Bally Gaming, Inc. v. Caldwell, Civil Action No. 3:13–cv–1084(DCB)(MTP).

• Decision Date: 28 March 2014
• Docket Number: Civil Action No. 3:13–cv–1084(DCB)(MTP).
• Citation: 12 F.Supp.3d 907
• Parties: BALLY GAMING, INC., Plaintiff v. Michael CALDWELL, Defendant.
• Court: U.S. District Court — Southern District of Mississippi

12 F.Supp.3d 907

BALLY GAMING, INC., Plaintiff

v.Michael CALDWELL, Defendant.

Civil Action No. 3:13–cv–1084(DCB)(MTP).

United States District Court,

S.D. Mississippi,

Northern Division.

Signed March 28, 2014.

Donald Alan Windham, Jr., Benjamin Bryant, William C. Reeves, Balch & Bingham, LLP, Jackson, MS, for Plaintiff.

Jason S. McCarter, Southerland, Asbill & Brennan, LLP, Samuel Justin Casey, Sutherland, Asbill & Brennan, LLP, Atlanta, GA, Clint D. Vanderver, Wells, Marble & Hurst, PLLC, Ridgeland, MS, Philip A. Gunn, Wells, Marble & Hurst, Jackson, MS, for Defendant.

MEMORANDUM OPINION AND ORDER

DAVID BRAMLETTE, District Judge.

This cause is before the Court on the defendant Michael Caldwell (“Caldwell”)'s motion to dismiss (docket entry 5), and motion to strike plaintiff's punitive damages claim (docket entry 7). Having carefully considered the motions and the plaintiff Bally Gaming, Inc. (“Bally”)'s responses, the memoranda of the parties and the applicable law, and being fully advised in the premises, the Court finds as follows:

Bally, a Nevada corporation, brought this action against Caldwell, an officer of Delta Investments & Development LLC (“Delta”), a bankrupt Nevada corporation. Caldwell is a resident citizen of the State of South Carolina. Caldwell moves to dismiss pursuant to Federal Rules of Civil Procedure 9(b), 12(b)(1), 12(b)(2), and 12(b)(6) on grounds of lack of subject matter jurisdiction, lack of personal jurisdiction, and failure to state a claim for which relief can be granted.

Delta was the owner and operator of the Grand Station Casino (“Casino”), which it operated on a vessel located in Vicksburg, Mississippi, known as the “Star of Vicksburg” (“Vessel”), and the Grand Station Hotel (“Hotel”). It acquired the Casino, Vessel and Hotel in December of 2010 for a purchase price of $3.25 million. Delta then sold its interest in the Hotel in March of 2011 to Great Southern Investment Group, Inc., for $2.1 million. Delta and Bally subsequently entered discussions regarding the use of Bally games in the Casino. In May of 2011, Bally made a $3 million loan to Delta to be used for renovation and operation of the Casino, and Delta executed certain loan documents including a Secured Promissory Note, a Loan Agreement, and a Preferred Ship Mortgage encumbering the Vessel. Delta subsequently defaulted on the loan. In April of 2012, Delta filed for bankruptcy in the Southern District of Mississippi. The proceeding has been converted to one under Chapter 7 of the Bankruptcy Code and remains pending as Case Number 12–01160–NPO.

Bally brings the present action against Caldwell for fraud, negligent misrepresentation, and director or officer liability. Caldwell asserts that he has not purposely availed himself of the jurisdiction of this Court and requests that he be dismissed for lack of personal jurisdiction. Neither plaintiff nor defendant has requested an evidentiary hearing. When a district court rules on a motion to dismiss for lack of personal jurisdiction without an evidentiary hearing, the plaintiff must only make a prima facie case that jurisdiction is proper. Quick Techs., Inc. v. Sage Group PLC, 313 F.3d 338, 343 (5th Cir.2002). In determining whether a prima facie case for personal jurisdiction exists, a court must accept the uncontroverted allegations in the plaintiff's complaint as true, and all factual conflicts contained in the parties' affidavits must be resolved in favor of the plaintiff. Bullion v. Gillespie, 895 F.2d 213, 217 (5th Cir.1990).

A federal court sitting in diversity may exercise personal jurisdiction only to the extent allowed a state court under applicable state law. Allred v. Moore & Peterson, 117 F.3d 278, 281 (5th Cir.1997). “A state court or a federal court sitting in diversity may assert jurisdiction if: (1) the state's long-arm statute applies, as interpreted by the state's courts; and (2) if due process is satisfied under the fourteenth amendment to the United States Constitution.” Id. at 281 (quoting Cycles, Ltd. v. W.J. Digby, Inc., 889 F.2d 612, 616 (5th Cir.1989)). However, if Mississippi law does not provide for the assertion of personal jurisdiction, the court need not considerthe due process issue. Cycles, 889 F.2d at 616.

Mississippi's long-arm statute provides:

Any nonresident person ... who shall make a contract with a resident of this state to be performed in whole or in part by any party in this state, or who shall commit a tort in whole or in part in this state against a resident or nonresident of this state, or who shall do any business or perform any character of work or service in this state, shall by such act or acts be deemed to be doing business in Mississippi and shall thereby be subjected to the jurisdiction of the courts of this state.

Miss.Code Ann. § 13–3–57. Thus, a court may exercise jurisdiction over a defendant if (1) the defendant entered into a contract with the plaintiff to be performed in whole or in part in Mississippi (the contract prong); (2) the defendant committed a tort, in whole or in part, against a plaintiff in Mississippi (the tort prong); or (3) the defendant was “doing business” in Mississippi (the “doing business” prong). See Roxco, Ltd. v. Harris Specialty Chem., Inc., 133 F.Supp.2d 911, 915 (S.D.Miss.2000).

Although Bally is a Nevada corporation, it is qualified to do business in Mississippi; therefore, it is a “resident” within the meaning of Mississippi's long-arm statute and is entitled to utilize its provisions. Breeland v. Hide–A–Way Lake, Inc., 585 F.2d 716, 720 (5th Cir.1978) (citing C.H. Leavell & Co. v. Doster, 211 So.2d 813 (Miss.1968)). Bally asserts that Caldwell is amenable to the personal jurisdiction of Mississippi courts under both the tort prong and the “doing business” prong. Plaintiff's Brief, p. 12.

The Mississippi Supreme Court has explained that a nonresident defendant may be “doing business” in Mississippi if “he did various acts here for the purpose of realizing a pecuniary benefit or otherwise accomplishing an object.” McDaniel v. Ritter, 556 So.2d 303, 309 (Miss.1989) (citing Restatement (Second) of Conflict of Laws § 35, Comment a (1971)). The State Supreme Court has also clarified that “[t]he long arm statute requires no direct nexus to the non-resident's business done here, only that the claim be incident thereto. The statute thus requires far less than that the liability generating conduct have occurred in Mississippi.” Id.

Bally alleges that

... in addition to actually traveling to Mississippi to meet with Bally regarding the loan and casino ..., Mr. Caldwell signed an application for Delta, the LLC in which he owned a majority stake, to obtain a business license in Mississippi, making Delta a Mississippi resident for long-arm purposes.... He appeared personally before the Mississippi Gaming Commission to request permission for Delta to operate a casino in Mississippi.... Because he was associated with a Mississippi gaming licensee, Mr. Caldwell was required to obtain a personal finding of suitability from the [S]tate Gaming Commission.... He did so on March 24, 2011, appearing in Mississippi and pledging at a Commission meeting to “comply with all federal and state laws, including the laws of Mississippi and particularly the Mississippi Gaming Control Act”; “comply with all the policies, rules and regulations adopted by the Mississippi Gaming Commission”; “adjudicate all legal proceedings (both state and federal) relative to said license in the courts located in the state of Mississippi” and “file an annual report as required by Mississippi Gaming Commission Regulation II.A.3.”Plaintiff's Brief, pp. 13–14 (citing Exhibit E thereto at p. 11).

As for the tort prong, the Mississippi Supreme Court has noted that this provision “contains no requirement that the part of the tort which causes the injury be committed in Mississippi.” Sorrells v. R & R Custom Coach Works, Inc., 636 So.2d 668, 672 (Miss.1994). “[P]ersonal jurisdiction over a defendant who allegedly committed a tort is proper if any of the elements of the tort—or any part of an element—takes place in Mississippi.” Jobe v. ATR Marketing, Inc., 87 F.3d 751, 753 (5th Cir.1996).

Bally alleges that Caldwell committed the intentional tort of fraudulent representation, which requires proof of multiple elements—“(1) a representation, (2) its falsity, (3) its materiality, (4) the speaker's knowledge of its falsity or ignorance of its truth, (5) his intent that it should be acted on by the hearer and in the manner reasonably contemplated, (6) the hearer's ignorance of its falsity, (7) his reliance on its truth, (8) his right to rely thereon, and (9) his consequent and proximate injury.” O.W.O. Invs., Inc. v. Stone Inv. Co., 32 So.3d 439, 446 (Miss.2010). As Jobe recognizes, the occurrence in Mississippi of any of these elements, or any part of an element, is sufficient to bring the non-resident defendant within the ambit of the long-arm statute. Jobe, 87 F.3d at 753.

Bally alleges:

Delta operates a casino located in Mississippi and is registered to do business in the State of Mississippi. Although Bally has refuted Caldwell's assertion that he was never personally present in the State of Mississippi (Adam Whitehurst's Declaration, attached as Exhibit A, establishes for purposes of this motion that Caldwell made direct representations to representatives of Bally regarding the purported use of the loan proceeds in Mississippi), Caldwell's other actions on behalf of Delta nevertheless occurred in this state, the state where Delta agreed to litigate all disputes, even if he was not physically in the state. Here, activity undertaken by Delta at Mr. Caldwell's direction in Mississippi—its purchase, ongoing operation, and disposition of the assets of a casino in Vicksburg—are integral to a number of the elements of a fraud claim, including reliance and injury.... These actions took place in Mississippi and form “part of an...