Aquatech Corporation v. Comfort Installs LLC

District Court, D. Nevada·Decided June 14, 2024·No. 2:24-cv-00259·Unknown

Opinion

Aquatech Corporation, Case No.: 2:24-cv-00259-JAD-MDC

Plaintiff v. Order Granting Motion to Dismiss and Closing Case Comfort Installs LLC, [ECF No. 9] Defendant

Aquatech Corporation, which has its principal place of business in Nevada, sues Comfort Installs LLC, for breaching a membership agreement by ordering Aquatech products and not paying for them.1 Comfort Installs, a Missouri company, moves to dismiss this action for want of personal jurisdiction, arguing that it “has no business relationship with Aquatech or any other Nevada company” and isn’t a party to the membership agreement.2 Aquatech counters that Comfort Installs assumed or acquired the membership agreement from a company that itself had acquired the agreement from the original signatory (a third Missouri company), and that the timing of unpaid orders indicates that they were placed by Comfort Installs. Aquatech also requests that I grant it jurisdictional discovery if the allegations and evidence that it presents aren’t sufficient for personal jurisdiction. I find that Aquatech has neither carried its burden of demonstrating that Comfort Installs purposefully availed itself of conducting activities in Nevada nor shown that it is capable of doing so, so I grant the motion to dismiss without leave to amend, and I deny Aquatech’s request for discovery because the evidentiary support it seeks wouldn’t cure this case’s jurisdictional shortcomings.

1 ECF No. 1 (complaint). 2 ECF No. 9 at 1. Background A. Aquatech seeks overdue payments from Comfort Center but discovers it no longer exists. In October 2014, Aquatech and The Comfort Center, LLC entered into a membership agreement.3 Comfort Center, a Missouri company, became an authorized Aquatech member, which gave it the right to use Aquatech’s trademarks and pool-product purchasing system and the option to buy shares of Aquatech stock.4 In return, Comfort Center agreed to prominently display and identify itself with Aquatech’s trademarks, respond to and pursue sales that Aquatech referred, and pay all purchase invoices and support fees “when and as due in strict accordance with [Aquatech’s] credit policy.”5 The membership agreement also contained a choice-of-law clause establishing that it would be “governed by and interpreted in accordance with the laws of the state of Nevada.”6 This relationship apparently went on uneventfully for years—Aquatech products were purchased, and timely payments for those products were tendered.7 But in October 2023, Aquatech realized that some purchases made through Comfort Center’s account hadn’t been paid for and sent a demand letter to Comfort Center “seeking payment for outstanding amounts due.”8 Comfort Center’s lawyer Jere Loyd responded, but to Aquatech’s surprise, he informed it that

3 ECF No. 10-2. 4 Id. at 3–4. 5 Id. at 4–5. 6 Id. at 12. 7 ECF No. 10-1 at ¶ 7. 8 Id. at ¶ 8; ECF No. 10-3. Comfort Center no longer existed.9 Loyd suggested that another entity, Comfort Center Sales LLC (Comfort Sales), might have been the “responsible party.”10 According to Loyd, Comfort Sales (also a Missouri company) had acquired Comfort Center’s assets “and operated for about a year thereafter before cessation of business.”11

B. Aquatech investigates, homes in on Comfort Installs, and sues it. After discovering that someone had purchased products through an account for a member that had ceased operations years prior, Aquatech began investigating.12 It learned that Comfort Center had indeed been wound up, Comfort Sales had been formed in December 2017, and Loyd’s name appeared on Comfort Sales’ articles of incorporation.13 At some point, Comfort Sales registered the fictious name “The Comfort Center” but cancelled it in July 2020.14 Several days after that cancellation, the name was registered to Comfort Installs.15 Aquatech realized that Comfort Installs is based out of the same location as Comfort Center and Comfort Sales were. And it discovered that Comfort Sales and Comfort Installs share the same members, one of whom “is a descendant” of “the guarantors of the membership agreement” between Comfort

Center and Aquatech.16 Based on this information and the letter from Loyd, Aquatech concluded that Comfort Installs had acquired Comfort Center’s assets through Comfort Sales, including the

9 ECF No. 10-3 at 2. It appears that Comfort Center was officially wound up back in 2020. ECF No. 10-4 at 2–3. 10 ECF No. 10-3 at 2. 11 Id. 12 ECF No. 10-1 at ¶¶ 10–11. 13 ECF No. 10-5 at 2–4. 14 ECF No. 10-7 at 2. 15 ECF No. 10-8 at 2. 16 ECF No. 10-1 at ¶ 17; see also ECF No. 10-2 at 13; ECF No. 10-5 at 2; ECF No. 10-8 at 2. membership agreement,17 and sued Comfort Installs for breach of the membership agreement and, alternatively, for unjust enrichment.18 Comfort Installs now moves to dismiss, arguing that this court lacks personal jurisdiction over it because it has “no business connection” to Nevada, has never “acquired companies that

have done . . . business in Nevada,” and “has never done business with Aquatech.”19 Comfort Installs highlights that it never signed the membership agreement that Aquatech is suing it for breaching, and contends that it didn’t otherwise acquire or assume the agreement from another company or purchase products from Aquatech, so it can’t be forced to resolve Aquatech’s claims in Nevada.20 Aquatech counters that it has shown that Comfort Installs acquired the membership agreement, thereby consenting to this court’s jurisdiction via the agreement’s Nevada choice-of- law clause.21 Aquatech also contends that, despite Comfort Installs’ averments to the contrary, its own investigation suggests that Comfort Installs is responsible for the unsettled product orders.22 Discussion

A federal court may dismiss an action under Federal Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction. The Fourteenth Amendment’s Due Process Clause limits a court’s power to bind a defendant to a judgment in the state in which it sits.23 When, as here, the

17 ECF No. 10-1 at ¶ 19. 18 ECF No. 1 at ¶¶ 12–23. 19 ECF No. 9 at 3. 20 Id. at 2–3. 21 ECF No. 10 at 3–4. 22 Id. 23 Walden v. Fiore, 571 U.S. 277, 283 (2014). Because Nevada’s long-arm statute grants courts jurisdiction over persons “on any basis not inconsistent with” the U.S. Constitution, the defendant is a nonresident, the court must determine whether the defendant has “certain minimum contacts such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.”24 “There are two forms of personal jurisdiction that a forum state may exercise over a nonresident defendant—general jurisdiction and specific

jurisdiction.”25 But Aquatech doesn’t contend that general jurisdiction exists; it argues only that this court has specific jurisdiction over Comfort Installs.26 A. To demonstrate that the court has specific jurisdiction over a non-forum defendant, the plaintiff must show purposeful availment. Specific jurisdiction “focuses on the relationship among the defendant, the forum, and the litigation.”27 This means that “the plaintiff cannot be the only link between the defendant and the forum”28 and “[t]he unilateral activity of those who claim some relationship with a nonresident defendant cannot satisfy the requirement of context with the forum [s]tate.”29 Courts in the Ninth Circuit apply a three-prong test to resolve whether specific jurisdiction exists.30 The plaintiff bears the burden of satisfying the first two by showing that (1) the defendant “purposefully avail[ed] [itself] of the privileges of conducting activities in the forum,” and (2)

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Aquatech Corporation v. Comfort Installs LLC, (D. Nev. 2024).

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