Everdry Marketing and Management v. Carter

• Court: Indiana Appellate Court
• Writing for the Court: Crone
• Citation: Everdry Marketing and Management v. Carter, 885 N.E.2d 6 (Ind. App. 2008)
• Decision Date: 14 April 2008
• Docket Number: No. 49A02-0706-CV-452.,49A02-0706-CV-452.
• Parties: EVERDRY MARKETING AND MANAGEMENT, INC., Appellant, v. Steve CARTER, Attorney General of Indiana, Appellee.

885 N.E.2d 6

EVERDRY MARKETING AND MANAGEMENT, INC., Appellant, v. Steve CARTER, Attorney General of Indiana, Appellee.

No. 49A02-0706-CV-452.

Court of Appeals of Indiana.

April 14, 2008.

Christopher L. Cassidy, Javitch, Block, & Rathbone LLP, Cleveland, OH, Attorney for Appellant.

Steve Carter, Attorney General of Indiana, Justin G. Hazlett, Deputy Attorney General, Indianapolis, IN, Attorneys for Appellee.

OPINION

CRONE, Judge.

Case Summary

Everdry Marketing and Management, Inc. ("Everdry"), appeals a trial court order granting the Indiana Attorney General's petition to enforce a civil investigative demand ("CID"). We affirm.

Issue

The dispositive issue is whether the trial court erred in asserting personal jurisdiction over Everdry for purposes of enforcing a CID.

Facts and Procedural History¹

Everdry is an Ohio corporation engaged in the offer and sale of franchises that provide waterproofing services for residential properties. Beginning in 2004, Everdry had franchisees doing business in Indiana, including Ross Management, Inc. ("Ross"), and Miken Industries, Inc. ("Miken"), operating in the Indianapolis and Fort Wayne areas respectively.² Both were generally known as Everdry Waterproofing ("EW"). Everdry admits that it was operating within the state in violation of statute because it had not filed a Uniform Franchise Registration Application ("Indiana Registration") with the Indiana Secretary of State as required by law for those businesses seeking to offer and sell franchises in Indiana.

In 2005, the Indiana Attorney General received complaints from Indiana consumers against EW alleging failure to honor the "lifetime warranties" offered for forty dollars per year to those who purchased Everdry's waterproofing systems. The consumers reported that they were experiencing wet and deteriorating basements and were not receiving the services promised in the warranties.

The Attorney General conducted an investigation and discovered that Everdry's website contained substantially the same warranty statement that appeared in the consumers' contracts. On March 10, 2006, pursuant to Indiana Code Section 4-6-3-3, the Attorney General issued a CID upon Everdry at its Macedonia, Ohio office. The CID alleges

reasonable cause to believe that Everdry Marketing and Management, Inc. may be in possession, custody, or control of documentary material, or may have knowledge of a fact that is relevant to an investigation being conducted by the [Indiana Attorney General's] Consumer Protection Division. This investigation seeks to determine whether Everdry Marketing and Management, Inc. has violated: Indiana's Deceptive Consumer Sales Act, Indiana Code § 24-5-0.5-1 et seq., by misrepresenting the characteristics or benefits of warranties offered to consumers purchasing Everdry waterproofing systems.

Appellant's App. at 11. The CID concludes with a demand that Everdry provide answers to attached interrogatories and requests for production. Id.

On March 24, 2006, counsel for Everdry contacted the Attorney General to arrange a meeting to discuss issues related to the CID. The meeting took place on May 3, 2006, at the Indianapolis office of the Attorney General and involved discussion of customer service issues in the Everdry franchise territories of Indianapolis and Fort Wayne. As a follow-up, Everdry contacted the affected consumers to arrange service and secure documentation regarding their level of satisfaction. At some point, Everdry revoked the franchise rights of Ross and Miken.

On June 2, 2006, the Attorney General filed a petition in Marion Superior Court to enforce the CID. On June 7, 2006, pursuant to Indiana Code Chapter 23-2-2.5, Everdry filed an Indiana Registration. On June 28, 2006, pursuant to Indiana Trial Rule 12(B)(2), Everdry filed a motion to dismiss the Attorney General's petition to enforce, claiming that the trial court lacked personal jurisdiction over Everdry. On July 14, 2006, the trial court deferred action on the Attorney General's petition to enforce and heard evidence on Everdry's motion to dismiss. The court denied Everdry's motion on July 27, 2006.

On August 2, 2006, Everdry filed a motion for certification of interlocutory order for appeal. The trial court granted the motion on September 18, 2006, and this Court denied Everdry's motion for interlocutory appeal on November 14, 2006.

On December 5, 2006, the Attorney General filed a motion for a hearing on its petition to enforce the CID. The trial court heard evidence on April 17, 2007, and entered an order summarily granting the petition on May 3, 2007. This appeal ensued. Additional facts will be provided as necessary.

Discussion and Decision

Everdry contends that the trial court lacked personal jurisdiction over it and therefore erred in granting the Attorney General's petition to enforce the CID. At the outset, we note that this appears to be an issue of first impression in Indiana. We first address the general nature of a CID, then examine traditional jurisdictional concepts, and finally apply them in the context of CID enforcement.

A CID is a pre-litigation tool used by the Attorney General to determine whether a violation of Indiana law has occurred. Liberty Publ'g, Inc. v. Carter, 868 N.E.2d 1142, 1144 (Ind.Ct.App.2007) (citing Auto-Owners Ins. Co. v. State, 692 N.E.2d 935, 939 (Ind.Ct.App.1998)), trans. granted (2008).³ Indiana Code Section 4-6-3-3 provides,

If the attorney general has reasonable cause to believe that a person may be in possession, custody, or control of documentary material, or may have knowledge of a fact that is relevant to an investigation conducted to determine if a person is or has been engaged in a violation of [various statutory provisions], or any other statute enforced by the attorney general or is or has been engaged in a criminal violation of IC 13, only the attorney general may issue in writing, and cause to be served upon the person or the person's representative or agent, an investigative demand that requires that the person served do any combination of the following:

(1) Produce the documentary material for inspection and copying or reproduction.

(2) Answer under oath and in writing written interrogatories.

(3) Appear and testify under oath before the attorney general or the attorney general's duly authorized representative.

The main function of the CID is not to allege that the subject of the CID has committed a violation of law, but rather to address "whether [the subject] may have certain information relevant to an investigation." Auto-Owners, 692 N.E.2d at 938. The Attorney General is not limited to issuing CIDs only to the person being investigated; rather, the Attorney General may also seek information from a non-violator concerning possible violations of state law by others as long as a reasonable basis exists to believe the non-violator possesses information relevant to the investigation. 21 C.J.S. Credit Reporting Agencies § 98 (2006) (citing CUNA Mut. Ins. Soc. v. Att'y. Gen'l, 380 Mass. 539, 404 N.E.2d 1219 (1980)); see also Ind.Code § 4-6-3-3.

In the traditional sense, personal jurisdiction is a court's power to bring a person into its adjudicative process and enforce a judgment against him. Am. Econ. Ins. Co. v. Felts, 759 N.E.2d 649, 653 (Ind.Ct.App.2001). Because Indiana state trial courts are courts of general jurisdiction, jurisdiction is presumed. Mid-States Aircraft Engines, Inc. v. Mize Co., 467 N.E.2d 1242, 1247 (Ind.Ct.App. 1984). The party contesting jurisdiction bears the burden of proving the lack of personal jurisdiction by a preponderance of the evidence, unless the lack of jurisdiction is apparent on the face of the complaint. Fid. Finan. Servs., Inc. v. West, 640 N.E.2d 394, 396 (Ind.Ct.App.1994). We review a trial court's decision regarding personal jurisdiction de novo. LinkAmerica Corp. v. Albert, 857 N.E.2d 961, 965 (Ind.2006). We do not defer to the trial court's legal conclusion as to whether personal jurisdiction exists. Id.

"We have repeatedly held that parties may consent by contract to the exercise of personal jurisdiction by courts that otherwise might not have such jurisdiction." Linky v. Midwest Midrange Systems, Inc., 799 N.E.2d 55, 57 (Ind.Ct.App. 2003) (quoting Mechanics Laundry v. Wilder Oil Co., 596 N.E.2d 248, 251 (Ind.Ct. App.1992), trans. denied). The Attorney General contends that Everdry consented to the jurisdiction of Indiana courts. The essence of the Attorney General's argument focuses on Everdry's act of filing an Indiana Registration. The Indiana Registration contained specific language indicating Everdry's contractual consent to jurisdiction:

[T]he undersigned does hereby consent that any such action or proceeding against it may be commenced in any court of competent jurisdiction and proper venue within said State by service of process upon said officer with the same effect as if the undersigned was organized or created under the laws of said State and had lawfully been served with process in said State.

Appellee's App. at 7.⁴

Everdry contends that the consent clause contained in the Indiana Registration applies only to internal matters between franchisor and franchisee. However, we agree with the Attorney General that, because its investigation involves matters connected to Everdry's franchising activities within Indiana, Everdry consented to jurisdiction for purposes of the CID. We analogize this consent to a party's act of submitting to a court's jurisdiction by entering a general appearance. Indiana Trial Rule 4(A) provides in pertinent part, "[t]he court acquires jurisdiction over a party or person who under these rules commences or joins in the action, is served with summons or enters an appearance." Just as the general appearance, entered after the lawsuit is filed, constitutes consent to jurisdiction, a registration filed after the initial issuance of the CID and prior to an enforcement order constitutes...