Freeman v. Summit Filtration Technology, LLC

Background

Michael D. Freeman sued Summit Filtration Technology, LLC, and its owner and managing member, Stanley E. Kieffer. Freeman alleged that defendants withheld his 2020 wages and a membership distribution to pressure him to buy Kieffer’s majority interest in Summit and to increase the value of that interest. Freeman brought claims under California and Wisconsin law. The case was removed from Alameda County Superior Court to federal court based on diversity jurisdiction.

Defendants filed a partial motion seeking dismissal of Kieffer for lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2). Alternatively, they asked the court to transfer the case to the Eastern District of Wisconsin under 28 U.S.C. § 1404(a). Defendants conceded that the court had personal jurisdiction over Summit.

Personal Jurisdiction

The court explained that, because the case was based on diversity jurisdiction, it applied California law and constitutional due-process principles. On a motion based on written materials rather than an evidentiary hearing, Freeman needed to make only a prima facie showing—that is, an initial showing—of facts supporting personal jurisdiction, with factual conflicts resolved in his favor.

The court rejected Freeman’s argument that the 2013 True-Up Agreement alone established sufficient contacts between Kieffer and California. The agreement’s only link to California was Freeman’s residence, and that connection resulted from Freeman’s circumstances rather than Kieffer’s own conduct.

The court nevertheless found a sufficient initial showing under the “guiding spirit” theory. Under that theory, a corporate officer’s own contacts with the forum may support jurisdiction when the officer was the central figure behind the alleged wrongful corporate conduct. Freeman alleged that Kieffer caused Summit to withhold his wages and membership distribution for Kieffer’s financial benefit. An email from Kieffer also supported the allegation that he directed how Summit would pay wages and distribute money. Taken together, the allegations, affidavits, and email supported a prima facie showing that Kieffer was the central figure in the challenged conduct.

The court found that Freeman’s claims arose from Kieffer’s forum-related activities because, but for Kieffer’s alleged direction to withhold money, Summit would not have injured Freeman in California. The court also concluded that defendants had not presented the compelling case required to show that exercising jurisdiction would be unreasonable. Although some convenience factors favored Wisconsin, other factors favored California or counterbalanced Wisconsin’s interests.

The court rejected Freeman’s alternative alter-ego theory. Freeman had not shown that refusing to exercise jurisdiction over Kieffer based on Summit’s separate legal status would cause fraud or injustice.

Transfer of Venue

The court also declined to transfer the case to the Eastern District of Wisconsin. It found no apparent fairness or justice interest in moving the dispute between a person who lives in California and a person who lives in Wisconsin from one state to the other. Although Summit’s office was in Wisconsin, defendants did not rebut Freeman’s assertion that most or all relevant records were stored electronically and could be accessed anywhere. Defendants also did not identify with particularity which witnesses would be inconvenienced by litigating in California.

Ruling

Judge Jacquelyn Corley denied defendants’ partial motion to dismiss for lack of personal jurisdiction and declined to transfer venue. The order disposed of Docket No. 19. It addressed jurisdiction and venue, not the underlying merits of Freeman’s claims for wages or membership distributions.