Santander Consumer USA Inc v. Shults Ford Inc
Filing
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Memorandum Opinion and Order. The court, rather than dismiss for lack of personal jurisdiction or improper venue, hereby transfers this action to the Western District of Pennsylvania pursuant to 28 U.S.C. §§ 118(c), 1406(a), and 1631. (Ordered by Judge Sam A Lindsay on 6/30/2011) (ddb)
IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
SANTANDER CONSUMER USA, INC.
f/k/a DRIVE FINANCIAL SERVICES,
Plaintiff,
v.
SHULTS FORD, INC.,
Defendant.
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Civil Action No. 3:11-CV-614-L
MEMORANDUM OPINION AND ORDER
Before the court is Defendant’s Motion to Dismiss or to Transfer, filed March 28, 2011.
After careful consideration of the motion, response, record, and applicable law, the court determines
that it lacks personal jurisdiction over Defendant and that venue is improper in the Northern District
of Texas. The court, rather than dismiss for lack of personal jurisdiction or improper venue, hereby
transfers this action to the Western District of Pennsylvania pursuant to 28 U.S.C. §§ 118(c),
1406(a), and 1631.
I.
Factual and Procedural Background
On February 22, 2011, Santander Consumer USA, Inc. f/k/a Drive Financial Services
(“Plaintiff” or “Santander”) filed Plaintiff’s Original Petition in the 14th District Court of Dallas
County, Texas. Shults Ford, Inc. (“Defendant” or “Shults”) timely removed the case to this court
on March 25, 2011, based upon diversity jurisdiction. Plaintiff brings a claim for breach of contract
against Defendant for its alleged misrepresentation of vehicle conditions and equipment options.
Memorandum Opinion and Order – Page 1
Santander is a corporation organized under the laws of the State of Illinois with its principal
place of business in Dallas, Texas. Santander is in the business of buying automobile retail
installment contracts from automobile dealers such as Shults. In August 2001, Santander and Shults
entered into a Non-Recourse Dealer Retail Agreement (“Agreement”) in which Shults would submit
proposals to sell and assign certain automobile retail installment sales contracts to Santander. In
2007, Shults assigned thirteen separate retail installment sales contracts (the “Contracts”) at issue
in this suit to Santander. Santander alleges that Shults misrepresented the condition of the vehicles,
and the equipment options included with the vehicles, by identifying equipment options that were
not included with the vehicles. Santander argues that these misrepresentations violated Shults’
warranty under Paragraph 8(J) of the Agreement. Specifically, Paragraph 8(J) states, “The Vehicle
and all options therein are accurately described in the Contract and such Vehicle was delivered by
Dealer and accepted without condition or reservation by Buyer(s).” Pl.’s App. at 7. Santander
alleges that, because Shults’s representations regarding the equipment options were false, the terms
of the Agreement require Shults to repurchase the Contracts.
Shults is a Delaware corporation with its principal place of business in Allegheny County,
Pennsylvania. Shults represents that it is a multi-location automobile dealership with a prominent
presence in the Pittsburgh region and that it does not maintain a place of business in Texas. Shults
contends that it does not maintain an office or have any employees in Texas, own or lease property
in Texas, conduct or solicit any business in Texas, or have any contractual obligations scheduled to
be performed in Texas. Shults contends that the Agreement was executed in Allegheny County,
Pennsylvania, and that all of the services provided by Shults pursuant to the Agreement were
performed in Allegheny County, Pennsylvania.
Memorandum Opinion and Order – Page 2
Shults now moves to dismiss this action for lack of personal jurisdiction and improper venue,
arguing that it does not possess sufficient minimum contacts with the State of Texas and that none
of the bases for proper venue exists in the Northern District of Texas. Plaintiff disagrees.
II.
Legal Standard
A.
Personal Jurisdiction
On a motion to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of
establishing a prima facie case for the court’s jurisdiction over a nonresident defendant. See Ham
v. La Cienega Music Co., 4 F.3d 413, 415 (5th Cir. 1993); Stuart v. Spademan, 772 F.2d 1185, 1192
(5th Cir. 1985). When the court rules on the motion without an evidentiary hearing, the plaintiff
may establish personal jurisdiction by presenting a prima facie case that personal jurisdiction is
proper, id.; proof by a preponderance of the evidence is not required. International Truck and
Engine Corp. v. Quintana, 259 F. Supp. 2d 553, 556 (N.D. Tex. 2003) (citing WNS, Inc. v. Farrow,
884 F.2d 200, 203 (5th Cir. 1989)). The court may determine the jurisdictional issue by receiving
affidavits, interrogatories, depositions, oral testimony, or any combination of the recognized
methods of discovery. Stuart, 772 F.2d at 1192. Uncontroverted allegations in a plaintiff’s
complaint must be taken as true, and conflicts between the facts contained in the parties’ affidavits
must be resolved in favor of the plaintiff. Bullion v. Gillespie, 895 F.2d 213, 217 (5th Cir. 1990).
After a plaintiff makes his prima facie case, the burden then shifts to the defendant to present “a
compelling case that the presence of some other consideration would render jurisdiction
unreasonable.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 477 (1985).
A federal court has jurisdiction over a nonresident defendant if the state long-arm statute
confers personal jurisdiction over that defendant, and if the exercise of jurisdiction is consistent with
Memorandum Opinion and Order – Page 3
due process under the United States Constitution. Ruston Gas Turbines, Inc. v. Donaldson Co., Inc.,
9 F.3d 415, 418 (5th Cir. 1993). Because the Texas long-arm statute extends to the limits of federal
due process, Schlobohm v. Schapiro, 784 S.W.2d 355, 357 (Tex. 1990), the court must determine
whether (1) the defendants have established “minimum contacts” with the forum state; and, (2)
whether the exercise of personal jurisdiction over the defendants would offend “traditional notions
of fair play and substantial justice.” Ruston Gas, 9 F.3d at 418 (citing International Shoe Co. v.
Washington, 326 U.S. 310, 316 (1945)).
The “minimum contacts” prong is satisfied when a defendant “purposefully avails itself of
the privilege of conducting activities within the forum state, thus invoking the benefits and
protections of its laws.” Burger King, 471 U.S. at 475. The nonresident defendant’s availment must
be such that the defendant “should reasonably anticipate being haled into court” in the forum state.
World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980). This test “ensures that a
defendant will not be haled into a jurisdiction solely as a result of ‘random,’ ‘fortuitous,’ or
‘attenuated’ contacts, or of the ‘unilateral activity of another party or a third person.’” Burger King,
471 U.S. at 475 (citations omitted). The “minimum contacts” prong of the inquiry may be
subdivided into contacts that give rise to “specific” personal jurisdiction and those that give rise to
“general” personal jurisdiction. Marathon Oil Co. v. A.G. Ruhrgas, 182 F.3d 291, 295 (5th Cir.
1999). Specific jurisdiction is only appropriate when the nonresident defendant’s cause of action
arises from, or is directly related to, the defendant’s contacts with the forum state. Helicopteros
Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 n.8 (1984). The exercise of general
personal jurisdiction is proper when the nonresident defendant’s contacts with the forum state, even
if unrelated to the cause of action, are continuous, systematic, and substantial. Id. at 414 n.9.
Memorandum Opinion and Order – Page 4
In evaluating the second prong of the due process test, the court must examine a number of
factors in order to determine fairness and reasonableness, including: (1) the defendant’s burden; (2)
the forum state’s interests; (3) the plaintiff’s interest in convenient and effective relief; (4) the
judicial system’s interest in efficient resolution of controversies; and (5) the state’s shared interest
in furthering social policies. Asahi Metals Indus. Co. v. Superior Court, 480 U.S. 102, 112 (1987).
As noted above, “once minimum contacts are established, a defendant must present ‘a compelling
case that the presence of some consideration would render jurisdiction unreasonable.’” Eviro
Petroleum, Inc. v. Kondur Petroleum, 79 F. Supp. 2d 720, 725 (S.D. Tex. 1999) (quoting Burger
King, 471 U.S. at 277). In fact, “[o]nly in rare cases . . . will the exercise of jurisdiction not comport
with fair play and substantial justice when the nonresident defendant has purposefully established
minimum contacts with the forum state.” Id. (quoting Guardian Royal Exch. Assurance, Ltd. v.
English China Clays, P.L.C., 815 S.W.2d 223, 231 (Tex. 1991)).
B.
Venue
In a diversity action, venue is proper in either a judicial district where the defendant resides,
or a judicial district in which a substantial part of the events or omissions giving rise to the claim
occurred or in which a substantial part of property that is the subject of the action is situated.
28 U.S.C. § 1391(a)(1)–(2). Venue is also proper in a judicial district in which any defendant is
subject to personal jurisdiction at the time the action is commenced, if there is no district in which
the action may otherwise be brought. Id. § 1391(a)(3).
Memorandum Opinion and Order – Page 5
III.
Analysis
Defendant has moved to dismiss the complaint against it for lack of personal jurisdiction
under Federal Rule of Civil Procedure 12(b)(2) and for improper venue under Federal Rule of Civil
Procedure 12(b)(3). The court will address each issue separately.
A.
Personal Jurisdiction
1.
General Jurisdiction
The exercise of general jurisdiction requires continuous and systematic general business
contacts between the defendant and the forum state. Helicopteros, 466 U.S. at 416. The court must
examine the totality of a defendant’s contacts with the forum over a reasonable number of years to
determine whether a defendant has established a business presence in the forum. Access Telecom,
Inc. v. MCI Telecomm. Corp., 197 F.3d 694, 717 (5th Cir. 1999), cert. denied, 531 U.S. 917 (2000).
Furthermore, “[t]he minimum contacts inquiry is broader and more demanding when general
jurisdiction is alleged, requiring a showing of substantial activities in the forum state.” Jones v.
Petty-Ray Geophysical Geosource, Inc., 954 F.2d 1061, 1068 (5th Cir.), cert. denied, 506 U.S. 867
(1992).
Defendant contends that its contacts with Texas are minimal and do not meet the
requirements for general jurisdiction. The court agrees. Defendant does not maintain an office or
a regular place of business in Texas, nor is Defendant registered to do business in Texas.
Furthermore, there is no indication that Defendant solicits business, advertises or markets its goods
in Texas. The contacts referenced by Plaintiff are not the type of continuous, systematic, and
substantial contacts necessary to support the exercise of general personal jurisdiction. See
Helicopteros, 466 U.S. at 416; see also Central Freight Lines v. APA Transport Corp., 322 F.3d
Memorandum Opinion and Order – Page 6
376, 380 (5th Cir. 2003). All of Defendant’s alleged contacts with Texas are connected with
Plaintiff’s claims in this suit. Accordingly, after considering Defendant’s contacts with Texas in
their totality, the court determines that Plaintiff has not presented a prima facie case of general
jurisdiction. The court now turns to whether Defendant’s contacts give rise to specific personal
jurisdiction.
2.
Specific Jurisdiction
Plaintiff argues that specific jurisdiction exists because the cause of action arises out of
Defendant’s purposeful contacts with Texas.
Plaintiff contends that Defendant purposely
established contacts with Texas by entering into the Agreement and assigning the Contracts to
Plaintiff, a Texas resident, with the Contracts to be performed in whole or in substantial part in
Dallas, Texas. Plaintiff further argues that the exercise of personal jurisdiction over Defendant
would not offend traditional notions of fair play and substantial justice.
Defendant argues that Plaintiff cannot establish specific jurisdiction because Shults does not
possess sufficient minimum contacts with Texas that directly relate to the cause of action.
Defendant asserts that entering into a contract with a resident of the forum state, without more, does
not establish sufficient minimum contacts. Defendant further contends that the exercise of personal
jurisdiction over Defendant would offend traditional notions of fair play and substantial justice.
To support the exercise of specific jurisdiction, Plaintiff’s claims for breach of contract must
relate to or arise from Defendant’s contacts with Texas. Helicopteros, 466 U.S. at 414 n.8.
Defendant presents the following facts in support of specific jurisdiction: (1) Defendant entered into
the Agreement with a Texas resident; (2) Defendant consented to a choice of law provision
mandating Texas law to govern the Agreement; (3) Defendant appointed Santander with power of
Memorandum Opinion and Order – Page 7
attorney; (4) Defendant agreed to indemnify Santander for claims arising from Defendant’s conduct;
and (5) Defendant assigned at least eighty Contracts, including the thirteen at issue in this suit, to
Plaintiff. The court will address each jurisdictional fact in turn.
Specific jurisdiction may not be based upon the mere fortuity of Plaintiff’s Texas residency.
See, e.g., Holt Oil & Gas Corp. v. Harvey, 801 F.2d 773, 778 (5th Cir. 1986); Product Promotions,
Inc. v. Coustaeu, 495 F.2d 483, 497 n.26 (5th Cir. 1974). “Merely contracting with a resident of the
forum state does not establish minimum contacts.” Moncrief Oil Int’l Inc. v. OAO Gazprom, 481
F.3d 309, 311 (5th Cir. 2007). Plaintiff’s unilateral activities in Texas do not constitute minimum
contacts if Defendant did not perform any of its contractual obligations in Texas, the contract did
not require performance in Texas, and the contract is centered outside of Texas. Accordingly,
Defendant’s entering into the Agreement with Plaintiff, a Texas resident, is insufficient to form the
basis of specific jurisdiction.
Plaintiff next argues that the choice of law provision in the Agreement requiring Texas law
to govern any disputes arising from the contract supports the exercise of personal jurisdiction.
Specifically, Paragraph 24 of the Dealer Retail Agreement states: “This Agreement shall be
interpreted pursuant to the laws of the State of Texas. Should any part of this Agreement be
determined to be unenforceable by a court, such enforceability shall not affect the rest of this
Agreement.” Pl.’s App. at 9. Plaintiff contends that the choice of law provision demonstrates
Defendant’s deliberate affiliation with Texas and the foreseeability of possible litigation in Texas.
A choice of law provision is a relevant factor for determining purposeful activity but is not
necessarily determinative. Jones v. Petty-Ray Geophysical Geosource, Inc., 954 F.2d 1061, 1069
(5th Cir. 1992). A choice of law provision standing alone is insufficient to confer jurisdiction.
Memorandum Opinion and Order – Page 8
Burger King, 471 U.S. at 482. The court must examine the quality and nature of a defendant’s
activities in their totality to determine whether a defendant purposefully availed itself of the
privileges afforded by the forum state. Electrosource, Inc. v. Horizon Battery Techs., Ltd., 176 F.3d
867, 871 (5th Cir. 1999). Pennsylvania is clearly the center of the parties’ activities. The Contracts
at issue were performed in Pennsylvania and involved automobiles purchased, located, and
ultimately repossessed in Pennsylvania.
Moreover, Defendant never appeared in Texas in
connection with the negotiation or execution of the Agreement. Rather, Defendant met and
negotiated with Plaintiff’s representatives in Allegheny County, Pennsylvania. Consequently, the
choice of law provision alone is not determinative as to whether Defendant possesses sufficient
contacts with the State of Texas.
Plaintiff also alleges that Defendant purposefully availed itself of the protection of Texas
laws when Defendant became Plaintiff’s agent through the execution of the power of attorney and
by agreeing to indemnify Plaintiff for claims arising from the contract. The court determines that
Plaintiff fails to demonstrate that either appointing Plaintiff as power of attorney or agreeing to
indemnify Plaintiff was part of an enduring or substantial business relationship between the parties,
such that Defendant had purposefully availed itself of the privilege of conducting business with
Texas. The power of attorney and indemnification provisions in the Agreement existed for the
limited purpose of carrying out the contractual relationship.* Because the power of attorney was
The Agreement indicates that this was a limited power of attorney. Paragraph 7 of the Agreement indicates
that its scope is limited to authorizing Plaintiff “to sign and endorse Dealer’s name upon any check, drafts, money orders
or other forms of payment that may come into [Santander] possession as payment of or on account of any Contract” and
“authorizes [Santander] to sign its name to any assignment of any Contract to [Santander] and to sign and endorse
Dealer’s name on any other instrument necessary to carry out the intent of this Agreement.” Def.’s App. at 7.
*
Memorandum Opinion and Order – Page 9
merely incidental to the parties’ contractual relationship, it adds little, if anything, to the overall
minimum contact analysis.
Finally, Plaintiff contends that Defendant assigned the Contracts for which Santander sues
for damages, all of which arise out of Defendant’s contacts with Santander, a Texas resident. As
noted above, Defendant’s entering into agreement with a Texas resident alone is insufficient to
constitute minimum contacts. Defendant never appeared in Texas in connection with the negotiation
or execution of the Agreement and all activities pursuant to the Agreement were performed in
Pennsylvania. Furthermore, the exchange of information and documents in the course of carrying
out the Contracts is insufficient to constitute purposeful availment. Holt Oil & Gas. Corp., 801 F.2d
at 778. The exchanges with Plaintiff rest on “nothing but ‘the mere fortuity that [Plaintiff] happens
to be a resident of the forum.’ ” Id. (quoting Patterson v. Dietze, Inc., 764 F.2d 1145, 1147 (5th Cir.
1985)).
The court examines the quality and nature of a defendant’s activities with the ultimate aim
of determining whether such defendant purposefully availed itself of the privileges afforded by the
forum state. Electrosource, 176 F.3d at 871. “The number of contacts with the forum state is not,
in itself, determinative.” Hydrokinetics, 700 F.2d at 1028. Viewing all of Defendant’s contacts in
their totality, the court determines that it has not purposefully availed itself of the benefits of the
forum state such that it could reasonably anticipate being haled into court in Texas. Because the
court concludes that Plaintiff has failed to present a prima facie case of specific jurisdiction, it need
not address whether the exercise of personal jurisdiction would violate traditional notions of fair
play and substantial justice.
Memorandum Opinion and Order – Page 10
B.
Venue
Plaintiff argues that venue is proper under 28 U.S.C. § U.S.C. 1391(a)(2) because a
substantial part of the events and omissions giving rise to the lawsuit occurred in the Northern
District of Texas. In the alternative, Plaintiff argues that venue is proper because Defendant is
subject to personal jurisdiction. Defendant argues that venue is improper because all of the events
occurred in Allegheny County, Pennsylvania.
As discuss above, the Agreement was centered and performed in Pennsylvania. Plaintiff
does not allege that any other specific events or omissions occurred in Texas. The court must
therefore conclude that no alleged event or omission giving rise to this claim occurred in Texas; nor
can Defendant be deemed to reside in the Northern District of Texas. For the reasons explained
above, Defendant is not subject to personal jurisdiction in this district. Accordingly, the court
determines that Plaintiff’s assertions of proper venue under Section 1391(a)(1) and (2) are without
sufficient basis. Venue is also improper under Section 1391(a)(3) because, as explained, personal
jurisdiction does not exist here. The court therefore determines that Defendant has carried its burden
under Rule 12(b)(3).
IV.
Conclusion
For the foregoing reasons, the court determines that Defendant Shults does not have
sufficient contacts with the State of Texas to establish general or specific jurisdiction over it and that
venue is improper in this district. While Defendant is entitled to dismissal of this action, the court
concludes that it is in the interest of justice to transfer this action to a district in which it could have
been brought originally. Accordingly, the court, rather than dismiss for lack of personal jurisdiction
or improper venue, hereby transfers this action to the Western District of Pennsylvania pursuant
Memorandum Opinion and Order – Page 11
to 28 U.S.C. §§ 118(c), 1406(a), and 1631. The clerk of the court shall effect this transfer in
accordance with the usual procedure.
It is so ordered this 30th day of June, 2011.
_________________________________
Sam A. Lindsay
United States District Judge
Memorandum Opinion and Order – Page 12
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