Hall v. Rag-O-Rama LLC
Filing
31
MEMORANDUM OPNION AND ORDER; 1)Defendnat's 13 FIRST MOTION to Dismiss for Lack of Jurisdiction by Rag-O-Rama LLC is DENIED. 2)Defendant to file its answer w/in 20 days of this Memorandum Opinion and Order. 3)To the extent not already completed, parties to conduct their Rule 26 conference and filing their Rule 26(f) Report Of Planning Meeting by 2/8/2019. Signed by Judge David L. Bunning on 1/8/2019.(LST)cc: COR
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
NORTHERN DIVISION
AT COVINGTON
CIVIL ACTION NO. 18-12-DLB-CJS
SALLY HALL
v.
PLAINTIFF
MEMORANDUM OPINION AND ORDER
RAG-O-RAMA, LLC
DEFENDANT
*** *** *** ***
Plaintiff Sally Hall brings a number of common-law claims against her former
employer, Rag-O-Rama, LLC, including wrongful termination, breach of her employment
contract, tortious interference with a business relationship, intentional and/or negligent
infliction of emotional distress, and fraudulent inducement. (Doc. # 6). Hall seeks, among
other things, reinstatement, lost wages, and compensatory and punitive damages. Id.
Defendant has moved to dismiss for lack of personal jurisdiction, arguing that none of its
contacts with Kentucky fall within one of the enumerated categories in Kentucky’s longarm statute and that the exercise of personal jurisdiction would violate federal due
process. (Doc. # 13). In the alternative, Defendant argues that the case should be
dismissed for improper venue. Id. The matter is fully briefed and ripe for review. (Docs.
# 23 and 30). For the reasons set forth herein, Defendant’s Motion to Dismiss is denied.
I.
FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff Sally Hall is a citizen of Kentucky and resides in Falmouth, Kentucky.
(Doc. # 6 ¶ 2). Defendant Rag-O-Rama is an Ohio limited liability company with its
principal place of business in Columbus, Ohio. Id. ¶ 3. At least one of its corporate
officers resides in Georgia. Id. Rag-O-Rama operates resale clothing stores in Ohio and
Georgia. (Docs. # 13 at 2 and 23-1 ¶ 6). Rag-O-Rama does not have a physical presence
in Kentucky and does not sell merchandise in Kentucky. (Docs. # 13 at 2 and 23-1 ¶ 6).
Plaintiff was a salaried employee of Rag-O-Rama on a part-time basis as a Trainer
from August 21, 2015 to June 13, 2016 and thereafter on a full-time basis as Area
Manager until her effective termination date of January 10, 2017. (Doc. # 6 ¶ 5). During
this entire time period, Hall worked predominantly from her home in Falmouth, Kentucky.
(Docs. # 6 ¶ 6 and 23-1 ¶¶ 2, 10). Hall had also previously worked at Rag-O-Rama from
1999-2003, where she “helped to develop its original business model, designed its
artwork and logos, helped to develop its original training and employee materials, and
operated its store in St. Louis, Missouri.” (Doc. # 6 ¶ 8).
Hall claims that Rag-O-Rama’s CEO Vance Whitener actively recruited her to work
at Rag-O-Rama. (Doc. # 6 ¶¶ 9, 11, 16). Specifically, Plaintiff alleges that Whitener
initiated phone calls to her in Kentucky requesting that she rejoin Rag-O-Rama, first on a
part-time basis in 2015 and then again on a full-time basis in 2016. (Doc. # 23-1 ¶ 4).
Defendant disputes this, claiming instead that Hall asked Whitener to hire her. (Doc. #
13-1 ¶ 8). Plaintiff further claims that she accepted Whitener’s offers of employment on
the phone. (Doc. # 23-1 ¶ 4). Plaintiff’s Trainer and Area Manager positions were
memorialized in two employment contracts, which were executed on September 18, 2015
and June 14, 2016, respectively. See (Docs. # 13-3 at 3 and 13-5).
The facts and circumstances surrounding Hall’s 2016 Area Manager contract are
as follows. Whitener sent a signed copy of the contract to Hall at her home in Kentucky,
which Hall then signed, scanned, and emailed back to Whitener at his home in Georgia.
2
(Doc. # 23-1 ¶ 5). The contract stated that Defendant would pay Plaintiff an annual salary
of $51,000 plus quarterly bonuses of $3,600 as well as other benefits. (Docs. # 6 ¶ 13
and # 13-5). Plaintiff claims that the contract, which went into effect on June 13, 2016,
required Hall to stay employed at Rag-O-Rama for at least one year, after which the
employment relationship was “at will.” (Docs. # 6 ¶¶ 12, 15 and # 23-1 ¶ 5). By contrast,
Defendant asserts that the employment contract was “at will” from the beginning. (Doc.
# 13-1 ¶ 9). As an Area Manager, Hall became one of three executives at Rag-O-Rama,
the other two being Whitener and Vice President Jorge Maymo. (Doc. # 23-2).
Rag-O-Rama hired Hall “with the express understanding and agreement that her
work would primarily be performed remotely from her residence in Falmouth, Kentucky.”
(Doc. # 6 ¶ 17); see (Doc. # 13-7 at 5). In addition, Defendant signed the contract with
Hall knowing that she “was a single mother who had custodial responsibilities for a minor
child and grandchild that required her to physically reside and be present in Falmouth,
Kentucky.” (Doc. # 6 ¶ 21). Nevertheless, Defendant at certain times communicated to
Hall its desire that she spend as much time as possible in Columbus. See (Doc. # 23-5).
As Area Manager for Rag-O-Rama, Hall’s primary responsibility was to manage
Defendant’s Columbus, Ohio store remotely by video feeds and through email and
telephone communications from her residence in Falmouth, Kentucky. (Docs. # 6 ¶ 19
and 23-1 ¶ 8). Defendant shipped a computer, monitor, and cellular telephone to Hall’s
home in Falmouth, Kentucky to enable her to manage the Columbus, Ohio store remotely.
(Doc. # 6 ¶ 8). Hall performed the “vast majority” of her work for Rag-O-Rama from her
home in Kentucky via the cameras and phone that Defendant provided. (Doc. # 23-1 ¶
10). Plaintiff would also make occasional visits to the Columbus store and sometimes
3
stayed in Columbus overnight in an apartment provided by Rag-O-Rama. (Doc. # 23-1 ¶
11). Hall was reimbursed for any travel expenses when visiting the store. Id. ¶ 8.
Not long after Hall started working full-time in June 2016, the employment
relationship began to sour. Hall’s three-month review listed a number of deficiencies in
her job performance. See (Doc. # 13-7). On January 10, 2017, Rag-O-Rama gave Hall
a “performance improvement plan” and “final warning,” listing a number of areas in which
Hall was not meeting expectations. See (Doc. # 13-8). Hall disputed Rag-O-Rama’s
account of her work performance and refused to sign the personal improvement plan.
See (Docs. # 6 ¶ 23 and 13-8 at 5). By letter dated January 12, 2017 and addressed to
Plaintiff’s home address in Kentucky, Rag-O-Rama informed Hall that she was terminated
effective January 10, 2017. See (Docs. # 6 ¶¶ 26-27 and 23-7).
Plaintiff filed a Complaint on January 10, 2018 (Doc. # 1) and an Amended
Complaint on January 24, 2018. (Doc. # 6). In her Amended Complaint, Plaintiff brings
claims for wrongful discharge, breach of contract, breach of fiduciary duty, breach of
warranty, fraudulent inducement, tortious interference with a contractual relationship, and
negligent and/or intentional infliction of emotional distress. Id. On March 21, 2018,
Defendant filed a motion to dismiss for lack of personal jurisdiction and improper venue.
(Doc. # 13). On May 17, 2018, Plaintiff filed a Response accompanied by an affidavit.
(Docs. # 23 and 23-1). Defendant filed a Reply on June 11, 2018. (Doc. # 30).
II.
ANALYSIS
A.
Standard of Review
When a defendant brings a Rule 12(b)(2) motion to dismiss, the burden is on the
plaintiff to establish personal jurisdiction. Theunissen v. Matthews, 935 F.2d 1454, 1458
4
(6th Cir. 1991). The plaintiff cannot meet her burden by simply pointing to the pleadings,
“but must, by affidavit or otherwise, set forth specific facts showing that the court has
jurisdiction.” Id. A court views the pleadings and affidavits in the light most favorable to
the plaintiff and “does not weigh the controverting assertions of the party seeking
dismissal.” Id. at 1459. When the court has not conducted an evidentiary hearing,3 a
plaintiff need only make a prima facie showing of personal jurisdiction, Neogen Corp. v.
Neo Gen Screening, Inc., 282 F.3d 883, 887 (6th Cir. 2002), making this burden “relatively
slight,” Estate of Thomson v. Toyota Motor Corp. Worldwide, 545 F.3d 357, 360 (6th Cir.
2008). Surviving a Rule 12(b)(2) motion does not relieve a plaintiff of her burden to prove
jurisdiction by a preponderance of the evidence, should the defendant later raise the
issue. Serras v. First Tenn. Bank Nat’l Ass’n, 875 F.2d 1212, 1214 (6th Cir. 1989).
B.
Hall has made a prima facie case of personal jurisdiction.
In diversity actions such as this one, “federal courts must look to the law of the
forum state to determine the reach of the district court’s personal jurisdiction over parties,
subject to constitutional due process requirements.”
Air Prods. & Controls, Inc. v.
Safetech, Int’l, Inc., 503 F.3d 544, 550 (6th Cir. 2007). Therefore, the exercise of personal
jurisdiction must be proper both under Kentucky’s long-arm statute and the federal Due
Process Clause. See id. The Kentucky Supreme Court has held that the state’s longarm statute (Ky. Rev. Stat. § 454.210) does not reach the outer limits of the Due Process
Clause. Caesars Riverboat Casino, LLC v. Beach, 336 S.W.3d 51, 57 (Ky. 2011).
3
Neither party has requested an evidentiary hearing.
5
Therefore, the Court must determine if personal jurisdiction is proper under Kentucky’s
long-arm statute and then conduct the federal due process analysis.
1.
Kentucky’s long-arm statute
Kentucky’s long-arm statute lists nine enumerated categories of conduct that form
the basis for personal jurisdiction. See Ky. Rev. Stat. § 454.210(2)(a). The long-arm
statute also contains a separate requirement that a plaintiff’s claim “arise from” the
enumerated conduct. See id. § 454.210(2)(b); Caesars, 336 S.W.3d at 58-59. Plaintiff
relies on the statute’s first enumerated category, which permits a Kentucky court to
exercise personal jurisdiction over a defendant who has “[t]ransact[ed] any business in
this Commonwealth.” Ky. Rev. Stat. § 454.210(2)(a)(1); see (Doc. # 23 at 4).
i. Defendant has transacted business in Kentucky.
Since the decision in Caesars, which held that Kentucky’s long-arm statute is not
coterminous with due process, “there is little [state] case law interpreting the meaning of
‘transacting business’ as used in [Ky. Rev. Stat. §] 454.210(2) . . . .” Gentry v. Mead, No.
16-100-DLB-CJS, 2016 WL 6871252, at *3 (E.D. Ky. Nov. 21, 2016). Nevertheless,
numerous federal courts in Kentucky have recently construed Ky. Rev. Stat. §
454.210(2)(a)(1) and have taken several different approaches. For instance, some courts
have looked to the plain meaning of “transacting business.” “Black’s Law Dictionary
defines ‘transact’ as ‘[t]o carry on or conduct (negotiations, business, etc.) to a
conclusion.’” Childress Cattle, LLC v. Cain, No. 3:17-cv-388-JHM, 2017 WL 3446182, at
*3 (W.D. Ky. Aug. 10, 2017) (quoting Aces High Coal Sales, Inc. v. Cmty. Tr. & Bank of
W. Georgia, No. CV 15-161-DLB-HAI, 2017 WL 3122661, at *14 (E.D. Ky. July 21, 2017)).
6
Other courts have asked whether there has been “a course of direct, affirmative
actions within a forum that result in or solicit a business transaction.” Gentry, 2016 WL
6871252, at *3 (quoting Modern Holdings, LLC v. Corning, Inc., No. 13-cv-405, 2015 WL
1481443, at *6 (E.D. Ky. Mar. 31, 2015)). Under this approach, an “isolated contract[]”
with a Kentucky resident does not alone constitute transacting business. Id. (quoting
Modern Holdings, 2015 WL 1481443, at *6). Thus, a non-resident defendant who enters
into a one-time lending agreement with a Kentucky resident has not transacted business
in Kentucky. Id. Similarly, the Kentucky long-arm statute does not extend to a Tennessee
defendant that communicated several times with a Kentucky plaintiff by telephone and
email but that provided services for the plaintiff exclusively in Tennessee.
See
Envirometric Process Controls, Inc. v. Adman Elec., Inc., No. 3:12-cv-62-S, 2012 WL
4023789, at *2-3 (W.D. Ky. Sept. 12, 2012). In contrast, a non-resident defendant that
establishes an office in Kentucky, has an employee who conducts business out of that
office, and pays that employee for his work in Kentucky is subject to long-arm jurisdiction
in Kentucky. Gentry, 2016 WL 6871252, at *3.
Finally, in determining the meaning of Ky. Rev. Stat. § 454.210(2)(a)(1), at least
two district courts in Kentucky have relied on the Sixth Circuit’s interpretation of
Michigan’s long-arm statute, which contains the identical phrase “transacting any
business.” See, e.g., Power Invs., LLC v. Becker, No. 5:18-466-DCR, 2018 WL 4390722,
at *2-3 (E.D. Ky. Sept. 14, 2018); Eat More Wings, LLC v. Home Mkt. Foods, Inc., 282 F.
Supp. 3d 965, 969 (E.D. Ky. 2017) (Bertelsman, J.). The Sixth Circuit has held that the
“use of the word ‘any’ . . . establishes that even the slightest transaction is sufficient to
bring a corporation within [the forum’s] long-arm jurisdiction.” Eat More Wings, 282 F.
7
Supp. 3d at 969 (alteration and emphasis in original) (quoting Beydoun v. Wataniya
Rests. Holding, Q.S.C., 768 F.3d 499, 504-05 (6th Cir. 2014)). Accordingly, in Becker,
the court found that defendants transacted business within the meaning of Kentucky’s
long-arm statute “because they called, texted, and sent e-mails to a Kentucky resident
and asked him to wire money, which he did from Kentucky.” 2018 WL 4390722, at 3.
Likewise, the court in Eat More Wings found the “transacting business” prong satisfied
when defendant had sent emails to a Kentucky resident, knowing he was in Kentucky,
and asked him to “send samples and instructions for his products, which [plaintiff] fulfilled
from Kentucky.” 282 F. Supp. 3d at 970.
The Court finds that, under any of the three approaches outlined above, Rag-ORama has transacted business in Kentucky. Plaintiff has put forth facts showing that
Defendant purposefully reached out to Plaintiff in Kentucky in order to begin a substantial
and long-term business relationship.
Specifically, Defendant contacted Plaintiff in
Kentucky to ask her to work for Rag-O-Rama and sent the employment contract to Plaintiff
in Kentucky, where Plaintiff signed it. (Doc. # 23-1 ¶¶ 4-5). Defendant did all this knowing
that Plaintiff would be working primarily from her home in Kentucky. Id. ¶ 7. Throughout
the course of the employment relationship, which lasted approximately one and a half
years, Defendant frequently contacted Plaintiff in Kentucky by phone, email, and regular
mail. See, e.g., id. ¶¶ 5, 8, 13. In addition, Defendant sent a computer, monitor, and
cellular phone to Hall’s residence in Kentucky to enable her to work remotely from her
home. Id. ¶ 8.
Therefore, by recruiting and hiring Plaintiff in Kentucky and maintaining an active
business relationship with Plaintiff in Kentucky, Defendant’s conduct fits within the plain
8
meaning of “transacting” business in Kentucky, which is defined as “carry[ing] on [and]
conduct[ing] negotiations, business, etc. to a conclusion.” Childress Cattle, 2017 WL
3446182, at *3 (internal parentheses omitted) (quoting Black’s Law Dictionary).
In
addition, Defendant has exhibited the “course of direct, affirmative actions within a forum
that result[ed] in . . . a business transaction.” Gentry, 2016 WL 6871252, at *3. Lastly,
Defendant’s acts of calling, emailing, and mailing Plaintiff in Kentucky as they related to
an ongoing contractual relationship are plainly sufficient under the Sixth Circuit’s “slightest
transaction” test. See Eat More Wings, 282 F. Supp. 3d at 969.
Defendant argues that the Court has no personal jurisdiction under the “transacting
any business” category of Kentucky’s long-arm statute because Rag-O-Rama “derives
no revenue from Kentucky and everything plaintiff did for Rag-O-Rama was directed at
operations in Ohio and Georgia.” (Doc. # 30 at 4). Defendant defines “business” too
narrowly, however. While Defendant does not sell its products in Kentucky, it can hardly
be denied that the recruitment and hire of a Kentucky executive-level employee to work
almost exclusively in Kentucky qualifies as “transacting any business in this
commonwealth.” Ky. Rev. Stat. § 454.210(2)(a)(1); see Gentry, 2016 WL 6871252, at *3
(“Actions such as leasing office space, hiring an employee, and executing contracts fit
squarely within the ordinary meaning of transacting business.”).
Indeed, Kentucky caselaw supports the conclusion that employing workers or
having agents in Kentucky constitutes “transacting business” under the long-arm statute.
See, e.g., Cooper v. Nair, No. 2013-CA-001746-MR, 2015 WL 128549, at *4 (Ky. Ct. App.
Jan. 9, 2015) (declining to exercise long-arm jurisdiction because defendant “has no
agents or employees working on its behalf in Kentucky”); Davis v. Wilson, 619 S.W.2d
9
709, 710 (Ky. Ct. App. 1980) (holding that a nonresident defendant’s “hiring and working
[plaintiff] in Kentucky were transactions of business in Kentucky”); Tube Turns Div. of
Chemetron Corp. v. Patterson Co., 562 S.W.2d 99, 99-100 (Ky. Ct. App. 1978) (noting
that defendant “has no employees or agents in Kentucky” in finding that the defendant
had not transacted any business in Kentucky within the meaning of the long-arm statute).
Thus, the Court finds that Defendant has transacted business in Kentucky.
ii.
Plaintiff has met the “arising from” requirement.
Hall’s claims also “aris[e] from” Rag-O-Rama transacting business in Kentucky as
required under the Kentucky long-arm statute. Ky. Rev. Stat. § 454.210(2)(b). 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-armjurisdiction.” Caesars, 336 S.W.3d at 59. Here, the alleged breach of contract and
alleged torts all stem from Defendant’s employment relationship with Plaintiff that
establishes personal jurisdiction under Ky. Rev. Stat. § 454.210(2)(a)(1). Thus, the Court
finds the Kentucky long-arm statute satisfied and now turns to whether personal
jurisdiction is permitted under federal due process.
2.
Due process
To establish personal jurisdiction over an out-of-state defendant, the plaintiff must
establish “certain minimum contacts with [the forum] such that maintenance of the suit
does not offend ‘traditional notions of fair play and substantial justice.’” Air Prods., 503
F.3d at 549 (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). “Depending
on the type of minimum contacts in a case, personal jurisdiction can either be specific or
10
general.” Id. at 549-50. Because the Court finds that it has specific personal jurisdiction
over Defendant, it does not consider the issue of general jurisdiction. See id. at 550.
A specific jurisdiction analysis involves a three-part test established by the Sixth
Circuit in Southern Machine Co. v. Mohasco Industries, Inc., 401 F.2d 374 (6th Cir. 1968).
First, a defendant must have purposefully availed itself of the privilege of acting in the
forum state or causing a consequence there. Air Prods., 503 F.3d at 550. Second, the
cause of action must arise from the defendant’s activities in the forum state. Id. Finally,
the defendant’s acts or the consequences caused by those acts must have a substantial
enough connection with the forum state to make the exercise of jurisdiction over
Defendant reasonable. Id. The first prong—purposeful availment—is the “sine qua non
for in personam jurisdiction” and is therefore “arguably the most important.” Id. (quoting
Mohasco, 401 F.2d at 381-82).
i.
Purposeful availment
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." Burger
King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985) (quotation marks and citation
omitted).
Purposeful availment is present when a defendant creates a “substantial
connection” with the forum state such that he “should reasonably anticipate being haled
into court there.” Id. at 474-75 (citations omitted). “With respect to interstate contractual
obligations, the Supreme Court has emphasized that parties who ‘reach out beyond one
state and create continuing relationships and obligations with citizens of another state are
subject to regulation and sanctions for the consequences of their activities.’” Air Prods.,
503 F.3d at 551 (quoting Burger King, 471 U.S. at 473). A defendant need not be
11
physically present in a state in which business is conducted “[s]o long as a commercial
actor’s efforts are ‘purposefully directed’ toward residents of another State.” Burger King,
471 U.S. at 476 (quoting Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 774 (1984)).
Although contracting with an out-of-state party alone does not automatically
establish minimum contacts, “the presence of certain factors in addition to the contract
will be found to constitute purposeful availment.” Air Prods., 503 F.3d at 551 (citing
Burger King, 471 U.S. at 478-79).
These factors include “prior negotiations and
contemplated future consequences, along with the terms of the contract and the parties'
actual course of dealing.” Burger King, 471 U.S. at 479.
In addition to these guiding principles set forth by the Supreme Court, two themes
emerge from Sixth Circuit caselaw. First, a one-time transaction with a plaintiff in the
forum state is unlikely to be sufficient under the Due Process Clause. However, a
defendant who maintains “a continuing business relationship” with a plaintiff in the forum
state has purposefully availed itself of the forum’s laws. Air Prods., 503 F.3d at 551. To
illustrate, the Sixth Circuit in Cole v. Mileti, 133 F.3d 433, 435 (6th Cir. 1998) found
purposeful availment where the defendant had negotiated a surety agreement with the
plaintiff in Ohio and maintained an ongoing business relationship with the Ohio plaintiff
for over ten years. Similarly, in Air Products, a defendant who had purchased goods from
an Ohio corporation for almost nine years was found to have purposefully availed itself of
the privilege of causing a consequence in Ohio. 503 F.3d at 551.
By contrast, the Sixth Circuit held that a California defendant that negotiated an
employment contract with an Ohio plaintiff and exchanged emails, phone calls, and faxes
with the plaintiff in Ohio did not have minimum contacts with Ohio because the plaintiff
12
relocated to California soon after the contract was signed. See Condon v. Flying Puck,
LLC, 35 F. App’x 173, 174 (6th Cir. 2002). In a similar case, the Sixth Circuit affirmed a
dismissal for lack of personal jurisdiction despite the defendant actively negotiating an
employment contract with the plaintiff in Ohio because plaintiff worked remotely in Ohio
for only one month before leaving to work at the defendant’s headquarters in Florida. See
Conti v. Pneumatic Prods. Corp., 977 F.2d 978, 980, 982 (6th Cir. 1992); see also
Houseman v. DPI Food Prods., No. 2005-66-WOB, 2005 WL 2656123, at *6 (E.D. Ky.
Oct. 18, 2005) (distinguishing Cole because, although the employment contract was
negotiated and signed in Kentucky, the parties “contemplated plaintiff's relocation to
Colorado and his employment there”).
Second, the Sixth Circuit has put great emphasis on a defendant’s affirmative act
of reaching out to a plaintiff whom he knows to be in the forum state. See Air Prods., 503
F.3d at 551; Cole, 133 F.3d at 436; In-Flight Devices Corp. v. VanDusen Air, Inc., 466
F.2d 220, 226-27 (6th Cir. 1972). For instance, in Air Products, the defendant initiated
contact with the plaintiff numerous times and those contacts “were made for purposes of
placing purchase orders and, therefore, continuing the parties’ business relationship.”
503 F.3d at 552. Likewise in In-Flight Devices Corp., the court found it significant that the
defendant entered into contract negotiations “with a firm which it necessarily knew was
based in [the forum state] and had its production facilities located within that State.” 466
F.2d at 227. Finally, in Cole, the Sixth Circuit declared that if “a nonresident defendant
transacts business by negotiating and executing a contract via telephone calls and letters
to [a forum-state] resident, then the defendant has purposefully availed himself of the
forum by creating a continuing obligation in [the forum].” 133 F.3d at 436.
13
Conversely, “[t]he unilateral activity of those who claim some relationship with a
non-resident defendant cannot satisfy the requirement of contact with the forum State."
Lak, Inc. v. Deer Creek Enters., 885 F.2d 1293, 1301 (6th Cir. 1989) (quoting Helicopteros
Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 417 (1984)).
The Sixth Circuit in
Kroger Co. v. Malease Foods Corp. distinguished Cole v. Mileti on this very basis, noting
that “Cole is inapposite to our case, because [defendant] initiated no contacts with Ohio.”
437 F.3d 506, 513 n.8 (6th Cir. 2006). In perhaps the most striking example of this rule,
the Sixth Circuit held that there was no purposeful availment despite the fact that
defendant (1) entered into a contract with the Ohio plaintiff, (2) corresponded with plaintiff
in Ohio via telephone, fax, and mail, (3) twice visited with plaintiff in Ohio, and (4) agreed
to be bound by Ohio law in the contract. Calphalon Corp. v. Rowlette, 228 F.3d 718, 720
(6th Cir. 2000). The Calphalon court observed that defendant’s contacts with plaintiff in
Ohio “occurred solely because [plaintiff] chose to be headquartered in Ohio.” Id. at 723.
The Sixth Circuit has since carefully distinguished Calphalon, observing that “there
is no mention in Calphalon that [defendant] ‘reached out’ to Ohio to negotiate with
[plaintiff].” Tharo Sys. v. cab Produkttechnik GmbH & Co. KG, 196 F. App’x 366, 371 (6th
Cir. 2006). Unlike in Calphalon, the court in Tharo Systems found that the defendant’s
contacts with the forum state “were not solely a result of [Plaintiff’s] choice of location
because [defendant] affirmatively reached out to [plaintiff] in Ohio to negotiate the [Letter
of Understanding] in an effort to strengthen the parties’ mutual business relationship.”
Tharo Sys., 196 F. App’x at 371 (emphasis added) (internal quotation marks omitted).
District courts in the Sixth Circuit have also distinguished Calphalon on this basis. See,
e.g., Knowledge Based Sols., Inc. v. Van Dijk, No. 16-cv-13041, 2017 WL 3913129, at *7
14
(E.D. Mich. Sept. 7, 2017); Alloy Bellows & Precision Welding, Inc. v. Cole, No. 1:15-cv494, 2015 WL 6964579, at *5 (N.D. Ohio Nov. 10, 2015).
In the case at bar, the Court finds the purposeful availment prong satisfied. First,
Rag-O-Rama’s employment relationship with Hall was “not a one-shot affair.” Mohasco,
401 F.2d at 385.
Rather, Hall’s employment with Rag-O-Rama spanned eighteen
months, see (Doc. # 13 at 2), and the parties intended to begin a long-term business
relationship when signing the contract. See (Docs. # 13-5 and 23-1 ¶¶ 5, 16). Unlike in
Condon and Conti, supra at 12-13, Hall continued living in Kentucky throughout the
duration of her employment with Rag-O-Rama and performed the “vast majority” of her
work for Rag-O-Rama while in Kentucky. (Doc. # 23-1 ¶ 10). Furthermore, over the
course of these eighteen months, Rag-O-Rama maintained a close business relationship
with Hall, contacting Hall in Kentucky on numerous occasions through email, telephone,
and ordinary mail. See Air Prods., 503 F.3d at 548; (Docs. # 13-2 at 3; 13-8 at 1; 23-1 ¶¶
4-5, 8, 10, 13; 23-4; 23-5; and 23-7).
Second, Rag-O-Rama’s contacts with Kentucky were not solely the result of
Plaintiff’s unilateral conduct.
Hall has alleged that Rag-O-Rama CEO Whitener
aggressively sought out Hall for high-level employment at Rag-O-Rama.1 (Doc. # 23-1
¶¶ 4-5). By doing so, Rag-O-Rama “affirmatively reached out to [Hall] in [Kentucky] to
negotiate the [employment contract] in an effort to strengthen the parties’ mutual business
relationship.” Tharo Sys., 196 F. App’x at 371. In addition, by calling Hall to discuss the
Although Defendant disputes this version of events, see (Doc. # 13-1 ¶ 8), “[w]here, as here, the
district court relies solely on written submissions and affidavits to resolve a Rule 12(b)(2) motion,” the court
may “not weigh ‘the controverting assertions of the party seeking dismissal.’” Air Prods., 503 F.3d at 549
(quoting Theunissen, 935 F.2d at 1459). Therefore, the Court must accept as true that Rag-O-Rama
actively recruited Hall to become an executive-level employee.
1
15
employment contract, which Hall then signed in Kentucky, defendant “transact[ed]
business by negotiating and executing a contract via telephone calls and letters to [a
Kentucky] resident” and “has purposefully availed [itself] of the forum by creating a
continuing obligation in [Kentucky].” Cole, 133 F.3d at 436; see (Doc. # 23-1 ¶¶ 4-5).
While Defendant does not sell merchandise in Kentucky and employed Hall to
manage stores outside of Kentucky, Defendant initiated contract negotiations with Hall,
whom Defendant “necessarily knew was based in [Kentucky] . . . .” In-Flight Devices
Corp., 466 F.2d at 227; see (Doc. # 23-1 ¶ 4). Not only was Defendant knowledgeable
of Plaintiff’s desire to work from Kentucky, but her doing so was specifically bargained for
in the negotiation of the employment contract. See (Docs. # 6 ¶ 17 and 13-1 ¶ 9).
Moreover, it was Defendant’s deliberate act of sending computer monitoring equipment
and a cellphone to Plaintiff’s home that enabled Plaintiff to manage the Columbus, Ohio
store remotely from her Kentucky residence. (Doc. # 23-1 ¶ 8). Given these facts,
Defendants contacts with Kentucky can hardly be characterized as “random, fortuitous,
or attenuated.” Lak, 885 F.2d at 1300 (quoting Burger King, 471 U.S. at 475).
The Court’s conclusion in this case aligns with other district court decisions in the
Sixth Circuit, which have held that “[a]n employment contract performed by the plaintiff in
the forum state with the knowledge and acquiescence of the defendant provides sufficient
minimum contacts to make the defendant subject to personal jurisdiction in the forum
state.” McKee v. Meltech, Inc., No. 10-2730, 2011 WL 1770461 at *3 (W.D. Tenn. May
9, 2011) (internal quotation marks omitted); accord Paine v. Intrepid, U.S.A., Inc., No.
3:14-cv-02005, 2015 U.S. Dist. LEXIS 100591, at *2-3 (M.D. Tenn. July 30, 2015); Goff
v. Brook-Hollow Capital, LLC, No. 3:12-0713, 2013 WL 6051035, at *5 (M.D. Tenn. Nov.
16
15, 2013); Hige v. Turbonetics Holdings, Inc., 662 F. Supp. 2d 821, 830-31 (E.D. Mich.
2009).
These courts considered factors such as whether (1) the defendant solicited the
employment of the plaintiff in the forum state; (2) the plaintiff worked predominantly from
within the forum state; (3) the plaintiff was a high-level employee in the defendant’s
business; (4) the plaintiff signed the employment contract in the forum state; (5) the
defendant had knowledge of, and “facilitated,” the plaintiff’s remote employment; and (6)
the work the plaintiff performed in the forum state advanced the defendant’s business
interests in the forum state. Paine, 2015 U.S. Dist. LEXIS 100591, at *2-3; Goff, 2013
WL 6051035, at *5; McKee, 2011 WL 1770461, at *3; Hige, 662 F. Supp. 2d at 830-32.
Here, all of the above factors, with the exception of the last one, point in favor of
exercising jurisdiction. Rag-O-Rama recruited Hall while she was living in Kentucky to
become an executive-level employee. (Docs. # 23-1 ¶¶ 4-5 and 23-2). Plaintiff signed
the employment contract in Kentucky and worked predominantly from her home in
Falmouth, Kentucky. (Doc. # 23-1 ¶¶ 5, 10). Hall worked remotely from Kentucky with
Rag-O-Rama’s blessing and with equipment that Rag-O-Rama provided for that very
purpose. (Doc. # 23-1 ¶¶ 7-8).
Defendant argues that Hall’s home office in Kentucky “existed for her convenience,
not Rag-O-Rama’s” (Doc. # 30 at 5) and cites a number of cases (all of which are nonbinding) for the proposition that “[a]n agent’s decision to work from home in the forum
state generally does not bind an entity to personal jurisdiction in that state where the
purpose of the arrangement is merely for the agent’s personal convenience.” (Doc. # 30
at 6) (quoting Listug v. Molina Info. Sys., LLC, No. 14-386 (DWF/SER), 2014 WL 3887939,
17
at *3 (D. Minn. Aug. 8, 2014)). Yet, as discussed, these cases are contrary to the
prevailing view among district courts in the Sixth Circuit. See supra at 16-17. In addition,
a substantial number of district courts outside of the Sixth Circuit have chosen to exercise
jurisdiction over defendants who employ individuals remotely in other states. See, e.g.,
Williams v. Preeminent Protective Servs., 81 F. Supp. 3d 265, 268 (E.D.N.Y. 2015);
Turner v. Advanced Navigation & Positioning Corp., No. 8:08-cv-1216-T-27-MSS, 2008
WL 4360989, at *5 (M.D. Fla. Sept. 24, 2008); Int'l Healthcare Exch., Inc. v. Global
Healthcare Exch., LLC, 470 F. Supp. 2d 345, 359-60 (S.D.N.Y. 2007).
In Williams v. Preeminent Protective Services,2 a case with facts closely
resembling this one, the plaintiff, who lived in New York, was hired by a Maryland
corporation that did no business in New York. 81 F. Supp. 3d 265, 268 (E.D.N.Y. 2015).
The plaintiff had a home office in New York and, like Hall, performed “virtually all of her
work . . . from her home in [the forum state].” Id. at 269 (internal quotation marks and
brackets omitted); (Doc. # 23-1 ¶ 10). Also like Hall, the plaintiff in Williams “was expected
to be available to defendants at all times, and was provided with a company-owned laptop
[and] cellphone . . . for that purpose.” Williams, 81 F. Supp. 3d at 269; (Doc. # 23-1 ¶¶ 8,
10). The Williams court expressly rejected the defendant’s argument that “an employee’s
decision to work from home in the forum state does not bind an entity to personal
jurisdiction in that state.”3 81 F. Supp. 3d at 271. The court held instead that “[p]laintiff’s
2
Defendant cites Williams in its Reply for the proposition that “telecommuting supports personal
jurisdiction only when the telecommuter solicited business in the foreign [sic] state or represented the
employer to third parties from the foreign [sic] state.” (Doc. # 30 at 7). There is no indication that the plaintiff
in Williams did either of these things from New York. In fact, the case stands for the opposite of what RagO-Rama says it does, in that the defendant need not seek a “unique benefit” from the state in which plaintiff
resides as long as it “hired plaintiff . . . while she lived in [the forum state].” Williams, 81 F. Supp. 3d at 272.
3
The case that the Williams defendants relied on for this proposition—Lucachick v. NDS Americas,
Inc., 169 F. Supp. 2d 1103, 1107 (D. Minn. 2001)—is also cited by Rag-O-Rama. (Doc. # 30 at 6).
18
decision to work from home . . . was not unilateral,” as “[d]efendants hired her knowing
that she would live and work in [the forum state], and continued their communications
with plaintiff [there] for a sustained period of time.” Id.
In summary, as Defendant recruited Plaintiff in Kentucky, sent a signed contract to
Plaintiff in Kentucky, and engaged in a close working relationship with Plaintiff in Kentucky
for a substantial period of time, Defendant has “reach[ed] out beyond one state and
create[d] [a] continuing relationship[] and obligations with [a] citizen[] of another state.”
Burger King, 471 U.S. at 473 (quoting Travelers Health Ass’n v. Virginia, 339 U.S. 643,
647 (1950)). Thus, the purposeful availment prong of the Mohasco test is satisfied.
ii.
Arising out of
The “arising out of” prong requires only “that the cause of action . . . have a
substantial connection with the defendant’s in-state activities.” Mohasco, 401 F.2d at 384
n.27. In other words, “[o]nly 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].” Id. at n.29. The “arising out of” standard “is a lenient one.”
Hige, 662 F. Supp. 2d at 832 (citing Bird v. Parsons, 289 F.3d 865, 875 (6th Cir. 2002)).
All but three of Plaintiff’s claims (Doc. # 6 ¶¶ 36-39, 43-48) stem from the employment
agreement with Defendant that was (1) negotiated while Plaintiff was in Kentucky, (2)
signed by Plaintiff in Kentucky, and (3) predominantly carried out in Kentucky. See (Doc.
# 23-1 ¶¶ 4-5, 10). Thus, the “arising out of” requirement is met regarding these claims.
Plaintiff’s other claims, including detrimental reliance, fraudulent inducement, and tortious
interference (Doc. # 6 ¶¶ 40-42), also arise out of Defendant’s contacts with Kentucky
because they relate to various verbal statements and assurances made to Hall while she
19
was in Kentucky as part of the negotiation process prior to Hall signing the employment
contract. See (Doc. # 23-1 ¶¶ 4-5).
iii.
Reasonableness
The third requirement under Mohasco is that “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.”
Mohasco, 401 F.2d at 381. “An inference arises that the third factor is satisfied if the first
two [Mohasco] requirements are met.” Bird, 289 F.3d at 875. The considerations relevant
to the reasonableness inquiry include “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.” Id. (citations omitted).
Here, the burden on Rag-O-Rama is minimal. Its principal place of business and
essential witnesses are located in Columbus, Ohio, which, the Court takes judicial notice,
is approximately one hundred miles from the Eastern District of Kentucky courthouse in
Covington. See Fed. R. Evid. 201; (Doc. # 13 at 1). Kentucky has a strong interest in
adjudicating the controversy, as Rag-O-Rama has contracted with a Kentucky resident.
See Mohasco, 401 F.2d at 385 (“[W]hen the contract is with a resident of [the forum state],
the State's interest in resolving a suit based on the contract and brought by that resident
cannot be doubted.”). Plaintiff Hall has an interest in her choice of forum. See Hige, 662
F. Supp. 2d at 833. Ohio also has an interest in adjudicating this suit, as it involves some
of its citizens. Yet, “this interest does not override the other factors suggesting that
personal jurisdiction in [Kentucky] is reasonable.” Bird, 289 F.3d at 876. Therefore, this
is not the “unusual case” where the exercise of personal jurisdiction would be
20
unreasonable. Theunissen, 935 F.2d 1461. As Hall has put forth facts satisfying both
the Kentucky long-arm statute as well as the Mohasco test, personal jurisdiction over
Rag-O-Rama is proper and Defendant’s Motion to Dismiss is denied.
C.
Venue is proper in this district.
The Eastern District of Kentucky is the proper venue in this case. Under the
general venue statute, venue is appropriate in a district where "any defendant resides."
28 U.S.C. § 1391(b)(1). If a defendant is an “entity,” it is deemed to reside “in any judicial
district in which such defendant is subject to the court's personal jurisdiction with respect
to the civil action in question.” Id. § 1391(c)(2); see Eagle Mining, LLC v. Elkland
Holdings, LLC, No. 14-105-ART, 2014 WL 3508017, at *3 (E.D. Ky. July 14, 2014)
(Thapar, J.).
As a limited liability company, see (Doc. # 13 at 1), Rag-O-Rama is
considered an “entity” for purposes of § 1391(c)(2). See Maxchief Invs. Ltd. v. Plastic
Dev. Grp., LLC, No. 3:16-cv-63, 2016 WL 7209553, at *3 (E.D. Tenn. Dec. 12, 2016).
Accordingly, since Rag-O-Rama is subject to personal jurisdiction in Kentucky based on
its contacts with Falmouth, Kentucky in the Eastern District of Kentucky,4 venue is proper
in this district. See 28 U.S.C. § 1391(b)(1) and (c)(2).
D.
The Court will not transfer this case to the Southern District of Ohio.
Defendant states several times in its briefing that the proper venue in this case is
the Southern District of Ohio rather than the Eastern District of Kentucky. See (Docs. #
13 at 1 and 30 at 1, 9). Yet, Defendant’s Motion is unmistakably styled as a motion to
dismiss for improper venue and not as a motion to transfer. See (Doc. # 13 at 1, 9) (citing
Federal Rule of Civil Procedure 12(b)(3) and asserting that “because venue is improper,
4
The Court takes judicial notice of the fact that Falmouth, in Pendleton County Kentucky sits in the
Eastern District of Kentucky. See Fed. R. Evid. 201.
21
this cause must be dismissed”). Furthermore, nowhere in Defendant’s Motion does it
request a transfer, and as such, Defendant has not “state[d] the relief sought” as required
under Federal Rule of Civil Procedure 7(b)(1)(C). Nor does Defendant suggest a statute
under which a transfer to the Southern District of Ohio would occur. Rag-O-Rama does
mention in its Reply that “the Court must either dismiss the case or transfer it to the
Southern District of Ohio ....” (Doc. # 30 at 1) (emphasis added). However, were the
Court to construe Defendant’s Motion as a motion to transfer based on this statement in
its Reply, it would frustrate the purpose of Rule 7 “to provide notice to the court and the
opposing party.” Elustra v. Mineo, 595 F.3d 699, 708 (7th Cir. 2010). Therefore, the
Court declines to consider whether transfer would be appropriate in this case.
III.
CONCLUSION
Accordingly, for the reasons stated herein, IT IS HEREBY ORDERED as follows:
(1)
Defendants’ Motion to Dismiss (Doc. # 13) is DENIED;
(2)
the Defendant shall file its answer within twenty (20) days of this
Memorandum Opinion and Order;
(3)
to the extent not already completed, the parties shall conduct their Rule 26
conference and file their Rule 26(f) Report of Planning Meeting not later than February
8, 2019.
This 8th day of January, 2019.
J:\DATA\Opinions\Covington\2018\18-12 MOO Denying MTD.docx
22
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?