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Danzig Ltd. v. Inception Mining, Inc.

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

February 28, 2018

DANZIG LTD., et. al., Plaintiffs,
v.
INCEPTION MINING, INC., et. al., Defendants.

          MEMORANDUM AND RECOMMENDATION AND ORDER

          David S. Cayer United States Magistrate Judge

         THIS MATTER is before the Court on “Defendants' Rule 12(B)(2) Motion to Dismiss for Lack of Personal Jurisdiction” (document #7), “Defendants' Rule 12(B)(2) Motion to Dismiss Plaintiff's First Amended Complaint for Lack of Personal Jurisdiction” (document #13), and “Defendants' Motion to Strike Affidavit of Elliott Foxcroft” (document #15), as well as the parties' briefs and exhibits.

         On January 31, 2018, these Motions were referred to the undersigned Magistrate Judge pursuant to 28 U.S.C. § 636(b)(1).

         The Court has considered the “Affidavit of Elliott Foxcroft” (document 9-5). Accordingly, “Defendant's Motion to Strike” (document #15) is denied.

         On May 8, 2017, Plaintiffs filed their First Amended Complaint as a matter of right. Fed.R.Civ.P. 15(a)(1)(B)(party may amend once as a matter of course, provided that it does so within “21 days after service of a responsive pleading or 21 days after service of a motion under Rule 12(b), (e), or (f), whichever is earlier”). Accordingly, the Court will deny as moot “Defendants' Rule 12(B)(2) Motion to Dismiss for Lack of Personal Jurisdiction” (document #7). See Young v. City of Mount Ranier, 238 F.3d 567, 573 (4th Cir. 2001) (amended pleading renders original pleading of no effect and motions directed at superseded pleadings are to be denied as moot).

         Having fully considered the arguments, the record, and the applicable authority, the undersigned respectfully recommends that “Defendants' Rule 12(B)(2) Motion to Dismiss Plaintiff's First Amended Complaint for Lack of Personal Jurisdiction” (document #13) be granted, as discussed below.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         This matter arises from the sale of Idaho gold mining property by non-party Inception Resources LLC to Gold American Mining Corporation (“Gold American”) through a purchase of assets. Gold American is a Nevada corporation and has never been registered in North Carolina. Plaintiff Brett Bertolami was the majority shareholder in Gold American and a North Carolina resident. Defendant Michael Ahlin, a Utah resident, is the owner/manager of Inception Resources LLC, a Utah limited liability company.

         Accepting the allegations of the Amended Complaint as true, the relevant business transactions were primarily negotiated between non-party Elliott Foxcroft on behalf of Plaintiff Bertolami and Defendant Trent D'Ambrosio on behalf of Defendant Ahlin. D'Ambrosio is a Utah resident. Defendants D'Ambrosio and Ahlin have had no contacts with North Carolina other than telephone and email communications during the negotiations. Foxcroft is the principal of Plaintiff Danzig Ltd (“Danzig”). Danzig is a North Carolina corporation with its principal place of business in Iredell County.

         In exchange for the gold mines, Gold American issued Inception Resources, LLC sixteen million shares of its stock. Gold American was later renamed Inception Mining Inc. and is a Defendant herein. For the purposes of this Motion, the parties agree that their objective was to allow Inception Resources, LLC, to place its gold mining assets into a publicly-traded corporation and have access to capital markets without incurring the costs of an initial public offering.

         Following the sale of assets, Plaintiffs were also issued nearly 1.8 million shares in the new entity, Inception Mining Inc. Plaintiffs allege that Defendants were contractually bound to raise an additional $1 million in capital, register Plaintiffs' shares with the Securities and Exchange Commission by a certain date, and issue no other shares at a price below 35 cents per share. Plaintiffs allege that their shares were significantly devalued as a result of Defendants' breach of these obligations. Plaintiffs assert claims for securities fraud under federal and state law as well as state law claims for breach of contract, unjust enrichment, fraud, breach of fiduciary duty, and negligent representation.

         On May 15, 2017, Defendants moved to dismiss, arguing there is no basis for this Court to exercise personal jurisdiction.

         In their response, Plaintiffs concede that there is no basis for general personal jurisdiction. They argue that the series of emails and telephone calls primarily between Foxcroft and D'Ambrosio along with the fact that Gold American was initially ...


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