Star Brite Distributing, Inc. v. Gavin

• Decision Date: 23 August 1990
• Docket Number: Civ. A. No. EC 89-208-D-D.
• Citation: 746 F. Supp. 633
• Parties: STAR BRITE DISTRIBUTING, INC., Plaintiff/Counter-Defendant, v. David C. GAVIN and Gary L. Geeslin, Defendants/Counter-Plaintiffs/Third-Party Plaintiffs, v. OCEAN BIO-CHEM, INC., Peter G. Dornau, Star Brite Distributing (Canada), Inc., and F.K.M., Inc., Third-Party Defendants.
• Court: U.S. District Court — Northern District of Mississippi

746 F. Supp. 633

STAR BRITE DISTRIBUTING, INC., Plaintiff/Counter-Defendant, v. David C. GAVIN and Gary L. Geeslin, Defendants/Counter-Plaintiffs/Third-Party Plaintiffs, v. OCEAN BIO-CHEM, INC., Peter G. Dornau, Star Brite Distributing (Canada), Inc., and F.K.M., Inc., Third-Party Defendants.

Civ. A. No. EC 89-208-D-D.

United States District Court, N.D. Mississippi, E.D.

August 23, 1990.

Michael Paul Shienvold, Fort Lauderdale, Fla., Thomas Y. Page, Edley H. Jones, III, Jackson, Miss., for plaintiffs.

Gary L. Geeslin, John W. Crowell, Columbus, Miss., for defendants.

MEMORANDUM OPINION

DAVIDSON, District Judge.

The court has before it two motions to dismiss this cause or to transfer it to the Southern District of Florida; one motion is filed on behalf of Ocean Bio-Chem, Inc., the other on behalf of the remaining third-party defendants and the plaintiff/counter-defendant. The movants challenge this court's in personam jurisdiction over them, and also challenge the propriety of venue of the plaintiff's counter-claim and third-party claim for patent infringement. After careful consideration, the court is of the opinion that the motions are without merit and should be denied.

Defendants Gavin and Geeslin filed a motion in the Southern District of Florida to dismiss the cause for lack of in personam jurisdiction or to transfer the action to this court. On June 30, 1990, the District Court for the Southern District of Florida ordered the transfer of this cause to this court, pursuant to 28 U.S.C. § 1404. At that time, the only claims before the court were those of Star Brite Distributing, Inc. (SBDI) against Gavin and Geeslin. The court found that venue was proper in the Northern District of Mississippi, as all defendants were resident here. No party has challenged that ruling. It is not clear from the opinion of the Florida court whether that decision was based on considerations of forum non conveniens or on defendants' claim of lack of in personam jurisdiction.

Thereafter, the defendants filed their answer and counter-claim against the plaintiff and later was allowed to amend to include third-party claims against Ocean Bio-Chem, Inc., Peter G. Dornau, Star-Brite Distributing (Canada), Inc., and F.K.M., Inc. The original claim by SBDI asserted that the defendants' efforts to levy against the assets of SBDI in the hands of third persons in pursuit of its judgment against the parent corporation was wrongful and damaged SBDI. Plaintiff had attempted to have this court amend that prior judgment to include SBDI, among others, but was rebuffed; in denying the motion to amend, the court pointed out that other, proper procedures existed, including the filing of counter-claims in the instant action. A copy of that opinion is appended hereto, and is incorporated by reference. The court incorporates into the record of this case, by judicial notice, the record of the prior related action, Gavin v. Star Brite Corp., No. EC 84-75-D-D. (Gavin I)

I. PERSONAL JURISDICTION

The burden of proof on the issue of in personam jurisdiction lies on the party asserting such jurisdiction. DeMelo v. Toche Marine, Inc., 711 F.2d 1260, 1270 (5th Cir.1983); Brown v. Flowers Industries, Inc., 688 F.2d 328, 331-34 (5th Cir. 1982). The parties have not requested an evidentiary hearing, and the court is of the opinion that a rehearing is not necessary for a ruling in this matter.¹ Thus the burden laid upon the defendants is the presentation of a prima facie case for personal jurisdiction. DeMelo, supra; Brown, supra; Data Disc, Inc. v. Systems Technology Associates, Inc., 557 F.2d 1280, 1285 (9th Cir.1977). A prima facie showing at this stage of trial would not eliminate the need for a final determination at a later stage of this litigation. DeMelo, at 1271, n. 12. For purposes of the instant determination, the court will take as true the averments of the defendants and will disregard the assertions of the third-party defendants where those assertions are the subject of factual dispute.

In evaluating the issue of in personam jurisdiction, the court must apply a two-part test: "First, the law of the forum state must provide for the assertion of such jurisdiction: and second the exercise of jurisdiction under state law must comport with the dictates of the fourteenth amendment due process clause." Smith v. Dewalt Products Corp., 743 F.2d 277, 278 (5th Cir.1984); see Interfirst Bank Clifton v. Fernandez, 844 F.2d 279 (5th Cir.1988). To satisfy the first step of this test, the defendants rely on the torts clause of the Mississippi long-arm statute. Miss.Code Ann. § 13-3-57. Plaintiff also alleges derivative jurisdiction through the doctrine of corporate disregard. See Quarles v. Fuqua Industries, Inc., 504 F.2d 1358 (10th Cir.1974). The fourteenth amendment allows personal jurisdiction to be either "general" or "specific."

"General jurisdiction" is personal jurisdiction based on a defendant's contacts with the forum that are unrelated to the controversy. To exercise general jurisdiction, the court must determine whether the contacts are sufficiently systematic and continuous as to support a reasonable exercise of jurisdiction. "Specific jurisdiction", on the other hand, is personal jurisdiction based on contacts with the forum that are related to the particular controversy. Even a single purposeful contact may in a proper case be sufficient to meet the requirement of minimum contacts when the cause of action arises from the contact. But to exercise specific jurisdiction, the court must examine the relationship among the defendant, the forum, and the litigation to determine whether maintaining the suit offends traditional notions of fair play and substantial justice. (citations omitted.)

Southmark Corp. v. Life Investors, Inc., 851 F.2d 763, 772 (5th Cir.1988). The defendants here do not plead general jurisdiction, but rather assert specific jurisdiction through the independent tort theory and through the piercing of the corporate veil. On the theory that the plaintiff and the third-party defendants have committed a fraud against the defendants, the court notes that it has been found to be sufficient for purposes of the fourteenth amendment that jurisdiction be based on an act occurring outside the forum state which did caused injury within the forum state. See Calder v. Jones, 465 U.S. 783, 104 S.Ct. 1482, 79 L.Ed.2d 804 (1984) (publication of a newspaper). As the defendants have made out a prima facie case of fraud against the plaintiff and third-party defendants, such fraud occurring in part in Mississippi and being intended to and allegedly injuring in fact persons within Mississippi, the court is convinced that the fourteenth amendment is satisfied in the instant case. Alford v. Whitsel, 322 F.Supp. 358 (N.D. Miss.1971).

a. Star Brite Distributing, Inc.

Defendants cite Wright & Miller, Federal Practice and Procedure, for the proposition that a plaintiff may not object to venue or personal jurisdiction for purposes of adjudicating either a permissive or a compulsory counter-claim. Id., § 1416 (compulsory), and § 1424 (permissive). SBDI's sole response is that it is not in this court voluntarily; this court must disagree. Plaintiff brought its claims against Gavin and Geeslin in Florida. That court found transfer of venue to be proper, and the plaintiff has not objected to that ruling. Plaintiff certainly did not object so strenuously to "being haled into" this court that it voluntarily dismissed its complaint rather than try its claims here. Plaintiff is, for purposes of this motion, voluntarily in this court. Plaintiff may not now object to this court's exercise of jurisdiction over it for purposes of deciding the counterclaim.

b. Third-Party Defendants

Ocean Bio-Chem was found liable to David Gavin for patent infringement in the prior litigation in this court.² That judgment has been upheld on appeal by the Federal Circuit. The instant counter-claim arises out of that judgment, and the actions of Ocean Bio-Chem in the preparation for litigation of that cause. The court thus finds that third-party defendant Ocean Bio-Chem is amenable to suit in this court on the defendants' cause of action for fraud.³ Similarly, the court finds, as a preliminary matter, that the defendants have set forth a prima facie case of fraud against the remaining third-party defendants.⁴ (See discussion of fraud claim, infra.)

Further, the defendants have asserted a third-party claim for disregard of the corporate identity between the parent and the subsidiary corporations, and between each of them and Peter G. Dornau. As discussed below, the defendants have presented a prima facie case under this theory, as well; the court holds that the defendants have established, to the court's satisfaction, a prima facie case for piercing the corporate veil, which is, in turn, sufficient to establish a prima facie case for the exercise of personal jurisdiction over the plaintiff and third-party defendants, with the exception of Peter Dornau.

c. Fraud

Erie Railroad v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), requires this court to apply the law of Mississippi, including Mississippi's conflict of laws rules, to the state law issues presented. Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). The Mississippi Supreme Court follows the center of gravity test of the Restatement (Second) of Conflicts of Law, § 6 and has ruled that different issues within the same case may be governed by the law of different states. Boardman v. United Services Auto. Association, 470 So.2d 1024, 1031 (Miss.1985), answer to certified question conformed to 768 F.2d 718 (5th Cir.1985), cert. denied 474 U.S. 980, 106 S.Ct. 384, 88 L.Ed.2d 337 (1985). As to the defendants' counter and third-party claims of fraud, the bulk of the allegedly fraudulent activity took place during discovery in Gavin I. That trial was conducted in...