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Mullinix v. Thirty-Eight Street, Inc.

United States District Court, W.D. Texas

September 20, 2019

PATRICK MULLINIX, Plaintiff
v.
THIRTY-EIGHT STREET, INC., ROGER BLOSS, AND BERNARD MOYLE, Defendants

          TO: THE HONORABLE LEE YEAKEL, UNITED STATES DISTRICT JUDGE

          REPORT AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE

          SUSAN HIGHTOWER, UNITED STATES MAGISTRATE JUDGE

         Before this Court are Defendants’ Motion to Dismiss for Lack of Personal Jurisdiction and for Improper Venue, or, in the Alternative, to Transfer to the Southern District of Florida, filed on June 20, 2019 (Dkt. No. 13); Plaintiff’s Motion to Compel Production, field on August 12, 2019 (Dkt. No. 24); Defendants’ Motion to Quash Subpoena, filed on September 11, 2019 (Dkt. No. 34); and the related response and reply briefs.

         The District Court has referred the above motions to the undersigned Magistrate Judge for Resolution and Report and Recommendation pursuant to 28 U.S.C. § 636(b)(1), Federal Rule of Civil Procedure 72, and Rule 1 of Appendix C of the Local Rules of the United States District Court for the Western District of Texas (“Local Rules”).

         I. BACKGROUND

         Defendant Thirty-Eight Street, Inc. (“TESI”) is a Florida corporation that owns various companies in the hotel industry for the purpose of franchising. Vantage Hospitality Group, Inc. (“Vantage”) is an affiliate of TESI that operated the branding aspect of the business with respect to certain registered service marks. Prior to August 2016, Patrick Mullinix (“Plaintiff”), a resident of Travis County, Texas, served as Vantage’s “Value Brand President, ” working on the Vantage brands and its associated hotel franchises. Defendants Bernard Moyle, a Florida resident, and Roger Bloss, a Nevada resident (“Individual Defendants”), were corporate officers of Vantage who worked with Plaintiff during the time period relevant to this lawsuit.

         Red Lion Hotel Corporation (“RLHC”) acquired Vantage in September 2016. Plaintiff alleges that as part of the acquisition agreement, the Individual Defendants would receive certain “earn-out bonuses” ($3 million and 276, 000 shares of RLHC stock) in 2017 and 2018 if RLHC achieved certain business goals. Dkt. No. 1-1 at ¶13. On September 27, 2016, while at a conference in Phoenix, Arizona, Plaintiff alleges that he had had a meeting with the Individual Defendants during which he entered into an oral agreement (the “Agreement”) “whereby Bloss and Moyle agreed that if the relevant Earn-Outs were achieved, they would pay Mullinix $125, 000 on receipt of the 2017 Earn-Out, with all income taxes relating to such payment to be paid by Defendants, and $375, 000 on receipt of the 2018 Earn-Out, again, with all related income taxes to be paid by Defendants.” Id. at ¶ 15. Plaintiff alleges that the Individual Defendants later refused his request that “this agreement be reduced to writing.” Id. at ¶ 16.

         Plaintiff alleges that he turned down numerous other job opportunities and continued to work for RLHC “solely because of the promises made under the Agreement.” Id. at ¶ 17. Plaintiff alleges that although the Earn-Out goals for both 2017 and 2018 were met, he received only a $125, 000 payment for 2017, without compensation for tax liability, and nothing for 2018, in violation of the Agreement.

         On December 21, 2018, Plaintiff filed this lawsuit in state court against TESI and the Individual Defendants (collectively, “Defendants”) alleging breach of contract, promissory estoppel, fraud and fraudulent inducement, and negligent misrepresentation. See Mullinix v. Thirty-Eight Street, Inc., D-1-GN-18-007640 (353rd Dist. Ct. Travis County, Tex. Dec. 21, 2018). While Plaintiff does not allege that he made any agreement with TESI, he has included TESI as a defendant in this case because he asserts that the Individual Defendants were acting as agents for TESI.

         On January 28, 2019, Defendants removed this case to federal court on the basis of diversity jurisdiction under 28 U.S.C. §1332. Defendants now have filed the instant Motion to Dismiss under Federal Rule of Civil Procedure 12(b)(2), arguing that the Court does not have personal jurisdiction over the Individual Defendants because they did not purposefully direct their activities toward Texas. Alternatively, Defendants move to transfer venue to the Southern District of Florida pursuant to 28 U.S.C. § 1404(a). The Court will determine whether it has personal jurisdiction over the Defendants in this case.

         II. LEGAL STANDARDS

         Federal Rule of Civil Procedure 12(b)(2) requires a court to dismiss a claim if the court does not have personal jurisdiction over the defendant. Fed.R.Civ.P. 12(b)(2). “If . . . 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).

         Federal Rule of Civil Procedure 12(b)(6) allows a party to move to dismiss an action for failure to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). In deciding a Rule 12(b)(6) motion to dismiss for failure to state a claim, “[t]he court accepts all well-pleaded facts as true, viewing them in the light most favorable to the [nonmovant].” In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007) (internal quotation marks omitted). While a complaint attacked by a Rule 12(b)(6) motion does not need detailed factual allegations in order to avoid dismissal, the plaintiff’s factual allegations “must be enough to raise a right to relief above the speculative level.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). The Supreme Court has explained that a court need not accept as true conclusory allegations or allegations stating a legal conclusion. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A complaint must contain sufficient factual matter “to state a claim to relief that is plausible on its face.” Id. (quoting Twombly, 550 U.S. at 570). “A claim has facial plausibility when the [nonmovant] pleads factual content that allows the court to draw the reasonable inference that the [movant] is liable for the misconduct alleged.” Id.

         III. ANALYSIS

         A. Personal Jurisdiction Principles

         A federal court sitting in diversity may exercise personal jurisdiction over a non-resident defendant if the state’s long-arm statute permits an exercise of jurisdiction over that defendant and 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). Because the requirements of the Texas 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. Sangha, 882 F.3d at 101. In order for personal jurisdiction to satisfy due process requirements, a plaintiff must show that (1) the defendant purposefully availed himself of the benefits and protections of the forum state by establishing “minimum contacts” with the forum state, and (2) the exercise of personal jurisdiction over that defendant does not offend traditional notions of “fair play and substantial justice.” 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 the defendant’s relationship to the forum state. Sangha, 882 F.3d at 101. Specific jurisdiction exists “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) (internal quotation marks omitted). For minimum contacts to exist, “a defendant must have purposefully availed himself of the benefits and protections of the forum state such that he should reasonably anticipate being haled into court there.” Carmona v. Leo Ship Mgmt., Inc., 924 F.3d 190, 193 (5th Cir. 2019) (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474-75 (1985) (internal citations omitted)). “That requirement is the ‘constitutional touchstone’ of personal jurisdiction. It ‘ensures that a defendant will not be haled into a jurisdiction solely as a result of random, fortuitous, or attenuated contacts, or of the ...


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