Harris v. Salmon Sims Thomas, PLLC

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QUANNAH HARRIS, d/b/a LAST MINUTE CUTS, Plaintiff, v. SALMON SIMS THOMAS, PLLC, EILEEN KELLER, AARON LOHMAN, AND JOHN DOES 1-10, Defendants.

No. 22-02757-MSN-tmp

United States District Court, W.D. Tennessee, Western Division

March 1, 2023

REPORT AND RECOMMENDATION

TU M PHAM, CHIEF UNITED STATES MAGISTRATE JUDGE

Before the court are four motions filed by defendants Salmon Sims Thomas, PLLC (“SST”), Eileen Keller, and Aaron Lohman (collectively “defendants”): a Motion to Dismiss for Lack of Jurisdiction (ECF No. 17), a Motion to Dismiss or Motion to Quash Service of Process (ECF No. 18), a Motion to Dismiss for Failure to State a Claim (ECF No. 19) and a Motion to Transfer Venue or Rule 12(b)(3) Motion to Dismiss.^[1](ECF No. 20.) Also before the court are two motions filed by pro se plaintiff Quannah Harris: a Motion to Strike Defendant Salmon Sims Thomas, PLLC's Rule 12(b)(2) Motion to Dismiss (ECF No. 21) and a Motion to Strike Defendants' Motion to Dismiss or Motion to Quash Service. (ECF No. 22.)

For the following reasons, it is recommended the defendants' Motion to Dismiss for Lack of Jurisdiction be denied and their Motion to Transfer be granted.

I. PROPOSED FINDINGS OF FACT

Plaintiff Quannah Harris is a resident of Memphis, Tennessee, who operates Last Minute Cuts, a school of barbering and cosmetology. (ECF No. 12.) On November 2, 2022, Harris filed a complaint against SST. (ECF No. 1.) SST is an accounting firm headquartered in Dallas, Texas. (Id. at PagelD 2.) In her complaint, Harris alleged that she retained SST to perform an audit of her school. (Id. at PageID 3.) The results of the audit were to be part of an application for accreditation with the National Accreditation Commission of Career Arts and Sciences (“NACCAS”). (Id.) If accredited, Harris's school would receive additional funding from the Department of Education. (Id.) According to Harris's complaint, she directed SST to perform an audit according to generally accepted accounting principles, otherwise known as a “G.A.A.P. audit.” (Id.) However, SST instead performed an audit according to generally accepted government auditing standards, or a “G.A.G.A.S. audit.” (Id.) Harris claims that as a result of the particular standards guiding the audit process, the audit she submitted caused her application to the NACCAS to be denied. (Id.) In this initial complaint, Harris brought five causes of action against SST: accounting malpractice, negligence, breach of fiduciary duty, negligent misrepresentation, and intentional misrepresentation. (ECF No. 1 at PageID 5-12.)

SST responded to Harris's complaint with several motions. First, it filed a motion to dismiss for lack of personal jurisdiction. (ECF No. 9.) There, it argued that the court lacked both general and specific jurisdiction to hear this case because SST performed all audits remotely from the state of Texas and had no contacts with the state of Tennessee. (Id. at PagelD 24.) SST also filed a motion to dismiss for failure to state a claim. (ECF No. 10.) It asserted that Harris did not have standing to bring claims on behalf of Harris & Harris, the entity that was party to their contract. (Id.) It also stated that Harris's claims were time-barred and that her causes of action failed as a matter of law. (Id.) Finally, SST filed a motion to dismiss or transfer, arguing both that venue was improper in the Western District of Tennessee, and even if it were not, the court should transfer venue pursuant to a forum selection clause agreed to by the parties. (ECF No. 11.) In support of this motion, SST attached two engagement letters that it claimed contained forum selection clauses. (Id. at PageID 170.) The text of the clause in the first letter reads as follows:

You agree that any dispute (other than our efforts to collect an outstanding invoice) that may arise regarding the meaning, performance, or enforcement of this engagement or any prior engagement that we have performed for you will, prior to resorting to litigation, be submitted to mediation and that the parties will engage in the mediation process in good faith once a written request to mediate has been given by any party to the engagement. Any mediation initiated, as a result of this engagement shall be administered within the county of Dallas in the state of Texas, by the Offices of Christopher Nolland, 1717 Main Street, Suite 5550, Dallas, TX 75201, or by another mediation organization chosen by our firm, according to its mediation rules, and any ensuing litigation shall be conducted within said county, according to Texas law. The results of any such mediation shall be binding only upon the agreement of each party to be bound. The costs of any mediation proceeding shall be shared equally by the participating parties.

(Id.) The signature page of the first engagement letter reads: “This letter correctly sets forth our understanding of Harris & Harris, dba Last Minute Cuts School of Barbering and Cosmetology. Acknowledged and agreed on behalf of Harris & Harris, Inc. dba Last Minute Cuts School of Barbering and Cosmetology[.]” (Id. at PageID 171.) The letter bears Quannah Harris's signature. (Id.) Her title is listed as “President.” (Id.) The first letter is dated May 4, 2020. (Id.) The engagement letter for the second audit contains an identical forum selection clause. (ECF No. 11-1 at PageID 197.) It is also signed by Quannah Harris as president of Harris & Harris. (Id. at PageID 198.)

On December 5, 2022, Harris filed an amended complaint. (ECF No. 12.) In her new complaint, she named Eileen Keller and Aaron Lohman as additional defendants. (Id.) According to the complaint, Keller is a partner at SST, while Lohman is an employee of the firm and the individual who completed the audits at issue. (Id.) Her claims now include breach of contract, accounting malpractice, negligent infliction of emotional distress, negligence, breach of fiduciary duty, negligent misrepresentation, and intentional misrepresentation. (Id.)

The defendants filed several new motions in response to Harris's amended complaint. As with the previous complaint, they assert that the court lacks personal jurisdiction (ECF No. 17) and that the case should be transferred or dismissed due to improper venue. (ECF No. 20.) They also filed a motion to dismiss for failure to state a claim. (ECF No. 19.) In addition to their previous arguments, they contend that Lohman and Keller may not be held individually liable for actions taken on behalf of SST. (Id.) The defendants also filed a motion to quash service of process. (ECF No. 18.) In that motion, they assert that Lohman and Keller were improperly served because the individual who was served with the summons and complain is not authorized to accept service of process on their behalf. (Id. at PageID 380.)

Harris filed two responses to the defendants' motions, as well as two motions to strike. In her response in opposition to the motion to dismiss for failure to state a claim, she argues that she has standing because she is the sole owner of Harris & Harris, an unincorporated sole proprietorship, and because she was the intended beneficiary of the contract. (ECF No. 15.) She also submits that she has adequately pled her causes of action. (Id.) In her response to the defendants' motion to transfer, she argues that the forum selection clause in the contracts between the parties were nullified when the defendants breached their agreement. (ECF No. 16 at PageID 304.) She further states that enforcement of the clause would be unjust and that the forum would be “seriously inconvenient” for her. (Id. at ECF No. 307-09.)

Although styled as motions to strike, Harris's two other motions appear to be responses to the defendants' other motions. In her motion to strike the defendants' motion to dismiss for lack of personal jurisdiction, she argues that jurisdiction over the defendants is proper pursuant to the Tennessee long-arm statute. (ECF No. 21.) Her motion to strike the defendants' motion to quash service asserts that she still has time to effect proper service, and that because Keller responded to the amended complaint in an unsworn declaration attached to the defendants' motion to dismiss, she should be considered properly served. (ECF No. 22.) The defendants responded to both of Harris's motions to strike. In response to her motion to strike relating to personal jurisdiction, the defendants again argue that because their company has “no contacts with the State of Tennessee,” this court does not have personal jurisdiction over them. (ECF No. 24 at PageID 517.) In their response to her motion to strike regarding service of process, they argue that while Harris has served Lohman and Keller, service was improper and should therefore be quashed.^[2](ECF No. 25.)

II. PROPOSED CONCLUSIONS OF LAW

A. Personal Jurisdiction

The court must first address the defendants' argument that this court lacks personal jurisdiction over them. “Personal jurisdiction is ‘[a]n essential element of the jurisdiction of a district . . . court' and without personal jurisdiction the court is ‘powerless to proceed to an adjudication.'” Mgmt. Registry, Inc. v. Cloud Consulting Partners, Inc., No. 3:19-CV-00340-JHM, 2019 WL 4478860, at *3 (W.D. Ky. Sept. 18, 2019) (quoting Emp'rs Reinsurance Corp. v. Bryant, 299 U.S. 374, 382 (1937)). In order to defeat a motion to dismiss under Rule 12(b)(2), the plaintiff must make a prima facie case that the court has personal jurisdiction. Conn v. Zakharov, 667 F.3d 705, 711 (6th Cir. 2012) . The court must consider the pleadings in the light most favorable to the plaintiff, but also must consider any undisputed factual assertions by the defendant. Id.

To determine whether personal jurisdiction over an out-ofstate defen...