Henderson v. SMC Prods., Inc.

[Cite as Henderson v. SMC Prods., Inc., 2019-Ohio-5275.]

IN THE COURT OF APPEALS OF OHIO
SIXTH APPELLATE DISTRICT
ERIE COUNTY

John Henderson, et al. Court of Appeals No. E-18-003

Appellants Trial Court No. 2009-CV-0576

v.

SMC Productions, Inc., et al. DECISION AND JUDGMENT

Appellees Decided: December 20, 2019

*****

D. Jeffery Rengel and Thomas R. Lucas, for appellants.

Jeffrey M. Stopar, for appellees.

*****

OSOWIK, J.

{¶ 1} This is an appeal from a judgment of the Erie County Court of Common

Pleas which granted appellees’ motion to vacate default judgment for lack of personal

jurisdiction. For the reasons set forth below, this court affirms the judgment of the trial

court.
 {¶ 2} This litigation began in 2009, and we explained its lengthy procedural

history in Henderson v. SMC Promotions, Inc., 6th Dist. Erie Nos. E-12-068, E-13-047,

2014-Ohio-4634. Briefly, in 2008 appellants, John and Dawn Henderson, a married

couple living in Erie County, Ohio, entered into a business arrangement or enterprise

(used interchangeably by the trial court) with California-based appellees, SMC

Promotions, Inc. (“SMC Promotions”), Specialty Merchandise Corp. (“SMC”), and

eMerchantClub, LLC (“EMC”). The business failed to launch within 30 days, and

appellants commenced this litigation in Ohio on July 8, 2009. The trial court granted

appellants’ motion for default judgment on November 16, 2009, and awarded damages

and attorney fees on September 26, 2012. Appellees finally appeared in the litigation on

March 18, 2013, by filing a common law motion to vacate the default judgment for lack

of personal jurisdiction. On August 2, 2013, the trial court denied the motion.

{¶ 3} Both parties appealed that decision. On October 17, 2014, this court

remanded the matter for the trial court to conduct a two-step analysis pursuant to Fraley

v. Estate of Oeding, 138 Ohio St.3d 250, 2014-Ohio-452, 6 N.E.3d 9, to determine

whether appellees were subject to the personal jurisdiction of the Ohio courts. That

process took over three years for the trial court to complete. On December 20, 2017, the

trial court granted appellees’ March 18, 2013 motion.

{¶ 4} Appellants filed this appeal setting forth four assignments of error:

I. The trial court erred in determining that it lacked personal

jurisdiction over defendants-appellees.

2.
 II. The trial court erred in reversing, on remand, its prior decision to

not enforce California form selection and arbitration clauses contained in an

on-line document where no evidence exists that appellants ever agreed to its

terms.

III. The trial court erred when it failed to deem admitted properly

served requests for admission to which appellees never responded.

IV. The trial court erred when it failed to consider the unopposed

testimony on the amount of appellants’ damages suffered at the hands of

appellees.

{¶ 5} We will review the first and second assignments of error together.

{¶ 6} In support of their first assignment of error, appellants argue the trial court

had personal jurisdiction over the appellees and erroneously conducted its two-step

analysis. Appellants argue the trial court had general personal jurisdiction because of the

nature and types of appellees’ contacts in Ohio and had specific personal jurisdiction

because of the facts in this case. In response, appellees argue the trial court correctly

determined that it lacked personal jurisdiction.

{¶ 7} “‘Jurisdiction’ means ‘the courts’ statutory or constitutional power to

adjudicate the case.’ The term encompasses jurisdiction over the subject matter and over

the person. * * * ‘If a court acts without jurisdiction, then any proclamation by that court

is void.’” (Citations omitted.) Pratts v. Hurley, 102 Ohio St.3d 81, 2004-Ohio-1980, 806

N.E.2d 992, ¶ 11. Personal jurisdiction is rudimentary for a court to render a valid

3.
judgment over a defendant. Maryhew v. Yova, 11 Ohio St.3d 154, 156, 464 N.E.2d 538

(1984). “This may be acquired either by service of process upon the defendant, the

voluntary appearance and submission of the defendant or his legal representative, or by

certain acts of the defendant or his legal representative which constitute an involuntary

submission to the jurisdiction of the court.” Id.

{¶ 8} We review the trial court’s decision on personal jurisdiction de novo as a

question of law. Fraley, 138 Ohio St.3d 250, 2014-Ohio-452, 6 N.E.3d 9, at ¶ 11, citing

Kauffman Racing Equip., L.L.C. v. Roberts, 126 Ohio St.3d 81, 2010-Ohio-2551, 930

N.E.2d 784, ¶ 27.

The determination whether an Ohio trial court has personal

jurisdiction over an out-of-state defendant requires a two-step inquiry.

First, the court must determine whether the defendant’s conduct falls within

Ohio’s long-arm statute or the applicable civil rule. If it does, then the

court must consider whether the assertion of jurisdiction over the

nonresident defendant would deprive the defendant of due process of law

under the Fourteenth Amendment to the United States Constitution.

Id. at ¶ 12, citing Kentucky Oaks Mall Co. v. Mitchell’s Formal Wear, Inc., 53 Ohio St.3d

73, 75, 559 N.E.2d 477 (1990).

{¶ 9} Appellants have the burden to establish the trial court’s personal jurisdiction.

Henderson, 6th Dist. Erie Nos. E-12-068, E-13-047, 2014-Ohio-4634, at ¶ 56; Klunk v.

Hocking Valley Ry. Co., 74 Ohio St. 125, 135, 77 N.E. 752 (1906) (at all times the burden

4.
of proof remains on the party whose case requires the proof of the fact at issue.). “‘Once

a defendant has challenged the trial court’s personal jurisdiction over him or her, the

plaintiff bears the burden of proving jurisdiction by a preponderance of the evidence.’”

(Citation omitted.) State ex rel. DeWine v. 9150 Group, L.P., 2012-Ohio-3339, 977

N.E.2d 112, ¶ 8 (9th Dist.). “[P]reponderance of evidence means the greater weight of

evidence. * * * The greater weight may be infinitesimal, and it is only necessary that it be

sufficient to destroy the equilibrium.” Travelers’ Ins. Co. v. Gath, 118 Ohio St. 257, 261,

160 N.E. 710 (1928). Preponderance is a higher burden of proof than prima facie, which

merely means “at first view” appearing sufficient to establish the fact unless rebutted.

Carr v. Howard, 17 Ohio App.2d 233, 235, 246 N.E.2d 563 (2d Dist.1969).

{¶ 10} The trial court’s decision on personal jurisdiction arose from appellees’

March 18, 2013 common law motion to vacate the November 16, 2009 default judgment,

which is the proper method to challenge a void judgment. Romp v. Jean-Pierre, 6th Dist.

Lucas No. L-15-1123, 2016-Ohio-5072, ¶ 14. “The authority to vacate a void judgment

is not derived from Civ.R. 60(B) but rather constitutes an inherent power possessed by

Ohio courts.” Patton v. Diemer, 35 Ohio St.3d 68, 518 N.E.2d 941 (1988), paragraph

four of the syllabus.

{¶ 11} The grant or denial of a common law motion to vacate a void judgment is

reviewed for an abuse of discretion. Terwoord v. Harrison, 10 Ohio St.2d 170, 171, 226

N.E.2d 111 (1967). Abuse of discretion “‘connotes more than an error of law or judgment;

it implies that the court’s attitude is unreasonable, arbitrary or unconscionable.’”

5.
Blakemore v. Blakemore, 5 Ohio St.3d 217, 219, 450 N.E.2d 1140 (1983), quoting State v.

Adams, 62 Ohio St.2d 151, 157, 404 N.E.2d 144 (1980).

{¶ 12} The trial court did not conduct a separate oral evidentiary hearing on the

common law motion to vacate default judgment for lack of personal jurisdiction, instead

relying on the entire record, including, without limitation, the January 8, 2010 evidentiary

hearing on damages. It was within the trial court’s discretion whether to conduct an

evidentiary hearing. See T.S. Expediting Services, Inc. v. Mexican Industries, Inc., 6th

Dist. Wood No. WD-01-060, 2002-Ohio-2268, ¶ 26, fn. ix. Even if the trial court was

required to hold a hearing specifically on the motion, the record shows the trial court held

a “hearing.” A “hearing may be limited to a review of the record, or, at the judge’s

discretion, the hearing may involve the acceptance of briefs, oral argument and/or newly

discovered evidence.” Ohio Motor Vehicle Dealers Bd. v. Cent. Cadillac Co., 14 Ohio

St.3d 64, 67, 471 N.E.2d 488 (1984).

{¶ 13} We will not reverse the trial court’s findings of fact absent an abuse of

discretion, nor will we make a finding of fact the trial court should have made nor extract

a finding where no such finding was made. In re Guardianship of Rudy, 65 Ohio St.3d

394, 396, 604 N.E.2d 736 (1992).

A. R.C. 2307.382 and Civ.R. 4.3(A)

{¶ 14} Our first step in the two-step analysis of personal jurisdiction over a

nonresident defendant is to determine if appellees’ conduct falls within R.C. 2307.382 or

Civ.R. 4.3(A). Fraley, 138 Ohio St.3d 250, 2014-Ohio-452, 6 N.E.3d 9, at ¶ 13. R.C.

6.
2307.382(A)(1) and Civ.R. 4.3(A) complement each other. “R.C. 2307.382(A)(1)

authorizes a court to exercise personal jurisdiction over a nonresident defendant, whereas

Civ.R. 4.3(A)(1) provides for service of process to effectuate that jurisdiction. Both

require that the nonresident defendant be ‘transacting any business’ in Ohio.” Kentucky

Oaks, 53 Ohio St.3d at 75, 559 N.E.2d 477. “[T]o the extent that R.C. 2307.382(A) and

Civ.R. 4.3(A) conflict, Civ.R. 4.3(A) controls.” Fraiberg v. Cuyahoga Cty. Court of

Common Pleas, Domestic Relations Div., 76 Ohio St.3d 374, 376, 667 N.E.2d 1189

(1996).

{¶ 15} Only one factor under Civ.R. 4.3(A) or R.C. 2307.382(A) is required to be

determined by the court for the first part of the two-part test. CompuServe, Inc. v.

Trionfo, 91 Ohio App.3d 157, 162, 631 N.E.2d 1120 (10th Dist.1993); Conn v. Zakharov,

667 F.3d 705, 713 (6th Cir.2012).

{¶ 16} R.C. 2307.382(A)(1) states, “A court may exercise personal jurisdiction

over a person who acts directly or by an agent, as to a cause of action arising from the

person’s * * * Transacting any business in this state.” “For purposes of R.C. 2307.382,

‘person’ includes ‘an individual, his executor, administrator, or other personal

representative, or a corporation, partnership, association, or any other legal or

commercial entity, who is a nonresident of this state.’” Fraley at ¶ 13, quoting R.C.

2307.381. R.C. 2307.382 is considered a procedural or remedial statute because it

“prescribes the methods of enforcement of rights or obtaining redress” as opposed to a

7.
substantive law statute that “creates duties, rights and obligations.” Kilbreath v. Rudy, 16

Ohio St.2d 70, 72, 242 N.E.2d 658 (1968).

{¶ 17} We find “Civ.R. 4.3(A) defines ‘person’ in terms nearly identical to R.C.

2307.381.” Fraley at ¶ 14. Civ.R. 4.3(A)(1) states:

When Service Permitted. Service of process may be made outside of

this state, as provided in this rule, in any action in this state, upon a person

who, at the time of service of process, is a nonresident of this state or is a

resident of this state who is absent from this state. “Person” includes an

individual, an individual’s executor, administrator, or other personal

representative, or a corporation, partnership, association, or any other legal

or commercial entity, who, acting directly or by an agent, has caused an

event to occur out of which the claim that is the subject of the complaint

arose, from the person’s * * * Transacting any business in this state.

{¶ 18} The trial court’s judgment entry evaluated the record in light of Civ.R.

4.3(A), R.C. 2307.382(A)(1)-(4) and (6), and R.C. 2307.382(B). The trial court then

concluded that appellants successfully showed R.C. 2307.382(A)(1) applied.

{¶ 19} The Ohio Supreme Court guides us to interpret “transacting any business in

Ohio” under R.C. 2307.382(A)(1) and Civ.R. 4.3(A)(1) where the meaning of “transact”

includes “to have dealings” and embraces in its meaning the carrying on or the

prosecution of business negotiations that is broader than the word “contract” and may

involve business negotiations which have been either wholly or partly brought to a

8.
conclusion. Kentucky Oaks, 53 Ohio St.3d at 75, 559 N.E.2d 477; Goldstein v.

Christiansen, 70 Ohio St.3d 232, 236, 638 N.E.2d 541 (1994), citing U.S. Sprint

Communications Co. Partnership v. Mr. K’s Foods, Inc., 68 Ohio St.3d 181, 185, 624

N.E.2d 1048 (1994) (the broad terms cannot be defined in a generalized manner and rely

on the particular facts of a case).

{¶ 20} An Ohio court reviews all relevant factors in its determination of

“transacting any business in Ohio,” including, without limitation, where and by whom the

business dealings were initiated, how much of the negotiations occurred in Ohio, and

whether the agreement obligates the non-resident defendant to make payments or owe

other obligations to an Ohio business. Ohlman Farm & Greenhouse, Inc. v. Kanakry, 6th

Dist. Lucas No. L-13-1264, 2014-Ohio-4731, ¶ 22. Another factor for review could be

whether the agreement orders the majority of the work to be performed in Ohio. Lucas v.

P & L Paris Corp., 7th Dist. Mahoning No. 11-MA-104, 2012-Ohio-4357. We are

mindful that “the mere solicitation of business does not constitute ‘transacting business.’

Furthermore, physical presence within the state is not necessary. * * * The determination

of when internet use constitutes ‘transacting business’ depends upon the type of internet

activity involved.” (Citations omitted.) Ashton Park Apts., Ltd. v. Carlton-Naumann

Constr., Inc., 6th Dist. Lucas No. L-08-1395, 2009-Ohio-6335, ¶ 15.

{¶ 21} The trial court made a number of findings of fact from the record that SMC

“transacted business in Ohio” for the first step in the personal jurisdiction analysis.

However, the trial court concluded it did not have personal jurisdiction over SMC

9.
Promotions and EMC. The record contains the pleadings and supporting documents,

including affidavits from fact witnesses. The record also contains the transcript of the

January 8, 2010 damages hearing before the trial court’s magistrate when each appellant

and appellants’ business broker expert testified and exhibits were admitted.

{¶ 22} First, the trial court found appellees entirely operated their businesses from

California. Appellees have no office or agents in Ohio, own no property in Ohio, send no

representatives to Ohio, and have no statutory agent in Ohio. We reviewed the record

and do not find the trial court abused its discretion in reaching this finding.

{¶ 23} Mrs. Henderson testified at the January 8, 2010 hearing she was aware of

seeking relief in the state of California because at one time she filed a complaint with the

California attorney general about SMC not refunding all of their money. The record also

contains two affidavits, dated March 16 and June 27, 2013, respectively, by Scott

Palladino, the Chief Financial Officer of SMC, which by then had changed its name to

Smart Living Company. Through his unrebutted affidavits, Mr. Palladino averred SMC

is a California corporation and has been headquartered in California since 1954. None of

SMC’s employees, shareholders, officers or directors reside in Ohio; SMC has no

property, office, telephone listing, or post office box in Ohio. SMC does not have any

relationship with any bank or financial institution in Ohio, and “No payment from Mr.

Henderson was accepted by SMC in the State of Ohio. * * * At no time has SMC shipped

any SMC goods to Mr. Henderson for re-sale in the State of Ohio. * * * SMC engages in

10.
national advertising and has never directly targeted the State of Ohio with its advertising

and/or internet website.”

{¶ 24} Second, the trial court found SMC did more than merely solicit business in

Ohio by infomercials. SMC is “an import distribution company, which distributed

merchandise to independent, individual distributors (‘members’), who pay a membership

fee.” SMC’s “intent and purpose of a national television infomercial was to establish

paid memberships whereby other parties (members) would purchase distributed goods

and re-sell them. This set-up was designed to be a continuing business endeavor intended

to benefit both parties.” We reviewed the record and do not find the trial court abused its

discretion in reaching this finding.

{¶ 25} Mr. Henderson testified that he and his wife were Ohio residents in 2008

when they saw the SMC infomercial on television at a time when they were both

unemployed and looking for work. “And because I was in the retail business, my wife’s

got a bachelor’s degree in business, we decided we could maybe put ourselves to work

and take care of our family by selling and we thought this looked like a good idea.” Mr.

Henderson understood the infomercial was an advertisement: “Well, it was an ad, an

infomercial, and they had Tom Bosley on there, and I, I grew up with Tom Bosley, and I

trusted that.” Mr. Henderson testified that after conferring with his wife, he called SMC:

“Well, they sort of tell you what it’s going to cost for membership, and it wasn’t very

much, and they were polite on the phone at that time and they explained a few things.

* * * [T]hey were going to send us a package of information, and we did receive that.”

11.
Mr. Henderson also went to SMC’s website: “And this, this was on their website with

Tom Bosley * * * saying make big profits by selling products, it’s easy, * * *.” Mr.

Henderson received and read the large package of information: “I did find where it said

that you could get your money back within 30 days, and so we thought it was safe, and

then with Tom Bosley, you know, that advertises this, or his picture is on this

information, we thought it would be a good thing to do.”

{¶ 26} He also testified how the business arrangement worked as an SMC

member:

Court: Tell me how this was supposed to work. Were you, were

you supposed to buy their materials online and then you were going to

resell them? Is that how this would work?

A: Correct.

Court: Okay, okay. So * * * they had a storehouse of merchandise

where you could go online and order the materials and then it would be –

A: Shipped to either the customer or to us.

Court: So you could go either way. You could either ship it directly

or that it would be shipped to you and then you’d, you’d ship it out?

A: Correct, Your Honor.

{¶ 27} Third, the trial court found that after appellants saw the infomercial on

television, they called SMC, who then “provided information about membership and a

business plan.” Appellants were told after becoming a paid member: (1) “they would

12.
receive one-on-one coaching for 60 days”; (2) they would be provided “[i]nstruction

manuals, and suggestions on methods of sale”; (3) they would be provided merchandise

“catalogues, sales circulars, and brochures”; and (4) they “could purchase goods, which

they could mark up and re-sell.” We reviewed the record and do not find the trial court

abused its discretion in reaching this finding of the commercial nature of the business

agreement.

{¶ 28} The record also contains Mr. Henderson’s April 23, 2013 affidavit in which

he averred he is a 65-year-old high school graduate “with no prior business ownership or

management training or experience.” He further averred, “Based upon that [2008 Tom

Bosley] advertisement, I telephoned SMC and verbally agreed to their business plan and

agreed to send money to them for merchandise. * * * I never consulted legal counsel

before contacting SMC by phone. No attorney was present when I contacted SMC. I

have no particular legal training, education or experience.”

{¶ 29} Fourth, the trial court found appellants paid the membership fee over the

phone via a credit card and then “purchased a gift card for website purchases of $5,195.

* * * The level of membership [appellants] purchased made them eligible to order the

entire catalog of goods on Defendants’ website.” We reviewed the record and do not find

the trial court abused its discretion in reaching this finding of appellants’ actual

purchases.

{¶ 30} Mr. Henderson testified appellants used a credit card on June 11, 2008, to

pay $264.95 for their membership with SMC. After their discussions with SMC,

13.
appellants then sent $5,195 in “cash” via two separate Western Union transactions on

June 19, 2008, for the set-up, activation, and initial monthly hosting of a website “with

the whole catalog” of SMC merchandise, along with the promotional materials, catalogs,

and flyers for the merchandise to re-sell, and for business coaching from “a person that

would help you get your site up and train you as you were going.” Mrs. Henderson

testified they were able to pay the $5,195 from “some money” they cashed out from

mutual funds. Mr. Henderson presumed that with the “whole” SMC catalog online

“everybody gets on the Internet [and] would see” his website. Mr. Henderson claimed

the business coach told them their business could be up and running in three to four days.

That did not happen because, “Well, you almost had to be a computer wizard, Your

Honor, to sort of make it through all these things that they give you. * * * [I]t’s just

overwhelming, * * * you have to know what you’re doing on the computer * * *.”

{¶ 31} Fifth, the trial court found that within 30 days after becoming SMC

members, appellants had “problems communicating with their coach,” and “[appellants]

cancelled the membership, rescinding the contract, without purchasing a single item.”

We reviewed the record and do not find the trial court abused its discretion in reaching

this finding.

{¶ 32} Mr. Henderson testified he first emailed SMC on July 1, 2008, to cancel the

membership. He then followed up with another email to SMC on July 23, 2008. Mrs.

Henderson testified she spoke with “Joey” of SMC on July 31, 2008, who told her if

everything received was mailed back, the full $5,195 would be refunded. Appellants

14.
received a refund of $264.95 for their SMC membership, but never received a refund of

$5,195 for the non-refundable website development. There was no merchandise to

return.

Court: Okay. But what I want to know is you, you never made any

step toward ordering any goods from ‘em, right?

A: That’s correct, sir.

Court: Okay. And you never had a client at all * * * order any

goods from them at all, period?

A: That’s correct.

{¶ 33} Sixth, the trial court found Elizabeth Moffitt established by affidavit that

she is “another Ohioan [who] responded to a similar infomercial and purchased a

membership, which led to Moffitt selling items from SMC’s catalog actively over six (6)

years. Moffitt ordered goods from SMC’s catalog, which SMC shipped to Ohio.” We

reviewed the record and do not find the trial court abused its discretion in reaching this

finding.

{¶ 34} The record contains the unrebutted affidavit of Ms. Moffitt in which she

averred:

In or about July of 2003, I signed up with Specialty Merchandise

Corp. (SMC) and purchased a membership kit for the purpose of selling

items from the SMC catalog to third-party purchasers. In or about late

2011 or early 2012, I terminated my business relationship with SMC.

15.
 Between 2003 and 2009 I actively did business with SMC. All products I

ordered from SMC were shipped by them to me in Ohio during this time

period. I first learned of the SMC business opportunity as a resident of

Xenia, Ohio through television infomercial advertising featuring

spokesman Tom Bosley. That infomercial aired on a local Ohio television

station that I received in my home in Xenia, Ohio in or about July of 2003.

{¶ 35} Finally, the trial court found there was evidence of an intent for a

profitable, ongoing business relationship between the parties. The trial court found

appellants purchased a membership, and rescinded it “without purchasing a single item.”

We reviewed the record and do not find the trial court abused its discretion in reaching

this finding of the intent of the parties.

{¶ 36} The trial court found Ms. Moffitt, another Ohioan, substantiated “how this

business enterprise worked.” However, the trial court did not reference the July 18, 2017

affidavit by Michelle Myers-Honaker, on which appellants rely to support their assertion

of continuous and ongoing contacts by SMC with Ohioans. The record contains the

unrebutted, brief affidavit of Ms. Myers-Honaker in which she averred she is an Akron,

Ohio resident and that sometime in 2001 “and for several years thereafter” she saw the

Tom Bosley infomercial in her home on a local television channel she can no longer

recall. She avers, “I contacted SMC after this infomercial and requested additional

information on the company and its business opportunities.” Ms. Myers-Honaker does

not aver anything further beyond contacting SMC in California.

16.
 {¶ 37} We reviewed de novo the entire record and find there is a preponderance of

evidence to support the trial court’s determination in support of the first step of personal

jurisdiction analysis. The trial court did not abuse its discretion when it determined it had

personal jurisdiction over SMC, and not over SMC Promotions or EMC, pursuant to R.C.

2307.382(A)(1). We will proceed to analyze the second step of personal jurisdiction

analysis for SMC.

B. Due Process

{¶ 38} Our second step in the two-step analysis for personal jurisdiction over SMC

is to evaluate the due process standards from Internatl. Shoe Co. v. State of Wash., Office

of Unemp. Comp. & Placement, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945) and its

progeny. Fraley, 138 Ohio St.3d 250, 2014-Ohio-452, 6 N.E.3d 9, at ¶ 30. Appellants

must demonstrate SMC has certain “‘minimum contacts’” in Ohio that “‘does not offend

traditional notions of fair play and substantial justice.’” Id., quoting Internatl. Shoe at

316.

{¶ 39} “Personal jurisdiction can be either general or specific, depending upon the

nature of the contacts that the defendant has with the forum state.” Kauffman Racing,

126 Ohio St.3d 81, 2010-Ohio-2551, 930 N.E.2d 784, at ¶ 46. General personal

jurisdiction is found where SMC’s contacts with Ohio are of “‘a continuous and

systematic nature’” that Ohio may exercise personal jurisdiction over SMC even if the

litigation is unrelated to SMC’s contacts with Ohio. Id., quoting Bird v. Parsons, 289

17.
F.3d 865, 873 (6th Cir.2002). Specific jurisdiction is found if SMC’s contacts with Ohio

satisfy a three-part test established by the Ohio Supreme Court. Id. at ¶ 48-49.

1. General Personal Jurisdiction

{¶ 40} Appellants argue the trial court had general personal jurisdiction over SMC

because the trial court “essentially found” R.C. 2307.382(A)(1), (2) and (4) were satisfied

where SMC deliberately pursued benefits of doing business in Ohio. Appellants further

argue SMC’s continuous and systematic contacts with appellants, Ms. Moffitt and Ms.

Myers-Honaker, all Ohioans, establish SMC reasonably expected to be haled into an

Ohio court. While they dispute the “Rules” formed part of the agreed-upon contract

between the parties, they, nevertheless, argue the “Rules” proved SMC reasonably

expected to be haled into a court in Ohio.

{¶ 41} In response, SMC points to appellants’ waiver of their general personal

jurisdiction claim because they failed to raise it before the trial court. SMC further

argues the trial court found there was insufficient evidence in the record for general

personal jurisdiction.

{¶ 42} Although general personal jurisdiction is currently a part of Ohio

jurisprudence, SMC points us to Daimler AG v. Bauman, 571 U.S. 117, 127-29, 134 S.Ct.

746, 187 L.Ed.2d 624 (2014), to support their argument that general jurisdiction is now

the disfavored jurisdiction theory over specific jurisdiction because contacts for general

jurisdiction have to be so continuous and systematic as to render the non-resident

18.
defendant “at home” in the forum state. We find there is some support in Ohio for that

interpretation. Fern Exposition Servs., L.L.C. v. Lenhof, 1st Dist. Hamilton No.

C-130791, 2014-Ohio-3246, ¶ 18-19. We further find that the U.S. Sixth Circuit Court of

Appeals has opined “Ohio law does not appear to recognize general jurisdiction over

non-resident defendants, but instead requires that the court find specific jurisdiction under

one of the bases of jurisdiction listed in Ohio’s long-arm statute.” Conn v. Zakharov, 667

F.3d 705, 717 (6th Cir.2012), citing Goldstein, 70 Ohio St.3d at 238, 638 N.E.2d 541,

fn. 1.

{¶ 43} Nevertheless, we will not address appellants’ claim the trial court had

general personal jurisdiction over SMC. The trial court’s December 20, 2017 judgment

entry clearly states, “this Court is not going beyond analyzing R.C. § 2307.382(A)(1)

* * *.” In addition, the trial court made no determination on general personal jurisdiction

because appellants did not raise that argument: “Here, Plaintiffs are not arguing general

jurisdiction and this Court cannot find from what has been presented that SMC has

continuous and systematic contacts such that general jurisdiction would apply.” We

decline to rule on the issue of general personal jurisdiction for the first time on appeal.

App.R. 12(A)(1)(c)(2); see Paul Cheatham IRA v. Huntington Natl. Bank, 2017-Ohio-

9234, 102 N.E.3d 597, ¶ 29 (6th Dist.), rev’d on other grounds, Paul Cheatham IRA v.

Huntington Natl. Bank, Slip Opinion No. 2019-Ohio-3342.

19.
 2. Specific Personal Jurisdiction

{¶ 44} Appellants also argue the trial court had specific personal jurisdiction over

SMC because this litigation arose from or is related to SMC’s contacts in 2008 with the

appellants in Ohio. Appellants argue that because the trial court found SMC was

“transacting any business” in Ohio pursuant to R.C. 2307.382(A)(1), “it was this

transacting of an intended ongoing nature that gave rise to Appellants’ causes of action.”

(Emphasis sic.) Appellants also argue their facts are unique, and the trial court confused

the re-sale of merchandise from the sale of goods and services when appellants sold the

business opportunity plan to appellants.

{¶ 45} In response, SMC essentially argues the trial court had no specific personal

jurisdiction over SMC pursuant to the exclusive forum-selection clause and to Walden v.

Fiore, 571 U.S. 277, 285-286, 134 S.Ct. 1115, 188 L.Ed.2d 12 (2014).

a. Forum-Selection Clause

{¶ 46} We must first address the forum-selection clause issue. In support of their

second assignment of error, appellants argue the trial court erred in reversing its prior

decision to not enforce the California forum-selection clause contained in an online

document because “no evidence exists” that appellants ever agreed to its terms.

{¶ 47} In response, SMC argues the trial court did not err. Although SMC urges

this court to apply California law to analyze the forum-selection clause in this matter, we

find appellants did not raise the California choice-of-law clause of the contract as an

assignment of error for our review, and we decline to do so here. App.R. 12(A)(1)(c)(2).

20.
 {¶ 48} A court’s personal jurisdiction over a party is a waivable right, “and there

are a variety of legal arrangements whereby litigants may consent to the personal

jurisdiction of a particular court system.” Kennecorp Mtge. Brokers, Inc. v. Country Club

Convalescent Hosp., Inc., 66 Ohio St.3d 173, 175, 610 N.E.2d 987 (1993). The use of a

forum-selection clause is one method whereby contracting parties may agree to submit to

the jurisdiction of a particular court. Original Pizza Pan v. CWC Sports Group, Inc., 194

Ohio App.3d 50, 2011-Ohio-1684, 954 N.E.2d 1220, ¶ 11 (8th Dist.). We previously

determined SMC did not consent to the personal jurisdiction of the Ohio courts.

Henderson, 6th Dist. Erie Nos. E-12-068, E-13-047, 2014-Ohio-4634, at ¶ 54. The issue

before us is whether appellants consented to the exclusive personal jurisdiction of

California pursuant to the forum-selection clause of their membership agreement with

SMC.

{¶ 49} We review de novo as a question of law the enforceability of a forum-

selection clause. Original Pizza at ¶ 10. Appellants bear the heavy burden of showing

that enforcement of a valid forum-selection clause should not be enforced. Id. A valid

forum-selection clause is not appropriately reviewed under a minimum contacts analysis

because the clause is valid irrespective of the number of contacts involved with the forum

state. Kennecorp at 174-175.

{¶ 50} It is undisputed in the record appellants called SMC and verbally purchased

a membership for $264.95. Mr. Henderson testified that, although he never signed any

documents, he considered himself an SMC member entitled to the member benefits he

21.
purchased, and when he did not feel that he received those benefits, he read and followed

the membership agreement terms to cancel his membership within 30 days. The trial

court found in its December 20, 2017 decision that “all membership agreements,

including this one, had forum selection clauses/choice of law and arbitration provisions

that any dispute be litigated by arbitration in California.” The SMC membership

agreement in the record contains clause No. 10 stating, in relevant part, “You consent to

the exclusive personal jurisdiction and venue in Los Angeles County, California, and

agree that it shall be the sole forum and venue for any and all disputes involving SMC,

including without limitation small claims actions.”

{¶ 51} Forum-selection clauses are classified as either permissive or mandatory.

Huber v. Inpatient Med. Services, Inc., 2018-Ohio-4686, 124 N.E.3d 382, ¶ 14 (9th

Dist.). A permissive clause authorizes jurisdiction in the designated forum but does not

prohibit litigation elsewhere while a mandatory clause fixes jurisdiction and venue in a

designated forum using words of exclusivity. Id. By the clear language of the SMC

membership agreement, we find the forum-selection clause designated Los Angeles

County, California with exclusive personal jurisdiction and venue over the parties.

{¶ 52} We previously determined a forum-selection clause contained in the

express terms of a commercial agreement was generally enforceable. Henderson at ¶ 52.

The Ohio Supreme Court established a three-part test to determine the validity of a

forum-selection clause: “(1) Are both parties to the contract commercial entities? (2) Is

there evidence of fraud or overreaching? (3) Would enforcement of the clause be

22.
unreasonable and unjust?” Preferred Capital, Inc. v. Power Eng. Group, Inc., 112 Ohio

St.3d 429, 2007-Ohio-257, 860 N.E.2d 741, ¶ 7.

{¶ 53} First, it is undisputed the arrangement between appellants and SMC was a

commercial one, not for appellants’ own consumption. Throughout the record appellants

repeatedly point to their arrangement with SMC as a business opportunity plan, to their

intent to obtain SMC business coaching to operate their business, and to use the SMC

website with the “whole catalog” to operate their business. Although appellants suggest

they acted individually or as sole proprietors, the relative size or sophistication of the

parties is not a material factor in the commercial context. Id. at ¶ 8. It is well established

that parties to contracts are presumed to have read and understood them before agreeing

to the terms, and a party’s failure to read, who is not prevented from reading, and know

the truth of the document is that party’s sole responsibility. Id. at ¶ 10. There is no

evidence in the record appellants cannot read or were prevented from reading SMC’s

documents.

{¶ 54} Second, a forum-selection clause in the commercial context will be upheld

where there is no evidence of fraud or overreaching. Id. at ¶ 10. To invalidate a forum-

selection clause based on fraud, plaintiff must establish that the fraud relates directly to

the negotiation or acceptance as to the forum-selection clause itself, and not the contract

generally. Salehpour v. Just A Buck Licensing, Inc., 12th Dist. Warren No. CA2013-03-

028, 2013-Ohio-4436, ¶ 14. The record does not show appellants alleged fraud with

respect to the forum-selection clause itself. At most appellants argue their lack of

23.
business education and experience meant they did not understand the ramifications of the

business arrangement they entered into with SMC. Appellants found the website

containing the SMC membership rules confusing, in addition to trusting spokesperson

Tom Bosley, but it is well established those factors do not excuse their obligations to read

and understand the business arrangement they pursued with SMC. At a minimum, Mr.

Henderson testified he read through the entire membership kit he received from SMC and

clearly recalled the 30-day cancellation clause.

{¶ 55} Third, a forum-selection clause in the commercial context will be upheld

unless enforcing the forum-selection clause would clearly be unreasonable and unjust,

i.e., so long as enforcement does not deprive litigants of their day in court. Kennecorp,

66 Ohio St.3d at 176, 610 N.E.2d 987.

{¶ 56} In reversing its earlier decision that enforcing the forum-selection clause

was unreasonable and unjust, the trial court’s December 20, 2017 decision states:

This Court [originally] found that since Plaintiffs filed bankruptcy,

given the undisputed record Plaintiffs could not afford to litigate in

California, the Courthouse doors would effectively be shut. With the

benefit of hindsight, not only the subsequent case law of Salehpour but also

the fact this Court awarded attorney fees of $74,150 and Plaintiff filed [a

supplemental motion] seeking an additional $254,478.89 in fees and

expenses, this Court would be compelled to now find that the cost to litigate

this case in Ohio vis-à-vis pursuing Arbitration in California may well have

24.
 been more expensive, less cost efficient and, thus, enforcing the California

forum selection clause and arbitration clause would not be procedurally

unconscionable. This Court would therefore vacate the judgments on this

basis also.

{¶ 57} We find appellants were not deprived of their day in court. Since 2008

appellants incurred tremendous cost trying to meet their burden to show the Erie County

Court of Common Pleas in Ohio had personal jurisdiction over SMC. By comparison,

enforcing the forum-selection clause would not be unreasonable or unjust because the

trial court found it might have been more efficient and less costly for appellants to bring

their claims in California. We do not find the trial court abused its discretion when it

made this finding of fact.

{¶ 58} Further, despite appellants’ claims, we do not find the forum-selection

clause conflicts with R.C. 1334.06(E), 1334.15(A) and 1334.10(A).

{¶ 59} First, the trial court made no findings in its December 20, 2017 decision

that R.C. Chapter 1334 governed its personal jurisdiction analysis. Appellants urge us to

find the trial court found R.C. Chapter 1334 applied in this matter pursuant to its

September 26, 2012 decision overruling appellants’ objections to the magistrate’s

decision on damages. However, the trial court voided that September 26, 2012 order,

making its contents a legal nullity.

{¶ 60} Second, even if R.C. Chapter 1334 governed personal jurisdiction in this

matter, R.C. 1334.06(E) and 1334.15(A) were not effective until September 28, 2012,

25.
which was well after the parties’ contacts in 2008, and this litigation commenced in 2009.

In addition, even if R.C. 1334.10(A), which was in effect in 2008, applied, it merely

granted permissive jurisdiction to an appropriate Ohio court over claims under R.C.

Chapter 1334. “Section 1334.10 * * * does not establish Ohio courts as the only courts

able to apply the Ohio [Business Opportunities Plans Act]. * * * Conferring jurisdiction

and designating an exclusive forum for adjudicating disputes are two very different

concepts. That simple grant of jurisdiction does not provide an exclusive right to bring

suit in an Ohio court.” Egrsco, LLC v. Evans Garment Restoration, LLC, S.D.Ohio No.

2:09-CV-358, 2009 WL 3259423, *5 (Oct. 8, 2009). Exclusive and mandatory forum

clauses are enforceable over the permissive jurisdiction under R.C. 1334.10(A). Ohio

Learning Centers, LLC v. Sylvan Learning, Inc., N.D.Ohio No. 1:10-CV-1062,

2010 WL 2803042, *5 (July 14, 2010), citing Egrsco at *4.

{¶ 61} For the foregoing reasons after a de novo review of the entire record, we

find appellants failed to establish by a preponderance of the evidence the forum-selection

clause in the SMC membership agreement is invalid and did not establish exclusive

personal jurisdiction in California courts.

{¶ 62} Appellants’ second assignment of error is not well-taken.

b. Minimum Contacts

{¶ 63} Appellants would also not prevail under a minimum contacts analysis, even

if the forum-selection clause was not valid.

26.
 {¶ 64} This court recognizes a three-part test for finding minimum contacts for the

purposes of specific personal jurisdiction over a non-resident defendant, in this case

SMC: (1) SMC must “purposely avail” itself of the privilege of acting in Ohio or causing

a consequence in Ohio; (2) the cause of action must arise from SMC’s activities in Ohio;

and (3) SMC’s acts or consequences caused by it must have a substantial enough

connection with Ohio to make the exercise of jurisdiction over SMC reasonable. Ohlman

Farm, 6th Dist. Lucas No. L-13-1264, 2014-Ohio-4731, at ¶ 26.

{¶ 65} The trial court’s December 20, 2017 judgment entry states a number of

findings of fact with respect to its decision that it had no specific personal jurisdiction

over SMC:

30. This Court finds that the record before it does not establish any

of the three part test for specific jurisdiction here. While SMC engaged in

national marketing infomercials, that advertising was not specifically

targeted to Ohioans. * * * The evidence here is that two memberships in

Ohio were created. Plaintiff requests this Court to find more existed based

on records which don’t, or no longer, exist. Plaintiff has the burden of

proof and despite several years of seeking discovery managed, albeit on its

own, to find one other Ohio “member.” * * * It appears Plaintiffs’ contact

was minimal and initiated by Plaintiffs. The fact the Plaintiff initiated

business contact is often a significant indicator in determining whether the

defendant deliberately pursued benefits of doing business in Ohio. * * *.

27.
 31. Moreover, all membership agreements, including this one, had

forum selection clauses/choice of law and arbitration provisions that any

dispute be litigated by arbitration in California. Although this fact is not

determinative, it is highly indicative that defendant did not reasonably

anticipate litigating in Ohio. * * *.

32. Furthermore, here, while there was an intent to establish

memberships, with ‘continuing obligations’ whereby the member Plaintiff

would buy goods which Defendants would ship to Ohio for Plaintiff to

re-sell from Ohio, the particular facts of this case, is that never happened.

Plaintiffs sensed something was amiss and promptly cancelled the

membership without ordering a single product. In this scenario, there was

no ‘ongoing’ or ‘continuing obligation.’ Had the facts been different and if

Plaintiff had ordered a sizeable number of goods, over a period of time, the

result would likely have been different. (Emphasis sic.)

33. Consequently, this court finds that to exercise Personal

Jurisdiction over SMC (or any of the other named Defendants) in this

particular case would run afoul of the Due Process Clause of the Fourteenth

Amendment. This Court is therefore vacating the prior judgment entries in

this case.

28.
 c. Purposeful Availment in Ohio

{¶ 66} For the first part of the three-part minimum contacts test, we must

determine whether SMC purposely availed itself of the privilege of acting in or causing a

consequence in Ohio. “Purposeful availment” means SMC’s contacts with Ohio

proximately resulted from SMC’s own actions that created a substantial connection with

Ohio such that SMC should reasonably anticipate being haled into court in Ohio.

Kauffman Racing, 126 Ohio St.3d 81, 2010-Ohio-2551, 930 N.E.2d 784, at ¶ 51.

“Purposeful availment” does not include random, fortuitous, or attenuated contacts or the

unilateral activity of another. Id.

{¶ 67} We first find that appellants’ emphasis on the role of the internet to

establish SMC submitted to personal jurisdiction in Ohio must still meet all traditional

jurisdiction principles. Kauffman Racing at ¶ 25. “‘[T]he Internet does not pose unique

jurisdictional challenges. People have been inflicting injury on each other from afar for a

long time. Although the Internet may have increased the quantity of these occurrences, it

has not created problems that are qualitatively more difficult.’” (Citations omitted.) Id.

“Personal jurisdiction exists only in forums in which a party has purposeful, deliberate

contact, not random contact occasioned by the wide accessibility of the internet.” In re

Blue Flame Energy Corp., 171 Ohio App.3d 514, 2006-Ohio-6892, 871 N.E.2d 1227,

¶ 22 (10th Dist.).

{¶ 68} Mere foreseeability that SMC’s website might cause appellants harm in

Ohio is insufficient, standing alone, to justify a finding SMC purposely availed itself of

29.
the privilege of operating in Ohio. James v. Hoffman, 2018-Ohio-2422, 112 N.E.3d 447,

¶ 25 (2d Dist.). The record shows appellants interacted with SMC’s website to download

information about membership and, after becoming a member, login and conduct some of

the tasks related to their membership. However, there is nothing in the record to indicate

SMC’s website targeted Ohioans. “‘A defendant purposefully avails itself of the

privilege of acting in a state through its website if the website is interactive to a degree

that reveals specifically intended interaction with residents of the state.’” (Citation

omitted.) Kauffman Racing at ¶ 26. Appellants must show SMC’s internet actions were

purposely directed toward Ohio. J. McIntyre Mach., Ltd. v. Nicastro, 564 U.S. 873, 883,

131 S.Ct. 2780, 180 L.Ed.2d 765 (2011). Appellants argue that SMC could generally

foresee its advertisements and merchandise would reach potential customers in Ohio.

However, we find that is not enough for Ohio to exercise personal jurisdiction where

appellants admit Ohio was just one state along with the rest of the United States where

SMC solicited business. Id. at 882. Merely predicting its merchandise would reach Ohio

“is not enough.” Id.

{¶ 69} The trial court also determined SMC did not target Ohio with its national

television advertisement featuring spokesman Tom Bosley in an infomercial, and we will

not disturb that finding. Appellants do not claim any particular Ohio connection by actor

Tom Bosley; rather they claim it was their trust in Tom Bosley during the infomercial

that caused them to call SMC in California in 2008. Appellants rely on their own

testimony and affidavits in the record to claim SMC targeted Ohioans because they and

30.
two other Ohioans saw the Tom Bosley infomercial in Ohio in 2001, 2003 and 2008.

However, we find those facts fail to show how SMC targeted Ohioans in light of the

undisputed evidence in the record of what amounts to only an intent to serve the Ohio

market, among the rest of the United States. Id. at 386-387; see Kleinfeld v. Link, 9 Ohio

App.3d 29, 31, 457 N.E.2d 1187 (3d Dist.1983).

{¶ 70} The record shows appellants admit SMC’s advertisements and

memberships targeted the entire United States, of which Ohio is a part. For example,

“Appellees were headquartered in California and sold these small business franchises by

selling ‘memberships’ to ‘members’ or customers like Appellants throughout the United

States, including Ohio.” (Emphasis sic.) In another example, “In this case, Appellees

purposefully directed their advertising at Ohio and other states * * *.” Appellants further

admit, “The evidence clearly demonstrates that Appellees nationwide television and

internet advertising campaign was designed to accept business contacts from anywhere in

the United States, including Ohio.”

{¶ 71} Of the three Ohioans in the record who saw the Tom Bosley infomercial,

only two actually entered into a business arrangement with SMC: appellants and Ms.

Moffitt. Even assuming the infomercials ran continuously during the eight-year period

from 2001 to 2008, it is difficult to see how two to three Ohioans out of all potential Ohio

television viewers during that time establish that SMC targeted Ohioans with the national

infomercial. See Krutowsky v. Simonson, 109 Ohio App.3d 367, 371, 672 N.E.2d 219

(9th Dist.1996).

31.
 {¶ 72} There is more evidence in the record SMC did not purposely avail itself in

Ohio. SMC did not contact appellants in Ohio to become members because it was

appellants who called SMC in California to pursue the business arrangement and,

ultimately, “verbally agreed to [SMC’s] business plan.” Each of the other two Ohioans

also admitted they contacted SMC in California to pursue the business arrangement or

enterprise. Appellants alleged SMC deficiently performed work owed to them, namely

business coaching and website development, but all of that work was to be performed in

California. None of SMC’s merchandise, warehoused in California, was mailed to Ohio

because appellants did not order any. Even if appellants ordered merchandise from SMC,

appellants’ customers could be located anywhere, and SMC could directly ship the

merchandise from California to that customer. All payments between appellants and

SMC were from appellants to SMC in California, although SMC refunded appellants’

credit card the membership fee after cancellation. SMC did ship the membership kit and

startup catalogs and brochures to appellants in Ohio, but that was all.

{¶ 73} We reviewed de novo the entire record and do not find SMC purposely

availed itself in Ohio through its own actions. Appellants failed to establish by a

preponderance of the evidence that SMC had a substantial connection with Ohio such

that SMC should reasonably anticipate being haled into court in Ohio. We find no abuse

of discretion by the trial court when it determined the facts for its analysis.

{¶ 74} Having failed to find support in the record for the first part of the three-part

test, which is dispositive, we may end our analysis. Krutowsky, 109 Ohio App.3d at 371,

32.
672 N.E.2d 219; Anilas, Inc. v. Kern, 28 Ohio St.3d 165, 168, 502 N.E.2d 1025 (1986);

Century Marketing Corp. v. Aldrich, 6th Dist. Wood No. WD-02-045, 2003-Ohio-1390,

¶ 23; Dean v. Motel 6 Operating L.P., 134 F.3d 1269, 1275 (6th Cir.1998).

{¶ 75} After a de novo review of the record, we find the trial court did not abuse

its discretion when it determined it lacked personal jurisdiction over SMC pursuant to the

due process clause of the Fourteenth Amendment. We find appellants failed to establish

by a preponderance of the evidence the second step of personal jurisdiction analysis. We

find the court’s attitude was not unreasonable, arbitrary or unconscionable when it

granted appellees’ motion to vacate the void default judgment.

{¶ 76} Appellants’ first assignment of error is not well-taken.

d. Conclusion

{¶ 77} In light of our decision on the first and second assignments of error, we

decline to address the third and fourth assignments of error regarding damages. App.R.

12(A)(1)(c).

{¶ 78} On consideration whereof, the judgment of the Erie County Court of

Common Pleas is affirmed. Appellants are ordered to pay the costs of this appeal

pursuant to App.R. 24.

Judgment affirmed.

A certified copy of this entry shall constitute the mandate pursuant to App.R. 27.
See also 6th Dist.Loc.App.R. 4.

33.
 Henderson v. SMC
Productions, Inc.
C.A. No. E-18-003

Thomas J. Osowik, J. _______________________________
JUDGE

Gene A. Zmuda, J. _______________________________
CONCURS AND WRITES JUDGE
SEPARATELY.

Christine E. Mayle, P.J.
DISSENTS AND WRITES
SEPARATELY.

ZMUDA, J.

{¶ 79} Although I fundamentally agree with the majority and would affirm the

trial court’s decision, I write separately to clarify the distinction between review of the

trial court’s factual findings and review of the application of the law to those facts. The

trial court’s factual findings are subject to an abuse of discretion standard. In re

Guardianship of Rudy, 65 Ohio St.3d 394, 396, 604 N.E.2d 736 (1992). The trial court’s

application of the law to the facts, in determining whether exercise of personal

34.
jurisdiction is proper, is reviewed de novo. Fraley v. Estate of Oeding, 138 Ohio St.3d

250, 2014-Ohio-452, 6 N.E.3d 9, ¶ 11.

{¶ 80} Once appellees raise a challenge to the exercise of personal jurisdiction,

appellants bear the burden of demonstrating the trial court’s personal jurisdiction over

appellees by a preponderance of the evidence. Fraley at ¶ 11; State ex rel. DeWine v.

9150 Group, L.P., 977 N.E.2d 112, 2012-Ohio-3339 (9th Dist.), ¶ 8, quoting ComDoc v.

Advance Print Copy Ship Ctr., 9th Dist. Summit No. 24212, 2009-Ohio-2998, ¶ 3. As

noted by the majority, the trial court conducted an evidentiary “hearing” based on the

record of sworn testimony. The evidence included testimony adduced at the 2010

damages hearing with supporting exhibits, testimony and documents submitted through

affidavits, and testimony proffered by filing the deposition of appellees’ designated

representative, conducted after the trial court permitted limited discovery pertinent to the

issue of personal jurisdiction and the two-step analysis under R.C. 2307.382 and Civ.R.

4.3(A).

{¶ 81} At the damages hearing, appellants testified regarding their introduction to

the purported business venture, beginning with television advertisements featuring Tom

Bosley. After reviewing the information, including terms that contained a provision for a

30-day money back guarantee, appellants paid the membership fee of $264.95 with a

credit card. Mr. Henderson specifically testified that he read all the materials provided,

and was reassured by the 30-day money back guarantee contained within those materials.

35.
The Standard Membership Rules, attached to the Scott Palladino Affidavit, provide at

paragraph 4:

Cancellation. If you cancel your membership within 30 days of

joining SMC, you may be eligible for a refund of your membership fees

(excluding shipping and handling). Call toll free 1-877-9033 for eligibility

and cancellation instructions. If you cancel after 30 days, you will remain

responsible for any remaining fees until paid in full.

Of significant import, prior to the present appeal, appellants did not dispute the existence

of the Standard Membership Rules, relied on by appellants in pursuing a return of funds

and introduced through the Palladino Affidavit. See Henderson v. SMC Promotions, Inc.,

6th Dist. Erie Nos. E-12-068, E-13-047, 2014-Ohio-4634 (Henderson I). For the first

time in their appellants’ brief, they now argue the existence of these Rules was never

established.1

{¶ 82} After payment of the membership fee, appellees’ representative contacted

appellants and provided a password for its website, and appellees paid $5,195 to set up

their own website and PayPal account, an amount chosen by appellants after speaking

1
In Henderson I, appellants raised issues for review regarding whether a forum selection
clause in a rescinded contract controlled, whether filing in an Ohio court evidenced an
intent not to “be bound by the contract forum selection clause,” and whether the forum
selection clause in a rescinded contract was timely asserted. While appellants did
challenge whether there was a “meeting of the minds” regarding these Rules, and argued
that only an oral contract was formed, the trial court in the present appeal found—as
fact—that the forum selection clause was part of the agreement and applicable to
appellants’ claims.

36.
with appellees’ representative, to gain access to the whole catalog of goods offered for

sale through appellees. While appellees promised a “business coach” to assist appellants

in launching their business, appellants spoke to their assigned coach only once, and a

subsequent “coach” never returned their calls. Appellants also received several boxes of

materials, by mail, including cards, brochures, and catalogs.

{¶ 83} After their own investigation, appellants feared the venture was actually a

scam, and cancelled the transaction within the 30-day money back guarantee period,

evidenced by a printout of their online cancellation. Appellants returned the boxes of

materials soon after, and received a return receipt dated within the 30-day period.

Appellees refunded the $264.95 membership fee by crediting appellants’ credit card

account. Appellants sought return of the $5,195, and when appellees did not return those

funds, Mrs. Henderson lodged complaints with the attorney generals in Ohio and

California. Appellants’ lawsuit followed, which resulted in the default judgment now

challenged as void for want of personal jurisdiction.

{¶ 84} Appellees did not appear and challenge personal jurisdiction until after the

trial court entered default judgment, and appellants filed their first appeal, challenging the

trial court’s decision to deny the award of loss of earnings damages as too speculative.

Appellees sought remand, so the trial court could consider their motion to vacate the

default judgment as a void judgment, rendered without personal jurisdiction over

appellees. In support, appellees proffered the Palladino Affidavit, with copies of the

Standard Membership Rules attached. After the trial court denied the motion, appellees

37.
filed a cross-appeal, challenging the trial court’s denial of their motion to vacate the

default judgment. See Henderson I. On October 17, 2014, we reversed the trial court’s

denial of appellees’ motion to vacate the judgment based on the trial court’s failure to

apply the proper analysis, and remanded the matter for determination of personal

jurisdiction. See id.

{¶ 85} Upon remand, the trial court permitted additional discovery, relative to the

determination of personal jurisdiction. Appellants filed a motion to strike appellees’

evidence, the Palladino Affidavit, offered in support of the motion to vacate judgment.

By early 2017, ongoing discovery disputes had delayed proceedings, with appellants

continuing to request documentation that appellees could not produce. The trial court

permitted appellants to take Palladino’s deposition, but by that time, Palladino had left

appellees’ employ and appellees were without authority to produce him as a witness.

Appellants noticed a Civ.R. 30(B)(5) deposition, and appellees produced Mark Schelbert

as their representative.

{¶ 86} In his deposition, Schelbert testified regarding the lack of corporate

records, a result of Smart Living Company’s purchase of the SMC business in 2011, and

the new systems in use, separate from the outdated computers and systems in use by

SMC. When questioned regarding business records that may pertain to appellees’

contacts with Ohio, Schelbert indicated he had no knowledge of SMC Promotions, prior

to acquisition and renaming as Smart Living Company. While Schelbert participated in

the acquisition, his review of documents was typical due diligence review of financial

38.
statements and the purchase agreement, and he did not review customer lists, member

accounts, shipment ledgers, or inquiry logs. The documents that Schelbert did review,

moreover, were viewed electronically, and aside from the financial statements, were not

preserved or accessible in 2017. Schelbert also indicated that only current customer files

were retained after the purchase in 2011.

{¶ 87} While Smart Living Company attempted to transfer data into its new

system, “[s]ome data was lost because [of] some failed old computer equipment” and

some data was corrupted. Schelbert was also asked about an official statement provided

by appellees in 2008 to the Ohio attorney general, consumer protection division, but had

no knowledge of the matter. As to specific written requests for admissions served by

appellants, Schelbert had no knowledge of any matters contained within those requests.

Schelbert did recall speaking to Palladino about the information requested by appellants

in discovery. As to the Palladino Affidavit, Schelbert was not certain of any documents

Palladino would have reviewed, relative to his affidavit, stating:

I - - I don’t know specifically what documents he reviewed other

than I think - - he shared with me the same information I’m sharing which

is that the documents were - - didn’t - - no longer existed or - - or were not

available.

Schelbert further indicated that the change in computer systems and data corruption

resulted in the loss of some information from the old computer systems, after the sale in

2011. Because he no longer had data for customers in Ohio in 2008, Schelbert could not

39.
provide any information on the number of SMC members with Ohio mailing addresses,

and therefore, could neither confirm nor deny the existence of Ohio members.

{¶ 88} The focus of the deposition of Schelbert was not on the existence of

Standard Membership Rules, as attached to the Palladino Affidavit. Instead, appellants’

counsel summed up the purpose of Schelbert’s deposition as:

My main - - and I’ll be real frank with you. My focus here is to try

to determine what records you’ve got and what you did with them and why

we can’t see whether there were any customers of SMC group prior to 2011

which - - you’ve answered a couple of times.

***

I just want to go through some of these remaining things here just to

verify and determine what - - what you did in terms of attempting to get the

information.

{¶ 89} After supplemental briefing on the motion to vacate judgment, the trial

court entered its judgment on December 20, 2017. Prior to conducting the two-step

analysis to determine whether it had personal jurisdiction over the non-resident

defendants, the trial court noted the difficulties posed by the passage of time and

prolonged discovery disputes. The trial court noted:

The problem after remand was that the original Defendants sold the

business and any documentation relating to any possible business dealings

with any other Ohioans could not be located, or, reportedly, did not exist.

40.
 As this Court expressed previously, there was not much of a record before

this Court prior to the remand to determine the issue of Personal

Jurisdiction and the issue itself was first raised in Defendants’ Reply Brief.

{¶ 90} As to the pending motion to strike defendants’ supporting affidavit and

documents, the trial court noted it had granted appellants’ request to depose Scott

Palladino in January 2017, expanding the limited discovery previously authorized to brief

the issue of long-arm jurisdiction. In February 2017, appellees informed the trial court

and appellants that they no longer employed Palladino, and their inquiry to Palladino,

requesting voluntary appearance for deposition, went unanswered. The trial court found:

To the extent the two Motions filed March 15, 2017 have not been

fully ruled upon, those Motions will be denied. First, this Court has

attempted to permit Plaintiff to engage in limited discovery related to the

issue of Defendants’ contacts with Ohio. However, as to producing

documentation, it appears simply not to exist. Schelbert laid out the

additional issues encountered when the Defendants were sold and

purchased. With respect to Palladino being deposed, Defendants are unable

to produce him. Defendants have no control over this former employee.

This Court notes that not only did Defendants produce an alternative

witness; but Plaintiffs made no attempts to seek an Order for an out of state

deposition to be honored by a California Court. In fact, deposing Palladino

was an after thought by Plaintiffs. Not only did Plaintiffs not request such

41.
 a deposition until years after the Palladino affidavits were filed, but shortly

after the remand, Plaintiffs did not even indicate they wanted to engage in

additional discovery; it was “paper” discovery. Plaintiffs should have, and

could have, requested Palladino’s deposition promptly after his Affidavits

were filed. By not doing so and waiting several years, Plaintiffs ran the risk

they, in fact, faced – that Palladino would no longer be under Defendants’

employ and control.

{¶ 91} While the trial court denied appellants’ motion to strike the Palladino

Affidavit, the trial court nevertheless determined that the more recent testimony of

Schelbert cast doubt on the credibility of Palladino. Without relying on the Palladino

Affidavit, which was not ordered stricken, the trial court found evidence that only SMC

transacted business in Ohio, but also found that SMC did not have the minimum contacts

necessary to satisfy “traditional notions of fair play and substantial justice.” The trial

court based this finding, in part, on the existence of the forum selection clause as part of

the Standard Membership Rules. The trial court made the specific finding that:

“[A]ll membership agreements, including this one, had forum selection

clauses/choice of law and arbitration provisions that any dispute be litigated

by arbitration in California. Although this fact is not determinative, it is

highly indicative that defendant did not reasonably anticipate litigating

in Ohio.” (Emphasis added.)

42.
 {¶ 92} The dissent disagreed with the trial court’s factual finding, and—without

finding any abuse of discretion—determined the evidence did not demonstrate the

existence of the forum selection clause. The dissent based this factual finding on the trial

court’s credibility determination regarding the Palladino Affidavit. While the trial court’s

ruling might appear to be inconsistent, as the Palladino Affidavit lacked credibility yet

the forum selection clause applied, any inconsistency may be resolved by examining the

content of the testimony.

{¶ 93} The issue in Schelbert’s deposition was long-arm jurisdiction, with

questions focused on the identity and number of Ohio members in SMC, and

documentation of business dealings with those Ohio members as evidence of appellees’

contact within Ohio. To this end, the Palladino Affidavit contained attestations regarding

contacts, pertinent to a two-step analysis, including the following:

Historically, when a prospective member inquired about SMC and

requested a free information packet, one was mailed to him or her. SMC

then followed up with a telephone call to that person, and the member may

have been offered other types of membership as well as other services not

included in the printed material sent to him or her. Some of these other

services may have included an e-commerce website. Today, prospective

members may sign up for a free membership online to learn more about

SMC.

43.
As to Palladino’s attestations, the trial court noted:

It is fairly clear from the Deposition of Schelbert that Palladino would have

little personal knowledge of Defendants’ business activities at the time

Plaintiffs made contact with Defendants. Given the time when Palladino

started with the Defendants and what documentation was available at that

time per Schelbert, Palladino’s attestations have suspect credibility. This

Court bases its decision on the record otherwise before it and the fact

Plaintiff has the burden of proof as indicated previously.

{¶ 94} The record, otherwise before the trial court, included Mr. Henderson’s

testimony that he had read all the materials, and especially remembered the 30-day

money back guarantee. In his testimony, Mr. Henderson acknowledged that the 30-day

money back guarantee language was referenced in an email communication, but he read

the actual guarantee language in materials sent to him by defendants, regardless of

whether he clicked on an Internet link. He stated, “The first reference before we even got

into this was the packet that they sent us with all this paperwork in it.” The 30-day

money back guarantee was part of the Standard Membership Rules that also contained

the forum selection clause, referenced in, and attached to, the Palladino Affidavit.

{¶ 95} Schelbert’s testimony, moreover, did not extend to the existence of a forum

selection clause in the Standard Membership Rules, but instead was limited to discovery

for purposes of determining contacts and personal jurisdiction. Schelbert indicated that

Palladino joined SMC in 2011, and Schelbert had no knowledge of any specific

44.
documents Palladino reviewed when drafting his 2013 affidavit, without any question

regarding the actual documents attached to his affidavit. To find the forum selection

clause is suspect because Palladino would not have had access to various documents,

despite the inclusion of actual, unchallenged documents, contradicts the record and the

trial court’s factual findings. Furthermore, as we noted in Henderson I, the only

challenge raised to the forum selection clause, previously, concerned the lack of assent to

the terms, as part of a “click through” form. See Henderson I, 6th Dist. Erie Nos.

E-12-068, E-13-047, 2014-Ohio-4634, at ¶ 36 (“While they acknowledged defendants’

claim that Mr. Henderson accepted the terms by clicking a button to proceed to the EMC

website, the Hendersons contended that this did not demonstrate a true meeting of the

minds and that defendants’ affidavit spoke in generalities and not to any specific

evidence that the Hendersons had agreed to their rules.”).

{¶ 96} In reviewing the record, it is clear that the evidence and the record supports

the trial court’s factual findings, including the finding that the forum selection clause

existed, and factored into the consideration of personal jurisdiction. The trial court,

accordingly, did not abuse its discretion in determining the facts upon which to apply the

two-step analysis of personal jurisdiction.

{¶ 97} Considering the factual findings, and finding no abuse of discretion, I

would agree with the majority’s application of the law to these facts, applying de novo

review to the two-step analysis. Therefore, I concur with the majority’s decision.

45.
 MAYLE, P.J.

{¶ 98} In my opinion, we must conduct a de novo review—without deference to

the trial court’s factual determinations—to determine whether personal jurisdiction exists.

And, after a de novo review, I believe that the record demonstrates that Ohio has specific

jurisdiction over SMC in this case. In addition, I do not believe that SMC can rely upon a

forum-selection clause, which was contained in its standard membership rules at some

point in time, because SMC did not establish that its rules contained the forum-selection

clause when the appellants purchased their membership in June 2008. For that reason, I

would reverse the trial court’s judgment that granted SMC’s motion to vacate judgment.

{¶ 99} Finally, I would address appellants’ third and fourth assignments of error

rather than find them moot, and I would find both of those assignments of error not well-

taken.

1. The trial court had personal jurisdiction over SMC.

{¶ 100} “Ordinarily, we review a trial court’s decision on a common-law motion

to set aside a void judgment under an abuse-of-discretion standard. Terwood v. Harrison,

10 Ohio St.2d 170, 171, 226 N.E.2d 111 (1967). But if the challenge implicates an issue

of law, we apply a de novo standard of review.” Altman v. Parker, 1st Dist. Hamilton

No. C-170683, 2018-Ohio-4583, ¶ 6, citing Cincinnati Ins. Co. v. Emge, 124 Ohio

App.3d 61, 705 N.E.2d 408 (1st Dist.1997). “Personal jurisdiction is a question of law

that appellate courts review de novo.” Kauffman Racing Equip., L.L.C. v. Roberts, 126

46.
Ohio St.3d 81, 2010-Ohio-2551, 930 N.E.2d 784, ¶ 27. See, e.g., State ex rel. DeWine v.

9150 Group, L.P., 2012-Ohio-3339, 977 N.E.2d 112, ¶ 8 (9th Dist.) (stating that a trial

court’s ruling on a motion to vacate for lack of personal jurisdiction should be

reviewed de novo).

{¶ 101} Specific jurisdiction applies when “a State exercises personal jurisdiction

over a defendant in a suit arising out of or related to the defendant’s contacts with the

forum.” Kauffman Racing Equip. at ¶ 47, quoting Helicopteros Nacionales de Colombia,

S.A. v. Hall, 466 U.S. 408, 414, 104 S.Ct 1868, 80 L.Ed.2d 404, fn. 8. Specific

jurisdiction exists only if (1) the defendant “purposefully availed” himself of the privilege

of acting in Ohio or causing a consequence in Ohio, (2) the cause of action arose from the

defendant’s activities in Ohio, and (3) the acts of the defendant, or consequences caused

by the defendant’s actions, have “a substantial enough connection” with Ohio to make the

exercise of jurisdiction “reasonable.” Id. at ¶ 49, quoting Bird v. Parsons, 289 F.3d 865,

874 (6th Cir.2002).

{¶ 102} “Purposeful availment” exists when “the defendant’s contacts with the

forum state “‘proximately result from actions by the defendant himself that create a

“substantial connection” with the forum State.’” Id. at ¶ 51, quoting Burger King Corp.

v. Rudzewicz, 471 U.S. 462, 475, 105 S.Ct. 2174, 85 L.Ed. 2d 528 (1985). To be sure, a

defendant has not “purposefully availed” himself of the privilege of acting in Ohio if his

contacts with this state could be described as “random,” “fortuitous,” or “attenuated,” or

47.
the result of the mere “unilateral activity of another party or third person.” Id. On the

other hand, “parties who ‘reach out beyond one state and create continuing relationships

and obligations with citizens of another state’ are subject to regulation and sanctions in

the other State for the consequences of their activities.” Burger King at 473, quoting

Travelers Health Assn. v. Virginia, 339 U.S. 643, 647, 70 S.Ct. 927, 94 L.Ed. 1154

(1950).

{¶ 103} Turning to the facts of this case, it is true that appellants initially became

interested in SMC after viewing an infomercial advertisement with actor Tom Bosley,

and that the appellants called SMC. As John Henderson testified, during that

conversation “they [i.e., SMC] sort of tell you what it’s going to cost for membership,

and it wasn’t very much.” The appellants paid the “SMC Merchandise Membership”

fee—$264.95—over the phone by credit card on June 12, 2008, and SMC then mailed a

membership packet to appellants. The appellants’ arrangement with SMC included a

“free” business coach, who was supposed to coach them on an ongoing basis during the

initial 60 days to get their business going. That same day, the appellants received an

introductory e-mail from Kerry Cox, Chief Communications Officer for SMC, containing

a number to call to schedule their first coaching session, and states “[y]ou’ve already

been assigned a coach. Your coach’s job is to work with you on the best marketing plan

for your particular situation.”

{¶ 104} Critically, after appellants purchased an SMC membership, an SMC

representative allegedly called appellants in Ohio and convinced them to upgrade their

48.
membership to a higher level—which required a cash payment of over $5000—so that

they could receive “big, thick” catalogs with even more items to sell, materials such as

brochures and “discount cards,” and an internet platform on which to sell their items. As

John Henderson testified:

Q: Okay. So you signed up. And how much did you send to them?

A: I think it was I want to say two, three hundred—

Q: I’m talking about initially.

A: About two, $300.

Q. Okay. And what, what did you, what was the next

communication you had from them? Did they send something to you [sic]

e-mail or fax or letter or something?

A: Well, then we, I believe we got more, more information and

then they called us and that’s where we started to get pretty interested.

* * * I talked to my wife, she was there with me on the phone, and they

were – they sort of reminded me of used car salesmen. They were really,

really getting into this thing, trying to get us to do, you know, to buy in

further, you know, plus our $300 dollars we sent in * * *.

***

Q: What did, what did they – in your conversations directly with the

defendants did they ever make any representations to you about how much

money you could make in this business?

49.
 A: Well, that’s where we get to that big, thick catalog and that’s

why we went that way. They said you could make 400 or 500,000 a year

and so that’s why we gave them the $5,000 because we could get that

catalog and put that on the Internet. (Emphasis added.)

{¶ 105} Appellants then cashed out their savings accounts, and went through

Western Union to send $5,195 in cash to SMC because “that’s how they wanted their

money.” This wire transfer was done on June 19, 2008. John Henderson testified that

within a day or two of this wire transfer, he spoke with his designated “coach.”

Henderson testified that “I think the first time he called us,” although the SMC

documents include a 1-800 number for members to call to set up a coaching appointment.

According to Henderson, during this initial coaching session, his coach told him that it

would take three to four days to get his website up and running, and the coach told him

“about the business cards” he needed to buy so that he could give them to customers “for

them to buy off the internet.” That is, appellants were supposed to distribute these

business or “discount cards” to customers and, according to Henderson, “once the

customer has that discount card, that’s the only way they can buy off the Internet. You

had to give them a card.” Presumably, these “discount cards” would have contained the

unique internet address of appellants’ SMC website.

{¶ 106} After this initial coaching session, however, appellants did not hear from

their SMC coach again. When they tried to contact him, they were told that their coach

was sick and they were given the name of another coach. That new coach, however,

50.
never called them back. Henderson testified that “[w]e waited, we waited, and we called

again and again” to no avail. At some point, Henderson talked to someone at SMC who

told him that “they were busy putting that catalog on the Internet and getting that set up,

that big, thick catalog that we wanted to put on the Internet.” In the meantime, appellants

started to see “red flags” because they were having substantial difficulty trying to set up a

PayPal connection on their website—which did not have any catalog items on it yet.

{¶ 107} It is true that appellants never ordered any merchandise from SMC to sell.

They did, however, receive “four or five” boxes from SMC—shipped to appellants in

Ohio—containing the large catalogs and other advertising materials (i.e., brochures and

discount cards) that were included in the higher “level” of membership that they

purchased for $5,195. But by the time they received these boxes, appellants had already

decided to cancel their membership. Henderson testified that those boxes contained “the

catalogs and a whole bunch of other stuff we never opened up. We sent it back * * *

[a]nd we never opened any of the boxes. We just * * * sent it right back the same day.”

The boxes were shipped back to SMC on July 31, 2008, which Henderson says was

“pretty close to when we cancelled.” He remembers calling to cancel his membership

and then receiving the boxes of SMC materials shortly thereafter.

{¶ 108} Although SMC refunded the initial membership fee of $264.95, it did not

return the $5,195 in cash that appellants had wired to SMC for their higher membership

status—which is why this lawsuit was filed.

51.
 {¶ 109} In my view, these facts demonstrate, by a preponderance of the evidence,

that there is personal jurisdiction over appellees in this case. 9150 Group, L.P.,

2012-Ohio-3339, 977 N.E.2d 112, at ¶ 8 (plaintiff bears the burden of proving personal

jurisdiction by a preponderance of the evidence). After appellants signed up for a basic

membership, SMC purposefully reached out and contacted appellants in Ohio for the

purpose of upselling a higher-level SMC membership for $5,195, shipped several boxes

of advertising material (purchased as part of this higher-level SMC membership) to

appellants in Ohio, and then refused to refund the $5,195 to appellants when they

cancelled their membership. This lawsuit—which focuses on the failure of SMC to

refund that $5,195 payment—is the direct and proximate result of “actions by the

defendant [itself] that create a ‘substantial connection’ with the forum State.” Kauffman

Racing Equip., L.L.C., 126 Ohio St.3d 81, 2010-Ohio-2551, 930 N.E.2d 784, at ¶ 51.

2. SMC did not establish that the SMC/EMC rules contained
a forum-selection clause as of June 2008.

{¶ 110} In SMC’s motion to vacate judgment, in addition to arguing that Ohio

lacked specific personal jurisdiction over it, SMC also argued that appellants waived

personal jurisdiction because they agreed to standard membership “rules” containing an

exclusive forum selection clause when they joined SMC in June 2008. Appellants denied

they agreed to those rules.

{¶ 111} SMC, however, submitted an affidavit from an SMC employee, Scott

Palladino, dated March 16, 2013 (the “Palladino Affidavit”), in support of its motion to

52.
vacate. Palladino states that his affidavit is based on personal knowledge and his review

of SMC’s “available business records.” The Palladino Affidavit attaches a copy of the

“SMC Rules in effect during June 2008,” and states that a copy of the SMC Rules would

have been sent to Henderson with his initial membership packet. The Palladino Affidavit

also attaches a copy of the rules applicable to the e-commerce service offered by SMC’s

affiliate and co-defendant, eMerchantClub LLC (the “EMC Rules”) that, according to his

review of records, were also in effect in June 2008. Palladino states that the company’s

records indicated that Henderson agreed to the EMC Rules on June 19, 2008, when he

logged into the “eMerchant Club Gift Card Central Website.” The SMC Rules and the

EMC Rules—Exhibits 1 and 2 to the Palladino Affidavit—contain a forum selection

clause providing for “exclusive personal jurisdiction and venue in Los Angeles,

California, and agree[ing] that it shall be the sole forum and venue for any and all

disputes * * *.”

{¶ 112} On August 2, 2013, the trial court denied SMC’s motion to vacate, on the

grounds that “the enforcement of the Forum Selection clause compelling Plaintiffs to

litigate any dispute in California would be unreasonable and unjust and deprive them of

their day in Court.” The parties then filed cross-appeals. On October 17, 2014, this court

determined that the court had erred by considering the forum selection clause before

determining personal jurisdiction, and remanded the matter to the trial court for a

personal jurisdiction analysis.

53.
 {¶ 113} On remand, the trial court permitted appellants to conduct discovery

relating to the issue of personal jurisdiction, including but not limited to discovery

relating to “the factual basis” of the Palladino Affidavit—through which SMC had

offered the SMC Rules and EMC Rules, containing a forum-selection clause, into the

record. On January 31, 2017, the trial court ordered SMC to arrange for the deposition of

Scott Palladino. But Palladino, who had left his employment with SMC in 2015, did not

respond to SMC’s attempts to contact him for deposition. SMC therefore produced a

different witness, Mark Schelbert, who was deposed on July 10, 2017, as appellees’

designated corporate representative.

{¶ 114} The trial court found that Schelbert’s testimony tarnished the credibility of

the Palladino Affidavit. Schelbert testified that SMC and its related entities were

purchased by Smart Living Company in November of 2011. Scott Palladino joined

SMC—through that corporate transaction—in 2011. Schelbert testified that most of

SMC’s corporate records were not preserved through the 2011 purchase. He said “the

business was in significant decline with significant loss of staff and support. And many

of the computer systems that we inherited—or acquired, were bad.” When asked if he

knew what documents Palladino could have reviewed when drafting his affidavit in 2013,

Schelbert testified that “I—I don’t know specifically what documents he reviewed other

than I think he—he shared with me the same information I’m sharing which is that the

documents were—didn’t—no longer existed or—or were not available.”

54.
 {¶ 115} Based on this record, the trial court found that the Palladino Affidavit had

“suspect credibility.” It stated:

This Court also notes that it put little credence in the Palladino

Affidavits. It is fairly clear from the Deposition of Schelbert that Palladino

would have little personal knowledge of Defendants’ business activities at

the time Plaintiffs made contact with Defendants. Given the time when

Palladino started with the Defendants and what documentation was

available at that time per Schelbert, Palladino’s attestations have suspect

credibility. This Court bases its decision on the record otherwise before it

and the fact Plaintiff has the burden of proof [with respect to personal

jurisdiction] as indicated previously[.]

{¶ 116} The trial court, therefore, disregarded the entire Palladino Affidavit

because it found that it lacked credibility. But, at the same time, the trial court stated

elsewhere in its opinion that “all membership agreements, including this one, had forum

selection clauses/choice of law and arbitration provisions that any dispute be litigated by

arbitration in California” as a factor weighing against personal jurisdiction.

{¶ 117} The Palladino Affidavit, however, is the sole evidence that the SMC and

EMC membership rules contained a forum-selection clause as of June 2008 when

appellants purchased their SMC membership. Accordingly, if the entire Palladino

Affidavit lacks credibility and should be disregarded, then SMC cannot meet its initial

55.
burden of establishing that there is a forum-selection clause in existence that governs this

dispute.

{¶ 118} Generally speaking, we defer to a trial court’s credibility determinations.

Sullinger v. Sullinger, 6th Dist. Lucas No. L-18-1079, 2019-Ohio-1489, ¶ 44. To the

extent that the credibility of the Palladino Affidavit may require a de novo review

because it relates to the existence of a contract and personal jurisdiction—both of which

are matters of law, see Nexus Communications, Inc. v. Qwest Communications Corp., 193

Ohio App.3d 599, 2011-Ohio-1759, 953 N.E.2d 340, ¶ 32 (10th Dist.); Starks v. Choice

Hotels Internatl., 175 Ohio App.3d 510, 2007-Ohio-1019, 887 N.E.2d 1244, ¶ 7 (1st

Dist.)—I believe that the record supports the trial court’s credibility determination.

Given Schelbert’s deposition testimony regarding the lack of corporate documentation

that existed after Standard Living’s purchase of SMC in 2011, it is not clear how

Palladino—who joined SMC in 2011—could have verified, in 2013, that the SMC and

EMC membership rules, attached to his affidavit as exhibits, were in effect in June 2008

when appellants joined SMC. For that reason, it is my view that SMC failed to prove that

a forum-selection clause is applicable to this dispute.

{¶ 119} Notably, appellees do not address the implications of the trial court’s

credibility determination relating to the Palladino Affidavit. Instead, appellees argue that

appellants are attempting to selectively enforce one portion of the agreement (requiring a

refund for cancelled membership within 30 days) while avoiding another portion of the

agreement (the forum-selection clause).

56.
 {¶ 120} It is certainly true that a party cannot enforce one provision of a written

contract while ignoring another provision of that same contract. See, e.g., Bohl v. Hauke,

180 Ohio App.3d 526, 2009-Ohio-150, 906 N.E.2d 450, ¶ 19 (4th Dist.) (rejecting

plaintiffs’ attempt to “selectively enforce provisions of a contract”). But here, appellants

are not attempting to enforce either of the written contracts that are attached to the

Palladino Affidavit. Rather, at the damages hearing on January 8, 2010, John Henderson

testified that he saw a 30-day guarantee somewhere in the initial packet of materials, but

he did not have any documentary support because he “had to send that back [to SMC] in

order to get our money.” The only documentation that appellants relied upon to support

their claim regarding a contractual “30 day guarantee” was an e-mail from SMC to Dawn

Henderson—sent after the appellants cancelled their membership—which states that

“[a]ll refunds are reviewed and may take up to 30 days to process.” The written SMC

and EMC rules were not before the court until March 18, 2013, when appellees submitted

the Palladino Affidavit in support of their motion to vacate judgment. The Palladino

Affidavit would have been sufficient to establish the existence of those rules during the

relevant time period but for the credibility issues that came to light on July 10, 2017,

during the corporate deposition of SMC.

{¶ 121} Accordingly, I would reverse the trial court’s judgment that granted

SMC’s motion to vacate judgment. In my view, there is personal jurisdiction over SMC

and SMC did not meet its burden to establish the existence of an applicable forum-

57.
selection clause because, as the trial court noted, the Palladino Affidavit has “suspect

credibility.”

3. Appellants’ third and fourth assignments of error.

{¶ 122} Appellants’ third and fourth assignments of error are focused on the trial

court’s September 26, 2012 judgment, which awarded the following damages to

appellants:

1) $15,585.00 pursuant to the Business Opportunity Plan Act

(§1334.09(A)). (i.e., $5,195.00 times 3 equals $15,585.00)

2) $5,195.00 pursuant to the common law Fraud [sic] claim

3) $10,390.00 for Punitive Damages

4) $0 for the Breach of Contract Claim

Total amount awarded is: $31,170.00

{¶ 123} In their third assignment of error, appellants argue that the trial court erred

by refusing to deem admitted requests for admission to which appellees never responded.

In those requests, appellants asked appellees to admit that appellants had been “harmed

and otherwise damaged in the amount of Five Million Dollars ($5,000,000)

compensatory damages” and “Ten Million Dollars ($10,000,000) punitive damages.”

Appellants argued that as a consequence of appellees’ failure to answer these requests for

admission, their damages were deemed admitted, thereby dispensing with the need for a

damages hearing. The trial court disagreed. It concluded that it was its role to determine

the appropriate amount of damages based on the evidence.

58.
 {¶ 124} The magistrate conducted the damages hearing and awarded appellants

$31,170. Appellants objected, arguing again that appellees’ failure to respond to their

requests for admission obviated the need for a damages hearing. The trial court overruled

appellants’ objection. It held that proof of damages must be presented before an award

may be made for an unliquidated damages claim, and under Civ.R. 55(A), it was within

its discretion to determine whether a hearing was needed. The court adopted the

magistrate’s damages award. In their third assignment of error, appellants argue that

because under Civ.R. 36(A), the unanswered admissions were automatically deemed

admitted, the compensatory and punitive damages constitute “stipulated damages” that

were conclusively proven without the need for additional evidence.

{¶ 125} Appellants are correct that under Civ.R. 36(A), “matters set forth in * * *

requests for admissions are automatically deemed admitted if they are not answered by

the rule’s deadline.” Gerken v. State Auto Ins. Co. of Ohio, 2014-Ohio-4428, 20 N.E.3d

1031, ¶ 18 (4th Dist.). This rule is self-executing and does not require a motion seeking

confirmation of the admissions. Id. Having said this, proof of damages is generally

required for a claim for unliquidated damages. Berube v. Richardson, 2017-Ohio-1367,

89 N.E.3d 85, ¶ 10 (8th Dist.). And under Civ.R. 55(A), it is within the trial court’s

discretion whether to conduct a hearing to determine the amount of damages to be

awarded against a defaulting party. A trial court will not be found to have abused its

discretion unless its decision is “contrary to law, unreasonable, not supported by the

evidence, or grossly unsound.” State v. Nisley, 3d Dist. Hancock No. 5-13-23,

59.
2014-Ohio-981, ¶ 15, State v. Boles, 187 Ohio App.3d 345, 2010-Ohio-278, ¶ 16-18 (2d

Dist.). In fact, “when [a] judgment is not liquidated, or only partially liquidated, it is

reversible error for the trial court to enter a default judgment without holding a hearing

on the damages issue.” (Internal citations and quotations omitted.) Hull v. Clem D’s

Auto Sales, 2d Dist. Darke No. 2011 CA 6, 2012-Ohio-629, ¶ 7.

{¶ 126} Here, I would find no abuse of discretion in the trial court’s decision to

hold a hearing on appellants’ claim for unliquidated damages. I would also find no abuse

of discretion in requiring appellants to prove their damages rather than merely relying on

unanswered requests for admission that purport to establish damages. I would also add

that “punitive damages are not recoverable as of right; their allowance is discretionary.”

Kelley v. Sullivan, 8th Dist. Cuyahoga No. 106189, 2018-Ohio-1410, ¶ 16, citing Roark

v. Rydell, 174 Ohio App.3d 186, 2007-Ohio-6873, 881 N.E.2d 333 (1st Dist.). So

regardless of the effect of appellees’ failure to respond to requests for admission, it was

within the trial court’s discretion to reject appellants’ request for $10 million in punitive

damages. I would find appellants’ third assignment of error not well-taken.

{¶ 127} In their fourth assignment of error, appellants argue that the trial court

erred in rejecting the unopposed damages opinions of their expert witness. At the

damages hearing, appellants offered the expert testimony of a local business broker to

assist in calculating damages from lost profits. Based on representations by appellees

that SMC members could generate annual sales of $300,000 to $500,000, appellants’

expert opined that the fair market value of the business was between $1,339,117 and

60.
$2,268,555. These figures were calculated using a 10-year earnings cycle. Importantly,

appellants’ expert rendered no opinions as to whether sales of $300,000 to $500,000 were

feasible estimates.

{¶ 128} The magistrate found that while appellants’ expert was credible, the

damages calculations were entirely speculative given that appellants never attempted a

single sale or purchased a single item for resale, the annual sales estimates “had no basis

in reality,” and appellees’ representations about members’ earning potential was

“puffing.” Appellants objected. The trial court agreed with the magistrate’s findings.

Appellants argue in their fourth assignment of error that their lost profits calculations

should have been accepted because they were based on the unopposed opinions of a

qualified expert, premised on logical, mathematical formulae and unopposed record

evidence.

{¶ 129} I agree with the trial court that appellants’ damages calculations were

speculative. Appellants returned the materials they received from SMC without even

opening them. They never purchased any goods and never sold any goods. While the

law in Ohio allows recovery of lost profits of a new business, “such lost profits must be

established with reasonable certainty * * * through the use of such evidence as expert

testimony, economic and financial data, market surveys and analyses, business records of

similar enterprises, and any other relevant facts.” AGF, Inc. v. Great Lakes Heat

Treating Co., 51 Ohio St.3d 177, 555 N.E.2d 634 (1990), paragraphs two and three of the

syllabus.

61.
 {¶ 130} Here, appellants offered expert testimony, but their expert witness

essentially performed only a math equation. He rendered no opinions as to whether sales

of $300,000 to $500,000 were feasible estimates, and appellants offered no other

economic or financial data, market surveys or analyses, business records of similar

enterprises, or any other relevant facts to establish that these sales figures were realistic.

{¶ 131} “In conducting a hearing on damages, the trial court has broad discretion

in assessing the weight and credibility of the evidence of damages.” Skiver v. Wilson,

2018-Ohio-3795, 119 N.E.3d 969, ¶ 18 (8th Dist.). I would find no abuse of discretion

here in the trial court’s decision rejecting appellants’ lost profits calculation. I would find

appellants’ fourth assignment of error not well-taken.

62.
 This decision is subject to further editing by the Supreme Court of
Ohio’s Reporter of Decisions. Parties interested in viewing the final reported
version are advised to visit the Ohio Supreme Court’s web site at:
http://www.supremecourt.ohio.gov/ROD/docs/.

63.