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Dorsey & Whitney LLP v. RegScan, Inc.

Court of Appeals of Colorado, Fourth Division

February 22, 2018

Dorsey & Whitney LLP, Plaintiff-Appellee,
v.
RegScan, Inc., Defendant-Appellant.

         City and County of Denver District Court No. 14CV34542 Honorable Karen L. Brody, Judge Honorable Elizabeth A. Starrs, Judge

          Dorsey & Whitney LLP, Scott P. Sinor, Andrea Ahn Wechter, Denver, Colorado, for Plaintiff-Appellee

          Johnson & Klein, PLLC, Eric K. Klein, Boulder, Colorado, for Defendant-Appellant

          OPINION

          JONES JUDGE.

         ¶ 1 This case involves a dispute between a law firm and its client over unpaid legal fees. The client, RegScan, Inc., a Pennsylvania-based internet company that assists companies with environmental, health, and safety regulations, appeals the $373, 707.43 judgment against it and in favor of the law firm of Dorsey & Whitney LLP (the law firm). Among the issues we address is whether the district court had personal jurisdiction over the nonresident client, an issue which turns on application of relatively well-settled principles to a set of facts that isn't all that uncommon. In the end, we conclude that the court had jurisdiction. Addressing as many of RegScan's other contentions as we need to, including an issue of first impression about the meaning of CRE 703, we affirm.

         I. Background

         ¶ 2 BNA, a competitor of RegScan, began marketing a product to which RegScan believed it had exclusive rights. So Edward Ertel, RegScan's president and CEO, called his close friend and former college roommate, Greg Tamkin, a partner in the law firm's Denver office who specializes in intellectual property matters. After they discussed the situation, RegScan hired the law firm. The parties' engagement letter limited the scope of the law firm's representation to pre-litigation work. But once it became clear that RegScan would have to take BNA to court to vindicate its perceived rights, Mr. Ertel and Mr. Tamkin agreed that the law firm would represent RegScan in that litigation. Mr. Tamkin sent Mr. Ertel an email confirming their modification of the earlier agreement, and Mr. Ertel sent a $25, 000 retainer to the law firm's Denver office.

         ¶ 3 The law firm filed the BNA case in the United States District Court for the Eastern District of Virginia. Throughout the litigation, Mr. Ertel had frequent, almost daily, conversations with attorneys in the law firm's Denver office via telephone and email. Each month, the law firm sent detailed bills to RegScan, charging time in tenth-of-an-hour increments.

         ¶ 4 While RegScan didn't specifically question the legitimacy of the hours worked or the billed hourly rates, it eventually complained to Mr. Tamkin that the litigation costs were exceeding his estimates. According to RegScan, Mr. Tamkin had estimated that the total cost of the representation would be between $300, 000 and $400, 000 dollars. The law firm ultimately billed RegScan a total of $769, 894.71, of which RegScan paid $371, 187.28.

         ¶ 5 Through a series of emails, the parties attempted to negotiate a resolution. But they couldn't reach an agreement, and the law firm sued RegScan in Denver District Court for the claimed outstanding balance, asserting claims for breach of contract and account-stated.[1] A jury found in the law firm's favor on both claims, awarding damages of $398, 707.43, less $25, 000, the amount of the retainer RegScan had already paid.[2]

         II. Discussion

         ¶ 6 RegScan raises half a dozen contentions on appeal: (1) the court didn't have personal jurisdiction over RegScan; (2) the law firm's expert witness shouldn't have been allowed to testify about billing records not admitted into evidence; (3) the elemental breach of contract jury instruction omitted an element of the claim; (4) the elemental account-stated jury instruction omitted an element of the claim; (5) the district court improperly excluded evidence under CRE 408 of RegScan's objections to the amount the law firm had charged; and (6) the district court erred by denying RegScan's motion for a directed verdict on the account-stated claim.

         ¶ 7 We first conclude that the district court had personal jurisdiction over RegScan. We then reject RegScan's other contentions potentially affecting the jury's verdict on the breach of contract claim. And because we affirm as to the breach of contract claim, and the jury awarded the same damages on both claims, we don't address RegScan's contentions pertaining exclusively to the account-stated claim.

         A. The District Court had Specific Personal Jurisdiction Over RegScan

         ¶ 8 We conclude that the district court had specific personal jurisdiction over RegScan based on RegScan's course of dealing with the law firm.

         1. Preservation and Standard of Review

         ¶ 9 Early on in the case, RegScan filed a motion to dismiss for lack of personal jurisdiction. The district court denied that motion in a thorough, written order. RegScan renewed its motion at the close of evidence and the court again denied it. Thus, RegScan preserved the issue.

         ¶ 10 Whether a court may exercise personal jurisdiction over a particular defendant presents a question of law that we review de novo. Griffith v. SSC Pueblo Belmont Operating Co. LLC, 2016 CO 60M, ¶ 9. Because RegScan renewed its motion at trial, the law firm was required to establish personal jurisdiction by a preponderance of the evidence. Goettman v. N. Fork Valley Rest., 176 P.3d 60, 66 n.3 (Colo. 2007); Archangel Diamond Corp v. Lukoil, 123 P.3d 1187, 1192 n.3 (Colo. 2005).[3]

         2. Requirements for Personal Jurisdiction

         ¶ 11 Colorado's long-arm statute confers jurisdiction over a cause of action arising from "[t]he transaction of any business within this state" to the maximum extent permitted by the Due Process Clauses of the United States and Colorado Constitutions. § 13-1-124(1)(a), C.R.S. 2017; Magill v. Ford Motor Co., 2016 CO 57, ¶ 14; Archangel Diamond Corp., 123 P.3d at 1193. This constitutional overlay means that a plaintiff desiring to invoke a Colorado court's jurisdiction over a nonresident defendant must show that doing so comports with the long-arm statute and due process. Archangel Diamond Corp., 123 P.3d at 1193. The result is a two-step process. First, the plaintiff must show that the defendant has sufficient minimum contacts with Colorado such that the defendant should reasonably have foreseen being haled into court here. Id. at 1194; Keefe v. Kirschenbaum & Kirschenbaum, P.C., 40 P.3d 1267, 1270 (Colo. 2002). And second, the plaintiff must show in addition to such minimum contacts that requiring the defendant to litigate in Colorado doesn't offend traditional notions of fair play and substantial justice. Align Corp. Ltd. v. Boustred, 2017 CO 103, ¶¶ 10, 13; Keefe, 40 P.3d at 1271.

         ¶ 12 Given the nature of RegScan's arguments regarding jurisdiction, further explanation of these two requirements is warranted.

         a. Minimum Contacts

         ¶ 13 "The quantity and nature of the minimum contacts required depends on whether the plaintiff alleges specific or general jurisdiction." Archangel Diamond Corp., 123 P.3d at 1194. The law firm hasn't ever claimed that RegScan is subject to general jurisdiction - that is, jurisdiction based on contacts unrelated to the events giving rise to the case - in Colorado. See id. Rather, it claims specific jurisdiction. This form of minimum contacts exists when the injuries precipitating the case arose out of and are related to "activities that are significant and purposefully directed by the defendant at residents of the forum." Align Corp., ¶ 11 (ultimately quoting Keefe, 40 P.3d at 1271); see Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985). Put another way, we must assess "(1) whether the defendant purposefully availed [itself] of the privilege of conducting business in the forum state, and (2), whether the litigation 'arises out of' the defendant's forum-related contacts." Archangel Diamond Corp., 123 P.3d at 1194.

         ¶ 14 Whether the purposeful availment requirement is met depends on the defendant's actions, not on those unilaterally taken by someone else. This limitation is necessary to assure that exercising jurisdiction doesn't result from "'random, ' 'fortuitous, ' or 'attenuated' contacts." Burger King Corp., 471 U.S. at 475 (quoting Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 774 (1984)); Archangel Diamond Corp., 123 P.3d at 1194; Keefe, 40 P.3d at 1270-71. However, a single act may be sufficient to establish specific jurisdiction, Goettman, 176 P.3d at 69, including, in some cases, the "defendant's deliberate creation of 'continuing obligations' with the forum state, " Archangel Diamond Corp., 123 P.3d at 1194 (quoting Keefe, 40 P.3d at 1271). "The proper question is not where the plaintiff experienced a particular injury or effect but whether the defendant's conduct connects [it] to the forum in a meaningful way." Walden v. Fiore, 571 U.S.___, ___, 134 S.Ct. 1115, 1125 (2014).

         ¶ 15 The "arising out of" requirement means that the defendant created a "substantial connection" with the forum state through the actions that gave rise to the case. Align Corp., ¶ 12; Archangel Diamond Corp., 123 P.3d at 1194; Giduck v. Niblett, 2014 COA 86, ¶ 16.

         b. Fair Play and Substantial Justice

         ¶ 16 Even if the plaintiff shows sufficient minimum contacts, a court shouldn't exercise personal jurisdiction over a nonresident defendant unless doing so would comport with traditional notions of fair play and substantial justice. This inquiry turns on factors such as (1) the burden that litigation in the forum state would impose on the defendant; (2) the forum state's interest in resolving the dispute; (3)the plaintiff's interest in obtaining convenient and effective relief; (4)the interstate judicial system's interest in the efficient resolution of cases; and (5) the states' shared interest in furthering substantive social policies. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292 (1980); Youngquist Bros. Oil & Gas, Inc. v. Miner, 2017 CO 11, ¶ 13; Align Corp., ¶ 13; Archangel Diamond Corp., 123 P.3d at 1195; Keefe, 40 P.3d at 1271-72. A defendant which has purposely directed its activities at forum residents must present a compelling case that some other consideration would render the court's exercise of jurisdiction unreasonable. Keefe, 40 P.3d at 1272.

         3. Analysis

         a. Minimum Contacts

         ¶ 17 Though RegScan doesn't contest that its conduct giving rise to this litigation is "substantially connected" to Colorado - as required by the second prong of the specific jurisdiction minimum contacts analysis - it does argue that its actions connecting it to Colorado are too attenuated to demonstrate purposeful availment because it merely contracted with a Minnesota-based law firm which happened to staff the case (filed in Virginia) with Colorado attorneys.

         ¶ 18 We aren't persuaded by RegScan's arguments. In our view, the record amply supports the conclusion that RegScan had sufficient contacts with Colorado that it reasonably could've expected to be haled into court here.[4] To wit:

. RegScan deliberately reached out to and solicited an attorney-client relationship with a Colorado attorney, based on that attorney's writing ability, expertise, and relationship to Mr. Ertel.
. RegScan entered into an attorney-client relationship leading to continuing obligations by both parties in the state of Colorado while knowing that Colorado attorneys would provide most, if not all, of the services for which it was contracting. (Colorado attorneys performed most (70%) of the work, and Mr. Tamkin did almost all of the work during the pre-litigation phase.)
. Mr. Tamkin executed the written fee agreement, showing his and the law firm's contact information and address in Colorado, and sent it to Mr. Ertel. Mr. Ertel signed it and returned it to Mr. Tamkin in Colorado.
. RegScan sought legal counsel who would charge lower rates than those charged by Washington, D.C., attorneys. By hiring Mr. Tamkin and his firm, RegScan knew it ...

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