Guidry et al v. Seven Trails West, LLC et al

Filing 37

MEMORANDUM AND ORDER IT IS HEREBY ORDERED that defendant Allegis Multifamily Trust, L.P.'s Motion to Dismiss for Lack of Personal Jurisdiction (Doc. #19) is GRANTED. IT IS FURTHER ORDERED that plaintiffs' claims against defendant Allegis Multifamily Trust, L.P., are hereby dismissed without prejudice. Granting 19 Motion to Dismiss Case. Signed by Magistrate Judge Frederick R. Buckles on 5/6/213. (NCL)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
JOHN GUIDRY, et al.,
Plaintiffs,
v.
SEVEN TRAILS WEST, LLC,
et al.,
Defendants.

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No.

4:12CV1652 FRB

MEMORANDUM AND ORDER
Presently pending before the Court is defendant Allegis
Multifamily Trust, L.P.’s Motion to Dismiss for Lack of Personal
Jurisdiction (Doc. #19).

All matters are pending before the

undersigned United States Magistrate Judge, with consent of the
parties, pursuant to 28 U.S.C. § 636(c).
Plaintiffs John Guidry and Simul-Vision Cable Systems,
Ltd., bring this fraudulent transfer action against defendants
Seven Trails West, LLC (Seven Trails); UBS Realty Investors, LLC
(UBS); and Allegis Multifamily Trust, L.P. (AMT), alleging that
defendants fraudulently caused assets to be transferred from Seven
Trails to AMT so as to avoid plaintiffs’ collection of a monetary
debt owed to them by Seven Trails as a result of a state court
judgment.

Plaintiffs also allege that defendants UBS and AMT are

alter egos of defendant Seven Trails and thus bear the legal duty
to

pay

the

judgment

owed

by

Seven

Trails

to

plaintiffs.

Plaintiffs, Missouri residents, originally brought this action in

the Circuit Court of St. Louis County, Missouri.

Defendant Seven

Trails, a Delaware corporation, removed the cause to this Court on
September 14, 2012, invoking this Court’s diversity jurisdiction.
Defendants UBS and AMT, businesses incorporated in the States of
Massachusetts and Delaware, respectively, consented to the removal
of the matter to this Court.

Inasmuch as the amount in controversy

exceeds $75,000.00, this Court has subject matter jurisdiction over
the cause.

28 U.S.C. §§ 1332(a), 1441.
Defendant AMT now seeks to dismiss plaintiffs’ claims

pursuant to Fed. R. Civ. P. 12(b)(2), arguing that this Court lacks
personal jurisdiction over AMT.

Plaintiffs have responded to the

motion to which defendant has replied.

For the following reasons,

defendant AMT’s argument is well taken, and plaintiffs’ claims
against AMT in this action should be dismissed without prejudice.
In bringing this cause of action, plaintiffs bear the
ultimate burden of proving jurisdiction.

To defeat a motion to

dismiss for lack of personal jurisdiction, plaintiffs need only
make a prima facie showing of jurisdiction.

Romak USA, Inc. v.

Rich, 384 F.3d 979, 983 (8th Cir. 2004); Dakota Indus., Inc. v.
Dakota Sportswear, Inc., 946 F.2d 1384, 1387 (8th Cir. 1991).

In

determining such a motion, the Court must view the pleadings,
affidavits and other evidence in a light most favorable to the
nonmoving party.

Romak USA, 384 F.3d at 983; Dakota Indus., 946

F.2d at 1387 (citing Watlow Elec. Mfg. v. Patch Rubber Co., 838

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F.2d 999, 1000 (8th Cir. 1988)); Aaron Ferer & Sons Co. v.
Diversified Metals Corp., 564 F.2d 1211, 1215 (8th Cir. 1977); see
also Dever v. Hentzen Coatings, Inc., 380 F.3d 1070, 1072-73 (8th
Cir. 2004) (Court may look to matters outside the pleadings to
determine whether personal jurisdiction exists).
The information and evidence before the Court on the
instant motion, viewed in a light most favorable to plaintiffs,
show the following relevant facts:
In 1999, defendant Seven Trails purchased property in St.
Louis County, Missouri, known as Seven Trails Apartments (the
Apartments).

Defendant UBS, a Massachusetts company, is the non-

member manager of Seven Trails and has the right, power and
authority to act on behalf of Seven Trails.

Defendant AMT, a

Delaware limited partnership, is an operating partnership and the
sole member of Seven Trails.
Plaintiffs are cable service providers and entered into
a contract with Seven Trails to provide service to the tenants of
the Apartments.

In August 2001, Seven Trails terminated the

contract with plaintiffs, effective September 30, 2001.

On March

31, 2003, plaintiffs sued Seven Trails and UBS for breach of
contract.

On May 18, 2006, a jury in the Circuit Court of the City

of St. Louis, Missouri, found in favor of plaintiffs and awarded
$706,000.00 in damages.

On appeal, the Missouri Court of Appeals

reversed the judgment on damages and remanded the matter for a new

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trial thereon.

On remand, the trial court determined on the

existing record and without a new trial that Seven Trails caused
plaintiffs to suffer damages in the amount of $24,363.56, and
judgment was entered thereon.

The Missouri Court of Appeals

reversed this judgment and remanded the matter to the trial court
with specific instruction to conduct a new trial on the issue of
damages.

See generally Guidry v. Charter Commc’ns, Inc., 308

S.W.3d 765 (Mo. Ct. App. 2010).
In September 2011, a new trial on damages was held, and
a

jury

rendered

its

verdict

against

plaintiffs $1,675,000.00 in damages.
entered thereon.

Seven

Trails,

awarding

Judgment for plaintiffs was

On September 12, 2012, the Missouri Court of

Appeals affirmed this judgment of the trial court. Application for
transfer to the Missouri Supreme Court was denied on November 20,
2012.

Guidry v. Seven Trails W. LLC., 382 S.W.3d 191 (Mo. Ct. App.

2012) (order) (per curiam).
In the meanwhile, during the pendency of the state court
litigation, Seven Trails executed a sales agreement by which it
sold the Apartments to BPG Properties, Ltd., for $36,750,000.00.
BPG Properties is a Pennsylvania company. The sale and transfer of
the Apartments was completed in March 2006, subsequent to the
filing of plaintiffs’ lawsuit against Seven Trails and two months
prior to the commencement of the first trial.

Seven Trails

executed all documents in connection with the sale outside the

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State of Missouri, and the closing of the sale took place outside
the State of Missouri.

The proceeds from the sale were wired

directly to an account held by AMT at a Bank of America located in
Hartford, Connecticut.

Plaintiffs claim that as a result of its

sale of the Apartments and the transfer of the proceeds to AMT,
Seven Trails rendered itself insolvent and thus judgment-proof.
On April 7, 2007, Bank of America issued a letter of
credit to Seven Trails in the amount of $749,100.00 to secure the
appeal bond on the first appeal of underlying cause of action.
Plaintiffs claim the monies used to secure the letter of credit
were provided to Seven Trails by AMT, without any consideration
given by Seven Trails for this transfer of monies.

Plaintiffs

further claim that, upon being released from the appeal bond, Seven
Trails repaid AMT the full amount of $749,100.00.
Seven Trails and AMT have separate books and records and
maintain separate bank accounts.

AMT is not registered to do

business in Missouri and has never had an office or post office box
in Missouri.

AMT has never had any employees or officers in

Missouri, nor has had any bank accounts, advertising or real estate
in Missouri.

AMT has never transacted business in Missouri, nor

has ever made a contract in Missouri.

No partner of AMT is a

resident or citizen of Missouri.
Discussion
In determining whether plaintiffs have established a

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prima facie case of personal jurisdiction, the Court must examine
whether

Missouri’s

defendant AMT.
2002).

long-arm

statute

confers

jurisdiction

over

Porter v. Berall, 293 F.3d 1073, 1075 (8th Cir.

If so, the Court must then determine whether the exercise

of personal jurisdiction would violate the Due Process Clause of
the Constitution.

Id.; Austad Co. v. Pennie & Edmonds, 823 F.2d

223, 225 (8th Cir. 1987).

Because it is well settled that the

Missouri long-arm statute authorizes the exercise of jurisdiction
over non-residents to the extent permissible under the Due Process
Clause, the Court turns immediately to the question of whether the
assertion of personal jurisdiction over defendant AMT would violate
Porter, 293 F.3d at 1075.

the Due Process Clause.
Due

process

requires

sufficient

“minimum

contacts”

between a defendant and the forum state so that “maintenance of the
suit

does

not

offend

substantial justice.”

traditional

notions

of

fair

play

and

World-Wide Volkswagen Corp. v. Woodson, 444

U.S. 286, 291-92 (1980).

“[I]t is essential in each case that

there be some act by which the defendant purposefully avails itself
of the privilege 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).
The Supreme Court has recognized two theories pursuant to
which personal jurisdiction may be asserted over a non-resident
defendant:

general

jurisdiction

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and

specific

jurisdiction.

Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408,
414-15 (1984).

General jurisdiction may be established if the

defendant has carried on a continuous and systematic, even if
limited, part of its general business in the forum state.

In such

circumstances, the alleged injury need not have any connection with
the forum state.
779

(1984).

Keeton v. Hustler Magazine, Inc., 465 U.S. 770,
For

general

jurisdiction

to

attach,

however,

defendant's contacts must be more than “random, fortuitous or
attenuated.”
(1985);

Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475

Keeton,

465

U.S.

at

774.

Specific

jurisdiction

is

appropriate only if the injury giving rise to the lawsuit occurred
within or had some connection to the forum state, meaning that the
defendant purposely directed its activities at the forum state and
the claim arose out of or relates to those activities.
Corp., 471 U.S. at 472.

Burger King

See Steinbuch v. Cutler, 518 F.3d 580, 586

(8th Cir. 2008).
To evaluate the sufficiency of a defendant's contacts,
the Court considers five factors:

1) the nature and quality of the

defendant's contacts with the forum state; 2) the quantity of such
contacts; 3) the relation of the cause of action to the contacts;
4) the interests of the forum state in providing a forum for its
residents; and 5) the convenience of the parties.

Steinbuch, 518

F.3d at 586 (citing Burlington Indus., Inc. v. Maples Indus., Inc.,
97 F.3d 1100, 1102 (8th Cir. 1996)).

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The first three factors are

given primary importance.

Id.

The third factor, addressing the

relation of the cause of action to the contacts, applies only with
respect to specific jurisdiction and is immaterial in a general
jurisdictional inquiry.

Id. (citing Johnson v. Woodcock, 444 F.3d

953, 956 (8th Cir. 2006)).
In the instant cause, the information and evidence before
the Court show AMT not to have carried on any part of its general
business in the State of Missouri, let alone any business which can
be considered continuous and systematic.

As such, AMT’s general

conduct does not bring it within the general jurisdiction of this
forum state.
Nor can it be said that AMT’s alleged conduct in relation
to the instant cause of action brings it within the specific
jurisdiction

of

the

forum

state.

Plaintiffs

aver

that

they

suffered injury due to Seven Trails’ transfer of its Apartments
sale proceeds to an account held by AMT in Connecticut, upon the
direction of UBS.

Although plaintiffs’ injury is connected to the

State of Missouri inasmuch as their judgment against Seven Trails
arose out of a Missouri court and the alleged fraudulent transfer
of monies relates to Seven Trails’ sale of Missouri property, there
is no evidence that AMT participated in the sale, was involved in
the underlying cause of action from which plaintiffs obtained their
judgment

against

Seven

Trails,

or

was

activity directed at the State of Missouri.

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involved

in

any

other

The transfer of monies

to AMT’s account relating to Seven Trails’ sale of the Apartments
occurred entirely outside the State of Missouri.

AMT’s alleged

conduct here consists of merely holding a bank account in the State
of Connecticut to which monies held outside the State of Missouri
were transferred through a transaction involving Pennsylvania and
Delaware companies. By holding this account, AMT did not purposely
avail itself of the privileges of conducting activities within
Missouri,

thereby

Missouri law.
solely

on

invoking

the

privileges

and

protections

of

To maintain this suit in Missouri against AMT based

the

attenuated

impact

of

its

holding

of

an

extraterritorial bank account would offend traditional notions of
fair play and substantial justice.

Given AMT’s lack of contacts

with Missouri, the exercise of personal jurisdiction over AMT in
the circumstances of this case would violate constitutional due
process.

Peabody Holding Co., Inc. v. Costain Grp. PLC, 808 F.

Supp. 1425, 1436-37 (E.D. Mo. 1992).
The undersigned notes, however, that plaintiffs allege in
their Complaint that AMT is the alter ego of Seven Trails and thus
that they should be allowed to pierce the corporate veil to obtain
judgment against AMT for the debt owed by Seven Trails.

“Personal

jurisdiction can be properly asserted over a corporation if another
is acting as its alter ego, even if that alter ego is another
corporation.”

Epps v. Stewart Info. Servs. Corp., 327 F.3d 642,

649 (8th Cir. 2003).

If a resident corporation is the alter ego of

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the nonresident corporate defendant, the resident’s contacts are
those of the nonresident’s and due process is satisfied.

Id.

Such

assertion of personal jurisdiction over the nonresident defendant,
however, is contingent upon the ability of the plaintiffs to pierce
the corporate veil.

Id.

The law of the state of incorporation

determines whether and how to pierce the corporate veil.

Id.; In

re Bridge Info. Sys., Inc., 325 B.R. 824, 830-31 (Bankr. E.D. Mo.
2005).

See also Matson Logistics, LLC v. Smiens, No. 12-400

ADM/JJK, 2012 WL 2005607, at *6 (D. Minn. June 5, 2012); American
Recreation Prods., Inc. v. Novus Prods. Co., LLC, No. 4:06CV258DJS, 2006 WL 3247246, at *2 (E.D. Mo. Nov. 8, 2006).
Both defendants AMT and Seven Trails are incorporated
under the laws of the State of Delaware.

In order to state a claim

under Delaware law for piercing the corporate veil under the alter
ego theory, plaintiffs must show:

“‘(1) that the corporation and

its shareholders operated as a single economic entity, and (2) that
an overall element of injustice or unfairness is present.’”

In re

Opus East, L.L.C., 480 B.R. 561, 570 (Bankr. D. Del. 2012) (quoting
Trevino v. Merscorp, Inc., 583 F. Supp. 2d 521, 528 (D. Del.
2008)).1
between

To determine whether a “single economic entity” exists
the

corporation

and

its

1

shareholder/member,

that

is,

In Delaware, a member of a limited liability company is the
equivalent of a shareholder of a corporation. In re Opus East,
L.L.C., 480 B.R. at 570 n.4 (citing Del. Code Ann. tit. 6, § 18302).
In the instant cause, AMT is the only member of Seven
Trails.
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between Seven Trails and AMT, the Court must consider the following
factors:
corporate

“(1)

undercapitalization;

formalities;

(3)

(2)

nonpayment

failure

of

to

dividends;

observe
(4)

the

insolvency of the debtor corporation at the time; (5) siphoning of
the corporation's funds by the dominant stockholder; (6) absence of
corporate records; and (7) the fact that the corporation is merely
a

facade

for

stockholders.”

the

operations

of

the

dominant

stockholder

Trevino, 583 F. Supp. 2d at 528-29.

or

“‘While no

single factor justifies a decision to disregard the corporate
entity,’ some combination of the above is required, and ‘an overall
element of injustice or unfairness must always be present, as
well.’”

Id. at 529 (quoting United States v. Golden Acres, Inc.,

702 F. Supp. 1097, 1104 (D. Del. 1988)).

Delaware law requires

that the alleged fraud or injustice come from defendants’ use of
the corporate form itself as a sham, and not from the underlying
claim.

Marnavi S.P.A. v. Keehan, ___ F. Supp. 2d ___, No. 08-389-

LPS, 2012 WL 5275470, at *10 (D. Del. 2012).
Here, plaintiffs allege in their Complaint that AMT has
been the sole member of Seven Trails since August 1996 and that, as
the sole member, AMT “has complete control and dominion of Seven
Trails’ finances, businesses, and policies.”
Compl, Doc. #15 at paras. 45, 46.)

(Pltfs.’ Sec. Amd.

Plaintiffs further allege that

the conveyance of the Apartments assets to AMT rendered Seven
Trails undercapitalized and insolvent “in order to otherwise avoid

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Seven Trails’ legal duty to pay the judgment owed to Plaintiffs.”
(Id. at para. 48.)

Other than these conclusory allegations,

plaintiffs have presented no evidence demonstrating that AMT and
Seven Trails operated as a single economic entity or that they used
the

corporate

form

itself

as

a

sham.

“[M]ere

ownership

or

direction of a corporate entity, without more, is not sufficient to
establish that the corporate form should be disregarded.”

Marnavi

S.P.A., 2012 WL 5275470, at *9 (internal quotation marks and
citation omitted).

Upon the information and evidence before the

Court, plaintiffs are unable to pierce the corporate veil and are
therefore unable to establish personal jurisdiction over defendant
AMT through the conduct of Seven Trails.

Accordingly, for all of the foregoing reasons,
IT IS HEREBY ORDERED that defendant Allegis Multifamily
Trust, L.P.’s Motion to Dismiss for Lack of Personal Jurisdiction
(Doc. #19) is GRANTED.
IT IS FURTHER ORDERED that plaintiffs’ claims against
defendant Allegis Multifamily Trust, L.P., are hereby dismissed
without prejudice.

UNITED STATES MAGISTRATE JUDGE
Dated this

6th

day of May, 2013.

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