Kresch et al v. Prince
Filing
15
ORDER Denying as Moot 5 MOTION to Dismiss filed by David Prince; Denying in Part 8 MOTION to Dismiss and Setting Motion Hearing re 8 MOTION to Dismiss: Motion Hearing set for 1/22/2020 03:00 PM before District Judge Arthur J. Tarnow. Signed by District Judge Arthur J. Tarnow. (MLan)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
ARI KRESCH AND 1-800-LAW-FIRM,
PLLC
Case No. 18-11219
Plaintiffs,
v.
SENIOR U.S. DISTRICT JUDGE
ARTHUR J. TARNOW
DAVID PRINCE AND THE LAW OFFICES
OF PRINCE AND ASSOCIATES, LLC
U.S. MAGISTRATE JUDGE
DAVID R. GRAND
DEFENDANTS.
/
OPINION AND ORDER DENYING IN PART DEFENDANT’S MOTION TO DISMISS THE
AMENDED COMPLAINT [8] AND DENYING AS MOOT DEFENDANT’S MOTION TO
DISMISS [4] THE ORIGINAL COMPLAINT
This is a breach of contract and fraud in the inducement suit brought by a
Michigan lawyer and his law firm against a Florida lawyer and his law firm.
Plaintiffs seeks to recover damages from Defendants’ alleged breach of a Joint
Venture Agreement signed between them on April 4, 2013. Defendant David
Prince has raised several defenses in his motion to dismiss. The Court will deny
the jurisdictional components of the motion to dismiss and schedule a hearing on
the remaining defenses raised by Mr. Prince.
FACTUAL AND PROCEDURAL BACKGROUND
Plaintiffs’ First Amended Complaint provides the following facts.
Plaintiff, Ari Kresch, is a citizen of Michigan. (Compl. ¶ 1). Plaintiff, 1-800-Law
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Firm, of which Mr. Kresch is CEO, has its principal place of business in
Michigan. (Id. at ¶ 2). Defendant, David Prince, is a citizen of Florida. (Id. at ¶
3). The Law Office of Prince and Associates, LLC, has its principal place of
business in Florida. (Id. at ¶ 4). Plaintiffs and Defendants entered into a Joint
Venture Agreement on April 4, 2013. (Id. at ¶ 10). The agreement was signed in
Michigan and provided for a trial period of 12-months. (Id. ¶¶ 10, 12). The
agreement assigned various responsibilities to each law firm, and it called for
revenue sharing between the law firms. (Id. ¶¶ 13-15). The agreement was shortlived, however, and failed to generate revenue. (Id. ¶ 15).
During the brief course of this partnership, Plaintiffs advanced
$470,213.34 towards Defendants’ operations. (Id. ¶ 16). Mr. Kresch also
provided a personal loan to Mr. Prince in the amount of $25,000. (Id. ¶ 17).
On April 17, 2018, Plaintiffs filed suit to collect these debts. [Dkt. # 1].
Defendant Prince filed a Motion to Dismiss [5] on February 21, 2019. Plaintiff
filed an Amended Complaint on March 11, 2019. Defendant Prince filed a
Motion to Dismiss the Amended Complaint [8] on May 1, 2019. On July 16,
2019, the Court issued an Order for Defendants to Show Cause why the Court
Should Not Strike Defendants’ Motion to Dismiss [12], because Mr. Prince,
though an attorney, is not admitted to practice in the Eastern District of Michigan
and thus cannot represent a corporate defendant. In his August 6, 2019 Reply
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brief [14], Mr. Prince explained that since The Law Offices of Prince and
Associates was dissolved in 2015, it cannot retain corporate counsel. (Dkt. # 14,
pg. 1). The Court therefore will construe Mr. Prince’s Motion to Dismiss to
pertain to his own defense only.
The Motion to Dismiss the Amended Complaint [8] is fully briefed. The
Court finds the jurisdictional portions of the motion suitable for determination
without a hearing in accord with Local Rule 7.1(f)(2). It will conduct a hearing
on the remaining portions of the motion on Wednesday January 22, 2020 at 3:00
P.M.
STANDARD OF REVIEW
Defendant Prince moves to dismiss Plaintiffs’ claims for lack of subject
matter jurisdiction pursuant to FED. R. CIV. P. 12(b)(1) and lack of personal
jurisdiction pursuant to FED. R. CIV. P. 12(b)(2).
A Rule 12(b)(1) challenge to subject matter jurisdiction takes the form of
a facial attack or a factual attack. Defendant makes a factual attack, which means
that it challenges “the factual existence of subject matter jurisdiction.”
Cartwright v. Garner, 751 F.3d 752, 759-60 (6th Cir. 2014). Accordingly,
Plaintiffs’ factual allegations do not get the benefit of the presumption of
truthfulness, and the Court may “weigh the evidence and satisfy itself as to the
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existence of its power to hear the case.” United States v. Ritchie, 15 F.3d 592,
598 (6th Cir. 1994).
On a Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction, the
Court must consider affidavits and pleadings in the light most favorable to the
plaintiff. Serras v. First Tenessee Bank Nat. Ass’n, 875 F.2d 1212, 1214 (6th Cir.
1989). Plaintiff bears the burden of “making a prima facie showing that personal
jurisdiction exists.” Id. The district court should not weigh “the controverting
assertions of the party seeking dismissal.” Air Products and Controls, Inc. v.
Safetech Intern., Inc., 503 F.3d 544, 549 (6th Cir. 2007) (quoting Theunissen v.
Matthews, 935 F.2d 1454, 1459 (6th Cir, 1991). Nevertheless, a defendant who
disputes the facts underlying personal jurisdiction “can invoke the court’s
discretion to order a pretrial evidentiary hearing on those facts.” Serras, 875 F.2d
at 1214.
ANALYSIS
I.
Subject Matter Jurisdiction
Plaintiffs bring this suit in federal court pursuant to 28 U.S.C, § 1332. In order
to exercise diversity jurisdiction over a dispute, the Court must satisfy itself that
complete diversity among the parties exists, and that the amount on controversy
is at least $75,000. Taking the pleadings as true, the suit is one between a
corporate and an individual citizen of Michigan and a corporate and an individual
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citizen of Florida. On its face, the suit is clearly one between “citizens of different
states.” § 1332(a)(1).
Nevertheless, Rule 12(b)(1) requires the Court to look beyond the pleadings
to investigate the source of its jurisdiction. Defendant admitted in his Motion to
Dismiss that his law firm, the Law Offices of Prince & Associates, L.L.C.
(“TLOOPA”) was “a Florida limited liability.” (Dkt. # 8, pg. 10). He argues,
however, that the ownership of non-party Jason Searns over TLOOPA spoils
diversity. In his reply brief, Defendant stated that Jason Searns was in fact a
partner of Defendant TLOOPA, and thus his citizenship was relevant for
determining whether complete diversity of citizenship existed. See Carden v.
Arkoma Associates, 494 U.S. 185 (1990) (holding that the citizenship of even
limited partners matters for purposes of determining where a partnership is
domiciled). Defendant closed his argument by observing that Plaintiff presented
no evidence that Jason Searns is not a citizen of Michigan.
The Court is unclear of the relevance of Jacob Searns to the jurisdictional
question because nowhere in the briefing do the parties make clear where he is
domiciled. The corporate organization of TLOOPA is also unclear, likely because
it is unrepresented. That being said, “subject-matter jurisdiction, because it
involves a court's power to hear a case, can never be forfeited or waived.”
Arbaugh v. Y&H Corp., 546 U.S. 500, 501 (2006). If Defendants actually
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demonstrate that TLOOPA is a partnership whose citizenship is determined by
the citizenships of its partners, that Mr. Searns is a partner, and that Mr. Searns
is a citizen of Michigan, the Court will revisit the issue of subject matter
jurisdiction. For now, however, the fact that TLOOPA is organized and
apparently headquartered in Florida, according to Florida law, is sufficient to
indicate that the complete diversity requirement of § 1332(a) is met.
The amount in controversy threshold of $75,000 is also met. Defendant argues
that because only $25,000 is at stake between Plaintiff Ari Kresch and Defendant
David Prince, personally, the Court has no jurisdiction over that matter. Plaintiffs,
however, seek to pierce the corporate veil and hold Defendant Prince personally
liable for the $470,213.34 they advanced to TLOOPA. “A single plaintiff may
aggregate his separate claims against a single defendant, but ‘[t]he traditional
judicial interpretation…has been from the beginning that the separate and distinct
claims of two or more plaintiffs cannot be aggregated in order to satisfy the
jurisdictional amount requirement.’” Naji v. Lincoln, 665 F. App'x 397, 401 (6th
Cir. 2016) (quoting Snyder v. Harris, 394 U.S. 332, 335 (1969)).
The Court certainly has jurisdiction over the loan to TLOOPA. Whether it
should also exercise supplemental jurisdiction over the $25,000 personal loan
between Mr. Kresch and Mr. Prince is a different matter, especially since it
appears that the personal loan is the only basis for Mr. Kresch’s standing in the
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suit. Where complete diversity is present and at least one named Plaintiff satisfies
§ 1332(a)’s amount in controversy requirements, courts can exercise
supplemental jurisdiction over claims of other plaintiffs that do not meet the
amount in controversy requirement. Exxon Mobil Corp., v. Allapattah Services,
Inc., 545 U.S. 546, 549, 559 (2005). Such claims are subject to 28 U.S.C. § 1367,
which has been interpreted to require district courts to hear claims over which it
would not otherwise have jurisdiction, if those claims arise out of a common
nucleus of operative facts with those claims over which it does have jurisdiction.
Soliday v. Miami County, Ohio, 55 F.3d 1158, 1165 (6th Cir. 1995) (quoting
United Mine Workers of America v. Gibbs, 282 U.S. 715 (1966)). Since this issue
has not been briefed, the Court invites the parties to file supplemental briefing on
whether or not the $25,000 personal loan and the $470,213.34 business loan arise
from a common nucleus of operative facts.
II.
Personal Jurisdiction
“A federal court may only exercise personal jurisdiction in a diversity case if
such jurisdiction is (1) authorized by the law of the state in which the court sits;
and (2) is otherwise consistent with the Due Process Clause of the Fourteenth
Amendment.” Youn v. Track, Inc., 324 F.3d 409, 417 (6th Cir. 2003). The facts
that form the basis of this suit—Defendants’ alleged contract with Plaintiffs—are
the same facts that form the basis of the Court’s personal jurisdiction over
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Defendant Prince. There is therefore an “affiliation between the forum and the
underlying controversy,” and the Court’s inquiry is one of specific, or limited,
jurisdiction, not general jurisdiction. Goodyear Dunlop Tires Operations, S.A. v.
Brown, 564 U.S. 915, 919 (2011).
The first prong of the analysis asks whether Michigan courts would have
jurisdiction over Mr. Prince. Michigan’s long arm statute provides for limited
personal jurisdiction over individuals who transact business in the state. M.C.L.
§ 600.705(1). Plaintiffs have pled that Mr. Prince entered into the Joint Venture
Agreement in Michigan, and, absent proof to the contrary, they have pled
sufficient grounds for the Court to exercise personal jurisdiction over Mr. Prince.
The second prong of the analysis asks whether such an exercise of personal
jurisdiction is constitutional, “The Due Process Clause of the Fourteenth
Amendment constrains a State’s authority to bind a nonresident defendant to a
judgment of its courts.” Walden v. Fiore, 571 U.S. 277, 283 (2014). In order to
be subject to the Court’s authority, “the nonresident generally must have “certain
minimum contacts ... such that the maintenance of the suit does not offend
‘traditional notions of fair play and substantial justice.’” Id. (quoting
International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). The Sixth
Circuit has provided a three-part test for determining whether a district court can
constitutionally exercise specific personal jurisdiction.
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(1) “the defendant must purposefully avail himself of the privilege of
acting in the forum state or causing a consequence in the forum state;” (2)
“the cause of action must arise from the defendant's activities there;” and
(3) “the acts of the defendant or consequences caused by the defendant
must have a substantial enough connection with the forum state to make
the exercise of jurisdiction over the defendant reasonable.” Youn, 324 F.3d
at 418 (quoting Southern Machine Co. v. Mohasco Industries, Inc., 401
F.2d 374, 381 (6th Cir.1968))
Plaintiffs easily meet their burden under this test. First, the complaint alleges
that Defendant came to Michigan to enter into a business relationship with a
Michigan entity. The pleadings allege that he availed himself of this partnership
to borrow money for TLOOPA. Second, the cause of action arises from the
deterioration of that relationship and Mr. Prince’s alleged failure to repay that
money. Third, by partnering his law firm with a Michigan law firm, Mr. Prince
entered into 12-month trial relationship with a Michigan law firm, contemplating
a division of labor that would necessarily entail cooperation between Florida and
Michigan attorneys and their staff on Florida and Michigan cases. (See Dkt. 11). It would not be unreasonable for Mr. Prince to expect that he could be sued in
Michigan if he were alleged to have violated the agreement. The Court can
therefore exercise personal jurisdiction over Mr. Prince in the resolution of this
matter.
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CONCLUSION
As a final matter, the Court finds that Defendant’s first Motion to Dismiss
[5] is now moot. See KBT Group, LLC v. City of Eastpointe, No. 18-10409 (E.D.
Mich. Apr. 10, 2019) (Tarnow, J.) (explaining that since an amended complaint
supersedes the original complaint, a motion to dismiss the original complaint is
moot). Having resolved the jurisdictional issues with Defendants motions under
Rule 12(b)(1) and 12(b)(2), the Court will schedule a hearing on the remaining
elements of Defendant’s Motion to Dismiss [8], specifically the portions of the
Motion governed by Rule 12(b)(6) and Rule 12(b)(7).
Accordingly,
IT IS ORDERED that Defendant David Prince’s Motion to Dismiss the
Amended Complaint [8] is DENIED IN PART as specified above. The remaining
components of the Motion to Dismiss the Amended Complaint [8] will be
adjudicated following a hearing, which will be scheduled for Wednesday, January
22, 2020 at 3:00 P.M.
IT IS FURTHER ORDERED that Defendant’s Motion to Dismiss [5] is
DENIED AS MOOT.
SO ORDERED.
Dated: September 12, 2019
s/Arthur J. Tarnow
Arthur J. Tarnow
Senior United States District Judge
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