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In re Bayou Hedge Fund Investment Litigation

January 19, 2007

IN RE BAYOU HEDGE FUND INVESTMENT LITIGATION
THIS DOCUMENT RELATES TO:
BROAD-BUSSEL FAMILY LIMITED PARTNERSHIP, MARIA LOUISE MICHELSOHN, MICHELLE MICHELSOHN, AND HERBERT BLAINE LAWSON, JR., INDIVIDUALLY AND ON BEHALF OF ALL OTHER PERSONS AND ENTITIES SIMILARLY SITUATED, PLAINTIFFS,
v.
BAYOU GROUP LLC, ET AL., DEFENDANTS.



The opinion of the court was delivered by: McMahon, J.

06 MDL 1755 (CM)

DECISION AND ORDER GRANTING IN PART AND DENYING IN PART THE HENNESSEE DEFENDANTS' MOTION TO DISMISS THE COMPLAINT

The court, for its opinion disposing of the motion to dismiss the complaint as filed by defendants The Hennessee Group LLC, Elizabeth Lee Hennessee and Charles Gradante (hereafter, "The Hennessee Defendants"):

Procedural Posture

The reader's familiarity with the demise of the Bayou Funds and subsequent criminal and civil proceedings is assumed.

This putative class action was originally filed in the District of Connecticut. It was transferred here by order of the Judicial Panel for Multi-District Litigation on April 18, 2006. Ordinarily, because the transfer is no more than a change of courtroom, this court would be required to apply the law that Connecticut would apply. In re Parmalat Sec. Litig., 412 F. Supp. 2d 392, 399 (S.D.N.Y. 2006).

However, the matter is complicated by the fact that defendants have moved to dismiss the case for lack of personal jurisdiction. If Connecticut lacked jurisdiction over defendants, it affects the choice of law issues that are raised by the motion on the merits. Hatfill v. Foster, 415 F. Supp. 2d 353 (S.D.N.Y. 2006). Therefore -- even though there is absolutely no doubt that this court has jurisdiction over defendants -- the first order of business is to decide whether Connecticut had personal jurisdiction over defendants. I will then turn to the choice of law issues -- and then to the merits of the motion.

Personal Jurisdiction

All three Hennessee Defendants first assert that Connecticut lacked personal jurisdiction over them. Plaintiff has the burden of establishing jurisdiction pursuant to this statute by a preponderance of the evidence, with all doubts being resolved in plaintiffs' favor.

Plaintiffs allege that Broad-Bussel is a limited partnership organized under the laws of North Carolina, with registered offices in Chapel Hill, North Carolina. The three individually named plaintiffs allege that they are all citizens of New York.

Defendant Hennessee Group LLC ("Hennessee Group") is a New York limited liability corporation with its principal place of business in New York. Its principals, defendants Elizabeth Lee Hennessee ("Elizabeth Hennessee") and Charles J. Gradante ("Gradante"), are also New York citizens and residents.

Defendants allege that The Hennessee Group is not subject to in personam jurisdiction in Connecticut because Connecticut restricts the right of non-residents to sue non-Connecticut corporations in Connecticut courts. Conn. Gen. Stat. § 33-929(f) provides "Every foreign corporation shall be subject to suit in this state, by a resident of this state or by a person having a usual place of business in this state . . . ." The Hennessee Group is a limited liability corporation. Plaintiffs are not residents of Connecticut and do not have any place of business in Connecticut. Therefore, at first blush it appears that Connecticut would not countenance the exercise of long-arm jurisdiction over The Hennessee Group, an out-of-state corporation.

Plaintiffs assert that they are not purporting to sue under this statute but rather under Connecticut's other long-arm statute, Conn. Gen. Stat. § 52-59(b), which provides:

As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any nonresident individual, foreign partnership or foreign voluntary association . . . who in person or through an agent:

(1) transacts any business within the state; (2) commits a tortious act within the state . . . .

This statute is modeled on New York's Civil Practice Law and Rules, C.P.L.R. 302, and so can be interpreted by looking at New York law. Zartolas v. Nisenfeld, 440 A.2d 179, 180-81 (Conn. 1981). However, unlike C.P.L.R. 302, this particular statute applies only to ...


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