Lucidrisk, LLC v. Ogden

• Decision Date: 19 May 2009
• Docket Number: No. 3:08-cv-1671 (CFD).,3:08-cv-1671 (CFD).
• Citation: 615 F.Supp.2d 1
• Parties: LUCIDRISK, LLC, plaintiff v. Keith OGDEN and Peter Gerhard, defendants.
• Court: U.S. District Court — District of Connecticut

Page 1

615 F.Supp.2d 1

LUCIDRISK, LLC, plaintiff v. Keith OGDEN and Peter Gerhard, defendants.

No. 3:08-cv-1671 (CFD).

United States District Court, D. Connecticut.

May 19, 2009.

COPYRIGHT MATERIAL OMITTED

David M. Wallman, Wallman Law Firm, Stamford, CT, for plaintiff.

Alan S. Modlinger, Miquel A. Pozo, Lowenstein Sandler, Roseland, NJ, Robert Burdette Mitchell, Pullman & Comley, Bridgeport, CT, for defendants.

RULING ON MOTION TO DISMISS

CHRISTOPHER F. DRONEY, District Judge.

This is a diversity case alleging breach of contract (against Keith Ogden only), breach of good faith¹ and CUTPA violations (against both Ogden and Peter Gerhard) arising out of a licensing agreement (the "contract") between the plaintiff LucidRisk, LLC, a provider of financial services software, and two officers of a hedge fund or funds referred to herein as "East Avenue." For the following reasons, the motion to dismiss is granted.

I. Background

The plaintiff, LucidRisk LLC, is a Connecticut limited liability company. Defendant Ogden is a resident of California and Chief Operating Officer of East Avenue Capital Partners Management Company LLC, a Delaware limited liability company. Defendant Gerhard is a resident of New Jersey and a "managing member" of East Avenue Capital Partners Management Company LLC.

LucidRisk alleges that Ogden signed a contract with LucidRisk for the licensing of software, which is used to calculate risk relating to hedge fund investments. The contract was signed in New Jersey in January, 2008, and listed "East Avenue Capital Mgmnt" as the "Client," "by Keith Ogden, COO." The contract contains a choice of law and forum selection provision which specifies that Connecticut law applies to any disputes between parties to the contract, and that such disputes "shall be adjudicated by an appropriate court located in Fairfield County, State of Connecticut."

In March 2008, Ogden (on behalf of East Avenue) repudiated the contract, stating that the hedge funds were experiencing financial difficulties and were shutting down. LucidRisk then filed suit in the Connecticut Superior Court against "East Avenue Capital Partners Management Company, LLC d/b/a East Avenue Management," a Delaware LLC. The federal action was filed in this Court in November, 2008, and the complaint alleges that Gerhard and Ogden submitted unaudited, intentionally misleading and inaccurate financial statements for East Avenue during the state court litigation, intentionally delaying the state court action, and violated a confidentiality agreement which Gerhard signed during the course of the state court litigation.

LucidRisk also alleges here that Ogden failed to adequately indicate on the contract that he was signing on behalf of a specific principal (because "East Avenue Capital Partners Management Company, LLC" is the actual name of East Avenue— not "East Avenue Capital Mgmnt," as appears on the contract), and alleges that there are several related entities with names closely resembling "East Avenue Capital Management." LucidRisk argues that because the identity of the principal is unclear, Ogden personally obligated himself under the contract and consented to jurisdiction in Connecticut.

The defendants maintain that they were not, individually, parties to the contract, and thus this federal action should be dismissed. They argue that Ogden's signature as an officer of East Avenue was clearly an act in his representative, not individual, capacity, and that the identity of the principal, East Avenue, is clear because there is only one entity using the "East Avenue" name that manages hedge funds and has the word "Management" in the title—the other similarly-named entities are the individual hedge funds managed by East Avenue. The defendants have moved to dismiss based on lack of personal jurisdiction and failure to state a claim.

II. Legal Standards

A. Rule 12(b)(2) Motions to Dismiss

On a Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction, the plaintiff has the burden of showing that the court has jurisdiction over the defendant. Metro. Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 566 (2d Cir.1996). When the parties have conducted jurisdictional discovery but no evidentiary hearing has been held, "the plaintiff's prima facie showing, necessary to defeat a jurisdiction testing motion, must include an averment of facts that, if credited by [the ultimate trier of fact], would suffice to establish jurisdiction over the defendant." Id. at 567 (citing Ball v. Metallurgie Hoboken-Overpelt, S.A., 902 F.2d 194, 197 (2d Cir.), cert. den., 498 U.S. 854, 111 S.Ct. 150, 112 L.Ed.2d 116 (1990)).

A plaintiff can make this showing through his "own affidavits and supporting materials[,]" Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 904 (2d Cir.1981), containing "an averment of facts that, if credited ... would suffice to establish jurisdiction over the defendant." Metro. Life Ins., 84 F.3d at 567. All pleadings, affidavits, and allegations are construed "in the light most favorable to the plaintiff and doubts are resolved in the plaintiff's favor." Whitaker v. American Telecasting, Inc., 261 F.3d 196, 208 (2d Cir.2001). When a motion to dismiss is based on pleadings and affidavits, dismissal is appropriate only if the submissions, when viewed in the light most favorable to the plaintiff, fail to make a prima facie showing of personal jurisdiction over the defendants. See DiStefano v. Carozzi N. Am., Inc., 286 F.3d 81, 84 (2d Cir.2001).

In assessing whether personal jurisdiction is authorized in a diversity case, the court must conduct a two-part inquiry. First, the court must look to the statutes of the forum state and determine whether the plaintiff has shown that Connecticut law would confer upon its courts the jurisdiction to reach the defendant, for example under the long-arm statute. If the exercise of jurisdiction is appropriate under a state statute, the court must decide whether such exercise comports with the requisites of due process. Metro. Life Ins., 84 F.3d at 567; see also Whitaker v. Amer. Telecasting, Inc., 261 F.3d 196, 208 (2d Cir.2001); Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 305 F.3d 120, 124 (2d Cir.2002).

B. Connecticut's Long-Arm Statute, Conn. Gen.Stat. § 52-59b(a)

This Court must first look to Connecticut's long-arm statute, Conn. Gen.Stat. § 52-59b(a), to determine whether Connecticut law confers any basis for exercising jurisdiction over these defendants. The long-arm statute provides that

a court may exercise personal jurisdiction over any nonresident individual ... who in person or through an agent ...

(1) Transacts any business within the state;

(2) commits a tortious act within the state ...

(3) commits a tortious act outside the state causing injury to person or property within the state ... if such person or agent (A) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state, or (B) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce....

Conn. Gen.Stat. § 52-59b(a). It is the first prong of the long-arm statute, which extends jurisdiction over one who "transacts any business" within Connecticut, on which the plaintiff relies.

1. "Transacts Any Business" (Section 52-59b(a)(1))

The term "transacts any business" in section (a)(1) embraces a "single purposeful business transaction" within the state. Zartolas v. Nisenfeld, 184 Conn. 471, 440 A.2d 179 (Conn.1981). A nonresident individual who has not entered the state physically nevertheless may be subject to jurisdiction under § 52-59b(a)(1) if that individual has "invoked the benefits and protection of Connecticut's laws" by virtue of his or her "purposeful Connecticut related activity...." Id. at 475, 440 A.2d 179.

The term "transacts business" is "not broadly interpreted in Connecticut." Goudis v. Am. Currency Trading Corp., 233 F.Supp.2d 330, 334 (D.Conn. 2002). For example, the negotiation of contracts, standing alone, does not constitute "transacting business" in Connecticut. Id. Similarly, the transmission of communications between an out-of-state defendant and a plaintiff within the jurisdiction does not, by itself, constitute the transaction of business in a forum state. Bross Utils. Svc. Corp. v. Aboubshait, 489 F.Supp. 1366, 1371-72 (D.Conn.1980); see also Greene v. Sha-Na-Na, 637 F.Supp. 591, 596 (D.Conn.1986) (nonresident's telephone call, telegram and letter to Connecticut plaintiff did not constitute transaction of business within the meaning of § 52-59b(a)(1)).

C. Consent to Personal Jurisdiction

In addition to arguing that the defendants transacted business in Connecticut under the Connecticut long-arm statute, the plaintiff also argues that the defendants voluntarily consented to personal jurisdiction in Connecticut by virtue of the choice of law and choice of forum provision of the contract.

"Unlike subject matter jurisdiction ... personal jurisdiction may be created through consent or waiver." United States Trust Co. v. Bohart, 197 Conn. 34, 39, 495 A.2d 1034 (1985). Connecticut courts continue to recognize that a party to a contract may voluntarily submit to the exercise of personal jurisdiction over it in Connecticut by agreeing to a contract's forum selection provisions. See, e.g., HCR Pool III Funding Corp. v. PARCC Healthcare, Inc., No. PJRCV020461562S, 2002 WL 1455775 at *2 (Conn.Super.Ct. May 28, 2002) (denying, based on language of forum selection clause, a motion to dismiss, and stating that the defendants "cannot ... assert that the court lacks personal jurisdiction over them, or, in the alternative, that they lack sufficient minimum contacts to satisfy due process requirements."), Call Center Solutions, Inc. v. Malson, No. CV000339425S, 2001 WL 590035 at *1 (Co...