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Gallagher v. Roberts

United States District Court, S.D. California

April 11, 2017

ELAINE GALLAGHER, Plaintiff,
v.
TIMOTHY ROBERTS, an individual; PANAMA REAL ESTATE VENTURES, INC., a corporation; PANAMA REAL ESTATE VENTURES, LLC, a Delaware Limited Liability Company; PANAMA REAL ESTATE FUND NO. 2, LLC, a Delaware Limited Liability Company; MICHAEL GALLAGHER and DOES 1-30, inclusive, Defendants.

          ORDER GRANTING MOTION TO DISMISS

          Hon. Roger T. Benitez United States District Judge.

         Now before the Court is a motion to dismiss brought by Defendants Timothy Roberts, Panama Real Estate Ventures, Inc., and Panama Real Estate Fund No. 2, LLC.[1] (Mot., ECF No. 10.) Plaintiff opposed. (Opp'n, ECF No. 13.) For the reasons stated below, the Court GRANTS the motion to dismiss.

         BACKGROUND[2]

         Plaintiff Elaine Gallagher (“Plaintiff” or “Elaine Gallagher”) and her former husband, Michael Gallagher, [3] are both real estate sales people. (Compl. ¶¶ 12-13.) In 2008, when the Gallaghers were still married, Michael O'Riordan introduced them to Defendant Timothy Roberts. (Id. ¶ 14.) The Gallaghers understood O'Riordan to be a wealthy, successful man, who described Roberts as a “smart investor” and his “best friend.” (Id.) At some point, Roberts met with the Gallaghers and advised them about a real estate investment in Panama. (Id. ¶ 16.) Roberts intended to form an entity that would purchase a large parcel of seaside property in the Republic of Panama (the “Panama Property”). (Id.) Roberts offered the Gallaghers a 25% interest in the entity for cash consideration of $250, 000. (Id.) He explained that after escrow closed in three to six months, the Gallaghers would receive a return of 100% of their initial investment and own a 25% interest in the entity. (Id.; see also ¶ 21.) Roberts did not provide the Gallaghers with a business plan or any documentation on the nature, risks, or projected figures of the investment. (Id. ¶ 17.)

         In late 2009, the Gallaghers agreed to make the investment and entrusted $250, 000 to Roberts. (Id. ¶ 18.) Elaine Gallagher and Michael Gallagher each have a 50% interest in the investment and its proceeds. (Id. ¶ 19.) The Gallaghers never received any indicia of ownership in the entity, but Roberts represented that their ownership was in Defendant Panama Real Estate Fund No. 2, LLC (“Fund No. 2”). (Id. ¶ 20.) Roberts formed Fund No. 2 in January 25, 2011, more than a year after he received the Gallaghers' money. (Id.)

         When the Gallaghers did not receive the return of their initial investment after six months, they began to inquire of Roberts. (Id. ¶ 21.) Roberts assured the Gallaghers that the property purchase would close and blamed title problems, legal issues, and difficult sellers for the delay. (Id.) Beginning in 2010 and continuing to 2016, Roberts provided the Gallaghers with engineering drawings of the proposed development of the land, elevation drawings, and lists of the amenities that would be added to the development. (Id.) In addition to the 25% interest in the Panama Property, Roberts offered the Gallaghers an additional $200, 000 payment over and above the return of the original $250, 000, a 33% interest in a second property, and an oceanfront lot on the second property. (Id.) Almost five years after the Gallaghers' investment, Fund No. 2 executed a contract to purchase the Panama Property on August 7, 2015. (Id. ¶ 22.)

         Plaintiff has repeatedly demanded the return of the $250, 000, but her demands have been refused. She now brings suit, alleging four claims for relief. Her first claim for relief alleges a violation of the Securities Act of 1933 against all Defendants. Her second claim for relief seeks an accounting against all Defendants. The third claim for relief seeks rescission of the purchase under California securities law against all Defendants. The fourth claim for relief alleges fraud against Defendant Roberts. Defendants Roberts, Panama Real Estate Ventures, Inc., and Panama Real Estate Fund No. 2, LLC move to dismiss for lack personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2), for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6), and for failing to plead fraud with particularity pursuant to Federal Rule of Civil Procedure 9(b).

         DISCUSSION

         I. Personal Jurisdiction

         Defendants move to dismiss Defendant Panama Real Estate Ventures, Inc. for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2). Plaintiff alleges that Panama Real Estate Ventures, Inc. is a corporation organized and existing under the laws of the Republic of Panama, but that its principal place of business is the State of California. (Compl. ¶ 3.) Defendants counter that the company is organized and has its principal place of business in Panama, and that it does not have sufficient contacts with the State of California. (Opp'n at 5.)

         A federal court may only exercise personal jurisdiction where such jurisdiction satisfies both the forum state's long-arm statute and constitutional principles of due process. Lee v. City of Los Angeles, 250 F.3d 668, 692 (9th Cir. 2001). Because California's long-arm statute permits the exercise of jurisdiction to the fullest extent permitted by the U.S. Constitution, the only question the Court must answer is whether the exercise of jurisdiction over Defendant Panama Real Estate Ventures, Inc. would be consistent with due process. See Cal. Civ. Proc. Code § 410.10 (“[A] court of this state may exercise jurisdiction on any basis not inconsistent with the Constitution of this state or of the United States.”). The traditional bases of personal jurisdiction that comport with due process are service while physically present in the forum, domicile, or consent. Absent the traditional bases, a defendant must have such “minimum contacts” with the forum state that “maintenance of the suit does not offend traditional notions of fair play and substantial justice.” Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945).

         On a Federal Rule of Civil Procedure 12(b)(2) motion to dismiss, the plaintiff bears the burden of establishing that personal jurisdiction exists. Mavrix Photo, Inc. v. Brand Techs., Inc., 647 F.3d 1218, 1223 (9th Cir. 2011). Where, as here, the court considers the motion without holding an evidentiary hearing, the plaintiff need only make a prima facie showing of jurisdictional facts to withstand the motion to dismiss. Id. A “prima facie” showing means that the plaintiff need only demonstrate facts that, if true, would support jurisdiction over the defendant. Lindora, LLC v. Isagenix Int'l, LLC, 198 F.Supp.3d 1127, 1135 (S.D. Cal. 2016). The plaintiff cannot simply rest on the bare allegations of her complaint, but uncontroverted allegations in the complaint must be taken as true. Id. at 1136. The Court may not assume the truth of allegations which are contradicted by affidavit, but it resolves factual disputes in plaintiff's favor. Id.

         A. Traditional Bases of Jurisdiction

         The parties dispute whether Panama Real Estate Ventures, Inc.'s principal place of business is California. This disagreement concerns the corporation's domicile. A corporation will be deemed “domiciled” in its state of incorporation and where it has its principal place of business. See Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 924 (2011); Daimler AG v. Bauman, 134 S.Ct. 746, 760 (2014) (“With respect to a corporation, the place of incorporation and principal place of business are ‘paradigm . . . bases for general jurisdiction.'”). If Plaintiff ...


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