Court Opinion

ID: 2982503
Source: CourtListenerOpinion
Date Created: 2015-09-22 20:22:04.131179+00
Date Added: 2024-06-11T15:48:06.835213
License: Public Domain

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                               File Name: 14a0533n.06

                                               No. 13-3674
                                                                                    FILED
                                                                                 Jul 21, 2014
                                                                            DEBORAH S. HUNT, Clerk
                              UNITED STATES COURT OF APPEALS
                                   FOR THE SIXTH CIRCUIT

LEXON INSURANCE COMPANY,                  )
                                          )
     Plaintiff-Appellant,                 )
                                          )                       ON APPEAL FROM THE UNITED
v.                                        )                       STATES DISTRICT COURT FOR
                                          )                       THE SOUTHERN DISTRICT OF
DEVINSHIRE LAND DEVELOPMENT, LLC,         )                       OHIO
                                          )
     Defendant-Appellee.                  )
_________________________________________ )

     BEFORE: ROGERS and COOK, Circuit Judges; MURPHY, District Judge*

     PER CURIAM. Lexon Insurance Company (“Lexon”) appeals the dismissal of a breach of

contract claim against Devinshire Land Development, LLC (“Devinshire”) for lack of specific

personal jurisdiction.1 For the following reasons, we reverse and remand for further proceedings.

     Devinshire is a real estate development company that sought to develop a residential golf

community named Queens Gap in Rutherford County, North Carolina. At the time development

began, Devinshire was organized as a limited liability under North Carolina law but owned by a

limited liability company organized in Ohio, which in turn, was managed by Ohio resident Devin

McCarthy.

     *
      The Honorable Stephen J. Murphy, III, United States District Judge for the Eastern District
of Michigan, sitting by designation.
         1
             Devinshire has not appeared or filed a brief in this court.
          As part of the development process, Devinshire entered into two performance agreements

with Rutherford County that required it to reach construction milestones by specified dates. The

performance agreements also obligated Devinshire to secure its obligations with performance bonds.

Through the Ohio-based Thomas-Fenner-Woods Agency, Devinshire obtained seven such bonds

from Lexon, a Texas corporation with its principal place of business in Tennessee. For each bond,

Lexon was the surety, Devinshire was the principal, and Rutherford County was the obligee.

      In connection with these bonds, McCarthy executed two general indemnity agreements. He

signed in three capacities: in his individual capacity, in his capacity as manager for Devinshire, and

in his capacity as a co-trustee of the Devin F. McCarthy Revocable Trust. The two indemnity

agreements obligated the signatories to pay all premiums and charges associated with the bonds and

to indemnify Lexon for bond-related liabilities.

      In May 2009, Devinshire and related development companies were sold to Queens Gap

Acquisition, a Delaware limited liability company. Devinshire then failed to pay bond invoices and

missed construction milestones. Rutherford County, therefore, informed Devinshire that it was in

default, and Lexon sued Devinshire in Ohio to enforce the indemnity agreements.2

      The district court, however, determined that Devinshire was not subject to specific personal

jurisdiction in Ohio because Lexon did not purchase the bonds from an Ohio-based insurance

company and, thus, did not have the contacts necessary to satisfy Ohio’s long-arm statute. We

review a district court’s dismissal for lack of personal jurisdiction de novo. Gerber v. Riordan,

649 F.3d 514, 517 (6th Cir. 2011).

      2
        Lexon also sued other indemnitors, who in turn, brought crossclaims, counterclaims, and
third-party claims. Though some involve Devinshire and its owners, these claims are not relevant
to the appeal.

                                                   -2-
      When a party seeks to dismiss a complaint for lack of personal jurisdiction pursuant to Federal

Rule of Civil Procedure 12(b)(2), the party seeking to assert personal jurisdiction bears the burden

of demonstrating that such jurisdiction exists. Youn v. Track, Inc., 324 F.3d 409, 417 (6th Cir.

2003). Because the district court did not conduct an evidentiary hearing, Lexon need only make a

prima facie showing of jurisdiction. Neogen Corp. v. Neo Gen Screening, Inc., 282 F.3d 883, 887

(6th Cir. 2002). Lexon can meet this burden by “establishing with reasonable particularity sufficient

contacts between [Devinshire] and the forum state to support jurisdiction.” Id. (quoting Provident

Nat’l Bank v. California Fed. Sav. Loan Ass’n, 819 F.2d 434, 437 (3d Cir. 1987)). We must

consider the pleadings and affidavits in a light most favorable to the plaintiff. CompuServe, Inc. v.

Patterson, 89 F.3d 1257, 1262 (6th Cir. 1996). Nevertheless, as is the case here, the proposition that

the showing must only be prima facie “loses some of its significance . . . where . . . the plaintiff has

received all of the discovery it sought with respect to personal jurisdiction and there does not appear

to be any real dispute over the facts relating to jurisdiction.” Int’l Techs. Consultants, Inc. v.

Euroglas S.A., 107 F.3d 386, 391 (6th Cir. 1997).

      “It is clear under Ohio law, a court may exercise personal jurisdiction over a non-resident

defendant only if specific jurisdiction can be found under one of the enumerated bases in Ohio’s

long-arm statute.” Conn v. Zakharov, 667 F.3d 705, 718 (6th Cir. 2012). Ohio’s long-arm statute

provides, in relevant part, for personal jurisdiction over a person “who acts directly or by an agent,

as to a cause of action arising from the person’s . . . [t]ransacting any business in this state.” Ohio

Rev. Code § 2307.382(A). While the Ohio courts interpret the “transacting business” prong broadly

to “permit jurisdiction over nonresident defendants who are transacting any business in Ohio,”

Kentucky Oaks Mall Co. v. Mitchell's Formal Wear, Inc., 559 N.E.2d 477, 480 (Ohio 1990), the

                                                  -3-
Ohio long-arm statute requires a “proximate cause” relationship between the defendant’s act and the

plaintiff’s cause of action. Brunner v. Hampson, 441 F.3d 457, 465-66 (6th Cir. 2006). A mere “but-

for” connection is insufficient. Id. As a result, we have determined that the Ohio long-arm statute’s

“arising from” prong has less reach than the Due Process Clause, and, thus, due process need not

be considered. Id.

      The district court interpreted this test too narrowly when it concluded that Lexon’s claims do

not arise from the purchase of the bonds from TFW in Ohio. Although Lexon’s breach of contract

claims stem most immediately from Devinshire’s failure to pay the bond premiums, the procurement

of the bonds in Ohio was nevertheless a proximate cause of Lexon’s injury. Lexon’s cause of action

arises from the larger construction deal, which was made possible by the furnishing of the progress

bonds in Ohio. In addition, Lexon conducted business in Ohio by entering into the indemnity

agreement in the state. McCarthy, the sole officer of Devinshire, presumably executed the

agreement on behalf of Devinshire while he resided in Ohio and worked there. The lawsuit arose

out of that indemnity agreement.

      Therefore, we conclude there is personal jurisdiction over Devinshire in Ohio. The district

court’s order is accordingly reversed, and the matter is remanded for further proceedings.

                                                -4-