Benge v. Software Galeria, Inc.

• Decision Date: 14 May 1985
• Docket Number: No. 85-254C(1).,85-254C(1).
• Citation: 608 F. Supp. 601
• Parties: Douglas R. BENGE and Pulson Corporation, Plaintiffs, v. SOFTWARE GALERIA, INC., Defendant.
• Court: U.S. District Court — Eastern District of Missouri

608 F. Supp. 601

Douglas R. BENGE and Pulson Corporation, Plaintiffs, v. SOFTWARE GALERIA, INC., Defendant.

No. 85-254C(1).

United States District Court, E.D. Missouri, E.D.

May 14, 1985.

Mark A. Brittingham, Robert A. Useted, St. Louis, Mo., for plaintiffs.

Daniel T. Rabbitt, Brown, James & Rabbitt, St. Louis, Mo., for defendant.

MEMORANDUM

NANGLE, Chief Judge.

This case is now before this Court on several motions filed by defendant. First, defendant moved to dismiss plaintiffs' complaint for lack of personal jurisdiction. Second, defendant moved to transfer this case to the United States District Court for the Northern District of California on two (2) grounds: 1) a forum selection clause in an agreement between plaintiffs and defendant; 2) the doctrine of forum non conveniens. Finally, defendant moved to dismiss Count V of plaintiffs' complaint, which count purports to assert a claim under the Racketeer Influenced and Corrupt Organizations Act (hereinafter "RICO"), 18 U.S.C. § 1961 et seq., for failure to state a claim upon which relief can be granted. After reviewing the allegations in plaintiffs' complaint, this Court will consider these motions seriatim.

I. PLAINTIFFS' COMPLAINT

Plaintiffs' claims arise out of a franchise agreement that they entered into with defendant on or about September 16, 1983. Plaintiff Douglas R. Benge (hereinafter "Benge") is President of plaintiff Pulson Corporation (hereinafter "Pulson"). Plaintiffs' complaint alleges that they entered into a franchise agreement with defendant Software Galeria, Inc., a California corporation with its principal place of business in the State of California, on or about September 16, 1983. Pulson is a Missouri corporation with its principal place of business, i.e., the "Software Galeria" franchise, in St. Louis County, Missouri. Subject matter jurisdiction of Counts I through IV is based on diversity of citizenship, 28 U.S.C. § 1332, and subject matter jurisdiction over Count V is based on 18 U.S.C. §§ 1961-64. The allegations concerning this Court's in personam jurisdiction over defendant are contained in paragraph 5 of plaintiffs' complaint, as follows:

Defendant transacts business, has made a contract, and has committed a tortious act within the State of Missouri all within the meaning of § 506.500.1(1), (2), and (3), R.S.Mo. and this Court may therefore assert personal jurisdiction over defendant.

Count I of plaintiffs' complaint is a claim for fraud in the inducement of the franchise agreement and seeks, inter alia, rescission of said agreement and damages. Plaintiffs allege in Count I that defendant made certain representations to plaintiffs in both the agreement itself and in the Franchise Information Guide given to plaintiffs prior to execution of the agreement. Plaintiffs further allege that defendant knew that said representations were false and that defendant had no intention of fulfilling said representations at the time they were made. In addition to rescission, plaintiffs seek actual damages in the amount of $124,898.00 and punitive damages in the amount of $500,000.00. Count II states a claim for breach of contract and seeks both rescission of the agreement and $124,898.00 in damages. Count III states a claim for conversion and/or prima facie tort with respect to the actions of defendant and seeks $124,898.00 in actual damages and $500,000.00 in punitive damages. Count IV states a claim for violation of the California Franchise Investment Law, Cal. Corp.Code § 31000, et seq., and seeks both rescission of the agreement and $124,898.00 in damages.

Count V purports to state a claim under the Federal RICO statute. Plaintiffs allege that defendant is a "person" and an "enterprise" as those terms are used in the statute. 18 U.S.C. §§ 1961(3), (4). In addition, plaintiffs' complaint alleges, as follows:

Defendant did willfully, unlawfully and knowingly conduct its affairs through a pattern of racketeering activity as defined in 18 U.S.C. § 1961(5), in violation of 18 U.S.C. § 1962(c), in that they committed acts in violation of 18 U.S.C. § 1341 (mail fraud) and 18 U.S.C. § 1343 (wire fraud), in that said misrepresentations were made as part of a fraudulent scheme or artifice to defraud and deceive plaintiffs and to induce them to enter into the Agreement and while attempting to, and for the purpose of, executing this artifice and scheme to defraud and deceive plaintiffs, defendant, its representatives, agents, and employees, in the course and scope of their employment, contacted plaintiffs by telephone and through the use of the United States Postal System on more than two (2) occasions.

Plaintiffs' Complaint ¶ 47. Plaintiffs further allege in Count V that defendant's scheme injured them in their business and property in the amount of $124,898.00 and they seek damages, trebled in accordance with 18 U.S.C. § 1964(c), in the amount of $124,898.00.

II. PERSONAL JURISDICTION

Defendant first moved to dismiss plaintiffs' complaint on the ground that this Court lacks in personam jurisdiction over defendant. Defendant is a non-resident and it was served with process under Missouri's long-arm statute.

In passing on a motion to dismiss for lack of jurisdiction over a non-resident, a federal diversity court is required to engage in a two-step inquiry: first, whether defendant committed one of the acts enumerated in the long-arm statute; and second, whether the exercise of personal jurisdiction over defendant violates the due process clause of the fourteenth amendment. The Land-O-Nod Company v. Bassett Furniture Industries, Inc., 708 F.2d 1338 (8th Cir.1983); Scullin Steel Co. v. National Railway Utilization Corp., 676 F.2d 309, 312 (8th Cir.1982). Plaintiff, the party that is seeking to invoke federal jurisdiction, has the burden of establishing that jurisdiction exists, and this burden may not be shifted to the party challenging the jurisdiction. Mountaire Feeds, Inc. v. Agro Impex, S.A., 677 F.2d 651, 653 (8th Cir. 1982). While the facts are viewed in the light most favorable to the plaintiffs, "there must nonetheless be some evidence upon which a prima facie showing of jurisdiction may be found to exist...." Aaron Ferer & Sons Co. v. Diversified Metals Corp., 564 F.2d 1211, 1215 (8th Cir.1977) (citations omitted). See also Data Disc, Inc. v. Systems Technology Associates, Inc., 557 F.2d 1280, 1285 (9th Cir.1977) (plaintiff need only make a prima facie showing of jurisdictional facts through submission of affidavits plus discovery materials); Greycas, Inc. v. Anderson, 584 F.Supp. 894, 895-96 (E.D.Mo.1984); 4 Wright & Miller, Federal Practice and Procedure: Civil § 1068 at 250 (1969).

Missouri's Long-Arm statute provides:

1. Any person or firm, whether or not a citizen or resident of this state, or any corporation, who in person or through an agent does any of the acts enumerated in this section, thereby submits such person, firm, or corporation, and, if an individual, his personal representative, to the jurisdiction of the courts of this state as to any cause of action arising from the doing of any such acts:

(1) The transaction of any business within this state;

(2) The making of any contract within this state;

(3) The commission of a tortious act within this state;

(4) The ownership, use, or possession of any real estate situated in this state;

(5) The contracting to insure any person, property or risk located within this state at the time of contracting.

2. Only causes of action arising from acts enumerated in this section may be asserted against a defendant in an action in which jurisdiction over him is based upon this section.

§ 506.500, R.S.Mo. (1982).

The due process clause of the fourteenth amendment places limits upon the power of a court to exercise personal jurisdiction over a non-resident defendant. The due process clause requires that a defendant have certain minimum contacts with the forum state such that the maintenance of the suit does not offend "traditional notions of fair play and substantial justice." International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945); Land-O-Nod, 708 F.2d at 1340. Accord World Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980); Kulko v. California Superior Court, 436 U.S. 84, 98 S.Ct. 1690, 56 L.Ed.2d 132 (1978). "In judging minimum contacts, a court properly focuses on `the relationship among the defendant, the forum, and the litigation.'" Calder v. Jones, ___ U.S. ___, 104 S.Ct. 1482, 1486, 79 L.Ed.2d 804 (1984) (citations omitted). See also Helicopteros Nacionales de Colombia S.A. v. Hall, ___ U.S. ___, 104 S.Ct. 1868, 1872, 80 L.Ed.2d 404 (1984). The defendant's contacts with the forum state must be purposeful and such that defendant "should reasonably anticipate being haled into court there." World Wide Volkswagen, 444 U.S. at 297, 100 S.Ct. at 567. See also Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1239, 2 L.Ed.2d 1283 (1958).

In this circuit, the due process standard has devolved into a consideration of five factors:

(1) the nature and quality of the contacts with the forum state; (2) the quantity of the contacts with the forum state; (3) the relation of the cause of action to the contacts; (4) the interest of the forum state in providing a forum for its residents; and (5) the convenience of the parties.

Aaron Ferer & Sons Co. v. Diversified Metals Corp., 564 F.2d 1211, 1215 (8th Cir. 1977). See Land-O-Nod, 708 F.2d at 1340. The first three factors are of primary importance and the last two are of secondary importance. Id.

Plaintiffs argue that personal jurisdiction over defendant is authorized under the long-arm statute, specifically the "transacting business" clause of said statute. Plaintiffs alleged that they are franchisees of defendant franchisor and that they operate said franchise in the State of Missouri. In State ex rel. Newport v. Wiesman, 627 S.W.2d 874 (Mo. banc 1982), the...