Saturn Mgmt. Llc v. Gem–atreus Advisors Llc

• Decision Date: 09 December 2010
• Docket Number: Civil Action No. 10–10485–WGY.
• Parties: SATURN MANAGEMENT LLC, Saturn Partners Limited Partnership II, and Jeffrey S. McCormick, Plaintiffs,v.GEM–ATREUS ADVISORS, LLC, Arun Ganguly, Arup Ganguly Charitable Trust, and Ganguly Technology Ventures, LLC, Defendants.
• Court: U.S. District Court — District of Massachusetts

754 F.Supp.2d 272

SATURN MANAGEMENT LLC, Saturn Partners Limited Partnership II, and Jeffrey S. McCormick, Plaintiffs,

v.GEM–ATREUS ADVISORS, LLC, Arun Ganguly, Arup Ganguly Charitable Trust, and Ganguly Technology Ventures, LLC, Defendants.

Civil Action No. 10–10485–WGY.

United States District Court, D. Massachusetts.

Dec. 9, 2010.

Azure M. Abuirmeileh, Michael A. Collora, Jeffrey S. McCormick, Amy B. Auth, Dwyer & Collora, LLP, Boston, MA, for Arup Ganguly Charitable Trust (Defendant).Terence K. Ankner, Peter C. Horstmann, Law Offices of Partridge, Ankner & Horstmann, LLP, Boston, MA, for Saturn Management LLC (Plaintiff).

MEMORANDUM AND ORDER

YOUNG, D.J.I. INTRODUCTION

On March 22, 2010, the plaintiffs Saturn Management LLC (“Saturn”), Saturn Partners Limited Partnership II (“SPLP II”) (collectively, “Saturn Entities”), and Jeffrey McCormick (“McCormick”) filed a complaint against GEM–Atreus Advisors, LLC (“GEM–Atreus”), Arun Ganguly (“Ganguly”), Arup Ganguly Charitable Trust (“Ganguly Trust”), and Ganguly Technology Ventures, LLC (“Ganguly Ventures”). Compl., ECF No. 1. The complaint includes claims of breach of contract, fraud, and violation of Massachusetts General Laws Chapter 93A against each of the defendants.

On July 19, 2010, GEM–Atreus and Ganguly filed a motion to dismiss or stay proceedings and compel arbitration. Mot. Dismiss or Stay Proceedings and Compel Arbitration (“GEM–Atreus and Ganguly's Mot. Dismiss”), ECF No. 14. On the same date, Ganguly Trust and Ganguly Ventures (collectively, “Ganguly Trust and Ventures”) filed a motion to dismiss for lack of personal jurisdiction and failure to state a claim upon which relief can be granted. Mot. Dismiss (“Ganguly Trust and Ventures' Mot. Dismiss”), ECF No. 16.

At an oral hearing on September 22, 2010, this Court granted GEM–Atreus and Ganguly's motion to compel arbitration, and the case as to those defendants was administratively closed. This Court took under advisement Ganguly Trust and Ventures' motion to dismiss for lack of personal jurisdiction.

II. FACTUAL BACKGROUND

On or about March 4, 2008, Saturn, represented by McCormick, entered into an agreement (the “Engagement Letter”) with GEM–Atreus. Compl. ¶ 11. GEM–Atreus was represented by its managing director, Ganguly, who was to act as a non-exclusive financial advisor to Saturn. Id. ¶ 12. These financial advisory services were to include the identification and introduction of prospective investors for SPLP II. Id. ¶ 13. In exchange, Saturn was to pay a monthly retainer of $8,000.00, all of which was to be repaid to Saturn if GEM–Atreus failed to raise any money for SPLP II. Id. ¶ 12. Saturn paid $66,000.00 in retainer fees to GEM–Atreus. Id. GEM–Atreus, however, allegedly raised no money for SPLP II. Aff. Jeffrey McCormick (“McCormick Aff.”) ¶ 18, ECF No. 21–8. Nevertheless, immediately upon signing the Engagement Letter, Ganguly began using Saturn's American Express credit card, without preapproval,¹ for his own personal use. Id. ¶ 20. Namely, Ganguly used Saturn's credit card to pay for five-star hotels, chauffeur services, and multiple first-class airfares. Id. Ganguly also charged Saturn for expenses he incurred while supposedly traveling on business, but was actually traveling with his mother and fiancée. Id. ¶ 21. Consequently, Saturn claims to have expended more than $730,000.00 for travel-related expenses and $370,801.92 for charges made by Ganguly with no business purpose. Compl. ¶¶ 14, 28.

After discovering these charges, Saturn requested immediate reimbursement and reiterated that it would no longer pay non-business expenses. McCormick Aff. ¶ 22. Ganguly agreed to reimburse Saturn for all of his personal expenses. Id. ¶ 23. For more than a year, however, Ganguly made excuses and misrepresented his intent to reimburse Saturn, despite its continuous follow-ups. Id. ¶ 24.

It was under these circumstances, and only after McCormick expressed Saturn's dissatisfaction, that Ganguly initiated a conversation regarding the possibility of Ganguly Trust and Ventures investing in SPLP II. Id. ¶ 27. McCormick was in Boston when this conversation took place. Id. On August 27, 2008, Ganguly sent an e-mail to McCormick confirming his commitment to invest $2,000,000.00 in SPLP II. Id. ¶ 28.

On September 9, 2008, Ganguly also sent Saturn a letter stating that Ganguly Trust's trustees agreed to invest $1,000,000.00 in SPLP II. Id. ¶ 29. Ganguly prepared a memorandum entitled “Update SP II Fundraising” (“Fundraising Memorandum”), dated September 17, 2008. Id. ¶ 20. In this Fundraising Memorandum, Ganguly stated that Ganguly Ventures would invest $2,000,000.00 no later than October 1, 2008, and Ganguly Trust would invest $1,000,000.00 no later than November 1, 2008. Id. The schedule attached to the Fundraising Memorandum indicated that there was a 100% chance of each these entities investing such amounts. Id. In accordance with the Fundraising Memorandum, Ganguly Trust and Ventures entered into two different agreements (the “Subscription Agreements”) with SPLP II, in which they committed to invest a total of $3,000,000.00 in SPLP II. ECF No. 1, Exs. 3, 4. These Subscription Agreements were drafted in Massachusetts, McCormick Aff. ¶ 33, and included the following choice of law and forum selection provision:

This agreement shall be construed in accordance with, and its validity, construction, and performance shall be governed by, the laws of the State of Delaware without regard to any choice of law doctrine that would require or permit application of the laws of any other jurisdiction. The Subscriber hereby irrevocably consents to the exclusive jurisdiction of any federal or state court sitting in the State of Delaware for purposes of any proceeding relating to this agreement and waives any objection to the convenience of any such court.

Subscription Agreements 6.

Saturn never received any of the promised money. McCormick Aff. ¶ 35. In reliance on the investment promises, SPLP II made other investment commitments in portfolio companies. Id. ¶ 36. To honor these commitments, McCormick personally invested an additional $3,000,000.00 in SPLP II. Id. ¶ 37. Similarly, Ganguly allegedly misrepresented other investors' intent. Id. at ¶ 38. He repeatedly assured McCormick that the Qatar Investment Authority (“Authority”) would invest at least $10,000,000.00 in SPLP II. Id. ¶¶ 39, 40. When McCormick met with Authority, however, he learned that it never intended to invest in the Saturn Entities. Id. ¶ 41.

According to McCormick, Ganguly also regularly scheduled meetings with potential investors around the world, only for McCormick to discover upon arrival at the destination that the meetings had never been arranged. Id. ¶ 43. McCormick later found out that Ganguly had stated to other parties that SPLP II was interested in investing with them while representing to SPLP II that those parties were interested in investing in it. Id. ¶ 45.

III. ANALYSISA. Legal Standard

The plaintiffs bear the burden of proving the court's personal jurisdiction over the defendants.² Daynard v. Ness, Motley, Loadholt, Richardson & Poole, P.A., 290 F.3d 42, 50 (1st Cir.2002). The question before this Court is whether the Saturn Entities and McCormick have asserted sufficient facts to establish personal jurisdiction over Ganguly Trust and Ventures.

B. Personal Jurisdiction Over Ganguly Trust and Ventures

A plaintiff can establish either specific or general jurisdiction over a defendant. See Harlow v. Children's Hosp., 432 F.3d 50, 57 (1st Cir.2005). The plaintiffs do not allege that Ganguly Trust and Ventures had “continuous and systematic contacts” with Massachusetts such that this Court could exercise general jurisdiction over these entities. See id. Consequently, the plaintiffs must assert sufficient facts to support the exercise of specific personal jurisdiction over Ganguly Trust and Ventures. “Specific jurisdiction exists when there is a demonstrable nexus between a plaintiff's claims and a defendant's forum-based activities, such as when the litigation itself is founded directly on those activities.” Massachusetts Sch. of Law at Andover, Inc. v. American Bar Ass'n, 142 F.3d 26, 34 (1st Cir.1998). “[T]o establish personal jurisdiction, [the plaintiffs] must show that ‘the Massachusetts long-arm statute grants jurisdiction and, if it does, that the exercise of jurisdiction under the statute is consistent with the Constitution.’ ” Hannon v. Beard, 524 F.3d 275, 280 (1st Cir.2008) (quoting Daynard, 290 F.3d at 52).

1. The Massachusetts Long–Arm Statute

Under the Massachusetts long-arm statute, this Court is authorized to assert “personal jurisdiction over a person, who acts directly or by an agent, as to a cause of action in law or equity arising from the person's ... transacting any business in [Massachusetts].” Mass. Gen. Laws ch. 223A, § 3. The notion of transacting business is broadly construed and easy to satisfy. See United Elec., Radio & Mach. Workers of Am. v. 163 Pleasant St. Corp., 960 F.2d 1080, 1087 (1st Cir.1992). A defendant's physical presence in the Commonwealth is not necessary to “transact business” in Massachusetts; rather it is the defendant's “attempt[ ] to participate in the commonwealth's economic life” that counts. Id.

While it is not true that any communication sent into Massachusetts is sufficient to establish personal jurisdiction, see M–R Logistics, LLC v. Riverside Rail, LLC, 537 F.Supp.2d 269, 275 (D.Mass.2008) (Saylor, J.), just a few such acts may satisfy the long-arm statute, see Workgroup Tech. Corp. v. MGM Grand Hotel, LLC, 246 F.Supp.2d 102, 110 (D.Mass.2003) (Collings, M.J.). Typically, “the focus is on the contacts relating to the formation of the contract; those contacts ordinarily must be instrumental to its formation to establish jurisdiction.” M–R Logistics, 537 F.Supp.2d at 275. “[E]xtensive post-contract communications that relate to the operation of the contract...