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Minimum Contacts Not There to Exercise Jurisdiction over Two Defendants Sought to be added – Glass & Goldberg | Financing, Property & Bankruptcy Law
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Minimum Contacts Not There to Exercise Jurisdiction over Two Defendants Sought to be added

The California Court of Appeals recently affirmed a motion to quash the addition of two defendants to an existing civil action on the grounds that insufficient contacts existed for the lower court to exercise jurisdiction over these parties. In RDPH Properties, Inc. v. Net Lease Capital Advisers, Inc., No. B248712 (2nd Dist. Calif. Ct. App. Div. One 2014), the Court of Appeals found that the trial court correctly invalidated the summons served upon 2 additional defendants on the ground that California lacked personal jurisdiction over them.

The lawsuit arose from a dispute arising from RDPH Properties’ (RDPH) attempt to prepay the purchase price to buy 100 percent of R2 Lui’s beneficial interest in a Delaware business trust. R2 Lui claimed that the amount tendered was not acceptable. RDPH filed a complaint on March 22, 2011, alleging, among other causes of action, breach of contract and fraud against R2 Lui, LLC, a Delaware limited liability company with its principal place of business in Nashua, New Hampshire, and John Hyslip, R2 Lui’s manager. While there was no issue regarding whether the trial court possessed jurisdiction over R2 Lui or its manager, two other parties sought to be added to the case objected to the attempts to bring them in to the case.

One Defendant, NLCA, presented evidence that it was incorporated in New Hampshire in 1997 and since that date has had its principal place of business in that state. It maintains offices in New Hampshire and New York and has never had an office or a bank account, paid taxes, or had its officers or directors reside in California. NLCA has never been registered or licensed to do business in California, nor has it engaged in business as a real estate agent or broker within the state. The company does not advertise in any California-specific trade journals or publications. Nor does it maintain an office mailing address, agent for service of process, telephone number, employees, or sales representatives in California. For all of these reasons, the Court concluded that it lacked the minimum contacts with the State necessary to exercise personal jurisdiction over NLCA.

The other Defendant, Dr. Henry Lui (Hyslip’s brother-in-law and a passive investor in R2 Lui), also lacked the minimum contacts to be subject to the California court’s jurisdiction. He has lived and been domiciled in Tennessee since 1996, has not lived or filed taxes in California since 1991, and has not owned or leased any property or maintained any bank, savings, loan or investment account in California since about the time he moved out of the state. Dr. Lui is a full-time cardiologist with a medical practice confined to Tennessee. From 2001 through 2012, Dr. Lui visited California once or twice a year to attend medical conferences or film festivals or to visit his late mother. Although Dr. Lui was a member of R2 Lui from October 2001 to January 2007, he acted entirely as a silent investor. He never served as a manager and had little to no input regarding R2 Lui’s investments, operations or transactions. Hyslip had constant and full managerial control over R2 Lui. Dr. Lui was periodically informed about the business and sought out for signature approvals by Hyslip, but not for R2 Lui’s financial documents. For all of these reasons, the Court reached the same conclusion with Dr. Lui as it had with NLCA.

The attorneys at Glass & Goldberg in California provide high quality, cost-effective legal services and advice for clients in all aspects of commercial compliance, business litigation and transactional law. Call us at (818) 888-2220, send an email inquiry to info@glassgoldberg.com or visit us online at www.glassgoldberg.com to learn more about the firm and to sign up for future newsletters.

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