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Forret v. Davis

United States District Court, E.D. Wisconsin

December 19, 2017

JAMES G. FORRET, Plaintiff,
JAMES L. DAVIS, Defendant.



         1. INTRODUCTION

         This action was originally filed in Waukesha County Circuit Court, and was removed to this Court on October 20, 2017. (Docket #1). According to his Complaint, Plaintiff loaned money to Defendant's start-up business, with Defendant personally guaranteeing the investment. When Plaintiff called in the loan, Defendant refused to pay, leading to Plaintiff filing this breach of contract action. Defendant maintains that this Court lacks personal jurisdiction over him, as he is a Minnesota resident. Defendant filed a motion to dismiss on that ground on October 27, 2017. (Docket #4). That motion is now fully briefed. (Response, Docket #11; Reply, Docket #14). For the reasons explained below, the motion must be granted.

         2. LEGAL STANDARD

         Under Federal Rule of Civil Procedure 12(b)(2), a party may move to dismiss on the ground that the court lacks jurisdiction over him. Fed.R.Civ.P. 12(b)(2). The plaintiff bears the burden of establishing personal jurisdiction when the defendant contests it. N. Grain Mktg., LLC v. Greving, 743 F.3d 487, 491 (7th Cir. 2014). However, in cases such as this one, where the matter is decided on a motion to dismiss and without an evidentiary hearing, the plaintiff “‘need only make out a prima facie case of personal jurisdiction.'” Id. (quoting Hyatt Int'l Corp. v. Coco, 302 F.3d 707, 713 (7th Cir. 2002)).

         Unlike some other challenges to a plaintiff's complaint, when questions of personal jurisdiction arise, the Court may consider affidavits and other evidence outside the pleadings. Purdue Research Found. v. Sanofi-Synthelabo, S.A., 338 F.3d 773, 782 (7th Cir. 2003). Indeed, it can “accept as true any facts contained in the defendant's affidavits that remain unrefuted by the plaintiff.” GCIU-Employer Ret. Fund v. Goldfarb Corp., 565 F.3d 1018, 1020 n.1 (7th Cir. 2009). Nevertheless, the court will “accept as true all well-pleaded facts alleged in the complaint and resolve any factual disputes in the affidavits in favor of the plaintiff.” Purdue, 338 F.3d at 782; Felland v. Clifton, 682 F.3d 665, 672 (7th Cir. 2012).

         3. RELEVANT FACTS

         The operative facts, drawn from Plaintiff's Complaint, the exhibits thereto, and the parties' affidavits, are as follows.[1] Plaintiff is a citizen of Wisconsin, while Defendant is a citizen of Minnesota. Both parties are successful businessmen, each with substantial personal net worth, who attained their wealth in the manufacture and distribution of lighting fixtures. The parties have known each other for forty years through their work in this field. As part of this relationship, Defendant knew that Plaintiff lived and worked in Wisconsin. Defendant does not live, work, or own property in Wisconsin. He does not have a business office or advertise any services here.

         At some point, Defendant created a company called Cachet Financial Solutions, Inc. (“Cachet”). Defendant is on the board of Cachet and, owning 22% of its common stock, is its single largest shareholder. Cachet is a Minnesota company with its principal place of business in Chanhassen, Minnesota (a suburb of Minneapolis). While he is a board member for Cachet, he does not actually perform any services for the company.

         In 2012, Cachet was in need of $3 million in debt financing. At that time, during conversations relating to the lighting business, Defendant casually mentioned to Plaintiff the possibility of investing in Cachet. Defendant solicited a $100, 000 investment from Plaintiff during those conversations. Plaintiff was reluctant to invest because it seemed like a risky venture and he was nearing retirement. Defendant ultimately convinced Plaintiff by offering him a personal, written guarantee that he would repay the loan if Cachet could not (the “Guarantee”). The Guarantee provided that if Cachet could not repay the loan by January 15, 2015, Defendant would do so. Defendant executed the Guarantee in Minnesota. Upon receipt of the written Guarantee, Plaintiff made the $100, 000 payment to Cachet from his home in Wisconsin.[2]

         In late 2013, Cachet asked Plaintiff to convert his loan into Cachet stock. Plaintiff was reluctant to convert his loan into stock, but Defendant persuaded him by offering to amend the Guarantee (the “Amendment”). According to the Amendment, Plaintiff agreed to convert his loan into Cachet stock. The conversion contemplated by the Amendment occurred while Plaintiff was located in Wisconsin. If Plaintiff's stock was worth less than $100, 000 as of March 15, 2015, Defendant would nevertheless be obligated to pay that amount to Plaintiff to buy his shares. Like the Guarantee, the Amendment was signed in Minnesota. When the time came, Plaintiff's stock was only worth about $21, 000. Plaintiff demanded the full $100, 000 price from Cachet, but it would not redeem his shares. Plaintiff then turned to Defendant and his Guarantee, but he too refused to pay.[3]

         Plaintiff and Defendant exchanged an unspecified number of e-mails relating to the Cachet investment. From 2013 to the filing of this lawsuit, Plaintiff has had communications with Defendant about Cachet and recoupment of Plaintiff's investment. In 2017, Defendant attempted to arrange repayment through Cachet but Plaintiff never received the money.

         Plaintiff asserts one claim against Defendant-breach of contract. Plaintiff alleges that he performed his obligations under both the Guarantee and the Amendment, by making the initial loan, and by converting his loan into Cachet stock. Defendant, however, failed to abide by those agreements when he would not repay the loan to Plaintiff after March 15, 2015.

         4. ...

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