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Personal Jurisdiction From E-Contacts Remains an Unpredictable Issue

February 25, 2013

Go Figure

Two cases that involve similar fact patterns, Grimaldi v. Guinn³³ and Skrodzki v. Marcello,³⁴ are instructive because they reach opposite results on similar facts. In Grimaldi, the plaintiff, a New York resident, owned a vintage 1969 Chevrolet Camaro. During fall 2005, the plaintiff was contemplating purchasing a "cross-ram" manifold and carburetor assembly (collectively, the cross-ram) from a non-party located in Georgia. The non-party referred the plaintiff to defendant Wayne Guinn of defendant Guinn's Engineering, both of which were located in New Jersey, to authenticate the cross-ram. Subsequently, the plaintiff called and emailed Guinn using the contact information posted on Guinn's website, which also included a statement that he performed restoration services in the Northeast. The plaintiff and Guinn then had a telephone conversation about the cross-ram and Guinn apparently offered to work with others located in Pennsylvania to install the cross-ram. Plaintiff's wife subsequently ordered Guinn's book from the Internet; Guinn wrote a personalized inscription to the plaintiff encouraging the plaintiff to use Guinn to install the cross-ram and then Guinn shipped the book to the plaintiff's residence in New York.³⁵

Plaintiff purchased the cross-ram from the non-party in May 2006 and, based on Guinn's promises that he could install the cross-ram and a $20,000 estimated cost of doing so, Guinn delivered the vehicle to another defendant located in Pennsylvania in September 2006. While at the Pennsylvania location, the plaintiff learned that another person, defendant Allen Tischler of New Jersey, would be involved in the project. Guinn and the Pennsylvania defendants posted to their respective websites that Guinn's vehicle has been delivered and Guinn's website released the information as a "news break," which the plaintiff alleged was to generate additional business. The plaintiff tendered partial payment. Subsequently, the plaintiff called the defendants on a number of occasions to inquire as to the status of the project, but defendants apparently tried to evade the calls. When the parties did speak, the defendants were vague regarding their progress, the completion date and the cost. In January 2007, the defendants sent photographs showing the progress to the plaintiff, which photographs showed that the vehicle was disassembled and not close to completion. For the next four months, the plaintiff continued to call the defendants to check the status, but the defendants continued to be evasive. In March 2007, Tischler called the plaintiff and told him more funds were required and, upon the plaintiff's request, Tischler faxed an invoice to the plaintiff.³⁶ In April 2007, the defendants sent more photographs to plaintiff and those photographs showed some progress but also demonstrated that the project was not close to completion and that the quality of the work was poor. By May 2007, the plaintiff had paid $32,000 to the defendants. In fall 2007, Tischler sent a DVD to the plaintiff containing pictures and a video showing Tischler working on the vehicle. In November 2007, the plaintiff recovered the vehicle but it and the cross-ram were totally disassembled. The plaintiff alleged that between May and November of 2007, he received at least 12 calls from Guinn and 15 calls from Tischler regarding the status of the project.

Guinn and Tischler moved to dismiss for lack of personal jurisdiction. The trial court denied that motion and Guinn appealed. The Second Department observed that the Zippo sliding scale of interactivity was useful in performing a jurisdictional analysis and held that Guinn's website "was thoroughly passive in nature" and would not by itself support the exercise of personal jurisdiction.³⁷ The Second Department then analyzed that nature of Guinn's other contacts with New York. Relying on Fischbarg and Deutsche Bank Securities, the Second Department held:

[I]n light of the number, nature and timing of all the contacts involved, including the numerous telephone, fax, e-mail and other written communications with the plaintiff in New York that Guinn initiated subsequent to his initial involvement in the project, as well as the manner in which Guinn employed his decidedly passive Web site for commercial access, Guinn must be deemed to have sufficient contacts with [New York].³⁸

In reaching this conclusion, the Second Department focused on the fact that even though the plaintiff initiated contact with Guinn, the nature and quality of the contacts and relationship established are determinative.³⁹ The court found that it was "clear that Guinn engaged in the 'purposeful creation of a continuing relationship' with the plaintiff."⁴⁰ The Second Department reasoned that following the plaintiff's initial emails to Guinn, Guinn "by virtue of his telephone calls and e-mails to the plaintiff…affirmatively attempted to establish a relationship with the plaintiff whereby he would be involved in the project."⁴¹ Accordingly, the Second Department held that personal jurisdiction existed under CPLR §302 because "Guinn purposefully created a continuing relationship with the plaintiff centered on the project at issue"⁴² and, therefore, "[i]t is beyond dispute that there is a substantial relationship between the transaction at issue and the claims asserted by the plaintiff; all of the plaintiff's claims arise directly from the subject transaction."⁴³

Skrodzki involved an almost identical fact pattern. In particular, (1) the plaintiff was a New York resident, (2) the defendants were residents of another state, (3) the defendants never visited New York and did no business in New York, (4) the plaintiff initiated contact with a defendant through a website that was advertising cranes that were available for sale and the defendants also operated their own website containing details about those cranes as well as a method to contact the defendants via email, (5) the parties negotiated the contracts via email, telephone and facsimile for a number of months, (6) the contract was for a single transaction, (7) the parties communicated for approximately six months after the contract was entered into about the crane and its shipment to Poland, (8) payment was sent from New York to another state, and (9) the defendants failed to perform under the contract. Defendants moved to dismiss for lack of personal jurisdiction. Judge Arthur D. Spatt held that no personal jurisdiction existed because the contract was a one-time agreement and did not require an ongoing relationship. The court rejected the argument that there was an ongoing relationship because "'attempts to adjust a dispute as to performance of a contract or to discuss differences under an existing contract have no jurisdiction[al] consequences.'"⁴⁴ Spatt also held that the defendants did not "actively project" themselves into New York because:

[t]he center of gravity for the commercial transaction between the parties was either Mississippi, where the defendants executed the contract, or Poland, where the Crane was to be delivered and ultimately used in a construction project.⁴⁵

Spatt cited Grimaldi and distinguished the Second Department's finding on the following basis: (1) the vehicle would be delivered to New York whereas the crane would be delivered to Poland, respectively, (2) the parties communicated after the contract was entered into for approximately one year and six months, respectively, and (3) the wife of the plaintiff in Grimaldi purchased a book from a website and the defendants sent the book to the plaintiff in New York with a personalized inscription.

Conclusion

Litigants continue to seek jurisdiction over parties who have never set foot in New York. While the sliding scale of interactivity continues to be used to evaluate the impact that a defendant's website will have on the personal jurisdiction analysis, the more important issue for both website and electronic communication cases is the nature of the relationship between the parties and the quality of the contacts with New York. As the foregoing cases demonstrate, the more attenuated the connection, the less likely that personal jurisdiction will be found to exist over the defendant. The analysis will become more complicated as people and entities use social networks and cloud-based programs to promote and solicit business. These technologies are based on the use of websites and servers of third parties and, thus, the "traditional" analysis of contacts with a forum state becomes more antiquated. Practitioners should be aware of these cases and the close factual analysis inherent in modern jurisdictional motions.

Robert S. Friedman is a partner in Sheppard Mullin Richter & Hampton's business trial and white collar practice groups in New York. Mark E. McGrath is an associate in the business trial and intellectual property practice groups.

Endnotes:

1. Robert S. Friedman and Mark E. McGrath, " Virtual Contacts and Personal Jurisdiction: The Next Frontier," NYLJ, June 15, 2009.

2. 9 N.Y.3d 375 (2007), aff'g, 38 A.D.3d 270 (1st Dept. 2007). The Court of Appeals' decision is discussed at length in our 2008 article, Robert S. Friedman and Mark E. McGrath, "E-Contacts and New York's Long Arm Statute," NYLJ,, April 7, 2008, Litigation Special Section, at S3.

3. 7 N.Y.3d 65 (2006). This case is fully discussed in our 2007 article, Robert S. Friedman and Mark E. McGrath, "Think Remote, Electronic Contacts Will Keep Jurisdiction Away?" NYLJ, June 18, 2007, Litigation Special Section, at S4.

4. No. 11 Civ. 3673 (RJS), 2012 WL 123989 (S.D.N.Y. Jan. 3, 2012).

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