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Marquette Business Credit, Inc. v. Internat'l Wood, Inc.: US District Court : CIVIL PROCEDURE - personal jurisdiction over borrower, guarantors, and officers limitetd guarantors; venue transfer denied

1
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Marquette Business Credit, Inc.,
Plaintiff,
v. Civil No. 08-1383 (JNE/FLN)
ORDER
International Wood, Inc., Sonak
Management LLC, Edward G. Gleason,
and Irwin A. Engelman,
Defendants.
Philip R. Schenkenberg, Esq., and Daniel J. Supalla, Esq., Briggs and Morgan, P.A., appeared
for Plaintiff Marquette Business Credit, Inc.
Steven R. Lindemann, Esq., Leonard, Street and Deinard, PA, appeared for Defendants
International Wood, LLC, Sonak Management LLC, and Edward G. Gleason.
Prairie A. Bly, Esq., Gray, Plant, Mooty, Mooty & Bennett, P.A., appeared for Defendant Irwin
A. Engelman.
Marquette Business Credit, Inc. (Marquette), brings this action against International
Wood, LLC (International Wood),1 Sonak Management LLC (Sonak), Irwin A. Engelman, and
Edward G. Gleason claiming breach of contract and conversion. The case is before the Court on
the motions of International Wood, Sonak, Gleason, and Engelman (collectively, Defendants) to
dismiss for lack of personal jurisdiction and improper venue, or in the alternative, to transfer
venue.2 For the reasons set forth below, the Court denies the motions.
1 Although the caption identifies International Wood as International Wood, Inc.,
International Wood stated in its Motion to Dismiss the Amended Complaint that it is misnamed
in the caption and that its proper name is International Wood, LLC.
2 International Wood, Sonak, and Gleason bring a joint motion while Engelman brings a
separate motion.
2
I. BACKGROUND
Marquette is a Minnesota corporation with its registered office in Minneapolis and
regional offices in Minnesota, Texas, and California. Marquette also has loan production offices
in several cities, including New York. International Wood is a Delaware limited liability
company that was formed in 2005 to acquire and operate a factory in Weslaco, Texas. Eighty
percent of International Wood is owned by Sonak, a Delaware limited liability company with its
principal place of business in New York. Sonak is owned by Gleason and his wife, both citizens
of New York.3 The remaining twenty percent of International Wood is owned by Engelman, a
citizen of New York. Gleason is the chairman of the board and chief executive officer of
International Wood. Engelman is the president and chief financial officer of International Wood.
Engelman and Gleason reside in New York.
During its operation, the International Wood factory produced wooden slats for window
coverings. International Woods former customers are primarily located in Texas, Arizona, and
New Jersey. After International Wood acquired the factory, its largest customer was Hunter
Douglas, a manufacturer of window coverings. The main Hunter Douglas facility was located in
Weslaco.
In 2006, International Wood sought to refinance its existing debt. Toward that end,
International Wood and Marquette entered into discussions about a lending transaction. The
initial contact between the two entities was between Gleason and Calvin Navatto, a loan officer
in Marquettes New York loan production office. According to Gleason, Navatto contacted him
and said that Marquette was a Texas-based bank that was interested in the transaction because
Marquette and International Wood were both located in Texas. Although Navatto was located in
3 Gleasons wife is not a party to this lawsuit.
3
New York, Jay Jensen, the regional vice-president of Marquettes Minnesota office, stated in an
affidavit that Navatto reported to him and that Marquettes Minnesota office supervised the New
York loan production office. According to Jensen, Navatto transferred the loan to Mike
Frodermann for underwriting and presentation to Marquettes Minnesota credit committee.
Frodermann was located in Minnesota and also reported to Jensen. The Minnesota credit
committee approved proceeding with the loan.
An affidavit submitted by Marquette vice-president Julie Lovaas states that she was
responsible for the loan after it received approval from the credit committee to its closing.
Lovaass affidavit and the accompanying exhibits indicate that she and representatives of
International Wood, including Gleason, communicated over the telephone, via e-mail, and by
written correspondence during that time. Lovaas was located in Minnesota, and her e-mail
signature block gives the address of Marquettes Minnesota office as her address. Gleason sent
at least one letter to Lovaas at Marquettes Minnesota address in connection with the closing.
Gleason submitted an affidavit stating that he participated in loan negotiations through face-toface
meetings with Marquette representatives in New York and telephone conversations with
Marquette representatives located in New York and Texas. In a supplemental affidavit, Gleason
stated that representatives of International Wood had contact with Minnesota employees of
Marquette over the telephone, via e-mail, and by written correspondence.
The loan closed in New York on August 9, 2007. According to Lovaass affidavit,
Navatto represented Marquette at the closing, but Lovaas executed the loan agreement in
Minnesota on behalf of Marquette. Lovaas also states that she and Gleason communicated over
the telephone on the day of closing. The parties executed several documents in connection with
the closing. Marquette and International Wood executed a loan and security agreement and
4
revolving promissory note (loan agreement). Sonak executed a limited guaranty and a
subordination agreement. Gleason and Engelman each executed a limited guaranty and a
validity and support agreement (VSA). The loan agreement, subordination agreement, VSAs,
and limited guaranties all identify Marquette as a Minnesota corporation and include Minnesota
choice-of-law clauses. In addition, the loan agreement, subordination agreement, and limited
guaranties include consents to jurisdiction and venue in Minnesota.
Pursuant to the terms of the loan, Marquette provided funding to International Wood on a
revolving basis. The loan was secured by International Woods inventory and accounts
receivable. The credit available to International Wood (borrowing base) was based on
International Woods eligible inventory and accounts receivable. The borrowing base therefore
changed as the value of the eligible inventory and accounts receivable fluctuated over time.
According to the loan agreement, International Wood was required to send a borrowing base
certificate to Marquette when International Wood wanted an advance on its credit. The loan
agreement gave the address of Marquettes Minnesota office as Marquettes address and required
International Wood to submit the borrowing base certificate so that it was received by Marquette
no later than 12:00 noon, Minneapolis, Minnesota time. Lovaas instructed Thomas Hickey,
International Woods controller, via an e-mail on the day of closing to send borrowing base
certificates to Marquettes MBC Reporting MN e-mail address so that Marquettes collateral
analyst could access the borrowing base certificates. The collateral analyst was located in
Minnesota. Lovaass affidavit states that Hickey e-mailed borrowing base certificates to
Minnesota when International Wood wanted to draw on its credit. The affidavits of Lovaas and
Jensen state that Marquettes Minnesota office administered the loan.
5
On October 16, 2007, Marquette sent a notice of default to International Wood resulting
from International Woods failure to provide audited financial statements to Marquette as
required by the loan agreement. The October 16 notice of default is on letterhead that gave the
address of Marquettes Minnesota office as Marquettes address (Marquette-Minnesota
letterhead). On October 23, 2007, Marquette and Defendants executed a temporary forbearance
agreement relating to the October 16 notice of default in which one of the conditions for
Marquettes forbearance was delivery of the forbearance agreement, after execution by all
Defendants, to Marquette by close of business on October 24, 2007.
At the end of 2007, International Wood discovered that it had overstated its accounts
receivable from Hunter Douglas. According to International Wood, the overstatement resulted
from billing errors that occurred when International Wood re-worked product for Hunter
Douglas and sent out an invoice for the re-worked product without creating a corresponding
credit for the returned product. International Wood notified Marquette of the overstatement. As
a result of this overstatement, Marquette deemed that certain Hunter Douglas receivables were
no longer eligible for inclusion in the borrowing base.
On December 19, 2007, Gleason and Lovaas spoke on the telephone regarding
International Woods request for funding in excess of that permitted under the loan documents
(overadvance). After Lovaas received a borrowing base certificate from Hickey later that day
indicating that the amount of the overadvance was 8,000, Marquette senior vice-president
Raul Booton, who was based in Minnesota, Lovaas, Jensen, and Gleason participated in a
telephone call during which Marquette required additional security before providing the
overadvance. Also on December 19, Marquette, International Wood, and Gleason executed a
temporary forbearance agreement in which the conditions for Marquettes forbearance included
6
delivery of the forbearance agreement, after execution by International Wood and Gleason, and
delivery of a forbearance guaranty executed by Gleason to Marquette by close of business on
December 19.4 The December 19 forbearance agreement also required delivery of Sonaks and
Engelmans acknowledgments of the December 19 forbearance agreement to Marquette by close
of business on December 21 for Marquettes continued forbearance. The December 19
forbearance agreement is on Marquette-Minnesota letterhead and contains a Minnesota choiceof-
law provision. The forbearance guaranty executed by Gleason contains a Minnesota choiceof-
law provision and a clause consenting to jurisdiction and venue in Minnesota.
On December 26, 2007, Marquette and Defendants executed a letter agreement in which
Marquette agreed to waive all breaches and defaults of the loan agreement arising from
International Woods transfer of its option to purchase the Weslaco factory to an entity owned by
Sonak and Engelman. Execution of the letter agreement by all Defendants was a condition
precedent to Marquettes waiver. The December 26 letter agreement is on Marquette-Minnesota
letterhead.
The parties participated in work-out discussions concerning the loan agreement through
e-mail and over the telephone between January and March 2008. These discussions involved
Marquette chief executive officer Jim Casper, who was based in Dallas, Lovaas, Jensen,
Marquettes Minnesota-based counsel, and Gleason. Lovaas and Gleason exchanged e-mails
during these discussions. In addition, Marquette and Defendants executed an agreement
extending Marquettes December 19 forbearance on January 21, 2008, and a second extension
agreement on February 13, 2008. The January 21 and February 13 extension agreements are on
4 Gleason contends that Marquette pressured him to sign the forbearance guaranty without
reading it and without benefit of counsel. Gleason does not link this contention to the issues of
jurisdiction and venue raised by his motion; the Court therefore declines to address his
allegations.
7
Marquette-Minnesota letterhead. The execution of each extension agreement by all Defendants
was a condition precedent to Marquettes extension of its forbearance. Marquette also required
Gleason to acknowledge his forbearance guaranty on January 21 and February 13.
The work-out discussions broke down in the spring of 2008, and Marquette filed suit on
May 20, 2008. Marquette asserts claims against International Wood for breach of the loan
agreement, against Gleason for breach of his forbearance guaranty, limited guaranty, and VSA,
against Engelman for breach of his limited guaranty and VSA, and against Sonak for breach of
its limited guaranty and subordination agreement. Marquette also asserts a claim for conversion
against Sonak in which Marquette alleges that Sonak has failed to turn payments it received from
International Wood over to Marquette in violation of the subordination agreement.
II. DISCUSSION
Defendants raise two arguments in support of their motions to dismiss. First, Defendants
contend that the Court lacks personal jurisdiction over them. Second, Defendants contend that
venue in the District of Minnesota is improper. In the alternative, Defendants move to transfer
this action to the United States District Court for the Southern District of Texas.5
A. Personal Jurisdiction
Marquette asserts that the Court has jurisdiction over Defendants by virtue of the
consents to jurisdiction and venue contained in the loan documents. Marquette also asserts that
the Court may exercise jurisdiction over Defendants pursuant to Minnesotas long-arm statute,
Minn. Stat. 543.19 (2006). Defendants respond that this action falls outside of the scope of the
clauses consenting to jurisdiction and venue and, in the alternative, that enforcement of the
clauses would be unreasonable even if this action fell within their scope. In addition, Defendants
5 Engelmans opening memorandum in support of his motion sought transfer to the
Northern District of Texas. In his reply, he clarified that he seeks transfer to the Southern
District of Texas, the District in which Weslaco is located.
8
contend that they do not have sufficient minimum contacts with Minnesota to permit the Court to
exercise jurisdiction over them. For the reasons explained below, the Court concludes that
Marquette has made a prima facie case that the Court may exercise personal jurisdiction over
Defendants regardless of whether this action falls within the scope of the clauses consenting to
jurisdiction and venue. The Court therefore declines to determine whether the clauses apply to
Marquettes claims.
To survive a motion to dismiss for lack of personal jurisdiction, a plaintiff must establish
a prima facie case that the forum state has personal jurisdiction over the defendant. Digi-Tel
Holdings, Inc. v. Proteq Telecomms. (PTE), Ltd., 89 F.3d 519, 522 (8th Cir. 1996). A court must
view the evidence in the light most favorable to the plaintiff when deciding whether the plaintiff
has made the requisite showing. Id. The court must determine whether the exercise of personal
jurisdiction over a non-resident defendant complies with the state long-arm statute, and if so,
whether it comports with due process. Id. Minnesotas long-arm statute, Minn. Stat. 543.19,
confers jurisdiction to the fullest extent permitted by due process. Coen v. Coen, 509 F.3d 900,
905 (8th Cir. 2007); In re Minn. Asbestos Litig., 552 N.W.2d 242, 246 (Minn. 1996). The Court
therefore need only consider whether the requirements of due process are satisfied to resolve the
jurisdictional challenges. Wessels, Arnold & Henderson v. Natl Med. Waste, Inc., 65 F.3d 1427,
1431 (8th Cir. 1995); Valspar Corp. v. Lukken Color Corp., 495 N.W.2d 408, 411 (Minn. 1992).
Due process allows a court to exercise personal jurisdiction over a non-resident defendant
if the defendant has certain minimum contacts with [the forum state] such that the maintenance
of the suit does not offend traditional notions of fair play and substantial justice. Intl Shoe
Co. v. Washington, 326 U.S. 310, 316 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463
(1940)). The defendants contacts with the state must be such that the defendant should
9
reasonably anticipate being haled into court there. World-Wide Volkswagen Corp. v. Woodson,
444 U.S. 286, 297 (1980). Unilateral activity by one who claims a relationship with the
defendant does not satisfy the minimum contacts requirement. Hanson v. Denckla, 357 U.S.
235, 253 (1958). Instead, the defendant must act so as to purposefully avail[] itself of the
privilege of conducting activities within the forum State, thus invoking the benefits and
protections of its laws. Id. Personal jurisdiction depends upon a defendants contacts with
the forum in the aggregate, not individually and the totality of the circumstances. Nw.
Airlines, Inc. v. Astraea Aviation Servs., Inc., 111 F.3d 1386, 1390 (8th Cir. 1997) (quoting
Northrup King Co. v. Compania Productora Semillas Algondoneras Selectas, S.A., 51 F.3d 1383,
1388 (8th Cir. 1995)). When determining whether it may exercise personal jurisdiction in a
contract case, a court must consider the parties prior negotiations, contemplated future
consequences and actual course of dealings. St. Jude Med., Inc. v. Lifecare Intl, Inc., 250 F.3d
587, 591 (8th Cir. 2001). A court must also take into account the terms of the contract. Id.
Five factors determine whether the exercise of personal jurisdiction over a defendant
comports with due process. See Nw. Airlines, 111 F.3d at 1390. The factors are: (1) the nature
and quality of the contacts with the forum state; (2) the quantity of contacts with the forum state;
(3) the relation of the cause of action to the contacts; (4) the forum states interest in providing a
forum for its residents; and (5) the convenience of the parties. Id. The last two factors are
secondary. Id.
The third factor distinguishes general jurisdiction from specific jurisdiction. See Wessels,
65 F.3d at 1432 n.4. The defendants maintenance of continuous and systematic contacts with a
state may subject it to the states general jurisdiction, that is, the state may assert personal
jurisdiction over the defendant in a suit regardless of where the cause of action arose. See id.
10
Specific jurisdiction refers to the states assertion of personal jurisdiction over a defendant in a
suit that arises out of or relates to the defendants contacts with the state. See id. Here,
Marquette contends that the Court has specific jurisdiction over Defendants. The Court
considers each Defendant in turn.
1. International Wood
International Wood contends that the Court lacks personal jurisdiction over it because it
has no customers in Minnesota, has never received any revenue from Minnesota, and has never
transacted business in Minnesota. Marquette responds that the Court may exercise jurisdiction
over International Wood because International Wood repeatedly contacted Marquette and its
employees in Minnesota by negotiating and entering into a contract that resulted in a significant,
on-going revolving loan made by a Minnesota company and serviced by its Minnesota office.
The Court first considers the nature and quality of International Woods contacts with
Minnesota. International Wood entered into a loan agreement that required it to send borrowing
base certificates to Marquette to obtain advances on its credit. The loan agreement also required
International Wood to furnish Marquette with schedules of accounts payable and inventory on a
monthly basis and borrowing base certificates [n]ot less often than weekly. The loan
agreement gave the address of Marquettes Minnesota office as Marquettes address, required
notices to be sent to that address, and defined the relevant time for receipt of the borrowing base
certificates and the timing of International Woods payments according to Minnesota time. It
also defined business day as any day on which commercial banks in Minneapolis, Minnesota,
are open for business. The loan agreements inclusion of a Minnesota choice-of-law clause,
while insufficient on its own to create personal jurisdiction, is an important factor in
determining whether [International Wood] purposely availed itself in [Minnesota]. See id. at
1434. Moreover, International Wood cannot reasonably be surprised that it is being haled into
11
court in Minnesota for an alleged breach of the loan agreement when the loan agreement
contains a clause in which International Wood consented to jurisdiction in Minnesota. In
addition, International Wood had repeated contacts with Lovaas, a Minnesota-based employee of
Marquette, over the telephone, via e-mail, and by written correspondence that were related to the
formation and performance of the loan agreement. While mail and telephone contacts alone are
insufficient to confer personal jurisdiction, they are relevant when determining whether
International Wood purposely availed itself of the privilege of doing business in Minnesota. See
id.
International Wood had contacts with Minnesota in addition to its execution and
performance of the loan agreement. Specifically, International Wood executed the October 23
forbearance agreement, the December 19 forbearance agreement, the December 26 letter
agreement, and the two extensions of the December 19 forbearance agreement. The December
19 forbearance agreement and December 26 letter agreement include Minnesota choice-of-law
clauses. Finally, International Wood participated in work-out discussions that included
Minnesota-based employees of Marquette in the spring of 2008.
The preceding description of the record indicates that International Woods contacts with
Minnesota are not random, fortuitous, or attenuated. Instead, they evince an intentional and ongoing
relationship between International Wood and Minnesota-based employees of Marquette.
Accordingly, the nature and quality of International Woods contacts with Minnesota favor the
exercise of personal jurisdiction over International Wood. See, e.g., St. Jude Med., 250 F.3d at
591-93 (finding that contract that contemplated an ongoing relationship requiring regular
communications between non-resident defendant and resident plaintiff supported the exercise of
personal jurisdiction); Wessels, 65 F.3d at 1433-34 (finding that corporations systematic
12
business relationship with Minnesota resident and numerous mail and telephone contacts
supported exercise of personal jurisdiction).
As to the second factor, the quantity of contacts, it is evident from the preceding
description of the nature and quality of International Woods contacts with Minnesota that
International Woods contacts with Minnesota were numerous. This factor supports the Courts
exercise of personal jurisdiction over International Wood.
The Court turns to the relationship between Marquettes cause of action and International
Woods contacts with Minnesota.6 In doing so, the Court first addresses International Woods
contention that Marquettes causes of action focus on activities that occurred in Texas, not in
Minnesota, because Marquette alleges a fraudulent scheme to conceal International Woods
accounts receivable and inventory.7 The Courts review of the Amended Complaint reveals that
Marquette alleges that International Wood breached the loan agreement by failing to repay the
amounts it owed Marquette under the loan agreement. Marquettes claim for breach of the loan
agreement therefore directly relates to International Woods contacts with Minnesota. This
factor supports the Courts exercise of jurisdiction over International Wood.
The Court next considers the forum states interest in the litigation. International Wood
contends that Minnesota has no interest in providing a forum for Marquette because Marquette is
6 Defendants contend that [b]ecause the Defendants have no contacts with Minnesota, it
follows that there is no relation between any such contacts and Marquettes causes of action.
As illustrated by the Courts description of Defendants contacts with Minnesota, this argument
is without merit.
7 Defendants repeatedly characterize Marquettes claims as those of a fraudulent scheme or
conspiracy to defraud. In doing so, Defendants rely heavily on a now-withdrawn discovery
motion filed by Marquette in July 2008. Eight of the nine claims in Marquettes Amended
Complaint, however, are straightforward claims for breach of contract and the ninth is a claim
for conversion based on Sonaks alleged receipt of funds in violation of the subordination
agreement. The Court declines to read allegations made in a withdrawn discovery motion into
the Amended Complaint.
13
headquartered in Texas and pleaded its complaint so that all of the relevant facts, witnesses, and
records are centered in southern Texas. The Court is not persuaded. Minnesota has an interest in
providing a forum for Marquettea Minnesota corporation having significant operations in
Minnesotato litigate claims arising out of a loan agreement which was negotiated in part by
Minnesota employees of Marquette and serviced by Marquettes Minnesota office. This factor
supports the exercise of jurisdiction over International Wood.
As to the fifth factor, the convenience of the parties, Marquette asserts that all of its
records and substantially all of its witnesses are located in Minnesota. International Wood
asserts that all of its records and virtually all of its witnesses are located in Texas. Whatever
inconvenience International Wood may undergo by being required to litigate in Minnesota is
equaled by the inconvenience Marquette would undergo by being forced to litigate in another
state. Moreover, Marquette is entitled to select the litigations forum. See Northrup, 51 F.3d at
1389. This factor slightly favors Marquette.8
International Wood makes additional arguments against the Courts exercise of personal
jurisdiction. First, International Wood contends that none of its representatives entered
Minnesota in connection with the loan agreement. The absence of physical entry into Minnesota
is insufficient reason to permit International Wood to avoid the Courts exercise of jurisdiction.
See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476 (1985) (Jurisdiction in these
circumstances may not be avoided merely because the defendant did not physically enter the
forum State.). Second, International Wood contends that Marquette approached International
Wood rather than International Wood reaching out to Marquette. Regardless of who initiated the
relationship, however, International Woods active pursuit of a business relationship with
8 The Court addresses the convenience of the parties in more detail in the context of
Defendants motions to transfer venue.
14
Marquette that involved repeated communications with Marquettes Minnesota-based employees
supports the Courts exercise of personal jurisdiction. See Wessels, 65 F.3d at 1433.
The Court concludes that Marquette has made a prima facie showing that International
Wood is subject to the specific jurisdiction of the Court. Accordingly, the Court denies
International Woods motion to dismiss for lack of personal jurisdiction.
2. Sonak
Sonak contends that the Court may not exercise jurisdiction over it because it has never
transacted business in Minnesota, it owns no property in Minnesota, and none of its
representatives have ever traveled to Minnesota on business. Marquette responds by
enumerating Sonaks contacts with Minnesota and asserting that analysis of the five factors
demonstrates that the Court may exercise jurisdiction over Sonak.
The Court first considers the nature and quality of Sonaks contacts with Minnesota. In
doing so, the Court is mindful that the Eighth Circuit has held that non-resident guarantors of a
contractual obligation have had insufficient contact with a forum state to confer jurisdiction. See
Ark. Rice Growers Coop. Assn v. Alchemy Indus., Inc., 797 F.2d 565, 573 (8th Cir. 1986) (The
mere fact that the individual defendants guaranteed an obligation to an Arkansas corporation
does not subject the guarantors to jurisdiction in Arkansas.). In so holding, however, the Eighth
Circuit distinguished cases where courts had exercised personal jurisdiction over non-resident
guarantors. Id. at 573-74. In the distinguished cases, there was substantive identity of the
guarantors and the corporation whose obligation they guaranteed, evidence that the beneficiary
of the guarantee contract would not have entered into the transaction without the guarantees of
specific individuals, or a provision in the guarantee contract or the underlying contract stating
that the law of the forum state would control. Id. All three of those factors are present with
respect to Sonak.
15
First, there is substantive identity of International Wood and Sonak, which owns eighty
percent of International Wood. Second, the limited guaranty and subordination agreement
executed by Sonak were listed as closing requirements in the loan agreement, suggesting that
Marquette would not have entered into the loan agreement without Sonaks guaranty and
subordination agreement. Third, Sonaks limited guaranty and subordination agreement each
contain a Minnesota choice-of-law clause and consents to jurisdiction and venue in Minnesota,
as does the underlying loan agreement. All of these factors support the Courts exercise of
jurisdiction over Sonak. Cf. id.
Sonak had contacts with Minnesota beyond its execution of the limited guaranty and
subordination agreement in that it also executed the October 23 forbearance agreement, the
December 19 forbearance agreement, the December 26 letter agreement, and the two extensions
of the December 19 forbearance agreement. Sonaks execution of those agreements was
required for Marquettes forbearance from exercising its rights under the loan agreement.
Moreover, the December 19 forbearance agreement and the December 26 letter agreement
contain Minnesota choice-of-law clauses. The Court concludes that the nature and quality of
Sonaks contacts with Minnesota support the Courts exercise of personal jurisdiction over
Sonak.
As to the second factor, it is clear that Sonak had multiple contacts with Minnesota. This
factor favors the Courts exercise of personal jurisdiction over Sonak.
The Court next considers the connection between the cause of action and Sonaks
contacts with Minnesota. Marquette claims that Sonak breached the limited guaranty because
Sonak failed to pay the amount due pursuant to the limited guaranty after receiving notice of
International Woods default. Marquette also asserts claims for breach of the subordination
16
agreement and conversion against Sonak in which Marquette alleges that Sonak has received
payments from International Wood and has refused to turn those payments over to Marquette in
violation of the subordination agreement. These claims are directly related to Sonaks contacts
with Minnesota. This factor supports the Courts exercise of personal jurisdiction over Sonak.
As to the fourth factor, as discussed with respect to International Wood, Minnesota has an
interest in providing a forum for Marquette to litigate claims against Sonak, a non-resident. This
factor weighs in favor of exercising jurisdiction over Sonak.
Finally, with respect to the fifth factor, it appears that Sonak will be inconvenienced
regardless of whether the suit proceeds in Minnesota or in Texas because Sonak is a Delaware
corporation having a principal place of business in New York and whose members are residents
of New York. Moreover, a plaintiff is normally entitled to select the litigations forum. See
Northrup, 51 F.3d at 1389. This factor supports the exercise of jurisdiction over Sonak.
The Court concludes that Marquette has made a prima facie showing that the exercise of
personal jurisdiction over Sonak comports with due process. The Court therefore denies Sonaks
motion to dismiss for lack of personal jurisdiction.
3. Gleason
Gleason contends that he has never transacted any business in Minnesota, owns no
property in Minnesota, has never traveled to Minnesota in connection with any of the events
giving rise to this lawsuit, and has not been to Minnesota for more than ten years. Marquette
responds with a list of Gleasons contacts with Minnesota and asserts that analysis of the five
factors demonstrates that the Court may exercise jurisdiction over Gleason.
When considering Gleasons contacts with Minnesota, the Court is mindful that a
corporate officers contacts with a forum state are not to be judged according to the
corporations activities there; rather, each defendants contacts with the forum state must be
17
assessed individually. Minn. Mining & Mfg. Co. v. Rauh Rubber, Inc., 943 F. Supp. 1117, 1122
(D. Minn. 1996), affd, 130 F.3d 1305 (8th Cir. 1997). Here, the VSA executed by Gleason
identifies him as an officer of International Wood and indicates that he entered into the VSA to
induce [Marquette] to make advances and extend other financial accommodations to or for the
account of [International Wood] under the Loan Agreement. Gleasons VSA and limited
guaranty are listed as closing requirements in the loan agreement and contain Minnesota choiceof-
law clauses. The limited guaranty contains a consent to jurisdiction and venue in Minnesota,
as does the underlying loan agreement. The nature and quality of these contacts support the
Courts exercise of jurisdiction over Gleason. Cf. Ark. Rice Growers, 797 F.2d at 573-74.
Gleason engaged in contacts with Minnesota in addition to his execution of the VSA and
limited guaranty. He communicated with Lovaas regarding the formation and performance of
the loan agreement over the telephone, via e-mail, and by written correspondence. He executed
the loan agreement and subsequent agreements on behalf of International Wood and spoke with
Lovaas over the telephone on the day of closing. Gleason called Lovaas in Minnesota on
December 19, 2007, to request the overadvance for International Wood. It was this request that
resulted in Gleasons execution of the December 19 forbearance agreement, which contains a
Minnesota choice-of-law clause, and the forbearance guaranty, which contains a Minnesota
choice-of-law clause and a clause in which he consented to jurisdiction and venue in Minnesota.
Gleason also executed the October 23 forbearance agreement, the December 26 letter agreement,
the two extensions of the December 19 forbearance agreement, and the two acknowledgements
of his forbearance guaranty. Gleasons execution of those agreements was required for
Marquette to forbear exercising its rights under the loan agreement. Finally, Gleason
participated in the work-out discussions with Minnesota-based employees of Marquette. The
18
Court concludes that the nature and quality of Gleasons contacts with Minnesota support the
Courts exercise of personal jurisdiction over him.
As the preceding description makes clear, Gleason had numerous contacts with
Minnesota. The quantity of Gleasons contacts with Minnesota therefore favors the Courts
exercise of personal jurisdiction over him.
The Court next considers the connection between the cause of action and Gleasons
contacts with Minnesota. Marquette asserts claims against Gleason for breach of the limited
guaranty and breach of the forbearance guaranty. Marquette alleges in its Amended Complaint
that Marquette has provided notice of International Woods default to Gleason and Gleason has
failed to make the payments due under the guaranties. These claims are directly related to
Gleasons contacts with Minnesota.
Marquette also asserts a claim against Gleason for breach of his VSA. Gleason
characterizes Marquettes claims against Gleason as common-law tort claims because Marquette
alleges fraud and misrepresentation by Gleason or Hickey in its claim for breach of the VSA.
Gleason contends that he could not have anticipated litigating an action in Minnesota that
includes claims of fraud and misrepresentation. Based on its review of the VSA, the Court is not
persuaded. Gleason represented in paragraph 9 of the VSA that to the best of his knowledge, the
present and future accounts securing the loan were valid and arose out of a bona fide sale; that
proper entries had been made in International Woods books; and that the amount of the accounts
represented by International Wood as owing by customers was correct. The VSA states that if
any of the representations set forth [in] Paragraph 9 are materially false or misleading when
made, [Gleason] shall be liable to [Marquette] for [Marquettes] actual damages and that
[Gleason] shall hold [Marquette] harmless for any actual loss, cost, expense, claim and damage
19
. . . arising out of fraud or misrepresentation made by [Gleason] (or by any employee . . . of
[International Wood] under the direct supervision of [Gleason]) with respect to the Collateral or
[International Woods] financial statements. Given this language, Gleason could have
reasonably anticipated that any claim for breach of the VSA would necessarily include
allegations of fraud and misrepresentation. Moreover, in light of the clauses consenting to
jurisdiction and venue in Minnesota in the underlying loan agreement and Gleasons limited
guaranty, as well as Gleasons additional contacts with Minnesota, Gleason could have
reasonably expected to be sued for breach of the VSA in Minnesota. See Nw. Airlines, Inc., 111
F.3d at 1391 (consent-to-jurisdiction clause in one of three contracts at issue and other contacts
with forum state showed defendant purposefully availed itself in the forum state and could have
reasonably expected to be sued there). The Court concludes that Marquettes claim for breach of
the VSA is directly related to Gleasons contacts with Minnesota.
As to the fourth and fifth factors, these factors support the Courts exercise of jurisdiction
over Gleason, a New York resident, for the same reasons as those given with respect to Sonak.
The Court concludes that Marquette has made a prima facie showing that Gleasons contacts
with Minnesota support the exercise of specific jurisdiction over him. The Court denies
Gleasons motion to dismiss for lack of personal jurisdiction.
4. Engelman
Engelman contends that the Court does not have jurisdiction over him because he has
never lived or worked in Minnesota, does not own or lease property in Minnesota, has only been
to Minnesota one time, fifteen years ago, for reasons unrelated to the present matter or to
International Wood, does not maintain an office to receive process in Minnesota, and does not
employ anyone in Minnesota. Engelman also contends that his isolated contact with
Marquette through the execution of the limited guaranty is insufficient to support the Courts
20
exercise of jurisdiction over him. Marquette responds by enumerating Engelmans contacts with
Minnesota and asserting that due process permits the Court to exercise jurisdiction over
Engelman.
Engelman executed a limited guaranty and VSA in connection with the loan agreement.
There is substantive identity between International Wood and Engelman, who owns twenty
percent of International Wood. The VSA states that Engelman entered into the VSA to induce
[Marquette] to make advances and extend other financial accommodations to or for the account
of [International Wood] under the Loan Agreement. The limited guaranty and VSA are listed
as closing requirements in the loan agreement. Engelman is identified as an officer of
International Wood in the VSA. The limited guaranty and VSA contain Minnesota choice-oflaw
clauses. The limited guaranty contains a clause consenting to jurisdiction and venue in
Minnesota, as does the underlying loan agreement. While the VSA does not contain such a
clause, Engelman could have reasonably expected to be sued for breach of the VSA in Minnesota
given its close relation to the loan agreement and limited guaranty. See id. The nature and
quality of these contacts support the Courts exercise of jurisdiction over Engelman. Cf. Ark.
Rice Growers, 797 F.2d at 573-74.
Moreover, Engelman had contacts with Minnesota in addition to his execution of the
limited guaranty and VSA. He executed the October 23 forbearance agreement, the December
19 forbearance agreement, the December 26 letter agreement, and the two extensions of the
December 19 forbearance agreement. Engelmans execution of those agreements was required
for Marquette to forbear exercising its rights under the loan agreement. The Court concludes that
the nature and quality of Engelmans contacts with Minnesota support the Courts exercise of
jurisdiction over him.
21
As to the second factor, Engelman had multiple contacts with Minnesota. The quantity of
Engelmans contacts with Minnesota supports the Courts exercise of personal jurisdiction over
Engelman.
The Court next considers the connection between the cause of action and Engelmans
contacts with Minnesota. Marquette asserts claims against Engelman for breach of his limited
guaranty and VSA. For the reasons given with respect to Gleason, the Court concludes that
Marquettes claims against Engelman are directly related to his contacts with Minnesota.
As to the fourth and fifth factors, these factors support the Courts exercise of jurisdiction
over Engelman, a New York resident, for the same reasons given with respect to Sonak.9 The
Court concludes that Marquette has made a prima facie showing that the exercise of personal
jurisdiction over Engelman comports with due process. The Court therefore denies Engelmans
motion to dismiss for lack of personal jurisdiction.
B. Venue
Defendants move to dismiss this action pursuant to Rule 12(b)(3) of the Federal Rules of
Civil Procedure on the ground that venue is not proper in Minnesota or, in the alternative, to
transfer venue to the Southern District of Texas pursuant to 28 U.S.C. 1404(a) (2006).
1. Defendants Motions to Dismiss
A court in which is filed a case laying venue in the wrong division or district shall
dismiss, or if it be in the interest of justice, transfer such case to any district or division in which
the case could have been brought. 28 U.S.C. 1406(a) (2006). In a civil action where
jurisdiction is founded solely on diversity, venue is proper in a judicial district in which a
9 Engelman asserts that Marquette, a Minnesota corporation, is not even a resident of
Minnesota, apparently on the ground that Marquettes principal place of business is located in
Dallas. He cites no authority for this proposition. The Court declines to conclude that an entity
incorporated in Minnesota is not a resident of Minnesota.
22
substantial part of the events or omissions giving rise to the claim occurred. 28 U.S.C.
1391(a)(2) (2006).
Defendants assert that a substantial part of the events giving rise to Marquettes claims
occurred in Texas. When determining whether venue is proper, however, the Court does not ask
which district among two or more potential forums is the best venue. Pecoraro v. Sky Ranch
for Boys, Inc., 340 F.3d 558, 563 (8th Cir. 2003). Instead, the Court asks whether the district
selected by the plaintiff had a substantial connection to the claims, regardless of whether other
forums had greater contacts. Id.
Here, Minnesota-based employees of Marquette, a Minnesota corporation, approved the
loan and directed the loan from its approval by the credit committee to its closing. The record
shows that numerous communications concerning the formation and performance of the loan
agreement took place between Minnesota-based employees of Marquette and employees of
International Wood. Marquette executed the loan documents in Minnesota and administered the
loan from Minnesota. International Wood sent its borrowing base certificates to Minnesota. The
Court concludes that Minnesota has a substantial connection to the claims asserted by Marquette
such that venue is proper here. The Court therefore denies Defendants motions to dismiss for
improper venue.
2. Defendants Motions to Transfer
Defendants alternatively seek to transfer this action to the Southern District of Texas
pursuant to 28 U.S.C. 1404(a), which provides that [f]or the convenience of parties and
witnesses, in the interest of justice, a district court may transfer any civil action to any other
district or division where it might have been brought. The party seeking a transfer ordinarily
bears the burden of establishing that a transfer is warranted. Terra Intl, Inc. v. Miss. Chem.
23
Corp., 119 F.3d 688, 695 (8th Cir. 1997). A motion to transfer an action to another district
should be denied unless the balance of factors strongly favors the moving party. See Graff v.
Qwest Commcns Corp., 33 F. Supp. 2d 1117, 1121 (D. Minn. 1999). Transfer should also be
denied if the factors are evenly balanced or weigh only slightly in favor of transfer. Id. The
decision whether to transfer an action is within the discretion of the district court. See Terra
Intl, 119 F.3d at 691. In determining whether transfer is appropriate, the Court must consider
the convenience of the parties, the convenience of the witnesses, and the interests of justice,
along with any other relevant factors. Id.
The parties do not dispute that this action could have been brought in the Southern
District of Texas. The Court therefore begins with the convenience of the parties. Marquette
contends that all of its records and substantially all of its witnesses are located in Minnesota.
Engelman contends that the Southern District of Texas is a convenient forum for Marquette on
the ground that its principal place of business is located in Texas and Marquettes employees
assigned to International Wood regularly travel to Texas. The Court is not persuaded that the
Southern District of Texas is a convenient forum for Marquette. Although Marquette does
maintain a regional office in Dallas, the evidence is undisputed that many of Marquettes
employees that were involved with the formation and administration of the loan, including
Lovaas, Frodermann, Booton, and Jensen, are located in Minnesota. With respect to Engelmans
assertion that employees of Marquette assigned to International Wood travel to Texas on a
regular basis, the affidavit he cites establishes only that Lee Anderson, a national field exam
manager for Marquette, traveled to International Woods Weslaco factory several times between
January and July 2008. Moreover, Marquettes Dallas office is approximately 500 miles from
Weslaco and approximately 240 miles from Houston, the nearest city to Dallas in which a U.S.
24
Courthouse for the Southern District of Texas is located. In addition, the record indicates that all
of Marquettes documents relating to the loan agreement are located in Minnesota. Based on
these facts, the Court concludes that the District of Minnesota is a convenient forum for
Marquette, and that the Southern District of Texas is not.
Defendants contend that the Southern District of Texas is more convenient for them
because all of International Woods documents and virtually all of its witnesses are located in
that district. While the Southern District of Texas is a more convenient forum for International
Wood because its principal place of business is in Weslaco, as are its records, the Court
questions whether the Southern District of Texas is a more convenient forum for Sonak, a
Delaware corporation having a principal place of business in New York, or for the individual
guarantors, both residents of New York. Even if the Court assumes that the Southern District of
Texas is more convenient for all Defendants, they have not persuaded the Court that a transfer to
the Southern District of Texas would result in anything more than a shift of the inconvenience
from Defendants to Marquette. This factor weighs in favor of maintaining this action in
Minnesota. See Janel Russell Designs, Inc. v. Mendelson & Assocs., Inc., 114 F. Supp. 2d 856,
862 (D. Minn. 2000).
The Court turns to the convenience of the witnesses. When evaluating this factor,
relevant considerations include the number of essential non-party witnesses, their location, and
the preference of courts for live testimony. See Graff, 33 F. Supp. 2d at 1121. This factor does
not turn, however, on a contest between the parties as to which presents a longer list of witnesses
located in the proposed transferee district. Id. at 1121-22. Instead, the party seeking the transfer
must clearly specify the essential witnesses to be called and make a general statement of what
their testimony will cover. Id. at 1122. A court must examine the materiality and importance of
25
the anticipated witnesses testimony and then determine their accessibility and convenience to
the forum. Id.
Marquette identifies as witnesses several of its Minnesota-based employees, including
Lovaas, Jensen, Booton, and Frodermann. Marquette contends that these witnesses will testify
about the loans underwriting, approval, and administration, the discrepancies in borrowing base
certificates, the discussion on December 19 relating to the forbearance agreement and
forbearance guaranty, and the work-out discussions. Defendants identify as witnesses
International Woods former controller, assistant controller, office assistant, customer service
representative, and shipping manager. According to Defendants, International Wood no longer
employs these witnesses and has no control over them. Defendants describe the testimony of
these witnesses as encompassing International Woods accounting systems, shipping systems,
and shipping procedures, as well as the origin of the discrepancies in the Hunter Douglas
receivables. Because Defendants have specified several non-party witnesses who are not subject
to the Courts subpoena power and made a general statement of what their testimony will cover,
the Court concludes that this factor favors transfer to the Southern District of Texas.
Finally, the Court addresses the interests of justice. Relevant considerations under this
factor include the plaintiffs choice of forum, the relative ability of the parties to bear the
expense of litigating in a distant forum, obstacles to a fair trial, and the advantages of having a
local court determine questions of local law. Terra Intl, 119 F.3d at 66; Graff, 33 F. Supp. 2d at
1122. Marquettes choice of this District as its forum is entitled to considerable deference. See
Terra Intl, 119 F.3d at 695. All of the contracts contain Minnesota choice-of-law clauses,
weighing in favor of maintaining venue in this District. Defendants contend that it is less of a
burden for Marquette to litigate in Texas than for Defendants to litigate in Minnesota because
26
Marquette is a large financial institution while International Wood is a corporation with little
income and the guarantors are two individuals and a limited liability corporation owned by
Gleason and his wife. Without evidentiary support, the Court is unable to assess Defendants
assertion regarding the parties relative abilities to litigate in Minnesota or Texas. Moreover,
Defendants do not explain why the Southern District of Texas is any more economical than the
District of Minnesota for Sonak, Gleason, and Engelman.
Defendants assert that they will be significantly hampered in presenting a defense to
Marquettes claims because their non-party witnesses are outside of the subpoena power of the
Court. The Court recognizes the preference for live testimony at trial, but concludes that in light
of the factors favoring denial of transfer, this preference does not warrant a transfer of venue to
the Southern District of Texas. If Defendants are unable to secure the attendance of International
Woods former employees or other non-party witnesses at trial, they may rely on transcripts or
video of the witnesses depositions. See Sun World Lines, Ltd. v. March Shipping Corp., 801
F.2d 1066, 1068 (8th Cir. 1986) ([W]e agree with the district court that the alternative of using
depositions of key witnesses provides adequate opportunity for [plaintiffs] to have their fair day
in court.). Moreover, the Court notes that each Defendant executed at least one contract
consenting to venue in Minnesota. In light of these facts, the Court is not persuaded that the
interests of justice require transfer to Defendants preferred venue.
Finally, Defendants contend that a local tax proceeding pending in Texas state court may
have significant implications for Marquettes claims and the liability of Engelman and Gleason
because the tax proceeding constitutes a competing claim on International Woods inventory.
Defendants further contend that a federal court in Texas is better positioned than a federal court
in Minnesota to avoid inconsistent outcomes between this action and the state tax proceeding,
27
but offer no explanation as to why. Under these circumstances, the Court concludes that the
pending tax proceeding does not support transfer of this action to the Southern District of
Texas.10
In summary, Defendants have not met their burden of establishing that the balance of
factors justifies transfer of this action to the Southern District of Texas. Accordingly, the Court
denies Defendants motions to transfer venue.
III. CONCLUSION
Based on the files, records, and proceedings herein, and for the reasons stated above, IT
IS ORDERED THAT:
1. The motion of International Wood, Sonak, and Gleason to dismiss for lack
of personal jurisdiction and improper venue or to transfer venue [Docket
No. 68] is DENIED.
2. Engelmans motion to dismiss for lack of personal jurisdiction and
improper venue or to transfer venue [Docket No. 71] is DENIED.
Dated: March 27, 2009
s/ Joan N. Ericksen
JOAN N. ERICKSEN
United States District Judge
10 Defendants also contend that transfer is warranted because the Court may need to inspect
International Woods inventory. The Court is not convinced that an inspection is so likely as to
justify transfer.
 

 
 
 

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