Case of the Day: Korea Trade Ins. Corp. v. ActiveON, Inc., 2018 U.S. Dist. LEXIS 39283 (S.D. Cal. Mar. 9, 2018)

Summary:

Plaintiff is trade insurance company backed by the Korean government, with a branch office in Los Angeles. Defendants are a set of affiliated Delaware corporations and their officers and directs. Plaintiff alleged that the defendants fraudulently induced the plaintiff to provide insurance to certain Korean banks, which in turn provided financing to the defendants. When the defendants did not repay the loans to the banks, the plaintiff was forced to pay out the insurance. The plaintiff alleged RICO violation, fraud and misrepresentation.

The court dismissed the RICO claim, citing RJR Nabisco, Inc. v. European Cmty., 136 S. Ct. 2090 (2016) and noting that the damage occurred in Korea where the plaintiff paid the banks pursuant to the insurance policies. Then the court dismissed the fraud and misrepresentation claim because the federal law claims were dismissed and there was no longer any basis to exercise pendant jurisdiction.

Takeaway:

This appears to be the correct reading of RJR Nabisco, which is another important case that further pulled back the U.S. court's extraterritorial reach. But it is a bit strange why the plaintiff's attorneys did not allege the obvious alternative basis of jurisdiction for the fraud claim: diversity jurisdiction.