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State, Dep't of Treasury, Division of Investment v. Qwest Communications International

August 18, 2006

STATE OF NEW JERSEY, DEPARTMENT OF TREASURY, DIVISION OF INVESTMENT, BY TREASURER JOHN E. MCCORMAC, PLAINTIFF-RESPONDENT,
v.
QWEST COMMUNICATIONS INTERNATIONAL, INC., JOSEPH P. NACCHIO, STEPHEN M. JACOBSEN, DRAKE S. TEMPEST, MARC B. WEISBERG, JAMES A. SMITH, AFSHIN MOHEBBI, LEWIS O. WILKS, CRAIG D. SLATER AND ARTHUR ANDERSEN, LLP DEFENDANTS, AND ROBERT S. WOODRUFF AND ROBIN R. SZELIGA, DEFENDANTS-APPELLANTS.
STATE OF NEW JERSEY, DEPARTMENT OF TREASURY, DIVISION OF INVESTMENT, BY TREASURER JOHN E. MCCORMAC, PLAINTIFF-RESPONDENT,
v.
QWEST COMMUNICATIONS INTERNATIONAL, INC., JOSEPH P. NACCHIO, STEPHEN M. JACOBSEN, DRAKE S. TEMPEST, MARC B. WEISBERG, JAMES A. SMITH, AFSHIN MOHEBBI, LEWIS O. WILKS, CRAIG D. SLATER AND ARTHUR ANDERSEN, LLP DEFENDANTS, AND PHILIP F. ANSCHUTZ, DEFENDANT-APPELLANT.



On appeal from Superior Court of New Jersey, Law Division, Mercer County, L-3738-02.

The opinion of the court was delivered by: Grall, J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

APPROVED FOR PUBLICATION

Argued November 16, 2005

Before Judges Stern, Grall and Lihotz.

This appeal arises from an action commenced by the State of New Jersey, Department of Treasury, Division of Investment (NJT) to recover damages allegedly sustained as a consequence of a civil conspiracy to induce investments in stock issued by Qwest Communications International, Inc. (Qwest) through a series of fraudulent misrepresentations. We granted three individual, non-resident defendants, Philip E. Anschutz, Robert S. Woodruff and Robin R. Szeliga (collectively defendants), leave to appeal from an order denying their motions to dismiss for want of personal jurisdiction.*fn1

While defendants are not New Jersey residents and do not have continuous and systematic contacts with this State sufficient to permit an exercise of general jurisdiction, we conclude that NJT has established a "relationship among [each] defendant, the forum, and the litigation" that is sufficient to permit exercise of personal jurisdiction. Lebel v. Everglades Marina, Inc., 115 N.J. 317, 323, 327 (1989) (quoting Shaffer v. Heitner, 433 U.S. 186, 204, 97 S.Ct. 2569, 2579, 53 L.Ed. 2d 683, 698 (1977)). The exercise of specific jurisdiction is based on defendants' "intentional act[s] calculated to create an actionable event in [this State]," -- i.e., the intentional dissemination of false information "expected or intended to cause injury in New Jersey." Blakey v. Continental Airlines, Inc., 164 N.J. 38, 67 (2000).

The following facts relevant to specific jurisdiction are drawn from the pleadings and the evidential materials submitted on the motion to dismiss. See Blakey, supra, 164 N.J. at 71-73; Lebel, supra, 115 N.J. at 324. The judge took no testimony, and there are no findings based on credibility to which we owe deference. See Rova Farms Resort, Inc. v. Investors Ins. Co., 65 N.J. 474, 484 (1974). As defendants acknowledge, our review is de novo.

NJT alleged that between April 1, 1999 and December 3, 2001, it purchased seven million shares of common stock issued by Qwest at prices that were artificially inflated through a civil conspiracy to defraud investors by misrepresenting earnings and assets in public statements, press releases, SEC filings and conference calls with investors in which a representative of NJT participated. Qwest has since restated earnings for the relevant years and announced its intention to provide additional restatements.

NJT's complaint details the dates and contents of misleading statements and correlates those dates with the dates of large purchases of Qwest stock made by NJT. The complaint also recites transactions involving shares of stock in Qwest from which the individual defendants turned a profit and diminished the potential for loss of their personal wealth, through public sale or, in Anschutz's case, hedging transactions and a sale of the Anschutz Company's stock in Qwest to Bell South.

None of the individual defendants disputed signing the documents or making statements attributed to them in releases and filings. Nor do they dispute NJT's history of stock purchases or their individual acquisitions or sales of Qwest stock.

Anschutz became involved in Qwest before its stock was publicly traded. He owned 100% of the stock in the Anschutz Company. The Anschutz Company owned SP Telecom. SP purchased Qwest, and adopted its name. After that purchase, the Anschutz Company owned 100% of Qwest. Anschutz was a chairman of Qwest and a member of its executive committee at all relevant times.*fn2

In fall 1996, when Qwest was considering a public offering of its stock, Anschutz met with Joseph P. Nacchio at Teterboro Airport in New Jersey. They discussed Nacchio's joining Qwest as its CEO. An agreement was reached under which Qwest opened offices in New Jersey and Nacchio worked from New Jersey, subject to the condition that he could be required to work in Colorado up to four days per week. Nacchio spent significant time in Colorado but also worked in New Jersey. Nacchio was in regular contact with Anschutz, whom he consulted on every major decision confronting him as CEO of Qwest. During Nacchio's tenure, Qwest traded its stock publicly. After the initial public offering, the Anschutz Company owned about 85% of the shares.

Woodruff was Qwest's CFO and Vice President of Finance when Nacchio took over as Qwest's CEO, and he stayed with Qwest until March 2001. Woodruff reported to Nacchio. He was responsible for treasury and finance. In addition, after Qwest went public, it added internal audit and investor relations divisions, both of which reported to the CFO. Woodruff had responsibility for SEC filings, which he signed after they were prepared by staff under his supervision. He involved outside auditors as he deemed appropriate. The investor relations division communicated with shareholders and the investment community; press releases and SEC filings were sent to investors who requested information. Woodruff reviewed releases about earnings that were disseminated to the press and investors. A representative of NJT received ...


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