Johnson v. Mazza

          ORDER DENYING DEFENDANTS' MOTION TO DISMISS [41]

          OTIS D. WRIGHT, II UNITED STATES DISTRICT JUDGE

         I. INTRODUCTION

         On February 12, 2016, Plaintiffs Matthew Johnson, Nathan Johnson, Gemini Partners Inc., and Alacrity Capital Offshore Fund, LTD. (collectively "Plaintiffs") filed their First Amended Complaint against multiple defendants, including specially appearing Defendants David Mazza, Paul M. West, and Anthony Allen Wood (collectively, "Defendants"), alleging fraud. (First Am. Compl. ("FAC"), ECF No. 38.) Defendants move to dismiss the First Amended Complaint for improper venue pursuant to Fed.R.Civ.P. 12(b)(3). (Def.'s Mot. to Dismiss Pl.'s First Am. Compl. ("Mot."), ECF No. 41.) For the reasons discussed below, the Court DENIES Defendants' Motion to Dismiss.^[1]

         II. FACTUAL BACKGROUND

         Plaintiffs are brothers who together formed Gemini Partners, Inc. ("Gemini") in 2001 and Alacrity Capital Offshore Fund, Ltd. ("Alacrity") in 2009. (FAC ¶ 26.) Gemini is an investment bank that provides capital-market services to medium-sized businesses. (Id.) Alacrity is a fund that provides secured loans to companies that are not able to obtain traditional financing on their own. (Id.)

         Plaintiffs were introduced to Defendant Mazza by a mutual friend. (Id. ¶ 28.) Defendants at the time were promoting a new business model, under the name Alethean, and were soliciting business from Plaintiffs. (Id.) Plaintiff Johnson informed Defendants that he was a resident of California and that he conducted his business primarily in California. (Id.) Defendants contacted Plaintiffs several times over the phone in order to discuss their business proposal. (Id. ¶ 30.) The business proposal offered Gemini an exclusive on investment banking deals through CPA360, a web-based portal that matched CPA's clients in need of financial services with financial services providers, such as Gemini. (Id. ¶ 38.) In turn, Alacrity would provide Alethean with a $1 million loan. (Id.) Defendants assured Plaintiffs that revenues generated as a result of the deal would exceed $5 million and that two of the top-100 accounting firms in the country-Defendants HBK Sorce Financial, LLC, and HA&W Wealth Management LLC-were fully committed to Alethean. (Id. ¶¶ 37- 38, 40, 42.)

         Years passed without significant deal flow to Gemini and without proper payments from Alethean to Alacrity. (Id. ¶¶ 48, 50.) After making a formal demand for payment, Defendants Wood, West, and Mazza, among others, began taking the position that they were no longer involved in the Alethean business model. (Id. ¶ 50.) Plaintiffs filed suit against the Alethean entities in California state court. (Id. ¶¶ 50- 51.) The court granted default judgment in December 2013. (Id. ¶ 51.) In early 2015, while trying to collect on the default judgment, Plaintiffs discovered a bankruptcy and a number of lawsuits filed against several Defendants named in this action. (Id. ¶¶ 52-53.) After reviewing the documents involved in the lawsuits, Plaintiffs discovered that Alethean was neither unique nor proprietary and had never been fully implemented or deployed, as previously stated. (Id. ¶¶ 54-57.)

         On October 29, 2015, Plaintiffs filed their Complaint in Los Angeles County Superior Court, asserting the following causes of action: (1) fraud; (2) fraudulent inducement; (3) fraudulent transfer; and (4) constructive fraudulent transfer. (Pl.'s Original Complaint ¶¶ 124-155, ECF No. 1-2.) On November 25, 2015, the case was removed to this Court. (Notice of Removal, ECF No. 1.) On December 9, 2015, Defendants Mazza, West, and Wood filed a Motion to Dismiss for lack of personal jurisdiction. (Def.'s Mot. to Dismiss, ECF No. 10.) On January, 29, 2016, this Court granted Defendants' Motion to Dismiss with leave to amend. (ECF No. 36.)

         On February, 12, 2016, Plaintiffs filed their First Amended Complaint, asserting the same four causes of action. (FAC ¶¶ 128-159.) On February 26, 2016, Defendants West, Wood, and Mazza filed this Motion to Dismiss for improper venue pursuant to Fed.R.Civ.P. 12(b)(3). (Mot. 2.) A timely opposition and reply were filed. (Pl.'s Opp'n to Def.'s Mot. to Dismiss ("Opp'n"), ECF No. 49; (Def.'s Reply to Pl.'s Opp'n ("Reply"), ECF No. 50.) This Motion is now before the Court for consideration.

         III. LEGAL STANDARD

         Federal Rule of Civil Procedure 12(b)(3) provides that if a party brings an action in the wrong court, a defendant can move to dismiss for improper venue. Fed.R.Civ.P. 12(b)(3). Parties may, by contract, designate a forum in which any litigation arising under the contract will take place. Comm. Network Servs. Corp. v. COLT Telcomms., 2004 U.S. Dist. LEXIS 18049, at *7. Litigation commenced elsewhere may be subject to dismissal for improper venue. See Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 595. Most forum-selection clauses enjoy strong presumptions of validity, Spradlin v. Lear Siegler Management. Services Co., 926 F.2d 865, 868 (9th Cir. 1991), and enforceability, Murphy v. Schneider National, Inc., 362 F.3d 1133, 1140 (9th Cir. 2004). A number of courts, including the Ninth Circuit, hold that a forum-selection clause is grounds for a rule 12(b)(3) motion to dismiss for "improper venue." See Argueta v. Banco Mexicano, S.A., 87 F.3d 320, 324 (9th Cir. 1996); Albany Ins. Co. v. Almacanadora Somex, S.A., 5 F.3d 907, 909, fn.3 (5th Cir. 1993).

         When a motion to enforce a forum-selection clause is made pursuant to Fed.R.Civ.P. 12(b)(3), the pleadings need not be accepted as true, and the court may consider facts outside of the pleadings. Murphy, 362 F.3d at 1137 (citing Richards v. Lloyd's of London, 135 F.3d 1289, 1292 (9th Cir.1998) and Argueta v. Banco Mexicano, S.A., 87 F.3d 320, 324 (9th Cir. 1996)).

         Murphy sets a new standard for evaluating a 12(b)(3) motion to dismiss pursuant to a forum-selection clause. If there are contested facts bearing on the enforceability of the forum-selection clause, with respect to the non-moving party's "meaningful day in court, " the court is obligated to draw all reasonable inferences in favor of the non-moving party and resolve all factual conflicts in favor of the non-moving party. Murphy, 362 F.3d. at 1138. If the facts asserted by the non-moving party are sufficient to preclude enforcement of a forum-selection clause, the non-moving party survives a 12(b)(3) motion. Id. at 1139.

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