Opinion
NO. 2019-CA-000073-MR
05-01-2020
Kevin L. MURPHY ; J. Jeffrey Landen ; Michael S. Jones; and Murphy Landen Jones PLLC, Appellants v. FRONTIER PROFESSIONAL BASEBALL, INC.; Washington Frontier League Baseball, LLC; and Stuart Williams, Appellees
BRIEFS FOR APPELLANTS: Gerald F. Dusing, Stacey L. Graus, Covington, Kentucky. BRIEF FOR APPELLEES: David A. Eberly, pro hac vice, Robert A. McMahon, Cincinnati, Ohio, Andrew McNeil, pro hac vice, Indianapolis, Indiana, Heather Hawkins, Cincinnati, Ohio.
BRIEFS FOR APPELLANTS: Gerald F. Dusing, Stacey L. Graus, Covington, Kentucky.
BRIEF FOR APPELLEES: David A. Eberly, pro hac vice, Robert A. McMahon, Cincinnati, Ohio, Andrew McNeil, pro hac vice, Indianapolis, Indiana, Heather Hawkins, Cincinnati, Ohio.
BEFORE: CLAYTON, CHIEF JUDGE; CALDWELL AND COMBS, JUDGES.
OPINION
CLAYTON, CHIEF JUDGE:
Kevin L. Murphy, J. Jeffrey Landen, Michael S. Jones, and Murphy Landen Jones PLLC appeal from two orders of the Boone Circuit Court. The circuit court granted motions to dismiss brought by Washington Frontier League Baseball, LLC, and Stuart Williams, and a motion to dismiss/motion for summary judgment brought by Frontier Professional Baseball Inc. The controversy involving these parties arose out of litigation in federal court in Indiana. At issue is whether the circuit court correctly determined that exercising personal jurisdiction over two of the appellees violated federal due process standards and erred in dismissing the appellants’ claims relating to a motion for sanctions and the assignment of malpractice claims in the Indiana litigation. Having reviewed the record, the applicable law, and the arguments of the parties, we affirm.
Kevin Murphy, J. Jeffrey Landen, and Michael S. Jones are partners in the law firm Murphy Landen Jones PLLC (henceforth collectively "Murphy"), located in Fort Mitchell, Kentucky. Frontier Professional Baseball, Inc. (henceforth "the League") is a nonprofit Ohio corporation which operates a baseball minor league in Kentucky, Ohio, Pennsylvania, Michigan, Indiana, and Illinois. Washington Frontier League Baseball, LLC (henceforth "Washington") is a Pennsylvania limited liability company which is a member of the League. Washington is owned and operated by Stuart Williams (henceforth "Williams"), a Pennsylvania resident and attorney.
Murphy was retained by the League to represent it as a nominal defendant in a derivative lawsuit filed by Washington and Williams in the federal district court for the Southern District of Indiana. At some point in the Indiana litigation, Murphy discussed a potential settlement between the League (its client) and the plaintiffs. According to Murphy, Washington and Williams, through their counsel, threatened to file motions for sanctions against Murphy and referred to a malpractice suit being brought against Murphy by the League.
Subsequently, the League, Washington, and Williams entered into a settlement agreement amongst themselves without the participation or involvement of Murphy. Murphy withdrew as counsel for the League after the federal court in Indiana approved the settlement. On July 6, 2018, Williams and Washington, on their own and derivatively on behalf of the League, filed a motion for sanctions against Murphy in the Indiana litigation.
Murphy simultaneously filed a complaint in Boone Circuit Court against the League, Washington, and Williams, alleging that the League failed to pay for legal services performed by Murphy. The complaint also sought a declaration of rights regarding the nature and scope of the League's and Washington's access to records of Murphy's legal representation of the League, and a declaration of rights regarding the validity and enforceability of the assignment of rights to direct or assert malpractice claims against Murphy. Finally, the complaint raised claims of tortious interference by Williams and Washington in the business relationship between the League and Murphy, and conspiracy among the League, Williams, and Washington to pursue legal malpractice claims against Murphy.
The League, Washington, and Williams filed motions to dismiss in the Boone Circuit Court action. The League also filed a motion for summary judgment on Murphy's claim for unpaid legal fees. The circuit court granted the motions in two orders entered on December 10, 2018. Murphy filed an appeal from these orders on January 9, 2019. On January 18, 2019, Murphy filed a motion in the circuit court for relief from judgment pursuant to Kentucky Rules of Civil Procedure (CR) 60.02 and requested the court to reinstate several counts of the complaint. The appeal was held in abeyance while the motion was pending. On February 26, 2019, the circuit court entered an order denying the CR 60.02 motion, and the appeal was returned to this Court's active docket. The appellants did not file a notice of appeal from the denial of the CR 60.02 motion.
On appeal, Murphy challenges (1) the circuit court's dismissal of the claims against Washington and Williams based on its determination that the exercise of personal jurisdiction over these parties does not comport with federal standards of due process; and (2) the circuit court's dismissal of claims against the League relating to the division of proceeds from a motion for sanctions and the assignment of any proceeds from a malpractice action against Murphy.
Under CR 12.02(b), a defendant may seek the dismissal of claims for "lack of jurisdiction over the person[.]" To determine whether personal jurisdiction over a nonresident defendant exists, the court must perform a two-step analysis:
First, review must proceed under KRS[ ] 454.210 [Kentucky's long-arm statute] to determine if the cause of action arises from conduct or activity of the defendant that fits into one of the statute's enumerated categories. If not, then in personam jurisdiction may not be exercised. When that initial step results in a determination that the statute is applicable, a second step of analysis must be taken to determine if exercising personal jurisdiction over the non-resident defendant
Kentucky Revised Statutes.
offends his federal due process rights.
Caesars Riverboat Casino, LLC v. Beach , 336 S.W.3d 51, 57 (Ky. 2011).
In assessing whether it could exercise personal jurisdiction over Washington and Williams under the long-arm statute, the circuit court noted that Washington is a Pennsylvania limited liability company that owns a baseball team which is a member of the League. Through its affiliation with the League, the team plays a limited number of games in Kentucky each year—for example, three in 2018. Williams, who operates Washington, is a Pennsylvania resident and attorney licensed to practice law in Pennsylvania and New York. On the basis of these facts, the circuit court found it had personal jurisdiction over Washington and Williams pursuant to KRS 454.210(1) and (2), because they transacted business in Kentucky and contracted to supply services in Kentucky.
The circuit court further found, however, that exercising personal jurisdiction over Washington and Williams would violate their federal due process rights. To determine whether the exercise of personal jurisdiction comports with federal due process standards, Kentucky courts use a three-part test originally set forth in Southern Machine Co. v. Mohasco Industries, Inc. , 401 F.2d 374 (6th Cir. 1968). See Hinners v. Robey , 336 S.W.3d 891, 898 (Ky. 2011). "The first prong of the test asks whether the defendant purposefully availed himself of the privilege of acting within the forum state or causing a consequence in the forum state. The second prong considers whether the cause of action arises from the alleged instate activities [or consequence.] The final prong requires such connections to the state as to make jurisdiction reasonable." Id. (footnote omitted) (quoting Mohasco , 401 F.2d at 381 ). This tripartite analysis fulfills the requirement "that in order to subject a defendant to a judgment in personam , if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.’ " Id. at 897 (quoting International Shoe Co. v. State of Washington, Office of Unemployment Compensation and Placement , 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945) ).
The circuit court found that Washington and Williams met the first prong of the Mohasco test by purposefully availing themselves of the privilege of acting within the forum state for the same reasons they were subject to personal jurisdiction under KRS 454.210, i.e. , they transacted business in Kentucky and arranged for baseball games to be played in Kentucky. The court found the second prong was not met, however, because other than Washington's and Williams's participation in depositions in the Indiana litigation at Murphy's offices in Fort Mitchell, Kentucky, the cause of action arose from the litigation in federal court in Indiana. The circuit court further found that the third Mohasco prong was not met because neither the activities of Washington and Williams, nor the consequences of those activities, had a substantial enough connection with Kentucky to make jurisdiction reasonable.
Murphy insists that the causes of action asserted in the complaint did arise from Washington's and Williams's activities in Kentucky. In addition to Washington and Williams traveling to Murphy's Kentucky offices to conduct two depositions as part of the Indiana litigation, as acknowledged by the circuit court, Murphy argues that Washington's status as a member of the League is another basis for satisfying the second Mohasco prong. Murphy argues that its claims against Washington and Williams would not have been possible but for Washington's status as a member of the League, because the claims arise from Washington's and Williams's conduct in settling the derivative litigation that Washington brought on behalf of the League, in its capacity as a League member.
In order to satisfy the "arising from" prong of Mohasco , "the plaintiff must demonstrate a causal nexus between the defendant's contacts with the forum state and the plaintiff's alleged cause of action.... [T]he cause of action must ... have a substantial connection with the defendant's in-state activities." Beydoun v. Wataniya Restaurants Holding, Q.S.C. , 768 F.3d 499, 506-07 (6th Cir. 2014) (internal quotation marks and citations omitted).
Murphy has not shown an adequate causal nexus between Washington's and Williams's contacts with Kentucky and Murphy's causes of action. Murphy's complaint essentially alleges collusion and conspiracy among the League, Washington, and Williams arising from the lawsuit in federal court in Indiana; the allegations of the complaint do not arise from specific events occurring in Kentucky. Murphy's claims for malfeasance against Washington and Williams arise out of their conduct in the Indiana litigation. Murphy has not provided any details regarding the underlying Indiana litigation, from which we must conclude it has no significant connection with Kentucky whatsoever.
As to the circuit court's conclusion that the activities of Washington and Williams, or the consequences caused by those activities, did not have a substantial enough connection with Kentucky to make jurisdiction reasonable under the third Mohasco prong, Murphy argues that if the first two Mohasco factors are present, then there is a strong inference the final factor is also met. Murphy contends that Kentucky has a substantial interest in adjudicating this dispute because it involves significant harm inflicted on Kentucky attorneys and implicates Kentucky's strong interest in ensuring that Kentucky law relating to the validity and enforceability of assignment of claims is interpreted and applied fairly and consistently. By contrast, Murphy insists, the interests of other states in resolving this conflict are minimal: Washington and Williams are Pennsylvania residents, the Frontier League is an Ohio corporation, and none of the parties resides in Indiana. Murphy claims the "fact pattern" underlying this case occurred in Kentucky but does not further elaborate.
The circuit court did not deny that Washington and Williams had some business connections to Kentucky. Indeed, it found these connections sufficient to exercise personal jurisdiction, but it concluded that the exercise of that jurisdiction did not comport with notions of fair play because the claims against them arose out of their handling of the litigation in Indiana federal court. We agree. As the appellees have argued, Williams's and Washington's allegedly tortious act was negotiating directly with the League, an Ohio corporation with a principal place of business in Illinois, to settle litigation in Indiana. In their motion for sanctions against Murphy, Washington and Williams sought damages for the time they spent conducting depositions in Kentucky, but the depositions were conducted as part of the Indiana litigation. Washington's activities in Kentucky, which are limited to its baseball team playing in Kentucky a few times per year, bear no relation to the tort claims asserted by Murphy. Simply put, Murphy's claims against Washington and Williams arose out of the conduct of the Indiana litigation. The circuit court correctly determined that the exercise of personal jurisdiction over these defendants did not comport with federal due process standards. Washington and Williams argue the circuit court erred in finding it had personal jurisdiction over them. Because we agree with the circuit court that the exercise of personal jurisdiction over these parties would violate federal standards of due process, this argument regarding personal jurisdiction is moot and need not be addressed here.
Murphy further argues that the circuit court erred in granting the League's motion to dismiss. The circuit court agreed that there was a controversy between Murphy and the League but stated that insofar as it related to the motion for sanctions against Murphy, it should be addressed in the court in which the motion was filed – the district court for the Southern District of Indiana. The court further stated that it was premature to address the assignment of malpractice claims by the League to Washington and Williams because no malpractice claim had been filed by the League at that time.
Murphy claims that there was an unlawful and voidable agreement amongst the appellees to share any proceeds resulting from the motion for sanctions and material steps had been taken in furtherance of that agreement, such as the League's providing documents from Murphy's Indiana litigation file to Washington and Williams. Elsewhere in its brief, however, Murphy states that the motion for sanctions was denied in its entirety. Appellants’ Brief, p. 4, footnote 1. Consequently, Murphy's arguments regarding the assignment of the proceeds of the motion for sanctions have, by its own admission, been rendered moot.
As for its seeking a declaration of rights regarding the assignment of malpractice claims, Murphy argues that the court erred in dismissing it on the grounds it was premature because the allegedly unlawful assignment agreement had been created and put into effect well before the circuit court's ruling. As evidence for this, Murphy points to the fact the League filed a malpractice suit against Murphy. The suit was filed in state commercial court in Indiana. Murphy filed a motion for summary judgment in that action, arguing that the settlement agreement was unlawful and should bar recovery. The Indiana commercial court denied the motion in an order entered on August 5, 2019.
The appellees have asked us to take judicial notice of the order, which they attached to their brief. Murphy does not appear to object, as the order was entered after the filing of the appellants’ brief in this case but is addressed by Murphy in its reply brief. Murphy argues it expressly informed the Indiana court that it was not, at that time, seeking a determination of whether the assignment should be invalidated, and instead affirmatively stated that the issue currently before it was whether the League was the real party in interest in the Indiana case. By contrast, Murphy claims it was seeking from the Boone Circuit Court a determination as to whether the League's assignment of the right to direct and assert legal malpractice claims or other claims against Murphy to Washington and Williams was invalid, unenforceable, or both. "Piecemeal litigation and splitting of causes of actions are highly disfavored. See Whittaker v. Cecil , 69 S.W.3d 69, 72 (Ky. 2002)." Arnold v. Patterson , 229 S.W.3d 923, 925 (Ky. App. 2007). The Indiana commercial court's order indicates its familiarity with the complex factual and legal issues of the underlying litigation. We fail to see how pursuing these claims separately in two different courts can possibly further judicial efficiency or attain consistency of results. For the foregoing reasons, the Boone Circuit Court's orders of December 10, 2018, granting the League's motion to dismiss/motion for summary judgment and Washington's and Williams's motions to dismiss are affirmed.
ALL CONCUR.