Monday, July 9, 2018

Case of the Day: Kasolas v. Yau (In re Fox Ortega Enters.), 2018 Bankr. LEXIS 1415 (Bankr. N.D. Cal. May 11, 2018)


Plaintiff is the trustee overseeing the bankruptcy of Premier Cru, a California business that ostensibly procured rare wines at a discount but in reality operated essentially as a Ponzi scheme. Defendant is a former customer in Hong Kong who made online orders from Premier Cru, and is alleged to have received a fraudulent transfer from the debtor's estate. The defendant sought to dismiss based on lack of personal jurisdiction.

The court denied the motion. The court found that the transaction occurred in California with a Californian company, and the fact that the defendant was never physically present in California was of no import. The court further found that "[t]here is a strong federal interest in hearing bankruptcy matters in the bankruptcy court where the bankruptcy case was filed[,]" especially considering "[t]here are 100 such cases with defendants residing all over the United States and the world."


In the opinion, the court declared: "This is simply not a close case.  . . .  The fact that there is a dearth of case law concerning federal courts exercising personal jurisdiction over non-resident defendants when those defendants were customers who made their purchases online is not vindication for Defendant's argument as he seems to believe." While I believe the court's decision in this case is correct, I am not sure about this strong pronouncement. Probably more correct to say in the peculiar context of bankruptcy (which may be one of the few occasions in which a seller sues a buyer, unlike the much more common scenario of a buyer suing a seller,) simply placing order online is enough to create personal jurisdiction.

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