Opinion
3:20-cv-00957-AR
06-23-2022
STEPHEN M. RAZE, as personal representative of THE ESTATE OF BRUCE G. RAZE, Plaintiff, v. STACY L. WALBRIDGE and JEREMY D. RICHARDSON, a married couple, Defendants.
FINDINGS AND RECOMMENDATION
JEFFREY ARMISTEAD United States Magistrate Judge.
Plaintiff Stephen M. Raze (Raze) brings this diversity action as the personal representative of the estate of Bruce G. Raze (Bruce) against defendants Stacy L. Walbridge and Jeremy D. Richardson. Am. Compl. ¶¶ 1-2, ECF No. 28. In his amended complaint, Raze asserts three claims for relief: a financial elder abuse claim under ORS § 124.110 (First Claim) and a common law fraud claim (Second Claim), both concerning Bruce's investment in a Michigan mobile home park, as well as a common law fraud claim concerning a Michigan bankruptcy proceeding (Third Claim). Id. ¶¶ 39-57.
Defendants move to dismiss with prejudice Raze's First and Second Claims under
Federal Rules of Civil Procedure (Rule) 12(b)(6) and 9(b), on the grounds that Raze failed to state a claim and plead his fraud claims with the required particularity. Def. Mot. to Dismiss at 2, ECF No. 35. Defendants also move to dismiss-under Rule 12(b)(2)-the Third Claim on the basis that the court lacks personal jurisdiction. For the following reasons, the court recommends granting defendants' motion.
Defendants alternatively argue that the Third Claim fails to state a claim for relief, constitutes an impermissible collateral attack on a confirmed Bankruptcy Plan, and is barred by ORS § 31.150(1), commonly referred to as Oregon's anti-SLAPP (Strategic Lawsuit against Public Participation) statute. Def. Mot. to Dismiss at 11. Because the court does not have personal jurisdiction over defendants for the Third Claim, it need not reach those arguments. Consequently, the court does not consider the exhibits that Raze submitted with his briefing. See ECF No. 44.
BACKGROUND
A. Underlying Factual Allegations
For the purposes of this motion to dismiss, the court assumes Raze's factual allegations are true. See Weston Family P'ship LLLP v. Twitter, Inc., 29 F.4th 611, 617 (9th Cir. 2022) (“When assessing the adequacy of a complaint, we accept all factual allegations as true and view them in the light most favorable to the plaintiff.”).
Defendants are a married couple residing in Vancouver, Washington. Am. Compl. ¶ 2. Bruce died on April 17, 2020. Id. ¶ 1. Walbridge and her father had known Bruce for over twenty years before his death. Walbridge therefore knew that Bruce had made significant speculative investments where he had provided investment funds to others at substantial financial risk to himself. Id. ¶ 4. Because of that relationship and her knowledge about Bruce's susceptibility to risky investments, Walbridge “promptly identified the 66-year-old Bruce as a target” when she was searching for investors to help her purchase a mobile home park in Mount Morris, Michigan. Id. ¶¶ 7, 12, 14.
In 2019, Walbridge approached Bruce about providing funding for this venture. During multiple phone calls and meetings with Bruce, Walbridge and Richardson “each made false and misleading representations” about the mobile home park that were “material” to Bruce's decision to invest funds. Id. ¶¶ 15-17. Walbridge provided Bruce with “printed materials” falsely representing that the property had “250 homes on site, monthly revenue of $59,522, and monthly profits of $43,712.” Id. ¶ 16. Given her experience and due diligence efforts, Walbridge “knew, or should have known” that these representations were false. Id. ¶¶ 16-17.
Following these discussions, Bruce agreed to provide funding. Id. ¶ 27. To accept the funds, Walbridge and Richardson formed Mount Morris Mobile Home Park LLC (MMMHP), a Michigan limited liability company. Id. ¶ 25, 27-28. However, Walbridge did not disclose that Richardson owned 50 percent of MMMHP and that he had been convicted of financial fraud felonies. Id. ¶ 27. Walbridge also failed to disclose that MMMHP was significantly undercapitalized and that the other solicited investors had declined to move forward with the transaction. Id. ¶ 44.
After securing a third-party loan of $900,000, Bruce transferred $704,890.05 into an escrow account for the benefit of MMMHP. Id. ¶¶ 23, 28. That same day, Walbridge executed a promissory note (Note) on behalf of MMMHP, stating that defendants would repay Bruce $1,925,200 by April 20, 2020-ten days before Bruce's third-party loan became payable. Id. ¶¶ 19, 23, 26. Walbridge did not disclose that “roughly 40% of the value of the property allegedly securing the [Note] was in the form of mobile homes, which are considered personal property incapable of being encumbered by a deed of trust or mortgage.” Id. ¶ 21.
In early April 2020, Walbridge approached Bruce about extending the terms of the Note. Id. ¶ 30. Before an agreement was reached, Bruce suffered a stroke and was placed in a medically induced coma. Id. Because of Bruce's medical disability, Raze contacted Walbridge to ask if the Note would be paid by April 20, 2020. Id. ¶ 31. During these discussions, Walbridge suggested extending the Note for another year and falsely represented that the value of the mobile home park would increase from a current value of $6 million to $10 million. Id. ¶ 31.
Bruce died on April 17, 2020, and MMMHP defaulted on the Note three days later. Id. ¶ 33. As a result, Bruce's Estate negotiated an extension and incurred additional costs on its third-party loan and had to sell certain property to raise cash to repay the lender. Id. ¶ 34. “Neither MMMHP nor Walbridge responded to [his] initial demand” for repayment. Id. ¶ 33.
B. MMMHP Bankruptcy Proceeding
On May 3, 2020, MMMHP filed for bankruptcy in the United States Bankruptcy Court for the Eastern District of Michigan. See In re: Mount Morris Home Park, LLC, Case No. 2030939 (E.D. Mich.). Bruce's Estate (referred to in the bankruptcy proceeding as the “Raze Estate”) submitted a claim and participated actively in the bankruptcy proceeding. See generally, id. In August, MMMHP and the Raze Estate submitted a Stipulation for an Order granting the Raze Estate a “secured claim against the Collateral, in the principal amount of $900,000, plus any and all interest charges and reinstatement fees charged to the Raze Estate” by its third-party lender. Motion to Approve Stipulation (Stipulation) at 7, Case No. 20-30939, ECF No. 63. The bankruptcy court approved the Stipulation on August 25, 2020. Order Approving Stipulation, Case No. 20-30939, ECF No. 73.
Under Federal Rule of Evidence 201, a court may take judicial notice of facts that are (1) generally known within the court's jurisdiction; or (2) “can be accurately and readily determined from sources whose accuracy cannot reasonable be questioned” without converting a motion to dismiss into a motion for summary judgment. See Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 998 (9th Cir. 2018). The court takes judicial notice of motions and orders in the Michigan bankruptcy proceeding, In re: Mount Morris Home Park, LLC, Case No. 20-30939 (E.D. Mich.), because these filings are matters of public record beyond public dispute. See Fauley v. Washington Mut. Bank FA, Case No. 3:13-cv-00581, 2014 WL 1217852 *4 (D. Or. Mar. 21, 2014) (taking judicial notice of motions and orders in a bankruptcy proceeding).
Later, MMMHP obtained $1.1 million from refinancing, which the bankruptcy court approved. Order Authorizing Debtor to Obtain Post-Petition Financing, Case No. 20-30939, ECF No. 89. On October 6, 2020, the bankruptcy court confirmed MMMHP's bankruptcy plan and ordered that, upon receipt of those refinancing funds and the appropriate wire transfer information, MMMHP “shall immediately wire transfer $912,850.00 to the Raze Estate.” Order Confirming Debtor's Modified Chapter 11 Plan at 9, Case No. 20-30939, ECF No. 90. In an October 2020 motion before this court, Raze acknowledged that MMMHP had transferred $912,850 to the Estate and “paid all that it could be compelled to pay due to the bankruptcy.” Voluntary Dismissal of Claim at 3, ECF No. 15.
C. Procedural History
On behalf of Bruce's Estate, Raze filed this action in June 2020, alleging that Walbridge and Richardson violated several Oregon securities liability statutes and committed financial elder abuse against Bruce in violation of ORS § 124.110. Compl. ¶¶ 29-42, ECF No. 1. Walbridge and Richardson moved to dismiss that complaint with prejudice. First Mot. to Dismiss, ECF No. 8.
In an April 2021 Findings and Recommendation (F&R), Magistrate Judge John V. Acosta recommended dismissal of all claims with prejudice. F&R at 14, 19, ECF No. 22. Raze objected, and after considering those objections, District Judge Michael H. Simon adopted Judge Acosta's recommendation in part. Order at 7, ECF No. 26. Judge Simon dismissed the securities liability claims with prejudice but granted Raze leave to “replead his claim for elder abuse under ORS § 124.110.” Order, ECF No. 26 (adopting in part F&R, ECF No. 22).
Raze filed an amended complaint, realleging a claim for financial elder abuse and asserting two new fraud claims. Am. Compl. ¶¶ 39-46. Defendants move to dismiss those claims with prejudice. Def. Mot. to Dismiss at 2. Raze opposes dismissal, contending that he has adequately alleged all three claims. Pl. Response to Mot. to Dismiss (Pl. Response), ECF No. 43. The case was reassigned to this court on March 23, 2022.
LEGAL STANDARD
A. Rules 12(b)(6) and (9)(b)
To survive a motion to dismiss under Rule 12(b)(6), a complaint must include allegations sufficiently detailed “to raise a right to relief above a speculative level” and render each pleaded claim “plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp, 550 U.S. at 556). “The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Mashiri v. Epsten Grinnell & Howell, 845 F.3d 984, 988 (9th Cir. 2017) (quotation marks omitted).
The complaint “may not simply recite the elements of a cause of action but must contain sufficient allegations of underlying facts to give fair notice and to enable the opposing party to defend itself effectively.” Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011). In evaluating the sufficiency of a complaint, the court accepts as true all well-pleaded factual allegations and construes them in the light most favorable to the non-moving party. Wilson v. Hewlett-Packard Co., 668 F.3d 1136, 1140 (9th Cir. 2012). The court need not, however, credit a plaintiff's legal conclusions that are couched as factual allegations. Iqbal, 556 U.S. at 678-79.
Additionally, when fraud is alleged, Rule 9(b) requires the plaintiff to “state with particularity the circumstances constituting fraud or mistake.” Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009). “Broad allegations that include no particularized supporting detail do not suffice.” United States v. United Healthcare Ins. Co., 848 F.3d 1161, 1180 (9th Cir. 2016) (citing Bly-Magee v. California, 236 F.3d 1014, 1018 (9th Cir. 2001)). Instead, the plaintiff must allege “the who, what, when, where, and how of the misconduct charged,” id., and explain “why the statement or omission complained of was false or misleading.” In re Rigel Pharm., Inc. Sec. Lit., 697 F.3d 869, 876 (9th Cir. 2012).
B. Rule 12(b)(2)
In a motion to dismiss for lack of personal jurisdiction under Rule 12(b)(2), the plaintiff bears the burden of proving that the court's exercise of jurisdiction is proper. Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004). When resolving such a motion on written materials, rather than after an evidentiary hearing, the court need “only inquire into whether the plaintiff's pleadings and affidavits make a prima facie showing of personal jurisdiction.” Id. (quoting Caruth v. Int'l Psychoanalytical Ass'n, 59 F.3d 126, 128 (9th Cir. 1995)). Although a plaintiff may not rest solely on the bare allegations of the complaint, uncontroverted allegations must be taken as true. Id.
Unless a federal statute governs personal jurisdiction, a district court applies the law of the forum state. Boschetto v. Hansing, 539 F.3d 1011, 1015 (9th Cir. 2008). Oregon's long-arm statute is co-extensive with constitutional standards. Gray & Co. v. Firstenberg Mach. Co., 913 F.2d 758, 760 (9th Cir. 1990) (citing Or. R. Civ. P. 4(L)). Thus, this court need only determine whether its exercise of personal jurisdiction would violate constitutional due process requirements. Boschetto, 539 F.3d at 1015.
DISCUSSION
Raze asserts three claims for relief in his amended complaint. In the First Claim, he alleges under ORS § 124.110 financial abuse of an elderly person and seeks triple the alleged economic damages from Walbridge and Richardson. Am. Compl. ¶¶ 39-46. In the Second Claim, based on the same conduct, Raze alleges Walbridge and Richardson engaged in common law fraud and requests $1,925,000 in damages. Id. ¶¶ 47-50. In the Third Claim, he alleges that Walbridge committed fraud during the Michigan bankruptcy proceeding and contends that Bruce's Estate suffered at least $147,000 in damages. Id. ¶¶ 51-57. Defendants argue that all claims should be dismissed.
ORS § 124.110 authorizes a “vulnerable person” to bring a civil action against a person who “wrongfully takes or appropriates money or property . . . without regard to whether the person taking or appropriating the money or property has a fiduciary relationship with the vulnerable person.” See also ORS § 125.100(2)(e) (defining “vulnerable person” to include “[a]n elderly person”). The court may award an “amount equal to three time all economic damages” to a party that prevail on this claim. ORS § 124.100(2)(a).
To begin with, the court notes that the amended complaint contains no factual allegations describing fraudulent conduct taken by Richardson. See generally, Id. “Rule 9(b) does not allow a complaint to merely lump multiple defendants together but requires plaintiffs to differentiate their allegations.” Swartz v. KPMG LLP, 476 F.3d 756, 764-65 (9th Cir. 2007). Given the absence of factual allegations regarding Richardson, the court finds that Raze fails to state any claims against Richardson and recommends dismissing him from this action. Below, the court considers whether Raze adequately alleges any claims against Walbridge.
A. First Claim: Raze Fails to State a Claim for Financial Elder Abuse
To state a claim for financial abuse of an elderly person under ORS § 124.110, a plaintiff must plausibly allege “(1) a taking or appropriation (2) of money or property (3) that belongs to an elderly or incapacitated person, and (4) the taking must be wrongful.” Church v. Woods, 190 Or.App. 112, 117 (2003). In his F&R recommending that defendants' first motion to dismiss be granted, Judge Acosta observed that only the fourth element-wrongful taking or conduct-was in dispute. F&R at 15. Judge Acosta explained:
Conduct generally is “wrongful” if it is carried out in pursuit of an improper motive or by improper means. A defendant's motives or means “may be wrongful by reason of a statute or other regulation, or a recognized rule of common law, or perhaps an established standard of a trade or profession.” “Improper means” must be independently wrongful by reason of statutory or common law, beyond the mere fact that the injury complained of occurred. Improper means, for example, include “violence, threats, intimidation, deceit, misrepresentation, bribery, unfounded litigation, defamation and disparaging falsehood.” The use of undue influence also constitutes an “improper means,” in that it involves the procurement of an unfair advantage.Id. at 16-17 (internal citations omitted; emphases added).
Judge Simon adopted this portion of the F&R. Order at 6. He concluded that the original complaint did not adequately allege that Walbridge fraudulently omitted information about the mobile home park because it lacked facts plausibly showing that the alleged “omissions [] were material to Bruce's decision to sign the Note.” Id. at 6. Similarly, Judge Simon concluded that Raze did not plausibly allege fraudulent misrepresentation because no facts suggested that “[Walbridge], who did not yet own the Mobile Home Park, knew that the Mobile Home Park did not generate the profits they told Bruce it generated.” Id. at 6. Finally, he noted that Raze's allegations of undue influence were alleged “in conclusory fashion.” Id. Accordingly, Judge Simon dismissed Raze's elder abuse claim with leave to amend, reasoning that “Raze may be able to plead facts plausibly suggesting that Defendants omitted material information, misrepresented material information, or exerted undue influence to induce Bruce” to invest funds in the mobile home park purchase. Id. at 7.
Raze's amended complaint-in which he realleges his financial-elder-abuse claim-is now before this court. The court notes that the amended complaint continues to satisfy the first three elements of a financial-elder-abuse claim. However, for the following reasons, the court finds that Raze again fails to plausibly allege what is required for the to the fourth element of a financial-elder-abuse claim-that Walbridge engaged in wrongful conduct through improper means.
First, the amended complaint reasserts the same “fraudulent omissions” that Judge Acosta and Judge Simon considered previously and found insufficient. Raze asserts that Walbridge failed to disclose that MMMHP was “significantly undercapitalized,” that the Note was secured by personal property, that Richardson was a member of MMMHP, and that he had “previously been convicted of financial fraud felonies.” Am. Compl. ¶¶ 16, 21, 27, 44. Raze made the following allegations in his original complaint:
In the complaint, Raze alleges Defendants: . . . (2) failed to disclose the “significant value of the personal property involved in the transaction” and failed to “adequately secure the Note with personal property”. . . (3) failed to disclose Richardson owns 50% of MMMHP; (4) failed to disclose “Richardson was previously convicted of the federal felony of Money Laundering”; . . . [and] (6) failed to disclose MMMHP was “significantly undercapitalized,” thereby placing “almost all the risk with the transaction on Bruce.”F&R at 17. Judge Acosta found those alleged omissions conclusory, and Judge Simon noted that Raze “fail[ed] to adequately allege these omissions were material to Bruce's decision” to invest in the mobile home park. Order at 6. Despite notice of those deficiencies, Raze realleges that Walbridge made the same omissions, without offering new facts to plausibly show how such omissions were material. Accordingly, the court finds that the amended complaint does not adequately allege that Walbridge fraudulently omitted information to induce Bruce to enter the transaction.
Second, Raze does not adequately allege that Walbridge fraudulently misrepresented the mobile home park to Bruce. In the amended complaint, Raze alleges that Walbridge provided Bruce with “printed material” that falsely represented the profits and units of the mobile home park. This allegation continues to inadequately state the elements of fraud with the level of particularly required by Rule 9(b). The court acknowledges that Raze's amended complaint better supports the element of “knowledge of falsity.” See Am. Compl. ¶ 16 (“Through her previous due diligence, Walbridge knew, or should have known: that the mobile home park had fewer than 250 units [and] that its revenue had not exceeded $52,030 for at least the two previous years.”). Nevertheless, the allegations remain too speculative to sustain the remaining elements of a fraudulent misrepresentation claim. See See McNeff v. Emmert, 260 Or.App. 239, 247 (2013) (listing elements of fraudulent misrepresentation claim).
And third, Raze's only allegation of undue influence remains conclusory. He asserts that Walbridge “exercised undue influence” because she used “her personal relationship with Bruce, and knowledge gained through that relationship about Bruce's susceptibility to risky investments” to identify him as a “target” investor. Am. Comp. ¶ 42. Although this paragraph alleges the existence of a personal relationship with Bruce, it does not state facts from which the court can infer that Walbridge exerted any “influence” over him. For these reasons, Raze has not adequately alleged that Walbridge engaged in any “improper means,” and he fails to state a financial elder abuse claim. This claim should be dismissed.
B. Second Claim: Raze Fails to State a Claim for Common Law Fraud
The Second Claim incorporates all the allegations of the First Claim, adding little else. Am. Comp. ¶ 43. Consequently, like the First Claim, the Second Claim satisfies neither Rule 12(b)(6)'s plausibility requirement nor Rule 9(b)'s particularity requirement. The court therefore recommends dismissal of the Second Claim.
C. No Leave to Amend the First and Second Claims
The court recommends dismissing Raze's first and second claims without leave to amend. A proposed “amendment is futile when no set of facts can be proved under the amendment to the pleadings that would constitute a valid and sufficient claim or defense.” Missouri ex rel. Koster v. Harris, 847 F.3d 646, 655-56 (9th Cir. 2007) (internal quotation and citation omitted). When assessing futility, “the court must remain guided by the underlying purpose of Rule 15 . . . to facilitate decisions on the merits, rather than on pleadings or technicalities.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (quotation omitted).
As discussed above, the court has already provided Raze the opportunity to correct the pleading deficiencies identified by Judge Acosta and Judge Simon. Despite clear explanation and direction about how to correct those deficiencies, Raze's claim for financial abuse of an elderly person remains inadequate. Rather than offer new factual material to support that claim, Raze simply realleges the same omissions, misrepresentations, and instances of “undue influence” previously dismissed as conclusory. Accordingly, his first claim should be dismissed with prejudice. See Dougherty v. City of Covina, 654 F.3d 892, 901 (9th Cir. 2011) (holding leave to amend may be denied as futile where repeated failures to add factual allegations failed to cure deficiencies).
For similar reasons, Raze's second claim should be dismissed with prejudice. Although Raze attempts to allege an independent fraud claim based on defendants “actions and inactions, statements and misrepresentations,” this claim is essentially a repackaged subpart of his first claim for relief. Raze already had the opportunity to allege fraud-both independently and as part of his financial elder abuse claim-and failed to do so plausibly and with particularity. Given this repeated failure, the court is not persuaded that, if granted leave to replead, Raze would offer additional facts adequately alleging common law fraud.
D. Third Claim: The Court Lacks Personal Jurisdiction
Raze characterizes the Third Claim as one for “fraud.” Am. Compl. ¶¶ 51-55. He contends that Bruce's Estate was harmed during the Michigan bankruptcy proceeding when Walbridge allegedly “filed false financial reports” omitting receipt of $147,000 in federal relief and falsely testified that she would file accurate reports. Id. ¶¶ 52, 55-56.
Raze previously acknowledged that Bruce's Estate received repayment for its secured claim in that bankruptcy proceeding. Voluntary Dismissal of Claim at 3 (acknowledging that MMMHP had transferred $912,850 to the Estate and “paid all that it could be compelled to pay due to the bankruptcy”). It is, therefore, not apparent to the court exactly how the Estate was harmed by Walbridge's alleged misconduct.
Defendants argue that the Third Claim should be dismissed for lack of personal jurisdiction because it “arises entirely out of two Washington residents' alleged activities in a Michigan bankruptcy proceeding.” Def. Mot. to Dismiss at 7. Raze counters that the court may properly exercise personal jurisdiction because Walbridge “maintain[s] her office as a licensed real estate broker” in the state and “presum[ably] pay[s] state and local taxes in Oregon.” Pl. Resp. at 11. The court agrees with defendants that Raze has not met his burden of establishing personal jurisdiction over the Third Claim and recommends its dismissal.
Because Walbridge is not an Oregon resident, the court may not exercise general personal jurisdiction over her in this action. See Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 924 (2011) (explaining that “general jurisdiction” exists where a defendants is “at home” and that a natural person is “at home” in her state of domicile). Instead, Raze must show that the exercise of pendent or specific personal jurisdiction is appropriate. See Picot v. Weston, 780 F.3d 1206, 1211 (9th Cir. 2015) (“When a plaintiff relies on specific jurisdiction, he must establish that jurisdiction is proper for each claim asserted against a defendant. If personal jurisdiction exists over one claim, but not others, the district court may exercise pendent personal jurisdiction over any remaining claims that arise out of the same common nucleus of operative facts as the claim for which jurisdiction exists.” (Quotation marks and internal citations omitted).
1. Pendent Jurisdiction
As an initial matter, Raze cannot rely on pendent personal jurisdiction because the court has recommended the dismissal of his first two claims for relief. In any event, the Third Claim does not share a “common nucleus of operative fact” with the First and Second Claims. The events underpinning the First and Second Claims are temporally and geographically distinct from the alleged misconduct unpinning the Third Claim. In the first two claims, Raze describes events that allegedly occurred in Oregon in 2019; in contrast, the Third Claim is directed toward misconduct that allegedly occurred in Michigan in 2020. Nothing in the amended complaint suggests that the Third Claim shares facts, evidence, or witnesses with his first two claims. Thus, the exercise of pendent personal jurisdiction over this claim is inappropriate.
2. Specific Personal Jurisdiction
To determine whether a forum state may assert specific jurisdiction over a nonresident defendant, the court “focuses on the relationship among the defendant, the forum, and the litigation.” Walden v. Fiore, 571 U.S. 277, 287 (2014). The analysis must consider the defendant's contacts with the forum state, and not with persons who reside there. Id. at 285. The Ninth Circuit applies the following three-part “minimum contacts” test to determine whether specific jurisdiction over a nonresident defendant exists:
(1) the non-resident defendant must purposefully direct his activities or consummate some transaction with the forum or resident thereof; or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws;
(2) the claim must be one which arises out of or relates to the defendant's forum-related activities; and
(3) the exercise of jurisdiction must comport with fair play and substantial justice, i.e., it must be reasonable.Freestream Aircraft (Bermuda) Ltd. v. Aero Law Grp., 905 F.3d 597, 603 (9th Cir. 2018) (quoting Schwarzenegger, 374 F.3d at 802). The plaintiff must satisfy the first two prongs of that test. Mavrix Photo, Inc. v. Brand Techs., Inc., 647 F.3d 1218, 1228 (9th Cir. 2011). If the plaintiff satisfies those prongs, the burden shifts to the defendant, who must present a “‘compelling case' that the exercise of jurisdiction would not be reasonable.” Boschetto, 539 F.3d at 1016 (quoting Schwarzenegger, 374 F.3d at 802).
As explained below, the Third Claim does not satisfy the first two prongs of the minimum contacts test.
a. No purposeful direction
Because the Third Claim is a tort claim and arises from conduct that Raze alleges occurred outside of Oregon, the court analyzes the first prong of the minimum contacts test under a purposeful direction standard. See Freestream Aircraft, 905 F.3d at 605 (“[A] purposeful direction analysis naturally applies in suits sounding in tort where the tort was committed outside the forum state.”). To show purposeful direction, Raze must plausibly allege that Walbridge “(1) committed an intentional act, (2) expressly aimed at the forum state, (3) causing harm that [she] knows is likely to be suffered in the forum state.” Yahoo! Inc. v. La Ligue Contre Le Racisme Et. L'Antisemitisme, 433 F.3d 119, 1206 (9th Cir. 2006) (en banc).
Raze does not plausibly allege that Walbridge's conduct giving rise to this claim was “purposefully directed” toward Oregon. First, Raze does not adequately allege that Walbridge engaged in any actionable “intentional acts.” Raze contends that, during the bankruptcy proceeding in Michigan, Walbridge committed fraud by filing “false financial reports” and providing misleading testimony. Am. Comp. ¶ 55. He does not, however, offer factual allegations to support the essential elements of a fraud claim. See id. ¶¶ 52-55 (failing to allege with particularity which “financial reports” were allegedly false and why).
Second, even assuming Raze had adequately alleged that Walbridge engaged in intentional conduct, the amended complaint contains no facts to suggest that her actions were “expressly aimed” at Oregon. Instead, the alleged wrongful conduct occurred in Michigan, during the bankruptcy proceeding of MMMHP, a Michigan LLC, whose primary asset was a mobile home park also located in Michigan. See Am. Comp. ¶¶ 7, 35. None of these allegations suggest conduct expressly directed toward Oregon.
Third, the harm allegedly suffered by Bruce's Estate-a loss of bargaining power during the bankruptcy proceeding for which Raze seeks at least $147,000-largely took place during the bankruptcy proceeding in Michigan. The court is not persuaded that Walbridge reasonably would have foreseen that this alleged harm was likely to be suffered in Oregon. See IPSL, LLC v. College of Mt. St. Vincent, 383 F.Supp.3d 1128, 1140 (D. Or. 2019) (finding effects of allegedly tortious conduct not tied to Oregon where the harm would follow no matter the plaintiff's location).
b. No harm arises from forum-related activities
As Raze fails to satisfy the first prong, he fails to satisfy the second prong. To show that the Third Claim “arises out” of forum-related activities, Raze must show that Bruce's Estate would not have suffered an injury “but for” defendants' forum-related conduct. See Myers v. Bennett Law Offices, 238 F.3d 1068, 1075 (9th Cir. 2001) (stating “but for” test). Raze asserts that, “but for” Walbridge's alleged false reports and testimony in the Michigan bankruptcy proceeding, Bruce's Estate would not have been harmed. The amended complaint draws no connection between Walbridge's alleged misconduct in that proceeding and her Oregon connections. Therefore, Raze fails to satisfy this prong of the test.
Because Raze has not met his burden that the Third Claim satisfies the first two prongs of the minimum contact test, the court need not consider the third prong. The exercise of specific personal jurisdiction over Walbridge for this claim lacks constitutional due-process requirements. Accordingly, the court recommends dismissal of this claim without prejudice and with leave to refile in a court of competent jurisdiction.
CONCLUSION
For the reasons stated, the court recommends GRANTING defendants' motion to dismiss (ECF No. 35). The First and Second Claims for relief should be dismissed with prejudice, and the Third claim should be dismissed for lack of personal jurisdiction without prejudice and with leave to refile in a court of competent jurisdiction. Any pending motions should be DISMISSED as MOOT.
SCHEDULING ORDER
The Findings and Recommendation will be referred to Judge Michael H. Simon. Objections, if any, are due within fourteen days. If no objections are filed, the Findings and Recommendation will go under advisement on that date. If objections are filed, a response is due within fourteen days. When the response is due or filed, whichever date is earlier, the Findings and Recommendation will go under advisement.