Dunn v. Barney

UNITED STATES BANKRUPTCY COURT

DISTRICT OF DELAWARE

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SB □

THOMAS M. HORAN rg 824 N. MARKET STREET

JUDGE Eat! WILMINGTON, DELAWARE

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February 16, 2024

VIA CM/ECF

Counsel to the Parties

Re: David Dunn, as Liquidating Trustee of the GCX Liquidating Trust v. William L.

Barney, Janet K. Troxell, Andrew P. Goldie, Dermot C. Lucey, Kenneth Martin

Stone, Roger Proeis, Rory O. Cole, Rodney H. Riley, Wilfred T.L. Kwan (in re

GCX Limited, et al.), Adv. Pro. No. 21-50264 (TMH), Case No. 19-1203] (TMH)

Before the Court are (i) the above-captioned defendants’ (the “Defendants”) motion to

dismiss (the “Motion to Dismiss”) [D.I. 61 and 62] the Third Amended Complaint (the “TAC’’)

[D.I. 56] in this adversary proceeding, and (ii) Plaintiff’s Cross-Motion for Entry of an Order

Alternatively Authorizing a Limited Period of Jurisdictional Discovery and Granting Related

Relief (the “Discovery Motion”) [D.I. 72]. On June 6, 2023, [held oral argument regarding the

Motion to Dismiss and the Discovery Motion. Because the Court lacks personal jurisdiction over

the Defendants, the Motion to Dismiss is granted, without prejudice. The Discovery Motion is

granted, in part.

Background

Because I write primarily for the parties, my discussion of the factual background is brief.

A. The Defendants

Two of the Defendants in this adversary proceeding are American citizens. The remainder

are non-American nationals.

1. The American Citizen Defendants

Plaintiff contends that Defendant William L. Barney (“Barney”) was GCX’s Chief

Executive Officer from January 2014 through April 2, 2020. TAC, 4 21. Plaintiff alleges that

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Barney is an American citizen with a permanent residence in Aberdeen, Maryland, although

presently residing in Hong Kong, China. Id. Barney submitted a declaration stating that he has

been a resident of Hong Kong since 1997 and has no present intention to move back to the

United States. Declaration of William L. Barney in Support of Defendants’ Motion to Dismiss

Plaintiff’s Third Amended Complaint, ¶ 2 [D.I. 64].

Plaintiff contends that Janet K. Troxell (“Troxell”) was a Director of RGL from May 29,

2015, and was also the sole Director and President of Reliance France. TAC, ¶ 23. Plaintiff

alleges that Troxell is an American citizen, and a resident of Texas. Id. Like Barney, Troxell

submitted a declaration stating that she is not a resident of the United States. Instead, Troxell

declares that she has resided in Solalá, Guatemala since February 28, 2021, and has no present

intention to move back to the United States. Declaration of Janet K. Troxell in Support of

Defendants’ Motion to Dismiss Plaintiff’s Third Amended Complaint, (the “Troxell Dec.”, ¶ 2

[D.I. 63].

ii. The Undisputed Foreign Defendants

Rory O. Cole (“Cole”) was GCX’s Chief Financial Officer, and Chief Financial Officer of

Reliance Globalcom Limited (“RGL”), each from January 2014 through December 2019. TAC, ¶

22. On August 31, 2020, Cole’s employment by GCX ceased. Id. Plaintiff alleges that Cole is a

British citizen, currently residing in the United Kingdom. Id.

Rodney H. Riley (“Riley”) was a Director of GCX and served as GCX’s Senior

Corporate Counsel since February 16, 2015. TAC, ¶ 24. Riley is a British citizen currently

residing in the United Kingdom. Id.

Andrew P. Goldie (“Goldie”) was GCX’s Finance Director EMEA and originally

employed by Globalcom (UK) Limited as its Finance Director EMEA. TAC, ¶ 25. Goldie was

also a Director of Reliance Ireland, from January 9, 2015 through July 30, 2019. Id. During this

time, Goldie served as a Director of RCOM INC. Id. Goldie is a British citizen currently residing

in the United Kingdom. Id.

Dermot C. Lucey (“Lucey”) was a Director of Reliance Ireland from October 2005

through November 2020. TAC, ¶ 26. Lucey is an Irish citizen currently residing in Ireland. Id.

Kenneth Martin Stone (“Stone”) was employed by FLAG Telecom Asia Limited, a non-

debtor subsidiary of RGL, as its General Counsel from December 11, 2018 to December 31,

2019, when Stone’s employment ceased. TAC, ¶ 28. During that period, Stone also served as

GCX’s General Counsel. Id. Stone is a British citizen currently residing in Hong Kong, China.

Id.

Roger Proeis (“Proeis”) was GCX’s Vice President of Global Marketing from March

2014 through January 2020. TAC, ¶ 29. Proeis is a British citizen currently residing in the Hong

Kong, China. Id.

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Wilfred T.L. Kwan (“Kwan”) was employed by FLAG Telecom Asia, a non-debtor

subsidiary of RGL, as its Chief Operating Officer since March 2014. TAC, ¶ 30. Kwan was also

GCX’s Chief Operating Officer from January 1, 2017 through June 30, 2020. Id. Kwan was also

a Director of RGL from May 29, 2015. Id. Kwan is not a citizen of the United States and

currently resides in Hong Kong, China. Id.

The Complaint

Plaintiff alleges that Troxell, Goldie, Riley, and Lucey each submitted to the general

personal jurisdiction of this Court on the theory that they have established minimum contacts

with the United States. Plaintiff reasons that they did so when they executed written consents

authorizing (i) the filing of the bankruptcy petitions; (ii) the filing of the Original Plan that would

have released each of the Defendants from liability; and (iii) the RSA.

By the TAC, Plaintiff seeks to avoid (a) as fraudulent transfers certain KERP payments

against Cole, Riley, Troxell, Proeis, Kwan, Stone, and Goldie (Counts I-II) and against Cole and

Troxell (Counts III-IV); and (b) as unauthorized post-petition transfers certain KERP payments

against Riley, Proeis, Kwan, Stone, Goldie, and Troxell (Count V). The TAC also alleges (a)

breach of fiduciary duties under Bermuda law against Riley (Counts VI-VIII) and Barney (Count

IX); (b) unlawful distributions and/or dividends under Bermuda law against Riley (Count X and

XI); (c) unlawful distributions and/or dividends under Bermuda law against Barney (Count XII);

(d) breach of fiduciary under Bermuda law relating to certain dividends against Riley and Cole

(Counts XIII-XIV); (e) unlawful distributions and/or dividends under Bermuda relating to certain

dividends against Cole and Riley (Count XV); (f) breach of fiduciary duty under French law

relating to certain uncollected accounts receivable against Troxell (Count XVI); (g) breach of

fiduciary duty under Irish law relating to certain uncollected accounts receivable against Goldie

and Lucey (Count XVII); and (h) disallowance of certain indemnification claims against Riley,

Cole, Troxell, Kwan, and Barney (Counts XVIII through XXII).

Jurisdiction

The Court has subject matter jurisdiction over this adversary proceeding. 28 U.S.C. §

1334(b). This action involves core and non-core claims. 28 U.S.C. § 157(b). The Defendants

have consented to entry of an order by the Court on the Motion to Dismiss. The Plaintiff has

consented to entry of an order by the Court on the Discovery Motion.

Standard of Review

Defendants move to dismiss the Complaint under Rules 12(b)(1), 12(b)(2), and 12(b)(6)

of the Federal Rules of Civil Procedure, each of which is made applicable to this adversary

proceeding by Federal Rule of Bankruptcy Procedure 7012(b). Because I am granting the Motion

to Dismiss under Rule 12(b)(2), I am accordingly limiting my discussion to the applicability of

Rule 12(b)(2).

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A. Rule 12(b)(2)

Federal Rule of Civil Procedure 12(b)(2) permits the Court to dismiss an action for lack

of personal jurisdiction. Fed. R. Civ. P. 12(b)(2). Determining personal jurisdiction involves a

two-part analysis. First, the court applies the long-arm statute of the state in which it is located.

See Intel Corp. v. Broadcom Corp., 167 F. Supp. 2d 692, 700 (D. Del. 2001). The court then must

ask whether exercising jurisdiction over the defendant in this state comports with the dictates of

due process. See id. That requirement is met when the court detects sufficient “minimum

contacts” between the non-resident defendant and the forum state, “such that the maintenance of

the suit does not offend traditional notions of fair play and substantial justice.” Int’l Shoe Co. v.

Washington, 326 U.S. 310, 316 (1945) (internal quotation marks omitted); see also Pinker v.

Roche Holdings, Ltd., 292 F.3d 361, 368–69 (3d Cir. 2002).

In resolving a motion under Rule 12(b)(2), the court must accept as true the allegations in

the complaint. Altech Indus., Inc. v. Al Tech Specialty Steel Corp., 542 F. Supp. 53, 55 (D. Del.

1982). The plaintiff, however, bears the burden of alleging facts sufficient to make a prima facie

showing of personal jurisdiction over the movant. ICT Pharms., Inc. v. Boehringer Ingelheim

Pharms., Inc., 147 F. Supp. 2d 268, 270–71 (D. Del. 2001). To meet this burden, the plaintiff

must offer facts which “establish with reasonable particularity” that jurisdiction exists. Id.

The Court, however, is not limited to review of the pleadings when considering a motion

under Rule 12(b)(2). See Carteret Sav. Bank, FA v. Shushan, 954 F.2d 141, 142 fn. 1 (3d Cir.

1992). A defendant may submit an affidavit contradicting the jurisdictional allegations leveled

against him. See Capmark Fin. Grp. Inc. v. Lin (In re Capmark Fin. Grp. Inc.), 479 B.R. 330, 338

(Bankr. D. Del. 2012). Once a defendant challenges personal jurisdiction under Rule 12(b)(2),

the plaintiff bears the burden of establishing personal jurisdiction by a preponderance of the

evidence. See Carteret, 954 F.2d at 146 (citing Time Share Vacation v. Atlantic Resorts, Ltd., 735

F.2d 61, 65 (3d Cir. 1984)).

B. The Plaintiff Must Allege Adequate Facts to Establish that this Court Possesses

Jurisdiction over the Defendants

There are two types of personal jurisdiction – general and specific. See Helicopteros

Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414–15 (1984). “When a court has general

jurisdiction over a party, that means lawsuits arising from any transaction can be brought against

the party in that state — regardless of whether the transaction itself had any ties to the forum.”

Smith v. NMC Wollard, Inc., Civ. A. No. 19-5101, 2020 U.S. Dist. LEXIS 72324, *5 (E.D. Pa.

April 24, 2020). Specific jurisdiction “depends on an ‘affiliatio[n] between the forum and the

underlying controversy,’ principally, activity or an occurrence that takes place in the forum State

. . .” Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011).

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C. General Jurisdiction

When determining whether general jurisdiction exists over an individual, the court looks

to where the individual has his or her domicile. Id. at 924; see also Bristol-Myers Squibb Co. v.

Superior Court, 582 U.S. 255, 262 (2017) (“For an individual, the paradigm forum for the

exercise of general jurisdiction is the individual’s domicile . . .” (citing Goodyear, 564 U. S. at

924).)

While an individual may have multiple homes, there is only one domicile. See Reich v.

Lopez, 858 F.3d 55, 63 (2d Cir. 2017). The domicile is an individual’s “true, fixed, and

permanent home and place of habitation. It is the place to which, whenever he is absent, he has

the intention of returning.” McCann v. Newman Irrevocable Trust, 458 F.3d 281, 286 (3d Cir.

2006) (quoting Vlandis v. Kline, 412 U.S. 441, 454 (1973)).

D. Specific Jurisdiction

Specific jurisdiction is “case specific.” Goodyear, 564 U.S. at 927. It may be exercised

where a plaintiff’s claims “arise out of or relate to the defendant’s contacts with the forum.”

Bristol-Myers, 582 U.S. at 262 (citations omitted). “[T]he defendant’s suit-related conduct must

create a substantial connection with the forum State[,]” giving rise to a “relationship among the

defendant, the forum, and the litigation.” Aldossari v. Ripp, 49 F.4th 236, 258 (3d Cir. 2022)

(citing Walden v. Fiore, 571 U.S. 277, 283–84 (2014).

The Third Circuit has outlined a three-part inquiry to determine whether specific

jurisdiction exists:

First, the defendant must have “‘purposefully directed’ his activities” at the forum.

Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472, 105 S. Ct. 2174, 85 L. Ed.

2d 528 (1985) (quoting Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 774, 104

S. Ct. 1473, 79 L. Ed. 2d 790 (1984)). Second, the plaintiff’s claim must “arise

out of or relate to” at least one of those specific activities. Helicopteros, 466 U.S.

at 414. Third, courts may consider additional factors to ensure that the assertion of

jurisdiction otherwise “comport[s] with ‘fair play and substantial justice.’” Burger

King, 471 U.S. at 476 (quoting Int’l Shoe, 326 U.S. at 320).

Marten v. Godwin, 499 F.3d 290, 296 (3d Cir. 2007).

Legal Analysis

A. This Court Lacks General Jurisdiction Over the Defendants

A person has only one domicile for general jurisdiction purposes. Reich, 858 F.3d at 63.

Because each of the Undisputed Foreign Defendants is domiciled outside the United States, they

are not subject to general jurisdiction.

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Whether Barney and Troxell are subject to general jurisdiction is another story because

the parties dispute where each is domiciled. Plaintiff alleges they are domiciled in Maryland and

Texas, respectively. Barney and Troxell dispute this assertion, and each put forward evidence as

to their domicile outside the United States. Therefore, the Plaintiff bears the burden of refuting

that evidence by a preponderance. See Carteret, 954 F.2d at 146 (citing Time Share Vacation v.

Atlantic Resorts, Ltd., 735 F.2d 61, 65 (3d Cir. 1984)).

An individual is a citizen of the state where he or she is domiciled, meaning the state

where he or she is physically present and intends to remain. See Washington v. Hovensa LLC,

652 F.3d 340, 344 (3d Cir. 2011). Barney submitted an affidavit evidencing that his permanent

residence is in Hong Kong and that he has “no present intention to move back to the United

States.” He attached to his affidavit his Hong Kong Permanent Card that was issued in March

1998.

Plaintiff relies on an Employment Agreement dated July 11, 2014 by and between GCX

Limited and Barney (the “Employment Agreement”). In particular, Plaintiff points to the

provision of the Employment Agreement that provides for “Home Leave” and business class

tickets for Barney and his family via the most direct route to Aberdeen, Maryland. This provision

of the Employment Agreement does not overcome the evidence put forward by Barney showing

that he has been a permanent resident of Hong Kong for more than twenty-five years. As a result,

Plaintiff has not offered evidence sufficient to controvert Barney’s affidavit and supporting

evidence. Barney is not subject to the general jurisdiction of this court.

Troxell’s domicile is the subject of more substantive dispute. Plaintiff attached to the

TAC numerous documents that Plaintiff alleges demonstrate that Troxell’s domicile is in Austin,

Texas. Such documents include (i) real estate records reflecting that Troxell owns real property

in Austin that is “owner occupied;” (ii) motor vehicle records showing that on May 12, 2021,

Troxell had an automobile registered at an address in Austin; (iii) a Texas Secretary of State

record indicating that on May 18, 2021, Troxell was registered to vote in Austin; (iv) a Texas

State Board of Public Accountancy record showing that on May 18, 2021, Troxell was an

“Individual Licensee;” (v) a LinkedIn profile dated June 29, 2021 representing Troxell is located

in Austin; (vi) a record showing that as of November 15, 2021 Troxell had a phone number

connected to an Austin address; and (vii) credit reports from November 1, 2021 and December

22, 2021 stating that Troxell had a then-current address in Austin.

In her affidavit, Troxell represents that she has resided in Guatemala since February 28,

2021, and has “no present intention to move back to the United States.” In response to the

documents attached to the Complaint, Troxell maintains the Austin address on certain “accounts

and profiles” because “the mail in Guatemala is unreliable.” Troxell Dec., ¶ 6. She also declares

that she simply has not updated her LinkedIn profile since moving to Guatemala. Id. at ¶ 7.

Troxell also represents that she had a Voice over Internet Protocol phone number with an Austin

area code, but had not used that number for approximately five or six years. Id. at ¶ 8. Troxell

incorporated a declaration submitted on December 13, 2021 (the “December Dec.”) and attached

to the TAC as Exhibit A. In the December Dec., Troxell stated that while she owns property in

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Austin, it is rented to a third-party and when she has visited Austin since February 28, 2021, she

has not stayed at the Austin property. December Dec., ¶ 3.

I find Troxell’s representations that she resides in Guatemala and has no present intention

to move back to the United States credible. Furthermore, it is Plaintiff’s burden to refute

Troxell’s evidence of her domicile outside the United States by a preponderance of the evidence,

and Plaintiff has not come forth with any compelling evidence to the contrary. Accordingly,

Plaintiff has not sustained his burden. Troxell is not subject to the general jurisdiction of this

court.

B. This Court Lacks Specific Jurisdiction Over the Defendants

A Rule 12(b)(2) motion imposes on the plaintiff the burden of proving personal

jurisdiction over the defendant. “Once the defendant raises the question of personal jurisdiction,

the plaintiff bears the burden to prove, by a preponderance of the evidence, facts sufficient to

establish personal jurisdiction.” Carteret, 954 F.3d at 146. When an evidentiary hearing is held to

determine whether the court may exercise personal jurisdiction, the plaintiff must establish

personal jurisdiction by a preponderance of the evidence. Control Screening LLC v. Tech.

Application & Prod. Co., 687 F.3d 163, 167 (3d Cir. 2012); Carteret, 954 F.2d at 146.

Specific jurisdiction requires the Court to undertake a two-step analysis. First, the

defendant must submit to statutory jurisdiction. Rule 7004(d) of the Federal Rules of Bankruptcy

Procedure provides a nationwide service of process standard. Service under Rule 7004(d) “is

effective to establish personal jurisdiction over the person of any defendant with respect to a case

under the Code or a civil proceeding arising under the Code, or arising in or related to a case

under the Code.” Fed. R. Bankr. P. 7004(f).

Second, the Court determines the limits of its jurisdiction under the Fifth Amendment of

the United States Constitution. Due process requires that the defendant establish “certain

minimum contacts” with the forum state “such that the maintenance of the suit does not offend

‘traditional notions of fair play and substantial justice.’” Int’l Shoe., 326 U.S. at 317 (quoting

Milliken v. Meyer, 311 U.S. 457, 463 (1940)); see also Hanson v. Denckla, 357 U.S. 235, 254

(1958) (finding specific jurisdiction when a defendant purposefully avails itself to the “privilege

of conducting activities within the forum . . .”). Specific jurisdiction is found only when the

contacts — the suit related conduct — “create a substantial connection with the forum state.”

Walden v. Fiore, 571 U.S. 277, 284 (2014). For specific jurisdiction to exist, the defendants

conduct must be “‘purposefully directed’ . . . at a resident of the forum and the injury arises from

or is related to” that conduct. GE v. Deutz AG, 270 F.3d 144, 152 (3d Cir. 2001) (quoting Burger

King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985)).

The Court applies a “national contacts” standard to determine the minimum contacts a

defendant has with the United States in general, as opposed to a Delaware-specific standard. See

Kesar, Inc. v. Uni-Marts, LLC (In re Uni-Marts, LLC), 405 B.R. 113, 122 (Bankr. D. Del. 2009);

Klingher v. Salci (In re Tandycrafts, Inc.), 317 B.R. 287, 289 (Bankr. D. Del. 2004) (“So long as

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a defendant has minimum contacts with the United States, therefore, due process permits service

on it.”).

i. Plaintiff’s Argument

Plaintiff asserts two bases of specific jurisdiction against Defendants. First, Plaintiff

asserts that Troxell, Goldie, Lucey, and Riley established sufficient minimum contacts with the

United States when they executed written consents authorizing (i) the filing of the Debtors’

bankruptcy petitions (TAC, ¶¶ 218, 226, 238, and 245), (ii) the Debtors’ filing of the Original

Plan that would have released each Defendant from liability (Id., ¶¶ 166–68); and (iii) the

Debtors to execute and perform the RSA (Id., ¶ 169). Plaintiff argues that Troxell, Goldie, Lucey,

and Riley supervised the negotiations of the Original Plan that “virtually eliminated their

personal liability.” Plaintiff’s Memorandum of Law in Opposition of Defendants’ Motion to

Dismiss Third Amended Complaint (the “Opposition”) [D.I. 67] at 8.

Second, Plaintiff asserts that all Defendants received the two forms of benefits through

the bankruptcy process. Plaintiff argues that Defendants received the benefit of limited

recoveries by the Trustee to the proceeds of D&O policies—benefits that provided them of notice

of a potential suit in the forum. See, e.g., TAC, ¶ 227; Opposition at 9. Plaintiff also argues that

Defendants received the benefit of broad releases through the bankruptcy plan. By receiving both

benefits, Plaintiff argues that Defendants established minimum contacts with the forum sufficient

to exercise specific jurisdiction.

ii. Analysis

a. Defendants Troxell, Goldie, Lucey, and Riley are not subject to

specific jurisdiction for their actions taken in authorizing and directing

the bankruptcy process

First, Plaintiff asserts that by executing written consents authorizing the voluntary

petitions for relief under Chapter 11, Defendants Goldie, Lucey, and Riley subjected themselves

to the jurisdiction of the Court. TAC, ¶¶ 226, 238, 245. Notedly, Plaintiff also alleges that

Defendant Troxell “personally authorized the bankruptcy filings” after participating in board

meetings occurring on September 12, 2019, and September 16, 2019, in which the restructuring

of the Debtors was discussed. TAC, ¶¶ 217–18. Plaintiff maintains that Defendants authorized

the bankruptcy filing and supervised the negotiations in their capacities as directors and officers.

While the Plaintiff asserts actions taken by the Defendants in their roles as directors and

officers of GCX as a source of contacts with the forum, the Defendants are not automatically

“insulate[d]” from having their official actions imputed to their persons, Calder v. Jones, 465

U.S. 783, 790 (1984); see also Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 782 n.13 (1984);

Urquhart-Bradley v. Mobley, 964 F.3d 36, 46 (D.C. Cir. 2020) (“[W]hen evaluating under the

Due Process Clause an individual’s contacts with the forum state, courts cannot ignore contacts

made by the individual just because they were made in his or her capacity as an employee or

corporate officer. Contacts are contacts and must be counted.”). The Court must assess the

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actions of each defendant—in their official or individual capacity—to determine whether they

maintain sufficient contacts with the forum. See Rush v. Savchuk, 444 U.S. 320, 332 (1980).

Plaintiff argues that Defendants, owing to their control over the bankruptcy process,

established sufficient contacts for the Court to exercise either general or specific jurisdiction. In

support of this assertion, Plaintiff cites several cases.

Plaintiff relies on In re Bozel S.A., 434 B.R. 86 (Bankr. S.D.N.Y. 2010), a case in which

the court established general jurisdiction over an individual defendant with significant contacts to

the forum. The defendant was listed as the “registered agent, director, or managing member of

three corporate entities in Florida,” listed his professional address in the state of Florida, verified

in testimony that he was “in control of his Florida location,” conducted several meetings in New

York, and signed and filed on behalf of the debtor for the Chapter 11 proceedings in New York.

However, that case was decided before the Supreme Court made clear that a defendant is only

subject to general jurisdiction where that defendant is “at home.” Daimler AG v. Bauman, 571

U.S. 117, 137 (2014).

But Plaintiff also relies on Bozel, among other cases, to establish specific jurisdiction

through the authorization of a voluntary petition for Chapter 11 proceedings. However, in Bozel,

the Court found that the defendants had extensive business contacts in the United States and was

otherwise active in the debtor’s bankruptcy case, including by testifying at hearings. In re Bozel,

434 B.R. at 98–100. There are no similar allegations here. In In re Bernard L. Madoff Inv. Sec.

LLC, the court established specific jurisdiction over defendants based on fraudulent transfer

claims. The defendants’ contacts—the transactions involved in their Madoff Investment

accounts—related to the fraudulent transfer claims commenced in an adversary proceeding in the

bankruptcy court. Picard v. Cohmad Sec. Corp. ETC (In re Bernard L. Madoff Inv. Sec. LLC),

418 B.R. 75, 80 (Bankr. S.D.N.Y 2009). In In re Deak & Co., the defendant had already

submitted themself as a party in interest to the bankruptcy proceedings; the court held that, by

voluntarily “injecting” themself into the proceedings, the defendant consented to jurisdiction in

all proceedings involving their interests. In re Deak & Co., 63 B.R. 422, 432 (Bankr. S.D.N.Y.

1986).

Plaintiff’s contentions rely on the Defendants’ actions as officers and directors in

authorizing the bankruptcy proceedings. To obtain specific jurisdiction, the Plaintiff’s claims

must “arise out of or relate” to the contacts established by the Defendants. Helicopteros

Nacionales, 466 U.S. at 414. Defendants’ actions do not rise out of or relate to any of the claims

asserted by Plaintiff. Defendants authorized GCX to file a voluntary petition for bankruptcy. To

that end, Defendants establish contacts related to the bankruptcy proceeding. Plaintiff asserts

claims for breach of fiduciary duty and fraudulent transfers related to bonus payments provided

to certain employees, both before and after the bankruptcy petition date. TAC, ¶ 15. But the

Court recognizes the attenuation between authorizing a company to file for bankruptcy, and the

transfer of bonus payments to certain employees. Defendants are not subject to personal

jurisdiction for their actions taken in authorizing the voluntary chapter 11 proceedings.

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b. The Court may not exercise jurisdiction over Defendants based upon

the benefits they received from the bankruptcy plan

Second, Plaintiff asserts that the Defendants obtained benefits from the bankruptcy plan.

The Plaintiff does not present, and the Court has not found, any cases wherein a non-debtor third

party is subject to personal jurisdiction on the basis of obtaining a benefit from a bankruptcy

plan.

The unilateral action of one party “who claim[s] some relationship with a nonresident

defendant cannot satisfy the requirement of contact with the forum State.” Hanson, 357 U.S. at

253. Courts reject the argument that a beneficiary purposefully avails itself to the forum state

solely for receiving a benefit. See, e.g., Budget Blinds, Inc. v. White, 536 F.3d 244, 262 (3d Cir.

2008) (holding that the acceptance of payment from a bank in the forum state does not itself

constitute purposeful availment to that forum state if the beneficiary did not initiate the

transaction); C & H Dev. Co. v. McIvor, 1996 U.S. Dist. Lexis 12029 (N.D. Cal. Aug. 6, 1996)

(holding that a beneficiary of a trust had not purposefully availed herself to the forum State);

Paccar Int’l v. Commercial Bank of Kuwait, S.A.K., 757 F.2d 1058, 1063-64 (9th Cir. 1985)

(noting that the third-party beneficiary did not “purposefully avail[] itself of the privilege of

conducting business in California by becoming the beneficiary of the letter of credit.”); Ark.

Nursing Home Acquisition, LLC v. CFG Cmty. Bank, 460 F.Supp.3d 621, 641 (D. Md. 2020)

(“New Milestone did not purposefully avail itself to Maryland merely because it was the

beneficiary of an agreement that (possibly) occurred in Maryland.”). To the contrary, Due

Process requires “some act by which the Defendant purposefully avails itself of the privilege of

conducting activities within the forum State . . . .” Defendants received the benefits of the

bankruptcy plan without taking any action to avail themselves to the forum. The Court may not

exercise personal jurisdiction over the Defendants based on the benefits received from the plan.

c. The business activities of Troxell, Barney, Kwan, and Cole are

inadequate to establish personal jurisdiction

Plaintiff argues that Defendants Troxell, Barney, Kwan, Cole remain subject to

jurisdiction by “conducting business on behalf of GCX, or its affiliates” and maintaining

“supervisory responsibility over various Debtors and affiliated entities that were formed and did

business in the United States.” Opposition at 11; TAC ¶¶ 242, 248. Plaintiff argues that Walden,

cited by the Defendants, does not apply to the case at hand because the “defendants in Walden

did nothing to reach out to the forum state.” Opposition at 9, 10.

Without addressing Plaintiff’s comparison of the present case to the facts in Walden,

Plaintiff still fails to meet the requirements to establish personal jurisdiction. Plaintiff uses

business conduct of the Defendants to establish contacts with the national forum. Yet Plaintiff

fails to demonstrate how those contacts relate to the suit at hand. Burger King, 471 U.S. at 472.

Conduct on behalf of GCX does not itself establish jurisdiction on a national level. Defendants

Troxell, Barney, Kwan, and Cole are not subject to personal jurisdiction based on the business

they conducted on behalf of GCX and its affiliates.

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d. Benefits Derived from the KERP Agreements Do Not Give Rise to

Personal Jurisdiction

Plaintiff maintains that personal jurisdiction over Defendants exists because of the

existence of the KERP Agreements. In bankruptcy court, a defendant need only establish

contacts on a national level to have contacts with the forum. Tandycrafts, Inc., 317 B.R. at 289.

Plaintiff asserts that the Defendants entered into the KERP Agreements that “provided for

retention bonuses in connection with the Debtors’ U.S. bankruptcy filing.” Opposition at 17. As

such, the Plaintiff argues that a fraudulent transfer claim arising out of the bonus payments to

Defendants constitutes the required relatedness of Defendants’ contacts to the forum.

Defendants assert that a fraudulent transfer claim—itself a statutory claim—cannot be

related to the contractual contacts identified by the Plaintiffs. The KERP Agreements contains a

clause providing for “‘the non-exclusive jurisdiction of [a] New York or federal court sitting in

New York County.’” Opposition at 17. Defendants accepted bonus payments based on the KERP

Agreement to continue their work for the Debtor. However, the Defendants assert that, even if

the KERP Agreements establish contacts with the forum, these contacts are not related to the

fraudulent transfer actions—derived instead from statutory law.O

The Court agrees with Defendants’ analysis. Defendants undoubtedly established contacts

with the forum when they entered into the KERP Agreements. However, due process requires

“that the defendant’s conduct and connection with the forum State are such that he should

reasonably anticipate being haled into court there.” World Wide Volkswagen Corp. v. Woodson,

444 U.S. 286, 297 (1980). As such, the established contacts must relate to the current action.

Burger King, 471 U.S. at 472.

The KERP Agreements established a contractual duty between Defendants and the

Debtors. Under those agreements, Defendants would reasonably anticipate a suit for breach of

contract, likely in New York, the non-exclusive jurisdiction provided for in the Agreements. But

Defendants could not anticipate the action at hand. Here, the Liquidating Trustee asserts a

fraudulent transfer claim against Defendants in a forum unilaterally chosen by Debtors, a

separate party. The Court recognizes a significant attenuation between the Defendants’ contacts

established through the KERP Agreements and the fraudulent transfer claims made by an

unrelated party in a bankruptcy proceeding. Defendants signed the KERP Agreements

presumably to acquire compensation for their continued work with GCX. These agreements

merely established each Defendant’s contractual duty to perform certain obligations to GCX in

exchange for compensation. The Defendants could not reasonably anticipate that, by entering

into the KERP Agreements, a Trustee would seek to enforce a statutory fraudulent transfer action

against them. Accordingly, the Court maintains no jurisdiction over the Defendants on the bases

of the KERP Agreements.1

1 Alternatively, in any event, I would find that the KERP Bonus Payments sought to be avoided in Count V of the

Complaint were approved under the Plan and would dismiss Count V on that basis.

Counsel to the Parties

February 16, 2024

Page 12

C. The Plaintiff is Granted Additional Time to Conduct Jurisdictional Discovery

Although this Court is dismissing every count of the Complaint on personal jurisdiction

grounds, it is appropriate to grant the Plaintiff time to engage in jurisdictional discovery. Toys

Us, Inc. v. Step Two, S.A., 318 E3d 446, 456 (3d Cir. 2003) (“Although the plaintiff bears

the burden of demonstrating facts that support personal jurisdiction, courts are to assist the

plaintiff by allowing jurisdictional discovery unless the plaintiff’s claim is ‘clearly frivolous.’”)

(quoting Mass. School of Law at Andover, Inc. v. American Bar Ass’n, 107 F.3d 1026, 1042 (3d

Cir. 1997). Accordingly, the Discovery Motion is granted in part and the Plaintiff shall have sixty

days from the date of this opinion and accompanying order to engage in discovery to determine

whether the Defendants are subject to general or specific jurisdiction.

Conclusion

For the foregoing reasons, Court will grant the Motion to Dismiss, without prejudice. The

Plaintiff is granted sixty days from the date of this opinion and accompanying order to engage in

discovery to determine whether the Defendants are subject to general or specific jurisdiction.

Pema WA ho HAL

Thomas M. Horan

United States Bankruptcy Judge