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LLC v. N2 Global Solutions, Inc.

United States District Court, W.D. Missouri, Western Division

February 14, 2019

N2 SELECT, LLC, et al., Plaintiffs,
N2 GLOBAL SOLUTIONS, INC., et al., Defendants.



         This case arises from an alleged scheme by a group of individuals living in New York to defraud a group of investors living in Kansas City, Missouri. Plaintiffs, a limited liability company and eight individual investors, [1] allege Defendants engaged in fraud, misrepresentation, breach of fiduciary duty, breach of contract, and legal malpractice by failing to disclose crucial information, embezzling from the company, and creating fraudulent documents.

         Now before the Court is Defendants Joseph F. Daniels (“Daniels”) and his law firm, McCarter & English, LLP's (“McCarter & English”) (collectively “the Lawyer Defendants”) joint Motion to Dismiss for lack of personal jurisdiction (Doc. 11). Because Plaintiffs have failed to carry their burden of proving facts sufficient to make a prima facie showing of personal jurisdiction over the Lawyer Defendants, the motion is GRANTED.


         Personal jurisdiction concerns “whether the controversy or the defendant has sufficient contracts, ties, or relationships with the forum to give the court the right to exercise judicial power over the defendant . . . .” 5B Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1351 (3d ed. 2004). Personal jurisdiction can be specific or general. Viasystems, Inc. v. EBM-Pabst St. Georgen GmbH & Co., KG, 646 F.3d 589, 593 (8th Cir. 2011). “Specific jurisdiction refers to jurisdiction over causes of action arising from or related to a defendant's actions within the forum state, while general jurisdiction refers to the power of a state to adjudicate any cause of action involving a particular defendant, regardless of where the cause of action arose.” Id. (internal quotations and ellipses omitted). In this case, Plaintiffs allege the Court possesses specific jurisdiction over the Lawyer Defendants.[2]

         In a diversity case such as this one, personal jurisdiction exists only to the extent permitted by the forum state's “long-arm statute” and the Due Process Clause of the Fourteenth Amendment. Myers v. Casino Queen, Inc., 689 F.3d 904, 909 (8th Cir. 2012); see Fed. R. Civ. P. 4(k)(1)(A). Missouri's long-arm statute authorizes personal jurisdiction over defendants who transact business, contract, or commit a tort within the state. Viasystems, 646 F.3d at 593; Mo. Rev. Stat. § 506.500. These categories are construed broadly, and the statute provides jurisdiction to the full extent permitted by the Due Process Clause. Id.

         “[B]ecause the Missouri long-arm statute authorizes the exercise of jurisdiction over nonresidents to the extent permissible under the due process clause, ” a federal court need only consider “whether the assertion of personal jurisdiction would violate” due process. Aly v. Hanzada for Import & Export Co., LTD, 864 F.3d 844, 849 (8th Cir. 2017) (quotations and citations omitted).[3]The court considers whether there is “sufficient minimum contacts between a defendant and the forum state so that jurisdiction over a defendant with such contacts may not offend traditional notions of fair play and substantial justice.” Id. (quotations and citations omitted). This decision is made by weighing five factors: “(1) the nature and quality of the contacts with the forum state; (2) the quantity of those contacts; (3) the relationship of those contacts with the cause of action; (4) Missouri's interest in providing a forum for its residents; and (5) the convenience or inconvenience to the parties, ” with the court giving “significant weight” to the first three factors. Id.

         To survive a motion to dismiss for lack of personal jurisdiction, a plaintiff must plead sufficient facts to support a reasonable inference that the defendant is subject to jurisdiction within the state. Creative Calling Sols., Inc. v. LF Beauty Ltd., 799 F.3d 975, 979 (8th Cir. 2015). Once a motion has been filed, the parties may submit evidence, such as affidavits, to bolster their positions. Id. The plaintiff bears the burden of proof and must establish jurisdiction by a preponderance of the evidence.[4] Id. Where, as here, the case is at the motion stage, the court may not dismiss for lack of personal jurisdiction if the evidence, viewed in the light most favorable to the plaintiff, is sufficient to support a conclusion that the exercise over the defendant is proper. Id.


         For purposes of resolving the pending motion, the Court finds the relevant jurisdictional facts, viewed in the light most favorable to Plaintiffs, to be as follows. These facts are based on allegations in the Second Amended Complaint (“the Complaint”) (Doc. 52), [5] the evidence (affidavits and emails) submitted by the parties, and reasonable inferences.

         From as early as 2009 until the present, Defendants Paul Amelio (“Amelio”) and David Katz (“Katz”) and others operated Defendant N2 Global Solutions, Inc. (“N2 Global”) to defraud Plaintiffs out of millions of dollars by claiming they had developed a wall socket technology that could significantly reduce and manage energy consumption as well as detect noxious gases, smoke, moisture, and mold. Katz and Amelio embezzled most of the money Plaintiffs invested, preventing the company from commercializing its technology. Katz and Amelio provided fraudulent investor documents, including multiple sets of conflicting bylaws, as well as fraudulent financial statements, capitalization tables, purchase orders, and tax returns.

         The fraud was allegedly carried out with the assistance of N2 Global's attorney, Daniels, who manufactured and/or backdated a series of fraudulent documents, including board resolutions, bylaws, and investment documents. Daniels used his position as a partner with the law firm of McCarter & English to provide a credible front. He was successful in inducing investment, and he continued to induce investment even after he was on actual notice of troubling litigation against N2 Global.

         The Lawyer Defendants have no ties to Missouri. Daniels is a New York attorney and resident who has not worked in Missouri. McCarter & English is a New Jersey limited liability partnership with its principal place of business in Newark, New Jersey, and an office in New York, New York. It is not registered with the Missouri Secretary of State to do business within Missouri, nor does it employ individuals in Missouri, have an office in Missouri, or own any Missouri real estate.

         The Lawyer Defendants acted as legal counsel to N2 Global. Although they communicated with a Kansas City-based attorney, Art Fillmore (“Fillmore”), who represented Plaintiff N2 Select and other Plaintiffs, [6] they never provided or sent letters or documents to Plaintiffs in connection with their work for N2 Global or otherwise. The Lawyer Defendants were located ...

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