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Jia v. Boardwalk Fresh Burgers & Fries, Inc.

United States District Court, S.D. Ohio, Western Division

September 6, 2019

Chunhong Jia, et al., Plaintiffs,
v.
Boardwalk Fresh Burgers & Fries, Inc., et al., Defendants.

          OPINION & ORDER

          MICHAEL R. BARRETT JUDGE

         This matter is before the Court upon Defendants' Motion to Dismiss for Lack of Personal Jurisdiction and Failure to State a Claim. (Doc. 14). Plaintiffs have filed a Response in Opposition (Doc. 16) and Defendants filed a Reply (Doc. 19). Also before the Court is Defendants' Motion to Stay Discovery Pending Resolution of Motion to Dismiss. (Doc. 20).

         I. BACKGROUND

         This matter is related to another case filed before this Court: Chunhong Jia, et al., v. Gary Chan, et al., No. 1:18-cv-00085-MRB (S.D. Ohio). Defendants Boardwalk Fresh Burgers & Fries, Inc. (“BFBF”) and David DiFerdinando are not parties to that case. Both cases stem from alleged fraudulent scheme perpetrated by Gary Chan, Terry Chan, and Jacquelyn Chan (“the Chans”) and businesses controlled by the Chans. The Chans are not parties to this case.

         Defendant DiFerdinando is a citizen and resident of the State of Florida. (Doc. 10, ¶ 3). DiFerdinando is the president of BFBF. (Id.) BFBF is a Delaware corporation with its principal place of business in Columbia, Maryland. (Id. ¶ 2). BFBF is a franchisor of fast casual restaurants. (Doc. 18-1, David DiFerdinando Dep. at 17, 25).

         In 2013, DiFermando was introduced to Terry Chan by a mutual friend. (Doc. 10, ¶ 15). Defendants began collaborating on the development of several BFBF franchises in Ohio. (Id.) Terry Chan explained that the franchises would be marketed to EB-5 investors. (DiFerdinando Dep. at 42). The EB-5 program allows such investors to gain lawful residency in the United States. (Doc. 10, ¶¶ 1, 11). BFBF entered into a development agent agreement (“Development Agreement”) with Jardin Hill, LLC, an entity controlled by the Chans. (Id. ¶¶ 15-16, 70). (DiFerdinando Dep. at 35-36). Jardin Hill agreed to pay $300, 000 to BFBF in exchange for the exclusive right to market BFBF franchisees in southern Ohio, plus an additional $30, 000 for a franchise to be operated by Jardin Hill. (Doc. 18-1, DiFerdinando Dep. at 34-35).

         According to the Amended Complaint, Defendants and the Chans agreed to create Boardwalk Fries Opportunities, L.P. (“BWF OPP”), an Ohio limited partnership that would market the franchises; BWF MGMT, LLC (“BWF MGMT”), an Ohio limited liability company that would act as BWF OPP's general partner; and Boardwalk Fries, LLC (“Boardwalk LLC”), an Ohio limited liability company that would control BWF MGMT. (Doc. 10, ¶¶ 2, 16, 33). The Chans and DiFerdinando signed an Operations Management Agreement on behalf of Boardwalk LLC. (Doc. 10, ¶ 21). Under the Operations Management Agreement, BWF MGMT was to perform certain duties for BWF OPP, including providing executive and strategic oversight, restaurant staff training, assistance in meeting the EB-5 program requirements, and providing information regarding BWBF franchises. (Doc. 10, ¶ 22). Defendants agreed that the first BWF OPP restaurant would be opened in Cincinnati. (Doc. 10, ¶ 20).

         Plaintiffs are citizens and residents of the People's Republic of China. (Doc. 10, ¶ 1). Plaintiffs allege that Defendants, conspiring with the Chans, used the EB-5 program to lure each Plaintiff into investing $500, 000 in BWF OPP as part of a development project that was supposed to develop BWBF restaurant locations in the Cincinnati and Dayton. (Doc. 10, ¶ 14). Instead of investing these funds, Plaintiffs claims that Gary Chan transferred $500, 000 from each Plaintiffs' escrow account in October 2015, and misappropriated these funds. (Doc. 10, ¶¶ 14, 66-67). Even though DiFerdinando came to Cincinnati to tour the market and scout locations for Ohio BWBF restaurants, a BFBF franchise was never opened in Ohio. (Doc. 10, ¶¶ 73, 74).

         In their Amended Complaint, Plaintiffs bring claims for breach of contract, unjust enrichment/quantum meruit, gross negligence, breach of fiduciary duty, conversion, fraud, conspiracy, piercing the corporate veil, and punitive damages. Defendants move to dismiss the Amended Complaint pursuant to Federal Rule of Civil Procedure Rule 12(b)(2) based on lack of personal jurisdiction; and alternatively, Defendants move to dismiss the Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) because the Amended Complaint fails to state a claim for relief.

         II. ANALYSIS

         Federal Rule of Civil Procedure 12(b)(2) provides that a defendant may seek dismissal if the court lacks personal jurisdiction over that defendant. “The party seeking to assert personal jurisdiction bears the burden of demonstrating that such jurisdiction exists.” Schneider v. Hardesty, 669 F.3d 693, 697 (6th Cir. 2012) (quoting Bird v. Parsons, 289 F.3d 865, 871 (6th Cir. 2002)). In the face of a supported motion to dismiss, the plaintiff may not rest on his pleadings, but must, by affidavit or otherwise, set forth specific evidence supporting jurisdiction. Theunissen v. Matthews, 935 F.2d 1454, 1458 (6th Cir. 1991) (citing Weller v. Cromwell Oil Co., 504 F.2d 927, 930 (6th Cir. 1974)). When a court considers a motion to dismiss pursuant to Rule 12(b)(2) without an evidentiary hearing, as this Court does here, the plaintiff “‘need only make a prima facie showing of jurisdiction.'” Bird v. Parsons, 289 F.3d 865, 871 (6th Cir. 2002) (quoting Neogen, 282 F.3d at 887) (internal citation omitted).

         “Under Ohio law, personal jurisdiction over non-resident defendants is available only if (1) the long-arm statute confers jurisdiction and (2) jurisdiction is proper under the Federal Due Process Clause.” Conn v. Zakharov, 667 F.3d 705, 712 (6th Cir. 2012) (citing Kauffman Racing Equip., L.L.C. v. Roberts, 126 Ohio St.3d 81, 930 N.E.2d 784, 790 (2010); Goldstein v. Christiansen, 70 Ohio St.3d 232, 638 N.E.2d 541, 543 (1994)).

         Under Ohio's long-arm statute, a court “may exercise personal jurisdiction over a person who acts directly or by an agent, as to a cause ...


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