Alan Grayson v. Randolph Anderson

PUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 14-1991

ALAN M. GRAYSON; AMG TRUST,

Plaintiffs - Appellants,

v.

RANDOLPH ANDERSON; PATRICK KELLEY; VISION INTERNATIONAL
PEOPLE GROUP PL.; TOTAL ECLIPSE INTERNATIONAL LTD.,

Defendants - Appellees,

and

CHARLES CATHCART; EVELYN CATHCART; YURIJ DEBEVC; CHARLES
HSIN; DERIVIUM CAPITAL USA INC; VERIDIA SOLUTIONS LLC;
SHENANDOAH HOLDINGS LTD; PTS INTERTECH INC; AQUILIUS INC;
OPTECH LIMITED; PAUL ANTHONY JARVIS; COLIN BOWEN; BANCROFT
VENTURES LTD; BANCROFT VENTURES UK LTD; SPENCER PARTNERS
LTD; ISLE OF MAN ASSURANCE LTD; DMITRY BOURIAK; BRYAN
JEEVES; ALEXANDER JEEVES; KRISTINA PHELAN; JEEVES GROUP,
THE; JEEVES HOLDINGS LTD; JAVELIN LTD; LEXADMIN TRUST REG;
ST VINCENT TRUST COMPANY LTD; ST VINCENT TRUST SERVICE LTD;
WINDWARD ISLES TRUST COMPANY LTD; SELBOURNE TRUST COMPANY
LTD; PELICAN TRUST COMPANY LTD; JEEVES GROUP ASIA LTD;
WACHOVIA SECURITIES, INC; JOHN DOE 1; JOHN DOE 2; JOHN DOE
3; JOHN DOE 4; JOHN DOE 5; JOHN DOE 6; JOHN DOE 7; JOHN DOE
8; JOHN DOE 9; JOHN DOE 10; JEEVES COMPANY LTD; ORANGEBURG
METAL TREATMENT CO LLC; ROBERT BRADENBURG; NIGEL THOMAS
TEBAY; JOANNA OVERFIELD BODELL; ISLE OF MAN FINANCIAL TRUST
LIMITED; NIGEL HARLEY WOOD; VISION INTERNATIONAL PEOPLE
GROUP PL; METARIZON LLC, f/k/a Metarizon Solutions LLC;
JONATHAN SANDIFER,

Defendants.
 14-1997

GRAYSON CONSULTING, INC.,

Plaintiff - Appellant,

and

KEVIN CAMPBELL, Chapter 7 Trustee,

Plaintiff,

v.

VISION INTERNATIONAL PEOPLE GROUP PL.; TOTAL ECLIPSE
INTERNATIONAL LTD.,

Defendants - Appellees,

and

EVELYN CATHCART; CHARLES D. CATHCART CRUSADER TRUST;
CATHCART INVESTMENT TRUST; CATHLIT INVESTMENT TRUST;
DIVERSIFIED DESIGN ASSOCIATED LTD; DAVID KEKICH; RED TREE
INTERNATIONAL; CHARLES HSIN, a/k/a CH Hsin, Chi Hsiu Hsin;
FIRST SECURITY CAPITAL OF CANADA INC; MARCO TOY INC;
BANCROFT VENTURES LTD; BANCROFT VENTURES UK LTD; WITCO
SERVICES UK LTD; JEEVES GROUP, THE; JEEVES COMPANY LTD;
JEEVES HOLDINGS LTD; BRYAN JEEVES; ALEXANDER JEEVES;
KRISTINA PHELAN; PAUL ANTHONY JARVIS; NIGEL THOMAS TEBAY;
COLIN CYPH BOWEN; MORIA THOMPSON MCHARRIE; DAVID ANTHONY
KARRAN; NIGEL HAMPTON MCGOWAN; FRANCIS GERRARD QUINN; PETER
KEVIN PERRY; BRIAN BODELL; ANDREW THOMAS; EDWARD J. BUDDEN;
JOANNA OVERFIELD BODELL; CONISTON MANAGEMENT LTD; JAVELIN
LTD; ST VINCENT TRUST SERVICE LTD; ST VINCENT TRUST COMPANY
LTD; LEXADMIN TRUST REG; ISLE OF MAN ASSURANCE LTD; ISLE OF
MAN FINANCIAL TRUST LTD; SPENCER PARTNERS LTD; SPENCER
VENTURE PARTNERS LLC; LINDSEY AG; OPTECH LTD; JACK W.
FLADER, JR.; JAMES C. SUTHERLAND; ZETLAND FINANCIAL GROUP
LTD; FRANKLIN W. THOMASON; DMITRY BOURIAK; NOBLESTREET LTD;
FINANCIAL RESOURCES GROUP LLC; STRUCTURED SYSTEMS AND
SOFTWARE INC; EAST BAY CAPITAL VENTURES LLC; CLIFFORD LLOYD;
NIGEL HARLEY WOOD; TSUEI CONSULTANTS INCORPORATED,

Defendants.
2
Appeals from the United States District Court for the District
of South Carolina, at Charleston. David C. Norton, District
Judge. (2:07-cv-00593-DCN; 2:07-cv-02992-DCN; 2:08-cv-03129-
DCN)

Argued: December 8, 2015 Decided: March 7, 2016

Before WILKINSON, NIEMEYER, and DIAZ, Circuit Judges.

Affirmed by published opinion. Judge Niemeyer wrote the
opinion, in which Judge Wilkinson and Judge Diaz joined.

ARGUED: Tucker Harrison Byrd, TUCKER H. BYRD & ASSOCIATES, P.A.,
Winter Park, Florida, for Appellants. Brian Cantwell Duffy,
DUFFY & YOUNG, LLC, Charleston, South Carolina; Mark H. Wall,
WALL TEMPLETON & HALDRUP, P.A., Charleston, South Carolina, for
Appellees. ON BRIEF: Katherine A. Stanton, WALL TEMPLETON &
HALDRUP, P.A., Charleston, South Carolina, for Appellee Patrick
Kelley. Seth W. Whitaker, DUFFY & YOUNG, LLC, Charleston, South
Carolina, for Appellee Total Eclipse International Ltd. W.
Randolph Anderson, Jr., New York, New York, Appellee Pro Se.

3
NIEMEYER, Circuit Judge:

Victims of a massive, South Carolina-centered Ponzi scheme

-- characterized by fraudulent loans secured by the borrowers’

publicly traded stock -- obtained a judgment of over $150

million against Derivium Capital (USA), Inc., its principals,

and numerous other participants in the scheme. Alan M. Grayson,

AMG Trust, and Grayson Consulting, Inc., three of the

plaintiffs, are now pursuing others whom they claim also

participated in the scheme.

With respect to the three plaintiffs’ claims against Vision

International People Group, P.L., a Cypriot company, the

district court granted Vision International’s motion to dismiss

for lack of personal jurisdiction under Federal Rule of Civil

Procedure 12(b)(2). And with respect to Grayson’s and AMG

Trust’s claims against Randolph Anderson, Patrick Kelley, and

Total Eclipse International Ltd. for aiding and abetting common

law fraud, the district court granted those defendants’ motion

for judgment as a matter of law at trial, concluding that the

cause of action was not recognized by South Carolina courts.

The plaintiffs filed separate appeals on the two rulings.

In the first, the three plaintiffs contend that, because the

district court did not conduct an “evidentiary hearing” in which

it took live testimony, it should have assessed the Rule

12(b)(2) motion under the more relaxed standard of whether the

4
plaintiffs had made a prima facie showing of personal

jurisdiction over Vision International rather than under the

more demanding standard that the district court applied, which

required them to prove facts demonstrating personal jurisdiction

by a preponderance of the evidence. And in the second, Grayson

and AMG Trust contend that the district court erred in

dismissing their claims for aiding and abetting fraud,

maintaining that South Carolina recognized the cause of action

in Connelly v. State Co., 149 S.E. 266 (S.C. 1929).

We consolidated the two appeals by order dated August 26,

2015, and now affirm on both. We conclude that, because the

parties engaged in full discovery on the jurisdictional issue

and fully presented the relevant evidence to the district court,

the court properly addressed Vision International’s Rule

12(b)(2) motion by weighing the evidence, finding facts by a

preponderance of the evidence, and determining as a matter of

law whether the plaintiffs carried their burden of demonstrating

personal jurisdiction over Vision International. We also agree

with the district court’s conclusion that South Carolina has not

recognized a cause of action for aiding and abetting common law

fraud and that it is not our role as a federal court to so

expand state law.

5
 I

Under the fraud scheme referred to as the 90% Stock Loan

Program, which began in 1997, borrowers delivered their publicly

traded stock to Derivium as collateral for loans in amounts up

to 90% of the stock’s market value. Because the loans were non-

recourse loans, the borrowers could, at the loan’s maturity date

of usually three years, surrender the stock with no further

obligation to pay the loan -- an attractive option if, at that

time, the stock’s value had depreciated. Alternatively, they

could pay the loan and demand return of the stock -- an

attractive option if, at that time, the stock’s value had

appreciated. It was, for the borrowers, thought to be a no-lose

proposition.

But the full, undisclosed details of the program, which was

designed and implemented largely by Charles Cathcart and Yuri

Debevc, two of Derivium’s principals, involved Derivium’s misuse

of the stock. Indeed, the principals sold the stock to fund

their personal investments in high-risk venture capital

opportunities, and, in the process, they realized substantial

personal income from commissions on the stock sales. Although

they hoped for yet larger returns on their investments, all but

one of the personal investments failed, and Derivium was unable

to return the borrowers’ stock at the loan maturity dates

because it had maintained no capital reserves and had entered

6
into no derivative transactions to hedge against losses.

Consequently, to cover the losses, the principals continued to

solicit stock from new borrowers and enter into new 90% loans

for years after the principals knew that the entire scheme would

eventually collapse.

Derivium went into bankruptcy in 2005, and victims of the

fraud began commencing actions in 2007 against Derivium, its

principals, and other employees and related companies implicated

in the scheme. There were more than 50 defendants in these

actions. With respect to some of the defendants, the district

court consolidated the actions for discovery and trial, and,

following trial, a jury returned a verdict in favor of the

plaintiffs in the amount of $150,478,525.29. The judgment

entered on that verdict was affirmed on appeal.

The plaintiffs in the present appeals then began pursuing

claims that had been stayed by the district court pending the

outcome of the principal trial. One of the defendants in these

resumed cases, Vision International, a Cyprus-based company

engaged in distributing health and beauty products outside of

the United States, filed a motion to dismiss under Rule 12(b)(2)

for lack of personal jurisdiction over it. To support its

motion, Vision International included deposition excerpts,

affidavits, and other documents developed during full discovery,

as well as a memorandum of law, to demonstrate that the court

7
lacked jurisdiction. To support their response, the plaintiffs

included more than 120 exhibits, likewise consisting of

deposition transcripts, affidavits, interrogatory answers, and

documentary evidence, as well as a memorandum of law, to

demonstrate that Vision International had sufficient contacts

with South Carolina and the United States generally. See S.C.

Code Ann. § 36-2-803 (South Carolina’s long-arm statute); Fed.

R. Civ. P. 4(k)(2) (a so-called federal long-arm “statute”).

The plaintiffs argued in their memorandum of law that both

Vision International’s CEO and its Legal Advisor had

participated in the Ponzi scheme in South Carolina and

California. The district court conducted a hearing on the

motion on July 1, 2013, and neither side asked to present any

further evidence, including any live testimony. Following the

hearing, the district court granted Vision International’s

motion to dismiss, concluding that the plaintiffs had failed to

meet their burden of proving, by a preponderance of the

evidence, facts demonstrating personal jurisdiction over Vision

International.

During the subsequent trial against Anderson, Kelley, and

Total Eclipse, the district court granted the defendants’ motion

for judgment as a matter of law with respect to Grayson’s and

AMG Trust’s claims for aiding and abetting fraud, reasoning that

no such cause of action existed under South Carolina law. After

8
the district court dismissed the aiding and abetting claims, the

jury found in favor of those defendants on the remaining claims.

On appeal, the plaintiffs challenge (1) the district

court’s procedure for dismissing their claims against Vision

International for lack of personal jurisdiction, and (2) the

district court’s ruling dismissing the claims against Anderson,

Kelley, and Total Eclipse for aiding and abetting common law

fraud.

II

On the personal jurisdiction issue, the plaintiffs contend

that the district court erred in granting Vision International’s

motion to dismiss because the court “did not conduct an

evidentiary hearing to resolve the conflicting evidence.” As a

consequence, they argue, the district court erred in failing to

recognize that, in that circumstance, they “only needed to make

a prima facie showing to establish jurisdiction” and thus that

their evidence had to be taken in the light most favorable to

them. Rather than applying the prima facie standard, they

argue, the district court “weighed and considered the evidence”

and applied a more difficult standard, from the plaintiffs’

point of view, by imposing on them the burden of proving facts

demonstrating jurisdiction by a preponderance of the evidence.

The plaintiffs maintain that only by applying the more rigorous

9
preponderance of the evidence standard was the district court

able to grant Vision International’s Rule 12(b)(2) motion to

dismiss.

Vision International contends that the district court

correctly held the plaintiffs to the preponderance of the

evidence standard and, in applying that standard, correctly

found that: (1) no evidence existed to show that Vision

International availed itself of the privilege of conducting

business in South Carolina; (2) no evidence existed to show that

Vision International had any contacts with South Carolina or

with the United States generally; and, more specifically, (3) no

evidence existed to show that actions taken by two of Vision

International’s employees in furtherance of the loan scheme fell

within the scope of their employment or were otherwise imputable

to Vision International.

A

Addressing the plaintiffs’ procedural arguments first, we

note that the Federal Rules of Civil Procedure do not provide

specific procedures for a district court’s disposition of

pretrial motions filed under Rule 12(b)(2). Nonetheless, the

general principles governing an appropriate procedure are well-

established.

10
 Under Rule 12(b)(2), a defendant must affirmatively raise a

personal jurisdiction challenge, but the plaintiff bears the

burden of demonstrating personal jurisdiction at every stage

following such a challenge. See Combs v. Bakker, 886 F.2d 673,

676 (4th Cir. 1989). And a Rule 12(b)(2) challenge raises an

issue for the court to resolve, generally as a preliminary

matter. Id. (“[T]he jurisdictional question thus raised [under

Rule 12(b)(2)] is one for the judge”). Indeed, only when a

material jurisdictional fact is disputed and that fact overlaps

with a fact that needs to be resolved on the merits by a jury

might a court defer its legal ruling on personal jurisdiction to

let the jury find the overlapping fact. Cf. Adams v. Bain, 697

F.2d 1213, 1219 (4th Cir. 1982) (noting that, “where the

jurisdictional facts are intertwined with the facts central to

the merits of the dispute,” deferring resolution of that factual

dispute to a proceeding on the merits “is the better view”).

The plaintiff’s burden in establishing jurisdiction varies

according to the posture of a case and the evidence that has

been presented to the court. For example, when the court

addresses the personal jurisdiction question by reviewing only

the parties’ motion papers, affidavits attached to the motion,

supporting legal memoranda, and the allegations in the

complaint, a plaintiff need only make a prima facie showing of

personal jurisdiction to survive the jurisdictional challenge.

11
Combs, 886 F.2d at 676; see also Mylan Labs., Inc. v. Akzo,

N.V., 2 F.3d 56, 62 (4th Cir. 1993) (explaining how courts may

consider affidavits from any party when applying the prima facie

standard). When determining whether a plaintiff has made the

requisite prima facie showing, the court must take the

allegations and available evidence relating to personal

jurisdiction in the light most favorable to the plaintiff. See

Combs, 886 F.2d at 676; Mylan Labs., 2 F.3d at 60. Ultimately,

however, a plaintiff must establish facts supporting

jurisdiction over the defendant by a preponderance of the

evidence. Combs, 886 F.2d at 676 (noting that “the burden [is]

on the plaintiff ultimately to prove the existence of a ground

for jurisdiction by a preponderance of the evidence”). And

because defendants file Rule 12(b)(2) motions precisely because

they believe that they lack any meaningful contacts with the

forum State where the plaintiff has filed suit, the better

course is for the district court to follow a procedure that

allows it to dispose of the motion as a preliminary matter.

To be sure, we have previously stated that, if a court

requires the plaintiff to establish facts supporting personal

jurisdiction by a preponderance of the evidence prior to trial,

it must conduct an “evidentiary hearing.” See, e.g., New

Wellington Fin. Corp. v. Flagship Resort Dev. Corp., 416 F.3d

290, 294 n.5 (4th Cir. 2005) (“[P]laintiff[s] must eventually

12
prove the existence of personal jurisdiction by a preponderance

of the evidence, either at trial or at a pretrial evidentiary

hearing” (quoting Prod. Grp. Int'l v. Goldman, 337 F. Supp. 2d

788, 793 n.2 (E.D. Va. 2004) (internal quotation marks

omitted))). But contrary to the plaintiffs’ position, an

“evidentiary hearing” does not automatically involve or require

live testimony. See, e.g., Boit v. Gar-Tec Prods., Inc., 967

F.2d 671, 676 (1st Cir. 1992) (noting how, in the personal

jurisdiction context, “[n]ot all ‘evidentiary hearings,’ . . .

involve evidence ‘taken orally in open court’” (quoting Fed. R.

Civ. P. 43(a))); id. at 676-77 (noting that, to apply the

preponderance of the evidence standard before trial, “a court

may take most of the evidence . . . by affidavits, authenticated

documents, answers to interrogatories or requests for

admissions, and depositions”); see also Fed. R. Civ. P. 43(c)

(providing that courts may “hear” motions “on affidavits or

. . . wholly or partly on oral testimony or on depositions”).

Rather, an “evidentiary hearing” requires only that the district

court afford the parties a fair opportunity to present both the

relevant jurisdictional evidence and their legal arguments.

Once the court has provided that opportunity, it must hold the

plaintiff to its burden of proving facts, by a preponderance of

the evidence, that demonstrate the court’s personal jurisdiction

over the defendant.

13
 As with many pretrial motions, a court has broad discretion

to determine the procedure that it will follow in resolving a

Rule 12(b)(2) motion. If the court deems it necessary or

appropriate, or if the parties so request, it may conduct a

hearing and receive, or not, live testimony. It may also

consider jurisdictional evidence in the form of depositions,

interrogatory answers, admissions, or other appropriate forms.

But we see no reason to impose on a district court the hard and

fast rule that it must automatically assemble attorneys and

witnesses when doing so would ultimately serve no meaningful

purpose. Creating such needless inefficiency would undermine a

principal purpose of the Federal Rules of Civil Procedure “to

secure the just, speedy, and inexpensive determination of every

action and proceeding.” Fed. R. Civ. P. 1.

At bottom, a district court properly carries out its role

of disposing of a pretrial motion under Rule 12(b)(2) by

applying procedures that provide the parties with a fair

opportunity to present to the court the relevant facts and their

legal arguments before it rules on the motion.

In this case, Vision International filed a Rule 12(b)(2)

motion to dismiss for lack of personal jurisdiction following

the completion of a full discovery process. In support of its

motion, it included numerous excerpts from depositions,

exhibits, affidavits, and similar evidence for consideration by

14
the court. Supporting their opposition to the motion, the

plaintiffs filed over 120 exhibits, including deposition

transcripts, affidavits, interrogatory answers, and documentary

evidence. Both sides also filed extensive memoranda of law.

After the parties completed their submissions, the district

court conducted a hearing on the motion on July 1, 2013, and,

after receiving argument, took the motion under advisement. At

the hearing, no party proffered, nor did the court request, more

evidence, and no party requested to present live testimony.

Presumably, the parties and the court were satisfied that the

court had before it all the relevant evidence from which to make

its decision. And, in this case, the evidence was substantial.

Following this procedure, the district court found facts by a

preponderance of the evidence and, based on those facts,

concluded as a matter of law that it lacked personal

jurisdiction over Vision International.

We find no deficiency in the process that was followed by

the district court and conclude that the district court

correctly applied the preponderance of the evidence standard,

rather than the prima facie standard, in finding facts. Because

full discovery had been conducted and the relevant evidence on

jurisdiction had been presented to the court, the court

appropriately considered the evidence and found the facts by a

preponderance of the evidence. And even though a hearing was

15
not mandatory, the court also conducted one. No party ever

claimed that the record was inadequately developed, that

relevant evidence was missing, or that it was unable to fairly

present its position. Accordingly, we find no error in the

procedure that the district court followed or the standard that

it applied for deciding Vision International’s Rule 12(b)(2)

motion.

B

On the merits of Vision International’s Rule 12(b)(2)

motion, the district court found that “there is no evidence that

indicates that [Vision International’s CEO Paul] Jarvis and

[Vision International’s Legal Advisor Ismini] Papacosta acted on

Vision’s behalf or in Vision’s interest when they participated

in the 90% Stock Loan Program.” Moreover, it found that Vision

International did not direct any of its activities to South

Carolina, did not maintain any office or agent in South

Carolina, did not own any property in South Carolina, and did

not conduct any business with or communicate with anyone in

South Carolina. At bottom, the court found that there was no

evidence demonstrating that Vision International “purposefully

availed itself of the privilege of conducting business in South

Carolina” or that it had “any meaningful connection with the

state.” Accordingly, the court held that the plaintiffs failed

16
to carry their “burden of proving, by a preponderance of the

evidence, [the grounds to demonstrate] that personal

jurisdiction [was] proper over Vision” under South Carolina’s

long-arm statute, South Carolina Code § 36-2-803. It also held

that the plaintiffs failed to carry their burden under Federal

Rule of Civil Procedure 4(k)(2) of proving, by a preponderance

of the evidence, that Vision International had sufficient

contacts with the United States generally.

While the plaintiffs argue that the district court erred

because the court did not construe the facts in favor of their

position, harking back to the failure to apply the prima facie

standard, they otherwise do not argue that the district court’s

factual findings were clearly erroneous or that its legal ruling

on personal jurisdiction was erroneous. See Carefirst of Md.,

Inc. v. Carefirst Pregnancy Ctrs., Inc., 334 F.3d 390, 396 (4th

Cir. 2003) (“We review de novo a dismissal for lack of personal

jurisdiction, though we review any underlying factual findings

for clear error” (citations omitted)).

We have already rejected the plaintiffs’ procedural

argument that the district court applied the wrong standard for

finding facts and now we affirm the court’s legal conclusion on

the merits that it lacked personal jurisdiction over Vision

International.

17
 Establishing personal jurisdiction over Vision

International under South Carolina’s long-arm statute required,

as a first step, that the plaintiffs prove that the defendant

had “purposefully availed itself of the privilege of conducting

activities in [South Carolina].” See Consulting Eng’rs Corp. v.

Geometric Ltd., 561 F.3d 273, 278 (4th Cir. 2009) (quoting ALS

Scan, Inc. v. Digital Serv. Consultants, Inc., 293 F.3d 707, 712

(4th Cir. 2002)); see also ESAB Grp., Inc. v. Zurich Ins. PLC,

685 F.3d 376, 391 (4th Cir. 2012) (“Because the scope of South

Carolina’s long-arm statute is coextensive with the Due Process

Clause, we proceed directly to the constitutional analysis”

(citations omitted)). The record in this case, however,

includes no evidence to support a claim that the plaintiffs did

so.

To be sure, two of Vision International’s employees, CEO

Jarvis and Legal Advisor Papacosta, conducted some business in

relation to the loan scheme while employed by Vision

International, including contacting businesses and individuals

in South Carolina using Vision International’s fax machines and

email accounts. But none of the extensive discovery in this

case yielded any evidence that the two were acting on Vision

International’s behalf or in Vision International’s interest

when doing so. Their actions, in other words, did not fall

within the scope of their employment with Vision International,

18
which, as a company, was engaged in the business of distributing

health and beauty products outside of the United States. See

Young v. F.D.I.C., 103 F.3d 1180, 1190 (4th Cir. 1997) (applying

South Carolina agency law in concluding that, “[i]f the employee

acted for some independent purpose of his own,” rather than

“with the purpose of benefiting the employer,” “the conduct

falls outside the scope of his employment” and, thus, that a

corporation cannot face vicarious liability for that employee’s

conduct). And insofar as no facts suggested that Jarvis and

Papacosta acted within the scope of their employment, it follows

that no dispute of fact could exist on that issue and that the

district court correctly resolved this question of agency law in

Vision International’s favor. Because the plaintiffs relied

entirely on the actions of these two employees to demonstrate

jurisdiction, the court also concluded correctly that Vision

International had not purposefully availed itself of the

privilege of conducting business in South Carolina and that

Vision International otherwise lacked any meaningful contacts

with the State.

We also conclude that the district court did not err in

rejecting the plaintiffs’ reliance on their federal law claims

to demonstrate personal jurisdiction over Vision International

under Rule 4(k)(2). That Rule provides that, “[f]or a claim

that arises under federal law, serving a summons or filing a

19
waiver of service establishes personal jurisdiction over a

defendant if: (A) the defendant is not subject to jurisdiction

in any state’s courts of general jurisdiction; and (B)

exercising jurisdiction is consistent with the United States

Constitution and laws.” Fed. R. Civ. P. 4(k)(2) (emphasis

added). Thus, if a plaintiff’s claims arise under federal law,

the plaintiff can invoke Rule 4(k)(2) if it demonstrates that no

State can exercise personal jurisdiction over the defendant but

that the defendant’s contacts with the United States as a whole

support the exercise of jurisdiction consistent with the

Constitution and laws of the United States. See Base Metal

Trading, Ltd. v. OJSC “Novokuznetsky Aluminum Factory”, 283 F.3d

208, 215 (4th Cir. 2002). Of course, if a plaintiff properly

invokes Rule 4(k)(2), it can rely on pendent jurisdiction for

its state law claims, so long as those claims arose under the

same nucleus of operative facts. See ESAB Grp., Inc. v.

Centricut, Inc., 126 F.3d 617, 628 (4th Cir. 1997).

In this case, the plaintiffs never argued, as they were

required to do, that no State could exercise personal

jurisdiction over Vision International. See Fed. R. Civ. P.

4(k)(2)(A). In fact, the plaintiffs discuss only whether South

Carolina could exercise jurisdiction over Vision International,

without mentioning Vision International’s status in other

States. See Base Metal Trading, 283 F.3d at 215 (“Base Metal

20
has never attempted to argue that NKAZ is not subject to

personal jurisdiction in any state. In fact, Base Metal

continues to assert that personal jurisdiction over NKAZ is

proper in Maryland as well as in other states”). In any event,

the record shows that Jarvis’ and Papacosta’s personal contacts

with businesses and individuals throughout the United States

failed to establish jurisdiction under Rule 4(k)(2) over Vision

International for the same reasons that those contacts proved

insufficient to satisfy jurisdiction under South Carolina’s

long-arm statute. Their contacts involved conduct that exceeded

the scope of their employment with Vision International and thus

could not be imputed to Vision International.

Accordingly, we affirm the district court’s ruling

dismissing the claims against Vision International for lack of

personal jurisdiction.

III

Plaintiffs Grayson and AMG Trust also contend that the

district court erred in granting judgment as a matter of law to

Anderson, Kelley, and Total Eclipse on state common law claims

that those defendants had aided and abetted common law fraud.

The plaintiffs argue that the district court erred in concluding

that no such cause of action exists under South Carolina law

because the South Carolina Supreme Court long ago recognized

21
this cause of action in Connelly v. State Co., 149 S.E. 266, 268

(S.C. 1929). We do not, however, read Connelly as the

plaintiffs read it, and we have found no other case in which

South Carolina has held that aiding and abetting common law

fraud exists as a cause of action in the State.

In Connelly, the South Carolina Supreme Court held that,

when a complaint charged two defendants jointly with the

composition and publication of an allegedly libelous editorial,

the defamation suit could be brought in the county of either

defendant and therefore that the trial court did not err in

refusing to transfer the case from the county of one defendant

to the county of the other. 149 S.E. at 271. In affirming the

trial court’s refusal to transfer the action, the South Carolina

Supreme Court said that it was “express[ing] no opinion as to

the merit or demerit of the case, and no finding of the facts

alleged.” Id.

In claiming that Connelly recognizes a claim for aiding and

abetting fraud, the plaintiffs point to language set forth in

the trial court’s opinion, which Connelly reprinted separately.

That language quotes at length from a note in volume 1914C of

the American Annotated Cases, which, in summarizing numerous

cases from other States, stated, “[A]ll who aid, advise,

countenance, or assist the commission of the tort are

wrongdoers.” Connelly, 149 S.E. at 268. But the trial court

22
did not adopt the language to formulate its holding, concluding

only that, when two persons participate in the writing and

publication of a libelous article, both are jointly liable and

that a suit, therefore, could be brought in the county of either

defendant. Id. at 270. Moreover, the language that the

plaintiffs rely on was neither in the South Carolina Supreme

Court’s opinion nor was it approved by that court. Indeed, in

affirming the trial court’s refusal to transfer the case, the

South Carolina Supreme Court stated, “We simply hold that, under

the showing made, considered in the light of the law of this

state governing such matters, it was the duty of [the trial

judge] to refuse the motion to transfer . . . .” Id. at 271

(emphasis added).

The plaintiffs’ assertion that Connelly constitutes “ample

authority” to support a cause of action in South Carolina for

aiding and abetting common law fraud borders on the frivolous.

To be sure, South Carolina courts have discussed aiding and

abetting other specified conduct. See, e.g., Future Grp., II v.

Nationsbank, 478 S.E.2d 45, 50 (S.C. 1996) (discussing “aiding

and abetting a breach of fiduciary duty”); Broadmoor Apartments

of Charleston v. Horwitz, 413 S.E.2d 9, 11 (S.C. 1991)

(discussing aiding and abetting an “abuse of process”). But we

have been unable to find any case that has held that aiding and

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abetting common law fraud, or even torts generally, would

constitute a cause of action in South Carolina.

As we have previously explained, “federal courts sitting in

diversity rule upon state law as it exists and do not surmise or

suggest its expansion.” Burris Chem., Inc. v. USX Corp., 10

F.3d 243, 247 (4th Cir. 1993) (emphasis added); Guy v. Travenol

Labs., Inc., 812 F.2d 911, 917 (4th Cir. 1987) (“In applying

state law, federal courts have always found the road straighter

and the going smoother when, instead of blazing new paths, they

restrict their travels to the pavement”). In accordance with

this well-established principle, we also decline any suggestion

by the plaintiffs that we expand South Carolina law by

recognizing a cause of action for aiding and abetting common law

fraud.

We therefore affirm the district court’s ruling to grant

judgment as a matter of law to Anderson, Kelley, and Total

Eclipse on the plaintiffs’ claim that they aided and abetted

common law fraud.

* * *

The judgments of the district court are

AFFIRMED.

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