Soares v. Varner

Background

Paul F. Soares, representing himself, sued William Varner and Arrowhead Energy, Inc. He alleged claims involving negligent misrepresentation, conversion, and an accounting. The complaint alleged that the defendants agreed to manage oil wells owned by Funchal Minerals Limited, an Oklahoma corporation doing business as OK Minerals, and that they falsely claimed ownership of the wells, a mineral lease, and equipment and misused money for expenses unrelated to OK Minerals. Soares sought damages for lost property, lost oil, equipment, minerals, other property, lost income, and business goodwill.

The court’s subject-matter jurisdiction was based on diversity of citizenship. Varner and Arrowhead moved to dismiss under Federal Rule of Civil Procedure 12(b)(2), arguing that the California court lacked personal jurisdiction over them. Personal jurisdiction is a court’s power to require a particular defendant to litigate in that court.

Judicial Notice

The court took judicial notice of records concerning Funchal Minerals Limited and related bankruptcy matters, but only for the existence of those matters and the fact that Funchal Minerals Limited is an Oklahoma corporation. The court did not take judicial notice of disputed facts in those records.

Personal Jurisdiction

The court rejected general jurisdiction. General jurisdiction permits a court to hear any claim against a defendant, but ordinarily requires affiliations so substantial and continuous that the defendant is essentially “at home” in the forum. The court found that Varner and Arrowhead could not fairly be regarded as at home in California. Varner was identified as an Oklahoma resident, and Arrowhead was identified as an Oklahoma corporation with its headquarters and principal place of business in Edmond, Oklahoma. Varner stated that Arrowhead managed oil and gas properties in Oklahoma and had no California offices, employees, operations, property, agent for service, advertising, or solicitation. Soares provided no evidence or plausible allegation contradicting those statements.

The court also rejected specific jurisdiction. Specific jurisdiction allows a court to hear claims connected to a defendant’s activities in the forum. The court applied the Ninth Circuit’s three-part test: the defendant must have purposefully directed activities toward the forum or purposefully conducted business there; the claims must arise from or relate to those activities; and exercising jurisdiction must be reasonable.

The court concluded that Soares had not shown purposeful direction toward California. Even accepting his assertions that the defendants solicited his business and investments, the court found that those assertions showed, at most, a business relationship with Soares. Under the governing law, a plaintiff’s residence or relationship with a defendant alone does not create the necessary connection between the defendant and the forum. The court also found no indication that the defendants executed or performed a contract in California.

Separately, the court found that Soares’s claims arose from alleged conduct involving oil wells in Oklahoma, including management, repairs, transfers of oil from Oklahoma to Texas, and alleged misappropriation of payments from oil and equipment sales. Soares therefore did not show that his claims arose from or related to the defendants’ contacts with California. Because he failed to satisfy the first two parts of the specific-jurisdiction test, the court did not address whether exercising jurisdiction would be reasonable.

The court also rejected Soares’s request for pendent personal jurisdiction, which can sometimes allow jurisdiction over related claims when the court already has jurisdiction over at least one claim. Because the court had no personal jurisdiction over the defendants for any of Soares’s claims, it found no basis for pendent personal jurisdiction.

Disposition

The court found that it lacked personal jurisdiction over the defendants and granted their motion to dismiss. Rather than dismissing the action, the court transferred it to the United States District Court for the Western District of Oklahoma under 28 U.S.C. § 1631. The court found that the action could have been filed there and that transfer was in the interest of justice, including because dismissal could create statute-of-limitations issues. The court vacated the January 28, 2022 case management conference.

The opinion also states that Soares’s claims against Sunoco had previously been dismissed with prejudice for lack of personal jurisdiction by the judge who previously handled the action; that prior ruling was not the disposition of the motion addressed here.