Air Products and Controls v. Safetech Intern.

Decision Date27 September 2007
Docket NumberNo. 06-1885.,06-1885.
Citation503 F.3d 544
PartiesAIR PRODUCTS AND CONTROLS, INC., Plaintiff-Appellant, v. SAFETECH INTERNATIONAL, INC. and R. Gaylen Davenport, Defendants-Appellees.
CourtU.S. Court of Appeals — Sixth Circuit
503 F.3d 544
AIR PRODUCTS AND CONTROLS, INC., Plaintiff-Appellant,
v.
SAFETECH INTERNATIONAL, INC. and R. Gaylen Davenport, Defendants-Appellees.
No. 06-1885.
United States Court of Appeals, Sixth Circuit.
Argued: April 16, 2007.
Decided and Filed: September 27, 2007.

[503 F.3d 547]

ARGUED: David P. Fornshell, Dinsmore & Shohl, Cincinnati, Ohio, for Appellant. Mark D. Murphy, Murphy Law Firm, Overland Park, Kansas, for Appellees. ON BRIEF: David P. Fornshell, Dinsmore & Shohl, Cincinnati, Ohio, for Appellant. Mark D. Murphy, Murphy Law Firm, Overland Park, Kansas, for Appellees.

Before: ROGERS and COOK, Circuit Judges; O'MALLEY, District Judge.*

OPINION

O'MALLEY, District Judge.


This is an appeal from two orders of the district court: (1) an order granting a motion to dismiss for lack of personal jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2) filed by Defendants-Appellees Safetech International, Inc. ("Safetech") and R. Gaylen Davenport ("Davenport") (collectively, "Defendants"); and (2) an order denying a motion for reconsideration filed by Plaintiff-Appellant Air Products and Controls, Inc. ("Air Products"). In this

503 F.3d 548

lawsuit, Air Products alleges, inter alia, that Defendants engaged in a fraudulent transfer of assets to avoid a debt owed to Air Products. The debt accrued from several years of purchases on credit by Safetech, and was reduced to a judgment award following litigation between the parties. The primary issue in this appeal is whether Safetech, a Kansas corporation, and Davenport, an individual residing in Kansas, are subject to personal jurisdiction in Michigan, where Air Products has its principal place of business. The district court found that it lacked personal jurisdiction over Safetech and Davenport because the causes of action did not "arise out of" Defendants' contacts with Michigan, and, accordingly, the district court dismissed the case. For the reasons stated herein, we REVERSE the district court's decision to dismiss for lack of personal jurisdiction and REMAND this action for further proceedings. We do not address the order denying Air Products' motion for reconsideration, as our decision as to the first order renders that issue moot.

I. BACKGROUND

Air Products is a Delaware corporation with its principal place of business in Pontiac, Michigan. From its Michigan headquarters, it manufactures and distributes life safety products, such as smoke detectors and various electronic relays. Safetech is a Kansas corporation with its principal place of business in Lenexa, Kansas. Safetech is a former customer of Air Products that, between 1993 and 2002, purchased a series of goods from Air Products for resale to Safetech's customers. Davenport is an individual who resides in Lenexa, Kansas. At all times relevant to this lawsuit, Davenport was the president and owner of Safetech.

In August 1993, Safetech opened a credit account with Air Products and purchased goods on credit from Air Products over the course of almost nine years, until March 2002. Air Products alleges that, over the course of those years, Davenport contacted Air Products in Michigan on several hundred occasions through telephone, email, fax, and ordinary mail, and that the cumulative value of the goods purchased exceeded several hundred thousand dollars. The goods purchased by Safetech were manufactured in Michigan and sent to Safetech in Kansas or directly to Safetech's customers.

Between 2001 and 2002, Safetech failed to make payments to Air Products for goods purchased, and, in 2002, their business relationship ceased. Litigation ensued in the United States District Court for the District of Kansas, initiated by Safetech, in which both parties asserted claims against each other, primarily for breach of contract, the result of which was a jury verdict in favor of Air Products in the amount of $216,290.51, plus $6,020.45 in costs. On June 22, 2004, the district court in Kansas entered judgment in favor of Air Products and against Safetech in that amount.

Air Products alleges that, throughout the trial, Safetech and its counsel represented to Air Products that Safetech was no longer in business and was without funds to pay past due amounts or, presumably, any judgment. Air Products claims to have later learned, however, that, in December 2003, Safetech and Davenport sold assets to a company named Firealarm.com in the amount of $1.5 million. Air Products alleges that the sale of assets to Firealarm.com was a fraudulent transfer, primarily because it included a bill of sale for $400,000 to Davenport personally for an asset that Air Products believes either does not exist or properly belongs to Safetech, not Davenport. Air Products contends that the $400,000 paid to Davenport should have been paid to Safetech

503 F.3d 549

and, as a result, would have been available to satisfy the judgment award of $216,290.51 owed by Safetech to Air Products.1 Air Products further alleges that, around the time of the sale of assets, Davenport was aware of Safetech's debt to Air Products because he acknowledged the debt during a deposition taken in connection with the Kansas litigation on August 28, 2003 and, therefore, that the transfer was undertaken with an intent to injure Air Products.

On July 5, 2005, Air Products filed this action in Michigan state court, asserting seven causes of action: two counts for fraudulent transfer or obligation under M.C.L.A. § 566.34(1)(a) and § 566.34(1)(b)(2), respectively; a count for transfer by debtor as fraud under M.C.L.A. § 566.35(1); a count only against Davenport for unjust enrichment; a count only against Davenport for illegal dividend; a count for attorneys fees; and a count for equitable relief. On August 4, 2005, Safetech and Davenport removed the action to the United States District Court for the Eastern District of Michigan and moved to dismiss for lack of personal jurisdiction. After the district court granted the motion, Air Products filed a motion for reconsideration, arguing that the district court did not adequately consider that its claim for attorneys fees was based on the contract between the parties and, thus, arose from Defendants' contacts with Michigan. The district court denied that motion on the basis that it was untimely and, in any event, that it was not well taken. Air Products filed a timely notice of appeal.

II. ANALYSIS

A. Law

This court reviews de novo a district court's dismissal for lack of personal jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2). In the context of a Rule 12(b)(2) motion, a plaintiff bears the burden of establishing the existence of jurisdiction. Serras v. First Tenn. Bank Nat'l Ass'n, 875 F.2d 1212, 1214 (6th Cir.1989). Where, as here, the district court relies solely on written submissions and affidavits to resolve a Rule 12(b)(2) motion, rather than resolving the motion after either an evidentiary hearing or limited discovery, the burden on the plaintiff is "relatively slight," Am. Greetings Corp. v. Cohn, 839 F.2d 1164, 1169 (6th Cir.1988), and "the plaintiff must make only a prima facie showing that personal jurisdiction exists in order to defeat dismissal," Theunissen v. Matthews, 935 F.2d 1454, 1458 (6th Cir.1991). In that instance, the pleadings and affidavits submitted must be viewed in a light most favorable to the plaintiff, and the district court should not weigh "the controverting assertions of the party seeking dismissal." Id. at 1459.

Personal jurisdiction over an out-of-state defendant arises from "certain minimum contacts with [the forum] such that maintenance of the suit does not offend `traditional notions of fair play and substantial justice.'" Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 85 L.Ed. 278 (1940)). Depending on the type of minimum contacts in a case, personal jurisdiction can either be specific or

503 F.3d 550

general. Reynolds v. Int'l Amateur Athletic Fed'n, 23 F.3d 1110, 1116 (6th Cir. 1994). In this case, Air Products asserts that both specific jurisdiction and general jurisdiction are present. Because we ultimately conclude that the district court had specific jurisdiction over Defendants, we focus only on that question and do not reach the question of general jurisdiction.

In analyzing personal jurisdiction in diversity actions such as this, federal courts must look to the law of the forum state to determine the reach of the district court's personal jurisdiction over parties, subject to constitutional due process requirements. Lanier v. Am. Bd. of Endodontics, 843 F.2d 901, 909 (6th Cir.1988). This court, therefore, must engage in a two-step process: (1) first, the court must determine whether any of Michigan's relevant long-arm statutes authorize the exercise of jurisdiction over Defendants; and, if so, (2) the court must determine whether exercise of that jurisdiction comports with constitutional due process.

As to the due process inquiry for specific jurisdiction (the only type of personal jurisdiction we address here), our Court has established a three part test for determining whether such jurisdiction may be exercised:

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.

S. Mach. Co. v. Mohasco Indus., Inc., 401 F.2d 374, 381 (6th Cir.1968). This court articulated this test based on existing Supreme Court jurisprudence on personal jurisdiction, primarily International Shoe, and the approach "simply applies in a specific fashion the broad rule requiring substantial minimum contacts as a basis for...

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