Freestream Aircraft (Bermuda) Ltd. v. Aero Law Grp.

• Decision Date: 18 September 2018
• Docket Number: No. 16-17347,16-17347
• Citation: 905 F.3d 597
• Parties: FREESTREAM AIRCRAFT (BERMUDA) LIMITED; Alireza Ittihadieh, Plaintiffs-Appellants, v. AERO LAW GROUP ; John Schmidt, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

905 F.3d 597

FREESTREAM AIRCRAFT (BERMUDA) LIMITED; Alireza Ittihadieh, Plaintiffs-Appellants,

v.AERO LAW GROUP ; John Schmidt, Defendants-Appellees.

No. 16-17347

United States Court of Appeals, Ninth Circuit.

Argued and Submitted April 12, 2018, San Francisco, California

Filed September 18, 2018

Marc Ayala (argued), Boies Schiller Flexner LLP, Armonk, New York; Douglas A. Mitchell, Boies Schiller Flexner LLP, Las Vegas, Nevada; for Plaintiffs-Appellants.

Angela T. Nakamura Ochoa (argued) and Joseph P. Garin, Lipson Neilson Cole Seltzer & Garin P.C., Las Vegas, Nevada, for Defendants-Appellees.

Before: Kim McLane Wardlaw and Jacqueline H. Nguyen, Circuit Judges, and Solomon Oliver, Jr.,^* District Judge.

NGUYEN, Circuit Judge:

A defendant who travels to Nevada and commits an intentional tort there can be sued in that state, absent circumstances that would make such a suit unreasonable. The outcome appears obvious, but we have admittedly created some confusion as to the proper analytical approach to specific jurisdiction in our circuit. Today we take the opportunity to clarify our case law.

Plaintiffs Freestream Aircraft (Bermuda) Limited ("Freestream") and Alireza Ittihadieh sued Defendants John Schmidt and Aero Law Group ("Aero") in the United States District Court for the District of Nevada, alleging that Schmidt made defamatory statements about Freestream at an aviation industry conference in Nevada. The district court granted Defendants’ motion to dismiss for lack of personal jurisdiction.

We have jurisdiction pursuant to 28 U.S.C. § 1291 and reverse.

FACTUAL BACKGROUND

Freestream is a Bermudan full-service aircraft company in the business jet market. It participates in all aspects of aircraft transactions: brokerage, acquisition, marketing, sales, custom design services, import/export, and maintenance review. Freestream was founded in 1992 by Plaintiff Alireza Ittihadieh, a citizen of the United Kingdom who currently resides in Switzerland.

John Schmidt, a Washington resident, is an attorney at Aero. Aero is a Washington professional corporation that provides transactional legal services to airlines and aircraft owners and operators worldwide. Aero allegedly regularly solicits business in Nevada, including by participating in industry meetings and conventions in the state.

Aero belongs to several trade groups, including the National Business Aviation Association ("NBAA"), and attends trade seminars and conferences around the world. The NBAA holds its annual conferences in various locations, and, in 2015, held a conference in Las Vegas, Nevada.

Freestream alleges that Schmidt has been attacking its reputation by falsely stating that a transaction structure used by Freestream—a "back-to-back" transaction¹ —is illegal and unethical and that Freestream only uses this type of transaction.

In 2014, Schmidt allegedly interfered with Freestream’s imminent sale of a Boeing Business Jet to a company named Blue City Holdings LLC by telling its representatives that Freestream was built entirely on illegal and unethical back-to-back transactions and urging them to discontinue all business with Freestream and Ittihadieh. After the transaction fell through, Freestream’s counsel wrote to Aero demanding that Schmidt and his colleagues stop defaming Freestream. Aero’s founder responded that, to his knowledge, nobody at Aero had ever stated or implied that Freestream’s business was built entirely on back-to-back transactions.

On June 25, 2015, at an aviation conference on the Isle of Man, Schmidt met with Masha Shvetsova, whom Schmidt understood to be an agent for potential buyers of a Boeing Business Jet. When Shvetsova told Schmidt that she was leaning towards using Freestream as a broker, Schmidt told her that she was "going to be led" to a back-to-back transaction. Shvetsova asked about the legality of back-to-back transactions. Schmidt responded, "It’s quite possibly illegal," adding that back-to-back transactions were "ripe" for criminal prosecution, "but it has not happened yet." When Shvetsova asked why brokers use the back-to-back transaction if it is illegal or arguably illegal, Schmidt said, "[I]t’s extremely lucrative."

Several months later, on November 18, 2015, Schmidt again met with Shvetsova at the NBAA Annual Meeting and Convention in Las Vegas, Nevada. This time, they were joined by Marwan Khalek, CEO of Gama Aviation, a global business aviation services company. During this conversation, Schmidt reiterated that back-to-back transactions are illegal under federal law and violate the ethical rules of the Washington State Bar. Schmidt said that Freestream would try to structure the sale to Shvetsova’s buyer as a back-to-back transaction, and the buyer would be "significantly disadvantaged by that." When Shvetsova reminded Schmidt that he had previously called back-to-back transactions "illegal, essentially," Schmidt agreed. He said that a broker in these transactions is not "a real, bona fide seller" and called the transactions "completely unethical."

PROCEDURAL HISTORY

Plaintiffs filed this action in the United States District Court for the District of Nevada, seeking compensation for defamation and injunctive relief against further defamatory statements. Plaintiffs allege that Schmidt’s statements at the NBAA meeting were false and defamatory because Freestream does not engage only in back-to-back transactions and those transactions are not illegal. Plaintiffs allege that the defamatory statements harmed their business because reputation is critically important in the private aviation industry, which enjoys a particularly tight-knit market.

Defendants filed a motion to dismiss for lack of personal jurisdiction or, in the alternative, to change venue to the Western District of Washington. The district court granted Defendants’ motion to dismiss for lack of personal jurisdiction without addressing whether venue transfer would be appropriate. This appeal timely followed.

STANDARD OF REVIEW

We review de novo the district court’s dismissal for lack of personal jurisdiction. Wash. Shoe Co. v. A-Z Sporting Goods Inc. , 704 F.3d 668, 671 (9th Cir. 2012). The factual findings underlying the district court’s jurisdiction determination are reviewed for clear error. Panavision, Int’l, L.P. v. Toeppen , 141 F.3d 1316, 1320 (9th Cir. 1998). To avoid dismissal, the plaintiff bears the burden of demonstrating that its allegations establish a prima facie showing of personal jurisdiction. Boschetto v. Hansing , 539 F.3d 1011, 1015 (9th Cir. 2008). Uncontroverted allegations in the complaint must be taken as true, and factual disputes are construed in the plaintiff’s favor. RioProps., Inc. v. Rio Int’l Interlink , 284 F.3d 1007, 1019 (9th Cir. 2002).

DISCUSSION

When no federal statute governs personal jurisdiction, the district court applies the law of the forum state. Boschetto , 539 F.3d at 1015. Nevada’s jurisdiction reaches the limits of due process set by the United States Constitution. Nev. Rev. Stat. § 14.065. Constitutional due process requires that a defendant "have certain minimum contacts" with the forum state "such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice." Int’l Shoe Co. v. Washington , 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945) (internal quotation marks omitted).

There are two categories of personal jurisdiction: (1) general jurisdiction and (2) specific jurisdiction. See Helicopteros Nacionales de Colombia, S.A. v. Hall , 466 U.S. 408, 413–15, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984). Plaintiffs concede that the allegations in the complaint do not support the exercise of general jurisdiction,² and so we address only specific jurisdiction here.

As to specific jurisdiction, we generally conduct a three-part inquiry—commonly referred to as the minimum contacts test—to determine whether a defendant has sufficient contacts with the forum to warrant the court’s exercise of jurisdiction:

(1) The non-resident defendant must purposefully direct his activities or consummate some transaction with the forum or resident thereof; or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws;

(2) the claim must be one which arises out of or relates to the defendant’s forum-related activities; and

(3) the exercise of jurisdiction must comport with fair play and substantial justice, i.e., it must be reasonable.

Schwarzenegger v. Fred Martin Motor Co. , 374 F.3d 797, 802 (9th Cir. 2004). The minimum contacts test "ensures that a defendant will not be haled into a jurisdiction solely as a result of random, fortuitous, or attenuated contacts[.]" Burger King Corp. v. Rudzewicz , 471 U.S. 462, 475, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985) (internal quotation marks omitted).

Under the minimum contacts test and the applicable authority, we conclude that there was specific jurisdiction in Nevada in this case.

I.

A.

Generally, "[t]he commission of an intentional tort in a state is a purposeful act that will satisfy the first two requirements [of the minimum contacts test]." Paccar Int’l, Inc. v. Commercial Bank of Kuwait, S.A.K. , 757 F.2d 1058, 1064 (9th Cir. 1985) ; see also Ballard v. Savage , 65 F.3d 1495, 1498 (9th Cir. 1995) ("[T]he ‘purposeful availment’ requirement is satisfied if the defendant has taken deliberate action within the forum state ...."). We applied that rule in Paccar and held that a non-Californian defendant could be sued in California for an allegedly fraudulent demand for payment made to a California entity. 757 F.2d at 1064. We found that "[t]he inducement of reliance in California [was] a sufficient act within California to satisfy the requirement of minimum contacts where the cause of action [arose] out of that inducement." Id. (first alteration in original) (quoting Data Disc, Inc. v. Sys. Tech. Assocs., Inc. , 557 F.2d 1280, 1288 (9th Cir. 1977) ).

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