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. So that none are misinformed by my posting wihtout a non de plume here, please allow me to state that I am NOT an Indiana licensed attorney, although I am an Indiana resident approved to practice law and represent clients in Indiana's fed court of Nth Dist and before the 7th circuit. I remain licensed in KS, since 1996, no discipline. This must be clarified since the IN court records will reveal that I did sit for and pass the Indiana bar last February. Yet be not confused by the fact that I was so allowed to be tested .... I am not, to be clear in the service of my duty to be absolutely candid about this, I AM NOT a member of the Indiana bar, and might never be so licensed given my unrepented from errors of thought documented in this opinion, at fn2, which likely supports Mr Smith's initial post in this thread: http://caselaw.findlaw.com/us-7th-circuit/1592921.html

  2. When I served the State of Kansas as Deputy AG over Consumer Protection & Antitrust for four years, supervising 20 special agents and assistant attorneys general (back before the IBLE denied me the right to practice law in Indiana for not having the right stuff and pretty much crushed my legal career) we had a saying around the office: Resist the lure of the ring!!! It was a take off on Tolkiem, the idea that absolute power (I signed investigative subpoenas as a judge would in many other contexts, no need to show probable cause)could corrupt absolutely. We feared that we would overreach constitutional limits if not reminded, over and over, to be mindful to not do so. Our approach in so challenging one another was Madisonian, as the following quotes from the Father of our Constitution reveal: The essence of Government is power; and power, lodged as it must be in human hands, will ever be liable to abuse. We are right to take alarm at the first experiment upon our liberties. I believe there are more instances of the abridgement of freedom of the people by gradual and silent encroachments by those in power than by violent and sudden usurpations. Liberty may be endangered by the abuse of liberty, but also by the abuse of power. All men having power ought to be mistrusted. -- James Madison, Federalist Papers and other sources: http://www.constitution.org/jm/jm_quotes.htm RESIST THE LURE OF THE RING ALL YE WITH POLITICAL OR JUDICIAL POWER!

  3. My dear Mr Smith, I respect your opinions and much enjoy your posts here. We do differ on our view of the benefits and viability of the American Experiment in Ordered Liberty. While I do agree that it could be better, and that your points in criticism are well taken, Utopia does indeed mean nowhere. I think Madison, Jefferson, Adams and company got it about as good as it gets in a fallen post-Enlightenment social order. That said, a constitution only protects the citizens if it is followed. We currently have a bevy of public officials and judicial agents who believe that their subjectivism, their personal ideology, their elitist fears and concerns and cause celebs trump the constitutions of our forefathers. This is most troubling. More to follow in the next post on that subject.

  4. Yep I am not Bryan Brown. Bryan you appear to be a bigger believer in the Constitution than I am. Were I still a big believer then I might be using my real name like you. Personally, I am no longer a fan of secularism. I favor the confessional state. In religious mattes, it seems to me that social diversity is chaos and conflict, while uniformity is order and peace.... secularism has been imposed by America on other nations now by force and that has not exactly worked out very well.... I think the American historical experiment with disestablishmentarianism is withering on the vine before our eyes..... Since I do not know if that is OK for an officially licensed lawyer to say, I keep the nom de plume.

  5. I am compelled to announce that I am not posting under any Smith monikers here. That said, the post below does have a certain ring to it that sounds familiar to me: http://www.catholicnewworld.com/cnwonline/2014/0907/cardinal.aspx

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