Court Opinion

ID: 1037656
Source: CourtListenerOpinion
Date Created: 2013-08-15 12:36:13.137798+00
Date Added: 2024-06-11T12:46:45.642033
License: Public Domain

Case: 11-14770        Date Filed: 08/14/2013       Page: 1 of 16

                                                                            [PUBLISH]

                  IN THE UNITED STATES COURT OF APPEALS
                             FOR THE ELEVENTH CIRCUIT
                                ________________________

                                      No. 11-14770
                                ________________________

                           D.C. Docket No. 1:11-cv-21065-DLG

XENA INVESTMENTS, LTD.,
                                                             Plaintiff-Appellant,
                                              versus

MAGNUM FUND MANAGEMENT LTD.,
DAVID FRIEDLAND,
DION FRIEDLAND,
                                                             Defendants-Appellees.
                                ________________________

                       Appeal from the United States District Court
                           for the Southern District of Florida
                             ________________________
                                    (August 14, 2013)

Before MARCUS, HILL, and SILER, * Circuit Judges.

*
 Honorable Eugene E. Siler, Jr., United States Circuit Judge for the Sixth Circuit, sitting by
designation.
              Case: 11-14770     Date Filed: 08/14/2013   Page: 2 of 16

HILL, Circuit Judge:

      This is an appeal from the district court=s grant of defendants-appellees,

Magnum Fund Management, Ltd. (MFM) and David Friedland=s (David), joint

motion to dismiss, and defendant-appellee Dion Friedland=s (Dion) motion to

dismiss the plaintiff-appellant, Xena Investments, Ltd.=s (Xena), complaint for lack

of personal jurisdiction and improper venue.

      The merits of Xena=s claims in its complaint arise from loans made by MFM

to a commercial real estate hedge fund managed by MFM in the British Virgin

Islands (BVI). Xena complains that, contrary to what it had been promised, the

defendants-appellees improperly and impermissibly secured these loans, giving

them priority status over Xena=s shares in the fund.

      The district court did not reach the merits of Xena=s claims. It dismissed its

complaint, finding that it had no jurisdiction or authority to determine the priority

of foreign parties entitled to, or payments made from, a foreign hedge fund. Under

de novo review, we affirm the judgment of the district court.

                                          I.

      As set forth in its 2011 complaint, Xena is a Cayman Islands corporation.

Its principal place of business is in Grand Cayman, Cayman Islands. Xena alleges

claims for fraud, negligent misrepresentation, and fraudulent inducement against

                                          2
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MFM, Dion, and David, and for breach of contract, and declaratory judgment

against MFM, for actions occurring in 2008.

       By declaration of Dion, submitted in support of his motion to dismiss, MFM

is incorporated in the Bahamas, with its principal place of business in the Bahamas.

It conducts no business in Florida.1 Dion is the principal decision maker for MFM.

He claims that he does not reside in Florida; does not transact business in Florida

or derive any income in Florida; does not maintain any banking or financial

accounts in Florida; and, pays no taxes in Florida or the United States. 2

       In David=s declaration, submitted in support of his joint motion to dismiss

with MFM, David claims that MFM entered a consulting agreement with Magnum

US Investments, Inc. (MUS) in 1996. MUS is a Florida corporation. David is

Dion=s son, and president of MUS. David is a Florida resident. 3

       1
          In its joint motion to dismiss with David, MFM argues that it is not licensed or qualified
to do business in Florida; has no office or employees in Florida; does not operate, conduct,
engage in, or carry on a business or business venture in Florida; has no office address or
telephone number in Florida; has no appointed agent for service in Florida; pays no taxes in
Florida; and, has no banking or other financial account in Florida.
       2
         Xena claims that both MFM and Dion were served personally in Florida. MFM and
Dion dispute this. As to MFM, Xena claims that a MUS employee in Miami was authorized to,
and did in fact, accept service on behalf of MFM. The employee later denied acceptance of
service by affidavit. Xena claims Dion was personally served at his apartment in Aventura,
Florida. Dion claims he was in Florida that day, but contends he was in Hallandale, Florida, at
his grandson’s tennis match.
       3
        MUS is not a party in this action. By his declaration, David has never been an
employee, officer, or director of MFM.

                                                 3
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       Pursuant to the consulting agreement, David declares that MUS performs

certain functions on behalf of MFM (research, due diligence, legal services, and

negotiations), but is powerless to bind MFM in any way or sign any documents on

its behalf.4

       Xena alleges in its complaint that it owns shares in Spectrum Galaxy Fund,

Ltd. (Spectrum). Spectrum is incorporated with limited liability in the BVI. One

of Spectrum=s subsidiary funds, MG Secured Debt Fund (MGSDF), is a hedge fund

participating in loans made to commercial real estate developers. MFM is the

investment manager of MGSDF.

       According to its complaint, Xena=s shareholder interest in MGSDF was

acquired in 2009, pursuant to a deed of assignment, from Pentagon Select Ltd.

(Pentagon). Pentagon is incorporated and registered in the BVI. In 2008, the value

of Xena=s (then Pentagon) shares in MGSDF was estimated to be approximately

$21 million.

       Xena=s complaint alleges that the fraud perpetrated by MFM, Dion, and

David arose in 2008 in an attempt by Xena (then Pentagon), to redeem its $21

       4
         Xena argues that, under agency principles, this consulting agreement is sufficient to
confer jurisdiction over MFM. See Meier ex rel. Meier v. Sun Int=l Hotels, Ltd., 288 F.3d 1264
(11th Cir. 2002). Xena argues that, by reason of this consulting relationship with MUS, MFM
regularly transacts business in Florida.

                                               4
                 Case: 11-14770        Date Filed: 08/14/2013         Page: 5 of 16

million in shares in MGSDF. At the time, out of economic necessity, MFM had

made certain loans to MGSDF.

        Xena claims in its complaint that it relied detrimentally upon MFM, Dion,

and David=s intentional and negligent misrepresentations to it that the MFM loans

were unsecured, and would not be secured. It was Xena=s understanding that the

outstanding loans had no automatic priority over Xena=s redemption rights, and the

loans would remain inferior to Xena=s rights.

       Thus satisfied, Xena alleges in its complaint that it agreed to decline to

exercise its redemption rights for two years. This agreement was memorialized in

a 2008 Forbearance Agreement between MFM and Xena (then Pentagon). 5 The

Forbearance Agreement contains a mandatory forum-selection clause (paragraph

10) which reads: AThis letter shall be governed by and construed in

accordancewith English law and any dispute arising out of, or in connection with,

the terms of this letter shall be subject to the exclusive jurisdiction of the English

Courts.@ 6

        5
          As we do not reach the merits of Xena=s claims, we do not examine the specific terms of
the Forbearance Agreement, other than its forum-selection clause, as it relates to this
jurisdictional appeal.
        6
         The record reflects that a second document, the Subscription (Private Offering)
Agreement between Spectrum/MGSDF and Pentagon/Xena also contains a forum-selection
clause. It states that the parties shall irrevocably submit to the jurisdiction of the courts of the
BVI and all shall be decided under the laws of the BVI.

                                                   5
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       The causes of action set forth in Xena=s complaint are: (1) for material,

fraudulent misrepresentations during negotiations for the Forbearance Agreement

in 2008, that the loans were unsecured, and would remain unsecured, by MFM,

Dion, and David; (2) for material, negligent misrepresentations during the same

negotiations that the loans were unsecured, and would remain unsecured, by MFM,

Dion, and David; (3) for fraudulent inducement to enter the Forbearance

Agreement based on misrepresentations that the loans were unsecured, and would

remain unsecured, by MFM, Dion, and David; if not for these misrepresentations,

Xena would not have entered the agreement; (4) for breach of contract under the

terms of the Forbearance Agreement against MFM; and (5) for a declaratory

judgment against MFM for threatening to withhold ten percent of Xena=s

redemption proceeds whenever actually paid. 7

        Finally, a third document contained in the record, the Deed of Assignment between
Pentagon and Xena, also contains a forum-selection clause. It states that the parties shall
irrevocably submit to the jurisdiction of the courts of the BVI. Disputes shall be decided under
the laws of the BVI, and, courts of the BVI shall have exclusive jurisdiction to settle any dispute
or claim that arises out of or in connection with the assignment of shares from Pentagon to Xena.
       7
           As the district court stated in its order:

                 The alleged misrepresentations concern whether the loans [MFM]
                 made to [MGSDF] were unsecured and would remain unsecured.
                 Xena also claims that Defendants fraudulently induced them into
                 the Forbearance Agreement they reached with [MFM] in
                 December 2008, and if not for Defendants= misrepresentations,
                 Xena would not have entered into the agreement. In the
                 alternative, Xena claims [MFM] breached the Forbearance
                 Agreement. Lastly Xena seeks declaratory judgment for [MFM]
                                                        6
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       According to the complaint, two years later, in 2010, during negotiations to

extend the Forbearance Agreement, Xena learned that, contrary to what Xena had

been promised in 2008, MFM, Dion, and David had converted the loans from

MFM to MGSDF to a secured status, with priority over Xena=s shares. Xena

claims that this conversion was memorialized in a revised loan document signed by

Dion on behalf of MFM and MGSDF, dated December 2008, the same day as the

Forbearance Agreement was executed.8

       Xena alleges in its complaint that this unsavory discovery caused it to be

concerned about additional misconduct possibly committed without its knowledge.

As a result, it commenced insolvency proceedings in 2010 against MGSDF in the

BVI. Joint liquidators were appointed to further investigate the financial affairs of

MDSDF.

                                               II.

       After MFM, Dion, and David submitted their declarations and motions to

dismiss for lack of personal jurisdiction and improper venue, Xena submitted a

              threatening to withhold ten percent of the Redemption proceeds
              whenever they are actually paid.
       8
         Xena alleges in its complaint that it is irrelevant whether the revised loan agreement
was backdated two years by the defendants, or that it was actually executed on the same date as
the Forbearance Agreement was signed.
                                               7
                  Case: 11-14770        Date Filed: 08/14/2013        Page: 8 of 16

memorandum of law opposing the motions. It also submitted an affidavit of

Yonaton Aronoff, one of Xena=s attorneys.

       Aronoff=s affidavit states that the attached six exhibits are true and correct

copies of certain websites, webpages and an online article. The district court found

the Aronoff affidavit inadmissible as hearsay; that there was no evidence that the

information on these websites was true and correct; and that Aronoff was not in a

position to verify their accuracy. 9 In the alternative, the district court found, that

even if these exhibits were not hearsay, they had no prima facie value, were

insufficient to prove systematic contacts by MFM in Florida, and therefore were

insufficient to assert jurisdiction over MFM in Florida.10

       The district court held that it lacked personal jurisdiction over MFM and

Dion, as Xena failed to rebut evidence presented by MFM and Dion to the

contrary. Thereafter the district court entered an order of dismissal of Xena=s

complaint for lack of personal jurisdiction.

       The district court also upheld the forum-selection clause contained in the

Forbearance Agreement, in that any disputes between Xena, MFM, Dion, and

       9
           Xena did not offer any rebuttal to the hearsay ruling by the district court.

       10
          Xena also complains that the district court granted the motions to dismiss without
conducting any jurisdictional hearing, or permitting any jurisdictional discovery. It claims that
disputed facts in the record should have been subject to discovery. MFM, Dion, and David
argue that, during the pendency of the case in the district court, Xena: (1) neither moved for an
evidentiary hearing regarding personal jurisdiction; (2) nor did it move to compel jurisdictional
discovery from the defendants.

                                                   8
                Case: 11-14770        Date Filed: 08/14/2013       Page: 9 of 16

David, shall be subject to the exclusive jurisdiction of the English Courts. It

dismissed Xena=s action for improper venue and denied all other pending motions

as moot. 11

       This appeal follows.

                                               III.

       There are only two issues before us on appeal:

       A. Whether or not the district court correctly dismissed Xena=s complaint

for lack of personal jurisdiction over MFM and Dion; and

       B. Whether or not the district court correctly dismissed Xena=s complaint

for improper venue under the forum-selection clause contained in the Forbearance

Agreement against MFM, Dion, and David.

                                               IV.

       We review a dismissal for lack of personal jurisdiction de novo. Alexander

Proudfoot Co. World Headquarters L.P. and APCO, Inc. v. Thayer, 877 F.2d 912,

916 (11th Cir. 1989). When a district court does not conduct a jurisdictional

hearing on a motion to dismiss, a plaintiff must establish a prima facie case of

personal jurisdiction over the nonresident defendant. See Cable/Home Commc=n

Corp. v. Network Prods., Inc., 902 F.2d 829, 855 (11th Cir. 1990).

       11
           This includes the defendants=s motion to quash service of process, due to insufficient
service of process.
                                                 9
             Case: 11-14770     Date Filed: 08/14/2013   Page: 10 of 16

      We review de novo a dismissal for improper venue involving a forum-

selection clause in an international agreement. See Lipcon v. Underwriters at

Lloyd’s, London, 148 F.3d 1285, 1290-91 (11th Cir. 1998).

                                          V.

      A. Motion to Dismiss for Lack of Personal Jurisdiction

      Here, the district court, in examining MFM and David=s joint motion to

dismiss, accepted the allegations contained in Xena=s complaint as true and

construed the complaint in its favor. See Bell Atlantic Corp. v. Twombly, 550 U.S.
544, 555-56, 127 S. Ct. 1955, 1965, 167 L. Ed. 2d 929, 940 (2007). It applied the

same rationale when conflicts arose between the factual allegations contained in

Xena=s affidavits, and the declarations of the three defendants. See Morris v. SSE,

Inc., 843 F.2d 489, 492 (11th Cir. 1988).

             1. MFM

      In its complaint, Xena alleged that, upon information and belief, MFM is a

foreign, non-Cayman Islands corporation, with offices in Miami, Florida, and that

MFM conducts business in Florida. In its motion to dismiss, MFM refutes these

assertions in detail. See note 1 supra.

      David=s declaration supports and reaffirms MFM=s position as a foreign

corporation. As president of MUS, David is unable to bind MFM in any way, or

sign documents on its behalf.

                                          10
               Case: 11-14770        Date Filed: 08/14/2013       Page: 11 of 16

       Dion=s declaration states that he is a foreign citizen. He is the decision

maker for MFM, a foreign corporation.

       When the burden of proof shifted back to Xena, Xena responded with a

memorandum of law opposing the motions to dismiss, and submitted the affidavit

of its counsel, Mr. Aronoff. The district court dismissed the six exhibits attached

to Aronoff=s affidavit as hearsay, applying the legal standards set forth above. It

found that Xena had not established a prima facie case supporting personal

jurisdiction over MFM, and granted its motion to dismiss. We agree. 12 In the

chain of entities, there is not one Florida entity before us. Every entity in this

appeal is a foreign corporation, including MFM.

               2. Dion

       Xena alleges in its complaint that Dion is an individual that resides in

Aventura, Florida. Dion, in response, declares that he is a foreign citizen whose

principal place of residence is outside the United States. For reasons previously

       12
           Xena argues that Meier ex rel. Meier, 288 F.3d at 1264, is applicable here. Xena
claims that the consulting agreement between MFM and MUS, on its own, under agency
principles, is enough to assert jurisdiction over MFM, and prove that MFM is present and doing
business in Florida. Id. Through MUS, Xena contends, MFM is holding itself out as doing
business in Florida, and MUS is sufficiently present in Florida, as the agent of MFM, to bind
MFM. Id.
        We disagree. In Meier, there was a parent-subsidiary relationship between the foreign
corporation and its Florida subsidiary. Id. at 1267. The Florida subsidiary in Meier had no
identity of its own, and operated solely for the benefit of its parent foreign corporation. Id. at
1272. There were also significant financial ties between the Meier foreign corporation and its
Florida subsidiary. Id. at 1273. None of these distinctions are present here.

                                                11
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stated, there was evidence that Dion has no continuous or systematic contact with

Florida.

      Thereafter, the burden of proof shifted back to Xena to prove that Dion had a

nexus of minimum contacts with Florida. The district court found that Xena had

failed to offer any proof in rebuttal of Dion=s declaration.

      As the district court found that there was no Abattle of affidavits,@ it was not

Ainclined to give greater weight . . . to the plaintiff=s version@ of the facts. See

Psychological Res. v. Gerleman, 624 F. Supp. 483, 486 (N.D.Ga. 1985). The

district court determined that Xena had failed to establish a prima facie showing of

personal jurisdiction over Dion. Xena=s claims against Dion were due to be

dismissed for lack of personal jurisdiction.

      We disagree. Under our de novo review, the record reflects that Xena

submitted evidence that it had established personal jurisdiction over Dion under

Florida’s transient jurisdiction rule, which is the exercise of jurisdiction based

solely on a “non-resident [] when [the] non-resident is properly served with service

of process while voluntarily present in the state.” Meier v. Sun Int’l. Hotels, Ltd.,

288 F.3d 1264, 1269 (11th Cir. 2002); Keveloh v. Carter, 699 So. 2d 285, 288

(Fla. Dist. Ct. App. 1997 (citing Burnham v. Super. Ct. of Cal., 495 U.S. 604

(1990)). Although Dion disputes this, the district court was required to accept

Xena’s allegations as true, and should not have dismissed the claims against him

                                            12
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for lack of personal jurisdiction. See Morris, 843 F.2d at 492. Nevertheless, we

need not reach this issue, as the district court correctly dismissed Xena’s claims

against Dion for lack of improper venue, discussed in the following Section B of

this opinion.

      B. Motions to Dismiss for Improper Venue

      As the district court found, forum-selection clauses are presumed to be valid

and enforceable Awhere the underlying transaction is fundamentally international in

character.@ Lipcon, 148 F.3d at 1295. These clauses will not be upheld if there is a

Astrong showing that enforcement would be unfair or unreasonable under the

circumstances,@ but the party attempting to invalidate a forum-selection clause has

a heavy burden of proof. Krenkel v. Kerzner Int=l Hotels Ltd., 579 F.3d 1279, 1281

(11th Cir. 2009).

      As the district court stated:

                Forum selection clauses and choice of law clauses will be
                found unreasonable and unenforceable Aonly when: (1)
                their formation was induced by fraud or overreaching; (2)
                the plaintiff would effectively be deprived of its day in
                court because of the inconvenience and unfairness of the
                chosen forum; (3) the fundamental unfairness of the
                chosen law would deprive the plaintiff of a remedy; or
                (4) enforcement of such provisions would contravene a
                strong public policy.@ Lipcon, 148 F.3d at 1296. Also, a
                plaintiff must specifically allege that the forum selection
                clause was included in the agreement because of fraud
                when seeking to invalidate it. See id. at 1296 (citing
                Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 594-
                95).
                                            13
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       Xena argues that its claims are broader than the Forbearance Agreement. It

claims they do not necessarily arise out of, or in connection with the Forbearance

Agreement. Xena contends that forum-selection clauses are not limitless, and, as

Dion and David are non-signatories to the Forbearance Agreement, they cannot

now invoke its forum-selection clause pertaining to English courts and English

law. 13 Xena also argues that because it was fraudulently induced into the

agreement the clause should not be binding, and therefore, venue in Florida is

proper.

       Relying upon the standards of law set forth above, the district court found,

that due to the presumption of validity of the forum clause contained in the

Forbearance Agreement, and Xena=s failure to challenge the clause specifically, the

forum-selection clause was valid. It dismissed all of Xena=s claims on the basis

that Florida is not a proper venue.

       13
            At oral argument, Xena offered Bahama Sales Assoc., LLC v. Byers, 701 F.3d 1335
(11th Cir. 2012), in support of its position that its claims surpass the limits of the Forbearance
Agreement. In Bahama Sales, Byers purchased a lot in the Bahamas. The parties signed a lot
purchase contract that contained a forum-selection clause and a choice-of-law clause that
required all disputes to be litigated in Bahamian courts under Bahamian law. Id. at 1338.
Byers=s mortgage financing note also contained a forum-selection clause and a choice-of-law
clause. Id. That clause required that all disputes be litigated in Florida under Florida law. Id.
When Byers failed to make payments on the mortgage note, Bahama Sales sued him in the
Middle District of Florida. Id. The district court dismissed Bahama Sales=s breach-of-contract
claim against Byers for lack of subject-matter jurisdiction. Id. at 1339. This court reversed the
district court on the basis that the forum-selection clause of the secondary document, the
mortgage note, requiring all disputes to be resolved in Florida, controlled. Id. at 1341. Xena=s
reliance upon Bahama Sales is misplaced. The secondary agreements here, unlike those in
Bahama Sales, do not require that all disputes be resolved in Florida. They direct the parties to
the BVI.

                                                14
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       The district court found the same true for Dion, as MFM=s principal decision

maker. Also, as representations made by David led to the execution of the

Forbearance Agreement, the district court found that the forum-selection clause

also controlled.

       Here, the district court enforced the forum-selection clause of the

Forbearance Agreement, requiring all disputes be resolved under English law in

English courts. Under our de novo review, the district court correctly enforced the

forum-selection clause against the signatories to the Forbearance Agreement, Xena

and MFM, and also the closely-related parties, Dion and David.14

                                              VI.

       This appeal appears to be a case of international forum shopping by Xena,

considering its previous instigation in 2010, of insolvency proceedings against

MGSDF in the BVI. This is an international dispute between foreign entities.

Only David lives in Florida. His father, Dion, is a foreign citizen.

       If the Forbearance Agreement is in effect, it appears that the parties must go

to the English Courts. If the Forbearance Agreement is not in effect, then perhaps

       14
           Xena argues that its claims are far broader than just those found in the Forbearance
Agreement (the primary document). Yet the forum-selection clauses in the Subscription
Agreement and the Assignment Agreement (the secondary documents) require that all disputes
be resolved under BVI law in BVI courts. Even if the primary document is not controlling, the
secondary documents also direct the parties to a foreign court. See Bahama Sales, 701 F.3d at
1341.

                                               15
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the parties must go to the courts of the British Virgin Islands. Either way, they

have no day in court in Florida.

       This is a simple case involving sophisticated international parties and an

international fund. Under our de novo review, the parties appear to be free to

litigate on foreign soil -- but that issue is not before us. What is before us is the

correct decision by the district court -- the parties are not free to litigate in Florida.

                                           VII.

       The judgment of the district court is affirmed.

       AFFIRMED.

                                            16