When out-of-state defendants’ only contacts with Virginia involve arranging two telephone interviews with another person, requesting a business plan, calculating loan terms, and offering assistance in completing a proposed real estate transaction, they are not subject to personal jurisdiction in Virginia .
Background
Brenda Sue Waller MD and Strange Fruit Farms LLC brought this action against eight defendants, alleging actual fraud, breach of good faith and fair dealing, fraud in the inducement of contract, violations of the Virginia Consumer Protection Act, violation of written contract, conversion, wire fraud, civil conspiracy, and intentional infliction of emotional distress.
That matter is now before the court in a motion to dismiss filed by Commercial Mortgage City Corporation, or CMC, and Jeffrey Lustbader. After this application was fully briefed, the plaintiffs applied for leave to amend their complaint.
Motion to Dismiss
In the light most favorable to plaintiffs, CMC defendants’ alleged contacts with Virginia included arranging two telephone interviews with Tommy Nelson, a potential loan financier; requesting a business plan for Forty Acres’ proposed operations; calculating loan terms and offering assistance in completing the real estate transaction with Nelson. However, the CMC defendants argue that they are subject to neither general nor specific personal jurisdiction in Virginia because plaintiffs’ complaint does not allege sufficient facts that would make jurisdiction proper in this court.
The Court finds that the CMC Defendants did not profit purposefully by doing business in Virginia. Defendants have no offices, agents or property in Virginia. They have also never made personal contact with a resident of the state. Their alleged contacts – responding to inquiries from a Virginia resident about loan servicing – do not indicate intentional engagement in significant, long-term business activities in the state.
The CMC defendants simply referred Dr. Waller to Nelson; he was to provide her with a loan and he was going to do business in the state of Virginia. Finally, there was never any contract clause, immunity clause, or choice of law between Dr. Waller and the CMC Defendants that reasonably gave rise to litigation in Virginia.
The only alleged “initiative” is Lustbader’s offer to help Dr. Waller complete the real estate deal with Nelson that Nelson initiated and was already in the works when Lustbader got involved. At most, the defendants simply continued a pre-established business arrangement, which the court said was fundamentally different from attracting new business to Virginia.
Furthermore, in analyzing the “nature, quality, and extent” of the parties’ communications, it is well established that “mere telephone calls and letters, and perhaps facsimile communication, in support of a transaction are not sufficient to form a basis for personal jurisdiction.” Lustbader’s only communication with plaintiffs consisted of telephone calls, the majority of which were initiated by a third party. As such, Lustbader’s contacts are hardly sufficient to create a reasonable expectation that he and CMC could be compelled to defend against a lawsuit in Virginia.
Opposing this conclusion, the plaintiffs argued that the court could exercise jurisdiction over the CMC defendants because they “used a computer wire transaction to conduct a fraudulent operation” in Virginia. But plaintiffs’ well-worn and persuasive allegations do not state a claim for fraud, especially when viewed under the heightened pleading standard set forth in Rule 9(b). As such, Plaintiffs cannot plausibly allege that the CMC Defendants committed fraud in Virginia and thus fail the effects test.
Amendment proposal
Plaintiffs’ proposed amended complaint attempts to assert several new grounds designed to subject the CMC Defendants to personal jurisdiction in this court, including: the CMC Defendants’ alleged Internet presence; the national Racketeer Influenced and Corrupt Organizations Act processing service and a long-arm provision of Virginia’s statute.
The CMC defendants argue that granting plaintiffs’ motion to amend would be futile because the facts contained in the proposed amended complaint do not cure the defective original complaint. The court agrees. Neither of these allegations is sufficient to subject defendants to personal jurisdiction in Virginia. As such, the court will deny plaintiffs’ request for leave to amend their complaint.
The CMC defendants’ motion to dismiss for lack of personal jurisdiction is granted. Plaintiffs’ motion for leave to amend is denied.
Waller v. Nelson, Case No. 4:22-cv-00120, June 21, 2023 WDVA in Danville (Cullen). VLW 023-3-346. 20 pages
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