McNic Oil & Gas Co. v. Ibex Resources Co., L.L.C.

• Decision Date: 28 September 1998
• Docket Number: No. Civ.A. 98-40243.,Civ.A. 98-40243.
• Citation: 23 F.Supp.2d 729
• Parties: McNIC OIL & GAS COMPANY, Plaintiff, v. IBEX RESOURCES COMPANY, L.L.C., JMA Resources, Inc., and Jeffrey J. McDougall, Defendants.
• Court: U.S. District Court — Eastern District of Michigan

23 F.Supp.2d 729

McNIC OIL & GAS COMPANY, Plaintiff, v. IBEX RESOURCES COMPANY, L.L.C., JMA Resources, Inc., and Jeffrey J. McDougall, Defendants.

No. Civ.A. 98-40243.

United States District Court, E.D. Michigan, Southern Division.

September 28, 1998.

COPYRIGHT MATERIAL OMITTED

Eugene Driker, Matthew J. Boettcher, Barris, Sott, Detroit, MI, for plaintiff.

Steven F. Spender, Spender & Robb, Flint, MI, for defendants.

MEMORANDUM OPINION AND ORDER DENYING DEFENDANTS' MOTION TO DISMISS FOR LACK OF JURISDICTION OVER THE PERSON AND GRANTING DEFENDANTS' MOTION TO TRANSFER VENUE PURSUANT TO 28 U.S.C. § 1404(a)

GADOLA, District Judge.

On July 31, 1998, defendants, IBEX Resources Company, L.L.C. (hereinafter IBEX), JMA Resources, Inc. (hereinafter JMA), and Jeffrey J. McDougall, filed a motion to dismiss for lack of personal jurisdiction. On the same day, defendants filed a motion to dismiss for improper venue. Alternatively, defendants request transfer of venue to a federal district court in the Western District Oklahoma. On August, 14, 1998, plaintiff, McNic Oil and Gas Co. (hereinafter MCNIC), responded to defendants' motion. Oral argument on both defendants' motions was heard by this Court on September 23, 1998. For the reasons set forth below, this Court will deny defendants' motion to dismiss for lack of personal jurisdiction, and grant defendants' motion for transfer of venue to a federal district court in the Western District of Oklahoma.

Factual Background

Plaintiff, McNic Oil and Gas Co. (MCNIC), is a corporation incorporated in Detroit, Michigan, with its principal place of business allegedly in Detroit, Michigan.¹ Defendant Ibex Resources Company (IBEX), is a limited liability company registered in Oklahoma, with its principal place of business in Oklahoma City, Oklahoma. Defendant JMA Resources, Inc. (JMA) is a corporation incorporated in Oklahoma, with its principal place of business in Oklahoma City, Oklahoma. Defendant Jeffrey J. McDougall is a resident of Yukon, Oklahoma.

The dispute between the parties arose after the execution of a series of agreements relating to MCNIC's retaining of IBEX for the purposes of managing, acquiring, developing, and operating oil and gas leases, as well as selling the hydrocarbons produced therefrom. There are six principal agreements at issue:

(1) Engagement Agreement dated April 1, 1994 (see Appendix to Defendants' Motions, Tab 5);

(2) Participation Agreement (Exhibit A to Engagement Agreement) (see Appendix to Defendants' Motions, Tab 6);

(3) Management Agreement dated April 1, 1994 (see Appendix to Defendants' Motions, Tab 4);

(4) Confidentiality Agreement dated March 21, 1994 (see Appendix to Defendants' Motions, Tab 3);

(5) Joint Operating Agreement (JOA) dated April 1, 1994 (see Appendix to Defendants' Motions, Tab 7); and

(6) Sublease dated September 1, 1997 (see Appendix to Defendants' Motions, Tab 8).

In its complaint, plaintiff requests an accounting, injunctive relief, damages for breach of contract and for breach of fiduciary duty, as well as a declaratory judgment determining the rights of the parties.

Most important for purposes of the instant motions, the Engagement Agreement, the Participation Agreement and the Management Agreement all contain forum selection clauses. These clauses provide that Michigan law will govern said agreements and that all litigation related to the agreements will be brought in a court located in Michigan. The Confidentiality Agreement, Joint Operating Agreement and Sublease do not contain forum selection clauses. Also important is the fact that defendant McDougall, in his capacity as president of IBEX, is a signatory of the Engagement Agreement, the Participation Agreement, and the Management Agreement. Defendant JMA, of which McDougall is the president, is not a signatory to these three agreements.

I. DEFENDANTS' MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION OVER DEFENDANT IBEX RESOURCES COMPANY, L.L.C., DEFENDANT JEFFREY J. MCDOUGALL, AND DEFENDANT JMA RESOURCES, INC.

Legal Standards

The burden rests on the plaintiff to establish the existence of personal jurisdiction over the defendant. See Welsh v. Gibbs, 631 F.2d 436, 438 (6th Cir.1980). Satisfying this burden requires that "plaintiff may not stand on his pleadings but must, by affidavit or otherwise, set forth specific facts showing that the court has [personal] jurisdiction." Theunissen v. Matthews, 935 F.2d 1454, 1458 (6th Cir.1991). However, when determining whether there have been sufficient contacts with the forum state to establish personal jurisdiction, the court must interpret the pleadings and affidavits in the light most favorable to the plaintiff. See id. at 1459.

A federal court sitting in diversity may exercise personal jurisdiction over an out-of-state defendant only after engaging in a two-step analysis. First, the court must determine whether the state long-arm statute authorizes jurisdiction over the nonresident defendant. Second, the court must consider whether the exercise of personal jurisdiction would not deny defendant his constitutional right to due process of law. See Omni Capital Int'l v. Rudolf Wolff & Co., Ltd., 484 U.S. 97, 104, 108 S.Ct. 404, 98 L.Ed.2d 415 (1987). There are two types of personal jurisdiction: general personal jurisdiction and specific or limited personal jurisdiction. The principles of general jurisdiction are applied when the plaintiff's cause of action is unrelated to the defendant's instate activities. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 n. 9, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984). Specific jurisdiction is applied when the plaintiff's cause of action arises out of the defendant's transactions of business with the forum state. Id. at 414 n. 8. In the instant case, plaintiff does not allege that defendants engaged in any on-going in-state activities upon which general jurisdiction might obtain.² Plaintiff's cause of action "arises out of or is related to" the defendants' conduct within Michigan. See Conti v. Pneumatic Prods. Corp., 977 F.2d 978, 981 (6th Cir.1992). Therefore, this Court must determine whether specific jurisdiction exists over each defendant.

The first step in the inquiry is whether the requirements of due process have been met. See Jeffrey v. Rapid Am. Corp., 448 Mich. 178, 529 N.W.2d 644 (Mich. 1995). This inquiry asks whether defendants have established such "minimum contacts" with the forum state, "that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice.'" International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945). This standard is satisfied, and a defendant is subject to in personam jurisdiction, when contacts with the "forum State are such that [the defendant] should reasonably anticipate being haled into court there." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980). With respect to interstate contractual obligations, parties who "reach out beyond one state and create continuing relationships and obligations with citizens of another state" are fairly subject to regulation and sanctions in the other state for the consequences of their activities. Travelers Health Ass'n v. Virginia, 339 U.S. 643, 647, 70 S.Ct. 927, 94 L.Ed. 1154 (1950).

The Sixth Circuit has further refined the due process analysis by setting forth a three-part test to determine whether specific jurisdiction exists over a nonresident defendant. See Cole v. Mileti, 133 F.3d 433, 435 (6th Cir.1998). "First, the defendant must purposefully avail himself of the privilege of conducting activities within the forum state; second, the cause of action must arise from the defendant's activities there; and third, the acts of the defendant or consequences caused by the defendant must have a substantial enough connection with the forum state to make its exercise of jurisdiction over the defendant fundamentally fair." Id.

The second step requires federal courts in diversity cases to apply the law of the forum state to determine whether personal jurisdiction exists. Nationwide Mut. Ins. Co. v. Tryg Int'l Ins. Co., 91 F.3d 790, 793 (6th Cir.1996) (citing LAK, Inc. v. Deer Creek Enterprises, 885 F.2d 1293, 1298 (6th Cir.1989)). This Court will look to Michigan's long-arm statutes to determine whether specific personal jurisdiction exists over each defendant. With respect to defendant Jeffrey J. McDougall, sued in his individual capacity, jurisdiction must be ascertained through reference to Michigan's long-arm statute regarding specific jurisdiction over individuals.³ Section 600.705 of the Michigan Compiled Laws provides that personal jurisdiction will attach if a cause of action arises out of an individual's "transaction of any business within the state." Mich.Comp. Laws § 600.705(1). This phrase, "any business within the state" has been very broadly interpreted. The term "any" includes "each" and "every" and comprehends even "the slightest" business transactions. See Sifers v. Horen, 385 Mich. 195, 199 n. 2, 188 N.W.2d 623 (1971).

With respect to personal jurisdiction over defendant JMA Resources, Inc., this Court must look to Michigan's long-arm statute regarding specific jurisdiction over corporations.⁴ Just as with respect to specific jurisdiction over individuals, Section 600.715 of the Michigan Compiled Laws provides that personal jurisdiction will attach if a cause of action arises out of a corporation's "transaction of any business within the state." Mich.Comp.Laws § 600.715(1).⁵

With respect to obtaining personal jurisdiction over defendant IBEX Resources Company, L.L.C., IBEX is not incorporated. IBEX, a limited liability company (L.L.C.), is instead an unincorporated voluntary association for purposes of Michigan law. Thus, this Court must apply Michigan's long-arm statute regarding specific jurisdiction over unincorporated associations.⁶ The...