Dierig v. Lees Leisure Ind Ltd et al
Filing
34
MEMORANDUM OPINION AND ORDER: It is ordered 1) Plaintiff's Motion to alter or amend 24 be and is hereby GRANTED; 2) Court's prior Order 23 is hereby VACATED; 3) Defendant Lees Leisure's Motion to Dismiss for Lack of Personal Juri sdiction and for insufficient Service of Process 11 is hereby DENIED and 4) Defendant Lees Leisure shall file its Answer within twenty (20) days of the date of this Order (3/19/2012). Signed by Judge David L. Bunning on 2/28/2012.(TED)cc: COR Modified to correct spelling error on 3/1/2012 (TED).
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
NORTHERN DIVISION
AT COVINGTON
CIVIL ACTION NO. 11-125-DLB-JGW
THOMAS H. DIERIG
vs.
PLAINTIFF
MEMORANDUM OPINION & ORDER
LEES LEISURE INDUSTRIES, LTD.
DEFENDANT
* * * * * * * * *
Plaintiff Thomas H. Dierig commenced this civil action against Defendants Lees
Leisure Industries, Limited (“Lees Leisure”),1 Lite Tent Camper, LLC (“Lite Tent”), and
Jimmie G. Dawkins (“Dawkins”)2 alleging product liability claims of negligence and strict
liability, as well as claims for breach of express and implied warranties, resulting from the
malfunction of a latch on a pull tent trailer manufactured by Lees Leisure and sold to
Plaintiff by Dawkins of Lite Tent, a distributor of Lees Leisure products.
This matter is currently before the Court upon Plaintiff’s Motion to Alter or Amend
or For Relief From Order pursuant to Federal Rules of Civil Procedure 59(e) and 60(b),
respectively (Doc. # 24).3 The motion seeks reconsideration of the Court’s November 23,
1
Lees Leisure also does business under the titles Lees-ure Lite Products, Ltd. and Leesure Lite. (Doc. # 1 at 2).
2
Upon agreement of the parties and Order of this Court (Doc. # 29), all claims by Plaintiff
against Defendants Lite Tent and Jimmie Dawkins in this action have been dismissed with
prejudice.
3
The Court granted Plaintiff’s Motion to Partially Withdraw his Motion to Alter or Amend
(Docs. # 28, 31), such that the only issue remaining is as to the dismissal of Defendant Lees
Leisure.
1
2011 Memorandum Opinion and Order (Doc. # 23) granting in part Defendants’ Motion to
Dismiss (Doc. # 11), and dismissing Plaintiff’s claims against Defendant Lees Leisure for
lack of personal jurisdiction. This motion has been fully briefed (Docs. # 32, 33), and is now
ripe for review.
I. FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff Thomas H. Dierig, a citizen of Kentucky, is a motorcyclist and camper. In
September 2009 Plaintiff became interested in purchasing a tent trailer, specifically one
manufactured by Canadian business entity Lees Leisure, to be pulled behind his
motorcycle. (Doc. # 12 at 1). Plaintiff developed this interest through conversation with a
fellow member of the Gold Wing Road Riders (“Gold Wing”) who owned a Lees Leisure pull
tent trailer, Plaintiff’s review of Lees Leisure advertisements in Wing World magazine, and
his review of Lees Leisure brochures. (Id. at 1-2). The Lees Leisure advertisements
directed Plaintiff to visit the Lees Leisure website, which in turn directed Plaintiff to contact
Jimmie Dawkins of Lite Tent in South Carolina, the nearest distributor. Lite Tent was also
touted as the exclusive authorized distributor in the Southeast and the only factory
authorized distributor in this region, according to its own website. (Id. at 3; see Doc. # 126). Upon contacting Dawkins at the direction of Lees Leisure’s website and brochure,
Dawkins advised Plaintiff that he had a trailer of the price range and description requested,
and agreed to place the item on hold. (Id. at 5).
On September 25, 2009, Plaintiff met with Dawkins at the Gold Wing bike rally in
North Carolina. (Doc. # 12 at 5). Finding the unit suitable, Plaintiff purchased the pull tent
trailer and received a Bill of Sale and a Certificate of Origin from Dawkins. Both of these
documents listed Plaintiff’s name and address in Highland Heights, Kentucky, and the
2
Certificate also bore the signature of a representative of Lees Leisure. (Id. at 5-6). The
trailer in question was manufactured in Canada by Lees Leisure and sold to a retailer in
Florida in 2005. (Doc. # 11-1 at 3). After acquiring the trailer from the Florida retailer, and
prior to this sale, Lite Tent had used this particular trailer as a demonstration model. (Id.).
In July 2010, Plaintiff drove his motorcycle with the attached tent trailer from his
home in Kentucky to British Columbia, Canada. During this trip, the pin used by Plaintiff
to secure the latch holding the trailer lid in place became unfastened. Consequently, the
lid of the trailer opened while Plaintiff was traveling in British Columbia. The effect of the
wind blowing against the open tent trailer allegedly caused the motorcycle to be “thrown
about the road, and causing the Plaintiff to lose control of his motorcycle and be thrown off
of his cycle into a ditch, resulting in Plaintiff being seriously injured.” (Doc. # 1 at 6).
Plaintiff states that this latch system constituted a defective and unreasonably dangerous
condition because it lacked the proper latch pin, and the manufacturer and distributor
provided insufficient instructions as to the type of pin necessary to alleviate this dangerous
condition. (Id.).
Plaintiff filed his Complaint on June 23, 2011 alleging claims of product liability,
including negligence and strict liability, as well as breach of express and implied warranties.
(Doc. # 1 at 5-9). Defendants filed a Joint Motion to Dismiss for Lack of Jurisdiction and
for Insufficient Service of Process as to Defendant Lees Leisure on September 6, 2011
(Doc. # 11). The Motion was fully briefed (Docs. # 12, 18), and the Court conducted oral
argument on November 17, 2011 (Doc. # 22). Defendant Lees Leisure additionally filed
a Motion to Strike Exhibit 16 to Plaintiff’s Response (Doc. # 17), which was likewise fully
briefed (Docs. # 19, 20). The Court issued a Memorandum Opinion and Order (Doc. # 23)
3
granting Defendants’ motion to dismiss as to Defendant Lees Leisure, which Plaintiff now
seeks to alter or amend (Doc. # 24), and denying Defendant’s Motion to Strike as moot.
Plaintiff’s Motion to Alter or Amend has been fully briefed (Docs. # 32, 33), and is now ripe
for review.
II. ANALYSIS
A.
Plaintiff’s Motion for Reconsideration is Granted, and Defendant’s
Motion to Dismiss for Lack of Personal Jurisdiction is Denied
Plaintiff moves the Court to Alter or Amend its November 23, 2011 Order of
dismissal pursuant to Federal Rule of Civil Procedure 59(e), or to vacate and set aside the
Order pursuant to Rule 60(b). (Doc. # 24). Neither of these rules, however, provide an
appropriate means to challenge a non-final order. Rule 59(e), by its own terms, applies
only to judgments. Likewise, the terms of Rule 60(b) state that it applies only to “final”
orders and judgments. See Mallory v. Eyrich, 922 F.2d 1273, 1277 (6th Cir. 1991); Payne
v. The Courier-Journal, 193 F. App’x 397, 400 (6th Cir. 2006); Browning v. Pennington, No.
08-CV-99-KKC, 2011 WL 197859, at * 2 (E.D. Ky. Jan. 20, 2011). The November 23, 2011
Order granted in part and denied in part Defendants’ Join Motion to Dismiss and was not
a final order. It did not dismiss all of the Defendants, leaving Plaintiff with unresolved
pending claims, and no separate judgment was entered. See Davey v. St. John Health,
297 F. App’x 466, 469 (6th Cir. 2008) (citing Rule 54(b) for the proposition that when a
plaintiff’s case has remaining claims, an order of dismissal as to less than all defendants
is not a final order). At the time Plaintiff filed the instant motion, no final order or judgment
had been entered in this case.
4
The Sixth Circuit has held, however, that “[d]istrict courts have inherent power to
reconsider interlocutory orders and reopen any part of a case before entry of a final
judgment.” Mallory, 922 F.2d at 1282 (citing Marconi Wireless Telegraph Co. v. United
States, 320 U.S. 1, 47-48 (1943)). Under this authority, “[a] district court may modify, or
even rescind, such interlocutory orders.” Id. Although the Federal Rules of Civil Procedure
do not explicitly address the reconsideration of non-final orders, the Sixth Circuit has
indicated, in an unpublished opinion, that reconsideration of such orders is supported by
Rule 54(b). Rodriguez v. Tennessee Laborers Health & Welfare Fund, 89 F. App’x 949,
959 (6th Cir. 2004); see Browning, 2011 WL 197859, at *2. Rule 54(b) states, in relevant
part:
[A]ny order . . . that adjudicates fewer than all the claims or the rights and
liabilities of fewer than all the parties does not end the action as to any of the
claims or parties and may be revised at any time before entry of a judgment
adjudicating all the claims and all the parties’ rights and liabilities.
Fed. R. Civ. P. 54(b). Generally, justification for reconsidering an interlocutory order is
found “when there is (1) an intervening change of controlling law; (2) new evidence
available; or (3) a need to correct a clear error or prevent manifest injustice.” Rodriguez,
89 F. App’x at 959. Plaintiff bases this motion for reconsideration on the need to correct
clear errors of law and fact.
Plaintiff contends that the Court’s November 23, 2011 Memorandum Opinion and
Order (Doc. # 23) contained a clear error suitable for correction through a motion to
reconsider. Specifically, he argues that the Court erred by granting dismissal of Defendant
Lees Leisure for lack of personal jurisdiction, asserting that the Court did not apply the
correct legal standards in evaluating the existence of apparent agency for personal
5
jurisdiction purposes. Plaintiff additionally argues that the Court mis-characterized the
Certificate of Origin, which was provided to him upon the purchase of the trailer. Upon
reconsideration, Plaintiff’s arguments provide sufficient evidence to meet the requirements
at the motion to dismiss stage, and for the Court to therefore amend its prior Order.
1.
Motion to Dismiss Standard
In considering a motion to dismiss made pursuant to Federal Rule of Civil Procedure
12(b)(2), the plaintiff, as the party asserting personal jurisdiction, always bears the burden
of demonstrating that jurisdiction exists. See, e.g., Serras v. First Tenn. Bank Nat’l Assn.,
875 F.2d 1212, 1214 (6th Cir. 1989); CompuServe, Inc. v. Patterson, 89 F.3d 1257, 1262
(6th Cir. 1996). However, when the court evaluates a jurisdictional motion relying solely
on written materials, “the plaintiff should be required only to make a prima facie case of
jurisdiction . . . [and] the burden of the plaintiff is relatively slight.” Am. Greetings Corp. v.
Cohn, 839 F.2d 1164, 1168-69 (6th Cir. 1988); Theunissen v. Matthews, 935 F.2d 1454,
1458 (6th Cir. 1991) (finding that “the plaintiff must make only a prima facie showing that
personal jurisdiction exists in order to defeat dismissal”). Without conducting an evidentiary
hearing, the court resolving a Rule 12(b)(2) motion “must consider the pleadings and
affidavits in a light most favorable to the plaintiff,” CompuServe, 89 F.3d at 1262, and “does
not weigh the controverting assertions of the party seeking dismissal.” Theunissen, 935
F.2d at 1459 (citing Serras, 875 F.2d at 1214). Therefore, “[d]ismissal . . . is proper only
if all the specific facts which the plaintiff . . . alleges collectively fail to state a prima facie
case for jurisdiction.” CompuServe, 89 F.3d at 1262 (citing Theunissen, 935 F.2d at 1459).
6
2.
Apparent Agency
Plaintiff attempts to establish personal jurisdiction over Defendant Lees Leisure
through the application of an actual, or at least an apparent, agency relationship. Plaintiff
asserts that for the purposes of personal jurisdiction, the acts of Lite Tent and Dawkins
should be attributed to Defendant Lees Leisure, for whom they were acting under at least
apparent authority when they sold the trailer to Plaintiff. In his motion, Plaintiff argues that
the Court did not apply the correct legal standard in its prior agency analysis. Specifically,
Plaintiff contends that the Court erroneously weighed the controverting assertions of
Defendants and did not view the facts in a light most favorable to Plaintiff. (Doc. # 24 at
3). Plaintiff also argues that the Court improperly rejected the significance of the Certificate
of Origin and incorrectly attributed its authorship. (Id.). Upon review, the Court agrees that
the previous Order did not view the facts in a light most favorable to Plaintiff and improperly
weighed the controverting assertions of the Defendants in contravention of the proper
standard of review at the motion to dismiss stage. Thus, the Court will reconsider the
existence of an agency relationship for the purpose of establishing personal jurisdiction.
“An apparent or ostensible agent is one whom the principal, either intentionally or
by want of ordinary care, induces third persons to believe to be his agent, although he has
not, either expressly or by implication, conferred authority upon him.” Middleton v. Frances,
77 S.W.2d 425, 426 (Ky. 1934). Although facts supporting an actual agency relationship
have yet to be proven, Plaintiff has presented sufficient evidence to support a prima facie
finding of at least apparent authority.
7
a. Two-Step Test
In its prior Order, the Court misstated Kentucky’s current law regarding apparent
authority in its previous Order by citing the standard in the Third Restatement of Agency.
Although some Kentucky appellate courts have employed the definition of apparent
authority found in the Third Restatement, see, e.g., Laurel Creek Health Care Ctr. v.
Bishop, No. 2009-CA 001055-MR, 2010 WL 985299, at *2 (Ky. Ct. App. Mar. 19, 2010), the
Kentucky Supreme Court has adopted the definition of apparent authority found in the
Restatement (Second) of Agency § 267. The definition states as follows:
One who represents that another is his servant or other agent and thereby
causes a third person justifiably to rely upon the care or skill of such apparent
agent is subject to liability to the third person for harm caused by the lack of
care or skill of the one appearing to be a servant or other agent as if he were
such.
Restatement (Second) of Agency § 267; see Roethke v. Sanger, 68 S.W.3d 352, 363 (Ky.
2001); Paintsville Hosp. Co. v. Rose, 683 S.W.2d 255, 257 (Ky. 1985). This definition
requires that: the principal (here, Lees Leisure) represented that the putative agent (here,
Lite Tent and Dawkins) had the authority to act on its behalf; and that the third party (here,
Plaintiff) justifiably relied on the principal’s representations.
Defendant Lees Leisure suggests, by reference to Curran v. Kwon, No. 83 C 2061,
1985 WL 715, at *2 (N.D. Ill. Apr. 25, 1985), that Plaintiff has failed to provide any specific
facts to satisfy the elements of apparent agency. (Doc. # 18 at 2). In Plaintiff’s Response
to Defendants’ Motion to Dismiss, he asserts that “Lees Leisure advertised in a magazine
circulated in Kentucky in a way that created apparent authority for Lite Tent and Mr.
Dawkins to act and sell units on behalf of Lees Leisure.” (Doc. # 12 at 17). He supports
this argument with reference to specific statements on Lees Leisure’s website and by
8
stating that “[t]he advertisement solicited business from Kentucky residents by encouraging
Kentuckians to call and provided information that could be used to contact an operator that
would provide direct contact information to the caller’s nearest distributor; in this case, Mr.
Dawkins and Lite Tent.” (Id.). Plaintiff further alleges to have relied upon this information
in choosing to contact and conduct business with Lite Tent and Dawkins. (Id.)
To meet the first element of apparent authority, Plaintiff must demonstrate that
Defendant Lees Leisure made representations that Lite Tent and Dawkins had the authority
to act on its behalf.
Plaintiff has attached to his written response copies of the
advertisements which he alleges constitute such representations. The Lees Leisure
advertisement in Wing World magazine identifies their products, then encourages
customers to “[c]all for nearest distributor.” (Doc. # 12-2 at 2). A brochure of Lees Leisure
likewise encourages the reader to “[c]all for a Distributor near you!” (Doc. # 12-3 at 4).
Additionally, the Lees Leisure website states that “We offer factory direct sales,” then
provides a list of “Factory Direct Distributors” and directs the reader to “find listed below a
Distributor near you.” (Doc. # 12-5 at 1, 12) (emphasis added). Listed, among others, is
the name and contact information of Lite Tent and Dawkins. (Id.).4
4
Plaintiff has also attached as an exhibit the business card of Dawkins, labeling Lite Tent
as a “Dealer for Lees-ure Lite Tent Trailers” and an exhibit featuring the content of Lite Tent’s
website (Docs. # 12-4, 12-6). It is important to note, however, that these manifestations are not
relevant to the apparent authority inquiry as “[a]pparent authority is based upon the representation
or conduct of the principal, not of the agent.” Enzweiler v. Peoples Deposit Bank of Burlington, Ky,
742 S.W.2d 569, 570 (Ky. Ct. App. 1987) (citing Savannah Sugar Refinery v. RC Canada Dry, 593
S.W.2d 880, 883 (Ky. Ct. App. 1980)). No evidence has been presented demonstrating that the
business card originated with Defendant Lees Leisure or, alternatively, that Lees Leisure ratified
the statements on the business card and web-site. Therefore, these additional representations will
not be considered at this stage.
9
The instant question, therefore, is whether the representations made by Defendant
Lees Leisure are of the kind which could give rise to apparent authority to sell units on its
behalf.
Defendant highlights the fact that “Lees Leisure and Plaintiff had no direct
communications before this case.” (Doc. # 32 at 3). However, direct contact between the
principal and the third party asserting apparent authority is not required to satisfy this first
element. See, e.g., Papa John’s Int’l, Inc. v. McCoy, 244 S.W.3d 44, 58 (Ky. 2008)
(Lambert, C.J., dissenting) (“Advertising and branding are the common means by which
manifestations of apparent agency are made.”) (citing Billops v. Magness Constr. Co., 391
A.2d 196, 198 (Del. 1978) (“The manifestations may be made directly to the third party, or
may be made to the community in general, for example, by way of advertising.”)).
Comment (a) to section 267 of the Restatement further defines the substance of the
required representations. It states that the rule of apparent agency generally applies where
the plaintiff’s dealing with the alleged agent is “in response to an invitation from the
defendant to enter into such relations.” Restatement (Second) of Agency § 267, cmt. a.
The advertisements and web-site of Defendant Lees Leisure, encouraging viewers to
purchase their products by contacting one of their listed distributors, could be viewed as
such an invitation. Significantly, Defendant Lees Leisure’s website emphasizes that “We
offer factory direct sales” and subsequently lists their “factory direct distributors,” including
Lite Tent. (Doc. # 12-5 at 1, 12) (emphasis added). Viewing these facts in a light most
favorable to Plaintiff and bearing in mind his “relatively slight” burden, Am. Greetings, 839
F.2d at 1169, the Court finds that Plaintiff has alleged sufficient facts to meet the first
element of apparent authority at this stage.
10
The second element necessary to establish the existence of apparent authority is
Plaintiff’s justifiable reliance on the representations made by Defendant Lees Leisure. The
Kentucky courts have held that the necessary “reliance need not be proven by express
testimony but can be proven by circumstantial evidence absent evidence of actual
knowledge to the contrary on the part of the person asserting ostensible agency.” Roethke,
68 S.W.3d at 363 (citing Paintsville Hosp., 683 S.W.2d at 257). Whether this reliance was
justifiable is a question of fact. The party asserting apparent agency, however, “must still
identify facts showing that he reasonably relied upon the ostensible agency relationship to
his detriment.” Middleton v. Hacker, No. 2006-CA-002364-MR, 2007 WL 3122270, at *2
(Ky. Ct. App. Oct. 26, 2007) (citing Roethke, 68 S.W.3d at 363-64). Plaintiff states that he
relied on the advertisements and marketing of Lees Leisure in believing that Lite Tent and
Dawkins were its agents and in consequently choosing to do business with them. (Doc.
# 12 at 17). No evidence has been presented to demonstrate that Plaintiff had any
knowledge that would contradict the existence of an agency relationship, nor that he had
any basis to believe that one did not exist.
Plaintiff’s arguments additionally place great reliance on the certificate of origin that
he received upon purchase of the trailer. (See Docs. # 1, 12, 24). In his Complaint,
Plaintiff states that he “purchased a Lees-ure Lite new motorcycle pull trailer from Lite Tent
and Jimmie Dawkins by Bill of Sale dated 9/25/09, . . . and Plaintiff then received a
certificate of origin . . . .” (Doc. # 1 at 3-4) (emphasis added). Defendant notes that
“Plaintiff did not even see [the certificate] until after he decided to purchase the trailer from
Lite Tent.” (Doc. # 32 at 4). Because Plaintiff states that he did not receive the certificate
until after agreeing to the purchase of the trailer, he cannot also assert that he relied on the
11
information therein when choosing to make such purchase.5 The certificate may have
served, however, to reaffirm Plaintiff’s previous belief that an agency relationship existed
between Defendant Lees Leisure and Defendants Lite Tent and Jimmie Dawkins, though
it was not relied on for the purposes of this determination.
Without consideration of the Certificate of Origin, Plaintiff has alleged that he relied
on the representations of Defendant Lees Leisure made through varying forms of
advertisement. Viewing these facts in a light most favorable to Plaintiff, the Court finds that
Plaintiff has alleged sufficient facts to establish a prima facie showing of justifiable reliance
and, thus, for a finding of apparent authority. Accordingly, the conduct of Lite Tent and
Jimmie Dawkins shall be imputed to their apparent principal, Defendant Lees Leisure, for
the purpose of establishing personal jurisdiction.
b. Effect of Settlement with Purported Agents
In its Response to Plaintiff’s Motion to Alter or Amend, Defendant asserts that “to the
extent that Plaintiff is alleging that Lees Leisure is vicariously liable for the actions of Lite
Tent or Jimmie Dawkins, his claims would fail even if he produced some evidence of an
agency relationship.” (Doc. # 32 at 4). Defendant bases this assertion on Kentucky law
establishing that the “release of an agent from liability also releases the principal.” Waddle
v. Galen of Kentucky, 131 S.W.3d 361, 365 (Ky. Ct. App. 2004) (citing Copeland v.
Humana of Kentucky, Inc., 769 S.W.2d 67 (Ky. Ct. App. 1989)). In Waddle, however, the
court continued, stating that this vicarious release from liability is effected only “insofar as
5
Plaintiff correctly notes that the Court erroneously attributed the source of Plaintiff’s name and
address as it appears on the Certificate of Origin, assigning it to Plaintiff’s own writing rather than that of
Jimmie Dawkins. (Docs. # 23 at 7; 24 at 5).
12
the principal’s liability is derived solely from the agent’s negligence.” Id.
In his Complaint, Plaintiff alleges product-liability claims upon which Defendant Lees
Leisure may be held directly liable (Doc. # 1 at 5-9), therefore Defendant Lees Leisure’s
potential liability arising from Plaintiff’s claims is not solely dependent on any alleged
negligence of its purported agents. Accordingly, the effect of a settlement agreement
between Plaintiff and these apparent agents does not nullify the potential liability of
Defendant Lees Leisure. Additionally, Plaintiff notes in his Reply that the ultimate liability
of Defendant Lees Leisure as to each claim need not be analyzed at this stage as the
matter before the Court is the issue of jurisdiction. (Doc. # 33 at 2).
3.
Personal Jurisdiction
In determining whether a defendant is subject to personal jurisdiction, the Court
must employ a two-step process.
The first step is to determine whether personal
jurisdiction over the defendant would be in accordance with the requirements of Kentucky’s
long-arm statute.6 If jurisdiction may be properly extended under the long-arm statute, the
Court proceeds to the second step. At step two of analysis, the Court examines whether
the exercise of personal jurisdiction would offend the due process rights granted under the
Constitution.
6
Until recently, courts have interpreted the Kentucky long-arm statute to be entirely
subsumed by the federal due process analysis for the exercise of personal jurisdiction over
nonresidents. This notion that personal jurisdiction in Kentucky reaches to the outer limits defined
by federal due process was overturned in Caesars Riverboat Casino, LLC v. Beach, 336 S.W.3d
51 (Ky. 2011). The court in Caesars restored the independent significance of the long-arm statute,
clarifying that “the proper analysis of long-arm jurisdiction over a nonresident defendant consists
of a two-step process.” Caesars, 336 S.W.3d at 57; see Hinners v. Robey, 336 S.W.3d 891, 895
(Ky. 2011). The court further held that “[t]o the extent Wilson, Cummings, and like cases hold
otherwise, they are overruled.” Caesars, 336 S.W.3d at 57.
13
a.
Kentucky Long-Arm Statute
There are nine instances enumerated in Kentucky’s long-arm statute which allow
Kentucky courts to extend personal jurisdiction over a nonresident. Defendant Lees
Leisure argues that the Kentucky long-arm statute does not permit this Court to exercise
personal jurisdiction over it “because the alleged negligence and injury that gave rise to this
claim all occurred outside the Commonwealth.” (Docs. # 11-1 at 4; 32 at 5 (stating that
“there is simply no provision of the Kentucky long-arm statue to establish personal
jurisdiction over Lees Leisure as Plaintiff’s claim does not arise out of any contact that Lees
Leisure had in Kentucky or any activity in the state”)). The fact that the product was
manufactured and allegedly gave rise to an injury outside the Commonwealth, however,
does not preclude jurisdiction under all provisions of the Kentucky long-arm statute.
Plaintiff implicates section (2)(a)(2) of the long-arm statute, asserting that his “claim
arises out of the Defendant, Lees Leisure, manufacturing and transferring its property . .
. to the plaintiff for use in Kentucky.” (Doc. # 24 at 4). This section states that “[a] court
may exercise personal jurisdiction over a person who acts directly or by an agent, as to a
claim arising from the person’s . . . [c]ontracting to supply services or goods in this
Commonwealth.” K.R.S. § 454.210(2)(a)(2). Because Defendant Lees Leisure was not
a direct party to this transaction, the Court must rely on the doctrine of apparent authority
for the basis that Defendant Lees Leisure transferred its property to Plaintiff during the
September 2009 sale.
The Kentucky Supreme Court recently interpreted this provision of the long-arm
statute in a case that is factually similar to the one at hand. In Hinners v. Robey, the court
held that “[a] plain reading of the statutory language produces the interpretation that the
14
contract need not be made or executed ‘in this Commonwealth,’ but, rather, only that the
contract provide for the supplying of services or goods to be transported into, consumed
or used in Kentucky.” 336 S.W.3d 891, 896 (Ky. 2011). That is the situation here. The
parties in Hinners entered into a contract to purchase a vehicle pursuant to an internet
auction. The defendant in that case, a resident of Missouri, had posted the vehicle for sale,
and the plaintiff, a Kentucky resident, had placed the winning bid. The court acknowledged
that the deal was finalized “beyond Kentucky’s border,” but added that “it was anticipated
by the parties from the outset that the vehicle would be transported to and used in
Kentucky.” Id.
The court instructs that these facts “[c]learly” demonstrate that the
defendant’s conduct fell within the purview of this particular provision of the statute.7
The facts here are similar. Pursuant to the advertisements of Defendant Lees
Leisure and its apparent agent, Lite Tent, Plaintiff contacted Dawkins to inquire about their
products. The parties determined that Lite Tent had a Lees Leisure product of the price
and description that Plaintiff was interested in purchasing. Dawkins agreed to hold the unit
for Plaintiff and to meet him at the Gold Wing bike rally in North Carolina, where, if Plaintiff
liked the trailer, he would purchase it. It was at this rally, a mutually convenient location,
that they ultimately finalized the sale. Plaintiff’s allegations demonstrate that Lite Tent
knew, and the parties intended, that the product would be transported back to Plaintiff’s
resident state of Kentucky as its primary place of storage and use. These allegations are
supported by the communications between Plaintiff and Dawkins, and by the listing of
7
The court found that this single contact was sufficient to authorize personal jurisdiction
under the Kentucky long-arm statute, though it ultimately found that the exercise of jurisdiction over
the nonresident would offend the standards of federal due process as it did not satisfy the first and
third prongs of the due process analysis. Hinners, 336 S.W.3d at 899-903.
15
Plaintiff’s address on the Bill of Sale and Certificate of Origin documents. Therefore, it is
evident from “[a] plain reading of the statutory language” that K.R.S. § 454.210(2)(a)(2) is
applicable because Defendant Lees Leisure, through its apparent agent, “contract[ed] to
supply . . . goods in this Commonwealth.” Hinners, 336 S.W.3d at 896. The exercise of
personal jurisdiction over Lees Leisure is therefore authorized by this statute if Plaintiff’s
claim is found to have arisen from this conduct.
Upon a finding that one of the provisions of the long-arm statute is applicable, a
court must additionally determine whether the cause of action is one “arising from” the
conduct identified in that particular provision.
K.R.S. § 454.210(2)(a).
In Caesars
Riverboat Casino, the court rejected the use of a “but for” test, and further instructed that
the “arising from” requirement is satisfied “[i]f there is a reasonable and direct nexus
between the wrongful acts alleged in the complaint and the statutory predicate for long-arm
jurisdiction.” Caesars Riverboat Casino, LLC v. Beach, 336 S.W.3d 51, 58-59 (Ky. 2011);
see also Hinners, 336 S.W.3d at 896-97.
Here, Plaintiff’s complaint alleges product liability claims, maintaining that these
claims arise from the manufacture and sale of the product in question.
Plaintiff
distinguishes the instant facts from those in Caesars, which held that “a slip-and-fall
accident in an Indiana casino could not reasonably be construed as ‘arising from’ the
casino’s ‘transacting business’ in Kentucky by way of advertising and promotional
campaigns.” Hinners 336 S.W.3d at 896 (citing Caesars, 336 S.W.3d at 58). Plaintiff
argues that unlike the tenuous connection in Caesars, the subject goods of the contract for
sale encompassed in section (2)(a)(2) embody the “defective and negligent condition” that
gave rise to Plaintiff’s injury and the basis for his claim. (Doc. # 12 at 9).
16
Given the “unlimited factual possibilities,” the Court “will ultimately have to depend
upon a common sense analysis, giving the benefit of the doubt in favor of jurisdiction.”
Caesars, 336 S.W.3d at 59. A claim to recover for injuries resulting from the use of an
allegedly defective and unreasonably dangerous product as sold to Plaintiff bears a
reasonable and direct nexus to the “[c]ontract[] to supply” those very “goods.” K.R.S. §
454.210(2)(a)(2).
For the reasons stated herein, the exercise of personal jurisdiction over Lees Leisure
is permissible in this case under K.R.S. § 454.210(2)(a)(2). Whether this Court may
ultimately exercise personal jurisdiction over Defendant Lees Leisure consequently
depends upon the result of the federal due process analysis.
b.
Federal Due Process
“The Fourteenth Amendment’s Due Process Clause sets the outer boundaries of a
state tribunal’s authority to proceed against a defendant.”
Goodyear Dunlop Tires
Operations, S.A. v. Brown, 131 S. Ct. 2846, 2848 (2011). Due Process “protects an
individual’s liberty interest in not being subject to the binding judgments of a forum with
which he has established no meaningful ‘contacts, ties, or relations.’” Burger King Corp.
v. Rudzewicz, 471 U.S. 462, 471-72 (1985) (quoting Int’l Shoe Co. v. Washington, 326 U.S.
310, 319 (1945)). In resolving the question of personal jurisdiction, “the constitutional
touchstone remains whether the defendant purposefully established ‘minimum contacts’
in the forum State.” Id. at 474 (quoting Int’l Shoe Co., 326 U.S. at 316). There are two
forms of personal jurisdiction.
General jurisdiction “depends on a showing that the
defendant has continuous and systematic contacts with the forum state sufficient to justify
the state’s exercise of judicial power with respect to any and all claims the plaintiff may
17
have against the defendant.” Kerry Steel, Inc. v. Paragon Indus., Inc., 106 F.3d 147, 149
(6th Cir. 1997) (citing Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 415
n.9 (1984)). Specific jurisdiction, on the other hand, “exposes the defendant to suit in the
forum state only on claims that ‘arise out of or relate to’ a defendant’s contacts with the
forum.” Id. (quoting Helicopteros, 466 U.S. at 414 n.8).
Plaintiff only argues for the application of specific personal jurisdiction. (Doc. # 12
at 21). In Southern Machine Co. v. Mohasco Industries, Inc., the Sixth Circuit implemented
a three prong test to determine the “outerlimits” of personal jurisdiction based upon a
defendant’s single contact with the forum state. Mohasco, 401 F.2d 374, 381 (6th Cir.
1968). These criteria are stated as follows:
First, the defendant must purposefully avail himself of the privilege of acting
in the forum state or causing a consequence in the forum state. Second, the
cause of action must arise from the defendant’s activities there. Finally, the
acts of the defendant or consequences caused by the defendant must have
a substantial enough connection with the forum state to make the exercise
of jurisdiction over the defendant reasonable.
Id. The Court will address each of these criteria in turn.
i.
The Defendant Must Have “Purposefully Avail[ed]”
Himself of the Privilege of Acting or Causing a
Consequence in the Forum State
The first prong of the Mohasco test, “the sine qua non for in personam jurisdiction,”
asks whether the defendant purposefully availed himself of the privilege of acting within the
forum state or causing a consequence therein. Mohasco, 401 F.2d at 381-82. “The
‘purposeful availment’ requirement ‘ensures that a defendant will not be haled into a
jurisdiction solely as a result of random, fortuitous, or attenuated contacts, or of the
unilateral activity of another party or a third person.’” Citizens Bank v. Parnes, 376 F. App’x
18
496, 502 (6th Cir. 2010) (unpublished opinion) (quoting Burger King, 471 U.S. at 475).
Plaintiff asserts that Defendant Lees Leisure purposefully availed itself of the laws of
Kentucky by “advertising directly to Kentucky residents by posting a Kentucky resident’s
positive testimonial on its website and by contracting to sell goods to be used in Kentucky
with known Kentucky residents.” (Doc. # 12 at 21). Defendant Lees Leisure maintains that
their conduct does not meet the requirements of purposeful availment, whether analyzing
their actions alone or in conjunction with those of their purported agent, Lite Tent.
Defendant supports this argument by stating that “they did not conduct business with
Plaintiff in the Commonwealth,” and that Plaintiff concedes that “the injury occurred outside
of the United States.” (Doc. # 11-1 at 11, 16).
The Supreme Court has held that “‘[t]he forum State does not exceed its powers
under the Due Process Clause if it asserts personal jurisdiction over a corporation that
delivers its product into the stream of commerce with the expectation that they will be
purchased by consumers in the forum State’ and those products subsequently injure forum
consumers.” Burger King, 471 U.S. at 473 (quoting World-Wide Volkswagen Corp. v.
Woodson, 444 U.S. 286, 297-98 (1980)); see also J. McIntyre Mach., Ltd. v. Nicastro, 131
S. Ct. 2780, 2789 (2011) (Kennedy, J., plurality) (indicating that “it is the defendant’s
actions, not his expectations, that empower a State’s courts to subject him to judgment”).
That is the situation here. Defendant Lees Leisure manufactured an allegedly defective
product and placed it into the stream of commerce, supported by various forms of
marketing targeted, in part, at residents of Kentucky. The product was eventually sold to
Plaintiff, a Kentucky consumer, by a distributor acting under apparent authority to sell the
product on Defendant’s behalf. This product then allegedly resulted in injury to Plaintiff.
19
The marketing of Defendant and its apparent agent, as well as the ultimate sale, reflect
more than a mere expectation that the product may be purchased by a resident of the
forum. These directed efforts reflect a purposeful intent to reach such a consumer.
Defendant’s reliance on the fact that they have no physical presence in Kentucky
is unavailing. The Supreme Court has stated that “[s]o long as a commercial actor’s efforts
are ‘purposefully directed’ toward residents of another State, we have consistently rejected
the notion that an absence of physical contacts can defeat personal jurisdiction there.”
Burger King, 471 U.S. at 476 (quoting Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 77475 (1984)). A defendant may “be subject to jurisdiction without entering the forum . . . as
where manufacturers or distributors ‘seek to serve’ a given State’s market.” J. McIntyre,
131 S. Ct. at 2788 (Kennedy, J., plurality) (stating that “[t]he defendant’s transmission of
goods permits the exercise of jurisdiction only where the defendant can be said to have
targeted the forum”) (quoting World-Wide Volkswagen, 444 U.S. at 295). The actions of
Defendant and its apparent agents demonstrate such efforts to reach certain groups of
consumers, including residents of Kentucky as one of the specifically targeted markets they
“seek to serve.” World-Wide Volkswagen, 444 U.S. at 295.
The Supreme Court has recently expounded upon the purposeful availment inquiry
in the context of a product-liability suit in J. McIntyre Machinery, Ltd. v. Nicastro, 131 S. Ct.
2780 (2011). The Court, in a plurality opinion, seeks to “reconcile the competing opinions”
in Asahi Metal Industry Co. v. Superior Court of California, adhering to the notion that “‘[t]he
placement of a product into the stream of commerce, without more, is not an act of the
defendant purposefully directed toward the forum State.’” J. McIntyre, 131 S. Ct. at 278889 (Kennedy, J., plurality) (quoting Asahi, 480 U.S. 102, 112 (1987) (O’Connor, J.)).
20
Defendant compares the present facts to those in J. McIntyre, in which the Supreme Court
found that a British manufacturer was not subject to personal jurisdiction in New Jersey
where one of its machines caused injury. In reaching their finding that the foreign
manufacturer had not purposefully availed itself of the laws of the forum, the Court
highlighted the facts that “at no time had [the defendant manufacturer] advertised in, sent
goods to, or in any relevant sense targeted the [forum] State.” J. McIntyre, 131 S. Ct. at
2785. In contrast, the facts here demonstrate that Defendant Lees Leisure has advertised
in, sent goods to, and targeted the Commonwealth of Kentucky in efforts to market and sell
its products.
The Sixth Circuit has also reaffirmed its “‘preference for Justice O’Connor’s stream
of commerce ‘plus’ approach’” from Asahi. Fortis Corporate Ins. v. Viken Ship Mgmt., 450
F.3d 214, 220 (6th Cir. 2006) (quoting Bridgeport Music, Inc. v. Still N The Water Publ’g,
327 F.3d 472, 480 (6th Cir. 2003)).
It is undisputed that Defendant Lees Leisure
manufactured the allegedly defective product in question and placed it in the stream of
commerce.
Plaintiff further argues that Defendant used testimonials from Kentucky
residents in its advertising, and sold the trailer at issue to Plaintiff through its apparent
agent, who entered into the sale with the knowledge and intent to sell to a Kentucky
consumer. Plaintiff relies on these additional actions to establish the requisite “plus”
consistent with Sixth Circuit precedent.
Defendant states that its “only contacts with Kentucky are through its website and
the national magazines in which it advertises,” (Doc. # 11-1 at 2, 13), and argues that
“‘merely advertising in trade publications is not a sufficient basis for establishing personal
jurisdiction.’” (Doc. # 18 at 10) (quoting Majestec 125, LLC v. Sealift, Inc., No. 1:06-cv-104,
21
2006 WL 2039984, at *5 (W.D. Mich. July 19, 2006)). Plaintiff, however, does not rely
solely on Defendant Lees Leisure’s national advertisements in Wing World magazine, nor
on the existence of a commercial web-site, to establish the necessary minimum contacts
with Kentucky and to show Defendant’s intent to target Kentucky consumers. The web-site
and brochure of Defendant Lees Leisure both contain a testimonial of a Kentucky resident,
each expressing satisfaction with their Lees Leisure product. (Docs. # 12-3 at 3; 12-5 at
7). Furthermore, advertisements of Defendant Lees Leisure establish an apparent agency
relationship with its distributor, Lite Tent, whose own website holds itself out as the
“Distributor for the Southeast” and the “Southeast exclusive stocking factory authorized
distributor for the full line of compact camping trailers and accessories manufactured by
[Lees Leisure] Trailers.” (Doc. # 12-6 at 1). It was upon review of these materials that
Plaintiff pursued the purchase of one of the advertised Lees Leisure pull tent trailers.
These marketing efforts do more than create a mere prediction that Lees Leisure products
may be purchased by consumers who are residents of Kentucky. They demonstrate a
clear effort on the part of Defendant Lees Leisure, directly and through its apparent agent,
to attract Kentucky residents to purchase their Kentuckian-approved products.
Additionally, the allegedly defective trailer was sold by Defendant Lees Leisure’s
apparent agent with the intention of selling to a Kentucky resident for Kentucky use.
Plaintiff contacted Lite Tent in response to the above advertisements and Lees Leisure’s
invitation to call a nearby distributor. After discussing Plaintiff’s needs and Lite Tent’s
inventory, Plaintiff and Dawkins agreed to meet at a mutually convenient location to
complete the transaction. At all relevant times, Lite Tent was aware that Plaintiff was a
Kentucky resident, and that upon purchase of the tent trailer, it would return home with him
22
to be stored and primarily used in Kentucky. This additional contact with Kentucky, based
on the success of deliberate marketing efforts by Defendant Lees Leisure, both directly and
through its apparent agent, cannot be considered “‘random, fortuitous, or attenuated.’”
Nationwide Mutual Ins. Co. v. Tryg Int’l Ins. Co., 91 F.3d 790, 795 (6th Cir. 1996) (quoting
Burger King, 471 U.S. at 475).
Defendant also compares the present facts to those in Hinners in an attempt to show
that “a defendant does not purposefully avail himself of the laws of Kentucky by selling a
single vehicle to a Kentucky resident outside the Commonwealth.” (Doc. # 11-1 at 11-12).
In Hinners, the court found that the defendant was not subject to personal jurisdiction in
Kentucky under the federal due process analysis because the fact “[t]hat the buyer’s home
state was Kentucky is a purely fortuitous consequence, not a purposeful choice of [the
seller].” Hinners, 336 S.W.3d at 900. The court highlighted in their analysis that the seller
“did not limit the auction to bidders from Kentucky or target his advertisement to Kentucky
residents, and in fact could not know the resident state of the successful bidder until the
auction was complete.” Id. at 899. The facts here are easily distinguished. The sale of the
product in question was ultimately a result of Defendant’s advertisements, expressly
directed at Kentucky residents, among other targeted consumers, and made in furtherance
of an ongoing business. Furthermore, the transaction was entered into with the knowledge
and understanding that the product was to be taken back to and stored where Plaintiff
resided, in Kentucky. As a result of the marketing efforts and the discussions that took
place prior to Plaintiff and Lite Tent consummating the sale, that the product was
purchased by a Kentucky resident to be primarily used and stored in Kentucky was not
merely a “fortuitous consequence.” Id.
23
Although Plaintiff concedes that he first contacted Lite Tent, this fact is
inconsequential. See Mohasco, 401 F.2d at 382 (finding that the plaintiff’s solicitation to
enter into an agreement was immaterial as defendant made the choice to deal with plaintiff,
and the court “cannot diminish the purposefulness of [defendant]’s choice”) (citing Shealy
v. Challenger Mfg. Co., 304 F.2d 102 (4th Cir. 1962)). The initial phone call by Plaintiff was
made in response to Lees Leisure and Lite Tent advertisements directly targeting
consumers, specifically including Kentucky residents. (Doc. # 12 at 4-5). Defendant’s
apparent agent, Lite Tent, was aware that Plaintiff was a resident of Kentucky and intended
to return home with the trailer. That the transaction was completed in North Carolina was
merely out of convenience to the parties. Plaintiff asserts that Lite Tent was also aware
prior to making the sale that the allegedly defective trailer would be primarily stored in and
used on the roads in Kentucky. Plaintiff has alleged sufficient facts to demonstrate that
Defendant Lees Leisure’s sale of a good into Kentucky through its apparent agent was not
a product of mere chance, but rather a direct result of Kentucky-targeted advertisements,
and the purposeful choice of the seller to make arrangements for the product to be
purchased by a known Kentucky resident.
The fact that the alleged physical injury to Plaintiff occurred outside of Kentucky
does not preclude a finding of purposeful availment. The defendant “may reasonably
foresee being haled into the forum to defend himself . . . when the plaintiff’s injury, although
a ‘consequence’ occurring outside the forum, is also a consequence of the defendant’s
business transactions in the forum.” Theunissen v. Matthews, 935 F.2d 1454, 1460 (6th
Cir. 1991). The injury to Plaintiff resulted from the allegedly unsafe condition of the product
when manufactured and marketed by Defendant Lees Leisure and subsequently sold to
24
Plaintiff by Defendant’s apparent agent, Lite Tent. It is immaterial to this determination that
the ultimate injury occurred beyond Kentucky borders.
Plaintiff has demonstrated sufficient minimum contacts “‘purposefully directed’ . . .
at residents of the forum” such that Defendant Lees Leisure has subjected itself to personal
jurisdiction in the courts of Kentucky for any claims arising out of, or relating to, those
contacts. Burger King, 471 U.S. at 472; see J. McIntyre, 131 S. Ct. at 2789 (“The question
is whether a defendant has followed a course of conduct directed at the society or economy
existing within the jurisdiction.”). Defendant Lees Leisure placed their products into the
stream of commerce with, not only an expectation to reach, but a concerted marketing
effort targeted to reach and attract consumers within this Commonwealth. Through its own
advertisements and sales and those of its apparent agent, Lite Tent, Lees Leisure was
successful in selling to a Kentucky resident the allegedly defective product at issue in this
case. Therefore, Plaintiff has presented sufficient facts to make a prima facie showing that
Defendant Lees Leisure purposefully availed itself of the laws of Kentucky.
ii.
The Cause of Action must “Arise From” the
Nonresident Defendant’s Activities in the Forum
State
The Court proceeds in the second prong to determine whether the cause of action
“arise[s] from” the activities of the nonresident in the forum state. This factor “requires only
‘that the cause of action, of whatever type, have a substantial connection with the
defendant’s in-state activities.’” Third Nat’l Bank in Nashville v. WEDGE Group, Inc., 882
F.2d 1087, 1091 (6th Cir. 1989) (quoting Mohasco, 401 F.2d at 384 n.27). “Only when the
operative facts of the controversy are not related to the defendant’s contact with the state
can it be said that the cause of action does not arise from that [contact].” Mohasco, 401
25
F.2d at 384 n.29.
Plaintiff’s cause of action arises out of injuries received from an allegedly defective
product marketed and sold to him as a resident of Kentucky. Lees Leisure targeted
Kentucky residents in its marketing, and, through its apparent agent, chose to sell its
product to a known Kentucky resident for use and storage in his home state. This conduct
and activity of Defendant Lees Leisure, directed at the Commonwealth, has a substantial
connection to Plaintiff’s claims rooted in the allegedly defective and unreasonably
dangerous nature of this very product.
Defendant relies on the holding in World-Wide Volkswagen, arguing that “it is a
violation of the Due Process Clause to subject manufacturers to personal jurisdiction all
over the Unite [sic] States simply because their product travels through a state.” (Doc. #
18 at 12-13) (citing World-Wide Volkswagen, 444 U.S. 286 (1980)). Defendant’s analogy
to World-Wide, however, is inapplicable as Kentucky is not merely a state which the
product has passed through as a result of the “unilateral activity” of the Plaintiff. See
Hanson v. Denckla, 357 U.S. 235, 253 (1958). Kentucky was known by both buyer and
seller to be the intended primary location for the product upon its sale to Plaintiff. Thus,
following Defendant’s own line of reasoning, Kentucky is a more appropriate choice of
jurisdiction than Canada, a location in which the product merely happened to travel through.
Plaintiff’s product liability cause of action here directly arises out of Lees Leisure’s activities
directed at the forum through the ultimate sale and the targeted advertisements which
induced Plaintiff, a Kentucky resident, to purchase its product for use in his state of
residence.
26
iii.
There Must be Substantial Enough Connection with
the Forum State Such That the Exercise of
Jurisdiction Over Defendant Is Reasonable
The third and final prong in the federal due process analysis requires that the
exercise of personal jurisdiction over a defendant be reasonable. The Sixth Circuit has
held that where the first two prongs of the Mohasco test have been met, “an inference
arises that this third factor is also present.” CompuServe, Inc. v. Patterson, 89 F.3d 1257,
1268 (6th Cir. 1996); see Tharo Sys., Inc. v. Cab Produkttechnik GMBH & Co. KG, 196 F.
App’x 366, 372 (6th Cir. 2006) (noting that a finding that the first two prongs of Mohasco
have been met leads to a presumption that jurisdiction is proper, except in “unusual
cases”). “Once it has been decided that a defendant purposefully established minimum
contacts within the forum State, these contacts may be considered in light of other factors
to determine whether the assertion of personal jurisdiction would comport with ‘fair play and
substantial justice.’” Burger King, 471 U.S. at 476 (quoting Int’l Shoe, 326 U.S. at 320).
In determining whether jurisdiction is reasonable, the Court considers several factors
including “‘the burden on the defendant, the interest of the forum state, the plaintiff’s
interest in obtaining relief, and the interest of other states in securing the most efficient
resolution of controversies.’” CompuServe, 89 F.3d at 1268 (quoting Am. Greetings Corp.
v. Cohn, 839 F.2d 1164, 1169-70 (6th Cir. 1988)). Plaintiff’s interest in obtaining relief is
manifest. Likewise, Kentucky’s interest in this case is straightforward. A Kentucky resident
purchased an allegedly defective product that was at all times intended to be brought back
into and used in Kentucky. This gives rise to an interest on a number of factors, such as
the safety of its residents from the use of defective products, highway safety concerns, and
potential expenses resulting from injury to persons or property from the use of an allegedly
27
defective trailer on Kentucky roads.
In circumstances such as here, where the defendant is a foreign party, “the Supreme
Court has directed us to undertake the reasonableness inquiry giving special weight to the
‘unique burdens placed upon one who must defend oneself in a foreign legal system.’”
Theunissen v. Matthews, 935 F.2d 1454, 1460 (6th Cir. 1991) (quoting Asahi Metal Indus.
Co. v. Superior Court, 480 U.S. 102, 114 (1987)). However, Lees Leisure has not provided
the Court with any reason why defending this case in Kentucky would be unduly
burdensome. Defendant merely states that it is unreasonable to subject it to personal
jurisdiction in Kentucky “because all Defendant[’s] relevant activities occurred in other
states and other countries.” (Doc. # 18 at 14). As stated more extensively herein, even
conduct and activities of Defendant that took place outside of the Commonwealth were
specifically directed, at least in part, at the Commonwealth and its resident consumers.
Defendant again compares these facts to those in Hinners, where the court found
that “in the case of a single contract formed over the Internet and touching upon this
Commonwealth, and when the sale is completed and thereafter each party goes his own
way,” the requirements of due process have not been met. Hinners, 336 S.W.3d at 902.
As previously stated, Hinners involved a private seller transferring a vehicle to a resident
of Kentucky through a single listing in an internet auction with no targeted advertising, “and
in fact [the defendant seller] could not know the resident state of the successful bidder until
the auction was complete.” Id. at 899. Here, however, the sale was the result of
Defendant’s marketing, targeted in part at Kentucky residents, and was made by
“purposeful choice” of Defendant’s apparent agent with the knowledge and intent to sell the
product to a Kentucky resident for use in his home state. Id. at 900. These facts are
28
further distinguished in that Defendant’s advertisements and the resulting sale of its product
was a function of Defendant’s ongoing commercial business.
Defendant further argues that jurisdiction is unreasonable because neither it, nor its
apparent agent, enjoys a “regular supply of customers from Kentucky” in the course of this
business. (Doc. # 18 at 15). However, it is clear from Plaintiff’s allegations that Defendant
and its agent can and do expect business from Kentucky residents, and further, that they
welcome and accommodate that business, even though sales to Kentucky residents may
not comprise a large portion of their annual revenue.8 Where defendants “‘purposefully
derive benefit’ from their interstate activities, it may well be unfair to allow them to escape
having to account in other States for consequences that arise proximately from such
activities.” Burger King, 471 U.S. at 473-74 (internal citations omitted) (quoting Kulko v.
Superior Court of California, 436 U.S. 84, 96 (1978)). Whether the directed advertisements
were successful to the degree intended does not change the fact that Defendant, both
directly and through its apparent agent, reached out to Kentucky to attract the business of
its residents. It was such conduct and activity that resulted in the sale of the allegedly
defective product to Plaintiff, which is at the center of this suit. Thus, it is reasonable to
compel Defendant Lees Leisure to come to the Commonwealth of Kentucky to defend itself
8
According to the affidavit of Dawkins, only two trailers were delivered to Kentucky
locations on behalf of Lite Tent, both in May 2009. (Doc. # 11-3 at 2). The affidavit of Richard
Lees, a Director of Defendant Lees Leisure, states that only one tent trailer has been sold and
shipped to a Kentucky resident through its website. (Doc. # 11-2 at 3). In his response, Plaintiff
has identified a Kentucky recipient of a tent trailer purchased from Lite Tent and delivered in May
2009 who also received a Lees Leisure accessory delivered to his Ludlow, Kentucky home by Lite
Tent in May 2010. Plaintiff has also identified a Kentucky resident who purchased a Lees Leisure
camper from Dawkins on behalf of Lite Tent in July 2007, which was delivered to his Frankfort,
Kentucky home. (Doc. # 12 at 5-6). From Plaintiff’s limited access to transactions in Lees Leisure
and Lite Tent’s sales histories, he has already identified sales into Kentucky beyond those
suggested by Defendant and its apparent agent.
29
against these claims.
Viewing the facts in a light most favorable to Plaintiff, Lees Leisure’s conduct and
activities directed at the forum state are sufficient to establish a prima facie showing that
personal jurisdiction is proper under the Kentucky long-arm statute and consistent with the
requirements of federal due process. Accordingly, the Court vacates its prior Order
granting Defendant Leisure’s motion to dismiss for lack of personal jurisdiction.
B.
Defendant’s Motion to Dismiss for Insufficient Service of Process is
Denied
Upon finding that the Court may exercise personal jurisdiction over Defendant Lees
Leisure, the Court must address Defendant’s Motion to Dismiss for Insufficient Service of
Process pursuant to Federal Rule of Civil Procedure 12(b)(5) (Doc. # 11). Defendant Lees
Leisure, a business entity organized under the laws of Canada, asserts that service was
not made in accordance with the Hague Convention and is therefore ineffective, meriting
dismissal. (Doc. # 11-1 at 16).9 Before a court may exercise personal jurisdiction over a
party, proper service of process must be effectuated. See Sawyer v. Lexington-Fayette
Urban Cnty. Gov’t, 18 F. App’x 285, 287 (6th Cir. 2001) (citing Amen v. City of Dearborn,
532 F.2d 554, 557 (6th Cir. 1976)). Plaintiff “bears the burden of perfecting service of
process and showing that proper service was made.” Id. (citing Byrd v. Stone, 94 F.3d 217,
219 (6th Cir. 1996)).
9
Defendant requests that, as a result of improper service, “this Court quash the summons
and dismiss Plaintiff’s claims against it.” (Doc. # 11-1 at 17). The case on which Defendant relies
on this issue, Collins, cites the Sixth Circuit’s instruction that “‘if the first service of process is
ineffective, a motion to dismiss should not be granted, but the case should be retained for proper
service later.’” Collins v. Westfreight Sys., Inc., No. 7:08-227-KKC, 2009 WL 1036381, at *3 (E.D.
Ky. Apr. 17, 2009) (quoting Stern v. Beer, 200 F.2d 794, 795 (6th Cir. 1953)).
30
Pursuant to the Federal Rules of Civil Procedure, proper service of a foreign
corporation, partnership, or other unincorporated association can be made “by any
internationally agreed means of service that is reasonably calculated to give notice.” Fed.
R. Civ. P. 4(f)(1) and 4(h)(2). This shall include “those [means] authorized by the Hague
Convention[.]” Id. This Court has previously held that the Hague Convention applies to
service of a Canadian corporate defendant, as Canada and the United States are both
parties to the Convention. See Collins v. Westfreight Sys., Inc., No. 7:08-227-KKC, 2009
WL 1036381 (E.D. Ky. Apr. 17, 2009); see also Hague Conference on Private Int’l Law,
http://www.hcch.net (listing the contracting states to the Convention, as well as the effective
date for its provisions and any relevant declarations made by each individual state).
While the parties agree that the Hague Convention applies, Defendant contends that
Plaintiff’s use of certified mail was not a proper means of service under the Convention.
Article 10(a) of the Hague Convention states, “[p]rovided the State of destination does not
object, the present Convention shall not interfere with the freedom to send judicial
documents, by postal channels, directly to persons abroad . . . .” Convention done at The
Hague art. 10(a), Nov. 15, 1965, 20 U.S.T. 361, 658 U.N.T.S. 163, C.T.S. 1989/2. There
is disagreement among the circuits, as well as among the district courts within this circuit,
whether this article allows service of process through postal channels. The Second and
Ninth Circuits have held that “the word ‘send’ in Article 10(a) was intended to mean
‘service’,” thus permitting the use of postal channels as a means of proper service of
process under the Hague Convention. Ackermann v. Levine, 788 F.2d 830, 838-39 (2d Cir.
1986) (holding that “[t]he service of process by registered mail did not violate the Hague
Convention”); see Brockmeyer v. May, 383 F.3d 798, 802 (9th Cir. 2004) (joining the
31
Second Circuit’s holding in Ackermann, finding that “send” in Article 10(a) includes “serve”).
Both circuits viewed this interpretation of “send” as “consistent with the purpose of the
Convention to facilitate international service of judicial documents.” Brockmeyer, 383 F.3d
at 802.
The Fifth and Eighth Circuits, however, have reached a different conclusion. Relying
on “the canons of statutory interpretation,” these circuits have determined that “the Hague
Convention does not permit service by mail.” Nuovo Pignone SpA v. STORMAN ASIA M/V,
310 F.3d 374, 384 (5th Cir. 2002); Bankston v. Toyota Motor Corp., 889 F.2d 172, 174 (8th
Cir. 1989) (concluding that “sending a copy of a summons and complaint by registered mail
to a defendant in a foreign country is not a method of service of process permitted by the
Hague Convention”). Rather, these circuits adhere strictly to the notion that “where a
legislative body ‘includes particular language in one section of a statute but omits it in
another section of the same Act, it is generally presumed that [the legislative body] acts
intentionally and purposely in the disparate inclusion or exclusion.’” Bankston, 889 F.2d
at 174 (quoting Russello v. United States, 464 U.S. 16, 23 (1983)). This analysis, however,
ignores the overwhelming evidence demonstrating a contrary intent of the drafters.
In its motion, Defendant relies on the decision in Collins v. Westfreight Systems for
the proposition that certified mail is not a proper means of service upon a Canadian
corporation. Collins, 2009 WL 1036381, at *2. As a matter of first impression in the
Eastern District of Kentucky, the court in Collins followed a decision in the Western District
of Kentucky concluding that “such service was not permitted under Article 10(a) because
the Hague Convention distinguishes between the terms ‘send’ and ‘service,’ and since
Article 10(a) uses the term ‘send,’ service of process cannot be completed by mail.”
32
Collins, 2009 WL 1036381, at * 2 (citing Uppendahl v. Am. Honda Motor Co., 291 F. Supp.
2d 531, 534 (W.D. Ky. 2003)).10 Defendant also notes a divergent outcome from this
district in Orms v. Takeda Pharmaceuticals America, Inc., but concludes that the result is
based solely on the fact that the defendant was a resident of Japan and “[w]hether a
defendant can be served via certified mail is a country-specific inquiry.” (Doc. # 11-1 at 17
n.1); see Orms v. Takeda Pharm. Am., Inc., No. 10-160-JMH, 2010 WL 2757760 (E.D. Ky.
July 12, 2010). To the extent that the Court in Orms was interpreting the plain meaning of
Article 10(a), however, it was not making a country-specific determination.
Though this issue is still unsettled, and in the absence of controlling Sixth Circuit
authority, the Court will follow the sound decision reached in a number of the circuits, as
well as within this district, that the term “send” as used in Article 10(a) of the Hague
Convention was intended to include service of process. See Ackermann, 788 F.2d at 838
(2d Cir. 1986); Brockmeyer, 383 F.3d at 802-03 (9th Cir. 2004); Research Sys. Corp. v.
IPSOS Publicite, 276 F.3d 914, 926 (7th Cir. 2002) (noting that “simple certified mail . . .
[is] a method [of service] permitted by Article 10(a) of the Hague Convention, so long as
the foreign country does not object”). The use of postal channels is a proper means of
service under Article 10(a) of the Hague Convention, provided that the State of destination
does not object.
This position is in line with Orms, the most recent precedent in this Court. In Orms,
the Court adhered to “the well-reasoned opinion in Sibley v. Alcan, 400 F. Supp. 2d 1051
10
In choosing to follow the Uppendahl decision, the Court noted that the plaintiff presented
no argument on the issue of interpretation of Article 10(a), maintaining only that the Hague
Convention did not apply. Collins, at * 2.
33
(N.D. Ohio 2005). The court in [Sibley] concluded that ‘[i]f Article 10(a) were intended only
to preserve the right to use postal channels for non-service correspondence, it would be
out of place in Article 10, chapter [1], and indeed in the Hague Convention itself[,]’ because
the purpose of the Hague Convention was to create agreements related to service of
process.”11 Orms, 2010 WL 2757760, at *2 (quoting Sibley, 400 F. Supp. 2d at 1054).
Statements from delegates representing Member States of the Convention, as well as
“[c]ommentaries on the history of negotiations leading to the Hague Convention further
indicate that service by mail is permitted under Article 10(a).” Brockmeyer, 383 F.3d at
802.
Signatories to the Hague Convention have repeatedly voiced their agreement with
the holdings that interpret Article 10(a) to permit service of process via postal channels.
The Practical Handbook, summarizing the findings of a “Special Commission of Experts,”
notes divergent interpretations, and comments that decisions holding that Article 10(a) does
not apply to service of process “‘contradict what seems to have been the implicit
understanding of the delegates . . . and indeed of the legal literature on the Convention and
its predecessor treaties.’” Brockmeyer, 383 F.3d at 803 (quoting Permanent Bureau of The
Hague, Practical Handbook on the Operation of the Hague Convention of 15 November
1965 on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial
Matters 44 (2d ed. 1992)). Furthermore, at the 2003 meeting of the Special Commission
11
Although the court in Sibley mistakenly refers to the content of Article 10 as residing in
chapter 2 of the Hague Convention, it is actually found in chapter 1, titled “Judicial Documents.”
The source of this statement as quoted in Sibley correctly makes this identification. See R. Griggs
Grp. Ltd. v. Filanto Spa, 920 F. Supp. 1100, 1105 (D. Nev. 1996). The mere typographical error
in Sibley in reproducing this quote does not affect the court’s otherwise sound analysis.
34
on the Practical Operation of the Hague, the Commission “reaffirmed its clear
understanding that the term ‘send’ in Article 10(a) is to be understood as meaning ‘service’
through postal channels.”
Permanent Bureau of The Hague, Conclusions and
Recommendations Adopted by the Special Commission on the Practical Operation of the
Hague Apostille, Evidence and Service Conventions, ¶ 55 (Oct. 28 - Nov. 4, 2003). The
opening language of Article 1 of the Hague Convention explicitly states that “[t]he present
Convention shall apply in all cases, in civil or commercial matters, where there is occasion
to transmit a judicial or extrajudicial document for service abroad.” Convention done at The
Hague art. 1 (emphasis added). In an effort to give full effect to the drafters’ intent, the
definition of “send” must be interpreted to include the service of process.
Under this widely supported interpretation of Article 10(a), Plaintiff’s use of certified
mail to serve Canadian Defendant Lees Leisure is proper as Canada has not stated its
objection to the use of postal channels for service of process as provided for under this
article.12 Therefore, Defendant’s motion to dismiss for insufficient service of process is
12
See Sibley v. Alcan, Inc., 400 F. Supp. 2d 1051, 1054-55 (N.D. Ohio 2005) (holding that
“service of process by registered mail . . . to a Canadian defendant is permitted by Article 10(a) of
the Hague Convention”); TracFone Wireless, Inc. v. Does, No. 11-cv-21871-MGC, 2011 WL
4711458, at *4 (S.D. Fla. Oct. 4, 2011) (finding that “Canada does not object to Article 10(a) and,
accordingly, permits service by international express mail”); Girafa.com, Inc. v. Smartdevil Inc., 728
F. Supp. 2d 537 (D. Del. 2010) (“Under Article 10 of the Hague Convention, Canada does not object
to service by postal channels.”); McCormick v. Apache, Inc., No. 5:09CV49, 2009 WL 2985470, at
*2 (N.D.W.Va. Sept. 15, 2009) (stating that “Canada, the destination country in this case, does not
object to service under Article 10"); Anderson v. Canarail, Inc., No. 05 Civ. 3828(HB), 2005 WL
2454072, at *4 (S.D.N.Y Oct. 6, 2005) (finding that pursuant to the Hague Convention, “service of
process by registered mail upon [the defendant] in Canada was a proper means of service”); see
also Hague Conference on Private Int’l Law, http://www.hcch.net, Convention of 15 November
1965, Status Table, Canada, Declarations (listing the test of Canada’s declarations, including those
to “[t]ransmission through postal channels,” and stating that “Canada does not object to service by
postal channels” as permitted in Article 10(a)).
35
denied.13
III. CONCLUSION
For the reasons stated herein, IT IS ORDERED as follows:
1)
Plaintiff’s Motion to Alter or Amend (Doc. # 24) be, and is is hereby
GRANTED;
2)
The Court’s prior Order (Doc. # 23) is hereby VACATED;
3)
Defendant Lees Leisure’s Motion to Dismiss for Lack of Personal Jurisdiction
and for Insufficient Service of Process (Doc. # 11) is hereby DENIED; and
4)
Defendant Lees Leisure shall file its Answer within twenty (20) days of the
date of the entry of this Order.
This 28th day of February, 2012.
G:\DATA\Opinions\Covington\2011\11-125 MOO Vacating Order & Denying D's MTD.wpd
13
The Court previously denied Defendant’s Motion to Strike Exhibit 16 to Plaintiff’s
Response (Doc. # 17) as moot. (Doc. # 23). This exhibit was presented by Plaintiff in support of
his argument that service upon Defendant was proper and in accordance with the provisions of the
Hague Convention, specifically Article 10(a). It contains an e-mail and pages printed from the
Hague Convention website regarding Canada’s declarations. (Doc. # 12-16). The content of
Plaintiff’s Exhibit 16, however, was unnecessary to the Court’s determination that service of process
is appropriate under Article 10(a) of the Hague Convention. Moreover, the fact that Canada does
not object to such means of service is well documented in case law. See cases cited supra note
12. The documents comprising Plaintiff’s Exhibit 16 were therefore not considered by the Court,
and thus any continuing objection to this exhibit by Defendant remains moot.
36
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