EASTERN DISTRICT OF TEXAS

No. 6:23-cv-00398

Power Funding, Ltd., et al.,

Plaintiffs,

v.

Chabad Lubavitch of Sunrise Inc. et al.,

Defendants.

OPINION AND ORDER

Before the court is defendants’ motion to dismiss for lack of 

personal jurisdiction and improper venue. Doc. 6. For the reasons 

below, defendants’ motion is denied.

This case arises out of an alleged scheme to fabricate invoices 

for textile goods and sell the right to collect on those invoices to 

innocent third parties SSMD Financial, L.L.C. and servicing 

agent Power Funding, Ltd. (collectively “plaintiffs”). Plaintiffs allege that in 2014 they entered into a written agreement (the “Factoring Agreement”) with Dreamtex, Inc., a Florida-based textile 

manufacturer. Id. at 17–18. When Dreamtex offered to sell an invoice receivable to plaintiffs, Power Funding would first conduct 

due diligence. That due diligence included (1) verifying the customer’s credit profile and (2) conferring with the customer 

through email and phone to verify the invoice amount and receipt

of the goods. Id. Thereafter, Power Funding would pay Dreamtex 

a percentage of the invoice amount, thus allowing Dreamtex immediate access to cash. Id. at 18. Customers to those invoice receivables were then to pay plaintiffs, instead of Dreamtex. 

At some point before 2021, Dreamtex allegedly began creating

false invoices. Id. at 19. Plaintiffs allege that Dreamtex officers 

Evan Young and Ivan Felsen recruited the current defendants, 

Chabad Lubavitch of Sunrise, Inc., The Synagogue of InverraryChabad, Inc. (d/b/a Camp Gan Israel Greater Ft. Lauderdale), 

Chabad of Greater Fort Lauderdale, Inc. (d/b/a Chabad Global 

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Thrift), Chabad of Sunrise at Sawgrass, Inc., Aron Y. Lieberman, 

Levi Yitzchok Chanowitz, Esther Chanowitz, Joseph Lebovics

(collectively “defendants”) as co-conspirators in the fraud. Id. 

Specifically, plaintiffs allege that Young would send a false invoice 

to defendants and tell them to “expect a ‘confirmation call’ or 

‘email’ from Power Funding.” Id. at 19. Then, when contacted by 

Power Funding, defendants would “misrepresent[] to Power 

Funding that the underlying goods were received,” and that “the 

goods met the Defendant’s expectations . . . .” Id. at 19–20; see id.

at 24, 33–36. The scheme was kept afloat in a process called invoice “kiting” or “cycling”: By the time a sold false invoice became due, Dreamtex had sold other false invoices to Power Funding, and used the new funding to pay defendants the invoice 

amount plus a commission. Defendants would then send Power 

Funding a check or wire payment, thus satisfying the invoice receivable debt. Id. at 20–21.

But, in 2022, Dreamtex allegedly was unable to “cycle” 

enough false invoices to keep the operation afloat, so invoices 

were left unpaid. Id. at 21–22. In September 2022, plaintiffs sued 

Dreamtex, Young, and Felson for fraud in the 241st Judicial District Court, Smith County, Texas, obtaining a default judgment 

(the “Dreamtex Lawsuit”). Id. at 25, 41–47. Dreamtex and Young 

admitted to the fraud, and the judgment was supported by an 

Agreed Statement of Facts in Support of Judgment. Id. at 22, 25, 

41–47. Plaintiffs allege that, in the Dreamtex Lawsuit, “the Court 

specifically found that its ruling did not impair the rights, claims 

or causes of action of either Plaintiff against any other potentially 

responsible party . . . .” Id. at 25.

Unable to collect on the state-court judgment from the 

Dreamtex parties, plaintiffs filed this action alleging (1) that defendants are jointly and severally liable for the invoices in a suit 

on accounts cause of action; (2) unjust enrichment; (3) fraud; 

(4) conversion; and (5) violations of the Texas Theft Liability Act.

Id. at 28–29. Plaintiffs seek $1,277,697.90 in unpaid invoices as 

well as interest on the invoices, exemplary damages, and 

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attorney’s fees. Id. at 30–31. Defendants timely removed the case 

to this court. See Doc. 1 at 2. On September 5, 2023, defendants 

filed the current motion, arguing that the court lacks personal jurisdiction over all defendants and that venue is improper under 28 

U.S.C. § 1406(a). Doc. 6.

Subject-matter jurisdiction pursuant to 28 U.S.C. § 1332(a) is 

properly alleged. Plaintiffs are citizens of Texas. Doc. 19 at 3. Defendants are citizens of Florida. Id. at 2–3. And the amount in controversy exceeds $75,000. See Doc. 1 at 2.

Personal Jurisdiction

Federal courts sitting in diversity may assert personal jurisdiction “if (1) the state’s long-arm statute allows it; and (2) exercising jurisdiction would not violate the Due Process Clause of the 

Fourteenth Amendment.” Halliburton Energy Servs., Inc. v. Ironshore Specialty Ins. Co., 921 F.3d 522, 539 (5th Cir. 2019). Texas’s

long-arm statute authorizes jurisdiction to the full extent allowed 

by the Due Process Clause of the Fourteenth Amendment. Id. So 

the question whether a defendant is subject to this court’s jurisdiction depends exclusively on the due-process principles first established in International Shoe Co. v. Washington, 326 U.S. 310 

(1945).

Personal jurisdiction comes in two forms, “general” and “specific.” Plaintiffs do not argue the court has general personal jurisdiction over defendants. Doc. 9 at 19. Specific jurisdiction, in contrast, arises from “the relationship among the defendant, the forum, and the litigation.” Walden v. Fiore, 571 U.S. 277, 283–84 

(2014). In determining whether the exercise of specific jurisdiction is proper, the Fifth Circuit considers three factors: 

(1) whether the defendant has minimum contacts with the 

forum state, i.e., whether it purposely directed its activities toward the forum state or purposefully availed itself of 

the privileges of conducting activities there; (2) whether 

the plaintiff’s cause of action arises out of or results from 

the defendant’s forum-related contacts; and (3) whether 

the exercise of personal jurisdiction is fair and reasonable.

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Inmar Rx Sols., Inc. v. Devos, Ltd., 786 F. App’x 445, 448 (5th Cir. 

2019). Once a plaintiff shows that the first two factors are satisfied, the burden shifts to the defendant to show that the exercise 

of jurisdiction would be unfair and unreasonable. Id.

Defendants deny that they were involved in the alleged 

Dreamtex fraud. See, e.g., Doc. 6-2 at 2–4 (Declaration by Joseph 

Lebovics). They claim that Young never revealed that the invoices

were false and that “Young misrepresented . . . how the monetary 

structure would work.” Id. In their motion here, defendants argue 

that the court lacks personal jurisdiction because they have never

conducted business in, traveled to, held bank accounts in, or based

employees out of Texas. See Doc. 6 at 7–8. And—contrary to what 

plaintiffs claim—defendants argue that they never received 

money from Power Funding. See, e.g., Doc. 6-2 at 4. 

Defendants also argue that any contacts sufficient to establish 

personal jurisdiction were created by Young, and defendants cite 

Walden v. Fiore for the proposition that minimum contacts with 

the forum state must arise from contacts the defendant himself 

creates. 571 U.S. 277, 284 (2014); Doc. 6 at 9, 14. And, absent 

Young’s contacts, defendants argue, “Plaintiffs’ only support for 

jurisdiction is that the Defendants may have communicated by 

mail, e-mail and telephone with Plaintiffs, Texas entities, and sent 

and received money to a bank located in Texas.” Doc. 6 at 9.

Defendants assert that Fifth Circuit precedent “has repeatedly held that the combination of mailing payments to the forum 

state, engaging in communications related to the execution and 

performance of the contract, and the existence of a contract between the nonresident defendant and a resident of the forum are 

insufficient to establish the minimum contacts necessary to support the exercise of specific personal jurisdiction over the nonresident defendant.” Freudensprung v. Offshore Tech. Servs., Inc., 379 

F.3d 327, 344 (5th Cir. 2004); see also Patterson v. Dietze, Inc., 764 

F.2d 1145, 1147 (5th Cir. 1985) (defendant’s telephone calls and 

wire transfers to Texas regarding a contract negotiated with Texas 

plaintiff were insufficient to support specific personal jurisdiction 

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over New York defendant where material performance of the contract occurred in Mexico); United My Funds, LLC v. Perera, 2020 

WL 674364, at *4 (E.D. Tex. Feb. 11, 2020) (“[R]eceiving a wire 

transfer, even if the wire transfer came from Texas is not sufficient 

to establish minimum contracts without more.”).

Plaintiffs characterize the events differently. Plaintiffs allege 

that the scheme was pervasive, took place over many years, and 

involved “millions of dollars of Power Funding’s money” passing 

through defendants’ bank accounts and that Power Funding’s 

money is property with a situs in Texas. Doc. 9 at 5. They argue 

that defendants made additional contacts to the forum by virtue 

of check and wire payments and through misrepresentations over

phone and email. Id. Finally they argue that, because defendants 

received a 3% commission for floating the invoices, their actions 

are “inextricably intertwined” with Young’s, and that both parties’ purposeful actions (separately or together) constitute the 

“minimum contacts” needed for specific jurisdiction. Id. 

What alleged contacts with Texas may the court consider in 

analyzing personal jurisdiction? Because an evidentiary hearing 

on the motion to dismiss was not conducted (or requested), “the

party seeking to assert jurisdiction is required only to present sufficient facts to make out a prima facie case supporting jurisdiction.” Cent. Freight Lines Inc. v. APA Transp. Corp., 322 F.3d 376, 

380 (5th Cir. 2003). Facts presented through affidavits and exhibits may be considered alongside the well-pleaded allegations in the 

complaint. Simon v. United States, 644 F.2d 490, 497 (5th Cir. 

1981). If a plaintiff’s prima facie case for personal jurisdiction is 

not born out after discovery and further fact-finding, the case will 

be dismissed at that point for lack of personal jurisdiction.

Here, defendants do not dispute that they paid Power Funding 

by mailing checks and sending wire payments to Texas. Doc. 10 at 

10. Defendants do not dispute that phone calls were made as part 

of Power Funding’s invoice-due-diligence process, but defendants argue that the calls were initiated by Power Funding to defendants in Florida. Id. Third, because defendants argue that 

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“Young misrepresented to [defendants] how the monetary structure would work,” the parties appear to dispute whether defendants were making misrepresentations in the due-diligence communications with Power Funding. Finally, the parties dispute 

whether Power Funding paid defendants. Doc. 1-1 at 16; Doc. 6-2 

at 4. 

Even if Power Funding did not send payments out of Texas to 

defendants, defendants’ checks, wire payments, and factual representations through phone and email constitute sufficient minimum contacts with this forum. The cases that defendants rely on 

to argue that wire payments and phone calls are not sufficient 

minimum contacts are inapposite, for those cases are breach-ofcontract cases. See Patterson v. Dietze, Inc., 764 F.2d at 1147. Here, 

in contrast, part of plaintiffs’ claims allege an intentional tort. 

“When the actual content of communications with a forum gives 

rise to intentional tort causes of action, this alone constitutes purposeful availment.” Wien Air Alaska, Inc. v. Brandt, 195 F.3d 208, 

213 (5th Cir. 1999). In Trois v. Apple Tree Auction Center, the Fifth 

Circuit held that tortious misrepresentations made by phone call 

into a forum by a nonresident defendant was a sufficient contact 

to establish personal jurisdiction. 882 F.3d 485, 491 (5th Cir. 

2018). Even if defendants did not initiate the due-diligence calls 

with Power Funding, plaintiffs’ well-pleaded allegations are that 

defendants’ representations on those phone calls give rise to a 

fraud claim. See id. (finding personal jurisdiction even where defendant did not initiate phone call into forum). 

Plaintiffs’ suit on account and unjust enrichment claims, however, sound in contract and equity. Had those claims been brought 

without the fraud claims, the court questions whether it would 

have specific jurisdiction over defendants. For example, plaintiff 

has not established that performance of any contractual obligations was “centered” in Texas. See Holt Oil & Gas Corp. v. Harvey, 

801 F.2d 773, 778 (5th Cir. 1986). However, although the court 

might not have specific jurisdiction over those claims alone, pendent personal jurisdiction exists over defendants on those 

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remaining claims. See Elevacity U.S., LLC v. Schweda, 2022 WL 

3704537, at *11 (E.D. Tex. Aug. 26, 2022) (exercising pendent 

personal jurisdiction).

Pendent personal jurisdiction allows a court with personal jurisdiction over a defendant as to one claim—the anchor claim—

to exercise personal jurisdiction over other claims that arise out 

of the same nucleus of operative facts. United States v. Botefuhr, 

309 F.3d 1263, 1272 (11th Cir. 2002) (citing 4A Charles Alan 

Wright et al., Federal Practice & Procedure § 1069.7 (3d ed.

2002)). If the pendent claims arise from the same operative facts

as the anchor, the court makes a discretionary determination of 

“whether entertaining the pendent claims against the defendant 

promotes ‘judicial economy, avoidance of piecemeal litigation[,] 

and the overall convenience of the parties.’” Elevacity, 2022 WL 

3704537, at *11 (quoting Canyon Furniture Co. v. Rueda Sanchez, 

2018 WL 6265041, at *13 (W.D. Tex. Nov. 8, 2018)). 

Although the Fifth Circuit has not addressed pendent personal jurisdiction, district courts in this circuit have adopted it.

Elevacity, 2022 WL 3704537, at *11 (collecting cases). As stated 

above, the contacts giving rise to intentional-tort claims permit 

the court to exercise personal jurisdiction over defendants. Defendants’ actions and omissions that sustained the invoice kiting, 

and any unpaid invoices giving rise to the suit on accounts claim,

arise out of the same operative facts as the intentional tort claims. 

The court finds that trying the suit on account, unjust enrichment, and tort claims together would promote judicial economy,

and that exercising jurisdiction over the defendants in all claims 

comports with “fair play and substantial justice.” Int’l Shoe Co., 

326 U.S. at 316. Defendants are not being haled into Texas based 

on “random, fortuitous, or attenuated contacts.” Walden, 571 U.S. 

at 286. Defendants are alleged to have repeatedly made contact 

with plaintiffs in this forum through phone and email representations, and through wire payments and checks. If those allegations 

are born out by the facts, defendants should have reasonably anticipated that they might be haled into a Texas court because of

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that conduct. See Trois, 882 F.3d at 491. Accordingly, defendants’ 

motion to dismiss under 12(b)(2) for lack of personal jurisdiction 

is denied. 

Venue 

Defendants also move to dismiss for improper venue under 

Federal Rule of Civil Procedure 12(b)(3) and 28 U.S.C. § 1406(a). 

Section 1406 requires dismissal or transfer of a case “laying venue 

in the wrong division or district.” Defendants argue that, under 

the general venue statute—28 U.S.C. § 1391—venue is not proper 

in this district. Doc. 6 at 18. Plaintiffs argue that § 1391, being the 

general venue statute, is not the proper statute to use when determining whether venue is proper in a removed action. Doc. 9 at 29–

30. 

Plaintiffs are correct. “[O]n the question of venue, § 1391 has 

no application to . . . a removed action.” Polizzi v. Cowles Mags., 

Inc., 345 U.S. 663, 665–66 (1953). The venue of removed actions 

is instead governed by 28 U.S.C. § 1441(a). Id. “Section 1441(a) 

expressly provides that the proper venue of a removed action is 

‘the district court of the United States for the district and division 

embracing the place where such action is pending.’” Id. (quoting 

28 U.S.C. § 1441(a)). Plaintiffs commenced this suit in the 7th Judicial District Court of Smith County, Texas. Doc. 1-1 at 6. The 

Eastern District of Texas and the Tyler Division are the district 

and division embracing Smith County. See 28 U.S.C. § 124. Accordingly, defendants’ motion to dismiss for improper venue is 

denied.

Because the defendants’ motion to dismiss for lack of personal 

jurisdiction and improper venue is denied, the court denies defendants’ motion for attorney fees under 28 U.S.C. § 1919.

So ordered by the court on May 7, 2024.

J. CAMPBELL BARKER

United States District Judge

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