Case Title: Leventhal v. Harrelson

Citation: 723 So. 2d 566

Docket Number: 1960172

State: alabama

Court: Alabama Supreme Court

Date: 1998-05-15T00:00:00Z

Document:
723 So. 2d 566 (1998)
Ronald S. LEVENTHAL
v.
Alfred HARRELSON, et al.
1960172

Supreme Court of Alabama.
May 15, 1998.
Rehearing Denied October 16, 1998.
*567 Ronald S. Leventhal, pro se.
R. M. Woodrow of Doster & Woodrow, Anniston, for appellees.
KENNEDY, Justice.
The opinion of August 22, 1997, is hereby withdrawn and the following is substituted therefor:
Ronald S. Leventhal appeals from a default judgment entered against him and in favor of Alfred Harrelson, Ed Greenwood, and Dick Sawyer, as trustees for the East Alabama Auto Parts Purchase Pension Plan, on their claims against him alleging breach of contract, fraud, misrepresentation, negligence, willfulness, recklessness, and breach of fiduciary duty. We affirm.
The record reflects the following pertinent facts: In 1986, Alfred Harrelson, Ed Greenwood, and Dick Sawyer, as trustees for the East Alabama Auto Parts Purchase Pension Plan, made an investment of $50,000 in a limited partnership known as Butler Creek Center, Ltd.[1] Before making the investment, the Trustees, on the recommendation of the defendant Martin ("Marty") Greene, who worked at the administrative firm servicing the Pension Plan, traveled to Georgia to meet with Mr. Leventhal regarding the potential investment.[2] According to both Leventhal and the trustees, upon their return to Alabama the trustees expressed reservations about whether to make the investment. According to the trustees, Mr. Greene assured them the investment was safe and secured for them a letter from Mr. Leventhal stating:
The plaintiffs contend that this letter agreement was mailed from Georgia to Alabama. The letter was signed by Ronald S. Leventhal, and it purported to be "Agreed to and acknowledged by: Alfred Harrelson, Trustee, East Alabama Autoparts Money Purchasing Pension Plan." The trustees invested in the partnership; however, on April 14, 1988, Alfred Harrelson requested, by a letter addressed to Mr. Leventhal, that Mr. Leventhal perform in accordance with the letter agreement and "buy out" the pension plan's investment. According to the trustees, when Mr. Leventhal refused to perform in accordance with the agreement, they sued him and Greene.
The trial in this case was originally set for September 16, 1996; however, the trial court granted the plaintiffs' motion for a default judgment on August 7, 1996, and set the hearing on damages for September 11, 1996. On September 11, the defendant failed to appear. The following order was entered on September 17:
(C.R. at 472-73.) Leventhal appeals the default judgment, arguing, in part, that the court did not have personal jurisdiction over him.
Rule 4.2(a)(2), Ala. R. Civ. P., states the requirements for personal jurisdiction over a nonresident defendant:
Due process requires that the defendant have such contacts with the forum that being sued there does not offend the "traditional notions of fair play and substantial justice." International Shoe Co. v. Washington, 326 U.S. 310, 66 S. Ct. 154, 90 L. Ed. 95 (1945). These contacts must be established by the defendant's purposeful acts. Id. Personal jurisdiction over a non-resident defendant may be either general or specific. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 104 S. Ct. 1868, 80 L. Ed. 2d 404 (1984). General jurisdiction applies where a defendant's activities in the forum state are "substantial" or "continuous and systematic," regardless of whether those activities gave rise to the lawsuit. Helicopteros. A court has specific jurisdiction when a defendant has had few contacts with the forum state, but those contacts gave rise to the lawsuit. Id.
The essential element of personal jurisdiction is that the defendant could have reasonably anticipated that the effects of his acts would be felt by the plaintiff in Alabama. Baker v. Bennett, 603 So. 2d 928 (Ala.1992), cert. denied, 507 U.S. 912, 113 S. Ct. 1260, 122 L. Ed. 2d 658 (1993).
The defendant Leventhal is a resident of Georgia. The evidence in the record suggests that Marty Greene, Leventhal's investment partner and codefendant, recommended the investment to the trustees of the Pension Plan. The trustees traveled to Georgia to meet with Leventhal. When the trustees, upon returning to Alabama, had misgivings about making the investment, Greene assured them it was safe and he secured for them the letter agreement from Leventhal. The letter agreement was by Leventhal individually and was mailed to the plaintiffs in Alabama.
The plaintiffs relied heavily on the letter from Leventhal wherein he stated that the investment was sound. Relying on Leventhal's letter, the plaintiffs paid Leventhal. However, Leventhal never repaid the original investment plus interest, as he agreed in the letter to do if the investment property was not sold.
Leventhal argues that because he never traveled to Alabama to discuss the investment in Georgia, he is not subject to personal jurisdiction in Alabama. However, there is no requirement that the defendant physically enter the forum state. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 105 S. Ct. 2174, 85 L. Ed. 2d 528 (1985). In Duke v. Young, 496 So. 2d 37 (Ala.1986), we held that an Alabama resident could maintain a *570 fraud action against six Georgia residents where the six had never traveled to Alabama or conducted negotiations in Alabama.
"[T]he reality of modern commercial life is that many transactions take place solely by mail or wire across state lines, obviating the need for physical presence in the state toward which the defendant's activities are directed." Shute v. Carnival Cruise Lines, 897 F.2d 377, 382 (9th Cir.1990), rev'd on other grounds, 499 U.S. 585, 111 S. Ct. 1522, 113 L. Ed. 2d 622 (1991). In CompuServe, Inc. v. Patterson, 89 F.3d 1257 (6th Cir.1996), the court held that so long as the nonresident commercial actor's efforts are purposefully directed toward residents of the forum state, the lack of physical presence does not bar the exercise of personal jurisdiction. In CompuServe, the nonresident defendant subscribed to a computer network service based in the forum state. The nonresident developed computer software known as "shareware" and entered into an ongoing contract with the service to have his shareware distributed through the service. The court held that he had availed himself of the benefits of doing business in the forum state.
Leventhal also argues that the plaintiffs initiated the contact with him, the nonresident. However, "who started it" is just one factor to consider in determining whether the defendant is subject to personal jurisdiction. Resuscitation Technologies, Inc. v. Continental Health Care Corp., (No. 96-1457, March 24, 1997) (S.D.Ind.1997) (not reported in F.Supp.).
Leventhal's activities were directed toward residents of the forum state. He knew from conversations with Greene that the plaintiffs were unsure of the investment. In response, Leventhal made written promises and representations that induced the plaintiffs to make the investment. Accordingly, the trial court had personal jurisdiction over Leventhal.
It is evident from the record that Leventhal attempted to avoid service of process. (C.R. 16, 42-46.) Leventhal would not cooperate with the plaintiffs in scheduling discovery. (C.R. 90-92.) He also failed or refused to show up at any hearing, docket call, or other court proceeding or to comply with the trial court's orders. (C.R. 476-78.) Conduct committed willfully or in bad faith constitutes culpable conduct for purposes of determining whether a default judgment should be set aside. Storage Equities, Inc. v. Kidd, 579 So. 2d 605 (Ala.1991).
Because the trial court had personal jurisdiction over Leventhal and because Leventhal willfully refused to appear, we affirm the trial court's default judgment.
It is clear under Alabama's Rules of Civil Procedure that when a defendant challenges the court's personal jurisdiction and the trial court overrules the challenge, the issue of personal jurisdiction is preserved for appeal. However, the defendant must proceed with the case on the merits.
OPINION OF AUGUST 22, 1997, WITHDRAWN; OPINION SUBSTITUTED; APPLICATION GRANTED; AFFIRMED.
HOOPER, C.J., and MADDOX, ALMON, SHORES, and HOUSTON, JJ., concur.
COOK and SEE, JJ., dissent.
COOK, Justice (dissenting).
The narrow issue in this case is whether the defendant, Ronald S. Leventhal, had sufficient contacts with, or activities in, the State of Alabama to make it fair and reasonable to require him to defend this action in Alabama. In other words, is there any evidence to establish that Leventhal's conduct relating to this investment opportunity, offered in Georgia, was such that Leventhal should reasonably have anticipated being sued in Alabama? I conclude that the evidence does not establish that Leventhal had sufficient contacts to give an Alabama court, specifically the Circuit Court of Calhoun County, personal jurisdiction over him. Therefore, I dissent.
Determining sufficient contacts is a fact-specific analysis. In Francosteel Corp. v. M/V Charm, 19 F.3d 624 (11th Cir.1994), the United States Court of Appeals for the Eleventh Circuit held that a contract to deliver goods to a Georgia port did not constitute sufficient contacts with the state of Georgia to justify that state's exercise of specific in personam jurisdiction, given that none of the *571 events giving rise to the action took place in Georgia. Id. at 627.
19 F.3d  at 627 (quoting Vermeulen v. Renault, U.S.A., Inc., 965 F.2d 1014, 1016 (11th Cir.1992)).
The defendant Leventhal is a resident of Georgia. The evidence in the record suggests that Marty Greene, Leventhal's codefendant, recommended an investment in Georgia property to the trustees of the Pension Plan. Although Greene worked with the firm that was servicing the Pension Plan, the record suggests that he also was an investor in the Georgia partnership he recommended to the trustees. The trustees traveled to Georgia to meet with Leventhal. When the trustees, upon returning to Alabama, began having misgivings about making the investment, Greene assured them it was safe and obtained for them a letter agreement from Leventhal. However, Leventhal never traveled to Alabama to discuss the Georgia investment. In addition, there is no evidence indicating that Greene was acting as Leventhal's agent when Leventhal, in effect, personally guaranteed the trustees a return on their investment.
Berlin v. Newman, 657 So. 2d 890 at 892 (Ala.Civ.App.1994), cert. denied, 657 So. 2d 894 (Ala.1995).
The only possible contact between Leventhal and Alabama was the letter Leventhal wrote that was provided to the plaintiffs in Alabama, giving them certain assurances regarding the Georgia investment. Any loss the plaintiffs suffered was occasioned by the decrease in value of the Georgia investment. Assuming the plaintiffs' allegations to be true, Leventhal's conduct did not cause an injury within Alabama. The investors traveled to Georgia to discuss a Georgia investment opportunity involving Georgia property, with Leventhal, a Georgia resident. The mere fact that the investors were Alabama residents does not give an Alabama court personal jurisdiction over the defendant, Ronald S. Leventhal. Therefore, I dissent.
[1]  Butler Creek Center, Ltd., later became Cumberland Creek Center, Ltd.
[2]  The plaintiffs settled their claims against Martin Greene, and he is not a party to this appeal.