Doak v. CTK Actuarial Services Inc
ORDER denying 4 Motion to Dismiss, as more fully set out. Signed by Honorable David L. Russell on 5/25/17. (jw)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF OKLAHOMA
STATE OF OKLAHOMA ex rel.,
JOHN D. DOAK, INSURANCE
COMMISSIONER, AS RECEIVER FOR
DRIVER’S INSURANCE COMPANY,
CTK ACTUARIAL SERVICES, INC.,
Case No. CIV-17-371-R
Defendant, a California-based actuary company, moves to dismiss this suit based
on lack of personal jurisdiction. Doc. 4. Plaintiff has responded. Doc. 6. Because this Court
has personal jurisdiction over Defendant, its Motion is DENIED.
This is a professional negligence action arising out of work that Defendant CTK
Actuarial Services, Inc. performed for Driver’s Insurance Corporation (DIC), which prior
to its insolvency wrote auto-insurance policies for high-risk drivers. Doc. 1, Ex. 4, at 1.
The company is now in liquidation and under the administration of a Receiver, the
Oklahoma Insurance Commissioner, John Doak, who brings this suit in his official
capacity. Though DIC has its administrative headquarters in Duluth, Georgia, the company
is domiciled in Oklahoma—meaning it was regulated by the Oklahoma Insurance
Department. This agency requires each insurance company to have an appointed actuary
in order to provide a Statement of Actuarial Opinion (SAO) on the reasonableness of the
insurance company’s estimated reserves that the company includes in its year-end balance
sheets. Doc. 6, at 4.
To satisfy this obligation, DIC retained CTK as its appointed actuary in order to
analyze DIC’s loss and Loss and Adjustment Expenses (LAE) reserves for the years 2008
through 2010. Doc. 1, Ex. 4, at 2. As an appointed actuary, CTK was tasked with grasping
the ins and outs of DIC’s business operations by relying on the financial information
provided by DIC. Ideally, CTK would have then used this information to demonstrate
DIC’s solvency in the eyes of the Oklahoma Insurance Department.
That, though, did not take place. Instead, the Department identified several problems
with DIC’s accounting- and reserve-estimates and found that DIC was insolvent. Id. at 2.
The OIC consequently placed DIC into receivership in January 2013. Plaintiff maintains
DIC’s insolvency was the result of CTK’s services. In short, it argues that CTK incorrectly
analyzed DIC’s loss data and whether some of DIC’s reinsurance contracts effectively
transferred risk. Doc. 1, Ex. 4, at 4. All of this allegedly breached CTK’s duty of
professional care and resulted in specious reserve-estimates and serious monetary damages
CTK, incorporated in and with its principal place of business in California, asks this
Court to dismiss it for lack of personal jurisdiction; CTK apparently performed no actuary
services in Oklahoma. DIC argues this is irrelevant: CTK understood the actuary reports it
prepared would be used by Oklahoma regulators to evaluate DIC’s solvency. Mindful that
CTK lacks the more-traditional contacts with the forum state but aware that one court from
this district has already found personal jurisdiction in a similar scenario, the Court will
deny Defendant’s Motion to Dismiss.
Plaintiff bears the burden of establishing personal jurisdiction. Intercon, Inc. v. Bell
Atlantic Internet Solutions, Inc., 205 F.3d 1244, 1247 (10th Cir. 2000). At the motion-todismiss stage, however, the Court resolves any factual disputes in favor of Plaintiff, and
Plaintiff need only make a prima facie showing of personal jurisdiction. Dudnikov v. Chalk
& Vermilion Fine Arts, Inc., 514 F.3d 1063, 1070 (10th Cir. 2008). To obtain personal
jurisdiction over a nonresident defendant in a diversity action, the plaintiff must show that
jurisdiction is legitimate under the laws of the forum state and that the exercise of
jurisdiction does not offend the Due Process Clause of the Fourteenth Amendment.
Intercon, Inc. v. Bell Atlantic Internet Solutions, Inc., 205 F.3d 1244, 1247 (10th Cir. 2000).
Because Oklahoma permits the exercise of jurisdiction to the full extent allowed by the
Constitution, the question is simply whether this Court’s jurisdiction over CTK comports
with due process. Id. A court may “exercise personal jurisdiction over an out-of-state
defendant if the defendant has ‘certain minimum contacts with [the State] such that the
maintenance of the suit does not offend traditional notions of fair play and substantial
justice.’” Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 923, 131 S.Ct.
2846 (2011) (quoting International Shoe Co. v. State of Wash., Office of Unemp’t Comp.
& Placement, 326 U.S. 310, 316 66 S.Ct. 154 (1945)). Further, personal jurisdiction may
be general or specific. OMI Holdings. Inc. v. Royal Ins. Co. of Can., 149 F.3d 1086, 1090–
91 (10th Cir. 2010). Jurisdiction is general if it does not arise directly from a defendant’s
forum-related activities and is instead based on the defendant’s “general business contacts
with the forum state.” Id. at 1091. Conversely, jurisdiction is specific if the case itself arises
out of or is related to the defendant’s contacts with the forum state. Id.
With Plaintiff having apparently conceded that CTK is not subject to general
jurisdiction, the Court concerns itself only with whether CTK has the requisite minimum
contacts with Oklahoma to satisfy in personam specific jurisdiction. This minimum-contact
standard requires, first, “that the out-of-state defendant must have ‘purposefully directed’
its activities at residents of [Oklahoma].” Dudnikov, 514 F.3d at 1071 (quoting Burger
King Corp. v. Rudzewicz, 471 U.S. 462, 472, 105 S.Ct. 2174 (1985)). It also demands that
“exercising personal jurisdiction over defendants . . . be consonant with traditional notions
of fair play and substantial justice.” Id. (quoting Int’l Shoe Co. v. Washington, 326 U.S.
310, 316 (1945)).
CTK, which has no offices or employees in Oklahoma, argues minimum contacts
with Oklahoma are missing. Its president Chester Kido met with DIC representatives not
in Oklahoma but at DIC’s administrative headquarters in Duluth, Georgia. Doc. 4, at 8.
And these Georgia offices were where CTK sent invoices and received payment from. Id.
Moreover, CTK sent the SAOs to DIC’s offices in Georgia, not to the Oklahoma Insurance
Department itself. Id. In fact, all dealings with DIC apparently took place between DIC’s
Georgia offices and CTK’s principal place of business in Northridge, California. Doc. 4,
at 9. Without these contacts, CTK argues, it can hardly be said that it purposefully availed
itself of the privilege of conducting activities in Oklahoma.
Normally that might be so. But one federal court in this district has already found
personal jurisdiction over an out-of-state defendant who contracted with an Oklahoma4
domiciled company to perform audits which it knew would be relied on by Oklahoma
regulators. See Oklahoma, ex rel. Doak v. Estate of Thornell, No. CIV-12-0708-HE, 2012
WL 4758129, at *4 (W.D. Okla. Oct. 5, 2012). There, Pegasus, a corporation domiciled in
Oklahoma but with its principal place of business in Alexander City, Alabama, retained an
individual from that city to perform financial audits. Id. at *1. After these inaccurate
financial statements failed to reveal Pegasus’s true financial condition, Pegasus found itself
in receivership. Id. The Oklahoma Insurance Commissioner then brought a negligence
claim against the Alabama auditor in Oklahoma state court. Id. Upon removal, the court
found that while she did not have any of the typical contacts that warrant personal
jurisdiction, the Alabama auditor nonetheless subjected herself to specific personal
jurisdiction in Oklahoma by preparing an audit report that she knew would be filed with
and relied on by the Oklahoma Insurance Department:
Plaintiff's claim arises out of [the auditor’s] own affirmative
actions, which created a connection with the State of
Oklahoma, rather than merely those of Pegasus. The fact that
she provided the audit to Pegasus and that Pegasus then
submitted it to the OID is not determinative, in light of her
knowledge of the intended use of the audit and its preparation
specifically for the OID. She is not being required “to appear
to account for merely ‘random, fortuitous, or attenuated
contacts' with the forum state.” Dudnikov, 514 F.3d at 1071
(quoting Burger King, 471 U.S. 475). SeeLeedom Fin. Servs.,
LLC v. Geer & Assocs., P.C., 2010 WL 1852395
(M.D.Fl.2010). An auditor who performs a regulatory audit for
an Oklahoma corporation, which audit is specifically directed
at compliance with Oklahoma's regulatory requirements,
should reasonably anticipate the possibility of being “haled
into court” there.
2012 WL 4758129, at *4–5 (emphasis added).
Swap the auditor for the actuary and you end up with this case’s facts. An out-ofstate defendant, CTK, contracted with DIC, an Oklahoma-domiciled company regulated
by the Oklahoma Insurance Department, to perform financial work that the defendant knew
the Oklahoma Insurance Department would rely on. CTK, after all, noted that each actuary
statement was “provided for regulatory purposes only,” acknowledged the Oklahoma
Insurance Department could request the statements, directed DIC to retain the actuarial
reports for seven years, and instructed DIC to make the reports available to regulating
bodies upon request. Doc. 1, Ex. 4, at 2–3; Doc. 6, at 4. In effect, “[CTK] knew that the
Oklahoma Insurance Commission had a special interest in, and obligation with respect to,
[DIC’s] financial stability.” Thornell, 2012 WL 4758129, at *4. CTK therefore
purposefully availed itself of an Oklahoma forum because “[p]urposeful availment requires
actions by the Defendant which create a substantial connection with the forum state.” OMI
Holdings, 149 F.3d at 1092 (10th Cir. 1998) (quotes omitted); also see Leedom Fin. Servs.,
LLC v. Geer & Assocs., P.C., No. 8:10-CV-917-T-23EAJ, 2010 WL 1852395, at *2 (M.D.
Fla. May 7, 2010) (finding personal jurisdiction over non-resident auditors because they
“(1) provided an audit report for the benefit of the plaintiff in [the forum] and (2) knew that
the plaintiff would rely on the audit report in [the forum]”); and N.Y. State Workers' Comp.
Bd. v. Consol. Risk Servs., Inc., 40 Misc. 3d 1232(A), 977 N.Y.S.2d 668 (N.Y. Sup. 2013)
(finding personal jurisdiction in New York over out-of-state defendant because defendant
had “purposefully interjected itself into [New York] by preparing actuarial reports for a
New York group self-insured trust in accordance with New York State regulations where
the actuary knew that the reports would be filed with a New York regulatory agency).
Because CTK purposefully availed itself of the privilege of conducting activities
within Oklahoma, the question becomes whether that “litigation results from alleged
injuries that arise out of or relate to those activities.” Employers Mut. Cas. Co. v. Bartile
Roofs, Inc., 618 F.3d 1153, 1160 (10th Cir. 2010) (quotes and cites omitted). “Many courts
have interpreted this language to require some sort of causal connection between a
defendant’s contacts and the suit at issue.” Dudnikov, 514 F.3d at 1078. “Some courts have
interpreted the phrase ‘arise out of’ as endorsing a theory of ‘but-for’ causation . . . while
other courts have required proximate cause to support the exercise of specific jurisdiction.”
Id. A third standard asks whether there is a substantial connection or discernible
relationship between the contacts and the suit. Id. While the Tenth Circuit has disavowed
this “substantial-connection test,” it has used both the “but-for” and “proximate-cause”
tests. See, e.g., id. at 1079. The alleged facts satisfy either of those two tests: But for CTK
preparing an actuary report to place DIC in compliance with Oklahoma regulators, DIC
would have no professional negligence claim against CTK; and or the same reasons, CTK’s
alleged actions were the proximate cause of DIC’s financial woes.
Having decided that plaintiff has met his burden of establishing personal
jurisdiction, the Court “must still inquire whether the exercise of personal jurisdiction
would ‘offend traditional notions of fair play and substantial justice.’” Id. at 1080 (quoting
Int’l Shoe, 326 U.S. at 316 (internal quotes omitted)). In deciding this, courts traditionally
(1) the burden on the defendant, (2) the forum state's interests
in resolving the dispute, (3) the plaintiff's interest in receiving
convenient and effectual relief, (4) the interstate judicial
system's interest in obtaining the most efficient resolution of
controversies, and (5) the shared interest of the several states
[or foreign nations] in furthering fundamental social policies.
That said, ‘where a defendant seeks to defeat jurisdiction, it must present a compelling case
that the presence of some other considerations would render jurisdiction unreasonable.”
Pro Axess, Inc. v. Orlux Distrib., Inc., 428 F.3d 1270, 1280 (10th Cir. 2005) (ellipsis and
brackets omitted). CTK has not raised these points, and the Court does not see any reason
why they would weigh against subjecting CTK to jurisdiction here. Plaintiff’s Motion to
Dismiss, Doc. 4, is therefore DENIED.
IT IS SO ORDERED this 25th day of May 2017.
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