United States District Court, W.D. Louisiana, Monroe Division
OCEAN SKY INTERNATIONAL, L.L.C., ET AL.
THE LIMU COMPANY, L.L.C., ET AL.
A. DOUGHTY MAG. JUDGE.
REPORT AND RECOMMENDATION
L. HAYES UNITED STATES MAGISTRATE JUDGE.
the undersigned Magistrate Judge, on reference from the
District Court, is a compound motion to dismiss for lack of
personal jurisdiction, Fed.R.Civ.P. 12(b)(2), and for failure
to state a claim upon which relief can be granted,
Fed.R.Civ.P. 12(b)(6), filed by defendants, The Limu Company,
L.L.C. (“LIMU”) and Gary Raser. [doc. # 25]. For
reasons that follow, it is recommended that the motion to
dismiss be denied, in its entirety.
April 19, 2018, Ocean Sky International, Inc. and Suni
Enterprises, Inc. filed the instant diversity suit, 28
U.S.C. § 1332, against the Limu Company, L.L.C.
(“LIMU”), Gary Raser (LIMU's CEO and
founder), plus other unknown individuals and entities
fictitiously named as, “Does 1-25.” Plaintiffs
alleged in their complaint that,
LIMU is a multi-level marketing company - otherwise known as
an “MLM” company - that manufactures and
distributes dietary supplements worldwide. As with other MLM
companies, LIMU markets and sells products through a network
of independent distributors (also referred to as
“Promoters”) who are remunerated pursuant to a
“Compensation Plan, ” which provides for a
structured series of rankings, commissions, and bonuses based
upon their sales volumes and the sales of distributors placed
The individuals that are aligned below a particular
distributor are known as that distributor's
“downline” or “downline
organization.” The downline may also be referred to as
To become a distributor for LIMU, an individual must submit a
“Distributor Application.” By submitting the
Distributor Application, distributors are required to
purchase products in order to earn any commissions and are
strongly encouraged to purchase a $499.00 or $999.00 fast
track pack (“Packs”) to earn in all areas of
compensation. Once purchasing a Pack, the distributor may
either resell the products to his or her customer base, or,
in the alternative, may consume the products for their own
Once the distributor receives his or her identification
number, a contract is formed between LIMU and the
distributor. The Distributor Application, Compensation Plan,
and Policies & Procedures collectively comprise
LIMU's “Distributor Agreement.”
According to the terms of the Distributor Agreement,
specifically Section 8(c)(ii) of LIMU's Policies &
Procedures, a distributor may only be terminated for cause.
LIMU entices distributors to join its sales force through the
offer of the “MLM Promise.” The MLM Promise is a
representation that if a distributor works hard and builds
his or her downline, then after a few years, the distributor
can sit back and enjoy a care-free lifestyle by living off
the distributor's residual commissions generated by his
or her downline organization. In some instances, LIMU
represents the MLM Promise by indicating to its distributors
that they “can build generational wealth.”
The promise of a lifestyle change is what entices many
distributors to join LIMU. However, in reality, once a
distributor works hard to achieve a high rank with the
corresponding income level, LIMU uses pre-textual reasons to
terminate the distributor and summarily confiscates his or
her downline and residual income for LIMU's own benefit.
Since LIMU cuts off the distributor's income, the
distributor is left without any funds to assert his or her
rights, and this is what LIMU counts on.
(Amend. Compl., ¶¶ 10-13, 16-19).
predecessors-in-interest joined LIMU in 2004. (Amend. Compl.,
¶ 25). Plaintiffs, in turn, joined LIMU based upon the
MLM Promise made by Raser and other LIMU corporate
representatives. Id. “Plaintiffs believed that
after they built their downline organization to a certain
level of success they would be able to possess sufficient
residual income from their downline to allow them to enjoy a
more leisurely lifestyle.” Id., ¶ 26. By
some unspecified date, plaintiffs achieved LIMU's top
rank, and were earning approximately $75, 000 per month,
collectively. Id., ¶ 27.
around November 1, 2017, Raser told the owner of Ocean Sky
and another LIMU distributor that they needed to start
enrolling more distributors quickly, or it was over.
Id., ¶¶ 32-33. Thereafter, the
relationship between LIMU and plaintiffs quickly
deteriorated, and on December 11, 2017, LIMU suspended Ocean
Sky and Suni's distributorships because of multiple
alleged violations of LIMU's Policies and Procedures.
Id., ¶¶ 41-42. On March 12, 2018, LIMU
formally terminated Ocean Sky and Suni's
distributorships. Id., ¶ 43.
contend that LIMU's actions were fraudulent, made in bad
faith, and constitute a breach of the Distributor Agreement.
Id., ¶ 44. Accordingly, they seek damages for
breach of written and oral contracts (against LIMU and DOES
1-25); for fraud and negligent misrepresentation (against all
defendants); and for detrimental reliance (against LIMU).
6, 2018, LIMU and Raser filed the instant motion to dismiss.
Defendants contend that the court lacks personal jurisdiction
to entertain the suit against Raser. In addition, defendants
seek dismissal of plaintiffs' claims on the merits for
failure to state a claim upon which relief can be granted.
Plaintiffs filed their opposition to the motion to dismiss on
June 27, 2018. [doc. # 27]. Defendants filed a reply brief on
July 9, 2018. [doc. # 30]. Plaintiffs filed a sur-reply on
September 10, 2018, and an amended complaint on September 12,
2018. [doc. #s 36 & 37]. Thus, the matter is ripe.
federal district court sitting in diversity may exercise
personal jurisdiction over a nonresident defendant as long
as, (1) the long-arm statute of the forum state confers
personal jurisdiction over that defendant; and (2) exercise
of such jurisdiction by the forum state does not transgress
due process protections under the United States Constitution.
Latshaw v. Johnston, 167 F.3d 208, 211
(5th Cir. 1999). Louisiana's long-arm statute
extends jurisdiction to the full limits of the United States
Constitution. See La. R.S. § 13:3201(B).
Accordingly, the sole issue here is whether exercising in
personam jurisdiction over the non-resident defendant
comports with federal due process. Jackson v. Tanfoglio
Giuseppe, S.R.L., 615 F.3d 579, 584 (5th Cir.2010)
personal jurisdiction to satisfy due process requirements,
the plaintiff must establish that “(1) the defendant
purposefully availed himself of the benefits and protections
of the forum state by establishing ‘minimum
contacts' with the forum state, and (2) the exercise of
personal jurisdiction over that defendant does not offend
‘traditional notions of fair play and substantial
justice.'” Moncrief Oil Intern., Inc. v. OAO
Gazprom, 481 F.3d 309, 311 (5th Cir. 2007)
minimum contacts may give rise to either
“general” or “specific” jurisdiction,
plaintiffs argue only the latter, which
exists when the “plaintiff's cause of action . . .
arises out of or results from the defendant's
forum-related contacts.” Willow Bend, L.L.C. v.
Downtown ABQ Partners, L.L.C., 612 F.3d 390, 392 (5th
Cir.2010). Stated differently, “[s]pecific or
case-linked jurisdiction depends on an affiliatio[n] between
the forum and the underlying controversy (i.e., an activity
or an occurrence that takes place in the forum State and is
therefore subject to the State's regulation).”
Walden v. Fiore, 571 U.S. 277, 134 S.Ct. 1115, 1125,
n.6 (2014) (citations and internal quotation marks omitted).
Fifth Circuit applies a three-step analysis for the specific
(1) whether the defendant has minimum contacts with the forum
state, i.e., whether it purposely directed its activities
toward the forum state or purposefully availed itself of the
privileges of conducting activities there; (2) whether the
plaintiff's cause of action arises out of or results from
the defendant's forum-related contacts; and (3) whether
the exercise of personal jurisdiction is fair and reasonable.
Monkton Ins. Servs., Ltd. v. Ritter, 768 F.3d 429,
433 (5th Cir.2014) (citing Seiferth v. Helicopteros
Atuneros, Inc., 472 F.3d 266, 271 (5th Cir.2006)).
plaintiff can successfully establish the first two prongs,
then the burden shifts to defendant to show that exercising
jurisdiction would prove unfair or unreasonable. Id.
a State to exercise jurisdiction consistent with due process,
the defendant's suit-related conduct must create a
substantial connection with the forum State.”
Walden, supra. The court must look to the
defendant's contacts with the forum state itself, not the
defendant's contacts with persons who reside there.
Id. (citation omitted). In other words, “[d]ue
process requires that a defendant be haled into court in a
forum State based on his own affiliation with the State, not
based on the ‘random, ...