839 F.2d 1164 (6th Cir. 1988), 86-3902, American Greetings Corp. v. Cohn

Docket Nº:86-3902.
Citation:839 F.2d 1164
Party Name:AMERICAN GREETINGS CORPORATION, Plaintiff-Appellant, v. Gerald A. COHN, Defendant-Appellee.
Case Date:February 17, 1988
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit
 
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Page 1164

839 F.2d 1164 (6th Cir. 1988)

AMERICAN GREETINGS CORPORATION, Plaintiff-Appellant,

v.

Gerald A. COHN, Defendant-Appellee.

No. 86-3902.

United States Court of Appeals, Sixth Circuit

February 17, 1988

Argued Dec. 8, 1987.

Rehearing Denied April 8, 1988.

Page 1165

Albert I. Borowitz, Barry L. Springel (argued), Jones, Day, Reavis & Pogus, Cleveland, Ohio, for plaintiff-appellant.

Daniel W. Hammer (argued), Thompson, Hine & Flory, R. Benton Gray, Cleveland, Ohio, for defendant-appellee.

Before LIVELY, Chief Judge, and JONES and GUY, Circuit Judges.

LIVELY, Chief Judge.

This appeal requires us to determine the reach of Ohio's long-arm statute in a somewhat unusual fact setting. The plaintiff is an Ohio corporation and the defendant is a nonresident shareholder who threatened a suit to have an amendment to the plaintiff's articles of incorporation declared invalid under Ohio law unless the plaintiff agreed either to rescind the amendment or pay the defendant a substantial sum of money. The plaintiff responded by filing this diversity action in the district court, seeking a declaration that the amendment is valid. The district court, without conducting an evidentiary hearing, granted the defendant's motion to quash service of process and to dismiss the action for lack of personal jurisdiction pursuant to Rule 12(b)(2) and (5), Fed.R.Civ.P. We reverse.

I.

American Greetings is an Ohio corporation with its principal place of business in Cleveland. The defendant is a resident of California who practices law there. He formerly was a resident of Ohio and is admitted to the Ohio bar. However, he has never practiced law or maintained an office in Ohio, and has never represented clients in Ohio. The defendant owns both Class A and Class B stock of American Greetings, having acquired the shares as a bequest from his father.

At the June 1985 annual meeting of shareholders an amendment to plaintiff's articles of incorporation was approved. The amendment addressed the Class B common shares, which carry ten times the voting rights of the Class A shares. Although as of the date of the vote the defendant was the owner of almost 2,000 Class B shares, he did not vote for or against the amendment.

Shortly after the amendment was approved the defendant began corresponding with plaintiff and expressing concern over the legality of the amendment. Over a period of nine months (August 1985 to April 1986) the defendant contacted the plaintiff on numerous occasions in writing, by telephone, through an Ohio lawyer, and through his brother, who lived in Ohio. These contacts are described in some detail in the complaint. Their general tenor was that the amendment to the articles was illegal and that the defendant insisted that it be rescinded.

On May 16, 1986, the plaintiff filed this diversity action in federal court in Ohio seeking a declaration that the amendment is legal and valid under Ohio law and binding on the defendant. On June 2, 1986, the district court, sua sponte, issued an order stating that it appeared that it lacked personal jurisdiction over the defendant, and that within ten days the plaintiff should either amend its complaint or transfer the action to an appropriate court. On June 30, 1986, the plaintiff filed an amended complaint.

In addition to describing the contacts as set forth above, the amended complaint alleged that "[i]n the course of, and as a result of, the meetings, correspondence and communications ..., Cohn threatened to

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sue American Greetings to have the Amendment declared illegal and invalid under Ohio law unless American Greetings agreed either to rescind the Amendment or to pay Cohn a very substantial sum of money." The amended complaint further alleged that Ohio has "a strong interest in the adjudication of this controversy since the claim asserted by Cohn is a challenge to the corporate structure and governance of American Greetings, an Ohio corporation." Finally, the amended complaint alleged that "Cohn's claim, unless and until judicially resolved, will place a cloud over the rights and obligations of American Greetings and its shareholders to effectuate stock transactions in accordance with the provisions of the Ohio corporation laws and of American Greetings' articles of incorporation."

Cohn responded to the amended complaint by filing a motion to quash and dismiss, pursuant to Fed.R.Civ.P. 12(b)(2) and (5). On August 29, 1986, the district court granted the defendant's motion and dismissed the complaint.

In its memorandum and order granting the motion to dismiss, the district court found that the cause of action asserted by American Greetings was not based on "minimum contacts" with Ohio sufficient to support personal jurisdiction over Cohn. After reviewing the Ohio long-arm statute, Ohio Rev.Code Sec. 2307.382, the court determined that the amended complaint did not satisfy its requirements, concluding:

The mere ownership of stock in an Ohio company and the expression of strong reservations concerning the legality of a matter of legitimate shareholder interest do not involve a non-resident in the substantial business contacts required by Ohio Rev.Code Sec. 2307.382. Cohn's actions relate solely to this ownership of stock he inherited in American Greetings. They are not the purposeful and substantial business transactions within Ohio contemplated by the Sixth Circuit in In-Flight [In-Flight Devices Corp. v. Van Dusen Air, Inc., 466 F.2d 220 (6th Cir.1972) ]. The exercise of jurisdiction over Cohn, under these circumstances, is unreasonable and offends traditional notions of fairness and justice.

II.

A.

The basic requirement for personal jurisdiction over a non-resident defendant has been clearly established since the Supreme Court's decision in International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). The holding in that case has been reiterated time and again by the Supreme Court:

[D]ue process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of...

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