Dody v. Brown

• Decision Date: 10 April 1987
• Docket Number: No. 86-1304-CV-W-5.,86-1304-CV-W-5.
• Citation: 659 F. Supp. 541
• Parties: Dwight S. DODY and Winner's Choice, Inc., Plaintiffs, v. Howard B. BROWN, et al., Defendants.
• Court: U.S. District Court — Western District of Missouri

659 F. Supp. 541

Dwight S. DODY and Winner's Choice, Inc., Plaintiffs, v. Howard B. BROWN, et al., Defendants.

No. 86-1304-CV-W-5.

United States District Court, W.D. Missouri, W.D.

April 10, 1987.

COPYRIGHT MATERIAL OMITTED

Andrew H. McCue, Mark D. Wasserstrom, P.C., Kansas City, Mo., for plaintiffs.

John R. Cullom, Kansas City, Mo., for defendants.

ORDER

SCOTT O. WRIGHT, Chief Judge.

Before the Court is defendants' motion to dismiss because of improper venue or, in the alternative, to transfer the case to the United States District Court for the Northern District of Florida. For the reasons set forth below, defendants' motion to dismiss is denied and defendants' motion to transfer is granted.

Factual Background

Plaintiffs Dwight S. Dody ("Dody"), a resident of Clinton, Missouri, and Winner's Choice, Inc. ("Winner's Choice"), a Missouri corporation, bring this action under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 et seq. ("RICO") based on an alleged fraudulent scheme involving the sale of distributorships for the lottery ticket dispensing machines to be operated within the State of Missouri.

According to the facts as set forth in plaintiffs' complaint, defendant Ramm Vending Promotions, Inc. ("Ramm") is a corporation organized and existing under the laws of Florida, with its principal place of business in Orlando, Florida. Defendant Howard B. Brown ("Brown") resides in the State of Florida and is a shareholder, officer and director of Ramm. Defendant Charles Arnold ("Arnold") resides in North Carolina and is also a shareholder, officer and director of Ramm.

During August, 1985, Arnold and Brown solicited investment capital from Dody and his wife, Nancy, at a seminar in Phoenix, Arizona. At this seminar, Arnold and Brown allegedly made numerous misrepresentations to plaintiffs for the purpose of obtaining investors to purchase "exclusive distributorships" for "lotto-game" vending machines from Ramm.

According to plaintiffs' petition, these misrepresentations in Phoenix included the following:

1. that Ramm was a lucrative investment opportunity from which Dody would earn a guaranteed return on his investment;

2. that other persons were actively pursuing the purchase of "exclusive territory" in Missouri;

3. that the "lotto tickets" were "computer-generated randomly selected probable winning combinations" based on information gathered from previous winners in various state lotteries;

4. that the vending machines would be made of industrial gauge steel with a fair market value in excess of $500.00; and

5. that the operation of the distributorship required minimal time and was "labornonintensive".

Upon plaintiffs' return to Clinton, Missouri, defendants exchanged numerous telephone calls with plaintiffs regarding inspection of defendants' operation in Florida. According to plaintiffs, defendants Brown and Arnold reaffirmed their misrepresentations regarding the profitability, location selection, legality and product quality. In reliance on these misrepresentations, plaintiffs visited defendants' offices in Orlando, Florida shortly thereafter.

According to plaintiffs' complaint, defendants Brown and Arnold continued to recite to plaintiffs in Florida the advantages of owning and operating a Ramm distributorship. Plaintiffs were presented with a proposed distributorship agreement ("agreement"). Plaintiffs did not enter into an agreement with defendants while in Florida, but returned to Missouri to further consider defendants' offer.

During this period, Dody formed Winner's Choice in Missouri for the purposes of implementing and administering the distributorship. Plaintiffs likewise received further telephone calls from defendants Brown and Arnold in which they continued to insure plaintiffs of the profitability, legality, location selection and product quality of defendants' investment package.

Plaintiffs then altered the terms of defendants' standard distributorship agreement, signed it on behalf of Winner's Choice, and mailed it back to defendants in Florida. Defendant Brown thereafter modified the contract, signed it on behalf of Ramm, and returned the modified agreement to Dody in Missouri. By an accompanying letter, Brown requested Dody to acknowledge his assent to the modified agreement by initialing and dating the changes and returning a fully executed copy of the agreement to Brown in Florida. Dody accepted the agreement as modified and returned it by mail to Florida.¹ Pursuant to the terms of the agreement, Dody alleges that he made three separate wire transfers, totaling $144,800.00, to defendants in Florida. Plaintiffs further contend that on November 7, 1985, defendants shipped to Missouri a sample machine that was to be used by plaintiffs in attempting to secure retail locations for their vending machines.² The remaining sample machines were sent to plaintiffs in Illinois due to the delay of the Missouri lottery.

Plaintiffs allege further that in order to delay discovery by plaintiffs of defendants' fraudulent practices on them in Missouri, defendants agreed to grant plaintiffs an exclusive limited territory in Chicago, Illinois. Such agreement was negotiated by telephone on about November, 1985, and was included as an "Exhibit" to the original agreement. Plaintiffs claim that defendants knew at the time they contracted with plaintiffs that another distributor existed for plaintiffs' "exclusive territory" in Chicago.

The distributorship proved to be impractical during its temporary operation in Illinois. Thereafter, plaintiffs returned to Missouri and attempted, by means of telephonic and postal communication, to rescind the agreement. Defendants allegedly refused to cooperate with plaintiffs and this lawsuit ensued.

Defendants now move to dismiss this action or, in the alternative, seek to transfer this case to the United States District Court for the Northern District of Florida, alleging that venue in this district is improper under either of three applicable venue provisions, 18 U.S.C. § 1965(a) (Venue for RICO actions), and 28 U.S.C. § 1391(b) and (c). In support of their motion, defendants argue that: (1) none of the defendants reside or are incorporated in Missouri; (2) none of the defendants own any property, either real or personal, in Missouri; (3) none of the defendants have an office or an agent in Missouri; (4) none of the defendants have ever conducted business within this district; and (5) none of the defendants have negotiated any sales agreements or contracts within this district.

In opposition to defendants' motion, plaintiffs argue that venue is proper, both under 18 U.S.C. § 1965 and 28 U.S.C. § 1391, since defendants clearly have transacted business within this district and since plaintiffs' claim arose here in Missouri.

Discussion

A. Venue

Plaintiffs rely on 18 U.S.C. § 1965 and 28 U.S.C. §§ 1391(b) and (c) as a basis for venue. Section 1965(a) provides that "any civil action or proceeding under this chapter against any person may be instituted in the District Court of the United States for any district in which such person resides, is found, has an agent, or transacts his affairs." (emphasis added).

Section 1391(b) provides that: "A civil action wherein jurisdiction is not founded solely on diversity of citizenship may be brought only in the judicial district where all defendants reside, or in which the claim arose ..." (emphasis added). Section 1319(c) provides that "a corporation may be sued in any judicial district in which it is incorporated or licensed to do business or is doing business ..." (emphasis added).

Plaintiffs concede that where defendants raise an objection to venue, the burden is upon plaintiffs to prove proper venue. See e.g. Pfeiffer v. International Academy of Biomagnetic Medicine, 521 F.Supp. 1331, 1337 (W.D.Mo.1981). In this case, the Court concludes that plaintiffs have failed to demonstrate that venue is proper in this district under either 18 U.S.C. § 1965(a), 28 U.S.C. §§ 1391(b) or 1391(c).

1. Venue under 18 U.S.C. § 1965(a)

Plaintiffs argue that venue is proper under § 1965(a) since defendants have clearly "transacted their affairs" within the Western District of Missouri. As noted by plaintiffs, a person transacts his affairs within a particular district when he regularly conducts business of a substantial and continuous character within that district. Miller Brewing Company v. Landau, 616 F.Supp. 1285, 1288 (E.D.Wis. 1985). See also Hodgdon v. Needham-Skyles Oil Company, 556 F.Supp. 75 (D.C. D.C.1982). (In order for venue to be proper under RICO venue provision, a defendant must regularly carry on a business of a substantial and continuous character within the district). Thus, plaintiffs must prove that defendants have regularly engaged in some significant and substantial activities in the Western District in order to show that venue is proper under § 1965(a).

Plaintiffs argue that defendants transacted business of a substantial and continuous nature within this district by claiming that defendants exchanged numerous phone calls with plaintiff in this district, the agreement at issue was executed in this district, payment was effectuated in Missouri by means of a wire transfer to defendants in Florida, and the effects of defendants' alleged fraud were felt here. Plaintiffs acknowledge, however, that other than the acts which give rise to this cause of action, defendants have not transacted any other business within the Western District of Missouri. Thus, the issue to be decided is whether these acts alone are sufficient, in and of themselves, to constitute regular, substantial and continuous business activity within this district. The Court concludes that it does not.

Plaintiffs have cited no cases which stand for the proposition that making a few telephone calls from outside the district to a person within the district constitutes transaction of any business within this district,...