Oakley v. Coast Prof'l

Decision Date07 February 2022
Docket NumberCivil Action 1:21-00021
PartiesCARLA OAKLEY, on behalf Of herself and all others similarly situated, Plaintiff, v. COAST PROFESSIONAL, INC., PERFORMANT FINANCIAL CORP., and PERFORMANT RECOVERY, INC. Defendants.
CourtU.S. District Court — Southern District of West Virginia
MEMORANDUM OPINION AND ORDER

David A. Faber, Senior United States District Judge.

Pending before the court is the renewed motion of defendant Performant Financial Corp. (PFC) to dismiss for lack of personal jurisdiction.[1] (ECF No. 62.) For the reasons that follow, the court will deny the motion.

I. Background

The court has previously summarized the general background to this case and will not do so again here. (See ECF Nos. 53 and 59.) Plaintiff's assertion that this court has personal jurisdiction over PFC depends on whether PFC's subsidiary Performant Recovery, Inc. (PRI), [2] is the alter ego of PFC. The court previously found as follows:

While plaintiff's opposition memorandum catalogues facts in support of the alter ego theory, the only allegation in the [First Amended Complaint] in support of the alter ego theory is that PFC operates as a single entity. This is too threadbare. But because amendment does not appear futile, the court will grant leave to amend.

(ECF No. 53, at 5-6.)

The Second Amended Class Action Complaint (“SAC”) similarly alleges, Defendant Performant Financial Corporation and its wholly owned subsidiaries are managed and operated as one business, with a single management team that reports to the Chief Executive Officer.” (ECF No. 56 SAC ¶ 15.) It also quotes from PFC's Form 10-Ks, filed with the U.S. Securities and Exchange Commission, acknowledging that PFC does operate “as one business.” (Id. at ¶¶ 12, 13.)

Unlike its predecessor, the SAC goes into greater detail regarding the nature of the relationship between PFC and PRI:

[PFC]'s Board of Directors oversee the activities of Defendant [PFC] and all of its subsidiaries, including Defendant [PRI]. Consumer complaints, whether made directly to Defendant [PFC], Defendant [PRI], or a third-party are reported, summarized, or referred to in reports to or meetings with Defendant [PFC]'s Board of Directors and/or Audit Committee.
Defendant [PFC] is the entity registered with the Consumer Financial Protection Bureau to respond to consumer complaints about [PRI].
On March 19, 2012, Defendant [PFC]'s wholly owned subsidiary, DCS Business Services, Inc., entered into a Credit Agreement with Madison Capital Funding LLC (2012 Credit Agreement”).
Defendant [PFC] categorized the 2012 Credit Agreement as [PFC]'s “Long-term Debt” in its filing with the Securities and Exchange Commission during the pendency of the Credit Agreement.
Defendant [PFC] categorized the 2012 Credit Agreement as Performant Financial Corporation's “Long-term Debt” in its filing with the Securities and Exchange Commission during the pendency of the Credit Agreement.
Defendant [PFC] was bound by the negative covenants of the 2012 Credit Agreement.
On April 12, 2012, Defendant [PFC] filed to register the trademark “Performant Recovery” with the United States Patent and Trademark Office.
Prior to November 12, 2012, DCS Business Services, Inc. changed its name to Performant Business Services, Inc., also a wholly-owned subsidiary of Defendant [PFC].
On or near January 20, 2015, Defendant [PFC] recorded an assignment of its entire interest in the “Performant Recovery” trademark (Performant Recovery Mark”) to Defendant [PRI] with the United States Patent and trademark Office. (https://assignments.uspto.gov/assignments/q?db=tm&sno =86287717) (last accessed Oct. 27, 2021).
Upon information and belief, [PFC] did not require payment from Defendant [PRI] for the assignment of the Performant Recovery mark. On or near February 12, 2015, [PFC] filed a correction with the United States Patent and Trademark Office regarding its assignment of the Performant Recovery mark to Defendant [PRI].
(https://assignments.uspto.gov/assignments/q?db=tm&sno =86287717) (last accessed Oct. 27, 2021).
On or near April 15, 2015, Defendant [PRI] conveyed a security interest in the trademark “Performant Recovery” to Madison Capital Funding, LLC. (https://assignments.uspto.gov/assignments/q?db=tm&sno =86287717) (last accessed Oct. 27, 2021).
Defendant [PRI]'s conveyance of the Performant Recovery mark to Madison Capital Funding, LLC was required because certain conditions described in the 2012 Credit Agreement had come to pass.
Upon information and belief, Performant Business did not pay Defendant [PRI] for the conveyance of its interest in the Performant Recovery mark to Madison Capital Funding, LLC.
Defendant [PFC]'s consolidated financial statements include the operations of Defendant [PRI].
Defendant, [PRI] conducts business in this County and State and maintains a principal place of business in Lathrop, California.
The California Secretary of State lists Defendant [PRI]'s address as 333 N Canyons PKWY STE 100 Livermore, CA 94551.
The California Secretary of State's website lists Defendant [PFC]'s “Entity Address” and “Mailing Address” as 333 North Canyons Parkway, Suite 100 Livermore CA 94551.
Lisa Im is the Chief Executive Officer for Defendant [PFC].
Lisa Im is the Chief Executive Officer of Defendant [PRI].
Ian Johnston is the Vice President and Chief Accounting Officer for Defendant [PFC].
Ian Johnston is the Chief Financial Officer of Defendant [PRI].
[PFC] cannot legally be separated from the actions of [PRI] and vice versa because of the overlap in their finances, assets, goals, duties, personnel, governance, property, and location.

(Id. at ¶¶ 16-38.)

Plaintiff and PFC now dispute whether the allegations of the SAC sufficiently allege an alter ego relationship between PFC and PRI for purposes of personal jurisdiction.

II. Legal Standard

The United States Court of Appeals for the Fourth Circuit has described the general framework for resolving a threshold personal jurisdiction challenge such as this one as follows:

When personal jurisdiction is properly challenged under Rule 12(b)(2), the jurisdictional question is to be resolved by the judge, with the burden on the plaintiff ultimately to prove grounds for jurisdiction by a preponderance of the evidence. When, however . . . a district court decides a pretrial personal jurisdiction motion without conducting an evidentiary hearing, the plaintiff need only make a prima facie showing of personal jurisdiction. In deciding whether the plaintiff has made the requisite showing, the court must take all disputed facts and reasonable inferences in favor of the plaintiff.

Carefirst of Md., Inc. v. Carefirst Pregnancy Ctrs., Inc., 334 F.3d 390, 396 (4th Cir. 2003) (citations omitted).

Federal courts must analyze whether the assertion of personal jurisdiction comports not only with the law of the forum state (the state's long-arm statute), but also with due process. Id. at 396. These two inquiries naturally merge into one when the forum state's law provides for the exercise of personal jurisdiction to the outermost limits of due process. Id. at 396-97.

Whether the two inquiries merge in West Virginia is unclear. A district court is bound to apply the forum state's long-arm statute as interpreted by its high court (although federal interpretations remain persuasive authority). Mylan Labs., Inc. v. Akzo, N.V., 2 F.3d 56, 61, 61 n.5 (4th Cir. 1993). Despite statements in opinions of federal courts that West Virginia's long-arm statute is coextensive with the boundaries of due process, see, e.g., In re Celotex Corp., 124 F.3d 619, 627-28 (4th Cir. 1997), the Supreme Court of Appeals of West Virginia describes its personal jurisdiction analysis as a “two-part inquiry.” State ex rel. Third-Party Defendant Health Plans v. Nines, 244 W.Va. 184, 852 S.E.2d 251, 259 (2020) (Armstead, C.J.); see also Syl. pt. 3, State ex rel. Ford Motor Co. v. McGraw, 237 W.Va. 573, 788 S.E.2d 319, 323 (2016) (“A court must use a two-step approach when analyzing whether personal jurisdiction exists over a foreign corporation or other nonresident.”).

The consistent assertion by the state's high court that there are two steps in the personal jurisdiction analysis suggests that West Virginia's long-arm statute, W.Va. Code, § 56-3-33, is possibly not coextensive with the limits of due process after all. The parties agree, however, that the court need only determine whether the exercise of personal jurisdiction over PFC comports with due process. More specifically, the question here is whether the allegations of the SAC, together with the benefit of all reasonable inferences in favor of plaintiff, state a prima facie case for the existence of an alter ego relationship for purposes of personal jurisdiction.

III. Discussion

The allegations here survive the motion to dismiss because, at least for jurisdictional purposes, they support the inference that PFC and PRI do not have separate corporate personalities. Without separate corporate personalities, an alter ego relationship exists for jurisdictional purposes such that PRI's minimum contacts with West Virginia are attributable to PFC. To be sure, this inference is not ultimately required under the allegations, even if proved. At this stage, however, the allegations blur the line between the two companies sufficiently such that dismissal for lack of personal jurisdiction is not presently warranted.

Due process requires ‘minimum contacts' with the forum, such that to require the defendant to defend its interests in that state ‘does not offend traditional notions of fair play and substantial justice.' Carefirst, 334 F.3d at 397 (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). A party may establish personal jurisdiction over a parent...

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