RESPONSE in Opposition re 37 MOTION for Extension of Time to Complete Discovery… — Greathouse Capitalplus (Dkt. 38)

Summary

Plaintiffs’ Memorandum in Partial Opposition to Defendants’ Motion to Extend Discovery Deadlines, filed in the U.S. District Court for the Eastern District of Arkansas, Central Division, on April 6, 2022 as Document 38 in Eric Greathouse, Ernesto Covarrubias, Tiffany Sumrall and Barbara Myles v. Capital Plus Financial, LLC and Crossroads Systems, Inc., Case No. 4:21-cv-1243-BRW. The plaintiffs, suing individually and for a class, state that the defendants’ motion seeks a stay of all discovery until the court resolves their forthcoming response or motion to dismiss the Amended Complaint. The plaintiffs say they agreed in principle to the requested extensions but asked that the motion leave open jurisdictional discovery, and they oppose the motion on that basis. Counsel include Justin A. Heller and Matthew M. Zapala of Nolan Heller Kauffman LLP.

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         Case 4:21-cv-01243-BRW Document 38 Filed 04/06/22 Page 1 of 5




                         IN THE UNITED STATES DISTRICT COURT
                             EASTERN DISTRICT OF ARKANSAS
                                   CENTRAL DIVISION


  ERIC GREATHOUSE, ERNESTO                              Case No. 4:21-cv-1243-BRW
  COVARRUBIAS, TIFFANY SUMRALL
  and BARBARA MYLES, individually and
  on behalf of all others similarly situated,


                  Plaintiff,

  v.

  CAPITAL PLUS FINANCIAL, LLC and
  CROSSROADS SYSTEMS, INC.,

                  Defendants.


   PLAINTIFFS’ MEMORANDUM IN PARTIAL OPPOSITION TO DEFENDANTS’
               MOTION TO EXTEND DISCOVERY DEADLINES

       Defendants’ pending Motion to Extend Discovery Deadlines (the “Motion”) seeks a stay

of all discovery pending the Court’s resolution of Defendants’ forthcoming response or motion

to dismiss Plaintiffs’ Amended Class Action Complaint. Plaintiffs object to the stay the Motion

seeks only in one narrow respect. In particular, to the extent Defendants file a motion to dismiss

the Amended Complaint that raises arguments regarding this Court’s jurisdiction to adjudicate

this case, Plaintiffs should be entitled to discovery relating to the many activities Plaintiffs allege

in their Amended Complaint that Defendants undertook in this District relating to the claims in

this case. See ECF 31 ¶¶ 23-38. Plaintiffs advised Defendants of their position prior to

Defendants’ filing their Motion. Accordingly, and as detailed herein, Plaintiffs oppose

Defendants’ pending Motion strictly on that basis.
           Case 4:21-cv-01243-BRW Document 38 Filed 04/06/22 Page 2 of 5




                                 FACTUAL BACKGROUND

       Plaintiff Eric Greathouse filed the initial complaint in this action on December 29, 2021

(ECF 1). Defendants moved to dismiss that complaint on February 25, 2022 (ECF 25).

Defendants argued at length in support of that motion that the Court lacks for personal

jurisdiction over them. Id., at 7-22. Rather than oppose that motion, Plaintiffs filed an Amended

Class Complaint Action (ECF 31), which includes substantial new and additional detailed facts

and allegations regarding Defendants’ contacts with Arkansas and in particular this judicial

District. See ECF 31 ¶¶ 23-38. Among other things, Defendant Capital Plus Financial, LLC

(“CPF”):

      Entered into Paycheck Protection Program (“PPP”) loan agreements with thousands of

       Arkansas residents;

      Committed to fund those loans—totaling over $38 million—via those agreements;

      Collected, at a minimum, nearly $7 million in fees attributable to those loans;

      Conducted wide-ranging reviews of each of those loan applications; and

      Maintained extensive dealings with the Small Business Administration’s Little Rock

       Commercial Loan Service Center, with respect to PPP loans to borrowers in Arkansas

       and numerous other states and U.S. territories. That Commercial Loan Service Center

       was one of only two such facilities nationwide, serving not only the East Coast but also

       Texas, where both Defendants are based.

ECF 31 ¶¶ 23-37. CPF is or during all relevant times was the only operating subsidiary of its

parent company, Defendant Crossroads Systems, Inc. (“Crossroads”). Crossroads extracted the

above-referenced loan processing fees from CPF; shared overlapping websites and certain senior

executives with PPP duties with CPF; communicated with the SBA’s Little Rock Commercial


                                                2
           Case 4:21-cv-01243-BRW Document 38 Filed 04/06/22 Page 3 of 5




Loan Service Center in the course of servicing PPP loans; and otherwise acted as CPF’s alter ego

with respect to the companies’ PPP lending, including directly in this District. Id. ¶ 38.

The Amended Complaint also not only includes a request that Plaintiffs be allowed to take

jurisdictional discovery in the event that the Court deems the existing proof in that context

insufficient; it also specifies many of the precise topics of that discovery based on the arguments

that Defendants made in their original motion to dismiss. Id. ¶ 37 n.1.

       Upon being served with the Amended Complaint, Defendants informed Plaintiffs of their

intention to seek from the Court an extension of their due date to respond to the Amended

Complaint, and an extension of the dates for the parties’ Rule 26(f) report and conference to

some point after the Court rules on their forthcoming motion to dismiss or other “response” they

represent they intend to file. Plaintiffs agreed in principle to those requests, and asked

Defendants to draft an appropriate motion. Upon reviewing the draft motion, Plaintiffs requested

only that Defendants include a provision asking that the Court leave open the possibility of

allowing jurisdictional discovery to go forward absent the resolution of Defendants’ motion to

dismiss.

       Rather than accommodate that request, Defendants filed two separate motions. The first

motion seeks only an extension of the due dates for Defendants’ motion to dismiss and Plaintiffs’

opposition to that motion, and is unopposed. See ECF 36. Plaintiffs now oppose only the latter

motion—the Motion to Extend Discovery Deadlines—and only because it makes no allowance

for discovery related to the Court’s personal jurisdiction over Defendants, assuming Defendants

again raise those issues in any motion to dismiss they may file. It bears emphasis that Plaintiffs

are not by virtue of this opposition now formally requesting jurisdictional discovery, but are

asking only that the Court recognize in its forthcoming order that jurisdictional issues alone may



                                                  3
           Case 4:21-cv-01243-BRW Document 38 Filed 04/06/22 Page 4 of 5




give the Court reason to open discovery earlier than it otherwise would pursuant to Defendants’

Motion.

                                          ARGUMENT

       Jurisdictional discovery should be permitted where a plaintiff offers “documentary

evidence, and not merely speculations or conclusory allegations” regarding a defendant's

contacts with the forum state. Steinbuch v. Cutler, 518 F.3d 580, 589 (8th Cir. 2008). See also

Valley View Agri, LLC v. Producers Co-op. Oil Mill, 2015 WL 853277, at *4 (E.D. Ark. Feb. 26,

2015) (allowing jurisdictional discovery). Such discovery is particularly appropriate where the

defendant is a corporation. Tishner v. Wright Med. Grp., Inc., 2017 WL 1520424, at *1 (E.D.

Ark. Apr. 25, 2017) (citation omitted).

       Plaintiffs anticipate they may seek to proffer documentary and other evidence reflecting

Defendants’ connections to Arkansas and this District in opposing any motion to dismiss that

Defendants may file. Plaintiffs’ allegations in the Amended Complaint give the Court reason to

anticipate that such evidence is in fact forthcoming. For those reasons, the Court at a minimum

should deny Defendants’ request for an order that Defendants might subsequently cite as grounds

to preclude jurisdictional discovery. Defendants’ refusal to either consider or reference Plaintiffs’

request for an exception in the order tends to suggest that Defendants have exactly that argument

in mind.

       Plaintiffs therefore respectfully request that any order the Court enters in response to

Defendants’ Motion specify that the Court’s ruling shall have no bearing on Plaintiffs’ ability to

seek leave to conduct jurisdictional discovery.




                                                  4
        Case 4:21-cv-01243-BRW Document 38 Filed 04/06/22 Page 5 of 5




Dated: April 6, 2022              Respectfully submitted,

                                  FRIDAY, ELDREDGE & CLARK, LLP
                                  Katherine C. Campbell, AR Bar 2013241
                                  Marshall S. Ney, AR Bar 91108
                                  3350 S Pinnacle Hills Pkwy, Suite 301
                                  Rogers, AR 72758
                                  T: (479) 695-6049
                                  F: (501) 244-5389
                                  kcampbell@fridayfirm.com
                                  Mmney@fridayfirm.com


                                  BAILEY & GLASSER LLP
                                  Lawrence J. Lederer (admitted pro hac vice)
                                  Michael L. Murphy (admitted pro hac vice)
                                  Bart D. Cohen (admitted pro hac vice)
                                  1055 Thomas Jefferson Street NW, Suite 540
                                  Washington, DC 20007
                                  T: (202) 463-2101
                                  F: (202) 463-2103
                                  llederer@baileyglasser.com
                                  mmurphy@baileyglasser.com
                                  bcohen@baileyglasser.com

                                  NOLAN HELLER KAUFFMAN LLP
                                  Justin A. Heller (admitted pro hac vice)
                                  Matthew M. Zapala (admitted pro hac vice)
                                  80 State Street, 11th Floor
                                  Albany, NY 12207
                                  T: (518) 449-3300
                                  F: (518) 432-3123
                                  jheller@nhkllp.com
                                  mzapala@nhkllp.com




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