Court Opinion

ID: 8438709
Source: CourtListenerOpinion
Date Created: 2022-11-04 16:55:38.087718+00
Date Added: 2024-06-11T16:48:35.223231
License: Public Domain

DAUGHTREY, Circuit Judge, dissenting.
Because I conclude that defendant Karsch’s contacts with Tennessee were intentional and injurious, and that they formed the basis of the plaintiffs’ action against Karsch, I respectfully dissent from the majority’s determination that those contacts were insufficient to establish personal jurisdiction.
The majority is correct in identifying the three-part test from Southern Machine Co. v. Mohasco Industries, Inc., 401 F.2d 374, 381 (6th Cir.1968), as applicable to the facts of this case. Thus, in order to establish personal jurisdiction, the record must show that (1) the defendant purposefully availed himself of acting in or causing a consequence in the forum state; (2) the cause of action arose from the defendant’s activities there; and (3) the acts or consequences had a substantial enough connection with the forum state to make the exercise of jurisdiction over the defendant reasonable. As the majority also notes, the district court analyzed the facts only under the first prong, concluded that Karsch’s contacts with Tennessee were insufficient to satisfy due process, and declined to exercise personal jurisdiction over Karsch.
As to the initial prong of the Southern Machine test, the majority posits that the defendant “did not purposefully avail himself of the privilege of acting under Tennessee law,” based on several propositions — all of them erroneous, in my judgment.
First, the majority emphasizes that Karsch did not initiate his communications with persons in Tennessee. But, the “dis-positive fact is not whether the plaintiff or the defendant initiated the contact between the parties, but whether the defendant ultimately ‘chose to deal’ with the plaintiff.” Nationwide Mut. Ins. Co. v. Tryg Int’l. Ins. Co., 91 F.3d 790, 796 (6th Cir.1996) (internal citation omitted). When Karsch responded to Rice’s demand for the Rule 144 letter, he made allegedly fraudulent and negligent phone calls to Tennessee, and he sent allegedly fraudu*466lent and negligent letters and e-mails into Tennessee. Regardless of whether Karsch or Lowery initiated these contacts, Karsch gave a direction to Lowery that he expected her to follow and that was therefore intended to have a result in Tennessee. Moreover, personal jurisdiction is also valid based on Karsch’s actions prior to the court’s order of January 2, 2001, directing Karsch to provide the 144 letters, because Karsch’s instructions to Lowery by e-mail on September 15, 2000, predated the court’s order. Thus, although the injury (sale at a lower price or no sale at all for the third trade) may have occurred after entry of the court’s order, the allegedly tortious contacts occurred prior to entry.
Second, the majority seizes on the fact that Karsch’s e-mail to Rice was sent to a “generic” address (yahoo.com). But regardless of the e-mail address, the message was directed to Rice, whom Karsch knew to be in Tennessee, given that his address was listed in the escrow agreement.
Third, the majority posits that actions taken by Karsch after the filing of the complaint cannot be considered. But regardless of Karsch’s activities after the amended complaint was filed, the plaintiffs alleged that Karsch made the representations to Rice and contacted Lowery prior to that date.
Finally, the majority characterizes the basis of the claims as an allegation that Karsch did not issue the Rule 144 letter, i.e., that Karsch failed to act in a manner that would have subjected him to jurisdiction in Tennessee. But, again, regardless of what action Karsch did not take, the fact remains that jurisdiction over Karsch may be validly exercised based on the affirmative directions that he did direct toward Tennessee, with the clear intent that those actions would produce results affecting persons and property within Tennessee. If Karsch had simply ignored Rice’s request for the Rule 144 letters, the majority’s conclusion might have weight; but Karsch chose to act affirmatively — and thereby developed the requisite contacts with Tennessee — when he made allegedly tortious statements to Rice and independently contacted and directed Lowery. I would therefore hold that the defendant “purposefully availed himself of causing a consequence in the forum state.”
I would further hold that the second prong was met, i. e., that the plaintiffs’ claims “arose from” Karsch’s contacts with Tennessee, because the plaintiffs themselves claim that those contacts were tortious. “If a defendant’s contacts with the forum state are related to the operative facts of the controversy, then an action will be deemed to have arisen from those contacts.” CompuServe, Inc. v. Patterson, 89 F.3d 1257, 1267 (6th Cir.1996). Karsch’s communications with Rice and Rice’s broker easily satisfy this prong of the test because, together with Karsch’s inaction in Florida and his instructions to the transfer agent in New York, they constitute plaintiffs’ entire action against Karsch. Being the “heart” of the complaint, the communications sent into Tennessee clearly provide the basis for this cause of action.
Finally, in terms of the third prong, Karsch’s contacts with Tennessee were substantial enough to make it reasonable to subject him to the personal jurisdiction of the Tennessee courts. Significantly, “[a]n inference arises that the third factor is satisfied if the first two requirements are met.” Bird v. Parsons, 289 F.3d 865, 875 (6th Cir.2002). In addition, the relevant factors to be considered are the burden on the defendant, the interest of the forum state, the plaintiffs interest in obtaining relief, and the interest of other states in securing the most efficient resolution of controversies. See id.
*467In this case, Karsch’s communications to persons within the state constituted the doing of business there, rather than simply the exchange of information. See Neogen Corp. v. Neo Gen Screening, Inc., 282 F.3d 883, 892 (6th Cir.2002). Karsch contacted Rice not only in Rice’s capacity as an employee of Pagan Lewis Motors, a Texas corporation, but also in Rice’s capacity as trustee for a large number of shares located in Tennessee and as personal owner of some of the shares. In the calls, letters, and e-mails in question, Karsch’s intent was to discuss the liquidation of this stock, not merely to relay information from Florida to Pagan Lewis in Texas. Hence, the purpose of his call and e-mail to Rice’s broker was not merely to provide information but to affect the actions of an individual in Tennessee.
We held in Neal v. Janssen, 270 F.3d 328, 332 (6th Cir.2001), construing the Tennessee long-arm statute (Tenn.Code Ann. § 20-2-214), that evidence of a defendant’s purposeful direction of communications into a forum that cause injury within the forum and form the “heart” of the action is sufficient to establish personal jurisdiction, regardless of the defendant’s absence from the state. Like the allegedly fraudulent communications sent by Janssen in that case, Karsch’s allegedly fraudulent communications were “not merely incidental” but were “elements of the cause of action itself.” Id. Like Janssen’s, Karsch’s communications did not “merely solicit!] business from the forum or involve!] services not alleged to form the basis of the complaint.” Id. Nor are we presented here with “a single phone call made in an effort to start a business relationship.” Id. at 333 (citing in comparison Serras v. First Tenn. Bank Nat’l. Assoc., 875 F.2d 1212, 1218 (6th Cir.1989)).
We also emphasized in Janssen the Supreme Court’s recognition of the “inescapable fact of modern commercial life that a substantial amount of business is transacted solely by mail and wire communications across state [and national] lines, thus obviating the need for physical presence within a State when business is conducted.” 270 F.3d at 333 (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985)). In circumstances similar to those in this case, other courts have extended Burger King’s “modem commercial life” expansion of personal jurisdiction to cover transmission of e-mail and use of the internet. See, e.g., Gorman v. Ameritrade Holding Corp., 293 F.3d 506, 511 (D.C.Cir.2002) (“ ‘Cyberspace’ ... is not some mystical incantation capable of warding off the jurisdiction of courts built from bricks and mortar.”). I conclude that in this case, as in Janssen, we should find that the plaintiffs have established at least a prima facie case of personal jurisdiction over the defendant and reverse the district court’s decision to the contrary. For that reason, I respectfully dissent.