Kroll Ontrack, Inc. v. Devon IT, Inc.
Filing
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MEMORANDUM OPINION AND ORDER. The Third-Party Defendants' Motion to Dismiss (Doc. No. 20 ) is DENIED. (Written Opinion). Signed by Judge Donovan W. Frank on 7/26/2013. (BJS)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Kroll Ontrack, Inc.,
Civil No. 13-302 (DWF/JJG)
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.
Jonathon T. Naples, Esq., and Keith S. Moheban, Esq., Leonard Street and Deinard, PA,
counsel for Plaintiff.
Charles A. McCauley, III, Esq., Gary M. Samms, Esq., Obermayer Rebmann Maxwell &
Hippel LLP; and Daniel J. Sathre, Esq., Mackall, Crounse & Moore, PLC, counsel for
Defendant Devon and Third-Party Plaintiff.
William E. Parker, Esq. counsel for Third-Party Defendants.
INTRODUCTION
This matter is before the Court on a Motion to Dismiss for Lack of Personal
Jurisdiction 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. 20). For the reasons set forth below,
the Court denies the motion.
BACKGROUND
Plaintiff Kroll Ontrack, Inc. (“Kroll”) is a corporation organized under the laws of
the State of Minnesota with its principal place of business located in Eden Prairie,
Minnesota. (Doc. No. 1; Doc. No. 11 (“Third-Party Compl.”) ¶ 10.) Defendant and
Third-Party Plaintiff Devon IT, Inc. (“Devon”) is a corporation organized and existing
under the laws of the Commonwealth of Pennsylvania with its principal place of business
in King of Prussia, Pennsylvania. (Id. ¶ 9.) Third-Party Defendant Mitts Law is a
Pennsylvania limited liability company with its principal place of business in
Philadelphia, Pennsylvania. (Id. ¶ 11.) Third-Party Defendant Mitts (“Mitts”) is an
attorney licensed in Pennsylvania with a business office located in Philadelphia,
Pennsylvania. (Id. ¶ 12.) Third-Party Defendant Milavec (“Milavec”) is an attorney
licensed in Pennsylvania with a business office located in Philadelphia, Pennsylvania.
(Id. ¶ 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. ¶¶ 12, 13.)
Devon engaged the legal services of Mitts Law for representation in litigation in
Pennsylvania (“Pennsylvania Litigation”). (Id. ¶ 17.) Pursuant to a fee agreement
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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.”
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between Mitts Law and Devon, Mitts Law would receive $4 million from a litigation
funder, 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.) Mitts
Law encouraged 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 sent it to Devon for execution. (Id.
¶ 20.) The SOW read, in part, as follows:
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.) Mitts Law attorneys were in “direct and extensive” contact with Kroll
over the course of the Pennsylvania Litigation. (Id. ¶ 21.) Karen Anderson was the main
Kroll contact for Mitts Law for issues regarding electronic data. (Doc. No. 29, Mulhern,
Jr. Aff, Ex. 2 at 207-208.) Ms. Anderson was located in Minnesota. (Id.) Kroll would
send invoices to Devon which would then be forwarded to Mitts Law with the
expectation that Third-Party Defendants would pay Kroll directly. (Third Party Compl.
¶ 34.)
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Mitts Law was dissatisfied with the services of Kroll and contacted Kroll directly
to resolve service issues and reduce fees for poorly performed services. (Id. ¶ 26, Ex. F
& ¶ 33.) Mitts contacted Kroll himself about reducing the fees because of his
dissatisfaction with Kroll’s performance of services. (Id. ¶ 33, Ex. G at 107.)
A sum of $250,000 in litigation funding became available to Mitts Law with the
understanding that the money would be used to pay Kroll’s invoices. (Id. ¶¶ 35-36.)
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 Mitt 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, ¶ 1, Ex. A (“Kroll Compl.”).) Devon removed the action to United States
District Court for the District of Minnesota. (Doc. No. 1; 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.) Kroll asserts three causes of action: Breach of
Contract, Account Stated, and Unjust Enrichment. (Id.) Devon filed a counterclaim
against Kroll and a Third-Party Complaint against Third-Party Defendants. (Doc. No. 9;
Third-Party Compl.) Third-Party Defendants now move to dismiss the Third-Party
Complaint based on a lack of personal jurisdiction.
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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,
however, 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 considering whether personal jurisdiction exists, the court may consider
matters outside the pleadings; “the court may inquire, by affidavits or otherwise, into the
facts as they exist.” Stevens v. Redwing, 146 F.3d 538, 543 (8th Cir. 1998) (quoting Land
v. Dollar, 330 U.S. 731, 735 n.4 (1947)). For the purpose of determining whether the
plaintiff has made a prima facie showing of personal jurisdiction, the Court must view the
evidence in the light most favorable to the plaintiff and resolve all factual conflicts in the
plaintiff’s favor. Digi–Tel, 89 F.3d at 522 (citing Dakota Indus., Inc. v. Dakota
Sportswear, Inc., 946 F.2d 1384, 1387 (8th Cir. 1991)).
In determining whether a court has personal jurisdiction over a non-resident
defendant, a court must ordinarily satisfy both the requirements of the state long-arm
statute and of federal due process. Northrup King, 51 F.3d at 1387. The Minnesota
long-arm statute extends jurisdiction to the maximum limit consistent with due process,
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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. Wash., 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)).
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
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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 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. The first three factors are of
primary importance, while the last two are “secondary factors.” Minn. Mining & Mfg.
Co. v. Nippon Carbide Indus. Co., 63 F.3d 694, 697 (8th Cir. 1995). The third factor
distinguishes between specific and general jurisdiction. Digi–Tel, 89 F.3d at 523 n.4
(citing Wessels, 65 F.3d at 1432 n. 4).
II.
Specific Jurisdiction over Third Party Defendants
Devon asserts specific jurisdiction exists here. In support of its assertion of
specific jurisdiction, Devon argues that Mitt Law’s 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. Devon points to
the agreement and interaction between Mitts Law and Kroll (which Mitts Law knew was
located in Minnesota) as an indication that Mitts Law purposefully availed itself of the
privilege of conducting activities within Minnesota and the protections of Minnesota
laws. (Id.)
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Third-Party Defendants argue that the contacts in Minnesota are not sufficient to
satisfy the minimum contacts requirement. (Doc. No. 32 at 5.) In particular, Third-Party
Defendants assert that their mail and telephone contacts with Minnesota are insufficient
to establish personal jurisdiction. (Id. at 6.) Third-Party Defendants contend that neither
the place of contracting nor the place of performance conclusively determines personal
jurisdiction. (Doc. No. 32 at 7.) Further, they claim that Devon failed to establish
personal jurisdiction over each individual Third-Party.
The Court first considers the nature, quality, and quantity of the Third- Party
Defendants’ contacts with Minnesota. Based on the preceding description of the record,
it is apparent that Mitts Law engaged in regular communication with Kroll, a Minnesota
company, in the course of its representation of Devon in the Pennsylvania Litigation.
Mitts Law attorneys negotiated the SOW on behalf of Devon, and Mitts Law advised
Devon to agree to the SOW. Further, Mitts Law contacted Kroll directly on issues
regarding its services for Devon. The Court concludes that these contacts with Minnesota
are not random, fortuitous, or attenuated, but rather demonstrate an intentional and
ongoing relationship with a Minnesota company, and go beyond solely interstate mail or
telephone contacts. The record also indicates, at this early stage of litigation, that
Third-Party Defendants Mitts and Milavec, who were the firm’s two founding and only
equitable partners at the time, were directly involved in and aware of the contacts.
Specifically, for example, Mitts directly communicated with Kroll regarding its poor
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performance and sought to negotiate a reduction in fees. (Third-Party Compl. ¶ 33, Ex. G
at 107.) 2 Thus, the Court concludes 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 there.
The Court next considers the relationship between the cause of action and
Third-Party Defendants’ contacts. Kroll’s Complaint asserts three causes of action
arising from Devon’s failure to pay Kroll for their services in connection with the
Pennsylvania Litigation. Devon’s claims against Mitts Law arise out of Mitts Law’s
alleged failure to remit payment to Kroll. The services provided by Kroll were
negotiated and handled by Mitts Law, not Devon directly. The Court finds the
negotiation of the SOW and fee arrangement and regular business communications by
Mitts Law and its attorneys with Kroll to be sufficient indications that Third-Party
Defendants’ contacts are closely enough related to the cause of action for the Court to
exercise specific jurisdiction over Third-Party Defendants.
In addition, the final two factors, which are accorded less weight in the Court’s
analysis, also support jurisdiction. Minnesota has an obvious interest in providing a
forum, in which Kroll, a Minnesota company, may fully litigate its claims. See Northrup,
51 F.3d at 1389. In addition, the convenience of the parties favors jurisdiction. A
plaintiff is normally afforded its selected forum. Kroll, and potentially witnesses
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The Court acknowledges that the record is less clear as to Milavec’s personal
contacts. The Court will entertain a future motion to reconsider should discovery reveal
that Milavec’s contacts are insufficient. See L. R. 7.1(j).
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therefrom, are in Minnesota. The Court recognizes that both Devon and Third-Party
Defendants are based in Pennsylvania, but any inconvenience to Third-Party Defendants
in litigating in Minnesota would be similarly experienced by Kroll if required to litigate
elsewhere.
Based on the record before it, the Court concludes that Devon has made a
prima facie showing that Third-Party Defendants are subject to specific jurisdiction of the
Court. The Court concludes that Third-Party Defendants should have reasonably
anticipated being haled into court in Minnesota in a dispute related to their relationship to
Kroll and Devon. The Court acknowledges that Third-Party Defendants’ contacts with
Minnesota are not far beyond the minimum necessary for the exercise of personal
jurisdiction. The Court, however, is not required to determine the “best” forum for the
suit but rather, the Court must determine whether minimum contacts exist so that the
exercise of jurisdiction over Third-Party Defendants does not offend traditional notions
of fair play and substantial justice. In this instance, the Court finds such minimum
contacts do exist. Therefore, the Court denies Third-Party Defendants’ motion to
dismiss.
ORDER
Based upon the foregoing, IT IS HEREBY ORDERED that Third-Party
Defendants’ Motion to Dismiss (Doc. No. [20]) is DENIED.
Dated: July 26, 2013
s/Donovan W. Frank
DONOVAN W. FRANK
United States District Judge
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