Sohns v. Dahl

• Decision Date: 11 February 1975
• Docket Number: Civ. A. No. 74-C-32-C.
• Parties: Gregory E. SOHNS, Plaintiff, v. Willy DAHL et al., Defendants.
• Court: U.S. District Court — Western District of Virginia

392 F. Supp. 1208

Gregory E. SOHNS, Plaintiff, v. Willy DAHL et al., Defendants.

Civ. A. No. 74-C-32-C.

United States District Court, W. D. Virginia, Charlottesville Division.

February 11, 1975.

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Francis L. Buck, Paxson, Smith, Boyd, Gilliam & Gouldman, Charlottesville, Va., for plaintiff.

Maurice M. Diliberto, Miami, Fla., Edward R. Slaughter, Jr., McGuire, Woods & Battle, Charlottesville, Va., for defendants.

MEMORANDUM OPINION

DALTON, District Judge.

This case comes before this court on defendants' motions to dismiss.

This is a multi-defendant action that centers around transactions involving the securities of two Bahamian corporations, International Inter-Ocean Transport, Ltd. (Transport) and Skipdahl, Ltd. (Skipdahl) and is based on an amended complaint containing three counts.

The first count avers that plaintiff purchased from Defendant Dahl securities in Transport and Skipdahl and that his purchases were induced by false and misleading material representations and omissions by Defendants Dahl and Diliberto in violation of section 10(b)¹ of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), (1934 Act) and Rule 10b-5², 17 C.F.R. § 240.10b-5, promulgated thereunder by the Securities and Exchange Commission.

The second count avers the same purchases by the plaintiff and a violation by the defendants of section 17(a)³ of the Securities Act of 1933, 15 U.S.C. § 77q(a) (1933 Act).

The third count avers the same purchases and defendants' violation of section 12⁴ of the 1933 Act, 15 U.S.C. § 77l.⁵

The fourth count avers the same purchases by plaintiff and a claim based on common law fraud and deceit.

With respect to count I, this court's jurisdiction is based on section 27⁶ of the 1934 Act, 15 U.S.C. § 78aa. With respect to counts II and III, jurisdiction is based on section 22(a) of the 1933 Act, 15 U.S.C. § 77v(a). Plaintiff asserts this court's jurisdiction over count IV on the theory of pendent jurisdiction.

Defendant Dahl, the seller of the securities, is alleged to be an officer, director and "control person" in both corporations.

Defendant Diliberto is alleged to be the secretary of Transport, a director of Skipdahl, a "control person" in and attorney for both corporations, and an attorney for Mr. Dahl. Plaintiff alleges that Mr. Diliberto actively participated in the negotiation and sale of these securities and was a "principal, aider and abettor and `co-conspirator' in the fraudulent scheme."

Plaintiff has sued the defendant law firm of Barrett, Diliberto and Estrumsa "as counsel for the corporation . . ., for the acts of its members and/or partner, defendant Diliberto, as well as for its own actions as participant, principal, aider and abettor and co-conspirator in the fraudulent sale of securities."

Defendants have raised several preliminary objections by motion:

Messrs. Diliberto and Dahl have moved to dismiss for improper venue and failure to state a claim and to transfer this case to the Southern District of Florida. In addition, Mr. Diliberto has moved to dismiss for lack of in personam jurisdiction and to strike plaintiff's claim for punitive damages. He has further objected to plaintiff's filing of his amended complaint without obtaining leave of court.

The law firm of Barrett, Diliberto and Estrumsa has moved to dismiss it as an improper party defendant.

I Improper Venue

Both Messrs. Dahl⁷ and Diliberto have filed a motion to dismiss for improper venue. In support of their motion, Mr. Diliberto has submitted several affidavits which compositively affirm the following conclusions:

(1) That he is neither an inhabitant nor a resident of Virginia and the Western District of Virginia in particular.

(2) That he has not conducted nor transacted any business nor participated in any offer or sale or transactions in the Western District and that no act or transaction occurred in the Western District.

Particularizing the above conclusory statements, Mr. Diliberto states:

"Your affiant conducted no business in the Western District of Virginia. Further, your affiant had no contact, exposure, phone calls initiated by the affiant, correspondence or any act of any nature with Plaintiff . . . prior to January 29, 1972.

. . . The first meeting at which affiant first met Mr. Sohns took place in affiant's office in Miami, Florida on January 29, 1972 when Plaintiff executed an agreement between Sohns and Dahl. . . .

. . . Prior to and after that act, all actions by affiant were done as (a) attorney for Dahl, or (b) attorney for Skipdahl, Ltd., a Bahamian Corporation.⁸ . . . there has been no affirmative allegation on the part of the Plaintiff that any activities of the Defendant occurred in the Western District of Virginia."

Mr. Dahl has submitted no affidavits in support of his motion to change venue.

Paragraphs 10 and 11 of plaintiff's amended complaint particularize events that support his choice of venue in this district. Paragraph 10 states:

Throughout the period of transactions, defendant Dahl corresponded through the mails with plaintiff in both McLean, Virginia and in Charlottesville, Virginia, making false representations designed to perpetuate the fraudulent misstatements that the vessel "Sea Explorer II" would be placed in operation in the Bahamas.

Paragraph 11 states:

"`In early October, 1973, in response to plaintiff's requests for repurchase of his securities, defendant Dahl repurchased 500 shares of Skipdahl, Ltd. from the plaintiff in Charlottesville, Virginia, for $6,000.00 for the purpose of quieting plaintiff's demands for assistance in advertising his shares, thereby delaying discovery of the misrepresentations and omissions alleged . . . Defendant Maurice M. Diliberto participated in the negotiations preceding the repurchase and handled the closing of the transaction by letters and telegrams. This repurchase coupled with the continuing representations concerning the vessel `Sea Explorer II', the nature of the plaintiff's interest in Skipdahl, Ltd. and its exemption from the Securities Act, and the dilatory excuses alleged in paragraph 10 constituted a manipulative and deceptive device and/or contrivance which perpetuated and furthered a scheme to obscure the fraudulent representations in connection with the original sale of the securities involved."

Plaintiff has repeated the substance of these allegations in his affidavits submitted in opposition to defendants' motion to dismiss for proper venue and further affirms that during the fall and winter of 1973, while living in Charlottesville, Va., the plaintiff received a telephone call from Mr. Diliberto and cablegrams from both defendants in connection with the repurchase of half his interest in Skipdahl, Ltd. This repurchase and the negotiations preceding it occurred in Charlottesville; Mr. Diliberto participated in these negotiations and handled its closing by telephone, letters and telegrams to Charlottesville. Summarizing his allegations, plaintiff maintains the existence of a scheme "employed by the defendants from December of 1971 through February of 1974 whereby the defendants . . . solicited offers from the plaintiff to buy shares in the corporations controlled by . . . Dahl and Diliberto; . . . and in furtherance of the existing scheme and to avoid detection of their previously fraudulent practices, the defendants maintained the fraudulent scheme through February of 1974." Plaintiff affirms that all communications received from the defendants while he resided in Charlottesville, including Mr. Dahl's repurchase of stock, continued the alleged scheme of misrepresentation. Affidavits of Gregory Sohns, plaintiff.

Based on the above allegations and affidavits, this court rules that the plaintiff has sufficiently shown that venue properly lies in this district.

In determining whether venue is proper in this district, this court is guided at the threshold by certain settled points of law.

Since venue properly laid for claims arising under either the 1933 or 1934 Act satisfactorily establishes venue for those claims arising under the other, SEC v. National Student Marketing, supra note 6a, 360 F.Supp. at 291; Zorn v. Anderson, 263 F.Supp. 745 (S.D.N.Y. 1966); and venue for state law claims may lie where the federal claims properly lie under the doctrine of pendent jurisdiction, United Mine Workers of America v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966); this court need consider only whether venue is proper in this district under the broader venue provision of the 1934 Act.

Secondly, although venue is a notion personal to each defendant, this court's jurisdiction over this action does not depend on whether each defendant performed an "act or transaction" in this forum district. In a multi-defendant and multi-forum securities action where plaintiff alleges a common scheme of acts and transactions to violate the securities laws, venue once established for any of the defendants in the forum, establishes venue for all defendants wherever found; this is so even in the absence of any acts by a particular defendant within that district. SEC v. National Student Marketing Corp., supra note 6a, 360 F.Supp. at 289-90 and cases cited therein. Since plaintiff has alleged defendants' joint participation in a common scheme, this court has considered the alleged acts of all defendants in reaching its decision.

Thirdly, and most importantly, section 27 of the 1934 Act, 15 U.S.C. § 78aa, prescribes special venue rules for actions instituted under the Act. That section provides that venue is proper in the district wherein any act or transaction constituting the violation occurs, the defendant is found, or the defendant transacts business.⁹ Plaintiff apparently concedes that the defendants neither are "found" nor "transact business" in this district, as those terms are used in section 27, and asserts venue only on the basis of "acts" or "transactions"...