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WTI Partners v. Ahn

United States District Court, D. Colorado

March 22, 2019

WTI PARTNERS, Plaintiff,


          Michael E. Hegarty, United States Magistrate Judge.

         Before the Court is Defendants Jonathan White, Matthew Scarlett, and WJSM Enterprises, Inc.'s [d/b/a Alcohol by Volume, Inc. (“ABV”)] Motion to Dismiss for Lack of Personal Jurisdiction [filed November 19, 2018; ECF No. 16]. The matter is fully briefed, and the Court finds oral argument would not materially assist the Court in its adjudication of the motion. For the reasons that follow, the Court grants the motion to dismiss Plaintiff's claims without prejudice.


         I. Procedural History

         Plaintiff, WTI Partners (“WTI”), initiated this action on August 31, 2018, then filed the operative Amended Complaint against Defendants Gregory Ahn (“Ahn”), Jonathan White (“White”), Matthew Scarlett (“Scarlett”), Cult of 8, Inc. (“CO8”), and Alcohol by Volume, Inc. (“ABV”), alleging claims for breach of contract, breach of fiduciary duty, unjust enrichment, fraud, and civil conspiracy, and seeking a declaration as to its interests in the entity Defendants and an accounting as to the royalties and proceeds allegedly owed to WTI, which claims to have had a purported equity share in CO8 and/or ABV. Am. Compl., ECF No. 7.

         Scarlett, White, and ABV (collectively, the “ABV Defendants”) filed the present motion on November 19, 2018, arguing that WTI fails to demonstrate the Court's personal jurisdiction over them because they are not residents of nor have any financial or other contacts with Colorado. Further, the ABV Defendants assert that although Scarlett and White visited Colorado in 2015 to meet with certain WTI officials, these meetings did not relate to any loans or other financial matters concerning CO8 and/or ABV but, rather, involved discussions with WTI partner, Robert Niemeyer, regarding the creation of a new venture and/or Scarlett's and White's concerns about potential improper reporting by Ahn to WTI.

         WTI counters that the ABV Defendants' contacts with Colorado are “actually substantial and directly connected to this dispute.” Resp. 2. WTI contends that Scarlett and White made several multi-day visits to Colorado to meet with WTI and discuss business operations and financial records of the enterprise at issue here, primarily stayed overnight at Niemeyer's residence in Boulder, and corresponded with WTI via telephone and email while sending various company documents and financial reports to WTI in Colorado. WTI asserts that it was during, and as a result of, these visits/communications that it suffered the harms set forth in the operative pleading. It also argues that the ABV Defendants' activities were “inextricably intertwined” with those of Ahn and CO8 and, thus, if jurisdiction is proper over the latter Defendants, it should be proper over the former.

         The ABV Defendants reply that emails among Scarlett, White, and Niemeyer in late 2015 reflect that Scarlett and White knew nothing about Ahn's financial reporting to WTI until that point and reported their suspicions at that time, and that the bulk of communications with WTI involved the creation of a new enterprise in which Niemeyer agreed to partner with Scarlett and White. In other words, the ABV Defendants contend that their few contacts with Colorado, particularly with WTI, did not involve activities from which WTI claims it was harmed.

         II. Statement of Facts

         The following are factual allegations made by WTI in its Complaint and offered by the parties for jurisdictional analysis.[1]

         1. WTI is a Colorado general partnership whose partners are all residents of and citizens of Colorado. WTI provides investment funds and business counseling and makes personal connections for other ventures throughout the United States of America.

         2. Steven Signer is currently the managing partner of WTI and Robert Niemeyer (“Niemeyer”) is a majority partner.

         3. ABV is a Nevada corporation with its principal place of business located in Carmel, California.

         4. Scarlett is an individual residing in and a citizen of Minnesota.

         5. White is an individual residing in and a citizen of Arizona.

         6. In 2010, at Ahn's request, WTI provided seed funding for CO8, a seller and distributor of wine, in return for equity ownership in CO8 and repayment of its investment with interest.

         7. Between 2010 and 2013, WTI invested $628, 500.00 in CO8. ECF No. 7, ¶ 24. CO8 paid $270, 300.00 in interest on this amount, but nothing toward the principal. Id. ¶ 40.

         8. In late 2014, CO8 and WTI agreed to amend the terms of their 2010 repayment agreement to provide for payment of royalties to WTI on Alias-branded wines sold by CO8 (the “Royalty Terms”). Id. ¶¶ 37-39. WTI was induced to amend the agreement based on withheld sales and revenue information about CO8's other wine brands. Id. ¶ 41.

         9. Ahn, White, and Scarlett traveled to Colorado in the second half of 2011 to meet with WTI representatives. At that time, Ahn, Scarlett, and White were employees of Cannonball Wine Company, and the purpose of the meeting was to discuss Cannonball's sales team and wine distribution. ECF No. 16-1, ¶ 3; ECF No. 21, ¶ 3.

         10. In early 2012, Scarlett and White formed ABV.

         11. At or about the same time, Scarlett and White joined with Ahn to create an enterprise between CO8 and ABV pursuant to an Equal Interest Agreement in which each individual would have one-third interest in the enterprise. ECF No. 30-4, ¶¶ 10-11; ECF No. 30-5, ¶¶ 24-26.

         12. Ahn, White, and Scarlett traveled to Colorado from January 30 to February 1, 2012 to meet with Signer and Niemeyer to discuss a “new venture.” Ahn introduced White and Scarlett to Signer as “individuals responsible for sales at ¶ 8.” ECF No. 30-1, ¶ 6. Mr. Signer met with the same individuals on at least one other occasion during that period to discuss WTI's potential investment in the new venture. Id. ¶ 7.

         13. Thereafter, ABV and CO8 operated as though they were part of one enterprise, with CO8 performing obligations of ABV and paying debts of ABV. ECF No. 30-4, ¶ 15.

         14. CO8 transferred trademarks, brands, labels, and equity to ABV for no consideration, spent millions of dollars building and protecting ABV's trademarks, and took out millions of dollars in debt for the mutual, ...

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