Justin Whaley; Rodney Redman; Ron Whaley; M. Sean Hatch; Michael Bahn; Jodie Daniels; Tom Maddi Plaintiffs - Appellants
Jimmy Esebag; United Licensing Group, Inc. Defendants - Appellees
Submitted: September 24, 2019
from United States District Court for the Western District of
Arkansas - Fayetteville
COLLOTON, ERICKSON, and STRAS, Circuit Judges.
ERICKSON, CIRCUIT JUDGE.
commenced this action in Arkansas federal court after a
dispute involving an investment agreement with defendants, a
California resident and his California-based business. The
district court dismissed the case for lack of personal
jurisdiction, and plaintiffs appealed. Because we find the
defendants had sufficient contacts with Arkansas to establish
personal jurisdiction, we reverse.
Justin Whaley, Rodney Redman, Ron Whaley, M. Sean Hatch,
Michael Bahn, and Jodie Daniels are residents of Arkansas;
plaintiff Tom Maddi is a resident of Illinois. Each plaintiff
is affiliated with and has been an employee of The Gyde
Group, LLC, an Arkansas-based merchandising and marketing
company with extensive experience marketing products to
Walmart, Inc. Defendant Jimmy Esebag is a resident of
California and the owner of California-based United Licensing
Group, Inc. ("ULG").
January 25, 2017, five of the seven plaintiffs met in
California with Esebag and his assistant, Nicholai Allen, to
discuss a potential marketing opportunity involving a new
dietary supplement, "Dr. Boost." During the meeting
and afterwards, Esebag stated an interest in working with the
plaintiffs because of their experience working with Walmart,
Inc., which has established its world headquarters in
Bentonville, Arkansas. At the heart of the dispute between
the parties is the plaintiffs' allegation that Esebag
falsely represented that he would invest $20 million of his
personal funds when Dr. Boost was ready for market, which he
stated would occur by June 2017.
the next few weeks, the plaintiffs participated from Arkansas
in a number of followup conversations with Esebag via Skype,
text, and email. These discussions primarily involved
finalizing the terms of the parties' business
relationship and developing a marketing strategy. Esebag also
emailed a sales pitch to the plaintiffs in Arkansas. During
these communications, the parties discussed using Arkansas as
a possible test market for the Dr. Boost products, with
Walmart, Inc. serving as a potential distribution partner.
second in-person meeting took place in California on February
27, 2017. At this meeting the plaintiffs agreed to invest in
the Dr. Boost venture by purchasing a minority share of ULG.
A third in-person meeting occurred in California on May 8,
2017, when Whaley, Chief Executive Officer, and Hatch, Chief
Financial Officer and General Counsel, agreed on behalf of
their investment company to pay $25 million for a 25%
interest in ULG. The exact payment schedule was to be
negotiated in the weeks that followed. Because the plaintiffs
did not have $25 million on hand for the investment, they
proposed a payment schedule that relied on future income from
Dr. Boost to fund their investment obligations.
10, 2017, Esebag emailed a first draft of the Memorandum of
Understanding (MOU) to the plaintiffs. The parties continued
to negotiate the payment schedule through a series of emails
and telephone conversations spread over the next few days.
Notwithstanding that no final payment schedule had been
agreed upon, on May 16, 2017, the plaintiffs wired $2.5
million of good faith money to Esebag from their Arkansas
bank account. During the next five and half weeks the parties
continued to negotiate the terms of the payment schedule
using both email and telephone. On June 2, 2017, Esebag
shipped samples of Dr. Boost to plaintiffs in Arkansas.
parties signed the MOU on June 23, 2017. Under its terms the
MOU is governed by California law. The MOU acknowledged the
$2.5 million payment, and it required the plaintiffs to make
additional payments of $5.625 million every three months,
beginning on December 1, 2017. The agreement also provided
the plaintiffs with the option to split the first payment
into two installments, with due dates on December 1, 2017,
and January 31, 2018.
plaintiffs assert that it was only after the MOU was signed
that they became aware of false statements and
misrepresentations made by Esebag during the negotiations.
Specifically, they allege Esebag never intended to invest $20
million of his own funds, and he misled them about the
timeline for product readiness.
5, 2017, Esebag traveled to Bentonville, Arkansas, to meet
with Whaley and Hatch. During this meeting, the plaintiffs
allege that Esebag repeated his false statements and
misrepresentations. At about the same time, the plaintiffs
made known their concern that they would be unable to make
the December payment required under the MOU because Dr. Boost
was not yet generating income. Esebag made a second trip to
Arkansas on August 10, 2017. The plaintiffs allege that
during this meeting Esebag demanded payment of $1 million in
October, as an advance on money due to be paid in December
under the MOU. According to the ...