S & P Investment Group, LLC v. Kingdom Materials Holdings LLC

Background

S & P Investment Group, LLC sued Kingdom Materials Holdings LLC (KMH), Kingdom Resources LLC, and Michael Blubaugh over claims arising from a 2017 note purchase agreement and related consulting arrangement. S & P alleged that it lent the defendants $250,000, which was to be repaid with 15 percent interest by September 21, 2017. The defendants also agreed to retain S & P as a business consultant for $100,000. As collateral for the loan, the defendants pledged three pieces of construction equipment and filed a financing statement with the Texas Secretary of State.

S & P alleged that the defendants failed to make the required payments. It asserted claims for breach of contract, fraud, unjust enrichment, conversion, breach of the implied covenant of good faith and fair dealing, and negligent misrepresentation. S & P sent communications and payment demands to the defendants’ office in Texas.

KMH filed a motion to dismiss for lack of personal jurisdiction and a motion to transfer the case to the Northern District of Texas. The opinion addresses KMH’s motions; it states that Kingdom Resources and Blubaugh did not oppose the transfer.

Personal jurisdiction

The court concluded that it lacked personal jurisdiction over KMH. For jurisdiction under New York’s long-arm statute, the court considered whether KMH had transacted business in New York and whether exercising jurisdiction would comply with due-process requirements.

The court found that S & P had not shown that KMH purposefully conducted business in New York. The agreement was negotiated remotely by telephone and email, KMH was not alleged to have offices, operations, or employees in New York, and the collateral was in Texas. The court found that KMH’s contract with a New York-based entity, together with an unsupported statement that KMH routinely transacted business in New York, was insufficient.

The court also found insufficient contacts to support either general or specific jurisdiction. It stated that KMH was incorporated in Wyoming and had its principal place of business in Texas, and that S & P had not plausibly alleged that KMH purposefully availed itself of the benefits of conducting activities in New York.

Transfer

Although the court found that it lacked personal jurisdiction over KMH, it determined that dismissal was unnecessary because the case could be transferred under 28 U.S.C. § 1404(a). The court found that the Northern District of Texas was a proper forum because KMH’s principal place of business was there, Texas had general jurisdiction over KMH, and relevant evidence was purportedly located there. The court did not address KMH’s separate argument that a forum-selection clause supported transfer because it found transfer appropriate under Section 1404(a).

The court also transferred the claims against Kingdom Resources LLC and Blubaugh. It stated that both were Texas residents, did not oppose the motion, and should be transferred to preserve the case as a whole.

Disposition

The court denied KMH’s motion to dismiss for lack of jurisdiction and granted KMH’s motion to transfer. The Clerk was directed to transfer the case to the United States District Court for the Northern District of Texas. The opinion did not decide the merits of S & P’s underlying claims.