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CSIdentity Corp. v. New Equity Prod., Inc.

United States District Court, W.D. Texas, Austin Division

August 15, 2019





         Before the Court are Defendants' Motion to Dismiss (Dkt. No. 15), Plaintiff's Response (Dkt. No. 16), and Defendants' Reply (Dkt. No. 18); Plaintiff's Amended Motion for Discovery (Dkt. No. 17); and Plaintiff's additional brief (Dkt. No. 27). The District Court referred the above motion to the undersigned Magistrate Judge for a report and recommendation pursuant to 28 U.S.C. § 636(b) and Rule 1(c) of Appendix C of the Local Court Rules.

         I. BACKGROUND

         Plaintiff CSIdentity Corporation (“CSID”) is a corporation that is headquartered and conducts its business activities in Austin, Texas. CSID provides identity theft protection, fraud detection, credit monitoring, identity monitoring, and related services. New Equity is headquartered in California. New Equity (“NEP”) assists police officer associations in website design, fundraising efforts, and with social media. New Equity allegedly has a history of doing business in Texas, including previously contracting with Texas law enforcement associations and departments. Defendant Howitt is New Equity's chief executive officer. He has his principal residence in California.

         In September 2017 CSID and NEP entered into a Technology Services Agreement (“Agreement”). CSID alleges that it prepared, negotiated, and made revisions to the Agreement during negotiations in Austin, Texas. CSID, under the agreement, basically created a fully hosted website for NEP's customers to access. Under the Agreement, NEP is required to pay CSID over one million dollars. The Agreement is set to conclude on September 8, 2022. CSID claims that Howitt and other NEP representatives requested the right to assign the Agreement to another one of Howitt's companies, Spider Cyber Security, LLC (“Spider Cyber”). In November 2017, CSID, NEP, and Spider Cyber entered into the Consent to Assignment Agreement (“Assignment/Guaranty Agreement”), in which NEP assigned its rights and obligations under the parties' original Agreement to Spider Cyber. Spider Cyber agreed to be bound by the Agreement and to perform all NEP obligations and liabilities under the Agreement. Howitt, who is the CEO of NEP and the manager-member of Spider Cyber, signed the Assignment/Guaranty Agreement on behalf of NEP and Spider Cyber Security.

         The Assignment/Guaranty Agreement contains a guaranty clause where NEP expressly guarantees Spider Cyber's performance and payment obligations under the Agreement. CSID claims that roughly four months after the parties entered into the Assignment/Guaranty Agreement, Spider Cyber relayed to CSID that it was insolvent and that Spider Cyber would be terminating the Agreement. CSID states that it emphasized to NEP it guaranteed Spider Cyber's payments under the Agreement, but NEP has allegedly refused to comply and has made none of the payments that are due. As a result, CSID filed this lawsuit, in which it brings several claims, including a breach of contract claim against NEP, breach of fiduciary duties claim against Howitt, a fraud claim against all defendants, and a civil conspiracy claim and alter ego claim against all defendants.

         Defendants move to dismiss for lack of personal jurisdiction and improper venue. The Court ordered additional briefing on the narrow question of the applicability of the forum selection clause in the Agreement. Dkt. No. 26. CSID timely filed the ordered briefing, Dkt. No. 27, while Defendants failed to file any additional brief.


         A non-resident defendant may move to dismiss for lack of personal jurisdiction under Rule 12(b)(2). “If, as here, 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.” Sangha v. Navig8 ShipManagement Private Ltd., 882 F.3d 96, 101 (5th Cir. 2018). “The district court is not obligated to consult only the assertions in the plaintiff's complaint in determining whether a prima facie case for jurisdiction has been made. Rather, the district court may consider the contents of the record at the time of the motion. . . .” Id. (internal quotations and citations omitted). “Although jurisdictional allegations must be accepted as true, such acceptance does not automatically mean that a prima facie case for [personal] jurisdiction has been presented.” Id. The plaintiff must prove that the court has jurisdiction over the defendant with regard to each claim. Seiferth v. Helicopteros Atuneros, Inc., 472 F.3d 266, 275 (5th Cir. 2006).

         A federal court sitting in diversity may exercise personal jurisdiction over a non-resident defendant if (1) the state's long-arm statute permits an exercise of jurisdiction over that defendant, and (2) an exercise of jurisdiction would comport with the requirements of the Due Process Clause of the Fourteenth Amendment. Sangha, 882 F.3d at 101; McFadin v. Gerber, 587 F.3d 753, 759 (5th Cir. 2009), cert. denied, 131 S.Ct. 68 (2010). Because the requirements of Texas's long-arm statute are coextensive with the requirements of the Due Process Clause, the sole inquiry is whether this Court's exercise of personal jurisdiction over the Defendants would be consistent with due process. Id. The Supreme Court has articulated a two-part test to determine whether a federal court sitting in diversity may properly exercise personal jurisdiction over a nonresident defendant: (1) the nonresident must have sufficient “minimum contacts” with the forum state, and (2) subjecting the nonresident to jurisdiction in the forum state must not offend traditional notions of “fair play and substantial justice.” McFadin, 587 F.3d at 759 (citing Int'l Shoe Co. v. Wash., 326 U.S. 310, 316 (1945)). A defendant's “minimum contacts” may give rise to either specific or general personal jurisdiction, depending on the nature of the suit and defendant's relationship to the forum state. Jackson v. Tanfoglio Giuseppe, S.R.L., 615 F.3d 579, 584 (5th Cir. 2010).

         In this Circuit, specific personal jurisdiction is a claim-specific inquiry; a plaintiff bringing multiple claims that arise out of different forum contacts must establish specific jurisdiction for each claim. McFadin, 587 F.3d at 759. Specific jurisdiction applies when a nonresident defendant “has purposefully directed its activities at the forum state and the litigation results from alleged injuries that arise out of or relate to those activities.” Walk Haydel & Assocs., Inc. v. Coastal Power Prod. Co., 517 F.3d 235, 243 (5th Cir. 2008). The touchstone of specific-jurisdiction analysis is “whether the defendant's contact shows that it reasonably anticipates being haled into court.” McFadin, 587 F.3d at 759. Even a single contact can support specific jurisdiction if it creates a “substantial connection” with the forum. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 n.18 (1985). Specific jurisdiction “focuses on the relationship among the defendant, the forum, and the litigation.” Sangha, 882 F.3d at 103 (quoting Monkton Ins. Servs. v. Ritter, 768 F.3d 429, 432-33 (5th Cir. 2014). Due process requires that specific jurisdiction be based on more than the “random, fortuitous, or attenuated” contacts a defendant makes by interacting with people affiliated with the forum state. Walden v. Fiore, 571 U.S. 277, 286 (2014). The plaintiff thus “cannot be the only link between the defendant and the forum. Rather, it is the defendant's conduct that must form the necessary connection with the forum State that is the basis for its jurisdiction over him.” Id. at 285.

         III. ANALYSIS

         A. Motion to ...

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