Hadad v. Lewis, Civ. A. No. 4-70210.
| Decision Date | 23 August 1974 |
| Docket Number | Civ. A. No. 4-70210. |
| Citation | 382 F. Supp. 1365 |
| Parties | Michael A. HADAD, Plaintiff, v. Jerry LEWIS et al., Defendants. |
| Court | U.S. District Court — Western District of Michigan |
COPYRIGHT MATERIAL OMITTED
Robert Craig Munson, Dearborn, Mich., for plaintiff.
Paul R. Grant, Detroit, Mich., for defendant Jerry Lewis.
Alfred A. Rosenberg, Brooklyn, N. Y., for defendant, Network Cinema Corp.
A. D. Ruegsegger, Detroit, Mich., for defendant Stephen J. Scheffer.
Giles & Conley, Birmingham, Mich., for defendant Jack J. Rose.
This is an action alleging fraud against the plaintiff, Michael A. Hadad, a citizen of the State of Michigan, by the defendants, Network Cinema Corporation, a foreign corporation and several nonresident individuals. The plaintiff alleges that this Court has jurisdiction by reason of the diversity of citizenship between himself and the defendants under 28 U.S.C. § 1332.
In the motions now before the Court, two of the individual defendants, Jerry Lewis, a resident of California, and Jack J. Rose, a resident of New Jersey, have moved to have the action dismissed against them. Affidavits and briefs were filed, and the Court heard arguments on the motions on July 29, 1974. For the reasons stated herein, the Court denies the motions of the defendants in all respects.
The facts in this action, as alleged by Mr. Hadad, are simple. On or about September 26, 1972, and for some time prior to that, the defendant corporation, Network Cinema, conducted an extensive nationwide advertising campaign aimed at inducing persons throughout the country to invest in franchises and area directorships of Network Cinema.1 The plaintiff, at some time around September 26, 1972, examined some of these advertisements and subsequently requested more information from Network Cinema.
As a result of the plaintiff's initiative, materials describing the investment opportunities with the defendants were mailed to him, and shortly thereafter he forwarded to Network Cinema a check for $7,500 as part consideration for a franchise theatre which was to be located in Jacksonville, Florida. A franchise agreement was subsequently executed on behalf of Network Cinema by Stephen J. Scheffer, the corporation's Vice President and Treasurer.2
In late January, 1973, before Mr. Hadad was able to begin operation of the Jacksonville theatre, Don Fortini, an agent of Network Cinema, agreed to sell to him an area directorship in lieu of the franchise which he had originally sought to buy. The cost of this directorship was $50,000 with the $7,500 down payment on the theatre franchise credited against that amount.3 The balance of $42,500 was subsequently paid by Mr. Hadad to Network Cinema in two payments of $25,000 and $17,500. The plaintiff shortly after the last payment received an Area Director Franchise Agreement which had been executed on behalf of Network Cinema by the defendant Jack Rose, the corporation's Executive Vice President. The agreement was consummated in March, 1973.
The plaintiff's cause of action is based on his allegation that at all times during which he was engaged in negotiations with Network Cinema, contrary to the representations, actions and conduct of the defendants, Network Cinema was either insolvent or on the verge of insolvency.
The defendants Lewis and Rose allege, as their first ground for dismissal of this action,4 that this Court lacks personal jurisdiction over them. Both the defendants and the plaintiff agree that if the Court has jurisdiction, it is by virtue of the Michigan long-arm statute, M.C.L.A. § 600.705(2).5 That statute states that:
The parties do not contest, and the Court does not believe that it is open to question, that fraud is a tort within the meaning of the Michigan statute. Cf. Nationwide Motorist Ass'n of Michigan, Inc. v. Nationwide Motorist Ass'n, Inc., 244 F.Supp. 490 (W.D.Mich.1955). The only issue before the Court, therefore, is whether the defendants did or caused any act to be done, or consequences to occur, in Michigan which resulted in this action for fraud.6
In an action for fraud, the elements of the case which the plaintiff must prove are the following:
In determining whether the defendants in this action may have caused any consequences within the state of Michigan upon which an action for fraud may be based, the Court proceeds from the principle stated in Nationwide Motorist Ass'n of Michigan, supra, that the "only acts which a defendant is capable of are the actual false representations" made by the defendants to the plaintiff. 244 F.Supp., at 493. We must turn then to the representations made by the defendants.
Mr. Rose in his brief in support of the motion to dismiss, on the issue of his actions in this case, states: "All the Complaint can be said to aver against Rose is that he was an officer of NCC (Network Cinema Corporation), the defendant corporation, who executed an agreement with plaintiff on NCC's behalf in his capacity as its Executive Vice President, and nothing more." Memorandum in Support of defendant Jack Rose's Motion to Dismiss, at 3-4. Bearing in mind that this motion is only to determine the Court's jurisdiction, the Court is of the opinion that the execution of the agreement by Mr. Rose was a sufficient representation to the plaintiff that Network Cinema was solvent, such that if the defendant, as Mr. Hadad alleges, was aware at the time that the corporation was insolvent or was about to become so, a case of fraud could be proved against him. The representation in this case was Mr. Rose's execution of the agreement, an act that completed the series of acts which ultimately resulted in the plaintiff parting with his money. There is no need to examine the plaintiffs' proofs at this point, it is sufficient that he has alleged facts sufficient for this Court to conclude that Mr. Rose did an act or caused a consequence in Michigan which resulted in this action.
Likewise, in the case of the defendant Jerry Lewis, the Court is of the opinion that his actions may be shown to have caused the consequences herein sued upon. Mr. Lewis did not personally make any representations to the plaintiff either in Michigan or in any other state. The plaintiff's contention with respect to this defendant, however, is that representations were made in the form of advertisements published by the defendant corporation, and that Mr. Lewis authorized other defendants to use his name to procure purchasers for franchises. In this regard, it is significant to note that the agreement which the plaintiff executed with Network Cinema contained the following clause:
Area Director Franchise Agreement, ¶ 5.
In deciding whether the defendant Lewis is amenable to the jurisdiction of this Court, then, these facts are of a major importance. The clause quoted above makes it abundantly clear that the reputation and name of Jerry Lewis were heavily relied upon by Network Cinema to sell its franchises. Whether that clause was boilerplate verbiage, or whether it represented the actual intention of Mr. Lewis is immaterial. The fact, as this Court views it, is that the plaintiff has alleged that it was the reputation of Jerry Lewis, as expressed in the advertisements by Network Cinema, which induced him to purchase the franchise. Since Mr. Lewis was a director of Network Cinema, it can be assumed that all of this was done with his personal knowledge and approval. See, Mason v. Vogue Knitting, 361 Mich. 481, 488, 105 N.W.2d 412 (1960).
Since this Court has determined that both defendants, based on the pleadings, could be found to have caused consequences in Michigan which resulted in this action for fraud, we turn to the question of whether there were sufficient contacts between the defendants and Michigan to make it reasonable for this Court to exercise jurisdiction under M.C.L.A. § 600.705(2). The Court notes that Michigan's long-arm statute is interpreted by the Michigan courts to reach the full limits allowed by the United States Constitution. Sifers v. Horen, 385 Mich. 195, 188 N.W.2d 623 (1971).
The particular facts of this case raise issues which have not been addressed directly before by the courts in this state. Nevertheless, the approach by this Court as well as other Federal courts, is to decide questions of long-arm jurisdiction on a case by case basis. In International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), the Supreme Court said:
To continue reading
Request your trial
-
Green v. Wilson
...by defining the quality of contacts necessary to justify personal jurisdiction under the constitution. See Hadad v. Lewis, 382 F.Supp. 1365, 1371 (E.D.Mich., 1974). Thus, situations may arise where a long-arm statute permits greater jurisdiction than does the constitution. 4 See Starbrite a......
-
Williams v. Garcia
...with the Texas defendants. This is compounded by their inability to serve Moses with the complaint in this action. In Hadad v. Lewis, 382 F.Supp. 1365 (E.D.Mich.1974), M.C.L.A. § 600.705(2) was construed as bestowing upon Michigan courts the broadest grant of jurisdiction that would be cons......
-
Parish v. Mertes
...We do not merely count contacts. Contacts are not to be measured quantitatively; they must be measured qualitatively. Hadad v. Lewis, 382 F.Supp. 1365 (E.D.Mich.1974). In so examining the nonresident defendants' contacts with the state of Michigan, we find a sufficient basis on which jurisd......
-
Microelectronic Systems Corp. v. Bamberger's
...Corp. v. Van Dusen Air, Inc., 466 F.2d 220 (6th Cir. 1972); Kiefer v. May, 46 Mich.App. 566, 208 N.W.2d 539 (1973); Hadad v. Lewis, 382 F.Supp. 1365 (E.D.Mich.1974); Mad Hatter, Inc. v. Mad Hatters Night Club Co., 399 F.Supp. 889 Michigan, like several other jurisdictions, has interpreted i......