As you probably know, we here at Suits by Suits have been fascinated by the strange case of Kirby Martensen, the former Oxbow Group executive who alleged that he was kidnapped and falsely imprisoned by billionaire William Koch. We teased for you last week that Koch’s motion to dismiss, to strike, and in the alternative to transfer venue of the case from California to Colorado was denied, and the case will proceed.
Now, we’ve gotten our hands on the judge’s decision and had a chance to review it in depth; particularly if you’re a civ pro geek like me, it’s worth a read. Even if you’re not, the decision helps any potential litigant -- and really, isn’t that all of us? -- understand where we can expect to sue or be sued. Read on....
First, a bit of background. The plaintiff, Kirby Martensen, lives in California. He has alleged that, after discovering a fraudulent scheme by Oxbow to evade paying taxes, Oxbow directed him and other top executives to attend a meeting at the Bear Ranch in Aspen, Colorado – a ranch owned and maintained by Oxbow, and the sole access to which is via a private road also owned and maintained by Oxbow. When Martensen arrived, he further alleged that Oxbow turned off phone and internet service at the Bear Ranch, hired two Colorado Sheriff deputies as “security agents,” and told him that “a sheriff is here to make sure you don’t wander off.” Martensen then alleges he was interrogated, stuffed into an SUV, driven several hundred miles to Denver, put on a private plane owned by Oxbow, and flown back to California – all without his consent and over his protests. Martensen then sued Koch in federal court in California.
In response, Koch moved to dismiss Martensen’s California complaint, or in the alternative, to transfer the case from California to Colorado. (Koch also (a) moved to dismiss Martensen’s § 1983 conspiracy claim, which was granted, but without prejudice and with leave for Martensen to amend, which we believe he will do; and (b) moved to strike Martensen’s allegations regarding punitive damages under Rule 12(f) of the Federal Rules of Civil Procedure, which was denied on the grounds that Rule 12(f) does not provide for that relief. Neither of these is relevant to the core dispute regarding personal jurisdiction that is the subject of this post.)
Essentially, Koch’s motion brings to the fore two concepts that are at the heart of many disputes, including those between employers and their employees. The first is the notion that the plaintiff “is master of her complaint” – that is, that, all things being equal, the person who was allegedly wronged (the plaintiff) has the right to bring a case wherever he or she sees fit, provided that the court is an appropriate forum to hear the dispute. And the second is the legal requirement that a court must have “personal jurisdiction” over a defendant; that prevents parties from the harassment and expense of being dragged into any random court anywhere in the country.
Typically, a court asserts personal jurisdiction over a defendant in one of three ways: when (1) the defendant resides in the state; (2) the defendant engages in continuous and systematic contact with the state; or (3) when the events giving rise to the claim occurred within the state and the defendant “purposefully avails” him- or herself of the jurisdiction.
If you’re not a lawyer, here’s what that means: Imagine that Mr. Able lives in Wyoming and Ms. Baker lives and works (like I do) in Maryland. Mr. Able is on vacation and skiing in Vermont. Ms. Baker is on a road trip, and is driving north along I-95 from Maryland to Maine. After driving along the eastern seaboard – through Delaware, Pennsylvania, New Jersey, New York, Connecticut, and Massachusetts – Ms. Baker then hits (the rather unlucky) Mr. Able in Vermont. Where could Ms. Baker legitimately expect to be sued?
In terms of personal jurisdiction, Ms. Baker could be sued in Maryland (where she lives and works), and Vermont (where the accident occurred). On these facts, however, she could not be sued in Mr. Able’s home state of Wyoming – even though that would obviously be far more convenient for Mr. Able – because Ms. Baker has no contact with Wyoming, and no reason to expect she could be dragged across the country into a court in Wyoming.
So how does this concept play out in the real-life dispute between Martensen and Koch? When Martensen sued Koch in California, Koch moved to dismiss on the grounds that he did not live, do business in, or commit the alleged wrong in California. In response, Martensen essentially advanced three arguments that the California courts nevertheless had personal jurisdiction over Koch and could therefore maintain his lawsuit. Let’s look at each one.
First, Martensen argued that Koch, as the owner and ultimate authority over a multi-billion-dollar corporation, Oxbow, should have all of Oxbow’s contacts imputed to him -- in other words, Koch should be treated as if every out-of-state contact by Oxbow is also a contact by Koch. Because Oxbow does lots of business in California and therefore could be sued there, Martensen argued that Koch could be sued in California as well. The Court rejected this argument, holding that a corporation’s contacts are imputed to its owner only when (1) the corporation is essentially the alter ego of the person or (2) the owner directly controlled and participated in the corporation’s activities. See Opinion at 6. Martensen did not even allege either of those two things.
Second, Martensen argued that Koch makes “periodic visits” to California and voluntarily filed a lawsuit in California in 2009. Id. at 6-7. The Court similarly rejected this argument; “periodic contacts” by definition do not equate to the “continuous and systematic general business contacts” that California law requires, and Courts are prohibited from considering the filing of an unrelated action in their jurisdictional analysis. Id. at 7.
Third, Martensen argued that the tort occurred in California and thus constituted specific jurisdiction; essentially, number (3) above. This may seem counter-intuitive; in our example, Ms. Baker hit Mr. Abel in Vermont, so it makes sense that specific personal jurisdiction vests in the Vermont courts. Here, the kidnapping, intimidation, and so forth are all alleged to have occurred in Colorado; one might ask how does that give rise to personal jurisdiction in California?
The answer is that the alleged false imprisonment continued – “unbroken,” in the Court’s words; see id. at 11 – until Martensen was released in Oakland, California; therefore, the wrong was committed in both states, and gives rise to personal jurisdiction in both.
Now, if you’re Mr. Koch, you might be tempted to argue that the majority of the alleged false imprisonment obviously occurred in Colorado, and thus, Colorado would be the better place to resolve this lawsuit. Indeed, Koch made precisely this argument, which is a question of venue rather than personal jurisdiction. Tomorrow, we’ll take a look at why the Court rejected it as well.