Opinion
No. 1:18-cv-483
2019-09-23
MARINE COLLECTIONS AND RECOVERY, LLC, Plaintiff, Counter-Defendant, v. M/Y YEMAYA, in rem, and Andrea Crossman, Defendants, Counter-Plaintiffs, Third-Party Plaintiffs, v. The Fiberglass Shop of Ft. Lauderdale Corp., Third-Party Defendant.
George Williams G. Furtado, Stephen Jay Hulst, Rhoades McKee P.C., Grand Rapids, MI, for Defendants, Counter-Plaintiffs, Third-Party Plaintiffs. Christopher James Zdarsky, Jeffrey D. Smith, Honigman Miller Schwartz and Cohn LLP, Kalamazoo, MI, for Plaintiff, Counter-Defendant.
George Williams G. Furtado, Stephen Jay Hulst, Rhoades McKee P.C., Grand Rapids, MI, for Defendants, Counter-Plaintiffs, Third-Party Plaintiffs.
Christopher James Zdarsky, Jeffrey D. Smith, Honigman Miller Schwartz and Cohn LLP, Kalamazoo, MI, for Plaintiff, Counter-Defendant.
OPINION AND ORDER GRANTING MOTION TO DISMISS
Paul L. Maloney, United States District Judge This lawsuit started as a maritime lien foreclosure action against Andrea Crossman and her boat, M/Y Yemaya. Third-party defendant the Fiberglass Shop sold its rights to a maritime necessaries lien to Plaintiff Marine Collections and Recovery who then sued the boat and its owner. Defendants, Crossman and the boat, filed a counterclaim against Marine Collections and a third-party complaint against the Fiberglass Shop. When the Fiberglass Shop did not timely respond to the third-party complaint, it was defaulted. The Fiberglass Shop filed a motion to dismiss for lack of personal jurisdiction or, alternatively, to set aside entry of default. Because the Court finds no basis for exercising jurisdiction over the Florida company, the motion to dismiss will be granted.
The Fiberglass Shop of Fort Lauderdale voluntarily dissolved on December 13, 2017. (ECF No. 48-6 PageID.541.)
I.
The Fiberglass Shop filed a motion under Rule 12(b)(2) asserting that there exists no basis for this Court to exercise personal jurisdiction over it. The Fiberglass Shop argues it was a Florida-based company with no ties to Michigan.
The entry of default does not prevent the Court from considering the motion to dismiss. Defects in personal jurisdiction are not waived by a default when the party fails to appear or otherwise respond. Reynolds v. Int'l Amateur Athletic Fed. , 23 F.3d 1110, 1120 (6th Cir. 1994) (citations omitted). And, the Fiberglass Shop's request to set aside the default in the alternative does not constitute a waiver of the personal jurisdiction defense. See Gerber v. Riordan , 649 F.3d 514, 520 (6th Cir. 2011).
A motion under Fed. R. Civ. P. 12(b)(2) challenges the exercise of personal jurisdiction over the moving party. The plaintiff bears the burden of establishing personal jurisdiction. Air Prods. and Controls, Inc. v. Safetech Int'l, Inc. , 503 F.3d 544, 549 (6th Cir. 2007) (citing Serras v. First Tennessee Bank Nat'l Ass'n , 875 F.2d 1212, 1214 (6th Cir. 1989) ); Theunissen v. Matthews , 935 F.2d 1454, 1458 (6th Cir. 1991). Trial courts may decide a 12(b)(2) motion before trial "on the basis of affidavits alone; or it may permit discovery in aid of the motion; or it may conduct an evidentiary hearing on the motion." Serras , 875 F.2d at 1214 (citation omittedWhere the court resolves the motion without holding an evidentiary hearing, the burden on the plaintiff is "relatively slight." MAG IAS Holdings v. Schmückle , 854 F.3d 894, 899 (6th Cir. 2017) (quoting Air Prods. , 503 F.3d at 549 ).
When the court decides the motion on these written submissions, it "must consider the pleadings and affidavits in the light most favorable to the plaintiff." Serras , 875 F.2d at 1214 (quoting Welsh v. Gibbs , 631 F.2d 436, 439 (6th Cir. 1980) ). "[T]he plaintiff may not stand on his pleadings, but must, by affidavit or otherwise, set forth specific facts showing that the court has jurisdiction." Theunissen , 935 F.2d at 1458 (citing Weller v. Cromwell Oil Co. , 504 F.2d 927, 930 (6th Cir. 1974) ). "In sharp contrast to summary judgment procedure, however, the court disposing of a 12(b)(2) motion does not weigh the controverting assertions of the party seeking dismissal." Id. at 1459 (citing Serras , 875 F.2d at 1214 ). By not considering the moving party's controverting assertions, non-resident defendants are prevented from "regularly avoiding personal jurisdiction simply by filing an affidavit denying all jurisdictional facts." Id.
II.
Federal courts relying on diversity jurisdiction must apply the law of the forum state to determine whether it may exercise personal jurisdiction over a defendant. Miller v. AXA Winterthur Ins. Co. , 694 F.3d 675, 678 (6th Cir. 2012). Personal jurisdiction can be established either generally or specifically. See Neogen Corp. v. Neo Gen Screening, Inc. , 282 F.3d 883, 888 (6th Cir. 2002). Courts, however, may not exercise personal jurisdiction unless the requirements of constitutional due process are met. Air Prods. , 503 F.3d at 550 ; Neogen Corp. , 282 F.3d at 889.
A. General Jurisdiction
The exercise of general and limited jurisdiction is governed by statute. Michigan provides for general jurisdiction over a corporation under any of three conditions: (1) incorporation in Michigan, (2) consent, and (3) carrying on of a continuous and systematic part of its business in the state. Mich. Comp. Laws § 600.711.
Defendants rely on the consent provision of the general jurisdiction statute. The Fiberglass Shop is not a Michigan corporation. Defendants have not argued that the Fiberglass Shop conducted continuous and systematic business in Michigan. Defendants argue the Fiberglass Shop consented to personal jurisdiction in Michigan through the assignment of the debt to Marine Collections. The Assignment defines "assignors" as "the Fiberglass Shop of Fort Lauderdale, Corp., Richard H. Loman and Susan Loman." (ECF No. 1-2 Assignment PageID.21.) Paragraph 9 of the Assignment provides
9. Assignors warrant and represent that they will fully cooperate with Assignee in litigating against M/Y "Yemaya " and Andrea Crossman. Assignors will appear at depositions and trial to provide testimony in the Assignee's suit against the Owner, Andrea Crossman, and the Vessel.
(Id. PageID.22.)
Defendants have not established that the Fiberglass Shop consented to be sued in Michigan. The Assignment does not mention Michigan. The Fiberglass Shop's obligation to appear at trial is contractually enforceable only by Marine Collections, not by Defendants. At this point in the litigation, the Fiberglass Shop and the Lomans have not appeared in Michigan and might never appear in Michigan. Defendants' authority does not require a different conclusion. An agreement to provide testimony should a trial occur is not the legal equivalent of a forum selection clause. See Burger King Corp. v. Rudzewicz , 471 U.S. 462, 473 n.14, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985) ; Ins. Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee , 456 U.S. 694, 704, 102 S.Ct. 2099, 72 L.Ed.2d 492 (1982). Defendants have not offered any authority suggesting that a forum selection clause for Michigan in a contract between two parties constitutes consent for the purpose of general personal jurisdiction in Michigan by a lawsuit brought by a third party. See, e.g. , Kernel Records Oy v. Mosley , No. 09-21597, 2010 WL 2812565, at *10 (S.D. Fla. July 5, 2010) (involving a music copyright infringement claim and a licensing agreement between two defendants, the plaintiff was not a third-party beneficiary to the licensing agreement and could not establish personal jurisdiction over the first defendant because the first defendant agreed to jurisdiction in any court in the event it was sued by the second defendant). Counsel for the Fiberglass Shop did not waive a personal jurisdiction defense by filing an appearance in this lawsuit. Using the Court's electronic docket, two attorneys entered appearances for the Fiberglass Shop at 4:26 and 4:27 p.m. on November 19, 2018. This motion to dismiss was filed at 4:29 p.m. the same day. Rule 12(b) requires challenges to personal jurisdiction to be raised by motion "before pleading if a responsive pleading is allowed." Fed. R. Civ. P. 12(b). Rule 12(h) provides that the personal jurisdiction defense in Rule 12(b)(2) is waived if the defense is not made by a Rule 12 motion or in a responsive pleading or in an amendment allowed by Rule 15(a)(1). Fed. R. Civ. P. 12(h)(2). This motion to dismiss was the very first document filed by the Fiberglass Shop in this lawsuit and, therefore, the defense was not waived under Rule 12(h). The motion raising the defense was literally within minutes of counsel entering an appearance through the Court's electronic case management system. The non-document appearances did not give Defendants any reasonable expectation that the Fiberglass Shop would be defending the third-party claim against it on the merits. See Gerber , 649 F.3d at 519.
B.
Finding no basis for general personal jurisdiction, Defendants must rely on specific or limited personal jurisdiction. Michigan's limited jurisdiction statute, the long-arm statute, identifies five actions which would subject a corporation to jurisdiction in Michigan courts: (1) transacting any business in the state; (2) doing or causing an act or consequences to occur in the state resulting in an action for tort; (3) owning or possessing real or tangible personal property situated in the state; (4) contracting to insure a person, property or risk located within the state at the time of contracting; and (5) entering into a contract for services to be performed or for materials to be furnished within the state by the defendant. Mich. Comp. Laws § 600.715.
For the purpose of the this motion, the Court assumes Defendants have established that the Fiberglass Shop performed an act covered by Michigan's long-arm statute. Andrea Crossman states, in an affidavit, that Loman and another agent of the Fiberglass Shop, "on behalf of the Fiberglass Shop, regularly emailed me in Michigan, texted me in Michigan, sent me invoices in Michigan, offered to come to Michigan, and otherwise regularly communicated with me in Michigan regarding the Boat." (ECF No. 48-4 Crossman Aff. ¶ 7 PageID.536.) The threshold for "transacting any business" is met by "the slightest act of business in Michigan." Neogen Corp. , 282 F.3d at 888 (quoting Lanier v. American Bd. of Endodontics , 843 F.2d 901, 906 (6th Cir. 1988) ). The Court is not aware of any authority attempting to define the word "transacting" in the long-arm statute. Under the low threshold or the long-arm statute, and the low threshold for showing a prima facie case for personal jurisdiction, the Court will assume that sending the invoices to Michigan for work completed in Florida falls under the statute. See, e.g. , Lanier , 843 F.2d at 907-08 (finding that phone calls and mailings but no physical presence can satisfy the transacting any business provision of Michigan's long arm statute).
Although Michigan's long arm statute is "coextensive with due process," Green v. Wilson , 455 Mich. 342, 565 N.W.2d 813, 816 (1997), even when a court finds that the defendant's act falls under the statute, the court must also conduct a due process analysis, id. at 816-17. See Neogen Corp. , 282 F.3d at 889. "[S]ituations may arise where the long-arm statute permits greater jurisdiction than does the constitution." Green , 565 N.W.2d at 815.
To satisfy constitutional due process, a plaintiff must show the defendant has sufficient "minimum contacts" with Michigan that exercising personal jurisdiction "would not offend ‘traditional notions of fair play and substantial justice.’ " Neogen Corp. , 282 F.3d at 889 (citation omitted). The "constitutional touchstone" for personal jurisdiction is "purposeful availment." Id. As explained by the Supreme Court,
This "purposeful availment" requirement ensures a defendant will not be haled into a jurisdiction solely as a result of "random," "fortuitous," or "attenuated" contacts, or of the "unilateral activity of another party or a third person[.]" 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 a defendant "deliberately" has engaged in significant activities within a State, or has created "continuing obligations" between himself and residents of the forum, he manifestly 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 Corp. , 471 U.S. at 475-76, 105 S.Ct. 2174 (italics in original) (internal citations omitted). The minimum contacts analysis requires courts to consider the contacts with the forum state created by the defendant and not just the defendant's contacts with persons in the forum state. Walden v. Fiore , 571 U.S. 277, 284-85, 134 S.Ct. 1115, 188 L.Ed.2d 12 (2014). "[T]he plaintiff cannot be the only link between the defendant and the forum." Id.
Defendants have not established that the exercise of personal jurisdiction under the facts here will satisfy constitutional due process. Defendants have not established that the Fiberglass Shop purposefully availed itself of the privilege of doing business in Michigan or causing a consequence in Michigan. The Fiberglass Shop was incorporated in Florida. Defendants have not alleged or established that the Fiberglass Shop has had any contacts with Michigan other than its contacts with Crossman. The Court infers from the allegations in the counterclaim and third-party complaint, Crossman approached the Fiberglass Shop to perform the repairs; the Fiberglass Shop did not solicit Crossman. (ECF No. 12 Counterclaim ¶ 11 PageID.70.)
Defendants have not established that the cause of action against the Fiberglass Shop arises from the Fiberglass Shop's activities in Michigan. The work on the boat occurred in Florida, not Michigan. The Fiberglass Shop's contact with Michigan are random and fortuitous based entirely on the fact that Crossman was located in Michigan. Had Crossman been located in any other state, the Fiberglass Shop would have no contacts whatsoever with Michigan. The contract to repair the boat appears to be a one-time agreement and was not created by the Fiberglass Shop with the anticipation of obtaining more business with Michigan residents. Accordingly, the Fiberglass Shop itself did not deliberately create any contacts, let alone substantial contacts, with Michigan. Under these circumstances, exercising personal jurisdiction over the Fiberglass Shop would not be reasonable.
Defendants devote a substantial portion of their response brief insisting the repairs on the boat were incomplete, inadequate and unauthorized and that the sale of assignment of the maritime lien and subsequent dissolution of the Fiberglass Shop constitute fraud. If true, Defendants would likely have a cause of action against the Fiberglass Shop that could be brought in a Florida court. But, the claims against the Fiberglass Shop cannot be made part of this lawsuit without some basis for exercising personal jurisdiction over the Fiberglass Shop.
III.
Exercising personal jurisdiction over the Fiberglass Shop would violate constitutional due process. Simply put, the Fiberglass Shop's contacts contact with Michigan occurred only because Crossman lived in Michigan. But for her residency here, the Fiberglass Shop might never have had contacts with Michigan at all. The emails and phone calls to Crossman in Michigan might satisfy the long-arm statute, but do not satisfy the constitutional requirements to make exercise of personal jurisdiction reasonable. Having concluded that the Court must not exercise personal jurisdiction over the Fiberglass Shop, the Court need not consider whether to set aside the entry of default.
ORDER
For the reasons provided in the accompanying Opinion, the Fiberglass Shop's motion to dismiss (ECF No. 42) is GRANTED. The Fiberglass Shop is DISMISSED from this lawsuit without prejudice. IT IS SO ORDERED.