United States Court of Appeals, Third Circuit, Appellate Docket Nos. 89-5908, 89-5883 and 91-5376
We represented Carteret Savings Bank, F.A. ("Carteret") (and its successors-in-interest) in this matter. Carteret retained a New Orleans attorney, Louis J. Shushan, and his law firm to represent it in connection with a loan agreement for the construction of a multi-use project in Louisiana. The loan documents prepared by the defendant attorney and his law firm included an agreement by Carteret to guarantee the obligations of its borrower to the general contractor of the proposed construction project. Defendant Shushan failed to advise Carteret that he had a prior and existing relationship with the general contractor. Among other things, Shushan failed to advise Carteret of this relationship when he attended a meeting with Carteret's loan officers in New Jersey.
Carteret's borrower subsequently defaulted on its obligations to the general contractor. The general contractor sued Carteret in Louisiana on its guarantee and obtained a judgment against Carteret in excess of $1,000,000.
Carteret instituted suit in New Jersey against Shushan (and his law firm) alleging that Shushan had committed fraud by, among other things, failing to disclose to Carteret at the meeting in New Jersey of its prior and existing relationship with the general contractor. Carteret further alleged that Shushan had breached the fiduciaries duties that they owed to Carteret. Carteret alleged that it would not have guaranteed the obligation of its borrower to the general contractor if it had known of Shushan's relationship with the general contractor.
Defendants moved to dismiss this action for lack of personal jurisdiction based on the fact that they were retained in Louisiana in connection with a loan involving a Louisiana construction project. The District Court Judge ruled that New Jersey could not exercise personal jurisdiction over defendants. Instead of dismissing the case, however, he ordered that the case be transferred to the District Court of Louisiana pursuant to 28 U.S.C. § 1406(a), which provides for transfer of actions where venue has been improperly laid.
Carteret appealed from this Order and also sought a writ of mandamus from the Third Circuit. Carteret argued, among other things, that § 1406(a) did not authorize the transfer of Carteret's action to the District Court of Louisiana because venue in New Jersey was proper. The Third Circuit issued the writ of mandamus requested by Carteret. The Court held that the trial court lacked authority to transfer the action to the District Court in Louisiana. The Third Circuit held that § 1406(a) could not be invoked where – as here – venue in the transferor forum was proper and the plaintiff objected to the transfer of the action. The Third Circuit remanded the matter to the District Court Judge to vacate his Order transferring the action to the District Court in Louisiana.
On remand, the District Court again determined that it lacked personal jurisdiction over defendants. The District Court dismissed the action.
Carteret appealed this dismissal to the Third Circuit. The Third Circuit vacated the District Court's dismissal of the action. The Appellate Court held that New Jersey could exercise personal jurisdiction over defendant Shushan and his law firm. The Court found it dispositive that Carteret had alleged that Shushan had committed fraud in New Jersey by failing to advise Carteret at a meeting in New Jersey of his prior and existing relationship to the general contractor. The Court further held that it had jurisdiction over defendants on Carteret's breach of fiduciary duty claim based on his attendance at the meeting in New Jersey and his regular mail and telephone contacts with Carteret in New Jersey.
