Horizon Aggressive Growth, L.P. v. Rothstein-Kass

Decision Date23 August 2005
Docket NumberNo. 04-12890.,04-12890.
Citation421 F.3d 1162
PartiesHORIZON AGGRESSIVE GROWTH, L.P., a Delaware limited partnership, Plaintiff-Appellant, v. ROTHSTEIN-KASS, P.A., a New Jersey professional corporation, Rothstein Kass & Company, P.C., a California professional corporation, Rothstein, Kass & Company, Certified Public Accountants, P.C., a New York professional corporation, John Does, 1-40, Marc J. Wolf, Defendants-Appellees. Gilbert H. Davis, Sims Moss Kline & Davis, LLP, a Georgia limited liability partnership, Defendants.
CourtU.S. Court of Appeals — Eleventh Circuit

Kenneth J. Catanzarite, Catanzarite Law Corp., Anaheim, CA, Mark C. Dungan, Icard, Merrill, Cullis, Timm, Furen & Ginsburg, P.A., Sarasota, FL, C. Morris Mullin, Columbus, GA, for Plaintiff-Appellant.

Scott A. Cole, Cole, Scott & Kissane, P.A., Miami, FL, Betsy Ellwanger Gallagher, Cole, Scott & Kissane, P.A., Tampa, FL, Joel M. Wolosky, Bondy & Schloss, LLP, New York City, Michael S. Reeves, Gorby, Reeves & Peters, P.C., Atlanta, GA, for Defendants-Appellees.

Appeal from the United States District Court for the Middle District of Florida.

Before EDMONDSON, Chief Judge, and BIRCH and COX, Circuit Judges.

BIRCH, Circuit Judge:

This appeal requires us to address whether Florida's Long-Arm statute, FLA. STAT. ch. 48.193, permits the assertion of in personam jurisdiction over an out-of-state auditing company that, in the negotiation of contracts and in the rendition of services from its out-of-state office, telephonically contacted a Florida-based partnership and electronically accessed its computer files. The district court found that Defendants-appellees Rothstein Kass & Co., P.C. and related entities1 neither were "doing business in Florida" nor committed a tortious act in Florida as defined by the Long-Arm statute, and therefore dismissed the action against Kass for lack of jurisdiction. Because the allegations in the complaint that Kass made misrepresentations in its telephonic communications with Plaintiff-appellant Horizon Aggressive Growth, L.P. ("Horizon") were sufficient to support jurisdiction under Florida's Long-Arm statute, we REVERSE the district court's order and REMAND for further proceedings.

I. BACKGROUND2

Horizon was established in 1998 as a private investment fund partnership that invested in publicly traded securities. The initial partnership offering documents provided that the fund would be managed by a general partner, Horizon Capital Management, Inc., which in turn would delegate fund management responsibilities to a portfolio manager. The 1998 partnership offering memorandum stated that Norman L. Yu & Company, Inc. ("Yu & Company") would be retained as the portfolio manager of the fund. The memorandum explained that Yu & Company was managed by Norman Yu, who had developed his proprietary Six Key Stock Selection System and would implement this system in managing the fund. In addition, the partnership offering memorandum provided that the fund would be audited annually by independent certified public accountants.

In 2000, pursuant to a March 1999 engagement letter signed between Horizon and Wolf while Wolf was working for an accounting firm that was later acquired by Kass California, Kass was called upon to audit Horizon's 1999 year-end financial statements. Wolf, then acting as a principal at Kass California, directed and oversaw the 1999 audit of Horizon. In 2000, Kass California entered into a second engagement with Horizon in which Kass was retained to perform audits of Horizon's performance calculations and reporting. Finally, in 2001, Horizon again engaged Kass California to conduct an audit of Horizon's 2000 year-end financial condition. It is undisputed that all of the accounting services rendered by Kass in connection with these various audits were performed by Kass employees in California.

In addition to these agreements between Kass and Horizon for the rendition of independent accounting services, however, Horizon alleged in its complaint that Kass represented that it would perform a more substantial role in serving the investment fund. The complaint noted that Paul A. Henley, CEO of Horizon Capital, Inc. and the progenitor of the Horizon partnership, expressed his view "[a]t the outset" that Horizon did not have the "back office services and systems necessary" to monitor Yu & Company's performance and compliance with its Six Key system. R1-2 at 20, ¶ 58. To address this concern, prior to contracting with Horizon, Wolf allegedly "affirmatively represented to Horizon that Kass would `watch Norman [Yu], Mark [Yu], and the Yu Company .... [,] would provide the "back office services and systems" for monitoring the Yu Company.... [, and] would serve as the watchdog for the partners and Horizon.'" Id. at 21, ¶ 59. According to the complaint, Kass offered to perform these back office services from its offices outside of Florida by: (1) accessing, monitoring, and managing Horizon's Florida-based accounting system and electronic files through the internet and the computer program Quickbooks; and (2) communicating with Horizon officials in Florida about its findings via telephone, faxes, e-mail, and regular mail. See id. at 21, ¶ 61. In his deposition, Wolf confirmed that Kass had represented to Horizon that back office services would be part of the services performed by Kass. See R2-35 at 114. Horizon alleged that it relied on Wolf's representations and operated with the understanding that Kass would perform the back office monitoring and watchdog functions. See R1-2 at 22, ¶ 63.

After Horizon's portfolio sustained substantial losses under the management of Yu & Company, Horizon filed suit against Kass in Florida state court.3 In its complaint, Horizon alleged, inter alia, that Kass California and Wolf:4 (1) committed professional negligence for their failure to perform back office monitoring and compliance services; (2) breached fiduciary duties they owed to Horizon by failing to perform the services they agreed to perform; (3) engaged in constructive fraud by making representations to Horizon with the intent to deceive and defraud and then failing to perform on their representations; and (4) breached a written contract by failing to act as an independent auditor and by neglecting to monitor Yu & Company. Kass responded by moving for the Florida action to be dismissed on the grounds that the assertion of personal jurisdiction was inappropriate under both the Florida Long-Arm statute and a due process analysis. After conducting a hearing on Kass's motion, the district court dismissed the claims against Kass because Horizon's allegations did not support the assertion of jurisdiction under Florida's Long-Arm statute, FLA. STAT. ch. 48.193.5

On appeal, Horizon argues that the district court erred in finding that personal jurisdiction was lacking. Specifically, Horizon argues that: (1) Kass was "doing business" as defined in the Long-Arm statute because its electronic access to Horizon's files and its remote management of Horizon's accounting systems allowed Kass employees to perform services as if they were at Horizon's Florida offices; and (2) Kass committed a tortious act in Florida by virtue of alleged misrepresentations made by Kass to Horizon which caused injury to Horizon in Florida. We will address each argument in turn.

II. DISCUSSION

"We review the district court's dismissal for lack of personal jurisdiction de novo." Meier ex rel. Meier v. Sun Int'l Hotels, Ltd., 288 F.3d 1264, 1268 (11th Cir.2002). Our analysis of the propriety of the assertion of personal jurisdiction is a two-step inquiry. "First, we determine whether the exercise of jurisdiction is appropriate under the forum state's long-arm statute." Mut. Serv. Ins. Co. v. Frit Indus., Inc., 358 F.3d 1312, 1319 (11th Cir.2004). "Second, we examine whether the exercise of personal jurisdiction over the defendant would violate the Due Process Clause of the Fourteenth Amendment to the United States Constitution, which requires that the defendant have minimum contacts with the forum state and that the exercise of jurisdiction over the defendant does not offend `traditional notions of fair play and substantial justice.'" Id. (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945)).

Florida's Long-Arm statute provides that:

(1) Any person, whether or not a citizen or resident of this state, who personally or through an agent does any of the acts enumerated in this subsection thereby submits himself or herself ... to the jurisdiction of the courts of this state for any cause of action arising from the doing of any of the following acts:

(a) Operating, conducting, engaging in, or carrying on a business or business venture in this state or having an office or agency in this state.

(b) Committing a tortious act within this state.

FLA. STAT. ch. 48.193(1).6 Because the construction and application of the Florida Long-Arm statute is a question of Florida law, we are required to construe the Long-Arm provisions as would the Florida Supreme Court. See Madara v. Hall, 916 F.2d 1510, 1514 (11th Cir.1990).

A. "Conducting Business" in Florida

"In order to establish that a defendant is `carrying on business' for the purposes of the long-arm statute, the activities of the defendant must be considered collectively and show a general course of business activity in the state for pecuniary benefit." Future Tech. Today, Inc. v. OSF Healthcare Sys., 218 F.3d 1247, 1249 (11th Cir.2000) (per curiam). Factors relevant, but not dispositive, to this analysis include the presence and operation of an office in Florida, see Milberg Factors, Inc. v. Greenbaum, 585 So.2d 1089, 1091 (Fla.Dist.Ct.App.1991), the possession and maintenance of a license to do business in Florida, see Hobbs v. Don Mealey Chevrolet, Inc., 642 So.2d 1149, 1153 (Fla.Dist.Ct.App.1994), the number of Florida clients served, s...

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