Opinion
Case No. 3:19-cv-46
10-31-2019
DRT Aerospace, LLC, Plaintiff, v. Pedro Soto, Defendant.
ENTRY AND ORDER GRANTING DEFENDANT'S MOTION TO DISMISS (ECF 4) AND DENYING DEFENDANT'S ALTERNATIVE MOTION TO TRANSFER AS MOOT (ECF 4).
Pending before the Court is Defendant's Motion to Dismiss, or Transfer in the Alternative. (ECF 4.) Defendant Pedro Soto moves the Court to dismiss Plaintiff's Complaint for Declaration (ECF 1) for lack of personal jurisdiction and failure to state a claim. In the alternative, Defendant moves the Court to transfer venue to the District of Connecticut. (ECF 4.)
I. Factual Background
This case arises from a dispute over the interpretation of the benefits provision in the parties' Employment Agreement. (See generally ECF 1.) Plaintiff, DRT Aerospace, LLC ("DRT Aerospace"), is an Ohio limited liability company whose sole member is DRT Holdings, Inc., an Ohio corporation with its principal place of business in Ohio. (Id. at PageID 2-3, ¶¶ 3, 7.) Pedro Soto ("Mr. Soto"), former employee of DRT Aerospace and Defendant in this case, is a natural person domiciled in Connecticut. (Id. at PageID 2, ¶ 4.)
The parties' employment relationship began when they entered into this Employment Agreement (or "Agreement") in January 2016, after DRT Aerospace acquired the company that had been employing Mr. Soto. (Id. at PageID 2, ¶ 9 (citing ECF 1-1 at PageID 5); ECF 4-1 at PageID 40, ¶ 2.) The Agreement provided that Mr. Soto would continue to work for DRT Aerospace as the Plant Manager in New Haven, Connecticut, in substantially the same capacity as he had for his previous employer. (ECF 1-1 at PageID 5, ¶ 1.) The Agreement contained an Ohio choice of law provision, and a provision stating that the parties "consent to the jurisdiction and venue of the federal and state courts located in New Haven County, Connecticut." (Id. at PageID 8.)
During his employment with DRT Aerospace, Mr. Soto held two different positions. (ECF 5-1 at PageID 64, ¶¶ 8-9.) From February 2016 until approximately April 2017, Mr. Soto served as the Plant Manager for DRT Aerospace's facility in New Haven, Connecticut. (Id. at ¶ 8.) Then, from approximately April 2017 until January 2019, Mr. Soto served as an Account Executive working out of DRT Aerospace's facility located in Meriden, Connecticut. (Id. at ¶ 9.)
Mr. Soto's role as an Account Executive "focused on sales, business development, and account management." (Id. at ¶ 10.) Mr. Soto reported to Gregory Fedele, who was based in DRT Aerospace's home office in West Chester, Ohio, regularly initiating phone calls and emails regarding the fulfillment of his job functions and other business matters. (Id. at PageID 65, ¶ 12.)
As part of his role as Account Executive, Mr. Soto managed "accounts and relationships with assigned customers." (Id. at PageID 64, ¶ 11.) Mr. Soto's primary assigned customer was GE Aviation, located in Evendale, Ohio, and serviced by the Meriden facility. (Id. at PageID 65, ¶ 13.) As an Account Executive, Mr. Soto traveled to Ohio on DRT Aerospace's dime several times for business purposes. (Id. at PageID 65-66, ¶¶ 16-21 (citing Exs. C through H to ECF 5-1 at PageID 85-07).) The record indicates that Mr. Soto traveled to Ohio six times within the last two years of his employment on official business for DRT Aerospace, including to attend trainings and to meet with GE Aviation. (Id.)
On January 7, 2019, Mr. Soto wrote his supervisor in Ohio with formal notice of his resignation from DRT Aerospace, effective January 22, 2019. (Id. at PageID 64, ¶ 7 (citing Ex. B to ECF 5-1 at PageID 84).) Around that time, Mr. Soto requested severance payment from DRT Aerospace pursuant to the parties' Employment Agreement in the amount of $78,407.29. (Id. at PageID 66, ¶ 23 (citing Ex. J to ECF 5-1 at PageID 110-11).) DRT Aerospace denied the request, asserting that Mr. Soto was not entitled to severance payment under the Agreement. (Id.)
On January 25, 2019, Mr. Soto's counsel sent a letter to DRT Aerospace's Human Resources Director in Ohio, claiming a right to the severance payment and expressing a desire to resolve the issue amicably. (Id.) When no response was received, Mr. Soto's counsel sent a second letter on February 14, 2019, this time with a formal demand and draft complaint for the Superior Court in New Haven, Connecticut. (Id. at PageID 66-67, ¶ 24 (citing Ex. K and Ex. L to ECF 5-1 at PageID 112-17).) The letter warned that the draft complaint would "be served and filed if [Mr. Soto's counsel did] not hear back from DRT Aerospace by the close of business on February 22." (Id. (citing Ex. K to ECF 5-1 at PageID 112).)
Before the expiration of time given to respond to Mr. Soto's demand letter, DRT Aerospace filed this action in the Southern District of Ohio on February 18, 2019, seeking a declaration that it does not owe Mr. Soto any payment under the Employment Agreement, or otherwise. (See id.; ECF 1.) Defendant responded with a Motion to Dismiss for Lack of Jurisdiction, or in the Alternative to Transfer. (ECF 4.) For the following reasons, Defendant's Motion to Dismiss is GRANTED, and Defendant's Alternative Motion to Transfer is DENIED as moot.
II. Personal Jurisdiction Standard
Defendant asserts that the case should be dismissed for want of personal jurisdiction. The plaintiff bears the burden of showing that personal jurisdiction exists. Theunissen v. Matthews, 935 F.2d 1454, 1458 (6th Cir. 1991). In responding to a properly supported motion to dismiss, "the plaintiff may not stand on his pleadings but must, by affidavit or otherwise, set forth specific facts showing that the court has jurisdiction." Id. Where, as here, the Court depends solely upon the pleadings, briefs, and affidavits of the parties, the plaintiff need only make a prima facie showing that personal jurisdiction exists to survive dismissal. Id. All facts must be construed in the light most favorable to the plaintiff. Id. at 1459.
III. Analysis
In Ohio, personal jurisdiction will be found only if (1) Ohio's long-arm statute confers jurisdiction, and (2) jurisdiction is proper under the Due Process Clause. Conn v. Zakharov, 667 F.3d 705, 712 (6th Cir. 2012) (citing Kauffman Racing Equip., L.L.C. v. Roberts, 930 N.E.2d 784, 790 (Ohio 2010)).
A. Ohio's Long-Arm Statute
"[U]nder Ohio law, a court may exercise personal jurisdiction over a non-resident defendant only if specific jurisdiction can be found under one of the enumerated bases in Ohio's long-arm statute." Id. at 718 (citations omitted). Ohio's long-arm statute provides, in pertinent part, that "[a] court may exercise personal jurisdiction over a person who acts directly . . . as to a cause of action arising from the person's . . . [t]ransacting any business in this state." Ohio Rev. Code Ann. § 2307.382(A)(1).
Ohio courts have taken a broad interpretation of the phrase "transacting any business," which is more encompassing than the word "contract" and includes "to carry on business" and "to have dealings." Contech Bridge Sol., Inc. v. Kaffaber, No. 1:11-cv-216, 2011 U.S. Dist. LEXIS 122875, at *21 (S.D. Ohio Oct. 24, 2011) (quoting Goldstein v. Christiansen, 638 N.E.2d 541, 544 (Ohio 1994)). Because "the Ohio 'transacting any business' standard is coextensive with the purposeful availment prong of constitutional analysis," the Court will analyze the two together under the Due Process analysis that follows. Burnshire Dev., LLC v. Cliffs Reduced Iron Corp., 198 F. App'x 425, 432 (6th Cir. 2006).
B. Due Process Clause
"[T]he Due Process Clause requires that the defendant have sufficient minimum contact[s] with the forum state so that finding personal jurisdiction does not offend traditional notions of fair play and substantial justice." Conn, 667 F.3d at 712 (internal quotations omitted). The Sixth Circuit employs the following three-pronged test to determine whether there is specific personal jurisdiction under the Due Process Clause:
First, the defendant must purposefully avail himself of the privilege of acting in the forum state or causing a consequence in the forum state. Second, the cause of action must arise from the defendant's activities there. Finally, the acts of the defendant or consequences caused by the defendant must have a substantial enough connection with the forum state to make the exercise of jurisdiction over the defendant reasonable.S. Mach. Co. v. Mohasco Indus., Inc., 401 F.2d 374, 381 (6th Cir. 1968).
i. Purposeful Availment
Purposeful availment is "something more than a passive availment of [the forum state's] opportunities." Bridgeport Music, Inc. c. Still N the Water Publ'g, 327 F.3d 472, 478 (6th Cir. 2003) (internal citation and quotation omitted). The defendant's own actions must "create a 'substantial connection' with the forum state" such that the defendant "should reasonably anticipate being haled into court there." CompuServe, Inc. v. Patterson, 89 F.3d 1257, 1263 (6th Cir. 1996) (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474-75 (1985)). This requirement "ensures that a defendant will not be haled into a jurisdiction solely as a result of 'random,' 'fortuitous,' or 'attenuated' contacts, or of the 'unilateral activity of another party or a third person.'" Bridgeport Music, 327 F.3d at 478 (quoting Burger King, 471 U.S. at 475).
"[P]arties who 'reach out beyond one state and create continuing relationships and obligations with citizens of another state' are subject to regulation and sanctions in the other State for the consequences of their activities." Burger King, 471 U.S. at 473. In the context of contractual relationships, courts must evaluate "prior negotiations and contemplated future consequences, along with the term of the contract and the parties' actual course of dealing . . . in determining whether the defendant purposefully established minimum contacts with the forum." Id. at 479. The focus is properly placed on the quality of the defendant's contacts with the forum rather than the quantity of contacts or the duration of the parties' relationship. Calphalon Corp. v. Rowlette, 228 F.3d 718, 722 (6th Cir. 2000); LAK Inc. v. Deer Creek Enterprises, 855 F.2d 1293, 1301 (6th Cir. 1989). Ohio district courts have expanded on and considered the following factors in determining whether an out-of-state defendant "purposefully availed" himself or "transacted business" in Ohio:
The first factor is whether the out-of-state defendant initiated the dealing. If it were the defendant who "reached out" to the forum state to create a business relationship, the defendant has transacted business within the forum state. The question of who initiates the contact, however, is but one factor to be considered and the determination is not always dependent upon who initiates the contact. . . .
The second factor is "whether the parties conducted their negotiations or discussions in the forum state, or with terms affecting the forum state." If the parties negotiated in Ohio with provisions affecting Ohio, the nonresident transacted business in Ohio. However, merely directing communications to an Ohio resident for the purpose of negotiating an agreement, without more, is insufficient to constitute "transacting business." "Rather, there must additionally be some
continuing obligation that connects the non-resident defendant to the state or some terms of the agreement that affect the state."Hitachi Med. Sys. Am., Inc. v. St. Louis Gynecology & Oncology, LLC, No. 5:09-cv-2613, 2011 U.S. Dist. LEXIS 17022, at *5 (N.D. Ohio Feb. 22, 2011) (internal citations omitted); see also Bachtel v. Barker, No. 1:15-cv-434, 2016 U.S. Dist. LEXIS 10149, at *11-12 (S.D. Ohio Jan. 28, 2016).
In Burger King, defendant had "'purposefully directed' his activities at residents of the forum." 472 (citing Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 774 (1984)). Defendant "deliberately '[reached] out beyond'" his home state of Michigan by applying for a franchise with a Florida company. Id. at 480. Defendant negotiated back and forth over the terms of the contract with the Florida headquarters, and purchased a substantial amount of restaurant equipment from the Florida company during the negotiations. Id. at 467. Defendant entered into a twenty-year, carefully structured franchise relationship that envisioned extensive continuing contacts with the Florida headquarters, and was governed by Florida law. Id. at 480. Under the agreement, defendant obligated himself personally to over $1 million in payments to the Florida headquarters throughout the course of the contract. Id. at 467. But after signing the contract, defendant refused to make the contractual payments to the Florida headquarters, and continued to use plaintiff's trademarks and confidential business information even after his termination. Id. at 480. These contacts and actions "caused foreseeable injuries to the corporation in Florida." Id.
The Court focused on the fact that defendant reached out to Florida and entered into a long-term franchise contract that created substantial continuing obligations in the forum. Id. The deliberate nature of defendant's actions and the foreseeability that his actions would cause harm in Florida made litigation there both reasonable and foreseeable. Id.; see also Tharo Sys. v. cab Produkttechnik GmbH & Co. KG, 196 F. App'x 336, 371 (6th Cir. 2006) (finding purposeful availment where defendant "affirmatively reached out" to the plaintiff in Ohio to negotiate their letter of understanding, and where the parties created a partnership with substantial ongoing contacts and obligations in Ohio because of their commercial relationship).
However, in Calphalon, the court held that defendant had not purposefully availed itself of the benefits and protections of Ohio law. 228 F.3d at 723. Plaintiff was an Ohio corporation, and defendant was a Minnesota corporation acting as plaintiff's sole representative in Minnesota. Id. at 722. There was no evidence that defendant reached out to plaintiff in Ohio to negotiate or begin the parties' contractual relationship, and defendant's obligations under the agreement were to be performed outside of Ohio. Id. Plaintiff argued that defendant had purposefully availed itself of the benefits of Ohio law through its relationship with plaintiff as a manufacturer's representative. Id. Plaintiff pointed to the following facts to demonstrate that there was purposeful availment: the parties agreement, which was the subject of the declaratory judgment action; the choice of law provision in the agreement; defendant's duties to report directly to plaintiff; defendant's communications by phone and fax with plaintiff; defendant's visits to plaintiff's offices in Ohio; and defendant's letter to plaintiff threatening litigation. Id.
The court held that the mere existence of a contract between the parties for seventeen months was insufficient to establish personal jurisdiction over defendant. Id. Placing defendant on notice that the contract was to be governed by Ohio law did not in itself "make a deliberate affiliation" with Ohio or make litigation there reasonably foreseeable. Id. at 723. The court further explained that Defendant's contacts with Ohio resulted not because defendant chose to create "continuous and substantial consequences" in Ohio, but because plaintiff "chose to be headquartered in Ohio." Id. The fact that plaintiff was based in Ohio was immaterial, because defendant "would have served as [plaintiff's] representative in the designated states, regardless of [plaintiff's] base of operation." Id. Therefore, defendant's contacts with Ohio were merely "'random,' 'fortuitous,' and 'attenuated,'" and did not amount to purposeful availment. Id. at 722; see also Bulso v. O'Shea, 730 F. App'x 347, 351-52 (6th Cir. 2018); Int'l Tech. Consultants, Inc. v. Euroglas, 107 F.3d 386, 395 (6th Cir. 1997).
Unlike in Burger King, Defendant was not the one to "reach out" to Plaintiff. To the contrary, Plaintiff initiated contact by purchasing the company that employed Defendant. (ECF 4-1 at PageID 40, ¶ 2.) Defendant signed a new Employment Agreement with Plaintiff as a result of this acquisition. (Id.; ECF 1-1.) Plaintiff misunderstands what it means to "reach out" or "initiate[] the dealing." Communication and other contact between the parties after the parties' relationship has been created does not constitute "initiat[ing] dealings with Ohio" as Plaintiff asserts. (ECF 5 at PageID 53.) One initiates the dealing by being the first to reach out to the other regarding the creation of a business relationship. See Burger King, 471 U.S. at 473; Tharo Sys., 196 F. App'x at 371; Hitachi Med. Sys., 2011 U.S. Dist. LEXIS 17022 at *5; Bachtel, 2016 U.S. Dist. LEXIS 10149 at *11-12.
The Employment Agreement at issue provided that "Employer employs Employee as the Plant Manager of its plant in New Haven, Connecticut. Employee will have such duties as are reasonably assigned to him from time to time by Employer, but which duties shall not be a substantive adverse alteration from Employee's duties for Space-Craft Mfg., Inc. immediately prior to the date hereof." (ECF 1-1 at PageID 5.) Thus, the parties envisioned that Mr. Soto would continue working in substantially the same capacity as before the acquisition occurred: in the plant in New Haven, Connecticut. On its face, the obligations under the Agreement were to be performed in Connecticut, not in Ohio, and the Agreement was not focused on exploiting any market in Ohio. (Id.) The contract does not purport to create any substantial continuing obligations in Ohio, and states a term of only two years. (Id.) The stated two-year term, or even the actual three-year employment relationship with DRT Aerospace, cannot be equated with the incredibly involved, twenty-year franchise agreement in Burger King.
Further, the fact that the Employment Agreement contained an Ohio choice of law provision merely demonstrates that Mr. Soto was on notice that the Agreement would be governed by Ohio law. This provision itself does not constitute purposeful availment of the benefits and protections of Ohio law. See Calphalon, 228 F.3d at 723 (placing defendant on notice that the contract was governed by Ohio law did not in itself "make a deliberate affiliation" with Ohio or make litigation there reasonably foreseeable). The Agreement also contained a provision wherein "the parties consent[ed] to the jurisdiction and venue of the federal and state courts located in New Haven County, Connecticut." (ECF 1-1, PageID 8.) Mr. Soto did not consent to jurisdiction in Ohio; instead, DRT Aerospace explicitly consented to jurisdiction in New Haven, Connecticut. Viewing those provisions together, and considering them in the light most favorable to DRT Aerospace, they send mixed messages and do not make litigation in Ohio more foreseeable for Mr. Soto. The provision consenting to jurisdiction in New Haven County only serves to make litigation in Connecticut foreseeable. If anything, the permissive nature of the forum selection clause could have placed Mr. Soto on notice that jurisdiction may be proper in other forums as well. However, notice of that possibility is also insufficient to "make a deliberate affiliation" with Ohio or to make litigation there reasonably foreseeable.
Aside from the Agreement, Plaintiff also points to Mr. Soto's contacts with Ohio in his role as an Account Executive as evidence that Mr. Soto purposefully availed himself of the benefits of Ohio law. However, like in Calphalon, Mr. Soto's contacts with Ohio (by phone, email, letters, and personal visits there) did not occur because Mr. Soto chose to create "continuous and substantial consequences" in Ohio, but rather because DRT Aerospace "chose to be headquartered in Ohio" and because DRT Aerospace chose to assign Mr. Soto an Ohio customer. Mr. Soto was not reaching out to Ohio to conduct his own business there, but rather was sent by DRT Aerospace on six paid trips to Ohio to attend trainings and meetings with his assigned Ohio client. (ECF 5-1 at PageID 65-66, ¶¶ 16-21 (citing Exs. C through H to ECF 5-1 at PageID 85-07).) Mr. Soto's communications with his Ohio supervisor were similarly fortuitous, as they would have occurred regardless of where his supervisor was located. See Euroglas, 107 F.3d at 395. There is no further connection with Ohio other than the fact that Ohio is DRT Aerospace's home state. See Camm Fin., LLC v. First Cmty. Bank, No. 4:16CV1293, 2017 U.S. Dist. LEXIS 216807, *6-8 (N.D. Ohio Mar. 31, 2017) (finding purposeful availment when defendant-bank's connection with Ohio went beyond the mere fact that it was plaintiff's home state).
Plaintiff's reliance on Coast to Coast Health Care Servs. v. Meyerhoffer, No. 2:10-cv-734, 2012 U.S. Dist. LEXIS 6250, at *6 (S.D. Ohio Jan. 19, 2012), is misplaced. Personal jurisdiction was proper in that case not because of the mere fact of the parties' employment relationship, but because defendant had purposely directed her tortious conduct at plaintiff to cause a consequence in Ohio. Id. at *10-11 (relying on Ohio Rev. Code Ann. § 2307.382(A)(3) and (A)(6) rather than (A)(1)). During her employment, defendant deliberately created scheduling errors for plaintiff, deleted critical and proprietary information, sent an open email in violation of company's instructions in order to advise clients of her resignations, and took steps to convert confidential information and direct plaintiff's clients to another company. Id. at *15. It was the deliberate nature of these contacts designed to cause a consequence in Ohio, along with the fact that the claims directly arose from those contacts, that subjected her to personal jurisdiction in Ohio. Id. at *12. Plaintiff also cites Contech Bridge Sol., Inc. v. Keaffaber, No. 1:11-cv-216, 2011 U.S. Dist. LEXIS 122875, at *21 (S.D. Ohio Oct. 24, 2011), and Rexam Healthcare Packaging, Inc. v. Osiris Med., Inc., No. 3:09-CV-1584, 2010 U.S. Dist. LEXIS 21702, at *4-5 (N.D. Ohio Mar. 9, 2010), wherein the intentional wrongdoing on the defendants' part made it easy to see that the claims arose form defendants' deliberate contacts directed at the forum state.
In contrast, the contacts that Plaintiff asserts confer personal jurisdiction over Mr. Soto here (communications by phone, email, letters, and physical visits) do not relate to the operative facts giving rise to the declaratory judgment action. The letters are an insufficient basis to establish purposeful availment. See Calphalon, 228 F.3d at 723.
In summary, the Court finds that Mr. Soto did not purposefully avail himself of Ohio law when: (1) he was not the one to "reach out" or "initiate" contact with Plaintiff in Ohio; (2) neither the choice of law provision, nor the terms of the Agreement create substantial or continuing obligations that would make litigation in Ohio reasonably foreseeable for Mr. Soto; and (3) Mr. Soto's contacts with Ohio are purely fortuitous because they occurred only as a result of Plaintiff's choice to be headquartered in Ohio and Plaintiff's choice to assign an Ohio customer to Mr. Soto, not because Mr. Soto made a "deliberate affiliation" with Ohio.
As in Calphalon, Mr. Soto's contacts "were precisely the type of 'random,' 'fortuitous,' and 'attenuated' contacts that the purposeful availment requirement is meant to prevent from causing jurisdiction." 228 F.3d at 723; see also Bulso, 730 F. App'x at 350.
ii. Arising From Defendant's Contacts
The second prong of the personal jurisdiction analysis requires that "the cause of action must arise from the defendant's activities" in the forum state. Mohasco Indus., 401 F.2d at 381. "The 'arising from' requirement under the second prong is satisfied when the operative facts of the controversy arise from the defendant's contacts with the state." Calphalon, 228 F.3d at 724 (citing Mohasco Indus., 401 F.2d at 384). Even though this is a "'lenient standard,' the cause of action must have a 'substantial connection' to the defendants' activity in the state." Bulso, 730 F. App'x at 351 (quoting MAG IAS Holdings, Inc. v. Schmückle, 854 F.3d 894, 903 (6th Cir. 2017)).
Plaintiff does not point to any of Defendant's contacts in Ohio giving rise to the declaratory judgment action other than that (1) Defendant signed the Employment Agreement with Plaintiff, an Ohio company; (2) the Agreement is governed by Ohio law; (3) Defendant sent a letter to his supervisor in Ohio ending the employment relationship between the parties; and (4) Defendant sent two letters to Plaintiff in Ohio claiming a right to severance payment under the Agreement. These are the only contacts relevant to Plaintiff's suit, which seeks a declaration that Plaintiff's interpretation of the Employment Agreement is correct, and that it does not owe Defendant any payment under the Agreement.
Plaintiff argues that the letters "rais[ed] the dispute at bar (regarding the parties' rights and obligations under the Employment Agreement) [and that they] were sent from Soto's attorney and received by DRT in Ohio." (ECF 5-1 at PageID 57.) As a result, Plaintiff claims that Mr. Soto's contacts are related to the cause of action here. (Id.) But the relevant question here is "whether the defendant's conduct connects him to the forum in a meaningful way." Walden v. Fiore, 571 U.S. 277, 290 (2014); see also Bulso, 730 F. App'x at 351. As discussed previously, these contacts are insufficient to meet the requirements for purposeful availment, let alone to create a "substantial connection" to Plaintiff's cause of action under the second prong of the Due Process analysis.
This case is about contract interpretation governed by Ohio law. The only provision in the Agreement connecting Mr. Soto to Ohio is the choice of law provision. The dispute here would have arisen regardless of the location of Defendant's supervisor, the company's headquarters, or one of Defendant's assigned customers. How many times Defendant visited Ohio for training and client meetings, or how many times Defendant communicated with his Ohio supervisor are immaterial to the question of the proper contractual interpretation of the parties' Employment Agreement. Defendant's activities in Ohio are not central to this dispute, or even a factor. Thus, it cannot be said that the cause of action has a "substantial connection" to Mr. Soto's activities in Ohio.
iii. Reasonableness
The only remaining question is whether it would be reasonable for the Court to exercise personal jurisdiction over Defendant. "In determining reasonableness, we examine three factors: (1) the burden on the defendant; (2) the forum state's interest; and (3) the plaintiff's interest in obtaining relief." Bulso, 730 F. App'x at 351 (citing Schmückle, 854 F.3d at 904).
Plaintiff argues that the burden placed on Mr. Soto "is insufficient to show that the exercise of personal jurisdiction over him would be unreasonable." (ECF 5 at PageID 58.) The Court disagrees. As previously discussed, the first two prongs of the Due Process analysis have not been met. Therefore, there is no presumption that exercising jurisdiction over Defendant would be reasonable. See Theunissen, 935 F.2d at 1462. Though Defendant has had contacts with Ohio, these contacts are insufficient to create a substantial connection between the Defendant and the forum state.
Plaintiff merely argues that "DRT and Ohio have a clear interest in creating a forum to determine the parties' rights and obligations under the Employment Agreement." (ECF 5 at PageID 58.) This does not explain why Plaintiff should obtain relief in Ohio rather than in another state. To the contrary, the effects of the payment or nonpayment of severance would be felt by Mr. Soto in Connecticut, rather than Ohio. Further, the state of Ohio has little interest in this employment dispute about an employee who lives and worked in Connecticut. (ECF 4 at PageID 35.) Balancing all three factors, the Court concludes that the declaratory judgment action lacks a sufficiently substantial connection with Ohio to make the exercise of jurisdiction over the Mr. Soto reasonable. See Calphalon, 228 F.3d at 724.
As a practical matter, it would be unreasonable to subject employees to personal jurisdiction under these facts. Large companies operating in multiple states would only need to ensure a choice of law provision in their preferred forum, pay to have their employees visit the company's headquarters in the forum state a few times, and assign the employees customers or other business contacts to work with in the forum state. Then, if any dispute regarding the employment relationship arose, even if unrelated to their contacts in the forum, employees could be subjected to personal jurisdiction in the forum state. These are precisely the type of fortuitous and attenuated contacts the Due Process Clause is designed to prevent from creating personal jurisdiction over a foreign defendant.
IV. Dismissal Under the Declaratory Judgment Act
Even if personal jurisdiction existed over Defendant, Defendant argues the action should be dismissed because Plaintiff's use of the Declaratory Judgment Act in this case is improper. While the Court agrees with Plaintiff that there is an "actual controversy" alleged in the Complaint, the Court would decline to exercise its discretionary jurisdiction to hear the case. The Declaratory Judgment Act provides, in relevant part:
In a case of actual controversy within its jurisdiction, . . . any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.28 U.S.C. § 2201(a). The phrase "a case of actual controversy" means the type of case or controversy that is justiciable under Article III of the United States Constitution. See 3M Co. v. Avery Dennison Corp., 673 F.3d 1372, 1376 (Fed Cir. 2012) (citing Aetna Life Ins. v. Haworth, 300 U.S. 227, 239-40 (1937)). An actual controversy must exist for a party to have standing to bring an action under the Declaratory Judgment Act. Id. The proper test is "whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." Maryland Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273 (1941) (citing Haworth, 300 U.S. at 239-40).
It makes no difference that oftentimes, in a declaratory judgment action, "the positions of the parties in the conventional suit are reversed; the inquiry is the same in either case." Id. (citation omitted). While a party need not show that there is a "reasonable apprehension of suit," specific, impending threats of litigation would demonstrate a justiciable controversy. See Lee v. Makhnevich, No. 11-cv-8665, 2013 U.S. Dist. LEXIS 43760, at *8 (S.D.N.Y. Mar. 27, 2013) (finding an "actual controversy" where declaratory defendant attempted to enforce the agreement, threatened plaintiff with suit twice, prepared and sent a draft version of the complaint they would file in New York state court, and sent two invoices, one threatening referral to a collection agency); Ontel Prods. Corp. v. Yeti Coolers, LLC, No. 16-5712, 2017 U.S. Dist. LEXIS 110508, at *14-15 (D.N.J. June 30, 2017) (holding there was no "actual controversy" where declaratory defendant did not send cease and desist letter; did not send a draft complaint; and did not specify a date on which they would file suit, or specify where they would file suit); Telebrands Corp. v. Exceptional Prods., No. 11-CV-2252, 2011 U.S. Dist. LEXIS 139308, at *5-6 (D.N.J. Dec. 5, 2011).
Here, when the parties disagreed as to whether DRT Aerospace owed Mr. Soto severance under the Employment Agreement, Mr. Soto retained a lawyer and sent a letter claiming a right to payment. (ECF 5-1 at PageID 66, ¶ 23 (citing Ex. J to ECF 5-1 at PageID 110-11).) When no response was received, Mr. Soto sent another letter through his lawyer, this time a formal demand threatening to file suit in Connecticut state court if no response was received prior to the close of business on February 22, 2019. (Id. at PageID 66-67, ¶ 24 (citing Ex. K and Ex. L to ECF 5-1 at PageID 112-17).) The demand included a draft complaint for the New Haven Superior Court. (Id.) Thus, DRT Aerospace had a reasonable apprehension of an impending lawsuit sufficient to demonstrate an "actual controversy."
The presence of an actual controversy, however, is not the end of the inquiry. District courts have substantial discretion under the Declaratory Judgment Act to determine "whether and when to entertain an action . . ., even when the suit otherwise satisfies subject matter jurisdiction prerequisites." Wilton v. Seven Falls Co., 515 U.S. 277, 282 (1995). The Sixth Circuit has developed a five-factor test to determine whether a district court should exercise jurisdiction over a declaratory judgment action:
(1) whether the judgment would settle the controversy;AmSouth Bank v. Dale, 386 F.3d 763, 785 (6th Cir. 2004) (citing Scottsdale Ins. Co. v. Roumph, 211 F.3d 964, 968 (6th Cir. 2000)). The Court will consider these factors in turn to determine whether dismissal is appropriate.
(2) whether the declaratory judgment action would serve a useful purpose in clarifying the legal relations at issue;
(3) whether the declaratory remedy is being used merely for the purpose of "procedural fencing" or "to provide an arena for res judicata";
(4) whether the use of a declaratory action would increase the friction between our federal and state courts and improperly encroach on state jurisdiction; and
(5) whether there is an alternative remedy that is better or more effective.
1. Settle the Controversy
In considering whether the judgment would settle the controversy, the Sixth Circuit noted that "counterclaims will so often be possible or even compulsory that all declaratory judgments will either be able to or not be able to settle the controversy." Id. at 786. The fact that this claim has been brought as a declaratory judgment action does not make it more or less likely that the controversy will be settled than if it were a coercive suit. Therefore, this factor does not weigh in favor of either party.
2. Useful Purpose
The second factor weighs heavily against allowing the declaratory judgment action to proceed. "The 'useful purpose' served by the declaratory judgment action is the clarification of legal duties for the future, rather than the past harm" that coercive actions are aimed at redressing. Id. at 786. Defendant argues that "[t]he Complaint seeks declaratory relief with regard to actions that occurred in the past and does not concern the future conduct of the parties under the Employment Agreement," and therefore, the declaratory judgment action in this case does not serve any useful purpose. (ECF 4 at PageID 30.) The Court agrees.
Where a pending coercive action, filed by the natural plaintiff, would encompass all the issues in the declaratory judgment action, the policy reasons underlying the creation of the extraordinary remedy of declaratory judgment are not present, and the use of that remedy is unjustified. This is true whatever the nature of the coercive action underlying the declaratory action—the important distinction in the case law is between situations where some uncertainty beyond the possibility of litigation exists (i.e., trademark infringement) and those where the injury is already complete.Id. at 787. Here, DRT Aerospace seeks a declaration that, when the employment relationship ended between the parties, DRT Aerospace had no obligation to pay Mr. Soto severance. (ECF 1.) The action was brought in response to a threat of suit to address past events following the ending of the employment relationship, rather than to clarify existing legal duties for an ongoing employment relationship. (Id.) "The threat of suit, however immediate, is not by itself sufficient for the invocation of the federal power to issue a declaratory judgment." Dale, 386 F.3d at 787 (quoting Hyatt Int'l Corp. v. Coco, 302 F.3d 707, 712 (7th Cir. 2002)).
"Declaratory actions are generally reserved for situations where 'some additional harm, not merely waiting for the natural plaintiff to sue, will befall the declaratory plaintiff in the meantime.'" Weiler v. Allf, No. 1:17-cv-673-MRB, 2018 U.S. Dist. LEXIS 168607, at *15 (S.D. Ohio Sept. 30, 2019) (citing Dale, 386 F.3d at 786). Neither party alleges any present or continual wrongdoing by the other that would require immediate clarification of the parties' respective rights. Moreover, "the historical incidents giving rise to liability are finished." Dale, 386 F.3d at 788. This factor weighs strongly in favor of dismissing the action.
3. Procedural Fencing
"Improper forum shopping typically motivates the first filer's run to the court of its choosing. Such motive is found most readily, and viewed most unenthusiastically, where the first filer acted on the basis of an anticipation that its opponent was about to file a substantive suit against it." Int'l Union, UAW v. Dana Corp., No. 3:99CV7603, 1999 U.S. Dist. LEXIS 22525, at *10 (N.D. Ohio Dec. 6, 1999) (citations omitted); see also Dale, 386 F.3d at 788. As one court explained:
Such motives have been found to constitute a "rush to the courthouse" and grounds for the dismissal of a declaratory judgment suit. Courts have found that the party filing suit in anticipation of a suit in another forum should not be rewarded for what amounts to forum shopping. "Put another way, 'the Court cannot allow a party to secure a more favorable forum by filing an action for declaratory judgment when it has notice that the other party intends to file suit involving the same issues in a different forum.'" Further, anticipatory suits deprive a potential plaintiff of his or her choice of forum. . . .PAJ, Inc. v. Yurman Design, Inc., No. 3:98-CV-2847-P, 1999 U.S. Dist. LEXIS 1424, at *9-11 (N.D. Tex. Feb. 9, 1999); see also Dana Corp., 1999 U.S. Dist. LEXIS 22525 at *12. "[T]he limited opportunity afforded by the Declaratory Judgement Act to seek a declaration of rights where an opponent may be disinclined to do so, or where the underlying controversy has not fully matured, should not be employed for other purposes, such as to tolerate, much less reward forum shopping." Dana Corp., 1999 U.S. Dist. LEXIS 22525 at *14 (internal citations omitted).
The "misuse of the Declaratory Judgment Act to gain a procedural advantage and preempt the forum choice of the plaintiff in the coercive action militates in favor of dismissing the declaratory judgment action." [A party] cannot be permitted to transform "a doctrine that was offered as a shield into a sword." "A plaintiff's choice of forum should only be given protection where the plaintiff before the court is the proper plaintiff—not a manufactured plaintiff through the misapplication of a declaratory judgment."
DRT Aerospace was placed on notice that Mr. Soto intended to file suit in Connecticut state court if DRT Aerospace did not respond within the specified period of time in the demand letter. (ECF 5-1 at PageID 66-67, ¶ 24 (citing Ex. K and Ex. L to ECF 5-1 at PageID 112-17).) Rather than responding or waiting for Mr. Soto to file a coercive suit, DRT raced to the courthouse to ensure its choice of forum. (Id.; ECF 1.) The only purpose of filing a declaratory judgment action here was for DRT Aerospace to secure its preferred choice of forum. As the Sixth Circuit explained in Dale:
This also dovetails with the previous factor: where a putative defendant files a declaratory action whose only purpose is to defeat liability in a subsequent coercive suit, no real value is served by the declaratory judgment except to guarantee to the declaratory plaintiff her choice of forum—a guarantee that cannot be given consonant with the policy underlying the Declaratory Judgment Act.Dale, 386 F.3d at 788 (citing Coco, 302 F.3d at 712).
While there may not be direct evidence of bad faith on DRT Aerospace's part, bad faith can be inferred from the fact that the declaratory judgment was filed within the response period provided in the recent demand letter, preemptively foreclosing any potential settlement opportunities. See Internet Transaction Sol., Inc. v. Intel Corp., No. 2:06-CV-035, 2006 U.S. Dist. LEXIS 29532, at *19-20 (S.D. Ohio May 8, 2006); FMC Corp. v. AMVAC Chem. Corp., 379 F. Supp. 2d 733, 744 (E.D. Pa. 2005); IMS Health, Inc. v. Vality Tech., Inc., 59 F. Supp. 2d 454, 463 (E.D. Pa. 1999). The Court agrees with Mr. Soto that DRT Aerospace's actions in filing this declaratory judgment action amount to inappropriate forum shopping, and could even be construed as acting in bad faith. Thus, this factor heavily weighs in favor of dismissal.
4. Friction Between Federal and State Courts
The fourth factor is inapplicable in this case, since only one action has been filed in federal court, and the parties do not claim that a parallel action has been filed in state court at this time.
5. Better Alternative Remedy
In considering whether there is a better alternative remedy, "The only question is which forum is most appropriate." Internet Transaction Sol., 2006 U.S. Dist. LEXIS 29532 at *21. While neither party directly addresses this factor, the Court finds that it weighs in favor of dismissing the declaratory action. Although there has been no subsequent coercive action filed in another court, the nature of this declaratory judgment action robbed the true plaintiff of his choice of forum. Mr. Soto, the true plaintiff, demonstrated his intent to file coercive suit in Connecticut state court when he sent his draft complaint to DRT Aerospace along with his demand letter. (ECF 5-1 at PageID 66-67, ¶ 24 (citing Ex. K and Ex. L to ECF 5-1 at PageID 112-17).) Instead of responding to Mr. Soto's demand letter or waiting for him to file a coercive suit, DRT Aerospace rushed to the courthouse in Ohio to file this declaratory judgment action. (Id.; ECF 1.) Now that Mr. Soto is defending this declaratory judgment action here in Ohio, he argues that the case should be dismissed or transferred to Connecticut federal court. (ECF 4.)
The Court need not decide which of these three forums is best. It is clear that Ohio is not the most appropriate forum for this dispute when Mr. Soto lived and worked primarily in Connecticut, where the effects of the payment or nonpayment of severance will be felt in Connecticut, and where DRT Aerospace, a large company, still operates out of the New Haven, Connecticut, location. The burden on Mr. Soto, an individual, will be much greater to travel to Ohio to defend this suit than it would be for DRT Aerospace to visit one of its locations in Connecticut throughout the litigation. Rather than the Court deciding which forum is most appropriate, the true plaintiff should have his choice, for he is the master of his complaint. See Dana Corp., 1999 U.S. Dist. LEXIS 22525 at *12; PAJ Inc., 1999 U.S. Dist. LEXIS 1424 at *11. Therefore, this factor weighs in favor of dismissal.
Factors 1 and 4 do not weigh in favor of either party in determining whether the Court should exercise its discretion to hear the case. However, factors 2, 3, and 5 heavily weigh in favor of dismissing the declaratory judgment action. Balancing all relevant factors, the Court declines to exercise jurisdiction over this declaratory judgment action.
V. Conclusion
Because Plaintiff is unable to make a prima facie showing that this Court has specific personal jurisdiction over Defendant, Defendant's Motion to Dismiss (ECF 4) is GRANTED. Even if personal jurisdiction did exist, the Court would decline to exercise its discretionary jurisdiction under the Declaratory Judgment Act and dismiss the case. In light of the Court's dismissal of Plaintiff's Complaint for Declaration, Defendant's Alternative Motion to Transfer is DENIED as moot.
The Clerk is ORDERED TO TERMINATE the captioned case upon the docket records of the United States District Court for the Southern District of Ohio, Western Division, at Dayton. DONE and ORDERED in Dayton, Ohio, this Thursday, October 31, 2019, 2019.
The Court acknowledges the valuable contribution and assistance of judicial extern Emma Walton in drafting this opinion.
s/Thomas M. Rose
THOMAS M. ROSE
UNITED STATES DISTRICT JUDGE