Summary
noting that personal jurisdiction can be waived
Summary of this case from Titan Feeding, LLC v. Corey Cattle Co.Opinion
Civil Action No. 1:19-cv-01179-DDD-KMT
07-27-2020
James M. WHITE, Plaintiff, v. Ron W. CHRISTIAN, Brake Plus, LLC, Kevin Cannon, SBT Distributors, LLC, Defendants.
Justin Tyler Bailey, Sanders Law Firm LLC, Colorado Springs, CO, for Plaintiff. Fred Anthony Paganelli, II, Stephanie Lauren Grass, Paganelli Law Group LLC, Indianapolis, IN, for Defendants.
Justin Tyler Bailey, Sanders Law Firm LLC, Colorado Springs, CO, for Plaintiff.
Fred Anthony Paganelli, II, Stephanie Lauren Grass, Paganelli Law Group LLC, Indianapolis, IN, for Defendants.
ORDER DENYING MOTION TO DISMISS
Daniel D. Domenico, United States District Judge
In this breach of contract action, Plaintiff James White, a citizen of Colorado, alleges that he loaned Defendant BrakePlus, LLC $100,000, guaranteed by Defendant Ron Christian. He alleges that BrakePlus failed to make required payments and, subsequently, Defendant Kevin Cannon (and apparently Defendant SBT Distributors, LLC) verbally agreed to permit Mr. White to keep profits from a certain business account in satisfaction of the payments he was owed by BrakePlus. According to Mr. White, this agreement wasn't honored either. Defendants, who are not citizens of Colorado, move to dismiss pursuant to Fed. R. Civ. P. 12(b)(2), asserting the court lacks personal jurisdiction over them. (See Mot., Doc. 26; Resp., Doc. 36; Reply, Doc. 37.) The motion is denied.
WAIVER
Mr. White argues that Defendants waived their right to challenge personal jurisdiction. "Objections to personal jurisdiction ... must be asserted in the answer or in a pre-answer motion." Fed. Deposit Ins. Corp. v. Oaklawn Apartments , 959 F.2d 170, 175 (10th Cir. 1992) (citing Fed. R. Civ. P. 12(b) ). "If a party files a pre-answer motion and fails to assert the defenses of lack of personal jurisdiction ... he waives th[at] defense[ ]." Id. (citing Fed. R. Civ. P. 12(h)(1) ); see also United States v. 51 Pieces of Real Prop. Roswell, N.M. , 17 F.3d 1306, 1314 (10th Cir. 1994) (citing with approval Glater v. Eli Lilly & Co., 712 F.2d 735, 738 (1st Cir. 1983) (holding that defenses set forth in Rule 12(h), which include lack of personal jurisdiction and ineffective service of process, must be raised in a party's "first defensive move")). Defendants, who challenge jurisdiction in their first substantive filing—this motion to dismiss—have not waived anything under these rules.
Mr. White disagrees, pointing to several earlier filings. Defendants’ counsel, before filing this motion, appeared (Docs. 15–16), moved for an extension of time to respond to the complaint (Doc. 17), moved to appear at the scheduling conference telephonically (Doc. 23), and "participated in the drafting of the proposed case management order" (Resp. at 9). According to Mr. White, these actions evince active participation in the litigation inconsistent with a right to object to personal jurisdiction. (Id. )
Not so, even according to the cases Mr. White cites. See, e.g. , Giduck v. Niblett , 408 P.3d 856, 863 (Colo. App. 2014) (holding the defendants did not waive their jurisdictional arguments when they asserted the same in first substantive filing); see also id. (quoting Archangel Diamond Corp. v. Arkhangelskgeoldobycha, 94 P.3d 1208, 1216 (Colo. App. 2004)), overruled on other grounds by Archangel , 123 P.3d 1187 ("Personal jurisdiction, however, may be waived if the defendant participates in litigation of the merits , even though the defendant raises the defense in the answer." (emphasis added)).
The court cannot, under these circumstances, begrudge Defendants their substantive arguments because of their obligation to participate in early procedural matters—such as drafting a proposed scheduling order—subject to the order of the magistrate judge and the Local Rules of this District. (See Doc. 11); see also Local Civ. R. 16.1 & 16.2. The proposed scheduling order, furthermore, expressly notices Defendants’ intent to rely on lack of personal jurisdiction as a defense. (See Doc. 27, at 4.) Here, participation in these mandatory, non-substantive matters did not invoke the litigation machinery enough to prejudice Defendants’ right to assert a proper defense in the manner comprehended by the cases and Federal Rules of Civil Procedure. Defendants did not waive their jurisdictional arguments here.
MOTION TO DISMISS
When the court's jurisdiction is contested, the plaintiff has the burden of proving jurisdiction exists. McNutt v. General Motors , 298 U.S. 178, 189, 56 S.Ct. 780, 80 L.Ed. 1135 (1936) ; Behagen v. Amateur Basketball Ass'n of the United States , 744 F.2d 731, 733 (10th Cir. 1984), cert. denied , 471 U.S. 1010, 105 S.Ct. 1879, 85 L.Ed.2d 171 (1985). "In the preliminary stages of litigation, however, the plaintiff's burden is light." Wenz v. Memery Crystal , 55 F.3d 1503, 1505 (10th Cir. 1995) (citing Doe v. National Medical Servs. , 974 F.2d 143, 145 (10th Cir. 1992) ). Where, as in the present case, there has been no evidentiary hearing, and the motion to dismiss for lack of jurisdiction is decided on the basis of affidavits and other written material, the plaintiff need only make a prima facie showing that jurisdiction exists. National Medical Servs. , 974 F.2d at 145 ; FDIC v. Oaklawn Apartments , 959 F.2d 170, 174 (10th Cir. 1992) ; Behagen , 744 F.2d at 733.
"The allegations in the complaint must be taken as true to the extent they are uncontroverted by the defendant's affidavits." Wenz , 55 F.3d at 1505. If the parties present conflicting affidavits, all factual disputes must be resolved in the plaintiff's favor, and "the plaintiff's prima facie showing is sufficient notwithstanding the contrary presentation by the moving party." Id. But only the well pled facts of plaintiff's complaint, as distinguished from merely conclusory allegations, must be accepted as true. Ten Mile Indus. Park v. Western Plains Serv. Corp. , 810 F.2d 1518, 1524 (10th Cir. 1987) ; Mitchell v. King , 537 F.2d 385, 386 (10th Cir. 1976).
Given these guidelines, the jurisdictional facts are as follows. Mr. White is a citizen of Colorado. Mr. Christian and BrakePlus are citizens of Nevada, and Mr. Cannon and SBT are citizens of Texas. BrakePlus and SBT are not registered with the Colorado Secretary of State to do business in Colorado. (See Christian Aff., Doc. 26-1; Cannon Aff., Doc. 26-2.) As they represent, "SBT does not do business in Colorado" (Cannon Aff. ¶ 9) and "BrakePlus has not done business in Colorado since 2013, when it sold approximately 550 units to Century Chev-rolet" (Christian Aff. ¶ 9).
The following is taken from the amended complaint (Doc. 9) to the extent that the allegations there are not controverted by affidavits filed by Defendants Christian and Cannon (see Docs. 26-1, 26-2), as well as from those affidavits.
Mr. Christian represents that BrakePlus is a Michigan limited liability company. However, the citizenship of an LLC is that of its members, not where it is incorporated. Siloam Springs Hotel, L.L.C. v. Century Sur. Co. , 781 F.3d 1233, 1237–38 (10th Cir. 2015). Because Mr. Christian is citizen of Nevada, that is also BrakePlus's citizenship for jurisdictional purposes.
It's not clear from the documents or pleadings exactly what BrakePlus's business is, though it appears to sell automobile parts or accessories.
In late 2013, BrakePlus needed an investment. On November 19, 2013, Mr. White loaned BrakePlus $100,000 via a note agreement. Mr. Christian executed the Agreement on behalf of BrakePlus and personally guaranteed it. (See Note, Doc. 9-1.) "At all times relevant to the entry into The Agreement at issue in this case, [Mr.] Cannon was involved in the negotiations and it was even suggested that [Mr.] Cannon serve as personal guarantor of The Agreement by [Mr.] Christian." (Am. Compl. ¶ 19.)
BrakePlus "acknowledge[d] that if [Mr. White] did not make the loan evidenced by this note to Borrower, Borrower's business would have failed under the terms" of a restraining order entered in other litigation. (Note, Doc. 9-1, at 3(c).)
BrakePlus "made a few initial payments as contemplated by The Agreement but has failed to comply fully with the terms of The Agreement." (Id. ¶ 20.) Apparently, BrakePlus "operate[d] as a fiction for the benefit of [Mr.] Cannon and his wholly owned company SBT." (Id. ¶ 21.) So at some point, Mr. Cannon and SBT entered into a verbal agreement with Mr. White whereby Mr. White would distribute BrakePlus products to PC Enterprises and would be allowed to keep profits he derived from that account in lieu of payments on the Agreement. (Id. ¶¶ 22, 42.) Mr. White performed "work and service on behalf of Defendants or in a fashion which conferred befit upon Defendants." (Id. ¶ 44.) But SBT and Mr. Cannon "terminated that agreement on or about October 22, 2018. Since that time Plaintiff has received no further payment related to The Agreement." (Id. ) Mr. White brought this suit alleging breach of contract, unjust enrichment, and promissory estoppel.
ANALYSIS
To obtain personal jurisdiction over a nonresident defendant, a plaintiff must show (1) that jurisdiction is legitimate under the laws of the forum state, and (2) that the exercise of jurisdiction does not offend the Due Process Clause. Soma Med. Int'l v. Standard Chartered Bank , 196 F.3d 1292, 1295 (10th Cir. 1999). Relevant here, Colorado's long-arm statute confers jurisdiction over "any cause of action arising from ... [t]he transaction of business within this state." Colo. Rev. Stat. § 13-1-124(1)(a). Because the Colorado long-arm statute extends personal jurisdiction within the state as far as the federal constitutional requirements of due process permit, Keefe v. Kirschenbaum & Kirschenbaum, P.C. , 40 P.3d 1267, 1270 (Colo. 2002), "the analysis collapses into a single inquiry regarding whether the requirements of due process are satisfied." Frontier Steel Bldgs. Corp. v. Wiser Const., LLC , No. CIV. 07-CV-02100-REB, 2008 WL 4293665, at *1 (D. Colo. Sept. 17, 2008) ; see also Grynberg v. Ivanhoe Energy, Inc. , 666 F. Supp. 2d 1218, 1229 (D. Colo. 2009) ("Colorado's long arm statute is coextensive with constitutional limitations imposed by the due process clause.").
The due process analysis consists of two steps. First, courts "consider whether the defendant has such minimum contacts with the forum state that he should reasonably anticipate being haled into court there. This minimum-contacts standard may be satisfied by showing general or specific jurisdiction." Employers Mut. Cas. Co. v. Bartile Roofs, Inc. , 618 F.3d 1153, 1159–60 (10th Cir. 2010). "[A] court may maintain general jurisdiction over a nonresident defendant, based on the defendant's continuous and systematic general business contacts with the forum state." Trujillo v. Williams , 465 F.3d 1210, 1218 n.7 (10th Cir. 2006) (internal quotation marks omitted). Under the specific-jurisdiction requirement, a plaintiff must show that (1) the defendant has "purposefully availed itself of the privilege of conducting activities or consummating a transaction in the forum state," Dudnikov v. Chalk & Vermilion Fine Arts, Inc., 514 F.3d 1063, 1071 (10th Cir. 2008) (emphasis omitted) (internal quotation marks omitted); and (2) " ‘the litigation results from alleged injuries that arise out of or relate to those activities.’ " TH Agric. & Nutrition, 488 F.3d at 1287 (quoting Burger King Corp. v. Rudzewicz , 471 U.S. 462, 472, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985) ). Second, if the defendant has minimum contacts within the forum state, courts "determine whether the exercise of personal jurisdiction over the defendant offends traditional notions of fair play and substantial justice." Employers Mut. Cas. Co. , 618 F.3d at 1160.
Defendants here aren't subject to "general" jurisdiction in Colorado. Mr. White hasn't contravened Defendants’ contention that they don't maintain continuous or systematic business contacts here. (See Mot. at 4–5; see also generally Resp.) The issue is whether the business transactions alleged, which are not contravened by Defendants’ affidavits, adequately support a finding of "specific" jurisdiction. The litigation arises out of these transactions, so the court need only determine whether Defendants purposefully availed themselves of the forum. The court finds they have.
Defendants, under circumstances in which the failure of their business was imminent, solicited a loan from Mr. White, at his "great risk" (Note, Doc. 9-1, at 3(c)), within the State of Colorado, resulting in The Agreement. BrakePlus failed to make timely payments, and Mr. Cannon and SBT, which were alter-egos of BrakePlus, offered to have Mr. White service an account—by performing work in Colorado—so that he could keep the profits from that account in lieu of collecting under the Agreement. Defendants therefore purposefully availed themselves of both Mr. White's Colorado bank account and, later, his Colorado labor. According to the complaint, for neither of these has Mr. White been properly reimbursed.
Defendants "dispute that the ‘contract was negotiated and agreed to within the State of Colorado’ as Mr. Christian was a resident of Arizona at the time and Mr. Cannon is a resident of Texas." (Reply at 3 (citing affidavits).) The court accepts these defendants’ residency as noted in their affidavits, but that doesn't establish that the contract wasn't negotiated in Colorado or, more importantly, that they didn't solicit Mr. White in Colorado.
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Jurisdiction "may not be avoided merely because the defendant did not physically enter the forum." Burger King Corp. v. Rudzewicz , 471 U.S. 462, 463, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985) (emphasis in original). Merely entering into a contract with a Colorado person or business, or merely making payments under the terms of an agreement payable in the state, may not be enough to support specific jurisdiction if in-state parties initiated the transaction with out-of-state parties. See New Frontier Media, Inc. v. Freeman , 85 P.3d 611, 614 (Colo. App. 2003). But active solicitation by out-of-state parties of a forum resident and his services, knowing he was in this forum, is enough, even if such parties never physically enter the state, see Martinez v. Farmington Motors, Inc. , 931 P.2d 546 (Colo. App. 1996) ; cf. Found. for Knowledge in Dev. v. Interactive Design Consultants, LLC , 234 P.3d 673, 681–82 (Colo. 2010) (finding specific jurisdiction in tort case where the "alleged misrepresentations occurred in communications intentionally directed at a Colorado corporation" and defendant "certainly understood that his communications [ ] would be received in Colorado" and the plaintiff "suffered the alleged injury from [defendant's] tortious conduct in Colorado").
Finally, in analyzing whether exercise of personal jurisdiction offends "traditional notions of fair play and substantial justice," Asahi Metal Indus. Co. v. Superior Court , 480 U.S. 102, 113, 107 S.Ct. 1026, 94 L.Ed.2d 92 (1987), a court should determine whether exercise of jurisdiction is reasonable in light of the circumstances surrounding the case by considering:
(1) the burden on the defendant, (2) the forum state's interest in resolving the dispute, (3) the plaintiff's interest in receiving convenient and effective relief, (4) the interstate judicial system's interest in obtaining the most efficient resolution of controversies, and (5) the shared interest of the several states in furthering fundamental social policies.
Pro Axess, Inc. v. Orlux Distribution, Inc. , 428 F.3d 1270, 1279–80 (10th Cir. 2005). With "minimum contacts established, it is incumbent on defendants to ‘present a compelling case that the presence of some other considerations would render jurisdiction unreasonable.’ " Dudnikov , 514 F.3d at 1080 (quoting Pro Axess , 428 F.3d at 1280 ). Defendants assert that it would be unreasonable for them to have to litigate here because they don't live here, and that Colorado has no greater interest in the matter than any other state. Mr. White doesn't squarely address the issue. Defendants’ argument is no more compelling than would be its inverse. Defendants, by their conduct, should have reasonably anticipated being haled into court here. It doesn't offend traditional notions of fair play and substantial justice to have Defendants litigate in Colorado.
CONCLUSION
The court therefore DENIES Defendants’ motion to dismiss for lack of personal jurisdiction. (Doc. 26.) The stay of this matter is hereby LIFTED . The parties are hereby ORDERED to jointly contact the chambers of the magistrate judge, within two weeks of the entry of this order, to set a scheduling conference.