July 17, 2019

Tenth Circuit: Corporation May Sue Canadian Officers and Directors in Oklahoma

The Tenth Circuit Court of Appeals published its opinion in Newsome v. Gallacher on Wednesday, July 17, 2013.

Plaintiff David Newsome is a litigation trustee appointed by the Bankruptcy Court for the Eastern District of Oklahoma to administer the legal claims of Mahalo Energy (USA), Inc. Newsome brought suit in the Northern District of Oklahoma alleging various breaches of fiduciary duty against the corporation’s former directors and officers, other closely affiliated persons, and a law firm that provided legal services to the corporation. All defendants are Canadian citizens or entities.

The defendants moved to dismiss for lack of personal jurisdiction and the district court granted that motion. Newsome appealed.

The Tenth Circuit concluded the district court erred in part. Specifically, the Court held the that individual defendants (every defendant but the law firm) cultivated sufficient contacts with Oklahoma to justify suit there: (1) the defendant purposefully directed its activities at residents of the forum state; (2) the plaintiff’s injury arose from those purposefully directed activities; and (3) defendants did not show that exercising jurisdiction in Oklahoma would offend traditional notions of fair play and substantial justice.

The Tenth Circuit further held that the fiduciary shield doctrine—under which personal jurisdiction may not attach to a corporate agent by virtue of actions the agent takes solely on the corporation’s behalf—did not apply. The Tenth Circuit therefore reversed as to the individual defendants and remanded for further proceedings.

As for the law firm, however, the Tenth Circuit affirmed. Given the law firm’s out-of-state character and that it performed all of its relevant services out of state on an out-of-state transaction, it did not cultivate sufficient contacts with Oklahoma to justify personal jurisdiction there. The Tenth Circuit held that the district court correctly dismissed the law firm.

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