Application to Enforce Administrative Subpoenas Duces Tecum of S.E.C. v. Knowles

• Decision Date: 20 June 1996
• Docket Number: No. 95-1425,95-1425
• Citation: 87 F.3d 413
• Parties: In the Matter of an APPLICATION TO ENFORCE ADMINISTRATIVE SUBPOENAS DUCES TECUM OF the SECURITIES AND EXCHANGE COMMISSION, Applicant-Appellee, v. Gaye B. KNOWLES, Respondent-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 413

87 F.3d 413

In the Matter of an APPLICATION TO ENFORCE ADMINISTRATIVE SUBPOENAS DUCES TECUM OF the SECURITIES AND EXCHANGE COMMISSION, Applicant-Appellee, v. Gaye B. KNOWLES, Respondent-Appellant.

No. 95-1425.

United States Court of Appeals, Tenth Circuit.

June 20, 1996.

Raymond L. Robin, Olle, Macaulay & Zorrilla, Miami, Florida, (David W. Stark, Amy J. Griffin, Otten, Johnson, Robinson, Neff & Ragonetti, P.C., Denver, Colorado, with him on the briefs), for Respondent-Appellant.

Robert M. Fusfeld, Securities and Exchange Commission, Denver, Colorado, (Simon M. Lorne, General Counsel, Jacob H. Stillman, Associate General Counsel, Katharine B. Gresham, Assistant General Counsel, Catherine A. Broderick, Counsel to the Assistant General Counsel, Securities and Exchange Commission, Washington, D.C., Paul Gonson, Solicitor, of Counsel, on the brief), for Applicant-Appellee.

Before SEYMOUR, BRORBY, and MURPHY, Circuit Judges.

MURPHY, Circuit Judge.

This case arises out of the enforcement by the district court against the appellant, a foreign national, of two administrative subpoenas duces tecum issued by the Securities and Exchange Commission. The appellant argues that the district court lacked personal jurisdiction to enforce the subpoenas. The district court held that it did not need personal jurisdiction over the appellant to do so.

The question presented is whether the appellant has the requisite minimum contacts to justify the district court's exercise of personal jurisdiction over him. This court holds that he does and that the district court properly enforced the subpoenas.

I. BACKGROUND AND PROCEDURAL SETTING

On June 14, 1995, and again on June 30, 1995, the Securities and Exchange Commission (the "SEC") issued administrative subpoenas duces tecum in the name of the appellant, Gaye B. Knowles. The SEC served Knowles with the first subpoena by hand at LaGuardia Airport in New York City. It later served the second on Knowles's counsel in Miami, Florida. These subpoenas were issued in connection with the Formal Order of Investigation in the nonpublic investigation conducted by the SEC out of its Denver, Colorado, office, In the Matter of the Rockies Fund, Inc., Redwood Microcap Fund, Inc., and Combined Penny Stock Fund, Inc., et al. ¹ The SEC issued these subpoenas pursuant to its authority under 15 U.S.C. §§ 77s(b), 78u(b), and 80a-41(b).

Knowles is presently a Bahamian citizen and resident and has been so since 1951. He is an independent investment consultant and, at the times the subpoenas were served on him, was also the president of two Bahamian companies, Global Petrol Trading and Swiss EuroFund, Inc. ² In the investigation, the SEC sought to determine whether bank accounts in the names of these two companies were used to bribe brokers in the United States to sell certain stock of American companies in violation of federal securities laws. The first subpoena directed Knowles to appear at a deposition and to produce certain personal documents and documents relating to the bank accounts of Global Petrol Trading. The second subpoena directed the same and called for Knowles to produce documents relating to the bank accounts of Swiss EuroFund, Inc.

In response to the subpoenas, Knowles appeared for deposition in Miami, Florida, on July 12, 1995. Knowles produced certain corporate documents pursuant to the subpoenas but objected to producing monthly banking statements and other banking documents of the two companies. In order to enforce the subpoenas, the SEC applied to the district court in the judicial district where it is conducting the investigation, as authorized in 15 U.S.C. §§ 77v(b), 78u(c), and 80a-41(c).

The SEC filed an Ex Parte Application for an Order to Show Cause and Application for an Order Compelling Compliance with Administrative Subpoenas Duces Tecum. The United States District Court for the District of Colorado subsequently issued an Order to Show Cause. Thereafter, the SEC served Knowles with the Order to Show Cause outside his home in Nassau, Bahamas. Knowles responded to the Order to Show Cause and moved the district court to dismiss the SEC's application for lack of personal jurisdiction over him.

In an Amended Memorandum Order and Opinion, the district court held that it did not need personal jurisdiction over Knowles in order to enforce the subpoenas against him. It held, instead, that judicial enforcement of an administrative subpoena may be had where the agency can show that: (1) the inquiry is conducted pursuant to a lawfully authorized, legitimate purpose; (2) it is reasonably relevant to an investigation which the agency has authority to conduct; and (3) all administrative prerequisites have been met. See United States v. Powell, 379 U.S. 48, 57-58, 85 S.Ct. 248, 254-55, 13 L.Ed.2d 112 (1964); SEC v. Blackfoot Bituminous, Inc., 622 F.2d 512, 514 (10th Cir.), cert. denied, 449 U.S. 955, 101 S.Ct. 362, 66 L.Ed.2d 220 (1980). The district court determined that the SEC met this three-pronged burden and that Knowles had adduced no evidence to the contrary. It therefore ordered Knowles to comply with the subpoenas within ten days. This court subsequently granted Knowles's Motion to Stay the Amended Memorandum Order and Opinion pending appeal. This appeal followed.

On appeal, Knowles argues that the district court erred when it determined it did not need personal jurisdiction over him in order to enforce the subpoenas. He also argues that the district court could not properly exercise jurisdiction over him because of his lack of personal contacts with the United States. In response, the SEC maintains that the district court had personal jurisdiction over Knowles based upon sufficient minimum contacts with the United States in relation to: (1) the subpoenas; (2) the matters under investigation by the SEC; and (3) his general business. In the alternative, the SEC argues that the minimum contacts analysis is not required because the district court had personal jurisdiction over Knowles based upon the SEC's service of the subpoenas on Knowles within the territorial limits of the United States. The SEC does not argue that personal jurisdiction is not required in order to enforce the subpoenas, as the district court held.

II. JURISDICTION

This court has jurisdiction to review the Amended Memorandum Order and Opinion under 28 U.S.C. § 1291. The district court's ruling on personal jurisdiction involves a question of law that is reviewed de novo. Taylor v. Phelan, 912 F.2d 429, 431 (10th Cir.1990), cert. denied, 498 U.S. 1068, 111 S.Ct. 786, 112 L.Ed.2d 849 (1991).

The issue here is a narrow one: whether the district court had personal jurisdiction over Knowles to enforce the administrative subpoenas duces tecum. The court notes at the outset that Knowles does not contend the SEC lacked the authority to issue the subpoenas under the tripartite test set out in Powell and Blackfoot. He does not challenge the methods or places of service of process employed in serving either the subpoenas or the Order to Show Cause. Moreover, Knowles does not seriously contend that he lacked capacity to produce corporate records in his possession or that the SEC could only secure production of the documents through service of subpoenas on Knowles's former corporate employers. ³ Therefore, we do not address these issues and limit this opinion to the question of the jurisdiction of the district court, based upon the extraterritorial service of the Order to Show Cause, to enforce the SEC's subpoenas duces tecum against Knowles. ⁴

A. Minimum Contacts

Under the due process clause of the Fifth Amendment, personal jurisdiction over a party does not exist unless that party has sufficient "minimum contacts" with the jurisdiction. International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945). ⁵ The exercise of jurisdiction must not "offend 'traditional notions of fair play and substantial justice.' " Id. (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 343, 85 L.Ed. 278 (1940)). Furthermore, the party's activities within the jurisdiction must render it foreseeable that the party should reasonably anticipate being haled into the forum court. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 567, 62 L.Ed.2d 490 (1980).

Under Federal Rule of Civil Procedure 4(k)(2), the service of a summons with respect to a claim under federal law in which Congress has authorized worldwide service establishes personal jurisdiction over the defendant, subject to constitutional limits. The Securities Exchange Act permits the exercise of personal jurisdiction to the limits of the Due Process Clause of the Fifth Amendment. SEC v. Unifund SAL, 910 F.2d 1028, 1033 (2d Cir.1990). Congress has provided for worldwide service of process in cases of the enforcement of subpoenas issued by the SEC. 15 U.S.C. § 77v(a). The language of § 77v(a) authorizes the service of process on a defendant in any district "of which the defendant is an inhabitant or wherever the defendant may be found." Id.; see also 15 U.S.C. §§ 78u(c), 80a-41(c) (employing language to permit service "wherever [the defendant] may be found"); accord 15 U.S.C. § 78aa. Under § 80a-41(c), the SEC is entitled to invoke the aid of the district court in which it is conducting its investigation.

Knowles was served by the SEC with the Order to Show Cause outside his home in Nassau, Bahamas. When the personal jurisdiction of a federal court is invoked based upon a federal statute providing for nationwide or worldwide service, the relevant inquiry is whether the respondent has had sufficient minimum contacts with the United States. See, e.g., Busch v. Buchman, Buchman & O'Brien, 11 F.3d 1255, 1258 (5th Cir.1994); United Liberty Life Ins. v. Ryan, 985 F.2d 1320, 1330 (6th Cir.1993); United Elec. Workers v. 163 Pleasant St. Corp., 960 F.2d 1080, 1085-86 & n. 6 (1st Cir.1992); Go-Video, Inc. v. Akai...