Opinion
Civil Action No. CCB-08-705.
September 2, 2008
MEMORANDUM
Now pending before the court is a motion to dismiss for lack of jurisdiction and improper venue or, in the alternative, for transfer, filed by defendants Confer Bethpage, LLC ("Confer"), Gordon Lenz, and Terry Trabich (collectively "moving defendants") against plaintiff AP Links, LLC ("AP Links"). AP Links is suing Global Golf, Inc. ("Global") for breach of contract; Global and Confer for fraudulent conveyance; Mr. Lenz and Confer for tortious interference with contract; Global's president Neal Trabich for breach of fiduciary duty; and all of the defendants for conspiracy to bring about the alleged fraudulent conveyance, tortious interference, and breach of fiduciary duty resulting in Global's breach of contract. The issues in this case have been fully briefed and no hearing is necessary. For the reasons stated below, the moving defendants' motion to dismiss or transfer will be treated as a motion to transfer, and will be granted.
The moving defendants also argue that this case should be dismissed on grounds of forum non conveniens. Because — for reasons to be discussed — this case is now being transferred to the forum in which the moving defendants reside, this argument is moot.
BACKGROUND
On November 8, 2000, AP Links, a Maryland limited liability company with its principal place of business in Baltimore, Maryland, entered into a written consulting agreement with Global, a New York corporation with its principal place of business in Laurel Hollow, New York. Peter Rubin and Aaron Young, both residents of Maryland, are AP Links's equity owners and managing members, and Neal Trabich, a resident of New York, is the sole owner of Global. Under the consulting agreement, AP Links promised to provide Global with consulting services "with respect to the development, management and operation of golf courses and/or other related activities," and in consideration for these services, Global promised to pay AP Links $720,000, payable in ninety-six equal monthly installments of $7,500, to be paid on the first day of May, June, July, August, September, and October for each year of the agreement. (Pl.'s Opp. to Mot. to Dismiss at Ex. 1, Consulting Agreement at 1.) At the same time, Global executed a promissory note with AP Links, whereby AP Links would loan Global $600,000 for work in connection with its facility agreement with New York's Bethpage State Park ("Bethpage contract") and Global would repay that loan with interest in thirty equal monthly installments of $25,301.14, to be paid on the fifteenth day of May, June, July, August, September, and October for each year of the agreement. (Pl.'s Opp. to Mot. to Dismiss at Ex. 1, Prom. Note at 3.) AP Links provided consulting services under the consulting agreement for a number of years, with Global making every payment due through October 2006.Starting in October 2006, several events took place that the plaintiff alleges resulted in Global's intentional breach of the consulting agreement. On October 19, Gordon Lenz created Confer, a limited liability company with its principal place of business in New York, designating as its agent Daniel Rosenthal (Pl.'s Opp. Mem. at Ex. 5, Confer Articles of Inc. at 1), whom the plaintiff alleges has provided legal representation for the Trabiches in the past. (Am. Compl. ¶ 42.) At some point thereafter, Mr. Trabich was hired as Confer's Director of Golf at a salary of $350,000 per year. (Pl.'s Opp. Mem. at Ex. 7, Russ Ltr. at 3.)
On November 3, Jay Russ of the law firm of Russ Russ, PC (where Mr. Rosenthal is of counsel) filed a lawsuit in New York state court alleging that the consulting agreement with AP Links was usurious, lacking consideration, lacking bona fides, unconscionable, and against public policy, and asked the court to declare its financial provisions unenforceable. (Pl.'s Opp. Mem. at Ex. 2, NY Trabich Compl. at 1 10-15.) The suit ultimately was dismissed. (Novikoff Aff. ¶ 6.)
AP Links claims that this lawsuit was filed as a preemptive measure, meant to provide Global with the means to enjoin enforcement of the consulting agreement before the end of the statute of limitations period. In support of this claim, it points to a letter Mr. Russ sent to Ronald Coruzzi, Mr. Trabich's business partner in a different agreement involving Saint Anne's Development Company, LLC ("SADC") (owned by the owners of AP Links), in which he informed Mr. Coruzzi that, "[i]n light of the year 2000 transaction, and a possible six year statute of limitations to assert certain claims with regard thereto," he would soon be filing a lawsuit on behalf of Global Golf, Mr. Trabich, and Mrs. Trabich against AP Links and SADC. (Pl.'s Opp. Mem. at Ex. 4.)
On December 15, while Global's lawsuit against AP Links was pending, Global assigned its Bethpage contract to Confer, which had recently become certified as a vendor/contractor with the New York State Office of Parks, Recreation, and Historic Preservation. (Pl.'s Opp. Mem. at Ex. 6.) This transaction, AP Links asserts, caused Global to become insolvent, to the extent that it was not already facing insolvency at the time of the assignment. Four days later, on Dec. 19, AP Links claims that Mr. Lenz provided Mrs. Trabich with a loan check for $500,000, which was allegedly secured by a mortgage on the Trabichs' primary residence, executed on December 21. (Pl.'s Opp. Mem. at Exs. 8 9.) AP Links alleges that this $500,000 loan check was consideration for the Bethpage contract assignment to Confer. (Am. Compl. ¶ 48.)
In 2007, Global allegedly stopped making the payments required by its consulting agreement and "declared that it does not intend to make any other payments," despite AP Links's demands that payments be made. ( Id. ¶¶ 25-26.) The amount now owed to AP Links is $405,000. ( Id. ¶ 28.) The plaintiff contends that the above transactions — specifically the lawsuit and the assignment of Global's Bethpage contract to a newly-created company with ties to Mr. Trabich — amount to a civil conspiracy "to engage in tortious interference, breach of fiduciary duty, and to effectuate a fraudulent conveyance" resulting in a shielding of Global's assets from AP Links. ( Id. ¶¶ 102-103.) All the defendants deny these contentions, and the moving defendants further claim that, since "[a]ll of the purportedly improper conduct of the Moving Defendants is alleged to have occurred in the State of New York," this court lacks personal jurisdiction over them. (Def.'s Mot. to Dismiss at 3.) Finally, the moving defendants claim that venue is improper, since all of them reside in New York and have engaged in no transactions in Maryland.
This court notes that Peter Rubin and Aaron Young, under the auspices of SADC, have filed two additional federal lawsuits that are now pending in two separate jurisdictions. The first is Saint Anne's Dev. Co., LLC, et al. v. Neal Trabich, et al., CV-07-1056, filed on April 24, 2007, in the District of Maryland, which alleges breach of contract, fraud, and conspiracy to commit fraud in relation to a facility agreement with SADC. Terry Trabich, a moving defendant here, is named in that suit. Partial summary judgment has already been granted in that suit in favor of SADC on its breach of contract claim. The second lawsuit is Saint Anne's Dev. Co., LLC v. Gordon Lenz, CV-08-1730, filed on April 28, 2008 in the Eastern District of New York, which alleges tortious interference by Mr. Lenz with a facility agreement between SADC and Mr. Trabich.
ANALYSIS
A. Lack of Personal Jurisdiction
When defendants challenge personal jurisdiction under Rule 12(b)(2), the burden is on the plaintiff to prove grounds for personal jurisdiction over them by a preponderance of the evidence. Mylan Labs., Inc. v. Akzo, NV, 2 F.3d 56, 59-60 (4th Cir. 1993). "When, however, as here, a district court decides a pretrial personal jurisdiction motion without conducting an evidentiary hearing, the plaintiff need only make a prima facie showing of personal jurisdiction." Carefirst of Md., Inc. v. Carefirst Pregnancy Ctrs., Inc., 334 F.3d 390, 396 (4th Cir. 2003) (citing Combs v. Bakker, 886 F.2d 673, 676 (4th Cir. 1989)). In deciding whether the plaintiff has made this showing, the court must resolve all disputed facts and reasonable inferences in the plaintiff's favor. Id.The court may assert either specific or general personal jurisdiction over non-resident defendants. Specific jurisdiction may exist where the claim is related to or arises out of the defendants' contacts with the state. See Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408, 414 n. 8 (1984). General jurisdiction may exist where the defendants' contact with the forum state is "continuous and systematic." Id. at 414-15 n. 9 (quoting Perkins v. Benguet Consol. Mining Co., 342 U.S. 437, 438 (1952)). AP Links argues that specific personal jurisdiction exists over the moving defendants.
Personal jurisdiction over the non-moving defendants — Global and Neal Trabich — is uncontested here. Of the twenty-two defenses raised in Neal Trabich's and Global's answer to AP Links's amended complaint, the mandatory defense of lack of personal jurisdiction was not raised. (Defs. Global Neal Trabich's Answer, ¶¶ 1-22.)
The court must perform a two-step inquiry to determine whether it may exercise personal jurisdiction over defendant. First, the court must determine if jurisdiction is authorized under the long-arm statute of the forum state. See Carefirst, 334 F.3d at 396; Christian Sci. Bd. of Dirs. of First Church of Christ, Scientist v. Nolan, 259 F.3d 209, 215 (4th Cir. 2001). Second, the court must decide whether personal jurisdiction comports with Fourteenth Amendment due process requirements. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292 (1980). The Maryland Court of Appeals has held that Maryland's long-arm statute is co-extensive with the scope of jurisdiction permitted by the Fourteenth Amendment due process clause, and so the statutory and constitutional inquiries merge. See Carefirst, 334 F.3d at 396-97. The Maryland long-arm statute, however, restricts specific jurisdiction to cases where the cause of action "aris[es] from any act enumerated" in the statute itself. Md. Code Ann., Cts. Jud. Proc. § 6-103(a). Thus, a plaintiff must "identify a specific Maryland statutory provision authorizing jurisdiction." Ottenheimer Publishers, Inc. v. Playmore, Inc., 158 F. Supp. 2d 649, 652 (D.Md. 2001).
While AP Links did not cite a specific provision of the long-arm statute in its complaint, in its opposition to the motion to dismiss it appears to rely on both § 6-103(b)(1) and § 6-103(b)(4) for Global and Mr. Trabich, and on 6-103(b)(4) by association for the moving defendants, since it identifies them as co-conspirators with Mr. Trabich, making them "agents" under § 6-103(b). See Mackey v. Compass Marketing, Inc., 892 A.2d 479, 495 (Md. 2006) ("when the requirements of the conspiracy theory are met, one co-conspirator may be the `agent' of another co-conspirator within the meaning of § 6-103(b)"). AP Links all but concedes that the only way to bring the moving defendants within the ambit of Maryland's long-arm statute is through appeal to a conspiracy theory of jurisdiction. Under this theory, when:
Section 6-103(b)(1) extends personal jurisdiction to any "person, who directly or by an agent . . . [t]ransacts any business . . . in the State."
Section 6-103(b)(4) extends personal jurisdiction to any "person, who directly or by an agent . . . [c]auses tortious injury in the State or outside of the State by an act or omission outside the State if he regularly . . . derives substantial revenue from . . . services . . . used or consumed in the State." Breach of contract and conspiracy to breach are considered tortious injuries. See Hare v. Family Publications Serv., Inc., 334 F. Supp. 953, 958 (D. Md. 1971).
(1) two or more individuals conspire to do something
(2) that they could reasonably expect to lead to consequences in a particular forum, if
(3) one co-conspirator commits overt acts in furtherance of the conspiracy, and
(4) those acts are of a type which, if committed by a non-resident, would subject the non-resident to personal jurisdiction under the long-arm statute of the forum state, then those overt acts are attributable to the other co-conspirators, who thus become subject to personal jurisdiction in the forum, even if they have no direct contacts with the forum.Mackey, 892 A.2d at 486 (Md. 2006) (quoting Cawley v. Bloch, 544 F. Supp. 133, 135 (D. Md. 1982)). AP Links alleges that, since Global committed overt acts — namely fraudulent conveyance — that would subject it to personal jurisdiction under Maryland's long-arm statute, knowing that such acts would lead to non-payment of a Maryland contract (satisfying elements (2), (3), and (4)), the moving defendants are thus subject to personal jurisdiction as well, insofar as they can be viewed as co-conspirators (under element (1)).
AP Links further alleges that the moving defendants conspired with Global to (a) tortiously interfere with Global's contract with AP Links and (b) breach Mr. Trabich's fiduciary duty to Global. It argues that these acts create two additional bases for jurisdiction under the conspiracy theory of jurisdiction. This argument fails as a matter of law with respect to tortious interference, since Global cannot tortiously interfere with its own contract, and therefore cannot enter into a conspiracy to do the same. See, e.g., Travelers Indem. Co. v. Merling, 605 A.2d 83, 90 (Md. 1992).
This argument also fails as a matter of law with respect to breach of fiduciary duty. In order to successfully allege a civil conspiracy to breach fiduciary duty, the plaintiff must establish that each co-conspirator "owes a duty to the plaintiff recognized by law" that renders her "potentially subject to liability for breach of that duty." BEP, Inc. v. Atkinson, 174 F. Supp. 2d 400, 409 (D. Md. 2001). Since none of the moving defendants are or were officers, directors, or high-level managers of Global, none of them are "personally bound" by any fiduciary duty to AP Links. Id. Therefore, they cannot be parties to a conspiracy to breach fiduciary duty.
However, before such a jurisdictional analysis can occur, AP Links must first make a prima facie claim of conspiracy, showing among other things that there was indeed an unlawful agreement among the defendants (thus making them co-conspirators). See Mackey, 892 A.2d at 485 (analyzing the elements of conspiracy before considering conferral of jurisdiction under a civil conspiracy theory); id. at 487 ("the acts of a co-conspirator in furtherance of the conspiracy may be attributed to other co-conspirators [for jurisdictional purposes] if the requirements of the conspiracy theory are met") (emphasis added). In Maryland, "a civil conspiracy is a combination of two or more persons by an agreement or understanding to accomplish an unlawful act or to use unlawful means to accomplish an act not in itself illegal, with the further requirement that the act or means employed must result in damages to the plaintiff." Hill v. Brush Engineered Materials, Inc., 383 F. Supp. 2d 814, 821 (D. Md. 2005) (quoting BEP, Inc. v. Atkinson, 174 F. Supp. 2d 400, 408 (D. Md. 2001)). The Fourth Circuit has emphasized that the agreement must be clear: "[i]ndependent acts of two wrongdoers do not make a conspiracy." Murdaugh Volkswagen, Inc. v. First Nat. Bank of South Carolina, 639 F.2d 1073, 1076 (4th Cir. 1981). Furthermore, the plaintiff must show that the alleged co-conspirators had knowledge of the unlawful conspiracy. See Cavalier Mobile Homes, Inc. v. Liberty Homes, Inc., 454 A.2d 367, 386 (Md. Ct. Spec. App. 1983). To do this, the plaintiff must establish "a unity of purpose or a common design and understanding, or a meeting of the minds in an unlawful arrangement." Id. (quoting American Tobacco Co. v. United States, 328 U.S. 781, 810 (1946)). Here, other than its bare allegations that the moving defendants "conspired with each other" (Am. Compl. ¶ 102), AP Links has so far not provided any evidence establishing a conspiratorial meeting of the minds between the moving defendants and Global sufficient for this court to apply the conspiracy theory to exercise personal jurisdiction over them.
Even if this court were to accept the civil conspiracy claim, and thus allow for the possibility of personal jurisdiction under the long-arm statute, personal jurisdiction over the moving defendants must still be deemed proper on Fourteenth Amendment due process grounds. Due process requires that a defendant not be involuntarily subjected to the personal jurisdiction of a forum unless the defendant "purposefully avail[ed] itself of the privilege of conducting activities in the forum state." Hanson v. Denckla, 357 U.S. 235, 263 (1958). Here, the moving defendants can theoretically be said to have purposefully availed themselves of the privilege of conducting activities in Maryland by choosing to enter into a conspiracy with Global to fraudulently convey a contract created in Maryland, thereby subjecting Global to personal jurisdiction here. See Mackey, 892 A.2d at 489-90. As discussed above, though, this conspiracy claim is far from clear. It would be tenuous at best to use this claim as the basis for finding that the moving defendants purposefully availed themselves of the privilege of conducting activities in Maryland. Accordingly, this court finds that it lacks personal jurisdiction over the moving defendants in this case.
The present case is distinguishable from Compass Marketing, Inc. v. Schering-Plough Corp., where the court found that the jurisdictional contacts of one co-conspirator could be imputed to the other co-conspirators. 438 F. Supp. 2d 592, 595 (D. Md. 2006). In that case, the defendants contesting personal jurisdiction were officers of two out-of-state corporations that had entered into contracts with a Maryland corporation (Compass Marketing, Inc.), and these corporations did not dispute that they were each subject to jurisdiction in Maryland. See Mackey, 892 A.2d at 482-83 (setting out the facts later applied in Compass Marketing). Furthermore, the alleged conspiracy in Compass Marketing was one in which each officer, as a result of the conspiracy, purposefully and directly interfered with contracts formed in Maryland. See id. Extending personal jurisdiction to the co-conspirators in that case was in clear comportment with the due process clause, since each co-conspirator "had a reasonable expectation, at the time the co-conspirator agreed to participate in the conspiracy, that acts to be done in furtherance of the conspiracy by another co-conspirator would be sufficient to subject that other co-conspirator to personal jurisdiction in the forum." Compass Marketing, 438 F. Supp. 2d at 596 (emphasis added).
Here, the plaintiffs have failed to make a prima facie claim that the moving defendants agreed to participate in the conspiracy at all. Moreover, the facts as alleged give no indication that the moving defendants had a reasonable expectation that their acts would involve their being subjected to personal jurisdiction in Maryland. See World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980).
B. Improper Venue
When defendants challenge venue under 28 U.S.C. § 1391 and no evidentiary hearing is held, the plaintiff need only make a prima facie showing of venue to survive the challenge. Mitrano v. Hawes, 377 F.3d 402, 405 (4th Cir. 2004). Plaintiffs need not show that their proposed venue is the "best" venue, since venue may be proper in more than one district. Id. Also, as with motions to dismiss for lack of personal jurisdiction, the court must resolve all disputed facts and reasonable inferences in the plaintiff's favor. Carefirst of Md., Inc., 334 F.3d at 396.
Plaintiff asserts that venue is proper here under 28 U.S.C. § 1391(a)(2), which provides that a civil action founded on diversity of citizenship may be brought in "a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred." The alleged events giving rise to AP Links's claims of fraudulent conveyance, tortious interference, and conspiracy to do the same against the moving defendants were (1) the assignment of the Bethpage contract to Confer, (2) the interference by Gordon Lenz and Confer with Global's consulting agreement with AP Links, and (3) the agreement formed among the moving defendants to bring about (1) and (2) (as well as Neal Trabich's breach of fiduciary duty). There is no evidence that any part of any of these events occurred in Maryland. As such, AP Links cannot claim that a "substantial part of the events . . . giving rise to the claim[s]" occurred in Maryland. Venue is therefore improper in Maryland with respect to the moving defendants.
Plaintiff argues that the court must examine "the entire sequence of events underlying the claim[s]," as instructed to do by the Fourth Circuit in Mitrano, and that the entire sequence of events here includes AP Links's performance of consulting services in Maryland. Mitrano, 377 F.3d at 405. While AP Links's performance of these services may be found to have given rise to the breach of contract claim against Global and Mr. Trabich, it cannot be said to have given rise to the claims raised against the moving defendants.
C. Transfer
Transfers of venue are authorized under both 28 U.S.C. § 1404(a) "[f]or the convenience of parties and witnesses, in the interest of justice" and 28 U.S.C. § 1406(a), which provides that "[t]he district court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought." The Fourth Circuit has interpreted § 1406(a) to authorize transfers in cases where venue is proper but an impediment (such as lack of personal jurisdiction) exists that would prevent the action from going forward in that district. In re Carefirst of Md., Inc., 305 F.3d at 255-56. The analysis of whether a transfer is "in the interest of justice" under § 1406(a) is the same as under § 1404(a). Nichols v. G.D. Searle Co., 991 F.2d 1195, 1201 n. 5 (4th Cir. 1993) (citing 15 Charles A. Wright, Arthur R. Miller Edward H. Cooper, Federal Practice Procedure, § 3827, at 246-66 (1986)).
Finding both personal jurisdiction to be lacking and venue to be improper with respect to the moving defendants, this court may either dismiss or transfer claims against them pursuant to § 1406(a). Such transfer is within the court's authority even though it lacks personal jurisdiction over the moving defendants, and it furthers the goal of 1406(a) to promote expeditious and orderly adjudication of cases and controversies. Goldlawr, Inc. v. Heiman, 369 U.S. 463, 466-67 (1962).
As discussed above, the connections of the claims against the moving defendants to New York so far predominate over those in Maryland that is impossible to conclude that a "substantial part" of the events giving rise to them occurred in Maryland under § 1391(a)(2). Furthermore, all of the moving defendants and named potential witnesses reside in New York, and any judgment obtained against the moving defendants would be enforced in New York. In light of these factors, and in the interest of justice, this court elects to transfer their claims to the Eastern District of New York, pursuant to § 1406(a).
Even if this court is incorrect in its conclusion that it lacks personal jurisdiction over the moving defendants, it is a sufficiently close question that transfer is warranted under § 1404(a) to remove the issue from the case. See Joseph M. Coleman Assocs., Ltd. v. Colonial Metals, 887 F.Supp. 116, 120 (D. Md. 1995) (finding transfer appropriate under § 1404(a) where doing so avoids the unnecessary "inject[ion]" of close questions into a case).
As for the non-moving defendants, Global and Neal Trabich, this court finds transfer of their claims to be justified under § 1404(a). Although venue may be proper for them in Maryland, venue can be proper in more than one district, Mitrano, 377 F.3d at 405, and transferring their claims to New York (where they are located) prevents duplicative proceedings and unnecessary inconvenience to the potential witnesses, all of whom reside in New York. Finally, such transfer would be convenient for all parties to the case; AP Links's owners Peter Rubin and Aaron Young have essentially conceded this point by filing a similar tortious interference lawsuit involving another Maryland-based company they own in New York. Finding transfer of the non-moving defendants to be convenient to the parties and witnesses and in the interest of justice, this court proposes to transfer their claims to the Eastern District of New York, pursuant to § 1404(a), thereby enabling the entire suit to proceed there. See Miller v. Asensio, 101 F. Supp. 2d 395, 409 (D. S.C. 2000) (recognizing that courts may transfer sua sponte pursuant to § 1404(a)). The non-moving defendants, however, will be given time to object if they disagree that transfer of the entire case is appropriate.
See supra note 4.
CONCLUSION
For the foregoing reasons, the moving defendants' motion to dismiss will be treated as a motion to transfer and, as such, will be granted after permitting the non-moving defendants to be heard. A separate Order follows.
ORDER
For the reasons stated in the accompanying Memorandum, it is hereby ORDERED that:
1. The defendants' motion to dismiss or to transfer (docket entry no. 17) is treated as one to transfer and, as such, is GRANTED;
2. This case shall be TRANSFERRED to the Eastern District of New York pursuant to 28 U.S.C. §§ 1404(a) and 1406(a); but only after the non-moving defendants advise the court of any objection to transfer of the entire case; and
3. Any objections are due no later than September 19, 2008.