American Greetings Corp. v. Cohn

• Decision Date: 08 April 1988
• Docket Number: No. 86-3902,86-3902
• Citation: 839 F.2d 1164
• Parties: AMERICAN GREETINGS CORPORATION, Plaintiff-Appellant, v. Gerald A. COHN, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1164

839 F.2d 1164

56 USLW 2472

AMERICAN GREETINGS CORPORATION, Plaintiff-Appellant, v. Gerald A. COHN, Defendant-Appellee.

No. 86-3902.

United States Court of Appeals, Sixth Circuit.

Argued Dec. 8, 1987.

Decided Feb. 17, 1988.

Rehearing Denied April 8, 1988.

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 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 the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend "traditional notions of fair play and substantial justice."

Id. at 316, 66 S.Ct. at 158 (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 343, 85 L.Ed. 278 (1940)). As recently as last year the Supreme Court opened its discussion of this issue by quoting the above language from International Shoe. See Asahi Metal Industry Co. v. Superior Court of California, --- U.S. ----, 107 S.Ct. 1026, 1029, 94 L.Ed.2d 92 (1987). In Southern Machine Co. v. Mohasco Industries, Inc., 401 F.2d 374, 381 (6th Cir.1968), this court identified three criteria to be satisfied if personal jurisdiction over a nonresident who is not generally engaged in activities within the forum state may be upheld under International Shoe and Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958). These criteria are:

First, the defendant must purposefully avail himself of the privilege of acting in the forum state or causing a consequence in the forum state. Second, the cause of action must arise from the defendant's activities there. Finally, the acts of the defendant or consequences caused by the defendant must have a substantial enough connection with the forum state to make the exercise of jurisdiction over the defendant reasonable.

If these criteria are satisfied, jurisdiction will be upheld if the facts of the particular case are such that "maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.' " International Shoe, 326 U.S. at 316, 66 S.Ct. at 158.

The law of the forum state determines the extent of the in personam jurisdiction of a federal court sitting in a diversity case. In-Flight Devices Corp. v. Van Dusen Air, Inc., 466 F.2d 220, 224 (6th Cir.1972). Ohio's long-arm statute, Ohio Rev.Code Sec. 2307.382, provides in pertinent part:

(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 state;

This court held in In-Flight Devices that Sec. 2307.382 extends personal jurisdiction to the constitutional limits set by the Due Process Clause. 466 F.2d at 225. See also R.L. Lipton Distributing Co. v. Dribeck Importers, Inc., 811 F.2d 967, 969 (6th Cir.1987) (The statute "has been construed to extend to the outer limits of due process."). When this determination has been made the question in a particular case is whether the jurisdictional reach of the forum state's courts can be extended to nonresidents consistently with due process. Southern Machine Co., 401 F.2d at 376. As the court stated in Lipton, "thus an Ohio personal jurisdiction analysis becomes an examination of constitutional limitations." 811 F.2d at 969.

B.

Without in any way departing from the principles enunciated in International Shoe, the Supreme Court has recently applied those principles to various fact situations in decisions that are instructive for the present case. In Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984), the Court concluded that the "minimum contacts" requirement was not satisfied. In so doing, the Court discussed the difference between "specific jurisdiction" and "general jurisdiction" in two footnotes:

It has been said that when a State exercises personal jurisdiction over a defendant in a suit arising out of or related to the defendant's contacts with the forum, the State is exercising "specific jurisdiction" over the defendant. See Von Mehren & Trautman, Jurisdiction to Adjudicate: A Suggested Analysis, 79 Harv.L.Rev. 1121, 1144-1164 (1986).

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When a State exercises personal jurisdiction over a defendant in a suit not arising out of or related to the defendant's contacts with the forum, the State has been said to be...