A recent decision by the California Court of Appeal clarified that, to demonstrate the court’s personal jurisdiction over a defendant in an antitrust case, the attorney general must simply establish that a defendant’s activities directed at the California market have a direct nexus with the anticompetitive conduct alleged in the complaint. SK Trading International Co. v. Superior Court of San Francisco County, No. A163590 (Cal. App. 1st Dist. Mar. 21, 2022).
The California attorney general filed suit against two oil and gas companies, SK Energy and Vitol, alleging that they participated in a conspiracy to manipulate the California gas market by artificially inflating spot market prices. As part of that suit, the attorney general sought to serve SK Trading, a South Korean corporation, which was the parent of SK Energy. SK Trading moved to quash service for lack of personal jurisdiction.
SK Trading argued that it has never had a presence in California or conducted business in the state, nor has it ever entered into a contract to buy or sell gasoline or gasoline futures contracts. It also stated that it has never executed any trades in California. The attorney general provided evidence that SK Trading encouraged SK Energy to hire a new trader with California gasoline trading experience and that it interviewed and approved the hiring of a trader formerly employed by Vitol. The new trader considered SK Trading his ”management,” and was unhappy with SK Trading’s “micromanagement” of his actions. A SK Trading executive met with a Vitol trader in Texas and discussed the “joint venture” in the West Coast market.
The trial court denied the motion to quash, finding that the attorney general had provided evidence that SK Trading “controlled and facilitated key aspects of the alleged conspiracy.” The court also found that SK Trading had played a primary role in hiring and supervising the former Vitol trader. The trial court concluded “the operative facts of the controversy are related to the defendant’s contact with this state.” SK Trading appealed.
In the appellate court, the attorney general argued that specific jurisdiction (jurisdiction related to the cause of action at issue) applied to SK Trading. The court stated the test for specific jurisdiction: 1) the defendant has purposefully availed itself of the forum benefits; 2) the controversy is related to the defendant’s contacts with the forum; and 3) asserting personal jurisdiction would comport with “fair play and substantial justice.”
The appellate court found that SK Trading “actively participated in the hiring and management of SK Energy’s California trader and facilitated agreements between SK Energy and Vitol regarding gasoline sales in California.” The court found that these are not general management activities in a parent-subsidiary relationship. The court also noted that whether the arrangements resulting from SK Trading’s actions were anticompetitive is yet to be decided, but the company’s executives admittedly participated in activities focused on the California gasoline market.
The California Court of Appeal distinguished this decision from an earlier federal district court decision that SK Trading was not subject to personal jurisdiction in California on similar claims. The federal court based its decision on agency and ratification theories. But the California Court of Appeal held that, under California law, “Plaintiff need not establish that SK Energy was acting as an agent of SK Trading so long as its claims relate to SK Trading’s own activities directed to the California market.” The appellate court also rejected the federal court’s use of a “but for” standard, under which plaintiff had to show it would not have been injured but for the actions of SK Trading. The court held that it was sufficient that SK Trading’s activities directed at the California market had a direct nexus with the alleged anticompetitive conduct.