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Thornapple Associates, Inc. v. Izadpanah

United States District Court, E.D. Virginia, Alexandria Division

September 30, 2014

GREGORY S. COLLETT D/B/A COLLETT LEGAL, et al., Third-Party Defendants.


JAMES C. CACHERIS, District Judge.

This matter is before the Court on Third-Party Defendants Joseph A. Clark ("Clark") and Gregory Collett's ("Collett") Motions to Dismiss the Third-Party Complaint [Dkts. 32, 36]. For the reasons set forth below, the Court will grant in part and deny in part Defendants' motions.

I. Background

This case arises out of a dispute over an expert fee agreement. Plaintiff Allen Izadpanah ("Plaintiff" or "Izadpanah") retained the legal services of Collett Legal and later Collett Clark LLP to represent him in a National Futures Association ("NFA") arbitration proceeding (Third-Party Compl. [Dkt. 21] ¶¶ 12-13.) As part of that proceeding, Collett Clark LLP and Izadpanah engaged the expert witness services of Thornapple Associates, Inc. ("Thornapple") ( Id. ¶ 7.) In the original complaint, Thornapple asserts breach of contract, account stated, quantum meruit, and unjust enrichment claims arising out of Izadpanah's alleged non-payment of expert witness fees. ( Id. ) Thornapple originally filed the case in the U.S. District Court for the District of Maryland, but upon consent of both parties Judge Theodore D. Chuang transferred the case to this Court. ( See 6/20/14 Order [Dkt. 13].)

Izadpanah denies liability for Thornapple's fees. (Third-Party Compl. ¶ 7.) However, to the extent that he is found liable, Izadpanah contends that Collett and Clark are legally responsible for half of the outstanding balance as well as half of any money already paid to Thornapple. ( Id. ¶ 9.) This purported indemnification agreement arises out of two documents. The first is the retainer agreement signed by Collett on May 8, 2012 and sent to Izadpanah for his signature.[1] In that agreement, Izadpanah agreed to pay any arbitration expenses.[2] (Third-Party Compl., Ex. A at 2.) Additionally, the agreement contained the following language:

[Collett Legal] anticipates the following primary expenses: (1) until roughly three months before any hearing, the primary expense is an NFA filing fee of approximately $1550; and (2) after roughly three months before any hearing, [Collett Legal] will discuss with you the anticipated expenses of (i) expert witnesses, (ii) hearing fees, and (iii) travel expenses to the hearing.

( Id. ) The second document that Izadpanah alleges gives rise to liability is an email sent from Collett to Izadpanah, copying Clark, sent on May 3, 2012. (Third-Party Compl., Ex. D, at 1.) In relevant part, that email states: "As discussed yesterday, as an addendum to the retainer agreement between Collett Clark LLP and you, if we do not get you a recovery, we will reimburse you for 50% of Thornapple's bill." ( Id. )

On the basis of these two documents, Izadpanah asserts a breach of contract claim against Collett and Clark.[3] (Third-Party Compl. ¶¶ 23-28.) Both defendants have moved to dismiss the complaint on the basis of lack of personal jurisdiction, improper venue, and failure to state a claim. (Clark's Mot. to Dismiss at 1; Collett's Mot. to Dismiss at 1.) Having been fully briefed and argued, Defendants' motions are now before the Court.

II. Analysis

A. Rule 12(b)(2) Motion to Dismiss for Lack of Personal Jurisdiction

Before turning to other issues raised by Defendants, the Court must first consider whether it has personal jurisdiction over the Defendants "for lacking this the remainder of its ruling would be wasted effort." Willis v. Semmes, Bowen & Semmes, 441 F.Supp. 1235, 1238 (E.D. Va. 1977). Federal Rules of Civil Procedure 12(b)(2) and 14 permit a third-party defendant to raise lack of personal jurisdiction as a defense in a pre-answer motion. The third-party plaintiff bears the burden of proving to the court the existence of jurisdiction over the defendant by a preponderance of the evidence. See New Wellington Fin. Corp. v. Flagship Resort Dev. Corp., 416 F.3d 290, 294 (4th Cir. 2005) (citation omitted). If there are disputed factual questions as to the existence of jurisdiction, the court may hold a separate evidentiary hearing or may defer ruling pending relevant evidence produced at trial. See Combs v. Bakker, 886 F.2d 673, 676 (4th Cir. 1989); Long v. Chevron Corp., No. 4:11cv47, 2011 WL 3903066, at *3 (E.D. Va. Sept. 2, 2011). In the absence of an evidentiary hearing, the burden on the plaintiff is simply to make a prima facie showing of a sufficient jurisdictional basis. New Wellington, 416 F.3d at 294. In determining whether a plaintiff has met this burden, courts "must construe all relevant pleading allegations in the light most favorable to the plaintiff, assume credibility, and draw the most favorable inferences for the existence of jurisdiction.'" Id. (quoting Combs, 886 F.2d at 676).

Federal courts exercise personal jurisdiction in the manner provided by state law. New Wellington, 416 F.3d at 294. Determining whether personal jurisdiction exists involves two steps: (1) whether the state's long-arm statue authorizes the exercise of jurisdiction and, if so (2) whether the exercise of jurisdiction is consistent with the Due Process Clause of the Fourteenth Amendment. Eagle Paper Int'l, Inc. v. Expolink, Ltd. No. CIV.A. 2:07CV160, 2008 WL 170506, at *3 (E.D. Va. Jan. 17, 2008). In Virginia, "[i]t is manifest that the purpose of Virginia's long-arm statute is to assert jurisdiction over nonresidents who engage in some purposeful activity in this State to the extent permissible under the due process clause." Peninsula Cruise, Inc. v. New River Yacht Sales, Inc., 512 S.E.2d 560, 562 (Va. 1999). Because Virginia's long-arm statute is intended to extend personal jurisdiction to the outer limits of due process, the constitutional and statutory inquiry merge. Id .; see also Consulting Eng'rs Corp. v. Geometric Ltd., 561 F.3d 273, 277 (4th Cir. 2009).

There are two types of personal jurisdiction that meet the requirements of due process: specific and general jurisdiction. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 473-74 (1985). In both instances, a non-resident defendant must have sufficient "minimum contacts" with the forum state such that "the maintenance of the suit does not offend traditional notions of fair play and substantial justice." Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945).

General jurisdiction exists for claims entirely distinct from the defendant's in-state activities when a defendant's activities in the state have been "continuous and systematic." Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 & n.9 (1984). Here, Izadpanah has not shown that Defendants' Virginia contacts meet this standard such that general jurisdiction would be appropriate. Clark is a citizen of New Jersey and Collett is a citizen of New York. ( See Clark's Mot. to Dismiss Mem., Ex. A [Dkt. 32], Clark Decl. ¶ 1 [hereinafter Clark Decl.]; Collett's Motion to Dismiss Mem., Ex. A [Dkt. 37], Collett Decl. ¶ 1 [hereinafter Collett Decl.].) Defendants own no property in Virginia and do not regularly conduct business here. (Clark Decl. ¶ 16; Collett Decl. ¶ 10.) Therefore, if personal jurisdiction exists over Defendants, it must be specific jurisdiction.

To adequately allege specific jurisdiction, the plaintiff must show that a defendant "purposefully directed his activities at the residents of the forum and the litigation results from alleged injuries that arise out of those activities." Burger King, 471 U.S. at 472 (citations omitted) (internal quotation marks omitted). This test protects a defendant from having to defend himself in a forum where he could not have anticipated being sued. Consulting Engineers, 561 F.3d at 276. It prevents "jurisdiction solely as a result of random, fortuitous, or attenuated contacts." Burger King, 471 U.S. at 475 (citations omitted) (internal quotation marks omitted).

In analyzing the due process requirements for asserting specific jurisdiction, the Fourth Circuit has set out a three-part test in which the Court must consider, in order, "(1) the extent to which the defendant purposefully availed itself of the privilege of conducting activities in the State; (2) whether the plaintiffs' claims arise out of those activities directed at the State; and (3) whether the exercise of personal jurisdiction would be constitutionally reasonable." Consulting Engineers, 561 F.3d at 278 ...

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