IN THE SUPERIOR COURT OF THE VIRGIN ISLANDS
DIVISION OF ST. THOMAS AND ST. JOHN

NIAGARA DISTRIBUTORS, INC., )
) CASE NO. ST-2019-CV-00656
Plaintiff, )
) ACTION FOR DEBT
vs. )
)
DAVID J. WARNER and BREAD DOUGH, )
INC. d/b/a BREADS AND CAKES, )
)
Defendants. )
)

MEMORANDUM OPINION

THIS MATTER is before the Court on Defendant Bread Dough, Inc. d/b/a
Breads and Cakes’ (“Bread Dough” or “defendant”) Motion to Dismiss, filed January
29, 2021. Niagara Distributors, Inc. (“Niagara” or “plaintiff’) opposes this motion.!
Bread Dough moves to dismiss this matter, pursuant to Virgin Islands Rules of Civil
Procedure 12(b)(1) and 12(b)(6) and claims the Court lacks subject-matter jurisdiction
and the Plaintiff has failed to state a claim upon which relief can be granted. For the

reasons set forth herein, the motion will be denied.

' This matter is fully briefed. Niagara filed its opposition on February 6, 2021. Bread Dough filed its reply on February
25, 2021.
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BACKGROUND AND PROCEDURAL POSTURE

Niagara is a Florida corporation and Bread Dough is a U.S. Virgin Islands
corporation. Defendant David J. Warner (“Warner”) is a resident of the U.S. Virgin
Islands. Warner has not joined the motion to dismiss. Warner has filed an answer to
the complaint.

In the underlying complaint, Niagara alleges it sold Bread Dough various
ingredients and materials for its wholesale bakery operation, for which Warner made
some payments and accepted the deliveries in an individual capacity and on Bread
Dough’s behalf. Niagara further alleges that Warner and Bread Dough failed to pay
for all supplies and food products, amassing a total debt of $55,289.80, excluding
interest and late charges.

DISCUSSION

V.I. R. Civ, P. 12(b) lists defenses to a claim for relief, which a party may assert
by motion. V.I. R. Civ. P. 12(b)(1) offers relief for lack of subject-matter jurisdiction.
V. I. R. Civ. P. 12(b)(6) allows dismissal for failure to state a claim upon which relief

can be granted.

I. This matter does not lack subject-matter jurisdiction.
A. Legal Standard

Subject: matter jurisdiction is a prerequisite for any legal action, and the party
asserting jurisdiction must generally prove that the court has subject-matter

jurisdiction. Raymond-Benjamin v. Assefa, 

 4 14 (citing Gov't of the V.L. v.
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UIW-SIU, 

 (V.I. 2016)). A party may assert the defense of lack of
subject-matter jurisdiction at any time during the pendency of the case. V.I. R. CIv.
P. 12(b)(1). When subject-matter jurisdiction is challenged, the plaintiff bears the
burden of persuasion. Thomas v. Govt of the V.I., No. ST-2014-CV-00312, 

, at 5 (V.I. Super. Ct. May 8, 2015) (unpublished).
B. Analysis

In the instant motion, Bread Dough argues Niagara lacks subject-matter
jurisdiction because Niagara is a foreign corporation—its principal place of business
being in Florida—and it has failed to follow the requisite steps permitting it to do
business in the U.S. Virgin Islands. Specifically, Bread Dough argues that as an
unregistered foreign company doing business in the U.S. Virgin Islands, Niagara is
essentially evading franchise taxes, nonpayment of which creates a bar to filing suit
in the U.S. Virgin Islands. See V.I. CODE. ANN. tit. 13, § 533. Niagara counters that
the issue of subject-matter jurisdiction has already been resolved in an order issued
by Honorable Denise M. Francois,? and such order must “continue to govern the
lissue] in subsequent stages of the same case,” pursuant to the law of the case
doctrine. Greene v. V.I. Water and Power Auth., 67 V.I 727 (V.I. 2017) (citing Hodge
v. Bluebeard’s Castle, Inc., 62 V.1. 671, 688 (V.I. 2015)). In its reply, Bread Dough

notes that Judge Francois merely stated that “there is no evidence before the Court

? Warner and Bread Dough previously filed a pro se motion to dismiss, which the Court treated as a
motion challenging subject matter jurisdiction. However, the Court denied the motion. See Order
Denying Def.’s Mot. to Dismiss, issued Nov. 10, 2020, by Hon. Denise M. Francois.
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to suggest that Niagara Distributors’ sale of supplies and food products to Bread
Dough, Inc. could be construed as doing business in the Virgin Islands for the
purposes of the Corporate Franchise Tax Act.” Therefore, Bread Dough argues, the
issue of subject-matter jurisdiction has not been explicitly decided. Additionally,
Bread Dough notes that subject-matter jurisdiction can be raised at any time during
the pendency of a case, citing V.I. R. Civ. P. 12.
1. Law of the Case Doctrine

The V.I. Supreme Court has adopted the law of the case doctrine. V.I. Taxi
Assoc. v. V-I. Port Auth., 67 V.1. 643, 672 (V.I. 2017). The doctrine says that “when a
court decides upon a rule of law, that decision should continue to govern the same
issues in subsequent stages of the same case.” /d. at 669 (quoting Arizona v.
California, 

 (1984)). In a recent case from the Superior Court of the
Virgin Islands, a defendant sought dismissal for lack of subject-matter jurisdiction.
Jones v. Jerome, 

 (V.1. Super. Ct. 2015). The Court had previously
denied a motion to dismiss filed on the same grounds, though it had been filed by the
opposing party. Jd. However, the court rejected the law of the case argument, finding
the doctrine does not bar dismissal of the case. Jd. The court in Jones v. Jerome found
the doctrine was purely discretionary under the circumstances of that case because
the court can revise previous orders at any time before entry of judgment adjudicating
all claims. /d. at n.2 (citing Stryker Corp v. TIG Ins. Co., No. 1:05-CV-51, 

, at *3-5 (W.D. Mich. Jan. 15, 2014) (stating “the law of the case
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doctrine posits that when a court decides upon a rule of law, that decision should
continue to govern the same issues in subsequent stages in the same case. . . [T]his
aspect of the law of the case doctrine does not limit the court's power, but merely
directs its discretion”)).

The Jones case is instructive for the instant matter. The order entered by
Judge Francois denies Bread Dough’s motion to dismiss, because “there is no
evidence” that Niagara “could be construed as doing business in the Virgin Islands
for the purposes of the Corporation Franchise Tax Act”.3 However, Judge Francois’
order does not explicitly state the suit has or lacks subject-matter jurisdiction, and
the issue of subject-matter jurisdiction may be raised at any time during the
pendency of a case. V.I. R. Civ. P. 12(b). Further, as informed by the Jones case, a
court need not find that a previous order denying dismissal for lack of subject-matter
jurisdiction activates the law of the case doctrine, and may revise such intermediate
decisions at its discretion, pending final adjudication. Therefore, the Court agrees
with Bread Dough that the law of the case doctrine need not apply in this context and
will assess Niagara’s claim for lack of subject-matter jurisdiction.

2. Subject-Matter Jurisdiction
“The applicable standard of review under Rule 12(b)(1) differs depending on

whether the moving party has made a facial attack or a factual attack on the court's

3 See Order Denying Def.’s Mot. to Dismiss, issued Nov. 10, 2020, by Hon. Denise M. Francois. Notably, the first
motion to dismiss filed by David Warner, on February 11, 2020, and adjudicated by Judge Francois, did not specify
a legal basis on which the Court should dismiss the matter. Therefore, that court surmised the defendants were
requesting dismissal for lack of subject-matter jurisdiction under V.I. R. Civ. P. 12(b)(1).
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power to hear the case.” Tutu Park, Ltd. v. Gov't of the Virgin Islands, 

 { 6 (quoting James-St. Jules v. Thompson, No. SX-09-CV-136, 

 *2, 

 *6 (V.I. Super. Ct. June 25, 2015) (unpublished)).
{In a facial attack, the argument assesses a claim on its face, specifically arguing its
failure to sufficiently establish subject matter jurisdiction. Racz v. Cheetham, 

 § 8 (citing Williams v. Juan F. Luis Hosp., 

 4 3).
When considering a facial attack, the court accepts the allegations within the
complaint as true, considering them in the light most favorable to the non-moving
party. Jd. (citing Williams, § 4). In contrast, a factual attack occurs “when a defendant
disputes the existence of certain jurisdictional facts .. .” and a factual attack may
only occur “after the allegations of the complaint have been controverted.” Tutu Park,
Ltd. 4 6 (quoting James-St. Jules, 

 at *7-8, 

,
at *3). In considering a factual challenge, the court “does not presume the plaintiff's
allegations are true,” Hacz, at § 9, but asks the court to consider the evidence and
satisfy itself of its jurisdictional authority to hear the case. Hansen v. Governor Juan
F. Luis Hosp. & Med. Ctr., Civ. No. SX-15-CV-509, 

, at *3 (Jun. 22,
2018). Therefore, in a factual attack, “the burden of proving the existence of subject
matter jurisdiction lies with the plaintiff.” Tutu Park, Ltd., at 4 6 (quoting James-St.
Jules, 

 at *7, 

, at *3).

In this matter, Bread Dough is making a factual attack because it disputes the

existence of appropriate jurisdictional facts and Niagara’s authority to bring this
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matter. Specifically, Bread Dough states that Niagara failed to register with the
Lieutenant Governor’s office, as is required under V.I. CODE. ANN. tit. 13, § 401, such
that Niagara is effectively evading payment of franchise taxes under 13 V.I.C. § 533,
non-payment of which bars filing suit in the Virgin Islands. Accordingly, the burden
of proving the existence of subject-matter jurisdiction lies with the plaintiff. Tutu
Park, Ltd., at J 6.

Title 13, section 531(a) of the Virgin Islands Code requires the payment of
franchise tax by every U.S. Virgin Islands corporation and by every foreign
corporation qualified to do business or doing business in the U.S. Virgin Islands. 4A
foreign corporation qualifies to do business in the U.S. Virgin Islands by complying
with the prerequisites of 13 V.I.C. § 401(a), including filing documentation with the
Lieutenant Governor of the territory.5 Because Niagara is a foreign corporation, it
must adhere with such requirements. However, it is undisputed that Niagara has not
registered as a foreign corporation: therefore, Niagara is not “qualified” to do business
in the Virgin Islands. Further, V.I. CODE. ANN. tit. 13, § 530(b) states in part that “a
foreign corporation shall be deemed to be doing business in the United States Virgin

Islands if it maintains an office in the United States Virgin Islands” (emphasis

4 Title 13 V.ILC. § 531(a) states, in pertinent part: “Every corporation incorporated under the laws of the United States
Virgin Islands and every foreign corporation qualified to do or doing business in the United States Virgin Islands
shall pay to the Lieutenant Governor for the use of the Government of the United States Virgin Islands, a franchise
tax...” {emphasis added).

> Title 13 V.LC. § 401(a) states, in pertinent part: “No corporation created by the laws of any foreign country or any
state of the United States, or the laws of the United States, shall do any business in the United States Virgin Islands
through or by branch offices, agents or representatives located in the United States Virgin Islands until it shall have
filed in the office of the Lieutenant Governor. . .”
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added). There is no indication that Niagara maintains an office in the U.S. Virgin
Islands, and, in fact, the affidavit offered by Niagara’s CEO, Janet Lucci, explicitly
states that Niagara has no office, agent, or representative in the U.S. Virgin Islands.§
Accordingly, though Niagara is a foreign corporation, it is neither qualified nor
registered to do business in the U.S. Virgin Islands under the statutory definitions.
Notably, the District Court of the Virgin Islands has held that the lack of an
office in the territory “alone is not dispositive because section 530(b)'s definition of
‘doing business’ is not all-inclusive”. M&T Mortg. Corp. v. White-Hamulton, 41 V.1.
269, 271 (D.V.I. Apr. 26, 1999). The phrase “doing business” also refers to “activities
which constitute a substantial part of the company's ordinary or customary business.”
Id. (quoting Am. Fid. Fire Ins. Co. v. Construcciones Werl, Inc., 12 V.1. 325, 367 (1975)
(emphasis in original)). For example, in M&7' Mortgage Corporation v. White-
Hamilton, the District Court of the Virgin Islands found that, of the corporation’s
154,570 total mortgages, only 34 originated in the Virgin Islands. Jd. Therefore, that
court found the operations in the Virgin Islands did not amount to a “substantial”
portion of the corporation’s ordinary business, such that the court could not find that
the corporation was “doing business” in the Virgin Islands. /d. Similarly, in the
instant matter, in its opposition Niagara states that its “business is on a global scale
generating millions of dollars in revenues of which less than 1% is earned in the

Virgin Islands,” citing a statistic sworn to by Niagara CEO Janet Lucci in her

6 See Affidavit of Janet Lucci, signed Feb. 5, 2021, at J 6.
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affidavit.7 There is no other information before the Court contradicting this statistic.
The Court finds this to be such an insignificant amount of Niagara’s overall business
that it cannot be construed as “substantial” and therefore, following the District
Court’s decision in M&T Mortgage Corporation, this Court finds that the quantity of
business that Niagara conducts in the Virgin Islands does not rise the level necessary
to find that Niagara is “doing business” in the Virgin Islands.

In several cases before Virgin Islands courts, litigants have made the same
argument Bread Dough makes here: because their opponent is foreign, unregistered,
and unqualified to do business in the Virgin Islands, the litigants have argued the
suit must be barred under the Virgin Islands Code. See Standex Co. v. John, 

 (V.I. 1992); Inland Northwest Health Servs. v. Gov't of the V.L, No. SX-20-CV-
24, 

 (V.I. Super. Ct. June 22, 2016). In Standex Co. v. John, Standex
was a New York corporation with some business in the Virgin Islands. Standex Co.,

. It sold and delivered bakery ingredients and materials to the
defendants, who refused to pay. Jd. The defendants moved to dismiss the complaint
on grounds that Standex lacked capacity to maintain the action because it was not
registered to do business in the Virgin Islands and did not pay a franchise tax. Jd. In
Inland Northwest Health Services v. Government of the Virgin Islands, the plaintiff
was a Washington corporation, doing business in the Virgin Islands. Inland

Northwest Health Servs., 

, at *1. The plaintiff alleged that it

? See Affidavit of Janet Lucci, signed Feb. 5, 2021, at ¥ 4.
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provided services to the defendant and sent relevant invoices, that the defendant did
not dispute the invoices or the amount due, but that the defendant did not pay for the
services provided. /d. The courts in both cases concluded that although the opponent
was a foreign corporation, unregistered to do business in the Virgin Islands, and
unqualified to do such business, the V.I. Code does not bar such corporations from
maintaining an action in the Virgin Islands. Standex Co., 

 (stating the
“Court resists the temptation to declare that what we have in this instance is a mere
legislative oversight and then read into the statute what is not in its text .. . based
upon the dictate of the relevant statutory provisions, the Court holds that a non-
qualified foreign corporation may not be barred from maintaining an action in the
Virgin Islands”); InJand Northwest, 

, at *4 (finding that “INHS was
neither a foreign corporation qualified to do business nor doing business in the
Territory, [so] it was not obligated to pay franchise tax pursuant to the provisions of
13 V.LC. § 531(a). Because INHS was not so obligated, it is not barred from
commencing or maintaining this action pursuant to 13 V.I.C. § 533(a)’).

The analysis in the foregoing cases tracks the instant situation. This Court
finds that Niagara is neither qualified to do business nor doing business under the
definitions in the V.I. Code and relevant case law, so Niagara is not required to pay
franchise taxes, pursuant to the language of 13 V.I.C. § 531{a). Accordingly, the
nonpayment of such taxes cannot bar Niagara from filing suit in the Virgin Islands.

The parties make no other arguments—and the Court sees no other basis—that
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subject-matter jurisdiction is lacking. Therefore, the Court will deny the portion of

Bread Dough’s motion requesting dismissal for lack of subject-matter jurisdiction.

II. This matter does not fail to state a claim upon which relief can be granted.
A. Legal Standard

The Virgin Islands is a notice pleading jurisdiction for purposes of stating a
claim. V.J. R. Civ. P. 8 (a)(2). The purpose of the notice pleading standard is to avoid
“dismissals of cases based on failure to allege specific facts which, if established,
plausibly entitle the pleader to relief.” V.I. R. Civ. P. 8 Reporter's Note: Mills-
Williams v. Mapp, 67 V.1. 574, 585 (V.I. 2017). Thus, the Court takes an “even more
liberal approach than that prescribed by Virgin Islands precedent applying Fed. R.
Civ. P. 8(a)(2) when considering if a complaint adequately alleges facts that put an
accused party on notice of claims brought against it.” Brathwaite v. H.D.V.I. Holding
Co., Inc., No. ST-16-CV-764, 

, at *2 (V.I. Super. Ct. May 24, 2017).
To evaluate a motion to dismiss for failure to state a claim, a court “merely tests
whether the claim has been adequately stated in the pleading:;” it does not address
the merits of the claim. Ox/ey v. Sugar Bay Club & Resort Corp., No. ST-18-CV-96,

, at *2 (V.I. Super., May 14, 2018).

B. Analysis

In the instant matter, Bread Dough alleges that Niagara has failed to

adequately state a claim for debt. Under Virgin Islands common law, an action for

debt requires the plaintiff demonstrate that (1) the defendant owes a certain amount
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and (2) the defendant is or should be obligated to pay that amount. Greenleaf
Commons, LLC v. St. John Day Spa & Salon, LLC, 

 4 9 (citing
Carlos Warehouse v. Thomas, 64 V.1. 173, 193 (V.I. Super. Ct. 2016)).

In Niagara’s complaint, it argues that “defendants executed invoices amassing
a total debt of $55,289.80,” thereby satisfying the first requirement to state a claim
for debt. As for the second requirement, the complaint states that “defendantl ] David
J. Warner purchased supplies and food products in his individual capacity in the
furthering of defendant Bread Dough, Inc.’s business in the U.S. Virgin Islands,” and
Niagara “served a demand for payment notice on defendants, and they have failed or
refuse to tender payment without just cause or legal excuse.”® Niagara also attached
a demand letter to its original complaint, stating that defendants’ “sporadic payments
in small sums of money is unacceptable”.9 The Court determines that Niagara has
claimed facts that, if true, demonstrate Bread Dough and Warner are obligated to
pay Niagara for the unpaid debts claimed. Therefore, Niagara has also satisfied the
second requirement to state a claim for debt.

Accordingly, under the standard of review for a V.I. R. Civ. P. 12(b)(6) motion,
“the claim has been adequately stated in the pleading,” and the Court need not yet

evaluate the issues on the merits. The Court therefore finds that Niagara has

® Compl. at 7, 8.
* Compl., attached Exhibit “Demand Letter for Full Payment”.
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satisfied the notice requirements, so the portion of Bread Dough’s motion alleging
Niagara failed to state a claim upon which relief could be granted will also be denied.

CONCLUSION

For the reasons set forth herein, Defendant Bread Dough’s motion to dismiss
will be denied. Although Niagara is a foreign corporation, unregistered and
unqualified to do business in the Virgin Islands, it is not performing a “substantial”
amount of business in the Virgin Islands. Accordingly, the Court finds it is not subject
to franchise taxes and therefore is not barred from bringing suit in the Virgin Islands
for such nonpayment. Therefore, the 12(b)(1) motion for lack of subject-matter
jurisdiction is denied. Additionally, Niagara has satisfied the notice pleading
requirements for stating a claim for debt, so the 12(b)(6) motion is also denied.

An order consistent herewith will immediately follow.

DATED: March 18, 2022 LAV ZZ- 72 LOELR _

Kathleen Mackay
Judge of the Superior Court
ATTEST: of the Virgin Islands
TAMARA CRETE
Clerk ist the Cuurt

A —
TOYA C \a 18 12092

Court Clerk Supervisor >
IN THE SUPERIOR COURT OF THE VIRGIN ISLANDS
DIVISION OF ST. THOMAS AND ST. JOHN

NIAGARA DISTRIBUTORS, INC., )
) CASE NO. ST-2019-CV-00656
Plaintiff, )
) ACTION FOR DEBT
vs. )
)
DAVID J. WARNER and BREAD DOUGH, )
INC. d/b/a BREADS AND CAKES, )
)
Defendants. )
)
ORDER

THIS MATTER is before the Court on Defendant Bread Dough, Inc. d/b/a
Breads and Cakes’ Motion to Dismiss. In accordance with the Memorandum Opinion
entered on this day, it is hereby

ORDERED that the Motion to Dismiss is DENIED; it is further

ORDERED that Defendant Bread Dough shall file an answer to the complaint

within twenty-one (21) days of entry of this Order; it is further

ORDERED that by April 30, 2022, the parties shall conduct a Scheduling
Conference pursuant to Rule 26(f) of the Virgin Islands Rules of Civil Procedure and
shall submit to the Court by May 15, 2022 a written report setting forth a proposed
discovery plan, together with a proposed order adopting the discovery plan as the

Scheduling Order in this case; and it is further
Magara Distributors, Inc. v. David J. Warner et al
Case No. ST-2019-CV-00656

Order

Page 2

ORDERED that copies of this Order and the Memorandum Opinion shall be

distributed to counsel of record.

DATED: March /&. 2022 _ ¢ VE Ajue ar

Kathleen Mackay
Judge of the Superior Court
ATTEST: of the Virgin Islands
TAMARA CHARLES
Clerk {the mec

BY: ees
LA oe RA
Court Clerk MACHO Ys IS, oo ry