Exchange Centre, L.L.C. v. Chen

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF LOUISIANA

EXCHANGE CENTRE, LLC CIVIL ACTION

VERSUS No. 20-2532

EDWARD CHEN SECTION: “J”(1)

ORDER AND REASONS

Before the Court are a Motion to Dismiss for Lack of Personal Jurisdiction and

a Motion to Strike (Rec. Doc. 19) filed by Defendant, Edward Chen; an opposition

thereto (Rec. Doc. 20) filed by Plaintiff, Exchange Centre, LLC; and a reply (Rec. Doc.

24) by Chen. Having considered the motions and legal memoranda, the record, and

the applicable law, the Court finds that the motion to dismiss and motion to strike

should be DENIED.

FACTS AND PROCEDURAL HISTORY

Plaintiff, Exchange Centre, L.L.C., owns the commercial office space at 935

Gravier Street, Suite 1000, in New Orleans, Louisiana. On July 12, 2019, Plaintiff,

as lessor, and Tenth Exchange Centre New Orleans, L.L.C. (“Tenth”), as lessee,

executed a lease (the “Lease”) for Suite 1000. Tenth entered into the Lease through

the signature of its registered officer, Chen. In addition, Chen executed a guaranty of

the Lease (the “Guaranty”)1 in his personal capacity, agreeing to guarantee the

performance of Tenth up to a maximum liability of $1,500,000.

1 For the sake of avoiding confusion, the Court will continue to refer to this contract as “the Guaranty” because the

parties and the contract itself refer to it as a guaranty. However, since the contract is governed by Louisiana law, the

On September 1, 2020, Plaintiff sent Chen a Notice of Rent Due as a result of

Tenth’s failure to pay rent. (Rec. Doc. 1-3). On September 17, 2020, Plaintiff filed suit

against Chen in his personal capacity for breach of the Guaranty, arising from his

alleged failure to fulfill the obligation of Tenth to Plaintiff. (Rec. Doc. 1). In the midst

of the COVID-19 crisis, the Clerk of Court issued an entry of default against Chen

due to his failure to file responsive pleadings to the complaint. (Rec. Doc. 9). In

response, Chen filed a motion to set aside the entry of default, explaining that he had

failed to respond because he was under quarantine due to a COVID-19 infection. (Rec.

Doc. 11). The Court subsequently granted the motion and set aside the entry of

default. (Rec. Doc. 16).

On April 19, 2021, Chen filed the instant motion to dismiss for lack of

jurisdiction, arguing that he does not have minimum contacts with Louisiana, and

thus, this Court lacks jurisdiction over Chen. (Rec. Doc. 19). Chen also filed a motion

to strike, arguing that Plaintiff’s complaint lacks a signature. (Id.). In its opposition,

Plaintiff argues that: (1) Chen waived his ability to challenge this Court’s lack of

jurisdiction, (2) this Court has personal jurisdiction over Chen, and (3) the motion to

strike should be denied. (Rec. Doc. 20).

LEGAL STANDARD

Rule 12(b)(2) of the Federal Rules of Civil Procedure permits dismissal of a suit

for lack of personal jurisdiction. “Where a defendant challenges personal jurisdiction,

the party seeking to invoke the power of the court bears the burden of proving that

contract should be referred to as a suretyship, and Chen, the guarantor, should be referred to as the surety. LA. CIV.

CODE art. 3035.

jurisdiction exists.” Luv N'Care, Ltd. v. Insta-Mix, Inc., 438 F.3d 465, 469 (5th Cir.

2006). However, the plaintiff is not required to establish jurisdiction by a

preponderance of the evidence; a prima facie showing is sufficient. Id. The court

must accept the plaintiff’s uncontroverted allegations and resolve all conflicts

between the facts contained in the parties’ affidavits and other documentation in

favor of jurisdiction. Id.

A federal court sitting in diversity must satisfy two requirements to exercise

personal jurisdiction over a nonresident defendant. Pervasive Software Inc. v.

Lexware GmbH & Co. KG, 688 F.3d 214, 220 (5th Cir. 2012). “First, the forum state’s

long-arm statute must confer personal jurisdiction. Second, the exercise of

jurisdiction must not exceed the boundaries of the Due Process Clause of the

Fourteenth Amendment.” Id. The limits of the Louisiana long-arm statute are

coextensive with constitutional due process limits. Jackson v. Tanfoglio Giuseppe,

SRL, 615 F.3d 579, 584 (5th Cir. 2010). Accordingly, the inquiry here is whether

jurisdiction comports with federal constitutional guarantees. See id.

The Due Process Clause of the Fourteenth Amendment guarantees that no

federal court may assume personal jurisdiction of a non-resident defendant unless

the defendant has certain “minimum contacts with [the forum state] such that the

maintenance of the suit does not offend ‘traditional notions of fair play and

substantial justice.’” Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (citation

omitted). The Supreme Court has recognized two types of personal jurisdiction:

specific and general. Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773,

1779-80 (2017).2

Specific jurisdiction is limited to “adjudication of issues deriving from, or

connected with, the very controversy that establishes jurisdiction.” Goodyear Dunlop

Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011) (internal quotation marks

and citation omitted). To establish specific jurisdiction, a plaintiff must show that “(1)

there are sufficient (i.e., not random fortuitous or attenuated) pre-litigation

connections between the non-resident defendant and the forum; (2) the connection

has been purposefully established by the defendant; and (3) the plaintiff’s cause of

action arises out of or is related to the defendant’s forum contacts.” Pervasive

Software, 688 F.3d at 221 (internal quotation marks and citation omitted). The

defendant can then defeat the exercise of specific jurisdiction by showing that it would

be unreasonable. Id. at 221-22.

DISCUSSION

I. WHETHER CHEN WAIVED HIS ABILITY TO CHALLENGE PERSONAL

JURISDICTION

Plaintiff argues that Chen waived his ability to challenge personal jurisdiction

by filing three motions prior to the instant motion to dismiss for lack of jurisdiction.

Rule 12(g) provides that “a party that makes a motion under this rule must not make

another motion under this rule raising a defense or objection that was available to

the party but omitted from its earlier motion.” Fed. R. Civ. P. 12(g)(2). Further, Rule

2 Plaintiff does not attempt to argue that the Court possesses personal jurisdiction over Chen based on general

jurisdiction. Indeed, the theory of general personal jurisdiction is so clearly inapplicable here that it warrants no further

discussion.

12(h) provides that a party may also waive “any defense listed in Rule 12(b)(2)-(5) by

... failing to either: (i) make it by motion under this rule; or (ii) include it in a

responsive pleading.” Fed. R. Civ. P. 12(h)(1)(B). Thus, the plain language of Rule 12

provides that the defense of lack of personal jurisdiction is waived where a party files

a Rule 12 motion or responsive pleading but fails to assert it, or where a party fails

to file a Rule 12 motion at all. Mississippi ex rel. Hood v. Entergy Miss., Inc., No. 3:08-

CV-780, 2017 WL 2973998, at *1 (S.D. Miss. July 11, 2017); cf. Alliantgroup, L.P. v.

Feingold, No. H-09-0479, 2009 WL 1109093, at *6 (S.D. Tex. Apr. 24, 2009)

(“[Defendant's] motion for extension of time to answer is not a responsive pleading

and his failure to object to jurisdiction in that motion did not waive his objection to a

lack of personal jurisdiction.”).

The first motion filed by Chen was an unopposed motion to continue the

submission date (Rec. Doc. 12) for Plaintiff’s motion for default judgment. The third

motion was a joint motion to set deadlines to file responsive pleadings (Rec. Doc. 17),

which was filed after the Court set aside the entry of default. The case law is quite

clear that Chen’s filing of these non-substantive motions did not waive his ability to

object to personal jurisdiction.3

3 See, e.g., Chemguard, Inc. v. Dynax Corp., 2010 U.S. Dist. LEXIS 146251 (N.D. Tex. February 2, 2010) (finding

that the filing of three motions for extension of time to answer or otherwise respond to complaint did not constitute a

waiver of the right to object to personal jurisdiction); United States v. 51 Pieces of Real Property, Roswell, N.M., 17

F.3d 1306, 1314 (10th Cir. 1994) (concluding that a party’s motion for extension of time to file a claim in a

forfeiture action did not constitute a “defensive move” that waived his personal-jurisdiction defense); Alliantgroup,

L.P. v. Feingold, 2009 U.S. Dist. LEXIS 34730 (S.D. Tex. April 24, 2009) (defendant’s post-removal “motion for

extension of time to answer is not a responsive pleading and his failure to object to jurisdiction in that motion did

not waive his objection to a lack of personal jurisdiction”); S&D Trading Acad., LLC v. AAFIS, Inc., 2007 U.S. Dist.

LEXIS 79839 (S.D. Tex. October 26, 2007) (“A motion to extend the time to answer is neither a Rule 12 motion nor

an answer, and it does not therefore cause the moving party to waive objections to personal jurisdiction under the

rubric of Rule 12.”).

The only other motion filed by Chen prior to the instant motion was his motion

to set aside the entry of default. (Rec. Doc. 11). Plaintiff argues that Chen waived his

right to challenge personal jurisdiction by making substantive arguments in that

motion; however, in his memorandum in support of that motion, Chen stated that he

“reserves the right to explore whether this Court has personal jurisdiction over him

and to bring such jurisdictional challenge.” (Rec. Doc. 11-1 at p. 8). Thus, it is clear

that Chen was contemplating bringing a motion to challenge personal jurisdiction.

Further, Chen has not filed a responsive pleading or any Rule 12 motions prior to the

instant motion. See Fed. R. Civ. P. 12(h)(1)(B). Accordingly, the Court finds that Chen

has not waived his right to challenge this Court’s exercise of personal jurisdiction.

II. WHETHER THE COURT HAS PERSONAL JURISDICTION OVER CHEN

A. Whether Chen’s Activities Constitute Minimum Contacts

Next, the Court must decide whether it has personal jurisdiction over Chen. In

order for this Court to assert personal jurisdiction over Chen, Plaintiff must establish

that Chen’s contacts with Louisiana are sufficient to establish personal jurisdiction.

“A non-resident can establish contact with the forum [state] by taking

purposeful and affirmative action, the effect of which is to cause business activity

(foreseeable by the defendant) in the forum state.” Central Freight Lines, Inc. v. APA

Transp. Corp., 322 F.3d 376, 382 (5th Cir. 2003). The business activity is “foreseeable

by the defendant” if the forum state is “clearly the hub of the parties’ activities.”

Moncrief Oil. Intern. Inc. v. OAO Gazprom, 481 F.3d 309, 313 (5th. Cir. 2007). The

most important consideration in determining the “hub of the parties’ activities” is

where the work contemplated by the contract is to be done. Id.

Here, Chen took purposeful and affirmative action by initiating and conducting

negotiations with Plaintiff that he intended to result in: (1) Tenth obtaining an office

lease in Louisiana, and (2) his guaranteeing of that lease. The only significant activity

surrounding these contracts involved the lease of an office in Louisiana. Although

Chen was acting as an agent of Tenth when he signed the Lease, he signed the

Guaranty in his personal capacity. The Guaranty is the source of Chen’s contacts with

Louisiana, and, under the terms of the Guaranty, it was foreseeable that Chen would

be haled into court in Louisiana if Tenth breached its obligations under the Lease.

Additionally, the Lease contains a choice-of-law clause favoring the application of

Louisiana law, which is incorporated by reference into the Guaranty. (Rec. Doc. 1-2

at pp. 25, 39). Thus, Chen was acutely aware of the possibility of being haled into

court in Louisiana. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 481-82 (1985)

(Choice of law provisions are entitled to some weight in considering whether a

defendant has purposefully invoked the benefits and protections of a state's laws for

jurisdictional purposes).

In support of his argument that this Court lacks jurisdiction over him, Chen

primarily relies upon NBD Bank v. Kersey, No. CIV. A. 99-1851, 2000 WL 64307, at

*5 (E.D. La. Jan. 25, 2000) (Schwarz, J.). In that case, the court found that “contacts”

with Louisiana by defendant guarantors, who had negotiated with the non-resident

plaintiff, were insufficient to establish jurisdiction through actions taken in their

capacities as agents of a non-party corporation. Defendants correctly note; however,

that NBD Bank is easily distinguishable from the facts of the present case because:

(1) Plaintiff is a Louisiana LLC that is domiciled in Louisiana and has its principal

place of business in Louisiana; (2) Chen executed the Guarantee with that Louisiana

LLC; and (3) the Guaranty incorporates a choice-of-law clause favoring the

application of Louisiana law. (Rec. Doc. 20 at p. 9).

In its opposition, Plaintiff cites Ochsner Clinic Foundation v. Nicholas,

wherein the court distinguished NBD Bank and stated that the plaintiff’s reliance

thereon was misplaced because NBD Bank involved a dispute between two non-

residents, whereas the plaintiff in that case was a resident business. CIV.A. 06-

10542, 2007 WL 2088383, at *3, n.2 (E.D. La. July 20, 2007) (Fallon, J.). The court

also placed much emphasis on the fact that the defendant purposely established

minimum contacts with the forum state by contracting for a continuing obligation

with a resident business. Id. at *3.

In the instant case, multiple facts weigh in favor of this Court’s exercise of

jurisdiction. First, Chen purposely availed himself of Louisiana law by entering into

a continuing obligation in his personal capacity with a Louisiana business (the

Guaranty, not the Lease). Second, the Guaranty incorporates a choice-of-law clause

applying Louisiana law by reference. Third, Tenth, the lessee covered by the

Guaranty, was a Louisiana business. Finally, the property secured by the Guaranty

was an immovable located in Louisiana. For the above reasons, the Court finds that

Chen has sufficient contacts with Louisiana for this Court to exercise jurisdiction.

B. Whether Plaintiff’s Claim Arises Out of or Relates to Chen’s Contacts

The Court must next determine whether this cause of action arises out of or

relates to his contacts with Louisiana. See Pervasive Software, 668 F.3d at 221.

Plaintiff brought this action in response to Chen’s breach of the Guaranty, which

secured the Lease between Plaintiff and Tenth. Chen argues that this action arises

out of Tenth’s alleged failure to fulfill its obligations, not his own. In its complaint,

Plaintiff alleges that Tenth failed to pay rent beginning in September 2019, and, as

of September 1, 2020, Tenth owed Plaintiff $92,578.58 in rent, late fees, default

interest, and attorneys’ fees. (Rec. Doc. 1, at pp. 3-4). Under the terms of the

Guaranty, Chen is liable to Plaintiff for Tenth’s failure to pay rent, without the

necessity of Plaintiff proceeding against Tenth or providing Chen with notice or

demand, although such notice was provided on September 1, 2020. (Rec. Doc. 1-2 at

p. 39). Thus, this action arises out of Chen’s alleged breach of the Guaranty because

he failed to fulfill his own obligations to Plaintiff.

C. Whether this Court’s Exercise of Jurisdiction over Chen would be Fair

or Reasonable

Since Plaintiff has established a prima facie case that Chen has minimum

contacts with Louisiana, the burden shifts to Chen to show that the exercise of

jurisdiction would be unreasonable such that it would violate traditional notions of

fair play and substantial justice. Luv N’ Care, 438 F.3d at 473. Chen made no

attempts to argue that the Court’s exercise of jurisdiction would be unreasonable in

this case. Therefore, the Court finds Chen has failed to meet its burden to show that

this Court’s exercise of personal jurisdiction would be unreasonable. See Pervasive

Software, 688 F.3d at 221-22. Accordingly, the Court may exercise personal

jurisdiction over Chen.

III. DEFENDANT’S MOTION TO STRIKE

Chen also filed a motion to strike, arguing that Plaintiff’s unsigned complaint

should be stricken from the record. Rule 11 requires that "every pleading, written

motion, and other paper must be signed by at least one attorney of record in the

attorney's name." Fed. R. Civ. P. 11(a). Courts "must strike an unsigned paper unless

the omission is promptly corrected" after the attorney is notified. Id.; see also

Hernandez v. Siemens Corp., 726 F. App'x 267, 269 (5th Cir. 2018). Plaintiff was

notified by the Court that his complaint was unsigned; however, the Clerk of Court

also notified Plaintiff that no corrective action was necessary. (Rec. Doc. 4).

Despite the confusion regarding Plaintiff’s “unsigned” complaint, Plaintiff’s

complaint is not deficient. Rule 5(d)(3)(C) states that any authorized filing made

through an e-filing account, together with that person’s name in the signature block,

constitutes that person’s signature. Fed. R. Civ. P. 5(d)(3)(C). Since this complaint

was filed through the Court’s e-filing system by Plaintiff’s counsel of record, Tyler

Arbour, and he presumably authorized the filing of the complaint, his name on the

signature block constitutes his signature. Therefore, Plaintiff’s motion to strike

should be denied because the complaint is treated as signed under Rule 5(d)(3)(C).

CONCLUSION

Accordingly,

IT IS HEREBY ORDERED that Edward Chen’s Motion to Dismiss for Lack

of Personal Jurisdiction and Motion to Strike (Rec. Doc. 19) are DENIED.

New Orleans, Louisiana, this 15th day of June, 2021.

OAK Sadue

SARL J.B fips

UNITED STAYSES DISTRICT JUDGE

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