D'Addario v. Geller
| Decision Date | 08 April 2003 |
| Docket Number | No. 2:02CV250.,2:02CV250. |
| Citation | 264 F.Supp.2d 367 |
| Parties | Lawrence D'ADDARIO, suing individually and on behalf of all others similarly situated, and derivatively on behalf of RMS Titanic, Inc., Plaintiff, v. Arnie GELLER, G. Michael Harris, Joe Marsh, Gerald Couture, Nick N. Cretan, Doug Banker, and RMS Titanic, Inc., Defendants. |
| Court | U.S. District Court — Eastern District of Virginia |
Steven G. Storch, Marianne R. Merritt, Storch Amini & Munves, P.C., New York City, NY, William R. O'Brien, Brydges, O'Brien & Frucci, PC, Virginia Beach, VA, Counsel for plaintiff.
John D. Padgett, McGuire, Woods, LLP, Norfolk, VA, Counsel for Geller, Couture, Cretan, Banker, and RMS TITANIC.
G. Michael Harris, Belleair, FL, Pro Se Defendant.
James L. Chapman, IV, Crenshaw, Ware & Martin, PCL, Norfolk, VA, H. Yale Gutnick, Strassburger, McKenna, Gutnick & Potter, Pittsburg, PA, Counsel for Marsh.
This matter comes before the court on defendants' various motions to dismiss for lack of personal jurisdiction, improper venue, failure to make a demand on the Board of Directors of RMS Titanic, Inc. ("RMST"), and failure to state a claim upon which relief may be granted. All defendants also seek a transfer of venue to another district, absent dismissal of the case.
Defendant RMST is a Florida corporation with its principal place of business in Atlanta, Georgia. Pursuant to an order entered by this court, RMST is the sole salvor-in-possession of the submerged wreck and wreck site of the historic ship-wreck TITANIC, which is located approximately 400 miles off the coast of Newfoundland. See R.M.S. Titanic, Inc. v. The Wrecked and Abandoned Vessel, No. 2:93cv902 (E.D. Va. June 7, 1994) () [hereinafter case referred to as "Action No. 2:93cv902"]. The wreck was discovered in international waters in 1985 by a joint American-French expedition. In 1987, a limited partnership named Titanic Ventures conducted an expedition and recovered approximately 1,800 artifacts. Titanic Ventures later sold its interests in the salvage operations, and the artifacts, to RMST. In 1993, RMST commenced an in rem action in this court against the TITANIC to become its salvor-in-possession. See Action No. 2:93cv902. All parties agree that RMST is subject to personal jurisdiction in this judicial district.
Defendant Arnie Geller is RMST's President, Chief Executive Officer ("CEO"), and a Director; he resides in Georgia. Defendant Gerald Couture is RMST's Vice-President, the Chief Financial Officer, and a Director. He resides in Florida. Defendant Nick N. Cretan is a Director of RMST and resides in New York. Defendant Doug Banker is also a Director of the corporation; he resides in Michigan.
Defendant G. Michael Harris was formerly the Executive Vice President, Chief Operating Officer, and a Director of RMST. His positions as Executive Vice President and Chief Operating Officer were terminated in the summer of 2000, after he led the 2000 expedition to the TITANIC. He was terminated as a Director in or shortly after September of 2000. He resides in Florida. Defendant Joe Marsh resides in Ohio and owns between 11% and 19% of the company's outstanding shares. Although Marsh is not a member of RMST's Board of Directors, plaintiff contends that Marsh is an "insider" who controls or colludes with Geller in making RMST's business management decisions.
In November of 1999, defendants Geller, Harris, and Marsh were instrumental in the hostile takeover of former RMST management. Plaintiff complains that RMST's new management has engaged in a scheme to loot the corporation, including "fraud, self-dealing, mismanagement, diversion and waste of corporate assets." Compl. ¶ 1. Plaintiff alleges that defendants Geller, Harris, and Marsh engaged in mail fraud and obstruction of justice in violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO"). He also seeks to recover damages from a wrongful denial of shareholders' voters' and dissenters' rights under Florida statutory law regarding the hostile takeover of RMST in November of 1999. Finally, he seeks to disgorge profits realized by defendant Marsh, who allegedly engaged in "insider trading" between December 2000 and January 2001.
Plaintiff filed this shareholder derivative suit on April 15, 2002, on behalf of similarly-situated shareholders and derivatively on behalf of RMST. Subject matter jurisdiction is based on 28 U.S.C. § 1331 (federal question jurisdiction), as plaintiff has alleged violations of 18 U.S.C. § 1962(c) (RICO) and 15 U.S.C. § 78aa (Securities Exchange Act of 1934). Subject matter jurisdiction is also based on diversity of citizenship, 28 U.S.C. § 1332. Plaintiff alleges the amount in controversy is greater than $75,000.
Defendants filed motions to dismiss, plaintiff filed memoranda in opposition, and defendants filed reply briefs.1 Because all the individual defendants asserted lack of personal jurisdiction, by order filed July 10, 2002, the court permitted plaintiff to conduct limited discovery on the issue of personal jurisdiction. On September 23, 2002, after limited discovery was conducted, plaintiff filed a supplemental memorandum in opposition to all the defendants' motions to dismiss for lack of personal jurisdiction. By motion filed September 26, 2002, plaintiff requested leave to file a sur-reply in response to defendants' then-forthcoming supplemental briefs.2 By motion filed September 20, 2002, plaintiff requested a preliminary injunction to prevent RMST from relinquishing its salvor-in-possession status in the salvage action.3
On October 7, 2002, Harris, Marsh, and the Geller defendants submitted supplemental memoranda in support of their respective motions to dismiss. By order entered October 15, 2002, after the defendants expressed no objection thereto, the court granted plaintiff leave to file a sur-reply pleading. To date, plaintiff has not filed a sur-reply. On December 11, 2002, the court heard oral argument on the varris, pro se, elected not to appear and relied on the arguments of other parties to the extent those arguments were applicable to him. All parties have had a full opportunity to present their arguments; therefore, this matter is ready for judicial determination.
All defendants, except RMST, have moved to dismiss the case under Rule 12(b)(2) of the Federal Rules of Civil Procedure for lack of personal jurisdiction. Plaintiff bears the burden of establishing the existence of personal jurisdiction by a preponderance of the evidence, Mylan Labs., Inc. v. Akzo, 2 F.3d 56, 59-60 (4th Cir.1993), but he is entitled "to favorable inferences from the pleadings, affidavits, and documents submitted on the issue." Reynolds Metals Co. v. FMALI, Inc., 862 F.Supp. 1496, 1498 (E.D.Va.1994) (citations omitted). Under Rules 4(k)(1)(A) and (D) of the Federal Rules of Civil Procedure, a federal court may base its exercise of power over a defendant's person in the manner provided by state law, see ESAB Group Inc. v. Centricut, Inc., 126 F.3d 617, 622 (4th Cir.1997), or when otherwise authorized by federal statute. In this case, plaintiff both contends that Virginia's long-arm statute authorizes personal jurisdiction and that nationwide service of process is proper, based on civil RICO claims against defendants Geller, Harris, and Marsh. In addition, plaintiff alleges Securities Exchange Act violations against defendant Marsh. The court will first address Virginia's long-arm statute before turning to these potential federal bases for personal jurisdiction.
Rule 4(k)(1)(A) permits a federal court to base its exercise of power over a defendant's person in the same manner as the forum's state courts. For state courts to possess personal jurisdiction over a defendant, a state statute must confer jurisdiction, and the exercise of jurisdiction must be consistent with the due process requirements of the Fourteenth Amendment.
In the case sub judice, plaintiff is proceeding under the Virginia long-arm statute, Virginia Code § 8.01-328.1 (2002). The Fourth Circuit has laid out the analysis that courts should apply when determining whether personal jurisdiction can be obtained pursuant to a long-arm statute. See, e.g., Holland v. Hay, 840 F.Supp. 1091, 1095 (E.D.Va.1994) (citing English & Smith v. Metzger, 901 F.2d 36, 38 (4th Cir.1990)). The court must first "determine whether the statutory language applies to [each] defendant; second, if the statutory language applies, [the court] must determine whether the statutory assertion is consistent with the due process clause of the Constitution." Id. (quoting Metzger, 901 F.2d at 38). Because the Virginia long-arm statute extends the amenability of a non-resident to jurisdiction to the outer perimeter allowed by the Due Process Clause, the statutory and constitutional inquiries merge into the question of whether the individual defendants had sufficient minimum contacts with Virginia to satisfy due process. See Metzger, 901 F.2d at 38 (); see also Stover v. O'Connell Assocs., Inc., 84 F.3d 132, 135-36 (4th Cir. 1996) (); Columbia Briargate Co. v. First Nat'l Bank, 713 F.2d 1052, 1057 (4th Cir.1983) ().
Virginia Code § 8.01-328.1 sets forth,
A court may exercise personal jurisdiction over a person, who acts directly or by an agent, as to a cause of action arising from the person's:
1. Transacting any business in this...
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