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CALIFORNIA CORPORATE & SECURITIES LAW

Out-of-State M&A Lawyer Can Be Sued In California

Many M&A transactions are negotiated across state lines.  When an out-of-state lawyer misrepresents facts in a phone call and email to a lawyer in California, do those communications render the foreign lawyer amenable to suit in California?  In essence, that was the question presented to the Sixth District Court of Appeal in Moncrief v. Clark, Cal. Ct. Appeal Case No. H040098 (July 21, 2015).

Presiding Justice Conrad L. Rushing opined that there are three requirements for establishing specific jurisdiction over a nonresident defendant:

  • the defendant must have purposefully availed himself or herself of forum benefits;
  • the controversy is related to or arises out of the defendant’s contacts with the forum; and
  • the assertion of personal jurisdiction would comport with fair play and substantial
    justice.

As to the first requirement, the defendant argued that because he only engaged in a single, fortuitous transaction with plaintiff, he did not personally avail himself of the benefits of California.  The Court, however, found that the defendant’s communications (a phone call and email) were purposely and voluntarily directed towards California.

According to the Court, relatedness requirement is determined under the substantial connection test.  That test is met if there is a substantial nexus or connection between the defendant’s forum activities and the plaintiff‟s claim.  The Court found that the test was met because the operative facts of the controversy were whether the defendant misrepresented facts concerning his client’s ownership of assets being sold.

The defendant struck out on fairness as well.  According to the Court of Appeal, mere residency in another state does not establish unfairness when the first two tests have been met.

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