Magic Toyota v. Southeast Toyota Distributors

Citation784 F. Supp. 306
Decision Date21 January 1992
Docket NumberCiv. A. No. 2:91-1031-18.
CourtUnited States District Courts. 4th Circuit. United States District Court of South Carolina
PartiesMAGIC TOYOTA, INC. and David B. Jones, Plaintiffs, v. SOUTHEAST TOYOTA DISTRIBUTORS, INC.; J.M. Family Enterprises, Inc.; Tender Loving Care Corp.; World Omni Financial Corp.; World Omni Leasing, Inc.; Joyserv Co., Ltd.; John McNally, as trustee of the dissolved corporation Carnett-Parsnett Systems, Inc.; Toyota Motor Sales U.S.A., Inc.; Toyota Motor Co., Inc.; Toyota Motor Credit Corp.; James Moran, Individually; John McNally, Individually; Al Hendrickson, Individually; Janice Moran, Individually; James M. Moran, Jr., Individually; Pat Moran, Individually; and Arlene McNally, Individually, Defendants.


Raymond R. Bergan, Douglas R. Marvin, Daniel F. Katz, Philip B. Busch, Washington, D.C., Morris D. Rosen, H. Brewton Hagood, Charleston, S.C., Stephen G. Morrison, Nina Nelson Smith, Arthur L. Coleman, Julie Jeffords-Moose, Columbia, S.C., for plaintiffs.

Douglas R. Abrams, Donald B. Stickland, Raleigh, N.C., William C. Clark, Hilton Head, S.C., for defendants.


NORTON, District Judge.

This matter is before the Court on a motion to dismiss for lack of personal jurisdiction and improper venue filed by defendants James Moran, Janice Moran, James Moran, Jr., Patricia Moran, John McNally, Arlene McNally and Al Hendrickson and a motion for summary judgment filed by all defendants.1


In the 1960's, defendant James Moran established a company named Southeast Toyota Distributors ("SET"), a Toyota distributorship for several Southeastern states, including South Carolina. SET enfranchises Toyota dealers within its region and distributes Toyota vehicles, parts and accessories to those dealers. After starting SET, James Moran's business blossomed and he later established several other complementary companies, including defendants Tender Loving Care Corporation ("TLC"),2 World Omni Financial Corporation ("WOFCO"),3 World Omni Leasing, Inc. ("WOLI"),4 JoyServ Company ("JoyServ"),5 Carnett-Parsnett Systems, Inc. ("Carnett")6 and J.M. Family Enterprises ("JMFE").7 These companies (collectively referred to as the "JM Family") provide financing, insurance and other products relating to the distribution and sale of Toyotas.

James Moran's business is a family business. Several of James Moran's children and other relatives are involved in the business and are named as defendants in this lawsuit. His daughters Patricia Moran and Arlene McNally, son James Moran, Jr., son-in-law John McNally and wife Janice Moran, are all involved in the JM Family and are being sued individually. The degree of corporate participation varies among the family members. Some are executives in the business, while others are merely minority stockholders and directors of some of the companies. Other defendants include Al Hendrickson, a long-time executive with SET, now in business for himself; Toyota Motor Sales, U.S.A. ("TMS"), the United States importer and distributor of Toyota vehicles; Toyota Motor Credit Corporation ("TMCC"), a finance company associated with TMS; and Toyota Motor Company ("TMC"), TMS's parent company and provider to TMS of the vehicles.8

In 1986, plaintiff David Jones, then a Florida resident, purchased a Toyota dealership in Beaufort, South Carolina, which he renamed Magic Toyota. The dealership is also a plaintiff in this case. Mr. Jones, who claims that he was not interested in opening a dealership in Beaufort, but in Hardeeville, South Carolina, alleges that SET induced Jones to buy the Beaufort dealership with the promise that he would be able to move the business to Hardeeville. In reliance on this promise, alleges Mr. Jones, he bought the dealership and agreed to use WOFCO as his wholesale financing source. Mr. Jones claims that once in the grip of James Moran and his "family," he learned that James Moran did not run his businesses in a lawful way. Mr. Jones claims that the JM Family sought to control its dealers and to coerce them to commit unlawful business activities. Once the JM Family determined that it could not control Mr. Jones, he alleges, it set out to destroy his dealership, which closed in 1989.

Following the demise of his dealership, Mr. Jones and Magic Toyota filed the instant action, alleging that defendants violated the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq., and alleging four state claims: breach of contract, fraud, unfair trade practices and violation of the Automobile Dealers Day in Court Act, S.C.Code Ann. § 56-15-20. The seven individual defendants now move to dismiss this action as to them for lack of personal jurisdiction and improper venue. All of the defendants move for summary judgment based on Res Judicata and Collateral Estoppel. The Court turns first to the motion to dismiss for lack of personal jurisdiction.


Defendants James Moran, Janice Moran, James Moran, Jr., Patricia Moran, John McNally, Arlene McNally and Al Hendrickson (the "Individual Defendants") contend that service of process was not authorized by any federal rule or statute, nor does it meet Due Process requirements, and therefore, service upon them was invalid, and this Court lacks personal jurisdiction over them.

Before this Court may exercise personal jurisdiction over the Individual Defendants, the procedural requirement of service of summons, as set forth in Federal Rule of Civil Procedure 4(e), must be satisfied. Omni Capital Int'l v. Rudolf Wolff & Co., Ltd., 484 U.S. 97, 108 S.Ct. 404, 98 L.Ed.2d 415 (1987). Rule 4(e) provides that a federal court may exercise jurisdiction over nonresident defendants if the service complies with either a federal or state statute authorizing service on non-resident defendants. Of course, aside from the procedural requirements, Due Process requirements must also be met before a court can exercise personal jurisdiction.

When a court's personal jurisdiction over a defendant is contested, the plaintiffs have the burden of showing that such jurisdiction exists. McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 785, 80 L.Ed. 1135 (1936). Where, as here, there has been no evidentiary hearing and the Court proceeds upon the written submissions, plaintiffs must make only a prima facie showing that jurisdiction exists. Combs v. Bakker, 886 F.2d 673, 676 (4th Cir.1989). While plaintiffs' written allegations of jurisdictional facts are generally construed in their favor, see id. and Kowalski v. Doherty, Wallace, Pillsbury & Murphy, 787 F.2d 7, 9 (1st Cir.1986), their showing of personal jurisdiction must be based on specific facts set forth in the record in order to defeat defendants' motion to dismiss. "In reviewing the record before it, a court may consider pleadings, affidavits, and other evidentiary materials without converting the motion to dismiss to a motion for summary judgment." VDI Technologies v. Price, 781 F.Supp. 85, 87 (D.N.H.1991). See also Wilson-Cook Medical, Inc. v. Wilson, 942 F.2d 247, 252 (4th Cir.1991). Plaintiffs assert that the RICO statute authorizes nationwide service of process and thus meets the Rule 4(e) requirement. Plaintiffs additionally look to the South Carolina Long Arm Statute, S.C.Code Ann. § 36-2-803, and the South Carolina Automobile Dealers Day in Court Act, S.C.Code Ann. § 56-15-20 as statutory sources of personal jurisdiction. The Court first addresses the federal statute upon which plaintiffs rely.

A. Section 1965(b) of RICO

Section 1965(b) of RICO states, in part:

In any civil RICO action ... in any district court of the United States in which it is shown that the ends of justice require that other parties residing in any other district be brought before the court, the court may cause such parties to be summoned, and process for that purpose may be served in any judicial district of the United States by the marshal thereof.

This section enables a plaintiff to bring before a single court for trial all alleged members of a nationwide RICO conspiracy. By authorizing nationwide service of process, the provision operates in some cases to confer personal jurisdiction over defendants who would not otherwise be within the court's jurisdictional reach. Butcher's Union Local No. 498, United Food and Commercial Workers v. SDC Inv., Inc., 788 F.2d 535, 539 (9th Cir.1986) and Anchor Glass Container Corp. v. Stand Energy Corp., 711 F.Supp. 325, 330 (S.D.Miss.1989).

The parties apparently agree that § 1965(b) ensures that at least one court will have jurisdiction over all RICO defendants. The parties disagree, however, as to when "the ends of justice require" a court to exercise personal jurisdiction in a particular case, pursuant to § 1965(b). Defendants contend that the Ninth Circuit's Butcher's Union decision properly interprets Congress' intent as to the meaning of the phrase. In that case, the Ninth Circuit adopted a rigid test. It held, "for nationwide service to be imposed under section 1965(b), the court must have personal jurisdiction over at least one of the participants in the alleged multidistrict conspiracy and the plaintiff must show that there is no other district in which a court will have personal jurisdiction over all of the alleged co-conspirators." Butcher's Union at 539. Defendants contend that a Florida court would have personal jurisdiction over all of the defendants in this case, and that therefore, under the Butcher's Union analysis, this Court cannot exercise personal jurisdiction unless it can look to another statute for support.

Espousing a more liberal reading of § 1965(b), plaintiffs urge the Court to use a "totality of the circumstances" approach when deciding whether the ends of justice require extending personal jurisdiction. The circumstances in this case dictate that this Court should extend jurisdiction, argue plaintiffs. The following...

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