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Gate Technologies, LLC v. Delphix Capital Markets, LLC

United States District Court, Second Circuit

July 9, 2013

GATE TECHNOLOGIES, LLC, et al., Plaintiffs,
v.
DELPHIX CAPITAL MARKETS, LLC, et al., Defendants.

OPINION AND ORDER

J. PAUL OETKEN, District Judge.

Plaintiffs Gate Technologies, LLC, Joseph K. Lantona, and Vincent R. Molinari bring this diversity action alleging breach of contract and various other claims under New York state law. Defendants have moved to dismiss several of Plaintiffs' claims, as well as all claims against Defendant Larry E. Fondren, pursuant to Federal Rules of Civil Procedure 12(b)(2) and 12(b)(6). For the reasons that follow, Defendants' motion is granted in part and denied in part.

I. Background

A. Factual Background[1]

Plaintiff Vincent Molinari is CEO of Plaintiff Gate Technologies, LLC ("Gate"). Molinari was introduced to Defendants, and the parties discussed the development of a potential business relationship; in September 2010, Gate entered into a mutual nondisclosure agreement with Defendants DelphX Capital Markets, LLC ("DCM"), Entre Global Services, Inc. ("Entre"), and Lawrence Fondren-the CEO and majority shareholder of DCM and Entre (together, "Defendants"). The purpose of the nondisclosure agreement was to protect confidential information among the parties as they engaged in various negotiations.

In March 2011, after months of negotiations, Gate executed a Letter of Intent ("the Letter") with Defendants, which stated Gate's intent to purchase up to 6.25% equity in DCM and/or Entre. By the Letter's terms, the parties agreed that during a 30-day period, commencing on the date of the Letter, Defendants would suspend all negotiations with other potential purchasers of DCM or Entre shares. (Notice of Removal, Dkt. No. 1 ("Compl."), Ex. A., at ¶ 6.) In consideration for this promise, and as provided by the Letter, Gate advanced to Defendants a fully refundable deposit of $50, 000.00.[2]

Later, in May, Gate advanced an additional $25, 000.00, as a "fully-refundable deposit, " to Defendants, and did so again, also in the amount of $25, 000.00, in July. The parties, however, never entered into a final agreement by which Gate would acquire an ownership interest in DCM and/or Entre. As a result, at the close of the 90-day period defined in the Letter, Gate made a demand for the return of the $100, 000.00 it had deposited with Defendants. To date, Defendants have not returned any of the monies deposited under the terms of the Letter.

Plaintiffs also allege that throughout the 30-day period, during which all negotiations with other entities were to be suspended, Defendants were actively engaged in negotiations with other business entities, including Sapient Capital Markets ("Sapient") and Meridian Investments ("Meridian"). These negotiations also involved the sale of an equity stake interest in DCM and/or Entre.

B. Procedural Background

This case was removed from the Supreme Court of Bronx County in September 2012. (Dkt. No. 1.) Defendants filed a motion to dismiss on September 26, 2012. (Dkt. No. 3.) Plaintiffs opposed Defendants' motion in November 2012, and that opposition was later docketed on December 20, 2012. (Dkt. No. 20.) Defendants replied on November 26, 2012. (Dkt. No. 14.)

II. Discussion

A. Motion to Dismiss Standard

When deciding a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), a court is obliged to "accept as true all of the factual allegations contained in the complaint." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 572 (2007). In so doing, the court must draw "all inferences in the light most favorable to the non-moving party's favor." In re NYSE Specialists Sec. Litig., 503 F.3d 89, 95 (2d Cir. 2007) (citation omitted). In addition to the complaint, courts may also consider, inter alia, "any written instrument attached to the complaint...." In re Scottish Re Grp. Sec. Litig., 524 F.Supp.2d 370, 382 (S.D.N.Y. 2007).

Although Federal Rule of Civil Procedure 8(a)(2) requires only a "short and plain statement of the claim showing that the pleader is entitled to relief, " the pleadings must nevertheless reflect "the grounds upon which [the] claim rests through factual allegations sufficient to raise a right to relief above the speculative level.'" ATSI Comm., Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007) (quoting Twombly, 550 U.S. at 555 (footnote omitted)). At bottom, the sine qua non of an adequate complaint is plausibility. See Twombly, 550 U.S. at 570 ("Here, in contrast, we do not require heightened fact pleading of specifics, but only enough facts to state a claim to relief that is plausible on its face. Because the plaintiffs here have not nudged their claims across the line from conceivable to plausible, their complaint must be dismissed."); see also Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) ("A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." (citation omitted)).

All claims of fraud must also comply with Rule 9(b)'s heightened pleading standard, which requires that the complaint: "(1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent." Lerner v. Fleet Bank, N.A., 459 F.3d 273, 290 (2d Cir. 2006) (quoting Mills v. Polar Molecular Corp., 12 F.3d 1170, 1175 (2d Cir. 1993) (quotations omitted)). Rule 9(b) provides, however, that while the circumstances of the fraud must be pleaded with particularity, "intent, knowledge, and other conditions of a person's mind may be alleged generally." Fed.R.Civ.P. 9(b).

B. Personal Jurisdiction over Larry E. Fondren

Defendants move to dismiss all claims against Fondren for lack of personal jurisdiction, pursuant to Federal Rule of Civil Procedure Rule 12(b)(2).[3] In response, Plaintiffs allege that New York's long-arm statute appropriately confers jurisdiction over Fondren.

While it is the plaintiff who "bears the burden of demonstrating personal jurisdiction over a person or entity against whom it seeks to bring suit, " Penguin Gr. (USA) Inc. v. Am. Buddha, 609 F.3d 30, 34 (2d Cir. 2010) (citation omitted), "[t]o defeat [a Defendant's] motion to dismiss for lack of personal jurisdiction, [a plaintiff] need only make out a prima facie case of personal jurisdiction." Viacom Int'l Inc. v. Kearney, No. 98 Civ. 6226 (SAS), 1999 WL 92601, at *3 (S.D.N.Y. Feb. 22, 1999) (citation omitted). "A prima facie case for personal jurisdiction must satisfy three elements: (1) proper service of process upon the defendant; (2) a statutory basis for personal jurisdiction; and (3) accordance with constitutional due process principles." Eternal Asia Supply Chain Mgmt. (USA) Corp. v. Chen, No. 12 Civ. 6390 (JPO), 2013 WL 1775440, at *3 (S.D.N.Y. Apr. 25, 2013) (citation omitted). A motion to dismiss on the ground that personal jurisdiction is lacking constitutes "inherently a matter requiring the resolution of factual issues outside of the pleadings"; accordingly, "all pertinent documentation submitted by the parties may be considered in deciding the motion." Yellow Page Solutions, Inc. v. Bell Atl. Yellow Pages Co., No. 00 Civ. 5563 (MBM), 2001 WL 1468168, at *1 (S.D.N.Y. Nov. 19, 2001) (citation and quotations omitted).

Personal jurisdiction in a diversity action, such as this, is governed by the law of the state in which the court sits. See Cutco Industries, Inc. v. Naughton, 806 F.2d 361, 365 (2d Cir. 1986); accord Viacom, 1999 WL 92601, at *3. Accordingly, here, the Court looks to the law of New York. Plaintiffs assert that jurisdiction over Fondren, a resident of Pennsylvania, is proper pursuant to sections 302(a)(1) and (3) of the New York Civil Practice Law and Rules ("C.P.L.R."). Section 302(a)(1) of the C.P.L.R. imparts jurisdiction over non-domiciliary defendants who "transact[] any business" within the state of New York, so long as the action arises out of such business activity. See N.Y. C.P.L.R. § 302(a)(1). "A defendant transacts business in New York when it purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.'" Viacom, 1999 WL 92601, at *3 (quoting McKee Electric Co. v. Rauland-Borg Corp., 20 N.Y.2d 377, 382 (1967)). "No single event or contact connecting defendant to the forum state need be demonstrated; rather, the totality of all defendant's contacts with the forum state must indicate that the exercise of jurisdiction would be proper." Cutco, 806 F.2d at 365. Thus, in determining whether a defendant has "purposefully availed" himself of the forum state, the Second Circuit has delineated the following, relevant factors:

(i) whether the defendant has an on-going contractual relationship with a New York corporation; (ii) whether the contract was negotiated or executed in New York, and whether, after executing a contract with a New York business, the defendant has visited New York for the purpose of meeting with parties to the contract regarding the relationship; (iii) what the choice-of-law clause is in any such contract; and (iv) whether the contract requires franchisees to ...

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