Gracious Living Corp. v. Colucci & Gallaher, PC

• Citation: 216 F.Supp.3d 662
• Decision Date: 19 October 2016
• Docket Number: No. 2:16–cv–02364–DCN,2:16–cv–02364–DCN
• Court: U.S. District Court — District of South Carolina
• Parties: GRACIOUS LIVING CORPORATION, Plaintiff, v. COLUCCI & GALLAHER, PC and John Keenan, Defendants.

216 F.Supp.3d 662

GRACIOUS LIVING CORPORATION, Plaintiff,
v.
COLUCCI & GALLAHER, PC and John Keenan, Defendants.

No. 2:16–cv–02364–DCN

United States District Court, D. South Carolina, Charleston Division.

Signed October 19, 2016

216 F.Supp.3d 665

David K. Haller, Haller Law Firm, Charleston, SC, for Plaintiff.

Andrew Wesley Countryman, Carlock Copeland Semler and Stair, Charleston, SC, for Defendants.

ORDER

DAVID C. NORTON, UNITED STATES DISTRICT JUDGE

This matter comes before the court on defendant Colucci & Gallaher, PC's ("Colucci") motion to dismiss and plaintiff Gracious Living Corporation's ("Gracious Living") motion to remand. For the reasons set forth below, the court denies Colucci's motion to dismiss for lack of personal jurisdiction and denies Gracious Living's motion to remand.¹

I. BACKGROUND

In this legal malpractice action Gracious Living, a Canadian company, seeks to recover against Colucci, a New York law firm and professional corporation. The complaint alleges that Colucci appeared through its then-employee John Keenan ("Keenan") in South Carolina courts on behalf of the plaintiff, even though no lawyers at Colucci were licensed in South Carolina. ECF No. 1, Ex. 1 ¶ 4.

Gracious Living initially retained Colucci in 2012 to represent it in a claim against Joseph Juscik ("Juscik") related to a commercial dispute. ECF No. 1, Ex. 1 ¶ 6. This 2012 action was filed in the U.S. District Court for the Western District of Michigan, Southern Division, and was eventually resolved pursuant to a settlement agreement between the parties. ECF No. 4–2. Juscik, who retained a residence in Mt. Pleasant, South Carolina, defaulted on the payment of the settlement agreement for the Michigan case in September 2013. Id. Keenan left Colucci in January 2014.² ECF No. 1, Ex. 1 ¶ 14. Without seeking Gracious Living's consent, Colluci transferred the Gracious Living file to Keenan. Id. ¶ 16.

In March 2014, South Carolina Federal Credit Union ("SCFCU") filed a foreclosure lawsuit against Juscik on the mortgage that it held on his home in Charleston County. Id. ¶ 17. Colucci was the statutory agent of service for this action, id. ¶ 12, and an Affidavit of Service as to Gracious Living Corporation was filed with the Clerk of Court for Charleston County. Gracious Living was entitled to the payment of the surplus from the foreclosure auction to satisfy its Confession of Judgment.

Beginning in November 2014, employees at Gracious Living began to correspond with Keenan about SCFCU's foreclosure action against Juscik. ECF No. 1, Ex. 1 at 32–40. Numerous emails from Gracious Living to Keenan asked about submitting documents to the Clerk of Court to ensure that Gracious Living would be able to collect

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on the $65,391.63 in surplus funds from the Juscik foreclosure. Neither Keenan, who by this time was no longer employed at Colucci, nor any other lawyer at Colucci, responded in a timely fashion and, as a result, Juscik was able to claim Gracious Living's share of the surplus funds. ECF No. 1, Ex. 1 ¶ 31–34.

Gracious Living alleges that Colucci committed legal malpractice because the law firm knew that none of the lawyers it employed were licensed to practice law in South Carolina, yet failed to advise Gracious Living to hire counsel in South Carolina, that (1) Colucci engaged in the unauthorized practice of law when Keenan prepared and filed the judgment for the settlement of the 2012 Michigan lawsuit under the supervision of senior Colucci attorneys, (2) Colucci failed to seek Gracious Living's consent to transfer its file to Keenan and failed to take steps to withdraw as counsel of record, (3) Colucci failed to properly supervise Keenan, and (4) neither Keenan nor Colucci took adequate steps to protect the interests of Gracious Living in the divvying up of surplus funds in the Juscik foreclosure matter. ECF No. 1, Ex. 1 ¶ 42.

The instant suit was initially filed in the Court of Common Pleas for Charleston County, South Carolina on May 25, 2016. ECF No.1–1. Colucci removed the case to federal court on June 30, 2016. Id. On July 7, 2016, Colucci moved to dismiss on the grounds that this court lacks personal jurisdiction over it. ECF No. 4–1. On July 24, 2016, Gracious Living filed a motion to remand to state court. ECF No. 10–1. The motions have been fully briefed and are ripe for this court's review.

II. STANDARD

A. Motion to Dismiss for Lack of Personal Jurisdiction

When the defendant challenges personal jurisdiction, the plaintiff has the burden of showing that jurisdiction exists. See In re Celotex Corp. , 124 F.3d 619, 628 (4th Cir. 1997). When the court decides a personal jurisdiction challenge without an evidentiary hearing, the plaintiff must prove a prima facie case of personal jurisdiction. See Mylan Labs . , Inc. v. Akzo, N.V. , 2 F.3d 56, 60 (4th Cir. 1993). "In considering the challenge on such a record, 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." In re Celotex Corp. , 124 F.3d at 628 (quoting Combs v. Bakker , 886 F.2d 673, 676 (4th Cir. 1989) ). However, the court need not "credit conclusory allegations or draw farfetched inferences." Masselli & Lane, PC v. Miller & Schuh, PA , 2000 WL 691100, at *1 (4th Cir. May 30, 2000) (quoting Ticketmaster–New York, Inc. v. Alioto , 26 F.3d 201, 203 (1st Cir. 1994) ).

B. Motion to Remand

If federal jurisdiction is doubtful, remand is necessary. Mulcahey v. Columbia Organic Chems. Co. , 29 F.3d 148, 151 (4th Cir. 1994) ; Pohto v. Allstate Ins. Co. , No. 10–2654, 2011 WL 2670000, at *1 (D.S.C. July 7, 2011) ("Because federal courts are forums of limited jurisdiction, any doubt as to whether a case belongs in federal or state court should be resolved in favor of state court.").

III. DISCUSSION

Colluci brings a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(2), arguing that the court cannot exercise personal jurisdiction over it as an out-of-state resident because exercising personal jurisdiction in South Carolina would offend due process. ECF No. 4–1. Gracious Living brings a motion to remand to state court, arguing that this court

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should abstain from hearing this case under the Burford v. Sun Oil Co. , 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943) abstention doctrine. ECF No. 10–1.

A. Motion to Dismiss for Lack of Personal Jurisdiction

In evaluating a challenge to personal jurisdiction under a state's long-arm statute, the court engages in a two-step analysis. First, the long-arm statute must authorize the exercise of jurisdiction under the facts presented. Second, if the statute authorizes jurisdiction then the court must determine if the statutory assertion of personal jurisdiction is consistent with due process. Ellicott Mach. Corp. v. John Holland Party Ltd. , 995 F.2d 474, 477 (4th Cir. 1993). South Carolina's long-arm statute extends to the outer limits allowed by the Due Process Clause, Foster v. Arletty 3 Sarl , 278 F.3d 409, 414 (4th Cir. 2002), so the only question before the court is whether the exercise of personal jurisdiction would violate due process. ESAB Grp., Inc. v. Centricut, LLC , 34 F.Supp.2d 323, 328 (D.S.C. 1999).

The due process test for personal jurisdiction involves two components: minimum contacts and fairness. International Shoe Co. v. Washington , 326 U.S. 310, 320, 66 S.Ct. 154, 90 L.Ed. 95 (1945). Under the minimum contacts test, a nonresident defendant must have certain minimum contacts such that the suit does not offend "traditional notions of fair play and substantial justice." Id . More broadly, due process is satisfied if the courts asserts personal jurisdiction over a defendant who "purposefully avails itself of the privilege of conducting activities within the forum state," Hanson v. Denckla , 357 U.S. 235, 253, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958), such that it "should reasonably anticipate being haled into court there." World–Wide Volkswagen v. Woodson , 444 U.S. 286, 297, 100 S.Ct. 580, 62 L.Ed.2d 490 (1980). After a showing of the defendant's purposeful availment, the reasonableness inquiry balances any burden on the defendant against countervailing concerns such as the plaintiff's interest in obtaining relief and the forum state's interest in the controversy. See id. at 292, 100 S.Ct. 580.

Personal jurisdiction over a nonresident defendant can be either specific or general. See ESAB Group, Inc. v. Centricut, Inc. , 126 F.3d 617, 623–24 (4th Cir. 1997). Specific jurisdiction is when a cause of action is related to the defendant's activities within the forum state. See S.C. Code Ann. § 36–2–803 ; Helicopteros Nacionales de Colombia, S.A. v. Hall , 466 U.S. 408, 414, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984). General jurisdiction is when a suit is unrelated to the defendant's contacts...