The World in U.S. Courts: Winter 2015 - Personal Jurisdiction
November.04.2014
Individual Plaintiffs formed a joint venture for a large scale-development project in Breckenridge, Colorado. They alleged that Defendants, an individual domiciled in Austria, two affiliated Austrian companies, and a Panamanian company, perpetrated a fraudulent financing scheme that ultimately led to the collapse of the project.
The district Court rejected Defendants challenges to personal jurisdiction, among other issues considered, and entered a default judgment of approximately $185 million in favor of Plaintiffs. The Court of Appeals affirmed the district Court’s decision in part, but, as relevant here, reversed as to personal jurisdiction over one of the Austrian companies because it did not exist until a year after the latest events underlying the suit. In affirming the district Court’s exercise of personal jurisdiction, the Court of Appeals found that Plaintiff had not only satisfied its obligation to make out a prima facie showing of personal jurisdiction, but had done so by a preponderance of evidence.
Noting that Colorado’s long-arm statute was co-extensive with the Due Process Clause of the U.S. Constitution, the Court of Appeals reviewed only that federal standard. Both parties agreed that “general personal jurisdiction” did not exist here. Rather, “specific personal jurisdiction” was asserted, with the Court considering the different implementation of that standard in the context of contract cases and tort cases. Rejecting Defendants’ view that the case should be treated as one in contract because of the unfunded loan agreement, the Court of Appeals employed the “purposeful direction” test used for assessing special personal jurisdiction in fraud cases. That test requires “(a) an intentional action…that was (b) expressly aimed at the forum state…with (c) knowledge that the brunt of the injury would be felt in the forum state.” Defendants did not contest that their actions were intentional. As to the other elements, the Court of Appeals found that Defendants’ interactions with Plaintiffs (Colorado residents), the Loan Agreement with Colorado entities, and the location of the project made clear that “the fraudulent financing scheme was expressly aimed at Colorado, and that it was equally the effects of the project’s failure would be felt mainly in Colorado.” Defendants also argued that Plaintiffs had limited interactions with the Austrian individual, and that he was an agent of one of the corporations and thus not subject to personal jurisdiction based on contacts on behalf of that corporation. The Court of Appeals dismissed both arguments, finding that the individual’s communications with Plaintiffs made clear that he was intentionally directing tortious action at Colorado, and that his status as an employee did not insulate him from personal liability where he had allegedly been a “primary participant” in the fraud. Lastly, in light of Defendants’ failure to present any considerations that would render jurisdiction unreasonable, the Court of Appeals determined that the district Court’s exercise of personal jurisdiction did not offend “traditional notions of fair play and substantial justice.”