Aboudib et al v. Matrix Diagnostic Imaging, LLC et al
Filing
23
OPINION; signed by Judge Gordon J. Quist (Judge Gordon J. Quist, jmt)
UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
__________________________
TONY ABOUDIB and ADVANCED
PAIN CLINIC, LLC,
Plaintiffs,
v.
Case No. 1:14-CV-452
MATRIX DIAGNOSTIC IMAGING, LLC,
ELITE VIEW IMAGING, LLC, JAMES
WALLER and ROBERT HOLLAND,
HON. GORDON J. QUIST
Defendants.
__________________________________/
OPINION
Plaintiffs, Tony Aboudib and Advanced Pain Clinic, LLC (APC), invoking this Court’s
diversity jurisdiction pursuant to 28 U.S.C. § 1332(a), have sued Defendants, Matrix Diagnostic
Imaging, LLC (Matrix), Elite View Imaging, LLC (Elite), James Waller, and Robert Holland,
alleging state-law claims for breach of contract, fraud, promissory estoppel, conversion, enforcement
of purchase agreement/specific performance, breach of guaranty, and civil conspiracy. All of
Plaintiffs’ claims arise out of Defendants Matrix’s and Waller’s alleged failures to perform their
obligations under an Asset Purchase Agreement with APC.
Defendants Matrix, Elite and Waller have now moved to dismiss Plaintiffs’ amended
complaint1 pursuant to Federal Rule of Civil Procedure 12(b)(1)–(3) on the grounds that the Court
1
On April 30, 2014, the Court entered an Order to Show Cause directing Plaintiffs to file an amended complaint
addressing deficiencies in their original complaint relating to diversity jurisdiction. (Dkt. # 6.) In particular, the Court
noted that Plaintiffs failed to allege the residences of the members of APC, Matrix and Elite, all of which are limited
liability companies. Plaintiffs filed their amended complaint on May 14, 2014, alleging that APC’s two members,
Aboudib and his wife, reside in Michigan, and Matrix’s and Elite’s sole member, W aller, resides in Texas. (Dkt. # 7
at Page ID#23.)
lacks subject matter jurisdiction and personal jurisdiction over Matrix, Elite and Waller, and venue
in this district is improper.2 For the reasons set forth below, the Court will grant the motion and
dismiss Defendants Matrix, Elite and Waller from this action.
I. BACKGROUND
Aboudib is a resident of Michigan and APC is a Texas limited liability company. (Dkt. #
7 at Page ID#23, ¶ 5.) Aboudib and his wife, who also resides in Michigan, are the only members
of APC. Defendants Matrix and Elite are Texas limited liability companies, whose members reside
in Texas and Louisiana. (Dkt. # 17-1 at Page ID#67, ¶ 4.) Defendant Waller resides in Texas and
is a member of Matrix and Elite. (Id. ¶¶ 3, 4.) Defendant Holland resides in Louisiana, and
apparently is the second member of Matrix and Elite. (Dkt. # 7 at Page ID#23, ¶ 11; dkt. # 17-1,
Page ID#67, ¶ 4.)
Prior to October 2012, Aboudib conducted a chiropractic business through APC in Southlake
Texas. (Dkt. # 17-1 at Page ID#67, ¶¶ 5, 6.) At some point, Aboudib relocated to Michigan, but
left certain equipment APC used in its business at its former Texas location. (Id. ¶¶ 6, 8.) On or
about October 1, 2012, APC and Matrix entered into an Asset Purchase Agreement (Agreement),
pursuant to which Matrix agreed to purchase from APC certain assets that APC used in its business
for a total purchase price of $75,000.00.3 (Dkt. # 17-3.) The equipment covered by the Agreement
included “(a) a Phillips BV26 Mobile Image Intensifier/C-Arm (the ‘C-Arm’); (b) a pain
management table (the ‘Pain Table’); and (c) an anesthesia supply cabinet/cart (the ‘Anesthesia
2
Defendant Holland has not joined in, or taken a position on, the instant motion.
3
Although not germane to the Court’s resolution of the instant motion, the Court questions whether Plaintiff
Aboudib is properly included in this case. Aboudib was not a party to the Agreement and is simply a member of APC.
As such, it appears that Aboudib would lack standing to sue based on Defendants’ failure to perform under the
Agreement. See M.C. L. § 450.4510 (members of an LLC may not sue for claims of the LLC unless the LLC refuses
to sue).
2
Cart’).” (Dkt. # 17-1 at Page ID#68, ¶ 10; dkt. # 17-3 at Page ID#105.)4 One of the Agreement’s
recitals stated that the sale was “[c]ontingent upon [Matrix] completing their transaction with
Southwest Securities, FSB; 1201 Elm St. #3500, Dallas TX 75720 for the assignment of the debt
agreement/note with regard to the MRI machine expected to occur on or before October 31, 2012.”
(Dkt. # 17-3 at Page ID#103.) The MRI machine, a Hitachi Airis II MRI machine, was owned by
Advanced Imaging, Inc. d/b/a Advanced Imaging. (Dkt. # 17-1 at Page ID#68, ¶ 11.) Defendant
Waller personally guaranteed Matrix’s payment obligation to the extent of $50,000, also contingent
on the completion of the MRI transaction with Southwest Securities FSB. (Dkt. # 17-3 at Page ID#
105.)
The purchase transaction contemplated by the Agreement never occurred because Advanced
Imaging filed a Chapter 7 bankruptcy petition in the United States Bankruptcy Court for the Western
District of Michigan on October 1, 2012. (Dkt. # 17-1 at Page ID#68.) Because the MRI machine
became a part of Advanced Imaging’s bankruptcy estate, Southwest Securities was unwilling to
negotiate an agreement with Matrix to assume Advanced Imaging’s obligation to Southwest
Securities, and Matrix was never able to complete a transaction with Southwest Securities as
contemplated by the Agreement. (Dkt. # 17-1 at Page ID#69, ¶¶ 15-18.)
In 2013, Elite negotiated an agreement with Advanced Imaging’s bankruptcy trustee to
purchase the MRI machine from Advanced Imaging’s bankruptcy estate. The bankruptcy court
approved the trustee’s motion for approval of the sale on April 9, 2003. (Dkt. # 17-1 at Page ID #69,
¶¶ 18–19; Dkt. # 17-4; Dkt. # 17-5.)
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The Agreement provided that the equipment it covered would be listed on Exhibit 2.1(a) to the Agreement.
Neither of the copies of the Agreement that the parties have submitted contains any exhibits. However, Defendant
W aller describes in his affidavit some of the equipment that was covered by the Agreement. Aboudib and APC do not
dispute that the property W aller describes was covered by the Agreement.
3
Although the transaction set forth in the Agreement did not occur, the property covered by
the Agreement—the C-Arm, Pain Table, and Anesthesia Cart—remained at Matrix’s business
location until May of 2013. In May 2013, Aboudib entered into a purchase agreement with Carl
Naehritz D.C. for the sale of the C-Arm, Pain Table, and Anesthesia Cart for a purchase price of
$10,000.00. (Dkt. # 17-6.) Aboudib arranged to have the equipment (which was at Matrix’s
location in a storage room) delivered to Dr. Naehritz’s office in Bedford, Texas. (Dkt. # 17-1 at
Page ID#69.)
II. DISCUSSION
A.
Lack of Subject Matter Jurisdiction—Amount in Controversy
This court has “original jurisdiction of all civil actions where the matter in controversy
exceeds the sum or value of $75,000, exclusive of interest and costs, and is between . . . citizens of
different States.” 28 U.S.C. § 1332(a)(1). Defendants argue that the Court lacks subject matter
jurisdiction because it is a legal certainty that Plaintiffs cannot claim the jurisdictional amount of
$75,000. Defendants note that under the Agreement, the most Plaintiffs could recover is $75,000
because that was the purchase price Defendants were to pay. Defendants contend that because
Plaintiffs eventually sold some of the property covered by the Agreement to Dr. Naehritz, the
$10,000 that Plaintiffs realized from the sale would reduce the amount of damages that Plaintiffs
could recover to less than $75,000.
The general rule in diversity cases is that the amount claimed by a plaintiff in his complaint
determines the amount in controversy, unless it appears to a legal certainty that the claim is for less
than the jurisdictional amount. St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288-89,
58 S. Ct. 586, 590 (1938). The amount in controversy is measured at the time the complaint is filed.
Klepper v. First Am. Bank, 916 F.2d 337, 340 (6th Cir. 1990). However, “the lack of the
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jurisdictional amount from the outset—although not recognized until later—is not a subsequent
change that can be ignored.” Charvat v. EchoStar Satellite, LLC, 630 F.3d 459, 462 (6th Cir. 2010)
(internal quotation marks and brackets omitted). In determining whether the jurisdictional amount
is met, a court should consider the type of relief authorized under state law. See Randall v. Pitzer,
23 F. App’x 532, 533 (6th Cir. 2001).
In this case, it would appear on initial review that to a legal certainty Plaintiffs cannot
establish a claim in excess of the $75,000 jurisdictional threshold because Plaintiffs received
$10,000 from the sale of at least some of the property covered by the Agreement to Dr. Naehritz.
Plaintiffs note, however, that if they are successful in establishing their conversion claim, they may
recover treble damages pursuant to M.C.L. § 600.2919a. Defendants respond that under Michigan
law, because Plaintiffs’ claims arise out of a contract, their remedies are based on contract law, not
tort law. Thus, Defendants argue, Plaintiffs cannot rely on treble damages to establish the amount
in controversy. While Defendants’ argument may be persuasive in the context of a motion to
dismiss or a motion for summary judgment, “[t]he test for whether the jurisdictional amount has
been met considers whether the plaintiff can succeed on the merits in only a very superficial way.”
Kovacs v. Chesley, 406 F.3d 393, 396 (6th Cir. 2005). That is, a court considers only whether state
law permits the type of damages claimed. Id. at 397. Given the availability of treble damages in
this case—without considering the merits—the Court concludes that Plaintiffs have established that
the amount-in-controversy requirement is satisfied.
B.
Lack of Personal Jurisdiction
Plaintiffs bear the burden of showing that jurisdiction exists. Int’l Techs. Consultants, Inc.
v. Euroglas S.A., 107 F.3d 386, 391 (6th Cir. 1997). “[I]n the face of a properly supported motion
for dismissal, the plaintiff may not stand on his pleading but must, by affidavit or otherwise, set
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forth specific facts showing that the court has jurisdiction.” Theunissen v. Matthews, 935 F.2d 1454,
1458 (6th Cir. 1991). A court must construe pleadings and affidavits in the light most favorable to
the party asserting personal jurisdiction. See Neogen Corp. v. Neo Gen Screening, Inc., 282 F.3d
883, 887 (6th Cir. 2002). Where a motion to dismiss for lack of personal jurisdiction is decided
without an evidentiary hearing, the plaintiff need only make out a prima facie showing of personal
jurisdiction. Dean v. Motel 6 Operating L.P., 134 F.3d 1269, 1272 (6th Cir. 1998) (quoting
CompuServe, Inc. v. Patterson, 89 F.3d 1257, 1262 (6th Cir. 1996)).
A federal court may exercise personal jurisdiction over an out-of-state defendant only if the
defendant has “certain minimum contacts with [the forum] such that maintenance of the suit does
not offend ‘traditional notions of fair play and substantial justice.’” Int’l Shoe Co. v. Washington,
326 U.S. 310, 316, 66 C. St. 154, 158 (1945) (quoting Millken v. Meyer, 311 U.S. 457, 463, 61 S.
Ct. 339, 343 (1940)). Personal jurisdiction may be of two types: “general jurisdiction, where the
defendant has continuous and systematic contact with the forum state, or limited jurisdiction, where
the subject matter of the lawsuit is related to the defendant’s contacts with the forum state.” Walker
Motorsport, Inc. v. Henry Motorsport, Inc., No. 95-2250, 1997 WL 148801, at *2 (6th Cir. Mar. 31,
1997) (per curiam) (internal citation and quotation marks omitted). Assessing the existence of
jurisdiction involves a two-part process: “(1) first, the court must determine whether any of
Michigan’s relevant long-arm statutes authorize the exercise of jurisdiction over Defendants; and,
if so, (2) the court must determine whether exercise of that jurisdiction comports with constitutional
due process.” Air Prods. & Controls, Inc. v. Safetech Int’l, Inc., 503 F.3d 544, 550 (6th Cir. 2007).
Plaintiffs have failed to carry their burden in this case. In support of their motion,
Defendants submit an affidavit from Defendant Waller. Defendant Waller states that he resides in
Texas, that Matrix and Elite are Texas limited liability companies, and that Matrix’s and Elite’s
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members reside in Texas and Louisiana. (Dkt. # 17-1 at Page ID#67, ¶¶ 3, 4.) Waller further states
that no Defendant conducts, or has conducted, business in Michigan, nor do they market any of their
services in Michigan. (Id. ¶ 7.) Finally, Waller states that all of the negotiations regarding the
purchase transaction covered by the Agreement occurred in Texas, and all of the property that was
the subject of the Agreement is, and has always been, located in Texas. (¶ 8.) Plaintiffs have not
submitted affidavits or other evidence to refute Waller’s factual assertions or to show that
Defendants have sufficient contacts with Michigan.
Plaintiffs argue that Defendants are subject to Michigan’s long-arm statutes because they
transacted business in Michigan.
See M.C.L.A. §§ 600.705(1) (individuals), 600.715(1)
(corporations). Plaintiffs contend that Defendants’ contacts with Michigan suffice to meet the
requirements of both Michigan’s long-arm statute and due process because Defendants knew that
they were contracting with a company with a place of business in Michigan, accepted instruction
from one of Plaintiff’s members who resided in Michigan, and consented to jurisdiction in
Michigan, as evidenced by the following provision in the Agreement:
7.6 Governing Law and Forum. The proper venue and forum as chosen and
agreed to by the parties to this Agreement shall be governed by and construed in
accordance with the laws of the State of Michigan.
While a valid forum selection clause can confer personal jurisdiction in Michigan over an out-ofstate defendant, see M.C.L.A. §§ 600.701, 600.711, 600.745; Walbridge Aldinger Co. v. Angelo
Iafrate Constr. Co., No. 308223, 2013 WL 3836228, at *4 (Mich. Ct. App. July 25, 2013) (per
curiam) (“A valid forum-selection clause, even standing alone, can confer personal jurisdiction.”)
(internal quotation marks and brackets omitted), the quoted provision, captioned “Governing Law
and Forum,” does not select a forum for litigation of disputes. It simply says that the chosen venue
and forum—whatever it is—will be governed by Michigan law. Nothing in that provision or any
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other provision of the Agreement states that the parties chose Michigan or any other jurisdiction as
a proper forum. As such, Defendants did not consent to jurisdiction in Michigan. With regard to
Plaintiffs’ remaining contentions—that Defendants contracted with a company with a place of
business in Michigan and accepted instruction from one of its members in Michigan—such activity,
in this Court’s judgment, does not constitute the transaction of business within Michigan. That is,
nothing in the record shows that Defendants actually transacted any business in Michigan, nor is
there any indication that Defendants or their agents traveled to Michigan or even sent
correspondence or made telephone calls to Plaintiffs in Michigan concerning the transaction covered
by the Agreement. In fact, it is undisputed that the Agreement was negotiated in Texas, that the
property subject to the Agreement was located in Texas, and that the Agreement was to be
performed in Texas.
Even if the Court concluded that Michigan’s long arm statutes authorized jurisdiction over
Defendants, Plaintiffs have not shown that the exercise of jurisdiction would comport with due
process. In deciding whether the exercise of personal jurisdiction would offend due process, the
Sixth Circuit applies the following three-part 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.
S. Mach. Co. v. Mohasco Indus., Inc., 401 F.2d 374, 381 (6th Cir. 1968).
The purposeful availment requirement ensures that the defendant has purposefully entered
into a connection with the forum “such that [it] should reasonably anticipate being haled into court
there.” World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S. Ct. 559, 567 (1980).
8
“[T]he mere existence of a contract . . . is insufficient to confer personal jurisdiction.” Calphalon
Corp. v. Rowlette, 228 F. 3d 718, 722 (6th Cir. 2000). In Kerry Steel, Inc. v. Paragon Industries,
Inc., 106 F.3d 147 (6th Cir. 1997), the plaintiff, a Michigan business, approached the defendant, an
Oklahoma company, offering to sell the defendant steel coils. The parties negotiated the purchase
by telephone and fax. The defendant then accepted the plaintiff’s offer by telephone and thereafter
sent purchase orders to the plaintiff in Michigan. After the defendant took possession of the steel
coils in Illinois, it refused to pay the full purchase price. The court held that, on these facts, the
plaintiff failed to demonstrate purposeful availment:
Paragon has no employees or offices in Michigan, and there has been no showing
that any Paragon employee has ever been in Michigan for the purpose of conducting
business there.
It was Kerry Steel that initially contacted Paragon in
Oklahoma—and Paragon responded without leaving home, as it were. . . . Kerry
Steele may or may not have reached out to Oklahoma, but in no way has it been
shown that Paragon reached out to Michigan.
The mere fact that Paragon entered into a contract with a Michigan
corporation does not mean that Paragon purposefully availed itself of the benefits
and protections of Michigan law.
Id. at 151 (internal quotation marks omitted). Similarly, in LAK, Inc. v. Deer Creek Enterprises, 885
F.2d 1293 (6th Cir. 2989), the Sixth Circuit held that the defendant, an Indiana partnership, could
not be subjected to personal jurisdiction in Michigan regarding a contract for the sale of Florida real
property to a Michigan partnership because its contacts with Michigan were “random” and
“attenuated.” Id. at 1301. The parties’ negotiations began in Florida, continued by phone between
Indiana and Michigan, and culminated in the plaintiff’s signing the contract in Michigan. The court
concluded: “There has been no showing that the object of Deer Creek’s contacts with Michigan was
to have ‘ongoing,’ or ‘far-reaching,’ or ‘continuous,’ or ‘substantial’ consequences in the Michigan
real estate market, thereby affording jurisdiction to the Michigan courts.” Id. at 1303.
9
In the instant case, the only contact Defendants Waller and Matrix have with Michigan is
that they entered into a contract with a Michigan business for the purchase of personal property in
Texas.5 The contract was negotiated in Texas and was to be performed in Texas. There is no
indication that Defendants traveled to Michigan to negotiate the contract, nor did they reach out to
Plaintiffs in Michigan. Thus, Defendants’ contacts with Michigan are even more “fortuitous” or
“attenuated” than those of the defendants in Kerry Steel, Inc. and LAK, Inc. See Walden v. Fiore,
__ U.S. __, 134 S. Ct. 1115, 1122 (2014) (noting that “the plaintiff cannot be the only link between
the defendant and the forum,” but instead, “it is the defendant’s conduct that must form the
necessary connection with the forum state that is the basis for its jurisdiction over him”). Having
concluded that Plaintiffs have failed to demonstrate purposeful availment, the Court need not
consider the second and third parts of the Mohasco test.
C.
Improper Venue
Defendants finally contend that venue in this district is improper. The Court agrees.
Pursuant to the federal venue statute, venue is proper in
(1) a judicial district in which any defendant resides, if all defendants are
residents of the State in which the district is located;
(2) a judicial district in which a substantial part of the events or omissions
giving rise to the claim occurred, or a substantial part of the property that is the
subject of the action is situated; or
(3) if there is no district in which an action may otherwise be brought as
provided in this section, any judicial district in which any defendant is subject to the
court’s personal jurisdiction with respect to such action.
5
Defendant Elite was not a party to the Agreement. Therefore, it has no contacts whatsoever with Michigan
relating to Plaintiffs’ claims.
10
28 U.S.C. § 1391(b). Applying this statute to the facts of the case, venue would be proper in Texas,
where a substantial part of the events or omissions giving rise to Plaintiffs’ claims occurred, or
possibly in Louisiana, where Defendant Holland resides. However, venue is not proper in this
district. Plaintiffs’ reliance on Michigan’s venue statute is misplaced because “[i]n a diversity case,
venue is determined according to 28 U.S.C. § 1391(b).” Great Lakes Paper Stock Corp. v. Buffalo
Recycling Enters. LLC, No. 13-CV-14112, 2014 WL 495421, at *3 (E.D. Mich. Feb. 6, 2014).6
III. CONCLUSION
For the foregoing reasons, the Court will grant Defendants’ motion and dismiss Defendants
Matrix, Elite and Waller from this case.
An Order consistent with this Opinion will enter.
Dated: December 18, 2014
/s/ Gordon J. Quist
GORDON J. QUIST
UNITED STATES DISTRICT JUDGE
6
Plaintiffs’ reference to the moving party’s burden on a motion to transfer venue misses the mark. Defendants
are asking the Court to dismiss the case based on improper venue, not to transfer the case to a more convenient venue
pursuant to 28 U.S.C. § 1404(a). In fact, the Court could not order such a transfer because to do so venue must be proper
in the transferor court. Van Dusen v. Barrack, 376 U.S. 612, 634, 84 S. Ct. 805, 818 (1964).
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