Guy v. Layman, Civil Action No. 95-533.

• Decision Date: 07 June 1996
• Docket Number: Civil Action No. 95-533.
• Parties: Garth GUY, Plaintiff, v. George E. LAYMAN, Sr. and George E. Layman, Jr., individually and d/b/a Forest Acres Partnership, Defendants.
• Court: U.S. District Court — Eastern District of Kentucky

932 F. Supp. 180

Garth GUY, Plaintiff, v. George E. LAYMAN, Sr. and George E. Layman, Jr., individually and d/b/a Forest Acres Partnership, Defendants.

Civil Action No. 95-533.

United States District Court, E.D. Kentucky.

June 7, 1996.

Laurence J. Zielke, Lawrence L. Pedley, Pedley, Zielke & Gordinier, Louisville, KY, for Garth Guy.

Stephen M. O'Brien, III, Lexington, KY, John S. Moore, Velikanje, Moore & Shore, Yakima, WA, for George E. Layman, Sr., Individually d.b.a. Forest Acres Partnership.

Benjamin L. Kessinger, Jr., Stites & Harbison, Lexington, KY, Michael J. Bettinger, David A. DeGroot, Pillsbury, Madison & Sutro, San Francisco, CA, for George E. Layman, Jr., Individually d.b.a. Forest Acres Partnership.

OPINION AND ORDER

FORESTER, District Judge.

I. INTRODUCTION

This matter is before the Court on the motion of Defendant George E. Layman, Sr. to dismiss for lack of personal jurisdiction pursuant to Fed.R.Civ.P. 12(b). This matter having been fully briefed, it is ripe for review.

II. DEFENDANT'S MOTION TO DISMISS

Essentially, Defendant George E. Layman, Sr. ("Layman, Sr.") argues that he lacks sufficient contacts with Kentucky for this Court to exercise personal jurisdiction over him. In support of his motion, Layman, Sr. asserts that he does not now nor has he ever owned property in Kentucky, that he has never transacted business in Kentucky, and that he has only visited Kentucky twice, both times to see the Kentucky Derby. Layman, Sr. admits that in 1974 he became one of four partners in Defendant Forest Acres Partnership ("Forest Acres"), a Washington partnership, and that this partnership purchased shares of Spendthrift Farms, a farm located in Kentucky, in 1983. However, Layman, Sr. contends that he was not personally involved in any negotiations, that he did not have any contact with anyone at Spendthrift Farms, and that he does not recall signing a subscription agreement. Layman, Sr. also admits that in 1986 Forest Acres and twelve other investors filed suit against Plaintiff Garth Guy and others in the District Court for the Northern District of California alleging misrepresentations in connection with the stock offering. However, Layman, Sr. asserts that the following year he withdrew as a partner of Forest Acres and assigned his rights in the lawsuit to the remaining partners.

In response, Plaintiff argues that the issue does not concern Layman, Sr.'s personal contacts with Kentucky. Instead, Plaintiff contends that Defendant Forest Acres purposefully availed itself of the privilege of acting in Kentucky when it entered the Subscription Agreement and bought shares of Spendthrift Farms, as a result of which Forest Acres obtained a seat on the Spendthrift Farms board of directors through which Defendant George Layman, Jr. actively participated in the management of Spendthrift Farms. Plaintiff argues that his claims arise from breach of the contract that establishes Forest Acres' contacts with Kentucky, thus giving this Court personal jurisdiction over Forest Acres Partnership. Therefore, because under partnership law each partner is jointly and severally liable for everything chargeable to the partnership as a result of the acts of any of the partners, Plaintiff argues that Layman, Sr. is personally liable for the acts of the partnership. Consequently, Plaintiff contends that jurisdiction over Forest Acres is sufficient to establish jurisdiction over Layman, Sr. and the other individual partners.

III. ANALYSIS

Plaintiff has not disputed Layman, Sr.'s lack of personal contacts with Kentucky. Rather, Plaintiff relies on this Court's jurisdiction over Forest Acres to establish personal jurisdiction over Layman, Sr. In support of this argument, Plaintiff relies on Felicia Ltd. v. Gulf American Barge Ltd., 555 F.Supp. 801, 806 (N.D.Ill.1983), which determined that because "General partners as well as partnership employees or agents are agents for all other general partners," jurisdiction over a partnership establishes jurisdiction over the individual partners. Plaintiff also relies on a similar decision in First Interstate Bank of Oregon v. Tex-Ark Farms Ltd., 71 Or.App. 427, 692 P.2d 678 (1984). The Defendant argues that these cases reflect the mistaken belief that general partners are agents for other general partners. Application of this mistaken reasoning leads to the exercise of personal jurisdiction over a defendant without first establishing jurisdiction over each defendant individually.

In opposing Plaintiff's argument that jurisdiction over a partnership is sufficient to establish jurisdiction over the individual partners, the Defendant directs the Court to Sher v. Johnson, 911 F.2d 1357 (9th Cir. 1990), which involved a legal malpractice lawsuit brought by a California resident in a federal district court in California against a Florida law firm and its partners stemming from the representation of the California client in a Florida criminal matter. The California client had sought out representation by the Florida firm in Florida. In connection with the representation, the firm and partners engaged in telephone communications with the client, received checks drawn on California banks, and one partner traveled to California to meet with the...