No. 86-01 INTHE SUPREME COURT OF THE STATEOF MONTANA 1986

SAMUEL JACKSON and RITA JACKSON, Plaintiffsand Appellants,

KROLL, POMERANTZ and CAMERON, aLaw Partnership, Defendants and Respondents.

APPEAL FROM: District Court of the Eighteenth JudicialDistrict, In and for the County of Gallatin, The Honorable JosephGary,Judgepresiding.

COUNSEL OF RECORD:

ForAppellant: Cok & Wheat;Michael E. Wheat,Bozeman,Montana

For Respondent: Nash,Wellcome, Frost,Guenther & Zimmer;Page Wellcome, Rozeman,Montana

Submitted on Briefs: June 20, 1986 Decided: September 9,1986 

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## -1986 Filed:&-Mr.Justice Frank B. Morrison, Jr. delivered the Opinion of the Court. Samuel and Rita Jackson (Jacksons), sued defendant, Kroll, Pomerantz, and Cameron, (Kroll),a law firmwith its principal place of business inNew York, alleging conspiracy and violation of theMontana Insurance Unfair Trade Practices Act. Kroll moved to dismiss for lack of personal jurisdiction. Following a hearing, the Eighteenth Judicial District Court granted Kroll's motion and dismissed the complaint. This appeal follows. Jacksons purchased residential property in Belgrade, Montana. Theproperty had been listedwith Realty World Land Office. Elizabeth McNeal, a sales agent for Realty World, originally showed the property to Jacksons. She represented to Jacksons that the lot was 120 feetwide by 140 feet long. Jacksons purchased the property in May of 1982. On October 3, 1982,Jacksons learned that the lotwas only 80 feetwide and that the fence and sprinkler system installed by the previous owners encroached upon the lots on either side of theproperty. Jacksons notified Realty World of the discrepancy on October 19, 1982. Realty World was covered by an errors and omissions insurance policy issued by Ambassador Insurance Company of New York (Ambassador)

# . Pursuant to the policy, RealtyWorld notified Ambassador ofJacksons' claimby giving notice to Ambassador's agent, the Kroll law firm. Kroll commenced investigation of the matter on behalf of Ambassador. On May 18, 1983, Kroll sent a letter to Jacksons' attorney denying liability on the part of Realty World.On November 10, 1983, Ambassador voluntarily placed itself into insolvency rehabilitation in the State of Vermont. Jacksons have settled with all parties concerned except Ambassador and Kroll. On May 8, 1985,Jacksons filed their complaint against Kroll law firm. Elliott Kroll filed affidavits in July and August of 1985, explaining Kroll's position. Elliot Kroll stated inhis affidavitsthat the Kroll law firm:1. did not act as an insurance company but merely represented insurance companies; 2. always hired local counsel to represent Ambassador in the various law suits filed against it; 3. was paid by Ambassador on an interimbasis, was not

on retainer and is owed considerable money by Ambassador; 4. owns no property or offices in Montana, retains no employees or agents in Montana, has no clients inMontana and does not regularly conductbusiness inMontana; 5. would contact, by telephone or letter, the interested parties, informing them that Krollwas acting for Ambassador, ascertain the pertinent facts concerning the claim and report the information to Ambassador's claims department; 6. never agreed to approve the payment of a claim unless approvedby Ambassador's claim agent first;and 7. never actually paid a claim with its own money. The District Court granted respondent's motion to dismiss holding that Rule 4B(1), M.R.Civ.P., cannot be extended to give Montana personal jurisdiction over Kroll. The District Judge found that according to Elliott Kroll's affidavits, the act which resulted in the tort action 

### - thedenial of liability on an insurance claim

## - was committedby Ambassador,not Kroll. He thenwent on to find that even 

### if Kroll was in some way responsible, there were insufficient "minimal contacts" by Kroll with Montana to satisfy due process. The sole issue on appeal is whether the law firm of Kroll, Pomerantz,and Cameron is subject to the jurisdiction of theMontana Courts. The rules controlling when a Montana District Courtmay exercise long-arm jurisdiction arewell-settled. Rule 4B(1), M.R.Civ.P., states: Rule 4B. Jurisdictionofpersons. (1) Subject to jurisdiction. All persons found within the state of Montana are subject to the jurisdiction of the courts of this state. In addition, any person is subject to the jurisdiction of the courts of this state as to any claim for relief arising from the doing personally, through an employee, or through an agent,of any of the following acts: (a) the transactionof anybusinesswithin this state; (b) the commission of any act which results in accrualwithin this state of a tortaction; (c) the ownership, use or possession of any property, or of any interest therein, situated within this state; (d) contracting to insure any person,property or risk located within this state at the time of contracting; (e) entering intoa contract for services tobe rendered or for materials to be furnished in this stateby such person; or (f) acting as director, manager, trustee, or other officer of any corporation organized under the laws of, or having its principal place of business within this state, or as personal representative of any estate within this state. Neither party contends Kroll is "foundwithin the state of Montana." Therefore, in order for jurisdiction to lie, Kroll must have done "personally, through an employee, or through an agent",any of the above-described acts. In their complaint,Jacksons contend that throughKroll's relationship with Ambassador, Kroll had the authority to and "did in fact participate in,manage and make command decisions concerningthe evaluationand processing ofJacksons' claim";that these acts constituted the practice of the business of insurance; and that Kroll's practice of the business of insurance violated theMontana Unfair Trade PracticesAct in thatKroll wrongly and in bad faith denied liability on their claim. These contentions, if true, constitute acts on which a tort action could be based. See Gould v. Mutual Life Insurance Co. ofNewYork (Wash.App. 19841,683 P.2d 207. Motions to dismiss,ofwhich this isone,have the effect of admitting all well-pleaded allegations in the complaint. In considering the motion, the complaint is construed in the light most favorable to the plaintiff, and all allegations of fact contained therein are taken as true. (Citationsomitted.) Willson v. Taylor (Mont. 19811, 634 P.2d 1180, 1182, 38

Kroll attempts to refute the facts alleged in Jacksons' complaintthrough affidavits. Affidavitsmay be used to help determine personal jurisdiction issues under motions to dismiss. Knoepke 

### v. Southwestern Railway Co. (~ont. 1980)~ 620 P.2d 1185, 1188, 37 St.Rep. 1910, 1914. However, affidavits may not be used by a defendant for the sole purpose of refuting the factual allegations in the complaint in order to deny plaintiffs their day in court. Harrington

v. Holiday Rambler Corp. (1974), 165 Mont. 32, 37, 525 P.2d 556, 558-559. Because Elliott Kroll's affidavits were used for exactly this purpose, we refuse to consider them. The contentions in Jacksons' complaint are accepted as true for purposes ofdetermining whether jurisdiction lies. Since the contentions in Jacksons' complaint constitute actsupon which a tort action could be premised,we hold that Kroll comes within Montana's long-arm jurisdiction statutes. Rule 4B(1), M.R.Civ.P. However, our inquiry does not endhere. We must next decide the most important question, whether the exercise of long-arm jurisdiction over Kroll would "comport with traditional notions of fair play and substantial justice." Simmons v. State of Montana (Mont.

In Simmons, supra,we adopted the test developed by the Ninth Circuit Court ofAppeals in Data Disc, Inc. v. Systems Technology Assoc., Inc. (9th Cir. 1977), 557 F.2d 1280, 1287, for determining when exercise of our long-arm jurisdiction will be commensurate with defendant's due process rights. When, as here, the non-resident defendant's activities within Montana are not so "substantial" or "continuous and systematic", as to subject defendant to general jurisdiction, the following three criteria must be met: 1. The non-resident defendant must do some act or consummate some transaction within the forum or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum,thereby invoking its laws. 2. The claim must be one which arises out of or results from the defendant's forum-related activities. 3. Exercise of jurisdiction must be reasonable. Simmons,670P.2d at 1378, 40 St.Rep. at 1656. In order to determine whether exercise of jurisdiction would be reasonable,wemust examine such factorsas: 1. The extent of defendant's purposeful interjection intoMontana; 2. The burden on defendant of defending in Montana; 3. The extent of conflict with the sovereignty of defendant's state; 

### 4. Montana's interest in adjudicatingthe dispute; 5. The most efficient resolution of the controversy;6. The importance of Montana to plaintiff's interest in convenient and effective relief; and 7. The existenceof an alternative forum. SeeTaublerv. Giraud (9thCir. 1981), 655F.2d 991, 994,and Simmons, 670 P.2d at 1383-1385, 40 St.Rep. at 1661-1664. The trial judge erred in holding that Kroll's due process rights would be violated should Montana exercise jurisdiction. If, as the complaint alleges, Kroll conducted the investigationonbehalf of the insurancecompany and made the decision to deny liability, Kroll "purposely availed itself of the privilege of conducting business in Montana" and committed a tort which accrued inMontana. Under Montana law, the act causing the injury (the decision to deny liability) need not occur in Montana as long as the tort

accrues here. See Bullard v. Rhodes Pharmacal Co., Inc.

(D.Mont. 1967), 263 F.Supp. 79, 82, and Scanlan v. Norma ProjektilFabrik (D.Mont. 1972), 345F.Supp. 292, 293. In addition, exercise of jurisdiction over Kroll is reasonable. If Kroll arranged with Ambassador to make decisions with respect to Ambassador's liability throughout the country, Kroll "purposefully interjected" itself into those states where the effects of such decisions are felt, including Montana. If Kroll "purposefully interjected" itself into Montana, the burden and inequity of requiring Jacksons to prosecute this action in New York would be far greater than that of requiring Kroll to defend itself in Montana. Finally, jurisdiction is reasonablebecauseMontana has a great interest in regulating bad faith by insurance companies in the state. The decision of the trial judge is reversed and theWe concur: /-