Filed 10/2/23 EHC Aspen Properties v. CCUR Holdings CA4/3
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
EHC ASPEN PROPERTIES, LLC,
Plaintiff and Appellant, G061474
v. (Super. Ct. No. 30-2021-01189890)
CCUR HOLDINGS, INC. et al., OPINION
Defendants and Respondents.
Appeal from an order of the Superior Court of Orange County, Deborah C.
Servino, Judge. Affirmed.
Stradling Yocca Carlson & Rauth, Justin N. Owens and Ahmad S.
Takouche for Plaintiff and Appellant.
Morrison & Foerster, Mark David McPherson, James R. Sigel, Michael
Komorowski, and Dan Marmalefsky for Defendants and Respondents.
* * *
This is an appeal from an order granting a motion to quash service of
summons for lack of personal jurisdiction. We affirm.
The case arises from an aircraft financing investment opportunity that
turned out to be a Ponzi scheme. In a nutshell, the parties on both sides of the lawsuit
sunk millions of dollars into the “investment,” believing they were making fully
refundable deposits that would be used to secure the conversion of passenger planes into
cargo planes. Plaintiff EHC Aspen Properties, LLC (Aspen) invested about $3.7 million,
and defendant CCUR Aviation Finance, LLC (CCURA) invested about $5.5 million.
Neither recovered its money.
Rather than sue the individuals and entities who absconded with its
investment, Aspen sued CCURA and others for breach of fiduciary duty, fraud, and
related claims, asserting defendants wrongfully induced Aspen to invest in the Ponzi
scheme. Defendants, none of which are located in California, moved to quash service of
summons for lack of personal jurisdiction, and the trial court granted their motion.
We affirm. As explained below, Aspen failed to establish defendants
purposefully availed themselves of California benefits so as to create personal
jurisdiction.
FACTS
The details surrounding how the aircraft investment transactions worked
and how the parties came to invest in the Ponzi scheme are disputed. Because of the
narrow issue on appeal, we need not resolve those ambiguities and instead provide only a
basic outline of what allegedly occurred.
CCUR Holdings, Inc. (CCURH) began investing in aircraft financing deals
in 2018. These deals were brokered by nonparty South Aviation, Inc. (South Aviation)
and its president Federico Machado, and the funds were held in escrow by nonparty
Wright Brothers Aircraft Title, Inc. (Wright Brothers). Between August 2018 and June
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2020, CCURH reportedly completed multiple deals, investing over $23 million in
refundable deposits.
In August 2020, CCURA and its sole member CCURH (collectively, the
CCUR Entities) decided to invest more funds with South Aviation, this time contributing
about $5.5 million. One of the CCUR Entities’ investors from previous South Aviation
transactions—nonparty Eric Edidin of Edidin Partners, LLC—sent an e-mail introducing
the CCUR Entities’ president and chief executive officer, defendant Igor Volshteyn, to
Edidin’s longtime contact, Luis Serrano, as a possible additional investor. As part of that
introduction, Edidin forwarded Serrano a nondisclosure agreement (NDA) and explained
that once Serrano executed the NDA, Volshteyn would send Serrano an “information
package” about the investment. It is unclear why Edidin facilitated this introduction
between his fellow investor and his friend, but he later attested that “no one asked [him]
to solicit other investors.”
Serrano signed the NDA in his capacity as manager of Westbrook
Management LLC in Irvine, California, and Volshteyn signed as president of CCURH.
After the NDA was fully executed, Volshteyn e-mailed Serrano a PowerPoint
presentation he had prepared about the “fully refundable aviation deposits” investment
opportunity.
Serrano reviewed the materials from Volshteyn, discussed the investment
opportunity with Edidin, and decided to invest about $3.7 million through his company,
Aspen. According to Serrano, it was Volshteyn (not South Aviation or Wright Brothers)
who prepared and submitted the letter agreements between Aspen and South Aviation
and the escrow agreements between Aspen and Wright Brothers. Additionally, all of
Aspen’s communications about the investment were with Edidin and Volshteyn, not
Machado or South Aviation.
Defendant JDS1, LLC (JDS1) also invested in the August 2020 aircraft
financing opportunity. JDS1’s managing member, Julian Singer, had been a friend and
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business associate of Edidin for over a decade. At Edidin’s suggestion, JDS1 and Aspen
entered into a finder’s fee agreement drafted by Edidin under which Aspen would pay
JDS1 30 percent of any profits that Aspen received from its investment. This finder’s fee
agreement was made even though no representative of JDS1 ever met with, spoke with,
or provided any services to Aspen or Serrano.
The 90-day term of the aircraft financing transaction was set to expire in
November 2020, at which time the parties’ principal investments would have been
returned. In November, however, Edidin informed Serrano the other investors planned to
reinvest their deposits for a two-month extension to January 2021 in exchange for an
additional fee to be paid by South Aviation. After discussing the matter further with
Edidin, Serrano decided to reinvest Aspen’s deposit. Volshteyn then prepared the
necessary reinvestment paperwork and coordinated its submission.
Shortly thereafter things fell apart. In January 2021, the CCUR Entities
learned that federal authorities had frozen the assets of Wright Brothers, and it soon
became clear that Machado, South Aviation, and their affiliates had emptied the escrow
accounts associated with the parties’ investments. Several months later, a federal grand
jury in Texas indicted Machado and others for using Wright Brothers, South Aviation,
and other entities to run a Ponzi scheme enriching themselves at the expense of their
investors.
The CCUR Entities sued Machado and South Aviation in Florida federal
court to recover the funds they lost in the Ponzi scheme. They secured the appointment
of a temporary receiver, who has been attempting to recover the embezzled funds.
Volshteyn invited Serrano to have Aspen join in the Florida lawsuit, but Aspen declined.
Instead, Aspen filed a complaint against the CCUR Entities, Volshteyn, and
JDS1 (collectively, Defendants) in Orange County Superior Court, asserting claims for
breach of fiduciary duty, professional negligence, professional malpractice, fraud,
negligent misrepresentation, violation of the federal Investment Advisers Act, and
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violations of the Corporations Code. The gist of Aspen’s complaint is that Defendants
induced Aspen to invest in the Ponzi scheme through misrepresentations, omissions, and
exaggerations about the investment. Aspen did not name Edidin, Machado, South
Aviation, or Wright Brothers as defendants.
Specially appearing, Defendants filed a motion to quash service of
summons for lack of personal jurisdiction, asserting Aspen had not alleged minimum
contacts between Defendants and California. In support of their motion, Defendants
presented evidence that the CCUR Entities are both organized under Delaware law and
have their principal places of business in Texas, that Volshteyn is a resident of Texas, and
that JDS1 is organized under Delaware law and has its principal place of business in New
Jersey. Defendants also presented evidence that indicated they conduct all their business
outside of California; they have no offices, facilities, assets, or real estate in California;
they are not registered to conduct business in California; they do not hold any licenses,
permits, certificates, bank accounts, securities accounts, or telephone numbers in
California; and they have no registered agents in California.
To establish Defendants did not know Aspen and Serrano were California
residents during the relevant period, Defendants submitted a declaration from Volshteyn,
who attested he “did not realize that Aspen was a California company, or that any of the
other individuals [he] was emailing with might have been located in California at the
time.” Defendants also submitted a declaration from Julian Singer, the sole member of
JDS1, who attested that JDS1’s “only communication” with Aspen were e-mails about
the finder’s fee agreement, which did not include Aspen’s residence information.
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Defendants removed the action to federal court, but Aspen filed an
amended complaint omitting the federal claim and then successfully moved to remand the
case to state court.
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Aspen opposed Defendants’ motion to quash and sought leave to take
jurisdictional discovery. In support of its opposition, Aspen relied in part on an August
2020 e-mail exchange between Serrano and Volshteyn in which Volshteyn asked for
Aspen’s address for the purpose of obtaining a certificate of insurance, and to which
Serrano responded that Aspen’s address was 114 Pacifica, Suite 310, Irvine, California
92618.
After hearing oral argument, the trial court granted Aspen’s request for
leave to take jurisdictional discovery, set a supplemental briefing schedule, and continued
the hearing on the motion to quash. Aspen retained new counsel who substituted into the
case in February 2022 and served written discovery requests on Defendants the next day.
Defendants objected to much of Aspen’s jurisdictional discovery. In March
2022, Aspen filed an ex parte application to continue the hearing on Defendants’ motion
to quash and to shorten time on Aspen’s anticipated motion to compel further discovery
responses. The trial court denied relief, finding Aspen had “failed to act diligently”
notwithstanding its change of counsel.
The parties submitted their supplemental briefing based on jurisdictional
discovery in April 2022. In its supplemental opposition, Aspen asserted Defendants
knew Aspen was located in California, as reflected by the fact that Serrano listed his
Irvine, California address in his signature block on the executed NDA, and the fact that
Volshteyn admitted at deposition that he requested Aspen’s address and then forwarded
that California address to a third party.
After hearing oral argument, the trial court granted Defendants’ motion to
quash, finding that Aspen had “not met its burden to show by a preponderance of the
evidence, the factual basis justifying the exercise of specific jurisdiction over
Defendants.” Aspen appealed.
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DISCUSSION
1. General Principles
“A plaintiff opposing a motion to quash service of process for lack of
personal jurisdiction has the initial burden to demonstrate facts establishing a basis for
personal jurisdiction. [Citation.] If the plaintiff satisfies that burden, the burden shifts to
the defendant to show that the exercise of jurisdiction would be unreasonable.”
(HealthMarkets, Inc. v. Superior Court (2009) 171 Cal.App.4th 1160, 1167-1168
(HealthMarkets).)
An order granting a motion to quash service of summons is directly
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appealable. (Code Civ. Proc., § 904.1, subd. (a)(3).) “If there is no conflict in the
evidence, the question whether a defendant’s contacts with California are sufficient to
justify the exercise of personal jurisdiction . . . is a question of law that we review
de novo.” (HealthMarkets, supra, 171 Cal.App.4th at p. 1168.) But if there is a conflict
in the evidence underlying that determination, we review the trial court’s express or
implied factual findings for substantial evidence, drawing all reasonable inferences in
support of the court’s order. (Ibid.; Thomson v. Anderson (2003) 113 Cal.App.4th 258,
266–267.)
California courts may exercise jurisdiction over nonresidents “on any basis
not inconsistent with the Constitution of this state or of the United States.” (§ 410.10.)
The United States Constitution permits a state to exercise jurisdiction over a nonresident
defendant if the defendant has sufficient “minimum contacts” with the forum “such that
the maintenance of the suit does not offend ‘traditional notions of fair play and
substantial justice.’” (Internat. Shoe Co. v. Washington (1945) 326 U.S. 310, 316; see
Snowney v. Harrah’s Entertainment, Inc. (2005) 35 Cal.4th 1054, 1061.) Under the
minimum contacts test, courts ask “whether the ‘quality and nature’ of the defendant’s
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All further undesignated statutory references are to this code.
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activity is such that it is ‘reasonable’ and ‘fair’ to require him to conduct his defense in
that State.” (Kulko v. California Superior Court (1978) 436 U.S. 84, 92.)
There are “two types of personal jurisdiction: ‘general’ (sometimes called
‘all-purpose’) jurisdiction and ‘specific’ (sometimes called ‘case-linked’) jurisdiction.”
(Bristol-Myers Squibb Co. v. Superior Court of Cal., San Francisco Cty. (2017) 582 U.S.
255, 262 (Bristol-Myers); Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th
434, 445 (Vons).)
A nonresident defendant is subject to a forum’s general jurisdiction if its
contacts in the forum state are “‘substantial . . . continuous and systematic.’” (Vons,
supra, 14 Cal.4th at p. 445.) A court with general jurisdiction may hear any claim against
that defendant, even if all the incidents underlying the claim occurred in a different state.
(Bristol-Myers, supra, 582 U.S. at p. 262.)
Aspen does not contend Defendants are subject to California’s general
jurisdiction. We therefore need only determine whether specific jurisdiction exists.
“Specific jurisdiction . . . covers defendants less intimately connected with
a State, but only as to a narrower class of claims. The contacts needed for this kind of
jurisdiction often go by the name ‘purposeful availment.’ [Citation.] The defendant . . .
must take ‘some act by which [it] purposefully avails itself of the privilege of conducting
activities within the forum State.’ [Citation.] The contacts must be the defendant’s own
choice and not ‘random, isolated, or fortuitous.’” (Ford Motor Co. v. Mont. Eighth
Judicial Dist. Court (2021) 592 U.S. __ [141 S.Ct. 1017, 1024].)
“When determining whether specific jurisdiction exists, courts consider the
‘“relationship among the defendant, the forum, and the litigation.”’” (Pavlovich v.
Superior Court (2002) 29 Cal.4th 262, 269.) A nonresident defendant is only subject to
the forum’s specific jurisdiction if three requirements are met: (1) the defendant has
purposefully availed itself of forum benefits with respect to the matter in controversy;
(2) the controversy is related to or arises out of the defendant’s contacts with the forum;
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and (3) the exercise of jurisdiction would comport with fair play and substantial justice.
(Ibid.)
“A defendant purposefully avails itself of a forum’s benefits if it
intentionally directs its activities at a forum such that, by virtue of the benefits the
defendant has received, it should reasonably expect to be haled into the forum’s courts.
[Citation.] By focusing on the defendant’s purpose, this requirement ensures defendants
will not be haled into a jurisdiction solely because fortuitous or attenuated contacts or
because of the unilateral activity of another party.” (Farina v. SAVWCL III, LLC (2020)
50 Cal.App.5th 286, 294–295 (Farina).)
2. Application
Applying those principles here, we conclude the trial court correctly
determined Aspen did not carry its burden of establishing personal jurisdiction over
Defendants.
It is undisputed Defendants are not residents of California: the CCUR
Entities are organized under Delaware law and have their principal places of business in
Texas, Volshteyn is a resident of Texas, and JDS1 is organized under Delaware law and
has its principal place of business in New Jersey. Defendants conduct all their business
outside of California; they have no offices, facilities, assets, or real estate in California;
they are not registered to conduct business in California; they do not hold any licenses,
permits, certificates, bank accounts, securities accounts, or telephone numbers in
California; and they have no registered agents in California.
The controlling question then is whether Defendants, in allegedly inducing
Aspen to invest in the aircraft financing opportunity, purposefully availed themselves of
the privilege of conducting activities in California. We conclude they did not.
To begin with, there is conflicting evidence as to whether Defendants knew
Aspen and Serrano were California residents when they were discussing the investment
opportunity in 2020. The parties never met in person, in California or elsewhere; all of
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their communications were by e-mail. Some of those e-mail communications did
indicate Aspen and Serrano were located in California; for example, Serrano inserted a
signature line on his NDA with CCURH listing an address in Irvine; Aspen’s
representative Jim Matthews sent Volshteyn several e-mails that included his Irvine
business address in his signature block; and Serrano gave Volshteyn Aspen’s Irvine
address in an e-mail concerning certificates of insurance. But testimonial evidence
suggests Defendants were nevertheless unaware of Aspen’s location. Volshteyn insists
he did not realize Aspen was a California company at the time of the transaction; he
claims he was not paying attention to the address listed in the e-mails, and he assumed
Aspen was located in Colorado given its name. Julian Singer of JDSI similarly attests
that JDSI’s only communication with Aspen was the e-mail exchange about the finder fee
agreement, which contains no address information for Aspen.
Because there is a conflict in the evidence as to whether any of the
Defendants knew Aspen and Serrano were residents of California, we review the trial
court’s implied factual finding that Defendants did not know Aspen’s location for
substantial evidence. (HealthMarkets, supra, 171 Cal.App.4th at p. 1168.) Under that
standard, the above-described testimonial evidence by Volshteyn and Singer sufficiently
establishes that Defendants were unaware Aspen and Serrano were California residents.
(See Elkman v. National States Ins. Co. (2009) 173 Cal.App.4th 1305, 1313 [evidence of
jurisdictional facts may be in the form of declarations].)
This finding could by itself support our affirmance of the trial court’s order
quashing the summons. (See Farina, supra, 50 Cal.App.5th at p. 290 [because
out-of-state developers did not know where plaintiff investors lived, trial court correctly
quashed service for lack of personal jurisdiction; “you do not purposefully avail yourself
of California benefits if you do not know your actions somehow connect to California”].)
But even if we were to assume arguendo that Defendants knew Aspen was a California
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company, there would still be insufficient evidence that Defendants purposefully availed
themselves of California benefits.
The fact that Aspen is a California company, without more, is not sufficient
to confer personal jurisdiction over Defendants. (Walden v. Fiore (2014) 571 U.S. 277,
286 [personal jurisdiction must be based on the defendant’s “own affiliation with the
State, not based on the ‘random, fortuitous, or attenuated’ contacts he makes by
interacting with other persons affiliated with the State”].) “[T]he plaintiff cannot be the
only link between the defendant and the forum.” (Id. at p. 285.)
For jurisdiction to exist, there must be “evidence the nonresident defendant
expressly aimed or intentionally targeted his or her intentional conduct at the forum
state.” (Burdick v. Superior Court (2015) 233 Cal.App.4th 8, 25. There is no such
evidence here.
Aspen insists in its brief and at oral argument that purposeful availment is
established because Volshteyn sent Aspen the PowerPoint and other communications
about the investment opportunity and facilitated the documents for Aspen’s investment
and reinvestment, CCURH entered into the NDA with Serrano, and JDS1 entered into the
finder’s fee agreement with Aspen. We cannot agree.
Although a forum does have “jurisdiction over defendants who reach out
and create continuing relationships and obligations with the forum’s residents” (Farina,
supra, 50 Cal.App.5th at p. 299), “an individual’s contract with an out-of-state party
alone [cannot] automatically establish sufficient minimum contacts in the other party’s
home forum” (Burger King Corp. v. Rudzewicz (1985) 471 U.S. 462, 478). Instead,
factors like “prior negotiations and contemplated future consequences, along with the
terms of the contract and the parties’ actual course of dealing . . . must be evaluated in
determining whether the defendant purposefully established minimum contacts within the
forum.” (Id. at p. 479; see, e.g., Rivelli v. Hemm (2021) 67 Cal.App.5th 380, 397-398
[ongoing contractual relationships supported a finding of purposeful availment]; Gilmore
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Bank v. AsiaTrust New Zealand Ltd. (2014) 223 Cal.App.4th 1558, 1572 [purposeful
availment occurred where defendant sent promotional materials to California resident,
negotiated contract here, and invoiced and collected funds from California trust as part of
“a scheme that contemplates an ongoing contractual relationship”].)
The evidence here suggests this was a one-time interaction between the
parties, as opposed to a continuing relationship or a substantial economic connection.
This was insufficient to confer personal jurisdiction on Defendants.
Aspen alternatively contends personal jurisdiction exists because
Defendants “[p]artnered” with non-party Eric Edidin, a California resident, and
purposefully directed their activities at California through Edidin. (See Anglo Irish Bank
Corp., PLC v. Superior Court (2008) 165 Cal.App.4th 969, 974 [“activities that are
undertaken on behalf of a defendant may be attributed to the defendant for purposes of
personal jurisdiction if the defendant purposefully directed those activities at the forum
state”].)
We are not persuaded. “[E]ven when a third party is involved, the focus of
our inquiry remains on the defendant’s actions and intent.” (Farina, supra,
50 Cal.App.5th at p. 296.) There is no evidence that Volshteyn, the CCUR Entities, or
JDS1 purposefully directed Edidin to do anything. To the contrary, it appears Edidin was
acting on his own volition. Edidin attested in his declaration that Singer and Volshteyn
did not ask him to solicit other investors for the transaction. And Volshteyn testified it
was Edidin who approached Volshteyn to ask if Serrano could participate in the
investment (not the other way around), and Volshteyn agreed as a favor. We accept the
trial court’s implicit finding that Defendants did not purposefully direct Edidin’s conduct.
On these facts, exercise of jurisdiction over Defendants would be
inappropriate. The trial court did not err in granting Defendants’ motion to quash service
of summons.
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DISPOSITION
The order is affirmed. Defendants shall recover their costs on appeal. (Cal.
Rules of Court, rule 8.278(a)(1).)
GOETHALS, J.
WE CONCUR:
O’LEARY, P. J.
SANCHEZ, J.
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