Date: 03-08-2010

Case Style: PVC Windows, Inc. v. Babbitbay Beach Construction

Case Number: 08-10401

Judge: Tjoflat

Court: United States Court of Appeals for the Eleventh Circuit on Appeal from the United States District Court for the Southern District of Florida, Miami-Dade County

Plaintiff's Attorney:

Defendant's Attorney:

Description: This case arises out of two contracts for the supply and installation of
windows and doors for a hotel construction project on the island of Saint Maarten
in the Netherlands Antilles. PVC Windoors, Inc. sued the parties with whom it
contracted and others for breach of contract and fraud in an effort to obtain
payment for work it performed.1 The defendants moved the district court to
dismiss the case on the ground that the court lacked jurisdiction over their persons,
and the court granted their motion. Because the defendants did not do business in
Florida, were not otherwise subject to the reach of Florida’s long-arm statute, and
lacked minimum contacts with Florida, we affirm the decision of the district court.

I.

A.

PVC Windoors, Inc. (“PVC”) is a Florida corporation with its principal
place of business in Miami-Dade County, Florida. PVC supplies and installs
doors and windows for residential and business customers. None of the
defendants is incorporated in Florida or maintains a principal place of business in
Florida. Babbitbay Beach Construction, N.V. (“Babbitbay Construction”) and
Babbitbay Beach Development Corporation, B.V. (“Babbitbay Development”) are
Saint Maarten companies with their principal places of business in Saint Maarten,
Netherlands Antilles. Columbia Properties Saint Maarten, LLC (“CP”) is an
Anguillan limited liability company with its principal place of business in
Anguilla. Sun Martin Limited (“Sun”) was an Anguillan company with its
principal place of business in Anguilla, but was dissolved on or about March 24,
2006, prior to the commencement of this litigation. Columbia Sussex Corporation
(“Columbia Sussex”) is a Kentucky corporation with its principal place of
business in Fort Mitchell, Kentucky.

On February 17, 2006, PVC entered into two separate contracts to supply
and install windows and doors for the Dawn Beach Resort & Spa and Dawn Beach
Resort Condominium in Saint Maarten (the “Project”). The first contract was with
Babbitbay Development; PVC agreed to transport the materials and equipment to
be used in the installation of the windows and doors on the Project (“Agreement
1”). The second contract was with Babbitbay Construction; PVC agreed to supply
the labor for the installation (“Agreement 2”).2 Columbia Sussex, CP, and Sun did
not sign either of the contracts. Prior to the execution of the two agreements,
Columbia Sussex orally represented to PVC that, if PVC contracted with
Babbitbay Construction and Babbitbay Development, Columbia Sussex would
guarantee Babbitbay Construction’s and Babbitbay Development’s performance of
the respective contracts, including the sums due PVC for the work.

B.

Shortly after work began on the Project, contractual disputes arose between
the contracting parties. When the disputes were not resolved to PVC’s
satisfaction, PVC filed a multi-count complaint in the Circuit Court of Miami-
Dade County, Florida, against Babbitbay Construction, Babbitbay Development,
Columbia Sussex, CP, and Sun. PVC alleged numerous material breaches of the
two contracts: Babbitbay Construction and Babbitbay Development failed to pay
for completed work; they required PVC to perform extra work without
compensation; they changed the terms of the contracts by requiring PVC to
employ a shipping agent and a subcontractor; they wrongfully terminated the
agreements; and Columbia Sussex, which had guaranteed the performance of the
contracts, had failed to pay PVC in accordance with the terms of the agreements.

In addition, PVC alleged that Columbia Sussex had fraudulently induced it to
enter into the contracts by representing that if PVC contracted with Babbitbay
Construction and Babbitbay Development, it would guarantee those parties’
performance of their obligations.

The defendants removed the case to the United States District Court for the
Southern District of Florida. See 28 U.S.C. § 1441. One month later, they jointly
moved the court to dismiss them from the case for lack of personal jurisdiction. In
lieu of responding to the motion to dismiss, PVC filed an amended complaint.

The amended complaint contains 151 paragraphs and ten counts.3 Seventythree
paragraphs precede Count I and describe the events that led to Agreements 1
and 2 as follows. In early 2005, Columbia Sussex solicited bids from contractors
in Florida, including PVC, to supply and install windows and doors for the Dawn
Beach Resort & Spa and Dawn Beach Resort Condominium in Saint Maarten.
PVC responded to the solicitation and, in November 2005, Columbia Sussex
requested PVC to submit a bid. PVC complied. In February 2006, Columbia
Sussex informed PVC as follows: PVC’s bid was being forwarded to the
companies developing the Project, Babbitbay Construction and Babbitbay
Development. Although Columbia Sussex was the “real party in interest” in the
development of the Project, any contracts PVC entered into would be with those
two firms. Columbia Sussex, however, would “guaranty [sic] payment and
performance of such agreements.” Babbitbay Construction and Babbitbay
Development accepted PVC’s bid and entered into separate contracts, Agreements
1 and 2.

Count I incorporates paragraphs one through seventy-three, and each of the
nine succeeding counts incorporates all preceding counts, such that Count X
amounts to an amalgamation of all counts of the complaint.4 Among the
allegations preceding Count I is the claim that Babbitbay Construction, Babbitbay
Development, CP, and Sun are alter egos and mere instrumentalities of Columbia
Sussex, and that the latter is the party that actually controlled these entities and
engaged in the conduct giving rise to PVC’s claims.5 Count I, “fraud in the
inducement,” alleges that Columbia Sussex and the other defendants collaborated
to make representations to PVC to induce it to enter into Agreement 1, knowing
that PVC would not be paid for its work. Count II repeats the same “fraud in the
inducement” allegation with respect to Agreement 2. Counts III and IV allege that
the defendants breached Agreements 1 and 2, respectively. Count V alleges that
Columbia Sussex fraudulently induced PVC to enter into Agreements 1 and 2 by
promising that it would guarantee the payments due PVC under those agreements,
a promise that it intended not to keep. Count VI alleges that Columbia Sussex
breached that promise. Count VII purports to be for “declaratory judgment,”
adjudicating the defendants’ joint and several liability for the payments due PVC
under Agreements 1 and 2, while Counts VIII, IX, and X state “alternative” claims
for unjust enrichment, quantum meruit, and open account, respectively.

The amended complaint alleges that the defendants’ “wrongful acts”
subjected the defendants to process under Florida’s long-arm statute (and thus to
the district court’s jurisdiction over their persons) because Columbia Sussex had
solicited bids for the Project work from Florida contractors, including PVC, and,
in the process, had used “telephonic and other electronic means in Florida.”

The defendants responded to the amended complaint by jointly moving the
district court to dismiss the case under Federal Rule of Civil Procedure 12(b)(2)
for lack of jurisdiction over their persons. Their motion asserted that the amended
complaint on its face showed that none of PVC’s claims related to any activities
that took place in Florida, and that the mere fact that Babbitbay Construction and
Babbitbay Development were parties to a contract with PVC, a Florida
corporation, did not satisfy the minimum contacts requirement of personal
jurisdiction. Attached to the motion to dismiss were four affidavits of Theodore
R. Mitchel, one for each of the defendants except Columbia Sussex. Each
affidavit denied that the defendant maintained an office in Florida, appointed an
agent for service of process in Florida, had property in Florida, or employed
anyone in Florida.

PVC responded to the defendants’ motion by filing the affidavits of PVC’s
chief executive officer, Gaston Boudreau, and its director of sales, Yves Saint-
Pierre. These affidavits were identical. They stated that “Columbia Sussex . . .
informed [PVC] on or about February 2006, in part in Florida . . . via telephonic
and other electronic means that [PVC] would have to enter into written agreements
with [Babbitbay Construction] and [Babbitbay Development],” and that
“Columbia Sussex . . . would guaranty [sic] payment and performance of such
agreements.”

After briefing was complete, the district court granted the defendants’
motions to dismiss for lack of personal jurisdiction and dismissed the case without
prejudice. Citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 105 S. Ct. 2174
(1985), the court found that the defendants’ activity in Florida was minimal and
clearly insufficient to satisfy the “minimum contacts” required by the Due Process
Clause of the Fourteenth Amendment. PVC now appeals that determination.6
II.

We undertake a two-step inquiry to determine whether the exercise of
personal jurisdiction over a nonresident defendant is proper. First, we determine
whether the state’s long-arm statute provides jurisdiction. Internet Solutions Corp.
v. Marshall, 557 F.3d 1293, 1295 (11th Cir. 2009). Only where the long-arm
statute provides jurisdiction do we proceed to the second step and determine
whether “the defendant ha[s] minimum contacts with the forum state” and, if it
does, whether the district court’s exercise of jurisdiction over that defendant
would “offend traditional notions of fair play and substantial justice.” Id. at
1295–96 (citations omitted) (alteration in original). In this case, in ruling on the
defendants’ motion to dismiss, the district court bypassed the first step and
proceeded directly to the second step. Because the federal courts are duty bound
to avoid a constitutional question if answering the question is unnecessary to the
adjudication of the claims at hand, see, e.g., Primera Iglesia Bautista Hispana of
Boca Raton, Inc. v. Broward County, 450 F.3d 1295, 1306 (11th Cir. 2006), we
consider first whether Florida’s long-arm statute provided the district court with
personal jurisdiction over any of the defendants.7

A.

The section 7 of Florida’s long-arm statute that PVC invokes reads:

Any person, whether or not a citizen or resident of this state, who personally or through
an agent does any of the acts enumerated in this subsection thereby submits himself or
herself and, if he or she is a natural person, his or her personal representative to the
jurisdiction of the courts of this state for any cause of action arising from the doing of
any of the following acts:

. . . .

(b) Committing a tortious act within this state.

. . . .

(g) Breaching a contract in this state by failing to perform acts required by the contract to
be performed in this state.

Fla. Stat. § 48.193(1).

The Florida long-arm statute provides two bases for the exercise of personal
jurisdiction: specific and general jurisdiction. In this case, PVC relies on the
theory of specific jurisdiction. Specific jurisdiction refers to “jurisdiction over
causes of action arising from or related to a defendant’s actions within the forum.”

Oldfield v. Pueblo De Bahia Lora, S.A., 558 F.3d 1210, 1220 n.27 (11th Cir.
2009). In Florida, be 8 fore a court addresses the question of whether specific
jurisdiction exists under the long-arm statute, the court must determine “whether
the allegations of the complaint state a cause of action.”9 Wendt v. Horowitz, 822
So. 2d 1252,1260 (Fla. 2002); see also 8100 R.R. Ave. Realty Trust v. R.W.
Tansill Constr. Co., 638 So. 2d 149, 151 (Fla. 4th Dist. Ct. App. 1994) (explaining
that where the sole basis of jurisdiction is the commission of a tort in Florida, the
court must necessarily determine whether the complaint states a cause of action in
order to determine jurisdiction). We therefore address the amended complaint’s
counts for fraudulent inducement and breach of contract separately.10

1.

The fraud in the inducement claims are asserted in Counts I, II, and V.
Although they are asserted against all five defendants, it is clear that Columbia
Sussex is the only defendant that, according to the amended complaint’s
allegations, made any misrepresentations to PVC.11 We therefore limit our
discussion of these counts to what Columbia Sussex may have said to PVC.

A cause of action for fraud in the inducement contains four elements: “(1) a
false statement regarding a material fact; (2) the statement maker’s knowledge that
the representation is false; (3) intent that the representation induces another’s
reliance; and (4) consequent injury to the party acting in reliance.” Thompkins v.
Lil’ Joe Records, Inc., 476 F.3d 1294, 1315 (11th Cir. 2007). We are satisfied that
the allegations of Counts I, II, and V satisfy the first three of these elements, but
not the fourth. Regarding the first three elements, the amended complaint alleges
that before PVC contracted with Babbitbay Construction and Babbitbay
Development, (1) Columbia Sussex represented that it would guarantee
performance of any contracts PVC entered into with those firms; (2) Columbia
Sussex knew that the representation was false in that it did not intend to guarantee
such performance; 12 and (3) Columbia Sussex intended to induce PVC to rely on
the representation. The amended complaint alleges that PVC relied on Columbia
Sussex’s representation, but that is not enough. It must allege facts establishing
that the reliance was reasonable. E.g., Avila S. Condo. Ass’n, Inc. v. Kappa Corp.,
347 So. 2d 599, 604 (Fla. 1977).

The allegations of the amended complaint, taken as a whole, fall short of
establishing PVC’s reasonable reliance on Columbia Sussex’s representation. If
PVC would not have contracted with Babbitbay Construction and Babbitbay
Development but for Columbia Sussex’s representation, one would expect that
when the promised guarantee was not forthcoming, PVC would have demanded
that Columbia Sussex provide the guarantee. But nothing in the amended
complaint evidences such a demand. It appears instead that, without demanding
that Columbia Sussex intervene on its behalf, PVC simply took Columbia Sussex
to court. Absent an allegation of a demand, we cannot conclude that PVC relied
on Columbia Sussex’s misrepresentation. In sum, Counts I, II, and V fail to state a
claim for relief. Those counts were therefore beyond the reach of Florida’s longarm
statute.

2.

PVC next argues that the court has jurisdiction of its breach of contract
claims, Counts III, IV, and VI, because the defendants “[b]reach[ed] a contract in
this state by failing to perform acts required by the contract to be performed in this
state.” The conduct giving rise to Counts III and IV consists of Babbitbay
Construction’s and Babbitbay Development’s—as alter egos of Columbia
Sussex—breach of Agreements 1 and 2. The conduct giving rise to Count VI is
Columbia Sussex’s breach of its promise to guarantee the performance of those
contracts. The defendants effectively concede that Counts III, IV, and VI state
claims for relief under Florida law.13 We therefore move to the question of
whether Florida’s long-arm statute provided the district court with personal
jurisdiction to entertain these three counts against any of the defendants.

It was PVC’s burden to convince the district court that it had jurisdiction
over the persons of the defendants. That is, PVC had to satisfy a threshold
requirement, the prima facie establishment of jurisdiction. “[T]he plaintiff bears
the burden of establishing a prima facie case of jurisdiction over the movant, nonresident
defendant.” Morris v. SSE, Inc., 843 F.2d 489, 492 (11th Cir. 1988)
(citing Delong Equip. Co. v. Washington Mills Abrasive Co., 840 F.2d 843, 845
(11th Cir. 1988)). A prima facie case is established if the plaintiff presents
affidavits or deposition testimony sufficient to defeat a motion for judgment as a
matter of law. Id. “[W]here the evidence presented by the parties’ affidavits and
deposition testimony conflicts, the court must construe all reasonable inferences in
favor of the non-movant plaintiff.” Id. If such inferences are sufficient to defeat a
motion for judgment as a matter of law, the court must rule for the plaintiff,
finding that jurisdiction exists.14 If, however, the court holds an evidentiary
hearing to adjudicate the issue of whether the court has jurisdiction over the
defendant’s person, the court determines the credibility of witness testimony,
weighs the evidence, and finds the relevant jurisdictional facts.

In this case, the court chose not to hold an evidentiary hearing to determine
whether the court had jurisdiction over the person of any of the defendants. It
chose, instead, to determine the existence of jurisdiction on the basis of the
parties’ affidavits. The court found that personal jurisdiction was lacking under
the constitutional due process standard, minimum contacts, rather than under the
long-arm statute standard. This is of no moment for our purposes, however,
because the same evidence—the affidavits of Mitchel, Boudreau, and Saint-
Pierre—is applicable under both analyses.

Mitchel’s affidavits were submitted on behalf of all defendants except
Columbia Sussex. Mitchel stated unequivocally that none of those defendants
ever had any contact with Florida. Boudreau and Saint-Pierre, on behalf of PVC,
averred that Columbia Sussex had communications with Florida contractors,
including PVC, via “telephonic and other electronic means,” and that Columbia
Sussex and PVC verbally agreed via “telephonic and other electronic means in
Florida . . . to enter into written agreements.”15 Considering the affidavits in the
light most favorable to PVC, the district court found that the defendants Mitchel
was referring to lacked the minimum contacts with Florida that due process
required. We conclude that these defendants had no contacts with Florida, and
thus were not within the long-arm statute’s reach.

The only affidavits before the court regarding Columbia Sussex’s contacts
with Florida were those of Boudreau and Saint-Pierre. Though the affidavits are
ambiguous and conclusory, we conclude that they sufficed to establish the district
court’s personal jurisdiction over Columbia Sussex under the long-arm statute.

We therefore move to the question of whether that defendant’s contacts with
Florida were sufficient to satisfy the Due Process Clause of the Fourteenth
Amendment.

B.

The Due Process Clause of the Fourteenth Amendment to the United States
Constitution protects a person’s liberty interest from being subject to the binding
judgments of a forum with which the person has established no meaningful
“contacts, ties, or relations.” Int’l Shoe Co. v. Washington, 326 U.S. 310, 319, 66
S. Ct. 154, 160 (1945). The Constitution prohibits the exercise of personal
jurisdiction over a nonresident unless his contact with the state is such that he has
“fair warning” that he may be subject to suit there. Shaffer v. Heitner, 433 U.S.
186, 218, 97 S. Ct. 2569, 2587 (1977) (Stevens, J., concurring in the judgment). A
defendant has such “fair warning” if he “purposefully directed” his activities at
residents of the forum and the litigation results from alleged injuries that “arise out
of or relate to” those activities. Burger King Corp. v. Rudzewicz, 471 U.S. 462,
472, 105 S. Ct. 2174, 2182 (1985) (citations omitted). In this way, the defendant
could have reasonably anticipated being sued in the forum’s courts in connection
with his activities there. Id. at 474, 105 S. Ct. at 2183.

In Burger King, the Supreme Court discussed the circumstances under
which a contractual relationship with an out-of-state defendant may satisfy the
“purposeful availment” test. The Court noted that a contract with an out-of-state
corporation, standing alone, is insufficient to create minimum contacts because 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, 105 S. Ct. at 2185 (quoting Hoopeston Canning
Co. v. Cullen, 318 U.S. 313, 316–17, 63 S. Ct. 602, 604–05 (1943)). Where,
however, the defendant has purposefully availed itself of the benefits and
protections of the forum state in its “prior negotiations . . . [and] contemplated
future consequences, along with the terms of the contract and the parties’ actual
course of dealing,” the forum state may exercise jurisdiction over the defendant.

Id. In that case, the Court found that a franchisee established minimum contacts
with Florida by signing a franchise agreement with a Florida corporation. The
Court explained that the franchisee planned a “substantial and continuing
relationship,” id. at 487, 105 S. Ct. at 2190, with Burger King’s Florida office by
entering into a “carefully structured 20-year relationship that envisioned
continuing and wide-reaching contacts with Burger King in Florida,” id. at 480,
105 S. Ct. at 2186. In addition, the Court found that the franchise agreement’s
Florida choice-of-law provision reinforced the franchisee’s “deliberate affiliation”
with Florida. Id. at 482, 105 S. Ct. at 2187.

In a case factually similar to the one here, at a meeting in Florida, a Costa
Rican corporation solicited a Florida marine salvage business to conduct salvage
operations in Costa Rica. Sea Lift, Inc. v. Refinadora Costarricense de Petroleo,
S.A., 792 F.2d 989, 991 (11th Cir. 1986). The boilerplate contract was discussed
in part in Florida, in part in Costa Rica, and via facsimile, and was to be governed
by English law. Id. at 991–92. We found that the defendant’s solicitation of the
plaintiff did not constitute purposeful availment of Florida law because the
contracted project was a “one-shot operation.” Id. at 994. We noted that, while
some in-Florida preparation may have been foreseeable, the plaintiff’s duties were
to be performed exclusively in Costa Rica. Id. Although “significant negotiations
of important terms” of the contract in the forum state may constitute purposeful
availment, the boilerplate contract in that case did not evidence any such
negotiations and the choice of English law indicated that the defendant did not
intend to avail itself of the benefits and protections of Florida law. Id. at 993–94
(citation omitted).

Here, the contacts between PVC and Columbia Sussex in Florida are even
weaker than the Florida contacts at issue in Sea Lift. Whereas the Sea Lift
defendant met with the plaintiff on Florida soil to solicit the latter’s entry into a
contract to conduct salvage operations—a fact we found insufficient to confer
personal jurisdiction—PVC’s strongest evidence to this effect is the statement in
the Boudreau and Saint-Pierre affidavits that negotiations between PVC and
Columbia Sussex took place “in part in Florida.” There is no indication of
whether this refers to a meeting in person in Florida, or whether it refers to the
“telephonic and other electronic means” by which the negotiations occurred. In
other words, PVC does not present evidence that Columbia Sussex made even the
“foot-fall” that Sea Lift held does not, standing alone, “invoke the benefits and
protections of the laws of the forum.” Id. at 993.

Columbia Sussex did enter into a one-time arrangement with PVC. After
refusing to contract with PVC for the provision of labor and materials for the
Project, it informed PVC that its bid for the work had been transmitted to
Babbitbay Construction and Babbitbay Development. If its bid was accepted,
Columbia Sussex would guarantee the performance of the resulting contract.

Columbia Sussex would act like a surety guaranteeing a landowner’s payment and
performance obligations under a construction contract. If Babbitbay Construction
or Babbitbay Development failed to perform, Columbia Sussex would stand in the
company’s shoes and cure the breach. We cannot say that in agreeing to serve as a
surety in this way, Columbia Sussex was intending to create a “substantial and
continuing relationship” with Florida.

****

See: http://www.ca11.uscourts.gov/opinions/ops/200810401.pdf

Outcome: The judgment of the district court is, accordingly, AFFIRMED.

Plaintiff's Experts:

Defendant's Experts:

Comments: Digested by Jesse Antell