The brother and a friend of Eric Watson have failed in a US appeal to formally distance themselves from a UK court ruling against the NZ expat businessman. 

Richard Watson and Timothy Connell were seeking to protect themselves and their companies against further litigation from Kea Investments, which won a case against Eric Watson in the UK in 2018.

But the United States Court of Appeals for the Eleventh Circuit upheld rulings of district courts in Florida and Georgia that they had no jurisdiction over Kea.

The appeals court decision described Connell as a friend of Eric Watson. 

In 2018, a London court ordered Watson to pay £43.5 million (NZ$83.21) to businessman Owen Glenn’s Kea Investments company, after business dealings went sour. Neither his brother Richard Watson, Connell nor their companies were party to the UK litigation. 

However, Kea had contacted Connell as it tried to find out where Eric Watson’s money had gone.

Connell and Richard Watson, and their companies, responded by suing Kea. Connell and Hart Dairy filed suit in the southern district of Florida, while Richard Watson and Hart Agriculture filed in the southern district of Georgia. 

The two men and their companies were seeking anti-suit injunctions to prevent Kea joining them to the proceedings in the UK. 

 The also wanted a declaration that their own assets were subject to jurisdictions in Florida and Georgia respectively, rather than the UK.

 Squirrelling money away

After winning its case against Eric Watson in the UK courts, Kea tried to identify and obtain his assets to satisfy that judgment. 

The company contacted US-based Connell three times through his lawyer in NZ, because Connell had received money from a Panamanian company connected with Eric Watson. 

Kea said, based on Eric’s prior actions, it thought he was trying to avoid satisfying the UK judgment by squirrelling away his money with friends and family, the appeals court ruling said.

The company had contacted Connell because there was “no explanation of how or on what terms” Connell had become the beneficial owner of a “very substantial quantity” of Eric Watson’s shell company. 

Kea asked Connell to explain his earlier corporate dealings with Eric Watson and his shell companies, and how they related to Connell's own business activities with Hart Dairy and other companies. 

No jurisdiction

Connell and Hart Dairy sued Kea in the southern district of Florida to seek a declaration that they were not liable to Kea for its judgment against Eric Watson, along with an anti-suit injunction.

Richard Watson and Hart Agriculture sued Kea in the southern district of Georgia along the same lines. The only major difference was that Watson and Hart Agriculture did not disclose any assets subject to UK jurisdiction, as Connell had.

Connell revealed to the district court in Florida that he took out a US$2m (NZ$3.13m) loan in funds that appeared to have been potentially traceable to the UK. 

He conceded that the UK courts had jurisdiction over those funds, but he wanted a ruling that they had no jurisdiction over him personally or his other assets, including Hart Dairy.

He sought a default judgment in his favour because Kea had not responded to the US lawsuit.

The UK case was a threat because it would order Connell's and Hart Dairy's assets to be removed from the district. The district court in Florida declined to rule on that because Kea was not subject to jurisdiction in the state. 

It declined the anti-suit injunction because that would prevent the UK court from being able to enforce its valid judgment.

If Connell and Hart Dairy were right to contend they weren't subject to UK jurisdiction, then the UK wouldn't proceed against them, the Florida court ruled.

The appeals court disagreed with the appellants' argument that the three letters sent to Connell's lawyer in NZ gave the two US state courts jurisdiction over Kea.

“With no office, agent or sales in Florida, sending a few exploratory letters isn’t enough to constitute ‘carrying on a business’ to subject Kea to specific personal jurisdiction in Florida,” the court ruled.

Kea’s only connection to Georgia was that it mentioned a dairy farm in that state in one of its letters to Connell, the court said.