Hirsch et al v. Johnson et al
Filing
17
MEMORANDUM OPINION re: 3 MOTION to Dismiss by Adam Romney. (See Memorandum Opinion For Details). Signed by District Judge James C. Cacheris on 6/26/14. (nhall)
IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF VIRGINIA
Alexandria Division
ROBERT HIRSCH and ROCCO J.
DeLEONARDIS,
Plaintiffs,
v.
ROBERT JOHNSON and ADAM
ROMNEY,
Defendants.
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M E M O R A N D U M
1:14cv332 (JCC/TRJ)
O P I N I O N
This matter is before the Court on Defendant Adam
Romney’s (“Romney”) Motion to Dismiss for Lack of Personal
Jurisdiction and Improper Venue (“Motion”).
[Dkt. 3.]
The
Court will grant Romney’s Motion to Dismiss for the reasons
stated below.
I.
Background
This case arises out of a dispute about how to
distribute settlement funds arising from a case in the Superior
Court of Arizona, Maricopa County captioned Wanchuk, et al. v.
PCM Ventures I, LLC, et al., No. CV2007-009523.
A. Factual Background
On November 20, 2011, Defendant Robert Johnson
(“Johnson”), acting individually and on behalf of Tightlines
1
International (“Tightlines”) executed an assignment of claims,
defenses and interests in an action captioned Wanchuk, et al. v.
PCM Ventures, I, LLC et al., Dkt. CV2007-0096523 (“Wanchuk
litigation”) to Rocco DeLeonardis (“DeLeonardis”) and Robert
Hirsch (“Hirsch”).
(Compl. ¶ 8.)
Plaintiffs allege that the assignment was made in
consideration of Plaintiffs’ agreement to provide Johnson and
Tightlines with “cash, assistance, Arizona legal counsel,
payment of legal expenses, fees and costs” to pursue Johnson’s
and Tightlines’ claims against Phoenix Capital Management,
P.C.M. Ventures I, LLC (“PCM”), and defend against PCM’s
counterclaims.
(Compl. ¶ 10.)
Under the assignment, any
proceeds of recovery, whether by trial, mediation, arbitration,
or negotiation would be split on a 65-35% basis.
(Compl. ¶ 12.)
The 65% share was to go to Plaintiffs in this action -- Hirsch
and DeLeonardis -- and the 35% share was to go to Johnson and
Tightlines.
(Compl. ¶ 13.)
Plaintiffs allege that on or about December 6, 2012,
DeLeonardis and Romney signed a retainer agreement whereby
Romney would act as attorney for DeLeonardis and Hirsch, in
their capacities as assignees and interested parties in the
Wanchuk litigation.
(Compl. ¶ 14.)
Plaintiffs allege that on
or about May 13, 2013, Johnson, his wife Pantipa Kitticachorn
(“Kitticachorn”), and Tightlines retained Romney to defend them
2
in a separate suit filed against them in the Superior Court of
Maricopa County captioned Janitell v. Robert Johnson, et al.,
CV2013-053875.
(Compl. ¶¶ 15, 48.)
Plaintiffs aver that Romney
colluded with Johnson and Kitticachorn “to defraud plaintiffs of
their 65% interest in the Wanchuk litigation, while Romney was
still acting as Plaintiffs’ counsel in the Wanchuk litigation.”
(Compl. ¶ 16.)
Specifically, Plaintiffs allege that the Wanchuk
litigation was settled in October 2013 and on October 24, 2013
all interested parties executed a Settlement Agreement.
¶ 19.)
(Compl.
Defendants in the Wanchuk matter wired $200,000 in
settlement proceeds to Romney’s escrow account at TruWest Credit
Union.
(Compl. ¶ 20.)
on November 1, 2013.
The $200,000 arrived in Romney’s account
(Compl. ¶ 20; Ex. 5.)
Plaintiffs allege
that since the settlement proceeds arrived to his account on
November 1, 2013, Romney has refused to disburse the $130,000
allegedly owing to Hirsch and DeLeonardis.
(Compl. ¶ 22.)
Plaintiffs allege that Romney “cites his preference for the
approval of Johnson and Kitticachorn before disbursing funds”
despite the requirements of the assignment and retainer
agreements.
(Compl. ¶ 22.)
Plaintiffs assert four claims against Johnson: (1)
breach of contract (Compl. ¶¶ 24-30); (2) repudiation of
contract (Compl. ¶¶ 31-34); (3) tortious interference with
3
retainer agreement (Compl. ¶¶ 35-39); (4) fraud (Compl. ¶¶ 4045); and five claims against Romney: (1) breach of December 6,
2012 retainer agreement (Compl. ¶¶ 46-57); (2) conversion and
misappropriation (Compl. ¶¶ 58-61); (3) breach of fiduciary duty
(Compl. ¶¶ 62-65); (4) legal malpractice (Compl. ¶¶ 66-76); (5)
punitive damages (Compl. ¶¶ 76-78).
B. Procedural Background
Plaintiffs filed their verified complaint against
Johnson and Romney on March 31, 2014.
[Dkt. 1.]
On April 30,
2014, Romney filed his Motion to Dismiss and accompanying
memorandum.
[Dkts. 3-4.]
On June 16, 2014, Romney filed a
Notice of No Response by Plaintiff to Defendant’s Motion to
Dismiss.
[Dkts. 11-12.]
their opposition.
On June 16, 2014, Plaintiffs filed
[Dkts. 13-14.]
The opposition states that at
the hearing on June 19, 2014, Plaintiffs intend to move for
leave to amend pursuant to Federal Rule of Civil Procedure
15(B).
The opposition also requests the Court enter a default
judgment against defendant Johnson.
On June 19, 2014,
Plaintiffs filed a supplemental exhibit to their affidavit in
opposition.
[Dkt. 15.]
Defendant’s Motion is before the Court.
II.
Standard of Review
Federal Rule of Civil Procedure 12(b)(2) permits
dismissal of an action when the Court lacks personal
4
jurisdiction over the parties.
The plaintiff bears the burden
of demonstrating personal jurisdiction by a preponderance of the
evidence once its existence is questioned by the defendant.
Combs v. Bakker, 886 F.2d 673, 676 (4th Cir. 1989).
When a
district court decides a pretrial personal jurisdiction
dismissal motion without an evidentiary hearing, however, the
plaintiff need prove only a prima facie case of personal
jurisdiction.
Mylan Labs., Inc. v. Akzo, N.V., 2 F.3d 56, 60
(4th Cir. 1993); Combs, 886 F.2d at 676.
In deciding whether
the plaintiff has proved a prima facie case, the district court
must draw all reasonable inferences arising from the proof, and
resolve all factual disputes, in the plaintiff’s favor.
Combs,
886 F.2d at 676; Wolf v. Richmond Cnty Hosp. Auth., 745 F.2d
904, 908 (4th Cir. 1984), cert. denied, 474 U.S. 826 (1985).
Federal Rule of Civil Procedure 12(b)(3) permits
dismissal of an action where venue is improper.
After the
defendant raises an objection to venue, the plaintiff has the
burden to establish that venue is appropriate in this district.
United Coal Co. v. Land Use Corp., 575 F. Supp. 1148, 1158 (W.D.
Va. 1983); 15 Charles Alan Wright, Arthur R. Miller, Edward H.
Cooper, Federal Practice and Procedure § 3826 (2d ed. 2005).
When no evidentiary hearing is held, the plaintiff need only
make a prima facie showing of venue to survive a motion to
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dismiss for improper venue.
Mitrano v. Hawes, 377 F.3d 402, 405
(4th Cir. 2004).
III. Analysis
A.
Motions Currently Before the Court
Defendant Romney filed his Motion to Dismiss on April
30, 2014.
Local Rule 7(F)(1) provides that “the opposing party
shall file a responsive brief and such supporting documents as
are appropriate, within eleven (11) days after service.”
Civ. R. 7(F)(1).
Local
Federal Rule of Civil Procedure 6(d) provides
a three (3) day extension period for service made in particular
ways, including, as in this case, by mail.
6(d).
Fed. R. Civ. P.
Therefore, Plaintiffs’ opposition was due fourteen days
after the Motion was filed, on or before May 14, 2014.
Plaintiffs’ opposition, filed on June 16, 2014, falls well
beyond this period.
Plaintiffs have not moved for an extension
of time and have not provided any reasons justifying this delay.
On June 16, 2014, before Plaintiffs filed their opposition,
Romney filed a Notice of No Response by Plaintiff and requested
that the Court grant his Motion as unopposed.
[Dkts. 11-12.]
Plaintiffs’ opposition and supplemental exhibit are untimely.
Nevertheless, Court will address the arguments raised in these
papers because even considering the facts offered by Plaintiffs,
this case must be dismissed.
6
Additionally, to the extent that Plaintiffs intend to
move for leave to amend and for default judgment through this
filing, these motions are not properly before the Court at this
time.
The Court will not address these newly raised requests in
Plaintiffs’ opposition.
The Court will consider these motions
“if separately filed, and properly briefed” once the instant
motion has been determined.
Banks v. Gen. Motors LLC, No.
3:12CV201, 2012 WL 7006844, at *3 (E.D. Va. Dec. 31, 2012).
B.
Motion to Dismiss for Lack of Personal
Jurisdiction
In Virginia, to establish jurisdiction over a nonresident, this Court must consider first whether jurisdiction is
authorized by Virginia law, and then whether the exercise of
jurisdiction comports with the due process requirements of the
Fourteenth Amendment to the United States Constitution.
Consulting Eng'rs Corp. v. Geometric, Ltd., 561 F.3d 273, 277
(4th Cir. 2009).
As Virginia’s general long-arm statute extends
personal jurisdiction to the fullest extent permitted by due
process, the statutory inquiry merges with the constitutional
inquiry.
Young v. New Haven Advocate, 315 F.3d 256, 261 (4th
Cir. 2002).
As a result, the Court need only undertake one
inquiry to determine whether the exercise of jurisdiction here
comports with the Fourteenth Amendment’s due process
requirements.
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To satisfy the requirements of due process, a
defendant must have sufficient “minimum contacts” with the forum
state “such that the maintenance of the suit does not offend
traditional notions of fair play and substantial justice.”
Int’l Shoe Co. v. Wash., 326 U.S. 310, 316 (1945).
To meet this
minimum contacts test, a plaintiff must show that a defendant
“‘purposefully directed his activities at the residents of the
forum’ and the litigation results from alleged injuries that
‘arise out of’ those activities.”
U.S. 462, 472 (1985).
Burger King v. Rudzewicz, 471
This test is designed to ensure that the
defendant is not “haled into a jurisdiction solely as a result
of random, fortuitous, or attenuated contacts.”
Consulting
Eng'rs Corp., 561 F.3d at 277.
Two types of personal jurisdiction meet these
constitutional requirements: specific jurisdiction and general
jurisdiction.
In analyzing the due process requirements for
asserting specific jurisdiction, the Fourth Circuit has set out
a three part test in which the Court must consider, in order,
(1) “the extent to which the defendant purposefully availed
itself of the privilege of conducting activities in the State”;
(2) “whether the plaintiffs’ claims arise out of those
activities directed at the State”; and (3) “whether the exercise
of personal jurisdiction would be constitutionally reasonable.”
Consulting Eng’rs Corp., 561 F.3d at 279 (citing ALS Scan, Inc.
8
v. Digital Serv. Consultants, Inc., 293 F.3d 707, 712 (4th Cir.
2002)).
General jurisdiction exists for claims entirely
distinct from the defendant’s in-state activities where a
defendant’s activities in a state have been “continuous and
systematic.”
Helicopteros Nacionales de Colombia, S.A. v. Hall,
466 U.S. 408, 415-16 (1984).
The Court first will analyze whether there is specific
jurisdiction under the facts here.
Then, the Court will
consider whether general jurisdiction is proper.
1.
Due Process Analysis for Specific Jurisdiction
In assessing the first prong of the test, courts in
the Fourth Circuit consider a variety of nonexclusive factors in
determining whether a defendant has purposefully availed himself
of the forum at issue.
278.
Consulting Eng’rs Corp., 561 F.3d at
In a business context, these factors may include: (1)
whether the defendant maintains offices or agents in the forum
state; (2) whether the defendant owns property in the forum
state; (3) whether the defendant reached into the forum state to
solicit or initiate business; (4) whether the defendant
deliberately engaged in significant or long-term business
activities in the forum state; (5) whether the parties
contractually agreed that the law of the forum state would
govern disputes; (6) whether the defendant made in-person
contact with the resident of the forum in the forum state
9
regarding the business relationship; (7) the nature, quality and
extent of the parties’ communications about the business being
transacted; and (8) whether the performance of contractual
duties was to occur within the forum.
Id.
Considering these factors and the case at hand
overall, the Court concludes that Romney did not purposefully
avail himself of the privilege of conducting activities in
Virginia.
Romney does not maintain offices, agents or own
property in Virginia.
(Romney Decl. ¶¶ 8, 12.)
Therefore, the
only basis this Court could have for exercising specific
jurisdiction over Romney is his contractual relationship with
Plaintiffs. 1
Arizona.
Romney is an attorney, licensed and practicing in
(Romney Decl. ¶ 4.)
Defendant asserts that he became
involved with Plaintiffs when he responded to a request posted
on “phoenix.craigslist.org” seeking an Arizona attorney to act
as local counsel in the Wanchuk matter.
(Romney Decl. ¶ 5.)
Romney did not reach into Virginia to initiate this business; he
responded to an advertisement aimed at Phoenix lawyers,
concerning work to be performed in Arizona.
(Romney Decl. ¶ 8.)
In discussing the legal work to be performed, DeLeonardis met
1
Plaintiffs’ only statement in their opposition brief concerning Romney’s
contacts with Virginia outside of his contractual relationship with
DeLeonardis is that Romney represents “Kittikachorn, a resident of the
Washington, D.C. and northern Virginia metropolitan area in an action
currently pending the Superior Court, Maricopa County.” (Hirsch Aff. ¶ 8.)
It is not clear based on this statement where Kitticachorn actually resides.
The Court cannot find that Romney purposefully availed himself of the
privilege of doing business in Virginia based on this imprecise claim.
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with Romney in Arizona.
(Romney Decl. ¶ 10.)
No portion of
the Wanchuk matter was litigated in Virginia and Romney did not
conduct any work on this matter outside of Arizona.
(Romney
Decl. ¶¶ 5-7)
Moreover, while Romney entered into a contractual
relationship with a resident of Virginia, “[t]he mere existence
of a contract with the out-of-state party cannot automatically
establish sufficient minimum contacts.”
Initiatives Inc. v.
Korea Trading Corp., 991 F. Supp. 476, 479 (E.D. Va. 1997); see
Burger King, 471 U.S. at 478 (“If the question is whether an
individual’s contract with an out-of-state party alone can
automatically establish sufficient minimum contacts in the other
party’s home forum, we believe the answer clearly is that it
cannot.”) (emphasis in original).
The contract is “ordinarily
but an intermediate step serving to tie up prior business
negotiations with future consequences which themselves are the
real object of the business transaction.”
Burger King, 471 U.S.
at 479 (quoting Hoopeston Canning Co. v. Cullen, 318 U.S. 313,
316-17 (1943)).
A court should therefore evaluate “prior
negotiations and contemplated future consequences, along with
the terms of the contract and the parties’ actual course of
dealing” in determining whether defendant has “purposefully
established minimum contacts within the forum.”
11
Id.
Here, the contract between Romney and Plaintiffs
concerned Romney’s representation of Plaintiffs in the Wanchuk
litigation.
(Compl. Ex. 1 [Dkt. 1-1].)
All acts contemplated
under the engagement agreement concerned the Wanchuk litigation
in the Superior Court of Arizona; Romney’s services would
necessarily be performed in Arizona.
Plaintiffs note that
“[d]uring the course of the aborted representation, Romney
telephoned and sent correspondence, electronic and otherwise,
hundreds and hundreds of such communications, to DeLeonardis in
the Commonwealth of Virginia.”
(Hirsch Aff. ¶ 7.)
Correspondence alone, however, is not sufficient to establish
minimum contacts that satisfy due process.
Cape v. von Maur,
932 F. Supp. 124, 128 (D. Md. 1996) (“Generally speaking,
correspondence and phone calls from out-of-state defendants to
in-state plaintiffs are insufficient as a matter of law to
establish the minimum contacts that satisfy due process.”).
Therefore, the Court finds that Romney did not
purposefully avail himself of the benefits or protections of
Virginia law by responding to a post on a Phoenix, Arizonaspecific section of Craigslist, and subsequently entering into
an engagement agreement concerning an Arizona lawsuit, merely
because one of the clients is a resident of this state.
See
Masselli & Lane, PC v. Miller & Schuh, PA, No. 99-2440, 2000 WL
691100, at *2 (4th Cir. May 30, 2000) (“When a case involves
12
legal representation by an out-of-state law firm, courts
emphasize the importance of . . . who initiated the contact.”);
Cape, 932 F. Supp. at 128 (“case law overflows on the point that
providing out-of-state legal representation is not enough to
subject an out-of-state lawyer or law firm to the personal
jurisdiction of the state in which a client resides”)
(collecting cases).
Indeed, this Court has noted with approval
that “other courts have suggested that the question of personal
jurisdiction in legal malpractice situations involving out-ofstate attorneys may turn on where the underlying lawsuit would
have been prosecuted and which state’s law would have applied.”
Allen v. James, 381 F. Supp. 2d 495, 498 (E.D. Va. 2005).
In
this case, both the Wanchuk and the Janitell actions underlying
these claims were prosecuted in the Superior Court of Maricopa
County, Arizona.
Moreover, this case is significantly distinguishable
from the case of English & Smith v. Metzger, where the Fourth
Circuit affirmed this Court’s exercise of personal jurisdiction
over an out-of-state attorney.
901 F.2d 36 (1990).
In English
& Smith, the defendant Metzger, a California lawyer, “initiated
the relationship” with Smith, a Virginia lawyer.
Smith, 901 F.2d at 39.
English &
Metzger “entered into contracts with
Smith by virtue of action taken in Virginia, and carried on a
continuing relationship with Smith in Virginia.”
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Id. at 39-40.
Accordingly, the court found that Metzger’s “intentional
contacts with the State” were sufficient to meet the
requirements of due process.
Id. at 40.
Here, by contrast,
Plaintiffs initiated the relationship with Romney in Arizona,
for work to be performed in Arizona.
Unlike the defendant in
English & Smith, Romney did not purposefully direct his
activities at Virginia such that the exercise of jurisdiction
would comport with due process.
Because Plaintiffs have not satisfied this first prong
of the test for specific jurisdiction, further consideration of
prongs two and three is unnecessary.
Consulting Eng’rs Corp.,
561 F.3d at 278 (“If, and only if, we find that the plaintiff
has satisfied this first prong of the test for specific
jurisdiction need we move on to consideration of prongs two and
three.”).
2.
General Jurisdiction
Additionally, the Court does not have general
jurisdiction over Romney.
Plaintiffs do not allege that Romney
has any “continuous or systematic” contacts with the state of
Virginia.
Helicopteros, 466 U.S. at 415-16.
As the Supreme
Court noted in Goodyear Dunlop Tires Operations, S.A. v. Brown,
131 S. Ct. 2846, 2853 (2011), “for an individual, the paradigm
forum for the exercise of general jurisdiction is the
individual’s domicile.”
Romney is a resident of Arizona who has
14
had no contacts with Virginia, other than with Plaintiff
DeLeonardis.
Accordingly, general jurisdiction is improper.
3.
Wire Transfer
At oral argument on June 19, 2014, Plaintiffs raised
for the first time the issue of quasi in rem jurisdiction. 2
Plaintiffs submitted to the Court a copy of an outgoing wire
detail from TruWest Credit Union.
[Dkt. 15.]
This wire detail
shows a transfer from a sending financial institution listed as
TruWest Credit Union to the receiving financial institution “WP
CONG FCU WASH.”
Romney.
The originator of the transaction is Adam
The wire detail also lists the address of a beneficiary
as “449 1ST STREET SOUTHEAST WASHINGTON DC 20003.”
Plaintiffs
assert that “WP CONG FCU WASH” is the Congressional Federal
Credit Union, a bank headquartered in Oakton, Virginia, that
maintains offices in Washington, D.C.
Plaintiffs argue this
Court may exercise jurisdiction over Romney because he
transferred the settlement funds at issue in this action to a
bank headquartered in Virginia.
Plaintiff’s argument is flawed because funds
transferred to the Congressional Federal Credit Union in
Washington, D.C. do not provide a basis for the exercise of
jurisdiction in Virginia.
That the bank is headquartered in
2
The Court will not address whether it would otherwise be able to exercise in
rem jurisdiction over this action under Shaffer v. Heitner, 433 U.S. 186
(1977) because the property at issue is not in this jurisdiction in the first
instance.
15
Oakton, Virginia does not change this analysis.
Courts within
the Fourth Circuit have found that a court may not obtain “quasi
in rem jurisdiction over another party through service on the
branch of a bank found in a district other than the district
where the bank account is maintained.”
Woodlands, Ltd., v.
Westward Ins. Co., LTD, 965 F. Supp. 13, 14-15 (D. Md. 1997)
(decided on the basis of federal admiralty law, but noting that
Maryland law compelled the same result); Sara Lee Corp. v.
Gregg, No. 1:02CV195, 2003 WL 23120116, at *3 (M.D.N.C. Dec. 18,
2013) (“The general rule is that each branch of a bank is
considered a separate entity, and in no way concerned with
accounts maintained by depositors in other branches or at the
home office, when it comes to attachment or garnishment.”
(internal quotation marks omitted)).
Accordingly, because the
Congressional Federal Credit Union in Washington is a separate
branch, and because the funds were wired to an account in
Washington, D.C., not Virginia, this Court has no basis for
exercising quasi in rem jurisdiction.
Because the Court has no basis for the exercise of
jurisdiction over Romney, Romney’s motion to dismiss for lack of
personal jurisdiction is granted.
Romney is dismissed.
16
Plaintiffs’ complaint against
C.
Motion to Dismiss for Improper Venue
The Complaint states that venue is appropriate in this
District pursuant to 28 U.S.C. §§ 1391(a)(1), (b)(1), (c) and
(d).
Section 1391(b)(1) does not, however, provide Plaintiffs
with proper venue in this district and no other sub-section of
the federal venue statute is available to lay venue in this
district based on the facts alleged in the Complaint.
Section 1391(b) provides that a civil action may be
brought 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.
Turning first to § 1391(b)(1), Plaintiffs allege that Defendants
Johnson and Romney are both residents of the State of Arizona. 3
3
The Complaint clearly states that Romney is a resident of Arizona. (Compl.
¶ 4.) Regarding Johnson’s residence, the Complaint alleges that he is “a
resident of the States of Texas and Arizona, and resides in Arizona at 2625
South Country Club, Tempe, Arizona 85282. (Compl. ¶ 3.) Under § 1391(c)(1),
a natural person is deemed “to reside in the judicial district in which that
person is domiciled.” 28 U.S.C. § 1391(c)(1). Even if Johnson were not
domiciled in Arizona, laying venue in this district would still be improper
because the action could be brought in the District of Arizona based on §
1391(b)(2).
17
(Compl. ¶ 3, 4.)
Because all defendants are residents of the
State of Arizona, venue is proper in the District of Arizona.
Likewise, the District of Arizona is a proper venue pursuant to
§ 1391(b)(2).
All of the events or omissions giving rise to
Plaintiffs’ claims occurred in Arizona.
The settlement funds at
issue in this action were located in an escrow account in
Scottsdale, Arizona.
(Compl. Ex. 5.)
As noted previously,
Plaintiffs claim that these funds have been transferred to
Congressional Federal Credit Union, in Washington, D.C.
15.]
Neither location, however, is in this district.
[Dkt.
This
district’s only connection to the matter at issue here is that
one of the plaintiffs is a resident.
Because this action may be brought in the District of
Arizona, 1391(b)(3) is unavailable to permit Plaintiffs to bring
this action in the Eastern District of Virginia.
Accordingly,
Rule 12(b)(3) provides an alternative basis for dismissal of
Plaintiffs’ complaint as to Romney.
IV. Conclusion
For the foregoing reasons, the Court will grant
Defendant’s Motion to Dismiss.
An appropriate Order will issue.
June 26, 2014
Alexandria, Virginia
/s/
James C. Cacheris
UNITED STATES DISTRICT COURT JUDGE
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