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LLC v. Singh

United States District Court, D. Minnesota

July 3, 2019

Patrick's Restaurant, LLC, Plaintiff,
v.
Sujit Kumar Singh, Defendant.

          Edward P. Sheu, Best & Flanagan LLP, Minneapolis, MN, for Plaintiff Patrick's Restaurant, LLC.

          John A. Kvinge, Larkin Hoffman Daly & Lindgren, Ltd., Minneapolis, MN, for Defendant Sujit Kumar Singh.

          OPINION AND ORDER

          Eric C. Tostrud United States District Judge

         This is a breach-of-contract case. Patrick's Restaurant, a Minnesota citizen, alleges that Sujit Kumar Singh, a citizen of India, agreed to invest $1.3 million in Patrick's in consideration for part ownership of the business but then paid nothing and walked away. Patrick's seeks recovery of an amount close to the $1.3 million it alleges Singh contracted to invest, plus consequential and incidental damages. Singh has moved under Federal Rule of Civil Procedure 12(b)(2) to dismiss the case for lack of personal jurisdiction. Alternatively, he has moved under Rule 12(b)(6) to dismiss Patrick's complaint for failing to state a claim upon which relief may be granted. Both motions will be denied. Patrick's has demonstrated that Singh's contract-related contacts with Minnesota coalesce to form a prima facie showing of personal jurisdiction, and Patrick's pleads a prima facie case on the merits.

         I

         The facts leading up to this litigation span approximately eight months and two continents, and they begin in August 2017. That month, Singh, a citizen and resident of India, “approached” Patrick Bernet “for the exclusive opportunity to invest in Mr. Bernet's Patrick's Restaurant, Inc.” Am. Compl. ¶¶ 3, 7 [ECF No. 27]. Bernet operates several “Patrick's Group” restaurants in Minnesota, and today he is the sole member and owner of Patrick's Restaurant, LLC. Id. ¶ 2; Id. Ex. 1 [ECF No. 27-1]. Singh engaged a Minnesota-based agent, Saul Mashaal, [1] to broker his investment. Am. Compl. ¶ 8.

         Patrick's alleges that this investment was “part of [Singh's] plan to emigrate to the United States through the Immigrant Investor Visa Program.” Id. ¶¶ 7, 9. Under the Immigrant Investor Visa Program, “a foreign entrepreneur who makes a capital investment in the United States can receive a permanent [EB-5] U.S. visa. . . . [and] the entrepreneur and his dependent family members are eligible for conditional permanent residency in the United States.” Vieira v. Korda, Civ. No. 2:17-cv-160-jmc, 2018 WL 2122825, at *2 (D. Vt. May 8, 2018); see also 8 U.S.C. § 1153(b)(5). This “EB-5 visa” is so named because it is the fifth-preference visa among the employment-based visas. See U.S. Citizenship & Immigration Servs., EB-5 Immigrant Investor Program, https://www.uscis.gov/eb-5 (last visited July 2, 2019). Patrick's alleges that Singh intended to immigrate to the United States though he does not allege specifically whether Singh planned to reside in Minnesota. See Am. Compl. ¶ 9.

         Patrick's counsel, at Singh's request, drafted an “Investment Opportunity offering” that contemplated a $3.5 million investment in improving four “Patrick's Group” restaurant divisions in exchange for a 40% ownership interest in the business. Id. ¶ 10; id. Ex. 1 at 1 (“The businesses now operating as Patrick's Group now [sic] has 4 different divisions, . . . which would be merged into a limited liability company . . . .”). Singh rejected this initial offering because it required a greater investment than would be necessary for Singh to be eligible for an EB-5 visa. Am. Compl. ¶ 11; see 8 U.S.C. § 1153(b)(5)(C) (requiring an investment of at least $1 million). Counsel for Patrick's then prepared a revised offering that contemplated a $1.3 million investment in consideration for a 40% ownership interest in one Patrick's location, “Patrick's Restaurant at Arbor Lakes.” Am. Compl. ¶ 11; id. Ex. 2 at 1 [ECF No. 27-1]. This document further contemplated that Singh's investment would be used to expand Patrick's Restaurant at Arbor Lakes “into adjacent space for a private Event Center, with private dining space, ” as well as to remodel the existing restaurant and to add “10 or more additional staff.” Am. Compl. Ex. 2 at 1; see also 8 U.S.C. § 1153(b)(5)(A)(ii) (requiring that the immigrant investor's investment will create full-time employment for ten or more people).

         This revised offering also addressed that Patrick's “is currently structured as [a] Subchapter S corporation, ” but proposed that it “would be restructured” as an LLC after Singh's investment. Am. Compl. Ex. 2 at 1 (“Investment of $1, 300, 000 . . . will lead to the following steps . . . .”). Singh allegedly communicated to Patrick's that he “wanted the type of investment vehicle that could make immediate distributions back to him, and with the lowest taxation rate, such as a limited liability company, rather than an S corporation.” Second Bernet Decl. ¶ 11 [ECF No. 36]; see also Id. ¶ 17 (stating that “reorganization, without Mr. Singh's investment, would make no sense [for Bernet] and would have adverse tax consequences for [Bernet]”). Throughout these negotiations and up to the date this case was commenced, Patrick's existed solely as a corporation; it had not yet formed an LLC.[2]See Kvinge Decl. Ex. B [ECF No. 23-1] (Certificate of Organization for Patrick's Restaurant, LLC, dated March 20, 2018), Ex. D [ECF No. 23-1] (Certificate of Incorporation for Patrick's Restaurant Inc. dated April 11, 2013).

         According to Patrick's, there were “significant negotiations and discussions” between Singh, Mashaal, and Bernet between August and October 2017, including emails and telephone calls. Am. Compl. ¶ 13. At some point, Singh allegedly “accepted Plaintiff's proposed terms, ” and Patrick's counsel prepared two letters of intent, along with proposed distributions and projections, wire transfer instructions, a document checklist, and a draft “Articles of Conversion, ” all of which were sent to Singh. Id.; id. Ex. 3 [ECF No. 27-1]. At Singh's instruction, Mashaal traveled to Dubai to have Singh sign the letters of intent and complete an immigration attorney's questionnaire relating to the EB-5 visa process. Am. Compl. ¶¶ 14, 27; id. Ex. 5 [ECF No. 27-1].

         One letter of intent is entitled “Letter of Intent - Exclusive Right to Purchase.” First Bernet Decl. Ex. A at 2 [ECF No. 9-1] (hereinafter “First Letter of Intent”); see also Am. Compl. ¶ 15. This First Letter of Intent is on Bernet's personal letterhead and opens by acknowledging that “it is [Bernet's] understanding that [Singh] intend[s] to make an investment totaling $1, 300, 000.” First Letter of Intent at 2. The opening paragraphs of the letter recite the planned timeline for two payment “installments”-$300, 000 on or before December 31, 2017, and $1 million on or before January 31, 2018. Id. The letter then provides:

Please consider this letter an offer to grant you the exclusive right to purchase a 40% interest in Patrick's Restaurant, LLC. You will receive your 40% interest in Patrick's Restaurant, LLC when the entire purchase amount of US$1, 300, 000 [sic] is received. The exclusive right to purchase granted herein shall remain open until January 31st 2018.
First, a non-refundable payment of U.S. $250, 000 will be required on or before December 31, 2017 for me to grant you the exclusive right to invest directly into Patrick's Restaurant LLC.
Second a non refundable [sic] payment of $50, 000 shall be deposited into a suitable escrow accounts [sic] to be disbursed to pay [immigration legal fees and costs].

Id. at 2-3. It closes with, “Thank you for considering this proposal, ” id. at 3, and attaches instructions for wiring the $300, 000 (the total of the two “non-refundable” payments of $250, 000 and $50, 000) to Bernet's California bank, id. at 4.

         The other letter of intent is entitled “Letter of Intent to Invest.” First Bernet Decl. Ex. B at 2 [ECF No. 9-2] (hereinafter “Second Letter of Intent”); see also Am. Compl. ¶ 16. This letter from Bernet is on “Patrick's Restaurant, LLC” letterhead, and does not mention the $300, 000 portion of the investment. Second Letter of Intent at 2. The letter states that “[a]fter Patrick's Restaurant, LLC receives [Singh's] investment of $1, 000, 000, ” Singh will have a 40% ownership share of the LLC. Id. It continues: “We all agree to act in good faith, to negotiate, approve, execute and deliver the agreements required to give full effect to the investment transaction before December 31st, 2017 so that the investment can be made on or before January 31st 2018.” Id. The letter closes with, “This letter sets forth the general terms of your planned investment into Patrick's Restaurant, LLC.” Id. at 3.

         On November 2, 2017, Singh signed both letters of intent in Dubai. First Letter of Intent at 3 (showing Singh signed below the statement “I agree to the terms and conditions set forth above”); Second Letter of Intent at 3 (similar). Singh then called Bernet to tell him that the initial wire transfer would be made by November 14, 2017. Am. Compl. ¶¶ 15-17. No. wire transfer was made that day, but at that time Singh did sign another agreement with Patrick's: the Capital Contribution Agreement. See Id. ¶ 19.

         The Capital Contribution Agreement essentially recites the same terms from the Second Letter of Intent, but it is styled more like a traditional contract. See First Bernet Decl. Ex. C [ECF No. 9-3]. Like the Second Letter of Intent, it makes no mention of the $300, 000 obligation-only the $1 million. See Id. at 1. It specifies that “Patrick's Restaurant, LLC . . . will be re-organized as a Minnesota Limited Liability Company on or about December, 312017 [sic] when the [required documents] will be filed with the Minnesota Secretary of State.” Id. The contract contains two other noteworthy clauses. First, it provides that “if Mr. Singh does not make the required contribution on or Before Janaury [sic] 31, 2018, the unpaid amount . . . shall be deemed to be a debt of Mr[.] Singh which [Patrick's] may collect through legal action.” Id. at 2. Second, it provides that the contract “shall in any and all events be governed by, construed and interpreted in accordance with the laws of the state of Minnesota.” Id.

         Around that same time, in November 2017, Singh signed an Operating Agreement for Patrick's Restaurant, LLC. Am. Compl. ¶ 26; id. Ex. 4 [ECF No. 27-1]. Although the LLC did not exist yet, the Operating Agreement (like the Capital Contribution Agreement) contemplated that Singh would have a 40% interest in the LLC and 40% voting power, while Bernet and Mashaal would have 51% and 9%, respectively. Am. Compl. Ex. 4 at 21.

         Shortly after the execution of the two letters of intent, Capital Contribution Agreement, and Operating Agreement, things took a turn for the worse. Patrick's alleges that in mid- to late-November, Singh represented that the initial $300, 000 payment had been wired to Bernet, but “Bernet could receive no confirmation it had.” Am. Compl. ¶ 30. Singh represented that the money was forthcoming and would be issued by mid-December. Id. ¶ 31. But (again) the money didn't arrive. See Id. ¶¶ 32-33. Singh repeatedly assured Bernet that he had wired the funds, going as far as to send “a purported wire transfer document from a bank in Russia.” Id. ¶¶ 33, 35; see First Bernet Decl. Ex. E at 11 [ECF No. 9-5]. But (again) the money didn't come. See Am. Compl. ¶ 37. Emails from Mashaal to Singh refer to “almost daily communications by text and phone calls” about the status of the wire transfer, though only select emails and text messages are attached to the complaint and affidavits. Id. Ex. 6 [ECF No. 27-1]; see also First Bernet Decl. ¶¶ 7, 10 [ECF No. 9] (“I received many e-mail messages from Mr. Mashaal and [Singh] . . . . [They] have sent many text messages to me . . . regarding the foregoing agreements and the alleged payments.”); id. Ex. E (emails), Ex. G [ECF No. 9-7] (text messages).

         Patrick's alleges that all along, Singh “knew Patrick's Restaurant, Inc. would be converted to [an LLC] . . . only when [Singh] paid the $1 million needed for the investment.” Am. Compl. ¶ 26. Patrick's alleges that in late December, “Plaintiff put on hold Plaintiff's corporate reorganization until confirmation [of the $300, 000 wire transfer] could be received.” Id. ¶¶ 33, 42. But plans for the expansion of Patrick's Arbor Lakes restaurant were already underway in reliance on Singh's planned investment; these included negotiating a lease, expanding the restaurant, and reorganizing the corporation. Id. ¶¶ 29 (“working with brokers, architects, an asset manager, a landlord, and contractors”), 32, 34, 39 (“work[ing] with Defendant's immigration counsel”); First Bernet Decl. Ex. D [ECF No. 9-4] (proposal from landlord for expansion).

         In early January, Singh “proposed an amendment to [the] transaction” that involved “delaying and reducing the payments.” Second Bernet Decl. ¶ 16. Patrick's agreed and sent a new timeline for payment to Singh, which Singh further revised, but ultimately Singh did not sign the proposed amendment. Am. Compl. ¶ 38; id. Ex. 7 [ECF No. 27-1]. In mid-January, “[Singh] had Mr. Mashaal send Mr. Bernet a check for $300, 000, on [Singh's] behalf.” Am. Compl. ¶ 40; First Bernet Decl. Ex. F [ECF No. 9-6]. But Singh “conditioned tender of the check on further delay and amendments [Patrick's] had not agreed to, ” so Patrick's never received the money. Am. Compl. ¶ 40; see also First Bernet Decl. ¶ 9 (“[T]he check cannot be cashed, and [Patrick's] has received no payment from either [Singh] or Mr. Mashaal.”).

         Throughout February and into March 2018, Singh, Mashaal, and Bernet “continued to communicate.” Am. Compl. ¶ 44. Ultimately, Singh never made the $300, 000 payment or the $1 million payment. Id. ¶ 45. Patrick's felt the effects of Singh's alleged breach here in Minnesota. Patrick's alleges it “lost the ability to expand and the profits anticipated from the expansion, the lease negotiations with the Landlord fell through, and [its] reputation and credibility have been damaged.” Id. ¶ 46.

         Patrick's commenced this case on March 20, 2018. See Compl. at 4 [ECF No. 1]. After Singh moved to dismiss for, among other things, a lack of personal jurisdiction, Patrick's filed an amended complaint that included additional jurisdictional allegations. See First Mot. [ECF No. 20]; Am. Compl. Patrick's seeks to recover $1.25 million (presumably for the $1.3 million investment it alleges Singh contracted to make minus $50, 000 for immigration-attorney fees and costs, which were for Singh's benefit), plus “all damages reasonably foreseeable, consequential, and incidental to Defendant's breaches.” Am. Compl. ¶ 59. Singh responded by renewing his motion to dismiss, ...


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