Alvion Properties, Inc. et al v. Weber et al

Filing 514

REPORT AND RECOMMENDATION: For the reasons stated in this report, the undersigned Magistrate Judge RECOMMENDS that third-party defendant Elizabeth Melland's motion for summary judgment 471 be GRANTED and that the third-party complaint against her be DISMISSED with prejudice. Signed by Magistrate Judge John S. Bryant on 2/13/12. (xc:Pro se party by email notification.)(tmw) Modified text on 2/14/2012 (tmw).

UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF TENNESSEE
NASHVILLE DIVISION
ALVION PROPERTIES, INC., SHIRLEY)
K. MEDLEY, and HAROLD M.
)
REYNOLDS,
)
)
Plaintiffs,
)
)
v.
)
)
BERND H. WEBER, RAYMONDE WEBER, )
CLAUDE J. CHAUVEAU, AMERICAN
)
GULF FINANCE CORP., ALVION
)
PARTNERS, LLC, AGF REALTY
)
SOLUTIONS, INC., TIMEDATA
)
HOLDINGS, LLC,
)
)
Defendants.
)
)
BERND H. WEBER, CLAUDE J.
)
CHAUVEAU,
)
)
Counter-Claimants,
)
)
Harold M. Reynolds, Shirley K. )
Medley, Donald M. Medley,
)
Farmers State Bank Of Alto Pass,)
Brad Henshaw, Allain de la
)
Motte, Elizabeth Melland,
)
Robert M. West, Melland Group, )
LLC,
)
Counter-Defendants.
)

NO. 3:08-0866
Judge Sharp/Bryant
Jury Demand

TO: The Honorable Kevin H. Sharp
REPORT AND RECOMMENDATION
Third-party defendant Elizabeth Melland has filed her
revived motion for summary judgment (Docket Entry No. 471). Thirdparty plaintiffs Bernd Weber and Claude Chauveau have not filed a
response

in

opposition

and

the

time

within

which

they

were

obligated to do so has expired.1
For the reasons stated below, the undersigned Magistrate
Judge recommends that third-party defendant Melland’s motion for
summary judgment be granted and the third-party complaint against
her dismissed with prejudice.
Standard of Review
A party may obtain summary judgment by showing “that
there is no genuine dispute as to any material fact and that the
movant

is

entitled

to

judgment

as

a

matter

of

law.

See

Fed.R.Civ.P. 56(a); Covington v. Knox County School Sys., 205 F.3d
912, 914 (6th Cir. 2000). The moving party bears the initial burden
of satisfying the court that the standards of Rule 56 have been
See Martin v. Kelley, 803 F.2d 236, 239 n.4 (6th Cir. 1986).

met.

The ultimate question to be addressed is whether there exists any
genuine dispute of material fact.

See Anderson v. Liberty Lobby,

Inc., 477 U.S. 242, 248 (1986); Covington, 205 F.3d at 914 (citing
Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986)).

If so,

summary judgment is inappropriate.
To

defeat

a

properly

supported

motion

for

summary

judgment, the nonmoving party must set forth specific facts showing
that there is a genuine issue of material fact for trial.

If the

party does not so respond, summary judgment will be entered if
appropriate.

Fed.R.Civ.P. 56(e).

The nonmoving party’s burden of

providing specific facts demonstrating that there remains a genuine

1

Mr. Weber and Mr. Chauveau did file a response in
opposition to an earlier version of Ms. Melland’s motion.
response is filed at Docket Entry No. 361.
2

This

issue of material fact for trial is triggered once the moving party
shows an absence of evidence to support the nonmoving party’s case.
Celotex, 477 U.S. at 325.

A genuine issue of material fact exists

“if the evidence is such that a reasonable jury could return a
verdict for the nonmoving party.”

Anderson, 477 U.S. at 248.

In

ruling on a motion for summary judgment, the Court must construe
the evidence in the light most favorable to the nonmoving party,
drawing all justifiable inferences in its favor.

See Matsushita

Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
Summary of Pertinent Factual Allegations
Third-party defendant Elizabeth Melland was first joined
as a party to this action upon the filing of a third-party
complaint (designated as a counterclaim) on November 4, 2010
(Docket Entry No. 322).

Ms. Melland is identified in paragraph 9

of this third-party complaint as a resident of Hillsboro, Oregon,
and the wife of third-party codefendant Allain De la Motte, “a
managing member, director and principal of Melland Group, LLC, and
as a co-conspirator against Counter-claimants.”

(Docket Entry No.

322 at 33). Unless the undersigned Magistrate Judge has overlooked
something in this prolix pleading, the only other place where Ms.
Melland is mentioned by name is in paragraph 31, where she is
alleged to have attended a “celebratory dinner” in November 2007,
to celebrate the closing of two “consulting agreements.”
Entry No. 322 at 38).

(Docket

Otherwise in this pleading Ms. Melland is

not mentioned by name, but is lumped together with third-party
defendants De la Motte, West and Melland Group, LLC under the
collective

label

“Melland

Counter-defendants.”
3

(Third-party

complaint, paragraph 14).
The undersigned Magistrate Judge summarizes the material
facts alleged in the 43-page counterclaim and third-party complaint
as follows:2
In June 2005, defendant Bernd H. Weber (“Mr. Weber”) was
introduced to Shirley Medley, Don Medley and Jack Reynolds, all
principals

in

Alvion

Properties,

Inc.

(“Alvion”).

Alvion

was

represented to own 4,500 acres of undeveloped land in Southwest
Virginia

that

contains

“vast

underlying

hundreds of millions of dollars.”

coal

reserves

worth

These Alvion principals entered

into certain agreements with Mr. Weber and Mr. Weber’s wholly-owned
company, American Gulf Finance Corporation (“AGFC”), pursuant to
which Mr. Weber and AGFC agreed to provide to Alvion certain
“consulting

and

business

development

services”

in

order

to

“monetize” the undeveloped coal reserves owned by the corporation.
Later, in September 2007, Weber persuaded Shirley Medley and Jack
Reynolds to execute certain irrevocable stock powers purporting to
transfer to Mr. Weber ownership of all Alvion stock.
Sometime before November 2007, and apparently in the
course of Mr. Weber’s duties as financial and business development
consultant to Alvion, Mr. Weber met representatives of the Melland
Group, LLC (“Melland”).

Melland is identified as a limited

liability company based in Oregon.

2

The Court in this summary has not attempted to include
every detail, but has sought to summarize those claims that may
implicate Ms. Melland.
4

According to paragraph 28 of the third-party complaint,
Mr. Weber on November 6, 2007, “negotiated and entered into a
personal consulting agreement with Melland and negotiated another
separate consulting agreement on behalf of Alvion with Melland.”
According to the third-party complaint, the consulting agreement
that Mr. Weber negotiated on behalf of Alvion required Alvion to
pay Melland $530,000 “in up-front licensing and consulting fees.”
Apparently at the same time, Mr. Weber entered into a separate
agreement between himself and Melland pursuant to which Melland
appointed Mr. Weber as its acting senior vice president and paid
Mr.

Weber

a

“consulting

fee”

of

$110,000.

(The

third-party

complaint fails to address what, at least to the undersigned
Magistrate Judge, appears to be a glaring and obvious conflict of
interest, in that Mr. Weber is receiving payment from both parties
to an agreement that Mr. Weber negotiated, apparently while acting
as an agent of one, or both parties.)

As consideration for the

money paid by Alvion to Melland pursuant to this agreement, Melland
was

to

provide

certain

consulting

and

technology

services,

including but not limited to access to “proprietary investment
technology” owned by Melland.
Sometime in November 2007, Mr. Weber was introduced by
the Melland principals to Claude Chauveau, identified as the
founder and chief executive officer of TimeData Corporation, a
financial information technology corporation.

Mr. Chauveau at the

time also served as an officer of Melland.
In November and December 2007, Mr. Weber and Mr. Chauveau
approached certain New York banks in an effort to license and
5

market the proprietary investment technology owned by Melland.
According to the third-party complaint, from December 2007 through
February 2008, Mr. Weber and Mr. Chauveau “shockingly received
extensive

negative

feedback

from

several

major

financial

institutions in New York that the Melland Counter-defendants’
alleged investment technology was complete nonsense and likely
illegal.” (Docket Entry No. 322 at 39). Mr. Weber and Mr. Chauveau
allege that, following these reports, they conducted an independent
investigation and confirmed that the Melland technology was neither
proprietary, a trade secret nor legitimately patentable. Mr. Weber
and Mr. Chauveau claim that on February 7, 2008, they met with
attorneys for Melland in New York and “unilaterally terminated
their

respective

defendants.”

relationships

with

the

Melland

Counter-

They also allegedly informed the Melland principals

that their claims regarding the Melland proprietary financial
technology were false and misleading.
According to the third-party complaint, the Melland
Counter-defendants thereafter (1) falsely claimed that Mr. Weber
and

Mr.

Chauveau

were

attempting

to

steal

Melland’s

alleged

proprietary investment technology; and (2) began to interfere
maliciously

with

Mr.

Weber

and

Mr.

Chauveau’s

business

relationships. Specifically, Mr. Weber and Mr. Chauveau claim that
the Melland principals, through an attorney, contacted the Alvion
principals and told them that Weber and Chauveau were attempting to
steal the Melland financial technology.
further

alleges

that

the

Melland

The third-party complaint

principals

apparently

also

convinced the Alvion principals that Mr. Weber and Mr. Chauveau
6

were

“dishonest

operators,”

and

that

they

were

also

likely

attempting to steal Alvion from the Alvion principals.
As a result of these allegedly false accusations by the
Melland principals, the third-party complaint alleges that on May
22,

2008,

the

Alvion

principals

“unilaterally

terminated

all

further communications with Counter-claimant Weber.” Mr. Weber and
Mr. Chauveau allege “that the Melland Counter-defendants and their
lawyers conspired with and duped the Alvion Counter-defendants and
Alvion into falsely believing that Counter-defendant Melland’s
allegations of proprietary investment technologies and claims
against Counter-claimants Weber and Chauveau were true.” (Docket
Entry No. 322 at 43).
Paragraph 49 of the third-party complaint alleges as
follows: “On August 12, 2008 having had enough of the Counterdefendants’ derisive and damaging collective adversarial actions
and interference, Counter-claimant Weber/AGFC finally made the
decision pursuant to the promissory estoppel doctrine to execute
AGFC’s legal rights vested in the Irrevocable Stock Powers (ISPs)
that counter-defendants Karnes Medley and Reynolds had executed on
September 3, 2007, which gave counter-claimant Weber/AGFC the right
to legally assume all voting and ownership control of Alvion.”
On August 14, 2008, the Melland principals filed suit
against Mr. Weber and Mr. Chauveau in the U.S. District Court for
the District of Oregon, alleging that Mr. Weber and Mr. Chauveau
“had stolen their fictitious proprietary investment technology.”
Less

than

a

month

later,

on

September

12,

2008,

the

Alvion

principals filed this action in this Court against Mr. Weber and
7

Mr. Chauveau alleging, among other things, that Mr. Weber and Mr.
Chauveau had “stolen Alvion from the Counter-defendants Karnes
Medley and Reynolds.” (Docket Entry No. 322 at 46).
The

third-party

counter-defendants

and

complaint

third-party

alleges

that

defendants,

all

of

the

collectively,

conspired together “to instigate, finance and file unsubstantiated
lawsuits against counter-claimant Weber, counter-claimant Chauveau
and others.” In addition it is alleged that the counter-defendants
and third-party defendants conspired to interfere unlawfully with
Mr. Weber’s legitimate ability to monetize the coal reserves of
Alvion; to cause unnecessary legal costs for Mr. Weber and Mr.
Chauveau; to discredit, defame and financially damage Mr. Weber and
Mr. Chauveau; and to attempt to convince this Court to declare the
irrevocable stock powers by which Mr. Weber obtained ownership of
all stock in Alvion to be fraudulent and legally null and void.
Analysis
In her motion for summary judgment, Ms. Melland argues
(1)

that

the

Court

lacks

personal

jurisdiction

over

her

in

Tennessee; (2) that service of process on her is insufficient; and
(3) that, based upon undisputed facts, she did not participate in
a conspiracy or otherwise engage in any wrongful acts toward thirdparty plaintiffs Weber and Chauveau.
Addressing service of process first, the undersigned
Magistrate Judge finds that there are at least genuine issues of
material fact regarding the adequacy of service, and therefore, Ms.
Melland’s arguments on this ground lack merit.

Ms. Melland in her

affidavit (Docket Entry No. 472) states that she has never been
8

properly served in this case as required by Federal Rule of Civil
Procedure 4 because she has been traveling outside the United
States since December 24, 2009.

The record contains a return of

service indicating that Ms. Melland was served with process by
means

of

United

States

mail,

certified

and

return

receipt

requested, addressed to her at 2460 SE Larkspur Court, Hillsboro,
Oregon 97123 (Docket Entry No. 335).

According to a copy of U.S.

Post Office records filed with the Court, this mail was delivered
and a notice left on November 12, 2010 (Id. at 10).
Rule
provides

4(e)

of

that

service

the
of

Federal

process

Rules

upon

of

an

Civil

Procedure

individual

may

be

accomplished through any of the means described in subsection (2)
or, according to subsection (1), by “following state law for
serving a summons in an action brought in courts of general
jurisdiction in the state where the district court is located or
where service is made.”

Although Rule 4 itself does not authorize

service of process by mail, the corresponding Tennessee state court
rule

does

permit

service

of

a

summons

and

complaint

upon

a

defendant by U.S. mail, registered return receipt or certified
return receipt.

Tenn. Rules of Civil Procedure 4.05(1)(a) and

4.04(10).
From

the

record

before

the

Court,

the

undersigned

Magistrate Judge finds that Ms. Melland was served by mail in
compliance with the provisions of Rule 4.05 of the Tennessee Rules
of Civil Procedure or, at a minimum, the record contains evidence
that at least gives rise to a disputed issue of material fact
relating to sufficiency of service of process.
9

Therefore, the

undersigned Magistrate Judge finds that, to the extent her motion
is premised upon insufficient service of process, her motion must
be denied.
Personal Jurisdiction and Evidence of Conspiracy.

Ms.

Melland also argues that this Court lacks personal jurisdiction
over her in Tennessee on the ground that her contacts with this
state are insufficient to justify requiring her to defend a lawsuit
here.

Paragraph 9 of the third-party complaint (Docket Entry No.

322 at 33) asserts that Ms. Melland is a resident of Hillsboro,
Oregon.
The Sixth Circuit has articulated a two-step inquiry to
determine whether a federal district court sitting in a diversityof-citizenship case can exercise personal jurisdiction over a
defendant: (1) whether the law of the state in which the district
court sits authorizes jurisdiction, and (2) whether the exercise of
jurisdiction comports with the Due Process Clause.

Brunner v.

Hampson, 441 F.3d 457, 463 (6th Cir. 2006) (citation omitted).

See

also Pickens v. Hess, 573 F.2d 380, 385 (6th Cir. 1978).
Tennessee’s long-arm statute subjects nonresident parties
to the jurisdiction of state and federal courts in Tennessee on any
claim arising from:
(1) the transaction of any business within this state;
(2) any tortious act or omission within this state;
(3) the ownership or possession of any interest in
property located within this state;
(4) entering into any contract of insurance, indemnity or
guaranty covering any person, property or risk located within this
10

state at the time of contracting;
(5) entering into a contract for services to be rendered
or for materials to be furnished in this state;
(6) any basis not inconsistent with the constitution of
this state or of the United States.
Tenn. Code Ann. § 20-2-214(a).
The Tennessee long-arm statute is construed to grant
jurisdiction fully to the limits of the Due Process Clause of the
Fourteenth Amendment. Pickens, 573 F.2d at 385. “The seminal case
in the Sixth Circuit for determining whether the exercise of
personal jurisdiction is consistent with due process is Southern
Machine Co. v. Mohasco Industries, Inc., 401 F.2d 374 (6th Cir.
1968).” Inter-City Products Corp. v. John Willey, Sr., et al., 149
F.R.D. 563, 571 (M.D. Tenn. 1993).
In her affidavit filed in support of her motion for
summary judgment (Docket Entry No. 472), Ms. Melland states that
she has never conducted or performed any of the activities listed
in the Tennessee long-arm statute that would support personal
jurisdiction over her here. This affidavit testimony is undisputed
by any sworn testimony in this record.
Third-party plaintiffs Weber and Chauveau, in their
response in opposition to Ms. Melland’s earlier motion for summary
judgment (Docket Entry No. 361), appeared to argue that personal
jurisdiction over Ms. Melland in Tennessee is premised upon their
allegations of the existence of a conspiracy, and that some of the
coconspirators committed acts within Tennessee.

However, Ms.

Melland’s supporting affidavit states that she is a “100% passive
11

investor” in Melland Group, LLC, that she has never performed any
management or made any decisions on behalf of this company, that
she had nothing to do with either this case or the case filed by
her husband against Mr. Weber and Mr. Chauveau in Oregon.
The Sixth Circuit has ruled that unsupported allegations
of the existence of a conspiracy are insufficient contacts to
justify the exercise of personal jurisdiction over a nonresident.
Chandler v. Barclays Bank PLC, 898 F.2d 1148, 1155 n. 3 (6th Cir.
1990).

Elsewhere the court has held that

“totally unsupported allegations of conspiracy cannot
constitute sufficient contacts . . . to justify an
exercise of personal jurisdiction . . . .
Similarly, the allegation of conspiratorial activities
with tortious consequences in the forum state is
insufficient to support jurisdiction under the long-arm
statute in the absence of some minimal factual showing of
. . . participation in the conspiracy.
Chrysler Corp. v. Fedders Corp., 643 F.2d 1229, 1237 (6th Cir.
1981).
As

referenced

elsewhere

in

this

report

and

recommendation, the only allegation in the third-party complaint of
any specific act by Ms. Melland is the claim that she attended a
“celebratory dinner” in Oregon in November 2007, which was attended
by Mr. Weber, Mr. Chauveau and others (Docket Entry No. 322 at 38).
Elsewhere in this lengthy third-party complaint Ms. Melland is not
mentioned specifically by name, but instead is lumped together with
others under the general, collective title of “Melland CounterDefendants.”

The undersigned Magistrate Judge finds that, in

12

addition

to

being

unsupported

by

any

sworn

testimony,

these

allegations lack even a minimal factual showing that Ms. Melland
participated in an alleged conspiracy and, therefore, they are
insufficient to support personal jurisdiction over her within
Tennessee.
For the foregoing reasons, the undersigned Magistrate
Judge finds that there are no genuine issues of material fact, that
Ms. Melland is entitled to judgment as a matter of law, that her
motion for summary judgment should be granted, and that the thirdparty complaint against her should be dismissed with prejudice.
RECOMMENDATION
For the reasons stated in this report, the undersigned
Magistrate Judge RECOMMENDS that third-party defendant Elizabeth
Melland’s motion for summary judgment (Docket Entry No. 471) be
GRANTED and that the third-party complaint against her be DISMISSED
with prejudice.
Under Rule 72(b) of the Federal Rules of Civil Procedure,
any party has fourteen (14) days from service of this Report and
Recommendation in which to file any written objections to this
Recommendation, with the District Court.

Any party opposing said

objections shall have fourteen (14) days from receipt of any
objections filed in this Report in which to file any responses to
said objections.

Failure to file specific objections within

fourteen (14) days of receipt of this Report and Recommendation can
13

constitute a waiver of further appeal of this Recommendation.
Thomas v. Arn, 474 U.S. 140 (1985), reh’g denied, 474 U.S. 1111
(1986).
ENTERED this 13th day of February 2012.
s/ John S. Bryant
JOHN S. BRYANT
United States Magistrate Judge

14