The opinion of the court was delivered by: Honorable Paul L. Maloney
Granting Plaintiffs' Motion to Reinstate BCS-Hampton Roads as a Party Defendant (Finding that, under Hertz (U.S. 2010), BCS-HR's Principal Place of Business is Michigan) Denying Plaintiffs' Motion to Reconsider Harshaw 5, 2010 WL 774321 (W.D. Mich. Feb. 25, 2010)
(Adhering to Determination that Virginia Substantive Law Governs All Claims and Issues)
Denying Plaintiffs' Motion for Leave to File Late Reply Brief
Declining to Decide Whether BCS-HR is Alter Ego of BCS and/or BCSI Taking Under Advisement the Parties' Cross-Motions for Summary Judgment on the Merits
This is a diversity tort case brought by Virginia citizens with respect to a Virginia adoption, and governed by the substantive law of Virginia. Plaintiffs William and Julie Harshaw ("Harshaw"), a married couple, adopted their son Roman from a Russian orphanage under the auspices, and with the services of defendants Bethany Christian Services of Hampton Roads, Bethany Christian Services and Bethany Christian Services International, Inc., all of whom are Michigan corporations with principal places of business in Grand Rapids, Michigan. The Harshaws proceed individually (counts 1-3) and as Roman's guardians (count 4).
In response to a BCS advertisement, the Harshaws attended an informational meeting at BCS's regional office in Virginia Beach, Virginia on June 12, 2003, and the next day they submitted a preliminary application to adopt through BCS in Russia, China or Guatemala. The application stated that they would accept a child with "very minor medical problems and would not consider a child with moderate to severe medical problems." They submitted an Application for International Adoption to BCS on June 18, 2003 which stated that they were "interested in parenting a child that has a positive prognosis for both mental and physical development." Id. ¶¶ 11-15 and Exs A & B.
The Harshaws underwent a pre-adoption family assessment conducted by BCS's regional office in Virginia, during which they signed an International Adoption Services Agreement. Comp ¶¶ 17-18 & Ex C. Relying on BCS's claimed experience and expertise in international adoption, the Harshaws understood that if the assessment was favorable, BCS would act as intermediary and/or fiduciary on their behalf to effectuate an adoption. Id. ¶¶ 16 & 19. On August 22, 2003, BCS issued an assessment stating that the Harshaws "feel equipped to parent a child who may have a minor, correctable problem with a good prognosis for normal development." It approved them to adopt a Russian child aged 12 to 36 months who had (at most) a "minor, correctable problem with a good prognosis for normal development." Id. ¶¶ 20-22 & Ex D. They paid BCS $16,000. Id. ¶ 24.
BCS representative Jeannie Walton initially referred a Russian child for the Harshaws, but the child had been severely burned by his mother and suffered medical problems as a result. The Harshaws declined and emphasized to BCS that they could only accept a child with minor, correctable conditions and a prognosis for normal development. Next, BCS provided them with Roman's name, age, sex, and photograph; a two-page document said to be an English translation of Roman's medical records at his orphanage; and an untranslated videotape showing what appeared to be Roman interacting with his caregivers in Russia. See Comp ¶¶ 25-29 and Ex E.
Relying on the video and the purported summary of Roman's medical records, the Harshaws told BCS they were willing to adopt Roman so long as BCS first provided any additional medical information about the boy. See Comp ¶ 30. At Walton's invitation, the Harshaws visited a BCS office to discuss the adoption. When they asked Walton whether Roman and the other Russian children they were considering were medically healthy, Walton responded that they were healthy, and explained that a medical doctor associated with Bethany, referred to as "Dr. D," had specific expertise in the evaluation of Russian children for the purposes of adoption and that Dr. D regularly examined the children in Russia on trips from his home in New York. Ms. Walton stated that Dr. D had examined Roman and that Roman was O.K. The Harshaws learned that the individual referred to as "Dr. D", is Dr. Michael Dubrovsky.
Comp ¶ 31. Relying on Walton's assurances regarding Dr. Dubrovsky's purported regular examination of Roman et al., the Harshaws traveled to the orphanage in Krasnoyarsk, Russia in December 2003, with BCS representatives Aleksandr "Alex" Vladimirovich and Yelena Vladimirovna acting as interpreters and guides. They were permitted to see Roman for only about one hour. Noting that Roman looked thin and perhaps ill, the Harshaws asked interpreter Alex if Roman was okay; after consulting orphanage staff, Alex told the Harshaws that Roman had had bronchitis. The Harshaws asked for more information about Roman and his mother's social and medical background, but Alex said none was available. They saw Roman for an hour the next day, then returned to America and met again with BCS's Jeannie Walton. See Comp ¶¶ 32-38.
When Walton asked how Roman looked and the Harshaws responded that he "appeared as if he might have been sick but otherwise appeared okay", she reassured them that what they saw was common in institutionalized children, and his issues were minor and often resulted from malnutrition and crowded conditions. Walton asked if they wished to proceed, and they said yes. Id. ¶¶ 38-40.
The next month, January 2004, the Harshaws returned to Russia to attend the final adoption hearing. When they took physical custody of Roman at the orphanage, they asked if there were any more medical records regarding Roman or his mother and were told there were none, and BCS never provided any additional medical information from then until after the adoption. See Comp ¶¶ 41-44.
After the Krasnoyarsk Regional Court entered an Order of Adoption on January 27, 2004, the Harshaws took Roman home to America, where they soon noticed that he was not developing and acting normally for his age and reported health. They spent about a year and a half taking Roman to physicians and mental-health professionals to figure out what might be wrong, leading to a January 2006 examination by neurodevelopmental pediatrician Dr. Frank Aiello III, M.D., who suggested Roman might be suffering from fetal alcohol syndrome and ordered more testing. See Comp ¶¶ 45-49. Following three days of examination and tests in June 2006, Dr. Ronald S. Federici, Psy.D., clinical director of a "neuropsychological and family therapy" clinic in Virginia, who diagnosed Roman with an alcohol/drug-related birth defect, identified as a fetal alcohol spectrum disorder causing neurocognitive and psychiatric abnormalities. See Comp ¶¶ 50-51.
The Harshaws allege that throughout the 24 months following the January 2004 adoption, they expressed concerns to BCS's social worker, during post-placement visits, about Roman's medical, emotional and psychological condition and behavior. The BCS social worker responded that Roman's problems were frequently associated with being institutionalized and that children adopted from such settings could "grow out of" the problems with a loving family. See Comp ¶ 59.
At an unspecified time in or after June 2006 (when Dr. Federici examined Roman), the Harshaws informed BCS of Federici's diagnosis and asked for more medical information, which BCS stated would be difficult to retrieve. See Comp ¶¶ 52-53. After the Harshaws repeated their requests, in October 2006 BCS provided two items which they had not previously provided: a ten-page Russian-language extract of Roman's medical records and history, and a six-page English translation. See Comp ¶¶ 54-55 and Ex F. The Harshaws allege that BCS either had these two documents in its possession all along (i.e., before the adoption was completed) or could and should have obtained them for review, translation and delivery to the Harshaws before they made their decision whether to adopt Roman. Id. ¶¶ 56-57. The Harshaws allege that they relied on BCS to provide all information reasonably available to it and if BCS had done so, they would not have pursued Roman's adoption. Id. ¶¶ 58 and 64-66. They also state that if BCS had provided complete, accurate medical information and appropriate post-placement assistance, they could have diagnosed Roman's condition earlier and started providing more-appropriate treatment earlier. Id. ¶ 67.
The Harshaws assert three claims on their own behalf: Count 1 Fraud / intentional misrepresentation (Comp ¶¶ 68-83)
Count 2 Negligent misrepresentation (Comp ¶¶ 84-94)
Count 3 Negligent failure to disclose (Comp ¶¶ 95-99)
They assert one claim on behalf of Roman, who is still a minor: count four, negligence (Comp ¶¶ 100-104). They allege that after Roman's adoption, BCS admitted it had "misinformed" the Harshaws by providing "unclear" medical information during the adoption process, and that Dr. Dubrovsky never examined Roman as it had represented. Id. ¶¶ 60-61. On each count, the Harshaws seek $75,000 in compensatory damages plus punitive damages, interest, and attorneys' fees, and demand a jury trial. Id. at 15-19 (prayers for relief).
The Harshaws filed the instant complaint in January 2008, and the defendants answered in April 2008. See Docs. 1, 6 & 8. From October 2008 through June 2009, the parties conducted discovery and the Magistrate resolved discovery disputes, see Docs. 17-78. In September 2009, the Harshaws filed a motion to compel production of documents requested in their second and third sets of requests for production, BCS filed an opposition brief, and pursuant to 28 U.S.C. § 636(b)(1)(A) the matter was referred to the Magistrate, who held a hearing and granted in part the Harshaws' motion to compel. See Docs. 112, 113, 125 & 128. On October 21, 2009, the Harshaws served the reports of experts Julian Davies M.D., and Andro Zangaladze, M.D., Ph.D., see Docs. 135-136.
In September 2009, BCS filed a motion to dismiss or for summary judgment on counts one, two and three -- the parents' common-law claims for fraud/intentional misrepresentation, negligent misrepresentation, and negligent failure to disclose -- on the ground that they are barred by the statute of limitations in Michigan and Virginia. This court denied BCS's unjustifiably late request for leave to amend their answer to assert the defense that counts 1-3 are barred by statutes of limitation, determining that BCS did not show good cause for failing to move for leave to amend before the deadline which the CMSO imposed. In January 2010, this court denied the defendants' motion for reconsideration as untimely and meritless. See Harshaw v. Bethany Christian Servs., Inc., No. 1:08-cv-104 Doc. 179, 2009 WL 5149925 (W.D. Mich. Dec. 15, 2009) (Maloney, C.J.) ("Harshaw 2"), recon. denied, Doc. 205, 2010 WL 331708 (W.D. Mich. Jan. 22, 2010) ("Harshaw 3").
On October 1, 2009, BCS moved to dismiss for failure to state a claim and/or for summary judgment on the merits of all four claims, urging application of Virginia substantive law; the Harshaws filed an opposition, and BCS replied. See Docs. 130-31 and 138 & 166. The Harshaws cross-moved for summary judgment on the merits of claims 2-4, urging application of Michigan substantive law; BCS filed an opposition, and the Harshaws replied. See Docs. 132-33, 139 and 166. Separately, the defendants moved for an order declaring that Virginia substantive law governs all the Harshaws' claims.
In Harshaw 5, issued in March 2010, this court granted that motion and held that Michigan choice-of-law precedents call for application of Virginia substantive law to the Harshaws' claims. This court wrote as follows:
"Because this is a diversity action, the law of the forum State, including the choice-of-law rules, apply." Montgomery v. Wyeth, 580 F.3d 455, 459 (6th Cir. 2009) (citing Uhl v. Komatsu Forklift Co., 512 F.3d 294, 302 (6th Cir. 2008)). "Generally speaking, a tort claim filed in a Michigan court will be governed by Michigan law 'unless a rational reason exists to displace it.'" Gass v. Marriott Hotel Servs., Inc., 558 F.3d 419, 425 (6th Cir. 2009) (citing Watkins & Son Pet Supplies v. Iams Co., 254 F.3d 607, 611 (6th Cir. 2001) (quoting Olmstead v. Anderson, 428 Mich. 1, 400 N.W.2d 292, 303 (Mich. 1987))).
More precisely, "Michigan choice of law principles provide that Michigan law applies absent a rational reason -- such as another State's interest -- to apply other law." Daimler-Chrysler Servs. North America, LLC v. Summit Nat'l, Inc., 289 F. App'x 916, 921 (6th Cir. 2008) (citing Sutherland v. Kennington Truck Serv., Ltd., 454 Mich. 274, 562 N.W.2d 466, 471 (Mich. 1997)) (emphasis added), cert. denied, -- U.S. --, 129 S.Ct. 2009 (2009).*fn1 "Michigan choice of law provisions favor allowing Michigan residents to bring suit in Michigan courts under Michigan law", Gass v. Marriott Hotel Servs., Inc., 558 F.3d 419, 425 (6th Cir. 2009) (citation omitted), and our Circuit has recognized a State's interest in "protecting its residents from injury and providing just compensation to its citizens" as a legitimate, relevant interest in a choice-of-law analysis. See Williams v. Toys 'R' Us, 138 F. App'x 798, 803 (6th Cir. 2005) ("Pennsylvania may have an interest in having its law applied because the accident occurred there. Pennsylvania's interest, however, does not outweigh Michigan's competing interest in protecting its residents from injury and" providing just compensation to its citizen, like Williams); Imaging Fin. Servs., Inc. v. Lettergraphics Detroit, Inc., No. 97-1930, 178 F.3d 1294, 1999 WL 115473, *3 (6th Cir. Feb. 9, 1999) (Boggs, Siler, Moore) ("Although there may be a reason to displace Michigan law on the contract claims (i.e., a choice of law provision in the contract itself), there is no reason to displace it on the tort claim here. The alleged injury occurred in Michigan to a Michigan company.").
By contrast, when the plaintiff is not a Michigan resident, these interests are absent and the analysis is no longer so strongly presumptively tilted in favor of applying the forum State's substantive law. See, e.g., Ruffin-Steinbeck v. dePasse, 267 F.3d 457 F.3d 463-64 (6th Cir. 2001) (because plaintiff was a Mississippi resident when she filed the complaint and a Mississippi or Alabama resident when she died, "[t]he district court did not err in determining that Michigan law did not apply to her cause of action, and under Mississippi law, Earline Ruffin's defamation claim was properly dismissed.").
To determine whether there is a rational reason to displace Michigan law, the court undertakes a two-step analysis. First, the court determines whether any foreign State has an interest in having its law applied: "if no State has such an interest the presumption that Michigan law applies cannot be overcome . . . ." Miller v. Airborne Express, Inc. , 2008 WL 2782921, *3 (E.D. Mich. July 17, 2008) (Steeh, J.) (citing Sutherland, 454 Mich. at 286, 562 N.W.2d 466) (citing Olmstead v. Anderson, 428 Mich. 1, 24, 29-30, 400 N.W.2d 292 (Mich. 1987))).
Second, if a foreign State does have an interest in having its substantive law applied, the court must determine whether Michigan's interests mandate that its law be applied despite the foreign State's competing interests. See Sutherland, 454 Mich. at 286, 562 N.W.2d 466 (citing Olmstead, 428 Mich. at 24, 29-30, 400 N.W.2d 292); see also Hall v. GMC, 229 Mich. App. 580,587, 582 N.W.2d 866 (Mich. App. 1998) (describing this "interest analysis").
Here the State of Virginia clearly has a strong interest in having its substantive law applied: the aforementioned interest in protecting its citizens and, where necessary, helping them obtain just monetary compensation and other judicial relief for damages unlawfully. Therefore, the court must consider whether the Michigan appellate courts would consider Virginia's interest in having its substantive law applied to its citizens' claims to be greater than Michigan's interest in having its substantive law applied to these non-residents' claims against its corporate domiciliaries.
Michigan precedent suggests that the Michigan Supreme Court would apply Virginia law here. While residing in Virginia, the Harshaws reviewed, signed, and submitted their BCS international adoption agreements in Virginia, to a Virginia corporation (Bethany Christian Services - Hampton Roads). The office presentation and discussions before they entered this contract took place in Virginia, as did the communication and contact between the parties for the family adoption assessment (conducted by BCS-Hampton Roads social worker Jeanne Walton). When the Harshaws brought Roman into the United States from Russia, the three of them entered into Virginia; so far as the record reflects, the Harshaws and their son remain residents of Virginia.
And significantly, the Harshaws do not seem to allege that any tortious conduct was committed in Michigan. Contrast Inland Waters Pollution Control Inc v. Jigawon, Inc., 2008 WL 205209, *7-8 (E.D. Mich. Jan. 22, 2008) (Lawson, J.) ("The defendants suggest that Texas law should apply to the claims of fraud . . . because they are citizens of Texas and that is where the tort took place. Neither of these reasons constitute[s] sufficient interest by a foreign state in having its law apply. [A]t least some of the tortious activity occurred in Michigan . . . ."), recon. denied, 2008 WL 373430 (E.D. Mich. Feb. 12, 2008).
In all, our case presents a compelling rationale for application of Virginia law: this was a contractual relationship which began in Virginia, with a Virginia corporation (BCS-Hampton Roads) playing at least an important tole (BCS-Hampton Roads), and the damages inflicted have been (and are being) suffered by the Harshaws and Roman in Virginia, where they continue to reside. See, e.g., Radeljak v. Daimlerchrysler Corp., 475 Mich. 598, 610-11,719 N.W.2d 40 (Mich. 2006) (holding that Croatian law would apply to a tort claim where the injury occurred in Croatia and the plaintiffs were residents and citizens of Croatia); Hernandez v. Ford Motor Co., 280 Mich. App. 545, 567-68, 760 N.W.2d 751 (Mich. App. 2008); Munic. High Income Fund, Inc. v. Goldman, Sachs & Co., No. 264224, 2006 WL 361149, *2-3 (Mich. App. Feb. 16, 2006) ("An injury state always has an interest in the conduct within its borders . . . .") (New York substantive law applied because the alleged misrepresentations and the resultant injury both occurred there); accord German Free State of Bavaria v. Toyobo Co., Ltd., 480 F. Supp.2d 948, 957 (W.D. Mich. 2007) (Enslen, Sr. J.) ("'The place of the wrong will never be dispositive in a given case, but it remains a factor to be considered in weighing the interests of the involved states . . . [however], the plaintiff's residence is a paramount consideration in determining which state's law to apply in a [Michigan] tort case.'") (quoting Olmstead, 428 Mich. at 24, 400 N.W.2d 292 (citing Abel v. Eli Lilly & Co., 418 Mich. 311, 328, 343 N.W.2d 164 (Mich. 1984))); Drooger v. Carlisle Tire & Wheel Co., 2006 WL 1008719, *2 (W.D. Mich. Apr. 18, 2006) (Enslen, Sr. J.)
("Defendant's only interest in having its home state's law apply . . . is that Defendant is a South Carolina resident. Mere corporate citizenship is not a weighty enough interest to tip the scales in Michigan's choice-of-law analysis.").
Accordingly, this court finds that a Michigan appeals court would apply Virginia substantive law to the Harshaws' claims, obligating this court to do so as well. "Michigan has no interest in affording greater rights of tort recovery to . . . [Virginia] resident[s] than those afforded by" their own State. Hall v. GMC, 229 Mich. App. 580, 585, 582 N.W.2d 866, 868 (Mich. App. 1998) (fact that plaintiff sustained his injury in North Carolina due to a defective auto part and was a NC citizen at the time of that injury, outweighed the fact that plaintiff had moved to Michigan before bringing suit); see also Farrell v. Ford Motor Co., 199 Mich. App. 81, 502 N.W.2d 567 (Mich. App. 1993); accord LL NJ, Inc. v. NBC-Subsidiary (WCAU-TV), L.P., 2008 WL 1923261, *12-13 (E.D. Mich. Apr. 13, 2008) (Lawson, J.) ("These decisions [Farrell and Hall] lead ineluctably to the conclusion that Michigan's choice-of-law rules favor application of NJ law to the trespass claim. Michigan has no real interest in this claim or the facts underlying it. The alleged trespass took place in NJ, and any harm that did occur happened there. [T]he undercover footage was never publicly disclosed. Moreover, the individuals involved in the undercover operation were citizens of either NJ or PA, not Michigan. The only interest that Michigan can claim with respect to the trespass count stems from the fact that the plaintiffs . . . are Michigan corporations. However, as the decisions in Farrell and Hall make clear, that alone is an insufficient basis on which to apply Michigan law. Because NJ has a significant interest in having its laws applied, and Michigan's interest is negligible, there is a rational basis to displace Michigan law and apply NJ law in its stead.") (NJ abbreviated) (citing Farrell, 199 Mich. App. at 94, 502 N.W.2d 567, & Hall, 229 Mich. App. at 587, 582 N.W.2d 866).
The Harshaws try to evade the Michigan Court of Appeals' decisions in Hall and Farrell by invoking Mahne v. Ford Motor Co., 900 F.2d 83, 86 (6th Cir. 1990). As the Harshaws explain it, In Mahne, the Sixth Circuit reviewed Michigan's approach to choice of law, beginning with Sexton v. Ryder Truck Rental, Inc., 413 Mich. 406, 320N.W.2d [sic] (1982), and culminating with Olmstead v. Anderson, 428 Mich. 1, 400 N.W.2d 292 (1987). In Olmstead, a Minnesota victim and a Michigan defendant were involved in a fatal accident in Wisconsin. Wisconsin law limited the recovery of damages for wrongful death; Minnesota law did not. The Michigan Supreme Court held that Michigan law as the law of the forum applied. According to the Sixth Circuit in Mahne, "After formulating a few generalizations from Sexton, lex fori rather lex loci is the presumptive rule of thumb for choice of law issues in tort cases, but that the issue must be decided on a case-by-case basis." [no citation to Mahne provided]
The Sixth Circuit's exposition of Michigan's lex fori approach to choice of law in Mahne, based on the Michigan Supreme Court's decision in Olmstead, was confirmed in . . . Sutherland . . . , 454 Mich. 274, 286 . . . (Mich. 1997), where that Court stated as follows: "We will apply Michigan law unless a 'rational reason' to do otherwise exists. * * *"
[I]n Mahne, the Sixth Circuit, applying Michigan conflicts law, held that where an accident took place in Florida, severely injuring a Florida resident, in a vehicle designed and manufactured in Michigan by Ford Motor Company, the Florida statute of repose would not be applied and recovery would be allowed under Michigan law. The [Sixth Circuit panel] stated that:
We think it is very clear from the lengthy discussion in Olmstead that the Michigan Supreme Court would hold, in a suit brought in a Michigan court by a party who is not a citizen of Michigan against a Michigan resident, arising out of an accident that occurred outside of Michigan and in the state of the plaintiff's residence, that Michigan law as the law of the forum presumptively controls the litigation; and further, that there must be a rational reason to displace Michigan law. * * " [Mahne,] 900 F.2d at 87 (citing Olmstead, 428 Mich. at 30.
P's Opp at 12-15 with n. 33 (other footnotes omitted) (citing Ammend v. Bioport, Inc., 322 F. Supp.2d 848(W.D. Mich. 2004) (applying Mahne to hold that MI law applied where non-residents were injected outside MI with an anthrax vaccine that had been made in MI by a MI corporation). [footnote: The Harshaws acknowledge that the Circuit's interpretation of Michigan choice-of-law principles in Mahne calls for the opposite result from the Michigan Court of Appeals's published decisions in Hall and Farrell. The Harshaws accurately state that BCS relied on Hall, which "held that a foreign state had a greater interest in the application of its law where the plaintiff resided in the foreign state, the injury occurred there, and the plaintiff's claim would have been barred if litigated in the foreign state."
Hall was based on the Michigan Court of Appeals's earlier decision * * * in Farrell . . . (1993). Farrell was a complete replay of Mahne . . . . In Farrell, a NC resident was killed there when a Ford vehicle manufactured and designed in Michigan rolled from neutral to reverse and backed over her. NC had a statute of repose; Michigan did not. Although, as in Mahne, Ford did not conduct any manufacturing activities in NC, the Michigan Court of Appeals flatly disagreed with the Sixth Circuit in Mahne, and held that NC did have an interest in protecting Ford and that NC's interest was greater than Michigan's interest.
Hall involved the identical situation as Farrell and Mahne, and the Court of Appeals held that the result was controlled by Farrell. As the Sixth Circuit made clear in Mahne, Michigan follows a lex fori approach, not a "greater interest" approach. Under the lex fori approach, Michigan law presumptively applies . . . .
[T]he court in Mahne strongly rejected the view of the Michigan Court of Appeals that Michigan law does not apply whenever the plaintiff resides in a foreign state, the injury occurred there, and the claim is barred by the law of that state.
P's Opp at 17. The Harshaws go on to say that "[f]or federal courts sitting in Michigan, Mahne is controlling in its analysis and application of Michigan choice of law . . . ." P's Opp at 15. That is precisely the opposite of the law. This court's task is only to consider how the Michigan Supreme Court would likely rule in the matter. An interpretation of state law by a federal court -- even a Court of Appeals -- has no bearing on that question. A federal court's interpretation of state law neither binds the State's lower courts nor predicts the decisions of its supreme court. As our Circuit acknowledged, "No federal court has the final say on what [state] law means. Even the decision of the highest federal court, the United States Supreme Court, about the meaning of [a state] law has no more binding authority on the [state] Supreme Court than the decision of [another State's] Supreme Court or for that matter any other court." Ohio v. Brunner, 549 F.3d 468, 472 (6th Cir. 2008); see also Humphreys v. Bellaire Corp., 966 F.2d 1037, 1042 (6th Cir. 1992) ("the district court's reliance on federal cases interpreting Ohio law is only correct if those cases accurately reflect the law of Ohio").
To the extent that Mahne's interpretation of Michigan choice-of-law is inconsistent with the Michigan Court of Appeals's published decisions in Hall and Farrell, this court must follow the latter. After the Michigan Supreme Court's own decisions, the precedential decisions of the State's Court of Appeals are the next-best legitimate and relevant predictor of how the Supreme Court would likely rule -- not the decisions of a foreign court (in this case, a federal court).]
Harshaw v. Bethany Christian Services, Inc. et al., No. 1:2008-cv-104 Document 229, 2010 WL 774321, *8-11 with n.6 (W.D. Mich. Feb. 25, 2010) (Maloney, C.J.) ("Harshaw 5") (some ¶ breaks added) (footnote 5 omitted).
The Harshaws have filed two motions which the court will dispose of today. First, the Harshaws move to reinstate BCS-HR as a party defendant; they rely on the U.S. Supreme Court's recent Hertz decision, which held that the "nerve center" test governs the determination of a corporation's principal place of business ("PPB"), rather than the total-activities test which our Circuit previously applied. The court agrees with the Harshaws that Hertz applies and that BCSHR's "nerve center" for this purpose is Michigan, not Virginia as it might have appeared under the former total-activities test. Second, the Harshaws move to reconsider Harshaw 5's determination that Michigan choice-of-law rules call for the application of Virginia substantive law to all their claims. The court finds that the addition of a third Michigan corporation (BCS-HR) to the roster of defendants adds little weight to the Michigan side of the scale, still leaving Virginia with the greater interest in having its substantive law applied to its citizens' suit regarding an adoption which was effectuated most directly and substantially by personnel in a Virginia office -- an office operated by a Bethany subsidiary or affiliate which itself was licensed to arrange adoptions only in Virginia -- which was approved by a Virginia state court, and which has allegedly caused harm in Virginia.
The Harshaws' Motion to Reinstate BCS-Hampton Roads as a Defendant
In June 2009, the Harshaws moved to voluntarily dismiss without prejudice a third defendant, Bethany Christian Services of Hampton Roads, Inc. ("BCS-Hampton Roads"), on the ground that its presence as a seemingly non-diverse, non-indispensable party would defeat this court's jurisdiction. This court granted the Harshaws' motion, but conditioned the dismissal of BCS-Hampton Roads on the Harshaws reimbursing the defense for the legal fees and costs incurred due to the erroneous inclusion of that party in this lawsuit. Based on the information then presented by the parties, the court reasoned as follows:
The Harshaws filed the instant complaint in January 2008, and with an extension of time the three BCS defendants jointly filed an answer in April 2008. See Doc. Nos. 1, 6 and 8. On April 17, 2008, BCS counsel (Perrin Rynders, Esq. of Varnum, Riddering LLP in Grand Rapids, Michigan) sent an e-mail to one of the Harshaws' counsel (Kevin A. Rynbrandt, Esq. of Rymbrandt & Associates, PLLC in Grand Rapids) regarding the basis for federal diversity jurisdiction in Michigan. BCS's e-mail stated, in its entirety:
Kev[in], I'm putting the answer together and I just realized that we might not have a diversity jurisdiction case. Isn't Bethany of Hampton Roads a citizen of Michigan and also Virginia? For sure it's a citizen of Michigan, but my understanding is that corporations have dual citizenship (where they're incorporated and where they have their principal place of business). Before I spend time digging into that issue too deeply, let me know if you've looked into it already.
Brief of Defendants BCS, BCSI and BCS-Hampton Roads filed June 29, 2009 in Opposition to Plaintiffs' FED. R. CIV. P. 41 Motion to Voluntarily Dismiss BCS-Hampton Roads ("Defs' Opp"), Ex A. The record does not reflect the response, if any, from the Harshaws' counsel.
From about October 2008 through June 2009, the parties conducted discovery and the Magistrate Judge resolved discovery disputes, see Docs. 17-78.
On June 15, 2009 the Harshaws moved for voluntary dismissal without prejudice of defendant Bethany Christian Services of Hampton Roads alone, pursuant to Federal Rule of Civil Procedure 41(a); BCS filed an opposition brief on June 29 and the Harshaws filed a reply brief on July 13, 2009. See Docs. 79-82. BCS's opposition brief recognizes the court's authority to dismiss BCS-Hampton Roads without prejudice to maintain complete diversity. But BCS contends that the court should dismiss the complaint without prejudice as to all three defendants; it emphasizes the uncontested fact that they alerted the Harshaws' counsel in writing to BCS-Hampton Roads' Virginia citizenship in April 2008, even before it filed the answer.
Alternately, BCS asks that if the court permits the Harshaws to voluntarily dismiss only BCS-Hampton Roads without prejudice, third conditions be attached. First,BCS contends that the Harshaws' re-filing of claims against BCS-Hampton Roads should be conditioned on them reimbursing BCS-Hampton ...