InFrasys, Inc. v. Bros. Pavement Prods., Corp. , 2020 Ohio 1157 ( 2020 )

[Cite as InFrasys, Inc. v. Bros. Pavement Prods., Corp., 2020-Ohio-1157.]
IN THE COURT OF APPEALS OF OHIO
SIXTH APPELLATE DISTRICT
ERIE COUNTY
InFrasys, Inc., et al. Court of Appeals No. E-19-047
Appellants Trial Court No. 2018 CV 0332
v.
Brothers Pavement Products,
Corp., et al. DECISION AND JUDGMENT
Appellees Decided: March 27, 2020
*****
James L. Murray, Dennis E. Murray, Jr. and William H. Bartle,
for appellants.
James W. Hart and Mark P. Smith, for appellees.
*****
ZMUDA, P.J.
{¶ 1} This matter is before the court on appeal from the judgment of the Erie
County Court of Common Pleas, granting the motion to dismiss for lack of personal
jurisdiction of appellees Walsh & Hughes, Inc., dba VelveTop Products, Inc. and John B.
Walsh.
I. Facts and Procedural Background
{¶ 2} Appellants, InFrasys, Inc. and ThorWorks Industries, Inc. are related
Minnesota corporations, with their principal place of business in Erie County, Ohio.
ThorWorks owns the SealMaster brand, and manufactures and sells seal coating products
and equipment to SealMaster system franchises. InFrasys oversees and supports the
franchise owners, and protects the SealMaster brand. InFrasys is the franchisor for the
SealMaster system.
{¶ 3} Walsh & Hughes, Inc. dba VelveTop Products, Inc. (“VelveTop”) is a New
York corporation, with John B. Walsh as the president and owner. Brothers Pavement
Products, Corp. (Brothers) is a New York corporation doing business with VelveTop.
John K. Walsh and James K. Walsh are the owners/operators of Brothers. John B. Walsh
is the father of John K. and James K. Walsh.
{¶ 4} The facts alleged by appellants regarding appellees, relative to the issue of
personal jurisdiction, are as follows.
{¶ 5} In July 2007, John B. Walsh traveled to Ohio to negotiate VelveTop’s sale
of SealMaster products to the Long Island, New York area. John B. Walsh followed up
by phone to InFrasys in Ohio to continue negotiations, and responded to correspondence
from InFrasys on behalf of his sons and their company, Brothers. The franchise
2.
negotiations resulted in the Supplier Agreement between VelveTop and Brothers, and a
Franchise Agreement between InFrasys and Brothers.
{¶ 6} On April 11, 2008, appellee VelveTop entered into a Supplier Agreement
with Brothers. The agreement concerned the production and supply of SealMaster
products to VelveTop, requiring VelveTop to cease manufacture of its sealers pursuant to
a contractual phase-in of purchasing SealMaster products from Brothers, with 100
percent of seal coat products purchased from Brothers within three years, and 100 percent
of asphalt emulsion sealer purchased from Brothers commencing the first day Brothers
began manufacture of the sealants. The Supplier Agreement also expressly referenced
the InFrasys franchise as follows:
4. Notwithstanding the terms and conditions of this agreement, it is
the understanding between the respective parties that all other terms and
conditions which would apply to market conditions, such as pricing,
supply, need, etc. will apply and that this agreement is entered into based
on the familial relationship between the principals of the parties to this
agreement and as an inducement for INFRAYSIS [sic], INC. to grant its
franchise to BROTHERS PAVEMENT PRODUCTS CORP.
(Emphasis added.)
{¶ 7} InFrasys and Brothers executed the InFrasys, Inc. Franchise Agreement on
June 11, 2008. The franchise agreement recited a term of ten years, and granted Brothers
the right to a SealMaster sales and distribution business, with additional permission to
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manufacture pavement sealers marketed with the SealMaster brand. The franchise was
exclusive within Brother’s New York territory. Pursuant to the Franchise agreement,
InFrasys permitted Brother’s use of all SealMaster proprietary marks and copyrighted
materials, and shared the InFrasys confidential operations manual and other confidential
information, including processes, systems, and product specifications.
{¶ 8} The Franchise agreement expressly referenced VelveTop in Paragraph
XVI.H. as follows:
H. Special Provisions Regarding VelveTop Products, Inc. Anything
in this Paragraph XVI. to the contrary notwithstanding, Franchisor,
Franchisee and the individual shareholders of Franchisee (the “Individual
Shareholders”) who are executing this Agreement (who are also deemed to
be “Franchisees” by virtue of Paragraph XVI.B) hereby agree as follows:
1. Franchisor acknowledges that John B. Walsh (“John Sr.”) is the
father of the Individual Shareholders and that he owns and operates a
business by the name of VelveTop Products, Inc. (“VelveTop”), which will
be in direct competition with the franchised Business after commencement
of the terms of this Agreement.
2. Franchisor agrees that VelveTop and John Sr. may continue their
current business under the terms of a Supplier Agreement with Franchisee,
4.
a copy of which is attached as Exhibit C.1 The Supplier Agreement shall
continue in force between the parties thereto through the term of this
Agreement and may not be amended without prior consent of Franchisor.
Franchisor further agrees that the Supplier Agreement may be assigned at
the time of any sale of VelveTop. As referenced in the Supplier
Agreement, Franchisor defines DECO SURFACING PRODUCTS to be
any product in direct competition with the Franchisor’s SportMaster brand.
{¶ 9} The Franchise Agreement contained a choice of law and venue clause,
requiring Ohio law and jurisdiction in Erie County, Ohio, with a waiver of personal
jurisdiction in Paragraph XXIX.B. Both John K. and James K. Walsh executed the
Agreement on behalf of Brothers.
{¶ 10} On February 6, 2018, appellants terminated the franchise of Brothers
alleging numerous breaches of the Franchise Agreement, including the failure to enforce
the terms of the Supplier Agreement between VelveTop and Brothers. On June 14, 2018,
appellants filed a complaint in Erie County Common Pleas Court, alleging breach of the
Franchise Agreement and Supplier Agreement, and seeking monetary and injunctive
relief. As to VelveTop and John B. Walsh, appellants alleged tortious interference with a
business/contractual relationship, and claimed VelveTop failed to comply with the
1
Exhibit A delineated the geographical territory for the franchise of Brothers, and Exhibit
B contained personal guaranties and assumptions of obligations by John K. and James K.
Walsh, each owning 50 percent in Brothers.
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phase-in periods in the Supplier Agreement and continued to manufacture its own sealers.
Appellants further alleged that Brothers sold “ingredients” for this unauthorized
manufacture rather than the finished product.
{¶ 11} Appellants alleged that ThorWorks is an intended third-party beneficiary of
the Franchise Agreement and Supplier Agreement, and InFrasys is an intended third-
party beneficiary of the Supplier Agreement.
{¶ 12} After extensions, discovery disputes, and limited discovery regarding the
issue of jurisdiction, VelveTop and John B. Walsh filed a motion to dismiss, alleging lack
of personal jurisdiction. InFrasys and ThorWorks opposed dismissal. They alleged John
B. Walsh controlled the negotiations for both VelveTop and his sons’ company, Brothers,
traveled to Ohio for initial negotiations, called InFrasys in Ohio for continued
negotiations, and sent his VelveTop trucks to ThorWorks in Sandusky, Ohio, to pick up
SealMaster materials and products.
{¶ 13} While apparently acknowledging John B. Walsh’s participation in
negotiations and his visit to Sandusky in 2007, appellees argued that they never had an
intention to enter into any agreement with appellants, and lacked the necessary contact
with the forum state to permit an exercise of personal jurisdiction.
{¶ 14} The trial court determined the motion based on the memoranda, affidavits
and deposition transcripts submitted in support.2 The trial court noted the applicable
2
The record on appeal does not include the deposition transcripts.
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standard in ruling without hearing, that appellants need only make “a prima facie
showing of jurisdiction” to survive the motion to dismiss. In applying the standard under
R.C. 2307.382 and Civ.R. 4.3(A)(1), the trial court determined that appellants satisfied
the first prong of the Goldstein test, finding an exercise of personal jurisdiction proper
under the long-arm statute and applicable civil rule based on Goldstein v. Christianson,
70 Ohio St.3d 232, 235-236, 638 N.E.2d 541 (1994). As to the second prong, however,
in applying the three-part test for due process, the trial court found that VelveTop and
John B. Walsh had the required minimum contacts and caused injury within the forum
state. The court determined, however, that the exercise of personal jurisdiction would be
unreasonable and deprive VelveTop and John B. Walsh of due process.
{¶ 15} As to this third factor of the due process analysis, the trial court found the
lack of evidence regarding frequency of travel to the ThorWorks site by VelveTop trucks
weighed against personal jurisdiction. The trial court, furthermore, noted that VelveTop
and John B. Walsh executed the Supplier Agreement two months prior to execution of
the Franchise Agreement, and made no mention of any connection between the two
agreements, as alleged by appellants.
{¶ 16} The trial court granted dismissal of VelveTop and John B. Walsh for want
of personal jurisdiction, and entered a finding of no just cause for delay. In a subsequent
“Nunc Pro Tunc” entry, the trial court sua sponte revised its judgment, striking the final
appealable language from the dismissal judgment entry. After appellants moved to
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reinsert the final appealable language, the trial court did so, finding the dismissal
judgment entry to be final and appealable once more.
II. Assignments of Error
{¶ 17} InFrasys and ThorWorks now appeal the dismissal, asserting the following
assignments of error:
1. The Trial Court Erred in Granting Defendants, Walsh & Hughes,
Inc., dba VelveTop Products, Inc. and John B. Walsh’s Motion to Dismiss
Plaintiffs’ Complaint for Lack of Personal Jurisdiction.
2. The Trial Court Erred in Removing, Via its 8-13-2019 Nunc Pro
Tunc Judgment Entry, the Civil Rule 54(B) Certification Included in its
Initial Judgment Entry of 8-7-2019. The 8-7-2019 Judgment Entry
Granting Defendants, Walsh & Hughes, Inc. and John B. Walsh’s Motion
to Dismiss for Lack of Personal Jurisdiction Was and Remains a Final
Appealable Order.
III. Analysis
{¶ 18} Because the parties dispute whether the trial court’s judgment entry of
dismissal constituted a final appealable order, we address appellants’ second assignment
of error first, as a threshold matter.3
3
Appellees did not seek to dismiss this appeal for want of a final appealable order.
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A. Final Order
{¶ 19} In dismissing VelveTop and John B. Walsh as defendants for want of
personal jurisdiction, the trial court initially included Civ.R. 54(B) language in the
judgment entry, finding no just cause for delay. The Rule permits appeal of an otherwise
interlocutory order pertaining to only some of the parties, if the judgment determines the
action as to those parties and includes the determination that there is “no just reason for
delay.” See Civ.R. 54(B) (“* * * [T]he court may enter final judgment as to one or more
but fewer than all of the claims or parties only upon an express determination that there is
no just reason for delay.”).
{¶ 20} Days later, the trial court ordered, sua sponte, the Civ.R. 54(B) language
stricken from the judgment of dismissal through a nunc pro tunc entry. As an initial
matter, we note that a nunc pro tunc entry is properly used to correct a judgment entry so
that it reflects the action actually taken by the court, and not to amend an entry to effect
substantive change. As the Ohio Supreme Court noted in State ex rel. Rogers v. Rankin,
154 Ohio St. 23, 26, 93 N.E.2d 281(1950):
“It is elementary that courts possess inherent common-law power to
enter judgments or orders nunc pro tunc in proper cases. The phrase
meaning simply ‘now for then’ is accurately descriptive. The general
purpose of such an entry is to record a prior but unrecorded act of the court.
In other words, the power to make nunc pro tunc entries is restricted
ordinarily to the subsequent recording of judicial action previously and
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actually taken. It is a simple device by which a court may make its journal
speak the truth.” (Citation omitted.)
The clerical purpose of a nunc pro tunc entry means a court may not amend a final
judgment, nunc pro tunc, to deprive the parties of “any rights which the previous order
had accorded * * * nor make that order any less final * * *.” Green v. Ken’s Flower
Shops, 6th Dist. Lucas No. L 94-088, 1994 WL 620732, *1-2 (Nov. 10, 1994), quoting
Huntington National Bank, v. Hebeka, 6th Dist. Lucas Nos. L 90-318 and L 90-360, 1992
WL 323945 (Jan. 4, 1991); Perfec. Stove Co. v. Sherber, 120 Ohio St. 445, 448, 166 N.E.
376 (1929).
{¶ 21} Here, the trial court attempted to substitute a new and different action,
striking the original finding of “no just cause for delay.” There appears no record,
furthermore, supporting appellees’ argument that the trial court intended the judgment to
be merely interlocutory from the outset. The record, instead, demonstrates a judgment
containing Civ.R. 54(B) language, and an attempt to substantively change the judgment
through a nunc pro tunc entry, only to be amended once more in a third entry. The
change, accordingly, sought to reverse an action taking in the final judgment, with no
record to support a finding that the nunc pro tunc entry merely recorded an action already
taken. Therefore, the trial court could not convert its final appealable order by nunc pro
tunc entry.
{¶ 22} The trial court, furthermore, had no jurisdiction to modify the final
appealable order sua sponte. Generally, a trial court lacks authority to vacate or modify a
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final judgment, sua sponte, without a written motion under Civ.R. 60(B) seeking relief
from judgment. (Citation omitted.) Midwest Environmental Controls, Inc. v. Houttekier,
6th Dist. Lucas No. L-04-1118, 2004-Ohio-5999, ¶ 3; see also Maxwell v. Univ. Hosps.
Health Sys., Inc., 8th Dist. Cuyahoga No. 104100, 2016-Ohio-7401, ¶ 5, citing Allstate
Ins. Co. v. Witta, 9th Dist. Summit No. 25738, 2011-Ohio-6068, ¶ 19, citing Pitts v. Ohio
Dept. of Transp., 67 Ohio St.2d 378, 380, 423 N.E.2d 1105 (1981) (“A trial court may
only relieve a party from judgment by the mechanisms provided by the Ohio Rules of
Civil Procedure.”). The trial court, therefore, erred in attempting to modify the final
judgment entered as to VelveTop and John B. Walsh without a proper written motion,
and its subsequent judgment entries were a nullity.4
{¶ 23} Finally, we note that a dismissal for lack of personal jurisdiction has been
determined as appropriate for appeal where the judgment prevents a refiling in the trial
court. In Natl. City Commercial Capital Corp. v. AAAA At Your Serv., Inc., 114 Ohio
St.3d 82, 868 N.E.2d 663, 2007-Ohio-2942, ¶ 10, the Ohio Supreme Court considered
whether dismissal for lack of personal jurisdiction constituted a final appealable order. In
that case, the court noted that parties challenging the assertion of personal jurisdiction
may appeal the judgment. Id., citing Goldstein, 70 Ohio St.3d at 235, 638 N.E.2d 541,
citing State ex rel. Bradford v. Trumbull Cty. Court, 64 Ohio St.3d 502, 597 N.E.2d 1164
While no party argues the trial court lacked authority to enter a third judgment entry,
restoring the language of the first, the initial entry constituted a final appealable order,
and therefore any subsequent action, entered without a motion under rule permitting
modification, was without authority and a nullity.
11.
(1992) and State ex rel. Pearson v. Moore, 48 Ohio St.3d 37, 548 N.E.2d 945 (1990). A
party challenging the opposite result, therefore, should also have the ability to appeal. In
Natl. City, the dismissal prevented a refiling in the trial court, despite indicating it was
without prejudice. In that case, the Supreme Court held, “[i]t is not logical to allow a
party that believes a court wrongly asserted jurisdiction to appeal but to prevent a party
that believes a court wrongly did not assert jurisdiction from appealing.” Natl. City at
¶ 10.
{¶ 24} In this case, appellants assert exclusive jurisdiction in Erie County, Ohio,
as to all defendants, pursuant to the Franchise Agreement, which purportedly
incorporates the Supplier Agreement. The trial court’s ruling, finding no personal
jurisdiction over appellees, prevents a refiling in that court. Therefore, considering the
trial court’s determination of a final appealable order under circumstances that prevented
refiling in the trial court, we find appellants’ second assignment of error well-taken, and
find this matter is properly before us on appeal.
B. Personal Jurisdiction
{¶ 25} In their first assignment of error, appellants argue the trial court erred in
finding it lacked personal jurisdiction over appellees. Appellants alleged personal
jurisdiction based on contacts with the forum state, and in the alternative, based on a
consent to jurisdiction within the Franchise Agreement.
{¶ 26} As to appellants’ claim of consent to jurisdiction pursuant to the Franchise
Agreement, we note appellants rely—in part—on argument going to the merits of their
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third-party beneficiary claims. Appellants seek to enforce the forum selection clause of
the Franchise Agreement against VelveTop and John B. Walsh as non-signatories who
benefited from the arrangement.5 The issue before us is personal jurisdiction, and
because our determination of minimal contacts and due process is dispositive, we do not
reach the merits of appellants’ claims.
{¶ 27} When a nonresident defendant seeks dismissal pursuant to Civ.R. 12(B)(2),
the plaintiff bears the burden of demonstrating proper jurisdiction. Ashton Park Apts.,
Ltd. v. Carlton-Naumann Constr., Inc., 6th Dist. Lucas No. L-08-1395, 2009-Ohio-6335,
¶ 12, citing Jurko v. Jobs Europe Agency, 43 Ohio App.2d 79, 334 N.E.2d 478 (8th
Dist.1974). “Personal jurisdiction is a question of law that appellate courts review de
novo.” Kauffman Racing Equip., LLC v. Roberts, 126 Ohio St.3d 81, 2010-Ohio-2551,
930 N.E.2d 784, ¶ 27.
5
Appellants rely on Villanueva v. Barcroft, 822 F. Supp.2d 726 (N.D.Ohio 2011), where
a non-signatory sought to enforce a forum selection clause against a signatory party. The
facts in the present case are distinguishable, and more aligned with the facts in the Third
Circuit Court of Appeals case of E.I. DuPont de Nemours and Co. v. Rhone Poulenc
Fiber and Resin Interm., S.A.S., 269 F.3d 187 (3d Cir.2001). In E.I. DuPont, the Third
Circuit noted that a non-signatory could be bound to a forum selection clause under
contract principles governing third-party beneficiaries to the underlying agreement.
Citing Coastal Steel Corp. v. Tilghman Wheelabrator Ltd., 709 F.2d 190, 202-204 (3d
Cir.1983), overruled on other grounds by Lauro Lines v. Chasser, 490 U.S. 495, 109
S.Ct. 1976, 104 L.Ed.2d 548 (1989).
13.
{¶ 28} Where the trial court determines the matter without an evidentiary hearing,6
appellants need only make a prima facie showing of jurisdiction. Kauffman at ¶ 27,
citing Fallang v. Hickey, 40 Ohio St.3d 106, 107, 532 N.E.2d 117 (1988). A prima facie
showing of personal jurisdiction requires “sufficient evidence to allow reasonable minds
to conclude that personal jurisdiction exists over the defendant.” Figley v. Ivex
Protective Packaging, Inc., 2016-Ohio-3501, 70 N.E.3d 12 (3d Dist.), quoting Parshall v.
PAID, Inc., 10th Dist. Franklin No. 07AP-1019, 2008-Ohio-3171, ¶ 9, citing Goldstein v.
Christiansen, 70 Ohio St.3d 232, 236, 638 N.E.2d 541 (1984) (additional citation
omitted.). We “view allegations in the pleadings and the documentary evidence in a light
most favorable” to appellants and resolve “all reasonable competing inferences” in
appellants’ favor in making the determination. Kauffman at ¶ 27, citing Goldstein at 236.
{¶ 29} Courts apply a two-step analysis in determining the proper exercise of
personal jurisdiction over a nonresident defendant, with the second prong requiring
consideration of three factors. This analysis requires determination of “(1) whether the
long-arm statute and the applicable rule of civil procedure confer jurisdiction and, if so,
6
Unlike a Civ.R. 12(B)(6) motion, which limits review to the pleading, a court may
consider outside evidence in determining its own jurisdiction, and may also hold an
evidentiary hearing. See, e.g., Jurko v. Jobs Europe Agency, 43 Ohio App.2d 79, 85, 334
N.E.2d 478, 482 (8th Dist.1975) (“When a court considers a challenge to its jurisdiction
over a defendant-a defense which may require the taking of extensive evidence-the court
may hear the matter on affidavits, deposition, interrogatories, or receive oral testimony,
as matters of jurisdiction are very often not apparent on the face of the summons or
complaint.”).
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(2) whether the exercise of jurisdiction would deprive the nonresident defendant of the
right to due process of law under the Fourteenth Amendment to the United States
Constitution.” Kauffman at ¶ 28, citing U.S. Sprint Comm. Co. Ltd. Ptnshp. v. Mr. K’s
Foods, Inc., 68 Ohio St.3d 181, 183-184, 624 N.E.2d 1048 (1994). Here, the trial court
found the first prong satisfied, and the first two factors under the second prong met, but
ultimately determined that exercise of personal jurisdiction offended due process under
the final factor of the due process analysis. For the reasons that follow, we disagree with
the trial court’s conclusion.
1. Jurisdiction Pursuant to Statute or Rule
{¶ 30} Ohio’s long-arm statute, R.C. 2307.382 enumerates conduct that will
permit a court’s exercise of personal jurisdiction, including:
(A)(1) Transacting any business in this state;
***
(A)(4) Causing tortious injury in this state by an act or omission
outside this state if he regularly does or solicits business, or engages in any
other persistent course of conduct, or derives substantial revenue from
goods used or consumed or services rendered in this state;
***
(A)(6) Causing tortious injury in this state to any person by an act
outside this state committed with the purpose of injuring persons, when he
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might reasonably have expected that some person would be injured thereby
in this state[.]
Civ.R. 4.3(A), likewise, permits service of process on nonresidents who have “caused an
event to occur out of which the claim that is the subject of the complaint arose” based on
“(1) Transacting any business in this state[.]” Civ.R. 4.3(A)(1).
{¶ 31} The “transacting any business” standard is “a broad statement of
jurisdiction[.]” U.S. Sprint Communications Co. Ltd. Partnership v. Mr. K’s Foods, Inc.,
68 Ohio St.3d 181, 185, 624 N.E.2d 1048 (1994), citing R.C. 2307.382(A)(1).
“Transact,” means “to prosecute negotiations; carry on business; to have dealings * * *.
The word embraces in its meaning the carrying on or prosecution of business negotiations
but it is a broader term than the word ‘contract’ and may involve business negotiations
which have been either wholly or partly brought to a conclusion * * *.” Kentucky Oaks
Mall Co. v. Mitchell’s Formal Wear, Inc., 53 Ohio St.3d 73, 75, 559 N.E.2d 477 (1990),
quoting Black’s Law Dictionary, 1341 (5 Ed.1979).
{¶ 32} Appellants referenced documentary evidence to support their allegations,
which are as follows. John B. Walsh initiated the contact with the forum state by
traveling to Sandusky Ohio in 2007 to inquire about VelveTop becoming a SealMaster
franchise. John B. Walsh followed up this contact with phone calls, leading negotiations
in order to facilitate a Brothers’ franchise, as an alternative to VelveTop obtaining the
franchise. John B. Walsh executed the Supplier Agreement with Brothers on behalf of
VelveTop, and that agreement expressly stated its purpose was to induce InFrasys to
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grant the franchise to his sons, and their company, Brothers. John B. Walsh also sent
VelveTop trucks to Ohio on numerous occasions each year, to pick up materials and
goods from ThorWorks. Additionally, after InFrasys and ThorWorks raised concerns of
a potential breach of the Supplier Agreement, John B. Walsh attended a meeting in
Sandusky regarding the issue, and John B. Walsh spoke on behalf of his sons and
Brothers. Based on these allegations, reasonable minds could conclude that appellants
satisfied their burden of establishing a prima facie showing of personal jurisdiction over
appellees, in conformity with R.C. 2307.384 and Civ.R. 4.3.
2. Due Process
{¶ 33} Once we determine that appellants satisfied both the Ohio long-arm statute
and rule, we must consider whether the exercise of personal jurisdiction comports with
due process. Although the long-arm statute permits exercise of personal jurisdiction, an
Ohio court may only do so if the exercise of jurisdiction would not violate constitutional
rights to due process. Kauffman, 126 Ohio St.3d 81, 2010-Ohio-2551, 930 N.E.2d 784, at
¶ 45.
{¶ 34} “[D]ue process is satisfied if the defendant has ‘minimum contacts’ with
the forum state such that the maintenance of the suit does not offend ‘traditional notions
of fair play and substantial justice.’” Kauffman at ¶ 45, quoting Internatl. Shoe Co. v.
Washington, 325 U.S. 310, 316, 66 S.Ct.154, 90 L.Ed.95 (1945) (additional citation
omitted.). Where a defendant “purposefully avails” themself “of the privilege of
conducting activities within the forum state,” the minimum-contacts requirement is
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deemed to be met. Kauffman at ¶ 45, quoting Hanson v. Denckla, 357 U.S. 235, 253, 78
S.Ct. 1228, 2 L.Ed.2d 1283 (1968).
{¶ 35} We apply a three-part test to determine whether a defendant has the
minimum contacts necessary for exercise of personal jurisdiction and necessary to satisfy
due process. Henderson v. SMC Productions, Inc., 6th Dist. Erie No. E-18-003, 2019-
Ohio-5275, ¶ 64. To demonstrate the necessary contacts, appellants must demonstrate
that (1) appellees “purposefully availed” themselves of the privilege of acting in Ohio or
causing a consequence in Ohio; (2) the cause of action must arise from appellees’
activities in Ohio, and (3) the appellees’ acts or consequences must have a substantial
enough connection with Ohio to make exercise of jurisdiction reasonable. Henderson
at ¶ 64, citing Ohlman Farm & Greenhouse, Inc. v. Kanakry, 6th Dist. Lucas No.
L-13-1264, 2014-Ohio-4731, ¶ 26; see also Kauffman at ¶ 48-49, quoting Southern
Machine Company v. Mohasco Ind., Inc., 401 F.2d 374, 381 (6th Cir.1968); Bird v.
Parsons, 289 F.3d 865, 874 (6th Cir.1989).
a. Purposeful Availment
{¶ 36} To demonstrate “purposeful availment,” appellants must show that
appellees’ contact proximately resulted from appellees’ own conduct that created a
“substantial connection” with Ohio. Kauffman at ¶ 51, citing Burger King Corp. v.
Rudzewicz, 471 U.S. 462, 475, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985) (additional citation
omitted.). A substantial connection is required to ensure “that a defendant will not be
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haled into a jurisdiction solely as a result of ‘random,’ ‘fortuitous,’ or ‘attenuated’
contacts.” Kauffman at ¶ 51, citing Burger King at 474-475.
{¶ 37} Here, appellants made a prima facie showing as to the first factor of the
test. Appellants presented evidence, demonstrating VelveTop, through John B. Walsh,
first sought an Ohio-based SealMaster franchise opportunity for VelveTop. He later
negotiated the franchise on behalf of Brothers, and as inducement for InFrasys to grant
the franchise to Brothers, VelveTop and Brothers entered into a Supplier Agreement.
VelveTop benefited from the combined deal by gaining access to the SealMaster catalog
and brand, pursuant to the terms of the Supplier Agreement. Negotiations took place in
Ohio, and VelveTop traveled to Ohio three or four times each year to pick up product
from ThorWorks. After InFrasys determined that breach of the Supplier Agreement and
Franchise Agreement had occurred, resulting in diminished royalties under the Franchise
Agreement, John B. Walsh traveled to Ohio to discuss the breach of the agreements.
Considering the allegations, with supporting evidence as to the factor used in determining
prima facie support for personal jurisdiction, we find appellants satisfied the first factor.
b. Harm Caused in the Forum State
{¶ 38} As to the second part of the test, appellants must show that the cause of
action arose, in Ohio, as a result of appellees’ activities. “If a defendant’s contacts with
the forum state are related to the operative facts of the controversy, then an action will be
deemed to have arisen from those contacts.” Kauffman at ¶ 70, quoting CompuServe, Inc.
v. Patterson, 89 F.3d 1257, 1267 (6th Cir.1996). Only a “relation” is necessary, as the
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test “does not require that the cause of action formally ‘arise from’ defendant’s contacts
with the forum; rather, this criterion requires only ‘that the cause of action, of whatever
type, have a substantial connection with the defendant’s in-state activities.’” Kauffman at
¶ 70, quoting Third Natl. Bank in Nashville v. WEDGE Group, Inc., 882 F.2d 1087, 1091
(6th Cir.1989), quoting S. Machine Co., 401 F.2d at 384, fn. 27.
{¶ 39} Here, appellants alleged that the conduct of VelveTop and John B. Walsh,
in failing to honor the Supplier Agreement, caused damages to their business in Erie
County, Ohio. Specifically, appellants alleged that VelveTop failed to purchase
SealMaster finished products and equipment from Brothers, depriving InFrasys of
royalties, fees, and income due under the Franchise Agreement, and depriving
ThorWorks of revenue and profits from the sale of these products. Additionally, as to
VelveTop and John B. Walsh, appellants alleged a claim for interference with the
business relationship with Brothers by refusing to honor the Supplier Agreement.
Appellants supported their allegations with affidavit testimony, describing violations of
the Supplier Agreement and John B. Walsh’s admission of violations. Considering the
allegations, with supporting evidence as to the factor used in determining prima facie
support for personal jurisdiction, we find appellants satisfied the second factor.
c. Inference of Reasonableness
{¶ 40} Once a plaintiff satisfies the first two parts of the test by demonstrating a
prima facie case, “‘then an inference arises that this third factor is also present.’”
Kauffman at ¶ 71, quoting CompuServe, Inc., 89 F.3d at 1268, citing Am. Greetings Corp.
20.
v. Cohn, 839 F.2d 1164, 1170 (6th Cir.1988). This inference applies in all but “the
unusual case.” Kauffman at ¶ 71, quoting Am. Greetings, 839 F.2d at 1170, quoting First
Natl. Bank of Louisville v. J.W. Brewer Tire Co., 680 F.2d 1123, 1126 (6th Cir.1982).
{¶ 41} The trial court determined appellants satisfied the first two factors, but not
the third, without any discussion of the inference pertaining to the third test. Moreover,
the trial court noted the “sporadic” visits to Ohio and lack of evidence on how frequent
VelveTop picked up materials each year, as well as the fact that VelveTop and John B.
Walsh were not signatories to the Franchise Agreement. Essentially, the trial court
addressed the third factor as a stand-alone requirement, lacking any benefit of an
inference arising from satisfaction of the first two prongs. The trial court elevated this
third factor by apparently requiring appellants to produce evidence of the frequency of
VelveTop’s presence in Ohio, a most stringent standard for proving the third factor
considering the applicable authority.
{¶ 42} Contrary to the trial court’s interpretation, the final inquiry regarding due
process is whether the claim has enough connection to Ohio to make exercise of
jurisdiction over appellees reasonable. Resolution of this test, considering the applicable
inference, “involves merely ferreting out the unusual cases where [Ohio’s interest in
resolving the dispute] cannot be found.” S. Machine Co., 401 F.2d at 384. The Ohio
General Assembly provides guidance in determining Ohio’s interest, as outlined in
Ohio’s long-arm statute, which provides for jurisdiction over those who transact business
in this state or cause tortious injury within this state. R.C. 2307.382(A)(1), (4), and (6).
21.
{¶ 43} Exercise of personal jurisdiction does not offend due process in this
instance. “A State generally has a ‘manifest interest’ in providing its residents with a
convenient forum for redressing injuries inflicted by out-of-state actors.” (Citations
omitted.) Burger King, 471 U.S. at 473, 105 S.Ct. 2174, 85 L.Ed.2d 528. In cases where
an out-of-state actor has purposefully acted and derived a benefit from their activities,
moreover, “it may well be unfair to allow them to escape having to account in other
States for consequences that arise proximately from such activities[.]” Burger King at
474, citing Kulko v. California Superior Court, 436 U.S. 84, 96, 98 S.Ct. 1690, 56
L.Ed.2d 132 (1978).
{¶ 44} Finally, the fact that contact may have been “sporadic” is not
determinative. “If it creates a ‘substantial connection’ to the forum state, a single
purposeful contact is enough to satisfy the requirements of due process.” (Citations
omitted.) Fallang v. Hickey, 40 Ohio St.3d 106, 108, 532 N.E.2d 117 (1988). In this
case, appellants claim injury to corporations located in Ohio, caused by appellees’
actions, and arising from appellees’ contacts with the forum state. Accordingly, exercise
of personal jurisdiction over appellees is reasonable, and the trial court erred in
determining otherwise. We find appellants’ first assignment of error well-taken.
22.
IV. Conclusion
{¶ 45} Having found the exercise of personal jurisdiction over appellees VelveTop
and John B. Walsh proper, we reverse the judgment of the Erie County Common Pleas
Court and remand the matter for further proceedings against all defendants. Appellees
are ordered to pay the costs of this appeal pursuant to App.R. 24.
Judgment reversed
and remanded.
A certified copy of this entry shall constitute the mandate pursuant to App.R. 27.
See also 6th Dist.Loc.App.R. 4.
Mark L. Pietrykowski, J. _______________________________
JUDGE
Thomas J. Osowik, J.
_______________________________
Gene A. Zmuda, P.J. JUDGE
CONCUR.
_______________________________
JUDGE
This decision is subject to further editing by the Supreme Court of
Ohio’s Reporter of Decisions. Parties interested in viewing the final reported
version are advised to visit the Ohio Supreme Court’s web site at:
http://www.supremecourt.ohio.gov/ROD/docs/.
23.