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Edgefield Holdings, L.L.C. v. Einbinder & Dunn, L.L.P.

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

December 31, 2019

EDGEFIELD HOLDINGS, L.L.C., Plaintiff,
v.
EINBINDER & DUNN, L.L.P., Defendant.

          MEMORANDUM OPINION AND ORDER

          JANE J. BOYLE UNITED STATES DISTRICT JUDGE

         Before the Court is Defendant Einbinder & Dunn, L.L.P.'s Motion to Dismiss for Lack of Personal Jurisdiction (Doc. 11). For the reasons that follow, the Court DENIES the motion (Doc. 11) and TRANSFERS the case to the Southern District of New York.[1] Plaintiff Edgefield Holdings, L.L.C.'s Objection to Einbinder's Reply (Doc. 19) is DENIED in part and MOOTED in part.

         I.

         BACKGROUND[2]

         On August 5, 2015, the United States District Court for the Southern District of Florida entered a Final Judgment in favor of The Learning Experience Systems, L.L.C. against Creative American Education and K. and B. Loganathan[3] (collectively, the Judgment Debtors) in the amount of $984, 074.31. Doc. 17, Second Am. Compl., ¶ 5. The defendant here, Einbinder, represented Creative American and the Loganathans in the Florida action. Id. ¶ 6. After judgment was entered in that action, the Florida court certified the Final Judgment for filing in Colorado, Texas, and California. Id. ¶ 8; see also Id. Ex. B (the order granting certification of judgment).

         On September 2, 2015, The Learning Experience filed a Motion for Charging Order in the Northern District of Texas (hereinafter, the Texas action), Id. ¶ 9, “in aid of enforcement” of the Final Judgment. Id., Ex. D, ¶ 5 (Motion for Charging Order). The motion explained that the Judgment Debtors held shares in Aces Creative American Investments LLC and listed Aces's Texas properties. Id. ¶¶ 2-3. The Learning Experience Systems sought any interest that the Judgment Debtors received from their membership interests in Aces. Id. Ex. D, ¶ 5. On September 9, 2015, Aces Creative sold one of its properties in Texas for $94, 635.34, which was wired to Einbinder. Id. ¶ 10. Then, on October 29, 2015, Judge Lindsay of the Northern District of Texas entered a charging order in the Texas Action, which gave The Learning Experience “the right to receive any distribution to which [the Judgment Debtors] would otherwise be entitled in respect of the membership interest held by [the Judgment Debtors] in Aces Creative . . . .” Id. ¶ 11; see also id., Ex. F, 3-4 (Agreed Charging Order).

         On September 23, 2016, The Learning Experience assigned all of its rights, title, and interest to the Final Judgment in the Florida Action to Edgefield. Id. ¶ 16. But earlier, on January 11, 2016, Aces Creative sold another one of its Texas properties. Id. ¶ 12. Edgefield alleges that the funds from the sale of the two Texas properties should have been distributed to The Learning Experience under the charging order but were instead fraudulently transferred to Einbinder. Id. ¶¶ 10, 13-14. And finally, on May 4, 2017, an attorneys' fee award of $83, 958.76 was awarded in favor of The Learning Experience against Creative American and the Loganathans in the Florida Action as well. Id. ¶¶ 15, 17.

         After learning of Aces Creative's transfers to Einbinder, Edgefield contacted Einbinder, who allegedly refused to return or transfer over the proceeds to Edgefield. Id. ¶ 17. Subsequently, Edgefield brought two causes of action pursuant to the Texas Uniform Fraudulent Transfer Act (TUFTA) against Einbinder: (1) Fraudulent Transfer under Texas Business and Commerce Code § 24.005(A)(1)-(2), and (2) Fraudulent Transfer under Texas Business and Commerce Code § 24.006(A). Id. ¶¶ 19-36.

         Einbinder then brought this Motion to Dismiss for Lack of Personal Jurisdiction (Doc. 11). All briefing has been submitted, and the motion is now ripe for review.

         II. LEGAL STANDARD

         Federal Rule of Civil Procedure 12(b)(2) allows for the dismissal of an action in which the court lacks personal jurisdiction over the defendant. A federal court may assert jurisdiction over a nonresident defendant in a diversity suit if the state's long-arm statute applies and due process is satisfied under the Fourteenth Amendment to the United States Constitution. Cycles, Ltd. v. W.J. Digby, Inc., 889 F.2d 612, 616 (5th Cir. 1989). Texas courts have interpreted the Texas long-arm statute as “extending to the limits of due process.” Bullion v. Gillespie, 895 F.2d 213, 215 (5th Cir. 1990). Accordingly, to determine whether it may assert jurisdiction under the Texas long-arm statute, a federal court must determine whether jurisdiction comports with federal constitutional guarantees of due process. Id. at 216.

         “The due process clause of the Fourteenth Amendment, as interpreted by the Supreme Court, permits the exercise of personal jurisdiction over a nonresident defendant when (1) that defendant has established ‘minimum contacts' with the forum state; and (2) the exercise of jurisdiction over that defendant does not offend ‘traditional notions of fair play and substantial justice.'” Ruston Gas Turbines, Inc. v. Donaldson Co., Inc., 9 F.3d 415, 418 (5th Cir. 1993) (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). “Both prongs of the due process test must be met” for the Court to exercise personal jurisdiction over a defendant. See id.

         A nonresident defendant's minimum contacts may either support an assertion of specific or general jurisdiction. WNS Inc. v. Farrow, 884 F.2d 200, 202 (5th Cir. 1989). A court may exercise specific jurisdiction when a cause of action arises out of a defendant's purposeful contacts with the forum. Dalton v. R & W Marine, Inc., 897 F.2d 1359, 1361-62 (5th Cir. 1990). Alternatively, a court is said to have general jurisdiction when a defendant has engaged in continuous and systematic contacts with the forum. Id.

         The party seeking to invoke federal jurisdiction bears the burden of establishing the requisite minimum contacts. WNS, 884 F.2d at 203. Further, “uncontroverted allegations in the plaintiff's complaint must be taken as true, and conflicts between the facts contained in the parties' affidavits must be resolved in the plaintiff's favor for purposes of determining whether a prima facie case for personal jurisdiction exists.” D.J. Invs., 754 F.2d at 546 (citations omitted).

         III. ANALYSIS

         The parties dispute whether the Court has personal jurisdiction over Einbinder. Specifically, Einbinder argues that it was a mere passive transferee of the proceeds the Judgment Debtors received from the sale of Aces's Texas properties, and thus this Court cannot assert specific personal jurisdiction over it. Doc. 12, Def.'s Br., 8. On the other hand, Edgefield argues that, at the very least, Einbinder was willfully blind to the fact that the ...


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