Bracken v. MH Pillars Inc.
| Decision Date | 29 December 2016 |
| Docket Number | No. 15-CV-7302 (RA),15-CV-7302 (RA) |
| Parties | ANDREW BRACKEN, Plaintiff, v. MH PILLARS INC. d/b/a PAYZA, OBOPAY, INC. d/b/a OBOPAY, and ULTRALIGHT FS, INC. a/k/a OBOPAY, INC., Defendants. |
| Court | U.S. District Court — Southern District of New York |
Plaintiff Andrew Bracken brings this diversity action seeking damages for Defendants' failure to release funds to which he claims he is entitled. Plaintiff was a customer of Defendant MH Pillars Inc. ("Payza"), a provider of payment services that functions similarly to PayPal. Defendants Obopay, Inc. and Ultralight FS, Inc. (collectively, "Obopay" or the "Obopay Defendants") are banks or money transfer services that held and distributed funds for Payza's users. Plaintiff brings claims for fraud, negligent misrepresentation, tortious interference with contract, breach of contract, promissory estoppel, unjust enrichment, conversion, and a violation of Section 349 of the New York General Business Law. Before the Court is Obopay's motion to dismiss the First Amended Complaint ("FAC") pursuant to Federal Rule of Civil Procedure 12(b)(1) and (2). Obopay argues that it is not subject to personal jurisdiction in New York and that the Court lacks subject-matter jurisdiction over the case. For the reasons that follow, Obopay's motion is denied without prejudice. While Plaintiff has failed to make a prima facie showing of personal jurisdiction over Obopay and the FAC's diversity allegations are deficient, the Court will allow a limited period of jurisdictional discovery. Obopay is free to renew its motion once jurisdictional discovery has been completed.
Plaintiff is a Colorado citizen who owned and managed a now-dissolved company called Bidxcel, LLC ("Bidxcel"). See FAC ¶ 2.1 In or around the fall of 2012, Plaintiff, through Bidxcel, established an account with Payza to allow Bidxcel's customers to purchase Bidxcel's products online. Id. ¶ 7.2 The account presently has a balance of $38,871.30. Id. ¶ 8. According to the FAC, however, the funds in the account are frozen due to a pending investigation by the U.S. Department of Justice. See id. ¶ 10. Plaintiff and Bidxcel "made clear to Defendants that the money was required for Plaintiff and/or Bidxcel to remain in business, and subsequently, in order to dissolve and wind down Bidxcel's affairs," id. ¶ 9, but Defendants have nevertheless refused to release the funds in Bidxcel's account to Plaintiff, id. ¶ 19.
Because Payza apparently lacked the necessary licenses to provide payment services on its own, it relied on Obopay during the relevant period "to distribute [Payza's] funds throughout the United States." Id. ¶ 11. In March 2012, Payza entered into an agreement with Obopay whereby Obopay agreed to appoint Payza as its "'authorized delegate' or similar representative under applicable money transmitter, sale of check, bill payment or similar laws in those states in which Obopay maintains Licenses." Robinson Decl. Ex. 1 ("Agent Agreement") § 2.1.3 The Agent Agreement "provided Payza with the required licensing to operate and provide services to its customers . . . in the United States." FAC ¶ 11. According to the FAC, Obopay "is or was theprimary bank" holding Payza user funds, including the funds at issue in this action. Id. ¶ 4. When Obopay encountered financial difficulties in late 2012, Payza invested in Obopay to ensure that Obopay "continued to provide the necessary licenses for Payza's US operations." Id. ¶¶ 12-13.
Obopay eventually terminated its agreement with Payza. See id. ¶ 18. Plaintiff alleges that the agreement between Payza and Obopay "was never in compliance with U.S. regulations" and that "Obopay was an illegitimate provider of the banking services Payza sought to perform"—facts that Payza "knew or should have known." Id. ¶¶ 14-16. Plaintiff appears to suggest that the freezing of Bidxcel's funds was the result this non-compliance, although the causal relationship is not clearly explained in the FAC. At least as of the date of the FAC, Payza and Obopay purportedly remained under investigation by the Department of Justice. Id. ¶ 21. According to the FAC, Obopay has been sanctioned by Kentucky state regulators, and Payza has been "successfully sued" in Canada in connection with claims similar to those brought here by Plaintiff. Id. ¶¶ 16, 20.
Plaintiff does not allege that the Obopay Defendants are citizens of New York. In fact, the FAC states that the Obopay Defendants have their primary place of business in California, id. ¶ 4, and makes no allegations as to their state of incorporation.4 According to a former officer of Obopay, the Obopay Defendants "have no direct contacts with New York"; no "offices, employees, agents, inventory, bank accounts or property in New York"; no "New York telephone number or mailing address in New York"; and "do not solicit business in New York." Robinson Decl. ¶¶ 6-9. Obopay, Inc. was licensed to do business in New York at one time, but only until February 2012. Id. ¶ 10. Furthermore, "Obopay never had a money transmission license or similar license to operate in New York and never authorized Payza to act in New York." Id. ¶ 5; see also Agent Agreement App. 1 ().
According to the FAC, however, Obopay "transacts] business within the State of New York," and "any wrongdoing by Obopay occurred in New York through its relationship with Payza." FAC ¶ 5. The FAC alleges that Payza is a U.K. company with a "registered agent" in New York and that Payza is "located" in New York. Id. ¶¶ 3, 5; but see Agent Agreement Pmbl. ( that Payza is a New York corporation whose principal place of business is in Montréal). The Agent Agreement between Obopay and Payza provides that "notices, demands and other communications" made pursuant to the Agreement must be delivered to Payza at an address in New York, Agent Agreement § 11.10, but it contains a California choice of law provision, see id. § 11.8.
"A plaintiff opposing a motion to dismiss under Rule 12(b)(2) for lack of personal jurisdiction has the burden of establishing that the court has jurisdiction over the defendant." BHC Interim Funding, LP v. Bracewell & Patterson, LLP, No. 02-CV-4695 (LTS), 2003 WL 21467544, at *1 (S.D.N.Y. June 25, 2003) (citing Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 171 F.3d 779, 784 (2d Cir. 1999)). "Prior to discovery, a plaintiff challenged by a jurisdiction testing motion may defeat the motion by pleading in good faith, legally sufficient allegations of jurisdiction." Dorchester Fin. Sec., 722 F.3d at 84 (quotation marks omitted). Pleadings and affidavits should be construed in the light most favorable to the plaintiff, see id. at 85, but "conclusory non-fact-specific jurisdictional allegations or a legal conclusion couched as a factual allegation will not establish a prima facie showing of jurisdiction," SPV OSUS Ltd. v. UBS AG, 114 F. Supp. 3d 161, 167 (S.D.N.Y. 2015) (quotation marks omitted). "In diversity cases, the issue of personal jurisdiction is governed by the law of the forum state . . . so long as the districtcourt's exercise of jurisdiction comports with the requirements of due process." D.H. Blair & Co. v. Gottdiener, 462 F.3d 95, 104 (2d Cir. 2006); see also Fed. R. Civ. P. 4(k)(1)(A).
Plaintiff asserts that the Obopay Defendants are subject to general jurisdiction in New York, but it is clear that exercising general jurisdiction over the Obopay Defendants based on the allegations in the FAC would violate due process. Under principles of due process, "a corporation may . . . be subject to general jurisdiction in a state only where its contacts are so 'continuous and systematic' . . . that it is 'essentially at home' in that state." Gucci Am., Inc. v. Weixing Li, 768 F.3d 122, 135 (2d Cir. 2014) (quoting Daimler AG v. Bauman, 134 S. Ct. 746, 761-62 (2014)). "Aside from 'an exceptional case' . . . a corporation is at home (and thus subject to general jurisdiction, consistent with due process) only in a state that is the company's formal place of incorporation or its principal place of business." Id. (quoting Daimler, 134 S. Ct. at 761 & n.19).
According to the FAC, the Obopay Defendants' principal place of business is California. See FAC ¶ 4. Plaintiff asserts in his brief that Obopay was incorporated in New York during the relevant time period, see Pl.'s Opp. at 3, but this is not alleged in the FAC. Plaintiff must thus demonstrate that this is the sort of exceptional case where a company is at home in a jurisdiction other than its formal place of incorporation or its principal place of business, see Gucci, 768 F.3d at 135, which he has not done. As discussed above, the FAC alleges that Obopay "transact[s] business within the State of New York" and that Obopay committed wrongdoing in New York "through its relationship with Payza." FAC ¶ 5. But these sorts of conclusory allegations cannot establish a prima facie showing of jurisdiction. See SPV OSUS, 114 F. Supp. 3d at 167. Moreover, they do not establish that Obopay is at home in New York. Transacting business in a state doesnot make a company at home there. See Daimler, 134 S. Ct. at 761 ().
The FAC also appears to assert that Obopay is subject to specific jurisdiction pursuant to N.Y. C.P.L.R. § 302, New York's long-arm statute. In his opposition to the motion, Plaintiff does not defend the assertion of specific jurisdiction in the FAC, requesting instead that the Court allow jurisdictional discovery so that the record can be more fully developed. See Pl.'s Opp. at 4-5. Plaintiff concedes that he "has no idea, outside of the [Agent Agreement], what specifically occurred in what jurisdiction." Id. at 5. The Court will...
To continue reading
Request your trial