Newsome v. Gallacher
2013 U.S. App. LEXIS 14415
| 10th Cir. | 2013Background
- Mahalo Energy (USA), Inc. (Mahalo USA) was a Delaware corporation operating exclusively in Oklahoma; it was wholly owned by Mahalo Energy Ltd. (Mahalo Canada) in Alberta.
- Mahalo Canada allegedly shifted debt and encumbered Mahalo USA’s Oklahoma assets to benefit Mahalo Canada and its directors, culminating in a $105M Ableco loan that Mahalo USA defaulted on and led to bankruptcy in Oklahoma.
- David Newsome, the bankruptcy-appointed litigation trustee for Mahalo USA, sued seven Canadian individual directors/officers (all domiciled in Alberta) and a Canadian law firm for breach of fiduciary duty and aiding-and-abetting; all alleged misconduct was planned/performed in Canada.
- Defendants moved to dismiss for lack of personal jurisdiction; the district court granted dismissal as to all defendants. The Tenth Circuit reviewed whether Oklahoma courts may exercise specific personal jurisdiction over the Canadian defendants.
- The Tenth Circuit held Oklahoma has personal jurisdiction over the individual Canadian defendants (reversed as to them) because they purposefully directed conduct at an Oklahoma company and knew the injury would be felt in Oklahoma; the fiduciary‑shield doctrine does not bar jurisdiction here.
- The court affirmed dismissal of the Canadian law firm because it performed relevant legal work entirely in Canada on an out‑of‑state transaction and did not purposefully avail itself of Oklahoma.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Personal jurisdiction over individual defendants | Newsome: defendants purposefully directed conduct at Mahalo USA (in Oklahoma); injuries were felt in Oklahoma (creditors there) so Oklahoma courts have specific jurisdiction | Defendants: actions occurred in Canada; contacts with Oklahoma are insufficient; conspiracy cannot be used to impute jurisdiction | Held: Jurisdiction exists over individual defendants — purposeful direction, injury arising from forum‑related conduct, and fair‑play factors satisfied |
| Conspiracy attribution for jurisdiction | Newsome: co‑conspirators can be treated as a group; conspiracy in Canada designed to injure Oklahoma company supports jurisdiction | Defendants: conspiracy occurred outside forum; no co‑conspirator pursued conspiracy within Oklahoma so Melea doesn’t apply | Held: Court accepted treating individual defendants as materially identical; did not require a separate conspirator‑in‑forum showing given pleaded facts; purposeful‑direction analysis satisfied |
| Fiduciary‑shield doctrine (doctrine barring jurisdiction for acts on corporate behalf) | Newsome: fiduciary shield is not part of federal due‑process minimum‑contacts analysis and Oklahoma has not adopted it; even if adopted, it would not apply to breach‑of‑fiduciary claims alleging self‑interest | Defendants: fiduciary‑shield prevents personal jurisdiction because acts were taken as corporate agents | Held: Fiduciary‑shield is a matter of state law (not constitutional); Oklahoma has not adopted it in a way that would bar these claims, and it would not apply to self‑interested breaches — so it does not defeat jurisdiction |
| Personal jurisdiction over Canadian law firm | Newsome: firm advised on transactions that harmed Mahalo USA and facilitated liens on Oklahoma property; firm received payments from Oklahoma accounts, so jurisdiction is proper | Law firm: performed all relevant services in Canada on an out‑of‑state transaction; did not solicit Oklahoma business; majority rule disfavors jurisdiction in such circumstances | Held: No personal jurisdiction over the law firm — out‑of‑state legal work on out‑of‑state matter did not purposefully avail firm of Oklahoma |
Key Cases Cited
- Int’l Shoe Co. v. Washington, 326 U.S. 310 (establishes minimum‑contacts due‑process framework)
- Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408 (distinguishes general vs. specific jurisdiction)
- Calder v. Jones, 465 U.S. 783 (tortious acts outside forum expressly aimed at forum support jurisdiction)
- Keeton v. Hustler Magazine, Inc., 465 U.S. 770 (employee status does not automatically shield individual from jurisdiction; contacts assessed individually)
- Dudnikov v. Chalk & Vermilion Fine Arts, Inc., 514 F.3d 1063 (10th Cir.) (articulates three‑part purposeful‑direction test for torts)
- OMI Holdings, Inc. v. Royal Ins. Co. of Canada, 149 F.3d 1086 (10th Cir.) (framework for fair‑play and substantial‑justice factors; weight of foreign law can defeat jurisdiction)
- Benton v. Cameco Corp., 375 F.3d 1070 (10th Cir.) (exercise of jurisdiction may offend fair play where foreign elements dominate)
- Ten Mile Indus. Park v. Western Plains Serv. Corp., 810 F.2d 1518 (10th Cir.) (discusses limits on imputing corporate contacts to individual officers)
- Home‑Stake Prod. Co. v. Talon Petroleum, C.A., 907 F.2d 1012 (10th Cir.) (explains fiduciary‑shield is a question of state law and not clearly adopted in Oklahoma)
- Rusakiewicz v. Lowe, 556 F.3d 1095 (10th Cir.) (rejects fiduciary‑shield where defendants’ own forum‑directed acts were alleged)
- N. Am. Catholic Educ. Programming Found., Inc. v. Gheewalla, 930 A.2d 92 (Del.) (creditors of insolvent corporation stand in shareholders’ place; governs Delaware fiduciary duty/standing analysis)
- Anadarko Petroleum Corp. v. Panhandle E. Corp., 545 A.2d 1171 (Del.) (directors’ duties in parent/subsidiary context)
- Hertz Corp. v. Friend, 130 S. Ct. 1181 (defines principal place of business for corporate domicile analysis)