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Ryan v. TEV Corp.

United States District Court, D. Maryland

November 1, 2019

KEVIN D. RYAN Plaintiff,
v.
TEV CORPORATION, et al., Defendants.

          MEMORANDUM OPINION

          Ellen L. Hollander United States District Judge

         In this family feud, plaintiff Kevin Ryan filed suit against defendants TEV Corporation (“TEV”) and his father, T. Anthony Ryan, the sole officer and director of TEV, alleging fraud and conversion. ECF 1 (the “Complaint”).[1] Plaintiff, one of TEV's four shareholders, claims that Mr. Ryan diverted dividends to himself that were owed to plaintiff, and purposely concealed his conduct by conveying false and misleading information to plaintiff and the Internal Revenue Service (“IRS”) with respect to TEV's finances. Id.

         The Complaint contains three counts lodged under Maryland law. Count I, lodged against Mr. Ryan, sets forth a claim for constructive fraud. ECF 1, ¶¶ 24-30. In Count II, plaintiff asserts a conversion claim against Mr. Ryan. Id. ¶¶ 31-37. Count III, raised against both defendants, seeks an “accounting of TEV's assets and finances.” Id. ¶ 44. Jurisdiction is premised on diversity of citizenship under 28 U.S.C. § 1332. Id. ¶¶ 4, 6.

         Defendants have filed a motion to dismiss, pursuant to Fed.R.Civ.P. 12(b)(2), for lack of personal jurisdiction (ECF 15), supported by a memorandum of law. ECF 15-1 (collectively, the “Motion”). Plaintiff opposes the Motion (ECF 16, “Opposition”), supported by the affidavit of Kevin. ECF 16-1. Defendants have replied. ECF 19.

         No hearing is necessary to resolve the Motion. See Local Rule 105.6. For the reasons that follow, I shall deny the Motion.

         I. Factual Background

         Plaintiff is a citizen of Maryland. ECF 1, ¶ 1. Mr. Ryan is a citizen of Florida. Id. ¶ 3. TEV was incorporated under the laws of the state of Rhode Island, but it wound up operations in 2017. Id. ¶¶ 2, 12. On April 17, 2018, the Secretary of State of Rhode Island revoked TEV's “Certificate of Incorporation/Authority to transact business in Rhode Island” due to its failure to maintain a registered office in the state. Id. ¶ 13.

         TEV's “business operations were limited to owning and leasing certain real property . . . .” Id. ¶ 14. TEV, a closely-held corporation, had four shareholders: Mr. Ryan; plaintiff; and plaintiff's siblings, Shane T. Ryan and Christopher A. Ryan. Id. ¶¶ 8, 10, 11. Mr. Ryan owned 19.879 percent of the total outstanding shares of TEV. Id. ¶ 8. Plaintiff and his siblings held the remaining shares, each owning 26.707 percent of TEV. Id. ¶ 10. Plaintiff alleges that TEV was required by its “governing documents” to make annual “distributions to shareholders of profits it earned from its real property (the “Annual Distributions”).” Id. ¶ 14. And, TEV was required “to account properly for the same in IRS tax filings.” Id.

         As noted, Mr. Ryan served as TEV's sole officer and director. Id. ¶ 8. In that capacity, Mr. Ryan owed fiduciary duties to TEV and its shareholders. Id. ¶ 9. However, according to plaintiff, TEV, “acting through Mr. Ryan, failed to make complete and accurate Annual Distributions to Plaintiff[.]” Id. ¶ 17. Instead, Mr. Ryan “caused TEV to disburse funds to himself, which he used for his personal benefit[.]” Id. ¶ 19 (emphasis in original). Further, Mr. Ryan took steps to “conceal from [plaintiff] the actual Annual Distributions owed to him.” Id. ¶ 18. He withheld from plaintiff “complete and accurate information regarding [the Annual Distributions], including, but not limited to, accurate tax information.” Id. ¶ 17. And, according to plaintiff, Mr. Ryan “deliberately provided false and misleading information regarding TEV's finances” to plaintiff and the IRS. Id. ¶ 18.

         On February 26, 2018, plaintiff demanded that defendants produce authenticated copies of TEV's governing documents, financial statements, income tax returns, and all records related to the Annual Distributions made between 2012 and 2018. Id. ¶ 21. However, defendants refused to furnish the requested information. Id. ¶ 22. According to plaintiff, his Annual Distributions “for all years prior to 2016 remain unpaid” and “unaccounted for.” Id. ¶ 23.

         Additional facts are included, infra.

         II. Standard of Review

         Defendants' Motion for lack of personal jurisdiction is predicated on Fed.R.Civ.P. 12(b)(2). ECF 15. “[A] Rule 12(b)(2) challenge raises an issue for the court to resolve, generally as a preliminary matter.” Grayson v. Anderson, 816 F.3d 262, 267 (4th Cir. 2016). Under Rule 12(b)(2), the burden is “on the plaintiff ultimately to prove the existence of a ground for jurisdiction by a preponderance of the evidence.” Combs v. Bakker, 886 F.2d 673, 676 (4th Cir. 1989); see Grayson, 816 F.3d at 267.

         When “the existence of jurisdiction turns on disputed factual questions the court may resolve the [jurisdictional] challenge on the basis of a separate evidentiary hearing, or may defer ruling pending receipt at trial of evidence relevant to the jurisdictional question.” Combs, 886 F.2d at 676. In its discretion, a court may also permit discovery as to the jurisdictional issue. See Mylan Labs., Inc. v. Akzo, N.V., 2 F.3d 56, 64 (4th Cir. 1993). However, neither discovery nor an evidentiary hearing is required in order for the court to resolve a motion under Rule 12(b)(2). See generally 4A Wright & A. Miller, Federal Practice & Procedure § 1351 (4d ed. 2019).

         “The plaintiff's burden in establishing jurisdiction varies according to the posture of a case and the evidence that has been presented to the court.” Grayson, 816 F.3d at 268. “When personal jurisdiction is addressed under Rule 12(b)(2) without an evidentiary hearing, the party asserting jurisdiction has the burden of establishing a prima facie case of jurisdiction.” Hawkins v. i-TV Digitalis Tavkozlesi zrt., 935 F.3d 211, 226 (4th Cir. 2019); see Grayson, 816 F.3d at 268. In that circumstance, “the district court must determine whether the facts proffered by the party asserting jurisdiction-assuming they are true-make out a case of personal jurisdiction over the party challenging jurisdiction.” Hawkins, 935 F.3d at 226; accord Sneha Media & Entm't, LLC. v. Assoc. Broad. Co. P Ltd., 911 F.3d 192, 196 (4th Cir. 2018); Carefirst of Md., Inc. v. Carefirst Pregnancy Ctrs., Inc., 334 F.3d 390, 396 (4th Cir. 2003). However, “[u]nlike under Rule 12(b)(6), the court may also consider affidavits submitted by both parties, although it must resolve all factual disputes and draw all reasonable inferences in favor of the party asserting jurisdiction.” Hawkins, 935 F.3d at 226; see Consulting Eng'rs Corp. v. Geometric Ltd., 561 F.3d 273, 276 (4th Cir. 2009); Grayson, 816 F.3d at 268; Mylan Labs., 2 F.3d at 62.

         Notably, “‘[a] threshold prima facie finding that personal jurisdiction is proper does not finally settle the issue; plaintiff must eventually prove the existence of personal jurisdiction by a preponderance of the evidence, either at trial or at a pretrial evidentiary hearing.'” Wellington Fin. Corp. v. Flagship Resort Dev. Corp., 416 F.3d 290, 294 n.5 (4th Cir. 2005) (citation omitted).

         III. Discussion

         Fed. R. Civ. P. 4(k)(1) permits a federal district court to exercise personal jurisdiction over a defendant in accordance with the law of the state in which the district court is located. Carefirst, 334 F.3d at 396. Therefore, “to assert personal jurisdiction over a nonresident defendant, two conditions must be satisfied: (1) the exercise of jurisdiction must be authorized under the state's long-arm statute; and (2) the exercise of jurisdiction must comport with the due process requirements of the Fourteenth Amendment.” Id.; accord Planet Aid, Inc. v. Reveal, Ctr. for Investigative Reporting, GLR-16-2974, 2017 WL 2778825, at *4 (D. Md. June 26, 2017).

         A. Maryland's Long-Arm Statute

         Maryland's long-arm statute is codified at Md. Code (2013 Repl. Vol., 2017 Supp.), § 6-103(b) of the Courts & Judicial Proceedings Article (“C.J.”). It authorizes “personal jurisdiction over a person, who directly or by an agent, ” id.:

(1) Transacts any business or performs any character of work or service in the State;
(2) Contracts to supply goods, food, services, or manufactured products in the State;
(3) Causes tortious injury in the State by an act or omission in the State;
(4) Causes tortious injury in the State or outside of the State by an act or omission outside the State if he regularly does or solicits business, engages in any other persistent course of conduct in the State or derives substantial revenue from goods, food, ...

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