Arkansas-Missouri Forest Products, LLC v. Lerner et al
Filing
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ORDER denying in part 7 motion to dismiss for lack of jurisdiction; finding as moot 18 motion to consolidate cases. Signed on 02/25/16 by District Judge Stephen R. Bough. (Amos, Gloria)
IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF MISSOURI
WESTERN DIVISION
ARKANSAS-MISSOURI FOREST
PRODUCTS, LLC,
Plaintiff,
v.
STUART J. LERNER and
L&M VENTURES, LLC,
Defendants.
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Case No. 4:15-cv-00771-SRB
ORDER
Before the Court is Defendants’ Motion to Dismiss Complaint and Memorandum in
Support Thereof (Doc. #7) and Plaintiff’s Motion to Consolidate Cases (Doc. #18). Defendants’
motion to dismiss (Doc. #7) is DENIED, IN PART. The Court finds it has personal jurisdiction
over the Defendants, but venue is improper before the Court. The Court further finds, however,
that dismissal is not appropriate, and the case should be transferred to the United States District
Court for the Eastern District of Missouri. Plaintiff’s motion to consolidate (Doc. #18) is,
therefore, DENIED as moot.
I.
Background
The parties, as well as other related parties not named in this case, have been involved in
litigation for years stemming from a failed business relationship. See Arkansas-Missouri Forest
Prods., LLC v. Lerner, et al., No. ED-102321, 2016 WL 234889 (Mo. App. E.D. January 19,
2016) (reversing and remanding trial court decision). Plaintiff Arkansas-Missouri Forest
Products, LLC (“AMFP”) is a Missouri limited liability company of which Mark and Diann
Garnett, Missouri citizens, are the sole owners. AMFP owned 30% of a company called Blue
Chip II, of which Defendant L&M Ventures was managing member. Defendant Stuart J. Lerner
is the managing member of L&M Ventures, and both are California citizens according to the
complaint.
AMFP’s claims in this case are based on the allegation that Defendants withheld from
production in a prior lawsuit a responsive, relevant document that would have changed the
outcome of the lawsuit and thereby caused Plaintiff’s injury. The prior lawsuit was conducted in
the Circuit Court of Cape Girardeau, Missouri, (“Cape Girardeau action”) and was concluded
with a jury trial, the result of which was appealed after the trial court entered judgment
notwithstanding the verdict and denied AMFP’s claim for accounting. The Missouri Court of
Appeals, Eastern District, issued an opinion on January 19, 2016, remanding the case back to the
state court for entry of judgment in accordance with the jury’s verdict and with instructions to
proceed with an accounting.
Yet another case involving related parties is pending before this Court. In the matter
Stuart J. Lerner, et al. v. Mark Garnett, et al., Case No. 6:13-cv-03131-SRB (“Lerner action”),
Lerner, L&M Ventures, and several Blue Chip companies are suing Mark and Diann Garnett,
and Steve Moore for: 1) tortious interference with business relationships; 2) breach of contract;
3) fraud; and 4) negligent misrepresentation. The document AMFP alleges should have been
produced in the Cape Girardeau action was produced by Lerner and L&M Ventures to the
Garnetts and Moore during the Lerner action. The Garnetts attempted to bring the claims
asserted in this case as counterclaims in the Lerner action and sought to add AMFP as a
counterclaimant. The counterclaims, however, belonged to AMFP and not the Garnetts, and
upon dismissing the Garnetts’ counterclaims for lack of standing, the Court dropped AMFP as a
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counterclaimant because AMFP was not an original party to the suit. AMFP then filed the
present case and seeks to have this case consolidated with the Lerner action.
AMFP’s complaint includes four counts: 1) fraudulent misrepresentation/concealment; 2)
negligent misrepresentation/concealment; 3) breach of fiduciary duty; and 4) equitable
accounting. Defendants moved to dismiss the complaint on five grounds: 1) lack of personal
jurisdiction; 2) improper venue; 3) failure to state a claim upon which relief can be granted as to
Counts I and II; 4) res judicata and collateral estoppel as to all counts; and 5) equitable
accounting cannot be maintained against these Defendants. The Lerner action is properly before
the Court because the Garnetts and Moore are residents of this judicial district. The venue
analysis in this case, however, differs from that in the Lerner action because here, Defendants are
California residents, and the complaint is based primarily on the allegation that a document was
withheld in the Cape Girardeau action thereby causing AMFP’s injury. Cape Girardeau is within
the boundary of the United States District Court for the Eastern District of Missouri. As a result,
the Court will transfer this case to the Eastern District of Missouri and will address only the
personal jurisdiction and venue arguments in this Order leaving the remaining arguments to be
decided by the transferee court.
II.
Legal Standard
A party may move to dismiss for lack of personal jurisdiction pursuant to Federal Rule of
Civil Procedure 12(b)(2). When considering a motion to dismiss for lack of personal
jurisdiction, “[t]he party seeking to invoke the jurisdiction of a federal court bears the burden of
establishing that jurisdiction exists.” Hicks v. Clay Cnty., 636 F. Supp. 2d 903, 907 (W.D. Mo.
2008) (citation omitted). “[T]o defeat a motion to dismiss for lack of personal jurisdiction, the
non-moving party need only make a prima facie showing of jurisdiction.” Id. “The [prima facie
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showing] must be tested, not by the pleadings alone, but by the affidavits and exhibits presented
with the motions and opposition thereto.” Miller v. Nippon Carbon Co., Ltd., 528 F.3d 1087,
1090 (8th Cir. 2008) (citation omitted).
A party may move to dismiss for improper venue pursuant to Federal Rule of Civil
Procedure 12(b)(3). “The moving party has the burden of establishing that venue is improper.”
Bomkamp v. Hilton Worldwide, Inc., No. 4:13-CV-1569-CAS, 2014 WL 897368, at *5 (E.D.
Mo. Mar. 6, 2014) (citation omitted). The determination of proper venue is governed by 28
U.S.C. § 1391(b), which provides, “A civil action may be brought in—(1) a judicial district in
which any defendant resides, if all defendants are residents of the State in which the district is
located; (2) a judicial district in which a substantial part of the events or omissions giving rise to
the claim occurred . . . ; or (3) if there is no district in which an action may otherwise be brought
as provided in this section, any judicial district in which any defendant is subject to the court’s
personal jurisdiction with respect to such action.” Upon a finding of improper venue, “[t]he
district court . . . shall dismiss, or if it be in the interest of justice, transfer such case to any
district or division in which it could have been brought.” 28 U.S.C. § 1406(a).
While in some circumstances a court may reverse the normal course and consider venue
before considering personal jurisdiction, the Court finds that the circumstances here do not
warrant such reversal. See Leroy v. Great West’n United Corp., 443 U.S. 173, 180 (1979)
(holding “sound prudential justification” existed for first considering venue where personal
jurisdiction issue required analysis of novel constitutional question that was ultimately
unnecessary because venue analysis required transfer to a federal district court in another state).
The venue analysis here requires transfer to another federal district court in Missouri, and
therefore, the personal jurisdiction analysis impacts the Court’s finding that the Eastern District
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of Missouri is a “district . . . in which [the case] could have been brought[]” under 28 U.S.C. §
1406(a).
III.
Discussion
Personal Jurisdiction
“Personal jurisdiction can be specific or general.” Dairy Farmers of Am., Inc. v. Bassett
& Walker, Intern., Inc., 702 F.3d 472, 475 (8th Cir. 2012) (citation omitted). In opposition to the
motion to dismiss, AMFP argues only that specific personal jurisdiction exists. (Doc. #16, p.12,
n.2) (“Ark-Mo has never asserted that defendant’s contacts with Missouri are so pervasive that
they are subject to general personal jurisdiction.”). “Specific jurisdiction can be exercised by a
federal court in a diversity suit only if authorized by the forum state’s long-arm statute and
permitted by the Due Process Clause of the Fourteenth Amendment.” Dairy Farmers, 702 F.3d
at 475. While some courts conduct the statutory and constitutional inquiries together, they are
separate inquiries. Id.
The Missouri long-arm statute provides:
1. Any person or firm, whether or not a citizen or resident of this state, or any
corporation, who in person or through an agent does any of the acts
enumerated in this section, thereby submits such person, firm, or corporation,
and, if an individual, his personal representative, to the jurisdiction of the
courts of this state as to any cause of action arising from the doing of any of
such acts: . . . (3) The commission of a tortious act within this state[.]
Mo. Ann. Stat. § 506.500 (2015). AMFP argues, “Missouri’s long-arm statute is satisfied
because defendants committed fraudulent and/or negligent misrepresentations in Missouri at the
trial during the Cape Girardeau lawsuit and during the discovery phase of that lawsuit.” (Doc
#16, p.5). Defendants counter that any misrepresentation during discovery occurred in
California where Defendants formulated their discovery responses. Even accepting Defendants’
counter position, “foreseeability is the standard to be applied when evaluating whether
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jurisdiction is appropriate over a tortious act occurring in another state with actionable
consequences in Missouri.” Myers v. Casino Queen, Inc., 689 F.3d 904, 911 (8th Cir. 2012). “If
a defendant can reasonably foresee his or her [tortious] actions having consequences felt in
Missouri, jurisdiction is authorized.” Id.
AMFP alleges that Defendants knowingly or negligently withheld from production a
relevant and responsive document, which caused a lack of documentary evidence on an issue that
“was critical to [Defendants’] defenses to the claims of Ark-Mo in the Cape Girardeau lawsuit
for breach of fiduciary duty, fraud, breach of agreement, and/or the amount of damages sustained
by Ark-Mo.” (Doc. #1, ¶30). Certainly, Defendants must have foreseen that their conduct, as
alleged, would cause consequences in Missouri where the Lerner action was pending and
decided. Accordingly, the Court finds Plaintiff has made a prima facie showing that Missouri’s
long-arm statute is satisfied.
“Even if personal jurisdiction over a defendant is authorized by the forum state’s longarm statute, jurisdiction can be asserted only if it comports with [the] Due Process Clause.”
Viasystems, Inc. v. EBM-Papst St. Georgen GmbH & Co., KG, 646 F.3d 589, 594 (8th Cir. 2011)
(citation omitted). “Due process requires that a defendant have certain ‘minimum contacts’ with
the forum state for personal jurisdiction to be exercised.” Myers, 689 F.3d at 911 (quoting Int’l
Shoe Co. v. Wash., 326 U.S. 310, 316 (1945)). “Contacts with the forum state must be sufficient
that requiring a party to defend an action would not ‘offend traditional notions of fair play and
substantial justice.’” Id. The Eighth Circuit applies “a five-factor test to evaluate whether a
defendant’s actions are sufficient to support personal jurisdiction: (1) the nature and quality of
the contacts with the forum state; (2) the quantity of those contacts; (3) the relationship of those
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contacts with the cause of action; (4) Missouri’s interest in providing a forum for its residents;
and (5) the convenience or inconvenience to the parties.” Id. (citation omitted).
Again, AMFP alleges Defendants lied in a Missouri court when they intentionally or
negligently failed to produce a relevant, responsive document and relied on the absence of that
document at trial in defending AMFP’s claims in the Cape Girardeau action. The Court finds
that AMFP has made a prima facie showing that the nature and quality of the contacts
Defendants had with Missouri; the relationship of those contacts with the cause of action; and
Missouri’s interest in providing a forum for AMFP, a Missouri limited liability company, satisfy
the Due Process Clause analysis.
Venue
“[W]hether venue is ‘wrong’ or ‘improper’ . . . is generally governed by 28 U.S.C. §
1391[.]” Atl. Marine Const. Co., Inc. v. U.S. Dist. Court, W.D. Tx., 134 S.Ct. 568, 577 (2013).
As stated by the Supreme Court, “When venue is challenged, the court must determine whether
the case falls within one of the three categories set out in § 1391(b). If it does, venue is proper; if
it does not, venue is improper, and the case must be dismissed or transferred under § 1406(a).”
Id. As previously outlined, a proper venue is a district where any defendant resides, if all
defendants are residents of the State in which the district is located, or a district where a
substantial part of the events or omissions giving rise to the claim occurred. 28 U.S.C. §§
1391(b)(1)-(2). As a “fallback option[,]” only when no district satisfies either of these criteria
will venue properly lie in “any judicial district in which any defendant is subject to the court’s
personal jurisdiction with respect to such action.” Id. at 578; 28 U.S.C. § 1391(b)(3).
AMFP argues that venue is not “improper” in the Western District of Missouri “because
the court can exercise personal jurisdiction over the non-resident defendants.” (Doc. #16, p.13).
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AMFP further argues that because venue in the Western District is proper, the discretionary
transfer provision in 28 U.S.C. § 1404(a) applies rather than the mandatory transfer provision in
28 U.S.C. § 1406(a). For the reasons already stated, the Court agrees it has personal jurisdiction
over the Defendants, but AMFP’s argument ignores the clear statutory language that section
1391(b)(3) only applies when no district satisfies the criteria in sections 1391(b)(1) or
1391(b)(2). The parties agree and the Court finds that section 1391(b)(1) does not apply
regardless of L&M Ventures’ residency for venue purposes under 28 U.S. C. §§ 1391(c)-(d),
because the individual defendant, Stuart Lerner, is a resident of California. Section 1391(b)(2)
applies, however, because – for all the reasons stated in connection with the Court’s finding on
personal jurisdiction – a substantial part of the events or omissions giving rise to the claim
occurred in the Eastern District of Missouri. No part of the events or omissions giving rise to the
claim occurred in the Western District of Missouri, and AMFP does not argue such.
Defendants moved to dismiss the complaint for improper venue, but the Court finds that
“the interest of justice” requires transfer of the case to the United States District Court for the
Eastern District of Missouri, a district in which both personal jurisdiction over the Defendants
exists and venue is proper. 28 U.S.C. § 1406(a). “Transfer is preferred over dismissal whenever
possible ‘to remove procedural obstacles which would prevent an expeditious and orderly
adjudication of a case on its merits.’” York v. Westwood Contractors, Inc., No. 6:06-CV-3468ODS, 2007 WL 781830, at *2 (W.D. Mo. March 13, 2007) (quoting Mayo Clinic v. Kaiser, 383
F.2d 653, 654 (8th Cir. 1967)). As previously detailed, these parties and other related parties
have been involved in protracted litigation for years, and AMFP first sought to raise these same
claims as counterclaims, which was denied. The Court, therefore, transfers the matter so that a
more expeditious and orderly adjudication may occur. Furthermore, the recent Missouri Court of
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Appeals decision may allow the parties to address the alleged state-court discovery violation to
be resolved in state court.
IV.
Conclusion
Defendant’s Motion to Dismiss Complaint and Memorandum in Support Thereof (Doc.
#7) is DENIED, IN PART. The Court finds it has personal jurisdiction over the Defendants, but
venue is improper before the Court. The Court further finds, however, that dismissal is not
appropriate, and the case should be transferred to the United States District Court for the Eastern
District of Missouri. As a result of the transfer, the Court declines to make a determination on
Defendants’ remaining arguments in favor of the transferee court. Plaintiff’s Motion to
Consolidate Cases (Doc. #18) is DENIED as moot.
IT IS SO ORDERED.
/s/ Stephen R. Bough
STEPHEN R. BOUGH
UNITED STATES DISTRICT JUDGE
Dated: February 25, 2016
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