United States District Court, E.D. Pennsylvania
OPINION DEFENDANTS' MOTION TO DISMISS, ECF NO.
F. LEESON, JR. UNITED STATES DISTRICT JUDGE
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).
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.
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.
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.
Purshe Kaplan Sterling Investments, Inc. (hereafter,
“PKS”), is a registered broker-dealer and FINRA
member organization. Am. Compl. ¶ 9. 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 ¶¶
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
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.
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.
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
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.
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.
STANDARD OF REVIEW
Rule 12(b)(2) Motion to Dismiss for Lack of Personal
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).
Rule 12(b)(6) Motion to Dismiss for Failure to State a
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)).
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.
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.
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.
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).
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).
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).
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.