RBC Capital Markets, LLC v. Garcia Hamilton & Associates, LP

Background

RBC Capital Markets, LLC sued Garcia Hamilton & Associates, LP over Garcia Hamilton’s sales of DuPont bonds to RBC. RBC asserted claims for reformation, breach of contract, breach of the duty of good faith and fair dealing, and unjust enrichment. The dispute followed DuPont’s announcement that its Agriculture Division would be separated from DowDuPont, which triggered the ability to call certain bonds and pay their holders the bonds’ face value.

Garcia Hamilton’s partner and portfolio manager, Jeff Detwiler, communicated with RBC employees through Bloomberg Instant. On May 8, 2019, Garcia Hamilton sold RBC 22,425,000 DuPont bonds. On May 9, Detwiler and RBC employee William Matthew Wagoner discussed another sale, and Garcia Hamilton sold RBC 47,158,000 additional bonds. RBC later alleged that Bloomberg had not yet reflected that the bonds had been called and demanded cancellation of the May 9 sale or a refund of an alleged $161,641.81 overpayment.

Garcia Hamilton moved to dismiss for lack of personal jurisdiction and improper venue. The opinion’s ruling addressed personal jurisdiction. RBC relied on New York’s long-arm statute, which permits jurisdiction over a non-New York defendant that transacts business in New York when the claim relates to that transaction.

Court’s analysis

The court explained that RBC had to make a preliminary showing that personal jurisdiction existed. Under New York’s long-arm statute, the relevant question was whether Garcia Hamilton purposefully conducted business in New York and whether those contacts had a substantial relationship to RBC’s claims.

The court compared the case with a New York Court of Appeals decision involving a Montana-based defendant that negotiated a bond sale with a New York-based employee through Bloomberg Instant. In that earlier case, the defendant had engaged in about eight other bond transactions with the employee over 13 months. Here, by contrast, Garcia Hamilton’s alleged contacts with RBC’s New York office consisted of two online communications over about 18 hours.

The court also found that the transaction’s center of gravity, if anywhere, was in Texas. Detwiler was directed to communicate with Wagoner because RBC’s usual contact was traveling. That usual contact worked from RBC’s Dallas office; the transaction was credited to him and finalized for settlement between Garcia Hamilton’s Houston office and RBC’s Dallas office. The bonds had been in Garcia Hamilton’s possession and had no particular connection to New York.

The court rejected RBC’s argument that electronic settlement through the Depository Trust & Clearing Corporation, a New York corporation, supplied the necessary contact. It treated that settlement as administrative and logistical work that did not show purposeful business activity in New York. The court concluded that Garcia Hamilton’s New York contacts were coincidental rather than a purposeful effort to use the New York marketplace.

Ruling

Judge Naomi Reice Buchwald held that Garcia Hamilton had not transacted business in New York under the state’s long-arm statute. Because the court found no other statutory basis for personal jurisdiction, it granted Garcia Hamilton’s motion to dismiss for lack of personal jurisdiction.

The court dismissed RBC’s complaint without prejudice to refiling in an appropriate forum. It directed the Clerk of Court to terminate the pending motion and close the case.