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Solo Cup Co. v. First Southwest Vending and Food Service

July 17, 2008

SOLO CUP COMPANY, PLAINTIFF,
v.
FIRST SOUTHWEST VENDING AND FOOD SERVICE, DEFENDANT.



The opinion of the court was delivered by: Geraldine Soat Brown United States Magistrate Judge

Magistrate Judge Geraldine Soat Brown

MEMORANDUM OPINION AND ORDER

In this action plaintiff Solo Cup Company ("Solo") is suing defendant First Southwest Vending and Food Service ("Southwest") for breach of a cafeteria lease agreement, and is also seeking a related declaratory judgment. Southwest has moved to dismiss pursuant to Fed. R. Civ. P. 12(b)(2) for lack of personal jurisdiction. ("Def.'s Mot.") [Dkt 12.] For the following reasons, Southwest's motion is granted. This action is dismissed without prejudice for lack of personal jurisdiction.

PROCEDURAL BACKGROUND

Solo's Complaint alleges that it is a Delaware corporation with its principal place of business in Highland Park, Illinois, and that Southwest is an "entity existing under the laws of Texas" with a principal place of business in Trophy Club, Texas. (Compl. ¶¶ 1-2.) [Dkt 1.]*fn1 The Complaint alleges breach of a cafeteria lease agreement dated May 14, 2004 ("Agreement") in which Southwest agreed to operate a cafeteria in Solo's Dallas manufacturing facility. (Compl. ¶9, Ex. A.)

Southwest filed the present motion including the affidavit of Gail Ross, the President of Southwest who signed the Agreement. (Def.'s Mot., Ex. A, Ross Aff. ¶ 1.) Solo took discovery on the motion, including Ms. Ross's deposition, and filed a response to the motion including declarations by Tom Pasqualini, Solo's Executive Vice-President for Supply Chain who signed the Agreement on behalf of Solo, and Marty Verville, the Human Resource Manager at Solo's Dallas facility. (Pl.'s Resp., Ex. A, Pasqualini Dec. ¶¶2, 4; Ex. B, Verville Dec. ¶ 2, 4.) [Dkt 32.]*fn2 The parties consented to the jurisdiction of a Magistrate Judge. [Dkt 15.] The court heard argument by counsel on the motion. [Dkt 36.]

FACTUAL BACKGROUND

In early 2004, Ms. Ross, Southwest's President, contacted Mr. Verville about submitting a quote for Southwest to operate vending machines at the Sweetheart Cup facility in Dallas, Texas. (Ross Dep. at 33.) Initially, Southwest's negotiations were with Sweetheart, but by the time the Agreement was signed, Ms. Ross was aware that the other party was Solo. (Ross Dep. at 35-36.) The record on the motion contains virtually no information about the relationship between Sweetheart and Solo, except a copy of the 2003 Texas Franchise Tax Report for Sweetheart Cup, identifying its principal place of business as Maryland, and documents from the Delaware and Texas Secretaries of State showing that in 2005, Sweetheart Cup Company, Inc., a Delaware corporation, changed the name under which it operates to "Solo Cup Operating Corporation." (Def.'s Reply, Ex. B.) However, it is undisputed that Southwest's negotiations began with Sweetheart Cup and ended in an agreement with Solo.

Ms. Ross and Mr. Verville conducted all of the negotiations over the proposed agreement, initially by telephone and then in Mr. Veville's office in Dallas, Texas. (Ross Dep. at 35; Ross Aff. ¶ 4.) Ms. Ross states that at no time during the negotiations did she have any contact or communication with anyone at Solo in Illinois. (Ross Aff. ¶ 4.) Solo presents no evidence to the contrary.

Southwest's attorney drew up a draft lease agreement, which Southwest provided to Solo. (Ross Dep. at 34-35.) Ms. Ross testified that she executed the Agreement on behalf of Southwest in May 2004, in Solo's office in Dallas, Texas. (Id. at 33-37.) At the time she signed it, it was already signed on behalf of Solo. (Id. at 36.) Mr. Verville made a copy of the signed Agreement, which he gave to her. (Id. at 37-38.) Mr. Verville's affidavit has a slightly different story. He states that on or around May 14, 2004, he received a copy of Agreement signed by Mr. Pasqualini on behalf of Solo, and that someone picked up a copy for Southwest at Ms. Ross's request. (Verville Dec. ¶¶ 3, 4.) Mr. Verville denies that Ms. Ross signed the Agreement on Solo's property. (Id. ¶ 5.) There is no suggestion, however, that Ms. Ross or anyone else on behalf of Southwest traveled to Illinois to negotiate or execute the Agreement. Mr. Pasqualini states that he executed the Agreement at Solo's headquarters in Illinois. (Pasqualini Dec. ¶ 4.) Mr. Pasqualini does not state that the Agreement was signed on behalf of Southwest when he received it. The Agreement attached to Solo's Complaint has a signature on behalf of Solo, but it is not signed on behalf of Southwest. (Compl., Ex. A.)

Under the Agreement, Southwest was to finish, furnish and operate a cafeteria in Solo's Dallas facility, as well as have the exclusive right to place vending machines in that facility. (Agreement ¶¶ 3,12.) Southwest would not pay rent or other monetary consideration for the lease, but would provide Solo's employees with coffee and one free meal for every ten purchased. (Id. ¶ 2.) Southwest would also pay Solo 15% of the net profits from vending machines in the facility. (Id. ¶ 12.) The Solo plant controller was to meet with a Southwest representative "monthly to review an accounting or financial statement for the purpose of confirming the amount of net profits from the vending machines." (Id. ¶ 12.) Mr. Verville states that if Southwest had paid royalties "due under the Agreement," Southwest would have been directed to send payments to Solo's corporate headquarters in Illinois for deposit in Solo's bank account in Illinois. (Verville Dec. ¶ 6.) The Agreement, however, is silent as to where any vending machine payments were to be made or sent. Southwest never made any payments to Solo. (Ross Dep. at 55.)

The Agreement provides for the application of Texas law (Agreement ¶ 26), and contains a clause stating that the Agreement embodies the "entire agreement between the parties" and "supersedes all prior agreements and understandings . . . ." (Id. ¶ 22).

All equipment for the cafeteria was purchased in Texas. (Ross Dep. at 54-55.) All of Southwest's communications and meetings with Solo prior to execution of the Agreement took place in Texas. (Ross Aff. at ¶ 4.)

Claiming that Southwest breached various provisions of the Agreement, Solo sent Southwest a notice of default in March 2006. (Compl. ¶ 22.)*fn3 Southwest's attorney responded by letter dated April 6, 2006, directed to both Mr. Verville in Dallas and to Barry White, Solo's Vice President of Human Resources in Highland Park, Illinois. (Pf.'s Resp., Ex. F.) Solo terminated the Agreement in June 2006, and in August 2007 filed this lawsuit in the ...


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