In case of a foreign banking conglomerate involved in a leveraged bond scheme, the Court of Appeal of California rules that the California trial court had personal jurisdiction over the defendants, where bank representatives solicited business in person in the State of California
The Anglo Irish bank, a corporation with its principal place of business in Ireland, is the parent company of the Isle of Man bank and the trust company, corporations with their principal places of business in Isle of Man. The Irish bank, Isle of Man bank and the trust company sought investors to borrow funds form the Isle of Man bank to purchase bonds to be held by the trust company. In March 2000, Davies, who was at that time managing director of the trust company, and Connolly, who was at that time director of the Isle of Man bank, met with 10 or 11 potential investors in California.
Kal Brar and Imelda Brar ("plaintiffs"), California residents, are co-trustees of the Satnam Trust. Plaintiffs transferred more than $4 million form the Satnam Trust to the Kivrar Trust, that had been created to purchase bonds. After meeting with Davies and Connolly, plaintiffs appointed the trust company trustee of the Kivrar Trust. In June 2000 the Kivrar Trust II was created. The Kivrar Trust II borrowed funds to purchase additional bonds. The plaintiffs' investments suffered losses, estimated to be approximately $2 million by December 2007.
Plaintiffs filed suit against Anglo Irish bank, Isle of Man bank, the trust company and others ("defendants") in May 2005, alleging intentional misrepresentation, fraudulent concealment, securities fraud, breach of fiduciary duty, negligent misrepresentation and an accounting.
Defendants moved to quash service for lack of personal jurisdiction. The trial court denied the motion finding that each defendant had sufficient contacts with the State to be subject to specific personal jurisdiction. Defendants Appealed to the Court of Appeal of California filing petitions for a writ of mandate, challenging the denial of their motions to quash. The Court of Appeals stayed the trial court proceedings and issued an order to show cause. After considering the case the Court of Appeals denied the petitions and lifted the stay of trial court proceedings and discharged the order to show cause. [Slip Op. 1 2].
"The proper jurisdictional question is not whether the defendant can be liable for the acts of another person or entity under state substantive law, but whether the defendant has purposefully directed its activities at the forum state by causing a separate person or entity to engage in forum contacts."
"Davies, Connolly, and McGee visited California for the purpose of engaging in economic activity with California residents. Contrary to Petitioners' argument that they only sought to satisfy Isle of Man's "know your customer" requirements, the purpose of satisfying those requirements was to make the leveraged investments possible. They discussed leveraging "with profit bonds" with the [plaintiffs] and other potential investors during the visit by Davies and Connolly in March 2000, McGee's visit a few months later, and Davies's visit in May 2001. Through those visits, they succeeded in garnering millions of dollars in investments from California residents."
"... [W]e conclude that the Irish bank, the Isle of Man bank, and the trust company purposefully directed their activities at California residents by and through the individuals who visited California on their behalf. We conclude further that Petitioners, and each of them, purposefully derived benefit from their activities in California and deliberately engaged in significant activities within this state, and that they therefore purposefully availed themselves of forum benefits." [Slip Op. 5]
"[Defendants] argue that after creating offshore trusts for the apparent purpose of removing assets from the jurisdiction of California courts, the plaintiffs should not be allowed to sue foreign defendants in California courts "just because their investment did not prove as fruitful as they had hoped." We conclude that by investing in foreign trusts, the plaintiffs did not waive the right to sue Petitioners in a California court to seek redress for injuries related to or arising out of Petitioners' California activities. Moreover, the plaintiffs do not allege only that the investments were unsuccessful, but that Petitioners made material misrepresentations and omissions in California in connection with the investments." [Slip Op. 6]
Citation: Anglo Irish Corporation, PLC v. Superior Court of Los Angeles County, B206714 (Cal. App. 2008).
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