JEM CORP. v. McClellan

• Decision Date: 04 December 1978
• Docket Number: Civ. A. No. 78-1069.
• Citation: 462 F. Supp. 1246
• Parties: J. E. M. CORPORATION, a Kansas Corporation, Plaintiff, v. Monty McCLELLAN, M. D., Harold M. Vogel, Max Assoulin, Defendants.
• Court: U.S. District Court — District of Kansas

462 F. Supp. 1246

J. E. M. CORPORATION, a Kansas Corporation, Plaintiff, v. Monty McCLELLAN, M. D., Harold M. Vogel, Max Assoulin, Defendants.

Civ. A. No. 78-1069.

United States District Court, D. Kansas.

December 4, 1978.

Bruce A. Swenson, Arvin, Arvin & Busey, Wichita, Kan., for plaintiff.

Byron Brainerd of Curfman, Brainerd, Harris, Bell, Weigand & Depew, Wichita, Kan., for Harold M. Vogel.

Darrell D. Kellogg of Kahrs, Nelson, Fanning, Hite & Kellogg, Wichita, Kan., for Monty McClellan, M. D.

Evans, Koelzer, Marriott, Osborne & Kreizman, Red Bank, N. J., and Robert J. O'Connor, Wichita, Kan., for Max Assoulin.

MEMORANDUM ORDER

THEIS, Chief Judge.

This matter comes before the Court on the motion of defendant Harold M. Vogel to dismiss the action pursuant to Rule 12(b)(2), Federal Rules of Civil Procedure, for lack of personal jurisdiction. Vogel was served in Chicago pursuant to Rule 4(e), Federal Rules of Civil Procedure, and the Kansas long arm statute, K.S.A. § 60-308(b).

Plaintiff alleges in this action that it contracted with defendant McClellan for the sale of an apartment complex for a total purchase price of $310,000.00. McClellan allegedly agreed to assume a $200,000.00 note and to provide plaintiff with a quantity of jade valued at $110,000.00. Plaintiff alleges that in order to receive an appraisal value for the stones, it initiated a single phone call with Vogel in Chicago, who apparently was familiar with the jade in question. Plaintiff alleges that Vogel represented over the telephone that the jade was worth as much as McClellan claimed and that its value was increasing. Plaintiff now claims that the jade's true worth is only $15,000.00, that Vogel knew this to be the case, and that Vogel intentionally and fraudulently misrepresented the jade's value to mislead plaintiff and to induce plaintiff to enter into a contract upon this mistaken belief.

The primary issue before this Court is whether a fraudulent misrepresentation made from without the jurisdiction that causes tortious injury in the jurisdiction constitutes a "tortious act within this state" within the meaning of K.S.A. § 60-308(b)(2). This Court finds that it does. The long arm statute accordingly applies and Vogel falls within the ambit of service of process authorized under Kansas law.

The Kansas long arm statute in pertinent part provides:

"(b) Any person . . . who in person or through an agent or instrumentality does any of the acts hereinafter enumerated, thereby submits said person . . to the jurisdiction of the courts of this state as to any cause of action arising from the doing of said acts:

. . . . .

(2) the commission of a tortious act within this state;

. . . . .

(7) causes injury to persons or property within this state arising out of an act or omission outside of this state by the defendant, provided in addition, that at the time of the injury either (i) the defendant was engaged in solicitation or service activities within this state; or (ii) products, materials or things processed, serviced or manufactured by the defendant anywhere were used or consumed within this state in the ordinary course of trade or use."

Plaintiff has not made any effort to extend jurisdiction over Vogel under the provisions of subsection (b)(7) cited above. Having concluded that subsection (b)(2) applies on the given facts, this Court will not pursue an examination of the applicability of (b)(7), except with regard to its impact on the necessary statutory interpretation of (b)(2) as held herein.

This Court is careful to add that this holding is statutory only. Any inquiry into the propriety of personal jurisdiction necessarily requires a distinctly twofold analysis. The first question must address the propriety of service under statute or rule—whether the state or federal government has authorized service under circumstances applicable to the given defendant. The second question is separate and independent of the first—whether the exercise of the jurisdiction properly invoked by statute or rule is consistent with the constitutional due process standards set forth in International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), and Shaffer v. Heitner, 433 U.S. 186, 97 S.Ct. 2569, 53 L.Ed.2d 683 (1977). See Product Promotions, Inc. v. Cousteau, 495 F.2d 483, 489 (5th Cir. 1974); Margoles v. Johns, 157 U.S. App.D.C. 209, 483 F.2d 1212, 1220 (1973); Beaty v. M. S. Steel Co., 401 F.2d 157 (4th Cir. 1968); Time, Inc. v. Manning, 366 F.2d 690, 693 (5th Cir. 1966); Sanders Associates, Inc. v. Galion Iron Works & Mfg. Co., 304 F.2d 915, 918 (1st Cir. 1962); Schreiber v. Allis-Chalmers Corp., 448 F.Supp. 1079, 1085 (D.Kan.1978); Professional Investors Life Ins. Co. v. Roussel, 445 F.Supp. 687 (D.Kan.1978). A motion to dismiss for lack of personal jurisdiction may be granted on either basis alone. Cases must be carefully distinguished on the basis of statutory holdings that find a defendant not within the literal terms of the statute or rule that authorizes service, and constitutional holdings that find the exercise of jurisdiction, once properly invoked by statute or rule, inconsistent with due process standards. See, e. g., Margoles v. Johns, supra; Beaty v. M. S. Steel Co., supra.

An initial matter for consideration is the standard of proof required for a determination of statutory applicability. Vogel, of course, denies having made a misrepresentation or committed fraud. In his answer he admits having a conversation with plaintiff concerning the value of some jade. It is not true under Kansas law that a plaintiff must initially prove the ultimate fact of tort liability as a precondition to filing an action and obtaining service under subsection (b)(2). This would make the existence of personal jurisdiction dependent upon the outcome of a trial on the merits. Courts of different states have chosen various standards for the degree of required proof. See cases cited in Casad, Long Arm and Convenient Forum, 20 Kan.L.Rev. 1, 16 (1971) hereinafter cited as Casad, Long Arm. The Kansas court has specifically held that for service to issue under the long arm statute, plaintiff need only make out a prima facie case that a defendant has committed those acts which allegedly give rise to liability. Hanson v. Murphy, 208 Kan. 297, 301, 491 P.2d 551 (1971); see also Professional Investors Life Ins. Co. v. Roussel, supra, at 692. The jurisdictional use of the language "commits a tortious act" therefore differs from its use in the context of liability.

"The jurisdictional requirements of such a statute are met when the defendant, personally or through an agent, is the author of acts or omissions within the State, and when the complaint states a cause of action in tort arising from such conduct. . . .

"An act or omission within the State . . is a sufficient basis for the exercise of jurisdiction to determine whether or not the act or omission gives rise to liability in tort."

Nelson v. Miller, 11 Ill.2d 378, 393, 143 N.E.2d 673, 681 (1957), cited with approval in Hanson v. Murphy, supra. See also Casad, Long Arm, supra, at 15-16.

In the instant case plaintiff's allegations and Vogel's answer are sufficient to make out a prima facie case that the allegedly fraudulent statements were made. This adequately brings Vogel within the reach of the statute. Vogel has not denied that a phone call was made. The sole dispute is a factual question regarding the content of the discussion—the same question that must ultimately be determined at the trial on the merits. Although the matter might have been more thoroughly presented to the Court at this stage of the proceedings by affidavits, plaintiff has made a sufficient showing to establish threshold jurisdiction.

The second and primary matter for consideration is the statutory construction of subsection (b)(2) of the Kansas long arm statute. Plaintiff argues that an intentional misrepresentation made to Kansas by phone from Illinois constitutes a tort within Kansas and therefore is a "tortious act within this state." Plaintiff is not without considerable authority for this proposition.

The Kansas Supreme Court has expressly recognized that the committee which drafted the Kansas Code of Civil Procedure "lifted bodily" the first four subsections of the long arm statute, including subsection (b)(2), from the Illinois Civil Practice Act of 1955, Ill.Ann.Stat. ch. 110 § 17. Woodring v. Hall, 200 Kan. 597, 600, 438 P.2d 135 (1968); 1963 Kan.Laws, ch. 303, § 60-308. The Kansas Court has also recognized and applied the rule that a statute adopted from another state "carries with it the construction placed upon it by the courts of that state." Barr v. MacHarg, 203 Kan. 612, 615, 455 P.2d 516, 519 (1969); Woodring v. Hall, supra, 200 Kan. at 601, 438 P.2d 135; McHenry v. Hubbard, 156 Kan. 415, 420, 134 P.2d 1107 (1943). The Court in Barr v. MacHarg, supra, expressly adopted the Illinois interpretation of subsection (b)(2), as the Court in Woodring v. Hall adopted the Illinois interpretation of the "transacting business" provision codified in Kansas law at K.S.A. § 60-308(b)(1).

Before the Kansas legislature adopted the Illinois Act and before the Kansas court in Barr v. MacHarg adopted the Illinois interpretation of subsection (b)(2), the Illinois court had given its "tortious act" provision the identical construction advanced by plaintiff here. In Gray v. American Radiator & Standard Sanity Corp., 22 Ill.2d 432, 176 N.E.2d 761 (1961), the Illinois Supreme Court held that the commission of a "tortious act in the forum" was the equivalent of the commission of a "tort in the forum." The Court found the phrase "tortious act" to be a composite of both negligence and damage. If the damage occurred within the state, then the tortious act occurred within the state within the meaning of the Illinois long arm statute. 176 N.E.2d at 763. Thus, when the Ohio manufacturer in Gray sold a valve to a...