Opportunity Fund, LLC v. Epitome Sys., Inc.

Decision Date27 November 2012
Docket NumberCase No. 2:11–CV–528.
Citation912 F.Supp.2d 531
PartiesThe OPPORTUNITY FUND, LLC, Plaintiff, v. EPITOME SYSTEMS, INC., et al., Defendants.
CourtU.S. District Court — Southern District of Ohio


Brian M. Zets, Brandon Lee Abshier, Wiles, Boyle, Burkholder & Bringardner Co., LPA, Columbus, OH, for Plaintiff.

Kristin Kendra Going, Drinker Biddle & Reath LLP, Washington, DC, Heather C. Giordanella, Matthew A. Luber, Drinker Biddle & Reath LLP, Philadelphia, PA, for Savana, Inc.


ALGENON L. MARBLEY, District Judge.


This matter is before the Court on Defendant Savana, Inc.'s (“Savana”) Motion to Dismiss the Amended Complaint Pursuant to Rules 12(b)(2), 12(b)(3), and 12(b)(6) of the Federal Rules of Civil Procedure (“Motion”). (Doc. 34.) For the reasons stated below, Defendant's Motion is GRANTED in part and DENIED in part.


In May 2008, Plaintiff, The Opportunity Fund, LLC (Opportunity Fund), an Ohio company, became an “investing entity” in Epitome Systems, Inc. (Epitome), a Delaware corporation based in Pennsylvania that provided client companies with business information processing services. This transaction was memorialized with a Loan and Security Agreement that granted some number of investing entities,1 including Opportunity Fund, a security interest in Epitome's assets as collateral for funds lent. (Doc. 26, Ex. A.) According to the terms of the Agreement, collateral assets consisted of a comprehensive list of Epitome's current and future personal property, including intangibles like stock, intellectual property, computer software rights, and customer lists.

In July 2008, in connection with the Loan and Security Agreement, Epitome executed a Secured Promissory Note (the “Note”) (Doc. 26, Ex. B) in which it promised to repay Opportunity Fund the lent sum of $100,000 plus interest on or before August 31, 2008. The Note contains a successor clause, which states: “This Note shall be binding upon Maker [Epitome] and its successors and shall inure to the benefit of the Payee [Opportunity Fund] and its successors and permitted assigns.” (Doc. 26, Ex. B at 6.) The Note also contains a choice of law and forum selection clause which directs that the laws of New York State govern [a]ll questions concerning the construction, validity, enforcement and interpretation” of the Note, and that “all legal proceedings concerning the interpretations, enforcement and defense” of the Note are to be “commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan.” (Doc. 26, Ex. B at 6–7.) Opportunity Fund alleges that Epitome failed to comply with the terms of the Note and that the $100,000 loan was never repaid.

In March 2009, a Bill of Sale and Transfer Statement (Bill of Sale”) (Doc. 26, Ex. C) was executed which sold Epitome, or some part of its assets, to Savana, a Delaware corporation with its primary place of business in Pennsylvania. The Bill of Sale lists Sovereign Bank as the seller. The Bill of Sale indicates that the buyer, Savana, paid Sovereign $400,000 for their purchase, less a $60,000 expense reimbursed by the seller.

Plaintiff alleges that “the March 16, 2009 Bill of Sale [of Epitome to Savana] was in fact a de facto consolidation or merger and/or Savana is merely a continuation of the business of Epitome and/or the March 16, 2009 transaction was entered into fraudulently for the purpose of escaping liability.” (Doc. 26 at ¶ 12.) In Plaintiff's conception of transaction, Savana was a newly formed company whose first act was the acquisition of Epitome in its entirety. Epitome as previously organized ceased operations in the wake of the transactions. Savana continues to conduct the business of Epitome under the Epitome name. The business continues to serve the same customers. ( See Doc. 39 at 3–4, Ex. C.) Savana has retained top officers of Epitome to run the business. In particular, Epitome's founder is President of the new company, and Epitome's Chief Financial Officer is the new entity's Chief Administrative Officer. (Doc. 39, Exs. C, D.) Plaintiff has included as Exhibits electronically available public records for Epitome's business entity registration in Pennsylvania (Doc. 39, Ex. A) and Delaware (Doc. 39, Ex. B). Neither evinces any information identifying ownership interests in Epitome.

In contrast, Defendant Savana contends that it purchased only some of Epitome assets, and in doing so did not assume any of Epitome's liabilities or obligations. Defendant characterizes the transaction at issue as a mere asset purchase at a public sale orchestrated by Sovereign Bank, which had seized the assets as collateral when Epitome defaulted on a secured loan. Defendant argues Sovereign's exercise of this post-default remedy was proper under the Uniform Commercial Code and denies that there is any continuity or commonality of ownership between itself and Epitome. ( See Docs. 35, 40.) Savana has submitted no sworn affidavits in support of these contentions.

In June 2011, Opportunity Fund filed a Complaint asserting breach of contract, conversion, promissory estoppel and unjust enrichment claims against named defendants Epitome and Savana. (Doc. 1.) After multiple futile attempts to serve process on Epitome through the agents so designated in Epitome's Pennsylvania and Delaware business entity records, Plaintiff concluded that Epitome no longer existed due to its purchase by Savana. Plaintiff therefore amended its Complaint to name Savana as the sole defendant. (Doc. 26.) Defendant Savana now moves to dismiss Plaintiff's Amended Complaint pursuant to Fed.R.Civ.P. 12(b)(2) for lack of personal jurisdiction, pursuant to Rule 12(b)(3) due to the presence of a forum selection clause in the Note, and pursuant to Rule 12(b)(6) for failure to state a claim on which relief can be granted. The Court discusses each asserted ground for dismissal in turn.

A. Personal Jurisdiction

Defendant Savana seeks dismissal of the claims against it for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2). “Because personal jurisdiction is a threshold determination linked to any subsequent order issued by the court,” The Kroger Co. v. Malease Foods Corp., 437 F.3d 506, 510 (6th Cir.2006), the Court turns to Defendant's Rule 12(b)(2) argument first. For the reasons set forth below, Defendant's Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction is DENIED.

1. Standard of Review

Plaintiff bears the burden of establishing that personal jurisdiction over a defendant exists. Air Prods. & Controls, Inc. v. Safetech Int'l, Inc., 503 F.3d 544, 549 (6th Cir.2007) (citing Serras v. First Tenn. Bank Nat'l Ass'n, 875 F.2d 1212, 1214 (6th Cir.1989)). Where, as here, “the district court relies solely on written submissions and affidavits to resolve a Rule 12(b)(2) motion, rather than resolving the motion after either an evidentiary hearing or limited discovery, the burden on the plaintiff is ‘relatively slight,’ and ‘the plaintiff must make only a prima facie showing that personal jurisdiction exists in order to defeat dismissal.’ Id. (quoting Am. Greetings Corp. v. Cohn, 839 F.2d 1164, 1169 (6th Cir.1988); Theunissen v. Matthews, 935 F.2d 1454, 1458 (6th Cir.1991)). Plaintiff can make this showing by ‘establishing with reasonable particularity sufficient contacts between [the Defendants] and the forum state to support jurisdiction.’ Neogen Corp. v. Neo Gen Screening, Inc., 282 F.3d 883, 887 (6th Cir.2002) (quoting Provident Nat'l Bank v. California Federal Savings Loan Ass'n, 819 F.2d 434, 437 (3d Cir.1987)). In deciding a Rule 12(b)(2) motion, the Court “construe[s] the facts in the light most favorable to the non-moving party,” and “does not weigh the controverting assertions of the party seeking dismissal.” CompuServe Inc. v. Patterson, 89 F.3d 1257, 1262 (6th Cir.1996) (emphasis in original) (citing Theunissen, 935 F.2d at 1459).

2. Law and Analysis
a. Introduction

“Personal jurisdiction over an out-of-state defendant arises from certain minimum contacts with [the forum] such that maintenance of the suit does not offend traditional notions of fair play and substantial justice.” Air Prods., 503 F.3d at 549 (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945)) (internal quotations omitted). When a federal court sits in diversity, [t]he exercise of personal jurisdiction is valid only if it meets both the state long-arm statute and constitutional due process requirements.” Calphalon Corp. v. Rowlette, 228 F.3d 718, 721 (6th Cir.2000) (citing Nationwide Mut. Ins. Co. v. Tryg Int'l Ins. Co., Ltd., 91 F.3d 790, 793 (6th Cir.1996)).

Here, Plaintiff argues that this Court has jurisdiction over Defendant Savana not because of its own contacts with Ohio, but because it is successor to Epitome. As the Sixth Circuit has explained:

federal courts have consistently acknowledged that it is compatible with due process for a court to exercise personal jurisdiction over an individual or a corporation that would not ordinarily be subject to personal jurisdiction in that court when the individual or corporation is an alter ego or successor of a corporation that would be subject to personal jurisdiction in that court.

Estate of Thomson v. Toyota Motor Corp. Worldwide, 545 F.3d 357, 362 (6th Cir.2008) (quoting Patin v. Thoroughbred Power Boats Inc., 294 F.3d 640, 653 (5th Cir.2002)). Accordingly, in evaluating Defendant's 12(b)(2) motion, the Court assesses first whether Plaintiff has made the requisite prima facie statutory and constitutional showing with respect Epitome, and then determines whether personal jurisdiction can be imputed to Savana as Epitome's successor.

b. Ohio's Long Arm Statute

Ohio's long-arm statute grants Ohio courts personal jurisdiction over a non-resident defendant “as to a cause of action arising from the person's ... [t]ransacting any business in [Ohio].”...

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