Tech. Funding Grp., LLC v. Clayborne
| Decision Date | 20 January 2012 |
| Docket Number | Civ. No. 11-843 BB/ACT |
| Parties | TECHNOLOGY FUNDING GROUP, LLC (a Delaware limited liability company), Plaintiff, v. COURTNEY R. CLAYBORNE, MICHAEL K. SABERS, and CLAYBORNE, LOOS & SABERS, LLP (a South Dakota limited liability partnership), and JOHN DOES 1-10, Defendants. |
| Court | U.S. District Court — District of New Mexico |
THIS MATTER comes before the Court on Defendants' motion to dismiss for lack of personal jurisdiction and improper venue. Doc. 6. Having closely reviewed the parties' submissions and the relevant authorities, the Court will grant the Defendants' motion.
On September 21, 2011, Plaintiff Technology Funding Group, LLC ("TFG") filed a civil action against Courtney R. Clayborne, Michael K. Sabers, Clayborne, Loos, & Saber, LLP (the "Law Firm"), and John Does 1-10 (collectively "Defendants") alleging violations of the New Mexico Racketeering Act and the Federal Racketeer Influenced and Corrupt Organizations Act ("RICO"). Doc. 2, ¶¶ 67-91. The Complaint further alleges conversion, unjust enrichment, and civil conspiracy. Id. at ¶¶ 92-110.
According to the Complaint, TFG is a limited liability company organized under the laws of Delaware. Id. at ¶ 1. It is deemed to be a citizen of New Mexico because all of its shareholders are New Mexico residents. Id. at ¶¶ 1, 3. In turn, Defendants Sabers and Clayborneare residents of South Dakota. Doc. 6, Ex. 1, ¶ 2; Doc. 6, Ex. 2, ¶ 2. Similarly, the Law Firm is a limited liability partnership organized and existing under the laws of South Dakota. Doc. 6, Ex. 1, ¶ 1.
The case arises out of TFG's purchase of Dakota Arms, Inc., a Minnesota corporation engaged in the business of manufacturing firearms. Doc. 2, ¶ 13. In 2006, Dakota Arms filed a voluntary petition for bankruptcy in the United States Bankruptcy Court for the District of Minnesota. Id. at ¶ 14. Pursuant to an asset purchase agreement approved by the Bankruptcy Court, TFG acquired Dakota Arms' assets, including the right to pursue an outstanding cause of action against First Western Bank of Sturgis ("FWB"). Id. at ¶¶ 16-19.
TFG then hired Sabers and the Law Firm to pursue the cause of action against FWB. The case, Technology Funding Group, LLC v. First Western Bank of Sturgis, 5:07-cv-05084 (hereinafter the "lender-liability lawsuit"), was filed on November 12, 2007 in the United States District Court for the Western Division of the District of South Dakota. Id. at ¶ 20. According to the Complaint, Clayborne participated in meetings and a mediation session involving Sabers and TFG. Doc. 2, at ¶ 21.
No facts in the lawsuit arose out of actions or conduct in New Mexico, all depositions were taken in South Dakota, and the parties ultimately resolved the lawsuit through mediation conducted in South Dakota before Retired Federal Magistrate Judge Marshall Young. Doc. 6, Ex. 1, ¶¶ 16-18. Sabers did, however, communicate with the members of TFG, including the President of the Company, Charles R. Kokesh - a resident of New Mexico. Doc. 6, Ex. 1, ¶ 20; Doc. 2, ¶ 2. During one conference call, Sabers allegedly urged Kokesh to accept a proposed settlement agreement with FWB. Doc. 2, ¶ 26. Sabers further offered to waive any performance or contingency fee due to the Law Firm if the case settled. Id. Subsequently, Kokesh allegedly sent Sabers an e-mail estimating the costs incurred during the litigation by the various law and accounting firms involved in the case. Id. at ¶ 33. The e-mail allegedly attributed $140,00 incosts attributable to the Law Firm. Id. That same day, Sabers and Kokesh held another conference call and discussed the anticipated total due to the Law Firm. Id. at ¶ 34. However, despite these conversations, the Complaint alleges that Sanders fraudulently misrepresented to the Bankruptcy Trustee that $280,000 in fees were attributable to the Law Firm. Id. at ¶ 37. Sanders also allegedly sent Kokesh an e-mail advising him to ignore this calculation error. Id. at ¶ 40. Plaintiff thus alleges that Sanders misrepresented the amount due the Law Firm, thereby perpetrating a fraud on the Bankruptcy Court. Id. at ¶38.
Outside of Defendants' representation of TFG, Defendants have no contacts with New Mexico. Indeed, neither Sabers, Clayborne, nor the Law Firm have any contacts whatsoever with New Mexico. Doc. 6, Ex. 1, ¶¶ 2, 3, 8-9; Doc. 6, Ex. 2, ¶¶ 2-9.
Ultimately, TFG and FWB settled the lender-liability lawsuit for $1,700,000. Id. at ¶ 47. Once the settlement was approved by the Bankruptcy Court, $1,700,000 was wired to the Law Firm's trust account with specific terms for disbursement. Id. at ¶¶ 47-48. The Law Firm then paid itself a total of $147,318.40 out of the trust account. Id. at ¶ 53. The Law Firm also claimed a further $97,692.76 as "Fee and Tax Remaining Due as per Agreement." Id. at ¶ 56. These disbursements were confirmed in a Settlement Statement sent to Kokesh. Id. at ¶ 54.
Believing that the Defendants had unlawfully retained $100,000, TFG's attorneys sent Sabers and the Law Firm a demand letter. Id. at ¶ 63. The Law Firm replied in a letter, explaining that the fee taken by the Law Firm was a performance fee. Id. at ¶ 64. The Plaintiff then filed the instant lawsuit which was followed shortly thereafter by Defendants' motion to dismiss for lack of personal jurisdiction and improper venue.
Plaintiff bears the burden of establishing personal jurisdiction, but where, as here, "the issue is raised early on in litigation, based on pleadings (with attachments) and affidavits, that burden can be met by a prima facie showing." Shrader v. Biddinger, 633 F.3d 1235, 1239 (10thCir. 2011). The Plaintiff can meet this burden by presenting facts that, if true, would reflect personal jurisdiction. See Melea Limited v. Jawer SA, 511 F.3d 1060, 1065 (10th Cir. 2007). In assessing the sufficiency of the Plaintiff's submission, the Court must assume the truth of the allegations if they are "plausible, non-conclusory, and non-speculative." Dudnikov v. Chalk & Vermilion Fine Arts, Inc., 514 F.3d 1063, 1070 (10th Cir. 2008). If factual disputes remain, they are resolved in favor of the Plaintiff. See Cory v. Aztec Steel Bldg., Inc., 468 F.3d 1226, 1229 (10th Cir. 2006) ().
The principal issue in this case is whether section 1965 of RICO confers jurisdiction over the Defendants by authorizing nationwide service of process. In relevant part, section 1965 provides:
18 U.S.C. § 1965. In Cory, 468 F.3d at 1229, the Tenth Circuit closely analyzed these four subsections. The Court first explained that "subsection (a) sets venue in 'any district in which [a defendant] resides, is found, has an agent, or transacts his affairs,' 18 U.S.C. § 1965(a), thereby suggesting that an 'action can only be brought in a district court where personal jurisdiction based on minimum contacts is established as to at least one defendant.'" Id. at 1230 (quoting PT United Can Co. Ltd. v. Crown Cork & Seal Co., 138 F.3d 65, 71 (2d Cir. 1998)). If jurisdiction is established as to one defendant, then subsection (b) authorizes nationwide service of process on "'other parties'" residing beyond the venued district if necessary to further the "'ends of justice.'" Id. (quoting 18 U.S.C. § 1965(b)). Finally, the Tenth Circuit noted, subsection (d) does not provide nationwide service of process. Id. In support of this reading of section 1965, the Tenth Circuit cited RICO's legislative history and decisions from the Second, Seventh, and Ninth Circuits.1 Id. at 1230-31; see also Multi-Media Int'l. LLC v. Promag Retail Servs. LLC, 343 F.Supp. 2d 1024, 1030 (D. Kan. 2004).
This Court is bound by the Tenth Circuit's interpretation of subsection 1965. See United States v. Spedalieri, 910 F.2d 707, 709 (10th Cir. 1990). Plaintiff must therefore establish personal jurisdiction over at least one Defendant in order to impose nationwide service under subsection (b) and establish jurisdiction over the remaining Defendants. Cory, 468 F.3d at 1230; see also Shell v. American Family Rights Ass'n, 2010 WL 1348548, *11-12 (D. Colo. Mar. 31, 2010); Bocciolone v. Solowsky, 2007 WL 4557834, *3 (D. Colo. Dec. 20, 2007).
Nonetheless, Plaintiff urges this Court to disregard Cory on the grounds that the Tenth Circuit incorrectly interpreted section 1965. Plaintiff argues that the Tenth Circuit overlooked two key arguments that are applicable in the instant case: (1) the role of Fed. R. Civ. P.4(k)(1)(C) and (2) the analysis provided in Noble Securities, Inc. v. Miz Engineering, Ltd., 611 F.Supp.2d 513, 547-48 (E.D. Va. 2009), for establishing jurisdiction under section 1965(d). Plaintiff's argument tracks the analysis provided in Noble Securities, Inc. and...
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