Melea, Ltd. v. Jawer Sa

• Decision Date: 26 December 2007
• Docket Number: No. 07-1127.,07-1127.
• Citation: 511 F.3d 1060
• Parties: MELEA, LIMITED; The Admiralty Trust; Barnacle Trust; Rum Row Trust; Port Royal Trust; Port Royal Charitable Trust, Successor to the Michael Ladney Charitable Trust and the Michael Ladney Charitable Remainder Trust; Russbury International Limited; Seward International Corporation BVI; Buccaneer Investments Limited, Plaintiffs-Appellants, v. JAWER SA, Defendant-Appellee, Barry S. Engel; Engel & Reiman, P.C., FKA Engel, Reiman & Lockwood, P.C., Defendants.
• Court: U.S. Court of Appeals — Tenth Circuit

511 F.3d 1060

MELEA, LIMITED; The Admiralty Trust; Barnacle Trust; Rum Row Trust; Port Royal Trust; Port Royal Charitable Trust, Successor to the Michael Ladney Charitable Trust and the Michael Ladney Charitable Remainder Trust; Russbury International Limited; Seward International Corporation BVI; Buccaneer Investments Limited, Plaintiffs-Appellants, v. JAWER SA, Defendant-Appellee Barry S. Engel; Engel & Reiman, P.C., FKA Engel, Reiman & Lockwood, P.C., Defendants.

No. 07-1127.

United States Court of Appeals, Tenth Circuit.

December 26, 2007.

Brice A. Tondre, Lakewood, CO, for Plaintiffs-Appellants.

Christopher J. King, Homer Bonner, P.A., Miami, FL, for Defendant-Appellee.

Before BRISCOE, EBEL, and MURPHY, Circuit Judges.

BRISCOE, Circuit Judge.

Plaintiff-Appellant Melea, Ltd., a Gibraltar corporation, retained Defendant-Appellee Jawer, S.A. ("Jawer"), a Swiss corporation, to administer Melea's day-to-day finances. Melea and its related entities (collectively, "Melea") filed this diversity action in federal district court in Colorado pursuant to 28 U.S.C. § 1332, alleging that Jawer breached its fiduciary duties by permitting a Colorado lawyer to overcharge for legal services and misappropriate funds from Melea. Jawer moved for dismissal, arguing that the court lacked personal jurisdiction. The district court granted the motion based on its conclusion that Jawer did not have the necessary minimum contacts with Colorado. Melea now appeals. We have jurisdiction pursuant to 28 U.S.C. § 1291, and affirm. We deny Jawer's motion for fees and costs sought pursuant to Rule 38 of the Federal Rules of Appellate Procedure, but remand Jawer's motion for "just damages, including attorney's fees and costs" under Swiss law to the district court for further proceedings consistent with this opinion.

I.

The facts of this case and the relationships between the various parties are far from clear. This lack of clarity is largely by design. In the early 1990s, Michael Ladney, a wealthy Florida businessman, developed an asset protection plan whereby he sought to place assets gained by virtue of his ownership of certain patents outside the reach of U.S. creditors. As a part of the plan, Ladney transferred his patents and other assets exceeding $10,000,000 to various trusts and corporations. With the exception of one of the trusts, which was based in Florida, none of these entities were located in the United States.

Jawer is a Swiss corporation with its principal place of business in Geneva, Switzerland. It describes its business as performing fiduciary and administrative services for clients. As a part of Jawer's services, it provides clients with ready-made shell corporations, through which its clients can conduct their businesses. In 1992, one of Ladney's attorneys contacted Jawer in order to obtain a corporation to transact patent-related business, including enforcing and licensing Ladney's patents. In response, Jawer provided Melea, a corporation in its inventory that had been formed under the laws of Gibraltar. Melea then received various assets, including the patents, from the trusts and corporations formed for Ladney's benefit. These trusts and corporations eventually became the owners of all shares and interests in Melea.

Shortly thereafter, in early 1993, Jawer's directors traveled to Florida to finalize Jawer's business arrangement with Ladney and his attorneys. At this meeting, Melea—at the time apparently controlled by Ladney through his attorneys—retained Jawer to administer Melea's day-to-day finances. As a part of the arrangement, Jawer's officers and directors also served as Melea's officers and directors. Melea and Jawer subsequently entered into a Fiduciary Mandate, under which Jawer had the power and obligation to open bank accounts for Melea, to appoint Melea's managing directors and other representatives, to ensure these representatives acted for Melea's benefit, and to carry out written instructions from Melea. Ferdinand Werder, now a director of both Jawer and Melea, signed the Mandate on Melea's behalf, while Maria de Fusco, also now a director of both companies, signed on Jawer's behalf. The Mandate incorporated various conditions to the relationship between Jawer and Melea. Among other conditions, the Mandate authorized Jawer to transfer part or all of its responsibilities to a third party of its choosing, and also authorized Jawer to make payments from and deposits into Melea's bank accounts.

The purpose of this complex arrangement was apparently to provide the illusion that Melea's affairs were being conducted from abroad, while they were in fact being run from the United States. Jawer made no meaningful business decisions of its own with respect to Melea. Pursuant to Ladney's instructions, Jawer instead conducted Melea's financial affairs in accordance with directions from attorneys for both Ladney and Melea in the United States.¹

The relationship between Jawer and the attorneys functioned in the following manner. The attorneys would provide Jawer with invoices related to Melea's business, both from themselves and from other parties conducting business with Melea. These invoices were sometimes accompanied by the attorneys' instructions to pay the invoices. Jawer would then summarily pay the invoices from Melea's Gibraltar-based bank accounts. From 1992 to 1996, Jawer received invoices and instructions from Melea's attorneys in Florida. In 1996, Melea retained Colorado attorney Barry Engel as its U.S. legal counsel, and from 1996 to 2002, Jawer received invoices and instructions from him.

Melea and Jawer agree that Jawer stopped communicating with the Florida attorneys and started communicating with Engel after Ladney himself told it to do so in May 1996. Ladney's degree of participation in the enterprise after Melea's formation is unclear. Viewed at arm's length, Ladney apparently remained a part of Melea's affairs through his involvement with two corporations that served as Melea's "sales representatives."² In some instances, Jawer received and followed instructions directly from Ladney's business agent. Ladney's attorneys, however, advised both him and Jawer that he should not be involved with the day-to-day operation of Melea and should avoid contact with Jawer, presumably to further the illusion that Melea was a foreign enterprise having nothing to do with Ladney. On at least one occasion, Engel directed Jawer to avoid direct contact with Ladney and instead to communicate with him through another of his attorneys. On another occasion, Engel requested that Jawer alter a billing statement to conceal its communications with Ladney. Jawer complied with these requests.

It is Jawer's alleged conduct during the course of its relationship with Engel that gives rise to this litigation. Melea contends that Jawer breached its fiduciary duties to Melea by paying out unearned legal fees to Engel and Ladney's other attorneys from Melea's Gibraltar-based bank accounts. Melea alleges that Jawer did not exercise its independent judgment concerning the propriety of those fees, and simply paid any bills Engel forwarded, in essence permitting Engel to make payment decisions. Melea terminated its relationship with Engel in early 2002, and terminated its relationship with Jawer shortly thereafter.

On April 8, 2005, Melea filed suit against Jawer, Engel, his law firm, and several other defendants in the United States District Court for the District of Colorado.³ Subject-matter jurisdiction was premised on diversity of citizenship. Jawer filed a motion to dismiss, alleging lack of personal jurisdiction. On September 18, 2006, the district court granted Jawer's motion and dismissed all claims against Jawer for lack of personal jurisdiction, because it did not believe that Jawer had the requisite "minimum contacts" with Colorado, and because it further believed that the exercise of jurisdiction over Jawer would offend "traditional notions of fair play and substantial justice." The court held no evidentiary hearing in this matter. Melea appeals from the final judgment entered on March 3, 2007.

II.

We review a trial court's dismissal for lack of personal jurisdiction over the defendant de novo. TH Agric. & Nutrition, LLC v. Ace European Group Ltd., 488 F.3d 1282, 1286 (10th Cir.2007). The plaintiff has the burden of proving that the court has jurisdiction. Benton v. Cameco Corp., 375 F.3d 1070, 1074 (10th Cir.2004). Where, as here, the district court does not hold an evidentiary hearing before dismissing the case, the plaintiff must only make a prima facie showing of personal jurisdiction. Id. The plaintiff may meet this burden "by demonstrating, via affidavit or other written materials, facts that if true would support jurisdiction over the defendant." TH Agric., 488 F.3d at 1286 (citation and quotation marks omitted). We accept as true any allegations in the complaint not contradicted by the defendant's affidavits, and resolve any factual disputes in the plaintiff's favor.⁴ Wenz v. Memery Crystal, 55 F.3d 1503, 1505 (10th Cir.1995).

A federal court sitting in diversity may only assert personal jurisdiction over a defendant if two criteria are met. "First, a federal district court may only exercise personal jurisdiction over a defendant `who could be subjected to the jurisdiction of a court of general jurisdiction in the state in which the district court is located.'" United States v. Botefuhr, 309 F.3d 1263, 1271 (10th Cir.2002) (quoting Fed.R.Civ.P. 4(k)(1)(A)). Second, an exercise of personal jurisdiction under state law must comport with the Fourteenth Amendment's due process clause. Id. In Colorado, only one inquiry is necessary, as the Colorado long-arm statute "confer[s] the maximum jurisdiction permitted by the due process clauses of the United States and Colorado constitutions,"⁵ and its requirements are necessarily addressed under a due process analysis. Archangel Diamond Corp. v. Lukoil, ...