JANE TRICHE MILAZZO, District Judge.
Before the Court is Defendant's Motion to Dismiss for Lack of Personal Jurisdiction (R. Doc. 14). For the following reasons, the Motion is DENIED.
This is an action for declaratory judgment in which Plaintiff, appearing as grantor of several trusts, asks this Court to issue a judgment declaring that his attempt to exchange certain assets held by those trusts for other assets of equivalent value was effective. Plaintiff is Thomas Benson, the successful and wealthy owner of the New Orleans Saints and New Orleans Pelicans franchises. Over the course of several years, Plaintiff established various trusts for the benefit of his daughter Renee Benson and his two grandchildren, Rita Benson LeBlanc and Ryan LeBlanc. Plaintiff created three trusts in 2009 (the "2009 Trusts"),
In January of 2015, Plaintiff sent correspondence to Defendant, requesting that he exchange the aforementioned trust assets for promissory notes of equivalent value. Defendant refused to make the exchange, stating that a unsecured promissory note is "not an appropriate trust investment" and that Defendant must "make his own independent verification that the assets to be exchanged are of equivalent
Defendant has filed a Motion to Dismiss for Lack of Personal Jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2).
"Where a defendant challenges personal jurisdiction, the party seeking to invoke the power of the court bears the burden of proving that jurisdiction exists."
Jurisdiction over a non-resident defendant is proper when (1) the defendant is amenable to service of process under the long-arm statute of the forum state, and (2) the exercise of personal jurisdiction is consistent with the Due Process Clause of the Fourteenth Amendment.
"The Due Process Clause of the Fourteenth Amendment protects a corporation, as it does an individual, against being made subject to the binding judgments of a forum with which it has established no meaningful `contacts, ties, or relations.'"
"If a nonresident defendant has sufficient related or unrelated minimum contacts with the forum, we must then consider whether the `fairness' prong of the jurisdictional inquiry is satisfied."
Plaintiff does not make any serious allegations that this Court has general jurisdiction over Defendant, and indeed, admitted at oral argument that this case does not present issues of general jurisdiction. Accordingly, this Court will focus its analysis on specific jurisdiction.
Specific personal jurisdiction exists when a defendant has purposely directed its activities, or availed itself of the privileges of conducting its activities, toward the forum state and the controversy arises out of or is related to those activities. "Although a nonresident's physical presence within the territorial jurisdiction of the court is not required, the nonresident generally must have `certain minimum contacts'. . . such that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice.'"
Defendant argues that this Court lacks personal jurisdiction over him because he does not have the requisite minimum contacts with the state of Louisiana.
In response, Plaintiff points in large part to the assets held by the trusts for which Defendant serves as trustee. The trusts hold interests in entities that own interests in the Saints, the Pelicans, the Benson Tower development, the New Orleans Fox television affiliates, and other pieces of immovable property in Louisiana. In addition, many of the LLCs and corporations in which the trusts hold interests are Louisiana entities. Plaintiff asserts that Defendant administered these Louisiana assets as trustee and that it is these assets that make up the value of the trusts. Plaintiff also alleges that Defendant attended monthly meetings in Louisiana with the trust beneficiaries to discuss their future ownership of the Saints and Pelicans franchises. Defendant also participated in conference calls and executed numerous documents on behalf of the trusts in connection with various transactions involving Louisiana property. Plaintiff likens Defendant's involvement to that of a business owner administering his assets from out-of-state.
In addition, Plaintiff contends, through the affidavit of the President of the New Orleans Saints and Pelicans Dennis Lauscha, that the New Orleans Saints paid the law firm of which Defendant is a partner a monthly retainer of $20,000, which increased to $25,000 in October 2014, and that this amount included payment for Defendant's administration of the trusts. In response to this contention, Defendant submitted a buzzer-beater, post-hearing memorandum and affidavit from a partner of the law firm asserting that the firm had "never billed" Plaintiff or any of his entities for the time that Defendant spent administering the trusts. It further stated that neither Plaintiff nor any of his entities have ever paid the law firm for the time Defendant spent administering the trust. The Court finds that the Defendant's artfully worded affidavit fails to contradict the affidavit of Mr. Lauscha. Further, Plaintiff responded with evidence showing that one of Plaintiff's entities paid the law firm an amount beyond the retainer for services rendered in relation to the Benson Tower, a trust asset. Notwithstanding the fact that any conflict in the facts must be resolved in favor of the plaintiff, it is clear to this Court that Defendant's trust administration services were compensated as part of the retainer paid to the law firm by the New Orleans Saints. Accordingly, Defendant was paid for his trust administration by a Louisiana-based sports franchise.
Lastly, Defendant sent notice that he refused to make the exchange at issue in this case to Plaintiff's attorney in Louisiana. Plaintiff contends that both he and his granddaughter Rita LeBlanc were citizens of Louisiana at the time that he requested the exchange. Thus, Defendant's refusal to make the exchange deprived Plaintiff, a Louisiana citizen, of control and ownership of Louisiana-based assets.
This Court must now consider whether these contacts are sufficient to constitute minimum contacts such that jurisdiction can be exercised over Defendant. The
Defendant cites Hanson v. Denckla to support the argument that he does not have minimum contacts with the forum state.
Defendant states that, like the trustee in Hanson, he has no property or office in Louisiana, and the trusts were executed in Texas while the settlor was a domiciliary there. Defendant contends therefore that only Benson's unilateral acts connect Defendant and the trust agreements to Louisiana. The Court cannot agree with Defendant's latter contention. In this case, unlike in Hanson, many of the trust assets at issue are located in the forum state. The trusts hold, and have held since their creation, substantial assets in Louisiana. It cannot, therefore, be said that the trust agreements have no connection with the forum state. It was not merely Benson's unilateral decision to move to Louisiana that gave Defendant and the trust agreements contacts with that state.
In addition, the assets of the trusts at issue here—ownership interests in closely held companies—differ starkly from the securities held by the trust in Hanson. At oral argument, Plaintiff's counsel attempted to liken this situation to a trust holding stock in a publicly traded company, such as Apple, noting that such would not subject the trustee to jurisdiction at Apple's headquarters in California. This Court finds that this analogy misses the point. The ownership interests held by the trusts at issue here are not securities in publicly traded companies. The trusts are substantial owners in closely held companies. In fact, the 2009 Trusts own 100% of the ownership interests of four entities (three
This Court is, however, persuaded by the Supreme Court's decision in Burger King v. Rudzewicz, in which it held that jurisdiction is appropriate over defendants who reach out beyond their state and "into another by, for example, entering a contractual relationship that `envisioned continuing and wide-reaching contracts' in the forum State."
This Court holds that, like the defendant in Burger King, Defendant purposefully availed himself of the benefits of the state of Louisiana by accepting the position of trustee of the trusts at issue. In the agreements creating the 2012 Trusts and both of the GRAT Trusts, Plaintiff expressly delivered certain listed property on the day of the trusts' creation to Defendant as trustee. This property, which was listed in the appendixes of the trust documents, included units of ownership of Benson Basketball, LLC and/or Benson Football, LLC. Benson Football, LLC owns the New Orleans Saints franchise, a lease of the Mercedes-Benz Superdome in New Orleans, and the WVUE television station in New Orleans. Benson Basketball, LLC owns the New Orleans Pelicans franchise, a lease of the New Orleans Smoothie King Center, and practice facilities near New Orleans. Defendant signed each of these trust documents as trustee and by their terms agreed to "administer" or "manage" the property."
Further, Defendant should have reasonably expected that his position as trustee
Having determined that Defendant has the requisite minimum contacts required to exercise personal jurisdiction, this Court must now consider whether the Plaintiff's cause of action arises out of or results from the Defendant's forum-related contacts. There are three schools of thought regarding what "arising out of or related to" means in the context of specific jurisdiction, and the Fifth Circuit remains a proverbial free agent, having not yet expressly taken a position. The Supreme Court has likewise declined to define the term.
Some circuits, the First and Sixth included, use a proximate cause standard in determining whether a cause of action arises out of the defendant's contacts with the forum state.
Other circuits, such as the Ninth, subscribe to a more relaxed test and require only that the defendant's contacts be a "but for" cause of the plaintiff's harm.
Finally, still other circuits adhere to a "substantial connection" test for the determination of relatedness. The question asked in the application of this standard "is whether the tie between the defendant's contacts and the plaintiff's claim is close enough to make jurisdiction fair and reasonable."
This approach has been criticized for failing to maintain a distinction between specific and general jurisdiction.
While many circuits have expressly adopted some variation of these tests, the Fifth Circuit has not. Many other courts, however, have read the Fifth Circuit's analyses to infer a preference for the "but for" standard.
This Court agrees that the Fifth Circuit would likely subscribe to a "but for" analysis and also finds the "but for" test to be the superior analysis. The "but for" standard ensures that the defendant's contacts with the forum have at least a minimal link to the plaintiff's cause of action, without requiring that defendant's contacts directly cause or give rise to the plaintiff's claims.
In Trinity Industries, Inc. v. Myers & Associates, Ltd., the Fifth Circuit applied a but-for causation standard to facts that are relevant here.
This Court finds that the Trinity analysis suggests a holding in this case that Plaintiff's cause of action arises out of Defendant's contacts with the forum state. Indeed, but for Defendant's agreement to serve as the trustee of Plaintiff's trusts, this dispute would not have occurred. If Defendant had neither agreed to administer nor actively administered the trusts and their Louisiana assets, Plaintiff would not be seeking a declaratory judgment against him for his instant failure to administer the trusts as Plaintiff requested. Plaintiff's cause of action seeking a judgment forcing Defendant to comply with the trust agreements and exchange certain Louisiana assets for promissory notes of equivalent value is a direct result of Defendant's service as trustee. Plaintiff's Complaint specifically alleges that Defendant's refusal to make the requested exchange is inconsistent with his previous actions as trustee. Accordingly, this Court holds that Plaintiff's cause of action arises out of Defendant's contacts with the forum state.
This Court notes, however, that even if the Fifth Circuit were to favor a different definition for "arising out of or related to," jurisdiction would still be appropriate here. These facts meet the "substantial connection" test because Defendant's contacts with Louisiana are sufficiently closely related to Plaintiff's cause of action to make jurisdiction reasonable. To be sure, a substantial amount of the assets held by the
Defendant's contacts with the forum could also be said to be the proximate cause of the Plaintiff's cause of action. To be sure, the correspondence that Defendant's counsel sent to Louisiana declining to make the Plaintiff's requested exchange directly caused the dispute at issue here. The Fifth Circuit has stated that "[a] single act directed at the forum state can confer personal jurisdiction so long as that act gives rise to the claim asserted."
Finally, this Court must consider whether the exercise of jurisdiction over Defendant would be fair and reasonable.
Plaintiff has shown that Defendant traveled to Louisiana on several occasions to attend meetings regarding trust assets. He cannot now say that he would be unduly burdened by traveling here for the purpose of defending himself in this litigation. In addition, it cannot be disputed that Louisiana, the forum state, has a significant interest in litigating the issues presented in this case—namely, the ownership of substantial property within its bounds. Accordingly, the exercise of jurisdiction over Defendant does not violate the traditional notions of fair play or substantial justice. This Court finds that Plaintiff has established a prima facie case of personal jurisdiction over Defendant.
For the foregoing reasons, this Motion is DENIED.
