Clemons v. WPRJ, LLC

• Decision Date: 28 January 2013
• Docket Number: Civil Action No. H–12–0334.
• Citation: 928 F.Supp.2d 885
• Parties: Charles R. CLEMONS and Patricia Clemons, Plaintiffs, v. WPRJ, LLC, Phyllis A. Kerseg, Warren M. Kerseg, Janet L. Adams, and Richard G. Adams, Defendant.
• Court: U.S. District Court — Southern District of Texas

928 F.Supp.2d 885

Charles R. CLEMONS and Patricia Clemons, Plaintiffs,
v.
WPRJ, LLC, Phyllis A. Kerseg, Warren M. Kerseg, Janet L. Adams, and Richard G. Adams, Defendant.

Civil Action No. H–12–0334.

United States District Court,
S.D. Texas,
Houston Division.

Jan. 28, 2013.

[928 F.Supp.2d 890]

Daniel Allen Wilson, Johnson Deluca et al., Houston, TX, for Plaintiffs.

Barry Stephen Rabon, Coats Rose et al., League City, TX, for Defendants.

OPINION AND ORDER OF TRANSFER
MELINDA HARMON, District Judge.

Pending before the Court in the above referenced cause, arising out of Plaintiff Charles R. Clemons and Patricia Clemons' investment in a project to purchase land, construct, and sell townhomes in Phoenix, Arizona, and alleging breach of partnership agreement, breach of fiduciary duty, fraud and fraudulent inducement, violation of the Texas Securities Act, Texas Revised Civil Statutes article 581–22, unjust enrichment/money had and received, and civil conspiracy, are the following motions, all with supporting exhibits attached: (1) Defendants Richard G. Adams and Janet L. Adams' motion to dismiss for improper venue under Federal Rule of Civil Procedure 12(b)(3) or, alternatively, to transfer venue in the interests of justice under 28 U.S.C. § 1406 (instrument # 4); (2) Defendants Richard G. Adams and Janet L. Adams' motion to dismiss for lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2) (# 6); (3) Defendant WPRJ, LLC's motion to dismiss for improper venue or, alternatively, to transfer venue under 28 U.S.C. § 1406(a) (# 8); (4) Defendant WPRJ, LLC's motion to dismiss for lack of personal jurisdiction (# 10); (5) and a joint motion for ruling on pending motions (# 21).

Allegations in the Complaint (# 1)

Plaintiffs assert that the Court has diversity jurisdiction under 28 U.S.C. § 1332 over this action and proper venue under 28 U.S.C. § 1391 because a substantial part of the events or omissions giving rise to Plaintiffs' claims occurred in Willis, Montgomery County, Texas.¹ Plaintiffs Charles R. Clemons and Patricia Clemons are residents of Texas. WPRJ, LLC is an Arizona limited liability with its principal place of business in Carefree, Arizona, while the individual Defendants are residents of Arizona and believed to be members, managers, owners, and agents of WPRJ, LLC who have done business with the State of Texas but do not maintain registered agents here. Alternatively, each of the Defendants is the alter ego of the other. “A unity of interest and lack of corporate separateness exists such that the actions of any one Defendant is to be one and the same as the actions of each of the other Defendants. [ sic ]” # 1 at ¶ 9.

Plaintiffs claim that venue in this district is proper pursuant to 28 U.S.C. § 1391 because (1) Defendants are subject to the personal jurisdiction of the courts of Texas and because a substantial part of the events or omissions giving rise to Plaintiffs' claims occurred in Willis, Montgomery

[928 F.Supp.2d 891]

County, Texas, (2) Plaintiffs purposely directed their misrepresentations to Plaintiffs in Texas, (3) Plaintiffs' reliance and damages were foreseeable by Defendants and occurred in Texas, and (4) Defendants performed intentional tortious acts against Texas residents and could reasonably anticipate being required to answer in Texas state court for their wrongful actions.

In 2009 Defendants contacted Plaintiffs in Texas and stated that they wanted to purchase real estate in Phoenix, Arizona, develop the land by constructing townhomes, and sell those homes, a project dubbed “Tres Agua.” They sought funding and asked Plaintiffs to invest as partners a total of $400,000.00 in exchange for a 10% ownership interest in the joint venture, and Plaintiffs agreed. The complaint asserts, “The partnership agreement constitutes a valid and enforceable contract.” # 1, ¶ 18. Each Defendant funded and participated in Tres Agua and exercised significant influence over management and operational and financial decisions of WPRJ, LLC relating to the project. Defendants represented that they would purchase the real property within six months of initial funding by Plaintiffs, begin building the townhomes within one year of receiving the funding, and begin selling the townhomes within eighteen months of the funding. They also promised Plaintiffs “a minimum 100% return of investment.” # 1, ¶ 11. Relying on these representations, Plaintiffs agreed to invest $400,000.00 in Tres Agua, and on June 28, 2006 wired Defendants an initial $150,000.00. On July 5, 2006, WPRJ executed a promissory note in Willis, Montgomery County, Texas in favor of Plaintiffs for $400,000.00, with the principal amount due within sixty days after the closing of the last unsold townhome of the development, with partial payments of at least $10,000.00 for each townhome built and sold. On December 18, 2006, Plaintiffs sent Defendants an additional $50,000.00 payment, on January 18, 2007 a $75,000.00 payment, and on May 1, 2007 a final $125,000.00.

On or about September 19, 2007, Defendants purchased real property located at 4040 N. 22nd Street, Phoenix, Arizona 85016 for the project. Defendants informed Plaintiffs that they purchased the property in the name of WPRJ, LLC for $2,000,000.00, part of which was financed by a third-party lender. As of February 3, 2012, when the complaint was filed, Defendants had not begun construction or development of the property. Plaintiffs kept contacting Defendants to check on the status of Tres Agua, but Defendants always offered an excuse for failing to begin construction. Plaintiffs demanded but did not receive an accounting regarding the partnership's profits and property. Then Defendants stopped communicating with Plaintiffs. Defendants also failed to make timely payments for the financed portion of the property and are at risk of losing it to foreclosure. Plaintiffs suspect and believe Defendants leased the property to a third party for the storage of equipment and machines, contrary to the parties' agreement.

Claims Against the Kerseg Defendants

With documentary evidence the Defendants report that co-Defendants Warren M. Kerseg and Phyllis Ann Kerseg have voluntarily filed for Chapter 7 bankruptcy in the District of Arizona. Title 11 U.S.C. § 362 “provides that the filing of a bankruptcy petition operates as a stay of the ‘commencement or continuation’ of all non-bankruptcy judicial proceedings against the debtor. The stay is automatic and ‘springs into being immediately upon the filing of a bankruptcy petition’ ” in a voluntary bankruptcy case. Chapman v. Bituminous Ins. Co. (In re Coho Res., Inc.), 345 F.3d 338, 343–44 (5th Cir.2003). Thus all Plaintiffs' claims against the Kerseg Defendants are stayed.

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Relevant Law Personal Jurisdiction and Rule 12(b)(2)

Whether personal jurisdiction may be exercised over a nonresident is a question of law. Cooper v. McDermott Intern., Inc., No. 93–2907, 1995 WL 450209, *3, 62 F.3d 395 (Table) (5th Cir. July 6, 1995), citing Ruston Gas Turbines, Inc. v. Donaldson Co., Inc., 9 F.3d 415, 418 (5th Cir.1993) ( “Absent any dispute as to the relevant facts, the issue of whether personal jurisdiction may be exercised over a nonresident defendant is a question of law....”). Where the facts are disputed, the party seeking to invoke the court's jurisdiction bears the burden of establishing sufficient contacts with the forum state by the nonresident defendant to invoke the court's jurisdiction. Bullion v. Gillespie, 895 F.2d 213, 216–17 (5th Cir.1990).

When a defendant files a motion to dismiss for lack of jurisdiction under Federal Rule of Civil Procedure 12(b)(2), the plaintiff bears the burden of demonstrating that the court has personal jurisdiction over the defendant. Luv N' Care, Ltd. v. Insta–Mix, Inc., 438 F.3d 465, 469 (5th Cir.2006), citing Wyatt v. Kaplan, 686 F.2d 276, 280 (5th Cir.1982). At the pretrial stage of litigation, if the district court does not conduct a hearing on personal jurisdiction, the plaintiff need only present a prima facie case of personal jurisdiction. Wilson v. Belin, 20 F.3d 644, 648 (5th Cir.), cert. denied,513 U.S. 930, 115 S.Ct. 322, 130 L.Ed.2d 282 (1994); Felch v. Transportes Lar–Mex S.A. DE CV, 92 F.3d 320, 325 (5th Cir.1996); Johnston v. Multidata Systems Intern. Corp., 523 F.3d 602, 609 (5th Cir.2008). Proof by preponderance of the evidence is not required. Johnston, 523 F.3d at 609.² When a defendant disputes factual bases for personal jurisdiction, the district court may consider the record before it, including “affidavits, interrogatories, depositions, oral testimony, or any combination of the recognized methods of discovery.” Quick Technologies, Inc. v. Sage Group PLC, 313 F.3d 338, 344 (5th Cir.2002) ( quoting Thompson v. Chrysler Motors Corp., 755 F.2d 1162, 1165 (5th Cir.1985)), cert. denied,540 U.S. 814, 124 S.Ct. 66, 157 L.Ed.2d 29 (2003); Kelly Law Firm, P.C. v. An Attorney for You, 679 F.Supp.2d 755, 762 (S.D.Tex.2009). The court has discretion as to the type and amount of discovery it will allow, but unless there is a full and fair hearing, it should not act as a factfinder and must construe all disputed facts in favor of the plaintiff. Walk Haydel, 517 F.3d at 241.

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On a motion to dismiss under Rule 12(b)(2), uncontroverted allegations in plaintiff's complaint are taken as true, and conflicts between facts in the parties' affidavits must be resolved in plaintiff's favor for purposes of the prima facie case of personal jurisdiction. Johnston, 523 F.3d at 609;Kelly Law Firm, 679 F.Supp.2d at 762;Revell v. Lidov, 317 F.3d 467, 469 (5th Cir.2002).

The court must find that it has personal jurisdiction over the defendant before it makes any decision on the merits. Sinochem Int'l Co. v. Malay. Int'l Shipping Corp., 549 U.S. 422, 430, 127 S.Ct. 1184, 167 L.Ed.2d 15 (2007); Guidry v. U.S. Tobacco Co., 188 F.3d 619, 623, n. 2 (5th Cir.1999) (“Personal jurisdiction is an...