Felland v. Clifton

• Decision Date: 06 June 2012
• Docket Number: No. 11–1839.,11–1839.
• Citation: 682 F.3d 665
• Parties: Robert W. FELLAND, Plaintiff–Appellant, v. Patrick CLIFTON, et al., Defendants–Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

682 F.3d 665

Robert W. FELLAND, Plaintiff–Appellant,

v.Patrick CLIFTON, et al., Defendants–Appellees.

No. 11–1839.

United States Court of Appeals,Seventh Circuit.

Argued Sept. 15, 2011.

Decided June 6, 2012.

Jon P. Axelrod (argued), Attorney, Dewitt, Ross & Stevens S.C., Madison, WI, for Plaintiff–Appellant.

Jacob B. Frost (argued), Attorney, Boardman & Clark, Madison, WI, for Defendants–Appellees.

Before FLAUM, MANION, and SYKES, Circuit Judges.

SYKES, Circuit Judge.

While vacationing in Arizona, Robert and Linda Felland entered into a contract to purchase a condominium unit in a planned beachfront development in Puerto Peñasco, Mexico. The project was managed by a real-estate development firm owned by Patrick Clifton, an Arizona resident. Robert Felland signed an agreement that required the couple to make a down payment in three installments. After making the first installment payment, the Fellands became concerned about the financing and timeliness of the project and sought reassurance from Clifton that the unit would be delivered on schedule. Clifton sent several communications—emails, phone calls, and letters—to the Fellands at their home in Wisconsin assuring them the project was properly financed and would be completed on time, and encouraging the Fellands to pay the additional installments on the down payment. Relying on these assurances, they made the payments. Clifton sent additional communications describing the project's progress, but did not deliver the unit by the contractual deadline. Further inquiry by the Fellands' attorney revealed that the project did not have financing; instead, advance sales of condominium units were funding the development.

Robert Felland sued Clifton in Wisconsin state court alleging intentional misrepresentation and seeking rescission and damages. Clifton removed the case to federal district court and moved to dismiss for lack of personal jurisdiction. The district court granted the motion, finding that Clifton's communications to the Fellands in Wisconsin did not satisfy the due-process minimum-contacts requirement for personal jurisdiction. Felland appealed.

We reverse. Felland's complaint alleges that Clifton's repeated communications to his Wisconsin home were part of a deliberate attempt to lull him into a false sense of security and to induce him to make the installment payments. While these communications might not be directly relevant to a simple breach-of-contract claim, they are critical to Felland's claim of intentional misrepresentation. Clifton was aware that Felland lived in Wisconsin, directed multiple communications to him there, and knew that the harm would be felt in Wisconsin. These allegations are sufficient to establish the minimum contacts necessary to satisfy the due-process requirements for jurisdiction over Clifton in Wisconsin. We also conclude that Clifton's communications satisfy the “local act or omission” provision of the Wisconsin long-arm statute.

I. Background

This case comes to us from a jurisdictional dismissal, so we take the following facts primarily from the complaint and its attached exhibits. The Fellands live in Three Lakes, Wisconsin. Clifton is a resident of Scottsdale, Arizona, and owns Clifton Meridian LLC, a real-estate development firm based in Scottsdale and organized under Arizona law. He also owns CM La Perla de Peñasco, S. De R.L. De C.V. (“CM La Perla”), a corporation organized under the laws of Mexico that specializes in building beachfront residential projects in northern Mexico.

In 2005 Clifton and Clifton Meridian began a luxury high-rise condominium project called La Perla del Mar in Puerto Peñasco, Mexico, a beachfront community about 30 miles from the Arizona border. Clifton formed CM La Perla to serve as owner of the property on which the La Perla Project would be built and to maintain an on-site sales office staffed by Clifton Meridian employees.

In February 2006, while the Fellands were vacationing in Arizona, they traveled to Puerto Peñasco to tour the La Perla Project's model unit. They met with Jon Puckett, Clifton's sales representative, to whom they provided their Wisconsin mailing address, telephone number, and email address. The Fellands were told that construction would begin in a few weeks and should be completed by early 2008, but they were not told that Clifton had yet to secure construction financing or that the start of construction was contingent upon the sale of additional units. On February 23, while on the development site in Mexico, Robert Felland signed a “Reservation of Unit” form, which noted his Wisconsin address and phone number, and he paid a refundable $5,000 deposit. Felland was told he would eventually need to sign a type of contract under the laws of Mexico called a Promise of Trust Agreement (“PTA”).

Felland returned to Puerto Peñasco in March 2006 to sign the PTA. The agreement stated that CM La Perla was represented by Patrick Clifton, but Clifton himself did not sign the form at this time. It further provided that Felland's unit would be delivered no later than January 31, 2009, and that failure to deliver by this date would entitle Felland to reimbursement of all money previously paid to CM La Perla. The purchase price for Felland's unit was $680,000, and the PTA required a 30% down payment of $204,000, payable in three installments of $68,000 over 90 days. Having already paid $5,000, Felland tendered a check for an additional $63,000 with the signed PTA. He was told that a fully executed copy of the PTA would be mailed to him once Clifton had signed it.

The next installment was due on April 10, 2006, but by this time the Fellands had become concerned about the La Perla Project because they had not received a countersigned copy of the PTA or a receipt or verification of their first payment. Linda Felland emailed Puckett expressing these concerns, noting that her husband was “talking about canceling” the purchase and seeking assurance that the project was on schedule. Puckett responded by email, indicating that the developer “was sending out the countersigned PTA ASAP.” He assured her that “this is a great project and has huge appreciation potential,” and noted that “I have 168K of my personal money invested in unit 801[.] I would not sell something that I am not invested in.” Soon after this email, Clifton mailed the signed PTA and a receipt to the Fellands at their Wisconsin address. Relying on these documents and Puckett's email, the Fellands proceeded with the additional down payments by sending two checks for $68,000, one on April 12 and the other on May 7, 2006. They received receipts for these payments by regular mail on April 20 and June 2, 2006, respectively. Throughout 2006 and 2007, the Fellands also received about six telephone calls to their Wisconsin home from Clifton Meridian employees regarding various aspects of the project; some of these calls were made before the Fellands paid the full down payment. In a declaration submitted in response to Clifton's motion to dismiss, Robert Felland attested that he would not have paid the series of installments on the down payment had he not received Puckett's reassurance about the project, the contract documents, and written receipts.

After the Fellands had paid the full down payment, Clifton Meridian continued to send them numerous communications on the status of the La Perla Project, both by email and regular mail. For example, in July 2006 Puckett sent an email to Linda Felland indicating that groundbreaking would begin that August with completion targeted for mid–2008. And in November 2006 Jason Silkey, Clifton Meridian's Director of Development, sent an email indicating that “[e]xcavation work continues on schedule at the site” and inviting owners to view the progress on the project's website. Clifton also contacted the Fellands by certified mail in March 2008, noting some problems with the project's financing but expressing optimism that a commitment could be secured with a new lender in short time. Overall, between May 11, 2006, and February 20, 2009, Clifton and his associates sent the Fellands 22 emails ¹ and two mailed messages. These updates were essential to Felland's continued confidence in the La Perla Project; without them he would have backed out of the purchase and demanded a refund of his down payment.

Clifton did not deliver the unit by the promised January 31, 2009 date. On February 10, 2009, Clifton sent an email to unit owners addressing the delays in the development and threatening “punitive legal action” against anyone who might “sabotage our financing attempts by organizing some type of legal action against the project”:

Unfortunately I must be very clear about the following: if anyone, I don't care who they are, engages in any activities to deliberately sabotage our financing attempts by organizing some type of legal action against the project or spread malicious and false lies about the project or developer I will assure you that we will take immediate and punitive legal action against the party or parties at fault.

After receiving this email, the Fellands sought legal advice, and on February 18, 2009, their attorney contacted Clifton demanding a refund of their $204,000 down payment. Clifton refused, and subsequent investigation revealed that Clifton did not have financing for the La Perla Project when Felland signed the PTA and that advance sales of condominium units were funding the project.

On June 1, 2010, Robert Felland filed this lawsuit in the Oneida County Circuit Court naming as defendants Patrick Clifton, Clifton Meridian LLC, and CM La Perla (collectively, “Clifton”). Felland sought rescission of the contract and damages, alleging that Clifton had committed a series of intentional misrepresentations. In particular, Felland asserted that Clifton concealed the development's financing difficulties from the beginning and that Clifton's later communications were made in...