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Alaska Telecom, Inc. v. R. Schafer (1/27/95), 888 P 2d 1296
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Notice: This opinion is subject to formal correction
before publication in the Pacific Reporter. Readers
are requested to bring errors to the attention of the
Clerk of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, telephone (907) 264-0607.
THE SUPREME COURT OF THE STATE OF ALASKA
ALASKA TELECOM, INC., )
) Supreme Court No. S-6159
Petitioner, )
) Trial Court No.
v. ) 3AN-91-4611 CI
)
ROGER A. SCHAFER, ) O P I N I O N
)
Respondent. ) [No. 4161 - January 27, 1995]
______________________________)
Petition for Hearing from the Superior
Court of the State of Alaska, Third Judicial
District, Anchorage, Glen C. Anderson, Judge,
on appeal from the District Court, Anchorage,
Michael Wolverton, Judge.
Appearances: William K. Walker, Law
Offices of William K. Walker, Anchorage, for
Petitioner. Gregory A. Miller, Law Offices
of Birch, Horton, Bittner and Cherot,
Anchorage; Robert W. Small, Berlinger &
Small, Abington, Pennsylvania, for
Respondent.
Before: Moore, Chief Justice,
Rabinowitz, Matthews and Compton, Justices,
and Bryner, Justice pro tem.*
MATTHEWS, Justice.
This case is a review of a district court order dismiss
ing a complaint for lack of personal jurisdiction.
I. FACTS AND PROCEEDINGS
Alaska Telecom, Inc. (ATI), is an Alaska corporation
with its principal offices in Anchorage. It is engaged in the
business of providing telecommunications services. In 1990, ATI
contracted to provide various professional services to NOUR
Trading Company in connection with the design, purchase, and
installation of a telecommunications system to be located in
Saudi Arabia. In anticipation of its business with NOUR, ATI
contracted with Roger A. Schafer, a Pennsylvania resident, to act
as a consultant to ATI and project manager for the project.
The initial arrangement between ATI and Schafer was
oral, resulting from telephone conversations between ATI's
representatives in Alaska and Schafer in Pennsylvania. The first
call was made by Schafer; in all, he made eight calls to
Anchorage prior to the formation of the contract.
Subsequently, Schafer was asked to meet with ATI's
representatives in Alaska. He traveled to Alaska, arriving on
February 3, 1991, and remained in Alaska until February 15, 1991.
While in Alaska he signed a written contract with ATI.
The written contract contained the following non-
competition clause:
14. Non-Competition:
A. During Term of Employment:
During the term of this employment agreement,
Consultant will not directly or indirectly,
either as an employee, employer, consultant,
agent, principal, partner, stockholder,
officer, or in any other individual represen
tative capacity, engage in or participate in
any business that is in competition in any
manner whatsoever with the business of ATI.
B. After Termination: On
termination of this employment agreement,
regardless of whether terminated by
Consultant himself or by ATI, Consultant will
not enter into or engage generally in direct
competition with ATI, nor will Consultant
participate as an individual, partner,
employee, officer, director, consultant, or
stockholder in any business of contract
telecommunication services, with ATI's
current customers, or with any future
customers developed during Consultant's
contract period, for a period of one (1) year
from the date of Consultant's termination.
The written contract also included a choice of law clause which
provided that the agreement "shall be interpreted under the laws
of the Commonwealth of Pennsylvania."
Schafer billed ATI for twelve days' services performed
in Alaska for $6,960.00.1 In total, Schafer provided services
from February 3, 1991, through March 31, 1991. During this time,
he performed services in Alaska, Pennsylvania, Virginia,
Maryland, and Canada.2
On or about April 1, 1991, Schafer went to work
directly for NOUR. ATI claims that this violated the non-
competition clause of the parties' agreement and filed a claim
for damages in the district court seeking lost profits of
$20,126, less an offset which would otherwise be due from ATI to
Schafer for unpaid services of $7,650. Schafer filed a special
appearance and moved to dismiss the complaint for lack of
personal jurisdiction. The district court granted the motion and
dismissed the complaint. ATI appealed to the superior court,
which affirmed the decision of the district court. ATI has now
petitioned for hearing to this court.3 We grant the petition and
reverse.
II. DISCUSSION
The exercise of personal jurisdiction requires
compliance with Alaska's long-arm statute, AS 09.05.015, and a
determination that application of the statute does not offend due
process.
A. Alaska's Long-Arm Statute
Alaska's long-arm statute, AS 09.05.015, lays out a
list of circumstances under which personal jurisdiction may be
exercised.4 Significantly, this list is not exclusive. Alaska
Statute 09.05.015(c) provides: "The jurisdictional grounds
stated in (a)(2)-(10) of this section are cumulative and in
addition to any other grounds provided by the common law." By
inserting this section into the statute, the legislature
manifested its intent to have the long-arm statute be co-
extensive with the Fourteenth Amendment.5
Even though personal jurisdiction requires compliance
with both the long-arm statute and due process concerns, the fact
that the long-arm statute is co-extensive with the Fourteenth
Amendment does not make the statute gratuitous. The state's long-
arm statute provides an authoritative basis for simplifying most
jurisdictional questions. By furnishing a list of specific
grounds providing jurisdiction, the state avoids converting every
jurisdictional issue into a constitutional question. See Jack H.
Friedenthal et al., Civil Procedure 3.12, at 140 (2d ed. 1993).
Thus, in most cases, jurisdictional issues can be resolved
quickly without much discussion. Borderline cases, raising due
process concerns, are oftentimes more difficult to assess.
Given the catch-all subsection (c), any case that does
not fit easily within the grounds explicitly described in the
previous subsections can stand as well upon the "grounds provided
by the common law." AS 09.05.015(c). This court has
consistently construed Alaska's jurisdiction to reach to the
maximum extent permitted by the due process clause of the
Fourteenth Amendment: "This court may exercise jurisdiction
under Alaska's long-arm statute to the maximum extent permitted
by due process under the federal constitution." Glover v.
Western Air Lines, Inc., 745 P.2d 1365, 1367 (Alaska 1987). See
also American Nat'l Bank v. International Seafoods, 735 P.2d 747,
749 (Alaska 1987); Kennecorp Mortgage v. First Nat'l Bank, 685
P.2d 1232, 1238 (Alaska 1984). Thus, in context, the statutory
catch-all clause refers to cases in which the exercise of
jurisdiction is permissible under the Fourteenth Amendment.
Arguably, jurisdiction is authorized in this case by
subsection (a)(5)(A). This subsection provides jurisdiction in
an action arising out of a promise made to a plaintiff by a
defendant to perform services in Alaska. See supra note 4.
Because of the unique nature of the alleged contract violation,
however, this case is not easily categorized.6 Thus, we find it
more appropriate to examine jurisdiction using the standards set
by subsection (c), that is, due process.
B. Due Process Requirements
This court outlined in Glover the current framework for
determining the limits of jurisdiction under the due process
clause:
Due process permits the assertion of
jurisdiction over a defendant in any state
with which the defendant has "certain minimum
contacts . . . such that the maintenance of
the suit does not offend 'traditional notions
of fair play and substantial justice.'" In
essence, jurisdiction may be asserted when it
is found that the defendant's contacts with
the forum are substantial enough that the
defendant could reasonably anticipate being
haled into court in that forum. The
defendant's contacts with the forum should be
found sufficiently substantial whenever a
defendant has maintained "continuous and
systematic general business contacts" with
the forum state. When a controversy is
"related to"or "arises out of"a defendant's
contacts with the forum, the exercise of
jurisdiction is said to be "specific"and is
justified on the basis of the relationship
among the defendant, the forum, and the
litigation. Even where the cause of action
does not "relate to"or "arise out of" the
defendant's contacts with the forum, however,
"general"jurisdiction may be asserted if
there are sufficient generalized contacts
between the state and the defendant.
745 P.2d at 1367 (citations omitted). Thus, due process analysis
asks two questions: first, whether minimum contacts exist;
second, whether maintenance of the suit is consistent with
traditional notions of fair play and substantial justice.
1. Minimum Contacts
This case involves "specific"jurisdiction, as ATI's
claim is one for breach of a contract which Schafer signed and
partially performed in Alaska. In such cases, the requirement
that a defendant be able to reasonably anticipate suit in a
particular forum "is satisfied if the defendant has '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 (1985) (citations omitted). An individual's
contract with an out-of-state party taken alone does not
"automatically establish sufficient minimum contacts in the other
party's home forum." Id. at 478. The contract along with such
other factors as "prior negotiations and future consequences . .
. and the parties' actual course of dealing . . . must be
evaluated in determining whether the defendant purposefully
established minimum contacts within the forum." Id. at 479.
One commentator has suggested that a single contract
plus one other contact with the forum state is sufficient to
establish jurisdiction:
Single contract cases are difficult and
have evenly divided the courts. Add to any
one of these cases a significant additional
contact, a personal appearance by the
defendant in the forum state to negotiate,
solicit, or facilitate the deal, and most
courts will immediately breathe a sigh of
relief and uphold jurisdiction. In so doing,
courts need not also decide how weighty a
contact a personal appearance to solicit or
negotiate is, or whether it is as significant
a contact as a personal local performance.
They only need conclude that both contacts
are sufficient to resolve the jurisdictional
question.
Martin B. Louis, Jurisdiction Over Those Who Breach Their
Contracts: The Lessons of Burger King, 72 N.C. L. Rev. 55, 75
(1993).
In this case, Schafer established numerous contacts
with the state -- not just one -- in addition to that of forming
a contract with an Alaskan. He solicited a contract with an
Alaskan entity; negotiated with ATI representatives by telephone
between Alaska and Pennsylvania; executed the written contract in
Alaska; performed a significant portion of his services in
Alaska; mailed his invoices to Alaska for payment; and was paid
by checks drawn on an Alaskan bank.
Furthermore, this litigation directly relates to the
contract. In the contract, Schafer agreed not to compete with
ATI by working independently for ATI's customers. If the
complaint's allegations are true, Schafer breached the contract
and damaged ATI by entering into a direct contractual
relationship with one of those customers.
For these reasons, sufficient minimum contacts exist in
Alaska such that jurisdiction consistent with due process can be
exercised over Schafer.
2. "Fair Play and Substantial Justice"
After it has been determined that a defendant
purposefully established minimum contacts within the forum state,
these contacts may be considered in light of other factors to
determine whether the assertion of personal jurisdiction would
comport with fair play and substantial justice. Burger King, 471
U.S. at 476. In a case such as the one before the court, where a
defendant who has purposefully directed his activities at forum
residents seeks to defeat jurisdiction, the defendant must
present a compelling case that certain considerations render
jurisdiction unreasonable. Id. at 477.
Schafer contends that when the contract was formed the
parties did not contemplate that he would do any work in Alaska.
Accepting this as true merely means that the factor of expected
performance in the forum state is lacking, not that jurisdiction
cannot be exercised. As Burger King makes clear, the actual
course of contract performance is also a relevant factor, id. at
479, and it is present in this case.
Also, the fact that the parties agreed that the
contract was to be interpreted under Pennsylvania law does not
mean that Alaska lacks jurisdiction. In Burger King, the forum
state's law governed. Yet this factor played only a minimal role
in the court's decision. Louis, supra, at 87. More importantly,
the choice of law provision does not negate the significance of
substantial contacts with Alaska with respect to this dispute.
See Volkswagenwerk v. Klippan, 611 P.2d. 498 (Alaska 1980)
(Alaska had jurisdiction as a matter of due process even though
forum selection clause required suit in another country).
Nor is jurisdiction likely to be especially burdensome
to Schafer. The court in Burger King stated that, "because
'modern transportation and communications have made it much less
burdensome for a party sued to defend himself in a State where he
engages in economic activity,' it usually will not be unfair to
subject him to the burdens of litigating in another forum for
disputes relating to such activity." Burger King, 471 U.S. at
474 (citation omitted). Schafer, in his conduct with ATI,
demonstrated that doing business with an Alaskan entity was not,
for him, particularly burdensome. He can now hardly put forth
the proposition that responding to a lawsuit in Alaska is
unreasonably burdensome.
III. CONCLUSION
Schafer's alleged breach of his promise with ATI, along
with other contacts made with Alaska, satisfies the "catch-all"
subsection (c) of the state's long-arm statute. These contacts
are sufficient to establish the minimum contacts required by due
process; personal jurisdiction in this case comports with fair
play and substantial justice.
REVERSED and REMANDED.
_______________________________
* Sitting by assignment made pursuant to article IV,
section 16 of the Alaska Constitution.
1 Schafer's invoices "for services"relate the following:
Date Location/Activities
Feb 3 Travel PHL/ANC
Feb 4 Anchorage/Project discussions;
ATI, EGE, Farinon
Feb 5 Anchorage/Discussions; civil,
towers, microwave, schedule shelters.
Feb 6 Anchorage/EGE frequencies,
power unit requirements and sources. DC
plant scope-scheme. Decibel BOM review.
Feb 7 Anchorage/Discussions -
Research Crypto AG scope-impact. EGE
progress. Shelter layout options.
Feb 8 Anchorage/EGE progress, Crypto
AG needs. Farinon Synchronization plus MUX
DEMUX details. LARSE Alarm-Monitor
System.
Feb 9 Anchorage/Crypto AG, Farinon
path profiles, project schedule.
Feb 10 Anchorage/Crypto AG coverage,
frequency planning, tower-antenna details.
Feb 11 Anchorage/Details and
scheduling on Harris Farinon generators.
Feb 12 Anchorage/Material control
discussions, shelter scenarios.
Feb 13 Cost estimates, discussions
and alternatives.
Feb 14 EGE discussion, project
schedule, Decibel products best and final
kick off.
Feb 15 Logistics, project budget and
schedule efforts. Depart Anchorage at
1900 local.
2 Schafer's invoices reflect the following approximate
percentages of time spent in the various locations:
Alaska 23%
Pennsylvania 38%
Virginia 34%
Maryland 4%
Canada 2%
3 Because the district court judge considered matters
outside the pleadings, the motion will be treated as one for
summary judgment under Civil Rule 56.
In reviewing a grant of summary judgment, this court
"must determine whether a genuine issue of material fact exists
and whether the moving party is entitled to judgment as a matter
of law." Saddler v. Alaska Marine Lines, Inc., 856 P.2d 784, 787
(Alaska 1993). All reasonable inferences of fact must be drawn
in favor of the non-moving party. Wright v. State, 824 P.2d 718,
720 (Alaska 1992).
4 ATI claims that this case falls within subsections
(a)(5)(A) and (B). These subsections provide:
(a) A court of this state having
jurisdiction over the subject matter has
jurisdiction over a person served in an
action according to the rules of civil
procedure
. . . .
(5) in an action
that
(A) arises out of
promise, made anywhere to the plaintiff
. . . by the defendant to perform
services in this state . . .;
(B) arises out of
services actually performed for the
plaintiff by the defendant in this state
. . . .
5 Alaska's long-arm statute, introduced as House Bill No.
16, was enacted by the 1967 legislature. It was patterned after
the Wisconsin long-arm statute, W.S.A. 262.05 (Recodified in 1975
as W.S.A. 801.05): "HOUSE BILL NO. 16 is taken from Sec. 262.05
of the Wisconsin Statutes (1964)." 1967 House Journal 39.
Wisconsin intended its long-arm statute to be co-
extensive with the Fourteenth Amendment. The Alaska Judiciary
Committee's report quotes from Wisconsin's declaration of
objectives: "[The statute] provide[s] a means for trying in
Wisconsin all personal actions which, in a due process sense, it
is reasonable to try here against the named defendant." Id.
(emphasis added).
Interestingly, Wisconsin's long-arm statute did not
have a clause similar to Alaska's "catch-all" clause. This
unique clause was inserted by the Senate as an amendment to House
Bill No. 16. 1968 House Journal 781-82. It was approved
subsequently by both the Senate and the House, providing further
evidence that the legislature intended the long-arm statute to
reach as far as permissible under the Fourteenth Amendment.
6 Because the promise at issue here is a promise not to
compete, it is not immediately apparent where performance will
take place. But since the violation might occur anywhere,
performance may be understood as being worldwide in scope --
including Alaska.
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