Hawes v. Reilly

          Newport County Superior Court (NC 14-148) Associate Justice Brian P. Stern

          For Plaintiff: Michael S. Pezzullo, Esq.

          For Defendant: Brandon S. Bell, Esq.

          Present: Suttell, C.J., Goldberg, Flaherty, Robinson, and Indeglia, JJ.

          OPINION

          William P. Robinson III, Associate Justice

         The plaintiff, George T. Hawes, appeals from a May 4, 2015 final judgment entered in the Newport County Superior Court. That judgment was entered to reflect an April 27, 2015 written decision in which the hearing justice quashed an execution previously issued by the Rhode Island Superior Court on a State of Utah District Court judgment and dismissed the plaintiff's petition to enforce the Utah judgment, on the grounds that Utah did not have personal jurisdiction over the defendant, Daniel P. Reilly.^[1] On appeal, the plaintiff contends that the hearing justice erred in refusing to grant full faith and credit to the order of the Utah District Court with respect to personal jurisdiction. He further avers that the hearing justice erred in determining that Utah did not have personal jurisdiction over Daniel. Lastly, he posits that Daniel "forfeited the defense of lack of personal jurisdiction."

         For the reasons set forth in this opinion, we affirm the judgment of the Superior Court.

         I

         Facts and Travel

         The facts of the case before this Court are somewhat complicated but are not materially in dispute. In relating those facts in this opinion, we rely primarily on the March 16, 2010 complaint filed in state court in Utah, the April 27, 2015 decision of the Rhode Island Superior Court in the instant case, and other documents in the record.

         A company named InnerLight Holdings, Inc. (InnerLight), with its principal place of business in Utah, hired William Reilly (Daniel's father) to act as their corporate counsel for the purpose of obtaining authorization from the United States Securities and Exchange Commission (SEC) to publicly trade InnerLight stock. Ultimately, however, InnerLight did not receive final authorization from the SEC to trade its shares publicly.

         In its March 16, 2010 First Amended Complaint filed in the State of Utah District Court, InnerLight represented that it had agreed to pay William with 650, 000 shares of InnerLight stock and had agreed to let him hold an additional 600, 000 shares, to be transferred after InnerLight became a public company. InnerLight further alleged that William, in the process of acting as InnerLight's corporate counsel, transferred 700, 000 shares without permission through several corporate entities-Ashworth Development, LLC (Ashworth); Doylestown Partners, Inc. (Doylestown); Shamrock Equities, Inc. (Shamrock); and Beachview Associates, Inc. (Beachview) (collectively, the corporate entities). Of significance is the fact that, according to his affidavit filed in Rhode Island Superior Court, Daniel was a minority shareholder in Doylestown, Shamrock, and Beachview, as well as being the secretary of Doylestown and Beachview and the Vice President of Shamrock.^[2] Mr. Hawes ultimately purchased shares of InnerLight stock that had purportedly been transferred by William to the corporate entities. Mr. Hawes also purchased warrants.^[3] InnerLight then rescinded the stock offerings, but Mr. Hawes did not receive a refund for the shares he had purchased.

         On March 16, 2010, InnerLight filed its previously mentioned First Amended Complaint in state court in Utah against William, Daniel, Shannon, the corporate entities, Mr. Hawes, and other investors who had purchased shares of InnerLight stock.^[4] Thereafter, Mr. Hawes answered the complaint. Included in his answer was a cross-claim against William, Daniel, Shannon, and the corporate entities, as well as other parties.^[5] On June 29, 2010, Daniel, Shannon, and the corporate entities filed a motion to dismiss InnerLight's First Amended Complaint in state court in Utah on the ground that Utah did not have personal jurisdiction over them;^[6] in addition, both sides filed memoranda of law with respect to that motion. Daniel's Utah counsel subsequently withdrew, and neither Daniel nor counsel representing him were present at the hearing on the motion to dismiss. The Utah District Court then denied the motion to dismiss in a brief order which stated that "Innerlight made a prima facie showing by pleading sufficient facts to establish that this Court may exercise personal jurisdiction over each of the non-resident Defendants." They then continued not to appear in the state court, and they did not engage new counsel. Accordingly, on May 11, 2012, an amended default judgment on Mr. Hawes's cross-claim was entered against Daniel, William, Shannon, and the corporate entities in the amount of $775, 000, plus "reasonable expenses, including attorney's fees * * *."

         On April 21, 2014, Mr. Hawes filed a "Petition to Enforce a Foreign Judgment" in the Rhode Island Superior Court, seeking enforcement in this jurisdiction of the default judgment from Utah against Daniel. On June 20, 2014, an execution was issued in the amount of $971, 351.78. On October 30, 2014, Daniel filed a motion to quash the execution and dismiss the petition for lack of personal jurisdiction in the foreign action.

         The hearing justice, after considering the briefings of the parties and after hearing argument, issued a written decision on April 27, 2015. In his written decision, the hearing justice first addressed whether or not he needed to give full faith and credit to the order of the state court in Utah that denied Daniel's motion to dismiss. After a thorough and commendable discussion of the facts and applicable precedent, the hearing justice determined that he would not be obligated to give full faith and credit to the denial of the motion to dismiss because that order was "vague" and did not include any "underlying reasoning." He added that "[i]n this case, it does not seem that a final determination of personal jurisdiction had [been] reached;" and he expressly noted that "[t]he order only states a prima facie showing of personal jurisdiction ha[d] been made." The hearing justice then reviewed Daniel's contacts with Utah and the applicable Utah law and came to the conclusion that Utah did not have personal jurisdiction over Daniel. For that reason, he quashed the execution and dismissed Mr. Hawes's petition. Final judgment subsequently entered on May 4, 2015. Mr. Hawes filed a timely appeal.

         II

         Standard of Review

         In a case which similarly involved the doctrine of full faith and credit, we stated, with respect to the standard of review to be applied, that "this Court will apply a de novo standard of review to questions of law that may implicate a constitutional right." Goetz v. LUVRAJ, LLC, 986 A.2d 1012, 1016 (R.I. 2010).^[7]

         With respect to issues of personal jurisdiction, we have explained that usually "mixed questions of law and fact, as well as inferences and conclusions drawn from the testimony and evidence presented at trial, are entitled to the same deference as the trial justice's findings of fact, that is, they will not be disturbed on appeal unless it is clearly wrong or otherwise incorrect as a matter of law." Cassidy v. Lonquist Management Co., LLC, 920 A.2d 228, 232 (R.I. 2007) (internal quotation marks omitted). However, we went on in Cassidy to clarify that "when deciding mixed questions of law and fact that involve constitutional issues, our review is de novo." Id. Therefore, we concluded that "[o]ur review of a challenge to in personam jurisdiction is de novo." Id.; see also Cerberus Partners, L.P. v. Gadsby & Hannah, LLP, 836 A.2d 1113, 1117 (R.I. 2003) (stating that "[o]ur review [of the dismissal of a case for failure to make a prima facie showing of personal jurisdiction] is de novo").

         III

         Analysis

         A

         Full Faith and Credit

         Mr. Hawes contends on appeal that the hearing justice erred in granting the motion to quash the execution and dismiss the petition because he did not grant full faith and credit to the order of the ...