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
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
FROM FAYETTE CIRCUIT COURT HONORABLE THOMAS L. TRAVIS, JUDGE
ACTION NO. 18-CI-00519
FOR APPELLANTS: Thomas W. Miller Lexington, Kentucky.
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.
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 and state 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.
AND PROCEDURAL BACKGROUND
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 454.210(2)(a) and (b).
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.
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.
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."United States
v. Scott Haire and Douglas Martin, Case No.
12-CR-60133-Williams(s) (S.D. Fla.).
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.
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,
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.
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 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
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 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.
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
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.
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.
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 ...