Connect with us

Appellate Circuit

A Shady Foreclosure Mill Collapse Raises Questions About Fraudulent Transfers and ‘That’ Factoring Agreement

It appears to LIF, from this and related articles we’re publishing, that NYC Lawyer Craig McGrain’s Factoring company was behaving more like an investor/owner than injured 3rd Party.

Published

on

LIF Releases a Series of Articles on Steven Ablitt’s Foreclosure Mill

PUBLISHED BY LIT: MAR. 21, 2022

Mass. lawyer Steven Ablitt was finally disbarred in 2021, but not before leaving a trail of upset and aggrieved staff without a job or payment of wages earned, clients who incurred substantial theft of funds from the firms’ IOLTA account(s), and shady associates and legal colleagues who Ablitt associated with ending up in financial strife and/or jail, due to the collapse of his firm as a result of his mismanagement and outright fraud.

In this article you’ll read about the background to the collapse of his default business (foreclosing homes after the 2008 financial crisis) and why we question the relationship between Ablitt and McGrain of Durham Commercial Capital, a factoring company which appears to have been acting much more than just a third party vendor, when considering the comments from the former staff employed at the law firm.

Strained foreclosure law firm shuts down after staff walks

JUL. 24, 2014 | REPUBLISHED BY LIT: MAR. 20, 2022

The troubled Woburn-based foreclosure firm Connolly, Geaney, Ablitt & Willard ceased operations over the Fourth of July holiday weekend, leaving employees unpaid and clients in potentially difficult situations.

Lawyers Weekly first reported on the firm’s disarray on June 12.

The story cited mass layoffs, unpaid employee insurance premiums and taxes, a whistleblower suit filed against the firm, and, ironically, the loss of its office building to foreclosure.

Since then, additional information about the firm and entities controlled by lawyer Steven A. Ablitt has come to light.

Connolly Geaney’s demise played out in spectacular fashion earlier this month when its remaining employees in Massachusetts and Florida walked out after being informed they would not be paid.

Internal emails obtained from several sources paint a chaotic picture of the firm’s final days, with employees frantically inquiring about their pay, only to be sent running in circles by Ablitt, the firm’s leaders

and officials from Durham Commercial Capital, a “factoring firm” that had been funding Connolly Geaney’s operations.

Durham Commercial officials confirmed that it has ceased providing money to the law firm or its affiliates after several years, but denied influence or control over payroll decisions.

President Craig L. McGrain, a New York lawyer, said in a prepared statement that Durham is undertaking an investigation into the law firm.

“Durham ceased purchasing its accounts due to what Durham deemed to be numerous breaches of contract arising in connection with certain of CGAW’s actions and behavior,”

Michael W. Ullman, a Florida lawyer representing Durham Commercial, said in an emailed response to questions.

In a July 6 email to firm and Durham Commercial officials, Antonio E. Campos, a lawyer in charge of Connolly Geaney’s Florida office, discussed its “constructive shut down.”

According to Campos, Durham Commercial’s Brian Mosher said payroll would not be met unless Ablitt paid it himself.

Campos wrote that he called name partner John Connolly Jr. on July 3 “to apprise him of the dire situation with the Florida office and to inform him … Mosher … had advised me of [Durham Commercial’s] intent to walk away if certain financial transactions were not met.

Mr. Connolly advised me that there was nothing that could be done and that he and the Board of Directors were also going to walk away.”

In an interview with Lawyers Weekly, Ablitt denied any responsibility for the firm, saying he was merely a client relations consultant.

Ablitt said he “resigned in every official capacity” in 2013 after his previous firm, Ablitt Scofield, merged with Connolly & Geaney and that he “conveyed all interest and all of my stock in March 2014.”

In a firm-wide email dated July 2, Ablitt wrote that “[i]t seems like [Durham Commercial’s] Brian Mosher and Craig McGrain are giving you inaccurate information.

The monies earned off your hard work has gone directly to Craig and Brian.

I am not sure what they have done with it.

I can’t advise you on what to do, but I can with certainty tell you that I will not be paying for payroll this week. … Please do not direct questions about payroll to my attention, I am no longer part of the firm.”

Cheryl B. Pinarchick of Boston’s Murphy & King confirmed that she is “working with one former employee in connection with potential claims against the firm” and has been contacted “by a number of other former employees seeking legal advice in connection with monies they believe are due to them.”

Kevin P. Geaney, who previously answered some questions on behalf of the firm, did not respond to recent interview requests.

In a Middlesex Superior Court filing in response to a former vendor’s lawsuit, Geaney acknowledged that Durham Commercial has an undischarged, “blanket” UCC lien on all the firm’s assets.

In addition to not paying employees, Connolly Geaney also failed to pay Florida-based Stewart Law Group for making appearances on behalf of the firm, according to an email obtained by Lawyers Weekly:

“Effective immediately, Stewart Law Group will not appear on behalf of Connolly Geaney law firm due to non-payment for services rendered,”

managing attorney Leslie S. Stewart wrote in a July 3 “stop work notice” to Connolly Geaney officials.

“This affects all appearances, including those previously confirmed.”

‘Cash flow crisis’

Former employees contend Ablitt is understating his role at the firm. Those employees include two paralegals who said Ablitt personally announced a round of firm layoffs in March.

When Durham Commercial froze the law firm’s accounts earlier this year, employees received handwritten paychecks from one of Ablitt’s entities, Summit Title Corp., which operated out of the same Cambridge Road office building in Woburn as Connolly, Geaney, Ablitt & Willard.

Ablitt explained that was done “as a favor on a one-time basis” because the law firm did not have enough checks to pay everyone after it lost the ability to use payroll service ADP, and that the requisite funds were wired from the law firm to Summit Title.

Ablitt also claimed to be Connolly Geaney’s largest creditor.

“No one has been hurt more than me financially,”

Ablitt wrote Lawyers Weekly in an email in which he claimed to have given $1.3 million in loans to the firm.

“It took me 14 years to build a firm that was billing 125k to 150k a day.

I built this company more or less by myself.

It took Jay Connolly, Kevin Geaney, Rachelle Willard, [former Chief Financial Officer] Bob Feige, Brian Mosher and Craig McGrain 16 months to destroy what was once a well respected firm.”

But allegations against predecessor firms controlled by Ablitt have been kicking around several Massachusetts courthouses in recent years and suggest that financial problems surfaced before the merger with Connolly & Geaney.

Many of the lawsuits pertain to Ablitt-affiliated businesses created to serve other real estate-related needs.

In addition to Summit Title, they include Ablitt’s Bay State Homes, previously Bay State Residential Brokerage, which was formed to leverage Ablitt’s industry contacts to market homes that remained in lender clients’ hands post-foreclosure, according to filings in a lawsuit between Ablitt and his original partner in the business.

Former Chief Financial Officer Alfred Moss said he was aware of a cash flow problem as early as 2011, according to his deposition testimony in a Norfolk Superior Court lawsuit brought against Ablitt by auctioneer Daniel J. Flynn & Co.

In a June 2012 affidavit filed in another vendor lawsuit in Middlesex County, Ablitt’s former partner, Lawrence F. Scofield Jr., said the firm was in the midst of a “cash flow crisis.”

In August 2012, LPS Agency Sales & Posting Inc. sued Ablitt Scofield and Ablitt for failure to make payments required under a $2.3 million promissory note personally guaranteed by Ablitt.

The parties agreed to a stipulated dismissal two months later, but, like Durham Commercial, LPS has an undischarged blanket lien against all Connolly, Geaney, Ablitt & Willard’s assets, according to Geaney’s recent filing in a Middlesex Superior Court case.

In an October 2012 deposition, Scofield acknowledged that the firm had not paid some vendors, even as it sent clients bills that itemized their charges.

At a Middlesex Superior Court hearing that year, Ablitt contended that his clients owed him far more — $7 million — than he owed his vendors — $2.5 million.

Scofield testified about Ablitt’s preference for hiring friends and/or companies he owned to perform services for the firm.

Those companies included AAA Constable Service, run by Jason Burke, who played hockey with Ablitt.

“[P]eople within the firm felt that the rates charged were in numerous cases excessive, but we were ordered to use AAA’s services because they were friends of Steven’s,” Scofield testfied.

Ablitt eventually decided to perform process-serving himself, according to filings in vendors’ lawsuits.

“Steven Ablitt wanted to set up his own service of process company as he thought it was profitable, and he created Nationwide [Service of Process],” Scofield said at the deposition. “And we basically were told to start sending our service of process work to Nationwide and not to” AAA Constable Service.

Nationwide served the firm’s lawsuits in Florida despite a state law that requires that a process server “be disinterested in any process he or she serves.” According to Ablitt’s testimony in a Middlesex Superior Court case, Nationwide hired independent contractors to serve process.

In his deposition and in a June 2012 affidavit, Scofield described the law firm’s relationships with Liberty Auctions Corp. and moving company Zambia Corp.

“Since the beginning of this year, Mr. Ablitt has orally expressed that he is a major stockholder in Zambia Corp,”

Scofield said in the 2012 affidavit.

“Since 2008, I have personal knowledge of the firm management policy that whenever a need exists for moving services or client property preservation services, such work should, at Mr. Ablitt’s direction, be sent to Zambia Corporation.”

According to filings and testimony in multiple state lawsuits, after falling out with Daniel J. Flynn & Co., Ablitt began sending his auction business to Liberty Auctions, owned by his hockey friend Christopher Kearney.

When law firm Ablitt Scofield later came to owe Liberty Auctions more than $1 million, according to Scofield’s deposition, the firm devised a system whereby clients in new cases would pay extra for auction services to cover the amounts the firm owed for auctions previously performed and billed to other cases.

“And we, several months ago said, ‘Look, why don’t we allow you to increase your rate to our clients and we’ll use that new increase to offset the amount that we owe you from the past,’” Scofield said at his deposition.

Complaints lodged with bar overseers

Bar disciplinary authorities in Florida and Massachusetts have received complaints about Connolly, Geaney, Ablitt & Willard.

In response to an inquiry from several of the firm’s Florida lawyers, the Florida Bar Ethics Department concluded in April that Connolly Geaney was running afoul of rules by operating a Florida office despite having no partner based and licensed in Florida to operate it.

And on July 10, Florida bar counsel informed a former Connolly Geaney paralegal that his wide-ranging complaint, which included allegations of the unauthorized practice of law, was “being referred to the Unlicensed Practice of Law department for review.”

One of the most recent bar complaints, filed in Massachusetts by former Connolly Geaney lawyer Walter H. Porr Jr., was provided to Lawyers Weekly by another employee who did not want to be named because he did not have permission to share it. Among Porr’s more serious allegations is his contention that the firm commingled client money in the firm’s operating account.

Lawyers Weekly reviewed a case in which it took the firm more than a year to deposit surplus funds from a foreclosure sale that it was supposed to be holding in trust for Sovereign Bank.

According to a review of the case file in Sovereign Bank v. Boston Local Development Corp., et al., Superior Court Judge Paul E. Troy approved in August 2012 Sovereign Bank’s motion to deposit the surplus funds for the reimbursement of other creditors, including the Boston Local Development Corp. Connolly Geaney did not deposit the funds with the court until November 2013.

Also during that period, Nationstar Mortgage dropped the firm due to “the slow pace of movement on their files,” according to a firm-wide email written by former CFO Feige in April 2013, in which he added:

“This performance has been true across all of our clients,” and, “We don’t need word of this to spread.”

Porr’s BBO complaint also alleges that the firm withheld but failed to pay his state and federal taxes; failed to report and pay unemployment insurance premiums; withheld but did not pay health insurance premiums; bounced hundreds of checks in excess of $100,000 “to courts, registries, newspapers, process servers, etc.”; and, since firing him in May, refused to substitute him out of three pending cases in which he was representing the firm, and hundreds more in which he was representing the firm’s clients.

Porr’s complaint was filed June 13.

The Office of Bar Counsel does not confirm or deny the existence of any investigation until and unless it files a petition for discipline, so it is not known whether the lawyers named — Ablitt, Geaney, Connolly and Willard — have responded to the allegations.

Feige declined to comment through his lawyer, Tara M. Swartz of Boston. Connolly and Willard did not return messages left on their home phones.

YOUR DONATION(S) WILL HELP US:

• Continue to provide this website, content, resources, community and help center for free to the many homeowners, residents, Texans and as we’ve expanded, people nationwide who need access without a paywall or subscription.

• Help us promote our campaign through marketing, pr, advertising and reaching out to government, law firms and anyone that will listen and can assist.

Thank you for your trust, belief and support in our conviction to help Floridian residents and citizens nationwide take back their freedom. Your Donations and your Voice are so important.



As principal of the firm, Michael Ullman has served as counsel and trusted advisor to over 200 factoring companies throughout the United States and abroad.

He also serves numerous other business clients in a range of industries.

He started Ullman & Ullman in 1980.

Ullman & Ullman, P.A. specializes in all forms of commercial transactions and litigation, including domestic, international and complex arbitration proceedings, entity formation and drafting of contracts and agreements.

Because of his more than 35 years of experience and significant involvement with factoring, forfaiting and asset-based lending, Mr. Ullman has extensive familiarity with business operations in a diverse range of industries.

Mr. Ullman serves as co-counsel for the International Factoring Association, a position he has held for over 10 years, and lectures frequently at IFA events as well as publishing frequently in the organization’s journal.

Education

Juris Doctor, Shepard Broad Law Center, Nova Southeastern University, 1979;
Graduated Magna Cum Laude in top 1% of class;
Served as member of and published for Nova Law School Law Review;
Bachelor of Arts, University of Florida, 1975

Admitted to Bar

Florida Bar

United States Bankruptcy Courts for the Southern, Middle and northern Districts of Florida

Federal Courts for the Southern, Middle and northern Districts of Florida

Federal Courts of Appeals, 11th and 5th Circuits

Received pro hac vice status to serve clients in numerous states throughout the country

Recent Speaking Engagements

May, 2021 – IFA 27th Annual Factoring Conference in Phoenix, AZ.

October, 2019 – IFA Supply Chain Finance Training Class in Las Vegas, NV.

April, 2019 – IFA 25th Annual Conference in San Diego, CA.

Published Articles

Bankruptcy: To Be Or Not To Be — Preferred
The Commercial Factor, newsletter of the International Factoring Association,
Volume I, Number I

Banks Beware: You May Owe Your Customer’s Factor! (or) Hey Factors: Does Your Client’s Bank Owe You Money?
The Commercial Factor, newsletter of the International Factoring Association,
Volume I, Number II

You Heard Right: You can factor a client who sells you invoices for its real estate construction jobs, you just have to watch out for….
The Commercial Factor, newsletter of the International Factoring Association,
Volume II, Number III

Recognized Honors

Michael W. Ullman was inducted as a Fellow into the American College of Commercial Finance Lawyers (“ACCFL”), a distinguished honor recognizing his prominence and substantial contributions in the practice of commercial finance, during the ABA Business Law Section meeting held in Montreal, Canada April 9, 2016.

The ACCFL, founded in 1991, is an exclusive group of commercial finance lawyers, jurists and academics who have not only achieved preeminence in the field of commercial finance law, but who also have contributed significantly to the education of others in commercial finance law through teaching, lecturing or published writings

. The ACCFL is dedicated to promoting the field of commercial finance law through education, legislative reform and the recognition of distinguished practitioners, jurists and academics. The College offers a venue to promote and recognize outstanding achievement and advances in the field of commercial finance law.

Possessing exceptional skills as an attorney in the financial services sector, Craig McGrain currently acts as President of Durham Funding, located in Pittsford, New York. Craig McGrain leads all legal negotiations for the firm and successfully directs operations in the sales, marketing, and accounting departments of the company as well.

An outstanding and very motivated student, Craig McGrain graduated from the State University of New York system’s University at Buffalo in three years. Receiving honors and membership in the Phi Beta Kappa Society, Craig McGrain was awarded a Bachelor of Science in Sociology and Statistics. At Vanderbilt University Law School, Craig McGrain ranked in the top of his class and edited for the Vanderbilt Law Review.

After obtaining a Juris Doctor degree, Craig McGrain began his legal career at Nixon Peabody LLP. Gaining in-depth experience in law pertaining to financial services, Craig McGrain concentrated his practice on commercial lending and loan restructuring.

Craig McGrain’s early success as an attorney led him to a partnership at the highly influential firm Hodgson, Russ, Andrews, Woods, and Goodyear, LLP (now Hodgson Russ LLP), located in Rochester, New York.

Craig McGrain headed the financial services department for the firm and accrued significant experience in handling complex litigation and structuring for lenders and other financial institutions.

Representing lenders in the United States and abroad, Craig McGrain has handled negotiations for bankruptcy proceedings and other related matters.

Committed to upholding the highest ethics in his profession, Craig McGrain is a member of the New York State Bar Association.

Craig McGrain gives generously of his time to his local community of Pittsford, New York, by coaching youth in a variety of sports activities. Fishing and playing tennis and hockey are among Craig McGrain’s favorite ways to relax in his free moments.

 

Missouri Court of Appeals,Western District.

Joseph LOVENDUSKI, Respondent, v. Craig L. McGRAIN, Appellant.

No. WD 59260.
Decided: August 07, 2001

Before THOMAS H. NEWTON, P.J., HAROLD L. LOWENSTEIN, J. and JAMES M. SMART, JR., J. Ann E. Buckley, St. Louis, for appellant. Joseph W. Vanover, Keith Wayne Hicklin, Platte City, for respondent.FACTUAL BACKGROUND

Mr. Craig McGrain appeals the default judgment against him and in favor of Mr. Joseph Lovenduski on Mr. Lovenduski’s “Petition on Loan/Breach of Contract.”   The issue in this case concerns the exercise of personal jurisdiction over an out-of-state defendant by the circuit court.   The history of the case, as demonstrated by the record, is as follows.

Mr. Lovenduski filed a petition against Mr. McGrain, a New York defendant, on April 20, 2000, to recover $120,000 in funds loaned, plus interest.   The petition alleged that Mr. Lovenduski was a Missouri resident and that Mr. McGrain was a resident of New York. Apparently, the parties did not execute a written agreement.   The petition alleged, however, that on two occasions Mr. Lovenduski borrowed $60,000 from Citizens Bank & Trust in Livingston, Missouri, and that the funds were advanced to Mr. McGrain through an affiliated corporation, First Austin Funding Corporation.   According to the petition, Mr. McGrain agreed to repay the loan, made some of the monthly payments, but eventually ceased payment.   Further, it alleged that the “transaction occurred” in the State of Missouri.

Mr. McGrain was personally served in New York on April 28, 2000.   On May 30, 2000, Mr. McGrain’s attorney filed a “Special Entry of Appearance to Contest Personal Jurisdiction.”

Mr. Lovenduski filed a “Motion for Entry of Default Judgment” on June 19, 2000.   Included with the motion was an “Affidavit in Support of Default Judgment” signed by Mr. Lovenduski that contained substantially the same facts as alleged in the petition, including the contention that the “transaction occurred” in the State of Missouri.   The motion was to be heard on July 7, but Mr. McGrain requested a continuance on June 26.   On July 21, 2000, the court held a hearing on Mr. Lovenduski’s motion.   Prior to the hearing, no motion to dismiss for lack of personal jurisdiction had been made by Mr. McGrain, nor had he filed an answer.   In entering default judgment against Mr. McGrain, the circuit court deemed the allegations in Mr. Lovenduski’s petition admitted.   On July 31, 2000, Mr. McGrain’s attorney filed an “Entry of Appearance” in addition to a “Notice of Hearing on Motion to Set Aside Default Judgment,” “Motion for Leave to File Answer Out of Time,” and “Motion to Dismiss for Lack of Personal Jurisdiction.”   The “Motion to Set Aside Default Judgment” was also filed on July 31, accompanied by an “Affidavit Denying Personal Jurisdiction” signed by Mr. McGrain.   Amended motions to set aside the default judgment were filed on August 14 and August 18.   On August 17, Mr. Lovenduski filed “Suggestions in Opposition to Defendant’s Amended Motion to Set Aside Default Judgment.”   Mr. McGrain’s Answer was filed on August 18, and his motion to dismiss was filed on August 25.   The motion to dismiss was accompanied by an affidavit signed by Mr. McGrain, which stated that he had been a resident of New York for fifteen years and was never a resident of Missouri;  he had never borrowed any money in Missouri;  prior to 1998, he had never been in Missouri;  he was in the State of Missouri once in 1998 for a three-hour business meeting unrelated to matters involved in the litigation;  he had no assets in the State of Missouri;  that he had no business interests in the State of Missouri;  and he had no other contacts with the State of Missouri.   Also, on August 25, “Notice of Hearing on the Motion to Dismiss” was filed.

On August 18, a hearing was held in regard to the motion to set aside the default judgment.   At the hearing, Mr. McGrain’s attorney acknowledged that “it is within [the circuit court’s] discretion to award fees against me for the trouble that has gone to the plaintiff’s law firm to try to press me into this.”   The court sustained Mr. McGrain’s motion, conditioned upon the payment of $500 in partial attorney’s fees.   An “Order Setting Aside Default Judgment” was filed on August 22, requiring payment of the partial attorney’s fees within fifteen days.

On September 11, the parties consented to October 6 as the date for the hearing on Mr. McGrain’s Motion to Dismiss.   However, on October 5, Mr. McGrain’s counsel requested leave to withdraw as Mr. McGrain’s attorney, citing Mr. McGrain’s failure to communicate as the grounds for the request.   The following day, Mr. Lovenduski filed a “Motion for Entry of Order Denying Amended Motion to Set Aside Default Judgment,” which alleged that the $500 in partial attorney fees had not been paid.   Also, on October 6, the law firm presently representing Mr. McGrain made its entry of appearance.   Former counsel for Mr. McGrain was granted leave to withdraw on October 25.   On November 6, the court entered an “Order and Judgment Denying Amended Motion to Set Aside Default Judgment,” which overruled Mr. McGrain’s amended motion to set aside the default judgment and reinstated the default judgment originally entered.   An “Amended Order and Judgment Denying Amended Motion to Set Aside Default Judgment” was filed on November 7, and Mr. McGrain filed his notice of appeal the same day.

In summary, the timeline for the case in the year 2000 is as follows:

April 20-Petition filed by Mr. Lovenduski

April 28-McGrain served in New York

May 30-“Special Entry of Appearance to Contest Personal Jurisdiction” filed

July 21-Hearing on Mr. Lovenduski’s motion for default judgment;  default judgment issued

July 31-“Entry of Appearance” filed by Mr. McGrain’s attorney;  “Notice of Hearing on Motion to Set Aside Default Judgment,” “Motion for Leave to File Answer Out of Time,” and “Motion to Dismiss for Lack of Personal Jurisdiction” filed by Mr. McGrain;  “Motion to Set Aside Default Judgment” with “Affidavit Denying Personal Jurisdiction” filed by Mr. McGrain

August 11-Hearing on Mr. McGrain’s motion to set aside the default judgment

August 14-“Amended Motion to Set Aside Default Judgment” filed by Mr. McGrain with his “Affidavit Denying Personal Jurisdiction”

August 16-“Amended Motion to Set Aside Default Judgment” filed by Mr. McGrain with his “Affidavit Denying Personal Jurisdiction”

August 18-Hearing held on Mr. McGrain’s amended motion to set aside the default judgment;  Answer filed for Mr. McGrain

August 22-Order setting aside the default judgment issued, conditioned on payment of $500 in partial attorney’s fees

August 25-“Motion to Dismiss for Lack of Personal Jurisdiction” filed by Mr. McGrain with affidavit

October 5-Request for leave to withdraw by Mr. McGrain’s former counsel

October 6-“Motion for Entry of Order Denying Amended Motion to Set Aside Default Judgment” filed by Mr. Lovenduski;  entry of appearance made by Mr. McGrain’s current counsel

November 6-“Order and Judgment Denying Amended Motion to Set Aside Default Judgment” issued by the circuit court

November 7-“Amended Order and Judgment Denying Amended Motion to Set Aside Default Judgment” issued by the circuit court;  Notice of appeal filed by Mr. McGrain

STANDARD OF REVIEW

In reviewing a default judgment, we will sustain the trial court’s discretion unless there is no substantial evidence to support it, it is against the weight of the evidence, or it erroneously declares or applies the law.  Young v. Safe-Ride Servs., 23 S.W.3d 730, 732 (Mo.App. W.D.2000);  Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976).   Because of this court’s distaste for default judgments, we subject the discretion of a trial court to deny a motion to set aside a default judgment to closer scrutiny than the discretion of a trial court to grant a motion to set aside, and, consequently, we are much more likely to interfere with the trial court’s decision when the motion to set aside the judgment has been denied.  Young, 23 S.W.3d at 732.

LEGAL ANALYSIS

We recognize that “a personal judgment rendered by a court without personal jurisdiction over the defendant is void and may be attacked collaterally” and that “a defendant ‘is always free to ignore the judicial proceedings, risk a default judgment and then challenge that judgment on jurisdictional grounds in a collateral proceeding.’ ” Crouch v. Crouch, 641 S.W.2d 86, 90 (Mo. banc 1982) (quoting Ins. Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 102 S.Ct. 2099, 2106, 72 L.Ed.2d 492 (1982)). Historically, the alternate method of objecting to personal jurisdiction was to enter a “special appearance” that was limited to challenging personal jurisdiction.  State ex rel. White v. Marsh, 646 S.W.2d 357, 359 (Mo. banc 1983).   Any action taken inconsistent with the claim of want of jurisdiction, “some overt act constituting a general appearance, by virtue of which the defendant submits himself or itself to the jurisdiction of the court”, was deemed to be waiver of the defense.  State ex rel. Boll v. Weinstein, 365 Mo. 1179, 295 S.W.2d 62, 66 (1956).

With the advent of the Civil Code of 1943, however, as well as the present Rules of Civil Procedure based on the code, the strict requirements for challenges to personal jurisdiction were relaxed, so that now a party has the ability to challenge personal jurisdiction in conjunction with other defenses.  State ex rel. Antoine v. Sanders, 724 S.W.2d 502, 503-04 (Mo. banc 1987).   Thus, not only is objecting by way of a “special appearance” no longer required, but it “serves no useful purpose.”  Marsh, 646 S.W.2d at 361.   Presently, Rule 55.27 1 addresses the defense of lack of personal jurisdiction.   The rule states, in pertinent part:

Every defense, in law or fact, to a claim in any pleading, ․ shall be asserted in the responsive pleading thereto if one is required, except that the following defenses may at the option of the pleader be made by motion:

* * *

(2) Lack of jurisdiction over the person;

* * *

A motion making any of these defenses shall be made:

(A) Within the time allowed for responding to the opposing party’s pleading, or

(B) If no responsive pleading is permitted, within thirty days after the service of the last pleading.

* * *

If a pleading sets forth a claim for relief to which the adverse party is not required to serve a responsive pleading, the adverse party may assert at the trial any defense in law or fact to the claim for relief.

Rule 55.27(a);  see F.A. Chapman v. Commerce Bank of St. Louis, 896 S.W.2d 85, 86 (Mo.App. E.D.1995).   Further, Rule 55.27(g)(1) provides, in relevant part:

A defense of lack of jurisdiction over the person ․ is waived (A) if omitted from a motion in the circumstances described in subsection (f) [which allows for consolidation of motions] or (B) if it is neither made by motion under this Rule nor included in a responsive pleading.

Although the present factual pattern would present an interesting question of whether Mr. McGrain waived the defense,2 we are not required to determine that issue.   The record is perfectly clear as to the justification chosen by the circuit court in exercising in personam jurisdiction over Mr. McGrain when it entered the default judgment on July 21, 2000:

THE COURT:  So what we have pending before us this morning is the Motion for Default Judgment?

MR. HICKLIN [counsel for Mr. Lovenduski]:  Yes.

THE COURT:  Do you have evidence?

MR. HICKLIN:  Judge, with the affidavit in support of it that I filed with my motion, which I would offer to The Court.

THE COURT:  What’s the basis of the jurisdiction, Mr. Hicklin?

MR. HICKLIN:  That the transaction occurred in the State of Missouri.   The defendant is a nonresident who resides in the State of New York, but the jurisdiction is because the transaction occurred in the State of Missouri.

Once the document was marked as Plaintiff’s Exhibit Number 1, counsel for Mr. McGrain noted that the affidavit was signed in Monroe County, New York, and the court admitted the exhibit.   Immediately thereafter, the following was said:

THE COURT:  Do you have any other evidence Mr. Hicklin?

MR. HICKLIN:  Your Honor, with no pleading, then all of the allegations of the petition are deemed admitted, including the jurisdictional allegations.

THE COURT:  The Court finds that all allegations of the Plaintiff’s Petition on Loan/Breach of Contract filed April the 20th, 2000, are deemed admitted.   The Court’s received in evidence the Affidavit in Support of Default Judgment, Plaintiff’s Exhibit Number 1.

And based upon the evidence, judgment is entered for plaintiff and against defendant․

Thus, prior to entering the Default Judgment, consent by waiver was not considered as a basis for personal jurisdiction over Mr. McGrain.   Rather, it is unmistakably clear that the circuit court based its determination on long-arm jurisdiction, which brings us to Mr. McGrain’s first point on appeal.   Quite simply, he argues that the circuit court lacked personal jurisdiction.   He suggests that the trial court lacked personal jurisdiction over him because Mr. Lovenduski’s petition and affidavit failed to establish that Mr. McGrain had contracted in Missouri or that he had sufficient minimum contacts with Missouri, and because Mr. McGrain, a New York resident who had been in Missouri only once for a meeting unrelated to the lawsuit, signed an affidavit which showed that he had not engaged in any activity enumerated in § 506.500.

Determining whether the assertion of personal jurisdiction is proper requires both a determination of whether the action arose out of an activity covered by § 506.500 or Rule 54.06 and whether there were sufficient minimum contacts with the State of Missouri to satisfy due process requirements.   See Angoff v. Marion A. Allen, Inc., 39 S.W.3d 483, 486 (Mo. banc 2001).   A court may consider affidavits, oral testimony, or depositions.  Conway v. Royalite Plastics, Ltd., 12 S.W.3d 314, 318 (Mo. banc 2000).   The only evidence presented here was an affidavit.   A trial court considering affidavits may believe or disbelieve any statement contained therein, and it has discretion in making factual determinations.  Chromalloy Am. Corp. v. Elyria Foundry Co., 955 S.W.2d 1, 4 (Mo. banc 1997) (quoting Quelle Quiche v. Roland Glass Foods, 926 S.W.2d 211, 213 (Mo.App. E.D.1996)).

Unfortunately for Mr. Lovenduski, “[t]he proper function of an affidavit is to state facts, not conclusions.”  Conway, 12 S.W.3d at 318.   Whether the transaction occurred in Missouri is a conclusion, and a legal one at that.   Although a contract wholly performed in Missouri might have been sufficient to have conferred personal jurisdiction, see State ex rel. Metal Serv. Ctr. of Ga., Inc. v. Gaertner, 677 S.W.2d 325, 327-28 (Mo. banc 1984), the affidavit did not contain sufficient detailed facts for this court to conclude that the “transaction” falls within one of the subsections of either § 506.500 or Rule 54.06.   The record does not suggest beyond the nebulous statements of the petition and Mr. Lovenduski’s affidavit what transaction occurred in Missouri, the nature of the transaction that occurred, when the transaction occurred, or how Mr. McGrain participated in the transaction.   Even at oral argument, counsel for the parties were unable to elaborate, so the court continues to wonder.

The determination of the jurisdictional issue is for the trial court in the first instance, but the sufficiency of the evidence to make a prima facie showing that the trial court may exercise personal jurisdiction is a question of law, which we review independently on appeal.  Weicht v. Suburban Newspapers of Greater St. Louis, Inc., 32 S.W.3d 592, 600 (Mo.App. E.D.2000).   Clearly, with so many unanswered questions, Mr. Lovenduski’s bare assertion that the transaction occurred in the state, and nothing more, was insufficient for the court to determine that it could exercise long-arm jurisdiction.  Section 506.500 provides, in relevant part:

1.  Any person or firm, whether or not a citizen or resident of this state, or any corporation, who in person or through an agent does any of the acts enumerated in this section, thereby submits such person, firm, or corporation, and, if an individual, his personal representative, to the jurisdiction of the courts of this state as to any cause of action arising from the doing of any of such acts:

(1) The transaction of any business within this state;

(2) The making of any contract within this state;

(3) The commission of a tortious act within this state;

(4) The ownership, use, or possession of any real estate situated in this state;

(5) The contracting to insure any person, property or risk located within this state at the time of contracting;

(6) Engaging in an act of sexual intercourse within this state with the mother of a child on or near the probable period of conception of that child.

* * *

3. Only causes of action arising from acts enumerated in this section may be asserted against a defendant in an action in which jurisdiction over him is based upon this section.

Rule 54.06 contains substantially the same provisions.

“To demonstrate that the action arose out of an activity covered by this statute, a plaintiff must make a prima facie showing of the validity of its claim.”  Conway, 12 S.W.3d at 318.   Although not required to prove all of the elements that form the basis of the defendant’s liability, a plaintiff must show that the acts contemplated by the statute took place.   Id. Here, Mr. Lovenduski has made no showing whatsoever that the acts contemplated by the statute took place.   Based on our review of the transcript at the hearing on the Motion for Default Judgment, quoted supra, we are left with the impression that the court determined that personal jurisdiction existed because the petition alleged and the Affidavit swore that the “transaction occurred” in Missouri.

The statute provides that long-arm jurisdiction exists due to “(1) The transaction of any business within this state;  [or] (2) The making of any contract within this state.” § 506.500.1, RSMo 2000;  see Rule 54.06.   While both subsections read together might be very loosely translated to mean that long-arm jurisdiction exists where a transaction occurs in the State of Missouri, Mr. Lovenduski had the burden of establishing long-arm jurisdiction by showing that Mr. McGrain engaged in an activity contemplated by the statute.   Because it was not presented with such intricate facts, see Farris v. Boyke, 936 S.W.2d 197, 203 (Mo.App. S.D.1996), we cannot see how the circuit court could have concluded that the long-arm statute was satisfied.

Additionally, the limits imposed by the Fourteenth Amendment further contained the circuit court’s ability to exercise personal jurisdiction.   Due process requires that the defendant have minimum contacts with the state so that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.  Conway, 12 S.W.3d at 318 (citing Int’l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945)).   Missouri courts consider five factors when ascertaining whether there are sufficient minimum contacts by the defendant:  “1) the nature and quality of the contact;  2) the quantity of those contacts;  3) the relationship of the cause of action to those contacts;  4) the interest of Missouri in providing a forum for its residents;  and 5) the convenience or inconvenience to the parties.”  Conway, 12 S.W.3d at 318.   Again, this court is left to guess as to any of the five factors.   We are not inclined to engage in speculation as to how the lower court considered any of these factors because the record does not reasonably suggest the nature and quality of Mr. McGrain’s contact.   Thus, not only does the record fail to establish that the suit arose out of an activity enumerated in § 506.500 or Rule 54.06, but it also failed to show that there are sufficient minimum contacts to satisfy due process.

Therefore, the record contains insufficient information for this court to evaluate the propriety of the circuit court’s exercise of personal jurisdiction over Mr. McGrain.

CONCLUSION

For the foregoing reasons, we are unable to determine whether the trial court properly exercised personal jurisdiction over Mr. McGrain.   Accordingly, the decision of the trial court is reversed and remanded for further proceedings consistent with this opinion.   We direct the trial court to determine whether there are sufficient minimum contacts with Missouri for the court to acquire personal jurisdiction over Mr. McGrain.   The trial court is also directed to liberally grant leave to amend the petition so that Mr. Lovenduski will be allowed to address the concerns raised in regard to § 506.500 and Rule 54.06.   Rule 55.33(a).

FOOTNOTES

1.   All rule references are to Missouri Rules of Civil Procedure (2001) unless otherwise indicated.

2.   Compare Sola v. Bidwell, 980 S.W.2d 60, 65 (Mo.App. W.D.1998) ( “when [the defendant] filed his entry of appearance, he became a participant in the case, free to contest personal jurisdiction.   As a participant, he was bound by the Rules of Civil Procedure, which require personal jurisdiction objections to be lodged within the time allowed for a responsive pleading․ [The defendant] did not file his motion challenging the court’s personal jurisdiction within the time provided by the rules.   Therefore, he waived any challenge he may have had to the court’s jurisdiction over his person.”) with Sanders, 724 S.W.2d at 504 (“The general rule, however, remains in force.   The challenge to venue must be made at the first opportunity, and will be waived by taking steps relating to the merits of the case before the objection to venue is presented.”) (citations omitted) (noting that “the defenses set out in subparagraph (2), (3), (4) and (5) of Rule 55.27(a) are of essentially the same quality and subject to the same legal principles.”)

NEWTON, Judge.

HAROLD L. LOWENSTEIN, Judge and JAMES M. SMART, Jr., Judge, concur.

ARK MILLER, LLC, et al., Plaintiffs, v. DURHAM GROUP, LTD., et al., Defendants.

United States District Court, N.D. California.

December 16, 2019.

Editors Note
Applicable Law: 28 U.S.C. § 1332
Cause: 28 U.S.C. § 1332 Diversity – Other Contract
Nature of Suit: 190 Contract: Other
Source: PACER


Attorney(s) appearing for the Case

Park Miller, LLC, a Delaware limited liability company, Henry S Lawson, an individual and co-trustee of the Lawson Charitable Remainder Unitrust and co-trustee of the Lawson Family Trust, Marcia Lawson, an individual and co-trustee of the Lawson Charitable Remainder Unitrust and co-trustee of the Lawson Family Trust, Lawson Land, Inc., a California corporation, Edward Miner, an individual and trustee of the Miner 2003 Living Trust, Edward Miner Separate Property, James Combs, an individual and co-trustee of the James and Dorothy Combs Family Living Trust, Dorothy Combs, an individual and co-trustee of the James and Dorothy Combs Family Living Trust, Suzanne B. Combs, an individual and co-trustee of the Gregory M. and Suzanne B. Combs Family Living Trust & Gregory M. Combs, an individual and co-trustee of the Gregory M. and Suzanne B. Combs Family Living Trust, Plaintiffs, represented by Alexandrea Marie Tomp , Bowles and Verna & Richard T. Bowles , Bowles & Verna LLP.

Roger E. Choplin, an individual and co-trustee of the Roger E. Choplin and Carolyn J. Mone Revocable Trust & Carolyn J. Mone, an individual and co-trustee of the Roger E. Choplin and Carolyn J. Mone Revocable Trust, Plaintiffs, represented by Richard T. Bowles , Bowles & Verna LLP.

Durham Group, Ltd., a New York Corporation, Durham Commercial Capital Corp., a New York Corporation, Maasai Holdings LLC, a New York limited liability company, First Austin Funding Corp., a New York corporation & Craig McGrain, Defendants, represented by June D. Coleman , Carlson & Messer LLP.

 


ORDER GRANTING MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION AND FOR FAILURE TO STATE A CLAIM

Re: Dkt. No. 13

WILLIAM H. ORRICK, District Judge.

INTRODUCTION

Plaintiff Park Miller LLC (“Miller”), a wealth advisory firm, advised its clients to invest in defendant Durham Group, Ltd. (“DGL”). Multiple promissory notes were executed between those clients and DGL. In November 2018, DGL defaulted on the promissory notes, for which the plaintiff clients (“the contracting plaintiffs”) bring breach of contract claims.1 The plaintiffs name DGL, Craig McGrain, the President and owner of DGL, and other allegedly related corporations owned by McGrain (Durham Commercial Capital Corp. (“DCC”), First Austin Funding Corp. (“First Austin”), and Maasai Holdings LLC (“Maasai Holdings”)) as defendants that engaged in fraud by misrepresenting and concealing the financial status of DGL. Miller contends that these fraudulent actions also interfered with its business relationship with its clients.

Defendants concede that the breach of contract claims against DGL and DCC state plausible causes of actions. The remaining defendants seek dismissal for lack of personal jurisdiction and, failing that, dismissal of the breach of contract claims as to them. All defendants move to dismiss the fraud claims. I agree that plaintiffs have not sufficiently alleged personal jurisdiction over McGrain, First Austin and Maasai Holdings and have not met Federal Rule of Civil Procedure 9(b)’s requirement to state fraud claims with particularity. I GRANT defendants’ motion with leave to amend.

BACKGROUND

I. PROCEDURAL BACKGROUND

On July 19, 2019, plaintiffs filed a complaint bringing multiple breach of contract claims and several claims based on fraud and misrepresentation. Complaint (“Compl.”) [Dkt. No. 1]. On September 25, 2019, defendants moved to dismiss the Complaint for lack of personal jurisdiction and for failure to state a claim, to which plaintiffs responded with both an opposition and a First Amended Complaint (“FAC”). Plaintiffs argue that the FAC adds more allegations about personal jurisdiction, particularly regarding the alter ego theory, and contend that the FAC moots defendants’ arguments on failure to state a claim. Oppo. 1.

In their reply, defendants request that I address their motion to dismiss despite the filing of the FAC, arguing that the FAC does not address the arguments made in the motion, and that the arguments continue to apply to the two additional plaintiffs added in the FAC. Reply [Dkt. No. 20] 3 n.2. I heard argument on November 13, 2019.

II. FACTUAL BACKGROUND

A. The Parties

Miller is incorporated in California and is engaged in comprehensive planning, investment management and other related services. Complaint (“Compl.”) [Dkt. No. 1] ¶ 1. The contracting plaintiffs reside in California or, in Lawson Land Inc.’s case, is incorporated in California. Id. ¶¶ 2-9; see also First Amended Complaint (“FAC”) [Dkt. No. 19] ¶ 10-11 (adding two more clients of Park Miller LLC as plaintiffs). All corporate defendants are incorporated in New York and McGrain is a New York resident. Id. ¶¶ 12-16

DCC is a factoring business, which purchases invoices owed to businesses in return for a percentage of the invoiced amounts. Declaration of Craig McGrain (“McGrain Decl.”) [Dkt. No. 13-1] ¶ 2. DGL borrows money through promissory notes and raises capital to fund DCC’s factoring business. Id. First Austin sells paper products. Maasai Holdings is a debt buyer. Id. ¶¶ 5-6. Plaintiffs allege that McGrain is the President of DGL, the Chief Executive Officer of DCC, and is in control of or owns First Austin and Maasai Holdings. Id. ¶¶ 12-16.

B. The Promissory Notes

Miller alleges that defendants induced it to advise its clients, the contracting plaintiffs, to invest in DGL by intentionally misrepresenting DGL’s financial status and concealing crucial information. FAC ¶ 104. Each of the contracting plaintiffs entered into promissory notes with DGL to invest millions of dollars to fund DCC’s factoring business. FAC ¶¶ 30-50; see also id. FAC, Exs. A-I (copies of the promissory notes between each contracting plaintiff and DGL). Each contracting plaintiff brings breach of contract claims against all defendants for defaulting on the promissory notes and failing to take action in order to cure the default. FAC ¶¶ 62-101 (causes of action (“COAs”) 1-5). As to these breach of contract claims, defendants move to dismiss the claims against all defendants except DGL/DCC, arguing that the other defendants are not parties to the underlying promissory notes. Mot. 1.2

C. Defendants’ Fraudulent Acts and Misrepresentation

Beginning no later than the first quarter of 2018, plaintiffs allege that defendants knew or should have known that their financial status had detrimentally changed because one of the entities to which they provided $1,797,000 was in default. FAC ¶ 51. Defendants identify this entity as 1-800 Solar in their reply. See Reply in Support of Motion to Dismiss (“Reply”) [Dkt. No. 20] 7. Plaintiffs contend that in April 2018, defendants knew or should have known that 1-800 Solar also filed for bankruptcy. FAC ¶ 51. Despite this knowledge, the financial statements of DGL and DCC emailed to Miller between January 2018 and November 2018 continued to reflect that the receivables of this bankrupt entity were active assets. Id. ¶ 52.

Plaintiffs assert that this false reporting prevented Miller from realizing the true financial condition of DGL and DCC. FAC ¶ 53. They contend that since the beginning of the business relationship between Miller, McGrain and DGL/DCC in 2010, “McGrain would customarily notify Park Miller of any and all changes to the Durham Entities’ financial condition,” and on “two prior occasions, McGrain timely notified Park Miller of events that compromised the Durham Entities’ financial security.” Id. ¶ 54.

Plaintiffs assert that this “customary business practice” caused Miller and its clients to rely on “full and accurate disclosure” of DGL/DCC’s financial status. FAC ¶ 55. Yet they claim that McGrain “failed to disclose” DGL/DCC’s true financial status,” “despite the knowledge that the [DGL/DCC] financial status had materially changed.” Id. McGrain allegedly knew that the financial statements of DGL/DCC did not accurately depict its true financial status and still permitted them to be circulated to plaintiffs. Id. Until plaintiffs discovered the inaccurate representations in November 2018, they assert that McGrain had provided evasive and deceptive answers about DGL’s and DCC’s financial situation during telephone calls with John Miller. Id. ¶ 56. They allege that in reliance on these misrepresentations and nondisclosures, Miller facilitated at least two additional promissory notes between its clients and DGL. See id. ¶ 58 (identifying contracting plaintiff Lawson Land, Inc. and another client who is not named as a plaintiff).

Plaintiffs claim that the misrepresentations caused contracting plaintiffs to delay efforts to collect from DGL earlier, causing them financial harm. Id. ¶ 60. They also contend that the misrepresentation and nondisclosures caused Miller to delay looking into the financial status of the entities beyond the allegedly false financial records provided to them. Id. ¶ 61. As a result, Miller allegedly lost clients and fees and suffered severe harm to its reputation as a wealth advisory firm. Id.

Based on these allegations, all plaintiffs bring fraud claims against all defendants. FAC ¶¶ 102-138 (Cause of Action [“COA”] 6 for fraud/intentional misrepresentation in under Civ. Code § 1572; COA 7 for fraudulent deceit under Cal. Civ. Code §§ 1709-1710; COA 8-9 for negligence and negligent misrepresentation). Miller also brings two claims against all defendants based on the clients and money it lost due to defendants’ fraud. FAC ¶¶ 139-154 (COA 10 for intentional interference with contractual relations; COA 11 for negligent interference with prospective economic relations).

LEGAL STANDARD

I. RULE 12(B)(6): MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM

Under Federal Rule of Civil Procedure 12(b)(6), a district court must dismiss if a claim fails to state a claim upon which relief can be granted. To survive a Rule 12(b)(6) motion to dismiss, the claimant must allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is facially plausible when the plaintiff pleads facts that “allow the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted). There must be “more than a sheer possibility that a defendant has acted unlawfully.” Id. While courts do not require “heightened fact pleading of specifics,” a claim must be supported by facts sufficient to “raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555, 570.

Under Federal Rule of Civil Procedure 9(b), a party must “state with particularity the circumstances constituting fraud or mistake,” including “the who, what, when, where, and how of the misconduct charged.” Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (internal quotation marks omitted). However, “Rule 9(b) requires only that the circumstances of fraud be stated with particularity; other facts may be pleaded generally, or in accordance with Rule 8.” United States ex rel. Lee v. Corinthian Colls., 655 F.3d 984, 992 (9th Cir. 2011). In deciding a motion to dismiss for failure to state a claim, the court accepts all of the factual allegations as true and draws all reasonable inferences in favor of the plaintiff. Usher v. City of Los Angeles, 828 F.2d 556, 561 (9th Cir. 1987). But the court is not required to accept as true “allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences.” In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008).

II. RULE 12(B)(2): MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION

Under Rule 12(b)(2) of the Federal Rules of Civil Procedure, a defendant may move to dismiss for lack of personal jurisdiction. The plaintiff then bears the burden of demonstrating that jurisdiction exists. Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004). The plaintiff “need only demonstrate facts that if true would support jurisdiction over the defendant.” Ballard v. Savage, 65 F.3d 1495, 1498 (9th Cir. 1995); Fields v. Sedgwick Assoc. Risks, Ltd., 796 F.2d 299, 301 (9th Cir. 1986). “Although the plaintiff cannot simply rest on the bare allegations of its complaint, uncontroverted allegations in the complaint must be taken as true.” Schwarzenegger, 374 F.3d at 800 (citations omitted). Conflicts in the evidence must be resolved in the plaintiff’s favor. Id. “Where, as here, the motion is based on written materials rather than an evidentiary hearing, the plaintiff need only make a prima facie showing of jurisdictional facts. In such cases, we only inquire into whether [the plaintiff’s] pleadings and affidavits make a prima facie showing of personal jurisdiction.” Caruth v. International Psychoanalytical Ass’n, 59 F.3d 126, 128 (9th Cir. 1995) (internal punctuation and citation omitted).

Where, as here, there is no applicable federal statute governing personal jurisdiction, the law of the state in which the district court sits applies.” Core-Vent Corp. v. Novel Indus. AB, 11 F.3d 1482, 1484 (9th Cir. 1993) (citation omitted). “California’s long-arm statute allows courts to exercise personal jurisdiction over defendants to the extent permitted by the Due Process Clause of the United States Constitution.” Id.; Cal. Civ. Proc. Code. § 410.10. “Because California’s long-arm jurisdictional statute is coextensive with federal due process requirements, the jurisdictional analyses under state law and federal due process are the same.” Schwarzenegger, 374 F.3d at 800-01.

“There are two types of personal jurisdiction: general and specific.” Fields v. Sedgwick Associated Risks, Ltd., 796 F.2d 299, 301 (9th Cir. 1986). “[G]eneral jurisdiction permits a defendant to be haled into court in the forum state to answer for any of its activities anywhere in the word.” Schwarzenegger, 374 F.3d at 801. It exists where a nonresident defendant’s activities within a state are “substantial” or “continuous and systematic.” Data Disc., Inc. v. Sys. Tech. Assocs., Inc., 557 F.2d 1280, 1287 (9th Cir. 1977). Such contracts must “be of the sort that approximate physical presence.” Bancroft & Masters, Inc. v. Augusta Nat’l Inc., 223 F.3d 1082, 1086 (9th Cir. 2000).

Specific jurisdiction arises when a defendant’s specific contacts with the forum give rise to the claim in question. Helicoptoros Nacionales de Columbia S.A. v. Hall, 466 U.S. 408, 414-16 (1984). “A court exercises specific jurisdiction where the cause of action arises out of or has a substantial connection to the defendant’s conduct with the forum.” Glencore Grain Rotterdam BV v. Shivnath Rai Harnarain Co., 284 F.3d 1114, 1123 (9th Cir. 2002). The Ninth Circuit employs a three-part test to determine whether there is specific jurisdiction over a defendant:

(1) the non-resident defendant must purposefully direct his activities or consummate some transaction with the forum or resident thereof; or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws; (2) the claim must be one which arises out of or relates to the defendant’s forum-related activities; and (3) the exercise of jurisdiction must comport with fair play and substantial justice, i.e., it must be reasonable.Williams v. Yamaha Motor Co. Ltd., 851 F.3d 1015, 1023 (9th Cir. 2017).

The first prong may be satisfied by “purposeful availment of the privilege of doing business in the forum; by purposeful direction of activities at the forum; or by some combination thereof.” Yahoo! Inc. v. La Ligue Contre Le Racisme Et L’Antisemitisme, 433 F.3d 1199, 1206 (9th Cir. 2006). In tort cases, courts typically inquire whether a defendant “purposefully directs his activities at the forum state, applying an `effects’ test that focuses on the forum in which the defendant’s actions were felt, whether or not the actions themselves occurred within the forum.” Id.3 In contrast, in contract cases, courts typically inquire whether a defendant “purposefully avails itself of the privilege of conducting activities or consummates a transaction in the forum, focusing on activities such as delivering goods or executing a contract.” Id. (citation and internal punctuation omitted).

With regard to the second prong, courts “measure this requirement in terms of `but for’ causation.” Bancroft & Masters, 223 F.3d at 1088. The plaintiff bears the burden of satisfying the first two prongs of the test. Schwarzenegger, 374 F.3d at 802. If the plaintiff succeeds in satisfying both of the first two prongs, the burden then shifts to the defendant to “present a compelling case” that the exercise of jurisdiction would not be reasonable.” Id. If the plaintiff cannot satisfy either of the first two prongs, personal jurisdiction is not established in the forum state. Id.

DISCUSSION

Defendants make three arguments in their motion: (i) dismiss all fraud claims against all defendants for failure to state a claim; (ii) dismiss breach of contract claims against all defendants except DGL/DCC because they were not parties to the underlying promissory notes; (iii) and dismiss McGrain, Maasai Holdings and First Austin for lack of personal jurisdiction. Mot. 1. Essentially, defendants argue that only the breach of contract claims against DGL/DCC should move forward in the FAC. Id.4

I. FAILURE TO STATE FRAUD CLAIMS

Plaintiffs’ fraud claims are denominated as fraud (COA 6), fraudulent deceit (COA 7), negligence based on misrepresentations (COA 8), negligent misrepresentation (COA 9), intentional interference with contract (COA 10) and negligent interference with prospective economic relations (COA 11). COA 6 through 9 relate to alleged promissory fraud that occurred on the promissory notes between contracting plaintiffs and DGL, and COA 10 and 11 relate to the business relationships that were allegedly severed between Miller and its clients due to defendants’ interfering actions. To sufficiently allege these claims, plaintiffs must meet the heighted pleading standard under Rule 9(b) and state with particularity the circumstances constituting fraud.

A. Specificity of Fraud Claims

Defendants initially argued that the Complaint only alluded to false representations about financial health of DGL/DCC because it contained one conclusory paragraph. Mot. 20; Compl. ¶ 29 (“Within the last three years, Defendants materially misrepresented [DGL’s] financial status to Plaintiffs and hid crucial financial information from Plaintiffs both through verbal communications and through financial reports and presentations.”).

Plaintiffs argue that their FAC identifies with sufficient particularity the who, what, when, where and how of the misconduct. Oppo. 11. But defendants contend that the one alleged “misrepresentation” plaintiffs added in their FAC does not suffice. Reply 11. They assert that the one entity discussed in the FAC, identified as 1-800 Solar, did not owe the receivables that DCC was owed; those were owed by 1-800’s clients to DCC. Id. at 8, n.6. Accordingly, they claim that 1-800 Solar’s bankruptcy did not affect 1-800 Solar’s ability to pay DCC, and in turn did not impact contracting plaintiffs from collecting regular payments from DGL. Id. at 8.

Defendants claim that the monthly accounts receivable aging reports received by John Miller (and thus Miller) showed the $1.8 million 1-800 Solar receivables aging into default, establishing that DGL did inform plaintiffs about the 1-800 Solar receivables for months. Reply 8 (citing to McGrain Decl. ¶¶ 10-11). Defendants also point out that John Miller was given access to the “Durham computer system to review the accounts and any other financial information Mr. Miller desired when he visited the [DGL’s New York offices], about twice a year.” Reply 12; see also McGrain Decl. ¶ 11. Defendants conclude that plaintiffs had access to the relevant information, making their fraud allegations implausible.

Plaintiffs stated at the hearing that they do not have a problem with the defendants’ reply arguments being considered on this motion. But regardless of defendants’ explanation about 1-800 Solar, plaintiffs have not sufficiently pleaded a fraud claim with particularity in the FAC. Some of the crucial information that they rely on is found in their opposition or attached declarations, not in the FAC. For example, plaintiffs allege in the FAC that “one of the entities” to which defendants provided $1,797,000 was in default and filed for bankruptcy, FAC ¶ 51, but that alleged entity is not identified as 1-800 Solar prior to plaintiffs’ filing of the declarations accompanying the opposition. See Miller Decl. ¶ 13 (“Around $1,797,000 worth of receivables owed by a particular company known as 1-800 Solar were represented as good assets when in fact the company was in default and had filed for bankruptcy in April 2018. This meant that there was no chance of recovery on the 1-800 Solar assets, yet they continued to remain on the books as an asset.”).

At the hearing, plaintiffs also argued that when John Miller asked McGrain whether the receivables were any good, McGrain simply replied, “No they’re not.” This allegation does not appear in the FAC. The only allegation in the FAC generally states, “McGrain provided evasive and deceptive answers about DCC and DGL’s financial situation via telephone calls with John Miller.” FAC ¶ 56. The FAC asserts that Miller “discover[ed] [ ] the inaccurate representations in November 2018,” but it does not describe how John Miller learned that the 1-800 Solar receivables were in fact worthless and non-recoverable and why that fact would necessarily contradict what was depicted in the financial statements emailed to him. In short, the FAC does not sufficiently link how the circumstances surrounding 1-800 Solar constitute fraud. An amended complaint that addresses these deficiencies and collectively includes all relevant factual allegations will help clarify that plaintiffs’ fraud claims meet the level of particularity required by Rule 9(b). Defendants’ motion to dismiss the fraud claims is GRANTED with leave to amend.

1. Promissory Fraud Claims

Some of plaintiffs’ claims relate to the promissory fraud that occurred pertaining to the promissory notes between contracting plaintiffs and DGL. These include fraud/intentional misrepresentation, fraudulent deceit, and negligent misrepresentation. See FAC (COAs 6, 7 and 9). Defendants argue that these claims have been insufficiently alleged because plaintiffs only alleged mere nonperformance; there must be other factual allegations to adequately allege that a defendant knowingly made false promises without an intent to perform. See Sunnyside Development Co., LLC v. Opsys Ltd., No. C 05-0553 MHP, 2005 WL 1876106, *6 (N.D. Cal. Aug. 8, 2005). Defendants point out that the promissory notes that predated November 2018 received regular interest payments for years. Mot. 21; McGrain Decl. ¶ 11. They argue that these claims should be dismissed as to all defendants, including DGL, a party to the underlying promissory notes, because plaintiffs have not alleged that DGL entered into the promissory notes intending to breach. Mot. 22.

Plaintiffs allege that “[i]n reliance on these misrepresentations/nondisclosures, Park Miller facilitated at least two additional promissory notes between its clients and Durham,” including the 2018 promissory note with Lawson Land, Inc., one of the contracting plaintiffs and Miller’s client. FAC ¶ 58. This promissory note was executed on July 2, 2018, after the alleged April 2018 bankruptcy of 1-800 Solar. Id. ¶¶ 34, 51; see also id. ¶ 34 & Ex. C (copy of the 2018 promissory note with Lawson Land, Inc.). Therefore, plaintiffs contend that defendants “knew or should have known that DGL did not have the ability to comply with the terms of [this promissory note] and could not pay the Lawsons interest or the principal sum back.” Id. ¶ 59.

Assuming plaintiffs fix the deficiencies of their underlying fraud claims as discussed above, these allegations could be sufficient to show promissory fraud as to contracting plaintiff Lawson Land, Inc. But plaintiffs do not explain their promissory fraud claims concerning the other eight contracting plaintiffs, all of whom executed their promissory notes before the first quarter of 2018 (when plaintiffs claim defendants began their misrepresentations about 1-800 Solar). FAC ¶¶ 31, 33, 37, 38, 41, 44, 47, 48; see also id., Exs. A, B, D-I. Plaintiffs have not alleged facts surrounding their theory that DGL entered into these promissory notes knowing it could not perform on them.

2. Interference Claims

Miller also brings two interference claims sounding in fraud — intentional interference with business relations and negligent interference with prospective business relations. See FAC (COAs 10 and 11). It alleges that as a result of the misrepresentations and nondisclosures, Miller delayed looking into the financial status of the entities beyond the false records provided to it, which in turn caused it to lose clients and suffer harm to its reputation as a wealth advisory firm. FAC ¶ 61. This is the only allegation in the FAC that alludes to the interference claims.

Plaintiffs argue that they are not required to plead these claims with Rule 9(b) specificity. Oppo. 14. They rely on Oracle Am., Inc. v. TERiX Computer Co., Inc., No. 5:13-CV-03385-PSG, 2014 WL 31344, at *11 (N.D. Cal. Jan. 3, 2014) for the contention that “Rule 9(b) might apply to an interference claim presented entirely on [] fraudulent conduct or conduct sounding in fraud,” but it does not apply when an “interference claim relies on several instances of misconduct[.]” Id. Because Miller characterizes its interference claims as resting on both defendants’ misrepresentations and DGL’s failure to perform on the underlying promissory notes, it concludes that Rule 9(b) does not apply. Id. But this characterization of its interference claims is not clearly reflected in the FAC.

Even if Rule 9(b) does not apply, Miller has not alleged any “specific, intentional breaches of contract.” Heartland Payment Sys., Inc. v. Mercury Payment Sys., LLC, No. C 14-0437 CW, 2014 WL 5812294, at *8 (N.D. Cal. Nov. 7, 2014). For example, in Heartland, the plaintiff asserted that it “identified nearly thirty merchants who have left Heartland for Mercury within the last six months prior to filing the Complaint,” but admitted it does not know “why every merchant who leaves Heartland has chosen to do so,” and cannot know without discovery. Id. Nonetheless, the court still dismissed the interference claims because the plaintiff “[did] not allege that any of its contracts with any former merchant have actually been breached, much less breached because of interference by [the defendant].” Id. Here, Miller only generally alleges that it has “lost clients” but does not allege how many were lost and whether it was due to defendants’ actions. Miller has also not specifically alleged that any of its contracts have been breached or any prospective economic relations that have been lost.

For the reasons set forth above, defendants’ motion to dismiss the fraud claims is GRANTED with leave to amend.

II. FAILURE TO STATE BREACH OF CONTRACT CLAIMS

Defendants also seek to dismiss the breach of contract claims against all defendants except DGL and DCC, arguing that the other defendants are not parties to the underlying promissory notes at issue. Mot. 22. As discussed in the next section, this court lacks personal jurisdiction over McGrain, First Austin and Maasai Holdings. Defendants’ motion to dismiss the breach of contract claims as to McGrain, First Austin and Maasai Holdings is moot in light of my lack of jurisdiction.

III. LACK OF PERSONAL JURISDICTION OVER McGRAIN

Defendants seek to dismiss McGrain under Rule 12(b)(2) for lack of personal jurisdiction. Mot. 14. They claim that he does not have sufficient “continuous and systematic” contacts with California as a New York resident to confer general jurisdiction, and that he does not have sufficient involvement in the alleged conduct to establish specific jurisdiction. Mot. 14-15. Plaintiffs respond that: (i) specific personal jurisdiction exists over McGrain because he purposefully directed his business activities at California; (ii) the fiduciary shield doctrine does not insulate McGrain from personal jurisdiction because he committed intentional torts; and (iii) he acted as the alter ego of DCC or DGL, and therefore the entities’ contacts are applicable to him too. See Oppo. 6-9. Plaintiffs have not provided sufficient allegations in their FAC to support those arguments.

A. Specific Personal Jurisdiction

Plaintiffs argue that there is specific personal jurisdiction over McGrain because he “purposefully directed his business activities at California and has negotiated and consummated the transactions that require performance in California and gave rise to this suit.” Oppo. 6. To support this argument, plaintiffs cite the declaration by John Miller, which is attached to their opposition. Id.; Declaration of John Miller (“Miller Decl.”) [Dkt. No. 18-1].

First, plaintiffs assert that McGrain knew Miller was a California corporation, as reflected in their business interactions, and that many of its clients were California residents, as reflected in the promissory notes. Oppo. 2; Miller Decl. ¶¶ 3-7, Exs. A-C (email exchange between Miller and McGrain discussing time zone difference). McGrain signed at least three promissory notes between DGL and contracting plaintiffs and other Miller clients that specify performance in California. Oppo. 2; Miller Decl. ¶ 7, Exs. D-E (copies of promissory notes with California addresses which McGrain signed). Defendants admit that McGrain negotiated the terms and signed three promissory notes, but argue that those promissory notes were executed between October 2010 and May 2011, which is outside the relevant 2016-2018 time period of the alleged fraud and misrepresentation. Reply 5; Suppl. McGrain Decl. ¶ 14 (citing to FAC, Exs. A, D and H of promissory notes entered between October 2010 and May 2011). Defendants contend that only promissory notes entered between 2016 and 2018 are relevant to this case as those are the ones that give rise to the fraud/misrepresentation claims. Id.5

Second, plaintiffs argue that McGrain was involved with drafting the terms of at least one of the promissory notes between a Miller client who resides in California and DGL. Oppo. 6; Miller Decl. ¶ 8, Ex. F (email exchange between McGrain and Miller discussing changes to a promissory note). Defendants respond that McGrain admits to helping draft the terms of one promissory note, but clarify that none of the plaintiffs were a party to this promissory note and that it is not relevant to the issues in this case. Reply 5; Suppl. McGrain Decl. ¶ 14 (noting that the promissory note executed on August 25, 2017 did not involve any of the plaintiffs or the alleged fraud and misrepresentation claims in this case).

Third, plaintiffs state that McGrain was copied on virtually all communications between Miller and DGL/DCC. Oppo. 6; Miller Decl. ¶¶ 10, 12, Ex. H (copies of emails to Miller with attached financial reports, on which McGrain is also a recipient). Defendants respond that plaintiffs have put forth various correspondence, most of which falls outside the relevant time period or is a communication sent by someone other than McGrain. Reply 5, n.3. They contend that none of the correspondence addresses the specific contracts at issue in this case. Id.

Plaintiffs have not sufficiently alleged that McGrain’s acts purposefully availed him to California. Their arguments are in a declaration attached to its opposition, not in the FAC. Moreover, plaintiffs have not explained how McGrain’s activities arose out of or relate to the underlying fraud and misrepresentation claims in this case. They have not alleged how McGrain’s activities relate to the alleged misrepresentation in 2018 about 1-800 Solar and its effect on the financial health of DGL/DCC. Accordingly, they have not demonstrated that exercise of specific personal jurisdiction over McGrain is proper.

B. Fiduciary Shield Doctrine

Even if minimum contacts were established, defendants argue that the fiduciary shield doctrine insulates McGrain from personal jurisdiction. Mot. 18. Under the fiduciary shield doctrine, “a person’s mere association with a corporation that causes injury in the forum state is not sufficient in itself to permit that forum to assert jurisdiction over the person.” Davis v. Metro Prods., Inc., 885 F.2d 515, 520 (9th Cir. 1989). California state law, which governs all the causes of action in this case, explicitly recognizes the fiduciary shield doctrine. See Shearer v. Superior Court, 70 Cal.App.3d 424, 430 (1977). Thus, defendants argue, the court “cannot impute personal jurisdiction over McGrain simply because he is an officer or agent of DGL or DCC (or any of the other corporations).” Mot. 18.

There are exceptions to the fiduciary shield doctrine. One of them is for intentional tortious acts committed by an officer or owner. See Seagate v. A.J. Kogyo Co., 219 Cal.App.3d 696, 703 (1990). For example, in Taylor-Rush v. Multitech Corp., 217 Cal.App.3d 103, 117-18 (1990), the court held the fiduciary shield doctrine did not insulate New York corporate officers and directors from personal jurisdiction where defendants made fraudulent representations purposely directed to the plaintiff, a California resident, because they were “the primary participants in negotiating and executing” the contracts with plaintiff. But unlike Taylor-Rush, defendants argue, McGrain did not make any representations to the contracting plaintiffs or any misrepresentations to Miller. Mot. 19.

Plaintiffs argue that the tortious activity exception to the fiduciary shield doctrine applies because “McGrain failed to disclose the material changes in the financial conditions of DGL and DCC to Park Miller LLC and the other plaintiffs with the intent to induce the plaintiffs to invest more money in DGL and DCC and refrain from taking action to recover their investments.” Oppo. 7. Their support for this argument is that McGrain allegedly “permitted” inaccurate financial statements to be sent to Miller and was copied on each of these communications. Oppo. 7; FAC ¶ 55; Miller Decl. ¶ 12. Even if the financial information was inaccurate, simply being copied on an email does not show that McGrain himself took part in the tortious acts of the company. Plaintiffs conclusorily allege that McGrain failed to disclose the material changes in the “financial conditions of DGL and DCC” to Miller and other plaintiffs with “intent to induce the Plaintiffs to invest more money in DGL and DCC and refrain from taking action to recover their investments.” See FAC ¶ 57. But this bare allegation is not sufficient to trigger the tortious activity exception of the fiduciary shield doctrine. Plaintiffs fail to explain why the fiduciary shield doctrine does not insulate McGrain from the acts of DGL or DCC.

C. Alter Ego Theory

Alternatively, plaintiffs argue that there is personal jurisdiction over McGrain because he is the alter ego of DGL or DCC. Oppo. 8. To survive a motion to dismiss, a plaintiff asserting application of the alter ego doctrine to extend personal jurisdiction must “allege specifically both the elements of alter ego liability, as well as facts supporting each.” MH Pillars Ltd. v. Realini, No. 15-CV-1383-PJH, 2017 WL 916414, at *12 (N.D. Cal. Mar. 8, 2017) (internal citation omitted). The plaintiff must show “(1) that there is such unity of interest and ownership that the separate personalities or the two entities no longer exists, and [that] (2) that failure to disregard their separate identities would result in fraud or injustice.” Williams v. Yamaha Motor Co. Ltd., 851 F.3d 1015, 1021 (9th Cir. 2017) (citing Ranza v. Nike, Inc., 793 F.3d 1059, 1073 (9th Cir. 2015)).

The “unity of interest” prong requires “a showing that the parent controls the subsidiary to such a degree as to render the latter the mere instrumentality of the former.” Ranza, 793 F.3d at 1073. (internal quotation marks and citations omitted). Courts generally consider nine factors in assessing whether the unity of interest prong of an alter ego relationship is satisfied:

(1) the commingling of funds and other assets of the entities, (2) the holding out by one entity that it is liable for the debts of the other, (3) identical equitable ownership of the entities, (4) use of the same offices and employees, (5) use of one as a mere shell or conduit for the affairs of the other, (6) inadequate capitalization, (7) disregard of corporate formalities, (8) lack of segregation of corporate records, and (9) identical directors and officers.Sandoval v. Ali, 34 F.Supp.3d 1031, 1040 (N.D. Cal. 2014) (citation omitted). While a court need not find that every factor is present, Updateme Inc. v. Axel Springer SE, No. 17-CV-05054-SI, 2018 WL 1184797, at *10 (N.D. Cal. Mar. 7, 2018), the Ninth Circuit has specifically found that “[t]otal ownership and shared management personnel are alone insufficient to establish the requisite level of control.” Ranza, 793 F.3d at 1073. A parent’s involvement in “macro-management issues” does not satisfy this element; the plaintiff must show that the parent directs the subsidiary’s “day-to-day operations” and that the “entities failed to observe their separate corporate formalities.” Id. at 1074-1075.

Plaintiffs argue that McGrain is the alter ego of DCC and DGL because he has an ownership interest in both entities, uses the same email addresses from both entities, and treats the assets of DGL and DCC as interchangeable. FAC ¶¶ 25-26. As defendants correctly point out, the intermingling of assets between DGL and DCC might support an alter ego theory between DGL and DCC but does not provide allegations of an alter ego theory involving McGrain. Reply 13. Plaintiffs have failed to show that McGrain was acting as the alter ego of DGL and DCC such that personal jurisdiction over McGrain would be appropriate under the alter ego theory.

Altogether, plaintiffs have failed to: (i) sufficiently plead specific personal jurisdiction over McGrain because they do not allege how any of his contacts with California arise out of or relate to the underlying claims; (ii) even if minimum contacts were established, plaintiffs do not allege why the fiduciary shield doctrine should not insulate McGrain from personal jurisdiction; and (iii) plaintiffs have not alleged that McGrain is the alter ego of DGL or DCC. I GRANT defendants’ motion to dismiss McGrain for lack of personal jurisdiction.

IV. LACK OF PERSONAL JURISDICTION OVER FIRST AUSTIN AND MAASAI HOLDINGS

Defendants also seek to dismiss First Austin and Maasai Holdings for lack of personal jurisdiction. Mot. 12-14. In opposition, plaintiffs argue that personal jurisdiction over First Austin and Maasai Holdings is proper under the alter ego theory. Oppo. 8-9. But they fail to sufficiently allege both elements of alter ego liability, i.e., that a unity of interest exists between these two entities and DGL/DCC, and that the failure to disregard their separate identities would result in fraud or injustice. See Ranza, 793 F.3d at 1073.

A. First Austin

Plaintiffs argue that First Austin is subject to personal jurisdiction in California because it was acting as the alter ego of DGL and DCC. Oppo. 8. In their original Complaint, plaintiffs alleged that McGrain, who is President of DGL and CEO of DCC, also controls and has an ownership interest in First Austin. Oppo. 8; Compl. ¶ 14; FAC ¶ 16. In the FAC, plaintiffs added an allegation that First Austin mingled its assets with DCC when it secured an interest in DCC’s assets by buying a line of credit owed by DCC to its bank, Crestmark Bank. Id. (citing FAC ¶¶ 25-29). Accordingly, plaintiffs allege that First Austin “now holds the primary security interest in all DCC’s assets” and DGL “has a subordinated claim to [DCC’s] assets.” FAC ¶ 27. Plaintiffs also point to First Austin’s website, durhamltd.com, and the fact that First Austin’s address and phone number are the same as DCC and DGL as evidence that the entities act as one. Declaration of Stuart Park Decl. (“Park Decl.”), Ex. C (screenshot of the durhamltd.com website).

Defendants counter that this is insufficient to show general or specific jurisdiction over First Austin. First, defendants argue that the mere fact that McGrain has an ownership interest in DCC, DGL and First Austin is not enough to confer jurisdiction over First Austin. Mot. 12. Second, defendants contend that plaintiffs’ new allegation regarding the mingling of assets between First Austin and DCC does not necessarily show that DCC or DGL have “fraudulently transferred its assets to First Austin to wrongfully underfund the company.” Reply 10. Instead, defendants clarify, First Austin purchased DCC’s line of credit debt from Crestmark Bank in March 2019, “well after the time period in question.”. Supplemental Declaration of Craig McGrain (“Suppl. McGrain Decl.”) [Dkt. No. 20-1] ¶ 7. Defendants further add that after First Austin purchased DCC’s line of credit debt, “First Austin was in no better security position than Crestmark had been.” Id. Third, defendants contend that a review of First Austin’s website, durhamltd.com, confirms that First Austin dba Durham Ltd. sells paper products and that First Austin is not DCC or DGL, nor did it have any relation to the promissory notes at issue in this case. Reply 10-11. They explain that First Austin shares an address and phone number with DCC and DGL because it subleases space to DCC and DGL, and point out that plaintiffs have not provided a case in which this is sufficient to confer personal jurisdiction. Id. at 11. Defendants assert that First Austin is a “separate business entity” that “has maintained corporate formalities required under New York law,” and “maintains its own, separate bank accounts; and files its own, separate tax returns.” Suppl. McGrain Decl. ¶ 7.

Plaintiffs’ allegations that First Austin is the alter ego of DCC and DGL are insufficient, even without consideration of the purported explanations offered by defendants in reply and its declarations. It is not clear how the allegation that First Austin bought a line of credit debt owed by DCC demonstrates that DCC or DGL fraudulently transferred its assets to First Austin to wrongfully underfund the company. Plaintiffs’ only other allegations are that McGrain has an ownership in both First Austin and DGL/DCC, and that the two entities share contact information. But the Ninth Circuit has found that “[t]otal ownership and shared management personnel are alone insufficient to establish the requisite level of control.” Ranza v. Nike, Inc., 793 F.3d 1059, 1073 (9th Cir. 2015). Even if these were enough to establish a unity of interest, plaintiffs are required to “allege specifically both of the elements of alter ego liability, as well as facts supporting each;” the FAC does not state any inequitable result that would result from respecting the corporate form of these separate entities. Sandoval, 34 F. Supp. 3d at 1040 (citation omitted). Plaintiffs have not sufficiently alleged that this court can exercise personal jurisdiction over First Austin based on an alter ego theory.

B. Maasai Holdings

In their FAC, plaintiffs add allegations that Maasai Holdings is owned by McGrain and shares the same address as DCC. FAC ¶ 29. They further assert that Maasai was created “in order to hold the inactive assets” of DCC and DGL and that the DCC and DGL “financial statements reflect that one or more loans were owed to it by Maasai.” Id.

Defendants counter that Maasai is a “debt buyer” and that Maasai “had no involvement in any of [the] loan agreements or the factoring business” at issue in this case or any activities in California. Mot. 13-14. They state that Maasai Holdings is a “separate business entity” that “has maintained business formalities required under New York law,” and has “its own separate bank accounts,” and accounting records. Suppl. McGrain Decl. ¶ 8.

Plaintiffs have failed to plausibly allege that Maasai Holdings is an alter ego of DCC and DGL. A conclusory allegation that plaintiffs are “informed and believe” that Maasai “was created in order to hold the inactive assets” of DGL and DCC is insufficient without supporting factual allegations. In addition, as stated above with respect to First Austin, total ownership and shared address is not enough to show unity of interest. Ranza, 793 F.3d at 1073. Plaintiffs have only alleged facts as to one of the nine unity factors; failure to address the other factors strongly weighs against a finding that DCC or DGL’s contacts should be imputed to Maasai Holdings. See, e.g., Stewart v. Screen Gems-EMI Music, Inc., 81 F.Supp.3d 938, 955 (N.D. Cal. 2015) (unaddressed factors weigh against finding of alter ego status); Corcoran v. CVS Health Corp., 169 F.Supp.3d 970, 984 (N.D. Cal. 2016) (finding plaintiffs only alleged facts as to identical ownership, same offices, and identical directors, and failure to address other factors weighed against finding alter ego status). Plaintiffs have also not alleged any inequitable result in support of alter ego liability. They have not demonstrated that this court can exercise personal jurisdiction over Maasai Holdings.

McGrain, First Austin, and Maasai Holdings are DISMISSED for lack of personal jurisdiction. Plaintiffs may amend their complaint to add sufficient allegations that would confer jurisdiction over these defendants. Plaintiffs request for jurisdictional discovery is denied at this stage but may be renewed depending on any added allegations in a second amended complaint.

CONCLUSION

First Austin, Maasai Holdings, and McGrain are DISMISSED for lack of personal jurisdiction. Defendants’ motion to dismiss breach of contract claims against all defendants except DGL and DCC is GRANTED for failure to state a claim. Defendants’ motion to dismiss fraud claims against all defendants is GRANTED for failure to state a claim. Given the upcoming holidays, plaintiffs are given thirty days from the date below to amend.

IT IS SO ORDERED.

FootNotes

1. The contracting plaintiffs are Henry S. Lawson, Marcia Lawson, Lawson Land, Inc., Edward Miner, James Combs, Dorothy Combs, Gregory Combs and Suzanne Combs, Roger E. Choplin and Carolyn J. Mone and various trusts of which they are co-trustees.

2. At the hearing, defendants clarified that they are not seeking to dismiss the breach of contract claim against DCC given that they do not seek to parse out DGL and DCC as separate entities. See Transcript of Proceedings Held on November 13, 2019 (“Transcript”) [Dkt. No. 23] 10:12-23.

3. However, as the Supreme Court reemphasized in Walden v. Fiore, 571 U.S. 277, 285 (2014) the “effects” “analysis looks to the defendant’s contacts with the forum State itself, not the defendant’s contacts with persons who reside there.”

4. Defendants say that this case is really about “the unfortunate circumstances of a law firm and a doctor that deceived [DCC] and their own clients, stealing millions of dollars, and leaving DCC and Plaintiffs facing the losses from the law firm’s and the doctor’s criminal and unethical conduct.” Mot. 1-2. DGL ultimately breached the promissory notes with Miller’s clients because of this alleged illegal activity. Id. at 2. Defendants argue Miller and the contracting plaintiffs attempt to make this a bigger case, involving parties that have no contact with California and its residents and who was not involved in DCC’s factoring business. Id. at 8. This is why defendants are not seeking dismissal of the breach of contract claims as to DGL and DCC.

5. In their original Complaint, plaintiffs alleged that the misrepresentation occurred “within the last three years.” Compl. ¶ 29. But the FAC now alleged that it occurred in 2018, given the circumstances around 1-800 Solar. FAC ¶ 51. Given that the FAC was filed at the time of the opposition, it appears that the relevant time period now is 2018, not between 2016 and 2018. Regardless, defendants’ argument is still applicable as the other promissory notes were executed well before 2018.

Tips for Youth Coaches by Craig McGrain

November 28, 2011

Outside of my professional role as President of Durham Funding, I find it important to allot my time so that I can give back to my community. Currently, I am youth sports coach for local hockey, lacrosse, and tennis teams, and I greatly enjoy the time I spend with these children.

Serving the community as a youth sports coach helps area children progress physically and mentally, learn good sportsmanship qualities, gain respect, and increase their physical activity levels. I have compiled a short list of tips for coaches who work with youth teams in any sport.

1. Always be patient. Working with young children can be especially trying, but a lot can be accomplished if the coach maintains a tolerant attitude.

2. Clearly define your role as the leader. This means that the coach must be prepared for every minute of practice and have a strategy for when things get off track.

3. Stay consistent in your coaching and discipline technique. Children respond best when they know what to do and what not to do. Consistency is the key in this approach.

4. Be a motivator. While all youth athletes want to win, the necessary hours of practice can sometimes take its toll and provoke lackluster activity. The coach’s role must always include a lively, confident persona. It will rub off on the players.

5. Pick your battles. Anyone who regularly works with children knows that, sometimes, there is no way to win. When a coach runs into trouble during practice, he or she should take a genuine look at all the options and consider the best interests of the youth involved.

6. Involve the parents. Parents can be a great help for several different reasons. They can provide refreshments as well as assist with coaching duties. Plus, youth athletes are usually more enthusiastic about the sport if their parents are engaged as well.

While coaching a youth sports team involves several unique scenarios and circumstances, this list is meant as a brief overview of the fundamental aspects required of a youth sports coach.

Howard

Craig Aka Craig L. Mcgrain sold 3340 Saxton Rd to Shc Management LLC for $300,000 on Nov. 8.

https://www.stargazette.com/story/money/2020/02/03/chemung-schuyler-steuben-tioga-county-real-estate-sales/4504013002/

https://www.zillow.com/homedetails/3340-Saxton-Rd-Avoca-NY-14809/209319482_zpid/

https://opencorporates.com/companies/us_ny/5510898

Department of Justice
U.S. Attorney’s Office
District of Massachusetts

FOR IMMEDIATE RELEASE
Tuesday, May 9, 2017

Former Milton Auctioneer Sentenced for Defrauding Investors of $21 Million

BOSTON – A well-known auctioneer was sentenced today in federal court in Boston for defrauding more than 90 victims – many of whom were friends, business associates and sophisticated investors – of more than $21 million.

Acting United States Attorney William D. Weinreb said, “Mr. Flynn preyed upon friends and family, taking their hard earned money with promises of high returns. Instead, he violated their trust, and used their investments to perpetuate an elaborate Ponzi scheme, using the money for his own personal expenses including renovations to his Milton home.”

“Through sophisticated financial schemes, Mr. Flynn took advantage of a wide array of victims, cheating them out of millions of dollars,”

said Harold H. Shaw, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division.

“This case highlights the FBI’s commitment to aggressively following the money, so that financial fraudsters like Flynn – who are motivated by greed – are brought to justice and do not take advantage of the hard working men and women of our communities.”

Daniel J. Flynn III, 54, of Milton, was sentenced by U.S. District Court Senior Judge Rya W. Zobel to four years in prison, three years of supervised release and ordered to pay restitution. In February 2017, Flynn pleaded guilty to nine counts of wire fraud.

Beginning around 2007, Flynn and another individual started a real estate fund called the DJF Real Estate Opportunity Fund (“the Fund”).

The fund touted Flynn’s experience in real estate and boasted of an extraordinary rate of return on investments.

To convince potential investors that the Fund was solid, Flynn purported to own promissory notes worth millions of dollars and an apartment complex in Quincy.

In fact, Flynn fraudulently created the promissory notes and used the Quincy apartment complex to defraud investors.

Specifically, Flynn used the promissory notes to defraud investors by soliciting loans from investors to purchase or invest in a piece of distressed real estate.

In return, Flynn gave the investor a promissory note guaranteeing the investor of a 12 to 15 percent return.

Although Flynn did make payments to investors, as is typical in a Ponzi scheme, the money came from other victims – not real estate investment profits.

In total, Flynn defrauded about 60 individuals and entities of approximately $18.4 million.

In addition, Flynn used the Quincy apartment complex to defraud investors.

In 2005, Flynn purchased the property for $995,000.

Despite the fact that he already owned the property, Flynn caused the Fund to purchase the apartment complex for approximately $2.2 million.

Flynn then convinced some investors to loan him money to develop the units and convinced other investors to loan him money to purchase the property – despite the fact that he already owned it – and promised a 12 to 15 percent profit in return.

Flynn never repaid the investors.

Lastly, acting as a real estate broker, Flynn sold two properties in Dorchester generating $451,000 in profits, but never returned the proceeds to the property owner.

The property owner later died due to heart failure, but family members recalled that the victim and Flynn were involved in a heated argument about the money.

Acting U.S. Attorney Weinreb and FBI SAC Shaw made the announcement today. Assistant U.S. Attorney Neil J. Gallagher Jr. of Weinreb’s Economic Crimes Unit prosecuted the case.

Topic(s):
Financial Fraud
Component(s):
Continue Reading
Advertisement
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Appellate Circuit

Constance Daniels, Student of Hard Knocks, Admonished Florida Lawyer and Friend of The Eleventh Circuit

LIF cannot comprehend how the People of Florida and the United States of America are so accepting of Brazen Corruption.

Published

on

LIF UPDATE

OCT 26, 2022

Five months after the 11th Circuit saved a colleague and lawyer from foreclosure, the mandate issued (without en banc hearing) and as instructed (reversed and remanded) the lower court has reopened the case.

LIT will be tracking this case closely, stay tuned.

LIF COMMENTARY

The article below starts with Constance Daniels failure to pay for her law school tuition loan issued in 2003. She defaulted in 2005 per the complaint. The USA won a judgment of $164k+ in 2011.

In 2010, Wells Fargo commenced foreclosure proceedings in state court, Hillsborough County.

While all this was going on, Ms Daniels, a Republican, was attempting to become a State judge in 2014, which failed.

In late November of 2017 a settlement was reached, dismissing the Wells Fargo foreclosure complaint.

In 2017-2018, lawyer Daniels was failing to look after her client(s). Many moons later, in 2021, that would result in a slap on the wrist by the referee, Hon. Daniel D. Diskey for Fl. Bar.

Then we move onto the June 2018 complaint, filed by Daniels against the mortgage servicer. It was removed to the lower court in Middle District  of Florida Federal Court.

The court, via one of the Moody clan of judges, sided with Select Portfolio Servicing, LLC and this formed the appeal which was decided this week by the 11th Circuit.

In Nov. 2020, Wells Fargo filed a renewed foreclosure complaint against Daniels and her homestead in State court. In Sept 2021, Wells Fargo voluntarily dismissed the case and terminated the lis pendens ‘due to loan modification’.

The issue for LIF in this case is quite clear. Who the 11th Circuit has chosen to upend it’s prior stance that mortgage servicers can do no wrong under the FDCPA, despite irrefutable facts confirming otherwise.

For example, LIF refers to the case we highlighted regarding a deficiency judgment (State case, March 2022):

Florida Lawyer Stephanie Schneider Appeals a Mortgage Foreclosure Deficiency Judgment

In that case, LIF investigated beyond the court opinions to discover the wife is a Florida Lawyer and her husband, Laurence Schneider is owner of S&A Capital, Inc., a mortgage investment company, has built a national portfolio of performing mortgages that have been written off by other financial institutions.

Our angst is clear. Lawyers are being treated preferentially by the courts over regular citizens and homeowners.

In the case of Daniels, whilst she may have legitimate arguments, there have been many citizens who have failed before her by the wordsmithing by the Federal and Appellate Court(s), which has refused to apply the correct legal interpretation of the FDCPA, or clarify the question(s) with the federal consumer agency, the CFPB.

Whilst LIF is unhappy with the anti-consumer watchdog, the Consumer Financial Protection Bureau (CFPB) which is a revolving door for staff to leave the Bureau and go work for a creditor rights law firm without any restriction or time limit (non-compete), the Daniels case should have been referred to the CFPB for interpretation about the matters of ‘first impression’.

The Second Circuit recently did so for a RESPA question in Naimoli v Ocwen and we highlighted the case on our sister website, LawsInTexas.com (Laws In Texas). Instead of doing so in Daniels, there is a dissenting opinion by Judge Lagoa, who’s father in law is a  senior judge in SD Florida (Paul C. Huck) and her hubby is a Jones Day Partner and apparently the leader of the Miami Chapter of the Federalist Society. Lagoa herself is a former Florida Supreme Court justice appointed by Gov DeSantis who ‘ensured he puts conservatives on the bench so that anyone coming to court knows how the court will rule’.

LIF anticipates the Daniels case will be subject to a rehearing petition and presented to the full en banc court for reconsideration. The opinion here is similar to the recent Newsom FDCPA opinion, which was too negative towards Wall St and the financial banking services community. As such, it was vacated by the en banc panel while they reconsider. The courts’ decision is currently pending.

In this case, there is still time for the 11th Circuit to correctly ask the CFPB to provide its opinion on the underlying facts raised on appeal and decided by the 3-panel.

However, what the judiciary won’t do is apply this retroactively to the thousands of cases which have been incorrectly tossed in the last 14 years, resulting in homeowners losing their homes to wrongful foreclosures.

United States v. Daniels (2011)

(8:11-cv-01058)

District Court, M.D. Florida

MAY 13, 2011 | REPUBLISHED BY LIT: MAY 26, 2022

USA Motion for Summary Judgment with Exhibits, Doc. 13, Aug 17, 2011

ORDER granting  Motion for summary judgment in favor of the Plaintiff and against the defendant in the amount of $109,813.74,

together with accrued interest in the amount of $54,097.10 as of February 28, 2011,

plus interested at the rate of 8.25 percent per annum and a daily rate of $24.80, until the date of judgment;

for post-judgment interest, at the legal rate, from the entry of final judgment until the date of payment;

and for such other costs of litigation otherwise allowed by law.

The Clerk of Court is directed to close the case.

Signed by Judge Elizabeth A. Kovachevich on 9/22/2011.

(SN) (Entered: 09/22/2011)

U.S. District Court
Middle District of Florida (Tampa)
CIVIL DOCKET FOR CASE #: 8:11-cv-01058-EAK-AEP

USA v. Daniels
Assigned to: Judge Elizabeth A. Kovachevich
Referred to: Magistrate Judge Anthony E. Porcelli
Demand: $164,000
Cause: 28:1345 Default of Student Loan
Date Filed: 05/13/2011
Date Terminated: 09/22/2011
Jury Demand: None
Nature of Suit: 152 Contract: Recovery Student Loan
Jurisdiction: U.S. Government Plaintiff
Plaintiff
USA represented by I. Randall Gold
US Attorney’s Office – FLM
Suite 3200
400 N Tampa St
Tampa, FL 33602-4798
813/274-6026
Fax: 813/274-6247
Email: FLUDocket.Mailbox@usdoj.gov
LEAD ATTORNEY
ATTORNEY TO BE NOTICED
V.
Defendant
Constance Daniels represented by Constance Daniels
PO Box 6219
Brandon, FL 33608
PRO SE

 

Date Filed # Docket Text
05/13/2011 1 COMPLAINT against Constance Daniels filed by USA. (Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Civil Cover Sheet)(MRH) (Entered: 05/13/2011)
05/13/2011 2 Summons issued as to Constance Daniels. (MRH) (Entered: 05/13/2011)
05/13/2011 3 ORDER regulating the processing of civil recovery actions. Service must be perfected by 09/10/2011. Signed by Deputy Clerk on 5/13/2011. (MRH) (Entered: 05/13/2011)
05/13/2011 4 STANDING ORDER: Filing of documents that exceed twenty-five pages. Signed by Judge Elizabeth A. Kovachevich on 7/15/08. (MRH) (Entered: 05/13/2011)
05/19/2011 5 NOTICE of designation under Local Rule 3.05 – track 1 (CLM) (Entered: 05/19/2011)
05/20/2011 6 CERTIFICATE OF SERVICE re 3 ORDER regulating the processing of civil recovery actions by USA (Gold, I.) Modified on 5/20/2011 (MRH). (Entered: 05/20/2011)
05/25/2011 7 CERTIFICATE OF SERVICE by USA (Notice of Designation Under Local Rule 3.05) (Gold, I.) (Entered: 05/25/2011)
07/06/2011 8 RETURN of service executed on 7/5/11 (Marshal 285) by USA as to Constance Daniels. (MRH) (Entered: 07/06/2011)
07/27/2011 9 MOTION for default judgment against Constance Daniels by USA. (Gold, I.) Modified on 7/27/2011 (MRH). NOTE: TERMINATED. INCORRECT MOTION RELIEF. ATTORNEY NOTIFIED. ATTORNEY TO REFILE. (Entered: 07/27/2011)
07/27/2011 10 MOTION for entry of clerk’s default against Constance Daniels by USA. (Gold, I.) Motions referred to Magistrate Judge Anthony E. Porcelli. (Entered: 07/27/2011)
07/28/2011 11 CLERK’S ENTRY OF DEFAULT as to Constance Daniels. (MRH) (Entered: 07/28/2011)
07/29/2011 12 ANSWER to 1 Complaint by Constance Daniels.(BES) (Entered: 07/29/2011)
08/17/2011 13 MOTION for summary judgment by USA. (Attachments: # 1 Exhibit A, # 2 Exhibit B)(Gold, I.) (Entered: 08/17/2011)
09/09/2011 14 ENDORSED ORDER TO SHOW CAUSE as to Constance Daniels.. The plaintiff filed a motion for summary judgment on 8/17/11. The defendant had up to and including 9/3/11 to respond to the motion. To date no response has been filed. Therefore, it is ORDERED that the defendant has up to and including 9/19/11 in which to show cause why the pending motion should not be granted. Signed by Judge Elizabeth A. Kovachevich on 9/9/2011. (SN) (Entered: 09/09/2011)
09/22/2011 15 ORDER granting 13 Motion for summary judgment in favor of the Plaintiff and against the defendant in the amount of $109,813.74, together with accrued interest in the amount of $54,097.10 as of February 28, 2011, plus interested at the rate of 8.25 percent per annum and a daily rate of $24.80, until the date of judgment; for post-judgment interest, at the legal rate, from the entry of final judgment until the date of payment; and for such other costs of litigation otherwise allowed by law. The Clerk of Court is directed to close the case.. Signed by Judge Elizabeth A. Kovachevich on 9/22/2011. (SN) (Entered: 09/22/2011)
10/12/2011 16 ABSTRACT of judgment as to Constance Daniels. (DMS) (Entered: 10/12/2011)

Order GRANTING Summary Judgment for $164k Student Loan Debt, Doc. 15, Sep 22, 2011

Daniels v. Select Portfolio Servicing, Inc.

(2018-Present)

(8:18-cv-01652)

District Court, M.D. Florida

ORDER

THIS CAUSE comes before the Court upon Defendant’s Motion to Dismiss Plaintiff’s Second Amended Complaint (Dkt. 24) and Plaintiff’s Response in Opposition (Dkt. 27).

The Court, having reviewed the motion, response, and being otherwise advised in the premises, concludes that Defendant’s motion should be granted.

Specifically, Plaintiff’s second amended complaint will be dismissed with prejudice because any further amendment is futile.

BACKGROUND

As the Court explained in its prior Order granting Defendant’s motion to dismiss, (see Dkt. 22), Plaintiff Constance Daniels initially filed suit in Florida state court against Defendant Select Portfolio Servicing, Inc. (“SPS”) alleging three Florida claims, which included a claim under Florida’s civil Racketeer Influenced and Corrupt Organizations (“RICO”) Act.

On July 10, 2018, SPS removed the case to this Court based on diversity jurisdiction.

On August 6, 2018, SPS moved to dismiss the entire complaint.

In relevant part, SPS argued that the complaint failed to allege any of the elements of a RICO claim.

On August 27, 2018, Daniels filed an amended complaint, which mooted SPS’s motion to dismiss.

Daniels’ amended complaint alleged two claims: a claim under the Fair Debt Collection Practices Act (“FDCPA”) and a claim under the Florida Consumer Collections Practices Act (“FCCPA”).

Both claims relied on the same allegations.

To summarize, Daniels alleged that SPS had “improperly servic[ed]” her mortgage loan “in reckless disregard” of her consumer rights. (Dkt. 12).

The amended complaint did not attach any mortgage statements.

SPS moved to dismiss Daniels’ amended complaint based on her failure to allege that SPS ever attempted to collect the mortgage balance.

The Court granted SPS’s motion.

The Court noted that the amended complaint did not identify or attach any communication from SPS to Daniels.

The Court also surmised that the dispute was more akin to a dispute about an improper accounting of Daniels’ mortgage.

The Court dismissed the FDCPA and FCCPA claims and provided Daniels a final opportunity to amend her complaint.

Daniels filed a second amended complaint.

The allegations are largely unchanged.

But, significantly, Daniels attaches multiple monthly mortgage statements that SPS sent to her.

She now claims that these mortgage statements constitute debt collection activity under the FDCPA and FCCPA.

SPS’s motion to dismiss argues that the monthly mortgage statements comply with Regulation Z of the Truth in Lending Act (the “TILA”)—they were not communications in connection with the collection of a debt—and therefore do not constitute debt collection activity under the FDCPA and FCCPA.

As explained further below, the Court agrees with SPS’s position based on the Court’s detailed review of the monthly mortgage statements.

Therefore, the second amended complaint will be dismissed with prejudice.

STANDARD OF REVIEW

Federal Rule of Civil Procedure 12(b)(6) allows a court to dismiss a complaint when it fails to state a claim upon which relief can be granted.

When reviewing a motion to dismiss, a court must accept all factual allegations contained in the complaint as true.

Erickson v. Pardus, 551 U.S. 89, 94 (2007) (internal citation omitted).

It must also construe those factual allegations in the light most favorable to the plaintiff.

Hunt v. Aimco Properties, L.P., 814 F.3d 1213, 1221 (11th Cir. 2016) (internal citation omitted).

To withstand a motion to dismiss, the complaint must include “enough facts to state a claim to relief that is plausible on its face.”

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).

A claim has facial plausibility “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

Pleadings that offer only “labels and conclusions,” or a “formulaic recitation of the elements of a cause of action,” will not do.

Twombly, 550 U.S. at 555.

DISCUSSION

The FDCPA and FCCPA prohibit debt collectors from using a “false, deceptive, or misleading representation or means in connection with the collection of any debt.”

See e.g. 15 U.S.C. § 1692e (emphasis added);

Fla. Stat. § 559.72 (“In collecting debts, no person shall . . .”) (emphasis added).

It is axiomatic then that the “challenged conduct is related to debt collection” to state a claim under either statute.

Reese v. Ellis, Painter, Ratterree & Adams, LLP, 678 F.3d 1211, 1216 (11th Cir. 2012);

see also Garrison v. Caliber Home Loans, Inc., 233 F. Supp. 3d 1282, 1286 (M.D. Fla. 2017) (“the FCCPA is a Florida state analogue to the federal FDCPA.”) (internal citations omitted).

“[T]he Eleventh Circuit has not established a bright-line rule” as to what qualifies as “in connection with the collection of any debt.”

Dyer v. Select Portfolio Servicing, Inc., 108 F. Supp. 3d 1278, 1280 (M.D. Fla. 2015).

“As a general principle, the absence of a demand for payment is not dispositive,” and courts should “instead consider whether the overall communication was intended to induce the debtor to settle the debt.”

Wood v. Citibank, N.A., No. 8:14-cv-2819-T-27EAJ, 2015 WL 3561494, at *3 (M.D. Fla. June 5, 2015) (citations omitted).

The second amended complaint attaches multiple monthly mortgage statements.1

Because the communications at issue here are all monthly mortgage statements, a discussion of the TILA is necessary.

The TILA requires SPS, a servicer, to send monthly mortgage statements.

12 C.F.R. § 1026.41. Specifically, 12 C.F.R. § 1026.41(d) requires that servicers provide debtors with detailed monthly mortgage statements containing, among other things: the “amounts due;” the “payment due date;” “the amount of any late payment fee, and the date that fee will be imposed if payment has not been received;” “an explanation of amount due, including a breakdown showing how much, if any, will be applied to principal, interest, and escrow and, if a mortgage loan has multiple payment options, a breakdown of each of the payment options;” “any payment amount past due;” a breakdown of “the total of all payments received since the last statement” and “since the beginning of the current calendar year;” “a list of all transaction activity that occurred since the last statement;” “partial payment information;” “contact information;” and detailed “account information” and “delinquency information.”

The Consumer Financial Protection Bureau (the “CFPB”) has issued a bulletin providing that a

“servicer acting as a debt collector would not be liable under the FDCPA for complying with [monthly mortgage statement] requirements.”

Implementation Guidance for Certain Mortgage Servicing Rules, 10152013 CFPB GUIDANCE, 2013 WL 9001249 (C.F.P.B. Oct. 15, 2013).

Courts have largely followed this guidance.

See, e.g., Jones v. Select Portfolio Servicing, Inc., No. 18-cv-20389, 2018 WL 2316636, at *3 (S.D. Fla. May 2, 2018) (citing 12 C.F.R. § 1026.41(d));

Brown v. Select Portfolio Servicing, Inc., No. 16-62999-CIV, 2017 WL 1157253 (S.D. Fla. Mar. 24, 2017) (noting the guidance and finding that monthly mortgage statements in compliance with the TILA were not debt collection).

The monthly mortgage statements at issue here were in conformity with the TILA requirements.

Moreover, the subject statements were substantially similar to model form H-30(B) provided by Appendix X to Part 1026 of TILA Regulation Z.

See also Jones, 2018 WL 2316636, at *4 (noting the similarities between a monthly mortgage statement and the model form in concluding no debt collection).

Although the monthly mortgage statements may not be identical to model form H-30(B), the differences are not significant deviations.

Notably, the plaintiff in Brown brought a nearly identical lawsuit against SPS.

The court explained in detail why the plaintiff was unable to state a claim under the FDCPA and FCCPA because the monthly mortgage statement was required to be sent pursuant to the TILA.

The complaint in Brown was dismissed with prejudice because “amendment would be futile” given that the basis for the claims was a monthly mortgage statement that was not actionable as a matter of law.

See 2017 WL 1157253, at *2-*4.

Also, the Jones court discussed in detail the numerous prior decisions addressing this issue, including multiple cases from this district that have held that monthly mortgage statements

“are almost categorically not debt collection communications under the FDCPA.”

2018 WL 2316636, at *5 (citing cases).

The particular monthly mortgage statements before the court in Jones were also sent by SPS and were substantively identical to the statements at issue in this case and in Brown.

Most recently, in Mills v. Select Portfolio Servicing, Inc., No. 18-cv-61012- BLOOM/Valle, 2018 WL 5113001 (S.D. Fla. Oct. 19, 2018), the court “agree[d] with the reasoning in Jones and [concluded] that the Mortgage Statements at issue [were] not communications in connection with a collection of a debt.” Id. at *2.

In conclusion, the substance of the monthly mortgage statements at issue in this case is substantially similar to model form H-30(B).

Any minor discrepancies in the language—when taken in the context of the document as an otherwise carbon copy of form H-30(B)—do not take the statements out of the realm of a monthly mortgage statement and into the realm of debt collection communications.

It is therefore ORDERED AND ADJUDGED that:

1. Defendant’s Motion to Dismiss Plaintiff’s Second Amended Complaint (Dkt.

24) is granted.

2. Plaintiff’s Second Amended Complaint is dismissed with prejudice.

3. The Clerk of Court is directed to close this case and terminate any pending motions as moot.

DONE and ORDERED in Tampa, Florida on December 18, 2018.

 

 

 

 

Copies furnished to: Counsel/Parties of Record

Judge Bert Jordan’s “Reputation” Warning to New Florida Lawyers

Constance Daniels Admonished by the Florida Bar (2021)

Constance Daniels, P.O. Box 6219, Brandon, admonishment in writing and directed to attend Ethics School effective immediately following a November 24 court order.

(Admitted to practice: 1995)

Daniels failed to act with reasonable diligence and failed to communicate with her client in connection with a dissolution of marriage action.

Daniels also failed to timely respond to the Bar’s formal complaint.

(Case No: SC21-683)

Constance Daniels v. Select Portfolio Servicing, Inc. (2022)

11th Cir., Published Opinion

(19-10204, May 24, 2022)

“A matter of first impression” 14 Years after the great recession and greatest theft of citizens homes in the history of the United States.

It’s quite incredulous how the 11th Circuit selects a Sanctioned Fl. Republican Lawyer, a failed judicial candidate and one who is facing foreclosure, for this ‘landmark’ published opinion in 2022.

Panel Author, Judge Bert Jordan, joined by Judge Brasher with a dissenting opinion by Judge Babs Lagoa

11th Circuit revives FDCPA lawsuit over mortgage statement language

How Westlaw is Summarizing the Latest Eleventh Circuit Opinion

(May 26, 2022)

Resolving an issue of first impression, a divided federal appeals panel has held that mortgage servicers can be liable under the Fair Debt Collection Practices Act for inaccuracies in monthly mortgage statements that contain additional debt-collection language.

Daniels v. Select Portfolio Servicing Inc., No. 19-10204, (11th Cir. May 24, 2022).

In a 2-1 decision, the 11th U.S. Circuit Court of Appeals on May 24 reinstated Constance Daniels’ lawsuit against Select Portfolio Servicing Inc., in which she alleges the company used faulty mortgage statements to try to collect payments she did not owe.

Writing for the panel majority, U.S. Circuit Judge Adalberto J. Jordan acknowledged that Select Portfolio was required to issue the mortgage statements under the Truth in Lending Act, 15 U.S.C.A. § 1638.

However, the mortgage statements fell within the scope of the FDCPA’s prohibition on false or misleading representations, 15 U.S.C.A. § 1692e, because they included additional debt-collection language — “this is an attempt to collect a debt” — the opinion said.

Judge Jordan reasoned that “in determining whether a communication is in connection with the collection of a debt, what could be more relevant than a statement in the communication than ‘this is an attempt to collect a debt’?”

U.S. Circuit Judge Barbara Lagao dissented, saying the majority treated the language like “magic words” that could convert an otherwise routine mortgage statement into a communication covered by the FDCPA.

Judge Lagoa also argued that the decision created a circuit split, although the panel majority insisted that the facts of Daniels’ case distinguished it from others in which federal circuit courts seemed to reach a contrary result.

District Court tosses FDCPA claims

Daniels sued Select Portfolio in the U.S. District Court for the Middle District of Florida in July 2018.

According to the suit, Daniels had prevailed in a state court foreclosure action brought by lender Wells Fargo in 2015, with the judge sanctioning Wells Fargo and enforcing an earlier loan modification agreement between the parties.

But Daniels’ mortgage servicer, Select Portfolio, later issued several monthly mortgage statements misstating the principal balance and amount due, and falsely claiming that her loan was in arrears, the suit says.

At least three of the mortgage statements included the sentence, “This is an attempt to collect a debt,” according to the suit.
Daniels accuses Select Portfolio of using false or misleading representations in connection with the collection of a debt, in violation of the FDCA and the Florida Consumer Collection Practices Act, Fla. Stat. Ann. § 559.72.

Select Portfolio moved to dismiss, saying Daniels was attempting hold it liable for issuing mortgage statements that are required under the Truth in Lending Act.

U.S. District Judge James S. Moody Jr. agreed and dismissed the suit in December 2018. Daniels v. Select Portfolio Servs. Inc., No. 18-cv-1652, (M.D. Fla. Dec. 18, 2018).

Judge Moody said that any discrepancies in language between Select Portfolio’s monthly statements and what is required under TILA “do not take the statements out of the realm of a monthly mortgage statement and into the realm of debt collection communications.”

On appeal, Daniels argued that compliance with TILA does not make a mortgage servicer immune from suit under the FDCPA and, even if it did, the monthly statements at issue included language beyond what is necessary under TILA.

Kaelyn S. Diamond and Michael A. Ziegler of the Law Office of Michael A. Ziegler represented Daniels.

Benjamin B. Brown and Joseph T. Kohn of Quarles & Brady LLP represented Select Portfolio.

By Dave Embree

YOUR DONATION(S) WILL HELP US:

• Continue to provide this website, content, resources, community and help center for free to the many homeowners, residents, Texans and as we’ve expanded, people nationwide who need access without a paywall or subscription.

• Help us promote our campaign through marketing, pr, advertising and reaching out to government, law firms and anyone that will listen and can assist.

Thank you for your trust, belief and support in our conviction to help Floridian residents and citizens nationwide take back their freedom. Your Donations and your Voice are so important.



Continue Reading

Appellate Circuit

Deutsche Bank and Nationstar Watch as 11th Circuit Discharge the Shotgun Despite Hunt’s Pleadings

There can be no doubt that this is a frivolous appeal and we would not hesitate to order sanctions if appellant had been represented by counsel.

Published

on

Hunt v. Nationstar Mortg., No. 21-10398

(11th Cir. May 27, 2022)

MAY 27, 2022 | REPUBLISHED BY LIT: MAY 30, 2022

Before ROSENBAUM, GRANT, and MARCUS, Circuit Judges. PER CURIAM:

Christopher M. Hunt, Sr., proceeding pro se, appeals following the district court’s dismissal of his civil complaint arising out of his 2006 purchase of residential property located in Atlanta, Georgia (the “Property”).

Hunt purchased the Property using proceeds from a loan that he eventually defaulted on, which prompted Nationstar Mortgage, LLC (“Nationstar”), then servicer of the loan, to seek a non-judicial foreclosure on the Property.

After filing or being named in a variety of related lawsuits,1 Hunt filed the instant pro se complaint in Georgia state court in June 2020 and named as defendants Nationstar, the Deutsche Bank National Trust

1 See, g., Hunt v. Nationstar Mortg., LLC, 684 F. App’x 938 (11th Cir. 2017) (unpublished) (“Hunt I”);

[MARCUS, ROSENBAUM AND ANDERSON]

Hunt v. Nationstar Mortg., LLC, 779 F. App’x 669 (11th Cir. 2019) (unpublished);

[PRYOR,W., GRANT AND ANDERSON]

Hunt v. Nationstar Mortg., LLC, 782 F. App’x 762 (11th Cir. 2019) (unpublished);

[PRYOR,W., GRANT AND ANDERSON]

Deutsche Bank Tr. Co. Am., as Tr. for Fifteen Piedmont Ctr. v. Hunt, 783 F. App’x 998 (11th Cir. 2019) (unpublished).

[TJOFLAT, JORDAN AND NEWSOM]

Companies (“Deutsche Bank”), and Jay Bray, the CEO of Nationstar.

He alleged that they had committed, inter alia, mortgage fraud and wrongful foreclosure in violation of federal laws, including the Sarbanes-Oxley Act and the Dodd-Frank Act.2

The district court denied a variety of preliminary motions filed by Hunt;

dismissed, without prejudice, the complaint as to defendant Bray for failure to effect proper service;

and

dismissed, with prejudice, the complaint as to Deutsche Bank and Nationstar, because it was a “shotgun” pleading, was barred by res judicata, and failed to state a claim upon which relief could be granted.3

After thorough review, we affirm.

I.

Whether a court has subject-matter jurisdiction, including removal jurisdiction, is a question of law that we review de novo.

See McGee v. Sentinel Offender Servs., LLC, 719 F.3d 1236, 1241 (11th Cir. 2013).

We also review de novo a denial of a motion to

2 Sarbanes-Oxley Act of 2002, Pub. L. No. 107-204, 116 Stat. 745 (hereinafter “Sarbanes-Oxley Act”), and the Dodd-Frank Wall Street Reform and Con- sumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376 (2010) (hereinafter “Dodd-Frank Act”).

3 Hunt also named Christian Sewing, the Chief Executive Officer (“CEO”) of Deutsche Bank, as a defendant, but he later voluntarily dismissed him.

And after filing the complaint, Hunt sought to add yet another defendant, the Albertelli Law Firm (“Albertelli Law”).

Bray, Sewing and Albertelli Law have not filed any briefs on appeal.

remand to state court. Conn.

State Dental Ass’n v. Anthem Health Plans, 591 F.3d 1337, 1343 (11th Cir. 2009).

A district court’s decision regarding the indispensability of a party is reviewed for abuse of discretion.

United States v. Rigel Ships Agencies, Inc., 432 F.3d 1282, 1291 (11th Cir. 2005).

We will disturb a district court’s refusal to change venue only for a clear abuse of discretion.

Robinson v. Giarmarco & Bill, P.C., 74 F.3d 253, 255 (11th Cir. 1996).

We also review the district court’s denial of a motion for recusal for abuse of discretion.

Jenkins v. Anton, 922 F.3d 1257, 1271 (11th Cir. 2019).

We review a district court’s grant of a motion to dismiss for insufficient service of process, under Rule 12(b)(5), by applying a de novo standard to questions of law, and a clear error standard to the court’s findings of fact.

Albra v. Advan, Inc., 490 F.3d 826, 829 (11th Cir. 2007).

But when a party fails to object to a magistrate judge’s findings or recommendations in a report and recommendation, he “waives the right to challenge on appeal the district court’s order based on unobjected-to factual and legal conclusions.” 11th Cir. R. 3-1.

Under the circumstances, we review a claim on appeal only “for plain error,” if “necessary in the interests of justice.” Id.

We review the dismissal of a “shotgun” pleading under Rule 8 for abuse of discretion.

Vibe Micro, Inc. v. Shabanets, 878 F.3d 1291, 1294 (11th Cir. 2018).

When appropriate, we will review a district court’s dismissal for failure to state a claim under Rule 12(b)(6) de novo.

Am. United Life Ins. Co. v. Martinez, 480 F.3d 1043, 1056–57 (11th Cir. 2007).

We will also review a dismissal

based on res judicata de novo.

Jang v. United Techs. Corp., 206 F.3d 1147, 1149 (11th Cir. 2000).

We review de novo a district court’s conclusions on collateral estoppel, but review its legal conclusion that an issue was actually litigated in a prior action for clear error.

Richardson v. Miller, 101 F.3d 665, 667–68 (11th Cir. 1996).

While pro se pleadings are liberally construed, issues not briefed on appeal are normally forfeited and we will generally not consider them.

Timson v. Sampson, 518 F.3d 870, 874 (11th Cir. 2008).

An appellant can abandon a claim by:

(1) making only passing reference to it;

(2) raising it in a perfunctory manner without supporting arguments and authority;

(3) referring to it only in the “statement of the case” or “summary of the argument”;

or

(4) referring to the issue as mere background to the appellant’s main arguments.

Sapuppo v. Allstate Floridian Ins. Co., 739 F.3d 678, 681– 82 (11th Cir. 2014).

In addition, if a district court’s order rested on two or more independent, alternative grounds, the appellant must challenge all of the grounds to succeed on appeal.

See id. at 680.

When an appellant fails to challenge on appeal one of the grounds on which the district court based its judgment, he is deemed to have abandoned any challenge of that ground, and it follows that the judgment is due to be affirmed.

See id.

II.

Liberally construed, Hunt’s brief on appeal seeks to challenge the district court’s decisions:

(1) denying remand of his case to state court

and

denying his request to file an amended complaint adding another defendant, Albertelli Law;

(2) denying his request

to transfer the case;

(3) denying his request to disqualify the judge;

(4) dismissing, without prejudice, his complaint as to defendant Bray for failure to effect proper service;

and

(5) dismissing his complaint, with prejudice, as to Deutsche Bank and Nationstar.

To be sure, Hunt’s arguments about these decisions by the district court are not clearly stated.

But even if we were to assume that he has preserved his arguments on appeal, they fail on the merits.

First, we are unpersuaded by Hunt’s arguments that the district court should have allowed him to file an amended complaint to add another party to the suit, which would have deprived the federal court of jurisdiction, and should have remanded the case to state court.

Federal courts have diversity-of-citizenship jurisdiction when the parties are citizens of different states and the amount in controversy exceeds $75,000.

28 U.S.C. § 1332(a)(1).

A corporation is a citizen of every state where it was incorporated and the one state in which it has its principal place of business.

Daimler AG v. Bauman, 571 U.S. 117, 133, 137 (2014); 28 U.S.C. § 1332(c)(1).

A defendant may remove any civil action brought in a state court to a federal district court that has original jurisdiction over the action.

28 U.S.C. § 1441(a).

The removing party bears the burden of proving that removal jurisdiction exists.

McGee, 719 F.3d at 1241.

Here, the district court did not err in denying Hunt’s motion to remand. As we’ve held in a previous appeal, his motion was based on his belated and fraudulent attempts to join Albertelli Law, in an effort to defeat the district court’s diversity jurisdiction.

See Hunt I, 684 F. App’x. at 942-44.

However, Hunt asserted federal

claims in his complaint, so the district court had jurisdiction in any event.

28 U.S.C. § 1441(a).

Accordingly, the district court correctly denied Hunt’s requests to remand the case and acted within its discretion to deny joinder.

Rigel Ships Agencies, Inc., 432 F.3d at 1291.

We also find no merit to Hunt’s claims that the district court should have transferred venue of his lawsuit.

A district court may transfer a civil action to any other district or division where it may have been brought “for the convenience of the parties and witnesses, and in the interest of justice.”

Robinson, 74 F.3d at 260 (quoting 28 U.S.C. § 1404(a)).

But in this case, the district court did not err because Hunt did not provide any cognizable reason for a transfer.

It appears that Hunt’s transfer request was based on his belief that case law in the United States District Court for the Middle District of Georgia would be more favorable to him – which is not a legitimate reason for transfer.

See 28 U.S.C. § 1404(a).

Similarly, we reject Hunt’s argument that the district court judge should have recused himself.

A judge must sua sponte recuse himself “in any proceeding in which his impartiality might reasonably be questioned” or “

[w]here he has a personal bias or prejudice concerning a party.”

28 U.S.C. § 455(a), (b)(1).

“The test is whether an objective, disinterested, lay observer fully informed of the facts underlying the grounds on which recusal was sought would entertain a significant doubt about the judge’s impartiality.”

Parker v. Connors Steel Co., 855 F.2d 1510, 1524 (11th Cir. 1988).

“Ordinarily, a judge’s rulings in the same or a related case may not serve as

the basis for a recusal motion.”

McWhorter v. City of Birmingham, 906 F.2d 674, 678 (11th Cir. 1990).

“The judge’s bias must be personal and extrajudicial; it must derive from something other than that which the judge learned by participating in the case.”

Id.

“The exception to this rule is when a judge’s remarks in a judicial context demonstrate such pervasive bias and prejudice that it constitutes bias against a party. Mere friction . . . however, is not enough to demonstrate pervasive bias.”

Thomas v. Tenneco Packaging Co., 293 F.3d 1306, 1329 (11th Cir. 2002) (quotation marks omitted).

As the record before us makes clear, no “objective, disinterested, lay observer fully informed of the facts underlying” these circumstances “would entertain a significant doubt about the judge’s impartiality.”

Parker, 855 F.2d at 1524.

Accordingly, the district court did not abuse its discretion in denying Hunt’s request for recusal or disqualification.

Nor do we find any merit to Hunt’s argument that the district court erred in dismissing the complaint against defendant Bray for lack of proper service.

When a federal court is considering the sufficiency of process after removal, it does so by looking to the state law governing process.

See Usatorres v. Marina Mercante Nicaraguenses, S.A., 768 F.2d 1285, 1286 n.1 (11th Cir. 1985).

Georgia law provides that service made “outside the state” of Georgia is to be done “in the same manner as service is made within the state.”

O.C.G.A. § 9-10-94.

Under Georgia law, service on natural persons is to be made “personally, or by leaving copies thereof at the defendant’s dwelling house or usual place of abode with some

person of suitable age and discretion then residing therein, or by delivering a copy of the summons and complaint to an agent authorized . . . to receive service of process.”

O.C.G.A. § 9-11-4(e)(7).

Notably, Hunt does not dispute these proposed findings set forth by the magistrate judge’s Report and Recommendation (“R&R”), that Hunt:

(1) mailed service to Bray;

and

(2) completed “corporate service” on Deutsche Bank, which Hunt asserted was also effective to serve Bray.

11th Cir. R. 3-1.

But, as the district court determined, Georgia law applied here and required personal service in these circumstances.

Albra, 490 F.3d at 829; O.C.G.A. § 9-11-4(e)(7).

Bray therefore was not properly served under Georgia law, and, for that reason, the district court did not err in dis- missing Hunt’s suit without prejudice as to Bray.

Finally, we find no error in the district court’s denial of injunctive relief and its dismissal of Hunt’s complaint against the two remaining defendants, Nationstar and Deutsche Bank.

A district court has the inherent authority to control its docket and ensure the prompt resolution of lawsuits, which includes the ability to dismiss a complaint on “shotgun” pleading grounds.

Shabanets, 878 F.3d at 1295.

We have described four types of “shotgun” com- plaints:

(1) those containing multiple counts where each count adopts all allegations of all preceding counts;

(2) those replete with conclusory, vague, and immaterial facts not obviously connected to any particular cause of action;

(3) those that do not separate each cause of action or claim for relief into different counts;

and

(4) those asserting multiple claims against multiple defendants without

specifying which of the defendants are responsible for which acts or omissions, or which of the defendants the claim is brought against.

Weiland v. Palm Beach Cnty. Sheriff’s Off., 792 F.3d 1313, 1321–23 (11th Cir. 2015).

“Shotgun” pleadings violate Rule 8, which requires “a short and plain statement of the claim showing that the pleader is entitled to relief,” Fed. R. Civ. P. 8(a)(2), by failing to, in one degree or another, give the defendants adequate notice of the claims against them and the grounds upon which each claim rests.

Shabanets, 878 F.3d at 1294–96.

We generally require district courts to allow a litigant at least one chance to remedy any deficiencies before dismissing the complaint with prejudice, where a more carefully drafted complaint might state a claim.

See id.; Silberman v. Miami Dade Transit, 927 F.3d 1123, 1132 (11th Cir. 2019).

But it need not grant leave to amend the complaint when further amendment would be futile.

Silberman, 927 F.3d at 1133.

Under federal law, res judicata, or claim preclusion, bars a subsequent action if

“(1) the prior decision was rendered by a court of competent jurisdiction;

(2) there was a final judgment on the merits;

(3) the parties were identical in both suits;

and

(4) the prior and present causes of action are the same.”

Jang, 206 F.3d at 1148– 49 & n.1 (quotation marks omitted).

We have held that “if a case arises out of the same nucleus of operative facts, or is based upon the same factual predicate, as a former action, the two cases are really the same ‘claim’ or ‘cause of action’ for purposes of res judicata.”

Baloco v. Drummond Co., Inc., 767 F.3d 1229, 1247 (11th

Cir. 2014) (quotation marks omitted and alterations adopted).

“In addition, res judicata applies not only to the precise legal theory presented in the prior case, but to all legal theories and claims arising out of the nucleus of operative fact” that could have been raised in the prior case.

Id. (quotation marks omitted and alterations adopted).

Collateral estoppel, or issue preclusion, “refers to the effect of a judgment in foreclosing relitigation of a matter that has been litigated and decided.”

Migra v. Warren City Sch. Dist. Bd. of Educ., 465 U.S. 75, 77 n.1 (1984).

Thus, “collateral estoppel is appropriate only when the identical issue has been fully litigated in a prior case.”

In re McWhorter, 887 F.2d 1564, 1567 (11th Cir. 1989) (quotation marks omitted).

“The party seeking to invoke collateral estoppel bears the burden of proving that the necessary elements have been satisfied.”

Id. at 1566.

“[C]hanges in the law after a final judgment [generally] do not prevent the application of res judicata and collateral estoppel, even though the grounds on which the decision was based [may be] subsequently overruled.”

Precision Air Parts, Inc. v. Avco Corp., 736 F.2d 1499, 1503 (11th Cir. 1984).

To safeguard investors in public companies and restore trust in the financial markets, Congress enacted the Sarbanes-Oxley Act of 2002, 116 Stat. 745.

See S. Rep. No. 107-146, pp. 2–11 (2002).

The Act contains several provisions, including a whistleblower protection provision which prohibits a publicly traded company or its officers from discharging an “employee” for providing information to a supervisory authority about conduct that the employee

“reasonably believes” constitutes a violation of federal laws against mail fraud, wire fraud, bank fraud, securities fraud, any SEC rule or regulation, or any provision of federal law relating to fraud against shareholders.

See 18 U.S.C. § 1514A(a)(1).

The Dodd-Frank Act whistleblower provision provides protection to individuals who provide “information relating to a violation of the securities laws to the” Securities and Exchange Commission (“SEC”).

15 U.S.C. § 78u-6(a)(6).

Thus, “[t]o sue under Dodd-Frank’s anti-retaliation provision, a person must first provide information relating to a violation of the securities laws to the [SEC].”

Dig. Realty Trust, Inc. v. Somers, 138 S. Ct. 767, 772–73 (2018) (quotation marks omitted and alterations adopted).

In his brief on appeal, Hunt does not expressly address the lower court’s “shotgun” pleading determination, and, as a result, the district court’s dismissal of the complaint is due to be affirmed.

Sapuppo, 739 F.3d at 681–82.

But in any event, the district court did not err in finding that his complaint was a “shotgun” pleading.

As the record reflects, the complaint consisted of three numbered paragraphs that spanned paragraphs and pages; failed to isolate claims by defendants;

and largely failed to discuss any facts — thereby falling into several of our identified categories of prohibited “shotgun” pleadings.

Weiland, 792 F.3d at 1321-23.

The district court also was correct that amendment would have been futile.

For one, res judicata and collateral estoppel barred Hunt’s claims for breach of contract and fraud, since Hunt sued the same parties for the same alleged breach of contract and fraud in several prior cases.

See, e.g., Hunt I, 684 F. App’x at 944.4

These decisions were final judgments and were “rendered by a court of competent jurisdiction,” “on the merits,” against the same parties, and “the prior and present causes of action [were] the same.”

Jang, 206 F.3d at 1149.

Moreover, even if some of Hunt’s claims had not been explicitly presented in any of his prior cases, they would still be barred by res judicata because every claim arose from the same facts as each of his prior cases, and he could have raised them in any of the prior proceedings.

Baloco, 767 F.3d at 1247.

Also, despite Hunt’s arguments, there have been no “changes in the law” that would “prevent the application of res judicata and collateral estoppel” in this case.

Precision Air Parts, 736 F.2d at 1503.

In addition, Hunt’s claims under the Sarbanes-Oxley Act and Dodd-Frank Act were futile because they fail to state a claim upon which relief could be granted.

As the record reflects, Hunt did not allege that he was an “employee” under the Sarbanes-Oxley Act, nor that he “provide[d] information relating to a violation of the securities laws to the [SEC]” as required under the Dodd-Frank Act.

4 To the extent that Hunt challenges the district court’s decisions under Fed. R. Civ. P. 60(b), we conclude that he has not identified any “extraordinary circumstances” entitling him to relief, and the district court did not abuse its discretion in this respect.

Toole v. Baxter Healthcare Corp., 235 F.3d 1307, 1316 (11th Cir. 2000) (quotation marks omitted).

Somers, 138 S. Ct. at 772–74.

Accordingly, Hunt did not state a cause of action under these statutes, and we affirm.

AFFIRMED.5

5 All of Hunt’s pending motions, which he filed after we imposed a filing restriction on him, are DENIED to the extent they request any relief.

For their part, Nationstar and Deutsche Bank have filed renewed motions for sanctions, requesting monetary sanctions against Hunt for his numerous motions before this Court under 11th Cir. R. 27-4.

Hunt is pro se and we DENY the motions for sanctions at this time.

See Woods v. I.R.S., 3 F.3d 403, 404 (11th Cir. 1993)

(“There can be no doubt that this is a frivolous appeal and we would not hesitate to order sanctions if appellant had been represented by counsel. However, since this suit was filed pro se, we conclude that sanctions would be inappropriate.”).

Although we are reluctant to impose sanctions on pro se appellants, we warn Hunt that our Court has imposed sanctions in circumstances like these, even for pro se litigants, and he is strongly cautioned against bringing any further frivolous motions or claims.

See Ricket v. United States, 773 F.2d 1214, 1216 (11th Cir. 1985)

(imposing sanctions on a pro se appellant who had been warned by the district court that the issues on appeal were frivolous).

YOUR DONATION(S) WILL HELP US:

• Continue to provide this website, content, resources, community and help center for free to the many homeowners, residents, Texans and as we’ve expanded, people nationwide who need access without a paywall or subscription.

• Help us promote our campaign through marketing, pr, advertising and reaching out to government, law firms and anyone that will listen and can assist.

Thank you for your trust, belief and support in our conviction to help Floridian residents and citizens nationwide take back their freedom. Your Donations and your Voice are so important.



Continue Reading

Appellate Circuit

God Goes in Front of Me and Makes the Crooked Straight and I Get to Keep My Pension

Ex-Inmate and Former Congresswoman Corrine Brown is Confident of Her Plea Deal Keepin’ Her out of Jail and Ending Her Criminal Case.

Published

on

Former congresswoman Corrine Brown to take plea deal
Brown faced retrial this fall on federal fraud charges

May 17, 2021 | REPUBLISHED BY LIT: May 17, 2022

JACKSONVILLE, Fla. – Former congresswoman Corrine Brown is set to change her plea Wednesday in a federal case that involves charges of fraud and conspiracy, avoiding a retrial that was scheduled to take place this fall.

Tuesday morning, News4JAX reporter Jim Piggott spoke with Corrine Brown by phone. She said everything will come out in court tomorrow.

“I want you to know, God has been good to me,”

Brown said.

“I just talked to my pastor and I know that He goes in front of me and make the crooked straight. That’s all I can tell you, He’s good.”

Former U.S. Rep. Corrine Brown is set to change her plea Wednesday in a federal case that involves charges of fraud and conspiracy, avoiding a retrial that was scheduled to take place this fall.

Brown was indicted in 2016 on charges that included conspiracy, wire fraud, and tax fraud, on accusations that she used contributions to the One Door for Education charity for personal expenses.

Brown was convicted on some of the charges in May 2017, and began a five-year prison sentence in January 2018. Brown was released in April 2020, due to coronavirus concerns.

Following her conviction, Brown appealed the guilty verdict, arguing the trial judge wasn’t justified in replacing a juror who said the Holy Spirit told him Brown was not guilty.

A three-judge panel of the 11th Circuit of the U.S. Court of Appeals initially upheld Brown’s conviction.

Brown’s attorneys then asked for a rehearing before the full 11th Circuit, known as an “en banc” hearing. In May 2021, the appellate court reversed the conviction with a 7-4 decision, sending the case back to the district court for a potential retrial.

In October 2021, we learned that prosecutors planned to re-try Brown on the felony counts she faced in her 2017 trial.

At the time, we learned prosecutors had already extended her a plea deal to avoid being retried and the possibility of a return to prison, an offer she rejected at the time.

Following the appointment of a new defense team, Brown’s retrial was set to take place in September of 2022.

News4JAX Jim Piggott spoke with attorney Curtis Fallgatter,

“(Jim) Are you surprised at all?

(Curtis) A little bit, but not terribly because of the age of the case, the complexity of the case, the number of issues, reversal on appeal issues about a retrial, can I get a conviction, the age of Brown.”

The court document indicating that Brown will be changing her plea does not indicate what charges she may be pleading guilty to, or what sentence could potentially be imposed.

Fallgatter doesn’t believe Brown will serve any additional time.

He said she would not agree to that, and the agreement should be an end to the case.

Brown is getting her pension, and that likely will not change.

YOUR DONATION(S) WILL HELP US:

• Continue to provide this website, content, resources, community and help center for free to the many homeowners, residents, Texans and as we’ve expanded, people nationwide who need access without a paywall or subscription.

• Help us promote our campaign through marketing, pr, advertising and reaching out to government, law firms and anyone that will listen and can assist.

Thank you for your trust, belief and support in our conviction to help Floridian residents and citizens nationwide take back their freedom. Your Donations and your Voice are so important.



Continue Reading

Most Read

Copyright © 2020-2023 LawsInFlorida.com is an online brand name which is wholly owned by Blogger Inc., a nonprofit 501(c)(3) registered in Delaware | Caricatures by DonkeyHotey