Mackey et al v. Marks et al

Filing 21

ORDER AND MEMORANDUM DECISION denying 8 Motion to Dismiss. Signed by Judge Tena Campbell on 10/17/14 (alt)

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH
CENTRAL DIVISION

TERRY MACKEY, an individual, and
MUSTANG HELICOPTERS, L.L.C., a Utah
Limited Liability Company, dba MACKEY
AVIATION,
Plaintiffs,

ORDER
and
MEMORANDUM DECISION

vs.
LLOYD MARKS, an individual, and
MUSTANG HELICOPTERS, L.L.C., a
Louisiana Limited Liability Company, DOES
1-20 and CORPS 1-20,

Civil No. 2:14-CV-00093-TC

Defendants.

Plaintiffs Terry Mackey and Utah limited liability company Mustang Helicopters LLC have
filed a breach of contract claim against Defendants Lloyd Marks and Louisiana limited liability
company Mustang Helicopters LLC. The Defendants have filed a motion to dismiss for lack of
personal jurisdiction and improper venue, or, in the alternative, on the basis of forum non
conveniens. Alternatively, they request that the court transfer this case to a federal district court in
the State of Louisiana. For the reasons set forth below, the court DENIES the Defendants’ motion.
BACKGROUND
Plaintiff Terry Mackey, a Utah resident, owns the Utah limited liability company Mustang

1

Helicopters LLC (Mustang UT). Mr. Mackey works full-time as a corrections officer for the state
of Utah while he maintains his aviation business on the side.
Defendant Lloyd Marks, a Louisiana resident, is the sole managing member of Louisiana
limited liability company Mustang Helicopters LLC (Mustang LA). He has never been domiciled
in Utah, does not travel to and from Utah regularly, and does not own real property in Utah.
Likewise, Mustang LA does not own real property in Utah or have offices in Utah.
In 2012, Mr. Marks, on behalf of Mustang LA, contacted Mr. Mackey in Utah about
purchasing the assets of Mustang UT. On November 5, 2012, Mustang UT entered into an Asset
Purchase Agreement1 (Agreement) with Mustang LA for the sale of, among other things, Mustang
UT’s FAA-issued Part 135 Air Carrier Certificate (135 Certificate) allowing the holder to fly
helicopters.
The Agreement was executed, at the suggestion of Mr. Marks, to resolve financial
differences between another of Mr. Marks’ limited liability companies—Ranger Aviation—and
Mustang UT. At the motion hearing, the Defendants said that Mustang UT had leased property
from Ranger Aviation and was behind in lease payments. Mr. Marks proposed the Agreement to
settle Mustang UT’s debt to Ranger Aviation. (By the Defendants’ own admission, the court
would have personal jurisdiction over Ranger Aviation if it were a party to this lawsuit.2) And that
is what the executed Agreement was meant to accomplish. Section 2.1(5) of the Agreement
provides that “Debts owed by [Mustang UT] to [Mustang LA] or any affiliated entity of [Mustang
LA] [i.e., Ranger Aviation LLC] . . . will be forgiven by [Mustang LA].” (Agreement § 2.1(5).)

1

The Agreement is attached as an exhibit to the Defendants’ Motion to Dismiss or Transfer
Venue (Docket No. 8).
2

See Defs.’ Mot. to Dismiss or Transfer Venue at 7.
2

The purchase price was $200,000, with $40,000 due at closing, and payments of $20,000 to
be made every three months until the full purchase amount was paid. Mustang LA was to send
these payments to Mustang UT’s Utah address (the payments that Mustang LA actually made to
Mustang UT followed that procedure). The parties agreed that the closing of the transaction
occurred in Louisiana and that Louisiana law would govern the Agreement.
The Agreement was signed by Mr. Mackey on behalf of Mustang UT and by Mr. Marks on
behalf of Mustang LA. Mr. Marks also signed the Agreement as a personal guarantor. The
Agreement’s signature page contains the following language: “Guarantor, LLOYD MARKS,
hereby personally guarantees payment and satisfaction of the consideration detailed in this
Purchase Agreement should BUYER [Mustang LA] be unable to perfect payment.” (Agreement at
p. 10.) The parties signed and dated the Agreement in their respective states of residence.
Mr. Marks did not travel to Utah and Mr. Mackey did not travel to Louisiana for the sale or
closing of the Agreement. But before the signing of the Agreement, a large amount of emails,
phone calls, and text messages were traded between the parties.3 This pattern continued after
execution of the Agreement as the parties worked out the operations in Utah and transfer of assets.
In addition, the Defendants, within twenty-four days of the effective date of the Agreement, fired
the chief pilot and various Utah-based employees.4

3

Plaintiffs estimate that there were hundreds of emails, calls, and text messages. See Pls.’
Opp’n Mem. (Docket No. 11) at 20.
4

See id. at 19. Defendants contest Plaintiffs’ right to use this set of facts in their argument.
The Defendants incorrectly contend that the Plaintiffs are only entitled to have their allegations
within the Complaint, not those in their opposition brief, taken as true. “The plaintiff bears the
burden of establishing personal jurisdiction, but where, as here, the issue is raised early on in
litigation, based on pleadings (with attachments) and affidavits, that burden can be met by a prima
facie showing.” Shrader v. Biddinger, 633 F.3d 1235, 1239 (10th Cir. 2011) (emphasis added).
Plaintiffs provided an affidavit from Mr. Mackey that vouches for the allegations in Plaintiffs’
3

The centerpiece of the Agreement was the sale and transfer of the 135 Certificate. Mr.
Marks requested that he be designated as the process agent for Mustang UT to deal with the
relevant documentation from the FSDO in Salt Lake City. To allow Mustang LA to use the 135
Certificate, the Federal Aviation Administration (FAA) Flight Standards District Office (FSDO) in
Salt Lake City needed to amend the certificate to allow flights in Louisiana. The FSDO of Salt
Lake City transferred this amendment process to the FSDO of Louisiana which, for reasons not
absolutely clear in the record, rejected the amendment process and sent the certificate back to Salt
Lake City for processing at that location. Mustang LA sent two employees to Salt Lake City
specifically to work with FSDO in amending and transferring the certificate.5 The FSDO of Salt
Lake City eventually downgraded the 135 Certificate (which allows an operator to employ and use
more than five pilots and conduct complex operations) to a Single Pilot Operator certificate (which
allows for an operator to employ and use only one pilot).6
On November 6, 2013, the Defendants notified the Plaintiffs that they would not continue
to make payments under the Agreement.7 At that point, the Defendants had paid $100,000 of the
purchase price and owed an outstanding debt of $100,000.
Unable to resolve the dispute, the Plaintiffs filed suit in the Utah state court at the end of
2013. At the beginning of 2014, the Defendants removed the suit to the federal district court.
Opposition. Consequently, the court includes that information in its analysis.
5

It is not clear from the record at what point in the transfer and amendment process the two
Mustang LA employees were sent to Salt Lake City, but it is clear they went to Salt Lake City after
execution of the Agreement.
6

Both parties allege that the downgrade was the result of a lack of cooperation by the other

party.
7

It appears that the Defendants stopped payment based on what they are characterizing was
a breach of the Agreement by the Plaintiffs.
4

Defendants have filed a motion to dismiss for lack of personal jurisdiction, improper venue,
or, in the alternative, on the basis of forum non conveniens. The Defendants contend that the court
does not have general or specific jurisdiction over them. They then contend that the District of
Utah is an improper venue under 28 U.S.C. § 1391 and § 1406 because a “substantial part of the
events or omissions giving rise to the claim,” 28 U.S.C. § 1391(2), did not occur in Utah and so the
matter should be dismissed altogether. In the alternative, they argue that, at a minimum, this court
should transfer the case “in the interest of justice” to the United States District Court for the
Lafayette Division of the Western District of Louisiana.8 And, finally, they contend that under the
common law doctrine of forum non conveniens, litigating this case in the District of Utah “would
be unnecessarily vexatious to the Defendants and would force the Court to deal with the nettlesome
issues of foreign law [i.e., the civil law of the State of Louisiana].” (Defs.’ Mot. to Dismiss or
Transfer Venue at 14.)
ANALYSIS
I.

Personal Jurisdiction
“To obtain personal jurisdiction over a nonresident defendant in a diversity action, a

plaintiff must show both that jurisdiction is proper under the laws of the forum state and that the
exercise of jurisdiction would not offend due process.” Intercon, Inc. v. Bell Atlantic Internet

8

Thirteen days after Mr. Marks and Mustang LA removed this case from state court in Utah
to the court here, Mr. Marks and Mustang LA filed a very similar suit against Mr. Mackey and
Mustang UT in the United States District Court for the Western District of Louisiana, Lafayette
Division. On July 15, 2014 (after this court held a hearing on the motion now before it), the
federal district court in Louisiana transferred that suit to this court based on its analysis under the
first-to-file rule (Mr. Mackey and Mustang UT had filed a motion to dismiss, stay, or transfer
venue in Louisiana). (See Notice of Transfer (Docket No. 20) Ex. 1 (Memorandum Ruling by the
Louisiana federal court).)
5

Solutions, Inc., 205 F.3d 1244, 1247 (10th Cir. 2000). The Tenth Circuit has noted that
“[a]lthough plaintiff bears the burden of establishing personal jurisdiction over defendant, in the
preliminary stages of litigation this burden is light.” Id. (internal quotation marks and citation
omitted).
There is no question that this court does not have general jurisdiction over either Mr. Marks
or Mustang LA. But the court finds that it has specific jurisdiction over both of the Defendants.
In Utah, the court applies a three-part test to determine whether the court has specific
jurisdiction under Utah’s long-arm statute.9 Using the three-part test, the court must determine
(1) whether the defendant’s conduct is described within parameters of the Utah long-arm statute;
(2) whether a “nexus” exists between plaintiff’s claims and the defendant’s conduct; and
(3) whether attainment of personal jurisdiction over the defendant satisfies the requirements of due
process. Far West Capital, Inc. v. Towne, 46 F.3d 1071, 1074 (10th Cir. 1995).
The Utah Supreme Court has stated that it “frequently make[s] a due process analysis first
because any set of circumstances that satisfies due process will also satisfy the long-arm statute.”
SII MegaDiamond, Inc. v. Amer. Superabrasives Corp., 969 P.2d 430, 433 (Utah 1998). The due
process clause protects an individual from being subject to “the binding judgments of a forum with
which he has established no meaningful ‘contacts, ties, or relations.’” Burger King Corp. v.
Rudzewicz, 471 U.S. 462, 471-72 (1985) (quoting International Shoe Co. v. Washington, 326 U.S.
310, 319 (1945)). 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.” WorldWide Volkswagen Corp. v. Woodson, 444 U.S. 286, 291 (1980) (quoting Int’l Shoe, 326 U.S. at

9

Utah Code Ann. § 78B-3-201.
6

316). If such contacts exist, the court must determine whether exercising jurisdiction over the
defendant would “offend traditional notions of fair play and substantial justice.” Int’l Shoe, 326
U.S. at 316 (internal citations omitted).
A.

Minimum Contacts

The minimum contacts necessary for specific personal jurisdiction under the due process
clause are established if the defendant has “purposefully directed his activities at residents of the
forum [state] and the litigation results from alleged injuries that arise out of or relate to those
activities.” Burger King, 471 U.S. at 472 (internal quotation marks and citations omitted). See
also Rambo v. Am. S. Ins. Co., 839 F.2d 1415, 1419 (10th Cir. 1988) (stating the “proper focus for
analyzing these contacts is whether they represent an effort by the defendant to purposefully avail[]
itself of the privilege of conducting activities within the forum State.”) (internal quotation marks
and citation omitted). The Supreme Court, in determining minimum contacts, rejected the
application of a rote mechanical analysis in favor of a realistic approach analyzing the entire
relationship of the parties. Burger King, 471 U.S. at 479. Under this approach, a court must
consider the “quantity and quality of [defendant’s] contacts with Utah, including ‘prior negotiations
and contemplated future consequences, along with the terms of the contract and the parties’ actual
course of dealing[.]” Soma Med. Int’l v. Standard Chartered Bank, 196 F.3d 1292, 1298 (10th Cir.
1999) (internal quotation marks and citations omitted). Due process is not violated when the
defendant’s minimum contacts create “‘continuing relationships and obligations with citizens’” of
the forum state. Burger King, 471 U.S. at 473 (quoting Travelers Health Ass’n. v. Virginia, 339
U.S. 643, 647 (1950)).
The analysis of whether the nonresident defendant purposefully availed itself of the forum
“‘turns upon whether the defendant’s contacts are attributable to his own actions or solely to the
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actions of the plaintiff . . . [and generally] requires . . . affirmative conduct by the defendant which
allows or promotes the transaction of business within the forum state.’” Rambo, 839 F.2d at 1420
(quoting Decker Coal Co. v. Commonwealth Edison Co., 805 F.2d 834, 840 (9th Cir. 1986)).
Here, given the course of the parties’ business negotiations, the terms of the Agreement,
and post-Agreement activities, the court concludes that the Defendants purposefully availed
themselves of the benefits and protections of Utah. First, Mr. Marks, on behalf of Ranger
Aviation, entered into a business agreement with Mustang UT. When the Ranger Aviation
business arrangement began to fall apart financially, Mr. Marks reached out to Mr. Mackey in Utah
and suggested the Asset Purchase Agreement as a medium through which Mustang LA and related
entities (i.e., Ranger Aviation) would forgive all debts owed by Mustang UT in exchange for a
transfer of the assets of Mustang UT to Mustang LA. When the Defendants ultimately signed the
Agreement, they committed themselves to a multi-year relationship with Utah. Mustang LA
agreed to buy a Utah business, to deliver payment to Utah for that business, to discharge a debt of
that Utah business for conduct that was admittedly performed in Utah, and to work with Plaintiffs
to amend and transfer the 135 Certificate. And Mr. Mackey personally guaranteed the Agreement.
Defendants entered into the Agreement knowing that they would have to work within Utah
for some time to complete the transfer of the 135 Certificate. Mustang LA sent two employees to
Utah to work with the FSDO in Salt Lake City. Mr. Marks, in order to further facilitate the
transfer, even requested that he be made the process agent for Mustang UT. Defendants exchanged
many phone calls, emails, and text messages with individuals in Utah. Payment for the Agreement
was not only sent to Utah, but deposited in a Utah bank.
Defendants created continuing relationships and incurred obligations to citizens of the State
of Utah, both of whom are entitled to the protection of Utah’s laws. Mr. Marks and Mustang LA
8

were involved in the hiring and firing of various Utah-based workers, as well as day-to-day
communications, both pre- and post-Agreement.
The facts, when viewed in their totality, indicate that Defendants purposefully established
continuing contacts, as well as obligations, with Utah residents arising out of the subject of this
litigation. By taking those steps, Defendants were on notice that any potential conflict between the
parties arising from their business dealings might end up in front of a Utah court. “[P]arties who
reach out beyond one state and create continuing obligations with citizens of another state are
subject to regulation and sanctions in the other state for the consequences of their activities.”
Burger King, 471 U.S. at 478.
B.

Fair Play and Substantial Justice

Even if a defendant’s actions satisfy the minimum contacts test, a court must also consider
whether “the exercise of personal jurisdiction over defendant would offend traditional notions of
‘fair play and substantial justice.’” Intercon, Inc. v. Bell Atl. Internet Solutions, Inc., 205 F.3d
1244, 1247 (10th Cir. 2000) (internal citations omitted). The Tenth Circuit has identified the
following five factors to consider when determining whether notions of fair play and substantial
justice will be offended by the exercise of personal jurisdiction:
(1) the burden on the defendant, (2) the forum state’s interest in resolving the
dispute, (3) the plaintiff’s interest in receiving convenient and effective relief,
(4) the interstate judicial system’s interest in obtaining the most efficient resolution
of the controversies, and (5) the shared interest of the several states in furthering
fundamental social policies.
Pro Axess, Inc. v. Orlux Distribution, Inc., 428 F.3d 1270, 1279-80 (10th Cir. 2005) (internal
quotation and citation omitted). “[W]here a defendant who purposefully has directed his activities
at forum residents seeks to defeat jurisdiction, he must present a compelling case that the presence
of some other considerations would render jurisdiction unreasonable.” Burger King, 471 U.S. at
9

477.
Defendants have presented no persuasive evidence or argument to indicate that notions of
fair play would be violated by allowing Plaintiffs to pursue their claims in Utah. Mr. Marks
operated a business that he admits is subject to personal jurisdiction of this court. Defendants were
actively involved with amending and transferring the 135 Certificate out of the FSDO office in Salt
Lake City. The record indicates that most of the witnesses who may be called in this action are
located in Utah. Accordingly, the court concludes that it has specific jurisdiction over Mr. Marks
and Mustang LA.
II.

Venue
The Defendants contend that venue is improper. Venue is proper in “a judicial district in

which a substantial part of the events or omissions giving rise to the claim occurred, or a
substantial part of property that is the subject of the action is situated,” or, “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.” 28 U.S.C.
§§ 1391(b)(2), (b)(3) (emphasis added).
The parties make numerous arguments about whether “a substantial part of the events”
occurred in Utah, but, frankly, the court’s conclusion that it has personal jurisdiction over both of
the Defendants is sufficient to establish venue. Id. § 1391(b)(3) (any court with personal
jurisdiction over a party is also a proper venue).
III.

Forum Non Conveniens
The Defendants alternatively assert that this court should exercise its discretion and dismiss

the case based on the forum non conveniens doctrine. Under 28 U.S.C. § 1404, the court has
discretion to change venue “[f]or the convenience of parties and witnesses, [and] in the interest of
10

justice.” 28 U.S.C. § 1404(a). Indeed, district courts have broad discretion in determining whether
to grant motions to transfer venue. Chrysler Credit Corp v. Country Chrysler, Inc., 928 F.2d 1509,
1515 (10th Cir. 1991). “The party moving to transfer a case pursuant to § 1404(a) bears the burden
of establishing that the existing forum is inconvenient.” Id. Furthermore, the moving party must
provide strong evidence of the inconvenience. Briesh v. Auto. Club of So. Cal., 40 F. Supp. 2d
1318, 1322 (D. Utah 1999) (citing Rivendell Forest Prods. Ltd. v. Canadian Pac. Ltd., 2 F.3d 990,
993 (10th Cir. 1993)). Allegations alone are not sufficient to satisfy the burden of proof. Id. The
party seeking transfer must demonstrate that the competing equities weigh in favor of adjudicating
the case in a transferee district. For the reasons set forth below, the Defendants have not met their
burden.
Specifically, the Defendants argue that the court should exercise its discretion to transfer
the case to a federal district court in Louisiana. They contend that:
[t]his case ought not to proceed in the District of Utah for various reasons. Chief
amongst them is the fact that the controlling law concerning interpretation of the
Asset Purchase Agreement will be the law of Louisiana. (See [Agreement] at 11.7.)
Louisiana is a civil law jurisdiction where the contractual rights and obligations
between parties are often governed by the Louisiana Civil Code. Jurisprudence in
Louisiana is markedly different as the state has not accepted portions of various
Restatements and the Uniform Commercial Code. Even stare decisis is not
inviolable in such a civil jurisdiction.
(Defs.’ Mot. to Dismiss at 15.) Defendants cite to Piper Aircraft Co. v. Reyno, 454 U.S. 235, 241
(1981), to support their position that Louisiana law is complex “foreign” law outside the expertise
of this court. While the court in Piper Aircraft did transfer the case on the basis that foreign law
applied, it was dealing with Scottish law, a far cry from the law of a state of the United States of
America. As Plaintiffs point out, the elements of a breach of contract claim are essentially the
same in Utah and Louisiana.

11

The Defendants also assert that:
FAA regulations and policies relevant to flying near and off of the coast [of
Louisiana] will likely become relevant. One of the biggest challenges for
transferring the Part 135 Certificate to Louisiana was assembling the proper
paperwork, flight manuals, and operational specifications to satisfy the FAA. The
FSDO office of the FAA in Salt Lake City was unfamiliar with those processes and
had the entire matter transferred to the FSDO in Baton Rouge, Louisiana[,] in an
attempt to resolve issues. All parties to this case may need to reference FAA
practices specific to coastal flying and experts about such matters are not easily
found in Utah.
(Id. at 16.) Assuming such information will be relevant when determining whether Plaintiffs
fulfilled their obligations under the Agreement to work with FAA officials to get the certificate
transferred from Utah to Louisiana, the out-of-state location of an expert on the subject does not
make this court an inconvenient forum. Experts are flown in from all over the country to testify in
cases. Furthermore, the fact that FSDO employees in the Salt Lake City office are also potential
witnesses (e.g., to discuss the role of the Plaintiffs in the process and the basis for problems they
experienced with the transfer to Louisiana) diminishes the strength of Defendants’ argument.
“[T]he plaintiff’s choice of forum should rarely be disturbed.” William A. Smith
Contracting Co. v. Travelers Indem. Co., 467 F.2d 662, 664 (10th Cir. 1972). Transfer to the court
in Louisiana would only shift the inconvenience to a small business and its owner, who works fulltime at a relatively modest job. Such inconvenience would be much greater than any
inconvenience to the Defendants. Plaintiffs note that Mr. Marks “is listed as Agent, Director,
President, Manager and Member with no less than 23 affiliations involving at least 14 business
entities[.]” (Pls.’ Mem. Opp’n at 25.) Merely shifting the inconvenience from one party to another,
which is what a transfer of this case would do, is not a justification for a transfer. Scheidt v. Klein,
956 F.2d 963, 966 (10th Cir. 1992).

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Accordingly, the court declines to transfer the case to a federal district court in Louisiana.10
ORDER
For all the foregoing reasons, the Defendants’ Motion to Dismiss or Transfer Venue
(Docket No. 8) is DENIED.
SO ORDERED this 17th day of October, 2014.
BY THE COURT:

TENA CAMPBELL
United States District Judge

10

The court also notes that the decision of United States District Court for the District of
Western Louisiana to transfer a highly similar (if not mirror-image) case to this court further
solidifies this court’s decision to keep the case.
13