Billing Associates Northwest LLC v. Addison Data Services LLC

• Court: Court of Appeals for the Ninth Circuit
• Decided: January 24, 2025
• Docket: 23-35198
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS JAN 24 2025 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

BILLING ASSOCIATES NORTHWEST No. 23-35198 LLC, a Washington limited liability company, D.C. No. 2:20-cv-01854-RSM

Plaintiff-Appellant, MEMORANDUM* v.

ADDISON DATA SERVICES LLC, a Texas limited liability company; LESLIE W. KREIS, Jr., a Texas resident; MENEDOZA LINE CAPITAL LLC, a limited liability company; DAVID DURHAM; KORENVAES HORIZON PARTNERS LP, a limited partnership; CHRISTOPHER HARPER, a Texas resident; CORBETT CAPITAL LLC, a limited liability company; PAT CRAINE, a Texas resident; JOE CRAINE, a Texas resident; JOHN AND JANE DOES, fictitious names for persons receiving constructive trust property,

Defendants-Appellees.

Appeal from the United States District Court for the Western District of Washington Ricardo S. Martinez, District Judge, Presiding

Argued and Submitted August 20, 2024 Portland, Oregon

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. Before: CHRISTEN and NGUYEN, Circuit Judges, and EZRA,** District Judge.

Billing Associates Northwest LLC appeals the district court’s dismissal of

its claims against Texas limited liability company Addison Data Services (“ADS”)

and several individual defendants alleged to be ADS’s owners and managers (the

“owner/manager defendants”). We have jurisdiction under 28 U.S.C. § 1291.

Reviewing de novo, see Calise v. Meta Platforms, Inc., 103 F.4th 732, 738 (9th

Cir. 2024), we affirm in part, reverse in part, and remand.

1. The district court properly declined to exercise personal jurisdiction over

the owner/manager defendants.1 Nonresident defendants must “have ‘certain

minimum contacts’ with the relevant forum such that the exercise of personal

jurisdiction ‘does not offend “traditional notions of fair play and substantial

justice.”’” Herbal Brands, Inc. v. Photoplaza, Inc., 72 F.4th 1085, 1089–90 (9th

Cir. 2023) (quoting Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)), cert.

denied, 144 S. Ct. 693 (2024). Because Billing Associates does not argue the

owner/manager defendants are subject to Washington jurisdiction generally, it

** The Honorable David A. Ezra, United States District Judge for the District of Hawaii, sitting by designation. 1 In the alternative, the district court dismissed the claims against the owner/manager defendants as untimely. Because this merits ruling could affect Billing Associates’ ability to pursue the claims in another forum, see Wages v. IRS, 915 F.2d 1230, 1234–35 (9th Cir. 1990), we address it as well.

2 must establish a basis for the district court’s jurisdiction specific to the underlying

controversy. See Walden v. Fiore, 571 U.S. 277, 283–84 & n.6 (2014).

To establish specific personal jurisdiction over a defendant, Billing

Associates must show, among other things, that the defendant “purposefully

direct[ed] his activities or consummate[d] some transaction with the forum or

resident thereof; or perform[ed] some act by which he purposefully avail[ed]

himself of the privilege of conducting activities in the forum, thereby invoking the

benefits and protections of its laws.” Herbal Brands, 72 F.4th at 1090 (quoting

Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 802 (9th Cir. 2004)).

“[J]urisdiction over each defendant must be established individually.” Sher v.

Johnson, 911 F.2d 1357, 1365 (9th Cir. 1990). “[A] person’s mere association

with a corporation that causes injury in the forum state is not sufficient in itself to

permit that forum to assert jurisdiction over the person.” Davis v. Metro Prods.,

Inc., 885 F.2d 515, 520 (9th Cir. 1989).

Billing Associates does not allege any specific actions taken by defendants

Mendoza Line Capital, LLC, Korenvaes Horizon Partners, L.P., Corbett Capital,

LLC, David Durham, Pat Craine, or Joe Craine. Consequently, it fails to show that

these defendants purposefully directed their conduct toward Washington. A

defendant’s awareness that the plaintiff will suffer harm in the forum state is not

sufficient. See Walden, 571 U.S. at 290.

3 Defendant Leslie W. Kreis, Jr. formed ADS and arranged for it to purchase

ADS Delaware’s assets, including the contracts with Billing Associates, but

nothing in the record suggests that Kreis personally directed conduct toward

Washington. See id. (holding that defendant’s out-of-state preparation of false

document used to wrongfully withhold funds from forum resident did not

“connect[] him to the forum in a meaningful way”). The transaction was between

two Texas-based limited liability companies, and non-defendant Michael Collier

caused Billing Associates to consent to the contracts’ assignment.

Defendant Christian Harper likewise did not direct relevant conduct toward

Washington. He did not join ADS until after ADS took over the contracts with

Billing Associates. Although Harper allegedly offered to turn over the landlords’

tenant utility payments in exchange for a new contract with Billing Associates, the

claims against Harper are for conspiring to cover up the transfer of the funds out of

ADS, not for offering to return them to the landlords. See Bristol-Myers Squibb

Co. v. Superior Ct., 582 U.S. 255, 264 (2017) (explaining that without a

connection between the forum and the underlying controversy, “specific

jurisdiction is lacking regardless of the extent of a defendant’s unconnected

activities in the State”).

4 Because Billing Associates failed to show that any of the owner/manager

defendants have the requisite minimum contacts with Washington, we affirm the

district court’s dismissal of these defendants for lack of personal jurisdiction.

2. The district court erred in ruling that the bankruptcy settlement agreement

bars Billing Associates’ claims. Although Billing Associates released ADS from

all claims that arose before the bankruptcy court approved the settlement

agreement, the agreement exempts “any claims against the bankruptcy estate” that

are “related to” an “agreement between the parties concerning post-petition access

to the estate’s [Starnik] database.” Billing Associates alleges that the database

“contained the information upon which [the second amended complaint] is based.”

It is ambiguous whether the exemption covers only disputes about access, as ADS

argues, or applies more broadly to claims discovered through access to the

database. Because ambiguities are normally construed against the drafting party,

see Perthuis v. Baylor Miraca Genetics Lab’ys, LLC, 645 S.W.3d 228, 241 (Tex.

2022), it is not clear from the face of the second amended complaint that Billing

Associates released its claims in the settlement agreement. See Nacarino v. Kashi

Co., 77 F.4th 1201, 1203 (9th Cir. 2023). Therefore, we reverse the dismissal on

this ground.

3. The district court erred in ruling that Billing Associates’ claims are

untimely. All the claims are subject to Texas’s four-year statute of limitations.

5 See Tex. Civ. Prac. & Rem. Code Ann. § 16.004(a)(5) (breach of fiduciary duty);

Agar Corp. v. Electro Circuits Int’l, LLC, 580 S.W.3d 136, 143 (Tex. 2019) (civil

conspiracy).

Billing Associates allegedly discovered its claims against ADS during the

initial bankruptcy proceedings, and it filed the complaint exactly four years after

the proceedings ended. Because “filing for bankruptcy tolls the running of

limitations,” Citibank N.A. ex rel. NRZ Pass-Through Tr. VI v. Pechua, Inc., 624

S.W.3d 633, 639 (Tex. Ct. App. 2021), Billing Associates timely filed its claims

against ADS.

Billing Associates allegedly discovered its own claims against the

owner/manager defendants “[a]fter the ADS [bankruptcy] was initially closed in

December 2016,” when “Billing Associates received further information for the

first time that revealed ADS transferred the Tenant Payments directly to the

[owner/manager] Defendants.” Thus, the claims are timely regardless of whether

Texas would toll the limitations period during ADS’s bankruptcy.

Billing Associates does not allege if—let alone when—the bankruptcy

trustee discovered ADS’s claims against the owner/manager defendants that

Billing Associates asserts derivatively. Billing Associates alleges only that the

trustee “obtained the right to access” the Starnik database during the initial

bankruptcy proceedings and that she “never pursued or resolved any claims against

6 the [owner/manager] Defendants.” Billing Associates had no obligation “to plead

around affirmative defenses.” U.S. Commodity Futures Trading Comm’n v. Monex

Credit Co., 931 F.3d 966, 972 (9th Cir. 2019). Because it is not clear from the

second amended complaint that Billing Associates’ derivative claims are time-

barred, they should not have been dismissed. See Nacarino, 77 F.4th at 1203.

Therefore, we reverse the district court’s dismissal of Billing Associates’

claims as untimely.

4. The district court erred in ruling that Texas’s one-satisfaction rule bars

Billing Associates’ claims. “Where a party seeking recovery has previously

settled, the one-satisfaction rule manifests itself in the form of a settlement credit.”

Bay, Ltd. v. Mulvey, 686 S.W.3d 401, 406 (Tex. 2024). Billing Associates alleges

that it suffered more than $1.6 million in damages and received substantially less

than that from the bankruptcy settlement.2 The one-satisfaction rule does not bar

Billing Associates from seeking to recover the shortfall, and we reverse the district

court’s contrary conclusion.

* * *

2 The parties dispute the amount of the settlement credit. ADS argues for a credit of $653,534.67—the full amount of Billing Associates’ allowed, unsecured claims in the bankruptcy proceeding—whereas Billing Associates alleges that it recovered less than $200,000 from the bankruptcy estate. We need not resolve the issue here.

7 We affirm the district court’s dismissal of the owner/manager defendants for

lack of personal jurisdiction. We reverse the district court’s rulings that the

settlement agreement, the statute of limitations, and the one-satisfaction rule bar

Billing Associates’ claims. On remand, the district court should consider ADS’s

remaining arguments for dismissal.

Each party shall each bear its own costs.

AFFIRMED in PART; REVERSED in PART; REMANDED.