Tafaro v. Innovative Discovery, LLC
Tafaro v. Innovative Discovery, LLC
Opinion of the Court
ORDER AND REASONS
Before the Court is a Motion to Dismiss for Lack of Personal Jurisdiction, Improper Venue, and, Alternatively, To Transfer to an Alternate Venue (Rec. Doc. 20) filed by defendant Innovative Discovery, LLC and a Motion to Dismiss for Lack of Personal Jurisdiction, Improper Venue, and, Alternatively, To Transfer to an Alternate Venue (Rec. Doc. 24) filed by defendant Allen C. Outlaw. Plaintiffs Christopher J. Tafaro and Brian C. Combe oppose the motions.
The motions, set for submission on October 8, 2014, are before the Court on the briefs without oral argument.
I. Background
Plaintiffs Christopher J. Tafaro and Brian J. Combe (collectively “Plaintiffs”) became “economic interest owners” of Innovative Discovery, LLC (“Innovative Discovery”) in 2006.
Plaintiffs are both residents of Louisiana. (Rec. Doc. 1-1. at 1). Innovative Discovery is registered in Delaware and has its principal place of business in Arlington, Virginia. Id. Outlaw is a resident of Virginia. Id.
Defendants now move to dismiss the Complaint for lack of personal jurisdiction and improper venue. Defendants argue that there is no factual basis for this Court to exercise either specific or general personal jurisdiction over them. They claim that any connection to Louisiana arises only from the mere fortuity that Plaintiffs reside in the forum and that no other
II. Discussion
Plaintiffs contend that the Court can find personal jurisdiction over the defendants on either a basis of specific jurisdiction or general jurisdiction.
A federal court sitting in diversity must satisfy two requirements to exercise personal jurisdiction over a nonresident defendant. Pervasive Software Inc. v. Lexware GmbH & Co. Kg, 688 F.3d 214, 220 (5th Cir. 2012). First, the forum state’s long-arm statute must confer personal jurisdiction. Second, the exercise of jurisdiction must not exceed the boundaries of the Due Process Clause of the Fourteenth Amendment. Id. (citing Mink v. AAAA Dev. LLC, 190 F.Sd 333, 335 (5th. Cir. 1999)). The limits of the Louisiana long-arm statute are coextensive with constitutional due process limits. Jackson v. Tanfoglio Giuseppe, SRL, 615 F.3d 579, 584 (5th Cir. 2010) (citing Walk Haydel & Assocs. v. Coastal Power Prod. Co., 517 F.3d 235, 242-43 (5th Cir. 2008)). Therefore, the inquiry is whether jurisdiction comports with federal constitutional guarantees. Id.
Specific jurisdiction requires a plaintiff to show that 1) there are sufficient, i. e., not random, fortuitous, or attenuated, pre-liti-gation connections between the non-resident defendant and the forum; 2) the connection has been purposefully established by the defendant; and, 3) the plaintiffs cause of action arises out of or is related to the defendant’s forum contacts. Pervasive Software, 688 F.3d at 221. It is well-settled that an individual’s contract with an out-of-state party alone cannot automatically establish sufficient minimum contacts in the other party’s home forum. Id. (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 478, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985)). The “minimum contacts” inquiry is fact intensive and no one element is decisive. McFadin v. Gerber, 587 F.3d 753, 759 (5th Cir. 2009). The touchstone is whether the defendant’s conduct shows that he could “reasonably anticipate being haled into court.” Id. (quoting Luv N’ Care, Ltd. v. Instar-Mix, Inc., 438 F.3d 465, 470 (5th Cir. 2006)). The defendant must not be “haled into a jurisdiction solely as a result of ‘random, fortuitous, or attenuated’ contacts, or of the ‘unilateral activity of another party or third person.’ ” Id. (quoting Electro-source, Inc. v. Horizon Battery Techs., Ltd., 176 F.3d 867, 871-72 (5th Cir. 1999)).
General jurisdiction, on the other hand, does not require a showing of contacts out of which the cause of action arose. Religious Tech. Ctr. v. Liebreich, 339 F.3d 369, 374 (5th Cir. 2003) (quoting Cent. Freight Lines v. APA Transport Corp., 322 F.3d 376, 381 (5th Cir. 2003)). However, it does require a showing of substantial, “ ‘continuous!,]’ and ‘systematic’ contacts ... between a defendant and a forum.” Johnston v. Multidata Systems Intern. Corp., 523 F.3d 602, 609 (5th Cir. 2008); Bowles v. Ranger Land Systems, Inc., 527 Fed. Appx. 319, 321 (5th Cir. 2013). In the context of a company, these contacts must be such as to “render [it] essentially at home in the forum state.” Daimler AG v. Bauman, -U.S.-, 134 S.Ct. 746, 754, 187 L.Ed.2d 624 (2014) (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown, — U.S. -, 131 S.Ct. 2846, 2851, 180 L.Ed.2d 796 (2011)). The Fifth Circuit, noting the “reduced role” played by general jurisdiction, has warned that the general jurisdiction standard is “a difficult one to meet.” Id. at 755 (quoting Goodyear Dun-lop Tires Operations, S.A., 131 S.Ct. at 2854); Johnston, 523 F.3d at 609 (citing Submersible Systems, Inc. v. Perforadora
At this stage a plaintiff need only establish a prima facie case of personal jurisdiction. See Walk Haydel & Assocs., Inc., 517 F.3d at 241. The Court must also construe all disputed facts in the plaintiffs favor. Id.
A. General Jurisdiction over Innovative Discovery
Plaintiffs argue that the following factual allegations are sufficient to establish personal jurisdiction over the defendants: Innovative Discovery did business with a Louisiana company owned in part by Plaintiffs (Digital Legal Services) on a number of occasions between 2006 and 2011;
As there is no allegation that any of the claims in the present lawsuit arose out of these contacts, the Court assumes that Plaintiffs offer these in an attempt to make out a prima facie case for general personal jurisdiction over Innovative Discovery. Three cases help to illustrate the threshold showing of contacts necessary to establish a prima facie case of general personal jurisdiction.
First, this Court examines a ease in which the Fifth Circuit found general jurisdiction to exist, albeit as to an individu
This Court now turns to cases in which the Fifth Circuit found that general jurisdiction did not exist. In Johnston v. Multidata Systems Intern. Corp., the court examined the contacts of three defendants. 523 F.3d 602 (5th Cir. 2008). One defendant company sold products to ten different customers in the forum state over the five year span immediately prior to the lawsuit, representing three percent of its sales in that period of time. Id. at 611. That same defendant also sent personnel on service trips to the forum, sent employees to attend trade conventions in the forum, and advertised in national publications that reached the forum state. Id. Another defendant company, in the five year period prior to the lawsuit, bought over five millions dollars in products from vendors in the forum state, entered into a contract with an unrelated party in the forum governed by the law of the forum, employed two residents of the forum state who worked from the forum state, and at one point had a director who lived in the forum state. Id. at 612. The third defendant company had an extensive and diverse set of contacts with the forum state, prompting the Fifth Circuit to divide the contacts into two categories. In the first category, the Fifth Circuit noted that the defendant entered into contracts with companies located in the forum state and coordinated clinical trials there. Id. at 613. However, it also noted that those sales and contracts represented a small percentage of its business. Id. In the second category, the Fifth Circuit noted that the defendant had sold a number of products to customers in the forum state but again observed that these sales constituted a small percentage of its overall sales. Id. at 613-14. The Fifth Circuit also recognized the following additional contacts of the same defendant: it regularly sent employees on service trips to the forum state, an employee lived in the forum-state, and the defendant had a license to do certain types of specialized work in the forum state. Id. at 614. Similarly, in Bowles the defendant had several employees working in the forum state and also had employees occasionally participating in training programs there or routing through the forum state for overseas operations. Bowles v. Ranger Land Systems, Inc., 527 Fed. Appx. 319, 321 (5th Cir. 2013). The defendant company paid franchise and unemployment taxes there as well. Id. As to all of the defendants in these two cases, the Fifth Circuit found that the contacts were insufficient to create general jurisdiction.
The contacts between the defendants and the forum state in this case more closely resemble the latter two cases. First, the lack of any specific allegation as to any contacts with the forum since 2011,
Two remaining claims of contacts require attention. The Plaintiffs claim at various points in their pleadings and affi
Similarly, this Court notes that Plaintiffs claim that members of Innovative Discovery, including Bruce Duff, regularly traveled to Louisiana to seek business. (Rec. Doc. 27-1, at 4). Even if these claims were not vague and overgeneralized, trips
In summary, and reviewing these contacts in toto, this Court considers the Supreme Court’s recent acknowledgment that the ultimate question is not only whether the out-of-state defendants’ contacts with the forum are “continuous and systematic,” nor even if factors such as sales to residents of the forum can be considered to be substantial, but it is instead whether the “affiliations with the state are so ‘continuous and systematic’ as to render [it] essentially at home in the forum State.” Daimler AG, 134 S.Ct. at 761 (quoting Goodyear Dunlop Tires Operations, S.A., 131 S.Ct. at 2851). The contacts alleged here, accepting all uncontro-verted allegations as true and construing all disputed facts in favor of Plaintiffs, fall short of this high threshold. Finally, it is undisputed that Innovative Discovery does not have any property in Louisiana, is not licensed to do business here, does not have a registered agent here, and does not pay taxes here. All work is performed at Innovative Discovery’s offices in Virginia. This Court cannot exercise general personal jurisdiction over defendant Innovative Discovery.
B. Specific Jurisdiction over Innovative Discovery
Turning to the specific jurisdiction analysis, Plaintiffs have failed to set forth a prima facie case as to the existence
of contacts with Louisiana out of which their causes of action arose. See Pervasive Software, 688 F.3d at 221. As specific jurisdiction is a claim-specific inquiry, the Court normally applies its analysis to each separate, alleged cause of action. Seiferth v. Helicopteros Atuneros, Inc., 472 F.3d 266, 274-75 (5th Cir. 2006). However, many of the present claims suffer from a common deficiency — no contact between the defendant and the forum out of which the cause of action arose. For example, the allegations of the misappropriations of funds or improper failure to issue tax dividends might certainly cause harm to these Louisiana investors in Louisiana, but these activities took place outside of Louisiana and did not in any way specifically target Louisiana. Mere foreseeability of the injury in the forum state is not enough to support a finding of personal jurisdiction absent some showing of defendant’s targeting of the forum. See Calder v. Jones, 465 U.S. 783, 788-789, 104 S.Ct. 1482, 79 L.Ed.2d 804 (1984) (emphasizing in its personal jurisdiction analysis not only the “focal point” of the harm but also of the forum-specific targeting of the libelous story at issue); Panda Brandywine Corp. v. Potomac Elec. Power Co., 253 F.3d 865, 869 (5th Cir. 2001) (holding that “foreseeability of causing injury in [the forum] ... is not a ‘sufficient benchmark’ for specific jurisdiction”) (citations omitted); Antonini v. Blue Gate Farm, LLC, no. 12-2386, 2012 WL 6632111, at *4 (E.D.La. Dec. 19, 2012)(noting that the context allowing for a finding of specific jurisdiction based on “[t]he effects [test for] jurisdiction ... is somewhat rare and not expansive”).
Plaintiffs’ contend that Defendants’ alleged refusal to produce books and records of the company in response to Plaintiffs’ demands is a contact out of which the cause of action arose. (Rec. Doc. 2-1, at
C. Personal Jurisdiction over Defendant Outlaw
Plaintiffs do not attribute any contacts to defendant Outlaw other than those reviewed above. The Court recognizes that Plaintiffs allege that Outlaw used “[Innovative Discovery] as his alter ego” and that defendant Outlaw is no longer a member of Innovative Discovery due to the claimed “breach of his fiduciary and other legal and contractual duties.” (Rec. Doc. 1-1, at 1). The allegations at issue have already been analyzed by the Court and will not be repeated here. Even assuming that the fiduciary shield doctrine would not prohibit the conflation of the individual and company identities in this case,
D. Other Pending Motions
Finally, the Court notes that both Defendants filed Motions for New Trial, to Alter or Amend Judgment and / or to Dissolve or Vacate Judgments in response to a state court order requiring Defendants to produce certain items within an abbreviated time-frame. (Rec. Docs. 6 and 11). Defendants argue that this order was obtained in violation of their due process rights and ask this Court to vacate the state court judgment pursuant to F.R.C.P. 59(e), to stay its enforcement during the adjudication of the motion, and to award them attorneys’ fees and costs related to the motion. These motions, reset for submission on August 27, 2014, were opposed by Plaintiffs.
The Court’s finding of lack of personal jurisdiction will result in a dismissal without prejudice as to the entirety of the Plaintiffs’ Complaint. Thus, these motions are granted insofar as the underlying state court order to produce books and records is now moot. Defendants’ requests for attorneys’ fees and costs in those motions are DENIED.
Accordingly, and for the foregoing reasons;
IT IS ORDERED that the Motion to Dismiss for Lack of Personal Jurisdiction, Improper Venue, and, Alternatively, To Transfer to an Alternate Venue (Rec. Doc. 20) filed by defendant Innovative Discovery, LLC is GRANTED.
IT IS FURTHER ORDERED that the Motion to Dismiss for Lack of Personal Jurisdiction, Improper Venue, and, Alternatively, To Transfer to an Alternate Venue (Rec. Doc. 24) filed by defendant Allen C. Outlaw is GRANTED.
IT IS FURTHER ORDERED that Plaintiffs’ complaint is DISMISSED without prejudice in its entirety for lack of personal jurisdiction.
IT IS FURTHER ORDERED that the Motion for New Trial, to Alter, or Amend Judgment and / or to Dissolve or Vacate Judgment (Rec. Doc. 6) filed by defendant Innovative Discovery, LLC and the Motion for New Trial, to Alter or Amend Judgment and / or to Dissolve or Vacate Judgment (Rec. Doc. 11) filed by defendant Allen C. Outlaw are GRANTED insofar as the underlying state court order to produce books and records is now moot. Defendants’ requests for attorneys’ fees and costs in those motions are DENIED.
. The Court declines the request for oral argument as it finds oral argument unnecessary to determine the issues before it.
. The operating agreement of Innovative Discovery describes an economic interest owner as one identified as such by the underlying agreement (as both Tafaro and Combe were) or generally as one "who acquires an Economic Interest but is not a Member.’
. (Rec. Doc. 27-1, at 2, 9)
. Id. at 2, 5, 7.
. Id. at 3.
. Id.
. Id. at 3-4.
. (Rec. Doc. 27-1, at 26-27).
. Id. at 64-66.
. Id. at 56-58.
. Id. at 51-55.
. Id. at 28-50.
. The Court also notes that Plaintiffs assert at various points that Innovative Discovery was regularly seeking or undertaking business in Louisiana. Such vague assertions do not factor significantly into a court’s determination of personal jurisdiction. See Gardemal v. Westin Hotel Co., 186 F.3d 588, 596 (5th Cir.l999)(finding that claims that defendant advertised in several publications in the forum and contracted with numerous businesses there were too "vague and overgeneralized” to affect its general jurisdiction analysis); In re Chinese Manufactured Drywall Products Liab. Litig., 767 F.Supp.2d 649, 658 (E.D.La. 2011) (excluding from consideration of personal jurisdiction "any vague and overgeneralized assertions that give no indication as to the extent, duration, or frequency of contacts.’ ’’) (citations omitted).
. The invoices and vendor balance sheet put the dollar value at $34,124.41, while Outlaw's affidavit cites a number of $35,556.97. (Rec. Doc. 38, at 7). The Court will use the latter number.
. In Johnston, some of the employees resided in and worked from the forum state but did not actually work with customers in the forum state. Johnston, 523 F.3d at 612-13. In Bowles, the court observed in a footnote concerning the stationing of employees at federal bases in the forum that “we assume without deciding that the presence of these employees at federal enclaves within [the forum] is relevant to assessing [the defendant’s] contacts with the state.” Bowles, 527 Fed.Appx. at 322, n. 1 (citations omitted).
. In Perkins v. Benguet Consol Mining Co., the president of a foreign corporation lived in Ohio during the Japanese occupation of the Philippines during World War II. 342 U.S. 437, 447-48, 72 S.Ct. 413, 96 L.Ed. 485 (1952). The Supreme Court found that Ohio could exercise general personal jurisdiction over the company there not simply because its president lived there, but because his activities in Ohio on behalf of the company rose to such a level that Ohio became the company’s "principal, if temporary, place of business.” Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 779 n. 11, 104 S.Ct. 1473, 79 L.Ed.2d 790 (1984) (citing Perkins, 342 U.S. at 448, 72 S.Ct. 413).
.It is a dubious proposition that an agency relationship can be used for purposes of establishing general jurisdiction. See Daimler AG v. Bauman,-U.S.-, 134 S.Ct. 746, 759, n. 13, 187 L.Ed.2d 624 (2014) ("Agency relationships, we have recognized, may be relevant to the existence of specific jurisdiction. [ ] It does not inevitably follow, however, that similar reasoning applies to general jurisdiction.”) (citations omitted) (emphasis in original). As the Court finds the contacts would still be insufficient even if attributing them to Innovátive Discovery, it expresses no opinion as to this broader issue.
. Argument in Plaintiffs’ opposition focuses on this particular cause of action and related contacts (other than broad statements that the causes of action "arise directly from Defendant Outlaw’s broken promises, deceit, and other tortious conduct”). (Rec. Doc. 28, at 8).
. The fiduciary shield doctrine holds that personal jurisdiction does not automatically extend to an individual acting in his corporate capacity even if the corporation at issue is found to be under the Court’s personal jurisdiction. Stuart v. Spademan, 772 F.2d 1185, 1197 (5th Cir. 1985).
Reference
- Full Case Name
- Christopher J. TAFARO v. INNOVATIVE DISCOVERY, LLC
- Cited By
- 3 cases
- Status
- Published