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Fulton Energy Group, LLC v. Burau

United States District Court, D. North Dakota, Southern Division

March 1, 2017



          JANET T. NEFF, United States District Judge

         Pending before the Court is Defendants' Motion to Dismiss Pursuant to Fed.R.Civ.P. 12(b)(2) and 12(b)(3) or, in the Alternative, to Transfer Venue Pursuant to 28 U.S.C. § 1404(a) (Dkt 19). Plaintiff has filed a Response (Dkt 21), and Defendants have filed a Reply (Dkt 23). Having fully considered the parties' submissions, the Court concludes that oral argument would not assist in the disposition of the issues presented. See W.D. Mich. LCivR 7.2(d). The Court concludes that this case is properly transferred to North Dakota under § 1404(a).

         I. Background

         This case arises out of Michigan-based Plaintiff Fulton Energy's purchase of Renegade Rentals, LLC, a North Dakota business, from Defendants Darin Burau and Tyler Huntington, each of whom retained a 12.5 percent membership interest in Renegade Rentals after the sale. Plaintiff filed this action alleging that Defendants failed to disclose and/or misrepresented the financial condition of Renegade Rentals in stating that the company had no undisclosed material debts, liabilities or obligations of any kind-thereby fraudulently inducing Plaintiff to enter into Stock Purchase Agreements, by which Fulton Energy paid Defendants $1, 375, 000.00 each for shares of Renegade Rentals.

         Plaintiffs Complaint alleges claims of (1) Breach of Contract/Declaratory Judgment; (2) Fraudulent Inducement/Misrepresentation; and (3) Unjust Enrichment (Dkt 1). The Complaint contains the following key allegations.

         Fulton Energy Group, LLC ("Fulton Energy") is a Michigan limited liability company, with its principal place of business in Grand Rapids, Michigan (Dkt 1 at PageID.1, ¶ 1). The members of Fulton Energy are Chris Frain, Charles Andrew Shaffer, Leigh Jennings, Steve Coe and Carey Bissonet (id. at PageID.2, ¶ 2). Chris Frain and Steve Coe reside in Colorado, while the remaining members reside in Michigan (id., ¶ 3). Accordingly, Fulton Energy is a citizen of Michigan and Colorado for diversity jurisdiction purposes (id., ¶ 4). Darin Burau ("Burau") is an individual residing in Williston, North Dakota (id., ¶ 5). Tyler Huntington ("Huntington") is an individual residing in St. George, Utah (id., ¶ 6).

         On or about July 8, 2014 and July 30, 2014, Fulton Energy entered into Share Purchase Agreements with Burau and Huntington, respectively, for the purpose of buying a portion of their ownership interests in Renegade Rentals, LLC ("Renegade Rentals") (id. at PageID.3, ¶ 1). At the time their respective Share Purchase Agreements were executed, Burau was the owner of fifty-five percent (55%) of the issued and outstanding shares of Renegade Rentals, and Huntington was the owner of forty-five percent (45%) (id., ¶¶ 2, 3). Fulton Energy purchased shares from Burau and Huntington respectively, resulting in Fulton Energy acquiring seventy-five percent (75%) of the issued and outstanding shares in Renegade Rentals (id., ¶ 4). Under the Agreements, Defendants made certain representations and warranties to Fulton Energy with respect to the financial condition of Renegade Rentals (id., ¶ 5). However, after acquiring the shares of Renegade Rentals, Fulton Energy learned of several, non-disclosed liabilities of Renegade Rentals that existed prior to Fulton Energy's ownership (id. at PageID.4, ¶ 10). In short, Renegade Rentals' financial condition was misrepresented by Burau and Huntington (id. at PageID.4, ¶ 11). All told, Defendants concealed over $750, 000.00 in known liabilities at the time the Agreements were entered into by the parties (id. at PageID.5, ¶ 13). All of the liabilities referenced in the Complaint, ¶ 12, existed prior to the closing of the Agreements (id., ¶ 14).

         II. Analysis

         Defendants move to dismiss this case on the ground that the Court lacks personal jurisdiction over Defendants, who are domiciled in North Dakota and Utah, and this case involves a North Dakota corporation that has never conducted business in Michigan. Defendants assert that the only connection to Michigan is that it is the home state of Plaintiff. Defendants contend that venue in this district is improper for the same reasons-Defendants are not residents of Michigan, and none of the alleged acts or omissions giving rise to Plaintiffs claims occurred in Michigan, 28 U.S.C. § 1391(b), which likewise warrants dismissal.

         Alternatively, Defendants move to transfer this case to North Dakota pursuant to 28 U.S.C. § 1404(a), where litigation involving Renegade Rentals, and related issues between the instant parties, is already pending.

         A. Motion to Dismiss

         The parties do not dispute the governing legal principles for jurisdiction and venue. They also do not dispute the essential underlying facts. They dispute whether this case must be dismissed for lack of personal jurisdiction over Defendants and/or improper venue.

         When a defendant moves to dismiss a complaint for lack of personal jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2), the plaintiff bears the burden of demonstrating that personal jurisdiction exists. Air Prods. & Controls v. Safetech Int'l, Inc., 503 F.3d 544, 549 (6th Cir. 2007) (citing Serras v. First Tenn. Bank Nat'l Ass'n, 875 F.2d 1212, 1214 (6th Cir. 1989)). Jurisdictionmustbe assessed individually with regard to each defendant. See Calder v. Jones, 465 U.S. 783, 790 (1984).

         Fed R. Civ. P. 12(b)(3) provides for a motion to dismiss for improper venue. Similarly, 28 U.S.C. § 1406(a) allows a district court to dismiss or transfer a case due to improper venue. There appears to be a split of authority as to which party has the burden of proof when a challenge to venue is raised. See Redd v. Stacer, No. 1:13-cv-1227, 2014 WL 2478136, at *2 (W.D. Mich. June 3, 2014) (citing Reilly v. Meffe, 6F.Supp.3d 760, 765 (S.D. Ohio 2014)). Regardless, venue must be '"proper for each claim and as to each defendant in order for the court to retain the action.'" Pioneer Surgical Tech., Inc. v. Vikingcraft Spine, Inc., No. 2:09-CV-271, 2010 WL 2925970, at *2 (W.D. Mich. July 21, 2010) (quoting Verbis v. Iowa Dep't of Human Servs., 18 F.Supp.2d 770, 774 (W.D. Mich. 1998)).

         On the record presented, the Court is left with considerable doubt that personal jurisdiction exists over both Defendants and that venue is proper in this district. Despite Plaintiff s arguments to the contrary, this case has its entire nexus in North Dakota, which is the situs of the parties' transactions and the business operations at issue, and where Plaintiffs solicited the purchase of Renegade Rentals, giving rise to the liability asserted against Defendants, North Dakota and Utah residents. Defendants conducted Renegade Rentals solely in North Dakota to engage in business services pertaining to the North Dakota oil fields. Defendants now are subject to contract and tort claims, ostensibly governed by North Dakota law. The fact that Plaintiff operates from its headquarters in Michigan, communicated with Defendants from Michigan, and after the purchase of Renegade Rentals moved certain administrative functions here, carries little weight in this overall scheme of circumstances. But the Court need not engage in a full analysis of jurisdiction and venue.

         Even if jurisdiction exists and venue is proper here, as Plaintiff contends, the circumstances leave no doubtthatthe case should be transferred to North Dakota pursuant to 28 U.S.C. § 1404(a). The Court proceeds with the analysis accordingly.

         B. ...

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