E-commerce has brought to the forefront an issue identified by courts in the days when traveling salesmen and delivery by the US Postal Service were the norm. Can a person or company be subject to the courts of another state without a presence in that state? This is often referred to as “personal jurisdiction,” even when applied to a business. The Massachusetts Appeals Court has issued a decision that expands the concept of personal jurisdiction, arising from a series of orders placed by email over the span of 21 months, and finding that a Long Island business was subject to suit in Massachusetts based on the many transactions. The case, known as Diamond Group, Inc. v. Selective Distribution International, Inc., is available here.
This is not a construction case but the facts could apply equally to dealings with a construction product vendor. Selective Distribution placed 79 orders for perfume with Diamond, and ultimately Diamond claimed that 45 invoices, for product worth $529,689, had not been paid. Diamond sued in the Massachusetts courts, and Selective filed a motion to dismiss claiming that it was not subject to personal jurisdiction in Massachusetts. Selective noted that it had no presence in Massachusetts, that all of the product purchased was delivered to its business on Long Island or to a warehouse in New Jersey, and thus argued that it did not have the “minimum contacts” necessary for courts of one state to recognize personal jurisdiction over an out-of-state business. (The “minimum contacts” standard is from a 1945 US Supreme Court decision, requiring such contacts before a person or company should expect to be subject to the courts of another state.)
The appellate court examined three criteria, two of which were the most critical. First, the court held that a lengthy series of orders over a 21-month span was a “purposeful availment” of commercial activity in Massachusetts. As the third point, given the lengthy series of orders, the court held that personal jurisdiction over Selective did not offend “traditional notions of fair play and substantial justice.” The court noted that prior cases in which courts decided there was no personal jurisdiction tended to involve isolated or incidental purchases by the out-of-state company. Seventy-nine purchases in this case meant that Selective was “an extraordinarily deliberate, regular, and active” purchaser within Massachusetts. Further, “The continuous contractual purchase of essential inventory from a vendor in the forum State amounts to the purposeful availment of business activity and of the applicable law of that State.”
The dissenting opinion argued that there was nothing in the series of transactions to suggest that Selective benefitted from any connection with Massachusetts, and the dissenting justice would have arrived at a different conclusion. It remains to be seen whether the Massachusetts Supreme Judicial Court will accept further appellate review. But this case is an incremental expansion of what may constitute doing business in another state sufficient to subject a person or company to personal jurisdiction to the courts in that state.