Lagoon v. Tower Grp., Inc.

• Decision Date: 19 August 2011
• Docket Number: Case No. 11–CV–0323–CVE–PJC.
• Citation: 809 F.Supp.2d 1300
• Parties: SLEEPY LAGOON, LTD., et al., Plaintiffs, v. TOWER GROUP, INC., Defendant.
• Court: U.S. District Court — Northern District of Oklahoma

809 F.Supp.2d 1300

SLEEPY LAGOON, LTD., et al., Plaintiffs,

v.TOWER GROUP, INC., Defendant.

Case No. 11–CV–0323–CVE–PJC.

United States District Court, N.D. Oklahoma.

Aug. 19, 2011.

Christina Marie Vaughn, Gerald Lynn Hilsher, McAfee & Taft, Tulsa, OK, John N. Hermes, McAfee & Taft, Oklahoma City, OK, for Plaintiffs.

John Henry Rule, II, Gable & Gotwals, Tulsa, OK, Sidney George Dunagan, Gable Gotwals, Oklahoma City, OK, for Defendant.

OPINION AND ORDER

CLAIRE V. EAGAN, Chief Judge.

Now before the Court is the Brief of Defendant Tower Group, Inc. in Support of Motion to Dismiss or Transfer Venue (Dkt. 16, 18). Defendant Tower Group, Inc. (Tower) asks the Court to dismiss the case for lack of personal jurisdiction or improper venue or, in the alternative, to transfer this case to the United States District Court for the Southern District of New York. Dkt. # 16, at 5. Plaintiffs respond that the Court has personal jurisdiction over Tower and Tower has not met its burden to show that plaintiffs' chosen forum is inconvenient. Dkt. # 27, at 6–7; Dkt. # 28, at 2.

I.

Plaintiffs formerly owned stock in Preserver Group, Inc. (Preserver) and entered a stock purchase agreement (SPA) with Tower for sale of their ownership interest in Preserver. Plaintiffs Sleepy Lagoon, Ltd. and McWhorter Family Trust were created under the laws of Texas, and plaintiff Gail McWhorter resides in Texas. Dkt. # 2, at 1–2. Plaintiff Alvin E. Swanner resides in Louisiana, and Brion Properties is a partnership created under Louisiana law with its principal place of business in Louisiana. Id. at 2. Plaintiff William E. Lobeck, Jr. is an individual residing in Oklahoma, and the William E. Lobeck, Jr. Trust and Kathryn L. Taylor Trust were created under Oklahoma law. Id. Tower is a Delaware corporation with its principal place of business in New York City, New York. Id., Dkt. # 16, at 6. Preserver formerly owned all of the stock of Preserver Insurance Company, and Preserver Insurance Company is licensed to conduct business in several states. Preserver Insurance Company is licensed to conduct business in Oklahoma, but it did not conduct business in Oklahoma when the parties initially entered negotiations for the sale of Preserver's stock and did not become licensed to sell insurance in Oklahoma until November 2008. Dkt. # 16–1, at 5.

Tower states that it does not conduct business in Oklahoma and does not solicit business from Oklahoma residents. Dkt. # 16, at 6–7. Tower's Chairman of the Board, President, and Chief Executive Officer, Michael H. Lee, states that Tower does not own or lease property located in Oklahoma and it does not maintain any type of presence in this state. Dkt. # 16–1, at 3. Lee further claims that Tower does not send its employees to Oklahoma for any purpose and Tower does not visit potential customers in Oklahoma. Id. Plaintiffs have provided a copy of Tower's 2010 Annual Report in which Tower states that “we conduct business in all 50 states and in the District of Columbia through 20 offices across the U.S. and in Bermuda.” Dkt. # 27–1, at 3. The 2010 Annual Report describes Preserver Insurance Company as an operating subsidiary of Tower and states that “through our Insurance Subsidiaries [ ] we offer a broad range of commercial, personal and specialty property and casualty insurance products and services to businesses in various industries and to individuals throughout the United States.” Id. at 6. Tower explains that “we” is used to mean Tower and its subsidiaries, and references to “we,” “us,” or “our” in the 2010 Annual Report may not refer to the direct activities of Tower. Dkt. # 27–1, at 6; Dkt. # 31–1, at 2.

Tower negotiated with plaintiffs for the sale of their ownership interest in Preserver, but the parties dispute whether plaintiffs or Tower initiated negotiations for the sale of plaintiffs' stock holdings in Preserver. Tower states that it “did not seek out either Preserver or the Sellers, and had no intention to conduct business in the State of Oklahoma.” Dkt. # 16, at 7. Lee states that executives of Preserver, on behalf of plaintiffs, approached Tower with an offer to sell their stock. Dkt. # 16–1, at 4. According to Lee, the negotiations took place in New York and New Jersey and Tower did not send a representative to Oklahoma to negotiate with plaintiffs or their attorneys. Id. He states that “[d]uring the time leading up to execution of the [SPA] Tower Group had some communications with representatives of the Sellers by telephone, facsimile, mail, and/or e-mail,” but he does not specify who was involved in these communications or where the communications were directed. Id. Plaintiffs present a different story about the initiation of negotiations between the parties. Patrick J. Haveron, former President and Chief Executive Officer of Preserver, states that Lee contacted him about possible employment with Tower and Lee inquired about the possibility of Tower acquiring Preserver. Dkt. # 27–2, at 1. Haveron advised Preserver's Board of Directors (the Board) about Tower's interest in acquiring Preserver, and the Board voted to pursue a more formal process in which Tower and other interested bidders could submit offers to purchase Preserver. Id. at 2. Haveron states that he disclosed to Tower information about each of the plaintiffs, including their state of residency, and Tower was aware that it would be contracting with parties in Oklahoma, Texas, and Louisiana. Id.

Tower submitted a proposed purchase price to the Board, and the Board agreed to negotiate exclusively with Tower. Id. Tower drafted a proposed SPA and submitted it to Preserver. Preserver's shareholders rejected Tower's proposed SPA but invited Tower to submit a revised SPA. Id. Tower provided a new draft of the SPA to the Board in August 2006. Id. The parties executed the final version of the SPA on November 13, 2006. Dkt. # 2–1, at 2. The parties agreed that “THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED AND THE RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF.” Dkt. # 2–2, at 37. The SPA required the parties to engage in post-closing activities and it was anticipated that the parties would continue to have contact. In particular, the parties agreed that a final payment would be made following a determination of the final base purchase price, and this would require payment by the buyer to the seller, or vice versa, depending on the final base purchase price determined by an accountant. Dkt. # 2–1, at 19–22. Tower agreed to provide various documents and information to plaintiffs during this process, and the parties created a dispute resolution procedure requiring continued communication between the parties and their legal representatives if they could not agree on a final base purchase price. Id. at 20–21. The parties also agreed that plaintiffs might be entitled to a contingent additional purchase price in an amount to be determined after March 31, 2010. Id. at 23. Each party designated a legal representative to receive notices and communications following execution of the SPA and plaintiffs requested to receive notice through the law firm of Crowe & Dunlevy in Oklahoma City, Oklahoma. Dkt. # 2–2, at 35.

Tower did communicate with the plaintiffs through their Oklahoma counsel by email, letter, and telephone. Tower's Senior Vice President and General Counsel, Stephen Kibblehouse, sent notices to or communicated with plaintiffs' Oklahoma counsel at least 16 times between August 2007 and March 2008. Dkt. # 27–3; Dkt. # 27–4. Tower's outside counsel, Ruth Oren, also sent emails to or called plaintiffs' Oklahoma counsel at least six times in 2010, and these communications relate to the possible payment of additional purchase price by Tower. Dkt. # 27–5. Tower acknowledges that these communications occurred but states that, from its perspective, none of the post-closing activities occurred in Oklahoma. Dkt. # 16, at 8. Tower claims that “[n]one of the knowledgeable personnel or records relevant to such activities are located in the State of Oklahoma” and all persons and records meeting this description are located in New York or New Jersey. Id. at 8.

Plaintiffs state that the final reserve measurement date used to determine whether any additional purchase price was owed to plaintiffs was March 31, 2010, and they claim that Tower unilaterally changed the accounting method to calculate Preserver's reserve of losses and loss adjustment expenses. Dkt. # 2, at 4. They allege that Tower's decision to change accounting methodology has prevented them from obtaining an independent calculation of the additional purchase price. Id. at 5. Plaintiffs submitted their own calculation of Preserver's reserve to Tower and demanded that Tower pay them $5,222,925.50 plus interest, but Tower refused to pay plaintiffs any additional purchase price. Id. at 6. On May 25, 2011, plaintiffs filed this case seeking to recover the additional purchase price, any expenses and attorney fees incurred to obtain the additional purchase price, and declaratory relief. Id. at 7–8. Defendant filed a motion (Dkt. 16, 18) to dismiss this case for lack of personal jurisdiction or improper venue, in the alternative, to transfer this case to the Southern District of New York.

II.

As to the motion to dismiss for lack of personal jurisdiction, plaintiffs bears the burden of establishing that the Court has personal jurisdiction over the defendant. OMI Holdings, Inc. v. Royal Ins. Co. of Canada, 149 F.3d 1086, 1091 (10th Cir.1998). “When a district court rules on a Fed.R.Civ.P. 12(b)(2) motion to dismiss for lack of personal jurisdiction without holding an evidentiary hearing, ... the plaintiff need only make a prima facie showing of personal jurisdiction to defeat the motion.” Id. (citations omitted). “The plaintiff may make this prima facie showing by demonstrating, via...