Isakson v. Roberts Markel Weinberg Butler Hailey

ATTORNEY DISCHARGE: No Montana personal jurisdiction over wrongful discharge suit by Texas law firm attorney who moved to Montana to work out of his home… case transferred to Texas Federal Court rather than dismissed… Molloy.

Roberts Markel Weinberg Butler Hailey is a law firm with 4 locations in Texas. In 2018 it hired Shawn Isakson, who lived in Texas, as business manager. In 2019 he became the CEO. (The Firm alleges that this was a title that he bestowed upon himself; he claims he was appointed by the Board of Directors.) He directly supervised 4-6 employees including 2 full-time permanent remote employees in Colorado and Illinois. In 7/20 he began working remotely from Whitefish. Several other executives worked remotely, either full-time or part-time, from their homes in Colorado, Illinois, or Texas without a primary office location.

Isakson moved to Whitefish during COVID for personal reasons unrelated to the Firm’s practice of law. He claims the Firm was aware that his move was permanent; the Firm maintains that it treated his remote work from Montana as temporary because he had assured that he still owned a home in Houston, he would be moving back to Houston, and his wife’s employer may also require her to return to Houston. It maintains that not only was his move to Montana neither required by nor a benefit to the Firm, it was not even “approved.” However, as apparently required by IRS guidelines pertaining to temporary work locations, in 11/21 the Firm updated his employment record to reflect a full-time remote status with his Montana address and began deducting Montana payroll taxes, paying Montana unemployment taxes, and providing work comp and employer’s liability insurance for his home office in Montana. In 11/22, the Firm’s VP Jeff Roberts terminated his employment during a phone call while Roberts was in Texas and Isakson was in Montana.

In 11/23 Isakson sued the Firm pursuant to Montana’s WDEA. The Firm moved to dismiss all claims for want of personal jurisdiction. At the conclusion of a hearing 3/14/24 the parties were asked to be prepared to discuss transfer of venue and related conflict of law issues at the preliminary pretrial conference the next day. At the 3/15 conference Isakson argued that the case should stay in Montana because it has personal jurisdiction over the Firm and, because the WDEA provides specific protections for employee-employer relations, Montana has the stronger interest. The Firm countered that Texas has the stronger interest because its laws protect employers by providing them the freedom & flexibility of an at-will system. The Court ordered supplemental briefing on conflict of law and choice of law issues raised at the conference.

The parties do not dispute that the Court lacks general personal jurisdiction over the Firm but disagree as to whether it had sufficient minimal contacts with Montana to support a finding of specific personal jurisdiction. Isakson asserts that such jurisdiction exists because the Firm “purposefully” employed him in Montana, paid Montana taxes, had a Montana-based work comp and employer’s liability policy, occasionally conducted business in Montana, and “engaged in conduct that resulted in the accrual of a tort action in the State of Montana, thereby injecting itself in multiple ways into the affairs of the State of Montana.”

Isakson insists that the requirements under Montana’s long-arm are met under Rule 4(b)(1) because the Firm transacted business in Montana under (A), committed an act resulting in a tort action under (B), and contracted to insure a person, property, or risk located in Montana under (D).

Neither side presents authority establishing a clear definition of “transaction of any business” in Montana. Isakson cites Prentice Lumber (Mont. 1970) for the proposition that there is a “prevailing trend” to interpret what constitutes conducting business broadly. However, under more recent precedent the Montana Supreme Court explained the factors that show a defendant was transacting business within Montana are the same as the factors that would support general jurisdiction, albeit to a less exacting standard. These factors include the defendant’s “local negotiations for various types of commercial transactions, the solicitation of business within the state, prior litigations in the forum, the presence of agents in the state, and the existence of ongoing contractual relationships with residents of the forum state.” Milky Whey (Mont. 2015) (quoting Wright & Miller).

Isakson argues that because he was employed in Montana, other employees of the Firm occasionally conducted business in Montana, and the Firm paid taxes and insured him in Montana, the Firm was transacting business within the meaning of Montana’s long-arm statute. He further relies on the fact that the Firm bought and still owns his computer and networking equipment and paid for his internet access. He also points out that he personally “transacted and solicited a great deal of corporate business” for the Firm from his home office in Montana.

The Firm counters that Isakson takes “significant liberties” with the facts in his affidavit. It argues that its only business is practicing law which it does exclusively in Texas and the work that Isakson performed — banking, payroll, hiring and managing employees, and paying vendors — was incidental to its practice of law, not its “business.” It asserts that any employees he claims “worked” while in Montana were on vacation. It points out that IRS guidelines require employers to pay taxes and insure even temporary remote workers once they have been working in another state for more than 1 year, and following such requirements is not enough to confer personal jurisdiction. In sum, it maintains that it did not transact business in Montana as to invoke jurisdiction because it did not hire Isakson in Montana, it did not seek to expand its business into Montana, his remote work location was a unilateral and unapproved decision by him, and his work itself is only ancillary to the Firm’s business. The Firm is correct.

Unlike in Prentice where the parties engaged in the interstate sale of lumber, the Firm is not engaged in the practice of law in Montana. It has never employed a Montana-licensed attorney, practiced law in Montana, or planned to generate legal work in Montana. Nothing in Isakson’s affidavit contradicts the Firm’s statements that it has never solicited business in Montana, negotiated locally to further its business in Montana, or had any clients, financial accounts, or other contractual relationships with Montanans, other than those directly linked to his remote location in Montana. Although the parties dispute whether any of the Firm’s other employees conducted business in Montana and the benefit of the doubt goes to Isakson, LNS (9th Cir. 2022), employees checking email and Isakson’s management team having work-related conversations at his home in Whitefish do not rise to “transacting business.” Many modern companies have out-of-state meetings and/or corporate retreats and employees often engage in important work-related conversations while traveling or for any number of reasons. These incidental contacts are insufficient to show that the Firm transacted business in Montana for the purposes of specific personal jurisdiction under 4(b)(1)(A).

Isakson next argues that personal jurisdiction is proper under (B) which extends jurisdiction over “the commission of any act resulting in accrual within Montana of a tort action.” The Firm argues that a WDEA claim cannot give rise to jurisdiction under (B) because it is a statutory claim that preempts other torts related to wrongful discharge. The Montana Supreme Court does not appear to have answered that question, but even assuming that a WDEA action is a tort action under the long-arm statute, jurisdiction would be improper.

The test for whether a tort accrued in Montana is “highly fact specific and dependent on the nature of the alleged tort at issue.” Groo (Mont. 2023) (tort accrued in Montana where a New York social media user directed a negative campaign at a Montana business and its customers). The inquiry “focuses on where the events giving rise to the tort occurred, rather than where the plaintiffs allegedly experienced or learned of their injuries.” Tackett (Mont. 2014). “Jurisdiction is not acquired through interstate communications solely by signing a contract to be performed in another state.” Groo; Cimmaron (Mont. 2003) (“Interstate communication is an almost inevitable accompaniment to doing business in the modern world, and cannot by itself be considered a contact for justifying the exercise of personal jurisdiction.”); Threlked (Mont. 2000) (no long-arm jurisdiction existed where the defendants’ interstate communications related entirely to services to be performed out-of-state).

While no Montana case is on all fours with this case, the reasoning in Bird (Mont. 1995) is persuasive. It held that Montana courts lacked personal jurisdiction over an Idaho attorney because, although he had communicated with his clients in Montana, the alleged fraud and deceit accrued in Idaho where he agreed to represent the Montanans for their claims arising out of an auto accident in Idaho.

Isakson’s claims center on his allegedly wrongful termination which Roberts, acting as an agent of the Firm from his office in Texas, performed over the phone. The termination targeted Isakson in Montana and was experienced by Isakson in Montana. However, the acts giving rise to the termination — both the Firm’s decision to terminate him and all of Isakson’s actions while working for the Texas-based Firm — occurred in Texas or were directed toward operating a business solely in Texas. Isakson was hired by the Texas Firm while he was a resident of Texas and even after his move to Montana he worked to advance its legal business in Texas. Under Montana law, any tort connected to his termination accrued where the events that gave rise to it occurred — in Texas. 4(b)(1)(B) does not confer specific jurisdiction over the Firm.

Isakson’s next argument is that jurisdiction is proper under (D) because his wrongful discharge claims arose from the Firm “contracting to insure any person, property, or risk located within Montana at the time of contracting.” He argues that after he had been working remotely from Montana for 1 year the Firm secured a Montana employer’s liability and work comp policy for him at his Montana address. The Firm disagrees that (D) applies because his termination claim is not connected to the policy, which covers an employee’s “bodily injury by accident or bodily injury by disease” and excludes “termination of any employee.” The Firm is correct.

The parties agree that “arising from” in this context means a “direct affiliation, nexus, or substantial connection between the basis for the cause of action and the act which falls within the long-arm statute.” Seal (Mont. 2002). At issue in Seal was whether a judge erred in deciding the merits of an insurance claim during a jurisdictional dispute. The plaintiff alleged that the defendant failed to fulfill her “contractual duty to insure the goods against loss or damage and he suffered a loss as a result of that breach.” Seal determined that personal jurisdiction was appropriate under (D) because “at their core, the allegations in the complaint derived from the alleged acts.”

Conversely, Isakson’s claims stem entirely from his allegedly wrongful termination. He does not allege any breach of the insurance policy and the policy excludes coverage for any damages arising from the “termination of any employee.” The mere fact that it covered him and his remote work location in limited ways is insufficient to create a substantial connection to his wrongful discharge claim. 4(b)(1)(D) cannot be used to establish personal jurisdiction over the Firm.

As Isakson has failed to establish specific personal jurisdiction under Montana’s long-arm statute, the Firm’s motion to dismiss could be granted for that reason alone. Milky Whey. However, even if he had satisfied one of the Rule 4(b)(1) conditions, the exercise of personal jurisdiction must also comport with due process. FMC (US 2021). The Firm argues that it neither availed itself of the benefits of Montana’s laws nor did it purposely direct any activity toward Montana. It maintains that “Isakson was hired in Texas, lived in Texas, and worked in Texas until he unilaterally ‘moved’ to Montana temporarily due to COVID-19.” Isakson counters that it purposefully availed itself of the benefits & protections of Montana laws and directed activity toward Montana when it terminated him here because it was a voluntary act designed to have an effect in Montana. The Firm has the better argument.

Taking Isakson’s factual allegations as true, the Firm withheld Montana taxes related to his employment, obtained insurance for him, and engaged in interstate communication with him related to his job. This distinguishes his case from where the defendant’s relationship with the forum state was predominantly to impact the market of the forum state. Sinatra (9th Cir. 1988) (a Swiss clinic’s tortious conduct was partly intended to avail it of California’s market). But the fact that the Firm never attempted to avail itself of Montana’s market for legal services weighs against finding that it “expressly aimed” any actions at Montana. Every connection between Montana and the Firm — including Isakson’s occasional hosting of Firm employees — was the result of his decision to move there and all are the sort of “random, fortuitous, or attenuated contacts” that under Burger King (US 1985) are insufficient to establish specific personal jurisdiction. Although he lives in Montana, his “injury is entirely personal to him and would follow him wherever he might choose to live or travel”; thus “the effects of [the Firm’s] actions are ‘not connected to the forum State in a way that makes those efforts a proper basis for jurisdiction.'” Picot (9th Cir. 2015) (quoting Walden (US 2014).

Because Isakson has neither established a prima facie showing of specific personal jurisdiction over the Firm under Montana’s long-arm statute nor one that comports with due process, the Court lacks personal jurisdiction over the Firm.

In response to the Firm’s motion to dismiss, Isakson requests that he be allowed to conduct discovery so he may further develop the jurisdictional evidence. The Firm argues that because his temporary remote work location was its only tie to Montana, jurisdictional discovery is not necessary.

Isakson’s allegation that he conducted business on the Firm’s behalf in Montana where his home functioned as a satellite office for the Firm provides a colorable basis for personal jurisdiction, but he fails to proffer specificity about what he would hope to learn through discovery. Merely pointing to existence of a jurisdictional dispute and arguing that discovery may uncover further evidence is insufficient to justify jurisdictional discovery.

Although the Court lacks personal jurisdiction over the Firm, transfer, rather than dismissal, is appropriate. 28 USC 1406(a). A transfer would not cause hardship to the Firm and its position on the merits would not be prejudiced, while a transfer would allow Isakson to obtain personal jurisdiction over the Firm while alleviating the procedural burdens related to the cost of refiling a suit in Texas Federal Court and any statute of limitations concerns that might apply to his potential cause(s) in Texas. Additionally, a transfer under 1406(a) does not prejudice any choice of law analysis to be determined by the Texas court.

Isakson v. Roberts Markel Weinberg Butler Hailey, 45 MFR 2, 4/9/24.

Anne Sherwood & Frederick Sherwood (Morrison, Sherwood, Wilson & Deola), Helena, for Isakson; Jean Faure & Katie Ranta (Faure Holden), Great Falls, for RMWBH.