Mullane v. Zurich Am. Ins. Co., Case No. 18-cv-12412-DJC

JONATHAN MULLANE, Plaintiff, v. ZURICH AMERICAN INSURANCE COMPANY and A MEDIUM CORPORATION, Defendants.

Case No. 18-cv-12412-DJC

UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS

May 21, 2019

MEMORANDUM AND ORDER

CASPER, J.

I. Introduction

Plaintiff Jonathan Mullane ("Mullane") has filed this lawsuit against Defendants Zurich American Insurance Company ("Zurich American") and A Medium Corporation ("Medium") (collectively, "Defendants") alleging violations of federal securities law (Counts I-IV), including 17 C.F.R. § 180.1, 15 U.S.C. §§ 77e, 77e(c) and 77q(a)-(b) (the "Securities Act of 1933") and 15 U.S.C. §§ 78j(b), 78j(c)(1), 78o(a)(1), and 78t (the "Securities Exchange Act of 1934"), and bringing claims for promissory estoppel (Count V), fraud in the inducement (Count VI), violation of Mass. Gen. L. c. 93A (Count VII-VIII) and intentional infliction of emotional distress (Count IX). Defendants have moved to dismiss. D. 10; D. 27. For the reasons stated below, the Court ALLOWS Defendants' motions.

II. Standard of Review

A. Motion to Dismiss for Lack of Personal Jurisdiction

To meet the burden of establishing the Court has personal jurisdiction under the prima facie standard, Mullane must "demonstrate the existence of every fact required to satisfy both the forum's long-arm statute and the Due Process Clause of the Constitution." United States v. Swiss Am. Bank, Ltd., 274 F.3d 610, 618 (1st Cir. 2001) (citing United Elec., Radio & Mach. Workers of Am. v. 163 Pleasant St. Corp., 987 F.2d 39, 44 (1st Cir. 1993)). The Court considers the facts alleged in the pleadings as well as the parties' supplemental filings. See Sawtelle v. Farrell, 70 F.3d 1381, 1385 (1st Cir. 1995). The Court will "take specific facts affirmatively alleged by the plaintiff as true (whether or not disputed) and construe them in the light most congenial to the plaintiff's jurisdictional claim." Mass. Sch. of Law at Andover, Inc. v. Am. Bar Ass'n, 142 F.3d 26, 34 (1st Cir. 1998). The Court will not "credit conclusory allegations or draw farfetched inferences," Ticketmaster-N.Y., Inc. v. Alioto, 26 F.3d 201, 203 (1st Cir. 1994), and recognizes that it is the plaintiff's burden to "verify the facts alleged through materials of evidentiary quality," Killion v. Commonwealth Yachts, 421 F. Supp. 2d 246, 252 (D. Mass. 2006) (quoting Barrett v. Lombardi, 239 F.3d 23, 27 (1st Cir. 2001)). The Court is also required to "add to the mix facts put forward by the defendants, to the extent that they are uncontradicted." Mass. Sch. of Law, 142 F.3d at 34.

III. Factual Background

Unless otherwise noted, the facts are as alleged in the complaint, D. 1-1. GoexPro International ("Goex") operates a cryptocurrency exchange business that facilitates trades between various cryptocurrencies. D. 1-1 ¶ 41. As part of this business, Goex solicited loans from consumers, including Mullane, to increase its "capital reserves" to facilitate the rapid exchange of cryptocurrencies. Id. ¶ 42. Goex used Medium's online publishing platform to promote itscryptocurrency business. Id. ¶ 10; D. 1-1 at 19. Between May 21, 2018 and June 24, 2018, Mullane loaned DASH and ETH cryptocurrencies to Goex. D. 1-1 ¶¶ 8, 34-39. When the loans matured, Goex refused to return the principal amounts and interest owed to Mullane, causing him to incur an "actual out-of-pocket loss" of $68,623.84. Id. ¶ 46. Goex also blocked Mullane's access to his online account on the Goex website. Id. ¶ 47. On October 5, 2018, Mullane sent Medium a demand letter asserting that Medium engaged in "unfair and deceptive trade practice" by allegedly failing to notify consumers that it enjoyed a "financial relationship" with Goex and by failing to disclose that it did not endorse Goex or guarantee the veracity of Goex's representations purportedly in violation of Mass. Gen. L. c. 93A. D. 10-1 at 1-2.¹

According to corporate documentation that Mullane purportedly reviewed on Goex's website, Goex asserts that it is a subsidiary of Zurich Investment Management AG ("Zurich Investment"), a corporation registered in Zurich, Switzerland. D. 1-1 ¶ 14. Mullane alleges that Zurich Investment, in turn, is wholly owned by Zurich Insurance Group ("Zurich Insurance"). Id. ¶ 23. Mullane also alleges that Goex "forged and digitally altered" corporate documents establishing a relationship between Goex and Zurich Investment. Id. ¶ 14.

The complaint does not contain allegations regarding the corporate relationship (if any) between Zurich American and the other Zurich entities: Zurich Investment and Zurich Insurance. Mullane nonetheless appears to allege that he sent an email to Zurich American on or about September 29, 2018 with copies of corporate documentation in which Goex purportedly assertsbeing wholly owned by Zurich Investment. Id. ¶ 32. Mullane contends that Zurich American should have, but refused to, publicly acknowledge Goex's allegedly improper use of Zurich Investment's name. Id. ¶ 33.

IV. Procedural History

Mullane instituted this action in Suffolk Superior Court on November 9, 2018. D. 1-1. Medium removed it to this Court on November 19, 2018. D. 1. Medium and Zurich American then moved to dismiss, respectively. D. 10; D. 27. The Court heard the parties on the pending motions and took these matters under advisement. D. 32.

V. Discussion

A. Personal Jurisdiction

Defendants contend the prima facie case for personal jurisdiction has not been established and seeks dismissal pursuant to Fed. R. Civ. P. 12(b)(2). As a preliminary matter, the Court assesses Defendants' citizenship. Medium is a Delaware corporation with a principal place of business in California. D. 1-1 ¶ 2. Zurich American is incorporated in the State of New York and has its principal place of business in Illinois. Id. ¶ 3. Because the Defendants are not alleged to be citizens or residents of Massachusetts, the Court must determine whether "exercising personal jurisdiction . . . comports with both the forum's long-arm statute and the requirements of the United States Constitution." SCVNGER, Inc. v. Punchh, Inc., 478 Mass. 324, 325 (2017) (citing World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 290 (1980)). The Court's analysis of the Massachusetts long-arm statute "precede[s] consideration of the constitutional question." Id. at 325.

1. Massachusetts Long-Arm Statute

The Massachusetts long-arm statute, Mass. Gen. L. c. 223A, § 3, enumerates eight grounds on which a nonresident defendant may be subjected to personal jurisdiction. Mullane argues thatthe Court has personal jurisdiction over both Defendants pursuant to sections 3(a) and 3(d) and as to Medium under section 3(c) of the Massachusetts long-arm statute. See D. 14 at 6; D. 29 at 7. These sections provide for the exercise of personal jurisdiction over an individual in a cause of action "arising from the person's (a) transacting any business in this commonwealth; . . . (c) causing tortious injury by an act or omission in the commonwealth; . . . (d) causing tortious injury in this commonwealth by an act or omission outside this commonwealth if he regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in this commonwealth." Mass. Gen. L. c. 223A, § 3(a), (c)-(d).

"For jurisdiction to exist under § 3(a), the facts must satisfy two requirements—the defendant must have transacted business in Massachusetts, and the plaintiff's claim must have arisen from the transaction of business by the defendant." Exxon Mobil Corp. v. Attorney Gen., 479 Mass. 312, 317 (2018) (quoting Tatro v. Manor Care, Inc., 416 Mass. 763, 767 (1994)). The "transacting business" clause is construed "broadly." Shipley Co. v. Clark, 728 F. Supp. 818, 821 (D. Mass. 1990) (citation omitted).

Mullane appears to assert the Court has personal jurisdiction under § 3(a) over Medium because Goex utilized Medium's website to solicit customers, including residents of Massachusetts. See D. 1-1 ¶ 12 (alleging that "Defendant Medium knew, or was 'willfully blind' in not knowing, that its website was openly soliciting investments from Massachusetts consumers"). Mullane has not alleged, however, that Medium conducted any business in Massachusetts and the existence of a website accessible to Massachusetts residents, without more, is not sufficient to authorize personal jurisdiction over Medium under § 3(a). See Pac. Indem. Co. v. NEDI Constr. LLC, Civ. A. No. 12-11844-RWZ, 2014 WL 496842, at *4 (D. Mass. Feb. 7,2014) (explaining that "[t]he mere existence of a website that is visible in a forum and that gives information about a company and its products is not enough, by itself, to subject a defendant to personal jurisdiction in that forum" (alteration in original) (quoting Cossaboon v. Me. Med. Ctr., 600 F.3d 25, 31 (1st Cir. 2010))).

With respect to Zurich American, Mullane asserts that § 3(a) confers jurisdiction because Zurich American transacts business in Massachusetts through "various trade names and wholly-owned subsidiaries." D. 29 at 7. Zurich American admits that it sells insurance policies in Massachusetts. D. 27-1 at 12. There is, however, no alleged connection between Zurich American's insurance business and this cause of action. Rather, Mullane's jurisdictional claim appears to depend on whether the alleged Massachusetts contacts of corporate affiliates may be imputed to Zurich American. D. 29 at 4. The "theory for imputing contacts from one entity to another is a theory based on piercing the corporate veil." Scallop Imaging, LLC v. Blackhawk Imaging, LLC, Civ. A. No. 17-cv-10092-ADB, 2018 WL 1440314, at *5 (D. Mass. Mar. 22, 2018) (quoting Katz v. Spiniello Cos., 244 F. Supp. 3d 237, 253 (D. Mass. 2017)). "The veil piercing standard in Massachusetts is demanding, as corporations are presumed to be separate and distinct entities notwithstanding [the] relationships between them." Id. (alteration in original) (citations...