Opinion
Case No. 1:08-cv-578.
December 17, 2008
Plaintiff LGT Enterprises, LLC ("LGT"), founded by Mark DeLaurence in 2006 and doing business as "Letsgotickets" and "Let's Go Tickets", is a ticket broker which purchases tickets to entertainment shows and events and sells those tickets to its customers, who usually use credit cards for the purchase by mail, telephone, and the Internet. See First Amended Complaint filed June 18, 2008 ("Am Comp") ¶¶ 10. LGT has an account agreement with non-party Elavon, doing business as NOVA Information Systems ("Nova"), which gathers the credit card information of LGT's customers and either charges the cards itself or sends the information to the credit card companies to process the charges. See Original Complaint filed June 18, 2008 ("Comp") ¶ 9. A ticket broker that applies for an account with Nova is assigned a merchant identification ("ID") number; when a customer buys the ticket broker's ticket with a credit card, Nova credits the ticket broker's merchant ID number with the appropriate amount. Comp ¶ 12.
LGT hired former defendants MerchantWarehouse.com, Inc. ("MerchantWarehouse") and Ticket Software doing business as TicketNetwork Direct, Inc. ("TicketNetwork") to help it prepare its application for a NOVA processing account. See Am Comp ¶¶ 10-11. In January 2007, LGT filled out most of a Nova account application; TicketNetwork Program Manager Ann Burke allegedly instructed LGT not to complete the lower portion of the second page of the application, which requests LGT's merchant ID numbers, saying that TicketNetwork or MerchantWarehouse would fill in those numbers. See Am Comp ¶¶ 12 14 and Exs. 1 2.
TicketNetwork's Burke also told LGT to open a business bank account within one month, and he did so. See Am Comp ¶¶ 13 15. LGT gave the business bank account number to TicketNetwork's Burke to forward to MerchantWarehouse. See Am Comp ¶ 15. Burke advised LGT to call a particular customer-service representative at MerchantWarehouse to make sure that the latter had the correct bank account number. LGT did so, and MerchantWarehouse forwarded LGT's merchant account application form to Nova; the application had merchant ID numbers filled in. See Am Comp ¶¶ 15-17 and Ex. 3.
After accepting LGT's merchant account application, NOVA sent a monthly statement to Mark DeLaurence as the principal of LGT. See Am Comp ¶ 18 and Ex. 4. The monthly statement had a "Sales Recap" section (which listed that month's ticket sales through MasterCard, Visa, American Express ("Am Ex"), and Discover) and a "Deposits" heading (which listed groups of deposits and stated the total amount of deposits for the month). See Am Comp ¶ 18. The statements, however, did not specify how much money each credit-card company had deposited. See Am Comp ¶ 18.
In February 2008, a single customer ordered over $5,000 of Eric Clapton concert tickets from LGT, using an AmEx card. See Am Comp ¶ 20. The credit-card companies typically deposited money into the merchant's account within 48 hours of the transaction, but LGT did not see that amount deposited into its account. Accordingly, LGT's DeLaurence called AmEx and learned that AmEx had deposited the money into an account corresponding to the merchant account number that it had, but the account did not belong to LGT. See Am Comp ¶ 19-21. The AmEx representative looked up LGT's actual merchant account number and found that it had made no deposits into LGT's account since the account's inception. See Am Comp ¶ 21. After speaking to officials at TicketSoftware and MerchantWarehouse, LGT's DeLaurence learned that the LGT merchant application form that was submitted to NOVA had the wrong merchant account number on it. See Am Comp ¶ 22.
In toto, AmEx deposited nearly $110,000 into the merchant bank account of defendant Judiah Luke Hoffman ("Hoffman") that should have been deposited into LGT's account, because AmEx had the wrong merchant bank account number associated with LGT's sales. See Am Comp ¶ 23. AmEx reimbursed LGT over $28,000, leaving LGT with about $81,500 in damages. See Am Comp ¶ 24.
Hoffman concedes that he withdrew the approximately $110,000 in funds from his account that belonged to LGT, but he claims that "[w]hen I withdrew the funds, I thought that they had been properly transferred to my account, and had no idea that they were supposed to be transferred into an account assigned to Plaintiff or any other Michigan resident." Hoffman's MTD, Ex A, Affidavit of Judiah Luke Hoffman dated October 10, 2008 ("Hoffman Aff") ¶ 5. In correspondence with Hoffman, LGT's principal has responded to this claim with skepticism: "From what I've been told, your monthly sales were small, and my payments to your account should have jumped right out and said `something's wrong' here." LGT's Opp, Ex 4 at 1 (e-mail from Mark DeLaurence to Judiah Hoffman dated Friday, April 4, 2008 at 3:59 p.m.).
On June 17, 2008, LGT filed the instant complaint, asserting four state-law claims: common-law and statutory conversion by Hoffman, breach of contract by TicketNetwork, and negligence by TicketNetwork and MerchantWarehouse. On July 21, 2008, MerchantWarehouse filed a motion to dismiss the negligence claim against it due to lack of personal jurisdiction. On August 18, 2008, LGT timely filed a brief in opposition to the motion to dismiss.
By opinion and order dated August 21, 2008, the court dismissed the complaint without prejudice because LGT failed to allege facts sufficient to establish diversity jurisdiction. That order gave LGT until October 3, 2008 to file an amended complaint purporting to cure the deficiency, and LGT did so on September 3, 2008. (The court denied without prejudice MerchantWarehouse's motion to dismiss for lack of personal jurisdiction.) The amended complaint asserts claims under Michigan law for common-law conversion, statutory conversion, negligence, and breach of contract.
On December 12, 2008, the court granted a joint stipulation dismissing defendants TicketSoftware and MerchantWarehouse with prejudice, leaving Hoffman as the only defendant. Only counts one and two, common-law conversion and statutory conversion, pertain to Hoffman.
Based on the allegations in the amended complaint, and in the absence of any motion to dismiss for lack of subject-matter jurisdiction, the court determines that LGT has met its burden of establishing diversity jurisdiction. See Am Comp ¶¶ 2-3 (alleging that LGT is a Michigan corporation with its principal place of business in Michigan) and ¶ 9 (alleging that Hoffman resides in Nevada and intends to stay there indefinitely, and has done nothing to suggest that he intends to live or work in Michigan)
Because defendants TicketSoftware and MerchantWarehouse are no longer in the case, the amended complaint's allegations relating to their citizenship are no longer relevant. See Am Comp ¶¶ 4 and 6 (TicketSoftware) and ¶¶ 7-8 (MerchantWarehouse).
On October 31, 2008, Hoffman filed a motion to dismiss the amended complaint for lack of personal jurisdiction. LGT filed an opposition brief on November 26, 2008 and Hoffman filed a reply brief on December 15, 2008. For the reasons that follow, the court will deny Hoffman's motion without prejudice.
Because both the "motion to dismiss" and the opposition attach and affirmatively rely on factual allegations and evidence outside the complaint and documents referred to therein — including affidavits and website pages — the court converts it into a motion for summary judgment. See Helmi v. Solvay Pharms., Inc., 2005 WL 1309152, *2-3 (W.D. Mich. June 1, 2005) (Gordon Quist, J.) ("Defendants brought their motion only as a motion to dismiss and not as a motion for summary judgment, even though they attached two affidavits. . . . Plaintiffs acknowledge and discuss the affidavits submitted by Defendants. * * * [T]he Court finds it appropriate to treat Defendant's motion as a motion for summary judgment.").
This is significant, because "[s]ummary judgment should not ordinarily be granted before discovery is completed." Bushway v. BOP, 198 F.3d 244, 1991 WL 1021584, *3 (6th Cir. Nov. 2, 1999) (p.c.) (Jones, Moore, Gilman) (citing Smith v. Freland, 954 F.2d 343, 348 (6th Cir. 1992) (quoting Tarleton v. Meharry Med. Coll, 717 F.2d 1523, 1535 (6th Cir. 1983))). See, e.g., Service, Hosp. Nursing Home Pub. Employees' Union, Local No. 47 v. Commercial Prop. Servs., Inc., 755 F.2d 499, 507 (6th Cir. 1985) (district court properly denied nonsignatory employer's summary judgment motion without prejudice as premature, given that discovery on alter ego/single-employer issue had not been completed); Davis v. Runyon, 142 F.3d 433, 1998 WL 96558, *2 (6th Cir. Feb. 23, 1998) (Kennedy, Jones, Clay) ("We agree with Appellant that the district court should have permitted him more time to conduct discovery and that its failure to do so made the grant of summary judgment improper. `Before ruling on summary judgment motions, a district judge must afford the parties adequate time for discovery, in light of the circumstances of the case.'") (quoting Plott v. GMC, Packard Elec. Div., 71 F.3d 1190, 1195 (6th Cir. 1995) ("Parties who suffer an adverse summary judgment may base their appeals on the lack of opportunity to discover evidence necessary to establish a genuine issue of material fact.")).
Because of the procedural posture of this case, LGT has never had an opportunity to conduct any discovery. LGT first had to amend its complaint to address the jurisdictional pleading deficiency identified by the court, and then it successfully worked to reach a settlement with the other defendants. None of the defendants ever filed an answer.
Indeed, in its response to Hoffman's motion, LGT asks that the court not grant summary judgment, but instead afford it the opportunity to conduct discovery on the issue of personal jurisdiction. See LGT's Opp at 14. LGT cogently explains specifically how discovery may enable it to show a genuine issue as to Hoffman's contacts with Michigan, and thereby to withstand summary judgment:
Mr. Hoffman claims that he did not sell tickets to Michigan events or advertise to sell tickets to Michigan customers. The websites described above show that he advertised to sell tickets to performances by entertainers who performed in Michigan during the time that he was a ticket broker. It is very unlikely that he never sold a ticket to a concert in Michigan, given the breadth of his advertisement and sales through Ticket Network.
Further, Mr. Hoffman's affidavit does not claim that he never sold any tickets to Michigan customers. It only claims that he did not sell any tickets to Michigan events, and did "not do business" in Michigan.
LGT's Opp at 14; see also LGT's Opp, Ex 6, Affidavit of Mark DeLaurence dated November 26, 2008 ("DeLaurence Aff") ¶¶ 2-3 ("I reviewed LGT's records to determine the amount of LGT's sales deposited into Judiah Hoffman's account that came from Michigan events. I determined that approximately $18,000 of LGT's money deposited in Judiah Hoffman's account was from ticket sales to 65 events in Michigan.").
LGT concludes by stating, "This Court should allow discovery regarding Mr. Hoffman's contacts with Michigan. Specifically, this Court should allow LGT access to records of all of Mr. Hoffman's ticket sales, and customers, including their locations and the locations of the events." LGT's Opp at 15. The court construes this as a request for relief under FED. R. CIV. P. 56(f), which permits the district court, inter alia, to "refuse the application for judgment", i.e., deny the summary-judgment. See Lyons v. Ray, 2007 WL 679005, *4 (E.D. Ky. Mar. 1, 2007) (Joseph M. Hood, J.) ("In his response to Dr. Ray's summary judgment motion, Lyons argues that numerous discovery issues remain outstanding; therefore, the dispositive motion is premature because he requires more time to conduct adequate discovery. This argument could be construed as a request for Rule 56(f) relief."), recon. denied, 2007 WL 1309679 (E.D. Ky. May 1, 2007).
Accordingly, the court will deny without prejudice Hoffman's premature motion for summary judgment on the issue of personal jurisdiction, with leave to re-file following the completion of jurisdictional discovery. See Fifth Third Bank v. Jefferson Pilot Securities Corp., 2007 WL 773734, *3 (W.D. Ky. Mar. 8, 2007) (McKinley, J.) ("After a review of the record, the Court concludes that summary judgment in this matter is premature. The parties have not yet conducted any discovery. * * * [P]laintiff's motion for summary judgment is denied with leave to refile after completion of discovery."); Nagel v. First of Michigan Corp., 784 F. Supp. 429, 438 (W.D. Mich. 1991) (Enslen, J.) ("In defending against the motion for summary judgment on its RICO claims, plaintiff has not had the benefit of the evidence it expects to obtain from this discovery. For this reason I deny without prejudice the defendant's motion for summary judgment as to plaintiff's RICO claims."); PML North America, LLC v. ACG Enters. of NC, Inc., 2006 WL 334269, *1 (E.D. Mich. Feb. 13, 2006) (Cleland, J.) (where answers and motions challenged personal jurisdiction, subject-matter jurisdiction, and venue, district court had "denied without prejudice the motion to dismiss and the motion for summary judgment as premature and granted the motion for discovery."); 1st Fed. S L Ass'n of Van Wert v. US Sterling Capital Corp., 2005 WL 548932, *2 (N.D. Ohio Mar. 7, 2005) (Carr, C.J.) ("U.S. Sterling also contests this court's in personam jurisdiction and venue. None of these issues can properly be decided simply based on the back-and-forth contentions of the parties' briefs. Discovery as to each is essential to fair adjudication. Defendant's effort to seek summary judgment is premature.").
ORDER
Hoffman's motion to dismiss the amended complaint for lack of personal jurisdiction [document # 30] is DENIED without prejudice.
The parties SHALL commence discovery relevant to personal jurisdiction and conclude such discovery by February 13, 2009.
Hoffman MAY file a renewed motion to dismiss for lack of personal jurisdiction no later than March 6, 2009.
This is not a final order, so it is not immediately appealable.