## Facts

- GT Securities, Inc. (GT), a California investment bank, provides advisory services for transactions involving technology companies.
- Triangle Venture Capital Group GmbH & Co. KG Nr. IV (Triangle), a German venture capital firm, and its subsidiary Klastech GmbH (Klastech), a German laser manufacturer, sought GT’s services to help identify a buyer for Klastech.
- GT and Klastech executed a July 31, 2010 engagement letter retaining GT to assist with exploring “strategic alternatives,” including a sale or merger, and requiring Klastech to pay a success (finder’s) fee if a transaction closed and to publicize GT’s role.
- Over the following years, GT alleged ongoing California-directed activity tied to the engagement, including frequent calls and emails with GT in California, at least one in-person meeting at GT’s California headquarters, and Klastech’s appointment of a California-based American sales manager.
- An American company later acquired Klastech.
- GT alleged that Triangle and Klastech refused to pay the success fee and made false statements minimizing or denying GT’s role in the sale.
- GT sued Triangle and Klastech in the U.S. District Court for the Northern District of California, asserting claims arising from the engagement letter and the alleged post-sale statements.
- Triangle and Klastech moved to dismiss for lack of personal jurisdiction (contesting general and specific jurisdiction). Klastech also argued GT’s claims should be dismissed or stayed in favor of arbitration based on equitable estoppel and arbitration clauses in other transaction-related agreements.

## Issues

1. Whether the Northern District of California could exercise specific personal jurisdiction over Klastech based on its California-directed contacts connected to retaining and working with a California investment bank.
2. Whether the Northern District of California could exercise specific personal jurisdiction over Triangle based on its alleged role in negotiating and directing the engagement and related California contacts.
3. Whether GT could be compelled to arbitrate under equitable estoppel when GT sued on an engagement letter that did not include an arbitration clause.

## Decision

- The court denied Klastech’s motion to dismiss for lack of personal jurisdiction, holding that specific jurisdiction existed.
- The court denied Triangle’s motion to dismiss for lack of personal jurisdiction, holding that specific jurisdiction existed.
- The court rejected Klastech’s arbitration argument based on equitable estoppel and declined to dismiss or stay the case on that ground.

## Legal Principles

- Specific personal jurisdiction in the Ninth Circuit generally requires: (1) purposeful direction or purposeful availment, (2) claims that arise out of or relate to the defendant’s forum contacts, and (3) a showing that exercising jurisdiction is reasonable.
- In contract-related cases, purposeful availment turns on more than the bare existence of a contract with a forum resident; courts consider prior negotiations, contemplated future consequences, the contract’s terms, and the parties’ course of dealing.
- Claims “arise out of” forum contacts when there is a sufficient connection between the defendant’s forum-related conduct and the asserted causes of action (often evaluated under a “but for” type of analysis in Ninth Circuit cases).
- Reasonableness is evaluated using factors such as the burden on the defendant, the forum state’s interest, the plaintiff’s interest in convenient and effective relief, and efficient resolution.
- A party seeking arbitration must show a valid basis to bind the opposing party to an arbitration agreement; equitable estoppel is a limited doctrine that may apply when a plaintiff’s claims depend on, or seek the benefits of, a contract containing an arbitration clause while attempting to avoid that clause.
- When the plaintiff’s claims are based on a separate agreement that lacks an arbitration provision and do not rely on the agreement containing the arbitration clause, equitable estoppel generally does not require arbitration.

## Conclusion

The court held that Triangle and Klastech’s California-directed conduct connected to hiring and working with a California investment bank supported specific personal jurisdiction in California for claims tied to the engagement and the alleged nonpayment and misstatements, and it refused to force arbitration where GT sued on an engagement letter without an arbitration clause and equitable estoppel did not apply.


GT Securities, Inc. v. Klastech GmbH, 2014 WL 2928013 (2014)