First Community Bank, N.A. v. First Tennessee Bank, N.A.

IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
May 14, 2013 Session

FIRST COMMUNITY BANK, N.A. V. FIRST TENNESSEE BANK, N.A.,
ET. AL.

Appeal from the Circuit Court for Knox County
No. 347511 Hon. Wheeler A. Rosenbalm, Judge

No. E2012-01422-COA-R3-CV - Filed August 20, 2013

Plaintiff brought this action against Defendants for fraud, constructive fraud, negligent
misrepresentation, civil conspiracy, unjust enrichment, and violation of the Tennessee
Securities Act, codified at Tennessee Code Annotated section 48-1-101, et seq. The claims
arose out of the purchase of asset-backed securities. Defendants filed motions to dismiss for
failure to state a claim, while Nonresident Defendants also objected to the court’s personal
jurisdiction. The court dismissed the complaint as requested for failure to state a claim and
for lack of personal jurisdiction. Plaintiff appeals. We affirm the dismissal of the complaint
for lack of personal jurisdiction as to Nonresident Defendants but reverse the dismissal of the
complaint for failure to state a claim as to the remaining defendants. We remand for
proceedings consistent with this opinion.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court
Affirmed in Part, Reversed in Part; Case Remanded

J OHN W. M CC LARTY, J., delivered the opinion of the Court, in which T HOMAS R. F RIERSON,
II, J., and D. K ELLY T HOMAS, J R., SP.J.,1 joined.

Lawrence F. Giordano and Linda J. Hamilton Mowles, Knoxville, Tennessee, and Daniel P.
Lynch and William J. Wyrick, Cranberry Township, Pennsylvania, for the appellant, First
Community Bank f/k/a First Community Bank, N.A.

Mark D. Griffin, Lori H. Patterson, and Kristine L. Roberts, Memphis, Tennessee, for the
appellees, First Tennessee Bank, N.A. d/b/a FTN Capital Markets and FTN Financial
Securities Corporation.

1
Judge on the Court of Criminal Appeals sitting by special designation.
Thomas K. Potter, III, and Lauren E. Kilgore, Nashville, Tennessee, for the appellee, Morgan
Keegan & Company, Inc.

H. Frederick Humbracht, Jr., Nashville, Tennessee, and Roger A. Cooper and Jared Gerber,
New York, New York, for the appellee, Bank of America Corporation as successor in interest
to Merrill Lynch, Pierce, Fenner & Smith, Inc.

W. Kyle Carpenter, Knoxville, Tennessee, and Floyd Abrams, Tammy L. Roy, and Philip
V. Tisne, New York, New York, for the appellee, The McGraw-Hill Companies, Inc. d/b/a
Standard & Poor’s Ratings Services.

W. Brantley Phillips, Jr., Nashville Tennessee, and Mark P. Gimbel and Colin P. Watson,
New York, New York, for the appellee, Trapeza Capital Management, LLC.

Dwight E. Tarwater and Taylor A. Williams, Knoxville, Tennessee, and Joshua M. Rubins,
James J. Coster, and David R. Lurie, New York, New York, for the appellee, Moody’s
Investors Services, Inc.

Bernard E. Bernstein, Knoxville, Tennessee, and Martin E. Flumenbaum, Roberta A. Kaplan,
Frank D. D’Angelo, James J. Beha, II, and Jacob H. Hupart, New York, New York, for the
appellee, Fitch, Inc. d/b/a Fitch Ratings.

John A. Lucas and Lane E. McCarty, Knoxville, Tennessee, and Michael T. Reynolds and
Kevin J. Orsini, New York, New York, for the appellees, J.P. Morgan Securities, LLC,
individually and as successor in interest to Bear Stearns & Company, Inc.

John E. Winters and John T. Johnson, Knoxville, Tennessee, Stephen L. Polk and Bryan M.
Ward, Atlanta, Georgia, for the appellee, SunTrust Robinson Humphrey, Inc. f/k/a SunTrust
Capital Markets, Inc.

James A. Holifield, Jr., Knoxville, Tennessee, and Eric R. Levine and Eric P. Heichel, New
York, New York, for the appellee, Keefe, Bruyette & Woods, Inc.

Andrew Colocotronis, Knoxville, Tennessee, and Ripley Hastings, Stephen M. LaRose, and
Danielle M. McLaughlin, Boston, Massachusetts, for the appellees, Preferred Term Securities
X, Inc.; Preferred Term Securities X, Ltd.; Preferred Term Securities XII, Inc.; Preferred
Term Securities XII, Ltd.; Preferred Term Securities XIII, Ltd.; Preferred Term Securities
XIV, Inc.; Preferred Term Securities XIV, Ltd.; Preferred Term Securities XVI, Inc.;
Preferred Term Securities XVI, Ltd.; Preferred Term Securities XXII, Inc.; Preferred Term
Securities XXII, Ltd.; Preferred Term Securities XXII, Inc.; Preferred Term Securities XXIII,
Ltd.; Preferred Term Securities XXVI, Inc.; Preferred Term Securities XXVI, Ltd.; Soloso

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CDO 2007-1, Inc.; Soloso CDO 2007-1, Ltd.; Trapeza CDO XIII, Inc.; and Trapeza CDO
XIII, Ltd.

OPINION

I. BACKGROUND

First Community Bank2 (“Plaintiff”) is a banking and financial services company that
is incorporated in Virginia. Plaintiff has more than 50 financial centers located in various
states, including Virginia, West Virginia, North Carolina, and Tennessee. In 2003, Plaintiff
began investing in asset-backed securities, namely collateralized debt obligations (“CDOs”)
and residential mortgage-backed securities (“RMBSs”). CDOs are an amalgam of different
forms of debt that are pooled together, regrouped into classes (“tranches”), assigned a rating,
and marketed to investors. Ideally, investors who purchase a tranche in a CDO receive a
steady influx of payments and eventually recoup the investment in addition to a profit.

In 2000, FTN Financial Securities Corporation (“FTN”), a wholly owned subsidiary
of First Tennessee Bank, N.A. (“FTB”), along with Keefe, Bruyette & Woods, Inc. (“KBW”)
developed pooled trust preferred CDOs, entitled Preferred Term Securities (“PreTSLs”).
PreTSLs were comprised of portfolios of debt issued by banks, insurance companies, and real
estate investment subsidiaries. FTN and KBW formed entities (“PreTSL Entities”) to serve
as the issuer or co-issuer of the asset-backed securities. From 2003 to 2007, Plaintiff
purchased notes in varying tranches in seven of the PreTSLs formed by FTN and KBW.

In June 2007, Plaintiff purchased notes in the A-3L tranche of a CDO, entitled Soloso
2007-1 (“Soloso”). The next day, Plaintiff purchased additional notes from the same tranche.
Bear Stearns & Company, Inc. (“Bear Stearns”) and SunTrust Robinson Humphrey, Inc.
(“SunTrust”) structured Soloso and created special purpose entities, Soloso CDO 2007-1,
Ltd. and Soloso CDO 2007-1, Inc. (“Soloso Entities”), to serve as issuer and co-issuer of
Soloso. One month later, Plaintiff purchased notes in the D tranche of a CDO, entitled
Trapeza CDO XIII (“Trapeza”). J.P. Morgan Securities, LLC (“JP Morgan”),3 along with
Morgan Keegan & Company, Inc. (“Morgan Keegan”) structured Trapeza and created special
purpose entities, Trapeza CDO XIII, Ltd. and Trapeza CDO XIII, Inc. (“Trapeza Entities”),
to serve as issuer and co-issuer of Trapeza. Trapeza Capital Management, LLC (“TCM”)
served as a collateral manager and assisted in the selection and management of the securities.
Unlike CDOs, RMBSs are securities “backed by a pool of residential mortgage loans”
and grouped into tranches. The recoupment of the purchase price and any profit are

2
Plaintiff is a wholly owned subsidiary of First Community Bancshares, Inc.
3
Formally known as J.P. Morgan Securities, Inc .
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dependent upon the viability of each underlying mortgage’s rates of return and default. On
December 22, 2006, Plaintiff purchased notes in the A-9 tranche of Residential Asset
Securitization Trust 2006-A9CB (“RAST”), which was backed by 2,016 mortgages. The
mortgages were acquired by IndyMac Bank, F.S.B. (“Indy”)4 and marketed by Indy and
Merrill Lynch, Pierce, Fenner & Smith, Inc. (“Merrill Lynch”).

Each sale, whether for a CDO tranche or the RMBS tranche, was conditioned upon
the receipt of a minimum rating by one of three rating organizations, Moody’s Investor
Services, Inc. (“Moody’s”); Fitch, Inc. doing business as Fitch Ratings (“Fitch”); and The
McGraw-Hill Companies, Inc. (“McGraw-Hill”) doing business as Standard & Poor’s
Ratings Services (“S&P”).5 The products were rated as follows:

Product Purchase Price Moody’s Fitch S&P
PreTSL X $10,000,000 A2 A No rating
PreTSL XII $10,000,000 A2 A No rating
PreTSL XII $10,417,695.61 A2 A No rating
PreTSL XIV $9,335,790 A2 A No rating
PreTSL XVI $4,119,326.67 A2 A No rating
PreTSL XXIII $8,180,712.21 A3 A No rating
PreTSL XXII $12,785,606.03 A3 A- No rating
PreTSL XXVI $7,000,000 A3 A- No rating
Trapeza $20,000,000 No rating A- No rating
Soloso $18,400,000 A2 A- No rating
RAST $25,000,000 Aaa No rating AAA

Each product received the required minimum rating. Specifically, the ratings from Moody’s,
Fitch, and S&P (collectively “Rating Agencies”) represented that each security was “upper-
medium grade” and “subject to low credit risk” according to Moody’s, of “high credit
quality” and “low default risk” with a “strong” capacity for repayment according to Fitch,
and of “[e]xtremely strong capacity to meet financial commitments” according to S&P.

4
OneWest Bank, F.S.B. as successor in interest to Indy has since been removed as a party.
5
S&P was not registered as a nationally recognized statistical rating organization until September 2007.
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 In order to finance the transactions, Plaintiff borrowed from other sources by aligning
the repayment terms with the anticipated income of principal and interest from its newly-
purchased investments. In August 2008, Moody’s downgraded the rating for a number of
Plaintiff’s investments. “Beginning in the fourth quarter of 2008, some” of the investments
“began to fail certain coverage tests” and began to “pay in kind, crippling their fair market
value.” Plaintiff eventually sold its CDOs. The following table represents Moody’s revised
ratings and sale price, if applicable:

Product Purchase Price Sale Price Revised Rating
PreTSL X $10,000,000 $1,106,000 Ca
PreTSL XII (both products) $20,417,695.61 $3,262,000 Ca
PreTSL XIV $9,335,790 $1,314,900 Ca
PreTSL XVI $4,119,326.67 $3,000.41 Ca
PreTSL XXII $12,785,606.03 $238,750 Ca
PreTSL XXIII $8,180,712.21 $990,000 C
PreTSL XXVI $7,000,000 $2,499 C
Trapeza $20,000,000 $2,500 Not rated by Moody’s
Soloso $18,400,000 $2,500.56 C
RAST $25,000,000 A2

Plaintiff retained its investment in RAST, despite a significant downgrade in its rating and
breaches in various “coverage tests.” In total, Plaintiff lost approximately $100,000,000 as
a result of the downgrade in the overall value of its CDOs. In order to recover from the
massive loss, Plaintiff cut shareholder dividends, froze salaries, and scaled back plans for
expansion and growth to the detriment of its shareholders, employees, and customers.

On September 15, 2011, Plaintiff filed a 207-page complaint, alleging fraud and
negligent misrepresentation against the Rating Agencies; the PreTSL Entities, the Soloso
Entities, and the Trapeza Entities (collectively “Issuing Entities”); and FTN, KBW, Morgan
Keegan, TCM, SunTrust, Bank of America Corporation (“BOA”) as successor in interest to

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Merrill Lynch,6 and JP Morgan, individually and as successor in interest to Bear Stearns 7
(collectively “Placement Agents”).8 Plaintiff brought claims for violation of the Tennessee
Securities Act (“TSA”) and unjust enrichment against Placement Agents and Issuing Entities.

In general, Plaintiff alleged that Placement Agents and Issuing Entities worked with
Rating Agencies in producing products that appeared marketable and that Rating Agencies
were retained and compensated based upon the rating it provided. Plaintiff claimed that
Placement Agents and Issuing Entities then knowingly provided the misleading rating to
secure the sale of the products.

In support of its claim for fraud, Plaintiff claimed that Placement Agents, Issuing
Entities, and Rating Agencies (collectively “Defendants”) “made materially false and
misleading representations and omissions” relative to the products, the underwriting and
rating process, the adequacy of the credit support and enhancement available, conflicts of
interest with Rating Agencies, and whether Rating Agencies had “sufficiently reliable facts
and sufficiently reliable models on which to assign” ratings. Plaintiff also specifically
alleged that those involved in the PreTSL and Soloso transactions made materially false and
misleading representations concerning the subscription of the products. Plaintiff asserted that
Defendants “made the representations and omissions either knowing of their falsity or with
recklessness as to whether the representations were false,” that its reliance upon the
representations and omissions was reasonable and justifiable, and that it suffered damages
as a result of the “fraudulent conduct, misrepresentations, and omissions.”

In support of its claim for negligent misrepresentation, Plaintiff alleged that Placement
Agents and Issuing Entities “supplied materially false, faulty and misleading information”
in an attempt to guide Plaintiff in its business transactions, that Defendants “failed to exercise
reasonable care in obtaining and communicating the information” concerning the quality of
the notes, that it was foreseeable, reasonable, and justifiable that Plaintiff would rely on the
information, and that Plaintiff suffered damages as a result of its reliance. Plaintiff further
alleged that Rating Agencies also “supplied materially false, faulty and misleading”
information and credit ratings, that Rating Agencies “held special expertise” and “had a duty
to conduct a reasonable investigation of the truthfulness of its representations regarding” the
ratings, that it was foreseeable, reasonable, and justifiable that Plaintiff would rely on the
information, and that Plaintiff suffered damages as a result of its reliance.

6
BOA purchased Merrill Lynch in 2008.
7
JP Morgan purchased Bear Stearns in 2008.
8
Originally, Plaintiff filed claims against S&P for each transaction. All but one of the claims were eventually
dismissed in recognition of the fact that S&P only rated RAST.
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 In support of its TSA claim against Placement Agents and Issuing Entities, Plaintiff
alleged that Placement Agents and Issuing Entities

(a) employed devices, schemes or artifices to defraud; (b) made untrue
statements of material facts or omitted to state material facts necessary in order
to make the statements made, in light of the circumstances under which they
were made, not misleading; or (c) engaged in acts, practices and a course of
business that operated as a fraud or deceit[.]

Plaintiff asserted that it suffered damages as a result of the “false and fraudulent conduct,
misrepresentations, and omissions.”

In support of its claim for unjust enrichment, Plaintiff alleged that it conferred a
benefit upon Placement Agents and Issuing Entities for the purchase of the products and that
they appreciated and accepted the benefit “under such circumstances that it would be
inequitable and unjust” to allow retention of “the benefit without payment of value.”

SunTrust and BOA filed motions to sever. Defendants sought dismissal, alleging that
Plaintiff had failed to state a claim upon which relief could be granted because the claims
were time-barred, because Plaintiff failed to plead its fraud-based claims with particularity,
because Plaintiff failed to identify a material misstatement upon which it reasonably relied,
because the securities were not purchased in Tennessee, and because the losses were caused
by general market conditions. Placement Agents claimed they had not sold the securities or
issued the offering materials. BOA argued that Plaintiff had not pled any facts concerning
successor liability. Rating Agencies asserted that Plaintiff’s claims were preempted by the
Credit Rating Agency Reform Act of 2006 (“the CRARA”) and that the ratings were
protected by the First Amendment to the United States Constitution.

Issuing Entities, Rating Agencies, and TCM (“Nonresident Defendants”) asked the
court to dismiss Plaintiff’s complaint for lack of personal jurisdiction, alleging that Plaintiff
was a Virginia corporation and that Plaintiff’s cause of action did not arise from and was not
related to any activities that occurred in Tennessee. Nonresident Defendants attached
affidavits in support of each motion.

Issuing Entities asserted that each entity was either a Delaware corporation or an
exempted company organized under the laws of the Cayman Islands. Donald Puglisi, Wendy
Ebanks, Carrie Bunton, and Andrew Dean submitted affidavits in support of the motion to
dismiss. Mr. Puglisi, director of each of the nine co-issuer defendants; Ms. Ebanks, director
of Trapeza CDO XIII, Ltd.; Ms. Bunton, director of the seven PreTSL issuer defendants; and
Mr. Dean, director of Soloso CDO 2007-1, Ltd., declared that Issuing Entities did not have
a place of business in Tennessee, did not regularly conduct or solicit business in Tennessee,

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and did not possess any property in Tennessee. They claimed that Issuing Entities had not
“actively participated in selecting the underlying assets, structuring the tranches of notes, or
marketing and selling to investors the notes at issue.”

S&P attached supporting affidavits from M. Scott Mason and Janet R. Sacks. Mr.
Mason asserted that the ratings relevant to this case were “issued out of New York” by
analysts who “were not based out of Tennessee.” Ms. Sacks claimed that McGraw-Hill was
incorporated under the laws of New York and had its principal place of business in New
York. She stated that McGraw-Hill did not maintain a bank account in Tennessee but
conceded that McGraw-Hill was authorized to transact business in Tennessee, had an agent
responsible for receiving service of process in Tennessee, reported $59 million in revenue
derived from Tennessee sales, employed 48 persons in Tennessee, and leased 17,800 square
feet of office space in Tennessee. She claimed that S&P did not have an agent responsible
for receiving service of process, was not authorized to transact business in Tennessee, and
did not employ any personnel in Tennessee.

Fitch, a Delaware corporation with its principal place of business in New York,
attached a supporting affidavit from Melanie Stein, who claimed that Fitch was not registered
to transact business in Tennessee, had no agent for service of process in Tennessee, did not
own or rent real property in Tennessee, and did not possess assets, bank accounts, post office
boxes, offices, or other facilities in Tennessee. She acknowledged that employees
occasionally traveled to Tennessee for business and that it derived 1.1 percent of its United
States income and 0.5 percent of its global income “from rating the securities of issuers based
in Tennessee.” She said that the ratings relevant to this case were not issued in Tennessee.

In support of its motion, Moody’s, a Delaware corporation with its principal place of
business in New York, asserted that there was no basis for general or specific jurisdiction
when it had no presence in Tennessee and did not commit any misconduct in Tennessee.
Moody’s conceded that it might have issued offering materials that could have been
circulated in Tennessee but claimed that it had not purposefully established any potentially
relevant contacts with Tennessee. Moody’s issued a supporting affidavit from William Tice,
a senior tax manager for Moody’s. Mr. Tice claimed that Moody’s

[was] not registered to do business in Tennessee; ha[d] no subsidiary
companies that [were] registered to do business in Tennessee; [did not own or
lease] real property in Tennessee; [did] not pay taxes in Tennessee; ha[d] no
employees or agents in Tennessee; ha[d] no bank accounts in Tennessee; and
ha[d] no post office boxes in Tennessee.

In support of its motion, TCM, a Delaware limited liability company, likewise
asserted that it was neither incorporated nor licensed to do business in Tennessee, had no

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offices or employees in Tennessee, and was not alleged to have engaged in any conduct in
Tennessee. TCM attached a supporting affidavit from Jeffrey Blomstrom, managing director
of TCM. Mr. Blomstrom attested that TCM had offices in New York and Ohio and that its
activities principally took place in those two states. He asserted that TCM did not participate
in the marketing of any of the securities or distribution of offering materials and that its work
was performed pursuant to a collateral management agreement and an indenture agreement,
which did not give TCM reason to believe that it would be subject to suit in Tennessee.

On February 16, 2012, Plaintiff filed a motion for leave to take limited discovery on
the issue of personal jurisdiction and sought to hold oral arguments in abeyance. Plaintiff
filed an amended complaint, along with interrogatories, requests for production of
documents, and notices of deposition. Defendants objected to the discovery requests and
filed renewed motions to dismiss. Nonresident Defendants either filed motions to quash or
requested a protective order to prevent discovery. The rest of the defendants objected to any
discovery that did not pertain to jurisdictional issues and sought timely oral argument on their
respective motions to dismiss.

Plaintiff’s amended complaint, which spanned 260 pages, added claims of civil
conspiracy and constructive fraud against Defendants and a claim of unjust enrichment
against Rating Agencies for the payment received for rating each product. In addition to
pleading jurisdictional facts in support of general and specific jurisdiction over Nonresident
Defendants, Plaintiff alleged that personal jurisdiction was appropriate because of their
“involvement in a civil conspiracy involving Tennessee co-conspirators [that] involved
substantial acts in furtherance of the conspiracy in Tennessee.” Plaintiff alleged that the
products were “sold in Tennessee through conduct occurring in Tennessee.” The offering
materials for the PreTSLs and Trapeza CDO provided that several of the underlying
securities were purchased from entities within Region 2, which included Tennessee.
Likewise, RAST included 13 mortgages from Tennessee and directed investors to surrender
certificates for transfer or exchange at an office in Nashville, Tennessee.

Plaintiff alleged that Defendants were guilty of civil conspiracy because they “omitted
numerous material facts in connection with the issuance, rating, marketing and sale” of each
product “for the purpose of defrauding” Plaintiff and others. Plaintiff relied upon the
“material misrepresentations and omissions made by” those “acting in concert and in
furtherance of the conspiracy” for each product. Plaintiff asserted that Defendants were
guilty of constructive fraud because they “owed a legal and/or equitable duty” to Plaintiff “to
provide accurate and complete information orally and in written communications” but that
each defendant “made the false representations and omissions knowing they were not
accurate or complete.” Relative to the unjust enrichment claim, Plaintiff alleged that it
conferred “an indirect benefit in the amount of the fees paid to [] Rating Agencies out of
[Plaintiff’s] purchase price proceeds” and that Rating Agencies appreciated and accepted the

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benefit under “circumstances that it would be inequitable and unjust for it to retain the benefit
without payment.”

Plaintiff also added general allegations and facts in its amended complaint. Plaintiff
claimed that FTN and KBW repurchased investments from investors and then sold them in
order to create the appearance of short-term profits and secondary market liquidity. Plaintiff
relied upon KBW’s representations of secondary market liquidity in making its purchases.

Plaintiff asserted that Rating Agencies participated in the structuring of the products
and selection of the securities in order to ensure that the products received an “investment
grade” rating. Plaintiff knew of the “issuer pays” model but claimed that it did not know the
extent to which the inherent conflict created misleading and inaccurate ratings. Plaintiff
relied upon the ratings and “believed that [it had paid] to ensure that the Rating Agencies
properly evaluated the investment risk.” Plaintiff retained its interest, in part, “in reliance
upon [] representations that [] Rating Agencies and [TCM] were continuing to evaluate the
underlying securities and would warn them if the risk of default increased.” Plaintiff claimed
that Rating Agencies knew that the modeling and historical assumptions used in rating the
products were inadequate and that they purposefully delayed downgrading the ratings.
Plaintiff asserted that in an effort to confuse investors, Rating Agencies assured the public
that the price collapse “had been caused by lax loan underwriting of which they did not know
and could not have learned when they issued their credit ratings.”

In the renewed motions to dismiss, Defendants asserted anew that Plaintiff failed to
state any claims upon which relief could be granted. Defendants responded to the new
claims of civil conspiracy by asserting that Plaintiff failed to plead sufficient facts
constituting tortious conduct or a relationship that would support a conspiracy claim.
Defendants responded to the new claim of constructive fraud by asserting that Plaintiff failed
to plead sufficient facts demonstrating that they owed Plaintiff a legal or equitable duty, that
they misrepresented or concealed material facts, or that Plaintiff relied upon any alleged
misrepresentations or omissions. Nonresident Defendants also renewed their objections to
personal jurisdiction and asserted that Plaintiff had not sufficiently alleged the existence of
tortious conduct or a relationship that would support Plaintiff’s new claim of conspiracy
jurisdiction. Rating Agencies responded to the new claim of unjust enrichment by asserting
that the claim must be dismissed because Plaintiff failed to allege that it had a sufficiently
direct relationship with Rating Agencies and because Plaintiff failed to allege that Rating
Agencies received a benefit from Plaintiff.

Plaintiff filed briefs in opposition to the motions to dismiss, asserting that dismissal
was inappropriate at this stage of the proceedings. Plaintiff attached affidavits from John C.
Spracher, Alan G. Stahl, and Adam L. Henry in support of the opposition to the motions to
dismiss for lack of personal jurisdiction. Mr. Spracher, senior vice president for Plaintiff,

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attested that he had been tasked with soliciting prospective investments and making purchase
recommendations to Plaintiff’s management committee. He explained that during his tenure
in that position, he had a longstanding working relationship with SunTrust and with FTN
through Eddie Murphey, FTN’s senior vice president. He claimed that Mr. Murphey was
aware of Plaintiff’s investment policies and procedures. He asserted that FTN marketed the
PreTSLs to him at various seminars held in Memphis and in Roanoke, Virginia. He stated,

Based upon the sales pitches on the PreTSL products made by FTN both
primarily at the seminars in Memphis, Tennessee and by phone calls made to
me by Eddie Murphey, I recommended to [Plaintiff’s committee] to purchase
the PreTSL[s.]

He related that he purchased the PreTSLs for Plaintiff through “phone conversations [with]
Eddie Murphey in Tennessee.” After purchasing the PreTSLs, he selected Trapeza and
Soloso for purchase. He asserted that in purchasing Soloso, he corresponded with Anna
White, who was “based in the Memphis, Tennessee office of Bear Stearns” and that he
ultimately purchased Soloso from Bear Stearns through phone conversations with Ms. White
in Tennessee. He further stated that prior to Plaintiff’s purchase of RAST, “Merrill Lynch
made an in-person presentation to [Plaintiff’s] investment management team.”

Mr. Stahl attested that he examined publicly available information and found that in
February 2012, Moody’s issued 11 rating actions for Tennessee governmental bond issuers.
He further stated, in pertinent part, “Moody’s issue[d] credit ratings on approximately 150
Tennessee governmental bond issues annually.” Relative to Fitch, he found that “[f]rom
October 2007 to September 2011, Fitch derived 1.1 [percent] of its United States income and
0.5 [percent] of its global income from rating the securities of issuers based in Tennessee.”
He likewise found that Fitch employees had traveled to Tennessee approximately 48 times
per year from 2007 to 2010 and that “Fitch generated $3,286,000 in revenue in 2010 from
rating the securities of issuers based in Tennessee.” Relative to McGraw-Hill, he found that
“McGraw-Hill, through S&P, ha[d] issued ratings on approximately 550 Tennessee
governmental, quasi-governmental and corporate bond issues.” He also found that McGraw-
Hill maintained an office branch in Memphis.

Mr. Henry related that he examined publicly available information and found that
FTN, KBW, Morgan Keegan, SunTrust, JP Morgan, and Merrill Lynch were registered as
brokers with the Securities and Exchange Commission and with Tennessee. He also found
that Mr. Murphey, who marketed the PreTSLs, and Drew Hearon, who marketed RAST,
were registered brokers in Tennessee. He claimed that the PreTSLs “were to be offered
through solicitations by [FTN] and/or KBW in all fifty states” and that Soloso “was to be
offered through solicitations by Bear Stearns in all fifty states.” Relative to Rating Agencies,
he claimed that Moody’s rated a City of Knoxville debt issuance, Fitch rated a State of

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Tennessee debt issuance, and that McGraw-Hill, while doing business as S&P, maintained
a list of hundreds of Tennessee municipal bonds that it rated.

Following a hearing on the various motions before the trial court, the court stated,

[P]laintiff has furnished some affidavits in response to the [motions to dismiss
for lack of jurisdiction], but the [c]ourt is constrained to conclude that []
Plaintiff has not established such a prima facie case that it should be permitted
at this point to inquire by discovery further about the personal jurisdiction
defense, and so this [c]ourt most respectfully denies that implicit request which
is in [P]laintiff’s motion for a status conference and sustains those motions
filed by defendants for either protective orders or to quash that issue.

The court ultimately held that it did not have personal jurisdiction over Nonresident
Defendants. Applying Tennessee law, the court found that Plaintiff’s claims were time-
barred. In finding that the claims were time-barred, the trial court stated,

[In 2006, Congress] passed comprehensive legislation [concerning rating
agencies]; in 2007[,] there was considerable public notoriety about the role of
rating agencies and whether or not they were laboring under conflicts of
interest and engaged in other wrongdoing; [] the rating agencies in this case
[re-rated or issued downgrades for Plaintiff’s securities]; [in 2007,] the Wall
Street Journal wrote at length about the very problems that are the basis of
[this] lawsuit; and [in July 2008, Congress] released a report . . . that called
attention to all of these problems. And I just really cannot see how anybody
that was in charge of investments at a banking institution could have not been
aware of all of these problems by at least July of 2008.

The trial court ruled that Plaintiff filed suit “more than two years and indeed more than three
years after [Plaintiff] knew or should have known these problems” and that “the pleadings
in this case reveal[ed] that the common-law actions and the statutory action are barred by the
two-year and three-year statute of limitations.” The court also held that any statutory law
claims relating to the 2003 PreTSL transactions were barred by TSA’s five-year statute of
repose. In the event of further appellate review, the court found that Plaintiff failed to plead
its fraud claims with particularity, and that Plaintiff failed to state a claim for negligent
misrepresentation, constructive fraud, and violations of the TSA. The court further found
that the non-fraud claims against Rating Agencies were preempted by the CRARA and that
Plaintiff’s complaint did not support a claim of unjust enrichment. The court declined to rule
on the issue of loss causation. This timely appeal followed.

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 II. ISSUES

We consolidate and restate the issues raised by Plaintiff on appeal as follows:

A. Whether the trial court erred in dismissing the complaint against
Nonresident Defendants for lack of personal jurisdiction.

B. Whether the trial court erred in dismissing the complaint for failure to state
a claim upon which relief could be granted.

C. Whether the trial court erred in holding that the non-fraud claims against
Rating Agencies were preempted by the CRARA.

Rating Agencies also raised an issue on appeal that we consolidate and restate as follows:

D. Whether Plaintiff’s non-fraud claims were barred by the First Amendment
to the United States Constitution.

III. STANDARD OF REVIEW

This appeal presents legal issues. The trial court’s conclusions of law are subject to
a de novo review with no presumption of correctness. Blackburn v. Blackburn, 270 S.W.3d
42, 47 (Tenn. 2008); Union Carbide Corp. v. Huddleston, 854 S.W.2d 87, 91 (Tenn. 1993).

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 IV. DISCUSSION

A.

Plaintiff asserts that the trial court erred in prohibiting discovery and in dismissing the
complaint for lack of personal jurisdiction. Nonresident Defendants respond that the trial
court did not err.

The trial court dismissed the amended complaint for lack of jurisdiction pursuant to
Rule 12.02(2) of the Tennessee Rules of Civil Procedure. A trial court’s decision to dismiss
for lack of personal jurisdiction presents a question of law. Tenn. R. Civ. P. 12.02(2). For
the purpose of determining whether a plaintiff established a prima facie showing of personal
jurisdiction over a defendant, we review the trial court’s decision de novo, with no
presumption of correctness. JRM Invs., Inc. v. Nat’l Standard, LLC, No. W2011-01143-
COA-R3-CV, 2012 WL 1956421, at *2 (May 31, 2012). In reviewing a trial court’s decision
to grant a motion to dismiss for lack of personal jurisdiction, we must take the plaintiff’s
allegations of fact as true. Tenn. R. App. P. 13(d).

When “a defendant supports its motion [to dismiss for lack of jurisdiction] with
affidavits, the plaintiff must establish its prima facie showing of personal jurisdiction over
the defendant by filing its own affidavits or other written evidence.” Gordon, 300 S.W.3d
at 644 (citing Chenault v. Walker, 36 S.W.3d 45, 56 (Tenn. 2001); Mfrs. Consol. Serv., Inc.
v. Rodell, 42 S.W.3d 846, 854-55 (Tenn. Ct. App. 2000)). “Dismissal is proper only if all
the specific facts alleged by the plaintiff collectively fail to establish a prima facie case for
personal jurisdiction.” Id. (citing Rodell, 42 S.W.3d at 855). “A trial court must take as true
all the allegations in the plaintiff’s complaint and supporting papers, if any, and must resolve
all factual disputes in the plaintiff’s favor.” Id. (citing Chenault, 36 S.W.3d at 56; Rodell,
42 S.W.3d at 855). In complex cases, the trial court may allow for jurisdictional discovery,
hold an evidentiary hearing, or hold the motion in abeyance until a trial on the merits has
been completed. See State v. NV Sumatra Tobacco Trading Co., - - - S.W.3d - - -, 2013 WL
1248285, at *10 (Tenn. March 28, 2013) (citing Gordon, 300 S.W.3d at 644).

“The Due Process Clause protects an individual’s liberty interest in not being subject
to the binding judgments of a forum with which he has established no meaningful ‘contacts,
ties, or relations.’” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 471-72 (1985) (quoting
Int’l Shoe Co. v. Washington, 326 U.S. 310, 319 (1945)). Personal jurisdiction over non-
residents is governed by Tennessee’s long-arm statutes, which “derive their scope from the
Tennessee and Federal Constitutions.” Sumatra, 2013 WL 1248285, at *11; see Tenn. Code
Ann. § 20-2-225. Tennessee “adopted the ‘minimum contacts’ test for determining when the
courts of this state may exercise personal jurisdiction over a nonresident defendant.” Rodell,
42 S.W.3d at 855. Personal jurisdiction may only be exercised if the nonresident defendant

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has “certain minimum contacts with [the forum state] such that the maintenance of the suit
does not offend ‘traditional notions of fair play and substantial justice.’” Int’l Shoe, 326 U.S.
at 316 (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)). This two-part test requires
evaluating whether the requisite minimum contacts are present and whether the exercise of
jurisdiction is fair. Burger King, 471 U.S. at 476; Davis Kidd Booksellers, Inc. v. Day-
Impex, Ltd., 832 S.W.2d 572, 575 (Tenn. Ct. App. 1992). In accordance with the two-part
test, Tennessee recognizes the doctrines of general, specific, and conspiracy jurisdiction.
Gordon, 300 S.W.3d at 647; Chenault, 36 S.W.3d at 54-55.

1. General Jurisdiction

Plaintiff asserts that it presented a prima facie showing of the trial court’s general, all-
purpose jurisdiction over Issuing Entities, TCM, and Rating Agencies.9 Nonresident
Defendants respond that Plaintiff cannot establish the applicability of general jurisdiction
because they did not engage in continuous, systematic activity in Tennessee that would
render them “essentially at home” in Tennessee.

General jurisdiction “may be proper even when the cause of action does not arise out
of the defendant’s activities in the forum state.” Sumatra, 2013 WL 1248285, at *15. State
courts “may assert general jurisdiction when the defendant is ‘essentially at home’ in the
state.” Id. at *15 (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct.
2846, 2851 (2011)). “Being essentially at home means that a nonresident defendant’s
contacts with the forum state are ‘sufficiently continuous and systematic’ such that it would
be fair to subject the defendant to suit in the forum state, even when the cause of action arises
elsewhere.” Id. (quoting Goodyear, 131 S. Ct. at 2854). Likewise, the Tennessee Supreme
Court explained in Gordon that

[a]n assertion of general jurisdiction must be predicated on substantial forum-
related activity on the part of the defendant. The nonresident defendant’s
contacts with the forum state must be sufficiently continuous and systematic
to justify asserting jurisdiction over the defendant based on activities that did
not occur in the forum state.

The general jurisdiction inquiry is very different from the specific jurisdiction
inquiry. The United States Court of Appeals for the Fifth Circuit has pointed
out that [u]nlike the specific jurisdiction analysis, which focuses on the cause
of action, the defendant and the forum, a general jurisdiction inquiry is dispute

9
TCM asserts that Plaintiff waived any issues pertaining to the court’s general and specific jurisdiction.
Having reviewed the pertinent documents, we conclude that the issues of general and specific jurisdiction as
they related to TCM were not waived.
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 blind, the sole focus being on whether there are continuous and systematic
contacts between the defendant and the forum. In order to warrant the exercise
of general jurisdiction over a nonresident defendant, the defendant must be
engaged in longstanding business in the forum state, such as marketing or
shipping products, or performing services or maintaining one or more offices
there; activities that are less extensive than that will not qualify for general in
personam jurisdiction.

The proper analysis for determining whether a defendant’s contacts are
continuous and systematic enough to warrant an assertion of general
jurisdiction requires ascertaining whether the continuous corporate operations
within a state [are] so substantial and of such a nature as to justify suit against
it on causes of action arising from dealings entirely distinct from those
activities.

300 S.W.3d at 647-49 (internal citations omitted). In determining whether a nonresident’s
contacts are sufficient, the court must engage in a “careful, non-mechanical evaluation of the
facts with particular focus on the nonresident defendant’s contacts with the forum state.” Id.
(internal citations omitted).

Issuing Entities & TCM

Plaintiff based its claim of general jurisdiction over Issuing Entities and TCM on the
following facts:

Millions of dollars of notes making up the underlying securities underlying the
products were purchased in Tennessee or from Tennessee entities by Issuing
Entities; the products were registered with the SEC and sold in all states,
including Tennessee; Issuing Entities knew Placement Agents were located in
Tennessee and knew that the products would be sold in and from Tennessee;
and TCM actively traded the underlying securities, 17.6 percent of which were
purchased from a region that included Tennessee, in and out of the Trapeza
CDO in concert with J.P. Morgan, Morgan Keegan, and Rating Agencies.

In addition to the transaction-related activity, Plaintiff claimed that Issuing Entities were
formed by Tennessee entities and that Issuing Entities issued the products back to Tennessee
entities.

We acknowledge the alleged originating connection between Issuing Entities and
Tennessee but cannot discount the fact that Issuing Entities were created as special purpose
entities solely to complete the sale and to assist in the return on Plaintiff’s investment.

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Likewise, we cannot discount the fact that TCM’s connection to Tennessee was limited to
the transactions at issue. The contacts at issue in this case were strikingly similar to the
contacts considered by the United States Supreme Court in Helicopteros Nacionales de
Colombia, S.A. v. Hall, 466 U.S. 408 (1984).

In Helicopteros, survivors of United States citizens who died in a helicopter crash in
Peru sought to recover damages from the Colombian corporation that owned the helicopter.
466 U.S. at 409-12. The survivors filed suit in a Texas court, asserting that the court had
general jurisdiction over the corporation because of the corporation’s contacts with Texas.
Id. Notably, the corporation’s contacts with Texas

consisted of sending its chief executive officer to Houston for a contract-
negotiation session; accepting into its New York bank account checks drawn
on a Houston bank; purchasing helicopters, equipment, and training services
from Bell Helicopter for substantial sums; and sending personnel to Bell’s
facilities in Fort Worth for training.

Id. at 416. Despite these contacts, the Court held that the citizens could not maintain their
actions because the corporation’s visits, helicopter purchases, and purchase-linked activity
were insufficient to subject the corporation to general jurisdiction in Texas. Id. at 416-19.

In consideration of the foregoing, we cannot characterize the presence of Issuing
Entities and TCM in the forum state as continuous and systematic. Issuing Entities and TCM
never visited Tennessee, were incorporated elsewhere, and whatever revenue they derived
from debts located in Tennessee paled in comparison to the revenue and purchasing activity
discussed in Helicopteros. Accordingly, we conclude that the facts presented by Plaintiff fall
short of collectively establishing a prima facie showing that the activities at issue in this case
were sufficiently continuous and systematic such that it would be fair to subject Issuing
Entities and TCM to suit in Tennessee even if the cause of action arose elsewhere. We
affirm the trial court’s refusal to permit additional discovery and the ultimate dismissal of the
complaint for lack of general, all-purpose jurisdiction as to Issuing Entities and TCM.

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 Rating Agencies

Plaintiff based its claim of general jurisdiction over Rating Agencies on the following
facts:

The agencies rate Tennessee’s bond debt and the debt of Tennessee
municipalities, governmental authorities, and corporations; the agencies are
global companies that sell and distribute publications in print form and by
computer services to various banks, financial institutions, libraries, and other
corporations in various states, including Tennessee; the agencies sell investor
related reports and publications on a daily basis to Tennessee customers; and
the agencies have been authorized to transact business in Tennessee for
decades.

Specifically, Plaintiff alleged that Moody’s

issued 11 ratings for Tennessee governmental bond issuers in February 2012;
issued credit ratings on approximately 150 Tennessee governmental bonds on
a yearly basis; generated approximately $50,000,000 from activities in
Tennessee on a yearly basis; and rated a Knoxville debt issuance on March 1,
2012.

Plaintiff alleged that Fitch

generated 1.1 percent of its national revenues and .5 percent of its global
revenues from Tennessee transactions; generated $12,100,000 from Tennessee
transactions in 2007; allowed employees to conduct business in Tennessee
approximately 150 times in 3 years; and rated a Tennessee debt issuance in
February 2012.

Plaintiff alleged that S&P,10

annually issued ratings on approximately 330 Tennessee governmental, quasi-
governmental, and corporate bond issues; leased office space in Tennessee;

10
Plaintiff’s suit was filed against McGraw-Hill doing business as S&P. Prior to January 1, 2009, S&P was
simply a unit of McGraw-Hill’s financial services division. Since that time, S&P became S&P’s Financial
Services, LLC, a wholly-owned subsidiary of McGraw-Hill. For purposes of this case, McGraw-Hill does
not allege that S&P should be treated as a wholly-owned subsidiary. See generally Gordon, 300 S.W.3d at
653-54 (addressing the issue of corporate separateness in considering questions of jurisdiction).
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 maintained a custom state share index of Tennessee companies and
investments; and offered Tennessee schools a line of textbooks.11

Plaintiff alleged that McGraw-Hill, through S&P

maintained a list of Tennessee bonds that it rated, issued ratings on
approximately 550 Tennessee governmental, quasi-governmental, and
corporate bond issues; maintained an office in Tennessee; employed 48 people
in Tennessee in December 2011; and generated $59,000,000 in revenue from
Tennessee sales; was authorized to transact business in Tennessee; and
maintained a designated agent for service of process in Tennessee.

The contacts at issue in this case simply did not rise to the level of the contacts
considered by the United States Supreme Court in Perkins v. Benguet Consolidated Mining
Company, 342 U.S. 437 (1952), the leading case on the issue of general, all-purpose
jurisdiction. See Goodyear, 131 S. Ct. at 2856 (stating that Perkins remains the “textbook
case” of general jurisdiction). In Perkins, the non-resident plaintiff sought recovery in Ohio
from the Benguet Consolidated Mining Company, which had ceased operations in the
Philippines during World War II and relocated to Ohio for the purpose of conducting its
business activities. 342 U.S. at 438-39. Notably, the corporation’s contacts with Ohio were
as follows:

[The president of the company] maintained an office [in Ohio] in which he
conducted his personal affairs and did many things on behalf of the company.
He kept there office files of the company. He carried on there correspondence
relating to the business of the company and to its employees. He drew and
distributed there salary checks on behalf of the company, both in his own favor
as president and in favor of two company secretaries who worked there with
him. He used and maintained in Clermont County, Ohio, two active bank
accounts carrying substantial balances of company funds. A bank in Hamilton
County, Ohio, acted as transfer agent for the stock of the company. Several
directors’ meetings were held at his office or home in Clermont County. From
that office he supervised policies dealing with the rehabilitation of the
corporation’s properties in the Philippines and he dispatched funds to cover
purchases of machinery for such rehabilitation. Thus he carried on in Ohio a
continuous and systematic supervision of the necessarily limited wartime
activities of the company. He there discharged his duties as president and
general manager, both during the occupation of the company’s properties by

11
We acknowledge that some of these allegations were countered by S&P’s affidavit; however, we, like the
trial court, were constrained to take Plaintiff’s allegations as true.
-19-
 the Japanese and immediately thereafter. While no mining properties in Ohio
were owned or operated by the company, many of its wartime activities were
directed from Ohio and were being given the personal attention of its president
in that State at the time he was served with summons.

Id. at 447-48. In consideration of the mining company’s extensive contacts with Ohio, the
Court held that the courts in Ohio were free to exercise jurisdiction over the mining
company. Id. at 448-49.

We acknowledge that general, all-purpose jurisdiction may be exercised over a
plaintiff with less than the amount of contacts considered in Perkins. However, “[a]
corporation’s ‘continuous activity of some sorts’ [is simply] ‘not enough to support the
demand that the corporation be amenable to suit unrelated to that activity.”’ Goodyear, 131
S. Ct. at 2856 (quoting Int’l Shoe, 326 at 318). In this case, Rating Agencies marketed their
services to Tennessee, engaged in the rating of debt issuances for Tennessee on a regular
basis, and in some cases, maintained an office in Tennessee for a limited number of
employees. These contacts, while establishing that Rating Agencies engaged in business
with Tennessee, plainly fall short of collectively establishing a prima facie showing that the
activities at issue in this case were sufficiently continuous and systematic such that it would
be fair to subject Rating Agencies to suit in Tennessee even if the cause of action arose
elsewhere. Accordingly, we affirm the trial court’s refusal to permit additional discovery and
the ultimate dismissal of the complaint for lack of general, all-purpose jurisdiction as to
Rating Agencies.

2. Specific Jurisdiction

Plaintiff argues that the trial court erred in dismissing its complaint for lack of
jurisdiction because it presented a prima facie showing of specific, case-linked jurisdiction
in its response to the motions to dismiss. Nonresident Defendants respond that Plaintiff
cannot establish the applicability of specific jurisdiction because they did not perform any
actions in Tennessee.

Citing a footnote in Gordon, Nonresident Defendants also assert that Plaintiff cannot
invoke specific jurisdiction because Plaintiff was a resident of Virginia, not Tennessee. The
referenced footnote provides,

Another plaintiff might have been able to make a plausible claim for
exercising specific personal jurisdiction over Greenview had he or she
demonstrated that Greenview purposely directed its activities toward
Tennessee residents and that the subject matter of the litigation related to those
activities. See Burger King [], 471 U.S. at 472-73 []; Masada Inv. Corp. v.

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 Allen, 697 S.W.2d [332, 334 (Tenn. 1985)]. This avenue was closed to Ms.
Gordon in this case because she is a resident of Kentucky.

Gordon, 300 S.W.3d at 649 n. 12. While the language appears on point, specific jurisdiction
was not at issue in Gordon because the plaintiff conceded that her claim did not arise out of
the defendant’s contacts with Tennessee. Id. Thus, any discussion regarding specific
jurisdiction was mere dicta and was not binding on this court. Rush v. Chattanooga Du Pont
Emps.’ Credit Union, 358 S.W.2d 333, 336 (Tenn. 1962); Staten v. State, 232 S.W.2d 18, 19
(Tenn. 1950). A plaintiff’s contacts with the forum state are generally irrelevant to the
question of personal jurisdiction unless the contacts were “so manifold as to permit
jurisdiction when it would not exist in their absence.” Calder v. Jones, 465 U.S. 783, 788
(1984) (citing Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 779-80 (1984)). However,
the forum must have some interest in adjudicating the dispute. Keeton, 465 U.S. at 776
(upholding jurisdiction over nonresident’s claim against nonresident publisher for publication
of false statements in forum state).

“Specific jurisdiction exists when a defendant has minimum contacts with the forum
state and the cause of action arises out of those contacts.” Sumatra, 2013 WL 1248285, at
*15. The Due Process Clause precludes jurisdiction unless “individuals have ‘fair warning
that a particular activity may subject [them] to the jurisdiction of a foreign sovereign.”’
Burger King, 471 U.S. at 472 (quoting Shaffer v. Heitner, 433 U.S. 186, 218 (1977)).
Requiring fair warning “‘gives a degree of predictability to the legal system that allows
potential defendants to structure their primary conduct with some minimum assurance as to
where that conduct will and will not render them liable to suit.”’ Id. (quoting World-Wide
Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980)). The “requirement is satisfied if
the defendant has purposefully directed his activities at residents of the forum and the
litigation results from alleged injuries that arise out of or relate to those activities.” Id.
(internal citations and quotations omitted).

In instructing courts how to assess a defendant’s minimum contacts with the forum
state, the Tennessee Supreme Court provided,

The first step is the fact-gathering exercise of identifying the relevant contacts.
The plaintiff is required to establish that minimum contacts exist by a
preponderance of the evidence. The court should consider the quantity of the
contacts, their nature and quality, and the source and connection of the cause
of action with those contacts. A defendant’s contacts are sufficiently
meaningful when they demonstrate that the defendant has purposefully
targeted Tennessee to the extent that the defendant should reasonably
anticipate being haled into court here.

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Sumatra, 2013 WL 1248285, at *30. In this case, Plaintiff was merely required to make a
prima facie showing of personal jurisdiction because the court limited evidence to the
affidavits submitted on the issue. See generally Gordon, 300 S.W.3d at 644 (discussing the
standard of review of a Rule 12.02 motion to dismiss).

Plaintiff asserted that Defendants “purposefully established numerous specific points
of contact with Tennessee and [that Plaintiff’s] causes of action arose from [the] activities
[that were] related to Tennessee.” According to Plaintiff, Issuing Entities and Rating
Agencies worked with Tennessee entities in the selection and structuring of the underlying
assets comprised in the various products. TCM actively traded the underlying assets that
included debt derived from Tennessee residents, and Issuing Entities were formed by
Tennessee entities. Plaintiff claimed that the products were sold in various states, including
Tennessee and that the products sold by Issuing Entities and rated by Rating Agencies
included underlying debt derived from Tennessee entities.

In this case, the connection of the structuring, rating, and marketing of the products
to the cause of action could not be greater. Tennessee entities, through Issuing Entities and
TCM, were intricately involved in the marketing and sale of the products. Rating Agencies
also worked with Tennessee entities to rate the products at issue. Despite such a connection,
the contacts at issue were not sufficiently meaningful to support the invocation of specific
jurisdiction. The products in this case were marketed to a sophisticated investor, not
residents of Tennessee or even other Tennessee entities. Defendants in this case targeted
Plaintiff, a banking and financial services company that was not even incorporated in
Tennessee. While Tennessee residents who bank with Plaintiff may encounter residual
effects of Plaintiff’s losses, the record is simply devoid of any evidence that would establish
that Nonresident Defendants “purposefully targeted Tennessee” in this case and “should
reasonably anticipate being haled into court here” for their actions in this case. Accordingly,
we affirm the trial court’s refusal to permit additional discovery and the ultimate dismissal
of the complaint for lack of specific, case-linked jurisdiction as to Nonresident Defendants.

3. Conspiracy Jurisdiction

The Tennessee Supreme Court adopted the doctrine of conspiracy jurisdiction in
Chenault. 36 S.W.3d at 55. The doctrine provides that when,

(1) two or more individuals conspire to do something,

(2) that they could reasonably expect to lead to consequences in a particular
forum, if

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 (3) one co-conspirator commits overt acts in furtherance of the conspiracy, and

(4) those acts are of a type which, if committed by a non-resident, would
subject the non-resident to personal jurisdiction under the long-arm statute of
the forum state,

then those overt acts are attributable to the other co-conspirators, who thus
become subject to personal jurisdiction in the forum, even if they have no
direct contacts with the forum.

Id. at 53 (quotation omitted).

As an initial matter, we must address whether the fourth prong of the test was
satisfied. The fourth prong of the conspiracy jurisdiction test was “designed to meet the
strictures of the ‘minimum contacts’ test.” Id. at 56-57. Tennessee’s adoption of conspiracy
jurisdiction was intended to support the exercise of jurisdiction over defendants who engaged
in a conspiracy to harm Tennessee residents but lacked the requisite minimum contacts to
support personal jurisdiction in Tennessee. When a court upholds a request for conspiracy
jurisdiction, the resident defendant’s actions and contacts with the forum state are imputed
to the nonresident defendant, thereby supporting the exercise of jurisdiction despite a lack
of minimum contacts with the forum state. See id. at 53-54 (“[I]n the abstract we find
nothing explicit or implicit in these constitutional principles that would prohibit the exercise
of jurisdiction based on the imputation of a co-conspirator’s minimum contacts. To the
contrary, we think that the conspiracy theory follows plainly from the very definition of
conspiracy and the meaning of co-conspirator liability: the acts of a conspirator in
furtherance of an illegal agreement with his co-conspirator are attributed to that co-
conspirator.”). In Chenault, the Tennessee Supreme Court imputed a resident’s contacts with
Tennessee to nonresidents, who purposefully targeted a Tennessean in an alleged civil
conspiracy to commit fraud. Id. at 56-58.

In this case, Nonresident Defendants do not lack minimum contacts with Tennessee.
Their contacts were simply not meaningful enough to support the invocation of specific
jurisdiction. Imputing additional contacts to them would not subject them to personal
jurisdiction under the long-arm statute of this state when the record is devoid of evidence that
they “purposefully targeted Tennessee” to the extent that they “should reasonably anticipate
being haled into court here.” As previously stated, the products in this case were marketed
to a sophisticated investor incorporated in Virginia, not residents of Tennessee or even other
Tennessee entities. With these considerations in mind, we affirm the trial court’s refusal to
permit additional discovery and the ultimate dismissal of the complaint for lack of conspiracy
jurisdiction as to Nonresident Defendants. Having concluded that the trial court did not have

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general, specific, or conspiracy jurisdiction over Nonresident Defendants, we further
conclude that the trial court did not err in dismissing the claims against them.

B.

While the trial court lacked jurisdiction over Nonresident Defendants, FTN, KBW,
Morgan Keegan, SunTrust, BOA as successor in interest to Merrill Lynch, and JP Morgan,
individually and as successor in interest to Bear Stearns conceded jurisdiction. The trial
court dismissed the amended complaint against them for failure to state a claim pursuant to
Rule 12.02(6) of the Tennessee Rules of Civil Procedure. A Rule 12.02(6) motion for failure
to state a claim upon which relief can be granted “challenges only the legal sufficiency of the
complaint, not the strength of the proof[;] therefore, matters outside the pleadings should not
be considered in deciding whether to grant the motion.” Trau-Med of Am., Inc. v. Allstate
Ins. Co., 71 S.W.3d 691, 696 (Tenn. 2002).

In dismissing Plaintiff’s complaint, the trial court considered publicly available
reports, newspaper articles, and the offering circulars relating to each transaction at issue.
Rule 12.03 of the Tennessee Rules of Civil Procedure provides,

If, on a motion [to dismiss], matters outside the pleadings are presented to and
not excluded by the court, the motion shall be treated as one for summary
judgment and disposed of as provided in Rules 56, and all parties shall be
given reasonable opportunity to present all material made pertinent to such a
motion by Rule 56.

The Tennessee Supreme Court held this general rule inapplicable when the motion is one
involving jurisdictional issues. See Nicholstone Book Bindery, Inc. v. Chelsea House
Publishers, 621 S.W.2d 560, 561 n. 1 (Tenn. 1981). Such is not the case when the motion
is one involving the insufficiency of the claim. Exceptions to the general rule allow

consideration of matters incorporated by reference or integral to the claim,
items subject to judicial notice, matters of public record, orders, items
appearing in the record of the case, and exhibits attached to the complaint
whose authenticity is unquestioned; these items may be considered by the
district judge without converting the motion into one for summary judgment.

Indiana State Dist. Council of Laborers v. Brukardt, No. M2007-02271-COA-R3-CV, 2009
WL 426237, at *8 (Tenn. Ct. App. Feb. 19, 2009) (quoting Wright and Miller, Federal
Practice and Procedure, Civil § 1357, p. 376 (3d ed. 2004)), perm. app. denied (Tenn. Aug.
24, 2009). The trial court in this case considered and relied upon newspaper articles, which
were not subject to judicial notice. Plaintiff complains on appeal that the materials relied

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upon by the trial court in dismissing its claims as time-barred were not “necessarily
comprehensive or even on point with the issues.” The record was replete with extraneous
information that was presented to the court, was not explicitly excluded from consideration,
and was ultimately referenced in the court’s decision. The motion should have been treated
as one for summary judgment, and the parties should have been given “reasonable
opportunity to present all material made pertinent to such a motion.” Tenn. R. Civ. P. 12.02.

Ordinarily, this court would simply review the dismissal using the standards
applicable to summary judgment. This case presents a “procedural anomaly of sorts”
because “no statement of undisputed material facts” exists for this court’s consideration.
Chambers, 2011 WL 3241836, at *5. Plaintiff was also not given the opportunity to offer
additional proof on the non-jurisdictional issues in the form of affidavits or other discovery
materials, thereby impeding its ability to show that there was a genuine issue for trial
pursuant to Rule 56 of the Tennessee Rules of Civil Procedure. Additionally, this is a case
of extreme complexity that involves numerous defendants and varying claims for relief.
With these considerations in mind, we remand this case to the trial court for purposes of
allowing the parties an opportunity to engage in discovery in accordance with Rule 56 of the
Tennessee Rules of Civil Procedure prior to the trial court’s ruling on the issue. See
generally Int’l Merch. Servs., Inc. v. ATM Cent., LLC, No. W2003-00849-COA-R3-CV,
2004 WL 170392, at *4-5 (Tenn. Ct. App. Jan. 27, 2004) (reversing the trial court’s dismissal
and allowing the parties to engage in limited discovery for purposes of Rule 56).

C.

Plaintiff argues that the trial court erred in holding that its non-fraud claims against
Rating Agencies were preempted by the CRARA. Having concluded that the trial court did
not have jurisdiction over Rating Agencies, this issue is pretermitted.

D.

Citing Sutton v. Stolt-Nielsen Transportation Group, Limited, No. E2008-01033-
COA-R3-CV, 2009 WL 499521, at *3 (Tenn. Ct. App. Feb. 27, 2009), Rating Agencies ask
this court to consider whether Plaintiff’s non-fraud claims were barred by the First
Amendment to the United States Constitution even though the issue was not addressed by
the trial court in the proceedings below. Having concluded that the trial court did not have
jurisdiction over Rating Agencies, this issue is pretermitted.
V. CONCLUSION

The judgment of the trial court is affirmed as to the court’s ruling that it did not have
personal jurisdiction over Moody’s Investor Services, Inc.; Fitch, Inc. doing business as Fitch
Ratings; The McGraw-Hill Companies, Inc. doing business as Standard & Poor’s Ratings

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Services; Trapeza Capital Management, LLC; Preferred Term Securities X, Inc.; Preferred
Term Securities X, Ltd.; Preferred Term Securities XII, Inc.; Preferred Term Securities XII,
Ltd.; Preferred Term Securities XIII, Ltd.; Preferred Term Securities XIV, Inc.; Preferred
Term Securities XIV, Ltd.; Preferred Term Securities XVI, Inc.; Preferred Term Securities
XVI, Ltd.; Preferred Term Securities XXII, Inc.; Preferred Term Securities XXII, Ltd.;
Preferred Term Securities XXII, Inc.; Preferred Term Securities XXIII, Ltd.; Preferred Term
Securities XXVI, Inc.; Preferred Term Securities XXVI, Ltd.; Soloso CDO 2007-1, Inc.;
Soloso CDO 2007-1, Ltd.; Trapeza CDO XIII, Inc.; and Trapeza CDO XIII, Ltd.

The judgment of the trial court is reversed as to the court’s ruling that Plaintiff failed
to state a claim against First Tennessee Bank, N.A. doing business as FTN Capital Markets;
FTN Financial Securities Corporation; Keefe, Bruyette & Woods, Inc.; SunTrust Robinson
Humphrey, Inc. formally known as SunTrust Capital Markets, Inc.; Morgan Keegan &
Company, Inc.; J.P. Morgan Securities, LLC, individually and as successor in interest to Bear
Stearns & Company, Inc.; and Bank of America Corporation as successor in interest to
Merrill Lynch, Pierce, Fenner & Smith, Inc.

The case is remanded for further proceedings consistent with this opinion. Costs of
the appeal are taxed one-half to the appellant, First Community Bank, formally known as
First Community Bank, N.A. and one-half to the appellees, First Tennessee Bank, N.A. doing
business as FTN Capital Markets; FTN Financial Securities Corporation; Keefe, Bruyette &
Woods, Inc.; SunTrust Robinson Humphrey, Inc. formally known as SunTrust Capital
Markets, Inc.; Morgan Keegan & Company, Inc.; J.P. Morgan Securities, LLC, individually
and as successor in interest to Bear Stearns & Company, Inc.; and Bank of America
Corporation as successor in interest to Merrill Lynch, Pierce, Fenner & Smith, Inc.

________ _ ___ _ _ _ _ _ _ _ _____________ _ _ _
JOHN W. McCLARTY, JUDGE

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