Behm v. John Nuveen & Co., Inc.

• Decision Date: 22 October 1996
• Docket Number: No. C3-96-315,C3-96-315
• Citation: 555 N.W.2d 301
• Court: Minnesota Court of Appeals
• Parties: Ivan BEHM, individually and on behalf of all others similarly situated, Appellant, v. JOHN NUVEEN & CO., INC., et al., Respondents.

Page 301

555 N.W.2d 301

Ivan BEHM, individually and on behalf of all others similarly situated, Appellant, v. JOHN NUVEEN & CO., INC., et al., Respondents.

No. C3-96-315.

Court of Appeals of Minnesota.

Oct. 22, 1996.

Syllabus by the Court

1. A district court may deny jurisdictional discovery where the proponent has failed to move timely to compel discovery and has failed to establish a likelihood of establishing additional material jurisdictional facts through record supplementation.

2. Minnesota courts have personal jurisdiction over nonresident officers and directors of a Minnesota corporation only if those officers and directors have had minimum contacts with this state.

3. Absent minimum contacts with Minnesota or evidence of domination or control of its affiliated investment fund, a Minnesota investment fund's advisor is not subject to personal jurisdiction in Minnesota courts.

4. A nonresident corporation's sole act of incorporating other corporations in Minnesota does not establish the minimum contacts to extend personal jurisdiction over the incorporator.

5. Where a previously filed federal action includes allegations of the same claims as those in a state court action and the federal forum is more convenient, the district court may properly dismiss the state action on the ground of forum non conveniens.

Samuel D. Heins, Eric L. Olson, Karla M. Gluek, Heins Mills & Olson, P.L.C., Minneapolis, for Appellant.

John D. French, Faegre & Benson, Minneapolis, for Respondents.

Considered and decided by PETERSON, P.J., and HARTEN and FOLEY, JJ. ^*

OPINION

HARTEN, Judge.

Shareholder and Illinois resident Ivan Behm appeals dismissal of his class action lawsuit against two Delaware corporations and nine officers and directors who are nonresidents of Minnesota. The district court based the dismissal on independent grounds of lack of personal jurisdiction and forum non conveniens. Because we agree with the district court that appellant has not established respondents' minimum jurisdictional contacts with Minnesota and that the Illinois federal district court is the more convenient forum, we affirm.

FACTS

Appellant shareholder Ivan Behm brought this Rule 23 class action on behalf of himself and all other similarly situated shareholders of the Nuveen Municipal Value Fund, Inc. (NUV Fund). He filed his complaint on July 7, 1995, in Hennepin County District Court, challenging the propriety of a shareholder rights offering by the NUV Fund. ¹ Appellant alleges that because the offering was made at a price below the shares' fair value, appellant and other nonconsenting shareholders suffered financial injury by the dilution of the net asset value of their shares.

The NUV Fund is a Minnesota corporation with its principal office in Chicago, Illinois. It is not a party to this lawsuit. Appellant named as defendants the following nonresidents:

(1) John Nuveen & Co., Inc. (Nuveen): a multi-million dollar investment banking firm that created the NUV Fund and about 81 other funds. It is a Delaware corporation with its principal place of business in Chicago, Illinois.

(2) The Nuveen Advisory Corp. (Adviser ): a wholly-owned subsidiary of Nuveen and registered investment adviser to the NUV Fund and other funds. It is a Delaware corporation with its principal place of business in Chicago, Illinois.

(3) R.J. Franke, D.E. Sveen, F.P. Wendt, L.H. Brown, J.E. O'Toole, M.K. Rosenheim, and P.R. Sawers: directors of the NUV Fund on November 5, 1993, when the contested rights offering was approved. O'Toole is deceased, Wendt is a Connecticut resident; the others are Illinois residents.

(4) J.J. Wesolowski and L.W. Martin: officers of and legal counsel for the NUV Fund. Both are Illinois residents.

In October 1993, Nuveen and Adviser recommended to the NUV Fund's board of directors that it conduct a rights offering. Appellant alleges that the directors simply "rubber stamped" the recommendation; the resulting offering was announced on November 8, 1993, and the value of NUV Fund shares dropped 9.9 percent by January 21, 1994.

Appellant claims that the offering, the directors' approval, and the officers' actions:

(1) were ultra vires acts violating the NUV Fund's articles of incorporation and Minn.Stat. §§ 302A.161, .251 (director standard of care), .361 (officer standard of care), and .405 (value of shares); and

(2) breached fiduciary obligations to the NUV Fund and its shareholders.

In short, appellant claims that the respondents approved, promoted, and marketed the shareholder rights offering in 1993 in their own financial interests to increase revenues from management and underwriting fees. He seeks damages and equitable relief against all respondents.

About 1 1/2 years before commencing the instant Minnesota action, appellant's counsel brought a direct action in federal district court in Illinois on behalf of NUV Fund shareholders (that action did not include the specific Minnesota statutory violations alleged in the instant action). The federal court dismissed without prejudice the federal class action with leave to replead it as a derivative action. The plaintiffs have preserved their appeal of that dismissal and have since refiled a derivative action in the federal court on behalf of all NUV Fund shareholders, asserting federal and Minnesota claims. Separate associated actions, one against an Illinois attorney who advised the defendants and one against the two NUV Fund officers and legal counsel who are named in the Minnesota action, were also filed in federal court. The three federal actions are being "coordinated" by the same judge assigned to hear In re Nuveen Fund Litigation, No. 94-C-360 (N.D.Ill.). Part of the federal derivative action has been dismissed on substantive grounds, and there is a motion pending to terminate the derivative claims in that action. On March 17, 1995, the parties in the Illinois actions stipulated to a stay of discovery, which was approved by the court on or about March 27.

On September 11, 1995, respondents moved for dismissal of this Minnesota action. They argued that the Minnesota courts lack personal jurisdiction over them, that Minnesota is not a convenient forum, and that the Minnesota case should be stayed at least pending the outcome of the Illinois actions. The district court dismissed the action on the separate grounds of lack of personal jurisdiction and forum non conveniens. This appeal challenges the order dismissing the action and the district court's failure to rule on appellant's pending discovery motion.

ISSUES

1. Did the district court abuse its discretion by effectively denying record supplementation?

2. Did the district court err in concluding that appellant had not shown the minimum contacts necessary to assert personal jurisdiction over the respondents?

3. Did the district court abuse its discretion by declining jurisdiction on the ground of forum non conveniens?

ANALYSIS

1. Discovery of Jurisdictional Facts

After respondents moved for dismissal, appellant served on respondents requests for documents, notices of deposition, and a subpoena duces tecum. The requests were broad, but contained some specific jurisdictional requests. Respondents objected to the requests on several grounds, including the federal court stay of discovery, and subsequently moved the court for a protective order. Appellant did not move to compel discovery, but two weeks after the hearing on the motion to dismiss, moved for leave to file (under seal) documents from the Illinois action. Appellant's counsel filed an accompanying affidavit and some documents from the Illinois action to establish respondents' contacts with Minnesota. He stated that the documents were subject to a confidentiality order in the Illinois action, but, if disclosed, would show more Minnesota contacts.

Jurisdictional discovery generally is permitted before a court rules on a motion to dismiss for lack of personal jurisdiction. See Domtar, Inc. v. Niagara Fire Ins. Co., 533 N.W.2d 25, 29 (Minn.1995) (motion to dismiss expressly denied after parties completed jurisdictional discovery), cert. denied, --- U.S. ----, 116 S.Ct. 583, 133 L.Ed.2d 504 (1995). Such discovery is not mandated, however, and is unnecessary where the discovery is unlikely to lead to facts establishing jurisdiction. See Hanson v. John Blue Co., 389 N.W.2d 523, 529 n. 1 (Minn.App.1986) (motion to dismiss proper even without jurisdictional discovery), review denied (Minn. Aug. 13, 1986). See generally 1 David F. Herr & Roger S. Haydock, Minnesota Practice § 12.6, at 257 (2d ed.1985). As with other discovery issues, the court has broad discretion in granting jurisdictional discovery. See Minn. R. Civ. P. 26.02; Shetka v. Kueppers, Kueppers, Von Feldt & Salmen, 454 N.W.2d 916, 921 (Minn.1990).

The district court order did not address the merits of the respondents' motion for a protective order or the appellant's motion to supplement the record. The disposition of the latter is at issue on this appeal. Having granted the dismissal motion, we assume that the district court examined the filed materials and concluded that supplementation of the record would have turned out to be materially unproductive. ² See Thompson v. Barnes, 294 Minn. 528, 536, 200 N.W.2d 921, 927 (1972) (reviewing court limits itself to consideration of issues record shows "were, or had to be, presented and considered by the trial court in deciding the matter before it"); see also Waters v. Fiebelkorn, 216 Minn. 489, 495, 13 N.W.2d 461, 464 (1944) ("on appeal error is never presumed"). We agree that appellant's proffered documents neither established nor suggested that record supplementation would have produced proof of the requisite minimum contacts required for personal jurisdiction over respondents. Therefore, we conclude there was no abuse of discretion in the district court's tacit denial of appellant's proposed record supplementation.

2. Personal Jurisdiction

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