Kroll Ontrack, Inc. v. Devon IT, Inc.
Filing
183
MEMORANDUM OPINION AND ORDER. Third-Party Defendants' Renewed Motion to Dismiss (Doc. No. 114 ) is GRANTED. (Written Opinion). Signed by Judge Donovan W. Frank on 6/27/2014. (BJS)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Kroll Ontrack, Inc.,
Civil No. 13-302 (DWF/TNL)
Plaintiff,
v.
MEMORANDUM
OPINION AND ORDER
Devon IT, Inc.,
Defendant and
Third-Party Plaintiff,
v.
Mitts Law, LLC f/k/a Mitts Milavec, LLC;
Maurice R. Mitts; and Stanley Milavec,
Third-Party Defendants.
Bryce Aaron Young, Esq., Jonathon T. Naples, Esq., and Keith S. Moheban, Esq.,
Stinson Leonard Street LLP, counsel for Plaintiff.
Gary M. Samms, Esq., Obermayer Rebmann Maxwell & Hippel LLP; and Daniel J.
Sathre, Esq., DeWitt, Mackall, Crounse & Moore, SC, counsel for Defendant and
Third-Party Plaintiff.
Dexter R. Hamilton, Esq., Nadia B. Hasan, Esq., Seven H. Silton, Esq., and Thomas P.
Kane, Esq., Cozen O’Connor, counsel for Third-Party Defendants.
INTRODUCTION
This matter is before the Court on a Renewed Motion to Dismiss Third-Party
Complaint Following Permitted Jurisdictional Discovery brought by Third-Party
Defendants Mitts Law, LLC f/k/a Mitts Milavec, LLC (“Mitts Law”), 1 Maurice R. Mitts
(“Mitts”), and Stanley Milavec (“Milavec”) (collectively, “Third-Party Defendants”)
(Doc. No. 114). For the reasons set forth below, the Court grants the motion.
BACKGROUND
The facts of this case were previously set forth in the Court’s July 26, 2013
Memorandum Opinion and Order (the “July 2013 Order”). (Doc. No. 50.) The Court
summarizes and updates the relevant facts below.
Plaintiff Kroll Ontrack, Inc. (“Kroll”) is a corporation organized under the laws of,
and with its principal place of business in, Minnesota. (Doc. No. 11, Third-Party Compl.
¶ 10.) Defendant and Third-Party Plaintiff Devon IT, Inc. (“Devon”) is a Pennsylvania
corporation with its principal place of business in Pennsylvania. (Id. ¶ 9.) Third-Party
Defendant Mitts Law is a Pennsylvania limited liability company with its principal place
of business in Pennsylvania. (Id. ¶ 11.) Third-Party Defendants Mitts and Milavec are
attorneys licensed in Pennsylvania with a business office located in Philadelphia,
Pennsylvania. (Id. ¶¶ 12-13.) Mitts and Milavec are the founding partners of Mitts Law
and were the two equity partners during all times relevant to this proceeding. (Id.)
1
Mitts Law is a successor in interest of Mitts Milavec, LLC, and was formerly
known as Mitts Milavec, LLC. (Doc. No. 11 (“Third-Party Compl.”) ¶ 11.) The Court
refers to both Mitts Law and Mitts Milavec, LLC, as “Mitts Law.”
2
Devon retained the legal services of Mitts Law for representation in litigation in
Pennsylvania (“Pennsylvania Litigation”). (Id. ¶ 17.) Pursuant to a fee agreement
between Mitts Law and Devon, Mitts Law would receive $4 million from a litigation
fund, and Mitts Law would be obligated to represent Devon and two other plaintiffs
through trial and to pay all costs for the Pennsylvania Litigation. (Id. ¶ 30, Ex. A.)
According to the Third-Party Complaint, Mitts Law urged Devon to retain Kroll to serve
as its “E-Discovery Liaison” and to provide project management services in the
Pennsylvania Litigation. (Id. ¶ 19.) The description of the contracted work is
memorialized in the Statement of Work (“SOW”). (Id. ¶ 19, Ex. D.) Mitts Law
negotiated the SOW and the SOW was executed by Devon and Kroll. (Id. ¶¶ 19, 20
& Ex. D.) The SOW provides, in part:
The intent of this [SOW] is to define activities, deliverables, and pricing to
meet the objectives of the Legal Technologies project for [Mitts Law] and
[Devon] (“Client”). The project may include assisting the Client in the
processing, review, and production of electronically stored information
(“ESI”) and/or paper documents. All work performed by [Kroll] on this
project will be conducted at the direction of and under the supervision of
[Mitts Law] in their capacity as counsel to [Devon] on their matter and as
such, all communications and documents exchanged between [Kroll],
[Mitts Law] and [Devon] shall be protected by the attorney-client privilege
and work product doctrine.
(Id. ¶ 19, Ex. D.) Devon alleges that Mitts Law attorneys were in “direct and extensive”
contact with Kroll over the course of the Pennsylvania Litigation. (Id. ¶ 21.) Devon has
submitted evidence, for example, that the main Kroll contact for Mitts Law was located
in Minnesota. (Doc. No. 29 (“Mulhern, Jr. Aff.”), Ex. 2 at 207-08.) In addition, Devon
contends that Kroll would send invoices to Devon, who would then forward the invoices
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to Mitts Law with the expectation that Third-Party Defendants would pay Kroll directly
pursuant to their fee arrangement. (Third-Party Compl. ¶ 34.)
At some point, Mitts Law became dissatisfied with Kroll’s services and contacted
Kroll directly to resolve the issues and to reduce fees for poorly performed services. (Id.
¶¶ 26, 33 & Ex. F.) Mitts contacted Kroll himself about reducing the fees because of his
dissatisfaction with Kroll’s performance of services. (Id. ¶ 33, Ex. G at 107.)
Devon alleges that a sum of $250,000 in litigation funding was to be used by Mitts
Law to pay Kroll’s invoices. (Id. ¶¶ 35-36.) Devon also alleges that Mitts Law never
paid the $250,000 to Kroll and instead retained the money. (Id. ¶¶ 37-38.) Because Kroll
did not receive payment, Kroll ceased providing services and terminated Mitts Law’s and
Devon’s access to the document review database it operated for the Pennsylvania
Litigation. (Id. ¶ 39.)
Kroll filed a Complaint against Devon in District Court for the State of Minnesota.
(Doc. No. 1, Notice of Removal ¶ 1, Ex. A (“Kroll Compl.”).) Devon removed the action
to this Court. (Notice of Removal; Third Party Compl. ¶ 14.) Kroll’s Complaint centers
on the alleged failure on the part of Devon to pay Kroll for services provided. (Kroll
Compl. ¶ 5.) Kroll asserts three causes of action: (1) Breach of Contract; (2) Account
Stated; and (3) Unjust Enrichment. (Id. ¶¶ 6-20.) Devon filed a counterclaim against
Kroll and a Third-Party Complaint against Third-Party Defendants. (Doc. No. 9;
Third-Party Compl.)
Third-Party Defendants moved to dismiss the Third-Party Complaint based on a
lack of personal jurisdiction. In the July 2013 Order, the Court denied the motion, but in
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doing so (and later during a November 26, 2013 hearing), the Court indicated that it
would entertain a motion to reconsider its decision after the parties conducted
jurisdictional discovery. Third-Party Defendants now renew their motion to dismiss for
lack of jurisdiction. 2 The Court considers the renewed motion below.
DISCUSSION
I.
Legal Standard
When a defendant challenges personal jurisdiction, the plaintiff has the burden to
show that personal jurisdiction exists. Burlington Indus., Inc. v. Maples Indus., Inc., 97
F.3d 1100, 1102 (8th Cir. 1996) (citing Gould v. P.T. Krakatau Steel, 957 F.2d 573, 575
(8th Cir. 1992)). To survive a motion to dismiss for lack of personal jurisdiction, the
plaintiff need only make a prima facie showing of personal jurisdiction over the
defendant. Digi–Tel Holdings, Inc. v. Proteq Telecomms. (PTE), Ltd., 89 F.3d 519, 522
(8th Cir. 1996) (citing Northrup King Co. v. Compania Productora Semillas Algodoneras
Selectas, S.A., 51 F.3d 1383, 1387 (8th Cir. 1995)). When, however, the parties have
completed jurisdictional discovery, a plaintiff has “the burden of proving by a
preponderance of the evidence the facts necessary to establish personal jurisdiction over
the defendant.” Safco Prods. Co. v. Welcom Prods., Inc., 730 F. Supp. 2d 959, 963
2
Devon asserts that this motion is premature because, at the time it was filed,
jurisdictional discovery had not been completed. (Doc. No. 123 at 2.) The Court notes,
however, that prior to the hearing on this matter, jurisdictional discovery had been
completed. Despite discovery having been completed, neither party cited to the relevant
deposition testimony in their briefs; nor did either party request to file a supplemental
brief prior to the hearing.
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(D. Minn. 2010) (citing Piexzenik v. Dyax Corp., 265 F.3d 1329, 1334 (Fed. Cir. 2001)).
Here, considering that Devon was afforded ample time to complete jurisdictional
discovery, the Court concludes that Devon must prove the facts necessary to establish
personal jurisdiction by a preponderance of the evidence.
In determining whether a court has personal jurisdiction over a non-resident
defendant, the requirements of both the state long-arm statute and federal due process
must be satisfied. Northrup King, 51 F.3d at 1387. The Minnesota long-arm statute
extends jurisdiction to the maximum limit consistent with due process, and therefore a
court in Minnesota need only evaluate whether the requirements of due process are
satisfied. Wessels, Arnold & Henderson v. Nat’l Med. Waste, Inc., 65 F.3d 1427, 1431
(8th Cir. 1995).
Federal due process requires that a defendant have “certain 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 quotations omitted). The defendant’s conduct and connection with the
forum state must be such that the defendant should reasonably anticipate being haled into
court there. WorldWide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980). It is
essential in each case that the defendant has purposefully availed itself of the privilege of
conducting activities within the forum state, thus invoking the benefits and protections of
its laws. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985) (quoting Hanson v.
Denckla, 357 U.S. 235, 253 (1958)).
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A court may use one of two different analyses to determine whether a defendant’s
contacts with the forum state establish personal jurisdiction. Epps v. Stewart Info. Servs.
Corp., 327 F.3d 642, 648 (8th Cir. 2003). In a general jurisdiction case, a defendant
maintains such “continuous and systematic” contacts with a state that it becomes subject
to the jurisdiction of that state’s courts for any purpose. Morris v. Barkbuster, Inc., 923
F.2d 1277, 1281 (8th Cir. 1991) (quoting Helicopteros Nacionales de Columbia v. Hall,
466 U.S. 408, 414 n.9, 416, 418–19 (1984)). Specific jurisdiction, on the other hand,
requires that the defendant has “purposely directed” its activities at residents of the forum
and that the litigation results from alleged injuries that “arise out of or relate to” those
activities. Wessels, 65 F.3d at 1432 (quoting Burger King, 471 U.S. at 472). Regardless
of which analysis is used, the Eighth Circuit applies a five-factor test in determining
whether the exercise of personal jurisdiction would pass constitutional muster: (1) the
nature and quality of the defendant’s contacts with the forum state; (2) the quantity of
contacts; (3) the source and connection of the cause of action with those contacts; and, to
a lesser degree, (4) the interest of the forum state; and (5) the convenience of the parties.
Wessels, 65 F.3d at 1432.
II.
Specific Jurisdiction over Third-Party Defendants
The Court originally determined that Devon made a prima facie showing that each
Third-Party Defendant purposefully availed itself or himself of the privilege of
conducting business within Minnesota, so as to reasonably anticipate being haled into
court in Minnesota. Specifically, the Court found that the Third-Party Defendants’
negotiation of the SOW, fee arrangement with Devon, and communications by Mitts Law
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and its attorneys with Kroll in Minnesota, supported a finding that Third-Party
Defendants’ contacts were closely enough related to the cause of action for the Court to
exercise specific jurisdiction over Third-Party Defendants.
Third-Party Defendants now urge the Court to revisit its decision following the
completion of jurisdictional discovery. Third-Party Defendants contend that Devon is
unable to establish personal jurisdiction over them for one essential reason— namely,
that all of the facts that relate to the Third-Party Defendants’ contacts with Minnesota
demonstrate that the entirety of their contacts arose in their representative capacity as
attorneys on behalf of their clients. Third-Party Defendants cite to authority in this
district that states that in order to establish personal jurisdiction over an out-of-state
lawyer, based on acts performed in his or her role as counsel, a party must show more
than mere communication with persons in the forum state at the client’s behest. See Nash
Finch Co. v. Preston, 867 F. Supp. 866, 868-69 (D. Minn. 1994); see also Austad Co. v.
Pennie & Edmonds, 823 F.2d 223, 226-27 (8th Cir. 1997) (holding that acts of a
non-resident attorney in the forum state on behalf of his client are not legally sufficient to
support exercise of personal jurisdiction over the attorney).
Devon asserts that specific jurisdiction over Third-Party Defendants exists here.
In support, Devon argues that their contacts with Minnesota are sufficient for Third-Party
Defendants to “reasonably anticipate being haled into court” in Minnesota in an action by
Kroll against Devon for the unpaid invoices under the SOW. (Doc. No. 123 at 6-10.)
For example, Devon points to the fee agreement between Devon and Third-Party
Defendants, whereby Third-Party Defendants agreed to pay Kroll directly on behalf of
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Devon for Kroll’s litigation services. Devon also points to Third-Party Defendants’
communications with Kroll and their negotiation of the SOW as indications that
Third-Party Defendants purposefully availed themselves of the privilege of conducting
activities within Minnesota under the protections of Minnesota laws. (Id.)
After reviewing the record and considering that time to complete jurisdictional
discovery has passed, the Court concludes that Devon has failed to establish, by a
preponderance of the evidence, that any of the Third-Party Defendants have contacts in
Minnesota beyond contacts that were made in a purely representative capacity. The
record demonstrates that Third-Party Defendants’ contacts with Kroll in Minnesota were
made at their client’s behest. In addition, while Third-Party Defendants may have
assisted in negotiating the SOW, that agreement was entered into by Devon and Kroll.
Finally, that Third-Party Defendants agreed, as part of their fee arrangement with Devon,
to pay Kroll from the funds received for their representation in the Pennsylvania
Litigation, is not enough to demonstrate that Third-Party Defendants’ connection with
Minnesota is such that they should have reasonably anticipated being haled into court in
Minnesota. The Court finds that Devon has failed to establish, by a preponderance of the
evidence, that the minimum contacts required to establish personal jurisdiction over
Third-Party Defendants exist. Thus, the Court grants Third-Party Defendants’ motion to
dismiss. 3
3
While the Court does not separately discuss the contacts made by each Third-Party
Defendant with Kroll in Minnesota, suffice it to say that all contacts between Mitts,
(Footnote Continued on Next Page)
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ORDER
Based on the files, records, and proceedings herein, IT IS HEREBY ORDERED
that Third-Party Defendants’ Renewed Motion to Dismiss (Doc. No. [114]) is
GRANTED.
Dated: June 26, 2014
s/Donovan W. Frank
DONOVAN W. FRANK
United States District Judge
(Footnote Continued From Previous Page)
Milavec, or the Mitts Law Firm and Kroll were made in their capacity as Devon’s legal
representative.
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