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Fiore Industries, Inc. v. Ericsson

United States District Court, D. New Mexico

October 30, 2019




         Plaintiff Fiore Industries, Inc. brings causes of action for breach of contract and various torts against Defendants John Ericsson and Algastar, Inc. Defendants move to dismiss individual defendant John Ericsson for lack of personal jurisdiction and move to dismiss all counts in the Complaint for failure to state a claim. Doc. 12. The Complaint alleges that Defendants agreed to pay Plaintiff for certain services in connection with a scientific algae-growth project, that Plaintiff performed those services, but that Defendants never paid Plaintiff. Defendants strenuously deny making any such agreement. Further, even taking as true all of the facts asserted in Plaintiff's Complaint, Defendants assert that the Complaint fails to state a claim and so should be dismissed under Federal Rule of Civil Procedure 12(b)(6). With regard to Plaintiff's tort claims (Counts I, II, and V), the Court agrees and hereby dismisses those claims without prejudice.[1] Plaintiff's remaining claims, however, survive.


         Plaintiff filed its Complaint in federal court on December 26, 2018. Doc. 1. Plaintiff alleges that it is a New Mexico corporation with its principal place of business in Bernalillo County, New Mexico. Compl. ¶ 1. Defendant John Ericsson is a citizen of the state of Florida, and Defendant AlgaStar, Inc. is a Delaware corporation with its principal place of business in Gulf Breeze, Santa Rosa County, Florida. Id. ¶¶ 2-3. According to the Complaint, Plaintiff entered into an oral contract with Defendants Ericsson and AlgaStar. Id. at ¶ 10. Specifically, Plaintiff asserts it agreed to provide Defendants with substantial support for the development of intellectual property for a scientific research project relating to the accelerated growth of algae. Id. ¶ 10. Under that contract, Defendants agreed to pay Plaintiff for the provision of technical support, a New Mexico tax credit, and various materials. Id. ¶ 11. Plaintiff provided the support, but Defendants never paid Plaintiff. Id. ¶¶ 11-12. The Complaint brings seven counts: (1) fraudulent inducement; (2) negligent misrepresentation; (3) promissory estoppel; (4) breach of contract; (5) prima facie tort; (6) unjust enrichment; and (7) quantum meruit.

         In the memorandum in support of their motion to dismiss, Defendants contest almost all of these facts. They assert that they were working with Los Alamos National Laboratories (“LANL”) and several universities, laboratories, and businesses on a project to use short wavelength radiation to stimulate growth of microalgae and cyanobacteria. Doc. 13 at 2. It was LANL who proposed that Defendant AlgaStar seek local assistance for developing hardware and software for the project. Id. A consultant for Plaintiff recommended that Defendant AlgaStar work with Rio Electro Optics Corporation (“Rio”). Id. Rio and Defendant AlgaStar entered into a non-disclosure agreement in 2017, under which neither profits nor losses would be shared absent a further written agreement. Id. In turn, it was Rio who chose to work with Plaintiff, because Rio wanted to make use of Plaintiff's facility. Id. Defendants met with Rio over the course of the project to monitor its status and observe test runs. Id. at 2-3. During these meetings, Plaintiff and Defendants discussed creating a written agreement that would allow the sharing of profits and losses from this project, but no agreement was ever reached. Id. at 3. The project resulted in units that failed to function. Id. Despite being asked, both Rio and Plaintiff refused to help Defendants make the units operational. Id.

         In the motion to dismiss, Defendants first argue that the Court lacks personal jurisdiction over Defendant Ericsson, who resides in Florida. They assert that Defendant Ericsson has not subjected himself to personal jurisdiction in New Mexico for claims against him in his individual capacity because he solely acted on behalf of a corporation, Defendant Algastar, Inc. Second, Defendants move to transfer venue to Florida based on a contract Defendants and Rio signed. Third, Defendants argue that no contract existed between Plaintiff and either defendant. Finally, Defendants argue that the Complaint fails to support the tort claims against them because it does not sufficiently allege the existence of a duty. For the reasons explained below, the Court finds that Plaintiff sufficiently alleges facts to support personal jurisdiction over Defendant Ericsson, that venue is proper in New Mexico, and that Plaintiff has sufficiently pled contract and quasi-contract claims. However, the Court agrees with Defendants that Plaintiff's tort claims are insufficiently pled.


         I. The Court Has Personal Jurisdiction Over the Contract Claims Against Defendant Ericsson.

         “The plaintiff bears the burden of establishing personal jurisdiction over the defendant.” Behagen v. Amateur Basketball Ass'n of U.S.A., 744 F.2d 731, 733 (10th Cir. 1984). “Prior to trial, however, when a motion to dismiss for lack of jurisdiction is decided on the basis of affidavits and other written materials, the plaintiff need only make a prima facie showing.” Id. A district court may determine whether the plaintiff has made a prima facie showing without holding an evidentiary hearing. OMI Holdings, Inc. v. Royal Ins. Co. of Canada, 149 F.3d 1086, 1091 (10th Cir. 1998). “The plaintiff may make this prima facie showing by demonstrating, via affidavit or other written materials, facts that if true would support jurisdiction over the defendant.” Id. “The allegations in the complaint must be taken as true to the extent they are uncontroverted by the defendant's affidavits.” Behagen, 744 F.2d at 733. “If the parties present conflicting affidavits, all factual disputes are resolved in the plaintiff's favor, and the plaintiff's prima facie showing is sufficient notwithstanding the contrary presentation by the moving party.” Id.

         A. The “fiduciary shield doctrine” versus the “no imputed contacts” rule.

         Defendants' primary argument for dismissal of Defendant Ericsson is based on the “fiduciary or corporate shield doctrine, which bars the exercise of personal jurisdiction over corporate officers for actions taken solely on behalf of the corporation.” Doc. 13 at 8. “Under the ‘fiduciary shield doctrine,' a nonresident corporate agent generally is not individually subject to a court's jurisdiction based on acts undertaken on behalf of the corporation.” Newsome v. Gallacher, 722 F.3d 1257, 1275 (10th Cir. 2013) (quoting 3A William Meade Fletcher et al., Fletcher Cyclopedia of the Law of Corporations § 1296.20 (Sept. 2012 update)).

         In Newsome v. Gallacher, the Tenth Circuit clarified the “significant confusion” surrounding this doctrine. 722 F.3d at 1275-79. The court surveyed prior case law and concluded that it sometimes failed to distinguish between the fiduciary shield doctrine “and a related concept that cautions against imputing contacts to a business's operators.” Id. at 1275. According to the second concept, which the Tenth Circuit called the “no-imputed-contacts rule, ” “[e]mployees' contacts with the forum state are not to be judged according to their employer's activities there.” Id. (citing Calder v. Jones, 465 U.S. 783, 790 (1984)). The no-imputed-contacts rule derives from federal constitutional due process and thus places limits on the state's exercise of its long-arm statute. In other words, the Constitution forbids the exercise of personal jurisdiction over an individual based on anything other than that individual's own contacts with the forum state. Id. at 1277-78. By contrast, under the “fiduciary shield doctrine, ” even the individual defendant's own contacts with the forum state do not justify the exercise of personal jurisdiction if those contacts were taken on behalf of a corporation. Id. at 1278. The fiduciary shield doctrine is a matter of state law, not federal constitutional due process. Id.

         As the Tenth Circuit instructed in Newsome, 722 F.3d at 1275, the Court will discuss each of these concepts separately in turn. Thus, the Court will first address whether Defendant Ericsson's own contacts with the forum state are sufficient to support personal jurisdiction in New Mexico. If they are, the Court will then address whether New Mexico state law would nonetheless disregard those contacts under the fiduciary shield doctrine.

         B. Defendant Ericsson's own contacts are sufficient to exercise personal jurisdiction over him.

         “[A]n analysis of whether a court's exercise of specific personal jurisdiction comports with the Due Process Clause is a two-step inquiry.” Pro Axess, Inc. v. Orlux Distribution, Inc., 428 F.3d 1270, 1276 (10th Cir. 2005). “First we consider whether ‘the defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there.” Id. (quoting World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980)). “Second, if the defendant's actions create sufficient minimum contacts, we must then consider whether the exercise of personal jurisdiction over the defendant offends traditional notions of fair play and substantial justice.” Id. at 1276-77 (internal quotation marks omitted).

         “In determining whether a defendant has established sufficient minimum contacts with the forum state, we examine whether the defendant ‘purposefully availed itself of the privilege of conducting activities within the forum State.'” Id. at 1277 (quoting Hanson v. Denckla, 357 U.S. 235, 253 (1958)) (alterations omitted). “A defendant's contacts are sufficient if the defendant purposefully directed its activities at residents of the forum, and the plaintiff's claim arises out of or results from actions by the defendant himself that create a substantial connection with the forum state.” Id. (internal quotation marks omitted).

         1. Minimum contacts

         As Defendants point out, Plaintiff's complaint is extremely short on details as to Defendant Ericsson's individual contacts with New Mexico. Compl. ¶¶ 10-11. Attached to its opposition to the motion to dismiss, however, Plaintiff submits the affidavit of Bill Miera, Chief Executive Officer of Fiore Industries. Doc. 16 at 15-17 (“Miera Aff.”).[2] Mr. Miera attests that, “[i]n approximately 2012, ” he “began working with John Ericsson and his company AlgaStar, Inc. in their project to develop a system for the accelerated growth of algae.” Miera Aff. ¶ 3. “Ericsson and AlgaStar wanted the assistance of Fiore Industries because of our extensive experience and connections in New Mexico with the engineering community and the two national laboratories located in the state (Sandia National Laboratories and Los Alamos National Laboratories), our access to materials that were vital to their project, our access to laboratories to perform test and engineer product, and our ability to obtain tax credits and funding from the state government.” Id. ¶ 4. “Ericsson and AlgaStar first approached us.” Id. ¶ 5. “We agreed with Ericsson and AlgaStar that, if we could not finalize an equity arrangement, Ericsson and AlgaStar would simply compensate Fiore Industries monetarily for what it provided to the project.” Id.

         In Pro Axess, Inc., the Tenth Circuit found purposeful availment based on a similar agreement to provide services. There, an out-of-state defendant corporation solicited a Utah company's assistance in procuring sunglasses frames in circumstances where “services necessary for the contract were to be performed in Utah.” Pro Axess, Inc., 428 F.3d at 1277. “Although the agreement between the parties was a single contract, fulfilling the contract required a continuing relationship based on the provision of services.” Id. In addition, the defendant corporation engaged in “various direct communications” with the plaintiff in Utah, which “provide[s] additional evidence that [defendant corporation] pursued a continuing business relationship with a Utah corporation.” Id. at 1277-78. This is directly analogous to Defendant AlgaStar's alleged activity: according to Mr. Miera, Defendant AlgaStar solicited Plaintiff's assistance in New Mexico; it engaged in a continuing relationship with a New Mexico corporation; and it engaged in various direct communications with Plaintiff in New Mexico. Miera Aff. ¶¶ 4-11.

         This leaves the question of whether Defendant Ericsson personally had contacts in New Mexico. Plaintiff provides evidence he did. Mr. Miera attests that, “[t]hroughout the process of the project, [Plaintiff] always-and only-dealt with John Ericsson.” Miera Aff. ¶ 6. “Mr. Ericsson was also physically in New Mexico and personally working on the project for the majority of the time we worked on the project.” Id. “I personally exchanged numerous emails with Mr. Ericsson.” Id. ¶ 7. “Ericsson and AlgaStar eventually abandoned the project, at which point Fiore Industries increased its demands to be paid for its work and materials.” Id. ¶ 10. “Ericsson refused, instead only offering an extension of debt that would be paid when AlgaStar received funding.” Id. “At one point in these negotiations, Ericsson attempted to secure himself-and not AlgaStar-a ‘gross sales licensing fee payable to me or my assigns as the inventor.'” Id. ¶ 11. In addition, Plaintiff attaches an email purportedly from Defendant Ericsson in which Defendant Ericsson writes, “As I have suggested before-lets schedule a conference call to get these matters resolved to everyone's satisfaction, otherwise most all our years of working together will become a loss.” Doc. 16 at 18 (emphasis added). At this stage, this evidence sufficiently supports Plaintiff's allegation that Defendant Ericsson personally worked with Plaintiff in New Mexico on the project that is the subject of this lawsuit. See Rusakiewicz v. Lowe, 556 F.3d 1095, 1103 (10th Cir. 2009) (‚ÄúThese are contacts in Utah by the defendants themselves, not . ...

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