Malekar v. Birley

Background

Shirish Malekar, a former Vident Financial employee, alleged that Vince Birley, the company’s chief executive officer, and Mohammed Baki, an executive, conspired to deprive him of his vested equity in Vident Investment Advisory. Malekar alleged that he had a 3.75% vested membership interest out of a possible 5% and that the defendants discouraged him from exercising his vested options. He asserted claims for fraud and breach of contract.

Malekar filed the case in San Francisco County Superior Court in July 2022. The defendants removed it to federal court in October 2022. Malekar moved to remand, or return the case to state court, arguing that the defendants had not shown complete diversity of citizenship. Baki moved to dismiss the claim against him under Federal Rule of Civil Procedure 12(b)(2), arguing that the court lacked personal jurisdiction over him.

Motion to Remand

The court explained that diversity jurisdiction requires each plaintiff to have different citizenship from each defendant and requires more than $75,000 to be at stake. Malekar did not challenge the amount requirement. He argued instead that the defendants had not established complete diversity.

The court found that Malekar was a citizen of California or Nevada for diversity purposes. It relied in part on his complaint’s references to himself as a California citizen, his employment in San Francisco, and alleged events occurring there. The court also considered evidence about the citizenship of the defendant entities and their ownership structure. It concluded that, whether citizenship was determined through the entities’ ownership chain or through the citizenship of the relevant trust’s members or trustees, the parties were completely diverse.

The court therefore denied the motion to remand and kept the case in federal court.

Motion to Dismiss for Lack of Personal Jurisdiction

The court then considered whether it could exercise personal jurisdiction—the court’s authority over a particular defendant—over Baki. It addressed both general jurisdiction, which allows claims unrelated to the forum, and specific jurisdiction, which depends on a connection between the defendant’s forum-related conduct and the claim.

For general jurisdiction, the court found that Baki’s frequent trips to California for business and family visits were insufficient. Baki stated that he was domiciled in Ecuador when the case was filed and continued to be domiciled there. The court concluded that it did not have general jurisdiction over him.

For specific jurisdiction, Malekar relied primarily on telephone calls in which Baki allegedly discouraged him from exercising his vested options, while knowing that Malekar was domiciled in California. The court held that directing conduct at a California resident, without more, did not create the required substantial connection between Baki’s suit-related conduct and California. The court also rejected Malekar’s argument that the alleged conspiracy supplied jurisdiction, explaining that personal jurisdiction must be based on forum-related acts personally committed by the nonresident defendant.

Because the first part of the specific-jurisdiction analysis was dispositive, the court did not reach the second part. It stated that the result would also be the same under the contract-related jurisdiction test because ordinary use of mail, telephone, or international communications generally does not establish purposeful activity directed at the forum.

Disposition

The court denied the motion to remand and granted the motion to dismiss Defendant Baki for lack of personal jurisdiction. The opinion does not state that the court reached the merits of Malekar’s fraud or breach-of-contract allegations against the other defendants. The court set a telephonic case-management conference for May 23, 2023, and directed the parties to submit a joint case-management statement by May 16, 2023. Judge Haywood S. Gilliam, Jr. signed the order.