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PSD Wins Personal Jurisdiction Dismissal in SDNY Transactional Litigation

In a 5-page decision, a federal judge in the Southern District of New York dismissed two individual defendants from a complex commercial litigation. An underlying dispute arose from a sale of an 81% interest in a company holding certain railway property and assets with an enterprise value of more than $180 million. An affiliate of the seller has a separate pending action against the buyer based on allegations that the buyer has knowingly aided and abetted breaches of fiduciary duty. In a separate action, Plaintiffs brought certain claims against a Canadian citizen and a Florida citizen who were the indirect beneficial owners of the seller.  The federal court granted the individuals’ motion to dismiss on personal jurisdiction grounds. The court explained:

“Plaintiffs misleadingly suggest that the SPA was ‘the genesis of all the disputes between the parties.’ (Pl.’s Opp’n 10). Yes, the SPA is the ‘genesis’ of all Plaintiffs’ claims insofar as it is how CMC Acquisition acquired an interest in CMC Industries. But that aside, CMC Industries’s claim against the Individual Defendants has nothing to do with the SPA. The claim does not involve the parties to the SPA, it does not allege breach of the SPA, and it does not call for interpretation of the SPA; instead, it involves an internal corporate governance dispute between a Texas corporation and foreign shareholders of that corporation governed by Texas law. Notably, elsewhere, CMC Acquisition itself has conceded that ‘the SPA includes no provision concerning the post-acquisition management of CMC or TRT LeaseCo,’ (Docket No. 54, at 17), rendering it irrelevant to the corporate governance dispute underlying the claim against the Individual Defendants. That is correct — and defeats Plaintiffs’ reliance on the SPA for personal jurisdiction over the Individual Defendants. ‘Where, as in the present action, the rights being asserted do not originate from the contract containing the forum selection clause, the clause does not apply.’”

PSD’s clients’ claims related to corporate governance and contract issues remain pending in both federal actions. A copy of the September 14, 2018 decision can be found here: 180914 Memorandum Opinion and Order