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Gault v. Thacher

United States District Court, D. South Carolina, Beaufort Division

February 15, 2019




         The following matter is before the court on Jane Vaden Thacher (“Thacher”) and Vaden of Beaufort Inc's (“the Corporation”), (together, “defendants”) motion to dismiss for failure to state a claim, ECF No. 5, and motion to dismiss for lack of personal jurisdiction, ECF No. 7. For the reasons set forth below, the court grants the motion to dismiss Thacher for lack of personal jurisdiction and grants in part and denies in part the motion to dismiss for failure to state a claim.

         I. BACKGROUND

         Plaintiff Ashley Shane Gault (“Gault”) brings this action against the Corporation and against Thacher, the President and majority shareholder of the Corporation. Gault argues that Thacher and the Corporation engaged in a course of self-interested dealings that depleted the Corporation's assets and therefore harmed him by decreasing the value of his 10% ownership interest in the Corporation. The Corporation is incorporated under the laws of Georgia, has its headquarters in Georgia, and has its principal place of business (“PPB”) in Georgia or South Carolina. Defendants attached to their motions to dismiss the Shareholders' Agreement and Stock Purchase Agreement that Gault signed in order to obtain his shares in the Corporation. While the Shareholders' Agreement states that the Corporation's PPB is in Savannah, Georgia, the Stock Purchase Agreement states that the Corporation's PPB is in Beaufort, South Carolina.

         Both documents were signed on November 16, 2011. These documents constitute an agreement between Gault, the Corporation, and Vaden of South Carolina (“Vaden of SC”). Thacher signed each agreement on behalf of the Corporation and on behalf of Vaden of SC. Gault's complaint and his responses to the motions to dismiss treat these agreements as though they exist between Gault, the Corporation, and Thacher as an individual. However, it is clear that he actually entered into an agreement with the Corporation and Vaden of South Carolina, another corporation of which Thacher is the President. Defendants have not asked the court to pierce the corporate veil.

         In 2011, Gault became a 10% shareholder in the Corporation and his ownership interest fully vested in 2016. Sometime after October 2017, Gault resigned. He now contends that Thacher and the Corporation engaged in a course of conduct that disadvantaged the Corporation, and thus diminished the amount of money that Gault received for this 10% stock ownership, while benefitting other businesses owned by members of Thacher's family (“Vaden Family Entities”). On October 19, 2018, Gault filed suit in the Beaufort County Court of Common Pleas and then filed an amended complaint on November 7, 2018. Defendants removed the action on November 21, 2018. On November 26, 2018, defendants filed their motions to dismiss. ECF Nos. 5 and 7. On December 8, 2018, Gault filed its responses to these motions. ECF Nos. 10 and 11. On December 17, defendants filed their replies. ECF Nos. 15 and 16. The court held a hearing on these matters on February 5, 2019. The motions are ripe for review.

         II. STANDARD

         When personal jurisdiction is challenged by the defendant, the plaintiff has the burden of showing that jurisdiction exists. See In re Celotex Corp., 124 F.3d 619, 628 (4th Cir. 1997). When the court decides a personal jurisdiction challenge without an evidentiary hearing, plaintiffs must prove a prima facie case of personal jurisdiction. See Mylan Labs., Inc. v. Akzo, N.V., 2 F.3d 56, 60 (4th Cir. 1993). To determine whether a plaintiff has satisfied this burden, the court may consider both the defendant's and the plaintiff's “pleadings, affidavits, and other supporting documents presented to the court” and must construe them “in the light most favorable to plaintiff, drawing all inferences and resolving all factual disputes in its favor, ” and “assuming [plaintiff's] credibility.” Masselli & Lane, PC v. Miller & Schuh, PA, 2000 WL 691100, at *1 (4th Cir. 2000) (table opinion); see Mylan Labs, 2 F.3d at 62; Combs v. Bakker, 886 F.2d 673, 676 (4th Cir. 1989)). The court, however, need not “credit conclusory allegations or draw farfetched inferences.” Masselli, 2000 WL 691100, at *1 (quoting Ticketmaster-New York, Inc. v. Alioto, 26 F.3d 201, 203 (1st Cir. 1994)).

         A Rule 12(b)(6) motion for failure to state a claim upon which relief can be granted “challenges the legal sufficiency of a complaint.” Francis v. Giacomelli, 588 F.3d 186, 192 (4th Cir. 2009) (citations omitted); see also Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992) (“A motion to dismiss under Rule 12(b)(6) [] does not resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.”). To be legally sufficient, a pleading must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). A Rule 12(b)(6) motion should not be granted unless it appears certain that the plaintiff can prove no set of facts that would support his claim and would entitle him to relief. Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993). When considering a Rule 12(b)(6) motion, the court should accept as true all well-pleaded allegations and should view the complaint in a light most favorable to the plaintiff. Ostrzenski v. Seigel, 177 F.3d 245, 251 (4th Cir. 1999). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (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.” Id.


         A. Motions to Dismiss for Lack of Personal Jurisdiction

         Defendants filed a motion to dismiss alleging that the court does not have personal jurisdiction over Thacher in her individual capacity. ECF No. 7. Defendants concede that the court has personal jurisdiction over the Corporation. ECF No. 16 at 3. In evaluating a challenge to personal jurisdiction under a state's long-arm statute, the court engages in a two-step analysis. Ellicott Mach. Corp. v. John Holland Party Ltd., 995 F.2d 474, 477 (4th Cir. 1993). First, the long-arm statute must authorize the exercise of jurisdiction under the facts presented. Id. Second, if the statute does authorize jurisdiction, then the court must determine if the statutory assertion of personal jurisdiction is consistent with due process. Id. South Carolina's long-arm statute extends to the outer limits allowed by the Due Process Clause. Foster v. Arletty 3 Sarl, 278 F.3d 409, 414 (4th Cir. 2002). Consequently, the only question before the court is whether the exercise of personal jurisdiction would violate due process. ESAB Grp., Inc. v. Centricut, LLC, 34 F.Supp.2d 323, 328 (D.S.C. 1999).

         The due process test for personal jurisdiction involves two components: minimum contacts and fairness. See World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980). Under the minimum contacts test, a nonresident defendant must have certain minimum contacts such that the suit does not offend “traditional notions of fair play and substantial justice.” Int'l Shoe Co. v. State of Wash., Office of Unemployment Compensation and Placement, 326 U.S. 310, 316 (1945). Due process is satisfied if the courts asserts personal jurisdiction over a defendant who “purposefully avails itself of the privilege of conducting activities within the forum state, ” Hanson v. Denckla, 357 U.S. 235, 253 (1958), such that it “should reasonably anticipate being haled into court there, ” World-Wide Volkswagen, 444 U.S. at 297. After a showing of the defendant's purposeful availment, the reasonableness inquiry balances any burden on the defendant against countervailing concerns such as the plaintiff's interest in obtaining relief and the forum state's interest in the controversy. See id. at 292.

         Personal jurisdiction over a nonresident defendant can be either specific or general. ESAB Group, Inc., 34 F.Supp.2d at 329. Gault does not appear to claim that this court has general personal jurisdiction over Thacher; rather, the parties' arguments focus on whether the court may exercise specific personal jurisdiction over her.[1] Specific jurisdiction arises when a cause of action is related to the defendant's activities within the forum state. See S.C. Code Ann. § 36-2-803; Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 (1984). The Fourth Circuit applies a three-part test when evaluating the propriety of exercising specific jurisdiction: (1) whether and to what extent the defendant purposely availed itself of the privileges of conducting activities in the forum state, and thus invoked the benefits and protections of its laws; (2) whether the plaintiff's claims arise out of those forum-related activities; and (3) whether the exercise of jurisdiction is constitutionally “reasonable.” Christian Sci. Bd. of Dirs. of the First Church of Christ v. Nolan, 259 F.3d 209, 215-16 (4th Cir. 2001) (citing Helicopteros, 466 U.S. at 414-16; Burger King v. Rudzewicz, 471 U.S. 462, 472, 476-77 (1985)).

         The first prong of the Nolan test for specific jurisdiction concerns whether a defendant has “purposefully avail[ed] itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.” J. McIntyre Mach., Ltd. v. Nicastro, 564 U.S. 873, 877 (2011) (quoting Hanson, 357 U.S. at 253). The “purposeful availment” element ensures that a defendant will not be haled into court in a jurisdiction solely as a result of “random, ” “fortuitous, ” or “attenuated” contacts or the unilateral activity of another person or third party. Burger King, 471 U.S. at 475. Even a single contact with the forum state can constitute purposeful availment sufficient to satisfy due process requirements. Id. at 475 n.18 (“So long as it creates a ‘substantial connection' with the forum, even a single act can support jurisdiction.”). The Fourth Circuit has relied on several nonexclusive factors to determine whether a defendant has purposefully availed itself of a forum in the context of a business relationship, including:

whether the defendant maintains offices or agents in the forum state; whether the defendant owns property in the forum state; whether the defendant reached into the forum state to solicit or initiate business; whether the defendant deliberately engaged in significant or long-term business activities in the forum state; whether the parties contractually agreed that the law of the forum state would govern disputes; whether the defendant made in-person contact with the resident of the forum in the forum state regarding the business relationship; the nature, quality and extent of the parties' communications about the business being transacted; and whether the performance of contractual duties was to occur within the forum.

Consulting Eng'rs Corp. v. Geometric Ltd., 561 F.3d 273, 278 (4th Cir. 2009) (citations omitted). Sporadic business activity within the forum state, including the existence of a guaranty agreement or a payment made within a state, “do not amount to purposeful availment of the privilege of conducting activities within” the forum state. Callum v. CVS Health Corp., 137 F.Supp.3d 817, 837 (D.S.C. 2015); see also State Bank of Alleghenies v. Hudnall, 1995 WL 469446, at *2 (4th Cir. Aug. 9, 1995) (“[T]he mere execution of a guaranty does not invariably subject one to personal jurisdiction in a foreign forum.”).

         The second factor in the specific jurisdiction analysis-that the litigation results from alleged injuries that “arise out of or relate to” the defendants purposeful availment into the state in question-is an equally important element in the court's analysis of this case. The court must consider whether Gault has sufficiently alleged that Thacher's wrongdoing was purposefully directed towards South Carolina, such that the court may exercise jurisdiction over her regarding these particular claims. The court finds that Gault has failed to sufficiently allege such contacts with South Carolina under both prongs.

         Before turning to the amended complaint's specific allegations of Thacher's wrongdoing, the court briefly addresses what role the fiduciary shield doctrine plays in the court's analysis of personal jurisdiction over Thacher. “Under the ‘fiduciary shield' doctrine, as it has generally been phrased, the acts of a corporate officer or employee taken in his corporate capacity within the jurisdiction generally do not form the predicate for jurisdiction over him in his individual capacity.” Columbia Briargate Co. v. First Nat. Bank in Dallas, 713 F.2d 1052, 1055-56 (4th Cir. 1983) (citing Bulova Watch Co. v. K. Hattori & Co., Ltd., 508 F.Supp. 1322, 1347 (E.D.N.Y. 1981)) (internal quotations omitted). However, the corporate shield doctrine does not prevent a court from exercising personal jurisdiction over a foreign corporate officer if that officer has otherwise exerted the sufficient minimum contacts within the forum state. See Id. (“[W]hen a non-resident corporate agent is sued for a tort committed by him in his corporate capacity in the forum state . . . he is properly subject to the jurisdiction of the forum court, provided the long-arm statute of the forum state is co-extensive with the full reach of due process.”); Magic Toyota v. Southeast Toyota Distrib., 784 F.Supp. 306, 310 (D.S.C. 1992) (finding that a court “may have personal jurisdiction over an individual non-resident employee based on acts he performed on behalf of his employer under certain circumstances”). While Thacher's role as an officer of the Corporation does not alone justify the court's jurisdiction over her, the court may still exercise jurisdiction over her if it finds that she otherwise engaged in sufficient directed activity in South Carolina in relation to Gault's allegations.

         In determining whether Thacher exercised sufficient minimum contacts in South Carolina to commit the wrongdoings alleged by Gault, the court may rely on information set forth in the complaint, Thacher's affidavit attached to her motions to dismiss, Gault's affidavit attached to his response to the motion to dismiss, and the various agreements submitted by both parties.[2] Gault's main grievance is that the Corporation and Thacher diverted funds from the Corporation to the other Vaden Family Entities. He argues that Thacher and the Corporation engaged in a course of self-interested dealings that depleted the Corporation's assets and therefore harmed him by decreasing the value of this 10% ownership interest in the Corporation. He claims that “Thacher authorized the Corporation to enter into agreements by which the Corporation guaranteed debts incurred by other Vaden Entities, which was not in the best interests of the Corporation or its minority shareholder Shane.” Am. Comp. ¶ 6. There is no allegation in this claim that Thacher was doing anything in South Carolina. This is a decision that would have been made at the Georgia headquarters. Thacher Affid. ¶¶ 10-13. Gault then claims that “Thacher took purposeful and calculated actions to transfer funds from the Corporation in South Carolina to herself and other entities in which she had or has an interest.” Am. Comp. ¶ 7. He refers to the “Corporation in South Carolina, ” but there is no separate corporation in South Carolina; it is headquartered in Georgia, where all agreements are made. Thacher Affid. ¶¶ 10-13. Gault may be referring to the physical dealership in South Carolina, but this is merely an asset of a Georgia Corporation. Gault further specifies in his affidavit that “[f]unds were transferred from the Beaufort store at Thacher's direction for the use of other Vaden Entities.” Gault Affid. ¶ 30. Even presuming Gault's claims to be true, Thacher, as an individual, did not have sufficient minimum contacts with South Carolina simply because she, as an officer of the Corporation, chose to move around money made in South Carolina within the Corporation. Additionally, the Corporation is a single corporate entity, not a parent company in Georgia with a distinct subsidiary company in South Carolina; as such, the income from the Corporation's dealership in South Carolina cannot be considered to exist separately from the overall income generated by the Georgia-based Corporation.

         Gault alleges that the “Corporation also pays management fees to Vaden Family Entities. It also has the opportunity to sell insurance products to its customers. Defendants allowed other Vaden Family Entities to profit from these activities, diverting potential revenue from the Corporation.” Am. Comp. ¶ 20. Later, Gault reiterates that “Thacher required the Corporation to pay ‘management fees' and ‘support fees' to other Vaden Family Entities for salaries and benefits of administrative personnel despite the fact that the Corporation employed its own administrative personnel since it needed staff knowledgeable in South Carolina DMV, Tax, and other legal requirements.” Id. ¶ 33. Specifically, Gault claims that when he began as the General Manager of the dealership, the store was paying $10, 500 a month in management fees to other Vaden Entities, and that they were paying $43, 500 in fees by the time he resigned. Gault Affid. ¶ 36. Again, these allegations do not demonstrate that Thacher purposefully availed herself of the benefits of operating South Carolina in relation to this alleged wrongdoing. This is clearly a shareholder's complaint about minimized returns due to corporate mismanagement. These corporate decisions would have been made at the Georgia headquarters, and Gault has not alleged otherwise. Thacher Affid. ¶¶ 10-13.

         Gault also claims that

Thacher transferred corporate opportunities, funds, and assets of the Corporation in excess of nine million dollars [ ] to other Vaden Family Entities. While those funds appear as receivable on the books of the Corporation, no promissory notes were signed, no repayment terms were required, and no interest has been charged. Thus, Defendant Thacher, as controlling shareholder and Board Member, charged [Gault] 4% interest for his loan, but no interest for $9 million in loans to the Vaden Family Entities, in which she had an interest. This has deprived the Corporation of approximately $1.5 million in interest payments from the Vaden Family Entities.

Am. Comp. ¶ 30. Here, Gault is talking about the transfer of the Corporation's opportunities and funds. The Corporation is incorporated and headquartered in Georgia. Just because it has a profitable dealership in South Carolina does not mean the Corporation's decisions-which form the basis for the alleged wrongdoing-are made in South Carolina. Those are the types of decisions made by the officers and directors at the Corporation's Georgia headquarters. Thacher Affid. ¶¶ 10-13.

         Gault also takes issue with the manner in which the Corporation handled property leasing matters in South Carolina. The dealership initially leased its property from a third party. Gault claims that when an opportunity arose to purchase land and build a new location, one of the Vaden Family Entities became the landlord and raised the rent significantly, all the while depriving Gault of the opportunity to participate in the decision-making process. Am. Comp. ¶ 19. While the building of the new property and raising of the rent took place in South Carolina, Gault has not alleged that Thacher personally had any contacts in South Carolina in regards to these actions. Cf. Columbia Briargate Co. v. First Nat. Bank in Dallas, 713 F.2d 1052, 1063 (4th Cir. 1983) (“What is required is some showing of direct, personal involvement by the corporate officer in some decision or action which is causally related to [the tort that caused] the plaintiff's injury.”). On the contrary, Thacher has reiterated that all major decisions regarding the corporation took place at the headquarters in Georgia by Georgia residents. Next, Gault claims that “[w]hen another tenant vacated property owned by a Vaden Family Entity and located near the dealership, the Corporation was required to pay the lease from ...

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