Morris Aviation, LLC v. Diamond Aircraft Indus., Inc.

• Decision Date: 26 July 2010
• Docket Number: Civil Action No. 3:09-CV-644-S
• Parties: MORRIS AVIATION, LLC, and Mascaro Aviation, LLC, Plaintiffs v. DIAMOND AIRCRAFT INDUSTRIES, INC., Defendant.
• Court: U.S. District Court — Western District of Kentucky

730 F.Supp.2d 683

MORRIS AVIATION, LLC, and Mascaro Aviation, LLC, Plaintiffs

v.DIAMOND AIRCRAFT INDUSTRIES, INC., Defendant.

Civil Action No. 3:09-CV-644-S.

United States District Court,

W.D. Kentucky,

at Louisville.

July 26, 2010.

Mark T. Hayden, Greenebaum Doll & McDonald PLLC, Cincinnati, OH, Michael A. Grim, Greenebaum Doll & McDonald PLLC, Louisville, KY, for Plaintiffs.

Ashley Bruce Trehan, Carl R. Nelson, Fowler White Boggs, PA, Tampa, FL, Carol D. Browning, Jamie K. Neal, Stites

& Harbison, PLLC, Louisville, KY, for Defendant.

MEMORANDUM OPINION

CHARLES R. SIMPSON III, District Judge.

Morris Aviation (a Kentucky corporation) and Mascaro Aviation (a Florida corporation) have sued Diamond Aircraft Industries (a Canadian corporation) for fraud and violation of state consumer protection statutes. Each plaintiff purchased a DA42 aircraft (Mascaro in August 2007, Morris in March 2008) from Premier Aircraft Sales, Inc., an authorized distributor of Diamond airplanes. ¹ These planes were designed for and sold with engines manufactured by Thielert Aircraft Engines G.m.b.H. ("TAE"), a German firm. Unbeknownst to the plaintiffs, TAE had begun experiencing financial problems in 2006. In November of that year it came under official investigation in its home country for attempting to obtain bank loans and stock certificates under false pretenses. Several months later, German authorities opened a second investigation into fraudulent activities perpetrated by TAE executives. The end result was TAE falling into a German insolvency proceeding in April 2008, at which all the firm's engine warranties-including those covering the engines that power the plaintiffs' planes-were declared void. Consequently, the plaintiffs allege, their engines are now worth substantially less than they were at the time of purchase. In addition, to remain operable the engines will require significant maintenance expenditures that would have been covered by the warranties if they were still in force.

Plaintiffs assert that Diamond misled them about the state of TAE's finances and the likelihood that their engine warranties would turn out to be worthless. They therefore filed a complaint in this court alleging fraudulent and negligent misrepresentation of those facts, as well as fraud by omission. In addition, Morris claims that Diamond violated the Kentucky Consumer Protection Act, KRS 367.110, et seq., and Mascaro claims violation of the Florida Unfair and Deceptive Trade Practices Act, Fla. Stat. § 501.201, et seq. Diamond has moved to dismiss the complaint for lack of personal jurisdiction and (failing that) on the basis that it fails to state a cognizable cause of action.² We turn first to the jurisdictional arguments.

I

The plaintiff bears the burden of establishing personal jurisdiction. Neogen Corp. v. Neo Gen Screening, Inc., 282 F.3d 883, 887 (6th Cir.2002) ( citing Nationwide Mut'l Ins. Co. v. Tryg Int'l Ins. Co., Ltd., 91 F.3d 790, 793 (6th Cir.1996)). While the district court may hold an evidentiary hearing to determine whether or not jurisdiction exists, it need not do so; in that case the plaintiff "need only make a prima facie showing of jurisdiction," CompuServe, Inc. v. Patterson, 89 F.3d 1257, 1262 (6th Cir.1996), establishing the necessary facts with "reasonable particularity." Neogen, 282 F.3d at 887 ( quoting Provident Nat'l Bank v. California Fed. Savings Loan Ass'n, 819 F.2d 434, 437 (3d Cir.1987)). Without a hearing the court may not "consider facts proffered by the defendant that conflict with those offered by the plaintiff," id. ( citing Serras v. First Tenn. Bank Nat'l Ass'n, 875 F.2d 1212, 1214 (6th Cir.1989)), and "must consider the pleadings and affidavits in a light most favorable to the plaintiff," CompuServe, 89 F.3d at 1262 ( citing Theunissen v. Matthews, 935 F.2d 1454, 1458 (6th Cir.1991)).

A federal district court can exercise jurisdiction over any person subject to the jurisdiction of the state in which it sits. Kerry Steel, Inc. v. Paragon Indus., 106 F.3d 147, 148 (6th Cir.1997). The Due Process Clause imposes constitutional limits on this jurisdiction, and Kentucky's long-arm statute, KRS 454.210, has been interpreted as reaching the outer limits of what federal law allows. Cummings v. Pitman, 239 S.W.3d 77, 84 (Ky.2007). Consequently the statutory requirements have merged into the due process analysis, and the only question regarding personal jurisdiction in Kentucky is whether the Constitution will allow it. Id. at 84-85.

In all questions of personal jurisdiction, "the constitutional touchstone remains whether the defendant purposefully established 'minimum contacts' in the forum state." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985) ( quoting International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945)). Personal jurisdiction may take one of two forms. "General jurisdiction" attaches upon "a showing that the defendant has continuous and systematic contacts with the forum state sufficient to justify the state's exercise of judicial power with respect to any and all claims the plaintiff may have against the defendant." Kerry Steel, 106 F.3d at 149. If a company has enough contacts with Kentucky, it can be sued here over a product sold in Oklahoma to an Alaskan citizen on the basis of general jurisdiction. Alternatively, "specific jurisdiction" can be premised on as little as a single event or transaction in the forum state, provided the claims at issue " 'arise out of or relate to' a defendant's contacts with the forum." Id. ( citing Helicopteros Nacionales de Colombia S.A. v. Hall, 466 U.S. 408, 414-415 & nn. 8-10, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984)).

A

We first ask whether Kentucky can constitutionally exercise general personal jurisdiction over Diamond. The "general jurisdiction inquiry is dispute blind, the sole focus being on whether there are continuous and systematic contacts between the defendant and the forum." Dickson Marine Inc. v. Panalpina, Inc., 179 F.3d 331, 339 (5th Cir.1999) ( citing Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414-16, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984); Mary Twitchell, The Myth of General Jurisdiction, 101 Harv. L.Rev. 610 (1988)). The purpose of this inquiry is to determine whether the forum state has enough of an interest in the defendant corporation itself to force it to submit to the state's authority, because in a general jurisdiction case the state need not have an interest in the specific cause of action alleged. Id. The assessment of general jurisdiction considers the defendant's connections with the forum state leading up to the accrual of the cause of action, and not just those contacts related to the case at hand. See 4 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1067.5 (3d ed. 2002). "General jurisdiction is proper only where 'a defendant's contacts with the forum state are of such a continuous and systematic nature that the state may exercise personal jurisdiction over the defendant even if the action is unrelated to the defendant's contacts with the state.' " Bird v. Parsons, 289 F.3d 865, 873 (6th Cir.2002) ( quoting Third Nat'l Bank v. WEDGE Group, Inc., 882 F.2d 1087, 1089 (6th Cir.1989)). It is difficult to get into court on the basis of general jurisdiction; leading commentatorshave described the threshold for general jurisdiction as "very substantial" and "quite rigorous." 4 Wright & Miller, supra, at § 1067.5.

There is no step-by-step test for general jurisdiction; the Supreme Court has handed us only the "continuous and systematic contacts" rubric. Accordingly, we must proceed by comparing the contacts in our case to those in other leading precedents. Helicopteros is the most prominent. There, the Court held that the Colombian defendant had not maintained sufficient contact with Texas to allow the state court to exercise general personal jurisdiction over it. 466 U.S. at 418-19, 104 S.Ct. 1868. This was true despite several arguably substantial connections with the would-be forum state: the defendant had negotiated a contract (unrelated to the tort action that was before the Court) in Texas; had accepted checks drawn on a Texas bank; had purchased nearly 80% of its fleet of helicopters as well as other spare parts and accessories in Texas; and had sent pilots to Texas for training. Id. at 411, 416, 104 S.Ct. 1868.

What contacts does Diamond have to Kentucky? There is no allegation that it (for instance) maintains an office in Kentucky, that it is licensed to do business here, that it has a bank account here, or that it directs any of its business operations from the Commonwealth. See Bird, 289 F.3d at 873-74 ( citing Helicopteros, 466 U.S. at 416, 418, 104 S.Ct. 1868). Diamond's connection to Kentucky is quite limited. First (and this is the plaintiffs' strongest argument), it has designated an authorized distributor (Premier) and a certified repair center (Don Davis Aviation, Inc., of Henderson, Kentucky) to serve the Kentucky market. This is however a rather tenuous contact, seeing as neither the distributor nor the repair center is actually a part of the Diamond corporate entity (and Premier is not even located in this Commonwealth). It is true that Diamond maintains some sort of contractual relationship with Don Davis Aviation, but a single such contract is hardly "systematic" and compares unfavorably to the Helicopteros defendant's significant and repeated purchases in the putative forum state. Second, the FAA's registry reflects at least ten Diamond-manufactured aircraft assigned to Kentucky. (Pl.'s Ex. C.) Again, however, this is not on its own substantial evidence that Diamond has directed its activities to Kentucky: the planes' present owners could have purchased them second-hand or from out of state before bringing them here. There is no evidence or even allegation regarding the sales themselves-nothing to show that...