United States District Court, W.D. Arkansas, Fayetteville Division
WHALEY ET AL. PLAINTIFFS
JIMMY ESEBAG and UNITED LISCENSING GROUP, INC. DEFENDANTS
OPINION AND ORDER
HOLMES, III CHIEF U.S. DISTRICT JUDGE
the Court are Defendants Jimmy Esebag and United Licensing
Group, Inc.'s (“Defendants”) motion (Doc. 13)
to dismiss for lack of personal jurisdiction or to
abstain and amended brief (Doc. 26) in support.
Plaintiffs Justin Whaley, Rodney Redman, Ron Whaley, M. Sean
Hatch, Michael Bahn, Jodie Daniels, and Tom Maddi
(“Plaintiffs) filed a response (Doc. 28) in opposition
with leave of Court. Defendants then filed a reply (Doc. 31)
to the response. For the following reasons, Defendants'
motion (Doc. 13) is GRANTED.
assert causes of action for violations of the Securities
Exchange Act, California Corporations Code, fraud, unjust
enrichment, and unfair competition. (Doc. 14, p. 5).
Plaintiffs, with the exception of Tom Maddi, are all Arkansas
residents. (Doc. 8, p. 2). Mr. Maddi is an Illinois resident.
(Doc. 8, p. 2). Plaintiffs are all affiliated with the Gyde
Group, LLC, an Arkansas LLC headquartered in Arkansas that
invests in merchandising and marketing opportunities. (Doc.
8, p. 3). Defendant Jimmy Esebag is a citizen of the state of
California. (Doc. 8, p. 2). His company, United Licensing
Group, Inc. (“ULG”), is a corporation organized
under the laws of the state of California, with its principal
place of business in Los Angeles, California. (Doc. 8, p. 2;
Doc. 28, p. 4). Plaintiffs Justin Whaley, Rodney Redman, Sean
Hatch, Michael Bahn and Jodie Daniels first met with Mr.
Esebag on January 25, 2017 to discuss a potential opportunity
to market a product called Dr. Boost. (Doc. 8, p. 3). This
meeting took place at Mr. Esebag's office in Los Angeles,
California. (Doc. 28-1, p. 1). Plaintiffs allege that Mr.
Esebag was very interested in working with them because of
their connections with Walmart, headquartered in Bentonville,
Arkansas. (Doc. 28-1, p. 1). Mr. Esebag told Plaintiffs that
once Dr. Boost was ready for market, he would invest $20
million of his own funds in a large-scale advertising
campaign. (Doc. 8, p. 4). Mr. Esebag also shared with
Plaintiffs that Dr. Boost was in the final stages of
development and the product would be available for sale in
June 2017. (Doc. 8, p. 4). Plaintiffs allege that Mr.
Esebag's statements regarding the product were knowingly
false and that they relied on those statements in making
their investment in ULG. (Doc. 8, p. 4).
January 31, 2017, Plaintiffs participated in a Skype call
with Mr. Esebag further discussing the Dr. Boost opportunity.
(Doc. 8, p. 4). Plaintiffs followed up this call with a
second in-person meeting with Mr. Esebag regarding the
product at his home in Los Angeles, California on February
27, 2017. (Doc. 8, p. 4). Following the February 2017
meeting, Mr. Esebag and Plaintiffs communicated by telephone,
text message, and email regarding a potential partnership on
the Dr. Boost venture. (Doc. 8, p. 4; Doc. 28, p. 3). As a
result of these conversations, Plaintiffs and Defendants
agreed that Plaintiffs would become a partner in the Dr.
Boost venture by purchasing a minority interest in ULG. (Doc.
8, p. 4; Doc. 28, p. 4). On May 8, 2017, Plaintiffs again met
with Mr. Esebag in California to discuss the purchase of a
minority interest in ULG. (Doc. 8, p. 5). At this meeting Mr.
Esebag and Plaintiffs Sean Hatch and Justin Whaley agreed
upon a minority interest purchase price of $25 million
dollars for a 25% interest in ULG, to be paid in installments
detailed in the payment schedule. (Doc. 8, p. 5).
10, 2017, Mr. Esebag emailed Plaintiffs the first draft of
the Memorandum of Understanding (“MOU”)
memorializing the parties' agreement. (Doc. 8, p. 5).
Over the course of the next several days, Defendants and
Plaintiffs again exchanged emails and phone calls to
negotiate the payment schedule. (Doc. 8, p. 5). On May 16,
2017, Plaintiffs wired Jimmy Esebag $2, 500, 000 from their
Arkansas bank account. (Doc. 8, p. 5). Between May 16, 2017
and June 23, 2017, the parties exchanged emails and calls to
attempt to finalize the terms of the MOU regarding the
payment schedule. (Doc. 8, p. 6). Plaintiffs allege that Mr.
Esebag falsely represented in these communications that the
parties would renegotiate the deal if the Dr. Boost sales
failed to support Plaintiffs' obligations to ULG. (Doc.
28, p. 5). The parties finalized the MOU on June 23, 2017.
(Doc. 8, p. 6). The MOU is governed by California law. (Doc.
8, p. 7).
allege that after the parties signed the MOU, Defendants'
misrepresentations became apparent. (Doc. 8, p. 7).
Plaintiffs assert that Defendants knew that Dr. Boost would
not be ready until after June 2017 because Mr. Esebag did not
select a manufacturer of the product until August 2017. (Doc.
8, p. 7). Mr. Esebag later informed Plaintiffs that he would
not invest the promised $20 million for product marketing.
(Doc. 8, p. 8). On July 5, 2017, Mr. Esebag met with Justin
Whaley in Bentonville, Arkansas to discuss the state of Dr.
Boost. (Doc. 28- 1, p. 4). Plaintiffs allege that Mr. Esebag
did not adhere to the agreed upon payment schedule and
traveled to Arkansas to personally demand payment at their
Arkansas office. (Doc. 8, p. 9).
of continued disagreements between the parties, Mr. Esebag
filed suit in Superior Court of the State of California,
County of Los Angeles, alleging breach of contract against
Justin Whaley, Rodney Redman, Ron Whaley, M. Sean Hatch,
Michael Bahn, Jodie Daniels, and Tom Maddi. (Doc. 14, p. 4).
The Defendants filed a notice of removal in the United States
District Court for the Central District of California. (Doc.
14, p. 5). However, this removal failed. (Doc. 14, p.
After the California complaint was filed, Plaintiffs filed
the instant action.
the Court can exercise personal jurisdiction over Defendants
requires an analysis of two issues: (1) whether the exercise
of personal jurisdiction over Defendants is allowed under the
forum state's long-arm statute; and (2) whether the
exercise of personal jurisdiction over Defendants comports
with due process. Dakota Indus., Inc. v. Dakota
Sportswear, Inc., 946 F.2d 1384, 1387-88 (8th Cir.
1991). “Arkansas's long-arm statute provides for
jurisdiction over persons and claims to the maximum extent
permitted by constitutional due process.”
Pangaea, Inc. v. Flying Burrito LLC, 647
F.3d 741, 745 (8th Cir. 2011) (citing Ark. Code Ann. §
16-4-101). The sole issue for analysis, then, is whether the
Court can exercise personal jurisdiction over Defendants
consistent with due process. Plaintiffs bear the burden of
persuasion on this issue:
When personal jurisdiction is challenged by a defendant, the
plaintiff bears the burden to show that jurisdiction exists.
To successfully survive a motion to dismiss challenging
personal jurisdiction, a plaintiff must make a prima facie
showing of personal jurisdiction over the challenging
defendant. A plaintiff's prima facie showing must be
tested, not by the pleadings alone, but by affidavits and
exhibits supporting or opposing the motion. Where no hearing
is held on the motion, we must view the evidence in a light
most favorable to the plaintiff and resolve factual conflicts
in the plaintiff's favor; however, the party seeking to
establish the court's personal jurisdiction carries the
burden of proof and that burden does not shift to the party
Fastpath, Inc. v. Arbela Techs. Corp., 760 F.3d 816,
820 (8th Cir. 2014) (citations and quotations omitted).
Because the Court is not holding a hearing on this motion,
the evidence is viewed and factual conflicts are resolved in
may exercise personal jurisdiction over an out-of-state
defendant consistent with due process so long as the
defendant has minimum contacts with the state such that
maintaining the lawsuit does not offend traditional notions
of fair play and substantial justice. Int'l Shoe Co.
v. State of Wash., Office of Unemployment Comp. and
Placement, 326 U.S. 310, 316 (1945). Where the
defendant's contacts with the forum state are so
systematic and continuous that the defendant can fairly be
said to be “at home” in the state, then courts in
that state may exercise personal jurisdiction over the
defendant in any case or controversy. Goodyear Dunlop
Tires Operations, S.A. v. Brown, 564 U.S. 915, 919
(2011). When the defendant's contacts are this
substantial, a court is said to be exercising “general
jurisdiction.” Id. Where the defendant's
contacts are too minimal for a court to exercise general
jurisdiction, it may still exercise “specific
jurisdiction” over those cases or controversies that
arise out of or relate to the defendant's contacts with
the forum (provided that exercising jurisdiction on the basis
of those contacts does not offend traditional notions of fair
play and substantial justice). Daimler AG v. Bauman,
571 U.S. 117, 126-28 (2014).
do not argue that general jurisdiction is present in this
case. Accordingly, the Court's analysis will focus on
specific jurisdiction. Specific jurisdiction may be exercised
over a person when a case or controversy arises out of that
person's contacts with the forum. Int'l
Shoe, 326 U.S. at 319 (“[T]o the extent that a
corporation exercises the privilege of conducting activities
within a state, it enjoys the benefits and protections of the
laws of that state. The exercise of that privilege may give
rise to obligations; and, so far as those obligations arise
out of or are connected with the activities within the state,
a procedure which requires the corporation to respond to a
suit brought to enforce them can, in most instances, hardly
be said to be undue.”). The Eighth Circuit has
traditionally employed a five-factor test to determine
whether the alleged contacts a defendant has with a forum
state are sufficient to exercise personal jurisdiction over
the defendant comporting with due process. Fastpath,
Inc., 760 F.3d at 821. The Eighth Circuit analyzes
“1) the nature and quality of contacts with the forum
state; 2) the quantity of the contacts; 3) the relation of
the cause of action to the contacts; 4) the interest of the
forum state in providing a forum for its residents; and 5)
convenience of the parties.” Id. The first
three factors are considered the most significant.
Id. Indeed, Supreme Court decisions like
Bauman and Goodyear clarify that the third
factor is of primary importance. Bauman, 571 U.S. at
126-28 (explaining that specific jurisdiction is the
adjudicatory authority in suits arising out of or relating to
a defendant's ...