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Brown v. Advanced Digital Solutions, LLC

United States District Court, W.D. North Carolina, Statesville Division

August 31, 2017

STEVEN K. BROWN, Plaintiff,
v.
ADVANCED DIGITAL SOLUTIONS, LLC, TIM LYVERS, and TODD PULVER, Defendants.

          ORDER

          RICHARD L. VOORHEES UNITED STATES DISTRICT JUDGE

         THIS MATTER IS BEFORE THE COURT on Defendants Advanced Digital Solutions, LLC's (“ADS”), Tim Lyvers' (“Lyvers”), and Todd Pulver's (“Pulver”) Motion to Dismiss pursuant to Fed.R.Civ.P. 12(b)(2) and 12(b)(3) or, in the alternative, to Transfer Venue pursuant to 28 U.S.C. § 1404 (Doc. 5) and on Plaintiff Steven K. Brown's (“Plaintiff” or “Brown”) Motion for Evidentiary Hearing or Limited Discovery (Doc. 9) as to the issue of personal jurisdiction. Plaintiff and Defendants have fully briefed the Court on both motions. (See Docs. 6-8; 12-15). Accordingly, the motions are ripe for disposition. For the reasons discussed below: (1) Plaintiff's Motion for Evidentiary Hearing or Limited Discovery (Doc. 9) is DENIED; and (2) Defendants' Motion to Dismiss pursuant to Fed.R.Civ.P. 12(b)(2) and 12(b)(3) or, in the alternative, to Transfer Venue pursuant to 28 U.S.C. § 1404 (Doc. 5) is GRANTED IN PART and DENIED IN PART and this case is TRANSFERRED to the District Court for the Southern District of Indiana.

         I. BACKGROUND

         Plaintiff, a North Carolina citizen and resident, was a member of Defendant ADS until November 2015. (Doc. 1-2 (Complaint) at 2-3). As of November 2015, Plaintiff owned approximately fifteen percent of ADS. Defendants Lyvers (the Chief Executive Officer and Manager of ADS) and Pulver (the Chief Operations Officer of ADS) collectively owned the remaining eighty-five percent of ADS. (Doc. 1-2 at 2; see also Docs. 13 at 1; 14 at 1). Defendant ADS is an Indiana Limited Liability Company registered with the North Carolina Secretary of State as a foreign limited liability company. (Doc. 1-2 at 2). Lyvers is a citizen and resident of Kentucky and alleges he has not resided in North Carolina since 2011 while Pulver is a citizen and resident of Nevada, having left North Carolina in October 2016. (Doc. 1-2 at 2; see Docs. 13 at 5; 14 at 21).

         In November 2015, due to a dispute among the three owners of ADS, Plaintiff and Defendants entered into and executed a confidential settlement and release agreement (“the Agreement”). (See Docs. 1-2 at 3; 8-1 at 19-24). The Agreement stipulates that Plaintiff will withdraw as a member of ADS in return for a settlement of $291, 300.00, payable in twenty-four monthly installments, as well as a payment of a one percent commission for every five percent mark-up on projects with which Plaintiff was directly involved during his tenure at ADS. (Doc. 1-2 at 3). ADS subsequently made only two payments to Plaintiff, but ceased remittance of further payments in February 2016. (Id.).

         The Agreement, which serves as the basis for Plaintiff's claims, includes a forum selection clause stating that “the Parties hereby agree that jurisdiction for the resolution of any disputes related to or arising out of the breach or alleged breach of any of the provisions contained in this Agreement shall lie in the state or federal courts in Marion County, Indiana.”[1] (Doc. 8-1 at 23). Furthermore, the same paragraph in the Agreement includes a choice-of-law clause designating Indiana law as the law governing the Agreement. (Id.). The Agreement also includes an email or telefax execution clause stating that “this Agreement shall not be binding on or constitute evidence of a contract between the Parties until such time as a counterpart of this Agreement has been executed by each Party and a copy thereof delivered via facsimile or email to each Party to this Agreement or its/his counsel.” (Id. at 23-24).

         Plaintiff filed a complaint against Defendants in the General Court of Justice, Superior Court Division for Lincoln County, North Carolina. (Docs. 1 at 1; 1-2). In his complaint, Plaintiff raises claims for Breach of Contract and for Fraudulent Inducement to Enter the Agreement. (Doc. 1-2). Plaintiff demands a jury trial and prays that the Court grant him the following relief: (1) an amount in excess of $25, 000.00 from Defendants; (2) a court order rescinding the Agreement; (3) costs including attorney's fees; and (4) any further relief that the Court deems just and proper. (Id.). Defendants were all served via certified mail, and timely removed the action to this Court. (Doc. 1). As Plaintiff is diverse from all Defendants and as the remaining payments on the Agreement exceed $75, 000.00, this Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. § 1332(a).

         Defendants filed a Motion to Dismiss pursuant to Fed.R.Civ.P. 12(b)(2) and 12(b)(3) or, in the alternative, to Transfer Venue pursuant to 28 U.S.C. § 1404. (Docs. 5; 6; 12). Defendants contend that the Court lacks personal jurisdiction over Defendants Lyvers and Pulver because the act of entering into an Agreement with Plaintiff alone is insufficient to confer personal jurisdiction over either Lyvers or Pulver. (Docs. 5; 6 at 3-4; 12-14). Defendants Lyvers and Pulver further argue that, even if personal jurisdiction exists as to them, the forum selection clause included in the Agreement is valid, mandatory, and should be enforced so as to dismiss the action for improper venue or to transfer the action to the Southern District of Indiana. (Doc. 6 at 4-12). Likewise, Defendant ADS seeks to enforce the forum selection clause with an eye toward dismissal or, in the alternative, a transfer to the Southern District of Indiana. (Id.). Plaintiff responded (Doc. 7) and provided an affidavit in support of his response (Doc. 8), arguing that the Court has both general and specific jurisdiction over Defendants Lyvers and Pulver because of their contacts with North Carolina in their capacities as owners of ADS, and also because of Lyvers' and Pulver's participation in the Agreement. (Doc. 7 at 6-11). Further, Plaintiff challenges the validity and applicability of the forum selection clause, arguing that it does not apply to Plaintiff's tort claim for fraudulent inducement, is permissive, and is unreasonable. (Doc. 7 at 11-21).

         Plaintiff also filed a Motion for an Evidentiary Hearing or Limited Discovery as to the issue of personal jurisdiction over Defendants Lyvers and Pulver. (Doc. 9). In the motion, Plaintiff restated allegations from his complaint and informed the Court that it has discretion to permit limited discovery, but provided no argument as to why the Court should permit discovery or what specific facts Plaintiff hopes to discover. (See Doc. 9). Defendants responded (Doc. 15), asserting previous arguments regarding the Court's lack of personal jurisdiction.

         II. PLAINTIFF'S MOTION FOR JURISDICTIONAL DISCOVERY

         A. Standard of Review

         In determining a motion to dismiss for lack of personal jurisdiction under Fed.R.Civ.P. 12(b)(2), a court may postpone the decision and permit discovery, determine the motion on the basis of the pleadings and affidavits, or hold an evidentiary hearing. Rich v. KIS California, Inc., 121 F.R.D. 254, 259 (M.D. N.C. 1988). To obtain jurisdictional discovery a “plaintiff must have at least a good faith belief that such discovery will enable it to show that the court has personal jurisdiction over the defendant” and “[m]ere conjecture or speculation” is not enough to justify jurisdictional discovery. Mouzon v. Radiancy, Inc., 85 F.Supp.3d 361, 373 (D.D.C. 2015).

         B. Analysis

         In his Motion for Evidentiary Hearing or Limited Discovery as to personal jurisdiction (Doc. 9), Plaintiff provides no sufficient reason for this Court to grant his request. Plaintiff merely repeats the allegations listed in his complaint while providing no indication as to what specific information or type of information he hopes to find through jurisdictional discovery. (See Doc. 9). In his Motion, Plaintiff's only guiding statement is that “Defendants Lyvers and Pulver . . . each has substantial contacts with North Carolina[, ] which include but are not limited to the [Agreement].” (Id. at 1).

         The Court's review of the record does not reveal any disputes with respect to the facts surrounding the personal jurisdiction issue. Furthermore, in light of the Court's resolution of personal jurisdiction below, jurisdictional discovery is unwarranted. Accordingly, Plaintiff's Motion for Evidentiary Hearing or Limited Discovery (Doc. 9) is DENIED.

          III. PERSONAL JURISDICTION AS TO LYVERS AND PULVER

         A. Standard of Review

         In a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(2), “[a] plaintiff bears the burden of proving that the Court has personal jurisdiction over a defendant by a preponderance of the evidence.” Am. Auto. Ins. Co. v. Jacobs, 2012 WL 5185617, at *4 (W.D. N.C. Sept. 27, 2012) (M.J.) (citing New Wellington Fin. Corp. v. Flagship Resort Dev. Corp., 416 F.3d 290, 294 (4th Cir.2005)), report and recommendation adopted, 2012 WL 5185614 (W.D. N.C. Oct. 18, 2012). When, as occurs here, a court makes a determination about jurisdiction only from legal memoranda, supporting affidavits and other documents, and allegations from the relevant complaint, a plaintiff need only make a prima facie showing of a sufficient jurisdictional basis to survive a jurisdictional challenge. Universal Leather, LLC v. Koro AR, S.A., 773 F.3d 553, 558 (4th Cir. 2014). In determining whether a plaintiff has met this burden, a court “must construe all relevant pleading allegations in the light most favorable to the plaintiff, assume credibility, and draw the most favorable inferences for the existence of jurisdiction.” Universal Leather, 773 F.3d at 558 (quoting Combs v. Bakker, 886 F.2d 673, 676 (4th Cir. 1989)); Grayson v. Anderson, 816 F.3d 262, 268 (4th Cir. 2016) (court “must take the allegations and available evidence relating to personal jurisdiction in the light most favorable to the plaintiff”).

         In order for a court to exercise personal jurisdiction over a defendant who is not a resident of the forum state at the time of suit, such jurisdiction must be consistent with (1) the long-arm statute of the state in which the district court sits; and (2) the Due Process Clause of the Fourteenth Amendment. Carefirst of Maryland, Inc. v. Carefirst Pregnancy Ctrs., Inc., 334 F.3d 390, 396 (4th Cir. 2003). The applicable North Carolina long-arm statute is N.C. Gen. Stat. § 1-75.4. “Like those of many other states, North Carolina's long-arm statute is construed to extend jurisdiction over nonresident defendants to the full extent permitted by the Due Process Clause. Thus, the dual jurisdictional requirements collapse into a single inquiry as to whether the defendant has such ‘minimal contacts' with the forum state that maintenance of the suit does not offend traditional notions of fair play and substantial justice.” Christian Sci. Bd. of Directors of First Church of Christ, Scientist v. Nolan, 259 F.3d 209, 215 (4th Cir. 2001) (citations and internal quotation marks omitted). Therefore, the court must analyze whether jurisdiction over Defendant Lyvers and over Defendant Pulver is consistent with the Due Process Clause of the Fourteenth Amendment.[2] See id.

         A plaintiff can rely on either general or specific jurisdiction to establish personal jurisdiction over a defendant. Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011). Regardless of whether a plaintiff relies on general or specific jurisdiction to assert personal jurisdiction over a defendant, “[f]airness is the touchstone of the jurisdictional inquiry, and the minimum contacts test is premised on the concept that a [defendant] that enjoys the privilege of conducting business within a state bears the reciprocal obligation of answering to legal proceedings there.” Tire Eng'g & Distribution, LLC v. Shandong Linglong Rubber Co. Ltd., 682 F.3d 292, 301 (4th Cir. 2012) (analyzing only specific jurisdiction, but noting that the Constitution requires fairness and minimum contacts regardless of whether plaintiff asserts specific or general jurisdiction).

         B. Analysis

         i. General Jurisdiction

         “A court may assert general jurisdiction [over a corporate entity] . . . when [the defendant's] affiliations with the State are so ‘continuous and systematic' as to render [the defendant] essentially at home in the forum State.” Goodyear, 564 U.S. at 919. However, when the defendant is an individual and not a corporate entity “the paradigm forum for the exercise of general jurisdiction is the individual's domicile.”[3] 564 U.S. at 923-24. Although the United States Supreme Court has not definitively answered whether “the ‘continuous and systematic contacts' analysis can be applied to individual defendants, the Supreme Court has strongly implied that it cannot and that domicile is the primary basis for a court's exercise of general personal jurisdiction over an individual defendant.” Carnrick v. Riekes Container Corp., 2016 WL 740998, at *2 (D. Colo. Feb. 24, 2016) (citing Burnham v. Superior Court of Cal., 495 U.S. 604, 610 n.1 (1990) (“It may be that whatever special rule exists permitting continuous and systematic contacts to support jurisdiction with respect to matters unrelated to activity in the forum applies only to corporations . . . .”); see Koch v. Pechota, 2017 WL 3234381, at *3 (D.N.J. July 31, 2017) (expressing same observations as in Carnrick and citing Burnham)). It is well established that an individual, legally, has only one domicile, and one of the rights determined by one's domicile is that of being sued under diversity of citizenship jurisdiction. Eckerberg v Inter-State Studio & Publishing Co., 860 F.3d 1079, 1086 (8th Cir. 2017) (“For purposes of federal jurisdiction, ‘domicile' and ‘citizenship' are synonymous terms.” (citation omitted)); McCann v. Newman Irrevocable Trust, 458 F.3d 281, 286 (3d Cir. 2006). Therefore, if domicile equates to an individual's state of citizenship for diversity jurisdiction purposes and an individual can have only one domicile, it cannot logically follow that a party can be domiciled in a state different from his state of citizenship in a diversity action.

         Plaintiff Brown asserts, and Defendants agree, that Defendants Lyvers and Pulver are not domiciled in North Carolina and were not so domiciled when this action was brought. (Docs. 1-2; 13; 14) (asserting that Lyvers and Pulver are residents and citizens of Kentucky and Nevada, respectively). Furthermore, Plaintiff's only argument as to why the Court has general jurisdiction over Lyvers and Pulver revolves around the allegation that they have continuous and systematic contacts with North Carolina, not that North Carolina was either party's residence or domicile at the time Plaintiff commenced this action. (Doc. 1-2). Even though Pulver lived in North Carolina just two months prior to Plaintiff's complaint being filed, Plaintiff's assertion that Pulver was a citizen of Nevada at the time Plaintiff commenced this action in state court (which continued at removal to this Court based on diversity) does not allow this Court to find that he is or was domiciled here for purposes of general jurisdiction. (See id.). Even though Plaintiff does not allege that Defendant Lyvers lived in North Carolina during any period relevant to the facts giving rise to this dispute, this logic clearly extends to Lyvers as well. (Id.). Therefore, if this Court has personal jurisdiction over Defendants Lyvers and Pulver it must be the result of specific jurisdiction, not general jurisdiction. See Kuhnen v. Remington, 2016 WL 3619657, at *3 (M.D. N.C. June 29, 2016) (“Here, there is no suggestion that any [individual] defendant is domiciled in North Carolina. To the contrary, the complaint alleges that they are ‘citizen(s) and resident(s)' of [other states]. As a result, the court lacks general personal jurisdiction over the defendants in this case.”).

         ii. Specifi ...


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