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Neff v. PKS Holdings, LLC

United States District Court, E.D. Pennsylvania

August 8, 2019

TONI CAIAZZO NEFF, Plaintiff,
v.
PKS HOLDINGS, LLC, et al., Defendants.

          OPINION DEFENDANTS' MOTION TO DISMISS, ECF NO. 12-GRANTED

          JOSEPH F. LEESON, JR. UNITED STATES DISTRICT JUDGE

         I. INTRODUCTION

         Plaintiff Toni Caiazzo Neff was employed by Defendant Purshe Kaplan Sterling Investments, Inc. (hereafter, “PKS”) as a compliance officer and claims she was fired in retaliation for reporting potential securities law violations to the Financial Industry Regulatory Authority (FINRA).

         Caiazzo Neff asserts four claims against eleven defendants, including PKS and several related entities and seven individuals with a supervisory relationship to Caiazzo Neff. She alleges retaliation under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, see 15 U.S.C. § 78u-6(h), and Pennsylvania state law claims for wrongful termination in violation of public policy, breach of the implied covenant of good faith and fair dealing, and intentional infliction of emotional distress.

         Defendants move to dismiss Caiazzo Neff's claims pursuant to Federal Rules of Civil Procedure 12(b)(2) and 12(b)(6), challenging the Court's personal jurisdiction over Defendants and arguing that the Amended Complaint fails to state a claim for which relief can be granted.

         For the reasons set forth below, the Court finds that it lacks personal jurisdiction over all Defendants except PKS and Katherine Flouton. Additionally, the Amended Complaint fails to state a claim under the Dodd-Frank Act or Pennsylvania state law. Accordingly, Defendants' motion is granted.

         II. BACKGROUND [1]

         Defendant Purshe Kaplan Sterling Investments, Inc. (hereafter, “PKS”), is a registered broker-dealer and FINRA member organization. Am. Compl. ¶ 9.[2] Caiazzo Neff was employed by PKS as a compliance officer beginning in March 2014 based on her experience in the finance industry. Am. Compl. ¶ 30. She was hired to work primarily from a home office in Pennsylvania, and frequently performed audits at Defendants' Pennsylvania business locations. Id. at ¶¶ 31-33. Defendants provided equipment for Caiazzo Neff's home office and communicated with her while she worked there. Id. at ¶ 34. Caiazzo Neff's responsibilities included reviewing new product offerings, regulatory disclosures, and cybersecurity procedures, performing cybersecurity audits at branch office locations, and conducting monthly and quarterly compliance reviews, among other duties. Id. at ¶¶ 38-39.

         In January 2016, Caiazzo Neff raised concerns about a particular product offering and did not recommend that the product be added to the PKS platform based upon her finding that members of senior management at the sponsor of the product were using investor funds for personal business interests. Id. at ¶ 42. The product was subsequently re-reviewed, without Caiazzo Neff's input, and Caiazzo Neff was instructed by colleagues not to raise concerns about the product before it was offered to purchasers. Id. at ¶¶ 43-46.

         In July or August 2017, Defendant Katherine Flouton, the Chief Operating Officer at PKS, assigned review of a second product to a less experienced employee, even though Caiazzo Neff was the only employee to have experience with that particular product type. Id. at ¶¶ 51-52. Flouton expected Caiazzo Neff to have concerns about the product and reassigned the review to avoid her oversight. Id. at ¶ 52. Defendants offered a third product, again over Caiazzo Neff's concerns, because it was a condition precedent to PKS's acquisition by Defendants MHC Securities and Wentworth Management Services. Id. at ¶¶ 54-57. MHC and Wentworth subsequently acquired ownership stakes in PKS in November 2017. Id. at ¶ 66. Caiazzo Neff alleges upon information and belief that the transfer of ownership did not affect the day-to-day control of PKS. Am. Compl. ¶ 67.

         In August 2017, Flouton and Defendant Lisa LaFond, PKS's Chief Compliance Officer, removed Caiazzo Neff from the compliance group and reassigned her to the role of Internal Auditor/Internal Audit Department. Id. at ¶ 58. Flouton and LaFond informed Caiazzo Neff that the reassignment was due to FINRA requirements that prohibited the compliance department from performing internal auditing. Id. Caiazzo Neff was to hold sole responsibility for internal audits, a task previously completed by eight to ten employees. Id. at ¶ 59. Caiazzo Neff believes that Defendants were attempting to force her into resigning from her position. Id. Caiazzo Neff was also removed from her role as the Cybersecurity Liaison with IT in November 2017 after being removed from a conference call by Defendant J. Peter Purcell, the Chief Executive Officer of PKS. Id. at ¶¶ 63-64.

         Flouton emailed Caiazzo Neff in January 2018 requesting an update about the internal audit, which was due in February 2018. Id. at ¶ 68. Caiazzo Neff felt that the communication encroached on an auditor's proper independence, and she contacted a FINRA official to discuss her concerns. Id. at ¶ 69. Caiazzo Neff also contacted Defendant David Purcell, the General Counsel at PKS, to discuss similar concerns. Id. at 73-74. During Caiazzo Neff's conversation with David Purcell, he told her that “compliance offers [sic], under security laws really only had [sic] two choices if they find something problematic; report it or resign.” Id. at ¶ 75.

         Two days after her conversation with David Purcell, Flouton contacted Caiazzo Neff to terminate her employment. Id. at ¶ 76. Flouton informed Caiazzo Neff that the “new owners, ” who Caiazzo Neff understands as MHC, Wentworth, and their respective managing officers, Defendants Alex Markowits and Ryan Morfin. Id. at ¶ 77-78. Caiazzo Neff also believes that Defendants became aware of her communication with a FINRA official. Id. at ¶ 79.

         Caiazzo Neff initiated this action on May 1, 2018, and filed an amended complaint on September 14, 2018. ECF No. 10. Caiazzo Neff named eleven defendants: PKS Holdings, LLC; PKS; MHC Securities; Wentworth Management, LLC; J. Peter Purcell; David Purcell; Lisa LaFond; Peter Sheehan; Alex Markowits; Ryan Morfin; and Katherine Flouton. Caiazzo Neff alleges four claims. Caiazzo Neff alleges that she was fired in retaliation for her whistleblowing activities in violation of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Pursuant to Pennsylvania state law, Caiazzo Neff alleges wrongful termination in violation of public policy, breach of the implied covenant of good faith and fair dealing, and intentional infliction of emotional distress.

         III. STANDARD OF REVIEW

         A. Rule 12(b)(2) Motion to Dismiss for Lack of Personal Jurisdiction

         The motion to dismiss standard under Rule 12(b)(2) is as follows:

When reviewing a motion to dismiss for lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2), I must accept the plaintiff's allegations as true and resolve disputed facts in favor of the plaintiff. Pinker v. Roche Holdings Ltd., 292 F.3d 361, 368 (3d Cir. 2002). However, once a defendant has raised a jurisdictional defense, the plaintiff must “prove by affidavits or other competent evidence that jurisdiction is proper.” See Metcalfe v. Renaissance Marine, Inc., 566 F.3d 324, 330 (3d Cir. 2009). If an evidentiary hearing is not held, a plaintiff “need only establish a prima facie case of personal jurisdiction.” Id. A plaintiff meets this burden by “establishing with reasonable particularity sufficient contacts between the defendant and the forum state.” Provident Nat. Bank v. California Fed. Sav. & Loan Assoc., 819 F.2d 434 (3d Cir. 1987).

Campbell v. Fast Retailing USA, Inc., No. CV 14-6752, 2015 WL 9302847, at *2 (E.D. Pa. Dec. 22, 2015).

         B. Rule 12(b)(6) Motion to Dismiss for Failure to State a Claim

         In rendering a decision on a motion to dismiss, this Court must “accept all factual allegations as true [and] construe the complaint in the light most favorable to the plaintiff.” Phillips v. Cnty. of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008) (quoting Pinker v. Roche Holdings Ltd., 292 F.3d 361, 374 n.7 (3d Cir. 2002)) (internal quotation marks omitted). Only if “the ‘[f]actual allegations . . . raise a right to relief above the speculative level'” has the plaintiff stated a plausible claim. Id. at 234 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 540, 555 (2007)). However, “the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (explaining that “[d]etermining whether a complaint states a plausible claim for relief . . . [is] a context-specific task that requires the reviewing court to draw on its judicial experience and common sense”). The defendant bears the burden of demonstrating that a plaintiff has failed to state a claim upon which relief can be granted. Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005) (citing Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1409 (3d Cir. 1991)).

         IV. ANALYSIS

         Defendants collectively move to dismiss Caiazzo Neff's Amended Complaint under Rule 12(b)(2) for lack of personal jurisdiction and under Rule 12(b)(6) for failure to state a claim for which relief can be granted.

         A. Personal Jurisdiction

         Defendants move to dismiss Caiazzo Neff's claims by challenging personal jurisdiction, asserting that none of the Defendants have sufficient contacts with Pennsylvania. Defs.' Mot. Dismiss 5, ECF No. 12. Caiazzo Neff asserts that PKS is subject to general jurisdiction in Pennsylvania because it is a registered corporation in Pennsylvania and that the other Defendants have sufficient minimum contacts with Pennsylvania to be subject to specific jurisdiction. Pl.'s Opp. 4-6, ECF No. 13.

         When a defendant moves to dismiss by challenging personal jurisdiction, the plaintiff must meet the burden of showing that personal jurisdiction is appropriate in the forum state. Metcalfe v. Renaissance Marine, Inc., 566 F.3d 324, 330 (3d Cir. 2009). She may do so by introducing “affidavits or other competent evidence.” Id. When there is no evidentiary hearing, the plaintiff only must show “a prima facie case of personal jurisdiction.” Id.

         District courts may exercise personal jurisdiction to the greatest extent permissible under the long-arm statute of the state in which the court sits. Id. Pennsylvania's long-arm statute allows jurisdictional exercise “based on the most minimum contact with th[e] Commonwealth allowed under the Constitution of the United States.” D'Jamoos v. Pilatus Aircraft, Ltd., 566 F.3d 94, 101 (3d Cir. 2009) (quoting 42 Pa. C.S. § 5322(b)) (internal quotation marks omitted).

         There are two theories by which a court may find constitutionally sufficient contacts supporting the exercise of personal jurisdiction: general jurisdiction and specific jurisdiction. General jurisdiction is based on a defendant's “continuous and systematic contacts” with the forum state and allows personal jurisdiction over a defendant for any claim, whether the claim is related to the defendant's contacts with the forum state or not. Metcalfe, 566 F.3d at 334 (quoting Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 416 (1984)). To determine whether a defendant is subject to general jurisdiction, a court asks whether the defendant is “at home” in the forum state. Daimler AG v. Bauman, 571 U.S. 117, 122 (2014) (citing Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011)). For individuals, “at home” means their domicile, and for corporations, “at home” includes the place of incorporation or a primary place of business, among other possibilities. Id. at 137 (citing Goodyear, 564 U.S. at 924).

         Specific jurisdiction permits a court to adjudicate when the defendant's conduct in the forum state makes it reasonably foreseeable that the defendant would be “haled into court” there. D'Jamoos, 566 F.3d at 105 (citing World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980)). To determine whether a defendant may be subjected to personal jurisdiction, the United States Court of Appeals for the Third Circuit has issued a three-part test. O'Connor v. Sandy Lane Hotel Co., 496 F.3d 312, 317 (3d Cir. 2007). First, the defendant must have purposefully directed their activities toward the forum state. Id. (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985)). Second, the claims must have arisen from the defendant's activities in the forum state. Id. (citing Helicopteros, 466 U.S. at 414). Finally, if the previous conditions are met, exercise of jurisdiction must “comport with ‘fair play and substantial justice.'” Id. (quoting Burger King, 471 U.S. at 476).

         Jurisdictional analysis must be specific to each defendant. Doe v. Hesketh, 15 F.Supp.3d 586, 592 (E.D. Pa. 2014) (citing Miller Yacht Sales, Inc. v. Smith, 384 F.3d 93, 95 n.1 (3d Cir. 2004)). A plaintiff is required to show that each defendant moving to dismiss has sufficient contacts with the forum state, even when their corporate family collectively has the necessary contacts. In re Chocolate Confectionary Antitrust Litigation, 602 F.Supp.2d 538, 559 n.17 (M.D. Pa. 2009). Therefore, the Court discusses each Defendant in turn.

         1. ...


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