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Hislop v. Paltar Petroleum Ltd.

United States District Court, D. Colorado

October 16, 2018

JOHN HISLOP, individually and derivatively on behalf of NATION ENERGY INC., DAVID N. SIEGEL, and ROBERT TELLES, as Trustee of DAVID N. SIEGEL FAMILY TRUST 2015, Plaintiff,


          R. Brooke Jackson United States District Judge.

         There are two matters before the Court. First, defendants have filed several motions relating to personal jurisdiction. ECF Nos. 46, 78, 80. Second, plaintiffs move for an order requiring payment of service costs on defendants who evaded service. ECF No. 86. For the reasons stated below, the motions to dismiss are GRANTED under the doctrine of forum non conveniens, and the motion for costs is DENIED.

         I. BACKGROUND

         This lawsuit was brought by four plaintiffs: (1) John Hislop, a Canadian citizen residing in England; (2) David Siegel, a U.S. citizen residing in Florida; (3) the David N. Siegel Family Trust 2015, a trust organized under Colorado laws; and (4) Nation Energy, Inc., a Wyoming shell company (Hislop filed derivatively on behalf of Nation Energy). Complaint, ECF No. 1 at ¶¶20- 22, 209. There are eight defendants: (1) Paltar Petroleum Limited, an Australian corporation; (2) Marc Bruner, a resident of Switzerland; (3) Michael Caetano, a resident of Canada; (4) Michael Lotito, a resident of either Colorado (according to plaintiffs) or Utah (according to defendants); (5) Darrel Causbrook, a resident of Australia; (6) Robert Buljevic, a resident of Canada; (7) Robert Madzej, a resident of Canada; and (8) Belinda Nisbet, a resident of Canada. Plaintiffs also join Does 1-20 as potential plaintiffs. Id. at ¶¶23-31.

         In 2012, Paltar acquired oil and gas exploration permits issued by the Northern Territory of Australia but lacked the necessary funds for the exploration and development of the permits. Id. at ¶2. So in 2015, Paltar and Nation Energy agreed to a joint venture where Paltar would execute the permits, and Nation Energy would provide the funding. Id. at ¶3. To close the deal, Mr. Hislop-the previous majority shareholder of Nation Energy-agreed eventually to become a minority shareholder, and Paltar would eventually take over as majority shareholder of Nation Energy. Id. at ¶4. But Nation Energy was supposed to benefit from the deal as well. In return for Nation Energy's funding, Nation Energy's wholly-owned subsidiary, Nation Energy (Australia) Pty Ltd. (“Nation Australia”), was to earn interest in production licenses issued to Paltar. Id. at ¶5. These royalty deals were memorialized in a series of “earning agreements” between Nation Australia and Paltar. Id.

         The relationship turned sour when defendants became concerned about Nation Energy's ability to provide funding for the venture. Id. at ¶6. Plaintiffs believe the concern was baseless because all parties understood at the venture's inception that Nation Energy did not have the funds to finance Paltar's operation. Id. Also, plaintiffs claim that Nation Energy raised millions from investors in 2016, but their fundraising efforts were disrupted by defendants. Id.

         In response to the fundraising concerns, plaintiffs allege that Paltar's chairman, Mr. Bruner, formulated a wrongful scheme in March 2017 “to strip Nation Energy and Nation Australia of the earning agreements and defraud Nation Energy's minority shareholder and investors.” Id. at ¶7. To execute the scheme, defendants allegedly planned to declare a fraudulent default by Nation Australia requiring them to surrender their interests to Paltar. Id. This scheme was part of a larger plan for Paltar to free itself of its contractual relationship with Nation Australia so that Paltar could then enter into a joint venture with one of Mr. Bruner's companies-Fortem Resources, Inc. (“Fortem”). Id. Once the secret scheme was in place, Mr. Bruner and his co-conspirators fraudulently induced plaintiffs to use plaintiffs' funds held in their lawyer's COLTAF trust account to pay Paltar's and Nation Energy's creditors. Id. at ¶8.

         Next came the alleged wrongful takeover of Nation Energy's and Nation Australia's boards of directors. From June 2016 to April 2017, Nation Energy's board consisted of Mssrs. Hislop, Siegel, and Causbrook. Id. at ¶9. Then on April 27, 2017 Mr. Bruner unilaterally increased the size of Nation Energy's board from three to seven and then stacked the board with his co-conspirators. Id. Two of those co-conspirators, Mr. Caetano-Fortem's chairman and CEO at the time, and Mr. Lotito-one of Paltar's officers, were appointed to the board. Id. (The complaint does not name the other two alleged “co-conspirators” that Mr. Bruner appointed to the newly created directorships.) Once in control of Nation Energy's board, Mr. Bruner ousted Mr. Siegel as chairman of the board and Mr. Hislop as president and CEO. Id. at ¶10. In their place, the board appointed Mr. Caetano as chairman, president, and CEO; Mr. Lotito as chief operating officer (“COO”); and Ms. Nisbet as secretary. Id.

         Two months later, “Bruner's Nation Energy Board” ousted Siegel, Mssrs. Hislop, and Nation Australia's then-CEO Andrew Logan from Nation Australia's board. Id. at ¶11. After the ouster, Mr. Bruner installed Mr. Caetano, Caetano's associate Mr. Madzej, and Paltar director Causbrook to Nation Australia's board; Mr. Caetano became board chair and CEO of Nation Australia. Id. This same month, Mssrs. Caetano and Lotito allegedly seized control of the COLTAF trust account and replaced Mr. Siegel as the account manager. Id. at ¶14.

         Now in control of both boards, the conspiracy allegedly came to life. Mssrs. Bruner, Caetano, Lotito, Causbrook, Nisbet, and others formulated a deal among Paltar, Fortem, and Nation Energy. Id. at ¶12. The plan called for Paltar to issue a default notice to Nation Australia demanding Nation Australia surrender its interest in the earning agreements to Paltar. Id. Once surrendered, Paltar would enter into a joint venture with Fortem to profit on the Australian exploration permits. Id. If the plan succeeded, both Nation Australia and Nation Energy would lose their interests in future Australian petroleum revenue-the sole purpose of their relationship with Paltar. Id.

         By July 2017 Paltar and Nation Energy had already prepared a settlement agreement, and Paltar and Fortem had begun to form and document their joint venture. Id. at ¶15. To further the alleged conspiracy Mr. Bruner caused Paltar to “declare a fraudulent ‘default' under the earning agreements.” Paltar's reason for the default was that Nation Australia failed to make its required payments due under the earning agreements. Id. In August 2017 Mr. Bruner's Nation Energy board voted to approve “(1) the termination of the earning agreements, (2) the execution of a settlement agreement with Paltar, and (3) the surrender all of Nation Energy's and Nation Australia's rights to Paltar”; Hislop and Siegel objected. Id. at ¶16. Plaintiffs alleged that defendants concealed from the dissenters the pending deal between Paltar and Fortem, which created a conflict of interest. Id.

         Mssrs. Caetano and Madzej then voted as Nation Australia directors to approve the settlement with Paltar along with the surrender and cancellation of the earning agreements. Id. at ¶17. They executed both settlements and cancellations causing Nation Energy irreparable harm. Id. at ¶18.

         Plaintiffs brought this lawsuit to redress alleged fraud and racketeering, breaches of fiduciary duties, and wrongful conduct that cost Nation Energy to lose valuable assets. Id. at ¶1. Plaintiffs allege six claims for relief: (1) breach of fiduciary duty against Paltar; (2) breach of fiduciary duty and violation of Wyoming Business Corporations Act against the director defendants; (3) aiding and abetting breach of fiduciary duty against Mr. Bruner; (4) fraudulent concealment against Mssrs. Paltar, Bruner, Lotito, and Causbrook; (5) civil RICO claims against all defendants; and (6) violation of Colorado's Organized Crime Control Act against all defendants.


         A district court has authority to dismiss a case on forum non conveniens grounds without first determining if it has personal jurisdiction over the defendants. Archangel Diamond Corp. Liquidating Tr. v. Lukoil, 812 F.3d 799, 803-04 (10th Cir. 2016) (citing Sinochem Int'l Co. Ltd. v. Malaysia Int'l Shipping Corp., 549 U.S. 422, 425 (2007) (“[A] court need not resolve whether it has authority to adjudicate the cause (subject-matter jurisdiction) or personal jurisdiction over the defendant if it determines that, in any event, a foreign tribunal is plainly the more suitable arbiter of the merits of the case.”)). In this case, I assume without deciding that plaintiffs have met their burden of showing personal jurisdiction under Rule 12(b)(2) because I conclude that the motions to dismiss are more appropriate for resolution under the doctrine of forum non conveniens.

         Under the doctrine of forum non conveniens, a court “may, in the exercise of its sound discretion, dismiss the case, even if jurisdiction and proper venue are established.” Yavuz v. 61 MM, Ltd., 576 F.3d 1166, 1172 (10th Cir. 2009) (quoting Am. Dredging Co. v. Miller, 510 U.S. 443, 447 (1994) (internal quotation marks omitted)). “The burden is on the moving party to establish the need for a forum non conveniens transfer . . . .” Rivendell Forest Prod., Ltd. v. Canadian Pac. Ltd., 2 F.3d 990, 993 (10th Cir. 1993). The moving party typically must overcome the “strong presumption in favor of hearing the case in the plaintiff's chosen forum . . . .” Yavuz, 576 F.3d at 1172 (quoting Gschwind v. Cessna Aircraft Co., 161 F.3d 602, 606 (10th Cir. 1998)). “A foreign plaintiff's choice of forum, however, warrants less deference.” Gschwind, 161 F.3d at 606.

         There are two threshold inquires that must be met before a court may transfer a case to a foreign country under the doctrine. Id. First, there must be an adequate and available alternative forum. Archangel Diamond Corp. Liquidating Tr. v. Lukoil, 812 F.3d 799, 804 (10th Cir. 2016). The first requirement is typically met when all defendants consent to the jurisdiction of the foreign court. Gschwind, 161 F.3d at 606. Second, foreign law must be applicable. Id. To answer this step, the district court must apply the applicable conflict of law principles. Archangel, 812 F.3d at 804. If there are some claims governed by foreign law and others governed by domestic law, the court must determine which claims predominate. Id. (holding that even when a plaintiff asserts a RICO claim governed by U.S. law, dismissal under forum non conveniens was appropriate because Russian law applied to the vast majority of the underlying disputes).

         If both threshold requirements are satisfied, the district court goes on to weigh private and public interest factors to determine whether to dismiss the case. Id. The private interest factors include:

(1) the relative ease of access to sources of proof; (2) availability of compulsory process for compelling attendance of witnesses; (3) cost of obtaining attendance of willing non-party witnesses; (4) possibility of a view of the premises, if appropriate; and (5) all other practical problems that make trial of the case easy, expeditious and inexpensive.

Gschwind, 161 F.3d at 606. For the public interest factors, courts weigh the following:

(1) administrative difficulties of courts with congested dockets which can be caused by cases not being filed at their place of origin; (2) the burden of jury duty on members of a community with no connection to the litigation; (3) the local interest in having localized controversies decided at home; and (4) the appropriateness of having diversity cases tried in a forum that is familiar with the governing law.

Id. Although the burden remains with the defendant as the moving party, the burden of pleading the private and public interest factors is lighter when dealing with a foreign plaintiff. Gschwind, 161 F.3d at 606.

         III. ...

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