Schmidt v. Wilbur
| Decision Date | 04 October 1991 |
| Docket Number | No. 91-70859.,91-70859. |
| Parties | Michael F. SCHMIDT, Plaintiff, v. E. Packer WILBUR, E.P.W. Properties, Inc., Wilbur & Co., Inc., E.P. Wilbur & Co., Inc., Realty International Corp., Thomson McKinnon Securities, Inc., and Prudential Bache Securities, Inc., Defendants. |
| Court | U.S. District Court — Western District of Michigan |
Michael F. Schmidt and Maurice A. Borden, Troy, Mich., for plaintiff Michael F. Schmidt.
Eric J. Pelton, David Deromedi, Detroit, Mich., and Bradley J. Schram, Bloomfield Hills, Mich., for defendants E. Packer Wilbur, E.P.W. Properties, Inc., Wilbur & Co., Inc., and E.P. Wilbur & Co., Inc.
This action was commenced in the Circuit Court of Wayne County, Michigan, and was subsequently removed to the United States District Court for the Eastern District of Michigan on the basis of diversity of citizenship.
Defendants E. Packer Wilbur, E.P.W. Properties, Inc., Wilbur & Company, Inc. and E.P. Wilbur & Company, Inc. have moved for dismissal of plaintiff's complaint, claiming that a court in Michigan, state or federal, has no personal jurisdiction over them. Defendants E. Packer Wilbur and E.P.W. Properties, Inc. also request dismissal of plaintiff's action on the basis of alleged lack of proper service upon them.
The litigation concerns claims by the plaintiff, a Michigan resident, which arose from his purchase of an investment interest (a "unit" in a limited partnership). Plaintiff alleges that he was induced to purchase the limited partnership interest by intentional misrepresentations, negligent misrepresentations and fraud, and further claims that there have been breaches of contract by the defendants.
The limited partnership in which plaintiff purchased an interest, and thereby himself became a limited partner, is known as "The Crossings at Oakbrook Limited Partnership" (hereinafter "Oakbrook"). The business and operations of Oakbrook involve ownership and operation of an office building in Oak Park, Illinois.
Oakbrook was organized in Connecticut and maintains its offices in that state.
E. Packer Wilbur is a resident of Connecticut.
E.P.W. Properties, Inc., Wilbur & Company, Inc. and E.P. Wilbur & Company, Inc. are corporations which were neither incorporated in the State of Michigan nor maintain their principal places of business within the State of Michigan.
E. Packer Wilbur and E.P.W. Properties, Inc. are the general partners in Oakbrook.
Wilbur & Company, Inc. was an initial limited partner in Oakbrook.
The role of E.P. Wilbur & Company, Inc. is not altogether clear from the pleadings on file, but it is not a general partner in Oakbrook.
Thomson McKinnon Securities, Inc. is a corporation which was not incorporated in Michigan and does not have its principal place of business in Michigan, but which did have offices in Michigan. This corporation acted as a designated agent for Oakbrook in soliciting, in Michigan, plaintiff's purchase of an investment interest in Oakbrook. Thomson McKinnon Securities, Inc. is not a party to defendants' motion for dismissal.
The respective roles of defendants Realty International Corporation and Prudential-Bache Securities, Inc. are not pertinent to resolution of the issues raised by this motion, and they are not parties to the motion.
The limited partnership agreement by which the Oakbrook limited partnership was created was initially executed September 5, 1985 and was subsequently amended on October 8, 1985 and again on November 12, 1985. The agreement provided, in part, as follows:
Plaintiff claims that his subscription agreement, by which he purchased an investment unit in Oakbrook, and was admitted to the limited partnership on November 12, 1985, was solicited from him in Michigan on October 18, 1985 and was signed by him in Michigan and that the solicitation was accomplished by Thomson McKinnon Securities, Inc., acting as agent of E. Packer Wilbur, E.P.W. Properties, Inc., Wilbur & Company, Inc., and E.P. Wilbur & Company, Inc.
The "Confidential Private Placement Memorandum" presented to plaintiff in Michigan by Thomson McKinnon Securities, Inc. constituted an offer of an interest in the Oakbrook limited partnership. This solicitation listed the general partners of Oakbrook as E. Packer Wilbur and E.P.W. Properties, Inc. and stated that "the principal office of each General Partner is 308 Center Street, Southport, Connecticut 06490." This memorandum further provided as follows:
The General Partners will appoint Thomson McKinnon Securities Inc. ("Thomson" or the "Placement Agent") as agent for placement of the Units offered hereby on a "best efforts" basis. Thomson shall have the right to appoint other National Association of Securities Dealers, Inc. ("NASD") broker-dealers as additional sales agents, subject to the approval of the General Partners, and will act as representative of such agents.
A "Broker-Dealer Distribution Agreement" of October 5, 1985 between the Oakbrook Limited Partnership and Thomson McKinnon Securities, Inc. stated:
The partnership is a Connecticut limited partnership with E.P.W. Properties, Inc., a Delaware Corporation, and E. Packer Wilbur, as the general partners.
This "Broker-Dealer Distribution Agreement" of October 5, 1985 designated Thomson McKinnon Securities, Inc. as Oakbrook's "exclusive agents to find subscribers for the units". The agreement was signed, on behalf of Oakbrook, by E. Packer Wilbur as general partner, and by E. Packer Wilbur as a representative of E.P.W. Properties, Inc., being the other general partner.
The defendants-movants seemingly concede, as indeed they should, that Thomson McKinnon Securities, Inc. acted as agent for the Oakbrook limited partnership in soliciting plaintiff's purchase of an investment unit in Oakbrook, but deny that it acted as agent for E. Packer Wilbur, E.P.W. Properties, Inc., Wilbur & Company, Inc. or E.P. Wilbur & Company, Inc. These defendants correctly point out that plaintiff has not seen fit to name Oakbrook limited partnership as a defendant.
Plaintiff, on the other hand, contends that Thomson McKinnon Securities, Inc., in soliciting plaintiff's investors in Michigan, acted as agent for E. Packer Wilbur, E.P.W. Properties, Inc., Wilbur & Company, Inc. and E.P. Wilbur & Company and therefore, in fact, that those other defendants were engaged in the solicitation of plaintiff in Michigan and in the various alleged misrepresentations, frauds and breaches of contract.
Defendants E. Packer Wilbur, E.P.W. Properties, Inc., Wilbur & Company, Inc. and E.P. Wilbur & Company, Inc. contend that the court does not have personal jurisdiction over them. They claim that they have not conducted any business in Michigan and are not, therefore, subject to personal jurisdiction of the United States District Court for the Eastern District of Michigan in this litigation, which was removed to federal court from the Circuit Court of Wayne County, Michigan.
Defendants E. Packer Wilbur, E.P.W. Properties, Inc., Wilbur & Company, Inc. and E.P. Wilbur & Company, Inc. contend also that they have not been properly served with process. They therefore assert that plaintiff's complaint against them should be dismissed, on the basis that this court has no jurisdiction over them and on the further basis of lack of proper service.
The plaintiff, on the other hand, contends that these defendants conducted business in Michigan through their agent, defendant Thomson McKinnon Securities, Inc. (out of which business arose the claims of plaintiff) and also maintains that service on these defendants was proper.
The Michigan Revised Limited Partnership Act provides, in pertinent part at Section 303 "— a limited partner is not liable for the obligations of a limited partnership unless the limited partner is also a general partner or, in addition to the exercise of rights and powers as a limited partner, the limited partner takes part in the control of the business." Michigan Compiled Laws, § 449.1303.
Section 403 of that same Michigan statute provides as follows:
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