Nev. Trading Co. v. Karpel, No. 75317-COA

CitationNo. 75317-COA
Case DateDecember 18, 2019
CourtCourt of Appeals of Nevada

NEVADA TRADING COMPANY, LLC, A NEVADA LIMITED LIABILITY COMPANY, Appellant,
v.
DONALD E. KARPEL; THE LAW FIRM OF ZELNER & KARPEL;
AND THE GLOBAL BAILEY GROUP II, A CALIFORNIA CORPORATION, Respondents.

No. 75317-COA

COURT OF APPEALS OF THE STATE OF NEVADA

December 18, 2019


ORDER AFFIRMING IN PART, REVERSING IN PART AND REMANDING

Nevada Trading Company, LLC, appeals from a district court order granting respondents' motion to dismiss for lack of personal jurisdiction pursuant to NRCP 12(b)(2). Eighth Judicial District Court, Clark County; Linda Marie Bell, Chief Judge.

In February 2017, Nevada Trading, a Nevada limited liability company, and respondent Global Baily Group II, a California corporation, entered into a short-term investment agreement.1 At the time of the agreement's formation, Global was represented by respondent Donald E. Karpel, a California attorney with an interest in the California-based law firm, respondent Zelner & Karpel. Neither Karpel nor Zelner & Karpel has offices, employees, or property in Nevada. Nor is Karpel licensed to practice law in Nevada. Karpel, however, was admitted pro hac vice in a separate matter at the time of the events related to this action.

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According to the terms of the investment agreement, Nevada Trading was to send, via wire transfer, $40,000 to Global. Specifically, the $40,000 was to be wired to Karpel's trust account in California and then forwarded to Global for investment as contemplated by contract. After eight days, Global would either return the $40,000, or, if the investment was successful, pay Nevada Trading a sum of $200,000. Prior to the transfer, Karpel received an email from Nevada Trading's attorney that included two attachments: one was the executed contract between Nevada Trading and Global; and the other was a letter with additional instruction for handling the $40,000, directing Karpel to hold the money in trust and refrain from distributing the funds to Global. Nevertheless, after Karpel confirmed receipt of the email, Nevada Trading wired the $40,000 to his trust account, and Karpel subsequently released the money to Global. Global never returned the $40,000, nor did it pay Nevada Trading the $200,000 contemplated in the contract.

As a result, Nevada Trading filed a complaint in Nevada against Global, Karpel, and Karpel & Zelner, alleging, among other things, breach of contract and fraud. Global, Karpel, and Karpel & Zelner moved the district court to dismiss the complaint for lack of personal jurisdiction, arguing they lacked sufficient minimum contacts with Nevada. After a hearing on the motion, the district court issued a written order granting the motion and dismissing the claims with prejudice.

Although Nevada Trading posits numerous arguments on appeal, this case presents two dispositive legal questions: (1) whether the district court erred when it determined that Nevada Trading failed to make

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a prima facie showing of personal jurisdiction as to all respondents;2 and (2) whether the district court erred when it dismissed Nevada Trading's claims with prejudice as to both. We conclude that the district court did not err as to the former but did err as to the latter.

Jurisdiction over nonresident defendants

"This court reviews de novo a district court's determination of personal jurisdiction," Fulbright & Jaworski v. Eighth Judicial Dist. Court, 131 Nev. 30, 35, 342 P.3d 997, 1001 (2015), but defers to the district court's findings of fact if they are supported by substantial evidence. Catholic Diocese, Green Bay v. John Doe 119, 131 Nev. 246, 249, 349 P.3d 518, 520 (2015).

When a nonresident defendant challenges personal jurisdiction, plaintiffs may meet their burden of establishing jurisdiction in one of two ways. Trump v. Eighth Judicial Dist. Court, 109 Nev. 687, 692, 857 P.2d 740, 743 (1993). Under the first method, which was used in this case, "the plaintiff has the burden of introducing competent evidence of essential facts which establish a prima facie showing that personal jurisdiction exists" and ultimately must prove jurisdiction by a preponderance of the evidence at trial. Id. (internal quotation marks omitted). The plaintiff, however, is

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required to go beyond the pleadings and "may not simply rely on the allegations of the complaint to establish personal jurisdiction." Id. at 693, 857 P.2d at 744. As a result, "the trial court hears the pretrial jurisdictional motion based on affidavits, depositions, and other discovery materials." Id.; see also Tricarichi v. Coop. Rabobank, U.A., 135 Nev., Adv. Op. 11, 440 P.3d 645, 649 (2019).3

"The Due Process Clause of the Fourteenth Amendment constrains a State's authority to bind a nonresident defendant to a judgment of its courts." Walden v. Fiore, 571 U.S. 277, 283 (2014). In order for a Nevada court to exercise personal jurisdiction over a nonresident defendant, a plaintiff must show that Nevada's long-arm statute, NRS 14.065, has been satisfied, and that the exercise of jurisdiction does not offend due process. Catholic Diocese, 131 Nev. at 249, 349 P.3d at 520. Since Nevada's long-arm statute reaches the limits of due process established by the United States Constitution, the analysis is the same for both. Id.; see also Baker v. Eighth Judicial Dist. Court, 116 Nev. 527, 531, 999 P.2d 1020, 1023 (2000). The requirements of due process are satisfied if the nonresident defendant's contacts with the forum are sufficient to acquire either (1) general personal jurisdiction, or (2) specific personal jurisdiction, and the exercise of jurisdiction over the nonresident defendant would be reasonable. Fulbright, 131 Nev. at 36, 342 P.3d at 1001.

Thus, to defeat respondents' motion to dismiss, Nevada Trading was required to make a prima facie showing of either general or specific

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jurisdiction by "produc[ing] some evidence in support of all facts necessary for a finding of personal jurisdiction." Trump, 109 Nev. at 692, 857 P.2d at 744. Although the district court's order addressed both general and specific jurisdiction and concluded that neither existed, Nevada Trading's arguments on appeal speak to specific jurisdiction. Therefore, we do not address general jurisdiction.4

Nevada Trading has not made a prima facie showing of specific personal jurisdiction

Nevada Trading argues that it made a prima facie showing of specific personal jurisdiction as to Global and Karpel.5 Specifically, Nevada Trading argues that it presented a prima facie case for specific personal jurisdiction because it pleaded that Global and Karpel conspired to defraud Nevada Trading. Furthermore, Nevada Trading contends that the district court erred when it failed to consider that Karpel was admitted pro hac vice (in an unrelated matter) when it conducted its jurisdictional analysis.

A court has specific personal jurisdiction over a nonresident defendant if the defendant has certain "minimum contacts" with the forum

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and "maintenance of the suit [would] not offend traditional notions of fair play and substantial justice." Baker, 116 Nev. at 532, 999 P.2d at 1023 (internal quotation marks omitted). To determine whether a court may exercise specific jurisdiction, this court utilizes a three-part test. Catholic Diocese, 131 Nev. at 249-50, 349 P.3d at 520. A court may exercise specific jurisdiction over a nonresident defendant where (1) the defendant purposefully and affirmatively directs his conduct toward the forum, thus creating "minimum contacts"; (2) the plaintiff's claims arise from the defendant's contact with the forum; and (3) exercise of the court's jurisdiction would be reasonable. See id.

The minimum contacts inquiry "focuses on the relationship among the defendant, the forum, and the litigation." Walden, 571 U.S. at 284 (internal quotation marks omitted). Thus, "the defendant's suit-related conduct must create a substantial connection with the forum State." Id. Two factors are particularly relevant in minimum contacts analysis. "First, the relationship must arise out of contacts that the 'defendant himself' creates with the forum State." Id. (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985)). And second, the analysis "looks to the defendant's contacts with the forum State itself, not the defendant's contacts with persons who reside there." Walden, 571 U.S. at 285 (emphasis added). Accordingly, "the plaintiff cannot be the only link between the defendant and the forum." Id.

When analyzing whether specific personal jurisdiction exists in a tort action, this court applies the "effects test." Tricarichi, 135 Nev., Adv. Op. 11, 440 P.3d at 650 (citing Calder v. Jones, 465 U.S. 783 (1984)). Nonetheless, the same minimum contacts principles remain applicable. Walden, 571 U.S. at 286. In other words, the "effects test" does not consider the plaintiff's contacts with the forum state; instead, the inquiry focuses on

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the defendant's relationship with the forum. Id...

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