NAT. EGG CO. v. Bank Leumi le-Israel BM

• Decision Date: 18 November 1980
• Docket Number: Civ. A. No. C80-187.
• Parties: NATIONAL EGG COMPANY, Plaintiff, v. BANK LEUMI le-ISRAEL B.M.; and Bank Leumi Trust Co. of New York, Defendants.
• Court: U.S. District Court — Northern District of Georgia

504 F. Supp. 305

NATIONAL EGG COMPANY, Plaintiff, v. BANK LEUMI le-ISRAEL B.M.; and Bank Leumi Trust Co. of New York, Defendants.

Civ. A. No. C80-187.

United States District Court, N. D. Georgia, Atlanta Division.

November 18, 1980.

COPYRIGHT MATERIAL OMITTED

John M. Edwards, Atlanta, Ga., for plaintiff.

Hugh W. Gibert, Atlanta, Ga., for defendants.

ORDER OF COURT

CHARLES A. MOYE, Jr., Chief Judge.

Plaintiff, National Egg Company (National), is a Georgia corporation with its principal place of business in Georgia. Defendant Bank Leumi le-Israel B.M. (Leumi-Philadelphia) is an Israeli bank with its principal offices in Israel and a branch in Philadelphia. Defendant Bank Leumi Trust Co. of New York (Leumi-New York) is a New York bank with principal offices in New York. Plaintiff alleges in its complaint (¶¶ 2 and 3) that the defendants are subject to this Court's jurisdiction by reason of their transaction of business and tortious activity in Georgia.¹ Subject matter jurisdiction is allegedly based upon diversity of citizenship. Venue is purportedly proper here under 28 U.S.C. § 1391(a) because the plaintiff resides in the Northern District of Georgia and because the claim arose in the Northern District of Georgia.

Plaintiff has alleged that defendants conspired to defraud it by misrepresenting to it the financial condition and solvency of Quality Egg Products Company, Inc. (Quality) "knowingly and for the sole purpose of inducing the Plaintiff to deliver eggs to Quality Egg on credit terms." ¶ 7. In furtherance of the alleged conspiracy, defendants purported to have Quality grant defendants a security interest in the eggs Quality was receiving from National. ¶ 8. In addition, National asserts that both defendants represented to it that (1) certain checks made by Quality to National had been dishonored erroneously, (2) that there were sufficient funds to pay the checks if they were redeposited, and (3) that plaintiffs should rely upon Leumi-Philadelphia's representations to that effect.² ¶ 9. Next, plaintiff asserts that it supplied $806,182.79 worth of eggs to Quality in justifiable reliance upon the previously mentioned representations. ¶ 10. Plaintiff also alleges that "Leumi³ held checks issued on the Quality Egg account and payable to the Plaintiff for an unreasonable length of time...." ¶ 12. "As a direct result of Leumi's⁴ misrepresentations and wrongdoing as aforesaid, Leumi⁵ was able to seize funds ... which otherwise would have and should have been paid to Plaintiff for eggs delivered." ¶ 13. In addition, to these allegations of fraud and conspiracy to defraud in count one, the plaintiff has set forth claims of legal fraud (count two) and negligence (count three) incorporating the factual allegations set forth above.

Presently before the Court are (1) defendants' motion to dismiss for failure to state a claim or alternatively for more definite statement and (2) defendants' motion to dismiss or alternatively for transfer to a more convenient forum.

I. SPECIFICITY OF PLEADINGS

Fed.R.Civ.P. 9(b) provides that, "In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge, and other condition of mind of a person may be averred generally." Rule 8(a), of course, requires only that the complaint set forth a "short and plain statement of the claim." Rule 9(b) is not intended to abrogate the basic pleading requirements of Rule 8(a). Elster v. Alexander, 75 F.R.D. 458, 461 (N.D.Ga.1977); 2A Moore's Federal Practice ¶ 9.03 at p. 9-28 (2d ed. 1979); 5 C. Wright & A. Miller, Federal Practice and Procedure: Civil § 1298 at p. 407 (1969). The competing policies underlying Rules 9(b) and 8(a) are best resolved by requiring averments of fraud to state such matters as the time, place and content of the alleged misrepresentations as well as who made the alleged misrepresentations to whom. Elster, 75 F.R.D. 458, 461-62; 2A Moore's, supra, ¶ 9.03 at p. 9-23; 5 Wright & Miller, supra, § 1297 at p. 403. It is also necessary to plead fraudulent conspiracy with enough specificity to inform multiple defendants of facts forming the basis for a charge of conspiracy. Elster, 75 F.R.D. 458, 461-62. In the instant case, the plaintiff has not pleaded these matters with sufficient specificity.

The Court held oral argument on the motion to dismiss for lack of personal jurisdiction on June 4, 1980. Although the plaintiff had engaged in significant discovery on the jurisdictional issue, the Court had great difficulty in understanding the plaintiff's factual allegations, particularly those factual allegations concerning the involvement of Leumi-Philadelphia in any fraudulent conspiracy. The facts have been made considerably clearer in plaintiff's post argument briefs. Even though the briefs make the facts clear enough for the Court to rule on the jurisdictional question, the Court believes that the difficulty incurred in understanding the motion to dismiss is an additional reason for concluding that the complaint pleads fraud with insufficient specificity. Accordingly, plaintiff is hereby ORDERED to file an amended complaint within twenty (20) days setting forth with particularity the matters mentioned above.⁶

II. PERSONAL JURISDICTION

It may seem anomalous to proceed to the jurisdictional issue prior to the plaintiff's amending its complaint, but as previously indicated, the plaintiff's post-hearing briefs, supported by citations to the factual record, provide a sufficient basis for concluding that the motion to dismiss must be DENIED. Following is a description of the facts developed through discovery.

It appears from the record that the statement in paragraph 9 of the complaint which plaintiff alleges to be a misrepresentation was made, if at all, by Lawrence Epstein, formerly assistant vice president of Leumi-New York, to Charles B. Cooper, Jr., executive vice president and general manager of plaintiff National. It further appears that the alleged misrepresentation was made during a phone conversation between Mr. Epstein in New York and Mr. Cooper in Georgia and that the call was initiated by Mr. Epstein. (Mr. Cooper's affidavit does not state that he was in Georgia, but the briefs of both parties assume this fact. Mr. Epstein testified that he did not know who initiated the phone call, but Elliot S. Robinson, a vice president of Leumi-New York, testified that Leumi-New York had a telephone bill for the call.) Moreover, Mr. Epstein discussed the call with his supervisor Howard Ross before making it.

The direct role of Philadelphia bank in the alleged fraud is limited. It returned Quality Egg checks to plaintiff and other Georgia businesses, and allegedly it did so wrongfully. In addition, however, there are significant links between Leumi-Philadelphia and Leumi-New York. First, Leumi-Philadelphia is a majority shareholder in Leumi-New York. Second, the Philadelphia bank had a security interest in the inventory of Quality. Inasmuch as Leumi-New York also had such a security interest, there was an arguable identity of interest between the two banks. Finally, before Mr. Epstein made his call to Mr. Cooper, Irving Feldman, vice president and senior loan officer at Leumi-Philadelphia, informed Leumi-New York that Quality checks were iin overdraft status.

In addition to the activities thus far described, both banks have engaged in other relationships with Georgia companies in the course of their banking business. For example, Leumi-Philadelphia provided checking account services to Sunbelt Industries, Inc. It sent Mr. Feldman to Georgia to enforce a security agreement with Sunbelt, and it has filed a lawsuit against Sunbelt and another Georgia company, Telfair Farms, in the United States District Court for the Southern District of Georgia. Also, Leumi-Philadelphia held a note from Northeast Poultry and Egg Farm, another Georgia company, as security for a loan to Quality. Finally, the New York bank maintains a correspondent account in Georgia with the First National Bank of Atlanta.

In sum, then, the defendants conduct at least a small part of their banking business with Georgia companies, and to some extent, they do so in Georgia. Presently at issue is whether they do so to such an extent that the plaintiff may establish personal jurisdictional over them in Georgia.

The burden of "proof" on the question of personal jurisdiction lies with the plaintiff. Plaintiff may rest on jurisdictional allegations in the complaint unless the defendant controverts those allegations with a factual showing. In that event, the plaintiff has the burden of going forward with sufficient factual evidence to establish a prima facie showing of the jurisdictional allegations. Walker v. Newgent, 583 F.2d 163, 166 (5th Cir. 1978), cert. denied, 441 U.S. 906, 99 S.Ct. 1994, 60 L.Ed.2d 374 (1979); Black v. Acme Markets, Inc., 564 F.2d 681, 683 n.3 (5th Cir. 1977), Data Disc, Inc. v. Systems Technology Assoc's, Inc., 557 F.2d 1280, 1285 (9th Cir. 1977); Product Promotions, Inc. v. Cousteau, 495 F.2d 483, 490-91 (5th Cir. 1974); Jetco Electronics Indus., Inc. v. Gardner, 473 F.2d 1228, 1232 (5th Cir. 1973); O'Hare Int'l Bank v. Hampton, 437 F.2d 1173, 1176 (7th Cir. 1971); United States v. Montreal Trust Co., 358 F.2d 239, 242 & n.4 (2d Cir. 1966); Atlanta Coliseum, Inc. v. Carling Brewing Co., 411 F.Supp. 253, 255 (N.D.Ga.1976). See also J.E.M. Corp. v. McClellan, 462 F.Supp. 1246, 1248 (D.Kan.1978) (procedure described above used but because required by state law); Strickland v. Foundation Life Ins. Co., 129 Ga.App. 614, 616, 200 S.E.2d 306 (1973) (burden of proof open question). This standard for ruling upon the motion to dismiss notwithstanding, the plaintiff still must prove the jurisdictional facts by a preponderance of the evidence at trial. Data Disc, 557 F.2d 1280, 1285 n.2; Montreal Trust, 358 F.2d 239, 242 n.4. See also Jetco, 473 F.2d 1228, 1232 n.4....