Alan Grayson v. Nigel Wood
Filing
PUBLISHED AUTHORED OPINION filed. Originating case number: 2:07-cv-00593-DCN,2:07-cv-02992-DCN,2:08-cv-03129-DCN. [999768735]. [14-1991, 14-1997]
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PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 14-1991
ALAN M. GRAYSON; AMG TRUST,
Plaintiffs - Appellants,
v.
RANDOLPH ANDERSON; PATRICK KELLEY; VISION INTERNATIONAL
PEOPLE GROUP PL.; TOTAL ECLIPSE INTERNATIONAL LTD.,
Defendants - Appellees,
and
CHARLES CATHCART; EVELYN CATHCART; YURIJ DEBEVC; CHARLES
HSIN; DERIVIUM CAPITAL USA INC; VERIDIA SOLUTIONS LLC;
SHENANDOAH HOLDINGS LTD; PTS INTERTECH INC; AQUILIUS INC;
OPTECH LIMITED; PAUL ANTHONY JARVIS; COLIN BOWEN; BANCROFT
VENTURES LTD; BANCROFT VENTURES UK LTD; SPENCER PARTNERS
LTD; ISLE OF MAN ASSURANCE LTD; DMITRY BOURIAK; BRYAN
JEEVES; ALEXANDER JEEVES; KRISTINA PHELAN; JEEVES GROUP,
THE; JEEVES HOLDINGS LTD; JAVELIN LTD; LEXADMIN TRUST REG;
ST VINCENT TRUST COMPANY LTD; ST VINCENT TRUST SERVICE LTD;
WINDWARD ISLES TRUST COMPANY LTD; SELBOURNE TRUST COMPANY
LTD; PELICAN TRUST COMPANY LTD; JEEVES GROUP ASIA LTD;
WACHOVIA SECURITIES, INC; JOHN DOE 1; JOHN DOE 2; JOHN DOE
3; JOHN DOE 4; JOHN DOE 5; JOHN DOE 6; JOHN DOE 7; JOHN DOE
8; JOHN DOE 9; JOHN DOE 10; JEEVES COMPANY LTD; ORANGEBURG
METAL TREATMENT CO LLC; ROBERT BRADENBURG; NIGEL THOMAS
TEBAY; JOANNA OVERFIELD BODELL; ISLE OF MAN FINANCIAL TRUST
LIMITED; NIGEL HARLEY WOOD; VISION INTERNATIONAL PEOPLE
GROUP PL; METARIZON LLC, f/k/a Metarizon Solutions LLC;
JONATHAN SANDIFER,
Defendants.
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14-1997
GRAYSON CONSULTING, INC.,
Plaintiff - Appellant,
and
KEVIN CAMPBELL, Chapter 7 Trustee,
Plaintiff,
v.
VISION INTERNATIONAL
INTERNATIONAL LTD.,
PEOPLE
GROUP
PL.;
TOTAL
ECLIPSE
Defendants - Appellees,
and
EVELYN CATHCART; CHARLES D. CATHCART CRUSADER TRUST;
CATHCART
INVESTMENT
TRUST;
CATHLIT
INVESTMENT
TRUST;
DIVERSIFIED DESIGN ASSOCIATED LTD; DAVID KEKICH; RED TREE
INTERNATIONAL; CHARLES HSIN, a/k/a CH Hsin, Chi Hsiu Hsin;
FIRST SECURITY CAPITAL OF CANADA INC; MARCO TOY INC;
BANCROFT VENTURES LTD; BANCROFT VENTURES UK LTD; WITCO
SERVICES UK LTD; JEEVES GROUP, THE; JEEVES COMPANY LTD;
JEEVES HOLDINGS LTD; BRYAN JEEVES; ALEXANDER JEEVES;
KRISTINA PHELAN; PAUL ANTHONY JARVIS; NIGEL THOMAS TEBAY;
COLIN CYPH BOWEN; MORIA THOMPSON MCHARRIE; DAVID ANTHONY
KARRAN; NIGEL HAMPTON MCGOWAN; FRANCIS GERRARD QUINN; PETER
KEVIN PERRY; BRIAN BODELL; ANDREW THOMAS; EDWARD J. BUDDEN;
JOANNA OVERFIELD BODELL; CONISTON MANAGEMENT LTD; JAVELIN
LTD; ST VINCENT TRUST SERVICE LTD; ST VINCENT TRUST COMPANY
LTD; LEXADMIN TRUST REG; ISLE OF MAN ASSURANCE LTD; ISLE OF
MAN FINANCIAL TRUST LTD; SPENCER PARTNERS LTD; SPENCER
VENTURE PARTNERS LLC; LINDSEY AG; OPTECH LTD; JACK W.
FLADER, JR.; JAMES C. SUTHERLAND; ZETLAND FINANCIAL GROUP
LTD; FRANKLIN W. THOMASON; DMITRY BOURIAK; NOBLESTREET LTD;
FINANCIAL RESOURCES GROUP LLC; STRUCTURED SYSTEMS AND
SOFTWARE INC; EAST BAY CAPITAL VENTURES LLC; CLIFFORD LLOYD;
NIGEL HARLEY WOOD; TSUEI CONSULTANTS INCORPORATED,
Defendants.
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Appeals from the United States District Court for the District
of South Carolina, at Charleston.
David C. Norton, District
Judge.
(2:07-cv-00593-DCN; 2:07-cv-02992-DCN; 2:08-cv-03129DCN)
Argued:
December 8, 2015
Decided:
March 7, 2016
Before WILKINSON, NIEMEYER, and DIAZ, Circuit Judges.
Affirmed by published opinion.
Judge Niemeyer wrote
opinion, in which Judge Wilkinson and Judge Diaz joined.
the
ARGUED: Tucker Harrison Byrd, TUCKER H. BYRD & ASSOCIATES, P.A.,
Winter Park, Florida, for Appellants.
Brian Cantwell Duffy,
DUFFY & YOUNG, LLC, Charleston, South Carolina; Mark H. Wall,
WALL TEMPLETON & HALDRUP, P.A., Charleston, South Carolina, for
Appellees.
ON BRIEF:
Katherine A. Stanton, WALL TEMPLETON &
HALDRUP, P.A., Charleston, South Carolina, for Appellee Patrick
Kelley. Seth W. Whitaker, DUFFY & YOUNG, LLC, Charleston, South
Carolina, for Appellee Total Eclipse International Ltd.
W.
Randolph Anderson, Jr., New York, New York, Appellee Pro Se.
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NIEMEYER, Circuit Judge:
Victims of a massive, South Carolina-centered Ponzi scheme
-- characterized by fraudulent loans secured by the borrowers’
publicly
traded
stock
--
obtained
a
judgment
of
over
$150
million against Derivium Capital (USA), Inc., its principals,
and numerous other participants in the scheme.
AMG
Trust,
plaintiffs,
and
are
Grayson
now
Consulting,
pursuing
Alan M. Grayson,
Inc.,
others
whom
three
they
of
claim
the
also
participated in the scheme.
With respect to the three plaintiffs’ claims against Vision
International
People
Group,
P.L.,
a
Cypriot
company,
the
district court granted Vision International’s motion to dismiss
for lack of personal jurisdiction under Federal Rule of Civil
Procedure
12(b)(2).
And
with
respect
to
Grayson’s
and
AMG
Trust’s claims against Randolph Anderson, Patrick Kelley, and
Total Eclipse International Ltd. for aiding and abetting common
law fraud, the district court granted those defendants’ motion
for judgment as a matter of law at trial, concluding that the
cause of action was not recognized by South Carolina courts.
The plaintiffs filed separate appeals on the two rulings.
In the first, the three plaintiffs contend that, because the
district court did not conduct an “evidentiary hearing” in which
it
took
live
testimony,
it
should
have
assessed
the
Rule
12(b)(2) motion under the more relaxed standard of whether the
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plaintiffs
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had
jurisdiction
made
over
a
Vision
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prima
facie
International
showing
rather
of
than
personal
under
the
more demanding standard that the district court applied, which
required them to prove facts demonstrating personal jurisdiction
by a preponderance of the evidence.
And in the second, Grayson
and
district
AMG
Trust
dismissing
their
contend
claims
that
the
for
aiding
and
court
erred
abetting
in
fraud,
maintaining that South Carolina recognized the cause of action
in Connelly v. State Co., 149 S.E. 266 (S.C. 1929).
We consolidated the two appeals by order dated August 26,
2015, and now affirm on both.
We conclude that, because the
parties engaged in full discovery on the jurisdictional issue
and fully presented the relevant evidence to the district court,
the
court
properly
addressed
Vision
International’s
Rule
12(b)(2) motion by weighing the evidence, finding facts by a
preponderance of the evidence, and determining as a matter of
law whether the plaintiffs carried their burden of demonstrating
personal jurisdiction over Vision International.
We also agree
with the district court’s conclusion that South Carolina has not
recognized a cause of action for aiding and abetting common law
fraud and that it is not our role as a federal court to so
expand state law.
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I
Under the fraud scheme referred to as the 90% Stock Loan
Program, which began in 1997, borrowers delivered their publicly
traded stock to Derivium as collateral for loans in amounts up
to 90% of the stock’s market value.
Because the loans were non-
recourse loans, the borrowers could, at the loan’s maturity date
of
usually
three
years,
surrender
the
stock
with
no
further
obligation to pay the loan -- an attractive option if, at that
time, the stock’s value had depreciated.
could
pay
attractive
the
loan
option
appreciated.
and
if,
at
demand
that
return
time,
Alternatively, they
of
the
the
stock
stock’s
--
value
an
had
It was, for the borrowers, thought to be a no-lose
proposition.
But the full, undisclosed details of the program, which was
designed and implemented largely by Charles Cathcart and Yuri
Debevc, two of Derivium’s principals, involved Derivium’s misuse
of the stock.
their
personal
Indeed, the principals sold the stock to fund
investments
in
high-risk
venture
capital
opportunities, and, in the process, they realized substantial
personal income from commissions on the stock sales.
Although
they hoped for yet larger returns on their investments, all but
one of the personal investments failed, and Derivium was unable
to
return
the
borrowers’
stock
at
the
loan
maturity
dates
because it had maintained no capital reserves and had entered
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into
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derivative
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transactions
to
hedge
against
losses.
Consequently, to cover the losses, the principals continued to
solicit stock from new borrowers and enter into new 90% loans
for years after the principals knew that the entire scheme would
eventually collapse.
Derivium went into bankruptcy in 2005, and victims of the
fraud began commencing actions in 2007 against Derivium, its
principals, and other employees and related companies implicated
in the scheme.
actions.
There were more than 50 defendants in these
With respect to some of the defendants, the district
court consolidated the actions for discovery and trial, and,
following
trial,
plaintiffs
in
a
the
jury
amount
returned
of
a
verdict
in
$150,478,525.29.
favor
The
of
the
judgment
entered on that verdict was affirmed on appeal.
The plaintiffs in the present appeals then began pursuing
claims that had been stayed by the district court pending the
outcome of the principal trial.
resumed
cases,
Vision
One of the defendants in these
International,
a
Cyprus-based
company
engaged in distributing health and beauty products outside of
the United States, filed a motion to dismiss under Rule 12(b)(2)
for
lack
motion,
of
personal
Vision
jurisdiction
International
over
included
it.
To
support
deposition
its
excerpts,
affidavits, and other documents developed during full discovery,
as well as a memorandum of law, to demonstrate that the court
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lacked jurisdiction.
included
more
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To support their response, the plaintiffs
than
120
exhibits,
likewise
consisting
of
deposition transcripts, affidavits, interrogatory answers, and
documentary
evidence,
demonstrate
that
as
Vision
well
as
a
International
memorandum
had
of
law,
sufficient
with South Carolina and the United States generally.
to
contacts
See S.C.
Code Ann. § 36-2-803 (South Carolina’s long-arm statute); Fed.
R. Civ. P. 4(k)(2) (a so-called federal long-arm “statute”).
The
plaintiffs
Vision
argued
International’s
participated
in
California.
the
The
in
their
CEO
Ponzi
district
memorandum
and
law
that
both
its
Legal
Advisor
had
in
South
Carolina
and
scheme
court
of
conducted
a
hearing
on
the
motion on July 1, 2013, and neither side asked to present any
further evidence, including any live testimony.
hearing,
the
district
court
granted
Vision
Following the
International’s
motion to dismiss, concluding that the plaintiffs had failed to
meet
their
burden
of
proving,
by
a
preponderance
of
the
evidence, facts demonstrating personal jurisdiction over Vision
International.
During the subsequent trial against Anderson, Kelley, and
Total Eclipse, the district court granted the defendants’ motion
for judgment as a matter of law with respect to Grayson’s and
AMG Trust’s claims for aiding and abetting fraud, reasoning that
no such cause of action existed under South Carolina law.
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the district court dismissed the aiding and abetting claims, the
jury found in favor of those defendants on the remaining claims.
On
court’s
appeal,
the
procedure
plaintiffs
for
dismissing
challenge
their
(1)
claims
the
district
against
Vision
International for lack of personal jurisdiction, and (2) the
district court’s ruling dismissing the claims against Anderson,
Kelley, and Total Eclipse for aiding and abetting common law
fraud.
II
On the personal jurisdiction issue, the plaintiffs contend
that the district court erred in granting Vision International’s
motion
to
dismiss
because
the
court
“did
not
conduct
evidentiary hearing to resolve the conflicting evidence.”
an
As a
consequence, they argue, the district court erred in failing to
recognize that, in that circumstance, they “only needed to make
a prima facie showing to establish jurisdiction” and thus that
their evidence had to be taken in the light most favorable to
them.
Rather
than
applying
the
prima
facie
standard,
they
argue, the district court “weighed and considered the evidence”
and
applied
a
more
difficult
standard,
from
the
plaintiffs’
point of view, by imposing on them the burden of proving facts
demonstrating jurisdiction by a preponderance of the evidence.
The plaintiffs maintain that only by applying the more rigorous
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preponderance of the evidence standard was the district court
able to grant Vision International’s Rule 12(b)(2) motion to
dismiss.
Vision
correctly
evidence
found
International
held
the
standard
that:
International
plaintiffs
and,
(1)
contends
in
no
availed
to
that
the
applying
evidence
itself
of
district
preponderance
that
existed
the
the
standard,
to
show
privilege
of
the
correctly
that
of
court
Vision
conducting
business in South Carolina; (2) no evidence existed to show that
Vision International had any contacts with South Carolina or
with the United States generally; and, more specifically, (3) no
evidence existed to show that actions taken by two of Vision
International’s employees in furtherance of the loan scheme fell
within the scope of their employment or were otherwise imputable
to Vision International.
A
Addressing the plaintiffs’ procedural arguments first, we
note that the Federal Rules of Civil Procedure do not provide
specific
procedures
for
a
district
court’s
pretrial motions filed under Rule 12(b)(2).
disposition
of
Nonetheless, the
general principles governing an appropriate procedure are wellestablished.
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Under Rule 12(b)(2), a defendant must affirmatively raise a
personal
burden
jurisdiction
of
challenge,
demonstrating
personal
following such a challenge.
676 (4th Cir. 1989).
issue
for
matter.
the
court
but
the
plaintiff
jurisdiction
at
bears
every
the
stage
See Combs v. Bakker, 886 F.2d 673,
And a Rule 12(b)(2) challenge raises an
to
resolve,
generally
as
a
preliminary
Id. (“[T]he jurisdictional question thus raised [under
Rule 12(b)(2)] is one for the judge”).
Indeed, only when a
material jurisdictional fact is disputed and that fact overlaps
with a fact that needs to be resolved on the merits by a jury
might a court defer its legal ruling on personal jurisdiction to
let the jury find the overlapping fact.
F.2d
1213,
1219
(4th
Cir.
1982)
Cf. Adams v. Bain, 697
(noting
that,
“where
the
jurisdictional facts are intertwined with the facts central to
the merits of the dispute,” deferring resolution of that factual
dispute to a proceeding on the merits “is the better view”).
The plaintiff’s burden in establishing jurisdiction varies
according to the posture of a case and the evidence that has
been
presented
to
the
court.
For
example,
when
the
court
addresses the personal jurisdiction question by reviewing only
the parties’ motion papers, affidavits attached to the motion,
supporting
legal
memoranda,
and
the
allegations
in
the
complaint, a plaintiff need only make a prima facie showing of
personal jurisdiction to survive the jurisdictional challenge.
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Combs, 886 F.2d at 676; see also Mylan Labs., Inc. v. Akzo,
N.V., 2 F.3d 56, 62 (4th Cir. 1993) (explaining how courts may
consider affidavits from any party when applying the prima facie
standard).
requisite
When determining whether a plaintiff has made the
prima
allegations
facie
and
showing,
available
the
court
evidence
must
relating
take
to
personal
jurisdiction in the light most favorable to the plaintiff.
Combs, 886 F.2d at 676; Mylan Labs., 2 F.3d at 60.
however,
a
jurisdiction
evidence.
plaintiff
over
the
must
establish
defendant
by
a
facts
the
See
Ultimately,
supporting
preponderance
of
the
Combs, 886 F.2d at 676 (noting that “the burden [is]
on the plaintiff ultimately to prove the existence of a ground
for
jurisdiction
by
a
preponderance
of
the
evidence”).
And
because defendants file Rule 12(b)(2) motions precisely because
they believe that they lack any meaningful contacts with the
forum
State
where
the
plaintiff
has
filed
suit,
the
better
course is for the district court to follow a procedure that
allows it to dispose of the motion as a preliminary matter.
To be sure, we have previously stated that, if a court
requires the plaintiff to establish facts supporting personal
jurisdiction by a preponderance of the evidence prior to trial,
it
must
conduct
an
“evidentiary
hearing.”
See,
e.g.,
New
Wellington Fin. Corp. v. Flagship Resort Dev. Corp., 416 F.3d
290, 294 n.5 (4th Cir. 2005) (“[P]laintiff[s] must eventually
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prove the existence of personal jurisdiction by a preponderance
of the evidence, either at trial or at a pretrial evidentiary
hearing” (quoting Prod. Grp. Int'l v. Goldman, 337 F. Supp. 2d
788,
793
n.2
omitted))).
(E.D.
But
Va.
2004)
contrary
to
(internal
the
quotation
plaintiffs’
marks
position,
an
“evidentiary hearing” does not automatically involve or require
live testimony.
F.2d
671,
676
See, e.g., Boit v. Gar-Tec Prods., Inc., 967
(1st
Cir.
1992)
(noting
how,
in
the
personal
jurisdiction context, “[n]ot all ‘evidentiary hearings,’ . . .
involve evidence ‘taken orally in open court’” (quoting Fed. R.
Civ.
P.
43(a)));
id.
at
676-77
(noting
that,
to
apply
the
preponderance of the evidence standard before trial, “a court
may take most of the evidence . . . by affidavits, authenticated
documents,
answers
to
interrogatories
or
requests
for
admissions, and depositions”); see also Fed. R. Civ. P. 43(c)
(providing
that
courts
may
“hear”
motions
“on
affidavits
or
. . . wholly or partly on oral testimony or on depositions”).
Rather, an “evidentiary hearing” requires only that the district
court afford the parties a fair opportunity to present both the
relevant
jurisdictional
evidence
and
their
legal
arguments.
Once the court has provided that opportunity, it must hold the
plaintiff to its burden of proving facts, by a preponderance of
the evidence, that demonstrate the court’s personal jurisdiction
over the defendant.
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As with many pretrial motions, a court has broad discretion
to determine the procedure that it will follow in resolving a
Rule
12(b)(2)
motion.
If
the
court
deems
it
necessary
or
appropriate, or if the parties so request, it may conduct a
hearing
consider
and
receive,
or
jurisdictional
not,
live
evidence
testimony.
in
the
form
It
of
may
also
depositions,
interrogatory answers, admissions, or other appropriate forms.
But we see no reason to impose on a district court the hard and
fast
rule
that
it
must
automatically
assemble
attorneys
and
witnesses when doing so would ultimately serve no meaningful
purpose.
Creating such needless inefficiency would undermine a
principal purpose of the Federal Rules of Civil Procedure “to
secure the just, speedy, and inexpensive determination of every
action and proceeding.”
Fed. R. Civ. P. 1.
At bottom, a district court properly carries out its role
of
disposing
applying
of
a
procedures
pretrial
that
motion
provide
under
the
Rule
parties
12(b)(2)
with
a
by
fair
opportunity to present to the court the relevant facts and their
legal arguments before it rules on the motion.
In this case, Vision International filed a Rule 12(b)(2)
motion to dismiss for lack of personal jurisdiction following
the completion of a full discovery process.
motion,
it
included
numerous
excerpts
In support of its
from
depositions,
exhibits, affidavits, and similar evidence for consideration by
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Supporting
plaintiffs
filed
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their
over
120
opposition
exhibits,
to
the
motion,
including
the
deposition
transcripts, affidavits, interrogatory answers, and documentary
evidence.
Both sides also filed extensive memoranda of law.
After
parties
the
completed
their
submissions,
the
district
court conducted a hearing on the motion on July 1, 2013, and,
after receiving argument, took the motion under advisement.
At
the hearing, no party proffered, nor did the court request, more
evidence,
and
no
party
requested
to
present
live
testimony.
Presumably, the parties and the court were satisfied that the
court had before it all the relevant evidence from which to make
its decision.
And, in this case, the evidence was substantial.
Following this procedure, the district court found facts by a
preponderance
concluded
as
of
a
the
evidence
matter
of
and,
law
based
that
on
it
those
lacked
facts,
personal
jurisdiction over Vision International.
We find no deficiency in the process that was followed by
the
district
court
and
conclude
that
the
district
court
correctly applied the preponderance of the evidence standard,
rather than the prima facie standard, in finding facts.
Because
full discovery had been conducted and the relevant evidence on
jurisdiction
had
been
presented
to
the
court,
the
court
appropriately considered the evidence and found the facts by a
preponderance of the evidence.
And even though a hearing was
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not mandatory, the court also conducted one.
claimed
that
the
record
was
inadequately
No party ever
developed,
that
relevant evidence was missing, or that it was unable to fairly
present its position.
Accordingly, we find no error in the
procedure that the district court followed or the standard that
it
applied
for
deciding
Vision
International’s
Rule
12(b)(2)
Rule
12(b)(2)
motion.
B
On
the
merits
of
Vision
International’s
motion, the district court found that “there is no evidence that
indicates
that
[Vision
International’s
CEO
Paul]
Jarvis
and
[Vision International’s Legal Advisor Ismini] Papacosta acted on
Vision’s behalf or in Vision’s interest when they participated
in the 90% Stock Loan Program.”
International
Carolina,
did
did
not
not
direct
maintain
Moreover, it found that Vision
any
of
its
any
office
activities
to
South
or
in
South
agent
Carolina, did not own any property in South Carolina, and did
not
conduct
any
South Carolina.
business
with
or
communicate
with
anyone
in
At bottom, the court found that there was no
evidence demonstrating that Vision International “purposefully
availed itself of the privilege of conducting business in South
Carolina” or that it had “any meaningful connection with the
state.”
Accordingly, the court held that the plaintiffs failed
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to carry their “burden of proving, by a preponderance of the
evidence,
[the
grounds
to
demonstrate]
that
personal
jurisdiction [was] proper over Vision” under South Carolina’s
long-arm statute, South Carolina Code § 36-2-803.
It also held
that the plaintiffs failed to carry their burden under Federal
Rule of Civil Procedure 4(k)(2) of proving, by a preponderance
of
the
evidence,
that
Vision
International
had
sufficient
contacts with the United States generally.
While the plaintiffs argue that the district court erred
because the court did not construe the facts in favor of their
position, harking back to the failure to apply the prima facie
standard, they otherwise do not argue that the district court’s
factual findings were clearly erroneous or that its legal ruling
on personal jurisdiction was erroneous.
See Carefirst of Md.,
Inc. v. Carefirst Pregnancy Ctrs., Inc., 334 F.3d 390, 396 (4th
Cir. 2003) (“We review de novo a dismissal for lack of personal
jurisdiction, though we review any underlying factual findings
for clear error” (citations omitted)).
We
have
already
rejected
the
plaintiffs’
procedural
argument that the district court applied the wrong standard for
finding facts and now we affirm the court’s legal conclusion on
the
merits
that
it
lacked
personal
International.
17
jurisdiction
over
Vision
Appeal: 14-1991
Doc: 81
Filed: 03/07/2016
Establishing
Pg: 18 of 24
personal
jurisdiction
over
Vision
International under South Carolina’s long-arm statute required,
as a first step, that the plaintiffs prove that the defendant
had “purposefully availed itself of the privilege of conducting
activities in [South Carolina].”
See Consulting Eng’rs Corp. v.
Geometric Ltd., 561 F.3d 273, 278 (4th Cir. 2009) (quoting ALS
Scan, Inc. v. Digital Serv. Consultants, Inc., 293 F.3d 707, 712
(4th Cir. 2002)); see also ESAB Grp., Inc. v. Zurich Ins. PLC,
685 F.3d 376, 391 (4th Cir. 2012) (“Because the scope of South
Carolina’s long-arm statute is coextensive with the Due Process
Clause,
we
(citations
proceed
directly
omitted)).
The
to
the
record
constitutional
in
this
analysis”
case,
however,
includes no evidence to support a claim that the plaintiffs did
so.
To be sure, two of Vision International’s employees, CEO
Jarvis and Legal Advisor Papacosta, conducted some business in
relation
to
the
loan
scheme
while
employed
by
Vision
International, including contacting businesses and individuals
in South Carolina using Vision International’s fax machines and
email accounts.
But none of the extensive discovery in this
case yielded any evidence that the two were acting on Vision
International’s
when doing so.
behalf
or
in
Vision
International’s
interest
Their actions, in other words, did not fall
within the scope of their employment with Vision International,
18
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Doc: 81
Filed: 03/07/2016
Pg: 19 of 24
which, as a company, was engaged in the business of distributing
health and beauty products outside of the United States.
See
Young v. F.D.I.C., 103 F.3d 1180, 1190 (4th Cir. 1997) (applying
South Carolina agency law in concluding that, “[i]f the employee
acted
for
some
independent
“with
the
purpose
of
purpose
benefiting
of
the
his
own,”
employer,”
rather
“the
than
conduct
falls outside the scope of his employment” and, thus, that a
corporation cannot face vicarious liability for that employee’s
conduct).
And insofar as no facts suggested that Jarvis and
Papacosta acted within the scope of their employment, it follows
that no dispute of fact could exist on that issue and that the
district court correctly resolved this question of agency law in
Vision
International’s
favor.
Because
the
plaintiffs
relied
entirely on the actions of these two employees to demonstrate
jurisdiction,
the
International
privilege
Vision
of
court
had
not
conducting
International
also
concluded
correctly
that
purposefully
availed
business
South
Carolina
any
meaningful
otherwise
in
lacked
itself
Vision
of
the
and
that
contacts
with the State.
We also conclude that the district court did not err in
rejecting the plaintiffs’ reliance on their federal law claims
to demonstrate personal jurisdiction over Vision International
under Rule 4(k)(2).
That Rule provides that, “[f]or a claim
that arises under federal law, serving a summons or filing a
19
Appeal: 14-1991
Doc: 81
waiver
of
service
defendant if:
in
any
establishes
courts
jurisdiction
Constitution
Pg: 20 of 24
personal
jurisdiction
over
a
(A) the defendant is not subject to jurisdiction
state’s
exercising
added).
Filed: 03/07/2016
and
of
is
laws.”
general
jurisdiction;
consistent
Fed.
R.
with
Civ.
the
P.
and
United
4(k)(2)
(B)
States
(emphasis
Thus, if a plaintiff’s claims arise under federal law,
the plaintiff can invoke Rule 4(k)(2) if it demonstrates that no
State can exercise personal jurisdiction over the defendant but
that the defendant’s contacts with the United States as a whole
support
the
exercise
of
jurisdiction
consistent
Constitution and laws of the United States.
with
the
See Base Metal
Trading, Ltd. v. OJSC “Novokuznetsky Aluminum Factory”, 283 F.3d
208, 215 (4th Cir. 2002).
Of course, if a plaintiff properly
invokes Rule 4(k)(2), it can rely on pendent jurisdiction for
its state law claims, so long as those claims arose under the
same
nucleus
of
operative
facts.
See
ESAB
Grp.,
Inc.
v.
Centricut, Inc., 126 F.3d 617, 628 (4th Cir. 1997).
In this case, the plaintiffs never argued, as they were
required
to
do,
that
no
State
could
jurisdiction over Vision International.
4(k)(2)(A).
exercise
personal
See Fed. R. Civ. P.
In fact, the plaintiffs discuss only whether South
Carolina could exercise jurisdiction over Vision International,
without
mentioning
Vision
International’s
States.
See Base Metal Trading, 283 F.3d at 215 (“Base Metal
20
status
in
other
Appeal: 14-1991
has
Doc: 81
never
personal
continues
Filed: 03/07/2016
attempted
to
jurisdiction
to
assert
Pg: 21 of 24
argue
in
that
that
any
state.
personal
NKAZ
is
In
not
fact,
jurisdiction
proper in Maryland as well as in other states”).
subject
Base
over
to
Metal
NKAZ
is
In any event,
the record shows that Jarvis’ and Papacosta’s personal contacts
with
businesses
and
individuals
throughout
the
United
States
failed to establish jurisdiction under Rule 4(k)(2) over Vision
International for the same reasons that those contacts proved
insufficient
to
satisfy
long-arm statute.
jurisdiction
under
South
Carolina’s
Their contacts involved conduct that exceeded
the scope of their employment with Vision International and thus
could not be imputed to Vision International.
Accordingly,
we
affirm
the
district
court’s
ruling
dismissing the claims against Vision International for lack of
personal jurisdiction.
III
Plaintiffs
Grayson
and
AMG
Trust
also
contend
that
the
district court erred in granting judgment as a matter of law to
Anderson, Kelley, and Total Eclipse on state common law claims
that those defendants had aided and abetted common law fraud.
The plaintiffs argue that the district court erred in concluding
that no such cause of action exists under South Carolina law
because the South Carolina Supreme Court long ago recognized
21
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Filed: 03/07/2016
Pg: 22 of 24
this cause of action in Connelly v. State Co., 149 S.E. 266, 268
(S.C.
1929).
We
do
not,
however,
read
Connelly
as
the
plaintiffs read it, and we have found no other case in which
South
Carolina
has
held
that
aiding
and
abetting
common
law
fraud exists as a cause of action in the State.
In Connelly, the South Carolina Supreme Court held that,
when
a
complaint
charged
two
defendants
jointly
with
the
composition and publication of an allegedly libelous editorial,
the defamation suit could be brought in the county of either
defendant and therefore that the trial court did not err in
refusing to transfer the case from the county of one defendant
to the county of the other.
149 S.E. at 271.
In affirming the
trial court’s refusal to transfer the action, the South Carolina
Supreme Court said that it was “express[ing] no opinion as to
the merit or demerit of the case, and no finding of the facts
alleged.”
Id.
In claiming that Connelly recognizes a claim for aiding and
abetting fraud, the plaintiffs point to language set forth in
the trial court’s opinion, which Connelly reprinted separately.
That language quotes at length from a note in volume 1914C of
the
American
cases
from
Annotated
other
Cases,
States,
assist
which,
stated,
the
in
“[A]ll
countenance,
or
commission
wrongdoers.”
Connelly, 149 S.E. at 268.
22
summarizing
who
of
numerous
aid,
the
advise,
tort
are
But the trial court
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Filed: 03/07/2016
Pg: 23 of 24
did not adopt the language to formulate its holding, concluding
only
that,
when
two
persons
participate
in
the
writing
and
publication of a libelous article, both are jointly liable and
that a suit, therefore, could be brought in the county of either
defendant.
Id.
at
270.
Moreover,
the
language
that
the
plaintiffs rely on was neither in the South Carolina Supreme
Court’s opinion nor was it approved by that court.
Indeed, in
affirming the trial court’s refusal to transfer the case, the
South Carolina Supreme Court stated, “We simply hold that, under
the showing made, considered in the light of the law of this
state governing such matters, it was the duty of [the trial
judge] to refuse the motion to transfer . . . .”
Id. at 271
(emphasis added).
The plaintiffs’ assertion that Connelly constitutes “ample
authority” to support a cause of action in South Carolina for
aiding and abetting common law fraud borders on the frivolous.
To be sure, South Carolina courts have discussed aiding and
abetting other specified conduct.
See, e.g., Future Grp., II v.
Nationsbank, 478 S.E.2d 45, 50 (S.C. 1996) (discussing “aiding
and abetting a breach of fiduciary duty”); Broadmoor Apartments
of
Charleston
v.
Horwitz,
413
S.E.2d
9,
11
(S.C.
(discussing aiding and abetting an “abuse of process”).
1991)
But we
have been unable to find any case that has held that aiding and
23
Appeal: 14-1991
Doc: 81
abetting
Filed: 03/07/2016
common
law
fraud,
Pg: 24 of 24
or
even
torts
generally,
would
constitute a cause of action in South Carolina.
As we have previously explained, “federal courts sitting in
diversity rule upon state law as it exists and do not surmise or
suggest its expansion.”
Burris Chem., Inc. v. USX Corp., 10
F.3d 243, 247 (4th Cir. 1993) (emphasis added); Guy v. Travenol
Labs., Inc., 812 F.2d 911, 917 (4th Cir. 1987) (“In applying
state law, federal courts have always found the road straighter
and the going smoother when, instead of blazing new paths, they
restrict their travels to the pavement”).
In accordance with
this well-established principle, we also decline any suggestion
by
the
plaintiffs
that
we
expand
South
Carolina
law
by
recognizing a cause of action for aiding and abetting common law
fraud.
We therefore affirm the district court’s ruling to grant
judgment
as
a
matter
of
law
to
Anderson,
Kelley,
and
Total
Eclipse on the plaintiffs’ claim that they aided and abetted
common law fraud.
*
*
*
The judgments of the district court are
AFFIRMED.
24
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