Grimm v. Allen

Maine Superior

Grimm v. Allen

Superior Court of Maine·Decided October 16, 2006·No. CUMcv-05-767·Unpublished

Opinion

STATE OF MAINE SUPERIOR COURT CUMBERLAND, ss Civil Action Docket No. CV-05-767

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CHRISTOPHER GRIMM, ARTHUR G R I M and ACCESS MAINE STREET #I, LLC,

Plaintiffs

v. DECISION AND ORDER

ROY ALLEN, BTG ADMINISTRATIVE SERVICES, LLC, CAREER MANAGEMENT SERVICES, INC., OONAI.D L. GARBRECHT ENDEAVOR FOUNDATION, INC., LAW LIBRARY HSTI a / k / a HEADHUNTER SPA TECH INSTITUTE, and KRIS STECKER, OCT 2 7 2006

Defendants

I. BEFORE THE COURT

Defendants, Career Management Services, Inc.; Headhunter I1 School of Hair Design, Inc.; and Kris Stecker move to dismiss h s action against them for lack of personal jurisdiction and for failure to state a claim on multiple counts.

11. BACKGROUND

Christopher and Arthur Grimm have filed a complaint1 alleging eight causes of action:

- Count I, breach of contract by Roy Allen ("Allen");

- Count 11, breach of contract by Endeavor Foundation, Inc.

("Endeavor");

- Count 111, breach of contract by Career Management Services, Inc.

("CMS" );

1 The amended complaint filed on April 4,2006 is the operative pleading.

- Count IV, breach of contract by Kris Stecker ("Stecker");

- Count V, unjust enrichment against BTG Administrative Services, LLC ("BTG");

- Count VI, unjust enrichment against CMS;

- Count VII, unjust enrichment against Stecker; and,

- Count VIII, unjust enrichment against HSTI Spa Tech Institute, Inc. ("Spa Tech").

Defendants CMS, HSTI and Stecker have filed a Motion to Dismiss for lack of personal jurisdiction, M.R.Civ.P. 12(b)(2)and for failure to state a claim, M.R.Civ.P. 12(b)(6).

This case arises from an investment made by the plaintiffs, Arthur and Christopher Grimm. Allen solicited an investment from Christopher Grimm on behalf of Endeavor, CMS and Spa Tech. Am. Compl. at ¶ 23. According to the amended complaint the Grimms loaned $300,000 to Access Maine, a company created at the direction of Allen as an investment vehicle. Id. at ¶¶ 21, 26, 30-31. The loan was to be secured by a promissory note and a royalty finance agreement with CMS and Spa Tech. Id. at P[ 27. The three members of Access Maine were the two Grimms and Robert Godfrey. Id. at ql 21. Godfrey was allegedly hired by Allen to set up and act as the president of BTG. Id. at ¶ 14. Allen acted as BTG's Chief Financial Officer. Id. at ¶ 11. Allen also was the executive director of a third company, Endeavor, whch acted as a management company for CMS and Spa Tech. Id. Allen was acting within the scope of his employment at CMS when he entered into the participation agreement with the plaintiffs. Id. at ¶ 27. Godfrey was named the manager of Access Maine. Id. at P[

HSTI, Headhunter Spa Tech Institute and Spa Tech Institute are the same entity and are labeled "Spa Tech" for the purposes of this memorandum.

21. At Allen's direction, Godfrey transferred approximately $280,000 invested by the Grimm's in Access Maine to BTG. Id. at ¶ 31. Allen then directed Godfrey to write checks from BTG to pay payroll expenses for CMS and Spa Tech, Stecker's personal tax obligations and expenses incurred by companies managed by Endeavor. Id. at ¶¶ 33-36. BTG, CMS and Spa Tech made some loan repayments totaling approximately $18,000. Id. at ¶ 38. The Grimms never received the promissory note or the royalty agreement that they allegedly were promised. Id. at ¶ 39.

111. DISCUSSION

A. Personal Jurisdiction Over CMS (Counts I11 and VI)

Under Maine's long arm statute, 14 M.R.S.A. 704-A (2005), and due process requirements, this State may exercise jurisdiction over a nonresident defendant when the court finds: "(1)Maine has a legitimate interest in the subject matter of the litigation; (2) the defendant, by [his] own conduct, reasonably could have anticipated litigation in Maine; and (3) the exercise of jurisdiction by Maine's courts comports with traditional notions of fair play and substantial justice." Commerce Bank 13Trust Co. v. Dworman, 2004 ME 142, ¶ 14, 861 A.2d 662, 666 (citations omitted). After the plaintiff has proven the first two prongs, the burden shifts to the defendant to prove that by exercising personal jurisdiction the court is violating traditional notions of fair play and substantial justice. Id. "The record is construed in the manner most favorable to the plaintiff." Bickford v. Onslow Mem'l Hosp. Fund, 2004 ME 111, ¶ 10, 855 A.2d 1150,1155.

To demonstrate that Maine has a legitimate interest in the subject matter of the litigation, a plaintiff must assert more than a mere interest "in providing a

Maine resident with a forum for redress against a nonresident." Murphy v. Keenan, 667 A.2d 591, 594 (Me. 1995). The state has "an interest in regulating and/or sanctioning parties who reach out beyond one state and create continuing relationships and obligations with Maine citizens for the consequences of their activities." Elec. Media Int'l v. Pioneer Communications, 586 A.2d 1256, 1259 (Me. 199l)(citationsomitted).

Here, the plaintiffs allege funds for CMS were solicited from the plaintiffs.

Am. Compl. at ql 23. As part of the investment and at the direction of CMSfs agent, the plaintiffs started a Maine company, Access Maine. Id. at ¶ 19 & 21. Some of the funds invested in that company were diverted to CMS. Id. at ql 33. The plaintiffs have alleged sufficient facts permitting the court to find that Maine has a legitimate interest in the subject matter due to CMS's intentionally entering into business relationshps with the plaintiffs in the State of Maine.

In order to demonstrate that the defendant should have reasonably expected litigation in Maine, the defendant must show that the nonresident defendant "purposely directs his activities at residents of" Maine by "deliberately engagng in significant activities" in this state or by "creating continuing obligations between hmself and residents of" Maine. Harriman v. Demoulas Supermarkets, Inc., 518 A.2d 1035, 1037 (Me. 1986)(quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475).

The plaintiff has alleged that CMS transacted business with the plaintiffs in the State of Maine including entering a contract with Endeavor, a Maine company, in which it purports to have business locations in Maine, agrees to be bound by Maine law and in w h c h it contracts to have its operations and financial affairs managed by Endeavor. Am. Compl. at ¶ 19 and Ex. A. The plaintiffs' claim that money they invested in Access Maine was improperly conveyed to CMS. Id. at ¶ 33. The plaintiffs allege that they were told that the plaintiffs' investment was secured by CMS. Id. at 725. Construing the record in the favor of the plaintiff, it appears that CMS sought out relationshps with multiple Maine companies and residents and in doing so faces the consequences of those relationshps in Maine courts.

Finally, the defendant has the burden of proving that if Maine exercises jurisdiction it would not comport with traditional notions of fair play and substantial justice. CMS denies the plaintiffs' allegations and argues that it should not be held responsible for the actions of its subsidiaries. However, the plaintiffs' have claims against CMS, not just its subsidiaries. CMS also claims that it has no business relationshps in Maine. The facts alleged by plaintiffs show that CMS did at some point have business relationshps with the plaintiffs in Maine.

CMS has not provided a compelling reason that shows it is unfair or unjust for the court to exercise jurisdiction over it in this case. B. Failure to State a Claim (Counts 111, IV, VI, VII, and VIII)

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