Merryman et al v. Citigroup, Inc. et al
Filing
29
MEMORANDUM OPINION AND ORDER granting 17 Motion to Dismiss, and dismissing case without prejudice for lack of personal jurisdiction. Signed by Honorable Timothy L. Brooks on November 19, 2015. (jn)
IN THE UNITED ST ATES DISTRICT COURT
WESTERN DISTRICT OF ARKANSAS
FAYETTEVILLE DIVISION
BENJAMIN MICHAEL MERRYMAN et al.
v.
PLAINTIFFS
CASE NO. 5:15-CV-5100
DEFENDANT
JPMORGAN CHASE BANK, N.A.
and
PLAINTIFFS
BENJAMIN MICHAEL MERRYMAN et al.
v.
CASE NO. 5:15-CV-5129
DEFENDANTS
CITIGROUP, INC. et al.
MEMORANDUM OPINION AND ORDER
Currently before the Court in Case No. 5: 15-cv-5100 are Defendant JPMorgan
Chase Bank, N.A. 's ("JPMorgan") Motion to Dismiss (Doc. 20) , Brief in Support (Doc. 21 ),
and supporting declarations (Docs . 22 , 23) ; Plaintiffs Benjamin Michael Merryman 's, Amy
Whitaker Merryman Trust's , and B Merryman and A Merryman 4th Generation Remainder
Trust's (collectively , "Merryman") Memorandum in Opposition (Doc. 33) ; and JPMorgan 's
Reply (Doc. 35).
Also currently before the Court in Case No. 5:15-cv-5129 are
Defendants Citigroup , lnc. 's, Citibank, N.A.'s, and Citigroup Global Markets lnc.'s
(collectively, "Citigroup") Motion to Dismiss (Doc. 17) and Brief in Support (Doc. 18);
Plaintiffs Benjamin Michael Merryman 's, Amy Whitaker Merryman Trust's, Benjamin
Michael Merryman Trust's, and B Merryman and A Merryman 4th Generation Remainder
Trust's (collectively , "Merryman ") Memorandum in Opposition (Doc. 27) ; and Citigroup's
1
Reply (Doc. 28) . For the reasons stated below, JPMorgan 's and Citigroup's Motions are
both GRANTED , and both cases are DISMISSED WITHOUT PREJUDICE under Fed . R.
Civ. P. 12(b )(2) for lack of personal jurisdiction .1
I. BACKGROUND
On May 1, 2015 , Plaintiffs filed a Class Action Complaint in this Court against
JPMorgan , asserting claims for breach of contract, breach of implied covenant of good
faith and fair dealing , and conversion . (Case No. 5: 15-cv-5100, Doc. 1). The finer details
of Plaintiffs' factual allegations against JPMorgan are rather complicated , but the following
language from the Complaint adequately summarizes Plaintiffs' claims for our present
purposes:
•
that JPMorgan "serves as a depositary bank for the issuance of American
Depositary Receipts ('ADRs') and in that capacity is charged with certain
contractual and implied obligations to the holders of the ADRs";
•
that Plaintiffs are among the holders of the ADRs ; and
•
that "JPMorgan breached its contractual duties . . . by secretly assigning
unfavorable foreign exchange ("FX") rates applied to the conversion of non-U .S.
dollar-based Cash Distributions by foreign companies prior to issuing those
payments to ADR Holders, and unlawfully keeping the spread between the FX rate
the Bank actually received at the time of the conversion and the rate JPMorgan
charged its clients ."
1
These two cases were consolidated solely for purposes of the Motions addressed in this
Order. In th is Order, the plaintiffs in both cases are collectively referred to as "Merryman "
or "Plaintiffs ," and JPMorgan and Citigroup are sometimes collectively referred to as
"Defendants. "
2
Id. at
1f1f
1, 3. On June 2, 2015 , Plaintiffs filed a Class Action Complaint in this Court
against Citigroup , also asserting claims for breach of contract, breach of implied covenant
of good faith and fair dealing , and conversion , which were premised on factual allegations
that can , for our present purposes, be fairly summarized in language identical to the
summary of those against JPMorgan above . (Case No. 5:15-cv-5129, Doc. 1,
,.m 1, 3).
JPMorgan and Citigroup filed their respective Motions to Dismiss on July 10, 2015 ,
and both Motions have now been fully briefed and are ripe for decision . Defendants
advance a variety of different arguments and theories in favor of dismissal or transfer, but
since this Court is persuaded that it lacks personal jurisdiction over Defendants in this
case , it will not reach any of the other arguments posited in their briefs .
II. LEGAL STANDARD
"To allege personal jurisdiction , 'a plaintiff must state sufficient facts in the
complaint to support a reasonable inference that the defendant can be subjected to
jurisdiction within the state. "' Wells Dairy, Inc. v. Food Movers Int'/, 607 F.3d 515 , 518
(8th Cir. 2010) (quoting Dever v. Hentzen Coatings, Inc. , 380 F.3d 1070, 1072 (8th Cir.
2004)) (alteration omitted) . The Court "must view the evidence in the light most favorable
to the plaintiff and resolve all factual conflicts in the plaintiff's favor." Digi-Tel Holdings,
Inc. v. Proteq Telecomm. (PTE), Ltd., 89 F.3d 519, 522 (8th Cir. 1996).
However,
Merryman bears the burden of proving sufficient facts to support a prima facie showing
of personal jurisdiction . Wells Dairy, 607 F.3d at 518 . "The plaintiff's prima facie showing
must be tested , not by the pleadings alone , but by the affidavits and exhibits presented
with the motions and opposition thereto ." Id.
3
The Arkansas long-arm statute authorizes the exercise of personal jurisdiction "to
the maximum extent permitted by the due process of law clause of the Fourteenth
Amendment of the United States Constitution ." Ark. Code Ann . § 16-4-101. Therefore,
the only question here is whether the exercise of personal jurisdiction over JPMorgan and
Citigroup is constitutionally permissible.
"Due process requires 'minimum contacts'
between the non-resident defendant and the forum state such that 'maintenance of the
suit does not offend traditional notions of fair play and substantial justice ,"' and "such that
[the] defendant 'should reasonably anticipate being haled into court there ."' Burlington
Indus., Inc. v. Maples Indus., Inc., 97 F.3d 1100, 1102 (8th Cir. 1996) (quoting WorldWide Volkswagen Corp. v. Woodson , 444 U.S. 286 , 291-92 , 297 (1980); Int'/ Shoe Co. v.
Washington , 326 U.S. 310 , 316 (1945)). "Like any standard that requires a determination
of reasonableness , the minimum contacts test . . . is not susceptible of mechanical
application ; rather, the facts of each case must be weighed to determine whether the
requisite affiliating circumstances are present." Kulka v. Superior Court of California In
and For City and County of San Francisco , 436 U.S. 84, 92 (1978) (internal quotation
marks omitted).
There are two types of personal jurisdiction that may be exercised:
general or specific. Viasystems, Inc. v. EMB-Pabst St. Georgen GmbH & Co. , KG, 646
F.3d 589 , 593 (8th Cir. 2011 ).
Ill. DISCUSSION
A. General Jurisdiction
Traditionally-and as law students were taught for decades-general-jurisdiction
analysis could be argued to have focused simply on whether a defendant had contact "of
a continuous and systematic nature" with the forum state , see Helicopteros Nacionales
4
de Colombia, S.A. v. Hall, 466 U.S . 408 , 416 (1984) , but "[i]n recent years , the Supreme
Court has clarified and , it is fair to say, raised the bar for [general] jurisdiction ," Kipp v. Ski
Enter. Corp. of Wis., Inc., 783 F.3d 695, 698 (7th Cir. 2015). In 2011 , the Supreme Court
explained in a unanimous opinion by Justice Ginsburg that "[a] court may assert general
jurisdiction over foreign (sister-state or foreign-country) corporations to hear any and all
claims against them when their affiliations with the State are so continuous and
systematic as to render them essentially at home in the forum State ." Goodyear Dunlop
Tires Operations, S.A. v. Brown , 131 S. Ct. 2846 , 2851 (2011) (internal quotation marks
omitted , emphasis added). Then in 2014, Justice Ginsburg further elaborated in a nearlyunanimous 2 opinion that "Goodyear made clear that only a limited set of affiliations with
a forum will render a defendant amenable to [general] jurisdiction there ." Daimler AG v.
Bauman , 134 S. Ct. 746 , 760 (2014).
In Goodyear and Daimler, the Supreme Court
identified "the place of incorporation and principal place of business" as "paradigm bases
for general jurisdiction " over a corporation . 134 S. Ct. at 760 (alterations omitted) . And
while the Daimler Court was careful to note that "Goodyear did not hold that a corporation
may be subject to general jurisdiction only in a forum where it is incorporated or has its
principal place of business ," the Daimler Court explicitly refused to "look beyond the
exemplar bases Goodyear identified , and approve the exercise of general jurisdiction in
every State in which a corporation engages in a substantial , continuous, and systematic
course of business ," terming such a formulation "unacceptably grasping ." Id. at 760-61
(internal quotation marks omitted).
2
Justice Sotomayor concurred separately in the judgment, but not for the reasons
advanced in the majority opinion .
5
In Daimler's most pertinent passage, the Supreme Court wrote:
Here, neither Daimler nor [its subsidiary] is incorporated in [the forum state
of] California, nor does either entity have its principal place of business
there . If Daimler's California activities sufficed to allow adjudication of this
Argentina-rooted case in California, the same global reach would
presumably be available in every other State in which [Daimler's American
subsidiary]'s sales are sizable. Such exorbitant exercises of all-purpose
jurisdiction would scarcely permit out-of-state defendants "to structure their
primary conduct with some minimum assurance as to where that conduct
will and will not render them liable to suit. "
Id. at 761-62 (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985)) .
Merryman presents no evidence-nor could they-that Arkansas is either
defendant's state of incorporation or primary place of business.
Instead, Merryman
presents a good deal of evidence that JPMorgan and Citigroup both engage in substantial
amounts of lending within the state of Arkansas, have interactive websites available to
Arkansas residents, and own real property in Arkansas. 3 Merryman also presents a good
deal of evidence that JPMorgan has initiated non-judicial foreclosures in Arkansas, and
that Citigroup has been subject to several investigations and enforcement actions by the
Arkansas Securities Department.
But Merryman offers no evidence or argument to
explain why Defendants' contacts with Arkansas are more significant than the contacts
they would have with any other state. 4 Instead, Plaintiffs would have the Court do the
very thing Daimler forbids : "look[ing] beyond the exemplar bases Goodyear identified, and
3
Additionally, Merryman presents evidence that Citigroup has designated a registered
agent for service of process in Arkansas. However, Ark. Code Ann. § 4-20-115 explicitly
states that "[t]he appointment or maintenance in this state of a registered agent does not
by itself create the basis for personal jurisdiction over the represented entity in this state. "
4
Furthermore, it seems clear to the Court from the evidence in the record-even viewed
in the light most favorable to Plaintiffs-that Merryman would be unable to do so even if
permitted an unlimited amount of discovery on the matter.
6
approv[ing] the exercise of general jurisdiction in every State in which a corporation
engages in a substantial , continuous, and systematic course of business. " Id. at 760-61.
Under these circumstances, there is simply no theory available to the Court by
which it could exercise general jurisdiction over JPMorgan or Citigroup that would not "be
ava ilable in every other State in which " their business activities "are sizable ." Therefore ,
under Daimler and Goodyear, this Court does not have general jurisdiction over these
defendants. Merryman protests that such a reading of Daimler is "ludicrous ," and that
"Daimler simply does not overturn the entire body of developed caselaw on general
jurisdiction ." (Case No. 5:15-cv-5100, Doc. 33 , p. 19; Case No. 5:15-cv-5129 , Doc. 27,
pp. 18-19). However, this Court believes the plain language of Daimler and Goodyear
cannot be read as anything other than a significant narrowing of general jurisdiction 's
scope , such that it cannot be exercised here. Whether this evolution in the law of general
jurisdiction is "ludicrous" is not for this Court to decide , but there can be no doubt the
change has occurred , is a rather dramatic departure ,5 and requires a different ruling in
the instant case than would likely have been reached under the old regime.
B. Specific Jurisdiction
The Court turns, then , to the issue of specific jurisdiction . "Specific jurisdiction
refers to jurisdiction over causes of action arising from or related to a defendant's actions
within the forum state .... " Viasystems , 646 F.3d at 593 (internal quotation marks and
alterations omitted). The Eighth Circuit provides a five-factor test that must be used in
analyzing whether personal jurisdiction may be exercised over a defendant, with the first
5
"Referring to the 'continuous and systematic' contacts inquiry that has been taught to
generations of first-year law students as 'unacceptably grasping ,' the majority announces
the new rule . . . ." Daimler, 134 S. Ct. at 770 (Sotomayor, J. , concurring).
7
three of these factors being especially important: (1) the nature and quality of the
defendant's contacts with the forum state ; (2) the quantity of those contacts; (3) the
relation of those contacts with the cause of action ; (4) the forum state's interest in
providing a forum for its residents; and (5) the convenience of the parties. Epps v. Stewart
Info. Servs. Corp., 327 F.3d 642 , 648 (8th Cir. 2003) . However, the Court need not
belabor a factor-by-factor analysis here , because "[s]pecific jurisdiction can only be found
if the controversy is related to or arises out of the defendant's contacts with the forum
state. " Johnson v. Woodcock , 444 F.3d 953 , 956 (8th Cir. 2006) (emphasis added ,
internal quotation marks omitted) . Put another way , "the defendant's suit-related conduct
must create a substantial connection with the forum State. " Walden v. Fiore , 134 S. Ct.
1115, 1121 (2014) (emphasis added). "[l]t is the defendant, not the plaintiff or third
parties, who must create contacts with the forum State." Id. at 1126.
None of the contacts between JPMorgan or Citigroup and Arkansas that were
described supra in this Court's discussion of general jurisdiction (lending activities,
websites, etc.) are argued to have given rise to the instant controversies.
Rather,
Plaintiffs contend that specific jurisdiction exists here because the contracts at issue
required payment to Plaintiffs, who happen to be located in Arkansas. They cite the
Eighth Circuit cases of Tyson Fresh Meats, Inc. v. Lauer Ltd. , L.L.C., 918 F. Supp . 2d
835 , 849 (8th Cir. 2013), and Papachristou v. Turbines, Inc., 902 F.2d 685 , 686 (8th Cir.
1990), in support of this argument. However, there is a critical distinction between these
cases and the instant ones: while the contracts in Tyson and Papachristou explicitly
contemplated the delivery of goods to specific locations in those cases' respective forum
8
states, the contracts giving rise to the instant action do not. 6 This is a very important
distinction because under controlling precedent, "(d)ue process allows a state to assert
personal jurisdiction over a defendant based on the in-state effects of defendants'
extraterritorial tortious acts only if those acts ... were uniquely or expressly aimed at the
forum state. " Viasystems , 646 F.3d at 594 (emphasis added).
Merryman has not presented any evidence that the instant contracts uniquely or
explicitly targeted Arkansas , nor has Merryman argued or alleged that any such evidence
might exist. There is no evidence or allegation that Defendants negotiated the contracts
in Arkansas, that the contracts are secured by any property located in Arkansas , or that
the contracts otherwise contemplate Arkansas in any way.
Nor could there be-as
JPMorgan aptly observes in its Reply, "[t]he ADRs at issue here are publicly traded , and
the identity and location of the person or entity at the end of the ADR payments stream
on a particular day is pure happenstance and not the result of [JPMorgan]'s volition ."
(Case No. 5:15-cv-5100 , Doc. 35 , p. 19) (citing In re Libor-Based Fin . Instruments
Antitrust Litigation , 2015 WL 4634541 , at *26 (S.D.N .Y. Aug . 4, 2015) ("These securities
may arrive in the hands of plaintiffs and other investors anywhere in the world by the
investors' own trades-not at the direction of the issuers. Such a fortuitous , plaintiffdriven contact cannot support personal jurisdiction. ")).
Plaintiffs have demonstrated
nothing more than that they are Arkansas residents who happen to be ADR Holders.
Ultimately, "[u]nder Plaintiffs' theory of jurisdiction , a national company could be sued by
6
Indeed , Merryman does not cite-and this Court has been unable , in its own
examination of the contracts , to independently identify-any contractual provision
specifically contemplating payment or delivery of anything at all to any resident of, or
location in , Arkansas.
9
any resident of any state in any state. This does not comport with 'traditional notions of
fair play and substantial justice ' as required by the Constitution ." Keeley v. Pfizer Inc.,
2015 WL 3999488 , at *3 (E.D. Mo. July 1, 2015) (quoting Daimler, 134 S. Ct. at 754).
C. Jurisdictional Discovery
Finally, Plaintiffs argue that "[i]f the Court is reluctant to exercise personal
jurisdiction based on the contacts highlighted above ," then "the Court should allow
Plaintiffs to conduct limited , jurisdictional discovery" into Defendants' "contacts to and
business within Arkansas ." (Case No. 5:15-cv-5100, Doc. 33, p. 21 ; Case No. 5:15-cv5129, Doc. 27 , p. 30). Whether to permit additional jurisdictional discovery is committed
to this Court's discretion , which should be exercised with an eye toward whether "facts
necessary to resolving the jurisdictional inquiry are either unknown or disputed ."
Viasystems , 646 F.3d at 598. This Court believes, from its review of the pleadings and
evidence already in the record , that jurisdictional discovery would not provide any further
illumination of these matters. No dispute can reasonably be said to exist over whether
any of the defendants are incorporated in Arkansas or have Arkansas as their primary
place of business, or whether Plaintiffs ' claims are premised on acts that were uniquely
or expressly aimed at Arkansas.
At bottom , these parties ' disagreement regarding
personal jurisdiction is not a factual one ; it is a legal one. No amount of discovery will
change the applicable law.
IV. CONCLUSION
For the reasons expressed above , the Court finds that Plaintiffs have not carried
their burden of establishing a prima facie case that this Court can assert personal
jurisdiction over JPMorgan and Citigroup . IT IS THEREFORE ORDERED that Defendant
10
JPMorgan Chase Bank , N.A. 's Motion to Dismiss (Case No. 5:15-cv-5100, Doc. 20) and
Defendants Citigroup , lnc.'s, Citibank N.A.'s, and Citigroup Global Markets, lnc.'s Motion
to Dism iss (Case No. 5:15-cv-5129, Doc. 17) are both GRANTED.
Both cases are
DISMISSED WITHOUT PREJUDICE under Fed . R. Civ. P. 12(b)(2) for lack of personal
jurisdiction.
IT IS SO ORDERED on this
f4
~y of Novem
O~
. BROOKS
UNITED STATES DISTRICT JUDGE
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