Interstate National Dealer Services, Inc. v. U.S. Auto Warranty, LLC et al

Filing 25

ORDER denying Defendant Vinson's 13 Motion to Dismiss for Lack of Personal Jurisdiction, and Plaintiff's 19 Motion to Amend Its Complaint is DENIED. Signed by Judge Richard W. Story on 9/11/2013. (cem)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
INTERSTATE NATIONAL
DEALER SERVICES, INC.,
Plaintiff,
v.
U.S. AUTO WARRANTY, LLC,
d/b/a U.S. AUTO PROTECTION
and RAY VINSON, JR.,
Defendants.

:
:
:
:
:
:
:
:
:
:
:
:

CIVIL ACTION NO.
1:12-CV-4265-RWS

ORDER
This case comes before the Court on Defendant Ray Vinson, Jr.’s Motion
to Dismiss for Lack of Personal Jurisdiction [13] and Plaintiff’s Motion to
Amend Its Complaint [19]. After reviewing the record, the Court enters the
following Order.
Background
This case arises from a dispute involving a Direct Marketing Agreement
and a Direct Marketer Pass-Through Agreement between Plaintiff Interstate
National Dealer Services (“Interstate” or “Plaintiff”), a Georgia company based
in Atlanta, and Defendant U.S. Auto Warranty, LLC d/b/a U.S. Auto Protection

AO 72A
(Rev.8/82)

(“U.S. Auto”), a company based in Chesterfield, Missouri. (Compl., Dkt. [1] ¶¶
1-2.) The president and CEO of U.S. Auto at the time was Defendant Ray
Vinson, Jr. (“Mr. Vinson”), a Missouri resident. (Id. ¶ 3.)
On or about April 19, 2011, the parties executed a Direct Marketing
Agreement [1-1] whereby U.S. Auto marketed and sold vehicle service
contracts (“VSCs”) that Interstate administered. (Id. ¶ 9, 13.) U.S. Auto agreed
to pay Interstate portions of the premiums it collected on the VSCs. (Id. ¶¶ 13,
16).
Parties also entered into a Direct Marketer Pass-Through Agreement [12] around the same time. Both contracts provided Interstate’s Atlanta address.
(Dkt. [1-1], [1-2].) Mr. Vinson signed the Pass-Through Agreement, while a
different U.S. Auto official signed the Direct Marketing Agreement. (See Dkt.
[1-1], [1-2].) Mr. Vinson was also the designated payee in the Pass-Through
Agreement, meaning he could receive payments directly on U.S. Auto’s behalf.
(Id. ¶ 12.) Plaintiff characterizes these payments as “commission payments”
that Interstate would pay for the VSCs U.S. Auto sold. (Pl.’s Mem. in Opp’n
(“Pl.’s Opp’n Br.”), Dkt. [20] at 5.) The Pass-Through Agreement also
provided that Interstate could withhold from commission payments any amount
2

AO 72A
(Rev.8/82)

U.S. Auto owed to Interstate. (Dkt. [1-2] ¶ 5.) After executing the PassThrough Agreement, Mr. Vinson provided Interstate with his personal bank
account information and a W-9 form with his Social Security Number on it.
(Pl.’s Opp’n Br., Dkt. [20] at 5). He later communicated by e-mail and
telephone with Interstate employees in Georgia about the Pass-Through
Agreement and directed Interstate to make electronic funds transfers into his
personal bank account, which Interstate did. (Id. at 4-5; see also Decl. of Brian
Becker, Dkt. [20-1] (E-mail correspondence between Mr. Vinson and Interstate
regarding commission payments).)
From April 19, 2011, until December 1, 2011, U.S. Auto sold VSCs
across the United States, including to over one hundred customers in Georgia.
(Decl. of Brian Becker, Dkt. [20-1] ¶ 5; Compl., Dkt. [1] ¶ 14.) Interstate paid
Mr. Vinson over $200,000 during this time pursuant to the Pass-Through
Agreement. (Id. ¶ 15.) U.S. Auto, however, allegedly failed to pay Interstate
all that it owed under the Direct Marketing Agreement, despite having collected
premiums on the VSCs. (Id. ¶ 16.) Plaintiff also asserts that U.S. Auto violated
the Direct Marketing Agreement by failing to issue refunds to customers who
cancelled their VSCs. (Id. ¶ 21.)
3

AO 72A
(Rev.8/82)

Interstate commenced this action on December 10, 2012, alleging statelaw claims of breach of contract, breach of fiduciary duty, and conversion. (Id.
¶ 27-42.) Neither U.S. Auto nor Mr. Vinson have filed answers in this action.
On March 7, 2013, Mr. Vinson filed a Motion to Dismiss for Lack of Personal
Jurisdiction [13]. Along with its Response to Mr. Vinson’s Motion, Plaintiff
filed a Motion to Amend Its Complaint [19] on April 4, 2013, to add Vinson
Mortgage Services, Inc. d/b/a/ Vinson Mortgage Group (“VMG”) as a
Defendant. The Court turns first to Mr. Vinson’s Motion to Dismiss for Lack
of Personal Jurisdiction.
Discussion
I.

Defendant Vinson’s Motion to Dismiss for Lack of Personal
Jurisdiction
Mr. Vinson asserts that he is not subject to this Court’s jurisdiction

because he has not transacted any business in Georgia. (Def.’s Br., Dkt. [13-2]
at 8-9.) Plaintiff argues that Mr. Vinson has transacted business in Georgia by
personally executing the Pass-Through Agreement with Interstate and
subsequently communicating with Interstate employees in Georgia by e-mail

4

AO 72A
(Rev.8/82)

and telephone regarding the Pass-Through Agreement. (Pl.’s Opp’n Br., Dkt.
[20] at 12-13.)
When a federal court sits in diversity, it properly may exercise personal
jurisdiction over the defendant “only if two requirements are met: (1) the state
long-arm statute, and (2) the Due Process Clause of the Fourteenth
Amendment.” Posner v. Essex Ins. Co., 178 F.3d 1209, 1214 (11th Cir. 1999).
Thus, the Court uses a “two-step inquiry in determining whether the exercise of
personal jurisdiction over a non-resident defendant is proper.” Internet
Solutions Corp. v. Marshall, 557 F.3d 1293, 1295 (11th Cir. 2009). First,
courts must consider whether the exercise of personal jurisdiction over the
defendant would comport with Georgia’s long-arm statute. Id. If so, courts
then consider whether the defendant has sufficient minimum contacts with the
state such that the exercise of jurisdiction would not offend Due Process notions
of “fair play and substantial justice.” Id. Finally, “[a] plaintiff seeking the
exercise of personal jurisdiction over a nonresident defendant bears the initial
burden of alleging in the complaint sufficient facts to make out a prima facie
case of jurisdiction.” United Techs. Corp. v. Mazer, 556 F.3d 1260, 1274 (11th
Cir. 2009).
5

AO 72A
(Rev.8/82)

However, motions to dismiss for lack of personal jurisdiction filed at the
pleading stage should be “treated with caution” and granted only if the plaintiff
has failed to allege “sufficient facts . . . to support a reasonable inference that
the defendant can be subjected to jurisdiction . . . .” Bracewell v. Nicholson Air
Servs., Inc., 680 F.2d 103, 104 (11th Cir. 1982). When considering a motion to
dismiss for lack of personal jurisdiction, the Court “must construe the
allegations in the complaint as true, to the extent they are uncontroverted by
defendant’s affidavits or deposition testimony. In addition, where the evidence
presented by the parties’ affidavits and deposition testimony conflicts, the Court
must construe all reasonable inferences in favor the non-movant plaintiff.”
Morris v. SSE, Inc., 843 F.2d 489, 492 (11th Cir. 1988) (internal citations
omitted).
A.

Georgia Long-Arm Statute

Mr. Vinson’s business activities with Interstate satisfy the Georgia longarm statute. Under the Georgia long-arm statute, “A court of this state may
exercise personal jurisdiction over any nonresident . . . as to a cause of action
arising from any of the acts . . . enumerated in this Code section, in the same

6

AO 72A
(Rev.8/82)

manner as if he or she were a resident of this state, if in person or though an
agent, he or she:
(1)

Transacts any business within this state;

....
(3)

Commits a tortious injury in this state caused by an act or
omission outside this state if the tort-feasor regularly does or
solicits business, or engages in any other persistent course of
conduct, or derives substantial revenue from goods used or
consumed or services rendered in this state . . . .

O.C.G.A. § 9-10-91. Mr. Vinson addressed sub-sections (1) and (3) in his Brief
(Dkt. [13-2] at 7-11), while Plaintiff only addressed sub-section (1) in its
Response. (Dkt. [20] at 10-14.) Additionally, because the Court has personal
jurisdiction over Mr. Vinson pursuant to sub-section (1), it is not necessary to
analyze sub-section (3).
According to Mr. Vinson, he executed the Pass-Through Agreement in
Missouri, he has “never visited Georgia in connection with any business with
Interstate,” and, to his knowledge, he has “never communicated with any
employee or representative of Interstate in Georgia about the Pass-Through
Agreement.” (Decl. of Ray Vinson, Jr., Dkt. [13-1] ¶¶ 11-13.) Furthermore,
7

AO 72A
(Rev.8/82)

Mr. Vinson argues that he executed the Pass-Through Agreement in his
capacity as the president of U.S. Auto and that the Agreement was “a
transaction between Interstate and U.S. Auto, not Interstate and Vinson.”
(Def.’s Br., Dkt. [13-2] at 8.) Either way, Mr. Vinson argues, “he did not do
any act or consummate any transaction in Georgia.” (Id.) Case law points to
the contrary.
“Interpreted literally, ‘transacts any business’ requires that the
‘nonresident defendant has purposefully done some act or consummated some
transaction in [Georgia] . . . .’ That said, a defendant need not physically enter
the state.” Diamond Crystal Brands, Inc. v. Food Movers Int’l, Inc., 593 F.3d
1249, 1264 (11th Cir. 2010) (citation omitted) (quoting Aero Toy Store, LLC v.
Grieves, 631 S.E.2d 734, 737 (Ga. Ct. App. 2006)); see also Amerireach.com,
LLC v. Walker, 719 S.E.2d 489 (Ga. 2011) (noting that physical presence in
Georgia is only one factor in considering whether a nonresident defendant has
transacted business under sub-section (1)). Thus, courts consider “a
nonresident’s mail, telephone calls, and other ‘intangible’ acts, though
occurring while the defendant is physically outside of Georgia.” Diamond
Crystal Brands, Inc., 593 F.3d at 1264 (citing Innovative Clinical & Consulting
8

AO 72A
(Rev.8/82)

Servs., LLC v. First Nat’l Bank of Ames, Iowa, 620 S.E.2d 352, 355-56 (Ga.
2005)).
By signing the Pass-Through Agreement with Interstate, a Georgia
corporation, by receiving over $200,000 throughout U.S. Auto’s performance of
the Direct Marketer Agreement, and by following up via e-mail and telephone
with Interstate employees who were in Georgia, Mr. Vinson transacted business
in the state of Georgia. The fact that the Pass-Through Agreement was
executed in Missouri is not conclusive, nor is his assertion that he never
communicated with anyone in Georgia prior to executing the Pass-Through
Agreement. The record shows that Mr. Vinson later communicated with
Interstate employees in Georgia in his effort to receive significant commission
payments from Interstate.
Mr. Vinson’s argument that he did not sign the Pass-Through Agreement
in his individual capacity does not exempt him from personal jurisdiction. In
the context of individuals operating in their corporate capacity, “[t]he status of
the individual defendants as employees or officers ‘does not somehow insulate
them from jurisdiction.’ ” Amerireach.com, LLC, 719 S.E.2d at 494 (quoting
Calder v. Jones, 465 U.S. 783, 790 (1984)). The Georgia Supreme Court has
9

AO 72A
(Rev.8/82)

further held that individuals acting on behalf of a corporation may be deemed to
have transacted business in Georgia “if those employees were primary
participants in the activities forming the basis of jurisdiction over the
corporation.” Id. at 495 (quoting Application to Enforce Admin. Subpoenas
Duces Tecum of the SEC v. Knowles, 87 F.3d 413, 418 (10th Cir. 1996)).
Assuming Mr. Vinson did execute the Pass-Through Agreement in his
capacity as president of U.S. Auto, though, would nevertheless establish that he
was a primary participant in the Pass-Through Agreement. The fact that Mr.
Vinson was the designated payee in the Pass-Through Agreement with a
Georgia company, coupled with his status as a primary participant in the
transaction, his e-mail and telephone communications with Interstate employees
in Georgia, and his receiving commission payments from Interstate, all
demonstrate that Mr. Vinson himself transacted business in Georgia.
B.

Due Process Analysis

Having decided that the requirements of the Georgia long-arm statute are
satisfied, the Court must now conduct a constitutional inquiry. The Court finds
that exercising personal jurisdiction over Mr. Vinson satisfies Due Process.

10

AO 72A
(Rev.8/82)

Personal jurisdiction is proper if the nonresident defendant has established
“certain minimum contacts with [the forum] such that the maintenance of the
suit does not offend traditional notions of fair play and substantial justice.”
Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 (1984)
(quoting Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)) (internal
quotation marks omitted).
First, Due Process requires that a defendant must have established
minimum contacts with the forum state such that he has fair warning that he
could be haled into court there. Diamond Crystal Brands, Inc., 593 F.3d at
1267. “[T]he fair warning requirement is satisfied if the defendant has
purposefully directed his activities at residents of the forum . . . and the
litigation results from alleged injuries that arise out of or relate to those
activities.” Id. (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472-73
(1985)) (internal quotation marks omitted).
Mr. Vinson’s business relationship with Interstate established the
necessary “minimum contacts” with Georgia such that he reasonably should
have anticipated being haled into Court here. While he was president of U.S.
Auto, his company entered into the Direct Marketing Agreement with Interstate,
11

AO 72A
(Rev.8/82)

a Georgia corporation. More significantly, he signed the Pass-Through
Agreement with Interstate, which was formed in conjunction with the Direct
Marketing Agreement, and chose himself as the designated payee to receive
commission payments. Mr. Vinson then “personally requested and inquired
into the status of wire transfers between Interstate and Mr. Vinson’s personal
bank account” through e-mail and telephone communications with Georgia
residents. (Pl.’s Opp’n Br., Dkt. [20] at 13.) Finally, Mr. Vinson received a
significant sum of money from Interstate. Mr. Vinson thus established
minimum contacts with Georgia such that he reasonably should have
anticipated defending suit here, and these contacts are clearly related to
Plaintiff’s claims.
Second, to determine whether the exercise of jurisdiction comports with
traditional notions of fair play and substantial justice, courts examine:
the burden on the defendant, the forum State’s interest in
adjudicating the dispute, the plaintiff’s interest in obtaining
convenient and effective relief, the interstate judicial system’s
interest in obtaining the most efficient resolution of controversies,
and the shared interest of the several states in furthering
fundamental substantive social policies.

12

AO 72A
(Rev.8/82)

Diamond Crystal Brands, Inc., 593 F.3d at 1274 (quoting Burger King Corp.,
471 U.S. at 477) (internal quotation marks omitted). A defendant challenging
personal jurisdiction must make a “ ‘compelling case’ that exercising
jurisdiction would be constitutionally unfair.” Id. Mr. Vinson has not made
such a showing. In fact, he did not address any of these factors in his briefs.
The Court therefore finds that exercising personal jurisdiction over Mr. Vinson
is fair.
Because Mr. Vinson transacted business in Georgia and established
minimum contacts here such that exercising jurisdiction over him would
comport with fair play and substantial justice, Mr. Vinson’s Motion to Dismiss
for Lack of Personal Jurisdiction [13] is DENIED.
II.

Plaintiff’s Motion to Amend Its Complaint
Under Rule 15(a)(1) of the Federal Rules of Civil Procedure, a party may

amend a pleading once as a matter of right within twenty-one days after service
of the pleading, or, if the pleading requires a response, within twenty-one days
after service of a responsive pleading or motion filed under Rule 12(b), (e), or
(f). Otherwise, under Rule 15(a)(2), the party must seek leave of court or the

13

AO 72A
(Rev.8/82)

written consent of the opposing parties to amend. Rule 15(a)(2) directs the
Court, however, to “freely give leave when justice so requires.” Despite this
instruction, however, leave to amend is “by no means automatic.” Layfield v.
Bill Heard Chevrolet Co., 607 F.2d 1097, 1099 (5th Cir. 1979).1 The trial court
has “extensive discretion” in deciding whether to grant leave to amend.
Campbell v. Emory Clinic, 166 F.3d 1157, 1162 (11th Cir.1999). A trial court
may choose not to allow a party to amend “when the amendment would
prejudice the defendant, follows undue delays or is futile.” Id. A claim is futile
if it cannot withstand a motion to dismiss. Fla. Power & Light Co. v. Allis
Chalmers Corp., 85 F.3d 1514, 1520 (11th Cir.1996); see Burger King Corp. v.
Weaver, 169 F.3d 1310, 1315 (11th Cir.1999) (futility is another way of saying
“inadequacy as a matter of law”). That is, leave to amend will be denied “if a
proposed amendment fails to correct the deficiencies in the original complaint
or otherwise fails to state a claim.” Mizzaro v. Home Depot, Inc., 544 F.3d
1230, 1255 (11th Cir. 2008).

1

In Bonner v. City of Prichard, the Eleventh Circuit Court of Appeals adopted
as binding precedent all decisions of the former Fifth Circuit decided before October
1, 1981. 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc).
14

AO 72A
(Rev.8/82)

In its proposed Amended Complaint [19-1], Plaintiff attempts to add a
new party, Vinson Mortgage Group, on the theory that Mr. Vinson, Interstate,
and VMG operated as alter egos of each other and were joint venturers. Under
Georgia law, to prevail on the alter ego theory “it is necessary to show that the
shareholders disregarded the corporate entity and made it a mere instrumentality
for the transaction of their own affairs; that there is such unity of interest and
ownership that the separate personalities of the corporation and the owners no
longer exist.” Baillie Lumber Co. v. Thompson, 612 S.E.2d 296, 299 (Ga.
2005) (quoting Heyde v. Xtraman, Inc., 404 S.E.2d 607, 610 (Ga. Ct. App.
1991)). A joint venture is established “where two or more parties combine their
property or labor, or both, in a joint undertaking for profit, with rights of mutual
control (provided the arrangement does not establish a partnership), so as to
render all joint venturers liable for the negligence of the other.” Kissun v.
Humana, Inc., 479 S.E.2d 751, 752 (Ga. 1997).
Plaintiff supplies conclusory allegations in its proposed Amended
Complaint that amount to a formulaic recitation of the alter ego and joint
venture elements. Such conclusory allegations in a complaint “will not do.”
See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (requiring a complaint to
15

AO 72A
(Rev.8/82)

“contain sufficient factual matter, accepted as true, to ‘state a claim to relief that
is plausible on its face’ ” (quoting Bell Atlantic Corp. v. Twombly, 550 U.S.
544, 570 (2007))). Plaintiff alleges, for example, that “U.S. Auto, Vinson, and
VMG are alter egos of each other” and operated as “business conduits of each
other.” (Dkt. [19-1] ¶¶ 79-80.) Without providing any other facts, Plaintiff
alleges that U.S. Auto, Mr. Vinson, and VMG “are jointly and severally liable
for the liabilities of each other.” (Id. ¶ 82.) Plaintiff’s joint venture allegations
are just as conclusory. (See id. ¶¶ 84-89.) Plaintiff makes no factual allegations
in the proposed Amended Complaint that would support its additional claims.
Because Plaintiff’s proposed Amended Complaint fails to state a claim as
to the alter ego and joint venture allegations, Plaintiff’s Motion to Amend Its
Complaint [19] is DENIED.
Conclusion
In accordance with the foregoing, Defendant Vinson’s Motion to Dismiss
for Lack of Personal Jurisdiction [13] is DENIED, and Plaintiff’s Motion to
Amend Its Complaint [19] is DENIED.

16

AO 72A
(Rev.8/82)

SO ORDERED, this 11th day of September, 2013.

_______________________________
RICHARD W. STORY
UNITED STATES DISTRICT JUDGE

17

AO 72A
(Rev.8/82)