The World in U.S. Courts: Winter 2015 - Personal Jurisdiction
November.18.2014
Plaintiff Alpha Capital Anstalt, a Lichtenstein-based company, brought an action in federal court in New York alleging securities fraud against New Generation Biofuels (NGBF) and its founders, officers, and directors, including the Chief Technology Officer, Italian resident Andrea Festuccia. Alpha Capital alleged that it was fraudulently induced to invest in NGBF as a result of defendants’ misrepresentations regarding the viability of NGBF’s pending patent applications, the value of a master license agreement covering those pending patents, and concealed NGBF stockholdings and sales.
Festuccia had never signed any of the securities filings at issue, though he signed and approved all of NGBF’s patent applications, including those submitted in the United States, and approved valuations of the Master License Agreement that were the basis of values disclosed in NGBF’s financial statements and SEC filings.
Alpha Capital’s claims were based on U.S. securities laws that provide for worldwide service of process and permit the exercise of personal jurisdiction to the limit of the Due Process Clause of the U.S. Constitution. In determining whether it had specific personal jurisdiction over Festuccia, the Court considered whether he had “purposefully availed” himself of the privilege of doing business in New York and thus could foresee being sued in the U.S. over claims arising from his activities. The Court found that specific personal jurisdiction existed, noting that NGBF was a publically-traded U.S. company and Festuccia was aware of and responsible for NGBF’s statements regarding the viability of its patents.