Multi-Media Intern., LLC v. Promag Retail Services

• Decision Date: 02 November 2004
• Docket Number: No. CIV.A. 04-2119-GTV.,CIV.A. 04-2119-GTV.
• Citation: 343 F.Supp.2d 1024
• Parties: MULTI-MEDIA INTERNATIONAL, LLC, Plaintiff, v. PROMAG RETAIL SERVICES, LLC, Don Sturtz, Joe Peters and John Does Numbers 1-10, Defendants.
• Court: U.S. District Court — District of Kansas

343 F.Supp.2d 1024

MULTI-MEDIA INTERNATIONAL, LLC, Plaintiff, v. PROMAG RETAIL SERVICES, LLC, Don Sturtz, Joe Peters and John Does Numbers 1-10, Defendants.

No. CIV.A. 04-2119-GTV.

United States District Court, D. Kansas.

November 2, 2004.

COPYRIGHT MATERIAL OMITTED

Maryteresa Doyle, Shawnee Mission, KS, for Plaintiff.

MEMORANDUM AND ORDER

VanBEBBER, Senior District Judge.

Plaintiff Multi-Media International, LLC ("MMI"), filed this lawsuit against Defendants Promag Retail Services, LLC, Don Sturtz, Joe Peters and John Does Numbers 1-10, alleging violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq., as well as state claims of fraud, negligent misrepresentation, defamation, unjust enrichment, and conversion.

This action is before the court on Defendants' motion to dismiss Plaintiff's complaint for lack of personal jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2), improper venue pursuant to Fed.R.Civ.P. 12(b)(3), and failure to state a claim upon which relief can be granted pursuant to Fed.R.Civ.P. 12(b)(6) (Doc. 2). For the reasons set forth below, Defendants' motion is granted in part, and denied in part.

I. FACTUAL BACKGROUND

Plaintiff, a Nevada limited liability company, is a magazine publisher with its principal place of business in Kansas.¹ Promag, a California limited liability company, is engaged in the business of billing and collecting Retail Display Allowances ("RDAs") on behalf of magazine retailers. RDAs are payments magazine publishers make to magazine retailers to receive, among other benefits, a more prominent display of their magazines. RDA payments are only due for copies of the magazines actually sold by the retailer, as retailers may return unsold copies of magazines to a publisher for credit. Typically, the RDA amount is ten percent of the magazine's cover price.

Between September 2000 and March 2004, Plaintiff alleges that Promag, through Defendants Peters and Sturtz, President and Vice President of Promag, respectively, submitted multiple inflated claims for RDA payments on behalf of their client-retailers. Plaintiff alleges that these RDA claim forms submitted by Promag did not reflect the actual number of magazines sold by the particular retailer. Rather, Plaintiff states that the forms reflected the amount of magazines that the retailer had not yet returned to Plaintiff as of the date Promag submitted the claim. Plaintiff also states that on several occasions Promag submitted duplicate claims from retailers purportedly represented by Promag, when the retailers were actually submitting and receiving RDA payments directly from Plaintiff's national distributor. Finally, Plaintiff claims that Promag, through Defendants Peters and Sturtz, made extortionate threats to force MMI to pay RDA claims that were not properly due.

II. DISCUSSION

A. Personal Jurisdiction

1. Standard of Review

Defendants request the court to dismiss this action pursuant to Fed.R.Civ.P. 12(b)(2). In opposing a Rule 12(b)(2) motion, the plaintiff bears the burden of establishing personal jurisdiction over the defendant. OMI Holdings, Inc. v. Royal Ins. Co. of Canada, 149 F.3d 1086, 1091 (10th Cir.1998) (citation omitted). Where, as here, the court does not hold an evidentiary hearing, and the motion rests on the plaintiff's complaint and affidavits submitted by the parties, the plaintiff need only make a prima facie showing of personal jurisdiction. Id. (citation omitted). "The plaintiff may make this prima facie showing by demonstrating, via affidavit or other written materials, facts that if true would support jurisdiction over the defendant. In order to defeat a plaintiff's prima facie showing of jurisdiction, a defendant must present a compelling case demonstrating `that the presence of some other considerations would render jurisdiction unreasonable.' "Id. (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 477, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985)) (further citation omitted).

Plaintiff's complaint invokes federal jurisdiction under RICO." `Before a federal court can assert personal jurisdiction over a defendant in a federal question case', the court must determine (1) `whether the applicable statute potentially confers jurisdiction' by authorizing service of process on the defendant' and (2) `whether the exercise of jurisdiction comports with due process.'" Peay v. BellSouth Med. Assistance Plan, 205 F.3d 1206, 1209 (10th Cir.2000) (quoting Republic of Panama v. BCCI Holdings (Luxembourg) S.A., 119 F.3d 935, 942 (11th Cir.1997)).

2. Does § 1965(d) of RICO Authorize Nationwide Service of Process?

As a threshold matter, the court notes that it asked both parties to submit additional briefing with respect to Defendants' personal jurisdiction challenge. Initially, Plaintiff analyzed the personal jurisdiction issue under the Kansas Long Arm Statute, K.S.A. § 60-308(b), and the Fourteenth Amendment's due process clause. But courts in this district, including this court, have construed 18 U.S.C. § 1965(d) to authorize nationwide service of process.² Headwear, U.S.A., Inc. v. Stange, 166 F.R.D. 36, 38 (D.Kan.1996); Monarch Normandy Square Partners v. Normandy Square Assocs. Ltd. P'ship, 817 F.Supp. 896, 898 (D.Kan.1993); Merchants Nat'l Bank v. Safrabank, No. 90-4194-R, 1991 WL 173781, at *1 (D.Kan. Aug.28, 1991). But see NL Indus., Inc. v. Gulf & W. Indus., Inc., 650 F.Supp. 1115, 1137 (D.Kan.1986) (observing that "it is not clearly established that § 1965(d) affords nationwide jurisdiction"). "`When a federal statute provides for nationwide service of process, it becomes the statutory basis for personal jurisdiction,'" and the court is left to determine whether jurisdiction comports with the Fifth Amendment's due process principles. Peay, 205 F.3d at 1210, 1212 (citation omitted). Thus, the court requested that the parties submit briefing on the applicability of RICO's nationwide service of process provision and the Fifth Amendment's due process constraints on personal jurisdiction.

In response to this request, Defendants suggest that § 1965(d) does not confer nationwide service of process for personal jurisdiction purposes, and urges the court to depart from its prior ruling in Headwear. Instead, Defendants submit that in certain circumstances § 1965(b) provides for nationwide service of process for personal jurisdiction purposes, but that those circumstances do not apply to this case. Defendants thus maintain that the court must analyze the personal jurisdiction challenge under the Kansas long arm statute and the Fourteenth Amendment's due process clause. The court will address Defendants' contentions.

Section 1965 of RICO contains special provisions for venue and service of process. It states:

(a) Any civil action or proceeding under this chapter against any person may be instituted in the district court of the United States for any district in which such person resides, is found, has an agent, or transacts his affairs.

(b) In any action under section 1964 of this chapter 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.

(c) In any civil or criminal action or proceeding instituted by the United States under this chapter in the district court of the United States for any judicial district, subpoenas issued by such court to compel the attendance of witnesses may be served in any other judicial district, except that in any civil action or proceeding no such subpoena shall be issued for service upon any individual who resides in another district at a place more than one hundred miles from the place at which such court is held without approval given by a judge of such court upon a showing of good cause.

(d) All other process in any action or proceeding under this chapter may be served on any person in any judicial district in which such person resides, is found, has an agent, or transacts his affairs.

18 U.S.C. § 1965(a)-(d).

The court recognizes that a split of authority exists among the Circuit Courts of Appeal as to whether § 1965(b) or (d) provides for nationwide service of process.³ The Fourth and Eleventh Circuits view § 1965(d) as authorizing nationwide service of process. ESAB Group, Inc. v. Centricut, Inc., 126 F.3d 617, 627 (4th Cir.1997) ("Section 1965(d) authorizes service of process `in any judicial district in which such person ... is found.'"); Republic of Panama, 119 F.3d at 942 (same). As long as the defendant is served process under RICO and Fifth Amendment due process concerns are satisfied, these courts find that personal jurisdiction exists. See ESAB Group, Inc., 126 F.3d at 627 ("Because [defendants] have been validly served ..., in personam jurisdiction over them is established, provided that such jurisdiction comports with the Fifth Amendment."); Republic of Panama, 119 F.3d at 942 ("Because the ... defendants are domestic corporations doing business in this country, the statutory basis for personal jurisdiction ... is satisfied.").

On the other hand, the Second, Seventh, and Ninth Circuits view § 1965(b) as authorizing nationwide service of process. PT United Can Co. Ltd., v. Crown Cork & Seal Co., Inc., 138 F.3d 65, 70 (2d Cir.1998) (affirming district court's ruling that " § 1965(b), and not § 1965(d), governs the exercise of personal jurisdiction under RICO"); Lisak v. Mercantile Bancorp. Inc., 834 F.2d 668, 671 (7th Cir.1987) (noting that " § 1965(b) creates personal jurisdiction by authorizing service"); Butcher's Union Local No. 498 v. SDC Inv., Inc., 788 F.2d 535, 538-39 (9th Cir.1986) (discussing 1965(b)'s provisions for nationwide service in RICO suits). Moreover, the Ninth and Second Circuits have observed that nationwide...