluated to determine whether the defendant purposefully
established minimum contacts). Patrick's action alone is
probably sufficient to support jurisdiction over the Motley
defendants and, when imputed, the Scruggs defendants as well.
See id. at 475 n.18 (noting that "[s]o long as it creates a
'substantial connection' with the forum, even a single act can
support jurisdiction") (quoting McGee, 355 U.S. at 223); R.C.
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Casad & W.B. Richman, 1 Jurisdiction in Civil Actions:
Territorial Basis and Process Limitations on Jurisdiction of
State and Federal Courts § 4-2, at 413 (3d ed. 1998) (stating
that "if the defendant or its agent was physically present in
the state to negotiate the service contract, cases have found
that the defendant transacted business there"). Even in cases
where the defendant was not physically present in the forum,
where the defendant initiated the transaction by mailing or
calling the plaintiff in the forum and when the defendant
contemplated that the plaintiff would render services in the
forum, all as alleged by Daynard here, many courts have found
jurisdiction. Casad & Richman, supra, § 4-2, at 414.
3. Reasonableness.
"Third, the exercise of jurisdiction must, in light of
the Gestalt factors, be reasonable." Foster-Miller, 46 F.3d at
144; see also World-Wide Volkswagen Corp. v. Woodson, 444 U.S.
286, 292 (1980) (listing factors). The Gestalt factors support
the conclusion that jurisdiction is reasonable.
The burden on the Scruggs defendants of appearing in
Massachusetts, given that they routinely represent clients
outside their home state, is not by any means unusual. In
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addition, Daynard's interest in bringing his action in this
forum, given the traditional deference accorded to a plaintiff's
choice of forum, weighs in favor of personal jurisdiction. This
is particularly true in light of Massachusetts's stake in being
able "to provide a convenient forum for its residents to redress
injuries inflicted by out-of-forum actors." Sawtelle, 70 F.3d
at 1395. Massachusetts's adjudicatory interest is likely to
weigh in favor of exercising personal jurisdiction because the
district court has already decided that, as between Daynard and
the Motley defendants, Massachusetts law governs the dispute
over the oral fee-splitting arrangement. Daynard, 188 F. Supp.
2d at 118-23. Finally, efficient administration of justice
favors jurisdiction in Massachusetts, where this action is
already proceeding against the Motley defendants.
E. Conclusion
We conclude that the Scruggs defendants' contacts
properly imputed from the Motley defendants, against the
backdrop of the Scruggs defendants' direct contacts with
Massachusetts, constitute "minimum contacts" with Massachusetts
"such that the maintenance of the suit does not offend
'traditional notions of fair play and substantial justice.'"
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Int'l Shoe, 326 U.S. at 316 (quoting Milliken, 311 U.S. at 463).
Again, we emphasize that we reach this conclusion under the
prima facie approach, taking Daynard's properly documented
evidentiary proffers "as true (whether or not disputed) and
constru[ing] them in the light most congenial to [Daynard's]
jurisdictional claim." Mass. Sch. of Law, 142 F.3d at 34.
Nothing in the opinion precludes the Scruggs defendants, in the
prospective district court proceedings, from challenging these
facts, if they wish, and renewing their jurisdictional
challenge, if appropriate.
III.
For these reasons, we reverse the dismissal of the
Scruggs defendants for lack of personal jurisdiction and remand
to the district court for further proceedings consistent with
this opinion.
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