Mansfield Heliflight, Inc. v. Freestream Aircraft USA, Ltd. et al
Filing
30
OPINION AND ORDER Denying 11 Defendant Freestream Aircraft USA, Ltd.'s Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(2), 12(b)(3), and 12(b)(6), and Denying as Moot 19 Plaintiff's Motion for Leave to Amend. Signed by Chief Judge Christina Reiss on 12/7/2016. (pac)
UNITED STATES DISTRICT COURT
FOR THE
DISTRICT OF VERMONT
MANSFIELD HELIFLIGHT, INC.,
Plaintiff,
v.
FREESTREAM AIRCRAFT USA, LTD.
and RUDOLPH MELK, JR.,
Defendants.
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211& DEC -7 PH ~: 33
CLET-H\
Case No. 2:16-cv-28
OPINION AND ORDER DENYING DEFENDANT FREESTREAM
AIRFCRAFT USA, LTD.'S MOTION TO DISMISS PURSUANT TO
FED. R. CIV. P. 12(b)(2), 12(b)(3), AND 12(b)(6), AND DENYING AS MOOT
PLAINTIFF'S MOTION FOR LEAVE TO AMEND
(Docs. 11 & 19)
Plaintiff Mansfield Heliflight, Inc. brings this action against Defendant Freestream
Aircraft USA, Ltd. ("Defendant Freestream") and Defendant Rudolph Melk, Jr.
(collectively, "Defendants") for fraudulent inducement (Count 1), tortious interference
with contract (Count II), tortious interference with a prospective business relationship
(Count III), civil conspiracy (Count IV), promissory estoppel (Count V), and unjust
enrichment (Count VI). 1
Pending before the court is Defendant Freestream's motion to dismiss for lack of
personal jurisdiction, improper venue, and failure to state a claim. (Doc. 11.) Plaintiff
opposes the motion. In the event the court grants any part of Defendant Freestream's
motion, Plaintiff requests leave to amend the Complaint. (Doc. 19.) After oral argument
on August 9, 20 16, the court took the pending motions under advisement.
1
On July 7, 2016, following Plaintiffs application for entry of default, the Clerk of Court
entered a default judgment as to Defendant Melk.
Plaintiff is represented by Benjamin H. Klein, Esq. Defendant Freestream is
represented by Patrick J. Rohan, Esq., Jonathan R. Voegele, Esq., Richard B. Drubel,
Esq., and Courtney R. Rockett, Esq.
I.
The Complaint.
The following facts are derived from allegations in the Complaint. Plaintiff is a
Vermont corporation with its principal place of business in Milton, Vermont. Defendant
Freestream is a New Jersey corporation with its principal place of business in Teterboro,
New Jersey. Defendant Melk is an individual who resides in Bantam, Connecticut.
Plaintiff alleges that at all times described in the Complaint, Defendant Melk acted as
Defendant Freestream's agent.
On or about July 21, 2015, "an entity affiliated with" Defendant Melk contracted
to purchase a Gulfstream IV aircraft (the "Aircraft") from Punj Lloyd Limited ("PLL"),
an aircraft seller in India. (Doc. 1 at
5-6,~
26.) At the time, Plaintiff alleges that
Defendant Melk "was acting as an agent for [Defendant] Freestream and/or [Defendant]
Freestream's ultimate buyer," Blackjet, LLC ("Blackjet"), and intended to resell the
Aircraft to Blackjet. !d. On the same day on which Defendant Melk entered into a
contract with PLL, Defendants failed to deposit the purchase funds into escrow which
terminated their contract to purchase the Aircraft.
On August 2, 20 15, Plaintiff contracted with PLL for the purchase of the Aircraft,
having previously deposited the full purchase price into escrow. At the time Plaintiff
entered into its contract with PLL, Plaintiff intended to resell the Aircraft to another
identified buyer for a profit.
On August 4, 2015, Defendants filed a lien against the Aircraft with the Federal
Aviation Administration ("FAA"). The lien stated that PLL owed Defendant Melk in
excess of $400,000 for nonpayment of services performed. However, neither Defendant
Melk nor Defendant Freestream had performed any services associated with the Aircraft.
On August 14, 2015, Connie Marrero, Defendant Freestream's Executive Vice
President, contacted Plaintiffs escrow agent to inform the agent that Defendant
Freestream had a contract to purchase the aircraft from PLL, and that it had filed a lien
2
with the FAA in order to protect its interest in the Aircraft. The escrow agent
subsequently communicated this information to Plaintiff.
On August 15, 2015, when Plaintiff contacted Defendant Freestream to inquire
about the FAA lien, Defendant Freestream responded that it had a valid purchase
agreement for the Aircraft predating Plaintiff's purchase agreement. Plaintiff then asked
PLL for clarification regarding Defendant Freestream's lien and whether PLL had
contracted with two buyers for the sale of the Aircraft. On August 17, 2015, PLL
informed Plaintiff that although it had previously entered into a purchase agreement with
Defendant Melk, that agreement was terminated by his failure to deliver the purchase
price. PLL denied entering into a purchase agreement with Defendant Freestream. PLL
further stated that the FAA lien "was premised on a blatant misrepresentation, as neither
[Defendant] Melk nor [Defendant] Freestream had ever performed any services on the
Aircraft." !d. at 7, ~ 37.
In an August 19, 2015 communication with Plaintiff, Defendant Freestream
indicated that it was not the purchaser of the Aircraft, but rather, was representing
Defendant Melk in his purchase of it. Defendant Freestream stated that Defendant
Melk's funds were in escrow, that he had conducted a "pre-buy inspection" of the
Aircraft, and that he had initiated the process of obtaining "ferry permits" from the FAA
to fly the Aircraft from India to the United States. !d. at 3, ~ 9. Plaintiff responded that it
had similarly invested time and expense to purchase the Aircraft, but that Defendant
Freestream's lien clouded the Aircraft's title and precluded Plaintiff from obtaining
financing and reselling it. Plaintiff stated that it would not relinquish its contractual
rights to the Aircraft unless it was compensated.
On August 20, 2015, Defendant Freestream sent Plaintiff an agreement (the
"Commission Agreement"), which provided that Defendant Melk, "through his alter ego"
Lima Mike Bravo, LLC ("Lima Mike Bravo"), would pay Plaintiff$100,000 for
terminating its contract with PLL and removing its purchase funds from escrow. !d. at 8,
~
44. Defendant Melk agreed to deliver the $100,000 payment upon completing his
purchase of the Aircraft. On or about August 25, 2015, Plaintiff and Defendant Melk
3
executed the Commission Agreement. On that same date, Plaintiffs escrow agent
informed PLL that Plaintiff was withdrawing its funds from escrow and terminating its
contract to purchase the Aircraft. Defendants indicated that they expected to close on the
Aircraft as early as that same day. However, that closing never occurred.
PLL' s attorney stated to Plaintiff on August 26, 20 15 that it was unwilling to sell
the Aircraft to Defendant Melk "given Defendants' misrepresentations and unlawful
conduct[.]" !d. at 9,
~
49. PLL's attorney allegedly stated that Defendant Melk, "by way
of the Fraudulent FAA Lien, tried to extort PLL into selling him the Aircraft[,]" and that
Defendant Melk was a broker who intended to sell the Aircraft to a third party
immediately after the purchase. !d. at 9, ~ 48. PLL's attorney further stated that "he was
working on a deal whereby [Defendant] Melk would be returned his non-refundable
deposit in exchange for his agreement to withdraw the [f]raudulent FAA [l]ien." !d. PLL
intended to pursue a purchase agreement with Plaintiff once the lien was released. "As a
result, Defendants decided to tarnish [Plaintiffs] credibility with PLL so that PLL would
be willing to sell them the Aircraft." !d. at 9, ~52.
On September 1, 2015, Defendants proposed to Plaintiff that it purchase the
Aircraft and immediately sell it to Defendant Melk. Defendants offered to pay Plaintiff
an additional $100,000, in addition to the original $100,000 promised, for a total of
$200,000, to engage in this transaction. Plaintiff agreed to this proposal.
Plaintiff executed an agreement with Defendant Melk on September 11, 20 15 that
enabled Plaintiff to negotiate the purchase of the Aircraft on Defendant Melk's behalf.
Plaintiff informed Defendant Melk that Defendants would need to deposit the purchase
funds into escrow in order to purchase the Aircraft. Plaintiff thereafter negotiated a new
deal with PLL to purchase the Aircraft.
Defendant Melk traveled to Milton, Vermont on September 25, 2015 in order to
discuss the purchase of the Aircraft with Plaintiff. Defendant Melk explained that he was
"still trying to get his buyers on board ... but that he expected to have an agreement from
all shortly." !d. at 10, ~ 57. Plaintiff again explained that unless he imminently deposited
4
funds into escrow, the deal with PLL would disintegrate because PLL had begun to doubt
Plaintiffs ability to fund the purchase and thereby close the deal.
Five days later, Defendant Melk sent Plaintiff a purchase agreement (the
"Purchase and Sale Agreement") reflecting the anticipated sale of the Aircraft from
Plaintiff to Defendant Melk. Defendant Melk used the "alter ego" SilverS tar Aviation,
LLC, registered to his home in Connecticut, as the purchaser in the Purchase and Sale
Agreement. Id. at 10, ,-r 59. Defendant Melk agreed to "update the commission side letter
to reflect" the name change and to reflect the obligation of SilverS tar Aviation, LLC to
pay Plaintiff upon completion of the sale. Id. at 11, ,-r 60. Plaintiff subsequently returned
the Purchase and Sale Agreement to Defendant Melk with revisions.
During the two weeks that followed, Defendant Melk "stalled when pressed by
[Plaintiff] about his delays, and was likewise noncommittal when asked about the
availability of funds for the purchase of the Aircraft." Id. at 11, ,-r 62. For example, on
October 7, 20 15, Plaintiff inquired regarding when Defendant Melk would execute the
Purchase and Sale Agreement, to which he responded that "it was with legal and that he
was at their mercy." Id. at 11, ,-r 63. Plaintiff allegedly informed Defendant Melk on or
about October 13, 2015 that unless he deposited funds into escrow, Plaintiffs transaction
with PLL would fail. Defendant Melk did not respond to Plaintiffs communication, and
Plaintiff never heard from him again.
Thereafter, Plaintiff contacted Ms. Marrero on October 16, 2015 to inquire
whether Defendants intended to complete the purchase of the Aircraft. Ms. Marrero
responded that she was out of the country and between flights, and could not respond at
that time. On that same day, Defendant Freestream allegedly signed a contract to
purchase the Aircraft directly from PLL.
Three days later, Plaintiff again contacted Ms. Marrero. Ms. Marrero responded
"that the deal was in [Defendant] Melk's hands, and that [Defendant] Freestream was no
longer involved in the purchase of the Aircraft." ld. at 12, ,-r 70. The next day, Plaintiff
communicated with Ms. Marrero who allegedly maintained that Defendant Freestream
5
"had stepped aside so that [Plaintiff] and [Defendant] Melk could finalize the deal." !d.
at12,~71.
On October 28, 2015, Defendant Freestream completed its purchase ofthe Aircraft
from PLL, and sold it to Blackjet, the buyer it had allegedly represented "all along[.]" !d.
at 12, ~ 73. Plaintiff alleges both Defendant Melk and Defendant Freestream earned
commissions as a result of the sale to Blackjet.
When Plaintiff discovered Defendant Freestream's purchase of the Aircraft,
Plaintiff contacted Defendant Freestream regarding the payment it had been promised in
exchange for Plaintiffs relinquishment of the right to purchase the Aircraft. Ms. Marrero
responded that Defendant Freestream did not owe Plaintiff any money because Plaintiff
had made that agreement with Defendant Melk. Plaintiff repeatedly attempted to contact
Defendant Melk by email and telephone to no avail.
II.
Declarations Related to the Pending Motions to Dismiss for Lack of Personal
Jurisdiction and for Improper Venue.
In analyzing the pending motions to dismiss for lack of personal jurisdiction and
for improper venue, the court is not confined to the allegations in the Complaint and may
also consider the parties' competing declarations. See Dorchester Fin. Sec., Inc. v. Banco
BRJ, S.A., 722 F.3d 81, 86 (2d Cir. 2013) (holding that the court may "consider[]
materials outside the pleadings ... without converting a motion to dismiss for lack of
personal jurisdiction into a motion for summary judgment"); GulfIns. Co. v.
Glasbrenner, 417 F.3d 353, 355 (2d Cir. 2005) (applying "the same standard of review in
Rule 12(b)(3) dismissals for improper venue as we do in Rule 12(b)(2) dismissals for lack
of personal jurisdiction" and observing that the court may "rely on pleadings and
affidavits" in deciding a motion to dismiss for improper venue). Declarations submitted
by the following individuals are therefore part of the record before the court: Eric D.
Chase (Plaintiffs President); Tina Lindberg (Plaintiffs Chief Financial Officer and
Director of Sales); Jonathan R. Voegele, Esq. (Defendant Freestream's counsel); and Ms.
Marrero (Defendant Freestream's Executive Vice President).
6
A.
Plaintiff's Declarations.
1.
Lindberg Declaration.
On August 14, 2015, Ms. Lindberg received the following email from Leda
Francis, President of Jetstream Escrow & Title Service, Inc. in Oklahoma City,
Oklahoma summarizing her telephone conversation with Ms. Marrero:
I just received a call from Connie Marrero at Freestream Aircraft. They
also have a signed contract with [PLL] for the purchase of [the Aircraft]!
They have funded AIC Title Service and the deposit has been made nonrefundable pending notification of deregistration from India. Having
learned of the multiple escrows, Freestream Aircraft has filed a lien with
FAA. Connie said you are free to call her if you would like to discuss.
They are obviously as shocked and concerned as you. Her telephone
number is [].
(Doc. 21-1 at 2.)
On August 15, 2015, Ms. Lindberg avers that she spoke with Ms. Marrero, who
"implied that it was Freestream that was purchasing the Aircraft and Freestream that had
filed the lien with the FAA." (Doc. 21 at 2, ~ 4.) Ms. Lindberg states that Ms. Marrero
told her that Defendant Freestream' s purchase agreement with PLL was "open and valid,
and that the lien was enforceable." !d.
Thereafter, Ms. Lindberg avers that Ms. Marrero called her "dozens" of times and
sent her "dozens" of text messages regarding the Aircraft. !d. at 2,
~
5. Ms. Lindberg
notes that Ms. Marrero made those contacts using a Vermont area code associated with
Ms. Lindberg's work and personal telephone and cell phone numbers. She additionally
represents that "[i]n one of [their] initial calls, Ms. Marrero expressed her surprise that a
helicopter company from Vermont was involved in the purchase of a business jet from
India." !d. Ms. Lindberg avers that during a telephone call on August 19, 2015, Ms.
Marrero informed her that Defendant Melk was the buyer of the Aircraft, "that
[Defendant] Freestream had been working with him since the beginning[,]" and that
Defendants' contract to purchase the Aircraft remained valid. !d. at 2,
~
6.
On August 20, 2015, Mr. Chase forwarded to Ms. Lindberg an email and the
attachment of a draft Commission Agreement, which he had received from Ms. Marrero.
7
Therein, Ms. Marrero states: "Please see attached for your review. Let me know if you
have any questions and/or changes." (Doc. 21-2 at 2.) Ms. Lindberg subsequently
reviewed the "document properties" of the Commission Agreement using Microsoft
Word, which demonstrated that Ms. Marrero had authored it. (Doc. 21 at 3, ,-r 8.) Ms.
Lindberg avers that she never spoke with Defendant Melk when negotiating the
Commission Agreement, but rather negotiated solely with Ms. Marrero.
Ms. Lindberg responded to Ms. Marrero's email on August 24, 2015 as follows:
As per our conversation, we are in agreement that we are stepping out of
our deal on the [Aircraft] for the fee of$100,000.00 to cover our expenses
incurred. I have made the changes to the agreement sent by you last week,
to reflect our current agreement. The memorialization of which is attached.
Please have Mr. Melk sign and return to me this evening.
(Doc. 21-4 at 2.) She attached a revised copy of the Commission Agreement, which Ms.
Marrero further revised and asked Ms. Lindberg to call her to discuss.
The following day, Ms. Marrero sent Ms. Lindberg a final version of the
Commission Agreement between Plaintiff and Defendant Melk, which he had signed.
The final Commission Agreement provides:
This letter confirms that upon signing below Lima Mike Bravo, LLC., has
agreed to release to [Plaintiff] a fee of One Hundred Thousand United
States Dollars ($1 00,000.00), to be paid at closing via wire transfer as per
instructions listed below: in exchange, [Plaintiff] ... has agreed not [to]
pursue any further action in regards to the purchase of the [Aircraft], until
such time as Lima Mike Bravo, LLC either closes and takes title to the
aircraft, or for a period of 120 days from the date of this agreement,
whichever comes first.
[Plaintiff], will take actions, as reasonably requested by Lima Mike Bravo,
LLC, that may be required to effectuate and carry out the closing of Lima
Mike Bravo's purchase of the [Aircraft] on August 25, 2015.
Notwithstanding the foregoing, [Plaintiff] shall not be required to take any
action that it deems unreasonable.
(Doc. 21-6 at 3.) The message includes Plaintiffs KeyBank bank account and routing
number, located in Milton, Vermont. Between August 24-26, 2015, Ms. Lindberg states
that Ms. Marrero sent her at least fourteen text messages regarding Defendants' request
8
that Plaintiff terminate its contract with PLL, and that between August 15-30, 2015, Ms.
Marrero called her numerous times for that same purpose.
On August 25, 2015, Plaintiffs escrow agent terminated Plaintiffs purchase
agreement with PLL? On that same day, Ms. Lindberg confirmed via email to Ms.
Marrero that Plaintiffs purchase agreement with PLL had been terminated.
Ms. Lindberg avers that on August 26, 2015 she spoke with PLL's counsel, who
explained that the FAA lien was invalid and would likely be rejected by the FAA. PLL's
counsel further explained that Defendants planned to file a disclaimer "since they now
recognized the penalty they could be subject to for filing false statements with a federal
agency." (Doc. 21 at 4, ,-r 17.) On September 3, 2015, a "Disclaimer and Release of
Lien" was filed with the FAA, signed by Defendant Melk. (Doc. 21-10 at 2.)
When PLL subsequently refused to sell the Aircraft to Defendant Melk, Ms.
Lindberg avers that Plaintiff agreed "to stand-in as the purchaser on his behalf, as long as
he would front all the funds for the purchase." (Doc. 21 at 4, ,-r 19.) Her declaration
includes a copy of the Purchase and Sale Agreement, dated as of October 4, 2015, that
Plaintiff reached with Defendant Melk for that purpose. The Purchase and Sale
Agreement, which is unsigned, reflects an agreement between Plaintiff and SilverS tar
Aviation, LLC. 3 The Purchase and Sale Agreement contains the following choice-of-law
provision:
Applicable Law and Jurisdiction. This Agreement, and any and all of the
rights and obligations of the parties hereunder or in any way arising out of
or relating hereto and any dispute in any manner relating to the foregoing
shall be governed by, and construed, enforced and determined in
accordance with, the laws of the State [o]fVermont.
(Doc. 21-11 at 8, § 3.4.)
2
Ms. Lindberg's declaration references and includes a copy ofthe August 3, 2015 Aircraft
purchase agreement signed by Plaintiff and PLL.
3
Because it is unsigned, it is unclear whether the Purchase and Sale Agreement became
effective. See Doc. 21-11 at 8, § 3.6 ("This Agreement shall be effective only when signed by all
parties.").
9
2.
Chase Declaration.
In his declaration, Mr. Chase avers that during an August 19, 2015 telephone call,
Ms. Marrero informed him that Defendant Melk was the buyer of the Aircraft, and that he
had invested more than $400,000 in preparation for that purchase. Mr. Chase further
avers that, "[a]s an experienced purchaser of used aircraft, [he] did not find this claim to
be credible." (Doc. 20 at 1, ~ 2.) When he questioned the validity of the FAA lien, Ms.
Marrero told him that FAA counsel and the attorneys for Defendants' escrow agent had
confirmed its validity. Mr. Chase responded that because Plaintiff had invested money in
pre-purchase arrangements and had anticipated a resale of the Aircraft, it would
relinquish its right to purchase the Aircraft only if it received compensation. Ms. Marrero
agreed to speak with Defendant Melk regarding a possible deal with Plaintiff. On August
20, 2015, Mr. Chase received a draft Commission Agreement requiring Defendant Melk
to pay Plaintiff in exchange for Plaintiffs agreement to terminate its contract with PLL.
On September 10, 2015, Mr. Chase states that he received an email from Ms.
Marrero, explaining that Defendant Melk wanted to talk to Mr. Chase directly. On
September 25, 2015, Defendant Melk traveled to Plaintiffs facility in Milton, Vermont to
discuss the transaction whereby Plaintiff would purchase the Aircraft from PLL and
immediately resell it to Defendant Melk.
B.
Defendant Freestream's Declarations.
1.
Voegele Declaration.
The Voegele Declaration includes a copy of the FAA lien on the Aircraft. The
lien is signed by Defendant Melk and provides that Lima Mike Bravo, LLC claims a lien
on the Aircraft "for NON payment of services rendered" in the amount of $404,355.00.
(Doc. 13-1 at 2.) It states that the services were rendered in connection with the July 21,
2015 purchase agreement with PLL.
2.
Marrero Declaration.
In her declaration, Ms. Marrero explains that Defendant Freestream provides
aircraft brokerage, acquisition, marketing, sales, and custom design services. She avers
that Defendant Freestream does not have any employees, agents, or offices in Vermont,
10
owns no property and has no assets, investment, security interests or banking or other
accounts in Vermont and "does not and never has derived substantial revenue from any
services rendered in Vermont." (Doc. 12 at 2,
~
8.) She further avers that Defendant
Freestream has never conducted transactions within Vermont or with a Vermont resident,
including Plaintiff.
Ms. Marrero asserts that Defendant Freestream did not negotiate or execute any of
the contracts at issue in Vermont, and that all of the witnesses and evidence relating to
Defendant Freestream's alleged involvement in this case are located in New Jersey. Ms.
Marrero avers that Defendant Free stream was not aware that Plaintiff was a Vermont
corporation with its principal place of business in Vermont until the instant lawsuit was
filed. In addition, she claims that Defendant Freestream did not knowingly send or direct
any telephonic or written communications related to this case to Vermont.
Ms. Marrero explains that Defendant Freestream and Defendant Melk "never had
any agency relationship, implied or otherwise, in connection with the transaction that is
the subject matter of this litigation" and that Defendant Freestream "never asked
[Defendant] Melk to act on its behalf." !d. at 3, ~ 15. She further states that Defendant
Freestream had no involvement in "negotiating, drafting, or signing any agreement
between [Plaintiff] and [Defendant Melk] or Lima Mike Bravo, LLC regarding payment
of $100,000 (or allegedly $200,000 at a later time) allegedly made in exchange for
[Plaintiffs] termination of its purchase agreement." !d. at 3, ~ 14. She avers that
Defendant Freestream "had knowledge of [the Commission Agreement] only insofar as
[she] was copied unwillingly on emails between [Plaintiffs] employees and [Defendant]
Melk on or about August 20, 2015 to August 25, 2015." !d. Ms. Marrero also avers that
neither she nor Defendant Freestream "caused a lien to be filed" on the Aircraft. !d. at 2,
~
13. Indeed, she states, Defendant Freestream "did not even know that such a lien was
going to be filed and learned of the lien only after it had been filed." !d.
11
III.
Conclusions of Law and Analysis.
A.
Whether to Grant Defendant Freestream's Motion to Dismiss for Lack
of Personal Jurisdiction.
"On a Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction, the
plaintiff bears the burden of showing that the court has jurisdiction over the defendant."
Metro. Life Ins. Co. v. Robertson-Ceca Corp., 84 F .3d 560, 566 (2d Cir. 1996). "In
evaluating whether the requisite showing has been made, [the court] construe[s] the
pleadings and any supporting materials in the light most favorable to the plaintiff[]."
Licci ex ret. Licci v. Lebanese Canadian Bank, SAL, 732 F.3d 161, 167 (2d Cir. 2013).
"In diversity or federal question cases the court must look first to the long-arm
statute of the forum state" to determine whether it authorizes jurisdiction over the
defendant in the forum. Bensusan Rest. Corp. v. King, 126 F.3d 25, 27 (2d Cir. 1997).
"[T]he second step is to analyze whether personal jurisdiction comports with the Due
Process Clause of the United States Constitution." Chloe v. Queen Bee of Beverly Hills,
LLC, 616 F.3d 158, 164 (2d Cir. 2010).
Vermont's long-arm statute, 12 V.S.A. § 913(b), provides:
Upon the service [on a party outside of Vermont], and if it appears that the
contact with the state by the party or the activity in the state by the party or
the contact or activity imputable to him is sufficient to support a personal
judgment against him, the same proceedings may be had for a personal
judgment against him as if the process or pleading had been served on him
in the state.
The Vermont Supreme Court has construed Vermont's long-arm statute as
permitting the exercise of personal jurisdiction to the "full extent permitted by the Due
Process Clause" of the United States Constitution. N Aircraft, Inc. v. Reed, 572 A.2d
1382, 1385 (Vt. 1990). Accordingly, the court need only examine "whether the exercise
of [personal] jurisdiction comports with federal due process. To do so, [it] undertake[s]
an analysis consisting of two components: the 'minimum contacts' test and the
'reasonableness' inquiry." Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 305
F.3d 120, 127 (2d Cir. 2002); see also N Aircraft, 572 A.2d at 1386 (citation and internal
quotation marks omitted) (providing that "once the court determines that a nonresident
12
defendant has purposefully established minimum contacts within the forum State, several
factors must be considered to ensure that exercising personal jurisdiction over the
defendant is reasonable").
"To determine whether a defendant has the necessary 'minimum contacts,' a
distinction is made between 'specific' and 'general' personal jurisdiction." In re
Terrorist Attacks on Sept. II, 200I, 714 F.3d 659, 673 (2d Cir. 2013). Specific
jurisdiction "exists when a [forum] exercises personal jurisdiction over a defendant in a
suit arising out of or related to the defendant's contacts with the forum[.]" !d. at 673-74
(alteration in original) (internal quotation marks omitted). In contrast, general
jurisdiction "is based on the defendant's general business contacts with the forum ... and
permits a court to exercise its power in a case where the subject matter of the suit is
unrelated to those contacts." Id at 67 4 (alteration in original) (internal quotation marks
omitted). In this case, there is no factual basis for general jurisdiction, and Plaintiff
concedes that it requests the court to exercise only specific jurisdiction.
1.
Whether Specific Jurisdiction Exists.
This court may exercise personal jurisdiction if Defendant Freestream has
"purposefully avail[ ed] itself of the privilege of conducting activities within the forum
State, thus invoking the benefits and protections of its laws[,] ... [which] ensures that a
defendant will not be haled into a jurisdiction solely as a result of random, fortuitous, or
attenuated contacts[.]" Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985)
(internal quotation marks omitted). "For the purpose of establishing specific personal
jurisdiction, the necessary fair warning requirement" that the defendant could reasonably
anticipate being sued in the forum state "is satisfied if the defendant has purposefully
directed his activities at residents of the forum, and the litigation results from alleged
injuries that arise out of or relate to those activities." In re Terrorist Attacks, 714 F.3d at
674 (internal quotation marks omitted).
In determining whether the court has jurisdiction over an out-of-state defendant
consistent with the Due Process Clause, the court "must evaluate the 'quality and
nature[]' ... of the defendant's contacts with the forum state under a totality of the
13
circumstances test[.]" Best Van Lines, Inc. v. Walker, 490 F.3d 239, 242 (2d Cir. 2007)
(quoting Burger King, 471 U.S. at 475). "These same principles apply when intentional
torts are involved." Walden v. Fiore, 134 S. Ct. 1115, 1123 (2014).
Plaintiff argues that Defendant Freestream has "minimum contacts" with Vermont
because it initiated and engaged in ongoing communications with Plaintiff, drafted and
negotiated the Commission Agreement, and conspired with Defendant Free stream's
alleged agent Defendant Melk, thereby making Defendant Melk's contacts with Vermont
attributable to Defendant Freestream. Defendant Freestream responds that its contacts
with Vermont were unwitting and insufficient, and that there is no factual or legal basis
for attributing Defendant Melk's contacts to it.
Plaintiff points to a number of ways in which Defendants reached out to Plaintiff
in Vermont and created contacts there. Defendant Freestream first contacted Plaintiffs
escrow agent and offered to discuss the FAA lien. Thereafter, Defendant Freestream
contacted Plaintiff on numerous occasions through telephone calls and text messages to
Ms. Lindberg's Vermont personal and work telephone and cell phone numbers. See
Burger King, 471 U.S. at 481 (holding that personal jurisdiction existed and noting that
the defendant "carried on a continuous course of direct communications by mail and by
telephone"). In one of these conversations, according to the Lindberg Declaration, Ms.
Marrero "expressed her surprise" that a Vermont company was involved in the purchase
of a business jet from India. (Doc. 21 at 2, ,-r 5); see RLB & Assocs., Ltd. v. Aspen Med.
Pty., 2016 WL 344925, at *5 (D. Vt. Jan. 27, 2016) (observing that awareness of
plaintiffs status as a Vermont corporation is "a factor to be considered" in the court's
analysis). These facts support a conclusion that Defendant Freestream knowingly and
voluntarily initiated contact with a Vermont company and that Plaintiffs claims arise out
of at least some of those contacts. 4
4
Cf RLB & Assocs., Ltd. v. Aspen Med. Pty., 2016 WL 344925, at *5 (D. Vt. Jan. 27, 2016)
(concluding that the court lacked personal jurisdiction over the defendants and observing that
"they did not 'reach out' to [p]laintiff, but instead were solicited by (p]laintiffto enter into a
business relationship").
14
Plaintiff's claim that Defendant Melk's contacts with Vermont may be imputed to
Defendant Freestream solely on an agency or conspiracy theory presents a closer
question. Plaintiff alleges that Defendant Melk at all times acted as Defendant
Freestream's agent.
"Generally, the actions of an agent may be imputed to the principal for purposes of
personal jurisdiction if ( 1) the agent acted within the scope of actual or apparent authority
bestowed by the principal; or (2) the principal ratified the agent's actions after the fact."
Lakeside Equip. Corp. v. Town of Chester, 795 A.2d 1174, 1180 (Vt. 2002) (citing Myers
v. Bennett Law Offices, 238 F.3d 1068, 1073 (9th Cir. 2001)). Apparent authority
"derives from conduct of the principal, communicated or manifested to the third party,
which reasonably leads the third party to rely on the agent's authority." New England
Educ. Training Serv., Inc. v. Silver St. P 'ship, 528 A.2d 1117, 1120 (Vt. 1987).
Plaintiff's declarations indicate that at times, Ms. Marrero, an officer and
employee of Defendant Freestream, acted at the apparent direction of Defendant Melk
and on both his and Defendant Freestream' s behalf. There is no evidence before the
court, however, regarding the scope of Defendant Melk's actual authority, only limited
evidence of Defendant Melk's apparent authority, and virtually no evidence that
Defendant Freestream and Defendant Melk ratified each other's acts. At this nascent
stage of the proceedings, Plaintiff has not sustained its burden to establish personal
jurisdiction on the basis of an agency relationship.
Correspondingly, the "conspiracy theory of jurisdiction" does not confer personal
jurisdiction over a non-resident co-conspirator based merely on allegations that a
conspiracy existed. See Vt. Castings, Inc. v. Evans Prods. Co., Grossman's Div., 510 F.
Supp. 940, 944 (D. Vt. 1981) ("[M]ere allegations of conspiracy, even coupled with the
presence of one conspirator within the jurisdiction, do not give jurisdiction over all
nonresident co-conspirators."). Rather, it must be alleged that "substantial acts in
furtherance of the conspiracy were performed in the forum state" and that the nonresident
15
co-conspirator "must know, or have good reason to know, that his conduct will have
effects in the (forum) state." !d. (internal quotation marks omitted). 5
At the pleadings stage, Plaintiff alleges sufficient evidence of an agreement to
jointly undertake activities contrary to Plaintiffs interests to render Defendant Melk's
contacts with Vermont plausibly attributable to Defendant Freestream. See, e.g., Vt.
Castings, 510 F. Supp. at 944-45 (concluding that nonresident defendant employee's acts
in Vermont could be imputed to the nonresident defendant and denying motion to dismiss
for lack of personal jurisdiction). Although Defendant Freestream disclaims any activity
on Defendant Melk's behalf, the evidence before the court is to the contrary and includes
Defendant Freestream's employee and Executive Vice President, Ms. Marrero, drafting
and negotiating the Commission Agreement on Defendant Melk's behalf with Plaintiff.
Defendant Melk also allegedly committed tortious acts in furtherance of the
conspiracy in Vermont, including travelling to Plaintiffs facilities in Vermont to
negotiate the Purchase and Sale Agreement. See Chloe, 616 F .3d at 171-72 (holding that
defendant's acts, including those by a co-defendant which were imputed to defendant,
justified the exercise of specific jurisdiction because his allegedly tortious acts were
purposely directed at the forum state).
The choice-of-law provision in the unsigned Purchase and Sale Agreement
provides some evidence that Defendants were on notice that Plaintiff believed their
business relationship would be governed by Vermont law. See Burger King, 471 U.S. at
482 ("Although [a choice-of-law] provision standing alone would be insufficient to
confer jurisdiction, ... it reinforce[ s] [defendant's] deliberate affiliation with the forum
State and the reasonable foreseeability of possible litigation there."). It is, moreover,
5
See also Melea, Ltd. v. Jawer SA, 511 F.3d 1060, 1070 (lOth Cir. 2007) ("[A] co-conspirator's
presence within the forum might reasonably create the 'minimum contacts' with the forum
necessary to exercise jurisdiction over another co-conspirator if the conspiracy is directed
towards the forum, or substantial steps in furtherance of the conspiracy are taken in the
forum[.]"); Allstate Life Ins. Co. v. Linter Grp. Ltd., 782 F. Supp. 215,221 (S.D.N.Y. 1992)
("[A] plaintiff must: (1) make a prima facie factual showing of a conspiracy; (2) allege specific
facts warranting the inference that the defendant was a member of the conspiracy; and (3) show
that the defendant's co-conspirator committed a tortious act pursuant to the conspiracy in this
jurisdiction.").
16
undisputed that each contact Defendants had with Vermont was solely in furtherance of
the allegedly tortious activities and breaches of contract that form the basis of Plaintiffs
claims.
When Defendant Melk's contacts with Vermont are imputed to Defendant
Freestream, those contacts, together with Defendant Freestream's own contacts with
Vermont, are sufficient to establish "minimum contacts" that justify the court's exercise
of personal jurisdiction over Defendant Freestream on the basis of specific jurisdiction.
2.
Application of the "Fairness Factors."
Having concluded that "minimum contacts" exist, the court turns to whether the
exercise of personal jurisdiction over Defendant Freestream comports with "traditional
notions of fair play and substantial justice." Int'l Shoe Co. v. State of Wash., Office of
Unemployment Comp. & Placement, 326 U.S. 310,316 (1945) (internal quotation marks
omitted). In making this determination, the court evaluates: "the burden on the
defendant, the forum State's interest in adjudicating the dispute, the plaintiffs interest in
obtaining convenient and effective relief, the interstate judicial system's interest in
obtaining the most efficient resolution of controversies, and the shared interest of the
several States in furthering fundamental substantive social policies." Burger King, 471
U.S. at 477 (internal quotation marks omitted).
"The import of the 'reasonableness' inquiry varies inversely with the strength of
the 'minimum contacts' showing-a strong (or weak) showing by the plaintiff on
'minimum contacts' reduces (or increases) the weight given to 'reasonableness."' Bank
Brussels Lambert, 305 F.3d at 129. In this case, because Plaintiff has not made a
compelling demonstration of "minimum contacts," the court examines the "fairness
factors" with greater scrutiny.
In evaluating whether the exercise of personal jurisdiction will result in the
efficient administration of justice, the court "generally consider[ s] where witnesses and
evidence are likely to be located." Metro. Life Ins., 84 F.3d at 574. Plaintiff asserts that
significant evidence is located in Vermont, including Mr. Chase and Ms. Lindberg, who
both allegedly have significant knowledge of the facts giving rise to Plaintiffs claims.
17
Ms. Marrero appears to be located in New Jersey, Defendant Melk is located in
Connecticut, and a small number of third-party witnesses may be located in Florida or
Oklahoma. It thus appears that there is not a single forum in which a substantial majority
of witnesses are located. See Irving v. Revera, Inc., 2011 WL 5329726, at *5 (D. Vt.
Nov. 4, 2011) (holding that where likely witnesses reside and discovery will likely be
taken outside the forum state, "this factor does not point decisively in favor of the
reasonableness or unreasonableness of exercising personal jurisdiction"). Defendant
Freestream nonetheless claims that its witnesses are located in New Jerse/ and that
Plaintiff has retained New York City-based counsel in this lawsuit. It therefore argues
that "a forum more proximate to the witnesses and evidence" would be more convenient.
(Doc. 11 at 18.)
Although there is no optimal forum, Vermont appears to be the forum with the
most extensive contacts with the witnesses and the evidence in this case. The burden
Defendant Freestream faces in litigating in Vermont is minimal. See Bank Brussels
Lambert, 305 F.3d at 129-30 (internal quotation marks omitted) ("[T]he conveniences of
modern communication and transportation ease what would have been a serious burden
only a few decades ago."). As a result, this fairness factor weighs slightly in favor of an
exercise of jurisdiction.
Vermont also has an interest in protecting its residents' business interests and in
redressing their tortious and contractual injuries. No other forum is likely to have an
equivalent interest in this dispute. See Burger King, 471 U.S. at 473 ("A State generally
has a 'manifest interest' in providing its residents with a convenient forum for redressing
injuries inflicted by out-of-state actors."); see also KBA N Am. Inc. v. Amerigraph, LLC,
2007 WL 4119119, at *3 (D. Vt. Nov. 16, 2007) (noting that "Vermont has a clear
interest in protecting the business interests of its residents").
There is no evidence that Defendant Freestream will suffer prejudice if it is forced
to litigate in a Vermont federal court. There is likewise no indication that Plaintiffwould
6
Other than Ms. Marrero and Defendant Melk, Defendant Freestream has not identified by name
any other witnesses located outside Vermont.
18
.---------------------------------------------------
face any prejudice if the dispute were litigated in another forum. However, Plaintiff does
have an interest in consolidating its claims against Defendants in a single forum and
litigating its claims in its chosen forum. See, e.g., Irving, 2011 WL 5329726, at *4
(noting that plaintiffs have "an interest in pursuing their eleven-count complaint against
all defendants ... even if it would not impact the size of a potential judgment"). Plaintiff
has already obtained a default judgment against Defendant Melk, and exercising
jurisdiction over Defendant Freestream would avoid the need to file a separate suit
against that defendant in another forum. Plaintiff may also claim a reasonable
expectation that its claims will be governed by Vermont law as contemplated by the
unsigned Purchase and Sale Agreement. Defendant Freestream identifies no contrary
expectation that this dispute would be governed by the laws of New Jersey or any other
forum. This factor thus also weighs in favor of a Vermont forum.
Finally, the court must "consider the common interests of the several states in
promoting substantive social policies." Metro. Life Ins., 84 F.3d at 575. Neither Plaintiff
nor Defendant Freestream has identified any substantive social policies that are
implicated by this case, and correspondingly, this factor does not weigh in either party's
favor. Kernan v. Kurz-Hastings, Inc., 175 F.3d 236,245 (2d Cir. 1999) (noting that the
parties did "not suggest[] or show[] that any substantive social policies would be
furthered or undermined by permitting the case against [defendant] to go forward in New
York").
On balance, the fairness factors weigh in favor of the court's exercise of personal
jurisdiction over Defendant Freestream in Vermont. It is therefore consistent with the
Due Process Clause of the United States Constitution for this court to exercise specific
jurisdiction. See Chloe, 616 F .3d at 173 (citation omitted) (finding the first three factors
favor jurisdiction and the last two factors are neutral, and holding that "asserting
jurisdiction over [defendant] comports with 'traditional notions of fair play and
substantial justice,' ... such that it satisfies the reasonableness inquiry of the Due Process
Clause").
19
For the foregoing reasons, Defendant Freestream's motion to dismiss under Fed.
R. Civ. P. 12(b)(2) for lack of personal jurisdiction is DENIED. Plaintiffs alternative
request for jurisdictional discovery is DENIED AS MOOT.
B.
Whether to Grant Defendant Freestream's Motion to Dismiss for
Improper Venue.
In resolving a motion to dismiss for improper venue, the court accepts the facts
alleged in the Complaint as true and views them in the light most favorable to Plaintiff.
See GulfIns. Co., 417 F.3d at 355; see also Jenkins v. Miller, 983 F. Supp. 2d 423,464
(D. Vt. 2013) (holding that at motion to dismiss stage, a plaintiff"need only make a
prima facie showing of venue"). "The concepts of personal jurisdiction and venue are
closely related but nonetheless distinct." United States ex rei. Rudick v. Laird, 412 F.2d
16, 20 (2d Cir. 1969).
28 U.S.C. § 1391(b) governs venue in diversity cases, and states that venue is
appropriate in:
( 1) a judicial district in which any defendant resides, if all defendants are
residents of the State in which the district is located;
(2) a judicial district in which a substantial part of the events or omissions
giving rise to the claim occurred, or a substantial part of property that is the
subject of the action is situated; or
(3) if there is no district in which an action may otherwise be brought as
provided in this section, any judicial district in which any defendant is
subject to the court's personal jurisdiction with respect to such action.
Plaintiff claims that venue is proper pursuant to 28 U.S.C. § 1391(b)(2) because
Defendant Freestream directed its conduct towards Plaintiff in Vermont, including
"voluminous misrepresentations giving rise to [Plaintiffs] claims[,]" and thus a
substantial part of the relevant events took place in Vermont. (Doc. 19 at 25.)
"[W]hen a plaintiff relies on§ 1391(b)(2) to defeat a venue challenge, a two-part
inquiry is appropriate." Daniel v. Am. Bd. of Emergency Med., 428 F.3d 408, 432 (2d
Cir. 2005):
First, a court should identify the nature of the claims and the acts or
omissions that the plaintiff alleges give rise to those claims. Second, the
court should determine whether a substantial part of those acts or omissions
20
occurred in the district where suit was filed, that is, whether significant
events or omissions material to those claims have occurred in the district in
question.
!d. (alterations, citation, and internal quotation marks omitted). A plaintiff "need not
demonstrate that [its] choice of venue is the best forum; [it] need only demonstrate a
prima facie case that [its] choice is permissible under the [venue] statute." Jenkins, 983
F. Supp. 2d at 464.
Although venue may be proper "in multiple judicial districts as long as 'a
substantial part' of the underlying events took place in those districts, ... [the Second
Circuit] caution[s] district courts to take seriously the adjective 'substantial[]' ... [and] to
construe the venue statute strictly." Gulf Ins. Co., 417 F.3d at 356-57. As a result,
"[ w ]hen material acts or omissions within the forum bear a close nexus to the claims,
they are properly deemed 'significant' and, thus, substantial, but when a close nexus is
lacking, so too is the substantiality necessary to support venue." Daniel, 428 F.3d at 433.
Courts within the Second Circuit have considered a variety of factors in
conducting a venue analysis pursuant to 28 U.S.C. § 1391, including where the plaintiff
allegedly received communications from the defendant regarding the subject matter at
issue in the lawsuit, 7 where the plaintiff allegedly sustained injuries, 8 and where a
pertinent contract was allegedly negotiated and entered into by the plaintiff. 9
In this case, Plaintiff alleges that Defendant Freestream drafted, forwarded, and
negotiated the Commission Agreement with Plaintiff in Vermont, and provided for
7
See, e.g., US. Titan, Inc. v. Guangzhou Zhen Hua Shipping Co., 241 F.3d 135, 154 (2d Cir.
2001) ("[M]any of [defendant's] communications reached [plaintiffs] offices in New York[.] ...
Accordingly, venue in the Southern District ofNew York was proper.").
8
See, e.g., Rothstein v. Carriere, 41 F. Supp. 2d 381, 387 (E.D.N.Y. 1999) ("'The place where
the harm occurred is ... relevant for venue purposes."'); see also Reynolds Corp. v. Nat 'l
Operator Servs., Inc., 73 F. Supp. 2d 299, 306 (W.D.N.Y. 1999) ("The Court is also convinced
that venue is proper for [the plaintiffs] tort claims. Although the tortious conduct arguably
occurred in Maryland, plaintiffs injuries, albeit economic in nature, occurred in this district.").
9
See, e.g., KBA N. Am. Inc. v. Amerigraph, LLC, 2007 WL 4119119, at *3 (D. Vt. Nov. 16,
2007) (holding that venue in breach of contract action was proper in the District of Vermont in
part because "the underlying agreements were at least in part negotiated, prepared, and entered
into by [plaintiff] in Vermont").
21
payment thereunder to Plaintiffs KeyBank account in Milton, Vermont. Plaintiff further
alleges it sustained its injuries in Vermont where it conducts business. The Commission
Agreement is central to Plaintiffs claims in this matter. See KBA N Am., 2007 WL
4119119, at *3 (holding venue in the District ofVermont is proper, and noting the
significance of failure to remit payment to plaintiff in Vermont in venue analysis); see
also Saltzman v. La. Auction Exch., Inc., 997 F. Supp. 537, 541 (S.D.N.Y. 1998) (finding
venue proper in New York in part because "[p]laintiffs counsel negotiated with
defendants from New York City, and payment under the terms of the letter agreement
was due to plaintiff in New York"). Because a "substantial part" ofthe events or
omissions giving rise to Plaintiffs claims occurred in Vermont, venue in the District of
Vermont is proper. Defendant Freestream's motion to dismiss for improper venue
pursuant to Fed. R. Civ. P. 12(b)(3) is therefore DENIED.
C.
Whether to Grant Defendant Freestream's Motion to Dismiss for
Failure to State a Claim.
In the event the court exercises personal jurisdiction over it, pursuant to Fed. R.
Civ. P. 12(b)(6), Defendant Freestream asks the court to dismiss Plaintiffs Complaint for
failure to state a plausible claim for relief. "[A] pleading must contain a short and plain
statement of the claim showing that the pleader is entitled to relief." Ashcroft v. Iqbal,
556 U.S. 662, 677-78 (2009) (internal quotation marks omitted). The "complaint must
contain sufficient factual matter, accepted as true, to state a claim to relief that is
plausible on its face." !d. at 678 (internal quotation marks omitted). "The plausibility
standard is not akin to a 'probability requirement,' but it asks for more than a sheer
possibility that a defendant has acted unlawfully." !d. (quoting Bell At!. Corp. v.
Twombly, 550 U.S. 544, 556 (2007)). "Where a complaint pleads facts that are merely
consistent with a defendant's liability, it stops short of the line between possibility and
plausibility of entitlement to relief." !d. (internal quotation marks omitted). "Threadbare
recitals of the elements of a cause of action, supported by mere conclusory statements, do
not suffice." !d.
22
1.
Whether Plaintiff Alleges a Plausible Claim of Fraudulent
Inducement (Count 1).
In Count I, Plaintiff asserts a claim for fraudulent inducement, alleging that
Defendant Freestream made several misrepresentations in order to induce Plaintiff to
abandon its contract to purchase the Aircraft from PLL. Defendant Freestream responds
that Plaintiff has not plausibly pled fraudulent inducement, has failed to plead fraud with
particularity, and has alleged an injury that is barred by the economic loss rule.
Under Vermont law, a party alleging fraudulent inducement must plead facts
alleging "an intentional misrepresentation of fact affecting the essence of the transaction,
false when made and known to be false by the maker, not open to the defrauded party's
knowledge, and relied upon by the defrauded party to its damage." Citibank N.A. v. City
of Burlington, 971 F. Supp. 2d 414, 430 (D. Vt. 2013) (internal quotation marks
omitted). 10 The plaintiff must also "state with particularity the circumstances constituting
fraud or mistake." Fed. R. Civ. P. 9(b). Rule 9(b) requires that the pleading '"(1) specify
the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3)
state where and when the statements were made, and (4) explain why the statements were
fraudulent."' Rombach v. Chang, 355 F.3d 164, 170 (2d Cir. 2004) (quoting Mills v.
Polar Molecular Corp., 12 F .3d 1170, 1175 (2d Cir. 1993)).
Plaintiff has pled fraudulent inducement with sufficient particularity. It identifies
at least three allegedly false statements that Defendant Freestream made or caused to be
made: (1) the August 4, 2015 lien filed against the Aircraft in the FAA aircraft registry,
falsely premised upon non-payment of services provided by Defendant Melk; (2) the
August 14, 2015 representation to Plaintiffs escrow agent that Defendant Freestream had
a valid contract to purchase the Aircraft; and (3) the August 20, 2015 representation that
Defendant Melk would pay Plaintiff to relinquish its claim to the Aircraft. Plaintiffs
Complaint further alleges that Ms. Marrero made a false representation on August 14,
20 15 to Plaintiffs escrow agent that a valid FAA lien existed on the Aircraft. Plaintiffs
°
1
For purposes of the pending motion, the parties assume that Vermont law applies to Plaintiffs
claims. Without deciding the issue, the court proceeds on that assumption as well.
23
Complaint adequately explains how each of the alleged statements was fraudulent and
how it relied on those statements to its detriment. Although Defendant Freestream points
out that Plaintiff had equal access to the alleged true facts through its communications
with PLL, it cites no authority for the proposition that Plaintiff was compelled to accept
PLL' s version of the events. At best, Defendant Freestream has identified a credibility
determination that must be made by the finder of fact.
In the alternative, Defendant Freestream relies on the economic loss rule that
"claimants cannot seek, through tort law, to alleviate losses incurred pursuant to a
contract," and seeks dismissal of Plaintiffs fraudulent inducement claim on this basis.
Springfield Hydroelectric Co. v. Copp, 779 A.2d 67, 70 (Vt. 2001). In support of this
argument, Defendant Freestream cites EBWS, LLC v. Britly Corp., 2007 VT 37, ~ 30, 181
Vt. 513, 524, 928 A.2d 497, 507, a case invoking the economic rule to bar recovery for
negligence claims. Whether the economic loss rule bars recovery for fraud-based claims
is not settled in Vermont. 11 At the pleading stage, dismissal of a novel claim without the
benefit of discovery and a factual record is not warranted. See Adato v. Kagan, 599 F .2d
1111, 1117 (2d Cir. 1979) ("Tenuous theories of liability are better assayed in the light of
actual facts than in pleader's supposition."). Defendant Freestream's motion to dismiss
Plaintiffs fraudulent inducement claim (Count I) for failure to state a claim is therefore
DENIED.
2.
Whether Plaintiff Alleges a Plausible Claim of Tortious
Interference with Contract (Count II).
In Count II, Plaintiff alleges that Defendant Freestream tortiously interfered with
Plaintiffs contract with PLL by filing a false FAA lien which prevented the
consummation of Plaintiffs purchase of the Aircraft. Defendant Freestream seeks
dismissal of this claim because Plaintiff unilaterally terminated the Commission
11
This court has previously declined to invoke the economic loss rule to dismiss fraud-based
claims under Vermont law. See, e.g., Sherman v. Ben & Jerry's Franchising, Inc., 2009 WL
2462539, at *4 (D. Vt. Aug. 10, 2009) (denying motion to dismiss fraud in the inducement
claims based on economic loss rule); see also Mount Snow Ltd v. ALL!, 2012 WL 1957560, at
*4 (D. Vt. May 30, 2012) (denying motion to dismiss constructive fraud claim based on
economic loss rule).
24
Agreement and therefore should not be permitted to claim Defendant Freestream
tortiously interfered with that contract.
To state a claim for tortious interference with contract, a plaintiff must allege that
the defendant intentionally and improperly caused a third party's non-performance of its
contract with the plaintiff. See Gifford v. Sun Data, Inc., 686 A.2d 472, 473 (Vt. 1996)
(holding that plaintiff must show that defendant "intentionally and improperly induced [a
third party] not to perform its contract"). The act of interference must be "wrongful or
improper by some measure beyond the fact of interference itself' in order to support
liability. Kollar v. Martin, 706 A.2d 945, 946 (Vt. 1997) (citation omitted).
Plaintiff concedes that it terminated the Commission Agreement, but alleges that it
was Defendants that caused this to occur. Plaintiff points out that PLL was prepared to
sell the Aircraft to Plaintiff but that Plaintiffs "financiers would not agree to fund the
purchase of the Aircraft as long as there was a $400,000 lien against it" and that "the
buyer that [Plaintiff] had identified to purchase the Aircraft also would have backed out
of the deal as a result of the Fraudulent FAA Lien." (Doc. 1 at 7,
~
39.) Viewing these
allegations in the light most favorable to Plaintiff and drawing all reasonable inferences
in its favor, Plaintiff has adequately alleged that PLL or other third-party financiers, or
both, would have terminated the sale of the Aircraft solely because Defendants had
allegedly improperly filed a fraudulent FAA lien against the Aircraft's title. Plaintiff thus
adequately alleges a causal relationship between Defendants' alleged tortious conduct
and an injury to Plaintiffs identified contractual relationships. Count II therefore
plausibly states a claim for tortious interference with contract, and Defendant
Freestream's motion to dismiss this claim is DENIED.
3.
Whether Plaintiff Alleges a Plausible Claim of Tortious
Interference with a Prospective Business Relationship
(Count III).
Based on the same nucleus of facts that underpin its claim in Count II, in Count
III, Plaintiff asserts a claim for tortious interference with a prospective business
25
relationship. Defendant Freestream argues that this claim must be dismissed because it
lacks sufficient factual content to state a plausible claim for relief.
To state a claim for tortious interference with a prospective business relationship,
a plaintiff must allege:
( 1) the existence of a valid business relationship or expectancy; (2)
knowledge by the interferer of the relationship or expectancy; (3) an
intentional act of interference on the part of the interferer; (4) damage to the
party whose relationship or expectancy was disrupted; and (5) proof that
the interference caused the harm sustained.
JA. Morrissey, Inc. v. Smejkal, 2010 VT 66,
~
21, 188 Vt. 245, 255, 6 A.3d 701, 708-09
(citing Gifford, 686 A.2d at 474 n.2). The tort "protects the same interest in stable
economic relationships as does the tort of interference with contract, but applies to
business relationships not formally reduced to contract." Gifford, 686 A.2d at 474.
"Competitive business practices[,]" however, do not give rise to this tort, and if a
defendant's interference is "intended to advance its own competing interests, the claim
will fail unless the defendant's methods are criminal or fraudulent." !d. at 475.
Plaintiff alleges that it had a prospective business relationship with an "identified"
third-party buyer to whom it expected to resell the Aircraft after purchasing it from PLL
and that "Defendants knew that [Plaintiff] intended to sell the Aircraft after the purchase
from PLL." (Doc. 1 at 7, 16, ~~ 39, 99.) In addition, Plaintiff alleges that Defendants
engaged in certain fraudulent and unlawful activity, such as filing a false FAA lien
which, if established, could be considered beyond mere "competitive business
practices[.]" Cf Gifford, 686 A.2d at 474 ("Competitive business practices are not
tortious."). Plaintiff has also alleged it has suffered damages due to the loss of an
expected resale profit, which allegedly resulted directly from Defendants' improper acts
of interference.
Accepting Plaintiffs factual allegations as true, the Complaint's allegations
adequately and plausibly allege that Defendant Freestream tortiously interfered with a
prospective business relationship of Plaintiffs. Defendant Freestream's motion to
dismiss Count III for failure to state a claim is therefore DENIED.
26
4.
Whether Plaintiff Alleges a Plausible Claim of Civil Conspiracy
(Count IV).
Count IV asserts a claim against Defendants for civil conspiracy. Defendant
Freestream argues that there is no independent cause of action for civil conspiracy under
Vermont law, and that, in any event, Plaintiffs allegations do not support a plausible
claim for relief. Vermont law defines a criminal conspiracy as "a combination of two or
more persons to effect an illegal purpose, either by legal or illegal means, or to effect a
legal purpose by illegal means[;]" in civil cases, the plaintiff "must be damaged by
something done in furtherance of the agreement, and the thing done [must] be something
unlawful in itself[.]" Akerley v. N. Country Stone, Inc., 620 F. Supp. 2d 591, 600 (D. Vt.
2009) (internal quotation marks omitted) (quoting Boutwell v. Marr, 42 A. 607, 609 (Vt.
1899)). The Vermont Supreme Court, however, in a non-precedential order issued by a
three-judge panel, has questioned the continued vitality of a common law cause of action
for civil conspiracy. See Davis v. Vile, 2003 WL 25746021, at *3 (Vt. Mar. 2003)
(unpub. mem.) ("[a]ssuming that there continues to be an independent cause of action for
the tort of civil conspiracy" and dismissing the claim for failure to allege facts satisfying
the elements of civil conspiracy). 12
Where applicable state substantive law is unclear, a federal court sitting in
diversity must predict how the state's highest court would decide the case. See Giuffre
Hyundai, Ltd. v. Hyundai Motor Am., 756 F.3d 204, 209 (2d Cir. 2014) (internal
quotation marks omitted) ("[I]t is our job to predict how the forum state's highest court
would decide the issues before us[.]"). At this juncture, the court predicts that in certain
circumstances, a civil conspiracy claim may be recognized under Vermont law.
Assuming that a claim of civil conspiracy will be recognized, Plaintiff has alleged
facts that support a plausible inference of a conspiracy between Defendants. It has
12
See also Saunders v. Morton, 2011 WL 1135132, at *9-10 (D. Vt. Feb. 17, 2011) (noting that
"[i]t is not entirely clear under Vermont law whether the tort of civil conspiracy constitutes an
independent cause of action" but that "this Court has issued decisions upon parties' claims of
civil conspiracy in which it has been assumed that the claim constitutes an independent cause of
action in Vermont."), report and recommendation adopted by 2011 WL 1114416 (D. Vt. Mar.
24, 2011).
27
alleged that a "meeting of the minds occurred" between Defendant Freestream and
Defendant Melk (Doc. 1 at 17, ~ 106), and that Defendants intentionally worked together
to thwart Plaintiffs purchase of the Aircraft from PLL and then profit from their resale of
the Aircraft to Blackjet. Plaintiff has alleged several overt acts in furtherance of the
alleged conspiracy, including that Defendant Freestream and Defendant Melk worked in
concert to cause a fraudulent and unlawful FAA lien to be filed in order to induce
Plaintiff to forego its purchase agreement with PLL. Defendant Freestream's motion to
dismiss Count IV for failure to state a claim is therefore DENIED.
5.
Whether Plaintiff Alleges a Plausible Claim of Promissory
Estoppel (Count V).
Count V asserts a claim of promissory estoppel, alleging that "Defendants made
multiple promises to pay [Plaintiff] if it would terminate its contract to purchase the
Aircraft and withdraw its funds from escrow" and that "Defendants' promises should
reasonably have been expected to induce an action or forbearance of a definite and
substantial character on the part of [Plaintiff]." I d. at 17, ~~ 110-11. Defendant
Freestream argues that it did not make any promises to Plaintiff, and that as a
sophisticated actor, Plaintiff "could not reasonably or justifiably presume that a side
agreement it had with a third-party" would form a legal obligation on the part of
Defendant Freestream. (Doc. 11 at 29.) Defendant Freestream also argues that Plaintiffs
remedy is at law, rendering equitable relief unavailable.
"Establishment of promissory estoppel requires ( 1) a promise on which the
promisor reasonably expects the promisee to take action or forbearance of a substantial
character; (2) the promise induced a definite and substantial action or forbearance; and
(3) injustice can be avoided only through the enforcement of the promise." Green
Mountain Inv. Corp. v. Flaim, 807 A.2d 461, 464 (Vt. 2002). "[T]he doctrine of
promissory estoppel is applicable only where there is no agreement, where the promise is
gratuitous, and there is unbargained-for reliance." Chomicky v. Buttalph, 513 A.2d 117 4,
1176 n.* (Vt. 1986).
28
The Complaint identifies two promises allegedly made by Defendants to pay
Plaintiff $100,000 which were memorialized in the August 2015 Commission Agreement
and the October 2015 Purchase and Sale Agreement and upon which Plaintiff allegedly
relied to its detriment. The Complaint alleges that Defendant Melk's "alter ego" entities
were parties to those two contracts. (Doc. 1 at 3, 8, 10, ~~ 13, 44, 59.) Whether
Plaintiff's reliance on the identified promises was reasonable is generally determined by
the trier of fact. See STMicroelectronics, N. V. v. Credit Suisse Sec. (USA) LLC, 648 F .3d
68, 81 (2d Cir. 2011) (affirming arbitral award on fraud-based claims and noting that
"reasonable reliance is often a question of fact for the jury rather than a question of law
for the court"); Marino v. Bank ofAm. Home Loans, 2013 WL 715611, at *7 (D. Vt. Feb.
27, 2013) (denying motion to dismiss fraudulent misrepresentation claim under Vermont
law where defendant argued that plaintiff's reliance was unreasonable because "the
relationship between the parties, [plaintiff's] level of sophistication, and the content of all
relevant communications has not been fully presented to the Court").
Plaintiff's legal claims and remedies at law against Defendants do not preclude a
claim of promissory estoppel at the pleading stage because Plaintiff is entitled to plead its
claims and legal theories in the alternative. See Stamp Tech, Inc. ex rei. Blair v.
Ludall/Thermal Acoustical, Inc., 2009 VT 91,
~
16, 186 Vt. 369, 377, 987 A.2d 292, 297
(noting that a party "is, of course, entitled to plead different legal theories in the
alternative"). Because Plaintiff has stated a claim for promissory estoppel, Defendant
Freestream's motion to dismiss Count Vis DENIED.
6.
Whether Plaintiff Alleges a Plausible Claim of Unjust
Enrichment (Count VI).
Plaintiff's final claim is for unjust enrichment. Defendant Freestream argues that
the existence of the Commission Agreement precludes equitable relief. To state a claim
under Vermont law for unjust enrichment, a plaintiff "must allege that a benefit was
conferred on defendant, that defendant accepted the benefit, and that it would be
inequitable to allow defendant to retain the benefit." Johnson v. Harwood, 2008 VT 4,
~
15, 183 Vt. 157, 166, 945 A.2d 875, 881. Unjust enrichment is a quasi-contractual
29
theory of liability, by which the law "implies a promise to pay when a party receives a
benefit and retention of the benefit would be inequitable." Brookside Mem 'Is, Inc. v.
Barre City, 702 A.2d 47, 49 (Vt. 1997).
Plaintiff has plausibly alleged that it conferred a benefit upon Defendant
Freestream by terminating its contract to purchase the Aircraft, which Defendant
Freestream accepted. Plaintiff has also plausibly alleged that Defendant Freestream acted
fraudulently and in concert with Defendant Melk to improperly induce Plaintiff to
relinquish its claim to the Aircraft, rendering it inequitable for Defendant Freestream to
retain the benefits of its own resale of the Aircraft to Blackjet.
Similar to Plaintiffs promissory estoppel claim, the existence of a contract does
not warrant dismissal of Plaintiffs unjust enrichment claim because Plaintiff may plead
its claims in alternative. In the event Plaintiffs adequate recovery at law is established,
Plaintiffs equitable claims will be dismissed. See, e.g., Schwartz v. Schwartz, 2014 WL
6390316, at *4 (E.D.N.Y. Nov. 17, 2014) ("As for the claims seeking equitable relief, ...
[u]pon consideration, the Court denies the motion at this time without prejudice. Such
claims may be dismissed should it be determined that plaintiff has an adequate remedy at
law."). Defendant Freestream's motion to dismiss Count VI for failure to state a claim is
therefore DENIED.
CONCLUSION
For the foregoing reasons, the court DENIES Defendant Freestream's motion to
dismiss pursuant to Fed. R. Civ. P. 12(b)(2), 12(b)(3), and 12(b)(6) (Doc. 11). The court
DENIES AS MOOT Plaintiffs motion for leave to amend (Doc. 19).
SO ORDERED.
Dated at Burlington, in the District of Vermont, this
30
_fday of December, 2016.
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