WATKINS AND SHEPARD TRUCKING, INC., Plaintiff, v. JOFRAN SALES, INC., d/b/a JOFRAN INC., a Massachusetts corporation, Defendant.

 

Cause No. CDV-2016-46

 

FIRST JUDICIAL DISTRICT COURT OF MONTANA, LEWIS AND CLARK COUNTY

 

2017 Mont. Dist. LEXIS 20

 

 

August 10, 2017, Decided

August 10, 2017, Filed

 

 

PRIOR HISTORY: Jofran Sales, Inc. v. Watkins & Shepard Trucking, Inc., 2016 U.S. Dist. LEXIS 88123 (D. Mass., July 7, 2016)

 

JUDGES:  [*1] KATHY SEELEY, District Court Judge.

 

OPINION BY: KATHY SEELEY

 

OPINION

 

ORDER ON MOTION FOR SUMMARY JUDGMENT

This matter arises out of a dispute between a trucking and freight management company, Watkins and Shephard Trucking, Inc., a Montana corporation (Watkins), and a wholesale furniture supplier, Jofran Sales, Inc., a Massachusetts corporation (Jofran). On January 19, 2016, Watkins filed a complaint against Jofran alleging Jofran breached contractual obligations to Watkins for transportation services and storage of Jofran’s furniture, and asking for a declaratory judgment that two contracts between the companies be rescinded and for restitution of amounts owed. On March 9, 2016, Jofran filed a motion to dismiss for lack of personal jurisdiction. The issue was briefed and oral argument held. On October 26, 2016, this Court ordered the motion to dismiss be converted to a motion for summary judgment, allowing for submission of supplemental materials. After a voluntary 90-day stay of the proceedings, Jofran filed a motion for summary judgment on February 15, 2017. Additional materials were filed, oral argument was heard on the motions for summary judgment, and the matter was deemed submitted on May 31, 2017. [*2]

This Court takes judicial notice of the proceedings in the United States District Court for the state of Massachusetts. On June 21, 2016, Jofran filed an action in Massachusetts alleging claims against Watkins for breach of contract, violation of implied covenant of good faith and fair dealing, negligence, tortious interference with prospective business relationship, and violations of consumer protection statutes under Massachusetts, Montana and California law. On July 7, 2016, Jofran obtained a trustee process attachment on Watkins’ bank account in the amount of $658,301. Watkins filed a motion to dismiss the action in Massachusetts on the basis of forum non conveniens, which was denied by the Massachusetts court on November 2, 2016.

 

STANDARD OF REVIEW

Summary judgment is appropriate when “the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Mont. R. Civ. P. 56(c)(3).

The party moving for summary judgment must establish the absence of any genuine issue of material fact and entitlement to judgment as a matter of law. Tin Cup County Water and/or Sewer Dist, v. Garden City Plumbing & Heating, Inc., 2008 MT 434, ¶ 22, 347 Mont. 468, 200 P.3d 60. Once the moving party has met its burden, [*3]  the party opposing summary judgment must present affidavits or other testimony containing material facts that raise a genuine issue as to one or more elements of its case. Id. (citing Fielder v. Bd. of Cnty Comm’rs, 2007 MT 118, ¶ 12, 337 Mont. 256, 162 P.3d 67).

 

DISCUSSION

Watkins is a trucking company with its principal place of business in Montana. Jofran is a furniture wholesaler incorporated in Massachusetts. The parties have had a contractual relationship for years which included Watkins transporting and providing storage for Jofran’s goods. Watkins’ complaint alleges Jofran owes significant arrearages on payment owed for storage and freight, thus breaching its contracts with Watkins. Jofran counters that Montana lacks personal jurisdiction of Jofran under Montana Rule of Civil Procedure 4(b) and the federal Due Process Clause. Watkins disagrees, alleging waiver of jurisdiction by Jofran and, in the alternative, specific jurisdiction due to Jofran’s contact with the forum state — Montana. The issues to be resolved by this Court are whether Jofran waived objection to jurisdiction; whether the LTL Transportation Service Agreement is incorporated by reference into the Storage Pricing Agreement; whether there is long-arm jurisdiction of Jofran pursuant to Montana Rule of Civil Procedure 4(b); and whether the federal Due Process Clause contraindicates personal jurisdiction. [*4]

 

Did Jofran Waive Objection to Personal Jurisdiction Pursuant to the LTL Transportation Services Agreement?

Jofran’s initial argument for lack of personal jurisdiction centers on the premise that there are two distinct contracts at issue — the Storage Pricing Agreement (Storage Agreement); and the LTL (less than load) Transportation Service Agreement (Transportation Agreement). Watkins argues the Storage Agreement is incorporated into the Transportation Agreement in which Jofran waived objection to personal jurisdiction in Montana. Jofran argues the versions of the Transportation Agreement submitted by Watkins through employee affidavits cannot be verified as “true and accurate.”

Although there are discrepancies with the versions of the Transportation Agreement submitted by Watkins, the critical language has remained the same. Jofran did not submit any version of the Transportation Agreement which contradicts language waiving objection to personal jurisdiction. Further, in considering a motion for summary judgment based on written materials rather than an evidentiary hearing, as in a motion to dismiss, “[c]onflicts between parties over statements contained in affidavits must be resolved [*5]  in the plaintiff’s favor.” Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004) (citations omitted).

The Transportation Agreement contains the clause:

 

This agreement shall be construed and governed in accordance with the laws of the State of Montana to the extent such laws do not conflict with the law set forth in Title 49 of the United States Code and Part 49 of the Code of Federal Regulations, in which case the latter shall prevail. Shipper waives any objection to the jurisdiction of the Courts of Montana.

 

 

Jofran asserts that “shipper” means this agreement applies only when goods are shipped, not stored, and therefore the term “shipper” used in the waiver clause supports Jofran’s contention that any waiver of jurisdiction, if found, could only apply to shipping a product, not storage of inventory. Watkins counters that “shipper” refers to Jofran, regardless of the exact service being provided to Jofran. Clearly, “shipper” refers to the company securing services through the agreement, which is Jofran. And also clearly, the services contemplated by the Transportation Agreement are shipping. The language is also clear that Jofran, as the “shipper” contemplated by this clause, has waived objection to jurisdiction of the “Courts of Montana.” [*6]

 

Does the Storage Pricing Agreement Incorporate the Transportation Agreement?

Watkins argues that Montana has personal jurisdiction of Jofran for claims brought pursuant to the Storage Agreement because Jofran waived any objection to jurisdiction in the Transportation Agreement. Watkins further asserts the Storage Agreement incorporates the language of the Transportation Agreement. The Storage Agreement states:

 

I acknowledge I have received a copy of and agree to the terms outlined in the following documents:

– Watkins and Shephard Zone Guide

– Watkins and Shephard Fuel Surcharge Schedule

– Watkins and Shephard Accessorial Guide

– Watkins and Shephard LTL Freight Agreement

– Watkins and Shephard Claims Policy

Current copies of these documents can be retrieved from our website at www.wksh.com

 

 

Acknowledging receipt of a document and agreeing to the terms of the documents does not clearly incorporate that document by reference. If Watkins intended Jofran to be bound by a clause in the Transportation Agreement for legal disputes arising under the Storage Agreement, Watkins could have clearly so stated. The Transportation Agreement signed by the parties delineates that several of the documents listed [*7]  above are specifically incorporated by reference.

The Transportation Agreement states:

 

3. Rates, Rules and Accessorial Charges. As compensation for services provided by WST, Shipper shall pay WST the rates set forth in the attached Rate Schedule. . . . In addition, all shipments made by WST at the request of Shipper are subject to the rules and accessorial charges applicable to the shipment as set forth in the attached Applicable Rules and Accessorial Charges. In addition, all shipments made by WST at the request of the Shipper are subject to the applicable Fuel Surcharge as set forth in the Fuel Surcharge Matrix attached hereto. All rates and other applicable charges and fuel surcharges are payable by Shipper in U.S Funds not later than twenty (20) days from . . . . The Rate Schedule and Applicable Rules and Accessorial Charges and Fuel Surcharge Matrix are incorporated herein and made a part of this Agreement.

 

 

(Emphasis added.)

The Transportation Agreement was entered into before the Storage Agreement and makes clear Watkins is familiar with when and how to specify which extrinsic documents are specifically incorporated by precise reference into an agreement.1

 

1   The executed Transportation Agreement submitted by Watkins includes signed “appendices” entitled “Applicable Notes and Accessorial Charges — Furniture” and “Cargo Claims Policy and Procedures Bulletin.” Watkins does not explain whether these are documents also claimed to be incorporated in the Storage Agreement as identified on that Agreement as “Accessorial Guide” and “Claims Policy.”

The Storage Agreement does [*8]  not specifically or clearly state the extrinsic documents listed, including the Transportation Agreement, are incorporated by reference. Although there is no “magic” language necessary to incorporate documents by reference, there must be some language expressing the parties’ intent to be bound by the terms of the incorporated document. In the context of government contracts, the US Court of Appeals for the Federal Circuit summarized the requirement for specificity of language when incorporating documents by reference.

 

[T]he language used in a contract to incorporate extrinsic material by reference must explicitly, or at least precisely, identify the written material being incorporated and must clearly communicate that the purpose of the reference is to incorporate the referenced material into the contract (rather than merely to acknowledge that the referenced material relevant to the contract, e.g., as background law or negotiating history).

 

 

Northrop Grumman Info. Tech., Inc. v. United States, 535 F.3d 1339, 1345, 2008 U.S. App. LEXIS 16493, *14-15 (Fed. Cir. 2008). “I . . . agree to the terms outlined in the following documents” does not clearly communicate intent to incorporate.

The imprecise language in the Storage Agreement, combined with the inconsistent labeling of the various extrinsic documents, and [*9]  the fact that Watkins’ clearly incorporated documents into the Transportation Agreement and submitted evidence that there are signed appendices to the Transportation Agreement, support the conclusion that Watkins did not clearly convey intent to incorporate the Transportation Agreement into the Storage Agreement.

The facts presented, collectively, support a finding that the Storage Pricing Agreement does not expressly and clearly incorporate by reference the terms of the LTL Transportation Service Agreement, and the Court finds the Storage Agreement does not incorporate the Transportation Agreement.

 

Is There Personal Jurisdiction of Jofran Based on Montana Rule of Civil Procedure 4(b)?

Montana applies a two-part test to determine whether a court may exercise personal jurisdiction over a nonresident defendant. First, the court determines whether personal jurisdiction exists pursuant to Montana Rule of Civil Procedure 4(b)(1), and then, if personal jurisdiction is found, “whether exercising personal jurisdiction comports with traditional notions of fair play and substantial justice embodied in the due process clause.” Threlkeld v. Colo., 2000 MT 369, ¶ 9, 303 Mont. 432, 16 P.3d 359 (citations omitted).

Personal jurisdiction can be either general or specific. General jurisdiction exists over “all persons found within the state of Montana. . . [*10]  .” Mont. R. Civ. P. 4(b)(1). A nonresident defendant is “found within” Montana for general jurisdiction purposes if its activities in the state are either “substantial” or “continuous and systematic.” Simmons Oil Corp v. Holly Corp., 244 Mont. 75, 83, 796 P.2d 189, 194 (1990). Although there is evidence of some business activity and affiliations in Montana by Jofran, the parties apparently agree there is inadequate contact with Montana to extend general jurisdiction over Jofran and that there is not sufficient evidence that Jofran’s limited affiliation with Montana renders Jofran “at home” in Montana.2

 

Absent general jurisdiction, Montana courts may exercise specific jurisdiction over any person “as to any claim for relief arising from the doing personally, or through an employee or agent, of any of the . . . acts” listed in the state’s “long-arm statute” adopted in Montana through this Court’s Rules of Civil Procedure. M. R. Civ. P. 4(b)(1) (A)-(G).

 

 

Milky Whey, Inc. v. Dairy Partners, LLC, 2015 MT 18, ¶ 21, 378 Mont. 75, 342 P.3d 13. Specifically, “long-arm” jurisdiction exists over a nonresident defendant when the plaintiff’s cause of action arises from the specific circumstances set forth in Montana Rule of Civil Procedure 4(b)(1), which states:

Additionally, any person is subject to the jurisdiction of Montana courts as to any claim for relief arising from the doing personally, or through an employee or agent, of any of the following [*11]  acts:

(A) the transaction of any business within Montana;

(B) the commission of any act resulting in accrual within Montana of a tort action;

(C) the ownership, use, or possession of any property, or of any interest therein, situated within Montana;

(D) contracting to insure any person, property, or risk located within Montana at the time of contracting;

(E) entering into a contract for services to be rendered or for materials to be furnished in Montana by such person;

(F) acting as director, manager, trustee, or other officer of a corporation organized under the laws of, or having its principal place of business within, Montana; or

(G) acting as personal representative of any estate within Montana.

 

 

Mont. R. Civ P. 4(b)(1)(A)-(G).

Specific jurisdiction . . . depends on an affiliation between the forum and the underlying controversy, principally, activity or an occurrence that takes place in the forum state and is therefore subject to the state’s regulation. Thus, . . . in contrast to general, all-purpose jurisdiction, specific jurisdiction is confined to adjudication of issues deriving from, or connected with, the very controversy that establishes jurisdiction.

 

 

Senne v. Kan. City Royals Baseball Corp., 105 F. Supp. 3d 981, 1015, (N.D. Cal. 2015) (citing International Shoe Co. v. Washington, 326 U.S. 310, 317, 66 S. Ct. 154, 90 L. Ed. 95 (1945)).

 

2   Initial briefing by Watkins raised the possibility of general jurisdiction of Jofran, but in subsequent briefing opposing the motion for summary judgment and responding to Jofran’s notice of supplemental authority, Watkins stated: “While both of these recent opinions primarily deal with general jurisdiction, which is not at issue here. . . .” (Emphasis added.)

Watkins argues that the [*12]  facts in this matter are most similar to those in Bitterroot Int’l Systems v. W. Star Trucks, Inc., 2007 MT 48, 336 Mont. 145, 153 P.3d 627. In Bitterroot Int’l the Supreme Court upheld the exercise of personal jurisdiction wherein an out-of-state corporation transacted business in Montana with a Montana based company and a dispute arose out of those business transactions. Bitterroot is distinguishable from the facts of this case. The business transactions in the Bitterroot case related to an informal agreement for transportation logistics to be developed and performed by Bitterroot. The services implemented by Bitterroot in Montana were more extensive, and there were daily communications with Montana employees. Further, Bitterroot employees “performed a significant portion of the obligations required” pursuant to the informal agreement at issue in Montana. Id., ¶¶ 8-10

Here, as in Milky Whey, the claim arises out of transactions, or performance of services pursuant to a contract, that took place outside of Montana. “[E]xercise of personal jurisdiction is proper under M. R. Civ. P. 4(b)(1)(A) where substantial interactions occur within Montana.” Milky Whey, ¶ 27 (citations omitted). “Even extensive interstate communications, however, do not give rise to jurisdiction where the contract is to be [*13]  performed in another state.” Id., ¶ 27 (citing Edsall Constr. Co. v. Robinson, 246 Mont. 378, 382, 804 P.2d 1039, 1042 (1991)).

The complaint filed by Watkins is for recission of the contracts between Watkins and Jofran and restitution of the amounts allegedly owed, or in the alternative, breach of contract for breach of both the storage and transportation contracts. The amount allegedly owed by Jofran to Watkins is a combination of arrearages for accounts receivable based on Watkins’ transportation and storage of Jofran’s furniture. Watkins contends the contracts were entered into via negotiation and communication via phone and email with Watkins’ Montana employees, invoices were generated in and mailed from the Montana offices, Jofran had made payments under the contracts to Watkins in Montana, Watkins’ accounting staff were located in Montana, and payments were processed in Montana. The evidence also shows that the dispute at issue is primarily related to storage of Jofran’s inventory provided by Watkins at a warehouse in Fontana, California. Watkins does not claim any storage or transportation of Jofran’s inventory occurs in Montana.

Entering into a contract and doing business with a Montana entity does not by itself command jurisdiction of the out-of-state [*14]  party.

 

[A] non-resident does not subject himself to the jurisdiction of Montana by merely entering into a contract with a resident of Montana. Moreover, interstate communication is an almost inevitable accompaniment to doing business in the modern world, and cannot by itself be considered a “contact” for justifying the exercise of personal jurisdiction. Personal jurisdiction is not acquired through interstate communications made pursuant to a contract that is to be performed in another state.

 

 

Tackett v. Duncan, 2014 MT 253, ¶ 30, 376 Mont. 348, 334 P.3d 920 (citations omitted).

There is insufficient evidence that any of the conditions of Montana Rule of Civil Procedure 4(b)(1)(A) through (G) were met regarding the services provided pursuant to either the Storage Agreement or the Transportation Agreement. This Court finds it does not have personal jurisdiction pursuant to Rule 4(b)(1) over Jofran for the claims at issue.

 

Does Exercise of Long-Arm Jurisdiction of Jofran Regarding Actions Arising from the Transportation Agreement Violate Due Process?

Jofran waived objection to jurisdiction in the Transportation Services Agreement. Even with such waiver, the Court will consider the due process concerns of fair play and substantial justice raised by exercising jurisdiction over Jofran for only the part of the complaint [*15]  dealing with allegations of amounts owed pursuant to the Transportation Agreement.

“The reasonableness of asserting jurisdiction over a nonresident defendant must be assessed in the context of our federal system of government. The Due Process Clause of the Fourteenth Amendment constrains a state’s authority to bind a nonresident defendant to a judgment of its courts.” Tackett v. Duncan, 2014 MT 253, ¶ 18, 376 Mont. 348, 334 P.3d 920 (citations omitted). Although it is not up to this Court to decide whether jurisdiction is appropriate in Massachusetts, it is relevant to consider the pending litigation in Massachusetts arising out of the same transaction as the claims in the Montana complaint when determining whether the exercise of jurisdiction would offend traditional notions of fair play and substantial justice. In denying Watkins’ motion to dismiss based on a forum non conveniens (inconvenient forum), the Massachusetts court carefully considered all arguments raised, including the possibility that Montana could also have jurisdiction. The Massachusetts court concluded, however, that Watkins “has not made a strong showing that the balance of factors strongly weighs in favor of litigating this action in Montana.” The denial of Watkins’ motion to dismiss in Massachusetts is not dispositive of [*16]  the case before this Court.3 However, allegations by both parties for breach of contract directly related to the amounts owed to Watkins by Jofran pursuant to the Transportation and Storage Agreements are raised in both lawsuits in both jurisdictions. Although there could be simultaneous legal action in more than one jurisdiction related to the same matters, this Court has found it lacks personal jurisdiction over Jofran, except for the waiver contained in the Transportation Agreement. Keeping jurisdiction of only Watkins’ action for declaratory judgment for rescission and equitable restitution of the amounts due under the Transportation Agreement, or breach of the Transportation Agreement, would carve up or bifurcate the proceedings between two jurisdictions in a manner which does not comport with traditional due process notions of fair play and substantial justice. Competing or conflicting orders would be a likely outcome. It offends the notions of fair play and substantial justice to intentionally set up that possible scenario. In this particular situation, due process demands dismissal of the matter for lack of personal jurisdiction.

 

3   Watkins argues that Jofran’s claim in the Massachusetts lawsuit alleging violation of the Montana Consumer Protection Act shows that Jofran considers itself to have transacted business in Montana, thereby giving rise to jurisdiction of Montana courts. This is not dispositive of the matter.

Based on the foregoing, Jofran’s motion for summary [*17]  judgment is GRANTED.

DATED this 10 day of August 2017.

/s/ Kathy Seeley

KATHY SEELEY

District Court Judge