American Bank Holdings, Inc. et al v. Grange Mutual Casualty Company, No. 8:2009cv02228 - Document 17 (D. Md. 2010)
Court Description: MEMORANDUM OPINION. Signed by Chief Judge Deborah K. Chasanow on 6/7/10. (sat, Chambers)
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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND : AMERICAN BANK HOLDINGS, INC., et al. : v. : Civil Action No. DKC 09-2228 : GRANGE MUTUAL CASUALTY CO. : MEMORANDUM OPINION Presently pending and ready for resolution in this contract dispute is a motion filed by Defendant Grange Mutual Casualty Company to improper dismiss or lack of alternatively, personal to jurisdiction, transfer to for the United States District Court for the Southern District of Ohio. (Paper 8). venue, for Also pending is a motion filed by Plaintiffs American Bank Holdings, Inc., and American Bank to strike in part Defendant s reply, or alternatively, for leave to file a surreply. 11). (Paper The issues are fully briefed and the court now rules pursuant to Local Rule 105.6, no hearing being deemed necessary. For the reasons that follow, both motions will be denied. I. Background This case arises from a merger agreement between two banks. Prior to the merger, The Grange Bank ( Grange Bank ), a federally chartered savings bank in Ohio, was a wholly-owned subsidiary of Defendant Grange Mutual Casualty Company, an Ohio corporation with its principal place of business in Ohio. In or around November 2006, Defendant resolved to sell Grange Bank and retained the services of an investment bank, Keefs, Bruyette & Woods, Inc. ( KBW ), to assist in finding a buyer. Later that month, KBW contacted James Plack, President and Chief Executive Officer of Plaintiff American Bank, to inquire as to American Bank s interest in purchasing Grange Bank. at ¶ 2). American Bank is a (Paper 9, Attach. 1, Maryland-based, wholly-owned subsidiary of Plaintiff American Bank Holdings, Inc., a Delaware corporation with its principal place of business in Maryland. Shortly after initiating contact, KBW sent Mr. Plack a document entitled Grange Bank Confidential Sales Memorandum, containing selected information pertaining to the business and operations of Grange Bank. (Paper 9, Attach. 2, at 3). The stated purpose of the memorandum was to assist [American Bank] in deciding whether [Grange Bank]. to (Id.). pursue a possible transaction with Mr. Plack and Grange consultant Michael McMennamin subsequently exchanged a series of phone calls and emails negotiating the terms of a proposal by American Bank. (Paper 9, Attach. 1, at ¶ 3). The end result of those communications was a formal letter of intent, dated January 5, 2007, by which American Bank proposed a business transaction whereby it will purchase certain 2 assets and assume certain liabilities . . . from The Grange Bank. (Paper 9, Attach. 3, at 2). On February 6, 2007, after further negotiations, the parties executed an Agreement and Plan of Merger by and Among American Bank Holdings, Casualty Company and Inc., The American Grange Bank, Bank Grange ( merger Mutual agreement ), which effected the merger of Grange Bank with American Bank, the surviving entity. provided number that of home (Paper Plaintiffs equity 1, Attach. would lines 2, 3). of credit agreement from purchase The Grange Bank and commercial a loans ( purchased loans ), which were to exclude non-performing loans and loans without security and collateral, as identified by an attached schedule. Plaintiffs further agreed to assume the deposit liabilities of Grange Bank and to indemnify Defendant from losses associated with those liabilities. Both parties agreed to take all necessary action, post-closing, to carry out the terms of the merger, to secure regulatory approval, and to transfer all data files associated with the purchased loans and assumed deposit liabilities from Ohio to Maryland. After signing the agreement, the parties collaborated over the course of several months, primarily by telephone and email, to gain approval Supervision ( OTS ). of At of the the the merger Federal closing of from Deposit the 3 the Office Insurance merger of Thrift Corporation agreement which occurred on June 29, 2007, in Ohio Plaintiffs paid consideration for the purchased loans in an amount equal to the aggregate unpaid principal balance plus accrued interest on the loans, as valued at the time of closing. approximately $81 responsibility million for in loan approximately Plaintiffs acquired assets $154 and assumed in deposit million liabilities, resulting in the net transfer of approximately $80 million in deposit liabilities to American Bank in Maryland. Defendant also transferred at closing $86.5 million to American Bank in consideration of Plaintiffs assumption of those liabilities. All of the records and files of Grange Bank were subsequently transferred currently housed. As to American part of its Bank, where post-closing they are obligations, American Bank provided a number of services, in Maryland, on Grange s behalf, including certain information technology services and preparation of reports in relation to compliance with IRS Defendant and OTS continued reporting to make requirements. direct deposits Additionally, of payroll and commissions owed its agents to deposit accounts at American Bank in Maryland. A dispute subsequently arose between the parties regarding certain of the purchased loans, and on August 25, 2009, Plaintiffs filed a complaint in this court alleging breach of the merger agreement. (Paper 1). In response, Defendant moved 4 to dismiss for Fed.R.Civ.P. lack of personal 12(b)(2), Fed.R.Civ.P. 12(b)(3), for or jurisdiction improper venue alternatively, to pursuant pursuant transfer Southern District of Ohio pursuant to 28 U.S.C. § 1406. 8). to to to the (Paper In its reply brief, Defendant asserted a novel claim that the case should be transferred pursuant to 28 U.S.C. § 1404 (paper 10, at 13-15), and Plaintiffs moved to strike this ground, or alternatively, for leave to file a surreply (paper 11). II. Motion to Dismiss A. Personal Jurisdiction Defendant moves to dismiss the complaint for lack of personal jurisdiction, arguing that it is not licensed to do business in Maryland, neither rents nor owns property there, and never sent representatives negotiations that gave Consequently, according to rise to Maryland to the Defendant, exercise personal jurisdiction over it. throughout merger this the agreement. court may not Plaintiffs contend that because Defendant initiated the business relationship between the parties, negotiated and executed an agreement contemplating the merger of Grange Bank into Maryland-based American Bank, and subsequently Maryland, transferred there are all of extensive Grange contacts jurisdiction in this court. 5 Bank s accounts supporting to specific When a court s power to exercise personal jurisdiction over a nonresident defendant Fed.R.Civ.P. 12(b)(2), resolved the by is the judge, challenged by jurisdictional with the burden a motion question on the is under to be plaintiff ultimately to prove grounds for jurisdiction by a preponderance of the evidence. Carefirst of Md., Inc. v. Carefirst Pregnancy Ctrs., Inc., 334 F.3d 390, 396 (4th Cir. 2003) (citing Mylan Labs., Inc. v. Akzo, N.V., 2 F.3d 56, 59-60 (4th Cir. 1993)). If the existence of jurisdiction turns on disputed facts, the court may resolve the challenge after a separate evidentiary hearing, or may defer ruling pending receipt evidence relevant to the jurisdictional question. Bakker, 886 F.2d 673, 676 (4th Cir. 1989). at trial of See Combs v. Where, as here, the court chooses to rule without conducting an evidentiary hearing, relying solely on the basis of the complaint, affidavits and discovery materials, the plaintiff need only make a prima facie showing of personal jurisdiction. Carefirst, 334 F.3d at 396; see also Mylan Labs., 2 F.3d at 60. plaintiff has jurisdiction, established the court a must prima draw In determining whether the facie all case of reasonable personal inferences arising from the proof, and resolve all factual disputes, in the plaintiff s favor. Mylan Labs., 2 F.3d at 60; Carefirst, 334 F.3d at 396. 6 The nature of the claim and the defendant s contacts with the forum state determine whether a court may assert specific or general personal jurisdiction over the defendant. Johansson Corp. v. Bowness Constr. Co., 304 F.Supp.2d 701, 703 (D.Md. 2004). Specific personal jurisdiction applies where a controversy is related to or arises out of a defendant s contacts with the forum. S.A. v. Hall, Heitner, 433 Helicopteros Nacionales de Colombia, 466 U.S. 408, U.S. 186, 204 414 (1984) (1977)). A (quoting court Shaffer may v. exercise general jurisdiction, by contrast, where a defendant maintains continuous and Helicopteros, systematic 466 U.S. at contact 415 with (quoting the Perkins Consol. Mining Co., 342 U.S. 437, 438 (1952)). assert that this court may exercise forum v. state. Benguet Here, Plaintiffs specific jurisdiction insofar as the alleged breach of the parties merger agreement arises from Defendant s contacts with Maryland. A federal district court may exercise specific personal jurisdiction over a nonresident defendant if (1) an applicable state long-arm statute confers jurisdiction and (2) the assertion of that jurisdiction is consistent with constitutional due process. Nichols v. G.D. Searle & Co., 991 F.2d 1195, 1199 (4th Cir. 1993). Maryland s long-arm statute, Md. Code Ann., Cts. & Jud. Proc. § 6-103, authorizes the exercise of personal jurisdiction to the limits permitted by the Due Process Clause 7 of the Fourteenth Amendment. See ALS Scan, Inc. v. Digital Serv. Consultants, Inc., 293 F.3d 707, 710 (4th Cir. 2002), cert. denied, 537 U.S. 1105 (2003). Because it limits specific jurisdiction to cases in which the cause of action aris[es] from any act enumerated, however, a plaintiff relying upon the long-arm statute statutory Corp., must provision 304 still identify authorizing F.Supp.2d at 704 a specific jurisdiction. (quoting Ottenheimer Maryland Johansson Publishers, Inc. v. Playmore, Inc., 158 F.Supp.2d 649, 652 (D.Md. 2001)). Plaintiffs here rely on Md. Code Ann., Cts. & Jud. Proc. § 6103(b)(1), which confers personal jurisdiction over a issue is corporation that transacts any business in the state. In the constitutional whether the defendant s analysis, contacts the with crucial the forum state are substantial enough that it should reasonably anticipate being haled into court there. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980). A defendant has fair warning that forum s it might be subject to a jurisdiction if it purposefully directs its activities at forum residents and the litigation results from alleged injuries that arise out of or relate to those activities. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985) (citing Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 774 Colombia, 466 U.S. at 414). (1984); Helicopteros Nacionales de Where a nonresident defendant has 8 purposefully engaged in significant activities within the forum state or has created continuing obligations with residents of the forum state, the defendant has obtained the benefits and privileges of conducting business there and it is presumptively not unreasonable to require him to submit to the burdens of litigation in that forum as well. Burger King Corp., 471 U.S. at 476. In Johansson, 304 F.Supp.2d at 705, Judge Blake set forth the relevant considerations for analyzing minimum contacts in the context of a contract dispute involving an out-of-state defendant: The Supreme Court has made clear that an out-of-state party s contract with a party based in the forum state cannot automatically establish sufficient minimum contacts in the forum state. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 478, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985). Instead, the court must perform an individualized and pragmatic inquiry into the surrounding facts such as prior negotiations, the terms of the contract, the parties actual course of dealing, and contemplated future consequences, in order to determine whether the defendant purposefully established minimum contacts within the forum. Id. at 479, 105 S.Ct. 2174; see also Mun. Mortgage & Equity v. Southfork Apartments Ltd. P ship, 93 F.Supp.2d 622, 626 (D.Md. 2000). Among the specific facts that courts have weighed are where the parties contemplated that the work would be performed, where negotiations were conducted, and where payment was made. Mun. Mortgage & Equity, 93 F.Supp.2d at 626 (internal quotation omitted). One of the most important factors 9 is whether the defendant initiated the business relationship in some way. See id. at 626-27 (quoting Nueva Eng'g, Inc. v. Accurate Elecs., Inc., 628 F.Supp. 953, 955 (D.Md. 1986)). Ultimately, the question is whether the contract had a substantial connection to the forum state. Burger King, 471 U.S. at 479, 105 S.Ct. 2174; Diamond Healthcare of Ohio, Inc. v. Humility of Mary Health Partners, 229 F.3d 448, 451 (4th Cir.2000). Plaintiffs have established a prima facie case for this court s exercise of specific jurisdiction over Defendant. Although there is a disagreement as to which party proposed the business relationship, for present purposes, the court must resolve all factual disputes supported by competent evidence in favor of Plaintiffs. See Mylan Labs., 2 F.3d at 60. The affidavit of American Bank President and CEO James Plack recites that Defendant solicited an offer from Plaintiffs, through KBW, its agent, by first contacting Mr. Plack by telephone and then sending him detailed a confidential information about contact with Defendant.1 sales Grange memorandum, Bank and which provided invited further Mr. Plack further avers that after this initial contact he worked directly with Michael McMennamin, a Grange consultant, through a series of telephone and email communications, to develop a proposal that was satisfactory to Grange. Thus, Grange courted a business relationship with 1 This is unlike general advertising for many buyers of a product. 10 American Bank, Mun. Mortgage & Equity, 93 F.Supp.2d at 627, a factor which exercising strongly specific militates jurisdiction in over favor of this court Defendant. See CoStar Realty Information, Inc. v. Meissner, 604 F.Supp.2d 757, 766 (D.Md. 2009) business (the essential transactions give factor rise to in determining specific whether jurisdiction is whether the defendant initiated the contact ); Nueva Eng g, Inc. v. Accurate Electronics, Inc., 628 F.Supp. 953, 955 (D.Md. 1986) (noting that the Fourth Circuit seems to have adopted the determination of whether the defendant initiated the business relationship in some way as a dispositive factor ).2 It is undisputed that throughout the subsequent negotiations no Grange representative ever set foot in Maryland, while American Bank representatives traveled to Ohio on at least two occasions; [A] however, nonresident personally or who through that has an fact never agent, 2 alone entered may is not the be dispositive. state, deemed to either have Defendant cites ESAB Group, Inc. v. Centricut, Inc., 126 F.3d 617, 625-26 (4th Cir. 1997), for the proposition that marketing efforts directed at potential buyers throughout the United States is not sufficient to support personal jurisdiction. In that case, however, the court was applying general, not specific, jurisdiction principles and determining whether the contacts were continuous and systematic. While not necessarily dispositive when other factors strongly weigh against jurisdiction, initiation of contact remains a relevant factor. See Consulting Engineers Corp. v. Geometric Ltd., 561 F.3d 273, 280 (4th Cir. 2009). 11 transacted business subsection (b)(1). 130, 141 (D.Md. in the state within the 1981); agreement of Snyder v. Hampton Indus., Inc., 521 F.Supp. see also Prince v. Illien Int l, Ltd., 806 F.Supp. 1225, 1228 (D.Md. 1992). merger meaning specifies that it may be Adoptions Indeed, the executed in counterparts (paper 1, attach. 2, at ¶ 9.6), and the fact that the closing occurred in Ohio is not particularly compelling in light of the fact that the agreement contemplates the merger of the Ohio bank into the surviving Maryland bank, with American Bank assuming indemnifying all of Grange Grange for Bank s deposit associated liabilities losses. It and is uncontroverted, moreover, that all of Grange Bank s files were subsequently they are transferred presently to American housed, and that Bank in Grange Maryland, Bank where transferred large sums of money to Maryland accounts in consideration of American Bank s assumption of its liabilities. Under these facts, there can be little doubt that Defendant has transacted business in Maryland within the meaning of Md. Code Ann., Cts. & Jud. Proc. § 6-103(b)(1), and that this court s exercise of personal jurisdiction over reasonable. Because the established a prima facie Defendant court finds is that constitutionally Plaintiffs have case for the exercise of specific jurisdiction over Defendant, Defendant s motion to dismiss for lack of personal jurisdiction will be denied. 12 B. Venue Defendant additionally moves to dismiss for improper venue, pursuant to Fed.R.Civ.P. U.S.C. § 1406(a). 12(b)(3), or to transfer under 28 In this circuit, when venue is challenged by a motion to dismiss, the plaintiff must establish that venue is proper: The burden of showing that the court has personal jurisdiction lies with the plaintiff, see, Combs v. Bakker, 886 F.2d 673, 676 (4th Cir. 1989), as does the burden of showing that venue is proper. See, Bartholomew v. Virginia Chiropractors Association, 612 F.2d 812, 816 (4th Cir. 1979), cert. denied, 446 U.S. 938, 100 S.Ct. 2158, 64 L.Ed.2d 791 (1980), overruled on other grounds by Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119, 102 S.Ct. 3002, 73 L.Ed.2d 647 (1982). Gov t of Egypt Procurement Office v. M/V ROBERT E. LEE, 216 F.Supp.2d 468, 471 (D.Md. 2002). Furthermore, in deciding a motion to dismiss [for improper venue], all inferences must be drawn in favor of the plaintiff, and the facts must be viewed as the plaintiff most strongly can plead them Three M Enters., Inc. v. Tex. D.A.R. Enters., Inc., 368 F.Supp.2d 450, 454 (D.Md. 2005) (quoting Sun Dun, Inc. of Washington v. Coca-Cola Co., 740 F.Supp. 381, 385 (D.Md. 1990)). Venue for this diversity action is governed by 28 U.S.C. § 1391(a): A civil action founded only on wherein jurisdiction is diversity of citizenship 13 may, except as otherwise provided by law, be brought only in (1) a judicial district where any defendant resides, if all defendants reside in the same State, (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated, or (3) a judicial district in which any defendant is subject to personal jurisdiction at the time the action is commenced, if there is no district in which the action may otherwise be brought. Pursuant to 28 U.S.C § 1391(c), [f]or purposes of venue under this chapter, a defendant that is a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced. It follows that personal jurisdiction over the sole corporate defendant provides a proper basis for venue. See The Rockefeller Univ. v. Ligand Pharmaceuticals, 581 F.Supp.2d 461, 467 (S.D.N.Y. 2008). Furthermore, both parties agree that venue can be proper if § 1391(a)(2) applies, i.e., if a substantial part of the events or omissions giving rise to the claim occurred in Maryland. Defendant asserts that venue is improper for essentially the same reasons jurisdiction. it argued the court did not have Specifically, Defendant contends, [T]here is no evidence that any, much less a substantial part of the events purportedly giving rise to American Bank s claims took place in Maryland. Negotiations did not 14 personal occur in Maryland. . . . Grange did not execute the contract in Maryland. . . . The closing took place in Ohio, not Maryland. . . . Grange did not render its performance under the contract in Maryland. . . . All of these events occurred in Ohio. . . . Venue in Maryland is simply improper. (Paper 8, at 12). As noted, it is undisputed that the closing on the merger agreement took place in Ohio. On the other hand, the negotiations leading up to the merger agreement took place by email and telephone between parties in Maryland and Ohio; thus, they occurred in both states. Similarly, executed, in parts, in both states. the contract was Defendant s claim that Grange did not render performance under the contract in Maryland is misplaced considering that the agreement itself effected the merger of Grange Bank with a Maryland bank, the surviving entity, and that large sums of money, as well as voluminous accounts, files, and records, were transferred to this State as a result. In addition to arguing that a substantial part of the events giving rise to their claim occurred in this district, Plaintiffs contend that the forum selection clause of the merger agreement constitutes a waiver of Defendant s venue challenge. The court need not address that claim, however, because the same contacts with Maryland that support the district court s exercise of personal jurisdiction 15 over [Defendant] also provide[] a basis for venue there. F.3d 312, 318 (4th Cir. 2000). Ciena Corp. v. Jarrard, 203 Accordingly, Defendant s motion to dismiss or to transfer for improper venue will be denied. III. Partial Motion to Strike Reply or to File a Surreply In its reply brief, Defendant argues, for the first time, that the case should be transferred pursuant to 28 U.S.C. § 1404. In response, Plaintiffs have moved to strike or to file a surreply. (Paper 11). Because Defendant is not eligible for relief under § 1404(a), the court will deny Plaintiff s motion and briefly address the claim. Section 1404(a) provides: For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought. To prevail on a motion to change venue pursuant to § 1404, the defendant must show by a preponderance of the evidence that the proposed transfer will better and more conveniently serve the interests of the parties and witnesses and better promote the interests of justice. Helsel v. Tishman Realty & Constr. Co., Inc., 198 F.Supp.2d 710, 711 (D.Md. 2002) (internal marks and citation omitted); see also Lynch v. Vanderhoef Builders, 237 F.Supp.2d 615, 617 (D.Md. 2002); Dicken v. United States, 862 F.Supp. 91, 92 (D.Md. 1994). In order to satisfy this burden, the defendant should submit affidavits from witnesses and parties explaining the hardships 16 [it] would suffer if the case were heard in the plaintiff s chosen forum. Dow v. Jones, 232 F.Supp.2d 491, 499 (D.Md. 2002) (citing Helsel, 198 F.Supp.2d at 712). inconvenience or hardship, without sustain a motion under § 1404(a). more, Mere assertions of are insufficient to See Dow, 232 F.Supp.2d at 499; Helsel, 198 F.Supp.2d at 712. Assuming, arguendo, that Defendant s motion to transfer under § 1404(a) is properly before the court, it cannot prevail because it consists solely of [m]ere assertions of inconvenience or hardship, without any supporting affidavits or documentary evidence. burden of showing Thus, Defendant has failed to carry its that the balance of convenience and the interest of justice [is] strongly in favor of the moving party. Dow, 232 F.Supp.2d at 499 (internal marks and citation omitted). Accordingly, insofar as relief is properly requested under § 1404(a), such relief will be denied. IV. Conclusion For the foregoing reasons, Defendant s motion to dismiss and Plaintiff s motion to strike or for leave to file a surreply will both be denied. A separate order will follow. ________/s/_________________ DEBORAH K. CHASANOW United States District Judge 17
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