United States Court of Appeals
For the First Circuit
No. 05-1832
PAUL E. PLATTEN; THOMAS P. FLANNERY; BRUCE N. PFAU,
Plaintiffs, Appellants,
v.
HG BERMUDA EXEMPTED LIMITED; HG (BERMUDA) EXEMPTED
PARTNERSHIP; HAY GROUP INVESTMENT HOLDING B.V.;
HAY ACQUISITION COMPANY I, INC.; HAY GROUP, INC.,
Defendants, Appellees,
CHRIS R. MATTHEWS,
Defendant,
PNC BANK, N.A.,
Trustee.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR
THE DISTRICT OF MASSACHUSETTS
[Hon. Reginald C. Lindsay, U.S. District Judge]
Before
Selya and Lynch, Circuit Judges,
and Smith,* District Judge.
Robert D. Cohan, with whom Cohan Rasnick Myerson LLP was on
brief, for appellants.
Michael I. Verde, with whom Ruth Dowling, Palmer & Dodge LLP,
*
Of the District of Rhode Island, sitting by designation.
Michael F. Gallagher, and Katten Muchin Rosenman LLP were on brief,
for appellees HG Bermuda Exempted Limited, HG (Bermuda) Exempted
Partnership, and Hay Group Investment Holding B.V.
W. Allen Woolley, with whom Foley Hoag LLP, Michael P.
Boudett, P. Renée Wicklund, and Kirkland & Ellis LLP were on brief,
for appellees Hay Acquisition Company I, Inc. and Hay Group Inc.
February 6, 2006
LYNCH, Circuit Judge. This multi-issue appeal arose out
of what ought to have been a straightforward contract dispute
brought in a court of appropriate jurisdiction.
Plaintiffs Paul Platten, Thomas Flannery, and Bruce Pfau,
who are former partners of HG (Bermuda) Exempted Partnership
("Partnership"), allege that the Partnership illegitimately
withheld termination distributions the three men believed they were
owed by falsely claiming that they had violated their non-
competition obligations. In seeking redress for this alleged
wrong, plaintiffs could have brought their contract claims against
the Partnership's successor-in-interest, HG (Bermuda) Limited ("HG
Limited"),1 in Bermuda, where HG Limited was organized and has its
usual place of business and in accordance with whose laws the
parties agreed to settle their contract disputes. Instead, they
sought to reach HG Limited in Massachusetts. To do so, they had to
bring in a number of other defendants -- who were not parties to
the agreement -- under close to a dozen tenuous legal theories. As
a result, we discuss the Massachusetts law of breach of contract,
civil conspiracy, and negligent misrepresentation, as well as seven
other state and federal claims.
1
The Partnership dissolved and was reconstituted in 2000
as HG Limited, which plaintiffs incorrectly identify in their
complaint as "HG Bermuda Exempted Limited." The parties agree that
the Partnership no longer exists, so we treat it as the same entity
as HG Limited for the purpose of this litigation.
-3-
The district court dismissed plaintiffs' action on
various grounds: for some claims, failure to establish personal
jurisdiction, see Fed. R. Civ. P. 12(b)(2), and for others, failure
to state a claim upon which relief can be granted, see Fed. R. Civ.
P. 12(b)(6). We affirm, concluding that plaintiffs have stated no
claims against the corporate parties as to whom there may be
personal jurisdiction in Massachusetts. As to the one other entity
against which plaintiffs do state claims, plaintiffs did not meet
their burden of proving that there is personal jurisdiction over
the relevant defendant in Massachusetts, as there would have been
in Bermuda.
I.
We recite the facts as they appear in plaintiffs'
original verified complaint and in their subsequent affidavits that
were admitted into the record by the district court. See Daynard
v. Ness, Motley, Loadholt, Richardson & Poole, P.A., 290 F.3d 42,
45 (1st Cir. 2002); Mass. Sch. of Law at Andover, Inc. v. Am. Bar
Ass'n, 142 F.3d 26, 34 (1st Cir. 1998). We also describe briefly,
where relevant, defendants' competing factual allegations, but rely
on them only to the extent that they are uncontradicted. Mass.
Sch. of Law, 142 F.3d at 34.
A. Background
Plaintiffs Platten, Flannery, and Pfau are former
employees of Hay Group Inc. ("HGI"), an international consulting
-4-
business incorporated in Pennsylvania.2 HGI is a wholly owned
subsidiary of Hay Acquisition Company I, Inc. ("Hay Acquisition"),
a Delaware corporation. In turn, Hay Acquisition is a wholly owned
subsidiary of Hay Group Investment Holding B.V. ("Hay BV"), a
Netherlands corporation, which itself is a wholly owned subsidiary
of HG Limited, a Bermudan corporation.
Plaintiffs allege that the five corporations, together
with Chris Matthews, operated as an "association-in-fact" known as
the "Hay Group," in which the operations of the corporations and
the Partnership were intermingled and controlled by Matthews.
Matthews was the Chief Executive Partner of the Partnership and
became the Chief Executive Officer of HG Limited when the
Partnership was reconstituted as such in 2000. At all times
relevant to the litigation, Matthews was also the sole stockholder
of Hay BV, the Chairman of the Board and President of HGI, and the
Chairman of the Board and Chief Executive Officer of Hay
Acquisition.
Platten was hired in 1989 as a Senior Executive
Compensation Consultant in HGI's Boston office. He was promoted in
1990 to Manager of that office and in 1998 to East Operations
Director, a position that he held until it was eliminated, and his
employment with HGI terminated, in 1999. In 1997, Platten also
became a member of the Partnership Management Committee. During
2
Defendants Hay Acquisition and HGI allege that HGI is
actually a Delaware corporation.
-5-
the entirety of his tenure at HGI, Platten worked out of the Boston
office, where he received, often by phone and at least twice in
person, directions from Matthews about both HGI and Partnership
business.
Co-plaintiff Flannery was hired in 1981 as an Associate
in the Chicago office of HGI. He subsequently transferred to other
HGI offices, including those in Kansas City, St. Louis, and
Singapore, where he served in various capacities, including as
General Manager. He was based in HGI's Dallas office at the time
he left the consulting practice voluntarily in 1999.
The third plaintiff, Pfau, was hired in 1990 as a Senior
Consultant in HGI's New York office and was eventually promoted to
Managing Director of the Research for Management division. His
employment with HGI, which was based solely in New York, terminated
voluntarily by agreement in 1999.
During the course of their employment with HGI,
plaintiffs were each required to enter into a partnership agreement
("Agreement") with the Partnership. Neither HGI nor Hay
Acquisition was a party to the Agreement; the Agreement itself says
that it was made "by and among" the initial and continuing partners
of the Partnership. The Agreement specifies that Bermuda law
governs its interpretation and enforcement.
By the terms of the Agreement, all partners, including
the plaintiffs, were required to make periodic capital
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contributions to the Partnership. Upon termination of employment
and absent some other agreement between the parties, a partner was
entitled, on the third anniversary of withdrawal from the
Partnership, to a termination distribution comprised of the sum of
the partner's capital contributions and his share of Partnership
assets. The distribution did not have to be paid in full, however,
if Matthews and the Partnership Management Committee determined
that the partner had been terminated for cause or (most relevant
here) that the partner's termination was "accompanied by" the
violation of the Agreement's non-competition clause. In that
event, the partner's termination distribution could be reduced to
the amount of his capital contributions and paid out over a five-
year period from the date of termination. It is this provision of
the Agreement that is at the center of this dispute.
After leaving HGI, plaintiffs accepted employment with
other consulting groups -- Platten with the Boston office of
PricewaterhouseCoopers, LLC, and then with the Boston office of
Watson Wyatt & Company; Flannery with the Boston office of Arthur
Anderson, LLP; and Pfau with the New York office of Watson Wyatt &
Company. Each plaintiff maintains that his actions after leaving
HGI were consistent with the Agreement's non-competition
obligations.
In 2002, each plaintiff made written inquiries to HG
Limited, the Partnership's successor, about his termination
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distribution. In turn, each received, among other correspondence
from HG Limited, a September 4, 2002 letter signed by Matthews.
The letter stated that a former partner's termination distribution
was tethered to his non-competition obligations and asked each
recipient to prove that he was not in violation of those
obligations. Each plaintiff responded by letter that he had not
broken the non-competition clause. On September 26, 2002, counsel
for HG Limited informed each plaintiff in writing that he was not
entitled to the immediate and full payment of his termination
distribution because he had failed to respect the non-competition
clause.
Plaintiffs allege that except with regard to termination
distributions, merely working for another consulting group was
generally not considered by the "Hay Group" to be a violation of a
partner's non-competition agreement. They further allege that
accusing them of violating their non-competition obligations was
merely a tactic the Partnership used to wrongfully deny them their
termination distributions. Matthews, they maintain, orchestrated
this scheme to the benefit of the existing partners, whose
partnership bonuses would increase as less money was being paid out
to their former colleagues. Plaintiffs allege that the benefits
would also trickle down to the "Hay Group" entities, including HGI
and Hay Acquisition, which would have more available cash and a
reduced need for borrowing to fund their operations.
-8-
B. Relevant Procedural History
Plaintiffs brought suit in the Superior Court for Suffolk
County, Massachusetts, on June 19, 2003. In addition to the
Partnership and its successor-in-interest, HG Limited, plaintiffs
named three other corporate defendants -- Hay BV, Hay Acquisition,
and HGI -- and one individual defendant, Chris Matthews.
Plaintiffs asserted a total of eleven counts in their
complaint. Against all defendants, plaintiffs claimed breach of
contract, breach of implied covenant of good faith and fair
dealing, fraud, negligent misrepresentation, negligence, breach of
fiduciary duty, unjust enrichment, unfair and deceptive practices,
civil conspiracy, and violation of the Racketeer Influenced and
Corrupt Organizations (RICO) Act, 18 U.S.C. §§ 1961-68. Plaintiffs
also asserted a claim of interference with contractual relations
against Hay BV, Hay Acquisition, and HGI.
Along with their verified complaint, plaintiffs filed an
ex parte motion for an attachment on trustee process of the goods,
effects, or credits of the defendants in the amount of $843,329,
the sum of the termination distributions that plaintiffs claimed
were due. Finding "a reasonable lik[e]lihood that the plaintiff[s]
will recover judgment," the superior court granted the motion and
issued an ex parte order of attachment. Plaintiffs subsequently
moved for a preliminary injunction, requesting an additional double
of that amount because of the mandatory treble damages provided
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under the RICO statute. This motion was denied by the court on
June 25, 2003.
The defendants removed the action on July 15, 2003 to the
Massachusetts federal district court on the basis of complete
diversity of the parties and, as to the RICO Act claim, federal
question jurisdiction. On August 8, 2003, Hay Acquisition and HGI
("Domestic Defendants") filed a motion to dismiss pursuant to Fed.
R. Civ. P. 12(b)(6). The district court on June 16, 2004 granted
the motion with respect to all claims against the Domestic
Defendants except for three: breach of contract, breach of implied
covenant of good faith and fair dealing, and unjust enrichment. On
the first two claims, the court held that, because of the choice of
law provision in the partnership Agreement, the Domestic Defendants
needed to have shown that the claims would have been meritless
under Bermuda, not Massachusetts, law.
On June 25, 2004, plaintiffs moved to amend their
complaint, seeking to restore the dismissed counts by adding
allegations of fraudulent inducement that they argued would cure
the defects in their claims for fraud, negligent misrepresentation,
and RICO Act violation. Their amended complaint further sought to
clarify that the claims for interference with contractual relations
and conspiracy were pleadings in the alternative, to be considered
only in the event that Hay Acquisition and HGI were found to be
separate entities from the Partnership. This motion was denied as
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futile by the district court on November 23, 2004. Plaintiffs
moved for reconsideration, which was denied on January 14, 2005.
On July 8, 2004, the Domestic Defendants moved for the
court to reconsider its denial of the motion to dismiss with
respect to the remaining three contract claims against them. On
December 21, 2004, the district court, holding that Massachusetts
law applied after all, granted the motion for reconsideration and
dismissed the breach of contract, breach of implied covenant of
good faith and fair dealing, and unjust enrichment claims against
Hay Acquisition and HGI. On December 29, 2004, the plaintiffs
filed a motion for reconsideration of the dismissal of the
contractual relations, negligence, and civil conspiracy claims
against Hay Acquisition and HGI, which the court denied on January
13, 2005. This left plaintiffs with no surviving claims against
the Domestic Defendants.
Meanwhile, on August 21, 2003, the Partnership, HG
Limited, and Hay B.V. ("Offshore Defendants") filed a separate
motion to dismiss for lack of personal jurisdiction and
insufficient service of process. See Fed. R. Civ. P. 12(b)(2),
(5). Plaintiffs filed their opposition to the motion on October 6,
2003, and, after defendants filed their reply, plaintiffs moved on
December 10, 2003 for leave to file a response and a second
affidavit of Platten ("Platten Affidavit II"). The district court
denied plaintiffs' motion on December 23, 2003. On January 23,
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2004, plaintiffs moved for the court to reconsider its denial of
their motion to file Platten Affidavit II; the court denied that
motion on February 18, 2004.
The district court granted the Offshore Defendants'
motion to dismiss for lack of jurisdiction on June 15, 2004. In
response, plaintiffs moved on June 25, 2004 for the court to
reconsider its dismissal of HG Limited or, in the alternative, to
defer ruling pending jurisdictional discovery.3 That motion was
denied on November 18, 2004.
On April 28, 2005, plaintiffs voluntarily dismissed, with
prejudice, all of their claims against Chris Matthews, the sole
individual defendant.
Plaintiffs then initiated this appeal.
II.
Plaintiffs challenge a number of district court rulings,
including the following: (1) its dismissal of ten of the
plaintiffs' claims against the Domestic Defendants, Hay Acquisition
and HGI, for failure to state a claim upon which relief can be
granted;4 (2) its refusal to admit into evidence Platten Affidavit
II; (3) its dismissal of the claims against HG Limited for lack of
3
Plaintiffs did not seek reconsideration of the court's
dismissal of Hay B.V. for lack of jurisdiction.
4
Plaintiffs do not challenge the district court's
dismissal of their negligence claim.
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personal jurisdiction; and (4) its denial of plaintiffs' request
for jurisdictional discovery.
A. Rulings Pertaining to the Dismissal of Claims Against HGI
and Hay Acquisition
Plaintiffs first claim error in the district court's
dismissal of their claims against the Domestic Defendants pursuant
to Fed. R. Civ. P. 12(b)(6). The crux of all the claims is that HG
Limited wrongfully failed to pay plaintiffs the full amount of
their termination distributions and that, as a result, liability
can be imposed upon Hay Acquisition and HGI, which are its third-
and fourth-tier subsidiaries, respectively.
We review de novo and may affirm on any ground supported
by the record. See Diva's Inc. v. City of Bangor, 411 F.3d 30, 40,
43 (1st Cir. 2005). We accept as true all well-pleaded facts
alleged by plaintiffs in their complaint and draw in their favor
all reasonable inferences fitting their stated theories of
liability. See Morales-Villalobos v. Garcia-Llorens, 316 F.3d 51,
52-53 (1st Cir. 2003). "[T]he threshold [for stating a claim] may
be low, but it is real." Gooley v. Mobil Oil Corp., 851 F.2d 513,
514 (1st Cir. 1988). Thus, plaintiffs are obliged to set forth in
their complaint "factual allegations, either direct or inferential,
regarding each material element necessary to sustain recovery under
some actionable legal theory." Id. at 515.
-13-
1. Dismissal of Breach of Contract, Breach of
Implied Covenant of Good Faith and Fair Dealing,
and Unjust Enrichment Claims
Plaintiffs asserted claims of breach of contract (i.e.
the Agreement), breach of an implied covenant of good faith and
fair dealing, and unjust enrichment against the Domestic
Defendants.
Plaintiffs concede that neither HGI nor Hay Acquisition
is a signatory to the Agreement. They allege, however, that
Offshore Defendant HG Limited, as the Partnership's successor, is
bound by the Agreement; that the Domestic and Offshore Defendants
comprise a single enterprise, known as the "Hay Group"; that all
the organizations in the enterprise have intermingled operations
and finances; and that the entire enterprise is pervasively
controlled by Chris Matthews and the Partnership. They thus argue
that the corporate form should be disregarded so as to allow them
to hold the Domestic Defendants liable for the Partnership's, now
HG Limited's, alleged misdeeds.
We apply, as did the district court and the parties,
Massachusetts law.5 "Under Massachusetts common law, disregarding
5
The district court initially denied the Domestic
Defendants' motion to dismiss the breach of contract and breach of
implied covenant claims, on the ground that defendants neglected to
show that plaintiffs failed to state a claim under Bermuda law. It
also initially denied defendants' motion to dismiss the unjust
enrichment claim. Subsequently, on defendants' motion, the court
reconsidered its rulings and dismissed the three claims, concluding
that "the viability of [all three] claims . . . is dependent on"
plaintiffs' corporate disregard theory, and that under
Massachusetts law, plaintiffs' allegations "are insufficient to
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the corporate form is permissible only in rare situations." United
Elec., Radio and Mach. Workers v. 163 Pleasant St. Corp. (Pleasant
St. I), 960 F.2d 1080, 1091 (1st Cir. 1992) (citing Pepsi-Cola
Metro. Bottling Co. v. Checkers, Inc., 754 F.2d 10, 15-16 (1st Cir.
1985)). In fact, "Massachusetts has been somewhat more 'strict'
than other jurisdictions in respecting the separate entities of
different corporations." Birbara v. Locke, 99 F.3d 1233, 1238 (1st
Cir. 1996) (quoting My Bread Baking Co. v. Cumberland Farms, Inc.,
233 N.E.2d 748, 752 (Mass. 1968)) (internal quotation marks
omitted).
My Bread, the seminal Massachusetts case on the corporate
disregard doctrine, holds that the presumption of corporate
separateness may be overcome only "in rare particular situations in
order to prevent gross inequity." 233 N.E.2d at 752. In
determining whether circumstances warrant the use of this "rare"
measure, we undertake an inquiry into the actual nature of the
corporate interrelationship to evaluate whether the "Pepsi-Cola
show that the corporate form of the defendants should be
disregarded . . . , particularly where there is no allegation as to
confusion as to the identity of contracting parties." Plaintiffs
do not appeal the court's choice-of-law determination.
"Where 'there is at least a reasonable relation between the
dispute and the forum whose law has been selected by the parties,
we will forego an independent analysis of the choice-of-law issue
and apply' the state substantive law selected by the parties."
Fed. Ins. Co. v. Raytheon Co., 426 F.3d 491, 496 n.2 (1st Cir.
2005) (quoting Merchs. Ins. Co. of N.H. v. U.S. Fid. & Guar. Co.,
143 F.3d 5, 8 (1st Cir. 1998)) (internal quotation marks omitted).
-15-
factors" militate in favor of disregarding the corporate form.
These factors are:
(1) common ownership; (2) pervasive control;
(3) confused intermingling of business assets;
(4) thin capitalization; (5) nonobservance of
corporate formalities; (6) absence of
corporate records; (7) no payment of
dividends; (8) insolvency at the time of the
litigated transaction; (9) siphoning away of
corporation's funds by dominant shareholder;
(10) nonfunctioning of officers and directors;
(11) use of the corporation for transactions
of the dominant shareholders; and (12) use of
the corporation in promoting fraud.
Attorney Gen. v. M.C.K., Inc., 736 N.E.2d 373, 380 n.19 (Mass.
2000) (citing Pepsi-Cola, 754 F.2d at 14-16).
In support of their corporate disregard theory,
plaintiffs allege the following in their complaint: (1) Matthews
served in multiple roles, including as Chief Executive Partner of
the Partnership, Chairman of the Board and President of HGI, and
Chairman of the Board and CEO of Hay Acquisition; (2) surplus
profits earned by HGI "are siphoned upward to the Partnership for
distribution to the partners as bonuses"; (3) the partnership
Agreement prevented partners from competing with any of the "Hay
Group" entities, and HGI has sought to enforce the non-compete
obligation; and (4) the "Hay Group" held itself out as one
"professional services firm" on its website. They further allege:
All managerial decisions, even extending to
the local level, were made by Matthews and the
Partnership Management Committee. From time
to time, at least twice, Matthews came to the
Boston office to review local financial
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performance and to review progress on product
development. He frequently supervised
performance and profitability of the Boston
office and other local offices acting as head
of U.S. operations. Matthews also regularly
placed telephone calls to Platten in Boston
wherein he would give [Platten] instructions
on management matters relating to the Boston
office and they would discuss the Boston
office's monthly performance, staffing issues
and collection efforts. The Boston office had
at least 100 clients located in Massachusetts.
Taken as true, these allegations do not meet the standard for
disregarding the corporate form.6
The circumstances here closely track those in Birbara, 99
F.3d 1233, in which we vacated a jury verdict on the ground that
the evidence was insufficient to justify piercing the corporate
veil. Here, as in Birbara, there is insufficient showing of
confused intermingling or pervasive control. That Matthews (and
Platten) sometimes acted on behalf of the Partnership and other
times on behalf of its subsidiaries "is to be expected when
individuals serve as directors for both a parent and its
subsidiary." Id. at 1239-40. Plaintiffs themselves acknowledge
that Matthews was "acting as head of U.S. operations" when he
supervised the Boston office's performance. "It is also to be
6 Plaintiffs make a few other allegations that go to
Matthews' "pervasive control" of the "Hay Group." But, as the
district court stated, "plaintiffs' insistence upon referring to
each and all of the corporate defendants by the broad collective
term 'Hay Group' . . . makes it difficult . . . to decipher who did
what and how, for the purpose of determining whether there is a
relationship of control, and not simply of cooperation, among the
Hay entities."
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expected that when a subsidiary company profits, the parent
company" -- in this case, the Partnership and its partners -- "will
as well." Id. at 1240.
Despite their allegations of intermingling, plaintiffs
have never alleged that they were confused about the identity of
the legal entity with which they were contracting.7 Indeed, the
allegations are insufficient to show any "fraudulent or injurious
consequence of the intercorporate relationship." Id. at 1238
(quoting My Bread, 233 N.E.2d at 752). "Plaintiffs were never
misled about which corporate entity . . . was obligated to them or
was dealing with them." Id. at 1240. They acknowledged that their
Agreement was with the Partnership and clearly understood that the
Partnership was responsible for the payment of the distributions.
In fact, Platten was once a member of the Partnership Management
Committee that oversaw the distribution payment scheme.
Ultimately, plaintiffs do not allege, and the
circumstances do not lead to an inference of, any gross inequity
that would argue in favor of overriding the presumption of
7
Defendants argue that Massachusetts courts do not pierce
the corporate veil in contract cases, "because the parties to
contractual relationships choose with whom to deal and can protect
themselves through bargaining." See Birbara, 99 F.3d at 1238
(noting that "[w]e have found no Massachusetts Supreme Judicial
Court case applying the veil piercing doctrine in a contract case"
and that some courts and commentators have declined to apply the
corporate disregard doctrine in contract cases, but declining
ultimately to resolve the issue). To resolve this case, we need
not decide the availability of the corporate disregard doctrine in
Massachusetts contract cases.
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corporate separateness. See Commonwealth v. Beneficial Fin. Co.,
275 N.E.2d 33, 91 (Mass. 1971) (courts will only look through the
corporate veil to "accomplish . . . essential justice"); My Bread,
233 N.E.2d at 752 (limiting the application of the corporate
disregard doctrine only to "rare particular situations in order to
prevent gross inequity"); see also Birbara, 99 F.3d at 1239
(collecting sources). Plaintiffs would not have been in the
position they are in now if they had sought relief directly from HG
Limited by suing it in Bermuda. Mere inconvenience is simply not
a sufficient ground for disregarding the corporate form.
Since Hay Acquisition and HGI are entities separate from
HG Limited and are not parties to the Agreement, they cannot be
held liable for breach of contract.8 "Having concluded that no
contract exists, there can be no derivative implied covenant of
good faith and fair dealing applicable to these parties." Mass.
Eye & Ear Infirmary v. QLT Phototherapeutics, Inc., 412 F.3d 215,
229 (1st Cir. 2005). Also, because the allegations are not
sufficient to show that they were beneficiaries to the contract,
the Domestic Defendants cannot be held liable for unjust
8
Plaintiffs also argue that the district court erred in
failing to follow the law of the case as established by the
Massachusetts Superior Court, which had determined, in granting
plaintiffs' ex parte order of attachment, that there was "a
reasonable lik[e]lihood that the plaintiff[s] will recover
judgment" on their breach of contract claim. The law of the case
doctrine, however, does not apply to tentative or preliminary
rulings. See Harlow v. Children's Hosp., 432 F.3d 50, 55 (1st Cir.
2005) (noting that interlocutory orders do not constitute law of
the case).
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enrichment. In any event, Massachusetts law does not allow
litigants to override an express contract by arguing unjust
enrichment. See, e.g., Zarum v. Brass Mill Materials Corp., 134
N.E.2d 141, 143 (Mass. 1956) ("The law will not imply a contract
where there is an existing express contract covering the same
subject matter."). We affirm the district court's dismissal of
these three claims against the Domestic Defendants.
2. Dismissal of Interference with Contractual
Relations and Civil Conspiracy Claims
Plaintiffs next contest the district court's dismissal of
their claims against HGI and Hay Acquisition for interference with
contractual relations and civil conspiracy.
We dispose first of plaintiffs' tortious interference
claim. Under Massachusetts common law, "[i]n an action for
intentional interference with contractual relations, the plaintiff
must prove that: (1) he had a contract with a third party; (2) the
defendant knowingly induced the third party to break that contract;
(3) the defendant's interference, in addition to being intentional,
was improper in motive or means; and (4) the plaintiff was harmed
by the defendant's actions." G.S. Enters., Inc. v. Falmouth
Marine, Inc., 571 N.E.2d 1363, 1369-70 (Mass. 1991) (citing United
Truck Leasing Corp. v. Geltman, 551 N.E.2d 20, 21 (Mass. 1990)).
Plaintiffs' principal argument on appeal is that the
Domestic Defendants, "by and through Matthews, took actions which
induced the Partnership to break the Agreement." In support of
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this theory, they rely on nothing more than conclusory allegations
that Matthews controlled the various "Hay Group" entities, that he
acted with improper motives to retain income for himself and the
"Hay Group," and that he knew, or should have known, that the
plaintiffs' termination distributions could not be rightfully
withheld. Taking these allegations as true, plaintiffs still
cannot make out a claim for interference of contract against the
Domestic Defendants based on their theory of liability.
Under Massachusetts law, in evaluating "whether the acts
and intent of natural persons, be they officers, directors or
employees, can be treated as the acts and intent of the corporation
itself," Beneficial Fin., 275 N.E.2d at 77, a court must examine
whether those natural persons have "been vested with the authority
to act on behalf of the corporation in the sphere of corporate
business in which he commits the [alleged wrongful] act," id. at 80
(applying this test to a question of criminal liability, but
deriving the test from civil and criminal cases). The record lacks
any allegation or fact by which a reasonable inference can be drawn
that Matthews was acting in the capacity and within the authority
of his positions at Hay Acquisition and HGI when he allegedly
"interfered" with the Partnership's contractual relationship with
the plaintiffs. See, e.g., Stoneman v. Fox Film Corp., 4 N.E.2d
63, 66 (Mass. 1936) (noting that the president of a corporation
"has not unlimited power but is restricted to doing those things
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which are usual and necessary in the ordinary course of the
corporate business," and holding that, where the president
committed wrongs while acting beyond the scope of his authority,
the corporation is not civilly liable for resulting injuries).
Moreover, as the district court intimated, plaintiffs essentially
were hoisted by their own petard: crediting their allegation that
all the "Hay Group" entities constituted one enterprise, "it seems
that the plaintiffs seek to hold the defendants liable for
interfering with their own contract"; "[t]here is no such tort."9
Similar problems beleaguer plaintiffs' civil conspiracy
claim. They allege that Matthews "organized and orchestrated" a
scheme by which employees of HGI would be invited to join the
Partnership, required to make substantial capital contributions
with promises of payment of termination distributions, and
subsequently denied their distributions by false claims of
violations of the non-competition obligations.
"For liability to attach on this basis, there must be,
first, a common design or an agreement, although not necessarily
express, between two or more persons to do a wrongful act and,
9
Plaintiffs argue that the court cannot decide that the
defendants constitute one entity in dismissing plaintiffs'
interference and conspiracy claims, while refusing to treat them as
one entity in dismissing plaintiffs' contract claims. But there is
nothing inconsistent about the court's reasoning: the court
evaluated the pleading requirements particular to each claim,
including the heightened pleading requirements attendant to the
corporate disregard doctrine, and concluded that plaintiffs failed
to meet them.
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second, proof of some tortious act in furtherance of the
agreement." Aetna Cas. Sur. Co. v. P & B Autobody, 43 F.3d 1546,
1564 (1st Cir. 1994). Plaintiffs make no factual allegations
supporting the conclusion that the Domestic Defendants engaged in
a common design or agreement with the Partnership to do a wrongful
act; to the contrary, plaintiffs' allegation is that all the
defendants comprise a single corporate enterprise. No civil
conspiracy claim can lie under plaintiffs' theory because an entity
cannot conspire with itself. There is also a risk in plaintiffs'
argument of confusing a family relationship among corporations with
a conspiracy; all that is shown here is a family relationship, and
that is insufficient on its own to support a conspiracy claim. Cf.
Gilbuilt Homes, Inc. v. Cont'l Homes of New Eng., 667 F.2d 209, 210
(1st Cir. 1981) (holding that "a vague reference to 'inter-family
relationships'" was not enough to state a claim for conspiracy
under Section 1 of the Sherman Act, 15 U.S.C. § 1). The district
court properly dismissed the civil conspiracy claim.
3. Dismissal of Fraud, Negligent Misrepresentation,
and RICO Act Claims
Plaintiffs contest the district court's dismissal of
their fraud, negligent misrepresentation, and civil RICO Act claims
against the Domestic Defendants.
The district court dismissed the three claims on the
ground that plaintiffs failed to allege that they relied on the
fraudulent misrepresentation or that their injuries stemmed from
-23-
such reliance. On appeal, plaintiffs essentially concede that at
the time the district court considered the claims, they had not
made allegations sufficient to support them. They suggest that
their success on appeal turns on the outcome of our review of the
district court's November 23, 2004 denial of plaintiffs' motion to
amend their complaint to cure acknowledged deficiencies in their
original pleadings. Plaintiffs attached a copy of their proposed
amended complaint to that motion; the court determined the motion
was futile.
We review the denial of a motion to amend for abuse of
discretion. See Hatch v. Dep't for Children, Youth, & Their
Families, 274 F.3d 12, 19 (1st Cir. 2001). Within that standard,
pure questions of law are reviewed de novo. Since denial of
plaintiffs' motion as futile would be appropriate if the amended
complaint still failed to state a claim sufficient to survive a
motion to dismiss, our review in this instance is, for practical
purposes, identical to review of a Rule 12(b)(6) dismissal based on
the allegations in the amended complaint. See id.
Under Massachusetts law, to make out a claim for fraud,
plaintiffs must show that the Domestic Defendants made a false
representation of a material fact with knowledge of its falsity for
purposes of inducing the plaintiff to act thereon, and that the
plaintiff actually relied on the representation. See Slaney v.
Westwood Auto, Inc., 322 N.E.2d 768, 779 (Mass. 1975). For a claim
-24-
for misrepresentation, plaintiffs must demonstrate that the
Domestic Defendants (1) made false statements of material fact (2)
to induce plaintiffs to enter into the Agreement, and (3) that they
reasonably relied on those statements to their detriment. See
Rodowicz v. Mass. Mut. Life Ins. Co., 192 F.3d 162, 175 (1st Cir.
1999) (citing Zimmerman v. Kent, 575 N.E.2d 70, 74 (Mass. App. Ct.
1991)). Both causes of action, then, require plaintiffs' reliance
on defendants' representations.
In their proposed amended complaint, plaintiffs alleged
that they were "induced to enter into the Agreement by [certain]
representations made in the Agreement," and that two individuals,
Ken Martin and Jim Williams -- each of whom was a partner in the
Partnership -- made "representations" in person or by phone as to
the meaning of the non-competition provision of the Agreement.
These allegations do not suffice to hold Hay Acquisition
and HGI liable for the fraud and misrepresentation claims. After
all, plaintiffs did not allege any justified reliance on the
misrepresentations. In fact, they stated that they entered into
the Agreement because it was "a condition of employment with the
Hay Group." And, as the district court pointed out, their
complaint states that they continued to demand their termination
distributions even after some of the alleged misrepresentations
were made.
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As to the civil RICO Act claim, it fails because
plaintiffs never alleged proximate cause between defendants'
wrongful conduct and plaintiffs' injuries. As the district court
observed, even if the Domestic Defendants can be held responsible
for misrepresentations by mail or wire, plaintiffs did not rely on
those misrepresentations. Therefore, their injuries, if proven,
come not from those misrepresentations, but from HG Limited's
alleged breach of the Agreement by failing to pay the three men
their termination distributions. See George Lussier Enters., Inc.
v. Subaru of New Eng., Inc., 393 F.3d 36, 51 (1st Cir. 2004)
("Section 1964(c) of [18 U.S.C.] requires that the defendant's
specified acts of racketeering were the proximate cause of the
plaintiffs' injuries.").
Because the allegations in plaintiffs' proposed amended
complaint would have been insufficient to make out fraud, negligent
misrepresentation, and RICO Act claims against the Domestic
Defendants, the district court did not abuse its discretion in
denying the motion to amend the complaint as futile. Nor did the
district court err in dismissing the underlying substantive claims
under Fed. R. Civ. P. 12(b)(6).
4. Dismissal of Plaintiffs' Remaining Claims Against
the Domestic Defendants
The remainder of plaintiffs' claims against the Domestic
Defendants are plainly meritless, and we quickly dispose of them.
-26-
Plaintiffs argue that the district court erred in
dismissing the plaintiffs' breach of fiduciary duty claims against
the Domestic Defendants. They suggest that the Partnership's
fiduciary duty should be extended to HGI and Hay Acquisition, "on
whose behalf Matthews acted." This agency theory fails for the
reasons articulated above. The district court correctly determined
that "plaintiffs have alleged no [independent] source of a
fiduciary duty as to these defendants" and the claim thus fails as
a matter of pleading.
Plaintiffs also contest the district court's dismissal of
their claim under Mass. Gen. Laws ch. 93A, § 11, which provides for
a cause of action against any "unfair method of competition or
. . . unfair or deceptive act or practice" in the conduct of "any
trade or commerce." The theory of liability for this claim is the
same as that underlying plaintiffs' misrepresentation claim, and
the theory fails for the same reason the misrepresentation claim
fails. Additionally, as the district court concluded, the alleged
misrepresentations made by defendants did not arise out of any
"trade or commerce" and thus do not fall within the purview of the
statute. See Linkage Corp. v. Trs. of Boston Univ., 679 N.E.2d
191, 207 n.33 (Mass. 1997) (noting that the statute does not extend
to "intra-enterprise disputes," such as "disputes between
individual members of a partnership arising from partnership
business," "because they are more similar to purely private
-27-
disputes and are not 'commercial transaction[s]'" (alteration in
original) (quoting Szalla v. Locke, 657 N.E.2d 1267, 1269 (Mass.
1995))).
B. Rulings Relating to Lack of Personal Jurisdiction over HG
Limited
We also affirm the court's rulings with respect to HG
Limited, the sole Offshore Defendant remaining in the case.
1. Exclusion of Platten Affidavit II
Plaintiffs argue that the district court erred in
refusing to admit into evidence Platten Affidavit II. The
plaintiffs had argued to the court that Platten Affidavit II, which
supplemented Platten's initial affidavit, should be admitted to
counter certain "misrepresentations of fact" purportedly made by
the Offshore Defendants in their motion to dismiss for lack of
personal jurisdiction.
We review district court rulings pertaining to motions
for reconsideration for abuse of discretion, see United States v.
One Lot of U.S. Currency ($36,634), 103 F.3d 1048, 1050 (1st Cir.
1997), and find none here. Plaintiffs sought leave to file Platten
Affidavit II on December 10, 2003, nearly two months after they
filed their opposition to the Offshore Defendants' motion to
dismiss for lack of jurisdiction. By that time, they had already
asked for leave to submit a second affidavit of Bruce Pfau, which
the district court subsequently granted. The court was under no
-28-
obligation to continue to allow plaintiffs to make piecemeal
corrections to their pleadings.
Plaintiffs argue that, in light of an intervening
Illinois decision, see Joy v. Hay Group, Inc., No. 02-C-4989, 2003
WL 22118930 (N.D. Ill. Sept. 11, 2003), which they claim is
favorable to them, the district court should have given them the
opportunity, through the affidavit, to revise their pleadings to
include additional factual allegations. But they admit that the
facts they sought to add were in existence at the time they filed
their original opposition. That they did not see the need for a
fuller factual presentation when they were required to respond does
not rescue their case. The district court was more than fair in
its handling of the case.10
2. Lack of Personal Jurisdiction over HG Limited
Plaintiffs also claim error in the district court's
dismissal of HG Limited, the Partnership's successor-in-interest,
for lack of personal jurisdiction.
10
Plaintiffs eventually submitted to the district court, in
conjunction with their June 25, 2004 motion for reconsideration of
the court's dismissal of HG Limited for want of personal
jurisdiction, a third, and more comprehensive, Platten affidavit
("Platten Affidavit III"). This affidavit was belatedly filed, and
it was the district court's prerogative whether to consider it.
The district court made no reference to it when it summarily denied
the motion for reconsideration. Given the court's silence and its
earlier refusal to consider Platten Affidavit II, we believe the
court did not allow Platten's third affidavit. See One Lot of U.S.
Currency, 103 F.3d at 1050. Plaintiffs concede as much in their
reply brief. We do not consider it.
-29-
Plaintiffs assert two bases for exercising personal
jurisdiction over HG Limited. Their first argument is that the
court may exercise specific jurisdiction based on HG Limited's
assumption of the Partnership's obligations under the Agreement.
Plaintiffs argue that specific jurisdiction over HG Limited exists
under subsections (a), (c), and (d) of the Massachusetts long-arm
statute. Mass. Gen. Laws ch. 223A, § 3. The state long-arm
statute states, in relevant part:
A court may exercise personal jurisdiction over a
person, who acts directly or by an agent, as to a
cause of action in law or equity arising from the
person's
(a) transacting any business in this
commonwealth;
. . . .
(c) causing tortious injury by an act or
omission in this commonwealth;
(d) causing tortious injury in this
commonwealth by an act or omission outside
this commonwealth if he regularly does or
solicits business, or engages in any other
persistent course of conduct, or derives
substantial revenue from goods used or
consumed or services rendered, in this
commonwealth . . . .
Id. Plaintiffs' second argument is that there is general
jurisdiction over HG Limited by virtue of its relationship with
HGI, which itself has sufficient contacts in Massachusetts to be
hailed into federal court in this state.
The district court found that neither jurisdictional
theory had sufficient factual support to carry the day. We review
-30-
those conclusions of law de novo, see Harlow v. Children's Hosp.,
432 F.3d 50, 57 (1st Cir. 2005), and affirm.
The district court analyzed plaintiffs' jurisdictional
claim under the prima facie standard of Boit v. Gar-Tec Products,
Inc., 967 F.2d 671 (1st Cir. 1992). See id. at 675. Under that
standard, "plaintiff[s] ultimately bear[] the burden of persuading
the court that jurisdiction exists." Mass. Sch. of Law, 142 F.3d
at 34. "[P]laintiffs may not rely on unsupported allegations in
their pleadings," Boit, 967 F.2d at 675, but are "obliged to adduce
evidence of specific facts," Foster-Miller, Inc. v. Babcock &
Wilcox Can., 46 F.3d 138, 145 (1st Cir. 1995). We, in turn, take
those "specific facts affirmatively alleged by the plaintiff[s] as
true . . . and construe them in the light most congenial to the
plaintiff[s'] jurisdictional claim." Mass. Sch. of Law, 142 F.3d
at 34. We also "add to the mix facts put forward by the
defendants, to the extent that they are uncontradicted." Id.
To establish personal jurisdiction, plaintiffs must show
that jurisdiction is both statutorily authorized and consistent
with the Constitution. See Daynard, 290 F.3d at 52. The Supreme
Judicial Court of Massachusetts has interpreted the state's long-
arm statute as coextensive with the outer limits of the
Constitution, id. (citing "Automatic" Sprinkler Corp. of Am. v.
Seneca Foods Corp., 280 N.E. 2d 423, 424 (Mass. 1972)); thus, the
only inquiry that remains is the constitutional one, see Sawtelle
-31-
v. Farrell, 70 F.3d 1381, 1388 (1st Cir. 1995). Specifically, the
question here is whether the Due Process Clause of the Fourteenth
Amendment allows Massachusetts to exercise personal jurisdiction
over HG Limited.
For the answer to this question to be yes, a defendant
must have sufficient minimum contacts with the forum 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)). The "minimum contacts" standard has
three requirements:
For specific jurisdiction, the plaintiff's
claim must be related to the defendant's
contacts. For general jurisdiction, in which
the cause of action may be unrelated to the
defendant's contacts, the defendant must have
continuous and systematic contacts with the
state. Second, for either type of
jurisdiction, the defendant's contacts with
the state must be purposeful. And third, the
exercise of jurisdiction must be reasonable
under the circumstances.
Harlow, 432 F.3d at 57; see also Cambridge Literary Props. Ltd. v.
W. Goebel Porzellanfabrik G.m.b.H. & Co. Kg., 295 F.3d 59, 63 (1st
Cir. 2002); Noonan v. Winston Co., 135 F.3d 85, 89 (1st Cir. 1998).
a. Plaintiffs' Claims of Specific Jurisdiction
Plaintiffs argue that specific jurisdiction over HG
Limited exists with respect to both their contract and tort claims.
"For specific jurisdiction, this circuit divides the
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constitutional analysis into three categories: relatedness,
purposeful availment, and reasonableness." Daynard, 290 F.3d at
60. "For its contract claim[s], . . . [plaintiffs] may ask the
court to draw inferences from the parties' 'prior negotiations and
contemplated future consequences, along with the terms of the
contract and the parties' actual course of dealing.'" Jet Wine &
Spirits, Inc. v. Bacardi & Co., 298 F.3d 1, 7 (1st Cir. 2002)
(quoting Daynard, 290 F.3d at 52). "For its tort claims,
[plaintiffs] must show a sufficient 'causal nexus' between [HG
Limited's] contacts with [Massachusetts] and [plaintiffs'] causes
of action." Id. (quoting Phillips Exeter Acad. v. Howard Phillips
Fund, 196 F.3d 284, 289 (1st Cir.1999)).
i. Specific Jurisdiction over Contract Claims
Plaintiffs' primary theory of specific jurisdiction is
that their breach of contract claim arises from HG Limited's
assumption of the Partnership's obligations under the Agreement,
which one of the plaintiffs entered into in Massachusetts.
Specifically, plaintiffs contend that there is sufficient evidence
in the record to support the propositions that the Partnership
solicited Platten to become a partner in Massachusetts, that the
Agreement was executed in Massachusetts, and that Platten's
performance under the Agreement occurred primarily in
Massachusetts.
-33-
HG Limited, in turn, counters that it has its principal
place of business in Bermuda; maintains its books, records, and
accounts in Bermuda; and pays taxes in Bermuda. Moreover, it
maintains that it has never attempted to solicit or service
customers in Massachusetts or to derive substantial revenue from
services rendered in the state. As a holding company, it exercises
only limited control over HGI, "a fourth-tier subsidiary," which
has an office in, among other places, Massachusetts.
We assume for present purposes that HG Limited fully
assumed the Partnership's obligations under the Agreement.
Nonetheless, we hold, as did the district court, that the record
lacks support for plaintiffs' allegations that the Partnership
established sufficient minimum contacts in Massachusetts to be
subject to suit by plaintiffs in this state. Our inquiry begins
and ends with the first prong of the constitutional inquiry, that
of relatedness.
In support of specific jurisdiction over their contract
claims, plaintiffs rely almost solely on the affidavits of Paul
Platten. The first of those affidavits, and the only Platten
affidavit admitted into the record, makes the following relevant
allegations:
2. In February, 1989, I was hired by the
defendant [HGI] with the Boston Office . . . .
7. As a condition of employment with the Hay
Group, I was required to become a partner in
the Partnership and, in or about 1992, in
-34-
Massachusetts, I entered into an Agreement
. . . with the Partnership . . . .
Aside from these allegations, plaintiffs provide no
additional details about the place and circumstances of
contracting. Flannery and Pfau's affidavits are silent with
respect to the place of contracting, and neither of the two has
ever claimed that their agreements with the Partnership were signed
or executed in Massachusetts.
The Supreme Court has held that "parties who 'reach out
beyond one state and create continuing relationships and
obligations with citizens of another state' are subject to
regulation and sanctions in the other [s]tate for the consequences
of their activities." Burger King Corp. v. Rudzewicz, 471 U.S.
462, 473 (1985) (quoting Travelers Health Ass'n v. Virginia, 339
U.S. 643, 647 (1950)). Evidence of a defendant's entry into a
contractual relationship with a plaintiff in another state is
relevant to whether the defendant "reached out" to that state. But
the mere fact that a plaintiff entered into a contract with a
defendant in the forum state is not in and of itself dispositive of
the personal jurisdiction question. "The [Supreme] Court long ago
rejected the notion that personal jurisdiction might turn on
'mechanical' tests or on 'conceptualistic . . . theories of the
place of contracting or of performance.'" Burger King, 471 U.S. at
478 (omission in original) (quoting Int'l Shoe, 326 U.S. at 319;
Hoopeston Canning Co. v. Cullen, 318 U.S. 313, 316 (1943)).
-35-
"Instead, [the Court has] emphasized the need for a 'highly
realistic' approach that recognizes that a 'contract' is
'ordinarily but an intermediate step serving to tie up prior
business negotiations with future consequences which themselves are
the real object of the business transaction.'" Id. at 479 (quoting
Hoopeston, 318 U.S. at 316-17).
As the district court points out, plaintiffs' affidavits
are "silent as to details regarding where negotiations took place,
where the agreement was presented for signatures, where it was
signed, where it was to be performed, and who represented the
Partnership at the time of the negotiations." Aside from Platten's
conclusory allegations that he performed Partnership business in
Massachusetts, none of the plaintiffs offer additional information
on whether the Partnership or HG Limited directed an out-of-state
activity at the forum state, see Phillips Exeter Acad., 196 F.3d at
289, whether the parties' Agreement contemplated ongoing
interaction between Platten in Massachusetts and the Partnership or
HG Limited in Bermuda, see Daynard, 290 F.3d at 61, or whether the
two other plaintiffs' claims are at all related to the
Partnership's and HG Limited's contacts in Massachusetts.
Plaintiffs fail to make out a prima facie case for specific
jurisdiction on the contract theory.
-36-
ii. Specific Jurisdiction Based on
Misrepresentation and Breach of Fiduciary
Duty Claims
Also unsuccessful is plaintiffs' argument that specific
jurisdiction over HG Limited exists on account of the Partnership's
alleged misrepresentation and breach of fiduciary duty.
To satisfy the relatedness prong of the constitutional
inquiry in a tort case,
[t]he evidence produced to support specific
jurisdiction must show that the cause of
action either arises directly out of, or is
related to, the defendant's forum-based
contacts. The relatedness requirement is not
an open door; it is closely read, and it
requires a showing of a material connection.
This court "steadfastly reject[s] the exercise
of personal jurisdiction whenever the
connection between the cause of action and the
defendant's forum-state contacts seems
attenuated and indirect." "Instead, the
defendant's in-state conduct must form an
'important, or [at least] material, element of
proof' in the plaintiff's case." A broad
"but-for" argument is generally insufficient.
. . . "[D]ue process demands something like a
'proximate cause' nexus."
Harlow, 432 F.3d at 60-61 (citations omitted) (quoting Pleasant St.
I, 960 F.2d at 1089; Cambridge Literary Props., 295 F.3d at 65);
see also Phillips Exeter Acad., 196 F.3d at 289. None of
plaintiffs' claims is sufficiently related to HG Limited's
Massachusetts contacts.
Plaintiffs allege that Platten was induced to enter into
the Agreement by misrepresentations that were made by an agent of
the Partnership in Massachusetts and that "[t]he scheme to defraud
-37-
and mislead Platten was furthered by four letters sent to him in
Massachusetts from the Partnership's New York lawyers and Matthews
himself." They further allege that "[t]wo similar letters were
sent by Matthews and the Partnership's New York counsel to Flannery
in Massachusetts."11 These letters all dealt with the non-
competition and termination distribution clauses of the Agreement,
and the plaintiffs' rights and responsibilities thereunder.12
Again, plaintiffs failed to provide any details in their
complaint or affidavits about the circumstances surrounding the
parties' entry into the Agreement, including any misrepresentations
that were made at that time, who may have made them, and in what
capacity. Thus, any alleged misrepresentations made by the
Partnership at the time of contracting cannot be the basis of
specific jurisdiction over HG Limited.
As for the correspondence from the Partnership's lawyers
and Matthews to Platten and Flannery, that itself does not suffice
to show relatedness. See Far W. Capital, Inc. v. Towne, 46 F.3d
11
Plaintiffs do not allege that any of the "Hay Group"
entities or their representatives directed any correspondence to
Pfau in Massachusetts. The record shows that Pfau did not live or
work in Massachusetts during the time period relevant to the
litigation.
12
The two letters that each plaintiff received were a
September 4, 2002 letter from Matthews, which stated, among other
things, that "[t]he Partnership Agreement provides that your
termination distribution may be reduced in amount if you are in
breach of the [non-competition obligations]," and a September 26,
2002 letter from HG Limited's counsel, which gave notice that
"[y]our eligibility [for distributions] is . . . deferred" because
of violation of the non-competition clause.
-38-
1071, 1077 (10th Cir. 1995) ("It is well-established that phone
calls and letters are not necessarily sufficient in themselves to
establish minimum contacts."); see also Nicholas v. Buchanan, 806
F.2d 305, 307-08 (1st Cir. 1986) (per curiam) (collecting cases).
We are doubtful that the letters even provide a basis for a viable
cause of action. Platten and Flannery did not allege reasonable
reliance on the purported misrepresentations; thus, any harm that
Platten or Flannery suffered did not arise out of those
misrepresentations, but instead out of the Partnership's alleged
breach of the promise to pay them their termination distributions.
In specific jurisdiction terms, plaintiffs have not shown a
"material connection" between their injuries and HG Limited's
contacts in Massachusetts and therefore cannot meet the relatedness
requirement of the due process inquiry.13 See Harlow, 432 F.3d at
61.
13
Plaintiffs rely on Murphy v. Erwin-Wasey, Inc., 460 F.2d
661 (1st Cir. 1972), which this court decided before the advent of
the Supreme Court's modern personal jurisdiction cases, see, e.g.,
Burger King, 471 U.S. 462; Calder v. Jones, 465 U.S. 783 (1984),
for the proposition that "there can be no constitutional objection
to Massachusetts asserting jurisdiction over the out-of-state
sender of a fraudulent misrepresentation, for such a sender has
thereby 'purposefully avail[ed] itself of the privilege of
conducting activities within the forum State.'" Murphy, 460 F.2d
at 664 (quoting Hanson v. Denckla, 357 U.S. 235, 253 (1958)).
Murphy, however, was an intentional tort case in which plaintiff's
alleged injury came directly as a result of defendants' fraudulent
misrepresentations. Id. at 663. Murphy also recognized that where
"it is clear from his allegation that plaintiff was not deceived by
[the allegedly tortious] acts, jurisdiction may not be asserted
under [Mass. Gen. Laws ch. 223A, § 3(c)]." Id. at 665.
-39-
Nor does HG Limited's alleged breach of fiduciary duty
satisfy the constitutional standard for asserting specific
jurisdiction. "A breach of fiduciary duty occurs [in the state]
where the fiduciary acts disloyally." Phillips Exeter Acad., 196
F.3d at 291. Thus, for minimum contacts analysis, even if the
effects of the alleged breach were felt in Massachusetts, there is
no evidence in the record that the alleged breach itself "occurred"
in this state, see id. (concluding that "an in-forum effect of an
extra-forum breach . . . [was] inadequate to support a finding of
relatedness"), as opposed to, say, Bermuda, where HG Limited has
its usual place of business, or Pennsylvania, from whence Chris
Matthews allegedly controlled the Partnership.
b. General Jurisdiction over HG Limited
Plaintiffs argue that general jurisdiction also exists
over HG Limited by virtue of its parent-subsidiary relationship
with HGI and of Platten's activities, as a partner, in
Massachusetts.
"General jurisdiction [may] exist[] when the defendant
has engaged in 'continuous and systematic activity' in the forum,
even if the activity is unrelated to the suit." Daynard, 290 F.3d
at 51 (quoting Pleasant St. I, 960 F.2d at 1088). "The standard
for evaluating whether [defendants' alleged] contacts satisfy the
constitutional general jurisdiction test 'is considerably more
stringent' than that applied to specific jurisdiction questions."
-40-
Noonan, 135 F.3d at 93 (quoting Glater v. Eli Lilly & Co., 744 F.2d
213, 216 (1st Cir. 1984)).
The bar is set even higher in a case like this one, in
which plaintiffs seek to disregard the corporate form. "The mere
fact that a subsidiary company does business within a state does
not confer jurisdiction over its nonresident parent, even if the
parent is sole owner of the subsidiary. There is a presumption of
corporate separateness that must be overcome by clear evidence
. . . ." Escude Cruz v. Ortho Pharm. Corp. 619 F.2d 902, 905 (1st
Cir. 1980) (citation omitted); see also Donatelli v. Nat'l Hockey
League, 893 F.2d 459, 465 (1st Cir. 1990); My Bread, 233 N.E.2d at
752 (elaborating the contours of the corporate disregard doctrine).
Relying primarily on Platten's affidavits, plaintiffs
argue that HG Limited engaged in continuous and systematic
activities in Massachusetts "through the Partnership's active
control over HGI's Boston office" and "through Platten, who
routinely engaged in Partnership business in Massachusetts."
Again, there is no reason to disregard the corporate
form in this case. Ultimately, nothing in the record substantiates
the proposition that HG Limited "plainly made a choice to avail
itself of the forum's benefices." Donatelli, 893 F.2d at 466. No
personal jurisdiction, specific or general, exists over the
defendant.
-41-
3. Denial of Motion for Partial Reconsideration and
for Jurisdictional Discovery
Plaintiffs also claim error in the district court's
summary denial of their motion for partial reconsideration of its
dismissal of HG Limited for lack of personal jurisdiction. With
the exception of allegations based on Platten Affidavit III, which
was not admitted into the record, their motion for reconsideration
merely reiterated the allegations and arguments advanced in their
reply to the Offshore Defendants' dismissal motion. There was no
abuse of discretion in the district court's declining to reconsider
its previous ruling. See Servants of the Paraclete v. Does, 204
F.3d 1005, 1012 (1st Cir. 2000) (holding that "a motion for
reconsideration is appropriate where the court has misapprehended
the facts, a party's position, or the controlling law," but is not
appropriate as a "vehicle[] to reargue an issue previously
addressed by the court when the motion merely advances new
arguments[] or supporting facts which were available at the time of
the original motion").
This leaves plaintiffs' final objection, which is to the
district court's summary denial of their motion to defer ruling on
the Rule 12(b)(2) issue pending jurisdictional discovery, which
they requested as an alternative to their motion for partial
reconsideration. Because "[t]rial management is peculiarly within
the ken of the district court," United States v. Saccoccia, 58 F.3d
754, 770 (1st Cir. 1995), we review only for abuse of discretion,
-42-
and find none here.
"[A] diligent plaintiff who sues an out-of-state
corporation and who makes out a colorable case for the existence of
in personam jurisdiction may well be entitled to a modicum of
jurisdictional discovery if the corporation interposes a
jurisdictional defense.” Sunview Condo. Ass'n v. Flexel Int'l, 116
F.3d 962, 964 (1st Cir. 1997). However, the availability of
jurisdictional discovery is subject to the district court's
discretion. See id.; accord United States v. Swiss Am. Bank, Ltd.,
274 F.3d 610, 625-26 (1st Cir. 2001).
"If a party needs jurisdictional discovery, that party
has an obligation to request it in a timely manner." Barrett v.
Lombardi, 239 F.3d 23, 28 (1st Cir. 2001). Plaintiffs had ample
opportunity to request jurisdictional discovery in the full year
between when they filed their initial complaint in state court and
when the district court ruled on the Offshore Defendants' motion to
dismiss for lack of personal jurisdiction. Yet, plaintiffs made no
attempt to do so until after the district court ruled in
defendants' favor. That alone suffices to justify the district
court's rejection of their motion. See id. at 28-29 (finding no
abuse of discretion in the district court's denial of discovery
when defendant did not seek discovery at any time prior to the
entry of an adverse judgment).
-43-
III.
We affirm. Costs are awarded to defendants.
-44-
Platten v. HG Bermuda Exempted Ltd.
Court: Court of Appeals for the First Circuit
Date filed: 2006-02-06
Citations: 437 F.3d 118
Copy Citations