Federal District Court Opinions

HEKMAN FURNITURE CO. v. FRONT STEEL IMPORTERS, INC.,
(W.D.Mich. 2005) HEKMAN FURNITURE CO., and NANHAI JIANTAI
WOODWORK CO., LTD., Plaintiffs, v. FRONT STEEL IMPORTERS,
INC., d/b/a SENTINEL FURNITURE INDUSTRIES, Defendant. File
No. 1:04-CV-338. United States District Court, W.D.
Michigan, Southern Division. March 30, 2005

OPINION

ROBERT BELL, Chief Judge, District

This diversity action for breach of contract, unjust
enrichment and declaratory judgment is before the Court on
Defendant’s motion to dismiss. For the reasons that follow
the motion will be granted.

I.

Plaintiff Nanhai Jiantai Woodwork Co. (“Jiantai” or “JTWW”)
is a Chinese corporation with its principal place of
business in the Peoples Republic of China.

Defendant Front Steel Importers, Inc., d/b/a Sentinel
Furniture Industries (“SFI”), is a California corporation
with its principal place of business in Palm Springs,
California. Page 2

Plaintiff Hekman Furniture Co. (“Hekman”), a wholly owned
subsidiary of Howard Miller Clock Company, is a Michigan
corporation with its principal place of business in Grand
Rapids, Michigan.

Defendant SFI operated as a distributor in the United
States for furniture manufactured by Plaintiff Jiantai. SFI
and Jiantai terminated their business relationship in the
spring of 2004.

On May 20, 2004, Plaintiffs commenced this action against
SFI. Counts I and II are claims by Jiantai against SFI for
breach of contract and unjust enrichment. Count III seeks a
declaratory judgment in favor of Jiantai and Hekman
declaring (1) that Jiantai’s termination of its business
relationship with SFI is in all respects legal and
operative; (2) that Jiantai has not breached any contract
in effect between Jiantai and SFI, and (3) that neither
Jiantai nor Hekman has tortiously interfered with SFI’s
business relations with Jiantai or Hekman.

Defendant has filed a motion to dismiss pursuant to Rules
12(b)(1), (2), (3), and (5), alleging lack of subject
matter jurisdiction, lack of personal jurisdiction,
improper venue, and insufficiency of service of process.

II.

The Court begins its consideration of the motion with the
declaratory judgment claim by Plaintiff Hekman. Defendant
SFI contends it is entitled to dismissal of Hekman’s
request for a declaratory judgment because Hekman has
failed to demonstrate any amount in Page 3 controversy
and because there is no actual controversy under which
Hekman can bring a cause of action for a declaratory
judgment.

The Declaratory Judgment Act provides that in “a case of
actual controversy within its jurisdiction” a federal court
“may” give a declaratory judgment. 28 U.S.C. § 2201.
The limitation in the Act to “cases of actual controversy,”
means that the Act is operative only in respect to
“controversies” in the constitutional sense. Aetna Life
Ins. Co. v. Haworth, 300 U.S. 227, 239-40 (1937)
(referencing U.S. Const. art. III, § 2).

A “controversy” in this sense must be one that is
appropriate for judicial determination. . . . The
controversy must be definite and concrete, touching the
legal relations of parties having adverse legal interests.
It must be a real and substantial controversy admitting of
specific relief through a decree of a conclusive
character, as distinguished from an opinion advising what
the law would be upon a hypothetical state of facts.

Kardules v. City of Columbus, 95 F.3d 1335, 1356-57 (6th
Cir. 1996) (quoting Aetna Life 300 U.S. at 240-41
(citations omitted)). “Basically, the question in each case
is whether the facts alleged, under all the circumstances,
show that there is a substantial controversy, between
parties having adverse legal interests, of sufficient
immediacy and reality to warrant the issuance of a
declaratory judgment.” Maryland Cas. Co. v. Pacific Coal &
Oil Co., 312 U.S. 270, 273 (1941).

Hekman’s request for a declaratory judgment is based upon
allegations that SFI sent a letter to Jiantai demanding
immediate payment, and, in the event of non-payment,
threatening to file a suit against Jiantai to enjoin
Jiantai from dealing with SFI customers and advising that
if Jiantai sought payment directly from SFI’s customers it
would constitute Page 4 intentional interference with
economic relations. (Compl. §§ 28-30). Hekman
has alleged that Howard Miller, Chairman and CEO of Hekman,
was copied on this letter, and that Mr. Miller also
received a letter from Mr. Good of SFI threatening to seek
an injunction against Hekman if Hekman deals directly with
Jiantai. (Compl. §§ 31-32). Based on these
communications, Hekman seeks a declaration that “neither
Jiantai nor Hekman has tortiously interfered with SFI’s
business relations with Jiantai or Hekman.” (Compl. at p.
5).

The controversy between Hekman and SFI is not appropriate
for judicial determination because it is not ripe. All
Plaintiffs have alleged is that SFI has threatened to file
suit if Jiantai does not pay SFI a certain amount of money
and if Jiantai continues to do business with SFI customers.
The threat of suit is contingent upon the occurrence of
future events, the non-occurrence of any one of which would
render the relief requested unnecessary. Because the
controversy is as yet hypothetical it is not sufficiently
definite and concrete or appropriate for judicial
determination.

Even if the controversy between Hekman and SFI could be
deemed an “actual controversy,” the Court would not be
required to exercise its jurisdiction over the dispute. The
power granted in the Declaratory Judgment Act is
permissive, not mandatory. Grand Trunk Western R. Co. v.
Consolidated Rail Corp., 746 F.2d 323, 325 (6th Cir. 1984).
“Where a federal court has jurisdiction to hear a
declaratory judgment claim, the power to do so is
discretionary, and the court may refuse to hear such a claim
on equitable grounds.” Page 5 Foundation for Interior
Design Educ. Research v. Savannah College of Art & Design,
244 F.3d 521, 526 (6th Cir. 2001).

In determining whether it is appropriate to exercise its
jurisdiction to render a declaratory judgment, courts
generally consider the following five factors:

(1) whether the judgment would settle the controversy;
(2) whether the declaratory judgment action would serve a
useful purpose in clarifying the legal relations at issue;
(3) whether the declaratory remedy is being used merely
for the purpose of “procedural fencing” or “to provide an
arena for a race for res judicata”; (4) whether the use of
a declaratory action would increase the friction between
our federal and state courts and improperly encroach on
state jurisdiction; and (5) whether there is an
alternative remedy that is better or more effective.

Scottsdale Ins. Co. v. Roumph, 211 F.3d 964, 968 (6th Cir.
2000) (citing Omaha Property & Casualty Ins. Co. v.
Johnson, 923 F.2d 446, 447-48 (6th Cir. 1991)).

It appears to this Court that the declaratory remedy is
being used merely to obtain a procedural advantage. As
noted above, the dispute between SFI and Hekman is largely
hypothetical. The heart of this action is the dispute
between Jiantai and SFI. That dispute has no ties to
Michigan. The addition of the declaratory judgment action
merely enables the Plaintiffs to force the Defendant to
litigate this California dispute in an inconvenient forum.
The Court will not participate in this ploy. See Foundation
for Interior Design, 244 F.3d at 527 (holding that a
party’s use of a declaratory judgment claim merely to
achieve a procedural advantage is a legitimate concern).
For all these reasons, the Court declines to exercise
jurisdiction over Hekman’s declaratory judgment claim.
Hekman will accordingly be dismissed as a plaintiff from
this action. Page 6

III.

Upon dismissal of Hekman, this Court is left with an action
by a Chinese corporation against a California corporation.
The Court must consider whether this is the proper venue
for such an action. A civil action where jurisdiction is
founded only on diversity of citizenship may be brought
only in

(1) a judicial district where any defendant resides, if
all defendants reside in the same State, (2) a judicial
district in which a substantial part of the events or
omissions giving rise to the claim occurred, or a
substantial part of property that is the subject of the
action is situated, or (3) a judicial district in which
any defendant is subject to personal jurisdiction at the
time the action is commenced, if there is no district in
which the action may otherwise be brought.

28 U.S.C. § 1391(a). For purposes of venue a
corporation is “deemed to reside in any judicial district
in which it is subject to personal jurisdiction at the time
the action is commenced.” 28 U.S.C. § 1391(c).
Accordingly, venue is proper in this district only if SFI
is subject to personal jurisdiction in this district.

A federal court’s exercise of personal jurisdiction in a
diversity of citizenship case must be (1) authorized by the
law of the state in which it sits, and (2) in accordance
with the Due Process Clause of the Fourteenth Amendment.
Neogen Corp. v. Neo Gen Screening, Inc., 282 F.3d 883, 888
(6th Cir. 2002) (citing Reynolds v. Int’l Amateur Athletic
Fed’n, 23 F.3d 1110, 1115 (6th Cir. 1994)). Michigan’s
“long-arm” statute extends “limited” jurisdiction over
nonresident corporations pursuant to Mich. Comp. Laws
§ 600.715, and “general” jurisdiction pursuant to
Mich. Comp. Laws § 600.711. “Limited jurisdiction
Page 7 extends only to claims arising from the defendant’s
activities that were either within Michigan or had an
in-state effect.” Neogen, 282 F.3d at 888. These activities
may include “[t]he transaction of any business within the
state,” or [e]ntering into a contract for services to be
performed or for materials to be furnished in the state by
the defendant.” M.C.L. § 600.715(1) & (5). The
Michigan long arm statute extends general personal
jurisdiction over a nonresident corporation where the
corporation carries on “a continuous and systematic part of
its general business within the state.” M.C.L. §
600.711(3).

Plaintiff Jiantai has the burden of establishing this
Court’s personal jurisdiction over Defendant SFI. Neogen,
282 F.3d at 887. However, because this Court is not
conducting an evidentiary hearing on the issue of personal
jurisdiction, Plaintiff need only make a prima facie
showing of jurisdiction. Id.

SFI is a California corporation that had its principal
place of business in Palm Springs, California, until it
closed its office in April 2004. (Good Decl. § 2).
SFI was not registered to do business in Michigan, never
had an office in Michigan, and did not employ any sales
representatives in Michigan. (Good Decl. § 3).

Jiantai has presented evidence that Mr. Good of SFI came
to Michigan to solicit Hekman’s business, that he traveled
to Michigan approximately twice a year to meet with Hekman
executives, that he communicated with Hekman by mail and by
telephone on a regular basis, and that SFI’s business with
Hekman in Michigan represents 20-25% of SFI’s total revenue
in any given year. (Miller Decl. §§ 5-7).
Page 8

Jiantai’s breach of contract and unjust enrichment claims
against SFI relate to unpaid invoices for goods that SFI
purchased from Jiantai. These claims are unrelated to any
activities by SFI in Michigan. In its declaratory judgment
claim Jiantai requests a declaration that Jiantai’s
termination of its business relationship with SFI was legal
and operative, that Jiantai has not breached any contract
with SFI, and that it has not tortiously interfered with
SFI’s business relations with Hekman. Although the issue of
interference with contractual relations bears on SFI and
Jiantai’s relationships with a Michigan firm, this issue is
secondary to the issue of whether Jiantai properly
terminated its business relationship with SFI. The
preliminary issue of Jiantai’s termination of its
relationship with SFI arose in California and/or China, not
in Michigan. The indirect impact that this preliminary
determination will have on an interference of contract
dispute in Michigan is not sufficient to show that the
declaratory judgment claim “arises out of” SFI’s
transaction of business or its contract to furnish
materials in Michigan as required for limited personal
jurisdiction.

In contrast to limited personal jurisdiction, general
jurisdiction exists when “a defendant’s contacts with the
forum state are of such a continuous and systematic nature
that the state may exercise personal jurisdiction over the
defendant even if the action is unrelated to the
defendant’s contacts with the state.” Bird v. Parsons 289
F.3d 865, 873 (6th Cir. 2002) (quoting Third Natl. Bank in
Nashville v. WEDGE Group, Inc., 882 F.2d 1087, 1089 (6th
Cir. 1989)). “A foreign corporation must actually be
present within the forum state on a regular basis, either
personally or through an independent agent, in order to be
subjected Page 9 to general personal jurisdiction.” Kircos
v. Lola Cars Ltd., 97 Mich. App. 379, 386, 296 N.W.2d 32,
35 (1980).

In Helicopteros Nacionales de Colombia, S.A. v. Hall, 466
U.S. 408 (1984), the Supreme Court considered whether due
process permitted the Texas courts to exercise general
personal jurisdiction over the nonresident defendant,
Helicol. Id. at 416. Helicol did have some contacts with
Texas, including “sending its chief executive officer to
Houston for a contract-negotiating session; accepting into
its New York bank account checks drawn on a Houston bank;
purchasing helicopters, equipment, and training services
from Bell Helicopter [located in Texas] for substantial
sums; and sending personnel to Bell’s facilities in Fort
Worth for training.” Id. However, Helicol lacked a place of
business in Texas and had never been licensed to do
business in Texas. The Court concluded that Helicol’s
contacts with Texas were insufficient to support the
exercise of general jurisdiction. Id.

The Sixth Circuit found no general personal jurisdiction
over Dotster in Bird v. Parson where there were no
allegations that Dotster had an office in Ohio, that
Dotster was licensed to do business in Ohio, that Dotster
had an Ohio bank account, that Dotster directed its
business operations from Ohio, or that any Dotster
defendants ever visited Ohio. 289 F.3d at 873-74. The Sixth
Circuit held that the allegation that 4,666 Ohio residents
registered internet domain names with Dotster failed to
establish that Dotster had a “continuous and systematic”
presence in Ohio because the registrations were similar to
the purchases that were held insufficient to establish
general jurisdiction in Helicopteros. Id. at 874. Page 10

In Kircos v. Goodyear Tire & Rubber Co., 70 Mich. App.
612, 247 N.W.2d 316 (1976), the court held that Michigan
courts could assert general personal jurisdiction over a
defendant who solicited sales in Michigan, maintained a
dealer in Michigan, realized an average of 2.78% of its
total revenue from Michigan customers, and had dozens of
sales in Michigan to customers who were among the large
industries in Michigan. Id. at 614.

Whether the fact that SFI conducts a large portion of its
business with a single customer in Michigan and makes twice
a year visits to Michigan is sufficient to permit the Court
to exercise general jurisdiction over SFI is not clear.
This Court is very skeptical as to whether or not SFI’s
contacts with a single customer constitute sufficient
minimum contacts between the nonresident defendant and
Michigan such that the exercise of personal jurisdiction
over Defendant would comport with due process and not
offend “traditional notions of fair play and substantial
justice.” See Int’l Shoe Co. v. Washington, 326 U.S. 310,
316 (1945)). It is not necessary, however, to resolve this
question because even if Jiantai has succeeded in making a
prima facie showing that this Court can exercise personal
jurisdiction over SFI, this Court is convinced that Michigan
is not the proper venue for this action.

If venue is improper, the district court may either dismiss
the case, or, if it is in the interest of justice, transfer
the case to another district where the case might have been
brought. 28 U.S.C. § 1406(a). Even if venue is
proper, a district court may nevertheless transfer it to
any other district where it might have been brought for the
convenience of parties and witnesses and in the interest of
justice. 28 U.S.C. § 1404(a). A district court may
Page 11 order a transfer of venue sua sponte. “Change of
venue pursuant to 28 U.S.C. § 1404(a) does not
require a motion; a district court may transfer a case sua
sponte.” Carver v. Knox County, Tenn., 887 F.2d 1287, 1291
(6th Cir. 1989). See also Muldoon v. Tropitone Furniture
Co., 1 F.3d 964, 966-67 (9th Cir. 1993) (describing sua
sponte transfer pursuant to section 1404(a)); Mills v.
Beech Aircraft Corporation, Inc., 886 F.2d 758, 761 (5th
Cir. 1989) (stating that a court may transfer case to
another district sua sponte under § 1404(a)). Cf.
Janis v. Ashcroft, 348 F.3d 491, 493 (6th Cir. 2003)
(holding that court could not sua sponte dismiss prisoner’s
complaint filed in wrong venue, but referencing 28 U.S.C.
§ 1404(a) which allows district courts to transfer a
case to a district court where venue is proper).

Because this case is between a Chinese corporation and a
California corporation, because the claims arise out of
their contacts in California and China, and because the
claims have no substantial connection to the State of
Michigan, this Court concludes that transferring this case
to the district where SFI had its principal place of
business in California fulfills the interests of justice
and would be more convenient for the parties and witnesses.
Accordingly, this action will be transferred to the United
States District Court for the Central District of
California.

IV.

Finally, there remains the issue of whether Defendant SFI
has been properly served. As of July 2004, the information
on file with the California Secretary of State indicated
that Page 12 the registered agent for Defendant SFI was
Robert E. Good with an address of 777 E. Tahquitz Way Ste.
200, Palm Springs, CA 92262. SFI has presented evidence
that it closed its offices at 777 E. Tahquitz Way on or
about April 1, 2004. (Good Decl. § 2). Plaintiffs’
return of service states that service was made on May 27,
2004, on the “authorized agent Robert E. Good by leaving
documents with Tracy Pollard the person in charge and able
to accept on behalf of.” On the date of service, Tracy
Pollard was employed by Ocean Properties Development Corp.
as a receptionist for the second floor executive office
suites located at 777 East Tahquitz Canyon Way, Palm
Springs, California. (Pollard Decl. § 2). She was
not employed by SFI. (Pollard Decl. § 3). Although
she told the process server that SFI no longer had an
office there, he nevertheless handed her the summons and
complaint. (Pollard Decl. § 4).

SFI has moved to dismiss this action or quash service due
to insufficient service of process. Plaintiffs have
responded that service was made by leaving the summons and
complaint with an individual at the address on file with
the Secretary of State and that Defendant SFI has received
actual notice of the complaint. Plaintiffs have not,
however, demonstrated that Pollard was authorized to accept
service of process on behalf of the corporation or that the
service of process otherwise complied with FED. R. CIV. P.
4(h) or the law of California. See CAL CIV. PROC. CODE
§ 416.10(a).

When a plaintiff does not perfect service of process within
120 days after filing the complaint the court may dismiss
the action without prejudice; however, “if the plaintiff
Page 13 shows good cause for the failure, the court shall
extend the time for service for an appropriate period.”
FED. R. CIV. P. 4(m). Because it appears that the defects
in service were due in part to SFI’s failure to maintain
accurate records on file with the California Secretary of
State, the court will quash service of process and grant
Jiantai an additional sixty days from the date of this
order to effect proper service on SFI.

An order and partial dismissal consistent with this
opinion will be entered.