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Out-of-stater subject to Louisiana law

By John O'Brien | Apr 17, 2007

BATON ROUGE, La. - James Gable recently found out that the long arm of Louisiana law reaches all the way to his home in California.

Gable's appeal to the Louisiana Supreme Court was denied April 11, meaning he will stay a defendant in Louisiana courts. He's part of a lawsuit that alleges misrepresentations in connection to the sale of various United States Telemetry Corp. securities.

Gable, one of eight defendants in the suit filed by Southeast Wireless Network, Slaydon Investment and Celia Katz, individually and as executrix of the succession of Samuel Katz, filed an Exception of Lack of Personal Jurisdiction with which the trial court agreed.

The state's Court of Appeals and Supreme Court did not, however, with the Supreme Court calling on a test of Louisiana's long-arm statute in its discussion. Gable was an employee of Texaco and was given a spot on USTC's board of directors because of Texaco's substantial investment in it.

"In this case, Plaintiffs have presented evidence of a specific action taken by Gable, in Louisiana, during his tenure on the board, which Plaintiffs allege give rise to their damages," Justice Catherine Kimball wrote. "Plaintiffs point to Gable's presence at a July 24, 2001 meeting in Baton Rouge which was attended by other USTC board members, USTC investors and potential investors.

"We find that Gable's silence at the meeting, his failure to take action to correct any false statements and/or misrepresentations made by his fellow directors, and his failure to disclose the true state of USTC's affairs to the Plaintiffs, are actions and omissions which, arguably, directly give rise to the Plaintiffs' damages. Based on this evidence, we find that Gable deliberately engaged in significant activities within Louisiana, and created continuing obligations between himself and Louisiana residents."

The dispute started with USTC's plan to develop equipment that would transfer data using low-frequency radio waves that were auctioned off by the Federal Communications Commission in 1994. The company was incorporated in Delaware, but had its principal place of business in Baton Rouge.

The plaintiffs were all Louisiana residents who owned the licenses for the radio bands. They allege that they were caused financial harm by USTC's omissions and misrepresentations related to the state of USTC's finances and technology.

The trial court will now be able to exercise jurisdiction over Gable.

"Despite the fact that Gable's actions may have been done solely in a corporate capacity, Louisiana, as a means of protecting its citizens, should not permit a director's wrongdoing in the sale of securities to escape personal responsibility via a corporate shield," Kimball wrote.

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