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Air Systems, Inc v. Newton

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

March 19, 2019

AIR SYSTEMS, INC., Plaintiff,
v.
JAMES R NEWTON, Defendant.

          ORDER AND OPINION DENYING DEFENDANT'S MOTION TO DISMISS AND GRANTING DEFENDANT'S MOTION TO TRANFER VENUE [6]

          Nancy G. Edmunds, United States District Judge

         Pending before the Court is Defendant's motion to dismiss for lack of personal jurisdiction or, in the alternative, to transfer this case to the Western District of Kentucky. (ECF No. 6.) Plaintiff opposes the motion. On February 6, 2019 the Court held a hearing in connection with Defendant's motion. For the reasons set forth below, the Court DENIES Defendant's motion to dismiss and GRANTS Defendant's motion to transfer venue to the Western District of Kentucky.

         I. Background

         This matter arises out of Defendant's employment with Plaintiff Air Systems, Inc. Plaintiff is a manufacturer's representative, distributer, and systems integrator of industrial air processes, equipment, technical services, and control systems. Plaintiff is a Michigan Corporation based in Royal Oak, Michigan. From 2011 through 2018, Defendant was employed by Plaintiff as an outside sales representative. According to the complaint, Defendant was employed out of Plaintiff's office in Royal Oak, Michigan. Defendant states that he worked exclusively in Louisville, Kentucky throughout his entire employment with Plaintiff.

         On June 22, 2018, Defendant resigned from his employment with Plaintiff. Defendant claims that he quit because Plaintiff failed to pay him his agreed upon wages over a period of several years. On July 17, 2018, Defendant filed a lawsuit against Plaintiff seeking to recover those unpaid wages and commissions. Defendant's wage lawsuit is currently pending in the United States District Court for the Western District of Kentucky, Louisville Division.

         Plaintiff did not assert any counterclaims in the Kentucky lawsuit. Instead, on November 2, 2018, Plaintiff initiated this action against Defendant in state court in Oakland County, Michigan. On November 11, 2018, Defendant removed the case to this Court on diversity grounds.

         In its complaint, Plaintiff asserts several claims against Defendant arising out of his resignation and subsequent business activities. These claims include allegations of tortious interference with Plaintiff's business contracts, existing customers, and future contracts, conversion of Plaintiff's confidential and proprietary information by allegedly refusing to return materials to Plaintiff, unfair competition, and unjust enrichment. Plaintiff alleges that it suffered lost profits and lost business opportunities as a result of Defendant's alleged conduct and seeks to recover damages from Defendant.

         Defendant moves to dismiss Plaintiff's complaint for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2). Defendant is a resident of Kentucky and claims that he resided in Kentucky during the entire term of his employment with Plaintiff. Defendant admits to having limited contacts with the state Michigan during his employment, but contends that none of this conduct relates to Plaintiff's claims. Defendant states that in his eight years of employment with Plaintiff he only travelled to Michigan on four occasions. First, in 2012, Defendant travelled to Plaintiff's office in Michigan for one day to present a summary of the 2011 sales results of Plaintiff's Kentucky office. Second, in 2013, Defendant travelled to Plaintiff's Michigan office for one day to present a summary of the 2012 sales for Plaintiff's Kentucky office. Defendant did not travel to Michigan from 2014 through 2017. But, in 2018 he took his third and fourth trips to Michigan: one to discuss the 2018 sales results of the Kentucky office, and the other to discuss alleged issues with the payment of his wages and commissions by Plaintiff.

         Defendant claims that aside from these four trips, none of his work for Plaintiff occurred in Michigan. Defendant alleges that he worked exclusively in Plaintiff's Louisville, Kentucky office throughout his employment and that all of the projects he performed were located in states other than Michigan. Defendant maintains that none of the customers or vendors for whom Defendant provided services on behalf of Plaintiff were based in Michigan. Thus Defendant asserts that Plaintiff's claims for tortious interference, conversion, unfair competition, and unjust enrichment do not arise out of his limited contacts with the state of Michigan and therefore the Court's assertion of personal jurisdiction would be improper.

         Plaintiff opposes Defendant's motion and contends that Defendant is subject to limited personal jurisdiction under MCL 600.705. Plaintiff submits the affidavit of its president who identifies a number of contacts between Defendant and the state of Michigan. According to Plaintiff, Defendant's contacts with the state of Michigan include reporting to Plaintiff's owners, inside sales personnel, engineering, and accounting personnel in Michigan; attending training and work related meetings in Michigan; and regularly accessing Plaintiff's computer servers in Michigan. Plaintiff also contends that Defendant regularly utilized and relied on Plaintiff's Michigan office for conducting his duties as Plaintiff's outside sales representative. For example, all inside sales functions for Defendant's jobs or projects were performed by Plaintiff's employees in Michigan. All confidential or proprietary information acquired by Defendant originated out of Plaintiff's office in Michigan. Defendant provided payroll and expense reimbursement information to and was issued payment out of Plaintiff's office in Michigan. And all of Defendant's employment related files were purportedly kept in Michigan.

         Plaintiff argues that although Defendant's tortious conduct at issue in this lawsuit may not have physically occurred in Michigan, the consequences of the conduct occurred in Michigan. According to the complaint, at the time Defendant resigned, Plaintiff was expecting several jobs that Defendant had quoted and had reported to be imminent orders awaiting final signatures on paperwork. These jobs did not materialize as expected. In addition, Plaintiff contends that Defendant retained but refused to turn over job files, drawings, blueprints, customer bid documents, estimates, paperwork, and other documents belonging to Plaintiff. Plaintiff alleges that as a result of Defendant's actions and failure to return the retained documents, Plaintiff either lost out on or could not perform projects it was awarded or was in the process of being awarded.

         In the alternative to its motion to dismiss for lack of personal jurisdiction, Defendant requests that the Court transfer this case to the Western District of Kentucky where Defendant's wage action is already pending. Plaintiff opposes this alternative relief.

         II. Standard

         Two statutes allow district courts to transfer venue: 28 U.S.C. § 1404(a) and 28 U.S.C. § 1406(a). “Section 1404(a) permits a transfer to any district where the case could have been brought for the convenience of parties and witnesses and in the interest of justice, ” while “Section 1406(a) enables a district court to transfer venue in the interest of justice when venue is improper in the original forum to any district or division in which it could have been brought.” Global Crossing Telecommunications, Inc. v. World Connection Group, Inc., 287 F.Supp.2d 760, 763 (E.D. Mich. 2003) (internal quotation marks omitted) (footnote omitted). A court may not transfer venue under § 1404(a) if the court lacks jurisdiction over a defendant, but it may transfer venue under § 1406(a) even if it lacks personal jurisdiction. Id. at 763-764. Thus, the Court must first consider whether it has personal jurisdiction over Defendant.

         When presented with a motion to dismiss for lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2), a court may decide the motion on the basis of written submissions and affidavits alone. See Serras v. First Tenn. Bank Nat'l Ass'n, 875 F.2d 1212, 1214 (6th Cir. 1989). When a court decides to pursue that path, the plaintiff must meet a “relatively slight” burden of a prima facie showing that personal jurisdiction exists to survive the motion. Estate of Thompson ex rel. Estate of Rakestraw v. Toyota Motor Corp. Worldwide, 545 F.3d 357, 360 (6th Cir. 2008). The plaintiff can do so by “establishing with reasonable particularity sufficient contacts between [the defendant] and the forum state to support jurisdiction.” Lexon Ins. Co. v. Devinshire Land Dev., LLC, 573 Fed.Appx. 427, 429 (6th Cir. 2014). The court must view the pleadings and affidavits in the light most favorable to the plaintiff, Estate of Thompson, 545 F.3d at 360, and may only dismiss if the specific facts alleged by the plaintiff collectively fail to make a prima facie case for jurisdiction, CompuServe, Inc. v. Patterson, 89 F.3d 1257, 1262 (6th Cir. 1996). “A federal court's exercise of personal jurisdiction in a diversity of citizenship case must be both (1) authorized by the law of the state in which it sits, and (2) in accordance with the Due Process Clause of the Fourteenth Amendment.” Neogen Corp. v. Neo Gen Screening, Inc., 282 F.3d 883, 888 (6th Cir. 2002).

         Michigan's long-arm statute has been construed “to bestow the broadest possible grant of personal jurisdiction consistent with due process.” Audi AG & Volkswagon of Am., Inc. v. D'Amatom, 341 F.Supp.2d 734, 741 (E.D. Mich. 2004). The statute extends both general and limited jurisdiction over nonresident individuals and corporations. See Mich. Comp. Laws § 600.701 (general, individuals); Mich. Comp. Laws § 600.705 (limited, individuals); Mich. Comp. Laws § 600.711 (general, corporations); Mich. Comp. Laws § 600.715 (limited, corporations). Limited personal ...


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