James Whiten Livestock, Inc. v. Western Iowa Farms, Co.

• Citation: 750 F. Supp. 529
• Decision Date: 06 November 1990
• Docket Number: Civ. No. 1:90-CV-1582-ODE.
• Parties: JAMES WHITEN LIVESTOCK, INC. v. WESTERN IOWA FARMS, CO. and Scott Mactier.
• Court: U.S. District Court — Northern District of Georgia

750 F. Supp. 529

JAMES WHITEN LIVESTOCK, INC. v. WESTERN IOWA FARMS, CO. and Scott Mactier.

Civ. No. 1:90-CV-1582-ODE.

United States District Court, N.D. Georgia, Atlanta Division.

November 6, 1990.

Alton Monroe Adams and Russell William Smith, Adams, Clifton & Sanders, Toccoa, Ga., for plaintiff.

James R. McKoon, Caldwell, Heggie & Helton, Chattanooga, Tenn., for defendant.

ORDER

ORINDA D. EVANS, District Judge.

This diversity action alleging libel, fraud and tortious interference with contractual relations is before the court on Plaintiff's motion to amend its complaint and Defendant Western Iowa Farms Co.'s ("Western") motion to dismiss for lack of personal jurisdiction, insufficient service of process, and failure to state a claim upon which relief can be granted or, alternatively, for summary judgment.

Plaintiff brought this action in state court on June 18, 1990. Defendants removed it to this court on July 19, 1990. Defendants have not answered the complaint. Instead, Western filed the motion now before the court pursuant to Fed.R. Civ.P. 12(b)(2, 5, 6). Plaintiff opposed that motion and filed a motion to amend its fraud claim. Defendant filed a reply brief.

This dispute arises from several cattle transactions undertaken between November 14, 1989 and January 1990. The parties do not seem to dispute the facts, which are relatively sparse. Defendant Western is incorporated and has its principal place of business in Nebraska. Western operates in several states, but has no registered agent in Georgia. Western is registered with the United States Department of Agriculture, Packers and Stockyards Administration as a "market agency" pursuant to the Packers and Stockyards Act of 1921 ("PSA"). 7 U.S.C. § 181 et seq. As a market agency, Western is in the business of financing cattle brokers in their purchases, a business known as a clearing service. Defendant Scott Mactier is vice-president of Western.

On November 14, 1990, Western entered into a clearing arrangement with a cattle broker based in Tennessee named Lannie D. Arnold. As required by regulations promulgated by the Packers and Stockyards Administration, 9 C.F.R. § 201.29(c), Western named Arnold as a clearee on its surety bond. By the terms of the clearing agreement, Arnold operated for his own benefit independent of Western. Western, however, retained the right as clearing agent to investigate potential sellers and to preapprove the checks it would clear for Arnold. The sole deposition produced by Plaintiff indicates that Western never investigated Plaintiff, (Hugh Mactier Deposition, 19-20), and that Western preapproved the clearing of checks by keeping a list provided by Arnold of his probable suppliers. (Hugh Mactier Deposition, 24). The agreement provides that Western was to receive payment from Arnold upon resale of the cattle. Western ended that relationship three months later in January, 1990. Plaintiff has alleged no contacts with Georgia besides those arising from Western's relationship with Arnold.

Plaintiff, a Georgia corporation operating in Stephens County, Georgia, purchases and sells cattle. Plaintiff had dealt with Arnold in the two years preceding the winter of 1989-1990. During the three months in question, Plaintiff sold five lots of cattle to Arnold, and received five checks from Western in payment. Western also called Plaintiff in November 1989 to inquire as to Plaintiff's relationship with Arnold, and called on January 18, 1990 to inform Plaintiff that Western had ended its clearing arrangement with Arnold. Subsequently, on January 24, 1990, Western filed in Georgia a Uniform Commercial Code financing statement claiming an interest in the livestock inventory and accounts receivable of Arnold.

This suit concerns a Proof of Claim filed by Western with the Packers and Stockyards Administration in Omaha, Nebraska on May 17, 1990. The Proof of Claim, only part of which was submitted by Plaintiff, asserted that Western had sold cattle to Plaintiff on January 8, 1990, but had received no payment. Pursuant to the Administration's regulations, Western included the name of Plaintiff's insurer and that of the Georgia Department of Agriculture. Plaintiff alleges that the Proof of Claim's contents are false and constitute libel per se. Furthermore, Plaintiff alleges that Western's actions constitute fraud against Plaintiff's insurer and tortious interference with Plaintiff's contractual relations.

Western's challenge to the jurisdiction of the court will be taken up first. The party asserting jurisdiction bears the burden of proving that jurisdiction exists. Quikrete Companies, Inc. v. NOMIX Corp., 705 F.Supp. 568, 571 (N.D.Ga.1989). In considering a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(2), a court may consider affidavits and other proof outside the pleadings because, unlike a motion under Rule 12(b)(6), it is a test of Plaintiff's proof. Edwards v. Assoc. Press, 512 F.2d 258, 262 n. 8 (5th Cir.1975) (citing Wright & Miller, § 1351). A motion to dismiss for lack of personal jurisdiction should be denied "if plaintiff alleges sufficient facts to support a reasonable inference that defendant can be subjected to jurisdiction of the court." Jackam v. Hosp. Corp. of America Mideast, Ltd., 800 F.2d 1577, 1579 (11th Cir.1986). In ruling on this motion, Plaintiff's allegations must be accepted as true, and the case will be dismissed only if it appears beyond doubt that Plaintiff can prove no set of facts in support of its claims. Id.

In a diversity action, federal courts have personal jurisdiction over nonresident defendants to the extent permitted by the forum state's long-arm statute, Fed.R. Civ.P. 4(e), subject to the limits of due process. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 291, 100 S.Ct. 559, 564, 62 L.Ed.2d 490 (1980). Plaintiff claims jurisdiction under O.C.G.A. § 9-10-91, which provides:

A Court of this state may exercise personal jurisdiction over any nonresident ... if in person or through an agent, he:

(2) Commits a tortious act or omission within this state, except as to a cause of action for defamation of character arising from the act;

(3) Commits a tortious injury in this state caused by an act or omission outside this state if the tort-feasor regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered in this state....¹

There are two approaches to interpretation of a broadly written long-arm statute such as § 9-10-91. The first approach reads it strictly, so as to limit jurisdiction to a greater extent than would due process. The strict approach is called the "New York rule" and it requires that the act causing the injury occur with the forum state. The second approach, called the "Illinois rule," see, Flint v. Gust, 180 Ga.App. 904, 906, 351 S.E.2d 95 (1986), reads the statute to be coextensive with the limits prescribed by due process, which would allow jurisdiction where the tortious act occurred out of state but caused injury in the forum state if defendant had significant minimum contact with the forum state. See, Asahi Metal Ind. Co. v. Superior Court, 480 U.S. 102, 109-113, 107 S.Ct. 1026, 1030-33, 94 L.Ed.2d 92 (1987) (most recent discussion by Supreme Court of contacts necessary to establish minimum contacts in tort case).

Since 1973, courts in Georgia have followed the Illinois rule, Coe & Payne Co. v. Wood-Mosaic Corp., 230 Ga. 58, 195 S.E.2d 399 (1973); Accord, Clarkson Pow- er Flow v. Thompson, 244 Ga. 300, 301, 260 S.E.2d 9 (1979); First United Bank v. First Nat'l Bank, 255 Ga. 505, 506, 340 S.E.2d 597 (1986), as have the courts of the Eleventh Circuit interpreting the Georgia long-arm statute, Delong Equipment Co. v. Washington Mills Abrasive Co., 840 F.2d 843, 849 (11th Cir.1988). The court in Clarkson reasoned that the 1973 amendments to § 9-10-91, which added subsection (3), had manifested an intent to circumvent decisions which had limited jurisdiction pursuant to subsection (b) to situations in which the negligent act occurred in Georgia, as under the New York rule. 244 Ga. at 301, 260 S.E.2d 9. The courts of Georgia subsequently developed a test, derived from the due process decisions rendered by federal courts, for evaluating cases under subsections (2) and (3), which the courts read together. Id.

(1) the nonresident has purposefully done some act or consummated some transaction with or in the forum (but the actual act or omission resulting in the injury here need not have occurred in this state). The defendant need not be physically within the forum when this act or transaction occurs and a single such instance may suffice;

(2) the Georgia plaintiff must have a legal cause of action in tort against the nonresident, which arises out of, or results from, the purposeful activity of the defendant involving this state; a resident is the victim of a "tortious act" when he suffers an injury here due to an act or omission of negligence occurring outside this state; and

(3) if the requirements of (1) and (2) are satisfied, the exercise of jurisdiction over the nonresident must be "reasonable."

Shellenberger v. Tanner, 138 Ga.App. 399, 407, 227 S.E.2d 266 (1976) (followed in, Smith v. Smith, 254 Ga. 450, 453, 330 S.E.2d 706 (1985); Delong Equipment Co. v. Washington Mills Abrasive Co., 840 F.2d 843, 849 (11th Cir.1988)).

In 1987, however, the Georgia Supreme Court broke its fourteen-year pattern of equating subsections (2) and (3) of the Georgia statute with the due process standard. Gust v. Flint, 257 Ga. 129, 356 S.E.2d 513 (1987) (applying § 9-10-91 to a fraud action). The nonresident defendants in Gust had only one alleged contact with Georgia: They called the plaintiff in Georgia and fraudulently induced him to send them money. The lower court found that jurisdiction existed under § 9-10-91(2) because, although the defendants' contact with Georgia was...