Jordan Dontos v. Vendomation NZ Limited, et

582 F. App'x 338
CourtCourt of Appeals for the Fifth Circuit
DecidedSeptember 16, 2014
Docket12-10986
StatusUnpublished
Cited by34 cases

This text of 582 F. App'x 338 (Jordan Dontos v. Vendomation NZ Limited, et) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fifth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Jordan Dontos v. Vendomation NZ Limited, et, 582 F. App'x 338 (5th Cir. 2014).

Opinion

PER CURIAM: *

Plaintiffs-Appellants Jordan and Jennifer Dontos are residents of Texas and co-owners of Crave, L.L.C., a Texas company. Plaintiffs filed suit in the Northern District of Texas against two citizens of Massachusetts, John Halpern and George Parkman Denny, and three corporations — Vendomation NZ Limited, Vendomation, L.L.C., and Vendomation Securities Limited, [hereinafter, collectively referred to as “the Vendomation Defendants”] — alleging state law claims of fraudulent asset transfer, fraud, negligent misrepresentation, civil conspiracy, and aiding and abetting," and asserting federal jurisdiction based on the diversity of citizenship of the parties, pursuant to 28 U.S.C. § 1332. 1 Plaintiffs contend that Defendants fraudulently induced them into a franchise agreement to service vending machines on unprofitable routes, made misrepresentations upon which Plaintiffs detrimentally relied, fraudulently transferred assets to avoid payment of Plaintiffs’ Texas state court judgment against them, and failed to inform the Plaintiffs of the franchiser’s *340 bankruptcy. The district court, after denying Plaintiffs’ motion for jurisdictional discovery, granted Defendants’ motion to dismiss for lack of personal jurisdiction, finding that Plaintiffs failed to establish a prima facie case for personal jurisdiction over any of the Defendants.

For the reasons that follow, we conclude that the district court erred in granting Defendants’ motions to dismiss for lack of personal jurisdiction because, accepting Plaintiffs’ allegations as true, Plaintiffs established a prima facie case of specific personal jurisdiction over Defendants Hal-pern, Denny and the Vendomation Defendants with regard to the Plaintiffs’ fraudulent asset transfer claim.

I.

Plaintiffs allege that Defendants Hal-pern and Denny were part-owners and board members of “All Seasons,” a vending services company. All Seasons, in order to engage in a franchising model, formed 24Seven USA Franchising, Limited (“24 Seven”), a Delaware Corporation, which is affiliated with various sister or partner franchising companies in New Zealand that Plaintiffs collectively refer to as the “VTL Group.” Plaintiffs assert that Defendants Halpern and Denny “were involved in the negotiation and deal with” the VTL Group companies to develop vending machine servicing franchises. As part of this effort to obtain franchise agreements, 24Seven distributed a Uniform Franchise Offering Circular (“UFOC”), listing Halpern and Denny as principals. On March 29, 2007, iii response to the. UFOC, Plaintiffs Jennifer and Jordan Dontos entered into a franchise agreement with 24Seven.

Plaintiffs provided 24Seven with $175,000 for the rights to service two vending machine routes in Texas. Plaintiffs were informed that these specific routes generated a weekly gross sale of almost $7,000. Relying on this information, Plaintiffs moved their home from Seattle, Washington, to Carrolton, Texas, quit their jobs in Washington, and borrowed over $300,000 to pay additional franchise fees. Plaintiffs assert that 24Seven never tendered access to the routes promised, despite its representations, and instead attempted to convince the Plaintiffs to accept less profitable routes.

Plaintiffs allege that because of the VTL Group’s financial difficulties, Halpern and Denny formed Bacon Whitney, LLC (“Bacon Whitney”) for the purpose of transferring the majority of VTL’s assets to Bacon Whitney, with the remainder placed in a trust for All Seasons. Bacon Whitney, by receiving the VTL Group’s assets, thereby “assumed control” over Plaintiffs’ money, vending service routes, and franchise agreement with 24Seven. 2 Plaintiffs allege that two officials of Bacon Whitney, Brad Camac and Mark Bruno, informed Plaintiffs of this transfer and assured them that Bacon Whitney was financially sound, invoking the good names and reputations of Halpern and Denny, and assuring Plaintiffs that they would be accepted as a franchisee of Bacon Whitney. However, Plaintiffs were never accepted as a franchisee of Bacon Whitney.

Plaintiffs then filed suit in Texas state court alleging, inter alia, state law claims

*341 of fraud, breach of the franchise agreement, and interference with contractual and business relationships. Plaintiffs filed suit against ten defendants, including 24Seven, VTL Group, and Bacon Whitney, as well as Mark Bruno, the Vice President of Bacon Whitney, and Brad Camac, a salesman for 24Seven, who allegedly made the fraudulent misrepresentations to the Plaintiffs about the vending machine routes. Bruno was dismissed as a Defendant because the Texas Court of Appeals found that Texas courts lacked personal jurisdiction over him. Dontos v. Bruno, 339 S.W.3d 777 (Tex.App.-Dallas 2011, no pet.). A different panel of the Texas Court of Appeals thereafter denied Ca-mac’s motion to dismiss for lack of personal jurisdiction, concluding that he was subject to suit in Texas for his allegedly fraudulent acts committed while employed by 24Seven. Camac v. Dontos, 390 S.W.3d 398 (Tex.App.-Dallas 2012). Plaintiffs assert that, as a result of this litigation, they were awarded a $6,000,000 judgment against the VTL Group and Bacon Whitney. Thereafter, in January of 2009, Plaintiffs were contacted by two Vendomation officials — Lisle McErlane, an attorney, and Erica Hannam, a manager of the Vendomation Defendants — who offered to settle the dispute between Plaintiffs and the VTL Group for a lump sum payment of $500,000. Plaintiffs accepted this offer on January 26, 2009, but never received the promised lump sum.

At the time of the state court judgment, Bacon Whitney had entered receivership in Massachusetts and was purchased by a corporation named Intellivend, in exchange for a $1,250,000' note. Plaintiffs allege that the Bacon Whitney receiver then assigned this note to Halpern and Denny, without sufficient compensation. In October 2009, the Vendomation Defendants obtained this note from Intellivend, becoming one of its largest creditors. In 2010, Intellivend entered bankruptcy proceedings. The Ven-domation Defendants do not dispute that, as of December 2010, Vendomation Securities Limited owned five franchise agreements in Texas as a result of receiving a $1.25 million note from Intellivend, which Intellivend later defaulted on.

Thereafter, in December 2010, and again in March 2011, McErlane contacted Plaintiffs via e-mail and arranged for a meeting with all holders of Intellivend franchise agreements (including Plaintiffs) to explain that the Vendomation Defendants now owned their franchise agreements. At this meeting, McErlane represented himself as an attorney, investor, employee, and partner for Vendomation. McErlane presented the franchisees with a document to sign, officially transferring their franchise agreements to Vendomation. McErlane allegedly suggested at this meeting that the franchisees would suffer “dire and adverse consequences” if they refused to sign the document.

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582 F. App'x 338, Counsel Stack Legal Research, https://law.counselstack.com/opinion/jordan-dontos-v-vendomation-nz-limited-et-ca5-2014.