David Schneider v. Michael Hardesty , 669 F.3d 693 ( 2012 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 12a0051p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
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DAVID M. SCHNEIDER,
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Plaintiff-Appellant,
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No. 09-3892
v.
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MICHAEL HARDESTY et al.,
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Defendants,
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THOMAS NELSON,
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Defendant-Appellee.
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Appeal from the United States District Court
for the Southern District of Ohio at Cincinnati.
No. 06-00836—Susan J. Dlott, Chief District Judge.
Argued: October 12, 2011
Decided and Filed: February 23, 2012
Before: MOORE and ROGERS, Circuit Judges; HOOD, District Judge.*
_________________
COUNSEL
ARGUED: Brian S. Sullivan, DINSMORE & SHOHL, Cincinnati, Ohio, for Appellant.
Michelle Sheehan, REMINGER, Cleveland, Ohio, for Appellee. ON BRIEF: Brian S.
Sullivan, Seth A. Schwartz, DINSMORE & SHOHL, Cincinnati, Ohio, for Appellant.
Thomas E. Nelson, Salt Lake City, Utah, pro se.
*
The Honorable Joseph M. Hood, United States District Judge for the Eastern District of
Kentucky, sitting by designation.
1
No. 09-3892 Schneider v. Hardesty et al. Page 2
_________________
OPINION
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KAREN NELSON MOORE, Circuit Judge. Plaintiff David M. Schneider
(“Schneider”) appeals the district court’s dismissal of his claims against defendant
Thomas Nelson (“Nelson”) for lack of personal jurisdiction. Schneider argues that the
district court improperly applied the preponderance-of-the-evidence standard, as
opposed to the prima facie standard, in determining whether Schneider pleaded facts
sufficient to establish personal jurisdiction over Nelson. Schneider further argues that
the district court erred in finding there is no personal jurisdiction over Nelson in Ohio.
We conclude that the district court improperly granted the motion to dismiss. Because
the exercise of jurisdiction comports with due process and is proper under Ohio’s long-
arm statute even under the more demanding preponderance-of-the-evidence standard,
we REVERSE the district court’s judgment and REMAND for further proceedings
consistent with this opinion.
I. BACKGROUND
In 2001, Michael Hardesty (“Hardesty”), a resident of Utah, solicited Schneider,
a resident of Ohio, to participate in an investment program. Pursuant to the program,
Schneider, a medical physician practicing in Ohio, purchased medical-malpractice
insurance from Hardesty’s foreign-based company, Provincial Insurance.1 A portion of
the funds from Schneider’s premiums were to be pooled with other premiums, invested
with London Reinsurance to create a captive insurance company, and then reinvested
with Vavasseur Corporation. The investment program was to provide Schneider with
federal-tax benefits and make him a partial owner of London Reinsurance in proportion
to the amount of his investment.
1
Provincial Insurance is a British Virgin Islands company licensed to conduct business in the
United States. R. 30 (Ex. C, Letter dated Sept. 29, 2003 at 1).
No. 09-3892 Schneider v. Hardesty et al. Page 3
In December 2001, Schneider mailed a $550,000 insurance-premium payment
to Provincial Insurance. Provincial Insurance pooled Schneider’s premium with other
premiums and transferred the funds to London Reinsurance. London Reinsurance then
placed the funds in the Bank of Butterfield in Europe. When London Reinsurance
attempted to transfer the funds to Vavasseur, it learned that the Bank of Butterfield had
frozen the assets because of SEC proceedings against Vavasseur. Unbeknownst to
Schneider, Vavasseur was in fact a Ponzi scheme that had received investments in excess
of one-hundred million dollars.2
In 2003, Hardesty hired Nelson, an attorney licensed to practice in Utah, to assist
with the recovery of London Reinsurance’s assets from the Bank of Butterfield. By
virtue of this employment, Nelson became the “authorized agent . . . [t]o sign on behalf
of London Reinsurance.” R. 7 (Ex. A, Nelson SEC Dep. at 81:18-22).
In September 2003, at Hardesty’s request, Nelson drafted a letter addressed “To
Whom It May Concern” directed at the doctors and medical practices whose premiums
were invested in London Reinsurance. R. 30 (Ex. C, Letter dated Sept. 29, 2003). The
letter introduced Nelson as an attorney “retained by Mike Hardesty . . . to assist in
recovering the funds that were invested with and managed by Terry Dowdell,” id. at 1,
and was drafted with Nelson’s signature block, R. 30 (Ex. B, Nelson Dep. at 22:24-
23:14). In the letter, Nelson summarized efforts to recover London Reinsurance’s assets
and stated that “the name, address, and contact information for each insured or medical
practice” had been provided to the Bank of Butterfield in aid of return of the funds. R.
30 (Ex. C, Letter dated Sept. 29, 2003 at 2). Nelson acknowledged that Hardesty was
under investigation by the SEC, but attested to Hardesty’s “integrity and honesty.” Id.
at 3. The letter concluded by stating that “every effort is being made to obtain a 100%
return of your funds.” Id. Nelson gave the letter to Hardesty, but did not participate in
mailing it to any of the investors.
2
Vavasseur’s manager, Terry Dowdell, pleaded guilty to federal charges related to the scheme.
No. 09-3892 Schneider v. Hardesty et al. Page 4
In December 2003, at Hardesty’s request, Nelson drafted a second “To Whom
It May Concern” letter with Nelson’s signature block. R. 30 (Ex. D, Letter dated Dec.
5, 2003). In that letter, Nelson requested that the investors provide Hardesty with a copy
of their current medical license, confirmation or documentation of membership in any
medical associations, a copy of their current passport or drivers license, and a current e-
mail address, home address, and telephone number. Nelson concluded by stating “we
are totally focused in our efforts to obtain a 100% return of all funds” and “foreign
counsel has already been authorized to move forward with legal proceedings against the
bank should negotiations fail to deliver the desired results.” Id. Nelson gave the letter
to Hardesty, but did not participate in mailing it to any of the investors. Schneider
maintains that he responded to Nelson’s second letter by sending the information
requested.3 Nelson testified that because investors were instructed to send the
information to Hardesty, Nelson “did not review the contents of” the “package” that
contained the information sent by investors. R. 30 (Ex. B, Nelson Dep. at 38:18-39:9).
On December 8, 2006, Schneider filed a lawsuit against multiple defendants,
including Hardesty and Nelson, alleging fraud and misrepresentation, among other
claims. Schneider alleged that the two letters written by Nelson contained false and
misleading statements by which Nelson furthered the scheme to defraud Schneider.
Schneider contended that Nelson’s actions induced reliance thereby harming Schneider.
Nelson moved to dismiss Schneider’s complaint for lack of personal jurisdiction.
In response to Nelson’s motion, Schneider requested leave to conduct limited discovery
on the issue of jurisdiction.4 The district court granted Schneider’s request and
permitted Schneider to depose Nelson. During the deposition, Nelson stated that
Hardesty had told him the names of some of the investors, but that he could not “recall”
whether the names he was provided constituted “a complete list or not.” R. 30 (Ex. B,
Nelson Dep. at 29:6-10). Nelson also stated that when he provided the letters to
3
Nelson argues that Schneider has not presented any evidence indicating that he did indeed send
this information to Hardesty.
4
Neither Schneider nor Nelson requested that the district court hold an evidentiary hearing.
No. 09-3892 Schneider v. Hardesty et al. Page 5
Hardesty, he was “[c]ertainly” aware that Hardesty might distribute them to investors.
Id. at 35:20-24.
After the parties submitted additional briefing, the magistrate judge issued his
report and recommendation. In finding personal jurisdiction lacking, the magistrate
judge stated:
[w]hat’s missing . . . is any indication from plaintiff, who has not filed an
affidavit or a verified complaint in this case, that he in [any way] relied
upon the information or representations in either letter to either take
action or refrain from taking action. There is no allegation that plaintiff
understood the letters to mean that Nelson was his legal representative
or that the letters otherwise had any effect on plaintiff’s conduct. In
other words, as far as the Court is aware at this time, the letters did not
lead to any course of conduct between the parties. Without some
modicum of proof that the letters caused or contributed to harm suffered
by plaintiff, or that the plaintiff relied on the statements set forth in the
letters, the Court is at a loss to understand how one can conclude that the
letters created a connection with the forum state or caused a consequence
in the forum state.
R. 28 (Report and Recommendation at 11). The district court adopted the report and
recommendation in full, granted Nelson’s motion to dismiss, and certified its order as
final and appealable pursuant to Federal Rule of Civil Procedure 54(b). Schneider now
appeals.
II. ANALYSIS
A. Standard of Review
“‘We review de novo a district court’s dismissal of a complaint for lack of
personal jurisdiction pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure.’”
Gerber v. Riordan, 649 F.3d 514, 517 (6th Cir. 2011) (quoting Bird v. Parsons, 289 F.3d
865, 871 (6th Cir. 2002)).
No. 09-3892 Schneider v. Hardesty et al. Page 6
B. Standard of Proof for Personal Jurisdiction
“The party seeking to assert personal jurisdiction bears the burden of
demonstrating that such jurisdiction exists.” Bird, 289 F.3d at 871. In Serras v. First
Tennessee Bank National Association, this Circuit explained that “[t]he weight of [the]
burden . . . depends on whether the trial court chooses to rule on written submissions or
to hear evidence on the personal-jurisdiction issue . . . .” 875 F.2d 1212, 1214 (6th Cir.
1989). When the district court “rules on written submissions alone” the burden consists
of “a prima facie showing that personal jurisdiction exists.” Id. When a pretrial-
evidentiary hearing is conducted, the preponderance-of-the-evidence standard applies.
Id. We explained that this rule prevents a defendant from “defeat[ing] personal
jurisdiction merely by filing a written affidavit contradicting jurisdictional facts alleged
by a plaintiff” while simultaneously allowing a defendant to “invoke the court’s
discretion to order a pretrial evidentiary hearing” and thereafter apply the more-exacting
standard when a plaintiff’s jurisdictional allegations are wholly unfounded. Id.Serras, however, did not speak to the scenario presented in this case where some
discovery was conducted, but an evidentiary hearing was not held. Schneider argues that
the district court improperly applied the preponderance-of-the-evidence standard, as
opposed to the less-demanding prima facie standard, in the absence of an evidentiary
hearing. Nelson counters that the district court properly applied the preponderance-of-
the-evidence standard because Schneider received all of the discovery that he requested
and there were no outstanding factual issues in dispute.5 Nelson relies on Dean v. Motel
6 Operating L.P. in support of this argument. 134 F.3d 1269 (6th Cir. 1998).
In Dean, the jurisdictional dispute concerned the control exercised by a company,
Accor, over a related corporate entity, Motel 6 Operating. Id. at 1273. The district court
5
Nelson also argues that Schneider should be estopped from arguing for the application of the
prima facie standard in light of representations made to the district court when requesting discovery. This
argument is without merit because Schneider’s position is not clearly inconsistent with that previously
taken before the district court. See Lorillard Tobacco Co. v. Chester, Willcox & Saxbe, 546 F.3d 752, 757
(6th Cir. 2008). In requesting leave to conduct limited discovery, Schneider pointed out that if the district
court did not allow discovery, the prima facie standard would apply. This statement is not inconsistent
with the position that after limited discovery, but in the absence of an evidentiary hearing, the prima facie
standard still applies.
No. 09-3892 Schneider v. Hardesty et al. Page 7
allowed “extensive discovery” in aid of the jurisdictional issue, though not all of the
discovery Dean requested, but did not hold an evidentiary hearing. Id. at 1272, 1274.
On appeal, we held that the district court erred in applying the preponderance-of-the-
evidence standard “because (although there was discovery) there was no evidentiary
hearing on the jurisdiction question.” Id. at 1272. The panel went on to state that “we
would not use this standard if the reason for not having an evidentiary hearing was that
there was no ‘real dispute’ as to the facts or to the extent of discovery.” Id. (citing Int’l
Techs. Consultants, Inc. v. Euroglas S.A., 107 F.3d 386, 391 (6th Cir. 1997)). Nelson
argues that this statement delineated an exception to the prima facie standard in the
absence of an evidentiary hearing when no “real dispute” exists.6
Neither Nelson nor the magistrate judge identified a case applying this exception
in the thirteen years since the decision in Dean, and, because the statement was not
essential to the Dean holding, it is arguably dicta.7 Assuming arguendo the exception
does exist, the question arises as to whether Dean’s use of the conjunction “or” implies
that the exception applies only when there is no “real dispute” both as to the scope of
discovery and as to the relevant facts, or whether the absence of a dispute as to either
element is individually sufficient. International Technologies Consultants, which Dean
cites in support, suggests that both elements need to be satisfied before the exception
applies. International Technologies Consultants recognized that the application of the
prima facie standard “loses some of its significance” when there is neither a dispute as
to the jurisdictional facts nor a dispute regarding the scope of discovery. 107 F.3d at
6
Other courts have not read Dean as creating such an exception, but have instead interpreted it
as confirming that the preponderance-of-the-evidence standard never applies in the absence of an
evidentiary hearing. See, e.g., Bradford Co. v. Afco Mfg., 560 F. Supp. 2d 612, 618-19 (S.D. Ohio 2008)
(“[T]he Sixth Circuit left no doubt in Dean v. Motel 6 Operating L.P. that the preponderance of evidence
standard does not apply where no evidentiary hearing has been held.”).
7
In fact, in most instances, this Circuit has applied the prima facie standard in the absence of an
evidentiary hearing without even considering the exception’s possible application. See, e.g., Bridgeport
Music, Inc. v. Still n the Water Publ’g, 327 F.3d 472, 476-78 (6th Cir. 2003) (applying prima facie standard
where there was limited discovery but no evidentiary hearing); Smith v. Home Depot USA, Inc., 294 F.
App’x 186, 188-89 (6th Cir. 2008) (unpublished) (same). The closest this Circuit has come to addressing
the issue was in Chrysler Corporation v. Uptown Motorcars-Hartford, Inc., No. 98-1097, 1999 WL
196558, (6th Cir. Apr. 1, 1999) (unpublished opinion). There a panel held the prima facie standard should
apply in the absence of an evidentiary hearing where it was unclear whether all discovery desired was
granted. Id. at *3.
No. 09-3892 Schneider v. Hardesty et al. Page 8
391. International Technologies Consultants read in conjunction with Serras would
suggest that any exception created in Dean was aimed at those rare instances in which
a plaintiff has been granted all discovery requested and that discovery resulted in an
undisputed set of facts such that an evidentiary hearing would be pointless.
Counsel admitted at oral argument that Schneider received all discovery
requested. Nelson also argues that there are no outstanding factual disputes. We
disagree. It is clear that the extent of Nelson’s knowledge of the locations of the
recipients of the “To Whom It May Concern” letters remains very much in dispute.
Each party gleans different inferences from Nelson’s deposition testimony, and neither
party’s factual conclusion is air tight. Moreover, that Nelson’s deposition resolved some
of the outstanding factual issues, i.e., whether an attorney-client relationship existed
between Nelson and Schneider, is of no moment.8 Other facts pertinent to the
jurisdictional inquiry, namely the exact extent of Nelson’s knowledge of the locations
of the investors, remain in dispute.
Ultimately, we need not decide conclusively whether the exception alluded to in
Dean in fact exists or whether it should apply in this instance. For the reasons that
follow, Schneider has demonstrated personal jurisdiction over Nelson in Ohio even
under the more exacting standard imposed by the district court—the preponderance-of-
the-evidence standard.
C. Personal Jurisdiction
In a diversity case, a plaintiff must satisfy the state-law requirements for personal
jurisdiction. Estate of Thomson ex rel. Estate of Rakestraw v. Toyota Motor Corp.
Worldwide, 545 F.3d 357, 361 (6th Cir. 2008). Thus, Schneider must demonstrate that
both due process and Ohio’s long-arm statute are satisfied. Id. “We have recognized
that Ohio's long-arm statute is not coterminous with federal constitutional limits.” Id.8
In his SEC deposition, Nelson testified that he could not answer the question as to whether he
was aware of the identities of the investors because of attorney-client privilege. See R. 30 (Ex. B, Nelson
Dep. at 26:6-9). During Nelson’s deposition in this case, Nelson clarified that he was referring to his
attorney-client relationship with Hardesty and that he did not have an attorney-client relationship with
Schneider. Id. at 32:23-33:3.
No. 09-3892 Schneider v. Hardesty et al. Page 9
Therefore, we begin by analyzing whether the requirements of Ohio’s long-arm statute
are met and then separately consider whether the exercise of jurisdiction would comport
with due process. Id.
1. Ohio’s Long-Arm Statute
Ohio’s long-arm statute establishes a statutory basis for jurisdiction over foreign
defendants. It states:
(A) A court may exercise personal jurisdiction over a person who acts
directly or by an agent, as to a cause of action arising from the person’s:
(1) Transacting any business in this state;
(2) contracting to supply services or goods in this state;
...
(6) causing tortious injury in this state to any person by an act
outside this state committed with the purpose of injuring persons,
when he might reasonably have expected that some person would
be injured thereby in this state . . . .
OHIO REV. CODE ANN. § 2307.382(A).
Schneider argues that jurisdiction is proper pursuant to Ohio’s long-arm statute
under two distinct theories. First, Schneider argues that Hardesty acted as Nelson’s
agent thereby both transacting business and contracting to supply services in Ohio under
OHIO REV. CODE ANN. § 2307.382(A)(1) and 2307.382(A)(2). Second, Schneider
argues that, by drafting the “To Whom It May Concern” letters and turning them over
to Hardesty, Nelson caused reasonably expected tortious injury within the meaning of
OHIO REV. CODE ANN. § 2307.382(A)(6). Because jurisdiction is proper under
§ 2307.382(A)(6), we decline to reach the merits of Schneider’s agency argument.
Although this Circuit has not had much occasion to consider the contours of
§ 2307.382(A)(6), the district courts have given it considerable attention and generally
“taken a broad approach” to its application. Grigor v. Starmark Hospitality Group LLC,
No. 2:10-cv-20, 2010 WL 2403137, at *5 (S.D. Ohio June 10, 2010) (quoting Shaker
Constr. Group, LLC v. Schilling, No. 1:08cv278, 2008 WL 4346777, at *4 (S.D. Ohio
Sept. 18, 2008)). Of particular note, district courts have found that fraudulent
No. 09-3892 Schneider v. Hardesty et al. Page 10
communications or misrepresentations directed at Ohio residents satisfy
9
§ 2307.382(A)(6)’s requirements. See, e.g., id.
Vlach v. Yaple from the Northern District of Ohio is particularly instructive and
persuasive. In Vlach, the plaintiff alleged that she received three communications from
the defendant—one letter and two emails—in violation of various federal-consumer-
protection statutes. 670 F. Supp. 2d 644, 646, 648 (N.D. Ohio 2009). The defendant
argued that, although the communications contained his signature block, “he did not
compose, review, or authorize” the communications and submitted an affidavit in
support of that fact. Id. at 646. The district court, applying the prima facie standard in
light of limited discovery and no evidentiary hearing, concluded that the plaintiff had
made a sufficient jurisdictional showing under § 2307.382(A)(6) to survive a motion to
dismiss. Id. at 647-48. The court stated that “[b]y allegedly sending ‘false, deceptive,
or misleading’ representations . . . [the defendant] should have reasonably expected that
the recipient would have been injured in [Ohio], given that the letter was addressed to
an Ohio resident.” Id. at 648.
The conduct that Schneider identifies of Nelson is strikingly similar. While the
defendant in Vlach disputed the fact that he prepared the written communication, in this
case Nelson disputes his knowledge of the location of the letters’ recipients. Here, as
in Vlach, this factual dispute is insufficient to defeat jurisdiction, and we hold that this
remains true under the preponderance-of-the-evidence standard. As previously
discussed, Nelson’s argument that he has no knowledge of the locations of the investors
belies actual representations made by Nelson. Nelson explicitly acknowledged that he
was involved in the transmission of the investors’ names and addresses to the Bank of
Butterfield. It defies logic that Nelson participated in this transmission, but remained
9
Such findings are consistent with Ohio state-court decisions. See, e.g., Kauffman Racing Equip.,
L.L.C. v. Roberts, 930 N.E.2d 784, 792 (Ohio 2010) (“When defamatory statements regarding an Ohio
plaintiff are made outside the state yet with the purpose of causing injury to the Ohio resident and there
is a reasonable expectation that the purposefully inflicted injury will occur in Ohio, the requirements of
R.C. 2307.382(A)(6) are satisfied.”); Herbruck v. LaJolla Capital, No. 19586, 2000 WL 1420282, at *3
(Ohio App. Sept. 27, 2000) (“A fair reading of the complaint and documentary materials shows that
Gallison committed tortious acts (alleged as conversion, fraud, and civil conspiracy) outside Ohio, while
knowing full well that the stock involved was of an Ohio corporation.”).
No. 09-3892 Schneider v. Hardesty et al. Page 11
ignorant of the investors’ geographic locations. If true, the only possible explanation is
that Nelson intentionally buried his head in the sand, and that cannot save Nelson from
being subject to jurisdiction in Ohio. Thus, accepting Nelson’s knowledge of the
locations of the investors, the case against him is even stronger than in Vlach and
surpasses muster under the Ohio long-arm statute under a preponderance-of-the-evidence
standard.
Accordingly, we hold that there are sufficient facts to conclude Nelson should
have reasonably expected that the letters would cause injury in Ohio making the exercise
of jurisdiction proper pursuant to OHIO REV. CODE ANN. § 2307.382(A)(6). We now
consider whether the exercise of personal jurisdiction over Nelson in Ohio also comports
with due process.
2. Due Process
Due process requires that a defendant have “minimum contacts . . . with the
forum State . . . such that he should reasonably anticipate being haled into court there.”
World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 291, 297 (1980). The
presence of such contacts ensures that the exercise of jurisdiction over the defendant
“does not offend ‘traditional notions of fair play and substantial justice.’” Int’l Shoe Co.
v. Washington, 326 U.S. 310, 316 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463
(1940)). “As a general rule, the sovereign’s exercise of power requires some act by
which the defendant ‘purposefully avails itself of the privilege of conducting activities
within the forum State, thus invoking the benefits and protections of its laws . . . . .’” J.
McIntyre Machinery, Ltd. v. Nicastro, --- U.S. ---, 131 S. Ct. 2780, 2787 (2011) (quoting
Hanson v. Denckla, 357 U.S. 235, 253 (1958)).
There are two forms of personal jurisdiction: general and specific. Indah v. U.S.
S.E.C., 661 F.3d 914, 920 (6th Cir. 2011). General jurisdiction is found where contacts
“are so continuous and systematic as to render [a foreign defendant] essentially at home
in the forum State.” Goodyear Dunlop Tires Operations, S.A. v. Brown, --- U.S. ---, 131
S. Ct. 2846, 2851 (2011) (internal quotation marks omitted). Specific jurisdiction
“depends on an affiliatio[n] between the forum and the underlying controversy,
No. 09-3892 Schneider v. Hardesty et al. Page 12
principally, activity or an occurrence that takes place in the forum State and is therefore
subject to the State’s regulation.” Id. (internal quotation marks omitted).
As Schneider claims only specific jurisdiction over Nelson, we employ this
Circuit’s three-part analysis to determine whether jurisdiction accords with due process.
See S. Mach. Co. v. Mohasco Indus., Inc., 401 F.2d 374, 381 (6th Cir. 1968). To
conclude that the exercise of jurisdiction is proper, we must find: (1) purposeful
availment “of the privilege of acting in the forum state or causing a consequence in the
forum state,” (2) a “cause of action . . . aris[ing] from activities” in the state, and (3) a
“substantial enough connection with the forum state to make the exercise of jurisdiction
over the defendant reasonable.” Id.a. Purposeful Availment
“The purposeful availment requirement ensures that a defendant will not be haled
into a jurisdiction solely as a result of random, fortuitous, or attenuated contacts, or of
the unilateral activity of another party or a third person.” Citizens Bank v. Parnes, 376
F. App’x 496, 502 (6th Cir. 2010) (unpublished opinion) (internal quotation marks
omitted) (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985)). “We
have held previously that purposeful availment may exist when a defendant makes
telephone calls and sends facsimiles into the forum state and such communications ‘form
the bases for the action.’” Intera Corp. v. Henderson, 428 F.3d 605, 616 (6th Cir. 2005)
(quoting Neal v. Janssen, 270 F.3d 328, 332 (6th Cir. 2001)).
The two letters that Schneider received in Ohio “form the bas[i]s for the action”
at issue. See id. However, the magistrate judge’s report and recommendation took issue
with Schneider’s failure to demonstrate that the letters induced reliance or established
“any course of conduct between the parties.” R. 28 (Report and Recommendation at 11).
We agree with Schneider that the allegations contained in the complaint sufficiently
plead reliance. Schneider’s complaint clearly sets out that he relied on the
representations in Nelson’s letter that Nelson was working to return the funds to
No. 09-3892 Schneider v. Hardesty et al. Page 13
Schneider and other investors.10 These representations were false and misleading. As
Nelson admitted during his deposition, he was acting solely in the interest of London
Reinsurance and his “goal was to get the funds returned to London Reinsurance” rather
than to the individual investors. R. 30 (Ex. B Nelson Dep. at 42:20-44:24). Moreover,
the two letters, on their face, indicate that Schneider’s reliance was reasonable: their
tone and content is reassuring and advisory, projecting the impression that Nelson is
acting in the best interests of the investors. The letters imply that Nelson seeks to
establish an ongoing relationship with the investors by promising to provide updates “as
major developments occur,” encouraging investors to contact Nelson with questions, and
stating that Nelson will be “as responsive as possible.” R. 30 (Ex. C, Letter dated Sept.
29, 2003 at 3). These representations, indicative of an intent to establish an ongoing
contact, are exactly the kind of conduct recognized to constitute purposeful availment
for due-process purposes. See Burger King, 471 U.S. at 473.
Thus, it is clear to us that had Nelson himself mailed the letters to Schneider
knowing they would reach Schneider in Ohio, there would be “purposeful availment”
to satisfy due process. See Neal, 270 F.3d at 332 (“[T]he actions of sending false
information into Tennessee by phone and fax had foreseeable effects in Tennessee and
were directed at individuals in Tennessee.”); Am. Greetings Corp. v. Cohn, 839 F.2d
1164, 1170 (6th Cir. 1988) (holding threatening letters and phone calls to plaintiff in
Ohio satisfied due process). The issue we must decide is whether either of two
complicating facts alters this conclusion: (1) that Nelson did not physically mail the
letters himself; and (2) that Nelson contends there is no direct evidence that Nelson knew
the letters would reach Ohio.
First, the fact that Nelson did not personally mail the letters has no impact on the
due-process analysis. This not an instance where letters a defendant drafted reached an
out-of-state plaintiff by “fortuitous” misfortune or “attenuated” circumstances. Cf.
World-Wide Volkswagen, 444 U.S. at 295. Nelson, by his own admission, drafted the
10
Moreover, the fact that Schneider actually followed the instructions given to him in the letters,
by mailing the requested information to Hardesty as instructed, provides tangible corroboration of
Schneider’s reliance.
No. 09-3892 Schneider v. Hardesty et al. Page 14
letters at Hardesty’s request knowing that Hardesty almost certainly would then mail the
letters to investors.11 Given Nelson’s intimate involvement in the creation of the letters
and his knowledge of their intended purpose, the fact that Hardesty rather than Nelson
mailed the letters does not make Nelson’s actions any less purposefully directed at the
recipient investors. See Koch v. Local 438, UAW, 54 F. App’x 807, 811-12 (6th Cir.
2002) (unpublished) (finding personal jurisdiction lacking over one defendant where
“her lack of leadership in [the relevant] events [made] her actions less purposefully
directed at the plaintiff” but finding personal jurisdiction over the defendant who
“initiated the process” by directing someone to write the defamatory letter and
participated in the decision to then send that letter). By drafting and providing Hardesty
with the letters for distribution, Nelson was the key actor in directing the harm inflicted
on the recipients. See id.; Air Prods. & Controls, Inc. v. Safetech Int’l, Inc., 503 F.3d
544, 552 (6th Cir. 2007) (discussing importance of which party initiated contacts to
purposeful availment analysis).
Second, despite Nelson’s contentions to the contrary, there is sufficient evidence
that Nelson knew, or at least should have known, that the letters were bound for an
investor in Ohio. In the first “To Whom It May Concern” letter, Nelson wrote that “we
assembled a package that included audited financials on Provincial Insurance, Ltd.” that
“included the name, address, and contact information for each insured or medical
practice” to be sent to the Bank of Butterfield in aid of recovery of the funds. R. 30 (Ex.
C, Letter dated Sept. 29, 2003 at 2). This is a clear statement by Nelson that he had
personal knowledge of the names and addresses of the investors, or at least access to that
information at his fingertips. Nelson cannot now renege on this representation for the
purpose of avoiding jurisdiction in Ohio. Under the preponderance-of-the-evidence
standard, this admission is sufficient to establish that Nelson knew where the various
investors were located. Accordingly, Schneider has demonstrated that Nelson
purposefully availed himself of the benefits and burdens of the State of Ohio satisfying
11
In fact, Nelson has presented no alternative explanation as to why Hardesty would have
requested that Nelson draft the letters in the first place.
No. 09-3892 Schneider v. Hardesty et al. Page 15
the first prong of the due-process analysis under the preponderance-of-the-evidence
standard.
b. Arising From
The second requirement is that the plaintiff’s cause of action arise from the
defendant’s contacts with the state. This requirement is subject to a “lenient standard,”
and we are without doubt that Schneider’s claims against Nelson satisfy it. See Bird,
289 F.3d at 875. As previously explained, the dispute at issue unequivocally “arises
from” the two letters that Nelson wrote and Schneider received. Those letters, that
Schneider received, read, and relied upon in Ohio, form the basis for Schneider’s
allegations that Nelson furthered the fraud perpetrated against Schneider. Accordingly,
the second prong of the analysis is met.
c. Substantial Connection
The third requirement is that the defendant have a sufficiently substantial
connection to the forum such that the exercise of jurisdiction is not unreasonable.
“[W]here, as here, the first two criter[ia] are met, ‘an inference of reasonableness arises’
and ‘only the unusual case will not meet [the substantial connection] criteri[on].’” Air
Prods. & Controls, Inc., 503 F.3d at 554 (quoting Theunissen v. Matthews, 935 F.2d
1454, 1461 (6th Cir. 1991)). “In determining whether the exercise of jurisdiction is
reasonable, the court should consider, among others, the following factors: (1) the
burden on the defendant; (2) the interest of the forum state; (3) the plaintiff's interest in
obtaining relief; and (4) other states’ interest in securing the most efficient resolution of
the policy.” Id. at 554-55.
While defending this matter in Ohio imposes a burden on Nelson, we cannot
conclude that this burden creates an “unusual case” where the “inference of
reasonableness” should be abandoned. See Youn v. Track, Inc., 324 F.3d 409, 420 (6th
Cir. 2003). Moreover, Ohio has an interest in ensuring that its residents have adequate
recourse for harms inflicted by nonresidents, and requiring Schneider to litigate this
dispute in Utah would impose a substantial burden on him. Cf. Nationwide Mut. Ins. Co.
No. 09-3892 Schneider v. Hardesty et al. Page 16
v. Tryg Int’l Ins. Co., 91 F.3d 790, 797 (6th Cir. 1996) (noting concern not implicated
where plaintiff is large corporation that “can easily travel to the defendant’s home
jurisdiction to seek redress”). “Because there is an inference of reasonableness when the
first two Southern Machine prongs are satisfied, and because there are no considerations
put forward by [Nelson] to overcome or contradict that inference, the exercise of
jurisdiction is reasonable under the circumstances of this case.” Air Prods. & Controls,
Inc., 503 F.3d at 555.
Accordingly, the exercise of personal jurisdiction over Nelson in Ohio comports
with due process.
III. CONCLUSION
Because we conclude that the exercise of jurisdiction both comports with Ohio’s
long-arm statute and due process, we REVERSE the judgment of the district court and
REMAND for further proceedings consistent with this opinion.