New Hampshire Bank Commissioner, as Liquidator for Noble Trust Company & a v. Cecil Sweeney & A. ( 2014 )

NOTICE: This opinion is subject to motions for rehearing under Rule 22 as
well as formal revision before publication in the New Hampshire Reports.
Readers are requested to notify the Reporter, Supreme Court of New
Hampshire, One Charles Doe Drive, Concord, New Hampshire 03301, of any
editorial errors in order that corrections may be made before the opinion goes
to press. Errors may be reported by E-mail at the following address:
reporter@courts.state.nh.us. Opinions are available on the Internet by 9:00
a.m. on the morning of their release. The direct address of the court's home
page is: http://www.courts.state.nh.us/supreme.
THE SUPREME COURT OF NEW HAMPSHIRE
___________________________
Merrimack
No. 2013-348
NEW HAMPSHIRE BANK COMMISSIONER, AS LIQUIDATOR FOR NOBLE
TRUST COMPANY & a.
v.
CECIL SWEENEY & a.
Argued: March 6, 2014
Opinion Issued: October 24, 2014
Ann M. Rice, deputy attorney general (Peter C.L. Roth, senior assistant
attorney general, on the brief and orally), and Sheehan Phinney Bass + Green
PA, of Manchester (Christopher M. Candon on the brief), for the petitioner.
Cleveland, Waters and Bass, P.A., of Concord (William B. Pribis on the
brief), and Law Offices of Robert A. Stolzberg, of Boston, Massachusetts (Robert
A. Stolzberg on the brief and orally), for respondents John Sinanis and
Stylianos Sinanis.
CullenCollimore, PLLC, of Nashua (Brian J.S. Cullen on the brief and
orally), for respondents Ivan Green, Mary Green, Susan Kelly (f/k/a Susan Fry
Hare), Frank Arnone, Charles Carlson, Webster Dean, Tom Langel, DeeAnn
Langel, Ardith Neustaeder, Darwin Schweitzer, Sharon Schweitzer, and Sharp
Enterprises.
LYNN, J. The respondents, fourteen non-residents1 named in a petition
filed by the New Hampshire Bank Commissioner, as liquidator for Noble Trust
Company (Noble) and Aegean Scotia Holdings, LLC (Aegean Scotia), appeal an
order of the Superior Court (Smukler, J.) denying their motions to dismiss for
lack of personal jurisdiction. We affirm and remand.
I
The following facts, which are common to each respondent, were found
by the trial court or are supported by the record and uncontested. Noble was a
non-depository banking institution that, at all times, conducted business in
Manchester. The respondents are residents of Michigan, Montana, Missouri,
Idaho, Texas, Florida, Oregon, and Kansas. Each respondent, or an agent of
each respondent, signed an Individual Investment Management Account Form
and Administration Agreement (agreement) with Noble. Each agreement bears
Noble’s name and New Hampshire business address and specifies that it will be
governed, interpreted, and enforced under New Hampshire law. Each
agreement required the signatories to attest that they had thoroughly read it
and agreed to its terms and conditions. The agreements instructed the
respondents to send their completed applications to Noble in New Hampshire,
and specified that the respondents could either send a check to Noble in New
Hampshire or wire funds to an account in Colorado. If the respondents had
inquiries about their accounts, they were directed to contact Noble’s president
at a New Hampshire telephone number. Periodic account statements, which
identified Noble as the account manager and named Aegean Scotia, another
New Hampshire entity, as Noble’s parent company, were sent to the
respondents.
In addition to these common facts, the trial court found or the record
supports the following facts specific to individual respondents. John and
Stylianos Sinanis agreed to send their investment money by check to Noble in
New Hampshire. Their nephew was an original owner of Noble and they
communicated with Noble through him. Susan Kelly and her husband Brian
corresponded with Noble on several occasions, first to add Brian to the
account, and then to liquidate it. Frank Arnone or his agent called Noble twice
in New Hampshire with account inquiries. Arnone also solicited Noble to serve
as Noble’s realtor. Ardith Neustaedter or her agent contacted Noble in New
1The respondents are John Sinanis, Stylianos Sinanis, Ivan Green, Mary Green, Susan Kelly,
Frank Arnone, Charles Carlson, Webster Dean, Tom Langel, DeeAnn Langel, Ardith Neustaedter,
Darwin Schweitzer, Sharon Schweitzer, and Sharp Enterprises.
2
Hampshire to make account inquiries and terminate her account. Ivan and
Mary Green or their agent contacted Noble in New Hampshire to purchase
insurance, make account inquiries, and terminate their account. Tom and
DeeAnn Langel faxed their agreement to Noble in New Hampshire and engaged
in e-mail correspondence with Noble. Webster Dean engaged in e-mail
correspondence with Noble, and his initial investment check bore Noble’s New
Hampshire address. Sharp Enterprises, through its agent, corresponded
several times with Noble to transfer and eventually close all Sharp accounts.
Charles Carlson corresponded with Noble to withdraw money. Darwin and
Sharon Schweitzer called Noble to withdraw money, wire funds to another
account, and renew their account.
The petition alleges that Noble was involved in a “Ponzi scheme,” in
which Noble used new investors’ money to cover the losses of earlier investors.
It seeks to set aside transfers of money from Noble to the respondents, impose
constructive trusts, and recover for unjust enrichment and conversion. The
respondents moved to dismiss the suit for lack of personal jurisdiction. The
trial court denied the motion, finding that the court could exercise personal
jurisdiction over the respondents on the basis that (1) Carlson and the
Schweitzers filed proofs of claim in the liquidation proceeding against Noble in
New Hampshire and (2) the remaining respondents had sufficient minimum
contacts with New Hampshire. This appeal followed.
II
Our standard of review for rulings on motions to dismiss for lack of
personal jurisdiction varies according to the case’s procedural posture.
Kimball Union Academy v. Genovesi, 165 N.H. 132, 136 (2013). “When, as in
this case, the trial court rules upon the motion without holding an evidentiary
hearing, the trial court employs a prima facie standard, and we review the trial
court’s decision de novo.” Id. (quotation omitted). Under the prima facie
standard, the inquiry is whether the petitioner has proffered evidence which, if
credited, is sufficient to support findings of all facts essential to personal
jurisdiction. Id. The petitioner ordinarily cannot rest upon the pleadings, but
must adduce evidence of specific facts. Id. “Both the trial court and we, when
undertaking de novo review, must accept the [petitioner]’s (properly
documented) proffers as true for the purpose of determining the adequacy of
the prima facie jurisdictional showing.” Id. (quotation omitted). “The
[petitioner’s] evidentiary proffers must be construed in the light most congenial
to the petitioner’s jurisdictional claim, and facts put forward by a respondent
may be considered only if they are uncontradicted by the petitioner’s
submissions.” Id.Determining whether a court may exercise personal jurisdiction over a
respondent contemplates a two-part analysis. Staffing Network v. Pietropaolo,
145 N.H. 456, 457 (2000). “First, the State’s long-arm statute must authorize
3
such jurisdiction. Second, the requirements of the federal Due Process Clause
must be satisfied.” Id. However, because New Hampshire’s long-arm statute
authorizes the exercise of personal jurisdiction over a non-resident “to the
extent permissible under the Federal Due Process Clause,” Hemenway v.
Hemenway, 159 N.H. 680, 685 (2010) (quotation omitted), the due process
analysis is normally dispositive of the matter. See Metcalf v. Lawson, 148 N.H.
35, 37 (2002) (stating that, in determining whether a New Hampshire court
may exercise personal jurisdiction over a non-resident defendant, “our primary
analysis relates to due process”).
III
Our long-arm statute, RSA 510:4, I (2010), provides, in pertinent part:
Any person who is not an inhabitant of this state and who, in
person or through an agent, transacts any business within this
state . . . submits himself . . . to the jurisdiction of the courts of
this state as to any cause of action arising from or growing out of
the acts enumerated above.
Here, the respondents transacted business within the meaning of the long-arm
statute because each opened an account with, and later withdrew money from,
Noble, a New Hampshire entity. Leeper v. Leeper, 114 N.H. 294, 297 (1974)
(holding that contacting and withdrawing assets from New Hampshire banks
“falls within the ambit of the phrase ‘transacts any business’” in RSA 510:4, I).
In addition, as explained in more detail below, the claims brought by the
petitioner all arise from or grow out of the accounts that the respondents
maintained with Noble in New Hampshire.
Under the Federal Due Process Clause, a court may exercise personal
jurisdiction over a non-resident respondent if the respondent has minimum
contacts with the forum, such that the maintenance of the suit does not offend
traditional notions of fair play and substantial justice. Kimball Union
Academy, 165 N.H. at 138. Personal jurisdiction can be “general,” if the
respondent’s contacts with the forum state are “continuous and systematic,” or
“specific,” if “the cause of action arises out of or relates to the [respondent]'s
forum-based contacts.” Staffing Network, 145 N.H. at 458 (quotations omitted).
Here, the petitioner asserts only that the court may exercise specific personal
jurisdiction.
In determining whether the exercise of specific personal jurisdiction over
the respondents comports with due process, we examine whether: (1) the
contacts relate to the cause of action; (2) the respondents have purposefully
availed themselves of the protection of New Hampshire’s laws; and (3) it would
be fair and reasonable to require the respondents to defend the suit in New
Hampshire. Id. Each factor must be evaluated on a case-by-case basis, and
4
all three factors must be satisfied for the exercise of jurisdiction to be
constitutional. Id. The determination of whether minimum contacts exist “is
one in which few answers will be written in black and white. The greys are
dominant and even among them the shades are innumerable.” Phelps v.
Kingston, 130 N.H. 166, 171 (1987) (quotation omitted).
First, the cause or causes of action must arise out of, or relate to, the
respondents’ contacts with New Hampshire. Staffing Network, 145 N.H. at
458. In addition, a finding of jurisdiction is more likely if there are “plus”
factors in addition to the mere existence of a contract with a New Hampshire
entity. Id. at 458. “Plus” factors include, but are not limited to: (1) the forum
state being the location to which payments under the contract were to be sent;
(2) a choice of law provision in the contract selects the forum state’s laws as
governing the transaction; and (3) the use of the petitioner’s form documents
bearing its address in the forum state. Id. Although not conclusive, a choice of
law provision militates in favor of finding jurisdiction in the state whose laws
govern the contract. Id. at 459.
Here, the respondents’ contacts with New Hampshire relate to the causes
of action. The respondents entered into an agreement and invested money with
Noble, a New Hampshire entity. Noble later sent payments, from New
Hampshire, to the respondents. The causes of action, to set aside fraudulent
transfers, impose constructive trusts, and recover for unjust enrichment and
conversion, seek the return of those same payments from the respondents.
Also “plus” factors are present – the agreement with Noble, which all the
respondents signed, included a choice of law provision specifying that it would
be interpreted and enforced under New Hampshire law, and the agreement
bore Noble’s address in New Hampshire.
Second, the respondents must have purposely availed themselves of the
protections of New Hampshire law. Staffing Network, 145 N.H. at 458-59.
Purposeful availment requires both foreseeability and voluntariness. Kimball
Union Academy, 165 N.H. at 140. Voluntariness requires that a respondent’s
contacts with the forum state proximately result from actions by the
respondent. Id. The contacts must be deliberate and not based on the
unilateral actions of another party. Id. Foreseeability requires that the
contacts must be of a nature such that a respondent could reasonably
anticipate being haled into court here. Id. The contacts cannot be merely
fortuitous, but rather, the respondents must have purposefully directed actions
at New Hampshire. Brother Records v. HarperCollins Publishers, 141 N.H.
322, 325 (1996).
The respondents purposely placed money with Noble, a non-depository
banking institution, in New Hampshire. The respondents claim that they did
not know that Noble was a New Hampshire entity, and, therefore, they did not
purposefully direct any activity at New Hampshire. These claims are at odds
5
with the evidence adduced by the petitioner. Each respondent signed an
agreement with Noble that included Noble’s New Hampshire address, a New
Hampshire choice of law provision, contact information for Noble in New
Hampshire, instructions to send the agreement to New Hampshire, and the
option to send a check to New Hampshire. Further, the agreements stated that
by signing, the respondents had read and agreed to the terms and conditions
in the agreement. Assertions by the respondents that contradict these
submissions by the petitioner are insufficient to defeat personal jurisdiction
under the prima facie standard. See Kimball Union Academy, 165 N.H. at 136.
Simply put, it is implausible that the respondents did not know that they were
investing with a New Hampshire entity.
By signing the agreement, sending the agreement and money to Noble in
New Hampshire, and contacting Noble in New Hampshire, the respondents
engaged in voluntary actions such that the contacts cannot be said to be based
on the unilateral activity of Noble. The respondents’ contacts with New
Hampshire were not fortuitous. Lyme Timber Co. v. DSF Investors, 150 N.H.
557, 562 (2004) (“Given that Lyme is based in New Hampshire and that
[defendant]’s communications were directed to Lyme here, the alleged impact
cannot be said to be fortuitous.”). By voluntarily entering into such
agreements with a New Hampshire entity, the respondents could reasonably
have anticipated being haled into court here. Computac, Inc. v. Dixie News
Co., 124 N.H. 350, 354 (1983); see also Burger King Corp. v. Rudzewicz, 471
U.S. 462, 464, 479-82 (1987) (finding it reasonably foreseeable that the
defendant, a Michigan resident, would be haled into court in Florida when he
purposely entered into an agreement with what he knew to be a Florida
enterprise, and the agreement contained a Florida choice of law provision).
Whether the respondents actually expected to be haled into court does not
determine whether jurisdiction was reasonably foreseeable. See J. McIntyre
Machinery, Ltd. v. Nicastro, 131 S. Ct. 2780, 2789 (2011) (“[I]t is the
[respondent]’s actions, not his expectations, that empower a State’s courts to
subject him to judgment.”).
The respondents argue that they were merely passive investors in Noble
and that their actions do not meet the purposeful availment requirement.
Noting that this court has not previously addressed the issue of personal
jurisdiction over so-called passive investors, the respondents rely upon cases
from other jurisdictions. See, e.g., Sender v. Powell, 902 P.2d 947, 951-52
(Colo. App. 1995) (holding that Colorado lacked personal jurisdiction over
defendant, a California resident, who invested in a Colorado business as a
limited partner and had no control over the enterprise); Tejal Vyas, LLC v.
Carriage Park, L.P., 600 S.E.2d 881, 888 (N.C. Ct. App. 2004) (finding that
North Carolina lacked personal jurisdiction over Illinois defendants whose only
connection to the forum state was that they entered into a contract with North
Carolina plaintiffs whereby plaintiffs invested in an Illinois real estate venture),
aff’d, 608 S.E.2d 751 (N.C. 2005); Klein v. Mega Trading Ltd., 416 So. 2d 866,
6
866 (Fla. Dist. Ct. App. 1982) (finding that Florida had no personal jurisdiction
over a New Jersey defendant whose only contact with Florida was that he
purchased an interest in a Florida limited partnership).
We recognize that these cases offer some support for the respondents’
position. However, we disagree with the Powell court’s conclusion that an
action seeking to recover allegedly excessive distributions made to an early
investor in a forum state Ponzi scheme does not arise out of the investor’s
investment in that venture. See Powell, 902 P.2d at 952. We also find Tejal
Vyas distinguishable because it involved essentially the reverse of the situation
presented here – in that case it was a North Carolina investor who sought to
subject Illinois defendants to jurisdiction in North Carolina even though the
real estate venture at issue was in Illinois, the agreement required performance
in Illinois, and the agreement was governed by Illinois law. See Tejal Vyas, 600
S.E.2d at 888. In this case, by contrast, New Hampshire unquestionably is the
jurisdiction that was the hub of the activities out of which the respondents’
alleged liability arises.
More persuasive, in our view, are cases such as Finn v. Walworth State
Bank, Nos. A11-2334, A11-2344, A12-0250, A12-2246, 2013 WL 6389521(Minn. Ct. App. Dec. 9, 2013), review denied (Minn. Feb. 18, 2014). In Finn,
the court found that several banks had sufficient minimum contacts with
Minnesota when their only contact with Minnesota was their purchase of loan
participations from a Minnesota entity. Finn, 2013 WL 6389521, at *1. The
entity, First United, engaged in a Ponzi scheme and the banks that invested
early were able to recover their investments and make profits. Id. The receiver
for First United brought clawback claims against the banks. Id. The banks
had entered into one or more participation agreements with First United. Id. at
*10. Many of the agreements included a Minnesota choice of law provision. Id.
at *13. The banks transferred money to First United or to a third party and
received payment from First United. Id. at *11. The court noted that many of
the banks did not solicit the transaction, and no one from the banks traveled to
Minnesota. Id. at *13.
The court in Finn found that the agreements provided for performance in
Minnesota and indicated an on-going relationship between First United and the
banks, which distinguished the case from several that involved one isolated
transaction between parties. Id. at *11. The court drew support for its ruling
from the fact that the activities provided for in the agreements were actually
performed by First United on behalf of the banks. Id. at *12. Even though the
banks disputed that First United was their agent because they did not actually
exercise control over First United, the court held that the banks’ right of
control, not the use of it, determined whether the banks had control over First
United. Id. The court also relied upon the choice of law provisions included in
the agreements signed by the banks. Id. at *13; see also Wessels, Arnold &
Henderson v. Nat. Medical Waste, 65 F.3d 1427, 1434 (8th Cir. 1995) (“The
7
choice of law clause . . . is insufficient standing alone to confer jurisdiction.
However, when these contacts are combined with the other factors, they
become wholly relevant and significant.”). Like the banks in Finn, the
respondents here signed form agreements, which included a New Hampshire
choice of law provision, named Noble as their agent, and indicated an on-going
relationship. Like the defendants in Finn, they sent money to New Hampshire
and received payments from New Hampshire.
We also find the decisions in Newbro v. Freed, 337 F. Supp. 2d 428(S.D.N.Y. 2004), and Picard v. Elbaum, 707 F. Supp. 144 (S.D.N.Y. 1989), to be
instructive. In Newbro, the defendants invested with a New York entity that
was running a Ponzi scheme. Newbro, 337 F. Supp. 2d at 430. The court
found that the defendants had sufficient minimum contacts with New York
because they maintained an investment account with a New York entity for two
years, during which time they had several communications with the account
manager in New York, both in person and by letter and telephone. Id. at 434.
The defendants voluntarily gave the New York entity the authority to act as
their broker, and at their direction, it wired money on their behalf and made
payments to them. Id.In Picard, the defendants were Connecticut residents and investors who
closed their accounts before their New York broker’s fraudulent scheme was
discovered. Picard, 707 F. Supp. at 145. Suit was brought against them to
recoup payments made to them in order to reimburse other investors who
allegedly had been defrauded. Id. The court held that New York could exercise
jurisdiction over the defendants because they opened an investment account in
New York, maintained the account for two years, and ordered at least one
transaction from the account. Id. at 149.
The respondents in this case, like the defendants in Newbro and Picard,
maintained an investment account for a prolonged period of time,2 engaged in
multiple communications with the entity that held the account, and had some
authority to direct account activities, such as withdrawing some or all of the
funds or having funds wired into another account. See also Fidelity State
Bank, Garden City, Kan. v. Oles, 130 B.R. 578, 585 (Bankr. D. Kan. 1991)
(finding minimum contacts because the defendant entered into a relationship
with, and made deposits to and withdrawals from, a bank that he knew was in
the forum state). Consistent with Finn, Newbro, and Picard, we find the
respondents’ forum-related contacts sufficient to establish that they purposely
availed themselves of the protection of New Hampshire law.
The third federal due process requirement is that it must be fair and
reasonable to require the respondents to defend the suit in New Hampshire.
2The record before the court reflects that the various respondents maintained accounts with
Noble for periods ranging from approximately six months to eighteen months.
8
Kimball Union Academy, 165 N.H. at 138. For this determination, we examine
the five “so-called ‘gestalt factors,’” which consider: the burden on the
respondent; the forum state’s interest in adjudicating the dispute; the
petitioner’s interest in obtaining convenient and effective relief; the interstate
judicial system’s interest in obtaining the most efficient resolution of
controversies; and the shared interest of the several states in furthering
fundamental substantive social policies. Vt. Wholesale Bldg. Prods. v. J.W.
Jones Lumber Co., 154 N.H. 625, 629 (2006). These factors sometimes serve
to establish the reasonableness of jurisdiction upon a lesser showing of
minimum contacts than would otherwise be required. Id.Here, a burden on the respondents exists, as is always the case with
non-resident respondents. However, we find that this burden is outweighed by
the other factors at play.3 New Hampshire has a great interest in adjudicating
this matter because the State has a substantial interest in the integrity and
economic stability of banks located in this state. See Leeper, 114 N.H. at 297.
New Hampshire also has an interest in seeing that the liquidation of Noble, a
New Hampshire entity, proceeds expeditiously. The respondents reside in
different states, which could require parallel lawsuits in eight different forums
if the litigation could not be consolidated in this state. The superior court’s
ability to act as the sole forum for resolving the matters in dispute between the
petitioner and all of the respondents greatly increases the speed and efficiency
of the liquidation, which will benefit the petitioner as well as the interests of the
interstate judicial system. The respondents argue that it is not fair to require
them to defend this suit in New Hampshire because they did not engage in any
wrongdoing. This assertion, however, goes to the merits of the litigation and
does not factor into the determination of whether this state may exercise
personal jurisdiction over the respondents. See Newbro, 337 F. Supp. 2d at432 n.1. In sum, we find that it is fair and reasonable to require the
respondents to defend this suit in New Hampshire.
Finally, the respondents argue that Noble was not their agent and that a
theory of agency cannot be used to confer personal jurisdiction over them. As
we find sufficient minimum contacts with New Hampshire based on acts of the
respondents themselves, we need not consider this argument.
Carlson and the Schweitzers argue that the trial court erred by relying
upon their proofs of claim filed in the liquidation proceeding to justify the
exercise of personal jurisdiction over them. They contend that their claims
were separate from the petitioner’s action, and as such, cannot be used to
3 It is apropos here to observe that, upon remand, the trial court has broad authority to
implement measures that may help to alleviate the burden on the respondents of defending the
litigation in this forum. For instance, in the exercise of its sound discretion, the court may require
that depositions be taken where the respondents live, or allow the respondents to participate in
depositions remotely.
9
support the exercise of personal jurisdiction. Assuming, without deciding, that
the trial court erred by relying upon the proofs of claim, we conclude that, for
all of the reasons discussed above, Carlson and the Schweitzers had sufficient
minimum contacts with New Hampshire to justify the exercise of personal
jurisdiction over them.
IV
For the reasons stated above, we hold that this state’s long-arm statute
and federal due process requirements permit New Hampshire courts to exercise
personal jurisdiction over all of the respondents in this case.
Affirmed and remanded.
DALIANIS, C.J., and HICKS and BASSETT, JJ., concurred.
10