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LP Solutions LLC v. Duchossois

United States District Court, D. Maine

April 11, 2018

CRAIG J. DUCHOSSOIS, Individually and as Co-Executor of the Estate of Richard Bruce Duchossois; RICHARD J. DUCHOSSOIS; KIMBERLY T. DUCHOSSOIS; DAYLE P. DUCHOSSOIS-FORTINO; and THOMAS A. SMITH, Co-Executor of the Estate of Richard Bruce Duchossois, Defendants



         The issue here is whether a federal court in Maine, with diversity jurisdiction, has specific personal jurisdiction over a family of mostly Illinois residents. Five members of that family-Richard L. Duchossois and his children Craig J. Duchossois, Kimberly T. Duchossois, Dayle P. Duchossois-Fortino, and Richard Bruce Duchossois[1]-signed contracts giving a Maine company the option to acquire their interests in an Illinois limited partnership involving Illinois real estate and the right to a portion of the cash distributions from the partnership in the meantime. The Maine company, LP Solutions, LLC (LPS), exercised its options in due course. When the Duchossoises stopped making payments allegedly due under the agreements, LPS sued them in Maine state court for breach of contract and unjust enrichment. Compl. ¶¶ 63-83 (ECF No. 5-2). The Duchossoises removed the case to federal court and moved to dismiss for lack of personal jurisdiction or, in the alternative, for a stay pending the results of a related lawsuit in Illinois state court between LPS and the Illinois partnership's General Partner. Notice of Removal (ECF No. 1); Defs.' Mot. 1-2 (ECF No. 6). After briefing and argument, I now Grant the defendants' motion and Dismiss the complaint, concluding on a prima facie record that the defendants have not purposefully availed themselves of Maine and thus that there is no specific personal jurisdiction over them here.


         Under the First Circuit's “prima facie review” standard for determining personal jurisdiction, I accept the specific facts that the plaintiff alleges so far as record evidence supports them. I also accept the facts that the defendants offer to the extent they are uncontradicted. Cossaboon v. Maine Med. Ctr., 600 F.3d 25, 31 (1st Cir. 2010). I construe the plaintiff's “properly documented evidentiary proffers . . . in the light most favorable to [its] jurisdictional claim.” A Corp. v. All American Plumbing, Inc., 812 F.3d 54, 58 (1st Cir. 2016).

         Four of the five defendants are domiciled in Illinois, and their agents[2] acted on their behalf from Illinois. Before he died in July of 2014, Richard Bruce Duchossois split his time between South Carolina and Florida, where his estate is now in probate. The defendants have no connections to Maine apart from this lawsuit and the events underlying it. Defs.' Mot. 2-3.

         Contract Formation

         In September of 2013, the defendants received form letters from the plaintiff soliciting the purchase of their interests in Elm Street Plaza Venture, an Illinois limited partnership (the Partnership). An agent of the plaintiff, William Gendron, followed up by phone with an agent of the defendants, Jennifer Hager, about the offer. Hager rejected the offer based on tax considerations. Gendron then told Hager about LPS's “Option Program, ” which he said would have attractive tax consequences for the defendants. Hager asked to see the agreements embodying the Option Program. A few days later Gendron emailed a draft of the Option Agreement to another Duchossois agent, Janet Czosek, along with a letter outlining the proposal. That proposal said the Option Program would allow the defendants to “lock [in]” the value of their partnership interests “at today's market value, receive a significant portion of the purchase price on a tax-deferred basis and avoid tax recapture.” Affordable Option Program, Hager Decl. Ex. D (ECF No. 6-8). Czosek forwarded these materials to Hager. Fully drafted versions of the Option Agreement arrived in Illinois by FedEx shortly thereafter, already signed by a representative of the plaintiff. Hager and Czosek emailed LPS that the terms of the Option Agreement were acceptable, collected signatures from the Duchossoises in Illinois and South Carolina, and, in early October, FedExed the executed agreements to the plaintiff in Maine. An LPS employee then emailed Hager and Czosek that the signed agreements lacked witness signatures. Hager and Czosek obtained new signature pages from the Duchossoises (presumably with witness signatures) and sent them to the plaintiff.[3] Defs.' Mot. 4-6; Czosek Decl. ¶¶ 10-21 (ECF No. 6-1); Hager Decl. ¶¶ 20-27 (ECF No. 6-4); Pl.'s Opp'n 3, 7 (ECF No. 7); Gendron Decl. ¶¶ 4-8 (ECF No. 7-13).

         Contract Terms

         The Option Agreements gave the plaintiff a twenty-year option to purchase each of the defendants' interests in the Partnership for a specified amount[4] (the plaintiff would also take on certain related tax liability incurred by a defendant for selling the interest during his or her lifetime). Option Agreement ¶ 2, Booth Decl. Ex. 2 (ECF No. 7-3).[5] The plaintiff agreed to pay 50% of the option price upon execution of the Option Agreement, followed by two additional installment payments of about 10% of the option price, to be paid annually, with the balance due upon exercise of the option. Id. ¶¶ 3, 5. In turn, prior to exercise, the defendants agreed to pay the plaintiff a portion of cash flow distributions from the Partnership equal to the proportion LPS had paid of the option price (e.g., if LPS had paid 50% of the option price, it would be entitled to 50% of normal distributions from the partnership). Id. ¶ 6. The defendants also agreed not to alienate or encumber their partnership interests and to vote their interests as directed by the plaintiff. Id. ¶ 4. The Agreements specify that communications to the plaintiff were to be sent to its address in Maine. Id. ¶ 9. They also contain a Maine choice-of-law provision. Id. ¶ 10.

         The defendants agreed that, upon the plaintiff's exercise of the options, they would transfer their partnership interests to the plaintiff for nominal consideration by executing the Assignment of Partnership Interest, attached to the Option Agreements as an exhibit. Id. ¶ 5. The Assignments purport to transfer completely the defendants' partnership interests to the plaintiff. Assignment of Partnership Interest ¶ 1, Ex. A. to Option Agreement, Booth Decl. Ex. 2 (ECF No. 7-3). Unlike the Option Agreements, the Assignments are governed by “the laws of the state where the Partnership is domiciled, ” which is Illinois. Id. ¶ 5.

         Performance, Exercise of Options, and Breach

         Once the Option Agreements were signed, LPS made the initial installment payments to the defendants in Illinois in October of 2013 by mailing checks to the children and wiring money to the father. Booth Decl. ¶ 10 (ECF No. 7-1); Booth Decl. Ex. 3 (ECF No. 7-4).

         In June 2014, the defendants paid the plaintiff a portion of cash distributions from the Partnership, as required by paragraph six of the Option Agreements. It did so by sending checks into Maine. Booth Decl. ¶ 25; Booth Decl. Ex. 8 (ECF No. 7-9).

         After Richard Bruce Duchossois died in July 2014, an agent notified the plaintiff by email.[6] The plaintiff then exercised its option on his interest and, in late August, sent the balance of the option price to Richard Bruce Duchossois's estate by check. The estate executed the Assignment and sent it to the plaintiff in Maine in early August. Booth Decl. ¶¶ 10, 17; Booth Decl. Ex. 4 (ECF No. 7-5); Defs.' Mot. 7; Hager Decl. ¶ 31.

         In October of 2014, LPS made the second round of installment payments to the other four defendants (again by mailing checks to the children and wiring money to the father). Booth Decl. ¶ 10; Booth Decl. Ex. 3.[7]

         On November 12, 2014, Hager on behalf of the Duchossoises emailed Gendron that “[w]e are anxious to speak to you about the tax consequences” of the Option Agreements. Booth Decl. Ex. 5 (ECF No. 7-6). Gendron understood this to mean that the defendants wanted the plaintiff to exercise its remaining options on the Family's interests. Gendron Decl. ¶ 14. Hager and Gendron spoke by phone on the 18th about this wish, and the parties corresponded back and forth into January about getting the Assignments signed. Gendron Decl. ¶¶ 14-18; Booth Decl. ¶¶ 19-22. The plaintiff exercised its Options effective as of December 2014. The plaintiff received Richard L. Duchossois's signed Assignment in December and scans of the remaining signed Assignments in January 2015. Booth Decl. ¶¶ 21-23. The plaintiff paid the balance on Richard L. Duchossois's interest by wire transfer on December 30, 2014, and on the remaining interests by check on February 3, 2015. Booth Decl. ¶ 10; Booth Decl. Ex. 3.

         In June of 2015 and May and June of 2016, the defendants sent their Partnership distributions by check to the plaintiff in Maine.[8] Booth Decl. ¶¶ 26-27. The parties engaged in routine correspondence regarding these payments. Booth Decl. Ex. 11 (ECF No. 7-12).

         The parties also collaborated on tax issues. Specifically, the plaintiff prepared and sent the defendants certain tax forms for tax years 2014 and 2015 to shift the defendants' Partnership tax liabilities to the plaintiff. Booth Decl. ¶¶ 31-32. The plaintiff says the defendants “solicited” it to prepare these forms, Pl.'s Opp'n at 10, a characterization that is arguably[9] supported by the record, at least as to the forms for tax year 2014. Booth Decl. ¶ 32; Booth Decl. Ex. 10 (ECF No. 7-11). (The Option Agreement and Assignment are silent on the parties' responsibilities for accomplishing the shift in tax burden.)

         In October of 2016, the Partnership experienced a “capital event” that led to combined distributions of over $1, 000, 000 to the defendants. The defendants have refused to turn over these distributions to the plaintiff despite its demands. Booth Decl. ¶¶ 33-34; Compl. ¶¶ 42-47.

         This is the factual record I use for the prima facie jurisdictional analysis.[10]


         1. Subject Matter Jurisdiction

         The defendants removed the case from Maine Superior Court on the basis of diversity jurisdiction. Notice of Removal ¶ 7 (citing 28 U.S.C. § 1332(a)(1)). The parties are diverse: the plaintiff is a citizen of Maine, while the defendants are citizens of other states. Id. ¶ 14.

         I conclude that the amount-in-controversy requirement is also satisfied. The defendants aggregate the value of the plaintiff's claims against each of them in their Notice of Removal to reach an amount in controversy of $1, 044, 490. Id. ¶ 15(c). But claims by a single plaintiff against multiple defendants cannot be aggregated to satisfy the amount in controversy requirement unless those defendants are jointly liable. 14AA Wright & Miller, Fed. Prac. & Proc. Juris. § 3704 n.15 (4th ed.) (collecting cases). Nevertheless I am satisfied that the amount claimed against each defendant individually satisfies the jurisdictional threshold. Compl. ¶¶ 43-44.

         2. Personal Jurisdiction

         When subject matter jurisdiction is based upon diversity of citizenship, a federal court asserts personal jurisdiction in accordance with the law of the forum (here, Maine) and the Fourteenth Amendment's due process clause. Sawtelle v. Farrell, 70 F.3d 1381, 1387 (1st Cir. 1995). The federal court becomes “the functional equivalent of a state court sitting in the forum state.” Baskin-Robbins Franchising LLC v. Alpenrose Dairy, Inc., 825 F.3d 28, 34 (1st Cir. 2016) (quoting Sawtelle, 70 F.3d at 1387). The Maine Law Court says that its statutory analysis tracks the due process clause. Murphy v. Keenan, 667 A.2d 591, 593 (Me. 1995) (“Maine's jurisdictional reach is coextensive with the due process clause of the United States Constitution.”). This leaves only the federal constitutional inquiry.[11] The plaintiff asserts specific, not general, jurisdiction.

         “The Due Process Clause of the Fourteenth Amendment requires that a defendant ‘have certain minimum contacts with [the forum state] such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.'” Baskin-Robbins, 825 F.3d at 35 (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). The First Circuit has said that the legal elements of minimum contacts analysis in specific jurisdiction cases are, in the conventional jargon, relatedness, purposeful availment, and reasonableness. Id. (citing C.W. Downer & Co. v. Bioriginal Food & Sci. Corp., 771 F.3d 59, 65 (1st Cir. 2014)). The plaintiff “ordinarily must shoulder the burden of proving personal jurisdiction over the defendant.” United States v. Swiss Am. Bank, Ltd. 191 F.3d 30, 40 (1st Cir. 1999).

         “Jurisdictionally speaking, each defendant must stand or fall based on its own contacts with the forum.” Phillips Exeter Acad. v. Howard Phillips Fund, Inc., 196 F.3d 284, 288 n.2 (1st Cir. 1999). Because all the defendants' contacts with Maine were accomplished through their agents, however, I analyze them all at once save, briefly, on one of the “Gestalt” reasonableness factors.

         Looming large over any analysis of personal jurisdiction in a contract case[12] like this one is the Supreme Court's seminal decision in Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985). The Court there rejected the notion that a “contract with an out-of-state party alone can automatically establish sufficient minimum contacts” in the plaintiff's home forum. Id. at 478.

Instead, we have emphasized the need for a “highly realistic” approach that recognizes that a “contract” is “ordinarily but an intermediate step serving to tie up prior business negotiations with future consequences which themselves are the real object of the business transaction.” It is these factors-prior negotiations and contemplated future consequences, along with the terms of the contract and the parties' actual course of dealing-that must be evaluated in determining whether the defendant purposefully established minimum contacts with the forum.

Id. at 479 (citations omitted). The First Circuit describes this as a “‘contract-plus' analysis.” United States v. Swiss Am. Bank, Ltd., 274 F.3d 610, 621 (1st Cir. 2001) (quoting Ganis Corp. of California v. Jackson, 822 F.2d 194, 197-98 (1st Cir. 1987). It applies to both relatedness and ...

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