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O'Quin v. Financial Services Online, Inc.

United States District Court, M.D. Louisiana

October 26, 2018




         This matter comes before the Court on the Motion to Dismiss for Lack of Personal Jurisdiction, Alternative Motion to Transfer Venue, and Alternative Motion for Abstention (Doc. 26) filed by Defendant Financial Services Online, Inc. (“FSO” or “Defendant”). Plaintiff Otis O'Quin (“O'Quin” or “Plaintiff”) opposes the motion. (Doc. 28.) Defendant has filed a reply memorandum. (Doc. 29.) Oral argument is not necessary. The Court has carefully considered the law, the record, and the arguments of the parties and is prepared to rule. For the following reasons, the Court will deny Defendant's motion to dismiss for lack of personal jurisdiction and Defendant's alternative motion for abstention. The Court will grant Defendant's alternative motion to transfer venue.

         I. Relevant Factual Background

         In essence, Plaintiff claims that FSO breached its employment contract with him and wrongfully terminated him. (Doc. 1-1 at 11; Doc. 26-1 at 1.)

         FSO is a Texas corporation with its principal place of business in Katy, Texas. (Doc. 26-1 at 2.) With the exception of Plaintiff, FSO's officers were all located in Texas during Plaintiff's employment with FSO. (Id.) FSO services financial advisors through the Internet via the sale of membership access to its library of financial tools and materials. (Id.) FSO services are all online, and its computer servers are located in Austin, Texas; in addition, all of FSO employees and contractors are currently located in Texas. (Doc. 26-1 at 3.) FSO is not authorized to do business in Louisiana, (Doc. 1 at 3; Doc. 26-1 at 3), and does not have a registered agent for service of process in Louisiana, (Doc. 26-1 at 3). Additionally, FSO claims it has no offices located in Louisiana, does not own any real property or significant assets in Louisiana, and does not maintain a bank account or conduct any advertising in Louisiana. (Id.) FSO's Louisiana customers total only approximately 1% of FSO's customers. (Id.)

         O'Quin entered into an employment contract (“Employment Contract” or “Contract”) with FSO on July 1, 2016. (Doc. 1-1 at 3.) According to the terms of the Contract, FSO agreed to guarantee employment to O'Quin for a minimum of five years, subject to renewals afterward. (Doc. 1-1 at 4.) Based on the Employment Contract, Plaintiff claims that he was a term employee of FSO, with the term of his employment running from July 1, 2016 through July 1, 2021. (Id.) Under the Employment Contract, O'Quin was to be the President of FSO, work about 30-hours a week over a five-day workweek, and perform duties specified in the Contract. (Doc. 1-1 at 4-5.) The Contract also included O'Quin's salary for performing his duties as President, which was $4, 000 per month, the annual salary rate equivalent to the highest paid employee at FSO. (Doc. 1-1 at 5.) Additionally, the Employment Contract required O'Quin to perform his duties from his home office in East Baton Rouge Parish. (See Doc. 1-1 at 3; Doc. 1-1 at 31.)

         In the summer of 2017, the majority owners of FSO, Jim O'Quin and Zach Kirkpatrick (“Kirkpatrick”) allegedly began to institute various changes to FSO. (Id.) Plaintiff disagreed with and opposed these changes. (Id.) When it became clear that the parties could not come to an agreement on the operation of the company, the parties began to discuss buyout proposals. (Doc. 1-1 at 6.) However, Plaintiff, Jim O'Quin, and Kirkpatrick never reached an agreement on a buyout proposal. (Id.) Afterward, Jim O'Quin and Kirkpatrick met with Plaintiff to discuss the new duties they expected him to take on as President of FSO. (Id.) Allegedly, these new duties far exceeded the scope of what Plaintiff agreed to do in his employment contract. (Id.) Plaintiff claims the purpose of these new duties was to attempt to force him to perform more work than he was capable of handling, in an effort to persuade him to quit. (Id.) Due to the Employment Contract, FSO was unable to terminate Plaintiff's employment “at will” because Plaintiff was employed under a fixed-term contract, which had not expired and FSO did not have serious grounds of complaint to terminate him for other reasons. (Id.)

         One month prior to the alleged breach of contract, FSO issued a report outlining the tasks Plaintiff accomplished pursuant to his new duties. (Doc. 1-1 at 7.) FSO was purportedly satisfied with Plaintiff's performance and work at that time. (Id.) In July 2017, Plaintiff sent Jim O'Quin and Kirkpatrick an email specifying his concerns about the future of the company. (Id.) In his correspondence, Plaintiff expressed his intentions to no longer be involved in managing FSO with the title of President, given that the new duties were more than he could handle on a part-time basis, per the original Employment Contract. (Id.) Plaintiff purportedly offered to discuss with Jim O'Quin and Kirkpatrick his intent to resign as President of FSO, but continue under his Contract as an employee of FSO with a different title and duties they all could agree upon. (Id.) Plaintiff claims such changes were permitted under the Contract, which specified that Plaintiff's employment duties or title could be changed by agreement and with approval of the parties. (Id.)

         Plaintiff alleges that in an effort to terminate him without having to pay him for the remaining months of his employment term under the Contract, Kirkpatrick and Jim O'Quin distorted Plaintiff's offer to resign as President as providing notice of Plaintiff's intent to terminate his employment with FSO entirely. (Doc. 1-1 at 8.) Plaintiff asserts that he never intended to resign completely from employment with FSO and that his email specifically excluded that possibility. (Id.) After Plaintiff was aware that his email would be used to terminate his employment with FSO, he rescinded his offer to resign as President of FSO in an email sent to Jim O'Quin and Kirkpatrick on July 24, 2017. (Id.) Kirkpatrick responded by attempting to convince Plaintiff that he should accept Kirkpatrick and Jim O'Quin's buyout proposal, and Kirkpatrick noted that Plaintiff's resignation had already been accepted. (Id.) Kirkpatrick and Jim O'Quin allegedly offered Plaintiff another opportunity to buy out their FSO shares because the parties could not amicably work together. (Id.) Plaintiff claims that Jim O'Quin and Kirkpatrick “forced” Plaintiff to make a decision: either he could remain an employee under his current Employment Contract following the buyout or he would lose his employment with FSO if he failed to agree to their buyout terms. (Doc. 1-1 at 8-9.) Plaintiff attempted to negotiate with Jim O'Quin and Kirkpatrick to lower their selling price to no avail. (Doc. 1-1 at 9.) Purportedly, this allowed Jim O'Quin and Kirkpatrick to make the decision for Plaintiff because they knew he would be unable to meet their price. (Id.)

         On August 7, 2017, Kirkpatrick sent a letter to Plaintiff providing that he was formally accepting Plaintiff's resignation from FSO, effective immediately, noting that FSO appreciated Plaintiff's offer to resign in lieu of the company terminating his employment. (Id.) Plaintiff claims this letter was nothing more than a termination letter. (Doc. 1-1 at 10.) Therefore, Plaintiff asserts that FSO breached its Contract to employ him for a minimum of five years when it terminated Plaintiff without any serious grounds for complaint. (Doc. 1-1 at 11.) As a result, FSO wrongfully terminated Plaintiff. (Id.) Plaintiff claims he is entitled to the remainder of his salary under the terms of the contract and reasonable attorney's fees pursuant to La. R.S. §§ 23:631-632. (Id.)

         II. Discussion

         A. Summary of Ruling

         Defendant's motion raises three issues. First, Defendant argues that Plaintiff's case should be dismissed because Plaintiff cannot satisfy the prima facie burden of establishing that this Court has personal jurisdiction over FSO. Second, and in the alternative, Defendant urges this Court to transfer this case to the Southern District of Texas, Houston Division (“Southern District”) under 28 U.S.C. § 1404(a) because it is a more convenient forum than the Middle District of Louisiana (“Middle District”). Third, and as a further alternative, Defendant requests that the Court stay the case pursuant to the Colorado River abstention doctrine. See Colorado River Water Conservation District v. United States, 424 U.S. 800 (1976).

         In sum, the Court will deny Defendant's motion to dismiss for lack of personal jurisdiction. Plaintiff has met his prima facie burden of demonstrating that this Court could establish specific personal jurisdiction over Defendant. However, the Court will grant Defendant's alternate motion to transfer venue. Pursuant to § 1404(a) and Fifth Circuit jurisprudence, Defendant has shown that a transfer of venue to the Southern District is clearly more convenient. As a result, the Court need not reach the issue of whether to grant Defendant's alternative motion for abstention; this alternative motion is denied without prejudice.

         B. Personal Jurisdiction

         1. Parties' Arguments

         a. Defendants' Motion (Doc. 26) and Supporting Memorandum (Doc. 26-1)

         Defendant argues that Plaintiff's claims against FSO should be dismissed because FSO is not subject to personal jurisdiction in Louisiana. (Doc. 26-1 at 1.)

         Defendant first contends that Plaintiff's case should be dismissed under Rule 12(b)(2) for lack of personal jurisdiction in Louisiana. (Doc. 26-1 at 5.) A federal court has jurisdiction over nonresident defendants if the forum state confers personal jurisdiction over that defendant by statute and if the exercise of jurisdiction is consistent with constitutional due process. (Doc. 26-1 at 5 (citing Ruston Gas Turbines, Inc. v. Donaldson Co., 9 F.3d 415, 418 (5th Cir. 1993)).) Defendant argues that Louisiana's long-arm statute is coextensive with the limits of constitutional due process. (Doc. 26-1 at 5 (citing La. R.S. § 13:3201; Walk Haydel & Assocs., Inc. v. Coastal Power Prod. Co., 517 F.3d 235, 242-43 (5th Cir. 2008)).) Under the Fourteenth Amendment, due process requires that the nonresident defendant must have “minimum contacts” with the forum state and that subjecting the nonresident defendant to the court's jurisdiction comports with “traditional notions of fair play and substantial justice.” (Doc. 26-1 at 5 (citing Walk Haydel, 517 F.3d at 243.)) Although the “minimum contacts” part of the analysis can give rise to “specific” or “general” personal jurisdiction, Defendant argues that Plaintiff can establish neither. (Doc. 26-1 at 6 (citing Marathon Oil Co. v. A.G. Ruhrgas, 182 F.3d 291, 295 (5th Cir. 1999)).)

         As to “general” personal jurisdiction, Defendant asserts that FSO's principal place of business is in Texas, rather than Louisiana, (Doc. 24), FSO is not registered to do business in Louisiana, nor does it maintain any headquarters or offices in Louisiana, and does not have a registered agent for service of process in Louisiana. (Doc. 26-1 at 6.) Additionally, FSO does not have any officers, employees (now that Plaintiff is no longer an FSO employee), or contractors in Louisiana. (Id.) Defendant further contends that FSO did not advertise in Louisiana, does not have a bank account, or own any movable or immovable assets in the state. (Doc. 26-1 at 6 (citing O'Quin Decl. ¶s 3, 7; Kirkpatrick Decl. ¶s 15-16).) According to Defendant, these facts negate the possibility of Louisiana courts exercising general jurisdiction over FSO. (Doc. 26-1 at 6-7 (citing Johnston, 523 F.3d at 609-13; Romero v. North Trail RV Ctr., 2010 WL 3724337, *3-4 (W.D. La. Aug. 20, 2010)).)

         Defendant also asserts that Plaintiff cannot establish “specific” jurisdiction over FSO in Louisiana. (Doc. 26-1 at 7.) The Fifth Circuit articulated a tripartite analysis for the “specific” jurisdiction inquiry: (1) The court determines “whether the defendant has minimum contacts with the forum state”; (2) The court considers “whether plaintiff's cause of action arises out of or results from the defendant's forum-related contacts”; and (3) if the plaintiff establishes the first two prongs, “the burden shifts to the defendant to defeat jurisdiction by showing that its exercise would be unfair or unreasonable.” (Doc. 26-1 at 7 (citing Seiferth v. Helicopteros Atuneros, Inc., 472 F.3d 266, 271 (5th Cir. 2006); see also Nuovo Pignone, SpA v. STORMAN ASIA M/V, 310 F.3d 374, 378 (5th Cir. 2002)).)

         Defendant argues that Plaintiff's petition fails to allege anything tending to show that FSO “purposefully directed” its activities at Louisiana or “purposefully availed itself of the privileges of conducting activities” in Louisiana. (Doc. 26-1 at 7.) Although Plaintiff alleged that his Employment Contract was “executed” in Baton Rouge, Louisiana, (Doc. 1 at 3), Defendant contends that this is inaccurate because Joan Barrett (“Barrett”), FSO's Secretary, executed the contract in Texas, (Doc. 26-1 at 7). Defendant also claims that Kirkpatrick and Jason McEachern (“McEachern”), FSO's Chief Executive Officer (“CEO”), drafted the contract in Texas, but that Plaintiff later signed the contract in Louisiana. (Doc. 26-1 at 7.) Moreover, all face-to-face negotiations of the employment contract took place in Texas. (Doc. 26-1 at 7-8.) Defendant further asserts that the employment contract was not “performed” in Baton Rouge, Louisiana, because although Plaintiff worked from home in Louisiana, he was working with Texas customers and potential customers. (Doc. 26-1 at 8.) Additionally, FSO performed its contractual obligations in Texas. (Id.) Finally, Defendant argues that the actions giving rise to Plaintiff's claims arose from alleged conduct by Defendant in Texas. (Id.) Therefore, because Plaintiff cannot demonstrate that this Court can establish general or specific jurisdiction over FSO in Louisiana, Defendant argues for the case's dismissal. (Doc. 26-1 at 9.)

         b. Plaintiff's Opposition (Doc. 28)

         In sum, Plaintiff argues that he can establish general and specific jurisdiction over FSO in Louisiana. (Doc. 28 at 1.)

         First, Plaintiff asserts that general jurisdiction over FSO in Louisiana is established through FSO's substantial, continuous, and systematic contacts with Louisiana. (Doc. 28 at 2.) Plaintiff, acting as President of FSO directed, controlled, and coordinated FSO's activities from his office in Baton Rouge for over 17 years. (Doc. 28 at 2.) Additionally, general jurisdiction should be found because of FSO's commercial activity over the Internet in Louisiana. (Doc. 28 at 2.) The Fifth Circuit's recently cited the standard in Zippo Manufacturing Company v. Zippo Dot Com, Inc.: “the exercise of jurisdiction is determined by the level of interactivity and commercial nature of the exchange of information that occurs on the Website.” (Doc. 28 at 2 (citing, Inc. v. Bailey, 726 Fed.Appx. 260 (5th Cir. 2018) (per curiam) (citing Mink v. AAAA Dev. LLC, 190 F.3d 333, 336 (5th Cir. 1999) (quoting Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F.Supp. 1119 (W.D. Pa. 1997)).) Thus, FSO is subject to general personal jurisdiction in Louisiana because FSO conducts business over the Internet by engaging in business transactions and entering into subscription contracts with Louisiana residents online. (Doc. 28 at 2.) FSO's website is highly interactive because it involves the knowing and repeated transmission of computer files over the Internet, satisfying the Zippo test. (Doc. 28 at 3.)

         Second, Plaintiff argues that he can assert specific jurisdiction over FSO in Louisiana. (Doc. 28 at 3.) FSO purposefully directed its activities at Louisiana residents because FSO employed O'Quin in Louisiana, and because this case arises out of and relates to FSO's breach of its employment contract with O'Quin. (Doc. 28 at 3.) Additionally, FSO purposefully availed itself of the privileges of conducting activities in Louisiana when FSO “reached out” to Plaintiff by telephone and mail with the aim of entering a long-term contractual relationship with Plaintiff. (Doc. 28 at 3 (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985)).) Plaintiff argues further that the lack of Defendant physically entering Louisiana does not preclude a finding that specific jurisdiction is established. (Doc. 28 at 3 (citing Burger King, 471 U.S. at 476; Central Freight Lines, Inc. v. APA Transport Corp., 322 F.3d 376 (5th Cir. 2003)).)

         c. Defendant's Reply (Doc. 29)

         With respect to general jurisdiction, Defendant notes that neither party disputes that FSO is incorporated and has its principal place of business in Texas. Defendant argues that the facts cited by Plaintiff do not show that FSO is “essentially at home” in Louisiana to be subject to general jurisdiction there. (Doc. 29 at 1 (citing Daimler AG v. Bauman, 134 S.Ct. 746, 761-62 (2014)).) Defendant argues that simply because Plaintiff communicated and met with potential customers residing in Louisiana, Plaintiff has not asserted that he met with customers in Louisiana. (Doc. 29 at 1-2.) Moreover, even if Plaintiff met with some customers in Louisiana, they comprise less than 1% of FSO's total customers, which is insufficient to confer general jurisdiction over FSO in Louisiana. (Doc. 29 at 2 (citing Mercury Rents, Inc. v. Crenshaw Enterprises, LLC, 2017 WL 2380642 (W.D. La. Apr. 13, 2017)).) Defendant also disputes Plaintiff's argument that general jurisdiction is present because FSO conducts a significant portion of its business over the Internet. (Doc. 29 at 2.) Defendant observes that the case Plaintiff cites in support of this assertion concerned specific jurisdiction rather than general jurisdiction, and in that case, the Fifth Circuit found that substantial internet activity did not meet the requirements of specific jurisdiction. (Doc. 29 at 2 (citing, 726 Fed.Appx. 260).)

         As for specific jurisdiction, Defendant disputes whether a contract is sufficient to establish minimum contacts in the opposing party's home forum. (Doc. 29 at 3 (citing Burger King, 471 U.S. at 479).) Instead, in contract cases, courts should consider factors such as “prior negotiations and contemplated future consequences, along with the terms of the contract and the parties' actual course of dealing.” (Doc. 29 at 3 (citing Burger King, 471 U.S. at 479).) Defendant further argues that Plaintiff does not dispute that the face-to-face negotiations leading to the Employment Contract all took place in Texas, the Employment Contract was drafted in Texas, and FSO executed the Employment Contract in Texas. (Doc. 29 at 3.) Plaintiff also performed work in Louisiana and Texas pursuant to the contract. (Doc. 29 at 3.) Thus, the Employment Contract was always centered in Texas. (Doc. 29 at 3.) As a result, the circumstances indicate that FSO would not reasonably anticipate being haled into court in Louisiana (Doc. 29 at 3 (citing World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980).)

         2. Rule 12(b)(2) Standard

         a. Generally

         When a nonresident defendant moves to dismiss for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2), the plaintiff bears the burden of establishing that the court has jurisdiction over the defendant. Herman v. Cataphora, Inc., 730 F.3d 460, 464 (5th Cir. 2013). To withstand a Rule 12(b)(2) motion, a “plaintiff need only present a prima facie case of personal jurisdiction to satisfy its burden.” Id.

         “When a court rules on a motion to dismiss for lack of personal jurisdiction without holding an evidentiary hearing, it must accept as true the uncontroverted allegations in the complaint and resolve in favor of the plaintiff any factual conflicts.” Id. A court determines the existence of personal jurisdiction over a nonresident defendant by examining the “(1) assertion of jurisdiction by the law of the forum, ” and “(2) conformity of the law with the Constitution.” Pedalahore v. Astropark, Inc., 745 F.2d 346, 347 (5th Cir. 1984). A defendant is amenable to the personal jurisdiction of a federal court sitting in diversity to the same extent that it would be amenable to the jurisdiction of a state court in the same forum. Id.

         In a diversity action, a federal district court may exercise personal jurisdiction over a defendant to the extent permitted by the applicable state law. Fed. R. Civ. Proc. 4(e)(1); Panda Brandywine v. Potomac, 253 F.3d 865, 868 (5th Cir. 2001). Pursuant to La. Rev. Stat. § 13:3201, Louisiana's long-arm statute, courts are permitted to exercise personal jurisdiction over nonresidents consistent with the Louisiana State Constitution and the Due Process Clause of the Fourteenth Amendment to the United States Constitution. A & L Energy, Inc. v. Pegasus Group, 791 So.2d 1266, 1270 (La. 2001). A court's exercise of personal jurisdiction over a non-resident defendant comports with the due process clause when (1) the defendant has purposefully availed himself of the benefits and protections of the forum state by establishing minimum contacts with that state and (2) the court's exercise of jurisdiction over that defendant does not offend traditional notions of fair play and substantial justice. Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945).

         The Supreme Court has recognized two types of personal jurisdiction: “general” and “specific” jurisdiction. Bristol-Myers-Squibb Co. v. Superior Court of Cal., 137 S.Ct. 1773, 1779 (2017) (citing Goodyear Dunlop Tire Operations, S.A. v. Brown, 131 S.Ct. 2846, 2851 (2011)). “Specific” jurisdiction, sometimes referred to as “case-linked” or “conduct-linked” jurisdiction, requires an “affiliatio[n] between the forum and the underlying controversy.” Goodyear, 131 S.Ct. at 2851. “[S]pecific jurisdiction is confined to adjudication of ‘issues deriving from, or connected with, the very controversy that establishes jurisdiction.” Id. (citation ...

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