Opinion
X06-CV-02-0175159 S
November 10, 2003
MEMORANDUM OF DECISION
The defendants John Purcell, Sr. ("Purcell") and Triac Holding I, Inc. ("Triac") have moved to dismiss this action for lack of personal jurisdiction. Purcell, a nonresident individual, and Triac, a foreign corporation, assert that the nature of their contacts with Connecticut do not justify the courts of this state exercising jurisdiction over them for purposes of adjudicating the plaintiff's claims.
The plaintiff GATX Financial Corporation ("GATX") has brought this action against National Fairways Partners I, Limited Partnership ("NFPI") and National Fairways, Inc. ("NFI") for damages and attorneys fees for allegedly defaulting on two notes held by GATX in the total amount of $2,315,000. NFI was the general partner of NFPI. Included in GATX's amended complaint is a claim that NFPI and NFI fraudulently conveyed significant sums to various limited partners of NFPI and various shareholders of NFI in violation of the Uniform Fraudulent Transfer Act, General Statutes § 52-552, et seq. In connection with its fraudulent conveyance claim, GATX added as defendants various limited partners of NFPI and shareholders of NFI, including Purcell and Triac. GATX seeks an avoidance of the transfer of funds to these limited partners and shareholders and a return of the funds to NFPI and NFI to be held in trust until GATX has been paid in full the amounts allegedly due it on its notes.
NFPI is a Connecticut limited partnership with its principal office located in Connecticut. NFI is a Delaware corporation with its principal place of business in Connecticut. Purcell, who was a limited partner of NFPI and a shareholder of NFI, is an individual residing in Florida and Triac, who was also a limited partner of NFPI and a shareholder of NFI, is a corporation incorporated in Delaware and qualified to do business in Florida. Purcell and Triac contend that their roles and activities as limited partners and shareholders are insufficient to justify under either the Connecticut longarm statutes or under the due process clause of the United States Constitution the assertion of jurisdiction by courts in Connecticut. GATX argues that Purcell and Triac purposively engaged in conduct that subjects them to the jurisdiction of Connecticut's courts for the resolution of this dispute. For the following reasons, I agree with the plaintiff.
"When a defendant files a motion to dismiss challenging the court's jurisdiction, a two part inquiry is required. The trial court must first decide whether the applicable state longarm statute authorizes the assertion of jurisdiction over the defendant. If the statutory requirements are met, its second obligation is then to decide whether the exercise of jurisdiction over the defendant would violate constitutional principles of due process." (Citations and internal quotation marks omitted.) Knipple v. Viking Communications, 236 Conn. 602, 606 (1996).
When personal jurisdiction is challenged, the plaintiff bears the burden of proving the court's jurisdiction. Id., 607. Because no evidentiary hearing was requested in this case by either party, the court will accept all undisputed factual allegations, including those contained in the complaint and those contained in affidavits, in determining whether the plaintiff has sustained its burden. Id., 608-09.
I PERSONAL JURISDICTION UNDER CONNECTICUT'S LONG-ARM STATUTES
GATX contends that Purcell is subject to the jurisdiction of Connecticut's courts pursuant to General Statutes § 52-59b(a)(1) and Triac is subject to the jurisdiction of Connecticut's courts pursuant to General Statutes § 33-929(e) because each has transacted business within the state. Specifically, GATX asserts that the defendants transacted business in this state by entering into the limited partnership agreement, investing in the Connecticut limited partnership and receiving substantial partnership proceeds. Purcell and Triac argue that the act of mere passive investment is insufficient to establish jurisdiction under Connecticut's longarm statutes.
GATX also maintains that Connecticut has jurisdiction over Purcell pursuant to subsection (2) of § 52-59b(a) because he committed a tortious act within the state and subsection (3) because he committed a tortious act outside the state causing injury to persons within the state. I need not address these claims because I find that Purcell is subject to this court's jurisdiction pursuant to subsection (1) of § 52-59b(a).
Jurisdiction over Purcell, a nonresident individual, is governed by § 52-59b. Subsection (1) of § 52-59b(a) provides "As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any nonresident individual, foreign partnership or over the executor or administrator of such nonresident individual or foreign partnership, who in person or through an agent: (1) Transacts any business within the state." In determining whether Purcell's actions constitute the transaction of business for purposes of this statute, the court "must balance considerations of public policy, common sense, and the chronology and geography of the relevant factors." Zartolas v. Nisenfeld, 184 Conn. 471, 477 (1981). Jurisdiction depends on the facts and circumstances of each case and cannot be determined by any "rigid formula." Id.
In Zartolas, our Supreme Court held that Connecticut had jurisdiction over out-of-state defendants in an action for the breach of covenants contained in a warranty deed concerning the sale of real estate located in Connecticut notwithstanding the facts that the deed was executed in Iowa and the defendants never traveled to Connecticut. The court construed the term "transacts any business" under § 52-59b(a)(1) to embrace a single purposeful business transaction. Id., 474. "The defendants purposefully availed themselves of the privileges of owning and selling Connecticut land Thus, this state may require them to defend a Connecticut suit alleging breach of the deed's warranties." Id., 478.
Jurisdiction over Triac, a foreign corporation, is governed by § 33-929. The plaintiff cites subsection (e) of § 33-929 as the basis for this court's jurisdiction. Subsection (e) provides that: "Every foreign corporation which transacts business in this state in violation of section 33-920 shall be subject to suit in this state upon any cause of action arising out of such business." The parties have not disputed that Triac has failed to obtain a certificate of authority from the Secretary of State which is required of any foreign corporation which transacts business in Connecticut. To establish jurisdiction pursuant to § 33-929(e) over a foreign corporation such as Triac, two conditions must be met: "the transaction of business in this state, and a cause of action arising out of the transaction of such business." Wilkinson v. Boats Unlimited, Inc., 236 Conn. 78, 86 (1996).
A review of the activities conducted by Purcell and Triac indicates that each has transacted business in this state for purposes of Connecticut's longarm statutes. Both Purcell and Triac voluntarily entered into a limited partnership agreement with NFPI in which they became members of the partnership. NFPI is a Connecticut limited partnership, formed in accordance with the laws of Connecticut, with its principal office in Connecticut. The limited partnership cane into existence through the filing of a certificate of limited partnership with the office of the Secretary of State of Connecticut and the limited partnership agreement provided that the agreement was to be governed and construed in accordance with Connecticut law. Among other activities, the limited partnership leased and operated a golf course in Connecticut. Purcell and Triac were also shareholders in NFI, which was the general partner of NFPI. Purcell and Triac periodically received substantial distributions from NFPI, totaling $3,186,069 for Purcell and $850,697 for Triac for the period 1999-2000.
In this case, the plaintiff's cause of action also arises out of the defendants' transaction of their business. GATX in its complaint asserts that the financial distributions to Purcell and Triac by NFPI constituted a fraudulent conveyance and it seeks to avoid those distributions. The limited partnership agreement and the distributions resulting from that agreement are at the core of this dispute.
Purcell and Triac argue that they were merely passive investors and, as such, they should not be subject to Connecticut's longarm jurisdiction. While this argument "might be persuasive if the transaction at issue involved the relatively routine and anonymous purchase of publicly traded stock through a broker or agent," Gaudio v. Guadio, 23 Conn. App. 287, 299 (1990), here, the defendants entered into a limited partnership agreement directly with a Connecticut limited partnership, involving sizeable periodic financial distributions to the defendants. Purcell and Triac purposefully engaged in substantial economic activity in Connecticut and availed themselves of the benefits and protections of Connecticut's laws. In doing so, they subjected themselves to Connecticut's jurisdiction to resolve a dispute over the appropriateness of the substantial financial distributions made by the partnership to them.
An alternative basis, not cited by GATX, exists for Connecticut's assertion of jurisdiction over Triac. Subsection (f) of General Statutes § 33-929 provides that "Every foreign corporation shall be subject to suit in this state, by a resident of this state or by a person having a usual place of business in this state, whether or not such foreign corporation is transacting or has transacted business in this state and whether or not it is engaged exclusively in interstate or foreign commerce, on any cause of action arising as follows: (1) Out of any contract made in this state or to be performed in this state." This subsection confers jurisdiction without regard to whether a foreign corporation transacts business in Connecticut and without regard to a causal connection between the plaintiff's cause of action and the defendant's presence in this state. The jurisdictional inquiry may be made, not only into whether a contract was made in Connecticut or performed here, but also into the totality of the contacts which the defendant may have with the forum. Lombard Bros., Inc. v. General Asset Management Co., 190 Conn. 245, 253-54 (1983). In this case, the parties' limited partnership agreement was both made and performed in Connecticut and the nature of the defendants' contacts with Connecticut warrant a finding of jurisdiction under § 33-929(f)(1).
II COMPLIANCE WITH THE DUE PROCESS CLAUSE
Purcell and Triac also contend that their contacts with the State of Connecticut fail to satisfy the minimum contacts requirement of the due process clause.
The due process clause of the Fourteenth Amendment mandates that, in order to subject a defendant who is not present within a state to the jurisdiction of the courts of that state, the defendant must have "certain minimum contacts with it such that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice.'" International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). The demand of "minimum contacts" extends to corporations as well as individuals. Id., 316-17. Whether "minimum contacts" exist to justify personal jurisdiction over a nonresident defendant depends on the individual circumstances of each case. "Like any standard that requires a determination of reasonableness, the minimum contacts test of CT Page 13133 International Shoe is not susceptible of mechanical application; rather, the facts of each case must be weighed to determine whether the requisite affiliating circumstances are present." (Internal quotation marks and citations omitted.) Kulko v. California Superior Court, 436 U.S. 84, 92 (1978). "[A]n essential criterion in all cases is whether the quality and nature of the defendant's activity is such that it is reasonable and fair to require him to conduct his defense in that State." (Internal quotation marks omitted.) Id. See also Frazer v. McGowan, 198 Conn. 243, 249 (1986).
Purcell and Triac argue that, as nonresident, passive investors, they may not be fairly haled into court in Connecticut to defend claims involving the fraudulent transfer of property. It may well be that jurisdiction based on a commonplace and inconsequential investment without more violates constitutional principles of due process. That, however, is not this case. The facts and circumstances of the defendants' relationship to the limited partnership and to Connecticut reveal a more significant relationship. The defendants purposively availed themselves of the privilege of becoming members of a Connecticut limited partnership with its principal office in Connecticut pursuant to an agreement expressly governed by Connecticut law and obtained substantial monetary benefits as a result. "[W]here a nonresident defendant `deliberately' has engaged in significant activities within a State, . . . 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." (Citations omitted.) Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474-76 (1985). Based on the facts of this case, Purcell and Triac should have reasonably foreseen that they might be called to Connecticut to defend a lawsuit arising from their membership in the Connecticut limited partnership.
In light of the above, the motions to dismiss of the defendants Purcell and Triac are hereby denied.
JON M. ALANDER JUDGE OF THE SUPERIOR COURT.