Central States Development, LLC v. Friedgut

• Decision Date: 18 November 2022
• Docket Number: S-21-818.
• Citation: 312 Neb. 909,981 N.W.2d 573
• Parties: CENTRAL STATES DEVELOPMENT, LLC, and Saint James Apartment Partners, LLC, appellants, v. Elizabeth FRIEDGUT and DLA Piper, LLP, appellees.
• Court: Nebraska Supreme Court

312 Neb. 909

981 N.W.2d 573

CENTRAL STATES DEVELOPMENT, LLC, and Saint James Apartment Partners, LLC, appellants,

v.Elizabeth FRIEDGUT and DLA Piper, LLP, appellees.

No. S-21-818.

Supreme Court of Nebraska.

Filed November 18, 2022

Richard P. McGowan, of McGowan Law Firm, P.C., L.L.O., for appellants.

Joseph S. Daly and Mary M. Schott, of Evans & Dixon, L.L.C., Omaha, and Martin J. O'Hara, of Much Shelist, P.C., pro hac vice, for appellees.

Heavican, C.J., Cassel, Stacy, Funke, Papik, and Freudenberg, JJ.

Funke, J.

INTRODUCTION

Central States Development, LLC (Central States), and Saint James Apartment Partners (SJ Apartment) appeal the dismissal of their complaint against Elizabeth Friedgut and the law firm of DLA Piper, LLP.

Friedgut, as an employee of DLA Piper, represented Central States and SJ Apartment in a dispute with the U.S. Department of Housing and Urban Development (HUD). Central States and SJ Apartment sued Friedgut and DLA Piper in connection with that representation, alleging legal malpractice. The district court found Friedgut and DLA Piper did not have the requisite minimum contacts with Nebraska for the court to have personal jurisdiction. Central States and SJ Apartment appeal. For the reasons set forth herein, we affirm.

BACKGROUND

Central States is a limited liability company operating in Nebraska and elsewhere. Its activities include developing and managing low- and moderate-income housing. Central States owns and operates apartment complexes that contract with HUD. HUD provides funds to Central States through "Housing Assistance Payment" (HAP) contracts that amount to all or a significant portion of a tenant's rent. Resultingly, a specific complex's primary source of revenue can consist of these payments by HUD rather than payments by tenants.

SJ Apartment is a Nebraska limited liability company. At all relevant times, Central States was the managing member of SJ Apartment and John Foley was the sole manager of Central States. Foley created SJ Apartment to acquire and develop an Omaha, Nebraska, apartment complex known as St. James Manor.

The prior owner of St. James Manor operated the complex in connection with a HAP contract. Central States and SJ Apartment applied for and were awarded tax credits from the Nebraska Investment Finance Authority to buy and develop St. James Manor. As part of the project, the prior owner assigned its interest in its HAP contracts for the property to SJ Apartment.

Foley solicited Friedgut's legal representation in order to obtain HUD's approval of the HAP assignment. Friedgut's practice focused on federal law, and she had experience working as legal counsel at HUD and with HAP contracts. Central States had a preexisting relationship with Friedgut insofar as it had initially retained her after its Missouri-based mortgage lender recommended it seek her services on an issue involving another property. Foley initially contacted Friedgut for assistance with a HUD-related issue involving a property in Iowa. He did so by calling her office in Chicago, Illinois.

Friedgut is a resident of Illinois and a former employee of DLA Piper's office in Chicago, Illinois. Central States and SJ Apartment's allegations concern Friedgut's representation of them while she was an employee of DLA Piper. Friedgut has never been licensed to practice law in Nebraska, has never been admitted pro hac vice in Nebraska, and has never appeared in any Nebraska court. Friedgut stated in her affidavit that she represented Central States and SJ Apartment without setting foot in Nebraska in relation to them or St. James Manor.

The director of operations for the office of general counsel at DLA Piper stated in his affidavit that DLA Piper was organized in Maryland and that its principal place of business is in Maryland. It does not have a Nebraska office, nor does it own or lease property in Nebraska, have a registered agent in Nebraska, have any employees or partners living in Nebraska, or have any attorneys with an active license to practice law in Nebraska. DLA Piper has a website that is generally accessible but that is not directed at Nebraska or Nebraska residents.

HUD is a federal agency, and HAP is a federal program. Friedgut communicated with Foley regarding HUD issues involving properties in Nebraska, Kansas, Iowa, and Colorado. She communicated with HUD on Foley's behalf in connection with St. James Manor and other properties outside of Nebraska. Her affidavit provides that she communicated with HUD exclusively through HUD's regional office in Kansas City, Kansas, and headquarters in Washington, D.C. Friedgut has no recollection of communicating with HUD's local office in Omaha on behalf of Central States or SJ Apartment.

The Kansas City office was her primary point of contact with HUD. Friedgut was not involved in Central States and SJ Apartment's acquisition of St. James Manor or the award of tax credits by the Nebraska Investment Finance Authority. She maintains that her involvement relating to each of Central States’ properties was specific to issues with HUD. Foley did, at some point, have Nebraska counsel, and Friedgut's affidavit provides that Foley "increasingly relied on his Nebraska counsel" in 2019.

Friedgut and DLA Piper regularly billed Central States and SJ Apartment for Friedgut's services by mailing invoices to Foley in Omaha, and Foley made payments on those invoices. Foley's affidavit provides that Friedgut communicated with him orally and in writing, participating in "dozens" of phone calls with him while he was in Omaha. Friedgut also participated in phone calls with other Nebraska-based parties in her representation of Central States and SJ Apartment, including the property manager and employees of St. James Manor, the prior owner of St. James Manor, and other counsel. She did not interact with Nebraska state officials or tenants of St. James Manor. Friedgut and DLA Piper never sent Foley an engagement letter or written services agreement, suggested a need for independent counsel, or otherwise expressly disavowed personal jurisdiction in Nebraska.

Friedgut was representing Central States and SJ Apartment when HUD indicated that it would not approve the prior owner's assignment of its HAP contract. Central States and SJ Apartment allege that HUD's unwillingness to approve the HAP assignment was "arbitrary and capricious," "completely irrational," and "contrary to HUD policy goals." Despite that, Central States and SJ Apartment allege that Friedgut did not seek reconsideration of the decision, a further meeting, or any appeal; when Foley asked about appeal, Friedgut responded she was unaware of any such process even though an appeal process was available; and no timely appeal was brought. Central States and SJ Apartment further allege that because the HAP assignment was not approved, SJ Apartment was unable to receive any meaningful rental income through HUD payments or otherwise and filed for bankruptcy protection; SJ Apartment sued HUD through Nebraska counsel and convinced HUD to retroactively approve the HAP assignment; and by that time, retroactive approval was futile because SJ Apartment had already lost St. James Manor to foreclosure in bankruptcy proceedings.

In December 2020, Central States and SJ Apartment filed a complaint in the district court for Douglas County, Nebraska, against Friedgut and DLA Piper alleging legal malpractice. Friedgut and DLA Piper subsequently moved to dismiss, arguing a lack of personal jurisdiction over themselves in the State of Nebraska.

The district court held a hearing to address the jurisdictional issue, and evidence was received. At the hearing, Friedgut and DLA Piper emphasized that Friedgut did not initiate or solicit contact with Foley to commence the parties’ relationship. Friedgut and DLA Piper argued that Friedgut's representation of Central States and SJ Apartment exclusively concerned federal law and HUD. Friedgut and DLA Piper maintained that the location of St. James Manor was not determinative.

At the hearing, the district court compared the case to Yeransian v. Willkie Farr¹ in explaining its conclusion that Friedgut and DLA Piper "[had] not purposefully availed themselves to the jurisdiction of Nebraska and would not expect to be haled into court [in the state]." The district court found it important that Foley initially reached out to Friedgut in Chicago to solicit her services.

The district court dismissed Central States and SJ Apartment's complaint on September 13, 2021. This appeal followed. Before the Court of Appeals addressed the appeal, we moved it to our docket.²

ASSIGNMENT OF ERROR

Central States and SJ Apartment assign, restated, that the district court erred in finding that the court lacked personal jurisdiction over Friedgut and DLA Piper.

STANDARD OF REVIEW

When a trial court relies solely on pleadings and supporting affidavits in ruling on a motion to dismiss for want of personal jurisdiction, the plaintiff need only make a prima facie showing of jurisdiction to survive the motion.³ However, if the court holds an evidentiary hearing on the issue or decides the matter after trial, then the plaintiff bears the burden of demonstrating personal jurisdiction by a preponderance of the evidence.⁴

An appellate court examines the question of whether the nonmoving party has established a prima facie case of personal jurisdiction de novo.⁵ In reviewing the grant of a motion to dismiss, an appellate court must look at the facts in the light most favorable to the nonmoving party and resolve all factual conflicts in favor of that party.⁶

ANALYSIS

Because the district court's hearing was on the issue of personal jurisdiction and the evidence received was limited to affidavits with accompanying exhibits, we review de novo the legal question of whether a prima facie case of personal jurisdiction has been established.⁷ Personal jurisdiction is the power of a tribunal to subject and bind a particular entity to its decisions....