Diebold, Inc. v. Firstcard Financial Services, No. 5:00-CV-742.

• Decision Date: 20 July 2000
• Docket Number: No. 5:00-CV-742.
• Citation: 104 F.Supp.2d 758
• Parties: DIEBOLD, INC., Plaintiff, v. FIRSTCARD FINANCIAL SERVICES, INC., et al., Defendants.
• Court: U.S. District Court — Northern District of Ohio

104 F.Supp.2d 758

DIEBOLD, INC., Plaintiff, v. FIRSTCARD FINANCIAL SERVICES, INC., et al., Defendants.

No. 5:00-CV-742.

United States District Court, N.D. Ohio, Eastern Division.

July 20, 2000.

Kenneth B. Baker, Michael D. Slodov, Javitch, Block, Eisen & Rathbone, Cleveland, OH, for Diebold Incorporated, plaintiff.

James H. Grove, Ronald C. Yingling, Nicola, Gudbranson & Cooper, Cleveland, OH, for Firstcard Financial Services, Inc., James B. Busi, Thomas J.F. Busi, defendants.

OPINION AND ORDER

GWIN, District Judge.

On May 15, 2000, Defendants Firstcard Financial Services, Inc. ("Firstcard"), Thomas Busi, and James Busi filed a motion to dismiss this contract action for lack of personal jurisdiction [Doc. 14]. Alternatively, defendants seek to transfer this action to the Eastern District of California pursuant to 28 U.S.C. § 1404(a) or § 1406(a). For the reasons that follow, the Court finds that it lacks personal jurisdiction over Thomas Busi and James Busi. Rather than transfer the claims against the Busis to the Eastern District of California, the Court dismisses them without prejudice, However, the Court denies Firstcard's motion to dismiss and to transfer.

I. Background

Plaintiff Diebold, Inc., is an Ohio corporation with its principal place of business in Stark County, Ohio. Plaintiff Diebold also has offices in California and North Carolina.

Defendant Firstcard Financial Services, Inc., is a Nevada corporation with its principal place of business in Jackson, California. Defendant Firstcard purchases and resells ATM machines throughout California, Utah, Oregon, Colorado, Idaho, and Wisconsin.

Defendant Thomas Busi is Firstcard's president. Defendant James Busi is Thomas Busi's father. Both are residents of Jackson, California.

On or about July 30, 1997, Defendant Firstcard entered into an "Authorized Diebold Reseller Agreement" with Plaintiff Diebold. The Reseller Agreement provided for the sale, resale, installation, and service of certain equipment to or on behalf of Firstcard. Thomas Busi, Firstcard's president, executed the agreement in Salt Lake City, Utah. All negotiations between Thomas Busi and Diebold representatives leading up to the Reseller Agreement took place in Salt Lake City and Pleasanton, California.

In the Reseller Agreement, Defendant Firstcard and Plaintiff Diebold agreed to a forum selection and choice of law clause. This clause reads:

The construction and performance of this Agreement, and of all agreements and documents relating to it, shall be governed by the internal laws of the State of Ohio, USA. Each of the parties hereto irrevocably: consents to the jurisdiction of the state and federal courts located in Cleveland or Akron, Ohio; agrees that any action, suit or proceeding ... by or between the parties hereto shall be brought in any court in Cleveland or Akron, Ohio; and waives any objection which the party may now or hereafter have to the choice of forum whether such objection is based upon the lack of personal jurisdiction, improper venue, forum non conveniens or any other ground.

Complaint, Exhibit 1, Reseller Agreement, ¶ 18.

On or about October 21, 1997, Defendants Thomas Busi and his father, James Busi, executed a separate Guaranty Agreement with Diebold. As with the Reseller Agreement, the Busis executed the Guaranty Agreement in Salt Lake City. The Guaranty Agreement was consideration for a third agreement between the parties.¹ Shortly after executing the Guaranty Agreement, Firstcard began purchasing ATM machines through Diebold's offices in Pleasanton, California. Diebold then shipped the machines from its warehouse in North Carolina. Firstcard accepted these shipments in Jackson, California.

Firstcard says the ATM machines it received from Diebold between November 1997 and July 1999 had mechanical problems and would frequently breakdown. During this period, Diebold serviced the ATM machines.

Plaintiff Diebold claims it has not been fully compensated by Firstcard for products and services supplied. On March 17, 2000, Diebold brought an action against the defendants for breach of contract, breach of guaranty, an accounting and unjust enrichment. The defendants now move to dismiss this case for lack of personal jurisdiction or to transfer it to the Eastern District of California.

II. Discussion

A. Thomas Busi and James Busi

1. Personal Jurisdiction

Defendants Thomas Busi and James Busi argue that the Court does not have personal jurisdiction over them. The Court agrees.

A district court considers two factors when determining whether it has in personam jurisdiction over a defendant. First, the Court must decide whether state law confers jurisdiction over the parties. Next, the court decides whether jurisdiction comports with due process — that is, whether the court's exercise of jurisdiction abides with "traditional notions of fair play and substantial justice." Nationwide Mutual Ins. Co. v. Tryg Int'l Ins. Co., Ltd., 91 F.3d 790, 793 (6th Cir.1996) (quoting International Shoe Co. v. State of Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945) (internal citation omitted)).

As the party asserting jurisdiction, the plaintiff bears the burden of showing that personal jurisdiction exists. See Compu-Serve, Inc., v. Patterson, 89 F.3d 1257, 1261-62 (6th Cir.1996); Theunissen v. Matthews, 935 F.2d 1454, 1458 (6th Cir. 1991). Generally, a plaintiff must prove jurisdiction by a preponderance of the evidence. See Dean v. Motel 6 Operating L.P., 134 F.3d 1269, 1272 (6th Cir.1998). However, a district court ruling on such a motion without conducting an evidentiary hearing must consider the pleadings and affidavits in a light most favorable to the plaintiff. See id. (citing CompuServe, 89 F.3d at 1262).

Further, a plaintiff can defeat a motion to dismiss for lack of personal jurisdiction by making a prima facie showing of jurisdiction. See Dean, 134 F.3d at 1272. A plaintiff can show either general or specific jurisdiction. To show general jurisdiction, a plaintiff must show the defendant has "continuous and systematic" contact with the forum state. To show specific jurisdiction, a plaintiff must show "the defendant purposefully established `minimum contacts' in the forum state." Nationwide Mutual, 91 F.3d at 794 (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985)).

Applying these principles, the Court first decides whether state law confers jurisdiction over the defendants. Here, the laws of Ohio govern the Court. Ohio's long arm statute reads in relevant part:

(A) A court may exercise personal jurisdiction over a person who acts directly by an agent, as to a cause of action from the person's;

(1) Transacting any business in this state; ...

Ohio Rev.Code § 2307.382(A)(1).

Because the parties entered into several agreements, the Court analyzes each agreement in turn. Specifically, the Court must first decide whether Thomas Busi's signing of the Reseller Agreement confers jurisdiction over him. Next, the Court must decide whether Thomas and James Busi's signing of the Guaranty Agreement confers jurisdiction over them.

Thomas Busi, acting in his corporate capacity as President of Firstcard, executed the original Reseller Agreement with Plaintiff Diebold. As explained below, the Court finds that the forum selection clause in the Reseller Agreement does not confer jurisdiction over Thomas Busi.

Corporate officers are generally not subject to personal jurisdiction due to the "fiduciary shield" doctrine. The doctrine holds that "if an individual has contact with a particular state only by virtue of his acts as a fiduciary of the corporation, he may be shielded from the exercise, by that state, of jurisdiction over him personally on the basis of that conduct." Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 902 (2d Cir.1981).

Ohio courts apply this doctrine with certain limitations. See Walker v. Concoby, 79 F.Supp.2d 827 (N.D.Ohio 1999) (discussing the doctrine and its application by Ohio courts). Ohio courts do not apply the doctrine if: (1) a non-resident defendant personally involves himself in transactions which give rise to the cause of action and (2) the non-resident defendant was physically present in the state. See, e.g., Heritage Funding & Leasing Co. v. Phee, 120 Ohio App.3d 422, 698 N.E.2d 67 (1997); Galloway v. Lorimar Motion Picture Mgmt., Inc., 55 Ohio App.3d 78, 562 N.E.2d 949 (1989). Thus, if Thomas Busi was involved in negotiating the Reseller Agreement and was physically present in Ohio, the fiduciary shield doctrine would not bar this Court from exercising personal jurisdiction over him.

Although Thomas Busi was actively involved in the negotiations which led to his signing the Reseller Agreement, he was never physically present in Ohio. The parties both negotiated and signed the agreement in Salt Lake City. Therefore, the fiduciary shield doctrine applies to Thomas Busi. Accordingly, this Court does not have personal jurisdiction over him based on his signing the Reseller Agreement.

Similarly, Thomas Busi's ad James Busi's signatures on the Guaranty Agreement do not confer personal jurisdiction. The Busis signed the Guaranty Agreement on October 21, 1997. The guaranty was purportedly in consideration of another agreement between the parties which they anticipated entering one week later. The Guaranty Agreement referred to this third agreement as a "Memorandum of Agreement."

Although labeled a "Guaranty", the agreement has characteristics of both a guaranty and a surety agreement.² In either case, the Court would not have jurisdiction over the Busis. Ohio courts hold that simply signing a guaranty or a surety agreement, without more, does not rise to "transacting any business." See, e.g., Teramar Corp. v. Rodier Co., 40 Ohio App.3d 39, 531 N.E.2d 721, 723 (1987) (finding no personal jurisdiction over defendant who signed agreement labeled "guaranty," yet more in the nature...