Ramco-Gershenson Properties LP v. Pattyworld, Incorporated et al
Filing
14
OPINION AND ORDER Denying Defendants' 7 Motion to Dismiss or Transfer. Signed by District Judge Matthew F. Leitman. (Monda, H)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
RAMCO-GERSHENSON
PROPERTIES LP,
Plaintiff,
Case No. 14-cv-10393
Hon. Matthew F. Leitman
v.
PATTYWORLD INC. and
GK 4120 NW 12 INC.,
Defendants.
_________________________________/
OPINION AND ORDER DENYING DEFENDANTS’ MOTION TO
DISMISS OR TRANSFER (ECF #7)
INTRODUCTION
In 2010, Defendant Pattyworld Inc. (“Pattyworld”) entered into a 10-year
lease with Plaintiff Ramco-Gershenson Properties LP (“Ramco”) for commercial
space in a Ramco-owned shopping center in Florida. Defendant GK 4120 NW 12
Inc. (“GK”) guaranteed Pattyworld’s performance under the lease. Approximately
two months after entering into the lease, Pattyworld attempted to terminate it.
Ramco filed suit in this Court, asserting that the attempted termination was not
timely and that Pattyworld and GK (collectively, the “Defendants”) anticipatorily
breached the lease and guaranty. Defendants have now moved to dismiss Ramco’s
claim for lack of personal jurisdiction or, in the alternative, to transfer the case to
the United States District Court for the Southern District of Florida. For the
reasons explained below, the Court denies Defendants’ motion.
FACTUAL BACKGROUND
A.
The Parties
1.
Ramco
Ramco is a Delaware limited partnership with its principal place of business
in Farmington Hills, Michigan. (Compl., ECF #1 at ¶1.) All of Ramco’s partners
are Michigan citizens. (Id.)
Ramco owns and operates retail shopping centers in Michigan and elsewhere
in the United States. (Id. at ¶7.) One of Ramco’s shopping centers, known as “The
Crossroads,” is located in Palm Beach County, Florida. (Id.) Ramco administers
leases for space in The Crossroads from its headquarters in Farmington Hills.
(Decl. of Michael Sullivan, ECF #9-9 at ¶7.)
2.
Pattyworld
Pattyworld is a New York corporation with its principal place of business in
New York. (Decl. of Lowell Hawthorne, ECF #7-1 at ¶¶4-5.) Pattyworld leases
commercial real estate on behalf of its affiliated company, GK. (Id. at ¶10.)
Pattyworld has never leased or owned real estate in Michigan. (Id. at ¶11.)
2
3.
GK
GK operates fast food restaurants serving Caribbean style food under the
name “Golden Krust.” (See id. at ¶12.) GK is incorporated in Florida and operates
out of New York. (Id. at ¶¶6-7.) GK has never operated a restaurant or any other
business in Michigan. (Id. at ¶13.)
Lowell Hawthorne (“Hawthorne”) is the president of both Pattyworld and
GK, and the two companies share the same New York headquarters. (Id. at ¶¶1, 2,
5, 7.)
B.
Pattyworld Enters into a Lease With Ramco
Pattyworld, through its Florida-based real estate broker, Danielle Hanson
(“Hanson”), identified The Crossroads as a potential location for a Golden Krust
restaurant. (Hawthorne Decl. at ¶26.) In or around August 2013, Pattyworld’s
Florida-based attorney, Sasha Watson (“Watson”), entered into discussions with
Ramco’s Florida-based retail leasing manager, Deirdre Morgan (“Morgan”),
regarding a potential lease. (Decl. of Sasha Watson, ECF #7-2 at ¶7.) The
negotiations ultimately expanded beyond Florida, with the parties conducting
“[p]ossibly one or more telephone calls between [D]efendants’ office in Bronx,
New York and [Ramco’s] office in Michigan.” (Hawthorne Dec. at ¶28(d).) At
some point during the negotiations, Morgan sent a draft lease to Pattyworld. (See
Watson Decl. at 32, Pg. ID 180.)
3
After Watson proposed several changes to the draft lease on Pattyworld’s
behalf, Ramco’s Michigan-based counsel, Karen Pifer (“Pifer”), became involved
in the negotiations on behalf of Ramco. (See id. at 26, Pg. ID 174.) Between
August 16 and 28, 2013, Watson and Pifer exchanged a series of emails regarding
the proposed revisions. (See id. at 6-26, Pg. ID 154-74.) Each email that Pifer sent
to Watson included a signature block that listed Pifer’s address in Bloomfield
Hills, Michigan. (Id. at 22, 26; Pg. ID 170, 174)
As the negotiations over the draft lease intensified, the parties paid
particularly close attention to a provision that required Pattyworld to submit
periodic sale reports to Ramco in Michigan (the “sales report provision”).1 (ECF
#1-2, hereinafter the “Lease,” at § 4.02; see also Watson Decl. at 10.) On August
7, Watson initially proposed that the sales report provision be deleted. (Watson
Decl. at 32, Pg. ID 180.) After Ramco did not delete the provision, on August 21,
Watson again suggested that that it be removed from the Lease. (Id. at 18, Pg. ID
1
The provision, as it appears in the Lease, states: “[Pattyworld] shall furnish to
[Ramco] within ninety (90) days after the expiration of each lease year and partial
lease year a complete statement … showing in all reasonable detail the amount of
[g]ross [s]ales made by [Pattyworld] from the leased premises during period [sic].”
While the provision, itself, does not mention Michigan, other provisions of the
Lease, (see §§ 1.01(k) and 26.05), require Pattyworld to provide notices and other
documents under the Lease to Ramco at Ramco’s Michigan headquarters. At the
hearing before the Court, counsel for Defendants acknowledged that Pattyworld
was obligated to provide the sales reports – and indeed to perform a host of
obligations under the Lease – in Michigan.
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166.) Later that day, Morgan responded that Ramco was unwilling to delete the
sales report provision. (Id.) Watson asked Morgan to “confirm the basis for the
sales reports and how these sale [sic] reports will be used” by Ramco. (Id. at 24,
Pg. ID 172.) Morgan responded that Ramco uses sales reports from its tenants “for
[its] own internal purposes” to evaluate how a particular shopping center is
performing. (Id.) The parties ultimately agreed to retain the sales report provision,
although they appear to have reduced the frequency of the required reporting and
lengthened the deadline after each period by which Pattyworld was required to
submit its reports. (See Lease at § 4.02; see also Watson Decl. at 10, 24, Pg. ID
158, 172.)
On August 27, Watson informed Pifer that Pattyworld was “in agreement
with the terms of the [L]ease.” (Watson Decl. at 8, Pg. ID 156.) On September 4,
in Bronx, New York, Hawthorne signed the Lease on behalf of Pattyworld. (Lease
at 33-34; Hawthorne Decl. at ¶21.) That same day, Pattyworld sent the Lease to
Pifer’s office in Bloomfield Hills, Michigan. (ECF #9-6 at 2, hereinafter the
“Morrison Letter.”)
Two Ramco principals executed the Lease at Ramco’s
headquarters in Farmington Hills, Michigan on September 10. (Lease at 33-34;
Sullivan Decl. at ¶5.)
Under the terms of the Lease, Pattyworld agreed to construct and, for a
period of at least 10 years, operate a Golden Krust restaurant on an area known as
5
“Outlot A” at The Crossroads. (Lease at §§ 1.01, 2.01, 2.02.) The Lease provided
that the agreement would be “governed by, and construed in accordance with, the
laws of the State of Florida.” (Id. at § 26.15.)
C.
The Lease Requires Pattyworld to Fulfill an Ongoing Series of
Obligations in Michigan
Under the Lease, Pattyworld incurred a number of obligations to Ramco that
Pattyworld had to perform in Michigan. These obligations primarily related to
deliveries – of documents, payments, plans, and other things – to Ramco at
Ramco’s Michigan’s headquarters. More specifically, Section 1.01(k) of the Lease
listed Ramco’s Michigan headquarters as Ramco’s designated address under the
Lease, and Section 26.05 of the Lease required Pattyworld to provide specified
deliveries to Ramco at that address.2 At oral argument before the Court, counsel
for Pattyworld conceded that under these Lease provisions Pattyworld was
required to perform the Lease obligations described immediately below in
Michigan.
First, the Lease required Pattyworld to deliver a $16,300 security deposit to
Ramco in Michigan. (Id. at 23.01) Consistent with this requirement, Pattyworld
2
Section 26.05 of the Lease provides that “[u]nless specifically stated to the
contrary in this Lease, any notice, demand, request, consent, approval or other
instrument which may be or is required to be given [to Ramco] under this Lease
shall be in writing … and shall be addressed … to the address set forth in Section
1.01(k) hereof….” (Lease, § 26.05.)
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included a $16,300 security deposit in its September 4 letter to Pifer’s office in
Bloomfield Hills.
(See Morrison Letter.)
Thereafter, the Lease required
Pattyworld to deliver all rent payments to Ramco’s Michigan headquarters. (Lease
at § 3.01.)
Second, the Lease required Pattyworld to perform construction-related tasks
in Michigan. For instance, the Lease obligated Pattyworld to submit to Ramco in
Michigan “for [Ramco’s] prior approval[,] all plans and specifications for the
construction of all improvements to be located on the leased premises.” (Id. at §
6.04.) In addition, if at any time after construction Pattyworld wished to alter the
building, the Lease required Pattyworld to submit alteration plans to Ramco’s
Michigan headquarters for Ramco’s prior approval. (Id. at § 6.05.)
Moreover, from the date that Pattyworld took possession of the premises,
Pattyworld was required to obtain insurance policies and provide copies of such
policies to Ramco in Michigan. (Id. at § 10.01.) Pattyworld, in fact, obtained such
policies and, as the Lease required, named Ramco as an additional insured on the
policies. (ECF #9-8 at 2.) The certificate of insurance that Pattyworld provided to
Ramco pursuant to the terms of the lease identified Ramco (at its Michigan
address) as the “certificate holder.” (Id.)
The Lease also obligated Pattyworld to provide certain financial reports to
Ramco in Michigan. As discussed above, the sales report provision required
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Pattyworld to submit annual reports on gross sales to Ramco in Michigan. (Lease
at § 4.02.) In addition, upon Ramco’s request, Pattyworld was required to provide
financial statements to Ramco in Michigan. (Id. at § 26.09.) At any time during
the term of the Lease, at Ramco’s request, Pattyworld was required to deliver to
Ramco’s offices in Michigan an “off-set statement” certifying, inter alia, the
effectiveness and commencement date of the Lease. (Id. at § 12.01.)
Other provisions in the Lease required Pattyworld to submit a notice or
request to Ramco in Michigan. Specifically, the Lease required Pattyworld to:
send any request to sublet the premises to Ramco in Michigan (id. at §
13.01);
provide written notice of fire or accidents on the premises to Ramco in
Michigan (id. at § 20.03);
submit a request to terminate the Lease to Ramco in Michigan if
Pattyworld wished to terminate after damage to and/or destruction of the
premises (id. at § 15.02);
provide a copy of all tax bills to Ramco in Michigan (id. at § 3.04(b));
and
provide written notice to Ramco in Michigan if, at the end of the initial
10-year term of the Lease, Pattyworld wished to exercise its option to
extend (id. at § 2.03).
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D.
GK Guarantees Pattyworld’s Performance
At the outset of negotiations, Ramco insisted that either Hawthorne or GK
guaranty Pattyworld’s performance throughout the term of the Lease. (See Watson
Decl. at 32, Pg. ID 180.) Although Hawthorne declined to guarantee Pattyworld’s
performance in his personal capacity, he agreed that GK would provide a guaranty.
(Id. at 30, 32; Pg. ID 178, 180.) Accordingly, on the same date that Hawthorne
executed the Lease on behalf of Pattyworld, he also executed a guaranty by GK.
(See ECF #1-3, hereinafter the “Guaranty” at 3; see also Hawthorne Decl. at ¶23.)
GK guaranteed not only Pattyworld’s payment of sums due under the Lease,
but also Pattyworld’s performance of all other contractual obligations. Indeed, GK
“guarantee[d] the full, faithful and timely payment and performance by
[Pattyworld] of all of the payments, covenants, and other obligations of
[Pattyworld] under or pursuant to the Lease.” (Guaranty at ¶A (emphasis added).)
Accordingly, the Guaranty required GK to fulfill the terms of the Lease, including
those tasks to be executed by Pattyworld in Michigan, on the same terms and to the
same extent as Pattyworld was obligated under the Lease.
Like the Lease, the Guaranty was “made pursuant to, and shall be interpreted
and applied in accordance with, the laws of the State of Florida.” (Id. at ¶L.)
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E.
The Lease Permits Pattyworld to Terminate Within 60 Days by
Providing Written Notice to Ramco in Michigan
Under certain limited circumstances, Pattyworld was permitted to terminate
the Lease prior to the expiration of the 10-year term. For instance, Pattyworld was
permitted to terminate the Lease if, within 60 days of the date of the Lease,
Pattyworld notified Ramco in writing that an “investigation[], survey[],
environmental audit[], examination[], or test[]”
disclosed conditions that, in
Pattyworld’s sole judgment, made the premises unsuitable for operating a
restaurant. (Id. at § 2.04.) The Lease required Pattyworld to deliver such a
termination notice to Ramco’s Michigan headquarters. (Id.)
F.
Pattyworld Attempts to Terminate Lease
On November 13, 2013, by letter to Pifer’s office in Bloomfield Hills,
Pattyworld notified Ramco that it “intend[ed] to terminate the [Lease] … effective
immediately.”
(ECF #1-4 at 2, hereinafter the “Termination Letter.”)
The
Termination Letter explained that Pattyworld would be “unable to obtain the
permits and approvals necessary to conduct the business that is the underlying
basis for th[e] [L]ease.”
(Id.)
The Termination Letter further stated that
Pattyworld had discovered “certain structural limitations that would make the
property unsuitable for the business to be conducted” and, therefore, “the
conditions precedent to the [L]ease will not be met.” (Id.)
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PROCEDURAL HISTORY
On January 27, 2014, Ramco filed its Complaint against Pattyworld and GK
in this Court. Ramco alleged – and Defendants have not disputed – that this Court
has diversity jurisdiction over the action under 28 U.S.C. § 1332. (See Compl. at
¶6.)
In the Complaint, Ramco claims that the Termination Letter was not timely
under the terms of the Lease. (Id. at ¶¶14-15.) Ramco alleges that Pattyworld’s
actions constituted an anticipatory repudiation of the Lease and that “Ramco is
entitled to receive from Pattyworld annual rent and other charges” due under the
Lease. (Id. at ¶¶19-20.) Ramco also asserts that, pursuant to the Guaranty, GK is
“liable for Pattyworld’s breaches and anticipatory repudiation” of the Lease. (Id.
at ¶24.)
On March 27, 2014, Defendants moved to dismiss Ramco’s Complaint
under Federal Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction or,
in the alternative, to transfer this action to the United States District Court for the
Southern District of Florida. (See ECF #7.) The Court heard oral argument on
Defendants’ motion on June 20, 2014. For the reasons discussed below, the Court
now denies Defendants’ motion.
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ANALYSIS
A.
The Defendants Are Subject to Personal Jurisdiction in This Court
1.
Legal Standard Governing a Motion to Dismiss for Lack Personal
Jurisdiction
In diversity cases, “federal courts apply the law of the forum state to
determine whether personal jurisdiction exists.” Miller v. AXA Winterthur Ins.,
694 F.3d 675, 679 (6th Cir. 2012) (quoting Nationwide Mut. Ins. Co. v. Tryg Int’l.
Ins. Co., 91 F.3d 790, 793 (6th Cir. 1996). In a motion to dismiss under Rule
12(b)(2) for lack of personal jurisdiction, the plaintiff bears the burden of
establishing jurisdiction. Serras v. First Tenn. Bank Nat’l Ass’n, 875 F.2d 1212,
1214 (6th Cir. 1989).
Where, as here, the Court relies solely on written
submissions and affidavits to resolve a motion under Rule 12(b)(2) – rather than
resolving the motion after an evidentiary hearing or limited discovery – the burden
on the plaintiff is “relatively slight.” Am. Greetings Corp. v. Cohn, 839 F.2d 1164,
1169 (6th Cir. 1988). To survive the motion, “the plaintiff must make only a
prima facie showing that personal jurisdiction exists.” Theunissen v. Matthews,
935 F.2d 1454, 1458 (6th Cir. 1991). The Court must view the pleadings and
affidavits in the light most favorable to the plaintiff, and the Court should not
weigh “the controverting assertions of the party seeking dismissal.” Id.
Personal jurisdiction may be either general or specific. See Air Products &
Controls, Inc. v. Safetech Int’l, Inc., 503 F.3d 544, 549-50 (6th Cir. 2007). General
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jurisdiction “depends on continuous and systematic contact with the forum state,”
whereas specific jurisdiction “grants jurisdiction only to the extent that a claim
arises out of or relates to a defendant's contacts in the forum state.” Miller, 694
F.3d at 679 (citing Kerry Steel, Inc. v. Paragon Indus., Inc., 106 F.3d 147, 149 (6th
Cir. 1997).
In this case, Ramco has alleged only specific jurisdiction. (See ECF #9 at
15-16.) In order to for a court to exercise specific personal jurisdiction over a
defendant in a diversity case, “the defendant must be amenable to suit under the
forum state’s long-arm statute and the due process requirements of the Constitution
must be met.” CompuServe, Inc. v. Patterson, 89 F.3d 1257, 1262 (6th Cir. 1996)
(quoting Reynolds v. Int’l. Amateur Athletic Fed., 23 F.3d 1110, 1115 (6th Cir.
1994)).
2.
Defendants are “Amenable to Suit” under Michigan’s Long-Arm
Statute
Michigan’s long-arm statute authorizes this Court to exercise personal
jurisdiction over the Defendants. The statute provides that a non-resident company
may be subject to jurisdiction in Michigan on claims “arising out of the act or acts
which create any of the following relationships,” including: “[t]he transaction of
any business within the state….” MCL § 600.715(1). The “‘slightest act of
business in Michigan’ is a sufficient business transaction for purposes of the
statute.” Miller, 694 F.3d at 679 (quoting Neogen Corp. v. Neo Gen Screening,
13
Inc., 282 F.3d 883, 888 (6th Cir. 2002)). In this case, Ramco has presented
evidence that Defendants negotiated with Ramco’s lawyers in Michigan; sent a
security deposit and certain notices under the Lease to Ramco’s lawyers in
Michigan; and incurred a number of ongoing obligations to be performed in
Michigan. By taking these acts, Defendants transacted business within Michigan.
See, e.g., Lanier v. Am. Bd. Of Endodontics, 843 F.2d 901, 908 (6th Cir. 1988)
(holding that a non-resident company had “transacted business” in Michigan
through mail and telephone contacts with a Michigan resident). Accordingly,
Ramco has presented a prima facie case that Defendants are subject to Michigan’s
long-arm statute. The Court will therefore proceed to the constitutional analysis.
3.
This Court’s Exercise of Personal Jurisdiction over Defendants
Comports with Constitutional Due Process
Constitutional due process requirements are satisfied when an out-of-state
defendant has “minimum contacts” with the forum state “such that maintenance of
the suit does not offend traditional notions of fair play and substantial justice.”
Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (internal citations omitted).
In Southern Machine Co. v. Mohasco Indus., Inc., 401 F.2d 374 (6th Cir. 1968),
the United States Court of Appeals for the Sixth Circuit established a three-part test
for determining whether the exercise of personal jurisdiction satisfies due process:
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
14
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. at 381.
a.
Defendants Have Purposefully Availed Themselves of
Acting in Michigan
In Southern Machine, the Sixth Circuit noted that the first prong of the test –
personal availment – is the “sine qua non” for personal jurisdiction. Id. 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 third person.’” Burger
King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985). “Jurisdiction is proper,
however, where the contacts proximately result from actions by the defendant
himself that create a ‘substantial connection’ with the forum State.” Id. (citation
omitted and emphasis in original).
“Although entering into a contract with an out-of-state party alone does not
automatically establish sufficient minimum contacts, the presence of certain factors
in addition to the contract will be found to constitute purposeful availment.” Air
Products, 503 F.3d at 551 (quoting Burger King, 471 U.S. at 476) (emphasis in
original). Among the relevant factors are “prior negotiations and contemplated
future consequences, along with the terms of the contract and the parties’ actual
15
course of dealing.” Burger King, 471 U.S. at 479. A critical factor in this regard is
whether the contract creates an ongoing relationship between the out-of-state party
and a resident of the forum. As the Supreme Court explained in Burger King,
where a defendant “has created ‘continuing obligations’ between himself and the
residents of the forum, he manifestly has availed himself of the privilege of
conducting business there.” Id. at 476 (internal citation omitted).
i.
Defendants’ Continuing Obligations to Ramco in
Michigan, Combined With Defendants’ Other
Contacts With Michigan, Amount to Purposeful
Availment
Through the Lease and Guaranty, Defendants incurred the very type of
“continuing obligations” in Michigan that amount to purposeful availment under
Burger King. The contractual obligations in Michigan to which Pattyworld and
GK assented were extensive. Indeed, Pattyworld (and GK, in the event of a default
by Pattyworld) obligated itself to submit construction plans to Ramco in Michigan
(Lease at § 6.04), send rent payments to Ramco in Michigan (id. at § 3.01), submit
alteration plans to Ramco in Michigan (id. at § 6.05), provide sales reports and
financial statements to Ramco in Michigan (id. at §§ 4.02, 26.09), submit tax bills
to Ramco in Michigan (id. at § 3.04(b)), and provide any notice due under the
Lease to Ramco in Michigan (id. at § 26.05). Importantly, Defendants undertook
many of these obligations for the entire 10-year duration of the Lease. The Lease
16
was thus not a one-time transaction, but rather a “continuing business relationship
that lasted a period of many years.” Air Products, 503 F.3d at 551.
Moreover, many of these continuing obligations to be performed in
Michigan were essential elements of the Lease and/or were essential to
Pattyworld’s ability to open and operate in Florida.
For instance, as Racmo
informed Pattyworld during the negotiations, Ramco would not have entered into
the Lease without Pattyworld’s agreement to provide the sales reports – reports
that Ramco needed in order to monitor the performance of the shopping center.
Likewise, before Pattyworld could build out its leased premises, it had to submit its
proposed construction plans to Ramco’s design-review staff in Michigan and had
to secure design approval from those Michigan-based Ramco staffers.
Accordingly, this is not a case wherein Defendants merely submitted rent
payments to an address in the forum state. See Kroger Co. v. Malease Foods
Corp., 437 F.3d 506, 512 n.5 (6th Cir. 2006) (finding that a Kansas company’s
submission of rent payments to an Ohio address was, by itself, insufficient to
support personal jurisdiction over the Kansas company in Ohio). On the contrary,
Defendants agreed to send to Ramco’s Michigan headquarters an ongoing flow of
information that was essential to both (1) Pattyworld’s ability to open and operate a
restaurant on the leased premises and (2) Ramco’s administration of the parties’
relationship. In sum, by entering into the Lease and Guaranty, Defendants created
17
meaningful “continuing obligations” in Michigan and thereby “manifestly …
availed [themselves] of the privilege of conducting business there.” Burger King,
471 U.S. at 476.
Defendants future contractual obligations in Michigan are not their sole ties
to Michigan. On the contrary, Defendants have already transacted business in
Michigan. Indeed, as the parties negotiated the terms of the Lease, Defendants,
through their attorney, exchanged several emails with Pifer, whom they knew to be
based in Michigan. (See Watson Decl. at 6-22, Pg. ID 154-170.) Additionally,
Defendants do not dispute that at least once – and perhaps multiple times – a phone
conversation took place between Defendants in New York and Ramco in
Michigan. (See Hawthorne Dec. at ¶28(d).) Pattyworld sent documents executed
by Defendants and a security deposit check to Pifer’s office in Michigan. (See the
Morrison Letter.) Defendants also obtained a certificate of liability insurance
naming Ramco as the certificate holder and listing Ramco’s address in Michigan
on the certificate. (ECF #9-8 at 2.) And when Defendants decided to terminate the
Lease, they sent the Termination Letter – addressed to Pifer at her Michigan office
address – to Pifer via email. (ECF #1-4 at 2.) As in Air Products, “Defendants
reached out beyond [their home state’s] borders to conduct business with a
company whose principal place of business it knew to be Michigan. Such contacts
18
are not ‘random,’ ‘fortuitous,’ or ‘attenuated,’ but are the result of deliberate
conduct that amounts to purposeful availment.” 503 F.3d at 551.
The facts of this case are analogous to Burger King, 471 U.S. at 462. In that
case, a Michigan resident entered into a 20-year agreement with Burger King to
operate a franchise in Michigan. The franchisee negotiated with Burger King’s
Florida headquarters and contractually obligated himself to submit payments and
notices due under the agreement to Burger King in Florida. When the business
relationship soured, Burger King sued the franchisee in Florida. The Supreme
Court held that subjecting the franchisee to personal jurisdiction in Florida did not
violate constitutional due process. Id. at 487. In finding that the franchisee “most
certainly knew that he was affiliating himself” with a Florida-based enterprise, the
Supreme Court noted that the contract itself “emphasize[d] that Burger King’s
operations are conducted and supervised from the Miami headquarters” and “all
relevant notices and payments must be sent [to Miami].” Id. at 480. The Supreme
Court also noted that “the parties’ actual course of dealing repeatedly confirmed
that decision-making authority was vested in the Miami headquarters.” Id. In this
case, as in Burger King, Defendants entered into a long-term agreement that
obligated them to perform part of the contract in the forum state, and they were put
on notice by the terms of the contract and the course of negotiations that Ramco’s
decision-making authority was located in the forum state. Accordingly, here, as in
19
Burger King, the exercise of personal jurisdiction in the forum state “d[oes] not
offend due process.” Id. at 487.3
Moreover, a finding that Defendants purposefully availed themselves of
acting in Michigan is consistent with Sixth Circuit precedent. For instance, in Cole
v. Mileti, 133 F.3d 433 (6th Cir. 1998), the Sixth Circuit determined that a
California resident who negotiated a surety agreement with an Ohio resident
through the exchange of telephone calls and letters had purposefully availed
himself of acting in Ohio. Id. at 436 (“If, as here, a nonresident defendant transacts
business by negotiating and executing a contract via telephone calls and letters to
an Ohio resident, then the defendant has purposefully availed himself of the forum
by creating a continuing obligation in Ohio”). Likewise, in In-Flight Devices
Corp. v. Van Dusen Air, Inc., 466 F.2d 220 (6th Cir. 1972), the Sixth Circuit held
that the defendant corporation purposefully availed itself of the forum state when it
made “a substantial business contract” with another party that it “necessarily
knew” was based in the forum. Id. at 227, abrogated on other grounds by Cole,
3
The contract in Burger King contained a Florida choice-of-law provision, and
that provision supported the plaintiff’s argument that the defendants were subject
to personal jurisdiction in Florida. See 471 U.S. at 482. The Lease does not require
application of Michigan law, and thus the case for asserting personal jurisdiction
over the Defendants here is not quite as strong as the case for asserting personal
jurisdiction over the defendants in Burger King. But given the other material
similarities between the facts of this case and those of Burger King, the decision in
Burger King provides significant support for the conclusion that the Defendants are
subject to personal jurisdiction in Michigan.
20
133 F.3d at 436. In this case, as in Cole and In-Flight Devices, Defendants
purposefully availed themselves of acting in a forum state by negotiating with a
resident of the forum and ultimately entering into a contract that created continuing
obligations in the forum.
ii.
Although the Florida Choice-of-Law Provision in the
Lease Weighs Against Purposeful Availment, It Is
Insufficient, By Itself, To Defeat Personal Jurisdiction
Defendants argue that the Florida choice-of-law provisions in the Lease and
Guaranty demonstrate that Defendants did not purposefully avail themselves of
acting in Michigan. (See ECF #7 at 20-21.) While the Florida choice-of-law
provision does support Defendants’ challenge to personal jurisdiction here, it is not
sufficient to overcome the factors described above that support a finding of
purposeful availment.
The Supreme Court addressed the role of choice-of-law provisions in
personal jurisdiction analysis in Burger King. There, the Supreme Court cautioned
lower courts not to “ignore[]” a choice-of-law provision “in considering whether a
defendant has purposefully invoked the benefits and protections of a State’s laws
for jurisdictional purposes.” 471 U.S. at 482. But a choice-of-law provision is just
one of many factors that a federal court must consider in its personal jurisdiction
analysis, and, importantly, the parties’ choice of one state’s law in a contract does
not preclude a finding that those parties have purposefully availed themselves of
21
conducting business in a second state. See Southern Machine, 401 F.2d at 382-83.
That is precisely what the Sixth Circuit held in Southern Machine where it
analyzed the “business realities” of a transaction and concluded that the defendant
purposefully availed itself of transacting business in Tennessee even though the
parties’ contract contained a New York choice-of-law provision. Id. Likewise, in
Cole, supra, the Sixth Circuit ruled that a defendant was subject to personal
jurisdiction in Ohio even though its contract with the plaintiff contained a
California choice-of-law provision. Cole, 133 F.3d at 435-37.4
Defendants have not cited any precedent that compels the conclusion that
because the Lease is governed by Florida law, they cannot be deemed to have
purposefully availed themselves of acting in Michigan. When asked at the June
20th hearing to identify the single case most favorable to their position, Defendants
4
In addition, other circuit courts of appeals have held that a defendant in a
contractual dispute may be subject to personal jurisdiction in a forum even if the
contract at issue is governed by the law of a different forum. The key issue,
according to these courts, is the defendant’s contacts and relationship with the
forum, not the contractual choice-of-law provision. See, e.g., Deprenyl Animal
Health, Inc. v. Univ. of Toronto Innovations Foundation, 297 F.3d 1343 (Fed. Cir.
2002) (“We are not persuaded that the inclusion of a foreign choice of forum and
choice of law provisions … diminishes the significance of [defendant’s] contacts
with Kansas … As a contractual mater, these clauses may control. But as a
constitutional matter … the Canadian choice of law clause[] fail[s] to undermine
the sufficiency of [defendant’s] contact with Kansas”); Electrosource, Inc. v.
Horizon Battery Technologies, Ltd., 175 F.3d 867, 873 (5th Cir. 1999)
(“[A]lthough the [a]greement contained a choice-of-Indian law clause, the
multitude of contacts between [defendant] and Texas substantially outweighs the
law choice factor”).
22
cited LAK, Inc. v. Deer Creek Enterprises, 885 F.2d 1293 (6th Cir. 1989). In LAK,
a Michigan company sued an Indiana partnership in Michigan for breach of a real
estate sale contract. The contract, for the sale of realty in Florida, provided that it
was governed by Florida law. The Sixth Circuit held that the Indiana partnership
was not subject to personal jurisdiction in Michigan. Id. at 1303. However, LAK
is easily distinguishable from the present case. Crucially, the contract at issue in
LAK was a one-off real estate transaction – it created no continuing obligations and
it did not “provide for any significant continuing relationship….” Id. at 1296.
Moreover, the Sixth Circuit stressed that the contract “did not require either [party]
to take any action in the State of Michigan.” Id. The facts in LAK thus contrast
sharply with this case, wherein Defendants agreed to perform a series of actions –
including paying rent, submitting design drawings and periodic reports, and
providing required notices – in Michigan over a period of at least 10 years.
Moreover, LAK underscores that a choice-of-law provision is not dispositive
when determining whether a party purposefully availed itself of acting in a forum.
The Sixth Circuit acknowledged that the Florida choice-of-law provision weighed
against a finding that the Indiana partnership purposefully availed itself of doing
business in Michigan, but the court did not deem the choice of Florida law to be
outcome-determinative. Id. at 1295. Instead, the court carefully evaluated the
nature of the relationship created by the parties’ contract – a one-time transaction
23
with no obligations in Michigan – and treated that issue as the most important in
determining whether the Indiana partnership purposefully availed itself of acting in
Michigan. LAK does not compel the conclusion that because the Lease is governed
by Florida law, the Defendants did not purposefully avail themselves of doing
business in Michigan. Although the choice-of-law provision in the Lease weighs
in Defendants’ favor, the provision does not outweigh the many continuing
obligations Defendants created for themselves in Michigan.
b.
Ramco’s Claims Arise From Defendants’ Activities in
Michigan
The second prong of the Southern Machine test is satisfied, as Ramco’s
claims for breach of the Lease and Guaranty arise from Defendants’ activities in
Michigan. Where, as here, a non-resident defendant purposefully avails himself of
the forum state for the purposes of entering into a contract, and “the cause of action
is for breach of that contract … then the cause of action naturally arises from the
defendant’s activities in [the forum state].”
Cole, 133 F.3d at 436 (citing
Compuserve, 89 F.3d at 1267; In-Flight Devices, 466 F.2d at 229). Because
Defendants purposefully availed themselves of entering a contract in Michigan, it
necessarily follows that Ramco’s action for breach of that contract arises from
Defendant’s activities in Michigan.
24
c.
This Court’s Exercise of Jurisdiction over Defendants is
Reasonable
The third prong of the Southern Machine test also is satisfied because this
Court’s exercise of jurisdiction over Defendants is reasonable. Where, as here, a
defendant purposefully avails himself of the forum and the cause of action arises
directly from that contact, the court may “presume [that] the specific assertion of
personal jurisdiction [is] proper.” Cole, 133 F.3d at 436 (citing CompuServe, 89
F.3d at 1268; First National Bank of Louisville v. J.W. Brewer Tire Co., 680 F.2d
1123, 1126 (6th Cir. 1982). Under this “inference of reasonableness … only [an]
unusual case” will not satisfy the reasonableness requirement. Air Products, 503
F.3d at 554 (quoting Theunissen v. Matthews, 935 F.2d 1454, 1461 (6th Cir.
1991)). Among the factors that a court should consider in assessing reasonableness
are “(1) the burden on the defendant; (2) the interest of the forum state; (3) the
plaintiff’s interest in obtaining relief; and (4) other states’ interest in securing the
most efficient resolution of the policy.” Id. at 554-55 (citing Intera Corp. v.
Henderson, 428 F.3d 605, 618 (6th Cir. 2005).
This case is not so unusual as to overcome the presumption that this Court’s
exercise of jurisdiction is reasonable.
“Although it would be a burden on
[Defendants] to travel from [New York] for this litigation, Michigan clearly has an
interest in protecting a company whose principal place of business is located in
Michigan.” Id. at 555. And the burden on the Defendants of litigating in Michigan
25
is certainly no greater than that of litigating in Florida – a State that is further from
their office in New York. Moreover, in light of Ramco’s claim for breach of the
Lease and Guarantee, which called for total rent payments of at least $1.6 million
(see Compl. at ¶11), Ramco has a substantial interest in obtaining relief. On
balance, these factors support the reasonableness of this Court’s exercise of
jurisdiction.
Defendants argue – incorrectly – that the location of The Crossroads in
Florida is “the ultimate trump card” that compels the conclusion that this Court’s
exercise of personal jurisdiction would be unreasonable. (Reply, ECF #10 at 5.)
In Defendants’ view, “the location of the property in Florida transcends any
reasonableness argument [Ramco] can make….”
(Id. at 5-6.)
However,
Defendants have neither demonstrated why the location of the property controls
nor shown that Florida has any interest whatsoever in the outcome of this
litigation. Ramco seeks money damages from Defendants. (See Compl. at ¶¶2022, 25-26.) To the extent that Ramco is successful, money would be paid from
Defendants’ headquarters in New York to Ramco’s headquarters in Michigan. No
relief sought in this action would in any way affect the property or any resident of
the State of Florida. In fact, when asked at the June 20th hearing to identify how
the result in this case, once the merits are reached, would have an effect on the
26
State of Florida, counsel for Defendants could identify no such impact.5 In sum,
although the location of the property in Florida may be a relevant fact, it is by no
means a “trump card” that renders unreasonable this Court’s assertion of personal
jurisdiction over Defendants.
B.
Defendants’ Motion to Transfer Venue Fails Because They Have Not
Presented Sufficient Evidence to Justify a Transfer
1.
Governing Legal Standard for Transfer
Defendants move to transfer this case to the Southern District of Florida
pursuant to 28 U.S.C. § 1404(a). That statute provides that “a district court may
transfer any civil action to any other district or division where it might have been
brought” when doing so serves “the convenience of parties and witnesses” and is
“in the interest of justice.” 28 U.S.C. § 1404(a). Courts should weigh these
considerations on an “individualized, case-by-case” basis. Stewart Org., Inc. v.
Ricoh Corp., 487 U.S. 22, 29, (1988) (quoting Van Dusen v. Barrack, 376 U.S.
612, 622 (1964)). “As the permissive language of the transfer statute suggests,
district courts have ‘broad discretion’ to determine when party ‘convenience’ or
5
Florida certainly has an interest in how its laws are interpreted, but this Court is
capable of fairly applying Florida law. Indeed, it is far from unusual for a federal
district court to apply the law of a different state. See, e.g., Telerent Leasing Corp.
v. Progressive Medical Imagining PLC, 918 F.Supp.2d 666, 672 (E.D. Mich. 2013)
(applying Pennsylvania law); Berger Enterprises v. Zurich Am. Ins. Co., 845
F.Supp.2d 809, 813 (E.D. Mich. 2012) (applying Ohio law); Harshaw v. Bethany
Christian Servs., 714 F.Supp.2d 751, 763 (W.D. Mich. 2010) (applying Virginia
law).
27
‘the interest of justice’ make a transfer appropriate.” Reese v. CNH Am. LLC, 574
F.3d 315, 320 (6th Cir. 2009) (quoting Phelps v. McClellan, 30 F.3d 658, 663 (6th
Cir. 1994)).
To succeed on a motion to transfer, “the movant must first show that the
case could have been brought in the transferee court.” Grand Kensington, LLC v.
Burger King Corp., 81 F.Supp.2d 834, 836 (E.D. Mich. 2000).6 Once it has been
determined that the case could have been filed in the transferee district, the district
court considers the following factors to determine whether to transfer a case:
(1) the convenience of witnesses; (2) the location of relevant
documents and relative ease of access to sources of proof; (3) the
convenience of the parties, (4) the locus of the operative facts; (5) the
availability of process to compel the attendance of unwilling
witnesses; (6) the relative means of the parties; (7) the forum's
familiarity with the governing law; (8) the weight accorded the
plaintiff's choice of forum; and (9) trial efficiency and the interests of
justice, based on the totality of the circumstances.
Overland, Inc. v. Taylor, 79 F.Supp.2d 809, 811 (E.D. Mich. 2000) (citation
omitted). In applying these factors, a court should keep in mind that “a plaintiff’s
6
Under 28 U.S.C. § 1391(b), venue is proper in a judicial district where: (1) “any
defendant resides, if all defendants are residents of the State in which the district is
located”; (2) “a substantial part of the events or omissions giving rise to the claim
occurred, or a substantial part of property that is the subject of the action is
situated”; or (3) “any defendant is subject to the court's personal jurisdiction with
respect to such action,” if “there is no district in which an action may otherwise be
brought.” 28 U.S.C. § 1391(b). There is no dispute that Ramco could have
brought this action in a Florida court.
28
choice of forum [is entitled to] substantial deference.” Audi AG and Volkswagon of
America, Inc. v. D’Amato, 341 F.Supp.2d 734, 749 (E.D. Mich. 2004).
The movant bears the burden of demonstrating, by a preponderance of the
evidence, that “fairness and practicality strongly favor the forum to which transfer
is sought.” Id. (internal citation omitted). Transfer is not warranted when doing so
will merely shift the inconvenience from one party to another. Wayne County
Employees' Retirement Sys. v. MGIC Invest. Corp., 604 F.Supp.2d 969, 975 (E.D.
Mich. 2009).
2.
Defendants Have Not Demonstrated That Transfer of Venue is
Warranted
Defendants have presented virtually no evidence that transferring this case to
the Southern District of Florida would be in the interest of fairness and practicality.
Even assuming, as Defendants argue, that Ramco could have brought the case in
the Southern District of Florida, transferring the case there would certainly not
serve the convenience of the parties and the witnesses and would not be in the
interest of justice.
a.
Several Factors Weigh Against Transfer
Several considerations clearly favor keeping this case in Michigan rather
than sending it to Florida. For instance, the convenience of the parties weighs
strongly against transfer. Ramco is based in Michigan, its representatives who
signed the Lease are based in Michigan, and it administered the Lease from
29
Michigan. (See Sullivan Decl. at ¶¶2, 5, 7.) Defendants, on the other hand, are
based in New York and have presented no evidence that they have any presence in
Florida.7 (See Hawthorne Decl. at ¶¶5, 7.) Retaining the case in Michigan would
be convenient for Ramco, whereas transferring the case to Florida would not
enhance convenience for either party.
The location of documents and ease of access to sources of proof also weigh
against transfer. By Defendants’ own admission, documents relating to the Lease
and Guaranty are located at Ramco’s headquarters in Michigan and Defendants’
headquarters in New York. (See ECF #7 at 24.) Defendants argue, though, that
documents relating to “the condition of the property, zoning issues, property
conditions, as well as those associated with mitigation would be located in
Florida.”
(Id.)
However, Defendants do not identify with specificity the
documents to which they refer or why such documents would be relevant in their
defense of Ramco’s claims. The mere existence of certain unidentified documents
relating to the condition of the property in Florida is insufficient to warrant transfer
when Defendants have failed to demonstrate that such documents would be
7
Although GK is incorporated in Florida (Hawthorne Decl. at ¶6), its principal
place of business is in New York (Id. at ¶7), and there is no evidence in the record
that GK has any operations in Florida that would be relevant to the adjudication of
Ramco’s claims.
30
relevant in litigating this case on the merits.8 Because it is undisputed that relevant
documents exist in Michigan, this consideration weighs against transfer.
b.
Some Factors are Neutral
Other considerations are neutral and do not help Defendants carry their
burden of justifying a transfer. For instance, Defendants have not identified any
witnesses who would present relevant testimony at trial and whose convenience
would be enhanced by transferring the case to Florida. Defendants note that
Watson, Hanson, and Morgan are located in Florida, but Defendants do not explain
why their testimony would be relevant at a trial on the merits. Although Watson,
as Defendants’ lawyer, and Morgan, as Ramco’s leasing agent, could testify about
pre-Lease execution issues, it is not clear how such testimony would be relevant to
this dispute – which centers around termination, not negotiation, of the Lease –
and, in any event, such testimony could well be inadmissible pursuant to an
integration clause in the Lease. (See Lease at § 26.02.)
Further, there is no evidence in the record that ties Hanson to the merits of
the dispute between the parties. Although Defendants argue that Hanson could
testify about the condition of the property prior to the execution of the Lease, it is
8
Defendants also assert that the “primary operative facts” – such as “issues
surrounding the conditions of the property” – are in Florida (see ECF #7 at 25), but
again, they fail to explain why such facts would be relevant at a trial on the merits
of Ramco’s breach of contract claims.
31
not clear why that testimony would be relevant since the basis of Ramco’s claim is
that Defendants’ Termination Letter was not sent within the deadline for
terminating the Lease for cause. Moreover, Defendants have not provided any
specifics as to what testimony Hanson may be able to offer.
In sum, the
Defendants have failed to present evidence showing specifically how anyone
located in Florida would provide relevant testimony at trial. Because Ramco has
not identified any non-party witnesses in Michigan, the convenience of the
witnesses is a neutral consideration.
Moreover, Defendants have failed to present evidence that the relative
means of the parties favors transfer.
Nor have Defendants identified any
“unwilling” witnesses, and the ability to compel the attendance of unwilling
witnesses is therefore not relevant.
These factors therefore do not bolster
Defendants’ request for transfer.
c.
The Florida Choice-of-Law Provision is the Only Factor
that Favors Transfer
Defendants correctly note that the Florida courts’ familiarity with the law
governing the Lease and Guaranty weigh in favor of transfer. However, this is the
only factor that favors transfer, and although it is a relevant consideration, it falls
far short of outweighing the many other factors that weigh against transfer.
32
d.
The Totality of the Circumstances Weighs Strongly Against
Transfer
Based on the totality of the circumstances, the interest of justice favors
keeping this case in Michigan. As noted above, “Michigan clearly has an interest
in protecting a company whose principal place of business is located in Michigan.”
Air Products, 503 F.3d at 555. In contrast, Florida has little interest in an action
for contract damages against New York-based companies.
“The balance of
convenience, considering all the relevant factors should be strongly in favor of a
transfer before such will be granted.” Jamhour v. Scottsdale Ins. Co., 211
F.Supp.2d 941, 946 (S.D. Ohio 2002). In this case, the convenience of the parties,
location of relevant documents and sources of proof, and the interests of justice
weigh against transfer. In contrast, Defendants have presented no evidence – other
than the choice-of-law provision – that favors transfer. Accordingly, Defendants
have failed to meet their burden of showing why their preferred forum should
prevail over the one chosen by Ramco.
CONCLUSION
For all of the reasons stated in this Opinion and Order, IT IS HEREBY
ORDERED that Defendants’ motion to dismiss or transfer (ECF #7) is DENIED.
s/Matthew F. Leitman
MATTHEW F. LEITMAN
UNITED STATES DISTRICT JUDGE
Dated: July 3, 2014
33
I hereby certify that a copy of the foregoing document was served upon the
parties and/or counsel of record on July 3, 2014, by electronic means and/or
ordinary mail.
s/Holly A. Monda
Case Manager
(313) 234-5113
34
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