District Court Finds Personal Jurisdiction over Foreign Executive for Tort He Knew Would Have a Detrimental Effect in U.S.

The World in U.S. Courts: Fall 2015 - Personal Jurisdiction/Forum Non Conveniens | September.25.2015

Marble Bridge Funding Group, Inc. v. Liquid Capital Exchange, Inc., U.S. District Court for the Northern District of California, September 25, 2015

Marble Bridge Funding Group sued Liquid Capital Exchange and two of its executives—Sol Roter (a Canadian citizen) and Bruce Dawson (a U.S. citizen)—claiming that they had misrepresented and fraudulently concealed facts regarding a transaction between Marble Bridge and Liquid Capital Exchange. Each Defendant moved to dismiss the case for lack of personal jurisdiction.

The District Court began by explaining its three-part test for exercising specific personal jurisdiction. First, the foreign defendant must "purposefully direct his activities or consummate some transaction with the forum" or a forum resident. Second, the Plaintiff's claim must "arise[] out of or relate to" the Defendant's activities in the forum. Third, exercising jurisdiction must be reasonable and comport with fair play and substantial justice.

The Court explained that, in tort cases, the first part of the test focuses on where the effects of the defendant's actions were felt in order to determine if the defendant "purposefully directed" its actions toward the forum. This inquiry, in turn, required a consideration of whether the defendant (i) committed an intentional act, (ii) expressly aimed at the forum state, (iii) causing harm that the defendant knew was likely to be suffered in the forum.

Beginning with Liquid Capital Exchange and Dawson, the Court concluded that, while Marble Bridge alleged intentional action by both defendants, it did not explain how the conduct was expressly aimed at anyone in California. The Court cited precedent holding that such claims of "untargeted negligence" cannot support the assertion of personal jurisdiction. Therefore, the Court concluded that it lacked personal jurisdiction over Liquid Capital Exchange and Dawson.

Turning to Roter, the Court found that Marble Bridge had sufficiently alleged that Roter purposefully directed his activities toward California. At the time of the transaction, Marble Bridge had identified itself to Roter by name and address, and Roter contacted Marble Bridge by phone and e-mail. The Court rejected Roter's contention that the contacts were minimal, noting that the quality—not quantity—of contact is the key inquiry. Furthermore, the fact that Roter's contacts were not themselves harmful was irrelevant. Thus, the Court found that Roter had purposefully directed his actions toward Plaintiff.

The Court held that Plaintiff easily satisfied the second step of the personal jurisdiction analysis. Roter knowingly contracted with a California corporation, and but for that agreement Plaintiff would not have suffered the injury alleged.

Finally, the Court determined that exercising personal jurisdiction over Roter would be reasonable and thus constitutional. It noted that the burden had shifted to Roter to make a "compelling case" that exercise of jurisdiction would be unconstitutional, and stated that its analysis would focus on the following factors: (1) the extent of the defendants' purposeful injection into the forum state's affairs; (2) the burden on the defendant of defending in the forum; (3) the extent of the conflict with the sovereignty of the defendant's state; (4) the forum state's interest in adjudicating the dispute; (5) the most efficient judicial resolution of the controversy; (6) the importance of the forum to the plaintiff's interest in convenient and effective relief; and (7) the existence of an alternative forum.

The first factor favored jurisdiction because Roter's actions in contracting with Plaintiff qualified as an injection into California affairs. Regarding the second factor, Roter argued that the inconvenience of traveling between Canada and the U.S., working in an unfamiliar legal system, weighed in his favor. But the Court found this unpersuasive, noting that technological advances have significantly reduced such inconvenience. Because Roter's alleged actions all occurred in Canada, the Court held that the third factor was in his favor; however, the fourth factor weighed against Roter, in light of California's strong interest in providing a forum to injured residents. The Court held that the fifth factor was neutral because relevant witnesses were evenly distributed between California and elsewhere. The Court afforded the sixth factor, the plaintiff's convenience, little weight even as it noted that Marble Bridge's interest in litigating in California was enhanced due to the presence of ongoing, related litigation in the forum. As to the seventh factor, Marble Bridge agreed alternate fora existed in which the dispute could be heard, but the Court considered this admission irrelevant because Roter had failed to establish that California was an unreasonable forum.

Considering all the factors together, the Court concluded that exercising jurisdiction in California was constitutionally reasonable. Therefore, the Court held that personal jurisdiction over Roter was appropriate, while it lacked personal jurisdiction over the remaining Defendants.

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