Communications Network Billing, Inc. v. ILD Telecommunications, Inc.

Filing 16

OPINION and ORDER (1) Granting Defendant's 11 Motion to Dismiss for Lack of Personal Jurisdiction Pursuant to Federal Rule of Civil Procedure 12(b)(2) and (2) Denying as Moot Defendant's Motion to Transfer Venue. Signed by District Judge Linda V. Parker. (RLou)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
COMMUNICATIONS NETWORK
BILLING, INC., a Nevada corporation,
Plaintiff,
Civil Case No. 17-10260
Honorable Linda V. Parker

v.
ILD TELECOMMUNICATIONS, INC.,
nka ILD CORP., a Delaware corporation,
Defendant.
________________________________/

OPINION AND ORDER (1) GRANTING DEFENDANT’S MOTION TO
DISMISS FOR LACK OF PERSONAL JURISDICTION PURSUANT TO
FEDERAL RULE OF CIVIL PROCEDURE 12(b)(2) AND (2) DENYING AS
MOOT DEFENDANT’S MOTION TO TRANSFER VENUE [ECF NO. 11]
I.

Introduction

This lawsuit arises from an agreement made between Plaintiff
Communications Network Billing, Inc. (“Plaintiff” or “CNBI”) and Defendant ILD
Telecommunications, Inc. nka ILD Corp. (“Defendant” or “ILD”). (ECF No. 1.)
Through the agreement, Plaintiff hired Defendant for billing and collection work
related to Plaintiff’s long distance services. (Id. at Pg ID 2.) Plaintiff alleges
Defendant failed to remit fees and owes Plaintiff $838,870.92. (Id. at Pg ID 3.)
Presently before the court is Defendant’s motion to dismiss or in the
alternative motion to transfer venue, filed pursuant to Federal Rule of Civil
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Procedure 12(b)(2) and 28 U.S.C. § 1404(a) respectively on February 21, 2017.
The motion has been fully briefed. Finding the facts and legal arguments
sufficiently presented in the parties’ briefs, the Court dispensed with oral argument
pursuant to Eastern District of Michigan Local Rule 7.1(f) on this date. For the
reasons that follow, the Court is granting Defendant’s motion to dismiss and
denying the motion to transfer venue as moot.
II.

Applicable Standards

When reviewing a Rule 12(b)(2) motion, a federal district court may proceed
by relying solely on written submissions and affidavits to resolve the jurisdictional
questions or it may permit limited discovery or hold an evidentiary hearing in aid
of the motion. Serras v. First Tenn. Bank Nat’l Ass’n, 875 F.2d 1212, 1214 (6th
Cir. 1989) (citation omitted). In all scenarios, “ ‘the plaintiff always bears the
burden of establishing that jurisdiction exists.’” Id. (citing McNutt v. General
Motors Acceptance Corp., 298 U.S. 178, 189 (1936).
A federal court may only exercise personal jurisdiction in a diversity case if
such jurisdiction is (1) authorized by the law of the state in which the court sits;
and (2) is otherwise consistent with the Due Process Clause of the Fourteenth
Amendment. Reynolds v. Int’l Amateur Athletic Fed’n, 23 F.3d 1110, 1115 (6th
Cir. 1994); Welsh v. Gibbs, 631 F.2d 436, 439 (6th Cir. 1980). The Sixth Circuit
“historically has understood Michigan to intend its long-arm statute to extend to
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the boundaries of the fourteenth amendment” and therefore, “the court need only
determine whether exercising personal jurisdiction violates constitutional due
process.” Children’s Legal Servs., PLLC v. Shore Levin and Derita, PC, 850
F.Supp.2d 673, 679 (6th Cir. 2012) (quoting Theunissen v. Matthews, 935 F.2d
1454, 1458 (6th Cir. 1991) and Bridgeport Music, Inc. v. Still N The Water Publ’g,
327 F.3d 472, 477 (6th Cir. 2003)).
Personal jurisdiction over an out-of-state defendant arises from “certain
minimum contacts with [the forum] 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 (1945) (internal citation omitted). Personal jurisdiction
takes two forms: general and specific. “A court may assert general jurisdiction
over foreign (sister-state or foreign-country) corporations to hear any and all
claims against them when their affiliations with the State are so ‘continuous and
systematic’ as to render them essentially at home in the forum State.” Goodyear
Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011) (citing Int’l
Shoe Co., 326 U.S. at 317.) “For an individual, the paradigm forum for the
exercise of general jurisdiction is the individual’s domicile; for a corporation, it is
an equivalent place, one in which the corporation is fairly regarded at home.” Id.
at 924.

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The Supreme Court recently reiterated the governing principles of specific
jurisdiction in Bristol-Myers Squibb Co. v. Superior Court of California, San
Francisco Cty., 137 S. Ct. 1773 (2017). “In order for a state court to exercise
specific jurisdiction, ‘the suit’ must ‘aris[e] out of or relat[e] to the defendant's
contacts with the forum.’” Bristol-Myers Squibb Co., 137 S.Ct. at 1780 (citing
Daimler AG v. Bauman, 571 U.S. ---, 134 S. Ct. 746, 754 (2014) (internal
quotation marks omitted; emphasis added)); see Burger King Corp. v. Rudzewicz,
471 U.S. 462, 472–473 (1985); Helicopteros Nacionales de Colombia, S.A. v. Hall,
466 U.S. 408, 414. “In other words, there must be an affiliation between the forum
and the underlying controversy, principally, [an] activity or an occurrence that
takes place in the forum State and is therefore subject to the State’s regulation.”
Id. (citing Goodyear Dunlop Tires Operations, S.A., 564 U.S. at 919.)
The Sixth Circuit has established a three-part test to determine whether a
court may exercise specific personal jurisdiction:
First, the defendant must purposefully avail himself of the privilege of
acting in the forum state or causing a consequence in the forum state.
Second, the cause of action must arise from the defendant’s activities
there. Finally, the acts of the defendant or consequences caused by
the defendant must have a substantial enough connection with the
forum state to make the exercise of jurisdiction over the defendant
reasonable.
Calphalon Corp. v. Rowlette, 228 F.3d 718, 721 (6th Cir. 2000) (citing Southern
Machine Co. v. Mohasco Indus., Inc., 401 F.2d 374, 381 (6th Cir. 1968)).
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A defendant “purposefully avails” himself if his “contacts proximately result
from the actions by the defendant himself that create a ‘substantial connection’
with the forum State.” Burger King Corp. 471 U.S.at 475. This requirement
“ensures that a defendant will not be haled into a jurisdiction solely as the result of
‘random,’ ‘fortuitous,’ or ‘attenuated’ contacts, or of the ‘unilateral activity of
another party or third person.’” Id. at 475 (quoting Keeton v. Hustler Magazine,
465 U.S. 770, 774 (1984); Helicopteros, 466 U.S. at 417)).
A court may transfer an action under 28 U.S.C. § 1404(a) if “(1) the action
could have been brought in the transferee district court; (2) a transfer serves the
interest of justice; and (3) a transfer is in the convenience of the witnesses and
parties.” Kepler v. ITT Sheraton Corp., 860 F.Supp. 393, 398 (E.D. Mich.1994)
(internal citation omitted). In determining whether transfer is proper, courts
consider the following factors:
(1) the convenience of the 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.
IFL Group v. World Wide Flight Servs., 306 F.Supp.2d 709, 712 (E.D. Mich.
2004) (citing Overland, Inc. v. Taylor, 79 F.Supp.2d 809, 811 (E.D. Mich. 2000)).

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Defendant bears the burden of showing that transfer of venue is appropriate.
Id. at 714. Plaintiff’s choice of forum deserves “foremost consideration” and
should not be disturbed unless the balance of factors strongly favors Defendant.
West Amer. Insurance Co. v. Potts, No. 89–6091, 1990 WL 104034 at *2 (6th Cir.
July 25, 1990) (unpublished) (citing Nicol v. Koscinski, 188 F.2d 537 (6th
Cir.1951)). The convenience of the witnesses is “one of the most important factors
in determining whether to grant a motion to change venue under § 1404(a).”
Downing, No. 09-14351, 2010 WL 1494767 at *5 (internal citation omitted).
III.

Background

Plaintiff CNBI provides long distance phone services to customers. (ECF
No. 1 ¶ 5.) On May 12, 2004, Plaintiff entered into the Billing and Collections
Agreement (“Agreement”) with Defendant regarding billing and collections. (Id.
at ¶ 6.) The Agreement stated that Defendant would provide billing and collection
services for call records supplied by Plaintiff. (ECF No. 1-1 at Pg ID 13.) In
particular, ILD would receive Plaintiff’s billing records and transmit them to local
exchange carriers. (ECF No. 11 at Pg ID 47.) The local exchange carriers would
bill and collect the charges. (Id.) In return for providing billing and collection
services, CNBI would pay ILD certain fees and charges. (ECF No. 1 ¶ 8.)
Plaintiff alleges that Defendant failed to remit the fees it collected based on the call
records supplied by Plaintiff. (Id. at ¶ 9.)
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The Agreement states that it is between “[CNBI], a Nevada limited liability
company with its principal office at 6701 Democracy Blvd, Suite 300, Bethesda,
MD, 20817 and [ILD], a Delaware corporation with its principal office located at
16200 Addison Road, Suite 100, Addison, Texas 75001.” (ECF No. 1-1 at Pg ID
13.) However, Plaintiff’s complaint states that Plaintiff is a Nevada corporation
with a principal place of business in Wayne County, Michigan. (ECF No. 1 ¶ 1.)
The complaint also states that Defendant is a Delaware corporation that conducts
business in Wayne County, Michigan. (Id. ¶ 2.)
Defendant filed their motion to dismiss on February 21, 2017 alleging that
this Court lacks personal jurisdiction over the matter. Defendant argues that it is
not subject to personal jurisdiction in Michigan for four reasons. First, ILD argues
that it is not subject to general personal jurisdiction because it does not conduct
business, own properties, or have a corporate presence in Michigan. (ECF No. 11
at Pg ID 54.) Rather, ILD states it is a Delaware corporation with a principal place
of business in Florida. (Id. at Pg ID 47.) Second, ILD contends that it is not
subject to specific personal jurisdiction because it did not purposefully avail itself
of the privilege of doing business in Michigan. (Id. at Pg ID 56.) Third,
Defendant alleges that Plaintiff’s claims do not arise from ILD’s activities in
Michigan. (Id. at Pg ID 59.) Fourth, Defendant claims their alleged acts do not
have a substantial enough connection to make personal jurisdiction in Michigan
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reasonable. (Id. at Pg ID 60.) If this Court finds that there is personal jurisdiction,
Defendant requests that this case be transferred to the Southern District of Florida
for the convenience of the parties and witnesses and in the interest of justice. (Id.
at Pg ID 62.)
In response, Plaintiff reminds the Court that it need only make a prima facie
showing of jurisdiction to defeat a motion to dismiss pursuant to Federal Rule of
Civil Procedure 12(b)(2). (ECF No. 13 at Pg ID 84.) Next, Plaintiff argues that
Defendant purposefully availed itself of the privilege to conduct business in
Michigan. (Id. at Pg ID 88.) In particular, Plaintiff states that “[w]henever ILD
communicated with CNBI regarding its performance under the Agreement, billing,
services, or general inquiries and business operations, it did so with BOSS’
employees1 working from CNBI’s office in Harper Woods, Michigan.” (Id. at Pg
ID 89.) Further, Defendant allegedly availed themselves to Michigan by remitting
CNBI’s payments into its Michigan-based Comerica bank accounts on a weekly
basis. (Id.) According to Plaintiff, Defendant has therefore enjoyed the benefits of
conducting business in Michigan. (Id.)
Next, Plaintiff argues that this action arises from Defendant’s conduct in
Michigan because Defendant failed to make timely payments to CNBI’s Michigan-

1

In their opposition brief, Plaintiff explains that it outsources its day-to-day
operations to a third party, Back Office Support Systems, Inc. (“BOSS”).
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based bank accounts. (Id. at Pg ID 90.) Plaintiff also contends that Defendant’s
activities have a substantial connection to Michigan.
Lastly, Plaintiff requests that this matter not be transferred to the Southern
District of Florida because transfer would shift the burden from Defendant to
Plaintiff. (Id. at Pg ID 94.)
IV.
A.

Analysis

General Jurisdiction

This Court can assert personal jurisdiction over a foreign company if their
contacts with the state are so “continuous and systematic” that the company finds
that they are “essentially at home in the forum State.” Goodyear Dunlop Tires
Operations, S.A., 564 U.S. at 919 (citing Int’l Shoe Co., 326 U.S. at 317.)
Plaintiff does not allege that Defendant’s conduct is continuous and systematic to
warrant general jurisdiction over Defendant. Defendant has no physical contacts in
Michigan nor does Defendant regularly conduct business in Michigan. Therefore,
the Court does not have general jurisdiction over Defendant ILD.
B.

Specific Jurisdiction

The Court will now turn to the Sixth Circuit’s three-part test to determine
whether specific jurisdiction exists over ILD. As previously noted, to establish
specific jurisdiction, the Court must find that:
First, the defendant must purposefully avail himself of the privilege of
acting in the forum state or causing a consequence in the forum state.
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Second, the cause of action must arise from the defendant’s activities
there. Finally, the acts of the defendant or consequences caused by
the defendant must have a substantial enough connection with the
forum state to make the exercise of jurisdiction over the defendant
reasonable.
Calphalon Corp., 228 F.3d at 721 (citing Southern Machine Co, 401 F.2d at 381
(6th Cir. 1968)).
Plaintiff argues that Defendant purposefully availed themselves to
jurisdiction in Michigan because of its communications with BOSS and payments
to Plaintiff’s Michigan-based accounts. (ECF No. 13 at Pg ID 89.) Plaintiff notes
that “[f]or nearly 13 years, ILD deposited tens of thousands of dollars on a weekly
basis into CNBI’s Michigan based Comerica account.” (Id. at Pg ID 83.) These
repeated communications and transactions, Plaintiff argues, are sufficient to
establish purposeful availment.
First, the Court notes that the following have remained undisputed, as noted
by Defendant: (1) Defendant did not travel to Michigan to negotiate the
Agreement; (2) Defendant’s alleged statements that form the basis for the fraud
claim were not made in Michigan; (3) Defendant sent money to Plaintiff from
Florida; and (4) Defendant has no physical presence in Michigan. (ECF No. 15 at
Pg ID 119.)
Defendant’s contacts with Michigan are insufficient to establish purposeful
availment. Defendant’s only contacts with the forum were communications with a
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third party, BOSS, and depositing remittances into Plaintiff’s bank account. In
Int’l Tech. Consultants v. Euroglas, the Sixth Circuit similarly determined that the
out-of-state defendant’s letters, phone calls, and faxes to plaintiff in Michigan did
not alter its determination that the court did not have personal jurisdiction over
defendant. 107 F.3d 386, 395 (6th Cir. 1997). The Sixth Circuit explained:
[T]he only reason the communications in question here were directed
to Michigan was that [Plaintiff] found it convenient to be present
there. [Defendant] was not attempting to exploit any market for its
products in Michigan, and the company presumably would have been
pleased to communicate with [Plaintiff] wherever the latter
wished….From the perspective of [Defendant], it was purely
fortuitous that [Plaintiff] happened to have a Michigan address.
Id.; see also Wizie.com LLC v. Borukhin, No. 2:14-10391, 2014 WL 2743375
(E.D. Mich. June 17, 2014) (finding that exercising personal jurisdiction over
defendant unreasonable where only contacts with forum state were emails, faxes,
and phone calls). The Court similarly finds that it would be unreasonable to
exercise specific personal jurisdiction over ILD for its communications with BOSS
and deposits into the Michigan-based bank account.
The second prong of the Sixth Circuit test requires that the cause of action
arise from the defendant’s activities in the forum state. The Supreme Court’s
recent decision in Brystol-Myers Squibb Co. affirmed this principle, stating that
“there must be an affiliation between the forum and the underlying controversy,
principally, [an] activity or an occurrence that takes place in the forum State and is
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therefore subject to the State’s regulation. Bristol-Myers Squibb Co., 137 S.Ct. at
1780 (citing Goodyear Dunlop Tires Operations, S.A., 564 U.S. at 919.) The
Complaint makes clear that the underlying controversy in this matter is ILD’s
alleged failure to remit the fees collected based on the call records supplied by
CNBI. (ECF No. 1.) Therefore, the critical question is where Defendant allegedly
made the decision to withhold CNBI’s payments.
Defendant provided a declaration by Kathy McQuade, the vice-president of
Billing and Collection of ILD. In the declaration, McQuade states that
Defendant’s billing clearinghouse division is based in Fort Lauderdale, Florida.
(See ECF No. 11 at Pg ID 70.) The billing clearinghouse division in Fort
Lauderdale is responsible for all of the servicing of the account, as well as the
following tasks: generating and reviewing client settlement statements; addressing
client inquiries and problems; and maintaining and negotiating the local exchange
carrier agreements. (Id.)
With respect to CNBI, the staff members at the billing clearinghouse
operations in Florida would submit monthly bill record data over the internet to
ILD’s billing and collection network database in Texas. (Id. at Pg ID 71.) After
the data is aggregated in Texas, it is sent to third-party vendors in Virginia or
Texas who would include the phone charges on a customer’s local telephone bill.
(Id.) Once the customer paid their bill, the money would be sent to ILD’s bank in
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Florida. (Id.) Any money sent from ILD to CNBI was sent from ILD’s bank
account in Florida to the bank account designated by the customer, CNBI. (ECF
No. 11 at Pg ID 51.) Based on these facts, the Court finds that any decision to
withhold money from CNBI would have occurred in Florida. Therefore, Plaintiff
fails to satisfy the second prong of the test.
The third prong of the test calls for an inquiry into whether defendant has a
“substantial enough connection with the forum state to make the exercise of
jurisdiction over the defendant reasonable.” Calphalon Corp., 228 F.3d at 721.
For the above stated reasons, the Court finds that Defendant lacks a substantial
connection with Michigan to make the exercise of jurisdiction over ILD
reasonable.
V.

Conclusion

The Court therefore concludes that it lacks personal jurisdiction over the
Defendant in this matter. Therefore, the Court does not need to discuss the issue of
transferring venue.
Accordingly,
IT IS ORDERED that Defendant’s motion to dismiss pursuant to Federal
Rule of Procedure 12(b)(2) is GRANTED;
IT IS FURTHER ORDERED that Defendant’s motion to transfer venue is
DENIED AS MOOT;
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IT IS FURTHER ORDERED that Plaintiff’s complaint is dismissed
without prejudice.
s/ Linda V. Parker
LINDA V. PARKER
U.S. DISTRICT JUDGE
Dated: August 16, 2017
I hereby certify that a copy of the foregoing document was mailed to counsel of
record and/or pro se parties on this date, August 16, 2017, by electronic and/or
U.S. First Class mail.
s/ R. Loury
Case Manager

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