LEEP, Inc. v. Nordstrom

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF OREGON

EUGENE DIVISION

LEEP, INC., an Oregon corporation,

Plaintiff, Case No. 6:20-cv-01673-MC

v. OPINION AND ORDER

JOHN NORDSTROM, an individual,

AMERICAP CO., L.P., AMERICAP

TWO, AMERICAP THREE,

LAURENCE ZIELKE and ZIELKE

LAW FIRM,

Defendants.

_____________________________

MCSHANE, Judge:

The current controversy involves Defendant Nordstrom’s retention of the Zielke law firm

to represent the interests of LEEP in a Kentucky arbitration proceeding. The arbitration occurred

at a time when Nordstrom’s legitimacy as CEO of LEEP, Inc., was in question. Plaintiff LEEP,

Inc. alleges that the Zielke firm breached numerous duties by failing to recognize the removal of

Nordstrom as CEO and by objection to Plaintiff’s attempt to substitute alternative counsel at the

1 – OPINION AND ORDER

arbitration proceeding. Because Plaintiff fails to show that Zielke has sufficient minimum

contacts in Oregon, Zielke’s Motion to Dismiss (ECF No. 160) is GRANTED.1

BACKGROUND

Plaintiff LEEP is a publicly traded corporation, organized in Oregon, with its principal

place of business in Idaho. FAC ¶¶ 4, 11; Def. Zielke Mot. Dismiss, Ex. 1 ¶ 1. From 2007 until

August 31, 2020, Defendant Nordstrom—a Kentucky resident—was on Plaintiff’s Board of

Directors as the Chief Executive Officer. FAC ¶¶ 5, 12. Defendant Zielki Law Firm is a law

firm—organized in Kentucky, with its principal place of business in Kentucky. Defendant Zielke

is an attorney-partner at Zielki Law Firm, admitted to practice law in Kentucky and Florida. FAC

¶¶ 9–10; Zielke Decl. ¶¶ 4, 7, ECF No. 160-5. In 2013, Nordstrom engaged Zielke. as counsel

for Plaintiff and filed a lawsuit in Kentucky state court for claims arising from a joint business

venture that was to be organized in Kentucky. FAC ¶¶ 60–61; Zielke Mot. Dismiss 10. The

parties settled that action pursuant to a settlement agreement that included an arbitration

provision for future disputes arising from any alleged breach of the agreement. FAC ¶¶ 70–71.

The agreement also provided a cash payment to LEEP, with the funds being delivered to

Nordstrom via Zielki Law Firm. . FAC ¶¶ 74–78. In August 2019, Zielke filed a demand for

arbitration in Kentucky state court on Plaintiff’s behalf. Pl.’s Resp. Mot. Dismiss 2, ECF No.

173.

On August 21, 2020, at a special shareholders meeting, Plaintiff’s shareholders appointed

a new Board of Directors. The new Board of Directors removed Nordstrom as CEO. FAC ¶¶ 97,

104–05. On September 13, 2020, Plaintiff provided Zielki notice of Nordstrom’s removal, but

1 Plaintiff names Laurence Zielke and the Zielki Law Firm as Defendants. Unless specifically stated otherwise, the

Court generally refers to those Defendants interchangeably as Zielke or the Zielki Law Firm.

2 – OPINION AND ORDER

the change in leadership was contested by Nordstrom and ZielkeFAC ¶ 110; see also Opinion

and Order, October 14, 2021, ECF No. 98. Plaintiff engaged Ziliak Law, LLC as counsel to

represent Plaintiff in the arbitration proceedings before an American Arbitration Association

arbitrator in Kentucky. FAC ¶¶ 114–15; Zielke Mot. Dismiss 11, Ex. 6, at 2. Ziliak filed an

appearance in the arbitration proceeding, but the arbitrator required a stipulated order

substituting counsel before it would recognize anyone other than Zielke as Plaintiff’s counsel.

FAC ¶ 116; Zielke Mot. Dismiss, Ex. 4, at 126. Zielki opposed the substitution of counsel, and

the arbitrator decided the arbitration would continue with Zielki representing Plaintiff. FAC ¶¶

121–22; Zielke Mot. Dismiss, Ex. 4, at 126. In December 2020, the arbitrator found partially in

favor of and partially against Plaintiff and awarded the other party attorney’s fees and costs.

Zielke Mot. Dismiss 11, Ex. 6, at 2. In April 2021, on behalf of Plaintiff, Zielki filed suit to

vacate or modify the arbitration award. Zielke Mot. Dismiss, Ex. 1. In October 2021, this Court

determined that Plaintiff’s change in leadership was valid, and Zielke withdrew as counsel from

the arbitration litigation. Zielke Mot. Dismiss, Ex. 7; see also Opinion and Order 5, ECF No. 98.

Plaintiff alleges that Zielke breached the fiduciary duty to Plaintiff by refusing to

acknowledge and accept the direction of Plaintiff’s new CEO during the arbitration,2 for failing

to account for and deliver payments owed to LEEP,3 for failing to insist the arbitration

proceeding be postponed until the question of Plaintiff’s governance was resolved,4 and for

delivering Plaintiff’s funds to Nordstrom rather than Plaintiff.5 FAC ¶ 3

2 See FAC ¶¶ 258–64.

3 See FAC ¶¶ 265–85.

4 See FAC ¶¶ 262–63.

5 See FAC ¶¶ 282–85.

3 – OPINION AND ORDER

STANDARD OF REVIEW

“Where a defendant moves to dismiss a complaint for lack of personal jurisdiction, the

plaintiff bears the burden of demonstrating that jurisdiction is appropriate.” Schwarzenegger v.

Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004). “Although the plaintiff cannot

‘simply rest on the bare allegations of its complaint,’ uncontroverted allegations in the complaint

must be taken as true.” Id. (quoting Amba Mktg. Sys., Inc. v. Jobar Int’l, Inc., 551 F.2d 784, 787

(9th Cir. 1977).

DISCUSSION

Because there is no applicable federal statute governing personal jurisdiction, the Court

looks to Oregon law. See Fed. R. Civ. P. 4(k)(1)(A). Oregon law authorizes personal jurisdiction

to the fullest extent permitted by the Due Process Clause of the U.S. Constitution. See Or. R.

Civ. P. 4L. To be consistent with due process, a plaintiff must show a defendant has “minimum

contacts” with Oregon, such that the exercise of personal jurisdiction “does not offend

‘traditional notions of fair play and substantial justice.’” Int'l Shoe Co. v. Washington, 326 U.S.

310, 316 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)). “[T]he defendant’s suit-

related conduct must create a substantial connection with the forum State,” and that connection

must arise out of contacts that the defendant created “with the forum State itself, not the

defendant’s contacts with persons who reside there.” Walden v. Fiore, 571 U.S. 277, 284–85

(2014). “[T]he plaintiff cannot be the only link between the defendant and the forum.” Walden,

571 U.S. at 285. Due process also demands that a defendant’s contact with the forum state be

purposeful, and not merely “random, fortuitous, or attenuated.” Burger King Corp. v. Rudzewicz,

471 U.S. 462, 475–76 (1985).

4 – OPINION AND ORDER

A court can have personal jurisdiction over a defendant that is either specific or general,

depending on the defendant’s contacts with the forum state and the nature of the claim.

Schwarzenegger, 374 F.3d at 801; Helicopteros Nacionales de Colombia, 466 U.S. 408, 414

(1984). A finding of general jurisdiction requires a defendant’s contacts with the forum state be

so “continuous and systematic” as to “‘approximate physical presence’ in the forum state.”

Schwarzenegger, 374 F.3d at 802 (quoting Bancroft & Masters, Inc. v. Augusta Nat’l, Inc., 223

F.3d 1082, 1087 (9th Cir. 2000)). And a court with general jurisdiction may require a defendant

to answer for any of its activities, even if the cause of action does not arise from the defendant’s

contacts with the forum state. Schwarzenegger, 374 F.3d at 801; Helicopteros Nacionales de

Colombia, 466 U.S. at 409. Here, Plaintiff concedes that this Court does not have general

jurisdiction over Defendants Zielke, et al. Pl.’s Resp. 6.

A finding of specific personal jurisdiction requires a defendant to have less contacts with

the forum state, but only with respect to a narrower class of claims. Ford Motor Co. v. Mont.

Eighth Judicial Dist. Ct., 141 S. Ct. 1017, 1024 (2021). For a court to exercise specific

jurisdiction over a defendant, there must be “a connection between the forum and the specific

claims at issue.” Bristol-Meyers Squibb Co. v. Superior Court, 173 S. Ct. 1773, 1781 (2017).

“[M]ere injury to a forum resident is not a sufficient connection to the forum.” Walden, 571 U.S.

at 290.

The Ninth Circuit has established a three-prong test for analyzing whether specific

jurisdiction over a defendant is proper:

1) The non-resident defendant must purposefully direct his activities or

consummate some transaction with the forum or resident thereof; or perform

some act by which he purposefully avails himself of the privilege of conducting

activities in the forum, thereby invoking the benefits and protections of its laws;

5 – OPINION AND ORDER

2) The claim must be one which arises out of or relates to the defendant’s forum-

related activities.

3) The exercise of jurisdiction must comport with fair play and substantial justice.

Schwarzenegger, 374 F.3d at 802.

“The plaintiff bears the burden of satisfying the first two prongs of the test.”

Schwarzenegger, 374 F.3d at 802. “If the plaintiff succeeds . . ., the burden then shifts to the

defendant to present ‘present a compelling case’ that the exercise of jurisdiction would not be

reasonable.” Schwarzenegger, 374 F.3d at 802 (quoting Burger King Corp., 471 U.S. at 476–78).

Here, Zielke, et al. have one contact with Oregon—Plaintiff—and Plaintiff’s claim arises out of

that activity—Zielke, et al. and Plaintiff’s attorney-client relationship. The inquiry is whether

Zielke et al.’s contact with Plaintiff satisfies the first prong: “purposeful availment.”

To satisfy the first prong, a plaintiff must show the defendant either purposefully availed

himself of the privilege of conducting activities in the forum or purposefully directed his

activities toward the forum. Schwarzenegger, 374 F.3d at 802. A purposeful availment analysis

is applied most often in actions based in contract or when a defendant’s tortious actions occur in

the forum state. Freestream Aircraft (Bermuda) Ltd. v. Aero Law Grp., 905 F.3d 597, 605 (9th

Cir. 2018). A purposeful direction analysis applies in actions based in tort, “where the tort was

committed outside the forum state.” Freestream Aircraft (Bermuda) Ltd., 905 F.3d at 605. Here,

Plaintiff’s claims sound in tort and the tort was committed outside of Oregon, so the Court

proceeds with a purposeful direction analysis.

To show purposeful direction, a plaintiff must establish that the defendant (1) committed

an intentional act, (2) expressly aimed at the forum state, (3) causing harm that the defendant

knows is likely to be suffered in the forum state. Dole Food Co., Inc. v. Watts, 303 F.3d 1104,

6 – OPINION AND ORDER

1111 (9th Cir. 2002) (interpreting the effects test set forth by the Supreme Court in Calder v.

Jones, 465 U.S. 783 (1984)). “However, the potential foreseeability of some incidental harm to

Plaintiffs” in the forum state, due to Defendant’s alleged conduct, “without more, does not show

that Defendants expressly targeted the forum state.” Morrill v. Scott Fin. Corp., 873 F.3d 1136,

1145 (9th Cir. 2017). To establish “specific personal jurisdiction, a tort must involve the forum

state itself, and not just have some effect on a party who resides there.” Morrill, 873 F.3d at

1145.

The Court finds that Plaintiff has not satisfied the “purposeful direction” test. Zielke

committed an intentional act—serving as Plaintiff’s legal counsel—and Zielke knew the harm of

any negligent representation would likely be suffered by Plaintiff in Oregon.6 However, Zielke’s

conduct was not “expressly aimed at the forum state.” Plaintiff fails to present any facts showing

Zielke’s contacts with Oregon apart from Zielke’s attorney-client relationship with Plaintiff. By

all accounts, the substance of that relationship and the alleged tortious conduct all took place in

Kentucky. Zielke never represented Plaintiff in an Oregon court, never traveled to Oregon to

meet with Plaintiff, never communicated with Plaintiff in Oregon. Zielke’s only communication

with Plaintiff was through Nordstrom, who lives in Kentucky. Neither Zielke nor any other

attorney at Zielki Law Firm is admitted to practice law in Oregon. Plaintiff is the only link

between Zielke and Oregon, and under Walden that is insufficient to establish specific personal

jurisdiction.

Plaintiff argues that Zielke purposefully directed his activities toward Oregon through his

actions as Plaintiff’s counsel. First, Plaintiff asserts that Zielkes representation of Plaintiff went

6 Even though Plaintiff’s principal place of business has moved over the years, Plaintiff is incorporated in Oregon.

See Pl.’s Resp. 11.

7 – OPINION AND ORDER

beyond the litigation and arbitration in Kentucky to more general representation of Plaintiff,

representation that may have involved “questions of Oregon law.” Pl.’s Resp. 1–3, 10. But even

if Zielke represented Plaintiff in other matters, that fact does not show an additional purposeful

contact with Oregon or a connection between Oregon and the specific claims at issue here.

Rather, that fact shows Zielke merely had a “random, fortuitous, or attenuated” contact with

Oregon because Nordstrom—a Kentucky resident—was referred to Zielke while seeking legal

services—in Kentucky—on Plaintiff’s behalf. FAC ¶ 60; Zielke Mot. Dismiss 9.

Second, relying on evidence of communications between Zielke and Nordstrom, Plaintiff

asserts that Zielke instructed Nordstrom to defy Plaintiff’s Board of Directors, thereby

deliberately interjecting the firm into the issue of who controlled Plaintiff, deliberately

interfering with Plaintiff’s Board of Directors’ authority to manage Plaintiff, and intending to

deny Plaintiff’s rights under Oregon law. See Record Decl. ¶ 24, Ex. 10, ECF No. 174.; Pl.’s

Resp. 13–14. But that assertion relates to conduct that was purposefully directed toward Plaintiff,

not conduct that was purposefully directed toward Oregon, the forum itself.7 Plaintiff alleges no

conduct that occurred in Oregon itself, no conduct that creates a substantial connection between

Zielke and Oregon; rather, the suit-related conduct arises out of Zielke’s contacts with an Oregon

corporation, an insufficient basis for personal jurisdiction under Walden. Any mention of Oregon

law or an Oregon state agency was due to Plaintiff’s connections to Oregon and was not a result

of Zielke’s purposeful contacts with the state. See Pl.’s Resp. 14–16. And even if the alleged

conduct had an effect on Plaintiff in Oregon, under Walden, mere injury to a forum resident is

7 “The discussion below will demonstrate that Plaintiff’s attorney client relationship with Defendants extended

beyond the Kentucky litigations and that Defendants’ conduct giving rise to Plaintiff’s claims was specifically

directed at Plaintiff’s rights under Oregon law and Plaintiff’s activities in Oregon.” Pl.’s Resp. 1–2 (emphasis

added).

8 – OPINION AND ORDER

not a sufficient connection to establish personal jurisdiction. In fact, Plaintiff’s incorporation in

Oregon is the only connection any Defendant, including Nordstom himself, has with the District

of Oregon. But that lone connection does not mean, as Plaintiff would have the Court believe,

that the Court has personal jurisdiction over any party whose actions taken in another state

impact Plaintiff. Personal jurisdiction requires more.

Given the above, Zielke’s representation of Plaintiff was not “expressly aimed” at

Oregon. Itfollows that they did not “purposefully avail” themselves of the privilege of

conducting activities in Oregon. Plaintiff’s three claims as alleged in the complaint all relate to

Zielke’s conduct as Plaintiff’s counsel in Kentucky. Ultimately, the Court must look to a

defendant’s actions and determine whether purposeful acts exist—expressly aimed at Oregon—

that would make Oregon’s exercise of jurisdiction proper. In this case, the Court finds no such

acts.

CONCLUSION

For the foregoing reasons, Defendants Zielke’s Motion to Dismiss (ECF No. 160) for

lack of personal jurisdiction8 is GRANTED, and the claims against them are DISMISSED

without prejudice.

IT IS SO ORDERED.

DATED this 5th day of December 2022.

_______/s/ Michael J. McShane ________

Michael McShane

United States District Judge

8 Even if this Court has personal jurisdiction, venue in Oregon is improper because all of the acts or omissions

giving rise to Plaintiff’s claims occurred in Kentucky. See 28 U.S.C. § 1391(b)(2) (venue proper when “a substantial

part of the events or omissions giving rise to the claim occurred” in the district). As noted above, no Defendant has

any connection with Oregon other than the fact that Plaintiff happened to choose, many decades ago, to incorporate

in Oregon.

9 – OPINION AND ORDER