In re Trade Partners, Inc., Investors Litigation

• Decision Date: 15 April 2008
• Docket Number: MDL Docket No. 1846.,No. 1:03-CV-321.,1:03-CV-321.
• Citation: 627 F.Supp.2d 772
• Parties: In re TRADE PARTNERS, INC., INVESTORS LITIGATION.
• Court: U.S. District Court — Western District of Michigan

Page 772

627 F.Supp.2d 772

In re TRADE PARTNERS, INC., INVESTORS LITIGATION.

MDL Docket No. 1846.

No. 1:03-CV-321.

United States District Court, W.D. Michigan, Southern Division.

April 15, 2008.

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OPINION

ROBERT HOLMES BELL, Chief Judge.

This matter is before the Court on several motions to dismiss that have been filed by Defendants Macatawa Bank Corporation and Richard Deardorff, Counter-Defendants David E. Polosky and Matthew J. Fox, and Third-Party Defendants Jeff Barrett and Sherry Tedaldi in Forrest W. Jenkins, et al. v. Macatawa Bank Corp., et al., File No. 1:03-CV-321.¹ These motions seek dismissal based on a lack of personal jurisdiction, various aspects of the Michigan Uniform Securities Act ("MUSA"), a failure to plead with the particularity required by Federal Rule of Civil Procedure 9(b), and a failure to state a claim of unjust enrichment. For the reasons that follow, all of the motions will be denied.

I. Background

This suit arises from the sale of viatical based investments by Trade Partners Inc. ("TPI") between 1996 and 2003. Defendant Macatawa Bank Corporation is the successor by merger to Grand Bank Financial Corporation. Macatawa Bank is the successor by merger to Grand Bank. Macatawa Bank is a wholly-owned subsidiary of Macatawa Bank Corporation. Grand Bank provided escrow services for funds involved in viatical based investments made with TPI. The Court will collectively refer to Macatawa Bank Corporation and Macatawa Bank as Macatawa.²

On November 8, 2006, the Court denied class certification in this case. On June 26, 2007, the Judicial Panel on Multidistrict Litigation ("JPML") transferred four cases involving individuals who had invested with TPI then pending outside of the Western District of Michigan to be consolidated with Jenkins v. Macatawa Bank Corp. The motions addressed in this opinion were filed prior to the JPML consolidation order.

Plaintiffs³ allege five causes against Deardorff and Macatawa, but only Plaintiffs' cause of action under the MUSA is relevant for purposes of these motions. (Dkt. No. 916, Second Am. Consolidated Compl. ¶¶ 70, 71.) Plaintiffs allege Macatawa was a seller, or a person who directly or indirectly controlled a seller, of unregistered securities in violation of section 301 of the MUSA, M.C.L.S. § 451.701 (Lexis-Nexis 1999); M.C.L.S. § 451.701 (Lexis-Nexis 2001).⁴ Plaintiffs allege Deardorff was an agent who materially aided in the sale of unregistered securities in violation of section 301 of the MUSA. Deardorff and Macatawa each filed counterclaims against Fox and Polosky and third-party complaints against Tedaldi and Barrett. (Dkt. No. 202, Macatawa's First Am. Third-Party Compl.; Dkt. No. 203, Deardorff's First Am. Third-Party Compl.; Dkt. No. 944, Macatawa's First Am. Countercl.; Dkt. No. 946, Deardorff's First Am. Countercl.) Deardorff and Macatawa's third-party complaints against Tedaldi and Barrett contain three counts, which are (1) fraud, (2) contribution under the MUSA for materially aiding in the sale of unregistered securities, and (3) unjust enrichment. (Deardorff's First Am. Third-Party Compl. ¶¶ 346-58; Macatawa's First Am. Third-Party Compl. ¶¶ 346-58.) Deardorff and Macatawa's counterclaim against Fox and Polosky contains two counts, which are (1) contribution under the MUSA for materially aiding in the sale of unregistered securities, and (2) unjust enrichment. (Deardorff's First Am. Countercl. ¶¶ 48-54; Macatawa's First Am. Countercl. ¶¶ 48-54.)

Although Barrett, Fox, Polosky, and Tedaldi filed their motions to dismiss against Deardoff and Macatawa, Deardorff and Macatawa join in Barrett, Fox, Polosky, and Tedaldi's motions with respect to the MUSA. Deardorff and Macatawa do not concede to the dismissal of their MUSA claims. Rather, to the extent that Barrett, Fox, Polosky, and Tedaldi prevail on any basis on which they seek dismissal of the MUSA claims asserted against them, Deardorff and Macatawa move for the dismissal of Plaintiffs' MUSA claim on the same basis. (Dkt. No. 834, Deardoff's Br. in Opp'n 7-8; Dkt. No. 836, Macatawa's Br. in Opp'n 6-7.)

II. Personal Jurisdiction

Barrett moves to dismiss Deardorff and Macatawa's third-party complaints against him pursuant Rule 12(b)(2) based on the Court lacking personal jurisdiction over him.⁵ Barrett is a resident of Houston, Texas. Barrett was an associate or outside sales person for TPI. (Dkt. No. 798, Barrett's Ans. to Macatawa's First Am. Third-Party Compl. ¶ 306.) Barrett sold TPI's viatical settlements and he received sales commissions from TPI. (Id. at ¶¶ 306, 311.)

"In a diversity action, the law of the forum state dictates whether personal jurisdiction exists, subject to constitutional limitations." Intera Corp. v. Henderson, 428 F.3d 605, 615 (6th Cir.2005) (citing Calphalon Corp. v. Rowlette, 228 F.3d 718, 721 (6th Cir.2000), and Reynolds v. Int'l Amateur Athletic Fed'n, 23 F.3d 1110, 1115 (6th Cir.1994)). See also Fed R.Civ.P. 4(e)(1), (k)(1)(A). A federal court must analyze jurisdiction in a two-step process. First, the court must determine if state law, here Michigan law, grants the court authority to exercise personal jurisdiction over the defendant. Neogen Corp. v. Neo Gen Screening, Inc., 282 F.3d 883, 888 (6th Cir.2002). Second, the court must determine if the exercise of personal jurisdiction over the defendant satisfies the Fourteenth Amendment's Due Process Clause. Id. The party asserting that the court has jurisdiction "bears the burden of making a prima facie showing of the court's personal jurisdiction over the defendant." Intera Corp., 428 F.3d at 615 (citing Calphalon Corp., 228 F.3d at 721, and Theunissen v. Matthews, 935 F.2d 1454, 1458 (6th Cir.1991)). The Court has determined that this motion to dismiss for lack of personal jurisdiction can be decided based upon the written submissions, without an evidentiary hearing. Therefore, the Court "`must consider the pleadings and affidavits in the light most favorable'" to the third-party plaintiffs. Serras v. First Tenn. Bank Nat'l Ass'n, 875 F.2d 1212, 1214 (6th Cir.1989) (quoting Welsh v. Gibbs, 631 F.2d 436, 439 (6th Cir.1980)). If the party asserting that the court has jurisdiction meets the burden of making a prima facie showing that personal jurisdiction exists, then the motion to dismiss should be denied, "`notwithstanding any controverting presentation by the moving party.'" Id. (quoting Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 904 (2d Cir.1981)).

A. Statutory Jurisdiction Under Michigan Law

Deardorff and Macatawa contend that the Court has personal jurisdiction based on the forum-selection clause in the associate agreement between Barrett and TPI. Michigan law "permits parties to contractually agree, in advance, to personal jurisdiction ...." Omne Fin., Inc. v. Shacks, Inc., 460 Mich. 305, 312, 596 N.W.2d 591 (1999). See also M.C.L.S. § 600.701(3) (LexisNexis 2008). Michigan Compiled Laws § 600.745(2) provides that

If the parties agreed in writing that an action on a controversy may be brought in this state and the agreement provides the only basis for the exercise of jurisdiction, a court of this state shall entertain the action if all the following occur:

(a) The court has power under the law of this state to entertain the action.

(b) This state is a reasonably convenient place for the trial of the action.

(c) The agreement as to the place of the action is not obtained by misrepresentation, duress, the abuse of economic power, or other unconscionable means.

(d) The defendant is served with process as provided by court rules.

M.C.L.S. § 600.745(2) (LexisNexis 2008). Before analyzing personal jurisdiction under § 600.745(2) the Court must first determine that the Court does not have another basis for personal jurisdiction over Barrett. M.C.L.S. § 600.745(2); MCNIC Oil & Gas Co. v. IBEX Resources Co., 23 F.Supp.2d 729, 735 n. 7 (E.D.Mich.1998). Deardorff and Macatawa do not contend that the Court has limited personal jurisdiction over Barrett, M.C.L.S. § 600.705, general jurisdiction over Barrett based on service of process in Michigan, M.C.L.S. § 600.701(1), or general jurisdiction over Barrett based on Barrett being domiciled in Michigan, M.C.L.S. § 600.702(2). As Deardorff and Macatawa did not assert these as bases for the Court's personal jurisdiction over Barrett, they are deemed to be waived.

The associate agreement between TPI and Barrett includes a forum-selection clause that provides that This agreement shall be governed by and construed according to the laws of the State of Michigan and venue shall be in the state and federal courts in Kent County, Michigan.

(Macatawa's Br. in Opp'n, Ex. D, Assoc. Agreement.)⁶ As Barrett did not file a reply to Macatawa's response, Barrett has not made any contention that the actions brought by Deardorff and Macatawa are outside the scope of the forum-selection clause because they are not parties to the associate agreement.

Under Michigan Compiled Laws § 600.745(2) there are four other requirements for personal jurisdiction based on the existence of a written agreement. First, the court must have the power to entertain this action. M.C.L.S. § 600.745(2)(a). The Court has the power to entertain Deardorff and Macatawa's action against Barrett under the Court's ancillary jurisdiction. 28 U.S.C. § 1367(b). Second, the court must be a reasonably convenient place for trial. M.C.L.S. § 600.745(2)(b). Macatawa is and TPI was based in Grand Rapids, Michigan. Additionally, many of the relevant witnesses and documents are in Michigan. The Court would be a reasonably convenient place for trial. See Lease Acceptance Corp. v. Adams, 272 Mich.App. 209, 225-27, 724 N.W.2d 724 (2006) (setting forth the factors to be considered in determining if a court is "reasonably convenient"). Third, the written agreement to personal jurisdiction must not have been obtained by duress,...