Mid-States Mortg. Corp. v. Louie

• Decision Date: 06 December 1993
• Docket Number: No. 93-C-0144.,93-C-0144.
• Citation: 841 F. Supp. 871
• Parties: MID-STATES MORTGAGE CORP., Plaintiff, v. Harry A. LOUIE, John E. Brittain, III, and Eugene W. Camara, Defendants.
• Court: U.S. District Court — Eastern District of Wisconsin

841 F. Supp. 871

MID-STATES MORTGAGE CORP., Plaintiff, v. Harry A. LOUIE, John E. Brittain, III, and Eugene W. Camara, Defendants.

No. 93-C-0144.

United States District Court, E.D. Wisconsin.

December 6, 1993.

Steven L. Strye, O'Neil, Cannon & Hollman, Kathryn A. Keppel, D. Michael Guerin, Denis J. Regan, Gimbel, Reilly, Guerin & Brown, Milwaukee, WI, for plaintiff.

William H. Levit, Jr., Mark J. Backe, Godfrey & Kahn, Milwaukee, WI, for defendants.

DECISION AND ORDER

RANDA, District Judge.

Before the Court is a Recommendation from the Honorable Magistrate Judge Robert L. Bittner regarding the Defendants' motion to dismiss the above captioned case for lack of personal jurisdiction. The Magistrate recommended dismissal of the action as the exercise of jurisdiction would not comport with the due process clause of the Fourteenth Amendment. The Magistrate undertook the two part analysis set forth in Daniel J. Hartwig Associates, Inc. v. Kanner, 913 F.2d 1213 (7th Cir.1990) and concluded that Wisconsin's long-arm statute applied. Nevertheless, the Magistrate determined that the exercise of personal jurisdiction pursuant thereto violated the due process clause of the Fourteenth Amendment. Pursuant to 28 U.S.C. § 636(b) and Local Rule 13.03 (E.D.Wis.), both parties have filed objections thereto. Pursuant to those same provisions, the Court reviews de novo the Magistrate's Recommendation. For the reasons set forth therein and briefly addressed below, the Court adopts the Magistrate's Recommendation of October 29, 1993.

ANALYSIS¹

The arguments raised by both parties were adequately and correctly addressed by the Magistrate's Recommendation. Simply put, the Magistrate's jurisdictional analysis properly rested upon the single transaction which gave rise to the matter in dispute. Not surprisingly, the Defendants do not object to the Magistrate's recommendation, but only to the conclusion that Wisconsin's long-arm statute (Wis.Stats. § 801.05(5)(d)) is applicable. In arguing that § 801.05(5)(d) is inapplicable, the Defendants point this Court's attention to two cases which the Magistrate correctly and convincingly distinguished. A.L. Afram v. Balfour, MacLaine, Inc., 63 Wis.2d 702, 218 N.W.2d 288 (1974); Nagel v. Crain Cutter Co., 50 Wis.2d 638, 184 N.W.2d 876 (1971) (Recommendation at 7-8) The Court incorporates the Magistrate's reasoning and analysis relative thereto and finds that the exercise of personal jurisdiction is warranted pursuant to Wis.Stat. § 801.05(5)(d).

The Plaintiff's objection focuses on the actions taken by the individual defendants (specifically, Brittain and Louie) in their management of Phoenix Funding Group, Inc. ("Phoenix"). Plaintiff argues that the day-to-day fax and telephone management activities of, at least, two of the defendants, comport with the due process clause. This argument ignores the distinction between individuals acting in their corporate as opposed to their individual capacities. The oft stated rule is that jurisdiction over the individual officers of a corporation may not be based merely on jurisdiction over the corporation. Weller v. Cromwell Oil Co., 504 F.2d 927 (6th Cir. 1974); 4 Wright & Miller, Federal Practice and Procedure, § 1069 (1987). Having no basis to conclude that the corporate form should be ignored, the Magistrate concluded that the "telephone, mail, and fax contacts with Wisconsin related to the business operations of Phoenix and not to the contract between the parties at issue in this case". (emphasis added) (Recommendation at 11) Accordingly, the Magistrate narrowed the personal jurisdiction analysis to the transaction at issue; the one and only contact these individual Defendants had with Wisconsin.

While satisfied that this contact fell within § 801.05(5)(d) thereby providing a statutory basis for the exercise of jurisdiction, the Magistrate concluded that the exercise of jurisdiction over these Defendants would not comport with "traditional notions of fair play and substantial justice". International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). Of the three Defendants, only Camara has ever been in Wisconsin and that was in 1978 for less than fifteen (15) minutes. (Recommendation at 6) This Court, upon review of the complete file, concludes that dismissal of the above captioned case against the Defendants is warranted for the reasons set forth in the Magistrate's Recommendation.²

NOW, THEREFORE, BASED ON THE FOREGOING, IT IS HEREBY ORDERED THAT:

1. The Defendants' motion to dismiss the above captioned Case No. 93-C-0144 is GRANTED;

2. The Plaintiff's motion to amend its Complaint is DENIED AS MOOT; and

3. Final Judgment shall be entered on a separate document.

SO ORDERED.

MAGISTRATE JUDGE'S RECOMMENDATION RE: DEFENDANTS' MOTION TO DISMISS

BITTNER, United States Magistrate Judge.

MEMORANDUM

The plaintiff, Mid-States Corporation (hereinafter referred to as Mid-States), commenced this action on January 11, 1993 in the State of Wisconsin, Milwaukee County Circuit Court, against defendants Harry A. Louie; John E. Brittain, III; and Eugene W. Camara, alleging the defendants breached their contract to pay $200,016.00 plus interest for the purchase of Phoenix Funding Group, Inc. (hereinafter referred to as Phoenix) stock. On February 12, 1993 the defendants removed the action to federal district court, invoking diversity jurisdiction pursuant to 28 U.S.C. § 1332(a)(2). Thereafter, the defendants filed a motion to dismiss for lack of jurisdiction and the plaintiff, in turn, filed a motion for leave to amend its complaint. Subsequently, in anticipation of a motion by the defendants to disqualify plaintiff's counsel, this Court entered an order on April 2, 1993 staying further briefing of the defendants' motion to dismiss for lack of personal jurisdiction and the plaintiff's motion for leave to amend until further order of the Court.

On April 30, 1993 the defendants' motion for disqualification of plaintiff's counsel was granted by this Court. Pursuant to a briefing schedule set into place following the decision on the disqualification issue, the briefing of the defendants' motion to dismiss and the plaintiff's motion to amend has been completed and such motions are ready for resolution. They will be addressed herein.

This action was assigned to this Court according to the random assignment of civil cases, pursuant to 28 U.S.C. § 636(b)(1)(B) and Local Rule 13.03 (E.D.Wis.). Since the parties have not consented to United States Magistrate Judge jurisdiction, this Court now makes its recommendation for the proposed disposition of the defendants' motion to dismiss and declines to rule on the plaintiff's motion to amend its complaint. Subject matter jurisdiction is obtained in this action pursuant to 28 U.S.C. § 1332(a). Venue is proper in this District under 28 U.S.C. § 1391(a).

DEFENDANTS' MOTION TO DISMISS

The defendants move the Court for issuance of an order, pursuant to Fed.R.Civ.P. 12(b)(2), dismissing this action on the ground the Court lacks personal jurisdiction.

In order to determine the scope of this Court's personal jurisdiction in a diversity case, this Court must examine State law governing personal jurisdiction. FMC Corp. v. Varonos, 892 F.2d 1308, 1310 (7th Cir. 1990); Fed.R.Civ.P. 4(e). The plaintiff has the burden of establishing jurisdiction under the Wisconsin long-arm statute, but the provisions of the Act are to be liberally construed in favor of exercising in personam jurisdiction. State ex rel. N.R.Z. v. G.L.C., 152 Wis.2d 97, 447 N.W.2d 533, 535 (1989); Lincoln v. Seawright, 104 Wis.2d 4, 9, 310 N.W.2d 596, 598 (1981). The statute represents an attempt to codify the due process requirements of "minimum contacts" set forth in International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). Consequently, a plaintiff's showing of compliance with Wis.Stat. § 801.05 raises a presumption of compliance with due process; a presumption the defendant is permitted to rebut. State ex rel. N.R.Z. v. G.L.C., 447 N.W.2d at 535; Lincoln v. Seawright, 310 N.W.2d at 599. The determination of whether a Wisconsin court has jurisdiction over a nonconsenting, nonresident defendant is a two (2) step process. Daniel J. Hartwig Associates, Inc. v. Kanner, 913 F.2d 1213, 1216 (7th Cir.1990). The first step is to determine whether the defendant is subject to jurisdiction under the applicable Wisconsin state long-arm statute. If not, then there is no jurisdiction and the inquiry is at an end. If so, then the court must go to the second step to determine whether the exercise of jurisdiction under the long-arm statute violates the due process requirements of the Fourteenth Amendment. Daniel J. Hartwig Associates, Inc. v. Kanner, 913 F.2d at 1216; Giotis v. Apollo of the Ozarks, Inc., 800 F.2d 660, 665 (7th Cir.1986), cert. denied, 479 U.S. 1092, 107 S.Ct. 1303, 94 L.Ed.2d 158 (1987) (citing Matter of All-Star Ins. Corp., 110 Wis.2d 72, 76, 327 N.W.2d 648, 650 Wis.Ct.App.1983). A District Court sitting in diversity must not only ask these same two (2) questions, but it should ask them in the same order since it is obviously preferable to decide a question on statutory rather than constitutional grounds. Giotis v. Apollo of the Ozarks, Inc., 800 F.2d at 665. In ruling on a motion to dismiss for lack of personal jurisdiction, courts are not limited to the facts set forth in the complaint, but rather may receive and consider affidavits from both parties. Nelson v. Park Indus., Inc., 717 F.2d 1120, 1123 (7th Cir.1983), cert. denied, 465 U.S. 1024, 104 S.Ct. 1277, 79 L.Ed.2d 682 (1984); see also, Met-L-Wood Corp. v. SWS Indus., Inc., 594 F.Supp. 706, 708 n. 5 (N.D.Ill.1984). When deciding such a motion solely on the basis of the parties' written materials, the plaintiff need only show a prima facie case of personal jurisdiction and is entitled to have all inferences about material jurisdictional facts...