Professional Investors Life Ins. Co. v. Roussel

• Decision Date: 11 January 1978
• Docket Number: No. 76-178-C5.,76-178-C5.
• Citation: 445 F. Supp. 687
• Court: U.S. District Court — District of Kansas
• Parties: PROFESSIONAL INVESTORS LIFE INSURANCE COMPANY, INC., an Oklahoma Corporation, Plaintiff, v. Louis J. ROUSSEL et al., Defendants.

445 F. Supp. 687

PROFESSIONAL INVESTORS LIFE INSURANCE COMPANY, INC., an Oklahoma Corporation, Plaintiff, v. Louis J. ROUSSEL et al., Defendants.

No. 76-178-C5.

United States District Court, D. Kansas.

January 11, 1978.

COPYRIGHT MATERIAL OMITTED

John C. Frieden, Topeka, Kan., for plaintiff.

Robert A. Schartz, Wichita, Kan., for Perkins.

Walter C. Williamson, Wichita, Kan., for Mick, Stack Assoc., Mick Adrian.

Bob W. Storey, Topeka, Kan., for Brandon, Pope and De La Barre.

MEMORANDUM AND ORDER

ROGERS, District Judge.

The above-captioned case came before the Court August 12, 1977, for hearing on plaintiff's motion to amend and defendants' motion to dismiss for failure to state a cause of action, lack of personal jurisdiction, and forum non conveniens. At that hearing both motions were ruled upon with the exception of that facet of defendants' motion to dismiss which dealt with the asserted lack of personal jurisdiction. Counsel for both parties were directed to submit supplementary briefs on the question of personal jurisdiction and the matter was taken under advisement. All briefs have been submitted; the Court has considered the arguments therein, and the matter is ripe for resolution.

This is a diversity action by plaintiff Professional Investors Life Insurance Co., Inc. (hereinafter "Professional Investors"), an Oklahoma Corporation, seeking to recover damages against various defendants for their asserted role in an allegedly fraudulent takeover of a Kansas Insurance Holding Company, Farm and Ranch Financial, Inc. ("Farm & Ranch"). Plaintiff wished to gain control of Farm & Ranch but alleges it was prevented from doing so by the conspiratorial acts of the defendants.

In its attempted takeover of Farm & Ranch, plaintiff executed a contract with First Greystone & Associates, a Missouri limited partnership not a party to this action. Plaintiff alleges, inter alia, that the tortious acts of defendants in carrying out an improper and illegal take-over induced First Greystone to breach this contract, because the surreptitious and illegal purchase of Farm & Ranch shares from other sources by defendants resulted in a threat to First Greystone that the value of the shares it held (and had contracted to sell to plaintiff) would plummet as a result of majority take-over of Farm & Ranch by defendants. As a result, First Greystone breached its contract with plaintiff and sold its holdings to defendants. Thus plaintiff pleads a cause of action based on tortious interference with contract rights. Plaintiff also asserts that the illegal take-over of Farm & Ranch by defendants constituted an interference with prospective contracts or possible business advantage, recognized as an actionable tort by many states. See, 86 C.J.S. Torts § 43. Plaintiff also alleges fraud generally. A formerly-asserted cause of action based on violations of federal securities acts has been obviated by the recent decision in Piper, et al. v. Chris-Craft Industries, et al., 430 U.S. 1, 97 S.Ct. 926, 51 L.Ed.2d 124 (1977).

The principal defendant in this action is Louis J. Roussel, a Louisiana resident, and a financier and investor well-versed in the law of corporate take-overs. See, Roussel v. Tidelands Capital Corp., 438 F.Supp. 684 (S.D.Ala., 1977); S.E.C. v. Roussel, No. 76-2571 (E.D.La. 8/23/76); West v. Certified Credit Corp., 162 So.2d 589 (La.App.1964). It is alleged Roussel orchestrated the conspiracy which led to "his" takeover of Farm & Ranch and the subsequent damage to plaintiff. Kansas law mandates filing and registration by those who would attempt to take over an insurance holding company. K.S.A. 40-3301 et seq. Both plaintiff and defendant Roussel, on behalf of National American Life Insurance Company (a Louisiana corporation controlled by Roussel and authorized to do business in Kansas) so registered. However, plaintiff alleges that prior to the time action was taken on either application by the Kansas Commissioner of Insurance, certain defendants at the direction of Roussel commenced acquisition of Farm & Ranch shares. Since under Kansas law registration and approval is prerequisite to any acquisition of ten percent or more of the stock of a Kansas insurance company, shares were allegedly acquired in the names of various defendant-investors whose portfolios were managed by Roussel. These include defendants Leu, Cauble, Azar, Salloum, and Empire Land Corporation, a Roussel-controlled Louisiana corporation.

It is alleged that in early February, 1975, prior even to the filing of National American's take-over application with the Kansas Insurance Commissioner, Roussel sent defendant Shada (a director of National American) to Kansas for the purpose of acquiring control of Farm and Ranch, and Shada began acquiring shares from individual shareholders. Defendant Shada employed defendant Mick Stack and Associates, a Kansas brokerage firm, to make these acquisitions. Defendants Mick, Adrian, Smith, and Perkins are directors or officers of Mick Stack and Associates; they are separately represented and have not joined in the present motion. Plaintiff has voluntarily dismissed defendant Perkins from the action. Defendant Brandon is a Kansas resident and corporate officer of Farm & Ranch, who allegedly cooperated with Roussel and the other defendants in their illegal take-over attempts.

On the same date Roussel through National American filed with the Kansas Commissioner of Insurance, such registration was also filed with the Securities Exchange Commission ("Schedule 13(d)"). Certain irregularities in this filing led to the entry of a consent decree in an action brought by the Securities Exchange Commission against Roussel, American Benefit, Empire Land Corporation, and Republic Petroleum Corporation, another Roussel-controlled corporation. We note here that plaintiff alleges that many of the corporate defendants in this action, National American among them, are themselves controlled by defendant Superfine Oil Company, a "family business" owned by defendant Roussel, defendant Louis J. Roussel, III, his son, and a third party not named as a defendant herein.

Defendant De LaBarre is Roussel's personal attorney and an officer or director of various Roussel-controlled entities. As a result of De La Barre's involvement in the filings with the S.E.C. relative to the Farm & Ranch take-over, he was suspended from practice before the S.E.C. In the Matter of De LaBarre, File No. 3-5064 (Securities and Exchange Commission Administrative Proceeding, 8/19/76). Plaintiff further alleges that De LaBarre was a central figure in the conspiracy who made many of the "contacts" with the other defendants, and may have entered Kansas for the purpose of furthering the plan. Defendant Pope is also suspected of entering Kansas; yet although De LaBarre and Pope are alleged to have made direct contact with an official of First Greystone for the purpose of inducing breach of the stock sales contract, these acts are assigned no situs in the amended complaint.

As can be seen, the alleged conspiracy has a very large cast of asserted participants. The alleged acts in furtherance of the conspiracy as outlined in the amended complaint and expanded upon in plaintiff's supplemental brief are not set forth here because of their complexity. Suffice it to say plaintiff has pleaded sufficient facts to indicate the existence of a grand plan to circumvent state and federal securities laws and gain control of Farm & Ranch. The problem before the Court is whether the acts alleged will support assumption of jurisdiction over each defendant under the Kansas long-arm statute, K.S.A. 60-308. The Court noted at the hearing that the nature and quality of each defendant's contacts with Kansas differed somewhat, and on the basis of the acts alleged in the amended complaint tentatively divided defendant into various "classes" according to the nature and locus of the acts alleged. Insofar as is practicable, we will discuss the applicable law as it relates to each such group.

We preface our discussion by noting that, where jurisdiction is controverted, the burden is on plaintiff to show that it exists. 5 Wright & Miller, Federal Practice & Procedure § 1350 and cases cited therein. In the absence of pleadings or affidavits controverting plaintiff's claims, jurisdiction is to be determined from the face of the complaint, with the allegations therein taken as true. Yonofsky v. Wernick, 362 F.Supp. 1005 (S.D.N.Y.1973). Moving defendants deny that any conspiracy was formed or carried out, and suggest that plaintiff has failed to carry its burden of proof in that regard. This "burden," however, is minimal at this stage of the litigation. Plaintiff need only make out a prima facie case of the jurisdictional fact of conspiracy or entry into the state should the long-arm decision hinge on these matters; bald denials of the pleaded facts will not sustain a jurisdictional challenge, particularly when the facts alleged are detailed rather than themselves conclusory in nature. Hanson v. Murphy, 208 Kan. 297, 302, 491 P.2d 551 (1971). Plaintiff's threshold showing in this regard is impressive considering the dearth of discovery undertaken in the case, and is buttressed by the exhibits showing the interest of the S.E.C. and Kansas Insurance Commissioner in the acts of the principal defendants.

The causes of action alleged by plaintiff are "business torts," and as such are both tortious and contractual in nature. The Kansas long-arm statute provides for assumption of personal jurisdiction over persons alleged to have committed any of the following acts, inter alia:

(b) Submitting to jurisdiction—process.

Any person, whether or not a citizen or resident of this state, who in person or through an agent or instrumentality does any of the acts hereinafter enumerated, thereby submits said person, and, if an individual, his or her personal representative, to the jurisdiction of the courts of this

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