Opinion
Case No. 1:00-CV-128
June 18, 2001
ORDER
In accordance with an Opinion entered this day,
IT IS HEREBY ORDERED that Defendants Raytheon Company, Raytheon Aircraft Company, and Raytheon Aircraft Services, Inc.'s Motion to Dismiss or Transfer (Dkt. No. 115) is DENIED.
IT IS FURTHER ORDERED that Defendants Raytheon Company and Raytheon Aircraft Company are
DISMISSED without prejudice.
IT IS FURTHER ORDERED that Plaintiff's Request for Costs found in its Brief in Opposition to Defendants Raytheon Company, Raytheon Aircraft Company, and Raytheon Aircraft Services, Inc.'s Motion to Dismiss or Transfer (Dkt. No. 117) are DENIED.
OPINION
This matter is before the Court on Defendants' Raytheon Company ("Raytheon"), Raytheon Aircraft Company ("RAC"), and Raytheon Aircraft Services, Inc. ("RAS") Motion to Dismiss or Transfer. Raytheon claims the Court should dismiss the case pursuant to Federal Rule of Civil Procedure 12(b)(6) because it was not a party to a contract with Plaintiff, nor does it control RAC or RAS to a degree that would warrant a finding of abuse of corporate form. RAC and RAS further claim that the Court does not have personal jurisdiction over either of them and should dismiss the case pursuant to Federal Rule of Civil Procedure 12(b)(2). In the alternative, RAC and RAS request the Court to transfer the venue of this case to the United States District Court for the Southern District of Florida pursuant to 28 U.S.C. § 1404 and the doctrine of forum non conveniens. In addition, Plaintiff requests costs in defending this Motion. The Court denies Defendants' Motion and Plaintiff's request.
Also pending is Defendant Outboard Marine Company's (Outboard) Motion to Dismiss Count III. Outboard has filed for bankruptcy, and all actions against Outboard have been stayed until further notice.
FACTS
Plaintiff purchased a used aircraft in August 1997 from Aero Toy Store, Inc. ("Aero"). Plaintiff alleges that prior to purchasing the aircraft, it contracted with RAC and/or RAS to perform a pre-purchase inspection. The contract to which Plaintiff refers is an invoice from RAS for services performed and was billed to Travel Consultants Aviation ("TCA"), located in Michigan. RAS performed some inspection services for TCA. More than one year after Plaintiff purchased the aircraft, it discovered corrosion during a mandatory 1200 hour/24 month inspection. Plaintiff complains that it relied upon RAC and/or RAS's pre-purchase evaluation, which did not report corrosion.
Plaintiff's Complaint lists two Counts against the Raytheon Defendants. Count IV of Plaintiffs Amended Complaint alleges breach of an express and/or implied contract between Plaintiff and Raytheon, RAC and RAS. Plaintiff's Amended Complaint states that RAS is a wholly-owned subsidiary of Raytheon and/or RAC. The Amended Complaint alleges that a reasonable inspection would have found the corrosion that was revealed a year later during the mandatory evaluation. Plaintiff alleges that Raytheon, RAC and/or RAS breached the contract by failing to report the corrosion. Count V of the Amended Complaint alleges negligent inspection against Raytheon, RAC and/or RAS. Plaintiff alleges that Raytheon, RAC and/or RAS failed to investigate and uncover the corrosion found later.
In its First Amended Complaint, Plaintiff asserts that Raytheon is a Delaware corporation with its principal place of business in Lexington, Massachusetts. Plaintiff asserts that RAC is a Kansas corporation with its principal place of business in Wichita, Kansas. Plaintiff further asserts that RAC has authorized service centers in Michigan. Plaintiff also asserts that RAS, a Kansas corporation with its principal place of business in Kansas, is a wholly-owned subsidiary of RAC.
In addition, Plaintiff asserts that RAS sends maintenance and service teams to Michigan and otherwise conducts regular and systematic business in Michigan.
ANALYSIS
A. The Dismissal of Raytheon and RAC
In October proceedings before the Court, Plaintiff agreed to dismissing Raytheon and RAC without prejudice. The Court has read the transcript of the October hearing and finds that Plaintiff did stipulate to the dismissal of Raytheon and RAC without prejudice.
Thus, this Motion to Dismiss or Transfer deals only with RAS.
B. Does the Court Have Personal Jurisdiction over RAS?
Defendant RAS argues that the Court does not have personal jurisdiction over RAS because it is beyond the reach of Michigan's long-arm statute and exercising personal jurisdiction would violate RAS's due process rights under the Fourteenth Amendment.
1. Standard of Review
The parties do not agree on the standard of review for this issue. RAS claims that Plaintiff must establish personal jurisdiction over RAS by a preponderance of the evidence. Plaintiff claims that it need only make a prima facie showing that jurisdiction is proper.
Generally, a plaintiff must establish jurisdiction over a defendant. See Int'l Techs. Consultants Inc. v. Euroglas S.A., 107 F.3d 386, 391 (6th Cir. 1997) (citing Third Nat'l Bank in Nashville v. WEDGE Group Inc., 882 F.2d 1087, 1089 (6th Cir. 1989); Theunissen v. Matthews, 935 F.2d 1454, 1458 (6th Cir. 1991)). A trial court, at its discretion, may rule on a 12(b)(2) motion on the basis of affidavits alone, or may choose to permit discovery in aid of the motion or conduct an evidentiary hearing on the merits of the motion. See Serras v. First Tennessee Bank Nat'l Assoc., 875 F.2d 1212, 1214 (6th Cir. 1989). If, however, the court has not held an evidentiary hearing to resolve factual questions relating to jurisdiction, a plaintiff need only make a prima facie showing of personal jurisdiction. See Euroglas S.A., 107 F.3d at 391(citing Theunissen, 935 F.2d at 1458). Moreover, a court disposing of a 12(b)(2) motion without an evidentiary hearing does not weigh the controverting assertions of the party seeking dismissal. Theunissen, 935 F.2d at 1459 (citing Serras, 875 F.2d at 1214).
In this case, the Court has not allowed discovery to aid its decision on the Motion to Dismiss for lack of personal jurisdiction. Discovery has occurred within the natural schedule of the case. The Court will look at the discovery materials submitted by the parties to the extent they aid the court. However, because the Court has not held an evidentiary hearing on any facts, Plaintiff need only make a prima facie showing of personal jurisdiction.
2. Did RAS Consent to or Waive Personal Jurisdiction?
Plaintiff argues that RAS consented to personal jurisdiction, thus giving the Court general personal jurisdiction over RAS. Plaintiff also argues that RAS has waived its opportunity to object to personal jurisdiction.
Challenges to personal jurisdiction can be expressly or impliedly waived. See Burger King v. Rudzewicz, 471 U.S. 462, 472 n. 4 (1985). Plaintiff argues that RAS consented to personal jurisdiction. Apparently, in April 2000, Plaintiff's and RAS's counsel discussed the possibility of Plaintiff dismissing one or more Defendants, and RAS consenting to jurisdiction. In addition, RAS's counsel stated to the Court that RAS had not "contested the jurisdiction of [RAS]. However, [RAS] didn't reserve that opportunity in our affirmative defenses."
The Court entered the stipulation to dismiss Raytheon Company and RAC, and Plaintiff dropped its pending and future discovery of jurisdictional matters. Plaintiff also filed its Response to Defendants' Request for Admission, in which it stated that the Court has jurisdiction over RAS. RAS never objected to this. These actions, argues Plaintiff, amount to consent to jurisdiction.
In the alternative, Plaintiff argues that RAS has waived the right to bring a personal jurisdiction defense. Rule 12(h) of the Federal Rules of Civil Procedure states that the defense of lack of personal jurisdiction must be brought in a motion that consolidates defenses, or if it is not made by a motion, included in a responsive pleading. Fed.R.Civ.Pro. 12(h). Although RAS pled that the "Court lacks jurisdiction over the Defendants" as an Affirmative Defense, Plaintiff asserts this was too broad to preserve a personal jurisdiction challenge. Plaintiff further asserts that RAS's failure to seek a judicial ruling on the issue of personal jurisdiction before engaging in substantial discovery, mediation, and negotiation constitutes waiver. See Rauch v. Day Night Manuf, 576 F.2d 697, 700-02 (6th Cir. 1987) (waiver where defendant filed an appearance, motion to dismiss on statute of limitations, and conducted extensive discovery); Hamilton v. Atlas Turner, Inc., 197 F.3d 58, 60 (2d Cir. 1999) (waiver where defendant participated in extensive pretrial proceedings); Cont. Bank, N.A. v. Meyer, 10 F.3d 1293, 1296-97 (7th Cir. 1993) (waiver where defendant complied with Rule 12(h) but actively proceeded with defense); Wyrough Loser, Inc. v. Pelmor Labs, Inc., 376 F.2d 543-547 (3d Cir. 1967) (waiver where defendant participated in adjudication of plaintiff's application for preliminary injunction without first securing determination on jurisdictional challenge).
RAS argues that it only consented to jurisdiction if Raytheon and RAC were dismissed with prejudice. RAS asserts that it did not consent to jurisdiction because Raytheon and RAC were dismissed without prejudice, and it did not waive this defense because it made a general pleading in its Affirmative Defenses that the Court lacked jurisdiction.
The Court is inclined to agree that RAS did not waive its lack of personal jurisdiction defense based on the argument that its pleading was too broad. In its Affirmative Defenses, RAS states that the Court "lacks jurisdiction over the Defendants." The Court reads this to raise a lack of personal jurisdiction defense because it says "over the Defendants." Had RAS objected to the Court's subject matter jurisdiction, it could have stated that "the Court lacks jurisdiction over the subject matter" or something similar. This does not mean, however, that RAS's actions do not constitute waiver. RAS engaged in substantial discovery, Court-ordered mediation, negotiations, and it prepared for a Court-ordered mini-trial. These actions constitute waiver of any personal jurisdiction defenses. Furthermore, RAS's argument that it did not consent to personal jurisdiction if Raytheon and RAC were dismissed without prejudice holds little weight. RAS had an opportunity to object to a dismissal without prejudice when it appeared for a Hearing before the Court but failed to do so.
Based on these facts and relevant case law, it appears that RAS consented to personal jurisdiction and waived the right to raise this defense. Moreover, it appears that RAS is subject to personal jurisdiction in Michigan.
3. Personal Jurisdiction in Michigan
A federal court sitting in diversity may not exercise jurisdiction over a defendant unless courts of the forum state would be authorized to do so by state law, and any such exercise of jurisdiction must be compatible with the due process requirements of the United States Constitution. See CompuServe, Inc. v. Patterson, 89 F.3d 1257, 1262 (6th Cir. 1996); LAK, Inc. v. Deer Creek Enters., 885 F.2d 1293, 1298 (6th Cir. 1989) (citing Southern Machine Co. v. Mohasco Indus., 401 F.2d 374, 376 n. 2 (6th Cir. 1968)).
Michigan Compiled Statutes § 711 addresses general personal jurisdiction for a foreign corporation, and Michigan Compiled Statutes § 715 addresses limited personal jurisdiction, and is commonly referred to at the "long-arm statute."
The Court does not address whether RAS is subject to general personal jurisdiction in Michigan because it finds that RAS is subject to limited personal jurisdiction. Thus, this Opinion should not be construed as making any finding regarding general personal jurisdiction.
RAS, in general, contends that Plaintiff's First Amended Complaint does not allege specific facts to support the proposition that RAS does business in Michigan.
a. Limited Personal Jurisdiction
Section 715 provides a court with limited personal jurisdiction when one of the following relationships exists between a corporation and Michigan: (1) the corporation transacts any business within Michigan; (2) the corporation does or causes to be done, or consequences to occur, in Michigan resulting in a tort action; (3) the corporation owns, uses, or possesses any real or tangible personal property located within Michigan; (4) the corporation contracts to insure any person, property, or risk located within Michigan at the time of contracting; (5) the corporation enters into a contract for services to be performed or for materials to be furnished in the state by the corporation. Mich. Comp. Laws § 715 (1996).
In addition, the exercise of personal jurisdiction must comply with the Due Process Clause, which requires that non-resident defendants have "minimum contacts" with the forum "such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice." See Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1940). To satisfy the Due Process Clause, Plaintiff must show: (1) RAS purposefully availed itself of the privilege of acting in Michigan; (2) the litigation arose from RAS's activities in Michigan; and (3) RAS's action, or the consequences thereof, must have a substantial connection with Michigan to make the exercise of personal jurisdiction over RAS reasonable. See e.g., Evans Tempcon, Inc. v. Index Indus., Inc., 778 F. Supp. 371, 375 (W.D.Mich. 1990). If the first two elements are shown, the inference arises that the reasonableness element is also met. See First Nat'l Bank v. J. W. Brewer Tire Co., 680 F.2d 1123, 1126 (6th Cir. 1982). Because Michigan's long-arm statute requires the same elements as those necessary to comport with the Due Process Clause, the Court will analyze personal jurisdiction via the Due Process Clause.
b. Application to RAS
RAS argues that this Court does not have limited personal jurisdiction because it has not purposefully availed itself of the privilege of acting in Michigan; Plaintiff's cause of action does not arise from RAS's activities in Michigan; and RAS's acts do not form a connection with Michigan substantial enough to make the Court's exercise of personal jurisdiction over RAS reasonable.
Plaintiff argues that RAS is subject to limited personal jurisdiction because it transacted business within Michigan. Plaintiff states that RAS entered into the contract to inspect the aircraft knowing that Plaintiff was a Michigan-based company. Plaintiff states that RAS also knew that the aircraft would be flown, stored, and chartered in Michigan. RAS also called Michigan with daily updates of its inspection, and it sent a final hand-written report of the inspection to Michigan.
The Court finds that RAS's contacts with Michigan are not random or fortuitous, but they amount to purposeful availment. Purposeful availment only requires that RAS's actions be "purposely directed" toward a resident in the forum. See Compuserve, Inc. v. Patterson, 89 F.3d 1257, 1264 (6th Cir. 1996). RAS entered into a substantial business contract with a Michigan corporation and knew it could be sued in Michigan if it breached that contract. See In-Flight Devices Corp. v. Van Dusen Air, Inc., 466 F.2d 220, 227 n. 13 (6th Cir. 1972) (making a substantial business contract with a forum's citizen is sufficient to satisfy purposeful availment). Furthermore, RAS maintained telephone contact and corresponded with Plaintiff. See Evans Tempcon, Inc. v. Index Indus., Inc., 778 F. Supp. 371, 376 (W.D.Mich. 1990) (purposeful availment satisfied where defendant knew it was dealing with a Michigan corporation, maintained telephone contact with Michigan corporation, and corresponded with Michigan corporation). In addition, RAS knew that the aircraft would be stored in Michigan as well as chartered here. These actions are enough under Michigan law even though RAS maintained no physical presence or solicitation in Michigan. See Starbright Dist. v. Excelds Mfg., 454 Mich. 302, 310-11 (1997); see also McVic Oil Gas Co. v. IBEX, 23 F. Supp.2d 729, 735-36 (E.D.Mich. 1998) (a "constant stream" of paper and telephone calls to the forum (Michigan) played a factor in finding personal jurisdiction over foreign defendant).
Furthermore, RAS sends its service team into Michigan and solicits Michigan customers through its internet website, which provides links to Raytheon "authorized" service centers in Michigan. This type of solicitation should have made RAS aware that it could cultivate business in Michigan as a result of this website and, in turn, be sued in Michigan. See Pijanowski v. Cleveland Clinic Found., 635 F. Supp. 1435, 1436 (E.D.Mich. 1986) (a clinic publicizing its reputation in Michigan and soliciting referrals in Michigan was subject to Michigan jurisdiction). See also CoolSavings.com, Inc. v. I.Q. Commerce Corp., 53 F. Supp.2d 1000, 1002-03 (N.D.Ill. 1999) (defendant purposely established minimum contacts when it set up interactive website and knew that residents of all states could use it); Quokka Sports, Inc. v. Cup Int'l, Ltd., 99 F. Supp.2d 1105, 1112 (N.D.Cal. 1999) (exercising personal jurisdiction over foreign defendant proper because the defendant used its website to aim interactive commercial activity at United States consumers); Inset Sys., Inc. v. InstructionSet, Inc., 937 F. Supp. 161, 164-65 (D.Conn. 1996) (website was continuous advertisement directed to all states, and defendant could reasonably anticipate being hailed into court in the forum in question); Maritz, Inc. v. Cybergold, Inc., 947 F. Supp. 1328, 1332-34 (E.D.Mo. 1996) (website functioning as advertisement for defendant's proposed service was sufficient basis for jurisdiction in Missouri because the type of information supplied on website was of a different quality and nature than other means of contact such as mass mailing of solicitations into a forum). In deposition, RAS's general manager admitted that RAS intended to build a network that would service planes throughout the United States. The general manager also stated that RAS's Fort Lauderdale, Florida, service center often sends maintenance crews to other states to perform work and has even sent maintenance crews into Michigan. All of these actions support the Court's finding that RAS has purposefully availed itself of the privilege of doing business in Michigan.
These service centers are third-party fixed-base operators, and two are located in Michigan.
The Court also finds that this litigation arises from RAS's activities in Michigan. RAS knowingly solicited Michigan consumers, and it knowingly entered into a contract with a Michigan corporation. In addition, RAS knew that Plaintiff was relying on its inspection to decide whether to buy the aircraft. RAS also mailed correspondence to Michigan and called Michigan several times. This indicates that RAS knew its actions were being done for a Michigan company. RAS purposefully availed itself of acting in Michigan and contemplated future consequences in Michigan. Thus, RAS is subject to personal jurisdiction in Michigan for purposes of a breach of contract suit. See Mich. Comp. Laws § 600.715; Chrysler Corp. v. Traveleze Indus., Inc., 527 F. Supp. 246, 250 (E.D.Mich. 1981). See also Calphalon Corp. v. Rowlette, 228 F.3d 718, 722 (6th Cir. 2000).
Having satisfied the first two International Shoe elements, the presumption arises that the third element of reasonableness is met. See First Nat'l Bank, 680 F.2d at 1126; see also CompuServe, 89 F.3d at 1268. Still, a court generally considers four factors when assessing reasonableness: (1) the forum's interest in the controversy; (2) the surprise to the defendants for being hailed into the forum; (3) the extent of the defendant's interstate contacts in general; and (4) the defendant's financial preparedness to litigate in a distant state. See In-Flight Devices, 466 F.2d at 234-35. Having analyzed these factors, the Court finds that it is reasonable and fair to exercise personal jurisdiction over RAS.
This dispute involves a substantial financial loss to Plaintiff, a Michigan resident. Michigan has a strong interest in a contract entered into by one of its residents, particularly where the resident suffers a loss. See Traveleze, 527 F. Supp. at 250. Michigan also has an interest in ensuring that all aircraft owned and operated by its residents are safe. This is especially true where RAS knew that the aircraft was to be stored in Michigan and offered for charter in Michigan.
RAS's knowing entry into a contract with a Michigan corporation makes it difficult to claim surprise at litigating in Michigan. In addition, RAS intentionally solicited business all over the United States, including Michigan, and could reasonably expect to be involved in litigation in any state to which it purposefully avails itself and causes a consequence to occur. This also evidences RAS's substantial interstate contacts in general. RAS maintains centers in various states and advertises that its services are available everywhere. RAS further stated in deposition that it sends service teams to different states. These actions are all indicative of RAS's expectation that they may be involved in litigation in a distant state.
It is difficult for the Court to gauge RAS's financial preparedness to litigate in Michigan as neither party produces any figures for the Court. Admittedly, litigating in Michigan means added expenses for RAS, such as travel costs for witness and employees and the expense of transporting evidence. On the other hand, Plaintiff will face the same costs if it litigated this action in a distant state. Because Plaintiff is the party who has allegedly suffered a loss and because the other International Shoe factors, including fairness, have been met, the Court does not find that added expenses is justification for refusing to exercise personal jurisdiction over RAS.
For these reasons, the Court finds that RAS is subject to limited personal jurisdiction in Michigan.
C. Motion to Transfer
RAS requests the Court transfer the case to the Federal District Court for the Southern District of Florida pursuant to 28 U.S.C. § 1404(a). Section 1404(a) permits a change of venue for the convenience of parties and witnesses. To succeed, RAS must first identify an alternative forum. See Stewart v. Dow Chem. Co., 865 F.2d 103, 106 (6th Cir. 1989) (citations omitted). Once RAS identifies an alternative forum, the Court considers the litigants' private interests and the public interest in determining the convenience of the forum chosen by the plaintiff as opposed to the available alternative forum. See id. The plaintiff's choice of forum, however, is rarely disturbed. See Gulf Oil Corp. v Gilbert, 330 U.S. 501, 508 (1947).
Plaintiff argue that RAS's Motion is untimely because it was not made within a reasonable time after Defendant became aware of the facts that form the basis of its Motion. See Lony v. E.I. Du Pont de Nemours Co., 935 F.2d 604, 607 (3d Cir. 1991) (citations omitted). Plaintiff's Motion to Transfer was filed approximately nine months after Defendant filed its Answers and Affirmative Defenses. This is after Defendant accepted venue in this forum in the Joint Status Report, after the parties filed witness lists, after the parties filed mediation summaries, and after extensive discovery.
Section 1404 does not provide a time within which a motion to transfer must be filed. As a result, some Courts look at the delay in moving to transfer when deciding whether to grant a motion to transfer venue. See Moore v. Teflon Comms. Corp., 589 F.2d 959, 968 (9th Cir. 1978); FTC v. Multinet Marketing, LLC, 959 F. Supp. 394, 395-96 (N.D.Tex. 1997); Blumenthal v. Mgmt. Assistance, Inc., 480 F. Supp. 470, 471 (N.D.Ill. 1979). Courts also look at whether the delay was avoidable. See Pilkington v. United Airlines, Inc., 855 F. Supp. 1248, 1250 (M.D.Fla. 1994). Other factors courts consider include whether the delay will unduly prejudice the opposing party, whether the delay appears to be a dilatory tactic, and other relevant factors.
See Essex Cran Rental Corp. v. Vic Krisch Constr. Co., 486 F. Supp. 529, 534-36 (S.D.N.Y. 1980); Am. Standard, Inc. v. Bendix Corp., 487 F. Supp. 254, 261 (W.D. Miss. 1980).
See Pathe Computer Control Sys. Corp. v. Kinmont Indus., Inc., 955 F.2d 94, 97-7 (1st Cir. 1994).
See U.S. Fid. and Guar. Co. v. Republic Drug Co., Inc., 800 F. Supp. 1076, 1081 (E.D.N.Y. 1992); Peteet v. Dow Chem. Co., 868 F.2d 1428, 1436 (5th Cir. 1989).
From the record it appears to the Court that RAS had access at an early point to all the facts it states in its Motion to Transfer. The Court is hesitant to call RAS's Motion to Transfer a dilatory tactic. The facts that trial has been set, the Court has devoted time and resources to familiarize itself with the case, and discovery has progressed are rather significant and do indicate that the Motion to Transfer may be dilatory in nature. The Court cannot produce, and neither does RAS produce, a sound reason for transferring venue, especially when the filing of the Motion to Transfer is delayed.
Moreover, it appears that the most convenient forum is Michigan. Most of the material evidence is in Michigan, including the corroded parts of the aircraft and copies of all relevant aircraft records. Similarly, most of the witnesses identified by the parties reside in Michigan, and the remaining witnesses reside in states that are closer in proximity to Michigan than Florida. Although RAS argues that the site of the alleged incompetent inspection was in Florida, the Court agrees with Plaintiff who states that it is RAS's conduct on trial. The Court recognizes the importance of the fact that the contract for inspection mandated that Florida law would apply to any disputes under the contract, this alone is not reason to transfer venue. The harm alleged occurred to a Michigan resident. Based on this, and the fact that the aircraft was flown in and out of Michigan and chartered there, Michigan courts have a great interest in this case.
For these reasons, the Court does not find that the factors to be considered weigh heavily in RAS's favor to support the disturbance of Plaintiff's selected venue, and the Court will deny RAS's Motion to Transfer Venue.
D. Plaintiffs Request for Costs
In its Brief in Opposition to RAS's Motion, Plaintiff asserts that it is entitled to costs incurred in defending against RAS's Motion. Plaintiff supports its request by arguing that RAS's Motion was frivolous and disingenuous. Although the Court denied RAS's Motion, it will not label the Motion frivolous or disingenuous. Therefore, the Court denies Plaintiff's request for costs.
CONCLUSION
For the foregoing reasons, the Court denies RAS's Motion to Dismiss or Transfer. The Court also denies Plaintiff's request for costs.
An Order consistent with this Opinion will follow.