Invesco High Yield Fund v. Hans Jecklin
19-15931
9th Cir.Jul 12, 2021Background
- Plaintiffs: several Morgan Stanley/Invesco funds sued Hans Jecklin, Swiss Leisure Group AG, and JPC Holding AG (collectively, Defendants) seeking to hold them liable for debts of SCGC via alter-ego and fraudulent-transfer theories.
- District court found Defendants exerted centralized control over SCGC, falsified corporate minutes, ignored corporate formalities in Nevada, commingled/use[d] SCGC funds (including to buy Jecklin’s Las Vegas home), and left SCGC undercapitalized.
- District court entered judgment for Morgan Stanley on alter-ego claims and awarded post-judgment interest and attorney’s fees; it also permitted substitution of successor fund plaintiffs under Fed. R. Civ. P. 25(c).
- Defendants appealed, challenging personal jurisdiction, alter-ego findings, substitution, interpretation of a 2004 settlement release, post-judgment interest, and the award of fees.
- Ninth Circuit affirmed jurisdiction, the alter-ego ruling, substitution, and post-judgment interest; it reversed the attorney’s-fees award under Nevada’s UFTA and affirmed that the settlement did not release Morgan Stanley’s claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Personal jurisdiction over Defendants | Nevada contacts (falsified minutes, use of SCGC funds, purchase of Jecklin’s Las Vegas home) relate to Morgan Stanley’s claims | Contacts insufficient or unrelated to claims | Specific personal jurisdiction proper; contacts related to alter-ego claims and fair play satisfied |
| Alter-ego / veil piercing | Defendants exercised control, commingled assets, undercapitalized SCGC, and treated entities as one | Challenge choice-of-law or sufficiency of domination | Defendants are SCGC’s alter egos under both Nevada and Delaware standards |
| Substitution under Fed. R. Civ. P. 25(c) | Successor funds received assignments; substitution proper | Substitution barred (e.g., Nevada prohibits assignment of personal claims) | District court did not abuse discretion; substitution allowed |
| 2004 settlement release scope (affiliate definition) | Release did not cover Jecklin; MSIA was not a controlling affiliate | Settlement’s “affiliate” language covers MSIA and releases claims | Settlement did not release Morgan Stanley’s claims; “affiliate” cannot be read so broadly |
| Post-judgment interest | Mandatory under federal law | (argued otherwise) | Amendment to include post-judgment interest proper and required |
| Attorney’s fees under Nevada UFTA | Fees recoverable | UFTA does not authorize fees | Reversed: Nevada UFTA does not permit attorney’s fees |
Key Cases Cited
- Boschetto v. Hansing, 539 F.3d 1011 (9th Cir. 2008) (specific-jurisdiction requires contacts that relate to the plaintiff’s claim)
- Ecklund v. Nev. Wholesale Lumber Co., 562 P.2d 479 (Nev. 1977) (Nevada veil-piercing test: unity of interest and injustice from recognizing separate entities)
- Wallace ex rel. Cencom Cable Income Partners II, L.P. v. Wood, 752 A.2d 1175 (Del. Ch. 1999) (Delaware requires complete domination/control for veil piercing)
- Crosse v. BCBSD, Inc., 836 A.2d 492 (Del. 2003) (Delaware requires sham entity designed to defraud creditors for veil piercing)
- Bobby Berosini, Ltd. v. People for the Ethical Treatment of Animals, 971 P.2d 383 (Nev. 1998) (Nevada UFTA does not authorize attorney’s fees)
- Air Separation, Inc. v. Underwriters at Lloyd’s of London, 45 F.3d 288 (9th Cir. 1995) (post-judgment interest awards are governed by federal statute and generally mandatory)