Adams v. Adams, (1st Cir. 2010)

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United States Court of Appeals

For the First Circuit

No. 09-1443

BERNARD L. ADAMS,

Plaintiff, Appellee,

v.

LEE B. ADAMS,

Defendant, Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Joseph L. Tauro, U.S. District Judge]

Before

Lynch, Chief Judge,

Torruella and Stahl, Circuit Judges.

    Christopher A. Duggan with whom H. Reed Witherby and Smith &

Duggan LLP were on brief for appellant.

    Stephen G. Howard with whom Gregory R. Youman and K&L Gates

LLP were on brief for appellee.

 

March 31, 2010

 

 

         STAHL, Circuit Judge. This case arises from a dispute

over a promissory note (the "Note") executed on September 8, 1988,

by a son, Lee B. Adams ("Lee"), in favor of his father, Bernard L.

Adams ("Bernard"). On May 16, 2008, Bernard filed suit in the

federal district court of Massachusetts, seeking enforcement of the

terms of the Note. Lee filed a motion to dismiss the complaint for

lack of personal jurisdiction, and the district court denied the

motion without hearing or explanation. Bernard subsequently filed

a motion for summary judgment. Lee renewed his arguments that the

District of Massachusetts lacked jurisdiction over him, but the

court granted summary judgment in favor of Bernard, specifically

affirming its prior ruling on the jurisdictional issue, and Lee

appealed.

         We reverse on the ground that the district court lacked

personal jurisdiction over Lee.

I. Facts and Background

         The circumstances which gave rise to the Note are

disputed by the parties. Lee claims that shortly after he moved to

Texas in 1988 with his then-wife Cynthia Adams, his parents,

Bernard and Mary Jeanne Adams, promised to give him funds to help

him purchase a home in Texas as an additional wedding present. Lee

asserts that in reliance on that promise, he and Cynthia optioned

a vacant lot in Frisco, Texas, on which they constructed a home.

         According to Lee, Bernard phoned him on or about

September 8, 1988, and told him that his accountant had advised

that Lee needed to sign a promissory note for the funds his parents

had agreed to give him in order for Bernard to minimize taxes on

the transfer. Lee claims that Bernard told him that if Lee

executed the Note, Bernard would not enforce it.

         Bernard disputes what he calls the "'additional wedding

present' assertion," claiming that the $110,000 transfer of funds

from himself to Lee was intended to be a loan and not a gift and

that the Note was executed in consideration of the loan.

         Bernard does not dispute, however, that the Note came

into being after he required, via telephone conference, that Lee

sign such a document before the funds would be delivered. Bernard

also does not dispute that he initiated the phone call to Lee, who

was located in Texas at the time.

         After that conversation, on September 8, 1988, Lee

received the Note in Texas and executed it under seal.

[1]

The Note,

in its entirety, provides:

FOR VALUE RECEIVED ($110,000 CASH), Mr. Lee Adams of

Frisco, Texas promises to pay to Mr. Bernard Adams of

Boston, Massachusetts the sum of $110,000 plus accrued

interest at an annual rate of 8%. This sum having been

advanced to Mr. Lee Adams exclusively for use in funding

the construction of his home. Interest will accrue

beginning June 1, 1988. No payments of interest or

principal are due until January 1, 1989, at which time

the note and accrued interest will be due upon demand.

 

This note shall be binding upon Mr. Lee Adams and his

heirs, executors and assigns and shall inure to the

benefit of Mr. Bernard Adams and his heirs, executors and

assigns.

 

WITNESS the execution hereof as an instrument under seal

as of this 8 day of September, 1988.

 

         Bernard subsequently transferred $110,000 of his personal

funds from a Massachusetts bank to Lee's account in Texas. It

appears that the signed Note was not then returned to Bernard.

[2]

In

fact, Bernard has never produced the original of the Note. The

copy of the Note which appears in the record shows a facsimile

transmission header indicating that it was faxed on June 20, 2003,

by Geary Porter, a Texas law firm, apparently to either Bernard or

his law firm, although the record does not so reflect. This copy

was produced by Bernard's lawyers when Lee was deposed in

connection with Bernard's divorce case.

         At the time the Note was executed, Lee was a resident of

Texas, and he has been a Texas resident since that time. Bernard

was a resident of Massachusetts when he transferred the $110,000 to

Lee.

[3]

Bernard asserts that he has been continuously domiciled in

Massachusetts since 1953.

[4]

         In addition to the facts pertaining specifically to this

transaction, Bernard has offered evidence of Lee's more general

contacts with Massachusetts.

[5]

But as Bernard has not attempted to

assert the existence of general jurisdiction over Lee, and the

additional contacts he cites are not related to the Note on which

he bases this cause of action, we do not consider these sporadic

contacts in our analysis.

II. Standard of Review

         When a court's personal jurisdiction over a defendant is

contested, the plaintiff has the ultimate burden of showing by a

preponderance of the evidence that jurisdiction exists. Ealing

Corp. v. Harrods Ltd., 790 F.2d 978, 979 & n.1 (1st Cir. 1986). A

district court "may choose from among several methods to determine

whether the plaintiff has met [his] burden." Adelson v. Hananel,

510 F.3d 43, 48 (1st Cir. 2007) (quoting Daynard v. Ness, Motley,

Loadholt, Richardson & Poole, P.A., 290 F.3d 42, 50-51 (1st Cir.

2002)) (internal quotations omitted). Here, because the district

court did not hold an evidentiary hearing before ruling on the

jurisdictional question, we would normally assume that the court

had employed the prima facie method. See Phillips v. Prairie Eye

Center, 530 F.3d 22, 26 & n.2 (1st Cir. 2008) (citing Foster-Miller, Inc. v. Babcock & Wilcox Canada, 46 F.3d 138, 146 (1st Cir.

1995)). But the case then proceeded to summary judgment, at which

time Lee again challenged the court's jurisdiction. In granting

summary judgment in favor of Bernard, the district court implicitly

found that Bernard had demonstrated jurisdiction by a preponderance

of the evidence.

         In finding that two cases which Lee raised did not alter

its previous decision on the jurisdictional question, the court

added:

In this case, Defendant [Lee] negotiated the Note over

the phone with Plaintiff, whom Defendant knew was located

in, and a resident of, Massachusetts. Additionally,

Defendant executed the Note knowing that the $110,000 he

received was from a Massachusetts resident. Finally, the

funds were disbursed through a Massachusetts bank.

 

Adams v. Adams, No. 08-10828-JLT, slip op. at 10-11 (D. Mass. Mar.

4, 2009). Thus, despite the lack of an evidentiary hearing, it

appears that the court evaluated the parties' submissions and

determined that Bernard had shown by a preponderance of the

evidence that the court had personal jurisdiction over Lee.

[6]

         We review the court's factual findings for clear error,

but our review of the court's legal conclusions as to whether its

findings support the existence of personal jurisdiction is always

non-deferential and plenary. Foster-Miller, Inc., 46 F.3d at 147-48.

III. Discussion

         The only factual findings which the district court

appears to have made regarding the jurisdictional issue were: (1)

Lee negotiated the Note over the phone with Bernard;

[7]

(2) Lee knew

that Bernard was located in,

[8]

and a resident of, Massachusetts; (3)

Lee executed the Note knowing that the $110,000 he received was

from a Massachusetts resident; and (4) the funds were disbursed

through a Massachusetts bank.

         Even if we assume the truth of these findings, apart from

that discussed in note 8, and accept all other evidence offered by

Bernard,

[9]

we hold that Bernard has not demonstrated the existence

of personal jurisdiction by a preponderance of the evidence.         Bernard grounds his claim of specific personal

jurisdiction over Lee in the Massachusetts long-arm statute, Mass.

Gen. Laws ch. 223A, § 3. Specifically, Bernard argues that the

long-arm statute authorizes jurisdiction over Lee because Lee met

the "transacting any business in [the] commonwealth" requirement of

223A, § 3(a). "We proceed directly to the constitutional analysis,

because the Supreme Judicial Court of Massachusetts has interpreted

the state's long-arm statute as an assertion of jurisdiction over

the person to the limits allowed by the Constitution of the United

States." Phillips, 530 F.3d at 26 (internal quotations omitted).

         In order for Massachusetts to exercise personal

jurisdiction over Lee, an out-of-state defendant, the Due Process

Clause requires that Lee have sufficient minimum contacts with the

state, such that "maintenance of the suit does not offend

'traditional notions of fair play and substantial justice.'" Int'l

Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (quoting Milliken

v. Meyer, 311 U.S. 457, 463 (1940)). When determining whether

specific jurisdiction exists, we have broken the minimum contacts

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.

 

Adelson, 510 F.3d at 49. We begin by asking whether Bernard has

demonstrated that his claims were directly related to or arose out

of Lee's contacts with Massachusetts.

A. Relatedness

         Bernard's claims sound in contract, so we look to whether

"the defendant's activity in the forum state was 'instrumental

either in the formation of the contract or its breach.'" Adelson,

510 F.3d at 49 (quoting Phillips Exeter Acad. v. Howard Phillips

Fund, Inc., 196 F.3d 284, 289 (1st Cir. 1999)). 

         Bernard has not demonstrated the typical factors which

have led us to conclude that there is sufficient relatedness

between the plaintiff's claims and the defendant's actions in the

forum state to warrant the exercise of specific personal

jurisdiction. This is not a case in which the specific terms of a

contract were "formalized and entered into" in the forum state.

See Adelson, 510 F.3d at 49. Rather, the Note was discussed over

the phone, between one party in Texas and the other who may or may

not have been in Massachusetts. We could infer that the Note was

drawn up in Massachusetts (though the record is silent on this

point), but it was executed in Texas. Nor is this a case in which

the defendant was "subject to 'substantial control and ongoing

connection to [the forum state] in the performance of this

contract.'" Phillips, 530 F.3d at 27 (quoting Adelson, 510 F.3d at

49) (alteration in Phillips).

         That said, to the extent that accepting funds from a

Massachusetts resident and discussing and executing an agreement to

repay those funds may be considered "contacts" with Massachusetts,

those acts are directly related to Bernard's claims. Bernard's

cause of action arises out of the Note and Lee's failure to pay.

So we will assume, arguendo, that Bernard has satisfied the

relatedness prong and consider purposeful availment.

B. Purposeful Availment

         The focus of the purposeful availment inquiry is the

defendant's intentionality. "This prong is only satisfied when the

defendant purposefully and voluntarily directs his activities

toward the forum so that he should expect, by virtue of the benefit

he receives, to be subject to the court's jurisdiction based on

these contacts." United States v. Swiss Am. Bank, Ltd., 274 F.3d

610, 624 (1st Cir. 2001) (citing Phillips Exeter, 196 F.3d at 292;

Ticketmaster-New York, Inc. v. Alioto, 26 F.3d 201, 207-08 (1st

Cir. 1994)). Purposeful availment rests on the elements of

voluntariness and foreseeability. Sawtelle v. Farrell, 70 F.3d

1381, 1391 (1st Cir. 1995). "Voluntariness requires that the

defendant's contacts with the forum state 'proximately result from

actions by the defendant himself.'" Phillips, 530 F.3d at 28

(quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985)).

"The contacts must be deliberate, 'and not based on the unilateral

actions of another party.'" Phillips, 530 F.3d at 28 (quoting

Adelson, 510 F.3d at 50). Foreseeability requires that the

contacts with the forum state be of a nature that the defendant

could "reasonably anticipate being haled into court there."

Adelson, 510 F.3d at 50 (quoting World-Wide Volkswagen Corp. v.

Woodson, 444 U.S. 286, 297 (1980)) (internal quotations omitted).

         Lee's contacts with Massachusetts were voluntary to the

extent that he knowingly accepted funds from a Massachusetts

resident and acquiesced in his father's requirement that he execute

the Note in order to receive the $110,000. In so doing, he was

"promis[ing] to pay . . . Mr. Bernard Adams of Boston,

Massachusetts."

         However, the fact that Lee accepted funds from an

individual who happened to be a Massachusetts resident and executed

a promise to repay that individual does not persuade us that he

should have foreseen that he could be haled into court in

Massachusetts. We have held that a defendant's awareness of the

plaintiff's state of residence is not, by itself, enough to create

personal jurisdiction. Phillips, 530 F.3d at 28. Further, we have

held that a defendant's entering into a contract with a resident of

the forum state cannot automatically establish minimum contacts.

"'[P]rior negotiations and contemplated future consequences, along

with . . . the parties' actual course of dealing . . . must be

evaluated in determining whether the defendant' has minimum

contacts with the forum." Swiss Am. Bank, 274 F.3d at 621 (quoting

Burger King, 471 U.S. at 479).

[10]

         Here, the only evidence of "negotiations" between the

parties prior to the execution of the Note is the September 1988

phone conversation between Bernard and Lee. Bernard points to this

phone call as evidence of purposeful availment, arguing that "[p]er

existing case law, phone calls, e-mails and faxes between an out-of-state defendant and the Commonwealth of Massachusetts are

sufficient to establish specific personal jurisdiction over a non-resident defendant." We look to evidence of telephone or

electronic communication when a defendant has not been physically

present in the forum state because it serves as evidence that the

defendant "reached into the forum." Swiss Am. Bank, 274 F.3d at

622; cf. Phillips Exeter, 196 F.3d at 292 ("Without evidence that

the defendant actually reached out to the plaintiff's state of

residence to create a relationship -- say, by solicitation -- the

mere fact that the defendant willingly entered into a tendered

relationship does not carry the day." (citation omitted)).

         First, there is no evidence that the one phone call which

Bernard cites was indeed between Lee and "the Commonwealth of

Massachusetts," as Bernard suggests, as there is no evidence that

Bernard was in Massachusetts when he placed the call. More

importantly, even if Bernard were in Massachusetts at the time, it

is significant that he, and not Lee, initiated the phone call. The

Note that resulted is one that Bernard required Lee to execute

before delivering the funds. A phone call from Bernard to Lee in

Texas concerning a contract that Bernard demanded that Lee execute

is not sufficient evidence that Lee "reached into" Massachusetts.

[11]

See Phillips, 530 F.3d at 29 (noting that "[d]efendant did not

initiate the contact with plaintiff in Massachusetts; rather, it

was the other way around," and holding that purposeful availment

was lacking). There is no additional evidence in the record

concerning the parties' "negotiations."

[12]

         As for the "contemplated future consequences" of the

Note, we find that they, too, do not suggest purposeful availment

by the defendant. There is little evidence in the record other

than the language of the Note itself as to what the parties

contemplated would be the future consequences of the Note. That

said, we can surmise from the Note that the law of Texas likely

would apply to its interpretation and enforcement. "[T]he law

applicable to a note is the law of the place where the note is

payable." Rokowsky v. Gordon, 501 F. Supp. 1114, 1121 (D. Mass.

1980) (citing Walling v. Cushman, 130 N.E. 175, 176 (Mass. 1921)).

Here, the Note does not list any place of payment,

[13]

but "[a] demand

note is payable at the place of residence of the maker if no place

of payment is named in the note." Rokowsky, 501 F. Supp. at 1121

(citing 11 Am. Jur. 2d Bills and Notes § 89).

[14]

It is undisputed

that at the time the Note was executed, Lee's place of residence

was Frisco, Texas, so the Note was payable there. The Note drawn

up by Bernard could easily have specified that it was to be payable

in Massachusetts, but it did not so require. Thus, on the face of

the Note, it was not contemplated by the parties that the Note

would be governed by the laws of Massachusetts. This is yet

further evidence that Lee did not purposefully avail himself of the

benefits and protections of Massachusetts law.

         We hold that Bernard has not demonstrated by a

preponderance of the evidence that Lee's actions related to the

Note constitute sufficient purposeful availment to allow for the

exercise of jurisdiction. Thus, we need not proceed to consider

the reasonableness prong of the analysis. See Swiss Am. Bank, 274

F.3d at 625.

 

IV. Conclusion

         The judgment of the district court is reversed. We

remand with instructions to dismiss the complaint for lack of

personal jurisdiction.

         Reversed and remanded.

Footnotes

[1] 'Because the Note was executed "under seal," at the time of

its execution under Massachusetts law (if applicable), a twenty-year statute of limitations for contracts under seal would apply.

See Mass. Gen. Laws ch. 260, § 1. Notably, Massachusetts has since

adopted the Uniform Commercial Code's specific statute of

limitations for demand notes, which provides that an action to

enforce a party's obligation to pay a note payable "on demand" must

be commenced within six years after the demand. Mass. Gen. Laws

ch. 106, § 3-118(b). If no demand is made, any action to enforce

the note is barred if neither principal nor interest on the note

has been paid for a continuous period of ten years. Id. As the

official comments state, if ten years passes after the making of a

note with no payment and no demand for payment, it is "likely to be

a family transaction in which a failure to demand payment may

indicate that the holder did not intend to enforce the obligation

but neglected to destroy the note." Id. cmt. 2.

              We note that Bernard's first written demand for payment on the

Note was made in 2005. Although Bernard alleges that he made oral

demands for payment before that date, he has asserted no dates for

those demands.

[2] 'Lee asserts that he did not send any document (electronic or

paper) into Massachusetts in connection with the Note, and Bernard

does not claim otherwise.

[3] 'There is no evidence in the record that Bernard was

physically in Massachusetts when he placed the phone call to Lee,

requiring Lee to sign the promissory note. Bernard has stated

merely that he was "residing in Massachusetts at the time" of the

phone conversation. Additionally, there is no evidence that Lee

knew whether Bernard was in Massachusetts at the time. Lee does

not dispute, however, that Bernard was a resident of Massachusetts

at the time of the transfer.

[4] 'Bernard stated in a deposition that from 2006 to 2008 he

lived temporarily at addresses in other states, including Florida

and Maine, during the pendency of his divorce from Lee's mother,

Mary Jeanne Adams.

[5] 'Lee was born and raised in Massachusetts, but he has not

lived in Massachusetts since 1980. Between the years 1980 and

2008, he made several visits to Massachusetts, none of them in

connection with the Note. According to Lee, the number of visits

is three; Bernard asserts that there have been at least five

visits. Lee worked for his family's business, Laminated Papers,

Inc. ("Laminated Papers") from 1981 through 2004, and for a brief

period prior to his graduation from college in 1980. Laminated

Papers was a Massachusetts corporation located in Holyoke,

Massachusetts. During his tenure at Laminated Papers, Lee received

a total salary of $950,233.33, and he withdrew pension benefits in

the amount of $65,178.02. Laminated Papers paid health and life

insurance premiums for Lee and on his behalf. Lee was given the

use of a company car, and he held a company American Express

account and company phone card. Lee notes that the work he did for

Laminated Papers after graduating college was not performed in

Massachusetts and did not require him to travel to Massachusetts,

and Bernard does not dispute this assertion.

[6] 'Lee argues that the court deprived him of the right to have

Bernard's jurisdictional showing evaluated under a preponderance-of-the-evidence standard, claiming that the court never required

Bernard to make more than a prima facie jurisdictional showing

before entering judgment against Lee. Assuming, as we do, that the

court did, indeed, apply the preponderance-of-the-evidence

standard, it nonetheless came to the incorrect conclusion.

[7] 'Lee disputes the court's characterization of the

conversation, arguing that there was no "consensual bargaining

process" to constitute negotiation. We must assume that by

"negotiated the Note over the phone," the court was referring to

Bernard's insistence that Lee sign the Note and Lee's acquiescence

to that request. The facts put forward by Bernard himself can lead

to no other interpretation.

[8] 'As we noted above, there is no evidence in the record that

Bernard was, in fact, located in Massachusetts at the time of the

phone call, much less that Lee knew whether he was in Massachusetts

at the time. Because this particular factual finding has no record

basis, we do not consider it in our analysis.

[9] 'In reviewing the evidence, we also accept facts put forward

by the defendant to the extent that they are uncontradicted. See

Daynard, 290 F.3d at 51.

[10] 'In Swiss American Bank, we engaged in this analysis in the

context of the relatedness prong, explaining that since that prong

focuses on the nexus between the defendant's contacts and the

plaintiff's cause of action, we would begin by identifying the

alleged contacts, since there can be no requisite nexus between the

contacts and the cause of action if no contacts exist. 274 F.3d at

621. However, as we have noted, the defendant's contacts are

central to each prong of the tripartite analysis. Sawtelle, 70

F.3d at 1389.

[11] 'See also Moelis v. Berkshire Life Ins. Co., 887 N.E.2d 214,

219 (Mass. 2008) (holding that nonresident plaintiffs' purchase of

an insurance policy from a Massachusetts company through agents in

their home states, and their mailing of annual premium payments to

Massachusetts did not constitute minimum contacts). The district

court found Moelis distinguishable on the theory that the only

contacts with Massachusetts in that case were the sending of mail

to a party located in the Commonwealth subsequent to a bargain

negotiated outside the Commonwealth. As we have previously

discussed, however, there is no evidence in this case that the Note

was negotiated in Massachusetts. It was negotiated over the phone

while one party was in Texas, and the other was in some location

not revealed by the record.

[12] 'At oral argument, we questioned Lee's counsel as to the

extent of the conversations about the $110,000 between Lee and

Bernard prior to the execution of the Note. We asked whether

Bernard had "called Lee out of the blue to offer to lend him

money." Lee's counsel said, "Oh, no. There had been discussions

prior about lending the money, or giving the money -- Lee says

giving the money as a wedding gift to help . . . he and his new

wife buy a house." However, there is no evidence in the record of

any such discussions, and it was Bernard's burden to put forward

such evidence if, indeed, those discussions took place.

[13] 'The fact that the Note contains a promise to pay "Mr. Bernard

Adams of Boston, Massachusetts" is not to the contrary. The Note

names Boston, Massachusetts as Bernard's place of residence, but

that does not indicate that payment was due in Massachusetts.

[14] 'While the Uniform Commercial Code ("UCC") was adopted in

Massachusetts in 1958, the particular portion of the Code having to

do with where demand notes are payable when no place of payment is

stated was not enacted in Massachusetts until 1998. See Mass. Gen.

Laws, ch. 106 § 3-111. Section 3-111 of the UCC espouses the same

principle cited by the Rokowsky court: "If no place of payment is

stated, an instrument is payable at the address of the drawee or

maker stated in the instrument. If no address is stated, the place

of payment is the place of business of the drawee or maker. . . .

If the drawee or maker has no place of business, the place of

payment is the residence of the drawee or maker."

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