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Failla v. FixtureOne Corp.

Supreme Court of Washington, En Banc

October 2, 2014

Kristine Failla, Petitioner ,
FixtureOne Corporation et al., Respondents

Argued: June 24, 2014.

As amended by order of the Supreme Court November 25, 2014.

Page 1113

Appeal from Peirce County Superior Court. 11-2-13799-1. Honorable Garold E. Johnson.

Michael W. Johns (of Roberts Johns & Hemphill PLLC ), for petitioner.

Thomas H. Oldfield (of Oldfield & Helsdon PLLC ), for respondents.

AUTHOR: Justice Mary I. Yu. WE CONCUR: Chief Justice Barbara A. Madsen, Justice Charles W. Johnson, Justice Mary E. Fairhurst, Justice Debra L. Stephens, Justice Charles K. Wiggins, Justice Steven C. Gonzá lez, Justice Sheryl Gordon McCloud. AUTHOR: Justice Susan Owens.


[181 Wn.2d 646] [As amended by order of the Supreme Court November 25, 2014.]

Page 1114

Yu, J.

¶ 1 This case asks whether Washington's long-arm statute, RCW 4.28.185, confers personal jurisdiction over an officer of a foreign corporation that employs a Washington resident. On the facts before us, we conclude it does for wage claims arising from that employment relationship and reverse the Court of Appeals.

Facts and Procedural History

¶ 2 In 2009, Kristine Failla, a Washington resident and experienced salesperson, was looking for a job she could perform from her Gig Harbor home. She e-mailed Kenneth A. Schutz looking for such a position. Schutz is the founder and chief executive officer (CEO) of FixtureOne Corporation, which sells fixtures, casework, and displays for use in retail stores. Clerk's Papers (CP) at 62. Both FixtureOne and Schutz are based in Pennsylvania, and at the time of Failla's e-mail, FixtureOne had no physical presence or customers in Washington.

¶ 3 Failla's inquiry caught the interest of Schutz, who replied to Failla that she " may be a fit" for FixtureOne because the company did " not have a sales representative in [this] area of the country." CP at 93. The parties continued negotiating, and Schutz eventually invited Failla to interview with FixtureOne in Pennsylvania, knowing she lived and planned to work in Washington. Schutz admits the nature of FixtureOne's business allows sales representatives to work anywhere with Internet and telephone access. CP at 63.

[181 Wn.2d 647] ¶ 4 FixtureOne hired Failla as an account executive in November 2009 and agreed to pay her an annual salary of $ 75,000, plus an additional three percent commission on sales. Failla's job responsibilities included, among other duties, " leading the company" in " [p]lanning, execution and management of profitable growth and expansion of the company's

Page 1115

revenue base and market share." CP at 30. The job also involved the " [d]esign, implementation and management of business development, client acquisition, and sales strategies." Id. Failla reported directly to Schutz, and the two communicated extensively by e-mail.

¶ 5 In December 2010, Failla requested a promotion and a raise. Schutz agreed and promoted her to FixtureOne's vice president of sales, increasing her salary to $ 135,000. Although there were outstanding commissions owed, Failla accepted the promotion and salary increase based on the assurances that the commissions would be paid. CP at 36. Schutz provided a draft employment agreement for Failla to sign in connection with the promotion. Among other things, the agreement contained a provision that it would be interpreted in accordance with Pennsylvania law. Failla proposed revisions to the agreement, but for reasons unknown neither Failla nor Schutz ever signed it.

¶ 6 Failla continued working for FixtureOne from her Washington home until May 2011. She received regular paychecks, and the only issue in this case is the sales commissions owed to her that were not paid. On May 26, 2011, Schutz e-mailed Failla to tell her that FixtureOne was " clos[ing] its doors" and ending her employment the following day. CP at 44. He assured Failla that FixtureOne would " pay your commissions and expenses asap in the next several weeks." Id. For two months following her termination, Schutz returned Failla's requests for payment with various explanations as to why the commissions remained unpaid. At one point he told Failla that he signed her commission check and blamed another employee for not mailing it. At other times he faulted the company's comptroller [181 Wn.2d 648] for failing to calculate the commission amount. Schutz eventually advised Failla that she would not receive a commission check and for the first time disputed whether such commissions were even owed. CP at 50.

¶ 7 Failla filed suit against FixtureOne and Schutz for the willful withholding of wages, including an allegation that Schutz was individually liable under Washington's wage laws, RCW 49.52.050 and .070. Failla served Schutz in Pennsylvania but was unable to serve FixtureOne. Consequently the suit proceeded against Schutz alone.

¶ 8 Failla and Schutz cross moved for summary judgment. [1] Schutz argued that the trial court lacked personal jurisdiction because he did not have the requisite minimum contacts with the state, and even if Washington could exercise jurisdiction over him, there were genuine issues of material fact preventing the entry of summary judgment. The trial court concluded it had personal jurisdiction and denied Schutz's summary judgment motion. Instead, the court granted summary judgment to Failla, awarding double damages pursuant to RCW 49.52.070, which provides for such damages when an employer willfully withholds wages due an employee.

¶ 9 The Court of Appeals reversed, holding that Washington's long-arm statute did not reach Schutz because the employment relationship between Failla and FixtureOne was inadequate to confer jurisdiction over Schutz. Failla v. FixtureOne Corp., 177 Wn.App. 813, 312 P.3d 1005 (2013). We granted review. Failla v. FixtureOne Corp, 180 Wn.2d 1007, 321 P.3d 1207 (2014).

¶ 10 Both parties agree FixtureOne, not Schutz, was the employer entity that hired Failla and that Failla performed work for FixtureOne in Washington. The disputed issue is whether Schutz, as the president and CEO of FixtureOne, is [181 Wn.2d 649] subject to Washington's jurisdiction and, if so, whether the trial court erred in finding he is liable under Washington's wage statute for nonpayment of wages under RCW 49.52.050 and .070. We hold that Schutz is subject to Washington's jurisdiction based on his level of contacts and transactions in Washington, ...

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