United States District Court, D. Massachusetts
MEMORANDUM AND ORDER ON MOTION TO DISMISS AND MOTION
FOR ENTRY OF DEFAULT JUDGMENT
ALLISON D. BURROUGHS, ALLISON D. BURROUGHS U.S. DISTRICT
August 24, 2016, Plaintiff Muhammed Saeed initiated this suit
against Defendants Omex Systems, Inc. (“Omex”),
WallachBeth Software, LLC (“WBS”), Michael
Wallach, David Beth, and WallachBeth Capital, LLC
(“WBC”) asserting breach of contract, breach of
fiduciary duty, and unjust enrichment claims under Delaware
law. Presently pending before the Court is a motion to
dismiss brought by WBS, Wallach, Beth, and WBC [ECF No. 10], on
the grounds that this Court lacks personal jurisdiction over
any of the moving Defendants and, alternatively, on the
grounds that Saeed has failed to state a claim upon which
relief can be granted. Also pending before the Court is
Saeed's Motion for Entry of Default of Omex [ECF No.18].
For the reasoning set forth below, the Court grants the
motion to dismiss and denies without prejudice the motion for
entry of default.
following are the facts as alleged in the Complaint [ECF No.
1] unless otherwise noted. In 2008, Saeed and WBS jointly
founded Omex Systems, LLC, now known as Omex Systems, Inc., a
company which provides a computer-based financial investment
platform. Compl. ¶¶ 1, 13. During the relevant time
period, Omex was a Delaware corporation with a primary place
of business in the state of New York. Id. ¶ 8.
WBS is a New York limited liability company with a primary
place of business in New York. Id. ¶ 9. Wallach
and Beth are both individual residents of either New York or
New Jersey. Id. ¶¶ 9-10; Wallach Decl.
[ECF No. 11-2] ¶ 27; Beth Decl. [ECF No. 11-1] ¶ 4.
Wallach and Beth also own WBC, a broker-dealer through which
Wallach and Beth operated Omex, which is also a New York
limited liability company with a primary place of business in
the state of New York. Compl. ¶¶ 9, 15. Saeed,
Wallach, and Beth, through WBS, co-managed Omex. Id.
operation of Omex was governed by an Operating Agreement
(“the Agreement”) [ECF No. 11-3] signed by
Wallach, Beth, and Saeed. Compl. at ¶¶ 16-17. The
Agreement outlined the classes of each of the limited
liability company members and the rights corresponding to
each class of membership. Id. at ¶¶ 19-21.
WBS is listed as a “Class A” member and Saeed is
listed as a “Class B” member. Id. at 20;
see also Agreement at 59-60. As a Class B member,
pursuant to the Agreement, Saeed was entitled to a 20% share
of net profits and net losses and a 20% gain on sale
allocation. Compl. ¶ 21; Agreement at 58.
February 18, 2011, Wallach and Beth, as managers and on
behalf of all other Class A members, sent a letter to Saeed
informing him that he had been removed as a manager, reducing
his share of net profits and losses to 0% and his gain on
sale allocation to 10%. Compl. at ¶ 22.
letter cited provisions of the Agreement which outlined the
process for involuntary withdrawal of a member. Id.
at ¶¶ 24-26. On April 6, 2011, Saeed received
another letter notifying him that he had been terminated as a
member of Omex entirely, and that his gain on sale allocation
had been further reduced to 0%. Id. at ¶ 29. In
2015, Omex was purchased by Raptor Trading Systems, Inc. for
total consideration exceeding two million dollars.
Id. at ¶¶ 31, 35. Saeed alleges that he
never received the $500, 000.00 he is entitled to from the
sale of Omex, as stipulated in the Agreement. Id. at
¶¶ 34-35; [ECF No. 11-3].
filed the Complaint on August, 24, 2016 against Omex, WBS,
WBC, and Wallach and Beth individually. On October 28, 2016,
Defendants WBS, WBC, Wallach, and Beth filed the instant
Motion to Dismiss [ECF No. 10] on the grounds of lack of
personal jurisdiction over any of the moving Defendants, and
failure to state a claim upon which relief can be granted.
See also [ECF No. 11].
December 21, 2016, Saeed moved for an entry of default of
Omex [ECF No. 18] for Omex's failure to file a timely
response to Saeed's complaint. To date, Omex has not
responded to the complaint or entered an appearance in this
MOTION TO DISMISS
evaluate a motion to dismiss for failure to state a claim
pursuant to Federal Rule of Civil Procedure 12(b)(6), the
Court must accept as true all well-pleaded facts, analyze
those facts in the light most hospitable to the
plaintiff's theory, and draw all reasonable inferences
from those facts in favor of the plaintiff. U.S. ex rel.
Hutcheson v. Blackstone Med. Inc., 647 F.3d 377, 383
(1st Cir. 2011). The Court may consider the “complaint,
documents annexed to it, and other materials fairly
incorporated within it, ” which “sometimes
includes documents referred to in the complaint but not
annexed to it” and “matters that are susceptible
to judicial notice.” Rodi v. S. New Eng. Sch. of
Law, 389 F.3d 5, 12 (1st Cir. 2004). Although detailed
factual allegations are not required, a complaint must set
forth “more than labels and conclusions.”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555
(2007). A “formulaic recitation of the elements of a
cause of action” is not enough, id. at 545;
the complaint must state “factual allegations, either
direct or inferential, respecting each material element
necessary to sustain recovery under some actionable legal
theory.” Gagliardi v. Sullivan, 513 F.3d 301,
305 (1st Cir. 2008) (internal quotations and citation
motion to dismiss asserts grounds for dismissal based both on
the merits and on jurisdictional deficiency, the
jurisdictional issues must be resolved prior to an analysis
of the merits. See Bell v. Hood, 327 U.S. 678, 682
(1945) (“Whether the complaint states a cause of action
on which relief could be granted is a question of law and
just as issues of fact it must be decided after and not
before the court has assumed jurisdiction over the
argue that this Court lacks personal jurisdiction over them.
There are two types of personal jurisdiction: general and
specific. See, e.g., Foster-Miller, Inc. v. Babcock &
Wilcox Canada, 46 F.3d 138, 144 (1st Cir. 1995). General
jurisdiction exists “when the litigation is not
directly founded on the defendant's forum-based contacts,
but the defendant has nevertheless engaged in continuous and
systematic activity, unrelated to the suit, in the forum
state.” Id. (quoting United Elec. Workers
v. 163 Pleasant St. Corp., 960 F.2d 1080, 1088 (1st Cir.
1992)). To establish specific jurisdiction, the plaintiff
must show that “the cause of action arises directly out
of, or relates to, the defendant's forum-based
contacts.” Pritzker v. Yari, 42 F.3d 53, 60
(1st Cir. 1994) (quoting United Elec. Workers, 960
F.2d at 1088-89).
plaintiff bears the burden of proving the existence of
personal jurisdiction. See, e.g., Foster-Miller, 46
F.3d at 145. Here, the Court will employ the “prima
facie” standard, which is the most common method used
to evaluate personal jurisdiction. Adelson v.
Hananel, 510 F.3d 43, 48 (1st Cir. 2007). It requires
the Court to consider whether the plaintiff has
“proffered evidence that, if credited, is enough to
support findings of all facts essential to personal
jurisdiction.” Boit v. Gar-Tec Products, Inc.,
967 F.2d 671, 675 (1st Cir. 1992). The plaintiff
“cannot rest upon the pleadings, but is obliged to
adduce evidence of specific facts.”
Foster-Miller, 46 F.3d at 145. The court may
“add to the mix facts put forward by the defendants, to
the extent that they are uncontradicted.” Daynard
v. Ness, Motley, Loadholt, Richardson & Poole, P.A.,
290 F.3d 42, 51 (1st Cir. 2002).
does not argue that this Court has general jurisdiction over
individual Defendants Wallach or Beth, or over WBS. [ECF No.
17 at 4-5]. Saeed only asserts that the Court has general
jurisdiction over WBC.
first argues that the Court has general jurisdiction over WBC
because it has been registered with the Massachusetts
Securities Division since 2009, but he has not cited relevant
case law to support the proposition that registration with
the Division is sufficient to establish general jurisdiction,
and his argument and citations conflate the requirements of
general and specific jurisdiction. See [ECF No. 17
at 4-5]. Plunkett v. Valhalla Investment Services,
Inc., 409 F.Supp.2d 39, 42 (D. Mass. 2006), which the
Court believes is one of the cases Saeed intended to cite,
held that a Massachusetts District Court had
specific jurisdiction over an out- of-state
defendant investment company alleged to have violated the
Massachusetts Uniform Securities Act, Mass. Gen. Laws ch.
110A, because the investment company “had minimum
contacts with Massachusetts.” The facts relevant to the
jurisdictional analysis are not fully fleshed out in
Plunkett because the court denied the motion to
dismiss on alternative grounds, but there is no indication of
an allegation that the defendant was registered with the
Massachusetts Securities Division, and the case never
addresses general personal jurisdiction. 409 F.Supp.2d at
42-43. Saeed also apparently intended to cite Bulldog
Investors Gen. P'ship v. Sec'y of the
Commonwealth, 929 N.E.2d 293, 300-01 (Mass. 2010), in
which the Massachusetts Supreme Judicial Court held that it
had personal jurisdiction over an out-of-state defendant
company that directed an offer of unregistered securities to
a Massachusetts resident. This case, too, only addresses
specific jurisdiction, and does not speak to general
jurisdiction. Bulldog Investors, 929 N.E.2d at
300-01. Moreover, Saeed's reliance on this case to
support the proposition that registration with the
Massachusetts Securities Division is sufficient to confer
general jurisdiction is inapposite because the case is
fundamentally premised on allegations that the defendant
company hadn't registered its securities in
violation of the Massachusetts Uniform Securities Act.
Id. As such, the cases upon which Saeed primarily
relies to assert this Court's general jurisdiction over
WBC do not support his position.
Saeed contends that WBC “admits to providing services
to multiple institutional brokerage clients in the
Commonwealth of Massachusetts over the past five plus
years” [ECF No. 17 at 5], but he has not provided
factual evidence to support this allegation. Defendants
submit, without contradiction, that they conduct less than 3%
of their business in Massachusetts. [ECF No. 21 at 4].
Moreover, even “continuous activity of some sorts
within a state is not enough to support the demand that the
corporation be amenable to suits unrelated to that
activity;” general jurisdiction may only be asserted in
jurisdictions “in which the corporation is fairly
regarded as at home.” Daimler AG v. Bauman,
134 S.Ct. 746, 757, 760 (2014) (citing Goodyear Dunlop
Tires Operations, S.A. v. Brown, 564 U.S. 915, 924
(2011)); see also International Shoe Co. v. State of
Wash., Office of Unemployment Compensation and
Placement, 326 U.S. 310, 318 (1945). For corporate
defendants, “the place of incorporation and principal
place of business are paradigm bases for general
jurisdiction, ” Daimler, 134 S.Ct. at 757,
760, and Plaintiff does not allege that WBC is either
incorporated or has a principal place of business in
Massachusetts. While there may be an “exceptional
case” in which a corporation is “essentially at
home” in a location other than the place of
incorporation or principal place of business,
Daimler, 134 S.Ct. at 761 n.19, Saeed has not
demonstrated that such an exception is warranted here.
See id. at 752, 761-62 (holding that 2.4% of global
sales and 10% of U.S. sales occurring in forum state were not
sufficient to support general jurisdiction over corporate
defendant); see also Campbell Pet Co. v. Miale, 542
F.3d 879, 884 (1st Cir. 2008) (finding that two percent of
defendant's total sales occurring in forum state falls
“far short” of the amount sufficient to exercise
general jurisdiction over the defendant). Therefore, Saeed
has not met his burden to prove that the Court has general
jurisdiction over WBC.