Derosa v. McKenzie

WILLIAM DEROSA, Plaintiff, v. CRAIG M. MCKENZIE Defendant.

Civil Action No. 2:16-cv-07516 (JLL)

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY

March 27, 2017

NOT FOR PUBLICATION

OPINION

LINARES, District Judge.

This matter comes before the Court by way of Defendant's, Craig M. McKenzie ("Defendant" or "Mr. McKenzie"), Motion to Dismiss (ECF No. 5, "Def.'s Mot. Dismiss") Plaintiff's, William DeRosa ("Plaintiff" or "Mr. DeRosa"), Complaint (ECF No. 1, "Compl.") for lack of personal jurisdiction under Federal Rule of Civil Procedure 12 (b)(2), res judicata and, in the alternative, transfer of venue pursuant to 28 U.S.C. § 1404 (a). In accordance with Federal Rule of Civil Procedure 78, the Court has considered the submissions of the parties and decides this matter without oral argument. For the reasons set forth below, the Court grants Defendant's Motion to Dismiss.

BACKGROUND

Dakota Plains Holdings Inc. ("Dakota Plains") is an energy transportation company which operates a Pioneer Terminal transloading facility in North Dakota. Compl. ¶ 4. During the relevant time period, Defendant, a Minnesota resident, served as the Chairman and ChiExecutive Officer of Dakota Plains. Id. In 2014, Lone Star Value Management ("Lone Star") acquired a substantial equity stake in Dakota Plains (the "Lone Star Acquisition"). Id ¶ 7. In light of the Lone Star Acquisition, Lone Star and Dakota Plains executed an agreement entitling Lone Star to place a nominee on the Dakota Plains Board of Directors (the "Dakota Plains Board"). Id ¶ 7. As a result of said agreement, Plaintiff, the former Director of Research at Lone Star and a New Jersey citizen, was nominated in July 2014 as the sole representative to serve on the Dakota Plains Board. Compl. ¶ 3; Def.'s Mot. Dismiss 1. Plaintiff served on the Dakota Plains Board from 2014 until 2015. Compl. ¶ 4.

During his tenure as the Director of Research at Lone Star, Plaintiff reported to Jeffrey Eberwein ("Mr. Eberwein"), the Chief Executive Officer of Lone Star. Id. Since the Lone Star Acquisition, Plaintiff contends that a Non-Disclosure Agreement ("Agreement")¹ existed allowing the sharing of confidential information between Lone Star and Dakota Plains. Id. As a result of the Agreement, Plaintiff claims that he was entitled and expected to share non-public information with Mr. Eberwein, and also with other officers and employees of Lone Star. Id.

Within two months of Plaintiff's appointment to the Dakota Plains Board, Plaintiff claims that Defendant began accusing him of "immaturity" and a "lack of understanding" and further avers that Defendant stated Plaintiff's requests for proper board procedures at Dakota Plains "was becoming a distraction." Id. ¶ 8. Plaintiff asserts that shortly thereafter, Defendant began to allege that Plaintiff had improperly "leaked" confidential information to Mr. Eberwein, despite supposedly knowing that any such disclosure was explicitly permitted by the Agreement. Id. Plaintiff alleges that his appointment to the Dakota Plains Board and his suggestions regardingthe proper corporate governance protocols were poorly received by the Defendant and as a result, Defendant set forth the defamatory statements. Id.

Thereafter, Plaintiff asserts that a disagreement developed between Lone Star and Dakota Plains in January 2015. Plaintiff maintains that the disagreement stemmed from Lone Star's concern with Dakota Plains' management decisions and purported failure to adhere to appropriate corporate governance protocols. Id. ¶ 9. Plaintiff claims that the Dakota Plains Board consequently adopted new by-laws prohibiting the sharing of confidential information with Lone Star, despite the provisions in the Agreement which permitted such sharing. Id. After the institution of the new by-laws, Plaintiff argues that Defendant then accused Plaintiff of violating said by-laws. Id.

Per Lone Star's request, Plaintiff resigned from his position as Director of Research on February 13, 2015. Id. Subsequently, Dakota Plains filed an 8-K statement with the Securities and Exchange Commission maintaining that Plaintiff had resigned for personal reasons. Id. Immediately thereafter, on February 23, 2015, Dakota Plains commenced a lawsuit against Plaintiff in the Nevada State Court, claiming he breached his fiduciary duties to Dakota Plains, by "routinely and inappropriately pass[ing] confidential Board information to Jeffrey E. Eberwein." Id. ¶ 10; Def.'s Mot. Dismiss 2.

During the pendency of the Nevada State court action, Dakota Plains issued a press release (the "Press Release") on March 18, 2016 which included the following assertions:

Moreover, after the Company appointed William DeRosa of Lone Star Value to the Board in 2014, Mr. DeRosa subsequently violated his fiduciary duties to all stockholders and committed unlawful acts by sharing material non-public information. Mr. DeRosa resigned from the Board because of his breach of fiduciary duty and will stand trial in court for his actions later this year.

Id. ¶ 11. Additionally, the Press Release informed readers of how to obtain a copy of the complaint from the Nevada State Court proceedings against Plaintiff. Id. The Press Release was published by the Business Wire, a wire service read by businesses and individuals in the financial community. Id. ¶ 12.

Pursuant to Nev. R. Civ. P. 68, Dakota Plains made an offer of judgment to the Plaintiff of which was accepted by the Plaintiff. Def.'s Mot. Dismiss 3. Thereafter, on October 27, 2016, the Nevada State Court accepted the Rule 68 disposition and entered judgment. Id. The matter was dismissed with prejudice pursuant to Nev. R. Civ. P. 41. Compl. ¶ 10; Def.'s Mot. Dismiss 3. Plaintiff maintains that he received $10,000 as a result of the agreement. Compl. ¶ 10.

Plaintiff commenced an action with this Court on October 19, 2016, by filing the instant Complaint which alleges: i.) Defamation Per Se and ii.) Intentional Infliction of Emotional Distress. On December 19, 2016, Defendant filed the Motion to Dismiss currently pending before the Court claiming that: i.) the Complaint should be dismissed for lack of personal jurisdiction pursuant to Fed. R. Civ. P. 12 (b)(2); ii.) Plaintiff's claims are barred by res judicata as a result of the Nevada State Court judgment; iii.) in the alternative, venue should be transferred to the District of Minnesota under 28 U.S.C. § 1404 (a). In response, Plaintiff filed a Brief in Opposition to Defendant's Motion to Dismiss (ECF No. 8, "Pl.'s Opp'n Br.") on January 19, 2017. On January 30, 2017, Defendant filed a Reply to Plaintiff's Response (ECF No. 9, "Def.'s Reply Br."). Plaintiff filed a Sur-reply (ECF No. 15, "Pl.'s Reply") on March 8, 2017.

LEGAL STANDARD

Under Federal Rule of Civil Procedure 12 (b)(2), a Court must dismiss a cause of action if the Court does not have personal jurisdiction over the Defendant. To determine if the exercise of personal jurisdiction over a nonresident defendant is appropriate, a court sitting in diversitymust engage in a two-step process. IMO Indus. v. Kiekert AG, 155 F.3d 254, 258-59 (3d Cir. 1998). The Court must first look to the state's long arm statute to determine if its application confers personal jurisdiction over the defendant. See Miller Yacht Sales, Inc. v. Smith, 384 F. 3d 93, 96 (3d Cir. 2004)("A federal court sitting in New Jersey has jurisdiction over parties to the extent provided under New Jersey state law."); see also 28 U.S.C. § 1332. "[N]ext, the Court must apply the precepts of the Due Process Clause of the Constitution." IMO Indus., 155 F. 3d at 259.

In New Jersey, the two-step "inquiry is collapsed into a single step" as its long-arm statute allows a court to exercise personal jurisdiction over non-resident defendants to the full extent allowed under the due process requirements of the United States Constitution. See Id. (citing Mesalic v. Fiberfloat Corp., 897 F. 2d 696, 698, n.5 (3d Cir. 1990)); see also N.J. Ct. R. 4:4-4 (authorizing personal jurisdiction "consistent with due process of law"). "The New Jersey Supreme Court has made it clear that New Jersey courts look to federal law for the interpretation of the limits on in personam jurisdiction." DeJames v. Magnificence Carriers, Inc., 654 F.2d 280, 284 (3d Cir. 1981); O'Connor v. Sandy Lane Hotel Co., Ltd., 496 F.3d 312, 316 (3d Cir. 2007); Provident Nat'l Bank v. Cal. Fed. Sav. & Loan Ass'n, 819 F.2d 434, 436 (3d Cir. 1987).

Personal jurisdiction over an out-of state defendant is permitted by the Fourteenth Amendment only when "the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985) (quoting Hanson v. Denckla, 357 U.S. 235, 253 (1958)). Accordingly, it is not-necessary for the defendant to be physically present in the forum for personal jurisdiction to exist, rather "personal jurisdiction under the Due Process Clause depends upon the relationship among the defendant, the forum and thelitigation." Burger King Corp., 471 U.S. at 467; Shaffer v. Heitner, 433 U.S. 186, 204 (1977). "Personal jurisdiction over a nonresident defendant may be asserted in two situations." Dollar Sav. Bank v. First Sec. Bank, N.A., 746 F.2d 208, 211 (3d Cir. 1984). First, "general jurisdiction" is present when the cause of action does not "arise out of or is unrelated to the defendant's contacts with the forum." See Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408 (1984); Rush v. Savchuk, 444 U.S. 320 (1980); Carteret Sav. Bank, FA v. Shushan, 954 F.2d 141, 149 (3d Cir. 1992)(citing Dollar Sav. Bank, 746 F.2d at 211 (3d Cir. 1984)); Time Share Vacation Club v. Atl. Resorts, Ltd., 735 F.2d 61 (3d Cir. 1984); Hendrickson v. Reg O Co., 657 F.2d 9 (3d Cir. 1981). Second, "specific jurisdiction" is invoked when the claim is related to or arises out of the defendant's contacts with the forum. See ...