“Preliminary Peek” Reveals Probable Jurisdiction Over Nebraska and Utah Defendants in Nevada, and so No Stay in Real Estate Lead Generator Case

Particularly in the TCPA context, properly managing discovery is critical. A TCPA defendant will often seek and obtain a stay pending the court’s resolution of a dispositive motion. The United States District Court for the District of Nevada recently denied a motion to stay based on its “preliminary peek” of the defendants’ pending dispositive motions. See Edwards v. Juan Martinez, 2:20-cv-00570-JAD-EJY, 2020 U.S. Dist. LEXIS 174114 (D. Nev. Sept. 22, 2020).

In that case, the plaintiff, Nevada resident Paul D.S. Edwards, claimed that he received four unsolicited calls from Century 21. He also alleged that Century 21 obtained his information from Defendant Cole Information Services, a Nebraska company, and Defendant RedX, a Utah company. Mr. Edwards also sued the CEOs of Cole and RedX, Jim Eggleston and Mark Leck, respectively.

In its “preliminary peek,” the Court analyzed–and rejected–the defendants’ jurisdictional arguments. The Court’s thorough opinion includes several useful takeaways, including the reach of specific jurisdiction in the TCPA context, the concept of the “fiduciary shield” doctrine, and the important nexus between merits briefing and managing discovery.

For the first takeaway, Cole Information Services and Mr. Eggleston argued that they could not face suit in Nevada court for calls that they did not make because they were not subject to jurisdiction in Nevada. The Court agreed (preliminarily, at least) that neither Cole Information Services nor Mr. Eggleston should face general jurisdiction in Nevada because neither were “at home” in Nevada. However, the Court carefully analyzed specific jurisdiction and held that both Nebraska defendants could face suit in Nevada for their (alleged) specific TCPA-violations.

Specifically, the Court applied the three-prong “minimum contacts” test that asks whether:

  1. The defendant has performed some act or transaction within the forum or purposefully availed himself of the privileges of conducting activities in the forum;
  2. The plaintiff’s claim arises out of or results from the defendant’s forum-related activities; and
  3. The exercise of jurisdiction is reasonable.

The Court concluded that: (1) Cole Information Services and Mr. Eggleston engaged in “purposeful direction” aimed at Nevada because they engaged in “trade shows ‘conducting promotional activities, exhibiting . . . products, and establishing business relationships'” in Nevada; (2) “but for” these defendants’ purposeful conduct and “sale of databases containing contact information, plaintiff would not have claims”; and (3) “the exercise of jurisdiction is reasonable because it is reasonable to litigate a dispute arising out of the sale of a Nevada resident’s phone number to a Nevada realtor in Nevada federal court.”

The second takeaway arises less often, but is just as useful. Namely, Utah resident Mr. Leck argued that the “fiduciary shield doctrine” and his lack of connection to Nevada should defeat the Court’s exercise of jurisdiction. Like with Cole Information Services and Mr. Eggleston, the Court agreed that Mr. Leck was likely not subject to general jurisdiction in Nevada. But the Court was “unconvinced that an exercise of specific jurisdiction over [Mr.] Leck would violate due process.” The Court explained that while the “fiduciary shield doctrine” did protect a person whose contact with the jurisdiction was limited to “mere association with a corporation,” Mr. Leck oversaw and provided “leadership, direction, and guidance for all the daily business activities” into Nevada. Further, the Court reiterated “that it is reasonable to litigate a dispute arising out of the sale of a Nevada resident’s phone number to a Nevada realtor in Nevada federal court.”

The last takeaway follows from the first two: a defendant’s ability to seek a stay of discovery may turn on the strength of its pending dispositive motions. So, if the underlying motion is a close call, it may make sense to take a different tactic for managing discovery–like seeking bifurcation, for instance.

 

 

 

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