Karalis v. Carn

Background

George Demetrius Karalis, representing himself, sued Kelly Douglas Carn, Thelma Ellen Carn, and Does 1–20. He alleged that he paid the defendants $99,180 through personal checks over several years to buy guns from their licensed gun store in Las Vegas, Nevada. According to the complaint, the defendants were supposed to hold the guns for him and provide them when requested, but he received neither the guns nor a refund.

Karalis also alleged that Kelly Carn was convicted of gun violations in federal and state court and that a Nevada state court ordered him to pay Karalis $98,189 in restitution. Karalis alleged that $76,464.81 remained unpaid after the Nevada probation office stopped collecting payments when Carn completed probation. Karalis further alleged that he had reached a $20,000 settlement with Carn in an earlier civil case, but that the settlement payment also remained unpaid.

The complaint asserted claims for breach of contract; constructive trust, unjust enrichment, and disgorgement; willful noncompliance with a criminal court’s restitution order; and an accounting.

Defendants’ motion

The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(2), arguing that the California court lacked personal jurisdiction over them. They also moved under Rule 12(b)(6), arguing that the complaint failed to state a claim on which relief could be granted.

Personal jurisdiction

Personal jurisdiction is the court’s authority over a particular defendant. Because no federal statute supplied a different rule, the court applied California’s jurisdictional law, which the court explained reaches as far as federal due-process limits.

The court considered both general and specific jurisdiction. General jurisdiction ordinarily exists where an individual is domiciled or where the person has continuous and systematic contacts with the forum that are comparable to physical presence. Karalis alleged that both defendants lived in Nevada, and he did not allege the continuous California contacts needed for general jurisdiction.

Specific jurisdiction requires a connection between the defendants’ own contacts with California and the claims. The court found that Karalis’s allegations concerned purchases made at a Nevada gun store and orders from Nevada state and federal courts. Karalis argued that California was involved because he used checks drawn on a California bank, made telephone calls from California, and hired a California attorney to draft the earlier settlement agreement. The court held that these were contacts by Karalis or by persons acting for him, not contacts the defendants themselves created with California. The defendants’ acceptance of checks from California did not establish that they conducted activities in California because they received the money in Nevada.

The court also rejected Karalis’s argument that the defendants waived their personal-jurisdiction defense by appearing in the case. The court explained that the defendants raised the defense in a motion to dismiss filed before an answer was required, so they did not waive it.

Transfer rather than dismissal

Karalis asked for permission to refile the case in federal court in Nevada. Under 28 U.S.C. § 1631, when a federal court lacks jurisdiction, it may transfer an action to a court where the action could have been brought if transfer serves the interests of justice. The court found that transfer was in the interests of justice because Karalis was representing himself, the court saw no evidence of bad faith, and both parties agreed that the District of Nevada was the appropriate forum.

Ruling

Judge Jacquelyn Corley GRANTED the defendants’ motion to dismiss for lack of personal jurisdiction and TRANSFERRED the action to the United States District Court for the District of Nevada, Las Vegas Division. Because the court lacked personal jurisdiction, it did not decide the defendants’ Rule 12(b)(6) argument that the complaint failed to state a claim.