WILLIAM HAWKINS; ERIC KELLER; THOMAS ZATO; KRISTOF GABOR; JUSTIN PANCHLEY, Plaintiffs - Appellants,
I-TV DIGITALIS TAVKOZLESI ZRT., f/k/a DMCC Kommunikacios Rt., Defendant-Appellee, DIGI TAVKOZLESI ES SZOLGALTATO KFT.; RCS & RDS S.A.; RCS MANAGEMENT S.A.; DIGI COMMUNICATIONS, N. V.; ZOLTAN TESZARI, Respondents - Appellees, and LASZLO BORSY; MEDIAWARE CORPORATION; MEDIATECHNIK KFT.; PETERFIA KFT.; SAM BLACK, Defendants. WILLIAM HAWKINS; ERIC KELLER; THOMAS ZATO; KRISTOF GABOR; JUSTIN PANCHLEY, Plaintiffs - Appellees,
I-TV DIGITALIS TAVKOZLESI ZRT., f/k/a DMCC Kommunikacios Rt., Defendant-Appellant, DIGI TAVKOZLESI ES SZOLGALTATO KFT.; RCS & RDS S.A.; RCS MANAGEMENT S.A.; DIGI COMMUNICATIONS, N. V.; ZOLTAN TESZARI, Respondents - Appellants, and LASZLO BORSY; MEDIAWARE CORPORATION; MEDIATECHNIK KFT.; PETERFIA KFT.; SAM BLACK, Defendants.
Argued: January 31, 2019
from the United States District Court for the Eastern
District of Virginia at Alexandria. Leonie M. Brinkema,
District Judge. (1:05-cv-01256-LMB-JFA)
B. Gilmore, STEIN, MITCHELL, CIPOLLONE, BEATO & MISSNER,
LLP, Washington, D.C., for Appellants/Cross-Appellees.
Christopher Landau, QUINN EMANUEL URQUHART & SULLIVAN,
LLP, Washington, D.C., for Appellees/Cross-Appellants.
Jonathan E. Missner, Brittany W. Biles, Kevin L. Attridge,
STEIN, MITCHELL, CIPOLLONE, BEATO & MISSNER, LLP,
Washington, D.C., for Appellants/Cross-Appellees.
Charles Wm. McIntyre, Jr., Anand V. Ramana, Phillip C. Chang,
MCGUIREWOODS, LLP, Washington, D.C., for
Appellees/Cross-Appellants RCS & RDS S.A., DIGI
Communications, N.V., and Zoltán Teszári.
M. Lee, Michael Madigan, Washington, D.C., Carl Hennies,
QUINN EMANUEL URQUHART & SULLIVAN, LLP, Houston, Texas,
for Appellees/Cross-Appellants i-TV Digitális
Távközlési zrt. and DIGI
WYNN, DIAZ, and RICHARDSON, Circuit Judges.
RICHARDSON, CIRCUIT JUDGE.
case, we are called upon to decide several jurisdictional
issues arising from an international business dispute. Over a
decade ago, in 2007, five American Plaintiffs obtained a
default judgment against Hungarian businessman
László Borsy and several companies he
controlled, including one called i-TV Digitális
("i-TV").The judgment afforded the Plaintiffs not
just money damages but also injunctive and declaratory relief
requiring Borsy to give them a majority interest in i-TV and
the other companies. In 2008, some of the Defendants tried to
have the judgment set aside, but the district court rejected
their efforts in a decision we upheld on appeal. The
Plaintiffs, though, found it hard to enforce their judgment
against Borsy and the defendant companies, apparently because
almost all of their assets were located overseas.
judgment lay mostly dormant until 2017, when the Plaintiffs
moved to enforce it against Defendants Borsy and i-TV along
with several foreign Respondentsthat had bought i-TV from
Borsy. The Plaintiffs argued that the Respondents were the
Defendants' successors-in-interest and that, by buying
i-TV from Borsy, Respondents aided and abetted him in
violating the injunction. The Respondents, all located
overseas, strenuously objected to the district court's
personal jurisdiction over them; despite those objections,
the district court permitted the Plaintiffs to take extensive
discovery from the Respondents.
discovery was ongoing, the Respondents and i-TV discovered a
potential technical defect in subject matter jurisdiction
during the initial litigation that led to the 2007 default
judgment. On that basis, they moved the court to set aside
the default judgment as void under Federal Rule of Civil
Procedure 60(b)(4). The district court granted the motion.
Plaintiffs appeal from the district court's decision
finding the 2007 default judgment void for lack of subject
matter jurisdiction. They argue that the judgment was not
void because there was an arguable (even if erroneous) basis
for jurisdiction. We agree with the Plaintiffs and reverse
the district court's ruling on the Rule 60(b)(4) motion.
the Respondents have filed a cross-appeal challenging the
district court's decision to permit extensive discovery
from them notwithstanding a lack of personal jurisdiction.
The Plaintiffs respond that it is enough to allege that the
Respondents aided and abetted Borsy in violating the
injunction; such aiding-and-abetting, they argue, is always
enough to establish personal jurisdiction. We reject this
theory as applied to foreign nonparties like these
Respondents. Consider the facts here: the foreign Respondents
allegedly helped a foreign national carry out a purely
foreign business transaction whose only tie to our country
was that it allegedly violated a federal- court injunction.
That is not enough to supply the minimum contacts that due
process requires. The Plaintiffs alternatively argue that the
Respondents are Borsy's successors-in-interest, but the
Plaintiffs have effectively waived that theory by changing
their argument on appeal. Therefore, we hold that the
district court lacked personal jurisdiction over the
Respondents and order them dismissed. On remand, the district
court will determine whether and how the matter should
proceed against i-TV.
early 2000s, Borsy controlled three Hungarian business
entities: MediaTechnik kft. (a software company), i-TV (the
operator of a cable television network in Debrecen, Hungary),
and Peterfia kft. (a real estate company that owned the
buildings used by MediaTechnik and i-TV). In 2002 and 2003,
Borsy sold roughly one-third of MediaTechnik and Peterfia to
an American, Plaintiff William Hawkins, in exchange for an
investment of $330, 000.
long afterward, Borsy proposed a "roll-up"
transaction in which MediaTechnik, i-TV, and Peterfia would
be placed under a single parent company, Mediaware
Corporation. He solicited an additional $1 million from
Hawkins and, in return, promised Hawkins a 49% stake in
Mediaware. He also invited four other Americans to
participate in the roll-up: Plaintiffs Eric Keller, Thomas
Zato, Kristof Gabor, and Justin Panchley, each an executive
or engineer in the computer-software industry. Borsy promised
each of them an ownership stake of varying size (ranging from
0.98% to 8%) in Mediaware, plus a substantial salary, as
compensation for working at his companies.
Plaintiffs claim that they lived up to their end of the
bargain but Borsy did not live up to his. Instead, they
claim, he absconded with their money and the fruits of their
labor. Borsy failed to deliver the salaries or shares he had
promised to Keller, Zato, Gabor, and Panchley. And while
Borsy apparently delivered the Mediaware shares to Hawkins,
he never completed the roll-up of i-TV into Mediaware,
meaning Hawkins never acquired the indirect ownership
interest in i-TV that Borsy had promised. Borsy also
allegedly forged a stockholders' agreement authorizing
him to vote Hawkins' shares in Mediaware.
October 2005, all five Plaintiffs filed a civil action
against Borsy, Mediaware, MediaTechnik, Peterfia, and i-TV in
the Eastern District of Virginia. Their claims included
fraud, breach of contract, conversion, breach of fiduciary
duty, and unjust enrichment. They requested, among other
things, an order that Borsy and the companies give them the
shares that they had been promised.
Defendants failed to timely answer the complaint, and default
was entered against them. In April 2006, the Defendants
finally appeared through counsel and successfully moved to
set aside the default. Peterfia and i-TV then moved to
dismiss for lack of personal jurisdiction, while Borsy,
Mediaware, and MediaTechnik answered the complaint. The
district court denied i-TV and Peterfia's motion to
dismiss without prejudice, and the case proceeded to
Defendants' participation in the litigation was
short-lived. In May 2006, Defendants' counsel withdrew.
The Plaintiffs then moved for a second entry of default due
to the Defendants' failure to participate in discovery.
The district court granted the motion. Next, the Plaintiffs
requested default judgment. That request was referred to a
magistrate judge, who recommended entering a default judgment
that included over $1.5 million in compensatory relief and an
injunction requiring the Defendants to deliver the promised
after, in September 2006, the Plaintiffs filed an emergency
motion requesting prompt entry of their requested judgment.
They reported that Borsy now claimed to have sold his shares
in i-TV, and they sought an immediate injunction to prevent
"Borsy's ongoing efforts to dissipate assets
rightfully belonging to Plaintiffs and to render any judgment
in favor of Plaintiffs meaningless." J.A. 339. The
district court granted the request in part: on October 2,
2006, it enjoined the Defendants "from disposing or
dissipating any assets, by sale, merger, or otherwise, or
from undertaking any transactions out of the ordinary course
of business, without the consent of the shareholders holding
a majority of the stock in such companies." J.A. 343-44.
January 2007, the Plaintiffs again requested the prompt entry
of default judgment in full. They reported that Borsy had
disobeyed the court's injunction by convening an i-TV
shareholder meeting and issuing i-TV shares to Respondent
DIGI Távközlési és
Szolgáltató kft ("DIGI kft."), which
thereby became the majority owner of i-TV. In February 2007,
the district court entered default judgment, adopting the
magistrate judge's recommendation. The judgment, among
other things, ordered specific performance of the promised
share transfers, awarding the Plaintiffs collectively
majority interests in Mediaware, MediaTechnik, i-TV, and
Peterfia. It also enjoined the Defendants "from
disposing of or dissipating any assets of the defendant
entities and the defendant entities may not engage in any
transactions without the consent of plaintiffs William
Hawkins, Eric Keller, Kristof Gabor, Justin Panchley, and
Thomas Zato." J.A. 376. None of the Defendants appealed
from the default judgment.
2008, three of the Defendants-Mediaware, MediaTechnik, and
Borsy- resurfaced and, through new counsel, moved to set
aside the judgment as void for lack of subject matter
jurisdiction under Rule 60(b)(4). They argued that
Mediaware's principal place of business was Virginia when
the Plaintiffs filed suit, meaning that Mediaware was a
Virginia citizen for diversity purposes. If true, that would
have destroyed complete diversity, because three of the
Plaintiffs were also Virginia citizens.
district court denied the motion from the bench. It noted
that Borsy had, during the proceedings leading up to the
default judgment, entered a declaration stating that
Mediaware had no relevant contacts with Virginia. That was
inconsistent with his new, post-judgment argument that
Mediaware was in fact headquartered there. We affirmed,
reasoning that the 2007 default judgment was not void unless
there was "no arguable basis" for jurisdiction.
Hawkins v. Borsey, 319 Fed.Appx. 195, 196 (4th Cir.
2008) (citing Wendt v. Leonard, 431 F.3d 410, 412-13
(4th Cir. 2005)). This standard was not satisfied,
particularly given Borsy's earlier declaration.
Plaintiffs proved unable to enforce the 2007 default
judgment, collecting just over $5, 000 from a retainer held
by Borsy's American attorney. Despite some contact with
DIGI kft. and the other Respondents, the Plaintiffs never
initiated enforcement proceedings in Hungary, ostensibly
because the Hungarian courts would not afford them relief.
However, the Plaintiffs later learned that one of i-TV's
indirect parent companies had sought to access the U.S.
capital markets in 2012 through a bond offering and, more
recently, planned an initial public offering of stock in
Romania. That apparently inspired them to try to collect from
i-TV's owners in federal court.
in May 2017, the Plaintiffs returned to the Eastern District
of Virginia. They moved to enforce the judgment against i-TV
as well as several Respondents that were not parties to the
original judgment. Four of the Respondents are companies,
each representing a link in i-TV's chain of ownership:
DIGI kft. (which owns i-TV, having acquired it from Borsy),
RCS & RDS, S.A. (a Romanian company that wholly owns DIGI
kft.), DIGI Communications N.V. (a Dutch company that
controls RCS & RDS, S.A.), and RCS Management S.A. (a
Romanian company that controls DIGI Communications N.V.). The
Plaintiffs later added Zoltán Teszári (a
Romanian citizen who owns a controlling stake in RCS
Management S.A.) as a Respondent. The Respondents were served
overseas pursuant to the Hague Convention on the Service
Abroad of Judicial and Extrajudicial Documents in Civil or
the district court, the Plaintiffs presented two theories for
imposing liability on the Respondents. The first is a
successor-in-interest theory, according to which DIGI kft.
succeeded to the Defendants' obligations under the
default judgment when it acquired i-TV. The second is a
civil-contempt theory, which posits that DIGI kft. aided and
abetted Borsy's violation of the district court's
injunctions. Borsy himself allegedly violated the injunctions
when he sold i-TV to DIGI kft. in a two-step transaction.
First, in October 2006, just after the district court entered
its first injunction, Borsy convened a meeting of i-TV's
shareholders and issued new shares to DIGI kft., giving it a
51% interest in i-TV. Second, in October 2008, Borsy sold his
remaining shares to DIGI kft. through an entity incorporated
in the Marshall Islands, violating the final injunction
entered in 2007. The Plaintiffs claim that DIGI kft. was
"in active concert or participation" with Borsy,
Fed.R.Civ.P. 65(d)(2)(C), because it bought i-TV despite
knowing that the injunctions forbade the sale.
Respondents opposed the Plaintiffs' motion to enforce.
They argued, among other things, that the district court
lacked personal jurisdiction over them as required to grant
the requested relief. The district court denied the motion to
enforce without prejudice from the bench. It concluded that
the motion raised "real issues that have to be fleshed
out," requiring discovery. J.A. 754. The court barely
addressed personal jurisdiction, noting that "when
there's an ...