Chung v. Chung Peng Chih-Mei

Background

Elizabeth Y. Chung sued Chung Peng Chih-Mei and Intertrust (Bahamas) Limited. The opinion states that Chung Peng Chih-Mei is David Chung’s mother, that David Chung is Elizabeth Chung’s estranged husband, and that Intertrust is the trustee of Bend Family Trust I, also referred to in the opinion as the Nichodon Family Trust after a name change.

Elizabeth Chung alleged that, beginning around 2004, David Chung placed assets belonging to him and/or Elizabeth Chung into trusts or entities under his mother’s name to avoid tax liability in the United States. She alleged that David Chung created and funded the Maple Family Trust with the couple’s assets, including an alleged $5 million contribution, and also created Bend Family Trust I as part of the alleged scheme. She sought a ruling that Chung Peng Chih-Mei and Bend Family Trust I did not own or have rights to the disputed assets. Elizabeth Chung had also begun a state-court proceeding to dissolve her marriage with David Chung.

Intertrust’s Motion to Dismiss

Intertrust moved under Federal Rule of Civil Procedure 12(b)(2), which permits dismissal when the court lacks personal jurisdiction over a defendant. Personal jurisdiction is a court’s authority to require a particular defendant to defend a case in that court.

Elizabeth Chung did not argue that California had general personal jurisdiction over Intertrust. The court therefore considered only specific personal jurisdiction, which can exist when a defendant deliberately conducted activities connected to the forum and the plaintiff’s claim arose from those activities.

Intertrust submitted evidence that it is incorporated and licensed under the laws of The Bahamas, is domiciled and has its principal place of business in Nassau, Bahamas, and administers the trust and its assets in The Bahamas. Intertrust stated that the trust and its assets had never been located, held, or administered in California; that it had no office, facility, employees, agents, representatives, bank accounts, addresses, or telephone numbers in California; and that it was not registered, licensed, or qualified to do business there.

Elizabeth Chung argued that Intertrust managed trust assets through David Chung, whom she described as a California-based agent, and that the trust held or managed assets substantially connected to California. The court found that she offered no sufficient evidence that the trust included assets in California. It found that an organizational chart she submitted appeared to be an individual’s personal notes and did not show that Bend Family Trust I held assets in California.

Elizabeth Chung also submitted a custodial agreement concerning David Chung’s alleged role as an agent. The court found that the agreement did not clearly establish whether Intertrust or Chung Peng Chih-Mei selected David Chung as an agent. The court further held that, even if the evidence showed that Intertrust deliberately directed activities toward California by appointing David Chung as an agent, Elizabeth Chung’s claims arose from the alleged creation of the trust, not from investment decisions or other actions David Chung may have taken as an alleged agent.

The court therefore granted Intertrust’s motion to dismiss for lack of personal jurisdiction, with leave to amend. The amendment is limited to jurisdictional allegations concerning Intertrust.

Jurisdictional Discovery

Elizabeth Chung requested discovery intended to determine whether the court had personal jurisdiction over Intertrust. The court approved the request in part. It allowed a three-hour video deposition of Intertrust on the proposed topics, except for the fifth topic. The court allowed questions about whether Intertrust communicated with David Chung concerning the Nichodon Family Trust or Bend Family Trust I.

The court approved modified versions of Elizabeth Chung’s first two proposed interrogatories. It limited the third interrogatory to information about the Nichodon Family Trust and Bend Family Trust I. The court allowed the second and third document requests but did not allow the fourth request. The opinion also states that Elizabeth Chung withdrew the first document request and portions of the first two interrogatories.

The court ordered Elizabeth Chung to complete jurisdictional discovery within 60 days after the order. She must file an amended complaint within 21 days after completing that discovery.

David Chung’s Motion to Intervene

David Chung moved to intervene as a defendant. Intervention is a procedure allowing a nonparty to join an existing case. The court found the motion premature because Intertrust had been dismissed for lack of personal jurisdiction and Chung Peng Chih-Mei had not yet appeared at the time of the hearing. Chung Peng Chih-Mei later filed a motion asserting lack of personal jurisdiction, lack of subject-matter jurisdiction, and failure to state a claim.

The court continued to find intervention premature because it was possible that the court would have personal jurisdiction over neither defendant. It denied David Chung’s motion to intervene without prejudice, meaning the order permits him to file a new intervention motion after the court decides Chung Peng Chih-Mei’s pending motion to dismiss.

Disposition

The court granted Intertrust’s motion to dismiss with leave to amend; approved Elizabeth Chung’s request for jurisdictional discovery in part; and denied David Chung’s motion to intervene without prejudice. Judge Beth Labson Freeman signed the order on February 27, 2023.