Appeal from the United States District Court for the Northern District of California. Jeffrey S. White, District Judge, Presiding. D.C. No. 3:02-CV-05971-JSW.
The opinion of the court was delivered by: Wallace, Senior Circuit Judge
Argued and Submitted October 8, 2009 -- San Francisco, California.
Before: J. Clifford Wallace, David R. Thompson and Sidney R. Thomas, Circuit Judges.
Plaintiffs-appellants Boston Telecommunications Group, Inc. (BTG) and Roderick Marshall (collectively, Marshall) appeal from the judgment of dismissal of claims against defendant-appellee Robert Wood arising out of an allegedly fraudulent business venture. The district court dismissed the action on forum non conveniens grounds. We have jurisdiction over Marshall's appeal pursuant to 28 U.S.C. § 1291, and we reverse.
The following are facts as alleged in Marshall's first amended complaint, except where otherwise stated. In late 1995 and early 1996, Marshall, a United States citizen, was living and working in Bratislava, Slovakia, providing legal services to various Slovak entities. During much of this time, he shared office space with Deloitte & Touche Slovakia, s.r.o. (Deloitte Slovakia), an entity providing consulting, auditing and other professional services. Marshall became acquainted with another American citizen, Robert Wood, who was then managing partner of Deloitte Slovakia.
Around April 1996, Wood began soliciting Marshall to invest in a business venture being pursued by a Deloitte Slovakia client, Global Cable Systems, Inc. (GCS), a Canadian company. Wood told Marshall that GCS was planning to acquire two Bulgarian cable television companies (the Bulgarian Venture), but needed funds to consummate the purchases. Wood further represented that GCS had signed a joint venture agreement (the Joint Venture) with a handful of other companies (United & Phillips Communications BV, itself a joint venture between an American company and a subsidiary of a Dutch company; Tevel Israel International Communications, Ltd., an Israeli corporation; and Bezeq Israel Telecommunications Company, Ltd., another Israeli company) pursuant to which those companies would pay GCS for the Bulgarian cable television companies.
Wood told Marshall that Deloitte Slovakia was assisting GCS with certain tasks related to the acquisition, but that financing for GCS's purchase of the Bulgarian cable television companies had fallen through and without a replacement investor, Wood might lose his job. Wood told Marshall that if Marshall invested $250,000 in the Bulgarian Venture, Deloitte Slovakia would give Marshall business referrals, offer Marshall future partnership in Deloitte Slovakia, guarantee the value of the Bulgarian Venture, and loan Marshall the amount of his investment. Wood provided various documents related to the Bulgarian Venture, including a valuation report prepared for GCS by Deloitte Slovakia (the Deloitte Valuation) and a copy of the signed Joint Venture agreement.
Initial discussions between Wood and Marshall apparently took place in Slovakia, and another meeting was held in Israel, attended by Wood, Marshall, GCS's chief executive officer George Mainas, and others, to discuss certain aspects of the proposed transactions. On Mainas's invitation, Marshall and Wood traveled to Vancouver and San Francisco to negotiate Marshall's investment. Mainas lived and worked in the San Francisco area and GCS was based in Vancouver. In opposition to Wood's renewed motion to dismiss on grounds of forum non conveniens, Marshall alleged that GCS was operated, in substantial part, from Mainas's offices in California. At these meetings in June 1996, Wood "reiterated" his previous representations, and in reliance on these and other representations, Marshall agreed to invest $250,000. In order to carry out the contemplated transactions, Marshall formed plaintiff BTG, which would enter into a partnership (the Partnership) with a subsidiary of GCS.
Upon their return to Slovakia, Marshall and Wood arranged for financing, through a Slovakian bank, of Marshall's $250,000 investment. During the Summer of 1996, Marshall and Avraham Zimmerman, a shareholder of GCS, engaged in various negotiations on behalf of the Partnership for the purchase of the Bulgarian cable television companies. By late August 1996, Marshall believed that the Partnership agreement had been finalized, that one of the target Bulgarian cable television companies had been purchased, and that an agreement had been reached with the seller as to the other one.
In September 1996, at Mainas's invitation, Marshall returned to Vancouver for a GCS meeting. Mainas asked Marshall for an additional investment, allegedly because the Bulgarian Venture was undervalued and it would appear to GCS shareholders that Mainas had sold half of GCS's business opportunity to Marshall at a fraction of its value. Mainas, Wood, Marshall and Zimmerman then traveled to San Francisco and, over the course of about three days, negotiated an arrangement pursuant to which BTG would invest an additional $250,000 in the Partnership. During these negotiations, Wood repeated many of the same representations he had already made. Based on those representations, Marshall agreed to invest the additional funds, and subsequently obtained financing for that investment through the same Slovakian bank.
By July 1997, however, Marshall learned that Mainas, GCS and its subsidiary had not taken certain necessary steps to complete the purchases of the two Bulgarian cable television companies. Marshall threatened litigation against GCS, but Wood continued, throughout the rest of 1997 and early 1998, to reassure Marshall that the necessary steps would be taken and that in any event, Marshall's investment was protected because Deloitte Slovakia had guaranteed it. In the Spring of 1999, Wood was transferred to a job in Yugoslavia with a different Deloitte entity, but the parties continued to communicate by telephone. Wood also continued to represent that he and Deloitte Slovakia were working toward completing the Bulgarian Venture. In reliance on Wood's representations, Marshall did not sue GCS.
In 2000, Wood returned to Deloitte Slovakia. Wood's subsequent conduct led Marshall to believe that Wood was trying to intimidate him, so that he would not seek to enforce Deloitte Slovakia's guarantee of his investment or investigate the matter further. By the end of 2002, Marshall obtained information that caused him to conclude that Wood had knowingly or recklessly made a number of fundamental fac- tual misrepresentations, including: that some of the documentation Marshall had received in connection with his investment was fraudulent; that the Joint Venture had been dissolved long before Wood convinced Marshall to invest; that the Joint Venture agreement contained a forged signature or had been terminated at the time Wood convinced Marshall to invest; that Wood, Mainas and others had acted to deceive Marshall for their own benefit; and that Deloitte Slovakia had never intended to guarantee Marshall's investment.
In December 2002, Marshall filed an action in the Northern District of California against Wood, Mainas, GCS (under the name "Consolidated Global Cable Systems, Inc."), and "Deloitte Touche Tohmatsu," which he characterized as a Swiss Verein with a United States headquarters and operations in approximately 90 countries, including Slovakia, through its "affiliate and agent" Deloitte Slovakia. The complaint was amended in March 2003 to add Deloitte Slovakia and a handful of other Deloitte-related entities as defendants.
The defendants moved to dismiss the complaint on several grounds. Wood moved for dismissal pursuant to Federal Rule of Civil Procedure 12(b)(5), arguing that he had not been served properly. The Deloitte entities moved to dismiss for lack of personal jurisdiction, and Wood later attempted to "join" those motions. Mainas and GCS moved to dismiss on the grounds that there was a mandatory arbitration clause in the ...