WOODRUFF v. GENERAL CONFERENCE OF SEVENTH-DAY ADVENTISTS

SARAH BARKER, District Judge

This matter comes before the Court on Defendant General Conference of Seventh-day Adventists' Motion to Dismiss for lack of personal and/or subject matter jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1), (2). For the reasons explained below, we GRANT Defendant's Motion to Dismiss. We previously granted the SCC and McCoy motion to dismiss for lack of personal jurisdiction. See March 25, 2004, Entry Granting Motion to Dismiss. A default judgment was entered against Hill in November, 2003 and an entry for default has been sought against Cumberland for its failure to answer or otherwise defend the plaintiff's complaint. Because General Conference's grounds for dismissal mirror those previously raised by Defendants McCoy and the SCC on which we have ruled, we here borrow liberally from our prior entry.

Plaintiff Randall Woodruff is the bankruptcy trustee for Legacy Healthcare, Inc. ("Legacy") and for Douglas Anthony Bradburn and Jacquelyn Sue Bradburn (the "Bradburns"). Plaintiff originally filed suit in state court seeking damages for breach of contract, promissory estoppel, conversion, actual or constructive fraud and civil conspiracy, which action was removed to federal court on the basis of diversity jurisdiction. An Amended Complaint was filed on September 25, 2003. Both suits named as Defendants the South Central Conference of Seventh-day Adventists ("SCC"), Cumberland River Health and Human Services Corporation ("Cumberland"), Joseph W. McCoy and Kenneth A. Hill. The Northeastern Conference Corporation of Seventh-day Adventists ("Northeastern") and the General Conference, an unincorporated association, were subsequently added as defendants.

Mr. and Mrs. Bradburn are Indiana residents who formerly owned Legacy, an Indiana corporation operating healthcare facilities in the state. PL's Am. Compl. at ¶¶ 12, 13, 23. In 2001, Legacy experienced financial distress and began looking for a purchaser of its assets. In August 2001, the Bradburns, on behalf of Legacy, executed an asset purchase and sale agreement with Cumberland. Id. ¶¶ 26-27.

The buyer, Cumberland, is a Tennessee religious corporation managed by Hill, an Ohio resident. SCC, with headquarters also in Tennessee, is an organization that serves 140 congregations of Seventh-day Adventists in Kentucky, Tennessee, Alabama, Mississippi and part of Florida. Def.'s South Central Conference of Seventh-day Adventists Br. In Supp. of Mot. to Dismiss ("Def.'s First Br."), Ex. A. SCC's connection with Cumberland was limited to a shared executive officer (other than Hill) and a single business transaction unconnected to the purchase of Legacy.

The General Conference is an unincorporated association located in Maryland and is the head of the worldwide Seventh-day Adventists church. Am. Compl. at ¶ 7. According to the General Conference's literature, it is the highest authority on earth as far as Adventist religious matters are concerned. PL's Br. In Opp. to General Conference Mot. To Dismiss ("Pl.'s Br.") at 4-7.

The General Conference is comprised of separately organized entities known as union conferences that have distinct geographic territories throughout the world. Second Wetmore Aff. at ¶ 5. These union conferences are typically made up of even smaller geographic conferences comprised of local churches; the SCC is one such union conference. The Northeastern Conference is a New York corporation with principal offices located there. Northeastern along with SCC operate healthcare businesses under the aegis of the Seventh-day Adventist Church.

Local Indiana Seventh-day Adventists churches are members of the Indiana Conference of Seventh-day Adventists or the Lake Region Conference of Seventh-day Adventists, neither of which is a party to this suit. Id. at ¶ 6. The General Conference's connection to Indiana and the plaintiff is apparently through the hierarchy of memberships or affiliations between a local church and a conference, between that conference's membership in a larger conference, and ultimately that larger conference's membership in the General Conference. Plaintiff contends that the General Conference is connected to local Indiana churches by virtue of its being the head of all Seventh-day Adventists churches on earth. Each level of conference in the Seventh-day Adventists church is managed by representatives elected by its membership. Pl.'s Br. at Tab F.

As recounted in our March 25, 2004 entry, by October 2001, the promised funding for the purchase of Legacy had not materialized. Legacy began to experience serious financial troubles and the company, as well as the Bradburns, filed for bankruptcy. Cumberland had been in control of Legacy's operations since the execution of the purchase agreement in August 2001. Plaintiff alleges that Hill made representations to the Bradburns that Cumberland and its purchase of Legacy would be financially backed by the SCC and, more generally, by the Seventh-day Adventists church. Am. Compl. ¶ 37. The event generating this lawsuit is the lost funding which led to the bankruptcy. Plaintiff alleges Cumberland, by and through its own actions and those of its "alter egos" (the SCC and the Church), breached three contracts with the Bradburns by failing: (1) to provide or obtain funding for the purchase of Legacy's facilities; (2) to collect over $1.4 million dollars in other accounts receivable of Legacy's and forfeiting to receivers the opportunity to collect those funds; (3) to take reasonable steps to redeem Legacy's facilities from receiverships; and (4) to responsibly file Medicare-related cost reports resulting in Medicare's demand of reimbursement. Am. Compl. § 31. In addition to a breach of contract claim, the plaintiff asserts a promissory estoppel claim for the same injury. Plaintiff also alleges the defendants diverted Legacy's revenues to bail out Cumberland when it was insolvent (Count III, conversion) and made fraudulent representations concerning the willingness and ability of the defendants to purchase and operate Legacy, all to the financial detriment of the Bradburns (Count IV, actual and constructive fraud). Finally, Plaintiff contends that Hill and others engaged in a civil conspiracy with the goal of furthering the Church's interest at the expense of Legacy's.

Rule 12(b) Standard of Review

Federal Rule of Civil Procedure 12(b)(2) requires the dismissal of a claim where jurisdiction over the defendant is lacking. In considering a Rule 12(b) motion, we examine the sufficiency of the plaintiffs complaint and not the merits of the lawsuit. Dismissal is appropriate only if it appears to a certainty that the plaintiff can establish no basis for personal jurisdiction. We accept as true all well-pleaded factual allegations and draw all reasonable inferences bearing on personal jurisdiction in favor of plaintiff. Yet if a complaint consists of conclusory allegations unsupported by factual assertions, it fails even under the liberal standards of Rule 12(b). In considering a motion to dismiss under Rule 12(b)(2), we also review affidavits and other documentary evidence which may have been filed, so long as any factual disputes are resolved in favor of the non-movant. Int'l Med. Group Inc. v. Am. Arbitration Ass'n, 2001 WL 984808, at *3-4 (S.D. Ind. 2001) (Barker, J.); see also. Gibson v. City of Chicago, 910 F.2d 1510, 1520-21 (7th Cir. 1990).

Personal Jurisdiction Standard of Review

Federal courts are courts of limited jurisdiction, so if personal jurisdiction is challenged, the plaintiff must establish on a prima facie case that jurisdiction is proper. Int'l Med. Group, at *4. A federal court exercising diversity jurisdiction has personal jurisdiction over a nonresident defendant only if the courts of the state in which the federal court sits would have such jurisdiction. North American Van Lines. Inc. v. A. Colonial Moving Storage Co., Inc., 2003 WL 22708182 (N.D. Ind. 2003). Under Indiana law, in order to establish personal jurisdiction, a defendant's contacts with Indiana must meet the requirements of Trial Rule 4.4 — Indiana's equivalent of a long-arm statute — and then be found sufficient to satisfy federal due process analysis. Anthem Ins. Cos, v. Tenet Healthcare Corp., 730 N.E.2d 1227, 1231-32 (Ind. 2000) (internal quotations omitted). In making this determination, Indiana courts apply literally the requirements of Trial Rule 4.4(A). American Economy Ins. Co. v. Felts, 759 N.E.2d 649, 657 (Ind.Ct.App. 2001).

Indiana Trial Rule 4.4(A) provides in relevant part that:

Any person or organization that is a nonresident of this state [. . .] submits to the jurisdiction of the courts of this state as to any action arising from the following acts committed by him or her or his or her agent:

(1) doing any business in this state;

(2) causing personal injury or property damage by an act or omission done within this state;

(3) causing personal injury or property damage in this state by an occurrence, act or omission done outside this state if he regularly does or solicits business or engages in any other persistent course of conduct, or derives substantial revenue or benefit from goods, materials, or services used, consumed, or rendered in this state; [. . .].

Trial Rule 4.4(A)(1) extends personal jurisdiction to those cases where the defendant does any business in Indiana, even where the suit is unrelated to that business. American Economy Ins. Co. v. Felts, 759 N.E.2d at 658.

Trial Rule 4.4

For Plaintiff to establish on a prima facie basis that jurisdiction over the person of the General Conference is proper, the General Conference's contacts with Indiana must meet the requirements of the long-arm statute. Plaintiff's primary argument in response to the motion to dismiss is that the SCC's actions are one and the same as the actions of the General Conference so that, if the SCC is subject to personal jurisdiction in this court, then so is the General Conference. Based on this reasoning, we assume it would also be true that if there is no jurisdiction over one of the entities, there is no jurisdiction over the other. Having previously determined that the SCC is not subject to personal jurisdiction of this court, and finding no new evidence to suggest that the General Conference has independent contacts with Indiana sufficient to submit it to our jurisdiction, Plaintiff has failed to satisfy the requirements of Indiana's long-arm statute in its effort to secure jurisdiction over the General Conference. Plaintiff nonetheless argues that we should examine the contacts relating to the General Conference separately, contending that: (1) the General Conference did business in Indiana which ultimately led to the plaintiff's injury from the breach of contract, conversion, and/or constructive fraud; (2) the General Conference injured Plaintiff by its acts or omissions done within the state; and (3) Plaintiff's injury also arose from the General Conference's regular solicitation of business in Indiana, which was a persistent course of conduct in Indiana from which it derived substantial revenue or benefit from services used, consumed, or rendered in the state. Ind. Trial Rule 4.4(A)(1)-(3). We examine each of these assertions in order below.

1. "Doing Business in Indiana" under Rule 4.4(A)(1).

Plaintiff has cited no facts to establish that the General Conference does any business directly in Indiana. It reasons that because the members or affiliates apparently do business in the state through the individual churches in Indiana, the umbrella association therefore is deemed to do business in Indiana. Pl.'s Br. at 10. In addition, Plaintiff maintains that the General Conference is the legal equivalent of the "Church" and that all Seventh-day Adventists churches located in Indiana are thus part of this single, unified "Church." PL's Br. at 4-8. In other words, the General Conference is present wherever a Seventh-day Adventists church exists because the General Conference and the local church are interchangeable. Plaintiff cites no authority for this proposition that a nonresident association is subject to personal jurisdiction in Indiana because one of its members does business in Indiana. We decline to adopt Plaintiff's "church" theory because the General Conference is clearly a legal entity separate and distinct from individual Seventh-day Adventists churches located in Indiana. Therefore, we cannot conclude on this basis that the General Conference does business in Indiana within the meaning of the long-arm statute.

2. "Causing Injury in Indiana" under Rule 4.4(A)(2).

Plaintiff next contends that personal jurisdiction can be asserted as to the General Conference based on its having caused injury to Legacy through its breach of contract, conversion, and/or constructive fraud, pursuant to Trial Rule 4.4.(A)(2). PL's Am. Comp. at ¶ 19. That rule provides jurisdiction over a defendant if he or she causes "personal injury or property damage by an act or omission done within this state [. . .]." Ind. Trial Rule 4.4(A)(2). Indiana requires actual presence in the state for this provision to apply. 1 William F. Harvey, Indiana Practice, 227 (1999). Plaintiff has not alleged or shown that the General Conference was actually present in Indiana when it committed an act or an omission injurious to plaintiff. Rather, it attempts to satisfy this requirement of actual presence on the part of the General Conference based on Cumberland's connection to the SCC which is, in turn, connected to the General Conference. However, we previously determined that Cumberland's activities in Indiana did not establish personal jurisdiction over the SCC, which holding breaks the chain on which Plaintiff had hoped to rely in obtaining jurisdiction over the General Conference. This approach is without merit and personal jurisdiction cannot be established on that basis.

3. "Causing Injury in Indiana" under Rule 4.4(A)(3).

Trial Rule 4.4(A)(3) confers jurisdiction over a defendant if he or she causes "personal injury or property damage in this state by an occurrence, act or omission done outside this state if [s]he regularly does or solicits business or engages in any other persistent course of conduct, or derives substantial revenue or benefit from goods, materials, or services used, consumed, or rendered in this state [. . .]". Plaintiff asserts that the injuries it experienced occurred in Indiana. PL's Am. Compl. ¶¶ 6, 10, 11. However, Plaintiff fails to plead any facts indicating that the General Conference's actions or omissions caused any injury. Once again, Plaintiff attempts to tie the actions of the SCC to the General Conference to establish personal jurisdiction over the General Conference. Piggybacking the actions of the member organization to the parent will not achieve jurisdiction over the nonresident parent. We have previously determined the SCC is not subject to personal jurisdiction in this court; neither is the General Conference. Subject Matter Jurisdiction

Were we to accept Plaintiff's "church" theory as a basis for personal jurisdiction, this suit would be subject to dismissal for lack of subject matter jurisdiction. By well-established statutory authority, in a suit in which jurisdiction is based upon diversity of citizenship, complete diversity is required. 28 U.S.C. § 1332; Carden v. Arkoma Assoc., 494 U.S. 185, 187 (1990). If local Indiana churches are members of the General Conference, either directly or through intermediary associations, then the General Conference is also a citizen of Indiana. Clearly, under Plaintiff's "church" theory, assuming that the General Conference is a citizen of Indiana because "its" local Seventh-day Adventists churches are located therein, complete diversity of citizenship would be destroyed since the Bradburns are also citizens of Indiana.

For the reasons outlined above, the General Conference's contacts with Indiana are not sufficient to satisfy the requirements of Indiana's long-arm statute to permit personal jurisdiction to be established under Trial Rule 4.4(A). Accordingly, we GRANT Defendant's motion to dismiss the Complaint against the General Conference without prejudice.

It is so ORDERED this.