Floyd's of Leadville, Inc. v. Alexander Capital LP

Background

Floyd's of Leadville, Inc. ("FOL") brought claims against Alexander Capital, LP, its partners, and associated individuals and entities. FOL alleges that the defendants conspired to defraud it by structuring investments and lending documents so that FOL could not repay its obligations, then attempting to acquire FOL's assets and form a new cannabidiol company.

FOL asserted four New York-law claims against Ronald Barrie Clapham: aiding and abetting fraud, aiding and abetting breach of fiduciary duty, intentional interference with prospective economic relations, and civil conspiracy. Clapham is identified in the opinion as a citizen and domiciliary of the United Kingdom. He moved to dismiss under Federal Rule of Civil Procedure 12(b)(2), which permits dismissal for lack of personal jurisdiction—the court's authority over a particular defendant.

Personal Jurisdiction Under New York Law

The court held that FOL made a prima facie showing—an adequate initial showing based on its allegations and the submitted materials—that New York's long-arm statute applied to Clapham.

First, the court concluded that Clapham transacted business in New York under New York Civil Practice Law and Rules § 302(a)(1). The court relied on allegations and evidence that Clapham signed, as a director of Speyside Holdings Limited, a subscription agreement for the purchase of $2 million in FOL stock; that the agreement selected New York law; and that the stock sale closed at a New York law firm's offices. The court found a substantial relationship between those contacts and FOL's claims because the claims concerned FOL's finances and the structure of investments in FOL.

The court also considered Clapham's attendance at a January 2020 meeting in New York between FOL and its creditors. Although Clapham said he took no action and was merely a spectator, the court found it reasonable to infer that he had an interest in the meeting because he was an FOL investor. The court further relied on his alleged membership on an advisory board created by Alexander Capital, his creation and presentation of an investment deck proposing a new company called Redemption Holdings, Inc., and his communications with FOL investors about transferring their investments to Redemption.

Second, the court held that FOL made a prima facie showing of jurisdiction under § 302(a)(2), which covers a defendant who commits a tortious act in New York personally or through an agent. Applying a co-conspirator agency theory, the court found that FOL plausibly alleged that Clapham joined and furthered a conspiracy involving acts in New York, knew of the effects of the alleged conduct in New York, stood to benefit financially from the conduct, and exercised some influence over New York-based co-conspirators. The court noted that Clapham did not challenge jurisdiction under § 302(a)(2) in his opening brief, but addressed the issue anyway.

Constitutional Due Process

The court next considered whether exercising jurisdiction would comply with the Constitution's due-process requirements. It found both sufficient minimum contacts with New York and a reasonable basis for exercising jurisdiction. The court relied on the same alleged business contacts and alleged participation in tortious conduct involving New York-based co-conspirators.

The court rejected Clapham's general assertions of expense and inconvenience. It concluded that he had not presented the compelling showing needed to establish that litigating in New York would be unreasonable, particularly because Redemption was litigating related claims against FOL in Colorado.

Disposition

The court denied Clapham's motion to dismiss. The opinion did not decide whether FOL's underlying fraud, fiduciary-duty, interference, or conspiracy claims were ultimately proven; it decided only that the case could proceed against Clapham in New York because the court had personal jurisdiction over him.