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Pacific Islands Development Program, East-West Center

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Swift Air Motion To Dismiss Denied By CNMI Judge
U.S. company accused of defrauding Saipan Air Inc.

By Alexie Villegas Zotomayor

SAIPAN, CNMI (Marianas Variety, Feb. 26, 2013) – The Swift Air executives’ motion to dismiss the case filed against them by Saipan Air Inc. was denied by the court yesterday.

In her 17-page memorandum of opinion and order, District Court for the NMI Chief Judge Ramona V. Manglona found that the court has specific personal jurisdiction over each of the defendants — Swift Air executives Donald A. Stukes, Jeffrey Conry, Hank Tobert, and Boris Van Lier — who each "purposefully availed himself of the privilege of conducting activities in the CNMI and that Saipan Air, Inc.’s fraud claim arises out of and relates to those activities.

Manglona said that the exercise of jurisdiction in the CNMI comports with fair play and substantial justice.

"Because the court has jurisdiction over defendants on the fraud claim, it may exercise supplemental jurisdiction over them on the related RICO [Racketeer Influenced and Corrupt Organizations Act] claims," Manglona’s order stated.

In this regard, the court also found it unnecessary to determine whether an alternative basis for jurisdiction exists in 18 U.S.C. 1965(b) which establishes nationwide service of process in RICO claims."

Tan Holdings’ Saipan Air Inc. sued Swift Air LLC last year for its failure to provide aircraft and is asking $50 million in punitive damages, special damages to be proven at trial, disgorgement of ill-gotten gains, restitution, attorney fees, costs, and for other relief.

Swift Air executives then filed a motion in court to dismiss this case for lack of jurisdiction in Oct. 2012.

In making its decision, the court resolved whether the defendants are subject to specific jurisdiction in the CNMI.

Manglona said that the court may exercise specific jurisdiction over a nonresident defendant if his or her less substantial contacts with the forum give rise to the cause of action before the court.

"If a defendant is subject to specific jurisdiction on any one claim, the court may exercise jurisdiction over all related claims," said Manglona.

The court explained that specific jurisdiction as to the fraud claim "depends on whether defendants purposely directed their activities or consummated a transaction in the CNMI or with a CNMI resident."

"If the court has specific jurisdiction over defendants on the fraud claim, it may exercise supplemental jurisdiction over them on the related RICO claims," Manglona’s order stated.

It was further explained that in evaluating purposeful direction, the court applies an effects test which imposes three requirements: (1) committed an intentional act, (2) expressly aimed at the forum state, (3) causing harm that the defendant knows is likely to be suffered in the forum state.

As to intentional act, the court finds that each of the defendants committed intentional acts.

Judge Manglona’s order also stated that to sustain specific jurisdiction, it is not enough that the intentional acts have foreseeable effects in the forum state — they must be expressly aimed at the forum state.

For the court, the requirement of "express aiming" is met when the defendant is alleged to have engaged in wrongful conduct targeted at a plaintiff whom the defendant knows to be a resident of the forum state.

The court found that Swift Air’s Conry, Van Lier, and Stukes knew that in negotiating for the agreement, Saipan Air was a CNMI resident.

The court also stated that each of the defendants "clearly" knew that the outcome of their various negotiations with Saipan Air would be felt in the CNMI. "Therefore their acts were expressly aimed."

The court also noted that the defendants knew that Saipan Air was a start-up company planning to bring tourists and investors to the CNMI and the effects of its failure to do so would be felt in the CNMI.

"Defendants knew that the brunt of the harm for any tortious conduct would be felt in the CNMI," Manglona’s order stated.

Even as the defendants declared that they did not act in their personal capacities, the court said, "this circumstance does not change the analysis."

Their being employees, the court said, does not "somehow insulate them from jurisdiction."

Manglona’s Feb. 25 order stated that the plaintiff, Saipan Air, has met its burden on the first two prongs of the test for specific jurisdiction, the burden is on the defendants to overcome the presumption of reasonableness.

In determining whether the exercise of personal jurisdiction over the defendants is reasonable, the court invoked a seven-factor analysis: (1) The extent of purposeful interjection into the forum state; (2) The burden on the defendant of defending in the forum; (3) The extent of conflict with the sovereignty of defendant’s state; (4) The forum state’s interest in adjudicating the dispute; (5) The most efficient judicial resolution of the controversy; (6) The importance of the forum to plaintiff’s interest in convenient and effective relief; and (7) The existence of an alternative forum.

The court said that the defendants purposefully interjected themselves into the CNMI when they made phone calls and sent e-mails to Saipan, citing that Conry and Van Lier solicited wire transfers and Stukes attempted to solicit a bridge loan from Saipan.

The defendants claim extreme burden on them to defend in the CNMI.

The court said that "the great distance" between Saipan and the U.S. was not an undue obstacle for the defendants when they sought business opportunity here and this should not be an undue burden for them to defend a lawsuit arising from their purposive conduct on Saipan.

The court believes that the CNMI’s interest in adjudicating the dispute is high.

It stated that the CNMI has an interest in affording its citizens a forum for redress of grievances.

For the court, the commonwealth’s economy is largely dependent on tourism and foreign investments which Saipan Air’s venture promised to promote.

The defendants want to confine the litigation in Arizona; however, the court said that efficiency for the litigation should not be confused with convenience for defendants

The court said that a federal court must apply CNMI law to the fraud claim that is the focus of this jurisdictional analysis.

"The District Court of the Northern Mariana Islands is better situated than the District of Arizona," said Manglona.

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