Facility Gateway Corp. v. Sovernet, Inc. ( 2017 )

Facility Gateway Corp. v. Sovernet, Inc., No. 273-3-17 Cncv (Mello, J., Nov. 7, 2017).
[The text of this Vermont trial court opinion is unofficial. It has been reformatted from the original. The accuracy of the text and the
accompanying data included in the Vermont trial court opinion database is not guaranteed.]
VERMONT SUPERIOR COURT
CHITTENDEN UNIT
CIVIL DIVISION
│
FACILITY GATEWAY CORPORATION, │
Plaintiff │
│
v. │ Docket No. 273-3-17 Cncv
│
SOVERNET, INC., ATN INTERNATIONAL
and OHCP NORTHEASTERN FIBER
BUYER, INC. │
Defendants │
│
DECISION ON DEFENDANT OHCP NORTHEASTERN FIBER BUYER, INC.’S
MOTION TO DISMISS
In this civil action, Plaintiff Facility Gateway Corporation seeks to recover from
defendants the sum of $2,397,506.30, which Plaintiff claims to be owed for services it
provided to Defendant Sovernet, Inc. pursuant to a contract to design and build
Sovernet’s datacenter in Williston, Vermont. The only cause of action that Plaintiff has
asserted against Defendant OHCP Northeastern Fiber Buyer, Inc. is a claim of unjust
enrichment (Amended Complaint, Count Four). Defendant OHCP has moved to dismiss
the plaintiff’s amended complaint for lack of personal jurisdiction pursuant to V.R.C.P.
Rule 12(b)(2) and for failure to state a claim upon which relief can be granted pursuant
to V.R.C.P. Rule 12(b)(6). Plaintiff opposes the motion. Plaintiff is represented by Erin
Miller Heins, Esq., and OHCP is represented by Christopher D. Roy, Esq. and Steven
Crowley, Esq.
OHCP’s Motion to Dismiss Pursuant to V.R.C.P. 12(b)(2)
On November 20, 2014, Plaintiff and Sovernet entered into a contract under
which Plaintiff agreed to design and build a datacenter for Sovernet at Pioneer Drive in
Williston, Vermont. The contract was amended a number of times over the course of
time. On December 29, 2016, Plaintiff achieved substantial completion of the project,
and in January of 2017, Plaintiff submitted its application for final payment to Sovernet.
On March 15, 2017, Plaintiff sent an email to Sovernet stating “[w]e have reached final
completion of your punch list.” Plaintiff commenced this lawsuit on March 21, 2017,
and on April 6, 2017, Plaintiff sent Sovernet a letter stating that, due to Sovernet’s
failure to pay the remaining amounts owed for the completed work on the datacenter,
Plaintiff had stopped work on the project.1
Plaintiff is a Wisconsin corporation engaged in the business of providing facility
design and construction services throughout the United States. Defendant Sovernet is a
Vermont corporation that provides internet and telecommunication services for
residential and business customers throughout northern New England. Defendant
OHCP is a Delaware corporation, with its principal place of business in New York, New
York; through a wholly-owned subsidiary, TVC Albany, Inc., OHCP owns 100% of
Sovernet’s corporate stock (Affidavit of John R. Monsky, ¶¶ 2 and 11).2 OHCP acquired
its ownership of Sovernet in March of 2017 (Amended Complaint, ¶ 6).
On March 14, 2017, OHCP issued a press release announcing that it had acquired
Sovernet and combined its operations with those of FirstLight Fiber, another OHCP
subsidiary (Exhibit 1 to Plaintiff’s Opposition to OHCP’s Motion to Dismiss).
FirstLight’s President stated that he expects the combination with Sovernet to be a
“seamless integration” (Id.). According to the press release, at least two seats on
FirstLight’s board of directors are occupied by partners at OHCP (Id.). OHCP further
stated that it “works actively in partnership with management [of its subsidiaries] to
implement strategic and operational initiatives to create franchise value” (Id.).
OHCP is not registered to do business in the State of Vermont and does not
conduct business in the State of Vermont (Monsky Affidavit, ¶ 4). OHCP does not own,
operate or maintain any office, real estate or personal property in the State of Vermont
(Id., ¶¶ 5-7). OHCP does not have employees who work in the State of Vermont, and
OHCP does not maintain a mailing address in the State of Vermont (Id., ¶¶ 8-9).
OHCP contends that its contacts with the State of Vermont are insufficient to
allow this court to exercise personal jurisdiction over it. Plaintiff argues that this court
can exercise jurisdiction over OHCP because Sovernet, a wholly owned subsidiary of
OHCP, is a Vermont corporation doing business in Vermont, and, “based upon the close
relationship between the two companies,” Sovernet’s Vermont contacts “may be
attributed to OHCP” (Plaintiff’s Opposition, p. 1). In the alternative, Plaintiff argues
that “Sovernet’s submission to jurisdiction in [Section A.13.1.2 of] its Agreement [with
the Plaintiff], may be invoked to establish jurisdiction over OHCP” (Id., pp. 1-2).
“Vermont’s long-arm statue, 12 V.S.A. § 913(b), permits state courts to exercise
jurisdiction over nonresident defendants ‘to the full extent permitted by the Due Process
Clause’ of the U.S. Constitution.” Fox v. Fox, 2014 VT 100, ¶ 9, 197 Vt. 466 (quoting
Northern Aircraft, Inc. v. Reed, 154 Vt. 36, 40 (1990)). The Due Process Clause has
been held to permit the exercise of personal jurisdiction “over a defendant in any state
where the defendant has ‘certain minimum contacts … such that the maintenance of the
1
The facts set forth in this paragraph come from this court’s Ruling on Plaintiff’s Motion for an Attachment on
Business Assets, entered October 31, 2017.
2
TVC Albany, Inc. owns all of the corporate stock of Sovernet Holding Corporation, a Delaware corporation, and
Sovernet Holding Corporation owns all of the corporate stock of Sovernet, Inc. (Monsky Affidavit, ¶ 11).
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suit does not offend traditional notions of fair play and substantial justice.’” Id.¶ 26.
The “minimum contacts” requirement ensures that defendants will have “fair warning”
that they can be called before a state’s courts on account of the defendant’s own
activities directed at the forum state or towards its citizens. Id. ¶ 27 (citing Burger King
Corp. v. Rudzewicz, 471 U.S.462, 472 (1985)).
A court may exercise either general or specific jurisdiction over a nonresident
defendant. General jurisdiction applies to suits not arising out of or related to the
defendant’s contacts with the forum state, Helicopteros Nacionales de Columbia, S.A. v.
Hall, 466 U. s. 408, 414 n. 9 (1984), whereas specific jurisdiction exists where a
defendant has “purposefully directed … activities at residents of the forum and the
litigation results from alleged injuries that arise out of or related to those activities.”
Burger King Corp., 471 U.S. at 472 (quotations and citations omitted). In either case,
the U.S. Supreme Court has made it clear that “it is essential in each case that there be
some act by which the defendant purposefully avails himself of the privilege of
conducting activities within the forum State, thus invoking the benefits and protections
of its laws.” Id. at 475. Moreover, “[u]nder this ‘purposeful availment’ requirement, a
defendant cannot be summoned into a jurisdiction merely as a result of fortuitous,
attenuated or random contacts.” Northern Aircraft v. Reed, 154 Vt. 36, 41-42 (1990).
OHCP does not have sufficient contacts with the State of Vermont in general to
justify this court exercising personal jurisdiction over it in this case. As noted above,
OHCP is not registered to do business in Vermont and does not conduct business here.
OHCP does not own, operate or maintain any office, real estate or personal property in
Vermont, it does not have employees who work in Vermont, and it does not maintain a
mailing address in Vermont. Bechard v. Constanzo, 810 F. Supp. 579, 585 (D. Vt. 1992)
(no general personal jurisdiction over N.Y. physician, who treated a Vermont resident in
the physician’s N.Y. office, where the physician had no office in Vermont, was not
licensed in Vermont, owned no property in Vermont, and solicited no business in
Vermont). Plaintiff argues in a footnote that OHCP’s ownership of Sovernet is sufficient
to support a finding of general jurisdiction because OHCP owns Sovernet and Sovernet
is a Vermont corporation headquartered and doing business in Vermont. The court
disagrees. OHCP’s ownership of Sovernet may be relevant to the question of specific
jurisdiction, but, standing alone, it does not support a finding of general jurisdiction.
See Mansfield Heliflight, Inc. v. Heli-One Canada, Inc., 2012 WL 4479851 at *5 (D. Vt.
September 28, 2012).
On the question of specific jurisdiction, Plaintiff has come forward with evidence
that on Marcy 14, 2017, OHCP issued a press release announcing that it had acquired
Sovernet and merged Sovernet’s operations with those of FirstLight Fiber, another
OHCP subsidiary. According to the Plaintiff, FirstLight’s President stated in the release
that he expects the combination with Sovernet to be a “seamless integration.” Plaintiff
further avers that, according to the press release, at least two seats on FirstLight’s board
of directors are occupied by partners at OHCP. Plaintiff further quotes OHCP as stating
that it “works actively in partnership with management [of its subsidiaries] to
implement strategic and operational initiatives to create franchise value.” OHCP
disagrees strongly with Plaintiff’s selections of quotes from the press release and with
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Plaintiff’s interpretation of what those quotes mean. However, in determining whether
a plaintiff has met its initial burden to sustain jurisdiction, the court “eschews fact
finding and simply accepts ‘properly supported proffers of evidence’ as true and rules on
the jurisdictional question as a matter of law.” Schwartz v. Frankenhoff, 169 Vt. 287,
295 (1999) (citation omitted).
Although the Plaintiff has not come forward with any evidence that OHCP itself
has purposely directed any activities at the forum state or towards its citizens, Plaintiff’s
evidence of OHCP’s post-stock-acquisition control over Sovernet (merging Sovernet into
another OHCP subsidiary, OHCP’s representation on the subsidiary’s board of directors,
and OHCP’s policy of actively partnering with the management of its subsidiaries) could
justify imputing Sovernet’s contacts with Vermont to OHCP on a theory that Sovernet is
“an ‘agent’ or a ‘mere department’ of” OHCP. Mansfield Heliflight at *6 (citation
omitted). However, this would only justify imputing Sovernet’s Vermont activities to
OHCP from the date of OHCP’s stock acquisition in March of 2017 forward. Clearly, it
would not justify imputing Sovernet’s pre-acquisition actions to OHCP, in the absence of
evidence that OHCP was asserting control over Sovernet before OHCP became its
owner.
All of the events that give rise to Plaintiff’s claims against the defendants in this
case occurred before OHCP acquired Sovernet. As noted earlier, Plaintiff entered into a
contract to design and build a datacenter for Sovernet in November of 2014. Plaintiff
achieved substantial completion of the project in December of 2016, and in January of
2017 Plaintiff submitted its application for final payment to Sovernet. Then, on March
15, 2017, Plaintiff sent an email to Sovernet stating “[w]e have reached final completion
of your punch list.” Plaintiff commenced this lawsuit on March 21, 2017, and on April 6,
2017, Plaintiff sent Sovernet a letter stating that, due to Sovernet’s failure to pay the
remaining amounts owed for the completed work on the datacenter, Plaintiff had
stopped work on the project. Thus, by the time OHCP had acquired Sovernet in March
of 2017, Plaintiff had already completed its construction of Sovernet’s datacenter, and
Sovernet had already refused to make final payment for the Plaintiff’s work.
Because Sovernet was not acting as “an agent” or a “mere department” of OHCP
at the time when the events occurred that give rise to the Plaintiff’s claims in this case,
Sovernet’s pre-stock-acquisition contacts with Vermont cannot be imputed to OHCP.
Put another way, this court cannot assert specific personal jurisdiction over OHCP
because none of Plaintiff’s alleged injuries arise out of or relate to activities that are
imputable to OHCP. Burger King Corp., 471 U.S. at 472 (Holding that specific
jurisdiction exists where a defendant has “purposely directed … activities at residents of
the forum and the litigation results from alleged injuries that arise out of or related to
those activities.”). For the same reasons, OHCP could not have had fair warning that, by
virtue of its March 2017 stock acquisition of Sovernet, it could be called before a court in
Vermont on account of Sovernet’s pre-acquisition activities. Id.
Lastly, the fact that the Agreement between Sovernet and the Plaintiff contained
a forum selection clause, selecting Vermont as the forum for resolution of disputes
arising under the Agreement, does not change the result. Under the circumstances in
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this case, OHCP could not reasonably have been expected to foresee that, by acquiring
Sovernet’s corporate stock in March of 2017, it was exposing itself to being sued in
Vermont over Sovernet’s pre-acquisition acts and omissions.
For the foregoing reasons, OHCP’s motion to dismiss Plaintiff’s Amended
Complaint for lack of personal jurisdiction pursuant to V.R.C.P. 12(b)(2) must be
GRANTED.
OHCP’s Motion to Dismiss Pursuant to V.R.C.P. 12(b)(6)
OHCP also moves to dismiss Plaintiff’s one count of unjust enrichment for failure
to state a claim upon which relief can be granted pursuant to V.R.C.P. 12(b)(6). Plaintiff
opposes the motion.
Because the court has concluded that Plaintiff’s suit against OHCP must be
dismissed without prejudice for lack of personal jurisdiction pursuant to V.R.C.P.
12(b)(2), there is no need for the court to determine whether Plaintiff has plead a viable
claim against OHCP for unjust enrichment. Therefore, the court declines to do so.
Plaintiff’s claim against OHCP is DISMISSED without prejudice for lack of
personal jurisdiction. The remaining parties shall within ten (10) days agree upon and
submit a proposed scheduling order for the court’s consideration.
SO ORDERED this 7th day of November, 2017.
_____________________________
Robert A. Mello, Superior Judge
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