Fraley v. Estate of Oeding

• Decision Date: 12 February 2014
• Docket Number: No. 2012–1994.,2012–1994.
• Citation: 6 N.E.3d 9,138 Ohio St.3d 250
• Court: Ohio Supreme Court
• Parties: FRALEY, d.b.a. Fraley Trucking, Appellee, v. ESTATE OF OEDING et al., Appellants.

138 Ohio St.3d 250

6 N.E.3d 9

FRALEY, d.b.a. Fraley Trucking, Appellee,

v.ESTATE OF OEDING et al., Appellants.

No. 2012–1994.

Supreme Court of Ohio.

Submitted Oct. 9, 2013.

Decided Feb. 12, 2014.

Syllabus of the Court

An Ohio court may not exercise personal jurisdiction over a nonresident based solely on the conduct of the nonresident's insurance company.

Repper, Pagan, Cook, Ltd., and Christopher J. Pagan, for appellee.

Smith, Rolfes & Skavdahl Co., L.P.A., and James P. Nolan II, Cincinnati, for appellants .

Green & Green, Lawyers, and Erin B. Moore, Dayton, urging reversal for amicus curiae Ohio Association of Civil Trial Attorneys.

FRENCH, J.

{¶ 1} In this appeal, we address whether Ohio courts may exercise in-personam jurisdiction over a nonresident defendant based solely on the conduct of the defendant's insurer. We hold that they may not.

Facts and Procedural History

{¶ 2} Appellee, David Fraley, d.b.a. Fraley Trucking, an Ohio resident, filed this negligence action against appellants, the estate of Timothy J. Oeding, J & R Equipment and Storing (“J & R”), and Auto–Owners Insurance Company (“Auto–Owners”), in the Butler County Court of Common Pleas. Fraley's action arises out of a motor-vehicle accident that occurred in November 2008 in Indiana. Fraley's complaint identifies an Indiana address for each appellant, and service of process was directed to the appellants in Indiana.

{¶ 3} Fraley alleged that Timothy Oeding, while acting within the course of his employment with J & R, negligently caused a collision between the motor vehicle Oeding was operating and a truck owned by Fraley and operated by Fraley's employee, Craig Farler, who was also acting within the course of his employment. Oeding died as a result of injuries sustained in the collision. Fraley alleged that Auto–Owners, which insured J & R and Oeding, conducted an independent investigation into the facts of the accident and, as part of its investigation, placed an investigative hold on Fraley's truck for approximately five months. Fraley claimed that Oeding's negligence proximately caused tangible property damage to Fraley's truck and personal injury to Farler. Fraley also claimed that Auto–Owners' investigatory hold caused Fraley intangible economic loss due to the loss of use of the truck. The parties' filings indicate that they settled Fraley's claims for property damage and personal injury but were unable to resolve Fraley's loss-of-use claim, the sole claim left to be resolved.

{¶ 4} Appellants moved the trial court to dismiss Fraley's complaint for lack of personal jurisdiction, pursuant to Civ.R. 12(B)(2). They argued that Fraley's allegations do not fall within the scope of Ohio's long-arm statute or Civ.R. 4.3(A) and that appellants do not have sufficient minimum contacts with Ohio to justify the exercise of jurisdiction. Appellants also argued that Auto–Owners' provision of insurance coverage in several states, including Ohio, is insufficient to permit Ohio's exercise of personal jurisdiction over Auto–Owners or its insureds given the circumstances of this case.

{¶ 5} In response to appellants' motion, Fraley submitted an affidavit in which he restated relevant facts from the complaint and further stated that he suffered economic loss in Ohio due to Auto–Owners' investigative hold. Fraley's affidavit additionally stated that Auto–Owners directed correspondence and calls to Fraley and his counsel in Ohio to resolve Fraley's claims and that Auto–Owners is licensed to transact business in Ohio. In his memorandum opposing dismissal, Fraley did not argue that Oeding or J & R had any personal contacts with Ohio, but argued that personal jurisdiction exists over all appellants because Auto–Owners transacted business in Ohio and caused tortious injury to Fraley in Ohio while acting as an agent of J & R and Oeding.

{¶ 6} The trial court granted appellants' motion to dismiss. The court held that it could not exercise personal jurisdiction over Oeding and J & R solely because their insurer did business in Ohio and further held that Fraley was not entitled to maintain a direct action against Auto–Owners, because he had not obtained a judgment against Auto–Owners' insureds.

{¶ 7} On appeal, Fraley conceded that Ohio law precludes him from bringing a direct action against Auto–Owners, but he argued that the trial court erred in determining that it lacked personal jurisdiction over Oeding and J & R. The Twelfth District Court of Appeals agreed and reversed the trial court's judgment. 2012-Ohio-4770, 981 N.E.2d 911 (12th Dist.).

{¶ 8} The court of appeals recognized that the record contains no indication that Oeding or J & R had any contact with Ohio and that Fraley's jurisdictional argument could prevail only if Auto–Owners' activities are imputed to J & R and Oeding. Id. at ¶ 9. The court of appeals acknowledged instances in which this court has imputed an insurer's action or inaction to its insured, see, e.g., Griffey v. Rajan, 33 Ohio St.3d 75, 77–78, 514 N.E.2d 1122 (1987), but it recognized that the question whether an insurer's actions can be imputed to a nonresident insured for purposes of obtaining personal jurisdiction over the insured is one of first impression in this state. Id. at ¶ 9–13. The court answered that question in the affirmative and held that Auto–Owners' investigatory hold and its correspondence and calls to Fraley and his attorney brought Auto–Owners, and by extension J & R and Oeding, within Ohio's long-arm statute. Id. at ¶ 19. The court also held that Ohio's exercise of jurisdiction over appellants would not contravene principles of due process. Id. at ¶ 23–24.

{¶ 9} This court accepted appellants' discretionary appeal. 134 Ohio St.3d 1484, 2013-Ohio-902, 984 N.E.2d 28.

Question Presented

{¶ 10} We are asked to determine whether an Ohio court may impute an insurance company's conduct to its nonresident insured for purposes of establishing personal jurisdiction over the insured. We hold that it may not. An Ohio court may not exercise personal jurisdiction over a nonresident based solely on the conduct of the nonresident's insurance company.

Analysis

{¶ 11} Appellants' motion to dismiss placed upon Fraley the burden to show that the trial court had personal jurisdiction over appellants. Kauffman Racing Equip., L.L.C. v. Roberts, 126 Ohio St.3d 81, 2010-Ohio-2551, 930 N.E.2d 784, ¶ 27, citing Fallang v. Hickey, 40 Ohio St.3d 106, 107, 532 N.E.2d 117 (1988). When, as here, a trial court determines a Civ.R. 12(B)(2) motion to dismiss without an evidentiary hearing, the plaintiff need only make a prima facie showing of jurisdiction. Id. In resolving the motion, the trial court must view the allegations in the pleadings and the evidence in the light most favorable to the plaintiff and make all reasonable inferences in the plaintiff's favor. Id., citing Goldstein v. Christiansen, 70 Ohio St.3d 232, 236, 638 N.E.2d 541 (1994). Personal jurisdiction is a question of law that appellate courts review de novo. Id.

{¶ 12} The determination whether an Ohio court has personal jurisdiction over an out-of-state defendant requires a two-step inquiry. First, the court must determine whether the defendant's conduct falls within Ohio's long-arm statute or the applicable civil rule. Kentucky Oaks Mall Co. v. Mitchell's Formal Wear, Inc., 53 Ohio St.3d 73, 75, 559 N.E.2d 477 (1990). If it does, then the court must consider whether the assertion of jurisdiction over the nonresident defendant would deprive the defendant of due process of law under the Fourteenth Amendment to the United States Constitution. Id.

{¶ 13} We begin with the question whether appellants' conduct falls within Ohio's long-arm statute or Civ.R. 4.3(A). Ohio's long-arm statute, R.C. 2307.382, enumerates specific conduct that gives rise to personal jurisdiction. It provides as follows:

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

(1) Transacting any business in this state;

* * *

(4) Causing tortious injury in this state by an act or omission outside this state if he regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered in this state.

For purposes of R.C. 2307.382, “person” includes “an individual, his executor, administrator, or other personal representative, or a corporation, partnership, association, or any other legal or commercial entity, who is a nonresident of this state.” R.C. 2307.381.

{¶ 14} Civ.R. 4.3(A)(1) and (4) mirror R.C. 2307.382(A)(1) and (4) respectively, regarding service of process on persons outside the state of Ohio. Civ.R. 4.3(A) defines “person” in terms nearly identical to R.C. 2307.381.¹

{¶ 15} Because Fraley concedes that he is not entitled to maintain a direct action against Auto–Owners, we consider only whether the trial court had personal jurisdiction over J & R and Oeding. The court of appeals characterized Auto–Owners as J & R and Oeding's agent, concluded that Auto–Owners' actions fell within R.C. 2307.382(A)(4), and held that Auto–Owners' actions may be imputed to Oeding and J & R. 2012-Ohio-4770, 981 N.E.2d 911, at ¶ 18–19. The court of appeals expressly recognized that “there is no indication that J & R or Oeding themselves had any contact with Ohio” but nevertheless held that “by virtue of the actions of Auto–Owners, J & R and Oeding are also within the purview of Ohio's long-arm statute.” Id. at ¶ 9, 19. The court of appeals' determination is contrary to the plain language of the long-arm statute.

{¶ 16} Our paramount concern in construing a statute is legislative intent. State ex rel. Steele v. Morrissey, 103 Ohio St.3d 355, 2004-Ohio-4960, 815 N.E.2d 1107, ¶ 21. To discern legislative intent, “we first consider the statutory language, reading words and phrases in context and construing them in accordance...