William A. Edison Trust No. One v. Iii

• Decision Date: 08 December 2010
• Docket Number: Case No. 10-1159-RDR
• Parties: WILLIAM A. EDISON TRUST NUMBER ONE, et al., Plaintiffs, v. R. D. PATTILLO III and RUSSELL H. TRIPPET, Defendants.
• Court: U.S. District Court — District of Kansas

WILLIAM A. EDISON TRUST NUMBER ONE, et al., Plaintiffs,
v.
R. D. PATTILLO III and RUSSELL H. TRIPPET, Defendants.

Case No. 10-1159-RDR

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS

Dated: December 8, 2010

MEMORANDUM AND ORDER

This matter is presently before the court upon defendants' motion to dismiss for lack of personal jurisdiction and/or improper venue or, in the alternative, for transfer. Having carefully reviewed the arguments of the parties, the court is now prepared to rule.

I.

This is a breach of contract action. Plaintiffs, Kansas residents, provided $800,000 for a senior housing development in Waco, Texas. The monies were loaned to First Bale, LLC, a Texas corporation. Defendants R.D. (Spike) Pattillo III and Russell H. Trippet, Texas residents, were the principal members of First Bale. A promissory note was executed by First Bale in favor of the plaintiffs. Plaintiffs were to receive interest payments and equity in First Bale. Defendants each signed personal guaranties for the loan. The project eventually failed. Plaintiffs brought

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an action in Kansas state court against the defendants based upon the personal guaranties. The matter was then removed to this court based upon diversity jurisdiction.

II.

"The standard that governs a Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction is well established: 'The plaintiff bears the burden of establishing personal jurisdiction over the defendant.'" Hudye Soil Services, Inc. v. Tyler, 4 6 F.Supp.2d 1157, 1161 (D.Kan.1999) (quoting Behagen v. Amateur Basketball Ass'n, 744 F.2d 731, 733 (10^th Cir. 1984), cert. denied, 471 U.S. 1010 (1985) (citations omitted)). See also Dudnikov v. Chalk & Vermillion Fine Arts, Inc., 514 F.3d 1063, 1069 (10^th Cir. 2008).

The extent of the plaintiff's burden depends in part on the way the trial court handles the motion to dismiss for lack of personal jurisdiction. The trial court can proceed in several ways including (1) reference to only the complaint and affidavits, (2) a pre-trial evidentiary hearing, or (3) sometimes at trial itself. Dudnikov, 514 F.3d at 1069. When the trial court decides the jurisdictional issue as the result of an evidentiary hearing or at trial, the plaintiff must generally establish that personal jurisdiction exists by a preponderance of the evidence. Id. at 1070 n. 4. However, when the motion is decided at a preliminary stage by reference to only the complaint and affidavits, the

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plaintiff need only make a prima facie showing of personal jurisdiction. Id. at 1070.

The parties have provided the court with substantial information concerning the background of this case. They have submitted affidavits and exhibits. Neither side has requested an evidentiary hearing and the court does not see the need for one. Accordingly, plaintiffs need only make a prima facie showing of personal jurisdiction. The plaintiff may carry this burden "by demonstrating, via affidavit or other written materials, facts that if true would support jurisdiction over the defendant." TH Agric. & Nutrition, LLC v. Ace European Grp. Ltd., 488 F.3d 1282, 1286 (10^th Cir. 2007) (internal quotation marks omitted). "All factual disputes are resolved in favor of the plaintiff[ ] when determining the sufficiency of this showing." Rusakiewicz v. Lowe, 556 F.3d 1095, 1100 (10^th Cir. 2009). "[T]o defeat a prima facie showing of jurisdiction, the defendant must demonstrate that the presence of some other considerations would render jurisdiction unreasonable." TH Agric. & Nutrition, 488 F.3d at 1286 (internal quotation marks omitted).

III.

In 2006, defendant Trippet, on behalf of himself and defendant Pattillo, contacted William Edison about the possibility of investing in a senior housing development in Waco, Texas called "The Homestead." Edison was located in Wichita, Kansas. Pattillo

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and Trippet were in Waco. Trippet knew Edison from prior professional relationships including a partnership between Trippet and Edison on another unrelated property in Waco. Trippet knew that Edison had successfully gathered investors for other real estate projects. Trippet initiated the conversation in hopes that Edison could gather other Kansas lenders to finance The Homestead. A number of telephone calls, e-mails and letters were subsequently exchanged between Edison in Kansas and Trippet and Pattillo in Texas.

In June 2006, Trippet faxed a 35-page informational document entitled "The Homestead" to Edison in Kansas. The document, which featured plans, drawings, budgets, photos, and comparable properties, was intended to educate and solicit Edison's financial participation in the project. On July 25, 2006, a certificate of formation for First Bale, LLC was filed with the Texas Secretary of State by Pattillo. Trippet and Pattillo were designated as the managers of First Bale, LLC. Pattillo was designated as its registered agent. First Bale was formed as a vehicle to own and operate The Homestead.

Pattillo and Trippet continued to communicate with Edison about his and the other Kansas lenders' involvement with The Homestead. These communications were made from Waco to Edison in Kansas. Eventually, four Kansas lenders agreed to loan $800,000 to First Bale in exchange for a 20% ownership interest. Pattillo and

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Trippet would also execute personal guaranties for the loan.

On January 18, 2007, First Bale executed a real estate lien note in favor of William L. Edison Trust Number One (third restatement) U/A May 4, 2005; William Hensley; Janet and/or Charles R. White; and McCullough Development, Inc. (the Kansas lenders). The note was signed by Pattillo as President of First Bale. In the note, First Bale promised to pay plaintiffs a principal sum of $800,000 plus interest at 9% per annum. The note expressly provided that the place of payment was Edison Investments in Wichita, Kansas. The note also provided as follows: "The laws of State of Texas shall govern this Note and it shall be enforceable, payable and collectible in Waco, McLennan County, Texas." Also, on January 18, 2007, First Bale executed a deed of trust for the real property and improvements upon which The Homestead was to be constructed in favor of the Kansas lenders as security for the note. Finally, on that date, Pattillo and Trippet each signed a personal guaranty in favor of the Kansas lenders to guarantee payment of the note. In the guaranties, Pattillo and Trippet agreed to pay the guaranteed indebtedness, when due or declared due, at the lender's mailing address which was specifically identified as Wichita, Kansas. The guaranties also provided that they were to be "construed under the laws of the state of Texas without regard to choice-of-law rules of any jurisdiction."

From January 2007 to January 2009, First Bale sent at least 14

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interest payments of $1,500 to each of the Kansas lenders. Thereafter, Trippet and Pattillo sought additional monies from the Kansas lenders to salvage the project when it became apparent that The Homestead units were not leasing rapidly enough. Eventually, on November 3, 2009, the senior lender in the project, Central National Bank, foreclosed its mortgage on the property and improvements of The Homestead. In the instant case, plaintiffs contend that First Bale is in default on the note. They seek payment of the amounts due under the note based upon the personal guaranties of Pattillo and Trippet.

IV.

The defendants rely upon the following facts in support of their motion to dismiss: (1) they are residents of Texas, not Kansas; (2) they have not traveled to Kansas; (3) they have no place of business in Kansas; (4) they have had no purposeful contacts with Kansas; (5) the subject of the loan and the guaranties was a project in Texas; (6) they executed the guaranties in Texas; (7) the fiduciary shield doctrine protects them because most of the contacts they made were made on behalf of First Bale, who is not a party to this action; and (8) the loan to First Bale was "enforceable, payable and collectible in Waco, McLennan County, Texas."

Plaintiffs suggest that personal jurisdiction is present in Kansas based upon the following facts: (1) multiple communications

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prior to the signing of the guaranties between Edison in Kansas and the defendants in Texas pursuant to e-mails, letters and telephone calls; (2) Trippet faxed a 35-page document to Edison in Kansas that was intended to solicit and entice financial participation in the project; (3) pursuant to the solicitations from the defendants, the Kansas lenders sent an $800,000 loan payment to Texas; (4) the defendants each signed a note on behalf of First Bale that provided for payments to be made to an address in Kansas; (5) the defendants each signed a guaranty that provided for payments to be made to Kansas; (6) First Bale sent at least 14 interest payments to the Kansas lenders in Kansas; (7) the defendants solicited more money from the Kansas lenders when it became apparent the project would not be successful; and (8) the fiduciary shield doctrine does not apply because the defendants were acting in furtherance of their own interests and First Bale was merely a shell to enable the completion of the project.

V.

To obtain personal jurisdiction over nonresident defendants in a diversity action, "a plaintiff must show that...