PRECISION LABORATORY PLASTICS v
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981 P.2d 454 (1999)
96 Wash.App. 721
PRECISION LABORATORY PLASTICS, INC., Appellant,
v.
MICRO TEST, INC., a foreign corporation, Respondent.
No. 23333-9-II.
June 18, 1999.
Publication Ordered July 23, 1999.
Court of Appeals of Washington, Division 2.
Mark Barshfield Anderson, Davies Pearson P.C., Tacoma, for Appellant.
Timothy C. Batten, Schreder Wheeler & Flint Lip, Atlanta, GA., Robert Nelson Meals, Meals & Bor P.l.l.c., Seattle, for
Respondent.
*455 HUNT, J.
455
Precision Laboratory Plastics, Inc., appeals dismissal of its breach of contract lawsuit against Micro Test, Inc. Holding
that Micro Test transacted business in Washington and was, therefore, subject to personal jurisdiction under the long-
arm statute, we reverse.
FACTS
I. CONTRACT
Micro Test, Inc. (Micro Test), a Georgia corporation, manufactures a medium for transporting disease-causing organisms
to medical laboratories. Precision Laboratory Plastics, Inc. (Precision Labs), a Washington corporation located in
Centralia, manufactures plastic parts and supplies used by medical, research, and pharmaceutical laboratories. Micro
Test uses vials, such as those produced by Precision Labs, to contain its medium for shipment.
On November 12, 1996, Micro Test ordered 10,000 10 ml vials from Precision Labs. Steve Racioppi, president of Micro
Test, telephoned Precision Labs and asked if they could also produce a 15 ml vial, similar to the 10 ml vial. Precision
Labs was not manufacturing 15 ml vials; rather, it would need to retool machinery and create the necessary larger mold.
Nonetheless, Joseph Lasby, Precision Lab's Chief Financial Officer, faxed information to Racioppi. After a series of
negotiations by telephone, Lasby prepared and faxed a written agreement to Racioppi, who requested minor changes.
After further long-distance negotiations, on February 6, 1997, the parties entered into a contract for Precision Labs to
create a special mold for manufacturing 15 ml vials for Micro Test.
[1]
Micro Test agreed to purchase 3 million 15 ml vials
over a three-year period, after which the price would be reduced. Micro Test could cancel the contract by giving 60 days
notice, but it would have to reimburse Precision Labs the unamortized cost of the mold. When Precision Labs received a
$3,800 down payment on the mold, it was to give Micro Test a date certain for the first shipment of vials so that Micro
Test could terminate its relationship with its existing supplier.
[2]
Micro Test ordered 10,000 10 ml vials in May 1997 and
20,000 more in October 1997. In September 1997, Precision Labs shipped Micro Test its first order of 15 ml vials.
II. GEORGIA LAWSUIT
Micro Test contends that the 15 ml vials were defective because they leaked. On January 12, 1998, Micro Test filed an
action in Georgia, claiming breach of contract based on product unfitness. Precision Labs filed a counterclaim, asserting
breach of contract for failure to pay for the product.
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III. WASHINGTON LAWSUIT
On January 16, 1998, Precision Labs filed a separate action in Lewis County Superior Court, Washington, asserting in
its complaint the allegations of the counterclaim it had previously filed in Georgia. On April 6, 1998, Precision Labs
amended its complaint. On April 8, 1998, Micro Test filed a special appearance and a CR 12(b)(2) motion to dismiss
Precision Labs' Washington action based on lack of personal jurisdiction over Micro Test.
[3]
Micro Test argued that it was
merely a buyer of Washington-made goods and, as such, it was not doing business in Washington and not subject to
Washington's long-arm statute, RCW 4.28.185.
On April 14, 1998, Micro Test filed its answer to Precision Labs' complaint, asserting five defenses: (1) lack of
jurisdiction, reiterated from its CR 12(b)(2) motion; (2) insufficient service of process; (3) supersedure by the Georgia
proceeding; (4) failure of a condition precedent; and (5) failure of consideration. On May 1, 1998, the Lewis *456 County
Superior Court granted Micro Test's motion to dismiss for lack of personal jurisdiction.
456
ANALYSIS
I. Standard of Review
A trial court's ruling on personal jurisdiction is a question of law reviewable de novo when the underlying facts are
undisputed. Lewis v. Bours,
119 Wash.2d 667, 669, 835 P.2d 221 (1992),
MBM Fisheries, Inc. v. Bollinger Mach. Shop &
Shipyard,
Inc., 60 Wash.App. 414, 418, 804 P.2d 627 (1991). If the trial court's ruling is based on affidavits and
discovery, "only a prima facie showing of jurisdiction is required." MBM,
60 Wash. App. at 418, 804 P.2d 627; Pedersen
Fisheries, Inc. v. Patti Indus., Inc.,
563 F.Supp. 72, 74 (W.D.Wash.1983). Here, although Precision Labs has the burden
of demonstrating jurisdiction, the allegations in its complaint are considered substantiated for purposes of appeal. See
MBM Fisheries,
60 Wash.App. at 418, 804 P.2d 627.
II. PERSONAL JURISDICTION
Personal jurisdiction is bounded by due process under the Fourteenth Amendment;
[4]
an out-of-state defendant must
have some minimum contact with the state so that personal jurisdiction will not offend "traditional notions of fair play and
substantial justice." International Shoe Co. v. State of Washington, Etc.,
326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed.
95, 161 A.L.R. 1057 (1945), quoting Milliken v. Meyer,
311 U.S. 457, 463, 61 S.Ct. 339, 343, 85 L.Ed. 278, 132 A.L.R.
1357 (1940).
General personal jurisdiction can exist when the defendant transacts "substantial and continuous business of such
character as to give rise to a legal obligation." MBM Fisheries,
60 Wash.App. at 418, 804 P.2d 627. Here, we are
concerned with specific jurisdiction, which arises from certain activities within the state. MBM Fisheries,
60 Wash.App. at
422-23, 804 P.2d 627. Specific personal jurisdiction over out-of-state defendants is measured by RCW 4.28.185, which
reads in pertinent part:
(1) Any person, whether or not a citizen or resident of this state, who in person or through an agent does
any of the acts in this section enumerated, thereby submits said person, and, if an individual, his
personal representative, to the jurisdiction of the courts of this state as to any cause of action arising from
the doing of any of said acts:
(a) The transaction of any business within this state
....
Three factors must coalesce to satisfy RCW 4.28.185:
(1) The nonresident defendant or foreign corporation must purposefully do some act or consummate
some transaction in the forum state; (2) the cause of action must arise from, or be connected with, such
act or transaction; and (3) the assumption of jurisdiction by the forum state must not offend traditional
notions of fair play and substantial justice, consideration being given to the quality, nature, and extent of
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the activity in the forum state, the relative convenience of the parties, the benefits and protection of the
laws of the forum state afforded the respective parties, and the basic equities of the situation. (citations
omitted)
Tyee Constr. Co. v. Dulien Steel Products, Inc.,
62 Wash.2d 106, 115-16, 381 P.2d 245 (1963); Smith v. York Food
Mach. Co.,
81 Wash.2d 719, 721, 504 P.2d 782 (1972); Shute v. Carnival Cruise Lines,
113 Wash.2d 763, 767, 783 P.2d
78 (1989) (emphasis added). RCW 4.28.185 extends personal jurisdiction over out-of-state defendants to the full limit of
federal due process. Shute,
113 Wash.2d at 771, 783 P.2d 78.
1. Purposeful Transaction In Forum State
The first Tyee
factor is whether the foreign corporation has transacted business in the forum state. It is irrelevant which
party initiated the transaction if a business relationship arises from the transaction. *457
Sorb Oil Corp. v. Batalla Corp.,
32 Wash. App. 296, 299, 647 P.2d 514 (1982); see Kysar v. Lambert,
76 Wash.App. 470, 487, 887 P.2d 431,
review
denied
126 Wash.2d 1019, 894 P.2d 564 (1995). But the mere presence of a contract alone cannot establish specific
personal jurisdiction; rather, we view the nature of the contractual relationship and consider factors such as:
457
prior negotiations and contemplated future consequences, along with the terms of the contract and the
parties' actual course of dealing [to determine] whether the defendant purposefully established minimum
contacts within the forum.
Burger King Corp. v. Rudzewicz,
471 U.S. 462, 479, 105 S.Ct. 2174, 2185, 85 L.Ed.2d 528 (1985). When parties "reach
out beyond one state and create continuing relationships and obligations with citizens of another state, courts need not
resort to a fictional `consent' in order to sustain the jurisdiction of [the latter state's courts]." Travelers Health Ass'n v.
Commonwealth of Virginia,
339 U.S. 643, 647, 70 S.Ct. 927, 929, 94 L.Ed. 1154 (1950) (emphasis added); Burger King
Corp.,
471 U.S. at 473, 105 S.Ct. 2174.
Here, Micro Test formed a contract with Precision Labs contemplating future consequences and creating a continuing
relationship with ongoing obligations. Micro Test has purposefully and continuously transacted business within
Washington State. If Micro Test had merely purchased goods from Precision Labs, then its argument against specific
personal jurisdiction might prevail. But Precision Labs and Micro Test negotiated an ongoing business relationship,
culminating in a bilateral contract, pursuant to which Precision Labs retooled its machinery to custom manufacture 15 ml
vials for Micro Test.
The contract reflects a series of negotiations facilitated by telephone and fax machine, the locus of which, therefore, is
difficult to pinpoint.
[5]
The parties agreed that Precision Labs would create a special mold at a cost of $38,000 so that
Precision Labs could custom manufacture 15 ml vials for Micro Test. Micro Test agreed to purchase 3 million vials over a
three-year period. Even if Micro Test cancelled prematurely, it would be liable for the remaining unamortized cost of
producing the mold. Viewing the totality of the business relationship between Precision Labs and Micro Test, we hold
that Micro Test purposely transacted business within this state.
2. Cause of Action Arising From Contract
The parties agree that the cause of action arises from this transaction. Thus, the second Tyee
factor is satisfied.
3. Fair Play and Substantial Justice
The third and final Tyee
factor is whether the Washington court's assertion of personal jurisdiction over Micro Test
offends traditional notions of fair play and substantial justice. We look to the nature, quality, and extent of Micro Test's
activity in this state, the convenience of the parties, the benefits and protections of Washington law, "and the basic
equities of the situation." Tyee Constr. Co.,
62 Wash.2d at 115-16, 381 P.2d 245.
Micro Test's activities in Washington consisted of negotiating a long term business relationship with Precision Labs,
convincing Precision Labs to build a special mold and custom manufacture a different size vial, and purchasing these
and other vials from Precision Labs. Long distance negotiation of a contract should not defeat jurisdiction in this
electronic era where myriad contracts are consummated daily by telecommunication.
[6]
*458 It is immaterial that: (1)
Micro Test has no office in Washington; (2) no Micro Test agent ever entered this state; and (3) each party remained in
458
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