Atkins v. Calypso Sys., Inc.
Decision Date | 08 October 2015 |
Docket Number | No. CV-14-02706-PHX-NVW,CV-14-02706-PHX-NVW |
Parties | Barry M. Atkins, Plaintiff, v. Calypso Systems, Inc., et al., Defendants. |
Court | U.S. District Court — District of Arizona |
Before the Court is Defendants' Motion to Dismiss First Amended Complaint (Doc. 37) and the parties' accompanying briefs. For the reasons that follow, the Motion will be granted in part and denied in part.
Plaintiff Barry Atkins is an Arizona resident. Defendant Calypso Systems, Inc. ("Calypso") is a California corporation whose principal place of business is in California. Defendant Eden Kim is Calypso's founder and CEO, as well as a California resident.
Atkins's First Amended Complaint (Doc. 17) alleges the following. In 2007, Kim emailed Calypso's financial information and sales forecasts to a third party in an attempt to raise capital. (Id. at ¶¶ 16-17.) That email was forwarded to Atkins. (Id. at ¶ 18.) Kim then telephoned Atkins in Arizona and, knowing Atkins was an Arizona resident, emailed Atkins asking for a loan. (Id. at ¶¶ 19-22.) In the following weeks, Kim and Atkins exchanged drafts of a loan agreement via email. (Id. at ¶¶ 23-24.) EventuallyKim signed and emailed to Atkins a final draft, entitled "Memorandum of Understanding," which Atkins signed. (Id. at ¶¶ 29-30, Ex. H.)
The agreement, by its terms, affirmed the parties' "inten[t] to enter into a series of agreements and transactions with the intent to provide for the corporate funding of Calypso." (Id. at Ex. H.) Atkins's company, Adventure Ventures, LLC ("Adventure"), agreed to lend Calypso $125,000 at 6% annual interest, which Calypso agreed to repay by December 15, 2007. (Id.) The agreement also outlined subsequent tranches that Adventure would pay Calypso upon the parties' achievement of certain benchmarks, and it included two years of Calypso's revenue forecasts. (Id.) Adventure agreed to use "commercial efforts to raise additional capital to meet [Calypso's] ongoing requirements" and to exert its "best efforts to achieve the terms and intent of this [agreement] and subsequent agreements." (Id.) The agreement specified that Calypso was in California, that Adventure was in Arizona, and that the agreement itself "shall be governed under the laws of the state of California." (Id.)
Calypso did not repay the loan by December 15, 2007. (Id. at ¶ 41.) Kim then assured Atkins the loan would be repaid and asked him to pay Calypso's outstanding rent of approximately $12,000. (Id. at ¶¶ 41-42.) Atkins agreed to do so. (Id. at ¶ 43.) Atkins then emailed Kim stating he had decided not to invest further in Calypso. (Id. at ¶ 44.) Kim made further promises that the loan would be repaid. (Id. at ¶ 45.) The parties then entered into a second agreement entitled "Bridge Loan Extension Agreement." (Id. at ¶ 46, Ex. Q.)
The second agreement purported to be an "extension of term of," an "amendment" to, and "pursuant to the terms of the previous agreement. (Id. at Ex. Q.) The parties agreed to extend the repayment deadline for all outstanding principal ($137,000) and interest to December 17, 2008, and to convert such principal and interest into shares of Calypso common stock.1 (Id.)
Calypso did not repay the loan by December 17, 2008. (Id. at ¶ 48.) Throughout the ensuing years, Atkins regularly demanded repayment, maintained contact with Kim, and monitored Calypso's financial statements. (Id. at ¶¶ 49, 54.) Kim continually assured him that the loan would be repaid once Calypso's financial condition improved and that Calypso would make an initial public offering upon reaching certain financial benchmarks. (Id. at ¶¶ 50-51.) In reliance on these assurances, Atkins delayed bringing suit. (Id. at ¶ 55.) After a series of emails between Kim and Atkins in 2014, culminating in an August 29 email titled "Settlement Proposal," Atkins concluded Kim had been stringing him along with false promises in order to stall legal action. (Id. at ¶¶ 56-65.) Adventure then assigned to Atkins its rights in the loan and security interests with Calypso. (Id. at ¶ 66.) Atkins filed suit on December 17, 2014. (Doc. 1.)
The Court dismissed Atkins's initial complaint for insufficient service of process. (Doc. 16.) Atkins then filed a First Amended Complaint alleging breach of contract, breach of covenant of good faith and fair dealing, fraud, negligent misrepresentation, unjust enrichment, and conversion. (Doc. 17.) Defendants move to dismiss for lack of personal jurisdiction, failure to state a claim within the governing statutes of limitations, and failure to plead fraud with sufficient particularity. (Doc. 37.)
Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004) (citations and alterations omitted).
Id. at 800-01 (citations omitted); see also A. Uberti & C. v. Leonardo, 181 Ariz. 565, 569, 892 P.2d 1354, 1358 (1995) .
Personal jurisdiction can be either specific or general. Walden v. Fiore, 134 S. Ct. 1115, 1121 n.6 (2014) (citations and alterations omitted).
Schwarzenegger, 374 F.3d at 801 (citations omitted).
Atkins has not shown general jurisdiction. The First Amended Complaint alleges that Calypso is a California corporation and that Kim is a California citizen. (Doc. 17 at¶¶ 2-3.) There is no allegation that Calypso has any offices in Arizona, that it sends employees to Arizona to transact business, or that it regularly enters into contracts with Arizona residents. There is no allegation that Kim has ever been to Arizona or that he regularly transacts business with Arizona residents. Plaintiff therefore has not shown "continuous and systematic" contacts between Defendants and Arizona that "approximate physical presence" in the state.
Atkins asks for an opportunity to conduct discovery in order to ascertain whether general jurisdiction exists. But Defendants have challenged only the formal sufficiency of his jurisdictional allegations, not their veracity. (Doc. 37 at 2-6.) As a result, discovery would not aid Atkins. La Reunion Francaise SA v. Barnes, 247 F.3d 1022, 1026 n.2 (9th Cir. 2001). Therefore discovery on this matter will not be permitted.
The Ninth Circuit employs "a three-part test to assess whether a defendant has sufficient contacts with the forum state to be subject to specific personal jurisdiction:
The plaintiff has the burden of proving the first two prongs. If he does so, the burden shifts to the defendant to set forth a compelling case that the exercise of jurisdiction would not be reasonable." Picot v. Weston, 780 F.3d 1206, 1211-12 (9th Cir. 2015) (citations omitted).
Id. at 1212 (citations and alterations omitted).
In either instance, the proper focus is on "the relationship among the defendant,...
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