Summary
In Scharff, the plaintiff was injured in an auto accident in California. He filed suit in Kansas against the defendants, three Iowa corporations which were doing business in Kansas at the time of the accident.
Summary of this case from Merriman v. Crompton Corp.Opinion
CIVIL ACTION No. 01-2520-CM
May 2, 2002
MEMORANDUM AND ORDER
On October 30, 2001, defendants CRST, Inc., CRST International Inc., and CRST Logistics Inc. removed this action, originally filed in the District Court of Wyandotte County, Kansas, to this federal district court. Pending before the court is defendants' Motion to Dismiss for Lack of Personal Jurisdiction (Doc. 9). As set forth below, defendants' motion is denied.
Background
Factual Background
Plaintiff Charles E. Scharff filed suit in state court against defendants CRST, Inc., CRST International, Inc., and CRST Logistics, Inc. In his complaint, plaintiff alleges that on or about November 30, 1999, plaintiff was occupying a parked motor vehicle at the Sacramento 49er Truck in Sacramento, California. Plaintiff alleges that, at that time and place, Michael Casey carelessly and negligently drove a truck into the parked vehicle plaintiff was occupying, causing plaintiff to sustain injury and damage. Plaintiff contends that, at the time of the collision, Michael Casey was acting within the course and scope of his agency, service and/or employment with the defendant CRST International, Inc., rendering the defendants liable to plaintiff for Michael Casey's actions under the doctrine of respondeat superior.
Defendants contend that this court lacks personal jurisdiction. In his complaint, plaintiff alleges that CRST Inc., CRST International Inc., and CRST Logistics Inc., are all three Iowa corporations with their principal place of business in Cedar Rapids, Iowa. Plaintiff asserts that, at the time of the collision, defendants were doing business within the State of Kansas. Plaintiff alleges that defendants have designated the Corporation Company, Inc. as their resident agent within the State of Kansas and that said defendants may be served with service of process within the state pursuant to Kan. Stat. Ann. § 60-304(a) . Additionally, plaintiff alleges that pursuant to Kan. Stat. Ann. § 17-7301, defendants have consented to actions against them in the State of Kansas by serving process on the Kansas Secretary of State. Finally, plaintiff alleges that defendants may be sued in the State of Kansas pursuant to Kan. Stat. Ann. § 17-7303 .
Defendants' amended answer denies having any such registered agent for service of process within the State of Kansas. Because the issue of service of process can be resolved under K.S.A. § 17-7307(c), the court declines to address this issue.
B. Procedural Background
Plaintiff filed his original petition in the District Court of Wyandotte County, Kansas, on September 28, 2001. On October 30, 2001, defendants filed their Notice of Removal, thereby removing the action to this federal court. In their Notice, defendants asserted this court had diversity jurisdiction over the action because none of the defendants are incorporated in Kansas — plaintiff's state of residency — and because Kansas is not the defendants' primary place of business. Additionally, the amount in controversy allegedly exceeds $75,000. 28 U.S.C. § 1332.
After defendants filed their Notice of Removal, they filed the instant motion pursuant to Federal Rule of Civil Procedure 12(b)(2). Defendants assert that this court lacks personal jurisdiction. First, defendants contend that none of them committed a tortious act against plaintiff in the State of Kansas. Additionally, defendants contend that the cause of action did not arise out of and is wholly unrelated to any business which defendants transact in the State of Kansas. Finally, defendants assert that the exercise of personal jurisdiction is prohibited by long-recognized principles of due process.
Personal Jurisdiction
A plaintiff opposing a motion to dismiss for lack of personal jurisdiction bears the burden of establishing that the exercise of personal jurisdiction over the defendant is proper. Kuenzle v. HTM Sport-Und Freizeitgerate AG, 102 F.3d 453, 456 (10th Cir. 1996). If the motion to dismiss is submitted prior to trial on the basis of affidavits and other written materials, the plaintiff need only make a prima facie showing to avoid dismissal for lack of personal jurisdiction. Id. Although the plaintiff will be required to prove the factual basis for jurisdiction by a preponderance of the evidence at trial, on a pre-trial motion to dismiss, all factual disputes are resolved in favor of the plaintiff. Id. If the plaintiff makes the required prima facie showing that personal jurisdiction exists, "a defendant must present a compelling case demonstrating `that the presence of some other considerations would render jurisdiction unreasonable.'" OMI Holdings, Inc. v. Royal Ins. Co. of Can., 149 F.3d 1086, 1091 (10th Cir. 1998) (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 477 (1985)). In diversity actions, personal jurisdiction over a nonresident defendant is determined by the law of the forum state. Federated Rural Elec. Ins. Corp. v Kootenai Elec. Co-op, 17 F.3d 1302, 1304 (10th Cir. 1994).
Defendants assert that, under Kansas law, when considering questions of personal jurisdiction, a two-step analysis is required. "First, the court must determine whether it has jurisdiction under the Kansas long-arm statute, [Kan. Stat. Ann.] § 60-308(b). Second, the court must determine whether the exercise of personal jurisdiction comports with constitutional guarantees of due process." Envtl. Ventures Inc. v. Alda Servs. Corp., 868 P.2d 540, 543, 19 Kan. App. 2d 292, 295 (1994). Plaintiff contends that the defendants are incorrect in their assertion that the Kansas long-arm statute must be satisfied in order for the court to exercise personal jurisdiction over the defendants. In light of Novak v. Mutual of Omaha Insurance Co., 28 P.3d 1033 (2001), this court agrees with plaintiff and holds that satisfaction of the Kansas long-arm statute is not the exclusive means by which this court may exercise jurisdiction over a foreign corporation.
A. Service of Process
Defendants contend that the Kansas long-arm statute does not confer jurisdiction over this action. The Kansas long-arm statute provides that any person transacting business within the state submits to jurisdiction as to any cause of action "arising from" the transaction of that business. Kan. Stat. Ann. § 60-308(b)(1). However, plaintiff does not assert that the petition alleges a cause of action "arising from" the transaction of business within this state by defendants. Instead, plaintiff asserts that this court has jurisdiction pursuant to the Kansas statutes requiring foreign corporations wishing to do business in the state to register with the Secretary of State and to receive a certificate of authority. Kan. Stat. Ann. § 17-7301 requires the filing of an application for such a certificate and further requires the applicant to consent to service upon the Secretary of State in any action against it. Defendants in this case never applied for or received a certificate of authority to do business in Kansas. However, § 17-7307(c) provides:
Any person having a cause of action against any foreign corporation, whether or not such corporation is qualified to do business in this state, which cause of action arose in Kansas out of such corporation doing business in Kansas, or arose while such corporation was doing business in Kansas, may file suit against the corporation in the proper court of a county in which there is proper venue. Service of process in any action shall be made in the manner prescribed by K.S.A. 1972 Supp. § 60-304.Id. § 17-7307(c) (emphasis added.)
Further, § 60-304(f) authorizes service on the Secretary of State, and states in relevant part:
Whenever any domestic corporation . . . transacting business without authority in this state, fails to appoint or maintain in this state a resident agent upon whom service of legal process or service of any such notice or demand may be had . . . the secretary of state shall be irrevocably authorized as the agent and representative of the corporation . . . to accept service of any process or service of any notice or demand required or permitted by law to be served upon the corporation.
Plaintiff states that, in the present action, service was made under the authority of Kan. Stat. Ann. § 60-304 by delivering the summons and petition to the agent designated by each defendant to receive service of process in Kansas. Defendant denies having any such registered agent. Plaintiff additionally states that the defendants were served under the authority of §§ 17-7307(c) and 60-304(f) by delivering the summons and petition to the Kansas Secretary of State.
As previously noted, plaintiff does not claim that the present cause of action arose out of any business conducted by defendants in Kansas. The act complained of — the alleged negligent truck accident — took place in California. Therefore, the question this court must decide is whether the cause of action arose "while" defendants were "doing business" in Kansas, such that § 17-7303(c) is satisfied. The phrase "doing business in this state," as used in the Foreign Corporation Registration Act, is defined in § 17-7303, which provides in pertinent part:
Every foreign corporation that has an office or place of business within this state, or a distributing point herein, or that delivers its wares or products to resident agents in this state for sale, delivery or distribution, shall be held to be doing business in this state within the meaning of the act. . . .
The defendants herein are engaged in interstate trucking. The defendants concede that this business includes picking up, transporting, and delivering goods and wares "at various locations throughout the state." (Jeff Doonan Aff.¶ 9). Without the benefit of further discovery, the full extent of defendants' activities in Kansas is unclear. However, at this time, the court is satisfied that the defendants were "doing business" within the state of Kansas for purposes of § 17-7303. Defendants have failed to adequately refute plaintiff's assertion that the defendants were doing business in Kansas at the time the cause of action arose.
Defendants argue that plaintiff must satisfy the long-arm statute in order for jurisdiction to be proper. Plaintiff asserts that, to the contrary, the long-arm statute is not the only means by which this court may assert jurisdiction. In support, plaintiff primarily relies on the case of Novak, 28 P.3d 1033. In that case, Florida and Wyoming residents filed suit in Kansas against two Nebraska corporations. The cause of action arose outside the state and had no connection to Kansas. Service of process was achieved in Kansas by delivering the summons and petition to the Insurance Commissioner pursuant to § 40-218. No attempt was made to obtain service outside the state under § 60-308, and the plaintiffs did not rely on the long-arm statute as a basis for jurisdiction. The defendants in Novak moved for dismissal, arguing that the court lacked personal jurisdiction. The defendants acknowledged they were doing business in Kansas, but argued that, because the claim sued upon was unconnected to their Kansas contacts, and did not arise out of any of the acts enumerated in § 60-308(b), the court had no personal jurisdiction.
Kan. Stat. Ann. § 40-218 requires every insurance company transacting business in Kansas to consent to jurisdiction within the state.
The Kansas Court of Appeals rejected the notion that the long-arm statute is the exclusive means for the exercise of jurisdiction over foreign corporations. The court noted that § 60-308(d) states: "Nothing in this section limits or affects the right to serve any process in any other manner provided by law." Thus, the long-arm statute covers only certain situations. As a result, when the long-arm statute does not cover a particular situation, the parties may resort to traditional bases of jurisdiction such as citizenship, domicile, and residence; or consent, either actual or implied. Novak, 28 P.3d at 1033. The court in Novak found that § 40-218 provided the statutory basis for the exercise of jurisdiction over the defendant insurance companies who, in accordance with the statute, had consented to jurisdiction in exchange for the privilege of doing business in Kansas.
In Novak, the Kansas court of appeals cited at length, and with approval, State ex rel. K-Mart Corp. v. Holliger, 986 S.W.2d 165 (Mo. 1999), wherein a Missouri resident injured in a fall at a K-Mart store in Colorado brought suit in Missouri. K-Mart challenged the jurisdiction of the Missouri court because the plaintiff's claim did not arise out of any act enumerated in Missouri's long-arm statute. The court in Holliger held:
K-Mart relies on the long-arm statute for its argument that Missouri does not have personal jurisdiction in this case because the claim did not arise out of one of the activities enumerated in the statute. However, long-arm statutes, as the name implies, are intended to expand the reach of the law of the state to authorize jurisdiction over foreign corporations that are not necessarily authorized to do business in the state but whose activities justify personal jurisdiction. . . . In this case, there is no need for a `long arm' to reach K-Mart outside of Missouri, because K-Mart has a registered agent in Missouri.Id. at 166-68.
Relying on the above rationale in Holliger, and applying "traditional bases of jurisdiction," the court in Novak concluded that jurisdiction was proper even though the plaintiff's claim had no connection with Kansas or with the defendants' in-state activities. The defendants were present in the state through their business activities, they were served with process in Kansas, and they had consented to jurisdiction under § 40-218.
While the statutory provision on which plaintiff in the instant case relies is not § 40-218, but rather § 17-7307, its effect is the same. Both § 40-218 and § 17-7307 (via § 60-304) allow service of process on the secretary of state for corporations conducting business within the State of Kansas. While § 40-218 deals solely with insurance companies, § 17-7307 affects all corporations transacting business in Kansas, both licensed and unlicensed. Both statutory provisions allow for service on the secretary of state as valid service of process.
B. Due Process
1. General Jurisdiction
Having determined that defendants' conduct need not necessarily fall within the reach of the Kansas long-arm statute, and instead finding that § 17-7307 applies, the court next turns to the issue of whether the exercise of personal jurisdiction comports with due process requirements. "The `minimum contacts' standard may be met in one of two ways." OMI Holdings, 149 F.3d at 1090. First, a court may exercise specific jurisdiction over a nonresident defendant where "the defendant has `purposefully directed' his activities at residents of the forum, and the litigation results from alleged injuries that arise out of or are related to those activities." Id. at 1090-91 (quoting Burger King, 471 U.S. at 472). Where no nexus is alleged to exist between the defendant's forum-related activities and the injury sustained, a court may nevertheless exercise "general" jurisdiction over a nonresident defendant whose contacts with the forum state are so pervasive that personal jurisdiction is conferred by the "continuous and systematic" nature of the defendant's in-state activities. Id. Here, plaintiff does not allege that the injury sustained arose out of or was related to the defendants' in state activities. Accordingly, the court addresses the issue of general jurisdiction only.
2. Minimum Contacts
Defendants, who are involved in interstate trucking, have conceded that this business includes picking up, transporting, and delivering goods and wares "at various locations throughout the state." The full extent of defendants' Kansas activities are not, however, known at this time. But the court assumes that the defendants' trucking activities throughout the state necessarily include establishing business relations with in-state businesses, making and performing contracts within the state, employing drivers, dockworkers or warehousemen, receiving payment for their deliveries (thereby benefitting economically from the state), as well as engaging in other activities associated with the trucking business. Resolving all factual disputes in favor of the plaintiff, the court finds that, by agreeing to deliver its goods and wares "at various locations throughout the state," defendants have purposefully established minimum contacts with Kansas through their trucking business across the state. Plaintiff has satisfied his burden of making a prima facie showing.
3. Traditional Notions of Fair Play and Substantial Justice
Next, the court must determine whether the exercise of personal jurisdiction offends traditional notions of fair play and substantial justice. In Volt Delta Resources v. Devine, the Kansas Supreme Court set forth several factors to consider when determining whether traditional notions of fair play and substantial justice are satisfied. Courts should consider: 1) the interest of the state in regulating the particular type of business or providing a forum for its residents; 2) whether evidence is available and the burden on the defense of defending in the forum; 3) the availability and accessibility of another forum; and 4) how much the defendant's activities locally contributed to the cause of action. Volt Delta Resources v. Devine, 740 P.2d 1089, 1093, 241 Kan. 775, 780 (Kan. 1987). Additionally, the court should consider the interstate judicial system's interest in obtaining the most efficient resolution of controversies and the shared interest of the several states in furthering fundamental substantive social policies. Burger King, 471 U.S. at 476-77.
Considering these factors in the context of the case at bar, and weighing all inferences in plaintiff's favor, the court finds that exercise of personal jurisdiction in Kansas does not offend traditional notions of fair play and substantial justice. Kansas has a significant interest in regulating all business conducted within this state by foreign corporations, as shown by its statutory provisions requiring foreign corporations wishing to do business in this state to register with the secretary of state and receive a certificate of authority. Kan. Stat. Ann. § 17-7301. This interest is further evidenced by § 17-7307, which permits a cause of action against any foreign corporation, whether or not such corporation is qualified to do business within the state, when the cause of action arose while such corporation was doing business in Kansas. These statutory provisions demonstrate that Kansas has a significant interest in regulating the business of foreign corporations conducting business within this state.
Additionally, Kansas has a significant interest in providing a forum for its residents to bring suit. In the present action, plaintiff's action would be time barred in California. See Cal. Civ. Proc. Code § 340(3) (one-year statute of limitations). Thus, Kansas may be the only forum where plaintiff may obtain relief. Accordingly, consideration of the first and third factors weighs in favor of exercising jurisdiction in this case.
In considering the second factor, the court is mindful that the accident occurred in California and that, as a result, evidence (such as eyewitnesses) may not be readily available in Kansas. However, there is no evidence in the record that defending this lawsuit would be more burdensome in Kansas than in California. In fact, considering that defendants are Iowa corporations, Kansas would appear to be the closest and possibly more convenient forum for defendants.
The court finds that the fourth factor, how much the defendants' activities locally contributed to the cause of action, weighs in favor of the defendants. However, this alone does not outweigh those factors favoring jurisdiction.
Finally, the interstate judicial system's interests in obtaining efficient resolution of controversies and in furthering fundamental substantive social policies also are best served by exercising jurisdiction in Kansas. The shared interests of the several states in assuring that their injured citizens are provided a forum to pursue justice weighs in favor of trying this case in Kansas. The court determines at this juncture that the exercise of personal jurisdiction over defendants is proper. At some point in the litigation, plaintiff may be required to prove the factual basis for jurisdiction by a preponderance of the evidence. However, because this is a pre-trial motion to dismiss, the court resolves all factual disputes in favor of plaintiff. Accordingly, the court finds that plaintiff has made a prima facie showing. Defendants' motion is denied.
IT IS THEREFORE ORDERED that defendants' Motion to Dismiss for Lack of Personal Jurisdiction (Doc. 9) is denied.