Express Services Inc v. King et al
Filing
40
ORDER denying 37 Motion for Order Permitting Limited Jurisdictional Discovery; granting in part and denying in part 24 Motion to Dismiss for Lack of Jurisdiction, as more fully set out. Signed by Honorable David L. Russell on 6/6/16. (jw)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF OKLAHOMA
EXPRESS SERVICES, INC. d/b/a
EXPRESS EMPLOYMENT
PROFESSIONALS, a Colorado
corporation
)
)
)
)
)
Plaintiff,
)
)
v.
)
)
DON G. KING, an individual,
)
EMILY D.S. KING, an individual,
)
SOUTHERN STAFFING, INC., a
)
Georgia corporation, and IMPACT
)
OUTSOURCING SOLUTIONS, INC., )
a Georgia corporation
)
)
Defendants.
)
Case No. CIV-15-1181-R
ORDER
Before the Court are Defendants Emily King and Impact Outsourcing Solutions,
Inc.’s Motion to Dismiss for lack of personal jurisdiction (Doc. No. 24) and Plaintiff
Express Services, Inc. d/b/a Express Employment Professionals’ request for jurisdictional
discovery. Doc. No. 37. The Court finds as follows.
I.
BACKGROUND
This lawsuit is the result of a soured business relationship. Express Services, Inc.
brings this lawsuit against Defendants Don G. King and Emily D.S. King (hereinafter
respectively referred to as “Mr. King,” and “Ms. King”), Southern Staffing, Inc.
(“Southern”), and Impact Outsourcing Solutions (“Impact”) for breaches of contract,
violation of the Lanham Act, tortious interference with contractual and business relations,
1
violation of the Oklahoma Deceptive Trade Practices Act, unfair competition, and unjust
enrichment.
Express is a Colorado corporation with its principal place of business in
Oklahoma. Am. Compl. ¶ 1. Southern is a Georgia corporation co-owned by the Kings.
Id., at ¶ 3; Doc. No. 24-1, at ¶ 3. Impact is also a Georgia corporation, which Mr. King
partially owns. Am. Compl. ¶ 3. Ms. King has no ownership interest in, nor is she an
officer or director of, Impact. Doc. No. 24-3, at ¶¶ 15-16.
According to the Amended Complaint, Express provides staffing, recruiting, and
human resource services to customers through a network of franchised locations. Am.
Compl. ¶ 7. In November 1998, Southern and Express entered into a Franchise
Agreement under which Southern would operate an Express franchise. Id., at ¶ 12. Mr.
King signed the Franchise Agreement and Ms. King, as corporate secretary, attested to it.
Doc. No. 24-1, at 61. The Franchise Agreement includes a forum selection clause. Doc.
No. 24-2, at 56-57. On September 1, 2004, Express and Mr. King entered into a
Developer Agreement under which Mr. King agreed to develop franchise prospects and
also to help consult and advise existing franchisees. Am. Compl. ¶ 21.
Sometime in August 2008, Southern and Express signed an amendment to the
1998 Franchise Agreement (“Amendment”). The Amendment states that “Express and
Franchisee agree to be bound by all of the terms and conditions of the original Franchise
Agreement (as amended), during the additional five (5) years provided by this
Amendment.” Doc. No. 32-3, at 2. In conjunction with the Amendment, the Kings
2
executed a Shareholders Guarantee (“Guarantee”).1 Doc. No. 32-3, at 3. There is no
dispute that the Guarantee is part of the Amendment. Doc. No. 38, at 7.
Somewhat simultaneously, from about 2002 through 2013, Express was providing
monthly services to Impact for a fixed monthly fee. Doc. No. 35, at 8. On or around April
2011, Mr. King began soliciting Express on behalf of Impact in Oklahoma, on a
collaborative business relationship. Doc. No. 35, at 8. In that effort, the following
activities occurred, according to Express:
on April 18, 2011, Mr. King sent an email to Express’s Chief Executive Officer,
Bob Funk, and Chief Operating Officer, Bon Fellinger (Doc. Nos. 35, at 10; 35-4);
in January 2012, Mr. King visited Oklahoma to discuss Impact’s business and
Impact and Express executed a non-disclosure agreement in Oklahoma in order to
“freely discuss Impact’s methods and business strategies” if the subject arose
(Doc. Nos. 24-1, ¶ 22-23; 35, at 11 (citing id.));
on February 2, 2012, Mr. King sent an email to Mr. Funk (who was in Oklahoma)
summarizing the January 2012 meeting (Doc. Nos. 35, at 11; 35-5);
Mr. King sent Express a presentation to solicit new business between Impact and
Express, which Mr. King emailed to Messrs. Funk and Fellinger in Oklahoma
(Doc. Nos. 35, at 11, 35-6; 35-7); and
Impact’s attorney sent a letter to Express headquarters in Oklahoma in December
2013 which discussed “expanded business opportunities” with Impact. Doc. Nos.
35, at 12, 35-8.
Thereafter, the relationship between the parties appears to deteriorate. Chief
among Express’s allegations against Defendants is that Mr. King used Express’s
confidential information and Express employees to solicit Express’s clients and steer
1
While Ms. King submits she does not recall signing the Guarantee, she does not dispute the authenticity
of the document bearing her signature. Rather, she argues any such signature was a mistake. The Court
will discuss this argument below.
3
Express employees to Impact; that Mr. King and Impact have used Express’s intellectual
property without authorization; and that Mr. King took other actions (or inactions) for the
benefit of Impact that violated the Developer Agreement2 or Franchise Agreement. Am.
Compl. ¶¶ 25-28.3 Express alleges that these transgressions occurred “in and among
several states including, but not limited to, Georgia and Texas.” Id. ¶¶ 26-27.
Southern and Mr. King agree that they are bound by the forum selection clause
and consent to jurisdiction. Doc. No. 24, at 2. Ms. King and Impact, however, argue that
the Court lacks personal jurisdiction over them and should dismiss them from the case.
II.
THE PERSONAL JURISDICTION STANDARD
Because the Court has ordered no evidentiary hearing in this matter, Express need
only make a prima facie showing that personal jurisdiction exists over Defendants.
Intercon, Inc. v. Bell Atl. Internet Solutions, Inc., 205 F.3d 1244, 1247 (10th Cir. 2000).
In determining the facts necessary to establish personal jurisdiction, the Court accepts as
true the well pled allegations set forth in the Complaint, but only “to the extent they are
uncontroverted by defendant’s affidavits.” Id. (quoting Wenz v. Memery Crystal, 55 F.3d
1503, 1505 (10th Cir.1995)); Dudnikov v. Charlk & Vermillion Fine Arts, Inc., 514 F.3d
1063, 1070. (10th Cir. 2008) (“Any factual disputes in the parties’ affidavits must be
resolved in plaintiffs’ favor.”). If there is conflicting evidence, all factual disputes are
resolved in Express’s favor. Intercon, 205 F.3d at 1505; Dudnikov, 514 F.3d at 1070.
2
In April 2013, Express terminated the Developer Agreement with Mr. King. Am. Compl. ¶ 22.
3
The parties spend a great portion of their briefs disputing whether Impact was a competing business and
when Express first learned about Impact’s existence. None of this is relevant for the question of personal
jurisdiction, and the Court will not address it.
4
III.
PERSONAL JURISDICTION OVER MS. KING
Both parties agree that the sole question before the Court as to Ms. King is
whether she has waived her personal jurisdiction objections by virtue of a forum selection
clause in the Franchise Agreement. Because personal jurisdiction is an individual right, it
may be contractually waived. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 n.
14 (1985) (“particularly in the commercial context, parties frequently stipulate in advance
to submit their controversies for resolution within a particular jurisdiction); Williams v.
Life Sav. & Loan, 802 F.2d 1200, 1202 (10th Cir. 1986) (“jurisdiction over a party may
be conferred upon a court by contractual agreement of the parties”); Hetronic Int’l, Inc. v.
Hetronic Germany GmbH, 2015 WL 5569035, at *1 (W.D. Okla. Sept. 22, 2015) (forum
selection clause waives objection to personal jurisdiction).
Ms. King argues that she has not waived this right because she was not a signatory
to the Franchise Agreement and therefore is not bound by the forum selection clause.
Express counters that the forum selection clause was incorporated by reference in the
Amendment and that because Ms. King signed the Guarantee to the 2008 Amendment to
the Franchise Agreement, she is bound to the forum selection clause. Ms. King
alternatively argues that application of the forum selection clause to her would be unfair
and unreasonable. The Court addresses these arguments in turn.
5
A.
The Forum Selection Clause Was Incorporated by Reference
The first question is whether Ms. King is in fact bound by the forum selection
clause due to her signature on the Guarantee.4 While Ms. King does not recall signing the
Guarantee and expresses surprise at having done so, she does not specifically deny
signing the Guarantee and admits that the signature appears to be hers. Doc. No. 32-1, at
¶¶ 6-7, 9. Even if this were a contested issue, at this juncture of the proceedings, the
Court is constrained to construe contested evidence in favor of Express. See AST v. Sports
Science, Inc., 514 F.3d 1054, 1058 (10th Cir. 2008) (“[w]hile we are aware that Mr.
Holiday claims he has never seen the Agreement, much less signed it, at this stage of the
litigation we are bound to construe all contested evidence in favor of AST”). Ms. King
also admits that signatories to the Guarantee agreed to be bound to the terms of the
Guarantee itself, as well as the Amendment. 38, at 7. (“[t]he guarantee language states
that the guarantors agree to be ‘. . . jointly and severally bound by all of the provisions
herein . . .’ That phrase obviously refers to the guarantee, and the five year amendment”)
(emphasis added). Specifically, the Guarantee states:
The undersigned individuals represent and warrant that they
are all of the stockholders of the above-named corporate
FRANCHISEE or otherwise have a direct or indirect
4
Ms. King submits that alternate versions of the Amendment and Guarantee exist – one, dated August 4,
2008 without her signature on the guarantee and one, dated August 1, 2008, which does bear her signature
on the guarantee. Doc. No. 32, at 2-3. Ms. King does not argue that the August 4 version controls, nor
could she reasonably do so. The August 4 version appears to be an unexecuted draft. It does not bear any
signatures from Express, an attestation from Ms. King, specify which Franchise Agreement it purports to
modify, and the guarantee only has generic references to “stockholder/member” rather than Mr. and Ms.
Kings’ names, while the August 1 version contains all of this information. Compare Doc. No. 32-2, at 2-3
(August 4 version) with Doc. No. 32-3, at 2-3 (August 1 version). Thus, the analysis in this Order focuses
on the August 1 fully executed version.
6
beneficial interest in the success of such corporate
FRANCHISEE.
Accordingly, to induce EXPRESS to enter into this
Agreement, each of the undersigned individuals hereby
execute this Amendment to the Franchise Agreement and
agree to be jointly and severally bound by all of the
provisions herein, and each of the undersigned individuals
hereby individually guarantee the performance by such
corporate FRANCHISEE of all of FRANCHISEE’S
obligations and payments hereunder.
The undersigned individuals further agree that EXPRESS
does not have to pursue any remedies it may have against the
above-named corporate FRANCHISEE; but rather,
EXPRESS may proceed directly and primarily against any
one or all of the undersigned individuals with or without
joining the above-named corporate FRANCHISEE as
principal or as a named party in any such proceeding.
Doc. No. 32-3, at 3 (emphasis added). Though the parties dispute the effect of the
language of the Guarantee, both agree that the signatories to the Guarantee are, at the
very least, bound to the terms of the Amendment which states, pertinently:
WHEREAS, EXPRESS and FRANCHISEE entered into a
Franchise Agreement dated 11/2/1998, and
WHEREAS, EXPRESS and FRANCHISEE desire to amend
that Franchise Agreement . . .
...
EXPRESS and FRANCHISEE agree to be bound by all of the
terms and conditions of the original Franchise Agreement
(as amended),5 during the additional five (5) years provided
by this Amendment.
Doc. No. 32-3 (emphasis added).
5
No party suggests, nor does the Court find, that any amendments to the Franchise Agreement impacted
the forum selection clause in the original agreement.
7
Ms. King argues that the forum selection clause does not bind her because it was
not specifically referenced in either the Amendment or the Guarantee. However, she does
not dispute that the Guarantee bears her signature, and concedes that guarantors are
bound to the provisions of the Amendment. Doc. Nos. 32-1, at ¶¶ 6-7, 9; 38, at 7. The
question then becomes, whether the forum selection clause in the Franchise Agreement is
a provision of the Amendment. To answer that question, the Court must determine
whether, as Express contends, the Franchise Agreement was incorporated by reference
into the Amendment. As discussed below, the Court agrees that it was.
The Oklahoma Supreme Court recently articulated a three-prong test to determine
whether a contract incorporates an extrinsic document by reference:
Oklahoma law does not recognize a vague attempt at
incorporation by reference as demonstrated in this action.
Under the Oklahoma law of contracts, parties may
incorporate by reference separate writings, or portions
thereof, together into one agreement where (1) the underlying
contract makes clear reference to the extrinsic document, (2)
the identity and location of the extrinsic document may be
ascertained beyond doubt, and (3) the parties to the agreement
had knowledge of and assented to its incorporation.
Walker v. Builddirect.Com Techs. Inc., 349 P.3d 549, 554 (Okla. 2015). 6
The Court finds that the Amendment incorporated the Franchise Agreement by
reference. First, the Amendment makes “clear reference” to the extrinsic document, i.e.,
the Franchise Agreement. The sole purpose of the Amendment was to modify the
Franchise Agreement, and one of the four express terms of the Amendment is that parties
6
Although Ms. King argues she would have signed the Guarantee in Georgia she relies on Oklahoma law
in her arguments on the enforceability of the forum selection clause. Doc. Nos. 32-1, at ¶ 9; 32, at 4.
8
thereto “agree to be bound by all of the terms and conditions of the original Franchise
Agreement (as amended)7 during the additional five (5) years provided by this
Amendment.”
Second, the identity and location of the extrinsic document, the Franchise
Agreement, was “acertain[able] beyond a doubt” to Ms. King. Southern was a party to
the Franchise Agreement (Doc. No. 24-2, at 4) and as the 50% owner and corporate
secretary of Southern, Ms. King no doubt could ascertain its identity and location. This is
underscored by the fact that she attested to and her husband signed the Franchise
Agreement on behalf of Southern.
Finally, Ms. King also had knowledge of and assented to this incorporation. “The
Court ascertains the parties’ mutual intentions from the four corners of the contract.”
Walker, 349 P.3d at 554. The Amendment clearly and unambiguously states that the
parties intended for all terms of the Franchise Agreement, including the forum selection
clause, to be a part of the Amendment. The Amendment provided that “EXPRESS and
FRANCHISEE agree to be bound by all of the terms and conditions of the original
Franchise Agreement (as amended), during the additional five (5) years provided by this
Amendment.” This language incorporated the entire agreement, including the forum
selection clause. See Walker, 349 P.3d at 553 (“[w]hen incorporated material is properly
referenced, that other document, or portions to which reference is made, becomes
constructively part of the writing, forming a single instrument”) (citations omitted). Any
7
Neither party argues that the Franchise Agreement was amended in such a way to modify the forum
selection clause at issue here.
9
failure by Ms. King to “to read duly incorporated terms will not excuse the obligation to
be bound.” Id. at 553.8 Accordingly, this element is met.
B.
Enforcement of Forum Selection Clause Would Not Be Unfair or
Unreasonable
Forum selection clauses are prima facie valid and should be enforced, absent a
compelling reason otherwise. Eads v. Woodmen of the World Life Ins. Soc., 785 P.2d 328,
330 (Okla. Civ. App. 1989) (“forum selection clauses are prima facie valid and should be
enforced unless they can be shown to be unreasonable under the circumstances”). As the
party challenging the forum selection clause, Ms. King “carries a heavy burden of
showing that the provision itself is invalid due to fraud or overreaching or that
enforcement would be unreasonable and unjust under the circumstances.” Riley v.
Kingsley Underwriting Agencies, Ltd., 969 F.2d 953, 957 (10th Cir.1992) (citing M/S
Bremen, 407 U.S. at 15); see also Adams v. Bay, Ltd., 60 P.3d at 511 (party resisting
forum “bears the burden of persuading the court that enforcement of the forum clause
would be unfair or unreasonable.”); Burggraff Servs., Inc. v. H2O Sols., 2014 WL
5766230 (Okla. Civ. App. Sept. 26, 2014)(“forum selection clauses enjoy prima facie
8
In contrast, this element was not present in Walker because the casual reference to the “Terms of Sale,”
did not provide the parties with sufficient information to have knowledge of and assent to its
incorporation. “A party is deemed to have notice of incorporated terms where a reasonable prudent
person, under the particular facts of the case, should have seen them.” Walker, 349 P.3d at 553. “[A]
party’s failure to read duly incorporated terms will not excuse the obligation to be bound.” Id. The
Oklahoma Supreme Court in Walker found that the parties could not have understood “Terms of Sale” to
refer to and incorporate an extrinsic document, where the contract “as presented, embodied all relevant
contract terms and conditions.” Id. at 554. As such, the phrase “Terms of Sale,” did not “clearly or
unambiguously state that the parties intended to incorporate any additional terms beyond the four-corners
of the Contract,” and “buttress[ed] the Court’s conclusion that,” there was no notice or assent. Id.
10
validity unless they are shown to be unreasonable under the circumstances of the
particular case.”).9
Ms. King argues that enforcement would be unfair and unreasonable because she
was not a party to, nor meaningfully involved in the negotiations on the Franchise
Agreement; she was not involved in any negotiations related to the forum selection
clause; she was not a signatory to any other amendments, guarantees, or modifications to
the Franchise Agreement; she had a policy of refusing to personally guarantee Southern’s
obligations; and any signature on a guarantee was a product of mistake and occurred
without discussing the forum selection clause. She further argues there was an absence of
meaningful choice or a fair opportunity to bargain for or against the forum selection
clause because the Amendment she signed did not specifically reference the forum
selection clause. Doc. No. 32, at 4-5.
These arguments are insufficient to meet Ms. King’s “heavy burden” to avoid the
forum selection clause. That she was a non-party to and did not negotiate the Franchise
Agreement is irrelevant because, as discussed above, she was a signatory to the
Guarantee which bound her to the forum selection clause in the Franchise Agreement.
9
It appears that the enforceability of forum selection clauses is a matter of federal common law rather
than state law. See Blackwell Enterprises, Inc. v. Henkels & McCoy, Inc., 2013 WL 3771290, at *4 (W.D.
Okla. July 16, 2013) (“although interpretation of the parties’ contract requires application of state law, the
majority of federal circuit courts have held that federal common law governs the effect to be given to a
forum selection clause in a diversity action”) (collecting cases). However, the court need not decide this
issue because Oklahoma appears to follow federal common law on this issue. See, e.g., Adams, 60 P.3d at
510 (“Absent compelling reasons otherwise, forum selection clauses are enforceable”) (citing Carnival
Cruise Lines, Inc. v. Shute, 499 U.S. 585, 595 (1991); M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1
(1972)); Burggraff Servs, 2014 WL 5766230 (citing to Eads, 785 P.2d 328); Eads, 785 P.2d at 330 (citing
M/S Bremen, 407 U.S. 1); see also Excell, Inc. v. Sterling Boiler & Mech., Inc. 106 F.3d 318, 320 (10th
Cir. 1997) (district courts need not expressly decide the issue where applicable state and federal laws are
the same).
11
Regarding her arguments that she did not negotiate the forum selection clause in the
Franchise Agreement or while signing the Guarantee, the United States Supreme Court
long ago rejected the idea that a forum selection clause is enforceable only if the parties
specifically negotiate for it. See Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 593
(1991) (“[W]e do not adopt the Court of Appeals’ determination that a nonnegotiated
forum-selection clause in a form ticket contract is never enforceable simply because it is
not the subject of bargaining.”); see also Presbyterian Healthcare Servs. v. Goldman,
Sachs & Co., 122 F. Supp. 3d 1157, 1187 (D.N.M. 2015) (“The Supreme Court has
rejected the notion that the parties must specifically negotiate a forum-selection clause for
it to be enforceable”) (citing id.); Cardoni v. Prosperity Bank, 2014 WL 3369334, at *7
(N.D. Okla. July 9, 2014) (“In general, a forum selection clause is enforceable even if one
party to the contract had no opportunity to negotiate for the inclusion or exclusion of a
forum selection clause.”)
Eads, upon which Ms. King relies heavily, does not compel another conclusion.
785 P.2d at 330. There, contract containing the forum selection clause was a clear
product of overreaching. The clause was in the employee’s third employment agreement
which the employer required the employee to consent to as a condition of employment.
Eads, 785 P.2d at 330. More recently, the Oklahoma Court of Appeals found
unenforceable a forum selection clause which was entered “at a time when emergency
services were required, had already been agreed upon, and were being performed.”
Burggraff Servs., 2014 WL 5766230, at *3. Given those circumstances, the court found
12
that there was no evidence that the forum selection clause was negotiated and the
defendants had little bargaining power. Id.
Such circumstances are not present here. Ms. King admits she is the Corporate
Secretary and 50% owner of Southern, and that her husband owns the other 50%. Doc.
Nos. 24-3, at ¶ 14; 32, at 2. She also admits that the Guarantee bears her signature. Doc.
No. 32-1, at ¶¶ 7, 9. Moreover, she was aware of the Franchise Agreement at the time she
signed the Guarantee, given the fact that she attested to the original Franchise Agreement.
Doc. No. 24-2, at 61. Finally, as Express points out, that Ms. King had a policy of
refusing to be a signatory to agreements involving Southern and Express underscores her
considerable bargaining power in these transactions. Given these facts, it cannot be said
that the forum selection clause was a result of unequal bargaining power or a lack of
meaningful choice like that present in either Eads or Burggraff.
Because the forum selection clause is binding and enforceable on Ms. King, the
Court concludes it has personal jurisdiction over Ms. King. Accordingly, Defendants’
Motion to Dismiss the claims against Ms. King for lack of personal jurisdiction is
DENIED.
IV.
PERSONAL JURISDICTION OVER IMPACT
The threshold issue for personal jurisdiction is whether any applicable statute
confers jurisdiction by authorizing nationwide service of process on the defendant. See
Dudnikov, 514 F.3d at 1070. The applicable statute here, the Lanham Act, does not. See
generally, 15 U.S.C. § 1051, et seq.; be2 LLC v. Ivanov, 642 F.3d 555, 558 (7th Cir.
2011) (Lanham Act does not authorize nationwide service of process); Cashland Inc. v.
13
Cashland Inc., 5:15-cv-800, (W.D. Okla. Jan. 14, 2016) (same). Accordingly, pursuant to
Federal Rule of Civil Procedure 4(k)(1)(A), the Court must apply the law of the state to
determine whether personal jurisdiction exists and determine whether the statutory
exercise of personal jurisdiction comports with constitutional due process. Dudnikov, 514
F.3d at 1070.
“The test for exercising long-arm jurisdiction in Oklahoma is to determine first
whether the exercise of jurisdiction is authorized by statute and, if so, whether such
exercise of jurisdiction is consistent with constitutional requirements of due process.”
Luckett v. Bethlehem Steel Corp., 618 F.2d 1373, 1385-86 (10th Cir. 1980) (citations
omitted). Because the Oklahoma long-arm statute extends jurisdiction to the maximum
extent permitted by due process, “this two-part inquiry collapses into a single due process
analysis.” Rambo v.Am. S. Ins. Co., 839 F.2d 1415, 1416 (10th Cir. 1988) (quoting
OKLA. STAT. ANN. tit. 12,§ 2004(F) (“A court of this state may exercise jurisdiction on
any basis consistent with the Constitution of this state and the Constitution of the United
States.”)); Dudnikov, 514 F.3d at 1070. “The Due Process Clause protects an individual’s
liberty interest in not being subject to the binding judgments of a forum with which he
has established no meaningful ‘contacts, ties, or relations.’” Burger King, 471 U.S. at
471-72 (citation and footnote omitted). Accordingly, a court “may exercise personal
jurisdiction over a nonresident defendant only so long as there exist ‘minimum contacts’
between the defendant and the forum State.” World-Wide Volkswagen Corp. v. Woodson,
444 U.S. 286, 291 (1980) (citation omitted). Plaintiff meets the minimum-contacts test by
establishing either general or specific jurisdiction. Emp’rs Mut. Cas. Co. v. Bartile Roofs,
14
Inc., 618 F.3d 1153, 1159 (10th Cir. 2010). If plaintiff does so, the Court must determine
if the exercise of personal jurisdiction over the defendant would offend “traditional
notions of fair play and substantial justice,” or, instead, is “reasonable.” OMI Holdings,
Inc. v. Royal Ins. Co. of Canada, 149 F.3d 1086, 1091 (10th Cir. 1998) (quoting Asahi
Metal Indus. Co. v. Superior Court of California, 480 U.S. 102, 113 (1987)).
Express argues only that the Court has specific jurisdiction over Impact. Express
therefore must show that: (1) Impact “purposefully directed its activities at residents of
the forum state” and (2) Express’s “injury arose from those purposefully directed
activities.” Newsome v. Gallacher, 722 F.3d 1257, 1264 (10th Cir. 2013) (citing
Dudnikov, 514 F.3d at 1070) (emphasis added).
A.
Whether Impact Purposeful Directed Its Activities at Oklahoma
Under the purposeful direction prong, Express must show that Impact committed
an intentional action, “expressly aimed at [Oklahoma],” with “knowledge that the brunt
of the injury would be felt in [Oklahoma].” Newsome, 722 F.3d at 1264 (citing Dudnikov,
514 F.3d at 1072).
Here, Express argues the following contacts show that Impact purposefully
directed its activities at Oklahoma: (1) Impact’s tortious activity of misusing intellectual
property and confidential information and diverting customers and employees was aimed
at Oklahoma because that is where Express felt the injuries; (2) from 2002 to May 2013,
Express and Impact had a business relationship whereby Express performed consultation
services for Impact; and (3) Impact solicited Express for a collaborative business
opportunity. Doc. No. 35, at 21-24.
15
Because Impact does not seriously challenge that the alleged activities were
intentional (Doc. No. 38, at 9), the Court turns to whether Express has met the “expressly
aimed” element. Under the Tenth Circuit’s “somewhat more restrictive approach,” the
“expressly aimed” element requires that the forum state must be the “focal point of the
tort.” Dudnikov, 514 F.3d at 1074 n. 9; Newsome, 722 F.3d at 1268 (quoting id.).
Express’s first proffered contact is Impact’s tortious activity of misappropriating
intellectual property and confidential information in order to divert customers and
employees from Express. Express only alleges that this activity took place and targeted
individuals in Georgia and Texas. Am. Compl. ¶¶ 26-27. Nevertheless, Express contends
that Impact expressly aimed these tortious activities at Oklahoma because it was aware
that Express was headquartered and would be injured in the state. Doc. No. 35, at 22-23.
In essence, Express argues that its presence in Oklahoma is sufficient to show that Impact
expressly aimed its activities at Oklahoma.
This argument has been rejected by both the Supreme Court and the Tenth Circuit.
Walden v. Fiore, 134 S. Ct. 1115, 1125 (2014) (“Calder made clear that mere injury to a
forum resident is not a sufficient connection to the forum”) (citing Calder v. Jones, 465
U.S. 783 (1984)); Rockwood Select Asset Fund XI (6)-1, LLC v. Devine, Millimet &
Branch, 750 F.3d 1178, 1180 (10th Cir. 2014) (Walden teaches that personal jurisdiction
cannot be based on interaction with a plaintiff known to bear a strong connection to the
forum state); Anzures v. Flagship Rest. Grp., 2016 WL 1612789, at *3 (10th Cir. Apr. 22,
2016) (“defendant’s suit-related conduct did not create any meaningful contacts with [the
forum] itself, and the fact that [the plaintiff] was affected [in the forum] (because he
16
resides there) [was] insufficient to authorize personal jurisdiction over defendants.”)
(citing Walden). Rather, this authority teaches that specific jurisdiction requires that the
defendant’s suit-related activity create meaningful contacts with the forum state:
. . . it is the defendant, not the plaintiff or third parties, who
must create contacts with the forum State. In this case, the
application of those principles is clear: Petitioner’s relevant
conduct occurred entirely [out of state], and the mere fact that
his conduct affected plaintiffs with connections to the forum
State does not suffice to authorize jurisdiction. . .
Walden, 131 S.Ct. at 1126); see also Rockwood Select, 750 F.3d at 1180; Anzures, 2016
WL 1612789, at *3.
Urging a contrary result, Express relies upon Newsome, where the Tenth Circuit
found that the Canadian defendants expressly aimed their activities at Oklahoma by
injuring Mahalo USA, a Delaware corporation that “operated exclusively in Oklahoma.”
722 F.3d at 1262. Because defendants were aware that Mahalo USA “operated
exclusively in Oklahoma,” Oklahoma was necessarily the focal point of any tort against
the company. Id. at 1269. In contrast, Express does not operate in Oklahoma exclusively,
but has “nearly 700 franchised locations in United States and Canada.” Am. Compl. ¶ 7.
Express’s other cases also do not support its argument that injury to a forum
resident alone is sufficient to establish personal jurisdiction. In Pro Axess, Inc. v. Orlux
Distribution, Inc., the breach-of-contract lawsuit involved a contract in which “services
necessary for the contract were to be performed” in the forum state. 428 F.3d 1270, 1277
(10th Cir. 2005). Express’s has not alleged or argued any actions related to the conduct
occurred in Oklahoma. AST Sports is likewise distinguishable because the total and direct
17
injury (non-payment of orders) occurred in the forum state. 514 F.3d 1054. As discussed
above, Express has not shown that to be the case here. Finally, the Supreme Court in
Burger King expressly rejected the idea that foreseeability of injury in another State alone
was sufficient to establish contacts there. 471 U.S. at 474 (“the Court has consistently
held that [foreseeability of injury in another State] is not a ‘sufficient benchmark’ for
exercising personal jurisdiction.”) (quoting World-Wide Volkswagen, 444 U.S. at 295).10
Accordingly, because Express relies exclusively on its own connections with
Oklahoma to argue that Impact’s out-of-state activities were expressly aimed at
Oklahoma it has failed to show that these contacts meet the purposeful direction prong.11
Even if the remaining contacts, Impact’s solicitation of and business relationship
with Express, could satisfy the purposeful direction prong, as discussed below, Express
has not made a prima facie showing that its injuries arose out of those contacts.
B.
Whether Express’s Injuries Arose From Those Activities
To determine if an injury arises out of those activities, courts apply either the butfor or the proximate-cause test. Newsome, 722 F.3d at 1269. Under the but-for test, “any
event in the causal chain leading to the plaintiff’s injury is sufficiently related to the
claim to support the exercise of specific jurisdiction.” Id. (quoting Dudnikov, 514 F.3d at
10
Moreover, in all of those cases, the litigation arose out of that business relationship. As discussed infra,
the instant lawsuit did not arise out of Impact’s solicitations of Express nor its prior business relationship
with Express.
11
The Court is likewise dubious that Express has shown that Impact knew that the brunt of the injury
would be felt in Oklahoma, given the fact that the conduct was in Georgia and would most directly impact
Express’s franchise in Georgia. Because Express cannot meet the “expressly aimed” element, however,
the Court does not reach this issue.
18
1078). By contrast, the proximate-cause test “is considerably more restrictive and calls
for courts to examine whether any of the defendant’s contacts with the forum are relevant
to the merits of the plaintiff’s claim.” Id. at 1269-70 (quoting Dudnikov, 514 F.3d at
1078). While the Tenth Circuit has not chosen one over the other, both tests require a
“true causal element,” between defendants’ forum contacts and the litigation. Id.; 12 see
also Shrader v. Biddinger, 633 F.3d 1235, 1240, 1246 n.8 (10th Cir. 2011) (discussing
Dudnikov, 514 F.3d at 1078–79) (discussing the “causal aspect” of “arising out of”); see
also Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011)
(“specific jurisdiction requires an ‘affiliatio[n] between the forum and the underlying
controversy’”) (quoting von Mehren & Trautman, Jurisdiction to Adjudicate: A
Suggested Analysis, 79 Harv. L. Rev. 1121, 1136 (1966)). The Court need not decide
which test to apply here, because Express’s theory fails under either test.
Express fails to identify the causal connection required under either test between
Impact’s solicitations or Impact’s retention of Express’s services, on the one hand, and
the injuries it suffered from the alleged theft of its intellectual property and confidential
information. Express alleges that Mr. King obtained this information in his capacity as an
Express franchisee and developer. Am. Compl. ¶ 26. It does not allege that Mr. King or
12
The Tenth Circuit has rejected a third test, the “substantial connection” test. See Shrader, 633 F.3d at
1246 n.8 (discussing Dudnikov, 514 F.3d at 1078–79). “Under this theory, the relationship between the
contacts and the suit can be weaker when the contacts themselves are more extensive.” Id. Rejecting this
test, the Tenth Circuit noted that the test “inappropriately blurs the distinction between specific and
general personal jurisdiction.” Id. The test “varie[d] the required connection between the contacts and the
claims asserted based on the number of the contacts” and therefore “improperly conflates these two
analytically distinct approaches to jurisdiction.” Id. Because the test eliminated “the distinction between
contacts that are sufficient to support any suit and those that require the suit be related to the contact, it
also undermines the rationale for the relatedness inquiry: to allow a defendant to anticipate his
jurisdictional exposure based on his own actions.” Id. at 1078–79.
19
Impact obtained this information during the course of, as a result of, or in any way related
to his alleged solicitations on behalf of Impact or Impact’s retention of Express for
consultative services. At most, Express appears to argue that the tortious conduct was
somehow a reaction to its rejection of Impact’s entreaties to expand an existing business
relationship. However, Express’s rejection was not a part of the causal chain that led to
Express’s injuries, as required under the but-for test. Nor was it a proximate cause of
Express’s injury, as Express has not shown how these contacts would be relevant to the
merits of its claims against Impact. Underscoring this conclusion is the fact that Express
omitted any reference to either the long-standing business relationship or the repeated
solicitations in its complaint. The undersigned therefore concludes that Express’s injuries
did not arise out of Impact’s Oklahoma contacts.
C.
Whether Exercising Jurisdiction Over Impact Would Offend Traditional
Notions Of Fair Play And Substantial Justice.
Once a plaintiff has satisfied its minimum-contacts burden, the defendant must
demonstrate that the exercise of personal jurisdiction would “offend traditional notions of
fair play and substantial justice.” Newsome, 722 F.3d at 1271 (quoting Dudnikov, 514
F.3d at 1080). However, Because Express has not met its minimum-contacts burden, the
Court need not address this issue.
D.
Express Request for Jurisdictional Discovery
Both in its brief opposing Defendants’ Motion to Dismiss and in a separate
Motion, Express requests leave to conduct jurisdictional discovery as to Impact.
The
decision to permit jurisdictional discovery is left to the sound discretion of the Court.
20
Breakthrough Management v. Chukchansi Gold Casino, 629 F.3d 1173, 1189 (10th Cir.
2010). Refusal to permit jurisdictional discovery is only an abuse of discretion “if the
denial results in prejudice to a litigant. Prejudice is present where pertinent facts bearing
on the question of jurisdiction are controverted . . . or where a more satisfactory showing
of the facts is necessary.” Grynberg v. Ivanhoe Energy, Inc., 490 F. App’x 86, 103 (10th
Cir. 2011) (internal quotation marks and citations omitted). Denial of discovery is not an
abuse of discretion where there is a “very low probability that the lack of discovery
affected the outcome of this case.” Bell Helicopter Textron, Inc. v. Heliqwest Intern.,
Ltd., 385 F.3d 1291, 1299 (10th Cir. 2004). Nor is it an abuse of discretion to deny
generalized, unsupported requests for jurisdictional discovery. World Wide Ass’n of
Specialty Programs & Sch. v. Houlahan, 138 F. App’x 50, 52 (10th Cir. 2005). The party
seeking discovery bears the burden to show entitlement to jurisdictional discovery.
Breakthrough Management, 629 F.3d at 1189 n. 11.
Express has not met its burden here. Express provides no specificity regarding
what it hopes to uncover during discovery. Instead, it makes generalized references
seeking “additional evidence” regarding Impact’s alleged use of Express’s trademarked
property, “Impact’s actions aimed towards Oklahoma, their knowledge of injury felt in
Oklahoma, and their actions regarding the use of Express’s protected mark(s).” Doc. No.
37, at 2. Further, in light of the Supreme Court’s decision in Walden, it is difficult to
imagine how information relating to the requested information will alter the Court’s
conclusion that jurisdiction over Impact is lacking. Finally, Express has not argued, let
alone demonstrated, that it will be prejudiced by denial of jurisdictional discovery.
21
Express has not identified any specific issue that would be clarified by the benefit of
discovery, nor demonstrated to the Court that additional facts are necessary to resolve the
jurisdictional issue. For these reasons, the Court denies Express’s request for
jurisdictional discovery.
Because Express has not met its prima facie burden to show that specific
jurisdiction exists over Impact, nor shown how discovery on this issue would be
productive, necessary, or helpful, the Court DENIES Express’s request for jurisdictional
discovery and GRANTS Defendants’ Motion to Dismiss the claims against Impact for
lack of personal jurisdiction.
V.
CONCLUSION
The Court therefore GRANTS IN PART AND DENIES IN PART Defendants’
Motion to Dismiss (Doc. No. 24).
It GRANTS the Motion with respect to Defendant Impact and DENIES the
Motion with respect to Defendant Emily King.
The Court also DENIES Express’s Motion, in the Alternative, for Order
Permitting Limited Jurisdictional Discovery. (Doc. No. 37). The claims against
Defendant Impact are therefore DISMISSED WITHOUT PREJUDICE for lack of
personal jurisdiction.
IT IS SO ORDERED this 6th day of June, 2016.
22
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