The First Circuit Court of Appeals has determined that Massachusetts courts have long-arm jurisdiction over a Canadian company “where the parties’ contacts were not first-hand and involved no physical presence in Massachusetts, but were by phone, email, and internet over an international border.” C.W. Downer & Co. v. Bioriginal Food & Sci. Corp., No. 14-1327 (1st Cir., decided November 12, 2014). The issue arose from the alleged breach of a contract between a global investment bank headquartered in Boston and a Saskatchewan-based company that produces dietary supplements.
The contracting parties never met, but the agreement was “negotiated by calls, emails, and teleconferences.” The bank agreed to act as the Canadian company’s exclusive financial adviser in connection with the latter’s potential sale. Communications between the parties occurred remotely over the ensuing three years, but the sale never took place. The following year the bank learned that the company had been sold and requested its transaction fee and a fourth milestone payment under the contract. The Canadian company refused, and the bank sued it for, among other matters, breach of contract and violation of the state’s unfair trade practices statute. The Canadian company removed the case to federal court and filed a motion to dismiss on the grounds that the court lacked personal jurisdiction over it, a forum non conveniens dismissal was appropriate in favor of a Saskatchewan court, and the statutory claim should be dismissed for failure to state a claim. The district court granted the motion for lack of jurisdiction, but did not reach the forum non conveniens issue, while denying as moot the motion to dismiss the statutory claim.
Conducting a de novo review, the First Circuit evaluated whether the Canadian company’s “suit-related conduct creates the necessary minimum contacts with Massachusetts.” It found “powerful” evidence of in-state contacts during the course of dealing. “Bioriginal had an ongoing connection with Massachusetts in the performance under the contract. Downer’s claims arise from the alleged breach of that contract. That is enough to establish relatedness.” The court also ruled that the company’s in-state contacts represented “a purposeful availment of the privilege of conducting activities in the forum state, thereby invoking the benefits and protections of that state’s laws and making the defendant’s involuntary presence before the state’s courts foreseeable.”
In this regard, the First Circuit rejected the district court’s conclusion that “‘interstate communications by phone and mail are insufficient to demonstrate purposeful availment’ absent other contacts,” and relied on U.S. Supreme Court cases that have “consistently rejected” a physical contact test for personal jurisdiction, recognizing instead the “inescapable fact of modern commercial life that a substantial amount of business is transacted solely by mail and wire communications across state lines.”
The court further determined that Massachusetts’s assertion of jurisdiction is fair and reasonable, observing that the Canadian company made no claim that the “international dimensions of the case” created “unique burdens” for it. According to the court, “[t]he parties have identified few burdens, interests, or inefficiencies that cut strongly in favor of or against jurisdiction.” Given that the first two prongs of the inquiry supported the bank, the court ruled that the Canadian company had not met its burden and remanded the matter for further proceedings.