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EP–19–CV–196–KC
10-22-2019
FEDERAL TRADE COMMISSION, and State of Ohio ex rel. Attorney General Dave Yost, Plaintiffs, v. EDUCARE CENTRE SERVICES, INC., et al., Defendants.
Christopher E. Brown, J. Ronald Brooke, Jr., Federal Trade Commission, Washington, DC, Erin B. Leahy, Office of the Attorney General, Jeffrey Loeser, Columbus, OH, for Plaintiffs. Aldo R. Lopez, Daniel H. Hernandez, Ray, McChristian & Jeans, P.C., El Paso, TX, Mitchell N. Roth, Roth Jackson Gibbons Condlin, PLC, Genevieve C. Bradley, McLean, VA, for Defendants.
Christopher E. Brown, J. Ronald Brooke, Jr., Federal Trade Commission, Washington, DC, Erin B. Leahy, Office of the Attorney General, Jeffrey Loeser, Columbus, OH, for Plaintiffs.
Aldo R. Lopez, Daniel H. Hernandez, Ray, McChristian & Jeans, P.C., El Paso, TX, Mitchell N. Roth, Roth Jackson Gibbons Condlin, PLC, Genevieve C. Bradley, McLean, VA, for Defendants.
ORDER
KATHLEEN CARDONE, UNITED STATES DISTRICT JUDGE On this day, the Court considered Defendant Mohammad "Mike" Souheil's Motion to Dismiss for Lack of Jurisdiction ("Souheil Motion to Dismiss"), ECF No. 33, and Relief Defendant 9896988 Canada Inc.'s ("989") Motion to Dismiss for Lack of Jurisdiction ("989 Motion to Dismiss"), ECF No. 40. For the following reasons, the Motions are DENIED .
I. BACKGROUND
The following facts and allegations are taken from Plaintiffs Federal Trade Commission ("FTC") and State of Ohio Attorney General's Complaint for Permanent Injunction and Other Equitable Relief ("Complaint"), ECF No. 9, Plaintiffs' Opposition to Defendant Mohammad Souheil's Motion to Dismiss, ECF No. 54, and Plaintiffs' Opposition to Relief Defendant 9896988 Canada's Motion to Dismiss, ECF No. 56.
At this stage, the Court treats the allegations in Plaintiffs' Complaint as true solely to assess the merits of Defendants' Motions to Dismiss pursuant to Rule 12(b)(2)'s well-established standard. See Clemens v. McNamee , 615 F.3d 374, 378 (5th Cir. 2010).
Plaintiffs are the FTC, an independent federal agency charged with enforcing the Federal Trade Commission Act, 15 U.S.C. §§ 41 – 58, ("FTCA"), and the State of Ohio via its Attorney General, Dave Yost. Compl. ¶¶ 12, 14. Defendant Souheil is a Canadian citizen and co-owner and president of co-defendants Prolink Vision, S.R.L. ("Prolink") and 989, as well as the telecommunications service provider, Globex Telecom Inc. Id. ¶¶ 36, 39. Relief Defendant 989 is a Canadian corporation alleged to have received funds related to the conduct challenged in the Complaint. Id. ¶¶ 51–52, 158–60.
The FTC brings this suit seeking injunctive and other equitable relief pursuant to sections 13(b) and 19 of the FTCA, 15 U.S.C. §§ 53(b), 57b, and the Telemarketing and Consumer Fraud and Abuse Prevention Act ("Telemarketing Act"), 15 U.S.C. §§ 6101 – 08. The FTC challenges Defendants' practices as violations of section 5(a) of the FTCA, 15 U.S.C. § 45(a), which prohibits unfair or deceptive acts or practices in or affecting commerce, and the FTC's Telemarketing Sales Rule ("Telemarketing Rule"), 16 C.F.R. Part 310, which governs the National Do Not Call Registry. Compl. ¶ 1. The State of Ohio brings this action pursuant to the Telemarketing Act, 15 U.S.C. § 6103, empowering an attorney general of any state to bring a civil action to enforce violations, along with the Ohio Consumer Sales Practices Act, Ohio Rev. Code Ann. § 1345.07 (West 2017), and the Ohio Telephone Solicitation Sales Act, Ohio Rev. Code Ann. § 4719.08 (West 2018). Compl. ¶ 2.
Plaintiffs allege that Defendants Souheil and 989—along with individual co-defendants Sam Madi, Wissam Abedel Jilal, and Charles Kharouf, corporate defendants Prolink and Educare Centre Services, Inc. ("Educare"), and Tripletel, Inc., and defendants in the related action FTC v. Madera Merchant Services , 3:19–cv–00195–KC, Madera Merchant Services, LLC and its principals ("Madera")—have engaged in "a deceptive telemarketing scheme" targeting "consumers throughout the United States" in violation of the FTCA, the Telemarketing Rule, and Ohio's Consumer Sales Practices Act and Telephone Solicitation Sales Act. Id. ¶¶ 5, 11.
Since at least February 2016, Defendants have allegedly carried out a scheme to market Educare's credit card interest rate reduction service to U.S. consumers through Prolink's telemarketing operation. Id. ¶ 68. In practice, this means that telemarketers make unsolicited phone calls to consumers with high double-digit interest rate credit cards and offer to provide them with the rate reduction service—which would "reduce the interest rates on the consumers' cards to 0%–10%, or transfer the balance to credit cards with substantially lower interest rates"—in exchange for a fee. Id. ¶¶ 69, 75. The telemarketers tell the consumers that the fee—"which typically ranges from $798 to $1,192"—must be paid upfront in order to obtain the lowered interest rates. Id. ¶ 80.
Prolink's telemarketing and Educare's interest rate reduction service allegedly rely on deceptive practices. Id. ¶¶ 68–93. The phone calls often initiate with recorded voice messages that "offer consumers the opportunity" to obtain lower interest rates and "instruct consumers to press a button on the telephone keypad to hear more." Id. ¶ 70. Pushing the button connects consumers with live Prolink telemarketers, who frequently fail to disclose the seller of the service as Educare, instead providing names "that sound like the name of a bank or credit card company." Id. ¶¶ 71–73. The telemarketers often list the final four digits of the consumers' credit card number in order to create the impression that consumers are speaking with a representative of their bank or credit card company. Id. The telemarketers then obtain consumers' personal information, such as social security number, email address, credit card issuer and number, and bank account and routing numbers. Id. ¶ 79. Though the telemarketers assure consumers that the service will substantially reduce their interest rates and promise a "100% money-back guarantee," the service "does not typically deliver the promised substantial rate reduction" and "do[es] not honor the refund promises." Id. ¶¶ 100, 105–07.
Plaintiffs allege that Prolink's telemarketing calls and Educare's interest rate reduction service violate federal and state statutes and administrative rules. Specifically, Plaintiffs allege the following violations: the FTCA's prohibition on the use of misrepresentations or deceptive omissions of material fact in or affecting commerce, 15 U.S.C. § 45(a), Compl. ¶ 120; the Telemarketing Rule's prohibitions on misrepresenting any debt-relief service in a telemarketing call, 16 C.F.R. § 310.3(a)(2)(x), Compl. ¶ 129, placing telemarketing calls to numbers on the Do Not Call Registry, 16 C.F.R. § 310.4(b)(1)(iii)(B), Compl. ¶ 135, using prerecorded telemarketing messages without prior express permission, 16 C.F.R. § 310.4(b)(1)(v)(A), Compl. ¶ 136, and failing to truthfully and promptly disclose the identity of the seller, 16 C.F.R. § 310.4(d)(1), Compl. ¶ 137; the Ohio Consumer Sales Practices Act's prohibition on engaging in unfair or deceptive practices in consumer transactions, Ohio Rev. Code Ann. § 1345.02 (West 2017), Compl. ¶ 148; and the Ohio Telephone Solicitation Sales Act's regulatory requirements for telemarketers, Ohio Rev. Code Ann. §§ 4719.02(A), 4719.04(A), 4719.06(A), 4719.07 (West 2018), Compl. ¶¶ 155–57.
To collect the fees solicited from consumers, the alleged scheme relies on remotely created payment orders ("RCPOs") drawn from consumers' checking accounts. Compl. ¶¶ 8–9. An RCPO is "a check or order of payment that the payee (typically a merchant or its agent) creates electronically" using the payor-consumer's bank account information. Id. ¶ 57. An RCPO does not require the payor's signature like a conventional check, but rather "bears a statement"—such as "authorized by account holder" or "signature not required"—that indicates the account holder authorized the check. Id. ¶ 58. RCPOs are subject to relatively less regulatory oversight than more common methods of consumer payments, such as automated clearinghouse, credit, and debit transactions. Id. ¶¶ 60–64. In June 2016, the FTC added a prohibition on the use of RCPOs in telemarketing sales to the Telemarketing Rule "because, after an extensive notice and comment process, it found little record of legitimate telemarketing business using RCPOs." Id. ¶ 65.
The fees collected from consumers by Prolink telemarketers for Educare's deceptive interest rate reduction service were allegedly processed by Madera, based in El Paso, Texas, which ran "an unlawful payment processing scheme." Id. ¶ 9. Using the personal information obtained from consumers during the telemarketing calls—such as bank account and routing numbers and personally identifying information—Madera provided "the means to collect payments from consumers through RCPOs." Id. ¶¶ 9, 94. Over the course of the scheme, and with Madera's payment processing services, Defendants withdrew at least $11.5 million from consumers' bank accounts through RCPOs. Id. ¶ 9. More than $7 million of that total was processed after June 13, 2016, when the ban on RCPOs in connection with telemarketing sales was added to the Telemarketing Rule. Id. ¶ 97. Therefore, Plaintiffs claim that Prolink and Educare's payment processing scheme, in partnership with Madera, violates the Telemarketing Rule, 16 C.F.R. § 310.4(a)(9), and the Ohio Consumer Sales Practices Act, Ohio Rev. Code Ann. § 1345.02(A) (West 2017). Id. ¶¶ 131, 150.
Plaintiffs allege the following as to Defendant Souheil individually. Prior to the conduct alleged in the Complaint, between 2008 and 2009, Souheil and co-defendant Jilal "operated a company known as FCS International (‘FCS’), which exploited its membership in an American Express affiliate program to market and sell interest rate reduction services to American Express cardholders." Id. ¶ 37. In 2009, American Express ended its affiliate relationship with FCS after consumers filed complaints that "FCS failed to deliver on its promise" to lower credit card interest rates and "submitted credit card applications on behalf of consumers without authorization." Id. ¶ 38. Souheil is also the director and president of Globex Telecom Inc., "which received more than $1 million in wire payments from Educare," and on behalf of whom Souheil "filed a letter of compliance with the U.S. Federal Communications Commission." Id. ¶ 39.
According to Plaintiffs, since at least February 2016, Souheil, along with the co-defendants and Madera, engaged in the deceptive telemarketing scheme described above. Id. ¶ 5. Souheil is "an owner and president of both Prolink and Relief Defendant 989, which, together, have received wire transfers from Educare totaling more than $4 million." Id. ¶ 36. Along with co-defendant Charles Kharouf, Souheil "appear[s] to operate Prolink out of Canada." Id. ¶ 29. Souheil "formulated, directed, controlled, had the authority to control, or participated in the acts and practices" described above. Id. ¶ 40. Those acts and practices include "deceptive telemarketing to U.S. consumers," "initiating, or causing others to initiate, unsolicited telephone calls," and "unlawful use of RCPOs in connection with telemarketing sales." Resp. to Souheil Mot. 5 (citing Compl. ¶¶ 5, 69, 113, 143–47); Compl. ¶ 147. In connection with the alleged conduct, Souheil "transacts or has transacted business in this district and throughout the United States." Compl. ¶ 40.
Plaintiffs allege the following as to Relief Defendant 989 individually. "Relief Defendant 9896988 Canada Inc. has received, directly or indirectly, funds or other assets from Defendants that are traceable to funds obtained from Defendants' customers through unfair or deceptive acts or practice described herein." Id. ¶ 158. The "ill-gotten" funds are "in excess of $1 million" and were transferred to 989 by Educare. Id. ¶ 117. Relief Defendant 989 "has no legitimate claim to those funds[,]" such that it "will be unjustly enriched if it is not required to disgorge the funds or the value of the benefit it received as a result of Defendant's unfair or deceptive acts or practices" and therefore "holds funds and assets in constructive trust for the benefit of Defendants' customers." Id. ¶¶ 117, 159–60.
On July 18, 2019, Plaintiffs filed their Complaint and an Ex Parte Motion for a Temporary Restraining Order, Asset Freeze, Appointment of a Temporary Receiver, Other Equitable Relief, and an Order to Show Cause Why a Preliminary Injunction Should Not Issue Against Defendants, ECF No. 7. This Court granted the Motion on July 19, 2019. Order Granting Ex Parte Mot., ECF No. 8. On August 14, 2019, Defendant Souheil filed the instant Motion to Dismiss and a Motion for Stay of Proceedings, Obligations Under the Temporary Restraining Order, and Discovery Responses ("Motion to Stay"), ECF No. 34. On August 19, 2019, Relief Defendant 989 filed the instant Motion to Dismiss and an equivalent Motion to Stay, ECF No. 41. On August 27, 2019, this Court denied Defendant Souheil's Motion to Stay. Order Den. Mot. to Stay, ECF No. 53. On August 30, 2019, this Court denied Relief Defendant 989's Motion to Stay. Order Den. Mot. to Stay, ECF No. 55. On August 30, 2019, Plaintiffs' filed their Response to Souheil's Motion to Dismiss, and on September 3, 2019, Plaintiffs filed their Response to 989's Motion to Dismiss. On September 6, 2019, Souheil filed a Reply ("Souheil Reply"), ECF No. 58, and on September 9, 2019, 989 filed a Reply ("989 Reply"), ECF No. 59.
II. DISCUSSION
A. Standard
Where, as here, the Court resolves questions of personal jurisdiction without holding an evidentiary hearing, Plaintiffs need only establish a prima facie case for personal jurisdiction. Clemens v. McNamee , 615 F.3d 374, 378 (5th Cir. 2010) ; Johnston v. Multidata Sys. Int'l Corp. , 523 F.3d 602, 609 (5th Cir. 2008) ("Proof by a preponderance of the evidence is not required."). To decide whether a prima facie case exists, the Court must accept as true Plaintiff's "uncontroverted allegations ... and resolve in its favor all conflict between the facts contained in the parties' affidavits and other documentation." Clemens , 615 F.3d at 378.
In cases arising under federal law, Rule 4(k)(2) provides for personal jurisdiction "where the defendant has contacts with the United States as a whole sufficient to satisfy due process concerns and the defendant is not subject to jurisdiction in any particular state." Adams v. Unione Mediterranea Di Sicurta , 364 F.3d 646, 650 (5th Cir. 2004) ; Busch v. Buchman, Buchman & O'Brien, Law Firm , 11 F.3d 1255, 1258 (5th Cir. 1994) ("[W]hen a federal court is attempting to exercise personal jurisdiction over a defendant in a suit based upon a federal statute providing for nationwide service of process, the relevant inquiry is whether the defendant has had minimum contacts with the United States."). Put differently, "Rule 4(k)(2) applies to actions in which a federal court draws its authority directly from federal law, and does not borrow it from state law." Submersible Sys., Inc. v. Perforadora Centr., S.A. de C.V. , 249 F.3d 413, 420 (5th Cir. 2001). The due process analysis in cases governed by Rule 4(k)(2) "is measured with reference to the Fifth Amendment, rather than the Fourteenth Amendment," id. , though "when applying Rule 4(k)(2), the Fifth Circuit has regularly adhered to the same legal standards developed in the Fourteenth Amendment context—the now-familiar minimum contacts analysis." Patterson v. Blue Offshore BV , No. 13-337, 2015 WL 4096581, at *9 (E.D. La. July 6, 2015) ; see also Ruiz v. Martinez , No. EP-07-CV-078-PRM, 2007 WL 1857185, at *9 (W.D. Tex. May 17, 2007) ("[Rule 4(k)(2) ] requires the same ‘minimum contacts’ analysis, but applies it to the nation as a whole rather than merely the forum state.").
Plaintiffs' federal claims arise under federal statutes that provide for nationwide service of process. 15 U.S.C. § 53(b) (authorizing the FTC to "bring suit in a district court" when "any provision of law enforced by the [FTC]" is violated and to serve process "on any person, partnership, or corporation, wherever it may be found"); 15 U.S.C. § 6103 (authorizing any state attorney general to bring a federal action for telemarketing violations and to serve process "in any district ... in which the defendant may be found"); see also FTC v. Ams. for Fin. Reform , 720 F. App'x 380, 383 (9th Cir. 2017) ("[P]ursuant to the FTC Act's nationwide service of process provision, the district court has nationwide personal jurisdiction.").
"There are two types of ‘minimum contacts’: those that give rise to specific personal jurisdiction and those that give rise to general personal jurisdiction." Lewis v. Fresne , 252 F.3d 352, 358 (5th Cir. 2001). Where the plaintiff alleges specific jurisdiction, the Fifth Circuit applies a three-step analysis: (1) "minimum contacts by the defendant purposefully directed at the forum state"; (2) "nexus between the defendant's contacts and the plaintiff's claims"; and (3) "that the exercise of jurisdiction over the defendant be fair and reasonable." ITL Int'l, Inc. v. Constenla, S.A. , 669 F.3d 493, 498 (5th Cir. 2012). Specific jurisdiction is appropriate only where the defendant "purposefully availed itself of the privilege of conducting activities in-state, thereby invoking the benefits and protections of the forum state's laws," though it "may arise incident to the commission of a single act directed at the forum." Herman v. Cataphora, Inc. , 730 F.3d 460, 464 (5th Cir. 2013) (citations omitted); see, e.g. Bates Energy Oil & Gas v. Complete Oilfield Servs. , 361 F. Supp. 3d 633, 648 (W.D. Tex. 2019) (noting the "long-standing Fifth Circuit principles that committing a tort in whole or in part in Texas will give rise to specific jurisdiction here"). Even in such a case, the litigation must "result[ ] from alleged injuries that arise out of or relate to those activities." Burger King Corp. v. Rudzewicz , 471 U.S. 462, 472, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985) (quotation omitted).
Souheil and 989 both argue that general jurisdiction may not be properly exercised here. Souheil Mot. to Dismiss, 7; 989 Mot. to Dismiss, 6. Though Plaintiff mentions that Souheil "has ties to the United States that might create general personal jurisdiction," Plaintiff ultimately argues that specific personal jurisdiction "is sufficient" in this case. Resp. to Souheil Mot. 4, 5–6 ("Because Plaintiffs have not argued that Souheil is subject to the exercise of general jurisdiction ..."); Resp. to 989 Mot. 3 ("Plaintiffs do not dispute there is no general personal jurisdiction over [989]."). Therefore, this Court addresses only whether Plaintiff has pleaded a prima facie case for specific personal jurisdiction over Defendants.
This Court must undertake "a ‘highly realistic’ approach to deciding whether a defendant has established the requisite minimum contacts" with the forum state. Trinity Indus., Inc. v. Myers & Assocs., Ltd. , 41 F.3d 229, 230 (5th Cir. 1995) (quoting Burger King , 471 U.S. at 479, 105 S.Ct. 2174 ). The touchstone is "whether the defendant's conduct shows that it reasonably anticipates being haled into court." McFadin v. Gerber , 587 F.3d 753, 759 (5th Cir. 2009) (quotation omitted). The defendant "must not be haled into a jurisdiction solely as a result of ‘random,’ ‘fortuitous,’ or ‘attenuated’ contacts, or of the ‘unilateral activity of another party or third person.’ " Id. (quoting Burger King , 471 U.S. at 475, 105 S.Ct. 2174 ).
B. Analysis
Defendant Souheil and Defendant 989 each filed motions to dismiss for lack of personal jurisdiction pursuant to Rule 12(b)(2). First, Souheil contends that Plaintiffs' jurisdictional allegations are conclusory and vague, and, if considered, do not sufficiently allege minimum contacts with the United States. Souheil Mot. to Dismiss 1–13. Even if sufficient minimum contacts are alleged, Souheil argues exercising personal jurisdiction would not be fair and reasonable. Id. at 13–15. Second, 989 also argues Plaintiffs' allegations are too conclusory, fail to allege minimum contacts, and that exercising jurisdiction would be unreasonable. 989 Mot. to Dismiss 4–12. The Court considers each motion in turn.
1. Personal jurisdiction over Defendant Souheil
Defendant Souheil argues that the Court should dismiss Plaintiff's Complaint and TRO for lack of personal jurisdiction because he "had no involvement in the alleged activities directed at the forum giving rise to Plaintiffs' claims." Souheil Mot. to Dismiss 1–2, 5–15. Therefore, he asserts he does not have minimum contacts with the United States sufficient to give rise to specific personal jurisdiction. Id. at 2, 7–13. Further, Souheil emphasizes that as a "citizen and resident of Canada with absolutely no ties to the United States," it would be "inherently un reasonable" to exercise personal jurisdiction over him and therefore contrary to the "fair and reasonable" inquiry. Id. at 2, 13–15.
Plaintiffs respond that "Souheil has established ‘minimum contacts’ in the United States and this district, and nothing about exercising jurisdiction over Souheil offends traditional notions of fair play and substantial justice." Resp. to Souheil Mot. 4. Plaintiffs argue that the factual bases laid out in the Complaint, and supplemented by affidavits, are sufficient to make out a prima facie case for this Court's personal jurisdiction over Souheil. Id. at 3, 4–9.
a. Plaintiffs sufficiently allege Souheil's minimum contacts
The first step in the Court's three-step specific jurisdiction analysis is the minimum contacts analysis. McFadin , 587 F.3d at 759.
Minimum contacts with the forum are sufficient for personal jurisdiction when the contacts would reasonably render litigation in that forum foreseeable. Burger King , 471 U.S. at 474, 105 S.Ct. 2174 (describing the "critical" foreseeability at issue as whether the defendant "should reasonably anticipate being haled into court" in the forum). The critical factor is "that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." Hanson v. Denckla , 357 U.S. 235, 253, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958). This "purposeful availment" requirement protects against "random" or "attenuated" contacts unfairly giving rise to jurisdiction. Burger King , 471 U.S. at 475, 105 S.Ct. 2174.
There should be little question that targeting U.S. consumers with unlawfully deceptive telemarketing calls amounts to purposeful availment of the forum United States and creates a reasonably foreseeable consequence of litigation in the forum. C.f. Shelton v. Nat'l Gas & Elec., LLC. , No. 17-4063, 2019 WL 1506378, at *7 (E.D. Pa. Apr. 5, 2019) ("In TCPA cases, courts generally find that specific personal jurisdiction exists when a defendant sends a message into the forum state by targeting a phone number in that forum."); Ott v. Mortg. Inv'rs Corp. of Ohio, Inc. , 65 F. Supp. 3d 1046, 1057 (D. Or. 2014) ("[Defendants] reasonably should have known that telemarketing to Oregon telephone numbers would cause harm to persons in Oregon."). Indeed, the Fifth Circuit has repeatedly held that intentionally directing misrepresentations over the phone to recipients in the forum gives rise to sufficient minimum contacts for specific personal jurisdiction. Trois v. Apple Tree Auction Ctr., Inc. , 882 F.3d 485, 491 (5th Cir. 2018) ; see, e.g. , Lewis , 252 F.3d at 358 ; Brown v. Flowers Indus., Inc. , 688 F.2d 328, 332, 334 (5th Cir. 1982).
In this case, Plaintiffs allege that Souheil and his co-defendants collectively engaged in a "deceptive telemarketing scheme" promoting an interest rate reduction service that promised, illusorily, to lower interest rates on U.S. consumers' credit cards in exchange for a fee. Compl. ¶¶ 68–93. Plaintiffs allege that Souheil, as co-owner and president of Prolink, "formulated, directed, controlled, had the authority to control, or participated in" the acts and practices of Prolink, which includes initiating, or causing other to initiate, outbound telephone calls that illegally sought to induce the purchase of the service. Id. ¶ 147. Making or directing the deceptive telephone calls to U.S. consumers amounts to purposeful availment of the forum United States. See Lewis , 252 F.3d at 358–59 (concluding that the defendants' telephone call to Plaintiff in the forum state was tortious, which "shows purposeful availment of the benefits and protections of Texas law"); Wien Air Alaska, Inc. v. Brandt , 195 F.3d 208, 213 (5th Cir. 1999) ("When the actual content of communications with a forum gives rise to intentional tort causes of action, this alone constitutes purposeful availment."); see also Mohon v. Agentra LLC , No. CIV 18-0915 JB/KRS, 400 F.Supp.3d 1189, 1242, 2019 WL 2583840, at *32 (D.N.M. June 24, 2019) (finding, in a TCPA case, "[t]he telemarketing calls suffice for purposeful availment").
By alleging that Souheil caused Prolink's telemarketing calls to U.S. consumers, Plaintiffs alleged that Souheil purposefully availed himself of the privilege of conducting significant activity in the United States. See Trois , 882 F.3d at 491 ("The defendants should have reasonably anticipated being haled into Texas court as a result of reaching out to Texas via phone in order to garner business and make specific representations."). Further, because Plaintiffs allege that Souheil intentionally reached out, or caused others to reach out, to customers known to reside in the United States to acquire their business through deceptive tactics, these contacts were not merely fortuitous nor random. See Wien Air Alaska , 195 F.3d at 213 (explaining that if courts considered the location of a tortious call recipient to be a mere fortuity, "the defendant could mail a bomb to a person in Texas but claim Texas had no jurisdiction because it was fortuitous that the victim's zip code was in Texas"). Thus, Souheil's alleged contacts with the forum through deceptive telemarketing are equivalent to, or greater than, those sufficient for minimum contacts in similar cases. See Lewis , 252 F.3d at 358 ; Trois , 882 F.3d at 491 ; Ott , 65 F. Supp. 3d at 1057. For example, in Lewis , minimum contacts were sufficient to establish specific personal jurisdiction where the defendant "participated in a telephone conversation" and "failed to correct allegedly false statements made by [a co-defendant] during that phone call." 252 F.3d at 358 (noting that "mere communications" were sufficient because they "involve[d] an intentional tort"). Likewise, in Trois , the Fifth Circuit emphasized that the significant contact in such cases is the intentionally deceptive conduct used while conducting business within the forum, not the act of making the call itself. 882 F.3d at 491. In that case, the defendant "did not initiate the conference call" at issue. Id. But, because as the "key negotiating party" he was "akin to an initiator of a phone call," such that it was the "intentional conduct on the part of [Defendant] that led to this litigation," the court still concluded he "should have anticipated being haled into Texas court." Id. ("To be sure, we are somewhat wary of drawing a bright line at who may push the buttons on the telephone."). Here, too, whether or not Souheil initiated any single phone call, he is alleged at minimum to have directed many deceptive phone calls be made to U.S. consumers, such that he is "akin to an initiator" of the calls and it is his intentional conduct "that led to this litigation." Id. These alleged contacts are sufficient for purposeful availment just like the single deceptive calls in Lewis and Trois.
Furthermore, unlike in those cases, Souheil's alleged contacts are not limited to the communications alone. Plaintiffs allege that Souheil designed and implemented a telemarketing scheme that purposefully targeted the United States. Compl. ¶ 147. Similarly, in Ott , a TCPA case, the defendants' implementation of an unlawful telemarketing scheme was sufficient to constitute purposeful availment. 65 F. Supp. 3d at 1059. The plaintiffs alleged "that the individual defendants purposefully directed their activities to Oregon because they formulated, directed, implemented, and ratified a telemarketing scheme aimed at all 50 states." Id. at 1057. The defendants rebutted that "their mere oversight of [the firm's] telemarketing operations" is insufficient, given that the firm "was a large operation with many employees, and plaintiffs do not allege that any of the individual defendants ever placed or participated in a telemarketing call." Id. at 1059, 1061. The court explained, however, that "plaintiffs do allege that the individual defendants were responsible for designing and implementing all activity by [the firm's] telemarketers" and received emails from consumers complaining of the violations. Id. at 1061. Thus, the plaintiffs alleged purposeful availment of the forum sufficient for minimum contacts. Id.
In this case, Souheil is similarly alleged to have operated Prolink's telemarketing activity and received emails and text messages concerning individual consumer inquiries about unauthorized bank charges. Compl. ¶ 40; Resp. to Souheil Mot. 7–8. Here too, then, Plaintiffs sufficiently allege Souheil's purposeful availment of the forum United States. See Ott , 65 F. Supp. 3d at 1061 ("[T]he individual defendants are alleged to be primary participants in the TCPA violations, much as a puppeteer pulls a puppet's strings ... and, thus, knew that the alleged conduct would cause harm to Oregon residents.").
Finally, Souheil's contacts also include facilitating the relationship with Madera, the scheme's United States-based payment processor. Resp. to Souheil Mot. 12. Souheil effectively served as the point of contact for Madera. Id. at 7–8. In that capacity, over a more than four-year period, Souheil regularly communicated with Madera employees in the United States via email, text message, and telephone, and received email updates on an almost daily basis. Id. Souheil's extensive communications with a business in the forum contribute to Plaintiffs' alleged minimum contacts. See Latshaw v. Johnston , 167 F.3d 208, 213, n.19 (5th Cir. 1999) (finding defendant's "ongoing business relationship ... and phone calls to Texas in furtherance of that relationship" to be sufficient minimum contacts and citing similar cases); Clemens , 615 F.3d at 381–82 ("[M]inimum contacts exist where the defendant purposely has availed itself of the privilege of conducting business in that state.") (internal quotation omitted).
Moreover, Plaintiffs submit evidence that Souheil "knew that Madera was processing Educare's consumer payments via remotely created checks." Resp. to Souheil Mot. 11. Thus, Souheil's regular contacts with a business in the forum were intentionally furthering unlawful activity harming residents of that forum. Knowingly directing illegal RCPO processing at the forum amounts to purposeful availment just as directing illegal telemarketing at the forum does. See Wien Air Alaska , 195 F.3d at 213 ("The defendant is purposefully availing himself of the privilege of causing a consequence in Texas.") (internal quotation omitted); Calder v. Jones , 465 U.S. 783, 790, 104 S.Ct. 1482, 79 L.Ed.2d 804 (1984) ("[P]etitioners are primary participants in an alleged wrongdoing intentionally directed at a California resident, and jurisdiction over them is proper on that basis.").
Altogether, Plaintiffs allege that Souheil's purposeful availment of the forum includes: making or directing deceptive phone calls to U.S. consumers, designing and implementing an unlawful telemarketing scheme that targeted the United States, and communicating extensively with a U.S.-based business to facilitate unlawful RCPO processing. The Court finds these allegations sufficient minimum contacts to support personal jurisdiction over Defendant Souheil.
b. There is a nexus between the alleged minimum contacts and Plaintiffs' claims
The second step in the Court's three-step specific personal jurisdiction analysis is the "nexus" requirement. McFadin , 587 F.3d at 763.
Minimum contacts give rise to specific personal jurisdiction when the plaintiff's claims arise from the defendant's contacts with the forum. Companion Prop. & Cas. Ins. Co. v. Palermo , 723 F.3d 557, 559 (5th Cir. 2013). In other words, there must be a "nexus" between the defendant's contacts and the plaintiff's claims. ITL Int'l , 669 F.3d at 498. Even a single act can create specific personal jurisdiction if the act gives rise to the claim at issue. Lewis , 252 F.3d at 358–59. This is especially the case where the act is itself unlawful, making resultant litigation inherently foreseeable. See, e.g. , Brown , 688 F.2d at 334 (holding single telephone call sufficient for specific personal jurisdiction because an intentional tort was committed on the call); Wien Air Alaska , 195 F.3d at 213 (finding transmission of letters, faxes, and phone calls containing fraudulent misrepresentations sufficient for specific jurisdiction in fraud case); see also Guidry v. U.S. Tobacco Co. , 188 F.3d 619, 628 (5th Cir. 1999) ("When a nonresident defendant commits a tort within the state ... that tortious conduct amounts to sufficient minimum contacts with the state ... [for] personal adjudicative jurisdiction over the tortfeasor and the causes of actions arising from its offenses or quasi-offenses.").
Here, Plaintiffs sufficiently alleged minimum contacts that have a nexus to Plaintiffs' claims. Souheil's contacts with the forum were made in the course of his alleged leadership role in the telemarketing and RCPO scheme. All of Plaintiffs' causes of action—claiming the telemarketing calls and RCPOs violated federal and state statutes and administrative rules—arise from the same acts making up Souheil's minimum contacts, satisfying the nexus element. See Access Telecom, Inc. v. MCI Telecomm. Corp. , 197 F.3d 694, 718 (5th Cir. 1999) ("[S]pecific jurisdiction over a nonresident exists when the defendant purposefully avails itself of the privilege of conducting activities in the forum, and the plaintiff's cause of action arises out of or relates to that act.") (internal quotations omitted). In other words, Souheil's alleged contacts with the United States are a but-for cause of Plaintiffs' claims. See Trinity Indus. , 41 F.3d at 231–32 (finding specific jurisdiction in a malpractice case because "there would be no injury or basis for a claim but for the fact that [the defendants] represented [the plaintiff] in Texas").
Ultimately, each of Plaintiffs' claims result from Souheil's minimum contacts with the forum: the FTCA, Telemarketing Rule, and all other claims arise directly from the telemarketing and RCPO activities that Souheil directed at the United States. Therefore, Plaintiffs have alleged minimum contacts with a nexus to Plaintiffs' claims, which is sufficient for a prima facie case of specific personal jurisdiction over Souheil. See Guidry , 188 F.3d at 625 ("[A] prima facie showing [requires] that (1) each [individual defendant] had minimum contacts with the forum state, and (2) the plaintiffs had a cause of action arising out of each such defendant's individual forum related contacts.").
c. Exercising jurisdiction over Souheil is fair and reasonable
The third step in the Court's three-step specific jurisdiction analysis is the fundamental fairness inquiry. McFadin , 587 F.3d at 763–64.
After Plaintiffs establish minimum contacts with a nexus to their claims, "the burden shifts to the defendant to show that the assertion of jurisdiction would be unfair." Walk Haydel & Assocs., Inc. v. Coastal Power Prod. Co. , 517 F.3d 235, 245 (5th Cir. 2008). Where the defendant seeking to defeat jurisdiction "purposefully has directed his activities at forum residents," the defendant then "must present a compelling case" that the exercise of jurisdiction would be unreasonable. Burger King , 471 U.S. at 477, 105 S.Ct. 2174 ; see also Wien Air Alaska , 195 F.3d at 215 ("It is rare to say the assertion is unfair after minimum contacts have been shown."). In evaluating the fairness of asserting jurisdiction, courts generally look to factors such as the burden on the defendant, the forum state's interest in adjudicating the dispute, the plaintiff's interest in obtaining relief, the judicial system's interest in an efficient resolution, and the interests of the states in furthering substantive social policies. Burger King , 471 U.S. at 477, 105 S.Ct. 2174 ; McFadin , 587 F.3d at 760.
As a proxy for balancing those factors, the Fifth Circuit has held that "an exercise of jurisdiction likely comports with the due process clause" when the cause of action is for a forum resident's injury that is "directly related to the tortious activities that give rise to personal jurisdiction." Wien Air Alaska , 195 F.3d at 215 (applying this presumption in case involving fraudulent misrepresentations suffered by forum residents, "given the obvious interests of the plaintiff and the forum state"); Walk Haydel , 517 F.3d at 245 (finding the presumption applicable in case involving fraud and breach of attorney-client relationship because "the forum state has a substantial interest in protecting its residents"). This case falls into that category. Souheil's minimum contacts with the United States giving rise to jurisdiction are deliberate violations of United States' laws causing injury to United States' residents, such that exercising jurisdiction is plainly fair and compliant with due process. As an equivalent example, in D.J. Investments, Inc. v. Metzeler Motorcycle Tire Agent Gregg, Inc. , 754 F.2d 542, 548 (5th Cir. 1985), the court found jurisdiction presumptively fair when the defendants' minimum contacts with the forum were tortious phone calls making misrepresentations to induce a contract. Id. The court explained that the defendants "engaged in purposeful activity which was directed at" the forum state, "[s]ome of the tortious activity took place in the state," and "the injurious effect fell entirely within the forum state." Id. Therefore, given that the cause of action related directly to those tortious activities, jurisdiction presumptively "would not be unfair or unreasonable so as to violate the due process clause." Id.
Here, too, the minimum contacts which give rise to jurisdiction—Souheil's alleged telemarketing and RCPO conduct—are purposeful, tortious activities directed at and taking place, at least in part, within the forum United States, with an injurious effect felt entirely by U.S. residents. Resp. to Souheil Mot. 10–11. And, because Plaintiffs' causes of action directly relate to those minimum contacts, the forum's interests in enforcing its laws and remedying its residents render the exercise of jurisdiction presumptively fair. See D.J. Invests. , 754 F.2d at 548 ; Wien Air Alaska , 195 F.3d at 215 ; Walk Haydel , 517 F.3d at 245 ; see also Revell v. Lidov , 317 F.3d 467, 476 (5th Cir. 2002) ("This inquiry into fairness captures the reasonableness of hauling a defendant from his home state before the court of a sister state; in the main a pragmatic account of reasonable expectations—if you are going to pick a fight in Texas, it is reasonable to expect that it be settled there.").
To argue that exercising jurisdiction would be fundamentally unfair, Souheil emphasizes his Canadian citizenship and lack of ties to the United States. See Souheil Mot. to Dismiss 2, 2 n.1, 3, 6, 7, 14–15. It is axiomatic, however, that "[j]urisdiction ... may not be avoided merely because the defendant did not physically enter the forum State." Burger King , 471 U.S. at 476, 105 S.Ct. 2174. The Burger King Court noted, in 1985 no less, that "it is an inescapable fact of modern commercial life that a substantial amount of business is transacted solely by mail and wire communications across state lines." Id. Thus, that Souheil has not been to the United States in over a decade and has no personal or property connections to the United States does not render jurisdiction unfair. See id. at 476, 105 S.Ct. 2174 ("So long as a commercial actor's efforts are ‘purposefully directed’ towards residents of another State, we have consistently rejected the notion that an absence of physical contacts can defeat personal jurisdiction there.").
Souheil insists that "it is inherently un reasonable to require him to travel to Texas from Canada to defend himself when there is no evidence supporting his involvement in the alleged unlawful activities." Souheil Mot. to Dismiss 14. But at this stage the Court is obliged to accept the Plaintiffs' allegations as true. Clemens , 615 F.3d at 378. Based on those allegations, it is simply not the case that exercising jurisdiction "would be an exercise in futility and a waste of this Court's resources," Souheil Mot. to Dismiss 14, given the "obvious interests" of Plaintiffs and the forum United States. See Wien Air Alaska , 195 F.3d at 215. Because Plaintiffs' obligation is only to allege a prima facie case, and they have done so, Souheil's continued refrain that he was "in no way involved with the unlawful acts asserted in the Complaint" is insufficient to render exercising jurisdiction contrary to fundamental fairness.
Specific personal jurisdiction is a "claim-specific inquiry," meaning that a plaintiff "bringing multiple claims that arise out of different forum contacts of the defendant must establish specific jurisdiction for each claim." McFadin , 587 F.3d at 759 (quotation omitted). Souheil does not raise the issue of the Court's personal jurisdiction over him as to the Ohio Attorney General's claims arising under Ohio state law, which each arise from the same facts as the federal claims. The Court is mindful that a challenge to personal jurisdiction is an affirmative defense that may be waived. Dillon v. Rogers , 596 F.3d 260, 271 (5th Cir. 2010). Nevertheless, for completeness, the Court points out that the doctrine of pendant personal jurisdiction fills any gap that may exist jurisdictionally because "[o]nce a district court has jurisdiction over a defendant for one claim, it may ‘piggyback’ onto that claim other claims over which it lacks independent personal jurisdiction, provided that all the claims arise from the same nucleus of material fact as the claim over which it has proper personal jurisdiction." Kinetic Concepts, Inc. v. Bluesky Med. Corp. , No. SA-03-CA-832-RF, 2004 WL 2550586, at *7 (W.D. Tex. Sept. 24, 2004) ; Tellez v. Madrigal , EP–15–CV–304–KC, 2016 WL 11121114, at *12–13 (W.D. Tex. Sept. 16, 2016) ; see also 4A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1069.7 (4th ed. 2019) (discussing pendent personal jurisdiction in federal question cases with supplementary jurisdiction over state claims where personal jurisdiction is asserted pursuant to Rule 4(k)(2)). Therefore, as to personal jurisdiction's claim-specific dimension, Plaintiffs' jurisdictional allegations are sufficient for each of their claims.
d. Souheil's counterarguments do not undermine Plaintiffs' prima facie case
Souheil raises several objections to argue that Plaintiffs' prima facie case for specific personal jurisdiction is insufficiently alleged. First, Souheil argues the allegations in the Complaint are too conclusory and vague to be considered. Souheil Reply 1–4. Second, Souheil argues that Plaintiffs' allegations are rebutted by his affidavits and therefore fail on evidentiary grounds. Souheil Reply 8–10. Third, Souheil argues that Plaintiffs' allegations amount to holding him individually responsible for the conduct of corporate co-defendants, contrary to fiduciary shield doctrine. Souheil Mot. to Dismiss 8; Souheil Reply 10. For the following reasons, Souheil's counterarguments are of no avail.
i. Plaintiffs' allegations are not conclusory and vague
Souheil first contends that the jurisdictional allegations in Plaintiffs' Complaint are too conclusory or vague for the Court to consider. In general, Fifth Circuit courts are "not require[d] ... to credit conclusory allegations." Panda Brandywine Corp. v. Potomac Elec. Power Co. , 253 F.3d 865, 869 (5th Cir. 2001). And, "[e]ach defendant's contacts with the forum State must be assessed individually." Calder , 465 U.S. at 790, 104 S.Ct. 1482. To that end, courts may discredit "vague and overgeneralized assertion[s]" that group the defendants together. See Head v. Las Vegas Sands, LLC , 760 F. App'x 281, 284 (5th Cir. 2019).
Souheil contends that the only allegations in the Complaint which name Souheil individually are conclusory. Souheil Reply 3. In particular, Souheil states the following sentences "must be disregarded": "[Souheil] directly participated in or controlled or had the authority to control the unlawful conduct challenged by the Complaint;" "[Souheil] formulated, directed, controlled, had the authority to control, or participated in the acts and practices of Prolink and Relief Defendant 989, including the acts or practices set forth in this Complaint;" and "Souheil, in connection with matters alleged herein, transacts or has transacted business in this district and throughout the United States." Id. at 3. Having deemed these allegations conclusory, Souheil argues the remaining allegations are "against the ‘Defendants’ collectively" and should therefore be excluded for vagueness. Id. at 4. Thus, Souheil concludes, "there are no remaining allegations that could support a prima facie case." Id.
However, the allegations Souheil objects to do not warrant exclusion. The challenged sentences allege that Souheil participated in the "unlawful conduct" described in the Complaint, particularly by controlling the "acts and practices of Prolink." Id. at 3. While these isolated sentences are not particularly specific, the allegations elsewhere in the Complaint are specific about the "unlawful conduct" and "acts and practices" being referred to. C.f. Tellabs, Inc. v. Makor Issues & Rights, Ltd. , 551 U.S. 308, 322, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007) ("[C]ourts must consider the complaint in its entirety."). For example, Plaintiffs explain in their allegations that Prolink's telemarketers relied on varied tactics of misrepresentation to elicit consumers into paying exorbitant fees. Compl. ¶¶ 68–93 (quoting from and describing individual instances of misrepresentative tactics used to deceive consumers). Further, the scheme relied on unlawful RCPOs to collect those fees, allowing Prolink and Educare to draw against consumers' bank accounts often with only nebulous informed consent. Id. ¶¶ 57–65, 94–97 (noting that some Educare bank accounts processing RCPOs had return rates—a metric of consumers challenging the withdrawals—of twenty percent or more). And, Prolink's telemarketing practices allegedly violated regulations such as the Do Not Call list and robocall rules. Id. ¶¶ 26, 113–116. Thus, the challenged sentences specifically allege that Souheil "participated" in this "unlawful conduct," and that Souheil "controlled" Prolink's telemarketing and RCPO payment processing. Id. ¶¶ 16, 40.
Such allegations are not conclusory. Rather, Plaintiffs allege Souheil's individual leadership role in illegal activity that is specifically detailed across the Complaint, not merely restating the ultimate legal conclusion of minimum contacts. C.f. Franklin v. X Gear 101, LLC , No. 17 Civ. 6452 (GBD) (GWG), 2018 WL 4103492, at *4 (S.D.N.Y. Aug. 28, 2018) (finding allegation that defendant "infringed Plaintiff's trademark and copyright" non-conclusory, while noting "an allegation that defendants simply ‘do business’ " is generally found by courts to be conclusory). It is true that the allegations are not explicit about the underlying facts of Souheil's "participation" or "control," but this is not fatal to jurisdictional allegations, especially at the 12(b)(2) stage prior to extensive discovery. See, e.g. , Guidry , 188 F.3d at 632 (declining to dismiss a civil conspiracy complaint on a 12(b)(2) motion challenging the sufficiency of jurisdictional allegations, given that "the nature of conspiracies often makes it impossible to provide details at the pleading stage.").
Rather, at the motion to dismiss stage, courts often find that directly alleging a defendant committed a wrongful act at issue is not conclusory for jurisdictional purposes. For example, in Edmond v. United States Postal Service General Counsel , 949 F.2d 415, 417, 425 (D.C. Cir. 1991), when determining the scope of jurisdictional discovery, the court considered plaintiffs' allegations that a prosecutor "suborned perjury" and "made false representations." Id. The court concluded "the allegations are not conclusory, but they are speculative." Id. at 425. Because the Complaint included "circumstantial evidence" and specific allegations which corroborated these more "speculative" ones, the court was not compelled, "[g]iven this evidentiary background," to exclude the allegations as conclusory. See id. ; see also id. at 428 (Silberman, J., concurring in part and dissenting in part) ("[I]t is often difficult to plead conspiracy in specific, non-conclusory terms because rarely is there (especially before discovery) hard evidence."). The Fifth Circuit reached a similar conclusion in Matassarin v. Grosvenor , No. 14-50148, 2014 U.S. App. LEXIS 21330, at *15-18 (5th Cir. Nov. 7, 2014). In that case, the plaintiff's jurisdictional allegation as to a fraud claim was that the defendants emailed "misrepresentations involv[ing] direct false statements" about an apartment's layout. Id. The court explained that, "while perhaps not particularly detailed," the allegations "are not conclusory." Id. ("[W]e accept the plaintiff's uncontroverted, nonconclusional factual allegations as true. Thus, we must accept as true [Plaintiff]'s allegations that fraud occurred before the sale.") (internal quotation and citation omitted).
Here, Plaintiffs' individual allegations about Souheil are not conclusory for the same reasons. Like in Edmond , the evidentiary background includes circumstantial evidence that corroborates the allegation that Souheil controlled Prolink's operations. See 949 F.2d at 426 ; Resp. to Souheil Mot. 7–8 (summarizing affidavit evidence that shows Souheil exchanged hundreds of emails with the managers of Madera, often discussing substantive aspects of Prolink's operations). And like in Matassarin , the allegations challenged by Souheil are not "particularly detailed" about Souheil's actions, but given that they must be accepted as true, nor are they conclusory for jurisdictional purposes. See 2014 U.S. App. LEXIS 21330, at *17.
By contrast, the cases Souheil relies on to support exclusion, namely Panda Brandywine Corp and Head , turned on markedly different records than what is before the Court in this case. See Souheil Reply 3–4. In Panda Brandywine , where the plaintiff's allegations were found to be conclusory, the sole jurisdictional allegation was "that Appellee knew Appellants are Texas residents and knew its actions would intentionally cause harm to Appellants in Texas." 253 F.3d at 869 ("Appellants present no other evidence of Appellee's contacts with Texas relating to Appellants' claims."). Similarly, in Head v. Las Vegas Sands, LLC , the court concluded jurisdictional allegations were lacking when "Plaintiffs' petition provide[d] no indication of what specific acts Defendants committed in Texas" and "only submit[ted] a single, two-page affidavit to carry their burden," stating with specificity only that "[a]ll named defendants sent corporate jets to McAllen, Texas on numerous occasions." 298 F. Supp. 3d 963, 973 (S.D. Tex. 2018), aff'd , 760 F. App'x 281 (5th Cir. 2019). The allegations in this case are not so thin. Because Plaintiffs make specific allegations throughout their Complaint, and then as to Souheil individually, corroborated by evidence in affidavits, Panda Brandywine and Head are distinguishable.
Therefore, the Court finds the allegations in the Complaint which allege Souheil's individual participation in the challenged conduct non-conclusory. For that reason, Souheil's vagueness challenge also fails because Plaintiffs adequately alleged individual jurisdictional facts as to Souheil without "grouping [the defendants] together." See Head , 760 F. App'x at 284. At this stage, Plaintiffs have met their prima facie burden.
The vagueness cases relied on by Souheil—Head , 760 F. App'x at 284, Petri v. Kestrel Oil & Gas Properties, L.P. , No. H-09-3994, 2011 WL 2181316, at *6 (S.D. Tex. June 3, 2011), and Howard v. ABN AMRO Mortgage Group, Inc. , No. 1:13CV543-KS-MTP, 2014 WL 1237317, at *1 (S.D. Miss. Mar. 26, 2014) —are similarly distinguishable from the instant case because of their sparse records and allegations. Souheil Reply 3–4. As mentioned above, the only jurisdictional allegation in Head was that the Defendants "sent jets" to Texas. 760 F. App'x at 284. In Petri , the plaintiffs' complaint named non-existent entities and "improperly lumped" defendants together. 2011 WL 2181316, at *6. In Howard , the complaint was described as "far from a model of clarity" as to the claims and the defendants at issue. 2014 WL 1237317, at *1. The Complaint and affidavits submitted by Plaintiffs in this case are far more extensive. Moreover, the latter two cases Souheil relies on turned on 12(b)(6) motions to dismiss for failure to state a claim, not for lack of personal jurisdiction. Petri , 2011 WL 2181316, at *1 ; Howard , 2014 WL 1237317, at *1, *2. Because those dismissals—for failure to state a claim due to the vagueness of the complaints—are distinct from this analysis of prima facie jurisdictional allegations on a 12(b)(2) motion, they are unpersuasive here.
ii. Plaintiffs submitted sufficient evidence
Second, Souheil argues his submission of affidavit evidence controverts Plaintiffs' jurisdictional allegations, undermining Plaintiffs' prima facie jurisdictional case. Souheil Reply 5–10.
When considering a 12(b)(2) motion, "[t]he court may determine the jurisdictional issue by receiving affidavits, interrogatories, depositions, oral testimony, or any combination of the recognized methods of discovery." Stuart v. Spademan , 772 F.2d 1185, 1192 (5th Cir. 1985). Absent an evidentiary hearing, the Court "must accept as true the uncontroverted allegations in the complaint and resolve in favor of the plaintiff any factual conflicts posed by the affidavits." Latshaw , 167 F.3d at 211.
In this case, Souheil argues that his affidavit evidence controverts the allegations in the Complaint, such that the Court need not accept Plaintiffs' allegations as true. Souheil Reply 10 (characterizing the affidavit evidence as directly controverting Plaintiffs' claims and stating that "Plaintiffs have presented no substantive evidence to the contrary"). Souheil submitted two personal declarations that generally deny Souheil's involvement in the unlawful conduct alleged in the Complaint. Souheil Reply 5; Souheil Mot. to Dismiss, Aff. of Mohammad Souheil in Support of His Mot. to Dismiss ("Souheil Aff. I") ¶ 9; Souheil Reply, Decl. of Mohammad Souheil in Support of His Mot. to Dismiss/Attached to His Reply Brief ("Souheil Aff. II") ¶¶ 3–10. Souheil also submitted affidavits containing declarations from Sam Madi and Charles Kharouf which corroborate Souheil's denials. Souheil Reply, Decl. of Sam Madi in Support of Mohammad Souheil's Mot. to Dismiss ("Madi Aff.") ¶ 2; Souheil Reply, Decl. of Charles Kharouf in Support of Mohammad Souheil A/K/A Mike Souheil's Mot. to Dismiss ("Kharouf Aff.") ¶ 3. The affidavits state that Souheil had no knowledge of or control over the unlawful conduct alleged in the Complaint. Souheil Reply 5–9. They explain that Souheil's involvement was limited to "provid[ing] IT development services to Educare" and "customer support" for the customer relationship management ("CRM") system of Souheil's company, 989, licensed to Educare. See Souheil Reply 7 (citing Souheil Aff. II ¶¶ 1, 4).
In their Response to Souheil's Motion to Dismiss, Plaintiffs submit affidavits corroborating their allegation that Souheil controlled Prolink's role in the telemarketing scheme. The declaration of Bruce C. Woods, owner and manager of Madera, includes Woods' impression that "Souheil always appeared to me to be in charge of Educare." Resp. to Souheil Mot., Decl. of Bruce C. Woods ("Woods Aff.") ¶ 7. Woods reached this conclusion because he "regularly communicated" with Souheil by email "on an almost daily basis," by text message, and by telephone. Id. ¶¶ 5, 6. Woods also states that Souheil "knew that Madera was processing Educare's consumer payments via remotely created checks," and "that Mike Souheil kept track of Educare's return rates." Id. ¶ 9.
Woods is a defendant in a related action before this Court, FTC v. Madera Merchant Services, LLC, et al. , No. 3:19-cv-00195-KC (W.D. Tex. July 18, 2019).
Furthermore, Plaintiffs submit the declaration of FTC investigator Christine Barker, who reviewed email and text communications between Souheil and Madera employees. Resp. to Souheil Mot., Decl. of Christine Barker ("Barker Aff.") ¶¶ 1–11. Barker found that an email address used by Souheil and email addresses used by Madera were present together in 958 different email threads, containing 1245 individual emails. Id. ¶ 3. Barker attaches several of those emails to support the allegation of Souheil's personal involvement in the telemarketing scheme's operations. Id. Attach. A–G. For example, the emails show Souheil discussing and taking responsibility for Educare's monthly RCPO processing amounts, the problematic return rates, and the substantive policy steps Prolink was taking to reduce chargebacks. Id. Attach. D, Attach. F, Attach G. Plaintiffs also submit affidavit evidence purporting to show wire transfers of proceeds from Educare to accounts controlled by Souheil. Id. ¶ 10.
Considering both parties' submissions, Plaintiffs' allegations are in conflict with Souheil's affidavits. As the most significant example of factual conflict, Souheil's submissions assert that Educare and Prolink operated "with absolutely no oversight, direction, involvement, or cooperation by Souheil," Souheil Reply 6–7, while Plaintiffs' submissions include emails plausibly showing Souheil's involvement with Educare and Prolink's substantive operations, Resp. to Souheil Mot. 7–8. Similarly, Plaintiffs submit evidence that Souheil "knew that Madera was processing Educare's consumer payments via remotely created checks," Woods Aff. ¶ 6, and Souheil responds, "I knew no such thing," Souheil Aff. II ¶ 10. Ultimately, then, Plaintiffs submitted evidence corroborating the allegations in the Complaint that conflicts with the general denials in Souheil's affidavits.
Despite Souheil's contention that "Plaintiffs have presented no substantive evidence" to contradict his general denials, Souheil Reply 10, there are several more examples of factual conflicts between the submissions. For example, despite swearing no knowledge of Prolink and Educare's operations, and no authority to represent their positions, Souheil once set up a phone call with Madera within minutes after Madera's expression of concern about high chargeback rates. Barker Aff. Attach. F. On the call, Souheil stated that he "put in another layer of people for verification," is "proud that he's at 11% for the month so far," and "offered to re–call everyone [sic] of his customers for verification." Id. This correspondence conflicts with Souheil, Kharouf, and Madi's statements that Souheil's role was limited to administration of the CRM system, Souheil Aff. II ¶¶ 3–5, Madi Aff. ¶ 2, Kharouf Aff. ¶ 3, and with Madi's statements that "Mr. Souheil did not have independent authority to communicate with Mr. Woods on Educare's behalf" and instead "would have to, and did, call me for direction on any particular issue," but also that Madi "never communicated with Mr. Souheil on any substantive issues involving Prolink, or its operations/production." Madi Aff. ¶¶ 4, 6.
Therefore, this Court's obligation is to resolve "conflicts between the facts contained in the parties' affidavits ... in the plaintiff's favor." Bullion v. Gillespie , 895 F.2d 213, 217 (5th Cir. 1990). Souheil may litigate the evidentiary conflicts "at trial along with the merits," where "the plaintiff must show by a preponderance of the evidence that jurisdiction is proper." See Walk Haydel , 517 F.3d at 241. For now, however, Plaintiff's only burden is to allege a prima facie case of jurisdictional facts. Id. "Any greater burden ... would permit a defendant to obtain a dismissal simply by controverting the facts established by a plaintiff through his own affidavit and supporting materials." Id. (quoting Data Disc, Inc. v. Sys. Tech. Assocs., Inc. , 557 F.2d 1280, 1285 (9th Cir. 1977) ). Souheil cannot obtain a dismissal by doing so here.
iii. Fiduciary shield doctrine does not apply
Third, Souheil argues that "fiduciary shield doctrine" prohibits jurisdiction here because Plaintiffs' allegations merely impute the conduct of the corporate co-defendants to Souheil individually. Souheil Mot. to Dismiss 8; Souheil Reply 10.
Fiduciary shield doctrine "holds that an individual's transaction of business within the state solely as a corporate officer does not create personal jurisdiction" over the individual, even when there is jurisdiction over the corporation. Stuart , 772 F.2d at 1197. Fiduciary shield doctrine does not bar jurisdiction, however, where the individual defendant is "being sued for specific acts, which had reasonably foreseeable consequences" within the forum, because "neither Texas or federal law allow[ ] the defendant to hide behind his corporate status." Gen. Retail Servs., Inc. v. Wireless Toyz Franchise, LLC , 255 F. App'x 775, 795 (5th Cir. 2007). Thus, fiduciary shield doctrine "does not prohibit [the defendant] from being held personally liable for his own tortious conduct simply because he is an officer of a corporation." Id. In other words, "the fiduciary shield doctrine does not prevent the Court's exercise of specific personal jurisdiction." XPEL Tech. Corp. v. Md. Performance Works Ltd. , No. SA-05-CA-0593-XR, 2006 WL 1851703, at *10 (W.D. Tex. May 19, 2006) (emphasis added).
Each fiduciary shield case that Souheil cites—Sefton v. Jew , 201 F. Supp. 2d 730, 743 (W.D. Tex. 2001), Donzi v. Global Financial Services, LLC , No. H-11-3642, 2012 WL 2403504, at *4–5 (S.D. Tex. June 25, 2012), and Schultz v. Moser Engine Service, Inc. , No. SA-16-CV-738-OLG, 2017 WL 8182730, at *5–6 (W.D. Tex. Mar. 13, 2017) —considered allegations of general personal jurisdiction based on contacts made in the course of a defendant's corporate employment, or else inadequately alleged specific jurisdiction. Souheil Mot. to Dismiss 7–8; Souheil Reply 10. In Schultz , the court applied the fiduciary shield doctrine based on general personal jurisdiction allegations, which all centered on contacts made in the course of the defendant's corporate employment. 2017 WL 8182730, at *5–6. In Sefton , the court found fiduciary shield doctrine applicable only after the plaintiff failed to adequately allege that any unlawful conduct occurred in or was directed at the forum, such that there was no basis for specific jurisdiction. 201 F. Supp. 2d at 743. In Donzi , the court declined to apply fiduciary shield doctrine because the plaintiff adequately alleged "that the officer committed fraudulent or tortious acts for which he may be held individually liable." 2012 WL 2403504, at *4–5. Here, too, Plaintiffs allege that Souheil individually participated in unlawful conduct for which he could be held individually liable, giving rise to this Court's specific personal jurisdiction. See Wireless Toyz , 255 F. App'x at 795.
Here, as explained above, Plaintiffs have adequately alleged Souheil's individual participation in the unlawful conduct challenged in the Complaint. This alone is sufficient to render fiduciary shield doctrine inapposite. See, e.g. , Casares v. Agri–Placements Int'l, Inc. , 12 F. Supp. 3d 956, 970 (S.D. Tex. 2014) (rejecting a fiduciary shield defense because "[p]laintiffs have made a prima facie showing that [defendant] was a primary participant in an alleged wrongdoing directed at Texas residents") (internal quotations omitted). Souheil insists that Plaintiffs are "ascribing the acts" of the corporate co-defendants to Souheil individually because his Motion, Reply, and Affidavits contend that he did not participate in any way in the challenged conduct. See Souheil Reply 10. But for purposes of this 12(b)(2) motion to dismiss, Plaintiffs must only allege that Souheil participated individually in the unlawful conduct to make out their prima facie case. See Dreher v. DGU Ins. Assocs., LLC , No. 13-6792, 2014 WL 2861938, at *2 (E.D. La. June 24, 2014). Plaintiffs have done so here by alleging that Souheil individually participated in the unlawful telemarketing scheme challenged in the Complaint.
Taking Plaintiffs' allegations as true and resolving conflicts of facts in the parties' affidavits in Plaintiffs' favor, Plaintiffs prima facie jurisdictional case survives Souheil's counterarguments. Plaintiffs have alleged Souheil's minimum contacts with the United States with a nexus to the claimed causes of action, and exercising jurisdiction is fair and reasonable.
2. Personal jurisdiction over Relief Defendant 989
Relief Defendant 989 argues that the Court should dismiss Plaintiffs' Complaint and terminate the TRO as to 989. 989 Mot. to Dismiss 2. It argues that Plaintiffs "assume incorrectly " that the alleged illicit proceeds possessed by 989 "were ill-gotten gains," when really, any funds received "were payments for actual services provided." Id. at 1. Therefore, because 989 did not "directly participate in, control, or have knowledge of the activities associated with Educare's [interest rate reduction] campaign alleged in the Complaint," Relief Defendant 989 argues it has "not done anything to purposefully avail itself of the benefits and protections of the United States" and "this Court must dismiss the Complaint for lack of personal jurisdiction." Id. at 2–3.
Plaintiffs argue they have alleged a prima facie case for personal jurisdiction over Relief Defendant 989. They assert the Court has personal jurisdiction over 989 because courts "may exercise personal jurisdiction over entities holding frozen assets connected to unlawful schemes (the res ), even if the entities are located abroad." Resp. to 989 Mot. 5 (citing SEC v. Roth , No. 11-2079, 2011 WL 2164116, at *3 (C.D. Ill. June 2, 2011) ). Plaintiffs allege that 989 "received funds in excess of $1 million" that were "obtained from Defendants' customers through unfair or deceptive acts or practice[s] described herein." Compl. ¶¶ 52, 158. The "ill-gotten" funds were transferred directly to 989 by Educare. Id. ¶ 117. Plaintiffs allege that 989 "has no legitimate claim to those funds" and "will be unjustly enriched if it is not required to disgorge the funds or the value of the benefit it received." Id. ¶¶ 117, 159–60.
a. Plaintiffs' allegations are sufficient for personal jurisdiction over 989 as a relief defendant
The Court agrees with Plaintiffs. This Court may exercise personal jurisdiction over 989 as a foreign entity holding frozen assets connected to the underlying unlawful scheme. See, e.g. , Roth , 2011 WL 2164116, at *3.
The receivership statute, 28 U.S.C. § 754, and 989's minimum contacts with the United States form the basis of the Court's jurisdiction. A party may be joined as a relief defendant when it is alleged that (1) the relief defendant possesses ill-gotten funds; and (2) the relief defendant does not have legitimate claim to those funds. Janvey v. Adams , 588 F.3d 831, 834 (5th Cir. 2009). An appointed receiver may then obtain "complete jurisdiction" over the property at issue by filing a copy of the complaint and the order of appointment in any "district in which property is located" within 10 days of appointment. 28 U.S.C. § 754. Then, as Plaintiffs and 989 both agree, the appointing court may exercise personal jurisdiction over the relief defendant pursuant to Rule 4(k) so long as service of process is proper and—because the defendant is outside the United States—there are minimum contacts with the United States to satisfy due process concerns. 989 Mot. to Dismiss 5; Resp. to 989 Mot. 5 (citing CFTC v. IBS, Inc. , 113 F. Supp. 2d 830, 853–54 (W.D.N.C. 2000) ); Busch , 11 F.3d at 1257–58.
A "relief defendant" has nominal defendant status, an obscure common law concept that allows a defendant—who possesses funds which are the subject of the litigation without a rightful ownership interest—to be joined solely to aid the recovery of relief pursuant to the district court's equitable authority, rather than as a party in interest. Janvey v. Adams , 588 F.3d at 834 ("[N]o cause of action is asserted against a nominal defendant.") (internal quotation omitted). While the relief defendant concept was developed in the securities context, the same rules have since been extended by courts to FTC enforcement actions as well, based on equivalent principles. See, e.g. , FTC v. LeadClick Media, LLC , 838 F.3d 158, 177–79 (2d Cir. 2016) ; FTC v. Network Servs. Depot, Inc. , 617 F.3d 1127, 1141–45 (9th Cir. 2010) ; FTC v. Think Achievement Corp. , 144 F. Supp. 2d 1013, 1020–22 (N.D. Ind. 2000) ; see also CFTC v. Kimberlynn Creek Ranch, Inc. , 276 F.3d 187, 192 n.4 (4th Cir. 2002) (extending to Commodity Futures Trading Commission enforcement context).
In this case, the Court joined 989 as a relief defendant, ordered an asset freeze, and appointed a temporary receiver with equitable powers over the Defendants' assets pursuant to 28 U.S.C. § 754. See Order Granting Ex Parte Mot. 4, 7, 11–15, 19–24, 25–27, 30. Plaintiffs state that "[o]n July 23, 2019, the Court-appointed receiver over [989] filed an Application for a Mareva Injunction in Canadian Superior Court in the District of Montreal, seeking to have a Canadian court adopt this Court's TRO as to [989]," "[t]he Montreal court approved the Application and issued a Mareva Injunction temporarily freezing the assets of [989] that same day," and "[989] received notice of the TRO on or before July 25." Resp. to 989 Mot. 3. Thus, the receiver complied with the requirements of § 754, asserting this Court's complete jurisdiction over the property at issue. See 28 U.S.C. § 754. Plaintiffs then served 989 pursuant to the Hague Convention in compliance with Rule 4(k)(2). Resp. to 989 Mot. 3. Relief Defendant 989 does not raise any objection to the receiver's compliance with § 754 nor with Plaintiffs' service of process pursuant to the Hague Convention and Rule 4(k)(2). See generally 989 Mot. to Dismiss; 989 Reply. Therefore, "[t]he only relevant inquiry ... is whether the defendant has sufficient contacts with the entire nation under the Fifth Amendment." IBS , 113 F. Supp. 2d at 853.
Mareva injunctions are an equitable remedy available in Canada to prohibit a party from transferring assets pending resolution of litigation. Grupo Mexicano de Desarrollo S.A. v. Alliance Bond Fund, Inc. , 527 U.S. 308, 328–33, 119 S.Ct. 1961, 144 L.Ed.2d 319 (1999) ; Velasquez v. Metro Fuel Oil Corp. , No. 12 CV 1548 (NGG)(LB), 2012 WL 5879446, at *1 (E.D.N.Y. Oct. 25, 2012). Here, the receiver applied for the Mareva injunction in the district where 989 resides and attached as exhibits the Plaintiffs' Complaint and this Court's TRO, which orders appointment of the receiver. See Originating Application for the Issuance of a Mareva Injunction and for an Interlocutory and Permanent Injunction Exs. P-3, P-6, Robb Evans & Assocs. LLC v. 9896988 Canada Inc., 2019 QCSC 500-17-108845-192 (Can.). Plaintiffs attach the Order granting the Mareva injunction to their Response to 989's Motion to Dismiss. Resp. to 989 Mot. Attach. A. Therefore, the Court accepts that the receiver's filing in the District of Montréal satisfied the requirements of § 754. See 28 U.S.C. § 754.
i. Relief Defendant 989's minimum contacts
Plaintiffs sufficiently allege 989 has minimum contacts with the United States. In general, a corporate officer's acts in their corporate capacity are commonly the basis for a corporation's contacts with a forum, given that the officer acts as the agent of the corporation. See, e.g. , Bigelow-Sanford, Inc. v. Gunny Corp. , 649 F.2d 1060, 1064 (5th Cir. 1981) ; Al-Qasimi v. Pallone , No. H-08-1523, 2008 WL 4178776, at *7, *9, *12 (S.D. Tex. Sept. 5, 2008) ; see also Int'l Shoe v. State of Washington , 326 U.S. 310, 316–17, 66 S.Ct. 154, 90 L.Ed. 95 (1945) (finding a corporation's minimum contacts "can be manifested only by activities carried on in its behalf by those who are authorized to act for it.").
And in other cases involving foreign relief defendants, courts have found similar allegations as those at issue here provide a sufficient basis for personal jurisdiction over an entity possessing ill-gotten funds. In SEC v. China Energy Savings Technology, Inc. , No. 06-CV-6402 (ADS)(AKT), 2007 WL 9711174, at *2–3 (E.D.N.Y. Mar. 19, 2007), the plaintiffs alleged the relief defendants "acted as straw-parties in order to enable the defendants to carry out their fraud." Id. at *3. The court found the relief defendants' "affirmative acts" in the United States, such as opening brokerage accounts to receive the funds from the named defendants, were sufficient minimum contacts such that "they could expect to be sued here." Id. at *3 (finding support for this conclusion in the affidavits submitted "not only by the SEC, but also by the Relief Defendants themselves"). Likewise, in CFTC v. Lake Shore Asset Management Ltd. , No. 07C3598, 2008 WL 1883308, at *3–6, *13 (N.D. Ill. Apr. 24, 2008), the court held that a receiver properly took jurisdiction over the property at issue and then served process in accordance with the Hague Convention. Id. at *4–5. The court's personal jurisdiction analysis as to the relief defendant was limited to the fact that it "performed administrative functions for other [named defendants]," such as payroll services, and received "[t]ransfers of more than $1 million" of funds from the challenged scheme. Id. at *13. The court exercised personal jurisdiction over the relief defendant on that basis. Id.
Here, Plaintiffs sufficiently allege 989's minimum contacts with the United States, based on Souheil's activities as a corporate officer and contacts equivalent to, if not greater than, those found sufficient in comparable cases. Souheil is 989's owner and president and acted in that capacity "in connection with the matters alleged" in the Complaint. Compl. ¶¶ 36, 40; see also Souheil Aff. II ¶ 3 ("My communications with [Madera] arose out of my role as the information technology administrator of the customer relationship management system (‘CRM’) that was licensed to Educare."); id. ¶ 10 ("Educare retained [989] to integrate the CRM with Madera."); 989 Reply 7 ("Souheil's communications with Madera were directly related to his role as the administrator of [989]'s CRM licensed to Educare."). Souheil, as president and owner of 989, was a "key principal of the [interest rate reduction] scheme" that targeted the United States and that "generated the res. " Resp. to 989 Mot. 6. Then, Educare transferred over $1 million of the alleged res directly to 989. Id. ¶¶ 117, 158–60. Relief Defendant 989 thus has contacts with the United States, including business contacts with Madera and Educare, by means of the activities of Souheil, its corporate president and owner. See Al-Qasimi , 2008 WL 4178776, at *8 ("Since [the individual defendant] ... carried out all of [the corporate defendant]'s contacts with [the plaintiff] in Texas as the president and employee of [the corporate defendant] ... the court concludes that [the individual and corporate defendant] have each engaged in conduct that may be sufficient to trigger the minimum contacts with Texas needed."). Furthermore, 989 performed "affirmative acts" in the United States, including, for example, invoicing and directly receiving the funds at issue from Educare's headquarters in the United States, as was sufficient in China Energy. See 2007 WL 9711174, at *2-3. And just like in Lake Shore , in this case a receiver properly effected jurisdiction over the property at issue and served process on the foreign relief defendant. See 2008 WL 1883308, at *3–6. Moreover, 989's contacts with the United States include providing the named Defendants with "system administration and support" and receiving transfers of ill-gotten funds, nearly identical to the "administrative functions" and transfers at issue in that case. See id. at *13. 989, then, could similarly "expect to be sued here." See China Energy , 2007 WL 9711174, at *3. Therefore, 989's minimum contacts with the United States are sufficiently alleged for this Court's exercise of personal jurisdiction over it as a relief defendant. See id. ; Lake Shore , 2008 WL 1883308, at *3–6, *13.
Indeed, Souheil submits documentation of 989's regular invoicing of Educare, sent to Educare's New York office. Aff. of Mohammad Souheil in Support of Relief Def. 9896988 Canada Inc.'s Mot. to Dismiss, Ex. 1. Though the parties dispute whether such funds were exchanged for valid consideration, there is no dispute—for purposes of alleging personal jurisdiction —that 989 regularly contacted a United States-based business to obtain the funds which directly give rise to 989's relief defendant status, contributing to 989's minimum contacts. See, e.g. , Sourcing Mgmt., Inc. v. Simclar, Inc. , 118 F. Supp. 3d 899, 911 (N.D. Tex. 2015) (collecting cases for the conclusion that "[w]hen a nonresident defendant receives Texas property for the purposes of defrauding a Texas resident, the nonresident defendant is subject to suit in Texas courts.").
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Finally, then—as explained with regard to Defendant Souheil's Motion—the exercise of personal jurisdiction must be fair and reasonable to comport with due process. McFadin , 587 F.3d at 760. Personal jurisdiction over Relief Defendant 989, like with Souheil, is based on unlawful contacts with the forum that resulted in injuries to forum residents, such that the strong interests of the United States render exercising jurisdiction presumptively fair. Wien Air Alaska , 195 F.3d at 215 ; Lewis , 252 F.3d at 359 ; see also Johnson , 2013 WL 2460359, at *7 (finding, in the relief defendant context, that a contrary result "would frustrate the court's ability to provide full relief for the underlying fraud"). 989 argues that it is "inherently unreasonable to require the defendant to travel to Texas from Canada." 989 Mot. to Dismiss 11. But as discussed above, "[t]he inconvenience of litigating in a distant forum, standing alone, is insufficient to defeat jurisdiction when balanced against the strong interest the United States has in enforcing its [consumer protection] laws." China Energy , 2007 WL 9711174, at *4 ("This is particularly true considering the effect that modern methods of communication and travel have had in somewhat reducing the burden on foreign litigants."). Moreover, here, the relief defendant at issue is a corporate entity whose owner and president will already be required to travel from Canada to Texas in connection with this litigation. Thus, 989 has not met its burden in showing the exercise of personal jurisdiction would be fundamentally unfair. Walk Haydel , 517 F.3d at 245. Therefore, Plaintiffs have sufficiently alleged Relief Defendant 989's minimum contacts with the United States for this Court's exercise of personal jurisdiction.
ii. 989's counterarguments do not negate Plaintiffs' sufficient jurisdictional allegations
Relief Defendant 989 raises similar objections to the sufficiency of Plaintiffs' jurisdictional allegations as Defendant Souheil, challenging the allegations as conclusory and controverted by affidavit evidence. 989 Mot. to Dismiss 1; 989 Reply 2–6.
First, 989 argues that Plaintiffs' jurisdictional allegations are conclusory and therefore should not be considered. 989 Reply 2–4. Plaintiffs allege that Educare transferred at least $1 million to 989 in funds "that can be traced directly to Defendants' unlawful acts or practices alleged in this Complaint," and that 989 "has no legitimate claim to those funds." Compl. ¶¶ 51–52, 117, 158. As a result, Plaintiffs allege, 989 "will be unjustly enriched if it is not required to disgorge the funds or the value of the benefit it received." Id. ¶ 159. While 989 is correct that this allegation is the primary basis for 989's status as a relief defendant, that does not render the allegation "conclusory," such that "no specific allegations remain" to support jurisdiction. 989 Reply 3. At this stage of the litigation, directly alleging that Educare transferred proceeds from its unlawful scheme to 989, with no legitimate basis for 989's ownership, is non-conclusory, supported by circumstantial evidence throughout the Complaint and affidavits, and must be accepted as true—just as with the individual allegations as to Souheil. See Matassarin , 2014 U.S. App. LEXIS 21330, at *15–18; Edmond , 949 F.2d at 425.
Second, 989 argues its affidavit evidence controverts Plaintiffs' allegations, undermining their entitlement to deference. 989 Reply 4–5. It submits a sworn declaration from Souheil stating that 989 was "responsible for the design and management of" Educare's CRM platform and provided Educare with "IT development services," such that all funds 989 received from Educare were payment for those services. Aff. of Mohammad Souheil in Support of Relief Def. 9896988 Canada Inc.'s Mot. to Dismiss ("989 Souheil Aff.") ¶¶ 2, 4–5, ECF No. 40. The affidavit also attaches invoices for the "aforesaid services" 989 provided to Educare. Id. Ex. 1. 989 concludes that "[t]his irrefutably disproves Plaintiffs' unsupported and vague allegations." 989 Mot. to Dismiss 10.
As with the evidentiary arguments in Souheil's Motion, however, 989's submissions only serve to create a conflict of fact which must be resolved in Plaintiffs' favor. See Bullion , 895 F.2d at 217. Where 989 alleges that Souheil provided IT services to Educare as legitimate consideration for the transferred funds, Plaintiffs allege that 989 received the funds as ill-gotten proceeds of Defendants' scheme. 989 Reply 4–5; Resp. to 989 Mot. 5–6. Plaintiffs' Woods and Barker affidavits—which reflect Souheil's operational knowledge of the alleged telemarketing scheme—corroborate the allegation that Souheil played a leadership role in the challenged conduct and therefore was not merely providing Educare with IT administration services on behalf of 989. See Woods Aff. ¶¶ 7–9; Barker Aff. ¶¶ 1–11; see also 989 Reply 5 ("incorporat[ing]" Souheil's objections to Plaintiffs' evidence into 989's arguments). Plaintiffs' allegations conflict with 989's assertion that the funds were legitimate consideration for services and not ill-gotten proceeds of the alleged scheme, and that conflict must be resolved in Plaintiffs' favor. See Latshaw , 167 F.3d at 211.
Similarly, despite 989's argument to the contrary, the invoice evidence does not irrefutably controvert Plaintiffs' allegations. See 989 Reply 5. Each invoice shows an identical bill, in varying amounts, for "management services" billed by 989 to Educare. See 989 Souheil Aff. Ex. 1. The existence of the invoices does not necessarily refute that the exchanges lacked legitimate consideration and that the funds were in fact ill-gotten proceeds of Defendants' alleged telemarketing scheme. They do establish, however, that the parties agree 989 possesses the funds at issue but disagree on the means by which 989 acquired them. See Resp. to 989 Mot. 5. The issue of a relief defendant's rightful ownership to the property subject to receivership is beyond the scope of this 12(b)(2) analysis. See, e.g. , Janvey v. Adams , 588 F.3d at 834–35 ; Janvey v. Reeves-Stanford , No. 3:09-CV-2151-N, 2010 WL 11463486, at *2–6 (N.D. Tex. Nov. 18, 2010) ; SEC v. World Capital Mkt., Inc. , No. CV 14-2334-JFW (MRWx), 2014 WL 12561076, at *2 (C.D. Cal. July 10, 2014). Plaintiffs' allegation that 989 received the funds without a rightful claim to ownership is plausibly supported by the record and must be accepted as true for personal jurisdiction purposes. Latshaw , 167 F.3d at 211.
Thus, 989's evidentiary submissions do not controvert Plaintiffs' allegations of 989's contacts with the United States. 989's submissions only serve to confirm 989's contacts with the forum by alleging 989 was providing services to and receiving money transfers from businesses based in the United States. 989, like Souheil, asks this Court to play fact finder and endorse its evidence over the Plaintiffs', but the Court may not do so at the motion to dismiss stage. See Walk Haydel , 517 F.3d at 241. Ultimately, then, 989's objections to the sufficiency of Plaintiffs' allegations fail. Plaintiffs have sufficiently alleged a prima facie case for this Court's personal jurisdiction over 989 as a relief defendant.
III. CONCLUSION
Plaintiffs have met their burden of alleging a prima facie case for personal jurisdiction over Defendant Souheil and Relief Defendant 989. Souheil is alleged to have purposefully established sufficient minimum contacts with the United States relating to Plaintiffs' claims for this Court's exercise of specific personal jurisdiction. 989, as a relief defendant, is also alleged to have sufficient minimum contacts with the United States for this Court's exercise of personal jurisdiction. For the foregoing reasons, Defendants Motions, ECF Nos. 33, 40, are DENIED .