Proud Veterans, LLC v. Ari Ben-Menashe et al

Filing 38

MEMORANDUM AND ORDER granting 30 Motion to Dismiss. This action shall be held in abeyance pending further order of the court. Parties shall file any motionsto transfer and/or briefs regarding whether transfer of this case would be in the interest o f justice under 28 U.S.C. §§ 1406 or 1631 within fourteen (14) days of this order, and any responses shall be filed within seven (7) days thereafter. Plaintiff's motions and memoranda in support and/or briefs shall be no longer than seven pages. Defendants' collective motions and memoranda in support and/or briefs shall be no longer than seven pages. Replies will not be allowed. Signed by District Judge Julie A. Robinson on 2/26/14. (mb)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS

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PROUD VETERANS, LLC,
Plaintiff,
v.
ARI BEN-MENASHE, et al.,
Defendants.

Case No. 12-CV-1126-JAR

MEMORANDUM AND ORDER
Plaintiff Proud Veterans, LLC’s Complaint in this diversity case alleges conspiracy to
defraud, breach of contract, breach of fiduciary duty, and seeks to pierce the corporate veil.1
Defendants filed motions to dismiss, alleging a lack of personal jurisdiction, improper venue and
failure to state a claim. Plaintiff filed a Motion for an Order Providing for Jurisdictional
Discovery.2 The Court granted Plaintiff’s motion, and ordered jurisdictional discovery on the
limited issue of personal jurisdiction and venue.3 Limited jurisdictional discovery has been
completed. Before the Court is Defendants’ renewed Motion to Dismiss (Doc. 30). The matter
has been fully briefed and the Court is prepared to rule. For the reasons set forth in detail below,
the Court finds that Defendants’ Motion to Dismiss should be granted for lack of personal

1

Doc. 1.

2

Doc. 22.

3

Doc. 26.

1

jurisdiction, but the Court allows the parties additional time to brief the issue of transfer.
I.

Factual Background
Drawing all reasonable inferences in favor of Plaintiff, the following facts are taken from

the Complaint and attached exhibits, and the declarations and exhibits attached to the parties’
briefs. The Court does not consider any general or conclusory allegations unsupported by
affidavit or other evidence.
This case arises out of a failed transaction between Defendant Traeger Resources and
Logistics, Inc. (“Traeger”), the seller of soybeans and Global Energy Markets (“GEM”), the
buyer, who is not a party to this action. Plaintiff Proud Veterans characterizes the transaction as
an “advance fee scheme.” Defendants claim, however, that the transaction failed because GEM’s
letter of credit ultimately proved to be insufficient to fund its purchase of the soybeans.
In January 2011, Plaintiff Proud Veterans, LLC (“Plaintiff”) entered into a contract with
GEM to promote GEM’s grain sales to Iran. To that end, in Montreal, Canada in February 2011,
Plaintiff introduced GEM to Traeger, a grain supplier. Negotiations between GEM and Traeger
commenced, with Plaintiff acting as facilitator, in exchange for Plaintiff earning a commission
of six dollars per metric ton. Defendant Ari Ben-Menashe (“Ben-Menashe”), a principal of
Traeger, negotiated the contract on behalf of Traeger; while Fred Boldaji and Sina Soumekhian
negotiated for GEM. Nick Gnemi, owner and CEO of Plaintiff, negotiated on behalf of Plaintiff.

The negotiations were successful and in April 2011, in a meeting in Amman, Jordan,
Traeger and GEM entered into a contract for Traeger to sell 35,000 metric tons of soybeans to
GEM. The contract required that GEM have a bank letter of credit in an amount equal to the

2

sale price plus the shipping costs. Shortly thereafter, GEM and Traeger agreed to amend the
contract to provide that Traeger would provide all shipping arrangements at a price of $30 per
metric ton, from which $10 per metric ton would be paid by Defendant Dickens & Madson
(“Dickens”). Traeger urged and recommended to GEM that Dickens be a participant in this
transaction, because Dickens would contribute $10 per metric ton from its source. Ben-Menashe
further stated that Dickens’ “source” was the United States government, because Leon Panetta,
then Director of the CIA and a personal friend of Ben-Menashe had convinced the United States
to assist this transaction with money in the from of a contribution to the purchase price. The
amended contract also required an advance deposit of $700,000 for shipping from GEM or
GEM’s sources.
When GEM and some potential investors from Dubai were unwilling or unable to deposit
any advance money, Traeger pressed Plaintiff to make the deposit or find investors who would.
Ben-Menashe, on behalf of Traeger, assured GEM that Traeger would send documentation
reflecting that the advance money would be held in escrow and returned if not used to transport
the soybeans. Thereafter, from April 4 to May 5, 2011, Plaintiff made a series of four payments
towards the $700,000 advance deposit, wiring a total of $450,000 to Defendant William
Schaap’s attorney trust fund account at HSBC Bank New York City. Schaap is an attorney who
represented Defendants Traeger, Dickens and Ben-Menashe.
After the first wire from Plaintiff, GEM emailed Schaap clarifying GEM’s request for
documentation of the agreement that the funds would be held in escrow. That same day, Schaap
sent a letter in response to GEM, which falsely stated that the $700,000 would be used for
shipping costs or would be refunded. The Complaint alleges that Ben-Manashe and Schaap

3

knew that the Plaintiff believed that under the uniform custom and practice of the trade, the
advance money for shipping costs would be refunded after a reasonable time if the funds were
not in fact used for shipping costs. On the same day as Schaap’s letter to GEM, in a telephone
conversation, Ben-Menashe falsely told Gnemi of Proud Veterans that Traeger owned sufficient
soybeans to complete the contract and that the soybeans would be delivered in less than thirty
days. Four days later, Ben-Menashe called Gnemi seeking additional funds for shipping and
Plaintiff introduced investor Allen Nasserisafar as an additional depositor of advance funds.
After Plaintiff transmitted two of the four wire payments to Schaap’s attorney trust fund
account, Defendant Ovsjannikovs, a principal of Andre Maritime Services Company (“Andre
Maritime”), falsely told Gnemi and Nasserisafar that the soybeans were located in the free port
of Alexandria, Egypt. Two days later, on April 29, 2011, Ben-Menashe falsely stated that the
soybeans were in storage in Alexandria and ready for delivery.
Plaintiff engaged an Iranian bank representative to investigate whether the soybeans were
in fact in storage and ready for delivery, and Plaintiff emailed Traeger on May 1, 2011 to inform
Traeger of Plaintiff’s investigation. When Plaintiff’s representative could not find the soybeans
in any of the storage facilities in Alexandria that could accommodate that quantity of soybeans,
Gnemi and Boldaji of GEM called Ovsjannikovs and confronted him with this discovery.
Ovsjannikovs did not dispute the report and stated he would report it to Ben-Menashe.
On May 10, 2011 Ben-Menashe sent another addendum to the Traeger-GEM contract
that confirmed the $700,000 deposit had been made and further stated that Traeger would make
the first shipment of the soybeans effective May 10, 2011. The addendum further provided that
GEM would provide Traeger with a copy of a revised letter of credit “Paid at Site,” within 72

4

hours after receipt of the validated request for shipping company, shipping agreement, name of
ship and proposed date and location for loading the ship. On May 10, Ovsjannikovs, on behalf
of Andre Maritime, sent a letter to GEM stating that Andre was ready to charter the ships to
deliver the soybeans. GEM and the other depositors waited, but never received any information
about the shipping agreement or other shipping arrangements and thus GEM never obtained a
revised letter of credit.
Thereafter, Traeger never produced any documentation showing the existence of
soybeans to fulfill the contract, and on May 18, Ben-Menashe stated that the soybeans had been
sold to a different buyer because of GEM’s non-performance of the contract. But, on May 20,
Ben-Menashe stated that the Traeger-GEM contract was still in effect and that GEM’s letter of
credit was sufficient. Ben-Menashe also falsely stated that Traeger would proceed to fulfill the
contract by obtaining soybeans from another supplier. Thereafter, Plaintiff requested
documentation about shipping and documentation confirming the location where the advance
money was on deposit. Ben-Menashe responded that he was going to cancel “this deal,” because
GEM was not in compliance; but on May 31, 2011 Ben-Menashe falsely stated that he had a new
Iranian buyer for the soybeans and that the Traeger-GEM contract was still in effect and would
be performed as originally agreed.
GEM’s letter of credit expired on or about June 6, 2011, and Plaintiff requested
reimbursement of the advance funds deposited in Schaap’s trust fund account. Ben-Menashe
and Ovsjannikovs continued to assure Plaintiff and GEM that the contract would be executed
soon, and Schaap emailed them, falsely stating that the contract would be completed within two
weeks.

On August 19, 2011, Traeger failed to meet another deadline, and GEM and

5

Traeger entered into a second contract called a “Reaffirmation Agreement” that reaffirmed their
obligations under the original contact and agreed that Traeger owed Plaintiff $1,050,000 and
owed GEM $3,150,000. On or about August 22, 2011, Schaap falsely told GEM’s attorney that
the funds were in a Traeger bank account in Hong Kong and would be wired to Schaap’s
attorney trust fund account for distribution to GEM and Plaintiff “in a day or two.” On
September 2 and again on September 4 and 5, 2011, Ben-Menashe falsely stated that the funds
had been “held up” by the government of China, but would be released and received in New
York and then transferred to GEM and Plaintiff “in a day or two.” On September 6, 2011,
pursuant to the Reaffirmation Agreement, Traeger wired $87,000 from Schapp’s HSBC bank
account in New York to Plaintiff’s Intrust Bank account in Kansas.
Thereafter, Plaintiff made repeated demands for payment of the remainder of the advance
funds. Plaintiff and GEM entered into a new settlement agreement with Traeger.4 The
settlement agreement was intended to resolve all claims arising out of the prior contracts and/or
obligations and is expressly governed by New York law. Ben-Menashe falsely stated to GEM
that sufficient funds to pay the amounts due under the settlement agreement were on deposit in a
Traeger bank account in Hong Kong, but that the Chinese government and Chinese banking
authorities were preventing Traeger’s withdrawal of the funds so it could pay the balance due
under the settlement agreement. Plaintiff claims that Schaap transferred the trust funds to
Traeger, which were then transferred to other persons or entities intended to be beyond the reach
of Traeger’s creditors.
Plaintiff is a Kansas limited liability company. Defendant Traeger is incorporated in

4

Doc. 1 at ¶¶ 51, 53, and Doc. 1–1 (Ex. O).

6

New York and has offices in Montreal, Quebec, Canada. Defendant Ben-Menashe is a citizen of
Canada and resides in Montreal. Defendant Schaap is a citizen of the state of New York.
Defendant Dickens & Madson is incorporated in New York and has offices in Montreal.
Defendant Ovsjannikovs is a citizen of Canada and lives in Montreal. Defendant Andre
Maritime is a Latvian company doing business in Latvia and Montreal. GEM is not a party to
this action, and is a company doing business in Virginia.
Plaintiff’s Complaint alleges diversity jurisdiction under 28 U.S.C. § 1332, proper venue
under 28 U.S.C. § 1391(a)(2), and sets forth the following causes of action: conspiracy to
defraud as to all Defendants (Count I); breach of a settlement agreement as to Defendants
Traeger and Ben-Menashe (Count II); breach of fiduciary duty as to Defendants Ben-Menashe
and Schaap (Count III);5 piercing the corporate veil and holding Defendant Ben-Menashe
personally liable for Traeger’s acts (Count IV); and attorney fees and costs as punitive damages
against Defendants Traeger, Ben-Menashe and Schaap (Count V).
All Defendants6 seek dismissal on the grounds that the Court lacks personal jurisdiction
and that venue in Kansas is improper. In addition, Defendants Ben-Menashe and Schaap move
for dismissal of the breach of fiduciary duty claim for failure to state a claim.7
II.

Standards for Personal Jurisdiction under Rule 12(b)(2).

5

The Court notes that Count III states that it applies only to Defendants Ben-Manashe and Schaap, while the
prayer in the Complaint seeks judgment on Count III against Traeger, Ben-Menashe and Schaap. Doc. 1 at 25–26,
29.
6

The Court notes that although the Motion to Dismiss does not list Defendant Andre Maritime Agency Co.
as a movant, the memorandum in support makes it clear that the motion is on behalf of all Defendants. See Doc. 31
at 6, 19.
7

Doc. 31 at 3–4.

7

Plaintiff has the burden of establishing personal jurisdiction over Defendants.8 In the
absence of an evidentiary hearing, as in this case, the plaintiff must make only a prima facie
showing of jurisdiction to defeat a motion to dismiss.9 “The plaintiff may make this prima facie
showing by demonstrating, via affidavit or other written materials, facts that if true would
support jurisdiction over the defendant.”10 Allegations in a complaint are accepted as true if they
are plausible, non-conclusory, and non-speculative, to the extent that they are not controverted
by submitted affidavits.11 At the same time, the Court does not have to accept as true conclusory
allegations, nor incompetent evidence. When a defendant has produced evidence to support a
challenge to personal jurisdiction, a plaintiff has a duty to come forward with competent proof in
support of the jurisdictional allegations of the complaint.12 The court resolves all factual
disputes in favor of the plaintiff.13 Conflicting affidavits are also resolved in the plaintiff’s favor,
and “the plaintiff’s prima facie showing is sufficient notwithstanding the contrary presentation
by the moving party.”14 “In order to defeat a plaintiff’s prima facie showing of jurisdiction, a
defendant must present a compelling case demonstrating ‘that the presence of some other

8

Shrader v. Biddinger, 633 F.3d 1235, 1239 (10th Cir. 2011).

9

AST Sports Sci., Inc. v. CLF Distrib. Ltd., 514 F.3d 1054, 1056–57 (10th Cir. 2008); Wenz v. Memery
Crystal, 55 F.3d 1503, 1505 (10th Cir. 1995).
10

Emp’rs Mut. Cas. Co. v. Bartile Roofs, Inc., 618 F.3d 1153, 1159 (10th Cir. 2010) (citing TH Agric. &
Nutrition, LLC v. Ace European Grp. Ltd., 488 F.3d 1282, 1286 (10th Cir. 2007)); OMI Holdings, Inc. v. Royal Ins.
Co. of Can., 149 F.3d 1086, 1091 (10th Cir. 1998).
11

Dudnikov v. Chalk & Vermilion Fine Arts, Inc., 514 F.3d 1063, 1070 (10th Cir. 2008) (citing Bell Atl.
Corp. v. Twombly, 550 U.S. 544 (2007)); Pytlik v. Prof’l Res., Ltd., 887 F.2d 1371, 1376 (10th Cir. 1989); Behagen
v. Amateur Basketball Ass’n of U.S.A., 744 F.2d 731, 733 (10th Cir. 1984), cert. denied, 471 U.S. 1010 (1985).
12

Pytlik, 887 F.2d at 1376.

13

Dudnikov, 514 F.3d at 1070.

14

Behagen, 744 F.2d at 733.

8

considerations would render jurisdiction unreasonable.’”15
III.

Minimum Contacts
In a federal diversity case, the law of the forum state determines the court’s jurisdiction

over defendants.16 To establish personal jurisdiction over a defendant, plaintiff must show that
jurisdiction is proper under the laws of the forum state and that the exercise of jurisdiction would
not offend due process.17 The Kansas long-arm statute is construed liberally so as to allow
jurisdiction to the full extent permitted by due process, therefore the Court proceeds directly to
the constitutional analysis.18
The due process analysis is comprised of two steps. First, the court must consider
whether the defendant has such minimum contacts with the forum state “that he should
reasonably anticipate being haled into court there.”19 If the requisite minimum contacts are
found, the Court will proceed to the second step in the due process analysis—ensuring that the
exercise of jurisdiction “does not offend ‘traditional notions of fair play and substantial
justice.’”20
“Minimum contacts” can be established in one of two ways, either generally or
specifically for lawsuits based on the forum-related activities:

15

OMI Holdings, 149 F.3d at 1091 (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 477 (1985)).

16

Fed. R. Civ. P. 4(e); Marcus Food Co. v. DiPanfilo, 671 F.3d 1159, 1166 (10th Cir. 2011).

17

Intercon, Inc., v. Bell Atl. Internet Solutions, Inc., 205 F.3d 1244, 1247 (10th Cir. 2000).

18

Federated Rural Elec. Ins. Corp. v. Kootenai Elec. Coop., 17 F.3d 1302, 1305 (10th Cir. 1994) (citing
Volt Delta Res., Inc. v. Devine, 740 P.2d 1089, 1092 (Kan. 1987)).
19

Emp’rs Mut. Cas. Co., 618 F.3d at 1159–60 (citing OMI Holdings, Inc., 149 F.3d at 1091).

20
See World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292 (1980) (quoting Int’l Shoe Co. v.
Washington, 326 U.S. 310, 316 (1945)).

9

General jurisdiction is based on an out-of-state defendant’s
“continuous and systematic” contacts with the forum state, and
does not require that the claim be related to those contacts.
Specific jurisdiction, on the other hand, is premised on something
of a quid pro quo: in exchange for “benefitting” from some
purposive conduct directed at the forum state, a party is deemed to
consent to the exercise of jurisdiction for claims related to those
contacts.21
Plaintiff does not allege general jurisdiction, but alleges that Defendants had minimum contacts
with Kansas based on specific jurisdiction.22 Specific jurisdiction exists over a nonresident
defendant “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.”23 In
evaluating the “purposefully directed” element, the Tenth Circuit has explained:
The first element can appear in different guises. In the tort
context, we often ask whether the nonresident defendant
“purposefully directed” its activities at the forum state; in contract
cases, meanwhile, we sometimes ask whether the defendant
“purposefully availed” itself of the privilege of conducting
activities or consummating a transaction in the forum state. In all
events, the shared aim of “purposeful direction” doctrine has been
said by the Supreme Court to ensure that an out-of-state defendant
is not bound to appear to account for merely “random, fortuitous,
or attenuated contacts” with the forum state.24
Because Plaintiff alleges both tort and contract causes of action, the Court will look to case law

21

Dudnikov, 514 F.3d at 1078 (internal citations and quotations omitted).

22

Plaintiff claims that the Kansas long-arm statute specifically provides for jurisdiction of its tort and
contract claims in this case. See K.S.A. § 60-308(b)(1)(A), (B) and (E). The Court “need not conduct a statutory
analysis apart from the due process analysis.” Marcus Food Co. v. DiPanfilo, 671 F.3d 1159, 1166 (10th Cir. 2011)
(citation and quotation omitted); Volt Delta Res., Inc. v. Devine, 740 P.2d 1089, 1093 (Kan. 1987) (“Although the
requirements of the long arm statute may be satisfied, federal constitutional considerations may defeat the assertion
of personal jurisdiction.”).
23

OMI Holdings, 149 F.3d at 1091 (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985)).

24

Dudnikov, 514 F.3d at 1071 (internal citations omitted).

10

interpreting both the “purposefully directed” and “purposefully availed” requirements.25
a.

Purposeful Direction

To satisfy the “purposeful direction” requirement, Plaintiff cites cases holding that
personal jurisdiction may be granted under the Kansas long-arm statute when the effects of a
tortious act by a foreign defendant are felt by the plaintiff in Kansas. However, in the Tenth
Circuit, “[t]he mere allegation that an out-of-state defendant has . . . committed business torts
that have allegedly injured a forum resident does not necessarily establish that the defendant
possesses the constitutionally required minimum contacts.”26 The Court evaluates both the
quantity and quality of defendant’s contacts with the State of Kansas.27 The Tenth Circuit, as
well as other courts, requires a plaintiff to present “something more” than the injuries a plaintiff
allegedly suffered in order to show that a defendant aimed or targeted its conduct at the forum
state.28
The Tenth Circuit applies an “effects test,” allowing the exercise of jurisdiction when
there is a prima facie showing that defendant (1) intentionally acted (2) in a manner expressly

25

The Court finds that the “arising out of or relating to” requirement is met in this case. Plaintiff alleges that
Defendants breached their contract with Plaintiff and conspired to defraud Plaintiff pursuant to an advance fee
scheme that included lulling the victim into inaction by false promises that the Defendants would soon be fulfilling
their end of the bargain. All of Defendants’ contacts relate to the merits of Plaintiff’s claims.
26

Far W. Capital, Inc. v. Towne, 46 F.3d 1071, 1079 (10th Cir. 1995); see also, Tomlinson v. H & R Block,
Inc., 151 F. App’x 655, 658 (10th Cir. 2005) (“But the mere allegation that a nonresident defendant tortiously
injured a forum resident does not necessarily establish sufficient minimum contacts to confer personal jurisdiction on
the forum.”).
27

Pro Axess, Inc. v. Orlux Distrib., Inc., 428 F.3d 1270, 1278 n.5 (10th Cir. 2005); OMI Holdings, 149 F.3d

at 1092.
28

See, e.g., Dudnikov, 514 F.3d at 1077; Allison v. Wise, 621 F. Supp. 2d 1114, 1120 (D. Colo. 2007);
Sunlight Saunas, Inc. v. Sundance Sauna, Inc., 427 F. Supp. 2d 1011, 1021 (D. Kan. 2006) (citing Cybersell, Inc. v.
Cybersell, Inc., 130 F.3d 414, 418 (9th Cir. 1997)); Gage, Inc. v. BioConversion Tech., LLC, No. 2:08-CV-57 DB,
2009 WL 3181940, at *10 (D. Utah Sept. 30, 2009); Toytrackerz LLC v. Koehler, No. 08-2297-GLR, 2009 WL
1505705, at *13, *16 (D. Kan. May 28, 2009).

11

aimed at Kansas, with (3) knowledge that the brunt of the injury would be felt in Kansas.29
While there is some overlap between the two elements, “expressly aiming” conduct is not the
same as an awareness of its foreseeable consequences. “[T]he ‘express aiming’ test focuses
more on a defendant’s intentions—where was the ‘focal point’ of its purposive efforts—while
the latter requirement concentrates on the consequences of the defendant’s actions—where was
the alleged harm actually felt by the plaintiff.”30 To “expressly aim” conduct, the forum state
must be the “focal point of the tort.”31 Plaintiff has failed to make this showing, instead relying
entirely on the awareness of foreseeable consequences; in this case, the fact that Plaintiff is
located in Kansas.32 “[T]he plaintiff’s residence in the forum, and suffering of harm there, will
not alone support jurisdiction under Calder.”33 A plaintiff’s principal place of business has been
characterized as a “mere fortuity.”34 In this case, the Court cannot find that Kansas was the focal
point of the tort.

29

Dudnikov, 514 F.3d at 1072 (analyzing Calder v. Jones, 465 U.S. 783 (1984)).

30

Id. at 1075.

31

Id. at 1074 n.9 (quoting Far West, 46 F.3d at 1080).

32

See Far West, 46 F.3d at 1080 (“Although FWC argues that it suffered the financial effects of these
alleged torts in Utah where it is incorporated, we hold that under Calder and its progeny, the defendants’ contacts
with Utah are insufficient to establish personal jurisdiction in this case.”); Wenz v. Memery Crystal, 55 F.3d 1503,
1508 (10th Cir.1995) (“That Wenz may be economically impacted in Colorado, simply because he lives there, is
insufficient to establish personal jurisdiction under subsection (1)(b) of the Colorado long-arm statute”).
33

Shrader v. Al Biddinger, 633 F.3d 1235, 1244 (10th Cir. 2011) (citations and quotations omitted); see also
Grynberg v. Ivanhoe Energy, Inc., 490 F. App’x 86, 2012 WL 2855777, at *8 (10th Cir. 2012) (finding that although
plaintiffs identified conduct that is connected in an attenuated fashion to Colorado, they fail to establish that
Colorado was the focal point of the defendants’ torts.).
34
Far West, 46 F.3d at 1079 (citing Reynolds v. Int’l Amateur Athletic Fed’n, 23 F.3d 1110 (6th Cir.), cert.
denied, 513 U.S. 962 (1994); Southmark Corp. v. Life Investors, Inc., 851 F.2d 763, 773 (5th Cir. 1988)).

12

b.

Purposeful Availment

The purposeful availment/expressly aimed requirement “ensures that a defendant will not
be haled into a jurisdiction solely as a result of random, fortuitous, or attenuated contacts.”35 The
Complaint alleges that Ben-Menashe and Schaap, on behalf of Traeger, negotiated two
settlement contracts with Plaintiff, one in August 2011,36 and the other September 28, 2011,37
which replaced the August contract. The mere existence of a contract with a Kansas citizen is
insufficient to establish the requisite minimum contacts in the forum state.38 Although
agreements alone are not sufficient to establish minimum contacts, “‘parties who reach out
beyond one state and create continuing relationships and obligations with citizens of another
state are subject to regulations and sanctions in the other state for the consequences of their
activities.”39 The Court must examine the parties’ “prior negotiations and contemplated future
consequences, along with the terms of the contract and the parties’ actual course of dealing.”40
The parties’ agreements in this case did not create a continuing relationship, nor did
Defendants initiate or solicit Plaintiff’s involvement. Plaintiff was initially introduced to
Defendants in connection with possible corn and wheat transactions. Those transactions were

35

Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985) (internal citations and quotation marks

omitted).
36

Doc. 1-1 at 29–30 (Ex. M).

37

Doc. 1-1 at 32–34 (Ex. O).

38

See Burger King Corp., 471 U.S. at 478; TH Agric. & Nutrition, LLC v. Ace European Grp. Ltd., 488 F.3d
1287 (10th Cir. 2007).
39

Marcus Food Co., 671 F.3d at 1166 (citations omitted).

40

Id. at 1166–67.

13

cancelled and are not the subject of this lawsuit.41 In February 2011, Gnemi was contacted by
GEM, who was interested in supplying corn, soybeans and wheat to Iran.42 Gnemi declares that
he set up a meeting for GEM’s principals to meet him in Montreal, Canada so that Gnemi could
introduce them to Ben-Menashe and Ovsjannikovs.43 Gnemi contacted Ben-Menashe and asked
if Traeger could provide 70,000 metric tons of soybeans to GEM as Plaintiff’s customer.44
Because Traeger was quoting the best price at the time, Gnemi encouraged GEM to do business
with Traeger.45 In March 2011, Gnemi contacted Traeger again about another corn transaction,
which contract offer was ultimately withdrawn by Ben-Menashe because his priority was going
to supplying soybeans to GEM instead of supplying corn to South Korea.46 Courts consider a
defendant’s solicitation as a significant factor in determining minimum contacts with the state of
Kansas,47 but here the solicitation was initiated by Plaintiff, who did not ultimately contract with
Traeger; GEM did.
In this case, the original soybean transaction contemplated a one-time sale. The two
41

Gnemi’s Declaration states that in the fall of 2010, Proud Veterans was looking for a corn seller, and
corresponded with Lenni Lenig of Aid Interactive, a New York company, who introduced Gnemi to Traeger, which
purported to be a seller of corn. Gnemi spoke to Ben-Menashe via telephone and then made arrangements to meet
him and his staff in Montreal, Canada. After that meeting, the parties attempted corn and wheat transactions that
were cancelled and are not the subject of this lawsuit. Doc. 37-1 at ¶9.
42

Doc. 37-1 at ¶21.

43

Id.

44

Id. at ¶22.

45

Id.

46

Id. at ¶23.

47

See, e.g., Cargill Meat Solutions Corp. v. Premium Beef Feeders, LLC, No. 13-CV-1168-EFM, 2014 WL
172197, at *3 (D. Kan. Jan. 15, 2014) (noting that defendants sought plaintiff’s business and continued their
contractual relationship well over a year); Hutton & Hutton Law Firm, LLC, v. Girardi & Keese, No. 13-1115-RDR,
2014 WL 36313, at *7 (D. Kan. Jan. 6, 2014) (finding that where contact was unsolicited by plaintiff, defendant’s
solicitation of plaintiff firm was significant factor in determining minimum contacts.).

14

settlement agreements were an attempt to resolve the disputes arising from the failed soybean
transaction. This situation is distinguishable from cases finding personal jurisdiction where the
parties’ agreements envisioned an on-going relationship.48 In contrast, the settlement agreement
was designed to amicably end the relationship.
Plaintiff argues that these contracts each required Plaintiff to perform its obligations
under the contract in Kansas. Plaintiff claims that the contracts were sent to Kansas, executed by
Plaintiff in Kansas, and required partial performance by Plaintiff in Kansas by executing and
having notarized and delivered into escrow general releases—all of which Plaintiff did. Plaintiff
claims that this shows that Ben-Menashe and Traeger “purposefully availed” themselves of the
opportunity to do business in Kansas and to enter into a contract that was to be performed by
Plaintiff in Kansas. While Plaintiff was required to execute releases and to deliver them into
escrow in Maryland, the contract did not require this to be done in Kansas nor was the attorney
holding the documents in escrow located in Kansas.49 Plaintiff’s decision to execute the
documents in Kansas was a personal preference, not a contract requirement. This conduct by
Plaintiff is the type of random, fortuitous, or attenuated contact that is insufficient to show
Defendants’ purposeful availment.
The court must examine both the quantity and quality of defendants’ contacts with the

48

See, e.g., Marcus, 671 F.3d at 1167–68 (finding a continuing relationship where the parties conducted a
10-year agency relationship).
49

See Payless Shoesource, Inc. v. Shops at Hancock, LLC, No. 11-4144-KHV, 2012 WL 1344977, at *4 (D.
Kan. April 18, 2012) (noting that where lease provisions in that case and a companion case designated a Kansas
address for notices and payments, but allowed plaintiff to change that designation, location in Kansas was not
relevant to the lease performance.); see also Green Country Crude, Inc. v. Avant Petroleum, Inc., 648 F. Supp. 1443,
1449 (D. Kan. 1986) (noting that “performance of a contract” within the meaning of the Kansas long-arm statute is
the timely execution of the acts required by the agreement, at the location and in the manner stipulated).

15

forum state.50 Defendants will not be subjected to the laws of a jurisdiction based only on
random, fortuitous or attenuated contacts.51 Nor will the defendant be subjected to the laws of a
jurisdiction solely as the result of the unilateral activity of another party or third person.52
In this case, Defendants’ alleged contacts consist of four telephone calls from BenMenashe in Canada to Gnemi of Proud Veterans in Kansas;53 one conference call from BenMenashe in Canada to Gnemi in Kansas and Nasserisafar in Tennessee;54 an email from Schaap
addressed to [e-mail], [e-mail], [e-mail]
and cc’d to [e-mail];55 and a wire transfer of $87,000 Traeger caused to be wired
from Schaap’s HSBC account to Proud Veterans Intrust Bank account in Kansas pursuant to the
Reaffirmation Agreement.56 The remaining contacts with Kansas alleged by Plaintiff involved
ten telephone calls, three emails, and four wire transfers by Plaintiff from its account in Kansas
to Schaap’s attorney trust account in New York— all initiated by Plaintiff.57
Schaap’s declaration shows that he is an attorney licensed to practice in New York and
Washington, D.C.; he represents Ben-Menashe, Traeger and Dickens; he has not been to Kansas

50

OMI Holdings, 149 F.3d at 1092.

51

AST Sports Sci., Inc. v. CLF Distrib. Ltd., 514 F.3d 1054, 1058 (10th Cir. 2008).

52

Id.

53

Doc. 1 at ¶¶ 20, 37, 42 and 49.

54

Id. at ¶21.

55

Doc. 1-1 at 27 (Ex. L).

56

Doc. 1 at ¶51, Doc. 1-1 at 34 (Ex. N).

57

Doc. 1 at ¶¶17s, 22, 23, 26, 27, 28, 30, 33, 36, 38, 39, 42, 46 and 58; Doc. 1-1 at 26 (Ex. K). The Court
notes that Gnemi’s Declaration states that there were several additional phone calls or emails that were not set out in
the Complaint. These additional contacts, some of which were unrelated to the transactions that are the subject of
the Complaint, do not affect the Court’s reasoning.

16

or initiated or solicited a business transaction in Kansas (other than defense of this case); he did
not initiate or solicit the Plaintiff to enter into the business arrangement that is the subject matter
of the Complaint; and he did not initiate any telephone calls into Kansas with respect to the
matters at issue in the Complaint.58
Ben-Menashe likewise declared that neither Traeger nor Dickens has ever had an agent in
Kansas or done business in Kansas; he has personally never been to Kansas; the business
arrangement between Traeger and GEM from which the claims in this case arise was initiated in
a face-to-face meeting in Amman, Jordan between himself and a representative of
GEM—Plaintiff was not present and he did not understand Gnemi or any entity with which he
was affiliated to be involved in the proposed transaction.59 Ben-Menashe further declared that
all of his communication with Gnemi had been either face-to-face in Montreal, Canada, where he
came to do business with Traeger, or in Seoul, Korea, or by telephone or email. Further, Gnemi
often initiated the calls, and when Ben-Menashe would call what he knew to be Gnemi’s cell
phone number, he did not know where Gnemi was physically located because he understood that
he traveled extensively.60 Ovsjannikovs declared, personally and as a representative of Andre
Maritime, that he has never been to Kansas, has never solicited or initiated a business transaction
in Kansas, and that he did not solicit Plaintiff to enter into the business arrangement that is the
subject matter of the Complaint.61

58

Doc. 31-1.

59

Doc. 31-2.

60

Id.

61

Doc. 31-3.

17

As a general rule, letters and telephone calls are insufficient to establish personal
jurisdiction.62 In the age of cell phones and call forwarding, calling the telephone number of
someone who is in Kansas at the time is not evidence of any purposeful activity directed toward
the forum state. Gnemi’s presence in Kansas at the time he answers his cell phone is fortuitous
or attenuated, and the use of modern telephone contacts that are not intrinsically tied to a
physical location do not necessarily constitute purposeful availment. Telephone contacts lack
constitutional significance under the minimum contacts doctrine due to the geography-defying
nature of twenty-first century telephone communications. There is no allegation either that the
telephone number at which Gnemi was called or from which he called in Kansas was inherently
restricted to being used or answered in Kansas (i.e., that it was not a cell phone or not subject to
call forwarding out-of-state) or that, if it was inherently restricted to being used or answered in
Kansas, Ben-Menashe or any other Defendant knew that to be the case so that they might be held
to have purposefully availed themselves of the benefits and protection of Kansas or purposefully
directed their activities to Kansas. Instead, Ben-Menashe’s declaration establishes that he did
not know Gnemi to be in Kansas, but rather knew him to travel extensively and called his cell
phone. The Court is aware that Gnemi declares that when he is away from Kansas he makes a
practice of relaying that information to people he is dealing with by phone or email.63 However,

62

Far West, 46 F.3d at 1077 (“It is well-established that phone calls and letters are not necessarily sufficient
in themselves to establish minimum contacts.”); Peterson v. Kennedy, 771 F.2d 1244, 1262 (9th Cir.1985)
(“ordinarily ‘use of the mails, telephone, or other international communications simply do not qualify as purposeful
activity invoking the benefits and protection of the [forum] state’ ”) (citation omitted), cert. denied, 475 U.S. 1122
(1986); Scullin Steel Co. v. Nat’l Ry. Utilization Corp., 676 F.2d 309, 314 (8th Cir.1982) (“use of interstate facilities
(telephone, the mail), . . . are secondary or ancillary factors and cannot alone provide the ‘minimum contacts’
required by due process”); Green Country Crude, 648 F. Supp. at 1451 (citation omitted) (“The mere negotiation of
a sales transaction, or placement of an order for goods, over the telephone with persons residing in Kansas does not
invoke the benefits and protections of the laws of this state.”).
63

Doc. 37-1 at ¶8.

18

this would only have significance if the Defendants were aware of this practice and then only if
Defendants’ responsive calls or emails were sent to Plaintiff within a relatively short time-frame.
There is no suggestion that any of the Defendants were aware of Gnemi’s practice of informing
people in phone and email correspondence if he was away from Kansas.
The same reasoning applies to the emails in this case. Defendants argue with regard to
Schaap’s email that: 1) the email is a reply to an email sent by Plaintiff; 2) nothing established
that the email was linked to Kansas in such a way that the email was directed there; and 3)
Plaintiff’s letterhead identifies its location as Derby, Kansas; Sulaymaniyah, Iraq; and Gangnamgu Seoul Korea.64 Email communication is not targeted to a particular forum in the way a letter
addressed for physical delivery is. Sending an email to be received and read at a location
unknown to the sender is not an act purposefully availing oneself of the privileges and protection
of Kansas law, but rather precisely the kind of “random, isolated, or fortuitous” contact with the
forum that the Supreme Court has said cannot constitute a basis for jurisdiction.65
Likewise the Plaintiff’s selection of a Kansas bank as a place from which to transfer funds is not
the act of a Defendant.66 “The receipt of a wire transfer is an inherently passive action.”67
Schaap claims he transferred the funds to the Kansas bank only because that is the institution
64

Doc. 1-1 at 25 (Ex. J).

65

Gargano v. Cayman Nat’l Corp., No. 09-11938-JLT, 2010 WL 2245034, at *5 (D. Mass. June 2, 2010)
(“This court cannot reasonably construe an email that could have been read from any computer anywhere in the
world, but which Plaintiff just happened to read in Massachusetts, as an intentional action by which Defendants
availed themselves of the privileges of doing business in Massachusetts. Defendants did not direct their conduct
toward Massachusetts. Rather, they sent an email to a stateless email account and Plaintiff, at his convenience, read
that email from a computer located in Massachusetts.”).
66

See Marble Pint Energy Ltd. v. Crusader Fin. Servs., Inc., No. 4:06CV1656 HEA, 2009 WL 1940383 at
*3 (E.D. Mo. July 7, 2009) (The argument in a fraud case that personal jurisdiction arises from the plaintiff sending
money from a forum-state bank “fails the due process test.”).
67

Gargano, 2010 WL 2245034 at *6.

19

selected by Plaintiff to conduct Plaintiff’s banking business. The court in Gargano v. Cayman
Nat’l Corp., in addressing a wire transfer from the United States to the Cayman Islands, noted
that “[i]t would have been equally acceptable to Defendants, if Plaintiff had transferred the
necessary funds by physically walking into the Cayman National Bank and handing a teller cash
or a paper check,” and that therefore the defendants had not intentionally directed their conduct
toward the United States, just because the money was at one time housed in an account there.68
The court went on to state:
To begin, the fact that Defendants knew the location of Plaintiff’s
domicile at the time that they dealt with him bears no relation to
the allegedly fraudulent transactions, which took place entirely
within the Cayman Islands. Similarly, the fact that the funds
necessary to complete the transaction were received from the
United States in no way constitutes an “important, or material
element of proof in the plaintiff’s case.” Indeed, where the money
came from is utterly irrelevant to the underlying issue, i.e. whether
or not Defendants fraudulently induced Plaintiff to purchase the
CLICO security. And Plaintiff’s claims certainly cannot be said to
have arisen out of the fax and letter sent to Plaintiff by Defendants’
counsel, since they were written in response to Plaintiff’s threat of
litigation and, therefore, came about only after the conduct
underlying Plaintiff’s claims was complete.69
Plaintiff urges the Court to consider all of the Defendants’ contacts collectively in light of
the conspiracy cause of action. Although “[t]he existence of a conspiracy and [overt] acts of a
co-conspirator within the forum may, in some cases, subject another co-conspirator to the
forum’s jurisdiction,” at least one of the co-conspirators is required to have pursued the

68

Id.

69

Id. at *4.

20

conspiracy within the forum state.70 Recognizing that “parties could potentially stretch the
conspiracy cause of action to subvert the due process principles that govern personal
jurisdiction,” the Tenth Circuit has acknowledged that personal jurisdiction requirements “must
be met as to each defendant.”71 However, even assuming that this Court could consider all of the
Defendants’ contacts and could find that Plaintiff has made a prima facie showing of minimum
contacts based on specific jurisdiction, the contacts would nevertheless be too weak to overcome
the reasonableness analysis.72
IV.

Reasonableness — Would the Exercise of Personal Jurisdiction Offend Traditional
Notions of Fair Play and Substantial Justice?
Assuming that Plaintiff has shown that Defendants had the requisite minimum contacts,

jurisdiction fails under the second step of the due process analysis, because subjecting
Defendants to jurisdiction in the forum state would offend traditional notions of fair play and
substantial justice.73 Once a plaintiff has made a minimum contacts showing, a defendant “must
present a compelling case that the presence of some other considerations would render
jurisdiction unreasonable.”74 This requires the weighing of the following factors: (1) the burden
on defendant; (2) the forum state’s interest in resolving the dispute; (3) the plaintiff’s interest in

70

Newsome v. Gallacher, 722 F.3d 1257, 1265 (10th Cir. 2013) (quoting Melea, Ltd. v. Jawer SA, 511 F.3d
1060, 1069 (10th Cir. 2007)).
71

Id. at 1265–66 (citations and quotations omitted).

72

See Grynberg v. Ivanhoe Energy, Inc., 490 Fed. App’x. 86, 2012 WL 2855777 at *3 n.3 (10th Cir. 2012)
(declining to reach the issue of whether the alleged co-conspirators’ contacts may be attributed to each other,
because “plaintiffs’ arguments border on the conclusory and, more importantly, they have failed to show sufficient
minimum contacts between any of the defendants and Colorado.”).
73

See Emp’rs Mut. Cas. Co. v. Bartile Roofs, Inc., 618 F.3d 1153, 1161 (10th Cir. 2010).

74

Burger King Corp. v. Rudzewicz, 471 U.S. 462, 477 (1985).

21

receiving convenient and effective relief; (4) the interstate judicial system’s interest in obtaining
the most efficient resolution of controversies; and (5) the shared interest of the several states in
furthering fundamental substantive social policies.75 Further, in this second step of the analysis,
the court should consider the strength of the defendant’s minimum contacts.76 If these factors are
strong, they may serve to establish the reasonableness of jurisdiction even if plaintiff’s showing
of minimum contacts is weak.77 Conversely, “the weaker the plaintiff’s showing on minimum
contacts, the less a defendant need show in terms of unreasonableness to defeat jurisdiction.”78
Given the weakness of the contacts in this case, the Defendants’ burden to show
unreasonableness is low.
The balance of the factors weighs in favor of Defendants. Defendants reside in New
York and Canada and have never been to Kansas. Defendants have had no general contacts in
this state, have not personally been in this state, and their only contacts with Plaintiff have been
by phone and email. Defending this action in Kansas would impose a burden on them.
However, because “defending a suit in a foreign jurisdiction is not as burdensome as in the past,”
especially for sophisticated parties, the Court finds that this factor weighs only slightly in favor
of Defendants.79 The Court finds that the second factor is neutral, as Kansas as well as the nonforum jurisdictions, such as New York, have an interest in resolving disputes involving residents

75

Employers Mut. Cas. Co., 618 F.3d at 1161.

76

TH Agrig. & Nutrition, LLC v. Ace European Grp. Ltd., 488 F.3d 1282, 1292 (10th Cir. 2007).

77

OMI Holdings, Inc. v. Royal Ins. Co, 149 F.3d 1086, 1095 (10th Cir. 1998); Pro Axess, Inc. v. Orlux
Distrib., Inc., 428 F.3d 1270, 1280 (10th Cir. 2005).
78

Trujillo v. Williams, 465 F.3d 1210, 1221 (10th Cir. 2006) (quotations omitted).

79

See AST Sports Sci., Inc., 514 F.3d at 1061.

22

of their state, and the settlement agreement provides that New York law applies.80
Third, the Court analyzes whether Plaintiff may receive convenient and effective relief in
another forum. Litigating this action in Kansas is obviously more convenient for Plaintiff.
However, while “[s]tates have an important interest in providing a forum in which their residents
can seek redress for injuries caused by out-of-state actors,” Plaintiff has suggested no reason that
federal court in New York, for example, would be unable to adjudicate its claims with equal
fairness and effectiveness, especially when the contract at issue is governed by New York law.81
This factor “may weigh heavily in cases where a Plaintiff’s chances of recovery will be greatly
diminished by forcing him to litigate in another forum because of that forum’s laws or because
the burden may be so overwhelming as to practically foreclose pursuit of the lawsuit.”82 The
facts of this case do not suggest this danger is present in this case. The contract at issue is
governed by New York law, and Gnemi is an international traveler that conducts business all
over the world.
The fourth factor considers the interstate judicial system’s interest in obtaining the most
efficient resolution of controversies. “The key points to consider when evaluating this factor are
(1) the location of witnesses, (2) the location of the wrong underlying the lawsuit, (3) what
forum’s law applies, and (4) ‘whether jurisdiction is necessary to prevent piecemeal
litigation.’”83 In this case the first two points favor Defendants because, other than Plaintiff’s
80

See OMI Holdings, Inc., 149 F.3d at 1096 (“The state’s interest is also implicated where resolution of the
dispute requires a general application of the forum state’s law.”).
81

See Dudnikov, 514 F.3d at 1081 (citing OMI Holdings, Inc., 149 F.3d at 1096).

82

Id. (quoting OMI Holdings, Inc., 149 F.3d at 1097).

83
Pro Axess, Inc. v. Orlux Distr., Inc., 428 F.3d 1270, 1279 (10th Cir. 2005) (quoting OMI Holdings, Inc.,
149 F.3d at 1097).

23

location in Kansas, there is no suggestion that any other witnesses or the underlying wrongs
occurred in Kansas. The third point favors Defendants because New York law applies under the
settlement agreement’s choice of law provision. The fourth point is neutral because neither side
has suggested that any potential jurisdiction would create piecemeal litigation.
As to fifth factor—the shared interest of the several states in furthering fundamental
social policies—nothing suggests that this is relevant in the instant case and therefore the Court
does not address it. Considering all the above factors and the weak— practically nonexistent—minimum contacts in this case, the Court must conclude that Defendants have
established a compelling case that this Court’s exercise of jurisdiction in this case would offend
traditional notions of fair play and substantial justice.84
V.

Venue
In this district, the standards for deciding a motion to dismiss under Rule 12(b)(3) for

improper venue are generally the same as those for deciding a motion to dismiss under
Rule 12(b)(2) for lack of personal jurisdiction.85 28 U.S.C. § 1391(b) governs venue and
requires that “a substantial part of the events or omissions giving rise to the claim occurred” in
this district.86 Because the Court finds no personal jurisdiction over Defendants, the Court
likewise finds that venue is improper.
In arguing that venue is improper in this Court, Defendants argue that the case could have

84

See Vestring v. Halla, 920 F. Supp. 2d 1189, 1197 (D. Kan. 2013) (finding that exercising personal
jurisdiction would offend traditional notions of fair play and substantial justice where contacts were weak and
Kansas had only a small interest in the case).
85

Mohr v. Margolis, Ainsworth & Kinlaw Consulting, Inc., 434 F. Supp. 2d 1051, 1057–58 (D. Kan. 2006).

86

See 28 U.S.C. § 1391(b).

24

been brought in New York—“[t]herefore proper venue lies only in New York.”87 When venue is
improper, the court may, in the interests of justice, transfer the case to a district court in which it
could have been brought pursuant to 28 U.S.C. § 1406(a). Likewise, 28 U.S.C. § 1631 provides
that when “a court finds that there is a want of jurisdiction, the court shall, if it is in the interest
of justice, transfer such action . . . to any other such court in which the action . . . could have
been brought at the time it was filed.”88
The parties have not moved for transfer, nor have they addressed whether the interests of
justice warrant transfer. The “interests of justice” proviso in § 1406(a) is not a “talismanic
incantation.”89 If upon refiling in the new venue the action now would be barred by the statute of
limitations, then it is in the interest of justice and “particularly appropriate” to transfer.90
Although the Court finds that Defendants’ Motion to Dismiss should be granted for lack
of personal jurisdiction, the Court will delay dismissal of this action to allow the parties to
address whether transfer of the case would be in the interest of justice. When considering the
consequences of a transfer, the Court is authorized to take “‘a peek at the merits’ to avoid raising
false hopes and wasting judicial resources that would result from transferring a case which is
clearly doomed.”91 To that end, the Court will address Defendants’ motion to dismiss for failure

87

Doc. 5 at 13; see also Doc. 31 at 24–25.

88

28 U.S.C. § 1631.

89

Ross v. Colo. Outward Bound Sch., 822 F.2d 1524, 1526 n. 1 (10th Cir. 1987).

90

Sinclair v. Kleindienst, 711 F.2d 291, 294 (D.C.Cir.1983) (citing Burnett v. N.Y. Cent. R.R. Co., 380 U.S.
424, 430, 85 S.Ct. 1050, 1055, 13 L.Ed.2d 941 (1965) (Section 1406(a) prevents “the unfairness of barring a
plaintiff's action solely because a prior timely action is dismissed for improper venue after the applicable statute of
limitations has run.”)); see also McDonald v. Doolittle, 885 F.Supp. 233, 235 (D. Kan.1995).
91

Hough v. Booker, 210 F.3d 1147, 1150 (10th Cir. 2000) (citation and quotation omitted).

25

to state a claim.
VI.

Failure to State a Claim
To survive a motion to dismiss under Fed. R. Civ. P. 12(b)(6), a complaint must present

factual allegations, assumed to be true, that “raise a right to relief above the speculative level”
and must contain “enough facts to state a claim to relief that is plausible on its face.”92 Under
this standard, “the complaint must give the court reason to believe that this plaintiff has a
reasonable likelihood of mustering factual support for these claims.”93 The plausibility standard
does not require a showing of probability that “a defendant has acted unlawfully,”94 but requires
more than “a sheer possibility.”95
The plausibility standard enunciated in Bell Atlantic v. Twombly,96 seeks a middle ground
between heightened fact pleading and “allowing complaints that are no more than ‘labels and
conclusions’ or ‘a formulaic recitation of the elements of a cause of action,’ which the Court
stated ‘will not do.’”97 Twombly does not change other principles, such as that a court must
accept all factual allegations as true and may not dismiss on the ground that it appears unlikely
the allegations can be proven.98
The Supreme Court has explained the analysis as a two-step process. For purposes of a

92

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007).

93

Ridge at Red Hawk, LLC v. Schneider, 493 F.3d 1174, 1177 (10th Cir. 2007) (emphasis in original).

94

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

95

Id.

96

Twombly, 550 U.S. 544 (2007).

97

Robbins v. Oklahoma, 519 F.3d 1242, 1247 (10th Cir. 2008) (quoting Twombly, 550 U.S. at 555).

98

Id. (citing Twombly, 550 U.S. at 556).

26

motion to dismiss, the court “must take all the factual allegations in the complaint as true, [but]
we ‘are not bound to accept as true a legal conclusion couched as a factual allegation.’”99 Thus,
the Court must first determine if the allegations are factual and entitled to an assumption of truth,
or merely legal conclusions that are not entitled to an assumption of truth.100 Second, the Court
must determine whether the factual allegations, when assumed true, “plausibly give rise to an
entitlement to relief.”101 “A claim has facial plausibility when the plaintiff pleads factual content
that allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.”102
Defendants’ Memorandum in Support of their motion to dismiss states that all
Defendants seek dismissal for lack of personal jurisdiction and improper venue, and “[i]n
addition, defendants Ben-Menashe and Schaap move for the dismissal of the breach of fiduciary
duty claim for failure to state a claim.”103 However, Defendants’ memorandum in support also
states for each Defendant that the allegations do not set out with particularity a claim of fraud,
and that the allegation of a conspiracy to defraud is a thread-bare conclusion, not a well-pled
fact.

Defendants Schaap and Ben-Menashe argue that the allegations in the Complaint do not

show a breach of fiduciary duty. Plaintiff’s response to the motion to dismiss does not address
the motion to dismiss for failure to state a claim, but rather states that it is adopting its prior

99

Iqbal, 556 U.S. at 678.

100

Id. at 679.

101

Id.

102

Id. at 678.

103

Doc. 31 at 4.

27

briefings in response to the prior motions to dismiss.104 Plaintiff’s prior briefings do not address
this issue other than to state that the Complaint provides that:
¶67. At the time defendants Ben-Menashe and Schaap began
conspiring together to use the Traeger corporation to defraud
Proud Veterans of advance money Traeger was insolvent, because
its liabilities exceeded its assets and it was unable to pay its
obligations as they came due.
¶68. At the time Ben-Menashe was a member of the board of
directors of Traeger.
¶69. At the time Proud Veterans wired and caused to be wired
advance deposit money to the attorney trust account of defendant
Schaap, Traeger had little or no cash at its disposal with which to
pay the debts of Traeger.
¶70. After the advance money deposits made and caused to be
made by Proud Veterans to the trust account of defendant Schaap,
Schaap transferred all of those trust funds to Traeger.
¶71. Under the law of the state of New York, which governed
Traeger and the obligations of Ben-Menashe as a director of
Traeger, the directors of an insolvent corporation owe a fiduciary
duty to the creditors of that corporation to cause the assets of the
corporation to be devoted to paying the corporation’s creditors
prior to any other disbursements of corporation funds.
¶72. Shortly after the April 5, 2011 contract TRL 1411 was signed
Ben-Menashe and Schaap agreed that the advance money to be
sought from Proud Veterans would not be used to pay the
obligations of Traeger but would be transferred to other persons
and entities intended to be beyond the reach of the creditors of
Traeger. In this way Ben-Menashe and Schaap conspired to cause
a breach by Ben-Menashe of his fiduciary obligations to Proud
Veterans and the other creditors of Traeger.
¶73. All of the advance money deposited by Proud Veterans in the
attorney trust account of Schaap was transferred by Schaap to
Traeger for the purpose of violating the fiduciary duties of BenMenashe and for defrauding Proud Veterans.105
Defendants argue that the Complaint fails to allege that any money belonging to Traeger
was, in fact, used for a purpose other than paying its creditors. However, the Complaint does
104

Doc. 37 at 3.

105

Doc. 1 at 26.

28

allege just that, and Defendants have not alleged otherwise. Taking Plaintiff’s factual allegations
in the Complaint as true, these factual allegations plausibly give rise to an entitlement to relief on
Plaintiff’s breach of fiduciary duty claim.
The Court finds that Defendants’ argument that Plaintiff has failed to set out its fraud
claim with particularity and that its conspiracy to defraud claim is a thread bare conclusion are
unpersuasive. The heightened pleading requirements of Fed. R. Civ. P. 9(b) “must be read in
conjunction with the principles of Rule 8, which calls for pleadings to be ‘simple, concise, and
direct.’”106 To survive a motion to dismiss, an allegation of fraud must “set forth the time, place
and contents of the false representation, the identity of the party making the false statements and
the consequences thereof.”107 In other words, the plaintiff must set out the “who, what, where,
and when” of the alleged fraud.108 Plaintiff’s Complaint satisfies these requirements. Plaintiff
filed a thirty-one page Complaint with fourteen multi-page exhibits attached, setting forth the
details of the alleged conspiracy to defraud with detail and particularity, and setting forth the
time, place and contents of the false representations, the identity of the party making the false
statements and the consequences thereof.109 These facts allow the Court to draw the reasonable
inference that Defendants are liable for the alleged misconduct. To the extent Defendants’

106

Schwartz v. Celestial Seasonings, Inc., 124 F.3d 1246, 1252 (10th Cir. 1997).

107

Tal v. Hogan, 453 F.3d 1244, 1263 (10th Cir. 2006) (citation and quotation omitted).

108

Plastic Packaging Corp. v. Sun Chem. Corp., 136 F. Supp. 2d 1201, 1203 (D. Kan. 2001) (citation

omitted).
109

See Fed. R. Civ. P. 9(b) (“In alleging fraud or mistake, a party must state with particularity the
circumstances constituting fraud or mistake.”); see also United States ex rel. Sikkenga v. Regence Bluecross
Blueshield of Utah, 472 F.3d 702, 726–27 (10th Cir.2006) (stating that Rule 9(b) requires a plaintiff to “set forth the
time, place, and contents of the false representation, the identity of the party making the false statements and the
consequences thereof” (internal quotation marks omitted)).

29

motion to dismiss suggests that Plaintiff’s conspiracy to defraud claim should be dismissed for
failure to state a claim, the Court denies the motion to dismiss as to that claim.
IT IS THEREFORE ORDERED BY THE COURT that Defendants’ Motion to
Dismiss (Doc. 30) for lack of personal jurisdiction shall be GRANTED. However, dismissal of
this action shall be held in abeyance pending further order of the Court.
IT IS FURTHER ORDERED BY THE COURT that the parties shall file any motions
to transfer and/or briefs regarding whether transfer of this case would be in the interest of justice
under 28 U.S.C. §§ 1406 or 1631 within fourteen (14) days of this order, and any responses shall
be filed within seven (7) days thereafter. Plaintiff’s motions and memoranda in support and/or
briefs shall be no longer than seven pages. Defendants’ collective motions and memoranda in
support and/or briefs shall be no longer than seven pages. Replies will not be allowed.
IT IS SO ORDERED.
Dated: February 26, 2014
S/ Julie A. Robinson
JULIE A. ROBINSON
UNITED STATES DISTRICT JUDGE

30