García v. Simple Factory

• Decision Date: 20 January 2015
• Docket Number: Civil No. 13–1056 SEC.
• Citation: 79 F.Supp.3d 385
• Parties: Carlos GARCÍA, Plaintiff, v. SIMPLE FACTORY, et al., Defendants.
• Court: U.S. District Court — District of Puerto Rico

79 F.Supp.3d 385

Carlos GARCÍA, Plaintiff
v.
SIMPLE FACTORY, et al., Defendants.

Civil No. 13–1056 SEC.

United States District Court, D. Puerto Rico.

Signed Jan. 20, 2015.

79 F.Supp.3d 386

Elizabeth Del Pilar Villagrasa–Flores, Ferraiuoli, LLC, San Juan, PR, Jenyfer Garcia–Soto, Sepulvado & Maldonado, PSC, Hato Rey, PR, for Plaintiff.

Harold D. Vicente–Colon, Vicente & Cuebas, San Juan, PR, Diego J. Loinaz–Martin, Loinaz Martin PSC, Guaynabo, PR, for Defendants.

OPINION AND ORDER

SALVADOR E. CASELLAS, Senior District Judge.

Before the Court are the defendants' renewed motions to dismiss based on a forum-selection clause, Dockets 46 & 47, and the plaintiff's opposition thereto. Docket # 49. Also pending is the plaintiff's motion for reconsideration of the order dismissing, for want of service of process, his claims against codefendant José Raúl Rodríguez. Docket # 45. After reviewing the filings and the applicable law, the plaintiff's motion for reconsideration is DENIED, and the defendants' motions are GRANTED. But their request to dismiss the securities fraud claim is HELD IN ABEYANCE.

Factual and Procedural Background

Carlos García, a Florida resident, brings this diversity action under the Puerto Rico General Corporations Act, P.R. Laws Ann. tit. 14, §§ 3501–4066, seeking “to enforce his rights as a shareholder,” Docket # 1, ¶ 11, of codefendant Simple Factory, a closely held Puerto Rican corporation and shareholder company of Social Media, LLC, which operates an online commerce marketplace (Gustazos) that connects merchants to consumers by offering discounted goods and services. Id. at ¶¶ 6, 14–16. Invoking federal-question jurisdiction, García also asserts violations of section 10(b) of the Securities and Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b–5 under that Act, 17 C.F.R. § 240.10b–5, against the “President and Director of Simple Factory,” Jorge E. Rodríguez

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(Rodríguez), and two of its officers, Margarita Hopgood, and José Raúl Rodríguez, all of whom are Puerto Rico residents.

Because the defendants seek to enforce a forum-selection clause, the analysis is procedurally controlled by Federal Rule of Civil Procedure 12(b)(6), Claudio–De León v. Sistema Universitario Ana G. Méndez, 775 F.3d 41, 45–46 (1st Cir.2014),¹ and the relevant facts are therefore drawn from the complaint and the document therein “incorporated by reference.” Rivera–Díaz v. Humana Ins. of P.R., Inc., 748 F.3d 387, 388 (1st Cir.2014).

The parties executed a Memorandum of Understanding (MOU), on October 20, 2011, whereby all agreed that, subject “to the execution of certain stock transfer agreements and joinder to stockholders agreements,” Docket # 46–1, p. 1, García would be given a 17% stake in Simple Factory's common voting stock. Id.; Docket # 1–9, p. 1 (“Pursuant to the MOU, Mr. García was granted a 17% equity stake in the Corporation.”) (emphasis added). As particularly relevant to this case, the MOU contains the following forum-selection clause: “the Court of First Instance of Puerto Rico, Superior Court of San Juan, shall be the exclusive venue for disputes pertaining to this MOU.” Docket # 46–1, p. 4.

According to the complaint, the defendants henceforth treated García as a shareholder: Simple Factory, for instance, made two dividend payments to García for the first two quarters of 2012. Docket # 1, ¶ 32. Then, on October 29, 2012, Rodríguez sent an email explaining that, although Simple Factory had been considering selling its Gustazos shares, García was “not interested” in selling his. Id. at ¶¶ 23–24. During that time frame, Rodríguez, supposedly in cahoots with the other individual defendants, allegedly told Garcia that Gustazos had offered to pay $40 for each of Gustazos's shares held by Simple Factory, but in December, 2012, Garcia allegedly discovered that Gustazos had instead offered to pay $50 a share. Id. at ¶¶ 35–37.

Rodriguez sent another email on November 6, 2012, in which he told Simple Factory's shareholders, “including Garcia, that they would become shareholders in Gustazos in their personal and official capacities.” Id. at ¶ 25. That same day, the complaint alleges, Rodriguez said that “he would be holding a conference call with Gustazos'[s] legal counsel regarding the preparation of the respective documentation and the formal issuance of Gustazos'[s] stock to Simple Factory's shareholders, including Garcia.” Id.

But, according to the complaint, “the process to transfer Simple Factory's stock in Gustazos” never materialized, at least concerning Garcia. Id. at ¶ 27. Things unraveled, and on December 18, 2012, Simple Factory's counsel informed Garcia that, although the MOU had “summarized” the “possibility” of including him as a shareholder, that was no longer the case. Id. at ¶ 29. Because of Garcia's alleged noncompliance with certain “considerations and actions,” id., he explained, Simple Factory

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notified Garcia that he was not a shareholder. Id. ¶ 30. Assuming the MOU had “any binding effect,” the explanation went, “the corporate documents mentioned in the MOU” were never executed. Id. (citation and internal quotation marks omitted).

This suit followed shortly thereafter. Docket # 1. Garcia's complaint contains six counts, five of which are grounded on Puerto Rico law: (1) a declaratory-judgment request, 28 U.S.C. § 2201(a), “recognizing” Garcia's alleged 17% equity stake in Simple Factory, and a concomitant request to have the defendants transfer “8,245 shares of Gustazos” to Garcia, and issue “Garcia's stock certificates,” Docket # 1, ¶¶ 40, 40–47; (2) breach of fiduciary duty, P.R. Laws Ann. tit. 14, § 3563, concerning the individual defendants' denial of Garcia's alleged stake in Simple Factory, and for “failing to maximize shareholder value in the corporation,” Docket # 1, ¶¶ 54–56; (3) “disgorgement of dividend distributions,” and a request to prohibit the individual defendants from “disgorg[ing] any illegal dividend payments ... after June 2012[,] which excluded García's pro-rata share,” id. at ¶¶ 57–59; (4) breach of contract, P.R. Laws Ann. tit. 31, §§ 2994, 3018, for the defendants' noncompliance with Simple Factory's alleged “binding corporate resolution” distributing “its equity interest in Gustazos to its shareholders,” Docket # 1, ¶ 60; and (5) damages, attorney's fees, and expenses concerning the alleged breach of contract. Id. at ¶ 62.

Last, but certainly not least, García musters a federal-law claim under section 10(b) of the Securities and Exchange Act, 15 U.S.C. § 78j, and Rule 10b–5 promulgated thereunder, 17 C.F.R. § 240.10b–5, which furnishes a private right of action to sue for damages suffered for making false statements or omissions in connection with the purchase or sale of any security. The nub of his securities fraud claim is that the individual defendants “intended to deceive García into believing Gustazos had made an offer lower than the actual offer communicated by Gustazos'[s] management,” Docket # 1, ¶ 49, claiming he relied on that misrepresentation “to reject” Gustazos's offer to buy his Simple Factory shares Id. at ¶ 51.

After several procedural nuances, the defendants (except for José Raúl Rodríguez) moved, incorrectly, under Federal Rule of Civil Procedure 12(b)(3) to enforce the MOU's forum-selection clause, contending that, because García's claims revolved around the purported breach of the MOU, they fell under the scope of its forum-selection clause. Dockets 19, 20. The Court denied those motions without prejudice, holding that they “improperly conflate [d] questions of venue with the enforcement of forum-selection clauses,” Docket # 31, p. 1, and criticizing their lack of developed analysis. Id. at 2.

In due course, Simple Factory, Rodríguez, and Hopgood, renewed their request to enforce the MOU's forum-selection clause. Dockets 46, 47. García timely opposed, mounting two contentions: first, he says that because this court has exclusive jurisdiction over his federal-law claim, it cannot be brought in local court, Docket # 49, p. 3; second, he maintains that none of the local-law claims is “based on the provisions of the MOU.” Id. at 2.

Meanwhile, on February 26, 2014, García was directed to show cause why his claims against codefendant José Raúl Rodríguez should not be dismissed for want of service of process, Docket # 34, as the service deadline had expired on May 31, 2013, Docket # 1, yet he never moved for an extension of time to effect service. He timely showed cause, positing that, although he attempted to personally serve this codefendant, “no further efforts were

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made” after the other codefendants moved to enforce the forum-selection clause. Docket # 37, p. 6. Finding those reasons “unpersuasive,” Docket # 40, the Court ruled that García had failed to show good cause, and thus entered partial judgment dismissing those claims without prejudice. Docket # 41. García now moves for reconsideration. Docket # 45.

Standard of Review

The Supreme Court has made clear that forum-selection clauses “are prima facie valid,” M/S Bremen v. Zapata Off–Shore Co., 407 U.S. 1, 10, 92 S.Ct. 1907, 32 L.Ed.2d 513...