United States District Court,

M.D. Alabama,

Southern Division.

AAA COOPER TRANSPORTATION, Plaintiff,

v.

WES–PAK, INC., and Vimy Ridge Partners, LLC, Defendants.

 

No. 1:11cv181–WHA–CSC.

March 13, 2012.

 

John David Kenneth Kuntz, The Kuntz Law Firm, Richmond, TX, Wade Hampton Baxley, Ramsey Baxley & McDougle, Dothan, AL, for Plaintiff.

 

Steadman Stapleton Shealy, Jr., Cobb, Crum & Pike, PC, Dothan, AL, James Northcutt Walter, Jr., Patricia Romano Osuch, Capell Howard PC, Montgomery, AL, for Defendants.

 

MEMORANDUM OPINION AND ORDER

W. HAROLD ALBRITTON, Senior District Judge.

I. INTRODUCTION

This case is before the court on a Motion to Dismiss filed by Vimy Ridge Partners, LLC (“VRP”) (Doc. # 11), and a Motion to Amend (Doc. # 27) filed by Plaintiff AAA Cooper Transportation (“AAA Cooper”) on May 20, 2011.

 

AAA Cooper filed a Complaint (Doc. # 1) in this court on March 15, 2011, against WesPak, Inc. (“Wes–Pak”), VRP, and Pratt Industries (USA) Inc. (“Pratt”). In the Complaint, AAA Cooper asserted a “Breach of Contract/Debt & Assumpsit” claim against Wes–Pak; a claim for attorney’s fees against Wes–Pak; and a fraudulent transfer claim against Wes–Pak, VRP, and Pratt, pursuant to Ark.Code Ann. § 4–59–204.

 

Pratt has been dismissed from this case, without prejudice, on motion of the Plaintiff. Doc. # 36.

 

AAA Cooper did not denominate each of its claims as “Counts.”

 

Subsequently, VRP filed a Motion to Dismiss (Doc. # 11) pursuant to Federal Rule of Civil Procedure 12(b), arguing that (1) this court did not have personal jurisdiction over VRP; (2) venue in this court was improper; and (3) the Complaint failed to state a claim upon which relief could be granted with respect to the fraudulent transfer claim.

 

AAA Cooper filed a response to the Motion to Dismiss. AAA Cooper also sought to amend its Complaint, to bolster its assertion that this court has personal jurisdiction and venue over all of the claims in this case. AAA Cooper’s proposed Amended Complaint added “more factual and legal bases” for personal jurisdiction and venue, and added a claim of “Fraud and Conspiracy to Defraud” against Wes–Pak and VRP.

 

VRP opposes AAA Cooper’s Motion to Amend, arguing that the Amended Complaint does not cure the defects that VRP pointed out in its Motion to Dismiss. Wes–Pak does not oppose the Motion to Amend.

 

As discussed in this court’s prior Memorandum Opinion and Order (Doc. # 37), because VRP’s opposition to the Motion to Amend is based on the ground of futility, and makes essentially the same arguments as VRP’s prior Motion to Dismiss (Doc. # 11), this court will consider the opposition to the Motion to Amend as a renewal of VRP’s Motion to Dismiss, now addressed against the Amended Complaint, and will analyze the Amended Complaint against the arguments made in the briefs with respect to both the Motion to Dismiss and Motion to Amend.

 

In order to rule accurately on the issue of personal jurisdiction, this court conducted an evidentiary hearing on December 21, 2011 to allow for AAA Cooper to provide evidence in support of its burden to prove that this court has personal jurisdiction over VRP. Following that hearing both VRP and AAA Cooper filed supplemental briefs in support of their arguments made during the hearing (Doc. # 55, # 56).

 

The court has subject matter jurisdiction of this case pursuant to 28 U.S.C. § 1332 (diversity), because there is complete diversity of citizenship, and the amount in controversy exceeds $75,000, exclusive of interest and costs.

 

For reasons to be discussed, the Motion to Amend is due to be GRANTED, and VRP is due to be DISMISSED as a party for want of personal jurisdiction.

 

II. LEGAL STANDARDS

The dispute over the Motion to Amend in this case effectively raises the issues of a motion to dismiss for lack of personal jurisdiction, for improper venue, and for failure to state a claim upon which relief may be granted. See Fed.R.Civ.P. 12(b)(2), (3), (6). Because the issue of personal jurisdiction will be determinative of the matter before the court, the proper legal standard in this case is one for a motion to dismiss for lack of personal jurisdiction. Cf. Bryant v. Rich, 530 F.3d 1368, 1376 (11th Cir.2008) (“When a court ‘treats [a] motion as having been brought under Rule 12(b), then it is subject to the rules and practices applicable to the most analogous Rule 12(b) motion.’ ”) (quoting 5C Fed. Prac. & Proc. Civ. § 1360).

 

In the context of a motion to dismiss for lack of personal jurisdiction in which a hearing has occurred, the plaintiff must prove the existence of personal jurisdiction by a preponderance of the evidence. Cf. National Enquirer, Inc. v. News Group News, Ltd ., 670 F.Supp. 962, 964 (S.D.Fla.1987) (citing Data Disk, Inc. v. Systems Technology Associates, Inc., 557 F.2d 1280, 1285 (9th Cir .1977) (“In this situation, where plaintiff is put to his full proof, plaintiff must establish the jurisdictional facts by a preponderance of the evidence, just as he would have to do at trial.”)).

 

III. FACTS

This case arises out of a contractual dispute between AAA Cooper and Wes–Pak. AAA Cooper is an Alabama corporation with its principal place of business in Dothan, Alabama, and Wes–Pak is an Arkansas corporation, with its principal place of business in Alexander, Arkansas. Frank E. Westerman (“Westerman”) is the President and CEO of Wes–Pak and is a citizen of Arkansas.

 

From the evidence presented at the hearing, including testimony, depositions, and exhibits, the court finds the following facts:

 

On June 6, 2008, AAA Cooper, a trucking company, agreed to enter into a Transportation Services Agreement (the “Agreement”) with Wes–Pak, a corrugated packing company. Westerman signed the Agreement on Wes–Pak’s behalf as “Pres.-CEO.” The Agreement required AAA Cooper to, inter alia, transport cardboard and fiber boxes from Wes–Pak’s Shreveport, LA facility to its Louisiana customers, and from its Little Rock, AR facility to its Arkansas customers. Doc. # 1–1 at 13. The Agreement did not contemplate that AAA Cooper would perform any services in Alabama.

 

AAA Cooper upheld its end of the bargain and sent a number of invoices for payment to Wes–Pak. However, as of April 2009, Wes–Pak began to fall behind in payments. Wes–Pak did not simply refuse to pay. Wes–Pak, mainly through Westerman, told AAA Cooper on a number of occasions, from early 2009 and continuing through February 2010, that it would be able to pay back the debt. Ultimately, Wes–Pak never fully satisfied its debt to AAA Cooper or to its other creditors, but instead, made a series of smaller payments to AAA Cooper.

 

The Plaintiff alleges in its complaint that in February 2010, Westerman told Charlie Prickett (“Prickett”), Executive Vice President and Chief Operation Officer of AAA Cooper, that Wes–Pak was going to sell a building, and, after closing the deal, would pay at least $148,000 to AAA Cooper. However, the facts from the evidentiary hearing demonstrate that AAA Cooper’s Director of Business Development, Mike Wrape (“Wrape”), was aware of Wes–Pak’s plan to sell one of its buildings in a lease-back agreement in order to generate cash as early as the summer of 2009. In an email dated July 9, 2009, Westerman explained that he had three potential buyers for the building in Alexander, Arkansas, and both Westerman’s deposition testimony and Prickett’s hearing and deposition testimony demonstrate that this sale was intended to be part of a lease-back agreement. Lease-back agreements are generally used to generate cash which, in this case, Wes–Pak intended to use to pay down some of its outstanding debts including the AAA Cooper debt.

 

On December 8, 2009, Wes–Pak entered into a lease-back agreement with Birch Brook, Inc. Birch Brook is a third party company having no relationship with Wes–Pak or AAA Cooper, and Wes–Pak chose to enter into an agreement with Birch Brook because it was the highest bidder for the Alexander building. The agreement contained a purchase price of $2,800,000 payable in cash from Birch Brook to Wes–Pak on closing, and also contained a fifteen-year lease-back provision in which Wes–Pak would pay yearly rent on the building of $320,000 to Birch Brook. The rent was to increase by 3% at years six and eleven. However, the deal with Birch Brook did not come to fruition due to a lapse in the closing date and other bargaining developments. This left Wes–Pak without a buyer for its lease-back plan.

 

Having no other buyer option for its lease-back plan, Westerman, as Trustee for the Westerman Family Revocable Living Trust; John Steuri, on behalf of the Steuri Family Limited Partnership, LLLP; John Lessell, as Trustee for The Lessell Family Revocable Living Trust; and Lewis A. Mahoney formed VRP, an Arkansas limited liability company, on February 5, 2010, to purchase the Alexander building. No members of VRP are citizens of Alabama. VRP bought the Alexander building under the same terms as the Birch Brook agreement using a bank loan and a loan from Wes–Pak. On that same day, Westerman called Prickett to let him know that he and other board members would be buying the building. Furthermore, he told Prickett that Wes–Pak should begin being able to start paying down some of its outstanding accounts. The exhibits presented by both parties as well as the testimony of Michelle Lewis, AAA Cooper’s Director of Administration and Customer Accounts, at the hearing made it clear that Wes–Pak did not pay down its entire balance after the lease-back agreement was finalized. That same evidence, however, demonstrates that following the lease-back agreement Wes–Pak made payments to AAA Cooper in excess of the regular $10,000 payments it usually made. For example, AAA Cooper’s check register shows that Wes–Pak paid AAA Cooper $34,031.67 on February 18, 2010; $22,346.47 on February 24, 2010; $35,000 on May 6, 2010; and $30,000 on May 10, 2010. These payments would have gone at least in part towards reducing Wes–Pak’s outstanding debt to AAA Cooper just as Westerman said Wes–Pak would do in his February 5, 2010 voicemail to Prickett.

 

VRP’s objection to Ms. Lewis’s testimony at the hearing, as to which the court reserved ruling, is OVERRULED.

 

Evidence has been presented that Prickett knew by February 5, 2010 that VRP, and not some third party company, would be the buyer of Wes–Pak’s Alexander building. Moreover, Prickett received an e-mail from Westerman on February 12, 2010, containing a commitment letter from an Arkansas bank concerning the $2,380,000 loan that VRP applied for, and which was personally guaranteed by Frank Westerman, Sr., Lewis A. Mahoney, John E. Steuri, and John C. Lessel. Accordingly, the evidence shows that Prickett knew about VRP and Wes–Pak’s lease-back agreement by no later than February 2010 and that Prickett did not expess any concerns about this purchase to VRP once he had the details in February.

 

Furthermore, AAA Cooper has also alleged that Wes–Pak had promised to pay it $148,000 from the profits of the lease-back agreement. The evidence presented, however, is contrary to this claim. The $148,000 number is drawn from a handwritten attachment to an October 22, 2009 email from Westerman to Prickett. On that handwritten attachment there is a series of dates with corresponding dollar figures including one labeled “12–7–148,457.00.” This October 22, 2009 e-mail appears to be part of a discussion between Westerman and Prickett about a possible merger between Wes–Pak and another company intended to yield cash for WesPak. Regardless, the timing of the e-mail makes it clear that it had nothing to do with the leaseback agreement which was not even supposed to close until January, 2010. Nor could the email concern VRP since VRP was not formed until February, 2010. It is clear that the $148,000 amount was in no way connected to the lease-back agreement as alleged by AAA Cooper.

 

Facts were also presented as to VRP’s capitalization, structure, and business. The four members of VRP each contributed $53,000 as starting capital for a total of $212,000 starting capital, and VRP issued each of the four members 15,300 Unit Certificates. VRP’s only business was the ownership of the Alexander building which VRP purchased from Wes–Pak. Furthermore, the trustees and partners of two members of VRP, who were also on the fivemember board of directors for Wes–Pak, Frank E. Westerman and John E. Steuri, abstained from Wes–Pak’s decision to perform the lease-back agreement with VRP. Wes–Pak’s three disinterested directors unanimously decided to enter into the lease-back agreement with VRP under the same general terms as the Birch Brook lease-back agreement.

 

After VRP agreed to the lease-back agreement, it took no other part in the facts as alleged by the Plaintiff. The remaining facts are taken from the allegations found in the Complaint and concern only Wes–Pak, AAA Cooper, and Pratt.

 

Wes–Pak was never able to pay all of its debt to AAA Cooper. Accordingly, AAA Cooper’s counsel contacted Westerman and demanded payment in April of 2010. Westerman directed counsel to contact Lessel, legal counsel for Wes–Pak, who told AAA Cooper that, although Wes–Pak was unable to pay the balance due, Wes–Pak was going to be sold to Pratt, and AAA Cooper would be paid if a deal was closed. Lessel told AAA Cooper that it should not sue prior to the closing date, because if it did, the suit would derail the deal. However, around November 2010, Lessel told AAA Cooper that Pratt had decided not to pay AAA Cooper at closing. Several months later, AAA Cooper filed the instant suit.

 

IV. DISCUSSION

VRP raises three arguments in this case: (1) that this court lacks personal jurisdiction over it; (2) that venue in this court is improper; and (3) that AAA Cooper’s fraudulent transfer claim should be dismissed. Because the court finds that it does not have personal jurisdiction over VRP, a discussion of the other two issues is unnecessary.

 

VRP contends that it should be dismissed from the case because this court lacks personal jurisdiction over it, pointing out that its partners are all non-residents of Alabama, and that it has no office or presence of any kind in Alabama, has never conducted business in Alabama, and committed no acts in Alabama related to AAACooper’s claims against it. AAA Cooper has offered two theories of personal jurisdiction. First, AAA Cooper argues that this court has personal jurisdiction over VRP because Wes–Pak, in its contract with AAA Cooper, consented to personal jurisdiction in this court, and VRP is bound by this consent as an “alter-ego” or “instrumentality” of Wes–Pak. Secondly, AAA Cooper argues that VRP has taken part in the furtherance of a conspiracy against AAA Cooper, and therefore this court has jurisdiction under a “conspiracy” theory.

 

The court will begin with a general discussion of personal jurisdiction before turning to each of AAA Cooper’s arguments.

 

A. Minimum Contacts

Two types of personal jurisdiction have been recognized by courts: general and specific. Consolidated Development Corp. v. Sherritt, Inc., 216 F.3d 1286, 1291 (11th Cir.2000). There has been no allegation made that this court has general jurisdiction over VRP, and rightfully so, since the evidence presented makes it clear that VRP has no presence in the state of Alabama. See Id. at 1292 (“General personal jurisdiction, … arises from a defendant’s contacts with the forum that are unrelated to the cause of action being litigated.”). Therefore, this court will look to whether it has specific personal jurisdiction over VRP.

 

To determine whether specific personal jurisdiction exists, the court must look at the applicable state long-arm statute and the federal due process requirements. Cronin v. Nat’l Ins. Co., 980 F.2d 663, 670 (11th Cir.1993) (citing Pesoplastic C.A. v. Cincinnati Milacron Co., 750 F.2d 1516, 1521 (11th Cir.1985)). Alabama’s long-arm statute permits personal jurisdiction to the extent allowed by the United States Constitution. Ala. R. Civ. P. 4 .2(a)(2); see Martin v. Robbins, 628 So.2d 614, 617 (Ala.1993). “When the courts of the forum State have interpreted the forum’s long-arm statute to confer jurisdiction to the limits allowed by federal due process, state law need not be applied: [the court] need only ask whether the exercise of jurisdiction over the nonresident defendant comports with due process.” Vermeulen v. Renault U.S.A ., Inc., 975 F.2d 746, 753 (11th Cir.1992).

 

The Due Process Clause “does not contemplate that a state may make binding a judgment in personam against an individual or corporate defendant with which the state has no contacts, ties, or relations.” Int’l Shoe Co. v. Washington, 326 U.S. 310, 319 (1945). There has been no evidence presented that VRP ever had any contacts with Alabama. It has no offices in Alabama and does no business in Alabama. No evidence was presented at the hearing to show that VRP committed any acts in Alabama related to Wes–Pak’s dealings with AAA Cooper. Accordingly, AAA Cooper has failed to prove that VRP has a sufficient amount of contacts with Alabama related to the present claim such that the exercise of jurisdiction over VRP on that basis would comport with due process.

 

B. Instrumentality Test

While it is clear that an exercise of specific personal jurisdiction over VRP, itself, would not comport with due process based on any acts committed by it in Alabama, “it is compatible with due process for a court to exercise personal jurisdiction over an individual or a corporation that would not ordinarily be subject to personal jurisdiction in that court when the individual or corporation is an alter ego … of a corporation that would be subject to personal jurisdiction in that court.” Patin v. Thoroughbred Power Boats Inc., 294 F.3d 640, 653 (5th Cir.2002).

 

In this case, Wes–Pak signed a contract in which it consented to personal jurisdiction in this court. However, VRP was not a signatory to that contract. To determine whether VRP is bound to that forum selection clause under this theory of the Plaintiff, this court must determine whether VRP is an alter-ego or instrumentality of Wes–Pak.

 

To determine alter-ego status, this court will apply Alabama law, because neither party has made an argument that some other state’s law applies. See See Bush v. Teachers Ins. & Annuity Ass’n of Am., No. 1:05cv378–VPM, 2006 WL 3075539, atn. 4 (M.D.Ala. Oct. 30, 2006) (McPherson, Mag. J.) (applying Alabama law when no argument was made to apply foreign law); Potts v. Dyncorp Int’l, LLC, No. 3:06cv124–WHA, 2007 WL 899040 (M.D.Ala. Mar. 23, 2007) (Albritton, J.) (applying Alabama law to determine whether out-of-state entity was an alter-ego of an entity subject to personal jurisdiction in Alabama)

 

Alabama law holds that a “separate corporate existence will not be recognized when a corporation is so organized and controlled and its business conducted in such a manner as to make it merely an instrumentality of another….” Forest Hill Corp. v. Latter & Blum, 29 So.2d 298, 302 (Ala.1947). In other words, the determination of alter-ego status is a question of how much control one party has over another. See 1 Fletcher Cyc. Corp. § 41.10 (“To determine whether the alter ego theory applies, courts must look at the level of control evidenced by the actual, substantial relationship of the parties …”) (emphasis added). This is a fact-intensive question, and the Alabama Supreme Court has emphasized that it is “impossible to catalogue the infinite variations of fact that can arise but there are certain common circumstances which are important.” Evntl. Waste Control, Inc. v. Browning–Ferris Indus., Inc., 711 So.2d 912, 914 (Ala.1997) (quoting Duff v. S. Ry., 496 So.2d 760, 762–63 (Ala.1986)). These factors include:

 

(a) The parent corporation owns all or most of the capital stock of the subsidiary.

 

While VRP is not a subsidiary of Wes–Pak, the court looks to those same factors in regard to AAA Cooper’s theory that VRP is the alter-ego of Wes–Pak.

 

(b) The parent and the subsidiary corporations have common directors or officers.

 

(c) The parent corporation finances the subsidiary.

 

(d) The parent corporation subscribes to all the capital stock of the subsidiary or otherwise causes its incorporation.

 

(e) The subsidiary has grossly inadequate capital.

 

(f) The parent corporation pays the salaries and other expenses or losses of the subsidiary.

 

(g) The subsidiary has substantially no business except with the parent corporation or no assets except those conveyed to it by the parent corporation.

 

(h) In the papers of the parent corporation or in the statements of its officers, the subsidiary is described as a department or division of the parent corporation, or its business or financial responsibility is referred to as the parent corporation’s own.

 

(i) The parent corporation uses the property of the subsidiary as its own.

 

(j) The directors or executives of the subsidiary do not act independently in the interest of the subsidiary but take orders from the parent corporation.

 

(k) The formal legal requirements of the subsidiary are nor observed.

 

Evntl. Waste Control, 711 So.2d at 915 (quoting Duff v. S. Ry., 496 So.2d 760, 762–63 (Ala.1986)).

 

Courts will not apply alter-ego or instrumentality theories without sufficient evidence of control. Therefore, the Alabama Supreme Court has found that a mere overlap in management does not, by itself, result in a finding of alter-ego status. Matrix–Churchill v. Springsteen, 461 So.2d 782, 788 (Ala.1984). Similarly, “the mere loan of money by one corporation to another does not automatically make the lender liable for the acts and omissions of the borrower.” Krivo Indus. Supply Co. v. Nat’l Distillers & Chem. Corp., 483 F.2d 1098, 1104 (5th Cir.1973).

 

Turning to the facts of this case, it is clear that the Plaintiff has failed to meet its burden of proof as to this court’s jurisdiction over VRP on this theory. Of the eleven factors recited in Duff, the Plaintiff has presented facts relevant to only three. The Plaintiff has demonstrated that two of Wes–Pak’s five directors had indirect interests in VRP because of their position as a trustee or partner in one of VRP’s founding member’s trusts or partnerships. Because of the presence of these interested parties, the Plaintiff has raised the specter of Wes–Pak’s control over VRP’s decision making process and the lack of independence on the part of VRP’s members. However, the inference that there is some sort of control by Wes–Pak or some impermissible interest on the part of Wes–Pak’s directors is negated by the fact that the two interested individuals, Frank E. Westerman and John E. Steuri, abstained from Wes–Pak’s decision to enter into the lease-back agreement with VRP. Moreover, the lease-back agreement was substantially identical to the one proposed by Birch Brook during an arms-length negotiation process. Accordingly, the evidence is clear that Wes–Pak accepted the same lease-back agreement from VRP that it would have from a third party, and Frank E. Westerman and John E. Steuri’s interests in VRP had no effect on the transaction.

 

The Plaintiff also presented arguments that VRP’s only business is with Wes–Pak. However, more accurately stated, VRP’s only business is the ownership of the Alexander building which it now leases to Pratt. The fact that VRP’s only business is the management of the Alexander building, even when coupled with the loan from Wes–Pak to VRP to allow VRP to buy the property at Birch Brook’s price, is simply not enough to demonstrate the requisite level of control.

 

VRP also presented evidence which tends to show that it acted independently of WesPak. VRP’s four members are the sole owners of VRP. The four members each contributed $53,000 to the initial capitalization of VRP and were each issued 15,300 Unit Certificates by VRP. There has been no evidence presented to demonstrate that VRP is undercapitalized, and there has been no evidence presented to support a finding that Wes–Pak pays any salaries, expenses, or losses for VRP. Nor is there any evidence that Wes–Pak uses VRP’s property. Actually, the evidence shows that Wes–Pak was required to pay VRP for the use of the Alexander building. Lastly, VRP provided evidence that it is following the formal legal requirements for maintaining an LLC, and there is no evidence to show that VRP is merely a division or department of Wes–Pak.

 

To reemphasize Alabama law on this issue, merely having common management between two companies is not enough to sufficiently establish control for personal jurisdiction, Matrix–Churchill, 461 So.2d at 788, nor does a loan from one company necessarily make the parties responsible for the liabilities of each other. See Krivo Indus. Supply Co., 483 F.2d at 1104. Given that AAA Cooper’s best evidence for Wes–Pak control over VRP relies on some common management of the two companies and the loan from Wes–Pak to VRP, this court finds that AAA Cooper has not met the burden of proof as to its “alter ego” or “instrumentality” theory of personal jurisdiction over VRP.

 

C. Conspiracy Jurisdiction

AAA Cooper argued in its Response to VRP’s Opposition to Motion for Leave to File First Amended Complaint (Doc. # 30) that this court had personal jurisdiction over VRP because of VRP’s involvement in a conspiracy with Wes–Pak to harm AAA Cooper. In making this argument, AAA Cooper relied exclusively on Mullins v. TestAmerica, Inc., 564 F.3d 386 (5th Cir.2009). In that case, the court upheld the district court’s finding of personal jurisdiction over a party that had no contacts with the forum state, Texas, other than its involvement in a fraudulent transfer scheme which affected “a known, major creditor in Texas whose right to payment arises out of contracts that share a strong connection with Texas.” Id. at 402. In order to reach this result, the court relied on the “effects” test from Calder v. Jones, 465 U.S. 783 (1984). Id. at 400–04. The Fifth Circuit interprets the “effects” test to allow “an act done outside the state that has consequences or effects within the state [to] suffice as a basis for jurisdiction in a suit arising from those consequences if the effects are seriously harmful and were intended or highly likely to follow from the nonresident defendant’s conduct.” Id. at 400 (citing Guidry v. U.S. Tobacco Co., 188 F.3d 619, 628 (5th Cir.1999)). In other words, the Fifth Circuit reasoned that involvement in a fraudulent transfer which targeted a specific entity in the forum state over a contract linked to the forum state could create personal jurisdiction over that individual. Id. at 402. It is important to note that the Fifth Circuit did not hold that a categorical finding of personal jurisdiction exists given “a non-resident defendant’s receipt of assets transferred with an intent to hinder, delay, or defraud a creditor,” nor did the court find that the Calder “effects” test supplanted the minimum contacts test. Id. at 400.

 

Even if the Mullins case were binding on this court, the factual distinctions make it inapplicable to the case at bar. There is simply no evidence before this court which points to a conspiracy between VRP and Wes–Pak to fraudulently transfer the Alexander building specifically to the disadvantage of AAA Cooper and its contract. Moreover, the sale by WesPak to VRP actually allowed Wes–Pak to make increased payments to AAA Cooper and its several other creditors. Furthermore, there is no evidence that AAA Cooper was paid less than other creditors or treated differently than any of Wes–Pak’s other creditors. The present case is not factually analogous to Mullins.

 

It is worth noting again that none of the trucking done by AAA Cooper for Wes–Pak took place in Alabama.

 

VRP, citing Matthews v. Brookstone Stores, Inc., 469 F.Supp.2d 1056 (S.D.Ala.2007), argues that in order for a “conspiracy theory” of personal jurisdiction to be established in Alabama, there must be some evidence of an overt act by the defendant. The Matthews court explained that “it is well established in Alabama that a plaintiff cannot establish personal jurisdiction under a conspiracy theory unless the plaintiff ‘plead[s] with particularity the conspiracy as well as the overt acts within the forum taken in furtherance of the conspiracy.’ “ Id. at 1066 (citing Ex parte McInnis, 820 So.2d 795, 806–07 (Ala.2001)). VRP argues that no evidence was presented sufficient to demonstrate an overt act by VRP in furtherance of a conspiracy against Wes–Pak. VRP argues that AAA Cooper has pointed to only one instance, an allegation found in AAA Cooper’s First Amended Complaint, which could be construed as an overt act by VRP. In the Amended Complaint, AAA Cooper alleges that Westerman, while acting on behalf of VRP and Wes–Pak, contacted AAA Cooper in February 2010 to let them know that Wes–Pak was going to close out on a deal to sell a building so that it could pay AAA Cooper $148,000. (Doc. # 25 at ¶ 15). AAA Cooper alleges that it was not made aware of the fact that VRP, a company owned in part by Westerman and Lessel, was the purchaser of the building. Id.

 

AAA Cooper’s allegation in its Amended Complaint is not supported by the evidence that surfaced during the hearing. As this court has explained, Westerman kept Wrape and Pickett abreast of the circumstances concerning the sale of the Alexander building. Most telling was the phone call from Westerman to Prickett in which Westerman explained that he was going to buy the Wes–Pak building to provide increased cash flow to Wes–Pak. Simply put, AAA Cooper’s allegations are not supported by the evidence presented to this court. Accordingly, this court finds no evidence to support any overt act in Alabama by VRP done in furtherance of any conspiracy against AAA Cooper.

 

For the foregoing reasons, AAA Cooper has failed to meet its burden of proof as to its “conspiracy” theory of personal jurisdiction.

 

Because AAA Cooper has failed to establish any theory to support this court’s personal jurisdiction over VRP, this court must dismiss VRP as a party to this suit.

 

V. CONCLUSION

For the foregoing reasons, it is hereby ORDERED as follows:

 

1. The Motion to Amend (Doc. # 27) is GRANTED.

 

2. VRP’s Motion to Dismiss (Doc. # 11), as now addressed to the Amended Complaint, is GRANTED on the basis of want of personal jurisdiction.

 

3. Defendant Vimy Ridge Partners, LLC is DISMISSED as a party defendant for want of personal jurisdiction.

 

4. The Motion to Strike Affidavit of William D. Prickett, III (Doc. # 21) is GRANTED, Mr. Prickett having testified at the hearing.

 

5. The Motion to Quash of Pratt Industries (Doc. # 32) is DENIED AS MOOT.

 

6. The case will proceed against Wes–Pak, Inc.

United States District Court, N.D. California,

San Jose Division.

Janet L. SAVAGE, Plaintiff,

v.

MTF RELOCATION, INC. dba Best Local Relocation, dba Best Week Relocation, dba Advanced Relocation dba Asap Relocation, dba MTF Relocation Moving and Storage, Defendants.

 

No. C10–04216 HRL.

March 9, 2012.

 

Janet L. Savage, Oakdale, CA, pro se.

 

ORDER THAT CASE BE REASSIGNED TO A DISTRICT JUDGE

REPORT AND RECOMMENDATION RE PLAINTIFF’S MOTION FOR DEFAULT JUDGMENT

HOWARD R. LLOYD, United States Magistrate Judge.

This lawsuit arises from pro se plaintiff Janet Savage’s 2009 relocation from California to Oklahoma. In sum, Savage says that defendant MTF Relocation, Inc. (MTF) and several individuals—doing business as various companies, including Best Local Relocation—engage in a “bait-and-switch” scheme to defraud customers of their money and property. According to plaintiff, defendant lures unsuspecting customers with low price quotes. Then, after packing up the customer’s belongings, plaintiff says that defendant illegally inflates the original price estimate and then keeps (and sells) the customer’s possessions when they do not or cannot pay the additional sums demanded. Additionally, Savage claims that defendant engages in “weight bumping,” i.e., recording an inflated weight when weighing customers’ belongings for purposes of extracting additional fees. Savage sues for alleged violations of the Carmack Amendment (49 U.S.C. § 14704), violations of the Racketeer Influenced and Corrupt Organizations (RICO) Act (18 U.S.C. §§ 1961–1968), and fraud.

 

Now before the court is plaintiff’s motion for entry of default judgment. Because not all parties have consented to the undersigned’s jurisdiction, the Clerk of the Court is ordered to reassign this case to a District Judge, along with the following report and recommendation for entry of default judgment.

 

BACKGROUND

According to the complaint, on September 30, 2009 Savage requested a quote from MTF, through the internet, for a small two-bedroom move (up to 4500 lbs). That same day, a Brian Feldmier responded via email on behalf of Best Local Relocation with a quote of $1,050.00 based on an estimated weight of 2100 lbs. (Complaint, Ex. 1). According to Feldmier’s email, the quoted price included, among other things, full service door-to-door pick up and delivery; the labor of loading and unloading; free blanket wrapping to protect furniture; and all taxes. (Id.). The email stated that “long distance moves are subject to a 9% fuel surcharge” and that extra charges would be made for packing materials and boxes. (Id. at 2). Nevertheless, the quote given to Savage indicated that there would be no fuel surcharge. (Id. at 1). Additionally, the email indicates that Savage requested notification of the actual weight of her belongings and charges, noting that “Customer [sic] Have the Right to observe the weighting of the shipment.” (Id. at 1).

 

The next day, Savage sent an email to Feldmier, requesting further information about the quoted price. Specifically, she stated that she did not need any packing materials because she would be packing her belongings herself. Plaintiff also asked whether the $1,050.00 quote was “firm” or whether “there is a chance that it will fluctuate.” (Complaint, Ex. 2). Feldmier replied that the quote was “firm.” (Id.). Explaining that additional pricing for packing materials was only “per customer request,” he further stated that there would be no such additional charges, as long as plaintiff packed her own things and used her own materials. (Id.).

 

Satisfied with the quoted price and reassured by statements on defendant’s websites that it was a member of the American Moving Storage Association and the California Moving & Storage Association, Savage decided to have MTF handle her move to Oklahoma. She says that she later learned that defendant was actually not a member of either association.

 

Prior to the move, and as required by defendant, plaintiff made an advance payment of $892.50—i.e., a $157.50 deposit, plus an additional $735.00 (70% of the estimated charge). (Complaint ¶ 17 and Exs. 1, 4 and 5).

 

On October 8, 2009, Best Local Relocation arrived to load her belongings onto the moving truck. Nevertheless, Savage says that the forms she was given to sign that day listed MTF Relocation, Inc. at the top. (Complaint ¶ 11, Ex. 3). Additionally, she claims that defendant has a practice of providing its customers with incomplete or blank forms—e.g., inventory forms, packing material order forms, revised written estimates, and bills of lading—which customers are told will be filled out at a later time, but which they are nonetheless required to sign after their items are loaded onto the moving truck. (Complaint ¶ 22).

 

It was only after the movers loaded her belongings onto the truck that Savage says she was told that she had to pay several thousand dollars over the original quoted price. For example, when the movers arrived, Savage says that they began padding her possessions and wrapping them in plastic. When she questioned the need for the additional packing materials, the movers reportedly told her that it was required for interstate moves, but did not mention that additional charges would be made. Plaintiff says that because no additional charges were mentioned, she believed that the packing materials were included in the original $1,050.00 price. Once her belongings were loaded, however, Savage says that she was told she would be required to pay over $1,000 for the packing and wrapping of her things. Specifically, the shipping order she received noted the original $1,050 quoted price, plus an additional $1,170.66 for “Containers, Packing & Unpacking,” as well as a $94.50 fuel surcharge. (Complaint, Ex. 4). When Savage questioned the additional charges, the movers told her to contact Best Local Relocation about her pricing concerns. Then, they drove off with her possessions.

 

When Savage called Feldmier at Best Local Relocation, he reportedly told her that the price should have been $1,050.00 as originally quoted and that he would contact her after he spoke to his supervisor about the matter. (Complaint ¶ 16). However, Savage says that she never heard from Feldmier again. (Id.).

 

At some point after MTF took possession of and stored her belongings, Savage says that she contacted MTF and was told that there was a significant increase in the price for her move due to the weight of her possessions. (Complaint ¶ 49). Plaintiff claims, however, that defendants did not provide notice of when and where the items would be weighed. (Id. ¶ 24). She asserts that defendants routinely (and falsely) inflate shipment weights, e.g., by including the moving tools and supplies in the weight of customers’ goods, in order to further increase charges. (Id.).

 

Matters got worse. Plaintiff says that after repeated attempts to contact Best Local Relocation, she received a voicemail message on October 18, 2009 from someone named Kamryn Duque. Duque told her that she needed to wire an additional $1,500 to Best Local Relocation before the truck with her possessions would leave California—and that an additional $1,126.17 would be due upon delivery of her items. (Complaint ¶ 17). Meanwhile, Best Local Relocation refused to deliver her belongings until the additional payments were made-and it also began charging plaintiff $410.40 per month in storage fees. (Id. ¶ 18).

 

On the evening of November 30, 2009, plaintiff says that she received an email from one Eric Cohen, who identified himself as “Kamryn[‘s] boss.” (Complaint, Ex. 6). Cohen offered to deliver plaintiff’s possessions if she paid a “discount” rate of $1,965.67 upon delivery. (Id.). The email stated that the offer was good for only five days. Moreover, Savage was advised that she would also have to pay several hundred dollars in storage fees for the months of November and December—or else her possessions would be auctioned. (Id.). The attached invoice indicated that the actual weight of Savage’s possessions was 3420 lbs and that the additional charges being demanded included, among other things, $990 .00 for the 1320 lbs. over the original 2100–lb estimate, plus an increased fuel surcharge of $183.60, a packing materials charge of $1,071.00, and a materials sales tax of $99.07. (Id.).

 

Then, on January 11, 2010, Savage says she received a letter, by certified mail, from MTF Relocation Moving & Storage, demanding payment of $2,379.98 for “Storage, rental, insurance, interest, packing, transportation, and lien charges as applicable.” (Complaint, Ex. 7). The letter went on to state that if payment was not made within ten days, her belongings would be sold at auction on February 20, 2010. (Id.). Savage says that she attempted to pay MTF the balance of the original $1,050.00, but that MTF refused to release her property unless the increased charges were paid. (Id. ¶ 51).

 

Plaintiff says that she never received her property, which included (among other things) a queen-sized bed set, dresser, sofa, and other household furniture; a refrigerator; washer/dryer appliances; a television; dishes and small kitchen appliances; an heirloom lamp and family Bible; her entire business wardrobe, shoes, and purses; home office supplies; and various sentimental objects, including art made by her son and memorabilia that belonged to deceased family members. (Complaint, Ex. 8).

 

This lawsuit followed.

 

Plaintiff was permitted to proceed in forma pauperis, and the U.S. Marshal was directed to effect service upon defendant. Initial service attempts were unsuccessful, however, because the business was “unknown” at the address plaintiff had for defendant. (Dkt. No. 6). Several weeks later, summons was reissued with a different address in Santa Clara, California that plaintiff says she obtained from the business record on file with the California Secretary of State. Meanwhile, plaintiff moved for an order permitting her to serve MTF by publication. That motion was denied without prejudice while service at the second address was attempted. And, as it turns out, MTF was served there. (Dkt. No. 17). MTF never responded to the complaint, and it has never made any appearance (formal or informal) in this matter. At plaintiff’s request, the Clerk of the Court entered MTF’s default. (Dkt. No. 23).

 

Plaintiff now moves for entry of default judgment. Specifically, she seeks a judgment of $36,252.50 in damages, which she says represents the trebled value of her possessions, 18 U.S.C. § 1964(c), plus her $892.50 advance payment. Pursuant to this court’s order, plaintiff submitted additional documents in support of her motion. The matter is deemed suitable for determination without oral argument. CIV. L.R. 7–1(b). For the reasons stated below, this court recommends that plaintiff’s motion for default judgment be granted.

 

LEGAL STANDARD

After entry of default, courts may, in their discretion, enter default judgment. See FED. R. CIV. P. 55; Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir.1980). In deciding whether to enter default judgment, a court may consider the following factors: (1) the possibility of prejudice to the plaintiff; (2) the merits of the plaintiff’s substantive claim; (3) the sufficiency of the complaint; (4) the sum of money at stake in the action; (5) the possibility of a dispute concerning material facts; (6) whether the default was due to excusable neglect; and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits. Eitel v. McCool, 782 F.2d 1470, 1471–72 (9th Cir.1986). In considering these factors, all factual allegations in the plaintiff’s complaint are taken as true, except those relating to damages. TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917–18 (9th Cir.1987). When the damages claimed are not readily ascertainable from the pleadings and the record, the court may conduct a hearing to conduct an accounting, determine the amount of damages, establish the truth of any allegation by evidence, or investigate any other matter. FED. R. CIV. P. 55(b)(2). A formal hearing is not required for a court to render a default judgment where the amount claimed is a liquidated sum or capable of mathematical calculation. Davis v. Fendler, 650 F.2d 1154, 1161 (9th Cir.1981).

 

DISCUSSION

All of the Eitel factors favor entry of default judgment here. Because plaintiff’s motion for default judgment focuses on remedies available under RICO, this court addresses only that claim here.

 

The RICO statute makes it illegal for “any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity,” or to conspire to do so. 18 U.S.C. §§ 1692(c) & (d). The elements of a civil RICO claim are “ ‘(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity (known as ‘predicate acts’) (5) causing injury to plaintiff’s business or property.’ “ Living Designs, Inc. v. E.I. DuPont de Nemours & Co., 431 F.3d 353, 361 (9th Cir.2005) (quoting Grimmett v. Brown, 75 F.3d 506, 510 (9th Cir.1996)). “Racketeering activity” is any act indictable under one of several provisions of Title 18 of the United States Code, including wire fraud (18 U.S.C. § 1343). 18 U.S.C. § 1961(1)(B). To establish a pattern, plaintiff must demonstrate that at least two predicate acts “are related, and that they amount to or pose a threat of continued criminal activity.” H.J., Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 239, 109 S.Ct. 2893, 106 L.Ed.2d 195 (1989). With respect to predicate crimes based on allegations of fraud, the factual circumstances of the fraud itself must be alleged with particularity, but the state of mind or scienter of the defendant may be alleged generally. FED. R. CIV. P. 9(b); Odom v. Microsoft Corp., 486 F.3d 541, 553–54 (9th Cir.2006). Pleading requirements are to be strictly enforced when default judgment is sought under RICO. Alan Neuman Productions, Inc. v. Albright, 862 F.2d 1388, 1393 (9th Cir.1988).

 

Having reviewed the record presented, this court finds that plaintiff has, for default judgment purposes, adequately alleged a claim under RICO and has submitted documentation that tends to support her claim that MTF used U.S. wires to carry out a scheme to defraud her of her money and property. “[A] wire fraud violation consists of (1) the formation of a scheme or artifice to defraud; (2) use of the United States wires or causing a use of the United States wires in furtherance of the scheme; and (3) specific intent to deceive or defraud.” Odom, 486 F.3d at 554. The use of the internet qualifies as use of United States wires. See generally U .S. v. Lee, 296 F.3d 792 (9th Cir.2002); U.S. v. Pirello, 255 F.3d 728 (9th Cir.2001). Here, the record presented to inform this court of the alleged pattern of racketeering activity is in the form of (1) MTF’s alleged use of various websites to solicit business; (2) emails between plaintiff and entities and individuals alleged to be part of the scheme; and (3) phone calls alleged to have taken place during the alleged scheme. Moreover, the allegations of the complaint, which are deemed true, demonstrate that the alleged predicate acts are the means by which defendant regularly conducts its business. (Complaint ¶¶ 21–25). See H.J., Inc., 495 U.S. at 242 (stating that “the threat of continuity may be established by showing that the predicate acts or offenses are part of an ongoing entity’s regular way of doing business.”).

 

RICO defines the term “enterprise” as “any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity.” 18 U.S.C. § 1961(4). This definition is not a demanding one. Odom, 486 F.3d at 548. “A single ‘individual’ is an enterprise under RICO. Similarly, a single ‘partnership,” a single ‘corporation,’ a single ‘association,’ and a single ‘other legal entity’ are all enterprises.” Id. Moreover, “an associated-in-fact enterprise under RICO does not require any particular organizational structure, separate or otherwise.” Id. at 551. Defendant MTF is an enterprise.

 

The sum of money at stake in the action is not insignificant. Nevertheless, because all liability-related allegations are deemed true, there is no possibility of a dispute as to material facts. Moreover, MTF never appeared or presented a defense in this matter; and, there is no indication that its default was due to excusable neglect. While the court prefers to decide matters on the merits, defendant’s failure to participate in this litigation makes that impossible. A default judgment is Savage’s only recourse.

 

It appears that plaintiff did not serve MTF with notice of the instant motion for entry of judgment. However, a party in default is not entitled to notice under Fed.R.Civ.P. 55(b)(2) unless it has appeared, formally or informally, and demonstrated a clear intent to defend the suit. FED. R. CIV. P. 55(b)(2) (“If the party against whom a default judgment is sought has appeared personally or by a representative, that party or its representative must be served with written notice of the application at least 7 days before the hearing.”); In re Roxford Foods, Inc., 12 F.3d 875, 879 (9th Cir.1993) (“While it is true that the failure to provide 55(b)(2) notice, if the notice is required, is a serious procedural irregularity that usually justifies setting aside a default judgment or reversing for the failure to do so, notice is only required where the party has made an appearance.”) (quotations and citations omitted); Wilson v. Moore & Assocs., Inc., 564 F.2d 366, 368 (9th Cir.1977) (“No party in default is entitled to 55(b)(2) notice unless he has ‘appeared’ in the action.”). As discussed above, there is no indication in the record that MTF has ever appeared, formally or otherwise, in this action.

 

Savage’s claimed damages include the $892.50 advance payment she made, as well as $11,790.00 for the loss of all her possessions. As requested in her complaint, she now seeks a judgment of $36,252.50, which sum represents the advance payments, plus the trebled value of her possessions under RICO. See 18 U.S.C. § 1964(c) (“Any person injured in his business or property by reason of a violation of section 1962 … may sue therefor in any appropriate United States district court and shall recover threefold the damages he sustains”). A plaintiff claiming injury to property must allege a “concrete financial loss.” Canyon County v. Syngenta Seeds, Inc. ., 519 F.3d 969, 975 (9th Cir.2008). This court finds that plaintiff adequately alleges that defendant’s racketeering activity proximately caused the loss of tangible property, i.e., her money and her belongings. Plaintiff says that the valuation of her household furniture, appliances, clothes, and other possessions is a “garage sale” estimate of their value. (Complaint, Ex. 8; Savage Decl. ¶ 6). This court finds plaintiff’s estimated value to be reasonable.

 

Because all parties have yet to consent to the undersigned’s jurisdiction, IT IS ORDERED THAT this case be reassigned to a District Judge. Further, it is RECOMMENDED that plaintiff’s motion for default judgment be granted, that judgment be entered in plaintiff’s favor against MTF in the amount of $36,252.50.

 

Plaintiff shall make all reasonable attempts to serve notice of this report and recommendation on defendant and then file a proof of service with the court. Any party may serve and file objections to this Report and Recommendation within fourteen days after being served. FED. R. CIV. P. 72(b); 28 U.S.C. § 636(b)(1)(B) & (C).