Corporate Creations Enterprises LLC v. Brian R. Fons Attorney at Law P.C.
Docket: No. 4D16-927
Court: District Court of Appeal of Florida; June 21, 2017; Florida; State Appellate Court
The Plaintiff appeals the dismissal of its complaint due to alleged lack of personal jurisdiction over the Defendants. The trial court determined that the Defendants did not possess the requisite minimum contacts with Florida for personal jurisdiction. However, the appellate court found that the contract between the parties explicitly granted jurisdiction to Florida courts, complying with sections 685.101 and 685.102 of the Florida Statutes (2015), thus meeting due process requirements. Consequently, the appellate court reversed the dismissal order.
The background details the formation of an Illinois limited liability company in 1997, where both Plaintiff and Defendants contributed capital and agreed on a managing member. An operating agreement was executed, which included choice of law and jurisdiction provisions specifying that legal matters would be construed under Illinois law, while jurisdiction for related proceedings would be in Florida courts.
After the relationship ended in 2014, a redemption agreement was signed where the Defendants sold their shares back to the Plaintiff, who relied on the Defendants’ representations of no outstanding claims against the company. Upon discovering potential breaches, the Plaintiff filed a lawsuit in Florida, seeking damages and a declaratory judgment. The Defendants moved to dismiss, arguing lack of personal jurisdiction, improper venue, and failure to state a claim, citing their residence and lack of business activities in Florida, and contending that the dispute arose from the redemption agreement, not the operating agreement.
The trial court granted the dismissal, asserting that the redemption agreement lacked jurisdictional provisions and that the Defendants did not have sufficient contacts with Florida. After the denial of a rehearing, the Plaintiff filed an appeal.
A circuit court’s order on a motion to dismiss for lack of personal jurisdiction is reviewed de novo. The Plaintiff presents two main issues on appeal. First, the Plaintiff contends the circuit court mistakenly identified the ownership redemption agreement as the sole basis for the lawsuit, which lacks a forum selection clause and choice of law provision, instead of recognizing the operating agreement, which includes these provisions. Second, the Plaintiff asserts that the court misapplied the precedent set in Hamilton by imposing a minimum contacts test that exceeds statutory and constitutional requirements.
The critical determination is which agreement(s) underpin the lawsuit. If the complaint is solely based on the ownership redemption agreement, the jurisdiction analysis relies on the minimum contacts standard from International Shoe Co. However, if the operating agreement is implicated, the jurisdictional analysis must consider the relevant statutory provisions. The Plaintiff argues that both agreements are interconnected, as the ownership redemption agreement is contingent upon the operating agreement and the prior business relationship established by it.
The court aligns with a precedent from Unison, where a similar personal jurisdiction issue arose, concluding that the redemption agreement cannot be assessed in isolation from the broader business context it serves. Both agreements are deemed relevant in this case. The court will further examine whether the operating agreement’s choice of law, venue, and jurisdiction waiver provisions sufficiently establish personal jurisdiction over the Defendants in Florida. The circuit court had previously maintained that the Plaintiff must also meet the minimum contacts requirement for jurisdiction, emphasizing that due process necessitates a defendant having minimum contacts with the forum state for personal jurisdiction to be valid.
Authorized informed consent can establish personal jurisdiction when statutory provisions are met, as outlined in International Shoe. In commercial contexts, parties often agree in advance to resolve disputes in specific jurisdictions, and such forum-selection clauses are enforceable if negotiated freely and deemed reasonable, as noted in Burger King Corp. v. Rudzewicz. Historically, Florida disallowed personal jurisdiction based solely on consent, as determined by the Florida Supreme Court in McRae v. J.D./M.D. Inc., emphasizing the absence of consent provisions in the state's long-arm statute. However, this changed with the enactment of sections 685.101 and 685.102, which permit personal jurisdiction through contractual agreements under specific conditions. These statutes allow courts to bypass traditional minimum contacts analysis if certain criteria are met, including: 1) a choice of law provision designating Florida law, 2) a non-resident's agreement to submit to Florida jurisdiction, 3) consideration of at least $250,000, 4) compliance with the U.S. Constitution, and 5) a substantial relation to Florida or a party being a Florida resident or incorporated in Florida. In this case, the operating agreement met all five factors, including the inclusion of a Florida law choice and a clause affirming the parties' submission to Florida jurisdiction.
The contract in question does not violate the U.S. Constitution and has a connection to Florida, satisfying the fourth and fifth jurisdictional factors. The Defendants contest the third factor, claiming insufficient consideration since only $60,000 was initially contributed, arguing that damages cannot be counted as consideration at the time of contract formation. However, consideration is broader than the Defendants suggest. Florida Statute § 685.101 allows for a $250,000 threshold to be met through obligations related to transactions aggregating that amount, not just through direct cash consideration. Relevant case law supports this interpretation, indicating that the statute applies even if the direct exchange does not meet the threshold, as long as the overall transactions do. The Plaintiff provided unrefuted evidence that the operating agreement met these requirements, leading to the conclusion that the complaint satisfied sections 685.101 and 685.102 of the Florida Statutes. Consequently, the court should have exercised personal jurisdiction over the Defendants, resulting in the reversal of the dismissal order for lack of jurisdiction and a remand for further proceedings.
