Burris v. James W. Green & Fisherman's Corner, LLC
| Decision Date | 26 August 2016 |
| Docket Number | Case No. 3:12cv521-MCR-CJK |
| Parties | CHARLES BURRIS, MELODY CUGNON, and those others that are similarly situated, Plaintiffs, v. JAMES W. GREEN and FISHERMAN'S CORNER, LLC, et al., Defendants. |
| Court | U.S. District Court — Northern District of California |
This matter is before the court on defendant Victor Franck's Motion to Set Aside Clerk's Default and Motion to Dismiss Defendant Victor C. Franck from Third Amended Complaint for Lack of Personal Jurisdiction. (Doc. 296).1 Plaintiffs responded in opposition. (Doc. 299). Thereafter, the court permitted the parties to engage in discovery related to the court's jurisdiction over defendant Franck. (Doc. 306). Following the conclusion of discovery, both Franck and plaintiffs supplemented their respective arguments. (Docs. 309, 310).
The matter has been referred to the undersigned Magistrate Judge for report and recommendation pursuant to 28 U.S.C. § 636, Fed. R. Civ. P. 72, and N.D. Fla.Loc. R. 72.3. Upon careful consideration of the record, the parties' submissions, and the relevant law, the undersigned concludes defendant Franck's Motion to Set Aside Clerk's Default and Motion to Dismiss Defendant Victor C. Franck from Third Amended Complaint for Lack of Personal Jurisdiction should be granted because plaintiffs have failed to establish this court can exercise jurisdiction over Franck.
Plaintiffs initiated this case on October 31, 2012, by filing a three-count complaint against Fisherman's Corner, LLC (which operated Fisherman's Corner Restaurant) and its owner, James Green, alleging (1) failure to pay minimum wages under the Florida Minimum Wage Act ("FMW"), Fla. Stat. § 448.110; (2) retaliatory discharge; and (3) failure to pay overtime compensation under the Fair Labor Standards Act, 29 U.S.C. § 201, et. seq. ("FLSA"). (Doc. 1). As to the FMW claim, plaintiffs sought to certify a class of all "tipped employees" who were not paid the applicable minimum wage or tip credit at the restaurant. (Id., p. 7-9).
On June 6, 2014, plaintiffs filed the third amended complaint, the operative pleading in this action. (Doc. 141). In addition to the claims raised in the initial complaint, the third amended complaint added claims related to the allegedly fraudulent transfer of assets from Fisherman's Corner, LLC, to Fisherman's Corner Restaurant, LLC. (Id.). Victor Franck is identified as a defendant "both individually and as a managing member of Perdido Key Investments, LLC and as managing member of Fisherman's Corner Restaurant, LLC." (Id., p. 5). Counts five, six, seven, eight, and nine of the eleven-count complaint assert liability against Franck individually. Count five alleges Franck and the other five defendants fraudulently transferred assets from Fisherman's Corner, LLC, to Fisherman's Corner Restaurant, LLC. (Id., p. 28-29). Count six asserts successor liability against every defendant except Fisherman's Corner, LLC. (Id., p. 30-32). Counts seven, eight, and nine claim Franck conspired with various combinations of defendants to transfer assets from Fisherman's Corner, LLC, to Fisherman's Corner Restaurant, LLC, and prevent plaintiffs from recovering damages in this action.2 (Id., p. 32-42).
Plaintiffs effectuated service of process on Franck under Florida's substituted service statutes. (Docs. 242, 244, 249, 251-53). On August 11, 2015, Franck filed a motion to quash service of process (doc. 254), which the court denied (284).3 The court ordered Franck to answer or otherwise respond to the third amended complaint within twenty-one days of November 5, 2015. (Doc. 284). Because Franck failed to file an answer within the allotted time, plaintiffs moved for entry of default. (Doc. 289). On December 2, 2015, default was entered against Franck. (Docs. 291, 292).On December 18, 2015, Franck filed the present Motion to Set Aside Clerk's Default and Motion to Dismiss Defendant Victor C. Franck from Third Amended Complaint for Lack of Personal Jurisdiction. (Doc. 296). Plaintiffs responded in opposition on January 8, 2016, (doc. 299) and the court subsequently permitted the parties to engage in discovery concerning the court's jurisdiction over defendant Franck. (Doc. 306). After discovery concluded, both Franck and plaintiffs supplemented their respective arguments. (Docs. 309, 310).
Victor Franck currently resides at 7318 Augusta Pines Drive in Spring, Texas. (Doc. 310-1, p. 7). He has never been a resident of Florida (doc. 296, p. 11), and plaintiffs' evidence does not establish Franck was ever in Florida. Franck is the sole member and "100 percent" owner of Perdido Key Investments, LLC ("PKI"), a Wyoming company formed on April 5, 2013. (Doc. 310-1, p. 33-34; doc. 310-2, p. 5-7). Franck and Catherine Greene are the named managers of PKI. (Doc. 310-1, p. 34). Franck states PKI conducts no operations and "has no activity." (Doc. 310-1, p. 35). PKI formed Fisherman's Corner Restaurant, a Florida limited liability company ("FCR").4 PKI is the sole member and manager of FCR. (Doc. 296, p. 11; doc. 310-2, p. 4). Franck, on behalf of PKI, electronically signed FCR's Articlesof Organization on May 21, 2013. (Doc. 310-2, p. 4). PKI's sole asset is FCR, which (after July 1, 2013) operated Fisherman's Corner Restaurant in Escambia County, Florida; FCR's only asset is the restaurant. (Doc. 310-1, p. 32-33).
Codefendant James Green owned Fisherman's Corner, LLC ("FC"), the entity previously responsible for operating Fisherman's Corner Restaurant. (Doc. 310-1, p. 31). In November 2010, Franck agreed to personally provide James Green and FC with a $100,000 revolving line of credit under the provisions of the Security Agreement for Revolving Line of Credit ("loan agreement"). (Doc. 310-1, p. 53; doc. 310-3). As collateral for the loan, Franck received a security interest in all the assets of FC. (Doc. 310-1, p. 55). The loan agreement is governed by Texas law. (Doc. 299-3, p. 16). FC periodically sent checks to Franck to repay monies loaned under the agreement. (Doc. 310-4, p. 2-5).
On July 1, 2013—after plaintiffs' initiated this action—ownership and operational control of Fisherman's Corner Restaurant was transferred from FC to FCR through an Asset Purchase Agreement. (Doc. 310-5, p. 2-17; doc. 310-1, p. 59-60). Franck signed the Agreement on behalf of FCR in his capacity as manager of PKI. (Doc. 310-5, p. 12, 17). FC sold its business "because [it] could not afford to pay its debts and obligations." (Doc. 310-1, p. 63; doc. 310-5, p. 2). The Asset Purchase Agreement provided that FCR would not assume any of the liabilities of FC, with the exception of (1) the loan agreement between FC and Franck; and (2) a potential a claim against FC by William E. Brown, Jr. (Doc. 310-5, p. 3). Franck signed the Florida Division of Hotels and Restaurants Application for Public Food Service Establishment License on behalf of FCR and mailed the document to Tallahassee from Texas. (Doc. 310-9, p. 2-4). After ownership and operational control were transferred to FCR, Franck continued to loan money to FCR under the agreement. (Doc. 310-1, p. 60-62, 86-87). James Green managed the day-to-day operations of FCR, and Cathy Green signed the checks. (Doc. 310-1, p. 76).
In addition, Franck owns "50 percent of the membership interest" in Green Acres Development, a Florida Limited Liability Company ("Green Acres"). (Doc. 310-1, p. 23, 26). For over ten years, Green Acres has owned real estate, including properties in Escambia County and Santa Rosa County. (Doc. 310-1, p. 24-25). Franck and James Green are the managers of Green Acres; as a manager, Franck receives reports from companies (NAI Halford and Tern Key Realty) who oversee and maintain the properties. (Doc. 310-1, p. 25-26). Franck also previously owned fifty percent of Perdido Bay Holdings, a Nevada company set up to own a seafood business based in Florida called Perdido Key Seafood, LLC. (Doc. 310-1, p. 40-44). The seafood business is no longer in operation. (Doc. 310-1, p. 41).
If the court lacks personal jurisdiction over defendant Franck, the entry of default must be set aside. See Tyco Fire & Sec., LLC v. Alcocer, 218 F. App'x 860, 864 (11th Cir. 2007) ( ). Accordingly, the personal jurisdiction issue will be addressed first.
"A plaintiff seeking to establish personal jurisdiction over a nonresident defendant 'bears the initial burden of alleging in the complaint sufficient facts to make out a prima facie case of jurisdiction.'" Louis Vuitton Malletier, S.A. v. Mosseri, 736 F.3d 1339, 1350 (11th Cir. 2013) (quoting United Techs. Corp. v. Mazer, 556 F.3d 1260, 1274 (11th Cir. 2009)). "When a defendant challenges personal jurisdiction 'by submitting affidavit evidence in support of its position, the burden traditionally shifts back to the plaintiff to produce evidence supporting jurisdiction.'" Id. (quoting Madara v. Hall, 916 F.2d 1510, 1514 (11th Cir. 1990)).
A federal court undertakes a two-step inquiry to determine whether personal jurisdiction exists: "the exercise of jurisdiction must (1) be appropriate under the state long-arm statute and (2) not violate the Due Process Clause of the Fourteenth Amendment to the United States Constitution." Mazer, 556 F.3d at 1274. Florida's long-arm statute must be "strictly construed," Sculptchair, Inc. v. Century Arts, Ltd., 94 F.3d 623, 627 (11th Cir. 1996), and provides in relevant part:
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