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Tricarichi v. Cooperatieve Rabobank, U.A.

Supreme Court of Nevada

May 2, 2019

MICHAEL A. TRICARICHI, Appellant,
v.
COOPERATIEVE RABOBANK, U.A.; UTRECHT-AMERICA FINANCE CO.; AND SEYFARTH SHAW LLP, Respondents.

          Appeal from district court orders, certified as final pursuant to NRCP 54(b), dismissing tort claims for lack of personal jurisdiction. Eighth Judicial District Court, Clark County; Joseph Hardy, Jr., Judge.

          Hutchison & Steffen, LLC, and Michael K. Wall, Mark A. Hutchison, and Todd W. Prall, Las Vegas; Sperling & Slater and Thomas D. Brooks and Scott F. Hessell, Chicago, Illinois, for Appellant.

          Lewis Roca Rothgerber Christie LLP and Dan R. Waite, Las Vegas; Hughes Hubbard & Reed LLP and Chris Paparella, New York, New York, for Respondents Cooperatieve Rabobank, U.A., and Utrecht-America Finance Co.

          Morris Law Group and Steve L. Morris, Akke Levin, and Ryan M. Lower, Las Vegas, for Respondent Seyfarth Shaw LLP.

          BEFORE HARDESTY, STIGLICH and SILVER, JJ.

          OPINION

          SILVER, J.

         In this appeal, we address specific personal jurisdiction and whether to adopt the conspiracy-based theory of personal jurisdiction. In the underlying case, Michael Tricarichi sued respondents for luring him into an intermediary or "Midco" tax shelter scheme that left him liable as a transferee for a $21.2 million federal tax deficiency and penalty. The district court dismissed Tricarichi's fraud, conspiracy, and racketeering claims for lack of personal jurisdiction over respondents, and concluded that Walden v. Fiore, 571 U.S. 277 (2014), overruled Davis v. Eighth Judicial District Court, 97 Nev. 332, 629 P.2d 1209 (1981), to the extent Davis supported a conspiracy-based theory of personal jurisdiction.

         First, as to specific personal jurisdiction, we conclude that neither sufficient minimum contacts nor conspiratorial acts targeted at Tricarichi support jurisdiction in Nevada. Tricarichi did not identify a link between the acts or conduct underlying his tort claims and Nevada, and because Tricarichi's injury does not connect respondents' actions to Nevada in a jurisdictionally significant way, the district court correctly determined that respondents lacked minimal contacts with Nevada to satisfy due process and support personal jurisdiction. Second, we clarify that Walden did not overrule Davis and that Nevada's long-arm statute encompasses a conspiracy-based theory of personal jurisdiction, which we adopt herein as a basis on which specific jurisdiction may lie. However, we conclude Tricarichi fails to establish personal jurisdiction under that theory because the complaint does not allege conspiratorial acts sufficient to establish the requisite minimum contacts with Nevada. We therefore affirm the district court's orders.

         FACTS AND PROCEDURAL HISTORY

         Appellant Michael Tricarichi was the president and sole shareholder of Westside Cellular, Inc., an Ohio C corporation. Relevant here, when Westside dissolved, it realized roughly $40 million from a settlement agreement in a civil lawsuit. Under the C corporate tax structure, Westside's proceeds were taxable both to Westside at the corporate level and, after distribution, to Tricarichi at the shareholder level.

         Fortrend International, LLC, a now defunct San Francisco-based "Midco" promoter, proposed Tricarichi engage in an intermediary transaction tax shelter known as a "Midco transaction" in order to avoid double taxation. Midco transactions are structured to provide the seller with the benefits of a stock sale and the buyer with the benefits of the asset purchase while avoiding the gain tax liability by claiming certain tax attributes-such as losses-that would allow the party to absorb the liability were the tax attributes legitimate. Salus Mundi Found, v. C.I.R., 776 F.3d 1010, 1013 (9th Cir. 2014). In 2001, the IRS determined that Midco transactions were improper tax avoidance schemes, for which fictional losses would be disallowed and corporate tax liability assessed. See Tricarichi v. C.I.R., 110 T.C.M. (CCH) 370 (T.C. 2015). Thus, if the IRS determines that the attributes of the Midco are artificial, the tax liability created by the built-in gain on the sold assets remains due. Salus Mundi Found., 776 F.3d at 1013.

         Fortrend began negotiating with Tricarichi around March 2003 for the purchase of Tricarichi's Westside stock. At that time, Tricarichi resided in Ohio, but moved to Nevada in May 2003. In July 2003, Fortrend's affiliate intermediary, Nob Hill, Inc., sent Tricarichi a letter of intent to purchase his Westside stock. In August 2003, Fortrend contacted respondent Cooperatieve Rabobank, U.A., to request a short-term loan to Nob Hill to finance the Westside stock purchase. Westside would then repay the loan once the stock purchased closed. Rabobank, which is organized under Dutch law and has its principle place of business in the Netherlands, also has principal branches in Utrecht, Netherlands, and New York, New York. To facilitate the funds transfer, Westside opened an escrow account with Rabobank. The account documents list Tricarichi's Nevada address.[1]

         On September 9, 2003, Tricarichi sold all of his Westside stock to Nob Hill for $34.6 million. Rabobank's wholly owned subsidiary, respondent Utrecht-America Finance Co., a Delaware corporation with its principal place of business in New York, New York, thereafter made a short-term loan to Nob Hill in New York for $2.9 million for the purchase of Westside.[2] Nob Hill then transferred those proceeds, along with the remainder of the purchase price, from its Rabobank account to Tricarichi's Rabobank account. Tricarichi thereafter transferred the funds to another bank account he controlled in New York. Nob Hill repaid Utrecht the $2.9 million with Westside's funds, and Rabobank received a $150, 000 fee from Nob Hill. Nob Hill thereby acquired Tricarichi's Westside stock.

         Tricarichi resigned from Westside. Nob Hill represented to Tricarichi that Westside's tax liability for 2003 would be satisfied and further agreed to indemnify Tricarichi against Westside's tax liability. Nob Hill also warranted that it did not intend to cause Westside to engage in an IRS reportable transaction.

         Consistent with the way Midco transactions operate, Nob Hill quickly merged into Westside. At that point, roughly $5.2 million remained in Westside's account. According to Tricarichi, Fortrend transferred the funds to its affiliates over the next few months rather than using those funds to facilitate Nob Hill's debt-collection business.

         After Nob Hill purchased Westside's stock, Nob Hill's sole shareholder, Millennium Recovery Fund, LLC, [3] contributed a portion of debt to Westside with a purported tax basis of about $43 million. Westside then wrote off the debt as uncollectable and used it to claim a bad debt tax deduction of roughly $42.5 million, thereby offsetting the settlement income and claiming it had no income tax liability for 2003. Similarly, Millennium previously planned to acquire a distressed Japanese debt for $137, 000 and claim a $314 million basis for it. In that case, [4] respondent Seyfarth Shaw LLP, a Chicago, Illinois, law firm, advised Nob Hill's president, John McNabola, that this high tax basis was appropriate.[5] Seyfarth has offices in ten United States locations but none in Nevada and is not registered to do business in Nevada. None of Seyfarth's attorneys have practiced in Nevada in connection with any matter involving Tricarichi.

         The IRS audited Westside's 2003 tax return and disallowed roughly $42.5 million in bad debt deductions and over $1.65 million claimed deductions for legal and professional fees. Westside did not pay the resulting tax deficiency of $15, 186, 570 and penalties of $6, 012, 777, as it had no assets. Thus, the IRS determined that Tricarichi had transferee liability. Tricarichi petitioned for review in the U.S. Tax Court. That court determined that the Westside stock transfer was an improper Midco transaction, Tricarichi had constructive knowledge that Fortrend intended to employ an illegal tax shelter, and Tricarichi was liable for the tax deficiency and penalties plus interest. See Tricarichi v. C.I.R., 110 T.C.M. (CCH) 370 (T.C. 2015).

         Tricarichi filed the underlying complaint against respondents Rabobank, Utrecht, and Seyfarth, asserting claims for aiding and abetting fraud, civil conspiracy, and violation of Nevada's racketeering statute (NRS 207.400(1)). Tricarichi also asserted a claim for unjust enrichment against Rabobank and Utrecht.[6] Seyfarth, Rabobank, and Utrecht filed motions to dismiss the complaint for lack of personal jurisdiction.

         Relying on Walden v. Fiore,571 U.S. 277 (2014), the district court granted the motions, finding that Tricarichi had not shown conduct by respondents in Nevada or directed at Nevada that would enable the court to exercise personal jurisdiction. The district court also concluded that appellant's reliance on Davis v. Eighth Judicial District Court,97 Nev. 332, 629 P.2d 1209 (1981), for a conspiracy-based theory of personal jurisdiction was misplaced because Walden overruled Davis. And, even though Tricarichi alleged Rabobank and Utrecht knew he was a Nevada resident when they contacted ...


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