CDM Investment Group, Inc. et al v. Sandoval et al

Filing 41

MEMORANDUM AND ORDER - The Magistrate Judge's Findings and Recommendation, ECF No. 40 , are adopted in their entirety. The Motion to Remand, ECF No. 30 , filed by Plaintiffs CDM Investment Group, Inc., and Airtite, Inc., is denied. The Motion to Dismiss, ECF No. 18 , filed by Defendants Dustin Sandoval, Ivan Meiring, and Integrated Specialty Contractors, LLC, is granted. The above-captioned case is dismissed, without prejudice. A separate judgment will be entered. Ordered by Chief Judge Laurie Smith Camp. (LKO)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA

CDM INVESTMENT GROUP, INC., a
Nebraska Corporation; and AIRTITE,
INC., a Nebraska Corporation;

8:18CV43

Plaintiffs,
MEMORANDUM
AND ORDER

vs.
DUSTIN SANDOVAL, IVAN MEIRING,
and INTEGRATED SPECIALTY
CONTRACTORS, LLC, an Illinois
Limited Liability Company;
Defendants.

Before the Court are the Findings and Recommendation of Magistrate Judge
Susan M. Bazis, ECF No. 40, recommending that the Motion to Remand, ECF No. 30,
filed by Plaintiffs CDM Investment Group, Inc. (CDM), and Airtite, Inc., doing business as
E&K of Chicago (E&K), be denied. The parties filed no objections to the Magistrate
Judge’s Findings and Recommendation and the Court adopts them in their entirety. Also
before the Court is the Motion to Dismiss or, in the Alternative, to Transfer, ECF No. 18,
filed by Defendants Dustin Sandoval, Ivan Meiring, and Integrated Specialty Contractors,
LLC. For the reasons stated below, the Motion to Dismiss will be granted.
BACKGROUND
The following facts are those contained in the parties’ briefs supported by citations
to the pleadings, affidavits, and exhibits, and any factual disputes are, for purposes of this
Motion, resolved in favor of Plaintiffs.

E&K is a subsidiary of E&K Companies, Inc., which is a subsidiary of CDM. Each
is a Nebraska corporation, and CDM and Airtite are in the construction and project
management industry. E&K maintains an office in Elmhurst, Illinois.1 Sandoval began
his employment with both E&K and CDM on July 1, 2001, and Meiring began his
employment with the companies on April 4, 2012. Throughout their employment with E&K
and CDM, Sandoval and Meiring resided and worked in Illinois, but occasionally made
work-related trips to Nebraska. Meiring attended several education committee meetings
in Nebraska between April 2014 and October 2015. Sandoval traveled to Nebraska for
training, participated in management phone calls with Nebraska personnel, and attended
education committee meetings in Nebraska. They also “contacted persons in Nebraska
for IT and administrative support with CDM.” Pl.’s Br., ECF No. 33, Page ID 312.
At the beginning of their employment, Sandoval and Meiring were required to enter
into Confidentiality and Conflict of Interest Agreements, and when each of them
eventually purchased shares of CDM, they entered into Shareholder Buy-Sell
Agreements.

Sandoval Confidentiality Agr., ECF No. 9-1, Page ID 96; Meiring

Confidentiality Agr., ECF No. 9-1, Page ID 81; Sandoval Shareholder Agr., ECF No. 9-1,
Page ID 85; Meiring Shareholder Agr., ECF No. 9-1, Page ID 71.
Sandoval achieved the positions of Chief Procurement Officer for CDM and Vice
President of Sales for E&K. Meiring became the Senior Estimator/Sales Manager and
managed E&K’s employees. They both voluntarily resigned their positions on January
22, 2018, to begin working at a competing construction company they formed in

The Magistrate Judge, in her Findings and Recommendation, concluded that E&K’s principal
place of business was in Kansas. ECF No. 40.
1

2

September 2017 called Integrated Specialty Contractors, LLC (Integrated). Integrated is
an Illinois limited liability company and has its principal place of business in Illinois.
After Sandoval and Meiring resigned their positions and began working at
Integrated, Plaintiffs initiated this action. They asserted claims for breach of contract
against Sandoval and Meiring and breach of fiduciary duty against Sandoval, Meiring,
and Integrated. These claims are based on Sandoval’s and Meiring’s creation of, and
current employment with, a competing company—Integrated—while they were still
employees of Plaintiffs and shareholders of CDM. In Defendants’ pending Motion, they
ask the Court to dismiss this action under Federal Rule of Civil Procedure 12(b)(2)
because they are not subject to personal jurisdiction in Nebraska. In the alternative,
Defendants ask that this case be transferred to the Northern District of Illinois under 28
U.S.C. § 1404(a).
STANDARD OF REVIEW2
“When challenged, ‘the plaintiff bears the burden to show that jurisdiction exists.”
Aly v. Hanzada for Imp. & Exp. Co., LTD, 864 F.3d 844, 848 (8th Cir. 2017) (quoting
Fastpath, Inc. v. Arbela Techs. Corp., 760 F.3d 816, 819 (8th Cir. 2014)). “To successfully
survive a motion to dismiss challenging personal jurisdiction, a plaintiff must make a prima
facie showing of personal jurisdiction over the challenging defendant.” Fastpath, 760 F.3d
at 820 (citing K—V Pharm. Co. v. J. Uriach & CIA, S.A., 648 F.3d 588, 591 (8th Cir.
2011)). “A plaintiff’s prima facie showing ‘must be tested, not by the pleadings alone, but
by affidavits and exhibits supporting or opposing the motion.” Fastpath, 760 F.3d at 820

2

The Court will not state the standard of review for a motion to transfer under 28 U.S.C. § 1404(a)
because it concludes that the Defendants are not subject to personal jurisdiction in the State of Nebraska.

3

(internal quotations omitted). If no hearing is held, the evidence must be viewed “in a
light most favorable to the plaintiff” and factual disputes are resolved in the plaintiff’s favor.
Id. Plaintiffs cannot shift the burden of proof to the party challenging jurisdiction. Id.
DISCUSSION
The Court will grant Defendants’ Motion to Dismiss because Plaintiffs have failed
to make a prima facie showing of personal jurisdiction over Defendants.3
In determining whether personal jurisdiction over a nonresident defendant exists,
the Court must determine whether: (1) the requirements of Nebraska’s long-arm statute,
Neb. Rev. Stat. § 25-536,4 are satisfied; and (2) the exercise of jurisdiction is permitted
by the Due Process Clause of the Fourteenth Amendment. See Coen v. Coen, 509 F.3d
900, 905 (8th Cir. 2007).

Because § 25-536 extends jurisdiction over nonresident

defendants to the fullest degree allowed by the Due Process Clause, Pecoraro v. Sky
Ranch for Boys, Inc., 340 F.3d 558, 561 (8th Cir. 2003), the Court need only determine
whether the assertion of jurisdiction offends constitutional limits.
The Supreme Court “recognize[s] two types of personal jurisdiction: ‘general’
(sometimes called ‘all-purpose’) jurisdiction and ‘specific’ (sometimes called ‘case-linked’)
jurisdiction.” Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773, 1779-80 (2017)
(citing Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011)); see
also BNSF Ry. Co. v. Tyrrell, 137 S. Ct. 1549, 1558 (2017). “‘Specific’ or ‘case-linked’

3

No hearing, evidentiary or otherwise, was held on the pending Motion.

“A court may exercise personal jurisdiction over a person . . . [w]ho has any other contact with or
maintains any other relation to this state to afford a basis for the exercise of personal jurisdiction consistent
with the Constitution of the United States.” Neb. Rev. Stat. § 25-536.
4

4

jurisdiction ‘depends on an affiliation[n] between the forum and the underlying controversy
. . . .’” Walden v. Fiore, 571 U.S. 277, 283 n.6 (2014) (quoting Goodyear Dunlop Tires
Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011)). “This is in contrast to ‘general’ or
‘all purpose’ jurisdiction, which permits a court to assert jurisdiction over a defendant
based on a forum connection unrelated to the underlying suit (e.g., domicile).” Walden,
571 U.S. at 283 n.6. Under either theory, due process requires that a nonresident
defendant 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)).
A. General Jurisdiction
Plaintiffs argue that the Defendants all “have substantial continuous and
systematic contacts with the State of Nebraska sufficient [for the Court] to exercise
personal jurisdiction.” Pl.’s Br., ECF No. 33, Page ID 316. Having substantial continuous
and systematic contacts with the forum implicates general jurisdiction. See BNSF Ry.
Co., 137 S. Ct. at 1558. However, the Supreme Court has clarified that, with respect to
corporations, “the inquiry under Goodyear is not whether a foreign corporation’s in-forum
contacts can be said to be in some sense ‘continuous and systematic,’ it 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, 571 U.S. at 138 (quoting Goodyear,
564 U.S. at 920) (emphasis added); 4A Charles Alan Wright et al., Federal Practice and
Procedure § 1069.5 (4th ed. 2015) (“[B]oth types of defendants [individuals and
corporations] are presumably subject to the same requirement that their contacts with the

5

forum state must be so continuous and systematic as to render them essentially at home
there[.]”).
“For an individual, the paradigm forum for the exercise of general jurisdiction is the
individual’s domicile; for a corporation, it is an equivalent place, one in which the
corporation is fairly regarded as at home.” Daimler, 571 U.S. at 137 (citing Goodyear,
564 U.S. at 923-24). “The ‘paradigm’ forums in which a corporate defendant is ‘at home’
. . . are the corporation’s place of incorporation and its principal place of business.” BNSF
Ry. Co., 137 S. Ct. at 1558 (quoting Daimler, 571 U.S. at 137).
Integrated is an Illinois limited liability company with its principal place of business
in Illinois, and Sandoval and Meiring are individuals who permanently reside in Illinois.
Notice of Removal ¶¶ 7-9, ECF No. 1, Page ID 2; Comp. ¶¶ 3-5, ECF No. 1, Page ID 6.
As such, Nebraska is not the paradigm forum for the exercise of general jurisdiction over
any of the Defendants. Although the paradigm forum may not be the only appropriate
forum, see Daimler, 571 U.S. at 137, the record clearly shows none of the Defendants
have affiliations with Nebraska that are “so continuous and systematic as to render them
essentially at home” in this forum. BNSF Ry. Co., 137 S. Ct. at 1558. Defendants are,
therefore, not subject to the Court’s general personal jurisdiction.
B. Specific Jurisdiction
Specific jurisdiction is “very different” from general jurisdiction. Bristol-Meyers
Squibb Co., 137 S. Ct. at 1780. “In order for a state[5] court to exercise specific jurisdiction,

“[W]hen a federal court relies on a state long-arm statute . . ., personal jurisdiction must also be
consistent with the Fourteenth Amendment due process principles that would apply in state court.” 4
Charles Alan Wright et al., Federal Practice and Procedure § 1068 (4th ed. 2015).
5

6

‘the suit’ must ‘aris[e] out of or relat[e] to the defendant’s contacts with the forum.” Id.
(quoting Daimler, 571 U.S. a 127) (emphasis in original). “[T]here must be ‘an affiliation
between the forum and the underlying controversy, principally, [an] activity or an
occurrence that takes place in the forum State.’” Bristol-Meyers Squibb Co., 137 S. Ct.
at 1780 (quoting Goodyear, 564 U.S. at 919). Accordingly, the “inquiry whether a forum
State may assert specific jurisdiction over a nonresident defendant ‘focuses on the
relationship among the defendant, the forum, and the litigation.’” Walden, 571 U.S. at
284 (quoting Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 775 (1984)).
“Sufficient minimum contacts requires some act by which the defendant ‘purposely
avails itself of the privilege of conducting activities within the forum State[.]’” Fastpath,
Inc. v. Arbela Techs. Corp., 760 F.3d 816, 821 (8th Cir. 2014) (quoting J. McIntyre Mach.,
Ltd. v. Nicastro, 564 U.S. 873, 880 (2011)). “For a State to exercise jurisdiction consistent
with due process, the defendant’s suit-related conduct must create a substantial
connection with the forum State.” Walden, 571 U.S. at 284. The “‘minimum contacts’
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. “[T]he plaintiff cannot be the only
link between the defendant and the forum. Rather, 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.” Id.
Plaintiffs did not identify any contacts that Integrated has had with Nebraska since
the company’s inception in September of 2017; thus, the Court lacks specific personal
jurisdiction over this defendant. With respect to Sandoval and Meiring, Plaintiffs first
argue that their history of work-related trips to Nebraska and communications with CDM
7

personnel in Nebraska throughout their employment subjects them to the Court’s
personal jurisdiction. Plaintiffs have made no showing, however, that this action arises
out of or relates, in any way, to Sandoval’s and Meiring’s work-related trips to Nebraska
or their communications with CDM personnel in Nebraska. This case arises out of their
creation of a competing company in Illinois, under Illinois law, while they were still
employees of E&K and employee-shareholders of CDM, not their work-related conduct in
Nebraska. See Comp., ECF No. 1-1. Thus, the work-related trips and communications
are not relevant contacts for purposes of specific personal jurisdiction.
Plaintiffs also argue Sandoval and Meiring are subject to the Court’s personal
jurisdiction because they were employees and shareholders of Nebraska companies and
the Shareholder Agreement’s choice-of-law clause states that Nebraska law governs the
contract.

A choice-of-law clause “is not a determinative factor in establishing

jurisdiction[,]” it may only “provide further evidence of a defendant’s deliberate affiliation
with the forum State and the reasonable foreseeability of possible litigation there.”
Fastpath, 760 F.3d at 821-22 (internal quotations omitted). However, Sandoval’s and
Meiring’s only other affiliations with the forum are their employment by, and shareholder
relationships with, Nebraska companies, which are not sufficient to confer specific
personal jurisdiction. Walden, 571 U.S. at 286 (“[A] defendant’s relationship with a
plaintiff or third party, standing alone, is an insufficient basis for jurisdiction.”); see also id.
(citing Burger King v. Rudzewicz, 471 U.S. 462, 478 (1985) (Contracting with a party in
the form does not, by itself, establish sufficient minimum contacts in the forum.)); Shaffer
v. Heitner, 433 U.S. 186, 216 (1977) (Owning shares of a corporation located in a
particular forum does not subject the shareholder to personal jurisdiction in that forum.).
8

Thus, the choice-of-law clause and employee-shareholder relationships do not establish
sufficient minimum contacts with Nebraska such that Sandoval and Meiring are subject
to the Court’s specific personal jurisdiction.
Because the Defendants are not subject to either general or specific personal
jurisdiction in Nebraska, this case will be dismissed.
Accordingly,
IT IS ORDERED:
1.

The Magistrate Judge’s Findings and Recommendation, ECF No. 40, are
adopted in their entirety;

2.

The Motion to Remand, ECF No. 30, filed by Plaintiffs CDM Investment
Group, Inc., and Airtite, Inc., is denied;

3.

The Motion to Dismiss, ECF No. 18, filed by Defendants Dustin Sandoval,
Ivan Meiring, and Integrated Specialty Contractors, LLC, is granted;

4.

The above-captioned case is dismissed, without prejudice; and

5.

A separate judgment will be entered.

Dated this 17th day of July, 2018.

BY THE COURT:
s/Laurie Smith Camp
Chief United States District Judge

9