Madison Stock Transfer, Inc. v. Exlites Holdings Int'l, Inc.

• Decision Date: 25 March 2019
• Docket Number: 18-CV-3293-SJB
• Citation: 368 F.Supp.3d 460
• Parties: MADISON STOCK TRANSFER, INC., Plaintiff, v. EXLITES HOLDINGS INTERNATIONAL, INC., Scorpion Bay Holdings, Inc., Soleeze Wave, Mark Julian, Chauncey Washington, Claire Singleton, Allegro Holdings, S.A., Azure Pro Trading, Ltd., Citrine Enterprises, Ltd., Sandstone Consulting, Inc., Zenlux, Ltd., Defendants.
• Court: U.S. District Court — Eastern District of New York

368 F.Supp.3d 460

MADISON STOCK TRANSFER, INC., Plaintiff,

v.EXLITES HOLDINGS INTERNATIONAL, INC., Scorpion Bay Holdings, Inc., Soleeze Wave, Mark Julian, Chauncey Washington, Claire Singleton, Allegro Holdings, S.A., Azure Pro Trading, Ltd., Citrine Enterprises, Ltd., Sandstone Consulting, Inc., Zenlux, Ltd., Defendants.

18-CV-3293-SJB

United States District Court, E.D. New York.

Signed March 25, 2019

Marshal D. Shichtman, Marshal Shichtman & Associates, P.C., Carle Place, NY, for Plaintiff.

Exlites Holdings International, Inc., pro se.

Judson T. Pitts, Pro Hac Vice, Tycksen & Shattuck L.C., Draper, UT, Amber Robinson, Robinson Law Office PLLC, St. Petersburg, FL, for Defendants.

MEMORANDUM AND ORDER

BULSARA, United States Magistrate Judge:

This action was initiated by a stock transfer agent in an attempt to resolve competing claims to the securities of Exlites Holdings International, Inc. ("Exlites")—a Utah-based consumer healthcare and durable medical supply company. The transfer agent, Madison Stock Transfer, Inc. ("Madison Stock"), brought this action to extricate itself from the competing directions it received regarding 300 million shares of Exlites—one of which directs it to issue the shares, another which directs it to refrain from doing so. Before this Court is the threshold question of whether this case can be maintained as an interpleader action and, if so, whether personal jurisdiction exists over the former president of Exlites—Mark Julian ("Julian")—who claims entitlement to the shares.

Madison Stock commenced this action on June 5, 2018 against Exlites, Scorpion Bay Holdings, Inc. ("Scorpion Bay"), Soleeze Wave ("Soleeze"), Julian, Chauncey Washington ("Washington"), Claire Singleton ("Singleton"), Allegro Holdings, S.A. ("Allegro Holdings"), Azure Pro Trading, Ltd. ("Azure Pro"), Citrine Enterprises, Ltd. ("Citrine Enterprises"), Sandstone Consulting, Inc. ("Sandstone Consulting"), and Zenlux, Ltd. ("Zenlux") pursuant to 28 U.S.C. § 1335 and Federal Rule of Civil Procedure 22, to have this Court resolve competing directions regarding the issuance and cancellation of Exlites stock. (Compl., Dkt. No. 1). Madison Stock's Complaint also makes an abuse of process claim against Julian and Washington and a claim for "account stated" against Exlites. (Id. ¶¶ 67-80). On July 13, 2018, Julian filed a motion to dismiss the claims against him based on lack of personal jurisdiction and improper venue. (See Mot. to Dismiss, Dkt. No. 7 ("Julian Mot.") ). For the reasons stated below, the Court grants in part and denies in part the motion to dismiss; to maintain this action, Madison Stock must provide a deposit or bond equivalent and show that venue is proper in the Eastern District of New York.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY

Madison Stock is a New York corporation that has been the transfer agent for Exlites since around April 24, 2014.¹ (Compl. ¶¶ 2, 27). Madison Stock "performs all its functions within" Kings County, New York, which it considers to be its principal place of business, and it has no other offices and "does not travel for the performing of transfer agent services." (Id. ¶¶ 19-20).

Exlites is a New Mexico corporation with is principal place of business in Utah. (Id. ¶ 3). It is the issuer of the stock in question in this action. (Id. ). According to its website, Exlites distributes medical equipment and "does contract manufacturing for medical products." About Us , Exlites Holdings International, Inc., https://exlitesholdings.com/about-us/ (last visited Mar. 21, 2019). Several of the other Defendants are international business entities; Allegro Holdings, Azure Pro, Citrine Enterprises, Sandstone Consulting, and Zenlux are all Belize entities with the same principal place of business at 508 Marina Towers, Belize City, Belize. (Compl. ¶¶ 1, 10-14). Scorpion Bay is also a Belize entity but has its principal place of business in the Bahamas. (Id. ¶ 9). Soleeze is a Florida corporation with its principal place of business in Florida. (Id. ¶ 7). The Complaint does not indicate the nature of the business or industry in which these Defendants operate.

The individual Defendants are all current or former officers or shareholders of Exlites. Julian is a citizen of Florida and the former president of Exlites. (Id. ¶¶ 5, 30, 33). Julian also controlled the Defendant corporation Soleeze. (Id. ¶ 29). Washington is also a citizen of Florida. (Compl. ¶ 6). As described below, both Julian and Washington obtained default judgment awards for the issuance of 200 million and 100 million shares, respectively, of Exlites common stock in a Florida state court proceeding brought against Exlites. (Id. ¶¶ 23-24). Singleton is a citizen of Texas who, at the time of the Complaint, was "a majority holder in and authority of record for Defendant Exlites." (Id. ¶ 25).

The history of the proceedings before the commencement of the federal action is extensive. The following narrative is drawn from the Complaint and the attached exhibits, and is presented to show the alleged competing claims faced by Madison Stock.

In 2014, Madison Stock took over as transfer agent for Exlites from Pacific Stock Transfer. (Id. ¶ 27). Soon thereafter, Michael Dillon ("Dillon"), the sole officer and director of Exlites, issued 25 million shares of its stock to Soleeze, the entity controlled by Julian, "in preparation for a merger/acquisition" with Soleeze. (Id. ¶¶ 28-29). Julian became the president of Exlites and Dillon became the corporate secretary, and on May 14, 2015, Exlites sent a resolution to Madison Stock to issue 20 million shares of stock to Scorpion Bay. (Compl. ¶¶ 30, 32; see Scorpion Bay Issuance, attached as Ex. F to Compl., Dkt. No. 1). Around the same time, Dillon held a shareholder vote to unwind Exlites's merger with Soleeze and remove Julian as an officer and director "for failure to fulfill the terms, agreements and expectations of the merger agreements." (Compl. ¶ 33). It is unclear from the Complaint what the results of this vote were, though it appears that Julian remained on as an Exlites officer.² Weeks later, on June 4, 2015, Julian and Singleton were elected to Exlites's Board of Directors and Dillon was removed from his position as secretary. (Id. ¶ 35). On October 3, 2016, Singleton removed Julian as an officer and director of Exlites using her "super voting block," which had been recognized by a corporate resolution signed by Singleton and Julian. (Id. ¶¶ 36-37).

Exlites and Singleton are now attempting to cancel a series of earlier Exlites share issuances: 20 million shares issued to Scorpion Bay on May 14, 2015, 15 million shares issued to the five Belize entities,³ and 25 million shares issued to Soleeze on December 19, 2014. (Id. ¶¶ 38-40). The Complaint does not explain how and when Exlites or Singleton communicated these requests to Madison Stock.⁴

In late 2016, Julian and Washington each received a default judgment in Florida state court, Pasco County, against Exlites in cases alleging, among other things, breach of contract. (Id. ¶¶ 22-24 (case numbers 2016-CA-2400-WS and 2016-CA-2413-WS, respectively); see Florida Default Judgment dated Nov. 1, 2016, attached as Ex. M to Compl., Dkt. No. 1 ("Julian Default J."); Florida Default Judgment dated Sept. 28, 2016, attached as Ex. N to Compl., Dkt. No. 1 ("Washington Default J.") ). The judgment ordered "the transfer agent of Defendant, Exlites Holding International, Inc." to issue 200 million shares of stock to Julian and 100 million shares to Washington. (Julian Default J.; Washington Default J. (emphasis omitted) ). In May 2018, Madison Stock received correspondence from counsel for Julian asking it to issue the 300 million shares of stock associated with these default judgments, which Madison Stock indicated it would do upon the docketing of the judgments in New York. (Compl. ¶ 51). Counsel for Julian subsequently demanded Madison Stock issue the shares immediately rather than wait for docketing in New York. (Id. ; see Notice of Court Order dated May 30, 2018, attached as Ex. O to Compl., Dkt. No. 1 ("Julian Letter") ). This demand also included threats of suit for wrongful refusal to transfer. (Compl. ¶ 51; see Julian Letter at 2 ("[U]nless the demand we previously issued ... is complied with in the next 10 days, we will seek leave of Court in the ... Florida Action to amend the Complaint to name Madison as a defendant and seek damages from it co-extensive with the issuer's liability.") (emphasis omitted) ).⁵

Madison Stock consulted with Singleton, the majority shareholder, about the issuance of these shares. (Compl. ¶ 25). Singleton had "no knowledge regarding the [Florida] litigations." (Id. ). Upon further investigation, Madison Stock discovered that Julian had essentially served himself in his Florida default judgment litigation, because he served Exlites via the Florida Secretary of State. The Secretary of State served the party Exlites had elected to receive notice: Julian. (Id. ¶ 26). In an email to Madison Stock's attorney from Singleton, Exlites objected to the issuance of the 300 million shares to Julian and Washington on June 1, 2018. (Id. ¶ 53; see Exlites Objection Email, attached Ex. Q to Compl., Dkt. No. 1 ("June Exlites Objection") ).

Madison Stock alleges that it has at least two claims for which there are competing directives: (1) a directive from Julian and Washington to issue 300 million shares of Exlites to them; an objection from Exlites to that issuance, and a counter-directive that those shares not be issued; and (2) the shares of Exlites previously issued to Soleeze, Scorpion Bay, and the Belize entities, which Madison Stock was instructed by Singleton to cancel.

Madison Stock asks this Court to decide its obligation as to the issuance or cancellation of the shares described above, namely the 200 million shares to Julian, the 100 million shares to Washington, the 25 million shares pertaining to Soleeze,⁶ and the 15 million shares...