Kelley v. Kirkman Grp.

DAVID KELLEY, Plaintiff, v. KIRKMAN GROUP, INC. and DAVID HUMPHREY, Defendants.

Case No. 3:19-cv-01068-SB

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF OREGON

January 22, 2020

OPINION AND ORDER

BECKERMAN, U.S. Magistrate Judge.

Plaintiff David Kelley ("Kelley") brings this action against Defendants Kirkman Group, Inc. ("Kirkman") and David Humphrey ("Humphrey") (together, "Defendants"), alleging a fraud claim against Defendants and a breach of contract claim against Kirkman only. Defendants filed a motion to dismiss, alleging: 1) lack of personal jurisdiction over Humphrey; 2) insufficient service of process on Humphrey; 3) failure to plead the fraud claim with sufficient particularity; and 4) failure to state a contract claim. Defendants also ask the Court to transfer venue to the United States District Court for the District of Nevada. The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1332. For the reasons set forth below, the Court grants the motion to dismiss the claim against Humphrey for lack of personal jurisdiction, grants Defendants' motion to dismiss both the fraud and contract claims, and denies Defendants' motion to transfer venue.

BACKGROUND

Kirkman is a Nevada corporation headquartered in Reno, Nevada, with an office in Lake Oswego, Oregon. (Decl. of David Humphrey ("Humphrey Decl.") ¶ 6, ECF No. 5.) Humphrey has served as Kirkman's President and Chief Executive Officer ("CEO") since 2001. (Id. ¶ 2.) Humphrey has resided in Reno, Nevada since 2010, and intends to reside there indefinitely. (Id. ¶ 5.)

In the spring of 2018, Kelley approached Humphrey to discuss Kirkman. (Decl. of David Kelley ("Kelley Decl.") ¶ 2, ECF No. 8-1.) The parties decided that Kirkman should hire Kelley, and that Kelley would eventually take over as CEO. (Id. ¶¶ 2-3.) In or around September 2018, Kelley met with Humphrey and the CEO of Rosewood Private Investments ("Rosewood"), a Texas company interested in purchasing Kirkman, in Oregon to discuss Kelley's anticipated employment. (Id. ¶ 3.) On September 26, 2018, Kirkman extended an offer of employment to Kelley, contingent upon Rosewood completing its purchase of Kirkman. (Compl. Ex. A.)

On or about October 1, 2018, Humphrey informed Kelley that Kirkman's deal with Rosewood was complete. (Kelley Decl. ¶ 5.) Kelley left his job at Nike and began working for Kirkman in its Oregon office. (Id.) On April 1, 2019, Kirkman terminated Kelley without cause. (Id. ¶ 6.)

DISCUSSION

I. STANDARD OF REVIEW

"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678. "The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully." Mashiri v. Epstein Grinnell & Howell, 845 F.3d 984, 988 (9th Cir. 2017) (internal quotation marks omitted) (citing Iqbal, 556 U.S. at 678)).

II. PERSONAL JURISDICTION

Defendants move to dismiss Kelley's fraud claim against Humphrey for lack of personal jurisdiction.

A. Legal Standards

Federal district courts "ordinarily follow state law in determining the bounds of their jurisdiction over [a defendant]." Picot v. Weston, 780 F.3d 1206, 1211 (9th Cir. 2015) (quoting Daimler AG v. Bauman, 571 U.S. 117, 125 (2014)). "Oregon law authorizes personal jurisdiction over defendants to the full extent permitted by the United States Constitution." Ranza v. Nike, Inc., 793 F.3d 1059, 1068 (9th Cir. 2015) (citation omitted). The Court must therefore inquire whether its exercise of jurisdiction over Humphrey would "comport[ ] with the limits imposed by federal due process." See id. ("[The court] therefore inquire[s] whether the District of Oregon's exercise of jurisdiction over [defendant] 'comports with the limits imposed by federal due process.'").

"Due process requires that the defendant 'have certain minimum contacts' with the forum state 'such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.'" Picot, 780 F.3d at 1211 (quoting Int'l Shoe Co. v. Washington, 326 U.S.310, 316 (1945)) (internal quotations omitted). "The strength of contacts required depends on which of the two categories of personal jurisdiction a litigant invokes: specific jurisdiction or general jurisdiction." Ranza, 793 F.3d at 1068.

Kelley acknowledged at oral argument that he is unable to meet his burden of demonstrating general jurisdiction over Humphrey, who is domiciled in Nevada. Accordingly, the Court addresses only whether Humphrey is subject to specific personal jurisdiction.

The Ninth Circuit employs the following three-prong test to determine if a defendant has sufficient minimum contacts to be subject to specific personal jurisdiction:

'(1) [t]he non-resident defendant must purposefully direct his activities or consummate some transaction with the forum or resident thereof; or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws;

(2) the claim must be one which arises out of or relates to the defendant's forum-related activities; and

(3) the exercise of jurisdiction must comport with fair play and substantial justice, i.e., it must be reasonable.'

Picot, 780 F.3d at 1211 (quoting Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 802 (9th Cir. 2004)).

"A purposeful availment analysis is most often used in suits sounding in contract[,]" while "[a] purposeful direction analysis, on the other hand, is most often used in suits sounding in tort." Id. Kelley's only claim against Humphrey is a fraud claim, and therefore the Court applies the purposeful direction test. See Slayden v. Schulz Boat Co., Inc., No. 3:13-cv-02259-AC, 2015 WL 225731, at *2 (D. Or. Jan. 16, 2015) (applying purposeful direction test to the defendants named in the plaintiff's fraud claim).

"'The plaintiff bears the burden of satisfying the first two prongs of the [specific jurisdiction] test. If the plaintiff fails to satisfy either of these prongs, personal jurisdiction is notestablished in the forum state.'" Morrill v. Scott Fin. Corp., 873 F.3d 1136, 1142 (9th Cir. 2017) (citation omitted in original); see also Adidas Am., Inc. v. Cougar Sport, Inc., 169 F. Supp. 3d 1079, 1084 (D. Or. 2016) ("[T]he plaintiff bears the burden of demonstrating that the court's exercise of jurisdiction is proper.").

B. Analysis

Under the first prong of the specific personal jurisdiction test, Kelley bears the burden of demonstrating that Humphrey purposefully directed his activities toward Oregon.

Courts analyze purposeful direction using the Supreme Court's three-part "effects test," requiring that the defendant: "'(1) committed an intentional act, (2) expressly aimed at the forum state, (3) causing harm that the defendant knows is likely to be suffered in the forum state.'" Axiom Foods, Inc. v. Acerchem Int'l, Inc., 874 F.3d 1064, 1069 (9th Cir. 2017) (quoting Calder v. Jones, 465 U.S. 783 (1984)). The Supreme Court recently "made clear that we must look to the defendant's 'own contacts' with the forum, not to the defendant's knowledge of a plaintiff's connections to a forum." Id. (citing Walden v. Fiore, 571 U.S. 277, 287 (2014)). "The proper question is not where the plaintiff experienced a particular injury or effect but whether the defendant's conduct connects him to the forum in a meaningful way." Walden, 571 U.S. at 290.

In his fraud claim, Kelley alleges that Humphrey knowingly misrepresented to Kelley that the sale of Kirkman to Rosewood had been completed, and Kelley relied on Humphrey's misrepresentation to leave his prior employment and accept Kirkman's offer of employment. (Compl. ¶¶ 7-16.) However, Kelley does not allege, either in his complaint or his declaration, where or how Humphrey made the alleged misrepresentation. In fact, Kelley has alleged only a single contact that Humphrey had with Oregon relevant to Kelley's claims: "I discussed my anticipated employment with Kirkman, including my eventual path to becoming CEO of Kirkman, with Humphrey and the CEO of Rosewood Private Investments . . . in Oregonsometime around September of 2018." (Kelly Decl. ¶ 3) (emphasis added). Kelley also asserts that Humphrey's first misrepresentation about the Rosewood sale did not occur until on or about October 1, 2018 (Kelly Decl. ¶ 4), necessarily post-dating the Oregon meeting in September 2018. Thus, other than the fact that Kelley allegedly suffered an injury in Oregon, Kelley has alleged no forum-related contact by Humphrey relating to his alleged misrepresentation. As such, Kelley has failed to meet his burden of proving that Humphrey committed an intentional act expressly aimed at Oregon.¹ See Morrill, 873 F.3d at 1146 ("Therefore, as in Walden, the forum state was only implicated by the happenstance of Plaintiff['s] residence[.]"); Sky Billiards, Inc. v. Loong Star, Inc., No. EDCV 14-00921 JGB (SPx), 2014 WL 12601022, at *4 (C.D. Cal. Sept. 4, 2014) ("Plaintiff's allegations regarding specific jurisdiction are threadbare and fail to meet the standard for personal jurisdiction.").

Accordingly, the Court grants Humphrey's motion to dismiss the complaint against him for lack of personal jurisdiction.²

III. FRAUD CLAIM

Defendants move to dismiss Kelley's fraud claim because he has not pleaded fraud with the particularity that Federal Rule of Civil Procedure ("Rule") 9(b) requires. (Mot. to Dismiss at 12-14.) Although Kelley acknowledges that he must plead the "times, dates, [and] places" of the alleged fraud, he argues that his allegation...