E-Alert Case Updates
Court Rules It Does Not Have Personal Jurisdiction Over Non-Resident Defendants
Ohio Learning Centers, LLC v. Sylvan Learning, Inc.
Plaintiffs Ohio Learning Centers, LLC and Janet Tomaskovich (collectively “Plaintiffs”) filed a First Amended Complaint against Defendants Sylvan Learning, Inc. (“SLI”), Sylvan Learning Centers, LLC (“SLC”), Educate, Inc., Education Solutions, LLC, and Randy Rohde (“Rohde”), alleging numerous causes of action arising out of Plaintiffs’ purchase of a Sylvan Learning Center in Westlake, Ohio. Before the Court was Education Solutions, LLC, and Randy Rohde (collectively “Defendants”) Motion to Dismiss for Lack of Personal Jurisdiction.
Plaintiffs alleged that Defendants SLI and SLC fraudulently induced them to purchase, finance, and run a Sylvan Learning Center franchise located in West Lake, Ohio. Rohde, who was an Ohio resident, owned Education Solutions, LLC. ES was a limited liability company organized under the laws of Ohio and operated a number of franchised Sylvan Learning Centers in Ohio. Rohde asserted that neither he nor ES owned any property in Maryland, were licensed to do business in Maryland, nor did they pay taxes, employ anybody, or maintain bank accounts in Maryland. Notwithstanding these assertions, Plaintiffs maintained that the United States District Court for the District of Maryland could exercise personal jurisdiction over Defendants. Plaintiffs argued that Defendants had the requisite minimum contacts with Maryland so as to establish both specific and general jurisdiction. Alternatively, Plaintiffs argued that the Court had jurisdiction over Defendants under the conspiracy theory of personal jurisdiction.
State courts may exercise jurisdiction over non-resident defendants only if the defendant has “certain minimum contacts with [the State] such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.” These minimum contacts, to the extent they exist, give rise to two (2) types of adjudicatory authority—specific jurisdiction and general jurisdiction. Specific jurisdiction exists when the defendant’s contacts with the forum state give rise to the episode-in-suit. On the other hand, if the defendant’s contacts with the forum state are not the basis for the suit, a court may nevertheless exercise general jurisdiction over a forum defendant if “instances in which the continuous corporate operations within a state [are] so substantial and of such a nature as to justify suit against it on causes of action arising from dealings entirely distinct from those activities.” In other words, a court may exercise general jurisdiction over a Defendant when the non-resident maintains “continuous and systematic” contacts with the forum state.
Here, Plaintiffs alleged that Defendants were subject to both specific and general jurisdiction in Maryland based on a number of alleged contacts with the State. For example, Plaintiffs alleged that: (1) Rohde was “very well acquainted with the executive leadership of Sylvan, with its headquarters located in Maryland;” (2) “Rohde, as a member of the [Franchise Owner’s Association] Board, ha[d] quarterly meetings with the executive leadership of Sylvan at Maryland headquarters;” (3) at some point, Rohde “spent a week at Sylvan headquarters in Maryland for ‘Sylvan 101’ training;” (4) Rohde owned a number of Sylvan franchises, and therefore made regular monthly payments to Sylvan in Maryland; and (5) Rohde and his franchises were required to purchase supplies, such as books and promotional materials, from Sylvan in Maryland.
The Court held that it was abundantly clear that these isolated contacts, taken as true, did not suffice to establish specific jurisdiction over Defendants. The causes of action asserted against Defendants related to alleged tortious contact perpetrated in connection with the marketing and operation of Sylvan franchises in Ohio. The alleged contacts set forth by Plaintiffs were business dealings that did not give rise to the episode-in-suit, and the tortious contact at issue clearly did not arise out of, or relate to, Defendants’ contacts with the forum.
Further, the Court held that it was clear that the infrequent and negligible contacts between the Defendants and the State of Maryland were not sufficient to establish general jurisdiction. Defendants certainly had dealings with Sylvan and its corporate headquarters in Maryland, but those contacts could hardly be said to be “continuous and systematic.”
Put simply, the Court held that doing business with, and sending checks to a Maryland corporation is a far cry from the type of contacts necessary for a court to exercise general jurisdiction. The Fourth Circuit “has made clear that due process requires that a Defendant’s contacts with the Forum State be tantamount to physical presence there.” The Defendants’ brief contacts with the State of Maryland in this case did not amount to “physical presence” and could not be considered sufficiently “continuous and systematic” to warrant exercising general jurisdiction.
Plaintiff’s remaining ground on which to base jurisdiction—the conspiracy theory of personal jurisdiction—faired to no better. The conspiracy theory of personal jurisdiction permits a court to exercise personal jurisdiction over a non-resident defendant without sufficient contacts with the forum, if the non-resident defendant was part of a conspiracy that committed jurisdictionally sufficient acts within the forum. Plaintiffs, however, could not make the requisite prima facie showing of a civil conspiracy claim because the Amended Complaint was devoid of facts that, even if taken as true, would support a civil conspiracy claim. Without factual support, Plaintiff’s Amended Complaint was not enough to support the Court’s exercise of personal jurisdiction over Defendants. Accordingly, the Court rejected Plaintiff’s attempt to use the conspiracy theory of personal jurisdiction to hale the foreign Defendants into the Court.
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