503 F.3d 544 (6th Cir. 2007), 06-1885, Air Products and Controls, Inc. v. Safetech Intern., Inc.

Docket Nº:06-1885.
Citation:503 F.3d 544
Party Name:AIR PRODUCTS AND CONTROLS, INC., Plaintiff-Appellant, v. SAFETECH INTERNATIONAL, INC. and R. Gaylen Davenport, Defendants-Appellees.
Case Date:September 27, 2007
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit
 
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503 F.3d 544 (6th Cir. 2007)

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.

September 27, 2007

Argued: April 16, 2007.

Appeal from the United States District Court for the Eastern District of Michigan at Detroit. No. 05-73031-Julian A. Cook, Jr., District Judge.

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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

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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

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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(l)(a) and § 566.34(l)(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)...

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