Raymond, Colesar, Glaspy & Huss v. Allied Capital Corp.

• Decision Date: 20 March 1991
• Docket Number: Civ. A. No. 3:90CV00625.
• Citation: 761 F. Supp. 423
• Court: U.S. District Court — Eastern District of Virginia
• Parties: RAYMOND, COLESAR, GLASPY & HUSS, P.C., Plaintiff, v. ALLIED CAPITAL CORPORATION, Defendant.

761 F. Supp. 423

RAYMOND, COLESAR, GLASPY & HUSS, P.C., Plaintiff, v. ALLIED CAPITAL CORPORATION, Defendant.

Civ. A. No. 3:90CV00625.

United States District Court, E.D. Virginia, Richmond Division.

March 20, 1991.

John Charles Thomas, Harry Margerum Johnson, III, E. Milton Farley, III, Hunton & Williams, Richmond, Va., for Raymond, Colesar, Glaspy & Huss, P.C.

Allen Scott Rugg, Kutak Rock & Campbell, Washington, D.C., David P. Parker, Statesville, N.C., for Allied Capital Corp.

MEMORANDUM AND ORDER

SPENCER, District Judge.

Defendant Allied Capital Corporation ("Allied") has moved to dismiss for lack of personal jurisdiction. Fed.R.Civ.P. 12(b)(2). For the reasons stated in this memorandum, the motion is DENIED.

I

The following describes the factual allegations of the complaint as if true.

Raymond, Colesar, Glaspy & Huss, P.C. ("Raymond, Colesar" or "RCGH") is a Virginia corporation based in Richmond. Allied is a Washington, D.C. corporation with its principal place of business there. Allied is a venture capital company which has arranged or provided financing for many ventures, including Consolidated Auto Recyclers, Inc. ("Consolidated"), a Delaware corporation with its principal place of business in Maine.

Allied's senior vice president Frederick L. Russell, Jr. contacted RCGH in January 1990 about performing accounting services for Consolidated. Russell explained to a RCGH representative¹ that Allied had a substantial investment in Consolidated and was concerned about the company's accounting and financial procedures. He asked RCGH to perform certain accounting and consulting services for Consolidated, and RCGH agreed to do so. RCGH agreed only because Allied had retained it; it would not have accepted the "engagement" without Allied's agreement and participation.

RCGH prepared a "draft engagement letter" for Consolidated, but also sent Russell a copy of the draft. "Russell immediately contacted RCGH and insisted that Allied execute the engagement letter rather than Consolidated." He explained that Allied was "in charge" of the work and had a "substantial interest" in ensuring the accuracy and completeness of the financial data obtained.

Russell asked RCGH to re-draft the engagement letter for his signature, on behalf of Allied. RCGH did this; Russell signed the letter in Allied's Washington office, and returned it to RCGH.

In reliance on Allied's statements and execution of the engagement letter, RCGH began performing services for Consolidated, and continued to do so until August 9, 1990. It obtained several assurances from Allied during that time that it would be paid for the work.

RCGH kept Allied fully informed of the progress on the Consolidated project and consulted with Allied frequently, "often at Allied's request." Allied expressed approval of RCGH's work, and the amount of RCGH's charges for its work, although bills themselves were sent to Consolidated in Maine.

Nevertheless, Allied "suddenly ceased to provide capital to Consolidated." This prompted Consolidated to file a Chapter 11 petition for relief in the Bankruptcy Court for the District of Maine on July 27, 1990.

RCGH then demanded payment for its services from Allied, which refused. The outstanding bill now stands at $125,780.50.

RCGH sues for recovery of this amount under four theories: 1) breach of contract, alleging that the engagement letter constitutes a written contract; 2) breach of guarantee, alleging that Allied's statements and actions, in conjunction with the engagement letter, constitute Allied's guarantee to RCGH that it would be paid for its services to Consolidated; 3) promissory and equitable estoppel, in that Allied represented that Consolidated would be supplied with sufficient capital to pay RCGH, with the intent that RCGH rely on such representations to its detriment by performing services for Consolidated, and RCGH in fact so relied; and 4) quantum meruit, alleging that Allied received $154,418.50 in benefit from the services RCGH rendered, and should not be unjustly rewarded by that benefit without paying for it under a contract implied by law.

II

Personal jurisdiction in this action is governed by the following provisions of the Virginia "long-arm" statute:

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 Commonwealth; ....

B. 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 ....

Va.Code Ann. § 8.01-328.1 (Cum.Supp. 1990) (emphasis added).

Raymond, Colesar points out that:

Allied actively participates in the operation of Virginia companies in which it has invested millions of dollars. Allied derives substantial income from these investments in Virginia companies. Most of Allied's officers live in Virginia. Allied's Registrar and Transfer Agent is located in Richmond. All of Allied's shareholder lists and records of stock transfers are maintained here. Allied has an interest in real property in Virginia. Allied's auditors are in Virginia.

Mem. in Opposition to Motion to Dismiss at 2 (supported by exhibits attached to the memorandum).

Allied argues that this is irrelevant, however, because it transacted no business in the Commonwealth in connection with the claims before this Court. It contends that the following facts are established by discovery to date:

The engagement of Raymond, Colesar was accomplished by its client, CAR, a Maine corporation. The majority of Raymond, Colesar's work was performed in Maine. Indeed, Mr. Russell's signature on the purported engagement letter attached to the complaint was obtained in a meeting in Washington, D.C. and no Allied employee ever entered Virginia in connection with Raymond, Colesar's providing services to Consolidated.

Mem. in Support of Motion to Dismiss at 4-5.

Allied also offers the affidavit of Mr. Russell, who contests several assertions in the pleadings and affidavit offered for RCGH. Russell admits that he first contacted RCGH, but contends that it was RCGH that demanded he sign the engagement letter in question. He also states that RCGH sent all invoices for its work involving Consolidated to Consolidated in Maine, until Consolidated filed for bankruptcy protection.

Allied further argues that any exercise of personal jurisdiction over it in this case would be unconstitutional, in light of International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945) and its progeny.

RCGH offers an irrelevant argument about the concept of general versus specific jurisdiction. The applicable portion of Virginia's long-arm statute is by its terms limited to specific jurisdiction.

RCGH relies on several facts that are in varying degrees disputed. It affirms its position that Allied frequently contacted RCGH both before and after RCGH agreed to provide services for Consolidated. Allied solicited its services, benefited from them by virtue of its stake in and control over Consolidated, and knew all along that much of the services RCGH provided would involve work done in Virginia. That suffices to show the kind of purposeful direction of activities toward Virginia that are enough to find personal jurisdiction under the Virginia long-arm statute and the Constitution, RCGH argues. See Mem. in Opposition to Motion to Dismiss at 14-16.

III

This motion requires resolution of two questions: 1) does the language of Virginia's long-arm statute reach CSI's conduct? and 2) does the statutory assertion of jurisdiction comport with the due process clause of the United States Constitution? E.g., Peanut Corp. of America v. Hollywood Brands, Inc., 696 F.2d 311, 313 (4th Cir. 1982).

It is appropriate to consider affidavits and other discovery in considering these questions. See Carter v. Trafalgar Tours, Ltd., 704 F.Supp. 673, 674 (W.D.Va. 1989); Crawford Harbor Assocs. v. Blake Constr. Co., 661 F.Supp. 880, 881 (E.D.Va. 1987). Raymond, Colesar bears the burden on this motion of making a prima facie showing that both parts of the test are satisfied. Crawford Harbor, 661 F.Supp. at 883. But see Carter, 704 F.Supp. at 673 (assuming truth of allegations in complaint for purposes of motion).

Analysis of these questions is complicated, because their resolution turns so on the specific factual situation. John G. Kolbe, Inc. v. Chromodern Chair Co., 211 Va. 736, 740, 180 S.E.2d 664, 667 (1971). Several principles are well settled, however.

First, the "manifest purpose" of Virginia Code § 8.01-328.1(A)(1) is "to assert jurisdiction over nonresidents who engage in some purposeful activity in Virginia to the extent permissible under the due process clause." Kolbe, 211 Va. at 740, 180 S.E.2d at 667 (construing former law with nearly identical language); accord Caldwell v. Seabord Sys. R.R., 238 Va. 148, 153, 380 S.E.2d 910, 912 (1989), cert. denied, ___ U.S. ___, 110 S.Ct. 1169, 107 L.Ed.2d 1071 (1990).

Second, the acts conferring jurisdiction under the statute must coincide with the acts giving rise to the substantive claim. Virginia Beach v. Roanoke River Basin Ass'n, 776 F.2d 484, 487 (4th Cir. 1985); Eastern Scientific Mktg. v. Tekna Seal, Inc., 696 F.Supp. 173, 176 (E.D.Va. 1988); see Va.Code Ann. §§ 8.01-328.1(A), (B).

Third, no single factor is dispositive. The determination whether the statute permits jurisdiction requires examination of both the quantity and quality of the contacts. This involves questions such as who benefited from the contacts, who initiated them and why, whether the contacts involved any person's physical presence in the state, and what further conduct in the forum state was contemplated by the parties.

A defendant need not ever physically enter Virginia in connection with the disputed transaction, for example. See, e.g., English & Smith v. Metzger, 901 F.2d 36 (4th Cir.1990); ...