The Sixth Circuit affirms a district court’s dismissal of
a suit concerning a contract entered into in foreign country for lack of
personal jurisdiction in Ohio over the Defendant, a Russian citizen who does
own Ohio realty but is rarely there
Plaintiff Richard A. Conn contracted with Defendant Vladimir
Zakharov, a Russian citizen, in which Conn would gain a 15% share of a proposed
venture by Zakharov’s company. No sooner had Conn moved to Russia to perform
the agreement, than Zakharov repudiated the contract. Conn then moved back to
the United States.
As to contacts with the U.S., Zakharov attended graduate
school at Case Western Reserve University in University Heights, Ohio, and
graduated in 2002. Zakharov and his wife own and maintain real estate year
round in Pepper Pike, Ohio which Zakharov spent millions of dollars renovating.
Zakharov also owns several vehicles registered in Ohio, and maintains a bank
account in Ohio, He also spends some time in Ohio each year.
After returning from Russia, Conn sued Zakharov in an Ohio
federal court basing jurisdiction on his property ownership. Conn claimed a
breach of contract and sought an judicial accounting to determine what a 15%
share of the Russian venture would have been. Zakharov moved to dismiss the
complaint [1] for lack of personal jurisdiction,[2] forum non conveniens, and
[3] failure to state a viable claim.
After discovery relating to the personal jurisdiction issue,
the district court granted Zakharov’s motion to dismiss. Finding that Zakharov
was not an Ohio resident, the court ruled that, for lack of sufficient Ohio
contacts, Plaintiff had not properly served him with process. Plaintiff filed an appeal. The U.S. Court of
Appeals for the Sixth Circuit, however, affirms. It rules that both Ohio state
law and the federal Due Process Clause precluded the district court from
finding personal jurisdiction over Zakharov.
The Court begins by citing its decision in International
Techs. Consultants v. Euroglas S.A., 107 F.3d 386, 391 (6th Cir. 1997). There
it stated that “[a] federal court sitting in diversity may not exercise
jurisdiction over a Defendant unless courts of the forum state would be
authorized to do so by state law—and any such exercise of jurisdiction must be
compatible with the due process requirements of the United States
Constitution.” [Slip op. 3]
Due process requires that the parties have sufficient
contacts with the forum state so that it is fair to subject them to
jurisdiction there. The Plaintiff has shown his belief that there is personal
jurisdiction over Defendant by suing him in an Ohio federal court. When
Defendant challenges such jurisdiction, the Plaintiff has to establish specific
facts that personal jurisdiction exists over the non‑resident Defendant by a
preponderance of the evidence. However, where, as is the case here, the
Defendant has moved to dismiss the case under Rule 12(b)(2) for lack of
personal jurisdiction and the district court rules on the motion without an
evidentiary hearing, the Plaintiff need only make a “prima facie” case that
there is personal jurisdiction.
Reviewing the district court’s dismissal de novo, the Court
of Appeals concludes that the District Court did not have personal jurisdiction
over Zakharov unless [1] Conn proved that jurisdiction was proper under a long‑arm
statute of Ohio and [2] the federal Due Process Clause allowed for
jurisdiction.
The Court first looks to Ohio state law, which declares that
personal jurisdiction is only available if the long‑arm statute confers
jurisdiction and jurisdiction is proper under the Federal Due Process Clause.
The Court notes that Ohio’s long‑arm statute does not reaches the limits of the
Due Process Clause. Therefore, the Court analyzes Federal Due Process law.
Ohio law specifies that it will grant personal jurisdiction
over non‑residents if their conduct falls within one of nine listed bases of
jurisdiction. In the Court’s view, Conn failed to allege that his claims arose
out of, or were related to, Zakharov’s activities in Ohio.
Moreover, federal due process requires that the Defendant
have sufficient minimum contacts with the forum state so that finding personal
jurisdiction does not offend “traditional notions of fair play and substantial
justice.” The Court, therefore limits its analysis to whether Due Process allows
the imposition of general jurisdiction under the facts of this case.
Next, the Court points out that, because Conn admits that
the suit is not related to any of Zakharov’s contacts with Ohio, Zakharov is
not subject to long‑arm jurisdiction under Ohio’s long arm statute. Conn argued
that Zakharov’s ownership of Ohio property makes him presumptively subject to
the jurisdiction of the Ohio courts.
The Court of Appeals also notes that Ohio law does not hold
that a person is a “resident” merely because he owns a residence in the state.
“Looking at the facts of this case, we cannot conclude that Zakharov has
demonstrated an intent to be an Ohio resident—that is, the intent to remain
permanently in Ohio. Zakharov travels to Ohio under a tourist or business visa,
which means that he must eventually leave Ohio to return to Russia. The fact
that DiMarco [Prouse, Dash & Crouch, L.L.P. v. DiMarco, 887 N.E.2d 1211,
1213‑16 (Ohio Ct. App. 2008)] traveled to Canada on a tourist visa was
persuasive evidence to the DiMarco court that he had no intent to remain in
Canada permanently; Zakharov’s traveling to Ohio under a tourist visa is
similarly persuasive to us. Furthermore, Zakharov is not registered to vote in
Ohio, does not have an Ohio driver’s license, and has spent an average of only
a few weeks a year in Ohio over the past several years.” [Slip op. 9‑10]
Conn then argues that Zakharov was personally served in
Ohio, and that this alone confers personal jurisdiction. The Court disagrees
that there was personal service on Zakharov. “Even assuming that [Burnham v.
Superior Court of California, 495 U.S. 604 (1990)] permits jurisdiction based
solely on proper, personal service of process on a Defendant who is present
within the forum state, there could be no jurisdiction here based on such
service.”
“Conn sent service of process through certified mail to
Zakharov’s Pepper Pike property. His housekeeper received that process when
Zakharov was not in the United States. Sometime later, Zakharov arrived in Ohio
and was given the documents. This is clearly not ‘personal service’ as
envisioned by Ohio law, which requires that personal service of process be
accomplished by the sheriff or bailiff of the jurisdiction, or by a person over
eighteen ‘who has been designated by order of the court.’ OHIO CIV. R. 4.1(B).
And receipt of service of process through certified mail is not sufficient by
itself to convey jurisdiction under Ohio’s long‑arm statute and its
accompanying rule of civil procedure.” [Slip op. 11]
Lastly, Conn argues that despite the inapplicability of the
long‑arm statute, Zakharov is still subject to jurisdiction under federal
general jurisdiction. The Circuit Court disagrees. “First, as we have
explained, Ohio law does not appear to recognize general jurisdiction over non‑resident
defendants, but instead requires that the court find specific jurisdiction
under one of the bases of jurisdiction listed in Ohio’s long‑arm statute.
Indeed, to hold otherwise would come dangerously close to collapsing Ohio’s two‑part
jurisdictional inquiry into one, an outcome that the Ohio Supreme Court has
repeatedly rejected. We do acknowledge, however, that courts within the Sixth
Circuit have come to inconsistent, and in some cases directly contradictory,
conclusions on whether Ohio law recognizes general jurisdiction, with some
cases holding that it does and other cases explicitly taking the opposite view
or simply holding that Ohio law requires application of the long‑arm statute in
order to find jurisdiction over a non‑resident Defendant.” [Slip op. 12]
“Second, even if Ohio law does recognize general
jurisdiction over non‑resident defendants, Federal Due Process law does not
allow for general jurisdiction based on Zakharov’s contacts with Ohio. As we
have explained, the Supreme Court distinguishes between general jurisdiction
and specific jurisdiction, either one of which is an adequate basis for
personal jurisdiction under the Due Process Clause.” [Slip op. 13‑14]
“Even if we did find that Zakharov’s contacts were
sufficient to subject him to the state’s general jurisdiction, we do not
believe that exercising jurisdiction would accord with fair play and
substantial justice. First, the burden on Zakharov to defend this action in
Ohio is heavy because he lives in Russia and would have to travel around the
world to engage in litigation.” [Slip op. 16‑17]
“Second, Ohio has no interest in this lawsuit—which involves
an alleged agreement that was not negotiated in Ohio, agreed to in Ohio, or
intended to be performed in Ohio—when neither party is a resident or citizen of
Ohio, foreign law will be applied, and no effects from the dispute will be felt
in Ohio.”
“Finally, although Conn clearly has an interest in bringing
this action in Ohio, he is not foreclosed from bringing the suit in the District
of Columbia—indeed, his counsel agreed at oral argument that this was an
option—and Conn may always bring the lawsuit in a Russian court, which he
admits would have jurisdiction and would hear the case on the merits, even if
the merits appear to be stacked against Conn under Russian law. Therefore, Ohio
is not the only forum where Conn may attempt to gain relief from his alleged
harm.” [Slip op. 17]
Citation: Conn v. Zakharov, 667 F.3d 705 (6th Cir.
2012).
**** Mr. William B. Blanchard (“Bill Blanchard”) is a Real Estate Attorney with offices in St. Charles and Oakbrook Terrace, Illinois. Bill specializes in representing real estate clients for purchases and sales as well as home owner real estate tax assessment appeals. Mr. Blanchard is General Counsel for Gaia Title, Inc. a title insurance agency and settlement services provider. The Company is owned by real estate attorneys who demand exemplary title insurance services and accurate and efficient settlement services. As General Counsel he is responsible for title examination, commitment and policy review, escrow settlement supervision and regulatory review. - Attorney Profile: https://solomonlawguild.com/william-b-blanchard%2C-esq - Attorney News: https://attorneygazette.com/william-blanchard%2C-esq#40b43d7b-94b2-48d3-b055-1979a636f1e7
