Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—Neb. Sup. Ct.: Nebraska court lacked jurisdiction over New York corporation where only contact was limited work by a Nebraska attorney, (Jan 18, 2018)

By Robert B. Barnett Jr., J.D.

In a tort suit by a Nebraska-based attorney against the New York-based corporate survivor of a share-for-share exchange involving the New York-based company that the attorney had been representing, the Nebraska Supreme Court upheld a lower court’s dismissal of the complaint for lack of personal jurisdiction over the corporate survivor. The attorney’s arguments that personal jurisdiction existed because (1) tortious acts were committed on a Nebraska resident, (2) the attorney briefly represented the corporate survivor after the stock swap, and (3) the predecessor company’s actions applied to the corporate survivor under an alter ego theory were all found insufficient to establish the required minimum contacts between the corporate survivor and Nebraska. The state Supreme Court did, however, rule that the lower court erred when it dismissed the complaint with prejudice because a court lacking jurisdiction cannot adjudicate the merits (Nimmer v. Giga Entertainment Media, Inc., January 12, 2017, Heavican, M.).

Background. John C. Nimmer, an attorney licensed in Nebraska with a satellite office in New York, where he was also licensed, began providing legal services to Digital Broadcasting Corporation (DBC) in 1995. DBC was incorporated in Delaware and had its principal offices in New York. In 2012, DBC merged with Giga Entertainment Media, Inc. (GEM), in an arrangement in which GEM would be the surviving corporation and DBC shareholders would exchange their DBC shares one-for-one for GEM shares. GEM was incorporated in Nevada and had its principal offices in New York.

In 2015, Nimmer who represented GEM after the corporate change on a few matters, withdrew his representation, demanding fees and a repurchase of his DBC stock. When negotiations broke down, the attorney sued GEM in Nebraska for breach of contract.

The trial court dismissed the suit for lack of personal jurisdiction over GEM, with leave to amend. The amended complaint included new claims for tortious interference and for violations of Nebraska’s Uniform Deceptive Trade Practices Act, arising out of the decision to forego a merger in favor of the stock swap. Once again, the trial court dismissed the suit for lack of personal jurisdiction, but this time with prejudice under the one-bite-at-the-apple theory.

The attorney appealed, basing his claim that Nebraska had personal jurisdiction on three theories: (1) specific personal jurisdiction existed as the result of tortious acts committed on a Nebraska resident; (2) general personal jurisdiction existed as the result of the attorney’s representation of GEM after the stock swap; and (3) general personal jurisdiction existed as the result of the actions of GEM’s alter ego (DBC).

Tortious acts. Under the U.S. Supreme Court test set forth in Calder v. Jones, 465 U.S. 783, 104 S. Ct. 1482, 79 L. Ed. 2d 804 (1984), one of the requirements for finding personal jurisdiction from tortious acts is that the allegedly tortious acts must be uniquely or expressly aimed at the forum state. The lawyer’s support for his claim was a 2015 email sent to shareholders. But this email, the court said, was a generic email sent to all shareholders. Its impact on Nebraska was incidental. Similarly, the offering of GEM shares to a Nebraska resident did not establish sufficient contacts, absent any showing that GEM was a registered broker-dealer in Nebraska or that it offered security or investment advice services in Nebraska. The alleged tortious conduct, the court concluded, was not directed at Nebraska.

Retention as attorney. An individual contract with an out-of-state party cannot establish automatically minimum contacts in the absence of additional evidence of contacts with the state (Burger King Corp. v. Rudzewicz, 471 U.S. 462, 105 S. Ct. 2174, 85 L. Ed. 2d 528 (1985)). In this analysis, the court looks to related factors such as the course of dealing and contemplated future consequences. Those factors in this case failed to support a finding that personal jurisdiction existed. The actual dealings were minimal, and it was even unclear whether services were actually performed. No evidence existed that the work the attorney performed involved disputes in Nebraska, arose under Nebraska law, or had any connection to Nebraska other than his existence in the state. Furthermore, the parties obviously contemplated no future relationship, given the attorney’s decision to stop representing GEM and the resulting lawsuit.

Alter ego. Successor corporations can, of course, be held responsible for the actions of the parent corporation. None of the cases establishing such liability, however, stand for the proposition that the predecessor’s contacts may be applied to the successor to confer personal jurisdiction. The successor’s contacts in this scenario must be analyzed in their own right. In this case, GEM had no contact with Nebraska other than the attorney’s presence in the state. That single contact was insufficient to establish personal jurisdiction. As a final matter, the court rejected the attorney’s assertion that an attorney hired by GEM had stipulated to Nebraska as the venue to settle disputes. What the other attorney actually did was make that offer to the Nebraska attorney as part of settlement negotiations. Given that settlement was never reached, GEM was not bound by that offer.

With prejudice. The Nebraska Supreme Court concluded that the lower court erred when it dismissed the second complaint with prejudice. While the court was sympathetic to the argument that dismissal with prejudice was appropriate because the attorney had already been given one chance to amend the complaint and had failed a second time, in fact a court that lacks jurisdiction has no power to rule on the merits. Thus, any dismissal for lack of jurisdiction must be without prejudice.

The case is No. S-17-070.

Attorneys: John C. Nimmer, pro se. Clarence E. Mock (Johnson & Mock, PC) for Giga Entertainment Media, Inc.

Companies: Giga Entertainment Media, Inc.

Cases: StateUnfairTradePractices NebraskaNews