Novo 1 Inc v. Levendo LLC et al
Filing
19
ORDER signed by Judge J P Stadtmueller on 5/9/11 denying 9 defendant Hines' Motion to Dismiss for Lack of Personal Jurisdiction; plaintiff is granted leave to conduct a limited deposition of Hines and to make written discovery requests targeted at the relationship between Hines and Levendo. (cc: all counsel) (nm)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
____________________________________________
NOVO 1, INC.,
Plaintiff,
v.
Case No. 10-CV-892
LEVENDO, LLC, and PATRICK HINES,
Defendants.
____________________________________________
ORDER
On October 12, 2010, Novo 1, Inc. (“Novo 1") filed a complaint against
defendants Levendo, LLC (“Levendo”) and Patrick Hines (“Hines”) seeking
$266,448.69 in damages for payment due for services provided by Novo 1 for
Levendo. (Docket #1). On January 11, 2011, Levendo answered the complaint and
individual defendant Hines moved to dismiss for lack of personal jurisdiction.
(Docket #’s 8, 9). For the reasons set forth below, defendant Hines’ motion will be
denied.
BACKGROUND
Novo 1 is a W isconsin corporation with its principal place of business in
W aukesha, W isconsin. (Compl. ¶ 1).
The company specializes in providing
customer interaction solutions and operating customer contact centers. Levendo is
a limited liability company organized under Florida law. (Defs.’ Disclosure ¶ 2)
(Docket #10). Tarajara Properties Limited owns 100% of Levendo. (Id.). In turn,
Holdtara Limited owns 100% of Tarajara Properties Limited. (Id.). It is unclear in
what type of business Levendo specializes. Levendo’s cursory website provides
little insight, citing only an address, phone number and email address with a heading
indicating it is a “telekom analysis and investment” company, which handles
“[d]eal analysis, creation and participation in Telekom and E-Telekom.
Direct
funding and sourcing, sales, acquisitions and joint ventures.” Levendo, LLC,
http://www.levendo.com (last visited April 25, 2011). According to the complaint,
Hines is the sole officer and/or director of Levendo. (Compl. ¶ 3). Novo 1 alleges
that Levendo is the alter ego of Hines and a mere instrumentality of Hines. (Compl.
¶ 3). Hines is not a resident of W isconsin, and neither has he had any contact with
the state of W isconsin outside of his duties as an officer or director of Levendo.
(Hines Aff. ¶¶ 4-10) (Docket #9-2). The plaintiff’s brief states that Hines “was
personally involved with the many communications, back and forth, with Novo 1
regarding the Agreement and debt in this lawsuit.” (Pl.’s Resp. Mot. Dismiss at 6).
On January 1, 2007, Novo 1 and Levendo entered into a Services Agreement
(“Agreement”). (Compl. ¶ 6). Pursuant to the Agreement, Novo 1 agreed to provide
Levendo with certain services and, in exchange, Levendo agreed to pay Novo 1
certain fees and charges on a monthly basis. (Compl ¶ 7). Moreover, Levendo
agreed that any fees not paid in full within 30 days from the date of an invoice from
Novo 1 would be considered past due and subject to 1.5% interest per month or to
the highest rate of interest allowed by law. (Compl. ¶ 9). The Agreement also
provided that upon Levendo’s failure to pay any amount due to Novo 1 within 60
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days from the date of an invoice, Novo 1 was permitted to terminate the Agreement
upon written notice to Levendo. (Compl. ¶ 10).
Problems arose as early as November 2009 when, according to Novo 1,
Levendo stopped paying invoices. (Compl. ¶ 11). Novo 1 contends that it repeatedly
attempted to seek payment, but Levendo refused to pay. (Compl. ¶ 11).
Accordingly, on May 18, 2010, Novo 1 notified Levendo by letter that Novo 1 was
terminating the Agreement and demanded immediate payment on the overdue
invoices, including interest. (Compl. ¶ 12). On June 16, 2010, Novo 1 again sent
Levendo a letter demanding payment. (Compl. ¶ 13). Levendo never responded to
either letter. (Compl. ¶ 13). This suit followed. Novo 1's complaint includes a claim
for breach of contract against both Levendo and Hines in his individual capacity. In
its complaint, Novo 1 requests the court to pierce the corporate veil of Levendo and
hold Levendo and Hines jointly and severally liable for the full amount of Novo 1's
damages. (Compl. ¶ 24).
DISCUSSION
I.
Personal Jurisdiction
The exercise of personal jurisdiction requires “sufficient contacts or ties with
the state of the forum to make [bringing suit] reasonable and just, according to our
traditional conception of fair play and substantial justice” such that the defendant is
not unduly burdened on the exercise of personal jurisdiction. See Int'l Shoe Co. v.
Washington, 326 U.S. 310, 320 (1945). As an initial matter, the parties agree that
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Levendo is subject to jurisdiction in this court pursuant to the consent to jurisdiction
and choice of law clause contained in the parties’ Agreement.1 On the other hand,
Hines argues that he was not a party to the Agreement and that Novo 1 has failed
to allege the minimum contacts necessary to warrant the court’s exercise of personal
jurisdiction over him. Novo 1 contends that jurisdiction is appropriate and appears
to present only one argument in support of the court’s exercise of personal
jurisdiction over Hines: that the court should pierce the corporate veil separating
Levendo from Hines.
Federal Rule of Civil Procedure 12(b)(2) governs defendant Hines’ motion to
dismiss for lack of personal jurisdiction. W hen a defendant brings a Rule 12(b)(2)
motion, the plaintiff has the burden of proving personal jurisdiction. Dorf v. Ron
March Co., 99 F.Supp.2d 994, 996 (E.D.W is. 2000). The burden, however, is not a
heavy one. Johnson Worldwide Assoc., Inc. v. Brunton Co., 12 F.Supp.2d 901, 906
(E.D.W is. 1998). A plaintiff need only make a prima facie showing of the existence
of personal jurisdiction for discovery to be permitted. Id.; Cent. States, Se. and Sw.
1
Levendo appears to be a citizen of Florida, where it is apparently registered and has its
principal place of business. (Defs.’ Disclosure ¶ 2). However, it is unclear where its only member,
Tarajara Properties Limited, resides. For purposes of determining personal jurisdiction, as well as
diversity issues, the Seventh Circuit held that an LLC is a citizen “of every state of which any
member is a citizen.” Belleville Catering Co. v. Champaign Market Place, LLC, 350 F.3d 691, 692
(7th Cir. 2003) (citing Cosgrove v. Bartolotta, 150 F.3d 729 (7th Cir. 1998)). Levendo has
consented to jurisdiction in this district and, therefore, the court has personal jurisdiction over
Levendo. However, this case is before the court based on diversity jurisdiction and, thus, Tarajara
Properties Limited must be a nonresident of Wisconsin. The court will allow the proceedings to
continue under the assumption that Tarajara Properties Limited is not a resident of Wisconsin.
However, if this is not the case, the parties are directed to notify the court immediately.
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Areas Pension Fund v. Phencorp Reinsurance Co., Inc.,440 F.3d 870, 877-78 (7th
Cir. 2006). In determining whether personal jurisdiction exists, the court may rely on
the complaint, affidavits, deposition testimony, exhibits, or other evidence in the
record. Schimpf v. Gerald, Inc., 2 F.Supp.2d 1150, 1160 (E.D.Wis. 1998). The court
must draw all inferences from the record in plaintiff's favor. PKWare, Inc. v. Meade,
79 F.Supp.2d 1007, 1011 (E.D.W is. 2000). Lastly, a conclusion that the plaintiff has
established a prima facie case of personal jurisdiction does not relieve the plaintiff
from proving jurisdictional facts at the summary judgment stage or at trial. See
O'Hare Int'l Bank v. Hampton et al., 437 F.2d 1173, 1176 (7th Cir. 1971).
In a diversity case, this federal court has personal jurisdiction over a
nonresident defendant only if a court in W isconsin would have personal jurisdiction.
Mid-America Tablewares, Inc. v. Mogi Trading Co., Ltd., 100 F.3d 1353, 1358 (7th
Cir. 1996). To determine whether it has personal jurisdiction over a defendant, the
court must first decide whether the defendant is subject to personal jurisdiction under
W isconsin's long arm statute and, if so, whether exercising jurisdiction under the
statute is consistent with the due process requirements of the Fourteenth
Amendment. Daniel J. Hartwig Assoc., Inc. v. Kanner, 913 F.2d 1213, 1216 (7th Cir.
1990); Giotis v. Apollo of the Ozarks, Inc., 800 F.2d 660, 664 (7th Cir. 1986);
Heritage House Restaurants, Inc. v. Continental Funding Group, Inc., 906 F.2d 276,
279 (7th Cir. 1990). Here, Novo 1 contends that personal jurisdiction exists over
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Hines under the alter ego doctrine, rather than under the W isconsin long-arm
statute, and, thus, the court will focus its inquiry accordingly.
Personal jurisdiction over Levendo does not automatically give rise to personal
jurisdiction over Hines as an individual. See Oxmans' Erwin Meat Co. v. Blacketer,
273 N.W .2d 285, 288 (W is. 1979) (“Personal jurisdiction over the officer [of a
company] could not be asserted on the basis of jurisdiction over the corporation”).
However, it appears that W isconsin courts have recognized a theory of specific
jurisdiction based on allegations that a nonresident is the alter ego of an entity that
is subject to the personal jurisdiction of the state. See Rasmussen v. General Motors
Corp., 326 W is.2d 264, 787 N.W .2d 59 (W is. Ct. App. 2010) (suggesting but not
holding that personal jurisdiction could be based on a piercing of the corporate veil
theory rather than under the long-arm statute); see also Taurus IP v.
DaimlerChrysler Corp., 519 F.Supp.2d 905 (W .D. W is. 2007) (applying W isconsin
law) (finding third party defendants were subject to personal jurisdiction under the
alter ego doctrine because the doctrine “imputes consent to jurisdiction to the alter
egos of a consenting party . . . for the simple reason that the actions of a party are
those of its alter egos.”) (citing Packer v. TDI Systems, Inc., 959 F.Supp. 192, 203
(S.D.N.Y. 1997).
Efforts to pierce the corporate veil are governed by the law of the state of
incorporation. Stromberg Metal Works, Inc. v. Press Mech., Inc., 77 F.3d 928, 933
(7th Cir. 1996). In this case, Levendo was formed in Florida and, therefore, Florida
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law governs. Similar to most other jurisdictions, courts applying Florida law are
reluctant to pierce the corporate veil and “will do so only in exceptional cases where
there has been extreme abuse of the corporate form.” 2 Government of Aruba v.
Sanchez, 216 F.Supp.2d 1320, 1362 (S.D. Fla. 2002). A party seeking to pierce the
corporate veil and hold a member or officer liable for the actions of the corporation
must prove: (1) that the corporation was a “mere instrumentality” of the member or
officer; and (2) that the member or officer engaged in “improper conduct” through the
corporation. Johnson Enterprises of Jacksonville, Inc. v. FPL Group, Inc. 162 F.3d
1290, 1320 (11th Cir. 1998) (citing Dania Jai-Alai Palace, Inc. v. Sykes, 450 So.2d
1114, 1117-21 (Fla. 1984)). Improper conduct is present only in “‘cases in which the
corporation was a mere device or sham to accomplish some ulterior purpose . . . or
where the purpose is to evade some statute or to accomplish some fraud or illegal
purpose.’” Dania Jai-Alai Palace, Inc., 459 So.2d at 1117 (quoting Mayer v.
Eastwood, Smith & Co., 122 Fla. 34, 164 So. 684, 687 (Fla.1935)).
In this case, Novo 1 has done little more than suggest that Hines is the alter
ego of Levendo and that Hines has engaged in improper conduct through the use
of Levendo. However, the court finds that while the allegations and evidence set
forth by Novo 1 are not sufficient to establish personal jurisdiction over Hines, they
2
Florida law subjects corporations and LLCs to the same treatment with regard to holding
members liable for the purpose of veil piercing. Fla. Stat. § 608.701 (“In any case in which a party
seeks to hold the members of a limited liability company personally responsible for the liabilities or
alleged improper actions of the limited liability company, the court shall apply the case law which
interprets the conditions and circumstances under which the corporate veil of a corporation may
be pierced under the law of this state.”).
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do make out a prima facie case necessary for Novo 1 to be permitted discovery on
the jurisdictional issue. For instance, the complaint alleges that Hines is a member
of Levendo and the sole officer and or director of Levendo. (Compl. ¶ 3). The
complaint further alleges that “Levendo is the alter ego of Hines and a mere
instrumentality of Hines.” (Compl. ¶ 3). Novo 1 also submitted the declaration of
Mike Satterlee (“Satterlee”), who served as a National Account Manager for Novo
1, in support of its alter ego theory of personal jurisdiction. According to Satterlee,
it was Hines who contacted Novo 1 in 2006 to solicit Novo 1's services, and it was
Hines who executed the Agreement. (Satterlee Decl. ¶¶ 8, 11) (Docket #17-2).
Furthermore, in Novo 1's response to the motion to dismiss, it claims that Hines was
“personally involved with the many communications, back and forth, with Novo 1
regarding the Agreement and debt in this lawsuit.” (Response at 6). Lastly, Novo 1's
evidence and allegations suggest that Hines – via Levendo – engaged in improper
conduct by soliciting, executing, and breaching the Agreement. W hile much of Novo
1's evidence shows only that Hines is affiliated with Levendo, the court finds, by
drawing all inferences from the record in plaintiff's favor,3 Novo 1 has made a
minimal showing that Hines exercised an unusually high degree of control over
Levendo. Thus, the facts set forth by Novo 1, and assumed to be true for purposes
of this motion, sufficiently make out a prima facie case that Levendo is the alter ego
3
The defendants’ disclosure statement also casts some suspicion on who actually controls
Levendo as it is fully owned by another company, which is in turn, also fully owned by another
company, both of which the court has no further information about.
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of Hines and Hines engaged in improper conduct by using Levendo as a device to
receive services from Novo 1 without paying for those services.4 Accordingly,
because Novo 1 has adequately demonstrated a colorable basis for jurisdiction, the
court will deny Hines’ motion to dismiss for lack of personal jurisdiction and allow
Novo 1 to conduct limited discovery regarding personal jurisdiction under the alter
ego theory over Hines.
Accordingly,
IT IS ORDERED that defendant Hines’ motion to dismiss for lack of personal
jurisdiction (Docket #9) be and the same is hereby DENIED; Novo 1 is granted leave
to conduct a limited deposition of Hines and to make written discovery requests
targeted at the relationship between Hines and Levendo.
Dated at Milwaukee, W isconsin, this 9th day of May, 2011.
BY THE COURT:
J.P. Stadtmueller
U.S. District Judge
4
In reaching this conclusion the court is mindful that “[w]hether sufficient minimum contacts
exist cannot be answered by applying a formula or rule of thumb, but by ascertaining what is fair
and reasonable in the circumstances of the particular situation.’” Hutter Northern Trust v. Door
County Chamber of Commerce, 403 F.2d 481, 484 (7th Cir. 1968). Based on the record now
before the court, it seems clear that Hines purposefully directed his efforts toward residents of
Wisconsin via Levendo, such that he should reasonably have anticipated being haled into court
here. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476 (1985). And while it would be
inappropriate for this court to allow plaintiff to conduct a fishing expedition in order to construct a
basis for personal jurisdiction, under the circumstances of this case, the court is satisfied that
plaintiff has shown it has a substantive and reasonable basis for believing that personal jurisdiction
exists over Hines.
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