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Southridge Partners II Limited Partnership v. Snd Auto Group, Inc.

United States District Court, D. Connecticut

December 19, 2019

SOUTHRIDGE PARTNERS II LIMITED PARTNERSHIP, Plaintiff,
v.
SND AUTO GROUP, INC., POTNETWORK HOLDINGS, INC., SIGN N DRIVE AUTO MALL, INC., CHARLES VACARRO, SECURITIES COUNSELORS, INC., GARY L. BLUM,, POTNETWORK HOLDING INC., RANDALL GOULDING, RICHARD GOULDING, Defendants.

          MEMORANDUM OF DECISION RE: DEFENDANTS' MOTION FOR SUMMARY JUDGMENT (ECF NO. 51)

          KARI A. DOOLEY, UNITED STATES DISTRICT JUDGE

         Preliminary Statement

         On May 24, 2019, this Court denied the motion for partial summary judgment asserted by Plaintiff Southridge Partners II Limited Partnership (“Southridge” or the “Plaintiff”) as to Counts One and Three of its Second Amended Complaint. (ECF No. 41.) In that Memorandum of Decision, the Court simultaneously rejected the argument raised by Defendant PotNetwork Holdings, Inc. (“PotNetwork”) in its opposition to Southridge's motion for summary judgment and by way of its own motion for summary judgment and supporting memorandum (ECF Nos. 51, 59), that the Court lacked personal jurisdiction over PotNetwork. See Southridge Partners II Ltd. P'ship v. PotNetwork Holdings, Inc., No. 3:17-CV-1925 (KAD), 2019 WL 2248691 (D. Conn. May 24, 2019). Instead, the Court concluded that it could exercise personal jurisdiction over PotNetwork pursuant to a valid forum selection clause embodied in the relevant Securities Transfer Agreement (“STA”) executed between Southridge and Defendant Sign N Drive Auto Mall, Inc. (“SND”), to which PotNetwork was a limited signatory.

         In this Memorandum of Decision, the Court addresses the remaining arguments of the other Defendants raised in their memorandum in support of the motion for summary judgment and in opposition to Southridge's motion for summary judgment. Specifically, the Defendants argue that the Court lacks personal jurisdiction over Defendants Gary Blum, Charles Vacarro, Richard Goulding, Randall Goulding, Securities Counselors, Inc., and SND Auto Group, Inc. (“New SND”).[1] PotNetwork also seeks dismissal of Counts Five and Six of the Second Amended Complaint (the “SAC, ” ECF No. 27) which allege breach of warranty and fraud/misrepresentation, for the same reasons previously advanced but rejected in this Court's May 2019 Memorandum of Decision.[2] Finally, Defendants assert that they are entitled to summary judgment as to Counts Seven, Eight, and Nine because Defendants, as agents of the corporations who were parties to the contracts at issue, cannot, as a matter of law, tortiously interfere with their own contracts.[3] For purposes of this memorandum, the Court assumes the parties' familiarity with the underlying facts and procedural history of the case, as recounted in its previous decision. For the reasons set forth below, the motion is GRANTED in part and DENIED in part.

         Standards of Review

         Personal Jurisdiction

         “A plaintiff bears the burden of showing that the court has personal jurisdiction over each defendant.” Carney v. Beracha, 996 F.Supp.2d 56, 60 (D. Conn. 2014) (citing Metro. Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 566 (2d Cir. 1996)). “This showing may be made through the plaintiff's own affidavits and supporting materials, containing an averment of facts that, if credited, would suffice to establish jurisdiction over the defendant.Doe v. Del. State Police, 939 F.Supp.2d 313, 321 (S.D.N.Y. 2013) (quoting S. New England Tel. Co. v. Global NAPs Inc., 624 F.3d 123, 138 (2d Cir. 2010)). “The court ‘construes the pleadings and affidavits in the light most favorable to plaintiffs, resolving all doubts in their favor,' but the court is ‘not bound to accept as true a legal conclusion couched as a factual allegation,' and a plaintiff may not rely on ‘conclusory non-fact-specific jurisdictional allegations.'” Id. (quoting Porina v. Marward Shipping Co., 521 F.3d 122, 126 (2d Cir. 2008), and Janzini v. Nissan Motor Co., 148 F.3d 181, 185 (2d Cir. 1998)) (brackets and internal citation omitted).

         “[P]ersonal jurisdiction is determined by the law of the state in which the district court sits.” Doe v. Ciolli, 611 F.Supp.2d 216, 220 (D. Conn. 2009). “If the exercise of jurisdiction is appropriate under [Connecticut's] statute, the court then must decide whether such exercise comports with the requisites of constitutional Fourteenth Amendment due process.” Ferrara v. Munro, 585 B.R. 269, 282 (D. Conn. 2018). For the Court's exercise of personal jurisdiction to satisfy due process, the non-resident must have sufficient “minimum contacts” with the forum state “such that maintenance of the suit ‘does not offend traditional notions of fair play and substantial justice.'” World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 291-92 (1980) (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)) (internal quotation marks omitted). “It is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws.” MacDermid, Inc. v. Deiter, 702 F.3d 725, 730 (2d Cir. 2012) (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985)) (brackets omitted).

         However, as relevant here, “[w]here an agreement contains a valid and enforceable forum selection clause, it is not necessary to analyze jurisdiction under the state long-arm statutes or federal constitutional due process, ” Bricken v. Bergtholdt, No. 11-CV-1992 (WWE), 2012 WL 2958217, at *1 (D. Conn. July 19, 2012), because “[p]arties can consent to personal jurisdiction through forum-selection clauses in contractual agreements, ” D.H. Blair & Co., Inc. v. Gottdiener, 462 F.3d 95, 103 (2d Cir. 2006); see also Phoenix Leasing, Inc. v. Kosinski, 47 Conn.App. 650, 653 (App. Ct. 1998) (“Thus, in commercial transactions, parties often consent to resolve disputes in a particular jurisdiction by incorporating forum selection clauses into their contracts. Connecticut case law is clear that the courts will uphold an agreement of the parties to submit to the jurisdiction of a particular tribunal.”)

         Motion to Dismiss

         When considering a motion to dismiss under Rule 12(b)(6), the Court must accept the complaint's factual allegations as true and draw all inferences in the plaintiff's favor. Littlejohn v. City of New York, 795 F.3d 297, 306 (2d Cir. 2015). The complaint, however, “must ‘state a claim to relief that is plausible on its face, '” setting forth “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Kolbasyuk v. Capital Mgmt. Servs., LP, 918 F.3d 236, 239 (2d Cir. 2019) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007) and Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). “The requirement to allege ‘facts' means that ‘bald assertions' and ‘merely conclusory allegations' do not suffice.” Bakhit v. Safety Markings, Inc., 33 F.Supp.3d 99, 103 (D. Conn. 2014) (citations omitted).

         Discussion

         Whether This Court May Exercise Personal Jurisdiction Over the Remaining Defendants Pursuant to the STA Forum Selection Clause

         Having previously concluded that the forum selection clause establishes personal jurisdiction over Defendant PotNetwork, the Court must next consider whether the forum selection clause is enforceable as to the other contested Defendants, none of whom are personal signatories to the STA.[4]

         Legal Standard

         The Second Circuit conducts a four-part inquiry to assess the enforceability of a forum selection clause. The first questions are: “(1) whether the clause was reasonably communicated to the party resisting enforcement; (2) whether the clause is mandatory or permissive, i.e., . . . whether the parties are required to bring any [] dispute to the designated forum or simply permitted to do so; and (3) whether the claims and parties involved in the suit are subject to the forum selection clause.” Martinez v. Bloomberg LP, 740 F.3d 211, 217 (2d Cir. 2014) (quotation marks and citation omitted). Satisfaction of these factors creates a presumption of enforceability, which can be overcome at step four by “a sufficiently strong showing that enforcement would be unreasonable or unjust, or that the clause was invalid for such reasons as fraud or overreaching.” Id. (quotation marks and citations omitted). The Defendants here assert that, as non-signatories to the STA, the forum selection clause should not be enforceable against them.[5]

         There is “ample support for the conclusion that the fact a party is a non-signatory to an agreement is insufficient, standing alone, to preclude enforcement of a forum selection clause.” Aguas Lenders Recovery Grp. v. Suez, S.A., 585 F.3d 696, 701 (2d Cir. 2009) (collecting cases). Rather, “where the alleged conduct of the non[signatories] is closely related to the contractual relationship, a range of transaction participants, parties and nonparties, should benefit from and be subject to forum selection clauses.” Magi XXI, Inc. v. Stato della Citta del Vaticano, 714 F.3d 714, 722 (2d Cir. 2013) (quotation marks and citation omitted). While “[i]t is well established in this Circuit that a non-signatory may enforce a forum selection clause against a signatory where the non-signatory is ‘closely related' to a signatory . . . the Second Circuit has not reached the question of when a signatory may enforce a forum selection clause against a non-signatory.” Prospect Funding Holdings, LLC v. Vinson, 256 F.Supp.3d 318, 324 (S.D.N.Y. 2017) (citing, inter alia, Magi XXI, 714 F.3d at 723). Nonetheless, district courts in this Circuit have applied the “closely related” standard in this context.[6] See Id. (collecting cases); see also, e.g., Power Up Lending Grp., Ltd. v. Nugene Int'l, Inc., No. 17-CV-176601 (SJF) (AKT), 2019 WL 2119844, at *9-*10 (E.D.N.Y. Jan. 10, 2019), report and recommendation adopted, 2019 WL 989750 (E.D.N.Y. Mar. 1, 2019) (applying forum selection clause to uphold exercise of personal jurisdiction over non-signatory defendant).

         “The case law makes clear that ‘closely related' in this sense is a fairly strict standard.” Miller v. Mercuria Energy Trading, Inc., 291 F.Supp.3d 509, 523 (S.D.N.Y. 2018), aff'd, 774 Fed.Appx. 714 (2d Cir. 2019). “This strict standard has some district courts asking whether a non-signatory could reasonably foresee that it would be bound to the clause, and others asking whether the non-signatory's interests are ‘completely derivative' of and ‘directly related to, if not predicated upon' the signatory party's interests or conduct.” Power Up Lending Grp., Ltd., 2019 WL 2119844, at *7 (quotation marks and citations omitted); see also Miller, 291 F.Supp.3d at 523 (articulating same standards). Thus “many courts have used the doctrine to bind non-party, non-signatory corporate officers to contracts entered into by their corporate employer.” Recurrent Capital Bridge Fund I, LLC v. ISR Sys. and Sensors Corp., 875 F.Supp.2d 297, 307 (S.D.N.Y. 2012) (citing cases); see also BNY AIS Nominees Ltd. v. Quan, 609 F.Supp.2d 269, 275 (D. Conn. 2009) (recognizing the same principle). To otherwise bind a non-signatory on the basis of foreseeability “implies that the non-signatory must have been . . . involved in the transaction in some manner.” Recurrent Capital, 875 F.Supp.2d at 307-08; see also Leviton Mfg. Co., Inc. v. Reeve, 942 F.Supp.2d 244, 259 (E.D.N.Y. 2013) (observing that the case law typically requires that the non-signatory have played some kind of “active role in the transaction” or in ...


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