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American Federation of State, County, and Municipal Employees, Council 5 v. Employee Based Systems, LLC

United States District Court, D. Minnesota

December 13, 2018

American Federation of State, County, and Municipal Employees, Council 5, Plaintiff,
v.
Employee Based Systems, LLC, Defendant.

          Gregg M. Corwin, Esq., Joshua Hegarty Esq. and Gregg M. Corwin & Associate Law Office, P.C., 1660 South Highway 100, Suite 500, St. Louis Park, MN 55146.

          Jason S. Raether, Esq. and Hellmuth & Johnson PLLC, 8050 W. 78th Street, Edina, MN 55439, counsel for defendant.

          ORDER

          David S. Doty, Judge

         This matter is before the court upon the motion to dismiss by defendant Employee Based Systems, LLC (EBS) for lack of jurisdiction and improper venue. Based on a review of the file, record, and proceedings herein, and for the following reasons, the court denies the motion.

         BACKGROUND

         This contract dispute arises out of EBS's alleged breach of its contract with plaintiff American Federation of State, County, and Municipal Employees, Council 5 (AFSCME). AFSCME is a union based in St. Paul, Minnesota. Compl. ¶ 3. EBS is a Colorado-based company that develops and provides payroll software and related services. Id. ¶¶ 4, 9. EBS is not registered to do business in Minnesota; does not own, use, or possess real property in Minnesota; does not have bank accounts in Minnesota; and does not advertise in Minnesota. Duty Decl. ¶¶ 6-8, 10.

         In the summer of 2017, AFSCME decided to replace its existing payroll system and issued a request for proposal (RFP) from software vendors.[1] Johnston Aff. ¶¶ 5-6. EBS responded to the RFP at the urging, and with the assistance, of a third party.[2] Id. ¶¶ 7-9; id. Ex. A; Duty Decl. ¶ 17. AFSCME accepted EBS's proposal and the parties negotiated a twelve-page contract under which AFSCME agreed to pay EBS $231, 712.48 for software and six years of maintenance and support services.[3] Johnston Aff. ¶¶ 11-19; id. Ex. C; Duty Decl. ¶¶ 19-20. All of the negotiations and related software demonstrations and discussions were conducted virtually via telephone, computer, and/or email. Duty Decl. ¶¶ 18-19. No one from EBS traveled to Minnesota during contract negotiations. Nor did EBS travel to Minnesota in performance of the contract.[4]Instead, EBS provided its software to AFSCME remotely by using Dropbox, Internet Information Services, and SQL servers, and also remotely provided support services. Id. ¶¶ 21-27.

         EBS did, however, remotely access AFSCME's computer systems and servers in Minnesota on numerous occasions. Altendorfer Aff. ¶¶ 17-20. EBS also communicated frequently with AFSCME in Minnesota. Id. ¶¶ 9-11, 14, 16, 21; id. Ex. A; Johnston Aff. ¶¶ 18, 22, 24-25. AFSCME calculates that its employees spent nearly ninety hours communicating with EBS during their relationship. Id. ¶ 21; id. Ex. A.

         According to AFSCME, EBS breached the contract by failing to develop functional software. Compl. ¶¶ 11-14. On August 6, 2018, AFSCME filed this action alleging one count of breach of contract. EBS now moves to dismiss for lack of personal jurisdiction and improper venue.

         DISCUSSION

         I. Personal Jurisdiction

         A. Standard of Review

          To survive a motion to dismiss for lack of personal jurisdiction, a plaintiff must establish a prima facie case that the forum state has personal jurisdiction over the defendant. Stevens v. Redwing, 146 F.3d 538, 543 (8th Cir. 1998). In the absence of an evidentiary hearing, a court “must look at the facts in the light most favorable to the nonmoving party and resolve all factual conflicts in favor of that party.” Dakota Indus., Inc. v. Dakota Sportswear, Inc., 946 F.2d 1384, 1387 (8th Cir. 1991). A federal court may assume jurisdiction over a nonresident defendant “only to the extent permitted by the long-arm statute of the forum state and by the Due Process Clause.” Romak USA, Inc. v. Rich, 384 F.3d 979, 984 (8th Cir. 2004) (citation and internal quotation marks omitted). Because the Minnesota long-arm statute “confers jurisdiction to the fullest extent permitted by the Due Process Clause, ” the court need only consider due process requirements. See Coen v. Coen, 509 F.3d 900, 905 (8th Cir. 2007).

         To satisfy due process, a defendant must have “sufficient minimum contacts” with the forum state such that maintaining the suit “does not offend traditional notions of fair play and substantial justice.” Romak, 384 F.3d at 984 (citation omitted). “Sufficient contacts exist when [a] defendant's conduct and connection with the forum state are such that [it] should reasonably ...


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