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Miller v. Native Link Construction, LLC

United States District Court, W.D. Pennsylvania

August 17, 2017

MATTHEW DAVID MILLER, Plaintiff,
v.
NATIVE LINK CONSTRUCTION, LLC, et al., Defendants.

          MEMORANDUM OPINION

          JOY FLOWERS CONTI CHIEF UNITED STATES DISTRICT JUDGE

         I. Introduction

         Pending before the court in this civil action are motions by all defendants to dismiss the Second Amended Complaint (ECF No. 82) filed by pro se plaintiff Matthew David Miller (“Miller” or “plaintiff”). For the reasons that follow, the court will grant the motions filed by defendants Native Link, LLC (“Native Link”), Pointguard Financial, PLLC (“Pointguard”), Nate Riggan (“Riggan”), JP Morgan Chase Bank, N.A. (“Chase Bank”), and Kristen Janosick (“Janosick”) insofar as these defendants seek a dismissal of plaintiff's claims for lack of personal jurisdiction. The motions to dismiss filed by Melinda Thompson-Walk (“Thompson-Walk”), Patrick L. Nolan (“Nolan”), and Mitchel Paul Walk (“Walk”) for lack of personal jurisdiction will be denied without prejudice.

         II. Background Facts

         This litigation stems from a business dispute that originated principally between Miller and defendants Thompson-Walk; her husband, Walk; and Nolan. Plaintiff is a resident of Allegheny County and a citizen of the Commonwealth of Pennsylvania. (See Second Amended Complaint, hereafter, “SAC, ” ¶1.) Walk and Thompson-Walk are citizens of the State of Washington, while Nolan is a citizen of Canada. (Id. ¶¶5-7.)

         At times relevant to this litigation, Thompson-Walk and Nolan were members of Native Link. (SAC ¶17.) Native Link is a limited liability company organized under the laws of Delaware for the purpose of “offer[ing] grant writing and consulting services for communications services and infrastructure to Native American governments.” (Id. ¶¶ 2, 17.) Its sole members are Thompson-Walk and Nolan. (Id. ¶2.) Walk serves as an officer of Native Link. (Id. ¶6.) Thompson-Walk and Nolan, together with another third party, also formed a California corporation known as “Native Link Communications Inc.” and a related entity known as “Native Link Communications (Canada) Inc.” (Id. ¶¶18-19.)

         On April 30, 2012, Miller, Thompson-Walk and Nolan formed a separate but related entity known as “Native Link Construction, LLC” (hereafter, “NL Construction”). NL Construction is a member-managed LLC organized under Delaware law for the purpose of performing installation, construction, training, engineering, and other services related to the communications industry, with a particular focus on Native American clients. (SAC ¶¶12, 16.) In May 2012, NL Construction registered with the Washington State Department as a foreign limited liability company licensed to conduct business in that state. (SAC ¶14, SAC Ex. 5, ECF No. 82-5.)

         Although Miller, Thompson-Walk, and Nolan held equal one-third interests in NL Construction, the latter two individuals had minimal involvement in the company's daily operations. (SAC ¶¶12, 22.) Thompson-Walk was named as one of NL Construction's members so that the company could qualify as “Native American owned, ” (id. ¶21), and Walk, her husband, “acted at all times as a partner in [her] place.” (Id.) The day-to-day operations and decisions of NL Construction were carried out by Miller and Walk, who held himself out as an officer of the company. (Id. ¶¶21-23.)

         Subsequent to NL Construction's formation on April 30, 2012, it opened a business account with Chase Bank in Spokane, Washington. (SAC ¶24.) Janosick, a small business specialist for Chase Bank, took possession of the “original LLC agreement”[1] as well as NL Construction's certificate of formation and certain other documentation required by Chase Bank. (Id.) Thereafter, Chase Bank, through Janosick, provided payroll and other related services for NL Construction. (Id.)

         At some point in or after October 2013, NL Construction and Native Link hired Pointguard and its agent, Riggan, to act as the CFO of both companies on an out-sourced basis. (SAC ¶33.) Miller was not involved in this decision and was only informed about it after the fact. (Id.)

         Beginning in November 2013, Thompson-Walk and Nolan “began treating [plaintiff] as an employee rather than a partner and making decisions without his input or approval, ” even though “[plaintiff] was the only partner that was an active participant in the daily operations of [NL Construction].” (SAC ¶36.) In addition, Thompson-Walk, Nolan, and Walk allegedly began misappropriating funds that were due and owing to NL Construction, using the funds to pay Native Link's obligations or depositing them into Native Link's bank account. (Id. ¶38.) Nolan also began using NL Construction's funds to pay for travel expenses that were unrelated to the company's business. (Id. ¶39.)

         In early 2014, “Walk and the CFO prepared a forecast of revenues” for NL Construction which “provided for commissions to [Native Link] for projects that it was not involved in” and omitted projects for which Miller was responsible for engineering and installation services. (SAC ¶37.) When Miller subsequently learned that a revised forecast would provide Native Link an even greater share of the profits from work performed by NL Construction, he asked for NL Construction's “2013 W2's and the quick books files, ” but he was never provided this information. (Id. ¶40.)

         On February 3, 2014, Miller learned that a particular project for which NL Construction had contracted would be performed by Native Link, and NL Construction would be relegated to the role of subcontractor. (SAC ¶41; SAC Ex. 38, ECF No. 82-38; SAC Ex. 39, ECF No. 82-39.) The following day, February 4, 2014, Miller learned that Native Link had hired a new electrical engineer. (Id. ¶42.) Although the electrical engineer was a Native Link employee, he was paid out of NL Construction's account. (Id.) According to Miller, this situation “placed [Native Link] in direct competition with [NL Construction], to the detriment of [plaintiff] and benefit of Melinda [Thompson-Walk], Mitchell Paul Walk, and Patrick Nolan.” (SAC ¶42 and SAC Ex. 40, ECF No. 82-40.) Thereafter, Miller discovered that Native Link was advertising for a communications construction manager, another position that Miller claims would be in “direct competition” with NL Construction. (Id.)

         On February 15, 2014, Miller was notified that a board meeting would be held the following day to review documents pertaining to a loan that Native Link would be making to NL Construction in the amount of $250, 000. (SAC ¶45 and SAC Ex. 46, ECF No. 82-46.) Miller was not provided any information about where the meeting would be held. (Id.) The following day, Walk emailed Miller, stating: “Attached is a document electing Melinda as [NL Construction's] new manager. Pat has signed this as well as Melinda already so please either sign or elect not to so we can move forward.” (SAC Ex. 47, ECF No. 82-47.) The attached document was a “Waiver and Consent to Actions in Lieu of the Annual Meeting of [NL Construction].” (SAC Ex. 48, ECF No. 82-48.) Miller construed the waiver form as a request that he “ratify and approve all financial actions of the company for 2013 and elect [Thompson-Walk] as manager.” (SAC ¶45.) Miller viewed the request as contrary to the terms of the operating agreement, pursuant to which NL Construction was to be member-managed and “all but routine decisions” would require a unanimous vote of the members. (Id.) Miller refused to sign the waiver document because he perceived that doing so would “severely harm his interest in [NL Construction] and [he had not been] provided the requested financial documents for review before approving.” (Id.)

         On February 19, 2014, Miller discovered that his authorization to draw funds from NL Construction's bank account at Chase Bank had been revoked, which hampered his ability to continue work on a particular construction project. (SAC ¶46.) That day, he spoke with Janosick, who advised him that she had revoked his access to the accounts. (SAC ¶47.) When Miller asked for the documentation authorizing her to do so, Janosick replied, “Ask Melinda, I don't have to tell you.” (Id.)

         On February 24, 2014, Miller discovered that his access to NL Construction's email account had been revoked and service to his cell phone had been cancelled. (SAC ¶48.) That same day, he received an email and an attached letter from NL Construction purporting to terminate his “employment” with the company due to various act of alleged misfeasance. (Id.) ¶48 and Exs. 50 and 51, ECF Nos. 82-50 and 82-51.) Miller denies the allegations of misfeasance and insists that he “continues to be a Member and not an employee of the company.” (Id. ¶48.)

         In March 2014, Thompson-Walk cancelled payments on a Verizon Wireless account that had been used by NL Construction and opened in Miller's name. (SAC ¶49.) Miller avers that, as a result of Walk's actions, he is responsible to pay early termination charges. (Id.)

         That same month, Chase Bank returned “guaranteed payment checks” which Miller had attempted to draw on NL Construction's bank account. The checks were returned unpaid “for reason Z Fraud.” (SAC ¶ 50.)

         When Miller later attempted to obtain unemployment compensation benefits in Pennsylvania, he discovered that Thompson-Walk, Janosick, and Chase Bank had “failed to file employment taxes in Pennsylvania” and “fraudulently listed [plaintiff's] address on his W2” as the Walks' Washington address. (Id. ¶51.) Thereafter, NL Construction contested payment of Pennsylvania unemployment compensation benefits. (SAC ¶51.) Although Miller ultimately received a favorable ruling, the payment was allegedly delayed by eleven months, causing him to fall behind on his mortgage payments. (Id.)

         III. Procedural History

         Plaintiff commenced this litigation on December 8, 2015, with the filing of his initial complaint (ECF No. 1), which named NL Construction, Native Link, Pointguard, JP Morgan Chase & Co., Thompson-Walk, Walk, Nolan, Riggan, and Janosick as defendants. On February 28, 2016, plaintiff filed an amended complaint (ECF No. 48), which added Chase Bank as a defendant. In both the original and amended complaints, the court's subject-matter jurisdiction was predicated exclusively on diversity of citizenship.

         On September 8, 2016, this court entered a memorandum opinion and order dismissing the amended complaint on the grounds that it failed to establish complete diversity between plaintiff and the various defendants. (See ECF Nos. 80 and 81.) The court found the pleading to be deficient in several respects. First, the amended complaint named NL Construction as a defendant; this meant that complete diversity was lacking because the citizenship of NL Construction depended on the citizenship of its members, and plaintiff was one of those members. (See Mem. Op. at 9-10, ECF No. 80.) Second, the amended complaint failed to properly allege the citizenship of the plaintiff and the defendants who are natural persons. (Id. at 11-12.) Finally, the amended complaint failed to allege the citizenship of the corporate defendants and Pointguard. (Id. at 12-14.) Based upon these defects, the court dismissed the amended complaint without prejudice and allowed plaintiff an opportunity to replead his claims to the extent he could do so in good faith and consistent with the strictures of 28 U.S.C. §1332(a).

         On September 25, 2016, plaintiff filed the second amended complaint (ECF No. 82), which is now the operative pleading in this matter. The second amended complaint dropped NL Construction and JP Morgan Chase & Co. as defendants and set forth seven claims against the remaining defendants. Count I of the second amended complaint now asserts a claim for breach of contract against Thompson-Walk, Nolan, and Walk (referred to collectively as the “NL Construction Defendants”). Count II asserts a claim of conversion against the NL Construction Defendants and Native Link. Count III asserts a claim against the NL Construction Defendants for breach of fiduciary duty. Count IV asserts a claim against Pointguard and Riggan (referred to collectively as the “Pointguard Defendants”) for breach of fiduciary duty. Count V asserts a claim against the NL Construction Defendants, the Pointguard Defendants, and Native Link for fraud. Counts VI and VII assert claims against Chase Bank and Janosick (referred to collectively as the “Bank Defendants”), respectively, for fraud and breach of fiduciary duty. With respect to each of the seven counts, plaintiff seeks compensatory damages in excess of $2 million as well as punitive damages.

         The sole basis for this court's subject-matter jurisdiction, as before, is diversity of citizenship. All the named defendants in this case have moved to dismiss the amended complaint. (See ECF Nos. 83, 85, 87, 89.) In general, these motions assert that plaintiff failed to establish the court's subject-matter jurisdiction, failed to establish this court's personal jurisdiction over each defendant, and failed to state claims upon which relief can be granted. See Fed. R. Civ. P. 12(b)(1), 12(b)(2), and 12(b)(6).

         “In instances where an issue of subject-matter jurisdiction is coupled with an issue of personal jurisdiction, courts should dispose of the issue of subject-matter jurisdiction before engaging with the question of personal jurisdiction unless compelling circumstances dictate otherwise.” Dickson v. Noble House Hotels & Resorts, Civil Action No. 14-1778, 2014 WL 4493725, at *3 (E.D. Pa. Sept. 10, 2014) (citing Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 587-88 (1999)). The court will therefore begin its analysis with the defendants' Rule 12(b)(1) challenges and then proceed, as appropriate, to address the challenges raised under Rule 12(b)(2) and 12(b)(6).

         IV. Defendants' Rule 12(b)(1) Challenges

         A. Standard of Review

         Federal courts are courts of limited jurisdiction. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). Jurisdictional challenges may be treated as either “facial” or as “factual.” See Constitution Party of Pa. v. Aichele, 757 F.3d 347, 357-58 (3d Cir. 2014). As an initial matter, therefore, the court must determine the type of challenge being raised.

         “A facial attack, as the adjective indicates, is an argument that considers a claim on its face and asserts that it is insufficient to invoke the subject matter jurisdiction of the court because, for example, it does not present a question of federal law, or because there is no indication of a diversity of citizenship among the parties, or because some other jurisdictional defect is present.” Constitution Party of Pa., 757 F.3d at 358. “Such an attack can occur before the moving party has filed an answer or otherwise contested the factual allegations of the complaint.” Id. (citing Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884, 889-92 (3d Cir.1977)). A facial attack on subject-matter jurisdiction “‘contests the sufficiency of the pleadings . . . .'” Id. (quoting In re Schering Plough Corp. Intron, 678 F.3d 235, 243 (3d Cir. 2012)). When analyzing this type of challenge, “‘the court must only consider the allegations of the complaint and documents referenced therein and attached thereto, in the light most favorable to the plaintiff.'” In re Schering Plough Corp., 678 F.3d at 243 (quoting Gould Elecs. Inc. v. United States, 220 F.3d 169, 176 (3d Cir. 2000)). “Thus, a facial attack calls for a district court to apply the same standard of review it would use in considering a motion to dismiss under Rule 12(b)(6), i.e., construing the alleged facts in favor of the nonmoving party.” Constitution Party of Pa., 757 F.3d at 358 (citing In re Schering Plough Corp., 678 F.3d at 243).

         A “factual” 12(b)(1) attack, on the other hand, challenges allegations underlying the assertion of jurisdiction in the complaint, and it allows the defendant to present competing facts. Constitution Party of Pa., 757 F.3d at 358. When considering a factual challenge, the court “is free to weigh the evidence and satisfy itself as to the existence of its power to hear the case, ” and “no presumptive truthfulness attaches to [the] plaintiff's allegations....” Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977). The court may weigh and consider evidence outside the pleadings. Constitution Party of Pa., 757 F.3d at 358 (internal quotation marks omitted). A Rule 12(b)(1) factual challenge thus “strips the plaintiff of the protections and factual deference provided under 12(b)(6) review.” Hartig Drug Co. Inc. v. Senju Pharm. Co., 836 F.3d 261, 268 (3d Cir. 2016) (citing Davis v. Wells Fargo, 824 F.3d 333, 348-50 (3d Cir. 2016)).

         Here, the defendants' various jurisdictional challenges are in the nature of facial attacks on the second amended complaint. Accordingly, the court will accept plaintiff's well-pled allegations as true and will consider only the content of the second amended complaint, the exhibits attached to the second amended complaint, and matters of public record, consistent with a traditional Rule 12(b)(6) analysis. See Mayer v. Belichick, 605 F.3d 223, 230 (3d Cir. 2010) (“In deciding a Rule 12(b)(6) motion, a court must consider only the complaint, exhibits attached to the complaint, matters of public record, as well as undisputedly authentic documents if the complainant's claims are based upon these documents.”). As the party advocating federal jurisdiction, plaintiff bears the burden of demonstrating that federal subject-matter jurisdiction exists. See Packard v. Provident Nat. Bank, 994 F.2d 1039, 1045 (3d Cir. 1993) (“The person asserting jurisdiction bears the burden of showing that the case is properly before the court at all stages of the litigation.”) (citing McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189 (1936)).

         B. Analysis

         As previously noted, the court's sole basis for exercising subject-matter jurisdiction is diversity of citizenship under 28 U.S.C. §1332(a). (See SAC ¶10.) To establish jurisdiction under §1332(a), there must be complete diversity as between the two sides in a dispute. See Caterpillar Inc. v. Lewis, 519 U.S. 61, 68 (1996) (diversity of citizenship jurisdiction applies when “the citizenship of each plaintiff is diverse from the citizenship of each defendant.”); see also Bumberger v. Ins. Co. of N. Am., 952 F.2d 764, 767 (3d Cir. 1991) (“‘[D]iversity jurisdiction does not exist unless each defendant is a citizen of a different State from each plaintiff.'”) (quoting Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 373 (1978) (alteration and emphasis in original)).

         The Pointguard Defendants move to dismiss the second amended complaint on the grounds that NL Construction is the real party in interest or an indispensable party to this action whose presence destroys complete diversity of jurisdiction. The Bank Defendants separately assert a lack of subject-matter jurisdiction based upon plaintiff's failure to plead properly the citizenship of Chase Bank. The court will address these issues in reverse order.

         1. Chase Bank's Citizenship

         In dismissing plaintiff's first amended complaint, this court observed that, among other things, the pleading failed to include any averments regarding the principal place of business of Chase Bank. The court noted that “JP Morgan Chase Bank NA may be a national bank as indicated in its name, i.e. ‘NA'; if so, its citizenship for diversity purposes is ‘the state in which its main office, as designated in its articles of association, is located.'” (Mem. Op. at 12, ECF No. 80 (citing 13F Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 3627 at 169 (3d ed. 2009))); see 28 U.S.C. §1348 (“All national banking associations shall, for the purposes of all other actions by or against them, be deemed citizens of the states in which they are respectively located.”); Wachovia Bank v. Schmidt, 546 U.S. 303, 307 (2006) (holding that “a national bank, for §1348 purposes, is a citizen of the State in which its main office, as set forth in its articles of association, is located”).

         Here, plaintiff alleges that Chase Bank is “a wholly-owned subsidiary of JP Morgan Chase & Co., a corporation organized and existing under the laws of the State of Delaware, with its principal place of business in the [S]tate of New York.” (SAC ¶4.) Although this averment may be sufficient to plead the citizenship of the parent holding corporation, it is insufficient to plead the citizenship of Chase Bank.

         Nevertheless, in the interests of justice and to expedite these proceedings, this court will take judicial notice of the fact that the main office of Chase Bank is located in Columbus, Ohio, as set forth in its articles of incorporation, which are available to the public at the U.S. Securities and Exchange Commission's website. See https://www.sec.gov/Archives/edgar/data/1062336/000119312504207055/dex991.htm; see also Fed. R. Evid. 201(b)(2) (allowing the courts to take judicial notice of adjudicative facts that “can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned”).[2] It follows that Chase Bank is a citizen of the State of Ohio, a conclusion that numerous other courts have reached as well. See Pipala v. JP Morgan Chase Bank NA, No. 16 CV 3723 (VB), 2016 WL 7378979, at *1 (S.D.N.Y. Dec. 20, 2016) (court noting, for purposes of establishing diversity-of-citizenship jurisdiction, that “prior cases from this district have found Chase to be a citizen of Ohio”) (citing Excelsior Funds, Inc. v. JP Morgan Chase Bank, N.A., 470 F.Supp.2d 312, 313 (S.D.N.Y. 2006)); Collins-Hardin v. WM Specialty Mortg., LLC, No. 12 C 50099, 2015 WL 3505188, at *1 (N.D. Ill. June 3, 2015) (court noting, for jurisdictional purposes, that “JP Morgan Chase Bank, N.A. [is] a national banking association, with its main office in Ohio”), motion for relief from judgment denied, No. 12 C 50099, 2015 WL 5664900 (N.D. Ill. Sept. 24, 2015); McMullen v. JP Morgan Chase Bank, No. 13-cv-087-RHW, 2013 WL 6096503 (E.D. Wash. Nov. 20, 2013) (holding that defendant JPMorgan Chase Bank was a national banking association organized under the laws of Ohio with its main office in Columbus, Ohio; thus, for the purpose of establishing diversity, it was considered a citizen of Ohio); Haynes v. JPMorgan Chase Bank, N.A., No. 11-13858, 2011 WL 4595271, *1 (E.D. Mich. Oct. 3, 2011) (same).

         The averments in the second amended complaint state that plaintiff is a citizen of the Commonwealth of Pennsylvania. Because no defendant identified in the second amended complaint is a citizen of Pennsylvania, complete diversity exists. The amount in controversy, exclusive of interests and costs, exceeds $75, 000. Therefore, this court has subject-matter jurisdiction over the instant litigation pursuant to 28 U.S.C. §1332, unless - as the Pointguard Defendants argue -- NL Construction's citizenship must be factored into the diversity analysis. If it must, then complete diversity is lacking.

         2. Plaintiff's Failure to Join NL Construction

         The Pointguard Defendants argue that plaintiff's claims are essentially in the nature of a derivative action brought on behalf of NL Construction and, therefore, since NL Construction is the “real party in interest, ” its citizenship must be factored into the diversity analysis. Relatedly, the defendants contend that NL Construction is an indispensable party whose joinder defeats diversity jurisdiction.

         a) Rule 17

         Federal Rule of Civil Procedure 17(a) provides that federal civil actions “must be prosecuted in the name of the real party in interest.” Fed.R.Civ.P. 17(a)(1). For purposes of determining whether complete diversity exists, a court generally “must disregard nominal or formal parties and rest jurisdiction only upon the citizenship of real parties to the controversy.” Navarro Sav. Ass'n v. Lee, 446 U.S. 458, 460-461 (1980); see Choi v. Kim, 50 F.3d 244, 246 (3d Cir.1995) (In considering whether it had diversity jurisdiction, the district court “was required to decide who was the real party in interest under Rule 17(a) of the Federal Rules of Civil Procedure.”) (citing authority); ABI Jaoudi & Azar Trading Corp. v. Cigna Worldwide Ins. Co., No. 91-6785, 2016 WL 3959078, at *15 (E.D. Pa. July 22, 2016) (court must rest diversity analysis upon the citizenship of real parties to the controversy, while disregarding nominal or formal parties)(citing Navarro, 446 U.S. at 461). For purposes of this analysis, “‘[t]here may be multiple real parties in interest for a given claim, and if the plaintiffs are real parties in interest, Rule 17(a) does not require the addition of other parties also fitting that description.'” ABI Jaoudi & Azar Trading Corp., 2016 WL 3959078, at *15 (quoting HB Gen. Corp. v. Manchester Partners, L.P., 95 F.3d 1185, 1196 (3d Cir. 1996)).

         To conduct its Rule 17(a) analysis, the court must determine which party has the enforceable substantive right under relevant state law. See Feriozzi Co., Inc. v. Ashworks, Inc., 130 F. App'x 535, 539 (3d Cir. 2005) (noting that Rule 17(a) “ensures that under the ‘governing substantive law, the plaintiffs are entitled to enforce the claim at issue'”) (quoting HB Gen. Corp., 95 F.3d at 1196); McAndrews Law Offices v. Sch. Dist. of Phila., Case No. 06-CV-5501, 2007 WL 515412, at *2 (E.D. Pa. Feb. 9, 2007) (“Where the question involved is whether a plaintiff is a real party in interest under Federal Rule of Civil Procedure Rule 17(a), a federal court will first look to state law to determine who has a substantive right of action.”) (citing American Fidelity & Casualty Co. v. All American Bus Lines, Inc. 179 F.2d 7 (10th Cir. 1949)).

         As a threshold matter the court must determine which state's law will apply for purposes of determining the relevant substantive rights. The laws of several different states are potentially relevant because plaintiff is a citizen of Pennsylvania, while NL Construction and Native Link are both Delaware LLCs, and many of the named defendants are citizens of Washington.[3]

         To make its determination, the court must apply Pennsylvania choice of law rules. See Atl. Marine Const. Co. v. U.S. Dist. Court for W. Dist. of Texas, 134 S.Ct. 568, 582, (2013) (“A federal court sitting in diversity ordinarily must follow the choice-of-law rules of the State in which it sits.”) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 494-49 (1941)). Complicating matters is the fact that plaintiff sued the various defendants under theories sounding in both contract and tort, and the relevant choice of law may differ among the various claims asserted in this lawsuit. See Young v. Home Depot U.S.A., No. 15-CV-5436, 2016 WL 8716423, at *4 (E.D. Pa. Sept. 30, 2016) (observing that the choice of law analysis is “issue-specific” and the court must examine whether “different states' laws apply to different issues in a single case”) (internal quotation marks and citation omitted).

         (i)Plaintiff's Contract Claim Against the NL Construction Defendants

         Under Pennsylvania choice-of-law rules, “the first question to be answered in addressing a potential conflict-of-laws dispute is whether the parties explicitly or implicitly have chosen the relevant law.” Assicurazioni Generali, S.P.A. v. Clover, 195 F.3d 161, 164 (3d Cir. 1999). As a general matter, Pennsylvania courts apply the state law that the parties have agreed upon. See Gay v. Creditinform, 511 F.3d 369, 389 (3d Cir. 2007) (“‘Pennsylvania courts generally honor the intent of the contracting parties and enforce choice of law provisions in contracts executed by them.'”)(quoting Kruzits v. Oluma Machine Tool, Inc., 40 F.3d 52, 55 (3d Cir. 1994)). Pennsylvania courts have adopted section 187 of the Restatement, Second, Conflict of Laws, pursuant to which a choice-of-law provision will be enforced:

“unless either (a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties' choice, or (b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue . . . .”

Gay, 511 F.3d at 389-390 (quoting Kruzits, 40 F.3d at 55) (ellipsis in the original); see Young v. Home Depot U.S.A., No. 15-CV-5436, 2016 WL 8716423, at *4 (E.D. Pa. Sept. 30, 2016).

         Here, plaintiff's breach of contract claim against the NL Construction Defendants is predicated upon the NL Construction Defendants' alleged violations of the underlying operating agreement. (See SAC ¶¶52-60.)[4] Plaintiff claims that the NL Construction Defendants breached the agreement by: (i) failing to provide him with the company's financial records and annual tax returns (SAC ¶¶54, 55), (ii) failing to give him advance written notice of their intent to enter into a loan agreement (id. ¶56), (iii) failing to make “guaranteed weekly payments of $1, 400.00 from 2/14/14 to the present” (id. ¶57), and (iv) failing to distribute the company's profits (id. ¶58).

         Relevantly, paragraph 20 of the operating agreement contains an express choice of law provision, which provides: “[t]his agreement will be governed by and construed in accordance with the laws of the state of Delaware.” (SAC Ex. 8, ¶20, ECF No. 48-8.)[5] Consistent with Pennsylvania choice-of-law principles, Delaware law should determine whether plaintiff has enforceable rights relative to any breach of the operating agreement. Delaware has a substantial relationship to the parties who are being sued in Count I because each of the named defendants is either a member or an officer of NL Construction, a Delaware LLC. The alleged contractual breaches concern conduct undertaken in the NL Construction Defendants' capacities as members or officers of that LLC. The rights upon which plaintiff is suing are ostensibly derived from the operating agreement, which is to be construed and governed in accordance with Delaware law. It does not appear that either Washington or Pennsylvania would have a materially greater interest in the resolution of Count I as compared to Delaware.

         Application of Delaware law would not offend the fundamental policy interests of either Washington or Pennsylvania. Washington's Limited Liability Company Act expresses a policy interest in “giv[ing] the maximum effect to the principle of freedom of contract and to the enforceability of limited liability company agreements.” Wash. Rev. Code §25.15.801(2). Pennsylvania's Uniform Limited Liability Company Act of 2016 (“ULLCA”), 15 Pa. Cons. Stat. §§8811 et seq., grants parties considerable flexibility in the crafting of their operating agreements. See generally Id. §8815(d). In addition, both jurisdictions recognize that a business entity's internal operations should be governed by the law of the state where the company was formed (which, in this case, would be Delaware). See Rodriguez v. Loudeye Corp., 189 P.3d 168, 172 (Wash.Ct.App. 2008) (“Shareholder claims involving a corporation's internal affairs are governed by the law of the state in which the corporation was incorporated.”)(citing Davis & Cox v. Summa Corp., 751 F.2d 1507, 1527 (9th Cir.1985)); 15 Pa. Cons. Stat. §402(a)(1) (“The laws of the jurisdiction of formation of a foreign association governs the . . . internal affairs of the association.”). Accordingly, the court will apply Delaware law in assessing plaintiff's substantive rights under Count I.

         As discussed, the Pointguard Defendants' Rule 17 challenge is based upon the theory that NL Construction, rather than plaintiff, is the real party in interest to this litigation because plaintiff's claims are derivative in nature. Under Delaware law, the distinction between direct and derivative claims turns on the resolution of two questions: “(1) who suffered the alleged harm (the [business entity] or the [plaintiff], individually); and (2) who would receive the benefit of any recovery or other remedy (the [business entity] or the [plaintiff], individually)?” Tooley v. Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031, 1033, 1039 (Del. 2004). “[Any] claimed direct injury must be independent of any alleged injury to the [business entity].” Id. at 1039. “The [plaintiff] must demonstrate that the duty breached was owed to [him] and that he . . . can prevail without showing an injury to the [business entity].” Id.

         Applying these standards, the court concludes that plaintiff's breach of contract claims are direct claims. Assuming that plaintiff can establish a right to receive copies of NL Construction's financial records, copies of tax returns, and advance written notice of any intended loan obligations, the deprivation of these rights was personal to him and directly harmed him. The same is true with respect to the NL Construction Defendants' alleged failure to make “guaranteed weekly payments” and to distribute company profits. Were these payments to be recovered, they would be payable to plaintiff, not NL Construction. Plaintiff is therefore the real party in interest for purposes of Count I.

         (ii)Plaintiff's Tort Claims

         The choice of law provision in the company's operating agreement raises a question about its relevance in the context of plaintiff's remaining tort claims. Under Pennsylvania law, a contractual choice of law provision “do[es] not govern tort claims between contracting parties unless the fair import of the provision embraces all aspects of the legal relationship.” Broederdorf v. Bacheler, 129 F.Supp.3d 182 (E.D. Pa. 2015) (internal quotation marks and citation omitted). In this case, the provision indicates a narrow intent, as it provides only that the “agreement will be governed by and construed in accordance with the laws of the state of Delaware.” (SAC Ex. 8, ¶20, ECF No. 82-8.) “Narrow choice of law provisions stating that a contract's terms or enforcement are to be governed, or construed, by the laws of another state are generally interpreted by Pennsylvania courts to relate only to the construction and interpretation of the contract at issue.” Grimm v. Citibank (S. Dakota), N.A., No. CIV.A. 08-788, 2008 WL 4925631, at *4 (W.D. Pa. Nov. 14, 2008) (citing Jiffy Lube Int'l, Inc. v. Jiffy Lube of Pa., Inc., 848 F.Supp. 569 (E.D.Pa.1994)); accord Coram Healthcare Corp. v. Aetna U.S. Healthcare Inc., 94 F.Supp.2d 589, 594 (E.D. Pa.1999) (choice of law provision that stated “[t]his agreement shall be governed by the state of Delaware” applied only to claims relating to parties' rights and duties under the contract itself).

         In light of these principles, the contractual choice of law provision has no application to plaintiff's tort claims against the NL Construction Defendants. The choice of law provision also does not apply to the tort claims against Native Link, the Pointguard Defendants, and the Bank Defendants, since these defendants were not parties to the operating agreement. Consequently, to determine the applicable law for Counts II through VII, the court must undertake a more traditional analysis.

         Under Pennsylvania's choice of law rules, when no choice of law provision governs what law to apply in a dispute, the first step is to determine “whether a conflict exists between the laws of [the competing states].” Budtel Assocs., LP v. Cont'l Cas. Co., 915 A.2d 640, 643 (Pa. Super. Ct. 2006) (citation omitted). If there is no conflict between the laws of competing states, no further analysis is necessary and the law of the forum state applies. See, e.g., State Farm Fire & Cas. Co. v. Holmes Prods., 165 F.App'x 182, 185 n.1 (3d Cir. 2006) (citation omitted) (“[B]ecause there is no conflict between the laws of other states that may have an interest . . . a court shall apply the law of the forum state.”).

         When there are relevant differences between the competing states' laws, courts must examine the governmental policies underlying each law and classify the conflict as “true, ” “false, ” or “unprovided for.” See Hammersmith v. TIG Ins. Co., 480 F.3d 220, 230 (3d Cir. 2007). A false conflict occurs when “‘only one jurisdiction's governmental interests would be impaired by the application of the other jurisdiction's law.'” LeJeune v. Bliss-Salem, Inc., 85 F.3d 1069, 1071 (3d Cir. 1996) (quoting Lacey v. Cessna Aircraft Co., 932 F.2d 170, 187 (3d Cir. 1991)). When a false conflict exists, courts apply the law of the only interested jurisdiction. See Garcia v. Plaza Oldsmobile Ltd., 421 F.3d 216, 220 (3d Cir. 2005) (citation omitted). A case is considered to be unprovided for “when no jurisdiction's interests would be impaired if its laws were not applied.” Budget Rent-A-Car Sys., Inc. v. Chappell, 407 F.3d 166, 170 (3d Cir. 2005). In unprovided for tort cases, courts use the lex loci delicti, or “place of the wrong” rule, and apply the law of the state where the harm occurred. Id. (citation omitted)

         A true conflict occurs when “both jurisdictions' interests would be impaired by the application of the other's laws.” Hammersmith, 480 F.3d at 230 (emphasis in original) (citations omitted). When a true conflict exists, a court must decide which state has the “greater interest in the application of its law.” Cipolla v. Shaposka, 267 A.2d 854, 856 (Pa. 1970). Pennsylvania courts do this by considering the factors set forth in the Second Restatement of Conflict of Laws. See Griffith v. United Air Lines, Inc., 203 A.2d 796, 805-06 (Pa. 1964); see also Troxel v. A.I. duPont Inst., 636 A.2d 1179, 1180-81 (Pa. Super. Ct. 1994). These factors include:

(a) the needs of the interstate and international systems, (b) the relevant policies of the forum, (c) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue, (d) the protection of justified expectations, (e) the basic policies underlying the particular field of law, (f) certainty, predictability and uniformity of result, and (g) ease in the determination and application of the law to be applied.

Restatement (Second) of Conflict of Laws §6 (1971).

         For purposes of the pending motions, the court must determine: (i) whether Delaware, Pennsylvania, and Washington would characterize any part of plaintiff's tort claims as derivative; (ii) whether these jurisdictions would recognize plaintiff as the real party in interest relative to such claims, and (iii) how Pennsylvania law would resolve any conflicts that may exist among the various jurisdictions in this regard. The court's analysis ...


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