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Rote v. Leapfrog Online Customer Acquisition, LLC

United States District Court, D. Oregon

March 3, 2017

TIMOTHY C. ROTE, Plaintiff,
v.
LEAPFROG ONLINE CUSTOMER ACQUISITION, LLC, and DOES 1 THROUGH 5, Defendants.

          FINDINGS AND RECOMMENDATION

          Honorable Paul Papak United States Magistrate Judge

         Plaintiff pro se Timothy C. Rote (a citizen of Oregon) filed this action against defendant Leapfrog Online Customer Acquisition, LLC ("Leapfrog") (a limited liability corporation organized under Delaware law and headquartered in Illinois), and five Doe defendants (each alleged to be a citizen of a state other than Oregon) on July 15, 2016. By and through his complaint, Rote alleges that at all material times he was a "secured lender" of Northwest Direct Marketing, Inc. ("NDM"), that NDM and Leapfrog were parties to an agreement pursuant to which NDM agreed to provide Leapfrog with "inbound and outbound telemarketing services" and Leapfrog agreed to pay NDM for those services, that Leapfrog breached its payment obligations to NDM, and that Rote "has foreclosed on the Accounts Receivable of NDM for the purpose of collecting said receivables and paying the secured lenders... their balances owed and to .return the balance for the benefit of the unsecured creditors of NDM." Arising out of the foregoing, Rote alleges Leapfrog's liability to him under Oregon law for breach of its contract with NDM, Rote seeks award of compensatory damages in the amount of $1, 080, 679.81 plus interest. It is Rote's position that this court may properly exercise diversity jurisdiction over his cause of action pursuant to 28 U.S.C. § 1332, based on the purported complete diversity of the parties and the amount in controversy.

         Now before the court is Leapfrog's motion (#12) to dismiss Rote's cause of action for lack of federal subject-matter jurisdiction. I have considered the motion and all of the pleadings and papers on file. For the reasons set forth below, Leapfrog's motion to dismiss should be granted, and Rote's action should be dismissed without prejudice for lack of subject-matter jurisdiction.

         LEGAL STANDARD

         The federal courts are courts of limited jurisdiction. See, e.g., Exxon Mobil Corp. v. Allapattah Servs., 545 U.S. 546, 552 (2005), citing Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 377 (1994). As such, the courts presume that causes of action "lie[] outside this limited jurisdiction, and the burden of establishing the contrary rests upon the party asserting jurisdiction." Kokkonen, 511 U.S. at 377; see also, e.g., Vacek v. United States Postal Serv., 447 F.3d 1248, 1250 (9th Cir. 2006).

         A motion under Federal Civil Procedure Rule 12(b)(1) to dismiss for lack of subject-matter jurisdiction may be either "facial" or "factual." See Safe Air v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004), citing White v. Lee, 227 F.3d 1214, 1242 (9th Cir. 2000). In a facial attack on subject-matter jurisdiction, the moving party asserts that a plaintiffs allegations are insufficient on their face to invoke federal jurisdiction, whereas in a factual attack, the moving party disputes the factual allegations that, if true, would give rise to subject-matter jurisdiction. Where a defendant raises a facial challenge to subject-matter jurisdiction, the factual allegations of the complaint are presumed to be true, and the motion may be granted only if the plaintiff fails to allege an element necessary for subject matter jurisdiction. See Savage v. Glendale Union High Sck, 343 F.3d 1036, 1039 n.l (9th Cir. 2003). By contrast, where a defendant raises a factual challenge to federal jurisdiction, "the district court may review evidence beyond the complaint without converting the motion to dismiss into a motion for summary judgment, " Safe Air v. Meyer, 373 F.3d at 1039, citing Savage, 343 F.3d at 1040 n.2, and "need not presume the truthfulness of the plaintiffs allegations, " id, citing White, 227 F.3d at 1242.

         "Defective allegations of jurisdiction may be amended, upon terms, in trial or appellate courts." 28 U.S.C. § 1653. It is improper to dismiss an action based on a defective allegation of jurisdiction without leave to amend "unless it is clear, upon de novo review, that the complaint could not be saved by amendment." Snell v. Cleveland, Inc., 316 F.3d 822, 828 n.6 (9th Cir. 2002), citing Lee v. City of Los Angeles, 250 F.3d 668, 692 (9th Cir. 2001).

         FACTUAL BACKGROUND

         I. The Parties

         Plaintiff Rote is an individual citizen of Oregon. At all material times, Rote was the president, secretary, and registered agent of NDM. At all material times, NDM was organized under Oregon law and headquartered in Oregon.

         Defendant Leapfrog is a limited liability corporation organized under Delaware law and headquartered in Illinois. Leapfrog has filed a disclosure statement (#11) asserting that "at least one" (unspecified) Oregon citizen is a limited partner of an (unspecified) limited partnership entity with ownership interests in two additional (unspecified) limited partnership entities, each of which has an ownership interest in third-party Leapfrog Online Direct Response, LLC ("LODR"), which is the 100% owner of Leapfrog, hi addition, Leapfrog has proffered in support of its motion the Declaration (#13) of Scott Epskamp ("Epskamp Decl") to the same effect as its disclosure statement.

         Although Rote alleges that the Doe defendants are citizens of states other than Oregon, he does not otherwise refer to them in his complaint, allege any conduct attributable to them, or suggest that any of them played any direct or indirect role in the complained-of conduct.

         II. Rote's Allegations Regarding the Parties' Dispute [1]

         On December 15, 2011, Leapfrog and NDM "entered into a contract for inbound and outbound telemarketing services. Complaint, ¶ 9. NDM provided such services to Leapfrog from a call center located in Beaverton, Oregon. See id, ¶ 10. In approximately April 2013, Leapfrog directed NDM to cease providing it with telemarketing services, and began relying on a new strategic partner to obtain such services. See id., ¶¶ 11-12. Rote advised Leapfrog at approximately that time that pursuant to the agreement between Leapfrog and NDM, Leapfrog was not entitled to terminate its agreement with NDM without first complying with a contractual provision calling for gradual "ramp down of the contract volume." Id., ¶ 13. Leapfrog nevertheless ceased doing business with NDM without first gradually ramping down the volume of services it required NDM to perform. See id., ¶¶ 13. At some subsequent time, Rote "foreclosed on the Accounts Receivable of NDM for the purpose of collecting said receivables and paying the secured lenders, Wells Fargo and Rote, their balances owed and to return the balance for the benefit of the unsecured creditors." Id., ΒΆ ...


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