Worth Grp. v. Morales

1

WORTH GROUP, INC., and ANDREW WILSHIRE, Petitioners, v. ROSALYN MORALES, Respondent.

No. 22-cv-81372-CANN/MCCABE

United States District Court, S.D. Florida

December 2, 2022

REPORT AND RECOMMENDATION

RYON M. MCCABE U.S. MAGISTRATE JUDGE

THIS CAUSE comes before the Court upon Respondent's Motion to Transfer or Dismiss (“Motion”) (DE 7), which was referred to the undersigned by United States District Judge Aileen M. Cannon (DE 9). For the reasons set forth below, the undersigned RECOMMENDS that the Motion be GRANTED.

I. BACKGROUND

A. The California JAMS Arbitration

In May 2021, Rosalyn Morales filed a JAMS arbitration claim in California against First National Bullion, LLC (“FNB”) and others pursuant to a mandatory arbitration clause (DE 7-3). The claim alleged that Morales, an elderly California woman, hired FNB to provide fiduciary investment advice regarding conservative and secure investments (DE 7-3 ¶ 2). FNB advised Morales to invest in precious metals on margin (DE 7-3 ¶ 4). The claim further alleged that FNB failed to disclose the risks of this investing strategy, which proved unsuccessful, such that Morales was “completely wiped out” (DE 7-3 ¶¶ 4-5). Morales alleged claims for, inter alia, financial elder abuse, intentional and negligent misrepresentation, and breach of fiduciary duty (DE 7-3 ¶¶ 57121). Arbitration is currently proceeding before a single JAMS arbitrator in California (DE 7-4).

B. Morales Adds Petitioners to the California Arbitration

As part of her FNB investment, Morales also signed a contract with Worth Group, Inc. (“Worth”), a Florida-based entity owned and controlled by Andrew Wilshire (DE 1-2; DE 7-1 ¶¶ 18-19). Under the contract, Worth agreed to make loans to Morales to finance leveraged purchases of precious metals (DE 1-2 at 2). Morales signed the Worth contract at FNB's San Diego office, along with numerous other documents presented to her by her FNB broker (DE 7-2 ¶¶ 3-5).

In May 2022, Morales filed a First Amended Statement of Claim in the California arbitration, adding Worth and Wilshire (collectively “Petitioners”) (DE 7-1). The amended claim alleged that Petitioners served as the architects of the unlawful scheme and the FNB acted merely as one of many affiliates throughout the country who assist Petitioners in perpetrating the same scheme on unsophisticated investors (DE 7-1 ¶¶ 32-42). The amended claim further alleged that the Commodity Futures Trading Commission (“CFTC”) previously sued Worth and Wilshire for a similar scheme related to off-exchange leveraged commodities transactions, resulting in a 2016 consent judgment against them (DE 7-1 ¶¶ 27, 29).

C. Petitioners Attempt to Dismiss the California Arbitration

In May or June of 2022, Petitioners moved to dismiss the California arbitration claims against them (DE 1 ¶ 22; DE 1-4 at 2-3). In support, they argued that Morales had signed, as part of the Worth contract, a mandatory arbitration clause that required her to submit to JAMS arbitration in Palm Beach County, Florida, with a retired Florida judge serving as arbitrator (DE 1-3 at 1). Specifically, the Worth contract provided as follows:

34. Location of any Dispute Resolution Concerning this Florida Agreement is Florida. ... You and WORTH agree that Palm Beach County, Florida is a mutually and reasonably convenient place for any arbitration hearing concerning disputes relating to your transactions with WORTH or to this Agreement and that all arbitration proceedings subject to this Agreement shall occur before the Judicial Arbitration and Mediation Society (“JAMS”) in Palm Beach County, Florida.

35. Arbitration.

a. Arbitration of Claims. The parties agree that any and all disputes, claims or controversies arising out of or relating to any transaction between or among them or to the breach, termination, enforcement, interpretation, validity or alleged unconscionability of any part of this Agreement shall be subject to and governed by the Federal Arbitration Act and shall be submitted to final and binding arbitration before JAMS, or its successor, in Palm Beach County, Florida.

e. Arbitrators. The parties agree that a single arbitrator shall be selected to adjudicate all disputes unless otherwise provided for in this Agreement. The selection and replacement of an arbitrator or arbitrators shall be in accordance with the JAMS Rules, except that: (i) each arbitrator shall be a retired judge of either the Florida Circuit Court or a United States District Court located in Florida, and (ii) any party may require a panel of three neutral arbitrators.

(DE 1-2 at 6).

The California arbitrator denied the motion (DE 1-5; DE 7-4). He reasoned that, since Petitioners and FNB had both agreed to JAMS arbitration, the issue “boil[ed] down to whether Morales must endure arbitration in two states regarding the same transaction” (DE 1-5 at 2; DE 74 at 3). The arbitrator then reasoned that JAMS arbitration rules, to which Petitioners had agreed, allowed for consolidation of arbitration proceedings, and further allowed for the arbitrator to determine the location of hearings (DE 1-5 at 2; DE 7-4 at 3). On this basis, the arbitrator denied Petitioners' motion and ruled that all of Morales' claims could proceed in a consolidated California forum, despite the differing language in the Worth contract (DE 1-5 at 2; DE 7-4 at 3).

Petitioners then filed this Petition (DE 1), seeking to compel Morales to file a separate, stand-alone JAMS arbitration claim in Palm Beach County, rather than in California, with a retired Florida judge presiding. Petitioners also ask this Court to stay the ongoing arbitration proceedings against them in California (DE 1 ¶ 79, 81).

II. ANALYSIS

By way of this Motion, Morales seeks to dismiss the Petition for lack of personal jurisdiction. Alternatively, she seeks transfer to the Southern District of California pursuant to 28 U.S.C. § 1404(a). The Court addresses each request below.

A. Personal Jurisdiction

This case arises under a petition to compel arbitration pursuant to the Federal Arbitration Act, 9 U.S.C. § 1 et seq. (“FAA”). As explained in Johns v. Taramita, 132 F.Supp.2d 1021, 1024 (S.D. Fla. 2001), the FAA does not authorize nationwide service of process or personal jurisdiction. To determine personal jurisdiction, therefore, this Court must look to Florida's long-arm statute, section 48.193, Florida Statutes. Id. at 1027 (“Because 9 U.S.C. § 4 is silent as to service of process or personal jurisdiction, the court must look to Florida's long-arm statute to determine whether personal jurisdiction exists in this case.”).

Florida's long-arm statute requires the Court to apply a two-prong test. First, the Court must determine whether the statute itself authorizes personal jurisdiction. See Carmouche v. Tamborlee Mgmt., Inc., 789 F.3d 1201, 1203 (11th Cir. 2015). Second, the Court must determine whether the exercise of jurisdiction satisfies the Fourteenth Amendment's due process clause, including an analysis of the nonresident defendant's “minimum contacts” with the forum state. Id.; see also Stubbs v. Wyndham Nassau Resort & Crystal Palace Casino, 447 F.3d 1357, 1363 (11th Cir. 2006).

In applying this two-step test, the Court follows a burden-shifting analysis. First, Petitioners bear the initial burden of alleging sufficient facts to make out a prima facie case of personal jurisdiction. See Louis Vuitton Malletier, S.A. v. Mosseri, 736 F.3d 1339, 1350 (11th Cir. 2013). Next, the burden shifts to Morales to submit affidavit to contradict Petitioners' allegations. Id. The burden then returns to Petitioners to produce counter-affidavits supporting personal jurisdiction. Id. If possible, the Court must reconcile the affidavits; where the parties' affidavits cannot be reconciled, however, the Court must conduct an evidentiary hearing to resolve the jurisdictional issue. See Abramson v. Walt Disney Co., 132 F. App'x. 273, 275 (11th Cir. 2005) (citing Venetian Salami Co. v. Parthenais, 554 So.2d 499, 503 (Fla. 1989)).

The Court finds no evidentiary hearing necessary in this case. Rather, based on the allegations in the Petition and the parties' respective affidavits, the Court finds Petitioners cannot satisfy the first prong necessary for personal jurisdiction, namely, Florida's long-arm statute does not authorize personal jurisdiction over Morales. In support of personal jurisdiction, Petitioners rely on section 48.193(1)(a)7., Florida Statutes, which provides:

(1)(a) A person, whether or not a citizen or resident of this state, who personally or through an agent does any of the acts enumerated in this subsection thereby submits himself or herself and, if he or she is a natural person, his or her personal representative to the jurisdiction of the courts of this state for any cause of action arising from any of the following acts: ...

7. Breaching a contract in this state by failing to perform acts required by the contract to be performed in this state.

§ 48.193(1)(a)7., Fla. Stat. Petitioners argue this subsection authorizes personal jurisdiction because Morales breached a contract in this state, i.e. the Worth contract, by “failing to perform acts required by the contract to be performed in this state.” Specifically, Petitioners argue Morales breached the Worth contract by failing to file her JAMS arbitration claim in Florida, as required by the contract's arbitration clause.

The Court disagrees. Two other courts in this district have rejected factually similar arguments. In Johns, 132 F.Supp.2d at 1023, for example, two parties entered into a contract to sell a sailing vessel, with a provision calling for mandatory arbitration to take place in Florida in the event of any disputes. When a dispute arose, one of the parties demanded...