Eighteen Seventy, LP v. Jayson

• Decision Date: 26 April 2022
• Docket Number: 20-8015
• Citation: 32 F.4th 956
• Parties: EIGHTEEN SEVENTY, LP; Marie Kennedy Foundation, Plaintiffs - Appellants, v. Richard JAYSON, Defendant - Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

32 F.4th 956

EIGHTEEN SEVENTY, LP; Marie Kennedy Foundation, Plaintiffs - Appellants,

v.Richard JAYSON, Defendant - Appellee.

No. 20-8015

United States Court of Appeals, Tenth Circuit.

FILED April 26, 2022

Leah C. Schwartz, Ranck & Schwartz, LLC, Jackson, Wyoming, for Plaintiffs-Appellants.

Tyler J. Garrett, Hathaway & Kunz, LLP, Cheyenne, Wyoming, for Defendant-Appellee.

Before HARTZ, HOLMES, and PHILLIPS, Circuit Judges.

HOLMES, Circuit Judge.

This case presents an issue of whether a federal court in Wyoming has personal jurisdiction over a defendant who is domiciled and resides in the United Kingdom and has never visited Wyoming. Over the course of four years, Plaintiffs-Appellants Eighteen Seventy, LP and the Marie Kennedy Foundation (the "Kennedy Entities" or "Entities") lost more than $10 million that they invested in CRUPE Pte. Ltd. ("CRUPE") and its subsidiaries. CRUPE is a foreign company organized under the laws of Singapore and managed in Zurich, Switzerland. Believing that CRUPE's co-founder and CFO, Defendant-Appellee Richard Jayson, induced their investment losses through misrepresentations and material omissions, the Kennedy Entities sued Mr. Jayson for gross negligence and breach of fiduciary duty in the U.S. District Court for the District of Wyoming. The Entities—both of which have their principal place of business in Wyoming—averred that Mr. Jayson surreptitiously used their financial support to compensate himself and another company co-founder while failing to provide the Kennedy Entities with information about CRUPE's viability and the true nature of their investments.

Mr. Jayson, a domiciliary and resident of the United Kingdom, moved to dismiss the Kennedy Entities’ suit, pursuant to Federal Rule of Civil Procedure 12(b)(2), arguing that the court lacked personal jurisdiction over him. The district court agreed with Mr. Jayson and dismissed the complaint.

The Kennedy Entities now appeal, claiming the district court erred when it held that Mr. Jayson lacked the requisite minimum contacts with Wyoming to afford the court personal jurisdiction. They contend that Mr. Jayson purposefully directed his tortious activities at Wyoming by preparing investment documents that encouraged the Kennedy Entities’ investments and by communicating with the Entities’ owners about the investments. Because the Kennedy Entities’ losses allegedly stemmed from these actions of Mr. Jayson, they assert that they have made a prima facie showing of his minimum contacts with Wyoming. Accordingly, they urge us to hold that the court erred in determining that it lacked personal jurisdiction over Mr. Jayson and to reverse the district court's judgment and remand for further proceedings.

However, exercising jurisdiction under 28 U.S.C. § 1291, we affirm the district court's judgment dismissing this action for lack of personal jurisdiction. Stated concisely, because the Kennedy Entities assert a "purposeful direction" theory of personal jurisdiction, the operative standard calls for an inquiry into whether the Entities have shown that Mr. Jayson's acts were (1) intentional, (2) "expressly aimed" at Wyoming, and (3) done with "knowledge that the brunt of the injury would be felt" in Wyoming. Dudnikov v. Chalk & Vermilion Fine Arts, Inc. , 514 F.3d 1063, 1072 (10th Cir. 2008).

Although the Kennedy Entities meet the first prong of the purposeful direction test, they fail to satisfy the second: that is, they fail to show that Mr. Jayson expressly aimed his conduct at Wyoming. Because the Kennedy Entities’ failure to make this showing is sufficient, standing alone, to fatally undercut their efforts to show purposeful direction and, more generally, to establish a prima facie case of personal jurisdiction over Mr. Jayson, we end our analysis there and uphold the district court's judgment. The upshot is that the Kennedy Entities’ appellate challenge fails.

I

A

The Kennedy Entities are organized under the laws of Delaware. Each has a principal place of business in Big Horn, Wyoming.¹ Eighteen Seventy, LP is a limited partnership that invests in stocks, bonds, commodities, futures, and other investment instruments, including private equity, while the Marie Kennedy Foundation is a private foundation that "makes grants to qualified grantees from a pool of capital, which is invested to generate funds for grants." Aplts.’ App., Vol. I, ¶ 7, at 7 (Compl., filed Jan. 31, 2019). Two brothers—Wyoming resident Peter Kennedy and Florida resident Paul Kennedy—make the investment decisions for each Entity. A third brother, John Kennedy—also a resident of Wyoming—owns Eighteen Seventy along with Peter and Paul. In addition to each Entity having its headquarters in Wyoming, Eighteen Seventy maintains its minute book and other corporate documents in Wyoming. The record does not tell us, however, whether either entity has any Wyoming-based investments or bank accounts.²

B

In 2011, Eighteen Seventy was introduced to Stuart Robertson, CRUPE's CEO and co-founder, regarding a possible capital investment in CRUPE. CRUPE claimed to have developed a unique building substance used in construction, which derived its value from being "environmentally-friendly, seismically, thermally and acoustically superior[,] ... lighter than other building materials[,] ... [and] fire-retardant." Id. , ¶ 30, at 12. CRUPE, based in Singapore and managed in Zurich, Switzerland, sought investments around the world to develop and market this product. Prior to investing in CRUPE, the Kennedy Entities allege that they were advised that CRUPE's unique building substance was technology that could not be reverse-engineered and was protected by patents pending in the United States and abroad. Furthermore, they allegedly were assured that "the technology, patent position, know-how and registered trademarks constituted the intellectual property of CRUPE"—owned through a CRUPE subsidiary, CRUPE IP GmbH. Id. , ¶ 31, at 12–13. The Entities considered this technology (the "CRUPE IP" or "IP") to be CRUPE's most valuable asset.

Mr. Jayson, a resident of the U.K., did not participate in these initial investment-related discussions, which took place over email and in meetings held outside of the United States. As CRUPE's director and CFO, Mr. Jayson was responsible for gathering information and drafting documents for potential investors. He first became involved with the Kennedy Entities indirectly, when he helped prepare a confidential memorandum ("Confidential Memorandum") for those interested in investing in CRUPE.³ CRUPE's attorney, Andreas Bihrer, subsequently emailed the memorandum to Peter and Paul Kennedy.

After reviewing the Confidential Memorandum, Eighteen Seventy, along with eleven other international investors, entered into a written investment agreement (the "Investment Agreement") with CRUPE on February 15, 2012. See Aplts.’ App., Vol. II, at 381 (Investment Agreement, dated Feb. 15, 2012) (showing investors located in St. Lucia, the British Virgin Islands, Hong Kong, Switzerland, the United Kingdom, and Singapore); see also Aplts.’ Opening Br. at 8 (asserting that Eighteen Seventy decided to invest in CRUPE "[b]ased on the Confidential Memo and accompanying documents"). The Investment Agreement assured investors that "all the IP will be held, registered, maintained and developed by the Company and its subsidiaries henceforth as owner of the IP." Aplts.’ App., Vol. II, at 396. It also imposed upon all CRUPE directors—including Mr. Jayson—obligations separate from those of the Company itself, including duties to: (1) "ensure that all decisions which are material ... shall be taken at a properly convened board meeting," (2) "procure ... all reasonable steps within their respective powers to sufficiently protect [the Company and its subsidiaries’] intellectual property rights," (3) refrain without Board approval from "enter[ing] into any transaction to transfer or license any IPR [i.e., IP rights]," and (4) refrain from incurring over one million euros in debt. Id . at 391–93. This agreement, along with all of CRUPE's subsequent investment agreements, provided that it was governed by Swiss law and subject to Swiss jurisdiction. Mr. Jayson reviewed, commented on, and later signed the agreement, which listed Eighteen Seventy's address in Wyoming along with those of the other investors; he did not, however, have any direct contact with Eighteen Seventy during this time.

In accordance with the initial Investment Agreement and subsequent agreements involving the Kennedy Entities, they invested a total of $10 million in CRUPE and its subsidiaries through share purchases and loans from 2012–2016, becoming CRUPE's largest investors.⁴ During this period, Paul and Peter Kennedy met with Mr. Jayson several times in the course of their business dealings with CRUPE; all of these meetings, however, took place outside of the United States.

For example, in the spring of 2012, following Eighteen Seventy's initial investment, Peter Kennedy (the Wyoming resident) met with Mr. Jayson and Mr. Robertson in Hong Kong, where Mr. Jayson "extolled the opportunities for CRUPE in China." Id . at 475 (Peter Kennedy Decl., filed Oct. 25, 2019). The meeting allegedly convinced Eighteen Seventy to make a second investment, and Mr. Bihrer emailed Peter and Paul—copying Mr. Jayson—with another subscription agreement containing Eighteen Seventy's address in Wyoming.⁵ Pursuant to this agreement, Eighteen Seventy purchased another $1.8 million worth of CRUPE shares on July 7, 2012.

Later, in September 2012, Peter and Paul met with Mr. Jayson and other CRUPE executives overseas, where they discussed Eighteen Seventy's willingness to provide CRUPE with a $2 million loan in lieu of a traditional investment. Following that meeting, in an email primarily directed at Mr. Robertson—which copied Mr. Jayson and Peter Kennedy (the Wyoming resident)—Paul Kennedy (the Florida resident) mentioned his interest in speaking with Mr. Jayson on...