Grayson v. Anderson, 816 F.3d 262 (4th Cir. Mar. 7, 2016) [click for opinion]
Plaintiffs in this case were victims of a massive South Carolina-centered Ponzi scheme involving fraudulent loans secured by the borrowers' publicly-traded stock. Plaintiffs already obtained a judgment for over $150 million against Derivium Capital (USA), Inc., its principals and other participants in the Ponzi scheme. Plaintiffs then brought this action against others they alleged were part of the scheme.
Defendant Vision International People Group, P.L., a Cypriot company, moved to dismiss pursuant to Fed. R. Civ. P. 12(b)(2). In support of its motion, Vision International provided deposition excerpts, affidavits, and other documents developed during full discovery, as well as a memorandum of law, to demonstrate that the court lacked jurisdiction. In opposition to the motion, Plaintiffs included more than 120 exhibits, likewise consisting of deposition transcripts, affidavits, interrogatory answers, and documentary evidence, as well as a memorandum of law, to demonstrate that Vision International had sufficient contacts with South Carolina and the United States generally.
The district court held a hearing on the motion, and neither side asked to present any further evidence, including live testimony. After the hearing, the district court granted Vision International's motion to dismiss concluding that Plaintiffs had failed to meet their burden of proving, by a preponderance of the evidence, facts demonstrating personal jurisdiction over Vision International.
Plaintiffs appealed, arguing that the district court should have only required a prima facie showing of personal jurisdiction to find in their favor, and that the court had erred in requiring them to prove facts showing personal jurisdiction by a preponderance of the evidence. On appeal, the Fourth Circuit noted that a plaintiff's burden in establishing jurisdiction depends on the posture of the case. If the motion is brought and the court decides the jurisdiction question by reviewing only the parties' motion papers, affidavits attached to the motion, supporting legal memoranda, and the allegations in the complaint, then a plaintiff need only make a prima facie showing of jurisdiction to survive the challenge. However, ultimately a plaintiff must establish facts supporting jurisdiction by a preponderance of the evidence. The better course is therefore to determine the jurisdictional question as a preliminary matter.
The Fourth Circuit had previously held that when a court requires a plaintiff to establish facts supporting personal jurisdiction by a preponderance of the evidence prior to trial, the court must hold an evidentiary hearing. However, the Fourth Circuit explained that an evidentiary hearing does not automatically require live testimony, but rather only that the district court afford the parties a fair opportunity to present both the relevant jurisdictional evidence and their legal arguments.
The court held that, since discovery was conducted and jurisdictional evidence was presented to the court, and no claim was made that the record was inadequately developed, the district court appropriately made its ruling based on a preponderance of the evidence standard.
The Fourth Circuit also upheld the district court's decision on the merits, finding that Vision International did not have the requisite contacts with South Carolina to support jurisdiction. While two of its employees did conduct some activity in the state on behalf of the Ponzi scheme, no evidence was adduced to show that they were acting on behalf of Vision International at that time. The Fourth Circuit also found that the federal law claims did not assist Plaintiffs because they did not argue, as they were required to, that no one State could exercise personal jurisdiction over the Defendant, but that the Defendant's contacts with the United States as a whole support the exercise of jurisdiction consistent with the Constitution and laws of the United States.
The Fourth Circuit thus affirmed both the grant of the motion to dismiss for lack of personal jurisdiction and the procedure by which the district court reached that decision.