CGC Holding Co. v. Hutchens
| Decision Date | 01 November 2011 |
| Docket Number | Civil Action No. 11–CV–01012–RBJ–KLM. |
| Citation | 824 F.Supp.2d 1193 |
| Parties | CGC HOLDING COMPANY, LLC, a Colorado limited liability company; Crescent Sound Yacht Club, LLC, a Florida limited liability company; Harlem Algonquin LLC, an Illinois limited liability company; and James T. Medick; on behalf of themselves and all others similarly situated, Plaintiffs, v. Tanya HUTCHENS; Jennifer Hutchens, a/k/a Jennifer Araujo; Canadian Funding Corporation; an Ontario corporation; 308 Elgin Street Inc., an Ontario corporation; First Central Mortgage Funding Inc., an Ontario corporation; First Central Holdings Inc., an Ontario corporation; Barry J. Poulson; Arsenau Poulson, a partnership; Alvin Meisels; Blaney McMurtry LLP, an Ontario limited liability partnership; Reznick, Parsons, Meisels, Taberner, a partnership; Ronald Gache; Broad and Cassel, a partnership H. Jan Luistermans, a/k/a Herman Luisterman; Realty 1 Real Estate Services Ltd., an Ontario corporation; and Doe Limited 1–100, Defendants. |
| Court | U.S. District Court — District of Colorado |
OPINION TEXT STARTS HERE
John F. Head, Head & Associates, P.C., Denver, CO, for Plaintiffs.
Brett M. Wendt, Michael Ennio Bonifazi, Michael Mahoney Frandina, Kutak Rock, LLP, Benjamin Mark Petre, Daniel Ray McCune, John Roger Mann, Kennedy Childs P.C., Heather K. Kelly, John M. Palmeri, Gordon & Rees, LLP, James D. Kilroy, Snell & Wilmer, LLP, Denver, CO, Isaac J. Mitrani, Mitrani, Rynor, Adamsky & Toland, P.A., Miami Beach, FL, for Defendants.
ORDER on PENDING MOTIONS
This order addresses nine pending motions, including motions to dismiss for lack of jurisdiction; motions to dismiss for failure to state a claim; motions to abstain or stay; and a motion for a preliminary injunction. It resolves all pending motions except plaintiffs' motion to certify a class and certain relatively minor motions that the Court will resolve electronically without a separate written order. The Court also will issue an order directing the parties to set a scheduling conference, where the manner of dealing with the class certification motion and the prospective schedule of this case generally will be addressed.
Plaintiffs allege that defendant Sandy Hutchens was the mastermind of a loan fraud scheme designed to extract monies from victims in the United States. The other defendants are alleged to have been participants in the implementation of the scheme. Plaintiffs, who applied for loans that were never made, allege that they were duped into advancing substantial loan processing fees which were not refunded when the scheme was discovered. Plaintiffs assert five claims for relief: (1) violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961 et seq.; (2) conversion; (3) negligent misrepresentation; (4) constructive trust; and (5) unjust enrichment.
I will include more detailed descriptions of the alleged facts below in the context of the specific motions that have been filed by the various defendants.
I. PERSONAL JURISDICTION GENERALLY.
Before discussing the several pending motions to dismiss for lack of personal jurisdiction, it will be useful to review basic points and authorities governing personal jurisdiction under both state and federal law.
Personal jurisdiction in Colorado is governed by Colorado's “long arm” statute, C.R.S. § 13–1–124(1), which provides that the transaction of business or the commission of a tortious act in Colorado subjects a person to the jurisdiction of Colorado's courts. The statute was intended to extend the jurisdiction of Colorado courts to the fullest extent permitted by the due process clause of the Fourteenth Amendment to the United States Constitution. Jenner & Block v. District Court, 197 Colo. 184, 590 P.2d 964, 965 (1979).
Under the due process clause of the Fourteenth Amendment a defendant must have had sufficient minimum contacts with the state such that assertion of jurisdiction does not offend traditional notions of fair play and substantial justice. International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945). The defendant must have done something “purposefully to avail itself of privilege of conducting activities” in Colorado. Le Manufacture Francaise v. District Court, 620 P.2d 1040, 1044 (Colo.1980) (quoting Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958)). Jurisdiction can be either general, where a defendant's contacts are of such a continuous and systematic nature that being haled into court in the forum would not offend his due process rights, or specific, where the claims arise out of the defendant's contacts with the forum. Archangel Diamond Corp. v. Lukoil, 123 P.3d 1187, 1190 (Colo.2005).
The commission of an intentional tort that causes damage to individuals or entities located in Colorado can be sufficient constitutionally to subject the alleged tortfeasor to the jurisdiction of Colorado courts. See D & D Fuller CATV Constr., Inc. v. Pace, 780 P.2d 520, 525 (Colo.1989); Jenner & Block, 590 P.2d at 966. See also Calder v. Jones, 465 U.S. 783, 788–91, 104 S.Ct. 1482, 79 L.Ed.2d 804 (1984) (). Under Calder as construed by the Colorado Supreme Court and the Tenth Circuit Court of Appeals, it is not enough that tortious conduct fortuitously has some effect in a state. Rather, in order to satisfy the “purposefully availed” test, the conduct must in some way have been aimed at the Colorado plaintiffs, and the relationship of the case to Colorado must not be attenuated or remote. Archangel Diamond Corp., 123 P.3d at 1999–1200; Far West Capital, Inc. v. Towne, 46 F.3d 1071 (10th Cir.1995).
A court may, as a matter of discretion, elect to consider a motion to dismiss for lack of personal jurisdiction on the documentary evidence (the complaint and affidavits or other evidence submitted by the parties) or after holding an evidentiary hearing. If the court considers only documentary evidence, the plaintiff need only make a prima facie showing of personal jurisdiction, i.e., raise a reasonable inference that jurisdiction exists. Uncontroverted allegations in the complaint are accepted as true. If the allegations are controverted, then conflicts are resolved in the plaintiff's favor for this purpose. Archangel, 123 P.3d at 1192. See Wenz v. Memery Crystal, 55 F.3d 1503, 1505 (10th Cir.1995).
If the court elects to conduct an evidentiary hearing, for example “if the record is rife with contractions, or when plaintiff's affidavits are patently incredible,” then the plaintiff's burden increases to a preponderance of the evidence. Archangel, 123 P.3d at 1192–93. Under Colorado law, courts may not resolve material issues of disputed fact concerning personal jurisdiction against a plaintiff without an evidentiary hearing. Id. at 1192.
The Court held oral argument on October 12, 2011. The parties did not come prepared to submit evidence. The Hutchens group of defendants indicated that they would like for the Court to hold a second hearing concerning the jurisdictional issues at which they would present evidence. Plaintiffs indicated that they were not requesting an evidentiary hearing. The other defendants either indicated that they did not want an evidentiary hearing or remained silent on the issue. The Court elects to resolve the personal jurisdiction issues on the documentary evidence.
“Before a federal court can assert personal jurisdiction in a federal question case, the court must determine (1) ‘whether the applicable statute potentially confers jurisdiction’ by authorizing service of process on the defendant and (2) ‘whether the exercise of jurisdiction comports with due process.’ ” Peay v. BellSouth Med. Assistance Plan, 205 F.3d 1206, 1209 (10th Cir.2000).
In the present case plaintiffs assert a violation of RICO. It is undisputed that RICO authorizes nationwide service of process. 18 U.S.C. § 1965. Accordingly, if a defendant is served within the United States, the first Peay requirement is met.
Regarding the second requirement, Peay held that “in a federal question case where jurisdiction is invoked based on nationwide service of process, the Fifth Amendment requires the plaintiff's choice of forum to be fair and reasonable to the defendant.” 205 F.3d at 1212. “The burden is on the defendant to show that the exercise of jurisdiction in the chosen forum will ‘make litigation so gravely difficult and inconvenient that [he] unfairly is at a severe disadvantage in comparison to his opponent.’ ” Id.
The Peay court set forth five factors that the trial court should consider in determining whether the defendant has met that burden: (1) defendant's contacts with the forum state, (2) inconvenience to the defendant, (3) judicial economy, (4) probable situs of discovery proceedings, (5) nature of the regulated activity.
RICO does not authorize extraterritorial service of process. 18 U.S.C. § 1965. See, e.g., Stauffacher v. Bennett, 969 F.2d 455, 460–61 (7th Cir.1992). However, Stauffacher and other similar cases were decided under the old Fed.R.Civ.P. 4(f), which was repealed in 1993 and replaced with Fed.R.Civ.P. 4(k)(2). See Central States, Southeast and Southwest Areas Pension Fund v. Reimer Express World Corp., 230 F.3d 934, 941 (7th Cir.2000) (hereafter “ Central States ”).
Rule 4(k)(2) provides:
Federal Claim Outside State–Court Jurisdiction. For a claim that arises under federal law, serving a summons or filing a waiver of service establishes personal jurisdiction over a defendant if:
(A) the defendant is not subject to jurisdiction in any state's courts of general jurisdiction; and
(B) exercising jurisdiction is consistent...
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