Adelson v. Hananel

• Decision Date: 13 July 2011
• Docket Number: No. 09–2231.,09–2231.
• Citation: 652 F.3d 75,32 IER Cases 860
• Parties: Sheldon G. ADELSON, Plaintiff, Appellee,v.Moshe HANANEL, Defendant, Appellant.
• Court: U.S. Court of Appeals — First Circuit

652 F.3d 75

32 IER Cases 860

Sheldon G. ADELSON, Plaintiff, Appellee,

v.Moshe HANANEL, Defendant, Appellant.

No. 09–2231.

United States Court of Appeals, First Circuit.

Heard Oct. 7, 2010.Decided July 13, 2011.

Lawrence G. Green, with whom Lynn C. Norton and Burns & Levinson LLP were on brief, for appellant.Andrew H. Schapiro, with whom Christopher J. Houpt and Mayer Brown LLP were on brief, for appellee.Before BOUDIN and HOWARD, Circuit Judges and BARBADORO,^* District Judge.HOWARD, Circuit Judge.

Appellee Sheldon Adelson brought this declaratory action to determine rights under an oral contract that he had negotiated with appellant Moshe Hananel. In the district court Hananel argued that the agreement, pursuant to which he was employed by a company owned by Adelson, entitled him to obtain a twelve percent investment in Adelson's casino venture in Macau. Adelson claimed that their agreement was not so broad as to contemplate the Macau investment option. Rather, the contract limited Hananel to reaping twelve percent of net profits from high-tech sector investments in Israel that had been discovered, recommended and supervised by Hananel, and that were realized while he was employed by Adelson's company.

In a prior appeal of this matter, Adelson v. Hananel, 510 F.3d 43 (1st Cir.2007) (“ Adelson I ”), we reversed the district court's forum non conveniens dismissal, but we did uphold the court's determination that, under the prima facie standard, Hananel was subject to specific personal jurisdiction. After a three-week bench trial on remand, the district court ruled in favor of Adelson, declaring that Hananel did not hold an option to obtain a twelve percent interest in Adelson's Macau casino. Adelson v. Hananel, 641 F.Supp.2d 65 (D.Mass.2009) (“ Adelson II ”). Hananel appeals from this judgment, arguing that the district court lacked personal jurisdiction, erroneously assigned to him the burden of proof, abused its discretion regarding a missing witness, and made factual errors regarding the formation and performance of the contract. We affirm.

I. Background

Hananel is a native, citizen, and resident of Israel. Adelson is a U.S. citizen and a permanent resident and domiciliary of Nevada, where he votes, owns property, and holds a driver's license. Adelson is also a native of Massachusetts and a current Massachusetts homeowner. He has worldwide business connections and investments, and he owns a warren of businesses known as the “Interface Group.”

On the basis of the disputed oral contract negotiated with Adelson, Hananel worked for one of Adelson's companies, Interface Partners International, Ltd. (“IPI”), from approximately 1996 to 2000. IPI is a Delaware corporation that Adelson founded in 1994 for the purpose of investing in Israel, with a particular focus on Israel's high-tech sector.

During the time period relevant to this case, IPI had offices in Needham, Massachusetts, and Ramat Gan, Israel. Hananel was based in Israel and was responsible for seeking investment opportunities there. Although IPI did not have regular employees working in Needham, it received ongoing legal and financial advice through frequent communications with one of the Interface Group companies co-located there, Interface Group Massachusetts (“IGM”). IGM personnel in the Needham office who provided such advice included IGM's general counsel Paul Roberts, who also described himself as “counsel to IGI”, and IGM's CFO Stephen O'Connor. There was testimony at trial that IPI's funding customarily came from Adelson's personal account in Las Vegas, Nevada, but not before passing through the IPI Massachusetts “office” as a capital contribution to IPI Massachusetts that was then “lent” to IPI Israel. Hananel made periodic calls to the Needham office and sent fax transmissions there at least monthly, including budget proposals for approval. He made one brief visit to the Needham office in late 1995, just before commencing his duties for IPI, and he later attended a meeting in Massachusetts to seek business opportunities in his role as chairman of a company in which IPI had invested.

The parties' evidence about the terms of Hananel's compensation was irreconcilable. As the district court accurately described the testimony:

In the discussions regarding Hananel's employment, it is undisputed that Adelson and Hananel agreed he would have a salary of $100,000 a year. They also agreed that Hananel would somehow receive 12% of the investments with which he was involved while at IPI.... Adelson and Hananel have different memories of the details of the twelve percent. Adelson testified that they agreed that Hananel would receive 12% of the net profits only of high tech investments in Israel that Hananel found, recommended, and supervised and which came to fruition while he was employed by IPI, but only so long as he remained employed there. Hananel testified that they agreed that he would receive “options” of up to 12 percent on any investment he or the Israeli office “initiated” outside the United States without any other geographic or time limitations so long as Hananel put up the proportionate costs of the investment at any point.

Adelson II, 641 F.Supp.2d at 72.

In this appeal, Hananel argues, as to jurisdiction, that differences between the prima facie facts determined before the first appeal and the facts as later found by the district court at the merits trial undermine our previous decision on personal jurisdiction. He draws attention to prior references, by both the district court and by us, to Adelson being a resident of Massachusetts when in fact he was a resident of Nevada, and he emphasizes that at trial the district court concluded that the contract was formed in Israel rather than in Massachusetts. As noted, Hananel also presses claims that the district court erred in assigning the burden of proof to him rather than to Adelson; that it should have ordered an adverse inference based on the “missing witness” rule; and that the court misapprehended the facts surrounding both the formation of and his performance under the contract.

II. Jurisdiction

General jurisdiction over Hananel was not alleged, and he argues that the district court also lacked specific jurisdiction over him. We review the jurisdictional issue de novo. Barrett v. Lombardi, 239 F.3d 23, 27 (1st Cir.2001). We concluded in Adelson I that the district court had personal jurisdiction over Hananel under the prima facie standard, and that Massachusetts was not an inconvenient forum. Adelson I, 510 F.3d 43. We are not persuaded that the facts as found at trial undermine our previous decision, and we conclude that Hananel's Massachusetts contacts support the district court's exercise of personal jurisdiction.

To establish specific personal jurisdiction over Hananel, Adelson “must demonstrate that the Massachusetts long-arm statute grants jurisdiction over Hananel and that the exercise of that jurisdiction comports with the Due Process Clause of the Fifth Amendment.” Adelson I, 510 F.3d at 48 (internal citation omitted). We have construed the Massachusetts long-arm statute ¹ as being coextensive with the limits permitted by the Constitution. We thus turn directly to the constitutional test for determining specific jurisdiction, see Daynard v. Ness, Motley, Loadholt, Richardson & Poole, P.A., 290 F.3d 42, 52 (1st Cir.2002), which has “three distinct components, namely, relatedness, purposeful availment (sometimes called ‘minimum contacts'), and reasonableness,” Hannon v. Beard, 524 F.3d 275, 282 (1st Cir.2008) (internal citation omitted). See also Astro–Med, Inc., v. Nihon Kohden America, Inc., 591 F.3d 1, 9 (1st Cir.2009).

A. Relatedness

To demonstrate “relatedness,” Adelson must show “ ‘a demonstrable nexus between [his] claims and [Hananel's] forum-based activities, such ... [that] the litigation itself is founded directly on those activities.’ ” Hannon, 524 F.3d at 280 (quoting Mass. Sch. of Law at Andover v. Am. Bar Ass'n, 142 F.3d 26, 34 (1st Cir.1998)). “[T]he relatedness test is a ‘flexible, relaxed standard,’ ” N. Laminate Sales, Inc. v. Davis, 403 F.3d 14, 25 (1st Cir.2005) (quoting Pritzker v. Yari, 42 F.3d 53, 61 (1st Cir.1994)), and the analysis focuses on the relationship between the defendant and the forum. Hannon, 524 F.3d at 283 (citing Sawtelle v. Farrell, 70 F.3d 1381, 1389 (1st Cir.1995)); see also Goodyear Dunlop Tires Operations S.A. v. Brown, ––– U.S. ––––, 131 S.Ct. 2846, 2851, 180 L.Ed.2d 796 (2011) (“Specific jurisdiction ... depends on an ‘affiliatio[n] between the forum and the underlying controversy’ ”); J. McIntyre Machinery, Ltd. v. Nicastro, ––– U.S. ––––, 131 S.Ct. 2780, 2788, 180 L.Ed.2d 765 (2011) (Kennedy, J.) (quoting Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414, n. 8, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984)) (“submission through contact with and activity directed at a sovereign may justify specific jurisdiction ‘in a suit arising out of or related to the defendant's contacts with the forum’ ”). Because this is a contract dispute, in examining the defendant's relationship to the forum “we look to whether ‘the defendant's activity in the forum state was instrumental either in the formation of the contract or its breach.’ ” Adams v. Adams, 601 F.3d 1, 6 (1st Cir.2010) (quoting Adelson I, 510 F.3d at 49). We may also consider whether the defendant was “subject to substantial control and ongoing connection to [Massachusetts] in the performance of the contract.” Id. (internal quotation marks and citations omitted); cf. Hahn v. Vermont Law School, 698 F.2d 48, 49 (1st Cir.1983) (“less [than substantial contacts are] required to support jurisdiction when the cause of action arises from the defendant's contacts with the forum ... than when it does not.”).²

Here, Hananel's contacts to the forum are directly related to his fulfillment of the terms of his employment contract as he claims them to be. As the...