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University of Louisville v. Lynch

United States District Court, W.D. Kentucky, Louisville Division

November 2, 2017

UNIVERSITY OF LOUISVILLE; and UNIVERSITY OF LOUISVILLE FOUNDATION PETITIONERS
v.
MERRILL LYNCH, PIERCE, FENNER & SMITH INC.; and TERRY C. DANZIGER RESPONDENTS

          MEMORANDUM OPINION AND ORDER

          Greg N. Stivers, United States District Judge.

         This matter is before the Court on Respondent's Motion to Dismiss (DN 5). For the reasons stated below, Respondent's Motion to Dismiss is GRANTED, and this matter is DISMISSED WITHOUT PREJUDICE pursuant to Fed.R.Civ.P. 19(b).

         I. BACKGROUND

         This case concerns a dispute over the disbursement of a $500, 000 charitable gift of an individual retirement account (“IRA”) from Dr. Franklin Danziger (“Dr. Danziger”) to Petitioner University of Louisville (“University”) to fund scholarships within the University's School of Medicine. The gift was memorialized in a Charitable Gift Agreement (“Agreement”). (Pet. Ex. A, DN 1-1). Under the terms of the Agreement, the funds were to be disbursed from Dr. Danziger's IRA upon his death pursuant to the IRA's beneficiary designation. (Eriksen Aff. ¶ 23, DN 10-2). Dr. Danziger added language to the IRA beneficiary designation form instructing Respondent Merrill Lynch, Pierce, Fenner & Smith, Inc. (“Merrill Lynch”) to follow the directives of his wife, Respondent Terry Danziger (“Danziger”), “if there [were] any question regarding the agreement, and whether or not the School of Medicine [would] receive the distribution.” (Eriksen Aff. ¶ 31). Following her husband's death, Danziger revoked the gift on the basis that the Agreement did not reflect his intent. (Eriksen Aff. ¶ 36).

         University and Petitioner University of Louisville Foundation, Inc. (collectively “Petitioners”) filed a lawsuit action against Merrill Lynch and Danziger in state court to determine the enforceability of the terms of the beneficiary designation form. (Pet. ¶¶ 27-32, DN 1-1). Danziger removed that lawsuit to this forum and moved to dismiss this action due to lack of personal jurisdiction. (Notice Removal, DN 1; Resp't's Mot. Dismiss, DN 5).

         II. DISCUSSION

         A. Danziger's Motion to Dismiss

         Danziger has moved to dismiss any claim asserted against her based on lack of personal jurisdiction. (Resp't's Mem. Supp. Mot. Dismiss 2-12, DN 5-1). In particular, she asserts that: (i) she was not transacting business in the Commonwealth of Kentucky to satisfy KRS 454.210; (ii) this dispute did not arise from any connection that she had to this forum; and (iii) this Court lacks both general and specific jurisdiction over her.[1] (Resp't's Mem. Supp. Mot. Dismiss 2-12).

         Under Fed.R.Civ.P. 12(b)(2), a litigant may challenge the Court's authority to entertain an action against her for lack of personal jurisdiction. See Fed. R. Civ. P. 12(b)(2). Personal jurisdiction comes in two forms: general and specific. See Miller v. AXA Winterthur Ins. Co., 694 F.3d 675, 678-79 (6th Cir. 2012). General jurisdiction arises when a defendant has affiliations so “continuous and systematic” with a forum as render the person “essentially at home” there, thus allowing courts in that forum to exercise jurisdiction over any and all claims against her. See Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011) (citing Int'l Shoe Co. v. Washington, 326 U.S. 310, 317 (1945)). Specific jurisdiction, on the other hand, arises from “minimum contacts” between a person and the forum, and permits the forum's courts to adjudicate “issues deriving from, or connected with, ” those particular contacts. Id. (citation omitted). When a district court rules on a jurisdictional motion to dismiss, without conducting an evidentiary hearing, the court must consider the pleadings and affidavits in a light most favorable to the plaintiff. To defeat such a motion, the plaintiff need only make a prima facie showing of jurisdiction and the court should not weigh the controverting assertions of the party seeking dismissal. Dean v. Motel 6 Operating, 134 F.3d 1269, 1272 (6th Cir. 1998).

         In determining whether personal jurisdiction exists over a nonresident defendant, the Court must apply the law of the state in which it sits. Third Nat'l Bank v. WEDGE Grp. Inc., 882 F.2d 1087, 1089 (6th Cir. 1989). In Caesars Riverboat Casino, LLC v. Beach, 336 S.W.3d 51 (Ky. 2011), the Supreme Court of Kentucky overruled its prior line of cases which held the Kentucky's long-arm statute permitted Kentucky courts to exercise jurisdiction over non-resident defendants as long as it was within the bounds of federal due process. See Id. at 57. The court clarified that “[o]nly after the requirements of KRS 454.210 have been satisfied can it be said that personal jurisdiction over a non-resident defendant extends to the outer limits permitted by federal due process.” Id. It created a two-step process to apply proper long-arm jurisdiction:

First, review must proceed under KRS 454.210 to determine if the cause of action arises from conduct or activity of the defendant that fits into one of the statute's enumerated categories. If not, then in personam jurisdiction may not be exercised. When that initial step results in a determination that the statute is applicable, a second step of analysis must be taken to determine if exercising personal jurisdiction over the non-resident defendant offends his federal due process rights.

Id.

         In this analysis, it must first be determined which provision of the long-arm statute applies in the case sub judice. Interpreting KRS 454.210(2)(a), the Kentucky Supreme Court noted “[w]hile we believe it fair to say that these provisions should be liberally construed in favor of long-arm jurisdiction, their limits upon jurisdiction must be observed as defined.” Id. at 56. Here, the only plausible basis for long-arm jurisdiction over Danziger is the subsection applicable to defendants who are “[t]ransacting any business in this Commonwealth . . . .” KRS 454.210(2)(a)(1).

         The underlying facts of this case reflect the following pertinent contacts: (1) Danziger contacted the Office of Advancement to advise that Dr. Danziger was interested in making an endowment to the Foundation; (2) the Office of Advancement and the Danzigers discussed Dr. Danziger's desire to make a donation to the School of Medicine; (3) Dr. Danziger signed a declaration of intent; (4) Danziger and her mother went to Louisville, Kentucky, to attend Muhammad Ali's birthday celebration and had lunch with the wife of Lukas Dwelly (“Dwelly”), who serves as the University's Office of Advancement's contact person, and Dwelly's daughters. All of the contacts and communications between the parties regarding the Agreement were conducted while the Danzigers were physically located in Arizona.

         It does not appear that Danziger engaged in any conduct related to the Agreement which could be characterized as transacting business in Kentucky. Even before the Caesars decision interpreted the Kentucky long-arm statute more conservatively, the Kentucky Court of Appeals held “it would be unreasonable for Kentucky to exercise jurisdiction over [the defendant] solely on the basis of negotiations by telephone and email which culminated in the acceptance of a single order in Louisville.” Tube Turn Div. of Chemetron Corp. v. Patterson Co., 562 S.W.2d 99 (Ky. App. 1978). See also Thompson v. Koko, No. 3:11-CV-648-H, 2012 U.S. Dist. LEXIS 13226, at *7 (W.D. Ky. Feb. 3, 2012) (finding that out-of-state defendant's actions of sending emails and letters, confirming receipt of a wire transfer, and sending account statements to the plaintiff in Kentucky did not amount to transacting business in Kentucky). Similarly, in Envirometric Process Controls, Inc. v. Adman Elec., Inc., No. 3:12CV-62-S, 2012 U.S. Dist. LEXIS 130015 (W.D. Ky. Sept. 11, 2012), the plaintiff, a Kentucky corporation, entered into a contract with an automotive manufacturer to construct conveyors at its assembly plant in Tennessee. See Id. at *4. As part of its bid for the project the plaintiff included a subcontract from the defendant, a Tennessee corporation, to provide electrical installation services and materials. See Id. at *5. When the installation was completed, the plaintiff claimed that the work was substandard and that the Tennessee defendant had ...


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