Opinion
No. 1:02-cv-222
September 15, 2003
MEMORANDUM
I. Introduction
Paragon Financial Group, Inc. ("Paragon Financial") filed this action against The Bradley Factor, Inc. ("Bradley Factor"), Ron Williams, William Campbell and Steve Campbell based upon diversity of citizenship. Paragon Financial performs factoring — it purchases the invoices or accounts receivable of another business, commonly known as the "client" and then awaits payment from the client's customers, generally known as the "account debtors."
Paragon Financial alleges that on or around April 17, 2000, Danny Sullivan d/b/a Sullivan Trucking entered into a factoring agreement with defendant/third-party plaintiff Bradley Factor. On or about July 2000, according to Paragon Financial, Bradley Factor became concerned about the Sullivan account. As a result of Bradley Factor's concerns, representatives of Bradley Factor traveled to Jefferson County, North Carolina, where they made an on-site visit with Sullivan and a number of its account debtors. Paragon Financial asserts that as a result of its October 2000 visits in North Carolina, Bradley Factor became convinced that many, if not all, of Sullivan's account debtors had been fraudulently created; and, in order to limit its financial exposure, Bradley Factor threatened to prosecute Sullivan unless it found another factor to handle its allegedly worthless invoices/accounts receivable.
On or about December 28, 2000, Sullivan approached Paragon Financial seeking to replace Bradley Factor with Paragon Financial as its factor. Prior to entering into a business/contractual relationship with Sullivan, Paragon Financial contacted Bradley Factor for information concerning the quality, nature and character of Sullivan's account debtors. Paragon Financial asserts that such inquiries between factors are a routine practice in the factoring industry.
According to Paragon Financial, Bradley Factor responded to its inquiries about why Sullivan was seeking a new factor by stating that a personality conflict had resulted in a rift between Bradley Factor and Sullivan. Paragon Financial asserts there was no such conflict and Bradley Factor and Sullivan created a ruse to induce Paragon Financial not to perform as thorough a "due diligence" investigation as it would have performed had Bradley Factor disclosed the truth to it.
Subsequently, Bradley Factor sold/transferred to Paragon Financial its rights and interest in Sullivan's accounts receivable for $765,302.32. Paragon Financial alleges that virtually all of the accounts Bradley Factor sold it were spurious and uncollectable.
Paragon Financial seeks damages from defendants, Bradley Factor, Ron Williams, Steve Campbell and William Campbell for fraudulent inducement based upon the allegedly false and material statements Bradley Factor made to Paragon Financial to induce it to enter into a factoring contract with Sullivan. [Court File No. 1-Count I]. Paragon Financial also seeks damages from Bradley Factor for negligent misrepresentation alleging that Bradley Factor failed to exercise reasonable care in obtaining or communicating information to Paragon Financial which it should have known were false and misleading statements. Paragon Financial asserts it justifiably relied on the false and misleading factual statements made by Bradley Factor in deciding to acquire Sullivan's accounts in exchange for a payment of $765,302.32 to Bradley Factor. [Court File No. 1 — Count II].
Paragon Financial also seeks damages from Bradley Factor for fraudulent inducement alleging that Bradley Factor should have known that a number of the false and misleading statements Bradley Factor made to Paragon Financial to induce it to enter into a factoring contract with Sullivan were half truths. [Court File No. 1-Count III]. Finally, Paragon Financial seeks damages from Bradley Factor for breach of contract, asserting that contrary to the terms of the Assignment Agreement entered into between Paragon Financial and Bradley Factor on December 28, 2000, Bradley Factor executed its security interest on certain trucks and equipment owned by Sullivan and sold such property for Bradley Factor's own benefit. [Court File No. 1 — Count IV].
Thereafter, on October 15, 2002, defendant Bradley Factor filed its answer to plaintiff Paragon Financial's complaint and a third-party complaint [Court File No. 11]. In its third-party complaint Bradley Factor claimed that the third-party defendants, Corporate Billing, Inc. and David Caradine, as well as the remaining third-party defendants, all of whom were account debtors of Sullivan, made fraudulent representation and/or inducements for the purpose of deceiving Bradley Factor to enter into a factoring contract with Sullivan. Id. Bradley Factor further alleged that the misrepresentation of the third-party defendants were intentional, reckless and/or fraudulent, and therefore, the third-party plaintiff's were entitled to punitive damages. Id. Finally, Bradley Factor alleged that third-party defendants David Caradine and Corporate Billing Inc. and the other third-party defendants negligently made misrepresentations and/or inducements, failed to exercise reasonable care in communicating the information, should have known that the misrepresentations were false, and should have known that Bradley Factor would rely on the misrepresentations and/or false inducements to its detriment. Id.
It is alleged that Paragon Financial is a Florida corporation/resident; Bradley Factor is a Tennessee corporation/resident; third-party defendants David Caradine and Corporate Billing, Inc. are residents of Alabama; and all of the remaining third-party defendants are residents of North Carolina.
Currently, there are a number of motions pending before the Court.
II. The motions of Third-Party Defendants Lynn Ferguson and Nathan Elliott to dismiss for lack of personal jurisdiction.[Court File No. 52, 78].
Third-party defendant Lynn Ferguson seeks dismissal of Bradley Factor's cause of action against her for lack of inpersonam jurisdiction on the grounds that "she had no dealings that are set out in the [third-party] Complaint that would give the Court jurisdiction in Tennessee." [Court File No. 53]. Id.
Third-party defendant Ferguson claims that:
Evidently, Defendant, Corporate Billing, Inc., and David Caradine ran a company, which supplied money to Sherry and Danny Sullivan, based upon fraudulent invoices from the Sullivans. The Sullivans dummied up invoices using various people they knew including, Lynn Ferguson. At some point, it appears that Corporate Billing, Inc. realized that the Sullivans were submitting bogus invoices.
[Court File No. 53]. She further asserts that
there are no minimum contacts necessary for jurisdiction. Further, even if jurisdiction was proper, it is obvious that almost all of the witnesses and transactions occurred in North Carolina and that would be the most convenient forum to litigate this matter. The only connection to Tennessee alleged is that one of the factoring companies is located in Bradley County [Tennessee] . . . under the doctrine of forum nonconveniens, the Court Should transfer this case to North Carolina.
[Court File No. 53].
The defendants/third-party plaintiff's have responded to third-party defendant Ferguson's motion to dismiss asserting: (1) that Ferguson is subject to jurisdiction in Tennessee and (2) in the alternative "[i]f the Court finds that North Carolina has jurisdiction over all of the parties in this litigation, and further finds that in the interest of justice and convenience that this matter should be transferred to the United States District Court for North Carolina pursuant to 28 U.S.C. § 1404, Defendants and Third-Party Plaintiffs have no objection in changing venue." [Court File No. 59].
The defendants/third-party plaintiff's assert that in personam jurisdiction over Ferguson in Tennessee is proper because:
. . . Ferguson signed a Continuing Guaranty on or about January 12, 2001, giving Bradley Factor an absolute and unconditional Guaranty for debt owed by Ferguson Grading to Bradley Factor. (Affidavit of Ron Williams at Exhibit "1"). Said Guaranty, by its terms, is to be construed according to the laws of the State of Tennessee, and obligates Ferguson to send all payments as related to the Continuing Guaranty to Bradley Factor's office in Tennessee. (Affidavit of Ron Williams at Exhibit "1"). Furthermore, Ferguson expressly consents to the jurisdiction of State and Federal Courts of Tennessee pursuant to the terms of the Continuing Guaranty, and Ferguson also designates the Secretary of State of Tennessee as her agent for service of process for any actions arising out of the Guaranty. (Affidavit of Ron Williams at Exhibit "1") . . . Finally, pursuant to the terms of the Continuing Guaranty, and further evidence of Ferguson's fraudulent conduct, Ferguson sent to Bradley Factor via mail in the State of Tennessee at least two (2) checks drawn on the account of Theresa Lynn Ferguson, one being in the amount of $15,500.00 which was insufficient as reflected by the "Account Closed" notation on the check, and the other being in the amount of $23,300.00 which was insufficient as reflected by the "Refer to Maker" notation on the check. (Affidavit of Ron Williams at Exhibit "2").
[Court File No. 60].
The Affidavit of Ron Williams, the Vice President of Marketing for The Bradley Factor, Inc. also appears in the record. [Court File No. 61]. In his Affidavit, Mr. Williams states:
As set forth in the Answer to the original Complaint and the Amended Third-Party Complaint, it is the contention of The Bradley Factor, Inc., Ron Williams, William Campbell and Steve Campbell that the Third-Party Defendants made negligent and/or fraudulent misrepresentations to all of us, and that these Third-Party Defendants acted in concert to perpetrate tortuous acts.
[Court File No. 61, ¶ 3]. Further, the Continuing Guaranty dated January 12, 2001, allegedly from Lynn Ferguson to Bradley Factor is attached to Ron Williams' Affidavit as Exhibit 1, and Mr. Williams makes certain averments about the Continuing Guaranty in his Affidavit. [Court File No. 61, ¶¶ 4, 5, Exhibit 1]. Finally, the Williams' Affidavit states:
To my knowledge, Lynn Ferguson sent at least two (2) checks to the Bradley Factor in the State of Tennessee via mail drawn on the account of Theresa Lynn Ferguson, a copy of those checks being attached hereto collectively as Exhibit "2". One check was in the amount of $15,500.00 which was insufficient as reflected by the "Account Closed" notation on the face of the check. The other check in the amount of $23,300.00 was also insufficient as reflected by the "Refer to Maker" notation on the check.
[Court File No. 61, ¶ 6, Exhibit 2].
Corporate Billing, Inc. and David Caradine object to third-party defendant Ferguson's motions to dismiss on the ground that the motion to dismiss is premature and untimely because no discovery has taken place with respect to this issue [Court File No. 66]. With respect to third-party defendant Ferguson's motion to transfer the case based upon improper and inconvenient venue, they state:
Upon Corporate Billing, Inc. and Caradine's information and belief, the Third Party Plaintiffs are residents of Bradley County, Tennessee, which is in the Southern Division of the Eastern District of Tennessee. Consequently, the Southern Division of the Eastern District of Tennessee is the proper forum for a lawsuit brought against the Third Party Plaintiffs. As Third Party Defendants, Corporate Billing, Inc. and Caradine are residents of Decatur, Alabama. Corporate Billing, Inc. and Caradine have minimum contacts with the Eastern District of Tennessee to confer jurisdiction over them based on the business that Corporate Billing, Inc. conducts in that District, but not necessarily the business that it may have conducted with The Bradley Factor. Corporate Billing, Inc. and Caradine also believe that the Southern Division of the Eastern District of Tennessee is a convenient forum. Consequently, as it pertains to the appropriateness and convenience of the forum, Corporate Billing, Inc. and Caradine believe that the Southern Division of the Eastern District of Tennessee is an appropriate forum, is adequately convenient for the parties and the matter should not be transferred to North Carolina.
[Court File No. 66].
Plaintiff Paragon Financial also objects to third-party defendant Ferguson's motion to dismiss on the grounds:
1. That Paragon Financial filed a four count complaint against Bradley Factor in state court in Palm Beach County, Florida, which state court action Bradley Factor succeeding in having dismissed on the grounds that Tennessee was the most appropriate forum for the action. In the Florida court, Bradley argued that Tennessee was the most appropriate forum since: (a) all of the defendants, including Sullivan were subject to jurisdiction in Tennessee; (b) all of the defense witnesses, exhibits and documents are located in Tennessee; (c) the public interest factor favored Tennessee; and (4) Paragon Financial could reinstate the action in Tennessee without inconvenience or prejudice; and
2. That as a third party defendant, Lynn Ferguson does not have standing to object to venue in this court.
A copy of Bradley Factor's pleadings in Florida state court and the Order of the Florida court appear in the record. [Court File No. 67, collective exhibit 1].
[Court File No. 67].
Third-party defendant Ferguson has filed her own affidavit in response to Bradley Factor's response to her motion to dismiss. [Court File No. 68]. More particularly, she has responded to Ron William's affidavit with an affidavit of her own which states in pertinent part:
6. The Continuing Guarantee filed by The Bradley Factor is a forgery. That is not my signature on that document. Further, Mr. Ron Williams who attested to that document on January 12, 2001 did not witness my signature on that date by me. I notice that in his Affidavit he does not claim to have witnessed my signature although he attested to the document. 9. I knew Sherry Sullivan through playing softball with her and I thought she was my friend. I did write four (4) checks to two factoring companies after Sherry Sullivan told me she was having some problems with her credit and needed to put some money in my account to pay Bradley Factoring . . .
[Court File No. 68].
The allegations in third-party defendant Nathan Elliott's motion to dismiss and in his brief in support of his motion to dismiss [Court File No. 78, 79] are virtually identical to those set forth in third-party defendant Ferguson's motion to dismiss and brief in support thereof [Court File No. 52, 53]. Paragon has filed a response to Nathan Elliott's motion to dismiss which is, likewise, virtually identical to its response to Lynn Ferguson's motion to dismiss. [Court File No. 81].
The defendants/third-party plaintiff's have filed a response to third-party defendant Nathan Elliott's motion to dismiss [Court File No. 83]. Accompanying that response to Elliott's motion to dismiss is another affidavit from Ron Williams of Bradley Factor [Court File No. 83], which states in pertinent part:
4. To my knowledge, Nathan Elliott sent at least six (6) check to the Bradley Factor in the State of Tennessee via mail drawn on the accounts of Nathan Elliott and Center Distributing, a copy of those checks being attached hereto collectively as Exhibit "1". These checks total the approximate amount of $89,111.13. Some of these checks were paid with sufficient funds, and some of these checks were insufficient as reflected by the notations on the faces of the checks.
[Court File No. 83, ¶ 4].
Finally, Corporate Billing, Inc. and David Caradine's response to third-party defendant Nathan Elliot's motion to dismiss appears in the record, [Court File No. 85], their response is identical to the response they filed with respect to third-party defendant Lynn Ferguson's motion to dismiss.
"In determining whether a defendant is subject to personal jurisdiction, the stage of the litigation affects the standard, but not the burden of proof." S S Screw Mach. Co. v. Cosa Corp., 647 F. Supp. 600, 605 (M.D. Term. 1986). The plaintiff bears the burden of persuasion on the issue of personal jurisdiction throughout the litigation. Id. (quoting Welsh v. Gibbs, 631 F.2d 436, 438 (6th Cir. 1980), cert. denied, 450 U.S. 981 (1981)). Specifically,
Fed.R.Civ.P. 12(d) enables [a] defendant to raise a jurisdictional challenge and a court to rule on the motion before a trial on the merits. A district court may decide whether to rule on the jurisdictional issue upon a full trial record, after an evidentiary hearing, or merely on the basis of a written record. At trial on the merits, plaintiff ultimately must prove facts that establish jurisdiction by a preponderance of the evidence. The same standard holds when plaintiff is put to his proof at a full evidentiary hearing. Welsh v. Gibbs, 631 F.2d at 438-39; Data Disc, Inc. v. Systems Technology Associates, Inc., 557 F.2d 1280, 1284-86 (9th Cir. 1977). When a court seeks to decide the issue on the basis of affidavits alone, however, plaintiff need only make a prima facie case of jurisdiction. To survive a motion to dismiss, thus, plaintiff need only "demonstrate facts which support a finding of jurisdiction." Welsh v. Gibbs, 631 F.2d at 43 8 (quoting Data Disc, Inc., 557 F.2d at 1285).Cosa Corp., 647 F. Supp. at 605.
Where, as here, the Court is not conducting an evidentiary hearing on the issue of personal jurisdiction:
Plaintiff must make only a prima facie showing and the Court views the evidence in the light most favorable to plaintiff. See Naogaon [Corp v. Neo Gen Screening, Inc., 282 F.3d 883]. 887 [(6th Cir. 2002]; CompuServe, Inc. v. Patterson, 89 F.3d 1257, 1262 (6th Cir. 1996) . . . "[I]n the face of a properly supported motion for dismissal, the plaintiff may not stand on his pleadings but must, by affidavit or otherwise, set forth specific facts showing that the court has jurisdiction." Theunissen v. Matthews, 935 F.2d 1454, 1458 (6th Cir. 1991). The Court does not, however, consider facts proffered by the defendant that conflict with those offered by the plaintiff. See Id. at 1459.AudiAG Volkswagen of America, Inc. v. Izumi, 204 F. Supp.2d 1014, 1017 (E.D. Mich. 2002).
"Where a federal court's subject matter jurisdiction over a case stems from the existence of a federal question, personal jurisdiction over a defendant exists 'if the defendants [are] amenable to service of process under the [forum] state's long-arm statute and if the exercise of personal jurisdiction would not deny the defendant[s] due process.'" Bird v. Parsons, 289 F.3d 865, 871 (6th Cir. 2002) (quoting Michigan Coalition of Radioactive Material Users, Inc. v. Griepentrog, 954 F.2d 1174, 1176 (6th Cir. 1992)). The Tennessee long-arm statute, Term. Code Ann. § 20-2-214 states in pertinent part:
20-2-214. Jurisdiction of persons unavailable to personal service in state — Classes of actions to which applicable. — (a) Persons who are nonresidents of Tennessee . . . are subject to the jurisdiction of the courts of this state as to any action or claim for relief arising from: 1. The transaction of any business within the state; 2. Any tortious act or omission within this state;
. . .
(5) Entering into a contract for services to be rendered or for materials to be furnished in this state; (6) Any basis not inconsistent with the constitution of this state or of the United States.
In Masada Inv. Corp. v. Allen, 697 S.W.2d 332, 334 (Tenn. 1985), the Supreme Court of Tennessee stated that prior to the addition of subsection (6) to Tenn. Code Ann. § 20-2-214, the statute was considered a statute "in which jurisdiction was assumed only over causes of action arising out of the defendant's activities in the state." Id. However, the Masada court stated that the addition of "[s]ubsection (6) changed the long-arm statute from a "single act" statute to a "minimum contacts" statute which expanded the jurisdiction of [the] Tennessee courts to the full limit allowed by due process." Id. (citing Shelby Mutual Ins. Co. v. Moore, 645 S.W.2d 242, 245 (Tenn.App. 1981). See also First Tennessee Nat. Corp. v. Horizon Nat'I Bank, 225 F. Supp.2d 816 (W.D. Tenn. 2002) (Under the Tennessee long-arm statute, Tenn. Code Ann. § 20-2-214(a)(6), "[i]n Tennessee jurisdiction may be asserted on any basis not inconsistent with the constitution of Tennessee or the United States.)" Where the forum state's long-arm statute extends jurisdiction to the limits imposed by federal constitutional due process requirements, the two applicable questions become one; namely, whether the exercise of personal jurisdiction would deny the defendants due process rights. Griepentrog, 954 F.2d at 1174;Bird, 289 F.3d at 871.
The Due Process Clause
protects an individual's liberty interest in not being subject to the binding judgments of a forum in which he has established no meaningful "contacts, ties, or relations." International Shoe Co. v. Washington, 326 U.S. at 319, 66 S.Ct. at 160. By requiring that individuals have "fair warning that a particular activity may subject [them] to the jurisdiction of a foreign sovereign," Shaffer v. Heitner, 433 U.S. 186, 218, 97 S.Ct. 2569, 2587, 53 L.Ed.2d 683 (1977)(STEVENS, J., concurring in judgment), the Due Process Clause "gives a degree of predictability to the legal system that allows potential defendants to structure their primary conduct with some minimum assurance as to where that conduct will and will not render them liable to suit." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 567, 62 L.Ed.2d 490 (1980).Burger King Corp. v. Rudzewicz, 471 U.S. 462, 471-72 (1985). Thus,
[t]he Due Process Clause of the Fourteenth Amendment limits the power of a state court to exert personal jurisdiction over a nonresident defendant. "[T]he constitutional touchstone" of the determination whether an exercise of personal jurisdiction comports with due process "remains whether the defendant purposefully established 'minimum contacts' in the forum State. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474, 105 S.Ct. 2174, 2183, 85 L.Ed.2d 528 (1985), quoting International Shoe Co. v. Washington, 326 U.S., at 316, 66 S. Ct., at 158. Most recently we have reaffirmed the oft-quoted reasoning of Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1239, 2 L.Ed.2d 1283 (1958), that minimum contacts must have abasis in "some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." Burger King, 471 U.S. at 475, 105 S.Ct. at 2183. "Jurisdiction is proper . . . where the contacts proximately result from actions by the defendant himself that create a 'substantial connection' with the forum State." IbId., quoting McGee v. International Life Insurance Co., 355 U.S. 220 223, 78 S.Ct. 199, 201, 2 L.Ed.2d 223 (1957) (emphasis in original).Ashai Metal Industry Co., Ltd. v. Superior Court of California, Solano County, 480 U.S. 102, 108-09 (1987).
Under the Due Process Clause, a forum may exercise personal jurisdiction over a nonresident which has "purposefully directed" its activities toward residents of the forum because:
[a] State generally ha[s] a "manifest interest" in providing its residents with a convenient forum for redressing injuries inflicted by out-of state actors.Burger King, 471 U.S. 473, (citing McGee v. International Life Insurance Co., 355 U.S. at 223).
Further, where individuals "purposefully derive benefit" from their interstate activities, Kulko v. California Superior Court, 436 U.S. 84, 98 So. Ct. 1690, 1699, 56 L.Ed.2d 132 (1978), it may well be unfair to allow them to escape having to account in other States for consequences that arise proximately from such activities; the Due Process Clause may not readily be wielded as a territorial shield to avoid interstate obligations that have been voluntarily assumed. And because "modern transportation and communications have made it much less burdensome for a party sued to defend himself in a State where he engages in economic activity," it usually will not be unfair to subject him to the burdens of litigating in another forum for disputes relating to such activity. McGee v. International Life Insurance Co., supra, 355 U.S. at 223, 78, S. Ct. at 201.Id.
The
"purposeful availment" requirement ensures that a defendant will not be haled into a jurisdiction solely as a result of "random," fortuitous," or "attenuated" contacts, Keeton v. Hustler Magazine, Inc., 465 U.S. at 774, 104 S. Ct., at 1478; World-Wide Volkswagen Corp. v. Woodson, supra, 444 U.S., at 299, 100 S.Ct. at 568, or of the "unilateral activity of another party or a third person," Helicopteros Nacionales de Columbia, S.A. v. Hall, supra, 466 U.S., at 417, 104 S. Ct., at 1873. Jurisdiction is proper, however, where the contacts proximately result from actions by the defendant himself that create a "substantial connection" with the forum State . . . Thus, where the defendant "deliberately" has engaged in significant activities within a State, . . . or has created "continuing obligations" between himself and residents of the forum, . . . he manifestly has availed himself of the privilege of conducting business there, and because his activities are shielded by the "benefits and protections" of the forum's laws, it is presumptively not unreasonable to require him to submit to the burdens of litigation in that forum as well.Burger King, 105 S.Ct. at 475-76.
Personal jurisdiction is either specific or general. First Tennessee, 225 F. Supp.2d at 820 (citing Conti v. Pneumatic Prods. Corp., 977 F.2d 978, 981 (6th Cir. 1992)). The difference between specific and general personal jurisdiction is:
General jurisdiction exists when "a defendant's contacts with the forum state are of such a continuous and systematic nature that the state may exercise personal jurisdiction over the defendant even if the action is unrelated to the defendant's contacts with the state." ThirdNat'lBank v. WEDGE Group, Inc., 882 F.2d 1087, 1089 (6th Cir. 1989). Specific jurisdiction arises only when the plaintiff establishes that 1) the defendant purposefully availed himself of the privilege of acting in the forum state or causing a consequence in the forum state, 2) the cause of action arose from the defendant's activities in the forum state, and 3) the acts of the defendant or consequences caused by the defendant have a substantial enough connection with the forum state to make the exercise of jurisdiction reasonable. Southern Machine Co. v. Mohasco Industries, Inc., 401 F.2d 374, 381 (6th Cir. 1968).First Tennessee, 225 F. Supp.2d at 820.
Here, if in personam jurisdiction exists over the third-party defendants, Lynn Ferguson and Nathan Elliott it will be specific personal jurisdiction. The defendants/third-party plaintiff's first argue that this Court has in personam jurisdiction over third-party defendant Lynn Ferguson based upon the forum selection clause in the Continuing Guaranty which it is alleged that Lynn Ferguson signed on January 12, 2001. [Court File No. 61, Exhibit 1]. As a general matter, forum selection clauses "are 'prima facie valid and should be enforced unless enforcement is shown by the resisting party to be "unreasonable" under the circumstances. '"Moses v. Business Card Express, Inc., 929 F.2d 1131, 1136 (6th Cir.), cert. denied, 502 U.S. 821 (1991) (quoting Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10, 92 S.Ct. 1907, 1913 (1972)). Here, third-part defendant Lynn Ferguson has filed her own affidavit responding to Ron Willliams' affidavit in which she asserts that the Continuing Guaranty filed by the Bradley Factor, Inc. is a forgery. [Court File No. 68, ¶ 6].
In this instance, however, even if the Court assumes arguendo that the Continuing Guaranty is a forgery, the Court still has a basis for finding in personam jurisdiction over both third-party defendants, Lynn Ferguson and Nathan Elliott. Namely, Ron Williams' Affidavits also refer to two checks which Lynn Ferguson sent to Bradley Factor in Tennessee [Court File No. 61, ¶ 6 , Exhibit 2], and six checks which Nathan Elliott/Center Distributing sent to Bradley Factor in Tennessee [Court File No. 83, ¶ 4 Exhibit 1]. Furthermore, Lynn Ferguson's own affidavit confirms the authenticity of these checks as it states:
I knew Sherry Sullivan through playing softball with her and I thought she was my friend. I did write four (4) checks to two factoring companies after Sherry Sullivan told me she was having some problems with her credit and needed to put some money in my account to pay Bradley Factoring . . .
[Court File No. 68, ¶ 9].
In their First Amended Complaint, defendants/third-party plaintiff's allege a cause of action for fraudulent misrepresentation. [Court File No. 24, p. 18]. These allegations include:
23. Further, Third Party Defendants, Sherry Sullivan and Danny Sullivan, as well as the other Third Party Defendant Account Debtors, made the aforesaid representations and inducements as described herein well knowing them to be false and fraudulent, with the intent of deceiving and inducing Bradley into entering into the Factoring Agreement with Sullivan Trucking, as well as continuing to pay Sullivan Trucking monies for purported account receivables.
[Court File No. 24, p. 19]. Among the fraudulent acts identified by Bradley is that:
16. Thereafter, in or about October 2000, as a matter of course, a representative of Bradley traveled to North Carolina to verify the purported account debtors of Sullivan, including the named Third Party Defendant Account Debtors. At that time, Sherry Sullivan introduced representatives of Bradley to the Third Party Account Debtors and these Third Party Defendant Account Debtors, as well as Sherry Sullivan, represented that the purported account receivables were genuine, valid, collectable, and payable for services rendered on behalf of Sullivan. In so doing, the Third Party Defendant Account Debtors confirmed in writing the alleged validity of the account receivables, as well as the amount owed as a result of services provided by Sullivan. Based upon these representations and inducements, and believing the same to be true. Bradley continued to factor account receivables of Sherry Sullivan, continued to pay sums of money to Sherry Sullivan for purported account receivables, and eventually sold some of what Bradley believed to be as valid account receivables to Paragon.
[Court File No. 24, p. 17].
In Neal v. Janssen, 270 F.3d 328, 331 (6th Cir. 2001), the Sixth Circuit recognized that under the Tennessee long-arm statute, "even a single act by defendant directed toward Tennessee that gives rise to a cause of action can support a finding of minimum contacts sufficient to exercise personal jurisdiction without offending due process." Id. In this action, third-party defendants Lynn Ferguson and Nathan Elliott each sent checks to Bradley Factor within the Tennessee. It is alleged that the receipt of these checks fraudulently and/or negligently mislead Bradley Factor into concluding that these third-party defendants were legitimate account debtors of Sullivan; and, it is further alleged that in reliance on that assumption, Bradley Factor took actions which were detrimental to it, including, but not limited to, the sale of some of its accounts receivable from Sullivan to Paragon. The Court, thus, concludes that the third-party defendants Lynn Ferguson and Nathan Elliott had sufficient minimum contacts with the state of Tennessee such that this Court's exercise of personal jurisdiction over them in this action will not offend due process.
Accordingly, the motions of third-party defendants Lynn Ferguson and Nathan Elliott to dismiss the claims of the third-party plaintiff's against them for lack of personal jurisdiction [Court File Nos. 52, 78] pursuant to Fed.R.Civ.P. 12(b)(2) will be DENIED. III. Third-party defendants Lynn Ferguson's and Nathan Elliott's Motion for a Transfer of Venue under 28 U.S.C. § 1404(a) under the doctrine of forum non conveniens[Court File No. 52, 78].
The third-party defendants seek dismissal of this action for improper venue under Fed.R.Civ.P. 12(b)(3). [Court File No. 52, 78]. However, in their briefs in support of their respective motion, they argue that "it is obvious that almost all of the witnesses and transactions occurred in North Carolina and that would be the most convenient forum to litigate this matter. The only connection to Tennessee alleged is that one of the factoring companies is located in Bradley County, [Tennessee]. Thus, under the doctrine of forum non conveniens , the Court should transfer this case to North Carolina." [Court File No. 53, 79]. Thus, it is not clear whether third-party defendants Lynn Ferguson and Nathan Elliot seek to challenge the venue of this action under Rule 12(b)(3) or whether they only seek a transfer of venue in this action to North Carolina under 28 U.S.C. § 1404(a) based upon the doctrine of forum non conveniens. [Court File No. 53, 79].
In First Flight Co. v. National Carloading Corp., 209 F. Supp. 730 (E.D. Tenn. 1962), this Court noted that "the great weight of authority deems a third-party suit ancillary to the original suit for purposes of venue, with the result that the usual venue requirements need not be met as to a third party defendant." Id. at 733. See also McGrath v. Lund's Fisheries, Inc., 170 F. Supp. 173, 175 (D. Del. 1959)("A great majority, and all of the later cases and text writers, take the position that the venue of the third party proceedings will follow that of the original proceedings and third party defendants may be brought in without regard to venue.").
However, the court in Daily Express, Inc. v. Northern Neck Transfer Corp., 483 F. Supp. 916 (M.D. Pa. 1979), held that even though a third-party defendant could not challenge the venue of the underlying action, a third-party defendant could bring a motion for transfer of venue based upon the doctrine of forum non conveniens under 28 U.S.C. § 1404(a). It noted that 28 U.S.C.
section 1406(a) deals with dismissal or transfer of a case when venue was improper at the time the case was initiated, that is before the Third-Party Defendant became involved. A Plaintiff would be prejudiced if a Third-Party Defendant were permitted to request transfer under § 1406(a) because of the relationship of that section to Rule 12 of the Federal Rules of Civil Procedure. Rule 12(b) requires that a Defendant raise the issue of improper venue by a Motion filed prior to the filing of a responsive pleading, or in the responsive pleading. Under Rule 12(h)(1), if a Defendant fails to object to venue in either of these two ways, he has waived the objection to venue. If the objection has been waived by the Defendant, to allow a Third-Party defendant to make the objection might lead to collusive efforts on the part of a Defendant to get a Third-Party Defendant into the action primarily for the purpose of moving for dismissal or change of venue. It would also prejudice the right of the Plaintiff to have a timely objection to the propriety of venue, or none at all.
A Motion to Transfer under § 1404 differs from a Motion under § 1406 in that there is no claim that venue is improper as to the original Plaintiff and Defendant. Neither is a request to transfer for the convenience of the parties or witnesses waived by the Defendant if not raised prior to or in a responsive pleading . . .
If the purpose of § 1404(a) is to allow the Court to consider which would be the more convenient forum for the parties and witnesses, a Third-Party Defendant should not be barred from requesting a review of the choice of forum. Underwood v. Continental Assurance Co., 141 F. Supp. 635 (D.C. Tex. 1956).Id. at 917-918. Thus, the Court will treat the venue challenge filed by third-party defendants Lynn Ferguson and Nathan Elliott as a request for a transfer to a more convenient forum under 42 U.S.C. § 1404(a).
Title 28, United States Code, § 1404(a):
permits the Court to transfer venue to another district where it might have been brought if it is necessary for the convenience of the parties and witnesses or the interests of justice. 28 U.S.C. § 1404(a)(1993). The burden is on the moving party to establish the need for a change of forum. Factors Etc., Inc. v. Pro Arts, Inc., 579 F.2d 215 (2d Cir. 1978). "Unless the balance is strongly in favor of the defendants, the plaintiff's choice of forum should rarely be disturbed." Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508, 67 S.Ct. 839, 91 L.Ed. 1055 (1947). In deciding whether to transfer a case because the forum is inconvenient, courts have considered the following factors: (1) the location of willing and unwilling witnesses, (2) the residence of the parties, (3) the location of sources of proof, and (4) the location of the events that gave rise to the dispute. Walker v. Consumers Power Co., 1990 WL 163 87 (6th Cir. ((Mich.)), cert. denied, 498 U.S. 815, 111. Ct. 55, 112 L.Ed.2d 30 (1990)).Blane v. American Inventors Corp., 934 F. Supp. 903, 907 (M.D. Term. 1996)). Moreover, in general:
a plaintiff's choice of forum will be given deference unless the defendant makes an appropriate showing. See Grand Kensington [LLC v. Burger King Corp.], 81 F. Supp.2d [834,] 836 [(E.D. Mich. 2000)](citing General Motors Corp. v. Ignacio Lopez deArriortua, 948 F. Supp. 656, 668 (E.D. Mich. 1996)). A transfer is not appropriate if the result is simply to shift the inconvenience from one party to another. See Evans Tempcon, Inc. v. Index Indus., Inc., 778 F. Supp. 371, 377 (W.D. Mich. 1990).Audi AG, 204 F. Supp.2d at 1023.
Applying these factors to this case, defendants have not satisfied their burden of showing that a transfer is appropriate, nor have they shown that the result of a transfer of venue from this district to North Carolina would have any result other than nullifying the plaintiff's choice of forum.
In this case, the Court notes that the Eastern District of Tennessee and the Western or Middle District of North Carolina are located in adjacent states and are not more than several hours apart in terms of travel time by automobile. Further, the Rule 26(a)(1) disclosures of plaintiff, Paragon Financial [Court File No. 51], lists a numbers of witnesses from both Tennessee and North Carolina. In addition, third-party defendants Corporate Billing, Inc. and David Caradine have strongly objected to the motion to transfer on the ground that they are residents of Decatur, Alabama, and it will be much easier for them to travel to the Eastern District of Tennessee than to any forum in North Carolina. [Court File No. 66].
Accordingly, the motions of third-party defendants Lynn Ferguson and Nathan Elliott for a transfer of venue to North Carolina [Court File No. 52, 78] on the ground of forum non conveniens pursuant to 28 U.S.C. § 1404(a) will be DENIED. VI. Third-party defendants' Motion for a More Definite Statement [Court File No. 52, 78]
Third-party defendant Lynn Ferguson moves the court for a more definite statement pursuant to Fed.R.Civ.P. 12(e) on the ground that the third-party plaintiff's have failed to comply with Fed.R.Civ.P. 9(b). [Court File No. 52]. Specifically, third-party defendant Ferguson requests that pursuant to Rule 9(b), "the allegations against this Third Party be alleged with specificity rather than being lumped in with all the other [third-party] defendants." [Court File No. 53].
Likewise, third-party defendant Nathan Elliot has also moved for a more definite statement pursuant to Fed.R.Civ.P. 12(e) on the ground that the third-party plaintiff's have failed to comply with Fed.R.Civ.P. 9(b). [Court File No. 78]. He makes virtually the same argument as third-party defendant Lynn Ferguson. [Court File No. 79].
Fed.R.Civ.P. 9(b) states:
Fraud, Mistake, Condition of the Mind. In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge, and other condition of mind of a person may be averred generally.
In Ekberg v. Pennington, No. Civ. A.02-845, 2002 WL 1611641 (E.D.La. July 19, 2002)(unpub.), the court succinctly summarized the law applicable to a motion for a more definite statement pursuant to Fed.R.Civ.P. 12(e):
A district court will grant a motion for a more definite statement pursuant to Rule 12(e) when the pleading at issue "is so vague or ambiguous that a party cannot reasonably be required to frame a responsive pleading." Fed.R.Civ.P. 12(e). The motion must state the defects in the pleading and the details desired. See Id. A party, however, may not use a Rule 12(e) motion as a substitute for discovery. Mitchell v. E-Z Way Towers, Inc., 269 F.2d 126, 132 (5th Cir. 1959). Given the liberal pleading standard set forth in Rule 8, Rule 12(e) motions are disfavored. See Mitchell, 269 F.2d at 132; Gibson v. Deep Delta Contractors, Inc., 2000 WL 28174, *6 (E.D. La. 2000). At the same time, the Supreme Court recently noted that "[i]f a pleading fails to specify the allegations in a manner that provides sufficient notice," then a Rule 12(e) motion may be appropriate. Swierkiewicz v. Sorema, N.A., 534 U.S. 506, 122 S.Ct. 992, 998, 152 L.Ed.2d 1 (2002). In deciding whether to grant a Rule 12(e) motion, the trial judge is given considerable discretion. Newcourt Leasing Corp. v. Regional Bio-Clinical Lab, Inc., 2000 WL 134700, *1 (E.D. La. 2000).Id. at * 1. "'[A] more definite statement will be required when 'defendants can only guess as to what conduct . . . an allegation refers.'" Amoco Production Co. v. Ber-Mac Elec. and Instrumentation, Ltd., No. Civ. A.OO-2305-JWL, 2001 WL 395130 (D. Kan. 2001) (quoting 555 M Manufacturing, Inc. v. Calvin Klein, Inc., 13 F. Supp.2d 719, 724 (N.D. Ill. 1998) (quoting Jackson Nat'l Life Ins. Co. v. Gofen Glossberg, Inc., 882 F. Supp. 713, 726 (N.D. Ill. 1995)).
However, in dealing with a claim that fraud has not been pled "with particularity" under Rule 9(b):
a court must factor in the policy of simplicity in pleading which the drafters of the Federal Rules codified in Rule 8. Rule 8 requires a "short and plain statement of the claim, "and calls for "simple, concise, and direct" allegations . . . Rule 9(b)'s particularity requirement does not mute the general principles set out in Rule 8; rather, the two rules must be read in harmony. See, e.g., Credit Finance Corp., Ltd. v. Warner Swasey Co., 638 F.2d 563, 566 (2d Cir. 1981). "Thus, it is inappropriate to focus exclusively on the fact that Rule 9(b) requires particularity in pleading fraud. This is too narrow an approach and fails to take account of the general simplicity and flexibility contemplated by the rules." 5 C. Wright A. Miller, Federal Practice and Procedure: Civil § 1298, at 407 (1969).Michaels Bldg. Co. v. Ameritrust Co., N.A., 848 F.2d 674, 679 (6th Cir. 1988). Rather, "the purpose undergirding the particularity requirement of Rule 9(b) is to provide a defendant fair notice of the substance of a plaintiff's claim in order that the defendant may prepare a responsive pleading. Id. (citing Ross v. A.H. Robins Co., Inc., 607 F.2d 545, 557 (2d Cir. 1979), cert. denied, 446 U.S. 946 (1980)). Thus, the Michaels court found that a fraud count satisfied Rule 9(b) when it specified:
the parties and the participants to the alleged fraud, the representations made, the nature in which the statements are alleged to be misleading or false, the time, place and content of the representations, the fraudulent scheme, the fraudulent intent of the defendants, reliance on the fraud, and the injury resulting from the fraud.Michaels, 848 F.2d at 679.
In their answer and amended third-party complaint [Court File No. 24] the third-party plaintiff's state:
. . . the Defendants aver that any damages sustained by the Plaintiff was due to the fraudulent and/or negligent misrepresentations given by the following individuals and/or entities to the Defendants and/or the Plaintiffs, such as, but not limited to, that Sullivan's purported account debtors were genuine, and the invoices submitted by Sullivan as related to purported account debtors were genuine, and the invoices submitted by Sullivan as related to purported account debtors were valid, collectable, and payable for services rendered on behalf of Sullivan. Defendants aver that these misrepresentations, in addition to other misrepresentations which may be developed during the discovery.
[Court File No. 24, pp. 10-11]. Further, after identifying the third-party defendants, the amended third-party complaint states:
16. Thereafter, in or about October 2000, as a matter of course, a representative of Bradley traveled to North Carolina to verify the purported account debtors of Sullivan, including the named Third Party Defendant Account Debtors. At that time, Sherry Sullivan introduced representatives of Bradley to the Third Party Defendant Account Debtors, and these Third Party Defendant Account Debtors, as well as Sherry Sullivan, represented that the purported account receivables were genuine, valid, collectable, and payable for services rendered on behalf of Sullivan. In so doing, the Third Party Defendant Account Debtors confirmed in writing the alleged validity of the account receivables, as well as the amount owed as a result of services provided by Sullivan. Based upon these representations and inducements, and believing the same to be true, Bradley continued to factor account receivables of Sherry Sullivan, continued to pay sums of money to Sherry Sullivan for purported account receivables, and eventually sold some of what Bradley believed to be as valid account receivables to Paragon. . . .
18. In March 2001, as a matter of course, representatives of Bradley traveled to North Carolina to collect account receivables owed by some of Cheyenne Trucking's purported account debtors. At that time, Sherry Sullivan told Bradley for the first time that most of the purported account debtors and account receivables were bogus and fictional. For the first time, Bradley learned that almost all the accounts it purchased from Corporate Billing, services for months, and sold to Paragon were not bonafide as represented by all Third Party Defendants.
. . .
22. Bradley justifiably relied upon said misrepresentations, and acted upon them.
Further, by reason of the false and fraudulent representations, Bradley was lulled into a false sense of security and was mislead to its prejudice.
23. Further, Third Party Defendant Account Debtors made the aforesaid representations and inducements as described herein well knowing them to be false and fraudulent, with the intent of deceiving and inducing Bradley into entering into the Factoring Agreement with Sullivan Trucking, as well as continuing to pay Sullivan Trucking monies for purported account receivables.
24. Bradley justifiably relied upon said misrepresentations, and acted upon them. Further by reason of the false and fraudulent representations, Bradley was misled to its prejudice, and eventually sold some of these account receivables to Paragon for which Paragon has brought suit against Bradley.
30. Further, Third Party Defendants, Sherry Sullivan and Danny Sullivan, as well as the other Third Party Defendant Account Debtors, negligently made the aforesaid representations and inducements as described herein, and failed to exercise reasonable care and competence in obtaining and/or communicating the information, and should have known that the representations and inducements as set forth herein were indeed false. All Third Party Defendants and Third Party Account Debtors intended and/or expected Bradley to rely upon representations.
31. Bradley justifiably relied upon said misrepresentations, and acted upon them to its detriment . . .
[Court File No. 24, pp. 16-20].
Based upon the pleading set forth above, the Court concludes that the Amended Complaint of the third-party plaintiff's complies with the spirit of both Fed.R.Civ.P. 8 and 9(b). The third-party complaint provides information as to the participants in the fraudulent scheme, the approximate date of the fraudulent representations were alleged to have been made, the nature of the fraudulent representations.
Accordingly, the motions [Court File Nos. 52, 78] of third-party defendants Lynn Ferguson and Nathan Elliot for a more definite statement under Fed.R.Civ.P. 12(e) will be DENIED.
VI. Motion of Defendants/Third-party plaintiff's for mediation [Court File No. 110].
Defendants/Third-party plaintiff's seek an order referring the parties to mediation stating:
. . . Bradley Factor would show that there have been limited settlement discussions by and between the parties, and mediation may produce a successful resolution of all issues in this case.
[Court File No. 110]. Third-party defendants Corporate Billing, Inc. and David Caradine have filed a limited objection to Bradley Factor's Motion for Mediation stating:
. . . Paragon had made a settlement offer to the Bradley Factor, Inc. ("Bradley"), which has not been responded to by Bradley. Second, the case is not ripe for mediation, discovery is continuing and representatives of Bradley and other significant parties have not yet been deposed. Third, given the discussions held between counsel for the parties and the incomplete discovery it is unlikely an agreement can be reached at this time. Thus, mediation at this point in the proceedings would simply delay further discovery. Fourth, the ThirdParty Defendants suspect that Bradley's motive in proposing mediation now is simply to avoid or delay damaging discovery . . .
. . . given that a mediated resolution of all (or any of) the issues is unlikely right now and there is a significant amount of discovery left to be done, the Third Party Defendants do not feel this is an appropriate time for mediation.
[Court File No. 112]. Third-party defendant Nathan Elliott, d/b/a Center Distributing has also objected to the motion of the defendants/third-party plaintiff's for an order referring this case to mediation [Court File No. 120]. Lastly, in a footnote in its response to an unrelated motion, plaintiff, Paragon Financial Group, Inc., has stated:
Paragon does not object to mediation. However, Bradley has taken Paragon's depositions, and Paragon needs to take Bradley's depositions before mediation. Bradley should not reasonably expect to require Paragon to mediate before the depositions. At the hearing of Bradley's motions on June 20, 2003, however, [Bradley's then counsel] stated that if the depositions are taken, "there will be no settlement."
[Court File No. 123, n. 1].
The Court notes that pursuant to Local Rule 16.4(a) of the Local Rules of the United States District Court for the Eastern District of Tennessee, "[w]ith or without the agreement of the parties in any civil action, except those exempted pursuant to Local Rule 16.3, the Court may refer all or part of the underlying dispute to Mediation pursuant to this Local Rule."
Based upon the motion of the defendants/third-party plaintiff's for a referral of this action to mediation and the responses received thereto, it appears to the Court that no party objects to mediation, but that plaintiff and some of the third-party defendants believe that based upon the current state of discovery, this action is not yet ripe for a mediation. Based upon these limited objections of certain of the parties, the Court is reluctant to order a mediation when that mediation is futile, i.e., when it is unlikely to result in a settlement of all, or at least some, of the issues in the action.
Further, the court notes that in an order issued on June 20, 2003, discovery in this action was stayed in order to permit the Court to resolve all of the numerous pending motions of the parties [Court File No. 119]. As of this juncture, that Order staying further discovery in this action remains in place.
In addition, there is also pending before the Court, a motion for counsel(s) for the defendants/third-party plaintiff's to withdraw from this action. [Court File No. 116]. Thus, it appears likely that the defendants/third-party plaintiff's, or at least some of them, will be represented by "new" counsel who will need some time to familiarize themselves with this action and determine whether or not a mediation may result in a settlement of the action and, if a medication is warranted, when discovery will have proceeded to the point that the time is ripe for the aforesaid mediation.
Accordingly, the motion of the defendants/third-party plaintiff's for referral of this action for mediation [Court File No. 110] will be held in abeyance. As soon as is reasonably practicable, but in any event no later than Monday, October 27, 2003, counsel for all the parties shall advise the Court whether or not they object to the referral of this action to a mediation.
In the event counsel for any of the parties to his action do object to a mediation, they shall state their reasons for such object with particularity.
V. Bradley Factor's Motion for a Protective Order [Court File No. 108].
Bradley Factor moves for a protective order as to deposition testimony. Bradley Factor seeks a protective order preventing the testimony of its designated representative about accounts of Bradley Factor other than the Sullivan Trucking Account on the grounds that such deposition testimony would be in violation of the Tennessee Financial Records Privacy Act, Term. Code Ann. § 45-10-101, etseq. In support of its motion for a protective order Bradley Factor
avers that any clients and/or accounts of Bradley Factor other than Sullivan Trucking and Cheyenne Trucking are not relevant to the claims and/or defense in this case, and are not reasonably calculated to lead to the discovery of admissible evidence.
[Court File No. 108].
Paragon Financial has responded in opposition to the motion for a protective order, contending that (1) Bradley has not identified any records it has prepared for an in-camera inspection, (2) Bradley has not specified the information which is to be covered by the protective order and (3) Bradley has not established that it qualifies for protection under the Tennessee Financial Records Privacy Act. [Court File No. 111].
Corporate Billing Inc. and David Caradine have also responded to the motion for a protective order [Court File No. 113]. They assert: (1) the Tennessee Financial Records Privacy Act does not apply because it applies only to banks and financial institutions; (2) under the liberal discovery rules a protective order limiting discovery from Bradley to questions concerning Cheyenne Trucking and Sullivan Trucking would unduly restrict the free flow of information covered by the discovery rules; (3) Bradley Factor should not be allowed to dictate the questions asked by other parties in discovery; and, (4) it is conceivable that Bradley Factor engaged in fraudulent transactions with accounts receivable other than those involving Paragon, which would be relevant issues in this action. [Court File No. 113].
Finally, Bradley Factor has also filed a supplemental motion for a protective order [Court File No. 118].
In State Dep't of Revenue v. Moore, 111 S.W.2d 367 (Tenn. 1986), the Supreme Court of Tennessee construed the Financial Records Privacy Act, Tenn Code Ann. §§ 45-10-101, et seq. for the first time. It stated that:
By enacting the Financial Records Privacy Act, the [Tennessee] Legislature recognized that customers of financial institutions and the financial institutions themselves have a legitimate expectation of privacy in their records. Further, the act also encourages adequate record keeping by protecting the interest in privacy and preventing unauthorized intrusions into the affairs of the customers and institutions.Id. at 373. The Court further observed:
Not only does the Financial Records Privacy Act clearly contemplate that due process protections be afforded to financial institutions as well as to their customers, but by explicitly describing the requisites of a valid subpoena, the Act provides both a guide to the financial institution to determine the facial validity of a subpoena under T.C.A. § 45-10-103(8), and grounds for contesting the validity and sufficiency of a subpoena.Id. at 376. Further, in State ex rel. Baugh v. Volunteer Bank and Trust Co., No. C. A. 950, 1990 WL 134567 (Tenn.Ct.App. Sept. 19, 1990)(unpub.), the Court stated:
We adhere to our construction of T.C.A. section 45-10-103, which permits certain routine disclosures that are not otherwise subject to the strictures of the Act, but all subpoenas issued to financial institutions are covered by the terms of this statute. The Act is unambiguous and will be construed on its face.Id. (citing Moore, 111 S.W.2d at 378).
The Act, Tenn. Code Ann. § 45-10-102, defines a financial institution as:
(3) "Financial institution" means a bank, savings and loan association, industrial loan and thrift company, credit union, mortgage broker, mortgage banker, or leasing company accepting deposits, making or arranging loans and making or arranging leases.
Tenn. Code Ann. § 45-10-102(3).
Bradley Factor clearly does not fall within this definition of "financial institution." Accordingly, Bradley Factor's motion for a protective order [Court File No. 108] preventing counsel for the other parties to this action from questioning its designated representative about accounts receivable from accounts other than those for Sullivan Trucking and Cheyenne Trucking will be DENIED.
Nothing in this memorandum and the accompanying order prevents counsel for the parties from agreeing to a protective order in which all counsel would agree to maintain the confidentiality of any information obtained from Bradley Factor about accounts other than those involving Cheyenne Trucking and Sullivan Trucking and limiting its dissemination to counsel for the parties and any expert witnesses during the discovery phase of this action.
A separate order will enter. ORDER
In accordance with the accompanying memorandum opinion:
(1) The motions of third-party defendants Lynn Ferguson and Nathan Elliott to dismiss the claims of the third-party plaintiff's against them for lack of personal jurisdiction [Court File Nos. 52, 78] pursuant to Fed.R.Civ.P. 12(b)(2) are DENIED;
(2) The motions of third-party defendants Lynn Ferguson and Nathan Elliott for a transfer of venue to North Carolina [Court File No. 52, 78] on the grounds of forum non conveniens pursuant to 28 U.S.C. § 1404(a) are DENIED;
(3) The motions [Court File Nos. 52, 78] of third-party defendants Lynn Ferguson and Nathan Elliot for a more definite statement under Fed.R.Civ.P. 12(e) will be DENIED;
(4) The motion of the defendants/third-party plaintiff's for referral of this action for mediation [Court File No. 110] is held in abeyance. As soon as is reasonably practicable, but in any event no later than Monday, October 27, 2003, counsel for all the parties shall advise the Court whether or not they object to the referral of this action to a mediation; and,
(5) Bradley Factor's motion for a protective order [Court File No. 108] preventing counsel for the other parties to this action from questioning its designated representative about accounts receivable from accounts other than those for Sullivan Trucking and Cheyenne Trucking is DENIED.