Eighteen Seventy L.P. v. Jayson

• Decision Date: 04 February 2020
• Docket Number: Case No. 19-CV-22-SWS
• Citation: 532 F.Supp.3d 1125
• Parties: EIGHTEEN SEVENTY L.P. and Marie Kennedy Foundation, Plaintiffs, v. Richard JAYSON, Defendant.
• Court: U.S. District Court — District of Wyoming

532 F.Supp.3d 1125

EIGHTEEN SEVENTY L.P. and Marie Kennedy Foundation, Plaintiffs,

v.Richard JAYSON, Defendant.

Case No. 19-CV-22-SWS

United States District Court, D. Wyoming.

Signed February 4, 2020

Filed February 5, 2020

Amanda F. Esch, Davis & Cannon, Cheyenne, WY, Aviva Wernick, Pro Hac Vice, Jeffrey B. Goldberg, Pro Hac Vice, Hughes Hubbard & Reed LLP, Miami, FL, Jena R. Akin, Davis & Cannon LLP, Sheridan, WY, for Plaintiffs.

Michael B. Rosenthal, Hathaway & Kunz, Cheyenne, WY, for Defendant.

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS

Scott W. Skavdahl, United States District Judge

This matter comes before the Court on Defendant Richard Jayson's Motion to Dismiss for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2) (ECF No. 8). The Court, having carefully considered the briefs and materials submitted in support of the motion, the response in opposition thereto, and being otherwise fully advised, finds Defendant's Motion to Dismiss should be GRANTED.

BACKGROUND

This lawsuit arises out of a series of investments made in a company called CRUPE Pte. Ltd. and its subsidiary, CRUPE Framing GmbH (collectively, "CRUPE"). Plaintiffs Eighteen Seventy L.P. and Marie Kennedy Foundation are a limited partnership and a private foundation whose activities primarily involve making investment decisions. (Comp. ¶¶ 3–7, ECF No. 1.) Both Plaintiff entities were formed under the laws of Delaware with a principal place of business situated in Big Hom, Wyoming.¹ Id. ¶¶ 1, 6. Plaintiff Eighteen Seventy is owned by three brothers, Paul Kennedy, Peter M. Kennedy III, and John Kennedy, and managed by brothers Peter and Paul Kennedy. Id. ¶¶ 3–4. Peter and Paul Kennedy also served as President and Vice President, respectively, of Plaintiff Marie Kennedy Foundation. Id. ¶ 7. Peter and John Kennedy are residents of Wyoming, while Tenth Circuit's opinionPaul Kennedy resides in Florida. Id. ¶ 5.

CRUPE is a foreign corporation, organized under the laws of Singapore and managed in Zurich, Switzerland. Id. ¶ 8. CRUPE was founded in 2011 "to market and to sell a unique building material throughout the world." Id. ¶¶ 11, 13, 30. This "unique" material had "superior thermal, fire, acoustic, seismic and wind resistant properties" and could be built "more quickly and at a significantly lower cost" than traditional materials, such as cement or brick. (Pls.’ Ex. D at 5, ECF No. 21-4.)

The Defendant in this action, Richard Jayson, was one of CRUPE's co-founders, as well as a director of and Chief Financial Officer ("CFO") for the company. (Compl. ¶ 13.)

In November 2011, CRUPE prepared and distributed an "information memorandum" to potential investors for the purpose of financing the company's growth. See id. This memorandum offered investors shares in CRUPE, but advised the shares "have not been and will not be registered" under the securities laws of the United States, among other countries. (Def.’s Ex. 8 at 3, ECF No. 9-8.) Plaintiffs were one of several recipients of the information memorandum,² and upon consideration of these materials, they agreed to invest. (Def.’s Ex. 4 ¶ 4, ECF No. 9-4.) In January 2012, Plaintiffs reached out to CRUPE's Chief Executive Officer ("CEO") and co-founder, Stuart Richardson, who provided Plaintiffs with a standard investment agreement that would regulate "certain aspects of the [their] investments in the Company and the governing of the Company." (Pls.’ Ex. F at 6–7, ECF No. 21-6; Pls.’ Ex. B at 4, ECF No. 21-2.) Twelve other investors were also parties to this agreement.³ (Pls.’ Ex. B at 3.) The investment agreement was further accompanied by a subscription agreement, in which Plaintiffs agreed to purchase the equivalent of $3,313,000 in CRUPE preference shares. (Pls.’ Ex. C, ECF No. 21-3.)

After signing the initial investment and subscription agreements, Plaintiffs continued their relationship with CRUPE and made several additional investments in the company. From 2012 to 2016, Plaintiffs purchased several million dollars’ worth of additional CRUPE preference shares, acquired portions of the company's debt, and provided financing to the company through loan agreements. (Compl. ¶¶ 8–9, 45.) In total, Plaintiffs suffused the company with $10,488,000, making them CRUPE's largest investor. Id. ¶¶ 27–70. Paul Kennedy also accepted a position as a member of CRUPE's board of directors, and in 2015 became Chairman. (Def.’s Ex. 4 ¶ 2.)

Plaintiffs contend that, in an effort to induce these and other investments, CRUPE's CEO Stuart Robertson, and the Defendant, CFO Richard Jayson, made a series of misrepresentations and omissions about CRUPE's assets, financial prospects, and other material information. (Compl. ¶¶ 10–18.) Among these misrepresentations were statements that CRUPE owned and controlled certain patented intellectual property related to the unique building material, when in fact Mr. Robertson later transferred the intellectual property out of CRUPE. Id. ¶¶ 39–43. Plaintiffs further allege the information memorandum provided to investors stated CRUPE's "sales order book" was in excess of $600 million, but in reality CRUPE's revenue from 2012 to 2015 only reached $3,000,000 in the aggregate, much of which was from steel sales rather than sales of the building material. Id. ¶¶ 47–48.

Following Mr. Robertson and Mr. Jayson's allegedly fraudulent activity, successive legal proceedings took place. In addition to an arbitration in Switzerland, two other lawsuits were filed. The first action was brought on behalf of CRUPE against Mr. Robertson in Singapore. (Def.’s Ex. 9, ECF No. 9-9.) The Singapore court dismissed the lawsuit in 2016 without a decision on the merits. See id. The second action occurred in the United States; Paul Kennedy, Eighteen Seventy L.P., and the Marie Kennedy Foundation filed suit against Mr. Robertson and others in United States District Court for the Southern District of Florida, alleging fraud, negligent misrepresentation, and violations of securities laws. (See Def.’s Reply Ex. 1, ECF No. 22-1.) In March 2018, the Florida court entered a default judgment against the defendants for approximately $15 million.⁴

Plaintiffs filed the present action on January 30, 2019 in the District of Wyoming, this time against Mr. Jayson. (See ECF No. 1.) The complaint asserts two causes of action—gross negligence and breach of fiduciary duties—based upon Mr. Jayson's alleged misrepresentations to investors and his purported failure to disclose materially adverse information. Id. ¶¶ 63–75. Plaintiffs contend Mr. Jayson's conduct fell below the applicable standard of care and was not in conformity with his fiduciary duties. See id. Defendant moved to dismiss the case on July 30, 2019, arguing this Court lacks personal jurisdiction over him (ECF No. 9). Mr. Jayson is a resident of the United Kingdom and has never traveled to Wyoming. (Def.’s Ex. 1 ¶¶ 2, 24, ECF No. 9-1.) He did not physically conduct any business in Wyoming and was, during the times alleged, acting on behalf of CRUPE. Id. ¶¶ 19, 25. As a result, he avers that he is not subject to personal jurisdiction in Wyoming.

In support of personal jurisdiction, Plaintiffs contend Mr. Jayson transacted business with and caused harm to Plaintiffs in Wyoming (ECF No. 21). In particular, Plaintiffs assert Mr. Jayson: (1) drafted and reviewed the information memorandum, investment agreement, and subscription agreement sent to Plaintiffs in Wyoming, (2) signed the investment and loan agreements, which listed a Wyoming address for Plaintiffs, (3) participated in negotiations for Plaintiffs’ loan agreements, (4) communicated with Plaintiffs in Wyoming via email and in phone conversations, and (5) attended meetings in Hong Kong, China and Zurich, Switzerland where Peter Kennedy, a Wyoming resident, was present. Id. at 3–17.

STANDARD OF REVIEW

To establish that a court has personal jurisdiction over a nonresident defendant in a diversity action, the plaintiff must show that the court's exercise of personal jurisdiction would be consistent with both the forum state's long-arm statute and the Due Process Clause of the Fourteenth Amendment to the United States Constitution. Marcus Food Co. v. DiPanfilo , 671 F.3d 1159, 1166 (10th Cir. 2011). Wyoming's long-arm statute permits Wyoming courts to exercise personal jurisdiction over a defendant on any basis that is consistent with the Wyoming or United States constitutions. WYO. STAT. ANN. § 5–1–107(a) ; Black Diamond Energy Partners 2001-A Ltd. v. S & T Bank , 278 P.3d 738, 742–43 (Wyo. 2012). Because Wyoming's long-arm statute confers the maximum jurisdiction permissible consistent with due process, the personal jurisdiction inquiry can be collapsed into a single analysis under the Due Process Clause.

Emp'rs Mut. Cas. Co. v. Bartile Roofs, Inc. , 618 F.3d 1153, 1159 (10th Cir. 2010).

In accordance with due process, a federal court "may exercise personal jurisdiction over a nonresident defendant only so long as there exists ‘minimum contacts’ between the defendant and the forum State ... [and] [t]he defendant's contacts with the forum state [are] such that maintenance of the suit ‘does not offend traditional notions of fair play and substantial justice.’ " World Wide Volkswagen Corp. v. Woodson , 444 U.S. 286, 291, 100 S.Ct. 580, 62 L.E.2d 490 (1980) (quoting International Shoe Co. v. Washington , 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945) ). A defendant meets the minimum contacts requirement if it "purposefully avails itself of the privilege of conducting activities within the forum State." Hanson v. Denckla , 357 U.S. 235, 253, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958). Such conduct within the forum State "make[s] being sued there foreseeable so that the defendant could ‘reasonably anticipate’ the suit." Fireman's Fund Ins. Co. v. Thyssen Min. Const. of Canada, Ltd. , 703 F.3d 488, 493 (10th Cir. 2012) (quoting World Wide Volkswagen , 444 U.S. at 297, 100 S.Ct. 580 ). A nonresident d...