MSI, Incorporated v. Herlinda Botello and MBS Corporation, Incorporated

NOT DESIGNATED FOR PUBLICATION

ARKANSAS COURT OF APPEALS

OLLY NEAL, Judge

DIVISION IV

CA01-34

SEPTEMBER 26, 2001

MSI, INCORPORATED AN APPEAL FROM THE BENTON

APPELLANT COUNTY CHANCERY COURT [E-00-807-2]

v.

HERLINDA BOTELLO and HON. DONALD R. HUFFMAN,

MBS CORPORATION, CHANCELLOR

INCORPORATED

APPELLEES APPEAL DISMISSED

On April 28, 2000, appellant, an Arkansas corporation having its principal place of business in Benton County, filed its petition for injunctive relief in chancery court. In its petition, appellant sought a restraining order against appellee and her company, a Georgia corporation. It also sought damages and attorney fees. Appellant specifically alleged that the appellees and appellant were parties to a contract to provide skilled construction workers to contractors in several states. It is further alleged that appellees breached their contract with appellant by soliciting its contractor clients in direct violation of a term in the written contract, which included language stating that the appellees were to refrain from any contact with the appellant's contractor clients for at least one year after doing business with appellant.

Appellees filed a motion to dismiss pursuant to Ark. R. Civ. P. 12(b) alleging that (1) appellant's petition was defective for failing to attach the contracts on which the petition was based; and (2) appellant failed to prove that the Benton County Chancery Court had jurisdiction over appellees. After an initial hearing on the motion, the chancellor granted appellant ten days to file an amended complaint. The chancellor reserved ruling on appellees' motion until such time as the amended complaint was filed. MSI resubmitted its complaint wherein it made specific references to specific contracts between the parties and also attached copies of the contracts to the amended complaint. None of the contracts referenced in the amended complaint were to be performed in Arkansas, nor did any of the contracts contain a choice of forum clause.

After the amended complaint was filed, appellees again renewed their motion. On October 10, 2000, the chancellor entered an order dismissing appellant's complaint without prejudice, finding that the facts alleged by the appellant, if true, would not support its claim for relief in equity or a claim for breach of contract. It is from this order that this appeal is brought. On appeal, appellant argues (1) the court erred in finding that the facts alleged by the appellant, if true, would not support a claim for relief of equity or support a claim for breach of contract, and (2) the chancery court of Benton County, Arkansas had personal jurisdiction of the parties to this case.

In reviewing a trial court's decision on a motion to dismiss for failure to state facts upon which relief could be granted, the appellate court treats the facts alleged in the complaint as true and views them in the light most favorable to the party who filed thecomplaint. Grine v. Board of Trustees, 338 Ark. 791, 2 S.W.3d 54 (1999); Rippee v. Walters, 73 Ark. App. 111, 40 S.W.3d 823 (2001). The complaint must state facts and not mere conclusions. Rippee, supra (citing Ark. R. Civ. P. 8). Arkansas is a fact-pleading state, and when determining whether a cause of action has been sufficiently pled, we look to the allegations of fact that the plaintiff contends support that cause of action. Rippee, supra (citing Brown v. Tucker, 330 Ark. 435, 954 S.W.2d 262 (1997)). Where the complaint only states conclusions without facts, the appellate court will affirm a trial court's dismissal on a 12(b)(6) motion. Rippee, supra.

"The requirement that jurisdiction be established as a threshold matter . . . is `inflexible and without exception,' for `[j]urisdiction is the power to declare the law,' and `[w]ithout jurisdiction the court cannot proceed at all in any cause.'" Rohrgas AG v. Marathon Oil Co., 526 U.S. 574 (1999) (citations omitted). "Personal jurisdiction . . . `represents a restriction on judicial power . . . as a matter of individual liberty.'" Id. (citing Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694 (1982)). "A party may insist that the limitation be observed, or he may forgo that right, effectively consenting to the court's exercise of adjudicatory authority." Rohrgas AG, supra (citing Fed. Rule Civ. P. 12(h)(1) (defense of lack of jurisdiction over the person waivable)); Insurance Corp. of Ireland, 456 U.S. 694 at 703.) "Personal jurisdiction . . . is `an essential element of the jurisdiction of a . . . court,' without which the court is `powerless to proceed to an adjudication.'" Rohrgas AG, supra (citations omitted). Whether a trial court had personal jurisdiction over non-residents must be decided on the facts of each case. Jagitsch v.Commander Aviation Corp., 9 Ark. App. 159, 655 S.W.2d 468 (1983).

Arkansas Rule of Civil Procedure 8 requires a pleading to contain "a statement in ordinary and concise language of facts showing that the court has jurisdiction of the claimand is the proper venue and that the pleader is entitled to relief." Appellant contends that the Benton County Chancery Court had jurisdiction over the parties. Appellee and her business are both located in Georgia; thus, they are non-residents of the State of Arkansas. Arkansas Code Annotated section 16-4-101(b) (Repl. 1999) allows the courts of this state to have personal jurisdiction of all persons and all causes of action or claims for relief, to the maximum extent permitted by the due process clause of the Fourteenth Amendment of the United States Constitution. Whether a state long-arm statute applies in any particular case is a question of state law. Jeanway Indus., Inc. v. Knudson Mfg. Co. Inc., 533 F. Supp. 678 (Ark. 1981). "Under Arkansas law, `the plaintiff has the burden of proving that a non-resident defendant has sufficient contacts with Arkansas to be sued in personam.'" Id. at 681 (citing Hawes v. Firearm Co. v. Roberts, 263 Ark. 510, 512, 565 S.W.2d 620 (1978)). "However, the non-resident defendant filing a motion to dismiss . . . `has the burden of going forward and offering proof to sustain the allegations (of no jurisdiction).'" Id.(citing Hawes v. Fireman Co. v. Roberts, 263 Ark. 510, 513, 565 S.W.2d 620 (1978)).

In response to appellant's motion for injunctive relief, appellees filed a motion to dismiss alleging that the complaint failed to state a claim upon which relief could be granted. Specifically, appellees pointed to the fact that the complaint failed to state facts to which appellees could adequately respond. In the initial hearing on appellees' motion to dismiss, the following colloquy took place between the court and appellant:

The Court: I think you need to put some facts in here that would allow the defendant to be able to defend itself. I guess I don't have enough statement[s] in here in regard to thefacts about the defendant to say that the defendant is subject to the jurisdiction of the state. Who is the defendant? I don't see any place that says something causes them to be subject to the jurisdiction of the State of Arkansas. . . I don't see anywhere where it says anything about jurisdiction.

Counsel for Appellant: Your Honor, it [contract] does not have a submission to jurisdiction clause. My client, who is based in Rogers, Arkansas, does business in several states. The defendant is based in Georgia. At least one of the contracts was performed in Arkansas. We have forty contracts, none of which were performed in Georgia. This state is as well-fixed as any other state in which to litigate this matter. My client was based here during the entire contract between her and the defendant, and under the long-arm statute it's clear that the defendant had minimal contacts with the state under these contracts.

The Court: That may be true, but the defendant's point is that it is not in the pleadings. There's nothing in the pleadings to indicate that Arkansas has jurisdiction except other than a statement. . . . Jurisdiction is based upon facts, and there aren't any facts in here stated that would give me cause to say or want to say that this court has jurisdiction. The defendant needs to have taken some action or done something that gives Arkansas jurisdiction . . . . I'll accept that as an allegation that they have done some business in Arkansas, but you need to get factual with it so that there's some basis so the other side can evaluate it. . . .

At the close of the hearing, the court granted appellant ten days to amend its complaint. Appellant's complaint re-adopted and re-alleged all allegations contained in the original complaint. Appellant also attached exhibits depicting agreements entered intobetween the parties. Neither contract required action of the parties in Arkansas. As a result, appellees renewed the dismissal motion, and the court granted the motion.

It is well settled that "a person who avails himself of the privilege of conducting activities in another state is subject to suit there if his contacts in that state have been such that the maintenance of the suit would not offend traditional notions of fair play and substantial justice." Nix v. Dunavant, 249 Ark. 641, 460 S.W.2d 762 (1970). The court looks to several factors in determining whether or not to exercise personal jurisdiction over a non-resident defendant. John Norrell Arms, Inc. v. Higgins, 332 Ark. 24, 962 S.W.2d 801 (1998). These factors include any conduct in or any contacts with the State of Arkansas such as would subject defendants to the state's jurisdiction, the quantity of contacts with the forum state, the interest of the forum state in providing a forum for its residents, and the convenience of the parties. Id.

Because Arkansas, a fact-pleading state, so requires, appellant should have supplied the court with a statement which would allow the court to determine whether or not it had jurisdiction over the parties. However, the complaint failed to so allege. The amended complaint included contracts that were performed in Missouri, Ohio, and Louisiana. None of the contracts specified that any correspondence or any actions were taken on behalf of the appellees in Arkansas. Therefore, because the appellant failed to specifically allege the bases for which the Arkansas court could hear cases involving contracts in Missouri, Ohio, and Louisiana and properly establish the jurisdiction of our courts to hear this matter, it was never established that the Arkansas courts had jurisdiction to hear the case.

Jurisdiction is the power of a court to decide cases and presupposes control over the subject matter and parties. Overton v. Jones, 74 Ark. App. 122, 45 S.W.3d 427 (2001). Before the case can be reached on the merits, a challenge to the court's personal jurisdiction is a threshold issue. Therefore, insofar as the connection to Arkansas in the present case is premised solely upon the appellant's incorporation in Arkansas, we hold that the trial court lacked jurisdiction over the appellees.

Dismissed.

Stroud, C.J., and Griffen, J., agree.