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H.E.B., LLC v. Jackson Walker, L.L.P.

Court of Appeals of Kentucky

October 11, 2019

H.E.B., LLC, A NEVADA LIMITED-LIABILITY COMPANY; BENNY RAY BAILEY; SAMAX FAMILY LIMITED PARTNERSHIP A NEW YORK LIMITED PARTNERSHIP BY AND THROUGH ANDREW MARGULIES AS GENERAL PARTNER; WILLIAM THOMPSON; JOHN WALLACE LANGLEY; JAMES M. RENFRO; STEVEN MITCHELL SACKS; JOHN WEITHMAN; RONNIE WARD; COMMERCIAL HOLDING AG, LLC; JOY BARKER CHEEK; PAMELA J. TAYLOR; MLH INVESTMENTS, LLC; RUSBAR FINANCIAL SERVICES, INC.; INNOVATIVE TECHNOLOGIES, LLC; TOM GRISSOM; AND JOE BRETT LANGLEY APPELLANTS
v.
JACKSON WALKER, L.L.P.; RICHARD F. DAHLSON; JAMES STUCKERT; SOLOMON O. HOWELL, JR.; P. RICHARD RISINGER; UNKNOWN DOE INDIVIDUAL DEFENDANTS 1-10; AND UNKNOWN DOE ENTITY DEFENDANTS 11-21 APPELLEES

          APPEAL FROM FAYETTE CIRCUIT COURT HONORABLE THOMAS L. TRAVIS, JUDGE ACTION NO. 18-CI-00519

          BRIEFS FOR APPELLANTS: Thomas W. Miller Lexington, Kentucky.

          BRIEF FOR APPELLEES JACKSON WALKER, LLP AND RICHARD F. DAHLSON: Barbara B. Edelman Jeffrey A. Kaplan, Jr. Lexington, Kentucky Brian S. Sullivan Cincinnati, Ohio.

          BEFORE: CLAYTON, CHIEF JUDGE; MAZE AND NICKELL, JUDGES.

          OPINION

          NICKELL, JUDGE.

         Disgruntled shareholders, led by H.E.B., LLC ("HEB"), a Nevada holding company with its principal place of business in Ft. Worth, Texas, claim Jackson Walker, L.L.P. ("JW"), a Texas law firm headquartered in Dallas, Texas, and Richard F. Dahlson, a partner in the JW law firm who lives and works in Dallas, Texas, committed legal malpractice by helping others dilute the value of stock in VHGI, Inc. ("VHGI"), a Delaware corporation in which all appellants invested. Appellants, some of whom reside in Kentucky, challenge dismissal of JW and Dahlson from a civil suit filed in Fayette Circuit Court. HEB previously filed similar claims against JW and Dahlson in Nevada in both federal[1] and state[2] court where both suits were dismissed. After hearing JW and Dahlson's motion, the Fayette Circuit Court sustained the motion to dismiss on June 12, 2018, finding neither had sufficient contacts to trigger Kentucky's long-arm statute, and federal due process considerations would make it unreasonable and burdensome for a Kentucky court to exercise jurisdiction. A motion to reconsider was denied on July 10, 2018. On review of the record, briefs and law, we affirm.

         FACTS AND PROCEDURAL BACKGROUND

         No discovery having occurred in this case, we rely heavily on the complaint to summarize facts pertinent to this appeal. We discuss the complaint in detail because all claims of wrongdoing raised in the complaint must arise from the actions of JW and Dahlson. KRS[3] 454.210(2)(a) and (b).

         Scott Haire is the "H" in HEB, an entity he launched with others in 1997 to raise capital for business ventures. According to the complaint, JW and Dahlson helped Haire set up HEB and provided legal services to HEB over a fifteen-year period during which more than $60 million was raised and invested in multiple companies, one of which was VHGI. Haire was Chairman and Chief Financial Officer of VHGI. Haire was also Chief Executive Officer ("CEO") of Wound Management Technologies, Inc. ("WMT"), another company he created.

         In early 2012, Haire was managing HEB and its controlling interest in VHGI. The complaint alleges through VHGI Coal, Inc., a wholly-owned subsidiary, VHGI acquired Lily Group Holdings, Inc. ("Lily"), an Indiana corporation and owner of the Landree coal mine in Indiana-an asset purportedly valued at more than $100 million. Lily was purchased from Risinger, an Indiana resident who was a VHGI director and shareholder. Risinger, a defendant herein, eventually became VHGI's CEO and sole director.

         Also, in early 2012, JW and Dahlson learned Haire was likely to be indicted in Florida for his role in an FBI sting investigating financial crimes. Haire pled guilty to conspiring to commit securities fraud in April 2013, admitting he schemed "to inflate the volume and stock of VHGI, a publicly traded company."[4]United States v. Scott Haire and Douglas Martin, Case No. 12-CR-60133-Williams(s) (S.D. Fla.).

         JW and Dahlson helped Haire prepare for his guilty plea and the prison sentence that followed. Dahlson recommended Haire minimize his role in all public companies including HEB, VHGI and WMT. Haire resigned all corporate leadership positions in late May 2012.

         Another step was revealing Haire's impending indictment to his mentor-Stuckert-a Kentucky resident, principal HEB investor and VHGI shareholder. Haire met with Stuckert, a defendant herein, in Stuckert's office in Louisville, Kentucky, [5] in May 2012 to relay the news. Dahlson attended the meeting at Haire's request, staying in the Commonwealth less than a day. Dahlson did not bill HEB for time or travel associated with the meeting. The complaint describes the purpose of the meeting as being "to inform Stuckert of the investigation and the potential indictment of Haire and have Dahlson opine on the investigation and its effect not only upon Haire, but upon VHGI, WMT, RedFin and the other affiliates of [HEB]." This is the only meeting alleged to have occurred in Kentucky.

         The complaint suggests once Haire's criminal dealings were exposed, JW and Dahlson no longer wanted Haire and HEB as clients so the attorney and his firm abandoned them and began representing Stuckert and Howell-another VHGI investor, Kentucky resident and defendant herein. Both Stuckert[6] and Howell had loaned money to VHGI which was ultimately diverted to Lily Group Holdings Company-not to be confused with Lily-another entity previously owned by Risinger and the means by which VHGI acquired the Landree mine.

         The complaint further alleges Stuckert met on June 7, 2012-at an unspecified location-with Lucy Singleton and Robert Lutz, Haire's successor as WMT's new CEO. According to the complaint, a day later, on June 8, 2012, Stuckert[7] met again with Singleton and Lutz-plus Dahlson-who acted as legal counsel to all three individuals and HEB. The complaint goes on to claim during that meeting-while Dahlson was still representing HEB-a plan was "hatched" for Stuckert to quietly take control of WMT, VHGI and RedFin, a third public company in which HEB was heavily invested, by illegally acquiring a significant number of HEB-owned shares in all three companies.

         Between September 2012 and February 2013, HEB attempted to either develop or sell the Landree mine to raise capital to strengthen VHGI, WMT and RedFin. Appellants claim Stuckert "thwarted" those attempts and in February 2013, took complete control of VHGI and its assets, including the Landree mine.

         The complaint further states in September 2013, Lily filed for bankruptcy causing individual shareholders to lose the value of their entire investment in VHGI. HEB lost more than $7 million when VHGI could not repay a loan.

         Appellants allege by endorsing the Stuckert takeover plan, JW and Dahlson violated their fiduciary duty to HEB and failed to protect HEB's interests. With the foregoing facts in mind we consider whether the Fayette Circuit Court properly determined it lacked specific personal jurisdiction over JW and Dahlson and dismissed the complaint as to both.

         ANALYSIS

         The complaint alleges multiple entities committed torts. We consider only the claims against JW and Dahlson because only they have been dismissed from this litigation. Allegations against Stuckert, Howell and ...


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