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LLC v. Trabelsi

United States District Court, D. Massachusetts

August 28, 2017



          Richard G. Stearns UNITED STATES DISTRICT JUDGE

         Defendants C. Parkinson Lloyd, a Utah attorney, and Kirton McConkie, P.C., Lloyd's Utah law firm, jointly move to dismiss this lawsuit brought by B2 Opportunity Fund, LLC. Defendants contend that this court lacks personal jurisdiction. For the following reasons, the court will allow the motion.


         The following facts are taken from the Amended Complaint and an affidavit from Lloyd. Lloyd practices law in Utah. In January of 2013, he began representing a company called Boston Investment and Development Corp. (BIDC), a Nevada corporation headquartered in Massachusetts and led by Nissim Trabelsi, a Massachusetts resident. In December of 2013, Lloyd moved from his previous law firm to Kirton McConkie (KM), also based in Utah. He brought BIDC with him as a client. In February of 2014, BIDC changed its name to Mazzal Holding Corp. Trabelsi continued as the president and CEO of the rechristened company. Invoices for the legal services provided by Lloyd and KM to Mazzal were mailed to either Israel or Massachusetts.

         In the summer of 2015, Trabelsi told Lloyd that he was interested in selling Mazzal. In August of that year, Lloyd spoke with Peter Peterson, the managing member of B2. When Peterson expressed interest in purchasing a publicly traded company, Lloyd mentioned that he had a client who had such a company to sell. On August 18, 2015, Lloyd told Peterson that Mazzal was still on the market and offered to introduce Peterson to Trabelsi. On September 10, 2015, Lloyd emailed Trabelsi and Peterson to make the mutual introduction.

         Lloyd remained involved as Trabelsi and Peterson negotiated several complex transactions. The transaction at issue began to take shape when Peterson contacted Lloyd in mid-November of 2015 to express an interest in purchasing Trabelsi's shares in Mazzal. Lloyd communicated this to Trabelsi. Subsequently, Lloyd drafted and revised a term sheet and provided comments on a letter of intent. To enable Trabelsi to complete some of the terms of the deal, he assisted the filing of Mazzal's 10-Q report for the third quarter of 2015. Lloyd drafted and circulated to the parties a draft stock purchase agreement and an escrow agreement, and then followed up with emails and amended documents, as needed, through the closing of the deal on February 5, 2016.

         The transaction proved ill-fated. The finalized stock purchase agreement (SPA) called for Trabelsi to transfer 45.8 million restricted shares and 9.5 million “free-trading shares” held by a “Shawn Telsi, ” who Trabelsi held out to be his brother-in-law. B2 alleges that Telsi was merely an alias for Trabelsi, and that the alias was instrumental in Trabelsi's alleged fraud: Trabelsi transferred 9.5 million of the 45.8 million restricted shares into Telsi's name, and then transferred those shares to B2, while representing them as the free-trading shares. Trabelsi afterwards sold a substantial number of the free-trading shares in the open market.

         The parties to the SPA - B2, Mazzal, and Trabelsi/Telsi- also entered into an escrow agreement appointing KM (and, by extension, Lloyd) as the escrow agent for the transaction. In that capacity, KM held $315, 000 in a Utah escrow account. The funds were to be released to Trabelsi after KM either received all of the shares covered by the agreement or was “informed by VStock Transfer, LLC, [Mazzal]'s Transfer Agent . . . that the [shares] have been returned to the Transfer Agent for transfer to the Buyer.” In response to an email from Lloyd, a VStock representative reported on February 8, 2016 that “it appears we have all necessary paperwork to process” the stock transaction. Lloyd and KM transferred the escrow funds to Trabelsi the same day. B2 alleges that VStock never possessed the requisite documents, and that Lloyd and KM failed to take steps to confirm that Trabelsi had provided the correct type of shares and accompanying documentation to VStock. This failure, B2 says, amounted to a breach of the escrow agreement, breach of fiduciary duty, and gross negligence to boot. In addition, B2 contends that Lloyd and KM effectively represented both sides to the SPA.[1]

         Lloyd and KM moved to dismiss, asserting that this court lacks personal jurisdiction. Shortly thereafter, B2 filed its Amended Complaint as of right, and Lloyd and KM responded by again moving to dismiss for lack of personal jurisdiction. See Fed. R. Civ. P. 12(b)(2).


         The parties open with a skirmish about the relationship between the SPA and the escrow agreement. B2 asserts that Lloyd and KM are bound by the SPA's choice of forum and its recital of a consent to jurisdiction in Massachusetts. B2 points out that the SPA specifically provides that “[e]ach party . . . consents to the personal jurisdiction of any state or federal court located in Suffolk County, Massachusetts . . . in any proceeding arising out of or relating to any transaction document.” Dkt 77-2, ¶ 6.6. The opening paragraph of the SPA defines “parties” and “party” as including Nissim Trabelsi, Shawn Telsi, the Mazzal Trust, and B2. Id. at 1. The problem posed by this definition for B2 is obvious: although the SPA provides that each “party” to the SPA consents to jurisdiction in Massachusetts, the term “party” does not include Lloyd or KM. The escrow agreement, which is unquestionably binding on Lloyd and KM, contains no consent to jurisdiction.

         B2 attempts to overcome this hurdle by arguing that the escrow agreement and SPA must be read as an integrated whole, and that Lloyd and KM are thus bound by the SPA's consent to jurisdiction provision. As the escrow agreement specifies Utah as the choice of law, and B2 does not contest its validity or applicability, the court will apply Utah law.[2] See Oahn Nguyen Chung v., Inc., 854 F.3d 97, 101 (1st Cir. 2017).

         Under Utah law, the interpretation of the terms of a contract is a question of law. McNeil Eng'g & Land Surveying, LLC v. Bennett, 268 P.3d 854, 857 (Utah Ct. App. 2011). The court must “look[] to the contract's four corners to determine the parties' intentions, which are controlling.” Bakowski v. Mtn. States Steel, Inc., 52 P.3d 1179, 1184 (Utah 2002). In ascertaining intent, as B2 argues, two agreements “executed substantially contemporaneously and . . . clearly interrelated . . . must be construed as a whole and harmonized.” Atlas Corp. v. Clovis Nat'l Bank, 737 P.2d 225, 229 (Utah 1987). This interpretive principle has force where, as here, it would be nonsensical to give identical terms in the SPA and the escrow agreement - such as “Trabelsi Shares” or “Telsi Shares” - different meanings. But in most circumstances this aphorism is an interpretive principle, not a rule altering the contractual obligations of non-parties. See, e.g., Paracor Fin., Inc. v. Gen. Elec. Capital Corp., 96 F.3d 1151, 1165 (9th Cir. 1996). It is therefore unsurprising that B2 points to no Utah case in which this rule has been invoked to hold a party to one agreement to the terms of a second agreement to which it is not a party. Instead, Utah cases import terms from one agreement into a separate agreement where both parties have signed the relevant agreements, see, e.g., Shields v. Harris, 934 P.2d 653, 657 (Utah Ct. App. 1997), or where a “clear and unequivocal” incorporation by reference has occurred, Consol. Realty Grp. v. Sizzling Platter, Inc., 930 P.2d 268, 273 (Utah Ct. App. 1996) (quoting Interwest Constr. v. Palmer, 886 P.2d 92, 97 n.8 (Utah Ct. App. 1994)). No incorporation of the jurisdictional provision with the “degree of specificity” required by Utah law, Hous. Auth. of Cty. of Salt Lake v. Snyder, 44 P.3d 724, 729 (Utah 2002), occurred here.[3]

         B2 musters one additional argument in an effort to apply the terms of the SPA to Lloyd and KM. It points to the SPA's specification that “[e]ach party” waives any objections to venue or forum non conveniens and “agrees not to initiate any proceeding arising out of or relating to any transaction document (unless otherwise stated to the contrary in any transaction document) in any other court or forum.” Dkt 77-2 ¶ 6.6. The term “transaction document” is likewise defined: “[A]ny other required documents or agreements . . . to which [either Trabelsi or Telsi] is a party.” Id. ¶ 2.1. These provisions, B2 contends, bar it from bringing suit against Lloyd and KM in any other forum, as its claims “aris[e] out of or relat[e] to” the escrow agreement, a “transaction document.” Once again, however, the provisions B2 identifies embody the agreement of “[e]ach party” to the SPA. Id. ¶ 6.6. Lloyd and KM are not parties to the SPA, either colloquially or in the manner in which the SPA defines that term. Consequently, the prohibition against suits in other fora does not bar B2 from suing Lloyd and KM elsewhere. Even if the provision were read (illogically) to apply to suits against nonparties, Lloyd and KM would lack standing to enforce it.[4]See Cumis Ins. Soc., Inc. v. BJ's Wholesale Club, Inc., 455 Mass. 458, 464 (2009) (‚ÄúThat the plaintiffs derive a benefit from a contract between others does not make them ...

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