Schwab v. Hites

• Decision Date: 14 September 2012
• Docket Number: Case No. 2:11–cv–638–FtM–29DNF.
• Parties: David SCHWAB, Jerry Schwab, Donna Schwab, Plaintiffs, v. Mary Lynn HITES, also known as Mary Lynn Schwab, Defendant.
• Court: U.S. District Court — Middle District of Florida

896 F.Supp.2d 1124

David SCHWAB, Jerry Schwab, Donna Schwab, Plaintiffs,

v.Mary Lynn HITES, also known as Mary Lynn Schwab, Defendant.

Case No. 2:11–cv–638–FtM–29DNF.

United States District Court,

M.D. Florida,

Fort Myers Division.

Sept. 14, 2012.

Ellen B. Newberry, Jon Douglas Parrish, Kirt R. Posthuma, Parrish, Lawhon & Yarnell, PA, Naples, FL, for Plaintiffs.

Christopher M. Corrigan, F. Thomas Vickers, Vickers Law Group, LPA, Westlake, OH, Robert E. Anderson, Henderson, Franklin, Starnes & Holt, PA, Ft. Myers, FL, for Defendant.

OPINION AND ORDER

JOHN E. STEELE, District Judge.

This matter comes before the Court on a Motion to Dismiss Amended Complaint for Lack of Personal Jurisdiction (Doc. # 33) filed on January 20, 2012, by defendant Mary Lynn Hites, also known as Mary Lynn Schwab (Mary Lynn or defendant). Plaintiffs David Schwab (David), Jerry Schwab (Jerry), and Donna Schwab (Donna) (collectively, plaintiffs) filed a response on February 3, 2012. (Doc. # 35.) Defendant filed a reply in support on February 17, 2012. (Doc. # 43.) For the reasons set forth below, the motion to dismiss is granted.¹

I.

Plaintiffs Jerry and Donna are husband and wife and parents to plaintiff David and defendant Mary Lynn. The parties were stock owners in a family business, Schwab Industries, Inc. (Schwab Industries), which conducted business through various subsidiaries in Ohio and Florida. Specifically, Jerry owned 46%, David owned 27%, Donna owned 6%, and Mary Lynn owned 20% of Schwab Industries. ² On February 28, 2010, Schwab Industries filed a voluntary bankruptcy petition under Chapter 11 of the United States Bankruptcy Code. On May 28, 2010, an order was entered in the Bankruptcy Case that authorized the sale of substantially all of the assets of Schwab Industries.

Pursuant to a sale under 11 U.S.C. § 363 of the United States Bankruptcy Code, Oldcastle Materials, Inc., a Delaware corporation with offices in Florida (Oldcastle), purchased certain Schwab Industries assets. To compliment its acquisition of assets, Oldcastle offered to buy, and Jerry, Donna, and David agreed to sell, their personal goodwill to Oldcastle. The Complaint alleges that although Mary Lynn had no goodwill to offer, she was a “seller” under the goodwill agreement. The Personal Goodwill Purchase Agreement (Goodwill Agreement) required David to enter into an Executive Employment Agreement, David and Donna to enter into a Consulting Agreement, and Jerry, David, Donna, and Mary Lynn to enter into a Non–Compete Agreement. The Personal Goodwill Agreement specified a purchase price of $1,000,000.00 (1 million) to be paid in annual installments of $200,000 per year, for five years. The Non–Compete Agreement specified a purchase price of $2,762,500 which was divided as follows: $300,000 in the first, second, and third years; $662,500 in year four; and $1,800,000 in year five. Neither agreement specifies how the payments would be allocated among the sellers.³

The Amended Complaint alleges that at the time Jerry, Donna, David, and Mary Lynn entered into the Personal Goodwill Agreement and the Non–Compete Agreement (collectively, the Oldcastle Contracts), plaintiffs and defendants did not have a mutual agreement as to how the monies earned on the contracts would be allocated amongst themselves. However, because the parties determined that it was imperative that the transaction with Oldcastle be consummated immediately, the parties agreed to determine the proper allocation of the proceeds in accordance with the relative personal goodwill and value of the non-compete agreement of the parties, equity, and fairness after the Oldcastle contracts were consummated but before the first payment was due.⁴

David, Jerry, Donna, and Mary Lynn appointed Ronald Manse, CPA as the “Seller's Agent” to receive the payments due under the two contracts in escrow. On or about June 23, 2011, Manse received the first payment under both the Personal Goodwill Agreement and the Non–Compete Agreement. The parties still had no agreement as to the allocation of the proceeds. On or about July 7, 2011, Mary Lynn, through counsel and via e-mail, directed Manse to refrain from making any distributions to the parties unless she received 25% of the funds. Manse distributed the first payment in four equal shares without specific authorization from David, Jerry, or Donna. David, Jerry, and Donna demanded that Mary Lynn return the proceeds to them and defendant refused.

As a result, plaintiffs commenced this action in the Circuit Court for the Twentieth Judicial Circuit of the State of Florida, in and for Lee County, Civil Division, entitled David Schwab, Plaintiff v. Mary Lynn Hites, case number 11–CA–003276. Mary Lynn removed the action to this Court on November 7, 2011 (Doc. # 1). On January 9, 2012, the defendants filed an Amended Complaint (Doc. # 29) asserting the following four state law causes of action: declaratory judgment (Count I); breach of fiduciary duties (Count II), quantum meruit (Count III), and unjust enrichment (Count IV).

Defendant filed the subject motion to dismiss seeking to dismiss the Complaint pursuant to Fed.R.Civ.P. 12(b)(2) because she is a resident of Ohio and this Court does not have either specific or general personal jurisdiction over her. Plaintiffs argue to the contrary.

II.

“Jurisdiction to resolve cases on the merits requires both authority over the category of claim in suit (subject-matter jurisdiction) and authority over the parties (personal jurisdiction), so that the court's decision will bind them” Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 577, 119 S.Ct. 1563, 143 L.Ed.2d 760 (1999); see also Sinochem Int'l Co. Ltd. v. Malay. Int'l Shipping Corp., 549 U.S. 422, 430–31, 127 S.Ct. 1184, 167 L.Ed.2d 15 (2007). The parties do not dispute subject-matter jurisdiction and the claims are clearly within the diversity jurisdiction of the Court pursuant to 28 U.S.C. § 1332(a) because the parties are diverse and the amount in controversy exceeds $75,000.00.

Personal jurisdiction is a restriction on judicial power as a matter of individual liberty, and “a party may insist that the limitation be observed, or he may forgo that right, effectively consenting to the court's exercise of adjudicatory authority.” Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 584, 119 S.Ct. 1563, 143 L.Ed.2d 760 (1999). Unless waived or forfeited ⁵, personal jurisdiction is “an essential element of the jurisdiction of a district court, without which the court is powerless to proceed to an adjudication.” Id. at 584, 119 S.Ct. 1563 (citation and internal quotation marks omitted).

The existence of personal jurisdiction is a question of law. Diamond Crystal Brands, Inc. v. Food Movers Int'l, Inc., 593 F.3d 1249, 1257 (11th Cir.2010); Oldfield v. Pueblo De Bahia Lora, S.A., 558 F.3d 1210, 1217 (11th Cir.2009). “A federal district court in Florida may exercise personal jurisdiction over a nonresident defendant to the same extent that a Florida court may, so long as the exercise is consistent with federal due process requirements.” Licciardello v. Lovelady, 544 F.3d 1280, 1283 (11th Cir.2008).

Plaintiff “bears the initial burden of alleging in the complaint sufficient facts to make out a prima facie case of jurisdiction.” United Techs. Corp. v. Mazer, 556 F.3d 1260, 1274 (11th Cir.2009). A prima facie case is established if plaintiff alleges enough facts to withstand a motion for directed verdict or judgment as a matter of law. PVC Windoors, Inc. v. Babbitbay Beach Constr., N.V., 598 F.3d 802, 810 (11th Cir.2010); SEC v. Carrillo, 115 F.3d 1540, 1542 (11th Cir.1997). If defendant challenges jurisdiction by submitting affidavit evidence making a specific factual denial based on personal knowledge, the burden shifts back to the plaintiff to produce evidence supporting jurisdiction. Mazer, 556 F.3d at 1274. Plaintiff bears the ultimate burden of establishing that personal jurisdiction is present. Oldfield, 558 F.3d at 1217. “Where the plaintiff's complaint and supporting evidence conflict with the defendant's affidavits, the court must construe all reasonable inferences in favor of the plaintiff.” Meier v. Sun Int'l Hotels, Ltd., 288 F.3d 1264, 1269 (11th Cir.2002). “If such inferences are sufficient to defeat a motion for judgment as a matter of law, the court must rule for the plaintiff, finding that jurisdiction exists.” PVC Windoors, 598 F.3d at 810.

“A federal court sitting in diversity undertakes a two-step inquiry in determining whether personal jurisdiction exists: the exercise of jurisdiction must (1) be appropriate under the state long-arm statute and (2) not violate the Due Process Clause of the Fourteenth Amendment to the United States Constitution. When a federal court uses a state long-arm statute, because the extent of the statute is governed by state law, the federal court is required to construe it as would the state's supreme court.” Diamond Crystal Brands, 593 F.3d at 1257–58 (internal citations and quotation marks omitted). The Court must determine the first step before proceeding to the second. PVC Windoors, 598 F.3d at 807–08.

The reach of the Florida long arm statute is a question of Florida law. Mazer, 556 F.3d at 1274. “A Florida court conducts a two-step inquiry when determining whether jurisdiction under Florida's long-arm statute is proper in a given case. Initially, it must determine whether the complaint alleges jurisdictional facts sufficient to invoke the statute. If so, the court must then examine whether the defendant has sufficient ‘minimum contacts' with Florida in order to satisfy due process requirements.” Canale v. Rubin, 20 So.3d 463, 465 (Fla. 2d DCA 2009) (citing Execu–Tech Bus. Sys., Inc. v. New Oji Paper Co., 752 So.2d 582, 584 (Fla.2000)). The due process analysis itself involves a two-part inquiry in which the Court first considers whether defendant engaged in minimum contacts with the state of Florida, then considers whether the...