Inter-Americas Ins. Corp., Inc. v. Xycor Systems, Inc., 88-1021-C.

• Decision Date: 25 February 1991
• Docket Number: No. 88-1021-C.,88-1021-C.
• Parties: INTER-AMERICAS INSURANCE CORPORATION, INC., a Kansas Corporation, Plaintiff, v. XYCOR SYSTEMS, INC., a Texas Corporation; Xycor, Inc., a California Corporation; Xycor, Inc., a de facto Corporation; Robert L. Reimers, James S. Kutzler, Stephen L. Calhoun, Shareholders of Xycor, Inc., a Dissolved Corporation; The Xycor, Inc. Shareholder's Liquidating Trust, Betty Sellers, Trustee, a California Corporation; Xycor Venture, Inc., a California Corporation; Systems Management, Inc., an Oklahoma Corporation, Defendants.
• Court: U.S. District Court — District of Kansas

757 F. Supp. 1213

INTER-AMERICAS INSURANCE CORPORATION, INC., a Kansas Corporation, Plaintiff, v. XYCOR SYSTEMS, INC., a Texas Corporation; Xycor, Inc., a California Corporation; Xycor, Inc., a de facto Corporation; Robert L. Reimers, James S. Kutzler, Stephen L. Calhoun, Shareholders of Xycor, Inc., a Dissolved Corporation; The Xycor, Inc. Shareholder's Liquidating Trust, Betty Sellers, Trustee, a California Corporation; Xycor Venture, Inc., a California Corporation; Systems Management, Inc., an Oklahoma Corporation, Defendants.

No. 88-1021-C.

United States District Court, D. Kansas.

February 25, 1991.

Charles W. Harris, Curfman, Harris, Stallings & Snow, Wichita, Kan., for plaintiff.

Richard E. Sparber, James Michael Zimmerman of Sparber, Ferguson, Naumann & Ponder, San Diego, Cal., for Xycor, Inc. and The Xycor Inc. Shareholder's Liquidating Trust, Betty Sellers, Trustee.

Gary M. Austerman, James M. Armstrong, Foulston & Siefkin, Wichita, Kan., Gordon Keckeissen, Wilson, Sonsini, Goodrich & Rosati, Palo Alto, Cal., John E. Ponder, James Michael Zimmerman, Sparber, Ferguson, Naumann, Ponder & Ryan, San Diego, Cal., for Xycor Venture, Inc.

MEMORANDUM AND ORDER

CROW, District Judge.

The case comes before the court on the following motions: defendant Xycor Venture, Inc.'s motion to dismiss for lack of personal jurisdiction pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure (Dk. 48); defendants', Robert L. Reimers, James S. Kutzler and Stephen L. Calhoun, motion to dismiss for lack of personal jurisdiction (Dk. 51); defendants', Xycor, Inc., The Xycor Inc. Shareholders' Liquidating Trust, Robert L. Reimers, James S. Kutzler and Stephen L. Calhoun, motion to dismiss pursuant to Rule 12(b)(6) (Dk. 51); and the defendants', Xycor, Inc., The Xycor, Inc. Shareholders' Liquidating Trust, Robert L. Reimers, James S. Kutzler and Stephen L. Calhoun, motion for summary judgment pursuant to Rule 56 (Dk. 82). Oral argument would not materially assist the court in deciding these motions. The motions will be addressed seriatim.

MOTIONS TO DISMISS PURSUANT TO RULE 12(b)(2)

To oppose successfully a pretrial motion to dismiss for lack of personal jurisdiction, the plaintiff must make a prima facie showing that statutory and due process requirements for exercising personal jurisdiction over defendants have been met. Behagen v. Amateur Basketball Ass'n of the United States, 744 F.2d 731, 733 (10th Cir.1984), cert. denied, 471 U.S. 1010, 105 S.Ct. 1879, 85 L.Ed.2d 171 (1985). Parties may submit affidavits and other documentary evidence for the court's consideration. Thermal Insulation Systems v. Ark-Seal Corp., 508 F.Supp. 434, 437 (D.Kan.1980). Allegations in the complaint are accepted as true to the extent they are uncontroverted by the affidavits. Pytlik v. Professional Resources, Ltd., 887 F.2d 1371, 1376 (10th Cir.1989). When the jurisdictional allegations in the complaint are challenged by an appropriate pleading, the plaintiff has the duty to support them with competent proof of the supporting facts. Id. If the affidavits are conflicting, the factual disputes are resolved in favor of the plaintiff's prima facie case. Behagen, 744 F.2d at 733. Plaintiff is entitled to the benefit of any factual doubts. Ammon v. Kaplow, 468 F.Supp. 1304, 1309 (D.Kan.1979).

In a diversity case, the law of the forum is used to judge whether the prima facie showing has been made. Yarbrough v. Elmer Bunker & Assocs., 669 F.2d 614, 616 (10th Cir.1982). Therefore, the court must address two questions. First, does the defendant's conduct come within one of the provisions of the Kansas long-arm statute? Second, does the exercise of jurisdiction comport with due process requirements? Cal Caulfield and Co. v. Colonial Nursing Homes, 642 F.Supp. 777, 779 (D.Kan.1986).

The defendants, Xycor Venture, Inc., Robert L. Reimers, James S. Kutzler and Stephen L. Calhoun, move to dismiss the claims against them for lack of personal jurisdiction. The plaintiff argues jurisdiction can be exercised over them under several long-arm provisions because of the conduct of Xycor, Inc. and the moving defendants' connections with that corporation. To prove the link with Xycor, Inc., the plaintiff proposes several theories; none of which provide a substantial basis for jurisdiction.

In August and September of 1985, the plaintiff, Inter-Americas Insurance Corporation, Inc. ("Inter-Americas"), purchased from defendant, Systems Management, Inc. (SMI), an Oklahoma corporation, a license to use a computer software system owned by SMI. The software is known as Credit Life and Health Insurance System, or "CLS System." The sale was consummated in a written agreement between the parties. Among its terms was that SMI would service the CLS System as necessary.

Subsequently, in September of 1985, SMI sold its exclusive license to the CLS System to Xycor, Inc. ("XI"), a California corporation. By the terms of the sale agreement, XI assumed SMI's obligations to service the CLS System for plaintiff. XI later wrote plaintiff on September 25, 1985, informing it of this acquisition of rights. Personnel with XI were sent to Inter-Americas to begin installing the CLS System. In a letter dated December 2, 1985, XI told plaintiff that it was assuming the responsibility for performing the contract between Inter-Americas and SMI. Through February 17, 1986, XI sent invoices on the software to plaintiff, and payment was subsequently sent to XI.

On February 16, 1986, XI entered into an Asset Purchase Agreement with Xycor Systems, Inc. ("XSI"), a Texas corporation. By its terms, XI assigned to XSI, inter alia, the exclusive license agreement for the CLS System with SMI and the unrestricted right to use the name, "XYCOR." The agreement also provided that XSI would "assume all obligations under" the SMI and XI license agreement with Inter-Americas and would "have the exclusive right and benefit to provide current and renewal services...." XI assigned title to all fixed assets, furniture, equipment and software used in its Dallas office to XSI. Three XI employees, including Buz Allen, were hired by XSI. The parties also agreed that XSI would take over XI's post office box and telephone lines which had been used in operating XI's Dallas office. Finally, the agreement specified that XI would be "called upon to perform extensive marketing services for sales" of the CLS System for the benefit of XSI.

Plaintiff did not learn of this assignment between XI and XSI until July 7, 1987. Plaintiff received correspondence from the Dallas office over Xycor letterhead in March, June, and November of 1986. These letters were signed by David Dibrell.¹ Nevertheless, after February 1986, plaintiff actively dealt with XSI exclusively regarding the installation and service of the CLS System.

On December 30, 1986, nearly a year after XI's assignment to XSI, Xycor Venture, Inc. ("XVI"), another California corporation, purchased the assets of XI. The next day, XI entered into corporate dissolution, and its remaining assets were transferred into The Xycor, Inc. Shareholder's Liquidating Trust ("Trust"), including the right to receive payments from XVI. Defendants, Robert L. Reimers, James S. Kutzler and Stephen L. Calhoun, were the shareholders of XI at the time of its dissolution. The shareholders personally agreed to remain liable for XI's debts. Plaintiff has alleged that the shareholders constitute a de facto corporation.

The contacts between plaintiff and XVI are limited. In February 1987, plaintiff received the Winter issue of "Xy-Line," a newsletter for Xycor software clients. The newsletter began with an open letter to clients explaining that there had been a change in management and ownership in order to obtain more capital. The newsletter listed a San Diego mailing address for Xycor, Inc. Another contact is the exchange of correspondence in the summer of 1987. A copy of plaintiff's letter to Dave Dibrell in Texas, dated June 25, 1987, was also sent to XI at its California address. Plaintiff complained in the letter of continuing bugs and errors in the CLS System. XI of California wrote back in July of 1987 informing plaintiff that XSI in Dallas had sole responsibility for the CLS System because of the assignment in 1986. The last contact involves the plaintiff receiving in the mail a solicitation in April of 1988 from XI in California. As for general contacts with the forum, plaintiff says XI still advertises in trade journals to which the plaintiff subscribes. As to all of these contacts, plaintiff presumes they are actions taken by XVI in the name of XI.

The issues of personal jurisdiction raised here are unique and difficult. Much of this is due to the multiple corporate transactions, as set forth above, and due to the plaintiff's theories of extended liability. Plaintiff argues that XI remained secondarily liable to plaintiff after it assigned the plaintiff's contract to XSI and that XVI assumed this secondary liability of XI in purchasing its assets. Plaintiff argues the individual shareholders are liable under a California statute for the debts of the dissolved XI, and one of those debts is presumably XI's secondary liability as assignor to plaintiff. Building upon the secondary liability nexus between XI and the moving defendants, plaintiff seeks to attribute XI's contacts with the plaintiff and the forum to the moving defendants as the basis for personal jurisdiction.

To date, a Kansas court does not appear to have addressed what must be shown to acquire personal jurisdiction over a successor corporation that is liable for the predecessor corporation which has the only contacts with Kansas. The parent-subsidiary corporate relationship as the basis for long-arm jurisdiction has been considered in Kansas with the courts eschewing strict reliance on the alter ego doctrine in favor of balancing all contacts with forum. Hoffman v. United Telecommunications, Inc., 575 F.Supp....