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Boston Post Partners II, LLP v. Paskett

United States District Court, D. Massachusetts

July 8, 2016

BOSTON POST PARTNERS II, LLP, Plaintiff,
v.
MICHAEL PASKETT; TODD HINES; CHARLES NEWMAN; NOPAL CACTUS FARMS, LLC; and GOLDEN SANDS PARTNERSHIP, Defendants.

          MEMORANDUM AND ORDER ON DEFENDANTS' MOTIONS TO DISMISS AND MOTION TO TRANSFER

          F. Dennis Saylor IV United States District Judge

         This is an action arising out of a failed business arrangement concerning the development of farmland in Arizona. Plaintiff Boston Post Partners II, LLP ("BPP") has filed a nine-count complaint against defendants Michael Paskett; Todd Hines; Charles Newman; Nopal Cactus Farms, LLC; and Golden Sands Partnership alleging, among other things, breach of contract and fraud.

         Defendants have filed three sets of motions, all but one concerning personal jurisdiction or venue. Defendant Paskett has moved to dismiss the entire action for improper venue under Fed R. Civ. P. 12(b)(3), or, in the alternative, to transfer the case to the District of Arizona under 28 U.S.C. § 1404(a). He has also moved to dismiss Count Six under Fed.R.Civ.P. 12(b)(6) for failure to state a claim. Defendant Hines has moved to dismiss the entire action for lack of personal jurisdiction under Fed.R.Civ.P. 12(b)(2) and improper venue under Fed.R.Civ.P. 12(b)(3), or, in the alternative, to transfer the case pursuant to § 1404(a). Defendants Newman, Nopal, and Golden Sands have moved to dismiss the entire action for lack of personal jurisdiction under Fed.R.Civ.P. 12(b)(2).

         For the following reasons, the Court will grant Paskett's motion to dismiss Count Six; transfer the matter to the District of Arizona under 28 U.S.C. § 1404(a); and deny the motions to dismiss for lack of personal jurisdiction or improper venue as moot.

         I. Factual Background

         Plaintiff Boston Post Partners II, LLP ("BPP") is a limited liability company registered in Delaware. (Pl. Opp. 1).[1] All of its members are residents of Massachusetts. (Id.)

         Defendant Michael Paskett resides in Idaho, defendant Todd Hines resides in the state of Washington, and defendant Charles Newman resides in Arizona. (Id. ¶¶ 3-5). Defendant Nopal Cactus Farms, LLC is a limited liability company, apparently organized under the laws of Arizona. (Id. ¶ 8).[2] Defendant Golden Sands Partnership is a partnership organized under the laws of Arizona, where it has its principal place of business. (Id. ¶ 9). Defendant Newman is the general partner of Golden Sands. (Id.). Each member of Nopal and each partner of Golden Sands resides in Arizona. (Id. ¶¶ 8-9). It appears that Newman controls Nopal and Golden Sands.

         At the beginning of 2015, Nopal owned 160 acres of farmland in Maricopa County, Arizona. (Id. ¶ 15). Arizona homestead rights provided Nopal the opportunity to lease surrounding state-owned land, at a fixed rate, for use as farmland. (Id. ¶ 16). Golden Sands exercised that right, on behalf of Nopal, leasing an additional 3, 502 acres of state-owned land (the "Leasehold Lands"). (Id. ¶17). Nopal also had the right, again due to Arizona homestead rights, to lease an additional 12, 000 acres of surrounding state-owned land (the "Additional Leasehold Lands"). (Id. ¶ 18).[3]

         According to the complaint, Paskett and Hines own and control an entity called GSJV. (Id. ¶ 23).[4] On February 13, 2015, GSJV contracted to purchase Nopal's 160 acres and to assume Golden Sands's lease for the Leasehold Lands for $10, 270, 000. (Id. ¶ 23).[5] Hines purportedly made a "good faith payment" of $350, 000 on behalf of GSJV. (Id.). According to the complaint, the closing date for the transaction was set for April 30, 2015. (Id. ¶ 23).[6]

         Paskett and Hines then "contacted BPP, with whom both had prior business dealings, to solicit its involvement to raise capital to purchase and lease the Nopal Lands, Leasehold Lands, and Additional Leasehold Lands and to develop the lands for agriculture." (Id. ¶ 24).

         On February 23, 2015, Paskett (as "representative" of GSJV) executed a Letter Agreement with BPP. (Pl. Opp. Ex. 1).[7] The Letter Agreement defined "GSJV" as "Michael Paskett, John Boley, & Doug Larsen." (Id.). It provided that "BPP will identify and source third party capital on an exclusive basis for GSJV for the purpose of acquiring and developing farmland in Arizona . . . starting with the Wilcox and Golden Sands properties." (Id.).[8] An existing Massachusetts corporation would become the "Acquisition Vehicle"; the Acquisition Vehicle would be owned by members of GSJV and BPP. (Id.). The Acquisition Vehicle would "make best efforts to acquire via merger the assets of the Wilcox property and the Golden Sands property." (Id.). Although the Letter Agreement is not entirely clear, it appears that GSJV and BPP would share equally in any equity of the Acquisition Vehicle that was not held by third-party capital investors. (See id.).

         The agreement stated that its terms were "enforceable" in Massachusetts and "subject to the laws of Massachusetts." (Id.). The agreement further provided that it "shall continue for [75] days after the date of execution" (that is, until May 10, 2015) and "shall terminate" unless both parties extend the agreement in writing or the closing date of the property acquisition is extended. (Id.; Am. Compl. ¶ 28).

         Hines did not sign the Letter Agreement and was not mentioned in it. However, according to the complaint, Paskett, "on behalf of [ ] Hines, orally discussed with BPP that [ ] Hines would participate in the partnership and joint venture." (Id. ¶ 30). It alleges that "[u]pon information and belief, defendants Paskett and Hines and Boley and Larsen agreed that defendant Hines would be an equal partner with defendant Paskett and that Boley and Larsen would not be partners" and that Hines "was recognized as a fully active participant in the partnership and joint venture by all parties." (Id. ¶ 30). According to the complaint, "Hines did not want his name listed on the Agreement because he was in the process of a divorce." (Id.).[9]The Letter Agreement does not contain an integration clause.

         According to the complaint, over the following months, BPP engaged experts and Arizona state regulators, and developed a plan for potential investors that detailed the homestead rights, water rights, farming potential, and the potential demand for agricultural products. (Id. ¶ 32). In addition, it developed marketing materials and began meeting with investors, and "worked to raise $25 million to $28 million in capital, " which was "sufficient" to make the purchase and develop the property. (Id. ¶ 38). BPP projected that the Arizona land could be developed and sold for up to $175 million in the next three to five years, and it estimated it would receive up to $30 million as a result. (Id.).

         According to the complaint, throughout this period, Paskett, Hines, and Newman had "many communications with BPP in Massachusetts by telephone, text message, and email on their own behalf and on behalf of entities that they owned and/or controlled." (Id. ¶ 13).[10]

         On March 26, 2015, the Stahl Hutterian Brethren, a nonprofit apostolic corporation, contacted Paskett and offered him $550 per acre per year, for a term of six years, to lease the lands and leaseholds GSJV had agreed to purchase from Nopal and Golden Sands. (Id. ¶¶ 11, 43). Paskett told BPP about the offer. (Id. ¶ 43). Hines appears to have been aware of the offer, as well. (Id. ¶ 46).

         Newman told Paskett that he would prefer to lease the Nopal-owned property, rather than sell it. (Id.). Paskett informed BPP of Newman's preference in an e-mail dated April 13, 2015. (Id.). In the same e-mail, somewhat ambiguously, Paskett told BPP:

This is a crazy turn of events I realize. Bear with me though. I'm going to close it. Then we can run down the road together without worry.

(Id.). According to the complaint, Paskett "continued for the following weeks to make similar representations - that there would be a closing on the land, BPP would still be involved after the closing, and BPP would be needed to refinance the balance sheet at closing with [$25 million]." (Id.). It further alleges that "[b]ased on those representations, BPP continued to work diligently to find an investor." (Id.).

         In fact, however, according to the complaint, "Paskett, Hines, and Newman were conspiring against BPP to exclude BPP from the deal for their own benefit." (Id. ¶ 49). On April 13, Paskett registered FTW, LLC as a limited liability company in Arizona. (Id. ¶ 50).[11]Two weeks later, on April 29, defendants Nopal and Golden Sands signed closing documents transferring the Arizona land and leaseholds to FTW. (Id. ¶ 53). At the same time, FTW's operating agreement was finalized. (Id. ¶ 54). According to the complaint, Paskett, Hines, and Newman "received a greater share of FTW than they would have for any proposal made with BPP, " and "[t]hey were able to accomplish this only by excluding BPP from the transaction." (Id. ¶ 56). Paskett allegedly "continued the ruse that BPP would be involved in a second stage of the transaction, " and thus "BPP continued to work to find an arrangement for further investment" until the end of June 2015. (Id. ¶¶ 57-59).

         In summary, BPP alleges that "[d]efendants Newman, Paskett, and Hines, acting through entities that they controlled, implemented [a] scheme to exclude BPP from the transactions." (Id. ¶ 52).

         II. Procedural History

         BPP filed the original complaint in this case on November 10, 2015.[12] It asserts nine claims: breach of fiduciary duty against Paskett, Hines, Newman, Nopal, and Golden Sands (Count One); breach of contract against Paskett (Count Two); breach of contract against Hines (Count Three); breach of the implied covenant of good faith and fair dealing against Paskett (Count Four); breach of the implied covenant of good faith and fair dealing against Hines (Count Five); violation of Mass. Gen. Laws ch. 93A against Paskett (Count Six); civil conspiracy against Paskett, Hines, Newman, Nopal, and Golden Sands (Count Seven); unjust enrichment against Paskett and Hines (Count Eight); and fraud against Paskett (Count Nine). It seeks, among other relief, money damages, a constructive trust "over the assets of BPP held by Defendants, " and pre-judgment attachment of assets of the defendants. (Am. Compl. at 7).

         Defendant Paskett has moved to dismiss Count Six under Fed.R.Civ.P. 12(b)(6), and has also moved to dismiss the entire action for improper venue under to Fed R. Civ. P. 12(b)(3), or to transfer the case to the District of Arizona under 28 U.S.C. § 1404(a). Defendant Hines has moved to dismiss the entire action for lack of personal jurisdiction under Fed.R.Civ.P. 12(b)(2) and improper venue under Fed.R.Civ.P. 12(b)(3), or, in the alternative, to transfer the case to Arizona pursuant to § 1404(a). Defendants Newman, Nopal and Golden Sands have moved to dismiss the entire action for lack of personal jurisdiction under Fed.R.Civ.P. 12(b)(2).

         III. Mass. Gen. Laws ch. 93A (Count Six)

         Paskett has moved to dismiss Count Six of the complaint, which asserts a claim under Mass. Gen. Laws ch. 93A for unfair and deceptive trade practices. Paskett is the only defendant named in Count Six.

         The Supreme Judicial Court has construed Chapter 93A as applying to actions that arise "between discrete, independent business entities, " but not to transactions between joint venturers or fiduciaries within a single company. Szalla v. Locke, 421 Mass. 448, 451 (1995); see also Zimmerman v. Bogoff, 402 Mass. 650, 662 (1988) (dispute between owners of a close corporation held to be "principally private in nature, " and therefore did "not fall within the purview of" Chapter 93A); Riseman v. Orion Research, Inc., 394 Mass. 311, 313-14 (1985) (Chapter 93A does not apply to disputes between corporate shareholders and the corporation concerning the internal governance of the corporation).

         The complaint expressly alleges that "Defendant Paskett and BPP entered into a partnership and joint venture, which they memorialized in [the Letter Agreement] . . . ." (Am. Compl. ¶ 25). The substance of BPP's claim against Paskett is that he failed to follow through on his obligations under the joint venture agreement. Indeed, Count One alleges a breach of fiduciary duty by Paskett (and others) that he owed to BPP as a joint venturer.

         It is well-established that Chapter 93A does not apply to a dispute of that nature. Cf. Szalla, 421 Mass. at 452 ("The association between the plaintiff and the defendant in the interests of forming a business venture together is not the kind of commercial transaction regulated by the statute."). Paskett and BPP were allegedly partners in a business venture, and the dispute concerns their respective rights and relationships in that venture. Count Six will therefore be dismissed.

         IV. Motions to Dismiss for Lack of Personal Jurisdiction

         Defendants Hines, Newman, Nopal, and Golden Sands have all moved to dismiss the case for lack of personal jurisdiction under Rule 12(b)(2).

         A. Standard of Review

         The plaintiff bears the burden of establishing that the court has personal jurisdiction over defendants. Daynard v. Ness, Motley, Loadholt, Richardson & Poole, P.A., 290 F.3d 42, 50 (1st Cir. 2002). Upon a motion to dismiss under Rule 12(b)(2), the court may employ several standards to assess whether plaintiff has carried this burden: the "prima facie" standard; the "preponderance-of-the-evidence" standard; or the "likelihood" standard. See Id. at 50-51, n. 5; Foster-Miller, Inc. v. Babcock & Wilcox Can., 46 F.3d 138, 145-47 (1st Cir. 1995). Where, as here, the court is called to make this assessment without first holding an evidentiary hearing, the prima facie standard is applied. United States v. Swiss Am. Bank, Ltd., 274 F.3d 610, 618 (1st Cir. 2001). Under this standard, the court takes the plaintiffs "properly documented evidentiary proffers as true and construe[s] them in the light most favorable to [plaintiff's] jurisdictional claim." A Corp. v. All American Plumbing, Inc., 812 F.3d 54, 57 (1st Cir. 2016) (citing Phillips v. Prairie Eye Ctr., 530 F.3d 22, 26 (1st Cir. 2008). A plaintiff may not "rely on unsupported allegations in [its] pleadings." A Corp., 812 F.3d at 54 (internal quotations omitted). "Rather, [plaintiff] must put forward ‘evidence of specific facts' to demonstrate that jurisdiction exists." Id. (quoting Foster-Miller, 46 F.3d at 145).

         B. Defendant Hines

         "Permissive forum selection clauses, often described as ‘consent to jurisdiction' clauses, authorize jurisdiction and venue in a designated forum, but do not prohibit litigation elsewhere." Rivera v. Centro Medico de Turabo, Inc., 575 F.3d 10, 17 (1st Cir. 2009) (quoting 14D Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 3803.1 (3d ed. 1998)). The Letter Agreement between Paskett (as a representative of GSJV) and BPP clearly states that "[t]his Agreement is subject to the laws of and is enforceable in the Commonwealth of ...


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