Cossart v. United Excel Corporation

United States Court of Appeals
For the First Circuit

No. 14-2144

WILLIAM COSSART,

Plaintiff, Appellant,

v.

UNITED EXCEL CORPORATION and KY HORNBAKER,

Defendants, Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS

[Hon. George A. O'Toole, Jr., U.S. District Judge]

Before

Thompson, Kayatta, and Barron,
Circuit Judges.

Kevin T. Smith, with whom Law Office of Kevin T. Smith LLC
was on brief, for appellant.
Marissa I. Delinks, with whom Hinshaw & Culbertson LLP was on
brief, for appellees.

September 30, 2015
 BARRON, Circuit Judge. This case presents a question

about the limits of personal jurisdiction. The issue arises in

connection with a lawsuit brought in Massachusetts concerning an

alleged breach of an employment contract. The contract

contemplated that the employee would work from Massachusetts for

a Kansas company, which then facilitated the employee's work from

Massachusetts by, among other things, providing him with equipment

and officially registering a sales office with the Commonwealth.

The employee sued after the company failed to pay him a commission

that he alleges he was due. Under the facts presented, we conclude

that the assertion of jurisdiction over the company and its

president is consistent with both the Massachusetts long-arm

statute and the Due Process Clause. We therefore reverse the

District Court's dismissal for lack of personal jurisdiction and

remand for further proceedings.

I.

United Excel Corporation, the employer and one of the

two defendant-appellees, is a so-called "design/build" company

that provides architectural and construction management services

to hospitals.1 It is incorporated and headquartered in Kansas.

1 The recited facts are drawn from the complaint, plaintiff's
evidentiary submissions, and, when uncontradicted, defendants'
affidavits. See C.W. Downer & Co. v. Bioriginal Food & Sci. Corp.,
771 F.3d 59, 65 (1st Cir. 2014).

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William Cossart, the plaintiff-appellant, worked for the company

as a salesman. He resides in Wayland, Massachusetts.

United Excel recruited Cossart in 2010. At that time,

Cossart traveled from his home in Massachusetts to United Excel's

offices in Kansas. There, he negotiated an employment contract

with, among others, Ky Hornbaker, United Excel's president and the

other defendant in this case.

That first employment contract assumed that Cossart

would continue to work out of his home in Wayland, Massachusetts.

United Excel memorialized the contract in a letter addressed to

Cossart in Wayland. The letter stated that United Excel would

provide Cossart with the business equipment that he would need to

work from Wayland, such as a computer, a printer, a cell phone,

and video conference equipment. United Excel also provided Cossart

with a business telephone number with a Kansas exchange and

redirected calls made to that number to Cossart's phone in Wayland.

And United Excel, acting through Hornbaker, registered with

Massachusetts to establish a "[g]eneral contracting sales office"

in the state just a day after Cossart started his new job with

United Excel in Wayland.

In 2012, United Excel and Cossart changed Cossart's

employment contract to make him a "commission only employee," while

leaving the other terms of his employment unaltered. United Excel

once again memorialized the employment contract in a letter sent

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to Cossart at his Wayland address. And the new agreement, like

the old, allowed Cossart to use home office equipment provided by

United Excel to facilitate his remote employment. United Excel

also continued to keep its registration up to date in

Massachusetts.

Over the course of his employment, Cossart made hundreds

of telephone calls and sent hundreds of e-mails on behalf of United

Excel from his Wayland office. He had numerous meetings and made

cold calls in an effort to solicit business from various hospitals

in Massachusetts, but he did not successfully secure business with

a Massachusetts client.

An attempt to secure an out-of-state client, however,

led to the present action. In October 2013, Cossart, working from

Massachusetts and under the second employment contract, identified

a potential deal in which United Excel would be retained by a

hospital in California. Cossart then contacted the California

hospital from his home in Wayland "numerous" times by phone and e-

mail in the course of trying to secure that deal. Cossart also

traveled from Massachusetts to California for "several" in-person

meetings.

When execution of the contract for the work for the

California hospital was "imminent," Cossart contacted Hornbaker to

discuss Cossart's belief that United Excel would owe him a $219,000

commission under the second employment contract for his work in

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securing the deal with the California hospital. Hornbaker

responded by phone and e-mail that he would not consummate the

California deal unless Cossart agreed to accept a commission of

only $62,000.

When Cossart refused to accept the lower commission,

United Excel rescinded its offer on the California contract, and

Hornbaker fired Cossart. Cossart then brought this action in a

Massachusetts state court against United Excel and Hornbaker. The

complaint alleged that the defendants violated the Massachusetts

Wage Act, Mass. Gen. Laws ch. 149, § 148,2 by refusing to pay

Cossart the compensation owed to him under the second employment

contract for his efforts to secure the deal with the California

hospital.

The defendants removed the case to federal district

court on the basis of diversity jurisdiction and then moved to

dismiss for lack of personal jurisdiction over both United Excel

and Hornbaker. The District Court granted the motion, and Cossart

now appeals.

2 The Wage Act requires employers to "pay . . . [their]
employee[s] the wages earned" -- including "commissions when the
amount of such commissions . . . has been definitely determined
and has become due and payable to such employee" -- within a
certain time period. Mass. Gen. Laws ch. 149, § 148. The Act
also expressly subjects certain corporate officers -- including
"the president and treasurer" -- to individual liability when their
employer is sued under the Act. Cook v. Patient Educ., LLC, 989
N.E.2d 847, 851 (Mass. 2013) (quoting Mass. Gen. Laws ch. 149, §
148).

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 II.

"Where, as here, a district court dismisses a case for

lack of personal jurisdiction based on the prima facie record,

rather than after an evidentiary hearing or factual findings, our

review is de novo." C.W. Downer & Co. v. Bioriginal Food & Sci.

Corp., 771 F.3d 59, 65 (1st Cir. 2014). In undertaking that

review, "we take the plaintiff's evidentiary proffers as true and

construe them in the light most favorable to the plaintiff's claim,

and we also consider uncontradicted facts proffered by the

defendant." Id. As the plaintiff, Cossart "bears the burden of

establishing that the district court has personal jurisdiction

over [the defendants]." Adelson v. Hananel, 510 F.3d 43, 48 (1st

Cir. 2007).

III.

"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 court sitting

in the forum state." Sawtelle v. Farrell, 70 F.3d 1381, 1387 (1st

Cir. 1995). Thus, in order to establish personal jurisdiction

over the defendants, Cossart must meet the requirements of both

the Massachusetts long-arm statute and the Due Process Clause of

the Fourteenth Amendment. The requirements of the Massachusetts

long-arm statute are similar to -- although not necessarily the

same as -- those imposed by the Due Process Clause. See Good Hope

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Indus., Inc. v. Ryder Scott Co., 389 N.E.2d 76, 80 (Mass. 1979)

("Although presented with jurisdictional facts sufficient to

survive due process scrutiny, a judge would be required to decline

to exercise jurisdiction if the plaintiff was unable to satisfy at

least one of the statutory prerequisites."); Burtner v. Burnham,

430 N.E.2d 1233, 1235-36 (Mass. App. Ct. 1982) ("It now appears to

be recognized that application of [the Massachusetts long-arm

statute] requires that (even if the fact pattern of the case is

constitutionally acceptable) the circumstances of the particular

case come within one of the specific subsections of [the

Massachusetts long-arm statute]."). We start by considering

whether that statute reaches the two defendants, United Excel and

Hornbaker.

A.

Section 3(a) of the Massachusetts long-arm statute

provides that "[a] court may exercise personal jurisdiction over

a person . . . as to a cause of action in law or equity arising

from the person's . . . transacting any business in this

commonwealth." Mass. Gen. Laws ch. 223A, § 3(a). We must

"construe[] the 'transacting any business' language of the statute

in a generous manner," and, in applying the clause to these facts,

we must focus on "whether the defendant[s] attempted to participate

in the commonwealth's economic life." United Elec., Radio & Mach.

Workers of Am. v. 163 Pleasant St. Corp., 960 F.2d 1080, 1087 (1st

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Cir. 1992). In deciding whether a claim "aris[es] from" a

defendant's "transacting business," moreover, we look to see

whether the transacted business was a "but for" cause of the harm

alleged in the claim. See Tatro v. Manor Care, Inc., 625 N.E.2d

549, 551 (Mass. 1994).

Here, United Excel recruited and hired Cossart, a

Massachusetts resident, as an employee; registered a sales office

with the Commonwealth in order to facilitate his work for the

company; and retained him as a Massachusetts-based employee for a

period of years. Moreover, Hornbaker personally negotiated the

employment contract that contemplated that this employee would

work out of Massachusetts and signed the certificate of

registration that established the United Excel sales office in

Massachusetts.

Those facts would seem to show -- in straightforward

fashion -- that each defendant "attempted to participate in the

commonwealth's economic life." United Elec., Radio & Mach. Workers

of Am., 960 F.2d at 1087. But the District Court concluded

otherwise, and thus held that the "transacting any business"

requirement of Section 3(a) was not met.

With respect to United Excel, the District Court based

its conclusion on Tatro, 625 N.E.2d at 551-52, and its reading of

the statement in that case that "[g]enerally the purposeful and

successful solicitation of business from residents of the

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Commonwealth . . . will suffice to satisfy" the "transacting any

business" requirement of Section 3(a). See Cossart v. United Excel

Corp., No. 14-10307-GAO, 2014 WL 4927041, at *1 (D. Mass. Sept.

30, 2014). The District Court concluded that because Cossart never

secured business from a Massachusetts client, and thus "[could

not] show that any of [United Excel]'s attempts to transact

business in the Commonwealth were successful," Section 3(a)

provided no basis for jurisdiction over United Excel. Id.

But Tatro does not hold that the "transacting business"

language of Section 3(a) requires that a defendant have

successfully solicited business in Massachusetts. And other

Massachusetts precedent shows that there is no such requirement.

In Haddad v. Taylor, 588 N.E.2d 1375, 1377 (Mass. App. Ct. 1992),

for example, the Massachusetts Appeals Court found that a non-

resident defendant had transacted business within the meaning of

Section 3(a) by negotiating, via telephone and the mail, a contract

for the sale of land in Massachusetts while outside the

Commonwealth, even though he was not the owner of the land (but

instead was acting through a power of attorney) and even though no

contract was actually consummated. Thus, the District Court erred

in treating the "purposeful and successful solicitation of

business" language in Tatro as a necessary -- rather than merely

a sufficient -- requirement for jurisdiction under Section 3(a).

And without such a requirement, we find that United Excel's conduct

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in Massachusetts easily qualifies as "transacting business" within

the meaning of Section 3(a).

With respect to Hornbaker, the District Court simply

wrote: "There is no evidence that Hornbaker as an individual

conducted activities within the scope of the long-arm statute."

Cossart, 2014 WL 4927041, at *1. For the reasons given above, we

disagree. And precedent supports subjecting corporate officers to

jurisdiction under the long-arm statute at least where they are

"primary participants" in corporate action, as Hornbaker was. See

LaVallee v. Parrot-Ice Drink Prods. Of Am., Inc., 193 F. Supp. 2d

296, 300-02 (D. Mass. 2002); Johnson Creative Arts, Inc. v. Wool

Masters, Inc., 573 F. Supp. 1106, 1111-12 (D. Mass. 1983);

Kleinerman v. Morse, 533 N.E.2d 221, 224-25 (Mass. App. Ct. 1989)

(finding jurisdiction where individual defendant "was the

principal actor on behalf of" the corporation).

Finally, we easily conclude that Cossart's claim

"aris[es] from" the defendants' transacting business in

Massachusetts. As stated above, Tatro held that the business

transacted must only be a "but for" cause of the claim to give

rise to jurisdiction. 625 N.E.2d at 553-54. That standard is

easily met here, where Cossart's claim arose from his work on the

California deal -- work he performed in Massachusetts under his

employment contract with United Excel and out of the sales office

officially registered in Massachusetts by Hornbaker.

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 B.

That leaves the question whether the Due Process Clause

blocks the exercise of personal jurisdiction over these

defendants. See Int'l Shoe Co. v. State of Wash., Office of

Unemployment Comp. & Placement, 326 U.S. 310, 316 (1945). The

exercise of personal jurisdiction may, consistent with due

process, be either "specific or case-linked" or "general or all-

purpose". See Goodyear Dunlop Tires Operations, S.A. v. Brown,

131 S. Ct. 2846, 2851 (2011). Because we find that these

defendants may constitutionally be subjected to specific

jurisdiction, we need not address general jurisdiction.

In determining whether the exercise of specific

jurisdiction over an out-of-state defendant conforms to the

constitutional limits established by the Due Process Clause, we

evaluate "(1) whether the claim directly arises out of, or relates

to, the defendant's forum state activities; (2) whether the

defendant's in-state contacts 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; and (3) whether the exercise of jurisdiction

is reasonable." C.W. Downer & Co., 771 F.3d at 65 (internal

quotation marks and alterations omitted). And, after applying

this test, under which all three prongs must be met, see id., we

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conclude that due process permits the exercise of specific

jurisdiction over both defendants.

1.

The first prong of the test, regarding "relatedness,"

"serves the important function of focusing the court's attention

on the nexus between a plaintiff's claim and the defendant's

contacts with the forum." Sawtelle, 70 F.3d at 1389. In this

case, to determine relatedness, we "must consider the contacts

between the defendants and the forum state viewed through the prism

of plaintiff['s] . . . claim" for unpaid compensation that is

allegedly due under the second employment contract and the

Massachusetts Wage Act. Id. Given that we are dealing here with

a contract dispute, we pay particularly close attention to "the

parties' prior negotiations and contemplated future consequences,

along with the terms of the contract and the parties' actual course

of dealing." C.W. Downer & Co., 771 F.3d at 66 (internal quotation

marks and citation omitted).

The defendants contend that Cossart's claim bears little

to no relationship to Massachusetts because the disputed

commission arose out of a contract with a California hospital, to

be performed in California. And further, the defendants assert

that their decision to not move forward with the California deal,

and thus to not pay Cossart any commission for his work on that

deal, was made in Kansas.

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 Fundamentally, that argument fails because it overlooks

the fact that this lawsuit arises out of an alleged breach not of

a contract with a California hospital, but rather of the contract

defendants procured with a Massachusetts resident to be performed

by the resident primarily from Massachusetts. Nor, for that

matter, was the potential California account that triggered the

employment-contract dispute without its forum-state contacts.

Cossart performed a substantial portion of the work that

led to the potential California account from the Massachusetts

sales office that United Excel (through Hornbaker) had registered

with the Commonwealth. That work included sending e-mails and

making phone calls from Massachusetts to California. At all times,

moreover, Cossart was acting within the scope of his employment

with United Excel, through an employment relationship the

defendants had entered into with full knowledge that Cossart would

perform his duties from Massachusetts.

In addition, when final execution of the California

contract was "imminent," Cossart contacted Hornbaker from

Massachusetts to discuss payment of his commission, which he says

he had already earned. And when United Excel, through Hornbaker,

refused to pay the commission that was allegedly due, the company

did so via e-mail and phone conversations with Cossart in

Massachusetts, thereby directly giving rise to this Massachusetts

Wage Act claim.

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 We thus conclude that Cossart's claim relates to United

Excel's and Hornbaker’s contacts with Massachusetts, for reasons

similar to those expressed in our recent decision in C.W. Downer

& Co. See id. at 66 ("[The foreign corporate defendant] had an

ongoing connection with Massachusetts in the performance under the

[inter-firm services] contract. [The resident corporate

plaintiff's] claims arise from the alleged breach of that contract.

That is enough to establish relatedness."). And so we proceed to

the next part of the inquiry: purposeful availment.

2.

The record is equally clear that "the defendant[s'] in-

state contacts [identified in the relatedness inquiry] 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," Id. at 65

(quotation marks and citation omitted). Our recent decision in

C.W. Downer & Co. once again shows why.

There, we held that an out-of-state company had

purposefully availed itself of the privilege of doing business in

Massachusetts by retaining the services of a Boston-based

investment bank. Id. at 66-69. We rested that judgment on the

company's voluntary solicitation of the bank's services; the

active formation of a long-term contractual relationship with a

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party reasonably known to be in Massachusetts (such that the

contracted-for services would foreseeably be rendered there); and

the performance of work under that contract by the bank, which was

treated as contact with the forum by the out-of-state company

because the voluntary contractual relationship had foreseeably led

the bank to undertake that work. Id. at 66-67 ("[The forum

plaintiff]'s extensive Massachusetts activities in this case,

given the context, were not unilateral. They were undertaken at

[the non-forum defendant]'s request and are attributable to [the

non-forum defendant]." (internal quotation marks omitted)).

Those same factors are present here. United Excel

recruited Cossart at his home in Massachusetts. The resulting

employment contract, as negotiated by Hornbaker, contemplated that

Cossart would continue to work from Massachusetts on United Excel's

behalf and that the company would facilitate that work by providing

the requisite office equipment.

In the course of performing that contract, moreover,

United Excel (through Hornbaker) voluntarily facilitated Cossart's

work from Massachusetts by registering a sales office with the

Commonwealth and keeping that registration current while Cossart

remained a United Excel employee.3 In addition, in the course of

3 Indeed, the facts here show even greater purposeful
availment than in C.W. Downer & Co. insofar as the non-forum
defendants here actively facilitated -- and did not merely

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the performance of that agreement, Cossart did significant work

for United Excel in Massachusetts -- as the defendants clearly

foresaw he would. That work included his efforts to secure the

California deal, for which Cossart asserts he is owed a commission

under the employment agreement. Finally, United Excel (again

through Hornbaker) allegedly breached the employment agreement

when it informed Cossart at his Massachusetts home that he would

not be paid the commission on the California deal.

The facts that prevented personal jurisdiction in

Phillips v. Prairie Eye Center, 530 F.3d 22 (1st Cir. 2008), the

principal case cited by defendants, are thus not present here. In

Phillips, the non-forum defendant did negotiate a contract with a

Massachusetts employee. 530 F.3d at 28-29. But the contract was

to be performed by the employee in Illinois, not from a

Massachusetts sales office that had been registered with the

Commonwealth by the non-forum defendant. See id.

3.

In light of our conclusion that the first two prongs of

the specific-jurisdiction test are met, we could find that the Due

Process Clause bars the exercise of personal jurisdiction over

these defendants only if such exercise would not be fair and

reasonable. See C.W. Downer & Co., 771 F.3d at 69. To determine

reasonably foresee -- the plaintiff's performance of the contract
from Massachusetts.

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whether that is the case, we must consider the so-called "gestalt"

factors: "(1) the defendant[s'] burden of appearing [in the forum

state], (2) the forum state's interest in adjudicating the dispute,

(3) the plaintiff's interest in obtaining convenient and effective

relief, (4) the judicial system's interest in obtaining the most

effective resolution of the controversy, and (5) the common

interests of all sovereigns in promoting substantive social

policies." Id.

Here, neither defendant has shown that "some kind of

special or unusual burden" would result from Massachusetts serving

as the forum. Bluetarp Fin., Inc. v. Matrix Const. Co., 709 F.3d

72, 83 (1st Cir. 2013) (citations and quotation marks omitted);

see also C.W. Downer & Co., 771 F.3d at 69 ("Bioriginal identifies

no special burden imposed by requiring it to litigate across the

Canada–United States border . . . ."). And Massachusetts clearly

has an interest in being the forum that determines whether Cossart,

who performed his work for the company in the Commonwealth, has a

meritorious claim under the Massachusetts Wage Act. Cf. C.W.

Downer & Co., 771 F.3d at 70 ("Massachusetts has 'significant'

interests in providing a convenient forum . . . when [its

citizens'] commercial contracts are said to be breached by out-

of-state defendants."). The remaining factors relevant to the

inquiry also do not indicate a problem with Massachusetts serving

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as the forum state. We therefore conclude that constitutional due

process does not bar Massachusetts from doing so.

IV.

For the foregoing reasons, we reverse the District Court's

order and judgment of dismissal for lack of personal jurisdiction

as to both defendants and we remand for further proceedings.

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