Harbison v. Garden Valley Outfitters, Inc.

Citations: 849 P.2d 669; 69 Wash. App. 590; 1993 Wash. App. LEXIS 177Docket: 28497-5-I

Court: Court of Appeals of Washington; April 26, 1993; Washington; State Appellate Court

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The Court of Appeals of Washington reviewed a trial court's decision denying a motion to dismiss for lack of personal jurisdiction involving Danny L. Harbison and Garden Valley Outfitters, Inc. (Garden Valley). The court partially reversed the trial court's decision, dismissing the individual defendants (the Rotthoffs) due to insufficient personal jurisdiction but affirming the dismissal of the corporate defendant based on sufficient jurisdiction under Washington's long-arm statute, considering the actions of its predecessor entity in the state.

Garden Valley, an Idaho corporation, sold its assets to Bear Valley Outfitters, Inc. (Bear Valley), which operated a promotional booth in Seattle, leading to a reservation for a hunting trip by the plaintiff. After the asset sale was terminated, Garden Valley assumed Bear Valley's obligations to the hunters and notified them of the repurchase. The plaintiff later traveled to Idaho, made a balance payment, and found conditions unsatisfactory, leading to a refund request that was denied. 

Both Garden Valley and the Rotthoffs sought dismissal based on a lack of contacts with Washington, citing an affidavit that only acknowledged a notification letter as their connection. The trial court denied their motion. The appellate court addressed procedural issues regarding Garden Valley's attempt to introduce a second affidavit, ultimately ruling that the criteria for augmenting the record were not met, as the affidavit did not pertain to prior trial proceedings and would not likely change the outcome.

The conditions for taking additional evidence on review are not satisfied. The affidavit's information is unnecessary for resolving the issues at hand, and the plaintiff’s payment of a deposit does not implicate the defendants' actions in this jurisdiction. The existing repurchase agreement sufficiently represents the status of the two companies, and the plaintiff has not claimed a merger between them. Additional evidence would not alter the court's decision, and it would not be unjust to rely on the current record. The information sought was known to Garden Valley during the initial hearing, negating any justification for not presenting it at that time. The court denies the motion to introduce further evidence and criticizes the appellants for improperly including materials in their brief that were not part of the record, violating RAP 10.3, which mandates that factual statements in briefs must reference the record.

The trial court did not clarify if it established jurisdiction under the general jurisdiction statute (RCW 4.28.080) or the long-arm statute (RCW 4.28.185), both of which will be discussed. Personal jurisdiction is a legal question reviewed de novo by the court when the underlying facts are undisputed. The plaintiff bears the burden of proving that the trial court has personal jurisdiction, with allegations in the complaint taken as true for appeal purposes. Aside from whether the plaintiff tendered a deposit while in Washington, the facts are undisputed, and it will be assumed that the plaintiff did tender the deposit.

Under RCW 4.28.080(10), general jurisdiction can be established over nonresident corporations conducting substantial and continuous business within Washington, allowing courts to hear cases unrelated to the defendant's local activities. This statute incorporates the due process requirements found in long-arm statutes. Previous cases illustrate that merely participating in isolated activities or transactions in Washington does not suffice to establish general jurisdiction, as seen in MBM Fisheries, where minimal engagement did not demonstrate the necessary continuous or substantial business activity to warrant such jurisdiction.

In *Banton v. Opryland U.S.A. Inc.*, the court held that various activities, such as a sales presentation and payment of commissions to local travel brokers, did not constitute systematic and continuous contacts that would warrant general jurisdiction over the defendants in Washington. The analysis then shifts to specific jurisdiction under Washington's long-arm statute, RCW 4.28.185, which allows courts to assert jurisdiction over nonresident defendants to the extent permitted by the U.S. Constitution's due process clause. 

Specific jurisdiction can be established if it meets two criteria: the statutory language must support jurisdiction, and exercising jurisdiction must not violate due process principles. The due process evaluation requires three conditions: 1) the nonresident must have purposefully engaged in some act within the state; 2) the cause of action must arise from that act; and 3) assuming jurisdiction must align with traditional notions of fair play and substantial justice, considering various factors such as the nature of the activity and the convenience of the parties involved.

Regarding tortious acts under RCW 4.28.185(1)(b), an injury occurs in Washington if the final act leading to liability happens there. In this case, since the last event attributed to the alleged tort was Garden Valley's failure to provide services, which did not occur in Washington, long-arm jurisdiction cannot be claimed under this provision. The discussion then shifts to whether jurisdiction exists under RCW 4.28.185(1)(a) concerning the transaction of business, questioning if Bear Valley's actions can be factored into Garden Valley's evaluation for jurisdictional purposes.

Under principles of successor liability, a purchasing company typically does not inherit the seller's debts unless specific conditions are met: (1) there is an agreement to assume those debts; (2) the companies have merged or consolidated; (3) the transaction defrauds the seller's creditors; or (4) the purchaser is merely a continuation of the seller. In this case, the memorandum agreement between Garden Valley and Bear Valley explicitly stated that Garden Valley would assume Bear Valley's obligations to hunters who had made deposits, satisfying the first criterion. Consequently, Garden Valley is deemed liable for Bear Valley's obligations.

The principles of substantive successor liability also extend to personal jurisdiction, allowing a successor to be held accountable for the predecessor's forum-related contacts. Since Garden Valley acquired assets partially linked to the forum, it is presumed to have knowledge of these contacts. This suggests no policy rationale to exempt Garden Valley from liability in the same jurisdiction where Bear Valley could have been held liable.

To determine whether extending jurisdiction over Garden Valley aligns with due process, the analysis focuses on whether the defendants intentionally established minimum contacts with Washington. This includes evaluating if they benefited from interstate activities or availed themselves of Washington's legal protections. The legal precedent set in Simmers indicates that the contacts of Bear Valley will also be considered. 

Garden Valley's reliance on Gravelie v. TBS Pac. Inc. is unpersuasive; in that case, the court ruled that a contract negotiated in Iowa, with performance solely in Hawaii, did not establish jurisdiction, due to differing statutory requirements. Washington's statute does not require that a contract be performed in the state to establish that a foreign corporation is "doing business" therein, distinguishing it from Gravelie. Furthermore, the situation in MBM Fisheries, where the defendant's activities did not demonstrate purposeful engagement in Washington, further supports the argument that mere contract execution is insufficient to establish minimum contacts.

Bear Valley actively participated in a sports show to solicit clients from Washington, including the plaintiff, and furthered this engagement by sending promotional materials into the state, satisfying the first element of the due process analysis. The cause of action is linked to alleged misrepresentations made at the trade show and in a promotional videotape directed to the plaintiff, thus fulfilling the second criterion. 

Regarding the third due process factor, the court assessed the defendants' activities in Washington, the convenience for the parties, the legal protections offered by Washington, and the overall fairness of the situation. Although the marketing efforts were not extensive enough for general jurisdiction, they were sufficiently focused on attracting clients for hunting trips. Washington has a vested interest in safeguarding its consumers from commercial misrepresentations. The convenience of witnesses was deemed equal, as four hunters were hosted by a comparable number of employees during their trip. 

While Idaho has a significant interest in regulating these businesses, the court concluded that exercising jurisdiction over Garden Valley under the transacting business clause of RCW 4.28.185(1)(a) aligns with due process. However, personal jurisdiction over the individual defendants, the Rotthoffs, was rejected since they had no individual contacts with Washington, leading to a reversal of the trial court's decision regarding them and a direction for their dismissal.

The court noted that the Rotthoffs sought attorney fees but determined that no distinct research or argument was presented solely for them, thereby denying the request. The decision was affirmed as to Garden Valley and remanded for trial, while reversed for the Rotthoffs. The plaintiff's request for terms related to the motion was denied, and the court noted a recent exception in Washington law concerning nonresident professional malpractice. The relevance of whether the two corporations formally merged was dismissed as inconsequential, and the sufficiency of Garden Valley's letter as a contact was not addressed.