Miceli v. Stromer

• Decision Date: 29 December 1987
• Docket Number: Civ. A. No. 87-C-835.
• Citation: 675 F. Supp. 1559
• Parties: Gilbert MICELI, et al., Plaintiffs, v. Peter STROMER, et al., Defendants.
• Court: U.S. District Court — District of Colorado

675 F. Supp. 1559

Gilbert MICELI, et al., Plaintiffs, v. Peter STROMER, et al., Defendants.

Civ. A. No. 87-C-835.

United States District Court, D. Colorado.

December 29, 1987.

Michael S. Kupecz, Aurora, Colo., for plaintiffs.

Elaine A. Menter, Pryor, Carney & Johnson, Englewood, Colo., for defendants.

ORDER

CARRIGAN, District Judge.

Plaintiffs Gilbert and Monica Miceli commenced this action alleging that the defendants Universal Life Church, Inc. ("ULC") and Peter R. Stromer fraudulently induced them to seek unsuccessfully a goal prized by some second only to eternal salvation: tax-exempt status as a religious charitable organization.

According to the complaint, ULC was a corporation established to organize and operate a religious order or "church" whose members, for a fee, could become ordained ministers, receive doctorate degrees in religious humanities, biblical studies, divinity, "universal life," metaphysics, or religious science. For an additional fee, a member could receive a "sainthood certificate."¹ Plaintiffs allege that they joined ULC and formed the "Miceli ministry" in reliance on ULC's promise that operation of the ministry would provide them tax-exempt status as a charitable organization.

Further, the complaint alleges, the plaintiffs paid the defendant ULC a $1,250 initiation fee to obtain authority to establish the "Miceli ministry." ULC had promised the plaintiffs that: (1) money paid into the ministry by the plaintiffs would be deductible for income tax purposes as charitable contributions, and (2) sums paid out of the ministry to the plaintiffs and their creditors would also be deductible.

Unfortunately for the plaintiffs, the Internal Revenue Service ("IRS") was found among those of little faith in the "Miceli ministry," and it denied the claimed charitable deductions. After denial of the deductions, ULC recommended that the plaintiffs consult the defendant Stromer, a tax attorney licensed to practice in California. Plaintiffs retained Stromer to represent them in seeking redeterminations of their 1980-82 income taxes. Stromer too failed to convert the IRS, and it continued to deny the claimed charitable deductions.

Four claims for relief are set out in the complaint. First it is asserted that ULC engaged in fraud, intentional misrepresentation, and concealment when it induced the plaintiffs to join ULC and pay it fees for establishing their ministry. Second it is claimed that ULC and Stromer are liable under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq. Third, legal malpractice is alleged against Stromer. Fourth ULC is charged with negligent misrepresentation in referring the plaintiffs to Stromer.

Defendants have jointly moved for: (1) dismissal under Fed.R.Civ.P. 12(b)(3) for improper venue; (2) transfer of venue under 28 U.S.C. § 1404(a); and (3) a stay of discovery pending resolution of these motions. Defendant Stromer, additionally, has moved under Fed.R.Civ P. 12(b)(2) for dismissal for lack of jurisdiction over his person. The issues have been briefed and oral argument was heard on December 4, 1987, with respect to the question of whether personal jurisdiction exists over the defendant Stromer. Because dismissal as against the defendant Stromer would affect consideration of the motions regarding venue, I shall discuss the personal jurisdiction issue first.

1. Stromer's Motion to Dismiss for Lack of Personal Jurisdiction.

Defendant Stromer contends that this action should be dismissed as against him for lack of personal jurisdiction.

Plaintiffs have invoked subject matter jurisdiction on the basis of diversity of citizenship under 28 U.S.C. § 1332. In a diversity case personal jurisdiction is determined under the law of the state where the court sits, with "federal law" entering the picture only if it becomes necessary to decide whether a state's assertion of jurisdiction violates federal due process. Halliburton Co. v. Texana Oil Co., 471 F.Supp. 1017, 1018 (D.Colo.1979); Associated Inns and Restaurant Co. v. Development Assocs., 516 F.Supp. 1023 (D.Colo.1981).

While § 1332 applies to the plaintiffs' state law negligence claim against the defendant Stromer, they have also sued Stromer under RICO. Federal question jurisdiction, therefore, supports the RICO claim (28 U.S.C. § 1331). For purposes of deciding the question of jurisdiction over Stromer's person, however, it makes little difference whether subject matter jurisdiction is based on diversity or a federal question, because the Colorado Supreme Court's interpretation of Colorado's long-arm statute extends jurisdiction to the maximum extent allowed by federal due process. Mr. Steak, Inc. v. District Court, 194 Colo. 519, 521, 574 P.2d 95, 96 (1978). Moreover, a federal court may assert jurisdiction over a non-resident defendant pursuant to the long-arm statute of the state where it sits, "if the statute is complied with and the assertion of jurisdiction is consistent with constitutional due process." 2A J. Moore, Moore's Federal Practice para. 12.072.-2, at 12-60 (2d ed. 1987).

Colorado's long-arm statute provides that Colorado courts have jurisdiction over any cause of action arising from "the transaction of any business within this state," and "the commission of a tortious act within this state...." Colo.Rev.Stat. § 13-1-124(a), (c). Resolution of jurisdictional issues under the Colorado long-arm statute frequently involves ad hoc factual analysis. Waterval v. District Court, 620 P.2d 5, 9 (Colo.1980), cert. denied, 452 U.S. 960, 101 S.Ct. 3108, 69 L.Ed.2d 971 (1981).

Personal jurisdiction may not be assumed over a nonresident defendant unless the defendant has minimum contacts with the forum state "such that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice.'" International Shoe v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945). See Burger King v. Rudzewicz, 471 U.S. 462, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985). A nonresident defendant must by words or conduct purposefully avail himself of the laws of the forum state to an extent which implies that the defendant "should reasonably anticipate being haled into court there." Worldwide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 567, 62 L.Ed.2d 490 (1980).

Courts applying Colorado law consistently have distinguished "between cases in which jurisdiction is sought based on a single isolated incident, and cases in which jurisdiction is predicated on allegations of continuous, substantial conduct in the forum state." Behagen v. Amateur Basketball Ass'n of U.S.A., 744 F.2d 731, 734 (10th Cir.1984), cert. denied, 471 U.S. 1010, 105 S.Ct. 1879, 85 L.Ed.2d 171 (1985). Where a single act or a minimum contact is the basis of jurisdiction, Colorado has adopted a three-pronged test to determine whether the activity of the nonresident may support in personam jurisdiction:

(1) "the defendant must purposely avail himself of the privilege of acting in the forum state or of causing important consequences in that state;"

(2) "the cause of action must arise from the consequences in the forum state of the defendant's activities;" and

(3) "the activities of the defendant or the consequences of those activities must have a substantial enough connection with the forum state to make the exercise of jurisdiction over the defendant reasonable." Van Schaak & Co. v. District Court, 189 Colo. 145, 147, 538 P.2d 425, 426 (1975).

See Sands v. Victor Equipment Co., 616 F.Supp. 1532 (D.Colo.1985).

In contrast, where "there are substantial continuous contacts with the forum state, jurisdiction may be found even when the cause of action does not arise out of the forum-related activity." Waterval v. District Court, 620 P.2d 5, 9 (Colo.1980). See Behagen, supra, 744 F.2d 731; Le Manufacture Francaise v. District Court, 620 P.2d 1040 (Colo.1980).

The burden of establishing personal jurisdiction is always on the party asserting it. Moore's, supra, at 12-55. "The allegations of the complaint as well as any evidence introduced by the parties at any hearing conducted to determine the jurisdictional issue may be considered to determine whether the plaintiff has established a prima facie showing of jurisdiction." Scheuer v. District Court, 684 P.2d 249, 251 (Colo.1984).

Initially, I conclude that the plaintiffs' allegation that Stromer negligently represented the plaintiffs satisfies the statutory requirement of the commission of a tortious act within Colorado. "Negligent conduct in a foreign state which causes injury in Colorado may be deemed an act committed within Colorado for purposes of the long-arm statute." Id. I thus turn to the question of whether federal due process standards are satisfied here.

The relevant inquiry is whether the contacts alleged by the plaintiffs are sufficient to enable this court to assume jurisdiction over Stromer. Because the "single act" or "minimum contact" of the defendant Stromer in representing the plaintiffs is the basis of jurisdiction here, I shall apply the Van Schaak test, as opposed to the "substantial and continuous contact" test, to determine whether asserting personal jurisdiction over Stromer complies with due process.

The first prong of the Van Schaak test is the requirement that the nonresident defendant have "purposefully availed himself of the privilege of acting in the forum state or of causing important consequences in that state." Whether a defendant "has purposefully availed himself of the privilege of conducting activities in Colorado depends on the quality and nature of such defendant's conduct in Colorado as well as the frequency of such conduct." Scheuer, supra, 684 P.2d at 251.

Plaintiffs insist that there is personal jurisdiction over the defendant Stromer because Stromer purposefully availed himself of the privilege of conducting activities in Colorado. More specifically, they allege that...