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Camps v. Gore Capital, LLC

United States District Court, M.D. Tennessee, Nashville Division

July 2, 2019

FERNANDO CAMPS, Plaintiff,
v.
GORE CAPITAL, LLC, KARL JAMES, ANGELA EVANS, and #AE20, LLC, Defendants.

          MEMORANDUM OPINION

          ELI RICHARDSON UNITED STATES DISTRICT JUDGE

         Pending before the Court is Defendant #AE20's Motion to Dismiss Second Amended Complaint and Cross-Claim for lack of personal jurisdiction (Doc. No. 103), filed pursuant to Fed.R.Civ.P. 12(b)(2). Defendant Evans filed a Response (Doc. No. 110), Plaintiff filed a Response (Doc. No. 112), Defendant #AE20 filed a Reply (Doc. No. 117), and Plaintiff filed a Sur-Reply (Doc. No. 137).

         Also pending before the Court is Defendant #AE20's Motion to Dismiss First (sic)[1]Amended Complaint and Cross-Claim for failure to state a claim (Doc. No. 105). Plaintiff filed Responses (Doc. Nos. 111 and 141[2]), #AE20 filed Replies (Doc. Nos. 118 and 142), and Plaintiff filed a Sur-Reply (Doc. No. 136).

         Also pending before the Court is Defendant Evans' Renewed Motion to Dismiss (Doc. No. 109), which is brought under Fed.R.Civ.P. 12(b)(7) and 19 for failure to join a required party. Evans relies on her previously-submitted Motion to Dismiss, Memorandum, Reply and “Sur-SurReply” (Doc. Nos. 84, 85, 91 and 97). Plaintiff filed a Response (Doc. No. 88) and a Sur-Reply (Doc. No. 94) to Evans' previously-submitted Motion to Dismiss and a Response (Doc. No. 114) in opposition to Evans' Renewed Motion to Dismiss.

         BACKGROUND

         Plaintiff is a citizen of Buenos Aires, Argentina. His Second Amended Complaint (Doc. No. 101) (“SAC”) alleges that Plaintiff was targeted by Defendants Evans, James, #AE20, LLC, and Gore Capital, LLC (“Gore”) in a series of fraudulent investment schemes, as a result of which Plaintiff claims he lost $550, 000. The SAC alleges that Defendant Evans is a resident of Tennessee, Defendant #AE20, LLC is a California limited liability company, and Defendant Gore Capital, LLC is a Delaware limited liability “corporation.”[3] The SAC does not allege the state of Defendant James' residence. Plaintiff's original Complaint (Doc. No. 1) and First Amended Complaint (Doc. No. 20) (“FAC”) list James' residence as Colorado. The Statement of Information filed with the State of California for #AE20 indicates that Defendant James is a resident of Colorado (Doc. No. 61-2), and Defendant Evans' Responses to Interrogatories indicate that James' address is in Colorado (Doc. No. 103-3 at Int. 2).

         As both Defendants #AE20 and Evans point out, the allegations of Plaintiff's original Complaint (Doc. No. 1), FAC (Doc. No. 20), and SAC (Doc. No. 101) contain allegations that are inconsistent among one another. Plaintiff has also filed at least two Affidavits (Doc. Nos. 55-1 and 112-2) that allege somewhat different accounts of what happened among these parties. For purposes of this background, the Court will rely upon Plaintiff's SAC, the operative Complaint at this time. Any relevant conflicts with prior pleadings and Affidavits will be noted where appropriate.

         In the SAC, Plaintiff contends that he began a relationship with Defendant Evans in late 2013, soon after which Evans began to introduce Plaintiff to business investment opportunities with friends and business associates in the United States, including an investment opportunity related to professional car racing. Plaintiff asserts that, in March 2014, Evans took him to a professional car-racing event in St. Petersburg, Florida, where he met Defendant James and Erik Davis, the co-founder of #AE20. Plaintiff alleges that James was the managing member of Gore. Plaintiff contends that Evans, James and Davis invited Plaintiff to invest money in the racing-related businesses of #AE20 and/or Always Evolving.[4]

         The SAC alleges that on April 12, 2014, Davis filed a Statement of Information with the State of California listing Davis and James as the two members of #AE20, LLC. Plaintiff contends that “it appears” that James' interest in #AE20 was transferred (or authorized to be transferred) to Gore on April 4, 2014. Plaintiff has not presented evidence that that transfer was ever made, however. Plaintiff asserts that, on April 23, 2014, Davis filed Articles of Incorporation for #AE20, but the document filed was actually Articles of Organization for #AE20, LLC. See Doc. No. 61-1. The Articles of Organization list Davis as the organizing member of the LLC. Id. Davis stated in his Declaration that, at all material times herein, he was a 50 percent member of #AE20 and James was the other 50 percent member (Doc. No. 61 at ¶ 2).

         The SAC asserts that “Defendants” instructed Plaintiff to wire-transfer money for investment in #AE20 to Evans' bank account in Tennessee, but paragraph 10 of Plaintiff's Affidavit, filed at Doc. No. 55-1, indicates that it was Defendant Evans who gave him that instruction. Defendant Evans has stated in discovery responses that she never transferred money to or from any accounts for #AE20 (Doc. No. 103-3 at Int. 8). Plaintiff avers that he wired $250, 000 to Evans' account for the purpose of investing with #AE20, #AE20-related businesses and Gore. Plaintiff also alleges that in exchange for a promissory note from Gore in the amount of $200, 000, he transferred $200, 000 to Gore's bank account. Plaintiff alleges that he also twice transferred $50, 000 (an additional $100, 000 investment) to Gore, which Plaintiff represents is a 50 percent member of #AE20, although that fact has no support in the record.[5] Plaintiff claims that he sought, in vain, to obtain documents from Defendants about his investments before ultimately filing this action on July 15, 2017.

         The SAC asserts breach of contract against Gore, fraud against all Defendants, fraud by wire transfer against all Defendants, intentional misrepresentation against all Defendants, and negligent misrepresentation against all Defendants. In her Answer to the First Amended Complaint, Defendant Evans alleged cross-claims against #AE20, James and Gore. #AE20 has moved to dismiss the claims and cross-claims against it for lack of personal jurisdiction and for failure to state a claim. Evans has moved to dismiss the claims against her for failure to join a necessary party, Defendant James. The Magistrate Judge allowed the parties to take limited discovery on the issues of personal jurisdiction and whether Defendant James is a necessary party to this action (Doc. No. 68).

         CROSS-CLAIM

         In response to #AE20's Motion to Dismiss, Defendant Evans points out that there is no longer a cross-claim by Evans against #AE20 in this action in its current posture. Evans' cross-claim was filed in response to the First Amended Complaint, which has been replaced with the Second Amended Complaint. Evans has not filed an Answer or Cross-Claim with regard to the Second Amended Complaint, in light of her pending Motion to Dismiss (Doc. No. 109) and represents that she has no cross-claims pending against #AE20 at this time.[6] Evans has stated that, if her Motion to Dismiss is denied, she will consider re-filing a cross-claim against #AE20 at that time. Therefore, #AE20's Motion to Dismiss the Cross-Claim will be denied as moot.

         #AE20'S MOTION TO DISMISS PURSUANT TO FED. R. CIV. P. 12(b)(2)

         (A) Personal Jurisdiction

         The party seeking to establish the existence of personal jurisdiction (here, Plaintiff) bears the burden to establish such jurisdiction. Beydoun v. Wataniya Restaurants Holding, 768 F.3d 499, 504 (6th Cir. 2014). In the face of a properly supported motion for dismissal, the plaintiff may not stand on his pleadings, but rather must, by affidavit or otherwise, set forth specific facts showing that the court has jurisdiction. Kent v. Hennelly, 328 F.Supp.3d 791, 796 (E.D. Tenn. 2018), appeal docketed, No. 18-5821 (6th Cir. Aug. 7, 2018); Miller v. AXA Winterthur Ins. Co., 694 F.3d 675, 678 (6th Cir. 2012). In deciding whether to dismiss for lack of personal jurisdiction, [7] the district court may rely upon the affidavits alone; it may permit discovery in aid of deciding the motion; or it may conduct an evidentiary hearing to resolve any apparent factual questions. Anwar v. Dow Chem. Co., 876 F.3d 841, 847 (6th Cir. 2017). Here, the Magistrate Judge permitted discovery in aid of deciding the motion.

         When a district court rules on a motion to dismiss for lack of personal jurisdiction without conducting an evidentiary hearing, the court must consider the pleadings and affidavits in a light most favorable to the nonmoving party. Ficarelli v. Champion Petfoods USA, Inc., No. 3:18-cv-00361, 2018 WL 6832075, at * 4 (M.D. Tenn. Dec. 28, 2018); Beydoun, 768 F.3d at 504. To defeat such a motion absent an evidentiary hearing, the plaintiff need only make a prima facie showing of jurisdiction. Id.[8] In this procedural posture, the court does not weigh the facts disputed by the parties but may consider the defendant's undisputed factual assertions. Conn v. Zakharov, 667 F.3d 705, 711 (6th Cir. 2012).

         In Schneider v. Hardesty, 669 F.3d 693 (6th Cir. 2012), the court declined to decide what standard to use when the parties are allowed discovery in aid of the jurisdictional issue but there is no evidentiary hearing, since the plaintiff had demonstrated personal jurisdiction even under the more-exacting “preponderance of the evidence” standard anyway. Id. at 699.[9] The court did suggest, however, that to the extent that the preponderance-of-the-evidence standard could apply in the absence of an evidentiary hearing, it should apply only in those “rare instances” in which a plaintiff has been granted all discovery requested and that discovery results in an undisputed set of facts such that an evidentiary hearing would be pointless. Id. Finally, the court in Schneider noted that some courts have held that the preponderance-of-the-evidence standard never applies in the absence of an evidentiary hearing. Id. at 698, n. 6. In Bridgeport Music, Inc. v. Still N the Water Publ'g, 327 F.3d 472, 476-78 (6th Cir. 2003), the court applied the prima facie standard where there was limited discovery but no evidentiary hearing. See also Schneider, 669 F.3d at 698, n.7.

         Here, as noted, the Magistrate Judge allowed limited discovery on the issue of personal jurisdiction. Plaintiff claims that he has not received all the discovery he requested and that there are real disputes about the facts relating to jurisdiction. #AE20 contends that it has provided full and complete responses to all discovery related to jurisdictional issues. There is no indication that Plaintiff filed a motion to compel the requested discovery, and Plaintiff did not request additional time to respond to #AE20's Motion to Dismiss to obtain additional discovery. Instead, Plaintiff responded to the motion but added an alternative request that, if the Court believes additional discovery is needed, Plaintiff be allowed to file a motion to compel documents. Plaintiff, however, not the Court, has the burden of proof and the obligation to figure out whether he can meet it. Plaintiff decided to attempt to carry that burden on the record as it now stands. Plaintiff is disputing discovery responses in his Response to Defendant's Motion to Dismiss, which is inappropriate. Discovery issues are to be determined upon proper motion to the Magistrate Judge, under her case management rulings, the Local Rules of this Court, and the Federal Rules of Civil Procedure.

         Because there has been no evidentiary hearing (and, for that matter, no request for an evidentiary hearing) with regard to this motion, the Court, in accordance with Bridgeport Music, Inc. v. Still N the Water Publ'g, 327 F.3d 472 (6th Cir. 2003), will determine whether Plaintiff has demonstrated personal jurisdiction over #AE20 under a prima facie standard.

         In a diversity case such as this one, a plaintiff must satisfy the state-law requirements for personal jurisdiction. Ficarelli, 2018 WL 6832075, at * 2. There is a two-step test to determine whether the Court properly has personal jurisdiction over #AE20. First, the Court must determine whether Tennessee's law authorizes jurisdiction; second, the Court must determine whether that authorization comports with due process. Id. For Tennessee federal courts sitting in diversity, it is unnecessary to analyze jurisdiction under Tennessee's long-arm statute separately from analyzing jurisdiction under the Due Process Clause, however, because Tennessee's long-arm statute has been interpreted to be “coterminous with the limits on personal jurisdiction imposed by the Due Process Clause.” Id. at * 3. In other words, the jurisdictional limits of Tennessee law and federal constitutional due process are identical, and the two inquiries are merged. Id.; Up-Rite Systems, Inc. v. Allender, No. 3-15-cv-710, 2016 WL 4702801, at * 2 (M.D. Tenn. Sept. 8, 2016) (citing Bridgeport, 327 F.3d at 477).

         In order for a non-resident defendant to be subject to the personal jurisdiction of a court, the defendant must have certain “minimum contacts” with the forum state, such that maintenance of the lawsuit does not offend “traditional notions of fair play and substantial justice.” Kent, 328 F.Supp.3d at 797 (citing Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). Personal jurisdiction comes in two forms: general and specific. Here, Plaintiff asserts that the Court has specific jurisdiction over #AE20. Specific jurisdiction must arise out of or be related to a defendant's contacts with the forum state. Ficarelli, 2018 WL 6832075, at * 3. In other words, specific jurisdiction is confined to adjudication of issues deriving from, or connected with, the very controversy that establishes jurisdiction. Up-Rite, 2016 WL 4702801, at * 4 (citing Goodyear Dunlap Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011)). For a court to exercise specific jurisdiction that is consistent with constitutional due process, the defendant's suit-related conduct must create a substantial connection with the forum state. Kent, 328 F.Supp.3d at 797.

         For specific jurisdiction to exist: (1) the defendant must purposefully avail itself of the privilege of acting in the forum state or causing a consequence in the forum state; (2) the cause of action must arise from the defendant's activities there; and (3) the acts of the defendant or consequences caused by the defendant must have a substantial enough connection with the forum state to make exercise of personal jurisdiction over the defendant reasonable. Ficarelli, 2018 WL 6832075 at * 3; Southern Machine Co. v. Mohasco Indus., Inc., 401 F.2d 374, 381 (6th Cir. 1968).

         The purposeful availment requirement is considered the most important. Kent, 328 F.Supp.3d at 798. Purposeful availment is something akin to a deliberate undertaking to do or cause an act or thing to be done in the forum state or conduct that can properly be regarded as a prime generating cause of effects resulting in the forum state-something more than a passive availment of the forum state's opportunities. Bridgeport, 327 F.3d at 478. The defendant must have purposefully availed itself of the privilege of acting in the forum state or causing a consequence in the forum state. Kent, 328 F.Supp.3d at 798. Requiring that a defendant take purposeful steps in the forum state ensures that a defendant's random, fortuitous, or attenuated contacts with the forum state will not subject it to being haled into court there. Id. (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985)). Additionally, the defendant's relationship with the forum state ...


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