García v. Simple Factory

79 F. Supp. 3d 385, 2015 U.S. Dist. LEXIS 7550, 2015 WL 241478
CourtDistrict Court, D. Puerto Rico
DecidedJanuary 20, 2015
DocketCivil No. 13-1056 (SEC)
StatusPublished

This text of 79 F. Supp. 3d 385 (García v. Simple Factory) is published on Counsel Stack Legal Research, covering District Court, D. Puerto Rico primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
García v. Simple Factory, 79 F. Supp. 3d 385, 2015 U.S. Dist. LEXIS 7550, 2015 WL 241478 (prd 2015).

Opinion

OPINION AND ORDER

SALVADOR E. CASELLAS, Senior District Judge.

Before the Court are the defendants’ renewed motions to dismiss based on a forum-selection clause, Dockets ##46 & 47, and the plaintiffs opposition thereto. Docket #49. Also pending is the plaintiffs motion for reconsideration of the order dismissing, for want of service of process, his claims against codefendant José Raúl Rodríguez. Docket # 45. After reviewing the filings and the applicable law, the plaintiffs motion for reconsideration is DENIED, and the defendants’ motions are GRANTED. But their request to dismiss the securities fraud claim is HELD IN ABEYANCE.

Factual and Procedural Background

Carlos García, a Florida resident, brings this diversity action under the Puerto Rico General Corporations Act, P.R. Laws Ann. tit. 14, §§ 3501-4066, seeking “to enforce his rights as a shareholder,” Docket # 1, ¶ 11, of codefendant Simple Factory, a closely held Puerto Rican corporation and shareholder company of Social Media, LLC, which operates an online commerce marketplace (Gustazos) that connects merchants to consumers by offering discounted goods and services. Id. at ¶¶ 6, 14-16. Invoking federal-question jurisdiction, Garcia also asserts violations of section 10(b) of the Securities and Exchange Act of 1934,15 U.S.C. § 78j(b), and Rule 10b-5 under that Act, 17 C.F.R. § 240.10b-5, against the “President and Director of Simple Factory,” Jorge E. Rodriguez [387]*387(Rodríguez), and two of its officers, Margarita Hopgood, and José Raúl Rodríguez, all of whom are Puerto Rico residents.

Because the defendants seek to enforce a forum-selection clause, the analysis is procedurally controlled by Federal Rule of Civil Procedure 12(b)(6), Claudio-De León v. Sistema Universitario Ana G. Méndez, 775 F.3d 41, 45-46 (1st Cir.2014),1 and the relevant facts are therefore drawn from the complaint and the document therein “incorporated by reference.” Rivera-Díaz v. Humana Ins. of P.R., Inc., 748 F.3d 387, 388 (1st Cir.2014).

The parties executed a Memorandum of Understanding (MOU), on October 20, 2011, whereby all agreed that, subject “to the execution of certain stock transfer agreements and joinder to stockholders agreements,” Docket #46-1, p. 1, Garcia would be given a 17% stake in Simple Factory’s common voting stock. Id.; Docket # 1-9, p. 1 (“Pursuant to the MOU, Mr. Garcia was granted a 17% equity stake in the Corporation.”) (emphasis added). As particularly relevant to this case, the MOU contains the following forum-selection clause: “the Court of First Instance of Puerto Rico, Superior Court of San Juan, shall be the exclusive venue for disputes pertaining to this MOU.” Docket # 46-1, p. 4. ' .

According to the complaint, the defendants henceforth treated García as a shareholder: Simple Factory, for instance, made two dividend payments to Garcia for the first two quarters of 2012. Docket # 1, ¶ 32. Then, on October 29, 2012, Rodriguez sent an email explaining that, although Simple Factory had been considering selling its Gustazos shares, Garcia was “not interested” in selling his. Id. at ¶¶ 23-24. During that time frame, Rodriguez, supposedly in cahoots with the other individual defendants, allegedly told Garcia that Gustazos had offered to pay $40 for each of Gustazos’s shares held by Simple Factory, but in December, 2012, Garcia allegedly discovered that Gustazos had instead offered to pay $50 a share. Id. at ¶¶ 35-37.

Rodriguez sent another email on November 6, 2012, in which he told Simple Factory’s shareholders, “including Garcia, that they would become shareholders in Gustazos in their personal and official capacities.” Id. at ¶ 25. That same day, the complaint alleges, Rodriguez said that “he would be holding a conference call with Gustazos’[s] legal counsel regarding the preparation of the respective documentation and the formal issuance of Gusta-zos’[s] stock to Simple Factory’s shareholders, including Garcia.” Id.

But, according to the complaint, “the process to transfer Simple Factory’s stock in Gustazos” never materialized, at least concerning Garcia. Id. at ¶27. Things unraveled, and on December 18, 2012, Simple Factory’s counsel informed Garcia that, although the MOU had “summarized” the “possibility” of including him as a shareholder, that was no longer the case. Id. at ¶ 29. Because of Garcia’s alleged noncompliance with certain “considerations and actions,” id., he explained, Simple Factory [388]*388notified Garcia that he was not a shareholder. Id. ¶ 30. Assuming the MOU had “any binding effect,” the explanation went, “the corporate documents mentioned in the MOU” were never executed. Id. (citation and internal quotation marks omitted).

This suit followed shortly thereafter. Docket # 1. Garcia’s complaint contains six counts, five of which are grounded on Puerto Rico law: (1) a declaratory-judgment request, 28 U.S.C. § 2201(a), “recognizing” Garcia’s alleged 17% equity stake in Simple Factory, and a concomitant request to have the defendants transfer “8,245 shares of Gustazos” to Garcia, and issue “Garcia’s stock certificates,” Docket # 1, ¶¶40, 40^17; (2) breach of fiduciary duty, P.R. Laws Ann. tit. 14, § 3563, concerning the individual defendants’ denial of Garcia’s alleged stake in Simple Factory, and for “failing to maximize shareholder value in the corporation,” Docket # 1, ¶¶ 54-56; (3) “disgorgement of dividend distributions,” and a request to prohibit the individual defendants from “dis-gorg[ing] any illegal dividend payments ... after June 2012[,] which excluded Garcia’s pro-rata share,” id. at ¶¶ 57-59; (4) breach of contract, P.R. Laws Ann. tit. 31, §§ 2994, 3018, for the defendants’ noncompliance with Simple Factory’s alleged “binding corporate resolution” distributing “its equity interest in Gustazos to its shareholders,” Docket # 1, ¶ 60; and (5) damages, attorney’s fees, and expenses concerning the alleged breach of contract. Id. at ¶ 62.

Last, but certainly not least, Garcia musters a federal-law claim under section 10(b) of the Securities and Exchange Act, 15 U.S.C. § 78j, and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5, which furnishes a private right of action to sue for damages suffered for making false statements or omissions in connection with the purchase or sale of any security. The nub of his securities fraud claim is that the individual defendants “intended to deceive Garcia into believing Gustazos had. made an offer lower than the actual offer communicated by Gustazos’[s] management,” Docket # 1, ¶ 49, claiming he relied on that misrepresentation “to reject” Gustazos’s offer to buy his Simple Factory shares Id. at ¶ 51.

After several procedural nuances, the defendants (except for José Raúl Rodrí-guez) moved, incorrectly, under Federal Rule of Civil Procedure

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Cite This Page — Counsel Stack

Bluebook (online)
79 F. Supp. 3d 385, 2015 U.S. Dist. LEXIS 7550, 2015 WL 241478, Counsel Stack Legal Research, https://law.counselstack.com/opinion/garcia-v-simple-factory-prd-2015.