When You Get There, Remember It's Nev-æd-uh, Not Na-Vah-Duh.

Farina v. SAVWCL III, LLC, No. B294516 (D2d8 Jun. 10, 2020)

Back in what we will probably soon start calling the last financial crisis, there was a hard money Lender in pooling Investor money to loan to real estate Developers in Las Vegas. Lender, which was also a Nevada entity located in Nevada, facilitated contractual arrangements between Developers and Investors. There were contracts (promissory notes) but no contact between Developers and Investors. Most of Investors in Nevada. But about 10 percent of the Investors were from California.

The music came to a stop in the Vegas real estate market in late 2007. The loans failed. Lender apparently went bk. Investors sued Developers for fraud, not in Vegas, but in LA Superior. (Lender isn’t a party to the case.) Developers moved to dismiss for lack of personal jurisdiction. The trial court granted the motion. 

The issue comes down to personal availment. The evidence showed that Developers weren’t directing Lender to reach out to Californians. At best, someone at Developers once sent a letter to someone at Lender, proposing that Investors trade their loans for equity interests in a joint venture to work out the souring debt.* (It was this swap that purportedly consummated the fraud.) Lender then sent that letter along to Investors with a letter of its own explaining the proposal. 

There was no evidence, however, that at the time Developers wrote the letter that they directed Lender to send their letter to Investors in California. Indeed, there was no evidence that Developer even knew at the time that any Investor was in California. That’s not personal availment. 

Nor was the mere promissory notes between California Investors and Developer enough to create personal jurisdiction here. The notes lent money to invest in real estate in Nevada, facilitated by a Nevada entity, governed by Nevada law and they were executed by Developers in Nevada. They specifically state that Investors’ addresses were on file with Lender (at its Nevada address.) Absent any evidence that Developers knew they were dealing with Californians, that’s not enough.

Finally, the fact that Developers retained some California-based architects and consultants to work on the developments did not create jurisdiction. For specific jurisdiction, the claims need to arise from or relate to the in-state contacts. But Plaintiff’s fraud claims had nothing to do with who Developers hired to work on their project. Indeed, there was not even any evidence that Investors even knew who Developers hired.

Affirmed.

*In what has to be the funniest parenthetical naming reference in a recent Court of Appeal decision, the Court explains, “[t]he joint venture’s name is SAVWCL III, LLC. We are unsure how to pronounce that, so we call it Joint Venture.”