Opinion
Civil Action No. 04-0917, Section "N".
September 17, 2004
ORDER AND REASONS
Before the Court is a Motion to Dismiss for Lack of Personal Jurisdiction or, Alternatively, to Dismiss for Improper Venue, filed by defendant Gallop, Johnson Neuman, L.C. ("Gallop"). For the reasons that follow, defendant's motion to dismiss is GRANTED.
I. BACKGROUND
This is a legal malpractice action arising out of the merger of MegsINet Inc. ("MegsINet"), whom Gallop represented, and CoreComm Ltd. A shareholder of MegsINet, plaintiff Michael Henry ("Henry") alleges that Gallop breached its fiduciary duty to the shareholders of MegsINet by not filing necessary documents which allegedly would have prevented the MegsINet shareholders from incurring a multi-million dollar tax liability as a result of the merger. Pl.'s Compl. at ¶¶ 18, 45. In his Complaint, Henry prays for $1.8 million in actual damages, costs, reasonable attorney's fees, and other relief.
As a shareholder of MegsINet, Henry paid taxes on the income derived from the merger, which he insists was entitled to tax-free treatment under Treasury Regulation 1.367(a)-3. Pl.'s Compl. at ¶ 18. Henry sued the Internal Revenue Service ("IRS") in 2002, seeking a tax refund on this ground. Henry v. United States, Civ. A. No. 02-0968 (E.D.La.). Gallop is not a party to the action against the Government.
At the time of the filing of the Complaint, Gallop was a Missouri limited liability company located in St. Louis, Missouri, see Aff. of John T. Walsh at ¶ 2 (Def.'s Ex. "A"), and Henry a resident of the State of Louisiana, Orleans Parish. See Pl.'s Compl. (Rec. Doc. No. 1). On June 22, 2004, Gallop filed its motion to dismiss for lack of personal jurisdiction on the grounds that (1) the claims alleged in this suit arose out of Gallop's contacts with Missouri — not the State of Louisiana, and therefore Henry cannot establish specific jurisdiction over Gallop; and (2) Gallop does not have the requisite minimum contacts with Louisiana to support the exercise of general jurisdiction. In the alternative, Gallop argues that this action should be dismissed because the Eastern District of Louisiana is not a proper venue for the adjudication of this dispute.
II. LAW AND ANALYSIS
A. Personal Jurisdiction
"In a diversity suit, a federal court has personal jurisdiction over a nonresident defendant to the same extent that a state court in that forum has such jurisdiction." Patin v. Thoroughbred Power Boats Inc., 294 F.3d 640, 652 (5th Cir. 2002). This determination generally requires a two-step evaluation to ensure that exercise of jurisdiction is proper both under the state long arm statute and under federal principles of constitutional due process. Id. "However, because Louisiana's long arm statute is coextensive with the limits of due process, `the sole inquiry into jurisdiction over a nonresident [under Louisiana law] is a one-step analysis of the constitutional due process requirements.'" Id. (quoting Petroleum Helicopters, Inc. v. Avco Corp., 834 F.2d 510, 514 (5th Cir. 1987)).
"`[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.'" Asahi Metal Industry Co., Ltd. v. Superior Court of California, Solano County, 480 U.S. 102, 108-09, 107 S.Ct. 1026, 1030, 94 L.Ed.2d 92 (1987) (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474 (1985) (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945))). To satisfy due process, the defendant through his own affirmative acts must have established contacts with the forum state such that he can be said to have "`purposefully avail[ed] [him]self of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.'" Asahi Metal, 480 U.S. at 112, 109 (quoting Burger King, 471 U.S. at 475); see also Holt Oil Gas Corp. v. Harvey, 801 F.2d 773, 777 (5th Cir. 1986) ("for an exercise of personal jurisdiction to be consistent with due process, the nonresident defendant must have some minimum contact with the forum which results from an affirmative act on the part of the nonresident"), cert. denied, 481 U.S. 1015 (1987). "The defendant's conduct and connection with the forum state must be such that he should reasonably anticipate being haled into court in the forum state." Holt Oil, 801 F.2d at 777.
Minimum contacts can take two forms. Where "litigation results from alleged injuries that arise out of or relate to" the defendant's contacts with the forum state, see Panda Brandywine Corporation v. Potomac Electric Power Company, 253 F.3d 865, 868 (5th Cir. 2001), it is the "`relationship among the defendant, the forum, and the litigation'" that must be examined to determine whether the defendant has purposely availed himself of the forum state's benefits and protections. See, e.g., We're Talking Mardi Gras, LLC v. Davis, 192 F. Supp. 2d 635, 637 (E.D. La. 2002) (quoting Shaffer v. Heitner, 433 U.S. 186, 204 (1977)). Where this relationship is sufficiently strong, the Court is said to have "specific jurisdiction" over the defendant. Id. Where a defendant's "`operations within a state [are] so substantial and of such a nature as to justify suit against [the defendant] on causes of action arising from dealings entirely distinct from those activities,'" then "the Court is said to have `general jurisdiction.'" Id. (quoting International Shoe, 326 U.S. at 318).
When a nonresident defendant asserts a motion to dismiss for lack of personal jurisdiction, the plaintiff has the burden of demonstrating the existence of that jurisdiction. Gundle Lining Const. Corp., v. Adams County Asphalt, Inc., 85 F.3d 201, 204 (5th Cir. 1996). "When a court rules on this issue without a full evidentiary hearing, plaintiffs need only make a prima facie showing of jurisdiction." Planet Beach Franchising Corp. v. C3ubit, Inc., 2002 WL 1870007, *1 (E.D. La.) (citing Wilson v. Belin, 20 F.3d 644, 648 (5th Cir. 1994)). In doing so, "the Court must accept as true all uncontroverted allegations in plaintiffs' complaint and resolve any factual disputes in their favor." Id. (citing Latshaw v. Johnson, 167 F.3d 208, 211 (5th Cir. 1999).
1. Specific Jurisdiction
To exercise specific jurisdiction over a nonresident defendant, the claim asserted against the defendant must arise out of or directly relate to his contacts with the forum state. See Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414, 104 S.Ct. 1868, 1872 (1984). As stated earlier, in determining whether the defendant has purposely availed himself of the forum state's benefits and protections, the proper focus here is on the "relationship among the defendant, the forum, and the litigation." See, e.g., We're Talking Mardi Gras, LLC, 192 F. Supp. 2d at 637 (quotation omitted).
In support of its motion to dismiss, Gallop has attached the affidavit of John. T. Walsh, a member in the Gallop law firm who has handled all or nearly all of the litigation generated by MegsINet since it became a client of Gallop. See Aff. of J. Walsh at ¶ 2. In his affidavit, Mr. Walsh states that Gallop is a limited liability company organized under the laws of Missouri and that its office is located in St. Louis, Missouri. Id. at ¶ 7. Mr. Walsh further states that "[n]o portion of the merger of MegsINet and Corecomm took place within the State of Louisiana and had anything to do with the State of Louisiana." Id. at ¶ 8. Furthermore, all work performed by Gallop in connection with the merger took place in Missouri, and its communications regarding the merger were directed to MegsINet executives at their Missouri and Illinois offices. Id. at ¶ 9.
In his Opposition, plaintiff argues that Mr. Walsh's affidavit contains false statements. In presenting that argument, however, plaintiff relies solely on certain information relevant to MegsINet, the law firm's client, and its contacts with the State of Louisiana. Having reviewed plaintiff's exhibits to his Opposition, the Court finds that plaintiff has provided no evidence which would tend to indicate that any of the statements to which Mr. Walsh attested are false.
While the Court finds that the above uncontested facts alone are sufficient to defeat jurisdiction, what is most telling, though, are the factual allegations found in plaintiff's Complaint. "All of the merger work was performed by `the law firm' in Missouri." Pl.'s Compl. at ¶ 46. "All documents related to the merger were received by `the law firm' at MegsInet Inc.'s office in Missouri." Id. at ¶ 47. "The actual vote and merger documents transfer and signing occurred in Missouri." Id. at ¶ 48. "All invoices of `the law firm' were sent to MegsINet Inc.'s accounting office in Missouri." Id. at ¶ 49. "All payments for services to `the law firm' were paid from MegsINet Inc.'s corporate operating accounts drawn off of Missouri bank accounts." Id. at ¶ 50. "All payments on behalf of the shareholders were paid to the firm from Missouri based merger escrow accounts." Id. at ¶ 51. Finally, plaintiff alleges that "Missouri law is clearly the only choice of law relevant to this case." Id. at ¶ 52. Given the above factual allegations made by plaintiff, the Court agrees with defendant that "the merger transaction that is the subject of Henry's suit has no connection of any sort to Louisiana." Def.'s Mem., p. 5.
Nevertheless, despite having made the above factual allegations, plaintiff counters that specific jurisdiction exists here, citing certain activities and contacts of MegsINet relative to the State of Louisiana. Plaintiff essentially argues the assertion of personal jurisdiction over Gallop is proper as the law firm had "full knowledge at the time they represented MegsINet Inc. and its subsidiaries that it conducted business in the State of Louisiana and had facilities and customers in the State of Louisiana." Pl.'s Opp'n., p. 5.
Plaintiff's position does not withstand scrutiny. This is so because the focus here is on Gallop's contacts with the forum, and not on the third party MegsINet's contacts with the forum. See Cudzik v. Ramada Resort Hotel, Inc., 1991 WL 81825 (E.D.La. May 3, 1991) (citing Kulko v. Superior Court of California, 436 U.S. 84, 93-94, 98 S.Ct. 1690, 1697-98 (1987) (the "minimum contacts" prong of the due process analysis requires that "it must be the purposeful acts of the defendant (and not of [the] plaintiff or anyone else) that result in the contact with the forum state."). In addition, plaintiff cites no legal authority supporting the assertion of personal jurisdiction over a nonresident defendant based solely on its client's contacts with the forum state, and this Court is aware of none. In fact, at least two federal district courts have addressed the same argument and have found personal jurisdiction on that basis to be lacking.
In deciding the two cases cited infra, the district courts addressed only the first prong, i.e., whether the exercise of jurisdiction was proper under the long-arm clause of the forum state, and not whether such jurisdiction would withstand scrutiny given the due process requirements. Nevertheless, the Court finds the reasoning employed by both courts to be instructive.
In Village Lane Rentals, LLC v. The Capital Financial Group, 159 F.Supp.2d 910 (W.D.Va. 2001), a group of Virginia investors sued brokers who arranged plaintiffs' investments with a California real estate partnership, alleging that the brokers submitted false and misleading information to plaintiffs in violation of federal and state securities law. The defendant brokers subsequently filed a third-party complaint against the California partnership and a California law firm engaged by the partnership to assist in the preparation of the Offering Memorandum and to provide legal representation in connection with the sale of the partnership's assets. The law firm moved to dismiss for lack of personal jurisdiction. The Court agreed and dismissed the claims asserted against the law firm, reasoning that the nonresident law firm could not be subjected to personal jurisdiction in Virginia "through the actions of a third party, namely, its client." 159 F.Supp.2d at 916. The Court further reasoned that:
[the law firm] took actions to permit its client, not the firm itself, to sell interests in Virginia. While the legal services provided by a law firm may facilitate its client's business activities in another state, those activities should not be attributed to the law firm for purposes of personal jurisdiction, particularly where the law firm's specific connections to a state are as attenuated as those of the [firm] were to Virginia in this case.Id. at 917.
Similarly, in National Union Fire Insurance Company v. Mason, Perry Kanovsky, 689 F.Supp. 303, 307 (S.D.N.Y. 1988), the Court rejected the argument that personal jurisdiction could be asserted over non-resident attorneys based on their client's contacts with the forum state, ruling that "[a]lthough the legal services provided by a law firm may facilitate the client's business activities in another state, those activities are not attributable to the law firm for the purposes of personal jurisdiction where federal jurisdiction is predicated on diversity of citizenship."
Likewise, under these circumstances where the defendant law firm's connections to the State of Louisiana are so attenuated, this Court finds that the Louisiana contacts of MegsINet simply provide no ground for the assertion of personal jurisdiction over Gallop. While the record is replete with evidence supporting the lack of jurisdiction over the nonresident defendant Gallop, plaintiff, in turn, has presented only baseless arguments supporting his position that the legal malpractice claim arises out of any purposeful contact between Gallop and the State of Louisiana. Accordingly, the Court finds that plaintiff simply has failed to satisfy his burden of making a prima facie showing of specific jurisdiction over Gallop.
2. General Jurisdiction
"Unlike the specific jurisdiction analysis, which focuses on the cause of action, the defendant and the forum, a general jurisdiction inquiry is dispute blind." We're Talkin' Mardi Gras, LLC, 192 F.Supp.2d at 641. Rather, "[t]he sole focus is on whether there are `continuous and systematic' contacts between the defendant and the forum." Id. (quoting Helicopteros, 466 U.S. at 414). "Due process requires that `continuous and systematic' contacts exist between the State and the defendant to exercise personal jurisdiction because the forum state does not have an interest in the cause of action." Id. (quoting Helicopteros, 466 U.S. at 414).
In this case, the undisputed facts indicate that Gallop has not had continuous and systematic contacts with the State of Louisiana. For example, Gallop does not regularly practice in the State of Louisiana; the firm does not maintain a regular place of business in the State; and it has no registered agent for service of process in Louisiana. Aff. of J. Walsh at ¶ 11. The law firm has no mailing address or phone number within the State of Louisiana. Id. "[Gallop] does not hire employees in Louisiana, nor does it employ persons living or working in the State of Louisiana." Id. "[Gallop] does not market or advertise its services to persons or entities in Louisiana, and it has never owned or leased real or personal property within Louisiana." Id. Additionally, from time to time, Louisiana businesses hire Gallop to represent them in matters in Missouri and Illinois. Id. at ¶ 12. While the firm's client have been sued in Louisiana courts on rare occasions, Gallop has restricted its contacts with Louisiana by retaining local counsel to defend those actions. Id. Finally, Gallop derives a nominal amount (not more than one percent) of its revenue from cases in Louisiana or clients residing in Louisiana. Id. at 13.
In light of these facts, the Court cannot find that the contacts between the defendant law firm and the State of Louisiana were continuous and systematic. Accordingly, the exercise of general jurisdiction would not be proper.
B. Venue
Because the Court finds that it does not have jurisdiction over Gallow, it is unnecessary to discuss the propriety of the venue selected by plaintiff. Nevertheless, had the Court found that it had personal jurisdiction over Gallow, the action would have been subject to dismissal as the Eastern District of Louisiana is not the proper forum for the reasons set forth in defendant's memorandum in support of its motion to dismiss.
III. CONCLUSION
For the foregoing reasons, IT IS ORDERED that defendant's Motion to Dismiss for Lack of Personal Jurisdiction is GRANTED.