The opinion of the court was delivered by: Karen E. Schreier Chief Judge
ORDER DENYING MOTION TO DISMISS
Plaintiffs, Lucile J. Bradley; Rodney J. Bradley; Lucile J. Bradley, as personal representative of the Estate of Mark E. Bradley; and Lucile J. Bradley, Rodney J. Bradley and Kerrie E. Applegate, as co-trustees of the Mark E. Bradley Revocable Trust, (the Bradleys), filed a complaint against defendants MDC Credit Corporation (MCC) and Premium Acquisitions, Inc., formerly known as Midcoast Acquisitions (MAC), alleging breach of a guaranty agreement entered into by defendants. Defendants move to dismiss the action for lack of personal jurisdiction. Plaintiffs oppose the motion. The motion is denied.
Lucille and Mark Bradley with their son, Rodney, owned MB Enterprises, Inc., f/k/a/ PortaStorage, Inc. (MBE). (Comp. ¶ 3.) MBE was organized in South Dakota, and its business was located in Sturgis, South Dakota. (Comp. ¶¶ 3, 4.) All plaintiffs reside in Sturgis, South Dakota. (Comp. ¶ 4.)
In late 2003, Rodney met a group of individuals representing an entity known as "MidCoast." (Comp. ¶ 7.) These individuals repeatedly contacted him by telephone and email soliciting the purchase of the Bradleys' family-owned business, MBE. (Comp. ¶ 7.) As a result, the Bradleys negotiated a sale of their MBE stock to a company called PST Investments, LLC ("PST"). (Comp. ¶ 7.) Defendant Premium Acquisitions, Inc., formerly known as MidCoast Acquisitions Corporation ("MAC"), was the sole owner of PST. (Comp. at Ex. B, second recital.) Defendant MDC Credit Corporation, formerly known as MidCoast Credit Corp. ("MCC") is affiliated with MAC. (Comp. at Ex. B, second recital.) Michael Bernstein was the president of PST, MAC, and MDC. (Comp. ¶¶ 5, 6; Complaint at Ex. A, at signature page.)
On January 30, 2004, PST and the Bradleys entered into a Share Purchase Agreement, and PST agreed to pay just over $2.67 million to the Bradleys for the purchase of their MBE stock. (Comp. at Ex. A, § 1.2.) The Share Purchase Agreement stated, "The Purchaser and the Company shall file all Federal and state income tax returns related to the Deferred Tax Liability on a timely basis, including extensions, and pay or cause to be paid the Deferred Tax Liability to the extent the Deferred Tax Liability is due given the Company's post-closing business activities." ((Comp. at Ex. A, § 3.4)
The Deferred Tax Liability amounted to approximately $1.3 million. (Comp. at Ex. A, § 2.18.) The Share Purchase Agreement also stated that PST would indemnify the Bradleys for any damages they might incur should PST fail to discharge the Deferred Tax Liability when due. (Comp. at Ex. A, § 9.2(c).) The Share Purchase Agreement was signed on January 30, 2004. (Comp. at Ex. A, Introduction.)
The parties also signed a Guaranty Agreement ("Guaranty") on January 30, 2004. (Comp. at Ex. B, Introduction.) The Guaranty recites that PST purchased all of the issued and outstanding stock of a South Dakota corporation pursuant to the Share Purchase Agreement between PST and the Bradleys. (Comp. at Ex. B, first recital.) The Guaranty also indicates that MAC was an entity affiliated with MCC and that MAC is the sole member of PST. (Comp. at Ex. B, second recital.) Further, the Guaranty states that, "As an inducement for Purchaser and Sellers to enter into the Share Purchase Agreement and for other good and value consideration, the receipt and sufficiency of which are hereby acknowledged: Guarantors hereby unconditionally and irrevocably guarantee . . . all of Purchaser's obligations." (Ex. B, preamble to § 1.)
In late 2007 or early 2008, the IRS sent a Notice of Deficiency to the Bradleys' counsel indicating that MBE's taxes, which were in the amount of $1,360,220 due March 31, 2004, had not been paid. (Comp. ¶ 14.) Additionally, the notice set forth a penalty in the amount of $544,088 for a total of nearly $2 million due to the IRS. (Comp. ¶ 14.) The IRS indicated to the Bradleys that PST had not filed a timely tax court petition in response to the Notice of Deficiency and had not paid the tax or penalties. (Comp. ¶ 14.) The IRS commenced proceedings with respect to the Bradleys for payment of tax, penalties, and interest. (Comp. ¶ 15.)
The Bradleys served notice and made a demand to PST, MCC, and MAC for payment and provisions pursuant to the Share Purchase Agreement and Guaranty. (Comp. ¶ 16.) The Bradleys have been unable to collect from PST. MCC and MAC have made representations that PST no longer exists. (Comp. ¶ 18.) MCC and MAC have refused to perform under the Share Purchase Agreement and Guaranty, in response to the Bradleys' demands. (Comp. ¶ 16.)
Plaintiffs, as the party seeking to establish the court's personal jurisdiction over defendants, bear the burden of proof to establish jurisdiction by a preponderance of the evidence. See Johnson v. Woodcock, 444 F.3d 953, 955 (8th Cir. 2006); Gould v. P.T. Krakatau Steel, 957 F.2d 573, 575 (8th Cir. 1992). To defeat a motion to dismiss for lack of personal jurisdiction, the nonmoving party need only make a prima facie showing of jurisdiction. Epps v. Stewart Information Services Corp., 327 F.3d 642, 647 (8th Cir. 2003) (quoting Falkirk Min. Co. V. Japan Steel Works, Ltd., 906 F.2d 369, 373 (8th Cir. 1990)). Because this court is relying on the pleadings and affidavits of the parties, it must view the facts in the light most favorable to plaintiffs, the nonmoving parties and resolve all factual conflicts in favor of the plaintiffs. See Dakota Indus., Inc. v. Dakota Sportswear, Inc., 946 F.2d 1384, 1387 (8th Cir. 1991).
In determining whether the court has personal jurisdiction over a non-resident defendant, the court must determine whether jurisdiction is proper under the long-arm statute of the forum state, and also whether exercising jurisdiction over the non-resident defendant comports with the Due Process Clause. Oriental Trading Co. v. Firetti, 236 F.3d 938, 943 (8th Cir. 2001) (quoting Morris v. Barkbuster, Inc., 923 F.2d 1277, 1280 (8th Cir. 1991)). Under South Dakota's long-arm statute, a person may become subject to jurisdiction in South Dakota by "the transaction of any business within the state," "commencing or participating in negotiations, mediation, arbitration or litigation involving subject matter located in whole or in part within the state," or by "commission of any act, the basis of which is not inconsistent with the Constitution of [South Dakota] or with the Constitution of the United States." SDCL 15-7-2(1), (10) and (14). South Dakota applies its long-arm statute to the fullest extent permissible under due process. Bell Paper Box, Inc. v. Trans Western ...