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Sanford v. Maid-Rite Corporation

United States District Court, D. Minnesota

April 21, 2014

DON SANFORD, et al., Plaintiffs,
v.
MAID-RITE CORPORATION, et al., Defendants.

W. Michael Garner and Elliot R. Ginsburg, W. Michael Garner, PA, Counsel for Plaintiffs.

Michael W. McNee and Robyn K. Johnson, Cousineau McGuire Chartered, Counsel for Defendants.

ORDER

MICHAEL J. DAVIS, Chief District Judge.

The above-entitled matter comes before the Court upon the Report and Recommendation of United States Magistrate Judge Leo I. Brisbois dated January 3, 2014. [Docket No. 36] Plaintiffs filed objections to the Report and Recommendation. [Docket No. 38]

Pursuant to statute, the Court has conducted a de novo review upon the record. 28 U.S.C. § 636(b)(1); Local Rule 72.2(b). Based upon that review, the Court adopts the Report and Recommendation of United States Magistrate Judge Leo I. Brisbois dated January 3, 2014.

I. Corporate Shield Doctrine

The Court has taken into account the Eighth Circuit's treatment of personal jurisdiction in cases involving corporate fiduciaries. The Report and Recommendation provides a short summary of this treatment, and describes the fiduciary or "corporate shield doctrine." (See Report and Recommendation, at 11.) Plaintiffs take issue with the appearance of the corporate shield doctrine in the Report and Recommendation, as this doctrine has not been adopted by the Eighth Circuit.

However, the Report and Recommendation goes on to provide the Eighth Circuit's general rule regarding personal jurisdiction over corporate officers, and then returns to applying the appropriate rules to the facts of this case; it does not apply the corporate shield doctrine to the facts of the present case. Additionally, it is clear from the briefs and the proceedings in this matter that Defendants are not requesting application of corporate shield doctrine, as they have conceded that other Maid-Rite fiduciaries (who are more active in managing the corporation) are subject to personal jurisdiction in this matter. (See Audio Tr., Docket No. 42, at 6.) The Report and Recommendation was written with this understanding. Because of this, the Court overrules Plaintiffs' objections to the mention of corporate shield doctrine.

II. Personal Jurisdiction

Plaintiffs also object to the Report and Recommendation's treatment of Dr. Performance of Minn., Inc. v. Dr. Performance Mgmt., LLC, No. 01-1524, 2002 WL 31628440 (D. Minn. Nov. 12, 2002). Plaintiffs argue that the Report and Recommendation did not adequately consider that case or the case of State v. Continental Forms , 356 N.W.2d 442 (Minn.Ct.App. 1984). Plaintiffs assert that these cases establish that Defendants Copple, Kirke, and Lewis are subject to the Court's personal jurisdiction, based upon (1) their potential liability under the Minnesota Franchise Act ("MFA") and (2) a "plus factor, " such as a tax identification form or a Franchise Disclosure Document ("FDD") registered with the forum state. The Court concludes, upon a review of the case law, that the MFA cannot extend application of Minnesota's long-arm statute beyond the reach of constitutional due process, and Plaintiffs have not established a basis for minimum contacts as to these Defendants that fall within that reach.

The Report and Recommendation provides that the Court lacks personal jurisdiction over Defendants Copple, Kirke, and Lewis because the Amended Complaint "fails to allege with any specificity any particular individual contacts by Copple, Kirke, or Lewis with Minnesota." (Report and Recommendation, at 11.) The Report and Recommendation goes on to state that "Plaintiffs rely solely on broad legal conclusions and alleged actions largely attributable to [Maid-Rite Corporation] as a corporation." (Id.)

The Report and Recommendation only briefly raises Dr. Performance as support for its appropriate conclusion that the MFA alone cannot establish jurisdiction in this matter. The Report and Recommendation does not reach the potential jurisdictional basis established in Continental Forms and acknowledged by Dr. Performance, a basis upon which Plaintiffs now rely in making their arguments. In Continental Forms, the Court of Appeals of Minnesota held that a tax statute imposing primary liability upon corporate officers, coupled with the listing of corporate officers on a tax form filed with the state, "presents a prima facie showing of minimum contacts." Cont'l Forms , 356 N.W.2d at 444.

Dr. Performance, a franchising case, recognized this basis for jurisdiction. See Dr. Performance, 2002 WL 31628440, at *4 ("[S]tatutory liability may establish an officer or director's minimum contacts with the forum state.") The Dr. Performance decision provided that liability under the MFA, coupled with some singular contact with the forum state, might establish personal jurisdiction. See id. at *5. Regarding the statutory liability element, the Court explained that, "[i]n order for personal liability to attach to controlling persons under the Minnesota Franchise Act, they must have been in positions of control at the time of the alleged violation, or actively participated in the violation." Id. at *4 (citing Minn. Stat. § 80C.17, subdiv. 2). While this liability may have been established, the Dr. Performance court held that the defendant had no contact with the state because no identifying form had been registered in Minnesota, as was the case in Continental Forms. Id. at *5. Therefore, personal jurisdiction was not proper in that case.

Here, Plaintiffs argue that personal jurisdiction is established because (1) there is prima facie case for Defendants Copple, Kirke, and Lewis's liability under the MFA, and (2) the Defendants' names are listed on FDDs filed with the state. As to MFA liability, Plaintiffs argue that Defendants Copple, Kirke, and Lewis are liable under the ...


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