United States District Court, D. Colorado
ORDER on MOTIONS TO DISMISS FIRST AMENDED COMPLAINT
FOR LACK OF PERSONAL JURISDICTION
R.
Brooke Jackson United States District Judge
I.
BACKGROUND
This
case arises out of an online auction conducted by Defendant,
Royalty Exchange, Inc. (RX) by which Plaintiff, Otimo Music,
Inc. (Otimo) purchased purported royalty rights in a music
catalog (“Catalog”) associated with the hip hop
artist King Lil' G. ECF No. 15 at ¶1-2. Defendant
MIH Entertainment, LLC (“MIH”) was the company
that sold these rights to Otimo using the RX auction.
Id. at ¶2. Defendant Michael Conner
(“Conner”), an individual, acted on behalf of MIH
in this transaction. Id. at ¶8. Otimo filed a
First Amended Complaint raising claims of breaches of
contracts against RX and MIH; securities fraud under the
Colorado Securities Act against MIH, Conner, and RX; and
common law fraud against MIH and Conner. See
generally ECF No. 15, First Amended Complaint. Otimo
alleges that MIH falsely claimed to have certain unencumbered
rights in the Catalog and sold them pursuant to the internet
auction operated by RX. Id. at ¶2. Otimo
further alleges that RX misrepresented its level of due
diligence to verify the legitimacy of the rights being sold,
causing it to pay $420, 000 for rights that do not exist or
are commercially useless. Id. at ¶1.
Otimo
is a Canadian Corporation located in Montreal, Quebec Canada,
and is a citizen of Canada. Id. at ¶4. Otimo is
the successor in interest to all of the claims of Ryan
Stotland, the individual who made the purchase of the
purported royalty rights from MIH on RX. Id. RX is a
Delaware Corporation with its principal place of business in
Denver, Colorado and is a citizen of Colorado. Id.
at ¶5. MIH is a California limited liability company
with its principal place of business in Burbank, California.
Id. at ¶9. Conner is a citizen of California.
Id. at ¶7.
Otimo's
fraud claim arises in connection with a contract that,
significant for present purposes, has a forum selection
clause that selected Colorado as the forum for commencing
litigation. Id. at ¶10. MIH Defendants filed a
motion to dismiss for lack of personal jurisdiction, ECF No.
20. Plaintiff filed a response to this motion, ECF No. 22,
and MIH Defendants filed a reply to this response, ECF No.
29. This motion has been fully briefed and is ripe for
review.
II.
STANDARD OF REVIEW
As a
district court sitting in diversity, I must exercise personal
jurisdiction according to both the forum state's long-arm
statute and the Constitution. Equifax Servs., Inc. v.
Hitz, 905 F.2d 1355, 1357 (10th Cir. 1990).
Colorado's long-arm statute confers the maximum
jurisdiction permitted under the Due Process Clause of the
Fourteenth Amendment. AST Sports Sci., Inc. v. CLF
Distribution Ltd., 514 F.3d 1054, 1057 (10th Cir. 2008).
Thus, my analysis will focus solely on the constitutional due
process analysis.
Due
process for jurisdictional purposes requires two elements.
First, defendants must have “minimum contacts”
with the forum state. World-Wide Volkswagen Corp. v.
Woodson, 444 U.S. 286, 291 (1979). The minimum contacts
test may be satisfied through a showing of either general or
specific jurisdiction. OMI Holdings, Inc. v. Royal Ins.
Co. of Canada, 149 F.3d 1086, 1090-91 (10th Cir. 1998).
General jurisdiction exists when defendants have
“continuous and systematic” contacts in the
state, even if those are unrelated to pending litigation.
Goodyear Dunlop Tires Operations, S.A. v. Brown, 564
U.S. 915, 919 (2011). Specific jurisdiction exists when the
defendants “purposely directed” their activities
at the forum state and the alleged injuries “arise out
of or relate to” those activities. OMI
Holdings, 149 F.3d at 1091.
Second,
if sufficient minimum contacts exist, I must determine
whether the exercise of personal jurisdiction over defendants
offends “traditional notions of fair play and
substantial justice.” OMI Holdings, 149 F.3d
at 1091 (quoting Asahi Metal Indus. Co. v. Superior Court
of Cal., 480 U.S. 102, 113 (1987)). In other words, I
must determine whether the exercise of personal jurisdiction
over defendants is “reasonable” in light of the
circumstances of the case. Id. Minimum contracts and
reasonableness work hand in hand. “[T]he weaker the
plaintiff's showing on minimum contacts, the less a
defendant need show in terms of unreasonableness to defeat
jurisdiction.” Trujillo v. Williams, 465 F.3d
1210, 1221 (10th Cir. 2006) (quoting Pro Axess, Inc. v.
Orlux Distribution, Inc., 428 F.3d 1270, 1280 (10th Cir.
2005)).
While
personal jurisdiction must comport with due process,
jurisdictional objections can be waived. See Burger King
Corp. v. Rudzewicz, 471 U.S. 462, 486, at n. 14 (1985)
(“We have noted that, because the personal jurisdiction
requirement is a waivable right, there are a variety of legal
arrangements by which a litigant may give express or implied
consent to the personal jurisdiction of the court.”)
(internal quotation marks and citation omitted).
To meet
the test described in OMI Holdings, plaintiffs bear
the burden of showing that personal jurisdiction exists.
However, plaintiff's “burden is light” at
this stage. AST Sports Sci., 514 F.3d at 1056. In
ruling on a Fed.R.Civ.P. 12(b)(2) motion without holding an
evidentiary hearing, plaintiff “need[s] only [to] make
a prima facie showing of personal jurisdiction to defeat the
motion.” OMI Holdings, 149 F.3d at 1091. To do
so, plaintiff must plead sufficient facts to show that, if
true, jurisdiction would be proper over defendants.
Id. The burden then shifts to the defendants to show
that jurisdiction is not proper. Id. Any factual
discrepancies must be resolved in plaintiff's favor
unless the allegations in the complaint are contradicted by
affidavits. Wenz v. Memery Crystal, 55 F.3d 1503,
1505 (10th Cir. 1995). If the latter occurs, plaintiff must
submit a counter-affidavit or other written material to
support jurisdiction. Melea, Ltd. v. Jawer SA, 511
F.3d 1060, 1065 (10th Cir. 2007).
III.
ANALYSIS
Otimo
raises two arguments to show that the exercise of personal
jurisdiction over MIH and Conner would be proper. The first
is that MIH consented to Colorado's jurisdiction in
executing the Revised Listing Agreement dated June 28, 2017
with RX. This agreement states: “The laws of the State
of Colorado govern all matters arising from this agreement
and the exclusive forum shall be a federal or state court in
Denver County, Colorado.” ECF No. 15, Ex. 2
(“Listing Agreement”) at ¶10.1. Otimo argues
that it is an intended third-party beneficiary of the
contract and that its dispute with MIH is so interrelated
with the Listing Agreement that the forum selection clause is
properly invoked. The second argument is that absent a
finding of consent to jurisdiction, this Court also has
specific personal jurisdiction. Otimo argues that the MIH
defendants, in using RX as a platform for selling its
purported rights, “purposefully directed” their
activities at Colorado, and that Otimo's injuries
“arise out of or relate to” those activities so
as to establish sufficient minimum contacts. As explained
below, I agree that this Court can exercise jurisdiction over
MIH pursuant to the forum selection clause of the Listing
Agreement. Because I find that MIH consented to jurisdiction
in Colorado, I will not address the alternative argument of
specific jurisdiction over MIH based on Colorado's
long-arm statute. However, because Conner is not a party to
this agreement, I must analyze his minimum contacts with the
forum and whether the exercise of personal jurisdiction over
him comports with traditional notions of fair play and
substantial justice. On this basis, again as explained below,
I find that this Court also has personal jurisdiction over
Conner.
1)
Invoking the Forum Selection Clause of the Listing
...