L.d.m. Worldwide Corp., Resp. v. Richard Erog, Apps. ( 2014 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
L.D.M. WORLDWIDE CORPORATION, a
Florida corporation, No. 67404-8-1
Respondent DIVISION ONE
UNPUBLISHED OPINION
METIN DALMAN; SIMURG MEDIA, an
alter ego of Metin Dalman, jointly,
severally, and individually as partners in
fact and implied in law,
Defendants,
RICHARD EROG; and BROADCAST r-o
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FACILITY, an unincorporated alter ego of x-
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Richard Erog jointly, severally, and -n
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individually as partners in fact and implied rn
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in law, CO V~T ~T
Appellant. FILED: February 3, 2014 5 |>
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Appelwick, J. — Erog appeals the denial of his motion to vacate the default-
judgment entered against him. He argues that he had insufficient contacts with
Washington and that he was never properly served the summons and complaint. We
affirm the trial court's exercise of jurisdiction and remand for an evidentiary hearing on
the issue of service.
FACTS
This appeal arises from a contract dispute between Richard Erog, a Nevada
resident, and LDM Worldwide Corporation (LDM), a corporation whose principal place
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of business is Washington. The parties arranged for LDM to provide media production
equipment and services for two sporting events: a California motocross competition and
the South Africa World Cup.
On May 12, 2010, LDM e-mailed Erog that a third party had passed on his
information for an event in Los Vegas. LDM wrote, "I can supply all that you need. . . .
Please give me a few hours to get a quote together." Erog responded that he hoped to
get a quote that night. The following day, Erog e-mailed LDM saying, "Here is the list.
Please check and get back to me."
The record does not contain a singular document memorializing the parties'
business relationship. However, it is clear that the parties subsequently arranged for
LDM's service for the motocross event in California. On May 17, LDM sent an invoice
to Erog for services for the event. Erog wired full payment of this invoice from his
Nevada account to LDM's Washington account.
On May 19, Metin Dalman1 approached LDM about a second event, writing "As
were [sic] spoken on the phone, we have several projects [in] South Africa. ... For this
Imay need to hire additional [equipment]. ... Can you help me on this [p]lease." LDM
responded with an estimate. The parties negotiated over price, and LDM provided the
requested equipment. On June 3, LDM sent an invoice to Erog for the deposit on the
1 Metin Dalman, who is not involved in this appeal, worked with Erog on the
projects with LDM. Together, the pair coordinated with LDM. Erog thus is not insulated
from the effect of Dalman's contacts with Washington. QL FutureSelect Portfolio Mamt..
Inc. v. Tremont Grp. Holdings. Inc., 175 Wash. App. 840, 892-93, 309 P.3d 555 (2013)
(finding that it makes good policy sense to impute to a corporation the contacts of its
agent). Erog does not argue otherwise.
No. 67404-8-1/3
equipment for the South Africa event. Erog again wired payment to LDM's Washington
account.
Erog and LDM continued to correspond about equipment and timing for the two
events. Negotiations began for a third event in Denver, but the deal fell apart. The
relationship eventually soured over the lack of subsequent payments.
LDM ultimately brought suit for breach of contract. Erog did not answer the
complaint. LDM then moved for an order of default and entry of default judgment, which
the court granted on December 7, 2010.
On May 6, 2011, Erog filed a motion to vacate the default judgment. He argued
that he had insufficient contacts with Washington, and that he had never been served a
copy of the summons and complaint. He produced three affidavits maintaining that
neither he nor anyone at his home received service on the day in question. In
response, LDM offered a detailed sworn affidavit from the process server affirming that
he properly served Erog.
The court denied Erog's motion, finding that both service and the exercise of
jurisdiction were proper. Erog appeals.
DISCUSSION
I. Minimum Contacts
Washington's long-arm statute provides jurisdiction over out-of-state defendants
who transact business within this state. RCW 4.28.185(1 )(a). The party asserting
jurisdiction has the burden of establishing its requirements by prima facie evidence, in
re Marriage of David-Ovtan, 171 Wash. App. 781, 798, 288 P.3d 57 (2012), review denied,
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177 Wash. 2d 1017, 304 P.3d 114 (2013). Under the long-arm statute, a plaintiff must
demonstrate three factors to establish jurisdiction over a foreign defendant:
"(1) The nonresident defendant or foreign corporation must purposefully
do some act or consummate some transaction in the forum state; (2) the
cause of action must arise from, or be connected with, such act or
transaction; and (3) the assumption of jurisdiction by the forum state must
not offend traditional notions of fair play and substantial justice,
consideration being given to the quality, nature, and extent of the activity
in the forum state, the relative convenience of the parties, the benefits and
protection of the laws of the forum state afforded the respective parties,
and the basic equities of the situation."
Shute v. Carnival Cruise Lines. 113 Wash. 2d 763, 767-68, 783 P.2d 78 (1989) (quoting
Deutsch v. W. Coast Mach. Co.. 80 Wash. 2d 707, 711, 497 P.2d 1311 (1972)). Erog
contends that LDM did not demonstrate any of the three factors.
A. Purposeful Availment
The first prong of the long-arm jurisdiction test is purposeful availment. ]± The
evaluation of purposeful availment is highly fact-specific and can turn on a number of
factors. See 14 Karl B. Tegland, Washington Practice: Civil Procedure § 4:8, at 72-
73 (2d ed. 2009).
A defendant may purposefully avail himself of a forum state by initiating a
transaction with the plaintiff in contemplation that some phase of it will take place in that
jurisdiction. SeaHAVN. Ltd. v. Glitnir Bank, 154 Wash. App. 550, 565, 226 P.3d 141(2010). In Peter Pan Seafoods. Inc. v. Mogelberg Foods. Inc., 14 Wash. App. 527, 530,
544 P.2d 30 (1975), the court upheld jurisdiction where an out-of-state defendant
affirmatively sought out a business relationship with a Washington corporation. There,
the defendant solicited a series of sales from the plaintiff, the defendant traveled to
Washington to inspect the plaintiff's facilities, and the goods were delivered "F.O.B.
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Seattle." Id. The court, focusing on the defendant's purposeful actions in initiating the
business relationship, found that this constituted purposeful availment. jd. at 530-31.
Similarly, in Crown Controls, Inc. v. Smiley, 47 Wash. App. 832, 834, 839, 737 P.2d
709 (1987), overruled on other grounds by 110 Wash. 2d 695, 699, 756 P.2d 717 (1988),
the court upheld jurisdiction where the defendant reached out to the plaintiff, a
manufacturer's representative, to purchase chemical controls equipment. The parties
conducted several telephone discussions, jd. The plaintiff ordered multiple products for
the defendant, some of which were manufactured in Washington, some of which were
not. See id. at 834, 836. Still, the court found purposeful availment, emphasizing the
defendant's purposeful acts in pursuing a business relationship with a Washington
corporation. See id. at 837-39 (analyzing cases involving defendants intentionally
seeking transactions with Washington businesses).
Even if a defendant does not initiate the business contact, that defendant may
still be subject to jurisdiction in Washington if a business relationship subsequently
arises. Sorb Oil Corp. v. Batalla Corp., 32 Wash. App. 296, 299, 647 P.2d 514 (1982).
Mere execution of a contract with a Washington resident will not suffice; the court must
examine the circumstances of the entire transaction, including contemplated future
consequences and the parties' actual course of dealing. SeaHAVN, 154 Wn. App. at
565-66. In Sorb Oil, the defendant was a Texas corporation with no office or agent in
Washington. 32 Wn. App. at 298. The plaintiff, a Washington corporation, replaced the
defendant's previous oil product distributor. ]d. The defendant subsequently placed
multiple telephone orders from the plaintiff over a 20 month period, jd at 300. The
court found it immaterial that the plaintiff initiated the contact and that the products did
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not ship from Washington, jd. at 300-01. It was key that the defendant engaged in
purposeful conduct in Washington in furtherance of business that was "more than de
minimis." See id. at 301.
By contrast, in SeaHAVN, the court declined to exercise jurisdiction where a
defendant entered the state to undertake a business transaction. See 154 Wn. App. at
569. There, the defendant's only contact with Washington consisted of attending two
meetings and signing an agreement in Seattle. ]d at 566. Neither the plaintiff nor the
defendant was a Washington citizen, and the transaction made virtually no impact in the
state. Id The court concluded that this contact alone did not create an ongoing
business relationship in Washington, and the defendant did not purposefully avail itself
of the forum. kLat569.
Thus, in evaluating purposeful availment, the "salient factor" is whether the
defendant negotiates an ongoing business relationship that has substantive effects and
creates future obligations in Washington. See Precision Lab. Plastics. Inc. v. Micro
Test, Inc., 96 Wash. App. 721, 727 n.5, 981 P.2d 454 (1999). In Precision, the parties
negotiated exclusively by telephone and fax. Id at 727. The court noted that, in "this
electronic era," it was unimportant that the defendant had no office in Washington and
never entered the state, jd 728-29. Instead, it was significant that the parties' contract
required the plaintiff to create a custom product in Washington to accommodate the
defendant's needs over a three year period, jd at 727-28. The court held that, viewing
the totality of the business relationship, the defendant formed a contract that
contemplated future consequences and created a continuing relationship with a
Washington business. Id at 727.
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No. 67404-8-1/7
The Ninth Circuit has taken a similar approach. For example, in Boschetto v.
Hansing, 539 F.3d 1011, 1014 (9th Cir. 2008), the court considered a dispute over an
electronically conducted contract. The plaintiff, a California resident, sued the
Wisconsin defendant over a onetime eBay car purchase, jd The defendant advertised
the car online, the plaintiff purchased the car online, the parties communicated only
electronically, and the plaintiff arranged to pick up the car in Wisconsin. Id The court
found jurisdiction improper, because this was a "'one-shot affair,'" without any ongoing
obligations or substantial business performed in California, id at 1017 (quoting
CompuServe. Inc. v. Patterson, 89 F.3d 1257, 1265 (6th Cir. 1996)).
Conversely, in Roth v. Garcia Marguez, 942 F.2d 617, 622 (9th Cir. 1991), the
court found that the contract's future consequences justified the exercise of jurisdiction.
There, the parties negotiated over the movie rights to a popular novel, id at 618. The
court noted that the plaintiff, a California movie producer, made the predominant efforts
to pursue the contract, and the defendants, neither of whom were American, had only a
minimal physical presence in the forum. Jd at 619, 622. The court also observed that
the movie would be filmed in Brazil—not California, where the plaintiff bought suit, id at
622. However, the contract contemplated additional work, such as editing, production,
and advertising, which would take place in California, id The checks that the
defendant would receive would be based on that work in the forum. ]d Thus, the
"'economic reality'" was that sufficient purposeful availment existed. Jd (quoting
Haisten v. Grass Valley Med. Reimbursement Fund, 784 F.2d 1392, 1398 (9th cir.
1986)).
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Here, the burden lies on LDM to demonstrate that Erog purposely availed himself
of the Washington forum. David-Ovtan, 171 Wn. App. at 798. LDM first contends that
Erog purposefully availed himself of the forum by soliciting the business relationship.
While LDM made initial contact, LDM argues that its first e-mail was merely a statement
of capability, and Erog's request for a quote was the true initiation of the business
relationship. Regardless of who initiated the relationship, Erog solicited LDM's business
for two subsequent events. This suggests availment on Erog's part, and separates the
present case from the one-shot affair in Boschetto.
LDM also alleges that jurisdiction is proper because the parties electronically
negotiated and consummated a contract through communications in Washington. This
is not persuasive. See Precision, 96 Wn. App. at 727 n.5 ("[T]he locus of [electronic]
negotiations culminating in a contract is not dispositive."). But, the fact that
communications were made exclusively via phone and e-mail is not fatal for jurisdiction
either. See, e.g., jd at 727; Crown Controls. 47 Wn. App. at 834.
LDM further argues that partial performance occurred in Washington by virtue of
its logistical arrangements. In many cases finding purposeful availment without the
defendant's physical presence, some or all of the plaintiff's performance took place in
the forum. For example, in Precision, the parties' contract required specially
customized manufacturing performed in Washington. 96 Wn. App. at 723, 728. In
Crown Controls, at least one item that the defendant ordered was from Washington and
shipped "'F.O.B. Bellevue.'" 47 Wn. App. at 836. And, in Roth, the event was a movie
that was shot out of state, but the postproduction services were performed by the
plaintiff in state. 942 F.2d at 622.
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No. 67404-8-1/9
Erog hired LDM to provide media production equipment and services for the
events. For the California event, LDM arranged for and provided mobile TV production
facilities, personnel, and broadcast equipment rentals. LDM made all arrangements
associated with its performance in Washington. Erog subsequently requested
broadcast equipment rentals for the South Africa event. LDM arranged for the
equipment rental and shipping for that event. Again, LDM made all arrangements
associated with its performance in Washington. The parties also began to negotiate for
LDM to provide a crew and equipment for a third event, in Denver.
In sum, LDM performed preproduction services in Washington for events held out
of state. As such, LDM's performance in Washington was not merely incidental
preparation, but a crucial component of the parties' contract. This is analogous to the
contracts in Crown Controls, Sorb Oil, or Roth: while the work involved out-of-state
resources and locations, an important facet of the plaintiffs' performance occurred in the
forum, and the defendants derived benefit from that performance. This is sufficient to
constitute purposeful availment.
B. Arising From the Transaction
The second prong, known as the "'but for'" test, requires that the cause of action
arise from or be connected to a transaction in Washington. Shute, 113 Wn.2d at 767-
68, 772. Here, the cause of action arises directly from the transaction between the
parties. This satisfies the "but for" prong.
C. Fair Play and Substantial Justice
The final prong asks whether an exercise of jurisdiction offends traditional
notions of fair play and substantial justice. Jd In evaluating this prong, courts consider
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the quality, nature, and extent of the defendant's activity in Washington; the relative
convenience of the parties in bringing an action in this forum; and the basic equities of
the situation. Precision, 96 Wn. App. at 728.
In Precision, the court concluded that the exercise of jurisdiction satisfied this
test, id at 731. It noted that the defendant's activities created an ongoing business
relationship and future obligations with a Washington corporation and that it was "of little
consequence" that the relationship quickly deteriorated, id. at 729. The court further
concluded that neither party suffered a sufficient inconvenience to impact its analysis:
We cannot say that [the respondent] will be unduly inconvenienced
by being hauled into Washington's courts anymore than [the appellant]
has been inconvenienced by responding in the Georgia courts. By virtue
of its ongoing business relationship with [the appellant], [the respondent]
enjoys the protection and benefits of Washington's laws governing
corporations and sales. Further, "[t]he protection of legal rights of
Washington residents is a legitimate state interest."
id at 729-30 (final alteration in original) (quoting Sorb Oil Corp., 32 Wn. App. at 301).
Here, Erog established a business relationship based on multiple transactions
with LDM that relied heavily on LDM's performance in Washington. We find no
evidence of particular inconvenience or inequity beyond Erog's allegations of insufficient
contacts. We do not find that an exercise of jurisdiction here would offend traditional
notions of fair play and justice.
The trial court did not err in exercising jurisdiction.
II. Evidence of Service
Erog argues that he was never properly served the copy of the summons and
complaint. Accordingly, he contends that the default judgment was void and that the
court should have vacated the judgment under CR 60(b)(5).
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No. 67404-8-1/11
Courts have a mandatory, nondiscretionary duty to vacate void judgments.
Ahten v. Barnes, 158 Wash. App. 343, 350, 242 P.3d 35 (2010). Thus, we review de novo
a trial court's decision to grant or deny a CR 60(b) motion to vacate a default judgment
for want of jurisdiction. ]d A judgment entered without proper service of the summons
and complaint is void for lack of jurisdiction. Am. Express Centurion Bank v. Stratman,
172 Wash. App. 667, 672, 242 P.3d 35 (2012). A plaintiff has the initial burden to produce
an affidavit of service that on its face shows that service was properly carried out. jd If
the plaintiff makes this showing, the burden then shifts to the defendant to prove by
clear and convincing evidence that service was improper. ]d
An affidavit of service that is regular in form and substance is presumptively
correct. Leen v. Demopolis, 62 Wash. App. 473, 478, 815 P.2d 269 (1991). Personal
service may be effected upon an individual or upon a foreign corporation's agent. RCW
4.28.080(10), (15). Personal service to may be effected upon any party outside the
state. RCW 4.28.180.
LDM's affidavits demonstrate that a process server delivered a copy of the
summons and complaint to Erog as an individual and as an agent of Broadcast. This
creates a prima facie case and shifts the burden to Erog to demonstrate clear and
convincing evidence that service was improper. Clear and convincing evidence exists
when the evidence shows the ultimate fact at issue to be highly probable. In re
Dependency of K.S.C., 137 Wash. 2d 918, 925, 976 P.2d 113 (1999).
Erog makes two challenges to LDM's original affidavits. He first alleges that the
affidavits failed to show exactly who was served and how. However, each affidavit
states that service of process was delivered to Richard Erog at his Las Vegas address.
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No. 67404-8-1/12
Erog also asserts that the affidavits were improper under RCW 9A.72.085. But, that
statute applies to unsworn statements, and the process server's affidavits were sworn
and notarized.
Erog further maintains that he was never served a copy of the summons and
complaint. He relies on three affidavits—his own, his babysitter's, and his friend's—to
demonstrate that neither he nor anyone at his home received service on September 15,
2010. His declaration states that he was not at home that night, but was out visiting
with friends. He avers that he did not find any paperwork when he returned, and his
babysitter did not inform him that any deliveries occurred. The other two declarations
corroborate this information. In response to Erog's declarations, LDM produced a
detailed sworn affidavit from the process server that provided supporting details based
on notes he took at the time of service.
In Leen, the court considered the clear and convincing evidence test in the case
of conflicting affidavits. 62 Wn. App. at 478. There, the process server stated that he
personally served the defendant, and other evidence in the record corroborated his
affidavit. Jd at 479. In response, the defendant submitted his own declaration that he
was not personally served, but later found the complaint in his mailbox. ]d at 479-80.
He also provided declarations from two other people stating that he was at a restaurant
with them at the time of alleged service. ]d at 480. However, the defendant did not
himself attest that he was at the restaurant at that time, id The court found that this did
not constitute clear and convincing evidence, id
The court again considered conflicting affidavits in Woodruff v. Spence, 76 Wn.
App. 207, 883 P.2d 936 (1994). There, the defendant filed a declaration that he was out
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No. 67404-8-1/13
of town when the process server's affidavit stated that service occurred. ]d at 210. He
also provided declarations from his son and a neighbor, both of whom were around his
residence that day and did not observe anyone else on the property, id The court did
not find that this constituted clear and convincing evidence. See id. But, it did find that
there was an issue of fact that required an evaluation of witness credibility. Jd. Asa
result, the court remanded for an evidentiary hearing to resolve the issue. ]d The court
distinguished Leen, where no hearing was needed because the affidavit of service had
corroborating evidence and the defendant's declaration was equivocal. See id at 210
n.1.
Erog's declarations contradict the process server's affidavit unequivocally. Even
if this constitutes a genuine issue of fact, it does not meet the standard of clear and
convincing evidence under Woodruff and Leen. This is insufficient to demonstrate that
the judgment was void.
However, Woodruff also establishes that a trial court may abuse its discretion by
failing to hold an evidentiary hearing when affidavits create an issue of fact that can be
resolved only by determining witness credibility. 76 Wn. App. at 210. Erog's
declaration was unequivocal about his whereabouts, unlike the defendant's in Leen.
And, as in Woodruff, Erog's declarations directly conflict with the process server's.
There is no way to reconcile the two without finding that one is false. This creates an
issue of fact that cannot be resolved without a determination of witness credibility.
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No. 67404-8-1/14
We affirm the trial court's exercise of jurisdiction and remand for an evidentiary
hearing on the issue of service.
WE CONCUR:
2~d £ J &X,J
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