# Dunn v. Barney

> United States Bankruptcy Court, D. Delaware · February 16, 2024

URL: https://www.frixlaw.com/law-library/cases/10456245

## Case

- **Court:** United States Bankruptcy Court, D. Delaware
- **Decided:** February 16, 2024
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10456245

## How later opinions describe it (automated extraction)

- 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
- finding specific jurisdiction when a defendant purposefully avails itself to the “privilege of conducting activities within the forum . . .”
- 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.”

## Opinion text

UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
‘ie
SB □
THOMAS M. HORAN rg 824 N. MARKET STREET
JUDGE Eat! WILMINGTON, DELAWARE
lll

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

Page 2

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.
Page 3

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).
Page 4

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).
Page 5

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.
Page 6

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
Page 7

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
Page 8

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
Page 9

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.
Page 10

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.
Page 11

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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10456245. Public record. Not legal advice.