Highway Auto Sales, Inc. v. Auto-Konig of Scottsdale, Inc.Highway Auto Sales, Inc. v. Auto-Konig of Scottsdale, Inc.
MEMORANDUM AND ORDER
This case involves both contract and tort claims arising out of the sale of an automobile. Because complete diversity exists between the parties and the amount in controversy exceeds $50,000 exclusive of interest and costs, subject matter jurisdiction exists pursuant to 28 U.S.C. § 1332. Pending is defendant’s Rule 12(b)(2) motion to dismiss or transfer for lack of personal jurisdiction. (Doci 5). For the following reasons, defendant’s motion shall be granted and the case transferrеd to the District Court of Arizona.
In January 1996, Mr. Joseph Liber (Li-ber), President of plaintiff Highway Auto Sales, Inc., saw an advertisement in the DuPont Registry — a national" publication specializing in new or pre-owned vehicles — offering a “1991 F40 Coupe Ferrari” for sale for $275,000. An automobile dealer specializing in the sale of expensive and rare automobiles, Liber telephoned defendant to inquire about the Ferrari, its availability and condition. Mr. David Murphy (Murphy), General Manаger of defendant Auto-Konig of Scottsdale, Inc. (Auto-Konig), received plaintiffs phone call and answered some preliminary questions about the Ferrari. Not having the answers to all of Liber’s questions, Murphy said he would “get back” to Liber after an inspection of the vehicle. On “getting back” to Liber, Murphy allegedly assured Liber that the Ferrari was in “excellent condition” and “authentic.” (Plaintiffs Complaint at . ¶ 7). The parties agreed upon a purchasе price of $226,000 including delivery of the car to Toledo, Ohio, the location of plaintiff. Plaintiff paid the purchase price in full and defendant delivered the vehicle on February 5,1996.
On inspecting the vehicle in Toledo, Liber discovered several problems with the Ferar-ri, including ripped and stained seat covers, nicks in the windshield and right rear “dog leg,” hairline cracks in the spoiler, and chipped paint in at least two locations on the car. (Plaintiffs Complaint at ¶ 12). Furthermore, by comparing his newly-purchased Ferrari to other “authentic” Ferraris, Liber discerned that the Auto-Konig Ferrari was
Without responding to the merits of plaintiffs claim, defendant moves for dismissal or transfer based on lack of personal jurisdiction. Defendant asserts that this court cannot exercise personal jurisdiction under either Ohio’s long-arm statute, O.R.C. § 2307.382, or the limits imposed by the due process сlause of the Constitution. For the following reasons, I agree with defendant that the contacts presented in this case do not meet the “minimum contacts” requirement for personal jurisdiction as articulated by the Supreme Court and applied in our Circuit. Therefore, this case should be transferred to the District of Arizona.
The Sixth Circuit recently affirmed that when “a district court rules on a jurisdictional motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(2) withоut conducting an evidentiary hearing, the court must consider the pleadings and affidavits in a light most favorable to the plaintiff.”
CompuServe Inc. v. Patterson,
To gain personal jurisdiction over a defendant, plaintiff must show: (1) the defendant is amenable to suit under the forum state’s long-arm statute; and (2) due process requirements of the Constitution are met.
CompuServe,
Ohio’s Long-Arm Statute
The Ohio long-arm statute, O.R.C. § 2307.382(A), broadly provides jurisdiction over any person or corporation:
(1) transacting any business in this state; (2) contracting to supply services or goods in this state; ... (6) causing tortious injury in this state to any person by an act outside this state committed with the purpose of injuring persons, when he might reasonably have expected that some person would be injured thereby in this state;
The Sixth Circuit has read the “transacting business” clause of Ohio’s long-arm statute as “extend[ing] to the federal constitutional limits of due process,” and intending to reach “as far as the Due Process Clause will allow.”
CompuServe,
Additionally, if the phrase “transacting business” is “broader than the word contract,” “transacting business” must logically subsume the narrower act of contracting. Thus, because defendant contracted with plaintiff, Ohio’s long-arm statute would apply on that basis as well. Even if the “transacting business” clause does not cover the instant action, defendant in fact contracted to — and actually did — “supply goods” (the Ferrari), to plaintiff in the state of Ohio. This brings this business interaction within the second category of Ohio’s long-arm statute.
In any event, the defendant’s alleged tortious conduct — acts of negligent misrepresentation and fraud — also fits squarely within Ohio’s long-arm statute. As described by plaintiff, the nonresident defendant’s acts of negligent misrepresentation and intentional fraud caused injury in Ohio by “omission,” thus bringing the instant action under the sixth category of Ohio’s long-arm statute.
In conclusion, under the “transacting business,” “supplying goods,” or “committing a tort by omission” theories, the first, second, and sixth categories of Ohio’s long-arm statute provide this court with the statutory power to entertаin the case at bar, thus clearing the first jurisdictional requirement.
Constitutional Due Process: Minimum Contacts
As required by the due process clause of the Constitution, a defendant must have “minimum contacts” with the forum state “such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.’ ”
International Shoe Co. v. Washington,
First, the defendant must purposefully avail himself of the privilege of acting in the forum state or causing a consequence in the forum stаte. Second, the cause of action must arise from the defendant’s activities there. Finally, the acts of defendant or consequences caused by the defendant must have a substantial enough connection with the forum state to make the exercise of jurisdiction over the defendant reasonable.
The first — and dispositive — inquiry in this case is whether the nonresident defendant corporation purposefully availed itself of the privilege оf “acting in” Ohio or “causing a consequence” in Ohio. This “purposeful avaihnent” prong is a “baseline requirement,”
In-Flight Devices,
where the defendant “deliberately” has engaged in. significant activities within a state or has created “continuing obligations” between himself and residents of the fоrum, he manifestly has availed himself of the privilege of conducting business there, and because his activities are shielded by “the benefits and protections” of the forum’s laws it is presumptively not unreasonable to require him to submit to the burdens of litigation in that forum as well.
Burger King Corp.,
First, the connections between defendant and Ohio were not so substantial that Auto-Konig reasonably would have anticipated being haled into an Ohio court. In exploring the outer limits of what constitutes “substantial” or “significant” minimum contacts, the Supreme Court has determined that merely entering into a contract with a resident of the forum state, without more, does not “automatically establish sufficient minimum contacts,” because a contract is “ordinarily but an intermediate step serving to tie up prior business negotiations with future consequences whiсh themselves are the real object of the business transactions.”
Burger King Corp.,
After the parties signed the contract, defendant accepted payment and delivered the vehicle to plaintiff. ' Accepting payment electronically, like discussions via phone аnd fax lines, involves- the “ancillary” use of “interstate facilities.”
Id.
Furthermore, “injection of [a product] into the stream of commerce, without more, would be at best a dubious ground for jurisdiction.”
CompuServe,
Second, in addition to not connecting with Ohio in “substantial or significant” ways, defendant’s contacts cannot be characterized as creating “continuing obligations” to or an ongoing relationship with plaintiff. A defendant establishes an ongoing relationship with a resident of a forum state when contractual obligations create “a realistic and' foreseeable impact upon the commerce of the forum state.”
Stump,
Advertising in a nationally circulated publication, negotiating the sale of a single vehicle over telephone and fax lines, and arranging the delivery of the vehicle to the forum state involve contacts of a short and fleeting character — contacts which are insufficient to create a “realistic and foreseeable impact” on the commerce of Ohio. There has been no showing that defendant’s contacts with Ohio were to have “ongoing,” “far-reaching,” “continuous,” or “substantial” consequences on commerce in Ohio.
See LAK, Inc. v. Deer Creek Enterprises,
Aside from applying principles of the “purрoseful availment” analysis, namely “significant” or “substantial” connections and the nonexistence of “continuing obligations,” it is helpful to analogize to specific cases. Recently, the Sixth Circuit in
CompuServe, supra,
explained that its defendant, in meeting the purposeful availment requirement, did much more than advertise, contract to sell, and send a product into the stream of commerce. Rather, the
CompuServe
defendant repeatedly sent a product to plaintiff CompuServe for resale, advertised the product with CompuServe, repeatedly demanded $100,000 from CompuServe to redress an alleged copyright infringement, described the lawsuit against CompuServe on one of CompuServe’s electronic forums, gave a “myriad” of others access to his product via CompuServe, and contracted with CompuServe to be the
exclusive distributor
of his software product.
See CompuServe,
The case at bar is distinguishable from the facts of
CompuServe
in a way that cuts against a finding of purposeful availment and, thus, personal jurisdiction. Indisputably, defendant communicated with plaintiff, entered into a contract with plaintiff, and injected a product — the Ferrari — into the stream of commerce. Unlike the
CompuServe
dеfendant, Auto-Konig did not contemplate an ongoing relationship with plaintiff, contract with plaintiff to be its “exclusive distributor” of automobiles, utilize plaintiff as a “marketer” of its automobiles, advertise its vehicles with plaintiff, give a “myriad” of others access to its vehicles through channels provided by plaintiff, or repeatedly contact plaintiff, make legal demands upon plaintiff, or inform the public that it was involved in a lawsuit with plaintiff. In short, Auto-Konig’s cоntacts with Ohio are of a significantly lesser quantity and, more importantly, of a significantly lesser “quality,”
see LAK, Inc. v. Deer Creek Enterprises,
Instead, the case at bar is far more similar to a case from this District,
Stump, supra,
where a nonresident defendant corporation contracted to purchase a used rolling mill from an Ohio corporation. In
Stump,
defendant initiated “a number” of telephone calls during which the рarties negotiated the sale. The sale item, a rolling mill, was located outside the forum jurisdiction, and defendant agreed to pay $150,000 for the mill. Finding the mill to be defective, defendant refused to pay the balance and filed suit alleging claims in contract and tort in Texas state court. Plaintiff then counterclaimed against defendant in Ohio state court, defendant removed the action to federal court, and filed for dismissal based on lack of рersonal jurisdiction. After a careful analysis of the contacts, the court dismissed the suit, stating that “these random, fortuitous and attenuated contacts are insufficient to hale Dallas Tube into court here.”
The essential facts of the ease at bar are virtually indistinguishable from
Stump.
6
Having taken all the specific facts alleged by plaintiff as true, plaintiff, because it has not shown defendant’s purposeful availment of the privilege of doing business in Ohio, fails to state a prima facie case for personal jurisdiction. For the foregoing reasons, it is
ORDERED THAT this case be, and it hereby is, transferred to the District of Arizona.
So ordered.
Notes
. In accordance with the Sixth Circuit’s warning against considering defendant's affidavits, see
CompuServe,
. Defendant, in its memorandum in support of the motion to dismiss, contends that "none of the provisions of Ohio’s long-arm statute would apрly because Auto-Konig does not have sufficient ‘minimum contacts' to be 'reached' by Ohio's long-arm statute.” (Plaintiff's Memorandum at 7). This statement seems to conflate the two personal jurisdiction hurdles. Instead of merging the "statutory” and "constitutional” analyses together, as defendant does in its brief, I will separately address (1) whether the words of Ohio’s long-arm statute convey upon this court the statutory power to assert personal jurisdiction in this matter and (2) whether the facts as stated by plaintiff grant this court the constitutional right to assert personal jurisdiction over this defendant. Thus, the two-part inquiry addresses the statutoiy power and the constitutional right to assert personal jurisdiction as two separate inquiries, not one conflated analysis as defendant seems to argue.
. As explained in
International Shoe,
the due process analysis of personal jurisdiction includes two inquiries: (1) does the defendant have "minimum contacts” with the forum state such that (2) the maintenance of the suit does not offend “traditional notions of fair play and substantial justice.”
. Plaintiff cites two Ohio cases — both from the same judge — for support of the notion that "entering into a contract with an Ohio resident satisfies the first requirement of
Southern Machine.”
(Plaintiff's Memorandum Opposing Defendant’s Motion to Dismiss at 10). In identical language, those two cases state "[tjhe intentional act of entering into a contractual relationship with a resident of Ohio is sufficient to meet the purposeful action requirement.”
Wright Int'l Express Inc. v. Roger Dean Chevrolet,
. Additionally, the boilerplate contract signed by the parties contains a choice of law provision, designating that the contract “shall be governed by the laws of the State of Arizona.” (Defendant’s Exhibit B at 7). Although choice of law provisions are "not sufficient guides for mеasuring the power of a state to issue process beyond its borders,”
Mohasco Indus.,
. One — and perhaps the only — significant difference between the case at bar and
Stump
is that