Lakin v. Prudential Securities, Inc.

• Citation: 348 F.3d 704
• Decision Date: 04 November 2003
• Docket Number: No. 02-2477.,02-2477.
• Parties: Scott B. LAKIN, Director of the Department of Insurance for the State of Missouri, in his statutory capacity as Liquidator of International Financial Services Life Insurance Company; George Dale, Commissioner of Insurance for the State of Mississippi, in his statutory capacity as Liquidator of Franklin Company Family Guarantee Life Insurance Company, and First National Life Insurance Company of America; Anne B. Pope, Commissioner of Commerce for the State of Tennessee in her statutory capacity as a Liquidator of Franklin American Life Insurance Company; Carroll Fisher, Insurance Commissioner for the State of Oklahoma, in his statutory capacity as Receiver of Farmers and Ranchers Life Insurance Company in Liquidation, Appellants, v. PRUDENTIAL SECURITIES, INC.; Prudential Investments, Inc., Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

348 F.3d 704

Scott B. LAKIN, Director of the Department of Insurance for the State of Missouri, in his statutory capacity as Liquidator of International Financial Services Life Insurance Company; George Dale, Commissioner of Insurance for the State of Mississippi, in his statutory capacity as Liquidator of Franklin Company Family Guarantee Life Insurance Company, and First National Life Insurance Company of America; Anne B. Pope, Commissioner of Commerce for the State of Tennessee in her statutory capacity as a Liquidator of Franklin American Life Insurance Company; Carroll Fisher, Insurance Commissioner for the State of Oklahoma, in his statutory capacity as Receiver of Farmers and Ranchers Life Insurance Company in Liquidation, Appellants, v. PRUDENTIAL SECURITIES, INC.; Prudential Investments, Inc., Appellees.

No. 02-2477.

United States Court of Appeals, Eighth Circuit.

Submitted: December 12, 2002.

Filed: November 4, 2003.

Douglas J. Schmidt, argued, Kansas City, MO (Michael Clithero and J. Dale Youngs, on the brief), for appellants.

Donald F. Luke, argued, New York, NY (John K. Carroll, Hilary Lane and C. Neil Gary, New York, NY; Stephen B. Higgins and Suzanne Montgomery, St. Louis, MO and Richard S. Brownlee III and Michael A. Dallmeyer, Jefferson City, MO, on the brief), for appellees.

Before BOWMAN, RILEY, and SMITH, Circuit Judges.

SMITH, Circuit Judge.

Appellants filed suit in Missouri state court, alleging claims of negligence, breach of contract, and breach of fiduciary duties. After removal, Appellee Prudential Savings Bank ("Prudential Savings") moved for dismissal for lack of personal jurisdiction. Appellants resisted the motion and filed a request for jurisdictional discovery. The district court then granted Prudential Securities' motion and denied appellants' request. We affirm in part, reverse in part, and remand for jurisdictional discovery.

I.

Beginning in 1991 a group of individuals-including Martin Frankel, John Hackney, Gary Atnip, and others-acquired and ran several insurance companies. After acquiring the companies, they allegedly engaged in an elaborate looting scheme, which converted and misappropriated the assets and funds of these insurance companies. The insurance companies are now insolvent and in receivership. Appellants serve as the court-appointed receivers of these insurance companies, which are located in their respective states-Missouri, Mississippi, Tennessee, and Oklahoma.

Appellee Prudential Savings is a federally-chartered savings bank. Its principal place of business and its home office are located in the State of Georgia. In December 1998, as part of the scheme, Hackney opened a custody account at Prudential Savings on behalf of Franklin American Life Insurance Company ("FAL"), a Tennessee-domiciled insurance company. On December 28, 1999, the account received a deposit of approximately $69 million; allegedly that money was later transferred to another bank account in Tennessee and then to Frankel's Swiss bank account.

After the alleged fraud was exposed and the insurance companies went insolvent, appellants filed a complaint against Prudential Savings and others¹ in Missouri state court. In pertinent part, the suit alleged that Prudential Savings was negligent and breached its contractual and fiduciary duties to FAL when it allegedly permitted the $69 million to be released to Frankel without proper instruction from FAL's officers. After the suit was filed, the case was removed to the United States District Court for the Western District of Missouri.

Prudential Savings then filed a motion to dismiss for lack of personal jurisdiction, arguing that it has only one physical office-located in Georgia-and that it has virtually no contact with Missouri residents. Appellants countered that from December 1998 to June 2001, Prudential Savings did have sufficient contacts with the State of Missouri. Appellants noted that Prudential Savings maintained home-equity loans and lines of credit to Missouri residents totaling around $10 million, or one percent of its loan portfolio. In addition, appellants noted that Prudential Savings maintained a Web site-www.prudential.com/banking²-on which Prudential Savings' services are offered to Missouri residents. As an alternative, appellants requested leave for jurisdictional discovery. The district court, however, disagreed with appellants, granted Prudential Services' motion to dismiss, and denied appellants' motion for jurisdictional discovery. For the reasons stated below, we affirm in part, reverse in part, and remand for jurisdictional discovery.

II.

We review de novo whether appellants have presented a prima facie case³ of personal jurisdiction, viewing the evidence in the light most favorable to the appellants and resolving all factual conflicts in their favor. Pecoraro v. Sky Ranch for Boys, Inc., 340 F.3d 558, 561 (8th Cir.2003). As we sit in diversity for this suit, our analysis of personal jurisdiction involves two steps. We first must consider whether the State of Missouri would accept jurisdiction under the facts of this case. Sondergard v. Miles, Inc., 985 F.2d 1389, 1392 (8th Cir.1993). Then, we must determine whether that exercise of jurisdiction comports with Constitutional Due Process restrictions. Id.

A. Jurisdiction

The Supreme Court has noted that states exercise two broad types of personal jurisdiction: specific jurisdiction and general jurisdiction. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 nn. 8-9, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984). Specific jurisdiction refers to jurisdiction over causes of action that "arise out of" or "relate to" a defendant's activities within a state. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985). General jurisdiction, "on the other hand, refers to the power of a state to adjudicate any cause of action involving a particular defendant, regardless of where the cause of action arose." Sondergard, 985 F.2d at 1392 (citation omitted); see also Helicopteros, 466 U.S. at 414 & n. 9, 104 S.Ct. 1868.

Appellants first argue that they have established a prima facie case of specific jurisdiction. However, a prima facie case of specific personal jurisdiction can only be established if Prudential Savings "has purposefully directed [its] activities at [Missouri] residents," and the claim of this suit either "arises out of" or "relates to" these activities. Burger King, 471 U.S. at 472, 105 S.Ct. 2174 (citation omitted); see also State ex rel. Newport v. Wiesman, 627 S.W.2d 874, 876 (Mo.1982) (en banc) (extending the Missouri long-arm statute to the extent permissible under the Due Process Clause). Here, the cause of action alleged-that Prudential Savings was negligent and breached its contractual and fiduciary duties to FAL-is entirely unrelated to Prudential Securities' activities in Missouri. Rather, the cause of action "arises out of" and "relates to" activities in the State of Tennessee. As a result, appellants' argument for specific jurisdiction fails.

Appellants next argue that the facts of this case-specifically Prudential Securities' Web site and its home-equity loans and lines of credit to Missouri residents⁴-are sufficient to establish general jurisdiction over Prudential Securities. Thus, we must examine whether Missouri "has authorized the exercise of general jurisdiction over non-resident corporations, and whether it would apply the doctrine in this case." Sondergard, 985 F.2d at 1392.

The Missouri Supreme Court has long held that a "foreign corporation present and conducting substantial business in Missouri" is subject to the jurisdiction of Missouri courts. State ex rel. K-Mart Corp. v. Holliger, 986 S.W.2d 165, 167 (Mo.1999) (en banc) (citing cases holding the same from 1907 forward). Missouri courts have interpreted the phrase "present and conducting substantial business" to mean that jurisdiction will be established if a non-resident corporation has "substantial" and "continuous" contacts with the State of Missouri.⁵ Sloan-Roberts v. Morse Chevrolet, Inc., 44 S.W.3d 402, 409 (Mo.Ct.App.2001) (citing Int'l Shoe Co. v. Washington, 326 U.S. 310, 318, 66 S.Ct. 154, 90 L.Ed. 95 (1945)); see also Shouse v. RFB Constr. Co., Inc., 10 S.W.3d 189, 193 (Mo.Ct.App.1999). This is identical to the federal due process requirements. See Int'l Shoe, 326 U.S. at 318, 66 S.Ct. 154; see also Helicopteros, 466 U.S. at 415, 104 S.Ct. 1868; Perkins v. Benguet Consol. Mining Co., 342 U.S. 437, 445, 72 S.Ct. 413, 96 L.Ed. 485 (1952).

Having determined that Missouri courts have authorized general jurisdiction, we must now determine if a Missouri court would apply the doctrine in this case. Generally, Missouri courts-like most courts-are hesitant to "exercise general jurisdiction over non-resident defendants." Sloan-Roberts, 44 S.W.3d at 410; see also Davis v. Baylor Univ., 976 S.W.2d 5, 7-8 (Mo.Ct.App.1998). Nevertheless, after reviewing the relevant factors and the applicable law, we conclude that appellants could establish a case of general personal jurisdiction if they are permitted to take jurisdictional discovery on remand.

1. Business Contacts

First, from December 1998 to June 2001, Prudential Savings maintained home-equity loans and lines of credit to persons in Missouri. These contacts are continuous. Home-equity loans and lines of credit are not single point-of-sale transactions. Rather, the terms of these loans are typically measured in months and years-creating continuous long-term contacts with the State of Missouri.

Appellants also argue that these business contacts are substantial because they total approximately $10 million. Prudential Securities counters that the home-equity loans and lines of credit only makes up one percent of their total loan portfolio. They therefore reason that the contacts should be considered insubstantial to establish general jurisdiction.⁶ While Missouri courts have not...