885 F.2d 1293 (6th Cir. 1989), 87-1321, LAK, Inc. v. Deer Creek Enterprises

Docket Nº:87-1321.
Citation:885 F.2d 1293
Party Name:LAK, INC., Plaintiff-Appellee, v. DEER CREEK ENTERPRISES, Defendant-Appellant.
Case Date:September 20, 1989
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit
 
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Page 1293

885 F.2d 1293 (6th Cir. 1989)

LAK, INC., Plaintiff-Appellee,

v.

DEER CREEK ENTERPRISES, Defendant-Appellant.

No. 87-1321.

United States Court of Appeals, Sixth Circuit

September 20, 1989

Argued Dec. 10, 1987.

Rehearing and Rehearing En Banc Denied Nov. 2, 1989.

Jeffrey G. Heuer, Jaffe, Snider, Raitt & Heuer, Brian G. Shannon, Detroit, Mich., Joel S. Perwin (argued), Miami, Fla., for defendant-appellant.

Gordon S. Gold, Evans & Luptak, D. Michael Kratchman (argued), Detroit, Mich., for plaintiff-appellee.

Before NELSON and BOGGS, Circuit Judges, and EDWARDS, Senior Circuit Judge.

DAVID A. NELSON, Circuit Judge.

This is an appeal from a judgment entered by a federal district court in Michigan in an action against an Indiana partnership on a contract for the sale of a valuable tract of land in Florida. The plaintiff is a Michigan corporation, and the federal courts have subject matter jurisdiction under 28 U.S.C. Sec. 1332. The defendant partnership was never present in Michigan, however, it never consented to be sued there, and it has insisted from the outset of the litigation that it never invoked the benefits and protections of Michigan's laws by purposefully availing itself of the privilege of transacting business in that state. The first question we must address, therefore--a question that is dispositive of the appeal, as it turns out--is whether the facts established by the plaintiff corporation justified the district court's exercising jurisdiction over the person of the defendant partnership.

The district court concluded (a) that the case came within the terms of Michigan Comp. Laws Sec. 600.725 (the section of Michigan's long-arm statute dealing with "limited" personal jurisdiction over partnerships) and (b) that such personal jurisdiction could be exercised without violating the defendant's rights under the Due Process Clauses of the Fifth and Fourteenth Amendments. A timely motion to dismiss the complaint for want of in personam jurisdiction was denied, and the district court ultimately went on to enter a decree

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of specific performance against the defendant.

We believe that the jurisdictional question was decided incorrectly, in light of the particular facts presented here, and we shall reverse the judgment for that reason.

I

The Supreme Court has rejected any resort to "talismanic jurisdictional formulas" for resolving questions of personal jurisdiction. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 485, 105 S.Ct. 2174, 2188, 85 L.Ed.2d 528 (1985). Instead, " 'the facts of each case must [always] be weighed' in determining whether personal jurisdiction would comport with 'fair play and substantial justice.' " Id. at 485-486, 105 S.Ct. at 2188-89, quoting Kulko v. California Superior Court, 436 U.S. 84, 92, 98 S.Ct. 1690, 1696, 56 L.Ed.2d 132 (1978). We are therefore prompted to sketch out the facts of the present case in somewhat greater detail than might have been necessary had the case arisen at an earlier stage in the development of our jurisprudence.

Defendant Deer Creek Enterprises is an Indiana general partnership formed by two brothers, Mark and Hart Hasten. Both of the Hastens are residents of Indiana. Their Deer Creek partnership has its principal place of business in Indianapolis, Indiana. Deer Creek transacts no business in Michigan, according to an affidavit signed by Mark Hasten, nor has it ever transacted business in that state. Deer Creek has no real or personal property in Michigan, and there is no contention that it ever designated an agent to accept service of process there.

At the time with which we are concerned in this proceeding, Deer Creek had substantial real estate holdings in Florida. It owned, among other things, a 45-acre tract of land known as the "Cypress parcel." This particular parcel, which is located in a residential area between Boca Raton and Ft. Lauderdale, Florida, was unimproved by any buildings other than a small eight-unit apartment structure. The land had considerable potential for development, it appears.

Deer Creek did not advertise the Cypress parcel for sale, either in Michigan or elsewhere. In November of 1983, however, Deer Creek's Florida representative, Mr. Richard Jerman, received an unsolicited inquiry about a possible purchase of the parcel by Beznos Realty Investment Company, a Michigan limited partnership that was the predecessor in interest of plaintiff LAK, Inc. The property acquisition manager for Beznos Realty, Mr. Al Beke, met with Mr. Jerman in Florida on November 17, 1983. On the following day Mr. Jerman was given a letter of intent, signed by Mr. Beke on behalf of the Beznos organization, proposing to purchase part of the parcel.

Messrs. Beke and Jerman had several subsequent meetings in Florida, and they spoke over the telephone at times when Beke was in Michigan and Jerman in Florida. At no point did Mr. Jerman or any other representative of Deer Creek go into the State of Michigan on business related to this matter.

On two occasions in the latter part of December, 1983, Mr. Harold Beznos, one of the principals of Beznos Realty, met in Florida with the Hasten brothers, at the latters' invitation, to discuss the proposed purchase. Mr. Beznos met again with Mark Hasten in Florida on January 4, 1984, and an affidavit subsequently signed by Mr. Beznos says of this meeting that "we continued to negotiate the specifics of a real estate transaction...."

Mr. Beznos returned to his home in Michigan shortly after the January 4 negotiating session, and he had further discussions with Mark Hasten and other representatives of Deer Creek over the telephone. 1 In February of 1984--around the

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time of yet another meeting between Messrs. Beznos and Hasten in Florida--Mr. Hasten instructed his lawyer in Indianapolis, Mr. Stephen Backer, to draw up a contract for the sale to Beznos Realty of the entire Cypress parcel.

On February 13, 1984, Attorney Backer dispatched a draft purchase agreement by Federal Express to Harold Beznos at the Biltmore Hotel in Phoenix, Arizona. It was subsequently learned that Mr. Beznos had left Phoenix, and on February 15 a second copy was sent to him at a hotel in Beverly Hills, California. (The record suggests that Mr. Beznos traveled extensively, and at various times he communicated with Deer Creek by telephone from Canada, Mexico, Texas, New York, Arizona and California, as well as from Michigan. Some of these calls evidently dealt with the third-party financing that was being arranged by Beznos, and others concerned matters having nothing to do with the Cypress parcel.)

Mr. Beznos gave the draft purchase agreement to his lawyer in Detroit, Mr. Michael Mehr, who promptly placed a telephone call to Attorney Backer in Indianapolis. The two lawyers had a number of conversations over the telephone in the latter part of February, and the agreement went through three additional drafts. Typed copies of these drafts were prepared in Mr. Backer's office in Indianapolis and were mailed to Mr. Mehr's office in Detroit. Unlike their principals, who had met several times in Florida, the lawyers never met face-to-face; all of their communications with one another were conducted by telephone or in writing.

Attorney Mehr's affidavit makes the point that "[n]o agreement to purchase and sell existed between the parties until the matters negotiated by me and Stephen Backer were expressed in the written Purchase Agreement." The affidavit of Mr. Beznos, similarly, says that "[n]o agreement to purchase the Deer Creek parcel existed until the matters set forth in the written Purchase Agreement were finalized." A revised copy of the purchase agreement was signed by Mr. Beznos in Michigan on February 29, 1984, and the document was then sent to Indiana for signature by Mr. Hasten. The purchase agreement was "finalized," in the sense that it became legally binding, only when Mr. Hasten signed it on behalf of Deer Creek. That signing occurred on March 2, 1984, in the State of Indiana.

The purchase agreement, which recited that Deer Creek was an Indiana general partnership, that Beznos Realty was a Michigan partnership, and that the land which formed the subject of the agreement was located in Florida, provided by its terms that the agreement was to be governed by the law of the situs state, Florida. (We pause here to note, parenthetically, that the agreement's Florida choice-of-law provision is by no means irrelevant to the question of personal jurisdiction. Burger King, 471 U.S. at 481, 105 S.Ct. at 2186. "Nothing in our cases," the Supreme Court has said, "suggests that a choice-of-law provision should be ignored in considering whether a defendant has 'purposefully invoked the benefits and protections of a State's laws' for jurisdictional purposes." Id. at 482, 105 S.Ct. at 2187 (emphasis omitted). A showing that Deer Creek purposefully availed itself of the benefits and protections of Michigan law is essential to the plaintiff's jurisdictional claim, as we shall see, and this essential showing is not helped by the fact that the parties chose to have the contract governed by the law of Florida, rather than the law of Michigan. The parties having elected to invoke the benefits of Florida law for deciding disputes under the contract, there is obviously much to be said in favor of letting such disputes be resolved in a Florida court.)

The agreement specified a purchase price of $5,501,562.00, to be paid by cash or certified check at the time of closing. It also provided that upon acceptance of the agreement by Deer Creek, Beznos Realty would tender $275,078.10 as earnest money.

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The latter sum, it was agreed, would be held until the closing in an account at a designated bank in Indianapolis...

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