Shah v. Nu-Kote Intern., Inc.

• Decision Date: 18 September 1995
• Docket Number: No. 94-CV-75189-DT.,94-CV-75189-DT.
• Citation: 898 F. Supp. 496
• Parties: Ashok K. SHAH, Plaintiff, v. NU-KOTE INTERNATIONAL, INC., a Delaware Corporation, Defendant.
• Court: U.S. District Court — Eastern District of Michigan

898 F. Supp. 496

Ashok K. SHAH, Plaintiff, v. NU-KOTE INTERNATIONAL, INC., a Delaware Corporation, Defendant.

No. 94-CV-75189-DT.

United States District Court, E.D. Michigan, Southern Division.

September 18, 1995.

COPYRIGHT MATERIAL OMITTED

Katherine W. Shensky, Bloomfield Hills, Michigan, for plaintiff.

David H. Oermann, Detroit, Michigan, for defendant.

OPINION AND ORDER REGARDING DEFENDANT'S MOTION TO DISMISS OR IN THE ALTERNATIVE FOR SUMMARY JUDGMENT

ROSEN, District Judge.

I. INTRODUCTION

Plaintiff Ashok Shah, a Michigan resident, brought this action against Defendant NuKote International, Inc. ("Nu-Kote") on December 30, 1994. Nu-Kote is a Delaware corporation which, during the relevant time period, maintained its principal place of business in Rochester, New York. Nu-Kote sells office supplies in Michigan and across most of the United States. Shah was employed by the company from September 1987 through at least October 31, 1988. Subject matter jurisdiction in this Court in premised on diversity of citizenship. 28 U.S.C. § 1332(a)(1). Discovery is incomplete.

In his complaint, Plaintiff alleges that Nu-Kote breached its employment contract with him by denying him the opportunity to purchase 25,000 shares of company stock at one dollar per share. Nu-Kote filed the instant motion to dismiss or for summary judgment on March 24, 1995. Plaintiff responded on May 2, and Defendant replied on May 15.

Defendant states three grounds for dismissal or summary judgment. First, it argues that it is not subject to the personal jurisdiction of this Court. Second, it asserts that venue is improper. Finally, it contends that Plaintiff's claim is barred by Michigan's six-year statute of limitations for contract claims.

Having considered the documents filed by the parties, and having held a status conference in chambers on June 21, 1995, the Court is now prepared to rule on Defendant's motion. This memorandum opinion and order sets forth that ruling.

II. FACTUAL BACKGROUND

Taken in the light most favorable to the Plaintiff, the record currently before this Court reveals the following. In the spring of 1987, while Plaintiff was working in Michigan, he was actively recruited by Defendant to work at its Rochester headquarters. On June 4, 1987, Plaintiff was formally offered employment with Defendant as the North American Director of Product Assurance and Quality. Plaintiff held this executive position for approximately 13 months. During much of that time, with Defendant's permission, Plaintiff continued to reside in Michigan and perform some of his job duties here.

Because of Plaintiff's status as a senior executive with the company, in addition to more traditional forms of compensation, Plaintiff was told he would be given an option to purchase company stock. On June 4, 1987, Plaintiff received a letter from Defendant's Executive Vice-President Endre Vargha indicating that he could purchase up to 25,000 shares of common stock at $1.00 per share.¹ Although the company was struggling, Plaintiff believed it would eventually be successful, and viewed the option to purchase stock as an attractive benefit.

Two months after Plaintiff began working for Defendant, Plaintiff received a second letter from Nu-Kote's Executive Vice-President, dated November 17, 1987, in which he was told that if he wanted to purchase stock he needed to submit a $25,000 check by December 21. In response, Plaintiff tendered a check for $25,000. On January 6, 1988, however, the check was returned to him with a note indicating that Nu-Kote had decided not to issue stock at that time, and that a future stock offering was contemplated.² No additional offerings were made during Plaintiff's short tenure with the company.

Shortly thereafter, Plaintiff spoke with Ron Tischer, the company's President, about the rescission of the stock offer. Tischer assured Plaintiff that Plaintiff would be offered stock in the future, and told him not to worry. This assurance was reaffirmed by the company's Executive Vice-President.

On October 31, 1988, Plaintiff was formally notified that his position was being eliminated and his job terminated "effective as of that date" as part of a restructuring of the company. (October 31, 1988, letter from Endre Vargha, Nu-Kote Executive Vice-President, to Plaintiff). Plaintiff describes the termination as amicable and not based on job performance. As a severance package, Plaintiff was given nine weeks' pay to cover the period between October 31 and December 30, 1988, and continued to receive medical, dental and life insurance coverage, in addition to other employee benefits. However, his short and long term disability insurance coverages were eliminated. Whether or not Plaintiff would be eligible to exercise his stock option in the future was never specifically discussed, nor was this topic addressed in Defendant's formal termination letter to Plaintiff.

III. ANALYSIS

A. This Court has Personal Jurisdiction over Defendant.

Defendant argues that its contacts with Michigan are too minimal for general personal jurisdiction, and that Plaintiff's claim does not arise from Defendant's activities here, making limited personal jurisdiction unavailable as well. Defendant supports its claim with an affidavit signed by Anthony Schmeck, a company executive. Mr. Schmeck states that at all times relevant to the complaint, Nu-Kote maintained its principal place of business in Rochester, New York, that in 1987 Nu-Kote obtained certification to do business in Michigan, but never actively engaged in business in the state, and that Nu-Kote's only current contact with Michigan is its maintenance of a single employee here as a sales representative. The representative travels in Michigan and neighboring states to meet with customers; however, he is not authorized to accept orders.

Additionally, Defendant argues that the two events most closely associated with the alleged breach—the return of the $25,000 check on January 6, 1988, and the company's decision(s) not to issue stock to employees — both occurred in Rochester, New York, not Michigan.

In diversity cases, a federal district court "must apply the law of the forum state to determine whether it may exercise jurisdiction over the person of a non-resident defendant. However, constitutional concerns of due process limit the application of this state law." Theunissen v. Matthews, 935 F.2d 1454, 1459 (6th Cir.1991) (citations omitted). "The relevant inquiry is whether the facts of the case demonstrate that the nonresident defendant possesses such minimum contacts with the forum state that the exercise of jurisdiction would comport with `traditional notions of fair play and substantial justice.'" International Shoe Co. v. State of Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945); accord Southern Machine Co. v. Mohasco Indus., 401 F.2d 374, 380 (6th Cir.1968)." Id. The Defendant's "conduct and connection with the forum State" must be "such that he should reasonably anticipate being haled into court there." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 567, 62 L.Ed.2d 490 (1980).

Personal jurisdiction in Michigan is governed by the Revised Judicature Act.³ That Act distinguishes between "general" and "limited" (or "specific") personal jurisdiction.

In a case of general jurisdiction, a defendant's contacts with the forum state are of such a "continuous and systematic" nature that the state may exercise personal jurisdiction over the defendant even if the action is unrelated to the defendant's contacts with the state. See, e.g., Perkins v. Benguet Consolidated Mining Co., 342 U.S. 437, 72 S.Ct. 413, 96 L.Ed. 485 (1952). In a specific jurisdiction case, "a State exercises personal jurisdiction over a defendant in a suit arising out of or related to the defendant's contacts with the forum." Helicopteros Nacionales de Columbia Colombia, S.A. v. Hall, 466 U.S. 408, 414 n. 8, 104 S.Ct. 1868, 1872 n. 8, 80 L.Ed.2d 404 (1984).

Third Nat'l Bank in Nashville v. WEDGE Group, Inc., 882 F.2d 1087, 1089 (6th Cir. 1989), cert. denied, 493 U.S. 1058, 110 S.Ct. 870, 107 L.Ed.2d 953 (1990); see also Theunissen, 935 F.2d at 1463 n. 4.

However, this division between general and personal jurisdiction should not be rigidly applied. As noted above, the relevant inquiry is whether an assertion of jurisdiction over the Defendant "would comport with `traditional notions of fair play and substantial justice.'" Theunissen, 935 F.2d at 1458. The more directly connected a particular plaintiff's cause of action is to the defendant's contacts with the forum state, the fewer contacts will be required. Conversely, the more remotely the cause of action is connected to forum contacts, the stronger those contacts will have to be. Only if the cause of action is entirely unconnected to the forum contacts must those contacts be continuous and systematic.⁴

1. General Personal Jurisdiction

Michigan courts may assert general jurisdiction over a corporation if it (1) is incorporated in the state, (2) has consented to state jurisdiction, or (3) carries on "a continuous and systematic part of its general business within the state." M.C.L. § 600.711. Plaintiff argues both that defendant carries on a "continuous and systematic part of its general business" within Michigan, and that it has consented to general jurisdiction by registering to do business in the state and appointing a resident agent (as required by M.C.L. § 450.1241).

In Renfroe v. Nichols Wire & Aluminum Co., 348 Mich. 425, 83 N.W.2d 590 (1957), the Michigan Supreme Court held that a foreign corporation did not consent to personal jurisdiction for a cause of action arising outside of the state when it registered to do business in the state and appointed a resident agent for service of process. Thus, Defendant's decision to register in this state can only be construed as consent to be sued in Michigan for claims arising out of its...