HomeStar Property Solutions, LLC v. Statebridge Company, LLC et al

Filing 48

Order Denying Defendants' Renewed Motion to Dismiss or to Transfer Venue 35 . (Written Opinion). Signed by The Hon. Paul A. Magnuson on 10/28/2013. (LLM)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA

HomeStar Property Solutions, LLC,
doing business as Energy REO
Solutions,

Civ. No. 13-1240 (PAM/SER)

Plaintiff,

v.

MEMORANDUM AND ORDER

Statebridge Company, LLC, and
Geneva House II, LLC,
Defendants.

This matter is before the Court on Defendant Geneva House II, LLC’s Motion to
Dismiss or, alternatively, to Transfer Venue, and on Defendant Statebridge Company’s
partial motion to dismiss. For the reasons that follow, the Motions are denied.
BACKGROUND
Plaintiff HomeStar Property Solutions entered into an alleged joint venture agreement
with Defendant Geneva House II and a non-party, RebuildUS, to buy and rehabilitate
foreclosed residential properties throughout the United States and re-sell them at a profit.
(Am. Compl. ¶ 4.) HomeStar was to provide the construction and renovation of the
properties; Geneva House provided financing and RebuildUS identified the properties to be
purchased. (Id.) Kevin Kanouff communicated with the other joint venturers on behalf of
Geneva House; Mr. Kanouff is also an officer of Defendant Statebridge Company, and his

communications regarding the joint venture were sent from his Statebridge e-mail account
and often included a Statebridge signature block. HomeStar alleges “[o]n information and
belief” that Geneva House is an alter ego of Statebridge. (Id. ¶ 3.)
HomeStar alleges that it performed nearly $500,000 worth of repairs for which it has
not been compensated. (Id. ¶¶ 7-8.) According to HomeStar, all of the sale proceeds for the
joint venture’s properties were paid to Statebridge. (Id. ¶ 17.)
Geneva House is a Colorado company; Statebridge is registered to do business in all
50 states and is licensed in Minnesota. (Id. ¶¶ 9-10.) Geneva House contends that this Court
lacks personal jurisdiction over it and seeks to have the action dismissed or transferred to
Colorado. Geneva House also appears to argue that the action should be dismissed for
improper venue. None of the residential properties at issue is located in Colorado or in
Minnesota. For its part, Statebridge contends that HomeStar has not sufficiently pled that
Statebridge is part of the alleged joint venture, such that the counts of the Complaint that
arise out of the alleged joint venture must be dismissed.
DISCUSSION
A.

Personal Jurisdiction
The Court can exercise personal jurisdiction over a nonresident defendant if

(1) Minnesota’s long-arm statute, Minn. Stat. § 543.19, is satisfied; and (2) the exercise of
personal jurisdiction does not offend due process. Stanton v. St. Jude Med., Inc., 340 F.3d
690, 693 (8th Cir. 2003). Because Minnesota’s long-arm statute extends the personal
jurisdiction of Minnesota courts as far as due process allows, In re Minn. Asbestos Litig., 552
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N.W.2d 242, 246 (Minn. 1996), the Court need only evaluate whether the exercise of
personal jurisdiction comports with the requirements of due process. Guinness Import Co.
v. Mark VII Distribs., Inc., 153 F.3d 607, 614 (8th Cir. 1998). It is a plaintiff’s burden to
demonstrate, “by a prima facie showing, that personal jurisdiction exists.” Stevens v.
Redwing, 146 F.3d 538, 543 (8th Cir. 1998)
Due process requires that the defendant have “certain minimum contacts” with the
forum state “such that the 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 (1945)
(citation omitted). Sufficient minimum contacts exist when the “defendant’s conduct and
connection with the forum State are such that [it] should reasonably anticipate being haled
into court there.” World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980).
There must be some act by which the defendant “purposefully avails itself of the privileges
of conducting activities within the forum State, thus invoking the benefits and protections of
its laws.” Hanson v. Denckla, 357 U.S. 235, 253 (1958). In contrast, contacts that are
merely random, fortuitous, attenuated, or that are the result of “unilateral activity of another
party or a third person” will not support personal jurisdiction. Burger King Corp. v.
Rudzewicz, 471 U.S. 462, 474 (1985) (citation omitted).
To determine the sufficiency of a defendant’s conduct with the forum state, the Court
examines five factors: (1) the nature and quality of the contacts; (2) the quantity of the
contacts; (3) the relation between the contacts and the action; (4) the forum state’s interest
in the litigation; and (5) the convenience of the parties. Epps v. Stewart Info. Servs. Corp.,
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327 F.3d 642, 648 (8th Cir. 2003). The third factor distinguishes between general and
specific jurisdiction. Wessels, Arnold & Henderson v. Nat’l Med. Waste, Inc., 65 F.3d 1427,
1432 (8th Cir. 1995). General jurisdiction is present whenever a defendant’s contacts with
the forum state are so “continuous and systematic” that it may be sued in the forum over any
controversy, independent of whether the cause of action has any relationship to the
defendant’s activities within the state. Helicopteros Nacionales de Columbia, S.A. v. Hall,
466 U.S. 408, 416 (1984). Specific jurisdiction refers to jurisdiction over causes of action
arising from or related to the defendant’s actions within the forum state. Burger King, 471
U.S. at 472-73. The fourth and fifth factors are secondary to the analysis. Minn. Min. &
Mfg. Co. v. Nippon Carbide Indus. Co., Inc., 65 F.3d 694, 697 (8th Cir. 1995). Here,
HomeStar does not contend that Geneva House is subject to the Court’s general jurisdiction,
but rather that the Court may exercise specific jurisdiction over Geneva House because this
case is related to Geneva House’s actions within Minnesota.
Despite Geneva House’s protestations to the contrary, this Court has jurisdiction over
the present controversy. Geneva House does not deny communicating repeatedly with
HomeStar in Minnesota regarding the alleged joint venture. Geneva House also does not
deny that it knew that HomeStar was a Minnesota company that would be organizing the
activities of the venture from its Minnesota offices. Although Geneva House, standing alone,
may not have sufficient contacts with Minnesota for the exercise of general jurisdiction,1 its

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If discovery bears out HomeStar’s contention that Geneva House is functionally
indistinct from Statebridge, then Statebridge’s contacts with Minnesota could be imputed to
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contacts are enough in nature, quality, and quantity for specific jurisdiction. Geneva House
“aimed its conduct at Minnesota, [it] intended to induce commercial activity in Minnesota,
[and] Minnesota was [at least one of] the focal point[s] for the alleged wrongdoing.” Jacobs
Trading, LLC v. Ningbo Hicon Int’l Indus. Co., 872 F. Supp. 2d 838, 847 (D. Minn. 2012)
(Ericksen, J.). HomeStar has established that Geneva House purposefully availed itself of
the privilege of conducting activities in Minnesota. See Hanson v. Denckla, 357 U.S. at 253.
Geneva House’s Motion to Dismiss is denied.
B.

Transfer
Geneva House contends that, even if a dismissal is not warranted, the case should be

transferred to the District of Colorado under § 1404(a).2 That section provides that “[f]or the
convenience of the parties and witnesses, in the interest of justice, a district court may
transfer any civil action to any other district or division where it might have been brought.”
28 U.S.C. §1404(a). The statute mandates three factors for a court to consider when
determining whether transfer is appropriate: (1) the convenience of parties; (2) the
convenience of witnesses; and (3) the interests of justice. However, a court is not limited to
considering only these three factors, because transfer determinations “require a case-by-case

Geneva House and the Court would have general jurisdiction over both entities.
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Geneva House also appears to contend that Minnesota is an improper venue for this
matter. But Geneva House misconstrues the requirements of § 1391. That section provides
that venue is proper in “a judicial district in which a substantial part of the events or
omissions giving rise to the claim occurred.” 28 U.S.C. § 1391. HomeStar has alleged that
a substantial part of the events in this case occurred in Minnesota, and thus venue is proper
here.
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evaluation of the particular circumstances at hand and a consideration of all relevant factors.”
Terra Int’l, Inc. v. Mississippi Chem. Corp., 119 F.3d 688, 691 (8th Cir. 1997).
“In general, federal courts give considerable deference to a plaintiff’s choice of
forum . . . .” Id. at 695; see also Christensen Hatch Farms, Inc. v. Peavey Co., 505 F. Supp.
903, 911 (D. Minn. 1981) (Renner, J.) (noting a “presumption in favor of a plaintiff’s choice
of forums”). Thus, the party seeking a transfer bears the burden of establishing that a change
of forum is appropriate. Id. Indeed, “unless the balance is strongly in favor of the defendant,
the plaintiff’s choice of forum should rarely be disturbed.” Gulf Oil Corp. v. Gilbert, 330
U.S. 501, 508 (1947). Further, “section 1404(a) provides for a transfer to a more convenient
forum, not to a forum likely to prove equally convenient or inconvenient, and a transfer
should not be granted if the effect is simply to shift the burden to the party resisting the
transfer.” Graff v. Qwest Commc’ns Corp., 33 F. Supp. 2d 1117, 1121 (D. Minn. 1999)
(Doty, J.).
Geneva House has not met its burden of establishing that a transfer is appropriate in
this case. It may be that most of Geneva House’s witnesses are located in Colorado, but it
is also true that most of HomeStar’s witnesses are located in Minnesota. Thus, a transfer to
Colorado would merely shift the inconvenience from Geneva House to HomeStar.
Moreover, the interests of justice, which is the factor that weighs “very heavily” in this
analysis, do not weigh in favor of a transfer. GMAC/Residential Funding Corp. v. The
Platinum Co. of Real Estate and Fin. Servs., Inc., Civ. No. 02-1224, 2003 WL 1572007, at
*2 (D. Minn. March 13, 2003) (Kyle, J.). A substantial part of the events giving rise to
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HomeStar’s claims occurred in, or have a significant connection to, Minnesota. That some
events also occurred in Colorado or elsewhere does not overcome the weight afforded to
HomeStar’s forum choice. There are no issues with this Court’s ability to apply the
applicable law, nor are there any obstacles to a fair trial or enforcement of a judgment. See
Terra Int’l, 199 F.3d at 696 (listing factors to be considered in evaluating interests of justice).
Geneva House has not established that a transfer is warranted. The Motion is therefore
denied.
C.

Motion to Dismiss for Failure to State a Claim
When evaluating a motion to dismiss under Rule 12(b)(6), the Court assumes the facts

in the Complaint to be true and construes all reasonable inferences from those facts in the
light most favorable to Plaintiff. Morton v. Becker, 793 F.2d 185, 187 (8th Cir. 1986).
However, the Court need not accept as true wholly conclusory allegations, Hanten v. Sch.
Dist. of Riverview Gardens, 183 F.3d 799, 805 (8th Cir. 1999), or legal conclusions Plaintiffs
draw from the facts pled. Westcott v. City of Omaha, 901 F.2d 1486, 1488 (8th Cir. 1990).
To survive a motion to dismiss, a complaint must contain “enough facts to state a claim to
relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 545 (2007).
Statebridge contends that HomeStar has failed to plead facts establishing six of its
claims against Statebridge. These claims are breach of joint venture agreement, breach of
joint enterprise agreement, breach of contract, promissory estoppel, accounting, and unjust
enrichment. According to Statebridge, the facts establish that Statebridge was not a party to
the joint venture agreement and thus cannot be liable under any theory for the alleged breach
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of that agreement.
As an initial matter, Statebridge cannot rely on the facts as it sees them to establish
its entitlement to a dismissal of HomeStar’s claims. This is a Motion to Dismiss. The Court
therefore takes the facts as pled and determines whether those facts plausibly support a cause
of action. That Mr. Kanouff disagrees with HomeStar’s characterization of his roles in
Statebridge, Geneva House, and the joint venture is not something the Court can consider on
a Motion to Dismiss.
Moreover, the facts to which Statebridge points as alleged support for its contention
that HomeStar concedes that Statebridge was not a party to the joint venture in fact point to
the opposite conclusion. Statebridge makes much of an e-mail referenced in the Amended
Complaint that outlines the profit-sharing for the joint venture and does not mention
Statebridge. (Breese Aff. (Docket No. 43-1) Ex. A.) But Mr. Kanouff sent the e-mail from
his Statebridge e-mail account with Statebridge’s address under his signature. Thus, it is a
plausible inference that Statebridge was involved, for example as a silent partner of Geneva
House or as an alter ego of Geneva House.
Similarly, the allegation that all of the proceeds from the joint venture were paid to
Statebridge shows that HomeStar’s claims plausibly allege Statebridge’s participation in, and
benefit from, the joint venture.
Statebridge also contends that HomeStar’s claim for a breach of joint enterprise fails
as a matter of law, because courts do not recognize joint ventures in this situation. But
HomeStar is entitled to plead in the alternative, and if it becomes clear through discovery that
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a joint-enterprise theory is not viable, Statebridge can move for summary judgment on that
claim. See Breeding v. Massey, 378 F.2d 171 (8th Cir. 1967) (noting that “the right of a
plaintiff to try his case on alternate theories has uniformly been upheld in the federal
courts”).
CONCLUSION
This Court has jurisdiction over Geneva House, and Minnesota is a convenient forum
in which to try the claims against Geneva House. Statebridge has failed to establish that any
of HomeStar’s claims should be dismissed.
Accordingly, IT IS HEREBY ORDERED that Defendants’ Renewed Motion to
Dismiss or to Transfer Venue (Docket No. 35) is DENIED.

Dated: October 28, 2013

s/ Paul A. Magnuson
Paul A. Magnuson
United States District Court Judge

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