Federal District Court Addresses Personal Jurisdiction Over Partnership and Surviving Partner

Federal District Court Addresses Personal Jurisdiction Over Partnership and Surviving Partner

      In a decision rendered in July, the US District Court for the Western District of Kentucky (Judge McKinley) addressed whether Kentucky courts had personal jurisdiction over both the partnership organized in Indiana and the surviving partner in that partnership, an Indiana resident. It was concluded that jurisdiction existed over both. Childress Cattle, LLC v. Cain, Civ. Act. No. 3:17-CV-00388-JHM, 2017 WL 3446182 (W.D. Ky. July 10, 2017).

      R & C Cain Farms (“Cain Farms”), a partnership between Roger Cain and his spouse Christie Cain, was a multiyear customer of the plaintiff Childress Cattle, LLC (“Childress”). While, for some period of time, everybody fully performed under the arrangement, in the last quarter of 2015, Cain Farms ordered and received cattle having a value of $675,239.63. Cain Farms remitted payment of only $380,607.65, leaving an outstanding balance of $294,631.98. Demands for payment were unavailing, and repossession of the cattle was not possible because Cain had apparently already sold the stock. On a date not specified in the opinion, Roger Cain passed away, leaving Christie Cain as the surviving partner.

      After Childress filed this suit, the defendants filed a motion to dismiss based upon an alleged lack of personal jurisdiction as well as other bases including lack of subject matter jurisdiction, improper service of process and improper venue.

Personal Jurisdiction

     Sitting in diversity and, in consequence, applying Kentucky law, the court began by noting that “all allegations in the well-plead complaints [will be taken] as true.” On that basis the court determined that there had been a plausible showing that Cain Farms was a partnership between Roger and Christie Cain, and that Christie was not, as she alleged, simply Roger’s wife without being either a partner. In evidence thereof, it had already been shown that Christie signed checks on behalf of the partnership, fielded phone calls with respect to payment and “corresponded with Childress regarding payment in cattle after Roger’s death.”

     With respect to whether the court had personal jurisdiction over the partnership, it began by observing that “a partner’s actions may be imputed to the partnership for the purpose of establishing minimum contacts.” Then applying the Kentucky long arm statute, the inquiry was whether jurisdiction was both authorized and whether that jurisdiction comported with the Due Process clause. Caesar’s Riverboat Casino, LLC v. Beach, 336 S.W.3d 51 (Ky. 2011). It was found that the partnership had purposely availed itself of the privilege of doing business in Kentucky through a multiyear pattern of ordering cattle and making payment thereon, citing Air Prod. & Controls, Inc. v. Safetech International, Inc., 503 F.3d 544, 551 (6^th Cir. 2007) for the proposition that “where a defendant ‘has created continuing obligations between himself and the residents of the forum, he manifestly has availed himself of the privilege of conducting business there.’”

     Setting aside additional objections based upon Due Process principles, it was held that the burden on the defendants in coming to Kentucky to defend the failure to perform upon the contract entered into in Kentucky would not be burdensome, and that ultimately Indiana has less interest in the action than does Kentucky.

     Turning to personal jurisdiction over Christie Cain, jurisdiction was found based upon her having tendered performance on the contracts with Childress and participation in various phone calls:

Childress’ allegations and the undisputed facts illustrate that Christie Cain was involved in the ongoing relationship between Cain Farms prior to and after Roger Cain’s death. Because this relationship was a lengthy, continuous, and consistent business relationship, the Court finds Christie Cain transacted business within the Commonwealth.  The Court found as well that due process principles were not violated. The dispute arose out of the failure by Cain Farms to make payment on the contracts, and Christie Cain was in charge of that function.

Though a close question, the Court finds that Christie’s involvement does not offend the notions of fair play and substantial justice. It is fair to say that when one is responsible for and actually does perform and tender payment on several contracts with a supplier, and unseasonably halts payments without proffering an explanation, one would reasonably expect to be hauled into court into the forum where payment is due.

Subject Matter Jurisdiction

     Cain argued that principles of res judicata should preclude Childress’ suit because it could have been brought in the probate of Roger Cain’s estate. However, because of limitations imposed in probate proceedings, it was found that probate was not, in effect, a full and fair hearing that would be given preclusive effect.

Improper Service of Process

      Christie Cain alleged that the service of process of the complaint was invalid because Cain Farms is a sole proprietorship and she was not its agent. The court rejected this argument in reliance upon its prior determination that, for purposes of this motion, Cain Farms was a partnership. In that Christie Cain was a partner in that partnership, service upon her was sufficient.

Improper Venue

       Describing the suit as one between citizens of Kentucky and citizens of Indiana, an allegation that the suit should be dismissed on the basis of forum non convenience was rejected.