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Duncan v. Harmon

United States District Court, E.D. Arkansas, Western Division

November 2, 2017



         Defendant James Harmon's motion to dismiss [Doc. No. 6] based on the failure to state a claim pursuant to Rule 12(b)(6), the lack of personal jurisdiction pursuant to Rule 12(b)(2), and the doctrine of forum non conveniens is denied. No evidentiary hearing is needed, and the request is denied. See Doc. No. 16, at 9. The stay is hereby lifted, and an amended initial scheduling order shall issue.

         I. BACKGROUND

         Plaintiff Randall Duncan is a resident of Arkansas and owner of plaintiff RMDI, a limited liability company organized under Arkansas law. Plaintiffs bring suit against defendant, who maintains residency in both Indiana and in the Carribean Island of Sint Maarten. Br. Supp. Mot. Dismiss, Doc. No. 10, at 1; Doc. No. 13-1, at 48 (email in which defendant refers to his "Indiana home office"). Plaintiffs claims are primarily based on a fraudulent statement made by defendant in Arkansas on January 28, 2014, which plaintiffs say induced Duncan to purchase defendant's half ownership interest in Carribean Cash Services, N.V. ("CCS"), a Sint Maarten limited liability company, and Cash Advance Systems, Ltd. ("CAS"), an Anguillan corporation.

         CCS is a microlending company that makes small, short-term, unsecured loans to residents of Sint Maarten and Curacao. Defendant founded CCS and owned a half interest in both CCS and CAS until he sold his shares in both companies to Duncan, who assigned them to RMDI. Duncan and defendant met through Rufus Wolff, an Arkansas lawyer with whom they were mutually acquainted. Although the parties dispute who initiated the negotiations, it seems clear that Wolff played a large role in facilitating the deal between Duncan and Harmon. In fact, the record indicates that defendant communicated with plaintiff almost entirely through Wolff. See Doc. No. 13-23 (email from defendant stating, "Any reason why I can't have an email for Randy and Greg at this time if appropriate?").

         Defendant says Wolff first suggested Duncan as a proposed purchaser via email on August 29, 2013, and at that time, Wolff represented that he had already met with Duncan three times regarding the tentative deal. Harmon Decl. ¶ 17., Doc. No. 7. Using Wolff as an intermediary, Duncan and defendant then negotiated the deal almost entirely by email or other forms of long-distance communication. By September 13, 2013, Wolff advised via email that Duncan was 99% sure he wanted to invest, and Wolff and Duncan traveled to Sint Maarten in October 2013 to negotiate terms and conduct due diligence regarding the tentative investment. Id. ¶¶ 17, 18. This trip was the first time defendant and Duncan met in person. Id. ¶ 18.

         Due to the potential tax consequences defendant would suffer if he did not close the deal by the end of the year, defendant aggressively pursued closing the deal as the end of the year approached. Duncan still had reservations, however, so the parties agreed to execute the CCS Stock Purchase Agreement and the CAS Stock Purchase Agreement electronically on December 31, 2013, each from their respective locations, see Id. ¶ 20, with a side agreement that would allow plaintiff more time to rescind the agreement if he chose.

         Before Duncan would finalize the deal, he arranged for defendant to make an "informal" visit to Arkansas in January 2014:

"Jim, You do not need to bring anything besides yourself and Citrana. You will not be meeting any of my other partners. The meeting will just be the two of us and Rufus and will be very informal. Likewise, there is nothing for you to prepare to talk about as it is logistics, timing and practical matters we will be discussing. Anything else that might come up you can shoot from the hip. This is not going to be a tense or pressure packed meeting. I am sure we could have dealt with any of my concerns over the phone. However, since we are planning on being partners in this venture for a long time I think it is very important for us to have the same expectations from the beginning and it is helpful to me to talk face to face instead of over the phone or by email since some things get lost in the translation. I just need to make sure there is nothing I have forgotten to deal with and am doubly sure this is the right thing for my investors, since I will be going from very liquid assets to a concentrated position in a very illiquid asset. I also know it was inconvenient for you and Citrana to change your plans and come on this trip at the last minute. Thank you again for doing so and I look forward to seeing you both soon. Randy."

Doc. No. 7-11. The subject line of the email reads, "Emailing: Side Agreement Jan 3114."

         Apparently, defendant and his wife were in Indiana tending to personal matters when the trip to Arkansas was planned. Duncan picked up defendant and his wife from the airport on January 28, 2014, and they had dinner at Duncan's home. According to Duncan, "in response to [his] direct question of whether Harmon was aware of any potential pending changes in the regulation of the Business, Harmon stated that he was not aware of any such pending or considered changes." Complaint ¶ 19, Doc. No. 2. Plaintiffs assert the statement was fraudulent because defendant was actually aware that Central Bank in Sint Maarten had proposed a regulation in which the maximum annual percentage rate ("APR") would be capped at 24% and because defendant intended that Duncan would rely on the false statement in entering the stock purchase agreements. Id. ¶¶ 25-27, 45. The visit ended the next morning when Duncan took Harmon and his wife back to the airport.

         On February 12, 2014, Duncan paid defendant $1, 531, 403 by wire transfer pursuant to the CCS Stock Purchase Agreement and $600, 000 by wire transfer pursuant to the CAS Stock Purchase Agreement. Id. ¶¶ 21-22. On December 20, 2016, plaintiffs filed a complaint against defendant for fraud and for violations of registration and anti-fraud provisions of the Arkansas Securities Act ("ASA").

         Notably, the agreement between the parties contemplated a continuing business relationship between defendant in Sint Maarten and plaintiffs in Arkansas. See Doc. No. 13-4; Doc. No. 16, at 16. The parties to this action have also engaged in litigation in Sint Maarten related to CCS's purported termination of defendant's employment, which occurred on or about November 23, 2016. Harmon Decl. ¶¶ 6, 31. That litigation relates to defendant's employment under Section 7.5 of the CCS Purchase Agreement. Doc. No. 10, at 23.


         A. Failure ...

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