Gaffney v. Shelton et al
Filing
20
MEMORANDUM OPINION AND ORDER granting in part and denying in part 5 Motion to Dismiss for Lack of Jurisdiction; motion is granted with leave to amend the complaint within 30 days as to claims made against Catherine Shelton; motion denied as to all other claims. Signed by Judge William K. Sessions III on 2/3/2012. (jam) Text clarified on 2/3/2012 (jlh).
UNITED STATES DISTRICT COURT
FOR THE
DISTRICT OF VERMONT
PATRICK GAFFNEY,
:
:
Plaintiff,
:
:
v.
:
:
NEAL SHELTON and CATHERINE
:
SHELTON, individually and
:
d/b/a NEAL’S VINTAGE GUITARS; :
NEAL’S MUSIC; and NICHOLAS
:
PANICCI,
:
:
Defendants.
:
Case no. 2:11-cv-189
Memorandum Opinion and Order:
Defendants’ Motion to Dismiss
Plaintiff Patrick Gaffney (“Gaffney”) has brought this
civil action against defendants Neal Shelton and Catherine
Shelton, individually and doing business as Neal’s Vintage
Guitars; Neal’s Music; and Nicholas Panicci (“Panicci”),
alleging breach of contract, unjust enrichment, consumer fraud,
and fraud in the inducement. Compl., ECF No. 1.
The claims stem
out of Shelton’s 2007 purchase of a 1959 sparkle blue Fender
Stratocaster electric guitar (“the Stratocaster”) from Panicci. 1
Subject matter jurisdiction is based on diversity pursuant to 28
U.S.C. § 1332.
1
Gaffney also named defendants Dan Duehren (“Duehren”)
and David Swartz (“Swartz”), the co-founders and operators of
California Vintage Guitar and Amp, whom he later dismissed
without prejudice on October 20, 2011 after they filed a motion
to dismiss. Notice of Dismissal, ECF No. 15.
Before the Court is the Defendants’ motion to dismiss for
lack of personal jurisdiction under Fed. R. Civ. P. 12(b)(2),
improper venue under Fed. R. Civ. P. 12(b)(3), and failure to
state a claim upon which relief can be granted pursuant to Fed.
R. Civ. P. 12(b)(6).
For the reasons that follow, the
Defendants’ motion to dismiss is DENIED as to claims made
against Neal Shelton, Neal’s Music, Neal’s Vintage Guitars and
Nicholas Panicci, and GRANTED with leave to amend as to claims
made against Catherine Shelton.
The Complaint fails to state a
claim for which relief can be granted against Catherine, and is
therefore dismissed with leave to amend within 30 days.
Factual Background
The following factual allegations, derived from Gaffney’s
Complaint, are taken as true for the purposes of evaluating the
motion to dismiss.
Gaffney is a resident of Putney, Vermont,
and an avid collector, seller and trader of vintage guitars and
related memorabilia.
Compl. ¶ 4, ECF No. 1.
Neal and Catherine
Shelton are residents of Huntington Beach, California.
According to the Complaint and materials filed in the Opposition
to the Motion to Dismiss, the Sheltons are dealers and retailers
of vintage guitars, and own and operate Neal’s Music and Neal’s
Vintage Guitars, a subsidiary of Neal’s Music, also in
2
Huntington Beach, California. 2
Compl. ¶ 6; Mem. in Opp’n to Mot.
to Dismiss Ex. 5, ECF No. 14-14.
Panicci is a resident of Los Angeles, California and a
dealer and collector of vintage guitars. Compl. ¶ 11.
Panicci
was the owner of the Stratocaster at the time it was sold to
Gaffney, and had previously placed the guitar with Mr. Shelton
to advertise.
Compl. ¶ 17.
Neal Shelton operates a website, “www.nealsmusic.com”, and
consumers are able to purchase goods directly from that site.
He has advertised individual guitars for sale on eBay,
gbase.com, and in Vintage Guitar Magazine.
Compl. ¶¶ 6-7;
Gaffney Decl. ¶¶ 8, 26, ECF No. 14-1.
Gaffney and Neal Shelton had conducted business prior to
the Stratocaster purchase.
In 2001 and 2002, Gaffney purchased
two guitars from Mr. Shelton.
At the time, Gaffney resided in
Vermont and Shelton shipped the guitars purchased to Vermont.
Gaffney Decl. ¶ 6-7.
Gaffney also made an offer on one of
Neal’s guitars advertised on eBay in February 2007.
Decl. ¶ 8.
Gaffney
During the same month Gaffney purchased the
Stratocaster, he bought an additional guitar belonging to
Panicci through Mr. Shelton, a 1968 purple Fender Telecaster,
2
Defendants dispute that Catherine Shelton is an owner
and operator of Neal’s Music.
3
which was paid for, shipped, and received by Gaffney without
complaint.
Gaffney Decl. ¶ 17.
I. The Blue Sparkle Fender Stratocaster
From June 2007 to September 2007, Neal Shelton advertised a
1959 Fender Stratocaster with blue sparkle finish in Vintage
Guitar Magazine, a magazine with national circulation.
12.
Compl. ¶
In July 2007, dismissed Defendants Swartz and Duehren, who
had previously assisted Gaffney in finding guitars to purchase,
emailed Gaffney pitching the Stratocaster.
They included
photographs and a history of the guitar with their email.
Compl. ¶¶ 13, 17.
Gaffney was aware that a similar but altered
version of the same guitar was being advertised within the
vintage guitar community, but was assured by Swartz and Duehren
that this guitar was in original condition.
Compl. ¶ 14.
Gaffney also received a phone call from Mr. Shelton about the
Stratocaster as well as additional vintage instruments. 3
¶ 15.
Compl.
Panicci called Gaffney a few days later, claiming
ownership of the Stratocaster, and assuring Gaffney of the
guitar’s original condition.
Compl. ¶ 16.
Neal Shelton,
working as Panicci’s agent, contacted Gaffney again, this time
via email, to reassure Gaffney of the original condition of the
guitar as well, and stated the guitar’s asking price as
3
Neal Shelton counters that all contact between
himself and Gaffney was initiated by the Plaintiff. Neal
Shelton Decl. ¶25, ECF No. 5-2.
4
$225,000.
Compl. ¶ 17.
However, Gaffney asserts that at this
time, Panicci had been told by vintage guitar dealers and
experts that the Stratocaster was likely not an original, that
it had previously been refinished, and that the neck of the
guitar was not original. Compl. ¶ 16.
On July 24, 2007, Panicci sent Gaffney a package of photos
via Federal Express, showing the Stratocaster in the original
dark blue color.
Compl. ¶ 18.
After receiving the photos,
Gaffney and Panicci agreed on a purchase price of $150,000 for
the guitar, case, and related memorabilia, to be paid as
$130,000 in wired cash, and three additional guitars Gaffney was
to send to Panicci totaling $25,000 in value.
To make up the
$5000 disparity, Panicci was to pay Gaffney the difference.
Compl. ¶ 19.
In addition, the parties discussed and agreed upon
a 24-hour approval period in which the buyer could keep the
items or return them as unsatisfactory. 4
Compl. ¶ 20.
Gaffney wired Panicci $50,000 on August 8, 2007, and an
additional $80,000 on August 9.
On the same day, Neal confirmed
with Gaffney that Panicci had received the funds and the
Stratocaster had been sent to Vermont.
Compl. ¶ 22.
On August 10, 2007, Gaffney received the guitar, and
immediately observed that the finish was not original, as it was
4
Defendants dispute that the approval period was agreed
upon.
5
closer to aqua in color than dark blue, and the texture of the
finish was rougher than that of the original.
Compl. ¶ 23.
Later that day, Gaffney called Neal Shelton to inform him that
he was returning the Stratocaster pursuant to their agreed upon
24-hour waiting period.
Mr. Shelton confirmed that Panicci
would refund Gaffney, and all parties agreed the guitar would be
shipped on August 14, 2007 for arrival to Neal’s place of
business on August 15.
Compl. ¶ 24.
On August 12, Panicci sent Gaffney an email advising him
not to ship the guitar to Neal Shelton.
Gaffney replied asking
where to ship the guitar, but Panicci never responded.
25.
Compl. ¶
On August 13, Gaffney received an email from Panicci’s
attorney instructing him not to return the guitar to Mr. Shelton
or Panicci.
Compl. ¶ 26.
After Panicci refused to accept the
Stratocaster’s return, Panicci’s attorney also sent to Gaffney
two written letters asserting that the guitar was in its
original condition.
Compl. ¶ 27.
In 2010, Gaffney had the guitar sent for a consignment sale
to a vintage guitar expert, who immediately informed him that
the guitar was not the original color, that the neck and frets
of the guitar had been refinished, replaced, or altered, and
that the guitar’s value did not exceed $10,000.
Compl. ¶ 16.
Gaffney filed his complaint against Defendants on July 25,
2011.
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Discussion
The Court will take up Defendants’ 12(b)(2), 12(b)(3), and
12(b)(6) challenges in that order.
It analyzes the claims
against Catherine Shelton separately.
Because the parties consider Neal Shelton and his
businesses as one, this Court will address the issues in regards
to Mr. Shelton, Neal’s Music, and Neal’s Vintage Guitars
collectively.
Compl. ¶ 6.
I. Personal Jurisdiction
Defendants argue that Gaffney has not shown that Mr.
Shelton, Shelton’s businesses, and Panicci are subject to
personal jurisdiction in Vermont.
A. Legal Standard
It is a plaintiff’s burden to show personal jurisdiction
over a defendant.
Metro. Life Ins. Co. v. Robertson-Ceco Corp.,
84 F.3d 560, 566 (2d Cir. 1996).
When little discovery has been
conducted and no evidentiary hearing has been held, the
plaintiff need only make a prima facie showing that includes “an
averment of facts that, if credited by the ultimate trier of
fact, would establish jurisdiction over the defendant.”
567.
Id. at
This showing may rest solely on a plaintiff’s own
pleadings, affidavits, and supporting materials.
Tom and
Sally’s Homemade Chocolates, Inc. v. Gasworks, Inc., 977 F.
Supp. 297, 300 (D. Vt. 1997).
In a diversity action, personal
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jurisdiction “is determined in accordance with the law of the
state where the court sits, with ‘federal law’ entering the
picture only for the purpose of deciding whether a state’s
assertion of jurisdiction contravenes a constitutional
guarantee.”
Metro. Life, 84 F.3d at 567.
A federal court may exercise personal jurisdiction over a
foreign defendant if the plaintiff makes a two-part showing: (1)
”that the defendant is amenable to service of process under the
forum state’s laws;” and (2) that “the court’s assertion of
jurisdiction under these laws comports with the requirements of
due process.”
Id.
Since the Vermont long-arm statute, Vt.
Stat. Ann. tit. 12 § 913(b), permits jurisdiction over
foreigners to the full extent of the due process clause, the
Court turns to the second prong of the relevant inquiry, due
process.
Ben and Jerry’s Homemade, Inc. v. Coronet Priscilla
Ice Cream Corp., 921 F. Supp. 1206, 1209 (D. Vt. 1996).
The due process test involves two inquiries relating to
“minimum contacts” and “reasonableness.”
at 567.
Metro. Life, 84 F.3d
In analyzing a defendant’s contacts with the forum
state, a court looks to “some act by which defendant
purposefully avails itself of the privilege of conducting
activities within the forum state, thus invoking the benefits
and protections of its laws.”
471 U.S. 462, 475 (1985).
Burger King Corp. v. Rudzewicz,
The defendant must have certain
8
minimum contacts with the forum state so as to “reasonably
anticipate being haled into court there.”
World-Wide Volkswagen
Corp. v. Woodson, 444 U.S. 286, 287 (1980).
The minimum contacts analysis differs for the two types of
personal jurisdiction, general and specific.
A court may assert
general jurisdiction over a foreign defendant when “their
affiliations with the State are so ‘continuous and systematic’
as to render them essentially at home in the forum State.”
Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct.
2846, 2851 (2011).
Specific jurisdiction relies upon an
“activity or occurrence that takes place in the forum state and
is therefore subject to the State’s regulation.”
Dunlop, 131 S. Ct. at 2846.
Goodyear
While general jurisdiction
addresses all affiliations a party may have with the forum
state, “specific jurisdiction is confined to the adjudication of
‘issues deriving from, or connected with, the very controversy
Id. (quoting Jurisdiction to
that establishes jurisdiction.’”
Adjudicate: A Suggested Analysis, 79 Harv. L. Rev. 1121, 1136
(1966)).
Once the requisite minimum contacts have been established,
the court must then turn to the reasonableness inquiry. The
plaintiff must show that asserting jurisdiction over the
defendant would not offend “traditional notions of fair play and
substantial justice.”
Metro. Life, 84 F.3d at 568 (quoting
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Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)).
The
five factors looked to when analyzing reasonableness are: (1)
the burden to the defendant; (2) the forum state’s interest in
the dispute; (3) the plaintiff’s interest in convenient and
effective relief; (4) the interstate judicial system’s interest
in efficiently resolving the cases; and (5) the interest of all
states in advancing their shared social policies.
Burger King,
471 U.S. at 476-77 (citing World-Wide Volkswagen, 444 U.S. at
292).
B. Minimum Contacts Analysis
Gaffney asserts that the Court has both general and
specific jurisdiction over defendants.
Because the Court
concludes it has specific jurisdiction over Neal Shelton, his
companies, and Panicci, it is unnecessary to decide whether the
Defendants’ forum connections are continuous and systematic.
Int’l Shoe Co., 326 U.S. at 317.
To establish minimum contacts necessary for specific
jurisdiction, Gaffney must show that his claims arise out of
Defendants’ contacts with Vermont.
See Chloé v. Queen Bee of
Beverly Hills, LLC, 616 F.3d 158, 166 (2d Cir. 2010); Chaiken v.
VV Publ’g Corp., 119 F.3d 1018, 1028 (2d Cir. 1997).
Gaffney
states that both Neal Shelton and Panicci reached out to him in
Vermont when offering the Stratocaster for sale.
17.
10
Compl. ¶¶ 15-
Neal Shelton called Gaffney, a Vermont resident, pitching
the Stratocaster.
Compl. ¶ 15.
A series of emails occurred
between Mr. Shelton and Gaffney regarding the Stratocaster sale,
and once the sale was finalized, Neal confirmed the shipment of
the guitar to Gaffney’s address in Vermont.
Compl. ¶¶ 22-23.
He was aware that Gaffney was a resident of Vermont, as the two
had conducted business previously and Neal Shelton had mailed
purchases to Gaffney in Vermont.
Gaffney Decl. ¶¶ 6-8; Mem. in
Opp’n to Mot. to Dismiss Ex. B., ECF No. 14-3.
Panicci also contacted Gaffney directly regarding the
Stratocaster.
Compl. ¶ 16.
In an effort to complete the sale,
Panicci mailed a package of photographs of the Stratocaster to
Gaffney to his address in Vermont.
Compl. ¶ 18.
Once the sale
was confirmed, Gaffney wired money to Panicci in California via
his Vermont bank account, a River Valley Credit Union account
based in Putney, Vermont. Compl. ¶¶ 21-22; Mem. in Opp’n
to Mot. to Dismiss Ex. F, ECF No. 14-7.
According to the
shipping receipt, Panicci mailed the Stratocaster to Gaffney in
Vermont.
Mem. in Opp’n to Mot. to Dismiss Ex. G, ECF No. 14-9.
After Gaffney requested to return the Stratocaster, he received
a written letter from Panicci’s attorney at his home in Vermont
asserting that the guitar was original. Compl. ¶ 27.
Neal Shelton and Panicci were aware they were negotiating
with a Vermont resident, and they sent correspondence and
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merchandise to Vermont, as well as received funds from Vermont.
The Court finds that the correspondence and negotiations were
directed at the forum state, and Defendants were availing
themselves of the privileges of conducting business in Vermont.
Burger King Corp., 471 U.S. at 475.
The correspondence was
directly related to Gaffney’s claims, and constituted minimum
contacts sufficient for a finding of specific jurisdiction.
C. Reasonableness Analysis
In analyzing the second part of the due process analysis
for personal jurisdiction, the Court finds that exercising
jurisdiction in Vermont will not violate notions of fair play
and substantial justice.
In Tom and Sally’s Homemade
Chocolates, the Court found that fair play and substantial
justice were not offended when “the burden of litigating in an
out of state forum would be no more for the Defendant than it
would be for Tom and Sally’s [a Vermont Corporation] if the
litigation were in [Defendant’s home state].”
301.
977 F. Supp. at
The same facts are found here, and litigation in
California would be an equal burden on Gaffney as litigating in
Vermont would be on Defendants.
Additionally, modern technology
allows for court communications to be carried out
electronically.
As a result, any jurisdictional change would
result in an equal burden on Gaffney, and as such, in finding
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Vermont has personal jurisdiction over Defendants, the concepts
of reasonableness are not violated.
II. Venue
Defendants have requested their case be dismissed due to
improper venue.
“[F]or venue to be proper, significant events
or omissions material to the plaintiff’s claims must have
occurred in the district in question, even if other material
events occurred elsewhere.”
F.3d 353, 357 (2d Cir. 2005).
Gulf Ins. Co. v. Glasbrenner, 417
In venue disputes, the plaintiff
bears the burden of proving that venue is proper.
Country Home
Products, Inc. v. Schiller-Pfeiffer, Inc., 350 F. Supp. 2d 561,
568 (D. Vt. 2004).
one state.
A contract may be negotiated in more than
Kirkpatrick v. Rays Group, 71 F. Supp. 2d 204, 213
(W.D.N.Y. 1999).
Venue may be proper in more than one district,
and a plaintiff need only establish that a substantial part of
the event occurred here even if a great part of the event
occurred elsewhere.
Country Home Products, 350 F. Supp. 2d at
568 (citing Kirkpatrick, 71 F. Supp. 2d at 212.)
“[T]he court
must draw all reasonable inferences and resolve all factual
conflicts in favor of the plaintiff.”
5B Wright & Miller,
Federal Practice & Procedure Civ. 1352 (3d ed. 2011).
In arguing that venue is improper, Defendants assert that
Gaffney is in the business of buying and selling guitars, and
that he regularly conducts this type of business with residents
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of many states.
Defendants argue that “Plaintiff was actually
doing business in California and therefore subject to
jurisdiction and venue in California rather than the opposite,
as he suggests.”
Def.’s Mot. to Dismiss 11.
However, Gaffney
asserts in the complaint that multiple communications were sent
to him in Vermont, and his portion of the negotiations occurred
in Vermont.
Viewing the facts in the light most favorable to
Gaffney at this stage, negotiations for and performance of the
contract took place in both California and Vermont.
As such,
venue is proper in Vermont as well as in California, and the
motion to dismiss is therefore denied.
III. Failure to State a Claim Upon Which Relief Can be Granted
Finally, Defendants assert that even if jurisdiction and
venue are proper, the case should be dismissed pursuant to Fed.
R. Civ. P. 12(b)(6) because Gaffney has failed to state a claim
upon which relief can be granted.
On a (12)(b)(6) motion to dismiss, a court must accept the
factual allegations of the complaint as true and draw all
reasonable inferences in favor of the plaintiff.
Erickson v.
Pardus, 551 U.S. 89, 93-94 (2007); Bolt Elect. Inc. v. City of
New York, 53 F.3d 465, 469 (2d Cir. 1995).
“[A] complaint must
contain sufficient factual matter, accepted as true, to state a
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claim for relief that is plausible on its face.”
Ashcroft v.
Iqbal, 556 U.S. 662, 129 S. Ct. 1937, 1949 (2009).
Here, Gaffney asserts four claims: (1) breach of contract;
(2) unjust enrichment; (3) consumer fraud; (4) fraud in the
inducement.
Gaffney has provided sufficient facts within his
complaint to state claims upon which relief can be granted.
Gaffney has asserted that negotiations for the purchase of
the Stratocaster took place between Gaffney and both Neal
Shelton and Panicci, and that a purchase was eventually made.
Compl. ¶¶4-23.
Gaffney claims that a 24-hour approval period
was agreed upon in which he could return the guitar, and that
this period was not honored.
Compl. ¶¶ 20, 24.
Gaffney has
also asserted that the Defendants misrepresented the condition
of the Stratocaster. Compl. ¶¶ 18-23.
Based upon the details of
the facts provided and apart from the exception detailed below,
Gaffney has met the burden under Fed. R. Civ. P. 12(b)(6) that
each of his claims are plausible on their face.
However as to Catherine Shelton, Gaffney fails to state a
justiciable claim.
The only mention of Catherine Shelton in the
complaint is a statement that she resides in Huntington Beach,
California and she and Neal Shelton “are dealers and retailers
of vintage guitars, and operate a business . . . known as Neal’s
Vintage Guitars.”
Compl. ¶ 5.
The only evidence of Catherine’s
involvement in the Stratocaster dispute is that she is listed as
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a Business Owner of Neal’s Music by a filing from the Orange
County Clerk’s office database provided by Gaffney.
Opp’n to Mot. to Dismiss Ex. 5, ECF No. 14-14.
Mem. in
There is no
mention of Catherine Shelton having any role in the Stratocaster
negotiations or sale.
The Complaint does not mention any
contact between Gaffney and Catherine.
Thus, the Court finds
the complaint and supporting documents are insufficient to state
a claim upon which relief can be granted against her.
The Court
therefore grants the moving Defendants’ 12(b)(6) motion to
dismiss with respect to Catherine Shelton with leave for Gaffney
to amend his complaint.
For the reasons stated above, Defendants’ motion to dismiss
is DENIED in part, and GRANTED in part with leave to amend
within 30 days, as to Catherine Shelton.
Dated at Burlington, in the District of Vermont, this 3rd
day of February, 2012.
/s/William K. Sessions III______
William K. Sessions III
U.S. District Court Judge
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