The opinion of the court was delivered by: Judge Smith
Plaintiffs Executone of Columbus, Inc., Executone Communications Solutions, Inc., CT-Innovations, LLC, Ideacom of the Gulf Coast, Inc., Ideacom Technologies of Georgia, Inc., and Ideacom Technologies, Inc. bring this action for breach of contract and promissory estoppel against Defendants Inter-Tel, Inc., (Inter-Tel) and Inter-Tel Business Information Systems, Inc. (IBIS). This matter is before the Court on Defendants' April 27, 2006 Motion to Transfer Venue or Dismiss for Lack of Personal Jurisdiction (doc. 21).
Plaintiffs Executone of Columbus, Inc., Executone Communications Solutions, Inc., CT-Innovations, LLC, Ideacom of the Gulf Coast, Inc., Ideacom Technologies of Georgia, Inc., and Ideacom Technologies, Inc. are companies that sell telephony products to consumers. (Compl. ¶¶ 14-19). Defendants Inter-Tel and IBIS are Arizona corporations, and IBIS is a wholly-owned subsidiary of Inter-Tel. (Compl. ¶¶ 7-8).
Each Plaintiff alleges that it entered into a separate distributorship agreement with a company called Executone Information Systems (EIS). These contracts began anywhere from October 1, 1996 and March 29, 1999 and were set to end on December 31, 2001. (Compl. ¶¶ 14-19). Thereafter, each agreement was to automatically renew itself for successive one-year terms unless terminated pursuant to the agreement. (Compl. ¶¶ 14-19).
These agreements placed certain obligations on EIS, including the obligation to (1) provide technical and service support; (2) act in good faith with respect to all matters covered by the agreement; and (3) utilize best efforts to provide the Plaintiffs with authorized products that are competitive in the marketplace in function, feature, and price, and to develop new products and make them available to distributors. (Compl. ¶ 22). Plaintiffs contend that EIS did not meet these obligations because they "consistently failed to provide adequate service and technical support to Plaintiffs," and the only products made available were of such poor quality and design that they were not competitive in the marketplace. (Compl. ¶¶ 24-27).
On October 17, 1999, Defendants entered into an asset purchase agreement with EIS. (Compl. ¶ 29). Plaintiffs allege that by so doing, Defendants assumed EIS's obligations and liability under Plaintiffs' distributor agreements. (Compl. ¶¶ 29-30). Plaintiffs contend that the Defendants' true motivation for purchasing EIS's telephony business was increase its own sales by over $100 million by closing EIS's headquarters, discontinuing the creation of new Executone products, converting Executone products to Inter-Tel products, and converting the Executone dealers' customer base to Inter-Tel products. (Compl. ¶31). Plaintiffs further allege that, over the course of several months, Defendants mislead them by making false assurances that they planned to continue providing the existing products, to develop new products, and that a severely problematic inventory shortage would be resolved by a certain date. (Compl. ¶¶ 32-39). Plaintiffs contend that they relied on Defendants' assurances to their collective detriment.
(Compl. ¶ 40). Further, Plaintiffs allege that Defendants failed to meet their obligation to provide technical service to them, stating that the waiting times were "extremely long" and that the technical service provided was unknowledgeable and unhelpful and technicians were deliberately instructed by Defendants to falsely disavow that certain problems were widespread. (Compl. ¶¶ 44).
Plaintiffs allege that in May 2000, Defendants closed Executone's headquarters in Connecticut, which eliminated altogether technical and service support and caused them to further fail to fulfill their obligations to Plaintiffs. (Compl. ¶¶ 45-46). On August 9, 2000, Plaintiffs allege that Defendants greatly harmed their business by writing off the Executone acquisition and announcing that "the Executone business now offers no value from the Executone business, products and related trademark, brand and name" and that "no value exists in the goodwill originally recorded for the Executone operations." (Compl. ¶ 47). Finally, Plaintiffs contend that Defendants made the decision to discontinue several Executone product lines and to market another Executone product under the Inter-Tel line, which would effectively allow Inter-Tel to raid the Executone customer base. (Compl. ¶ 49). For the forgoing reasons, Plaintiffs bring this action against Defendants for breach of contract and promissory estoppel.
II. Arguments of the Parties
1. Claims against Inter-Tel
Defendants assert that the Court lacks personal jurisdiction over Inter-Tel as it is an Arizona corporation which does no business in Ohio, has not advertised in Ohio, and does not have offices or own property in Ohio. Defendants support their assertion with the affidavit of Kristen Bonfiglio, Inter-Tel's Assistant Secretary, which attests to Inter-Tel's lack of ties to Ohio. Furthermore, Defendants assert that IBIS, not Inter-Tel, was the party which purchased EIS's assests. Therefore, Defendants assert that this Court does not have jurisdiction over Inter-Tel, and Plaintiffs' claims against it should be dismissed or transferred to the Eastern District of Virginia.
Defendants argue that venue would be appropriate in the Eastern District of Virginia because the distributorship agreements at issue requires that any claims brought under them be evaluated under Virginia law. Furthermore, Defendants allege that the distributorship agreements contain a forum selection clause that lists the Eastern District of Virginia as one of many venues that the parties agreed would be appropriate for suits arising out of the agreements. However, Defendants do not contend that venue is merely inconvenient.
Defendants also contend that although IBIS does conduct some business in Ohio, that five out of six of the Plaintiffs are suing it for activity that did not arise out of its business contacts in Ohio. To support this contention, Defendants attach the affidavit of Ray McCloud, Senior Vice President of IBIS, who attests that, with the exception of Executone of Columbus (EOC), IBIS did not conduct business in Ohio with Plaintiffs. Defendants further argue that Ohio law does not recognize general jurisdiction, and therefore the out-of-state Plaintiffs may not sue IBIS based on claims that did not arise in Ohio. Thus, Defendants maintain that only EOC can properly bring suit against IBIS in this Court.
Defendants contend that in order for venue to be proper, it has to be proper as to all parties and all claims. Therefore, Defendants assert that Plaintiffs cannot obtain jurisdiction over IBIS simply by virtue of the Court's specific jurisdiction over EOC's claims. Thus, Defendants argue that the Court should either dismiss all of the out-of-state Plaintiffs' claims against IBIS, or, alternatively, argues that the Court should transfer the entire action to the Eastern District of Virginia.
Plaintiffs dispute Defendants' contention that Inter-Tel is not liable under the distributorship agreements. They make arguments that Inter-tel itself is a party to these distributorship agreements and "directly connected with practically every allegation and claim in Plaintiffs' Complaint." Plaintiffs support their contention with evidence showing that (1) Inter-Tel has previously allowed itself to be sued on one of the distributor agreements; (2) Inter-Tel sent numerous letters to all Executone dealers listing itself as the purchaser of the agreements and discussing the transaction ; and (3) Inter-Tel's executive officers made key decisions relating to the Executone deal.
Plaintiffs contend that since EOC's claims arose from business activity that Inter-Tel conducted in Ohio, Inter-Tel is subject to the specific jurisdiction on these claims. In addition, Plaintiffs contend because the Court is able to obtain specific jurisdiction over EOC's claims, it is also able to consider the out-of-state Plaintiffs as properly joined to this action.
Plaintiffs state that Sixth Circuit precedent permits this Court to exercise general jurisdiction over nonresident defendants. Plaintiffs assert that Inter-Tel conducts business in Ohio on its own. Plaintiffs also contend that Inter-Tel conducts numerous business activities through its subsidiaries in Ohio, and thus, is subject to the general jurisdiction of this Court through the doctrines of merger and attribution. Plaintiffs allege numerous facts regarding the relationship between Inter-Tel and its subsidiaries to support this contention, see infra sec. III(B)(2)(b).
Plaintiffs claim that IBIS was party to a distributorship agreement with EOC. Plaintiffs further contend that EOC's claims are based on activity that Inter-Tel conducted in Ohio, making it subject to the specific jurisdiction of the courts on EOC's claims. In addition, Plaintiffs contend since the Court is able to obtain specific jurisdiction over EOC's claims, then it is also able to consider the out-of-state Plaintiffs as properly joined to this action.
Plaintiffs also argue that IBIS is subject to the general jurisdiction of this Court because of its systematic and continuous business activity in Ohio. They argue that IBIS is qualified to do business in OH, has done over $10 million in business in Ohio between the years of ...