Facts

Urban Commons LLC partnered with DBS Bank to put together a real estate investment trust (REIT) that would be publicly traded. It also approached Frank and Jerome Yuan about investing in the REIT by contributing six hotels to the REIT's portfolio. The Yuans would receive payment for the hotels from the proceeds of the IPO. DBS Bank Ltd. (DBS Bank) advised on the IPO as its issue manager, a secured lender to the REIT, a joint bookrunner, and underwriter. DBS Bank appointed DBS Trustee, its wholly-owned Singapore-based subsidiary, to serve as trustee. In early 2019, to prepare for the IPO, DBS Bank circulated copies of draft prospectuses along with other financial information and documents to the involved parties, including communications concerning Urban Commons and several California properties. In April 2019, on the eve of the IPO, Urban Commons reported that one of the original members of the banking syndicate involved in the IPO was withdrawing. Urban Commons approached the Yuans to cover an $89 million shortfall in IPO-related fees and expenses. DBS Bank negotiated a deal between the Yuans and Urban Commons, where Urban Commons would retain $89 million owed to the Yuans for their contribution of the six properties and later repay the shortfall to the Yuans. The Yuans' loan to Urban Commons was made on May 22, 2019, through a corporation, Lodging USA LendCo, LLC (LendCo), which the Yuans subsequently assumed control of. The IPO went forward on May 24, 2019, but by March 2020 the REIT defaulted and suspended trading due to fraud by Urban Commons. In the subsequent bankruptcy, the Yuans' $89 million loan was wiped out and their properties were seized and sold. LendCo brought a lawsuit against DBS Bank for negligent misrepresentation, violation of California's Unfair Competition Law (UCL), and unjust enrichment/restitution. The Court dismissed the complaint for failure to state a claim because LendCo failed to allege its misrepresentation claim with sufficient particularity, it did not plead a vested interest required by the UCL, and the basis of its unjust enrichment claim was unclear. LendCo amended its complaint, dropping its UCL claim and adding facts regarding the statements it claims to be actionable under the tort of negligent misrepresentation and the basis of its unjust enrichment claim.

PLAINTIFF'S CONTENTIONS: Plaintiff maintained that defendants were subject to specific jurisdiction since defendants were engaged in economic activity within California such as "contracting directly with private distributors located in California." Moreover, plaintiff argued that the court may exercise personal jurisdiction over defendants because "DBS Trustee was tasked with monitoring the REIT Manager and the underlying properties of the REIT, of which eight out of 16 were located in California, creating multiple continuing relationships and obligations between DBS Trustee and the State." As to the misrepresentation claim, plaintiff alleged that it was induced into making its $89 million loan to Urban Commons through a series of misrepresentations made by defendants, including a draft prospectus and overview of financials made to the Yuans in January 2019, statements in its prospectus that the REIT was "well-structured for growth," and statements in January 2019 that the Queen Mary would require minimal capital expenditure. Finally, plaintiff argued that it conferred an unjust monetary benefit on defendants by providing the $89 million capital shortfall that was necessary for the IPO.

DEFENDANTS' CONTENTIONS: Defendants alleged that plaintiff never explained what intentional act it committed that was expressly aimed at California for specific jurisdiction. Defendants maintained that any alleged misrepresentations claims based on statements made in 2019 were barred by the three-year statute of limitations. Finally, defendants alleged that other statements made about the growth potential of the IPO and capital investment were mere puffery that were not subject to misrepresentation claims.

Result

The court entered judgment for defendant. It dismissed the action with prejudice as to DBS Bank Ltd. for failure to state a claim and dismissed the action without prejudice as to DBS Trustee Ltd.