GEO-CULTURE, INC. v. SIAM INVESTMENT MANAGEMENT, 147 Or. App. 536 (1997)

936 P.2d 1063

9501-00400; CA A91628Oregon Court of Appeals.Submitted on record and briefs November 21, 1996.
Affirmed April 16, 1997.

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Appeal from the Circuit Court, Multnomah County, Janice R. Wilson, Circuit Judge. (Judgment), Henry Kantor, Judge (Motion).

Michael J. Morris filed the brief for appellant.

Charles F. Adams, Joel A. Mullin, and Stoel Rives LLP filed the brief for respondent.

Before Deits, Presiding Judge, and De Muniz and Haselton, Judges.

HASELTON, J.

Affirmed.

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HASELTON, J.

Plaintiff, Geo-Culture, Inc., appeals from a judgment dismissing its claims against defendant, HBZ Finance Limited (HBZ), a Hong Kong corporation, for lack of personal jurisdiction. ORCP 21 A(2). The trial court determined that plaintiff’s pleadings and evidentiary submissions were insufficient to support the exercise of jurisdiction pursuant to ORCP 4 D(1) and ORCP 4 L and, particularly, that plaintiff had not demonstrated the requisites of “co-conspirator” jurisdiction. We affirm.

The gist of the dispute, as described in plaintiff’s complaint and affidavits,[1] is as follows. Plaintiff is an Oregon corporation that is involved in the development of greenhouse horticulture using geothermal energy for heating. Defendant HBZ is a Hong Kong corporation authorized to act as, inter alia, a depository bank.

In the summer or fall of 1993, plaintiff sought venture-capital financing to expand its operations. In the course of those efforts, plaintiff came into contact with defendant Stephenson, an officer of defendant All Financial Services, Inc. Stephenson, in turn, provided plaintiff with information concerning “Siam Commercial Group,” or, individually, defendants Siam Investment Management S.A., Siam Commercial Finance S.A., Siam Management S.A., and Siam Holdings S.A. (the Siam defendants), as a possible source of funding. Stephenson assured plaintiff that the Siam Commercial Group had substantial assets and many ongoing projects in various stages of completion.

Thereafter, the Siam defendants, and, particularly, Siam Investment Management S.A., represented that, if plaintiff met certain conditions, including the payment of a

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substantial “loan application” fee, Siam Investment Management S.A. would issue a firm commitment letter. If plaintiff accepted and complied with the terms of that letter, the loan would be forthcoming.

In May 1994, plaintiff applied for a loan of $6.75 million and paid a loan application fee of $15,100, in the form of a cashier’s check, to Siam Management S.A. Siam Holdings S.A. subsequently endorsed the check,[2] and the check was ultimately deposited with, and endorsed by, defendant HBZ.

In June 1994, Siam Holdings issued a “letter of commitment” to plaintiff in which Siam Holdings agreed to provide the $6.75 million loan on the fulfillment of certain conditions, including plaintiff’s payment of an additional “commitment fee” to Siam Holdings. Plaintiff thereafter performed the conditions, including the payment of the additional commitment fee of $11,700, in the form of a cashier’s check, to Siam Holdings. Again, Siam Holdings endorsed the check, and again the check was ultimately deposited with, and endorsed by, HBZ. Notwithstanding plaintiff’s performance of all conditions and its payment of the loan application and commitment fees, the Siam defendants never advanced the proposed funds.

In January 1995, plaintiff filed this action, asserting claims for breach of contract, fraud, and racketeering activity, in violation of the Oregon Racketeer Influenced and Corrupt Organizations Act (ORICO), ORS 166.715 et seq. The original complaint did not refer to, much less allege claims against, HBZ. Thereafter, plaintiff amended its complaint to allege, in conclusory fashion, that HBZ was the “undisclosed principal” of the Siam defendants, collectively and individually, and of “subagent” defendant All Financial Services. In its claim for fraud, plaintiff alleged that “defendants are engaged in a scheme or conspiracy.” In its ORICO claim, plaintiff alleged that the defendants “conspir[ed]” to violate ORICO.

HBZ filed a motion to dismiss for lack of personal jurisdiction. ORCP 21 A(2). HBZ argued that plaintiff had

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failed to plead any basis warranting the exercise of personal jurisdiction under ORCP 4 A through L and, particularly, that asserting jurisdiction over HBZ would not comport with due process. In response, plaintiff moved to compel discovery of jurisdictional facts from HBZ through telephonic deposition and documentary production and to defer its response on the “jurisdictional merits” until that discovery was completed. The trial court ruled that plaintiff could conduct discovery concerning jurisdictional facts, but only in accordance with the process described in the Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters.[3] The court reserved ruling on other aspects of the motion to compel until the Hague Convention discovery, if any, was completed. Without pursuing Hague Convention discovery, plaintiff then filed a response to the motion to dismiss.

In opposing dismissal, plaintiff asserted that exercising personal jurisdiction over HBZ would be appropriate under the “co-conspirator” theory of jurisdiction, which some courts have adopted.[4] Plaintiff asserted, particularly, that, in depositing the cashier’s check into its own account, HBZ was acting not as a bank, but as a co-conspirator in the Siam defendants’ activity. Plaintiff contended that, because of the “co-conspirator” nexus, HBZ should be subject to the jurisdiction of the Oregon courts.[5]

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In reply, HBZ argued that, even if “co-conspirator” long-arm jurisdiction were cognizable under ORCP 4, plaintiff had failed to plead and prove the requisites for such jurisdiction, as recognized and applied in other jurisdictions. In particular, HBZ asserted that, notwithstanding the conclusory and unadorned allegation of “conspiracy,” plaintiff had not pleaded or proffered evidence of any facts from which it could be reasonably inferred that HBZ was a participant in a conspiracy, much less that HBZ knew, or should have known, that any act in furtherance of the Siam defendants’ alleged conspiracy would occur or have an effect in Oregon. See, e.g., Dixon v. Mack, 507 F. Supp. 345, 348-50 (SDNY 1980); Gemini Enterprises, Inc. v. WFMY Television Corp., 470 F. Supp. 559, 564 (MDNC 1979) Istituto Bancario Italiano v. Hunter Eng. Co., 449 A.2d 210, 225
(Del 1982) (all endorsing a “knew or should have known” requirement).

The trial court adopted HBZ’s argument and dismissed plaintiff’s claims:

“I think it’s — there’s a reasonable likelihood that the Supreme Court would acknowledge a conspiracy theory for personal jurisdiction, but I think even under the cases that have allowed the conspiracy basis, that here the plaintiff has neither pleaded nor presented evidence of sufficient facts from which it could be inferred that HBZ was aware of the conduct.

“* * * * *

“* * * [I]n light of my ruling that this Court has no personal jurisdiction over this defendant, I am going to deny any and all other relief sought against it, including the right of discovery. So that may be the equivalent of the ruling you wanted, but I’m denying your Motion to Compel.”[6]

On appeal, plaintiff raises two assignments of error: (1) The trial court erred in directing plaintiff to pursue discovery of jurisdictional facts in accordance with the process

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specified in the Hague Convention, while reserving ruling on the availability of discovery under the Oregon Rules of Civil Procedure pending completion of the Hague Convention process. (2) The trial court erred in granting HBZ’s motion to dismiss for lack of personal jurisdiction. For clarity of analysis, we address those assignments in reverse order.

Plaintiff contends that HBZ is subject to jurisdiction pursuant to ORCP 4 D(1) and ORCP 4 L,[7] because HBZ acted as a co-conspirator in a scheme to defraud, and to engage in racketeering activities with respect to, plaintiff.[8]
Acknowledging that HBZ had no direct contact with Oregon, plaintiff invokes the concept of “co-conspirator” jurisdiction recognized in some jurisdictions[9] but rejected in others.[10]
Neither we nor the Oregon Supreme Court have previously addressed, much less endorsed, “co-conspirator” jurisdiction.

We need not, and do not, decide whether “co-conspirator” jurisdiction is cognizable under ORCP 4 D(1) or ORCP 4 L. Like the trial court, we conclude that, whatever the abstract merits of that question, plaintiff failed to make even a prima facie
showing of the requisites of such jurisdiction.

In so holding, we find persuasive the Delaware Supreme Court’s analysis in Istituto. There, the court identified the elements that a plaintiff must demonstrate before an

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out-of-state defendant can be subjected to jurisdiction based on alleged participation in a conspiracy:

“(1) a conspiracy to defraud existed; (2) the defendant was a member of that conspiracy; (3) a substantial act or substantial effect in furtherance of the conspiracy occurred in the forum state; (4) the defendant knew or had reason to know of the act in the forum state or that acts outside the forum state would have an effect in the forum state; and (5) the act in, or effect on, the forum state was a direct and foreseeable result of the conduct in furtherance of the conspiracy.” 449 A.2d at 225.

See also Glaros v. Perse, 628 F.2d 679, 682 (1st Cir 1980) (plaintiff’s factual allegations concerning conspiracy must connect plaintiff to forum activity); Hasenfus v. Corporate Air Services, 700 F. Supp. 58, 62 (DDC 1988) (“Bald speculations that defendants are alleged co-conspirators do not constitute the threshold showing necessary to carry the burden of establishing personal jurisdiction.”).[11]

Here, plaintiff failed to plead, much less prove, that HBZ “knew or had reason to know * * * that acts outside the forum state would have an effect in the forum state[.]”Istituto, 449 A.2d at 225. Plaintiff’s amended complaint merely alleged that HBZ was a conspirator, without pleading any of the elements of conspiracy. That is, plaintiff merely asserted that “[d]efendants are engaged in a scheme or conspiracy to collect various ‘application fees’ and ‘commitment fees’ ” and that defendants participated in unlawful racketeering activity by “[c]onspiring to violate ORS 166.720(1), (2), or (3).” Nothing in the amended complaint or in plaintiff’s evidentiary submissions referred to HBZ’s actual or constructive knowledge with respect to activities in Oregon.

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We note, moreover, that this is not a case in which plaintiff was somehow “blind-sided” by some insufficiency in its jurisdictional pleadings or proof. HBZ’s legal memoranda in support of the motion to dismiss clearly identified the deficiencies in plaintiffs pleadings and proof — even under a “co-conspirator” theory of jurisdiction — and plaintiff stood pat. The trial court did not err in granting HBZ’s motion to dismiss.

Plaintiff’s first assignment of error challenges the trial court’s order directing that discovery on jurisdictional issues would, at least initially, be limited to the process available under the Hague Convention. The trial court did not err. Because plaintiff’s operative amended complaint failed to allege a prima facie basis for asserting jurisdiction over HBZ, the court did not err in so limiting discovery pursuant to ORCP 21 A.[12] See, e.g., Steers v. Rescue 3, Inc., 129 Or. App. 20, 23, 877 P.2d 654 (1994) (affirming dismissal for lack of personal jurisdiction and specifically rejecting defendant’s argument that trial court abused its discretion in denying motion for continuance “to enable [the plaintiff] to conduct further discovery about [the defendant’s] supposed activities in Oregon”).

Affirmed.

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