Beverly K. Oswald v. Tarek Shehadeh and Falon Vela

FILED
Aug 06 2018, 10:17 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEY FOR APPELLANT ATTORNEYS FOR APPELLEE:
Charles E. Oswald TAREK SHEHADEH
Harrison & Moberly, LLP Christopher J. Evans
Indianapolis, Indiana Shana D. Tesnar
Adler Tesnar & Whalin
Noblesville, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Beverly K. Oswald, August 6, 2018
Appellant-Plaintiff, Court of Appeals Case No.
29A02-1711-PL-2627
v. Appeal from the Hamilton
Superior Court
Tarek Shehadeh and The Honorable Steven R. Nation,
Falon Vela, Judge
Appellees-Defendants The Honorable David K. Najjar,
Magistrate
Trial Court Cause No.
29D01-1701-PL-211
Vaidik, Chief Judge.
Case Summary
[1] Beverly Oswald, an Indiana resident, sued Tarek Shehadeh and Falon Vela,
Arkansas residents, in Indiana for breach of contract. Shehadeh and Vela
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moved to have the suit dismissed for lack of personal jurisdiction. The trial
court agreed that Indiana lacked personal jurisdiction over the defendants and
dismissed the suit.1
[2] On appeal, Oswald contends that Shehadeh and Vela had sufficient minimum
contacts in Indiana to give Indiana specific personal jurisdiction over the
defendants and that exercise of personal jurisdiction over the defendants is
reasonable. Shehadeh argues that personal jurisdiction does not exist in
Indiana, and, even if he and Vela are subject to personal jurisdiction in Indiana,
the contract at issue contains a forum-selection clause requiring Oswald’s claim
to be heard in Arkansas.2 We agree with Oswald that Indiana can exercise
personal jurisdiction over Shehadeh and Vela and that it is reasonable for
Shehadeh and Vela to defend this matter in Indiana. Furthermore, the
language of the contract is not a forum-selection clause but rather a choice-of-
law provision requiring the trial court to apply Arkansas law. We reverse the
trial court’s order and remand for further proceedings.
1
The trial court’s order provides that the matter was dismissed under Indiana Trial Rule 12(B)(1)—lack of
subject-matter jurisdiction. Appellant’s App. Vol. II p. 6. However, on appeal, both Oswald and Shehadeh
state that the case was dismissed for lack of personal jurisdiction. Appellant’s Br. p. 11; Appellee’s Br. p. 9
n.1 (“Appellee is compelled to conclude that lack of subject matter jurisdiction was likely not the substantive
basis for the trial court’s dismissal of Appellant’s case below.”). Based on our review of the record, we agree
with the parties that the trial court’s order contains a typographical error and that the court intended to
dismiss this case under Indiana Trial Rule 12(B)(2)—lack of personal jurisdiction.
2
Vela was unrepresented during the trial-court proceedings and did not file a brief on appeal. In cases where
an appellee fails to submit a brief, we will not undertake the burden of developing arguments on her behalf.
Orlich v. Orlich, 859 N.E.2d 671, 673 (Ind. Ct. App. 2006). Instead, we “apply a less stringent standard of
review” and will reverse upon a showing of prima facie error, which is error “at first sight, on first
appearance, or on the face of it.” Id.
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Facts and Procedural History
[3] Oswald is the sole owner of Eville Louie, LLC, which owns and operates Bar
Louie restaurants and is headquartered in Indiana. In January 2010, Eville
Louie owned and operated two Bar Louie Restaurants in the Little Rock,
Arkansas area—Little Rock Louie, LLC, and North Rock Louie, LLC. One
month later, Oswald interviewed candidates for the general-manager position of
the Little Rock Louie restaurant. The interviews took place in Indiana, and
Shehadeh was one of the applicants interviewed. During his interview, he
expressed an interest in buying an ownership stake in Little Rock Louie and
North Rock Louie. At the time, Oswald declined his offer but hired Shehadeh
as the Little Rock Louie general manager. Shehadeh returned to Indiana in
April 2010 to participate in a mandatory two-week Bar Louie training program.
As part of his duties as general manager, Shehadeh repeatedly contacted
Oswald and other Indiana residents, and he traveled to Indiana to attend Bar
Louie management meetings.
[4] In 2015, Shehadeh and Vela contacted Oswald in Indiana and expressed their
interest in buying Little Rock Louie and North Rock Louie. Oswald agreed to
sell the Arkansas restaurants to the pair. The sales contract was signed and
executed in September 2015. As part of the terms of the sale, Shehadeh and
Vela “assume[d] and agree[d] to pay all lender obligations relative to both
businesses.” Appellant’s App. Vol. II p. 13. These obligations included twelve
promissory notes—eight of which were held by Indiana residents or Indiana
corporations. Shehadeh and Vela also agreed to pay Oswald annual
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installments for the cost of the restaurants. At all relevant times, Oswald lived
in Indiana.
[5] After Shehadeh and Vela began operating the Arkansas restaurants, they
continued to use an Indiana payroll company, an Indiana insurance agent, and
Indiana accountants. Shehadeh also “received corporate mail in Indiana” and
continued to receive mail there as of October 2017. Id. at 51.
[6] In January 2017, Oswald sued Shehadeh and Vela in Hamilton County,
Indiana, for breach of contract. Shehadeh and Vela separately moved for the
case to be dismissed for lack of personal jurisdiction. Oswald responded and
filed an affidavit in support of her position. Shehadeh replied and filed his own
affidavit in support of his motion. After the hearing on the motions, the trial
court concluded that Indiana lacked personal jurisdiction over Shehadeh and
Vela and dismissed the case.
[7] Oswald now appeals.
Discussion and Decision
[8] Oswald contends that the trial court erred when it granted the motions to
dismiss because (1) there are sufficient minimum contacts to establish personal
jurisdiction over Shehadeh and Vela and (2) Shehadeh and Vela have failed to
prove that exercise of personal jurisdiction over them is unreasonable.
[9] Before we address Oswald’s personal-jurisdiction argument, we first discuss
Shehadeh’s argument that paragraph 5.2 of the contract is a forum-selection
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clause that requires Oswald to bring her claim in Arkansas. We disagree.
Paragraph 5.2 reads, “This agreement shall be interpreted and enforced in
accordance with the laws of the State of Arkansas.” Appellant’s App. Vol. II p.
13. We have long held that language requiring only that an agreement shall be
interpreted and enforced under the laws of a specific state is a choice-of-law
provision and not a forum-selection clause. See Dexter Axle Co. v. Baan USA,
Inc., 833 N.E.2d 43, 46 (Ind. Ct. App. 2005) (concluding that the software
agreement contained only a choice-of-law provision because it required that the
agreement “be interpreted and construed in accordance with the laws of
Virginia”); Albright v. Edward D. Jones & Co., 571 N.E.2d 1329, 1332 (Ind. Ct.
App. 1991) (concluding that the clause, “This agreement and its enforcement
shall be governed by the law of the State of Missouri,” was a choice-of-law
provision), trans. denied. To be a forum-selection clause, the provision must
include language indicating that the parties have consented to have a particular
jurisdiction hear a legal dispute arising under the contract. See Dexter Axle Co.,
833 N.E.2d at 47 (finding that the consulting agreement contained both choice-
of-law and forum-selection clauses because the agreement stated, “This
Agreement will be construed and controlled by the laws of the State of
California, U.S.A. . . . and the parties mutually consent to exclusive
jurisdiction and venue in the state and federal courts sitting in Santa Clara
County, California.” (emphasis added)); Bowlers Country Club v. Royal Links
USA, Inc., 846 N.E.2d 732, 734 n.2 (Ind. Ct. App. 2006) (“The RLU forum
selection clause provides: ‘Any action related to this Agreement may be brought
only in the courts of Lucas County, Ohio, or, if it has or can acquire
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jurisdiction, in the United States District Court for the Northern District of
Ohio, Western Division. Each party consents to the exclusive jurisdiction of
such courts[.]’” (emphasis added)), trans. denied. Paragraph 5.2 does not state
that Oswald, Shehadeh, and Vela consent to the exclusive jurisdiction of
Arkansas or any similar language. Rather, the paragraph only requires that
Arkansas law be applied by whatever court hears a dispute arising under the
contract. This is a choice-of-law provision, not a forum-selection clause.3
[10] We turn now to Oswald’s personal-jurisdiction argument. Personal jurisdiction
is a question of law, which we review de novo. LinkAmerica Corp. v. Cox, 857
N.E.2d 961, 965 (Ind. 2006). We do not defer to the trial court’s legal
conclusion on whether personal jurisdiction exists. Id. Personal jurisdiction
turns on the facts, “namely the extent of a defendant’s contacts with the forum,
and ordinarily a trial court’s factual findings on that point would be reviewed
for clear error.” Wolf’s Marine, Inc. v. Brar, 3 N.E.3d 12, 15 (Ind. Ct. App.
2014). However, the trial court did not issue any findings of fact and made its
ruling based on the paper records submitted by the parties and the arguments of
counsel. “In such a case, we are in as good a position as the trial court to
3
Even if this case were litigated in Arkansas, we are convinced that the Arkansas court would reach the same
conclusion that this language is a choice-of-law provision. See Goodwin v. Magness Oil Co., CV-17-249, 2018
WL 2245652, --- S.W.3d --- (Ark. Ct. App. May 16, 2018) (concluding that the contract included both a
choice-of-law provision and a forum-selection clause: “This Agreement shall be governed by and construed in
accordance with the laws of the State of Arkansas. Any action shall be adjudicated in the Circuit Court of
Baxter County, Arkansas.”).
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determine the existence of jurisdictional facts and will employ de novo review
as to those facts.”4 Id. (quotations omitted).
[11] Indiana Trial Rule 4.4(A)—Indiana’s “long-arm” rule for exercising personal
jurisdiction over out-of-state defendants—permits exercising personal
jurisdiction in any manner that is consistent with the Due Process Clause of the
Fourteenth Amendment to the United States Constitution. LinkAmerica, 857
N.E.2d at 965. The Due Process Clause “requires that before a state may
exercise jurisdiction over a defendant, the defendant must have ‘certain
minimum contacts with [the state] such that the maintenance of the suit does
not offend traditional notions of fair play and substantial justice.’” Id. at 967
(quoting Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). Indiana trial
courts are courts of general jurisdiction, and jurisdiction is presumed. Keesling
v. Winstead, 858 N.E.2d 996, 1000 (Ind. Ct. App. 2006). “Therefore, the
plaintiff need not allege jurisdiction in its complaint.” Id. (citations omitted).
Once personal jurisdiction is challenged, usually by the defendant, “the plaintiff
4
During the hearing, the trial court did not allow the parties to present any evidence because it believed that
doing so would convert the motions to dismiss into motions for summary judgment. Furthermore, the court
indicated in its order that it did not consider the affidavits of the parties and only considered “the pleadings of
the parties, the argument of counsel at the hearing, and the applicable law” in reaching its decision.
Appellant’s App. Vol. II p. 6. On appeal, Shehadeh and Oswald disagree as to whether the trial court should
have considered the affidavits they filed in support of and in opposition to the motions to dismiss. A motion
to dismiss for lack of personal jurisdiction is not treated as a motion for summary judgment because materials
outside of the pleadings are filed. Mid-States Aircraft Engines, Inc. v. Mize Co., Inc., 467 N.E.2d 1242, 1247 (Ind.
Ct. App. 1984). This conversion-to-summary-judgment rule only applies to a motion to dismiss for failure to
state a claim under Indiana Trial Rule 12(B)(6). See Ind. Trial Rule 12(B). In fact, when a defendant
challenges personal jurisdiction, the plaintiff is not only permitted but required to present evidence to support
her claim that personal jurisdiction over the defendant exists. Keesling v. Winstead, 858 N.E.2d 996, 1000
(Ind. Ct. App. 2006). Therefore, we have considered the parties’ affidavits in our de novo review.
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must present evidence to show that there is personal jurisdiction over the
defendant.” Id. Once the plaintiff satisfies her burden, the defendant must then
present “a compelling case that the presence of some other considerations
would render jurisdiction unreasonable.” Burger King Corp. v. Rudzewicz, 471
U.S. 462, 477 (1985).
[12] Personal jurisdiction may be established in one of two ways. First, if the
defendant’s contacts with the forum state were so “continuous and systematic”
that the defendant “should reasonably anticipate being haled into the courts of
that state for any matter, then the defendant is subject to general jurisdiction[.]”
LinkAmerica, 857 N.E.2d at 967. Even if the defendant’s contacts are not
“continuous and systematic,” personal jurisdiction may be exercised “if the
controversary is related to or arises out of the defendant’s contacts with the
forum state.” Id. This is specific jurisdiction, and it requires that the
“defendant purposefully availed itself of the privilege of conducting activities
within the forum state so that the defendant reasonably anticipates being haled
into court there.” Id.
[13] Oswald contends that specific jurisdiction exists because: Shehadeh and Vela
solicited Oswald in Indiana for the sale of her Arkansas restaurants; Shehadeh
and Vela signed the sales contract and sent it to Indiana for Oswald to sign; the
payment for the restaurants was sent to Indiana; Shehadeh and Vela assumed
many of Oswald’s debts with Indiana vendors; after taking over operational
control of the restaurants, Shehadeh and Vela continued to use Indiana vendors
for the company payroll, insurance, and accounting; and Shehadeh maintained
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a corporate mailbox in Indiana for the restaurants. Shehadeh does not rebut
any of Oswald’s claims; rather, he contends that “enter[ing] into a contract with
an Indiana resident, is, without more, insufficient to subject him to suit in
Indiana.” Appellee’s Br. p. 16. Shehadeh is correct; a contract, by itself, is
insufficient to subject him to suit in Indiana. See Burger King, 471 U.S. at 478
(“If the question is whether an individual’s contract with an out-of-state party
alone can automatically establish sufficient minimum contacts in the other
party’s home forum, we believe the answer clearly is that it cannot.”). But, as
Oswald points out, there was more than just a contract in this matter; there
were multiple contacts with Indiana, some of which are still ongoing.
[14] Nevertheless, Shehadeh relies on our decision in Wolf’s Marine to support his
contention that Indiana does not have personal jurisdiction. In Wolf’s Marine,
an Indiana resident sued a Michigan company in Indiana for breach of contract
and claimed specific personal jurisdiction. The Indiana resident made the
initial contact with the company in Michigan, the contract was for a limited
duration and scope, the contract was fully executed in Michigan, and no goods
were delivered to or from Indiana. We concluded that the Michigan company
did not have sufficient minimum contacts with Indiana to permit the state to
exercise specific jurisdiction over it. We find that Shehadeh’s reliance on this
case is misplaced. Unlike Wolf’s Marine, Shehadeh solicited Oswald in Indiana
to sell her restaurants. The contract was a multi-year agreement requiring
Shehadeh and Vela to make annual payments to Oswald in Indiana. And, as
already discussed, after the contract was executed Shehadeh and Vela
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maintained multiple business relationships with Indiana companies and
residents and maintained a mailbox in Indiana for the restaurants. We
conclude that Oswald has met her burden of proving that Shehadeh and Vela
have sufficient minimum contacts related to the contract in Indiana for there to
be specific personal jurisdiction here.5
[15] Our inquiry does not stop here, however. We must also ensure that it is
reasonable for Shehadeh and Vela to litigate this matter in Indiana. “[I]f the
defendant has contacts with the forum state sufficient for general or specific
jurisdiction, due process requires that the assertion of personal jurisdiction over
the defendant is reasonable.” LinkAmerica, 857 N.E.2d at 967. Reasonableness
is determined by balancing five factors:
(1) the burden on the defendant; (2) the forum State’s interest in
adjudicating the dispute; (3) the plaintiff’s interest in obtaining
convenien[t] and effective relief; (4) the interstate judicial
system’s interest in obtaining the most efficient resolution of
controversies; and (5) the shared interest of the several States in
furthering fundamental substantive social policies.
Id. at 967-68 (citing Burger King, 471 U.S. at 476-77). The burden is on the
defendant to present “a compelling case that the presence of some other
5
Because we conclude that there is specific personal jurisdiction in this case, we do not address the parties’
arguments regarding general personal jurisdiction.
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considerations would render jurisdiction unreasonable.” Burger King, 471 U.S.
at 477.
[16] Shehadeh claims that it is unduly burdensome on him to travel to Indiana to
litigate this matter because he is a resident of Arkansas, bought businesses
located in Arkansas, and “signed a contract which he might have reasonably
believed would not only be governed by Arkansas law but also enforced in the
state of Arkansas, should that become necessary.” Appellee’s Br. p. 19
(emphasis added). He also points out that the contract discloses the
involvement of Arkansas lenders. Shehadeh, however, does not state that any
evidence or witnesses in support of his defense would become unavailable if the
case were litigated in Indiana. He has failed to show how proceeding in
Indiana will burden him.
[17] As for factor two, Shehadeh states, “Arkansas clearly has a more substantial
interest than Indiana in adjudicating this dispute.” Id. He then lays out all of
the reasons why Arkansas is interested in adjudicating this dispute. But the
question isn’t whether another state has an interest in adjudicating the dispute;
it is whether Indiana, as the forum state, has an interest in adjudicating the
dispute. Shehadeh has failed to meet his burden on the second factor.
[18] Shehadeh concedes “that it is likely convenient for Oswald to litigate the merits
of this case in an Indiana forum.” Id. at 20. He then argues that this
convenience does not outweigh the “disadvantages occasioned upon [him] in
having to litigate this dispute in a foreign forum[.]” Id. Shehadeh’s argument is
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unrelated to the factor being weighed. He has conceded factor three in favor of
Oswald.
[19] Regarding the fourth factor—the interstate judicial system’s interest in
obtaining the most efficient resolution of controversies—Shehadeh correctly
points out that if Oswald succeeds on the merits of her claim, she will have to
have the judgment enforced in Arkansas. Shehadeh, however, does not point
to any case law that says Arkansas will not enforce an out-of-state judgment.
To the contrary, “The State of Arkansas must give full faith and credit to
foreign judgments under the U.S. Constitution.” Amant v. Callahan, 20 S.W.3d
896, 898 (Ark. 2000) (citing U.S. Const. art. 4, § 1; Ark. Code Ann. § 16-66-
602; First Commercial Trust Co. v. Rank, 915 S.W.2d 262 (Ark. 1996)). Shehadeh
also contends that Arkansas should hear the case because paragraph 5.2 of the
contract requires the court to apply Arkansas law. But he offers no argument as
to why Indiana courts are incapable of correctly interpreting and applying
Arkansas law. Our trial courts have historically adjudicated matters requiring
them to interpret and apply a foreign jurisdiction’s law. See Berberena v. State, 86
N.E.3d 199 (Ind. Ct. App. 2017) (comparing Illinois and Indiana statutes to
determine if defendant was a serious violent felon); Hollingsworth v. State, 907
N.E.2d 1026 (Ind. Ct. App. 2009) (comparing Arkansas and Indiana statutes to
determine if defendant was a serious violent felon); Mann v. State, 754 N.E.2d
544 (Ind. Ct. App. 2001) (comparing Ohio and Indiana statutes for enhanced
felony conviction).
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[20] As to the fifth and final factor, Shehadeh states that the connection to this
matter is “real and tangible for the state of Arkansas in a way that is not for
Indiana, and the truth of this proposition seems rather obvious.” Appellee’s Br.
p. 20. He does not elaborate on this statement nor does he make an argument
for why litigating this matter in Arkansas would further fundamental and
substantive social policies. Again, his argument is unrelated to the factor being
weighed.
[21] Balancing all five factors, we conclude that Shehadeh has failed to meet his
burden to present a compelling case for why litigating this dispute in Indiana is
unreasonable. In sum, Shehadeh and Vela have sufficient minimum contacts
with Indiana for the court to exercise personal jurisdiction over them, and their
due-process rights will not be violated by requiring them to litigate this matter
in Indiana.
[22] Reversed and remanded.
Pyle, J., and Barnes, Sr. J., concur.
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