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Huff v. Liberty League International

April 14, 2009

VICKI HUFF, ON BEHALF OF HERSELF AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFF,
v.
LIBERTY LEAGUE INTERNATIONAL, LLC, AN ARIZONA CORPORATION; BEYOND FREEDOM PUBLISHING, LLC, AN ARIZONA CORPORATION; BRENT PAYNE; SHANE KRIDER; LIBERTY LEAGUE HOLDINGS, LLC, AN ARIZONA CORPORATION, FORMERLY KNOWN AS BIG ASS BRITCHES HOLDINGS, LLC, AN ARIZONA CORPORATION; AND DOES 1-100, INCLUSIVE, DEFENDANTS.



The opinion of the court was delivered by: VIRGINIA A. Phillips United States District Judge

[Motion filed on January 26, 2009]

ORDER GRANTING (1) MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION, (2) MOTION TO COMPEL ARBITRATION, (3) MOTION TO DISMISS, AND DENYING MOTION TO STRIKE

Defendants' (1) Motion to Dismiss for Lack of Personal Jurisdiction, (2) Motion to Compel Arbitration, (3) Motion to Dismiss for Failure to State a Claim, and (4) Motion to Strike certain allegations in Plaintiff's Complaint came before the Court for hearing on April 6, 2009. After reviewing and considering all papers filed in support of, and in opposition to, the Motion, as well as the arguments advanced by counsel at the hearing, the Court GRANTS the Motion to Dismiss for Lack of Personal Jurisdiction, GRANTS the Motion to Compel Arbitration, GRANTS the Motion to Dismiss for failure to state a claim, and DENIES the Motion to Strike certain allegations in Plaintiff's Complaint.

I. BACKGROUND

A. Factual Allegations

On August 15, 2006, Plaintiff Vicki Huff purchased a Liberty League Starter Kit and Beyond Freedom Home Study Course from the Liberty League Internet website, http://libertyleague.com. (FAC ¶¶ 60, 62.) Before purchasing those products, Plaintiff was required to complete an online "Associate Application Agreement" that required assent to certain terms and conditions. (Boisnier Decl. ¶¶ 4, 10.) Plaintiff subsequently purchased certain products and tickets to attend Liberty League conferences, which required assent to identical terms and conditions to which Plaintiff assented previously. (FAC ¶¶ 64, 65.)

Plaintiff alleges she spent over $30,000 on Liberty League products and conferences. (FAC ¶ 69.) According to Plaintiff, Liberty League engages in a multi-level marketing scheme similar to a pyramid scheme; Liberty League employees fraudulently misled Plaintiff into purchasing Liberty League products and services and tricked her into believing she would earn lucrative income and attain financial freedom. (Id. at 20.)

B. Procedural History

On July 25, 2008, Plaintiffs Vicki Huff, Sarah McDowell, and Lynne Milsom, filed a lawsuit in this Court against Defendants Liberty League International, LLC, Beyond Freedom Publishing, LLC, Brent Payne, Julie Payne, Shane Krider, Michelle Krider, and Liberty League Holdings, LLC alleging the following claims: (1) violation of RICO, through transporting and receiving stolen money, 18 U.S.C. § 1962(c)-(d); (2) violation of RICO through mail and wire fraud, 18 U.S.C. § 1962(c)-(d); (3) violation of consumer protection statutes; (4) violation of state and federal anti-pyramid statutes; and (5) unjust enrichment.

On October 17, 2008, Defendants filed a "Motion to (1) Compel Arbitration, or in the Alternative to (2) Transfer the Case to the District Court of Arizona, or (3) Dismiss the Complaint for Lack of Personal Jurisdiction, or (4) Dismiss the Case for Failure to State a Claim, or (5) For a More Definite Statement." On December 5, 2008, instead of opposing the Motion, Plaintiff Vicki Huff ("Plaintiff") filed an amended putative class action Complaint ("First Amended Complaint" or "FAC"), which removed Defendants Julie Payne and Michelle Krider and the RICO claims, but added claims that Defendants violated California Business and Professions Code Sections 17200 and 17500.*fn1

On January 26, 2009, Defendants filed a "Motion to:

(1) Compel Arbitration; (2) Dismiss the Case for Failure to State a Claim (or Alternatively to Require a More Definite Statement); (3) Dismiss or Strike Claim for Injunctive Relief and Strike Irrelevant Allegations; and (4) Dismiss the Complaint for Lack of Personal Jurisdiction," the Declaration of Cathy Flanagan ("Flanagan Declaration"), the Declaration of Nadine Boisnier ("Boisnier Declaration"), and the Declaration of David R. Burtt ("Burtt Declaration"). On March 2, 2009, Plaintiff filed Opposition and the Declaration of Patricia N. Syverson ("Syverson Declaration"). On March 23, 2009, Defendants filed a Reply.

II. DISCUSSION

A. Motion to Dismiss for Lack of Personal Jurisdiction

Defendants move the Court to dismiss the FAC because the Court lacks personal jurisdiction over Defendants Beyond Freedom Publishing, LLC, Brent Payne, Shane Krider, and Liberty League Holdings, LLC.*fn2 (See Mot. at 19-23; Reply at 11-14.)

1. Legal Standard

Due process requires that nonresident defendants have certain "minimum contacts" with the forum state so that the exercise of jurisdiction does not offend traditional notions of fair play and substantial justice. Int'l Shoe v. Washington, 326 U.S. 310 (1945). "[I]t is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its law." Hanson v. Denckla, 357 U.S. 235, 253 (1958).

A court may exercise personal jurisdiction over a nonresident defendant generally or specifically. Doe v. Am. Nat'l Red Cross, 112 F.3d 1048, 1050 (9th Cir. 1997). Specific jurisdiction exists when: (1) the defendant purposefully avails himself of the "privilege of conducting activities in the forum;" (2) the claims arises "from the defendant's forum-related activities;" and, (3) is reasonable. See Data Disc, Inc. V. Sys. Tech. Assocs., Inc., 557 F.2d 1280, 1287 (9th Cir. 1977). Alternatively, a court has general jurisdiction when the defendant's activities within a state are "substantial" or "continuous and systematic." Id.

The plaintiff has the burden to establish a court's personal jurisdiction over a defendant. Cubbage v. Merchent, 744 F.2d 665, 667 (9th Cir. 1984), cert. denied, 470 U.S. 1005 (1985). The plaintiff need only demonstrate facts that, if true, would support jurisdiction over the defendant. Ballard v. Savage, 65 F.3d 1495, 1498 (9th Cir. 1995) (citations omitted); see also AT&T v. Compagnie Bruxelles Lambert, 94 F.3d 586, 588 (9th Cir. 1996) (where trial court rules on jurisdictional issue based on affidavits and discovery materials without holding evidentiary hearing, plaintiff need only make prima facie showing).

2. Discussion

a) Beyond Freedom Publishing, LLC

Plaintiff alleges "Defendant Beyond Freedom Publishing, LLC is an Arizona corporation. At all relevant times, Beyond Freedom Publishing was in the business of publishing personal development products for Liberty League Int'l." (FAC at ¶ 15.) This allegation fails to show any basis for the Court to exercise personal jurisdiction over this Defendant, either generally or specifically.

Plaintiff does not allege Beyond Freedom Publishing, LLC, has had any contact with California whatsoever, let alone any contacts sufficient to satisfy the Court's jurisdictional requirements. See Calder v. Jones, 465 U.S. 783, 789-90 (1984) ("Each defendant's contacts with the forum State must be assessed individually.") Instead, Plaintiff argues Beyond Freedom Publishing, LLC's alleged association with Liberty League International is sufficient to confer jurisdiction here; this is an inadequate basis. See Davis v. Metro Productions, Inc., 885 F.2d 515, 520 (9th Cir. 1989) ("a person's mere association with a corporation that causes injury in the forum state is not sufficient in itself to permit that forum to assert jurisdiction over that person"). Accordingly, the Court GRANTS Defendants' Motion on this basis, with leave to amend.

b) Brent Payne & Shane Krider

Plaintiff alleges Mr. Payne and Mr. Krider "are and were, at all relevant times, co-founders and managers of Defendant Liberty League Int'l. As such, they directed, managed and controlled the operations of Defendant Liberty League Int'l. Payne and Krider are residents of the state of Arizona." (FAC at ¶ 16.) Plaintiff also alleges they "are and were, at all relevant times, co-founders and managers for Beyond Freedom Publishing." (Id. at ¶ 15.)

Plaintiff does not meet her burden of showing the Court has personal jurisdiction over these Defendants; there is no allegation that they purposefully availed themselves of conducting business in California, nor that the claims against them arise out of their contact with California, nor any other basis that would show the Court reasonably could exercise either general or specific jurisdiction over these Defendants. See Calder v. Jones, 465 U.S. at 789-90; Davis v. Metro Productions, Inc., 885 F.2d at 520; Brown v. Gen. Steel Domestic Sales, LLC, 2008 WL 2128057, at *10 (C.D. Cal. 2008) ("The fact that a corporation is subject to jurisdiction in the forum state, however, does not necessarily confer jurisdiction over its individual officers. Instead, the court must examine the individual's contacts with the forum to determine if they are sufficient to warrant the exercise of jurisdiction over him in connection with forum-related claims.").*fn3

Plaintiff does not meet her burden of showing the Court may exercise either specific or general personal jurisdiction over these Defendants. Accordingly, the Court GRANTS ...


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