Brown v. Kerkhoff

Decision Date23 August 2007
Docket NumberNo. 4:06-cv-00342-JEG.,4:06-cv-00342-JEG.
PartiesHeidi BROWN, and Heidi Brown as Parent and Next Friend of Trevor Rhiner, Individually and On Behalf of All Others Similarly Situated, Plaintiffs, v. Dr. Paul KERKHOFF; Kerkhoff Chiropractic; The Masters Circle; Dr. Larry Markson; Dr. Bob Hoffman; Dr. Dennis Perman; and John Does, Defendants.
CourtU.S. District Court — Southern District of Iowa

Kimberley K. Baer, Steven P. Wandro, Wandro & Associates PC, Des Moines, IA, for Plaintiffs.

James H. Gilliam, Sean P. Moore, Brown Winick Graves Gross Baskerville Schoenebaum, Des Moines, IA, Jonathan R. Poole, Mary M. Brockington, Strickland Brockington Lewis LLP, John E. Floyd, Bondurant Mixon & Elmore LLP, Atlanta, GA, for Defendants.

ORDER

GRITZNER, District Judge.

This matter comes before the Court on a Motion to Dismiss for Failure to State a Claim (Clerk's No. 21) filed by Defendants Kerkhoff Chiropractic, The Masters Circle, Inc., Larry Markson, Bob Hoffman, Dennis Perman, and Paul Kerkhoff; a Motion to Dismiss for Lack of Personal Jurisdiction (Clerk's No. 22) filed by Defendants The Masters Circle, Inc., Larry Markson, Bob Hoffman, and Dennis Perman; and a Motion for Leave to File Third Amended Complaint and Dissolve or Modify the State Court's June 15, 2006, Order Pursuant to 28 U.S.C. 1450 filed by Plaintiffs (Clerk's No. 33). Plaintiffs are represented by Kimberley Baer, Steven Wandro, and Kasey Kincaid. Defendants are represented by Mary Brockington, Jonathan Poole, James Gilliam, and Sean Moore. Following an April 27, 2007, hearing, these matters are fully submitted and are ready for disposition.1

                                                       TABLE OF CONTENTS
                FACTUAL AND PROCEDURAL HISTORY...........................................................474
                  I.  Factual Allegations................................................................474
                      A.  The Defendants.................................................................474
                      B.  Defendants' Alleged Wrongful Practices.........................................476
                      C.  The Proposed Class Representatives.............................................477
                          1.  Heidi Brown and Trevor Rhiner..............................................477
                          2.  Cynthia Christian..........................................................478
                      D.  Nonresident Defendants' Contacts with Iowa.....................................478
                          1.  The Masters Circle.........................................................478
                              a.  Physical Presence......................................................478
                              b.  Virtual Presence.......................................................481
                          2.  Individual Nonresident Defendants..........................................481
                              a.  Markson................................................................481
                              b.  Hoffman................................................................482
                              c.  Perman.................................................................482
                II. Procedural History...................................................................483
                DISCUSSION...............................................................................483
                
                  I.  Issues Related to Standing.........................................................483
                      A.  Relevance of the State Court's June 2006 Order.................................483
                      B.  Standing of Brown and Rhiner to Sue The Masters Circle, Hoffman
                            Markson, and Perman..........................................................484
                          1.  Applicable Legal Standards.................................................484
                          2.  Discussion.................................................................485
                          3.  The Third Amended Complaint................................................486
                      C.  Conclusion.....................................................................487
                 II.  Motion to Dismiss for Lack of Personal Jurisdiction................................487
                      A.  Applicable Legal Standards.....................................................487
                          1.  Burden of Proof............................................................487
                          2.  Constitutional and Statutory Considerations................................488
                              a.  Service of Process.....................................................488
                              b.  Constitutional Parameters..............................................489
                      B.  Personal Jurisdiction Under RICO...............................................489
                          1.  Statutory Authorization....................................................489
                              a.  Statutory Provisions...................................................489
                              b.  Analysis...............................................................490
                                   i.  The Argument for Subsection (d)...................................491
                                  ii.  The Argument for Subsection (b)...................................491
                                 iii.  Application of Subsection (b).....................................493
                                       (a) The Ninth Circuit Approach....................................494
                                       (b) The Tenth Circuit Approach....................................494
                                       (c) Application of the Tests......................................495
                          2.  Constitutional Considerations..............................................497
                          3.  Conclusion.................................................................497
                      C.  Personal Jurisdiction Under the Calder "Effects" Test..........................497
                          1.  Applicable Legal Standards.................................................497
                          2.  Discussion.................................................................498
                      D.  Personal Jurisdiction Under the Iowa Long-Arm Statute..........................499
                          1.  Applicable Legal Principles................................................499
                          2.  Summary of Defendants' Contacts............................................501
                              a.  The Masters Circle.....................................................501
                              b.  Individual Defendants..................................................503
                          3.  Nature, Quality, and Quantity of the Nonresident Defendants'
                                Contacts, and the Relation of Such Contacts to Plaintiffs' Causes of
                                Action...................................................................503
                                a.  The Masters Circle...................................................503
                                     i.  Internet Contacts...............................................503
                                         (a) Legal Standards.............................................504
                                         (b) Analysis....................................................506
                                    ii.  Non-Internet Contacts...........................................508
                                   iii.  Individual Defendants...........................................512
                                    iv.  Conclusion......................................................512
                          4.  Interest of the Forum State and Convenience of the Parties.................512
                          5.  Conclusion.................................................................513
                      E.  Personal Jurisdiction Under A "Conspiracy Jurisdiction" Theory.................513
                      F.  Conclusion.....................................................................518
                III.  Motion to Dismiss for Failure to State a Claim.....................................518
                      A.  Applicable Legal Standards.....................................................518
                          1.  Rule 8(a) Claims (Non-Fraud Based Claims)..................................518
                          2.  Rule 9(b) Claims (Fraud Based Claims)......................................523
                      B.  Civil Conspiracy...............................................................525
                          1.  Elements of the Claim......................................................525
                          2.  Allegations of an Agreement or Understanding to Effect a Wrong.............526
                              a.  Allegations of the Second Amended Petition.............................526
                              b.  Analysis...............................................................527
                
                          3.  Allegations of Injury or Damage............................................528
                          4.  Conclusion.................................................................528
                      C.  Ongoing Criminal Conduct.......................................................529
                          1.  Overview of the Statute....................................................529
                          2.  Purported Pleading Deficiencies............................................530
                          3.  "Specified Unlawful Activity" Allegations..................................530
                              a.  Theft by Deception Under Iowa Law......................................530
                                   i.  Legal Standards...................................................530
                                  ii.  Arguments of the Parties..........................................531
                                 iii.  Allegations of the Second Amended Petition........................531
                                  iv.  Analysis..........................................................532
                                   v.  Conclusion........................................................534
                              b.  Insurance Fraud Under Iowa and New York Law............................534
                                   i.  Legal
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