Vig v. Indianapolis Life Ins. Co., 3:04CV824LN.

384 F.Supp.2d 975

Dr. Vibha VIG and Dr. Vibha Vig, M.D., P.A. Plaintiffs v. INDIANAPOLIS LIFE INSURANCE COMPANY, L. Donald Guess, Individually, and as Trustee for the Xelan Welfare Benefit Trust, Steve Spencer, Both Individually and as Agent for Indianapolis Life Insurance Company, Michael E. Lloyd, Individually and in His Capacity as Agent for Williams Coulson, Williams Coulson, Attorneys at Law, and John Does 1-10 Defendants

No. 3:04CV824LN.

United States District Court, S.D. Mississippi, Jackson Division.

July 19, 2005.

COPYRIGHT MATERIAL OMITTED

Cynthia H. Speetjens, Jackson, MS, Craig Robert Sessums, Jones Funderburg & Sessums, Jackson, MS, Jesse M. Harrington, Madison, MS, John H. Daniels, III, Dyer, Dyer, Jones & Daniels, Greenville, MS, Judson Morgan Lee, Thomas R. Frazer, II, Frazer Davidson, P.A., Jackson, MS, for Plaintiffs.

David M. Skeens, — PHV, J. Michael Vaughn — PHV, Walters, Bender, Strohbehn & Vaughn, PC, Kansas City, MO, Jimmy Fred Spencer, Jr., William R. Ray, Watkins & Eager, Jackson, MS, James W. Shelson, Damany Freeman Ransom, Phelps Dunbar, Eddie J. Abdeen, Madison, MS, Jeffrey P. Hubbard, Jeffrey M. Williams, Wells, Moore, Simmons & Hubbard, Jackson, MS, for Defendants.

MEMORANDUM OPINION AND ORDER

TOM S. LEE, District Judge.

This cause is before the court on the motion of defendants Williams Coulson, Attorneys at Law, and Michael E. Lloyd, individually, to dismiss for lack of personal jurisdiction pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure, to dismiss based on improper venue pursuant to Rule 12(b)(3) and 28 U.S.C. § 1406, or alternatively, to transfer to the state of Pennsylvania pursuant to 28 U.S.C. § 1404(a). Plaintiffs Dr. Vibha Vig and Dr. Vibha Vig, M.D., P.A., have responded to the motion and the court, having considered the memoranda of authorities, together with attachments, submitted by the parties, concludes that the motion should be denied.

Plaintiffs, residents of Mississippi, filed this action alleging various breach of contract and fraud-based claims and seeking to recover damages stemming from their participation in a Xelan, Inc. Welfare Benefit Trust (WBT). Plaintiffs allege that they were contacted by Xelan, a California company, both directly and through Xelan's local agent, Steve Spencer, and were induced to invest in the Xelan WBT by false and misleading representations. More specifically, plaintiffs allege that defendants misrepresented that the Xelan WBT was a viable tax shelter investment and concealed from plaintiffs the fact that the Xelan WBT was merely an illegal tax-avoidance scheme. Plaintiffs allege that as a result of defendants' actions, they lost all of their contributions, totaling $143,500, and are subject to paying taxes, interest and penalties to the IRS.¹

As is pertinent to the present motion, the complaint alleges that defendant Michael Lloyd, a member of the Pennsylvania law firm of Williams Coulson, participated with Xelan in marketing the Xelan WBT by generating an opinion letter which falsely represented that the Xelan WBT was a welfare benefit fund within the meaning of Code Section 419(e)(1) and entitled to tax deductions. Plaintiffs claim they relied, in part, on the Lloyd/Williams Coulson letter in deciding to participate in the Xelan WBT, and charge that "[e]ither Williams Coulson is grossly negligent in determining the facts or is a co-conspirator with all other Defendants."

Personal Jurisdiction:

In their motion, Lloyd and Williams Coulson first seek dismissal on the basis that this court lacks personal jurisdiction over them due to the complete lack of contacts between them and the state of Mississippi. In support of their motion, they point out that Williams Coulson's only office is located in Pittsburgh, Pennsylvania; the law firm neither owns nor maintains any real or personal property in Mississippi; it has no attorneys licensed to practice in Mississippi; it does not advertise or solicit business in Mississippi; and it has no agent for service of process in Mississippi. Michael Lloyd, one of the founding members of Williams Coulson, is licensed and qualified to practice law only in Pennsylvania, and has never practiced law in Mississippi or engaged in any business whatsoever in Mississippi. These defendants further explain in the motion, and accompanying affidavit and exhibits, that Williams Coulson was hired in 1997 by Xelan, a California corporation, to review the Xelan 419 Welfare Benefit Trust and to provide a legal opinion regarding the tax consequences to employers and their employees with respect to their participation in the WBT. Williams Coulson's contacts with Xelan representatives occurred outside of Mississippi, and even the opinion letter on which plaintiffs base their claim against Lloyd and Williams Coulson was sent to Xelan in California, which in turn forwarded the letter to the respective WBT participants. Defendants insist, therefore, that they are due to be dismissed from this action.

A federal district court sitting in diversity in Mississippi has personal jurisdiction over a nonresident defendant if (1) the long-arm statute of the forum state confers personal jurisdiction over that defendant; and (2) exercise of jurisdiction under the long-arm statute is consistent with due process under the United States Constitution. Bryant v. Salvi, 2005 WL 1625319, at 2 (5th Cir.2005).

Under Mississippi's long-arm statute, personal jurisdiction over a defendant in a tort claim is proper "if any element of the tort, or any part of any element, takes place in Mississippi." Id.² Defendants argue in their motion that even if they committed a tort, which they deny, it certainly was not committed, even in part, in Mississippi; rather, their sole involvement in this case stems from Lloyd's having drafted the opinion letter, and that letter, they note, was drafted in Pennsylvania for their client in California. They submit that even had they been negligent in drafting that letter, only the consequences of that alleged tort, i.e., pain and suffering or economic effects, occurred in Mississippi. They thus conclude that in these circumstances, the long-arm statute will not permit an exercise of jurisdiction over them.

The distinction between "injury" and "consequences of an injury" is significant for purposes of jurisdictional analysis:

A court has jurisdiction under the long-arm statute if the "injury" took place in Mississippi, but not if only the consequences of the "injury" were felt in Mississippi. Jobe v. ATR Mktg., 87 F.3d 751, 753 n. 2 (5th Cir.1996). The injury is the "actual invasion of a legally protected interest." See Allred, 117 F.3d at 282; Jobe, 87 F.3d at 753 n. 2. The collateral consequences of that invasion can reach well beyond the actual injury. See Allred, 117 F.3d at 282; Jobe, 87 F.3d at 753 (distinguishing actual injury from collateral consequences such as pain and suffering and economic effects).

Bryant, 2005 WL 1625319, at 2. Defendants reason that if they were negligent in drafting the opinion letter, then they were negligent in Pennsylvania, not in Mississippi, and thus, the actual injury, if any, resulting from the opinion letter, occurred in Pennsylvania, and only the consequences of such injury were felt in Mississippi.

The court would tend to agree that had defendants merely been negligent in providing a legal opinion to Xelan regarding the nature and propriety of the Xelan WBT, and had Xelan in turn provided that opinion to its prospective customers in marketing the WBT, it would follow that only the consequences of an injury that occurred elsewhere were felt in Mississippi. Cf. Bryant, 2005 WL 1625319, at 2 (in suit by Mississippi beneficiaries of estate claiming that the defendant, an Illinois attorney, failed to execute their decedent's wishes with regard to moving to Mississippi and with regard to a codicil to her will, court concluded that the actual injury occurred in Illinois and only the consequences thereof reached Mississippi); First Trust Nat. Assoc. v. Jones, Walker, Waechter, Poitevent, Carrere & Denegre, 996 F.Supp. 585, 588 (S.D.Miss.1998) (finding no injury in Mississippi, but at best consequences of injury, where Minnesota financial institution sued Louisiana law firm for a legal opinion it provided at the request of a New York investment bank to the bank's Texas office regarding the validity and priority of a lien on collateral located in Mississippi).

Here, however, plaintiffs allege the actual invasion of their legal right occurred in Mississippi when they were induced to invest in the trust in reliance on the opinion letter directed by Williams Coulson/Lloyd to them in Mississippi. Jurisdiction may therefore properly be asserted under the long-arm statute.³

The question thus becomes whether the exercise of jurisdiction comports with due process. "Under the Due Process clause, a court can constitutionally exercise personal jurisdiction over a defendant if the defendant has `minimum contacts' with the forum state, and the exercise of jurisdiction does not `offend traditional notions of fair play and substantial justice.'" Bryant, 2005 WL 1625319, at 2 (quoting International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945)).

"Under the `minimum contacts' analysis, personal jurisdiction can be either general or specific." Id. Where a nonresident defendant has engaged in "substantial, continuous and systematic" activities within the forum state, general jurisdiction exists, and permits the courts of the forum state to exercise jurisdiction over any cause of action, even if unrelated to the defendants' activities in Mississippi. Id. In contrast, specific personal jurisdiction over a defendant, which is what is at issue here, "exists where the defendant's contacts with the forum state arise from, or are directly related to, the cause of action." Id. It is jurisdiction "for a particular cause of action." Id....