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WALKER v. SMITH

April 15, 2003

KENNETH H. WALKER, PETER C. MORSE, JONATHAN S. LINEN, AND MARCIE KENNEDY, PLAINTIFFS,
v.
LINDA SMITH, RONALD SMITH, JAMES L. FORD, AND L. LEE WEBER, INDIVIDUALLY AND D/B/A FACECAKE MARKETING TECHNOLOGIES, INC., DEFENDANTS.



The opinion of the court was delivered by: Robert W. Sweet, United States District Judge

OPINION

The plaintiffs Kenneth H. Walker ("Walker"), Peter C. Morse ("Morse"), Jonathan S. Linen ("Linen") and Marcie Kennedy ("Kennedy") (collectively, the "Plaintiffs"), have moved for summary judgment pursuant to Rule 56, Fed.R.Civ.P., against Linda B. Smith ("Smith"), Ronald Smith ("R. Smith"), James L. Ford ("Ford") and L. Lee Weber ("Weber"), d/b/a FaceCake Marketing Technologies, Inc. ("FaceCake") (collectively, the "Defendants"). The Defendants have cross-moved to dismiss for lack of jurisdiction pursuant to Rule 12(b)2, Fed.R.Civ.P., for improper venue pursuant to Rule 12(b)3, Fed.R.Civ.P., and 26 U.S.C. § 1406(a), and for summary judgment pursuant to Rule 56, Fed.R.Civ.P.

For the reasons set forth below, the Plaintiffs' motion for summary judgment is denied, the cross-motion of the Defendants to dismiss for lack of jurisdiction is granted as to certain defendants, and their cross-motion for summary judgment to dismiss the complaint is granted.

Prior Proceedings

This action was commenced on June 3, 2002. The action was reassigned to this Court as related to Retail Options, LLC v. FaceCake.com, Inc., et al., 02 Civ. 4155 (RWS).

No discovery has been had.

The instant motions were heard and marked fully submitted on January 29, 2003.

The Facts

The facts set forth below are based upon the parties' Local Rule 56.1 statements and the complaint.

Walker is a resident of New York, New York. Morse is a resident of West Conshohocken, Pennsylvania. Linen is a resident of Summit, New Jersey. Kennedy is a resident of Wynnewood, Pennsylvania.

Smith is a resident of Woodland Hills, California and the chief executive officer ("CEO"), director and shareholder of Facecake. R. Smith is a resident of Atlanta, Georgia and an officer, director and shareholder of FaceCake. Ford is a resident of Hilton Head, South Carolina, chief financial officer, director and shareholder of FaceCake. Weber is a resident of Atlanta, Georgia and a shareholder of FaceCake.

Walker, Morse, Linen and Kennedy received notes in the amount of $50,000, $50,000, $25,000, and $100,000, respectively, executed by FaceCake Marketing Technologies, Inc. ("FaceCake 3 Marketing") (the "Notes"). Philip Schein ("Schein") and Richard Costello ("Costello"), alleged by Defendants to be California residents, assigned similar notes in the amount of $25,000 and $50,000 respectively to Walker. The Notes were issued in March and April 2001.

Notice of default upon the Notes has been served upon the maker of the Notes, but the defaults are disputed by the Defendants.

The maker of the Notes was incorporated in California as FaceCake.com Inc. Its name was changed to FaceCake Marketing Technologies, Inc. It has also used the name FaceCake Beautiful Technologies. The payment for the Notes was made by checks or money wires payable to FaceCake.com. The Defendants are officers, directors or shareholders of the maker of the Notes which will be referred to as FaceCake.

The Notes were issued to finance the activities of FaceCake and were signed by Smith with the title CEO. The facts and circumstances giving rise to the financing are in dispute. It was anticipated that Walker and a corporation with which he was affiliated, Retail Options, LLC ("Retail Options"), would assist FaceCake in sales and development.

The Notes were executed in California and delivered in California, by their terms governed by the law of California, and payable at the residences of the Plaintiffs.

FaceCake has its office and accounts in California, does no business in New York, and, as of the filing of the complaint, has not derived any income from New York. A promotional pamphlet of FaceCake bearing the title of FaceCake Beautiful Technologies lists an office in Woodland Hills, California and contains a reference to Los Angeles and New York.

Correspondence, fax and wire transmissions were exchanged between New York (primarily addressed to Walker) and California in connection with the ...


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