Franklin Capital Funding, LLC v. Ace Funding Source, LLC
ORDER granting 4 Defendant's Motion to Dismiss and Dismissing the Case without Prejudice for Lack of Personal Jurisdiction. Signed by District Judge Terrence G. Berg. (AChu)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
ACE FUNDING SOURCE, LLC,
HON. TERRENCE G. BERG
DEFENDANT’S MOTION TO
DISMISS (ECF NO. 4) AND
DISMISSING THE CASE
WITHOUT PREJUDICE FOR
LACK OF PERSONAL
This is a dispute over priority rights to financing payments.
Plaintiff Franklin Capital Funding alleges that it possesses the most
senior security interest in the collateral of non-party Superior Logistics.
Plaintiff alleges that Defendant Ace Funding Source tortiously interfered
with its security interest when it entered into a subsequent financing
agreement and began to withdraw collateral from Superior Logistics’
account. The instant action was filed against Defendant on April 3, 2020
in the Circuit Court for the County of Oakland. ECF No. 1-1. Defendant
removed the case to this Court on July 30, 2020. ECF No. 1.
This case is now before the Court on Defendant’s Motion to Dismiss
pursuant to Federal Rules of Civil Procedure 12(b)(2), (3), and (6). ECF
No. 4. For the reasons outlined below, the Court will GRANT
Defendant’s Motion to Dismiss (ECF No. 4) because this Court lacks
personal jurisdiction over Defendant Ace.
Non-parties TopRock Funding LLC (“TopRock”) and Superior
Logistics Ohio LLC (“Superior”) entered into a revenue purchase
agreement dated November 10, 2019. ECF No. 1-1, PageID.9.
Subsequently, on December 12, 2019, TopRock filed a UCC-1 financing
statement (“First Financing Statement”) with the State of Ohio, which
Plaintiff alleges covered “substantially all of Superior’s assets, including
proceeds from sales and receivables.” ECF No. 1-1, PageID.9.
On March 2, 2020, Plaintiff Franklin purchased the obligations
owed to TopRock1 by Superior. ECF No.1-1, PageID.9. The details of the
purchase and assignment are outlined in an assignment agreement. See
ECF No. 1-1, PageID.63-65. According to the Agreement all claims,
rights, and actions against Superior were sold, assigned, and transferred
While this is how Plaintiff’s complaint describes the purchase, the
assignment agreement describes Chrome Capital LLC as the “Assignor”
and does mention or discuss TopRock Funding LLC. See ECF No. 1-1,
PageID.63. Plaintiff’s complaint alleges that TopRock Funding LLC is
also known as Chrome Capital, LLC, and that together these two entities
are known as “TopRock.” ECF No. 1-1, PageID.9. Defendant disputes this
assertion and instead claims that TopRock Funding LLC and Chrome
Capital LLC are distinct corporations. During oral argument, Plaintiff
asserted that these are closely related companies that transfer assets
between each other. However, Plaintiff conceded that there are no
documents currently on the record which explain this relationship.
to Plaintiff Franklin. The Agreement also assigns Plaintiff Franklin “all
of its right, title, and interest under its agreements with Superior”
including those against “any third party” arising from the obligations of
the Assignor’s agreement with Superior. ECF No. 1-1, PageID.9. On
March 4, 2020, pursuant to the agreement, TopRock assigned its First
Financing Statement to Franklin in an assignment filed with the State
of Ohio. ECF No. 1-1, PageID.10. See ECF No. 1-1, PageID.72.
On March 4, 2020, Plaintiff Franklin also made an additional
$1,700,000 loan to Superior. See ECF No. 1-1, PageID.75-100. The loan
agreement outlined Superior’s agreement to “[k]eep its assets, whether
now owned or hereafter acquired, free of any lien, charge, or claim.” ECF
No. 1-1, PageID.11. As security for the loan, on March 4, 2020 Superior
executed a Continuing Security Agreement, which granted Plaintiff
Franklin a security interest in the following collateral:
(a) all of [Superior's] Accounts, Chattel Paper, Deposit Accounts,
Documents, Equipment, Farm Products, Fixtures, Goods, General
Intangibles, Instruments, Inventory, Investment Property, Letter
of Credit Rights ... , Software ...
(b) all present and future insurance claims relating to any of the
( c) all Goods, Instruments ... , Documents ... , policies and
certificates of insurance, Deposit Accounts, and money or other
property ... which are now or later in possession of [Franklin], or
to which [Franklin] now or later controls possession by documents
( d) all present and future books, records, and data of [Superior]
relating to any of the above; and
( e) all present and future accessions, additions and attachments to,
proceeds, parts, products, replacement, substitutions, Supporting
Obligations and rights arising out of, any of the above, including
but not limited to stock rights, subscription rights, interest,
distributions, dividends, stock dividends, stock splits, or
liquidating dividends, renewals, all cash and Accounts, insurance
policies and proceeds, arising from the sale, rent, lease, casualty
loss or other disposition of any of the above and cash and other
property which were proceeds of any of the above and are
recovered by a bankruptcy trustee or otherwise as a preferential
transfer by [Superior].
ECF No. 1-1, PageID.102.
Plaintiff Franklin alleges that the security interest was perfected
under a UCC-1 Financing Statement (“Second Financing Statement”),
which was filed on February 18, 2020 with the state of Ohio. ECF No. 11, PageID.13. See ECF No. 1-1, PageID.117-18. The Second Financing
Agreement outlined the collateral for the loan and stated that “[a]ny
attempt by a third party to exercise dominion or control over the
collateral described in the financing statement would constitute
conversion of secured party’s collateral.” ECF No. 1-1, PageID.13-14.
Accordingly, Plaintiff Franklin contends that the Second Financing
Statement provided “express notice” that any third party interference
with Franklin’s security interest rights “would constitute tortious
interference and/or conversion.” ECF No. 1-1, PageID.14.
Superior also sought and obtained additional funding from
Defendant Ace. Plaintiff alleges that on or about January 27, 2020,
Superior obtained a merchant cash advance from Defendant Ace. ECF
No. 1-1, PageID.14. According to Plaintiff’s complaint, as a result of this
cash advance, Defendant Ace began various forms of debt collection
including debiting Superior’s accounts, directing Superior’s customers to
make payments directly to Defendant Ace, and threatening to “send the
martial” to collect the funds. ECF No. 1-1, PageID.14.
But, Defendant Ace claims that they could not have had knowledge
of or notice of the loan Plaintiff Franklin gave to Superior Logistics, or its
security interest, because “both came after Ace Funding entered into its
contract with Superior Logistics, Superior Logistics granted it a security
interest, and Ace Funding filed its UCC-1 Financing Statement.” ECF
No. 4, PageID.148 (emphasis in original). According to Defendant Ace, on
December 4, 2019, Superior Logistics and Ace Funding entered into an
agreement for the purchase and sale of future receipts. ECF No. 4,
PageID.149. See ECF No. 4, PageID.181. Pursuant to the agreement,
Defendant Ace was to obtain the receipts it purchased by making
withdrawals from a bank account designated by Superior Logistics.
Additionally, Defendant Ace contends Superior Logistics granted Ace
Funding “a security interest in all of its assets as part of the transaction.”
ECF No. 4, PageID.150. On January 23, 2020, Defendant Ace filed a
UCC-1 Financing Statement to perfect its security interests in the state
of Ohio. ECF No. 4, PageID196-97.
Despite Ace’s agreements and UCC financing statements, Plaintiff
Franklin asserts that it holds the most senior security interest in the
relevant assets. Plaintiff contends that the First Financing Statement,
subsequent assignment, and Second Financing Statement provided
Defendant Ace with constructive notice that “any interference by third
parties with Franklin’s secured party’s rights would constitute tortious
interference and/or conversion.” ECF No. 1-1, PageID.15. According to
Plaintiff, because Franklin held the senior security interest Defendant
Ace’s debt collection not only intercepted the collateral belonging to
Plaintiff, but also converted proceeds. ECF No. 1-1, PageID.15.
As a result of these allegations, Plaintiff’s complaint brings claims
against Defendant for (1) declaratory judgment as to priority in
collateral, (2) tortious interference with a contractual relationship, (3)
tortious interference with future business expectations, (4) conversion,
and (5) temporary, preliminary, and permanent injunctive and
declaratory relief. ECF No. 1-1, PageID.16-22.
STANDARD OF REVIEW
Under Federal Rule of Civil Procedure 12(b)(2), a party may assert
lack of personal jurisdiction as a defense. In a motion to dismiss for lack
of personal jurisdiction under Rule 12(b)(2), the plaintiff bears the
burden of establishing the court’s authority over the defendant.
Theunissen v. Matthews, 935 F.2d 1454, 1458 (6th Cir. 1991). See also
Neogen Corp. v. Neo Gen Screening, Inc., 282 F.3d 883, 887 (6th Cir.
2002). Where subject matter jurisdiction is based on diversity of
citizenship, federal courts look to state law to determine personal
jurisdiction. Fed. R. Civ. P. 4(k)(1). See also Daimler AG v. Bauman, 571
U.S. 117, 125 (2014) (“Federal courts ordinarily follow state law in
determining the bounds of their jurisdiction over persons.”).
“Under Michigan's long-arm statute, the state’s jurisdiction
extends to the limits imposed by federal constitutional Due Process
requirements, and thus, the two questions become one.” Sports Auth.
Michigan, Inc. v. Justballs, Inc., 97 F.Supp.2d 806, 810 (E.D. Mich.2000).
Stated differently, Michigan’s long-arm statute allows the exercise of
personal jurisdiction to the full extent permitted under the Constitution.
Therefore, the Court must determine whether the exercise of jurisdiction
complies with the limits imposed by the Due Process Clause.
Michigan law recognizes two bases for personal jurisdiction over a
corporation: (1) general, and (2) specific (called “limited personal
jurisdiction” in state law parlance). See Mich. Comp. Laws Ann. §
600.711, 600.715. A court has general jurisdiction over a corporation
where the defendant’s contacts within the forum “are so ‘continuous and
systematic’ as to render [it] essentially at home in the forum state.”
Daimler AG, 571 U.S. at 139 (quoting Goodyear Dunlop Tires Operations,
S.A. v. Brown, 564 U.S. 915, 919 (2011)) (alteration in original). As to
specific jurisdiction, the inquiry “focuses on the relationship among the
defendant, the forum, and the litigation.” Walden v. Fiore, 571 U.S. 277,
284 (2014) (internal punctuation and citations omitted). For a court to
exercise specific jurisdiction, “the defendant’s suit-related conduct must
create a substantial connection with the forum State.” Id.
Defendant contends that this Court does not have personal
jurisdiction over Ace Funding. ECF No. 4, PageID.153. Plaintiff,
however, alleges that the Court has both general and specific jurisdiction
over Defendant Ace. For the reasons discussed below, Defendant’s motion
to dismiss will be granted because the Court lacks personal jurisdiction
over Defendant Ace. Because this is a sufficient basis for granting the
motion and dismissing the case, the Court declines to address the other
arguments presented in Defendant’s briefing.
a. General Jurisdiction
Plaintiff Franklin contends that this Court may exercise general
jurisdiction over Defendant Ace. “General jurisdiction allows a plaintiff
to sue a defendant ‘on any and all claims,’ regardless of the connection
(or lack thereof) between the claim and the forum.” Maxitrate Tratamento
Termico E Controles v. Super Sys., Inc., 617 F. App’x 406, 408 (6th Cir.
2015) (quoting Daimler AG, 571 U.S. at 138). The pertinent inquiry in
determining whether the court may exercise general jurisdiction is
“whether that corporation’s affiliations with the State are so continuous
and systematic as to render [it] essentially at home in the forum state.’”
Daimler AG, 571 U.S. at 139 (internal quotations and citation omitted).
Plaintiff argues that the Court has general jurisdiction over
Defendant Ace because Defendant Ace has allegedly solicited business
from Michigan residents through its website and established “long-term
lending relationships with Michigan residents” as evidenced by Ace’s
UCC filings and litigation within Michigan courts. ECF No. 5,
PageID.222. The Court finds this evidence is insufficient to establish
general jurisdiction over Defendant Ace.
The kinds of activities Plaintiff identifies Defendant Ace conducting
in Michigan are well short of what would be needed to demonstrate
Operations, S.A., 564 U.S. at 919. First, Plaintiff directs the Court to 70
UCC statements filed by Ace that evidence a security interest in assets
located in Michigan or assets owned by Michigan residents. ECF No. 5,
PageID.219-220. Plaintiff contends that these UCC filings provide
evidence that Defendant Ace was “soliciting and procuring sales and
purchases,” which is a factor courts consider when evaluating general
jurisdiction. ECF No. 5, PageID.222. However, in Daimler AG v.
Bauman, the Supreme Court determined that significant sales presence
is not enough to confer general personal jurisdiction because if it was,
general jurisdiction “would presumably be available in every other State
in which [the defendant’s] sales are sizable.” 571 U.S. at 139. “A
corporation that operates in many places can scarcely be deemed at home
in all of them.” Id. at 139, n.20. Therefore, merely showing that
Defendant Ace has done business in Michigan through the creation of
lending relationships is not sufficient to show continuous and systematic
contacts that would make Defendant Ace effectively “at home” in the
forum. Plaintiff’s reference to Helzer v. F. Joseph Lamb Co., is also
unavailing on this point because the case was decided long before the
Supreme Court’s guidance in Goodyear and Daimler, and the facts are
distinguishable. 171 Mich.App. 6 (Mich. Ct. App. 1988). In Helzer, the
corporation not only bought and sold parts in Michigan, but “sen[t] a
company courier to Michigan on a daily basis, and ha[d] a direct computer
link-up with its Michigan parent corporation.” Id. at 11. There is no
evidence that Defendant Ace had such daily contacts here.
Next, Plaintiff argues that Defendant Ace has utilized its website
to solicit business from Michigan residents. Plaintiff argues that the
internet contacts Defendant Ace receives through the “interactivity” of
its websites also establishes general jurisdiction. ECF No.5, PageID.22122. The Court finds no authority to support this proposition, and the case
law states the opposite. See Negash v. DeVry Univ., Case No. 17-10256,
2018 WL 1570625, at *4 (E.D. Mich. Mar. 30, 2018) (finding “internet
presence alone is not a sufficient basis for general jurisdiction.”). Plaintiff
directs the Court to Audi AG and Volkswagon of Am., Inc. v. D’Amato, to
support their argument that the “interactivity of a website” is a
determinative factor in establishing general jurisdiction. 341 F.Supp.2d
734, 742 (E.D. Mich. 2004). But, in Audi AG the court found that the
interactivity of the corporation’s website was sufficient for a court to
exercise specific jurisdiction, also called limited personal jurisdiction in
the state cases. Id. at 741. The court did not discuss or apply this
principle to general jurisdiction and, as discussed above, the standards
for the two types of personal jurisdiction are distinct.
Beyond the lack of case law, the extent to which Defendant Ace
utilized its website to “solicit” business is in dispute. Defendant submits
evidence that Ace Funding’s website only allows interested parties to
submit an inquiry, but not actually to apply for any loan or enter into any
agreements. Defendant says that any contracts entered into relating to
assets—even those in Michigan—arise under New York contract law.
ECF No. 6, PageID.345. Defendant also argues that most of its business
comes from brokers or independent sales organizations—not from any
solicitation by Ace Funding agents in person or through the website. In
sum, Defendant Ace’s website and the activity conducted through it, is
insufficient to establish general jurisdiction because it fails to
demonstrate that Defendant had “continuous and systematic contacts” in
Further, even if Plaintiff did adequately allege “continuous and
systematic contacts,” this alone is insufficient for general jurisdiction.
The correct inquiry under Goodyear is whether the contacts in a forum
state are so continuous and systematic as to render the company at home
in the forum state. Daimler, 571 U.S. at 139. “The ‘paradigm’ forums in
which a corporate defendant is ‘at home,’ . . . are the corporation’s place
of incorporation and principle place of business.” BNSF Ry. Co. v. Tyrrell,
137 S. Ct. 1549, 1558 (2017) (quoting Daimler AG, 571 at 139, n. 19).
Here, Defendant Ace Funding is a New York corporation and its principal
place of business is in Jericho, New York. ECF No. 4, PageID.178.
Accordingly, Michigan is not the “paradigm” forum where Ace Funding
is “at home.”
Our inquiry does not end here, however, as “[t]he exercise of general
jurisdiction is not limited to these forums; in an exceptional case, a
corporate defendant’s operations in another forum may be so substantial
and of such a nature as to render the corporation at home in that State.”
BNSF Ry. Co., 137 S. Ct. at 1158 (internal quotations omitted). The
Supreme Court has suggested that Perkins v. Benguet Consol. Mining
Co., 342 U.S. 437 (1952) exemplifies such an “exceptional case.” Id. In
Perkins, the Court determined a foreign corporation located in the
Philippines was subject to general jurisdiction in Ohio when war required
the general manager and owner of the company to relocate to Ohio, where
he continued conducting the business on behalf of the company. Perkins,
342 U.S. at 448. Nothing remotely analogous has been alleged here.
Plaintiff has offered no evidence to support a finding that this is “an
exceptional case,” or any authority to support the proposition that
Defendant Ace’s contacts are sufficient to establish it was “at home” in
Michigan. There is no evidence that Defendant Ace has physical
locations, employees, or officers in Michigan. There is no evidence that
Defendant Ace has bank accounts or conducts daily corporate activities
in Michigan. While Plaintiff offers proof that Defendant has filed
multiple UCC debtor financing statements and has brought one case
within Michigan courts, this evidence merely confirms that Defendant
Ace has done some in-state business in Michigan. This is insufficient for
purposes of establishing general jurisdiction. BNSF Ry. Co., 137 S. Ct. at
1559 (finding corporation was not “so heavily engaged in activity” in the
forum state as to render it “essentially at home” even though corporation
had “over 2,000 miles of railroad track and more than 2,000 employees in
the [forum state].”See also SRS Techs., LLC v. Nat’l Minority Trucking
Ass’n, Inc., No. 17-1320, 2018 WL 925847, at *2 (E.D. Mich. Feb. 16,
2018); Pilipovic v. Driver, Case No. 19-12033, 2019 WL 4511678, at *1
(E.D. Mich. Sept. 19, 2019) (“Merely conducting business in the forum
state does not necessarily render a corporation ‘at home’ there.”).
In sum, Plaintiff has failed to bear its relatively light burden of
showing that Defendant Ace had sufficient business activities in
Michigan to “render [it] essentially at home in the forum state.” Daimler
AG, 571 U.S. at 119 (alteration in original). Accordingly, the Court does
not have general jurisdiction over Defendant Ace.
b. Specific Jurisdiction
The Court next turns to Plaintiff’s claim that the Court may
exercise specific jurisdiction over Defendant Ace. Specific jurisdiction is
dependent on “defendant’s case-related contacts to the jurisdiction.”
Walden, 571 U.S. at 284 (quoting Burger King Corp. v. Rudzewicz, 471
U.S. 462, 475 (1985)). Stated differently, under specific jurisdiction, a
plaintiff may sue a defendant “only on claims that arise out of the
defendant’s activities in the forum state.” Maxitrate, 617 F. App’x at 408.
The Sixth Circuit has evaluated whether a defendant has sufficient
“minimum contacts” with the forum state under a three prong test:
First, the defendant must purposefully avail himself of the privilege
of acting in the forum state or causing a consequence in the forum
state. Second, the cause of action must arise from the defendant's
activities there. Finally, 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.
Gerber v. Riordan, 649 F.3d 514, 518 (6th Cir. 2011) (internal quotations
omitted). In sum, jurisdiction depends on Defendant Ace’s contacts with
Michigan as it relates to the cause of action in the complaint.
The Court need not assess the first and third prong of the test
because it is clear that the second prong of the test is not met. To find
specific jurisdiction “the cause of action must arise from the defendant’s
activities there.” Gerber, 649 F.3d at 518. Plaintiff alleges that the second
prong is met because Defendant Ace’s “actions had consequences in
Michigan resulting in harm to Franklin, a Michigan resident.” ECF No.
5, PageID.225. But both the Supreme Court and courts in this district
have rejected this theory of specific jurisdiction. Walden, 571 U.S. at 290.
When assessing specific jurisdiction, “[t]he proper question is not
where the plaintiff experienced a particular injury or effect but whether
the defendant’s conduct connects him to the forum in a meaningful way.”
Walden, 571 U.S. at 290. “To find otherwise would ‘improperly attribute[
][the] plaintiff's forum connections to the defendant[s] and make [ ] those
connections ‘decisive’ in the jurisdictional analysis.” Zellerino v. Roosen,
118 F.Supp.3d 946, 952 (E.D. Mich. 2015) (quoting Walden, 571 U.S. at
289) (alternations in original). In Walden, the Supreme Court outlined
two key principles with regard to the types of contacts necessary to
establish specific jurisdiction. First, the relationship between the
defendant and the forum “must arise out of contacts that the ‘defendant
himself’ creates with the forum State.” 571 U.S. at 284 (quoting Burger
King, 471 U.S. at 475) (emphasis in original). Second, the analysis “looks
to the defendant's contacts with the forum State itself, not the
defendant's contacts with persons who reside there.” Id. at 285. Under
this principle, “the plaintiff cannot be the only link between the
defendant and the forum.” Id. As summarized by the court in Zellerino v.
Roosen, the Supreme Court’s holding in Walden make it clear that
specific jurisdiction may not “exist over a defendant in a forum solely
because the effects of his intentional act are felt there.” 118 F.Supp.3d at
Applying those principles here, it is clear that Defendant Ace’s
conduct—entering into a contract with a company in Ohio to purchase
revenue and withdrawing funds from that company’s bank account in
Ohio—may not form the basis for Defendant to be sued in a Michigan
court. ECF No. 4, PageID.158. Plaintiff does not allege that any of
Defendant Ace’s challenged conduct took place in Michigan. Additionally,
the exhibits Plaintiff provides with regard to Defendant Ace’s general
business activities in Michigan have no bearing on this analysis because
the UCC statements and Michigan litigation Plaintiff references have
nothing to do with this cause of action. See Goodyear Dunlop Tires
Operations, S.A., 564 at 919 (“In contrast to general, all-purpose
jurisdiction, specific jurisdiction is confined to adjudication of issues
deriving from, or connected with, the very controversy that establishes
jurisdiction.”) (internal citations and punctuation omitted) (emphasis
added). And, while an employee of Ace allegedly sent a text message that
contained aggressively rude language about Plaintiff Franklin (“I told
Franklin Funding to f*** off,” ECF No. 5, PageID.217), the relevant
inquiry for specific jurisdiction “looks to the defendant’s contacts with the
forum State itself, not the defendant’s contacts with persons who reside
there.” Walden, 571 U.S. at 285, 286 (noting that in the intentional torts
content, “it is likewise insufficient to rely on a defendant’s ‘random,
fortuitous, or attenuated contacts.’”). The case law is clear “that mere
injury to a forum resident is not a sufficient connection to the forum,” and
that is all Plaintiff has alleged here. Id. at 290 (referencing Calder v.
Jones, 465 U.S. 783 (1984)).
In sum, Plaintiff has only alleged that the impact of Defendant
Ace’s actions, and not Defendant’s actions themselves, were felt in
Michigan. Therefore, Plaintiff has failed to establish the necessary
second prong of specific jurisdiction, which requires that the cause of
action arise from the defendant’s activities in the forum state.
Therefore, because Plaintiff has failed to establish that the Court
may exercise personal jurisdiction—general or specific—over Defendant
Ace consistent with due process, the Court must dismiss the case against
Accordingly, IT IS HEREBY ORDERED that Defendant’s Motion
to Dismiss (ECF No. 4) is GRANTED under Fed. R. Civ. P. 12(b)(2). The
Court will not address Defendant’s arguments under Rules 12(b)(3) and
12(b)(6) because it has no personal jurisdiction over Defendant Ace
It is further ORDERED that the complaint is DISMISSED
Dated: March 31, 2021
s/Terrence G. Berg
TERRENCE G. BERG
UNITED STATES DISTRICT JUDGE
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