Marcellx, Llc et al v. Sbarra

MOTION to Dismiss for Lack of Jurisdiction and Venue, MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM

W.D. Pa.November 21, 2016

IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA MARCELLX, LLC, DAVID M. PRUSHNOK, G. DANIEL PRUSHNOK, and JOHN P. PRUSHNOK, Plaintiffs, v. DONALD D. SBARRA, Defendant. ) ) ) ) ) ) ) ) ) ) ) Civil Action No. 16–cv–1319 MOTION TO DISMISS AMENDED COMPLAINT Defendant Donald D. Sbarra ("Sbarra"), by and through his undersigned counsel, Buchanan Ingersoll & Rooney PC, and in accordance with Rules 12(b)(2), 12(b)(3), and 12(b)(6) of the Federal Rules of Civil Procedure, moves to dismiss the Amended Complaint. In support of his motion, Sbarra avers as follows: I. INTRODUCTION 1. This lawsuit involves a single telephone conversation. An individual by the name of Russell Parker ("Parker"), who was located in Florida, called Sbarra in Kansas on July 26, 2016. During the call, Sbarra allegedly stated that Plaintiffs had stolen the assets that they sold to Parker's company. 2. Plaintiffs initially asserted a single cause of action against Sbarra for slander per se. In response, Sbarra moved to dismiss on the basis that this Court lacks personal jurisdiction over Sbarra and that venue in this Court is improper. Plaintiffs then amended their complaint to include five additional counts against Sbarra arising from the same telephone call: injurious falsehood, slander, commercial disparagement, intentional interference with contractual Case 2:16-cv-01319-MPK Document 12 Filed 11/21/16 Page 1 of 11 2 relations, and tortious interference with prospective business relations.1 3. However, this Court still lacks personal jurisdiction over Sbarra. The Amended Complaint must therefore be dismissed under Rule 12(b)(2) of the Federal Rules of Civil Procedure. 4. Venue remains improper in this Court. The Amended Complaint is therefore also subject to dismissal under Rule 12(b)(3). 5. Even assuming arguendo that personal jurisdiction and venue existed (they do not), the Tortious Interference Claims would nevertheless fail as a matter of law under Rule 12(b)(6) because Plaintiffs have not asserted facts to support those claims. II. FACTUAL BACKGROUND A. The Swamp Angel Property 6. Sbarra is the managing member of Swamp Angel Energy, LLC ("Swamp Angel"), an entity that formerly owned the shallow oil and gas rights associated with a parcel in McKean County, Pennsylvania known as the "Swamp Angel Property". Am. Compl. at ¶¶ 8–9. 7. In March 2012, Swamp Angel signed a written agreement in which it agreed to convey those shallow rights to Horizontal Exploration, LLC ("Horizontal"). Id. at ¶ 11. Horizontal subsequently assigned its rights under the contract to MarcellX, LLC ("MarcellX") in June 2012. Id. at ¶ 15. 8. After MarcellX acquired the shallow rights, its owners began soliciting investors to provide the funding that was necessary to drill new shallow wells on the Swamp Angel 1 The slander per se, injurious falsehood, slander, and commercial disparagement claims are collectively identified herein as the "Defamation Claims," and the intentional interference with contractual relations and tortious interference with prospective business relations claims are identified as the "Tortious Interference Claims." Case 2:16-cv-01319-MPK Document 12 Filed 11/21/16 Page 2 of 11 3 Property. Id. at ¶ 18.2 A partnership by the name of Horizontal Fund I, Ltd. ("Fund I") was formed in December 2012 to develop the shallow rights that MarcellX had acquired. Id. at ¶ 19. However, Fund I ran out of money and the further development of the Swamp Angel Property came to a halt. Id. at ¶ 20. 9. In July 2014, certain of the investors in Fund I (the "Investors") filed a lawsuit in this Court at Docket No. 14–866 against Horizontal, Thompson, MarcellX, and the Prushnoks (the "Fund I Litigation"). Id. at ¶ 21. The Investors allege (among other claims) that they were fraudulently induced to invest approximately $3.5 million in Fund I by the defendants, who engaged in a Ponzi–like scheme in which they improperly utilized the Investors' money to enrich themselves. The Investors seek to rescind their investment contracts and receive the return of their investments. At this time, the Fund I Litigation remains pending in this Court. B. The Telephone Conversation 10. Although Sbarra did not invest in Fund I, a trust in which he serves as the trustee invested in the partnership. See Amended Complaint in Fund I Litigation [Doc. 56] at ¶¶ 1, 24. Sbarra learned in the summer of 2016 that MarcellX was negotiating to sell certain of the wells and assets on the Swamp Angel Property — including assets that were believed to have been developed using Fund I's money — to an entity known as Prime Energy & Chemical, LLC ("Prime Energy"). Am. Compl. at ¶ 26. 11. Sbarra telephoned Parker, a principal of Prime Energy, on July 26, 2016 in an attempt to discuss its acquisition associated with the Swamp Angel Property. Id. at ¶ 28. On the same day, Parker returned Sbarra's call. Id. at ¶ 29. 2 MarcellX was owed by David M. Prushnok, G. Daniel Prushnok, and John P. Prushnok (collectively, the "Prushnoks") as well as Mark Thompson ("Thompson"). Case 2:16-cv-01319-MPK Document 12 Filed 11/21/16 Page 3 of 11 4 12. Sbarra was located in his office in Kansas at the time of the telephone conversation, and Parker was located in Florida. Affidavit of Donald D. Sbarra ("Sbarra Aff."), a copy of which is attached to the Motion to Dismiss Amended Complaint as Exhibit A, at ¶¶ 3–6. 13. During the call, Sbarra allegedly told Parker that the "Prushnoks sold you stolen property."3 Am. Compl. at ¶¶ 36, 42. C. The Claims Against Sbarra in the Amended Complaint 14. On November 4, 2016, Plaintiffs filed a six–count Amended Complaint against Sbarra. Id. at ¶¶ 52–83. However, all six counts are based on the same, singular factual allegation — namely, that "Sbarra's statement that 'the Prushnoks sold you stolen property'" was false and/or made without privilege or justification. Id. at ¶¶ 53, 62, 65, 70, 77, 82. 15. Plaintiffs allege that subject matter exists because complete diversity exists between Sbarra (a citizen of Kansas) and Plaintiffs (citizens of Pennsylvania). Id. at ¶ 6. Nowhere in the Amended Complaint, however, do Plaintiffs identify any basis for the Court to exercise personal jurisdiction over Sbarra. 16. While Plaintiffs suggest that venue is proper in this Court because Sbarra aimed the alleged tortious conduct at the Western District, this assertion constitutes a legal conclusion rather than a factual averment that his Court must accept as true. See id at ¶ 7. As the applicable case law makes clear, a single phone between Kansas and Florida does not render venue proper in Pennsylvania. 3 In the Fund I Litigation, the Investors have in fact asserted a conversion claim against MarcellX and the Prushnoks relating to their improper use of wells and assets developed using Fund I's money. See Amended Complaint in Fund I Litigation at ¶¶ 182–88, 197–201. Case 2:16-cv-01319-MPK Document 12 Filed 11/21/16 Page 4 of 11 5 III. ARGUMENT A. Sbarra is Not Subject to Personal Jurisdiction in Pennsylvania 17. When a nonresident defendant challenges the court's power to exercise personal jurisdiction, the plaintiff bears to burden of proving the existence of a ground for jurisdiction by a preponderance of the evidence. See IMO Indus., Inc. v. Keikert AG, 155 F.3d 254, 257 (3d Cir. 1998). 18. Pennsylvania's long–arm statute authorizes its courts "to exercise personal jurisdiction over nonresident defendants to the constitutional limits of the due process clause of the fourteenth amendment." Mellon Bank (East) PSFS, Nat'l Ass'n v. Farino, 960 F. 2d 1217, 1221 (3d Cir. 1992). Due process requires that the defendant have "minimum contacts" in the state, such that the defendant purposefully availed itself of the privilege of conducting activities within that state. Asahi Metal Indus. Co., Ltd. v. Superior Court of California, 480 U.S. 102, 109 (1987); International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). 19. "There are two types o[f] personal jurisdiction — general jurisdiction and specific jurisdiction." Lincoln Gen. Ins. Co. v. A&G Commercial Trucking, Inc., No. 1:CV–12–1534, 2013 WL 2896824, at *3 (M.D. Pa. June 12, 2013) (citing Marten v. Godwin, 499 F.3d 290, 296 (3d Cir. 2007)). 20. General personal jurisdiction exists only if the defendant engages in "continuous and systematic" activities with the state, and empowers the court to exercise jurisdiction over even those causes of action that arise from the defendant's activities unrelated to the state. Verotex Certainteed Corp. v. Consol. Fiber Glass Prod. Co., 75 F.3d 147, 151 n.3 (3d Cir. 1996). Case 2:16-cv-01319-MPK Document 12 Filed 11/21/16 Page 5 of 11 6 21. Because Sbarra does not live in Pennsylvania, and does not conduct continuous activities in Pennsylvania, general jurisdiction does not exist. See Sbarra Aff. at ¶¶ 1–2. 22. The Court can therefore only exercise jurisdiction over Sbarra if the actions that he is alleged to have taken that gave rise to the this lawsuit enable this Court to exercise specific jurisdiction. See Lincoln General, 2013 WL 2896824, at *3 (citing Marten, 499 F.3d at 296) ("[I]n the absence of such systemic and continuous contacts with the forum state, '[s]pecific jurisdiction exists when the claim arises from or relates to conducted purposely directed at the forum state.'") (emphasis added). 23. In 1984, the Supreme Court of the United States established a standard known as the "effects test" for determining whether a court can exercise personal jurisdiction over nonresident defendants who have allegedly committed an intentional tort outside of a forum. Calder v. Jones, 465 U.S. 783 (1984). Among other factors, the "effects test" requires a plaintiff to allege and establish that "the defendant expressly aimed his tortious conduct at the forum such that the forum can be said to be the focal point of the tortious activity." Remick v. Manfredy, 238 F.3d 248, 258 (3d Cir. 2001) (citing IMO, 155 F.3d at 265–66). 24. Here, Plaintiffs cannot satisfy the requirements of the "effects test." Sbarra did not make the allegedly false statement to anyone in Pennsylvania. Sbarra was located in Kansas when he made the allegedly defamatory statement, which he communicated to Parker in Florida. Sbarra Aff. at ¶¶ 3–6. Accordingly, Plaintiffs cannot establish that Sbarra's allegedly defamatory statement was "expressly aimed" aimed at Pennsylvania. 25. The Amended Complaint must therefore be dismissed for lack of personal jurisdiction under Rule 12(b)(2) of the Federal Rules of Civil Procedure. Case 2:16-cv-01319-MPK Document 12 Filed 11/21/16 Page 6 of 11 7 B. Venue is Not Proper in This Court 26. In an action against a single defendant, venue is proper in "a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated." 28 U.S.C. § 1391(b)(2).4 27. Pennsylvania courts have repeatedly held that "venue will not be proper in a district for a defamation claim if injury is the only event occurring in that district." Lomanno v. Black, 285 F. Supp. 2d 637, 642 (E.D. Pa. 2003) (citing DaimlerChryslter Corp. v. Askinazi, No. CIV.A. 99–5581, 2000 WL 822449, at *6 (E.D. Pa. June 26, 2000)); see also Manning v. Flannery, No. 09–03190, 2010 WL 55295, at *11 (E.D. Pa. Jan. 6, 2010). 28. In defamation matters, the plaintiff must establish that the defendant published the allegedly defamatory statement in the judicial district in order for venue to exist. See, e.g., Dobrick–Pierce v. Open Options, Inc., No. 2:05CV1451, 2006 WL 2089960, at *6 (W.D. Pa. July 25, 2006). 29. Similarly, in order for venue to exist for a tortious interference claim, the judicial district must be the locus of the defendants' purportedly wrongful conduct. See Lomanno, 285 F. Supp. 2d at 643. 30. Here, neither the author nor the recipient of the allegedly false statement was located in the Western District of Pennsylvania. They were located in Kansas and Florida, respectively. The only connection with the Western District is that the allegedly false statements were about Plaintiffs' activities in Western District. The law is clear that such allegations do not make this Court a proper venue to resolve any of Plaintiffs' claims. 4 The other provisions in Section 1391(b) involve venue in actions involving multiple defendants. See 28 U.S.C. § 1391(b)(1) and (3). Case 2:16-cv-01319-MPK Document 12 Filed 11/21/16 Page 7 of 11 8 31. The Amended Complaint must therefore be dismissed under Rule 12(b)(3) of the Federal Rules of Civil Procedure because venue is improper. C. The Tortious Interference Claims Fail to State a Claim Upon Which Relief Many Be Granted 32. Under Pennsylvania law, a "plaintiff brining an intentional interference [with contractual relations] claim must allege breach or nonperformance" of the contract with the third party. Dreiling Millennium Trust II v. Reliant Rental Care, Inc., 833 F. Supp. 2d 429, 434 (E.D. Pa. 2011). 33. Plaintiffs have failed to allege that Sbarra caused any third party to breach its contractual obligations to any of the Plaintiffs. The only existing contract that Plaintiffs identify in the Amended Complaint is the agreement between MarcellX and Prime Energy. Am. Compl. at ¶ 27. 34. However, Plaintiffs conceded that Prime Energy performed that contract. Id. Plaintiffs allege in particular that "MarcellX entered into a Purchase and Sale Agreement with [Prime] to convey the Swamp Angel shallow mineral rights to Prime in exchange for funds sufficient to pay off CNB Bank and on or about July 21, 2016, MarcellX and Prime successfully closed on said transaction." Id. (emphasis added). Nowhere in the Amended Complaint do Plaintiffs allege that Sbarra's statement to Russell caused Prime Energy to breach any of the terms contained in its contract with MarcellX. 35. Under Pennsylvania law, "[t]o state a cognizable claim [for tortious interference with prospective business relations], a complaint must allege that a particular contract or express offer was being contemplated by a plaintiff and/or third party which was improperly impeded by the defendant's action." Monroeville Chrysler, LLC v. DaimlerChrysler Motors Co. LLC, No. Case 2:16-cv-01319-MPK Document 12 Filed 11/21/16 Page 8 of 11 9 06–657, 2007 WL 4150344, at *7 (W.D. Pa. Nov. 19, 2007) (quoting Silver v. Mendel, 894 F.2d 598, 602 (3d Cir. 1990)). A "[p]laintiff cannot rest its tortious interference claim on the 'mere hope that additional contracts or customers would have been forthcoming but for defendant's interference.'" Id. (internal quotation omitted). 36. Plaintiffs have not alleged facts which (if true) would establish the existence of a prospective contractual relationship. Plaintiffs merely assert that "there was a prospective business relationship between Plaintiffs and Prime relating to Plaintiffs' potential role as operators in the development of the mineral rights conveyed to Prime." Am. Compl. at ¶ 80. This single conclusory allegation is insufficient to plead the existence of a prospective contractual relationship. 37. As Pennsylvania courts make clear, Plaintiffs must allege the existence "a particular contract or express offer" with Prime Energy. However, Plaintiffs not pleaded any facts, discussion, or communications with Prime Energy about serving as its operator. In fact, Plaintiffs have not alleged that they ever even communicated with Prime Energy about the possibility that one or more Plaintiffs might serve as an operator in developing the rights that Prime Energy acquired, let alone any facts to suggest that Prime Energy was interested in exploring such a relationship.5 38. Because Plaintiffs have not plead that they were in the process of negotiating a contract with Prime Energy, their conclusory assertion that a prospective contractual relationship existed is insufficient (as a matter of law) to plead a claim for tortious interference with prospective contractual relationship. 5 Plaintiffs cannot plead any such facts. Prime Energy's counsel has advised that Prime Energy had no interest in retaining Plaintiffs to operate or develop any of Prime Energy's assets. Case 2:16-cv-01319-MPK Document 12 Filed 11/21/16 Page 9 of 11 10 39. The Tortious Interference Claims must therefore be dismissed under Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim. WHEREFORE, Sbarra respectfully requests that this Honorable Court grant his motion, dismiss all claims in the Amended Complaint, and award Sbarra any further relief as may be just and proper. Respectfully submitted, BUCHANAN INGERSOLL & ROONEY PC By: /s/ Gregory J. Krock Gregory J. Krock Pa. I.D. No. 78308 Eric M. Spada Pa. I.D. No. 311446 One Oxford Centre 301 Grant Street, 20th Floor Pittsburgh, PA 15219–1410 (412) 562–3983/3743 Counsel for Defendant Donald D. Sbarra Case 2:16-cv-01319-MPK Document 12 Filed 11/21/16 Page 10 of 11 CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of the foregoing Motion to Dismiss Amended Complaint was filed with the Court via the CM/ECF system on the 21st day of November, 2016, which system will provide notice of the filing to the following counsel of record: Scott M. Hare LAW OFFICE OF SCOTT MICHAEL HARE 1806 Frick Building 437 Grant Street Pittsburgh, PA 15219 Matthew T. Logue James R. Thornburg LOGUE LAW FIRM 500 Grant Street, Suite 2900 Pittsburgh, PA 15219 /s/ Gregory J. Krock Gregory J. Krock Case 2:16-cv-01319-MPK Document 12 Filed 11/21/16 Page 11 of 11 Case 2:16-cv-01319-MPK Document 12-1 Filed 11/21/16 Page 1 of 3 Case 2:16-cv-01319-MPK Document 12-1 Filed 11/21/16 Page 2 of 3 Case 2:16-cv-01319-MPK Document 12-1 Filed 11/21/16 Page 3 of 3 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA MARCELLX, LLC, DAVID M. PRUSHNOK, G. DANIEL PRUSHNOK, and JOHN P. PRUSHNOK, Plaintiffs, v. DONALD D. SBARRA, Defendant. ) ) ) ) ) ) ) ) ) ) ) Civil Action No. 16–cv–1319 ORDER OF COURT AND NOW, this _____ days of ____________________, 20__, upon consideration of the Motion to Dismiss Amended Complaint, and for good cause shown, it is hereby ORDERED that the Motion is GRANTED. All counts contained in the Amended Complaint are hereby DISMISSED. BY THE COURT: ______________________________ Maureen P. Kelly Chief Magistrate Judge Case 2:16-cv-01319-MPK Document 12-2 Filed 11/21/16 Page 1 of 1