ILNews

COA: Court has personal jurisdiction over CIDs

Jennifer Nelson
January 1, 2008
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Indiana trial courts can assert personal jurisdiction over out-of-state companies for the purposes of enforcing an Indiana Attorney General's petition to enforce a civil investigative demand, ruled the Indiana Court of Appeals today.

In a case of first impression, the appellate court was asked to determine whether a trial court lacked personal jurisdiction over an Ohio company that had franchises located in but not registered in Indiana, and thus erred by granting the Attorney General's petition to enforce a civil investigative demand (CID).

"As the issue before us is one of jurisdiction, we leave it to the trial court to address the issue of scope pursuant to its powers as outlined in the statute. The trial court committed no error in asserting personal jurisdiction over Everdry," wrote Judge Terry Crone.

In Everdry Marketing and Management, Inc. v. Steve Carter, Attorney General of Indiana, No. 49A02-0706-CV-452, Everdry, an Ohio corporation that provides waterproofing services for homes, had franchises operating in Fort Wayne and Indianapolis. It had not filed a Uniform Franchise Registration Application with Indiana before franchising the company. After receiving complaints about the Indiana franchises failing to honor "lifetime warranties" on Everdry's waterproofing systems, the Attorney General's office found Everdry's Web site contained a very similar warranty statement as the one that appeared in the customer's contracts. Pursuant to Indiana Code Section 4-6-3-3, the Attorney General's office issued a CID upon Everdry at its Ohio office. CIDs are a pre-litigation tool to determine whether an Indiana law has been violated and address whether a subject has certain information relevant to the investigation.

The CID alleged the company may be in possession of documentary material or knowledge of fact relevant to an investigation being conducted by the Attorney General's Consumer Protection Division and an investigation sought to determine if Everdry misrepresented its warranty to customers.

A meeting took place between Everdry's counsel and the Attorney General's office. Afterwards, the company contacted customers to arrange service and revoked the franchise rights of the Indiana companies.

On June 2, 2006, the Attorney General's office filed a petition in Marion Superior Court to enforce the CID; five days later Everdry filed with Indiana a Uniform Franchise Registration Application. At the end of June, the company filed a petition to dismiss the petition to enforce the CID, claiming the trial court lacked personal jurisdiction over the Ohio company. In April 2007, the trial court heard evidence on the Attorney General's petition and entered an order in May summarily granting the petition.

The Court of Appeals unanimously agreed with the Attorney General that the Indiana trial court had personal jurisdiction over Everdry regarding the enforcement of the CID. After the Attorney General's office first sent the CID to Everdry, but before the trial court affirmed the petition to enforce it, Everdry filed its Indiana Uniform Franchise Registration Application. The Indiana registration contained specific language indicating Everdry's contractual consent to jurisdiction.

"Just as the general appearance, entered after the lawsuit is filed, constitutes consent to jurisdiction, a registration filed after the initial issuance of the CID and prior to an enforcement order constitutes consent to the court's jurisdiction," Judge Crone wrote.

Next, the appellate court examined Indiana Trial Rule 4.4(A) which names eight specific acts that can serve as a basis for an Indiana trial court's assertion of personal jurisdiction over a nonresident, including certain minimum contacts with the forum state by the nonresident defendant.

On top of the Indiana registration, Everdry engaged in significant interaction with its Indiana franchisees and their customers, the franchisees used Everdry's products, and the warranties used by their franchisees were the same as the warranty on Everdry's Web site, which is sufficient contact to establish jurisdiction.

The appellate court had to determine the operative date of inquiry as it applies to jurisdictional matters in the context of a CID; the court determined the operative date of inquiry regarding jurisdictional contacts should be the date the trial court orders the enforcement of the CID. Before the enforcement order, the CID is just a request from the Attorney General and not subject to penalties for noncompliance. Once the trial court orders enforcement, noncompliance can be enforced by a contempt citation, Judge Crone wrote.

Everdry also contended in its appeal that the scope of the CID was impermissibly broad because it sought privileged information. The section of Indiana Code dealing with CIDs does provide some safeguards to protect privileged information, such as allowing a company to not produce information for a CID that would be "privileged from disclosure if demanded by a subpoena duces tecum issued by a court in aid of a grand jury investigation," and the trial court is able to modify a CID to protect the respondent's right to confidentiality, he wrote.
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  1. It appears the police and prosecutors are allowed to change the rules halfway through the game to suit themselves. I am surprised that the congress has not yet eliminated the right to a trial in cases involving any type of forensic evidence. That would suit their foolish law and order police state views. I say we eliminate the statute of limitations for crimes committed by members of congress and other government employees. Of course they would never do that. They are all corrupt cowards!!!

  2. Poor Judge Brown probably thought that by slavishly serving the godz of the age her violations of 18th century concepts like due process and the rule of law would be overlooked. Mayhaps she was merely a Judge ahead of her time?

  3. in a lawyer discipline case Judge Brown, now removed, was presiding over a hearing about a lawyer accused of the supposedly heinous ethical violation of saying the words "Illegal immigrant." (IN re Barker) http://www.in.gov/judiciary/files/order-discipline-2013-55S00-1008-DI-429.pdf .... I wonder if when we compare the egregious violations of due process by Judge Brown, to her chiding of another lawyer for politically incorrectness, if there are any conclusions to be drawn about what kind of person, what kind of judge, what kind of apparatchik, is busy implementing the agenda of political correctness and making off-limits legit advocacy about an adverse party in a suit whose illegal alien status is relevant? I am just asking the question, the reader can make own conclsuion. Oh wait-- did I use the wrong adjective-- let me rephrase that, um undocumented alien?

  4. of course the bigger questions of whether or not the people want to pay for ANY bussing is off limits, due to the Supreme Court protecting the people from DEMOCRACY. Several decades hence from desegregation and bussing plans and we STILL need to be taking all this taxpayer money to combat mostly-imagined "discrimination" in the most obviously failed social program of the postwar period.

  5. You can put your photos anywhere you like... When someone steals it they know it doesn't belong to them. And, a man getting a divorce is automatically not a nice guy...? That's ridiculous. Since when is need of money a conflict of interest? That would mean that no one should have a job unless they are already financially solvent without a job... A photographer is also under no obligation to use a watermark (again, people know when a photo doesn't belong to them) or provide contact information. Hey, he didn't make it easy for me to pay him so I'll just take it! Well heck, might as well walk out of the grocery store with a cart full of food because the lines are too long and you don't find that convenient. "Only in Indiana." Oh, now you're passing judgement on an entire state... What state do you live in? I need to characterize everyone in your state as ignorant and opinionated. And the final bit of ignorance; assuming a photo anyone would want is lucky and then how much does your camera have to cost to make it a good photo, in your obviously relevant opinion?

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