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Learschmidt Investment Group, LLC v. AB-Alpine, LLC

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

August 12, 2019

LEARSCHMIDT INVESTMENT GROUP, LLC, Plaintiff,
v.
AB-ALPINE SPE, LLC., et al., Defendants.

          ORDER

          NANETTE K. LAUGHREY, UNITED STATES DISTRICT JUDGE.

         On June 19, 2019, defendant AB-Alpine SPE, LLC (“AB-Alpine”) and plaintiff LearSchmidt Investment Group, LLC (“LearSchmidt”) appeared before the Court for an evidentiary hearing on the issue of personal jurisdiction. After considering the exhibits, testimony, and arguments of counsel, the Court finds that personal jurisdiction over AB-Alpine is proper.

         I. Background

         In January 2017, LearSchmidt entered into an Asset Purchase Agreement (“APA”) with IQ Payment Systems, LLC d/b/a Alpine Payment Systems (“Alpine”), in which LearSchmidt purchased the revenues produced by a portfolio of merchant accounts, described more fully in Section 1.1 of the APA (the “Accounts”). See Doc. 38-1 (2017 APA). Under the terms of the 2017 APA, LearSchmidt purchased Alpine's right, title, and interest to all revenue produced for the portfolios identified in the 2017 APA for $1, 740, 000. Pursuant to the agreement, Alpine guaranteed $60, 000 in monthly revenue for eighteen months, and LearSchmidt was to receive notice and right of first refusal to purchase the rights or interests in the Accounts from Alpine, should Alpine elect to sell or dispose of any of its rights.

         LearSchmidt alleges that in or around May 2018 Alpine “sold its rights and interests in the Accounts to [AB-Alpine], ” without notice pursuant to its right of first refusal. Doc. 38 (First-Amended Complaint), ¶ 26. LearSchmidt asserts that “the obligations and covenants of Alpine under the [2017 APA] are binding upon [AB-Alpine] as the successor and assign of Alpine.” Id. at ¶ 62.

         AB-Alpine previously moved to dismiss LearSchmidt's claims for lack of personal jurisdiction, pursuant to Federal Rule of Civil Procedure 12(b)(2).[1] The Court denied the motion finding that LearSchmidt had made a prima facie showing of personal jurisdiction, Doc. 73, and scheduled the matter for an evidentiary hearing, Doc. 72.

         II. Discussion

         LearSchmidt carries the burden of proof and must demonstrate personal jurisdiction by a preponderance of the evidence. Dakota Industries, Inc. v. Dakota Sportswear, Inc., 946 F.2d 1384, 1387 (8th Cir. 1991); Cantrell v. Extradition Corp. of America, 789 F.Supp. 306, 303 (W.D. Mo. 1992) (“[I]f the Court holds an evidentiary hearing-in a manner similar to determining the issue at trial-the plaintiff must demonstrate personal jurisdiction by a preponderance of the evidence.” (quotations omitted)).

         It is uncontested that AB-Alpine is not a signatory to the 2017 APA forming the basis of LearSchmidt's claims, see Doc. 38-1, nor does AB-Alpine, a Florida limited liability company located in Boca Raton, Florida, maintain offices, own property, or operate facilities in Missouri, Doc. 10-1, ¶¶ 3-10. However, LearSchmidt asserts that personal jurisdiction is proper because AB-Alpine (1) is a mere “continuation of” or corporate “successor to [Alpine]” and (2) “engaged in business transactions” in Missouri, sufficient to satisfy the Missouri long-arm statute and due process. Doc. 55, pp. 3, 5; Doc. 38 at ¶ 12. After consideration of the testimony and evidence presented by the parties, the Court finds that LearSchmidt has met its burden of establishing personal jurisdiction by a preponderance of the evidence.

         A. Mere Continuation

         Jurisdictional contacts of a corporate predecessor may be imputed to its successor without offending due process where the successor is “merely a continuation” of its predecessor. Koch Supplies, Inc. v. Charles Needham Indust., 1990 WL 274485, *3 (W.D. Mo. 1990); see also Lakota Girl Scout Council, Inc. v. Havey Fund-Raising Mgmt., Inc., 519 F.2d 634, 637 (8th Cir. 1975) (explaining that “if the corporation is [the defendant's] alter ego, its contacts are [the defendant's] and due process is satisfied”); Patin v. Thoroughbred Power Boats Inc., 294 F.3d 640, 653 (5th Cir. 2002) (“[F]ederal courts have consistently acknowledged that it is compatible with due process for a court to exercise personal jurisdiction over an individual or a corporation that would not ordinarily be subject to personal jurisdiction in that court when the individual or corporation is an alter ego or successor of a corporation that would be subject to personal jurisdiction in that court.”); Massi v. Holden, No. 09-cv-1821, 2011 WL 6181258, at *5 (D. Minn. Dec. 13, 2011) (“[P]ersonal jurisdiction over a corporate successor may be based on its predecessor's contacts with the forum, provided the successor would be liable for its predecessor's acts under the forum's law.” (quotation omitted)). The theory is that because the predecessor and successor are the same entity, the jurisdictional contacts of one are the jurisdictional contacts of the other for purposes of the due process analysis. Patin, 294 F.3d at 653; see also Green v. Montgomery Ward & Co., 775 S.W.2d 162, 166 (Mo.Ct.App. 1989) (“The rationale for this is quite simple. It would be all too easy for a corporation to immunize itself from liability by utilizing such a device as a change of name.”).

         To determine whether a successor company is “merely a continuation” of its predecessor the Court considers whether there has been “a transfer or sale of all, or substantially all” of the predecessor's assets. Med. Shoppe Int'l, Inc. v. S.B.S. Pill Dr., Inc., 336 F.3d 801, 804 (8th Cir. 2003) (quoting Grand Labs v. Midcon Labs, 32 F.3d 1277, 1281 n.5 (8th Cir. 1994)). Where such a transfer of assets has taken place, the Court considers whether: (1) there is “common identity of officers, directors and stockholders”; (2) incorporators of the successor also incorporated the predecessor; (3) “business operations are identical”; (4) the transferee uses the same equipment, labor force, supervisors, and name of the transferor; and (5) notice has been given of the transfer to employees or customers. Med. Shoppe Int'l, Inc., 336 F.3d at 804 (citing Roper Elec. Co. v. Quality Castings, Inc., 60 S.W.3d 708, 711-13 (Mo. App. 2001)). Although no single factor is determinative, the first factor-common identity of officers, directors, and stockholders-is a “key” factor. Helms v. Prime Tanning Corp., 2010 WL 1935952, *10 (W.D. Mo. May 11, 2010).

         LearSchmidt argues that AB-Alpine “is a continuation of Alpine, ” Doc. 17, ¶ 36, because “some or all of the assets of Alpine were sold and purchased by . . . ‘AB Alpine.'” Doc. 17-1 (Affidavit of Andrew Lear), ¶ 9. AB-Alpine, via affidavit and through the testimony of its Chief Corporate Development Officer, Richard Feldman, acknowledges purchasing “many of the assets and liabilities of [Alpine], ” but denies assuming any liabilities pursuant to the 2017 APA.[2] Doc. 54-1 (Affidavit of Darrell Dirks), ¶ 4; see also Doc. 50-1 (2018 APA). Schedule B to the 2018 APA between Alpine and AB-Alpine summarizes the assets purchased by AB-Alpine to include “residual payments” owed to Alpine under various portfolios; “[a]ny and all other agreements and rights to compensation” due to Alpine; “[a]ll tangible/Intangible Assets listed in the Bill of Sale, such as computers, office furniture, other office equipment, trade names, patents, company websites, social media accounts etc.”; “[c]ustomer lists, records, and files”; “[a]ll rights to the current phone numbers used in [Alpine's] Business”; all merchant agreements; “[a]ll merchant books and records”; and “[a]ll rights to reserves and deposits.” Doc. 50-1, p. 24 (Purchased Assets). Thus, despite AB-Alpine's intent to limit its liabilities under the 2017 APA, LearSchmidt has established that there was a substantial transfer of assets from Alpine to AB-Alpine, and Court turns to its analysis of the five Roper factors. See Med. Shoppe Int'l, Inc., 336 F.3d at 804 (finding a “substantial transfer of assets” sufficient to invoke mere continuation doctrine).

         First, AB-Alpine acknowledges that when this lawsuit was initiated, until sometime after its removal to federal court, Brian McDevitt was a part owner of AB-Alpine. Doc. 1 (Notice of Removal), p. 3 (identifying Brian J. McDevitt as one of three members of AB-Alpine). Mr. McDevitt was also a part owner of Alpine and one of two members of Alpine to execute the 2017 APA on its behalf. Doc. 38-1, p. 11. AB-Alpine asserts that Mr. McDevitt is no longer a member of AB-Alpine. Doc. 54-1, ¶ 21. However, this does not negate the fact that at the time of the asset transfer and alleged breach, as well as for the first few months of this ...


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