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    Nevada Developers' Ignorance Of Investors' Location Precludes Suit In California

    "A funnel hovered over the American West. Into the large end went investor dollars and investor dreams. Out the little end streamed dollars into Las Vegas, where a Nevada intermediary made loans to Nevada land developers who had high hopes for big projects. The funnel channeled over $40 million in 2006 and 2007. But remember what happened next: the subprime meltdown. The investors ended up getting back just 17 cents on the dollar. They sued the developers."


    So begins Justice John Shepard Wiley Jr.'s opinion in Farina v. Savwcl Iii, 2020 Cal. App. LEXIS 514.  As further detailed in the opinion, the developers obtained money from over 500 investors, about 50 of whom lived in California.  When they brought suit in California, Superior Court Judge Teresa A. Beaudet granted the developers' motion to dismiss because she found that the developers did not have the minimum contacts with California necessary to support jurisdiction.

    The Court of Appeal affirmed Judge Beaudet's ruling finding that the developers did not know where the investors were located because the developers dealt with a hard money loan broker in Las Vegas that acted as intermediary.  As a result, the Court of Appeal found "On this record, there was no willful ignorance.  There was just ignorance."  

    Although the investors brought a variety of claims, none appears to have involved the California Corporate Securities Law of 1968.  Thus, the Court of Appeal's opinion does not address whether an offer or sale of a security was made "in this state".  The investors were previously unsuccessful in establishing federal court jurisdiction.  West Charleston Lofts III, LLC v. Farina, 2017 U.S. Dist. LEXIS 76458.