AM Diagnostics, Inc. v. Denney, 92-71157.
| Decision Date | 14 January 1993 |
| Docket Number | No. 92-71157.,92-71157. |
| Citation | 810 F. Supp. 887 |
| Parties | AM DIAGNOSTICS, INC.; Eugene Schuster; Quest Biotechnology, Inc.; and Venture Funding, Ltd., Plaintiffs, v. Jerry DENNEY; The National Commercial Bank; Monitor Bioscience, Ltd.; William Waddington; and Patrick Maguire, Defendants. |
| Court | U.S. District Court — Western District of Michigan |
Mayer Morganroth, Southfield, MI, for plaintiffs.
Ralph W. Barbier, Jr., Grosse Pointe Woods, MI, for defendant Jerry Denney.
Martin Domb, New York City, for defendant National Commercial Bank.
Philip T. Carter, Bloomfield Hills, MI, for defendant NCB.
Laurie S. Gill, Boston, MA, for defendants Monitor and Maguire.
David H. Oermann, Detroit, MI, for defendants Monitor, Waddington and Maguire.
On May 12, 1992, defendant Jerry Denney filed a motion to dismiss for lack of personal jurisdiction; defendant the National Commercial Bank "NCB" filed a motion to dismiss for lack of personal jurisdiction or, in the alternative, to transfer venue; and defendants Monitor Bioscience, Ltd. "Monitor", William Waddington, and Patrick Maguire filed a joint motion to dismiss for lack of personal jurisdiction. On June 26, 1992, plaintiffs AM Diagnostics, Inc. "AMD", Eugene Schuster, Quest Biotechnology, Inc. "Quest", and Venture Funding, Inc. "Venture" filed joint "answers" to the motions to dismiss; Denney filed a reply July 16, 1992; NCB filed a reply July 17, 1992; and Monitor, Waddington, and Maguire filed a reply July 17, 1992.
In August 1990, the London branch of NCB, a Saudi Arabian bank, extended a £740,000.00 loan facility "Facility" to American Monitor (UK) Ltd. "AMUK", an English corporation. AMUK's business was to sell laboratory testing machines called "analyzers" and chemical reagents to customers in the United Kingdom. The analyzers and reagents were made and shipped to AMUK in England by AMUK's parent company, plaintiff AMD, an Indiana corporation. The Facility was evidenced by a letter agreement between NCB and AMUK. As security for the loan, AMUK and NCB entered into a debenture whereby AMUK granted NCB a security interest in all of AMUK's assets. Both the Facility and the debenture were negotiated and executed in England, and both are by their terms governed by English law. The debenture gave NCB the right, in the event of a default by AMUK, to appoint a receiver in accordance with English law.
As additional security for the loan, NCB had requested the guarantee of plaintiff AMD (AMUK's parent company) and AMD's directors. AMD and its directors refused to give these guarantees. Instead, NCB was offered and subsequently accepted the guarantees of plaintiffs Schuster and Venture. Accordingly, Schuster and Venture each entered into a guarantee with NCB dated August 7, 1990.1 The guarantees of Schuster and Venture are by their terms governed by New York law. In addition, each guarantor, in the language of the guarantees, (a) submitted to the jurisdiction of New York courts, (b) appointed an agent for service of process in New York, (c) waived any right to a jury, (d) waived any defenses of the borrower AMUK, and (e) waived any counterclaims against NCB.
Schuster, a Michigan citizen, and Venture, a Michigan corporation, are shareholders of AMD. AMD is the sole shareholder of AMUK. The fourth plaintiff in this case, Quest, is also a shareholder of AMD. AMUK is not a party to this action.
The Facility was to expire, by its terms, June 30, 1991. On June 28, 1991, AMUK and NCB entered into a "side letter" whereby NCB extended the Facility to December 31, 1991, but with new drawings permitted only until September 30, 1991.
On September 16, 1991, AMUK defaulted under the Facility by failing to pay and admitting its inability to pay an invoice in the amount of £19,963.00. NCB advised AMUK that this constituted an event of default, that as a result NCB had no further commitment to AMUK under the Facility, and that the advances outstanding under the Facility continued to be repayable on demand at any time. However, NCB did not demand payment in full at that time. NCB sent a copy of its default notice to the guarantors Schuster and Venture.
Within days of this default notice, AMUK asked NCB to advance an additional £50,000.00 to enable AMUK to meet payroll and other current expenses. AMUK informed NCB that AMUK's parent, plaintiff AMD, was unable or unwilling to advance any funds to AMUK. NCB agreed to advance the funds requested by AMUK to avert its imminent collapse. By mid-October 1991, AMD still had not provided any financial help to its subsidiary AMUK; and AMUK requested a further advance from NCB of nearly £70,000.00. NCB informed AMUK by letter that it would consider making such further advances only upon certain conditions, including a guarantee from AMD and other forms of security. NCB sent copies of this letter to the guarantors. The following week, AMD informed NCB that AMD would not agree to any of these conditions. On October 31, 1991, NCB wrote (a) to AMUK, demanding payment of the £554,299.00 then outstanding under the Facility and (b) to each guarantor, demanding payment of that same sum under the guarantees.
On November 1, 1991, in accordance with its alleged rights under the debenture and English insolvency law, NCB appointed two licensed insolvency practitioners from the London office of Ernst & Young, chartered accountants, as administrative receivers of AMUK. That same day the receivers accepted their appointment and assumed their duties. Thereafter, the receivers notified all creditors of AMUK of their appointment and activities.
After analyzing the precarious financial condition of AMUK, the receivers concluded that, to maximize the return to creditors, AMUK should be sold as a going concern, rather than liquidated. Accordingly, the receivers advertised the business for sale while they continued to operate the business. They received only one offer, that from a group that included the English-based managers of AMUK itself. After negotiating with the group and increasing the amount of their offer, the receivers recommended accepting the group's offer. On December 4, 1991, the receivers sold AMUK's business, including most of its assets, to defendant Monitor, an English corporation newly formed by AMUK's management group, for the purchase price of £120,000.00.2 The receivers have since continued to collect AMUK's assets and tried to sell its remaining assets not included in the sale to Monitor.
On March 4, 1992, the instant suit was filed by plaintiffs. In essence, plaintiffs allege that (1) defendants conspired to steal away AMUK and thereby deprive plaintiffs, as direct and indirect shareholders of AMUK, of their allegedly valuable interest in AMUK; and (2) defendants made various misrepresentations to plaintiffs concerning (a) the Facility and related loan agreements and (b) AMUK's efforts to obtain alternative sources of financing.
As of April 30, 1992, after accounting for all receipts by and operating expenses of the receivers, there remained approximately £413,000.00 due to NCB under the Facility, not including the receivers' and attorneys' fees. On May 5, 1992, NCB filed an action in the Southern District of New York against the two guarantors, defendants Schuster and Venture, to recover the deficiency due NCB.
It is plaintiffs' burden to establish the existence of personal jurisdiction over defendant. Serras v. First Tenn. Bank Nat'l Ass'n, 875 F.2d 1212, 1214 (6th Cir. 1989); Welsh v. Gibbs, 631 F.2d 436, 438 (6th Cir.1980). A court must interpret the pleadings and affidavits in the light most favorable to plaintiffs. Id. Where the court finds that there are no issues of credibility or disputed issues of fact, it may decide the motion on the basis of written materials. Andrews Univ. v. Robert Bell Indus., 685 F.Supp. 1015, 1017 (W.D.Mich. 1988).
Michigan's general personal jurisdiction statute, Mich.Comp.Laws Ann. § 600.701, reads in relevant part:
Michigan's limited personal jurisdiction statute, Mich.Comp.Laws Ann. § 600.705, reads in relevant part:
Michigan's corporate general personal jurisdiction statute, Mich.Comp.Laws Ann. § 600.711, reads in relevant part:
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...(W.D.Mich. Dec. 29, 2008) (citing Witbeck v. Bill Cody's Ranch Inn, 428 Mich. 659, 411 N.W.2d 439 (1987)); AM Diagnostics, Inc. v. Denney, 810 F.Supp. 887, 895–96 (E.D.Mich.1993); Weller v. Cromwell Oil Co., 504 F.2d 927, 931 (6th Cir.1974) (finding no personal jurisdiction over officers of......