Serras v. First Tennessee Bank Nat. Ass'n

• Decision Date: 25 May 1989
• Docket Number: No. 88-1282,88-1282
• Citation: 875 F.2d 1212
• Parties: , RICO Bus.Disp.Guide 7214 Dennis T. SERRAS, Michael C. Gibbons, and Dieter J. Boehm, Plaintiffs-Appellants, v. FIRST TENNESSEE BANK NATIONAL ASSOCIATION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1212

875 F.2d 1212

13 Fed.R.Serv.3d 1178, RICO Bus.Disp.Guide 7214

Dennis T. SERRAS, Michael C. Gibbons, and Dieter J. Boehm, Plaintiffs-Appellants, v. FIRST TENNESSEE BANK NATIONAL ASSOCIATION, Defendant-Appellee.

No. 88-1282.

United States Court of Appeals, Sixth Circuit.

Argued Dec. 13, 1988.

Decided May 25, 1989.

Robert W. Southard, Bruce T. Wallace (argued), Hooper, Hathaway, Price, Beuche & Wallace, Ann Arbor, Mich., for plaintiffs-appellants.

Stephen G. Anderson (argued), Knoxville, Tenn., James M. Cameron, Dykema, Gossett, Spencer, Goodnow & Trigg, Ann Arbor, Mich., for defendant-appellee.

Before MERRITT, MARTIN and JONES, Circuit Judges.

MERRITT, Circuit Judge.

This is a civil action for damages under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. Sec. 1961 et seq. and under the common law of fraud. The question on appeal is whether the District Court in the Eastern District of Michigan has personal jurisdiction, under Michigan's long-arm statute, M.C.L. Sec. 600.715, over defendant First Tennessee Bank. By an Order dated February 19, 1988, the Court below held that it did not. Plaintiffs Dennis T. Serras, Michael C. Gibbons, and Dieter J. Boehm appeal. We reverse.

I.

In the transaction that gives rise to this suit, SABP Partnership (in which all three plaintiffs were partners) purchased a restaurant in Memphis, Tennessee, from William F. Mullins. Mullins had obtained the restaurant with the help of a loan from the United American Bank. When that bank failed and went under the receivership of the FDIC, the First Tennessee Bank purchased some of its assets. Among these assets was the Mullins' loan.

According to the plaintiffs, the Bank knew that its loan to Mullins was turning sour and entered into efforts, along with Mullins, to sell the restaurant to a new owner. They assert that the Bank, taking on the role of a seller in order to protect its interest in the restaurant, deceived the plaintiffs into thinking that the appraised value and the collateral value of the restaurant were much higher than it knew them to be. They assert that, relying on the Bank's fraudulent representations as to the property's value, they agreed to purchase it, to take out a loan from the Bank and to give their personal guarantees that the loan would be paid. No one disputes that SABP Partnership executed a promissory note to the Bank for $900,000 and that each plaintiff guaranteed the note for $100,000.

SABP Partnership has defaulted on the note, and the Bank has sued all three plaintiffs in Tennessee's Chancery Court on their guarantees. It appears that this federal litigation was filed first, but that the Bank obtained service on Serras, Gibbons and Boehm in the state-court action before the Bank was served with the complaint in the federal action. Each side's claims against the other may turn out to be a compulsory counterclaim in the suit in which that side appears as defendant, as the two actions arise from the same facts.

II.

A.

The Bank brought its motion to dismiss under Fed.R.Civ.P. 12(b)(2), which specifies that the defense of lack of personal jurisdiction may be made by that vehicle. Rule 12(d) provides that a motion to dismiss brought under Fed.R.Civ.P. 12(b)(2) may be heard and determined before trial, but that the court has the power to defer hearing of evidence and a ruling on the motion until trial. Fed.R.Civ.P. 12(d). "As there is no statutory direction for procedure upon an issue of jurisdiction, the mode of its determination is left to the trial court." Gibbs v. Buck, 307 U.S. 66, 71-72, 59 S.Ct. 725, 728, 83 L.Ed. 1111 (1939).

The case law establishes a settled procedural scheme to guide trial courts in the exercise of this discretion. If it decides that the motion can be ruled on before trial, the court "may determine the motion on the basis of affidavits alone; or it may permit discovery in aid of the motion; or it may conduct an evidentiary hearing on the merits of the motion." Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 904 (2nd Cir.1981). However the court handles the motion, the plaintiff always bears the burden of establishing that jurisdiction exists. McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 785, 80 L.Ed. 1135 (1936); Weller v. Cromwell Oil Co., 504 F.2d 927, 929 (6th Cir.1974). The weight of the plaintiff's burden, however, depends on whether the trial court chooses to rule on written submissions or to hear evidence on the personal-jurisdiction issue (either pretrial or during trial). If the court rules on written submissions alone, the plaintiff may not rest on his pleadings to answer the movant's affidavits, but must set forth, "by affidavit or otherwise [,] ... specific facts showing that the court has jurisdiction." Id. at 930. When the trial court has determined that the motion to dismiss for lack of personal jurisdiction can be decided upon these written submissions, it "must consider the pleadings and affidavits in the light most favorable to the plaintiff." Welsh v. Gibbs, 631 F.2d 436, 439 (6th Cir.1980), cert. denied, 450 U.S. 981, 101 S.Ct. 1517, 67 L.Ed.2d 816 (1981) (quoting Poston v. American President Lines, Ltd., 452 F.Supp. 568, 571 (S.D.Fla.1978)). Thus, her burden is merely that of making a prima facie showing that personal jurisdiction exists. Id. at 438. If she meets that burden the motion to dismiss should be denied, "notwithstanding any controverting presentation by the moving party." Marine Midland Bank, 664 F.2d at 904.

Any other rule would empower a defendant to defeat personal jurisdiction merely by filing a written affidavit contradicting jurisdictional facts alleged by a plaintiff. Data Disc, Inc. v. Systems Technology Associates, Inc., 557 F.2d 1280, 1285 (9th Cir.1977). But neither is the defendant left unprotected from the plaintiff's bald written allegation of jurisdictional facts. First, a defendant who alleges facts that would defeat the court's personal jurisdiction can invoke the court's discretion to order a pretrial evidentiary hearing on those facts. If the written submissions raise disputed issues of fact or seem to require determinations of credibility, the court retains the power to order an evidentiary hearing, Welsh, 631 F.2d at 439, and to order discovery of a scope broad enough to prepare the parties for that hearing. Wells Fargo & Co. v. Wells Fargo Express Co., 556 F.2d 406, 430 n. 24 (9th Cir.1977). At this stage, the burden on the party asserting jurisdiction quite properly increases. She must now establish that jurisdiction exists by the same standard that would obtain if the matter were deferred to trial: the preponderance of the evidence. Welsh, 631 F.2d at 439; see also Marine Midland Bank, 664 F.2d at 904. And second, even if the court issues a pretrial order denying defendant's 12(b)(2) motion, the defendant may proceed to trial without waiving the defense. Hunt v. BP Exploration Co. (Libya) Ltd., 492 F.Supp. 885, 895 (N.D.Tex.1980). A threshold determination that personal jurisdiction exists "does not relieve [the plaintiff] ... at the trial of the case-in-chief from proving the facts upon which jurisdiction is based by a preponderance of the evidence." United States v. Montreal Trust Co., 358 F.2d 239, 242 n. 4 (2d Cir.), cert. denied, 384 U.S. 919, 86 S.Ct. 1366, 16 L.Ed.2d 440, reh'g denied, 384 U.S. 982, 86 S.Ct. 1858, 16 L.Ed.2d 693 (1966). Moreover, a pretrial ruling denying a 12(b)(2) motion to dismiss "does not purport to settle any disputed factual issues germane to the underlying substantive claim. What is settled is the court's power to exercise personal jurisdiction over a defendant, nothing more." Val Leasing, Inc. v. Hutson, 674 F.Supp. 53, 55 (D.Mass.1987). As the Supreme Court has said in McNutt, the party asserting jurisdiction "must carry throughout the litigation the burden of showing that he is properly in court." McNutt, 298 U.S. at 189, 56 S.Ct. at 785.

The court's solicitude for defendants who object to its personal jurisdiction is always tempered, however, by its concern that the door to a federal courtroom not be slammed in the face of a plaintiff seeking to invoke its powers where there is, in fact, no defect in personal jurisdiction. Particularly where the disputed jurisdictional facts are intimately intertwined with the parties' dispute on the merits, a trial court should not require plaintiffs to mount "proof which would, in effect, establish the validity of their claims and their right to the relief sought." Milligan v. Anderson, 522 F.2d 1202, 1207 (10th Cir.1975); Montreal Trust Co., 358 F.2d at 242. Judicial resources may be more efficiently deployed if the court holds but one hearing on the contested facts. Bialek v. Racal-Milgo, Inc., 545 F.Supp. 25, 33-34 (S.D.N.Y.1982). And more fundamentally, as the Second Circuit has noted, postponing proof till trial allows a plaintiff to present all her proof "in a coherent, orderly fashion and without the risk of prejudicing his case on the merits." Data Disc, 557 F.2d at 1285-86 n. 2. In many cases, then, a district court may find sound reasons to rule, on the basis of written submissions, that the plaintiff has made her prima facie showing that the court has personal jurisdiction over a defendant, and to reserve all factual determinations on the issue for trial.

In the present case, we hold that the District Court erroneously granted the Bank's motion for summary judgment on written submissions, in light of the plaintiffs' fully adequate allegation of jurisdictional facts in the affidavit sworn by plaintiff Serras. We do not reach a question properly within the District Court's discretion: whether a pretrial evidentiary hearing will be necessary to resolve the Bank's Rule 12(b)(2) motion, or whether the factual dispute it involves would be more efficiently and more fairly resolved at trial.

B.

In this case, many of the facts relevant to personal jurisdiction are undisputed....