Telco Communications, Inc. v. New Jersey State Firemen's Mutual Benevolent Ass'n
Docket: No. 95-P-642
Court: Massachusetts Appeals Court; August 30, 1996; Massachusetts; State Appellate Court
The complaint, filed on October 4, 1993, by Telco Communications, Inc. (a Rhode Island corporation), against the New Jersey State Firemen’s Mutual Benevolent Association (FMBA), centers on a December 14, 1992, agreement whereby Telco was to solicit advertising and publish a publication for FMBA. Telco employed independent contractor salespersons who were directed by Telco, with advertising revenues split among Telco, FMBA, and the salespersons, ensuring FMBA received at least $30,000. The agreement required FMBA to provide Telco with a list of communities where solicitation would not occur by December 31, 1992. However, FMBA delivered this list in January 1993, after Telco began solicitation, identifying 25 communities. Telco claimed the late delivery and excessive restrictions hindered its ability to fulfill the $30,000 guarantee, leading to FMBA's claim for unpaid amounts. Telco's complaint included a breach of contract claim and a request for a declaratory judgment.
FMBA moved to dismiss the case for lack of personal jurisdiction, while Telco sought a preliminary injunction to prevent FMBA from pursuing a countersuit in New Jersey, which allegedly involved similar legal issues. The court allowed FMBA's motion to dismiss on April 15, 1994, and denied Telco's injunction request. Telco appealed, arguing that a forum selection clause in the agreement designated Massachusetts as the exclusive venue for disputes. The judge referenced a precedent indicating a shifting court attitude toward enforcing such clauses but noted that the Supreme Judicial Court had not fully recognized them.
The Supreme Judicial Court has endorsed the enforcement of forum selection clauses if deemed fair and reasonable, as established in Jacobson v. Mailboxes Etc. U.S.A. Inc. However, the clause in question—stating that the agreement would be governed by Massachusetts law—was incorrectly characterized by the plaintiff as a forum selection clause. The judge clarified that it did not specify Massachusetts as the exclusive legal forum, distinguishing it from other cited cases that clearly stated a designated forum. The plaintiff's interpretation of "enforced pursuant to the laws of the Commonwealth of Massachusetts" as a choice-of-forum indication was rejected, as it merely indicated that Massachusetts law would apply regardless of the forum, similar to the ruling in Morris v. Watsco, Inc.
Should the forum selection argument fail, Telco contended that jurisdiction could be established under Massachusetts' long-arm statute, which requires an assessment of the parties' relationship and activities concerning the contract. The burden of proof lies with Telco to demonstrate jurisdiction. The facts indicate that Telco operates nationally, had a business presence in Seekonk, and engaged FMBA, which is based in New Jersey, through negotiations held in New Jersey. The final contract was executed in New Jersey, with no prior business relationship between the parties. The contract's primary aim was to secure advertising from New Jersey companies for a publication celebrating local firefighters.
Telco entered into a contract to solicit advertising, managing personnel who were independent contractors based in New Jersey. The revenues from advertisers were deposited into an FMBA account, from which 28% was paid to the contractors, 42% to Telco, and 30% was retained by FMBA, subject to a minimum guarantee of $30,000 from Telco. The composition and printing of the publication were to occur in Seekonk, Massachusetts, with inter-state communications regarding advertising content. FMBA retained approval rights over the publication’s content. However, the contract failed before publication, with FMBA claiming it received only $7,306.99 from the revenues. The dispute centers on solicitation activities in New Jersey, with most witnesses likely from that state.
In terms of jurisdiction, Massachusetts law (G.L. c. 223A, § 3) requires specific instances for personal jurisdiction over non-residents. The court must find that the jurisdiction asserted aligns with due process. The burden rests on the plaintiff to demonstrate compliance with the statute. The analysis suggests that the core of the transaction occurred in New Jersey, with minimal connections to Massachusetts, insufficient to qualify as doing business under § 3(a). Merely having a contract with a Massachusetts business does not satisfy this requirement. Although FMBA had the right to approve the publication, this was rendered moot by events. The presence of a choice-of-law clause does not significantly strengthen the case for jurisdiction, and the overall business activities did not materially impact Massachusetts commerce.
Telco's argument for jurisdiction is weak, as evidenced by four cited cases. In **Droukas v. Divers Training Academy, Inc.**, a Massachusetts buyer's breach of warranty claim against a Florida seller failed due to minimal engagement in Massachusetts. The case of **Good Hope** illustrates that jurisdiction may exist if a nonresident defendant actively engages in extensive communication and investment-related activities in Massachusetts, leading to losses for the plaintiff based on negligence. Similarly, **Tatro** affirmed jurisdiction when a California hotel solicited patrons from Massachusetts, resulting in a negligent injury to a Massachusetts resident. **Connecticut Natl. Bank v. Hoover Treated Wood Prod. Inc.** also supported jurisdiction based on purposeful solicitation of business in Massachusetts.
Further analysis reveals that a Massachusetts court may hesitate to assert jurisdiction over a New Jersey buyer if the contract involves goods manufactured or services rendered in New Jersey, as this could deter business. In **Nichols Assocs. v. Starr**, the Massachusetts court declined jurisdiction over a Connecticut developer, emphasizing minimal Massachusetts connections. The present case mirrors Nichols, lacking any significant actions by the defendant to avail themselves of Massachusetts's laws. The court notes that the plaintiff has primarily invoked New Jersey's protections through their activities, not the defendant's. Constitutional requirements for jurisdiction—specifically, that a defendant must reasonably anticipate being haled into court in a foreign state—are not met as there is no evidence of the defendant purposefully directing activities at Massachusetts residents.
The warning pertains to the plaintiff in New Jersey, not the defendant in Massachusetts. The judgment is affirmed, with the understanding that the plaintiff could seek jurisdiction based on a forum selection clause. The case of Water Energizers Ltd. v. Water Energizers, Inc. is referenced, highlighting that a court can exercise personal jurisdiction over a party who conducts business within the Commonwealth. A second addendum, signed on June 2, 1993, finalized certain percentages, though its terms are not detailed in the main complaint. The original contract required performance by April 24, 1993, but the addendum extended Telco’s deadline to September 20, 1993, for delivering fire prevention booklets. This extension may affect the relevance of the prompt notice requirement for prohibited localities, which is central to the breach of contract claim. The judge noted that the contract breach is linked to activities in New Jersey. Similarities are drawn with Little, Brown Co. v. Bourne, where jurisdiction was upheld in Massachusetts for a collaborative project. The distinction between passive and active purchasers in jurisdictional matters is illustrated in Whittaker Corp. v. United Aircraft Corp., reinforcing the principles established in Good Hope.
