MD Appellate Court Widens the Personal Jurisdiction Net: Part 2

By: Cynthia L. Polasko

In part one of this article, attorney Cynthia L. Polasko discussed a case where Bowie & Jensen, LLC represented Evapco, Inc. and several of its subsidiary companies in a lawsuit against a former employee, his wife, and two corporations that the husband and wife formed together. In addition, Polasko outlines how the Court of Special Appeals of Maryland joined other courts from across the country in holding that a non-signatory to a contract may nonetheless be bound by that contract’s forum-selection clause if the non-signatory is so “closely related” to the dispute such that it becomes “foreseeable” that it will be bound.

The key is that there must be a sufficiently close relationship between the non-signatory, the dispute, and the parties involved in the dispute. This relationship can be based on the non-signatory’s ownership of the signatory, the non-signatory’s involvement in the negotiations, the relationship between the two parties, and whether the non-signatory received a direct benefit from the agreement. In such instances, it does not defy the non-signatory’s reasonable expectations that it would be bound by the clause, just as the signatory parties are.

The Court of Special Appeals cited the following examples where parties were found to be “closely related,” so that a non-signatory could be bound by a forum-selection clause it did not personally sign:

  • Two companies were bound to a forum-selection clause when both companies were headed by, and received information from, an individual who did sign a contract containing a forum-selection clause
  • A collection agency that acted as an agent for a credit union was bound by the forum-selection clause signed by the credit union
  • A company was bound to an agreement between its sole shareholder and the company which hired the shareholder
  • A wife was bound by the forum-selection clause in an agreement signed by her husband where the husband entered into a franchise agreement to operate a vehicle repair center and the wife acted as an agent of the business

As applied to the Petersons, the Court of Special Appeals held that Mrs. Peterson was closely related to the contractual relationship between Mr. Peterson and Evapco, Inc., because Mrs. Peterson had participated in the sale of Tower Components, Inc. and signed the stock purchase agreement, which in turn expressly referenced the confidentiality agreement her husband signed.   The two North Carolina entities were also found to be closely related to the contractual relationship between Mr. Peterson and Evapco, Inc., because Mr. Peterson was a co-owner and officer of both entities; the principal place of business for each LLC was the Petersons’ home address; and records confirmed that Mr. Peterson conducted business on behalf of both entities.

The appellate court also affirmed the judgment of the circuit court, which found the Petersons and their companies liable for their unlawful competitive conduct and awarded Evapco, Inc. more than $3 million in damages.

This case is a prime example of the representation that the attorneys at Bowie & Jensen, LLC aim to provide with each situation. We believe in building long-term relationships with our clients and work very hard to make clients feel comfortable with the legal process. We start by listening to your business needs and goals and take the time to get to know you and your business objectives.

If we can be of service, contact us for more information.