Pawan Kumar v. Rajesh Kumar

COURT OF APPEALS
DECISION NOTICE
DATED AND FILED This opinion is subject to further editing. If
published, the official version will appear in
the bound volume of the Official Reports.
May 15, 2024
A party may file with the Supreme Court a
Samuel A. Christensen petition to review an adverse decision by the
Clerk of Court of Appeals Court of Appeals. See WIS. STAT. § 808.10
and RULE 809.62.

Appeal No. 2023AP1269 Cir. Ct. No. 2023CV188

STATE OF WISCONSIN IN COURT OF APPEALS
DISTRICT II

PAWAN KUMAR AND MADAN LAL,

PLAINTIFFS-APPELLANTS,

V.

RAJESH KUMAR AND DURGA INVESTMENTS, LLC,

DEFENDANTS-RESPONDENTS.

APPEAL from an order of the circuit court for Waukesha County:
MICHAEL P. MAXWELL, Judge. Affirmed in part; reversed in part and cause
remanded.

Before Gundrum, P.J., Neubauer and Lazar, JJ.

Per curiam opinions may not be cited in any court of this state as precedent

or authority, except for the limited purposes specified in WIS. STAT. RULE 809.23(3).
No. 2023AP1269

¶1 PER CURIAM. Pawan Kumar and Madan Lal (Plaintiffs) appeal
from an order of the circuit court dismissing certain of their claims against Rajesh
Kumar and Durga Investments, LLC (Defendants). Plaintiffs contend the court
erred in dismissing their claims against Durga for lack of personal jurisdiction
because it refused to consider evidence submitted by Plaintiffs regarding Durga’s
contacts with Wisconsin and instead limited its analysis to the allegations in the
complaint. They also argue that the court erred in dismissing their intentional
misrepresentation claim. We agree that the court erred in failing to consider the
evidence submitted by Plaintiffs in opposition to Defendants’ jurisdictional
challenge. We further conclude that the evidence is sufficient to establish personal
jurisdiction over Durga. However, the court did not err in dismissing the
intentional misrepresentation claim against both Defendants. Accordingly, we
reverse the circuit court’s order dismissing Durga for lack of personal jurisdiction,
affirm the court’s dismissal of the intentional misrepresentation claim, and remand
this case for further proceedings.

BACKGROUND

¶2 Plaintiffs commenced this lawsuit in Waukesha County, Wisconsin,
alleging claims for breach of contract, breach of fiduciary duty, and intentional
misrepresentation. The relevant allegations from the complaint are as follows.
Pawan, Lal, and Rajesh are residents of Wisconsin. Rajesh is the managing
member of Durga, a Georgia limited liability company. Rajesh owns fifty percent
of the limited liability company, while Plaintiffs each own twenty-five percent.
Durga was primarily in the business of real estate ownership, rental, and leasing.
Plaintiffs allege that Durga’s sole asset was property in Georgia “worth over One
Million Dollars” that it sold in May 2021.

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¶3 Plaintiffs allege that they “have made repeated requests for
information” from Rajesh, “including a request to see bank statements, financial
statements, the closing documents for the sale of the real estate, miscellaneous
financial records, and tax returns as well as the amended operating agreement of
the limited liability company.” Rajesh has failed to provide any information
Plaintiffs have requested. As a result, Plaintiffs allege they are unable to
determine “the value of their investment in the company, any income they are
owed by the company, proceeds of the sale of the real estate described, and
[Durga’s] corporate structure.”

¶4 Plaintiffs further allege that Rajesh, “both individually and on behalf
of defendant, Durga Investments, LLC, misrepresented to the plaintiffs the status
of the company by the mere failure to respond to reasonable requests for
information about the company.” They allege that Rajesh, “by his silence, and his
ignorance of the duties he has to the plaintiffs, has intentionally misrepresented to
the plaintiffs their current status in the company and their right to obtain
information about the company and thereby due to omission, has misrepresented
the status of the defendant company.”

¶5 Plaintiffs also allege that Defendants have failed to advise regarding
income or profits on their investments to which they are entitled, and they assert
that Defendants “have transferred money and/or taken positions to enhance
[Rajesh’s] position relative to the assets of [Durga].”

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¶6 Defendants moved to dismiss Plaintiffs’ claims against Durga for
lack of personal jurisdiction pursuant to WIS. STAT. § 802.06(2)(a)3. (2021-22).1
The motion alleged that Durga was formed in Georgia, has its principal office in
Georgia, and otherwise lacked the necessary minimum contacts with Wisconsin to
establish personal jurisdiction. Defendants also moved to dismiss all of Plaintiffs’
claims pursuant to § 802.06(2)(a)6. for failure to state a claim.

¶7 Plaintiffs opposed the motion and submitted an affidavit from Lal
stating that “virtually all of [Durga’s] dealings” have been performed in Wisconsin
“by and through its various owners.” For example, Lal averred that Durga’s
banking activity has occurred in Wisconsin and attached bank statements for
Durga listing Rajesh’s Wisconsin address. Lal also averred that “[a]ll agreements
for the LLC and subsequent sale of the Georgia real estate were negotiated and
executed here, in Wisconsin.” Finally, Lal stated that Durga “has retained lawyers
in Wisconsin” related to matters other than this lawsuit and that he “ha[s] received
a K-1 generated from Durga Investments LLC here, in Wisconsin.” Lal went on
to state his understanding that the Georgia real estate has been sold and that Durga
no longer owns any assets in Georgia.

¶8 At a hearing on Defendants’ motion, counsel for Defendants urged
the circuit court not to consider Lal’s affidavit because “it’s really trying to amend
the complaint that’s been submitted. It introduced a host of new facts. It
introduces entirely new scenarios. It contradicts with the pleadings that are in the
record .…” The circuit court granted the motion to dismiss the claims against

1
All references to the Wisconsin Statutes are to the 2021-22 version unless otherwise
noted.

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Durga for lack of personal jurisdiction, stating that “there is no allegation in the
complaint that there was activity or action in the state of Wisconsin.” The court
also granted the motion to dismiss the intentional representation claim, stating that
the complaint did not plead “the essential elements … of misrepresentation.”
Plaintiffs appeal.

DISCUSSION

I. Personal Jurisdiction

¶9 Whether a court has personal jurisdiction over an out-of-state
defendant is a question of law we review de novo. Johnson Litho Graphics of
Eau Claire, Ltd. v. Sarver, 2012 WI App 107, ¶6, 344 Wis. 2d 374, 824 N.W.2d
127. The question involves a two-step inquiry. Kopke v. A. Hartrodt S.R.L.,
2001 WI 99, ¶8, 245 Wis. 2d 396, 629 N.W.2d 662. The circuit court first
determines if the defendant is “subject to jurisdiction under Wisconsin’s long-arm
statute,” WIS. STAT. § 801.05. Kopke, 245 Wis. 2d 396, ¶8. If so, then the court
considers whether the exercise of long-arm jurisdiction satisfies the nonresident’s
constitutional due process rights. Id. The plaintiff bears “the minimal burden of
establishing a prima facie threshold showing” that both the statutory and
constitutional requirements are satisfied. Id. (citation omitted).

¶10 WISCONSIN STAT. § 802.06(4) provides that when the defendant
challenges personal jurisdiction, that issue “shall be heard and determined before
trial” in accordance with WIS. STAT. § 801.08. In turn, § 801.08(1) expressly
provides that “[a]ll issues of fact … raised by an objection to the court’s
jurisdiction over the person or property as provided by [§] 802.06(2) shall be heard
by the court without a jury in advance of any issue going to the merits of the case.”

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¶11 As relevant here, “a complaint need not state facts necessary to give
the court personal jurisdiction over the defendant.” Bielefeldt v. St. Louis Fire
Door Co., 90 Wis. 2d 245, 253, 279 N.W.2d 464 (1979). Thus, in reviewing
whether a plaintiff has met his or her burden, “we may consider documentary
evidence and weigh affidavits.” Kopke, 245 Wis. 2d 396, ¶8. “We accept as true
all well-pleaded allegations in the complaint, unless controverted by affidavits of
the challenging party.” Carlson v. Fidelity Motor Grp., LLC, 2015 WI App 16,
¶8, 360 Wis. 2d 369, 860 N.W.2d 299. “Factual doubts are to be resolved in favor
of the plaintiff,” Kopke, 245 Wis. 2d 396, ¶8 (citation omitted), and we must keep
in mind that “[t]he focus in a jurisdictional analysis is not on the plaintiff but on
the [defendant’s] contacts with Wisconsin.” Stayart v. Hance, 2007 WI App 204,
¶15, 305 Wis. 2d 380, 740 N.W.2d 168.

¶12 Here, the circuit court erroneously declined to consider the evidence
Plaintiffs submitted in response to the motion to dismiss for lack of personal
jurisdiction. The court improperly limited its analysis to the allegations in the
complaint and based its decision on the purported lack of allegations “that there
was activity or action in the state of Wisconsin.”

¶13 Plaintiffs contend that the complaint, Lal’s affidavit, and the
attached bank statements establish a basis for personal jurisdiction over Durga
under multiple provisions in Wisconsin’s long-arm statute, WIS. STAT. § 801.05.
For example, they argue that Lal’s affidavit establishes that all of the members of
Durga are Wisconsin residents, that Durga conducts its banking activity in
Wisconsin, that agreements related to Durga and its sale of real estate in Georgia
were negotiated and executed in Wisconsin, and that Lal received a K-1 from
Durga in Wisconsin. These facts, Plaintiffs argue, establish personal jurisdiction
under § 801.05(1)(d) because they show that Durga “engaged in substantial and

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No. 2023AP1269

not isolated activities within” Wisconsin.2 Plaintiffs contend further that Durga’s
contacts with Wisconsin satisfy constitutional due process because they show that
Durga “purposely availed itself” of the privilege of doing business in Wisconsin,
and thus requiring it to defend itself in a Wisconsin court does not offend “fair
play and substantial justice.” See Kopke, 245 Wis. 2d 396, ¶23 (citation omitted).

¶14 Defendants do not address the merits of Plaintiffs’ argument.
Instead, they contend that the circuit court was correct not to consider Lal’s
affidavit and to limit its analysis to the allegations in the complaint. As explained
above, Wisconsin law expressly relieves a plaintiff of the obligation to establish
jurisdiction in the complaint and permits circuit courts to consider materials
outside the complaint when analyzing personal jurisdiction. Given Defendants’
failure to respond to Plaintiffs’ jurisdictional arguments, we deem them to have
conceded that Plaintiffs’ evidentiary submissions establish the statutory and

2
WISCONSIN STAT. § 801.05(1) provides that “[a] court of this state having jurisdiction
of the subject matter has jurisdiction over a person served in an action pursuant to [WIS. STAT.
§] 801.11” if, among other things:

(1) LOCAL PRESENCE OR STATUS. In any action whether arising
within or without this state, against a defendant who when
the action is commenced:

(a) Is a natural person present within this state when served;
or

(b) Is a natural person domiciled within this state; or

(c) Is a domestic corporation or limited liability company; or

(d) Is engaged in substantial and not isolated activities within
this state, whether such activities are wholly interstate,
intrastate, or otherwise.

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constitutional bases for the exercise of personal jurisdiction over Durga. See
Charolais Breeding Ranches, Ltd. v. FPC Secs. Corp., 90 Wis. 2d 97, 109, 279
N.W.2d 493 (Ct. App. 1979).3

II. Intentional Misrepresentation

¶15 Plaintiffs also challenge the circuit court’s dismissal of their
intentional misrepresentation claim. Defendants contend that the complaint fails
to allege several essential elements of intentional misrepresentation—specifically,
(1) an affirmative representation of fact that was untrue; and (2) Plaintiffs’ reliance
upon it. See Kailin v. Armstrong, 2002 WI App 70, ¶31, 252 Wis. 2d 676, 643
N.W.2d 132 (listing elements of intentional misrepresentation).

¶16 “A motion to dismiss for failure to state a claim tests the legal
sufficiency of the complaint.” Data Key Partners v. Permira Advisers LLC, 2014
WI 86, ¶19, 356 Wis. 2d 665, 849 N.W.2d 693 (citation omitted). “[W]e accept as
true all facts well-pleaded in the complaint and the reasonable inferences
therefrom.” Id. To withstand a motion to dismiss, those facts and inferences must
“plausibly suggest a violation of applicable law.” Id., ¶21. Whether a claim is
sufficient to withstand a motion to dismiss is a question of law that we review
de novo. Hermann v. Town of Delavan, 215 Wis. 2d 370, 378, 572 N.W.2d 855
(1998).

3
In light of our conclusion that jurisdiction is conceded, we need not reach Plaintiffs’
additional arguments that jurisdiction is established under WIS. STAT. § 801.05(3), (5) and (6).
See Hussey v. Outagamie County, 201 Wis. 2d 14, 17 n.3, 548 N.W.2d 848 (Ct. App. 1996) (“If
a decision on one point disposes of the appeal, we will not consider other issues raised.”).

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No. 2023AP1269

¶17 In lieu of allegations of false words, Plaintiffs allege that Rajesh, as
the managing member of Durga, “failed and refused to provide any information”
to Plaintiffs in response to their repeated requests for financial and other
information, including information about the proceeds from the sale of the real
estate, in breach of his fiduciary duty.4

¶18 “The general rule is that silence, a failure to disclose a fact, is not an
intentional misrepresentation unless the [nondisclosing party] has a duty to
disclose.” Ollerman v. O’Rourke Co., 94 Wis. 2d 17, 26, 288 N.W.2d 95 (1980).
“If there is a duty to disclose a fact, failure to disclose that fact is treated in the law
as equivalent to a representation of the nonexistence of the fact.” Id. As relevant
here, “[i]f a fiduciary relationship exists between the parties, however, the failure
to disclose may be actionable as both an intentional misrepresentation (fraud) and
a breach of fiduciary duty.” Doe v. Archdiocese of Milwaukee, 2005 WI 123,
¶50, 284 Wis. 2d 307, 700 N.W.2d 180 (footnotes omitted).

¶19 Here, Rajesh’s alleged failure to disclose information about the
proceeds of the sale of the real estate, for example, arguably amounts to a
representation that there were none. That said, even assuming that Rajesh’s
alleged failure to provide any factual information was made with intent to deceive
Plaintiffs and induce them to act upon it to their pecuniary damage, there are no
allegations that plausibly suggest that Plaintiffs believed the “representation” that
there was no information to be provided or that they relied on it. See WIS JI—
CIVIL 2401 (identifying elements of intentional misrepresentation to include “that

4
Defendants do not dispute that Rajesh, the managing member of Durga, owes Plaintiffs
a fiduciary duty.

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No. 2023AP1269

(plaintiff) believed such representation to be true and relied on it”). Defendants
emphasize the absence of allegations related to this element in their appellate
brief, and Plaintiffs do not point to any such allegations in their reply brief. We
take their failure to do so as a concession. See United Coop. v. Frontier FS
Coop., 2007 WI App 197, ¶39, 304 Wis. 2d 750, 738 N.W.2d 578 (recognizing
that the failure to refute a proposition asserted in a response brief may be taken as
a concession).

¶20 For these reasons, we affirm the circuit court’s determination that the
complaint failed to allege a claim for intentional misrepresentation. We reverse
the circuit court’s order dismissing Plaintiffs’ claims against Durga on personal
jurisdiction grounds and remand this case for further proceedings. Given our
disposition, we deny Defendants’ motion for an award of attorney fees and costs
pursuant to WIS. STAT. RULE 809.25(3).

By the Court.—Order affirmed in part; reversed in part and cause
remanded.

This opinion will not be published. See WIS. STAT.
RULE 809.23(1)(b)5.

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