Damian v. Int'l Metals Trading & Invs., Ltd.

• Decision Date: 22 March 2017
• Docket Number: Case No. 1:16–CV–20343–DMM
• Citation: 243 F.Supp.3d 1308
• Court: U.S. District Court — Southern District of Florida
• Parties: Melanie E. DAMIAN, as Receiver of Hunter Wise Commodities, LLC, Hunter Wise Services, LLC, Hunter Wise Credit, LLC, and Hunter Wise Trading, LLC, Plaintiff, v. INTERNATIONAL METALS TRADING & INVESTMENTS, LTD. and Bill Perry, Defendants.

243 F.Supp.3d 1308

Melanie E. DAMIAN, as Receiver of Hunter Wise Commodities, LLC, Hunter Wise Services, LLC, Hunter Wise Credit, LLC, and Hunter Wise Trading, LLC, Plaintiff,

v.INTERNATIONAL METALS TRADING & INVESTMENTS, LTD. and Bill Perry, Defendants.

Case No. 1:16–CV–20343–DMM

United States District Court, S.D. Florida.

Signed March 22, 2017

Kenneth Dante Murena, Damian & Valori LLP, Miami, FL, for Plaintiff.

Bill Perry, Chicago, IL, pro se.

ORDER AND OPINION DENYING DEFENDANT BILL PERRY'S MOTIONS TO DISMISS

DONALD M. MIDDLEBROOKS, UNITED STATES DISTRICT JUDGE

THIS CAUSE comes before the Court upon Defendants Bill Perry's ("Perry") multiple pro se Motions to Dismiss with Prejudice ("Motions"), filed between December 29, 2016 and January 25, 2017. (DE 38, 42, 44, 45, 51, & 52). Plaintiff Melanie E. Damian, Receiver for the Hunter Wise Entities (the "Receiver"), filed an Omnibus Response in opposition to the Motions on January 27, 2017 (DE 53), to which Perry replied on February 7, 2017 (DE 55). For the reasons stated below, the Motions are denied.

BACKGROUND

This action was brought pursuant to the Receiver's powers and responsibilities, as defined by the Court in the action styled United States Commodity Future Trading Comm'n v. Hunter Wise Commodities, LLC, et al. , Case No. 12–81311–CIV–Middlebrooks (the "Receivership Action"). (DE 1, hereinafter "Complaint" or "Compl." at ¶¶ 1–3, 12). The underlying claim in the Receivership Action concerned the Hunter Wise Entities' violation of the Dodd–Frank Act. That violation, orchestrated by Hunter Wise's principals, was based on a scheme to defraud customers by enticing them to purchase physical precious metals through intermediary dealers (Compl. at ¶¶ 21–27), when in fact the customers did not receive title to any physical metals and the HW entities did not possess or store metals on their behalf. (Id. at ¶ 35). Rather, the customers' orders were ultimately aggregated into Hunter Wise's own derivative trading accounts for metal futures or forward contracts. (Id. at ¶¶ 30–37). Hunter Wise compensated dealers involved in the scheme "with a portion of the fees and charges paid by the customers for the transactions." (Id. at ¶ 25). After protracted litigation initiated by the CFTC, the Court issued an Order of Final Judgment, Permanent Injunction, Civil Monetary Penalty and Other Equitable Relief against the Hunter Wise Entities, which ordered those entities and their principals to pay restitution to their customers. (Id. at ¶ 46; see Receivership Action, DE 306).

In the instant action, the Receiver alleges that Defendant International Metals Trading & Investments, Ltd. ("International Metals") was one of the dealer entities that "work[ed] to solicit customers and execute financed transactions with the HW Entities." (Compl. at ¶ 18). The Receiver alleges further that Perry "was the President and sole shareholder" of International Metals, that he managed its operations, personally solicited customers on behalf of the HW Entities, and facilitated fraudulent transactions between International Metals and the HW Entities. (Id. at ¶ 19). In addition, the Complaint alleges that one of the HW Entities, HW Credit, transferred a total of $564,335.59 in four separate transactions to International Metals as commissions for its solicitations. (Id. at ¶¶ 49–50, 53). This money, says the Complaint, derived from funds that the HW Entities' customers had invested. (Id. at ¶ 52). Purportedly, these funds were then transferred from International Metals to Perry. (Id. at ¶ 51).

The Receiver brings three causes of action against Defendants, two for fraudulent transfer under a California state statute (id. at ¶¶ 59–68; 69–79) and one for common law unjust enrichment (id. at ¶¶ 80–84). Perry seeks to dismiss the Complaint on various jurisdictional and procedural grounds, and also strenuously denies the factual allegations contained in the Complaint.

LEGAL STANDARD

A motion pursuant to Federal Rule of Civil Procedure 12(b)(1) is one to dismiss for lack of subject matter jurisdiction. See Fed. R. Civ. P. 12(b)(1). A defendant can move to dismiss under Rule 12(b)(1) by either facial or factual attack. McElmurray v. Consolidated Gov't of Augusta–Richmond County , 501 F.3d 1244, 1251 (11th Cir. 2007). "A facial attack on the complaint requires the court merely to look and see if the plaintiff has sufficiently alleged a basis of subject matter jurisdiction, and the allegations in his complaint are taken as true for the purposes of the motion." Id. (quotations and citations omitted).¹ By contrast, a factual attack on a complaint challenges the existence of subject matter jurisdiction using extrinsic evidence, such as affidavits or testimony. Id. The burden for establishing federal subject matter jurisdiction rests with the party bringing the claim. See McCormick v. Aderholt , 293 F.3d 1254, 1257 (11th Cir. 2002).

Where, as here, a district court does not hold an evidentiary hearing on a motion to dismiss for lack of personal jurisdiction, "the plaintiff must establish a prima facie case of personal jurisdiction." Melgarejo v. Pycsa Panama, S.A. , 537 Fed.Appx. 852, 863 (11th Cir. 2013) (citing Mut. Serv. Ins. Co. v. Frit Indus., Inc. , 358 F.3d 1312, 1319 (11th Cir. 2004) ). "A prima facie case is established if the plaintiff presents sufficient evidence to defeat a motion for a directed verdict. The district court must construe the allegations in the complaint as true, to the extent they are uncontroverted by defendant's affidavits or deposition testimony." Morris v. SSE, Inc. , 843 F.2d 489 (11th Cir. 1988) ; see also Madara v. Hall , 916 F.2d 1510, 1514 (11th Cir. 1990). "Where ... the defendant submits affidavits to the contrary, the burden traditionally shifts back to the plaintiff to produce evidence supporting jurisdiction unless those affidavits contain only conclusory assertions that the defendant is not subject to jurisdiction." Meier ex rel. Meier v. Sun Int'l Hotels, Ltd. , 288 F.3d 1264, 1269 (11th Cir. 2002). "Where the plaintiff's complaint and supporting evidence conflict with the defendant's affidavits, the court must construe all reasonable inferences in favor of the plaintiff." Id.

DISCUSSION

As a threshold matter, the Receiver argues that the Court should not reach the merits of Perry's grounds for dismissal because he has already answered the Complaint, meaning that any subsequently filed motion to dismiss is procedurally barred. See Fed. R. Civ. P. 12(b) (motion under this provision must be filed "before" submitting responsive pleading). I decline to apply that principle. The disposition of this case is unusual in that Perry never filed a document self-styled as an answer. Rather, the Court construed the document Perry submitted upon making an initial appearance (DE 30) as an answer because it addressed the merits of the allegations (see DE 31), though it was labeled a "Motion to Dismiss" (DE 30 at 1). Since the Federal Rules "were not adopted to set traps and pitfalls by way of technicalities for unwary litigants", Des Isles v. Evans , 225 F.2d 235, 236 (5th Cir. 1955), I entertain the merits of Perry's Motions.²

Perry asserts that the Court lacks supplemental jurisdiction to hear this case. See 28 U.S.C. § 1367(a). However, "[i]t is well-established that a federal district court has subject matter in ancillary actions brought in the court where the receiver is appointed ‘to accomplish the ends sought and directed by the suit in which the appointment was made.’ " Am. Freedom Train Found. v. Spurney , 747 F.2d 1069, 1073 (1st Cir. 1984) (quoting Pope v. Louisville, New Albany & Chicago Ry. Co. , 173 U.S. 573, 577, 19 S.Ct. 500, 43 L.Ed. 814 (1899) ); accord Robb Evans & Assoc., LLC v. Holibaugh , 609 F.3d 359, 363 (4th Cir. 2010) ; Donnell v. Kowell , 533 F.3d 762, 769 (9th Cir. 2008) ; Scholes v. Lehmann , 56 F.3d 750, 753 (7th Cir. 1995) ; United States v. Franklin Nat'l Bank , 512 F.2d 245, 249 (2d Cir. 1975). Here, this Court appointed Damian as Receiver in the Receivership Action in order to recover the type of funds sought in the present action. Accordingly, the Court has supplemental jurisdiction over the Complaint's state court claims "irrespective of diversity, amount in controversy or any other factor which would normally determine jurisdiction." Haile v. Henderson Nat'l Bank , 657 F.2d 816, 822 (6th Cir. 1981).

Next, the Court construes Perry's Motions to dispute personal jurisdiction over both himself and his company. As prior orders in this case stressed (see DE 31 at 2, n.1; DE 32), Perry cannot represent Defendant International Metals because corporate entities may not appear pro se . They must be represented by counsel in all dealings with the Court. Palazzo v. Gulf Oil Corp. , 764 F.2d 1381, 1385 (11th Cir. 1985). In any event, personal jurisdiction over both Perry and International Metals exists pursuant to the federal receivership statutes. The Federal Rules make service an effective means of establishing personal jurisdiction when it is specifically "authorized by a federal statute." Fed. R. Civ. P. 4(k)(1)(C). 28 U.S.C. § 1692 is such a statute, since it allows "process [to be] issue [d] and [ ] executed[d]"—and therefore in personam jurisdiction to be exercised—in any federal district where receivership property³ is "believed" to exist, so long as the receiver adheres to the notification requirements set forth in § 754. S.E.C. v. Bilzerian , 378 F.3d 1100, 1103–04 (D.C. Cir. 2004) ; Haile , 657 F.2d at 823. In this case, the Receiver avers that she followed § 754's notice requirements (Compl. at ¶ 8) and has demonstrated proper service of process upon both Perry and International Metals.⁴ Because service was proper, the Court has personal jurisdiction of Defendants in this case under Rule 4(k)(1)(C).

In a related argument, Perry suggests that the Receiver has not sued the correct entity. That is because, according to Perry, the referenced transactions were...