Am. Gen. Life Ins. Co. v. Pareto Sec.

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AMERICAN GENERAL LIFE INSURANCE CO., et al., Plaintiffs, v. PARETO SECURITIES, INC., et al., Defendants.

Civil Action No. H-23-4492

United States District Court, S.D. Texas, Houston Division

June 12, 2024

MEMORANDUM AND ORDER

LEE H ROSENTHAL UNITED STATES DISTRICT JUDGE

The plaintiffs, American General Life Insurance Company and The Variable Annuity Life Insurance Company (together, the “Insurance Companies”) are regulated annuity and life insurance companies based in Houston, Texas. (Docket Entry No. 1 at ¶ 14). The Insurance Companies offer life insurance products to customers throughout the United States and internationally. The Insurance Companies invest premiums into various investment vehicles to generate revenues which are used to pay life insurance claims. (Id.)

The defendants are Pareto Securities AS (“Pareto AS”) and Pareto Securities, Inc. (together, “Pareto”). Pareto AS is a global investment bank organized and headquartered in Norway, specializing in maritime and aquaculture industries. (Id. at ¶ 18). Pareto Inc. is incorporated in Delaware and has its principal place of business in New York, as well as an office in Houston Texas. (Id. at ¶ 19). Pareto Inc. is a wholly owned subsidiary of Pareto AS. (Id.)

The Insurance Companies entered into a note purchase agreement in January 2019 to invest $75 million in notes issued by GT USA Wilmington, LLC (“GTW”). The GTW notes were sold to the Insurance Companies by Pareto. (Id. at ¶ 1). The Insurance Companies allege that Pareto was “in regular and frequent communication” with them, but that Pareto “expressly denied [them] access to GTW.” (Id. at ¶ 3). The Insurance Companies allege that although Pareto informed them that GTW would take over all stevedoring operations at a particular port leading to a large increase in revenue, Pareto allegedly failed to inform the Insurance Companies that GTW had repudiated its contract to take over the stevedoring operations at that port before the Insurance Companies invested $75 million in the GTW notes. (Id. at ¶ 5).

At the end of 2019, GTW's first-year revenues were half the projected amounts, and the company had a negative EBIDTA (Earnings Before Interest, Taxes, Depreciation, and Amortization). (Id. at ¶ 7). GTW and Pareto provided the Insurance Companies with reasons for this deficit, including a refinery fire and “geopolitical” delays, but those reasons did not include GTW's contract repudiation. (Id.). GTW defaulted on its debt service ratio covenants under the note purchase agreement in November 2019 and sent a letter informing the Insurance Companies of the default.

In November 2023, the Insurance Companies sued Pareto AS and Pareto Inc. under the Texas Securities Act. Pareto AS moves to dismiss on the basis that the court lacks personal jurisdiction over it. (Docket Entry No. 6). Pareto Inc. moves to dismiss on the basis that the statute of limitations bars this suit. (Docket Entry No. 7). Based on the briefing, hearing, record, and applicable law, the court grants Pareto AS's motion to dismiss and denies Pareto Inc.'s motion to dismiss. The reasons are set out below.

I. The Legal Standards

A. Rule 12(b)(2)

A federal court sitting in diversity may exercise personal jurisdiction over a nonresident defendant if the long-arm statute of the forum state confers personal jurisdiction over that defendant and the exercise of jurisdiction by the forum state is consistent with due process under the United States Constitution. Delgado v. Reef Resort Ltd., 364 F.3d 642, 644 (5th Cir. 2004). The Texas long-arm statute confers jurisdiction to the limits of due process. Stroman Realty, Inc. v. Antt, 528 F.3d 382, 385 (5th Cir. 2008); see Tex. Civ. Prac. & Rem. Code Ann. § 17.041-045; see also Religious Tech. Ctr. v. Liebreich, 339 F.3d 369, 373 (5th Cir. 2003). Due process permits the exercise of personal jurisdiction over a nonresident defendant when that defendant has “minimum contacts” with the forum state and the exercise of jurisdiction over the defendant does not offend “traditional notions of fair play and substantial justice.” Johnston v. Multidata Sys. Int'l Corp., 523 F.3d 602, 609 (5th Cir. 2008) (quoting Wilson, 20 F.3d at 647).

“Minimum contacts” can be established through evidence of “contacts that give rise to ‘specific' personal jurisdiction and those that give rise to ‘general' personal jurisdiction.” Wilson, 20 F.3d at 647. A court may exercise specific jurisdiction when the nonresident defendant's contacts with the forum state arise from, or are directly related to, the cause of action. Gundle Lining Constr. Corp. v. Adams Cty. Asphalt, Inc., 85 F.3d 201, 205 (5th Cir. 1996) (citing Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 n.8 (1984)). To determine specific jurisdiction, a court must “examine the relationship among the defendant, the forum, and the litigation to determine whether maintaining the suit offends traditional notions of fair play and substantial justice.” Id. (citing Shaffer v. Heitner, 433 U.S. 186, 204 (1977)). Even a single contact can support specific jurisdiction if the defendant “purposefully avails itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985) (quoting Hanson v. Denckla, 357 U.S. 235, 253 (1958)). “The non-resident's ‘purposeful availment' must be such that the defendant ‘should reasonably anticipate being haled into court' in the forum state.” Ruston Gas Turbines, Inc. v. Donaldson Co., Inc., 9 F.3d 415, 419 (5th Cir. 1993) (citing World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980)). Specific jurisdiction requires a “sufficient nexus” between the nonresident defendant's contacts forum contacts and at least one of the causes of action. Rittenhouse v. Mabry, 832 F.2d 1380, 1390 (5th Cir. 1987). As part of the minimum-contacts analysis, a court evaluates any contracts, the parties' “actual course of dealing,” and the parties' “prior negotiations and contemplated future consequences.” Burger King, 471 U.S. at 479.

When the cause of action does not arise from or relate to the foreign defendant's purposeful conduct within the forum state, general jurisdiction may apply. Due process requires that the foreign defendant have engaged in continuous and systematic contacts with the forum state before a court may exercise general personal jurisdiction. Helicopteros Nacionales, 466 U.S. at 414-15; Bearry v. Beech Aircraft Corp., 818 F.2d 370, 374 (5th Cir. 1987). The plaintiff must demonstrate contacts of a more extensive quality and nature between the forum state and the nonresident defendant than those needed to support specific jurisdiction. Dalton v. R & W Marine, 897 F.2d 1359, 1362 (5th Cir. 1990). “To exercise general jurisdiction, the court must determine whether ‘the contacts are sufficiently systematic and continuous to support a reasonable exercise of jurisdiction.'” Holt Oil & Gas Corp. v. Harvey, 801 F.2d 773, 777 (5th Cir. 1986) (quoting Stuart, 772 F.2d at 1191).

“[F]ederal courts have consistently acknowledged that it is compatible with due process for a court to exercise personal jurisdiction over an individual or a corporation that would not ordinarily be subject to personal jurisdiction in that court when the individual or corporation is an alter ego or successor of a corporation that would be subject to personal jurisdiction in that court.” Patin v. Thoroughbred Power Boats Inc., 294 F.3d 640, 653 (5th Cir. 2002). “Likewise, when a group of affiliated corporations constitutes a single business enterprise, a court may ‘disregard the concept of corporate separateness and extend liability to each of the affiliated corporations' for the purpose of preventing fraud or achieving equity.” In re Ark-La-Tex Timber Co., Inc., 482 F.3d 319, 335 (5th Cir. 2007) (quoting Brown v. Auto. Cas. Ins. Co., 644 So.2d 723, 727 (La.App. 1st Cir. 1994).

B. Rule 12(b)(6)

Rule 12(b)(6) allows dismissal if a plaintiff fails “to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). Rule 12(b)(6) must be read in conjunction with Rule 8(a), which requires “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). A complaint must contain “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Rule 8 “does not require ‘detailed factual allegations,' but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 555). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). “The plausibility standard is not akin to a ‘probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. (quoting Twombly, 550 U.S. at 556).

To withstand a Rule 12(b)(6) motion, a complaint must include “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Lincoln v. Turner, 874 F.3d 833, 839 (5th Cir. 2017) (quoting Twombly, 550 U.S. at 555). “Nor does a complaint suffice if it tenders ‘naked assertion[s]' devoid of ‘further factual enhancement.'” Iqbal 556 U.S. at 678 (alteration in original) (quoting Twombly, 550 U.S. at 557). “A complaint ‘does not need detailed factual allegations,' but the facts alleged ‘must be enough to raise a right to relief above the speculative level.'” Cicalese v. Univ. of Tex. Med. Branch, 924 F.3d...