8:09-mn JFA Date Filed 10/19/09 Entry Number 54 Page 1 of 2 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF SOUTH CAROLINA ANDERSON DIVISION
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1 8:09-mn JFA Date Filed 10/19/09 Entry Number 54 Page 1 of 2 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF SOUTH CAROLINA ANDERSON DIVISION IN RE: LANDAMERICA 1031 EXCHANGE SERVICES, INC., INTERNAL REVENUE SERVICE 1031 TAX DEFERRED EXCHANGE LITIGATION Angela M. Arthur, et.al. vs. Plaintiffs, SunTrust Bank, et.al Defendants. Case No. MDL No Southern District of California C.A. No. 3:09-cv District of South Carolina C.A. No. 8:09-cv DEFENDANT JONES S MOTION TO DISMISS PURSUANT TO FRCP 12(B(2 Defendant Devon M. Jones by and through her undersigned counsel, hereby moves the Court to dismiss Plaintiffs Amended Consolidated Complaint in its entirety, based on lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b(2. The grounds for this motion, as discussed more fully in the Memorandum in Support submitted herewith, are that Plaintiffs have failed to meet their burden of proving, by a preponderance of the evidence, that jurisdiction over Jones is proper. See Mylan Labs, Inc. v. Akzo, N.V., 2 F.3d 56, 60 (4th Cir Plaintiffs are therefore unable to establish specific or general in personam jurisdiction over Defendant Jones. WASH_
2 8:09-mn JFA Date Filed 10/19/09 Entry Number 54 Page 2 of 2 This Motion is also supported by applicable court rules, case law, and the arguments to be offered by counsel at the hearing on this matter. Wherefore, Defendant Jones respectfully requests that this Court Dismiss Plaintiff s Consolidated Amended Complaint based on lack of personal jurisdiction pursuant to FRCP 12(b(2, and enter an order granting such other relief as the Court deems appropriate. Dated: October 19, 2009 Respectfully submitted, /s/ John J. Pringle Jr. John Pringle Jr. Ellis, Lawhorne & Sims P.A Main Street 5th Floor Columbia, South Carolina Scott L. Fredericksen David A. Hickerson Foley & Lardner LLP Washington Harbour 3000 K Street, N.W. Suite 600 Washington, D.C COUNSEL FOR DEFENDANT JONES WASH_
3 8:09-mn JFA Date Filed 10/19/09 Entry Number 54-1 Page 1 of 10 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF SOUTH CAROLINA ANDERSON DIVISION IN RE: LANDAMERICA 1031 EXCHANGE SERVICES, INC., INTERNAL REVENUE SERVICE 1031 TAX DEFERRED EXCHANGE LITIGATION Angela M. Arthur, et.al. vs. Plaintiffs, SunTrust Bank, et.al Defendants. Case No. MDL No Southern District of California C.A. No. 3:09-cv District of South Carolina C.A. No. 8:09-cv Class Action [Jury Trial Demanded] DEFENDANT JONES S MEMORANDUM IN SUPPORT OF MOTION TO DISMISS PURSUANT TO RULE 12(B(2 Defendant Devon M. Jones ( Jones, through undersigned counsel, hereby submits this Memorandum in Support of her Motion to Dismiss Plaintiffs Complaint pursuant to Rule 12(b(2 of the Federal Rules of Civil Procedure, on the basis that this Court lacks personal jurisdiction over her. FACTS ALLEGED The following paragraph contains the only jurisdictional allegations made by the Plaintiffs against the Defendants in the Amended Consolidated Complaint ( Complaint or Compl. : This Court has personal jurisdiction over the Defendants because: (i they each conducted business in California and/or South Carolina; (ii received and converted Exchange Funds derived from California and/or South Carolina; (iii made or aided and abetted the making of false statements in California and/or South
4 8:09-mn JFA Date Filed 10/19/09 Entry Number 54-1 Page 2 of 10 Carolina; (iv and knowingly assisted LES in breaching fiduciary duties owed Californians, South Carolinians and others. Venue is proper here because one or more failed 1031 Exchanges occurred in this District and in the Southern District of California. Compl. 15. There are no jurisdictional facts specific about Jones alleged in the Complaint. ARGUMENT When personal jurisdiction over a non-resident defendant is disputed under Rule 12(b(2 of the Federal Rules of Civil Procedure, Plaintiffs have the burden of proving, by a preponderance of the evidence, that jurisdiction is proper. Mylan Labs., Inc. v. Akzo, N.V., 2 F.3d 56, 60 (4th Cir. 1993; Combs v. Bakker, 886 F.2d 673, 676 (4th Cir Plaintiffs have failed to show that personal jurisdiction is appropriate for each Defendant to this action, as required by due process. Magic Toyota, Inc. v. Southeast Toyota Distributors, Inc., 784 F.Supp. 306, 313 (D.S.C (citing Hanson v. Denckla, 357 U.S. 235, 253 (1958. Instead, the Complaint alleges the same set of generalized contacts for all Defendants, and fails to establish a prima facie case for personal jurisdiction any of the Individual Defendants, let alone Defendant Jones. Therefore, the Complaint should be dismissed because Plaintiffs cannot establish specific or general in personam jurisdiction over Defendant Jones. 1. Personal Jurisdiction Over Defendant Jones is Not Consistent With Due Process. A court may validly exercise personal jurisdiction over a non-resident defendant where a statute authorizes service of process on the non-resident defendant, and the exercise of personal jurisdiction comports with the Due Process Clause of the Fourteenth Amendment. Mylan Labs, 2 F.3d at 60. This case was comprised of two actions, Case No. 3:09-cv in the Southern District of California, and Case No. 8:09-cv in the District of South Carolina (the Transferor Actions. These Transferor Actions were consolidated into the instant case in the District of South Carolina by the Judicial Panel on Multi-District Litigation ( MDL Panel. 2
5 8:09-mn JFA Date Filed 10/19/09 Entry Number 54-1 Page 3 of 10 As Jones was named as a defendant only after this action was consolidated in the District of South Carolina, the applicable long-arm statute is that of South Carolina. 1 S.C. St In cases consolidated by the MDL Panel, the Fourth Circuit has accepted the general rule that the law of the transferee Circuit controls pretrial issues, including whether the court has personal jurisdiction over the action. See In re Digitek Products Liab. Litig. v. Actavis, Inc., 2009 WL (S.D.W.Va (citing In re Methyl Tertiary Butyl Ether (MTBE Prods. Liab. Litig., 241 F.R.D. 435, 439 (S.D.N.Y. 2007; In re MTBE Prods. Liab. Litig., The South Carolina long-arm statute states: (1 A court may exercise personal jurisdiction over a person who acts directly or by an agent as to a cause of action arising from the person's (a transacting any business in this State; (b contracting to supply services or things in the State; (c commission of a tortious act in whole or in part in this State; (d causing tortious injury or death in this State by an act or omission outside this State if he regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in this State; or (e having an interest in, using, or possessing real property in this State; or (f contracting to insure any person, property or risk located within this State at the time of contracting; or (g entry into a contract to be performed in whole or in part by either party in this State; or (h production, manufacture, or distribution of goods with the reasonable expectation that those goods are to be used or consumed in this State and are so used or consumed. (2 When jurisdiction over a person is based solely upon this section, only a cause of action arising from acts enumerated in this section may be asserted against him, and such action, if brought in this State, shall not be subject to the provisions of (3. S.C. St
6 8:09-mn JFA Date Filed 10/19/09 Entry Number 54-1 Page 4 of 10 WL , *5 (S.D.N.Y (applying the law of the Second Circuit on a motion to dismiss for lack of personal jurisdiction; Bradley v. United States, 161 F.3d 777, 782 n.4 (4th Cir As this case has been consolidated in the District of South Carolina, Fourth Circuit law applies. The Court must first inquire as to whether the state long-arm statute authorizes the exercise of jurisdiction over Jones. See Wolf v. Richmond County Hosp. Auth, 745 F.2d 904, 909 (4th Cir If the statute does authorize jurisdiction, then the court must determine whether the exercise of personal jurisdiction over Jones is consistent with the Due Process Clause of the Fourteenth Amendment. Id. The South Carolina long-arm statute has been interpreted to reach the outer bounds permitted by the Due Process Clause. See Federal Ins. Co. v. Lake Shore, Inc., 886 F.2d 654, 657 n. 2 (4th Cir When a state long-arm statute is co-extensive with due process, the statutory inquiry necessarily merges with the constitutional inquiry, and the two inquiries essentially become one. Stover v. O Connell Assocs., Inc., 84 F.3d 132, (4th Cir Therefore, the only inquiry necessary is whether this Court s exercise of personal jurisdiction over a non-resident defendant is consistent with due process. It is well-established that personal jurisdiction may be exercised over a nonresident defendant only where the defendant has minimum contacts with the forum state such that requiring the defendant to defend his interests in the forum does not offend traditional notions of fair play and substantial justice. Int l Shoe, Co. v. Washington, 326 U.S. 310, 316 (1945 (quoting Miliken v. Meyer, 311 U.S. 457, 463 (1940. As shown below, neither specific nor general in personam jurisdiction is appropriate over Jones. 4
7 8:09-mn JFA Date Filed 10/19/09 Entry Number 54-1 Page 5 of Defendant Lacks Sufficient Minimum Contacts With South Carolina to Give Rise to Specific Personal Jurisdiction. Personal jurisdiction can be specific or general. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 n. 9 (1984. Specific personal jurisdiction is established when the cause of action arises out of the defendant s contacts with the forum. Base Metal Trading, Ltd. v. OJSC Novokuznetsky Aluminum Factory, 283 F.3d 208, 213 (4th Cir If a case is grounded on specific personal jurisdiction, it is essential that there be some act by which the defendant purposefully avails [himself] of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws. Hanson v. Denckla, 357 U.S. 235, 253 (1958. Such activities must be purposefully directed toward the forum state to ensure that non-residents have fair warning that a particular activity may subject them to litigation within the forum. Lesnick v. Hollingsworth & Vose Co., 35 F.3d 939, 945 (4th Cir. 1994; Plant Genetic Systems, N.V. v. Ciba Seeds, 933 F.Supp. 519, 521 (M.D.N.C (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474 (1985 and World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980. Both general and specific personal jurisdiction require that the defendants actions must be directed at the forum state in more than a random, fortuitous, or attenuated way. ESAB Group, Inc. v. Centricut, Inc., 126 F.3d 617, 625 (4th Cir (citing Burger King, 471 U.S. at 475, Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 775 (1984; World-Wide Volkswagen, 444 U.S. at 299 (1980. See also Southern Plastics Co. v. Southern Commerce Bank, 310 S.C. 256 (1992. Plaintiffs Complaint impermissibly conflates the contacts of LandAmerica 1031 Exchange Services, Inc. ( LES and Jones. Plaintiffs attempt to impute personal jurisdiction over LES to an officer of the same. But, it is well-settled that [p]ersonal jurisdiction over an individual officer, director, or employee of a corporation does not automatically follow from 5
8 8:09-mn JFA Date Filed 10/19/09 Entry Number 54-1 Page 6 of 10 personal jurisdiction over the corporation [p]ersonal jurisdiction must be based on an individual s personal contacts with or purposeful availment of the forum state. Harte-Hanks Direct Mktg./Baltimore, Inc. v. Varilease Tech. Fin. Group, Inc., 299 F.Supp.2d 505, (D.Md (emphasis added. See also Bonney v. Roelle, 117 F.3d 1413, *8 (4th Cir (finding that due process protects the officer from personal jurisdiction if he had never personally availed himself of the privilege of conducting activities in the forum state.. The Complaint does not allege a single, individual, personal contact between Jones and South Carolina. Instead, Plaintiffs make broad allegations against all of the Defendants collectively, without showing how the alleged acts formed the necessary contacts between each individual Defendant and South Carolina. While a single tort may be sufficient to create a contact upon which to base in personam jurisdiction, the tortious act must also have a substantial connection with the forum state. McGee v. Int l Life Ins. Co., 355 U.S. 220, 223 (1957. But, if the claim against the corporate agent rests on nothing more than that he is an officer or employee of the non-resident corporation and if any connection he had with the commission of the tort occurred without the forum state under sound due process principles, the nexus between the corporate agent and the forum state is too tenuous to support jurisdiction over the agent personally by reason of service under the long-arm statute of the forum state. Columbia Briargate Co. v. First Nat l Bank in Dallas, 713 F.2d 1052, (4th Cir Although the Complaint in conclusory fashion states that the Individual Defendants, including Jones, the Assistant Secretary of LES, conducted a series of wrongful acts that were directed at South Carolina, Compl. 15, the Complaint fails to set forth any specific factual allegations regarding Jones. Instead, the Complaint does not point to any specific acts directed at South Carolina. Rather, the acts alleged had only attenuated effects that allegedly 6
9 8:09-mn JFA Date Filed 10/19/09 Entry Number 54-1 Page 7 of 10 reached all LES customers across the United States, not only in South Carolina. The Fourth Circuit has held that non-resident corporate officers who conduct activities generally directed at customers throughout the United States have not created sufficient contacts to justify specific personal jurisdiction. 2 ESAB Group, 126 F.3d Corporate acts with nationwide effects are too unfocused to justify personal jurisdiction, as personal jurisdiction would depend on a plaintiff s decision about where to establish residence. Such a theory would always make jurisdiction appropriate in the plaintiff s home state, for the plaintiff always feels the impact of the harm there. Although the place that the plaintiff feels the alleged injury is plainly relevant to the inquiry, it must ultimately be accompanied by the defendant s own contacts with the state if jurisdiction over the defendant is to be upheld. Id. (emphasis in original. Plaintiffs Complaint does not make a single allegation that Jones personally contacted exchange customers in South Carolina. Plaintiffs stated intent to move for class certification in this action further supports the conclusion that Jones s acts clearly could not be directed specifically at South Carolina. Compl Plaintiffs propose to form a class of [e]ach and every person whose 1031 Exchange Funds were deposited by LandAmerica Exchange Services, Inc. with SunTrust Bank and who have been denied their rights in and access to those Exchange Funds. 2 In ESAB Group v. Centricut, the Fourth Circuit examined the question whether corporate activities directed generally at customers throughout the United States can be the basis for specific personal jurisdiction in South Carolina. 126 F.3d 617. The Court concluded that a defendant s knowledge of and intent to cause possible effects in the forum state do not create sufficient contacts with the forum, and therefore do not give rise to justify specific personal jurisdiction. ESAB Group, 126 F.3d at 625. This activity, standing alone, does not support proof of an intent by [the defendant] to avail [himself] of the privilege of conducting activities in [the forum state]. Id. See also Hanson, 357 U.S. at 253 ( The unilateral activity of those who claim some relationship with a non-resident defendant cannot satisfy the requirement of contact with the forum state. This activity also does not manifest behavior intentionally targeted at and focused on the forum state. Id. 7
10 8:09-mn JFA Date Filed 10/19/09 Entry Number 54-1 Page 8 of 10 Compl This proposed class of approximately 400 victims with relatively large claims cannot be drawn from South Carolina alone. The fact remains, however, that only one of the five named Plaintiffs in the current suit has any alleged ties to South Carolina. Jones did not, and Plaintiffs have not alleged that she did, personally correspond, participate in any telephone call or otherwise speak with, transact with, contract with, or have any other form of contact with the Terry Plaintiffs or any other exchange customers in South Carolina or elsewhere. Jones Aff Jones did not, nor has there been any allegation that she did, negotiate or draft the Exchange Agreements between LES and the Plaintiffs. Jones Aff. 13. Jones was the Assistant Secretary of LES and was not involved in LES sales activities, marketing efforts, or any other day-to-day company activities in LES s offices nationwide. Jones Aff. 9. The Fourth Circuit requires the special jurisdiction inquiry to examine: (1 the extent to which the Defendant purposefully availed himself of the privilege of conducting activities in South Carolina; (2 whether Plaintiffs claims arise out of those activities directed at South Carolina; and (3 whether the exercise of personal jurisdiction would be constitutionally reasonable. ALS Scan, Inc. v. Digital Serv. Consultants, Inc., 293 F.3d 707, 712 (4th Cir. 2002; See Hanson, 357 U.S. at 253. Jones never availed herself personally of the privilege of conducting activities within South Carolina, and Plaintiffs claims therefore cannot arise from her South Carolina contacts. Due process therefore prevents this Court from exercising specific personal jurisdiction over Jones. 3. Defendant Lacks Continuous and Systematic Contacts with the Forum State Necessary for General Personal Jurisdiction. Plaintiffs have also failed to meet their burden to show that Jones is subject to general personal jurisdiction in South Carolina. General personal jurisdiction arises where a defendant s continuous, systematic, and substantial connections to the forum gives the court 8
11 8:09-mn JFA Date Filed 10/19/09 Entry Number 54-1 Page 9 of 10 authority to exercise jurisdiction over the defendant in a suit that does not arise from the defendant s activities in the forum state. Helicopteros Nacionales, 466 U.S. at 414. [T]he threshold level of minimum contacts sufficient to confer general jurisdiction is significantly higher than for specific jurisdiction. ALS Scan, Inc. v. Digital Serv. Consultants, Inc., 293 F.3d 707, 715 (4th Cir (internal quotation marks omitted; Nichols v. G.D. Searle & Co., 991 F.2d 1195, 1199, (4th Cir (the requisite minimum contacts between the defendant and the forum state must be fairly extensive. In other words, general jurisdiction is ordinarily reserved for those defendants who have such substantial contacts with the forum state that they may be considered essentially domiciled within that state. Estate of Bank v. Swiss Valley Farms, Co., 286 F.Supp.2d 514, (D.Md (citing Atlantech Distribution, Inc. v. Credit Gen. Ins. Co., 30 F.Supp. 534 (D.Md Jones is not, and never has been a resident of South Carolina. Jones Aff. 18, 28. Jones does not maintain personal offices, employees, agents, properties, assets, or financial accounts in South Carolina. Jones Aff. 17, 19, 20, 27. Jones has never personally entered into contracts in South Carolina, committed a tort or omission, been convicted of a crime, advertised or solicited business, been accredited in, or otherwise conducted business in South Carolina. Jones Aff. 17, 21-26, 29. In sum, Jones s contacts with South Carolina would be best described as nonexistent, not continuous and systematic. Given the Fourth Circuit s prescription that broad constructions of general jurisdiction should be generally disfavored, this action should be dismissed in light of the due process considerations weighing against this Court s exercise of personal jurisdiction over Jones. Nichols, 911 F.2d at
12 8:09-mn JFA Date Filed 10/19/09 Entry Number 54-1 Page 10 of 10 CONCLUSION For the reasons set forth above, Defendant Devon Jones respectfully requests that the Court dismiss Plaintiffs Complaint pursuant to Rule 12(b(2 of the Federal Rules of Civil Procedure for lack of personal jurisdiction over her, and for such other relief as the Court deems proper and just under the circumstances. Dated: October 19, 2009 Respectfully submitted, /s/ John J. Pringle Jr. John Pringle Jr. Ellis, Lawhorne & Sims P.A Main Street 5th Floor Columbia, South Carolina Scott L. Fredericksen David A. Hickerson Foley & Lardner LLP Washington Harbour 3000 K Street, N.W. Suite 600 Washington, D.C COUNSEL FOR DEFENDANT JONES 10
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