Barrett v. Veritas Offshore

United States Court of Appeals
For the First Circuit

Nos. 00-1834
00-1835

DONAL B. BARRETT,

Plaintiff, Appellant,

v.

VICTOR J. LOMBARDI, JR., ET AL.,

Defendants, Appellees.

APPEALS FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Rya W. Zobel, U.S. District Judge]

Before

Selya, Circuit Judge,

Cyr, Senior Circuit Judge,

and Boudin, Circuit Judge.

W.P. Colin Smith, Jr. for appellant.
Alan R. Curhan, with whom Burns & Levinson and Gadsby
Hannah, LLP were on brief, for appellees.

January 17, 2001
 SELYA, Circuit Judge. Smarting from the sting of a

failed business relationship, plaintiff-appellant Donal B.

Barrett sued his erstwhile co-venturer, Victor J. Lombardi, Jr.,

and one of Lombardi's companies, Veritas Offshore, Ltd.

(Veritas). Acting on the defendants' joint dispositive motion,

the district court determined (1) that it lacked in personam

jurisdiction over Veritas, and (2) that, for jurisdictional and

other reasons, the complaint stated no claim against Lombardi

upon which relief could be granted. Barrett appeals from the

order of dismissal. We affirm in part and reverse in part.

I. BACKGROUND

In order to place these appeals into perspective, we

recount the facts as alleged by the appellant in the operative

pleading (the first amended complaint), as supplemented by his

affidavit in opposition to the joint motion to dismiss.

In November 1995, the appellant and Edward Dyman

organized NetFax, Inc., a Delaware corporation, for the purpose

of developing and commercially exploiting new technologies for

Internet facsimile transmission conceived by Frederick Murphy

(Dyman's brother-in-law). Murphy himself soon joined the

enterprise. The company established a base of operations in

Cambridge, Massachusetts, and installed the appellant as its

chairman. All the "founder's stock" stood in Dyman's name

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(although the appellant maintains that Dyman held the shares as

his nominee).

In short order, Lombardi tried to insinuate himself

into the business, touting his expertise and connections.

Gulled by Lombardi's rodomontade and eager to bring him into the

fold, the appellant directed Dyman to transfer a substantial

number of NetFax shares to Veritas. These transfers occurred in

March 1996 and periodically thereafter, involving an aggregate

of 4,046,666 shares (about 30% of the founder's stock). In the

same general time frame, Dyman also transferred substantial

amounts of stock to the appellant and to Murphy, retaining only

a token amount for himself.

The marriage did not go well. In time, disputes over

how to manage the affairs of the fledgling company led to the

appellant's ouster as NetFax's chairman. Lombardi took his

place. That change in command culminated in the execution of a

separation agreement (the Agreement), dated July 31, 1998. In

the Agreement, Lombardi promised, among other things, to grant

the appellant a warrant, expiring July 31, 2000, for the

purchase of 1,000,000 shares of NetFax stock at a price of

$0.001 per share. The appellant never received the warrant.

Lombardi's ascension to the throne failed to improve

NetFax's fortunes and the company suspended operations in

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September 1998. Six months later, the appellant went to court.

Invoking diversity jurisdiction, 28 U.S.C. § 1332(a), he filed

suit against Lombardi and Veritas in the United States District

Court for the District of Massachusetts.

The appellant's first amended complaint contains five

statements of claim. The first four charge federal securities

fraud, deceptive trade practices, common law deceit, and common

law misrepresentation, respectively. All of these counts derive

from falsehoods attributed to Lombardi, including exaggerations

about his supposed expertise and his failure to disclose his

checkered financial past (a history that, as the appellant

belatedly learned, involved a number of questionable stock deals

and a personal bankruptcy). The fifth statement of claim,

sounding in contract, concerns Lombardi's refusal to deliver the

warrant.

The defendants denied the material averments of the

complaint and, in due course, filed a motion to dismiss. The

district court determined that it lacked in personam

jurisdiction over Veritas; that, in all events, the appellant's

first four counts were vulnerable because he was not the real

party in interest (Dyman, after all, had transferred the

shares); and that those counts also failed because of an

insufficient showing of damages. These determinations left

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standing only the breach of contract claim (count five). As to

that cause of action, the court focused on the price to be paid

for the underlying stock — 1,000,000 shares at $0.001 per share

— and, by a process of simple multiplication, ascertained that

the dispute involved only $1,000. Starting from that premise,

the court ruled that it lacked subject-matter jurisdiction by

reason of an inadequate amount in controversy.

Having disposed of all the appellant's claims, the

court granted the motion to dismiss and entered judgment in the

defendants' favor. The appellant then moved unsuccessfully for

relief from the judgment. The district court denied that motion

out of hand. These appeals — one taken upon the initial entry

of judgment and the second upon the denial of reconsideration —

followed.

II. CLAIMS AGAINST VERITAS

In our view, efficient resolution of the claims against

Veritas does not require us to go beyond the district court's

determination that it lacked in personam jurisdiction over that

defendant. We confine our discussion accordingly.

A. The Motion to Dismiss.

Veritas is a foreign corporation headquartered in the

Cayman Islands. Since there is no evidence that it regularly

conducts business in Massachusetts, the appellant must establish

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a basis for the exercise of specific jurisdiction. See

Donatelli v. Nat'l Hockey League, 893 F.2d 459, 462-63 (1st Cir.

1990) (elucidating concepts of "general" and "specific" personal

jurisdiction, and distinguishing between them). To achieve this

goal, the appellant must present sufficient facts to satisfy two

cornerstone conditions: "first, that the forum in which the

federal district court sits has a long-arm statute that purports

to grant jurisdiction over the defendant; and second, that the

exercise of jurisdiction pursuant to that statute comports with

the strictures of the Constitution." Pritzker v. Yari, 42 F.3d

53, 60 (1st Cir. 1994). In this case, then, the appellant

cannot hale Veritas into the district court unless he can

satisfy the rigors of both the Massachusetts long-arm statute

and the United States Constitution.

Compliance with the state standard for personal

jurisdiction necessitates a showing that the cause of action

arises from the defendant's "transacting any business" in

Massachusetts, Mass. Gen. Laws ch. 223A, § 3(a), or from a

tortious in-state "act or omission," id. § 3(c). Compliance

with the federal constitutional standard involves a somewhat

more extensive showing. That showing has three aspects:

First, the claim underlying the litigation
must directly arise out of, or relate to,
the defendant's forum-state activities.
Second, the defendant's in-state contacts

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 must represent a purposeful availment of the
privilege of conducting activities in the
forum state, thereby invoking the benefits
and protections of that state's laws and
making the defendant's involuntary presence
before the state's courts foreseeable.
Third, the exercise of jurisdiction must, in
light of the Gestalt factors, be reasonable.

United Elec., Radio & Mach. Workers v. 163 Pleasant St. Corp.,

960 F.2d 1080, 1089 (1st Cir. 1992).

We have developed a taxonomy that provides a variable

set of guidelines, each corresponding to a particular level of

analysis, for use when a trial court adjudicates a motion to

dismiss for want of personal jurisdiction. See Foster-Miller,

Inc. v. Babcock & Wilcox Can., 46 F.3d 138, 145-47 (1st Cir.

1995); Boit v. Gar-Tec Prods., Inc., 967 F.2d 671, 674-78 (1st

Cir. 1992). The most conventional of these methods — and the

one that applies here — authorizes the district court to

restrict its inquiry to whether the plaintiff has proffered

evidence which, if credited, suffices to support a finding of

personal jurisdiction. Rodriguez v. Fullerton Tires Corp., 115

F.3d 81, 83-84 (1st Cir. 1997); Foster-Miller, 46 F.3d at 145.

To make this prima facie showing, the plaintiff cannot

rest upon mere averments, but must adduce competent evidence of

specific facts. Foster-Miller, 46 F.3d at 145; Boit, 967 F.2d

at 675. When he does so, the court must accept the proffer at

face value. Foster-Miller, 46 F.3d at 145. Determining the

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adequacy of this prima facie jurisdictional showing is a

quintessentially legal determination — a determination which, on

appeal, engenders de novo review. Rodriguez, 115 F.3d at 84.

In the circumstances at bar, the district court

correctly found the appellant's proffer wanting. The appellant

failed even to allege — let alone offer competent proof — that

Veritas had conducted any business in Massachusetts or that it

had any significant ties to the state. Indeed, the appellant's

only mention of Veritas in either his amended complaint or in

his affidavit in opposition to the motion to dismiss indicated

that Veritas was the transferee and holder of the NetFax shares,

and that he believed it to be owned and managed by Lombardi.

The mere acceptance of shares transferred from within the forum

state, without more, does not constitute a minimum contact

sufficient to subject a foreign corporation to jurisdiction in

that state's courts. E.g., Shaffer v. Heitner, 433 U.S. 186,

216 (1977). Nor will the fact that the transferee is

beneficially owned or controlled by a person or entity who does

business in the forum state suffice to tip the jurisdictional

balance. See Keeton v. Hustler Magazine, Inc., 465 U.S. 770,

781 n.13 (1984) ("[N]or does jurisdiction over a parent

corporation automatically establish jurisdiction over a wholly

owned subsidiary."); Cent. States, S.E. & S.W. Areas Pension

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Fund v. Reimer Express World Corp., 230 F.3d 934, 944 (7th Cir.

2000) (similar).

In the face of these powerful precedents, the appellant

attempts to bolster his position by noting that his opposition

to the motion to dismiss portrayed Lombardi as an agent of

Veritas (so that business transacted by Lombardi in

Massachusetts could be attributed to Veritas). This attempt

fizzles. In order to defeat a motion to dismiss for want of in

personam jurisdiction, a plaintiff must do more than simply

surmise the existence of a favorable factual scenario; he must

verify the facts alleged through materials of evidentiary

quality. See Foster-Miller, 46 F.3d at 145; Boit, 967 F.2d at

675. Thus, allegations in a lawyer's brief or legal memorandum

are insufficient, even under the relatively relaxed prima facie

standard, to establish jurisdictional facts. Cf. Fragoso v.

Lopez, 991 F.2d 878, 887 (1st Cir. 1993) (explaining that

statements in a brief are not adequate to forestall summary

judgment); Kelly v. United States, 924 F.2d 355, 357 (1st Cir.

1991) (similar).

That ends this aspect of the matter. Because the

appellant placed insufficient facts before the district court to

satisfy the minimum requirements for the exercise of personal

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jurisdiction, the court appropriately granted Veritas's motion

to dismiss.

B. The Motion for Relief from Judgment.

Following the district court's order of dismissal, the

appellant moved for relief from judgment.1 He submitted with the

motion a new affidavit asserting that Veritas was subject to in

personam jurisdiction in Massachusetts because it functioned as

Lombardi's "alter ego." The appellant posits that this neoteric

submission bridged the jurisdictional gap, and that the district

court therefore should have vacated its order of dismissal. He

is wrong.

A motion for relief from judgment cannot be used merely

to reargue a point already decided. See Cody, Inc. v. Town of

Woodbury, 179 F.3d 52, 56 (2d Cir. 1999); Cashner v. Freedom

Stores, Inc., 98 F.3d 572, 577 (10th Cir. 1996). Given the lack

of exceptional circumstances justifying extraordinary relief

under subsection (6) of Rule 60(b), Ahmed v. Rosenblatt, 118

1 To be precise, the appellant filed a motion seeking (1)
"reconsideration of the [district] court's judgment dated
February 23, 2000," or (2) "to alter or amend [that] judgment,"
or (3) "reconsideration under Rule 60(b)." We do not spend any
time on the first two options. After all, new matters cannot be
asserted as of right on a motion for reconsideration, Appeal of
Sun Pipe Line Co., 831 F.2d 22, 25 (1st Cir. 1987), and the ten-
day window for filing motions to alter or amend, Fed. R. Civ. P.
59(e), had closed by the time that the appellant filed his
motion. Accordingly, we treat the appellant's motion, favorably
to him, as one filed under Rule 60(b).

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F.3d 886, 891 (1st Cir. 1997), the appellant's cryptic motion in

this case necessarily invoked subsection (1) of Rule 60(b).

That subsection permits a court to relieve a party from a final

judgment on the ground of "mistake, inadvertence, surprise, or

excusable neglect." Fed. R. Civ. P. 60(b)(1). The second

affidavit, however, includes nothing that indicates why the

information that it contains was omitted from the appellant's

first affidavit. This brings the appellant's case within the

ambit of our holding in Mas Marques v. Digital Equipment Corp.,

637 F.2d 24 (1st Cir. 1980).

In Mas Marques, as here, the plaintiff filed a motion

and affidavit after the entry of judgment. Id. at 28. There,

as here, the late affidavit contained no explanation for the

plaintiff's failure to submit the critical information to the

court at an earlier date. Id. at 29. There, as here, the

plaintiff made no assertion that further facts became known to

him only after judgment had been entered. Id. Given those

omissions, the district court concluded that the tardy affidavit

did not warrant relief under Rule 60(b). We agreed, stating:

In these circumstances, particularly where
[the plaintiff] should have been aware of
the deficiencies in his case before the
entry of judgment, relief under Rule 60(b)
would not have been justified. . . . A
defeated litigant cannot set aside a
judgment . . . because he failed to present
on a motion for summary judgment all of the

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 facts known to him that might have been
useful to the court.

Id. at 29-30 (citations, internal quotation marks, and emphasis

omitted).

Mas Marques controls here. Because the appellant has

given no acceptable reason for the delay in presenting the

second affidavit to the district court, we cannot say that the

court abused its discretion in refusing to reopen the

jurisdictional question. See 12 James Wm. Moore et al., Moore's

Federal Practice ¶ 60.41[1][c][ii] (3d ed. 1999) ("Courts

repeatedly deny relief when they find that the facts and

circumstances demonstrate a lack of diligence in pursuing . . .

litigation.").

The appellant strives to avoid this result in two ways.

First, he asks for leniency on the basis that he originally

filed suit pro se. This request seems disingenuous. While pro

se litigants sometimes are accorded a measure of latitude in

procedural matters, e.g., Instituto de Educacion Universal Corp.

v. United States Dep't of Educ., 209 F.3d 18, 23 (1st Cir.

2000), no such latitude is warranted where, as here, the

unrepresented party is himself a lawyer.2 Godlove v. Bamberger,

2The appellant is a Harvard-trained attorney admitted to the
bars of New York, Massachusetts, and the District of Columbia.
He has practiced securities law for some thirty-five years.

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Foreman, Oswald & Hahn, 903 F.2d 1145, 1148 (7th Cir. 1990).

And at any rate, by the time the motion to dismiss was argued,

the appellant had retained counsel who appeared on his behalf.

Under the circumstances, the appellant is not entitled to any

special solicitude.

The appellant's second initiative consists of a plea,

made in his Rule 60(b) motion, that the district court ought not

to have dismissed the complaint without affording him the

opportunity to conduct discovery about Veritas and its business

activities. This plea lacks merit. If a party needs

jurisdictional discovery, that party has an obligation to

request it in a timely manner. Rodriguez, 115 F.3d at 86;

Whittaker Corp. v. United Aircraft Corp., 482 F.2d 1079, 1086

(1st Cir. 1973). The appellant failed to fulfill this

obligation: to the contrary, he did not seek additional

discovery at any time prior to the entry of an adverse judgment.

This was plainly too late. 3 See Rodriguez, 115 F.3d at 86.

3
The appellant's dilatoriness is all the more striking
because ample opportunity for discovery existed prior to the
lower court's ruling. The original complaint was filed by the
plaintiff on March 29, 1999; the defendants' joint motion was
filed on September 9, 1999; and the district court rendered its
decision on February 23, 2000.

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Consequently, we cannot fault the district court for denying the

motion for relief from judgment.4

III. THE CLAIMS AGAINST LOMBARDI

Our conclusion that the district court lacked

jurisdiction over Veritas, see supra Part II, impacts the

appellant's other claims as well. That holding leaves Lombardi

as the sole defendant. Personal jurisdiction over him is not a

problem. The district court found, preliminarily, that it had

such jurisdiction, and Lombardi does not now contest that

finding. We return, then, to the claims limned in the amended

complaint.

A. The First Four Counts.

As to the first four counts of the amended complaint,

the appellant has thus far sought rescission — and only

rescission — as a remedy. The district court highlighted this

narrow focus, observing that these counts "contain[] no explicit

statement of harm or loss." The appellant's brief on appeal

likewise emphasizes this focus, and his counsel twice reaffirmed

at oral argument in this court that rescission was the goal of

4
Given this holding, we need not evaluate whether the
additional facts contained in the second affidavit, if
seasonably placed before the court, would have made a
dispositive difference on the jurisdictional question. We do
note, however, that the contents of that affidavit appear more
conclusory than factual.

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the first four counts. Finally, the appellant presented no

developed argumentation in support of a claim for money damages

in either the district court or this court.5 Thus, no claim for

money damages is properly in the case at this juncture. See

Gooley v. Mobil Oil Corp., 851 F.2d 513, 515 (1st Cir. 1988)

(discussing pleader's obligation to allege "each material

element necessary to sustain recovery").

Nor are the first four counts viable in respect to the

prayer for rescission. When a party seeks to rescind a contract

for the transfer of property, a court ordinarily can enforce

rescission only as between the party who surrendered the

property (or persons claiming by, through, or under that party)

and the party who holds the property. Here, Dyman (who

delivered the disputed stock) is not a party, and Veritas (which

now holds the stock) is not properly before the court. To cinch

matters, none of the counts in question either state facts

sufficient to place the appellant in Dyman's shoes or delineate

any theory under which rescission might be ordered in the

5
Although the prayer for relief inscribed at the tail end of
the amended complaint made a passing reference to money damages
regarding one of the four counts, the appellant did not pursue
this vague allusion either here or below. Consequently, the
averment lacks the capacity to transform the character of the
first four counts. See Aulson v. Blanchard, 83 F.3d 1, 7 (1st
Cir. 1996) (deeming waived an allegation made by the plaintiff
in the trial court but not thereafter pressed).

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absence of both the transferor and the transferee. 6

Consequently, the district court's decision to dismiss the first

four counts of the amended complaint in their entirety passes

muster.

Before leaving this topic, we hasten to add an

acknowledgment that, even without Dyman and Veritas in the case,

some claim theoretically might lie on the appellant's behalf

within the framework of the first four counts of the amended

complaint. Thus, we do not foreclose the possibility that, on

remand, the district court, in its discretion, might yet permit

the complaint to be further amended. We do not pursue the point

for we must deal with matters as they were when the trial court

ruled, not with matters as they might become.

B. Count Five.

Count five is a different kettle of fish. That count

embodies a claim for specific performance of the warrant

provision of the Agreement executed in connection with the

appellant's removal as NetFax's guiding light. The pertinent

provision states that Lombardi "shall grant to Mr. Barrett a

warrant to acquire One Million (1,000,000) shares of [NetFax's]

6Indeed, the appellant apparently recognizes this
shortcoming. See Appellant's Brief at 32 (indicating that
"Veritas has to be before the Court" in order to effectuate
rescission).

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common stock . . . at an exercise price of $.001 per share."

The appellant alleges that Lombardi never delivered the warrant

and seeks specific performance of this covenant.

The district court ruled that it did not have subject-

matter jurisdiction over this count because "the total contract

price is $1,000," and "that amount . . . clearly falls short of

the $75,000 minimum amount in controversy required" as a

precondition for federal diversity jurisdiction under 28 U.S.C.

§ 1332(a). We review this determination de novo. Bull HN Info.

Sys., Inc. v. Hutson, 229 F.3d 321, 328 (1st Cir. 2000); Allen

v. R & H Oil & Gas Co., 63 F.3d 1326, 1336 (5th Cir. 1995). We

conclude that the district court erred by focusing on the

exercise price for the shares rather than the value of the

warrant itself.

The Supreme Court erected the framework for determining

whether a cause of action satisfies the jurisdictional minimum

in St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283

(1938). The Court laid down a general rule to the effect that

the amount specified by the plaintiff controls, as long as that

amount is asserted in good faith. Id. at 288. Hence, a court

can dismiss an action for insufficiency of the amount in

controversy only when, "from the face of the pleadings, it is

apparent, to a legal certainty, . . . that the plaintiff never

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was entitled to recover" a sum equal to, or in excess of, the

jurisdictional minimum. Id. at 289. On this record, we do not

believe that the district court supportably could say to a legal

certainty that the appellant was not entitled to recover more

than $75,000 (or property worth more than that amount) under

count five. We explain briefly.

As said, count five involves a warrant to acquire

1,000,000 shares of stock at an exercise price of $.001 per

share. The value of a warrant is typically the difference

between the market value (during the currency of the warrant

period) of the shares to which the warrant pertains and the

exercise price payable for those shares. See, e.g., Niagara

Hudson Power Corp. v. Leventritt, 340 U.S. 336, 343-44 (1951);

Custom Chrome, Inc. v. Comm'r, 217 F.3d 1117, 1125 (9th Cir.

2000); SEC v. Warde, 151 F.3d 42, 46 n.1 (2d Cir. 1998); Swiss

Bank Corp. v. Dresser Indus., Inc., 141 F.3d 689, 691 (7th Cir.

1998). In his first affidavit, dated October 11, 1999, the

appellant estimated the value of NetFax's patented technology at

somewhere between $10,000,000 and $100,000,000, and the market

value of NetFax stock at somewhere between $0.34 and $2.26 per

share. Even taking the low-end valuation, the shares to which

the warrant pertained theoretically were worth $340,000 at that

point. On this set of assumptions, the value of the warrant

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(the spread between market value and exercise price) would have

been $339,000. This is a sum well above the requisite

jurisdictional minimum.

We recognize, of course, that the party invoking

jurisdiction has the burden to show that it is proper. E.g.,

Viqueira v. First Bank, 140 F.3d 12, 16 (1st Cir. 1998). In an

amount-in-controversy case, however, all the plaintiff must do

to carry this burden in the face of a motion to dismiss is to

set forth facts which, if true, would prevent the trier from

concluding to a legal certainty that the potential recovery is

capped at a figure below the jurisdictional minimum. See Dep't

of Recreation & Sports v. World Boxing Ass'n, 942 F.2d 84, 88

(1st Cir. 1991). Here, the appellant did supply some

information bearing on the value of the warrant, and Lombardi

proffered nothing to contradict these figures or otherwise

establish that the appellant, even if successful in recovering

the property (the warrant), would wind up with a prize worth

less than $75,000. We do not think that the district court, on

this bareboned record and without conducting an evidentiary

hearing, could simply brush aside the appellant's estimates as

"based entirely on speculation" and declare to a legal certainty

that the warrant was worth less than the required jurisdictional

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amount. For this reason, we hold that the district court erred

in dismissing count five of the amended complaint.7

IV. CONCLUSION

We need go no further. For the reasons stated, we

sustain the determination that Veritas was not properly before

the court and, accordingly, we affirm so much of the lower

court's order as dismissed, without prejudice, the claims

against Veritas. We also affirm the district court's dismissal

of the first four counts of the amended complaint as to

Lombardi. We hold, however, that the court erred in concluding

on this meager record that it lacked subject-matter jurisdiction

over the fifth count of the amended complaint. We therefore

reverse so much of the order of dismissal as pertains to that

count and remand for further proceedings consistent with this

opinion.

Affirmed in part, reversed in part, and remanded. No costs.

7
There is a wrinkle here. According to the terms of the
Agreement, the warrant expired during the pendency of this
appeal. We leave the legal significance (if any) of this new
development to the parties and the district court.

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