Clemons et al v. WPRJ LLC et al

Filing 22

OPINION AND ORDER OF TRANSFER granting 4 Motion to Change Venue to the United States District Court of Arizona, Phoenix Division; denying 4 Motion to Dismiss; denying 6 Motion to Dismiss; denying 8 Motion to Dismiss; granting 8 Motion to Change Venue to the United States District Court of Arizona, Phoenix Division; denying 10 Motion to Dismiss; mooting 21 Motion. Case terminated on January 28, 2013.(Signed by Judge Melinda Harmon) Parties notified.(htippen, )[Transferred from txsd on 1/29/2013.]

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
CHARLES R. CLEMONS and PATRICIA §
CLEMONS,
§
§
Plaintiffs,
§
§
VS.
§
§
WPRJ, LLC, PHYLLIS A KERSEG,
§
WARREN M. KERSEG, JANET L.
§
ADAMS, and RICHARD G. ADAMS,
§
§
Defendant.
§

CIVIL ACTION H-12-0334

OPINION AND ORDER OF TRANSFER
Pending before the Court in the above referenced cause,
arising out of Plaintiff Charles R. Clemons and Patricia Clemons’
investment in a project to purchase land, construct, and sell
townhomes in Phoenix, Arizona, and alleging breach of partnership
agreement,

breach

of

fiduciary

duty,

fraud

and

fraudulent

inducement, violation of the Texas Securities Act, Texas Revised
Civil Statutes article 581-22, unjust enrichment/money had and
received, and civil conspiracy, are the following motions, all with
supporting exhibits attached:

(1) Defendants Richard G. Adams and

Janet L. Adams’ motion to dismiss for improper venue under Federal
Rule of Civil Procedure 12(b)(3) or, alternatively, to transfer
venue

in

the

interests

of

justice

under

28

U.S.C.

§

1406

(instrument #4); (2) Defendants Richard G. Adams and Janet L.
Adams’ motion to dismiss for lack of personal jurisdiction under
Federal Rule of Civil Procedure 12(b)(2) (#6); (3) Defendant WPRJ,
-1-

LLC’s motion to dismiss for improper venue or, alternatively, to
transfer venue under 28 U.S.C. § 1406(a) (#8); (4) Defendant WPRJ,
LLC’s motion to dismiss for lack of personal jurisdiction (#10);
(5) and a joint motion for ruling on pending motions (#21).
Allegations in the Complaint (#1)
Plaintiffs assert that the Court has diversity jurisdiction
under 28 U.S.C. § 1332 over this action and proper venue under 28
U.S.C. § 1391 because a substantial part of the events or omissions
giving rise to Plaintiffs’ claims occurred in Willis, Montgomery
County, Texas.1 Plaintiffs Charles R. Clemons and Patricia Clemons
are residents of Texas.

WPRJ, LLC is an Arizona limited liability

with its principal place of business in Carefree, Arizona, while
the individual Defendants are residents of Arizona and believed to
be members, managers, owners, and agents of WPRJ, LLC who have done

1

The general venue statute, 28 U.S.C. § 1391(b), provides,

A civil action may be brought in–
(1) a judicial district in which any defendant resides,
if all defendants are residents of the State in which the
district is located;
(2) a judicial district in which a substantial part of
the events or omissions giving rise to the claim
occurred, or a substantial part of property that is the
subject of the action is situated; or
(3) if there is no
otherwise be brought
judicial district in
the court’s personal
action.

district in which an action may
as provided in this section, any
which any defendant is subject to
jurisdiction with respect to such
-2-

business with the State of Texas but do not maintain registered
agents here.

Alternatively, each of the Defendants is the alter

ego of the other.

“A unity of interest and lack of corporate

separateness exists such that the actions of any one Defendant is
to be one and the same as the actions of each of the other
Defendants.[sic]”
Plaintiffs

#1 at ¶ 9.

claim

that

venue

in

this

district

is

proper

pursuant to 28 U.S.C. § 1391 because (1) Defendants are subject to
the personal jurisdiction of the courts of Texas and because a
substantial

part

of

the

events

or

omissions

giving

rise

to

Plaintiffs’ claims occurred in Willis, Montgomery County, Texas,
(2) Plaintiffs purposely directed their misrepresentations to
Plaintiffs in Texas, (3) Plaintiffs’ reliance and damages were
foreseeable by Defendants and occurred in Texas, and (4) Defendants
performed intentional tortious acts against Texas residents and
could reasonably anticipate being required to answer in Texas state
court for their wrongful actions.
In 2009 Defendants contacted Plaintiffs in Texas and stated
that they wanted to purchase real estate in Phoenix, Arizona,
develop the land by constructing townhomes, and sell those homes,
a project dubbed “Tres Agua.”

They sought funding and asked

Plaintiffs to invest as partners a total of $400,000.00 in exchange
for a 10% ownership interest in the joint venture, and Plaintiffs
agreed.

The

complaint

asserts,

-3-

“The

partnership

agreement

constitutes a valid and enforceable contract.”

#1, ¶ 18.

Each

Defendant funded and participated in Tres Agua and exercised
significant influence over management and operational and financial
decisions of WPRJ, LLC relating to the project.

Defendants

represented that they would purchase the real property within six
months

of

initial

funding

by

Plaintiffs,

begin

building

the

townhomes within one year of receiving the funding, and begin
selling the townhomes within eighteen months of the funding.

They

also promised Plaintiffs “a minimum 100% return of investment.”
#1, ¶ 11. Relying on these representations, Plaintiffs agreed to
invest $400,000.00 in Tres Agua, and on June 28, 2006 wired
Defendants an initial $150,000.00.

On July 5, 2006, WPRJ executed

a promissory note in Willis, Montgomery County, Texas in favor of
Plaintiffs for $400,000.00, with the principal amount due within
sixty days after the closing of the last unsold townhome of the
development, with partial payments of at least $10,000.00 for each
townhome built and sold.

On December 18, 2006, Plaintiffs sent

Defendants an additional $50,000.00 payment, on January 18, 2007 a
$75,000.00 payment, and on May 1, 2007 a final $125,000.00.
On or about September 19, 2007, Defendants purchased real
property located at 4040 N. 22nd Street, Phoenix, Arizona 85016 for
the project.

Defendants informed Plaintiffs that they purchased

the property in the name of WPRJ, LLC for $2,000,000.00, part of
which was financed by a third-party lender.

-4-

As of February 3,

2012, when the complaint was filed, Defendants had not begun
construction or development of the property.

Plaintiffs kept

contacting Defendants to check on the status of Tres Agua, but
Defendants

always

construction.

offered

Plaintiffs

an

excuse

demanded

for

but

failing

did

not

to

begin

receive

accounting regarding the partnership’s profits and property.
Defendants stopped communicating with Plaintiffs.

an

Then

Defendants also

failed to make timely payments for the financed portion
property and are at risk of losing it to foreclosure.

of the

Plaintiffs

suspect and believe Defendants leased the property to a third party
for the storage of equipment and machines, contrary to the parties’
agreement.
Claims Against the Kerseg Defendants
With documentary evidence the Defendants report that coDefendants Warren M. Kerseg and Phyllis Ann Kerseg have voluntarily
filed for Chapter 7 bankruptcy in the District of Arizona.

Title

11 U.S.C. § 362 “provides that the filing of a bankruptcy petition
operates as a stay of the ‘commencement or continuation’ of all
non-bankruptcy judicial proceedings against the debtor.

The stay

is automatic and ‘springs into being immediately upon the filing of
a bankruptcy petition’” in a voluntary bankruptcy case. Chapman v.
Bituminous Ins. Co. (In re Coho Res., Inc.), 345 F.3d 338, 343-44
(5th Cir. 2003).

Thus all Plaintiffs’ claims against the Kerseg

Defendants are stayed.

-5-

Relevant Law
Personal Jurisdiction and Rule 12(b)(2)

Whether

personal

jurisdiction

nonresident is a question of law.

may

be

exercised

over

a

Cooper v. McDermott Intern.,

Inc., No. 93-2907, 1995 WL 450209, *3, 62 F.3d 395 (Table) (5th Cir.
July 6, 1995), citing Ruston Gas Turbines, Inc. v. Donaldson Co.,
Inc., 9 F.3d 415, 418 (5th Cir. 1993)(“Absent any dispute as to the
relevant facts, the issue of whether personal jurisdiction may be
exercised over a nonresident defendant is a question of law . . .
.”). Where the facts are disputed, the party seeking to invoke the
court’s jurisdiction bears the burden of establishing sufficient
contacts with the forum state by the nonresident defendant to
invoke the court’s jurisdiction.

Bullion v. Gillespie, 895 F.2d

213, 216-17 (5th Cir. 1990).
When a defendant files a motion to dismiss for lack of
jurisdiction under Federal Rule of Civil Procedure 12(b)(2), the
plaintiff bears the burden of demonstrating that the court has
personal jurisdiction over the defendant.

Luv N’ Care, Ltd. v.

Insta-Mix, Inc., 438 F.3d 465, 469 (5th Cir. 2006), citing Wyatt v.
Kaplan, 686 F.2d 276, 280 (5th Cir. 1982).

At the pretrial stage

of litigation, if the district court does not conduct a hearing on
personal jurisdiction, the plaintiff need only present a prima
facie case of personal jurisdiction. Wilson v. Belin, 20 F.3d 644,
-6-

648

(5th

Cir.),

cert.

denied,

513

U.S.

930

(1994);

Felch

v.

Transportes Lar-Mex S.A. DE CV, 92 F.3d 320, 325 (5th Cir. 1996);
Johnston v. Multidata Systems Intern. Corp., 523 F.3d 602, 609 (5th
Cir.

2008).

required.

Proof

by

preponderance

Johnston, 523 F.3d at 609.2

of

the

evidence

is

not

When a defendant disputes

factual bases for personal jurisdiction, the district court may

2

As the Fifth Circuit explained in Walk Haydel & Associates,
Inc. v. Coastal Power Production Co., 517 F.3d 235, 241-42 (5th Cir.
2008),
Ultimately, the plaintiff must show by a preponderance of
the evidence that jurisdiction is proper. Often, the
determination of whether this standard is met is resolved
at trial along with the merits.
This is especially
likely when the jurisdiction issue is intertwined with
the merits and therefore can be determined based on jury
fact findings. In this situation it is often “preferable
that [the jurisdictional] determination be made at trial,
where a plaintiff may present his case in a coherent,
orderly fashion and without the risk of prejudicing his
case on the merits.” But this court has said that after
a pretrial evidentiary hearing confined to the
jurisdictional issue, where both sides have the
opportunity to present their cases fully, the district
court can decide whether the plaintiff has established
jurisdiction by a preponderance of the evidence.
[footnotes omitted]
The panel further opined, id. at 241,
If the court determines that it will receive only
affidavits or affidavits plus discovery materials, these
very limitations dictate that a plaintiff must make only
a prima facie showing of jurisdictional facts through the
submitted materials in order to avoid a defendant’s
motion to dismiss. Any greater burden such as proof by
a preponderance of the evidence would permit a defendant
to obtain a dismissal simply by controverting the facts
established by a plaintiff through his own affidavit and
supporting materials.
-7-

consider

the

record

before

it,

including

“affidavits,

interrogatories, depositions, oral testimony, or any combination of
the recognized methods of discovery.” Quick Technologies, Inc. v.
Sage Group PLC, 313 F.3d 338, 344 (5th Cir. 2002)(quoting Thompson
v. Chrysler Motors Corp., 755 F.3d

1162, 1165 (5th Cir. 1985)),

cert. denied, 540 U.S. 814 (2003); Kelly Law Firm, P.C. v. An
Attorney for You, 679 F. Supp. 2d 755, 762 (S.D. Tex. 2009).

The

court has discretion as to the type and amount of discovery it will
allow, but unless there is a full and fair hearing, it should not
act as a factfinder and must construe all disputed facts in favor
of the plaintiff.
dismiss

under

Walk Haydel, 517 F.3d at

Rule

12(b)(2),

241.

uncontroverted

On a motion to
allegations

in

plaintiff’s complaint are taken as true, and conflicts between
facts in the parties’ affidavits must be resolved in plaintiff’s
favor

for

purposes

of

the

prima

facie

case

of

personal

jurisdiction. Johnston, 523 F.3d at 609; Kelly Law Firm, 679 F.
Supp. 2d at 762; Revell v. Lidov, 317 F.3d 467, 469 (5th Cir. 2002).
The court must find that it has personal jurisdiction over the
defendant before it makes any decision on the merits.

Sinochem

Int’l Co. v. Malay. Int’l Shipping Corp., 549 U.S. 422, 430 (2007);
Guidry v. U.S. Tobacco Co., 188 F.3d 619, 623, n.2 (5th Cir.
1999)(“Personal

jurisdiction

is

an

essential

element

of

the

jurisdiction of a district court, without which it is powerless to
proceed to an adjudication.”).
-8-

Under the federal rules, except where a federal statute
provides for broader personal jurisdiction, the district court’s
personal jurisdiction is coterminous with that of a court of
general jurisdiction of the state in which the district court sits.
Submersible Sys., Inc. v. Perforadora Cent., S.A. de C.V., 249 F.3d
413, 418 (5th Cir. 2001).

A federal court sitting in diversity may

exercise personal jurisdiction over a nonresident defendant if the
forum state’s long-arm statute confers personal jurisdiction over
that

nonresident

jurisdiction

defendant

satisfies

due

and

if

process

the

exercise

under

the

of

United

personal
States

Constitution. McFadin v. Gerber, 587 F.3d 753, 759 (5th Cir. 2009),
citing Moncrief Oil Int’l, Inc. v. OAO Gasprom, 481 F.3d 309, 311
(5th Cir. 2007).

The Texas long-arm statute3 extends jurisdiction

3

The Texas long-arm statute, Texas Civil Practice & Remedies
Code § 17.042, which permits Texas courts to exercise jurisdiction
over nonresident defendants that “do business”in Texas, provides,
In addition to other acts that may constitute doing
business, a nonresident does business in this state if
the nonresident:
(1) contracts by mail or otherwise with a Texas resident
and either party is to perform the contract in whole or
in part in this state;
(2) commits a tort in whole or in part in this state; or
(3) recruits Texas residents, directly or through an
intermediary located in this state, for employment inside
or outside this state.
The list of activities that constitute “doing business” in Texas is
not exclusive. PHC-Minden, 235 S.W. 3d at 166.
-9-

to the limits of the federal due process.

Schlobohm v. Schapiro,

784 S.W. 2d 355, 357 (Tex. 1990); Gonzalez v. Bank of America Ins.
Servs., Inc., 2011 WL 6156856 *3 (5th Cir. Dec. 12, 2011), citing
Stroman Realty, Inc. v. Antt, 528 F.3d 382, 385 (5th Cir. 2008).
Thus because in Texas the issue of whether a court has personal
jurisdiction

over

a

defendant

is

determined

by

federal

constitutional law, a plaintiff in a diversity action in federal
court in Texas4 need only demonstrate that (1) the defendant
purposely availed himself of the benefits and protections of the
forum state by establishing that the defendant had minimum contacts
with the forum state, and (2) the exercise of personal jurisdiction
over that defendant does not offend traditional notions of fair
play and substantial justice.

Int’l Shoe Co. v. Washington, 326

U.S. 310, 316 (1945); Alpine View Co., Ltd. v. Atlas Copco AB, 205
F.3d 208, 214 (5th Cir. 2000);

Moncrief Oil Int’l, Inc. v. OAO

Gasprom, 481 F.3d 309, 311 (5th Cir. 2007).
Personal
jurisdiction.

jurisdiction

can

be

either

specific

or

general

Mink v. AAAA Develop., LLC., 190 F.3d 333, 336 (5th

Cir. 1999). “Where a defendant ‘has continuous and systematic
general business contracts’ with the forum state, the court may
exercise ‘general jurisdiction over any action brought against the

4

See Johnston v. Multidata Sys. Int’l Corp., 523 F.3d 602,
609 (5th Cir. 2008)(“Because the Texas long-arm statute extends to
the limits of federal due process, the two-step inquiry collapses
into one federal due process analysis.”).
-10-

defendant [regardless of whether the action is related to the forum
contacts].”

Luv N’ Care, 438 F.3d at 469, citing Helicopteros

Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 415 (1984).
See also Access Telecom, Inc. v. MCI Telecomms. Corp., 197 F.3d
694, 717 (5th Cir. 1999)(“General jurisdiction can be assessed by
evaluating

contacts

of

the

defendant

with

the

forum

over

a

reasonable number of years, up to the date the suit was filed.”),
cert. denied, 531 U.S. 917 (2000). “[T]he minimum contacts inquiry
is broader and more demanding when general jurisdiction is alleged,
requiring a showing of substantial activities in the forum state.”
Jones v. Petty-Ray Geophysical Geosource, Inc., 954 F.2d 1061, 1068
(5th

Cir.),

cert.

denied,

506

U.S.

867

(1992).

“[V]ague

and

overgeneralized assertions that give no indication as to the
extent, duration, or frequency of contacts are insufficient to
support general jurisdiction.”

Johnston, 523 F.3d at 610.5

5

In Johnston, the Fifth Circuit discussed how extremely
difficult it is to establish general jurisdiction over a
nonresident defendant. 523 F.3d at 610-11. The panel examined the
Supreme Court’s ruling in Helicopteros, 466 U.S. at 418-19, in
which it found that defendant’s contacts with Texas, purchasing
helicopters, spare parts, and accessories for more than $4 million
over a six-year period from a Texas company, sending management and
maintenance personnel to Texas for technical consultations and
prospective pilots to Texas for training, and receiving a check for
more than $5 million drawn on a Texas bank, were insufficient to
support personal jurisdiction.
Among other cases from this
Circuit, Johnston cited Cent. Freight Lines, Inc. v. APA Transp.
Corp., 322 F.3d 376, 381 (5th Cir. 2003), in which the Fifth Circuit
concluded that general jurisdiction did not exist even though the
defendant regularly arranged and received interline shipments to
and from Texas and sent sales people to Texas to develop business,
negotiate contracts and service national accounts; Wilson v. Belin,
-11-

If the defendant has relatively few contacts, the court may
still exercise personal jurisdiction over that party if the suit
arises out of or is related to the defendant’s contacts with the
forum.”

Helicopteros, 466 U.S. at 414 & n.8.

Plaintiffs claim

that the Court has specific jurisdiction over Defendants in this
case.
The Fifth Circuit has concluded that specific jurisdiction is
“a claim-specific inquiry:

‘A plaintiff bringing multiple claims

that arise out of different forum contacts of the defendant must
establish specific jurisdiction for each claim.’“

McFadin, 587

F.3d at 759, quoting Seiferth v. Helicopteros Atuneros, Inc., 472
F.3d 266, 271 (5th Cir. 2006).

Moreover, the Fifth Circuit has

established a three-step analysis for determining whether specific
jurisdiction exists:

“‘(1) whether the defendant has minimum

20 F.3d 644, 651 (5th Cir. 1994)(“Even if [the defendant’s] contacts
with Texas via his short-lived malpractice insurance arrangement
through a Texas law firm and his multi-year pro bono association
with the historical society were arguably continuous, we hold that
they were not substantial enough to warrant the imposition of
general personal jurisdiction over him.”); Access Telecom, 197 F.3d
at 717 (in order to confer general jurisdiction it is not
sufficient that a corporation do business in Texas; it must have a
business presence in Texas); Alpine View Co. v. Atlas Copco AB, 205
F.3d 208, 218 (5th Cir. 2000)(holding that general jurisdiction did
not exist where the defendant occasionally sold products to
entities in Texas that used the defendant’s products for projects
in Texas and the defendant’s employees made field visits to Texas
between December 1992 and December 1993). Johnston, 523 F.3d at
610-12 (concluding that Multidata’s sale of approximately $140,000
worth of goods over a five-year period to Texas customers and its
employees’ occasional travels to Texas to service equipment or
attend trade conventions did not support general jurisdiction over
Multidata).
-12-

contacts with the forum state, i.e., whether it purposely directed
its activities toward the forum state or purposely availed itself
of the privileges of conducting activities there6; (2) whether the
plaintiff’s cause of action arises out of or results from the
defendant’s forum-related contacts7; and (3) whether the exercise
of personal jurisdiction is fair and reasonable.’”

Seiferth, 472

F.3d at 271, quoting Nuovo Pignone, SpA v. STORMAN ASIA M/V, 310
F.3d 374, 378 (5th Cir. 2002). The minimum contacts review is factintensive and no single contact is decisive; “the touchstone is
whether

the

defendant’s

conduct

shows

that

it

‘reasonably

anticipates being haled into court.’ The defendant ‘must not be
haled

into

a

jurisdiction

solely

as

a

result

of

‘random,’

‘fortuitous,’ or ‘attenuated’ contacts, or of the ‘unilateral
activity of another party or third party.’‘”

McFadin, 587 F.3d at

759, citing Luv N’ Care, 438 F.3d at 470 (citing World-Wide
Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980)), and
Electrosource, Inc. v. Horizon Battery Tech., Ltd., 176 F.3d 867,
6

Purposeful availment requires a defendant to seek some
benefit, advantage or profit by “availing” itself of the
jurisdiction. Michiana Easy Livin’ Country, Inc. v. Holten, 168
S.W. 3d 777, 785 (Tex. 2005).
7

The litigation must also “result from the alleged injuries
that ‘arise out of or relate’ to those activities.” Guardian Royal
Exch. Assurance Ltd. v. English China Clays, P.L.C., 815 S.W. 2d
223, 228 (Tex. 1991), citing Burger King, 471 U.S. at 472. For
specific jurisdiction, there “must be a substantial connection”
between the nonresident defendant’s contacts with the forum state
and the “operative facts of the litigation.” Guardian Royal, 815
S.W. 2d at 229-33.
-13-

871-72 (5th Cir. 1999)(quoting Burger King Corp. V. Rudzewicz, 471
U.S. 462 (1985)). Thus specific jurisdiction may not be based upon
the mere fortuity that a plaintiff is a Texas resident.

Santander

Consumer USA, Inc. v. Shults Ford, Inc., Civ. A. No. 3:11-CV-614-L,
2011 WL 2601520, *4 (N.D. Tex. June 30, 2011), citing Holt Oil &
Gas Corp. v. Harvey, 801 F.2d 773, 778 (5th Cir. 1986).
“[W]hether the minimum contacts are sufficient to justify
subjection of the non-resident to suit in the forum is determined
not on a mechanical and quantitative test, but rather under the
particular facts upon the quality and nature of the activity with
relation to the forum state.” Mississippi Interstate Exp., Inc. v.
Transpo, Inc., 681 F.2d 1003, 1006 (5th Cir. 1982). “The nature and
quality

of

these

contacts

must

justify

the

conclusion

that

defendant should have reasonably anticipated being haled into court
in the forum state.”

Coats v. Penrod Drilling Corp., 5 F.3d 877,

884 (5th Cir. 1993), cert. denied, 510 U.S. 1195 (1994).
The mere fact that a party contracted with a resident of Texas
is insufficient to establish minimum contacts necessary to support
personal jurisdiction.

Moncrief Oil Int’l, Inc. v. OAO Gasprom,

481 F.3d 309, 311 (5th Cir. 2007)(“Merely contracting with a
resident of the forum state does not establish minimum contacts.”);
Cardinal Health Solutions, Inc. v. St. Joseph Hosp. of Port
Charlotte, Fla. Inc., 314 Fed. Appx. 744, 745 (5th Cir. 2009).

Nor

does

and

the

exchange

of

communications
-14-

in

the

developing

performing of a contract constitute purposeful availment of the
benefits

and

protections

of

the

laws

of

Texas.

Id.;

id.;

Freudensprung v. Offshore Technical Services, Inc., 379 F.3d 327,
344 (5th Cir. 2004).

“[P]urchases and related trips, standing

alone, are not a sufficient basis for a State’s assertion of
jurisdiction.”

Helicopteros,

466

U.S.

at

417.

Moreover

jurisdiction may not be based on the fortuity of one party residing
in

the

forum

state.

McFadin,

587

F.3d

at

760.

Mere

foreseeability, by itself, does not create personal jurisdiction.
Moncrief Oil, 481 F.3d at 313.
A

choice-of-law

provision

may

be

a

relevant

factor

for

determining purposeful activity directed toward the forum state,
but is not necessarily determinative, and standing alone, it is
insufficient to confer jurisdiction.

Consumer USA, Inc. v. Shults

Ford, Inc., 2011 WL 2601520 at *4, citing Petty-Ray Geophysical,
954 F.2d at 1069, and Burger King, 471 U.S. at 482.

The court must

examine the quality and nature of the defendant’s activities in the
forum in their totality, rather than the number, to decide whether
the defendant purposely availed itself of the privileges offered by
the forum state.

Id., citing Electrosource, Inc. v. Horizon

Battery Techs., Ltd., 176 F.3d 867, 871 (5th Cir. 1999).
Venue
A court that lacks personal jurisdiction over a defendant may
still transfer the matter to another venue under either 28 U.S.C.
-15-

§ 1404(a) or § 1406(a).

While Defendants cite § 1406 for their

motions to transfer, they confuse the requirements under the two
statutes, e.g., apply the private and public interest factors and
convenience factors, which relate to § 1404(a), to their analysis
under § 1406.
Where a case is in a proper venue the district court has broad
discretion to transfer a case under 28 U.S.C. 1404(a)8 for the
convenience of parties and witnesses and in the interest of
justice.9

In re Volkswagen of America, Inc., 545 F.3d 304, 311 (5th

Cir. 2008).
whether

a

Nevertheless the court must initially determine
civil

action

destination venue.”

“‘might

Id. at 312.

have

been

brought’

in

the

The general venue statute, 28

U.S.C. § 1391, quoted in footnote 1, governs a plaintiff’s choice
of venue.

Id. “[W]hile a plaintiff has the privilege of filing his

claims in any judicial division appropriate under the general venue
statute, § 1404(a) tempers the effects of the exercise of this
privilege.”

In re Volkswagen, 545 F.3 at 313.

Under § 1404(a) the

court is not authorized to dismiss the case, as it is under

8

Section 1404(a) provides, “For the convenience of parties
and witnesses, in the interest of justice, a district court may
transfer any civil action to any other district or division where
it might have been brought or to any district or division to which
all parties have consented.”
9

It is improper for the court to consider the convenience of
counsel, which is irrelevant, in reviewing a transfer of venue
under § 1404(a). In re Volkswagen AG, 371 F.3d 201, 206 (5th Cir.
2004).
-16-

1406(a).

Id.

The Fifth Circuit has adopted the private and public interest
factors set forth in Gulf Oil Corp. v. Gilbert, a forum non
conveniens case, and applied them to determine whether a transfer
is for the convenience of the parties and witnesses and in the
interest of justice under 28 U.S.C. § 1404(a).

In re Volkswagen,

545 F.3d at 313 & nn.9 and 10 (citing Humble Oil & Refining Co. v.
Bell Marine Service, Inc., 321 F.3d 53, 56 (5th Cir. 1961)), cert.
denied, 555 U.S. 1172 (2009).
cause for the transfer.

The moving party must show good

Id. at 314.

“When the transferee venue is

not clearly more convenient than the venue chosen by the plaintiff,
the plaintiff’s choice should be respected.”

Id.

The private

interest factors are “‘(1) the relative ease of access to sources
of proof; (2) the availability of compulsory process to secure the
attendance of witnesses; (3) the cost of attendance for willing
witnesses; and (4) all other practical problems that make trial of
a case easy, expeditious and inexpensive.”
public

interest

factors

include

“‘(1)

Id. at 315.
the

The

administrative

difficulties flowing from court congestion; (2) the local interest
in having localized interests decided at home; (3) the familiarity
of the forum with the law that will govern the case; and (4) the
avoidance of unnecessary problems of conflict of laws [or in] the
application

of

foreign

law.’”

Id.

These

factors,

while

appropriate for most cases, are not exhaustive or exclusive, and
-17-

none is dispositive.

Id.

Because Defendants argue that venue here is improper, if they
are correct their motions to transfer would fall under § 1406.
Under 28 U.S.C. § 1406(a), where venue is “laid in the wrong
division or district,” the district court must either dismiss the
case or transfer it to a proper venue in “any district or division
in which it could have been brought”; where venue is proper, under
28 U.S.C. § 1404(a) a court may transfer the case “to any other
district or division where it might have been brought or to any
district or division to which all parties have consented” “for the
convenience of parties and witnesses, in the interest of justice.”
“[A] district is ‘wrong’ within the meaning of § 1406 whenever
there

exists

an

‘obstacle

adjudication’ on the merits.

(to)

an

expeditious

and

orderly

Inability to perfect service of

process on a defendant in an otherwise correct venue is such an
obstacle.”

Ellis v. Great Southwestern Corp., 646 F.2d 1099, 1105

(5th Cir. 1981), citing Dubin v. United States, 380 F.2d 813 (5th
Cir. 1967).

Lack of personal jurisdiction is another ground for

such a transfer.

Ellis, 646 F.2d at 1105 and n.7.

Once a defendant challenges venue as improper under Federal
Rule of Civil Procedure 12(b)(3), the plaintiff bears the burden of
demonstrating that the chosen venue is proper.

Am. Gen. Life Ins.

Co. v. Rasche, 273 F.R.D. 291, 396 (S.D. Tex. 2011).

In deciding

whether the venue is proper, the court may look at evidence in the

-18-

record

beyond

those

facts

admissible attachments.

alleged

in

the

complaint

and

its

Ambraco, Inc. v. Bossclip B.V., 570 F.3d

233, 238 (5th Cir. 2009)(citing Ginter ex rel. Ballard v. Belcher,
Prendergast & Laport, 536 F.3d 439, 448 (5th Cir. 2008)), cert.
denied, 130 S. Ct. 1054 (2010).

On a Rule 12(b)(3) motion, the

Court must accept as true all the allegations in the complaint and
resolve all factual conflicts in favor of plaintiff.

Hamilton v.

United Parcel Service, Inc., Civ. A. No. 1:11-CV-240, 2012 WL
760714,

*5

(E.D.

Tex.

Feb.

13,

2012),

citing

Braspetro

Oil

Services, Co. v. Modec (USA), Inc., No. 06-20561, 240 Fed. Appx.
612, 615 (5th Cir. May 11, 2007), and 5B Charles Alan Wright &
Arthur R. Miller, Federal Practice and Procedure § 1352 (3d ed.
2004).

The decision whether to dismiss or transfer the case under

§ 1406(a) lies within the discretion of the Court.

Dubin v. United

States, 380 F.2d 813, 815 (5th Cir. 1967).
Pending Motions
Because all the motions to dismiss or transfer are nearly
identical, the Court will focus on those of the Adams Defendants
and then examine any additional points added by WPRJ, LLC.
The Adams Defendants seek dismissal of the case for improper
venue because all Defendants reside in Arizona and no substantial
part of the claims occurred in Texas.

Alternatively, they request

the Court to transfer the case to the United States District Court
of Arizona, Phoenix Division.

The Adams Defendants emphasize that
-19-

they have not had continuous or systematic contacts with Texas. As
the

only

event

to

occur

in

Texas,

Plaintiffs

executed

the

promissory note (#5, Ex. A-1) in Texas with WPRJ, LLC, an Arizona
Limited Liability Company.

The Adams Defendants, with supporting

affidavits, argue that the following substantial events occurred in
Phoenix, Arizona:

(1) Plaintiffs forwarded funds to Phoenix; (2)

the bank loan for land purchase took place in Phoenix; (3) the
purchase of the land occurred in Phoenix; (4) all efforts to build
condominiums took place in Phoenix; (5) the impending sale or
foreclosure will occur in Phoenix; and (6) the failure to develop
and sell the condominiums took place in Phoenix.
The Adams Defendants further contend that the claims for
breach of fiduciary duty, fraud and fraudulent inducement, civil
conspiracy, unjust enrichment, and violation of the Texas Security
Act could not have occurred in Texas because the Adams Defendants
have not been to Texas in at least ten years.

Moreover Plaintiffs

will have to come to Phoenix to present their claims against the
Kersegs in the bankruptcy court, so they can litigate these claims
in Arizona, too.

Defendants also maintain that there is no fraud

relating to the promissory note; the project just became undoable
because of the economic recession and because the bursting of
Arizona’s housing bubble had a severe impact.
Alternatively, the Adams Defendants seek transfer of this
action to the District of Arizona, Phoenix Division, in the

-20-

interests of

justice under 28 U.S.C. § 1406(a).

Defendants are

subject to the jurisdiction of the United States District Court for
the District of Arizona, Phoenix Division, venue is proper there,
and the transfer is in the interest of justice.

Among the private

interest factors supporting a transfer are that (1) all Defendants
reside in the Phoenix area, (2) all the documents are there, (3)
the Tres Agua project was to be performed there, and (4) Texas
Plaintiffs’ choice of forum should be given little deference since
it has no meaningful ties to the controversies that are the subject
of this litigation. Defendants also list ten witnesses that reside
in the Phoenix area and a brief statement about what they will
testify.

Finally

the

Adams

Defendants

point

out

that

the

promissory note states, “Upon . . . default, Holders may exercise
any remedies or combination of remedies Holder may have under
Arizona law.”
note

#4, Ex. A-1.

provides

“Arizona

The final provision of the promissory

Law.

This

Promissory

Note

shall

be

construed in accordance with and governed by the laws of the State
of Arizona.”

Id.

Defendants further urge that Arizona courts are

more familiar with Arizona law.
The Adams Defendants argue that the Court lacks personal
jurisdiction over them.

They are not residents of Texas and have

no purposeful contacts with Texas.

Plaintiffs’ claim arose out of

their signing of the promissory note with Co-Defendant WPRJ, LLC,
on whose behalf Co-Defendant Phyllis Kerseg was the signatory. The

-21-

Adams Defendants were not in Texas when the promissory note was
signed.

Furthermore, to establish specific jurisdiction in a case

based on contract, more than mere contracting with a resident of
the forum state is necessary to subject a nonresident to the
forum’s jurisdiction.

Colwell Realty Invest., Inc. v. Triple T

Inns, Inc., 785 F.2d 1330, 1334 (5th Cir. 1986), citing Burger King
Corp. v. Rudzewicz, 471 U.S. 462, 478-79 (1985).

Moreover,

although the promissory note was signed in Texas, all relevant acts
occurred in Arizona:

Plaintiffs sent money to Arizona and the

repayment obligation is triggered by property sales in Arizona.
The promissory note identifies Arizona law as the governing law.
There is no general jurisdiction over the Adams Defendants
because they have not had continuous or systematic contacts with
Texas.
Moreover asserting jurisdiction over Defendants would offend
traditional notions of fair play and substantial justice and would
be inconsistent with constitutional due process.

Defendants list

ten

be

witnesses

who

live

in

Arizona

and

would

burdened

by

traveling to Texas. Arizona has a greater interest in adjudicating
the dispute because the promissory note obligation is wholly
triggered by events in Arizona.

They reiterate that Plaintiffs

must come to Arizona anyway to pursue their claims against Kerseg
in bankruptcy court in Phoenix.

The state’s interest in efficient

resolution of the controversy is better served in Arizona because

-22-

all Defendants, witnesses, and documents are in the Phoenix area,
while the only thing located in Texas are the Plaintiffs.

This

litigation is the result of loan proceeds sent to Arizona to build
an Arizona project; the greater impact is borne in Arizona because
more that $400,000.00 were expended there because of the bursting
of Arizona’s housing bubble, and this failure along with numerous
others should be dealt with by an Arizona court.

The tort claims

against Adams Defendants could not have occurred in Texas because
they have not been to Texas for at least ten years.

They contend

that even if a court has jurisdiction over one alleged conspirator,
that fact does not confer jurisdiction over non-resident alleged
co-conspirators.

Hawkins v. Upjohn Co., 890 F. Supp. 601, 608-09

(E.D. Tex. 1994).10
WPRJ, LLC provides some minor additions to these arguments.

10

Plaintiffs argue that this case is not applicable because
the forum in which multiple conspirators committed violations of
the Racketeer Influenced and Corrupt Organizations Act (“RICO”) was
not a forum in which the plaintiffs wanted to sue.
Here the
Clemonses chose to sue in Texas, a forum which had personal
jurisdiction over one of the alleged conspirators.
The Court notes that RICO has its own jurisdictional
provisions. In Hawkins, a RICO civil conspiracy case, the court
addressed a particular provision in the statute that permitted
general nationwide service of process, 18 U.S.C. § 1965(d), and
concluded that it did not provide personal jurisdiction over all
co-conspirator defendants even if the forum state had jurisdiction
over one conspirator. The Fifth Circuit has not recognized this
conspiracy theory of personal jurisdiction. Hawkins, 890 F. Supp.
at 608; Conwill v. Greenberg Traurig, LLP, Civ. A. No. 09-4365,
2009 WL 5178310, *4 (E.D. La. Dec. 22, 2009). This Court finds
that instant case does not involve either a RICO conspiracy claim
or relate to any nationwide service provision, and thus Hawkins is
not relevant.
-23-

Of its four members when the promissory note was signed (the Adams
Defendants and the Kerseg Defendants), only Phyllis Kerseg was in
Texas on behalf of WPRJ, LLC for the signing.

It insists that the

tort claims for breach of fiduciary duty, fraud and fraudulent
inducement, and civil conspiracy, as well as the common law claims
of unjust enrichment/money had and received and violations of the
Texas Securities Act, could not have occurred in Texas as WPRJ, LLC
was

at

all

times

in

Arizona

except

for

the

signing

of

the

promissory note.
Regarding lack of personal jurisdiction, WPRJ, LLC insists
there is no specific jurisdiction because it does no business in or
with the State of Texas, all relevant acts for this litigation took
place in Arizona, and there was no purposeful availment of Texas by
WPRJ, LLC. Nor does it have continuous or systematic contacts with
Texas to support general jurisdiction. Moreover the exercise of
jurisdiction over WPRJ, LLC would offend traditional notions of
fair play and substantial justice because the ten identified
witnesses live in Arizona, Texas does not have as great an interest
in adjudicating the dispute because the promissory note obligation
is wholly triggered by events in Arizona, Plaintiffs’ interest in
convenient and effective relief is not possible solely in Texas
because the Kersegs are in bankruptcy court in Phoenix, the
interstate

judicial

system’s

interest

in

obtaining

the

most

efficient resolutions of his matter requires dismissal in Texas

-24-

because all defendants, all witnesses, and all documents are in
Phoenix. Moreover to defeat Plaintiffs’ broad accusations, despite
their failure to identify with specificity any act committed by
WPRJ, LLC in Texas, WPRJ, LLC will have to marshal evidence from
its

bankers,

accountants,

appraisers,

other

investors

and

contractors, all of whom are in the Phoenix area
Plaintiffs’ Responses re Personal Jurisdiction (#13 and 14)
As examples of purposeful contacts with Texas supporting
specific jurisdiction here, Plaintiffs broadly refer to the alleged
purposeful solicitation by WPRJ, LLC of investment by Plaintiffs in
Texas during visits by its members to Texas, without specifying any
except the signing of the promissory note by Phyllis Kerseg; the
representations

made

by

Defendants

while

in

Texas,

but

not

identifying any one specifically; and the performance WPRJ, LLC was
supposed to carry out in Texas, again without particular facts.
(In contrast, Defendants have shown performance of the construction
and sale of the townhomes had to occur or fail to occur in Arizona
and that Plaintiffs’ investment payments were sent to Arizona.)
Plaintiffs claim that each of WPRJ, LLC’s contacts was significant,
but do not show any contact beyond the signing of the note, nor why
or how any other contact was important. They note that convenience
is not a test for minimum contacts.
As for traditional notions of fair play and substantial
justice, Plaintiffs observe that Defendants came to Texas to

-25-

solicit their investment, so requiring them to come to Texas to
litigate is not an unfair or unreasonable burden.

They argue that

the choice of law provision in the promissory note “plays no part
in WPRJ’s minimum contacts,” and that much of this dispute will be
resolved under Texas law, with which Texas courts are more familiar
than Arizona courts.

As a fundamental social policy, Texas has a

strong interest in its citizens’ ability to sue foreign defendants
who enter Texas to do business in Texas and who commit torts
against Texas residents.

Moreover Plaintiffs claim that because

they have full-time duties supervising their disabled daughter, it
would be extremely inconvenient for them to litigate in Arizona.
Plaintiffs’ Response re Personal Jurisdiction (#14)
Plaintiffs argue that WPRJ purposefully solicited them, paid
personal visits to Texas, took actions within Texas’ borders, and
was supposed to perform in Texas.

Many of the things which took

place in Arizona are irrelevant to Plaintiffs’ claims. Convenience
is not part of the test for minimum contacts; it is only part of
the second prong for the exercise of personal jurisdiction over a
defendant, the fairness test.

Southwest Offset, Inc. v. Hudco

Publishing Co., 622 F.2d 149, 152 (5th Cir. 1980).
Urging that specific jurisdiction exists because with the
knowledge and involvement of the Adams Defendants, WPRJ, LLC and
Phyllis Kerseg purposefully came to Texas and availed themselves of
the privilege of conducting activity there, i.e., seeking benefit,

-26-

advantage, or profit,

Plaintiffs insist that their claims arose

from Plaintiffs’ signing of the promissory note with WPRJ, LLC, at
which time it made significant representations while it was in
Texas visiting the Clemonses.
and the Clemonses

Those contacts directed at Texas

along with WPRJ, LLC’s expected performance in

Texas, where it breached the agreement, forms the basis of the
Clemonses’ entire claim.
While

the

Arizona

choice-of-law

provision

in

the

promissory note cannot be “ignored,” the easily distinguishable
facts in Burger King demonstrate that in this case the provision is
meaningless. 471 U.S. at 482. In Burger King a Michigan defendant
protested against being sued in Florida even though the contract
provided it would be construed under Florida law.

In this case,

the Clemonses are not protesting Arizona’s exercise of jurisdiction
over

them;

jurisdiction.

WPRJ

is

protesting

Texas’

ability

to

exercise

Plaintiffs argue that Burger King would only be

relevant if WPRJ had sued the Clemonses in Arizona.
Court’s Decision
Regarding personal jurisdiction, the Court finds that it has
no general jurisdiction over this case because no party has argued
that it does and there has been no showing that any Defendant had
continuous and systematic contacts with Texas.
The first step in

determining

whether

there is specific

personal jurisdiction over Defendants is to determine whether they

-27-

each have minimum contacts with Texas.

The only alleged personal

contact purposefully directed toward Texas and the Clemonses was
WPRJ, LLC’s solicitation of the Clemonses’ investment and execution
of the promissory note, through Defendant Phyllis Kerseg acting on
its behalf,11 in Texas; the complaint does not allege that any of
the other named Defendants had a direct contact with the forum
state or communications with Plaintiffs.
As a threshold matter the Court finds that there are two
agreements at issue here.

The promissory note with the Arizona

choice-of-law provision on which Plaintiffs focus is one, but the
more

significant

one,

which

includes

and

embraces

the

note

agreement which was part of the consideration for the executing of
the

promissory

note,

is

the

partnership

agreement

to

enable

Defendants to fund, develop, build, and sell townhomes in the
Phoenix area in return for a 10% interest in the joint venture for
the Clemonses.
partnership

The promissory note, which is incident to this

agreement,

was

to

fund,

through

the

Clemonses

investment, a substantial part of the Tres Agua project. This suit
is not limited to a claim of failure of Defendants’ to make

11

All claims against Kerseg are stayed because of the
bankruptcy. Even if they were not, because Plaintiffs allege that
Phyllis Kerseg signed the promissory note on behalf of WPRJ, LLC,
under the fiduciary shield doctrine, “an individual’s transaction
of business within the state solely as a corporate officer does not
create personal jurisdiction over that individual even though the
state has in personam jurisdiction over the corporation.” Stuart
v. Spademan, 772 F.2d 1185, 1197 (5th Cir. 1985).
-28-

payments on the promissory note, but the failure of the Tres Agua
project

and

the

joint

venture

agreement.

The

only

contact

specified in the complaint was the signing of the promissory note.
As noted, “[m]erely contracting with a resident of Texas is
insufficient to establish minimum contacts necessary to support
personal jurisdiction.”

Moncrief Oil, 481 F.3d at 311; in accord

Cardinal Health Solutions, Inc., 314 Fed. Appx. at 745.

Nor does

the exchange of communications in the course of developing and
performing of a contract constitute purposeful availment of the
benefits

and

protections

of

the

laws

of

Texas.

Id.;

id.;

Freudensprung v. Offshore Technical Services, Inc., 379 F.3d 327,
344 (5th Cir. 2004); McFadin, 587 F.3d at 760 (“We have held that
communications relating to the performance of a contract themselves
are insufficient to establish minimum contacts.”).
complaint

specifies

that

the

partnership

Plaintiffs’

agreement,

not

the

promissory note, is the basis of their breach of contract claim.
#1, ¶¶ 18-21.
Plaintiffs have charged Defendants with fraud and fraud in the
inducement.

It

is

well

established

that

commission

of

an

intentional tort aimed a the forum state will satisfy the minimum
contacts requirement.

Calder v. Jones, 465 U.S. 783, 788-89

(1984); Panda Brandywine Corp. v. Potomac Elec. Power Co., 253 F.3d
865, 869 (5th Cir. 2001)(“[T]he key to Calder is that the effects
of an alleged intentional tort are to be assessed as part of the

-29-

analysis of the defendant’s relevant contacts with the forum.”);
Wien Air Alaska, Inc. v. Brandt, 195 F.3d 208, 213 (5th Cir.
1999)(“When the actual content of communications with a forum gives
rise to intentional tort causes of action, this alone constitutes
purposeful availment.”).
The

problem

here

is

that

Plaintiffs’

conclusory

fraud

allegations, totally lacking in factual detail for support, fail to
meet the pleading standards of Federal Rule of Civil Procedure
12)b)(6), no less of Rule 9(b).

While the sufficiency of the

allegations of a complaint may be challenged by motion under
Federal Rule of Civil Procedure 12(b)(6) for failure to state a
claim, even if the defendant does not file such a motion, the court
“has the authority to consider the sufficiency of a complaint on
its own initiative.”

Landavazo v. Toro Co., 301 Fed. Appx. 333,

336 (5th Cir. Dec. 5, 2008)(citing Carroll v. Fort James Corp., 470
F.3d 1171, 1177 (5th Cir. 2006)(“As a general rule, a district court
may dismiss a complaint on its own for failure to state a claim.”),
cert. denied, 129 S. Ct. 2417 (2009).
“While a complaint attacked by a Rule 12(b)(6) motion to
dismiss does not need detailed factual allegations, . . . a
plaintiff’s

obligation

‘entitle[ment]

to

to

relief’

provide

the

requires

more

‘grounds’
than

of

his

labels

and

conclusions, and a formulaic recitation of the elements of a cause
of action will not do . . . .”

Bell Atlantic Corp. v. Twombly, 127

-30-

S.

Ct.

1955,

1964-65

(2007)(citations

omitted).

“Factual

allegations must be enough to raise a right to relief above the
speculative level.”
Federal

Practice

Id. at 1965, citing 5 C. Wright & A. Miller,

and

Procedure

§

1216,

pp.

235-236

(3d

ed.

2004)(“[T]he pleading must contain something more . . . than . . .
a statement of facts that merely creates a suspicion [of] a legally
cognizable right of action”).

“Twombly jettisoned the minimum

notice pleading requirement of Conley v. Gibson, 355 U.S. 41 . . .
(1957)[“a complaint should not be dismissed for failure to state a
claim unless it appears beyond doubt that the plaintiff can prove
no set of facts in support of his claim which would entitle him to
relief”], and instead required that a complaint allege enough facts
to state a claim that is plausible on its face.”

St. Germain v.

Howard,556 F.3d 261, 263 n.2 (5th Cir. 2009), citing In re Katrina
Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007)(“To survive
a Rule 12(b)(6) motion to dismiss, the plaintiff must plead ‘enough
facts to state a claim to relief that is plausible on its face.’”),
citing Twombly, 127 S. Ct. at 1974).

“‘A claim has facial

plausibility when the pleaded factual content allows the court to
draw the reasonable inference that the defendant is liable for the
misconduct alleged.’”

Montoya v. FedEx Ground Package System,

Inc., 614 F.3d 145, 148 (5th Cir. 2010), quoting Ashcroft v. Iqbal,
129 S. Ct. 1937, 1940 (2009).

Dismissal is appropriate when the

plaintiff fails to allege “‘enough facts to state a claim to relief
-31-

that is plausible on its face’” and therefore fails to “‘raise a
right to relief above the speculative level.’”

Montoya, 614 F.3d

at 148, quoting Twombly, 550 U.S. at 555, 570.
In addition to Rules 8(a) and 12(b)(6), fraud claims must also
satisfy the heightened pleading standard set out in Federal Rule of
Civil Procedure 9(b): “In allegations alleging fraud . . ., a party
must state with particularity the circumstances constituting fraud
or mistake.

Malice, intent, knowledge, and other conditions of a

person’s mind may be alleged generally.”

A dismissal for failure

to plead with particularity as required by this rule is treated the
same as a Rule 12(b)(6) dismissal for failure to state a claim.
Lovelace v. Software Spectrum, Inc., 78 F.3d 1015, 1017 (5th Cir.
1996).

The

Fifth

Circuit

interprets

Rule

9(b)

to

require

“specificity as to the statements (or omissions) considered to be
fraudulent, the speaker, when and why the statements were made, and
an explanation of why they were fraudulent.”

Plotkin v. IP Axess,

Inc., 407 F.3d 690, 696 (5th Cir. 2005).
Plaintiffs have failed to meet these standards and therefore
the Court will not consider the fraud and fraudulent inducement
claims for purposes of determining personal jurisdiction.
Furthermore, as indicated supra, specific jurisdiction is “a
claim-specific inquiry: ‘A plaintiff bringing multiple claims that
arise out of different forum contacts of the defendant must
establish specific jurisdiction for each claim.’“

-32-

McFadin, 587

F.3d at 759, quoting Seiferth v. Helicopteros Atuneros, Inc., 472
F.3d 266, 271 (5th Cir. 2006).

Plaintiffs have asserted claims for

breach of fiduciary duty, unjust enrichment/money had and received,
and civil conspiracy, which they have alleged arise out of contacts
with Texas.

This litigation did not arise out of or relate to

Defendants’ activities, i.e., executing the promissory note, in
Texas.

Plaintiffs have failed to make a prima facie case for

minimum contacts, and thus specific jurisdiction, for any of their
causes of action.
Specific jurisdiction may not be based upon the mere fortuity
that a plaintiff is a Texas resident. Santander Consumer USA, Inc.
v. Shults Ford, Inc., 2011 WL 2601520, at *4, citing Holt Oil & Gas
Corp. v. Harvey, 801 F.2d at 778.

There was an obligation

ultimately to perform repayment of the note to the Clemonses,
fortuitously residing in Texas, but the inclusive partnership
agreement established all other performance of the partnership
agreement

to

occur

in

Arizona,

jurisdiction over all the parties.

which

would

have

personal

Indeed the Arizona choice-of-

law provision in the promissory note is a relevant factor for
determining purposeful activity directed toward Arizona in light of
all the other factors pointing to it as the proper venue and
support personal jurisdiction in that state. Consumer USA, Inc. v.
Shults

Ford,

Inc.,

2011

WL

2601520

at

*4,

citing

Petty-Ray

Geophysical, 954 F.2d at 1069, and Burger King, 471 U.S. at 482.

-33-

Nor do the alleged contacts satisfy the “fair play and
substantial justice” prong of the personal jurisdiction test.

The

nature, quality and number of contacts with Texas arising from this
dispute pale in contrast to those with Arizona, while Arizona’s
interest in resolving the litigation arising out of the Tres Agua
project, property contained within its borders, is far greater than
Texas’s.

It is clear that not only do the Defendants all reside in

Arizona, but all identified witnesses and documents are located
there, too, as is the bankruptcy proceeding of the Kersegs, so an
Arizona forum would provide efficient resolution of the dispute.
Both states’ federal district courts are capable of construing the
law of either forum; indeed federal courts sitting in diversity
constantly apply the laws of other states.

Neither forum is so

distant, given today’s advanced transportation and the ease of
travel, that traveling to the other would constitute a severe
burden on any of these parties.
In sum, the Court concludes that the nature and quality of
Defendants’ contacts with Texas do not support the conclusion that
Defendants should have reasonably anticipated being haled into
court in Texas on any of the causes of action in this action and
the exercise of personal jurisdiction by this Court over them in
this

suit

would

offend

substantial justice.

traditional

notions

of

fair

pay

and

Deference to a plaintiff’s choice of forum

“disappears” when, as here, the suit has no connection to the

-34-

chosen venue.

Reed v. Final Oil and Chem. Co., 995 F. Supp. 705,

714 (E.D. Tex. 1998). Plaintiffs have failed to make a prima facie
case of personal jurisdiction over Defendants arising out of
Defendants’ contacts with Texas for any of their causes of action.
Therefore

because

the

Court

finds

it

lacks

personal

jurisdiction over Defendants, the Court examines the motions to
dismiss or for transfer in the interest of justice under § 1406(a).
District courts have “‘broad discretion in deciding whether to
order a transfer.’”

In re Volkswagen of America, Inc., 545 F.3d

304, 311 (5th Cir. 2008)(citations omitted).
“Courts typically favor transfer over dismissal.”

Scott v.

U.S. Army, 2008 WL 3914814835, *1 (W.D. Tex. June 20, 2008), citing
14D Charles Alan Wright, Arthur R. Miller, & Edward H. Cooper,
Federal Practice and Procedure § 3827 (2008).
The first question is whether this suit could have been
brought in Arizona. Both the first two prongs of the general venue
statute, 28 U.S.C. § 1391(b), are met by the destination forum:
all Defendants reside in the Phoenix area and a substantial part of
the events or omissions in dispute occurred in, and all of the
property at issue is located in, Arizona. The Southern District of
Texas does not satisfy either prong of § 1391(b).

As indicated

above, the Arizona federal district court would have personal
jurisdiction over all parties because of their involvement in the
Tres Agua project, although such is not a requirement under §

-35-

1406(a). Nationwide Bi-Weekly Admin., Inc. v. Belo Corp., 512 F.3d
137, 140 (5th Cir. 2007)(Section 1406(a) “permits a court to
transfer a case ‘to any district or division in which it could have
been brought’ regardless whether it has personal jurisdiction over
the defendants.”), citing Goldlawr, Inc. v. Heiman, 369 U.S. 463,
466 (1962).

Nevertheless, “a district is ‘wrong’ within the

meaning of § 1406(a) whenever there exists an ‘obstacle (to) an
expeditious and orderly adjudication’ on the merits,”

Ellis v.

Southwestern Cor., 646 F.2d 1099, 1105 (5th Cir. 1981); Allchem
Performance Products, Inc.,

F. Supp. 2d

10-3224, 2012 WL 2886714, *6 (July 13, 2012).

, Civ. A. No. HLack of personal

jurisdiction in this Court is a basis for such a transfer.

Id., at

1105 and n.7; id.
Accordingly, for the reasons stated above the Court
ORDERS the following:
(1)

All claims against the Kerseg Defendants are STAYED

pursuant to 11 U.S.C. § 362;
(2)

Defendants’ motions to dismiss for lack of personal

jurisdiction and improper venue (#4,6,8, and 10) are
DENIED;
(3) Defendants’ motions to transfer the case (#4, 8) to
the United States District Court of Arizona, Phoenix
Division, under 28 U.S.C. § 1406(a), are GRANTED;
(4 The joint motion for ruling on pending motions (#21)

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is MOOT.
SIGNED at Houston, Texas, this

28th

day of

January , 2013.

___________________________
MELINDA HARMON
UNITED STATES DISTRICT JUDGE

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