Clark v. Milam

• Decision Date: 22 July 1993
• Docket Number: Civ. A. No. 2:92-0935.
• Citation: 830 F. Supp. 316
• Court: U.S. District Court — Southern District of West Virginia
• Parties: Hanley C. CLARK, Commissioner of Insurance for the State of West Virginia, as Receiver of George Washington Life Insurance Company, Plaintiff, v. Arthur W. MILAM, et al., Defendants.

830 F. Supp. 316

Hanley C. CLARK, Commissioner of Insurance for the State of West Virginia, as Receiver of George Washington Life Insurance Company, Plaintiff, v. Arthur W. MILAM, et al., Defendants.

Civ. A. No. 2:92-0935.

United States District Court, S.D. West Virginia, Charleston Division.

July 22, 1993.

COPYRIGHT MATERIAL OMITTED

Joshua I. Barrett, Rudolph L. DiTrapano, Debra L. Hamilton, Ditrapano & Jackson, Charleston, WV, Ellen G. Robinson, C. Philip Curley, Mary Cannon Veed, Cynthia H. Hyndman, Robinson Curley & Clayton, P.C., Chicago, IL, for plaintiff.

John E. Jenkins, Jr., John M. Poma, Suzanne McGinnis Oxley, Jenkins, Fenstermaker, Krieger, Kayes & Farrell, Huntington, WV, for Arthur W. Milam.

John H. Wilbur, pro se.

Walter C. Walden, Grand Rapids, MI.

Dudley D. Allen, pro se.

Frank E. Clark, Jr., pro se.

Michael J. Davoli, pro se.

John E. Jenkins, Jr., John M. Poma, Jenkins, Fenstermaker, Krieger, Kayes & Farrell, Huntington, WV, for Mahoney, Adams & Criser, P.A.

Rebecca A. Betts, Robert B. King, King, Betts & Allen, Charleston, WV, Paul J. Bschorr, Alice K. Jump, White & Case, New York City, for John J. McAvoy and Carolyn B. Lamm.

Michael Bonasso, Jeffrey M. Wakefield, Flaherty, Sensabaugh & Bonasso, Charleston, WV, for Betty Cordial, Lynn Pendlebury, John Collins and Cheryl Davis.

John H. Tinney, John J. Nesius, Miller A. Bushong, III, Spilman, Thomas, Battle & Klostermeyer, Charleston, WV, David Alden, Cleveland, OH, for Tom Fennell and Ernst & Young.

John Andrew Smith, Kay, Casto, Chaney, Love & Wise, Charleston, WV, for Lamar Walker and Walker & Associates.

Michael Bonasso, Jeffrey M. Wakefield, Flaherty, Sensabaugh & Bonasso, Charleston, WV, Therese Koelle Desai, Michael R. Glover, Joyce N. Van Cott, Glover & Van Cott, Phoenix, AZ, for CTF & Associates, Inc.

MEMORANDUM OPINION AND ORDER

HADEN, Chief Judge.

Pending are renewed motions to dismiss for lack of personal jurisdiction filed pursuant to the provisions of Rule 12(b)(2), Fed. R.Civ.P., by Defendants Dudley D. Allen, Frank E. Clark Jr., Michael J. Davoli, John H. Wilbur, Arthur W. Milam, Mahoney, Adams and Criser, P.A., f/k/a Mahoney, Adams, Milam, Surface and Grimsley, P.A., also f/k/a Mahoney, Hadlow and Adams, P.A., John J. McAvoy and Carolyn B. Lamm.¹ Plaintiff, West Virginia State Insurance Commissioner, seeks in this action to recover losses suffered by the now insolvent George Washington Life Insurance Company ("GW LIFE"), a West Virginia corporation. Plaintiff alleges GW LIFE's insolvency resulted from the systematic fraud and breach of fiduciary duties of certain of its officers and directors, and from the professional negligence of certain of its attorneys.

By Order entered February 12, 1993, the Court denied without prejudice Defendants' earlier motions to dismiss, and ordered the parties to conduct discovery on the jurisdictional issues. In their renewed motions to dismiss, Defendants again assert this Court lacks personal jurisdiction over each of the Defendants.² For reasons which follow, the Court DENIES the renewed motions to dismiss filed by each Defendant except for John J. McAvoy and Mahoney, Adams & Criser, P.A., whose dismissal motions the Court GRANTS.

I.

When a court's personal jurisdiction is contested by a Rule 12(b)(2) motion, the jurisdictional question raised is one for the court, and the plaintiff bears the burden of ultimately proving by a preponderance of the evidence the existence of a ground for jurisdiction. Combs v. Bakker, 886 F.2d 673, 676 (4th Cir.1989). But where, as here, the court addresses the challenge only on the motion papers, supporting legal memoranda, affidavits, other documents, and the relevant allegations of the complaint, the burden on the plaintiff is to make a mere prima facie showing of jurisdiction to survive the jurisdictional challenge. Id.; Ryobi America Corp. v. Peters, 815 F.Supp. 172, 175 (D.S.C. 1993); Verosol B.V. v. Hunter Douglas, Inc., 806 F.Supp. 582, 588 (E.D.Va.1992).

The burden plaintiff bears to establish the court's jurisdiction normally is not a heavy one, particularly where the court chooses to rule on the issue without an evidentiary hearing. 5A Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 1351 (1990). Mere allegations of personal jurisdiction are sufficient for a party to make a prima facie showing. Dowless v. Warren-Rupp Houdailles, Inc., 800 F.2d 1305, 1307 (4th Cir.1986). When considering a challenge to its personal jurisdiction on the parties' filings, the court must resolve factual conflicts in favor of the party asserting jurisdiction for the purpose of determining whether he or she has made the requisite prima facie showing. Bakker, 886 F.2d at 676; Eastern Marketing Corp. v. Texas Meridian Prod. Co., Inc., 798 F.Supp. 363, 364 (S.D.W.Va.1992) (Haden, C.J.). The Court must "construe all relevant pleading allegations in the light most favorable to the plaintiff, assume credibility, and draw the most favorable inferences for the existence of jurisdiction." Bakker, 886 F.2d at 676.

II.

The Court employs the traditional two-step analysis³ to resolve the personal jurisdiction dispute at issue here. Consequently, it must determine whether the West Virginia longarm statute, W.Va.Code § 56-3-33 (1992),⁴ is applicable, and if so, whether the statute's exercise in this case will violate the due process clause of the United States Constitution. World-Wide Volkswagon Corp. v. Woodson, 444 U.S. 286, 290, 100 S.Ct. 559, 563, 62 L.Ed.2d 490 (1980); Dowless, 800 F.2d at 1306; Vishay Intertechnology, Inc. v. Delta International Corp., 696 F.2d 1062, 1064 (4th Cir.1982).

There being no talismanic jurisdictional formula, the Court must nevertheless decide whether Plaintiff has met its burden of establishing a prima facie case of personal jurisdiction with respect to each Defendant. Burger King v. Rudzewicz, 471 U.S. 462, 485-86, 105 S.Ct. 2174, 2189, 85 L.Ed.2d 528 (1984). The Court has analyzed Plaintiff's case as it relates to each Defendant on the facts and arguments presented by the parties. For brevity's sake, however, it is possible to group certain of the Defendants for this discussion by shared traits bearing on their amenability to jurisdiction.

A. The Officer/Director Defendants

Most Defendants served as members of GW LIFE's Board of Directors or as corporate officers; some served in both capacities.⁵ Each of the O/D Defendants alleges this Court lacks personal jurisdiction over him, arguing principally the West Virginia longarm statute does not apply to him, and there exist insufficient contacts between the movant and West Virginia for the Court to assert jurisdiction consistent with due process requirements.⁶

The Court is of the opinion the Pittsburgh Terminal decision, supra note 3, is dispositive of the O/D Defendants' motions.⁷ There the court held two non-resident directors of a West Virginia corporation transacted business in the State, even though they were never present in the State, when they solicited proxies from a West Virginia corporation and, as directors, voted the shares of the corporation in favor of a proposed merger. Regardless of where the actual solicitation, proxy mailings and voting occurred, the Court concluded defendants transacted business in West Virginia because their acts could be given effect only in West Virginia, the state of incorporation.

The court concluded "each act ... was given effect in West Virginia by virtue of West Virginia law just as surely as if the directors had been in the principal office of the corporation in West Virginia, present and voting in person." Pittsburgh Terminal, 831 F.2d at 527. The Fourth Circuit rejected defendants' argument that Shaffer v. Heitner, 433 U.S. 186, 97 S.Ct. 2569, 53 L.Ed.2d 683 (1977), required a state to include the word "director" explicitly in its long-arm statute to bring corporate directors within the statute's scope. Said the court:

Certainly, a director of a corporation has created a continuing obligation between himself and the corporation, one which inures significantly to the director's benefit, not to mention that of the corporation. Directors reap the advantages and protections available to them under state law, and it is not unfair to require them to answer for any alleged breaches of trust as a director in the forum that has bestowed those protections. No one forced or tricked the defendants into assuming their positions, and it seems clear that the defendants have purposely availed themselves of the privilege of doing business as directors under West Virginia's laws.

Pittsburgh Terminal, 831 F.2d at 529.

GW LIFE was established under West Virginia's corporate laws in 1906. The O/D Defendants cannot contend credibly they were unaware GW LIFE was a West Virginia corporation when they accepted and exercised directorships. Neither should they be surprised at being haled into this Court to answer charges of alleged wrongdoing in their capacities as officers and directors of the corporation. Every decision they made and every action they undertook with regard to GW LIFE affected and was directed at a West Virginia resident: GW LIFE. "Of course, it may be something of a fiction to say that a corporation is a resident of the chartering State. Nevertheless, `in many respects ... the law acts as if State chartering of a corporation has meaning.'" Pittsburgh Terminal, 831 F.2d at 530 (quoting Shaffer, 433 U.S. at 226 n. 4, 97 S.Ct. at 2591 n. 4 (Brennan, J., concurring and dissenting)).

Although the O/D Defendants argue strenuously that requiring them to defend in this Court would offend notions of "fair play and substantial justice," the Court concludes the only notions offended are Defendants' own. See Burger King, 471 U.S. at 476-77, 105 S.Ct. at 2184. West Virginia has a strong interest in providing a forum for a claim such as this, where the directors of one of its domestic corporations are alleged to have...