02/07/95 TRWL Financial v. Select International, Inc.
[Editor's note: footnotes (if any) trail the opinion]
[1] COURT OF APPEALS OF MINNESOTA
[2] TRWL Financial Establishment, a Liechtenstein corporation,
[3] Plaintiff
v.
[4] Select International, Inc., defendant and third party
[5] plaintiff, Respondent v. Superior International
[6] Trading, Ltd., third party defendant, Appellant
[7] No. C4-94-1615
[8] 527 N.W.2d 573
BLUE BOOK CITATION FORM: 1995.MN.43 (http://www.versuslaw.com)
[9] Date Filed: February 7, 1995
[10] Appeal from District Court, Hennepin County; Hon. Gary Larson,
Judge. District Court File No. 9321631.
[11] SYLLABUS
[12] 1. The nonresident defendant's single transaction with a Minnesota
business can be sufficient for this state's exercise of personal jurisdiction
over the defendant, if the cause of action arises directly out of the transaction.
But where the Minnesota party is the aggressor in the transaction, the
nonresident has not purposefully directed its activities at this state
and its due process rights protect it from Minnesota's exercise of personal
jurisdiction.
[13] 2. A forum selection
clause, added in a memorandum confirming a sale, is a material alteration
that does not become part of the contract under the governing commercial
statute.
[14] APPELLATE PANEL:
[15] Considered and decided by Crippen, Presiding Judge, Randall, Judge,
and Schumacher, Judge.
[16] DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE CRIPPEN
[17] This appeal concerns the trial court's holding that Minnesota could
exercise personal jurisdiction over appellant under Minnesota's long arm
statute or a forum selection
clause included in respondent's purchase order. We reverse.
[18] FACTS
[19] Respondent Select International, Inc. entered into a contract to
supply pajamas to TRWL Financial Establishment for shipment overseas. To
fulfill its contract with TRWL, Select contacted New York-based Superior
International Trading, Ltd. by telephone and negotiated the purchase of
over 127,000 pairs of pajamas, with delivery to occur at Mobile, Alabama.
Select faxed a purchase order detailing the terms of the agreement and
wired its payment to Superior in New York.
[20] The pajamas supplied to TRWL were apparently defective and TRWL
sued Select in Minnesota state court. Select served a third-party complaint
on Superior, and Superior appeals from the order denying its motion to
dismiss the third-party complaint for lack of personal jurisdiction.
[21] TRWL and Select are both Minnesota-based corporations. Superior
is a New York corporation with its only office in that state. It has no
business address or telephone listing in Minnesota. It has no employees
here. It maintains no agent for service of process in Minnesota, and it
is not registered to do business in this state. It has no bank accounts
or an interest in any real property in Minnesota. This is the first time
Superior has transacted business with Select. But between 1984 and 1992
Superior purchased approximately $500,000 of merchandise from Universal
International, Inc., another Minnesota-based corporation. It has neither
transacted nor solicited any other business in Minnesota.
ISSUES
[22] 1. Has appellant had sufficient contacts with Minnesota so that
Minnesota's exercise of personal jurisdiction over it does not offend its
due process rights?
[23] 2. Is a forum selection
clause added to a confirmatory memorandum part of a sales contract under
Minn. Stat. § 336.2-207?
[24] ANALYSIS
[25] The trial court's order denying Superior's motion to dismiss for
lack of personal jurisdiction is an appealable order. See In re State &
Regents Bldg. Asbestos Cases, 435 N.W.2d 521, 522 (Minn. 1989). On established
facts, the existence of personal jurisdiction is a question of law that
this court reviews de novo. Stanek v. A.P.I., Inc., 474 N.W.2d 829, 832
(Minn. App. 1991) pet. for rev. denied (Minn. Oct. 31, 1991), cert. denied
U.S. , 22 L. Ed. 2d 123, 89 S. Ct. 994 (1992).
[26] Superior having challenged the exercise of personal jurisdiction
over it, Select bears the burden of proving a prima facie case supporting
jurisdiction. Harddrives, Inc. v. City of LaCrosse, 307 Minn. 290, 293,
240 N.W.2d 814, 816 (1976). At the pre-trial stage, Select's allegations
and evidence supporting jurisdiction must be taken as true. Id.
I. Long Arm Statute
[27] Minnesota may exercise personal jurisdiction over Superior if the
requirements of the long arm statute, Minn. Stat. § 543.19 (1992),
are met and jurisdiction is consistent with due process. Marquette Nat'l
Bank v. Norris, 270 N.W.2d 290, 294 (Minn. 1978). Minnesota's long arm
statute is intended to confer personal jurisdiction over nonresident defendants
to the maximum extent permitted by due process law. Id. at 294. Contacts
that are extensive enough to satisfy due process are sufficient to satisfy
the requirements of the long arm statute. Valspar Corp. v. Lukken Color
Corp., 495 N.W.2d 408, 411 (Minn. 1992).
[28] Due process dictates that before Minnesota can exercise personal
jurisdiction over a defendant, the defendant must have "minimum contacts"
with this state. International Shoe Co. v. Washington, 326 U.S. 310, 316,
66 S.Ct. 154, 158, 90 L. Ed. 95 (1945). The defendant must have purposefully
availed itself of the privilege of conducting business in this state so
as to invoke the benefits and protection of Minnesota laws. Hanson v. Denckla,
357 U.S. 235, 253, 78 S.Ct. 1228, 1240, 2 L. Ed. 2d 1283 (1958). The defendant
must reasonably be able to anticipate that it would be haled into Minnesota's
courts. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100
S.Ct. 559, 567, 62 L. Ed. 2d 490 (1980).
[29] In deciding whether there are sufficient "minimum contacts" to
satisfy due process, we are to analyze five factors: (1) the quantity of
contacts with Minnesota; (2) the nature and quality of the contacts; (3)
the source and connection of those contacts to the cause of action; (4)
Minnesota's interest in providing a forum; and (5) the convenience of the
parties. National City Bank v. Ceresota Mill Ltd., 488 N.W.2d 248, 252-53
(Minn. 1992) (citations omitted). The first three factors are primary and
the last two factors are to receive lesser consideration. Dent-Air, Inc.
v. Beech Mountain Air Serv., Inc., 332 N.W.2d 904, 907 (Minn. 1983).
[30] A. Quantity of Contacts and Connection to the Cause of Action
[31] If the cause of action arises directly out of Superior's contact
with this state, even a single, isolated transaction between the parties
can be sufficient to confer personal jurisdiction over it. Marquette, 270
N.W.2d at 295. In such a case, Minnesota is said to have "specific" personal
jurisdiction. Valspar, 495 N.W.2d at 411. Where personal jurisdiction is
asserted based on a single, isolated transaction, "the nature and quality
of the contact becomes dispositive." Marquette, 270 N.W.2d at 295.
[32] Superior's only relevant contacts with Minnesota were its telephone
and fax contacts with Select that culminated in the sales contract that
is the basis for Select's cause of action.*fn1 Because personal jurisdiction
over Superior is asserted based on a single transaction directly related
to the cause of action, the nature and quality of the contacts become dispositive.
[33] B. Nature and Quality of the Contacts
[34] In evaluating the nature and quality of the contacts, we are to
attempt to ascertain whether Superior has purposefully availed itself of
the benefits and protection of Minnesota law. Dent-Air, 332 N.W.2d at 907.
The question is whether Superior had "fair warning" of being sued in Minnesota.
Real Properties, Inc. v. Mission Ins. Co., 427 N.W.2d 665, 668 (Minn. 1988)
(citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472, 105 S.Ct. 2174,
2181, 85 L. Ed. 2d 528 (1985)). Superior had "fair warning" if it "purposefully
directed" its activities at residents of this state. Id. (citing Keeton
v. Hustler Magazine, Inc., 465 U.S. 770, 774, 104 S.Ct. 1473, 1478, 79
L. Ed. 2d 790 (1984)). Incidental contacts as a result of unilateral activity
by another party will not satisfy due process. Burger King, 471 U.S. at
474-75, 105 S.Ct. at 2183; see also Dent-Air, 332 N.W.2d at 907.
[35] In Dent-Air, the supreme court held that Minnesota could not exercise
personal jurisdiction over the nonresident defendants, principally because
the resident plaintiffs were the aggressors in the transactions at issue.
332 N.W.2d at 907-08.
[36] The cases have distinguished . . . between the quality of contacts
of buyers and sellers. The distinction is based primarily on the traditional
scenario in which the seller is the aggressor in the interstate relationship;
the seller solicits customers, advertises, or otherwise initiates the dealings.
Where the buyer is the aggressor, however, its buyer status will not protect
it.
[37] Id. at 907 (citations omitted). Mere inquiry by a prospective buyer
or seller does not make the inquirer the aggressor in the transaction.
In order for a party to be the aggressor, it must be the dominant party
in pursuing the transaction. See id. at 908.*fn2
[38] In those cases where Minnesota has exercised personal jurisdiction
over nonresidents based on a single transaction, the nonresidents initiated
contacts with the Minnesota residents and took some action that induced
the residents to enter into the transaction. Marquette, 270 N.W.2d at 296.
Accord Trident Enter. Int'l Inc. v. Kemp & George, Inc., 502 N.W.2d
411, 415-16 (Minn. App. 1993). Otherwise, the supreme court has declined
to extend personal jurisdiction over nonresident defendants based on a
single transaction. See Bellboy Seafood Corp. v. Kent Trading Corp., 484
N.W.2d 796 (Minn. 1992) (no jurisdiction over nonresidents where there
was a single sales transaction between Minnesota seller and New York buyer
negotiated by a Florida broker).
[39] Here, Select was the aggressor in the transaction. When Select
contacted Superior in New York, it did more than make a simple inquiry
about the availability and price of goods. Select actively pursued a contract
for the purchase of Superior's goods in order to fulfill its own contract
with TRWL. Superior did not initiate the contact, did not distribute advertising
intended to reach Select, and did not actively pursue Select's business.
Superior did not purposefully direct its activities at a Minnesota resident;
it did nothing except engage in negotiations with a buyer who happened
to reside in Minnesota.
[40] Moreover, no part of the contract at issue here was performed in
Minnesota. Only the negotiations took place here, and then only by fax
and telephone.*fn3 The goods were delivered to Select in Mobile, Alabama,
they never entered Minnesota, and they were destined for the former Soviet
Union. In short, the nature and quality of Superior's contacts with Minnesota
did not give it "fair warning" it might be sued here. This factor weighs
heavily against exercising personal jurisdiction.
[41] Select makes a substantial argument that Superior had fair warning
that it might be sued in Minnesota. Superior knew it was supplying goods
to a Minnesota resident for resale to another Minnesota resident. Superior
voluntarily became an integral part of a Minnesota business relationship
so it should reasonably have foreseen that it would be involved in litigation
here if there was a dispute over the goods. But mere foreseeability that
a transaction will have an impact in the forum state will not confer personal
jurisdiction over a non-resident defendant. Dent-Air, 332 N.W.2d at 907
(citing World-Wide Volkswagen, 444 U.S. at 295, 100 S.Ct. at 566).
[42] Select also argues that Superior's contacts are no less substantial
than the contacts in Burger King that subjected the nonresident there to
personal jurisdiction. But it was the nonresident in Burger King who "reached
out" to create a business relationship with residents of another state,
not the resident. 471 U.S. at 479-80, 105 S.Ct. at 2186. No appellate decisions
have extended personal jurisdiction where neither the nonresident nor its
goods were ever physically present in the forum state, no part of the contract
was performed in the state, and the resident was the aggressor in the transaction.
[43] C. Minnesota's Interest and Convenience of the parties
[44] The underlying lawsuit here is between two Minnesota residents.
Minnesota has a significant interest in providing a forum for its residents
in this dispute. Superior, as third-party defendant, is an integral party
to the dispute between Select and TRWL, so Minnesota also has a significant
interest in providing a forum for the dispute between Superior and Select.
If Minnesota does not exercise jurisdiction over Superior, Select may have
to litigate this dispute twice, once against TRWL in Minnesota and, if
it loses, against Superior in New York. Moreover, it would seem that Superior
will have to monitor the litigation in Minnesota because its liability
may hinge on the outcome of that case. It does not appear that it would
be any more inconvenient for Superior to litigate in Minnesota than it
would be for Select to litigate in New York. The convenience of the parties
and judicial economy weigh in favor of exercising personal jurisdiction
over Superior.
[45] Although the factors of convenience and judicial economy weigh
in favor of exercising jurisdiction, they are secondary factors, and proof
of these factors, by themselves, fails to establish that due process permits
Minnesota to exercise personal jurisdiction over Superior.
II. Forum Selection
Clause
[46] Because personal jurisdiction is a matter of individual liberty,
Superior could consent to the exercise of personal jurisdiction. North
Cent. Serv., Inc. v. Eastern Communications, Inc., 379 N.W.2d 708, 710
(Minn. App. 1986) (quoting Insurance Corp. of Ireland v. Compagnie Des
Bauxites, 456 U.S. 694, 702-03, 102 S. Ct. 2099, 2104, 72 L. Ed. 2d 492
(1982)). This could occur by entering into a contract containing a valid
forum selection
clause. Interfund Corp. v. O'Byrne, 462 N.W.2d 86, 88 (Minn. App. 1990)
(citing National Equip. Rental Ltd. v. Szukhent, 375 U.S. 311, 315-16,
84 S. Ct. 411, 414, 11 L. Ed. 2d 354 (1964)).
[47] Select faxed a purchase order to Superior in New York, detailing
the terms of the sale. The boilerplate provisions of this purchase order
included a forum selection
clause.*fn4 The parties did not discuss such a clause during their negotiations.
The purchase order was signed on behalf of Select. Superior did not sign
the order, but it shipped the goods without objecting to the forum
selection clause.
[48] As Select contends, the forum selection
clause would be enforceable if it were part of the parties' contract. See
generally Hauenstein & Bermeister, Inc. v. Met-Fab Indus., Inc., 320
N.W.2d 886, 888 (Minn. 1982). But under the commercial code the forum
selection clause was not part of the parties'
contract.
[49] Select's purchase order was a written confirmation of the parties'
agreement. Minn. Stat. § 336.2-207 (1992) determines whether an additional
term, contained in a written confirmation but not expressly negotiated,
is part of a contract for the sale of goods.*fn5
[50] 336.2-207 Additional terms in Acceptance or Confirmation
[51] (1) written confirmation which is sent within a reasonable time
operates as an acceptance even though it states terms additional to or
different from those offered or agreed upon, unless acceptance is expressly
made conditional on assent to the additional or different terms.
[52] (2) The additional terms are to be construed as proposals for addition
to the contract. Between merchants such terms become part of the contract
unless:
[53] (a) The offer expressly limits acceptance to the terms of the offer;
[54] (b) They materially alter it; or
[55] (c) Notification of objection to them has already been given or
is given within a reasonable time after notice of them is received.
[56] (3) Conduct by both parties which recognizes the existence of a
contract is sufficient to establish a contract for sale although the writings
of the parties do not otherwise establish a contract. In such cases the
terms of the contract consist of those terms on which the writings of the
parties agree, together with any supplementary terms incorporated under
any other provisions of this chapter.
[57] (Emphasis added.) Although this section typically applies where
the parties have sent each other written confirmations with conflicting
additional terms, a "battle of forms", it is also applicable where only
one party sends a written confirmation of a prior oral agreement. See Minn.
Stat. § 336.2-207, U.C.C. cmt. 1;*fn6 see also Dale R. Horning Co.
v. Falconer Glass Indus., 710 F. Supp 693, 697 (S.D.Ind. 1989).
[58] Superior and Select are merchants within the meaning of the U.C.C.
Minn. Stat. § 336.2-104(1) (1992). The purchase order did not expressly
make acceptance of the writing conditional on assent to the additional
terms, nor is there any evidence that the parties expressly limited their
agreement to the terms agreed upon orally. Under Minn. Stat. 336.2-207(2),
the forum selection
clause became part of the contract unless it "materially altered" the parties'
agreement or appellant seasonably gave notification of objection to the
additional term. Whether an additional term materially alters an agreement
is a question of fact which must be resolved on a case by case basis. N&D
Fashions, Inc. v. DHJ Indus., Inc., 548 F.2d 722, 726 (8th Cir. 1977).
[59] An agreement is materially altered if an addition would "result
in surprise or hardship if incorporated without express awareness by the
other party." Id. (quoting U.C.C. § 2-207 cmt. 4). The Minnesota Supreme
Court has stated a presumption that a party adversely affected by a forum
selection clause has received consideration
at the time of contracting, offsetting any hardship of litigating in a
foreign jurisdiction. Hauenstein, 320 N.W.2d at 890. If the forum
selection clause is contained in the boilerplate
language of a confirmatory memorandum, and is not bargained for, this presumption
is untenable. The clause works a surprise upon Superior.
[60] Selection of a distant forum with which a party has no contacts,
while enforceable if contained in an agreement freely and consciously entered
into, can result in surprise and hardship if permitted to become effective
by way of confirmation forms that are all too often never read. Subtle
differences in courts, jurors, and law among the states and consideration
of litigation expense are factors the Court believes most merchants would
consider important.
[61] Dale R. Horning Co., 710 F. Supp. at 699 (quoting Product Components
v. Regency Door & Hardware, 568 F. Supp. 651, 654 (S.D.Ind. 1983));
accord In re Sweetapple Plastics, 77 B.R. 304, 309 (Bankr. M.D. Ga. 1987);
General Instrument Corp. v. Tie Mfg. Inc., 517 F. Supp. 1231, 1235 (S.D.N.Y.
1981); National Mach. Exch. v. Peninsular Equip. Corp., 106 Misc. 2d 458,
431 N.Y.S.2d 948, 949 (N.Y. Sup. Ct. 1980). In the circumstances of this
case, the forum selection
clause materially altered the parties' agreement as a matter of law and
did not become part of the contract by operation of Minn. Stat. §
336.2-207.*fn7
[62] Even if the forum selection
clause were part of the contract under the commercial code, it would be
unenforceable because it is illegible. Boilerplate contract terms that
are unreadable or illegible are invalid. See McCarthy Well Co. v. St. Peter
Creamery, 410 N.W.2d 312, 316 (Minn. 1987). The forum
selection clause is the last of 18 fine print
boilerplate contract terms found in the purchase order. We have reviewed
the sole copy of the purchase order appearing in the trial court record
and agree with Superior that it is not legible.
[63] DECISION
[64] Minnesota cannot employ its long arm statute to exercise personal
jurisdiction over appellant without defeating appellant's due process rights.
The forum selection
clause included in respondent's purchase order form materially altered
the terms of the sale contract and did not become part of the contract
under Minn. Stat. § 336.2-207. Respondent's third-party complaint
against appellant is dismissed for lack of personal jurisdiction.
[65] Reversed.
[66] Gary L. Crippen
[67] February 1, 1995
[68] CASE RESOLUTION
[69] Reversed.
***** BEGIN FOOTNOTE(S) HERE *****
[70] *fn1 Contacts with the forum state that are unrelated to the cause
of action can also satisfy due process but they must "constitute the kind
of continuous and systematic general business contacts" that indicate the
defendant has generally subjected itself to jurisdiction in that state.
Real Properties, Inc. v. Mission Ins. Co., 427 N.W.2d 665, 669 (Minn. 1988)
(citing Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408,
414, 104 S.Ct. 1868, 1872, 80 L. Ed. 2d 404 (1984)); see also Valspar,
495 N.W.2d at 411 ("In a general jurisdiction case, a defendant conducts
so much business within a state that it becomes subject to the jurisdiction
of that state's courts for any purpose.") Superior's transactions with
Universal are not continuous, systematic and general business contacts
with Minnesota indicating that Superior has generally subjected itself
to jurisdiction in this state, so those contacts are not relevant here.
[71] *fn2 We followed the reasoning of Dent-Air in Maiers Lumber &
Supply, Inc. v. Chancey Trailers, 354 N.W.2d 585, 587 (Minn. App. 1984)
(jurisdiction denied where resident buyer initiated contact with nonresidents
and change in delivery terms) and Walker Mgmt., Inc. v. FHC Enter., Inc.,
446 N.W.2d 913, 915 (Minn. App. 1989), pet. for rev. denied (Minn. Oct.
24, 1989) ("defendant's contacts with Minnesota are insufficient to warrant
jurisdiction when the plaintiff has initiated the business contacts and
the defendant did not purposefully avail itself of Minnesota law.")
[72] *fn3 Appellant argues that Minnesota is precluded from exercising
personal jurisdiction over it simply because its only contacts with Minnesota
were by fax and telephone. But if the defendant has otherwise purposefully
directed its business activities at residents of the forum state the mere
fact that the contacts were by mail, fax, and phone, and the defendant
was never physically present in the state, will not prevent the forum state
from exercising personal jurisdiction. See Burger King, 471 U.S. at 476,
105 S.Ct. at 2184; Marquette, 270 N.W.2d at 295; Trident, 502 N.W.2d at
415.
[73] *fn4 The parties agree that this Purchase Order shall be governed
by the laws of the State of Minnesota and any dispute between the parties
shall be brought only before the courts of the State of Minnesota."
[74] *fn5 The trial court concluded that the forum
selection clause was part of the contract
by application of Minn. Stat. § 336.2-201(2) and (3) (c) (1992). Minn.
Stat. § 336.2-201 is the U.C.C. statute of frauds. The statute of
frauds is not applicable to the case at hand. Minn. Stat. 336.2-201 only
addresses whether an enforceable contract exists and is only applicable
when a party raises the statute of frauds as a defense; it says nothing
about what the terms of the contract are. The trial court should have applied
Minn. Stat. § 336.2-207 to determine whether the forum
selection clause was part of the contract.
See Minn. Stat. 336.2-201, U.C.C. cmt.3. See also Marlene Indus. Corp.
v. Carnac Textiles, Inc., 45 N.Y.2d 327, 380 N.E.2d 239, 240-41, 408 N.Y.S.2d
410 (N.Y. 1978).
[75] *fn6 "This section is intended to deal with [the] situation. .
. where an agreement has been reached either orally or by informal correspondence
between the parties and is followed by one or both of the parties sending
formal acknowledgements or memoranda embodying the terms so far as agreed
upon and adding terms not discussed."
[76] *fn7 Select argues that Minn. Stat. § 336.2-207 is not applicable
because prior to faxing the purchase order the parties had no contract.
The discussions between Superior and Select were merely oral negotiations
and the purchase order was an offer to purchase which Superior accepted
by shipping the goods.
[77] During their oral negotiations, Superior and Select agreed on the
quantity of goods to be sold, the price, the quality of the goods, where
the goods would be delivered and the method of payment. Agreement on these
terms is sufficient to form a contract under the Uniform
Commercial Code. See Step-Saver Data Sys.
v. Wyse Technology, 939 F.2d 91, 100 (3d Cir. 1991).
[78] Even if the parties did not enter into an oral contract, their
agreement on these terms at least constituted an offer to contract. Minn.
Stat. 336.2-207 also applies where the parties do not have a binding contract
and the writing is "expressed and intended as the closing or confirmation
of an agreement [and] adds further minor suggestions." Minn. Stat. §
336.2-207, U.C.C. cmt. 1. Whether the parties reached an oral contract
or merely made an offer to contract, the forum
selection clause was an additional term which
must be analyzed under Minn. Stat. 336.2-207.
***** END FOOTNOTE(S) HERE *****
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