Noel Hillman

Offering some guidance on the minimum contacts requirement in the digital age, a federal judge has declined to exercise jurisdiction over a contract dispute where messages that went “into the electronic ether” were about the only thing connecting the defendant with New Jersey.

“In this day and age, those communications could have been with someone physically located anywhere in the world,” U.S. District Judge Noel Hillman of the District of New Jersey said in Exporting Commodities International v. Southern Mineral Processing.

“And if this is how contracts are negotiated and if those contacts are deemed to satisfy the minimum contact requirement, then every contract negotiated by email and telephone would justify personal jurisdiction over a non-forum defendant,” which “is clearly not the law,” Hillman said.

According to the Nov. 17 decision, Exporting Commodities International (ECI), based in Marlton and overseas, engaged Southern Mineral Processing (SMP), based in Birmingham, Alabama, about purchasing some 150,000 tons of reclaimed coal from a defunct power plant owned by Mississippi Power, for resale to a third party, Uniper. ECI claimed that, in a July 2016 email exchange, it confirmed the terms of the transaction, and SMP accepted the proposal. Later the same day, an SMP principal called ECI and informed him that he had been offered a higher price for the same coal, and ultimately did not sell to ECI, leaving ECI unable to meet its obligation to supply the materials to Uniper.

In ECI's suit, claiming breach of contract and other counts, a default judgment was entered against SMP, which later moved to vacate the default and ask for dismissal, claiming the District of New Jersey lacked personal jurisdiction.

SMP said it was a small, family-owned company, consisting of two employees and a president, that had only ever conducted business in its home state and in neighboring Mississippi, except one prior deal with ECI in 2013, to purchase 18,000 tons of coal. SMP also denied that a sales contract had been executed as a result of its 2015 and 2016 dealings with ECI.

ECI contended that SMP had initiated contact in the abandoned sale.

Hillman noted that such initiation can trigger personal jurisdiction, but vacated the default judgment and granted SMP's motion for dismissal. He acknowledged that SMP apparently “initiated the negotiations with ECI knowing it had an office in New Jersey,” but said those emails and calls “are not so much to New Jersey as they are into the electronic ether.”

ECI pointed to the U.S. Court of Appeals for the Third Circuit's 1993 ruling in Grand Entertainment v. Star Media Sales, where the court found personal jurisdiction over a Spanish company sued by a Pennsylvania-based company based on the defendant's “affirmative actions” to engage the plaintiff. But that case, according to Hillman, “involved an undisputed contract” and “arose before the common and regular use of email and communication via the internet.”

The current case is similar to Grand Entertainment in that the defendant apparently initiated the negotiations, Hillman said, but he looked instead to Siegmeister v. Benford, decided last June in the District of New Jersey. In that case, involving a $50,000 diamond sale between a New Jersey company and California company that fell through, the court said mere correspondence, including calls and emails, are insufficient for personal jurisdiction in New Jersey.

Hillman, like the Siegmeister court, also relied on Vetrotex Certainteed v. Consolidated Fiber Glass Products, which held that communications between parties in different forums about forging a contract is “insufficient of itself to be characterized as purposeful activity invoking the benefits and protection of the forum state's laws.”

If “personal jurisdiction were established under these circumstances, SMP could be haled into any court in the country simply by virtue of the location of its contractual parties,” the judge said.

“In short, the case law instructs this Court that there must be more and here we find that 'more' is lacking,” Hillman wrote, noting the uncertainty of whether a contract actually was formed and the lack of “indication that New Jersey has any interest in this case, particularly when it appears that the laws of Alabama or New York may only apply.”

SMP was represented by Joseph A. Bahgat of the Privacy Firm in Philadelphia.

“I think it's a very important decision for New Jersey because historically, even recently, the case law tends to be a little behind in terms of technology,” Bahgat said by phone.

Hillman's decision is “not groundbreaking, but it's tough to find a case in New Jersey to cite” on this issue, he said. “I hope this one gets published.”

ECI was represented by Joseph B. Silverstein of Green, Silverstein & Gross in Philadelphia. He didn't return a call seeking comment.

Noel Hillman

Offering some guidance on the minimum contacts requirement in the digital age, a federal judge has declined to exercise jurisdiction over a contract dispute where messages that went “into the electronic ether” were about the only thing connecting the defendant with New Jersey.

“In this day and age, those communications could have been with someone physically located anywhere in the world,” U.S. District Judge Noel Hillman of the District of New Jersey said in Exporting Commodities International v. Southern Mineral Processing.

“And if this is how contracts are negotiated and if those contacts are deemed to satisfy the minimum contact requirement, then every contract negotiated by email and telephone would justify personal jurisdiction over a non-forum defendant,” which “is clearly not the law,” Hillman said.

According to the Nov. 17 decision, Exporting Commodities International (ECI), based in Marlton and overseas, engaged Southern Mineral Processing (SMP), based in Birmingham, Alabama, about purchasing some 150,000 tons of reclaimed coal from a defunct power plant owned by Mississippi Power, for resale to a third party, Uniper. ECI claimed that, in a July 2016 email exchange, it confirmed the terms of the transaction, and SMP accepted the proposal. Later the same day, an SMP principal called ECI and informed him that he had been offered a higher price for the same coal, and ultimately did not sell to ECI, leaving ECI unable to meet its obligation to supply the materials to Uniper.

In ECI's suit, claiming breach of contract and other counts, a default judgment was entered against SMP, which later moved to vacate the default and ask for dismissal, claiming the District of New Jersey lacked personal jurisdiction.

SMP said it was a small, family-owned company, consisting of two employees and a president, that had only ever conducted business in its home state and in neighboring Mississippi, except one prior deal with ECI in 2013, to purchase 18,000 tons of coal. SMP also denied that a sales contract had been executed as a result of its 2015 and 2016 dealings with ECI.

ECI contended that SMP had initiated contact in the abandoned sale.

Hillman noted that such initiation can trigger personal jurisdiction, but vacated the default judgment and granted SMP's motion for dismissal. He acknowledged that SMP apparently “initiated the negotiations with ECI knowing it had an office in New Jersey,” but said those emails and calls “are not so much to New Jersey as they are into the electronic ether.”

ECI pointed to the U.S. Court of Appeals for the Third Circuit's 1993 ruling in Grand Entertainment v. Star Media Sales, where the court found personal jurisdiction over a Spanish company sued by a Pennsylvania-based company based on the defendant's “affirmative actions” to engage the plaintiff. But that case, according to Hillman, “involved an undisputed contract” and “arose before the common and regular use of email and communication via the internet.”

The current case is similar to Grand Entertainment in that the defendant apparently initiated the negotiations, Hillman said, but he looked instead to Siegmeister v. Benford, decided last June in the District of New Jersey. In that case, involving a $50,000 diamond sale between a New Jersey company and California company that fell through, the court said mere correspondence, including calls and emails, are insufficient for personal jurisdiction in New Jersey.

Hillman, like the Siegmeister court, also relied on Vetrotex Certainteed v. Consolidated Fiber Glass Products, which held that communications between parties in different forums about forging a contract is “insufficient of itself to be characterized as purposeful activity invoking the benefits and protection of the forum state's laws.”

If “personal jurisdiction were established under these circumstances, SMP could be haled into any court in the country simply by virtue of the location of its contractual parties,” the judge said.

“In short, the case law instructs this Court that there must be more and here we find that 'more' is lacking,” Hillman wrote, noting the uncertainty of whether a contract actually was formed and the lack of “indication that New Jersey has any interest in this case, particularly when it appears that the laws of Alabama or New York may only apply.”

SMP was represented by Joseph A. Bahgat of the Privacy Firm in Philadelphia.

“I think it's a very important decision for New Jersey because historically, even recently, the case law tends to be a little behind in terms of technology,” Bahgat said by phone.

Hillman's decision is “not groundbreaking, but it's tough to find a case in New Jersey to cite” on this issue, he said. “I hope this one gets published.”

ECI was represented by Joseph B. Silverstein of Green, Silverstein & Gross in Philadelphia. He didn't return a call seeking comment.