Deloney et al v. Chase et al

Filing 28

ORDER granting 11 Motion to Dismiss for Lack of Jurisdiction. Plaintiffs' claims against Defendant William Hallack, Jr. are dismissed without prejudice. Signed by Honorable Susan O. Hickey on August 30, 2016. (mll)

IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF ARKANSAS
TEXARKANA DIVISION
JERRY DELONEY and
PEGGY DELONEY
VS.

PLAINTIFFS
CASE NO. 15-CV-4104

DENNIS CHASE,
CHASEMASTER CORPORATION, and
WILLIAM HALLACK, JR.

DEFENDANTS
ORDER

Before the Court is Separate Defendant William Hallack, Jr.’s Motion to Dismiss
Complaint. (ECF No. 11). Plaintiffs have filed a response and supplement in opposition. (ECF
Nos. 14, 27). William Hallack, Jr. has filed a reply. (ECF No. 17). The Court finds this matter
ripe for consideration.
BACKGROUND
Plaintiffs, residents of Arkansas, received $460,738.00 in December 2010 from the
United States Department of Agriculture (“USDA”) in a civil rights action for racial
discrimination. Contractual issues surrounding the funds from the civil rights action are at issue
in the present case. Defendant Dennis Chase, a resident of Louisiana, represented Plaintiffs in
the civil rights action as a non-lawyer advocate. Near the conclusion of the civil rights action,
Chase contacted Defendant William Hallack, Jr.—an attorney—and proposed that Hallack keep
any funds awarded from Chase’s USDA cases in escrow. 1 Hallack is a resident of Louisiana and
is not licensed to practice law in Arkansas. Hallack issued an engagement letter to Chase on
October 26, 2010. (ECF No. 14, Exh. 2). The letter was addressed only to Chase and stated that
Hallack would “represent [Chase’s] principal claimants” in “reviewing and revising settlement
documents, assisting principal claimants in execution of settlement documents, and escrowing
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It appears that the USDA requires that any award of funds be wired to an escrow account for dispersion.

and disbursing settlement proceeds.” 2 Hallack contends that he did not know the identity of any
“principal claimants” at the time the engagement letter was issued.
In August 2011, Plaintiffs allege that, under the guise of an investment opportunity,
Defendant Chase defrauded Plaintiffs of $110,000 from the settlement funds. Plaintiffs claim
that Defendant Hallack disbursed the $110,000 to Defendant Chase without performing any
investigation concerning the circumstances or propriety of the disbursal.
In an effort to recover the settlement funds, Plaintiffs originally filed suit against
Defendants Chase and Hallack in the Circuit Court of Little River County, Arkansas. Defendant
Hallack filed a motion to dismiss in that case, arguing that the Circuit Court lacked personal
jurisdiction over him. A hearing on the motion was held before the Honorable Charles Yeargan.
In the hearing, Judge Yeargan stated his intent to grant the motion to dismiss. (ECF No. 13, Exh.
1, p. 33). Prior to an order of dismissal being issued, Plaintiffs non-suited their case. (ECF No.
14, Exh. 3) Thereafter, Plaintiffs re-filed their claims in this Court. (ECF No. 1). Plaintiffs’
Complaint alleges breach of contract, promissory estoppel, unjust enrichment, conversion,
breach of fiduciary duty, and fraud claims against Defendants Dennis Chase and Chasemaster
Corporation. Plaintiffs allege legal malpractice and breach of fiduciary duty against Defendant
William Hallack. 3 Plaintiffs assert that this Court has jurisdiction to hear this action pursuant to
28 U.S.C. § 1332 because the amount in controversy in this action exceeds $75,000 and is
between citizens of different states.
In the present Motion to Dismiss, Defendant Hallack reasserts the arguments made in his
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While the engagement letter provides for reviewing and executing settlement documents, Hallack
maintains that his only work with Chase involved holding the funds in escrow. Plaintiffs do not dispute
this assertion.
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Plaintiffs’ Complaint also included claims against Ronald Novack, Jr. and Juli Anne Novack, two
individuals who were allegedly involved in the conversion of the $110,000 at issue. Plaintiffs voluntarily
dismissed the Novacks from this suit on April 28, 2016. (ECF No. 19).

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motion before the Circuit Court of Little River County. Hallack maintains that Plaintiffs’
Complaint is devoid of facts which could support an exercise of personal jurisdiction over him.
Specifically, Hallack claims that he has no relevant contacts with the state of Arkansas and that
all of his legal work related to Plaintiffs’ funds was carried out in Louisiana.
DISCUSSION
To survive a motion to dismiss for lack of jurisdiction, the burden is on the plaintiff to
plead facts sufficient to support a reasonable inference that a court possesses personal
jurisdiction over the defendant. Creative Calling Solutions, Inc. v. LF Beauty Ltd., 799 F.3d 975,
979 (8th Cir. 2015). An action should not be dismissed for lack of personal jurisdiction at the
motion to dismiss stage if the facts, viewed in the light most favorable to the plaintiff, are
sufficient to support a conclusion that personal jurisdiction exists over a defendant. Id.
A federal court sitting in diversity must look to the forum state’s long-arm jurisdictional
statute to determine if it can exert personal jurisdiction over an out-of-state defendant. Id.
Arkansas’ jurisdictional statute permits personal jurisdiction over a defendant to the extent
permitted by the due process clause of the Fourteenth Amendment. Ark. Code Ann. §16-4101(B). For a court to exercise specific personal jurisdiction over an out-of-state defendant, the
defendant must have a minimum level of contacts between himself and the forum state. WorldWide Volkswagen Corp. v. Woodson, 444 U.S. 286, 291 (1980). For these contacts to create
jurisdiction, there must be “some act by which the defendant purposefully avails itself of the
privilege of conducting activities within the forum state, thus invoking the benefits and
protections of its laws.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474-475 (1985) (quoting
Hansen v. Denckla, 357 U.S. 235, 253 (1958)).
The Eighth Circuit uses a five-factor test for determining whether this “purposeful

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availment” exists. Dever v. Hentzen Coatings, Inc., 380 F.3d 1070, 1073-74 (8th Cir. 2004). The
five factors are: the nature and quality of a defendant’s contacts with the forum state, the quantity
of such contacts, the relation of the cause of action to the contacts, the interest of the forum state
in providing a forum for its residents, and convenience of the parties. Id. The first three factors
carry the most weight, but all factors should be considered within the totality of the
circumstances in order to decide whether personal jurisdiction complies with due process. See KV Pharmaceutical Co. v. J. Uriach & CIA, S.A., 648 F.3d 588, 592-93 (8th Cir. 2011).
In this case, Hallack argues that his personal contact with Plaintiffs was limited to a few
phone calls and e-mails. Further, Hallack maintains that the funds at issue were held in escrow
in Louisiana and that any distribution of those funds was made by Hallack in Louisiana. In sum,
no substantive legal work was performed outside of Louisiana. Plaintiffs do not dispute these
facts. 4 Rather, Plaintiffs argue that Hallack’s agreement to hold their funds in escrow, as
evidenced by the October 2010 engagement letter, amounts to a continuing relationship or
obligation with Arkansas citizens that confers personal jurisdiction. The Court disagrees with
Plaintiffs’ assessment.
When a contractual obligation is the alleged contact through which a defendant has
purposefully availed himself to a state’s privileges, a court can exert personal jurisdiction if the
interstate agreement creates a continuing relationship or obligation with citizens in the forum
state. See Burger King, 471 U.S. at 473. However, the mere existence of a contract with a citizen

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In their opposition to the Motion to Dismiss, Plaintiffs request they be permitted to conduct discovery in
order to “develop[] additional jurisdictional facts pertinent to the Court's determination of Defendant's
Motion.” Plaintiffs did not indicate what specific information they hope to develop during discovery. In
their supplemental brief in opposition, Plaintiffs seem to clarify their request by stating that they would
like to “conduct discovery on the October 26, 2010 engagement letter, so that they might prove for the
Court that the ‘principal claimants’ referenced in the letter are indeed Plaintiffs Jerry and Peggy
Deloney.” The Court finds no such discovery necessary and assumes arguendo that the principal
claimants referenced in the engagement letter include Plaintiffs Jerry and Peggy Deloney.

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of a state is not enough on its own to confer jurisdiction over the out-of-state party. Id. at 478.
Determining whether a contract creates a sufficient basis for personal jurisdiction requires an
examination of the parties’ negotiations, the parties’ course of dealing, and the contract itself. Id.
at 479.
Weighing all relevant factors, the Court finds that Plaintiffs have failed to establish that
Defendant Hallack has sufficient contacts with the state of Arkansas to establish personal
jurisdiction. Stated another way, Hallack’s engagement letter and later contacts with Plaintiffs
do not rise to the level of a “continuing relationship” or obligation with citizens of Arkansas.
While the October 2010 engagement letter makes reference to the “principal claimants” from the
civil rights action, Hallack did not speak with Plaintiffs about his legal services prior to the
agreement to hold the funds in escrow. In fact, he testifies that he did not know the identity of
any principal claimants represented by Chase at that time. Hallack’s communications leading up
to the engagement were only with Defendant Chase, a Louisiana resident, and the engagement
letter was addressed only to Chase. Plaintiffs do not dispute these facts. While Hallack does
appear to have later had a small amount of email and phone contact with Plaintiffs, it is
undisputed that his work with escrow funds was done exclusively in Louisiana. Under these
circumstances, the Court finds that the agreement to hold the funds in escrow and the course of
dealing between Hallack and Plaintiffs do not indicate that Hallack purposefully directed any
actions toward this forum. Accordingly, because there is no indication that Hallack purposefully
availed himself of the laws and privileges of doing business in Arkansas, he cannot be subject to
personal jurisdiction by a court in Arkansas.

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CONCLUSION
For the reasons stated above, the Court finds that Defendant William Hallack, Jr.’s
Motion to Dismiss (ECF No. 11) should be and hereby is GRANTED. Plaintiffs’ claims against
this Defendant are DISMISSED WITHOUT PREJDUCE for lack of personal jurisdiction.
IT IS SO ORDERED, this 30th day of August, 2016.

/s/ Susan O. Hickey
Susan O. Hickey
United States District Judge

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