Opinion
C-1-01-462
April 11, 2002
ORDER
This matter is before the Court upon defendant Rusnak's motion to dismiss for lack of personal jurisdiction (doc. 4), plaintiff's opposing memorandum (doc. 17), and Rusnak's reply memorandum (doc. 19).
Plaintiff J. R. Rose ("Rose") originally brought this action in the Butler County, Ohio Court of Common Pleas against defendants Rusnak Automotive Group ("Rusnak") and Volkswagen Credit, Inc. ("VCI"). Plaintiff asserts causes of action for violation of the Ohio Consumer Sales Act (O.R.C. 1345.01 et seq.), violation of the Motor Vehicle Sales Rule (Ohio Administrative Code 109:4-3-16(B)), violation of the Truth in Lending Act, and common law fraud and deceit. The action was removed to the United States District Court for the Southern District of Ohio, Western Division. Jurisdiction is premised under 28 U.S.C. § 1331 and § 1332.
Plaintiff makes the following allegations in the complaint: Rusnak, a car dealer, advertised for sale in a magazine of national circulation a collectible 1994 Bentley Brooklands automobile which the dealer represented to be "immaculate" and "in pristime condition throughout." Rose saw the magazine advertisement in Butler County, Ohio. Rose and Rusnak communicated via fax and telephone, and Rose agreed to buy the car for $70,000. Rusnak arranged for Rose's financing. Rose signed the sales contract in Ohio, and Rusnak delivered the car to Ohio and had the car titled in Rose's name in Ohio. Rose maintains that, when he received the Bentley, the car was damaged, and that such damage was not disclosed by Rusnak prior to the consummation of the sale. Rose maintains that the car was damaged in the front and rear, that the car was equipped with parts of the wrong model year, and that the hood, rear, and sides had been painted, detracting from the vehicle's value. Rose sought to cancel the sales agreement, and when Rusnak refused, Rose filed suit in state court.
In addition to the nationally distributed magazine, Rose maintains that Rusnak advertises vehicles on the internet through a nationally accessible website (www.rusnakautogroup.com) which allows a customer to initiate and consummate a consumer transaction from a remote location. Through the website, a potential buyer can view vehicles for sale, obtain quotes and calculate sample payments, send e-mail to Rusnak, and request vehicle service appointments. The website also provides a telephone number for contacting sales representatives.
Rose asserts that at all relevant times, Rusnak was and is a corporation, supplier and merchant engaged in the business of selling and servicing motor vehicles nationwide, including within the jurisdiction of this Court, and of arranging for the financing of agreements relating to the sale of motor vehicles nationwide. As such, Rose argues that jurisdiction by this Court is appropriate in this case.
Defendant moves to dismiss the complaint for lack of personal jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2). Defendant contends that, while the Court may have personal jurisdiction over Rusnak pursuant to the Ohio long-arm statute, Ohio Rev. Code § 2307.382(A), the exercise of jurisdiction over Rusnak does not comport with due process. In support of its motion, Rusnak alleges that merely entering into a contract in the forum state, without more, does not establish minimum contacts such that a defendant would anticipate being haled into court in the forum state. Rusnak maintains that its actions do not constitute purposeful availment, and that the telephone and fax communications and the national advertising do not establish the requisite connection with the state of Ohio. Furthermore, Rusnak maintains that Rose did not consult or use the Rusnak website in purchasing the Bentley from Rusnak. Accordingly, Rusnak asserts that the maintenance of the suit in Ohio offends traditional notions of fair play and substantial justice under the Constitution.
Plaintiff asserts that jurisdiction is proper under the Ohio long-arm statute because the causes of action arise from Rusnak's "transacting any business in the state" (O.R.C. § 2307.382(A)(1)). Plaintiff also asserts that the exercise of jurisdiction over the defendant comports with due process and fundamental fairness because: (1) Rusnak purposely availed itself of the benefits of the laws of Ohio through repeated and substantial communications with Rose; by sending the sales contract to Ohio; by delivering the car to Ohio; by tithng the car in Rose's name in Ohio; by arranging for Rose's financing; by advertising the car for sale in a nationally distributed magazine; by engaging in the business of selling and servicing motor vehicles nationwide, including within the jurisdiction of this Court; and by maintaining an interactive website through which a customer can initiate and consummate consumer transactions from remote locations; (2) Rose's causes of action arise from Rusnak's activities in Ohio; and (3) the Court's exercise of personal jurisdiction over Rusnak is constitutionally reasonable because Rusnak is a sophisticated party which was aware that it made a contract with an Ohio resident from which it would benefit, and because Rusnak, a commercial enterprise, is better equipped to defend itself in Ohio than Rose would be to bring his action in another forum. Moreover, Rose asserts that Ohio has a strong interest in resolving Plaintiff's dispute, which arises under Ohio's consumer protection laws.
Applicable law
Plaintiff has the burden of alleging facts which demonstrate the existence of personal jurisdiction over the defendant. American Greetings Corp. v. Cohn, 839 F.2d 1164, 1168 (6th Cir. 1988). In ruling on a 12 (b)(2) motion to dismiss without conducting an evidentiary hearing, the court must consider the pleadings and affidavits in the light most favorable to the plaintiff Compuserve, Inc. v. Patterson, 89 F.3d 1257, 1262 (6th Cir. 1996). To defeat the motion, the plaintiff need only make a prima facie showing of jurisdiction. Id. The court "does not weigh the controverting assertions of the party seeking dismissal." Id .
To determine whether the court has personal jurisdiction in a diversity case, the court must look to the law of the forum state. Welsh v. Gibbs, 631 F.2d 436, 439 (6th Cir. 1980). Personal jurisdiction exists if the defendant's conduct satisfies one of the provisions of the Ohio long-arm statute, and the application of Ohio's long-arm statute to the defendant does not offend the notions of fair play under the due process clause of the fourteenth amendment to the United States Constitution. Compuserve, 89 F.3d at 1263; Cincinnati Sub-Zero Products, Inc. v. Augustime Medical, Inc., 800 F. Supp. 1549, 1555 (S.D. Ohio 1992) (Weber, J.). Where the state long-arm statute extends to the limits of the due process clause, the two inquiries are merged and the court need only determine whether the assertion of personal jurisdiction violates constitutional due process. Nationwide Mutual Insurance Co. v. Tryg International Insurance Co., Ltd., 91 F.3d 790, 793 (6th Cir. 1996).
The United States Court of Appeals for the Sixth Circuit has acknowledged that the Ohio Supreme Court held in the case of Goldstein v. Christiansen, 638 N.E.2d 541, 545 n. 1 (Ohio 1994), that the Ohio General Assembly did not intend the Ohio long-arm statute to extend to the limits of the due process clause. Cole v. Mileti, 133 F.3d 433, 436 (6th Cir. 1998); Vorhis v. American Medical Systems, Inc., 124 F.3d 201, 1997 WL 476527 (6th Cir. Aug. 19, 1997) (unpublished opinion). The court in Cole noted, however, that the central inquiry in a personal jurisdiction analysis remains whether the defendant established certain minimum contacts with Ohio so that the exercise of personal jurisdiction over the defendant does not offend "traditional notions of fair play and substantial justice." Id .
It is not clear from the decision in Cole whether the Sixth Circuit has abandoned its long-standing position that Ohio's long-arm statute extends to the limits allowed by the United States Constitution based on the decision in Goldstein . Compare Bird v. Parsons, 127 F. Supp.2d 885, 888 (S.D. Ohio 2000) (Merz, Magistrate J.) (citing Cole for the proposition that Ohio long-arm statute does not extend to the limits of the due process clause) with Norcold, Inc. v. Greg Lund Products, Ltd., 109 F. Supp.2d 819, 821-23 (S.D. Ohio 2000) (Rice, J.) (finding that the Sixth Circuit in Cole did not explicitly adopt Goldstein but has instead merged the long-arm statute analysis with the due process analysis). Pending clarification of the issue, and based on its determination that the outcome of this motion is the same under either analysis, the Court will resolve the current motion in accordance with Goldstein . That approach requires the Court to determine the applicability of the Ohio long-arm statute and then, if applicable, to separately determine whether the exercise of in personam jurisdiction would satisfy due process. See Norcold, 109 F. Supp.2d at 823, n. 4.
The pertinent provisions of the Ohio long-arm statute state as follows:
(A) A court may exercise personal jurisdiction over a person who acts directly or by an agent, as to a cause of action arising from the person's:
(1) Transacting any business in this state;
(C) When jurisdiction over a person is based solely upon this section, only a cause of action arising from acts enumerated in this section may be asserted against him.
The Ohio Supreme Court has interpreted "transacting business" under the long-arm statute to mean "to carry on business" or "to have dealings" and to have a broader meaning than the word "contract." Douglas v. Modern Aero, Inc., 954 F. Supp. 1206, 1210 (N.D. Ohio 1997) ( citing Goldstein, 70 Ohio St.3d at 236). "Transacting business" subsumes the narrower act of contracting. Id . ( citing Highway Auto Sales v. Auto-Konig of Scottsdale, 943 F. Supp. 825, 829 (N.D. Ohio 1996)); Kentucky Oaks Mall v. Mitchell's Formal Wear, Inc., 53 Ohio St.3d 73 (1990). A defendant must do some act or consummate some transaction within the forum. Hoover Co. v. Robeson Indus. Corp., 904 F. Supp. 671, 674 (N.D. Ohio 1995) ( citing Ohio State Tie Timber, 456 N.E.2d 1309, 1313 (Ohio 1982)). The question is not whether the transaction made an impact on Ohio, but whether the defendant transacted business in Ohio. Id .
Jurisdiction may be found to exist either generally or specifically. Nationwide, 91 F.3d at 793. Jurisdiction may exist generally where the defendant has engaged in "continuous and systematic" conduct within the forum state which renders the defendant amenable to suit in any lawsuit brought against it in that state. Id . at 793 ( citing Perkins v. Benquet Consolidated Mining Co., 342 U.S. 437, 445-47 (1952). Jurisdiction may exist specifically where the subject matter of the lawsuit arises out of or is related to the defendant's contacts within the forum. Id . ( citing Conti v. Pneumatic Products Corp., 977 F.2d 978, 981 (6th Cir. 1992)). Specific jurisdiction may in certain cases be premised on a single act of the defendant. Nationwide, 91 F.3d at 794 (citing McGee v. International Life Ins. Co., 355 U.S. 220, 222 (1957)).
In this circuit, a three-part test applies to determine whether the exercise of specific jurisdiction comports with due process:
First, the defendant must purposefully avail himself of the privilege of acting in the forum state or causing a consequence in the forum state. Second, the cause of action must arise from the defendant's activities there. Finally, the acts of the defendant or consequences caused by the defendant must have a substantial enough connection with the forum state to make the exercise of jurisdiction over the defendant reasonable.Id. (quoting Southern Machine Co. v. Mohasco Indus., 401 F.2d 374, 381 (6th Cir. 1968)). The purposeful availment requirement insures against a defendant being haled into a jurisdiction solely as a result of "`random,' `fortuitous,' or `attenuated' contacts." Burger King v. Rudzewicz, 471 U.S. 462, 475 (1985) ( quoting Keeton v. Hustler Magazine, 465 U.S. 770, 774 (1984)). The requirement is satisfied if the defendant's actions create a "substantial connection" with the forum state such that defendant should reasonably anticipate being haled into court there. Compuserve, 89 F.3d at 1263 (citing Burger King, 471 U.S. at 474-75). The Supreme Court has explained,
[W]here the defendant `deliberately' has engaged in significant activities within a State . . . or has created `continuing obligations' between himself and residents of the forum . . . he manifestly has availed himself of the privilege of conducting business there, and because his activities are shielded by "the benefits and protections' of the forum's laws it is presumptively not unreasonable to require him to submit to the burdens of litigation in the forum as well.Burger King, 471 U.S. at 475-76. The focus is on the quality of the contacts and not their number. Reynolds v. Internat'l Amateur Athletic Federation, 23 F.3d 1110, 1119 (6th Cir. 1994).
To satisfy the second criterion, it is only necessary that the cause of action "have a substantial connection with the defendant's in-state activities." Southern Machine, 401 F.2d at 384 n. 27. Generally, "[a]n action will be deemed not to have arisen from the defendant's contacts with the forum state only when they are unrelated to the operative facts of the controversy." Creech v. Roberts, 908 F.2d 75, 80 (6th Cir. 1990).
In determining whether the third prong is met, the court may consider the extent of the forum state's interest in the controversy and whether defendant could foresee the possibility of being haled into court in the forum state. In Flight Devices Corp. v. Van Dusen Air, Inc., 466 F.2d 220, 233 (6th Cir. 1972). The factors to be considered include "the burden on the defendant, the interest of the forum state, the plaintiff's interest in obtaining relief, and the interest of other states in securing the most efficient resolution of controversies." American Greetings, 839 F.2d at 1169-70. When the first two criteria are met, an inference arises that the third criterion is satisfied. Southern Machine, 401 F.2d at 381.
The fact that a commercial actor has no physical presence in the state does not defeat personal jurisdiction. Burger King, 471 U.S. at 476. "Physical presence is not the touchstone of personal jurisdiction." Neal v. Janssen, 270 F.3d 328, 333 (6th Cir. 2001). An individual may be held to have purposely availed himself of the privilege of acting in a state if his efforts are "purposefully directed" toward residents of that state. Burger King, 471 U.S. at 476.
In some cases, the use of interstate facilities such as the telephone and mail may be a "secondary or ancillary" factor which "cannot alone provide the minimum contacts required by due process." Reynolds, 23 F.3d at 1119 ( citing Scullen Steel Co. v. Nat'l Railway Utilization Corp., 676 F.2d 309, 314 (8th Cir. 1982)). The Court of Appeals recently held in a fraud action, however, that "when a foreign defendant purposefully directs communications into the forum that cause injury within the forum, and those communications form the `heart' of the cause of action, personal jurisdiction may be present over that defendant without defendant's presence in the state." Neal, 270 F.3d at 332-33. The Court in Neal determined that plaintiffs' allegations that defendant had intentionally defrauded them in phone calls and faxes directed to plaintiffs in the forum state were sufficient to constitute purposeful availment. The Court also determined that the second Mohasco requirement that the cause of action arise from the defendant's activities in the forum state was met in that defendant had engaged in a course of conduct over a period of time and the alleged misrepresentations were the elements of the cause of action itself. The Court also found that the exercise of jurisdiction was reasonable based on the facts that defendant had engaged in a business transaction with plaintiffs that continued over a substantial period of time, defendant had established a relationship with plaintiffs from which he hoped to profit substantially, and defendant had defrauded plaintiffs by altering the amount of money to be sent to them in the forum state. Id .
The constitutional touchstone for all questions of personal jurisdiction is "whether the defendant purposefully established minimum contacts' in the forum State." Burger King, 471 U.S. at 474 (quoting Internat'l Shoe Co. v. Washington, 326 U.S. 310 (1945)). Due process requirements are satisfied if a nonresident defendant has had contacts with the forum state sufficient enough as not to "offend traditional notions of fair play and substantial justice." Internat'l Shoe, 326 U.S. at 316.
Opinion
The Court has considered the parties' written submissions to determine whether the plaintiff has made a prima facie showing of personal jurisdiction. In so doing, the Court has considered the materials in the light most favorable to the plaintiff.
A. The Court May Exercise Jurisdiction Under The Ohio Long-Arm Statute
The first issue before the Court is whether any pertinent provision of the Ohio long-arm statute is satisfied. The Court answers this question in the affirmative. Ohio Rev. Code § 2307.382(A)(1) is satisfied because the defendant transacted business with the plaintiff in Ohio and because the instant causes of action arise from the defendant's dealings in Ohio. Defendant Rusnak contacted Rose in Ohio via telephone and fax, negotiated the sale of an automobile with him while he was in Ohio, delivered the car to Rose in Ohio, and titled the car in Roses's name in Ohio. The claims at issue arise directly from the negotiations and dealings between Rusnak and Rose, a portion of which occurred via telephone calls and fax transmissions between California and Ohio. Therefore, Rusnak has "transacted business" in Ohio within the meaning of the Ohio long-arm statute.
B. Jurisdiction Comports With Due Process
The fundamental fairness requirements for specific jurisdiction are satisfied when a defendant purposely avails himself of the laws of the forum state, when the cause of action arises out of the defendant's dealings with the forum state, and when the exercise of jurisdiction is constitutionally reasonable.
In Highway Auto Sales, Inc. v. Auto-Konig of Scottsdale, Inc., 943 F. Supp. 825, 827-828 (N.D. Ohio 1996), the plaintiff Liber purchased a Ferrari for $226,000 after viewing a national advertisement and negotiating with the Arizona seller via telephone and fax communications. When Liber received the vehicle, he determined that the car did not conform with the salesman's representations, and sought to revoke his acceptance of the vehicle. When the seller refused, the plaintiff brought suit in the United States District Court for the Northern District of Ohio. Although personal jurisdiction was proper under the Ohio long-arm statute, the Court found that personal jurisdiction did not comport with due process, and transferred the action to the District of Arizona.
The Highway Auto Sales court reasoned that, while the defendant communicated with plaintiff, entered into a contract with plaintiff, and injected the product in to the stream of commerce, the defendant did not contemplate an ongoing relationship with plaintiff sufficient to satisfy purposeful availment. Id . at 832-33. Rather, the sale of the Ferrari to Liber was a "one-shot affair" not constituting purposeful availment.
The Court distinguishes the instant case from the facts of Highway Auto Sales . While the facts seem analogous at first blush, there are significant differences which indicate a contrary result in the instant case. It is true that, like the plaintiff in Highway Auto Sales, Rose also viewed an advertisement in a nationally distributed publication. Similarly, both Rose and Liber negotiated with the sellers through telephone and fax communications. However, unlike Liber, Rose did not tender payment in full for the vehicle at issue; rather, the defendant Rusnak arranged a financing agreement with Rose. In so doing, the transaction between Rose and Rusnak extended beyond the "one-shot affair" contemplated by the parties in Highway Auto Sales. Id . at 832. The defendant Rusnak contemplated continued dealings with Rose and the forum state and purposefully availed itself of the laws of Ohio to protect its security interest in the Bentley.
It is clear that the present causes of action arise out of Rusnak's dealings with the forum state. In determining whether the exercise of personal jurisdiction is constitutionally reasonable, the court may consider the forum state's interest in resolving the dispute as well as whether the defendant could have foreseen the possibility of being haled into court in the forum state. Exercising personal jurisdiction over Rusnak is constitutionally reasonable in this case because the state of Ohio has an interest in resolving disputes involving Ohio residents who look to Ohio's consumer laws for protection. Moreover, based on the defendant's activities in the forum state, Rusnak could have reasonably foreseen the possibility of being haled into court in Ohio.
In deciding this issue, the materials have been considered in the light most favorable to the plaintiff. Because the plaintiff has made a prima facie showing that the defendant has purposefully availed itself of the laws of the forum state, that the cause of action arises out of the defendant's activities in the forum state, and that the exercise of jurisdiction is constitutionally reasonable, this Court may exercise personal jurisdiction over the defendant consistent with the demands of due process.
Conclusion
Defendant's motion to dismiss for lack of personal jurisdiction is DENIED without prejudice. It is understood that the objection to personal jurisdiction has not been waived by the defendant, and may be considered again when the Court reaches the merits of this case. This case will proceed to trial in accordance with the schedule established by the Court.