Illumination Station, Inc. v. Bank of America, N.A. et al

Filing 75

ORDER finding as moot 45 Motion to Dismiss Party; granting 53 Motion to Set Aside Default and denying 58 Motion to Dismiss. Signed by Honorable Jimm Larry Hendren on September 26, 2011. (sh)

IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF ARKANSAS
HARRISON DIVISION
ILLUMINATION STATION, INC.
v.

PLAINTIFF

Civil No. 10-3047

BERMAN INDUSTRIES, INC.;
ILLUMINATION HOME DECOR, LLC;
CASA CREATIONS, INC.;
RJB GROUP, LLC;
RONALD ARMSTRONG; and
ROBERT BERMAN

DEFENDANTS

O R D E R
Now

on

this

26th

day

of

September,

2011,

come

on

for

consideration the following:
*

Defendant Ronald Armstrong's Motion To Dismiss Or, In The

Alternative,

Motion

To

Stay

Case

("First

Motion

To

Dismiss")(document #45);
*

Motion

To

Set

Aside

Clerk's

Entry

Of

Default

As

To

Illumination Home Decor, LLC And Casa Creations, Inc. ("Motion To
Set Aside Default")(document #53); and
*
Transfer

Motion
Venue

To
And

Dismiss

Or,

In

The

Alternative,

Consolidate

Of

Separate

Motion

Defendants

To

Ronald

Armstrong, Illumination Home Decor, LLC And Casa Creation, Inc.
("Second Motion To Dismiss")(document #58),
and from said motions, and the response thereto, the Court finds and
orders as follows:
1.

Plaintiff

Illumination

Station,

Inc.

("Illumination

Station") asserts multiple causes of action said to have arisen out
of

commercial

relationships

and

transactions

involving

the

defendants and relating to the buying and selling of home decor
items.

The defendants are Ronald Armstrong ("Armstrong") and two

entities he controls, Illumination Home Decor, LLC ("IHD") and Casa
Creations,

Inc.

("Casa");

Robert

Berman

("Berman");

Berman

Industries, Inc. ("Berman Industries"), an entity of which Berman
and Armstrong are both officers; and RJB Group, LLC ("RJB").
2.

The initial Complaint named Bank of America, N.A. and

Berman Industries as defendants.
Complaint

("First

Amended

A First Amended And Restated

Complaint")

added

claims

against

Armstrong, IHD, Casa, Berman, and RJB.
In response to the First Amended Complaint, Armstrong filed the
First

Motion

Illumination

To

Dismiss.

Stations

Before

filed

its

disposition
Second

of

Amended

that
And

motion,
Restated

Complaint ("Second Amended Complaint") and Armstrong, IHD, and Casa
filed the Second Motion To Dismiss.
The First Motion To Dismiss contends that this Court lacks
personal jurisdiction over Armstrong and that the First Amended
Complaint fails to state a claim.

These arguments are repeated in

the Second Motion To Dismiss, and consequently the Court finds the
First Motion To Dismiss moot.
3.

On March 31, 2011, the First Amended Complaint was served

on Patrick Mitchell ("Mitchell), Registered Agent for both IHD and
Casa.

When these defendants failed to timely respond, Illumination

Station obtained a Default against each of them.
IHD and Casa move to set aside the Default, contending that
Mitchell

did

not

inform

Armstrong

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(Managing

Member

of

IHD

and

President of Casa) that he had been served with the First Amended
Complaint until April 26, 2011, and that they would have meritorious
defenses against the First Amended Complaint for the same reasons
set forth in the First Motion To Dismiss.
A default judgment may be set aside where there is mistake,
inadvertence, surprise, or excusable neglect; the defaulting party
makes some showing of a meritorious defense; and the opposing party
would not be prejudiced if the default is excused.
El-Batrawi, 524 F.3d 907, 912-14 (8th Cir. 2008).

Stephenson v.

The same factors

are relevant in determining whether to grant relief from an entry of
default, but a lesser showing is required.

Johnson v. Dayton

Electric Mfg. Co., 140 F.3d 781, 783 (8th Cir. 1998).

While default

is appropriate in some situations, there is "a 'judicial preference
for adjudication on the merits'." Id.
The reason given by IHD and Casa for failure to respond to the
First Amended Complaint is that they did not know about it because
their registered agent failed to notify Armstrong about service of
process.

This satisfies the relatively low hurdle of excusable

neglect.
The showing of a meritorious defense is slim, colorable at
best, but in light of the preference for adjudication on the merits,
the Court will give IHD and Casa the benefit of the doubt.
There is no reason to believe Illumination Station will be
prejudiced by setting aside the Default.

This case has moved slowly

to date, for reasons entirely unrelated the default of IHD and Casa,

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and discovery has not commenced.
When the Court weighs all three factors, in light of the
relatively modest burden for setting aside a default, it finds that
the Motion To Set Aside Default should be granted.
4.

In its Second Amended Complaint, Illumination Station

asserts the following claims:
*

that Berman Industries has been unjustly enriched at the

expense of Illumination Station;
*

that Berman, Armstrong, and Berman Industries violated

the Arkansas Deceptive Trade Practices Act;
*

that Berman, Armstrong, and Berman Industries defrauded

Illumination Station;
*

that all defendants engaged in the making of fraudulent

conveyances in violation of both Arkansas and Illinois law;
*

that all defendants engaged in a civil conspiracy to

defraud Illumination Station; and
*

that the corporate veil of Berman Industries should be

pierced so as to allow Illumination Station to reach the assets of
Berman and Armstrong personally.
5.

Armstrong, IHD and Casa move the Court to dismiss these

claims, or to transfer them to the United States District Court for
the Northern District of Illinois.

In support of dismissal, they

contend that this Court lacks personal jurisdiction over them and
that the Second Amended Complaint fails to state a claim upon which
relief can be granted.

In support of transfer, they contend that

the matter should be consolidated with a "parallel action" pending

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in Illinois (the "Illinois Case").
Illumination Station objects to all types of relief requested
in the motion.
6.

As plaintiff, Illumination Station has the burden of

proving by a preponderance of the evidence that the Court has
personal jurisdiction over defendants. Dakota Industries, Inc. v.
Dakota Sportswear, Inc., 946 F.2d 1384 (8th Cir. 1991).

The

Eighth

the

Circuit

has

had

many

opportunities

to

review

requirements of personal jurisdiction in a diversity case such as
the one at bar.

The relevant principles may be quoted from one

such case, Burlington Industries, Inc. v. Maples Industries, Inc.,
97 F.3d 1100 (8th Cir. 1996), as follows:
In a diversity action, a federal court may assume
jurisdiction over nonresident defendants only to the
extent permitted by the long-arm statute of the forum
state, and by the due process clause of the Fourteenth
Amendment.
We have previously recognized that the
Arkansas long-arm statute authorizes jurisdiction over
foreign corporations to the fullest extent allowed by
constitutional due process.
Due process requires "minimum contacts" between the nonresident defendant and the forum state such that
"maintenance of the suit does not offend traditional
notions of fair play and substantial justice.
The
defendant's conduct and connection with the forum state
must be such that defendant should "reasonably
anticipate being haled into court there."
Specific jurisdiction refers to jurisdiction over causes
of action arising from or related to a defendant's
actions
within
the
forum
state
while
general
jurisdiction refers to the power of a state to
adjudicate any cause of action involving a particular
defendant, regardless of where the cause of action
arose.
-5-

Where specific personal jurisdiction over a non-resident
is asserted, due process is satisfied if the defendant
has purposely directed its activities at forum
residents, and the litigation results from injuries
arising out of, or relating to, those activities.
(Internal citations omitted.)
7.

Burlington sets out five factors to be considered in

evaluating a challenge to personal jurisdiction:
*

the nature and quality of defendant's contacts with the

forum state;
*

the quantity of defendant's contacts with the forum

state;
*

the relationship between defendant's contacts with the

forum state and the cause of action asserted against it;
*

the interests of the forum state in providing a forum

for plaintiff to resolve its dispute with defendant; and
*

the convenience of the parties.

The first three of these factors are the most important, with
the last two being of lesser importance.
8.

The evidence with regard to whether Armstrong, IHD and

Casa purposely directed their activities at Illumination Station,
an Arkansas resident, comes from the Declaration of Steve Pederson
("Pederson"),

owner,

officer and

corporate

representative

of

Illumination Station, and the Declaration of Armstrong, Managing
Member of IHD and President of both Casa and Berman Industries.

(a)

Pederson averred that he and his wife had become friends

with Armstrong and his wife, and that Armstrong visited Arkansas
-6-

ten to twelve times a year in the last ten years, both for
business and recreational purposes.

Pederson averred that during

those years, Armstrong also directed numerous telephone calls and
much

written

and

electronic

correspondence

to

Illumination

Station's offices in Arkansas.
Pederson averred that Armstrong visited Harrison about half
a dozen times in early 2009 "to discuss the status of Berman
Industries'

business

and

to

induce

additional

orders

from

[Illumination Station] based upon representations that [Berman and
Armstrong] would invest additional monies into Berman Industries
to keep it afloat."
Pederson

averred

that

from

June

to

September

of

2009,

Armstrong spent about half of each month in Harrison, conducting
business on behalf of IHD and Casa, staying at least part of the
time

in

Pederson's

home

and

conducting

business

out

of

Illumination Station's offices.
(b)

Armstrong averred that Berman Industries was an Illinois

corporation headquartered in Chicago, which manufactured and sold
light fixtures and related products for some forty years, until it
closed on April 21, 2009.

Armstrong further averred that Berman

Industries conducted its business from Chicago, and that many
former employees still reside in that area.
Armstrong averred that Illumination Station directed its
payments

to

Berman

Industries

in

Chicago,

and

that

when

Illumination Station's account balance got out of hand, Armstrong
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handled negotiations to reduce it from Chicago.
9.

The Court need not dwell at length on the last two

factors.

It

is

axiomatic

that

states

have

an

interest

in

providing a forum for their citizens to resolve disputes, and as
analyzed in ¶12, infra, there is no evidence one way or the other
about the convenience of the parties.
10.

The

averments

of

Armstrong

and

Pederson

are

not

contradictory, and when the Court evaluates them it concludes that
Armstrong

had

sufficient

contacts

with

Arkansas,

and

with

Illumination Station and its officer Pederson in Arkansas, to
justify this Court's exercise of personal jurisdiction over him.
Pederson's Declaration averred to numerous business contacts -- in
person,

by

telephone,

by

mail,

and

by

internet

--

made

by

Armstrong, and to a significant amount of time spent in the state,
in the offices of Illumination Station, doing business related to
Illumination Station.
Pederson's Declaration also supplies evidence sufficient to
justify the exercise of personal jurisdiction over IHD and Casa,
in that he avers Armstrong spent many weeks in Arkansas in the
Summer of 2009 conducting business on behalf of these entities.
For these reasons, the Court finds that the Second Motion To
Dismiss should be denied insofar as it seeks dismissal for lack of
personal jurisdiction over Armstrong, IHD, and Casa.
11.

Armstrong, IHD and Casa also contend that the Second

Amended Complaint fails to state a claim upon which relief can be

-8-

granted.

Their arguments in this regard are so insufficiently

fleshed out that the Court will not consider them, and the Second
Motion To Dismiss will be denied insofar as it seeks dismissal on
this basis.
12.

Finally Armstrong, IHD and Casa contend for transfer on

the basis that there is a "parallel action" pending in Illinois.
The

Court

is

aware

that

there

is

a

related

action

pending

in

Illinois, having dismissed Illumination Station's claims against
Bank

of

America,

previously

filed

N.A.,
in

because

the

United

mirror
States

image

claims

District

Court

had

been

for

the

Northern District of Illinois.
Movants also contend that transfer would fulfill the purposes
of 28 U.S.C. § 1404(a), preventing the waste of time, energy and
money and protecting litigants, witnesses, and the public against
unnecessary inconvenience and expense.

They make no effort to

substantiate this sweeping contention, other than to refer to a
letter from counsel for Illumination Station to Armstrong in which
it is asserted that the case at bar and the Illinois Case are
"inextricably intertwined."
Under

§

1404(a),

"[f]or

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 ti might
have been brought."

The party seeking transfer has the burden of

proving that it is warranted, and considerable deference is given to
the

plaintiff's

choice

of

forum.

-9-

Terra

International,

Inc.

v.

Mississippi Chemical Corp., 119 F.3d 688, 695 (8th Cir. 1997).
Movants have not carried their burden of justifying a transfer
in

this

case.

There

is

no

evidence

that

the

claims

against

Armstrong, IHD and Casa are mirror images of any claims asserted in
the Illinois Case, nor that such were filed earlier than the claims
against them in the case at bar.

The statements of plaintiff's

counsel in his letter to Armstrong are not evidence.
Moreover, Armstrong, IHD and Casa made no effort to demonstrate
that the convenience of parties or witnesses weighs in favor of
transfer. The Second Motion To Dismiss will, therefore, be denied
insofar as it requests a transfer of this case to the United States
District Court for the Northern District of Illinois.
IT

IS

THEREFORE

ORDERED

that

Defendant

Ronald

Armstrong's

Motion To Dismiss Or, In The Alternative, Motion To Stay Case
(document #45) is moot.
IT IS FURTHER ORDERED that the Motion To Set Aside Clerk's
Entry

Of

Default

As

To

Illumination

Home

Decor,

LLC

And

Casa

Creations, Inc. (document #53) is granted.
IT IS FURTHER ORDERED that the Motion To Dismiss Or, In The
Alternative, Motion To Transfer Venue And Consolidate Of Separate
Defendants Ronald Armstrong, Illumination Home Decor, LLC And Casa
Creation, Inc. (document #58) is denied.
IT IS SO ORDERED.
/s/ Jimm Larry Hendren
JIMM LARRY HENDREN
UNITED STATES DISTRICT JUDGE

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