Hanline v. Sinclair Global Brokerage Corp.

• Decision Date: 09 February 1987
• Docket Number: No. 86-0282-CV-W-1.,86-0282-CV-W-1.
• Parties: John V. HANLINE, Plaintiff, v. SINCLAIR GLOBAL BROKERAGE CORPORATION, et al., Defendants.
• Court: U.S. District Court — Western District of Missouri

652 F. Supp. 1457

John V. HANLINE, Plaintiff, v. SINCLAIR GLOBAL BROKERAGE CORPORATION, et al., Defendants.

No. 86-0282-CV-W-1.

United States District Court, W.D. Missouri, W.D.

February 9, 1987.

John Harl Campbell, Campbell & Meyers, Kansas City, Mo., for plaintiff.

Gordon D. Gee, Rich, Granoff, Levy & Gee, Kansas City, Mo., Timothy J. Carey, Lloyd S. Clareman, Finley, Kumble, Wagner, Heine, Underberg, Manley, Myerson & Casey, New York City, for defendants.

MEMORANDUM AND ORDERS

JOHN W. OLIVER, Senior District Judge.

This is an action brought by a customer of Sinclair Global Brokerage Corporation (SGBC), a brokerage firm, against the firm and two of its officers. The case now pends on defendants' motion to dismiss with prejudice Counts II and III of plaintiff's amended complaint. For the reasons stated, defendant's motion will be granted in part and denied in part.

I. Personal Jurisdiction

Defendants' initial argument is that this Court lacks personal jurisdiction over the individual defendants, each of whom is an officer of the corporate defendant. Both individual defendants are residents and domiciliaries of the State of New York. Defendants contend that plaintiff's amended complaint fails to demonstrate that the individual defendants had sufficient contacts with Missouri to satisfy either the Missouri long-arm statute or constitutional due process.

Determining the propriety of an exercise of personal jurisdiction over non-resident defendants is a two-step process. First, the Court must determine that the exercise comports with the requirements of the long-arm statute of the state in which it sits. See Mountaire Feeds, Inc. v. Agro Impex, S.A., 677 F.2d 651, 653 (8th Cir. 1982). Second, the Court must ensure that minimum contacts exist between each defendant and the forum state such that the exercise of personal jurisdiction does not offend traditional notions of fair play and substantial justice under the due process clause. International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945).

The Missouri long-arm statute, Mo.Ann. Stat. § 506.500 (Vernon Supp.1987), confers jurisdiction over a person as to any cause of action arising from his transaction of any business within the state, his entering into any contract within the state, or his commission of a tortious act within the state. The scope of the statute was meant to be as broad as is consistent with the dictates of due process. See State ex rel. Deere and Co. v. Pinnell, 454 S.W.2d 889, 892 (Mo.1970) (en banc).

Once a defendant has challenged the court's personal jurisdiction over him, the plaintiff assumes the burden of establishing sufficient jurisdictional facts, and that burden may not be shifted to the defendant. See Institutional Food Marketing Associates, Ltd. v. Golden State Strawberries, Inc., 747 F.2d 448, 452 (8th Cir.1984). The plaintiff's complaint must allege sufficient facts "to support a reasonable inference that the defendant can be subjected to jurisdiction within the state." Id. at 453.

In the present case, plaintiff seeks to base personal jurisdiction over the individual defendants on the tortious act prong of the Missouri long-arm statute.¹ Thus, plaintiff must make a prima facie showing that a tort has been committed. Institutional Food, supra, 747 F.2d at 453. Further, the establishment of a prima facie case requires more than mere allegations that all elements of the tort are present. Id. at 454.

In an order dated September 25, 1986, this Court deferred ruling the question of personal jurisdiction in order to afford plaintiff an opportunity to file an amended complaint pleading adequate jurisdictional facts. That amended complaint must now be examined to determine whether it contains facts sufficient to support an inference that the individual defendants committed a tort bringing them within the purview of the Missouri long-arm statute.

Plaintiff claims that defendants breached a fiduciary duty owed him, thereby causing him tortious injury in Missouri. Plaintiff alleges that at all relevant times defendants Tese and Sinclair were officers of defendant corporation, and that as such they exercised supervisory authority over the corporation's Kansas City office. Amended Complaint ¶ 25(b); 26(a). Defendant Sinclair was the plaintiff's original account executive. Amended Complaint ¶ 25(a). Plaintiff further alleges that Tese and Sinclair authorized and permitted local employees to accept responsibility for trading plaintiff's account without specific authorizations from plaintiff for each trade. Amended Complaint ¶ 25(c); 26(c). Plaintiff asserts that he placed his trust and confidence in each defendant "to faithfully manage plaintiff's account in accordance with plaintiff's instructions and in accordance with plaintiff's best interests." Amended Complaint ¶ 27.

Plaintiff asserts that the individual defendants' failure to adequately supervise the Kansas City office during the illness of that office's local supervisor left undiscovered unauthorized trading in plaintiff's account. Amended Complaint ¶ 29(a) and (b); 30(a) and (b). Plaintiff contends that defendants had actual or constructive knowledge that plaintiff had previously provided funds for margin calls when necessary, yet through Genovese² acting as their agent within the scope of his agency instructed that the treasury bills and open positions that secured plaintiff's account be liquidated to satisfy a margin call. Amended Complaint ¶ 29(e); 30(e). Finally, plaintiff alleges that the individual defendants through Genovese acting as their agent instructed and commanded other agents and employees of SGBC to conceal the unauthorized trading from plaintiff. Amended Complaint ¶ 29(g); 30(g). In support of this contention, plaintiff attaches to his suggestions in opposition to defendants' motion to dismiss a transcript of a telephone conversation between Genovese and a local employee in which the unauthorized trading is discussed.

The allegations in plaintiff's amended complaint fall short of establishing the prima facie case of tort necessary to obtain jurisdiction over the individual defendants under the Missouri long-arm statute. Though plaintiff's allegations outline a claim for breach of fiduciary duty in conclusory terms, plaintiff points to no specific facts linking actions of the individual defendants to Missouri. For example, plaintiff alleges that defendants had actual or constructive knowledge of the terms and history of plaintiff's account, yet plaintiff fails to plead any objective manifestation of defendants' supposed knowledge. Cf. McKeehan v. Wittels, 508 S.W.2d 277, 283 (Mo.Ct.App.1974) (knowledge of one corporate officer not imputable to another corporate officer). Similarly, plaintiff baldly alleges that defendants acted in various ways through Genovese acting as their agent, but fails to point to any overt act of the individual defendants to establish that agency. See Institutional Food Marketing Associates, Ltd. v. Golden State Strawberries, Inc., 587 F.Supp. 1105, 1110 (E.D.Mo.1983), aff'd, 747 F.2d 448 (8th Cir. 1984) (plaintiffs have not made prima facie showing that agency existed).

Such conclusory allegations cannot be held to support an exercise of personal jurisdiction under the Missouri long-arm statute. In Institutional Food, the Eighth Circuit found that the district court had properly refused to exercise personal jurisdiction over a corporation in a case in which, as here, the plaintiff had sought to invoke the tortious act prong of the Missouri long-arm statute. Noting that the plaintiff had failed to establish an element of the alleged tortious interference with contract, the Court explained:

The establishment of a prima facie case requires more than the allegation that the defendant acted without justification. In order to state a cause of action, it is necessary that facts be alleged from which it could be found that the interference was not justified.

747 F.2d at 454. Absent a prima facie showing that the individual defendants themselves acted in a manner to subject themselves to personal jurisdiction in Missouri, this Court cannot exercise jurisdiction over them on the basis of actions imputed to them.

Moreover, an assertion of personal jurisdiction over the individual defendants would violate the due process minimum contacts standard articulated in International Shoe and its progeny. Due process minimum contacts analysis focuses on the "relationship among the defendant, the forum, and the litigation." Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414, 104 S.Ct. 1868, 1872, 80 L.Ed.2d 404 (1984), quoting Shaffer v. Heitner, 433 U.S. 186, 204, 97 S.Ct. 2569, 2579, 53 L.Ed.2d 683 (1977).

The application of the minimum contacts standard in the Eighth Circuit involves the consideration of five factors:

(1) the nature and quality of the contacts with the forum state; (2) the quantity of the contacts with the forum state; (3) the relation of the cause of action to the contacts; (4) the interest of the forum state in providing a forum for its residents; and (5) the convenience of the parties.

Land-O-Nod Co. v. Bassett Furniture Industries, Inc., 708 F.2d 1338, 1340 (8th Cir.1983). In evaluating the contacts of a defendant under this test, the Eighth Circuit has noted that

"unilateral activity of those claiming a relationship with a nonresident defendant is not sufficient and `it is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.' Hanson v. Denckla, 357 U.S. 235, 253 78 S.Ct. 1228, 1239, 2 L.Ed.2d 1283 (1958).... For it is a defendant's contacts with the forum state that are of interest in determining whether personal jurisdiction exists, not its contacts with a resident of the forum."

Institutional Food, su...