Will Remote Workers Impact Jurisdiction In Commercial Disputes?

Jennifer L. Parent
Director, Litigation Department
Published: New Hampshire Bar News
December 16, 2020
News - Featured Image - Trial-Practice-and-Litigation

Many businesses today have a number of employees working remotely.  While these homebased arrangements started as a temporary answer to the stay at home orders, a number of them have remained in place and are expected to continue well into 2021.

Companies now have employees engaging in work in states different from their principal places of business. What does this mean for personal jurisdiction when it comes to business disputes? A recent decision from the United States District Court for the District of Massachusetts found in one contract dispute that an executive of a New Hampshire based plaintiff who was working from his home in Boston was not sufficient to support personal jurisdiction over the defendant.

Plaintiff’s Allegations

In Collision Communications, Inc. v. Nokia Solutions and Networks OY, the plaintiff brought claims against the defendant for breach of contract, breach of covenant of good faith and fair dealing, detrimental reliance, negligent and intentional misrepresentation, quantum meruit and violation of Massachusetts General Law Chapter 93A.1 The plaintiff, a Delaware company with a principal place of business in Peterborough, New Hampshire, designs software to run with original equipment manufacturers (OEMs) for cellular basestations.2 The defendant is a Finish telecommunications equipment company with a principal place of business in Finland.3

The companies began talks in 2015 to determine if their two technologies would integrate, resulting in a written proof of concept agreement.4 In May 2017, at a meeting in New Hampshire, the parties considered furthering their business relationship and, as alleged, discussed the terms for a commercial agreement.5 The plaintiff alleged that the defendant reassured it that an agreement was in place even if not signed in a written contract and encouraged the plaintiff to continue working on the technology.6 The parties held a meeting in Finland the next month, and for the remainder of 2017 and until November 2018, communications continued, with drafts being exchanged, but no written agreement was finalized before the defendant claimed there had never been an agreement between the parties.7

The plaintiff brought the above action in federal court in Massachusetts and the defendant moved to dismiss for, inter alia, lack of personal jurisdiction. The defendant contended that there were insufficient contacts between the parties in Massachusetts. The plaintiff countered by arguing that its chief operating officer (COO), who had email and telephone communications with the defendant that led to the claims at issue, worked primarily out of his home in Boston and that the defendant had knowledge of this remote work.8

Long Arm Statute and Due Process

Under the Due Process Clause of the Fourteenth Amendment, “a court may not assert jurisdiction over a defendant unless ‘the defendant’s conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there.’”9  This analysis requires a case specific inquiry into relatedness, purposeful availment, and reasonableness.10 Where federal court jurisdiction is based on diversity, the court must also determine whether the plaintiff has satisfied the state’s long-arm statute.11

Concluding that the plaintiff had failed to meet its burden under the Massachusetts long-arm statute, the District Court found that the defendant’s contacts with the Commonwealth were “’too fortuitous and incidental’” as it “did not choose to work specifically with [the COO] over Plaintiff’s New Hampshire-based employees, nor did [the COO] work from Massachusetts at Defendant’s request or to Defendant’s benefit.”12 The COO also used his work email with no physical address in the signature block and the defendant had contact with other executives, including the plaintiff’s president, regarding the terms of the business agreement.13 The parties never had an in-person meeting in Massachusetts and neither party is registered to do business in Massachusetts.14

The District Court further concluded that even if the plaintiff had met the long-arm statute requirements, there was no jurisdiction under the Due Process Clause.15 Based on the factual allegations, the plaintiff had failed to demonstrate any nexus between its claims and the defendant’s activities in that state, that the defendant purposeful availed itself of that forum, or that exercising jurisdiction was reasonable. Ultimately, the District Court found that

“Massachusetts cannot be said to have an interest in adjudicating a dispute between a New Hampshire company incorporated in Delaware, and a Finnish company, merely because the latter directed communications to an employee of the former who happened to be in this state…Similarly, the most effective resolution of this matter is not likely through adjudication in this forum when Plaintiff is located in New Hampshire and will have witnesses and documents outside of the Commonwealth.”16

Rather than dismiss the action, the District Court transferred the case to the District of New Hampshire pursuant to 28 U.S.C. §1631. A motion to dismiss for failure to state a claim is currently pending in that transferred case.17

While the facts in this contract dispute did not establish personal jurisdiction over the defendant, there may be circumstances where remote-work sufficiently satisfies the jurisdictional hurdles. Given the prevalence of these remote-work arrangements, these types of jurisdictional challenges are expected.

Endnotes

1. No. 19-CV-12251-ADB. The decision is dated September 2, 2020.
2. Id. at *2.
3. Id.
4. Id.
5. Id. at *3.
6, Id. at *3-*4.
7. Id. at *4.
8. Id. at *8.
9. Id. at *6 (citing World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980)).
10. Id. at *13-19.
11. Id. at *6-7.
12. Id. at *10-11 (citations omitted).
13. Id. at *8-9.
14. Id. at *9.
15. Id. at *13-*19.
16. Id. at *18 (citation omitted).
17. No. 1:20-CV-00949-JD.

Jennifer Parent has more than 24 years of experience litigating and resolving disputes for companies and business owners in a wide range of complex commercial cases and employment matters. She can be reached at [email protected].