News & Noteworthy

Authored - NJ Contract Law Update - S Cube v. Sanikommu: Where to Sue on Contract Issues
Windels Marx - Commercial Litigation
OCTOBER 24, 2012

S Cube Soft, Inc. v. Sanikommu, 2012 WL 4069536 (N.J.App.Div. Sept. 18, 2012), is illustrative of questions that frequently arise as to where one may sue in the event of an alleged contract breach or related claim.

S Cube brings us back to familiar law-school territory involving questions of minimum contacts, in personam jurisdiction, general jurisdiction and specific jurisdiction. The Court actually does a fairly good job of explaining all these concepts and the basic principles of law involved. For example, a party cannot be sued in New Jersey if he/she/it neither is present in New Jersey nor has "certain minimum contacts with it" (citations omitted) .

The resulting inquiry is very fact intensive, sometimes (when there is an aggressive defense on jurisdictional grounds) leading to discovery and even a plenary fact hearing. Those latter elements were absent in S Cube.1

As described by the Opinion, S Cube was essentially a headhunter for IT consultants. Deloitte asked S Cube to find a Java programmer to work in Michigan. S Cube told Deloitte it would subcontract through Meridian Technologies Inc. of Michigan. "Meridian provided Michigan-resident Sanikommu's name to S. Cube". Sanikommu also spoke directly with S Cube and arranged for Deloitte to contract with Sanikommu. "Deloitte insisted that Sanikommu's work be placed by non-party 'Technosoft'". Sanikommu's Deloitte work, and his direct relationship with Technosoft, were both performed in Michigan.

Sanikommu then tried to be hired directly by S Cube. S Cube refused, so as not to breach or interfere with any contract. Sanikommu then stopped submitting timesheets to Technosoft (timesheets which S Cube had been further processing in order to effectuate payment all around). However, Sanikommu's alleged explanation--that "he had left the assignment at Deloitte for another position elsewhere--was debunked when S Cube "discover[ed] that Sanikommu had become an employee of Technosoft and was still working at Deloitte."

The lawsuit by S Cube against Sanikommu followed. It sought remedies for "tortious interference with contract and business relations, unjust enrichment and misrepresentation, and unfair competition". What followed was not a joinder of issue on the merits, but rather a motion to dismiss for lack of in personam jurisdiction.

S Cube focused on the fact that it was in the circuitous conduit for payment, and thus 'a party to the overall contract', at least in the lay sense. Sanikommu emphasized the fact that the work was Michigan work and that he had no direct/concrete contractual relationship with S Cube. "The only purposeful contact that Sanikommu ha[d] with New Jersey was when he called [S Cube] to ask if he could leave his employment with Meridian and work directly for S Cube."

The Court agreed with Sanikommu that this wasn't enough. Pertinently, the Court noted:

  1. "Sanikommu neither resides nor does business in New Jersey"
  2. "[A]t all times pertinent Sanikommu acted in Michigan on behalf of entities located there".
  3. "The significant actions in the matter were performed by Michigan actors." Apart from the admission above as to the change-of-employment request, "the only link to New Jersey is S Cube's place of business".
  4. S Cube found Sanikommu in Michigan and placed him to work there.
  5. "Any fraud or any tort that was allegedly committed occurred in Michigan." The Court obviously concluded that there was no contract or quasi-contract claim, and ruled that contract substitute claims2 would have to be litigated in Michigan, which was the obvious forum for the dispute.
  6. The Court further noted that there were no facts proffered (nor could there have been, under the scenario presented) that Sanikommu had "continuous and systematic contacts in New Jersey", so as to warrant jurisdiction based on "general jurisdiction" as opposed to the specific contacts at issue.

The moral of the story is that regardless of the merits of a dispute, part of counsel's strategic planning must be where to sue; both in terms of a jurisdiction that may be favorable and a jurisdiction that may be permissible.

Contact & Legal Disclaimer

Clark Alpert is the author of Guide to New Jersey Contract Law, published by the New Jersey Institute for Continuing Legal Education, originally published in 2007 and updated in November 2011. His updates on New Jersey contract law are based in recent issues and practical methods for addressing similar situations in your practice or business. They are not intended to serve as legal advice. Clark welcomes your questions and comments.

1 In fact, the S Cube Court noted that "there was no jurisdictional discovery", clearly implying that there could have been.

2 See my prior Article, "Quasi-Contract Claims", dated June 27, 2012.

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