United States District Court, W.D. Virginia, Roanoke Division
For John Tatoian, Plaintiff: Charles Robison Allen, Jr., LEAD ATTORNEY, ROANOKE, VA; Jeffrey Hellman, LEAD ATTORNEY, PRO HAC VICE, Law Offices of Jeffrey Hellman, LLC, New Haven, CT.
For William Lee Andrews, III, Virginia Worldwide Group, LLC, Black Ink of Virginia, Inc., Defendants: Timothy Joseph Battle, LEAD ATTORNEY, Law office of Timothy J. Battle, Alexandria, VA.
Hon. Glen E. Conrad, Chief United States District Judge.
In this case, Plaintiff John Tatoian, a Connecticut citizen, alleges tat Defendant Richard Schulenberg, a California citizen, participated in a scheme to defraud him. The matter is presently before the court on Schulenberg's motion to quash service and to dismiss the complaint for lack of personal jurisdiction. For the following reasons, the court will grant that motion.
Factual and Procedural Background
The following facts are taken from the complaint, unless otherwise noted. The court construes all allegations and reasonable inferences in the light most favorable to Tatoian. See Carefirst of Maryland, Inc. v. Carefirst Pregnancy Cntrs., Inc., 334 F.3d 390, 396 (4th Cir. 2003).
In October 2012, Tatoian was repeatedly solicited by Edward Glazebrook to make a short-term loan to Glazebrook, Anthony Junge, and Global Financial Solutions, LLC (collectively, the " Borrowers" ). Compl. ¶ 14, Dkt. No. 1. Tatoian agreed to loan the Borrowers $325,800.00 (the " funds" ). Id. ¶ 15. This loan was memorialized in a promissory note dated December 2, 2012. Id. To fund this loan, Glazebook " directed Mr. Tatoian to wire the funds to the IOLTA account of Defendant  Schulenberg, Esquire, who was then to wire the funds to the Escrow Account of Attorney William Lee Andrews, III." Id. ¶ 16.
On December 3, 2012, Tatoian wired the funds to Schulenberg. Id. ¶ 21. According to the complaint, " Schulenberg expressly agreed to wire Mr. Tatoian's monies to the escrow account of Attorney Andrews at Wells Fargo Bank," though the complaint does not say how or with whom Schulenberg so agreed. Id. ¶ 22. On December 17, 2012, " Schulenberg wired...$306,870.00 to [Defendant] Virginia Worldwide [Group, LLC]'s account at Wells Fargo, not [Defendant] Andrews IOLTA account as Borrowers had represented." Id. ¶ 23. Schulenberg later withdrew the remaining $19,870.00 from his IOLTA account " for his personal benefit without Mr. Tatoian's authorization or an express agreement to do so." Id. ¶ 24. Defendant Andrews then allegedly distributed the funds from Schulenberg's transfer to other entities and individuals named as defendants in the complaint. Id. ¶ 25. The complaint asserts that " the entire venture was an elaborate fraudulent conspiracy" involving the Borrowers, Schulenberg, Andrews, and the other defendants, designed to defraud Tatoian and others " by promising high rates of return for short term loans then transferring...funds through a maze of transfers to the conspirators." Id. ¶ ¶ 28, 37.
Tatoian filed suit on September 9, 2014. He names Schulenberg in six of the eight counts in the complaint: (1) fraudulent transfer under the Connecticut Uniform Fraudulent Transfer Act (Count I); (2) constructive fraudulent transfer under the Connecticut Uniform Fraudulent Transfer Act (Count III); (3) fraudulent transfer under the California Uniform Fraudulent Transfer Act (Count V); (4) unjust enrichment (Count VI); (5) theft under Connecticut law (Count VII); and (6) conspiracy under the California Uniform Fraudulent Transfer Act (Count VIII).
On November 24, 2014, Schulenberg filed a motion to quash service and to dismiss the complaint for lack of personal jurisdiction. See Def.'s Mot. Dismiss, Dkt. No. 19. Schulenberg attaches a declaration to that motion, which provides the following pertinent facts: Schulenberg is a California resident who is licensed to practice law in California. He is not licensed to practice, and does not practice, in Virginia. As part of his law practice, Schulenberg " handles escrows in business transactions for a fee." Id. Ex. 1 ¶ 2. According to Schulenberg, he is " not a party to any of these transactions. [His] role is to receive funds and to disburse those funds in accordance with the written instructions of the party on whose behalf the funds are received." Id. With respect to Tatoian's allegations, Schulenberg states that he was retained by Reliance Investment Group, LLC (" Reliance" ), a Nevada corporation, pursuant to the terms of an escrow agreement Id. ¶ 9, Ex. A. Under that agreement, Schulenberg was to receive Tatoian's funds and then disburse those funds in accordance with his client's instructions. Id. ¶ 9. He retained a portion of those funds as payment for his services in accordance with the terms of his agreement with Reliance. Id. Schulenburg maintains that he has " never entered into any agreements (written or oral) with [Tatoian]," and that " although [he] understood that the funds being sent to [his] account were the proceeds of a loan made by [Tatoian] to [Reliance's] capital partner (Global Financing Solutions, LLC), [he] did not represent [Global]" in the transaction or otherwise participate in the negotiation or execution of the loan agreement at issue here. Id. ¶ 11.
Tatoian filed a response to Schulenberg's motion on December 12, 2014. Schulenberg did not file a reply. As neither party has requested a hearing, the court now considers the motion ripe for review on the parties' written submissions alone.
A motion to dismiss under Rule 12(b)(2) of the Federal Rules of Civil Procedure challenges the court's ability to exercise personal jurisdiction over the defendant. " Where, as here, the district court addresses the question of personal jurisdiction on the basis of motion papers, supporting legal memoranda, and the allegations in the complaint, the plaintiff bears the burden [of] making a prima facie showing of a sufficient jurisdictional basis to survive the jurisdictional challenge." Consulting Eng'rs Corp. v. Geometric Ltd., 561 F.3d 273, 276 (4th Cir. 2009). In deciding whether the plaintiff has made such a showing, " the court must take all disputed facts and reasonable inferences in favor of the plaintiff."
Carefirst, 334 F.3d at 396.
A federal district court sitting in diversity " may only exercise personal jurisdiction over [a nonresident defendant] if such jurisdiction is authorized by the long-arm statute of the state in which it sits and application of the long-arm statute is consistent with the due process clause of the Fourteenth Amendment."
Consulting Eng'rs, 561 F.3d at 277. The Virginia long-arm statute provides multiple bases for the exercise of personal jurisdiction. See Va. Code § 8.01-328.1. According to the Supreme Court of 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 [Virginia] to the extent permissible under the due process clause ."
Peninsula Cruise. Inc. v. New River Yacht Sales, Inc.,257 Va. 315, 512 S.E.2d 560, 562 (Va. 1999). Because the long-arm statute extends personal jurisdiction to the outer limits of the due process clause, the court's inquiry is limited to whether it would violate due process to require Schulenberg to appear and defend in this forum. Id.; see ...