Cossart v. United Excel Corporation , 804 F.3d 13 ( 2015 )

United States Court of Appeals
For the First Circuit
No. 14-2144
WILLIAM COSSART,
Plaintiff, Appellant,
v.
UNITED EXCEL CORPORATION and KY HORNBAKER,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. George A. O'Toole, Jr., U.S. District Judge]
Before
Thompson, Kayatta, and Barron,
Circuit Judges.
Kevin T. Smith, with whom Law Office of Kevin T. Smith LLC
was on brief, for appellant.
Marissa I. Delinks, with whom Hinshaw & Culbertson LLP was on
brief, for appellees.
September 30, 2015
BARRON, Circuit Judge. This case presents a question
about the limits of personal jurisdiction. The issue arises in
connection with a lawsuit brought in Massachusetts concerning an
alleged breach of an employment contract. The contract
contemplated that the employee would work from Massachusetts for
a Kansas company, which then facilitated the employee's work from
Massachusetts by, among other things, providing him with equipment
and officially registering a sales office with the Commonwealth.
The employee sued after the company failed to pay him a commission
that he alleges he was due. Under the facts presented, we conclude
that the assertion of jurisdiction over the company and its
president is consistent with both the Massachusetts long-arm
statute and the Due Process Clause. We therefore reverse the
District Court's dismissal for lack of personal jurisdiction and
remand for further proceedings.
I.
United Excel Corporation, the employer and one of the
two defendant-appellees, is a so-called "design/build" company
that provides architectural and construction management services
to hospitals.1 It is incorporated and headquartered in Kansas.
1 The recited facts are drawn from the complaint, plaintiff's
evidentiary submissions, and, when uncontradicted, defendants'
affidavits. See C.W. Downer & Co. v. Bioriginal Food & Sci. Corp.,
771 F.3d 59, 65 (1st Cir. 2014).
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William Cossart, the plaintiff-appellant, worked for the company
as a salesman. He resides in Wayland, Massachusetts.
United Excel recruited Cossart in 2010. At that time,
Cossart traveled from his home in Massachusetts to United Excel's
offices in Kansas. There, he negotiated an employment contract
with, among others, Ky Hornbaker, United Excel's president and the
other defendant in this case.
That first employment contract assumed that Cossart
would continue to work out of his home in Wayland, Massachusetts.
United Excel memorialized the contract in a letter addressed to
Cossart in Wayland. The letter stated that United Excel would
provide Cossart with the business equipment that he would need to
work from Wayland, such as a computer, a printer, a cell phone,
and video conference equipment. United Excel also provided Cossart
with a business telephone number with a Kansas exchange and
redirected calls made to that number to Cossart's phone in Wayland.
And United Excel, acting through Hornbaker, registered with
Massachusetts to establish a "[g]eneral contracting sales office"
in the state just a day after Cossart started his new job with
United Excel in Wayland.
In 2012, United Excel and Cossart changed Cossart's
employment contract to make him a "commission only employee," while
leaving the other terms of his employment unaltered. United Excel
once again memorialized the employment contract in a letter sent
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to Cossart at his Wayland address. And the new agreement, like
the old, allowed Cossart to use home office equipment provided by
United Excel to facilitate his remote employment. United Excel
also continued to keep its registration up to date in
Massachusetts.
Over the course of his employment, Cossart made hundreds
of telephone calls and sent hundreds of e-mails on behalf of United
Excel from his Wayland office. He had numerous meetings and made
cold calls in an effort to solicit business from various hospitals
in Massachusetts, but he did not successfully secure business with
a Massachusetts client.
An attempt to secure an out-of-state client, however,
led to the present action. In October 2013, Cossart, working from
Massachusetts and under the second employment contract, identified
a potential deal in which United Excel would be retained by a
hospital in California. Cossart then contacted the California
hospital from his home in Wayland "numerous" times by phone and e-
mail in the course of trying to secure that deal. Cossart also
traveled from Massachusetts to California for "several" in-person
meetings.
When execution of the contract for the work for the
California hospital was "imminent," Cossart contacted Hornbaker to
discuss Cossart's belief that United Excel would owe him a $219,000
commission under the second employment contract for his work in
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securing the deal with the California hospital. Hornbaker
responded by phone and e-mail that he would not consummate the
California deal unless Cossart agreed to accept a commission of
only $62,000.
When Cossart refused to accept the lower commission,
United Excel rescinded its offer on the California contract, and
Hornbaker fired Cossart. Cossart then brought this action in a
Massachusetts state court against United Excel and Hornbaker. The
complaint alleged that the defendants violated the Massachusetts
Wage Act, Mass. Gen. Laws ch. 149, § 148,2 by refusing to pay
Cossart the compensation owed to him under the second employment
contract for his efforts to secure the deal with the California
hospital.
The defendants removed the case to federal district
court on the basis of diversity jurisdiction and then moved to
dismiss for lack of personal jurisdiction over both United Excel
and Hornbaker. The District Court granted the motion, and Cossart
now appeals.
2 The Wage Act requires employers to "pay . . . [their]
employee[s] the wages earned" -- including "commissions when the
amount of such commissions . . . has been definitely determined
and has become due and payable to such employee" -- within a
certain time period. Mass. Gen. Laws ch. 149, § 148. The Act
also expressly subjects certain corporate officers -- including
"the president and treasurer" -- to individual liability when their
employer is sued under the Act. Cook v. Patient Educ., LLC, 989
N.E.2d 847, 851 (Mass. 2013) (quoting Mass. Gen. Laws ch. 149, §
148).
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II.
"Where, as here, a district court dismisses a case for
lack of personal jurisdiction based on the prima facie record,
rather than after an evidentiary hearing or factual findings, our
review is de novo." C.W. Downer & Co. v. Bioriginal Food & Sci.
Corp., 771 F.3d 59, 65 (1st Cir. 2014). In undertaking that
review, "we take the plaintiff's evidentiary proffers as true and
construe them in the light most favorable to the plaintiff's claim,
and we also consider uncontradicted facts proffered by the
defendant." Id. As the plaintiff, Cossart "bears the burden of
establishing that the district court has personal jurisdiction
over [the defendants]." Adelson v. Hananel, 510 F.3d 43, 48 (1st
Cir. 2007).
III.
"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 court sitting
in the forum state." Sawtelle v. Farrell, 70 F.3d 1381, 1387 (1st
Cir. 1995). Thus, in order to establish personal jurisdiction
over the defendants, Cossart must meet the requirements of both
the Massachusetts long-arm statute and the Due Process Clause of
the Fourteenth Amendment. The requirements of the Massachusetts
long-arm statute are similar to -- although not necessarily the
same as -- those imposed by the Due Process Clause. See Good Hope
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Indus., Inc. v. Ryder Scott Co., 389 N.E.2d 76, 80 (Mass. 1979)
("Although presented with jurisdictional facts sufficient to
survive due process scrutiny, a judge would be required to decline
to exercise jurisdiction if the plaintiff was unable to satisfy at
least one of the statutory prerequisites."); Burtner v. Burnham,
430 N.E.2d 1233, 1235-36 (Mass. App. Ct. 1982) ("It now appears to
be recognized that application of [the Massachusetts long-arm
statute] requires that (even if the fact pattern of the case is
constitutionally acceptable) the circumstances of the particular
case come within one of the specific subsections of [the
Massachusetts long-arm statute]."). We start by considering
whether that statute reaches the two defendants, United Excel and
Hornbaker.
A.
Section 3(a) of the Massachusetts long-arm statute
provides that "[a] court may exercise personal jurisdiction over
a person . . . as to a cause of action in law or equity arising
from the person's . . . transacting any business in this
commonwealth." Mass. Gen. Laws ch. 223A, § 3(a). We must
"construe[] the 'transacting any business' language of the statute
in a generous manner," and, in applying the clause to these facts,
we must focus on "whether the defendant[s] attempted to participate
in the commonwealth's economic life." United Elec., Radio & Mach.
Workers of Am. v. 163 Pleasant St. Corp., 960 F.2d 1080, 1087 (1st
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Cir. 1992). In deciding whether a claim "aris[es] from" a
defendant's "transacting business," moreover, we look to see
whether the transacted business was a "but for" cause of the harm
alleged in the claim. See Tatro v. Manor Care, Inc., 625 N.E.2d
549, 551 (Mass. 1994).
Here, United Excel recruited and hired Cossart, a
Massachusetts resident, as an employee; registered a sales office
with the Commonwealth in order to facilitate his work for the
company; and retained him as a Massachusetts-based employee for a
period of years. Moreover, Hornbaker personally negotiated the
employment contract that contemplated that this employee would
work out of Massachusetts and signed the certificate of
registration that established the United Excel sales office in
Massachusetts.
Those facts would seem to show -- in straightforward
fashion -- that each defendant "attempted to participate in the
commonwealth's economic life." United Elec., Radio & Mach. Workers
of Am., 960 F.2d at 1087. But the District Court concluded
otherwise, and thus held that the "transacting any business"
requirement of Section 3(a) was not met.
With respect to United Excel, the District Court based
its conclusion on Tatro, 625 N.E.2d at 551-52, and its reading of
the statement in that case that "[g]enerally the purposeful and
successful solicitation of business from residents of the
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Commonwealth . . . will suffice to satisfy" the "transacting any
business" requirement of Section 3(a). See Cossart v. United Excel
Corp., No. 14-10307-GAO, 2014 WL 4927041, at *1 (D. Mass. Sept.
30, 2014). The District Court concluded that because Cossart never
secured business from a Massachusetts client, and thus "[could
not] show that any of [United Excel]'s attempts to transact
business in the Commonwealth were successful," Section 3(a)
provided no basis for jurisdiction over United Excel. Id.But Tatro does not hold that the "transacting business"
language of Section 3(a) requires that a defendant have
successfully solicited business in Massachusetts. And other
Massachusetts precedent shows that there is no such requirement.
In Haddad v. Taylor, 588 N.E.2d 1375, 1377 (Mass. App. Ct. 1992),
for example, the Massachusetts Appeals Court found that a non-
resident defendant had transacted business within the meaning of
Section 3(a) by negotiating, via telephone and the mail, a contract
for the sale of land in Massachusetts while outside the
Commonwealth, even though he was not the owner of the land (but
instead was acting through a power of attorney) and even though no
contract was actually consummated. Thus, the District Court erred
in treating the "purposeful and successful solicitation of
business" language in Tatro as a necessary -- rather than merely
a sufficient -- requirement for jurisdiction under Section 3(a).
And without such a requirement, we find that United Excel's conduct
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in Massachusetts easily qualifies as "transacting business" within
the meaning of Section 3(a).
With respect to Hornbaker, the District Court simply
wrote: "There is no evidence that Hornbaker as an individual
conducted activities within the scope of the long-arm statute."
Cossart, 2014 WL 4927041, at *1. For the reasons given above, we
disagree. And precedent supports subjecting corporate officers to
jurisdiction under the long-arm statute at least where they are
"primary participants" in corporate action, as Hornbaker was. See
LaVallee v. Parrot-Ice Drink Prods. Of Am., Inc., 193 F. Supp. 2d
296, 300-02 (D. Mass. 2002); Johnson Creative Arts, Inc. v. Wool
Masters, Inc., 573 F. Supp. 1106, 1111-12 (D. Mass. 1983);
Kleinerman v. Morse, 533 N.E.2d 221, 224-25 (Mass. App. Ct. 1989)
(finding jurisdiction where individual defendant "was the
principal actor on behalf of" the corporation).
Finally, we easily conclude that Cossart's claim
"aris[es] from" the defendants' transacting business in
Massachusetts. As stated above, Tatro held that the business
transacted must only be a "but for" cause of the claim to give
rise to jurisdiction. 625 N.E.2d at 553-54. That standard is
easily met here, where Cossart's claim arose from his work on the
California deal -- work he performed in Massachusetts under his
employment contract with United Excel and out of the sales office
officially registered in Massachusetts by Hornbaker.
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B.
That leaves the question whether the Due Process Clause
blocks the exercise of personal jurisdiction over these
defendants. See Int'l Shoe Co. v. State of Wash., Office of
Unemployment Comp. & Placement, 326 U.S. 310, 316 (1945). The
exercise of personal jurisdiction may, consistent with due
process, be either "specific or case-linked" or "general or all-
purpose". See Goodyear Dunlop Tires Operations, S.A. v. Brown,
131 S. Ct. 2846, 2851 (2011). Because we find that these
defendants may constitutionally be subjected to specific
jurisdiction, we need not address general jurisdiction.
In determining whether the exercise of specific
jurisdiction over an out-of-state defendant conforms to the
constitutional limits established by the Due Process Clause, we
evaluate "(1) whether the claim directly arises out of, or relates
to, the defendant's forum state activities; (2) whether the
defendant's in-state contacts 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; and (3) whether the exercise of jurisdiction
is reasonable." C.W. Downer & Co., 771 F.3d at 65 (internal
quotation marks and alterations omitted). And, after applying
this test, under which all three prongs must be met, see id., we
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conclude that due process permits the exercise of specific
jurisdiction over both defendants.
1.
The first prong of the test, regarding "relatedness,"
"serves the important function of focusing the court's attention
on the nexus between a plaintiff's claim and the defendant's
contacts with the forum." Sawtelle, 70 F.3d at 1389. In this
case, to determine relatedness, we "must consider the contacts
between the defendants and the forum state viewed through the prism
of plaintiff['s] . . . claim" for unpaid compensation that is
allegedly due under the second employment contract and the
Massachusetts Wage Act. Id. Given that we are dealing here with
a contract dispute, we pay particularly close attention to "the
parties' prior negotiations and contemplated future consequences,
along with the terms of the contract and the parties' actual course
of dealing." C.W. Downer & Co., 771 F.3d at 66 (internal quotation
marks and citation omitted).
The defendants contend that Cossart's claim bears little
to no relationship to Massachusetts because the disputed
commission arose out of a contract with a California hospital, to
be performed in California. And further, the defendants assert
that their decision to not move forward with the California deal,
and thus to not pay Cossart any commission for his work on that
deal, was made in Kansas.
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Fundamentally, that argument fails because it overlooks
the fact that this lawsuit arises out of an alleged breach not of
a contract with a California hospital, but rather of the contract
defendants procured with a Massachusetts resident to be performed
by the resident primarily from Massachusetts. Nor, for that
matter, was the potential California account that triggered the
employment-contract dispute without its forum-state contacts.
Cossart performed a substantial portion of the work that
led to the potential California account from the Massachusetts
sales office that United Excel (through Hornbaker) had registered
with the Commonwealth. That work included sending e-mails and
making phone calls from Massachusetts to California. At all times,
moreover, Cossart was acting within the scope of his employment
with United Excel, through an employment relationship the
defendants had entered into with full knowledge that Cossart would
perform his duties from Massachusetts.
In addition, when final execution of the California
contract was "imminent," Cossart contacted Hornbaker from
Massachusetts to discuss payment of his commission, which he says
he had already earned. And when United Excel, through Hornbaker,
refused to pay the commission that was allegedly due, the company
did so via e-mail and phone conversations with Cossart in
Massachusetts, thereby directly giving rise to this Massachusetts
Wage Act claim.
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We thus conclude that Cossart's claim relates to United
Excel's and Hornbaker’s contacts with Massachusetts, for reasons
similar to those expressed in our recent decision in C.W. Downer
& Co. See id. at 66 ("[The foreign corporate defendant] had an
ongoing connection with Massachusetts in the performance under the
[inter-firm services] contract. [The resident corporate
plaintiff's] claims arise from the alleged breach of that contract.
That is enough to establish relatedness."). And so we proceed to
the next part of the inquiry: purposeful availment.
2.
The record is equally clear that "the defendant[s'] in-
state contacts [identified in the relatedness inquiry] 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," Id. at 65
(quotation marks and citation omitted). Our recent decision in
C.W. Downer & Co. once again shows why.
There, we held that an out-of-state company had
purposefully availed itself of the privilege of doing business in
Massachusetts by retaining the services of a Boston-based
investment bank. Id. at 66-69. We rested that judgment on the
company's voluntary solicitation of the bank's services; the
active formation of a long-term contractual relationship with a
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party reasonably known to be in Massachusetts (such that the
contracted-for services would foreseeably be rendered there); and
the performance of work under that contract by the bank, which was
treated as contact with the forum by the out-of-state company
because the voluntary contractual relationship had foreseeably led
the bank to undertake that work. Id. at 66-67 ("[The forum
plaintiff]'s extensive Massachusetts activities in this case,
given the context, were not unilateral. They were undertaken at
[the non-forum defendant]'s request and are attributable to [the
non-forum defendant]." (internal quotation marks omitted)).
Those same factors are present here. United Excel
recruited Cossart at his home in Massachusetts. The resulting
employment contract, as negotiated by Hornbaker, contemplated that
Cossart would continue to work from Massachusetts on United Excel's
behalf and that the company would facilitate that work by providing
the requisite office equipment.
In the course of performing that contract, moreover,
United Excel (through Hornbaker) voluntarily facilitated Cossart's
work from Massachusetts by registering a sales office with the
Commonwealth and keeping that registration current while Cossart
remained a United Excel employee.3 In addition, in the course of
3 Indeed, the facts here show even greater purposeful
availment than in C.W. Downer & Co. insofar as the non-forum
defendants here actively facilitated -- and did not merely
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the performance of that agreement, Cossart did significant work
for United Excel in Massachusetts -- as the defendants clearly
foresaw he would. That work included his efforts to secure the
California deal, for which Cossart asserts he is owed a commission
under the employment agreement. Finally, United Excel (again
through Hornbaker) allegedly breached the employment agreement
when it informed Cossart at his Massachusetts home that he would
not be paid the commission on the California deal.
The facts that prevented personal jurisdiction in
Phillips v. Prairie Eye Center, 530 F.3d 22 (1st Cir. 2008), the
principal case cited by defendants, are thus not present here. In
Phillips, the non-forum defendant did negotiate a contract with a
Massachusetts employee. 530 F.3d at 28-29. But the contract was
to be performed by the employee in Illinois, not from a
Massachusetts sales office that had been registered with the
Commonwealth by the non-forum defendant. See id.
3.
In light of our conclusion that the first two prongs of
the specific-jurisdiction test are met, we could find that the Due
Process Clause bars the exercise of personal jurisdiction over
these defendants only if such exercise would not be fair and
reasonable. See C.W. Downer & Co., 771 F.3d at 69. To determine
reasonably foresee -- the plaintiff's performance of the contract
from Massachusetts.
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whether that is the case, we must consider the so-called "gestalt"
factors: "(1) the defendant[s'] burden of appearing [in the forum
state], (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." Id.
Here, neither defendant has shown that "some kind of
special or unusual burden" would result from Massachusetts serving
as the forum. Bluetarp Fin., Inc. v. Matrix Const. Co., 709 F.3d
72, 83 (1st Cir. 2013) (citations and quotation marks omitted);
see also C.W. Downer & Co., 771 F.3d at 69 ("Bioriginal identifies
no special burden imposed by requiring it to litigate across the
Canada–United States border . . . ."). And Massachusetts clearly
has an interest in being the forum that determines whether Cossart,
who performed his work for the company in the Commonwealth, has a
meritorious claim under the Massachusetts Wage Act. Cf. C.W.
Downer & Co., 771 F.3d at 70 ("Massachusetts has 'significant'
interests in providing a convenient forum . . . when [its
citizens'] commercial contracts are said to be breached by out-
of-state defendants."). The remaining factors relevant to the
inquiry also do not indicate a problem with Massachusetts serving
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as the forum state. We therefore conclude that constitutional due
process does not bar Massachusetts from doing so.
IV.
For the foregoing reasons, we reverse the District Court's
order and judgment of dismissal for lack of personal jurisdiction
as to both defendants and we remand for further proceedings.
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