United States District Court, D. Nevada
MIRANDA M. DU, District Judge.
Before the Court is a Motion to Dismiss And/Or Strike (dkt. no. 152) filed by Third-Party Defendants Cede & Co. ("Cede") and The Depository Trust Company ("DTC") (together, "DTC Defendants"). The Court has also reviewed the opposition filed by Third-Party Plaintiffs Elena and Michael Sammons ("the Sammons") (dkt. no. 172) and DTC Defendants' reply (dkt. nos. 171, 200). For the following reasons, the motion is granted.
In an order issued on June 13, 2014, the Court addressed a similar Motion to Dismiss and/or To Strike filed by Third-Party Defendant COR Clearing, LLC ("COR"). (Dkt. no. 226.) COR's motion focused on Fed.R.Civ.P. 14(a), whereas the present motion takes issue with this Court's jurisdiction and the sufficiency of the Sammons' pleadings, along with Rule 14. ( See dkt. no. 161.) The order denying COR's motion ("COR Order") erroneously noted that COR was the only Third-Party Defendant to move to dismiss or strike the Sammons' First Amended Third Party Complaint. (Dkt. no. 226 at 2.) On June 18, 2014, the Court granted, in part, the Sammons' Motion to Correct the COR Order, recognizing that DTC and Cede had filed the present motion in February 2014. (Dkt. no. 230.)
This motion arises out of a complaint filed by Plaintiff China Energy Corporation ("CEC") in the First Judicial District Court of the State of Nevada in and for the County of Carson City. (Dkt. no. 128-1 at 1.) CEC seeks a declaration that certain shareholders "including the Sammons" did not properly dissent to a stock split. ( Id. at 4-7.) CEC alleges that the Sammons "failed to timely deposit [their] stockholder's certificates, " ( id. ¶¶ 33-34), and that their "purported demand was expressed" in the wrong currency. ( Id. ¶ 35.) Because of these errors, CEC asks the Court to declare that "[n]o defendant is entitled to payment for his or her shares." ( Id. at 7.) Alternatively, CEC requests a "fair value determination" that before the stock split, CEC's stock was worth $0.14 per share. ( Id. at 6-7.)
After removing CEC's action, the Sammons filed a Third-Party Complaint against Cede, DTC, and COR (together, "Third-Party Defendants"), pursuant to Rule 14. (Dkt. no. 128.) Proceeding pro se, the Sammons allege that the Third-Party Defendants vitiated their ability to dissent to CEC's stock split. ( Id. ¶¶ 19, 25, 28, 32-36, 40-41.) The Sammons allege that in so doing, the Third-Party Defendants breached a contract, their fiduciary duties, and were negligent. ( Id. ¶ 41.) If, as CEC requests, this Court declares that the Sammons failed to dissent to CEC's stock split, the Sammons request declaratory judgment specifying that, but for the Third-Party Defendants' errors, the Sammons would have properly dissented to CEC's stock split. ( Id. at 12.)
DTC is a securities depository and clearing agency. ( Id. ¶¶ 5-6; dkt. no. 152-1, Ex. 1 ¶ 7.) DTC is incorporated in New York as a limited purpose trust company; its primary place of business is New York City, New York. (Dkt. no. 152-1, Ex. 1 ¶ 7.) Securities deposited with DTC are registered to Cede, DTC's nominee. ( Id. ¶ 9.) Cede is a partnership under New York law, and its principal place of business is New York City, New York. ( Id. ¶ 7; dkt. no. 128 ¶ 4.)
Before CEC's stock split, the Sammons allege that they asked Cede, the shareholder of record for their CEC shares, to provide a letter consenting to their dissent pursuant to NRS § 92A.400(2). (Dkt. no. 128 ¶¶ 17-18.) DTC allegedly refused to provide this written consent, instead indicating that it would charge $400 to perfect the Sammons' dissenters' rights. ( Id. ¶¶ 19, 40.) The Sammons contend that Cede mailed a dissenters' rights letter to CEC in Nevada, asserting appraisal rights for Elena Sammons' shares. ( Id. ¶ 25.) Because the letter misstated the number of shares at issue and Elena Sammons' address, Cede allegedly withdrew the letter and submitted a corrected copy to CEC. ( Id. ¶¶ 25, 28.) Additionally, the Sammons allege that the Third-Party Defendants caused Quicksilver Stock Transfer, LLC ("Quicksilver"), CEC's Nevadabased stock transfer agent, to print an unnecessary stock certificate for their shares. ( Id. ¶¶ 23, 31-35; see dkt. no. 200 at 42.) The stock certificate was untimely delivered to CEC. (Dkt. no. 128 ¶¶ 34-35.)
DTC Defendants argue that the Third-Party Complaint should be dismissed for three reasons. (Dkt. no. 152 at 3.) First, they assert that the Court lacks personal jurisdiction. Second, they contend that the Sammons' impleader was improper under Rule 14. Third, they argue that the Sammons fail to state essential elements of their claims. The Court finds that the personal jurisdiction argument is dispositive.
III. LEGAL STANDARD
Courts must liberally construe complaints filed by pro se litigants. Erickson v. Pardus, 551 U.S. 89, 94 (2007) (per curiam). Like other plaintiffs, pro se third-party plaintiffs bear the burden of establishing the district court's personal jurisdiction. See Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004). Where, as here, the defendant's motion is based on written materials rather than an evidentiary hearing, "the plaintiff need only make a prima facie showing of jurisdictional facts to withstand the motion to dismiss." Brayton Purcell LLP v. Recordon & Recordon, 606 F.3d 1124, 1127 (9th Cir. 2010) (internal quotation marks omitted). The plaintiff cannot "simply rest on the bare allegations of its complaint, ' [but] uncontroverted allegations in the complaint must be taken as true." Schwarzenegger, 374 F.3d at 800 (citation omitted) ( quoting Amba Mktg. Sys., Inc. v. Jobar Int'l, Inc., 551 F.2d 784, 787 (9th Cir. 1977)). The court "may not assume the truth of allegations in a pleading which are contradicted by affidavit, " Data Disc, Inc. v. Sys. Tech. Assocs., Inc., 557 F.2d 1280, 1284 (9th Cir. 1977), but it may resolve factual disputes in the plaintiff's favor, Pebble Beach Co. v. Caddy, 453 F.3d 1151, 1154 (9th Cir. 2006).
A two-part analysis governs whether a court retains personal jurisdiction over a nonresident defendant. "First, the exercise of jurisdiction must satisfy the requirements of the applicable state long-arm statute." Chan v. Soc'y Expeditions, 39 F.3d 1398, 1404 (9th Cir. 1994). Because "Nevada's long-arm statute, NRS § 14.065, reaches the limits of due process set by the United States Constitution, " the Court moves to the second part of the analysis. Baker v. Eighth Judicial Dist. Court ex rel. Cnty. of Clark, 999 P.2d 1020, 1023 (Nev. 2000). "Second, the exercise of jurisdiction must comport with federal due process." Chan, 39 F.3d at 1404-05. "Due process requires that nonresident defendants have certain minimum contacts with the forum state so that the exercise of jurisdiction does not offend traditional notions of fair play and substantial justice." Id. at 1405 ( citing Int'l Shoe v. Washington, 326 U.S. 310, ...