District Court Finds Personal Jurisdiction over UK Managing Partner of California Investment Fund Company

The World in U.S. Courts: Summer and Fall 2016 - Personal Jurisdiction/Forum Non Conveniens/ Foreign Sovereign Immunity Act (FSIA)

Chassin Holdings Corp. v. Formula VC Ltd., U.S. District Court for the Northern District of California, April 19, 2016

This case involves two defendants jointly accused of fraud, violations of securities laws, and contractual and fiduciary breaches, all related to a failed venture capital firm.  One defendant, Formula VC Ltd., is a Cayman Islands company with its principal place of business in California.  The other defendant, Andrey Kessel, is a UK citizen and one of two managing partners of Formula VC. 

The District Court in California first considered defendant Kessel’s argument that it lacked personal jurisdiction over him, stating that it must determine whether Kessel’s conduct satisfied the two requirements of the Due Process Clause of the U.S. Constitution: That he have minimum contacts with the U.S., and that the exercise of jurisdiction would satisfy “traditional notions of fair play and substantial justice” and thus be reasonable. 

With respect to Chassin’s claim under the Securities Exchange Act of 1934, the Court observed that claims could be presented in any U.S. district and therefore the jurisdictional inquiry considered the defendants’ contacts with the U.S. as a whole, not just with the forum State.  Further, the Court noted that the plaintiff could take advantage of the jurisdictional test applied in either tort or contract cases—respectively, whether the defendant “purposefully directed” its conduct towards the forum, or whether it “purposefully availed” itself of the protection of the forum’s laws.  Given these standards, the Court found minimum contacts to exist.  First, Kessel had set up bank accounts in California and operated investment funds through those accounts.   Second, Kessel exercised control over the venture capital firm at issue in the litigation and established minimum contacts with the State of California through his involvement in that corporation, which had its principal place of business in California.  Third and finally, the Court found that Kessel purposely availed himself of the forum by taking advantage of U.S. laws and capital markets. 

The Court also found that its exercise of personal jurisdiction over Kessel would be reasonable, not least of all because Kessel failed to argue in his motion to dismiss that such exercise would be unreasonable.  The Court dismissed any idea that Kessel would be burdened by having to defend a suit in the U.S. given the conveniences of modern transportation and telecommunication, and also found that an exercise of jurisdiction would be proper given the absence of any expressed interest on the part of the UK in adjudicating plaintiff’s allegation.

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