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Cook v. McQuate

United States District Court, W.D. Virginia, Roanoke Division

September 30, 2016

RACHEL L. COOK, Plaintiff,
SCOTT MCQUATE, et al., Defendants.


          Michael F. Urbanski United States District Judge

         Before the court are the objections of Scott McQuate, John Blazer, and The Ohio Company ("Defendants") to the Report and Recommendation ("R&R") issued by United States Magistrate Judge Robert S. Ballou. ECF No. 53. The R&R addresses Defendants' motion to dismiss, filed pursuant to Fed. R. Civ. 12(b)(2) and Fed.R.Civ.P. 12(b)(6), arguing the court lacks personal jurisdiction over Defendants and that Count V of the amended complaint alleging RICO violations fails to state a claim. In the underlying amended complaint, Plaintiff Rachel Cook ("Cook") alleges Defendants engaged in (I) actual fraud, (II) conspiracy, (III) conversion, (IV) breach of fiduciary duty, and (V) Racketeer Influenced and Corrupt Organization ("RICO"). ECF No. 18. The R&R recommends finding that this court maintains personal jurisdiction over Defendants, but recommends dismissing Count V without prejudice. ECF No. 52.

         Defendants' objections argue the R&R (1) erred in sua sponte considering personal jurisdiction case law not asserted by Cook, (2) improperly applied the effects test articulated in Calder v. Jones, 465 U.S. 783, 104 S.Ct. 1482 (1984), and (3) erroneously recommends that Count V be dismissed without prejudice. ECF No. 53. Cook has filed a response to these objections. ECF No. 54. The Defendants' arguments are addressed in turn below.

         For die reasons that follow, the court agrees with the R&R that personal jurisdiction over Defendants is proper and the dismissal of Count V without prejudice is warranted. Therefore, Defendants' objections, ECF No. 53, are OVERRULED, and the R&R, ECF No. 52, ADOPTED in its entirety. Accordingly, die court will DENY in part and GRANT in part Defendants' motion to dismiss, ECF No. 18, DISMISSING Count V for RICO violations without prejudice and allowing Cook fourteen (14) days to amend Count V.


         Rule 72(b) of the Federal Rules of Civil Procedure permits a party to "serve and file specific, written objections" to a magistrate judge's proposed findings and recommendations within fourteen days of being served with a copy of the report. See also 28 U.S.C. § 636(b)(1). The Fourth Circuit has held that an objecting party must do so "with sufficient specificity so as reasonably to alert die district court of die true ground for the objection." United States v. Midgette, 478 F.3d 616, 622 (4th Cir.), cert denied. 127 S.Ct. 3032 (2007).

To conclude otherwise would defeat the purpose of requiring objections. We would be permitting a party to appeal any issue that was before the magistrate judge, regardless of the nature and scope of objections made to the magistrate judge's report. Either the district court would then have to review every issue in the magistrate judge's proposed findings and recommendations or courts of appeals would be required to review issues that the district court never considered. In either case, judicial resources would be wasted and the district court's effectiveness based on help from magistrate judges would be undermined.

Id. The district court must determine de novo any portion of the magistrate judge's report and recommendation to which a proper objection has been made. "The district court may accept, reject, or modify the recommended disposition; receive further evidence; or return the matter to the magistrate judge with instructions." Fed.R.Civ.P. 72(b)(3); accord 28 U.S.C. § 636(b)(1). "General objections that merely reiterate arguments presented to the magistrate judge lack the specificity required under Rule 72, and have the same effect as a failure to object, or as a waiver of such objection." Moon v. BWX Technologies, Inc., 742 F.Supp.2d 827, 829 (W.D. Va. 2010), aff'd, 498 F.App'x 268 (4th Cir. 2012) (citing Veney v. Astrue, 539 F.Supp.2d 841, 845 (W.D. Va. 2008)); see also Thomas v. Arn, 474 U.S. 140, 154 (1985) ("[T]he statute does not require the judge to review an issue de novo if no objections are filed").


         Defendants' first argument in support of the objections posits that in ruling on a motion to dismiss for lack of personal jurisdiction, courts are limited only to application of case law put forth by the parties, even where the parties fail to cite binding precedent from the United States Supreme Court and such citation aids the court in reaching the proper outcome. ECF No. 53, at 5-6. Fans of justice everywhere can take comfort as courts are not so constrained, and district courts may consult binding case law, even when litigants fail to do so.

         The Fourth Circuit Court of Appeals has indeed cautioned district courts in regards to sua sponte raising affirmative defenses for which defendants maintain the burden. See, e.g., Clodfelter v. Republic of Sudan, 720 F.3d 199, 207-210 (4th Cir. 2013). However, such concerns do no confront the court, where, as here, Defendants assert the affirmative defense of lack of personal jurisdiction. See ECF No. 18, at 18-31. The parties briefed personal jurisdiction and apparently discussed it at oral argument. ECF No. 53, at 5, fn 3. In explaining the personal jurisdiction analysis employed in the R&R, the magistrate judge relied on Calder, a case not cited by the parties. Such actions were entirely appropriate- particularly considering that Calder is binding precedent from the United States Supreme Court-and the magistrate judge is not precluded from applying applicable law simply because the parties did not.

         The cases cited by the Defendants are inapplicable and do not address the issue of a district court's authority to cite case law beyond that presented by the parties.[1] The court wholeheartedly agrees with Judge Moon's observation in Wootten, 2016 WL 922795 at *4, that district courts are under no obligation to fashion arguments on behalf of litigants. However, such an observation simply has no impact on district court's authority to consult relevant case law to address issues properly before the court. The magistrate judge did not err in consulting Calder to assist in determining whether Virginia maintains personal jurisdiction over the Defendants.


         Having determined that the magistrate judge acted properly in consulting case law not contained in the parties' briefs, the court now turns to Defendants' arguments that Virginia lacks specific personal jurisdiction over Defendants ...

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