The opinion of the court was delivered by: Lewis A. Kaplan, District Judge.
This is an action by a Frenchman against a Canadian for an alleged securities fraud in Dubai. Not surprisingly, defendants move to dismiss for lack of subject matter jurisdiction and, in the alternative, lack of personal jurisdiction over the individual defendant.
The plaintiff, Francois Marland, is a French citizen who resides in Switzerland.*fn1 Defendant Big Sky Energy Corporation, although incorporated under the laws of Nevada, has its principal place of business in London and offices in Canada and Kazakhstan.*fn2 Its shares are traded on NASDAQ.*fn3 Its chairman, defendant Matthew Heysel, is a Canadian citizen resident in Dubai.*fn4
In early 2006, Marland began buying Big Sky shares. By June 11, 2006, he had accumulated 250,000 shares valued at $277,500.*fn5
On June 11, 2006, Piero Ventura, an associate of Marland, met Heysel in a hotel in Dubai. The two allegedly discussed Big Sky's loss of an important oil field as well as the company's general prospects. According to the complaint, Heysel told Ventura that Big Sky had just signed an agreement with Alexander Maschkevich, whom he described as being well connected in the Kazakh region and as a main shareholder of Eurasia Group. In addition, Heysel related that he had given Eurasia Group several million shares of Big Sky to recover the lost oil field for the company. He claimed that Big Sky would become a billion dollar company as a result of these developments. He urged Marland not to sell his Big Sky shares and allegedly added that he "had conveyed this information as 'inside information' in advance of any public announcement."*fn6
Marland claims that he in consequence "was effectively frozen," implying that this was so because he believed that he could not sell his shares while in possession of inside information. He continued to hold his stock, rather than sell, as Big Sky shares dropped to approximately 4 cents per share.*fn7 He charges Heysel and Big Sky with fraud on the theory that Heysel's statements were materially false in that "Eurasia Group did not enter into a strategic partnership with Big Sky, nor did it gain any major stock interest in exchange for providing business opportunities that might have increased Big Sky's market value."*fn8 Moreover, Big Sky, he says, did not recover the lost oil field.*fn9
The complaint contains four causes of action. The first and third charge Heysel and Big Sky, respectively, with common law fraud based on the alleged misrepresentations by Heysel to Ventura. The second and fourth allege violations of Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act")*fn10 and Rule 10b-5 thereunder*fn11 against Heysel and Big Sky, respectively, on the same theory.
Subject Matter Jurisdiction
Federal courts are courts of limited jurisdiction. Plaintiffs therefore always have the burden of pleading and proving ...