Daynard v. ScruggsDaynard v. Scruggs
The issue on appeal is whether a federal district court sitting in Massachusetts has specific personal jurisdiction over a suit brought by Richard A. Daynard, a Massachusetts law professor, for fees in the tobacco litigation, against the Mississippi law firm of Scruggs, Millette, Bozeman & Dent, and Richard Scruggs, a senior partner (“Scruggs defendants“). At the heart of Daynard‘s claim is the argument that the court may reach the Scruggs defendants based in large part on contacts imputed from the South Carolina law firm of Ness, Motley, Loadholt, Richardson & Poole, and Ronald Motley (“Motley defendants“), all of whom purportedly acted on behalf of both firms in engaging Daynard to work on litigation against the tobacco industry. We conclude, contrary to the district court, that the Scruggs defendants are subject to specific personal jurisdiction based on their contacts with Massachusetts, particularly those contacts properly attributed to them from the Motley defendants, who are also defendants in this litigation.
Daynard is a law professor at Northeastern University specializing in litigation against the tobacco industry. He sued the Motley and Scruggs defendants, claiming that, pursuant
The Motley defendants, based on their Massachusetts contacts, concede personal jurisdiction, but, central to this case, the Scruggs defendants do not. Daynard does not challenge the district court‘s conclusion that the Scruggs defendants’ own direct contacts with Massachusetts are, by themselves, insufficient to permit personal jurisdiction. Instead, he challenges the district court‘s ruling that personal jurisdiction does not exist based on the imputation of some of the Motley defendants’ contacts, which were purportedly made on behalf of both law firms, to the Scruggs defendants. The district court reasoned that the Motley defendants were not the Scruggs defendants’ agents, and, even if they were, the Scruggs defendants did not exert “substantial influence” over the Motley defendants’ in-forum activities. The district court reasoned that it could not, consistent with the Due Process Clause of the
We conclude that Donatelli‘s substantial influence test is not controlling in this case, where Daynard alleges that the defendants were in a joint venture, or at least held themselves out to be in a type of agency relationship. We need not determine whether the defendants were actually engaged in a joint venture between themselves, however. The facts, as asserted by Daynard and construed in the light of whether he has made a prima facie jurisdictional showing, suffice to show a relationship between the two defendants sufficient to impute some of the Motley defendants’ contacts to the Scruggs defendants. These same facts show that the Scruggs defendants
Traditional common law concepts, embodied in the law of Massachusetts, Mississippi, and South Carolina, confirm the fundamental fairness of requiring the Scruggs defendants to answer in Massachusetts. We conclude that the Scruggs defendants’ contacts with Massachusetts, particularly those contacts of the Motley defendants properly attributed to the Scruggs defendants, suffice to permit personal jurisdiction over the Scruggs defendants consistent with the Massachusetts long-arm statute and the
I.
In this case there are many disputed, and as of yet unresolved, facts. We do not resolve these disputed facts because we “must accept the plaintiff‘s (properly documented) evidentiary proffers as true for the purpose of determining the adequacy of the prima facie jurisdictional showing.” Foster-Miller, Inc. v. Babcock & Wilcox Canada, 46 F.3d 138, 145 (1st Cir. 1995). We use Daynard‘s version of the facts (although we provide a brief description of the defendants’ competing version), drawn from his complaint, both sides’ subsequent affidavits, and the products of jurisdictional discovery, including Daynard‘s deposition of Scruggs.
A. Daynard‘s Allegations
Daynard is a resident and citizen of the Commonwealth of Massachusetts. He is, and has been for over thirty years, a law professor at Northeastern University School of Law, located in Massachusetts. For much of that time, he has focused his professional and academic efforts on defeating the tobacco industry in court. Daynard is Chair of the Tobacco Product Liability Project, President of the Tobacco Control Resources Center, and a frequent advocate for, and consultant to, those opposing the tobacco industry.
For many years there was a consensus that the potential for recovery against the tobacco industry was negligible. Indeed, the tobacco industry, until 1997, boasted that it had never paid a cent to a tort plaintiff. As of 2002, the situation is drastically different. Lawyers have sued the tobacco companies on behalf of many states and recovered
Daynard says that his efforts were central to many of these titanic recoveries. He quotes reputable authorities stating that he is the “recognized leader” in tobacco litigation on behalf of the public health and the “foremost authority” on, and “driving force” behind, anti-tobacco legal theory and strategy. In fact, Daynard quotes one authority stating that without Daynard‘s tobacco work, the state-initiated tobacco litigation would not even exist.
Shortly after this initial meeting in Boston, Daynard traveled to Ness Motley‘s South Carolina offices, where he met with members of the firm, including Ronald Motley. At these meetings, Daynard identified and explained legal theories for recovery on behalf of state governments. After these meetings, Daynard continued to communicate regularly, by phone and fax, with members of Ness Motley, providing them advice on similar matters.
Daynard asserts that his legal theories, strategies, evidence, and arguments “subsequently formed a central component” of the firms’ litigation brought on behalf of several states against the tobacco industry. In addition, Daynard introduced Ness Motley firm members to experienced tobacco litigators and to pleading and discovery files from other tobacco cases.
When the state tobacco litigation commenced, Daynard continued to work with both firms, educating their attorneys on the relevant issues, counseling them based on his experience in other tobacco litigation, providing them with relevant documents and information, and introducing them to potential witnesses and contacts. He developed litigation strategies and worked on pleadings and other documents for the firms. Many of these services were performed in Boston. See Daynard v. Ness, Motley, Loadholt, Richardson & Poole, P.A., 188 F. Supp. 2d 115, 118 (D. Mass. 2002)
Ness Motley recognized and encouraged Daynard‘s efforts by assigning him specific projects, by requesting his information and assistance, by transporting him to selected meetings and proceedings, and by accepting his work product. At some point in 1996, when Daynard became concerned that some Ness Motley attorneys were trying to minimize his role in the litigation, Mr. Motley assured Daynard that this was not the case.
In July of 1996, when Daynard reported to Ness Motley on the time he had expended to complete a research project that Ness Motley had requested, the firm, consistent with its own and the Scruggs defendants’ past assurances, informed Daynard that it would compensate him for his work by paying him a share of
Daynard says that, at a meeting in late August of 1996, Scruggs Millette and Ness Motley “confirmed” their agreement to compensate him in the form of a share of the fees. On August 25 through August 27, 1996, Daynard, Motley, and Scruggs were in Chicago, Illinois, participating in meetings related to the state tobacco litigation. Scruggs and Motley scheduled a meeting with Daynard during that period to discuss Daynard‘s specific share of any fee award. Although Motley was ultimately not able to attend the meeting, Daynard met with Scruggs. Daynard says he asked Scruggs “whether he was speaking for both himself and Mr. Motley” and Scruggs stated that he was, that Daynard could rely on this, and that he was acting with at least “apparent authority” for Motley. Scruggs promised Daynard 5% of any fees ultimately recovered, in any state tobacco litigation in which any of the defendants were counsel, as compensation for Daynard‘s past and continuing assistance. Daynard says he accepted the 5% agreement and that he and Scruggs shook hands on
Relying on this 5% figure, and “ongoing assurances and representations,” Daynard continued to work for the two firms. For example, Scruggs requested that Daynard be available during the trial in the Mississippi litigation and agreed to compensate Daynard for the cost of paying a substitute teacher to cover his Northeastern University teaching obligations. Daynard agreed by committing $15,000 of his own personal funds to buy himself out of his teaching obligations so that he could be present full-time during the trial.
Almost a year after the alleged handshake on the 5% compensation figure, and after the Mississippi state litigation had reached a tentative settlement, Daynard wrote a letter to Scruggs confirming the fee arrangement and identifying certain expenses that Daynard had incurred associated with the Mississippi litigation. Scruggs never responded. A few months later, Daynard wrote another letter, this time to both Scruggs and Motley, referring to the 5% fee arrangement. At this point,
B. State Court Proceedings, Federal District Court Proceedings, and the Defendants’ Side of the Story
On December 27, 2000, Daynard sued the Motley defendants and the Scruggs defendants in the Superior Court for Suffolk County, Massachusetts, seeking, among other things, compensation in the form of what Daynard says is his rightful share of fees generated from settlements with several states, not including Massachusetts. Daynard claims that Ness Motley and Scruggs Millette have already received millions and will receive over two billion dollars of the fees generated from the settlement, 5% of which he claims is rightfully his. With the
In their answer, the Motley defendants conceded the Massachusetts court‘s personal jurisdiction, but told a story on the merits very different from Daynard‘s. The Motley defendants admit that, in 1993, Patrick of Ness Motley met Daynard in Massachusetts, and that the firm continued to meet with and communicate with Daynard. Furthermore, they agree that Daynard provided them with documents related to the tobacco litigation, identified some potential witnesses, and did some general work on the state tobacco litigation. The Motley defendants admit that the firm made specific requests of Daynard and provided him with transportation to certain meetings and proceedings. They say that they paid Daynard for this work.
But the Motley defendants downplay Daynard‘s expertise, say that his assistance was neither invaluable nor substantial, and claim that his theories never formed a central component of their tobacco litigation. Furthermore, they deny that either they or Scruggs ever met with Daynard in Chicago and agreed upon the 5% figure. They deny that any agreement as alleged by
On May 30, 2001, the Motley defendants moved for summary judgment. The district court denied this motion in part on September 13, 2001, and issued its conclusions in a written memorandum on December 3, 2001. Daynard v. Ness, Motley, Loadholt, Richardson & Poole, P.A., 178 F. Supp. 2d 9 (D. Mass. 2001). The district court addressed those issues reserved in the September 13 hearing and in the December 3 memorandum in a second memorandum and order, in which it denied the Motley defendants’ motion for summary judgment. Daynard, 188 F. Supp. 2d 115.
The Scruggs defendants pursued a different legal strategy. On April 20, 2001, they moved to dismiss Daynard‘s complaint for lack of personal jurisdiction or for failure to state a claim, and moved in the alternative for summary judgement. See
[i]t has always been my understanding that Professor Daynard acted as a volunteer in all of his endeavors with respect to the litigation, or was otherwise
compensated by Ness Motley as a consultant on a limited basis, and that his activities were designed primarily to promote his own agenda with respect to tobacco control.
As to personal jurisdiction, Scruggs states that neither he nor his firm has ever had any offices, real estate, bank accounts, or other property in Massachusetts. Furthermore, none of the Scruggs defendants has ever practiced law in Massachusetts. Daynard does not deny this. In addition, Scruggs says that he has never traveled to Massachusetts in connection with any fee sharing arrangement with Daynard or in connection with any of Daynard‘s work under the alleged arrangement. He denies that he or his firm had any role in contacting or retaining Daynard in Massachusetts. He further states that the Scruggs defendants did not request, or even have knowledge of, the Motley defendants’ meetings with Daynard. Scruggs also denies that the Scruggs defendants or the Mississippi joint venture, to the extent that it existed, ever gave the Motley defendants any directions with respect to Daynard.
Although Scruggs concedes that “Daynard did at times consult with me concerning the tobacco litigation in general,” he says that “these instances were extremely infrequent and were
With respect to any relationship between Scruggs Millette and Ness Motley, Scruggs stated, in a second affidavit, that Scruggs Millette was part of a written joint venture agreement in the Mississippi litigation, but that Ness Motley was not a party to that agreement. He says that “[p]rior to April of 1999, there was simply no arrangement [between Scruggs Millette and Ness Motley] with respect to the sharing of attorney‘s fees in the nationwide tobacco litigation.” Scruggs also noted that there was no agreement that “either Scruggs Millette or Ness Motley could exert control over tobacco litigation in states where those firms were not counsel of record.”
The district court, after one hearing on May 31, 2001, and after granting Daynard limited jurisdictional discovery on the issue of the relationship between the defendants from 1992 to 1998, held another hearing on September 13, 2001, in which it dismissed Daynard‘s complaint against the Scruggs defendants for lack of personal jurisdiction. At that September 13 hearing,
[W]hile the facts are sufficient to show a joint venture with respect to the Mississippi litigation, as the First Circuit has defined the term substantial influence in the Donatelli versus National Hockey League case, there is insufficient evidence in this case that the Mississippi law firm or Mr. Scruggs exercised a substantial influence over the Ness firm such as would subject Scruggs or the Mississippi firm to personal jurisdiction in Massachusetts.
Soon after that, the court entered final judgment in favor of the Scruggs defendants, thus permitting an immediate appeal to this court.
The district court supported its September 13 conclusion in a December 21, 2001, memorandum. Daynard v. Ness, Motley, Loadholt, Richardson & Poole, P.A., 184 F. Supp. 2d 55 (D. Mass. 2001). In that memorandum, the district court addressed two theories on which Daynard might show personal jurisdiction over the Scruggs defendants. Id. at 60-76. First, the district court concluded that it did not have personal jurisdiction over the Scruggs defendants based on their own direct contacts with Massachusetts. Id. at 68. Second, the district court concluded that it lacked jurisdiction over the
II.
A. Burden of Proof and Standard of Review
To hear a case, a court must have personal jurisdiction over the parties, “that is, the power to require the parties to obey its decrees.” United States v. Swiss Am. Bank, Ltd., 191 F.3d 30, 35 (1st Cir. 1999). The plaintiff bears the burden of proving the court‘s personal jurisdiction over the defendant. Foster-Miller, 46 F.3d at 145; Boit v. Gar-Tec Prods., Inc., 967 F.2d 671, 674-75 (1st Cir. 1992). The district court, faced with a motion to dismiss for lack of personal jurisdiction,
The district court applied the prima facie method. Daynard, 184 F. Supp. 2d at 61. We review the district court‘s choice of method de novo. Foster-Miller, 46 F.3d at 147. The parties do not object to the district court‘s choice of the prima facie method. Daynard states in his brief that the district court employed the prima facie approach and the Scruggs defendants agree, making no attempt to challenge the applicability of this approach. Therefore, the Scruggs defendants have waived any objection to the application of the prima facie method. Cashmere & Camel Hair Mfrs. Inst. v. Saks Fifth Ave., No. 00-2341, 2002 U.S. App. LEXIS 5361, at *10 (1st Cir. Apr. 1, 2002); Ortiz v. Gaston County Dyeing Mach. Co., 277 F.3d 594, 598 (1st Cir. 2002). Under these circumstances, we accept the prima facie method.6
Accordingly, Daynard has the burden of making a prima facie showing of personal jurisdiction over the Scruggs defendants. We “must accept the plaintiff‘s (properly documented) evidentiary proffers as true for the purpose of determining the adequacy of the prima facie jurisdictional showing.” Foster-Miller, 46 F.3d at 145. We take these facts “as true (whether or not disputed) and construe them in the light most congenial to the plaintiff‘s jurisdictional claim.” Mass. Sch. of Law at Andover, Inc. v. Am. Bar Ass‘n, 142 F.3d 26, 34 (1st Cir. 1998); see also Sawtelle v. Farrell, 70 F.3d 1381, 1385-86 (1st Cir. 1995). “We then add to the mix facts put forward by the defendants, to the extent that they are uncontradicted.” Mass. Sch. of Law, 142 F.3d at 34. We review the district court‘s application of the prima facie standard de novo. Foster-Miller, 46 F.3d at 147.
B. Background Law
“In determining whether a non-resident defendant is subject to its jurisdiction, a federal court exercising diversity jurisdiction ‘is the functional equivalent of a state
To establish personal jurisdiction, Daynard must show that the Massachusetts long-arm statute grants jurisdiction and, if it does, that the exercise of jurisdiction under the statute is consistent with the constitution. Foster-Miller, 46 F.3d at 144.
Daynard‘s complaint pleads that personal jurisdiction exists under subsections (a), (c), and (d) of the Massachusetts
“The Due Process Clause protects an individual‘s liberty interest in not being subject to the binding judgments of a forum with which he has established no meaningful ‘contacts, ties, or relations.‘” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 471-72 (1985) (quoting Int‘l Shoe Co. v. Washington, 326 U.S. 310, 319 (1945)). “[D]ue process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.‘” Int‘l Shoe, 326 U.S. at 316 (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)); see also Noonan v. Winston Co., 135 F.3d 85, 90 (1st Cir. 1998). In a contract case, we evaluate the parties’ “prior negotiations
The more difficult question in this case is whether any of the Motley defendants’ contacts may be imputed to the Scruggs defendants for purposes of establishing “minimum contacts.” We conclude that some of these contacts may be imputed. The next question is whether the sum of any imputed and direct contacts permits the court to exercise personal jurisdiction over the Scruggs defendants consistent with the Constitution. We conclude that these contacts suffice under Supreme Court law, e.g., Burger King, 471 U.S. at 471-87; Int‘l Shoe, 326 U.S. 310, and the law of this circuit, e.g., Noonan, 135 F.3d at 90; Foster-Miller, 46 F.3d at 144.
C. Imputed Contacts
Daynard alleges that the relationship between the Motley defendants and the Scruggs defendants is such that some of the Motley defendants’ contacts with Massachusetts should be imputed to the Scruggs defendants. As the district court recognized, whether the defendants were in all respects joint
Daynard alleges that the Motley defendants and the Scruggs defendants were part of a formal, written joint venture between themselves. He also says that he believed the parties to be joint venturers because they “consistently purported to be” in such a relationship. Daynard argues that at the time Charles Patrick of Ness Motley came to Massachusetts to retain him, Ness Motley and Scruggs Millette were engaged in a form of tobacco litigation joint venture. Daynard says that Patrick was acting for both firms when Patrick retained him and that Patrick
1. Applicability of Donatelli‘s “substantial influence” test.
First, there is the threshold question of whether the district court properly applied Donatelli, 893 F.2d 459, as the governing test. The parties devote the majority of their attention to this issue, but it is not dispositive of the personal jurisdiction question. The district court concluded that even if the Motley defendants acted as the Scruggs defendants’ agents, “there was no substantial influence as required by Due Process.” Daynard, 184 F. Supp. 2d at 76. The district court derived this “substantial influence” requirement from Donatelli, 893 F.2d at 469, a general jurisdiction case. The district court was in error. It read Donatelli as applying an exclusive test and as applying in the present, very different context. This over-reads Donatelli.
The question before us is whether Daynard must meet the
In Donatelli, this court held that
an unincorporated association which does not itself conduct significant activities in, or enjoy affiliating circumstances with, a state cannot be subject to the general personal jurisdiction of the state‘s courts on the basis of a member‘s contacts within the state unless the member carries on the in-forum activities under the association‘s substantial influence.
Id. at 472. Donatelli sued the National Hockey League (“NHL“) in Rhode Island, challenging the NHL‘s draft and its failure to declare him a free agent. Jurisdiction in Rhode Island over the NHL was premised on the fact that a member team of the NHL had contacts with Rhode Island. His suit was unrelated to either
Donatelli‘s substantial influence test does not control the entire universe of cases in which one party‘s contacts might be attributed to another. By its terms, Donatelli applies “in the world of unincorporated associations.” Id. at 468. Indeed, as Donatelli itself observed, the substantial influence test does not control where one seeks to attribute contacts from partner to partnership or from subsidiary to corporate parent. Id. at 465-67. In the partnership context, “the activities of the partner are generally attributed to the partnership and jurisdiction over the partnership follows from the partner‘s contacts, if sufficient, regardless of the absence of independent contacts between the partnership qua entity and the
In addition, although we do not decide whether Donatelli‘s approach to attribution is necessarily limited to general jurisdiction cases, we note, as stated several times in the Donatelli opinion, including in the above quoted passage, that Donatelli “focus[ed] . . . upon . . . general as opposed to specific jurisdiction.” Id. at 463; see also id. at 461 (stating the issue on appeal as whether “an unincorporated association is subject to the general personal jurisdiction of every court having jurisdiction over one of its members“) (internal quotation marks omitted). This is important because, as Donatelli states clearly, the standard for general jurisdiction is more strict than the standard for specific jurisdiction. Id. at 463. General jurisdiction
The problem Donatelli addresses is, in some ways, more likely to occur in general jurisdiction cases. In general jurisdiction cases, the suit does not arise out of or relate to the defendant‘s forum contacts. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 n.9 (1984). Donatelli addresses the potentially unjust scenario in which an association, with no direct contacts with a forum, is haled into a forum based on one of its members’ continuous and systematic activities in the forum, to answer a lawsuit unrelated to either the member‘s or the association‘s in-forum activities. 893 F.2d at 469. Something more is needed to say that the association has purposefully availed itself of the benefits of in-forum activity. Otherwise, the association is subject to a suit in that forum, unrelated to anything the association has done in the forum, by merely engaging in a limited relationship with a member, that through its own activities engages in continuous and systematic activities in a forum.
This problem, however, is less likely to arise in specific jurisdiction cases such as this one. Here a direct connection is alleged between the in-forum activities of the agent (the Motley defendants) and the agent‘s relationship with the principal (the Scruggs defendants). When the cause of action relates to both the association‘s activities giving rise to the suit and to the member‘s in-forum activities, the same risk of unfairness is not necessarily present. In the present case, Daynard‘s suit relates to the Scruggs defendants’ alleged promise to pay him a share of the fees and to the Motley defendants’ activities in Massachusetts, claimed to have been ratified by Scruggs. Donatelli is not controlling in this context. It addresses a question different from the inquiry
But that does not end the matter. We must still determine whether the relationship between the defendants permits imputing a sufficient quantum of the Motley defendants’ connections to the Scruggs defendants.
2. Implied agency and ratification.
For purposes of personal jurisdiction, the actions of an agent may be attributed to the principal.8 Whether or not an agent is initially authorized to act on behalf of a principal, the agent‘s actions may be attributed to the principal, for
We disagree with the district court‘s conclusion that “the defendants were not in any sort of agency relationship.” Daynard, 184 F. Supp. 2d at 74; see also id. at 76. Traditional common law concepts support the conclusion that the Scruggs defendants’ relationship with the Motley defendants suffices to bring the parties within the rule that permits imputation of contacts for jurisdictional purposes.
Section 16 of the Uniform Partnership Act, which is codified in the laws of Massachusetts, Mississippi, and South Carolina, recognizes the common law doctrine of partnership by estoppel —
When a person . . . represents himself, or consents to another representing him to any one, as a partner . . . he is liable to any such person to whom such representation has been made, who has, on the faith of such representation, given credit to the actual or apparent partnership, and if he has made such representation or consented to its being made in a public manner he is liable to such person, whether the representation has or has not been made or communicated to such person so giving credit by or with the knowledge of the apparent partner making the representation or consenting to its being made.
Partnerships and joint ventures aside, a theory of agency by estoppel is similarly availing to Daynard. Under the Restatement (Second) of Agency,
[a] person who is not otherwise liable as a party to a transaction purported to be done on his account, is nevertheless subject to liability to persons who have changed their positions because of their belief that the transaction was entered into by or for him, if
- he intentionally or carelessly caused such belief, or
- knowing of such belief and that others might
change their positions because of it, he did not take reasonable steps to notify them of the facts.
Even if the defendants’ relationship were to fall slightly outside of the confines of these specific doctrines, the question before us is whether a sufficient relationship exists under the Due Process Clause to permit the exercise of jurisdiction, not whether a partnership, joint venture, or other particular agency relationship between the two defendants exists. We think it consistent with the Due Process Clause to attribute to the Scruggs defendants the Motley defendants’ retention of, and certain interactions with, Daynard where, as
We take the facts alleged and produced by Daynard in the light most favorable to his jurisdictional assertion. Even if the parties were not joint venturers, they held themselves out to Daynard to be part of a joint venture or other agency relationship and are subject, for personal jurisdiction purposes, to the doctrine of estoppel. Daynard, throughout his dealings with the defendants, understood them to be joint venturers. He says the parties “consistently purported to be joint venturers” and that he reasonably relied on this understanding. The question is whether he had a basis for this belief grounded in the Scruggs defendants’ own conduct or conduct undertaken with their consent.
In support of his understanding, Daynard states that he believed the firms to be in a joint venture based on their statements and conduct. Daynard states that Patrick was acting for both firms when Patrick retained him and that Patrick retained him to advance the objectives of the joint venture. He
Daynard supports his claim with documentary evidence of a joint venture that he unearthed through jurisdictional discovery. Around October 1994, the Scruggs defendants entered into a “Joint Venture Agreement” with several firms to pursue tobacco litigation on behalf of the state of Mississippi. The Motley defendants claim to have abided by this agreement and their firm‘s name was listed on the agreement, although they never signed the agreement. In a letter from Joseph Rice of Ness Motley to Richard Scruggs, Rice stated: “As we have discussed several times, we have not signed the Mississippi Joint Venture Agreement solely because we don‘t want to be governed by Mississippi Tax Law. We are agreeable to all terms in the agreement and, as you know, we have acted under the agreement from the beginning.” In the agreement, Ness Motley firm members, including Mr. Motley, were listed as members of several of the “teams” and “committees” forming the “Litigation Management Structure” outlined in the agreement. Mr. Motley was
Scruggs says that Ness Motley did not sign the joint venture agreement, that Ness Motley did not perform under the agreement‘s terms, and that the litigation team did not function as outlined in the agreement. He says Ness Motley did not make the capital contributions specified in the agreement, that there was a distinction between being counsel of record and being a party to the joint venture agreement, and that Ness Motley‘s failure to sign the agreement caused “great concern.” Scruggs says that, upon receiving the letter from Rice, stating that Ness Motley had “acted under the agreement from the beginning,” he called Rice and told him that “this wasn‘t good enough” and that “nobody else” considered Ness Motley to have performed under the agreement.
Scruggs concedes, however, that the profits from the
Daynard then says that after Motley hired him, he began a course of dealing with the defendants in which he provided both firms with legal advice, including advice to members of the Scruggs firm physically present in Boston, as well as assistance provided from Boston by phone and fax. Daynard also cites several conversations with both Scruggs and Motley in which they agreed to pay him a share of the fees obtained by both firms, Scruggs‘s statement that Scruggs had at least apparent authority to promise the 5%, and Motley‘s statement that he would be compensated as part of the “team.”
Finally, in support of his claim that the defendants held themselves out to be joint venturers, Daynard presents a 1998 letter to Hawaii‘s attorney general, from Joseph Rice of Ness Motley, stating that “Ness, Motley has an arrangement with Richard Scruggs to work jointly on all of the state cases against the Tobacco Industry.” Noting that “[w]e have no formal, written agreement,” he said “Ness, Motley and Dick
Scruggs said that he considered Rice‘s statement that “Ness, Motley has an arrangement with Richard Scruggs to work jointly on all of the state cases against the Tobacco Industry” to be “a bit of an overstatement.” On the other hand, Rice‘s letter to Hawaii‘s attorney general said “I am sending a copy of this letter to Dick so he may respond likewise, if he has any questions or any additions.” Scruggs did not write anything to contradict Rice‘s characterization and stated, in his deposition, that “[t]here was no reason to contradict it.” Scruggs conceded that “[t]here was a general cooperative effort between [Scruggs Millette and Ness Motley] to advance litigation against the tobacco industry.” Although this letter may not go to Daynard‘s understanding of the firms’ relationship, and although it was written by Rice of Ness Motley, not by any of the Scruggs defendants, Scruggs‘s silence carries at least some weight.
Many of these same facts support the conclusion that the Scruggs defendants subsequently ratified the Motley defendants’ conduct. Even if Patrick, when he hired Daynard, was acting without actual authority from the Scruggs defendants, Daynard says Patrick purported to act as an agent for both firms when Patrick retained Daynard, and that Scruggs effectively ratified that representation.
“A person may ratify a prior act done by another without actual or apparent authority. . . . by . . . conduct that is justifiable only on the assumption that the person so consents.” Restatement (Third) of Agency § 4.01 (Tentative Draft No. 2, 2001).9
After Ness Motley retained Daynard, and as a result of this employment, Daynard asserts that he began providing information directly to the Scruggs defendants. Daynard says that he “communicated regularly” with the Scruggs defendants, that they came to Boston to receive his advice, and that he “had many conversations, meetings and written communications in Boston with members of the defendant firms, in which [he] provided advice and undertook specific projects for their use in the tobacco litigation.” Even if the Scruggs defendants did not come to Boston, we think there is adequate other evidence of ratification, accepting Daynard‘s allegations.
Daynard says that he had “several conversations” with “both Mr. Motley and Mr. Scruggs in which they stated that they
Finally, Daynard asserts that in reliance on his arrangements with the Scruggs defendants and at their request, he had to commit out-of-pocket expenses of $15,000 to retain someone to meet his teaching obligations. Again, there is no evidence that Scruggs disavowed any contractual relationship as he accepted Daynard‘s assistance. To be sure, Scruggs says Daynard was a volunteer, but reasonable inferences support Daynard‘s version.
The Scruggs defendants had many opportunities to disavow a relationship with Daynard or to clarify the relationship. For example,
By knowingly accepting the benefits of the transaction initiated in Massachusetts, the Scruggs defendants ratified Patrick‘s act of hiring and retaining Daynard on behalf of both firms, which ultimately gave rise to this law suit. See Inn Foods, 45 F.3d at 597 n.7 (noting that “benefits received are certainly strong evidence that the principal acquiesced in the agent‘s transaction“); Restatement (Third) of Agency, supra, § 4.01, cmt. d. In addition, by repeatedly agreeing to compensate Daynard for ongoing work conducted in Massachusetts, agreeing to pay Daynard a share of the fees and later shaking hands on the 5% figure, and accepting his coming from Boston to Mississippi to assist at trial, Scruggs, acting on behalf of his firm
D. The Remaining Constitutional Analysis
The easier question in the case is the remaining constitutional one. Given the Scruggs defendants’ direct contacts with Massachusetts and their contacts imputed from the Motley defendants, do the Scruggs defendants have “minimum contacts” with Massachusetts “such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.‘“? Int‘l Shoe, 326 U.S. at 316 (quoting Milliken, 311 U.S. at 463). The answer is yes.
For specific jurisdiction, this circuit divides the constitutional analysis into three categories: relatedness, purposeful availment, and reasonableness:
First, the claim underlying the litigation must directly arise out of, or relate to, the defendant‘s forum-state activities. Second, the defendant‘s in-state contacts must represent 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. Third, the exercise of jurisdiction must, in light of the Gestalt factors, be reasonable.
1. Relatedness.
As to the first requirement, that “the claim underlying the litigation must directly arise out of, or relate to, the defendant‘s forum-state activities,” Foster-Miller, 46 F.3d at 144, the district court correctly concluded, based merely on the Scruggs defendants’ direct contacts with the forum, that the alleged breach of contract in this case “arose” from a course of dealing between the parties. The contract was in the form of a working relationship -- started in Massachusetts -- that called for interaction between Massachusetts, South Carolina, and Mississippi. Drawing all inferences in favor of Daynard, he arguably meets the relatedness requirement,
2. Purposeful availment.
“Second, the defendant‘s in-state contacts must represent 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
The district court‘s reasoning on purposeful availment considered only the Scruggs defendants’ direct contacts and found them insufficient. We need not address this conclusion as Daynard has not challenged it on appeal. We note, however, that, as the district court recognized, Scruggs did have some contacts with Massachusetts, however minimal. The Scruggs defendants, according to Daynard, engaged in telephone and fax communications with him in Massachusetts.11 In addition, Daynard says the Scruggs defendants also had conversations with him, in which they agreed to pay him a share of the fees as compensation
Combined with Patrick‘s physical presence in Massachusetts to negotiate the agreement which ultimately gave rise to this litigation, and the ongoing relationship between the Motley defendants and Daynard -- properly attributed to the Scruggs defendants -- we can properly say that the Scruggs defendants “engaged in . . . purposeful activity related to the forum that would make the exercise of jurisdiction fair, just, or reasonable,” Rush v. Savchuk, 444 U.S. 320, 329 (1980). See Burger King, 471 U.S. at 479 (holding that “prior negotiations and contemplated future consequences, along with the terms of the contract and the parties’ actual course of dealing” must be evaluated to determine whether the defendant purposefully established minimum contacts). Patrick‘s action alone is probably sufficient to support jurisdiction over the Motley defendants and, when imputed, the Scruggs defendants as well. See id. at 475 n.18 (noting that “[s]o long as it creates a ‘substantial connection’ with the forum, even a single act can support jurisdiction“) (quoting McGee, 355 U.S. at 223); R.C.
3. Reasonableness.
“Third, the exercise of jurisdiction must, in light of the Gestalt factors, be reasonable.” Foster-Miller, 46 F.3d at 144; see also World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292 (1980) (listing factors). The Gestalt factors support the conclusion that jurisdiction is reasonable.
The burden on the Scruggs defendants of appearing in Massachusetts, given that they routinely represent clients outside their home state, is not by any means unusual. In
E. Conclusion
We conclude that the Scruggs defendants’ contacts properly imputed from the Motley defendants, against the backdrop of the Scruggs defendants’ direct contacts with Massachusetts, constitute “minimum contacts” with Massachusetts “such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.‘”
III.
For these reasons, we reverse the dismissal of the Scruggs defendants for lack of personal jurisdiction and remand to the district court for further proceedings consistent with this opinion.
Notes
A Court may exercise personal jurisdiction over a person, who acts directly or by an agent, as to a cause of action in law or equity arising from the person‘s
- transacting any business in this commonwealth;
. . .
- causing tortious injury by an act or omission in this commonwealth; [or]
- causing tortious injury in this commonwealth by an act or omission outside this commonwealth if he regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue . . . , in this commonwealth . . . .