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 (6th
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.
