Adara Networks Inc. v. Langston

• Decision Date: 03 September 2020
• Docket Number: NO. 2018-IA-01686-SCT,2018-IA-01686-SCT
• Parties: ADARA NETWORKS INC. and Eric K. Johnson v. Shane F. LANGSTON
• Court: Mississippi Supreme Court

301 So.3d 618

ADARA NETWORKS INC. and Eric K. Johnson

v.Shane F. LANGSTON

NO. 2018-IA-01686-SCT

Supreme Court of Mississippi.

September 3, 2020

ATTORNEYS FOR APPELLANTS: STEPHEN L. THOMAS, SHELDON G. ALSTON, Jackson, ROBERT RICHARD CIRILLI, JR., SIMON TURNER BAILEY, Jackson

ATTORNEYS FOR APPELLEE: SHANE F. LANGSTON, REBECCA M. LANGSTON, KEVIN JERRELL WHITE, Jackson, CHRISTOPHER JUSTIN BROOME

EN BANC.

RANDOLPH, CHIEF JUSTICE, FOR THE COURT:

¶1. Adara Networks Inc. (Networks Inc.) appeals the denial of a Rule of Civil Procedure 12(b)(2) motion to dismiss for lack of personal jurisdiction. The Hinds County Chancery Court properly denied Networks Inc.'s motion. The chancery court can assert personal jurisdiction over Networks Inc. under either the doing-business prong of our long-arm statute or the tort prong. Langston pled sufficient facts to establish Networks Inc. did or does business in Mississippi and to plead the tort of breach of fiduciary duty. Therefore, we affirm the judgment of the chancery court.

FACTS AND PROCEDURAL HISTORY

¶2. At the time the complaint was filed, Networks Inc. was incorporated in Florida¹ with its principal place of business in San Jose, California.

¶3. Shane Langston has been a member of the Mississippi Bar since 1984 and until 2016 was a resident of Mississippi. At the time of filing, he was a resident of Texas.

¶4. Years before Langston moved to Texas, Langston purchased one million shares of preferred stock in Networks Inc. for $500,000. This purchase was made at the urging of his then-Madison County, Mississippi, neighbor, Ken Primos. Unknown to Langston, Primos was a paid shill for Networks Inc., acting to entice Langston and other Mississippians to invest in Networks Inc. In an affidavit filed in this proceeding, Primos swore that since at least 2002 he has been paid monthly by Networks Inc. to solicit and influence investors for Networks Inc. including residents of Mississippi. Primos annually received IRS forms 1099 from Networks Inc. for his efforts.

¶5. Several years later, Langston was contacted again by Primos on behalf of Networks Inc. in Mississippi and was persuaded to invest additional funds in the form of a convertible loan to Networks Inc. In 2013, Langston exercised his right to convert the $250,000 debt instrument into several hundred thousand shares of common stock.

¶6. Throughout the years, Primos regularly communicated with Langston and other investor residents of Mississippi for Networks Inc. In the same affidavit, Primos swore that he provided information to Langston and other Mississippi residents at the direct instruction and behest of the chief executive officer of Networks Inc. Eric Johnson.²

¶7. Networks Inc. has held one shareholder meeting over the twenty-year period that Langston has been a shareholder. That shareholder meeting was held in Jackson, Mississippi, with roughly one hundred Mississippi shareholders in attendance. Langston also had several meetings with Johnson and Networks Inc.'s chief financial officer, Lillian Arbuckle, in Jackson, Mississippi. In 2003, Langston received a letter from Networks Inc. CEO Johnson touting sales and developments, listing the University of Mississippi as a customer and stating that products developed by Networks Inc. would be utilized by the Mississippi Division of Medicaid and the Mississippi Bar Association.

¶8. Langston has sought multiple times to examine various corporate documents. Each time, Primos was dispatched by Networks Inc. to discourage Langston. Primos told Langston to withdraw his requests because a merger or buyout was imminent and disclosures would adversely impact Networks Inc. Eventually, Langston joined other Mississippi investors³ seeking financial disclosures, in a demand letter to Networks Inc. dated January 24, 2018. These shareholders offered to send an accountant to Networks Inc.'s offices in San Jose, California, to examine the documents.

¶9. Networks Inc. countered the shareholders request by producing only selected documents on April 9, 2018 in Jackson, Mississippi. However, before allowing the investors to review any documents, Networks Inc. required execution of a confidentiality agreement. That agreement contained a clause requiring that any dispute arising under that agreement would be governed and interpreted by the laws of Mississippi and, further, that any disputes that arose were subject to the jurisdiction of Mississippi courts. Langston alleged that the selective production failed to encompass the documents requested and required by either Florida or Mississippi law.

¶10. Among the documents produced were financial statements showing that in 2012 more than 90 percent of Networks Inc.'s cash assets were on deposit with Trustmark National Bank in Jackson, Mississippi. Furthermore that percentage increased in 2013, 2014, and 2015, before subsequent withdrawals by Networks Inc. substantially decreased the balance in 2016 and 2017. After review, the shareholders again requested full compliance with the law, but the requests were ignored. Finally, Langston filed a complaint for accounting in the Chancery Court of the First Judicial District of Hinds County, Mississippi, an appropriate venue as stated in Mississippi Code Section 79-4-16.04(b) (Rev. 2013).⁴

¶11. Networks Inc. responded with a Rule of Civil Procedure 12(b)(2) motion to dismiss for lack of personal jurisdiction. Networks Inc. also claimed that it had not subjected itself to the benefits and protections of Mississippi law, despite evidence to the contrary in the confidentiality agreement.⁵ Langston filed affidavits establishing a prima facie case for personal jurisdiction, while Networks Inc. stood only on its briefs and the arguments advanced by its counsel. After due consideration, the chancery court denied Networks Inc.'s motion. Networks Inc. appeals to this Court.

STANDARD OF REVIEW

¶12. This Court reviews jurisdictional questions de novo. Canadian Nat'l Ry. Co. v. Waltman , 94 So. 3d 1111, 1115 (Miss. 2012) (quoting Knight v. Woodfield , 50 So. 3d 995, 998 (Miss. 2011) ). When considering a motion under Rule 12(b)(2), we take all allegations made in the complaint and their reasonable inferences as true, just as a trial court would. Id. (quoting R.C. Constr. Co. v. Nat'l Office Sys. , 622 So. 2d 1253, 1255 (Miss. 1993) ). To determine whether a Mississippi court can exercise personal jurisdiction, courts ask two questions: first, whether our long-arm statute permits an exercise of jurisdiction and, second, whether that exercise of jurisdiction offends the due-process guarantees of the Fourteenth Amendment. Dunn v. Yager , 58 So. 3d 1171, 1184 (Miss. 2011) (quoting Estate of Jones v. Phillips ex rel. Phillips , 992 So. 2d 1131, 1137 (Miss. 2008) ).

ANALYSIS

I. Can a Mississippi court properly exercise personal jurisdiction over Networks Inc.?

A. The Long-Arm Statute

¶13. Mississippi's long-arm statute provides, in relevant part,

Any nonresident person, firm, general or limited partnership, or any foreign or other corporation not qualified under the Constitution and laws of this state as to doing business herein, who shall make a contract with a resident of this state to be performed in whole or in part by any party in this state, or who shall commit a tort in whole or in part in this state against a resident or nonresident of this state, or who shall do any business or perform any character of work or service in this state, shall by such act or acts be deemed to be doing business in Mississippi and shall thereby be subjected to the jurisdiction of the courts of this state. Service of summons and process upon the defendant shall be had or made as is provided by the Mississippi Rules of Civil Procedure.

Miss. Code Ann. § 13-3-57 (Rev. 2019). Satisfaction of any of the three prongs, be it through contract, tort, or doing business, establishes personal jurisdiction over a nonresident corporation. Id. The parties have presented argument on the applicability vel non of the latter two prongs. We will address the doing-business prong first because that issue is dispositive.

1. Can a Mississippi court assert personal jurisdiction over Networks Inc. under the doing-business prong?

¶14. In its motion to dismiss, Networks Inc. relied exclusively on federal cases, arguing that a present nonresident plaintiff cannot utilize the doing-business prong against a nonresident defendant. Not one of the cases argued share facts or law common with the case sub judice and therefore offer neither precedential nor persuasive value. The cases cited by Networks Inc., save one, seek damages for injuries that occurred not only outside of the state of Mississippi but also outside the United States of America.⁶ Networks Inc. asked the chancellor to ignore both the plain text of our statute and our precedent regarding its language. None of the cases support their argument.

¶15. The dissent's opinion similarly offers cases that have no precedential value. Federal cases may have persuasive value if they share common facts or law. Those cited do not. The applicable Mississippi law is found in the long-arm statute.⁷

This Court has interpreted the plain language found in that statute. In C.H. Leavell & Company v. Doster , 211 So. 2d 813, 815 (Miss. 1968) (emphasis added),⁸ this Court stated,

[t]he defendant in this case is also subject to the jurisdiction of the courts of Mississippi under category (3) of the first sentence of section 1437. Any nonresident is subject to suit in this state who shall do any business or perform any character of work or service in this state if the action or proceeding accrues from acts done in this state .

Further, the plain text of the statute does not restrict usage of the third prong to only Mississippi residents. The state of Mississippi, as does every state in the union, has a profound interest in regulating those who conduct business and who, while doing so, inflict harm on persons within her borders.

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