Klapmeier v. Telecheck International, Inc., 5-70 Civ. 31.

Citation315 F. Supp. 1360
Decision Date11 September 1970
Docket NumberNo. 5-70 Civ. 31.,5-70 Civ. 31.
PartiesJames E. KLAPMEIER, John F. Harris, Jack Dekker, Zaven Dadekian, Dave Wilbourn, Plaintiffs, v. TELECHECK INTERNATIONAL, INC., a Hawaii Corporation, Harry M. Flagg, Harry D. Felt, Robert J. Baer, Herbert C. H. Chun, George L. K. Kerr, Herman T. F. Lum, Bruce A. McCandless, Gerald C. McKenna, David S. Nakano, Omar A. Tunks, J. Edwin Whitlow, and Clifford H. N. Yee, Defendants.
CourtUnited States District Courts. 8th Circuit. United States District Court of Minnesota

Rider, Bennett, Egan, Johnson & Arundel, by Stuart W. Rider, Jr., Minneapolis, Minn., for plaintiffs.

Dorsey, Marquart, Windhorst, West & Halladay, by Peter Dorsey and James H. O'Hagan, Minneapolis, Minn., for defendants.

NEVILLE, District Judge.

Jurisdiction in the above entitled case over the persons of certain parties defendant, residents of Hawaii and California, not claimed to be reachable by process under the Minnesota long-arm statute, depends upon the application of 15 U.S.C. § 78aa, § 27 of the Securities Exchange Act of 1934, which reads:

"The district courts of the United States * * * shall have exclusive jurisdiction of violations of this chapter or the rules and regulations thereunder, and of all suits in equity and actions at law brought to enforce any liability or duty created by this chapter or the rules and regulations thereunder. Any criminal proceeding may be brought in the district wherein any act or transaction constituting the violation occurred. Any suit or action to enforce any liability or duty created by this chapter or rules and regulations thereunder, or to enjoin any violation of such chapter or rules and regulations, may be brought in any such district or in the district wherein the defendant is found or is an inhabitant or transacts business, and process in such cases may be served in any other district of which the defendant is an inhabitant or wherever the defendant may be found. * * *" Emphasis added

and on § 22(a) of the Securities Act of 1933, codified as 15 U.S.C. § 77v, which makes similar provision for nationwide service of process.

The basis for plaintiffs' allegations both of amenability to personal jurisdiction under the above section and of liability under certain sections of the Securities Act is their contention that these defendants are "controlling persons" within the meaning of 15 U.S.C. §§ 77o and 78t(a).

The issue of "control" is a complex fact question which requires an examination of the relationships of the various alleged "controlling persons" to the person or entity which transacted the sale of securities alleged to have violated the Act, an examination of which cannot be limited to a cursory review of their proportionate equity positions, employment or director status on the relevant dates. While a majority shareholder might as a matter of law be held to "control" the entity regardless of his actual participation in management decisions and the specific transaction in question, the absence of a substantial ownership of shares does not foreclose liability under the Act as a "controlling person". The court does not believe this issue is adaptable to resolution against the plaintiffs at this early stage of the case. In a situation where jurisdictional facts are so closely intertwined with the ultimate factual issue determinative of statutory liability, this court must work from a presumption that jurisdictional facts alleged in the complaint to the effect that these defendants are, or were, "controlling persons" are correct for purposes of pretrial motions attacking jurisdiction. To grant the motions now would be a determination of the ultimate fact question that the movants were not "controlling persons". The determination to deny the motions to dismiss however cannot and should not be read to imply an ultimate finding that they are or were "controlling persons", but only that thus far the court does not have sufficient evidence before it to be able intelligently to rule on the question. Conceivably after discovery...

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11 cases
  • Dyer v. Eastern Trust and Banking Company
    • United States
    • U.S. District Court — District of Maine
    • December 30, 1971
    ...Prima facie, such a person is a controlling person within the meaning of Section 15 of the Act.45 Klapmeier v. Telecheck International, Inc., 315 F. Supp. 1360, 1361 (D.Minn.1970); Larson v. Tony's Investments, Inc., CCH Fed. Sec.L.Rep. ¶ 92,324 at 97,534 (M.D. Ala.1968); Miller v. Hano, 8 ......
  • Dowling v. Narragansett Capital Corp.
    • United States
    • U.S. District Court — District of Rhode Island
    • April 17, 1990
    ...aff'd in part and rev'd in part, 583 F.2d 542 (1st Cir.1978) (officers and directors); Klapmeier v. Telecheck International, Inc., 315 F.Supp. 1360, 1361 (D.Minn.1970) (majority shareholder). Moreover, at least in the case of directors, liability may be imposed even if they did not actively......
  • In re Diasonics Securities Litigation
    • United States
    • U.S. District Court — Northern District of California
    • September 21, 1984
    ...or entity which transacted the sale of securities alleged to have violated the Act"), quoting from Klapmeier v. Telecheck International, Inc., 315 F.Supp. 1360, 1361 (D.Minn.1970), rev'd on other grounds, 482 F.2d 247 (8th Cir.1973). As Senior Vice President and Chief Operating Officer, De ......
  • Securities and Exchange Commission v. Coffey, 73-1396
    • United States
    • United States Courts of Appeals. United States Court of Appeals (6th Circuit)
    • March 28, 1974
    ...to hold King liable. Whether a person "controls" another under section 20(a) is a complex factual question. Klapmeier v. Telecheck International, Inc., 315 F.Supp. 1360 (D.Minn.1970). But cf. Myzel v. Fields, 386 F.2d 718, 738 (8th Cir. 1967). There is no indication that the District Court ......
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