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Le-Vel Brands LLC v. Quintessential Biosciences, Inc.

United States District Court, N.D. Texas, Dallas Division

June 24, 2019

LE-VEL BRANDS, LLC, Plaintiff,



         Before the Court is Defendants' Motion to Dismiss Complaint (the “Motion”) (Doc. No. 47) and Defendants' Evidentiary Objections to Declaration of Christopher Schmidt and Motion to Strike (the “Motion to Strike”) (Doc. No. 54). Because the Court finds that the challenged statements relevant to the Court's decision on the Motion are not hearsay or conclusory, the Court DENIES the Motion to Strike. After considering the Motion, response, reply, and applicable law, the Court GRANTS IN PART and DENIES IN PART the Motion. Because Plaintiff Le-Vel Brands, LLC cannot establish that this Court has personal jurisdiction over Defendant Quintessential Biosciences, Inc. either on the basis of general or specific jurisdiction, the Court GRANTS the Motion to dismiss as it relates to Defendant Quintessential Biosciences, Inc. Because the Court does have specific personal jurisdiction over Defendants Jaime Tetrault, Megan Baker, and Nikki Voiles, the Court DENIES the Motion to dismiss as to these defendants on the basis of lack of personal jurisdiction. Because Plaintiff Le-Vel Brands, LLC alleges plausible claims and venue is not inappropriate as to Defendants Jaime Tetrault, Megan Baker, and Nikki Voiles, the Court DENIES the Motion to dismiss as to these defendants on the bases of failure to state a claim and improper venue. Finally, because the Texas Citizens Participation Act (“TCPA”) is either procedural in nature, or at least directly conflicts with the Federal Rules of Civil Procedure, the Court DENIES the Motion to dismiss to the extent it relies upon the TCPA.

         I. Factual and Procedural Background

         The parties dispute many of the facts at this early stage of litigation, but the Court provides a brief summary of the relevant facts for purposes of this Order. Plaintiff Le-Vel Brands, LLC (“Le-Vel”) and Defendant Quintessential Biosciences, Inc. (“QSciences”) are both companies that sell health and wellness products. Both companies operate through the process of direct sales, meaning that representatives for each company advertise and sell products directly to customers, primarily through the use of social media. A representative earns a commission on sales that he or she makes for the company.

         Representatives for these companies also make commissions on sales made by other representatives of their “teams”: Representatives may recruit other people to join the company, and when these newly recruited representatives make their own sales, the representatives who recruited them earn a certain commission on these sales as well.

         Le-Vel refers to their representatives as “Promoters.” Defendants Jaime Tetrault (“Tetrault”), Megan Baker (“Baker”), and Nikki Voiles (“Voiles”) (collectively, the “Promoter Defendants, ” and, collectively with QSciences, the “Defendants”) are all former Promoters for Le-Vel. While working for Le-Vel, the Promoter Defendants made sizeable commissions through their own sales and the sales of their teams. Each of the Promoter Defendants worked for Le-Vel until either September or November 2018, at which time each Promoter Defendant left Le-Vel and joined QSciences.

         Le-Vel alleges claims in their state-court petition for (1) breach of contract, (2) business disparagement, (3) defamation, (4) tortious interference with existing contracts, and (5) tortious interference with prospective business relations. Regarding Le-Vel's breach-of-contract claims, Le-Vel alleges that each Promoter Defendant entered into a contract with Le-Vel (the “Promoter Agreement”) as a precondition to employment with Le-Vel. The Promoter Agreement contains a non-solicitation provision that restricts a contracting Promoter from soliciting other Promoters or customers away from Le-Vel for a period of one year after the termination of the Promoter's employment at Le-Vel. Le-Vel alleges that the Promoter Defendants violated the Promoter Agreement by (1) soliciting other Promoters at Le-Vel to join QSciences and (2) causing Le-Vel customers to divert their business to QSciences. Also relevant to this Order is Section 8.15 of the Promoter Agreement, which states that Promoters submit to the personal jurisdiction of state and federal courts in Dallas, Texas and that it is a material breach to initiate a suit in another venue.

         Le-Vel brought this case against the Defendants on December 3, 2018 in state court. The state court granted Le-Vel's application for a temporary restraining order (“TRO”) on December 4, 2018. On December 17, 2018, one day before the expiration of the TRO, the Defendants removed the case to this Court. Le-Vel moved to extend the state-court TRO, and this Court granted the extension of the TRO. On January 8, 2019, the Court held a hearing on whether a preliminary injunction should issue against the Defendants. On January 18, 2019, the Court entered an agreed preliminary injunction in this case. The Defendants filed their Motion to Dismiss Complaint on February 25, 2019, and, having received a response and reply to the Motion, it is now ripe for this Court's consideration.

         II. Applicable Law

         When a defendant challenges whether a district court has personal jurisdiction over him or her, “[t]he plaintiff has the burden to . . . show[] that personal jurisdiction is proper.” Monkton Ins. Servs., Ltd. v. Ritter, 768 F.3d 429, 431 (5th Cir. 2014) (citing Luv N' Care, Ltd. v. Insta-Mix, Inc., 438 F.3d 465, 469 (5th Cir. 2006)). “[I]f . . . the court rules on personal jurisdiction without conducting an evidentiary hearing, the plaintiff bears the burden of establishing only a prima facie case of personal jurisdiction.” Hazim v. Schiel & Denver Book Publishers, 647 Fed.Appx. 455, 457 (5th Cir. 2016) (citing Quick Techs., Inc. v. Sage Grp. PLC, 313 F.3d 338, 343 (5th Cir. 2002); Sys. Pipe & Supply, Inc. v. M/V VIKTOR KURNATOVSKIY, 242 F.3d 322, 323-24 (5th Cir. 2001)). A plaintiff does not have to establish personal jurisdiction by a preponderance of evidence when the Court does not hold an evidentiary hearing. Bonner v. Triple-S Mgmt. Corp., 661 Fed.Appx. 820, 821-22 (5th Cir. 2016). “[The Court] must accept the plaintiff's uncontroverted allegations, and resolve in [the plaintiff's] favor all conflicts between the facts contained in the parties' affidavits and other documentation.” Monkton Ins. Servs., 768 F.3d at 431 (quoting Revell v. Lidov, 317 F.3d 467, 469 (5th Cir. 2002)). Although the Court must accept a plaintiff's jurisdictional allegations as true, the Court “may consider the contents of the record at the time of the motion, ” and acceptance of a plaintiff's jurisdictional allegations does not necessarily mean that the plaintiff has established a prima facie case for personal jurisdiction. Hazim, 647 Fed.Appx. at 457-58 (quoting Paz v. Brush Engineered Materials, Inc., 445 F.3d 809, 812 (5th Cir. 2006)).

         In considering whether the court has personal jurisdiction over a nonresident defendant, the court must consider: (1) whether the long-arm statute of the state in which it sits confers personal jurisdiction over the defendant; and, if so, (2) whether the exercise of personal jurisdiction is consistent with due process under the United State Constitution. Mink v. AAAA Dev. LLC, 190 F.3d 333, 335 (5th Cir. 1999). The Supreme Court of Texas has interpreted the state's long-arm statute “to reach as far as the federal constitution permits.” Schlobohm v. Schapiro, 784 S.W.2d 355, 357 (Tex. 1990). Therefore, this Court need only address whether the exercise of personal jurisdiction over the nonresident defendant would be consistent with the Due Process Clause of the Fourteenth Amendment. Mink, 190 F.3d at 335-36.

         “To establish that personal jurisdiction is proper, the plaintiff must show that the nonresident defendant ‘purposefully availed [itself] of the benefits and protections of the forum state by establishing “minimum contacts” with the forum state.'” Monkton Ins. Servs., 768 F.3d at 431 (quoting Latshaw v. Johnston, 167 F.3d 208, 211 (5th Cir. 1999)). “[M]aintenance of the suit [must] not offend traditional notions of fair play and substantial justice” as well. Int'l Energy Ventures Mgmt., L.L.C. v. United Energy Grp., Ltd., 818 F.3d 193, 212 (5th Cir. 2016) (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)); see also Asahi Metal Indus. Co., Ltd. v. Superior Court of California, Solano County, 480 U.S. 102, 113 (1987) (describing the factors a court considers in analyzing whether exercising jurisdiction over the defendant complies with “traditional notions of fair play and substantial justice” (quoting Int'l Shoe, 326 U.S. at 316)).

         “Sufficient minimum contacts will give rise to either specific or general jurisdiction.” Monkton Ins. Servs., 768 F.3d at 431 (quoting Revell, 317 F.3d at 470). Specific jurisdiction over a defendant exists when the defendant has “singular or sporadic” contacts with the forum state, but “only if the cause of action asserted arises out of or is related to those contacts.” Int'l Energy, 818 F.3d at 212 (emphasis omitted). On the other hand, a court has general jurisdiction over a defendant, allowing a plaintiff to bring all claims the plaintiff may have against that defendant, when the defendant's “affiliation with the State are so ‘continuous and systematic' as to render [the defendant] essentially at home in the forum State.” Daimler AG v. Bauman, 571 U.S. 117, 127 (2014) (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011)). “[O]nly a limited set of affiliations with a forum will render a defendant amenable to [general] jurisdiction there.” Id. at 137. “For an individual, the paradigm forum for the exercise of general jurisdiction is the individual's domicile; for a corporation, it is an equivalent place, one in which the corporation is fairly regarded as at home.” Goodyear, 564 U.S. at 924. The state of incorporation and the state in which a corporation has its principal place of business are two forums in which the Supreme Court has held a corporation is “at home.” Daimler, 571 U.S. at 137. These locations are not the only states in which general jurisdiction may exist, but they typify the forums in which a corporation would be “at home.” Id. at 137-39. The Fifth Circuit has interpreted Daimler and Goodyear to mean that “[i]t is . . . incredibly difficult to establish general jurisdiction in a forum other than the place of incorporation or principal place of business.” Monkton Ins. Servs., 768 F.3d at 432.

         III. ...

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