United States District Court, E.D. Virginia, Richmond Division
Hannah Lauck, United States District Judge.
matter comes to bar on the briefing submitted pursuant to
this Court's Memorandum Opinion and Order regarding
whether to permit limited jurisdictional discovery
("Gillison /"). (ECF Nos. 42, 43.)
Plaintiffs Felix Gillison, Jr. and Dawn Mays-Johnson
("Plaintiffs") filed their Brief Regarding Their
Need for Jurisdictional Discovery (the "Discovery
Brief). (ECF No. 44.) Defendants Lead Express, Inc.
("Lead Express") and Takehisa Naito (collectively
with Lead Express, "Defendants") responded, (ECF
No. 45), and Plaintiffs replied, (ECF No. 46).
Court dispenses with oral argument because the materials
before it adequately present the facts and legal contentions,
and argument would not aid the decisional process.
Accordingly, the matter is ripe for disposition. The Court
exercises jurisdiction pursuant to 28 U.S.C. §
1331. For the reasons that follow, the Court
shall not allow jurisdictional discovery, and will dismiss
the Second Amended Complaint without prejudice.
Procedural and Factual Background
case arises out of a purported "sham business
operation" orchestrated by Lead Express and its
principal and alter ego, Takehisa Naito. (Second Am.
Compl. ¶ 2.) Lead Express obtains millions of consumer
reports on consumers with whom it has no relationship.
According to Plaintiffs, because Lead Express has no
relationship with these consumers, it obtains reports without
a permissible purpose, in violation of 15 U.S.C. §
1681b(f). Plaintiffs also assert that Lead Express
obtained the consumer reports under false pretenses, by
alleging that it was the "end user" of the
reports. (Id. ¶ 16.)
represent some of the thousands of consumers whose consumer
reports Lead Express obtained from Clarity Service, Inc.
("Clarity"), "a nontraditional
consumer-reporting agency that specializes in assembling
subprime consumer data." (Id. ¶ 12.)
"Unlike traditional consumer-reporting agencies, most of
Clarity's major customers did not buy its data to
determine if a loan applicant would pay his or her
bills." (Id. ¶ 13.) Rather, companies like
Lead Express secretly purchase Clarity's consumer reports
for the purpose of targeting vulnerable customers who might
seek high-interest loans. By using Clarity, Defendants could
bypass Experian's more stringent credentialing and
conceal the role of La Posta Tribal Lending Enterprise
("La Posta Lending") in offering these loans. Such
practices also make it more difficult for consumers to know
who obtained their report.
allege that Clarity obtained their consumer reports from
Experian and sold them to Lead Express, who would
"purportedly" utilize the information to
evaluate consumers for loans. (Id. ¶ 15.) In
accordance with this practice, Lead Express executed an
"end user" agreement with Clarity, in which Lead
Express represented that it constituted the "end
user" of the consumer reports. (Id. ¶ 16.)
Lead Express then obtained consumer reports from Clarity,
including more than 30, 000 consumer reports on Virginia
consumers during a five-year period. The purpose of obtaining
these reports was to ultimately target Virginia consumers for
high-interest loans, but Lead Express did not solicit
consumers for loans or provide loans to the Virginia
consumers directly. Instead, "[i]f the consumer's
data obtained from Clarity satisfied Lead Express's loan
criteria, an affiliate company, not Lead Express, would
solicit the consumer for a loan." (Id. ¶
26.) Lead Express obtained Gillison's consumer report on
January 17, 2014, and Mays-Johnson's report on May 8,
2015, in order to market high-interest loans to them.
spite of Lead Express's certification that it was the
"end user" of the consumer reports, Lead Express
never provided a "firm offer of credit" to
Plaintiffs, and Plaintiffs never applied for credit with Lead
Express or authorized Lead Express to pull their
reports. (Id. ¶ 23.) Rather, Lead
Express purchased the consumer data "in order to obtain
leads on potential consumers who may be interested in
high-interest loans"-data an affiliate company would use
to offer loans to consumers. (Id. ¶¶
25-26.) Accordingly, Plaintiffs contend, Lead Express
"lacked a permissible purpose to obtain Plaintiffs'
consumer reports." (Id. ¶¶ 23, 27.)
assert two related class claims against the Defendants: (1) a
violation of 15 U.S.C. § 1681b(f) ("Count
One"); and, (2) a violation of 15 U.S.C. § 1681q
("Count Two"). Plaintiffs allege that
Defendants' violations entitle each consumer to statutory
damages between $100 and $1, 000 under §
Plaintiffs filed their Second Amended Complaint, Defendants
moved to dismiss it under three separate theories: (1) lack
of subject-matter jurisdiction because the Plaintiffs did not
have standing to bring this lawsuit; (2) lack of personal
jurisdiction; and, (3) improper venue. (See Mot.
Dismiss, ECF No. 26). Alternatively, Defendants requested
that the Court transfer the case to the United States
District Court for the Central District of California as the
briefing on the Motion to Dismiss concluded, Plaintiffs filed
the Motion for Permission to Take Jurisdiction-Related
Discovery (the "Motion for Discovery"). (ECF No.
31.) Plaintiffs requested that the Court permit the parties
to conduct discovery for 90 days if the Court found that
Plaintiffs had not established personal jurisdiction.
Gillison I, the Court found that Plaintiffs'
Second Amended Complaint "fail[s] to make a prima facie
showing of specific personal jurisdiction."
(Gillison 119.) The Court denied Plaintiffs'
Motion for Discovery because the requested discovery bore
"little relevance to the allegations of specific
jurisdiction pleaded." (Id. 29.) On the
other hand, the Court considered with trepidation
"Defendants' patently inconsistent
declarations" regarding their business, finding that the
inconsistencies did not give Plaintiffs a fair opportunity to
make their case regarding specific personal
jurisdiction. (Gillison 731.)
interest of justice, and to clarify the record, the Court
ordered parties to brief the need for jurisdictional
discovery in light of Gillison 7.
Applicable Legal Standards
Legal Standard to Permit Jurisdictional Discovery
under the Federal Rules of Civil Procedure is generous in
scope and freely permitted, and district courts "have
broad discretion in [their] resolution of discovery problems
that arise in cases pending before [them]." Mylan
Labs., Inc. v. Akzo, N.V., 2 F.3d 56, 64 (4th Cir. 1993)
(alterations in original) (quoting In re Multi-Piece Rim
Prods. Liab. Litig, 653 F.2d 671, 679 (D.C. Cir. 1981)).
A district court does not abuse its discretion by denying
jurisdictional discovery "[w]hen a plaintiff offers only
speculation or conclusory assertions[.]"
Carefirst, 334 F.3d at 402; see also Base Metal
Trading, Ltd v. OJSC "Novokuznetsk)? Aluminum
Factory," 283 F.3d 208, 216 n.3 (4th Cir. 2002)
(finding the district court did not abuse its discretion in
denying jurisdictional discovery where "the plaintiff
simply want[ed] to conduct a fishing expedition in the hopes
of discovering some basis of jurisdiction");
Reynolds & Reynolds Holdings, Inc. v. Data Supplies,
Inc., 301 F.Supp.2d 545, 554 (E.D. Va. 2004) ("The
court does not abuse its discretion to deny jurisdictional
discovery when the plaintiff raises only 'bare
allegations' to dispute defendant's affidavits
denying jurisdictional acts or contacts.").
discovery can be appropriate when a plaintiff files a motion
containing "specific and substantive" allegations
regarding a court's jurisdiction, see, e.g.,
Mamo, 2006 WL 572327 at *2, or when
"'significant gaps in the record' exist"
regarding the court's jurisdiction over the defendant.
Weinstein v. Todd Marine Enters., 115 F.Supp.2d 668,
676 (E.D. Va. 2000) (quoting Coastal Video Commc'ns
Corp. v. The Staywell Corp., 59 F.Supp.2d 562, 571 (E.D.
Personal Jurisdiction; Burden of Proof
district court considers a challenge to personal jurisdiction
without conducting an evidentiary hearing, the plaintiff need
only make a prima facie showing of personal jurisdiction,
rather than show jurisdiction by a preponderance of the
evidence. Carefirst, 334 F.3d at 396; see also
Combs v. Bakker, 886 F.2d 673, 676 (4th Cir. 1989);
Machulsky v. Hall, 210 F.Supp.2d 531, 537 (D.N.J.
2002) ("[A]t no point may a plaintiff rely on the bare
pleadings alone in order to withstand a defendant's Rule
12(b)(2) motion to dismiss for lack of personal
jurisdiction." (quoting Patterson v. Fed. Bureau of
Investigation, 893 F.2d 595, 603-04 (3d Cir. 1990)).).
[c]ourt, in deciding whether a plaintiff has met th[e] burden
[of making a prima facie case supporting personal
jurisdiction], 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." Brooks, 242
Fed.Appx. at 890. Still, a plaintiff cannot rely on
"bare pleadings alone" after a defendant properly
challenges personal jurisdiction. Machulsky, 210
F.Supp.2d at 537 (quotation omitted). Instead, 'the
plaintiff must sustain its burden of proof in establishing
jurisdictional facts through sworn affidavits and competent
evidence .... [A] plaintiff must respond with actual proof,
not mere allegations." Id. (quotation omitted).
Personal Jurisdiction: Legal Standard
courts exercise personal jurisdiction in the manner provided
by state law. New Wellington Fin. Corp. v. Flagship
Resort Dev. Corp., 416 F.3d 290, 294 (4th Cir. 2005).
Therefore, a district court must first decide whether
Virginia state law permits the court to exercise personal
jurisdiction over the defendant, and second, whether the
exercise of such jurisdiction comports with the due process
requirements of the Fourteenth Amendment. Id; Christian
Sci. Bd. of Dirs. of the First Church of Christ, Scientist v.
Nolan, 259 F.3d 209, 215 (4th Cir. 2001); ESAB
Group, Inc. v. Centricut, Inc., 126 F.3d 617, 622 (4th
Virginia's long-arm statute extends personal jurisdiction
to the extent permitted by the Due Process Clause, 'the
statutory inquiry necessarily merges with the constitutional
inquiry, and the two inquiries essentially become
one.'" Young v. New Haven Advocate, 315
F.3d 256, 261 (4th Cir. 2002) (quoting Stover v.
O'Cornell Assocs., Inc., 84 F.3d 132, 135-36 (4th
Cir. 1996)) (internal citation omitted). Accordingly, the
inquiry becomes whether the defendants maintain sufficient
minimum contacts with the forum state so as not to offend
"traditional notions of fair play and substantial
justice." Int'l Shoe Co. v. Washington, 326
U.S. 310, 316 (1945) (quoting Milliken v. Meyer, 311
U.S. 457, 463 (1940)).
standard for determining the existence of personal
jurisdiction over a nonresident defendant varies, depending
on whether the defendant's contacts with the forum state
also provide the basis for the suit."
Careflrst, 334 F.3d at 397. If a defendant's
contacts with the state also constitute "the basis for
the suit, those contacts may establish specific
jurisdiction----- [I]f the defendant's contacts with the
State are not also the basis for suit, then jurisdiction over
the defendant must arise from the defendant's general,
more persistent, but unrelated contacts with the
State." ALS Scan, Inc. v. Digital Serv.
Consultants, Inc., 293 F.3d 707, 712 (4th Cir. 2002)
(citing Helicopteros, 466 U.S. at 414 & nn.8-9).
Fourth Circuit has adopted a three-part test to determine
whether specific jurisdiction exists. Reynolds Foil,
2010 WL 1225620, at *2. Specifically, the Court must
consider: "(1) the extent to which the defendant
purposefully avail[ed] 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[J (3) whether the exercise of
personal jurisdiction would be constitutionally
reasonable." ALSScan, 293 F.3d at 712
(alteration in original) (internal citations omitted).
"If, and only if... the plaintiff has satisfied this
first prong of the test for specific jurisdiction need [the
Court] move on to a consideration of prongs two and
three." Consulting Eng'rs, 561 F.3d at 278.
The Requisite Showing for Plaintiffs' Claims to
bear the ultimate burden to show that the Court has specific
personal jurisdiction over Defendants by a preponderance of
the evidence. See Carefirst, 334 F.3d at 396. To
meet their burden, Plaintiffs must show that Defendants (1)
"purposefully avail[ed] [themselves] of the privilege of
conducting activities in [Virginia]... [(2) that]
[Plaintiffs' claims arise out of those activities
directed at the State ... and ... [(3) that] the exercise of
personal jurisdiction would be constitutionally
reasonable." ALS Scan, 293 F.3d at 712
(internal citations omitted).
One alleges that Defendants improperly obtained
Plaintiffs' "consumer reports from Clarity without a
permissible purpose," in violation of 15 U.S.C. §
1681b(f). (Second Am. Compl. ¶ 50.) For Count One to
survive, Plaintiffs must show both that Defendants have
meaningful contacts to Virginia, and that those contacts
relate to the allegedly improper acquisition of the reports
from Clarity. See Walden, 134 S.Ct. at 1125.
Two claims that Defendants knowingly misrepresented
themselves to Clarity as the end user of the reports it
obtained from Clarity, in violation of 15 U.S.C. §
1681q. For Count Two to survive, Plaintiffs must show both
that Defendants have meaningful contacts to Virginia, and
that those contacts relate ...