Opinion
2:07-CV-975-ECR-GWF.
January 8, 2010
Order
Plaintiff Chase Bank USA, N.A. ("Chase") alleges that Defendants are engaged in various debt elimination schemes, which have induced Chase customers to submit meritless billing disputes and file frivolous lawsuits against Chase. Now before the Court are a motion to dismiss (#80) filed by Defendant Theresa Matson and a motion to dismiss (#81) filed by Defendant Stellar Services Group ("Stellar Services"). In addition, Stellar Services has filed a "Motion for Oral Argument Pursuant to Local Rule 78-2" (#103).
The motions are ripe, and we now rule on them.
I. Factual and Procedural Background
This lawsuit was filed on July 23, 2007, and Chase's First Amended Complaint ("FAC") (#64) was filed on March 19, 2009. Chase alleges that Defendants are involved in "fraudulent or fictitious debt elimination schemes" conducted "via the Internet and other marketing routes." (FAC ¶ 11 (#64).) As part of these schemes, consumers are advised, for example, to file false claims of billing errors using form documents provided by Defendants, and which lack "any individualized, fact-based claims specific to a given credit car account or credit card customer." (Id. ¶ 28.) The consumers are advised to follow up with further form documents when the claims are denied, extending the processing of the claims. (Id. ¶ 29.) Numerous meritless lawsuits have been filed by consumers acting on the advice of Defendants, and using form pleadings, discovery requests, and motions provided by Defendants. (Id. ¶ 30.) Chase has been forced to expend significant resources to process the claims and defend the lawsuits filed by consumers at the instigation of Defendants. (Id. ¶ 35.) In addition, some Chase customers have stopped making payments and defaulted on their obligations to Chase on the advice of Defendants. (Id.) Further, Chase argues that its reputation is being damaged by the false allegations of illegal activity contained in the form complaints provided to consumers by Defendants. (Id.)Defendant NAES, Inc. ("NAES"), is a corporation that began providing such fraudulent debt elimination services to Chase customers "by late 2006." (Id. ¶ 32.) Defendant Michael Fitzpatrick was the sole officer, director and shareholder of NAES, and oversaw and directed the business of NAES. (Id. ¶ 3.) In February 2008, Fitzpatrick filed dissolution papers for NAES with the Nevada Secretary of State. (Id. ¶ 36.) Chase alleges, however, that the assets and business operations of NAES were transferred to Stellar Services, which is run by Matson and Defendant Christopher Robinson, as well as others who have not yet been identified. (Id. ¶¶ 4-5, 37.)
Chase's First Amended Complaint asserts six claims for relief: (1) Preliminary and Permanent Injunction; (2) Intentional Interference with Contractual Relations; (3) Defamation; (4) Civil Conspiracy; (5) Alter Ego Against NAES and Fitzpatrick; and (6) Alter Ego Against Stellar Services, Robinson and Matson.
Matson's motion to dismiss (#80) was filed on May 26, 2009. Chase opposed (#88) the motion (#80); no reply was filed. Stellar Services' motion to dismiss (#81) was filed also on May 26, 2009. Chase opposed (#89) the motion (#81), and Stellar Services replied (#92). Stellar Services' motion (#103) for oral argument on its motion to dismiss (#81) was filed on September 2, 2009. Chase did not file a response to the motion for oral argument (#103).
II. Matson's Motion to Dismiss (#80)
Matson's motion to dismiss (#80) raises four basic issues. First, she argues that the Court lacks personal jurisdiction over her, and seeks dismissal on that basis pursuant to Federal Rule of Civil Procedure 12(b)(2). Second, in the alternative, she suggests that the District of Nevada is an inappropriate venue under 28 U.S.C. § 1391. Third, she asserts that Chase's First Amended Complaint fails to state a claim, and seeks dismissal pursuant to Federal Rule of Civil Procedure 12(b)(6). Finally, she challenges whether the amount in controversy requirement for diversity jurisdiction is satisfied; this argument falls under Federal Rule of Civil Procedure 12(b)(1), dismissal for lack of subject matter jurisdiction, though she fails to cite to that rule. We will address each of Matson's arguments separately.
A. Personal Jurisdiction
The plaintiff bears the burden of establishing that this Court has personal and subject matter jurisdiction over the defendant.See Mattel, Inc. v. Greiner Hausser GmbH, 354 F.3d 857, 862 (9th Cir. 2003). A motion to dismiss for lack of jurisdiction may attack the sufficiency of the complaint, or it may be made as a "speaking motion" attacking the existence of jurisdiction as a matter of fact. Thornhill Pub. Co., Inc. v. Gen. Tel. Elecs. Corp., 594 F.2d 730, 733 (9th Cir. 1979). "Where the jurisdictional issue is separable from the merits of the case, the judge may consider the evidence presented with respect to the jurisdictional issue and rule on that issue, resolving factual disputes if necessary." Id. However, absent an evidentiary hearing, the plaintiff "need only make a prima facie showing of jurisdiction to survive the motion to dismiss." Mattel, 354 F.3d at 862. Further, absent an evidentiary hearing, the non-movant's version of any contested facts must be taken as true. Rhoades v. Avon Prods., Inc., 504 F.3d 1151, 1160 (9th Cir. 2007). Here, Matson makes no arguments regarding jurisdiction based on the sufficiency of the complaint. Rather, she appears to attack the existence of jurisdiction as a matter of fact, based on the circumstance that she "does not reside in the District of Nevada nor does [she] conduct business in this district." (D.'s Mot. at 2 (#80).)
An analysis of personal jurisdiction has two components. First, there must be a statute that gives the court authority to exercise jurisdiction. Data Disc Inc. v. Sys. Tech. Assoc. Inc., 557 F.2d 1280, 1286 (9th Cir. 1977). Second, the exercise of jurisdiction must meet Constitutional due process standards. Id. Because there is no applicable federal statute governing personal jurisdiction, our starting point is Nevada's long-arm statute.See Fed.R.Civ.P. 4(k)(1)(A); Doe v. Unocal Corp., 248 F.3d 915, 923 (9th Cir. 2001) (per curiam). Nevada's long-arm statute permits the exercise of jurisdiction to the limits of due process. NEV. REV. STAT. § 14.065; See Abraham v. Agusta, S.P.A., 968 F. Supp. 1403, 1407 (D. Nev. 1997). Thus, our analysis of personal jurisdiction under Nevada's long-arm statute and the Constitution collapse into one, and we consider only whether the exercise of jurisdiction comports with the Fourteenth Amendment's due process requirements.
A court may have personal jurisdiction over a defendant in one of two ways: general or specific. Reebok Int'l Ltd. v. McLaughlin, 49 F.3d 1387, 1391 (9th Cir. 1995). Though Chase argues that exercise of general personal jurisdiction over Matson would be appropriate, there is no need to decide that issue: specific jurisdiction alone would be sufficient to survive Matson's motion to dismiss.
The Ninth Circuit has established a three-prong test for analyzing a claim of specific personal jurisdiction:
(1) The non-resident defendant must purposefully direct his activities or consummate some transaction with the forum or resident thereof; or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws;
(2) the claim must be one which arises out of or relates to the defendant's forum-related activities; and
(3) the exercise of jurisdiction must comport with fair play and substantial justice, i.e., it must be reasonable.
The plaintiff bears the burden of satisfying the first two prongs of the test. If the plaintiff fails to satisfy either of these prongs, personal jurisdiction is not established. If the plaintiff succeeds in satisfying both of the first two prongs, the burden then shifts to the defendant to present a compelling case that the exercise of jurisdiction would not be reasonable.Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 802 (9th Cir. 2004) (internal citations and quotation marks omitted).
Chase asserts that Matson has repeatedly engaged in business in Nevada and with Nevada residents, and has presented evidence relating to one instance of such business activity. Matson engaged in extensive correspondence via e-mail with Lance Taylor-Warren, a Chase customer who utilized the services of Defendants and eventually initiated litigation against Chase using documents and legal advice provided to him by Matson. (See P.'s Opp. (#88) Exs. C, D, and E.) It is precisely the sorts of services provided to Mr. Taylor-Warren by Matson that give rise to Chase's claims.
The matter is complicated somewhat by the circumstance that Mr. Taylor-Warren was a customer of NAES, and Matson was apparently an employee of NAES at the time of their interactions. Matson argues that her activities on behalf of an employer should not give rise to personal jurisdiction over her as an individual. The Supreme Court has rejected, however, the notion that "employees who act in their official capacity are somehow shielded from suit in their individual capacity." Keeton v. Hustler Magazine, 465 U.S. 770, 781 n. 13 (1984); see also Calder v. Jones, 465 U.S. 783, 790 (1984) ("Petitioners are correct that their contacts with California are not to be judged according to their employer's activities there. On the other hand, their status as employees does not somehow insulate them from jurisdiction."). In other words, the existence of a corporate form does not create a due process limit on jurisdiction over the employees of a corporation. Davis v. Metro Prods., Inc. 885 F.2d 515, 520-522 (9th Cir. 1989) (discussing Calder and Keeton). Though some states have adopted a "fiduciary shield" doctrine that would create such a limit, Nevada is not such a state; rather, as noted above, Nevada's long arm statute permits exercise of jurisdiction to the limits of due process. See NEV. REV. STAT. § 14.065; c.f. Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 902 (2d Cir. 1981) (explaining fiduciary shield doctrine as formerly applied under New York long-arm statute). Moreover, Chase has alleged that Stellar Services has taken over the business of NAES since the latter's dissolution, and that Stellar Services is an alter ego of Matson.
Taking all reasonable inferences in the non-moving party's favor, as we must in the present procedural posture, it appears that Matson's business activities in Nevada on behalf of NAES and later, allegedly, Stellar Services, satisfy all three prongs of Schwarzenegger test with regard to personal jurisdiction over her individually, as well. As such, we have personal jurisdiction over Matson, and her arguments to the contrary are rejected.
B. Venue
In a diversity case, venue is appropriate in a district where (1) any defendant resides, if all defendants reside in the same state, (2) a substantial part of the events giving rise to the claim occurred, or (3) where any defendant is subject to personal jurisdiction at the time the action is commenced, if there is no district in which the action may otherwise be brought. 28 U.S.C. § 1391(a). Matson's argument that Nevada is an inappropriate venue invokes only the first of these subsections, asserting that Matson does not reside in Nevada, nor does she conduct business here.
As discussed above, the evidence does not support the second part of Matson's argument: it appears that she has conducted business in Nevada. In any case, Matson offers no evidence or argument that demonstrates venue in Nevada would not be appropriate pursuant to 28 U.S.C. § 1391(a)(2), as a place where a substantial part of the events giving rise to Chase's claims occurred. Chase's claims are based, at least in part, on debt elimination schemes involving Chase customers who are Nevada residents, and who filed claims and lawsuits against Chase in Nevada. As such, a substantial part of the events giving rise to Chase's claims occurred in Nevada. Thus, venue is proper in Nevada pursuant to 28 U.S.C. § 1391(a)(2).
C. Failure to State a Claim
Matson's argument that Chase's First Amended Complaint fails to state a claim upon which relief can be granted is based in part on a purported lack of specificity. Matson asserts that Chase "has failed to identify any damages with the exception of possible legal fees and costs associated with litigation against its cardholders." (Mot. at 4 (#80).) Further, Matson notes that Chase "has failed to identify any specific action against any cardholder(s) [in] which it has incurred any legal fees or costs." (Id.)
Federal Rule of Civil Procedure 8(a) does not require a plaintiff to plead the details that Matson asserts are lacking from Chase's First Amended Complaint. The First Amended Complaint (#64) contains "a short and plain statement of the grounds for the court's jurisdiction," "a short and plain statement of the claim showing that the pleader is entitled to relief," and a "demand for the relief sought." FED. R. CIV. P. 8(a). Indeed, Chase's complaint describes the factual basis for its claims in some detail, as we have summarized above. Though the specific Chase customers who have acted on Defendants' alleged debt elimination schemes are not named, Matson has demonstrated no reason why a heightened pleading standard, so as to require such details, should be required in this case.
Matson further asserts that the First Amended Complaint "fails to establish any damages which have not already been awarded previously." (Mot. at 5 (#80).) The premise underlying this assertion is that the only damages claimed by Chase are attorney's fees and court costs incurred in litigation with cardholders. Matson assumes that Chase either would have already recovered these alleged damages in the judgments against the Chase customers, or that Chase was not entitled to such damages, because the customers prevailed.
Matson's argument fails for several reasons. First, under the American rule, a prevailing party normally does not recover attorney's fees. See, e.g., Buckhannon Bd. and Care Home, Inc. v. W. Va. Dep't of Health and Human Res., 532 U.S. 598, 602 (2001). Matson's assumption that if Chase prevailed in suits against the cardholders it would have necessarily already recovered its costs and attorney's fees is therefore flawed.
Moreover, Matson's characterization of the damages sought by Chase as limited to attorney's fees and costs is simply false. Chase also seeks to recover sums lost due to customers defaulting on obligations at the instigation of Defendants. (FAC ¶ 35 (#64).) Further, Chase seeks damages to compensate for alleged injury to its reputation from defamatory statements published by Defendants regarding alleged illegal activity on the part of Chase. (Id. ¶ 60-63.) In addition, Chase seeks injunctive relief against any future activity by Defendants similar to that which gave rise to this case. (Id. ¶ 48.) As such, even a cursory examination of Matson's First Amended Complaint reveals that Chase does seek relief that has not already been awarded previously.
In short, Chase's First Amended Complaint states a claim to relief that is "plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Matson's arguments to the contrary are without merit. As such, dismissal pursuant to Federal Rule of Civil Procedure 12(b)(6) would be inappropriate. D. Amount in Controversy
Matson challenges whether we have subject matter jurisdiction over this action, arguing that Chase has "failed to substantiate a controversy that exceed [sic] the sum or value of $75,000.00. . . ." (Mot. at 2 (#80).) As noted above, the burden of establishing that the Court has jurisdiction over the defendant lies with the plaintiff. Mattel, 354 F.3d at 862. Where the amount in controversy is at issue, "[t]o justify dismissal, it must appear to a legal certainty that the claim is really for less than the jurisdictional amount." Crum v. Circus Circus Enters., 231 F.3d 1129, 1131 (9th Cir. 2000) (internal quotation marks omitted). Thus, because the burden of proof to establish jurisdiction lies with the plaintiff, Chase must show that it does not appear to a legal certainty that its claims are for less than the required amount. United States v. S. Pac. Transp. Co., 543 F.2d 676, 682 (9th Cir. 1976).
Matson's argument that the amount in controversy requirement is not met is based on the premise, discussed above in a different context, that the only damages claimed by Chase are attorney's fees and court costs incurred in litigation with cardholders. Matson asserts that Chase either would have already recovered these alleged damages in the judgments against the Chase customers, or that Chase was not entitled to such damages, because the customers prevailed.
Matson's argument fails here, too, and for similar reasons. Under the American rule, a prevailing party normally does not recover attorney's fees. See, e.g., Buckhannon, 532 U.S. at 602. Matson's assumption that if Chase prevailed in suits against the cardholders it would have necessarily already recovered its costs and attorney's fees is therefore flawed. Furthermore, Matson's characterization of the damages sought by Chase as limited to attorney's fees and costs is false. Chase additionally seeks to recover sums lost due to customers defaulting on obligations at the instigation of Defendants. (FAC ¶ 35 (#64).) Also, Chase alleges damage to its reputation from defamatory statements published by Defendants regarding alleged illegal activity on the part of Chase. (Id. ¶ 60-63.) Moreover, Chase seeks injunctive relief against any future activity by Defendants similar to that which gave rise to this case. (Id. ¶ 48.) The amount in controversy requirement may be met where the value of the injunction sought to either party meets or exceeds the statutory minimum. See McCauley v. Ford Motor Co. (In re Ford Motor Co./Citibank (S.D.), N.A.), 264 F.3d 952, 958 (9th Cir. 2001). Any of these categories of damages could potentially exceed the jurisdictional amount.
We conclude that Chase has met its burden of demonstrating that it does not appear to a legal certainty that the amount in controversy is less than the jurisdictional amount. As such, we have subject matter jurisdiction over this case, and Matson's motion will be denied in that respect.
III. Stellar Services' Motion for Oral Argument (#103)
Stellar Services requests oral argument on its motion to dismiss (#81), pursuant to Local Rule 78-2. Local Rule 78-2 provides that "[a]ll motions may, in the court's discretion, be considered and decided with or without a hearing." Having now examined the papers filed in support of and in opposition to Stellar Services' motion to dismiss (#81), we will deny Stellar Services' request for oral argument. The issues raised by the motion and the arguments of the parties are clear from the papers, and it does not appear that oral argument would be helpful to the Court.
In the alternative to its request for oral argument, Stellar Services requests a ruling on its motion to dismiss (#81) at the Court's "earliest convenience." This request is granted: we now turn to consideration of the merits of the motion.
IV. Stellar Services' Motion to Dismiss (#81)
Stellar Services' motion to dismiss (#81) asserts the same arguments as Matson's motion to dismiss (#80). Indeed, the two motions are virtually identical, except for the name of the moving party — they even share many of the same typographical errors. Though the evidence presented by Chase relates to business dealings by Matson, on behalf of NAES, it is also alleged that Stellar Services has taken over the business of NAES, including its business conducted in Nevada, and no evidence has been submitted that would demonstrate otherwise. As such, though the evidence of personal jurisdiction is somewhat weak with regard to Stellar Services, in particular, it is sufficient in the present procedural posture. We need not elaborate further on the other issues raised by Stellar Service's motion (#81); our discussion above suffices. The motion (#81) will be denied.
V. Conclusion
We have specific personal jurisdiction over both Matson and Stellar Services, on the basis of the business activities they conduct in Nevada that have given rise to Chase's claims. Venue is proper in Nevada because Nevada is the district where a substantial part of the events giving rise to the claim occurred. We have subject matter jurisdiction, because the amount in controversy appears to be satisfied. Finally, Chase's First Amended Complaint does not fail to state a claim; the allegations are made with the requisite specificity to satisfy Federal Rule of Civil Procedure 8(a), and Chase's claims for damages are not limited to amounts already recovered in other cases.IT IS, THEREFORE, HEREBY ORDERED that Matson's motion to dismiss (#80) is DENIED. IT IS FURTHER ORDERED that Stellar Services' motion for oral argument (#103) is GRANTED IN PART and DENIED IN PART on the following basis: Stellar Services' request for oral argument is denied; its request for a ruling on its motion to dismiss (#81) at the Court's "earliest convenience" is granted. IT IS FURTHER ORDERED that Stellar Services' motion to dismiss (#81) is DENIED .