SPERZEL v. CHEMBIO DIAGNOSTICS INC

UNITED STATES DISTRICT COURT

DISTRICT OF MAINE

JOHN J. SPERZEL, III, )

)

Plaintiff )

)

v. ) No. 2:20-cv-00193-GZS

)

CHEMBIO DIAGNOSTICS, INC., )

)

Defendant )

RECOMMENDED DECISION ON MOTION TO DISMISS

FOR LACK OF PERSONAL JURISDICTION

In this suit arising from the alleged unlawful refusal of defendant Chembio Diagnostics,

Inc. (“Chembio”) to allow its former chief executive officer, plaintiff John J. Sperzel, III, to

exercise his Chembio stock options, Chembio moves pursuant to Federal Rule of Civil Procedure

12(b)(2) to dismiss the complaint for lack of personal jurisdiction. See Motion to Dismiss

(“Motion”) (ECF No. 16) at 1-2; Complaint and Demand for Jury Trial (“Complaint”) (ECF No.

1) ¶¶ 1-10. For the reasons that follow, I conclude that Sperzel fails to demonstrate the

appropriateness of the exercise of personal jurisdiction over Chembio in this forum and, hence,

recommend that the court grant the Motion and dismiss the Complaint without prejudice.1

I. Applicable Legal Standards

“When a court’s jurisdiction is contested” pursuant to Rule 12(b)(2), “the plaintiff bears

the burden of proving that jurisdiction lies in the forum state.” Sawtelle v. Farrell, 70 F.3d 1381,

1387 (1st Cir. 1995). “To establish personal jurisdiction in a diversity case” such as this, “a

plaintiff must satisfy both the forum state’s long-arm statute and the Due Process Clause of the

1 The “dismissal of a claim for lack of personal jurisdiction is not on the merits and is without prejudice[.]” Pushor

v. Mount Wash. Observatory, Inc., Docket No. 2:17-cv-354-NT, 2018 WL 3478892, at *2 n.6 (D. Me. July 19, 2018).

Fourteenth Amendment.” C.W. Downer & Co. v. Bioriginal Food & Sci. Corp., 771 F.3d 59, 65

(1st Cir. 2014). “Because the Law Court has deemed Maine’s long-arm statute coextensive with

the permissible exercise of personal jurisdiction under the Due Process Clause of the Fourteenth

Amendment, the due process inquiry controls in the present case.” Lucerne Farms v. Baling

Techs., Inc., 226 F. Supp. 2d 255, 257 (D. Me. 2002).

The “constitutional touchstone for personal jurisdiction” is “minimum contacts” between

a defendant and the forum state. United Elec., Radio & Mach. Workers of Am. v. 163 Pleasant St.

Corp., 960 F.2d 1080, 1087 (1st Cir. 1992). A defendant must have “sufficient contacts with the

forum state so that subjecting him, her, or it to the forum’s jurisdiction does not offend traditional

notions of fair play and substantial justice.” Id. (citation and internal quotation marks omitted).

In turn, “[i]n analyzing minimum contacts,” the First Circuit has “recognized two types of

personal jurisdiction: general and specific.” Id. at 1088. “General jurisdiction exists when the

litigation is not directly founded on the defendant’s forum-based contacts, but the defendant has

nevertheless engaged in continuous and systematic activity, unrelated to the suit, in the forum

state.” Id. Specific jurisdiction exists when “(1) [the] claim[s] directly arise[ ] out of or relate[ ]

to the defendant’s forum activities; (2) the defendant’s forum contacts represent a purposeful

availment of the privilege of conducting activities in that forum, thus invoking the benefits and

protections of the forum’s laws and rendering the defendant’s involuntary presence in the forum’s

courts foreseeable; and (3) the exercise of jurisdiction is reasonable.” Plixer Int’l, Inc. v.

Scrutinizer GmbH, 905 F.3d 1, 7 (1st Cir. 2018).

There are three recognized standards for determining whether the exercise of personal

jurisdiction is lawful: the prima facie standard, the preponderance standard, and the likelihood

standard. Rodriguez v. Fullerton Tires Corp., 115 F.3d 81, 83 (1st Cir. 1997); see also Foster-

Miller, Inc. v. Babcock & Wilcox Can., 46 F.3d 138, 145-47 (1st Cir. 1995) (outlining standards

and circumstances under which they apply).

When, as here, the court makes a jurisdictional ruling without holding an evidentiary

hearing, the prima facie standard applies. See, e.g., Phillips v. Prairie Eye Ctr., 530 F.3d 22, 26

(1st Cir. 2008). Under that standard, “the inquiry is whether the plaintiff has proffered evidence

which, if credited, is sufficient to support findings of all facts essential to personal

jurisdiction.” Id. “It is not enough for [the plaintiff] to rely on unsupported allegations in [the]

pleadings.” A Corp. v. All Am. Plumbing, Inc., 812 F.3d 54, 58 (1st Cir. 2016) (citation and internal

quotation marks omitted). “Rather, [the plaintiff] must put forward evidence of specific facts to

demonstrate that jurisdiction exists.” Id. (citation and internal quotation marks omitted).

In assessing this showing, the court “must accept the plaintiff’s (properly documented)

evidentiary proffers as true . . . (whether or not disputed) and construe them in the light most

congenial to the plaintiff’s jurisdictional claim.” Daynard v. Ness, Motley, Loadholt, Richardson

& Poole, P.A., 290 F.3d 42, 51 (1st Cir. 2002) (citations and internal quotation marks omitted).

Here, I have done so, taking into account relevant evidence adduced by Chembio only to the extent

that it does not conflict with Sperzel’s evidence.

Sperzel seeks to make a prima facie showing that the court has specific jurisdiction over

Chembio, conceding that, in the absence of jurisdictional discovery, he cannot show that general

jurisdiction exists. See Plaintiff’s Opposition to Defendant’s Motion to Dismiss (“Opposition”)

(ECF No. 23) at 10-11.

II. Factual Background

Sperzel is the former president and CEO of Chembio, a publicly-traded Nevada corporation

with its principal place of business in Hauppauge, New York, which is on Long Island. Affidavit

of John J. Sperzel, III (“Sperzel Aff.”) (ECF No. 24) ¶ 1; Declaration of Neil Goldman (“Goldman

Decl.”) (ECF No. 17) ¶ 3. Chembio develops point-of-care diagnostic tests for infectious diseases.

Complaint ¶ 1. Sperzel grew up in Maine, spent his freshman year at the University of Maine in

Orono, Maine, and has been a Maine resident since 2014. Sperzel Aff. ¶ 2. Before then, he lived

in New Jersey. Id. ¶¶ 12, 45.

Chembio has no employees located in Maine and is not registered with the Maine Secretary

of State to do business in Maine. Goldman Decl. ¶¶ 17-18. Although Chembio does not maintain

an official office in Maine, Chembio sales representatives cover certain sales territories that

include Maine. Sperzel Aff. ¶ 48. Chembio’s website is also accessible to Maine residents. Id.

¶ 50. Between January 2019 and June 2020, Chembio shipped product totaling $2,306.23 in value

to Maine. Goldman Decl. ¶ 19. Chembio’s total gross product sales in 2019 were $28.8 million,

of which $4.8 million was generated from product sales in the United States. Sperzel Aff. ¶ 49.

In December 2013, Sperzel was contacted by an executive search firm that had been

retained by the Chembio Board of Directors to identify a new CEO. Id. ¶ 4. In negotiating his

potential employment, Sperzel communicated with the executive search firm and members of the

Chembio Board of Directors while he was physically located in Maine. Id. ¶ 5. Those negotiations

culminated in the execution of an employment agreement dated March 13, 2014 (the “2014

Employment Agreement”), which Sperzel signed while in Maine and which bears his Maine

residential address. Id. ¶¶ 6-7; [2014] Employment Agreement, Exh. A (ECF No. 17-1) to

Goldman Decl., at 13. The 2014 Employment Agreement contained provisions applying New

York law to disputes arising out of the contract and setting forth Sperzel’s consent to the personal

jurisdiction of the federal and state courts of New York with respect to any lawsuit filed against

him by Chembio relating to the contract. 2014 Employment Agreement at 12, § 16.

During negotiations over the 2014 Employment Agreement, Sperzel recommended that

Chembio open a small corporate office in Massachusetts because it is a hub of life science

technology and innovation, investors, and senior executives. Sperzel Aff. ¶ 8. Chembio agreed

that this was a good idea and added a provision to Sperzel’s employment agreement contemplating

travel between Massachusetts and New York. Id.; 2014 Employment Agreement at 3, § 5(f).

Although the proposal was never implemented, Sperzel continued to be entitled pursuant to the

2014 Employment Agreement to reimbursement of expenses of travel between Massachusetts and

New York. Sperzel Aff. ¶ 9; 2014 Employment Agreement at 3, § 5(f). The 2014 Employment

Agreement provided that notice to Sperzel was to be sent to his Maine address. 2014 Employment

Agreement at 12, § 17 & 13.

When Sperzel joined Chembio, the company asked him to complete Form ID, an

application for an access code to file documents through the electronic filing system of the United

States Securities and Exchange Commission (SEC). Sperzel Aff. ¶ 11. Sperzel completed the

form, which lists his Brunswick, Maine, residential address, and returned it to Richard Larkin,

Chembio’s chief financial officer, who filed it with the SEC. Id.; Exh A. (ECF No. 24-1) thereto

at Page ID ## 326-27.

In connection with the 2014 Employment Agreement, Sperzel was granted options to

purchase up to 250,000 shares of Chembio’s stock. 2014 Employment Agreement at 4, § ¶ 6(a).

The grant of those options, which was negotiated as part of Sperzel’s initial offer of employment,

was set forth in seven separate stock agreements (the “2014 Stock Option Agreements”), each

dated March 18, 2014, and bearing Sperzel’s Maine residential address. Sperzel Aff. ¶ 16; Exhs.

C (ECF No. 24-1) thereto at Page ID ## 343-53, D (ECF No. 24-1) thereto at Page ID ## 355-65,

E (ECF No. 24-2) thereto at Page ID ## 367-77, F (ECF No. 24-2) thereto at Page ID ## 379-89,

G (ECF No. 24-2) thereto at Page ID ## 391-401, H (ECF No. 24-2) thereto at Page ID ## 403-

13, I (ECF No. 24-2) thereto at Page ID ## 415-25.

Chembio’s commuting records indicate that Sperzel was working at Chembio’s offices in

New York during the week of March 16-22, 2014. Goldman Decl. ¶ 8; Exh. C (ECF No. 17-3)

thereto at Page ID ## 252-53. The 2014 Stock Option Agreements were executed on Chembio’s

behalf by Richard Larkin, who at that time was Chembio’s chief financial officer and worked full-

time in New York. Exhs. C-I to Sperzel Aff. at Page ID ## 347, 359, 371, 383, 395, 407, 419;

Declaration of Katherine Davis (“Davis Decl.”) (ECF No. 18) ¶ 14.

On March 31, 2017, Sperzel entered into a new employment agreement with Chembio (the

“2017 Employment Agreement”). Sperzel Aff. ¶ 13. He was not in New York when he signed

that agreement, which bears his Maine residential address. Id. ¶¶ 13-14; [2017] Employment

Agreement, Exh. B (ECF No. 24-1) thereto, at Page ID # 341. The 2017 Employment Agreement

was executed by Chembio in New York. Exh. B to Sperzel Aff. at Page ID # 341; Davis Decl.

¶ 14. In connection with that new three-year employment agreement, Sperzel was granted

additional stock options pursuant to a series of three stock option agreements (the “2017 Stock

Option Agreements”). Sperzel Aff. ¶ 16; Exhs. J (ECF No. 24-3) thereto at Page ID ## 427-37, K

(ECF No. 24-3) thereto at Page ID ## 439-49, L (ECF No. 24-3) thereto at Page ID ## 451-61.

The 2017 Stock Option Agreements were signed by Larkin on behalf of Chembio but contain no

signature from Sperzel. Exhs. J-L to Sperzel Aff. at Page ID ## 431, 443, 455.

In 2017, Sperzel became gravely ill while traveling outside of the United States and was

airlifted to a hospital in Miami, Florida. Sperzel Aff. ¶ 33. After a brief hospital stay in Florida,

he traveled to New York, where he led Chembio’s quarterly Board of Directors meeting and annual

shareholder meeting and made its first-quarter earnings report to Wall Street, all while wearing a

portable defibrillator. Id. Afterwards, he was admitted to Massachusetts General Hospital in

Boston, Massachusetts, and diagnosed with Giant Cell Myocarditis, a rare heart disorder that can

cause acute heart failure and often death. Id.

Sperzel spent more than two months at Massachusetts General Hospital, where he

eventually received a life-saving heart transplant, and four weeks at a rehabilitation center in

Boston, Massachusetts. Id. ¶¶ 34-35. Given that extended stay, Sperzel provided Chembio with

his girlfriend’s contact information in North Attleboro, Massachusetts, as his emergency contact.

Id. ¶ 36. While Sperzel was recovering, and until he resumed his CEO role on a full-time basis on

October 3, 2017, Chembio temporarily sent his company mail to his girlfriend’s address as a

convenience. Id. ¶ 37. Sperzel realized only after he left Chembio that the company had

mistakenly changed his address to that of his girlfriend. Id. ¶ 40-41. He never authorized anyone

at Chembio to do so. Id. ¶ 42.

Throughout his employment with Chembio, Sperzel regularly conducted business on

behalf of the company while in Maine. Id. ¶¶ 23, 25. For example, he sent work-related emails

from his Chembio email account and had numerous conversations with Chembio representatives

while he was in Maine, including on weekends and while he was on vacation. Id. ¶ 23. During

2015, with the knowledge and support of the Chembio Board of Directors, Sperzel traveled to

Maine to meet with the chairman and CEO of a diagnostics company to negotiate terms of a

strategic business transaction. Id. ¶ 24.

During his employment with Chembio, Sperzel traveled extensively for work, including to

Chembio’s facilities in New York, Malaysia, Brazil, and Germany. Id. ¶ 19. He also traveled to

meet with investors, investment bankers, strategic partners, government officials, and customers.

Id. He stayed in hotels on Chembio business approximately 160 nights of each year of his

employment with the company. Id.

Consistent with Sperzel’s employment agreements, unless he was traveling elsewhere on

Chembio business or not working, he usually spent four days a week at Chembio’s headquarters

on Long Island, New York. Id. ¶ 20. He would drive his car to Connecticut, where he took a ferry

to Long Island, and stay at a hotel for the duration of his workweek in New York, after which he

would either return to Maine for the weekend or visit his children (two of whom continued to live

in Massachusetts with his ex-wife after their divorce) or his girlfriend, who also lived in

Massachusetts. Id. ¶¶ 20, 22, 45.

The ferry and hotel receipts that Sperzel submitted to Chembio in connection with his

commute to Long Island and Chembio business trips included his Maine residential address and

were reviewed and approved by Chembio’s chief financial officer. Id. ¶¶ 21, 26; Exhs. M (ECF

No. 24-3) thereto at Page ID # 463, N (ECF No. 24-3) thereto at Page ID # 465, O (ECF No. 24-

3) at Page ID # 467.

When Sperzel booked hotel rooms for other Chembio Board members and executives in

connection with company business, his name and Maine residential address would have appeared

on those individuals’ receipts. Sperzel Aff. ¶ 27. When Sperzel paid for Chembio work-related

expenses using his personal Chase Visa credit card and submitted the receipts for reimbursement,

his Chase Visa credit card statement showed his Maine residential address. Id. ¶ 28; Exh. P (ECF

No. 24-3) thereto at Page ID # 469.

Throughout Sperzel’s six-year employment with Chembio, the company paid his wages by

direct deposit into his bank account with TD Bank. Sperzel Aff. ¶ 29. The address listed on his

TD Bank statements is his Maine residential address. Id.; Exh. Q (ECF No. 24-3) thereto at Page

ID ## 471-72. In each one of the tax years 2014 to 2019, Sperzel filed state tax returns as a Maine

resident, and his state and federal tax returns for those years listed his Maine residential address.

Sperzel Aff. ¶¶ 30-31; Exhs. R (ECF No. 24-3) thereto at Page ID # 474-75, S (ECF No. 24-3)

thereto at Page ID ## 477-78. Sperzel’s W-2 statements from Chembio for the years 2014 to 2018

all show his Maine residential address. Sperzel Aff. ¶ 32; Exhs. T (ECF No. 24-3) thereto at Page

ID # 480, U (ECF No. 24-3) thereto at Page ID # 482, V (ECF No. 24-3) thereto at Page ID # 484.

On November 13, 2018, Sperzel received a letter dated November 12, 2018, from Gail

Page, chair of the Chembio Compensation Committee, notifying him that the committee had

approved an additional restricted stock award to him. Sperzel Aff. ¶ 46; Exh. W (ECF No. 24-3)

thereto at Page ID # 486. The letter, on which Page copied Katherine Davis and John Potthoff,

respectively the chair and a member of the Chembio Board of Directors, was addressed to him at

his Brunswick, Maine, residential address. Id.; Davis Decl. ¶ 2; Declaration of John Potthoff (ECF

No. 19) ¶ 2. After his departure from Chembio, Sperzel also received a letter from the Missouri

Department of Revenue Taxation Division, sent to and received at his Brunswick, Maine,

residential address, stating that, as an officer of Chembio, he was personally liable for the

company’s unpaid employer withholding taxes in that state. Sperzel Aff. ¶ 47; Exh. X (ECF No.

24-3) thereto at Page ID # 488.

During 2019, Sperzel’s relationship with the Chembio Board of Directors became strained

over the issue of his compensation. Davis Decl. ¶ 10. Sperzel informed the Board on December

27, 2019, that he had an offer to become CEO of another company and asked the Board for a

response. Id. After multiple calls, Sperzel and the Board were not able to agree on a new

compensation package for him, and discussions turned to negotiating a separation agreement. Id.

The parties concluded their negotiations on a separation agreement on January 3, 2020, id. ¶ 12,

and electronically signed the agreement on January 7, 2020, Separation and Release Agreement

(“Separation Agreement”), Complaint ¶ 46; Exh. N (ECF No. 1-14) thereto at 7. The Separation

Agreement contains a New York choice of law provision. Separation Agreement at 7, § 15.

When Sperzel attempted to exercise his vested stock options after his departure from

Chembio, he intended to sell that stock soon after the option exercise. Sperzel Aff. ¶ 52. The

monies he would have received from the sale of that stock would have been deposited into the

same TD Bank account bearing his Maine residential address in which Chembio deposited his

wages during his employment with the company. Id.

In connection with Sperzel’s employment with Chembio, he completed and submitted to

Chembio two separate direct deposit forms, one dated March 19, 2014, and another December 19,

2018. Second Declaration of Neil Goldman (“Second Goldman Decl.”) (ECF No. 26) ¶ 3; Exh. A

(ECF No. 26-1) thereto. Each of Sperzel’s direct deposit forms directed that his wages be

deposited into two separate bank accounts, with a fixed amount to be deposited in the first account

and the remainder in the other. Second Goldman Decl. ¶ 4; Exh. A thereto.

On September 8, 2020, Goldman accessed the public website for Bank of America, which

showed that the routing number matching the first bank account listed on Sperzel’s direct deposit

forms (011000138) is affiliated with Bank of America accounts for the State of Massachusetts.

Second Goldman Decl. ¶ 5; Exh. B (ECF No. 26-2) thereto. On September 8, 2020, Goldman also

accessed the public website for TD Bank, which showed that the routing number matching the

second bank account listed on Sperzel’s direct deposit forms (211370545) is affiliated with TD

Bank accounts in the states of Massachusetts and Rhode Island. Second Goldman Decl. ¶ 6 & Exh.

C (ECF No. 26-3) thereto.

Had Sperzel exercised any of his stock options, the relevant agreements each required that

he deliver a written Exercise Notice to Chembio. Goldman Decl. ¶ 16. Chembio employees

located in New York would have processed his exercise of his options. Id. ¶ 15. If Sperzel elected

a cashless exercise, which allows payment of the strike price portion of the shares by surrendering

an equivalent value of options, Chembio would have calculated the 10-day Volume Weighted

Average Price for the shares in accordance with the relevant option agreements to determine the

net shares he would receive. Id. ¶ 16. Alternatively, if Sperzel opted for a cash exercise, he would

have needed to send the funds for the strike price to Chembio along with his Exercise Notice. Id.

Once Chembio either determined the net shares due to Sperzel or confirmed that he had

paid the full strike price, Goldman would have sent a letter to Chembio’s transfer agent, Action

Stock Transfer Corp., a Utah-based company that handles the actual issuance of the shares. Id.

The shares would then have been registered with AST for book purposes. Id. At that point, Sperzel

could have elected to (i) leave the shares on AST’s book, (ii) request that a paper certificate be

prepared and issued by AST and sent to him, or (iii) set up a “deposit/withdrawal at custodian”

(DWAC) transaction whereby Sperzel’s broker would have posted the DWAC and retrieved the

shares in book entry form from the transfer agent. Id.

Sperzel filed the instant complaint against Chembio on June 3, 2020, alleging that its

refusal to allow him to exercise his vested options constituted a breach of the Separation

Agreement, the 2014 Stock Option Agreements, and the 2017 Stock Option Agreements, as well

as a breach of the implied covenant of good faith and fair dealing. Complaint ¶¶ 50, 90-165. He

also brought a claim for quantum meruit on the basis of the same conduct, which he alleged had

unjustly enriched Chembio. Id. ¶¶ 166-72.

III. Discussion

The First Circuit has instructed that the exercise of specific jurisdiction over an out-of-

forum defendant is appropriate if three requirements are met:

First, the claim underlying the litigation must directly arise out of, or relate to, the

defendant’s forum-state activities. Second, the defendant’s in-state contacts must

represent a purposeful availment of the privilege of conducting activities in the

forum state, thereby invoking the benefits and protections of that state’s laws and

making the defendant’s involuntary presence before the state’s courts foreseeable.

Third, the exercise of jurisdiction must be reasonable.

PREP Tours, Inc. v. Am. Youth Soccer Org., 913 F.3d 11, 17 (1st Cir. 2019) (citation and internal

punctuation omitted). This inquiry “is not susceptible of mechanical application; rather, the facts

of each case must be weighed to determine whether the requisite affiliating circumstances are

present.” Id. (citation and internal quotation marks omitted). Factors relevant to assessing whether

a plaintiff has shown both relatedness and purposeful availment in a contract case include “prior

negotiations and contemplated future consequences, along with the terms of the contract and the

parties’ actual course of dealing[.]” LP Sols., LLC v. Duchossois, Civil No. 2:18-CV-25-DBH,

2018 WL 1768037, at *5 (D. Me. Apr. 11, 2018), aff’d 907 F.3d 95 (1st Cir. 2018) (citation and

internal quotation marks omitted).

For the reasons that follow, I conclude that the plaintiff has failed to demonstrate

relatedness or purposeful availment. Either shortcoming is independently fatal to his bid to

maintain this action in Maine. See, e.g., Copia Commc’ns, LLC v. AMResorts, L.P., 812 F.3d 1, 4

(1st Cir. 2016) (while First Circuit doubted that plaintiff had “come close to satisfying”

relatedness, purposeful availment, or reasonableness prongs of analysis, it could “comfortably rest

the disposition of this appeal” on plaintiff’s failure to demonstrate purposeful availment). I need

not and do not consider the so-called “Gestalt factors” pursuant to which the reasonableness of the

exercise of jurisdiction is assessed. See, e.g., Sawtelle, 70 F.3d at 1394 (“[A] failure to demonstrate

the necessary minimum contacts eliminates the need to even reach the issue of reasonableness: the

gestalt factors come into play only if the first two segments of the test for specific jurisdiction have

been fulfilled.”) (citation and internal punctuation omitted).

A. Relatedness

In assessing relatedness, “the First Circuit frequently notes that a consideration in a contract

action such as this is whether the defendant’s forum-based activity was instrumental in the

contract’s formation or breach.” Duchossois, 2018 WL 1768037, at *5 (citation and internal

punctuation omitted). “[T]o be constitutionally significant, forum-state contacts need not involve

physical presence.” Phillips Exeter Acad. v. Howard Phillips Fund, Inc., 196 F.3d 284, 290 (1st

Cir. 1999). However, “the relatedness requirement is not met merely because a plaintiff’s cause

of action arose out of the general relationship between the parties; rather, the action must directly

arise out of the specific contacts between the defendant and the forum state.” Id. (citation and

internal punctuation omitted).2

Sperzel contends that he has made the requisite showing that Chembio’s forum-based

activity was instrumental to the formation or breach of the contracts at issue in this case, pointing

out that (i) he negotiated the terms of his initial employment agreement while in Maine and a

Maine resident, (ii) the 2014 Employment Agreement and the seven 2014 Stock Option

Agreements bear his Maine residential address, (iii) the document Chembio filed with the SEC

upon Sperzel’s initial employment reflected his Maine address, (iv) while in Maine, he transacted

company business by telephone, mail, and email, (v) he met with a potential business partner in

Maine with Chembio’s knowledge, (vi) throughout his employment with Chembio, the company

2 The plaintiff’s claims for breach of the implied covenant of good faith and fair dealing and quantum meruit require

no separate analysis. “The First Circuit has repeatedly used a contract-oriented jurisdictional analysis in cases with

related breach of contract and unjust enrichment claims.” Duchossois, 2018 WL 1768037, at *5 n.12.

paid his wages to a TD Bank account bearing his Maine residential address, (vii) he submitted

hundreds of receipts for reimbursement listing his Maine address that were reviewed and approved

by Chembio’s chief financial officer, and, (viii) had Chembio not unlawfully prevented him from

exercising his vested stock options, which he planned to sell thereafter, he would have deposited

the proceeds in the same TD Bank account. See Opposition at 12-14.

He cites Lucerne Farms, 226 F. Supp. 2d at 260, Henderson v. Laser Spine Inst. LLC, 815

F. Supp. 2d 353, 369 (D. Me. 2011), Doyle v. Merz N. Am., Inc., 405 F. Supp. 3d 186, 193 (D.

Mass. 2019), and Ouellette v. True Penny People, LLC, 352 F. Supp. 3d 144, 153 (D. Mass. 2018),

for the proposition that this showing suffices. See Opposition at 14.

Nonetheless, as Chembio counters, see Defendant’s Reply in Support of Motion to Dismiss

(“Reply”) (ECF No. 25) at 2-5, the majority of the contacts on which Sperzel relies relate to the

parties’ general relationship, not to the formation or breach of the 11 agreements at issue, and the

few remaining relevant contacts do not suffice to demonstrate relatedness.

As concerns contract formation, while Sperzel states that he negotiated the 2014 Stock

Option Agreements from Maine, he offers no evidence of the number or nature of Chembio’s

communications with him during that process. “[T]he due process inquiry turns on the defendant’s

contacts with the forum, not the location of the plaintiff’s residence.” Doyle, 405 F. Supp. 3d at

193. On the showing made, one cannot conclude that Chembio was even aware that Sperzel was

in Maine at the time. Moreover, Sperzel has not contested Chembio’s evidence that the 2014 Stock

Option Agreements were executed in New York. While the related 2014 Employment Agreement

arguably was formed in Maine – Sperzel avers he signed that agreement in this forum – it is not

among the 11 agreements Sperzel alleges Chembio breached. The formation of a related

agreement, standing alone, does not satisfy the test of relatedness.

Likewise, while Sperzel avers that he was physically in both Maine and New York during

negotiations leading to the formation of the 2017 Stock Option Agreements, he again offers no

evidence of the number or nature of Chembio’s communications with him while he was in Maine.

He concedes that he never signed those agreements and presents no evidence that they were formed

in this state. Further, although Sperzel avers that he was not in New York when he signed the

related 2017 Employment Agreement, he does not state that he was in Maine.

Sperzel offers no evidence regarding Chembio’s contacts, if any, with Maine bearing on

the formation of the 2020 Separation Agreement.

As concerns contract breach, Sperzel contends that, had he exercised his stock options, he

would have sold his shares and deposited the proceeds in his TD Bank account bearing his Maine

address. While “courts repeatedly have held that the location where payments are due under a

contract is a meaningful datum for jurisdictional purposes[,] . . . that fact alone does not possess

decretory significance.” Phillips Exeter, 196 F.3d at 291 (citations omitted). In any event, for two

independent reasons, Sperzel’s reliance on any deposit of proceeds to his TD Bank account is

misplaced. First, Maine would not have been the location of the payment: the routing number of

Sperzel’s TD Bank account indicates that it was located in Massachusetts or Rhode Island, not in

Maine.

Second, and in any event, Chembio would not have deposited those proceeds. Had Sperzel

exercised his stock options, Chembio employees in New York would have first processed the

exercise of the options to determine the strike price of the shares, and then Chembio would have

directed its transfer agent in Utah to issue the shares to Sperzel, who then could have sold the

shares through his stockbroker. On the record presented here, the alleged breach of the 11

agreements at issue seemingly occurred in New York, where Chembio processes requests to

exercise stock options. Regardless, there is no evidence that it occurred in Maine.

Sperzel’s showing, hence, “constitute[s] too thin a reed to support the district court’s

exercise of personal jurisdiction” over Chembio. 163 Pleasant St., 960 F.2d at 1090.3

B. Purposeful Availment

“The purposeful availment prong represents a rough quid pro quo: when a defendant

deliberately targets its behavior toward the society or economy of a particular forum, the forum

should have the power to subject the defendant to judgment regarding that behavior.” C.W.

Downer, 771 F.3d at 66 (citation and internal quotation marks omitted). “The cornerstones of this

inquiry are voluntariness and foreseeability[,]” which “places the emphasis on the defendant’s

intentions and prohibits jurisdiction based on random, fortuitous, or attenuated contacts.” Id.

(citation and internal quotation marks omitted).

“In contract cases, [the First Circuit has] found that the exercise of jurisdiction is

reasonably foreseeable when the defendant deliberately directed its efforts toward the forum state

or when the defendant entered a contractual relationship that envisioned continuing and wide-

reaching contacts in the forum State.” Duchossois, 907 F.3d at 104 (citations and internal

punctuation omitted). Sperzel demonstrates neither.

3 Lucerne Farms, Henderson, Doyle, and Ouellette are distinguishable. In each of those cases, plaintiffs demonstrated

significant specific forum-based contacts by defendants related to their breach of contract or other claims. See Lucerne

Farms, 226 F. Supp. 2d at 257, 260 (New York defendant allegedly breached sales agreement at issue by failing to

deliver operational baling machine, or provide start-up assistance and reimbursement for parts and subsequent

servicing, to Maine plaintiff); Henderson, 815 F. Supp. 2d at 368-69 (Florida defendants allegedly breached

agreements to provide acceptable medical treatment and ensure insurance coverage to Maine plaintiff after calling and

faxing plaintiff in Maine regarding arrangements for the treatment and costs/insurance coverage at issue); Doyle, 405

F. Supp. 3d at 189-90, 193 (defendant North Carolina employer allegedly liable for its supervisory employees’

harassment of, and retaliation against, plaintiff saleswoman in her assigned sales territory of Massachusetts); Ouellette,

352 F. Supp. 3d at 149-50, 153 (Florida defendant allegedly breached employment contract with Massachusetts

plaintiff after negotiating contract with him while he was home in Massachusetts and then entering into contract that

envisioned his performance of work from Massachusetts).

Sperzel contends that Chembio deliberately availed itself of the privilege of conducting

business in Maine because (i) Sperzel “worked regularly and continuously on behalf of Chembio

and with Chembio’s knowledge while he resided and worked in Maine, including communicating

with Chembio representatives and meeting with a potential business partner[,]” (ii) Chembio paid

his wages to his TD Bank account bearing his Maine address, (iii) Chembio received and approved

expense reports and issued W-2 statements bearing his Maine address, and (iv) Page sent a letter

to him at his Maine address on behalf of the Compensation Committee notifying him that he had

been approved for an additional restricted stock award. Opposition at 15-16. He adds that he even

received a letter at his Maine address from another state warning him that he was personally liable

for Chembio’s tax liability as a company officer. See id. at 16.

He argues that, because “Sperzel’s Maine residency was well known to Chembio, . . . the

Company’s presence before a court in Maine was foreseeable[,]” citing Henderson, 815 F. Supp.

2d at 371, Reed & Reed, Inc. v. George R. Cairns & Sons, Inc., 519 F. Supp. 2d 148, 154 (D. Me.

2007), Doyle, 405 F. Supp. 3d at 193, and Ouellette, 352 F. Supp. 3d at 154, for the proposition

that an adequate showing of purposeful availment has been made. See id.

In this context, as in the relatedness context, the only contacts relevant to analysis are those

bearing on the claims at issue in the case. See, e.g., Copia Commc’ns, 812 F.3d at 5 (disregarding

certain of defendant’s contacts with forum state in analyzing purposeful availment when “[n]o

claim in this lawsuit . . . arises out of or relates directly to any of these contacts,” rendering them

irrelevant). None of the contacts on which Sperzel relies to demonstrate purposeful availment has

any apparent bearing on his claims for breach of the 11 agreements at issue.4

4 While the 2018 letter from Page informed Sperzel that the Chembio Compensation Committee had approved an

additional restricted stock award to him, Sperzel seemingly cites the letter, sent to him at his Maine residential address,

to rebut Chembio’s evidence that it believed he resided in Massachusetts, not Maine. See Motion at 2-3. There is no

apparent connection between the 2018 letter and the 2014 and 2017 stock option grants at issue in this suit.

In any event, to the extent that Sperzel relies on his work in Maine on Chembio’s behalf,

it is undisputed that Chembio expected him to work in New York when not traveling on Chembio

business, and he did so. With one exception – Sperzel’s meeting with a potential business partner

in Maine – Sperzel introduces no evidence that Chembio was aware of – let alone directed – his

work from Maine. Sperzel’s reliance on deposits by Chembio to his TD Bank account falls short

of constituting a forum connection for the reasons discussed above. This leaves Chembio’s mere

knowledge that Sperzel resided in Maine, which, on its face, does not demonstrate purposeful

availment of the privilege of conducting business in Maine. See, e.g., Prairie Eye, 530 F.3d at 28

(a “defendant’s awareness of the location of the plaintiff is not, on its own, enough to create

personal jurisdiction over a defendant”); Harlow v. Children’s Hosp., 432 F.3d 50, 63 (1st Cir.

2005) (“Jurisdiction cannot be created by and does not travel with the plaintiff . . . wherever she

goes.”).5

IV. Conclusion

For the foregoing reasons, I recommend that the court GRANT the motion to dismiss

without prejudice for lack of personal jurisdiction over the defendant, Chembio.

5 Again, Henderson, Reed & Reed, Doyle, and Ouellette are distinguishable. In each of those cases, defendants

voluntarily and knowingly initiated contacts with plaintiffs in the forum state related to the claims at issue. See, e.g.,

Henderson, 815 F. Supp. 2d at 371 (in action alleging breach of agreement to provide medically acceptable treatment

and ensure insurance coverage, Florida defendants “began a series of promotional correspondence – multiple phone

calls, faxes, and emails – intended to solicit [Maine plaintiff’s] business and induce him to come to Florida” for the

“advertised surgery”); Reed & Reed, 519 F. Supp. 2d at 151-52, 154-55 (defendant Massachusetts contractor

headquartered in New Hampshire solicited bid from plaintiff Maine subcontractor resulting in subcontract and later

Mutual Defense Agreement that plaintiff alleged were breached); Doyle, 405 F. Supp. 3d at 189-90, 193-94 (defendant

North Carolina employer, which assigned plaintiff saleswoman a territory including Massachusetts, knew that she

“would work and sell its products in Massachusetts[,]” where she alleged she had been harassed and retaliated against

by supervisors); Ouellette, 352 F. Supp. 3d at 150, 154 (Florida defendant’s “voluntary actions in [Massachusetts] –

entering into an employment contract with a Massachusetts resident that envisioned performance in the forum –

certainly rendered suit in the forum [for breach of that contract] foreseeable”).

NOTICE

A party may file objections to those specified portions of a magistrate judge’s report or

proposed findings or recommended decisions entered pursuant to 28 U.S.C. § 636(b)(1)(B) for

which de novo review by the district court is sought, together with a supporting memorandum,

within fourteen (14) days after being served with a copy thereof. A responsive memorandum

shall be filed within fourteen (14) days after the filing of the objection.

Failure to file a timely objection shall constitute a waiver of the right to de novo review

by the district court and to appeal the district court’s order.

Dated this 7th day of February, 2021.

/s/ John H. Rich III

John H. Rich III

United States Magistrate Judge