New England Biz Law Update
A Texas-based company could not be sued in Rhode Island for manufacturing allegedly defective fertilizer products that caused a Rhode Island plaintiff to lose royalty payments, a U.S. magistrate judge has found.
The defendant company argued that the complaint should be dismissed for lack of personal jurisdiction.
Judge Patricia A. Sullivan agreed.
“Due process requires more than a defendant’s knowledge of reduced royalties received in the plaintiff’s home state,” Sullivan wrote. “[The defendant] simply did not benefit from contact with Rhode Island in a way that makes the exercise of personal jurisdiction over it in Rhode Island foreseeable.”
The 25-page decision is Daniels Agrosciences, LLC v. Ball DPF, LLC.
Providence attorneys Eric E. Renner and Craig M. Scott represented the plaintiff. Representing the defendant was Robert M. Duffy, also of Providence.
Turf battle
Plaintiff Daniels Agrosciences, or DAS, a Rhode Island limited liability company, develops fertilizer and plant food products for turf, horticulture, landscape and retail markets. The plaintiff licenses its technology to other companies that manufacture and sell the products, in consideration for royalty payments.
The plaintiff entered into an exclusive license agreement with Progressive Turf, LLC, a Georgia limited liability company. Under that license, Progressive was authorized to manufacture and sell turf fertilizer based on a formula developed by the plaintiff in exchange for royalty payments.
In August 2010, Progressive contracted with defendant Ball DPF — a manufacturer of horticultural, landscape and turf products — to manufacture turf fertilizer products at the defendant’s facility in Texas.
The suit arose from the plaintiff’s allegation that the defendant made improper and unauthorized changes to the plaintiff’s turf fertilizer formula, causing Progressive to stop purchasing manufactured turf fertilizer products from the defendant in January 2011. As a result, the plaintiff claimed, Progressive reduced its royalty payments to the plaintiff until they eventually ceased entirely and the value of the plaintiff’s brand was diminished.
The plaintiff eventually brought suit in Rhode Island federal court alleging tortious interference with contractual and advantageous business relations.
Lack of jurisdiction
The plaintiff tried to establish general jurisdiction based on an allegation that the defendant’s corporate parent, Illinois-based Ball Horticultural, has a New England sales office in Connecticut, where it employs a sales representative whose responsibilities include the sale of Ball products in parts of New England including Rhode Island.
“Taking DAS’s facts as true, such sales efforts alone are insufficient to move the jurisdictional meter,” Sullivan said. “[S]ales efforts by the parent of the defendant do not give rise to personal jurisdiction over the subsidiary.”
The plaintiff went on to argue that the defendant’s former website and current Facebook page established sufficient contact in that they advised the public how to purchase the defendant’s Daniels Plant Food and related products in Rhode Island.
“The existence of an informational website accessible in a forum is insufficient to establish jurisdiction unless, at a minimum, it has interactive features that allow online ordering, which is entirely missing from Ball’s online presence,” Sullivan said.
“Whether viewed individually and holistically, DAS’s jurisdictional facts do not establish either continuous and systemic contacts or purposeful availment directed at Rhode Island,” the magistrate judge found, noting that the defendant is a Texas company without an office, employees or files in Rhode Island. “Ball cannot be ‘fairly regarded’ as ‘essentially at home’ in Rhode Island.”
To support its claim of specific jurisdiction over the defendant, the plaintiff alleged that the defendant knew that by manufacturing bad turf fertilizer product in Texas and supplying it to Progressive, Progressive would suffer decreased sales, which in turn would lead to decreased royalty payments from Progressive to the plaintiff in Rhode Island.
“The only connection to Rhode Island is Progressive’s transmission of reduced royalty payments,” Sullivan said. “Mere knowledge of where the payments go does not make it foreseeable that Ball would be haled into court here,” she added.
“To exercise personal jurisdiction here would foreshadow the demise of meaningful limits on personal jurisdiction,” the magistrate judge said. “Just as general jurisdiction is not appropriate because Ball is not ‘at home’ in Rhode Island, I find that specific jurisdiction is lacking because the only connection between Rhode Island and the claim is the happenstance that DAS is based in Rhode Island so it is the locus of the alleged injury.”
